1

After you have determined that there is an employer-employee relationship, the next
issue is whether or not such employee is entitled to the labor standards benefit.
LABOR STANDARDS (Second Exam) Is he entitled to the overtime pay, night shift differential, holiday pay, 13th month pay,
among others? And who are exempted by law?

PART V. CONDITIONS OF EMPLOYMENT
Article 82. Coverage. The provisions of this Title shall apply to employees in all
establishments and undertakings whether for profit or not, but not to government
employees, managerial employees, field personnel, members of the family of the
employer who are dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as determined
by the Secretary of Labor in appropriate regulations.
As used herein, "managerial employees" refer to those whose primary duty
consists of the management of the establishment in which they are employed or
of a department or subdivision thereof, and to other officers or members of the
managerial staff.
"Field personnel" shall refer to non-agricultural employees who regularly perform
their duties away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty.
We have already discussed the employment relationship as a condition precedent
before we apply the Labor Code provisions.
This is a very important provision because the subsequent discussions – overtime,
rest periods, holiday pay – are in connection to Art. 82. When we talk about the Labor
Code, we determine whether or not there’s an employer-employee relationship. The
next thing to consider is whether or not you are entitled to these Labor
Standards. General rule, they are provided in Art. 82 but you have to take note who
are not included therein.
If the issue is not about the employment, even if there is an employer-employee
relationship, the Labor Tribunals do not have jurisdiction.
Take note, it states that “the provisions of this Title” meaning, Articles 82 to 96 of
the Labor Code. It does not say that there is no employer-employee relationship
among these persons mentioned or that the Labor Code does not apply to them –
not necessarily.
This title shall apply to employees in all establishments except to those mentioned
herein. Now, as I mentioned before, it is very important to determine whether or not
there is an employer-employee relationship.
Quick Overview : We already know what an employer is – we have the definition in
the Labor Code but as I have mentioned, the definition in Art. 97 is circuitous – a
person acting directly or indirectly in the interest of an employer in relation to an
employee. The employee – any individual employed by an employer.
The Social Security Law (R.A. 1161) gives us a clearer definition:
● Employer — Any person, natural or juridical, domestic or foreign, who
carries on in the Philippines any trade, business, industry, undertaking, or
activity of any kind and uses the services of another person who is under
his orders as regards the employment, except the Government and any
of its political subdivisions, branches or instrumentalities, including
corporations owned or controlled by the Government: Provided, That a
self-employed professional shall be both employee and employer at the
same time.
● Employee — Any person who performs services for an employer in which
either or both mental and physical efforts are used and who receives
compensation for such services, where there is an employer-employee
relationship: Provided, that a self-employed professional shall be both
employee and employer at the same time.
Also, we have already discussed what are the tests to be employed, whether or not
there is an employer-employee relationship. Most important – the four-fold test – the
control test but we’ve had cases applying the economic dependence test.
Labor Standards apply only if there exists an employer-employee relationship. Where
the legal basis of the complaint is not employment, then the application of the Labor
Standards will not exist.
Who are these excluded employees? MEMORIZE
1. government employees - remember to apply the charter test
2. managerial employees
3. field personnel
4. members of the family of the employer who are dependent on him
for support
5. domestic helpers
6. persons in the personal service of another
7. workers who are paid by results as determined by the Secretary of
Labor in appropriate regulations
1. GOVERNMENT EMPLOYEES
(a) Government employees whether employed by the National
Government or any of its political subdivision, including those employed
in government-owned and/or controlled corporations
These are the ones that are governed by the Civil Service Law. Applying
the charter test, if the government employee is covered by the Civil
Service Rules then the provisions here in the Labor Code regarding his
working conditions, rest periods, among others, will not apply to them. But
it does not mean that they are not entitled to the holiday pay, among
others. Another law will apply to them, that is, the Civil Service Law.
2. MANAGERIAL EMPLOYEES
As used herein, "managerial employees" refer to those whose primary
duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof, and to other officers
or members of the managerial staff.
There are two kinds of managerial employees we have to consider. They
are those managerial employees who really manage. Take note, when
we talk about a managerial employee, we do not again look at the title.
We look at what his duties and functions are. Essentially, when you are a
manager, you have the discretion. Let us say, independent judgment as
to who you can hire, who you can fire, among others. You may be given
the title manager but if you do not exercise discretion, you cannot be
considered a managerial employee as mentioned here in Article 82. You
can be called sanitation manager. Just because there is “manager” does
not mean that he is a managerial employee.
The other kind of managerial employee contemplated under Art. 82 are
the members or officers of the managerial staff. This is further
elucidated in the Implementing Rules and Regulations.
MANAGERIAL EMPLOYEES
IMPLEMENTING RULES AND REGULATIONS BOOK 3 RULE 1
Section 2. Exemption - The provisions of this Rule shall not apply to the following
persons if they qualify for exemption under the conditions set forth herein:
(a) Government employees whether employed by the National Government or
any of its political subdivision, including those employed in government-owned
and/or controlled corporations;
(b) Managerial employees, if they meet all of the following conditions:
(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or sub-division thereof.
(2) They customarily and regularly direct the work of two or more employees
therein.

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(3) They have the authority to hire or fire employees of lower rank; or their
suggestions and recommendations as to hiring and firing and as to the promotion
or any other change of status of other employees, are given particular weight.
(c) Officers or members of a managerial staff if they perform the following
duties and responsibilities:
(1) The primary duty consists of the performance of work directly related to
management policies of their employer;
(2) Customarily and regularly exercise discretion and independent judgment; and
(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute, under general supervision, special assignments and
tasks; and
(4) Who do not devote more than 20 percent of their hours worked in a work week
to activities which are not directly and closely related to the performance of the
work described in paragraphs (1), (2) and (3) above.
(d) Domestic servants and persons in the personal service of another if they
perform such services in the employer's home which are usually necessary or
desirable for the maintenance and enjoyment thereof, or minister to the personal
comfort, convenience, or safety of the employer as well as the members of his
employer's household.
(e) Workers who are paid by results, including those who are paid on piece-
work, "takay," "pakiao" or task basis, and other non-time work if their output rates
are in accordance with the standards prescribed under Section 8, Rule VII, Book
Three of these regulations, or where such rates have been fixed by the Secretary
of Labor and Employment in accordance with the aforesaid Section.
(f) Non-agricultural 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.
Managerial employees, and other officers and members of the managerial staff are
excluded from the coverage of Arts. 82 to 96.
When we talk about managerial employees under Labor Standards, they are different
from the managerial employees under Labor Relations. We are talking about
managerial employees with regard to Articles 82 to 96.
Are supervisory employees within the term of “managerial employees” to be
excluded in Art. 82?
3. FIELD PERSONNEL
(f) Non-agricultural 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.
Requisites:
● Non-agricultural
● Outside of the office
● Hours of work cannot be determined with reasonable certainty
If a person is considered as a field personnel (when the 3 requisites are present),
then you are excluded from the application of Article 82 to 96 of the Labor Code.
If they are required to be at a specific place at a specific time, the employee cannot
be said to be a field personnel despite the fact that they are performing work at a
place away from the principal office of their employer. For example: drivers
The time and performance of a field personnel is also not supervised by the employer.
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In determining whether an employee’s actual working hours in the field can be
determined with reasonable certainty, there must be an investigation as to whether
or not such employee’s time and performance are constantly supervised by the
employer.
If usage of work hours are supervised by the employer, he cannot be considered as
a field personnel.
4. MEMBERS OF THE FAMILY OF THE EMPLOYER WHO ARE
DEPENDENT ON HIM FOR SUPPORT
Essentially when you hire your siblings or children as working for you. That
person also depends upon you for support. This is common in family
businesses. In that case, they are exempted from labor standards
provisions because there is an underlying relationship – the employee,
who is your relative, is dependent on you for support.
For example: A case was filed by a brother against the sister, alleging that he has
been working for her. There was no proof that he was employed.
5. DOMESTIC HELPERS OR PERSONS IN THE PERSONAL SERVICE
OF ANOTHER
(d) Domestic servants and persons in the personal service of another if
they perform such services in the employer's home which are usually
necessary or desirable for the maintenance and enjoyment thereof, or
minister to the personal comfort, convenience, or safety of the employer
as well as the members of his employer's household.
It is the employer’s household who is being served by the domestic helper or persons
in the personal service of another.
Labor Code : Article 145. Assignment to non-household work. No
househelper shall be assigned to work in a commercial, industrial or agricultural
enterprise at a wage or salary rate lower than that provided for agricultural or non-
agricultural workers as prescribed herein.
When domestic servants work not anymore in the employer’s household but in
connection to a commercial, industrial, or agricultural enterprise, you will no longer
be considered as a domestic worker or kasambahay. Rather, you will be considered
as a regular worker for agriculture or non-agriculture enterprise where the applicable
minimum wage will be applied to them. For kasambahays, there is a different
standard of wage provided for them.
6. WORKERS WHO ARE PAID BY RESULTS
(e) Workers who are paid by results, including those who are paid on
piece-work, "takay," "pakiao" or task basis, and other non-time work if their
output rates are in accordance with the standards prescribed under
Section 8, Rule VII, Book Three of these regulations, or where such rates
have been fixed by the Secretary of Labor and Employment in accordance
with the aforesaid Section.cralaw
Why are they excluded? They do not have specific hours of work. They are paid to
the extent of the work that they finish. It is not determinative of whether or not there
is an employer-employee relationship.
Do not confuse this arrangement for payment with the quota basis. If you are given
working hours and a quota to reach, that makes you a timed-worker. The quota is
merely for purposes of discipline and not as a piece-rate payment.
2 kinds of pakyaw workers
a. Piece Rate
b. Task Basis
WORKING CONDITIONS AND REST PERIODS
COVERAGE
National Sugar v. NLRC

FACTS: Petitioner National Sugar Refineries Corporation (NASUREFCO), a
corporation which is fully owned and controlled by the Government, operates three
(3) sugar refineries located at Bukidnon, Iloilo and Batangas.
Private respondent union represents the former supervisors of the
NASUREFCO Batangas Sugar Refinery In 1988, petitioner implemented a Job
Evaluation (JE) Program affecting all employees, from rank-and-file to department
heads. We glean from the records that for about ten years prior to the JE Program,
the members of respondent union were treated in the same manner as rank-and file
employees.
As such, they used to be paid overtime, rest day and holiday pay pursuant to the
provisions of Articles 87, 93 and 94 of the Labor Code as amended. With the
implementation of the JE Program, members of respondent union were re-classified
under levels S-5 to S-8 which are considered managerial staff for purposes of
compensation and benefits.
In June 1990, the members of herein respondent union filed a complaint with the
executive labor arbiter for non-payment of overtime, rest day and holiday pay
allegedly in violation of Article 100 of the Labor Code.
ISSUE: WON supervisory employees are within the term managerial employees
under Art. 82 and should no longer receive overtime, rest day, and holiday pay? YES,
they should no longer receive overtime, rest day, and holiday pay as a
consequence of the JEP.
HELD: As found out by the Court, the supervisory employees are under the
supervision of their respective department superintendents, and that generally, they
assist the latter in planning, organizing, staffing, directing, controlling, communicating
and in making decisions in attaining the company's set goals and objectives. These
supervisory employees are likewise responsible for the effective and efficient
operation of their respective departments. It is apparent that the members of
respondent union discharge duties and responsibilities which ineluctably qualify
them as officers or members of the managerial staff. Therefore, they are not
entitled to receive overtime, rest day, and holiday pay.
The controversy actually involved here seeks a determination of whether or not these
supervisory employees ought to be considered as officers or members of the
managerial staff.
Prior to the JE Program, the union members, while being supervisors, received
benefits similar to the rank-and-file employees such as overtime, rest day and holiday
pay, simply because they were treated in the same manner as rank-and-file
employees, and their basic pay was nearly on the same level as those of the latter,
aside from the fact that their specific functions and duties then as supervisors had
not been properly defined and delineated from those of the rank-and-file.
Hence, it can be safely concluded therefrom that the members of respondent union
were paid the questioned benefits for the reason that, at that time, they were rightfully
entitled thereto. Prior to the JE Program, they could not be categorically classified as
members or officers of the managerial staff considering that they were then treated
merely on the same level as rank-and-file. Not voluntary employee practice.
They were reclassified upon the implementation of the JE Program. In other
words, after the JE Program there was an ascent in position, rank and salary. This
in essence is a promotion which is defined as the advancement from one position to
another with an increase in duties and responsibilities as authorized by law, and
usually accompanied by an increase in salary. They are no longer entitled to the
benefits which attach and pertain exclusively to their positions.
- How is managerial employees different from supervisory employees?
- Managerial employee - exercise discretion, judgement, they are paid to
laydown and execute managerial the policies - even the title is not
manager, but is a member of managerial staff (under IIR OF the labor
code) they are also excluded. Supervisory employees are also excluded
if they have managerial function. - they recommend to managers, but they
have independent decisions and actions .
- Nomenclatures of jobs does not automatically exempt them, you have to
determine the nature of their job
San Miguel v. Democratic
FACTS: On January 27, 1955, the Democratic Labor Association filed complaint
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against the San Miguel Brewery, Inc. embodying 12 demands for the betterment of
the conditions of employment of its members. The company filed its answer to the
complaint specifically denying its material averments and answering the demands
point by point. The company asked for the dismissal of the complaint.
After the morning roll call, the employees leave the plant of the company to go on
their respective sales routes either at 7:00 a.m. for soft drinks trucks, or 8:00 a.m. for
beer trucks. They do not have a daily time record. The company never require them
to start their work as outside sales personnel earlier than the above schedule.
These employees receive monthly salaries and sales commissions in variable
amounts. The amount of compensation they receive is uncertain depending upon
their individual efforts or industry.
CIR : Outside or field sales personnel are entitled to the benefits of the Eight-Hour
Labor Law.
ISSUE: Is the Eight-Hour Labor Law applicable to field sales personnel? NO.
HELD: This was with regard to salesmen or salesperson in connection to the 8-Hour
Labor Law which is now included in the Labor Code. The 8-Hour Labor Law only
has application when the employee or laborer is paid in a monthly or daily basis
or is paid in hourly or daily compensation. In which case, if he is to work beyond
the requisite period of 8 hours, he should be paid additional compensation.
This law has no application when the employee or laborer is paid on a piece-
work, pakyaw, or commission basis regardless of the time employed. The
philosophy behind this is that his earnings are in the form of commission based on
the gross receipts of the day. His participation depends upon his industry so that the
more hours he employs in the work, the greater are his gross returns and the higher
the commission.
Commissions were extra compensation for their industry. True, that in this case,
the employees are paid in fixed salary for their service but for their extra work, they
are paid a commission which is in view of extra compensation to which they are
entitled.
Field sales personnel receiving regular monthly salaries are not subject to the 8-
hour Labor Law therefore if they work more than 8 hours, they are not entitled to
overtime pay.
The reasons for excluding an outside salesman are fairly apparent. Such salesman,
to a greater extent, works individually. There are no restrictions respecting the time
he shall work and he can earn as much or as little, within the range of his ability, as
his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject
to the personal supervision of his employer, and his employer has no way of knowing
the number of hours he works per day.
- Remember the reason why overtime pay is not entitled to them because
their hours of work is not known
Union Filipino v. Vivar
FACTS: This labor dispute stems from the exclusion of sales personnel from the
holiday pay award and the change of the divisor in the computation of benefits
from 251 to 261 days.
Respondent Filipro, Inc. (now Nestle Philippines, Inc.) filed with the National Labor
Relations Commission (NLRC) a petition for declaratory relief seeking a ruling on its
rights and obligations respecting claims of its monthly paid employees for holiday pay
in the light of the Court's decision in Chartered Bank Employees Association v. Ople.
Filipro filed a motion for clarification seeking (1) the limitation of the award to three
years, (2) the exclusion of salesmen, sales representatives, truck drivers,
merchandisers and medical representatives (hereinafter referred to as sales
personnel) from the award of the holiday pay, and (3) deduction from the holiday pay
award of overpayment for overtime, night differential, vacation and sick leave benefits
due to the use of 251 divisor.
ISSUE: Whether or not Nestle’s sales personnel are entitled to holiday pay? NO.

HELD: When we say field personnel under Art. 82, it means that their actual hours of
work in the field outside of the office cannot be reasonably ascertained. In this case,
with regard to sales personnel, the company has no way of determining whether
or not these sales personnel were really doing their work, going from one place to
another.
The requirement that actual hours of work in the field cannot be determined with
certainty must be read in conjunction with the implementing rules – field personnel
and other employees whose time and performance is unsupervised by the employer
did not amplify but merely interpreted and expounded the clause "whose actual hours
of work in the field cannot be determined with reasonable certainty."
To determine if the employee is a field personnel excluded under Art. 82 – whether
or not the employee’s actual working hours in the field can be determined with
reasonable certainty, query must be made as to whether or not such employee's time
and performance is constantly supervised by the employer.
In this case, the salesmen were not supervised. They had this Supervisor of the
Day (SOD) schedule, but it is just a schedule and does not signify what they really
did during the day. The purpose of this schedule is merely to ensure that the sales
personnel are out of the office not later than 8:00 a.m. and are back in the office not
earlier than 4:00 p.m.
The criteria for granting incentive bonus are: (1) attaining or exceeding sales volume
based on sales target; (2) good collection performance; (3) proper compliance with
good market hygiene; (4) good merchandising work; (5) minimal market returns; and
(6) proper truck maintenance. (Rollo, p. 190).
The above criteria indicate that these sales personnel are given incentive bonuses
precisely because of the difficulty in measuring their actual hours of field work. These
employees are evaluated by the result of their work and not by the actual hours of
field work which are hardly susceptible to determination.
The reasons for excluding an outside salesman are fairly apparent. Such a salesman,
to a greater extent, works individually. There are no restrictions respecting the time
he shall work and he can earn as much or as little, within the range of his ability, as
his ambition dictates. In lieu of overtime he ordinarily receives commissions as extra
compensation. He works away from his employer's place of business, is not subject
to the personal supervision of his employer, and his employer has no way of knowing
the number of hours he works per day.
Holiday Pay (251 or 261 as divisor). Following the criterion laid down in
the Chartered Bank case, the use of 251 days' divisor by respondent Filipro indicates
that holiday pay is not yet included in the employee's salary, otherwise the divisor
should have been 261. There is thus no merit in respondent Nestle's claim of
overpayment of overtime and night differential pay and sick and vacation leave
benefits, the computation of which are all based on the daily rate, since the daily rate
is still the same before and after the grant of holiday pay.
However, prior to their being declared null and void, the implementing rule and policy
instruction enjoyed the presumption of validity and hence, Nestle's non-payment of
the holiday benefit up to the promulgation of the IBAA case on October 23, 1984
was in compliance with these presumably valid rule and policy instruction.
1984: Fairer reckoning point. Operative fact doctrine.
Auto Bus v. Bautista
FACTS: Antonio Bautista has been employed by Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor with travel routes Manila-Tuguegarao via Baguio,
Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio. Respondent was
paid on commission basis, seven percent (7%) of the total gross income per travel,
on a twice a month basis.
On 03 January 2000, while he was driving Autobus No. 114 along Sta. Fe, Nueva
Vizcaya, the bus he was driving accidentally bumped the rear portion of Autobus No.
124, as the latter vehicle suddenly stopped at a sharp curve without giving any
warning. He averred that the accident happened because he was compelled by the
management to go back to Roxas, Isabela, although he had not slept for almost
twenty-four (24) hours, as he had just arrived in Manila from Roxas, Isabela.
Respondent further alleged that he was not allowed to work until he fully paid the
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amount of P75,551.50, representing thirty percent (30%) of the cost of repair of the
damaged buses and that despite respondent’s pleas for reconsideration, the same
was ignored by management.
After a month, management sent him a letter of termination. Thus, on 02 February
2000, respondent instituted a Complaint for Illegal Dismissal with Money Claims for
nonpayment of 13th month pay and service incentive leave pay against Autobus.
Petitioner, on the other hand, maintained that respondent’s employment was replete
with offenses involving reckless imprudence, gross negligence, and dishonesty. To
support its claim, petitioner presented copies of letters, memos, irregularity reports,
and warrants of arrest pertaining to several incidents wherein respondent was
involved. Furthermore, petitioner avers that in the exercise of its management
prerogative, respondent’s employment was terminated only after the latter was
provided with an opportunity to explain his side regarding the accident on 03 January
2000.
ISSUE: Is Antonio Bautista entitled to service incentive leave? YES, he was not a
field personnel but a regular employee.
HELD: YES. The issue revolves around the proper interpretation of
Article 95 of the Labor Code vis-à-vis Section 1(D), Rule V, Book III of
the Implementing Rules and Regulations of the Labor Code which
provides:
The grant of service incentive leave has been delimited by the Implementing Rules
and Regulations of the Labor Code to apply only to those employees not explicitly
excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall not apply to
employees classified as "field personnel." The phrase "other employees whose
performance is unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of field
personnel under the Labor Code as those "whose actual hours of work in the field
cannot be determined with reasonable certainty."
At this point, it is necessary to stress that the definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs his duties
but also with the fact that the employee’s performance is unsupervised by the
employer.
As discussed above, field personnel are those who regularly perform their duties
away from the principal place of business of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also necessary to ascertain
if actual hours of work in the field can be determined with reasonable certainty by the
employer. In so doing, an inquiry must be made as to whether or not the employee’s
time and performance are constantly supervised by the employer.
Can he be considered as a field personnel and as such not entitled to service
incentive leave?
No, because Bautista was still under the constant supervision by his employer. It is
of judicial notice that along the routes that are plied by these bus companies, there
are its inspectors assigned at strategic places who board the bus and inspect the
passengers, the punched tickets, and the conductor’s reports.
There is also the mandatory once-a-week car barn or shop day, where the bus is
regularly checked as to its mechanical, electrical, and hydraulic aspects, whether or
not there are problems thereon as reported by the driver and/or conductor.
They too, must be at specific place as specified time, as they generally observe
prompt departure and arrival from their point of origin to their point of destination. In
each and every depot, there is always the Dispatcher whose function is precisely to
see to it that the bus and its crew leave the premises at specific times and arrive at
the estimated proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered as field personnel. Thus he, is
entitled to service incentive leave.
Atty. Jazzie’s Discussion
We have here a bus driver whose route is from Manila-Tuguegarao. If you just look
at that fact, it may appear that he is a field personnel. But again, when do we consider

an employee as a field personnel and therefore not entitled to these labor standards?
Field Personnel – those who regularly perform their duties away from the principal
place of business of the employer and whose actual hours of work in the field cannot
be determined with reasonable certainty.
With regard to this driver, along the road there are inspectors assigned at strategic
places to ensure they are travelling on time and on the same route. There is also that
mandatory once-a-week car barn or shop day. Clearly, respondent here is not as field
personnel but rather a regular employee that is entitled to service incentive leave pay.
- Does it necessarily mean that once you are a bus driver you are already
considered a field personnel exempted by article 82? No, xx you must first
ask whether rtthey employee is supervised
Dasco v. Philtranco
CASE: This is a complaint for regularization, underpayment of wages, non-payment
of service incentive leave (SIL) pay, and attorney’s fees, filed by the petitioners
against Philtranco Service Enterprises Inc., (PSEI).
FACTS: On various dates from 2006 to 2010, the petitioners were employed by the
respondents as bus drivers and/or conductors with travel routes of Manila
(Pasay) to Bicol, Visayas and Mindanao, and vice versa. On July 4, 2011, the
petitioners filed a case against the respondents alleging that:
1) they cannot be considered as field personnel because their working hours
are controlled by the respondents from dispatching to end point and their
travel time is monitored and measured by the distance because they are
in the business of servicing passengers where time is of the essence; and
In response, the respondents asserted that:
1) the petitioners are not entitled to overtime pay and SIL pay because they
are field personnel whose time outside the company premises cannot be
determined with reasonable certainty since they ply provincial routes and
are left alone in the field unsupervised.
ISSUE: Are the bus drivers and conductors field personnel and thus not entitled to
service incentive leave pay? No, they are not field personnel BUT regular
employees who perform tasks usually necessary and desirable to the
respondents’ business.
HELD: No, they are not field personnel and thus entitled to service incentive leave
pay. The determination of whether bus drivers and/or conductors are considered as
field personnel was already threshed out in the case of Auto Bus Transport Systems,
Inc. v. Bautista, where the Court explained that:
As a general rule, field personnel are those whose performance of their job/service
is not supervised by the employer or his representative, the workplace being away
from the principal office and whose hours and days of work cannot be determined
with reasonable certainty; hence, they are paid specific amount for rendering specific
service or performing specific work. If required to be at specific places at specific
times, employees including cannot be said to be field personnel despite the fact that
they are performing work away from the principal office of the employee.
At this point, it is necessary to stress that the definition of a "field personnel" is not
merely concerned with the location where the employee regularly performs is
unsupervised by the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of business of the
employer and whose actual hours of work in the field cannot be determined with
reasonable certainty.
Thus, in order to conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be determined with
reasonable certainty by the employer. In so doing, an inquiry must be made as to
whether or not the employee’s time and performance are constantly supervised
by the employer.
Guided by the foregoing norms, the NLRC properly concluded that the petitioner are
not field personnel but regular employees who perform tasks usually necessary and
desirable to the respondents’ business. Evidently, the petitioners are not field
personnel as defined above and the NLRC’s finding in this regard is supported by the
established facts of this case:
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1) the petitioners, as bus drivers and/or conductors, are directed to transport
their passengers at a specified time and place;
2) they are not given the discretion to select and contract with prospective
passengers;
3) their actual work hours could be determined with reasonable certainty, as
well as their average trips per month; and
4) the respondents supervised their time and performance of duties.
In order to monitor their drivers and/or conductors, as well as the passengers and the
bus itself, the bus companies put checkers, who are assigned at tactical places along
the travel routes that are plied by their buses. The drivers and/or conductors are
required to be at the specific bus terminals at a specified time. In addition, there are
always dispatchers in each and every bus terminals, who supervise and ensure
prompt departure at specified times and arrival at the estimated proper time.
Obviously, these drivers and/or conductors cannot be considered as field personnel
because they are under control and constant supervision of the bus companies
while in the performance of their work. As correctly observed by the NLRC: It is
undisputed that the bus drivers/conductors ply specific routes of PSEI, averaging 2
to 5 days per round trip. They follow fixed time schedules of travel and follow the
designated route of PSEI.
Thus, in carrying out their functions as bus drivers/conductors, they are not at liberty
to deviate from the fixed time schedules for departure or arrival or change the routes
other than those specifically designated for PSEI, in accordance with the franchise
granted to the PSEI, as a public utility provider. In other words, petitioners are clearly
under the strict supervision and control of PSEI in the performance of their functions
otherwise the latter will not be able to carry out its business as public utility service
provider in accordance with its franchise.
The Court agrees with the above-quoted findings of the NLRC. Clearly, the
petitioners, as bus drivers and/or conductors, are left alone in the field with the duty
to comply with the conditions of the respondents’ franchise, as well as to take proper
care and custody of the bus they are using. Since the respondents are engaged in
the public utility business, the petitioners, as bus drivers and/or conductors, should
be considered as regular employees of the respondents because they perform tasks
which are directly and necessarily connected with the respondents’ business.
Thus, they are consequently entitled to the benefits accorded to regular employees
of the respondents, including overtime pay and SIL pay.
Atty. Jazzie’s Discussion
We have here bus drivers and conductors. As determined by the Supreme Court,
they were monitored – there were checkers assigned at tactical places along the
routes and they are required to be at the terminal at a specific time. There are
dispatchers at each and every bus terminal to supervise and ensure prompt departure
at specified times and arrival at the estimated proper time.
If required to be at specific places at specific times, these drivers cannot be said to
be field personnel, despite performing work away from the principal office of the
employer.
In deciding whether or not the employee’s actual working hours in the field can be
determined with reasonable certainty, a query must be made as to whether or not
such employee’s time and performance is constantly supervised by the
employer. That phrase in the IRR – “whose time and performance is unsupervised
by the employer” – that is not an additional requirement that is provided under the
Labor Code. Rather it just further explains when you determine whether or not the
actual working hours can be determined with reasonable certainty.
For field personnel to be excluded from these labor standards under Article 82-96,
not agricultural, out of the office, and hours of work cannot be determined with
reasonable certainty. Time and performance is unsupervised by the employer.
- There are inspectors in certain locations, there is control once a week
where the bus is barned, and the bus must be at a specific place and time,
and dispatchers also monitor the coming and going of the bus. So its easy
for the company to monitor them. This makes them regular employees,
and article 82 - 96 of the labor court is therefore applicable to them
HOURS OF WORK

LABOR CODE Article 83. Normal hours of work. The normal hours of work of
any employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a population of at least one
million (1,000,000) or in hospitals and clinics with a bed capacity of at least one
hundred (100) shall hold regular office hours for eight (8) hours a day, for five
(5) days a week, exclusive of time for meals, except where the exigencies of the
service require that such personnel work for six (6) days or forty-eight (48) hours,
in which case, they shall be entitled to an additional compensation of at least
thirty percent (30%) of their regular wage for work on the sixth day. For
purposes of this Article, "health personnel" shall include resident physicians,
nurses, nutritionists, dietitians, pharmacists, social workers, laboratory
technicians, paramedical technicians, psychologists, midwives, attendants and all
other hospital or clinic personnel.
The eight hour work day was enacted primarily to safeguard the health and welfare
of the laborer or employee. It is also a way to minimize unemployment by forcing
employers, in cases of work which is more than 8 hours, to utilize different shifts of
laborers or employees working only for 8 hours a day.
The 8-hour law is also for the benefits of the employees so that they could have more
time to have meaningful lives or enjoy other aspects of life. This must be complied
with by the employer.
Take Note: It shall not exceed 8 hours a day. Therefore, you can work for less than
8 hours and have part-time jobs.
Who are included: resident physicians, nurses, nutritionists, dietitians, pharmacists,
social workers, laboratory technicians, paramedical technicians, psychologists,
midwives, attendants and all other hospital or clinic personnel.
Effect if the employee exceeds 8 hours: He is entitled to overtime pay.
If there is a training agreement, duly accredited by the government office, between
the resident physician and the hospital, the labor code is not applicable because there
is no employer-employee relationship.
Concept of a Working Day
It is not identical to a calendar day. According to the rule of 24 consecutive hours
beginning its day at the time of the first hour of work. The length is the same as that
of a calendar day but the time when it begins is not the same as that of a specific
calendar day.
If you go to work and your work is from 8:00 am to 5:00 pm (with 12:00 nn to 1:00 pm
as break), then that is your working hours or working day.
If you are not made to work for more than 8 hours for a working day, then you are not
entitled to overtime pay.
Scenario: You work 8-5 and reported at 10 am and worked for additional hours. You
did not work for more than 8 hours because you started your working day at 10:00
am. Therefore, you are not entitled to overtime pay.
Establishments with 3 shifts. (day, afternoon, night shifts) If you were made to work
from 7 am to 3 pm and 11 pm to 1 am, you will not be entitled to overtime since within
a working day, you already exceed 8 hours of work.
Under our Labor Law, it is prohibited that you offset your overtime hours from
undertime hours.
Article 88. Undertime not offset by overtime. Undertime work on any particular
day shall not be offset by overtime work on any other day. Permission given to the
employee to go on leave on some other day of the week shall not exempt the
employer from paying the additional compensation required in this Chapter.
If you worked for more than 8 hours for 1 working day, you will be entitled to overtime
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pay.
COMPRESSED WORK WEEK ARRANGEMENT
The Department of Labor already issued a Memorandum for a compressed work
week. An employer will work for more than 8 hours per working day for 4 days instead
of 5 days. This is to address the issue of traffic especially in NCR.
Take note that even with this Memorandum, Article 83 was never amended or
repealed. There would be legal basis since a Memorandum cannot repeal a Law.
- Force leave
- Compressed work week
- Broken time schedule
Article 84. Hours worked. Hours worked shall include
(a) all time during which an employee is required to be on duty or to be at a
prescribed workplace; and
(b) all time during which an employee is suffered or permitted to work.
Rest periods of short duration during working hours shall be counted as hours
worked.
Book III Rule 1 of Omnibus Rules to Implement the Labor Code:
SECTION 3. Hours worked. — The following shall be considered as
compensable hours worked:
(a) All time during which an employee is required to be on duty or to be at the
employer's premises or to be at a prescribed work place; and
(b) All time during which an employee is suffered or permitted to work.
In addition to that, we have Section 4.
What are the principles in determining that the time spent by an employee is
considered hours worked?
GUIDELINES
SECTION 4. Principles in determining hours worked. — The following general
principles shall govern in determining whether the time spent by an employee is
considered hours worked for purposes of this Rule:
(a) All hours are hours worked which the employee is required to give his
employer, regardless of whether or not such hours are spent in productive labor
or involve physical or mental exertion.
(b) An employee need not leave the premises of the work place in order that his
rest period shall not be counted, it being enough that he stops working, may rest
completely and may leave his work place, to go elsewhere, whether within or
outside the premises of his work place.
(c) If the work performed was necessary, or it benefited the employer, or the
employee could not abandon his work at the end of his normal working hours
because he had no replacement, all time spent for such work shall be considered
as hours worked, if the work was with the knowledge of his employer or
immediate supervisor.
(d) The time during which an employee is inactive by reason of interruptions in
his work beyond his control shall be considered working time either if the
imminence of the resumption of work requires the employee's presence at the
place of work or if the interval is too brief to be utilized effectively and gainfully in
the employee's own interest.
What about the preliminary activities before an employee begins his work? For
instance, wearing of gloves, apron, hair net, or safety glasses before going to

work. Are they compensable? Generally, they are deemed as working hours when
they are required or controlled by the employer and pursued necessarily for the
employer’s benefit.
Employees who are required to suit up before the work (PPEs).
SECTION 5. Waiting time. —
(a) Waiting time spent by an employee shall be considered as working time if
waiting is an integral part of his work or the employee is required or engaged by
the employer to wait.
(b) An employee who is required to remain on call in the employer's premises or
so close thereto that he cannot use the time effectively and gainfully for his own
purpose shall be considered as working while on call.
An employee who is not required to leave word at his home or with company
officials where he may be reached is not working while on call.
Between “engaged to wait” and “waiting to be engaged”, which one is
compensable? In determining whether waiting time constitutes working time, the
controlling factor is whether such waiting time spent is so spent predominantly for
the employer’s benefit or for the employee.
Engaged to Wait Waiting to be Engaged
Compensable Not compensable
Waiting is an integral part or required
When a truck driver that is waiting for his cargo to be unloaded from the container,
his waiting time is compensable as it is an integral part of his work. When a truck
driver has delivered the cargo by 12nn and was asked by his employer to come back
by 6pm to make another delivery. That waiting time between 12:01pm until 6pm,
when he is free to do other activities, is not compensable.
If a driver is designated to arrive at a designated location. For example Gensan. He
leaves at 9 am. He is merely waiting to be engaged. There is idle time but such is not
engaged to wait.
What about coffee breaks? Employees are allowed to have coffee breaks. Such
coffee breaks are compensable, provided that the employee does not go outside the
working place.
What about working while eating? Not automatically compensable. You need to
consider the circumstances of the case.
Not compensable when the employee is completely free from his duty even if he is
inside the work premises.
Rest periods shall not exceed 20 minutes to be considered as working hours.
Philippine Graphic Arts v. NLRC
FACTS: In October, 1984, the petitioner corporation was forced by economic
circumstances to require its workers to go on mandatory vacation leave in batches of
seven or nine for periods ranging from 15, 30, to 45 days. The workers were paid
while on leave but the pay was charged against their respective earned leaves.
As a result, the private respondents filed complaints for unfair labor practice and
discrimination.
LA dismissed the complaint.
ISSUE: Is the forced vacation leave without pay an unfair labor practice? NO.
HELD: The Court is convinced from the records now before it, that there was no
unfair labor practice. As found by the NLRC, the private respondents themselves
never questioned the existence of an economic crisis but, in fact, admitted its
existence.
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A consensus was reached. There is basis for the petitioner's contentions that the
reduction of work schedule was temporary, that it was taken only after notice and
consultations with the workers and supervisors, that a consensus was reached on
how to deal with deteriorating economic conditions and reduced sales and that the
temporary reduction of working days was a more humane solution instead of a
retrenchment and reduction of personnel. The petitioner further points out that this is
in consonance with the collective bargaining agreement between the employer and
its employees.
The decision to resort to forced leaves was, under the circumstances, a
management prerogative. The workers' claim of non-resort. to the grievance
machinery is negated by their failure to initiate steps for its employment.
This was the discussion in the case of Philippine Graphic Arts v. NLRC where the SC
upheld the forced leave arrangement because it was also agreed upon by the
parties. This was to prevent losses on the part of the employer and at the same time
protecting the employees source of income. So, it is to balance the respective rights
of both the employers and the employees.
San Juan de Dios v. NLRC
Note: RA 5901 “An act prescribing 40 hours a week of labor for government and
private hospitals or clinic personnel”
FACTS: Petitioners, the rank-and-file employee-union officers and members of San
Juan De Dios Hospital Employees Association, sent on July 08, 1991, a "four (4)-
page letter with attached support signatures . . . requesting and pleading for the
expeditious implementation and payment by respondent" Juan De Dios Hospital "of
the '40-HOURS/5-DAY WORKWEEK' with compensable weekly two (2) days off
provided for by Republic Act 5901 as clarified for enforcement by the Secretary of
Labor's Policy Instructions No. 54 dated April 12, 1988."
Policy Instructions no. 54 : Working Hours and Compensation of Hospital/Clinic
Personnel. In effect, RA 5901 requires that the covered hospital workers who used
to work seven (7) days a week should be paid for such number of days for working
only 5 days or 40 hours a week.
The evident intention of RA 5901 is to reduce the number of hospital personnel,
considering the nature of their work, and at the same time guarantee the payment to
them of a full weekly wage for seven (7) days.
Consistent with such spirit and intent, it is the position of the Department that
personnel in subject hospital and clinics are entitled to a full weekly wage for seven
(7) days if they have completed the 40-hour/5-day workweek in any given workweek.
ISSUE: Are petitioners entitled to a full weekly salary with paid two days off if they
have completed the 40 hours/5-day workweek? No, they are not.
HELD: A cursory reading of Article 83 of the Labor Code betrays petitioners'
position that "hospital employees" are entitled to "a full weekly salary with paid two
(2) days' off if they have completed the 40-hour/5-day workweek". What Article 83
merely provides are: (1) the regular office hour of eight hours a day, five days per
week for health personnel, and (2) where the exigencies of service require that health
personnel work for six days or forty-eight hours then such health personnel shall
be entitled to an additional compensation of at least thirty percent of their regular
wage for work on the sixth day.
There is nothing in the law that supports then Secretary of Labor's assertion that
"personnel in subject hospitals and clinics are entitled to a full weekly wage for seven
(7) days if they have completed the 40-hour/5-day workweek in any given workweek".
Policy Instructions No. 54 being inconsistent with and repugnant to the provision of
Article 83 of the Labor Code, as well as to Republic Act No. 5901, should be, as it is
hereby, declared void.
With regard to that 2-day rest period, are the health personnel entitled to a
compensation pay for the 2-day rest period? No. The law provides that they are
entitled to two rest days in every 5 consecutive days of work, but if they work on the
6th consecutive day, they will get an additional compensation of 30%. But there is
nothing in Article 83 of the Labor Code that they are entitled to be paid on that 2-day
rest period or rest days.

Take note of what we have already learned under Article 83, in connection with Article
91, specifically with regard to health personnel of hospitals with 100-bed capacity,
the employee can work for 5 consecutive days only.
If they work on the 6th consecutive day, they get additional premium of 30
percent. We might encounter few cases in relation to the Blue Sunday Law. It’s an
old law, but with the enactment of the Labor Code, the Blue Sunday Law has already
been repealed.
Pan American v. Pan American
FACTS: Pan American Airways claims that the one-hour meal period should not be
considered as overtime work because the evidence showed that its employees could
rest completely and were not in any manner under the control of the company during
the said one- hour period.
ISSUE: Whether or not the one-hour period is considered as working time? YES.
HELD: The one-hour meal period is a working time and thus, compensable. The
court found that during that one-hour meal period, the employees (mechanics) were
required to stand by for emergency work; that if they happened not to be available
when called, they were reprimanded by the leadman; that as in fact it happened on
many occasions, the mechanics had been called from their meals or told to hurry up
eating to perform work during this period.
Why is there a need to determine whether the one-hour meal period is a working
hour? It is important to determine whether such meal period is considered a working
time because the employees (mechanics) in this case are claiming for overtime pay.
If such meal period is not considered a working time, then the Pan American
employees cannot demand for an overtime.
When we talk about this concept of working while eating, it is not compensable if
the employee is completely free from his duties, even if he does not leave the
workplace.
In this case, they were not free. They are required to work immediately when a plane
arrives, even if they were eating. When they fail to do so, they would be reprimanded
by their leadman. In subsequent articles, we will know that such rest periods shall not
exceed 20 minutes, including the coffee breaks or snacks.
Working While Sleeping
If such sleeping falls under the situation of being ‘engaged to wait’, it is
compensable. As long as they are under supervision.
Take for example the airplane mechanics. If, say, flights are delayed, such mechanics
will just be waiting for the planes to arrive and, in the course of waiting, they may fall
asleep. Such waiting time (including their sleep) is compensable because they are
engaged to wait. Their sleep can be interrupted anytime. This is, of course, under the
condition that the employee do not leave the workplace.
ON-CALL
General Rule: It is compensable.
However, we have to determine when is an ‘on call’ arrangement compensable.
‘On call’ arrangement may be compensable when an employee is at the employer’s
premises, similar to those who sleep while waiting, and can be called anytime to
perform his tasks. He may go outside, provided, that he is so close to the employer’s
premises that he may not be able to use his time for personal purposes. Such ‘on
call’ arrangement may be considered compensable.
Take note, for an ‘on call’ arrangement to be compensable, first, there must be and
employer-employee relationship that exists. Second, the employee should not be free
to do other things or personal activities during the ‘on call’ waiting period. If the
employee is free to do other things or personal activities, such ‘on call’ waiting period
is not compensable.
That’s what you have to watch out for. Not every situation that the worker is on call is
always compensable. You have to look at the scenario or arrangement for that
person. If he can do other things while on the on-call arrangement, then such
work is not compensable.
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When we say on call that is compensable, even if you are not doing anything, that is
compensable as long as you are under the control of the employer. But when we say
that you are on call and you are idle [not necessarily idle, but you should always have
your phone or internet so you can be contacted], that is not compensable. But when
you start working, that’s when it becomes compensable. It is not automatic, you
have to look at the circumstances of each case.
TRAVEL TIME
Going to and from work, that will not be considered as part of the 8 hours.
General Rule: The time spent traveling to and from the place of work is not
considered as working time.
But you also have to consider these factors:
1. If the employee is bound to travel in a conveyance furnished by the
employer, or free to choose his conveyance.
If he's free, then it's not working hours. Whether or not during the travel,
he is subject to employer supervision and control. If he is, then it is
considered as working hours.
2. If the travel takes place under vexing and dangerous conditions, that
would also be considered as working hours.
When is it considered as working hours?
Travel to and from the workplace is not work time. But if the employee receives an
emergency call outside of his regular working hours and he is asked to report
immediately to the office, the travel from home to work can be considered as
compensable hours
Travel in a day's work/Travel is part of your work
EX: Medical representatives have fixed salary but they also earn commissions. They
need to travel. Since they have to submit a report on which clinics they went to within
that day, then the travel time from one doctor to another is counted as working hours.
Construction workers have many projects. Their travel time from one project to
another is considered as compensable hours. Wherein such travel is continued as
hours worked so it is covered in the eight- hour period.
But for example instead of travelling from one project to another, you go home and
rest, then that is not part of the compensable hours.
Travel Away from Home
General Rule: Considered as working time when it comes across or coincides with
the employee's regular working hours.
If, for example, you are required to travel to another place for your work, then that will
be considered as work time. It is compensable when it comes across or coincides
with the employee's regular working hours.
SECTION 6. Lectures, meetings, training programs. — Attendance at lectures,
meetings, training programs, and other similar activities shall not be counted as
working time if all of the following conditions are met:
(a) Attendance is outside of the employee's regular working hours;
(b) Attendance is in fact voluntary; and
(c) The employee does not perform any productive work during such attendance.
Sibal v. Notre Dame
FACTS: Delia R. Sibal was employed as school nurse by Notre Dame of Greater
Manila starting January 1973. Prior to school year 1976- 1977, she was compensated
on a 12-month basis, although she worked only during the ten-month period of
classes. She was not required to report for work for the entire Christmas and summer
vacations.
However, on March 10, 1976, Notre Dame’s director, Fr. Enrique Gonzales,
requested Sibal to shorten her summer vacation, from two weeks after the last day

of classes to two weeks before the first day of classes of the next school year. Sibal
acceded to the request.
Again, sometime in April 1980, Fr. Gonzales required Sibal to report during that
summer to help in the library. Sibal contested the order, stating that it will
necessitate a change in the terms and conditions of her employment and that library
work is alien to her profession as nurse. Fr. Gonzales relented.
In November 1980, Fr. Gonzales was replaced by Fr. Pablo Garcia. Fr. Garcia
required Sibal to report for work during the summer before the beginning of school
year 1981-1982. In return, Sibal informed him that her contract does not require her
to report for work during the summer vacation.
That time, Sibal did not receive her vacation pay. During school year 1981-1982,
Sibal was assigned to teach health subjects to 900 students because the two (2)
teachers of the health subjects had left the school. For this work, she was not given
compensation for teaching. In December 1981, petitioner received her 13th month
pay which was computed on the basis of a 10-month period only.
On April 5, 1982, Fr. Garcia again required petitioner to work during that summer to
update all the clinical records of the students. Sibal objected to the order by reiterating
that her contract does not require her to report for work during summer. In addition,
she reminded Fr. Garcia that she had not received any compensation for teaching
health subjects the past school year.
Failing to receive the compensation demanded, on May 10, 1982, Sibal filed a
complaint. Summons was served on respondent school on the opening day of
classes but on the same day also Notre Dame served Sibal her letter of termination
effective immediately.
ISSUES: (1) Whether or not Sibal illegally terminated? YES
(2) Whether or not the semestral break is part of hours worked? YES
RULING: (1) Yes. Sibal was illegally terminated without prior notice and without giving
her a chance to defend herself. While it is true that it is the sole prerogative of the
management to dismiss or lay-off an employee, the exercise of such a prerogative,
however, must be made without abuse of discretion, for what is at stake is not only
private respondent's position (petitioner in this case) but also his means of livelihood.
(2) Yes. The Supreme Court cited the case of University of Pangasinan Faculty Union
v. University of Pangasinan which stated that semestral breaks may be considered
as "hours worked" under the Rules implementing the Labor Code and that regular
professors and teachers are entitled to ECOLA during the semestral breaks, their
"absence" from work not being of their own will.
Why is the semestral break considered as hours worked with regard to these
teachers? Because the semestral break is outside of the control of the employee.
We are only talking about the regular employees. This cannot apply for part-time
teachers as they are paid per semester only. What is covered here as semestral
break considered as hours work is with regard to regular professors and teachers.
With regard to 8 hours work, if an employer alleges that the employee works less
than the required hours, the employer bears the burden of proving his allegation that
the employee worked less than the normal hours of employment with substantial
evidence.
Entitled to compensation for teaching health subjects. Although the subject
taught is Health and allied to her profession, and is taught during regular working
hours, petitioner's teaching the subject in the classroom and her administering to the
health needs of students in the clinic involve two different and distinct jobs. They
cannot be equated with each other for they refer to different functions.
Article 85. Meal periods. Subject to such regulations as the Secretary of Labor
may prescribe, it shall be the duty of every employer to give his employees not
less than sixty (60) minutes time-off for their regular meals. This is non-
compensable
GR: The one-hour mealtime is not compensable. This is because the employer
has no control of where you will eat, or how you spend your mealtime. As long as it's
not less than 60 minutes. However, if it is predominantly spent for the employer's
benefit, as what happened in the case of Pan American, even if their lunch break is
an hour but anytime they can be called to work, then it is compensable.
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It is also compensable even if it is less than 60 minutes, but in no case shall it be
shorter than 20 minutes. That is based on Section 7 of the IRR Rule.
SECTION 7. Meal and Rest Periods. — Every employer shall give his
employees, regardless of sex, not less than one (1) hour time-off for regular meals,
except in the following cases when a meal period of not less than twenty (20)
minutes may be given by the employer provided that such shorter meal period is
credited as compensable hours worked of the employee:
(a) Where the work is non-manual work in nature or does not involve strenuous
physical exertion;
(b) Where the establishment regularly operates not less than sixteen (16) hours a
day;
(c) In case of actual or impending emergencies or there is urgent work to be
performed on machineries, equipment or installations to avoid serious loss which
the employer would otherwise suffer; and
(d) Where the work is necessary to prevent serious loss of perishable goods. Rest
periods or coffee breaks running from five (5) to twenty (20) minutes shall be
considered as compensable working time.
Luzon Stevedoring v. Luzon Marine
FACTS: On June 21, 1948, herein respondent Luzon Marine Department Union filed
a petition with the Court of Industrial Relations containing several demands against
herein petitioner Luzon Stevedoring Co., Inc., among which were the petition for full
recognition of the right of COLLECTIVE bargaining, close shop and check off.
However, on July 18, 1948, while the case was still pending with the CIR, said labor
union declared a strike which was ruled down as illegal by this Court in G.R. No. L-
2660 promulgated on May 30, 1950. In view of said ruling, the Union filed a
"Constancia" with the Court of Industrial Relations praying that the remaining
unresolved demands of the Union presented in their original petition be granted.
ISSUE: WON the definition of Hours of Work as presently applied to dry land laborers
was equally applicable to seamen?
Were they entitled to overtime pay? Yes.
HELD: No. In this particular case, The Supreme Court ruled that it does not need to
set a criterion different of that from that applied to laborers on land. For under the
provisions of Section 1, Commonwealth Act Number 444, the only thing to be done
is to determine the meaning and scope of the term working place.
Working Place
A laborer need not leave the premises of the factory, shop or boat in order that his
period of rest shall be counted, it being enough that he ceases to work, rest
completely and leave or may leave at his will the spot where he is actually staying
while working, to go somewhere else, whether within or outside the premises of the
said factory, shop or boat. If these requisites are complied with, the period of such
rest will not be counted.
NOTE: The circumstances of the seamen are different because they are in their
respective ship, boat or vessel, but does it mean that they are entitled to overtime
work because they are in the working place of their laborers?
No. The Supreme Court ruled that there is no different criterion for land laborers and
seamen under these circumstances. It was admitted by the employer that the seamen
rendered 4 hours of overtime. It is no question that they are entitled to their overtime
pay. These cannot be subject of a waiver.
Silence of Employee, Not Considered as Laches
The laborers in this case declared long before the filing that they have been
demanding their overtime pay. It is not just and humane that he should be deprived
of what is lawfully his under the law, for the true intendent of Commonwealth Act No.
444 is to compensate the worker for services rendered beyond the statutory period
and this should be made to retroact to the date when such services were actually
performed.
Stolt-Nielsen v. NLRC

FACTS: The ship captain ordered Meynardo J. Hernandez (hired as a radio officer)
to carry the baggage of crew member Lito Loveria who was being repatriated. He
refused to obey the order out of fear in view of the utterance of the said crew member
"makakasaksak ako" and also because he did not perceive such task as one of his
duties as radio officer. As a result of such refusal, private respondent was ordered to
disembark on April 30, 1990 and was himself repatriated on May 15, 1990. He was
paid his salaries and wages only up to May 16, 1990.
Private respondent filed before the public respondent POEA a complaint for illegal
dismissal and breach of contract paying for, among all things, payment of his salaries,
wages, overtime and other benefits due to him for the unexpired portion of the
contract which was six (6) months and three (3) days.
Petitioner STOLT-NIELSEN in its answer alleged that on April 26, 1990, private
respondent refused to follow the "request" of the master of the vessel to explain to
Lolito Loveria the reason for the latter's repatriation and to assist him in carrying his
baggage, all in violation of Article XXIV, Section 1 of the Collective Bargaining
Agreement (CBA) and the POEA Standard Contract. Hence, private respondent, after
being afforded the opportunity to explain his side, was dismissed for gross
insubordination and serious misconduct.
In reply, he denied that the master of the vessel requested him to explain to Loveria
the reason for the latter's repatriation
ISSUES: (1) W/N complainant was legally dismissed on the ground of gross
insubordination? NO.
(2) W/N Private respondent was entitled to the award of overtime pay? NO, it was
unjustified.
HELD: With respect to the first issue, petitioner Stolt-Nielsen emphasizes how
"employment on board ocean-going vessels is totally different from land-based ones
in that the former strict and faithful compliance of all lawful commands and orders of
the master or captain of the vessel is of paramount and crucial importance." Petitioner
then cites Part I, Section A (2) of the POEA Standard Employment Contract which
provides:
2. The seaman binds himself to the following: "a. to faithfully comply with and observe
the terms and conditions of this contract, violation of which shall be subject to
disciplinary action pursuant to appendix 2 of this crew contract.
Article 282 of the Labor Code Termination by Employer.
The Court agrees that by virtue of the aforementioned CBA and POEA Standard
Contract provisions cited by the petitioner, private respondent is indeed bound to
obey the lawful commands of the captain of the ship, but only as long as these
pertain to his duties. The order to carry the luggage of a crew member, while being
lawful, is not part of the duties of a radio officer. Assuming arguendo that lawful
commands of a ship captain are supposed to be obeyed by the complement of the
ship, private respondent's so-called "act of disobedience" does not warrant the
supreme penalty of dismissal.
As to the award of overtime pay
The rendition of overtime work and the submission of sufficient proof that the said
work was actually performed are conditions to be satisfied before a seaman could be
entitled to overtime pay which would be computed on the basis of 30% of the basic
monthly salary. In short, the contract provision guarantees the right to overtime
pay but the entitlement to such benefit must first be established.
Realistically speaking, a seaman, by the very nature of his job, stays on board a ship
or vessel beyond the regular eight-hour work schedule. For the employer to give him
overtime pay for the extra hours when he might be sleeping or attending to his
personal chores or even just lulling away his time would be extremely unfair and
unreasonable.
Petitioner's argument is well taken.
A close scrutiny of the computation of the monetary award shows that the award for
overtime was for the remaining six (6) months and three (3) days of private
respondent's contract at which time he was no longer rendering services as he had
already been repatriated. In light of our aforequoted ruling in Cagampan v. NLRC,
said award for overtime should be, as it is hereby, disallowed for being unjustified.
_____________________________________________________
LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020
10
Basic Premise of Overtime Pay Work rendered beyond 8 hours, the employee is
entitled to overtime pay.
Difference with Regard to Seamen
There is emphasis on the actual work that they rendered while they are on board.
Considering that they are seamen, they are on board for 24 hours. If the employer
would be held liable for overtime pay just because these seamen are there in the
vessel, it would become unfair.
The Supreme Court did not say that they are not entitled to overtime pay. However,
there must be proof that such seamen actually rendered work for that excess of 8
hours in that ship or vessel.
National Development Co. v. CIR
FACTS: National Development Company, a government-owned and controlled
corporation has four shifts of work. One shift was from 8 a.m. to 4 p.m., while the
three other shifts were from 6 a.m. to 2 p.m; then from 2 p.m. to 10 p.m. and, finally,
from 10 p.m. to 6 a.m.
In each shift, there was a one-hour mealtime period, to wit: From 11 a.m. to 12
noon for those working between 6 a.m. and 2 p.m. and from 7 p.m. to 8 p.m. for those
working between 2 p.m. and 10 p.m. The records disclose that although there was a
one-hour mealtime, NDC nevertheless credited the workers with eight hours of
work for each shift and paid them for the same number of hours.
However, since 1953, whenever workers in one shift were required to continue
working until the next shift, NDC instead of crediting them with eight hours of overtime
work, has been paying them for six hours only, NDC alleged that the two hours
corresponding to the mealtime periods should not be included in computing
compensation. National Textile Workers Union whose members are employed at the
NDC, maintained the opposite view and asked the Court of Industrial Relations to
order the payment of additional overtime pay corresponding to the mealtime periods.
ISSUE: Whether or not the mealtime breaks should be considered working time and
shall not be deducted from their overtime pay? Yes, they should be considered as
working time.
RULING: Yes, it should be considered as working time. Under the law, the idle time
that the employee may spend for resting and during which he may leave the place of
work, although not the premises of his employer, is not counted as working time.
In this case, the CIR found that work in NDC was continuous and it did not permit
the employees and laborers to rest completely. Therefore, the mealtime breaks
should be counted as working time for purposes of overtime compensation.
How was it determined that their shift was continuous and they were not
allowed to leave in the one-hour period? What evidence was considered by the
court? Their timecards. If the one-hour meal period is not compensable, then the
employees should have timed out their cards but in this case, it was continuous.
That's why the meal period in this case, although they have that "one-hour meal
period', it is compensable because they are still under the supervision of their
employer – they can be called anytime.
Again, here you have continuous shifts. The meal-time break here should be
counted as working time for purposes of overtime compensation. The timecards of
the employees showed the work was continuous and without interruption. The
employees cannot freely leave their workplace nor rest completely. Furthermore,
during the period covered by the computation, the work was on a 24-hour basis and
only divided into shifts.
GR: Meal periods should be at least 60 minutes and not compensable unless it falls
under what has been discussed in the cases of NDC and Pan American. The
mealtime can be less than 60 minutes but in no case shorter than 20 minutes, and to
which such can be considered as compensable.
With regard to rest periods No rest periods or coffee breaks can run from 5-20
minutes but considered as compensable working hours What about if the meal period
is shortened at the employees' request as they want to go home early?
EX: Can the lunch break be only from 12:00-12:30 pm and they be allowed to
go home by 4:30? Yes, the request of employees to have their meal periods
shortened so they can leave earlier has been established. The effect is that the

shortened meal is not compensable because it was requested by the employees, and
they rendered the 8-hour work. However, to allow such arrangement, the following
conditions must be met:
a) It must be voluntarily agreed by the employees in writing;
b) No diminution whatsoever in their salaries or other benefits existing before
the shortened meal period;
c) Their work does not involve strenuous physical as exertion;
d) That they still be given their 5-20 minute coffee or rest periods; and
e) The value of the benefits derived by the employees is equal and
commensurate to the compensation due to them for the shortened meal;
and
f) With regard to overtime, (if they still work after 4:30) then they will be
entitled to overtime pay; and
g) If the effectivity of such working time arrangement must be determined by
the Secretary of the DOLE
- in stevedore, the issue is different, because they were still in the boat.,
here, in this case, there must be proof that he actually worked more than
8 hours.
IRR SECTION 7
- period is 1 hour but may be less, but not less than 20 minutes
- If there is work during rest time, - then still compensable
- Rest time less than 1 hour asked by employees? - yes they may request
it so they can leave work earlier - in such a situation the shortened meal
period is not compensable. For it to be allowed the DOLE required:
- Employee must write it voluntarily
- Waiver of xx
- Strenuous physical exertion
Sime Darby v. NLRC
FACTS: Sime Darby Pilipinas, Inc. is engaged in the manufacture of automotive tires,
tubes and other rubber products. Prior to the present controversy, all company factory
workers in Marikina including members of the union worked from 7:45 a.m. to 3:45
p.m. with a 30 minute paid “on call” lunch break.
Sime issued a memorandum to all factory-based employees advising all its monthly
salaried employees in its Marikina Tire Plant, except those in the Warehouse and
Quality Assurance Department working on shifts, a change in work schedule.
The union filed on behalf of its members a complaint with the Labor Arbiter. However,
the Labor Arbiter dismissed the complaint on the ground that the change in the work
schedule and the elimination of the 30-minute paid lunch break of the factory workers
constituted a valid exercise of management prerogative and that the new work
schedule, break time and one-hour lunch break did not have the effect of diminishing
the benefits granted to factory workers as the working time did not exceed 8 hours.
The NLRC sustained the Labor Arbiter and dismissed the appeal. However, upon
motion for reconsideration by private respondent, the NLRC reversed its earlier
decision.
ISSUE: Whether the right to fix the work schedules of the employees rest principally
on their employer? YES.
RULING: Yes. The right to fix the work schedules of the employees rest principally
on their employer. In the instant case Sime Darby, as the employer, cites as reason
for the adjustment the efficient conduct of its business operations and its improved
production. It rationalizes that while the old work schedule included a 30-minute paid
lunch break, the employees could be called upon to do jobs during that period as they
were “on call.”
Even if denominated as lunch break, this period could very well be considered as
working time because the factory employees were required to work if necessary and
were paid accordingly for working.
With the new work schedule, the employees are now given a one-hour lunch break
without any interruption from their employer. Since the employees are no longer
required to work during this one-hour lunch break, there is no more need for them to
be compensated for this period. (No more interruption = no need to be compensated)
_____________________________________________________
LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020
11
Every business enterprise endeavors to increase its profits. In the process, it may
devise means to attain that goal. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. Thus, management is free to regulate, according to its
own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay off of workers and discipline, dismissal and recall of workers.
Further, management retains the prerogative, whenever exigencies of the service
so require, to change the working hours of its employees. So long as such prerogative
is exercised in good faith for the advancement of the employer’s interest and not for
the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements.
Take note of what happened here: from a 30-minute compensable meal period,
management changed it with a one-hour meal period that is not compensable,
wherein thereafter, their dismissal will be extended from employment.
But the SC said that the management is free to regulate, according to its own
discretion and judgment, all aspects of employment. It retains the prerogative,
whenever exigencies of the service so require, to change the working hours of its
employees, as long as such prerogative is exercised in good faith for the
advancement of the employer’s interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements.
The new work schedule, with a non-compensable one-hour lunch break, still complies
with the daily 8-hour work without violating the Labor Code provision. Besides, the
new schedule applies to all employees that are similarly situated. Take note that there
was a change from paid to unpaid, but no violation of the Labor Code provisions.
Article 86. Night shift differential. Every employee shall be paid a night shift
differential of not less than ten percent (10%) of his regular wage for each hour
of work performed between ten o’clock in the evening and six o’clock in the
morning.
Rationale
Work done at night is very exceptional and justified only on the grounds of inevitable
necessity wherein if there’s no more other alternative schedule but to perform night-
work, such would be the arrangement and of course it would just be fair that such
worker will be entitled to a greater pay than an ordinary work to compensate him
for the convenience.
Such as when you are working in a BPO wherein your employer is from a different
country which has a different timezone. There is no alternative but to perform night
work.
It is a premium for working when the employee is supposed to sleep. Unless in
accordance with the law of nature, night work cannot be regarded as desirable and
of course when you work at night the experience is different. You cannot even say
that it's the same with the morning of that 8 hours of work. It’s really different because
productivity at night might not be the same at morning.
Example From the very beginning you have long sleep at night and then you have
activities during the day like going to school, then suddenly you will be scheduled for
night-shift work. In that case, the law compensates for such nature of work.
It also entails additional danger because you need to travel at night.
WORK PERFORMED ON ORDINARY WORKING DAY with NIGHT SHIFT
DIFFERENTIAL
Daily Wag - 400.00 (10:00 pm to 6:00 am, with compensable break)
Wage/Hour - 400.00/ 8 hours
- 50.00 per hour
Total Wage for the Day - Regular Daily Wage + NSD Pay

- 400.00 x 110%
- 440.00
This is only for illustration purposes. Not for bar exams.
Mercury Drug v. Dayao
FACTS: Nardo Dayao and 70 others filed a case in the Court of Industrial Relations
against Mercury Drug Co., Inc., and/or Mariano Que, President & General Manager,
and Mercury Drug Co., Inc., Employees Association. They prayed for:
1) payment of their unpaid back wages for work done on Sundays and legal
holidays plus 25% additional compensation from date of their employment
up to June 30, 1962;
2) payment of extra compensation on work done at night;
3) reinstatement of Januario Referente and Oscar Echalar to their former
positions with back salaries (subsequently Referente and Echalar were
dropped as party petitioners in this case because the court has no
jurisdiction over the subject of the claims); and,
4) as against the respondent union, for its disestablishment and the refund
of all monies it had collected from petitioners. (Court held that 'petitioners'
cause of action against the respondent Association should be dismissed
without prejudice to the refiling of the same as an unfair labor practice
case)
Mercury Drug
- That the company being a service enterprise is excluded from the
coverage of the Eight Hour Labor Law, as amended;
- That no court has the power to set wages, rates of pay, hours of
employment or other conditions of employment to the extent of
disregarding an agreement thereon between the respondent company
and the petitioners, and of fixing night differential wages;
- That the petitioners were fully paid for services rendered under the terms
and conditions of the individual contracts of employment;
ISSUE : Are petitioners entitled to 25% additional compensation for performing work
during Sunday and legal holidays and nighttime service? YES
HELD: The Court finds merit in the claim for the payment of additional compensation
for work done on Sundays and holidays. While an employer may compel his
employees to perform service on such days, the law nevertheless imposes upon him
the obligation to pay his employees at least 25% additional of their basic or regular
salaries.
What is the defense of Mercury Drug? There is already a waiver in their contract
for night shift differential. Additional compensation for nighttime work or night shift
differential is founded on public policy. Therefore, this is not subject to waiver. This is
a common issue with regard to benefits under the Labor Code. And again, we
emphasize this, employment is higher than property right because there are
instances wherein the benefits cannot be subject to waivers. As in this case of
Mercury Drug.
The "waiver rule" is not applicable in the case at bar. Additional compensation for
nighttime work is founded on public policy, hence the same cannot be waived. (Article
6, Civil Code). The Court ruled that any agreement in a contract of employment which
would exclude the 25% additional compensation for work done during Sundays and
holidays is null and void as mandated by law.
The private respondents were at a disadvantage insofar as the contractual
relationship was concerned. Workers in our country do not have the luxury or freedom
of declining job openings or filing resignations even when some terms and conditions
of employment are not only onerous and iniquitous but illegal It is precisely because
of this situation that the framers of the Constitution embodied the provisions on social
justice (Section 6, Article II) and protection to labor (Section 9, Article II) in the
Declaration of Principles and State Policies.
Who has the burden of proof that such benefit has been paid? The employer.
The employer admitted that the respondents rendered overtime.
National Semiconductor v. NLRC
_____________________________________________________
LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020
12
FACTS: NSD (HK corp in PH) employed Edgar Santos as technician with P5,501/mo
during graveyard shift (10PM til 6 AM). On 8 January 1993, Santos did not report for
work, resumed only on 9 January BUT he made two entries in his daily time record
to make it appear that he reported on the 8th.
Supervisor Limsiaco knew that he was not present on the 8th and found that he
falsified the DTR entry. An investigation was conducted and he was asked to file a
explanatory memo within 48 hrs. Santos claimed in his memo that he was absent
and the entry was only due to carelessness – found unsatisfactory so he was
dismissed. Filed a complaint for illegal dismissal + damages.
LA: legal dismissal BUT no due process so indemnify him 1k + pay unpaid night
differentials of 19,801.47.
NLRC: affirmed, conclusions were sufficiently supported by evidence
What is the working schedule of the employees?
From 10pm-6am that’s why the employees are claiming for night shift differential.
ISSUE: Who has the burden to prove the payment of night shift differential? NSD
(the employer)
What did the Supreme Court say? It is the employer who has custody of the
pertinent documents that can prove whether or not they did in fact paid such benefit
to its employee which is in this case the night shift differential pay.
The Supreme Court held that the burden of proving payment rests on the employer
as the non-payment of night shift differential is a negative allegation which need not
be supported by evidence unless it is an essential part of his cause of action. The
burden of proving that payment of such benefit has been made rests upon the party
who will suffer if no evidence at all is presented by either party.
But take note as to how you will interpret this ruling of the SC. In this case, it has
already been established that the employees work from 10pm-6am so there is no
dispute that they work at night.
The question now is, were they given their night shift differential? In connection
to that, it is the employer who has the burden of proof to show that the benefit as
provided under Article 86 was given to these employees.
It means the employer must show that the employee has been duly paid of his night
shift differential because it has possession of the documents and timecards among
others, and in the absence of proof, the presumption is that the employer did not
pay such benefits to the employees.
However, this presumption upon the employer is correct provided that the employee
has already established that he is entitled to such benefits. In this case, there is no
issue as to his working hours (10pm-6am). It means the employee must first establish
his allegation.
The burden of proving entitlement to night shift differential, overtime pay, and
holiday pay among others rests on the employee. If it can be proven that he
indeed worked within that period, then the employer will have now the burden to show
that indeed they paid such benefit or labor standard benefit.
Why would this be relevant?
Example: If it has been established in this case that their work is from 8am- 5pm but
extends from 5pm-12midnight. There is overtime and night shift differential.
But who has the burden of proof that the employee actually worked for that
additional hours? It is the employee. You must show proof as to what days you
worked beyond 8 hours to be entitled to night shift differential. Once it is established,
the burden of proof is now upon the employer to show that he has paid the
corresponding labor standard benefit.
The ruling in National Semiconductor vs. NLRC is correct because it has already
been established that the working schedule of the employee is from 10pm-6am. So,
the burden of proof is with the employer that he has paid that additional 10% of his
regular wage for the night shift differential.
TAKE NOTE: Night shift differential and overtime work are to be treated
separately.
 13

EX: You work from 8am-5pm then you have overtime by 5pm- 12midnight. That’s Wage/Hour - 400.00/8 hours
already an additional of 7 hours of work which is equivalent to overtime. Also, the - 50.00
10pm-12midnight is already night shift differential.
Work in Excess of 8 hours - 50.00 x 130% x 130% x number of hrs of OT
Night shift differential here for every hour is 10% of his daily hour wage so that is work
110% of his regular hour wage for the 2 hours, 10pm-12mn. - 84.50 x 2 hours
- 169.00
- it was evident that the employees rendered nightshift work, the same with
the mercury case Total Wage for the Day - Daily Wage with Holiday Pay + Overtime Pay
- All that is left to be proved is whether the nightshift differential was paid, - 520.00 + 169.00
the burden of proof of the payment of which is on the one who is liable to - 689.00
pay.
If overtime falls within the period covered by night differential, premiums for
For overtime work that has night shift differential - the burden is shifted on the overtime work should first be integrated into the regular hourly rate of the employee
employee. before computing the night shift pay.
- this is because it is different from the normal course of business
- Employee must now prove that he actually worked beyond 8 hours
including nightshift\ WORK IN EXCESS OF 8 HOURS PERFORMED ON ORDINARY WORKING
- Once established, the employer will now prove that the payment was DAY - (25%) OF THE HOURLY RATE
made.
Daily Wage - 400.00 (2:00 pm to 12:00 mn, with compensable break)

Article 87. Overtime work. Work may be performed beyond eight (8) hours a day Wage/Hour - 400.00/8 hours
provided that the employee is paid for the overtime work, an additional - 50.00
compensation equivalent to his regular wage plus at least twenty-five percent
(25%) thereof. Work performed beyond eight hours on a holiday or rest day shall Work in Excess of 8 hours - 50.00 x 125% x number of hours of Overtime
be paid an additional compensation equivalent to the rate of the first eight hours Work
on a holiday or rest day plus at least thirty percent (30%) thereof. - 62.50 x 2 hours
- 125.00
Cost Of Living Allowance is excluded when computing for overtime pay.
NSD - 125 x 10%
Take Note: Overtime pay should not be confused with the term premium pay. - 12.50

Overtime pay is the one mentioned under Article 87 or the compensation for work Wage for the Day - Regular Daily Wage + Overtime Pay + NSD
rendered in excess of 8 hours in a day. It is computed by multiplying the overtime - 400.00 + 125.00 + 12.50
hourly rate by the number of hours worked in excess of 8 hours. - 537.50

Premium pay refers to the additional compensation as required by law for work
performed within 8 hours of non-working days such as rest days and regular or
special holidays.
Let’s assume that you have an employee who renders work from 8:00 am to 5:00 pm.
If he works for overtime for 2 hours.
WORK IN EXCESS OF 8 HOURS PERFORMED ON ORDINARY WORKING
DAY (25%) OF THE HOURLY RATE
Daily Wage - 400.00 (8:00 am to 5:00 pm, with 1 hour lunch break)
Wage/Hour - 400.00/8 hours
- 50.00
Work in Excess of 8 hours - 50.00 x 125% x number of hours of Overtime
Work
- 62.50 x 2 hours
- 125
Total Wage for the Day - Regular Daily Wage + Overtime Pay
- 400.00 + 125.00
- 525.00
Unless there is an agreement more favorable to the worker, the overtime rate is 30%
of the rate for the first 8 hours on a holiday or rest day. Thus, the holiday or rest day
premium should be first added to the regular base pay before computing the
overtime pay on such day.
WORK IN EXCESS OF 8 HOURS PERFORMED ON SCHEDULED REST
DAY OR A SPECIAL DAY - (30%) OF THE HOURLY RATE
Daily Wage - 400.00 (8:00 am to 5:00 pm, with 1 hour lunch break)
Can Overtime Pay be integrated in the Basic Salary provided? YES.
1. A clear written agreement knowingly and freely entered into by the
employee.
2. The mathematical result shows that the agreed legal wage rate and the
overtime pay, computed separately, are equal or higher than the separate amounts
legally due.
Is it necessary that the 8-hour working hours be continuous? NO. The
minimum working hours need not be continuous as to constitute as the legal
working day of 8 hours as long as 8 hours is within such working day. Whether it is
continuous or broken, once the employee has rendered more than 8 hours, then
the employee is entitled to overtime pay.
With regards to the entitlement of overtime pay, an express instruction from the
employer to the employee to render overtime is not required. It is sufficient that
the employee is permitted to work. Neither is an express approval from the superior
a requisite to make overtime work compensable.
If an employee demands overtime pay? It is his burden to prove that he has
rendered overtime work.
GENERAL RULE : THE RIGHT TO OVERTIME PAY CANNOT BE
WAIVED
However, if there is a compressed workweek proposed, the same shall be valid
provided the following conditions are present:
1. The employees voluntarily agree to work nine (9) hours a day from
Monday to Friday.
2. That there will not be any diminution whatsoever in the weekly or
monthly take-home pay and fringe benefits of the employee.
3. The value of the benefits that will accrue to the employees under the
proposed work schedule is more than, or at least commensurate with

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LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020

or equal to, the one-hour overtime pay that is due them during the
weekdays based on the employees’ qualification.
4. The one-hour overtime pay of the employees will become due and
demandable if ever they are permitted or made to work on any Saturday
during the effectivity of the new working time arrangement, since the
agreement between the employees and management is that there will be
no Saturday work in exchange for a longer workday during weekdays.
5. The work of the employees does not involve strenuous physical
exertion and they are provided with adequate rest periods or “coffee
breaks” in the morning and afternoon.
6. The effectivity of the proposed working time arrangement shall be of
temporary duration as determined by the Minister of Labor and
Employment.
No law amending Article 87 but only declarations by the Department of Labor.
DEPARTMENT ADVISORY No. 2 Series of 2009
Guidelines on the Adoption of Flexible Work Arrangements (FWAs)
I. Purpose - x x x Adoption of FWAs is considered as better alternative than
the outright termination of the services of the employees or the total closure
of the establishments. Anchored on voluntary basis and conditions mutually
acceptable to both the ER and EEs, it is recognized as beneficial in terms of
reduction of business costs and helps in saving jobs while maintaining
competitiveness and productivity in industries.
II. Concept - x x x
Flexible work arrangements refer to alternative arrangements or schedules
other than the traditional or standard work hours, workdays or workweek.
The effectivity and implementation of any of the FWAs provided herein shall be
temporary in nature.
III. Flexible Work Arrangements
The following are the FWAs which labor and management may consider:
1. Compressed Workweek wherein 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
workweek of the company pursuant to the provisions of Department
Advisory No. 02, series of 2004, dated December 2, 2004.
2. Reduction of Workdays wherein the normal workdays per week are
reduced but should not last for more than 6 months.
3. Rotation of Workers wherein the employees are rotated or
alternately provided work within the workweek.
4. Forced Leave wherein the employees are required to go on leave
for several days or weeks utilizing their leave credits if there are any.
5. Broken-time schedule wherein the work schedule is not continuous
but the work hours within the day or week remain.
6. Flexi-holidays schedule wherein the employees agree to avail the
holidays at some other days provided there is no diminution of
existing benefits as a result of such arrangement.
7. Under these FWAs, the ERs and the EEs are encouraged to explore
alternative schemes under any agreement and company policy or
practice in order to cushion and negate the effect of the loss of
income of the EEs.
IV. Administration of Flexible Work Arrangements
The parties to the flexible work schemes shall be primarily responsible for its
administration. x x x
V. Notice Requirement
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Prior to its implementation, the ER shall notify the Department through the
Regional Office which has jurisdiction over the workplace, of the adoption of any
of the above FWAs.
The notice shall be in the Report Form attached to this advisory.
The Regional Office shall conduct an ocular visit to validate whether the
adoption of the FWAs in in accordance with this issuance.
Take Note:
On waiver or quitclaim : Not allowed in overtime pay.
Exception: If the waiver is in exchange of some benefits which shall be equivalent
to the overtime pay which he should have been entitled to under the law.
The overtime pay is compensation added to the regular wage but the regular base
pay or basic pay should exclude money received by an employee in different
concepts, such as Christmas bonus and other fringe benefits.
For purposes of computing the overtime pay, the COLA shall not be included
in the computation thereof.
We have also seen that night shift differential is different from overtime pay. It is
payment for work during the night while overtime pay is payment for working more
than 8 hours within the working day.
POWER INTERRUPTION
● Not exceeding 20 minutes, treated as worked or compensable hours.
● More than 20 minutes, may not be treated as hours worked provided employees
can leave their workplace and use the time effectively for their own interest.
● Employer may extend working hours of his employees outside of the regular
schedules to compensate for the loss of man-hours without being liable for
overtime pay.
● Industrial enterprises with 1 or 2 work shifts may adopt any of the workshifts to
prevent serious loss or damage to materials, machineries, or equipment that
may result.
● Days when work was not required and no work could be done because of
shutdown due to electrical power interruptions, lack of raw materials, and repair
of machineries are not deemed hours worked.
Article 88. Undertime not offset by overtime. Undertime work on any
particular day shall not be offset by overtime work on any other day. Permission
given to the employee to go on leave on some other day of the week shall not
exempt the employer from paying the additional compensation required in this
Chapter.
Article 89. Emergency overtime work. Any employee may be required by the
employer to perform overtime work in any of the following cases:
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 it is necessary to prevent loss of life or property or in case of
imminent danger to public safety due to an actual or impending
emergency in the locality caused by serious accidents, fire, flood,
typhoon, earthquake, epidemic, or other disaster or calamity;
c) When there is urgent work to be performed on machines, installations,
or equipment, in order to avoid serious loss or damage to the employer
or some other cause of similar nature;
d) When the work is necessary to prevent loss or damage to perishable
goods; and
e) Where the completion or continuation of the work started before the
eighth hour is necessary to prevent serious obstruction or prejudice to
the business or operations of the employer.
Any employee required to render overtime work under this Article shall be paid the
additional compensation required in this Chapter.
Why do you need to take note of this? Under the instances in Article 89,
overtime work is an obligation. This means that for work or overtime work not
covered by Article 89, it is optional on the part of the employee. The employee can

validly refuse to render overtime.
It’s a situation where an employer may legally compel his employees to render
overtime work with the corresponding overtime pay.
IRR BOOK III RULE I
SECTION 10. Compulsory overtime work. — In any of the following cases, an
employer may require any of his employees to work beyond eight (8) hours a day,
provided that the employee required to render overtime work is paid the additional
compensation required by these regulations:
(a) When the country is at war or when any other national or local emergency has
been declared by Congress or the Chief Executive;
(b) When overtime work is necessary to prevent loss of life or property, or in case
of imminent danger to public safety due to actual or impending emergency in the
locality caused by serious accident, fire, floods, typhoons, earthquake, epidemic
or other disaster or calamities;
(c) When there is urgent work to be performed on machines, installations, or
equipment, in order to avoid serious loss or damage to the employer or some other
causes of similar nature;
(d) When the work is necessary to prevent loss or damage to perishable goods;
(e) When the completion or continuation of work started before the 8th hour is
necessary to prevent serious obstruction or prejudice to the business or
operations of the 6employer; or
(f) When overtime work is necessary to avail of favorable weather or
environmental conditions where performance or quality of work is dependent
thereon.cralaw In cases not falling within any of these enumerated in this Section,
no employee may be made to work beyond eight hours a day against his will.
Article 90. Computation of additional compensation. For purposes of
computing overtime and other additional remuneration as required by this
Chapter, the "regular wage" of an employee shall include the cash wage only,
without deduction on account of facilities provided by the employer.
Regular wage is straight time pay
Additional compensation is the overtime pay or 13 month pay and other premium
pay
Other facilities provided by the employer are not included
PNB v. NLRC
The employees were ascertaining here that for purposes of computing the overtime
pay, the longevity pay and cost of living allowance should be included.
The Supreme Court said no because it would have a higher base. Higher base x 25%
for overtime pay then they will be entitled to higher overtime pay. The SC said that
for purposes of computation of overtime, cost of living allowance (COLA) is not
included.
What is the rationale behind overtime pay? The employee puts more effort,
physical and mental. He is delayed in going home to his family and to other things for
relaxation, and he might miss important engagements. So that extra compensation,
more or less, as determined by the Supreme Court, would justify what was lost to that
employee due to that additional time to work.
Nonetheless, when we talk about overtime pay, it cannot be interpreted beyond what
is provided under Article 87 unless there is a Collective Bargaining Agreement
(CBA). If in the CBA, the employees together with the union, representing the
employees, have agreed for a higher percentage for purposes of computing the
overtime pay, that is valid.
Also, if they’ve agreed among others for the inclusion of benefits and allowance in
computing the overtime pay, that is valid if provided in the CBA. What the law and
jurisprudence emphasize is it should not be less than what is provided under
Article 87 because we are talking about standards – minimum, that should be
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complied by both employers and employees. It can be beyond by the agreement
between the parties. But in this case, nothing in their agreement to include COLA for
purposes of computation of the overtime pay.
TAKE NOTE: Though the employees have already received their overtime pay, but
were not given their 10% night shift differential, PNB can still pay it because these
are two different benefits under the Labor Code.
The Labor Code provisions are just minimum working standards. The law
allows voluntary agreements which comply with the minimum standards that
we have under the law.
Bisig v. Philippine Refining
Facts: This is an appeal from the decision of the Court of First Instance of Manila
dated December 8, 1966, in Civil Case No. 65082, holding that Christmas bonus
and other fringe benefits are excluded in the computation of the overtime pay of
the members of the appellant union under Section 6, Article VI of the 1965 collective
bargaining agreement.
The rate mentioned in this case is not really that of a higher rate but if you consider
the compensation pay which includes already the computation for overtime pay, it’s
higher than the 25% required under Article 87.
But again, as a general rule, it is not included as held in this case, bonuses and fringe
benefits for purposes of computing the overtime pay. However, it can be included if
the parties agreed and if there’s a collective bargaining agreement. In this case,
there’s nothing in their collective bargaining agreement which would include fringe
benefits and Christmas bonus in the regular base pay as the basis for the overtime
pay.
However, the Supreme Court noted here that they had a contractual agreement
regarding regular pay plus 50% thereof which includes an overtime compensation
and therefore it’s actually higher than what is required under the law. So again, the
regular base pay as basis for computation of overtime work excludes money received
in different concepts such as Christmas bonus, and other fringe benefits.
In fine, the parties may agree for the payment of overtime compensation in an amount
to be determined by applying a formula other than the statutory formula of "regular
wage plus at least twenty-five per centum additional" provided that the result in
applying the contractual formula is not less than the result in applying said
statutory formula.
In the case at bar, it is admitted that the contractual formula of "regular base pay plus
50% thereof" yields an overtime compensation which is higher than the result in
applying the statutory formula as elaborated in the Nawasa case. Consequently, its
validity is upheld and the parties are enjoined to accord due respect to it.
Now, as provided in Article 87, the rate is 30% for the first eight hours on a holiday
or rest day. And then the holiday or rest day premium should be first added to the
regular base pay before computing the overtime pay of such day.
What would happen if someone worked on a holiday for eight hours? In the
subsequent article, this would be 130% so that would be:
400 x 130% = 520 so the 520 will be the basis for the computation of the
overtime pay.
520 will be divided by eight (hours of work) = 65.
65 x 130% x 2 hours
But what is stated in Article 87 is the 30%. That 30% is different. So unless there
is an agreement that is more favorable to the worker, the overtime rate 30% for
the first eight hours on a holiday or rest day and then the premium pay should
first be added to the regular base pay before you compute the overtime pay.
Now, we’ve already discussed how work day is computed so do take note of that
because that is very important with regard to overtime work.
What about an express instruction from the employer? Is it required so that
your overtime work would be entitled to that 25% or 30% under Article 87?
Not necessarily. As long as the employee is permitted to work within or beyond

the 8 hours’ work. Verbal instructions or if seen by the employer that the
employee is working beyond the working hours, that is already an express
approval by a superior and the employee is entitled to an overtime pay. This is
also clear in that case of REOTAN V. NATIONAL RICE AND CORN
CORPORATION. What happened in this case?
- the important thing is that the parties agreed that a higher multiplier
is used
- Divisor: number of ACTUAL working days in a year
Reotan v. National Rice
Facts: Fermin Reotan, Silvestre Reotan and Praxedes Balane were guards-
watchmen in the agencies or branches of the National Rice and Corn Corporation
(NARIC). Inasmuch as these agencies had each only two (2) guards-watchmen, the
latter had been required by their immediate superiors to work in two (2) shifts of 12
hours daily each, except when they were on vacation or sick leave of absence.
Having made demands of payment of the corresponding overtime compensation
which were not heeded by the NARIC, on July 15, 1954, plaintiffs filed their respective
claims for overtime with the Wage Administration Service, which, on February 16,
1955, rendered decision in their favor. Inasmuch as, this notwithstanding, the NARIC
persisted in its refusal to pay said compensation, plaintiffs instituted the present
separate actions, which were jointly heard and disposed of in one decision, as above
stated.
Issue: Whether or not NARIC should give overtime pay to the appellants
notwithstanding its nature as Government Owned and Controlled Corporation subject
to the Civil Service Law.
What is the defense here on the part of NARIC that the employees are not
entitled to overtime pay? The defense here of NARIC is that it is a government-
owned corporation and that it is an exception to the payment of overtime.
Is that the only defense? Because you mentioned earlier that it is not a defense
because they are covered by the Civil Service Law. But nonetheless, just because
they are covered with such law, they are not entitled to overtime pay?
What was their defense here? Aside from the applicability of the Civil Service Law.
When can the employees claim for an overtime pay?
Because that ruling of the Supreme Court is even applicable to private entities. Again,
what was the other defense here on the part of the employer?
Is NARIC liable for overtime payment, notwithstanding the Resolution? YES.
TAKE NOTE: One of their defenses is that there was a resolution wherein they
issued that there would be no overtime pay or meal allowance allowed unless it has
been previously approved by its general manager and in case of absolute
necessity.
However, the Supreme Court said any agreement or contract between the employer
and laborer employee contrary to the provision of this Act shall be null and void ab
initio. That’s the same thing when this eight-hour labor law was incorporated into the
Labor Code provision. As long as the work performed was necessary and it benefited
the employer to which the employee could not abandon his work at the end of his
shift.
Section 6 of Commonwealth Act No. 444 specifically provides that 'any agreement
or contract between the employer and the laborer or employee contrary to the
provision of this Act shall be null and void ab initio'. Even in cases of disaster or
calamity, to prevent loss of life and property, Section 3 of said Commonwealth Act
No. 444 provides that 'in all such cases the laborers and employees shall be entitled
to receive compensation for the overtime work performed at the same rate as the
regular wages or salary, plus at least 25 per centum additional'.
Section 4 of the same Act provides that 'no person, firm, or corporation ... shall
compel an employee or laborer to work during Sundays and legal holidays, unless he
is paid an additional sum of at least 25 per centum of his regular remuneration."
If the work performed was necessary, or that it benefited the company or that
the employee could not abandon his work at the end of his eight hour work because
there was no substitute ready to take his place and he performed overtime services
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upon the order of his immediate superior, notwithstanding the fact that there was a
standing circular to the effect that before overtime work may be performed with pay,
the approval of the corresponding department head should be secured, such
overtime services are compensable in spite of the fact that said overtime
services were rendered without the prior approval of the Department Head.
EXAMPLE: There’s no substitute ready or because he performed over time,
notwithstanding the fact that there’s a memorandum or circular that would require the
approval of their head, such overtime services will still be considered as
compensable. In spite of the fact which as in this case, said overtime services were
rendered without the prior approval of the department head.
On the part of the employer, he should take note of this because if you allow the
employee to work beyond the eight hours’ work, even if there’s a memorandum which
requires the approval of the department head or the boss, they can still claim it. So,
don’t be angry to your employer if they would tell you to go home after your shift
because you’ll be working overtime and he has to pay for it.
In that case, they are also making sure that there’s no need for you to work beyond
the eight hours working time because you can work for it the next day. But of course,
if it is voluntary on the part of the employee, and if I were the employer I will find that
willingness, hard work and volition that the employee really wants to work voluntarily
beyond the working hours. That is what should be noted.
Why is there an emphasis on that? Because I mentioned earlier that I did not study
Computer Engineering. When I started working as a Computer Engineer, there are
times that there are tasked given and I don’t know how to do it. So voluntarily I do
stay more than eight hours. But I did not charge it as an overtime pay and I do not
ask for overtime pay because during that time, it was voluntary on my part to work
beyond the eight hours working time.
Admittedly, there are a lot who work more than eight hours but they do not claim for
an overtime pay.
When you say more than eight hours, we are talking of eight productive hours. It is
not included in that eight hours when an employee sat to open his Facebook or
Tinder.
TAKE NOTE : there was a policy that the general manager has approved the
overtime work - nevertheless, since the petitioners proved that they actually rendered
work - as long as it was necessary and it benefited the company - overtime pay is still
claimable.
For holidays and Sundays, there are jurisprudence which require a written approval
or authority before an employee can render overtime. However, this is not the
controlling rule.
William Lines v. Lopez
Facts: Eugenio Lopez was employed as storekeeper on 5 May 1947 and was
terminated on 13 October 1962. He received a separation pay of 1,586.00.
17 March 1964 (1 year, 5 months and 2 days from separation) : Lopez filed a petition
with CIR claiming salary differentials in the amount of 2,816.00, premium pay for
services rendered on Sundays and holidays, as well as daily overtime compensation
with a request for reinstatement.
With regard to money claims and overtime pay, there is that period of 3 years,
otherwise, that action shall be barred. The claimant- respondent can only collect for
the overtime compensation.
It was clearly proven that he worked 2 hours more, in excess of the regular 8 hours
a day. Therefore, he is entitled to overtime within 3 years prior to the filing of the
complaint. Moreover, for purposes of computing overtime pay, the court ruled that
Sundays and Legal Holidays are not included based on the principle that being
on board the vessel on these days were part and parcel and inherent in the work of
said seamen.
Action to Recover Compensation
Principle of estoppel cannot be invoked against the employees, with regard to
overtime pay. And overtime pay in arrears retroacts to the day when the services
were actually rendered.

But, take note of the 3-year period as allowed under the law. Any waiver or quitclaim
executed by the employee as a general rule is not valid or binding. You can still
question it in the proper administrative office.
Integration of Overtime Pay in the Basic Salary It is also possible that the
overtime pay is integrated in the basic salary. There can be an agreement between
the employer and the employee that the overtime pay will be part of the basic salary
but subject to the following requisites:
1) There must be a clear written agreement between the parties
2) Knowingly entered into by the parties,
3) Mathematical result will show that the agreed legal wage rate and the
overtime pay, computed separately will be equal or at least higher than
the amounts legally due.
When we say “Labor Standards,” we mean the minimum. As long as it can be proven
that the employer gave the minimum standards in favor of the employee, then the
employer will not be bound for any difference. The only exception is if there is a CBA,
which entitles the employees to a higher rate.
Article 4 was applied.
In case of seamen, the question is whether or not they actually rendered service in
excess of 8 hours in one working day.
Overtime pay should not be confused with night shift differential.
Overtime Pay Night Shift Differential
Added to the minimum wage for Added to the minimum wage for
hours worked beyond the 8-hour each hour of work performed from
period 10PM to 6AM
25% - rate of overtime pay for regular 10% of his regular wage for each
day hour of work
30% - rate of overtime pay if you
work more than 8 hours on a holiday
or rest day
If an employee worked more than 8 hours and he worked between those hours of 10
PM to 6 AM, he is entitled to both Overtime Pay and Night Shift Differential. Because
the Night Shift differential is different. It is payment for work during the night while
Overtime Pay is payment for the excess of the regular 8-hour work.
How do you compute for Overtime Pay? You take the daily rate, then divide it by
8, and that would be the additional overtime rate that he will have beyond the 8-hour
period. Under Article 87, he will be entitled to 25% of that Regular Wage. So you have
to compute how much is his hourly rate, daily rate, divided by 8 hours, and that per
hour rate, multiply by 125%.
If for example he works on his rest day, a Special Non-Working Holiday, then his pay
with the Premium pay, not just the regular pay for that 8-hour period, divide it by 8,
multiply that by 130% and you will get his Overtime rate.
NWSA (National Waterworks and Sewerage Authority) v. NWSA UNION
Doctrine: The NAWASA is a public utility. Although pursuant to Section 4 of
Commonwealth Act 444 it is not obliged to pay an additional sum of 25% to its
laborers for work done on Sundays and legal holidays, yet it must pay said additional
compensation by virtue of the contractual obligation it assumed under the collective
bargaining agreement.
Since, there is a bargaining agreement between the Petitioner and the Respondent,
Petitioner will have to pay compensation on Sundays and legal holidays, for the
circumstance is also included in Article 93, paragraph d of the Labor Code.
Facts: Petitioner National Waterworks & Sewerage Authority is a government-owned
and controlled corporation created under Republic Act No. 1383, while respondent
NWSA Consolidated Unions are various labor organizations composed of laborers
and employees of the NAWASA. The other respondents are intervenors Jesus
Centeno, et al., hereinafter referred to as intervenors.
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Acting on a certification of the President of the Philippines, the Court of Industrial
Relations conducted a hearing on the controversy then existing between petitioner
and respondent unions which the latter embodied in a "Manifesto", namely:
● implementation of the 40-Hour Week Law (Republic Act No. 1880);
● alleged violations of the collective bargaining agreement concerning
"distress pay";
● minimum wage of P5.25;
● promotional appointments and filling of vacancies of newly created
positions;
● additional compensation for night work;
● wage increases to some laborers and employees; and strike duration pay.
a.) Whether or not NAWASA is a public utility and, therefore, exempted from
paying additional compensation for work on Sundays and legal holidays. The
court agrees with petitioner that the NAWASA is a public utility because its primary
function is to construct, maintain and operate water reservoirs and waterworks for the
purpose of supplying water to the inhabitants, as well as consolidate and centralize
all water supplies and drainage systems in the Philippines.
We likewise agree with petitioner that a public utility is exempt from paying
additional compensation for work on Sundays and legal holidays conformably
to Section 4 of Commonwealth Act No. 444 which provides that the prohibition,
regarding employment of Sundays and holidays unless an additional sum of 25% of
the employee's regular remuneration is paid shall not apply to public utilities such as
those supplying gas, electricity, power, water or providing means of transportation or
communication.
In other words, the employees and laborers of NAWASA can be made to work on
Sundays and legal holidays without being required to pay them an additional
compensation of 25%.
In the collective bargaining agreement entered into between the NAWASA and
respondent unions it was agreed that all existing benefits enjoyed by the employees
and laborers prior to its effectivity shall remain in force and shall form part of the
agreement, among which certainly is the 25% additional compensation for work on
Sundays and legal holidays therefore enjoyed by said laborers and employees. It
may, therefore, be said that while under Commonwealth Act No. 444 a public utility
is not required to pay additional compensation to its employees and workers for work
done on Sundays and legal holidays, there is, however, no prohibition for it to pay
such additional compensation if it voluntarily agrees to do so. The NAWASA
committed itself to pay this additional compensation. It must pay not because of
compulsion of law but because of contractual obligation.
b.) In determining whether one has worked in excess of eight hours, whether
or not the undertime for that day should be set off. There is merit in the decision
of respondent court that the method used by petitioner in offsetting the overtime with
the undertime and at the same time charging said undertime to the accrued leave of
the employee is unfair, for under such method the employee is made to pay twice
for his undertime because his leave is reduced to that extent while he was made to
pay for it with work beyond the regular working hours.
The proper method should be to deduct the undertime from the accrued leave but
pay the employee the overtime to which he is entitled. This method also obviates the
irregular schedule that would result if the overtime should be set off against the
undertime for that would place the schedule for working hours dependent on the
employee.
c.) In computing the daily wage, whether or not the additional compensation
for Sunday work should be included. The way to determine the daily rate of a
monthly employee is to divide the monthly salary by the actual number of working
hours in the month. Thus, according to respondent court, Section 8 (g) of Republic
Act No. 1161, as amended by Republic Act 1792, provides that the daily rate of
compensation is the total regular compensation for the customary number of hours
worked each day. In other words, according to respondent court, the correct
computation shall be (a) the monthly salary divided by the actual of working hours in
a month or (b) the regular monthly compensation divided by the number of working
days in a month.
d.) How should the collection bargaining agreement of December 28, 1956 and
Resolution No. 29, series of 1957 of the Grievance Committee be interpreted
and construed insofar as the stipulations therein contained relative to "distress
pay" is concerned. Paragraph 3, Article VIII, of the collective bargaining agreement
entered into between the employer and respondent unions, provides:

Because of the peculiar nature of the function of those employees and laborers of the
Sewerage Division who actually work in the sewerage chambers, causing "unusual
distress" to them, they shall receive extra compensation equivalent to twenty-five
(25%) of their basic wage.
Petitioner contends that the distress pay should be given only to those who actually
work inside the sewerage chambers while the union maintains that such pay should
be given to all those whose work have to do with the sewerage chambers, whether
inside or outside. The Court of Industrial Relations sustained the latter view holding
that the distress pay should be given to those who actually work in and outside the
sewerage chambers, and by sewerage chambers should be understood to mean as
the surroundings where the work is actually done, not necessarily inside the
sewerage chambers.
It is clear then that all the laborers whether of the sewerage division or not
assigned to work in and outside the sewerage chambers and suffer in unusual
distress because of the nature of their work are entitled to the extra compensatory.
The basis of overtime is you rendered work more than 8 hours in one working day.
So, if you exceeded the 8 hours, you are entitled for an overtime pay regardless of
your work effort or working hours previous to such day or thereafter.
If a worker incurs undertime hours, then his undertime hour should not be
offset against the overtime hours. So, what will happen? The employee will not
be paid for the hours that he did not work during the day and with regard to his
overtime work, he will be entitled for an overtime pay.
They are separate and distinct. It is very clear under Article 88.
WEEKLY REST PERIODS
SUMMARY
Regular Working Day 8 hours
Overtime Work Entitled to an additional 25%
Night Shift Additional 10% of regular wage
Worked more than 8 hours during a Additional 10% for every hour plus 25%
Night Shift for overtime pay
Article 91. Right to weekly rest day.
It shall be the duty of every employer, whether operating for profit or not, to provide
each of his employees a rest period of not less than 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. However, the employer
shall respect the preference of employees as to their weekly rest day when such
preference is based on religious grounds.
IRR Book III Rule III Weekly Rest Periods
Section 1. General statement on coverage. — This Rule shall apply to all
employers whether operating for profit or not, including public utilities operated
by private persons.
Section 4. Preference of employee. — The preference of the employee as to
his weekly day of rest shall be respected by the employer if the same is based
on religious grounds. The employee shall make known his preference to the
employer in writing at least seven (7) days before the desired effectivity of the
initial rest day so preferred.
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Where, however, the choice of the employee as to his rest day based on
religious grounds will inevitably result in serious prejudice or obstruction to the
operations of the undertaking and the employer cannot normally be expected to
resort to other remedial measures, the employer may so schedule the weekly
rest day of his choice for at least two (2) days in a month.
For every six consecutive working days (working week), the employee is
entitled to a rest period or rest day of not less than 24 hours. Rest is at least
in 24 hours, no work is given to you.
General Rule: Employees’ preference must be respected by the employer if it is
based on religious grounds but take note of the exception mentioned under the
implementing rules.
Exception: If it causes obstruction to the operation, rest day can be scheduled at
least 2 days in a month in accordance with the preference of the employee.
When it comes to health personnel (San Juan De Dios v. NLRC) in a hospital with
110-bed capacity, you have 5 continuous days of work. When you work on the 6th
day, you will get a premium of 30%. This is based on Article 83 of the Labor Code.
Blue Sunday Law where the rest day was on Sundays. (No longer applicable)
With the repeal of Blue Sunday Law, Sunday is no longer the designated rest day.
Is it allowed for an employee to waive her right to additional compensation
for rest day? An express waiver of compensation for work is not valid. Therefore,
it does not bar claims for extra compensation. Article 91 in connection with related
Implementing Rules.
MEMORIZE THESE INSTANCES
Article 92. When employer may require work on a rest day. The employer
may require his employees to work on any day:
a) In case of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disaster
or calamity to prevent loss of life and property, or imminent danger
to public safety;
b) In cases of urgent work to be performed on the machinery,
equipment, or installation, to avoid serious loss which the employer
would otherwise suffer;
c) In the event of abnormal pressure of work due to special
circumstances, where the employer cannot ordinarily be expected to
resort to other measures;
d) To prevent loss or damage to perishable goods;
e) Where the nature of the work requires continuous operations and the
stoppage of work may result in irreparable injury or loss to the
employer; and
f) Under other circumstances analogous or similar to the foregoing as
determined by the Secretary of Labor and Employment.
IRR Book III Rule III Weekly Rest Periods
Section 6. When work on rest day authorized. — An employer may require any
of his employees to work on his scheduled rest day for the duration of the following
emergencies and exceptional conditions:
(a) In case of actual or impending emergencies caused by serious accident, fire,
flood, typhoon, earthquake, epidemic or other disaster or calamity, to prevent loss
of life or property, or in cases of force majeure or imminent danger to public safety;
(b) In case of urgent work to be performed on machineries, equipment or
installations to avoid serious loss which the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to special circumstances, where
the employer cannot ordinarily be expected to resort to other measures;
(d) To prevent serious loss of perishable goods;

(e) Where the nature of the work is such that the employees have to work
continuously for seven (7) days in a week or more, as in the case of the crew
members of a vessel to complete a voyage and in other similar cases; and
(f) When the work is necessary to avail of favorable weather or environmental
conditions where performance or quality of work is dependent thereon.
No employee shall be required against his will to work on his scheduled rest
day except under circumstances provided in this Section: Provided, However, that
where an employee volunteers to work on his rest day under other circumstances,
he shall express such desire in writing, subject to the provisions of Section 7
hereof regarding additional compensation.
- Take note that e and f are not included under Article 92. They still fall
under analogous circumstances.
- He is entitled to additional compensation even if it is voluntary.
- to an additional compensation of 30% for work rendered on Sundays and holidays.
What is the effect when an employee works on his rest day? The employee is
entitled to an additional rate 30% of his daily wage.
If he works for 8 hours, that should be 130% of his daily wage. No employee shall be
required against his will to work on his scheduled rest day, except for those reasons
mentioned in Article 92 and the Implementing Rules of the Labor Code.
In case work on rest day is required but is not based on one of those grounds
mentioned by the Labor Code, the employee may work on voluntary basis. You
cannot force an employee to go to work. You cannot make that as a ground for
suspension or dismissal if the employee refuses to work on a rest day and the
circumstances do not fall under Article 92.
Even if the work rendered on a rest day is either voluntary or under Article 92, the
employee shall be paid the additional compensation. If an employee agrees to
voluntary work on a rest day, such agreement must be made in writing, unless
otherwise provided for by the Implementing Rules.
Article 93. Compensation for rest day, Sunday or holiday work.
a) Where an employee is made or permitted to work on his scheduled rest
day, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage. An employee shall be entitled to
such additional compensation for work performed on Sunday only
when it is his established rest day.
b) When the nature of the work of the employee is such that he has no
regular workdays and no regular rest days can be scheduled, he
shall be paid an additional compensation of at least thirty percent
(30%) of his regular wage for work performed on Sundays and
holidays.
- Example: security guards, if they work everyday, then
Sunday shall be his presumed rest day.
c) Work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee. Where such holiday work falls on the employee’s scheduled
rest day, he shall be entitled to an additional compensation of at least
fifty percent (50%) of his regular wage.
d) Where the collective bargaining agreement or other applicable
employment contract stipulates the payment of a higher premium pay
than that prescribed under this Article, the employer shall pay such
higher rate.
SPECIAL NON-WORKING DAYS (as what may be proclaimed by the Office of the
President or Congress without prejudice to the CBA)
August 21 - Ninoy Aquino Day
November 2 - All Saints Day
December 8 - Feast of the Immaculate Concepcion
December 31 - Last day of the year
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During the Special Non-working days, the no work, no pay principle applies. If they
do not report for work, they will not receive pay for these days. There are also local
non-working days.
Under Paragraph (a), the employee works on a rest day, to which he is entitled to a
premium pay, which is an additional 30 percent of his regular daily wage. In other
words, he will be compensated for 130% of his daily wage. In an 8-hour work where
he earns a daily wage of ₱ 400.00, when he works on a rest day, then he shall receive
130% of ₱ 400.00 (which shall be ₱ 520.00).
When it will be asked in the bar, or if I will ask in the exam, the question will not state
the minimum wage because it differs in every region. What you shall remember is
that it will be 130% of the daily wage, or 100% of daily wage plus 30% additional
based on his daily wage.
For the scenario under Paragraph (b), the employee has no rest day and he is entitled
Who are covered under this scenario? An example would be security guards. They
do not have fixed rest days. If they work on a Sunday or holiday, the Sunday will be
presumed as their rest day and if they work on that Sunday, then he is eligible to
receive the additional premium of at least 30 percent of his regular wage.
Under Paragraph (c), work is performed on a special non-working holiday. Take note
that we have regular holidays and special non- working holidays.
If work is performed on a special non-working holiday under Paragraph (c), then the
employee shall be entitled to an additional pay of at least 30 percent of his regular
daily wage.
However, if that special non-working holiday falls on the rest day of the
employee, his additional compensation is at least 50% of his daily wage.
Take note: Do not confuse special non-working holidays with special working
holidays. In the latter, there is no additional compensation.
When an employee works on a special working holiday, he shall only be entitled to
his regular daily wage. No premium shall be paid since it is considered an ordinary
working day.
For Paragraph (d), if there is a Collective Bargaining Agreement (CBA), that would
be the applicable rate, provided that it is higher than the premium pay as provided
under Article 93 of the Labor Code.
Article 94. Right to holiday pay.
a) Every worker shall be paid his regular daily wage during regular
holidays, except in retail and service establishments regularly
employing less than ten (10) workers;
b) The employer may require an employee to work on any holiday but
such employee shall be paid a compensation equivalent to twice his
regular rate; and
c) As used in this Article, "holiday" includes: New Year’s Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth
of June, the fourth of July (no longer applicable), the thirtieth of
November, the twenty-fifth and thirtieth of December and the day
designated by law for holding a general election.
Take note of the paragraph a. It is very clear that if the employer is engaged in retail
and service and has less than 10 employees, even if the employee works during a
regular holiday, the employee shall not be entitled to holiday pay.
IRR Book III Rule IV Holidays with Pay
SECTION 4. Compensation for holiday work. — Any employee who is permitted
or suffered to work on any regular holiday, not exceeding eight (8) hours, shall be
paid at least two hundred percent (200%) of his regular daily wage. If the holiday
work falls on the scheduled rest day of the employee, he shall be entitled to an
additional premium pay of at least 30% of his regular holiday rate of 200% based
 20
on his regular wage rate. Compensable even if unworked Not compensable if unworked
subject to certain conditions
12 Regular Holidays: Important to memorize these
Limited to the list enumeration Not exclusive since a law or
REGULAR HOLIDAYS ordinance may provide other special
(As amended by RA 9849) holidays

New Year’s Day 1 January Rate is 200% of the regular rate if Rate is 130% of the regular wage if
Maundy Thursday Movable Date worked, 260% if it falls on a rest day worked, 150% if it falls on a rest day
Good Friday Movable Date
Araw ng Kagitingan 9 April
Labor Day 1 May IRR Book III Rule IV Holidays with Pay
Independence Day 12 June
National Heroes Day Last Monday of August Section 5. Overtime pay for holiday work. — For work performed in excess of
Eidl-Fitr Movable Date eight hours on a regular holiday, an employee shall be paid an additional
Edil Adha Movable Date compensation for the overtime work equivalent to his rate for the first eight hours
Bonifacio Day 30 November on such holiday work plus at least 30% thereof.
Christmas Day 25 December
Rizal Day 30 December Where the regular holiday work exceeding eight hours falls on the scheduled rest
day of the employee, he shall be paid an additional compensation for the overtime
work equivalent to his regular holiday-rest day for the first 8 hours plus 30%
PURPOSE: To prevent the diminution of the monthly income earned by an employee
thereof. The regular holiday rest day rate of an employee shall consist of 200% of
on account of interruptions. They are entitled to be paid on that day even if they did
his regular daily wage rate plus 30% thereof.
not report to work and must be duly compensated.

The worker is forced not to work because of a celebration but he should not be
deprived of what he should have earned. IRR Book III Rule IV Holidays with Pay

He is entitled to the 100% regular holiday pay + COLA. Section 6. Absences. —

Article 94 is based on the fact that the workers are forced to take a rest but he is not
deprived of what they should have earned on the said regular holiday.
It is important to remember what are treated as regular or special holidays because
of the difference in premium pay.
HOW TO COMPUTE WAGES ON HOLIDAYS
(a) All covered employees shall be entitled to the benefit provided herein when
they are on leave of absence with pay. Employees who are on leave of absence
without pay on the day immediately preceding a regular holiday may not be paid
the required holiday pay if he has not worked on such regular holiday.
(b) Employees shall grant the same percentage of the holiday pay as the benefit
granted by competent authority in the form of employee's compensation or social
security payment, whichever is higher, if they are not reporting for work while on
such benefits.

REGULAR HOLIDAYS SPECIAL HOLIDAYS
If it is the employee’s regular work If unworked - No pay, unless there is a
day: favorable company policy or CBA
granting payment of wages on
If unworked - 100% special days if unworked
(c) Where the day immediately preceding the holiday is a non-working day in the
establishment or the scheduled rest day of the employee, he shall not be
deemed to be on leave of absence on that day, in which case he shall be entitled
to the holiday pay if he worked on the day immediately preceding the non-working
day or rest day.

If worked - If worked - DOUBLE HOLIDAY

1st 8 hours - 200%
Excess of 8 hours - plus 30% of
hourly rate on said day
If it is the employee’s rest day:
If unworked - 100%
If worked -
1st 8 hours - plus 30% of 200%
Excess of 8 hours - plus 30% of
hourly rate on said day
We are referring to employees who are
paid on a monthly basis, not on per day
(no work, no pay)
The employee should not have been
absent without pay on the working day
preceding the regular holiday.
When the holiday falls on a Sunday and
the following Monday is not a holiday,
you have to consider if the employee
rendered work on a Sunday or not.
1st 8 hours - plus 30% of the daily rate
of 100%
Excess of 8 hours - plus 30% of
hourly rate on said day
If falling on an employee’s rest day and
if worked -
1st 8 hours - plus 50% of the daily rate
of 100%
Excess of 8 hours - plus 30% of hourly
rate on said day
If double holiday (2 Regular Holidays on the same day) (e.g Araw ng Kagitingan
falls on Good Friday/Maundy Thursday):
● If the employee does not report for work, entitled to 200% of his basic
wage (100% each of the holiday). If the employee is paid for only 1 holiday,
it would constitute a diminution of salary, from 12 paid holidays it will only
be 11 paid holidays
● If the employee reports for work, entitled to 300% (100% each of the
holiday plus 100% regular work)
● If the employee reports for work but on his rest day, entitled to an
additional 30% for each 100% wage so 390% (100% each of the holiday
plus 100% regular work).
For monthly paid employees, if the monthly salaries are computed using factors which
already constituted the payment for the 12 legal holidays, no additional payment is
given.
For work rendered on a legal holiday, an additional compensation of 100% of the
regular salary shall be paid to the employees.
What if the employee is daily paid? If he is considered as a regular employee, he
will still be entitled to the holiday pays even if these are not worked. If he works, he
is entitled to 200% and 300% if it falls on a double holiday.

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That is why it is very important to determine the status of the employee.
TWO SUCCESSIVE REGULAR HOLIDAYS
An employee decides to take a vacation. An employee may not be paid for the
successive holidays if he does not report for work on the day immediately preceding
the first holiday. Unless he works on the first holiday. In the latter case, he will be
entitled to his regular wage on the first holiday plus the holiday pay and holiday pay
on the second holiday.
Rationale: The law does not want the employees to decide just when they want to
report for work as this might compromise the work schedule and operation of the
employer.
IRR Book III Rule IV Holidays with Pay
Section 8. Holiday pay of certain employees. —
(a) Private school teachers, including faculty members of colleges and
universities, may not be paid for the regular holidays during semestral
vacations. They shall, however, be paid for the regular holidays during Christmas
vacation;
(b) Where a covered employee, is paid by results or output, such as payment on
piece work, his holiday pay shall not be less than his average daily earnings for
the last seven (7) actual working days preceding the regular holiday; Provided,
However, that in no case shall the holiday pay be less than the applicable statutory
minimum wage rate.
(c) Seasonal workers may not be paid the required holiday pay during off-season
when they are not at work.
(d) Workers who have no regular working days shall be entitled to the benefits
provided in this Rule.
Remember what we have discussed under Article 82 of the Labor Code as to who
are considered covered employees for conditions of employment (Article 82 to 96).
With regard to holiday pay, field personnel are not covered. The actual works in the
field must be ascertained.
What about part-timer? They are still entitled to holiday pay but since they only work
part-time, their holiday pay is also only partial. The amount of holiday pay of a part-
timer is to be determined on a case to case basis wherein you have to consider which
of the following yields the highest amount:
1. Based on his regular wage per day; or
2. Based on his basic wage on the working day immediately preceding the
holiday, if the employee is present or on leave with pay on the last working
day immediately prior to the holiday; or
3. The average of his basic wages for the last 7 working days for employees
paid by results; or
4. The basic wage on the particular holiday if worked.
IRR Book III Rule IV Holidays with Pay
Section 7. Temporary or periodic shutdown and temporary cessation of
work. —
(a) In cases of temporary or periodic shutdown and temporary cessation of
work of an establishment, as when a yearly inventory or when the repair or
cleaning of machineries and equipment is undertaken, the regular holidays falling
within the period shall be compensated in accordance with this Rule.
(b) The regular holiday during the cessation of operation of an enterprise due to
business reverses as authorized by the Secretary of Labor and Employment may
not be paid by the employer.
Article 95. Right to service incentive leave. MANDATORY
a) Every employee who has rendered at least one year of service shall
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be entitled to a yearly service incentive leave of five days with pay.
b) This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at
least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment
after considering the viability or financial condition of such
establishment.
c) The grant of benefit in excess of that provided herein shall not be
made a subject of arbitration or any court or administrative action.
Every employee who has rendered at least one year of service is entitled to a
yearly service incentive leave of 5 days with pay. (12 months whether continuous
or broken)
- you only need to proove that you worked atleast 1 year
- The employer has then the burden of proof that it gave the entitlement
Are part-time workers subject to incentive leave? YES. They are entitled to the
full benefits of the 5-day service incentive leave, not pro rata.
Are piece rate workers subject to incentive leave? NO.
When the employer claims that he is not obligated to pay service incentive leave
to his employees, he has the burden of proof to show why he is exempted from this
provision. He could prove that he has less than 10 employees. If he fails to show
such proof, then he will be deemed covered by Article 95.
Presumption: Employees are entitled to service incentive leave.
If the employer alleges otherwise, he has the burden of proof.
COMMUTATION OF SERVICE INCENTIVE LEAVE
It shall be commutable to its money equivalent if it is not used or exhausted at the
end of the year. The basis of conversion shall be the salary rate at the date of
commutation. The use of the commutation of the service incentive leave may be
on a pro rata basis.
Pro rata: He has worked for more than a year but less than two years, his service
incentive leave for the second year will be pro rata.
Domestic Workers: They are entitled to service incentive leave but need not be
converted to cash as it can be carried over to succeeding years.
VACATION LEAVE AND SICK LEAVE
There is no provision in the Labor Code which mandates the employer to give
vacation or sick leave. These are voluntary in nature. The employee has the burden
of proof to prove entitlement to vacation and sick leave benefits. You may present
your contract or company policy or CBA.
If the employer already grants vacation leave with pay, you cannot anymore
demand the service incentive leave pay.
IRR Book III Rule V Service Incentive Leave
Section 1. Coverage. — This rule shall apply to all employees except:
(a) Those of the government and any of its political subdivisions, including
government-owned and controlled corporations;
(b) Domestic helpers and persons in the personal service of another;
(c) Managerial employees as defined in Book Three of this Code;
(d) Field personnel and other employees whose performance is unsupervised by
the employer including those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof;
(e) Those who are already enjoying the benefit herein provided;

(f) Those enjoying vacation leave with pay of at least five days; and
(g) Those employed in establishments regularly employing less than ten
employees.
Section 2. Right to service incentive leave. — Every employee who has
rendered at least one year of service shall be entitled to a yearly service incentive
leave of five days with pay.
Section 3. Definition of certain terms. — The term "at least one-year service"
shall mean 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.
Section 4. Accrual of benefit. — Entitlement to the benefit provided in this Rule
shall start December 16, 1975, the date the amendatory provision of the Code
took effect.
Section 5. Treatment of benefit. — The service incentive leave shall be
commutable to its money equivalent if not used or exhausted at the end of the
year.
Section 6. Relation to agreements. — Nothing in the Rule shall justify an
employer from withdrawing or reducing any benefits, supplements or payments as
provided in existing individual or collective agreements or employer's practices or
policies.
REGULAR HOLIDAYS
Insular v. Inciong
FACTS: On June 20, 1975, Insular Bankof Asia and America Employees Union
(IBAAEU) filed a complaint against the Insular Bankof Asia and America for the
payment of holiday pay. On August 25, 1975, Labor Arbiter granted the petitioner's
complaint for payment of holiday pay.
On December 16, 1975, Presidential Decree No. 850 was promulgated amending,
among others, the provisions of the Labor Code on the right to holiday pay.
On February 16, 1976, by authority of Article 5 of the same Code, the Department of
Labor (now Ministry of Labor) promulgated the rules and regulations for the
implementation of holidays with pay.
On April 23, 1976, Policy Instruction No. 9 was issued by the then Secretary of
Labor (now Minister) interpreting the above-quoted rule, pertinent portions of which
read:
The ten (10) paid legal holidays law, to start with, is intended to benefit
principally daily employees. In the case of monthly, only those whose
monthly salary did not yet include payment for the ten (10) paid legal
holidays are entitled to the benefit.
Under the rules implementing P.D. 850, this policy has been fully clarified to
eliminate controversies on the entitlement of monthly paid employees.
The new determining rule is this:
If the monthly paid employee is receiving not less than P240, the maximum
monthly minimum wage, and his monthly pay is uniform from January to
December, he is presumed to be already paid the ten (10) paid legal
holidays.
However, if deductions are made from his monthly salary on account of
holidays in months where they occur, then he is still entitled to the ten (10)
paid legal holidays. ..." (emphasis supplied).
Insular Bankof Asia and America by reason of the ruling laid down by the
aforecited rule implementing Article 94 of the Labor Code and by Policy
Instruction No. 9, stopped the payment of holiday pay to its employees.
ISSUE: W/N Policy Instruction No. 9 was valid. IT WAS NULL AND VOID.
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LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
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RULING: NO. Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void since in
the guise of clarifying the Labor Code's provisions on holiday pay, they in effect
amended them by enlarging the scope of their exclusion.
It is clear that monthly paid employees are not excluded from the benefits of
holiday pay. However, the implementing rules on holiday pay promulgated by the
then Secretary of Labor excludes monthly paid employees from the said benefits
by inserting, under Rule IV, Book Ill of the implementing rules, Section 2, which
provides that:
"employees who are uniformly paid by the month, irrespective of the number of
working days therein, with a salary of not less than the statutory or established
minimum wage shall be presumed to be paid for all days in the month whether
worked or not.”
In the case at bar, the provisions of the Labor Code on the entitlement to the
benefits of holiday pay are clear and explicit – it provides for both the coverage
of and exclusion from the benefits.
In Policy Instruction No. 9, the then Secretary of Labor went as far as to
categorically state that the benefit is principally intended for daily paid
employees, when the law clearly states that every worker shall be paid their
regular holiday pay. This is a flagrant violation of the mandatory directive of
Article 4 of the Labor Code, which states that "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.”
Discussion: Policy Instruction Number 9 that was also mentioned in the case of
Mantrade and Chartered Bank in which the Supreme Court held that Section 2,
Rule IV, Book III of the implementing rules and Policy Instruction No. 9 issued by
the then Secretary of Labor are null and void since in the guise of clarifying the
Labor Code's provisions on holiday pay, they in effect amended it differed from
what is provided in the Labor Code by enlarging the scope of their exclusion.
In this case, it is clear that monthly paid employees are not excluded from
the benefits of holiday pay contrary to the findings of the Ministry of Labor.
In the case of Chartered Bank, since the private respondents premise its action
on the invalidated rule and policy instruction that was mentioned in the case of
Insular, the employees belonging to the petitioner association are entitled to the
legal holiday pay. Also, the divisor assumes an important role determining
whether or not the holiday pay is included in the computation over the monthly
paid employee’s daily salary rate.
In computing the compensation for its employees, the divisor they used was 251
with regard to the overtime pay, the basis using that divisor was the deduction of
the Sundays and Saturday and the 10 legal holidays from the 365 days.
The higher the divisor, the smaller daily wage on the part of the employee. It is
better to determine whether or not if it satisfies the minimum wage limit.
It will also determine whether or not if the regular holiday pay is included in the
monthly wage.
Essentially when you say payment of entitlement to the payment of a holiday
pay, it is easier to compute if employees are paid in a daily rate; if monthly rate,
compute that by monthly rate x 12 divide it by the number of days.
EXAMPLE: If they only work for 5 days a week (Sun and Sat not included so
deduct 104 days: 52 Sundays plus 52 Saturdays), do not include the legal
holidays since they are entitled to such.
[Monthly Rate x 12 mo. / (365-104)] = Daily Rate
The quotient should not be less than the minimum daily wage.
Since they are using 251 (365 days - 104 Sundays and Saturdays – 10 Legal
Holidays). Regular holidays here are excluded.
Same issue in Mantrade vs Bacungan, Policy instruction No. 9, “while additional
exclusion is only in the form of a presumption that all monthly paid employees
have already been paid holiday pay, it constitutes a taking away or a deprivation

which must be in the law if it is to be valid. An administrative interpretation which
diminishes the benefits of labor more than what the statute delimits or withholds
is obviously ultra vires.”
DISCUSSION : The law clearly states that every worker shall be paid their
regular holiday pay. Monthly paid workers are not excluded.
- section 8 of the IRR (take note)
- pay, as claimed, from 1975 to 1977, private respondent National Alliance of Teachers
Far East v. Lebatique
FACTS: Far East Agricultural Supply, Inc. hired Jimmy Lebatique as his
company driver. His main task is to deliver animal feeds to the company’s clients. He
was hired in 1996. Sometime in 2000, he complained of non-payment of overtime
pay.
He was suspended on the alleged illegal use of company vehicle. Even so, he
reported the next day but he was prohibited to enter the company premises.
Eventually, he was terminated by telling him that he needs to look for another job by
the General Manager of the company. He, then, filed a complaint for illegal dismissal
and nonpayment of overtime pay, service incentive leave and other pay.
The Labor Arbiter ruled in favor of Lebatique. However, it was reversed by the NLRC
saying that there is no dismissal to speak of since he was only suspended and that it
found out that he is a field personnel. However, upon appeal on the CA, it ruled in
favor of Lebatique.
ISSUE:
a) Whether or not Lebatique was illegally dismissed. YES
b) Whether or not Lebatique was a field personnel. NO, HE WAS A
REGULAR EMPLOYEE. He was under the control and supervision of Far
East.
HELD:
a) The Court ruled that yes, he was illegally dismissed. According to the
petitioner he abandoned his work and it was a valid ground for dismissal.
However, according to the Court, Lebatique did not abandon his work; he
was illegally dismissed and it is upon the petitioner to prove the valid
dismissal that he abandoned his work. The Court said that there was no
abandonment of work since the mere proof of filing a complaint is already
enough to say that there was no intent to abandon his work.
b) No, he is not a field personnel and therefore, entitled to the payment of
service incentive leave.
NOTE: It is important to determine whether or not he is a field personnel because if
he is a field personnel, he is not entitled to the benefits – payment of overtime and
service incentive leave.
Why can’t he be considered a field personnel? He is a driver; he’s out in the field
driving. According to the Court, a) Lebatique is directed to deliver the goods on
specified time of days and also, b) he is not given the discretion to select and contract
with clients. Further, c) Far East issued a directive that company drivers should stay
in the client’s premises during truck ban hours from 5PM to 9AM and from 9AM to
5PM. In other words, during working hours, he is under the control and supervision
of the employer. Therefore, that is not the field personnel considered to be exempted
from these benefits – overtime pay and service incentive leave pay.
Take note of the coverage under Article 82 and, this applies to the provisions from
Article 83 up to Article 96. Service incentive leave is included there.
Take note that for every benefit, take note who is entitled and who is not entitled as
provided by law.
Jose Rizal College v. NLRC
FACTS: JRC is a non-stock, non-profit educational institution duly organized and
existing under the laws of the Philippines. It has three groups of employees
categorized as follows:
(a) personnel on monthly basis, who receive their monthly salary uniformly throughout
the year, irrespective of the actual number of working days in a month without
deduction for holidays;
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(b) personnel on daily basis who are paid on actual days worked and they receive
unworked holiday pay and
(c) collegiate faculty who are paid on the basis of student contract hour.
Before the start of the semester they sign contracts with the college undertaking to
meet their classes as per schedule. Unable to receive their corresponding holiday
and Office Workers (NATOW) in behalf of the faculty and personnel of Jose Rizal
College filed with the Ministry of Labor a complaint against the college for said alleged
non-payment of holiday pay, docketed as Case No. RO4-10-81-72.
ISSUE: Whether or not the school faculty who according to their contracts are paid
per lecture hour are entitled to unworked holiday pay. No payment for REGULAR
HOLIDAY but with payment for Special Holidays or for other reasons that
classes are suspended or shortened.
RULING: Labor Arbiter Julio Andres, Jr. found that faculty and personnel employed
by JRC who are paid their salaries monthly, are uniformly paid throughout the school
year regardless of working days, hence their holiday pay are included therein while
the daily paid employees are remunerated for work performed during holidays per
affidavit of JRC's treasurer.
There appears to be no problem therefore as to the first two classes or categories of
JRC's workers.
The problem, however, lies with its faculty members, who are paid on an hourly
basis, for while the Labor Arbiter sustains the view that said instructors and
professors are not entitled to holiday pay, his decision was modified by the National
Labor Relations Commission holding the contrary. Otherwise stated, on appeal the
NLRC ruled that teaching personnel paid by the hour are declared to be entitled to
holiday pay.
Under [Article 94(a) and (b) of the Labor Code, and the Omnibus Rules, Book III,
Rule IV, Section 8], apparently, the JRC, although a non-profit institution is under
obligation to give pay even on unworked regular holidays to hourly paid faculty
members subject to the terms and conditions provided for therein.
We believe that the aforementioned implementing rule is not justified by the
provisions of the law which after all is silent with respect to faculty members paid
by the hour who because of their teaching contracts are obliged to work and consent
to be paid only for work actually done (except when an emergency or a fortuitous
event or a national need calls for the declaration of special holidays).
Regular holidays specified as such by law are known to both school and faculty
members as "no class days;" certainly the latter do not expect payment for said
unworked days, and this was clearly in their minds when they entered into the
teaching contracts.
On the other hand, both the law and the Implementing Rules governing holiday
pay are silent as to payment on Special Public Holidays.
It is readily apparent that the declared purpose of the holiday pay which is the
prevention of diminution of the monthly income of the employees on account of work
interruptions is defeated when a regular class day is cancelled on account of a special
public holiday and class hours are held on another working day to make up for time
lost in the school calendar.
Otherwise stated, the faculty member, although forced to take a rest, does not earn
what he should earn on that day. Be it noted that when a special public holiday is
declared, the faculty member paid by the hour is deprived of expected income, and it
does not matter that the school calendar is extended in view of the days or hours lost,
for their income that could be earned from other sources is lost during the extended
days.
Similarly, when classes are called off or shortened on account of typhoons, floods,
rallies, and the like, these faculty members must likewise be paid, whether or not
extensions are ordered.
ORDER:
a) Exempting JRC from paying hourly paid faculty members their pay for
regular holidays, whether the same be during the regular semesters of the
school year or during semestral, Christmas, or Holy Week vacations;

b) Ordering JRC to pay said faculty members their regular hourly rate on
days declared as special holidays or for some reason classes are called
off or shortened for the hours they are supposed to have taught, whether
extensions of class days be ordered or not; in case of extensions said
faculty members shall likewise be paid their hourly rates should they teach
during said extensions.
Discussion
Take note how the SC here distinguished regular holidays and its corresponding pay
and special public holidays. This refers only to faculty paid by the hour, like us law
teachers. Essentially, no work, no pay. (Even if there is work sometimes, there is still
no pay. Making an exam is still work! But who’s counting?)
In the instant case, those who are paid by the hour do not expect to work, and
therefore, they are not to be paid, unless they can render work, like [in AdDU], when
there are make-up classes—MUCs are chargeable.
Also, take note here with regard to the rule that if there is no work due to a special
public holiday, the treatment is not the same. In instances when classes are called
off or shortened on account of typhoons, floods, rallies, and even school activities,
teachers expect that there are classes on such days if not for the fortuitous events.
Thus, they can charge for that. Again, this is only applicable for the faculty who are
paid per hour.
Here, the teachers will be paid for the Christmas vacation as provided for in the IRR.
The case of JRC shall be controlling over the IRR with regard to regular holiday pay.
Wellington v. Trajano
FACTS: On 6 August 1991, a routine inspection was conducted by a Labor
Enforcement Office on Wellington Flour Mills, an establishment owned & operated by
P Wellington Investment and Manufacturing Corporation. His report, with a copy
“explained to and received by” Wellington’s personnel manager, set forth the finding
of “non-payment of regular holidays falling on a Sunday for monthly-paid
employees.”
Wellington sought reconsideration, arguing that their monthly salaries already
includes holiday pay for all regular holidays, hence there is no legal basis for LEO’s
finding. It pays its employees a fixed monthly compensation using the “314”
factor, which undeniably covers and already includes payment for all the working
days in a month as well as the 10 unworked regular holidays within a year.
The Regional Director ruled that “when a regular holiday falls on a Sunday, an extra
or additional working day is created and the employer has the obligation to pay the
employees for the extra day except the last Sunday of August since the payment for
the said holiday is already included in the 314 factor,” and accordingly directed
Wellington to pay its employees compensation corresponding to four (4) extra
working days.
P filed an MR, pointing out that it was in effect being compelled to “shell out an
additional pay for an alleged extra working day” despite its complete payment of all
compensation lawfully due its workers, using the 314 factor. This was taken as an
appeal, and acted on by R Undersecretary Trajano. The latter held that the “divisor
being used by P does not reliably reflect the actual working days in a year,” and
demanded Wellington to pay the six additional working days resulting from regular
holidays falling on Sundays in 1988, 1989 and 1990. P’s reconsideration was denied.
ISSUE: Whether or not a monthly-paid employee, receiving a fixed monthly
compensation, is entitled to an additional pay aside from his usual holiday pay,
whenever a regular holiday falls on a Sunday. NO or YES?
HELD: The theory loses sight of the fact that the monthly salary in Wellington —
which is based on the so-called "314 factor" — accounts for all 365 days of a year;
i.e., Wellington's "314 factor" leaves no day unaccounted for; it is paying for all the
days of a year with the exception only of 51 Sundays.
There is no provision of law requiring any employer to make such adjustments in the
monthly salary rate set by him to take account of legal holidays falling on Sundays in
a given year, or, contrary to the legal provisions bearing on the point, otherwise to
reckon a year at more than 365 days. Employers shall assure that employees get
their monthly rate.
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There is no question that Wellington complied with the minimum norm laid down
by the law – by paying its employees "a salary of not less than the statutory or
established minimum wage," and that the monthly salary thus paid was "not less than
the statutory minimum wage multiplied by 365 days divided by twelve.”
The monthly salary was fixed by Wellington to provide for compensation for every
working day of the year including the holidays specified by law — and excluding only
Sundays. The “314 factor” simply deducted 51 Sundays from the 365 days normally
comprising a year, and used the difference as basis for determining the monthly
salary.
The monthly salary thus fixed actually covers payment for 314 days of the year,
including regular and special holidays, as well as days when no work is done by
reason of fortuitous cause, as above specified, or causes not attributable to the
employees.
Discussion
Was the factor used here proper? No. The Regional Director said that the factor
used by Wellington did not take into consideration the other holidays that fall on a
Sunday. He ordered Wellington to pay additional working days in 1988, 1989 and
1990 because in these years, the regular working holidays fell on a Sunday.
With regard to fixed monthly pay employees, you have to take note whether, indeed,
the regular pay is already embedded in such. You have to compute the whole
deducted monthly pay. Compute it by 12 but do not divide it by 365 because it means
that they worked for every year.
What happened here is that only the divisor that he used was 314 which merely
deducted the days that the employees did not work, including Sundays. However, it
did not include their regular holiday pay which they were not required to work but
nevertheless, they are entitled to pay. The higher the divisor, the lower is their daily
wage.
Compare 365 and 314, the difference is large but the SC said that it was not enough.
You only included Sundays which were not worked. You should also include holidays
which they did not work even if it falls on a Sunday. You should treat them differently.
There is no provision of law requiring any employer to make such adjustments in the
monthly salary rate set by him to take account of legal holidays falling on Sundays in
a given year, because in fact, this is out of the control on the part of the employee.
As earlier mentioned, what the law requires of employers opting to pay by the month
is to assure that "the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve," and to pay that salary "for
all days in the month whether worked or not," and "irrespective of the number of
working days therein."
That salary is due and payable regardless of the declaration of any special holiday in
the entire country or a particular place therein, or any fortuitous cause precluding
work on any particular day or days (such as transportation strikes, riots, or typhoons
or other natural calamities), or cause not imputable to the worker.
The SC ruled that if the holiday falls on a Sunday, that is beyond the control of the
employee. Thus, you must account for all of these days not only Sundays but also
regular holidays falling on a Sunday as provided by law.
SERVICE INCENTIVE LEAVE : You can convert it into cash when unutilized
Bonifacio Murillo v. Sun Valley Realty
FACTS: Petitioners were employed in April 1967 as maintenance men tasked with
the upkeep of the roads and water system of the Sun Valley Subdivision. On January
11, 1980, they were notified by the respondents that their contract was to be
terminated by January 31.
Thus, on that day, they were terminated but the private respondent has not complied
with or filed any application for the clearance to terminate from the Ministry of Labor.
Therefore, on February, the next month, they filed for a complaint for illegal dismissal,
and praying among others, the grant of emergency leave allowance and payment of
service incentive leave.
The Labor Arbiter ruled in their favor but this was reversed by the NLRC due to a
defect in their position paper. They contended that, among others, they were entitled
to these benefits.

ISSUE:
a) Whether or not they were illegally dismissed. YES
b) Whether or not they are entitled to such service incentive leave. YES
HELD:
a) Yes. Under the rules, it requires that the clearance was to be secured by the
employer before one would shut down his business. There is no showing that the
employer, here, applied for the clearance to shut down prior to the petitioner’s
dismissal from work. The petitioners, here, were, in fact, illegally dismissed.
b) Yes. The Court ruled that they are entitled to such pay because it was a general
rule that the policy in the Labor Code is to include all establishments under the
coverage in the provision granting such service incentive leave to workers.
The employers, here, claims for the exception, citing Rule 5, Section 1 paragraph
10 (g) that those employed in establishments regularly employing less than 10
employees. They claim that they only have 6 employees and hence, covered by
the exception.
However, such claim was not proven by them because as held by the SC, it was
incumbent upon them to prove that they belong to a class exempted by law from
the general rule. Specifically, it was their duty and not of the employees that they
have less than 10 employees. Having failed to discharge this task, the employer
must be deemed covered by the general rule notwithstanding the failure of the
employees to allege the exact number of people. Hence, they are entitled to such
service incentive leave.
It is not enough to allege that he has only 6 employees. What proof could be shown
to show that you have less than 10 employees? Payroll records where the
employees sign when they receive their salary SSS records where the
employees are listed
DISCUSSION :
- The employer raised the defense that it was not obligated to pay the SIL
to its employees.
- Burden to show that the employer is exempted from the SIL rests upon
the employer. (Less than 10 employees in his establishment yo!)
Article 96, amended by RA 11360 (2019)
Service charges. – All service charges collected by hotels, restaurants and
similar establishments shall be distributed completely and equally among the
covered workers except managerial employees.
In the event that the minimum wage is increased by law or wage order, service
charge paid to the covered employees shall not be considered in determining the
employer’s compliance with the increased minimum wage.
To facilitate resolution of any dispute between the management and the
employees on the distribution of service charges, a grievance mechanism is
established or if inadequate, the grievance shall be referred to the regional office
of the Department of Labor and Employment which has jurisdiction over the
workplace for conciliation.
For purposes of this Article, managerial employees refer to any person vested with
powers or prerogatives to lay down and execute management policies or hire,
transfer, suspend, lay-off, recall discharge, assign or discipline employees or to
effectively reconcile such managerial actions.
Old version: Article 96. Service charges. All service charges collected by hotels,
restaurants and similar establishments shall be distributed at the rate of eighty-
five percent (85%) for all covered employees and fifteen percent (15%) for
management. The share of the employees shall be equally distributed among
them. In case the service charge is abolished, the share of the covered employees
shall be considered integrated in their wages.
Discussion
This law was approved on 7 August 2019 and the IRR was issued on 19 November
2019.
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If the service charge will be abolished by the employer, the share of the employees
will be deemed integrated in their wages. With this amendment, the employer cannot
claim that before they charged their customers with service charge but with this
amendment, they will not charge a service charge. If it is abolished, considering that
the employees were entitled to 85% before, they will be deemed integrated with the
wages.
With regard to service charges, if the owner decides to continue, he must maintain
the average share of the establishment because that is the matter of the right of the
employees.
However, take note that service charge is not in the nature of profit share in favor
of the employees. It means that it cannot be deducted from wage. As long as it is
considered as service charge, the share distributed to the employees will not be
considered as part of their wages.
Once abolished, the share of the employees will be deemed integrated in their wages.
General rule: Tips do not form part of the service charge.
Exception: Where the establishment does not collect service charges but has a
practice of pooling tips, it should be monitored and accounted for in the same manner
as that of a service charge.
IRR Book III Rule VI Service Charges
SECTION 1. Coverage. — This rule shall apply to all establishments collecting
service charges such as hotels, restaurants, and other similar establishments,
including those entities operating primarily as private subsidiaries of the
Government. (as amended)
SECTION 2. Definition of terms - x x x
a. Covered employees refer to all employees except managerial employees as
defined herein under the direct employ of the covered establishment, regardless
of their positions, designations or employment status, and irrespective of the
method by which their wages are paid.
c. Managerial employees refer to any person vested with power and prerogatives
to lay down and execute management policies or hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees or to effectively recommend such
managerial actions.
SECTION 3. Distribution of service charges. — All service charges collected
by covered employers shall be distributed completely and equally, based on actual
hours or days of work or service rendered, among the covered employees,
including those already receiving the benefit of sharing in the service charge.
SECTION 4. Frequency of distribution. — The shares referred to herein shall
be distributed and paid to the employees not less than once every two (2) weeks
or twice a month at intervals not exceeding sixteen (16) days.
SECTION 5. Integration of service charges. — In case the service charges is
abolished the share of covered employees shall be considered integrated in their
wages. The basis of the amount to be integrated shall be the average monthly
share of each employee for the past twelve (12) months immediately preceding
the abolition of withdrawal of such charges.
SECTION 6. Relation to agreements. — Nothing in this Rule shall prevent the
employer and his employees from entering into any agreement with terms more
favorable to the employees than those provided herein, or be used to diminish any
benefit granted to the employees under existing laws, agreement and voluntary
employer practice.
Check Section 5 and 6 from Codals
Tips and Service Charges are different. When you say tip, this is a reward to the
one who rendered you services. A recognition for their excellent service. Tip is not
compulsory. But for Service Charges, even if you don’t like the service, you need to
pay for it.

EXAMPLE: Bellboy, you give him tip but the tip is not the service charge included in
the bill when you check out. Tips do not form part of the service charges mentioned
under Article 96.
Tip pocketing can be considered as a serious offense of dishonesty.
EXCEPTION: If there is no Service Charge but there is Pooling of Tips, the employer
and employee are not prohibited from implementing their own rules on how they will
distribute the tips. In this case, not reporting the tip can be a ground for dishonesty.
The Service Charge is not in the nature of a profit share. This must not be deducted
from wage. It is not part of the wage.
13th MONTH PAY (PD 851)
19 December 1976
Section 1. All employers are hereby required to pay all their employees receiving
a basic salary of not more than P1,000 a month, regardless of the nature of their
employment, a 13th-month pay not later than December 24 of every year.
Section 2. Employers already paying their employees a 13th-month pay or its
equivalent are not covered by this Decree.
IRR of PD 851
Coverage: All employers are required to pay their rank and file employees 13th
month pay, regardless of the nature of their employment and irrespective of the
methods by which their wages are paid, provided they worked for at least one (1)
month during a calendar year. The 13th month pay should be given to the employees
not later than December 24 of every year.
EMPLOYERS NOT COVERED BY PD 851
1. The Government and any of its political subdivisions, including
government-owned and controlled corporations, except those
corporations operating essentially as private subsidiaries of the
Government.
2. Employers already paying their employees 13-month pay or more in a
calendar year of its equivalent at the time of this issuance.
3. Employers of those who are paid on purely commission, boundary, or
task basis, and those who are paid a fixed amount for performing a
specific work, irrespective of the time consumed in the performance
thereof, except where the workers are paid on piece-rate basis in which
case the employer shall grant them 13th month pay. We refer to
workers paid a standard amount for every unit of used produced
without regard to the time spent producing the same.
ENTITLED TO 13th MONTH PAY
1. Casual workers
2. Seasonal workers
Computation of 13th Month Pay
Total basic salary earning during the year / 12 months
= The Third Division in Duplicators found that:
PROPORTIONATE 13th month pay
What is the intention of the law?
National Federation v. Ovejera (GR No.L-59743, May 31, 1982)
Held: The evident intention of the law, as revealed by the law itself, was to grant an
additional income in the form of a 13th month pay to employees not already
receiving the same. Otherwise put, the intention was to grant some relief — not to
all workers — but only to the unfortunate ones not actually paid a 13th month salary
or what amounts to it, by whatever name called; but it was not envisioned that a
double burden would be imposed on the employer already paying his
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employees a 13th month pay or its equivalent — whether out of pure generosity
or on the basis of a binding agreement and, in the latter ease, regardless of the
conditional character of the grant (such as making the payment dependent on profit),
so long as there is actual payment. Otherwise, what was conceived to be a 13th
month salary would in effect become a 14th or possibly 15th month pay.
The term "its equivalent" ... shall include Christmas bonus, mid-year bonus, profit-
sharing payments and other cash bonuses amounting to not less than 1/12th of the
basic salary but shall not include cash and stock dividends, cost of living allowances
and all other allowances regularly enjoyed by the employee, as well as non-monetary
benefits. Where an employer pays less than 1/12th of the employee's basic salary,
the employer shall pay the difference."
To require employers (already giving their employees a 13th month salary or its
equivalent) to give a second 13th month pay would be unfair and productive of
undesirable results. To the employer who had acceded and is already bound to give
bonuses to his employees, the additional burden of a 13th month pay would amount
to a penalty for his munificence or liberality. The probable reaction of one so
circumstance would be to withdraw the bonuses or resist further voluntary grants for
fear that if and when a law is passed giving the same benefits, his prior concessions
might not be given due credit; and this negative attitude would have an adverse
impact on the employees.
Discussion: The issue was whether or not PD 851 obliges the employer to give its
workers a 13th month salary in addition to what they have been receiving (Christmas,
milling, amelioration bonuses wherein their value already exceeds the disputed 13th
month pay).
Remember that when we talk of 13th month pay, it is in the nature of additional
income granted to employees who are not receiving the same. Essentially to increase
the real wages of the workers.
We say that the 13th month is based on wage but it is not part of wage.
Framanlis v. Minister of Labor (GR No.72616-17, March 8, 1989)
Held: With regard to the 13th month pay, petitioners admitted that they failed to pay
their workers 13th month pay in 1978 and 1979. However, they argued that they
substantially complied with the law by giving their workers a yearly bonus and other
non-monetary benefits amounting to not less than 1/12th of their basic salary, in the
form of:
1. a weekly subsidy of choice pork meat for only P9.00 per kilo and later increased to
P11 per kilo in March 1980, instead of the market price of P10 to P15 per kilo;
2. free choice pork meat in May and December of every year; and
3. free light or electricity.
4. all of which were allegedly "the equivalent" of the 13th month pay.
Unfortunately, under Section 3 of PD No. 851, such benefits in the form of food or
free electricity, assuming they were given, were not a proper substitute for the 13th
month pay required by law.
Neither may year-end rewards for loyalty and service be considered in lieu of 13th
month pay.
Philippine Duplicators v. NLRC (GR No. 110068, February 15, 1995)
In the instant case, there is no question that the sales commission earned by the
salesmen who make or close a sale of duplicating machines distributed by petitioner
corporation, constitute part of the compensation or remuneration paid to salesmen
for serving as salesmen, and hence as part of the "wage" or salary of petitioner's
salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or
guaranteed wage; the greater part of the salesmen's wages or salaries being
composed of the sales or incentive commissions earned on actual sales closed by
them. No doubt this particular salary structure was intended for the benefit of the
petitioner corporation, on the apparent assumption that thereby its salesmen would
be moved to greater enterprise and diligence and close more sales in the expectation
of increasing their sales commissions. This, however, does not detract from the

character of such commissions as part of the salary or wage paid to each of its
salesmen for rendering services to petitioner corporation.
In other words, the sales commissions received for every duplicating machine sold
constituted part of the basic compensation or remuneration of the salesmen of
Philippine Duplicators for doing their job. The portion of the salary structure
representing commissions simply comprised an automatic increment to the monetary
value initially assigned to each unit of work rendered by a salesman.
These commissions are not overtime payments, nor profit-sharing payments nor any
other fringe benefit. Thus, the salesmen's commissions, comprising a predetermined
percent of the selling price of the goods sold by each salesman, were properly
included in the term "basic salary" for purposes of computing their 13th month pay.
In Boie-Takeda the so-called commissions "paid to or received by medical
representatives of Boie-Takeda Chemicals or by the rank and file employees of
Philippine Fuji Xerox Co.," were excluded from the term "basic salary" because these
were paid to the medical representatives and rank-and-file employees as
"productivity bonuses." The Second Division characterized these payments as
additional monetary benefits not properly included in the term "basic salary" in
computing their 13th month pay. We note that productivity bonuses are generally tied
to the productivity, or capacity for revenue production, of a corporation; such bonuses
closely resemble profit-sharing payments and have no clear director necessary
relation to the amount of work actually done by each individual employee. More
generally, a bonus is an amount granted and paid ex gratia to the employee; its
payment constitutes an act of enlightened generosity and self-interest on the part of
the employer, rather than as a demandable or enforceable obligation.
A bonus is a "gratuity or act of liberality of the giver which the recipient has no right
to demand as a matter of right."
If an employer cannot be compelled to pay a productivity bonus to his employees, it
should follow that such productivity bonus, when given, should not be deemed to fall
within the "basic salary" of employees when the time comes to compute their 13th
month pay.
It is also important to note that the purported "commissions" paid by the Boie-Takeda
Company to its medical representatives could not have been "sales commissions" in
the same sense that Philippine Duplicators paid its salesmen Sales commissions.
Medical representatives are not salesmen; they do not effect any sale of any article
at all. In common commercial practice, in the Philippines and elsewhere, of which we
take judicial notice, medical representatives are employees engaged in the promotion
of pharmaceutical products or medical devices manufactured by their employer.
x x x accordingly, that additional payments made to employees, to the extent they
partake of the nature of profit-sharing payments, are properly excluded from the ambit
of the term "basic salary" for purposes of computing the 13th month pay due to
employees. Such additional payments are not "commissions" x x x
However, what particular types of earnings and remuneration are or are not properly
included or integrated in the basic salary are questions to be resolved on a case to
case basis, in the light of the specific and detailed facts of each case. In principle,
where these earnings and remuneration are closely akin to fringe benefits, overtime
pay or profit-sharing payments, they are properly excluded in computing the 13th
month pay. However, sales commissions which are effectively an integral portion of
the basic salary structure of an employee, shall be included in determining his 13th
month pay.
x x x both productivity bonuses and sales commissions may have an incentive effect.
But there is reason to distinguish one from the other here. Productivity bonuses are
generally tied to the productivity or profit generation of the employer corporation.
Productivity bonuses are not directly dependent on the extent an individual employee
exerts himself. A productivity bonus is something extra for which no specific additional
services are rendered by any particular employee and hence not legally demandable,
absent a contractual undertaking to pay it. Sales commissions, on the other hand,
such as those paid in Duplicators, are intimately related to or directly proportional to
the extent or energy of an employee's endeavors.
Discussion:
The discussions in these cases are not opposite or contrary to each other. They
present different factual situations although they use the same word commissions to
which the legal characterizations must accordingly differ.
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Kamaya v. NLRC (GR No. 75289, August 31, 1989)
x x x there is no law that mandates the payment of the 14th month pay. This is
emphasized in the grant of exemption under Presidential Decree 851 (13th Month
Pay Law) which states: "Employers already paying their employees a 13th month pay
or its equivalent are not covered by this Decree." Necessarily then, only the 13th
month pay is mandated. Having enjoyed the additional income in the form of the 13th
month pay, private respondents' insistence on the 14th month pay for 1982 is already
an unwarranted expansion of the liberality of the law.
Also contractually, as gleaned from the collective bargaining agreement between
management and the union, there is no stipulation as to such extra remuneration.
Evidently, this omission is an acknowledgment that such benefit is entirely contingent
or dependent on the profitability of the company's operations.
Verily, a 14th month pay is a misnomer because it is basically a bonus and, therefore,
gratuitous in nature. The granting of the 14th month pay is a management prerogative
which cannot be forced upon the employer. It is something given in addition to what
is ordinarily received by or strictly due the recipient. It is a gratuity to which the
recipient has no right to make a demand. 7
This Court is not prepared to compel petitioner to grant the 14th month pay solely
because it has allegedly ripened into a company practice" as the labor arbiter has put
it. Having lost its catering business derived from Libyan students, Kamaya Hotel
should not be penalized for its previous liberality.
An employer may not be obliged to assume a "double burden" of paying the 13th
month pay in addition to bonuses or other benefits aside from the employee's basic
salaries or wages. Restated differently, we rule that an employer may not be obliged
to assume the onerous burden of granting bonuses or other benefits aside from the
employee's basic salaries or wages in addition to the required 13th month pay.
Discussion:
There are really employers who give out 14th month or 15th month pay to their
employees. It is basically a bonus and based on the gratuitous part of the employer.
The only ground that you can question if it is withdrawn later on is if it can be alleged
as company practice.
When it comes to 13th month pay, what is required under the law is that it must be
paid before 24 December. Some employers make it a practice to pay in June and
December.
Take note:
- who is entitled? How is it computed? What is the basis?
WAGES
DEFINITION
97 onwards we do not apply those exempted from Article 82 to 96.
Article 97 to 101 are preliminary matters as to wages.
Article 97. Definitions. As used in this Title:
(a) "Person" means an individual, partnership, association, corporation,
business trust, legal representatives, or any organized group of
persons.
(b) "Employer" includes any person acting directly or indirectly in the
interest of an employer in relation to an employee and shall include the
government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporations and institutions, as well
as non-profit private institutions, or organizations.
(c) "Employee" includes any individual employed by an employer.
(d) "Agriculture" includes farming in all its branches and, among other
things, includes cultivation and tillage of soil, dairying, the production,
cultivation, growing and harvesting of any agricultural and horticultural
commodities, the raising of livestock or poultry, and any practices
performed by a farmer on a farm as an incident to or in conjunction with
such farming operations, but does not include the manufacturing or
processing of sugar, coconuts, abaca, tobacco, pineapples or other
farm products.

(e) "Employ" includes to suffer or permit to work.
(f) "Wage" paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for services
rendered or to be rendered and includes the fair and reasonable value,
as determined by the Secretary of Labor and Employment, of board,
lodging, or other facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include any profit to
the employer, or to any person affiliated with the employer.
These are simple definitions, but I want you to understand the definition of wage.
You would see that wages are separate from the other benefits that we have already
discussed from Article 82-96. Because when we talk about wages, it covers all
employees. Because remember, when we discussed Article 82, we specifically
discussed who are not covered by the benefits mentioned by Article 83-96.
When you look at the definition here of wages, it refers to the remuneration or
earnings of an employee. In common parlance, wage is distinguished from salary.
That when we say wages, rank and file employees or blue-collared workers, and with
regard to salaries, for high ranking officers or managers. But when you look at the
definition under our law, wages and salaries refer to the same thing. There’s no
distinction under our law.
What is important is that whether we refer to them as wages or salaries, these refer
to the payment for the work done by an employee.
TAKE NOTE: There’s no need for a written contract for an employee to be entitled to
such wages, and the definition of wages was explained further in the case of Songco.
Difference between Salary and Wage
Songco v. NLRC
Issue: Basis of separation pay due to petitioners. They received at least
40,000.00 as salary + commissions.
CBA provides for a Retirement Gratuity in the amount equivalent to one (1) month’s
salary per year of service.
Petitioners: Their basic salary, earned sales commission and allowances should be
added together.
Article 97(f) is explicit that commission is included in the definition of the term wage.
Salary is the reward or recompense for services performed.
Why were the commissions deemed included in the definition of wage or
salaries as provided by Article 97? Commission is the recompense, compensation
or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee,
when the same is calculated as a percentage on the amount of his transactions or on
the profit to the principal.
The nature of the work of a salesman and the reason for such type of
remuneration for services rendered demonstrate clearly that commission are
part of petitioners' wage or salary.
The Court takes judicial notice of the fact that some salesmen do not receive any
basic salary but depend on commissions and allowances or commissions alone, are
part of petitioners' wage or salary. We take judicial notice of the fact that some
salesman did not receive any basic salary but depend on commissions and
allowances or commissions alone, although an employer-employee relationship
exists. Bearing in mind the preceding discussions, if we adopt the opposite view that
commissions do not form part of wage or salary, then, in effect, we will be saying that
this kind of salesmen do not receive any salary and therefore, not entitled to
separation pay in the event of discharge from employment.
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Why was there an issue as to whether or not the term wage includes allowances
or commissions? It’s because if it would be deemed included, it would entitle the
employees to a higher separation pay. Because here, their one month salary
exclusive of allowances and commissions, could be the basis for the computation of
separation pay. But here, the Supreme Court held that first, the allowances given to
the employees are considered part of the basic salary of the employee and also with
regard to commission, it is included in the term salary.
So you would see that in the case of Songco, the Supreme Court again emphasized
salary and wages are synonymous, even the term “pay” that is received by the
employee.
These commissions are direct remunerations for services rendered to the
increase of the income of Zuelig, therefore, the same should be included for the
purposes of computing the separation pay. In this case, since the commissions were
earned by actual market transactions, this should be included in the separation pay.
What should be taken into account is the average commissions earned during
their last year of employment. Otherwise, the Supreme Court also noted that if we
do not include the commissions for the purposes of including it in the salary in
computing the separation pay, what about those employees who rely on their
commissions from their employer since the nature of their work is commission based?
They could not have received anything. So according to the Supreme Court, it would
be an absurd situation. This narrow interpretation is not in accord with the liberal spirit
of our labor laws and considering the purpose of separation pay which is, to alleviate
the difficulties which confront a dismissed employee thrown into the streets to face
the harsh necessities of life.
Salary is separate from allowances. Again, there was a discussion here that for
the purpose of separation pay, this includes allowances. Also, tip and gratuity pays
are not included in term salary or wages.
This is because essentially, when we talk about gratuity pay, this is intended to
reward the worker for having rendered a satisfactory or efficient service to the
company. Sometimes the gratuity pay is given by the employer for the performance,
but also there is gratuity pay that comes in the form of tips from the customers.
- Take note how the salary or wage is given - how it is structured
- Salary is different from gratuity pay - it does not form part of the salary or
wage
- There is no need that the salary or wage is written
Article 98. Application of Title. This Title shall not apply to farm tenancy or
leasehold, domestic service and persons working in their respective homes in
needle work or in any cottage industry duly registered in accordance with law.
We have a separate law for domestic services, the Kasambahay Law.
Lower than minimum wage but the employee shall still be entitled to the same
benefits such as SSS.
Employees of cooperatives - if allowed by dole - not entitled to minimum wage
MINIMUM WAGE RATES
Article 99. Regional minimum wages. The minimum wage rates for agricultural
and non-agricultural employees and workers in each and every region of the
country shall be those prescribed by the Regional Tripartite Wages and
Productivity Boards. (As amended by Section 3, Republic Act No. 6727, June 9,
1989).
It’s the lowest wage rate that the employer is bound to pay its workers.
The classification of workers is also very important. It is the nature of work that
classifies.
Here in the Philippines, we have different minimum wages per region. As of the
present, effective February 16, 2019 for Region XI, if you are a non-agricultural,
industrial, commercial, retail or service, the minimum wage is P396. For agricultural,
the minimum is P391. For retail or service, where the employees are not more than
ten, the minimum is P381. These are the statutory minimum wage, meaning, the
lowest wage rate fixed by law that an employer can pay his workers.

It is very clear under Article 99 and the wage orders that there’s a difference in the
classification of industrial and commercial workers and agricultural workers.
However, when we say agricultural workers, that is at present covered under P391,
you do not say that a worker engaged in farming, he is automatically entitled to the
P391 minimum wage. “in connection to farming”
When we talk about agricultural here, there are two: plantation and non-plantation. If
you fall under non-plantation agricultural wage, you are entitled to the higher pay of
P396. What do I mean by that?
If you work in a farm but you are an accountant, so you don’t fall under the definition
of an agricultural worker. Or for example, you are the operator of a tractor, still in
connection with agriculture but you are not considered as an agricultural worker.
So when we say an agricultural worker as mentioned in this wage order, we are
referring to persons who practice directly in connection to agriculture. Essentially, the
farmers themselves, those who are tilling the soil, among others.
Do not confuse that with those who are involved in the actual manufacturing or
process, for example the manufacture of sugar from sugarcanes, they are not
considered as agricultural workers.
An employee here cannot waive his right to minimum wage because it is contrary to
public policy and contrary to law and therefore void. Even if an employee signs an
agreement, that he voluntarily agrees that his wage is below the statutory minimum
wage, such waiver is not recognized. Even with such waiver, the employee can go to
the NLRC and file a complaint for underpayment of wages.
An employee is not estopped to sue for underpayment of wages. A laborer or
employee who accepts a lower wage than the minimum wage can always go to the
NLRC and claim for the deficiency.
TAKE NOTE: This wage order does not apply to household or domestic helpers
because we have a different law for that. Also, to those who are employed or
registered in cottage industries. So, they can receive below minimum wage but there
must be a certification similar to those who are working under duly-registered
cooperatives. But to be exempted, it must still be approved by the Secretary of Labor.
There’s also a special law for barangay micro-business enterprises, they have
requirements that they need to comply and submit to the DTI. There must be a
certificate of authority for them to be exempted. So you cannot just say a small
business is already exempted.
But when we talk about exemptions here, exemption only to the minimum wage. What
do I mean by that? There is no exemption as to the other benefits, like SSS, Philhealth
among others.
The ability of the employer to pay is immaterial. (poor financial conditions)
If totong nalugi na ang small business, wala ring makuha si employee. However for
bigger companies, they have assets.
Waiver of right to minimum wage
- not allowed because it is contrary to law and against public policy - it is
void
The employee can sue for the amount of the difference.
If there was FIling of complaint before the Labor Arbiter
- compromise can be made in the mediation
- There will be release waiver and quitclaim
- What cannot be waived is future pay
- What can be waived is payment for labor done - through a compromise
- You cannot pay future fraud.
- Once you file a complaint before the LA, you are seeking for the difference
of your actual pay and the minimum wage. Once there is compromise, the
Release, Waiver, and Quitclaim is already valid. If you are not amenable,
then there is no problem. Then you file a Position Paper.
NON-DIMINUTION OF BENEFITS
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Article 100. Prohibition against elimination or diminution of benefits. Nothing
in this Book shall be construed to eliminate or in any way diminish supplements,
or other employee benefits being enjoyed at the time of promulgation of this Code.
Be familiar with the requisites:
1. The grant or benefit is founded on a policy or has ripened into a practice
over a long period of time;
2. The practice is consistent and deliberate;
3. The practice is not due to error in the construction or application of a
doubtful or difficult question of law; and
4. The diminution or discontinuance is done unilaterally by the employer.
Instances that we could not say that there is a diminution of benefits:
1. If it is merely a correction of error. If it is really an error, it must be corrected
as soon as possible. Otherwise, it will be taken against the employer and
will be considered as in violation of Article 100.
2. Due to a negotiated benefit between the employer and the employees,
such as a CBA, wage order compliance.
3. Benefits on reimbursement.
4. Reclassification of position, such as to manager who are not entitled to
overtime pay.
5. Contingent and productivity benefits.
Vergara v. Coca Cola
FACTS: Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-
Cola Bottlers Philippines, Inc. from May 1968 until he retired on January 31, 2002 as
a District Sales Supervisor (DSS) for Las Piñas City, Metro Manila.
At that time, the company’s retirement plan stated that the annual performance
incentive pay of sales supervisors shall be considered in the computation of
retirement benefits using the following formula:
Basic monthly salary + monthly average performance incentive (which is the
total performance incentives earned during the year immediately preceding
+ 12 months) x number of years in service.
Unsatisfied with the retirement pay he got, Vergara filed a complaint against the
company with the National Labor Relations Commission for payment of the sum of
P474,600 representing unpaid sales management incentives (SMI), and the recovery
of the P496,016.67 that the company deducted from his pay to cover for the unpaid
accounts of two dealers within his sales territory.
After going through the NLRC, the parties entered into a compromise agreement
with the company reimbursing Vergara the P496,016.67 it deducted for the earlier
mentioned unpaid accounts.
The CA dismissed petitioner’s case on January 9, 2007 and denied his motion for
reconsideration two months thereafter. Hence, this present petition.
ISSUE: Whether the SMI should be included in the computation of petitioner’s
retirement benefits on the ground of consistent company practice (NO)
RULING: Generally, employees have a vested right over existing benefits voluntarily
granted to them by their employer. Thus, any benefit and supplement being enjoyed
by the employees cannot be reduced, diminished, discontinued or eliminated by the
employer.
To be considered as a regular company practice, the employee must prove by
substantial evidence that the giving of the benefit is done over a long period of time,
and that it has been made consistently and deliberately.
The benefit must be characterized by regularity, voluntary and deliberate intent of
the employer to grant the benefit over a considerable period of time.
In this case, the Court found no substantial evidence to prove that the grant of SMI
to all retired DSSs regardless of whether or not they qualify to the same had ripened
into company practice. Despite more than sufficient opportunity given him while his
case was pending before the NLRC, the CA, and even to the Court, petitioner utterly
failed to adduce proof to establish his allegation that SMI has been consistently,

deliberately and voluntarily granted to all retired DSSs without any qualification or
conditions whatsoever.
The only two pieces of evidence that he stubbornly presented throughout the entirety
of this case are the sworn statements of Renato C. Hidalgo (Hidalgo) and Ramon V.
Velazquez (Velasquez), former DSSs of respondent who retired in 2000 and 1998,
respectively. They claimed that the SMI was included in their retirement package
even if they did not meet the sales and collection qualifiers. However, juxtaposing
these with the evidence presented by respondent would reveal the frailty of their
statements.
The verity of all these statements and representations stands and holds true to Us,
considering that petitioner did not present any iota of proof to debunk the same.
We rule that petitioner could have salvaged his case had he step up to disprove
respondent’s contention that he miserably failed to meet the collection qualifiers of
the SMI.
Atty. Jazzie’s Discussion : Regularity and Deliberateness over a significant
period of time.
There was no diminution of benefits here. Take note of the requisites for there to be
diminution of benefits:
1. The grant or benefit is founded on a policy or has ripened into a practice
over a long period of time;
2. The practice is consistent and deliberate;
3. The practice is not due to error in the construction or application of a
doubtful or difficult question of law; and
4. The diminution or discontinuance is done unilaterally by the employer
Here, Vergara was saying that it has been a regular practice that employees would
be granted the SMI. For it to be considered a company practice, the employee must
prove by substantial evidence that the benefit has been observed for a long period
of time, consistently and deliberately. In this case, there was no showing that the
employer agreed to continue giving the benefit in favor of the employee. In this case,
Vergara was not able to show such substantial evidence.
The principle against diminution of benefits is applicable only if the grant or benefit is
founded on an express policy or has ripened into a practice over a long period of time
which is consistent and deliberate. It presupposes that a company practice, policy
and tradition favorable to the employees has been clearly established; and that the
payments made by the company pursuant to it have ripened into benefits enjoyed by
them.
Coca-Cola here also had their witnesses which would show that there has never been
a practice of granting these benefits consistently to all employees.
Wesleyan v. Wesleyan
Unilateral changes or suspensions in the implementation of the provisions of the
CBA, therefore, cannot be allowed without the consent of both parties.
This is about the non-diminution rule found in Article 100. The issue was whether the
university practice, Wesleyan University’s granting its employees two sets of
retirement benefits have already been established as defined by law.
TAKE NOTE: We mentioned in the case of Central, that an exception to the rule is
that when the practice is due to error in the construction or application of a doubtful
or difficult question of law. The error, however, must be corrected immediately after
its discovery; otherwise, the rule on Non-Diminution of Benefits would still apply.
But in this case, if there was an error, it was never corrected by the University.
They also said that only one retirement benefit was referred to in the CBA and the
PERAA (Private Education Retirement Annuity Association) program. The
Supreme Court said that these are two entirely different benefits and they have been
granting it to the previous employees who have already retired from the work.
Therefore, it has already been an established policy.
In this case, respondent was able to present substantial evidence in the form of
affidavits to support its claim that there are two retirement plans.
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In other words, they were able to establish that it has been a practice of Wesleyan
University to give 2 retirement plans, one under the CBA retirement plan and
another under the PERAA plan. They are not one and the same.
Further, any doubt in the interpretation of the provisions of the CBA should be
resolved in favor of the employees. Nothing was mentioned in the CBA that there is
only one retirement benefit. Therefore, for the retiring employees, the employer
cannot say they only gave one retirement benefit because that would constitute
diminution of benefits under Art 100.
EXCEPTIONS TO NON-DIMINUTION OF BENEFITS
1. In Case of Error
2. Negotiated Benefits
3. Voluntarily Agreed Upon by The Employee
4. Wage Order Compliance
5. Benefits On Reimbursement Basis (cost of lodging and meals when
assigned to another station - if you are not assigned to that station
anymore- no longer entitled to benefits)
6. Reclassification of Position (say if you are a rank and file employee, and
you are not managerial or supervisory - no longer entitled to overtime pay
- there is no diminution of benefits)
7. Based On Contingent Benefit or Conditional Bonus (not demandable
unless contingency or condition already happened)
In Case of Error
In the cases we’ve discussed, one exception was already mentioned, in case of error.
But again, it must be corrected immediately.
Negotiated Benefits
Another exception is if it involves negotiated benefits. In other words, based on the
CBA agreement, they agreed for lower or diminution of benefits of some sort and in
exchange of some or other benefits. If there is CBA, it is okay because it is voluntary.
Voluntary Agreed Upon By the Employees
Another instance is the case of Waterfront Insular Hotel wherein the employees
agreed for a lower salary just to help Waterfront. It is allowed because it was
voluntarily agreed upon by the employees.
Wage Order Compliance
For example, if you give an across the board salary increase to rectify a salary
distortion caused by compliance with the wage disorder. It cannot be said to have
ripen to a company practice.
What do you mean by that?
What if, for example, every year, there is a wage increase because of a wage order?
For three years there is a wage increase however on the fourth year, there is no wage
order. The employees cannot invoke the non-diminution of benefits because the
employer is only complying with the wage order which just so happened that every
year there was an increase.
Even if the company for example continuously grants a wage increase based on a
wage order or, let us say, pursuant to a Collective Bargaining where it was stated that
there is an increase every year for the next five years, the same would not
automatically ripen into a company practice.
Benefits on Reimbursement Basis
EXAMPLE: An employee is given a per diem to cover cost for meals and lodging in
connection to his travels outside of his permanent office or station. But what if after
many years, he is no longer traveling and is now working in an office? He can longer
be entitled to the per diem because these are benefits that’s essentially on
reimbursement basis on expenses in connection to meals and lodging and other
travel expenses.
Reclassification of Position
EXAMPLE: If you are promoted from rank and file to manager. As a manager, you
are not entitled to overtime pay. You can no longer invoke that you were entitled to
overtime pay before because there is no diminution of benefits in that case. However,
it must be done in good faith because if it could be shown that the employee was
promoted so that the employer is no longer required to pay for the benefits that he is
entitled, then the employee can claim for diminution of benefits.
Based on Contingent Benefit or Conditional Bonus

EXAMPLE: Bonus is given to employees based on profits. If the company has a huge
profit for the year then there is a bonus for the employees. So, if, consistently, they
profit for the past three years and then on the fourth year they suffered losses or the
profit is not huge enough then the employee cannot demand from the employers
because it is based on a condition or a contingent for the employee to be entitled to
such benefit. That is the same thing with productivity benefits or productivity bonus
because that is also subject to a contingency or a condition.
Under Article 100, there is that phrase there "in any way diminish supplements”. We’ll
still discuss this along the way when we go to wage deductions but for now, I want to
mention the difference between facilities and supplements.
Facilities Supplements
Part of the basic salary of the employee Grants given by employers to
employees which is over and above the
basic wage and should not be credited
against the basic salary
Include articles or services for the Constitute extra remuneration or
benefit of the employee or his family but special privileges or benefits given to or
exclude tools of the trade or articles or received by the laborers over and
services primarily for the benefit of the above their ordinary earnings or wages
employer or necessary to the conduct
of the employer’s business.
The determination of whether or not an item is a facility or a supplement is not on the
kind of what is being received or what is received by the employee but rather what is
the intention or purpose given by the employer to the employee in giving this, whether
facility or supplement. If it is necessary for the daily needs of the employee and his
family, that is considered as a facility and it can be credited against the wages. This
is because, even if this will not be given by the employer, the employee would
nevertheless spend for this facility. In giving of facilities, the purpose is not only the
benefit of the employee but also to benefit the employer.
Usually, when we talk about facility i.e. basic commodities, that partakes the nature
of a facility. But in the case of supplement, you can live without it.
Our Haus v. Parian
FACTS: Respondents Alexander Parian, Jay C. Erinco, Alexander Canlas, Bernard
Tenedero and Jerry Sabulao were all laborers working for petitioner Our Haus Realty
Development Corporation, a company engaged in the construction business. On May
2010, the petitioner company experienced financial distress and had to suspend
some of its construction projects to alleviate its condition. The respondents were
among those who were affected who were asked to take vacation leaves.
Eventually, these laborers were asked to report back to work but instead of doing so,
they filed with the LA a complaint for underpayment of their daily wages claiming
that except for Tenedero, their wages were below the minimum rates prescribed in
the following wage orders from 2007 to 2010. They also claimed that Our Haus failed
to pay them their holiday, Service Incentive Leave (SIL), 13th month and overtime
pays.
ISSUE: Whether or not the lodging and meals are included in the computation of the
wages? NO.
HELD: NO. Our Haus asks us to believe that there is a substantial distinction between
the deduction and the charging of a facility’s value to the wages. In reality, deduction
and charging both operate to lessen the actual take-home pay of an employee; they
are two sides of the same coin. In both, the employee receives a lessened amount
because supposedly, the facility’s value, which is part of his wage, had already been
paid to him in kind. As there is no substantial distinction between the two, the
requirements set by law must apply to both.
Under the law, only the value of the facilities may be deducted from the
employees’ wages but not the value of supplements.
The requirements for charging the value of facilities are the following:
a) proof must be shown that such facilities are customarily furnished by
the trade;
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b) the provision of deductible facilities must be voluntarily accepted in
writing by the employee; and
c) The facilities must be charged at fair and reasonable value
Facilities include articles or services for the benefit of the employee or his family but
exclude 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. If it is primarily for
the employee’s gain.
Supplements are paid to employees on top of their basic pay and are free of charge.
Since it does not form part of the wage, a supplement’s value may not be included in
the determination of whether an employer complied with the prescribed minimum
wage rates. If it is mainly for the employer’s advantage.
Supplements, therefore, constitute extra remuneration or special privileges or
benefits given to or received by the laborers over and above their ordinary earnings
or wages. The board and lodging provided by Our Haus are categorized as
supplements, not as facilities.
Our Haus is engaged in the construction business, a labor-intensive enterprise. The
success of its projects is largely a function of the physical strength, vitality and
efficiency of its laborers. Its business will be jeopardized if its workers are weak,
sickly, and lack the required energy to perform strenuous physical activities. Thus, by
ensuring that the workers are adequately and well fed, the employer is actually
investing on its business.
Purpose Test: If the benefit or privilege granted to the employee is clearly for the
employer’s convenience, it will NOT be considered as a facility but a supplement.
Under the purpose test, the subsidized meals and free lodging provided by Our Haus
are actually supplements. Although they also work to benefit the respondents, an
analysis of the nature of these benefits in relation to Our Haus’ business shows that
they were given primarily for Our Haus’ greater convenience and advantage.
Consequently, the daily wages paid to the respondents are clearly below the
prescribed minimum wage rates in the years 2007- 2010.
Comments
Here, there was a purpose test mentioned to determine whether or not the benefits
given in favor of the employee constitutes a facility or supplement. Again, when we
mention facility, it is part of the wage. Consequently, it is part of the computation
whether or not there is compliance for the minimum wage.
TAKE NOTE: Our Haus’ allegation that it is not liable for violation of the minimum
wage, or underpayment of wages because these employees were given meals and
lodging. These are needed by the employees but these are necessarily for the benefit
of the employer because the employer needs the employee’s constant presence.
This is similar to scenario where, a doctor who hires a driver on a 24/7 duty with
lodging and meals, such lodging and meals should not be included in the computation
of wages because it is the employer who benefits. The fact that he is a doctor that is
on-call 24/7 indicates that the benefits from lodging and meals of the driver is for the
doctor.
You have to be very careful in considering whether or not it is a facility or a
supplement. It is important to note that facilities are included in the computation of
minimum wage because it is included in the computation for 13th month pay also, in
computation for separation pay. In the case of supplements, these are excluded.
The purpose test was mentioned. If a benefit or privilege granted to the employee is
clearly for the employer’s convenience, it will not be considered as a facility but a
supplement. Careful consideration is given to the nature of the employer’s business
in relation to the work performed by the employee. This test is used to address
inequitable situations wherein employers consider a benefit deductible from the
wages even if the factual circumstances show that it clearly redounds to the
employers’ greater advantage.
This will be further discussed in wage reduction. It is included here because I want to
emphasize that even if it is a supplement, if there is a diminution in the supplement,
there is also a violation of Article 100 because Article 100 not only includes employee
benefits but also includes supplements as we have mentioned.
This is similar to Article 127 which also deals with diminution of benefits.

Article 127. Non-diminution of benefits. No wage order issued by any regional
board shall provide for wage rates lower than the statutory minimum wage rates
prescribed by Congress. (As amended by Republic Act No. 6727, June 9, 1989)
Article 101. Payment by results.
The Secretary of Labor and Employment shall regulate the payment of wages by
results, including pakyao, piecework, and other non-time work, in order to ensure
the payment of fair and reasonable wage rates, preferably through time and
motion studies or in consultation with representatives of workers’ and employers’
organizations.
This is only a mode of paying wages but does not define the essence of the relation.
It is not determinative whether or not there is an employer-employee relationship.
Take note of the spelling. Under the Labor Code it is spelled as “pakyao”, But there
are already several cases decided by the Supreme Court where it is spelled as
“pakiao” or “pakyaw”.
For payments by results including pakyao how would you know if there is no
violation of the minimum wage law?
Usually there is a time and motion studies that is to be conducted together with the
Department of Labor and Employment (DOLE).
If you are paid on a piece-rate, while again is allowed under the law, to determine
whether or not you are being paid below the minimum wage, there has to be time
and motion study to determine how much work is done in a day or in the 8-hour
work for such work. Through it, the average rate for 8 hours can be determined, not
expert or entry level.
So if you are a piece-rate worker you cannot immediately, for example, go the Labor
Arbiter and demand for underpayment of wages for violation of minimum wage law.
You have to have first a finding that you are being paid lower than what should have
been allowed based on your work since you are being paid by results. In other words,
we have to consider how much you can finish in an 8- hour work because that is the
basis of our minimum wage. First, ask for a time and motion study and by that time,
based on the findings of the DOLE, if you’re being paid for less then, that is the time
you can file for underpayment of wages.
Another in thing that you should consider, in a time and motion study, what should
be considered is the average rate, which should not be the fastest, nor the slowest
especially if you are a new employee.
When we talk about persons or employees paid by results under Article 101, we have
to distinguish those who are supervised and not supervised.
A piece-rate worker belongs to the first type if he, for example, performs his work
within the company premises.
EXAMPLE: Dy Keh Beng vs International Labor where he was a piece-rate worker
and the element of control was present.
However, there are also those who are paid by results or pakyao who are
unsupervised where they execute the result but again there is no control with regards
to the means and methods. As long as you are paid per piece for the result of your
work. In that case, it will fall under paid by results being unsupervised.
However again, whether supervised or unsupervised, they are similar in determining
the pay rate – the basis is the unit of work produced or the quantity thereof.
When we talk about payment by result, it is only a method of compensation and does
not define, by itself, what is the relationship between the parties. It is only a method
of computing compensation but not determinative of the existence of an employee-
employer relationship.
With regard to these persons employed who are paid by results if it is determined that
if they are really employees, what about those other benefits that we have discussed?
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Are they entitled to that? EXAMPLE: For night-shift differential, it will only apply to
those employees who are paid by results if they are supervised by the employer. If
they are not supervised, then they are not entitled to night-shift differential.
Also, piece-rate employees can be entitled to holiday pay and 13th month pay. But
of course, to be entitled for the 13th month pay, he must have rendered at least 1
month of service or work for the calendar year.
FORMS OF PAYMENT
Article 102. Forms of payment. No employer shall pay the wages of an employee
by means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any
object other than legal tender, even when expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such manner
of payment is customary on the date of effectivity of this Code, or is necessary
because of special circumstances as specified in appropriate regulations to be
issued by the Secretary of Labor and Employment or as stipulated in a collective
bargaining agreement.
General Rule: Wages shall be paid by legal tender, just form of payment or money
which you can compel the other party to accept as payment of an obligation (not just
money issued by the Central Bank).
Exception: Facilities such as board and lodging facilities that are customarily
furnished by the employer to the employee. It must be in writing and the value thereof
must be fair and reasonable.
Facilities may be resorted to under the following conditions:
1) It must be customarily provided by the trade or industry.
2) It must be fair and reasonable.
3) It must be accepted in writing.
4) The employer must not gain peculiarly. Technically speaking, this is not
an additional requisite, it could be under the requirement that it is fair and
reasonable.
It is important that the employer has proof that he has paid wages to the
employee.
In connection to that, IRR Book II Rule VIII
Section 2. Payment by check. — Payment of wages by bank checks, postal
checks or money orders is allowed where such manner of wage payment is
customary on the date of the effectivity of the Code, where it is so stipulated in a
collective agreement, or where all of the following conditions are met:
(a) There is a bank or other facility for encashment within a radius of one (1)
kilometer from the workplace;
(b) The employer or any of his agents or representatives does not receive any
pecuniary benefit directly or indirectly from the arrangement;
(c) The employees are given reasonable time during banking hours to withdraw
their wages from the bank which time shall be considered as compensable hours
worked if done during working hours; and
(d) The payment by check is with the written consent of the employees concerned
if there is no collective agreement authorizing the payment of wages by bank
checks.cralaw
Relate Section 2 to Article 102.
At present, by virtue of an issuance by DOLE, payment of wages through an ATM
has been allowed.
Remember that there are establishments or employers who have ATM machines
within their premises. Effect: The employees can no longer use the excuse that they
will take a break to withdraw their salaries.

Article 103. Time of payment. Wages shall be paid at least once every two (2)
weeks or twice a month at intervals not exceeding sixteen (16) days. If on account
of force majeure or circumstances beyond the employer’s control, payment of
wages on or within the time herein provided cannot be made, the employer shall
pay the wages immediately after such force majeure or circumstances have
ceased. No employer shall make payment with less frequency than once a month.
The payment of wages of employees engaged to perform a task which cannot be
completed in two (2) weeks shall be subject to the following conditions, in the
absence of a collective bargaining agreement or arbitration award:
1. That payments are made at intervals not exceeding sixteen (16) days,
in proportion to the amount of work completed;
2. That final settlement is made upon completion of the work.
The IRR likewise provides that payment shall be made not less than once every two
weeks or twice a month at intervals not exceeding 16 days. Why 16 days? We have
months which have 31 days.
For employees who are engaged in a task basis and if they have not finished their
tasks within that 15-day period. Is the employer obligated to give something to the
worker? YES. He is still covered by Article 103. The wage to be paid shall be based
on the percentage of completion.
Article 104. Place of payment. Payment of wages shall be made at or near the
place of undertaking, except as otherwise provided by such regulations as the
Secretary of Labor and Employment may prescribe under conditions to ensure
greater protection of wages.
Generally, payment of wages are manual. Now, that practice is no longer common.
There are more modes of payment such as through bank transfers.
Exception:
IRR Book III Rule VIII
Section 4. Place of payment. — As a general rule, the place of payment shall be
at or near the place of undertaking. Payment in a place other than the work place
shall be permissible only under the following circumstances:
(a) When payment cannot be effected at or near the place of work by reason of
the deterioration of peace and order conditions, or by reason of actual or
impending emergencies caused by fire, flood, epidemic or other calamity
rendering payment thereat impossible;
(b) When the employer provides free transportation to the employees back and
forth; and
(c) Under any other analogous circumstances; Provided, That the time spent by
the employees in collecting their wages shall be considered as compensable
hours worked;
(d) No employer shall pay his employees in any bar, night or day club, drinking
establishment, massage clinic, dance hall, or other similar places or in places
where games are played with stakes of money or things representing money
except in the case of persons employed in said places.
Reason: So that the employee will not automatically spend his salary to gambling and
other similar things.
RA 6727 : Wage Rationalization Act
Section 7. Upon written permission of the majority of the employees or workers
concerned, all private establishments, companies, businesses, and other entities
with twenty five (25) or more employees and located within one (1) kilometer
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radius to a commercial, savings or rural bank shall pay the wages and other
benefits of their employees through any of said banks and within the period of
payment of wages fixed by Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines.
Article 105. Direct payment of wages. Wages shall be paid directly to the
workers to whom they are due, except:
a. In cases of force majeure rendering such payment impossible or under
other special circumstances to be determined by the Secretary of
Labor and Employment in appropriate regulations, in which case, the
worker may be paid through another person under written authority
given by the worker for the purpose; or
b. Where the worker has died, in which case, the employer may pay the
wages of the deceased worker to the heirs of the latter without the
necessity of intestate proceedings. The claimants, if they are all of age,
shall execute an affidavit attesting to their relationship to the deceased
and the fact that they are his heirs, to the exclusion of all other persons.
If any of the heirs is a minor, the affidavit shall be executed on his
behalf by his natural guardian or next-of-kin. The affidavit shall be
presented to the employer who shall make payment through the
Secretary of Labor and Employment or his representative. The
representative of the Secretary of Labor and Employment shall act as
referee in dividing the amount paid among the heirs. The payment of
wages under this Article shall absolve the employer of any further
liability with respect to the amount paid.
Remember that it must be the employee who will receive the wages. What if the
employer or the general manager is approached by the wife with kids demanding the
wages of the husband? Can the employer be compelled to give the wages to the
wife? NO, it will be in violation of Article 105.
Article 106. Contractor or subcontractor. 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.
If you are talking about a contracting arrangement, you have the principal, contractor,
and the employees. In a lawful contracting arrangement, the relationship is trilateral.
CONTRACTING or SUBCONTRACTING refers to an arrangement whereby a
principal agrees to farm out to a contractor the performance or completion of a

specific job or work within a definite or predetermined period, regardless of whether
such job or work is to be performed or completed within or outside the premises of
the principal.
CONTRACTOR refers to any person or entity engaged in a legitimate contracting or
subcontracting arrangement providing services for a specific job or undertaking
farmed out by the principal under a Service Agreement.
There are instances where you have the principal, contractor, subcontractor, and
employees or principal, contractor, and employees.
TRILATERAL RELATIONSHIP - You have two contracts but three different parties.
I. Service Contract - principal (indirect employer) and contractor
(manpower services)
II. Employment Contract - contractor and its employees
If it falls under labor-employee contracting, that is not valid.
Article 107. Indirect employer. The provisions of the immediately preceding
article shall likewise apply to any person, partnership, association or corporation
which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
Article 108. Posting of bond. 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.
Why would an employer or an indirect employer require for such bond? Since
they may be held liable to the employees.
Article 109. Solidary liability. 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 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.
- Liability of the indirect employer for violations under the Labor Code.
- Employers would not be held liable to benefits of the employee such
as SSS and PhilHealth (not under the Labor Code).
There is a legitimate contracting/independent contracting and not labor-only
contracting.
The distinctions are important because they will have different liabilities.
PBCOm v. NLRC
Facts: Philippine Bank of Communications (PBCom) and the Corporate
Executive Search Inc. (CESI) entered into a letter agreement dated January 1976
under which CESI undertook to provide "Temporary Services" to petitioner consisting
of eleven (11) messengers. The contract period is described as being "from January
1976—." The petitioner in truth undertook to pay a "daily service rate of P18," on a
per person basis. Ricardo Orpiada was assigned to work with the petitioner bank.
CESI hired Ricardo Orpiada on 25 June 1975 as a Tempo Service employee, and
assigned him to work with the petitioner bank as evidenced by the appointment memo
issued to him on 25 June 1975. On or about October 1976, the PBCom requested
(CESI) to withdraw Orpiada's assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now
Ministry of Labor and Employment) against the petitioner for illegal dismissal and
failure to pay the 13th month pay provided for in Presidential Decree No. 851. Labor
Arbiter: Respondent bank is ordered to reinstate complainant to the same or
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equivalent position with full back wages and to pay the latter's 13th month pay for the
year 1976.
NLRC: Except for the modification reducing the complainant's back wages to two (2)
years without qualification, the Decision appealed from is hereby AFFIRMED in an
other respects.
CONTENTION OF PBCOM: Maintains that no employer-employee relationship was
established between itself and Ricardo Orpiada and that Ricardo Orpiada was an
employee of (CESI) and not of the bank. The bank documents its position by
pointing to the following provisions of its letter agreement with CESI:
1. The individual/s you i.e. (CESI) will assign to us i.e. petitioner) will be subject to
our acceptance and will observe work-days, hours, and methods of work (sic);
on the other hand, they will not be asked to perform job (sic) not normally related
to the position/s for which Tempo Services were contracted.
2. Such individuals will nevertheless remain your own employees and you will
therefore, retain all liabilities arising from the new Labor Code as amended Social
Security Act and other applicable Governmental decrees, rules and regulations,
provided that, on our part, we shall:
a. Require your employers assigned to us to properly accomplish your daily
time record, to faithfully reflect all hours worked in our behalf whether such
work be within or beyond eight hours of any day.
b. Notify you of any change in the work assignment or contract period
affecting any of your employers assigned to us within 24 hours, after such
change is made.
Issue:
A. Whether or not an employer-employee relationship existed between the PBCom
and Ricardo Orpiada. YES
B. Is the relationship between the bank and CESI one of employer and job
(independent) contractor or one of employer and "labor-only" contractor? Labor-Only
Contracting
C. Who is liable for payment of wages of Ricardo Orpiada? PBCom and CESI are
jointly and severally liable.
Ruling:
A. YES. This Court listed certain factors to be taken into account in determining the
existence of an employer-employee relationship. These factors are:
(1) The selection and engagement of the putative employee; In the present case,
Orpiada was not previously selected by the bank. The selection of Orpiada by CESI
was, however, subject to the acceptance of the bank and the bank did accept him.
CESI had hired Orpiada from the outside world precisely for the purpose of assigning
or seconding him to the bank.
(2) The payment of wages; With respect to the payment of Orpiada's wages, the
bank remitted to CESI amounts corresponding to the "daily service rate" of Orpiada
and the others similarly assigned by CESI to the bank, and CESI paid to Orpiada and
the others the wages pertaining to them.
(3) The power of dismissal; In respect of the power of dismissal we note that the
bank requested CESI to withdraw Orpiada's assignment and that CESI did, in fact,
withdraw such assignment. Upon such withdrawal from his assignment with the bank,
Orpiada was also terminated by CESI.
(4) The power to control the putative employees' conduct, although the latter is
the most important element. Turning to the power to control Orpiada's conduct, it
should be noted immediately that Orpiada performed his sections within the bank's
premises, and not within the office premises of (CESI).
As such, Orpiada must have been subject to at least the same control and
supervision that the bank exercises over any other person physically within its
premises and rendering services to or for the bank, in other words, any employee or
staff member of the bank.
B. CESI was engaged in "labor-only" contracting. CESI is not a parcel delivery
company: as its name indicates, it is a recruitment and placement corporation
placing bodies, as it were, in different client companies for longer or shorter periods
of time. The undertaking of (CESI) was to provide its client with a certain number of
persons able to carry out the work of messengers. Such undertaking of CESI was

complied with when the requisite number of persons were assigned or seconded to
the petitioner bank.
C. PBCom and CESI are jointly and severally liable. Under the general rule set
out in the first and second paragraphs of Article 106, an employer who enters into a
contract with a contractor for the performance of work for the employer, does not
thereby create an employer-employee relationship between himself and the
employees of the contractor. Thus, the employees of the contractor remain the
contractor's employees and his alone.
Nonetheless when a contractor fails to pay the wages of his employees in
accordance with the Labor Code, the employer who contracted out the job to the
contractor becomes jointly and severally liable with his contractor to the employees
of the latter "to the extent of the work performed under the contract" as such employer
were the employer of the contractor's employees.
EER for a LIMITED PURPOSE. The law itself, in other words, establishes an
employer-employee relationship between the employer and the job contractor's
employees for a limited purpose, i.e., in order to ensure that the latter get paid the
wages due to them.
“Labor Only Contracting.” A similar situation obtains where there is "labor only"
contracting. The "labor-only" contractor-i.e. "the person or intermediary" is considered
"merely as an agent of the employer."
The employer is made by the statute responsible to the employees of the "labor
only" contractor as if such employees had been directly employed by the
employer.
EER between the EMPLOYER and the EMPLOYEES of the Labor Only
Contractor. Thus, where "labor only" contracting exists in a given case, the statute
itself implies or establishes an employer-employee relationship between the
employer (the owner of the project) and the employees of the "labor only" contractor,
this time for a comprehensive purpose: "employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code. "
The law in effect holds both the employer and the "labor-only" contractor responsible
to the latter's employees for the more effective safeguarding of the employees' rights
under the Labor Code.
SC: The petition for certiorari is DENIED and the decision promulgated on 29
December 1983 of the National Labor Relations Commission is AFFIRMED.
Questions:
Is there an employer-employee relationship between Orpiada and PBCom?
Yes.
Is there labor-only contracting? Yes.
How did the Supreme Court arrive with the said conclusion? Where "labor only"
contracting exists in a given case, the statute itself implies or establishes an
employer-employee relationship between the employer (the owner of the project) and
the employees of the "labor only" contractor, this time for a comprehensive
purpose: "employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code." The law in effect holds both the
employer and the "labor-only" contractor responsible to the latter's employees for the
more effective safeguarding of the employees' rights under the Labor Code.
Atty. Jazzie’s Discussion The SC discussed that portion wherein assuming that
there was an allegation that even he was an employee of PBCom, he was merely a
casual employee. That was their defense. The SC said that even if he was merely a
casual employee, the fact that he has been working for more than a year, he is
considered to be a regular employee, who should enjoy the benefit of security of
tenure.
What was the basis of the Supreme Court in saying that there was labor-only
contracting and not a legitimate job contracting? Section 9 of Rule VIII of Book
III entitled "Conditions of Employment," of the Omnibus Rules Implementing the
Labor Code provides as follows:
Section 9. Labor-only contracting. — (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:
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(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent
as if the latter were directly employed by him.
(c) For cases not falling under this Rule, the Secretary of Labor and Employment
shall determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the
protection and welfare of the workers.
In contrast, job contracting - contracting out a particular job to an independent
contractor is defined by the Implementing Rules as follows:
Section 8. Job Contracting. — There is job contracting permissible under the
Code if the following conditions are met:
(a) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and
(b) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary
in the conduct of his business.
The bank and (CESI) urge that (CESI) is not properly regarded as a "labor-only"
contractor upon the ground that (CESI) is possessed of substantial capital or
investment in the form of office equipment, tools and trained service personnel.
We are unable to agree with the bank and (CESI) on this score. The definition of
"labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be
read in conjunction with the definition of job contracting given in Section 8 of the
same Rules.
The undertaking given by CESI in favor of the bank was not the performance of a
specific — job for instance, the carriage and delivery of documents and parcels to
the addresses thereof. There appear to be many companies today which perform this
discrete service, companies with their own personnel who pick up documents and
packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addresses. In the present case,
the undertaking of (CESI) was to provide its client-the bank, with a certain number of
persons able to carry out the work of messengers.
Such undertaking of CESI was complied with when the requisite number of persons
were assigned or seconded to the petitioner bank. Orpiada utilized the premises and
office equipment of the bank and not those of (CESI). Messengerial work – the
delivery of documents to designated persons whether within or without the bank
premises — is of course directly related to the day-to-day operations of the bank.
Section 9(2) quoted above does not require for its applicability that the petitioner
must be engaged in the delivery of items as a distinct and separate line of business.
Atty. Jazzie’s Discussion Very important discussion here is that the Supreme Court
emphasized the four-fold test, the essential requisites to have an employer-
employee relationship. Based from that, the SC said that there is an employer-
employee relationship between the bank and Orpiada.
Who exercises the power to select in this case? The SC noted that among the
four elements, the 2 are attributed to the contractor and the other 2 are attributed to
PBCom.
So what are these factors?

1. Power to Select PBCom had the right to accept or to refuse to accept
Orpiada in this case. So, the power to select was attributed to PBCom
2. Payment of Wages This power was attributed to CESI.
3. Power to Dismiss This power was attributed to CESI.
4. Power of Control The SC took into consideration that the right of control
belongs to the bank. Orpiada performed his duties within the premises of
PBCom and not within the office premises of CESI. The SC also discussed
that the nature of work of Orpiada is directly related to the nature of the
business of the bank.
TAKE NOTE: As to how the SC arrived at the conclusion that CESI was only
considered as a labor-only contractor and that the petitioner Bank is liable to Orpiada
as if Orpiada has been directly employed not only by CESI but also by the bank.
However, the SC held here that in ruling that there is labor-only contracting, CESI
and PBCom are solidarily liable. Nonetheless if the bank is the one who will pay the
employees because there is an agreement between the bank and CESI, the bank
can seek reimbursement from the contractor.
But on the part of the employee, the liability is solidary between the contractor and
the principal.
Neri v. NLRC
Facts: : Virginia Neri and Jose Cabelin were hired by Building Care Corp (BCC),
a corporation engaged in providing technical maintenance, engineering,
housekeeping, security and other specific services to its clientele. Neri and Cabelin
were assigned to work in Cagayan de Oro City Branch of Far East Bank and Trust
Company (FEBTC).
Neri as a radio/telex operator and Cabelin as janitor, before being promoted to
messenger (only Cabelin was promoted). Neri and Cabelin instituted a complaint
against FEBTC and BCC at the DOLE to compel FEBTC to accept them as regular
employees and for it to pay the differential between the wages being paid them
by BCC and those received by FEBTC employees with similar length of service.
The Labor Arbiter dismissed the complaint for lack of merit. The LA also held that
they were regular employees of BCC, not FEBTC because BCC proved that it had
substantial capital.
The NLRC affirmed the decision of the LA. Neri and Cabelin contend that BCC is
engaged in Labor-only contracting because it failed to adduce evidence that it
invested in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of its business. Further, Neri and
Cabelin argue that they are performing duties which are directly related to the
principal business or operations of FEBTC.
Issue: W/N BCC is a labor-only contractor, as such, Neri and Cabelin may be
recognized as regular employees of FEBTC? They are considered as regular
employees of Building Care Corp.
Ruling: No. BCC is not a labor-only contractor.
The Court held that BCC need not prove that it made investments in the form of tools,
equipment, machineries, etc., because it has established that it has sufficient
capitalization.
Be that as it may, the Court has already taken judicial notice of the general practice
adopted in several government and private institutions and industries of hiring
independent contractors to perform special services. These services range from
janitorial, security and even technical or other specific services considered directly
related to the principal business of the employer. Nevertheless, they are not
necessary in the conduct of the principal business of the employer.
Applying the “right of control” test, they are still considered employees of BCC. In
the case of petitioner Neri, it is admitted that FEBTC issued a job description which
detailed her functions as a radio/telex operator. However, a cursory reading of the
job description shows that what was sought to be controlled by FEBTC was actually
the end-result of the task, e.g., that the daily incoming and outgoing telegraphic
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transfer of funds received and relayed by her, respectively, tallies with that of the
register.
The guidelines were laid down merely to ensure that the desired end-result was
achieved. It did not, however, tell Neri how the radio/telex machine should be
operated. It can also be noted that:
● Neri and Cabelin reported for work wearing the prescribed uniform of
BCC;
● Leaves of absence were filed directly with BCC; and
● Salaries were drawn only from BCC.
● Neri secured a certification from BCC that she was employed by the latter.
It was BCC alone which had the power to reassign petitioners. Petitioners cannot be
held to be employees of FEBTC as BCC "carries an independent business" and
undertakes the performance of its contract with various clients according to its "own
manner and method, free from the control and supervision" of its principals in all
matters "except as to the results thereof." BCC has not committed any violation.
This is a case for conversion of employment status so that Petitioners can receive
the same salary being given to regular employees of FEBTC. However, as
determined, petitioners are not regulars of FEBTC but of BCC. As such, they are not
entitled to the same salaries as FEBTC’s regular employees.
QUESTIONS What is the difference between this case and that earlier case of
PBCom because remember, PBCom was also cited here?
One main distinction is the right to control.
In BCC, it is emphasized here that FEBTC did not have control over the work of Neri
because BCC was the one who had control over the daily incoming and outgoing
telegraphic transfer of funds received by relayed by Neri and that it tallies with their
register.
Furthermore, there was also a difference as to the payment of wages. In BCC, Neri
was paid in lump sum, unlike that of the PBCom case wherein CESI was paid on a
daily rate on a per person basis.
Take note of the distinction of the PBCom case and the Neri case.
Here, BCC was able to prove that it was a legitimate job contractor. The presumption
is that there is labor-only contracting. In other words, if you alleged that you are
involved in job contracting or legitimate job contracting, you have the burden of proof
to show that there is substantial capital or investments in costs or machineries. The
SC emphasized that it is not required that the contractor must be able to prove
substantial capital and investments (emphasize on the word ”either”).
In this case, while it was said that the services may be directly-related to the principal
business, it may be shown that it was necessary in the conduct of their business and
further, it was also proven that the bank here, Far East Bank, had no control over the
petitioners in this case.
Rosewood v. NLRC A legitimate contracting business
Facts: All the complainants were employed by the Veterans Philippine Scout
Security Agency as security guards: Napoleon Mamon on October 7, 1989; Arsenio
Gazzingan on September 25, 1988; Rodolfo C. Velasco on January 5, 1987;
Armando Ballon on June 28, 1990; Victor Aldeza on March 21, 1990; and Jose L.
Cabrera in January 1988. Complainants were constructively and illegally dismissed
by the security agency which placed them on floating status and at the same time
gave assignments to newly hired security guards.
On May 13, 1991, a complaint for illegal dismissal; underpayment of wages; and for
nonpayment of overtime pay, legal holiday pay, premium pay for holiday and rest day,
thirteenth month pay, cash bond deposit, unpaid wages and damages was filed
against Veterans Philippine Scout Security Agency and/or Sergio Jamila IV
(collectively referred to as the "security agency," for brevity).
Thereafter, Rosewood was impleaded as a third-party respondent by the security
agency.
LABOR ARBITER: The labor arbiter noted the failure of the security agency to
present evidence to refute the complainants' allegation. The labor arbiter held
Rosewood jointly and severally liable with the security agency as the complainants'
indirect employer under Articles 106, 107 and 109 of the Labor Code.

NLRC: Dismissed petitioner's appeal
Issue: Whether Rosewood is solidarily liable with the security agency for the
payment of back wages, wage differential and separation pay? Rosewood is
solidarily liable to pay the complainants ONLY wage differentials during the
period that the complainants were actually under its employ. Rosewood is
exonerated from the payment of backwages and separation pay.
Ruling: Yes. The arbiter ruled that petitioner was liable in solidum with the agency
for salary differentials based on Articles 106, 107 and 109 of the Labor Code which
hold an employer jointly and severally liable with its contractor or subcontractor, as if
it is the direct employer. We quote said provisions below:
Article 106. Contractor or subcontractor. 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.
Article 107. Indirect employer. The provisions of the immediately preceding article
shall likewise apply to any person, partnership, association or corporation which,
not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
Article 109. Solidary liability. 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 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.
The joint and several liability of the employer or principal was enacted to ensure
compliance with the provisions of the Code, principally those on statutory minimum
wage. The contractor or subcontractor is made liable by virtue of his or her status
as a direct employer, and the principal as the indirect employer of the contractor's
employees.
Rosewood should not, however, be held liable for wage differentials incurred while
the complainants were assigned to other companies.
Under these cited provisions of the Labor Code, should the contractor fail to pay the
wages of its employees in accordance with law, the indirect employer (the petitioner
in this case), is jointly and severally liable with the contractor, but such responsibility
should be understood to be limited to the extent of the work performed under the
contract, in the same manner and extent that he is liable to the employees directly
employed by him.
The indirect employer's liability to the contractor's employees extends only to the
period during which they were working for the petitioner, and the fact that they were
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reassigned to another principal necessarily ends such responsibility. The principal is
made liable to his indirect employees, because it can protect itself from irresponsible
contractors by withholding such sums and paying them directly to the employees or
by requiring a bond from the contractor or subcontractor for this purpose.
With the foregoing discussion in mind, we now take up in detail the petitioners liability
to each of the complainants.
Mamon worked for petitioner for a period of a little more than one year beginning
February 3, 1990 until May 16, 1991. Inasmuch as petitioner was his indirect
employer during such time, it should thus be severally liable for wage differential from
the time of his employment until his relief from duty. He was relieved upon the request
of petitioner, after it had learned of the complaint for underpayment of wages filed by
Mamon and several other security guards.
Gazzingan was assigned to petitioner as a security guard for a period of one year.
For said period, petitioner is solidarily liable with the agency for underpayment of
wages based on Articles 106, 107 and 109 of the Code. His dismissal cannot be
blamed on the petitioner. Like Mamon, Gazzingan had already been assigned to
another client of the agency when he was illegally dismissed. Thus, Rosewood
cannot be held liable, jointly and severally with the agency, for back wages and
separation pay.
Rodolfo Velasco was assigned to petitioner from December 31, 1988 until May 16,
1991. Thus, petitioner is solidarily liable for wage differentials during such period.
Petitioner is not, however, liable for back wages and separation pay, because
Velasco was no longer working for petitioner at the time of his illegal dismissal.
Ballon. Petitioner was the indirect employer of Ballon during the period beginning
November 6, 1990 until May 15, 1991; thus, it is liable for wage differentials for said
period. However, it is not liable for back wages and separation pay, as there was
no evidence presented to show that it participated in Ballon's illegal dismissal.
Aldeza. Petitioner is liable for wage differentials in favor of Aldeza during the period
he worked with petitioner, that is, October 16, 1990 until May 15, 1991.
The cause of Aldezas illegal dismissal is imputable, not to petitioner, but solely to the
security agency. In Aldezas case, the solidary liability for back wages and separation
pay arising from Articles 106, 107 and 109 of the Code has no application.
Cabrera was an employee of the security agency, but he never rendered security
services to petitioner. This fact is evident in the labor arbiter’s findings. Hence,
petitioner is not liable to Cabrera for anything.
In all these cases, however, the liability of the security agency is without question, as
it did not appeal from the Decisions of the labor arbiter and Respondent Commission.
SC: The petition is partially GRANTED. The assailed Decision is hereby MODIFIED,
such that petitioner, with the security agency, is solidarily liable to PAY the
complainants only wage differentials during the period that the complainants were
actually under its employ, as above detailed. Petitioner is EXONERATED from the
payment of back wages and separation pay.
Atty. Jazzie’s Discussion Under the facts of this case, there is no labor-only
contracting. It is a legitimate contracting business. This is a job-contracting
agency. The security agency is the direct employer of the employees. But even if
there is a job contracting and there is no labor-only contracting, the principal can still
be held liable for the benefits under the Labor Laws.
Again, with regard to the benefits, these refer to the payment of wages, 13th month
pay, holiday pay, among others. The nature of Rosewood's liability is solidarily with
the direct employer, Veterans Security Agency.
The indirect employer's liability, however, extends only to the period during
which they were working for the petitioner and the fact that they were
reassigned to another principal necessarily ends such responsibility of the
indirect employer.
The provisions of Article 106 and Article 107 of the Labor Code cannot apply to the
petitioner considering that the complainants were no longer working or no longer
assigned to it when they were illegally dismissed.
An indirect employer should not be made liable without a finding that it had
committed or conspired with the illegal dismissal. The proposition that payment

of backwages and separation pay should be covered by Article 109 of the Labor Code
(which holds that an indirect is solidarily liable with his contractor or subcontractor for
any violation of any provision of this code) would have been tenable if there had been
proof that the principal conspired with the contractor in connection to the illegal
dismissal.
The SC here specified, one at a time, the extent of the liability of Rosewood to the
employees or complainants, taking into consideration, say, the wage differentials of
the employees but only for the period they actually worked for Rosewood. The nature
of the liability is solidary. It is very clear under Article 109.
Solidary Liability - Anyone of the Joint Liability - As many debtors as
debtors would be liable for the full there as debts; cannot compel the
obligation debtor to pay more than his
proportionate share
Surety - Solidarily liable together with Guarantor - Only liable after the
the principal debtor exhaustion of the assets of the principal
debtor
Guarin v. NLRC
Facts: Novelty Philippines, Inc., is a domestic corporation engaged in the garment
manufacturing business. It entered into a contract with Lipercon Services, Inc., its
service contractor who provides workers for other companies. Under their contract of
services, it stipulated there, particularly in paragraph 1, that –
“The Contractor shall provide the Company with contractual laborers, helpers,
janitors, as requested by the Company from time to time, and for such other activities
that may be contracted out at the discretion of the Company.”
Other stipulations include that Lipercon shall comply with labor laws and that there
is no employer-employee relationship between Novelty and the employees that
would be assigned by Lipercon to Novelty.
Also, that Lipercon shall have exclusive discretion as to the selection, engagement,
and discharge of its personnel, and that the contract will remain in full force from July
6, 1983 to 1984, renewable at the option of Novelty and either party may terminate
the contract upon giving a 30-day notice upon the other party.
Petitioners here were hired by Lipercon and assigned to Novelty as helpers, janitors,
janitresses, firemen, and mechanics under the agreement between Lipercon and
Novelty. They worked there for around 3 years.
On December 31, 1986, Novelty terminated its agreement with Lipercon, which
resulted in the dismissal of Guarin and the others. Thereafter, they filed a complaint
for illegal dismissal.
Issue: W/N, as found by the NLRC, Lipercon is an independent contractor and that
Guarin and the others are its employees. Lipercon was only a Labor Only
Contractor
Ruling: Under the Contract of Services between Novelty and Lipercon, Lipercon was
only a labor-only contractor. It is only an agent of Novelty securing workers for the
latter, who is the direct employer.
Even though the NLRC found that Lipercon was not a mere labor only contractor
because it had substantial capital or investments in the form of tools, equipment,
machineries, etc., the NLRC pointed out that “it claims to have possessed substantial
capital and equipment essential to carry out its business as a general independent
contractor”, the SC said that such finding of NLRC, is based on insubstantial
evidence.
The SC reiterated the rule that the burden of proof on the contractor to prove that it
has substantial capital, investment, etc. and that petitioners Guarin, et. al. need not
prove that Lipercon has substantial capital, etc. Article 106, paragraph (4) of the
Labor Code provides that –
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases,
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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.
What about the nature of work of the petitioners in this case? Novelty
contends that the services which are directly related to manufacturing garments
are sewing, textile cutting, designs, dying, quality control, personnel,
administration, accounting, finance, customs, delivery and similar other activities;
and that allegedly, it is only by stretching the imagination that one may
conclude that the services of janitors, janitresses, firemen, grasscutters,
mechanics and helpers are directly related to the business of manufacturing
garments.
The SC said here that the work of gardeners in maintaining clean and well-kept
grounds around the factory, mechanics to keep the machines functioning
properly, and firemen to look out for fires, are directly related to the daily
operations of a garment factory.
That fact is confirmed by Novelty’s rehiring the workers or renewing the contract
with Lipercon every year from 1983 to 1986, a period of three (3) years.
TAKE NOTE: The Supreme Court here emphasized that he who alleges that he
is engaged in independent or job contracting has the burden of proof to show the
presence of the requisites, including the substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others.
In this case, it was not the employees who had the burden of proof. The
petitioners need not prove the negative fact that the contractor does not have
substantial capital or investment in tools to engage in job contracting. The case
of Guarin was also mentioned in the case of Rhone Poulenc.
Rhone Poulene v. NLRC CSI is engaged in job contracting
Facts: Rhone-Poulenc Agrochemicals Philippines, Inc., is a corporation engaged
in the manufacture of agro-chemicals. Its business operations involve the formulation,
production, distribution and sale in the local market of its agro-chemical products.
As a consequence of the sale by Union Carbide, Inc. of all its agricultural-chemical
divisions worldwide in favor of RhonePoulenc Agrochemie, France, the petitioner's
mother corporation, Rhone-Poulenc acquired from Union Carbide Philippines Far
East, Inc. (Union Carbide for short) the latter's agro-chemical formulation plant in
Namayan, Mandaluyong, Metro Manila.
Rhone-Poulenc and Union Carbide agreed on a three-month transition period for
the turnover of the Namayan plant. Hence, both Union Carbide and Rhone-Poulenc
shared and operated the same facilities.
Prior to the sale, Union Carbide had entered into a contract with Contemporary
Services, Inc. (CSI) for the latter's supply of janitorial services. During the transition
period, Union Carbide continued to avail itself of CSI's janitorial services. Thus,
Rhone-Poulenc found itself sharing the Namayan plant with Union Carbide while the
factory was being serviced and maintained by janitors supplied by CSI.
Midway through the transition period, Union Carbide instructed CSI to reduce the
number of janitors working at the plant from eight (8) to seven (7). Paulino Roman,
one of the janitors, was recalled by CSI for reassignment. However, Roman refused
to acknowledge receipt of the recall memorandum.
Union Carbide formally notified CSI of the termination of their janitorial service
agreement citing as reason the global buy-out by Rhone-Poulenc, Agrochemie,
France of Union Carbides Inc.'s agrochemical business. CSI issued a memorandum
to the seven remaining janitors assigned to the Namayan plant, including Urcisio
Orain, recalling and advising them to report to the CSI office for reassignment. Like
Roman, the janitors refused to acknowledge receipt of the recall memorandum.
Meanwhile, in anticipation of the pull-out by Union Carbide, Rhone-Poulenc started
screening proposals by prospective service contractors. It likewise invited CSI to
submit to its Bidding Committee a cost quotation of its janitorial services. However,
another contractor, the Marilag Business and Industrial Services, Inc. passed the
bidding committee's standards and obtained the janitorial services contract.
The eight janitors reported for work at the Namayan plant but were refused
admission and were told that another group of janitors had replaced them. These
janitors then filed separate complaints for illegal dismissal, payment of 13th month
 39
salary, service leave and overtime pay against Union Carbide, Rhone- Poulenc and petitioner derived from the continuous availment by Union Carbide of the services of
CSI. CSI’s janitors was merely incidental.

Labor Arbiter Asuncion ruled that CSI is a legitimate service contractor and that
Roman and Orain were employees of CSI. The NLRC ordered Rhone-Poulenc to
reinstate Roman and Orain and to pay one year backwages, or to grant them
separation pay if reinstatement was not feasible.
Rhone-Poulenc maintains that it is CSI, and not Union Carbide and Rhone-
Poulenc, as successor, which is the actual employer of the janitors. It insists that
CSI is a legitimate independent contractor providing janitorial services to a wide range
of clientele including Union Carbide.
The NLRC also overlooked the fact that it was still Union Carbide who paid CSI for
the services of these janitors. Also, even prior to the expiration of the transition period,
the petitioner, in anticipation of the pullout of Union Carbide and it hired service
agencies, started screening its own service contractors. Under these circumstances,
the petitioner may not be deemed to have absorbed the respondent janitors as its
own employees.
Guarin Case Rhone Poulenc Case

Issue 1: Whether or not the janitors were employees of Union Carbide? NO There was failure to prove the essential It was established that CSI had other
requisites for one to be considered to clients and that it had substantial
Ruling: No, there is no employer-employee relationship between Union Carbide be engaged in legitimate job capital.
and the janitors. The janitors themselves admitted that they were selected and hired contracting.
by CSI and were assigned to Union Carbide. CSI likewise acknowledged that the two
janitors were its employees. The janitors drew their salaries from CSI and not from It also noted the number of employees The janitors that were farmed out to
Union Carbide. CSI exercised control over these janitors through Richard Barroga, that were farmed out by Lipercon in Union Carbide were only 8.
also a CSI employee, who gave orders and instructions to CSI janitors assigned to favor of Novelty, which was 120. For
the Namayan plant. Moreover, CSI had the power to assign its janitors to various such number of employees, how can it
clients and to pull out, as it had done in a number of occasions, any of its janitors not be engaged in work which is directly
working at Union Carbide. related to the function of the principal in
this case.
Employer-employee relationship; Elements in determining the existence of employer-
employee relationship. — In determining the existence of employer-employee
relationship, the following elements are generally considered, namely: DISTINCTIONS
"Labor-Only Contracting" and "Job Contracting"
(1) the selection and engagement of the employees;
(2) the payment of wages;
(3) the power of dismissal; and Labor-Only Contracting Legitimate Job Contracting
(4) the power to control the employee’s conduct—although the latter is the most
important element. An employer-employee relationship is There is no employer-employee
created by law between the principal relationship between the contractor's
Although the application of the aforementioned four-fold test will not establish an and the employees supplied by the employees and the principal.
employer-employee relationship, a person or employer who contracts with another labor-only contractor
for the performance of the former’s work or of any work nevertheless becomes liable
to the employees of the contractor. The principal is considered as the direct The principal is only considered as the
employer of the employees supplied by indirect employer, as defined under
Issue 2: Whether or not CSI is a labor-only contractor? CSI is engaged in job the labor-only contractor Article 107 of the Labor Code
contracting
The principal is solidarily liable with the The solidary obligation of the principal
Ruling: No, CSI is engaged in job contracting. As to whether CSI is engaged in labor- labor-only contractor to the employees and the legitimate job contractor is only
only contracting or in job contracting, applying the test prescribed by the Labor Code in the same manner and extent that the for a limited purpose – to ensure that
and the implementing rules, the Court finds sufficient basis from the records to principal is liable to the employees the employees are paid their wages
conclude that CSI is engaged in job contracting. directly hired by him. and other benefits under the Labor
Code.
In Kimberly Independent Labor Union v. Drilon, the Court took judicial notice of the
general practice adopted in several government and private institutions and The labor-only contractor is considered The contractor undertakes to perform a
industries of hiring a janitorial service on an independent contractor basis. merely as an agent to provide supplies, specific job for the principal.
recruits, and places personnel to work
Even on the supposition that the janitors were, indeed, employees of Union Carbide for the principal.
or that CSI is a labor-only contractor, thus making Union Carbide a direct employer
of these janitors, Rhone-Poulenc, as purchaser of Union Carbide’s business, is not
compelled to absorb these janitors into its workforce. An innocent transferee of TESTS EMPLOYED BY THE SC (Based on the Cases Discussed)
a business establishment has no liability to the employees of the transferor to
continue employing them. 1. Right of Control Test - Determine whether the method of manner of the contractor
in performing the contracted job is completely free from control and direction of the
Is there labor-only contracting here? NO. CSI is engaged in job contracting. principal, except as to the results thereof (cases of PBCOM and Far East Bank).

Even if there is legitimate job contracting, is Rhone Poulenc here liable for the
dismissed employees? NO. The Janitorial Service Agreement does not bind Rhone
Poulenc. The SC said that even on the supposition that the janitors were, indeed,
employees of Union Carbide or that CSI is a labor-only contractor, thus making Union
Carbide a direct employer of these janitors, petitioner Rhone-Poulenc, as purchaser
of Union Carbide’s business, is not compelled to absorb these janitors into its
workforce. An innocent transferee of a business establishment has no liability to the
employees of the transferor to continue employing them.
What about the fact that these janitors were working during the transition
period between Union Carbide and Rhone Poulenc? During the three-month
transition period prior to Union Carbide’s turnover of the facilities, the service
contract between Union Carbide and CSI was still in force. Whatever benefit the
2. Substantial Capital or Investment Test - Determine whether the contractor has
substantial capital or investment in the form of tools, machineries, equipment, work
premises, and other materials which are necessary in the conduct of his business.
NOTE: Under Department Order 174 – the substantial capital is P 5 million in shares
or stocks (corporation, partnership or single proprietorship).
3. Direct Relation to The Principal's Business Test - Determine whether the
employees recruited, supplied, or placed by the contractor performed activities which
are directly related to the main business of the principal.
4. Legal Rights and Benefits Compliance Test - Determine whether the service
agreement between the principal and the contractor assures the employee of the

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latter farmed out to the former, the entitlement to all labor and occupational safety
and health standards, free exercise of their right to self-organization, security of
tenure, and social and welfare benefits. If these are given by the contractor, there is
compliance to the legal rights and benefits compliance test.
Among the four, the legal rights and benefits compliance test is the least used test
employed by the courts.
Insert masada case
Dep order 174 - “substantial capital” can be considered if it is 5,000,000 pesos
Central v. Central
Facts: Central Azucarera De Tarlac (petitioner) is a domestic corporation engaged in
the business of sugar manufacturing, while respondent is a legitimate labor
organization which serves as the exclusive bargaining representative of petitioner's
rank-and-file employees. In compliance with PD 851, petitioner granted its employees
the mandatory 13th month pay since 1975. The formula used by petitioner in
computing the 13th-month pay was: Total Basic Annual Salary divided by 12.
Included in petitioner's computation of the Total Basic Annual Salary were the
following: basic monthly salary; first 8 hours overtime pay on Sunday and
legal/special holiday; night premium pay; and vacation and sick leaves for each year.
Throughout the years, petitioner used this computation until 2006.
On November 6, 2004, respondent staged a strike. During the pendency of the strike,
petitioner declared a temporary cessation of operations. In December 2005, all the
striking union members were allowed to return to work. Subsequently, petitioner
declared another temporary cessation of operations for the months of April and May
2006. The suspension of operation was lifted on June 2006, but the rank-and-file
employees were allowed to report for work on a 15 day-per-month rotation basis that
lasted until September 2006. In December 2006, petitioner gave the employees their
13th-month pay based on the employee's total earnings during the year divided by
12. Respondent objected to this computation. It averred that petitioner did not adhere
to the usual computation of the 13th-month pay. It claimed that the divisor should
have been 8 instead of 12, because the employees worked for only 8 months in 2006.
It likewise asserted that petitioner did not observe the company practice of giving its
employees the guaranteed amount equivalent to their one month pay, in instances
where the computed 13th-month pay was less than their basic monthly pay.
Since the parties failed to reach a settlement, respondent applied for preventive
mediation before the National Conciliation and Mediation Board. However the parties
still failed to settle the dispute. On March 29, 2007, respondent filed a complaint
against petitioner for money claims based on the alleged diminution of
benefits/erroneous computation of 13th-month pay before the Regional Arbitration
Branch of the NLRC. The Labor Arbiter (LA) dismissed the complaint. The NLRC
reversed the decision however, and ordered petitioner to adhere to its established
practice of granting 13th-month pay on the basis of gross annual basic which includes
basic pay, premium pay for work in rest days and special holidays, night shift
differential and paid vacation and sick leaves for each year. Additionally, respondent
is ordered to observe the guaranteed one month pay by way of 13th month pay. The
CA affirmed the decision of the NLRC.
Issue: Whether there was an error in the computation of the 13th-month pay of its
employees as a result of its mistake in implementing P.D. No. 851
Ruling: NO, there was no error, even if there was it has already ripened into company
practice. The 13th-month pay mandated by Presidential Decree (P.D.) No. 851
represents an additional income based on wage but not part of the wage. It is
equivalent to one-twelfth (1/12) of the total basic salary earned by an employee within
a calendar year. All rank-and-file employees, regardless of their designation or
employment status and irrespective of the method by which their wages are paid, are
entitled to this benefit, provided that they have worked for at least one month during
the calendar year. If the employee worked for only a portion of the year, the 13th-
month pay is computed pro rata.
The Rules and Regulations Implementing P.D. No. 851 defines "basic salary" to
include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to
Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975. The Supplementary Rules and
Regulations clarifies that overtime pay, earnings, and other remuneration that are not
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part of the basic salary shall not be included in the computation of the 13th-month
pay. Under the Revised Guidelines on the
Implementation of the 13th-Month Pay Law, it was specifically stated that the
minimum 13th-month pay required by law shall not be less than one-twelfth (1/12) of
the total basic salary earned by an employee within a calendar year. Furthermore,
the term "basic salary" of an employee for the purpose of computing the 13th-month
pay was interpreted to include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits which are
not integrated as part of the regular or basic salary, such as the cash equivalent of
unused vacation and sick leave credits, overtime, premium, night differential and
holiday pay, and cost-of-living allowances. However, these salary-related benefits
should be included as part of the basic salary in the computation of the 13th-month
pay if, by individual or collective agreement, company practice or policy, the same
are treated as part of the basic salary of the employees. Based on the foregoing, it is
clear that there could have no erroneous interpretation or application of what is
included in the term "basic salary" for purposes of computing the 13th-month pay.
As correctly ruled by the CA, the practice of petitioner in giving 13th-month pay based
on the employees' gross annual earnings which included the basic monthly salary,
premium pay for work on rest days and special holidays, night shift differential pay
and holiday pay continued for almost thirty (30) years and has ripened into a company
policy or practice which cannot be unilaterally withdrawn. Article 100 of the Labor
Code, otherwise known as the Non-Diminution Rule, mandates that benefits given to
employees cannot be taken back or reduced unilaterally by the employer because
the benefit has become part of the employment contract, written or unwritten. The
rule against diminution of benefits applies if it is shown that the grant of the benefit is
based on an express policy or has ripened into a practice over a long period of time
and that the practice is consistent and deliberate. Nevertheless, the rule will not apply
if the practice is due to error in the construction or application of a doubtful or difficult
question of law. But even in cases of error, it should be shown that the correction is
done soon after discovery of the error.
Department Order 174 s.2017
Section 5. Absolute Prohibition against Labor-Only Contracting. Labor-Only
Contracting which is totally prohibited, refers to an arrangement where:
(a) i. The contractor or subcontractor does not have substantial capital or
ii. The contractor or subcontractor does not have investments in the
form of tools, equipment, machineries, work premises, among others;
and
iii. The contractor’s or subcontractor’s employees recruited and placed
by such person are performing activities which are directly related to
the principal business or operations of the principal or
(b) The contractor or subcontractor does not exercise the right to control
over the performance of the work of the employee
The substantial capital has been raised to 5 Million for one to be considered as
legitimate job contracting.
TAKE NOTE of the requisites for there to be Labor-Only Contracting:
1. No substantial capital or investment which relates to the job, work or
service to be performed AND employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which are
directly related to the main business of the principal; OR
2. The contractor does not exercise the right to control over the performance
of the work of the contractual employee
This is very important because if there is labor-only contracting, what would
be the effect? The contractor may be merely treated as an agent of the principal.
The principal will be the one considered as an employer as if he is the one who
directly employed the employees. Therefore, he would be responsible for all their
entitlements and benefits under the labor law.
Nonetheless, even if it is considered as a labor-only contracting, you still apply the
rules in solidary liability. On the part of the employees, this is for their benefit because
they can go to either of them. When we talk about solidary liability, any one of them
can be held or can be compelled to pay as in this case, the benefits that are entitled
to the employees.

EFFECT OF LABOR-ONLY CONTRACTING
1. The subcontractor will be treated as the agents of the principal, and
representations by the subcontractor to the employees will bind the
principal. Therefore the representations by the subcontractor to the
employees will bind the principal.
2. The principal will become the employer as if it directly employed the
workers, and will be responsible for all their entitlements and benefits
under labor laws (for all purposes under Social Legislation and Labor
Legislation) not just under the Labor Code
3. The principal and subcontractor will be solidarily treated as employer.
4. The employees will become employees of the principal, subject to the
classifications of employees under the Labor Code.
If one is considered as a Labor-Only Contractor, essentially the effect is that the
contractor is eliminated by law to which the principal will be considered as the
employer of those who were hired.
Labor-Only Contracting is considered as legally wrong. This is an attempt to evade
obligations of an employer.
Also prohibited is contracting with a cabo, as defined under Section 3 of DO 174,
Series of 2017:
"Cabo" — refers to a person or group of persons or to a labor group which, under
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 as an agent of the employer or as an ostensible independent contractor.
Department Order 174
Section 6. Other Illicit Forms of Employment Arrangements. In addition to
Section 5 of these Rules, the following are hereby declared prohibited for being
contrary to the law or public policy:
a) When the principal farms out work to a "Cabo".
b) Contracting out of job or work through an in-house agency,
c) Contracting out of job or work through an in-house cooperative which merely
supplies workers to the principal. Take note that a cooperative can be
considered as a labor-only contractor or a legitimate job contractor depending
upon the circumstances.
d) Contracting out of a job or work by reason of a strike or lockout whether actual
or imminent.
e) Contracting out of a job or work being performed by union members and such
will interfere with, restrain or coerce employees in the exercise of their rights to
self-organization as provided in Article 259 of the Labor Code, as amended.
f) Requiring the contractor's/subcontractor's employees to perform functions
which are currently being performed by the regular employees of the principal.
g) Requiring the contractor's/subcontractors employees 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 or contractor from
liability as to payment of future claims; or require the employee to become
member of a cooperative.
h) Repeated hiring by the contractor/subcontractor of employees under an
employment contract of short duration,
i) Requiring employees under a contracting/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.
j) Such other practices, schemes or employment arrangements designed to
circumvent the right of workers to security of tenure.
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Effect: Same as Labor-Only Contracting.
DO 174, Series of 2017
Section 8. Permissible Contracting or Subcontracting Agreements.
Notwithstanding Sections 5 and 6 hereof, contracting or subcontracting shall
only be allowed if all the following circumstances concur:
a) The contractor or subcontractor is engaged in a distinct and independent
business and undertakes to perform the job or work on its own responsibility,
according to its own manner and method;
b) The contractor or subcontractor has substantial capital to carry out the job
farmed out by the principal on his account, manner and method, investment in
the form of tools, equipment, machinery, and supervision;
c) In performing the work farmed out, the contractor or subcontractor is free from
the control and/or direction of the principal in all matters connected with the
performance of the work except as to the result thereto; and
d) The Service Agreement ensures compliance with all the rights and benefits
for all the employees of the contractor or subcontractor under the labor laws.
REMEMBER: In labor-only contracting, the indirect employer has control over the
employees while in legitimate job contracting, the principal has no control over the
employees. Now we already have an idea as to what constitutes labor-only
contracting and what is legitimate job contracting. Let us go to the cases.
TESTS TO DETERMINE THE EXISTENCE OF A LEGITIMATE JOB
CONTRACTING ARRANGEMENT
1. RIGHT OF CONTROL TEST - addresses the issue of whether the
contractors’ manner and method of performing the contracted job, work,
or service are completely free from the control and direction of the
principal except as to the result thereof.
2. SUBSTANTIAL CAPITAL OR INVESTMENT TEST - seeks to address
the issue of whether the contractor has substantial capital or investment
in the form of tools, equipment, machineries, work, premises, and other
materials which are necessary in the conduct of its business.
3. DIRECT RELATION TO THE PRINCIPAL’S BUSINESS TEST - seeks to
address the issue of whether the employees recruited, supplied or placed
by a contractor are performing activities which are directly related to the
main business of the principal.
4. LEGAL RIGHTS AND BENEFITS COMPLIANCE TEST - addresses the
issue of whether the Service Agreement between the principal and
contractor assures the employees of the latter farmed out to the former of
their entitlement to all labor and occupational safety and health standards,
free exercise of their right to self-organization, security of tenure, and
social and welfare benefits.
These tests are just in connection to the circumstances mentioned under the
Department Order. All of these must be present for a legitimate contracting.
Section 9. Solidary Liability. In the event of 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 provisions of the Labor
Code and other social legislations, to the extent of the work performed under the
employment contract. For Labor-Only Contracting
For legitimate job contracting : There is solidary liability between the principal and
the contractor but in connection on to Labor Code provisions.
NFA v. MASAD GR No. 163448 (March 8, 2005)
There was a legitimate contracting. Who will be liable for the roll-up costs for the
security guards?

Held: Hence, the prescribed increases or the additional liability to be borne by the
principal under Section 6 of RA 6727 is the increment or amount added to the
remuneration of an employee for an 8-hour work.
x x x Since the increase in wage referred to in Section 6 pertains to the "statutory
minimum wage" as defined herein, principals in service contracts cannot be made to
pay the corresponding wage increase in the overtime pay, night shift differential,
holiday and rest day pay, premium pay and other benefits granted to workers. While
basis of said remuneration and benefits is the statutory minimum wage, the law
cannot be unduly expanded as to include those not stated in the subject provision.
At any rate, the interest of the employees will not be adversely affected if the
obligation of principals under the subject provision will be limited to the increase in
the statutory minimum wage. This is so because all remuneration and benefits other
than the increased statutory minimum wage would be shouldered and paid by the
employer or service contractor to the workers concerned. Thus, in the end, all
allowances and benefits as computed under the increased rate mandated by RA
6727 and the wage orders will be received by the workers.
Moreover, the law secures the welfare of the workers by imposing a solidary liability
on principals and the service contractors. Under the second sentence of Section 6 of
RA 6727, in the event that the principal or client fails to pay the prescribed wage
rates, the service contractor shall be held solidarily liable with the former.
WORKER PREFERENCE IN CASE OF BANKRUPTCY
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)
Take note that it must be read together with Articles 2241, 2242, 2244 of the Civil
Code which refer to preference and concurrence of credits.
When we say concurrence of credits, the credits have the same rank. What will
remain as assets of the employer will be divided among those concurrence credits.
For preference credits, we are referring to specific property and whose credits are
preferred over them. If this property will be sold, such proceeds will go to this
preferred party.
What do we need to take note of this, especially for those who will still have Credit
Transactions, you have to take note that Article 2241 enumerates preferred creditors
in connection with a movable property. Article 2242 enumerates who are the
preferred creditors in connection with a real estate property. What do you mean by
that? Meaning, if the debtor is insolvent, who shall be, among the creditors, be the
one preferred to be paid. Article 2244 enumerates those that are preferred credits
that are not falling under the categories of Art. 2241 and 2242.
In concurrence of credits, if the debtor has no more preferred credits but still has
assets which are not enough to pay all his obligations, the concurrence of credits
shall apply.
Why is that related with Article 110? If you try to look at Article 110, it would appear
that the worker is highly prioritized or the first priority. But if you relate that to the
provisions of the Civil Code on preference and concurrence of credits, first, there
must be a bankruptcy proceeding for an employee to raise Article 110. Second, when
we say priority, priority after the preferred credits. You cannot say that the employees
will always be first paid with the assets of the employer.
Article 110 only holds true when the property is not subject to a lien.
DBP v. NLRC
Article 110 of the Labor Code cannot be viewed in isolation but must be read in
relation to the Civil Code scheme on classification and preference of credits.
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The right of first preference as regards unpaid wages recognized by Article 110 does
not constitute a lien on the property of the insolvent debtor in favor of workers. It is
but a preference of credit in their favor, a preference in application. It is a method
adopted to determine and specify the order in which credits should be paid in the final
distribution of the proceeds of the insolvent's assets. It is a right to a first preference
in the discharge of the funds of the judgment debtor.
The DBP anchors its claim on a mortgage credit. It creates a real right which is
enforceable against the whole world. It is a lien on an identified immovable property,
which a preference is not. A recorded mortgage credit is a special preferred credit
under Article 2242 (5) of the Civil Code on classification of credits. The preference
given by Article 110, when not falling within Article 2241 (6) and Article 2242 (3) of
the Civil Code and not attached to any specific property, is an ordinary preferred
credit although its impact is to move it from second priority to first priority in the order
of preference established by Article 2244 of the Civil Code.
In fine, the right to preference given to workers under Article 110 of the Labor Code
cannot exist in any effective way prior to the time of its presentation in distribution
proceedings. It will find application when, in proceedings such as insolvency, such
unpaid wages shall be paid in full before the "claims of the Government and other
creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors
must be convened, their claims ascertained and inventoried, and thereafter the
preferences determined in the course of judicial proceedings which have for their
object the subjection of the property of the debtor to the payment of his debts or other
lawful obligations.
DBP v. SEC
It is clear from the wording of the law that the preferential right accorded to employees
and workers under Article 110 may be invoked only during bankruptcy or judicial
liquidation proceedings against the employer. The law is unequivocal and admits of
no other construction.
Indubitably, the preferential right of credit attains significance only after the properties
of the debtor have been inventoried and liquidated, and the claims held by his various
creditors have been established.
What Article 110 of the Labor Code establishes is not a lien, but a preference of credit
in favor of employees. This simply means that during bankruptcy, insolvency or
liquidation proceedings involving the existing properties of the employer, the
employees have the advantage of having their unpaid wages satisfied ahead of
certain claims which may be proved therein.
Rubberworld v. NLRC
Labor claims cannot proceed independently of a bankruptcy liquidation proceeding,
since these claims "would spawn needless controversy, delays, and confusion." With
more reason, allowing labor claims to continue in spite of a SEC suspension order in
a rehabilitation case would merely lead to such results.
The preferential right of workers and employees under Article 110 of the Labor code
may be invoked only upon the institution of insolvency or judicial liquidation
proceeding. Indeed, it is well-settled that "a declaration of bankruptcy or a judicial
liquidation must be present before preferences over various money claims may be
enforced." But debtors resort to preference of credit — giving preferred creditors the
rights to have their claims paid ahead of those of other claimants — only when their
assets are insufficient to pay their debts fully. The purpose of rehabilitation
proceedings is precisely to enable the company to gain a new lease on life and
thereby allow creditors to be paid their claims from its earnings. In insolvency
proceedings, on the other hand, the company stops operating, and the claims of
creditors are satisfied from the assets of the insolvent corporation. The present case
involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the
preference of credit granted to workers or employees under Article 110 of the Labor
Code is not applicable.
Robledo v. NLRC
Held: Now, the claims of petitioners are actually money claims against the estate of
Felipe Bacani. They must be filed against his estate in accordance with Sec. 5 of
Rule 86.
The rationale for the rule is that upon the death of the defendant, a testate or intestate
proceeding shall be instituted in the proper court wherein all his creditors must appear
and file their claims which shall be paid proportionately out of the property left by the

deceased. The objective is to avoid duplicity of procedure. Hence the ordinary actions
must be taken out from the ordinary courts. Under Art. 110 of the Labor Code, money
claims of laborers enjoy preference over claims of other creditors in case of
bankruptcy or liquidation of the employer's business.
ATTORNEY’s FEES
Article 111. Attorney’s fees.
a. In cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of
wages recovered.
b. It shall be unlawful for any person to demand or accept, in any judicial
or administrative proceedings for the recovery of wages, attorney’s
fees which exceed ten percent of the amount of wages recovered.
Article 111 is not limited to wage recoveries. There are other instances wherein labor
related claims on the part of the employee. The limit to the amount of attorney’s fees
that can be demanded in connection to recovery of wages.
Take Note: Non-lawyers as a general rule are not allowed to appear before the NLRC.
In certain instances, it may be allowed, but it does not mean that they are not entitled
to attorney’s fees.
RA 9406 on representation of PAO - The amounts collected from the cost of suit,
attorney’s fees, and contingent fees imposed upon the adversary of the PAO’s client
after a successful litigation shall be collectively referred to as success fees shall be
deposited as a Special Trust Fund.
Taganas v. NLRC
We agree with the NLRC's assessment that fifty percent of the judgment award as
attorney's fees is excessive and unreasonable. The financial capacity and economic
status of the client have to be taken into account in fixing the reasonableness of the
fee.
Furthermore, petitioner's contingent fee falls within the purview of Article 111 of the
Labor Code. This article fixes the limit on the amount of attorney's fees which a
lawyer, like petitioner, may recover in any judicial or administrative proceedings since
the labor suit where he represented private respondents asked for the claim and
recovery of wages. In fact, We are not even precluded from fixing a lower amount
than the ten percent ceiling prescribed by the article when circumstances warrant it.
Nonetheless, considering the circumstances and the able handling of the case,
petitioner's fee need not be further reduced.
Traders v. NLRC
There are two commonly accepted concepts of attorney's fees, the so-called ordinary
and extraordinary. In its ordinary concept, an attorney's fee is the reasonable
compensation paid to a lawyer by his client for the legal services he has rendered to
the latter. The basis of this compensation is the fact of his employment by and his
agreement with the client.
In its extraordinary concept, an attorney's fee is an indemnity for damages ordered
by the court to be paid by the losing party in a litigation. The basis of this is any of the
cases provided by law where such award can be made, such as those authorized in
Article 2208, Civil Code, and is payable not to the lawyer but to the client, unless they
have agreed that the award shall pertain to the lawyer as additional compensation or
as part thereof.
Evidently, the P3,000.00 monthly fee provided in the retainer agreement between the
union and the law firm refers to a general retainer, or a retaining fee, as said monthly
fee covers only the law firm's pledge, or as expressly stated therein, its "commitment
to render the legal services enumerated." The fee is not payment for private
respondent's execution or performance of the services listed in the contract, subject
to some particular qualifications or permutations stated there.
Generally speaking, where the employment of an attorney is under an express valid
contract fixing the compensation for the attorney, such contract is conclusive as to
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the amount of compensation. We cannot, however, apply the foregoing rule in the
instant petition and treat the fixed fee of P3,000.00 as full and sufficient consideration
for private respondent's services, as petitioner would have it.
We have already shown that the P3,000.00 is independent and different from the
compensation which private respondent should receive in payment for his services.
While petitioner and private respondent were able to fix a fee for the latter's promise
to extend services, they were not able to come into agreement as to the law firm's
actual performance of services in favor of the union. Hence, the retainer agreement
cannot control the measure of remuneration for private respondent's services.
In any case, whether there is an agreement or not, the courts can fix a reasonable
compensation which lawyers should receive for their professional services. However,
the value of private respondent's legal services should not be established on the basis
of Article 111 of the Labor Code alone.
In the first place, the fees mentioned here are the extraordinary attorney's fees
recoverable as indemnity for damages sustained by and payable to the prevailing
part. In the second place, the ten percent (10%) attorney's fees provided for in Article
111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules
is the maximum of the award that may thus be granted. Article 111 thus fixes only
the limit on the amount of attorney's fees the victorious party may recover in any
judicial or administrative proceedings and it does not even prevent the NLRC from
fixing an amount lower than the ten percent (10%) ceiling prescribed by the article
when circumstances warrant it.
Article 111 of the Labor Code regulates the amount recoverable as attorney's fees in
the nature of damages sustained by and awarded to the prevailing party. It may not
be used therefore, as the lone standard in fixing the exact amount payable to the
lawyer by his client for the legal services he rendered. Also, while it limits the
maximum allowable amount of attorney's fees, it does not direct the instantaneous
and automatic award of attorney's fees in such maximum limit.
PROHIBITIONS REGARDING WAGES
Article 112. Non-interference in disposal of wages. No employer shall limit or
otherwise interfere with the freedom of any employee to dispose of his wages. He
shall not in any manner force, compel, or oblige his employees to purchase
merchandise, commodities or other property from any other person, or otherwise
make use of any store or services of such employer or any other person.
The employee cannot be told what to do with his wages. In some workplaces, it
cannot be allowed that the canteen cannot be managed by the employer. These are
usually run by cooperatives or outsiders.
Although the employer cannot interfere with the employee as to how he will dispose
of his wages, the employer can advise the employee.
Article 113. Wage deduction. No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
a. In cases where the worker is insured with his consent by the employer,
and the deduction is to recompense the employer for the amount paid
by him as premium on the insurance;
b. For union dues, in cases where the right of the worker or his union to
check-off has been recognized by the employer or authorized in writing
by the individual worker concerned; and
c. In cases where the employer is authorized by law or regulations issued
by the Secretary of Labor and Employment.
What are authorized to be deducted:
1. Value of meals and other facilities. Remember the requisites for it to be
considered validly deducted.
2. Where the employee is insured with his consent by the employer,
deductions for the amount paid by the said employer as premiums for the
said insurance. Union dues. There must be authority in writing of the
individual concerned.

3. Court awards, subject to execution or attachments but take note only for
debts or obligations incurred for food, shelter, clothing, or medical
attendance.
4. Withholding tax and deductions for the SSS premium share of the
employee, Philheaht, HMDF.
5. Cooperative.
What if the employee is indebted to the employer? Deductions may be allowed is
such indebtedness has become due and demandable.
What if the employee is obligated to a third person who is a friend of the
employer? This is allowed if such deduction is authorized in writing by the employee
to which the employer shall agree to make the deduction. The employer is not
obligated to do so.
What about unpaid absences? That is allowed as deduction. If the employee is paid
on a monthly basis, they shall determine the daily wage before making the
appropriate deductions.
Rule VIII. Payment of Wages
SECTION 14. Deduction for loss or damage. — Where the employer is engaged
in a trade, occupation or business where the practice of making deductions or
requiring deposits is recognized to answer for the reimbursement of loss or
damage to tools, materials, or equipment supplied by the employer to the
employee, the employer may make wage deductions or require the employees to
make deposits from which deductions shall be made, subject to the following
conditions:
(a) That the employee concerned is clearly shown to be responsible for the loss
or damage;
(b) That the employee is given reasonable opportunity to show cause why
deduction should not be made;
(c) That the amount of such deduction is fair and reasonable and shall not exceed
the actual loss or damage; and
(d) That the deduction from the wages of the employee does not exceed 20
percent of the employee's wages in a week.
Article 114. Deposits for loss or damage. No employer shall require his worker
to make deposits from which deductions shall be made for the reimbursement
of loss of or damage to tools, materials, or equipment supplied by the employer,
except when the employer is engaged in such trades, occupations or business
where the practice of making deductions or requiring deposits is a recognized
one, or is necessary or desirable as determined by the Secretary of Labor and
Employment in appropriate rules and regulations.
Article 115. Limitations. No deduction from the deposits of an employee for the
actual amount of the loss or damage shall be made unless the employee has
been heard thereon, and his responsibility has been clearly shown.
Article 116. Withholding of wages and kickbacks prohibited. It shall be unlawful
for any person, directly or indirectly, to withhold any amount from the wages of
a worker or induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other means whatsoever without the worker’s
consent.
RCPI V. SECRETARY RCPI is still liable for the union service fee of private
respondent.
Facts: The union was awarded 15% of the total backpay of the RCPI employees
as its union service fee, with petitioner being directed to deposit said amount with
the NCR office. RCPI directly paid its employees the full amount of their backpay,
without deducting the service fee, completely ignoring the service fee due to the
respondent union.
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RCPI also supposedly paid to one Atty. Rodolfo M. Capocyan the 10% fee that
properly pertained to respondent union. Atty. Capocyan was a mere fictitious
character, his attorney’s fees, which included the claim of respondent, necessarily
devolved upon RCPI.
There was no valid novation of the prior judgment because the pre-existing
obligation thereunder and the new one sought to be created are not absolutely
incompatible. The said agreement simply gave RCPI a method and more time for
the satisfaction of the said judgment, until the terms of said agreement had been
fully complied with.
The Supreme Court mentioned that RCPI cannot invoke the lack of individual
written authorization for the payment of the service fee as required under the
requirement of Article 113.
Prior to the payment made for its employees:
1. The petitioner is now ordered by the regional director of labor to
deduct the “attorney’s fees” from the total amount of due to its
employees and to deposit it actually to the regional office and not to
the representative of other union.
2. Under the facts of this case it was shown that the compromise
agreement entered into by petitioner and the subsequent union
BMRCPINLF was considered in bad faith.
3. The Supreme Court also noted that even if there was no written
authorization was made, it was remedied by the subsequent
compromise agreement whereby the employees expressly uphold
the 10% deduction and held the RCPI free from any claim. However,
that provision did not free RCPI from its liability because it released that
amount in favor of the union by virtue of that CBA which was executed in
bad faith. That’s is the connection to Article 113.
HELD: In this case, the wage deductions were valid. However, since the RCPI
released it in favor of a different personality, different from what the court ordered
and person receiving was not actually entitled thereto, the liability of the RPCI was
not extinguished.
The basis of the claim of the union is that the deduction is a union service fee, but
in fact it is an attorney’s fee.
Recall that in Article 111, if you are not an attorney and there is no attorney-client
relationship with the employee, you are not entitled to that 10%. Take note that the
Union here is the one claiming the 10% not personal lawyers of the employees.
The Supreme Court made mention of Article 222. There are instances where it is
allowed for non-lawyers to appear before Regional Labor Arbiters (LA/NLRC). One
of the basis is the provision of Article 222 of the Labor Code. Under the same
provision no attorney’s fees, negotiations fees or similar charges of any kind arising
from any CBA shall be imposed on any individual member of the contracting union.
In this case, it is payment for the individual union members, which is contrary
to the provisions under Article 222, what is allowed in the last paragraph is
attorney’s fees may be charged against union funds to be agreed by the parties.
Finally, the ruling of this case was contrary to the last paragraph stating “Any
contract, agreement or arrangement of any sort to the contrary shall be null and
void. “
The Supreme Court has not nullified nor reversed this ruling of RCPI. Be wary of
this provision that deductions are not allowed for the payment of attorney’s fees.
Even if there was consent of the employees, it appears that it was contrary to the
provisions under Article 222, it should be null and void.
MILAN V. NLRC An employer is allowed to withhold terminal pay and benefits
pending the employee’s return of its properties.
Facts: Solid Mills’ employees and their families were allowed to occupy the SMI
Village out of liberality and for the convenience of the employees on the condition
that the employees would vacate the premises anytime the Company deems fit.
The Supreme Court in this case stated that requiring clearance before the release
of last payments to the employee is a standard procedure among employers,
whether public or private.

Clearance procedures are instituted to ensure that the properties, real or personal,
belonging to the employer but are in the possession of the separated employee, are
returned to the employer before the employee’s departure. The SC made mention in
this case Articles 110, 113, and 116 of the Labor Code. It also cited Article 1706 of
the Civil Code.
TAKE NOTE: In the MOA, grant of separation pay “less accountabilities”, accrued
sick leave benefits, vacation leave benefits, and 13th month pay of the employees;
this became the mode of contention on the part of the employees. They contended
that they have no accountability based on their EER relationship.
However, the SC discussed in this case the term debt and accountability. It further
emphasized that it may be true that not all employees enjoyed the privilege of staying
in Solid Mills’ property.
However, this alone does not imply that this privilege when enjoyed was not a result
of the employer-employee relationship. Those who did avail of the privilege were
employees of Solid Mills. Therefore, petitioners’ continued possession of the subject
property should be included in the term accountability.
Accountabilities (means obligation or debt). As long as the debt or obligation was
incurred by virtue of the EER, generally, it shall be included in the employees’
accountabilities that are subject to clearance procedures.
The accountabilities of employees are personal. They need not be uniform among
all employees in order to be included in accountabilities incurred by virtue of an
employer-employee relationship. The return of the property’s possession became an
obligation or liability on the part of the employees when the employer-employee
relationship ceased.
The employees’ benefits are not being reduced but they are only being subjected
to the condition that the employees return the properties properly belonging to the
employer. “No one shall be enriched or benefited at the expense of another.”
Thus, Solid Mills has the right to withhold petitioners’ wages and benefits because of
this existing debt or liability. The employees shall return the housing in exchange for
the release of their benefits, as agreed upon by the parties.
Mabeza v. NLRC Mabeza is entitled to the payment of the deficiency in her wages
equivalent to the full wage applicable from May 13, 1988 up to the date of her illegal
dismissal.
FACTS: Norma Mabeza contends that around the first week of May, 1991, she and
her co-employees at the Hotel Supreme in Baguio City were asked by the hotel’s
management to sign an instrument attesting to the latter’s compliance with minimum
wage and other labor standard provisions of law.
Mabeza signed the affidavit but refused to go to the City Prosecutor’s Office to swear
to the veracity and contents of the affidavit as instructed by management. The
affidavit was nevertheless submitted on the same day to the Regional Office of the
Department of Labor and Employment in Baguio City.
After she refused to proceed to the City Prosecutor’s Office, Mabeza avers that she
was ordered by the hotel management to turn over the keys to her living quarters
and to remove her belongings from the hotel premises. She thereafter reluctantly
filed a leave of absence from her job which was denied by management. When she
attempted to return to work on May 10, 1991, the hotel’s cashier informed her that
she should not report to work and, instead, continue with her unofficial leave of
absence.
ACTION FILED: Consequently, Mabeza filed a complaint for illegal dismissal
before the Arbitration Branch of the National Labor Relations Commission—CAR
Baguio City. In addition to her complaint for illegal dismissal, she alleged
underpayment of wages, non-payment of holiday pay, service incentive leave pay,
13th month pay, night differential and other benefits.
RESPONDENT’S CONTENTION: Private respondent Peter Ng alleged before that
petitioner surreptitiously left her job without notice to the management and that she
actually abandoned her work. He maintained that there was no basis for the money
claims for underpayment and other benefits as these were paid in the form of facilities
to petitioner and the hotel’s other employees.
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ISSUE: WON there is underpayment of wages? YES.
HELD: Labor Arbiter Pati accepted the private respondent’s bare claim that the
reason the monetary benefits received by petitioner between 1981 to 1987 were less
than minimum wage was because petitioner did not factor in the meals,
lodging, electric consumption and water she received during the period in her
computations. Granting that meals and lodging were provided and indeed
constituted facilities, such facilities could not be deducted without the employer
complying first with certain legal requirements.
Without satisfying these requirements, the employer simply cannot deduct the value
from the employee’s wages:
1. Proof must be shown that such facilities are customarily furnished by the
trade.
2. The provision of deductible facilities must be voluntarily accepted in writing
by the employee.
3. Facilities must be charged at fair and reasonable value.
IN THIS CASE: Requirements were not met in the instant case.
1. Private respondent failed to present any company policy or guideline to
show that the meal and lodging are part of the salary.
2. He failed to provide proof of the employee’s written authorization and he
failed to show how he arrived at the valuations.
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in
his decision were figures furnished by the private respondent’s own accountant,
without corroborative evidence.
More significantly, the food and lodging, or the electricity and water consumed by the
petitioner were not facilities but supplements.
A benefit or privilege granted to an employee for the convenience of the
employer is not a facility. The criterion in making a distinction between the two not
so much lies in the kind (food, lodging) but the purpose. Considering, therefore, that
hotel workers are required to work different shifts and are expected to be available at
various odd hours, their ready availability is a necessary matter in the operations of
a small hotel, such as the private respondent’s hotel.
It is therefore evident that the petitioner is entitled to the payment of the deficiency in
her wages equivalent to the full wage applicable from May 13, 1988 up to the date of
her illegal dismissal.
Barred by prescription. Claims covering the period of OCtober 1987 up to the time
of the filing of the cse on May 13, 1988.
Special Steel Products Inc. v. Villareal and So Special Steel has no legal authority
to withhold the 13th month pay and other benefits of respondents.
FACTS: Special Steel Products, Inc., petitioner, is a domestic corporation engaged
in the principal business of importation, sale, and marketing of BOHLER steel
products. Lutgardo C. Villareal and Frederick G. So, respondents, worked for
petitioner as assistant sales manager and salesman, respectively.
Sometime in May 1993, Villareal obtained a car loan from the Bank of Commerce,
with petitioner as surety, as shown by a continuing suretyship agreement and
promissory note wherein they jointly and severally agreed to pay the bank
P786,611.60 in 72 monthly installments.
On January 15, 1997, Villareal resigned and thereafter joined HiGrade Industrial and
Technical Products, Inc. as executive vice president.
Sometime in August 1994, petitioner sponsored respondent Frederick So to attend
a training course in Kapfenberg, Austria conducted by BOHLER, petitioner’s
principal company.
When respondent returned nine months thereafter, petitioner directed him to sign a
memorandum providing that BOHLER requires trainees from Kapfenberg to continue
working with petitioner for a period of three (3) years after the training.

Otherwise, each trainee shall refund to BOHLER $6,000.00 (US dollars) by way
of set-off or compensation. On January 16, 1997 or 2 years and 4 months after
attending the training, respondent resigned from petitioner.
Immediately, petitioner ordered respondents to render an accounting of its
various Christmas giveaways they received. These were intended for distribution
to petitioner’s customers. In protest, respondents demanded from petitioner payment
of their separation benefits, commissions, vacation and sick leave benefits, and
proportionate 13th month pay. But petitioner refused and instead, withheld their 13th
month pay and other benefits.
ACTION FILED: On April 16, 1997, respondents filed with the Labor Arbiter a
complaint for payment of their monetary benefits.
ISSUE: May an employer withhold its employees’ wages and benefits as lien to
protect its interest as a surety in the latter’s car loan and for expenses incurred in a
training abroad? NO.
RULING: Article 116 of the Labor Code, as amended, provides:
ART. 116. Withholding of wages and kickbacks prohibited It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages (and benefits)
of a worker or induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other means whatsoever without the worker’s consent.
The above provision is clear and needs no further elucidation. Indeed, Special Steel
has no legal authority to withhold respondents’ 13th month pay and other benefits.
What an employee has worked for, his employer must pay.
DOCTRINE: Thus, an employer cannot simply refuse to pay the wages or benefits of
its employee because:
1. he has either defaulted in paying a loan guaranteed by his employer; or
2. violated their memorandum of agreement; or
3. failed to render an accounting of his employer’s property.
Article 2071, inapplicable in the case of Villareal Nonetheless, petitioner, relying on
Article 2071 contends that the right to demand security and obtain release from the
guaranty it executed in favor of Villareal may be exercised even without initiating a
separate and distinct action. There is no guaranty involved herein and, therefore,
the provision of Article 2071 does not apply.
A guaranty is distinguished from a surety in that a guarantor is the insurer of the
solvency of the debtor and thus binds himself to pay if the principal is unable to pay,
while a surety is the insurer of the debt, and he obligates himself to pay if the principal
does not pay.
Based on the above distinction, it appears that the contract executed by petitioner
and respondent Villareal (in favor of the Bank of Commerce) is a contract of
surety. In fact, it is denominated as a continuing suretyship agreement.
Hence, Special Steel could not just unilaterally withhold respondent’s wages or
benefits as a preliminary remedy under Article 2071. It must file an action against
Villareal. Thus, the Appellate Court aptly ruled that petitioner may only protect its
right as surety by instituting an action to demand a security.
Articles 1278 and 1279, in the case of So. As to So, petitioner maintains that there
can be a set-off or legal compensation between them. Consequently, it can
withhold his 13th month pay and other benefits. For legal compensation to take place,
the requirements set forth in Articles 1278 and 1279 of the Civil Code must be
present.
In the present case, set-off or legal compensation cannot take place between
petitioner and So because they are not mutually creditor and debtor of each
other.
A careful reading of the Memorandum dated August 22, 1994 reveals that the lump
sum compensation of not less than US $6,000.00 will have to be refunded by each
trainee to BOHLER, not to petitioner.
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CONCLUSION: In fine, we rule that petitioner has no legal right to withhold
respondents’ 13th month pay and other benefits to recompense for whatever amount
it paid as security for Villareal’s car loan; and for the expenses incurred by So in his
training abroad.
Five J Taxi v. NLRC Maldigan (entitled to refund of deposits) Sabsalon (not entitled
to any refund, he even has a debt to Five J Taxi)
FACTS: Domingo Maldigan and Gilberto Sabsalon were hired by the petitioners
as taxi drivers and, as such, they worked for 4 days weekly on a 24-hour shifting
schedule. Aside from the daily "boundary" of P700.00 for air-conditioned taxi or
P450.00 for non-air-conditioned taxi, they were also required to pay P20.00 for car
washing, and to further make a P15.00 deposit to answer for any deficiency in
their "boundary," for every actual working day.
They eventually stopped working for the company. Sometime in 1989, Maldigan
requested petitioners for the reimbursement of his daily cash deposits for 2 years,
but herein petitioners told him that not a single centavo was left of his deposits as
these were not even enough to cover the amount spent for the repairs of the taxi he
was driving.
This was allegedly the practice adopted by petitioners to recoup the expenses
incurred in the repair of their taxicab units. When Maldigan insisted on the refund of
his deposit, petitioners terminated his services.
Sabsalon, on his part, claimed that his termination from employment was effected
when he refused to pay for the washing of his taxi seat covers.
ISSUE: WON the deposits and car wash expenses should be reimbursed by Five J
Taxi?
Deposits – YES Car Wash Expenses – NO
HELD: It can be deduced therefrom Article 114 provides the rule on deposits for loss
or damage to tools, materials or equipment supplied by the employer. Clearly, the
same does not apply to or permit deposits to defray any deficiency which the taxi
driver may incur in the remittance of his "boundary." Also, when private respondents
stopped working for petitioners, the alleged purpose for which petitioners required
such unauthorized deposits no longer existed. In other case, any balance due to
private respondents after proper accounting must be returned to them with
legal interest.
The accounting shows that from 1987-1991, Sabsalon was able to withdraw his
deposits through vales or he incurred shortages, such that he is even indebted
to petitioners in the amount of P3,448.00.
With respect to Maldigan's deposits, nothing was mentioned questioning the same
even in the present petition. We accordingly agree with the recommendation of the
Solicitor General that since the evidence shows that he had not withdrawn the same,
he should be reimbursed the amount of his accumulated cash deposits.
On the matter of the car wash payments, the labor arbiter had this to say in his
decision: "Anent the issue of illegal deductions, there is no dispute that as a matter
of practice in the taxi industry, after a tour of duty, it is incumbent upon the driver to
restore the unit he has driven to the same clean condition when he took it out, and
as claimed by Five J Taxi, private respondents were made to shoulder the expenses
for washing, the amount doled out was paid directly to the person who washed the
unit, thus we find nothing illegal in this practice, much more to consider the
amount paid by the driver as illegal deduction in the context of the law."
Consequently, private respondents are not entitled to the refund of the P20.00
car wash payments they made. It will be noted that there was nothing to prevent
private respondents from cleaning the taxi units themselves, if they wanted to save
their P20.00. Also, as the Solicitor General correctly noted, car washing after a tour
of duty is a practice in the taxi industry, and is, in fact, dictated by fair play.
Discussion When you talk about taxi drivers, at the end of their trip, they pay their
boundary. Usually, as what happened in this case, with regard to their deposit, they
remit their boundary every day. They have an additional Php15 to defray any
shortage. This is very common among drivers. This Php15 daily deposit is supposed
to answer for the shortage in boundary. In addition to that, they are also required to
give the Php20 for car wash. On the part of the Php15 deposit to defray any shortage,

the Supreme Court ruled that such is not allowed. The rule on deposits is not
applicable to this case because Article 114 refers to loss or damages that was already
incurred by the employee. Nonetheless, because the Supreme Court ruled that they
are entitled for the return of their deposits, considering that Sabsalon has already
made previous withdrawals, they are only entitled to the remaining balance. On the
other employee, there was no proof that any withdrawal was made, 5J Taxi was
required to return the said cash deposits to Maldigan.
What about the Php 20 car wash payments? It will be noted that there was nothing
to prevent the private respondents in cleaning the taxi themselves if they want to save
the Php 20. However, it must be noted that car washing after a tour of duty is a
practice in the taxi industry. The Php 20 carwash payment was validly paid.
Therefore, there was no obligation on the part of the employer to return the car wash
payments. When you talk about loss or damages, the amount of deduction must be
the value of the thing at the time it was lost or damaged and not the purchase price.
SHS Perforated v. Diaz There was unlawful withholding of Diaz’s salary. Contrary to
Article 116 and not falling under the exceptions in Article 113.
FACTS: SHS Perforated Materials, Inc. (SHS) – a start-up corporation organized and
existing under the laws of the Republic of the Philippines and registered with the
Philippine Economic Zone Authority.
Hartmannshenn – president of SHS, German National
Schumacher – treasurer and board of directors of SHS
Diaz – Manuel F Diaz
Manuel F. Diaz was hired by SHS as Manager for Business Development on
probationary status from July 18, 2005 to January 18, 2006, with a monthly salary of
₱100,000.00.
In addition to his responsibilities mentioned in his Contract of Probationary
Employment, Diaz was also instructed by Hartmannshenn to report to the SHS office
and plan at least two (2) days every work week to observe technical processes
involved in the manufacturing of perforated materials, and to learn about the products
of the company, which Diaz was hired to market and sell.
During Diaz’s employment, Hartmannshenn was often abroad and, because of
business exigencies, his instructions to Diaz were either sent by electronic mail or
relayed through telephone or mobile phone. When he would be in the Philippines, he
and the Diaz held meetings. As to Diaz’s work, there was no close supervision by
him.
During meetings with the Diaz, Hartmannshenn expressed his dissatisfaction over
Diaz’s poor performance. Diaz allegedly failed to make any concrete business
proposal or implement any specific measure to improve the productivity of the SHS
office and plant or deliver sales except for a meager ₱2,500.00 for a sample product.
On November 16, 2005, in preparation for his trip to the Philippines, Hartmannshenn
tried to call Diaz on his mobile phone, but the latter failed to answer. On November
18, 2005, Hartmannshenn arrived in the Philippines from Germany, and on November
22 and 24, 2005, notified Diaz of his arrival through electronic mail messages and
advised him to get in touch with him.
On November 29, 2005, Hartmannshenn instructed its Account Services Department
head to not release Diaz’s salary. The next day, on November 30, 2005, Diaz served
on SHS a demand letter and a resignation letter. His letter stated: His resignation
from SHS effective is immediately upon receipt of his due and demandable salary
which has been illegally withheld. That it was due to these illegal and unfair labor
practices that he offers his resignation
Petitioner’s Contentions: Diaz was unable to give a proper explanation for his
behavior. Hartmannshenn then accepted Diaz’s resignation and informed him that
his salary would be released upon explanation of his failure to report to work, and
proof that he did, in fact, work for the period in question. Diaz agreed to these "exit"
conditions through electronic mail. Instead of complying with the said conditions,
however, Diaz sent another electronic mail message to Hartmannshenn and
Schumacher on December 1, 2005, appealing for the release of his salary.
NLRC: The withholding of Diaz’s salary was said to be a valid exercise of
management prerogative. The act was deemed justified as it was reasonable to
demand an explanation for failure to report to work and to account for his work
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accomplishments. The NLRC held that the Diaz voluntarily resigned as evidenced by
the language used in his resignation letter and demand letters.
ISSUE:
1. WON the withholding of Diaz’s salary was a valid exercise of management
prerogative. – NO.
2. WON the Diaz has been constructively dismissed. – YES.
3. WON the Diaz should be awarded separation pay equivalent to at least one month
pay in lieu of reinstatement, full backwages, and other privileges and benefits. – YES.
4. WON Hartmanshen and Schumacher may be held solidarily and personally liable
with SHS for the payment of monetary award to Manuel. – NO.
1ST ISSUE : Withholding of Salaries Not a Management Prerogative
Management prerogative refers "to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of work.
"Although management prerogative refers to "the right to regulate all aspects of
employment," it cannot be understood to include the right to temporarily
withhold salary/wages without the consent of the employee. To sanction such
an interpretation would be contrary to Article 116 of the Labor Code, which provides:
ART. 116. Withholding of wages and kickbacks prohibited. – It shall be unlawful for
any person, directly or indirectly, to withhold any amount from the wages of a worker
or induce him to give up any part of his wages by force, stealth, intimidation, threat
or by any other means whatsoever without the worker’s consent.
Any withholding of an employee’s wages by an employer may only be allowed
in the form of wage deductions under the circumstances provided in Article
113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in behalf of any
person, shall make any deduction from the wages of his employees, except:
a. In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium on
the insurance;
b. For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
c. In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor.
Absent a showing that the withholding of complainant’s wages falls under the
exceptions provided in Article 113, the withholding thereof is thus unlawful. Petitioner
contends that Art 116 only applies when it is established that an employee is entitled
to his salary and wages.
Was Diaz not entitled to salary because of his failure to report to work and
failure to account for his whereabouts and work accomplished during the
period in question? As can be gleaned from Diaz’s Contract of Probationary
Employment and the exchanges of electronic mail messages between
Hartmannshenn and Diaz, the latter’s duties as manager for business development
entailed cultivating business ties, connections, and clients in order to make sales.
Such duties called for meetings with prospective clients outside the office rather than
reporting for work on a regular schedule. In other words, the nature of Diaz’s job did
not allow close supervision and monitoring by petitioners. Neither was there any
prescribed daily monitoring procedure established by petitioners to ensure
that Diaz was doing his job.
Therefore, granting that Diaz failed to answer Hartmannshenn’s mobile calls and to
reply to two electronic mail messages and given the fact that he admittedly failed to
report to work at the SHS plant twice each week during the subject period, such

cannot be taken to signify that he did not work from November 16 to November 30,
2005.
Although it cannot be determined with certainty whether Diaz worked for the entire
period from November 16 to November 30, 2005, the consistent rule is that if doubt
exists between the evidence presented by the employer and that by the employee,
the scales of justice must be tilted in favor of the latter in line with the policy mandated
by Articles 2 and 3 of the Labor Code to afford protection to labor and construe doubts
in favor of labor. For petitioners’ failure to satisfy their burden of proof, Diaz is
presumed to have worked during the period in question and is, accordingly,
entitled to his salary. Therefore, the withholding of Diaz’s salary by petitioners is
contrary to Article 116 of the Labor Code and, thus, unlawful.
2 ND ISSUE : Diaz was constructively dismissed. There is constructive dismissal
if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him
except to forego his continued employment. It exists where there is cessation of work
because continued employment is rendered impossible, unreasonable or unlikely, as
an offer involving a demotion in rank and a diminution in pay.
What made it impossible, unreasonable or unlikely for Diaz to continue working
for SHS was the unlawful withholding of his salary. For said reason, he was
forced to resign. It is of no moment that he served his resignation letter on November
30, 2005, the last day of the payroll period and a non-working holiday, since his salary
was already due him on November 29, 2005, being the last working day of said
period.
In fact, he was then informed that the wages of all the other SHS employees were
already released, and only his was being withheld. In this case, the withholding of
Diaz’s salary does not fall under any of the circumstances provided under Article 113.
Neither was it established with certainty that Diaz did not work from November 16 to
November 30, 2005. Hence, the unlawful withholding of Diaz’s salary amounts to
constructive dismissal.
3 RD ISSUE Diaz is entitled to separation pay. Diaz was constructively dismissed
and, therefore, illegally dismissed. Although Diaz was a probationary employee,
he was still entitled to security of tenure. Section 3 (2) Article 13 of the Constitution
guarantees the right of all workers to security of tenure.
This Court has held that probationary employees who are unjustly dismissed during
the probationary period are entitled to reinstatement and payment of full backwages
and other benefits and privileges from the time they were dismissed up to their actual
reinstatement.
Diaz’s reinstatement, however, is no longer feasible as antagonism has caused a
severe strain in their working relationship. Under the doctrine of strained relations,
the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. Payment
liberates the employee from what could be a highly oppressive work environment,
and at the same time releases the employer from the obligation of keeping in its
employ a worker it no longer trusts. Therefore, a more equitable disposition would be
an award of separation pay equivalent to at least one month pay, in addition to his
full backwages, allowances and other benefits.
4 TH ISSUE. Hartmanshenn and Schumacher cannot be held personally liable
Corporate directors and officers are only solidarily liable with the corporation for
termination of employment of corporate employees if effected with malice or in bad
faith. Bad faith does not connote bad judgment or negligence; it imports dishonest
purpose or some moral obliquity and conscious doing of wrong. To sustain such a
finding, there should be evidence on record that an officer or director acted
maliciously or in bad faith in terminating the employee.
Hartmanshenn withheld Diaz’s salary in the sincere belief that Diaz did not work for
the period in question and was, therefore, not entitled to it. There was no dishonest
purpose or ill will involved as they believed there was a justifiable reason to withhold
his salary. Thus, although they unlawfully withheld Diaz’s salary, it cannot be
concluded that such was made in bad faith. Accordingly, corporate officers,
Hartmannshenn and Schumacher, cannot be held personally liable for the corporate
obligations of SHS.
What about the defense of SHS here that it cannot be proven that the Diaz
worked for that period, for him to be entitled to the wages during the said
payroll period? The SC said that the nature of the Diaz’s job did not allow close
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supervision and monitoring by petitioners. Neither was there any prescribed daily
monitoring procedure established by petitioners to ensure that Diaz was doing his
job.
Therefore, granting that Diaz failed to answer Hartmannshenn’s mobile calls and to
reply to two electronic mail messages and given the fact that he admittedly failed to
report to work at the SHS plant twice each week during the subject period, such
cannot be taken to signify that he did not work from November 16 to November 30,
2005.
What were the evidences shown by the Diaz here that he exerted effort during
his employment? He presented the electronic mail reports sent to Hartmannshenn
and the receipt presented by Diaz as evidence of his having worked during the
subject period, as well as eight notarized letters of prospective clients vouching for
meetings they had with Diaz during the subject period. The consistent rule is that if
doubt exists between the evidence presented by the employer and that by the
employee, the scales of justice must be tilted in favor of the latter in line with the
policy mandated by Articles 2 and 3 of the Labor Code to afford protection to labor
and construe doubts in favor of labor.
Discussion In this case, the withholding of the salary of the petitioner for the
remaining period was not valid, as it is contrary to Article 116 of the Labor Code.
Also, citing that any form of withholding may only be allowed in the case of wage
deductions as provided under Article 113. Considering that there was no compliance
with the requirements under Article 113, the withholding thereof was considered as
unlawful.
On the allegation that there was no proof that the respondent here worked during the
said payroll period, the evidence shown by SHS here were not enough. On the other
hand, respondent was able to prove (that he worked). There were even notarized
letters that he conducted meetings with prospective clients.
And then, applying the provisions of the Labor Code that in case of doubt between
the evidence presented by the employer and that by the employee, the scales of
justice must be tilted in favor of the employee. TAKE NOTE: If you look at the
provisions – Article 114, 115, 116, and 117, these are still in connection with Article
113, pertaining to Wage Deductions.
Solas v. Power & Telephone Supply There was valid withholding of his salary as
partial payment of his debt.
FACTS: Herbert Solas entered into a contract of employment with Power and
Telephone Supply Philippines, Inc., to be the Assistant Sales Manager of the
company with a monthly salary of P21,600.00, excluding bonuses and commission.
POWER & TELEPHONE SUPPLY granted petitioner Herbert Solas and Franklin D.
Quiachon an amount of P85,418.00 each, corresponding to their sales commission
from the month of January to June of 1998. From that time up to the present, no
other sales commission was ever again given to them.
On 04 February 2000, Solas requested for the release of his alleged commission
which had already accumulated since July of 1998. However, in an inter-office
memorandum, said request was denied, and instead, the petitioner was even
mandated to settle his outstanding obligation with the company.
On 07 February 2000, Solas likewise received another memorandum requiring him
to return the issued cellular phone, car and key to his office, which he allegedly all
complied. Solas averred that these were all forms of harassment including the non-
payment of his salary for the month of February 2000, and onwards.
Hence, on 15 February 2000, he instituted a case for illegal constructive
dismissal, recovery of 10% sales commission on gross sales, and attorney's fees.
ISSUE: Was there a valid reason to withhold his salary for the month of February
2000? YES.
HELD: There was valid reason for respondents' withholding of petitioner's salary for
the month of February 2000. Solas does not deny that he is indebted to his employer
in the amount of around P95,000.00. Power and Telephone Supply Philippines, Inc.
explained that petitioner's salary for the period of February 1-15, 2000 was applied
as partial payment for his debt and for withholding taxes on his income; while

for the period of February 15-28, 2000, Solas was already on absence without leave,
hence, was not entitled to any pay.
Company Car. The company car was actually issued to Franklin D. Quiachon
although petitioner and another employee, Nelson Gatbunton, may borrow the car for
company operations with the consent of Quiachon as stated in an office
memorandum dated March 10, 1999. Since Nelson Gatbunton had to attend official
business in Clark, said employee was then given use of the company car.
Office Key. The taking of the office key from petitioner was also justified, as
respondents stated that the company's office consisted only of one big room without
separate or individual offices, so it was only the main door that required a key. The
key to the office door could be borrowed by any employee from a co-employee in
possession thereof in case of overtime or weekend work, but not a single employee
had the exclusive use of the key to the office.
Cellphone. Respondents maintain that said phone remained the property of the
company, and it became company policy for its employees to pay for personal calls.
When petitioner's debts and advances accumulated, and he showed no intention of
paying for them despite receipt of bonuses, the company had to take measures to
regulate the use of the company cellphones.
Solas never refuted respondents' explanations for withholding his salary and the
reasons why he was required to return the company car, key and cellphone.
Verily, the only conclusion that may be reached is that respondents' explanations are
truthful and, based thereon, the NLRC and the CA committed no grave abuse of
discretion in ruling that there was no constructive dismissal in this case.
Commissions. Lastly, as to petitioner's claim for commissions, the NLRC and the
CA were correct in not sustaining the award thereof by the LA. It must be borne in
mind that there is no law which requires employers to pay commissions; thus, it is
incumbent upon petitioner to prove that that there is indeed an agreement between
him and his employer for payment of the same. The employment certificate was
insufficient to prove that Solas was entitled to his claim for sales commissions since
it does not give the details as to the conditions for payment of the same or the agreed
percentage.
Article 118. Retaliatory measures. It shall be unlawful for an employer to
refuse to pay or reduce the wages and benefits, discharge or in any manner
discriminate against any employee who has filed any complaint or instituted any
proceeding under this Title or has testified or is about to testify in such
proceedings.
Article 119. False reporting. It shall be unlawful for any person to make any
statement, report, or record filed or kept pursuant to the provisions of this Code
knowing such statement, report or record to be false in any material respect.
Article 118: It shall be unlawful to do the following against any employee who filed
a complaint or has testified:
1) Refuse to pay
2) Reduce the wages and benefits
3) Discharge or in any manner discriminate
If the employee is dismissed = illegal dismissal
Article 248 on unfair labor practice in connection with labor relations
Article 119 - Most common false reporting is making an employee sign a blank
payroll. Why is tit blank? The employee would fill it up to show that they are
complying with the payment of minimum wages.
Payroll: Period, regular pay, hours worked. If there are additional pays, they shall
also be reflected on the payroll.
1) We emphasize what is written in the Labor Code
2) Take into consideration the IRRs
3) Decided cases
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Liability for wages and benefits in case of change of corporate personality.
There are no specific provision under the Labor Code because they deal more
on obligations and contracts. GR: A corporation has a personality which is separate
and distinct from its stockholders or directors.
Under Corporation Law, there is a Doctrine of Piercing the x x x x
RA 6727
WAGE RATIONALIZATION ACT
Amended the original Articles 120 and 127 of the Labor Code. RA 6727 was an act
to rationalize wage policy determination by establishing the mechanism and proper
standards therefor, amending for the purpose Article 99 and incorporating Articles
120 to 127 into PD 442 (Labor Code of the Philippines). It fixes wage rates,
providing wage incentives or industrial disperse to the countryside and for other
purposes.
With RA 6727, two bodies were created.
1. National Wage and Productivity Commission (NWPC) – It is the bigger
body. However, it does not issue wage orders. At the very least, it reviews wage
orders. It is not required for NWPC to review the wage orders.
2. Regional Tripartite Wage and Productivity Board (RTWPB) – It issues
wage orders covering the respective regions.
When we talk about minimum wage, it differs per region.
Two Ways of Adjusting the Minimum Wage
(1) Floor Wage - involves the fixing of determinate amount that would be added to
the prevailing statutory minimum wage
(2) Salary Ceiling Method - where the wage adjustment is applied to employees
receiving a certain denominated salary ceiling
Difference:
Employees Confederation v. NWPC The delegation to fix the wages per region
through the RTWPB is valid.
FACTS: ECOP questioned the validity of the wage order (October 23, 1990) issued
by the RTWPB, pursuant to the authority granted by RA 6727. The wage order
increased the minimum wage by P17.00 daily in the National Capital Region.
The wage order is applied to all workers and employees in the private sector with an
increase of P 17.00, including those who are paid above the statutory wage rate.
ECOP appealed with the NWPC but it dismissed the petition. The Solicitor General
posits that the Board upon the issuance of the wage order fixed minimum wages
according to the Salary Ceiling Method. Petitioners insist that through RA 6727, the
power of RTWPB was delegated to grant minimum wage adjustments and in the
absence of authority, it can only adjust floor wages.
ECOP: The grant of an across-the-board wage increase to workers already being
paid more than existing minimum wage rates is in excess of the Board’s authority.
They may only prescribe minimum wages not determine salary ceilings.
SolGen: The Board did not grant additional or other benefits to workers and
employees but rather fixed minimum wages according to the “salary-ceiling method”.
ISSUE: Whether or not the wage order issued by RTWPB dated October 23, 1990 is
valid.
HELD: The Court agrees with the Solicitor General. It noted that there are two ways
in the determination of wage, these are floor wage method and salary ceiling
method. The floor wage method involves the fixing of determinate amount that would
be added to the prevailing statutory minimum wage, while the salary ceiling method
involves the wage adjustment is applied to employees receiving a certain
denominated salary ceiling.
RA 6727 gave statutory standards for fixing the minimum wage.

Art. 124. Standards/Criteria for Minimum Wage Fixing. — The regional
minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of living
necessary for the health, efficiency and general well-being of the employees within
the framework of the national economic and social development program. In the
determination of such 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;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;
(i) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of
economic and social development.
The wage order was not acted in excess of board’s authority. The law gave
reasonable limitations to the delegated power of the board.
RA 6727 is meant to rationalize wages, by having permanent boards to decide wages
rather than leaving wage determination to Congress year after year and law after law.
Discussion In this case, the SC clarified that the delegation to fix the wages per
region through the RTWPB is valid. It was through an act of Congress.
1st Wage Order – prescribed the Floor Wage Method; it fixes the determinate amount
that would be added to the prevailing statutory minimum wage (add 17 to the
prevailing minimum wage)
Salary Ceiling Method - even if above the prevailing minimum wage rate, it would still
apply to you within that ceiling (up to 125)
With regard to the issue of the wage order here, the first wage order in the NCR was
increasing the minimum wage by ₱17.00. The subsequent wage order clarified that
even those who were already above the minimum wage, as long as the minimum
wage was 125.00, they shall also receive an increase of 17.00 per day.
NOTE: The advantage of the salary ceiling method is it reduces disputes arising from
wage distortion, which often happens if you have the floor wage method.
Floor Wage Method was applied in the recent wage order here in Region 11
(increasing the minimum wage). It focused only on a fixed amount without mentioning
any ceiling with regard to those who were already being earned by wage workers.
However, the increasing trend used is the second mode, which is the Salary
Ceiling Method.
Metrobank v. NLRC There was wage distortion and such shall be corrected using
the formula by the dissenting opinion of Bonto-Perez.
FACTS: The Metropolitan Bank entered into a CBA with the Union, granting a
monthly P900 wage increase to regular employees. Subsequently, the bank,
pursuant to RA 6727, gave the P25 increase per day or P750 a month to its
probationary employees and to those who had been promoted to regular or
permanent status but whose daily rate was P100 and below. The bank however
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refused to give the same increase to its regular employees who were receiving
more than P100 per day and recipients of the P900 CBA increase.
The Union demanded from the bank the correction of the alleged wage distortion. It
contended that the bank's implementation of RA 6727 resulted in the
categorization of the employees into two groups:
a. probationary employees and regular employees receiving P100 or less a day,
and
b. the regular employees receiving over P100 a day. Thus, between the two
groups, there emerged a substantially reduced salary gap.
BANK: Averred that its implementation of RA 6727 did not constitute a distortion
because only 143 employees or 6.8% of the bank's population of a total of 2,108
regular employees benefited.
The Union and the Bank ultimately agreed to refer the issue for compulsory arbitration
to the NLRC. The Labor Arbiter ruled in favor of the union and ordered the Bank to
restore to its employees the P900 CBA wage gap they used to enjoy over non-regular
employees by granting them a P750.00 monthly increase. On appeal, the NRLC
reversed the decision of the Labor Arbiter and ruled that there is a wage distortion.
ISSUES:
1 Was there a wage distortion? (YES)
2 Can the bank be compelled to add on legislative increases without regard to what
is already given to the employees? (NO)
HELD: Wage Distortion Results In Elimination Or Severe Contraction Of
Intentional Quantitative Differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the distinctions
embodied in such wage structure based on skills, length of service, or other logical
bases of differentiation.
In mandating an adjustment, RA 6727 did not require that there be an elimination or
total abrogation of quantitative wage or salary differences. A severe contraction
thereof is enough such as in this case where the contraction between personnel
groupings comes close to 83% which can be considered severe. The intention of the
law and the agreement of the parties along with the often repeated rule that all doubts
in the interpretation and implementation of labor laws should be resolved in favor of
labor, must always prevail and be given effect.
Employers Cannot Be Compelled to Add On Legislative Increases in Salaries
Without Regard to What They Are Already Paying to Their Employees The
intentional quantitative differences in wage among employees of the bank have been
set by the CBA to about P900 per month. However, giving the employees an across-
the-board increase of P750 as ruled by the Labor Arbiter may not be conducive to
the policy of encouraging "employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases prescribed by statute or
administrative regulation," particularly in this case where both Republic Act 6727 and
the CBA allow a credit for voluntary compliance.
To compel employers simply to add on legislative increases in salaries or
allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutory prescribed
minimum rates of increases. Clearly, this would be counter-productive so far as
securing the interests of labor is concerned.
Metro Transit v. NLRC The distortion was rectified on 17 April (rank-and-file) and 1
December (supervisory) 1991.
FACTS: Metro is the operator and manager of the Light Railway Transit System in
Metro Manila. It employs close to 1,000 rank-and-file and over 200 supervisory
employees. SEAM is a union composed of supervisory employees of petitioner
Metro. In May 1989, SEAM was certified as the sole bargaining unit for the
supervisory employees of Metro.
On 1 December 1989, the first collective bargaining agreement between petitioner
Metro and private respondent SEAM took effect. Prior to December 1989, Metro
had a CBA only with its rank-and-file employees. During the period when no CBA
 51
governed the terms and conditions of employment between Metro and its supervisory ISSUE:
employees, whenever rank-and-file employees were paid a statutorily mandated
salary increase, supervisory employees were, as a matter of practice, also paid the (1) Was there a Wage Distortion? (YES)
same amount plus P50.00.
(2) Assuming that a distortion existed, was it rectified? (YES)
On 17 April 1989, Metro paid its rank-and-file employees a salary increase of P500.00
per month in accordance with the terms of their CBA. Metro, however, did not HELD:
extend a corresponding salary increase to its supervisory employees. On 1
December 1989, Metro, in compliance with its CBA with SEAM, paid its supervisory
(1) Was there a Wage Distortion? Yes.
employees a salary increase of P800.00 per month.
The Court finds and so holds that a wage distortion did occur when the salaries of
On 17 April 1990, Metro paid its rank-and-file and supervisory employees a P600.00
rank-and-file employees were increased by P500.00 per month on 17 April 1989 as
monthly increase. The payment thus made to rank-and-file employees was in
stipulated in their CBA and no corresponding increase was paid to the supervisory
compliance with the second year salary increase provided in their CBA. On the other
employees. This fact was admitted by Atty. Virgilio C. Abejo, counsel for petitioner
hand, the P600.00 per month paid to supervisory employees was advanced from their
Metro, during the oral hearing and Metro is bound by that admission. In addition, Atty.
second year salary increase, provided in their CBA, of P1,000.00 per month effective
Abejo explained that his client, as a matter of practice, granted its supervisory
1 December 1990. On 1 December 1990, Metro paid its supervisory employees the
employees a salary increase (and a premium) whenever it paid its rank-and-file
remaining balance of P400.00 per month in addition to the P600.00 a month it had
employees a salary increase.
earlier started to pay.
(2) Assuming that a distortion existed, was it rectified? Yes.
The third year salary increases due rank-and-file and supervisory employees were
paid on 17 April and 1 December 1991, respectively, as scheduled in their
corresponding CBAs. After careful examination of the provisions of the CBA between Metro and SEAM, in
particular the provisions relating to anniversary salary increases every 1 December
beginning 1989 to 1991, we believe and so hold that together with the increase of
On 24 March 1992, private respondent SEAM filed a Notice of Strike before the
P550.00 referred to in Part I above, those provisions will have adequately rectified
National Conciliation and Mediation Board ("NCMB") charging petitioner Metro with
the wage distortion which arose in respect of rank-and-file and supervisory
(a) discrimination in terms of wages; (b) underpayment of salary increase per CBA
employees.
for 1990 and/or adjustment of salaries for correction of disparity/inequity in pay with
rank-and-file employees and (c) harassment and demotion of union officers.
Conciliation and mediation efforts before the NCMB failed. On 23 June 1992, acting The CBA of supervisory employees granted them an aggregate monthly
on a petition filed by Metro, the Secretary of Labor assumed jurisdiction over the labor increase of P2,800.00 over three (3) years
dispute and certified the same to public respondent NLRC for same compulsory
arbitration. CBA Effectivity

NLRC: Metro was ordered to pay the amount of P550.00 per month wage increase Increase Date Amount
effective April 17, 1989 and onwards to each supervisory employee and likewise pay
the sum of P600.00 per month representing underpayment in the correction of Year I 1-Dec-89 800.00
inequities in pay or underpayment of CBA wage increase effective December 1, 1990
and onwards. Year Ii 1-Dec-90 1,000.00

PET: Metro denies that it underpaid its supervisory employees. Metro maintains that: Year III 1-Dec-91 1,000.00

(a) the first increase of P800.00 effective 1 December 1989 as provided in its CBA
with SEAM is higher than the P500.00 increase paid its rank-and-file employees; Upon the other hand, the CBA of the rank-and-file employees granted them
monthly increases totalling P1,850.00 also over three (3) years:
(b) that assuming arguendo a distortion in pay still existed, the same was corrected
when the majority of the supervisory employees, in a referendum, voted to accept the
CBA Effectivity
advance payment of P600.00 out of the scheduled CBA increase of P1,000.00
effective 1 December 1990;
Increase Date Amount
(c) it was actually SEAM who had proposed the advance payment of P600.00 from
Year I 17-Apr-89 500.00
their scheduled second year increase of P1,000.00;
Year Ii 17-Apr-90 600.00
(d) SEAM had further agreed that, come 1 December 1990, only the balance of
P400.00 would have to be paid to supervisory employees; and Year III 17-Apr-91 750.00
(e) payment by Metro of the balance of P400.00 on 1 December 1990 was merely its
compliance with the scheduled second year increase aligned with Metro's After all the above listed salary increases had become effective, the last being on 1
subsequent agreement with SEAM to advance the effectivity date of the first P600.00. December 1991, supervisory employees as a group were receiving P950.00
more per month than rank-and-file employees as a group.
RES: There is an existing wage distortion in respect of the salaries of rank-and-file
and supervisory employees was when Metro, on 17 April 1989, paid its rank-and-file Adding to this figure the amount of P550.00 per month which we in Part I have held
employees their CBA-stipulated P500.00 increase but did not grant a corresponding petitioner Metro must pay, the increase in pay of supervisory employees would
increase (and a premium) to its supervisory employees. Furthermore, the advance be P1,500.00 more per month than the increases in pay of rank-and-file
by Metro of the P600.00 on 17 April 1990 only "artificially" reduced the existing employees.
distortion. The advance was, according to SEAM, extended merely to give the
appearance of a reduction of the existing distortion in pay between the rank-and-file We consider the difference of P1,500.00 per month a significant differential that
and supervisory employees. On 1 December 1990, when supervisory employees clearly distinguishes, on the basis of pay scales, a rank-and-file employee from a
were paid the balance of P400.00 the distortion existing prior to 17 April 1990 was supervisory employee.
reinstated. SEAM claims, on top of the salary increases granted to supervisory
employees by their CBA, they should be paid the increase corresponding to the Applying the above increases to the actual salaries being received by rank-and-file
P500.00 increase given rank-andfile employees not only for 1989 but also onwards. and supervisory employees of Metro, we find that indeed the distortion caused by the
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CBA-stipulated wage increase granted rank-and-file employees on 17 April 1989 was
rectified by 1 December 1991.
The record before us does not include the actual amounts of the rank-and-file and
supervisory employees' salaries. In its position paper before the NCMB, however,
private respondent SEAM stated:
The highest salary of some rank-and-file employees at present (before adding the
CBA increase) is P4,790.00 which is higher than some supervisors with [a] salary of
P3,980.00.
Taking the above SEAM figures and adding to them the respective CBA-stipulated
increases to the salary of the highest paid rank-and-file employee and to the lowest
paid supervisory employee, plus the P550.00 in wage already held due to all
supervisory employees as of 17 April 1989, we find that the salary of the lowest paid
supervisory employee was, by 1 December 1991, P690.00 more than the salary of
the highest paid rank-and-file employee.
The difference in monthly wage scales of P690.00 clearly and substantially
distinguishes, on the basis of pay, a rank-and-file employee from a supervisory
employee. That differential would, of course, be significantly greater for average rank-
and-file employees receiving a salary less than P4,790.00 and for average
supervisory employees receiving a salary greater than P3,980.00
Discussion Is it required that any correction of the wage distortion must result
to the same gap between two different levels as it was before any wage
increase? NO. It is not required to maintain the same historical gap – the gap prior
to the wage increase. What is essential is that there must be a substantial gap
between those two levels despite the fact that there is a wage increase. In this case,
it is not necessary that you would maintain the gap between these two levels in
connection to wage rate.
Should a wage distortion exist, there is no legal requirement that in the rectification
of that distortion by re-adjustment of the wage rates of the differing classes of
employees, the gap which had previously or historically existed be restored in
precisely the same amount. In other words, correction of a wage distortion may be
done by reestablishing a substantial or significant gap (as distinguished from the
historical gap) between the wage rates of the differing classes of employees.
In this case, it was true that there was a wage distortion when an increase was given
to the rank-and-file employees but not to the supervisory employees. Take note that
later on, in December, there was already an increase given to the latter.
The Court ruled that there was indeed a distortion caused by the CBA-stipulated
wage increase granted to the rank-and-file employees on 17 April 1989, but this was
subsequently rectified by 1 December 1991. The additional payments corrected the
wage distortion. Liability was between April to December. NASIP
Ilaw at Buklod v. NLRC
FACTS: The union known as Ilaw at Buklod Ng Manggagawa (IBM) said to represent
4,500 employees of San Miguel Corporation, more or less, working at the various
plants, offices, and warehouses located at NCR presented to the company a
"demand" for correction of the significant distortion in the workers' wages.
In that demand, the Union explicitly invoked Section 4 (d) of RA 6727 which reads
as follows: Where the application of the increases in the wage rates under this
Section results in distortions as defined under existing laws in the wage structure
within an establishment and gives rise to a dispute therein, such dispute shall first
be settled voluntarily between the parties and in the event of a deadlock, the same
shall be finally resolved through compulsory arbitration by the regional branches
of the National Labor Relations Commission having jurisdiction over the workplace.
ISSUE: Whether or not the strike is legal in the resolution of wage distortion? No.
HELD: The strike involving the issue of wage distortion is illegal as a means of
resolving it. The legality of these activities is usually dependent on the legality of the
purposes sought to be attained and the means employed therefore. It goes without
saying that these joint or coordinated activities may be forbidden or restricted by law
or contract. In the instance of "distortions of the wage structure within an
establishment" resulting from "the application of any prescribed wage increase by
virtue of a law or wage order," Section 3 of Republic Act No. 6727 prescribes a
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specific, detailed and comprehensive procedure for the correction thereof, thereby
implicitly excluding strikes or lockouts or other concerted activities as modes of
settlement of the issue.
The provision states that the employer and the union shall negotiate to correct the
distortions. Any dispute arising from wage distortions shall be resolved through the
grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration.
Unless otherwise agreed by the parties in writing, such dispute shall be decided by
the voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar
days from the time said dispute was referred to voluntary arbitration. In cases where
there are no collective agreements or recognized labor unions, the employers and
workers shall endeavor to correct such distortions. Any dispute arising there from
shall be settled through the National Conciliation and Mediation Board and, if it
remains unresolved after ten (10) calendar days of conciliation, shall be referred to
the appropriate branch of the National Labor Relations Commission (NLRC). It shall
be mandatory for the NLRC to conduct continuous hearings and decide the dispute
within twenty (20) calendar days from the time said dispute is submitted for
compulsory arbitration. The pendency of a dispute arising from a wage distortion shall
not in any way delay the applicability of any increase in prescribed wage rates
pursuant to the provisions of law or Wage Order.
The legislative intent that solution of the problem of wage distortions shall be sought
by voluntary negotiation or arbitration, and not by strikes, lockouts, or other
concerted activities of the employees or management, is made clear in the
rules implementing RA 6727 issued by the Secretary of Labor and Employment
pursuant to the authority granted by Section 13 of the Act. Section 16, Chapter I of
these implementing rules, after reiterating the policy that wage distortions be first
settled voluntarily by the parties and eventually by compulsory arbitration, declares
that, "Any issue involving wage distortion shall not be a ground for a
strike/lockout." (Section 16, Chapter I, IRR)
Did the Supreme Court rule that there was wage distortion under these
circumstances? No. There is nothing in here wherein the Supreme Court said that
there was a wage distortion.
Why is this case included? This is so you would know that if there is an issue on
wage distortion, it cannot be ground for a strike. It was clearly established that the
employees conducted a strike or slowdown due to wage distortion. In fact, the
workers involved even issued a joint notice reading as follows:
IPATUPAD MUNA ANG EIGHT HOURS WORK SHIFT PANSAMANTALA HABANG
HINDI IPINATUTUPAD NG SMC MANAGEMENT ANG TAMANG WAGE
DISTORTION
A strike is not the solution when there is wage distortion. The legislative intent
that solution of the problem of wage distortions shall be sought by voluntary
negotiation or arbitration, and not by strikes, lockouts, or other concerted activities of
the employees or management, is made clear in the rules implementing RA 6727
issued by the Secretary of Labor and Employment pursuant to the authority granted
by Section 13 of the Act. While the issue here was wage distortion, it was San Miguel
who alleged that the strike or slowdown be declared illegal based on the fact that
wage distortion is not a valid ground for a strike.
Even if there was no such illegal prohibition, and even assuming the controversy
really did not involve the wage distortions caused by RA 6727, the Supreme Court
ruled that the concerted activity in question would still be illicit because contrary to
the workers' explicit contractual commitment "that there shall be no strikes,
walkouts, stoppage or slowdown of work, boycotts, secondary boycotts, refusal to
handle any merchandise, picketing, sit-down strikes of any kind, sympathetic or
general strikes, or any other interference with any of the operations of the COMPANY
during the term of their collective bargaining agreement.
What you have to remember is that if wage distortion is an issue, strike is not
a valid solution. You have the solution laid down in R.A. 6727 – voluntary
negotiation or arbitration.
Nasipit v. Nasipit Not applicable to NIASSI’s employees since only the minimum-
wage earners are entitled to the prescribed wage increase.
FACTS: Nasipit Integrated Arrastre and Stevedoring Services, Inc. (or NIASSI) is a
domestic corporation with office at Talisay, Nasipit, Agusan del Norte. Nasipit

Employees Labor Union (or Union) was the collective bargaining agent of the rank-
and-file employees of NIASSI.
The Regional Tripartite Wages and Productivity Board (or Wage Board) of Caraga
Region issued Wage Order RXIII-02 which granted an additional PhP 12 per day
cost of living allowance to the minimum wage earners in that region. In relation
to this, the Union file a complaint against NIASSI before the Department of Labor and
Employment (DOLE) Caraga Regional Office for the inspection of NIASSI’s records
and the enforcement of Wage Order. The Union alleged that NIASSI failed to
implement the wage order. However, the inspection team sent by DOLE noted that
the wage order was not applicable to NIASSI’s employees since they were already
receiving a wage rate higher than the prescribed minimum wage.
The case eventually reached to the National Conciliation and Mediation Board
(NCMB) for voluntary arbitration. The Voluntary Arbitrator Jesus Chavez rendered a
decision granting the Union’s prayer for the implementation of the wage order with
the reason that such wage order did not specifically prohibit the grant of wage
increase to employees earning above the minimum wage. Chavez also noted that
the Collective Bargaining Agreement (or CBA) between NIASSI and the Union
provides that wage increases granted by the company within one year from signing
the CBA shall not be creditable to future legally mandated wage increases.
NIASSI contented that its employees enjoy a daily wage level higher than the
minimum wage mandated by the subject wage order, as such the wage order is not
applicable. Furthermore, the interpretation of the CBA provision on wage crediting
finds no application either.
ISSUE: Whether Wage Order RXIII-02 is applicable to NIASSI’s employees who, at
the time of the issuance and effectivity of the wage order, were already receiving a
wage rate higher than the prevailing minimum wage
RULING: NO. Wage Order RXIII-02’s coverage is specific
Section 1 of WO RXIII-02, an Section 1(a) of the IRR provides the Coverage which
states that “The minimum wage rates prescribed under the Order shall apply to the
minimum wage earners in the private sector regardless of their position, designation
or status and irrespective of the method by which their wages are paid.”
Moreover, Section 1(c) of the IRR provides that “Workers and employees who, prior
to the effectivity of the Order were receiving a basic wage rate per day or its monthly
equivalent of more than those prescribed under the Order, may receive wage
increases through the correction of wage distortions in accordance with Section 1,
Rule IV of this Rules.
Under the principle of expressio unius est exclusio alterius, the express mention of
one excludes all others. The wage order is specific enough to cover only minimum
wage earners. Necessarily excluded are those receiving rates above the prescribed
minimum wage. The only situation when employees receiving a wage rate higher
than that prescribed by the Wage Order may still benefit from such order is through
the correction of wage distortions.
Authority of RTWPB
Moreover, as discussed in Metropolitan Bank and Trust Company, Inc. vs National
Wages and Productivity Commission:
R.A. No. 6727 declared it a policy of the State to rationalize the fixing of minimum
wages and to promote productivity improvement and gain-sharing measures to
ensure a decent standard of living for the workers and their families; to guarantee the
rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industrial dispersal; and to allow business and
industry reasonable returns on investment, expansion and growth.
In line with its declared policy, R.A. No. 6727 created the NWPC, vested with the
power to prescribe rules and guidelines for the determination of appropriate minimum
wage and productivity measures at the regional, provincial or industry levels;
and authorized the RTWPB to determine and fix the minimum wage rates applicable
in their respective regions, provinces, or industries therein and issue the
corresponding wage orders, subject to the guidelines issued by the NWPC. Pursuant
to its wage fixing authority, the RTWPB may issue wage orders which set the daily
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minimum wage rates, based on the standards or criteria set by Article 124 of the
Labor Code.
Interpretation of the CBA Provision
Furthermore, the Union’s reliance on the above quoted CBA provision and on the
flawed arbitrator’s case disposition is really misplaced. Consider that in his decision,
Chavez, after admitting that NIASSI’s employees were receiving a wage rate higher
than the prescribed minimum wage, proceeded to fault NIASSI for not presenting
evidence to show that the overage or excess resulted from general wage increases
granted by the company itself within one year from the effectivity of the CBA in 1997.
By simplistically utilizing the adage "doubt is resolved in labor," instead of relying on
the case records and the evidence adduced, the voluntary arbitrator extended the
coverage of WO RXIII-02 to include those who, by the terms of the order, are not
supposed to receive the benefit. If only the voluntary arbitrator was circumspect
enough to consider the facts on hand, he would have seen that the CBA provision on
noncreditability finds no application in the present case, because creditability is not
the real issue in this case. And neither is the interpretation of the CBA provision.
Discussion If there is a Wage Order increasing the minimum wage, as a rule, it would
only affect those who are earning below the minimum wage with the new minimum
wage.
For those already earning higher than the minimum wage, they cannot insist that they
be given the same increase. Their salary could only be increased if the wage order
imposing a new wage increase would cause a wage distortion.
When we say wage distortion, because of the increase in the minimum wage, those
who are affected cannot necessarily say that the historical gap be maintained, and
they cannot also say that they are entitled to the same increase, as provided in the
wage order.
Those are the things you should consider in connection to the provisions under Article
120-127, as well as R.A. 6727.
TAKE NOTE
1. What is a wage distortion?
2. When is there a wage distortion?
3. What are the two bodies?
4. What are the two ways of adjusting the minimum wage?
Prubankers v. Prudential There was no wage distortion. A disparity in wages
between employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law.
FACTS: On Nov 18 1993 the Regional Tripartite Wages and Productivity Board of
Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living
Allowance (COLA) to workers in the private sector who had rendered service for at
least 3 months before its effectivity, and for the same period thereafter, in the
following categories:
● P17.50 in Naga & Legaspi;
● P15.50 in the municipalities of Tabaco, Daraga & Pili and the city of Iriga;
● P10.00 in all other areas of the Bicol Region.
On Nov 23 1993 the Regional Tripartite Wages and Productivity Board of Region VII
issued Wage Order No. RB VII-03, which directed the integration of the COLA
mandated pursuant to Wage Order No. RO VII-02-A into the basic pay of all workers.
The wage order also called for an increase in the minimum wage rates for all workers
and employees in the private sector as follows:
● P10.00 in Cebu, Mandaue & Lapulapu;
● P5.00 in the municipalities of Compostela, Liloan, Consolacion, Cordova,
Talisay, Minglanilla, Naga and the cities of Davao, Toledo, Dumaguete,
Bais, Canlaon and Tagbilaran.
Pursuant to the said wage orders, RESP granted a COLA of P17.50 to its employees
at its Naga branch and integrated the P150.00 per month COLA into the basic pay of

its rank-and-file employees at its Cebu, Mabolo and P. del Rosario branches. On
June 7 1994, PET wrote to RESP requesting that a Labor Management Committee
be convened to discuss and resolve the wage distortions that resulted from the
implementation of the wage orders. PET also demanded that PET extend the
application of the wage orders to its employees outside Region V & Region VII,
claiming that the regional implementation of the said orders resulted in a wage
distortion.
VA: Ruled that the regional implementation of the wage orders by PET resulted in a
wage distortion nationwide which should be resolved in accordance with Art. 124 of
Labor Code.
CA: Ruled that there was no wage distortion on the following grounds:
The variance in the salary rates in different regions are justified by R.A. 6727.
The distinctions between each employee group in the region are maintained, as all
employees were granted an increase in minimum wage rate.
PET’s contentions: RESP’s regional implementation:
1. A wage distortion exists, because the implementation of the two Wage Orders has
resulted in the discrepancy in the compensation of employees of similar pay
classification in different regions.
2. Implementation violated the principle of equal work, equal pay;
3. RESP-Bank when it adopted a uniform wage policy has sufficiently established a
management practice thus, it is estopped from implementing a wage order for a
specific region only.
ISSUE: WON a wage distortion resulted from RESP’s implementation of the
aforecited Wage Orders? (NO)
HELD: NO. There was no wage distortion as there is no wage parity between
employees in different rungs, instead there is a wage disparity between employees
in the same rung but located in different regions of the country. A disparity in wages
between employees holding similar positions but in different regions does not
constitute wage distortion as contemplated by law. – Different regional wages are
mandated by the law (specifically RA 6727) as there is recognition that there exist
regional disparities in the cost of living. RA 6727 recognizes that there are different
needs for the different situations in different regions of the country.
EQUAL PAY, EQUAL WORK: RA 6727 mandates that wages in every region must
be set by the particular wage board of that region, based on the prevailing situation
therein. Necessarily, the wages in different regions will not be uniform. Thus, under
RA 6727, the minimum wage in Region 1 may be different from that in Region 13,
because the socioeconomic conditions in the two regions are different.
MANAGEMENT PRACTICE CONTENTION: Said nationwide uniform wage policy of
the Bank had been adopted prior to the enactment of RA 6727. After the passage of
said law, the Bank was mandated to regionalize its wage structure.
NOTE: In this case, the fourth element of wage distortion is absent. The Supreme
Court emphasized that we are talking about different regions with different minimum
wages. This disparity in wages between employees holding similar positions but in
different regions does not constitute wage distortion. It is the hierarchy of positions
and disparity of their corresponding wages and other emoluments that are sought to
be preserved by the concept of wage distortion. Petition is DENIED.
Discussion In the present case, it is clear that no wage distortion resulted when
respondent implemented the subject Wage Orders in the covered branches. In the
said branches, there was an increase in the salary rates of all pay classes.
Furthermore, the hierarchy of positions based on skills, length of service and other
logical bases of differentiation was preserved. In other words, the quantitative
difference in compensation between different pay classes remained the same in all
branches in the affected region. Put differently, the distinction between Pay Class 1
and Pay Class 2, for example, was not eliminated as a result of the implementation
of the two Wage Orders in the said region. Hence, it cannot be said that there was a
wage distortion.
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A wage distortion shall mean a situation where an increase in prescribed wage results
in the elimination of severe contraction of intentional quantitative differences in wage
or salary rates between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.
Wage Distortion presupposes a classification of positions and rankings at various
levels where a significant change occurs at the lowest level of positions in terms of
basic wage without a corresponding change in the other level in the hierarchy
negating as a result thereof the distinction between one level of position from the next
higher level and resulting in a parity between the lowest level and the next level or
rank. This concept assumes an existing grouping or classification of employees which
establishes distinctions among such employees on some relevant or legitimate basis.
EX: You work in a company, you are a minimum wage earner here in Davao City,
391.00. The next higher in position has a salary of 450.00. Thereafter, a wage order
was issued increasing the 391.00 minimum wage by 30.00 so it becomes 421.00.
The difference between those two positions will be contracted. So, a distortion will
take place. There will be instances wherein they will even be the same. That is the
situation that is covered under Art. 124.
Elements of Wage Distortion
1. An existing hierarchy of positions with corresponding salary rates;
2. A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one;
3. Elimination of the distinction between the two levels; and
4. The existence of the distortion in the same region of the Country
Why is it that there is no wage distortion with regard to similarly-situated
employees but in different regions? Because it is an accepted fact that in each
region, there are different cost of living expenses. There are several factors to
consider. In Manila, the minimum wage is around 500.00. In Davao, 391.00.
Is there wage distortion? NO. As we very well know, in Manila or in the NCR, the
cost of living is higher.
Any wage order that would increase the minimum wage of one employee in another
region, will not cause a wage distortion with a similar employee, even if they have
similar employer. The SC emphasized the 4 elements for wage distortion to exist.
SPECIAL GROUP OF EMPLOYEES
WOMEN (ARTICLES 132-140)
Art. 132. Facilities for women. The Secretary of Labor and Employment shall
establish standards that will ensure the safety and health of women employees.
In appropriate cases, he shall, by regulations, require any employer to:
(a) Provide seats proper for women and permit them to use such seats
when they are free from work and during working hours, provided they
can perform their duties in this position without detriment to
efficiency;
(b) To establish separate toilet rooms and lavatories for men and women
provide at least a dressing room for women; For transgenders, that is
more a gender issue rather than a labor issue.
(c) To establish a nursery in a workplace for the benefit of the women
employees therein; and Breastfeeding stations for mothers. In the more
recent years, it has been implemented.
(d) To determine appropriate minimum age and other standards for
retirement or termination in special occupations such as those of flight
attendants and the like. It is possible that for certain types of employees
in connection with their functions. You have to consider women in
relation to the work they perform.

We have to keep in mind the nature of the work of the employee in applying
paragraph (a).
For example, the need to provide seats for cashier may not be applicable to
salesgirl in department stores whose work necessarily involves walking around
and assisting customers.
Art. 134. Family planning services; incentives for family planning.
a. Establishments which are required by law to maintain a clinic or infirmary shall
provide free family planning services to their employees which shall include, but
not be limited to, the application or use of contraceptive pills and intrauterine
devices;
b. In coordination with other agencies of the government engaged in the promotion
of family planning, the Department of Labor and Employment shall develop and
prescribe incentive bonus schemes to encourage family planning among female
workers in any establishment or enterprise
This has not been strictly followed.
Art. 136. Stipulation against marriage. It shall be unlawful for an employer to
require as a condition of employment or continuation of employment that a woman
employee shall not get married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely
by reason of her marriage.
PT&T V. NLRC
FACTS: Grace de Guzman was initially hired by petitioner as a reliever, specifically
as a "Supernumerary Project Worker," for a fixed period for C.F. Tenorio who went
on maternity leave. Under the Reliever Agreement which she signed with petitioner
company, her employment was to be immediately terminated upon expiration of the
agreed period. Thereafter, private respondent's services as reliever were again
engaged by petitioner, this time in replacement of one Erlinda F. Dizon who went on
leave during both periods. After August 8, 1991, and pursuant to their Reliever
Agreement, her services were terminated.
On September 2, 1991, private respondent was once more asked to join petitioner
company as a probationary employee, the probationary period to cover 150 days. In
the job application form that was furnished her to be filled up for the purpose, she
indicated in the portion for civil status therein that she was single although she had
contracted marriage a few months earlier.
It now appears that private respondent had made the same representation in the two
successive reliever agreements. When petitioner supposedly learned about the same
later, its branch supervisor in Baguio City, Delia M. Oficial, sent to private respondent
a memorandum requiring her to explain the discrepancy. In that memorandum, she
was reminded about the company's policy of not accepting married women for
employment.
In her reply, private respondent stated that she was not aware of PT&T's policy
regarding married women at the time, and that all along she had not deliberately
hidden her true civil status. Petitioner nonetheless remained unconvinced by her
explanations. Private respondent was dismissed from the company which she readily
contested by initiating a complaint for illegal dismissal, coupled with a claim for non-
payment of cost of living allowances (COLA).
ISSUE: Was she illegally dismissed? YES
RULING: Grace de Guzman was illegally dismissed. In this case, private respondent
from employment on account of her dishonesty, the record discloses clearly that her
ties with the company were dissolved principally because of the company's policy
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that married women are not qualified for employment in PT&T, and not merely
because of her supposed acts of dishonesty.
Grace’s dismissal was not due to concealment. That it was so can easily be seen
from the memorandum sent to private respondent by Delia M. Oficial, the branch
supervisor of the company, with the reminder, in the words of the latter, that "you're
fully aware that the company is not accepting married women employee, as it was
verbally instructed to you." Again, in the termination notice sent to her by the same
branch supervisor, private respondent was made to understand that her severance
from the service was not only by reason of her concealment of her married status but,
over and on top of that, was her violation of the company’s policy against marriage.
Verily, private respondent's act of concealing the true nature of her status from PT&T
could not be properly characterized as willful or in bad faith as she was moved to act
the way she did mainly because she wanted to retain a permanent job in a stable
company. In other words, she was practically forced by that very same illegal
company policy into misrepresenting her civil status for fear of being disqualified from
work. While loss of confidence is a just cause for termination of employment, it should
not be simulated. It must rest on an actual breach of duty committed by the employee
and not on the employer's caprices. Furthermore, it should never be used as a
subterfuge for causes which are improper, illegal, or unjustified.
Private respondent, it must be observed, had gained regular status at the time of her
dismissal. When she was served her walking papers, she was about to complete the
probationary period of 150 days as she was contracted as a probationary employee.
That her dismissal would be effected just when her probationary period was winding
down clearly raises the plausible conclusion that it was done in order to prevent her
from earning security of tenure.
The government, to repeat, abhors any stipulation or policy in the nature of that
adopted by petitioner PT&T. The Labor Code state, in no uncertain terms, as follows:
(Section 136. Stipulation against marriage.)
It is not relevant that the rule is not directed against all women but just against married
women. And, where the employer discriminates against married women, but not
against married men, the variable is sex and the discrimination is unlawful. Upon the
other hand, a requirement that a woman employee must remain unmarried could be
justified as a "bona fide occupational qualification," or BFOQ, where the particular
requirements of the job would justify the same, but not on the ground of a general
principle, such as the desirability of spreading work in the workplace. A requirement
of that nature would be valid provided it reflects an inherent quality reasonably
necessary for satisfactory job performance.
Petitioner's policy is not only in derogation of the provisions of Article 136 of the Labor
Code on the right of a woman to be free from any kind of stipulation against marriage
in connection with her employment, but it likewise assaults good morals and public
policy, tending as it does to deprive a woman of the freedom to choose her status, a
privilege that by all accounts inheres in the individual as an intangible and inalienable
right.
- Take note of this case, there were already several special laws in 1997
for women workers
- Even if it was true that there was concealment on the part of de guzman,
the same cannot be considered. Because she concealed it because of the
policy of the employer
- There was no valid cause for dismissal
DUNCAN V. GLAXO WELLCOME PHILIPPINES
FACTS: Pedro Tecson was hired by Glaxo Wellcome Philippines, Inc. as medical
representative on October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which stipulates, among others,
that he agrees to study and abide by existing company rules; to disclose to
management any existing or future relationship by consanguinity or affinity with co-
employees or employees of competing drug companies and should management find
that such relationship poses a possible conflict of interest, to resign from the
company.
The Employee Code of Conduct of Glaxo similarly provides that an employee is
expected to inform management of any existing or future relationship by
consanguinity or affinity with co-employees or employees of competing drug

companies. If management perceives a conflict of interest or a potential conflict
between such relationship and the employee’s employment with the company, the
management and the employee will explore the possibility of a "transfer to another
department in a non-counterchecking position" or preparation for employment outside
the company after six months. Tecson was initially assigned to market Glaxo’s
products in the Camarines Sur-Camarines Norte sales area. Subsequently, Tecson
entered into a romantic relationship with Bettsy, an employee of Astra
Pharmaceuticals, a competitor of Glaxo. Bettsy was Astra’s Branch Coordinator in
Albay. She supervised the district managers and medical representatives of her
company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders from his District
Manager regarding the conflict of interest which his relationship with Bettsy might
engender. Still, love prevailed, and Tecson married Bettsy in September 1998.
In January 1999, Tecson’s superiors informed him that his marriage to Bettsy gave
rise to a conflict of interest. Tecson’s superiors reminded him that he and Bettsy
should decide which one of them would resign from their jobs, although they told him
that they wanted to retain him as much as possible because he was performing his
job well.
Tecson requested for time to comply with the company policy against entering into a
relationship with an employee of a competitor company. He explained that Astra,
Bettsy’s employer, was planning to merge with Zeneca, another drug company; and
Bettsy was planning to avail of the redundancy package to be offered by Astra. With
Bettsy’s separation from her company, the potential conflict of interest would be
eliminated. At the same time, they would be able to avail of the attractive redundancy
package from Astra.
In August 1999, Tecson again requested for more time resolve the problem. In
September 1999, Tecson applied for a transfer in Glaxo’s milk division, thinking that
since Astra did not have a milk division, the potential conflict of interest would be
eliminated. His application was denied in view of Glaxo’s "least-movement- possible"
policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan
del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request
was denied.
Tecson defied the transfer order and continued acting as medical representative in
the Camarines Sur-Camarines Norte sales area.
During the pendency of the grievance proceedings, Tecson was paid his salary, but
was not issued samples of products which were competing with similar products
manufactured by Astra. He was also not included in product conferences regarding
such products.
TECSON: Glaxo’s policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates
invalid distinctions among employees on account only of marriage. They claim that
the policy restricts the employees’ right to marry.
They also argue that Tecson was constructively dismissed as shown by the following
circumstances:
(1) he was transferred from to the Butuan-Surigao-Agusan sales area, (2)
he suffered a diminution in pay,
(3) he was excluded from attending seminars and training sessions, and
(4) prohibited from promoting Glaxo’s products which were competing with
Astra’s products.
GLAXO: Policy is a valid exercise of its management prerogatives and does not
violate the equal protection clause; and that Tecson’s reassignment does not amount
to constructive dismissal.
It likewise asserts that the policy does not prohibit marriage per sebut only proscribes
existing or future relationships with employees of competitor companies, and is
therefore not violative of the equal protection clause. It maintains that considering the
nature of its business, the prohibition is based on valid grounds.
According to Glaxo, Tecson’s marriage to Bettsy, an employee of Astra, posed a real
and potential conflict of interest. Astra’s products were in direct competition with 67%
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of the products sold by Glaxo. In any case, Tecson was given several months to
remedy the situation, and was even encouraged not to resign but to ask his wife to
resign form Astra instead.
Glaxo also points out that Tecson was aware that such policy was stipulated therein.
In said contract, he also agreed to resign from respondent if the management finds
that his relationship with an employee of a competitor company would be detrimental
to the interests of Glaxo.
ISSUES:
(1) Whether the Glaxo’s policy against its employees marrying employees
from competitor companies is valid, and in not holding that said policy
violates the equal protection clause of the Constitution; YES.
(2) Whether Tecson was constructively dismissed. NO.
HELD: Glaxo’s policy prohibiting an employee from having a relationship with an
employee of a competitor company is a valid exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing
strategies and other confidential programs and information from competitors,
especially so that it and Astra are rival companies in the highly competitive
pharmaceutical industry.
The prohibition against personal or marital relationships with employees of competitor
companies upon Glaxo’s employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its interests against
the possibility that a competitor company will gain access to its secrets and
procedures.
Indeed, while our laws endeavor to give life to the constitutional policy on social
justice and the protection of labor, it does not mean that every labor dispute will be
decided in favor of the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest of fair play.
The challenged company policy does not violate the equal protection clause of the
Constitution. It is a settled principle that the commands of the equal protection clause
are addressed only to the state or those acting under color of its authority.
In any event, from the wordings of the contractual provision and the policy in its
employee handbook, it is clear that Glaxo does not impose an absolute prohibition
against relationships between its employees and those of competitor companies. Its
employees are free to cultivate relationships with and marry persons of their own
choosing. What the company merely seeks to avoid is a conflict of interest between
the employee and the company that may arise out of such relationships. As succinctly
explained by the appellate court, thus:
The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not aimed
at restricting a personal prerogative that belongs only to the individual. However, an
employee’s personal decision does not detract the employer from exercising
management prerogatives to ensure maximum profit and business success.
Tescon was made known of the policy prior to his employment. Tecson, therefore,
was aware of that restriction when he signed his employment contract and when he
entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily
entered into a contract of employment with Glaxo, the stipulations therein have the
force of law between them and, thus, should be complied with in good faith." He is
therefore estopped from questioning said policy. Tecson was not constructively
dismissed.
Constructive dismissal is defined as a quitting, an involuntary resignation resorted to
when continued employment becomes impossible, unreasonable, or unlikely; when
there is a demotion in rank or diminution in pay; or when a clear discrimination,
insensibility or disdain by an employer becomes unbearable to the employee. None
of these conditions are present in the instant case. The record does not show that
Tescon was demoted or unduly discriminated upon by reason of such transfer. Glaxo
properly exercised its management prerogative in reassigning Tecson to the Butuan
City sales area because it was merely in keeping with the policy of the company in
avoidance of conflict of interest, and thus valid.

Tecon’s wife holds a sensitive supervisory position as Branch Coordinator in her
employer-company which requires her to work in close coordination with District
Managers and Medical Representatives. She therefore takes an active participation
in the market war characterized as it is by stiff competition among pharmaceutical
companies. Moreover, and this is significant, petitioner’s sales territory covers
Camarines Sur and Camarines Norte while his wife is supervising a branch of her
employer in Albay. The proximity of their areas of responsibility, all in the same Bicol
Region, renders the conflict of interest not only possible, but actual, as learning by
one spouse of the other’s market strategies in the region would be inevitable.
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of
their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to
areas where the need for pushing its products is great. More so if such reassignments
are part of the employment contract.
As noted earlier, the challenged policy has been implemented by Glaxo impartially
and disinterestedly for a long period of time. In the case at bar, the record shows that
Glaxo gave Tecson several chances to eliminate the conflict of interest brought about
by his relationship with Bettsy. When their relationship was still in its initial stage,
Tecson’s supervisors at Glaxo constantly reminded him about its effects on his
employment with the company and on the company’s interests. After Tecson married
Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the
company or asking his wife to resign from Astra. Glaxo even expressed its desire to
retain Tecson in its employ because of his satisfactory performance and suggested
that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his
repeated requests for more time to resolve the conflict of interest. When the problem
could not be resolved after several years of waiting, Glaxo was constrained to
reassign Tecson to a sales area different from that handled by his wife for Astra.
Notably, the Court did not terminate Tecson from employment but only reassigned
him to another area where his home province, Agusan del Sur, was included. In
effecting Tecson’s transfer, Glaxo even considered the welfare of Tecson’s family.
Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of
Glaxo.
- the policy here is a prohibition of employees marrying employees of their
competitors
- this policy is allowed since it will be detrimental to the company’s business,
- it is not an absolute prohibition it is only limited in marriage between glaxo
employees and its employees of its competitors
STAR PAPER v. SIMBOL Take note of this case. There were many principles
discussed. 2 types of employment policies involving spouses. Invalid if the employer
fails to show that such prohibition is related to business necessity.
FACTS: The respondents in this case were employees of Starpaper, aside from
Lorna Estrella who was allegedly dismissed due to immoral conduct. Estrella was
hired on July 29, 1994. She met Luisito Zuñiga, also a co-worker. Petitioners stated
that Zuñiga, a married man, got Estrella pregnant. The company allegedly could have
terminated her services due to immorality but she opted to resign on December 21,
1999.
The respondents each signed a Release and Confirmation Agreement. They stated
therein that they have no money and property accountabilities in the company and
that they release the latter of any claim or demand of whatever nature.
Respondents offer a different version of their dismissal. Simbol and Comia allege that
they did not resign voluntarily; they were compelled to resign in view of an illegal
company policy. As to respondent Estrella, she alleges that she had a relationship
with co- worker Zuñiga who misrepresented himself as a married but separated man.
After he got her pregnant, she discovered that he was not separated. Thus, she
severed her relationship with him to avoid dismissal due to the company policy.
On November 30, 1999, she met an accident and was advised by the doctor to
recuperate for twenty-one (21) days. She returned to work but she found out that her
name was on-hold at the gate. She was denied entry. She was directed to proceed
to the personnel office where one of the staff handed her a memorandum. The
memorandum stated that she was being dismissed for immoral conduct. She refused
to sign the memorandum because she was on leave for twenty-one (21) days and
has not been given a chance to explain. The management asked her to write an
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explanation. However, after submission of the explanation, she was nonetheless
dismissed by the company. Due to her urgent need for money, she later submitted a
letter of resignation in exchange for her thirteenth month pay.
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorney’s fees. They averred that the aforementioned company
policy is illegal and contravenes Article 136 of the Labor Code. They also contended
that they were dismissed due to their union membership.
ISSUE: Whether the company policy of Starpaper prohibiting an employee to have a
relationship with his/her co-employee is a valid exercise of management prerogative?
NO, it is violative of Article 136. The SC was looking for the reasonableness of
such prohibition.
HELD: The requirement that a company policy must be reasonable under the
circumstances to qualify as a valid exercise of management prerogative was also at
issue in the 1997 case of Philippine Telegraph and Telephone Company v. NLRC. In
said case, the employee was dismissed in violation of petitioner’s policy of
disqualifying from work any woman worker who contracts marriage. We held that the
company policy violates the right against discrimination afforded all women workers
under Article 136 of the Labor Code, but established a permissible exception, viz.:
A requirement that a woman employee must remain unmarried could be justified as
a "bona fide occupational qualification," or BFOQ, where the particular requirements
of the job would justify the same, but not on the ground of a general principle, such
as the desirability of spreading work in the workplace. A requirement of that nature
would be valid provided it reflects an inherent quality reasonably necessary for
satisfactory job performance.
The cases of Duncan and PT&T instruct us that the requirement of
reasonableness must be clearly established to uphold the questioned
employment policy. The employer has the burden to prove the existence of a
reasonable business necessity. The burden was successfully discharged in Duncan
but not in PT&T.
We do not find a reasonable business necessity in this case.
Petitioners’ sole contention that "the company did not just want to have two (2) or
more of its employees related between the third degree by affinity and/or
consanguinity" is lame. That the second paragraph was meant to give teeth to the
first paragraph of the questioned rule is evidently not the valid reasonable business
necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co-employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine
Operator, to Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. Neither did petitioners explain how this
detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid justification,
the employer can create policies based on an unproven presumption of a perceived
danger at the expense of an employee’s right to security of tenure.
Disparate Impact Theory
Petitioners contend that their policy will apply only when one employee marries a
co-employee, but they are free to marry persons other than co-employees. The
questioned policy may not facially violate Article 136 of the Labor Code but it creates
a disproportionate effect and under the disparate impact theory, the only way it could
pass judicial scrutiny is a showing that it is reasonable despite the discriminatory,
albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the employee’s right to
be free from arbitrary discrimination based upon stereotypes of married persons
working together in one company.
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our
jurisdiction is vast and extensive that we cannot prudently draw inferences from the
legislature’s silencethat married persons are not protected under our Constitution and
declare valid a policy based on a prejudice or stereotype. Thus, for failure of
petitioners to present undisputed proof of a reasonable business necessity, we rule

that the questioned policy is an invalid exercise of management prerogative.
Corollarily, the issue as to whether respondents Simbol and Comia resigned
voluntarily has become moot and academic.
On The Alleged Resignation of Estrella The contention of petitioners that Estrella
was pressured to resign because she got impregnated by a married man and she
could not stand being looked upon or talked about as immoral is incredulous. If she
really wanted to avoid embarrassment and humiliation, she would not have gone back
to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for
reinstatement. We have held that in voluntary resignation, the employee is compelled
by personal reason(s) to dissociate himself from employment. It is done with the
intention of relinquishing an office, accompanied by the act of abandonment. Thus, it
is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given
the lack of sufficient evidence on the part of petitioners that the resignation was
voluntary, Estrella’s dismissal is declared illegal.
Discussion
Take note of the differences among the cases of PT&T, Duncan and Starpaper. Here
in this case, the Supreme Court that banning spouses from working in the same
company is not a valid exercise of management prerogative.
According to the Supreme Court, to justify a bona fide occupational qualification the
employer must the two (2) factors:
1. That the employment qualification is reasonably related to the essential
operation of the job involved.
2. That there is a factual basis for believing that all persons meeting the
qualification would be unable to properly perform the duties of the job.
The basis of Starpaper here in saying that spouses working in the same place will
affect their business is not impressed with merit.
How could Star Paper assert that its policy is valid?
It could have shown that employing spouses in the same company would result to
loss of check and balance, control or a connivance could arise, if ever. If you are the
employer, you have to justify why do you have a particular prohibition. If it just a
prohibition without any valid justification, it will result to discrimination.
The questioned policy here was considered in violation of Article 136.
- What is lacking for the prohibition (policy) to be upheldd, is the
reasonableness of the prohibition -
- No spouse employment and anti-nepotism
- No spouse policy - invalid if employer fails to present that such prohibition
is a business necessity, here there was no reason behind the prohibition.
Hence it wasnt reasonably necessary.
- when allowed? Like in banks , guard and teller are married
PROHIBITED ACTS
Art. 137. Prohibited acts. It shall be unlawful for any employer:
a. To deny any woman employee the benefits provided for in this Chapter
or to discharge any woman employed by him for the purpose of
preventing her from enjoying any of the benefits provided under this
Code.
b. To discharge such woman on account of her pregnancy, or while on
leave or in confinement due to her pregnancy;
c. To discharge or refuse the admission of such woman upon returning to
her work for fear that she may again be pregnant.
Here, discrimination by reason of pregnancy. However, you also have to consider the
nature of the work. If the pregnancy of the woman would be counter-productive, then
the nature of the job in connection with the prohibition on pregnancy should be taken
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into consideration (OKAY LANG yung buntis sa mercury drug pero as a security
guard hindi.)
There may also be instances, although the employers are also careful of this, if the
nature of the work includes travel and they would tend to have a preference over
male employees because it would be easier for them to travel, because if they employ
women for such positions, then there is a probability that they will get pregnant and
won't be assigned to travel or will be assigned at the nearest location.
Of course, this is discrimination, but if you won't be employed or promoted because
of that, then you have to prove that that is the basis of the discrimination which is not
that easy if you are the employee. Hence, if you are discriminated against, then you
have the burden of proof that by reason of you being a woman, or being pregnant,
that you are not promoted or accepted to a certain position.
Art. 138. Classification of certain women workers. Any woman who is
permitted or suffered to work, with or without compensation, in any night club,
cocktail lounge, massage clinic, bar or similar establishments under the effective
control or supervision of the employer for a substantial period of time as
determined by the Secretary of Labor and Employment, shall be considered as an
employee of such establishment for purposes of labor and social legislation.
Article 138 establishes the employer-employee relationship between the women
mentioned therein and their employer in a night club, cocktail lounge, massage clinic,
bar or similar establishments.
Anti sexual harassment act sec 3
NIGHT WORKERS
RA 10151 repealing Articles 130 and 131
Night Workers fall under Articles 154-161 of the Labor Code. Take note on who are
considered as night workers
Article 154. Coverage. - This chapter shall apply to all persons, who shall be
employed or permitted or suffered to work at night, except those employed in
agriculture, stock raising, fishing, maritime transport and inland navigation, during
a period of not less than seven (7) consecutive hours, including the interval from
midnight to five o'clock in the morning, to be determined by the Secretary of Labor
and Employment, after consulting the workers' representatives/labor
organizations and employers.
Night worker' means any employed person whose work requires performance of
a substantial number of hours of night work which exceeds a specified limit. This
limit shall be fixed by the Secretary of Labor after consulting the workers'
representatives/labor organizations and employers.
Article 155. Health Assessment. - At their request, workers shall have the right
to undergo a health assessment without charge and to receive advice on how to
reduce or avoid health problems associated with their work:
(a) Before taking up an assignment as a night worker
(b) At regular intervals during such an assignment; and
(c) If they experience health problems during such, an assignment which
are not caused by factors other than the performance of night work.
With the exception of a finding of unfitness for night work, the findings of such
assessments shall not be transmitted to others without the workers' consent and
shall not be used to their detriment.
Night worker – any employed person whose work requires performance of a
substantial number of hours of night work which exceeds a specified limit. This limit
shall be fixed by the Secretary of Labor after consulting the workers'
representatives/labor organizations and employers.

An example of this would be the call center agents, and therefore, these provisions
would be applicable to them.
Article 156. Mandatory Facilities. - Suitable first-aid facilities shall be made
available for workers performing night work, including arrangements where such
workers, where necessary, can be taken immediately to a place for appropriate
treatment. The employers are likewise required to provide safe and healthful
working conditions and adequate or reasonable facilities such as sleeping or
resting quarters in the establishment and transportation from the work premises
to the nearest point of their residence subject to exceptions and guidelines to be
provided by the DOLE.
You've probably seen this at call centers wherein they have their own shuttle or van
because that is required under the law. Again, there are a lot of them who are night
workers, and the shift of the others end at dawn. It would be difficult for them to go
home. So that is one of the concerns that are addressed in the law.
Article 157. Transfer. – Night workers who are certified as unfit for
night work, due to health reasons, shall be transferred, whenever practicable, to a
similar job for which they are fit to work.
If such transfer to a similar job is not practicable, these workers shall be granted
the same benefits as other workers who are unable to work, or to secure
employment during such period.
A night worker certified as temporarily unfit for night work shall be given the same
protection against dismissal or notice of dismissal as other workers who are
prevented from working for reasons of health.
Article 158. Women Night Workers. - Measures shall be taken to ensure that an
alternative to night work is available to women workers who would otherwise be
called upon to perform such work:
(a) Before and after childbirth, for a period of at least sixteen (16) weeks, which
shall be divided between the time before and after childbirth;
(b) For additional periods, in respect of winch a medical certificate IS produced
stating that said additional periods are necessary for the health of the mother or
child:
(1) During pregnancy;
(2) During a specified time beyond the period, after childbirth is fixed pursuant to
subparagraph (a) above, the length of which shall be determined by the DOLE
after consulting the labor organizations and employers.
During the periods referred to in this article:
(i) A woman worker shall not be dismissed or given notice of dismissal, except for
just or authorized causes provided for in this Code that are not connected with
pregnancy, childbirth and childcare responsibilities.
(ii) A woman worker shall not lose the benefits regarding her status, seniority, and
access to promotion which may attach to her regular night work position.
Pregnant women and nursing mothers may be allowed to work .at night only if a
competent physician, other than the company physician, shall certify their fitness
to render night work, and specify, in the case of pregnant employees, the period
of the pregnancy that they can safely work.
The measures referred to in this article may include transfer to day work where
this is possible, the provision of social security benefits or an extension of
maternity leave.
The provisions of this article shall not leave the effect of reducing the protection
and benefits connected with maternity leave under existing laws.
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Article 159. Compensation. The compensation for night workers in the form of
working time, pay or similar benefits shall recognize the exceptional nature of night
work.
They are entitled to the night shift differential.
These provisions regarding night workers – they are considered as special group
because working at night is different from normal. We grow up sleeping at night and
spending the day awake. Here, the nature of the work is night because they render
service to different parts of the world or different time zones compared here in the
Philippines. The advantage of this is that they have higher pay and they have
additional benefits as provided for in the law.
Here, they have health assessment under Article 155 and mandatory facilities.
Article 161. Night Work Schedules. - Before introducing work schedules
requiring the services of night workers, the employer shall consult the workers'
representatives/labor organizations concerned on the details of such schedules
and the forms of organization of night work that are best adapted to the
establishment and its personnel, as well as on the occupational health measures
and social services which are required. In establishments employing night
workers, consultation shall take place regularly."
DOMESTIC WORKERS ACT or BATAS KASAMBAHAY (KASAMBAHAY
LAW)
Republic Act No. 10361
NOTE: KASAMBAHAY LAW repealed articles 141-152 of the Labor Code.
SEC. 4. Definition of Terms. – As used in this Act, the term:
(d) Domestic worker or “Kasambahay” refers to any person engaged in
domestic work within an employment relationship such as, but not limited to, the
following: general househelp, nursemaid or “yaya”, cook, gardener, or laundry
person, but shall exclude any person who performs domestic work only
occasionally or sporadically and not on an occupational basis.
The term shall not include children who are under foster family arrangement, and
are provided access to education and given an allowance incidental to education,
i.e. “baon”, transportation, school projects and school activities.
SEC. 7. Guarantee of Privacy. – Respect for the privacy of the domestic worker
shall be guaranteed at all times and shall extend to all forms of communication
and personal effects. This guarantee equally recognizes that the domestic
worker is obliged to render satisfactory service at all times.
SEC. 8. Access to Outside Communication. – The employer shall grant the
domestic worker access to outside communication during free time: Provided,
That in case of emergency, access to communication shall be granted even
during work time. Should the domestic worker make use of the employer’s
telephone or other communication facilities, the costs shall be borne by the
domestic worker, unless such charges are waived by the employer.
SEC. 9. Right to Education and Training. – The employer shall afford the
domestic worker the opportunity to finish basic education and may allow
access to alternative learning systems and, as far as practicable, higher
education or technical and vocational training. The employer shall adjust the
work schedule of the domestic worker to allow such access to education or
training without hampering the services required by the employer.

SEC. 10. Prohibition Against Privileged Information. – All communication
and information pertaining to the employer or members of the household shall
be treated as privileged and confidential, and shall not be publicly disclosed by
the domestic worker during and after employment. Such privileged information
shall be inadmissible in evidence except when the suit involves the employer or
any member of the household in a crime against persons, property, personal
liberty and security, and chastity. Bawal ang chismis
Section 11.Employment Contract.– An employment contract shall be
executed by and between the domestic worker and the employer before the
commencement of the service in a language or dialect understood by both the
domestic worker and the employer. The domestic worker shall be provided a
copy of the duly signed employment contract which must include the following:
(a) Duties and responsibilities of the domestic worker;
(b) Period of employment;
(c) Compensation;
(d) Authorized deductions;
(e) Hours of work and proportionate additional payment;
(f) Rest days and allowable leaves;
(g) Board, lodging and medical attention;
(h) Agreements on deployment expenses, if any;
(i) Loan agreement;
(j) Termination of employment; and
(k) Any other lawful condition agreed upon by both parties.
The Department of Labor and Employment (DOLE) shall develop a model
employment contract for domestic workers which shall, at all times, be made
available free of charge to domestic workers, employers, representative
organizations and the general public. The DOLE shall widely disseminate
information to domestic workers and employers on the use of such model
employment contract.
In cases where the employment of the domestic worker is facilitated through a
private employment agency, the PEA shall keep a copy of all employment
contracts of domestic workers and shall be made available for verification and
inspection by the DOLE.
SEC. 13. Recruitment and Finder’s Fees. – Regardless of whether the domestic
worker was hired through a private employment agency or a third party, no share
in the recruitment or finder’s fees shall be charged against the domestic worker by
the said private employment agency or third party.
SEC. 14. Deposits for Loss or Damage. – It shall be unlawful for the employer
or any other person to require a domestic worker to make deposits from which
deductions shall be made for the reimbursement of loss or damage to tools,
materials, furniture and equipment in the household.
SEC. 15. Prohibition on Debt Bondage. – It shall be unlawful for the employer
or any person acting on behalf of the employer to place the domestic worker under
debt bondage.
SEC. 20. Daily Rest Period. – The domestic worker shall be entitled to an
aggregate daily rest period of eight (8) hours per day.
SEC. 21. Weekly Rest Period. – The domestic worker shall be entitled to at least
twenty-four (24) consecutive hours of rest in a week. The employer and the
domestic worker shall agree in writing on the schedule of the weekly rest day of
the domestic worker: Provided, That the employer shall respect the preference of
the domestic worker as to the weekly rest day when such preference is based on
religious grounds. Nothing in this provision shall deprive the domestic worker and
the employer from agreeing to the following:
(a) Offsetting a day of absence with a particular rest day;
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(b) Waiving a particular rest day in return for an equivalent daily rate of pay;
(c) Accumulating rest days not exceeding five (5) days; or
(d) Other similar arrangements.
SEC. 22. Assignment to Nonhousehold Work. – No domestic worker shall be
assigned to work in a commercial, industrial or agricultural enterprise at a wage
rate lower than that provided for agricultural or nonagricultural workers. In such
cases, the domestic worker shall be paid the applicable minimum wage.
SEC. 23. Extent of Duty. – The domestic worker and the employer may mutually
agree for the former to temporarily perform a task that is outside the latter’s
household for the benefit of another household. However, any liability that will be
incurred by the domestic worker on account of such arrangement shall be borne
by the original employer. In addition, such work performed outside the household
shall entitle the domestic worker to an additional payment of not less than
the existing minimum wage rate of a domestic worker. It shall be unlawful for
the original employer to charge any amount from the said household where the
service of the domestic worker was temporarily performed.
APEX V. NLRC The Kasambahay Law was not yet enacted. She was considered as
a regular employee who was illegally dismissed.
FACTS: Private respondent was employed by Apex Mining to perform laundry
services at its staff house. She was originally paid on a piece rate basis, but was
eventually paid P250 a month which was eventually increased to 575 pesos. She met
an accident , and reported it to her immediate supervisor and the personnel officer.
Because of such accident she was not able to continue with her work. She was
eventually dismissed. She went to DOLE and the judgement ordered APEX to pay
her Salary DIfferential , emergency living allowance, Separation pay, and 13th month
pay.
ISSUE: Should private respondent be considered as mere househelper or domestic
servant? And not a regular employee?
RULING: NO. Rule XIII, section I (b), Book 3 of the Labor Code, as amended defines
the terms “househelper” or “domestic servant.
House helper - synonymous to the term “domestic servant”, it refers to any person,
male or female, who renders services in and about the employer’s home and which
services are usually necessary or desirable for the maintenance and enjoyment
thereof, and ministers exclusively to the personal comfort and enjoyment of the
employer’s family.
The definition cannot be interpreted to include househelper or laundrywomen working
in staffhouses of a company, like petitioner who attends to the needs of the
company's guest and other persons availing of said facilities. By the same token, it
cannot be considered to extend to then driver, houseboy, or gardener exclusively
working in the company, the staffhouses and its premises.
The criteria is the personal comfort and enjoyment of the family of the employer in
the home of said employer. While it may be true that the nature of the work of a
househelper, domestic servant or laundrywoman in a home or in a company
staffhouse may be similar in nature, the difference in their circumstances is that in
the former instance they are actually serving the family while in the latter case,
whether it is a corporation or a single proprietorship engaged in business or industry
or any other agricultural or similar pursuit, service is being rendered in the staffhouses
or within the premises of the business of the employer.
Section 24. Minimum Wage. – The minimum wage of domestic workers shall
not be less than the following:
(a) Two thousand five hundred pesos (P2,500.00) a month for
those employed in the National Capital Region (NCR);
(b) Two thousand pesos (P2,000.00) a month for those employed in chartered

cities and first class municipalities; and
(c) One thousand five hundred pesos (P1,500.00) a month for
those employed mother municipalities.
After one (1) year from the effectivity of this Act, and periodically
thereafter, the Regional Tripartite and Productivity Wage Boards (RTPWBs)
shall review, and if proper, determine and adjust the minimum wage rates of
domestic workers.
SEC 25. Payment of Wages. – Payment of wages shall be made on time
directly to the domestic worker to whom they are due in cash at least once a
month. The employer, unless allowed by the domestic worker through a written
consent, shall make no deductions from the wages other than that which is
mandated by law. No employer shall pay the wages of a domestic worker by
means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any
object other than the cash wage as provided for under this Act.
The domestic worker is entitled to a thirteenth month pay as provided for by law.
- Take note that a domestic worker is entitled to a 13th month pay.
SEC. 27. Prohibition on Interference in the Disposal of Wages. – It shall be
unlawful for the employer to interfere with the freedom of any domestic worker
to dispose of the latter’s wages. The employer shall not force, compel or oblige
the domestic worker to purchase merchandise, commodities or other properties
from the employer or from any other person, or otherwise make use of any store
or services of such employer or any other person.
SEC 28. Prohibition Against Withholding of Wages. – It shall be unlawful for
an employer, directly or indirectly, to withhold the wages of the domestic worker.
If the domestic worker leaves without any justifiable reason, any unpaid salary
for a period not exceeding fifteen (15) days shall be forfeited. Likewise, the
employer shall not induce the domestic worker to give up any part of the wages
by force, stealth, intimidation, threat or by any other means whatsoever.
- A unique provision
SEC. 29. Leave Benefits. – A domestic worker who has rendered at least one
(1) year of service shall be entitled to an annual service incentive leave of five
(5) days with pay: Provided, That any unused portion of said annual leave shall
not be cumulative or carried over to the succeeding years. Unused leaves shall
not be convertible to cash.
SEC. 30. Social and Other Benefits. – A domestic worker who has rendered
at least one (1) month of service shall be covered by the Social Security System
(SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home
Development Mutual Fund or Pag-IBIG, and shall be entitled to all the benefits
in accordance with the pertinent provisions provided by law.
Premium payments or contributions shall be shouldered by the employer.
However, if the domestic worker is receiving a wage of Five thousand pesos
(P5,000.00) and above per month, the domestic worker shall pay the
proportionate share in the premium payments or contributions, as provided by
law.
The domestic worker shall be entitled to all other benefits under existing laws.
SEC. 32. Termination of Service. – Neither the domestic worker nor the
employer may terminate the contract before the expiration of the term except for
grounds provided for in Sections 33 and 34 of this Act. If the domestic worker is
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unjustly dismissed, the domestic worker shall be paid the compensation already
earned plus the equivalent of fifteen (15) days work by way of indemnity. If the
domestic worker leaves without justifiable reason, any unpaid salary due not
exceeding the equivalent fifteen (15) days work shall be forfeited. In addition, the
employer may recover from the domestic worker costs incurred related to the
deployment expenses, if any: Provided, That the service has been terminated
within six (6) months from the domestic worker’s employment.
If the duration of the domestic service is not determined either in stipulation or by
the nature of the service, the employer or the domestic worker may give notice to
end the working relationship five (5) days before the intended termination of the
service.
The domestic worker and the employer may mutually agree upon written notice to
pre-terminate the contract of employment to end the employment relationship.
- Take note of this since it is very different with what is provided by the
Labor Code.
- Deployment expenses: Shouldering transportation fees.
SEC. 33. Termination Initiated by the Domestic Worker. – The domestic worker
may terminate the employment relationship at any time before the expiration of
the contract for any of the following causes:
(a) Verbal or emotional abuse of the domestic worker by the employer or any
member of the household;
(b) Inhuman treatment including physical abuse of the domestic worker by the
employer or any member of the household;
(c) Commission of a crime or offense against the domestic worker by the employer
or any member of the household;
(d) Violation by the employer of the terms and conditions of the employment
contract and other standards set forth under this law;
(e) Any disease prejudicial to the health of the domestic worker, the employer, or
member/s of the household; and
(f) Other causes analogous to the foregoing.
SEC. 34. Termination Initiated by the Employer. – An employer may terminate
the services of the domestic worker at any time before the expiration of the
contract, for any of the following causes:
(a) Misconduct or willful disobedience by the domestic worker of the lawful order
of the employer in connection with the former’s work;
(b) Gross or habitual neglect or inefficiency by the domestic worker in the
performance of duties;
(c) Fraud or willful breach of the trust reposed by the employer on the domestic
worker;
(d) Commission of a crime or offense by the domestic worker against the person
of the employer or any immediate member of the employer’s family;
(e) Violation by the domestic worker of the terms and conditions of the employment
contract and other standards set forth under this law;
(f) Any disease prejudicial to the health of the domestic worker, the employer, or
member/s of the household; and
(g) Other causes analogous to the foregoing.

Take Note: We do not have a regular employment when it comes to domestic
workers or kasambahay. They are not considered regular employee on fixed
period or contract. What is important is whether or not there is a valid cause for
termination, initiated by the worker or the employer as provided under Sections 33
and 34.
RIGHTS AND BENEFITS OF KASAMBAHAY
62
disposed of or distributed in accordance with his directions; or
Sells any goods, articles or materials to be processed or fabricated in or about a
home and then rebuys them after such processing or fabrication, either by himself
or through some other person.

1. Minimum wage
MATERNITY LEAVE
2. Other mandatory benefits, such as the daily and weekly rest periods
3. Service Incentive Leave
4. 13th month pay REPUBLIC ACT No. 11210 - also applies to employees in the public sector
5. Freedom from employer’s interference in the disposal of wages
6. Coverage under the SSS, PhilHEalth, and Pag-Ibig Laws
7. Standard of treatment REPUBLIC ACT No. 11210 “Expanded Maternity Leave in the Private
8. Board, lodging, and medical attendance Sector”
9. Right to privacy
10. Access to outside communication COVERAGE: Female employees who gave birth starting 11 March 2019
11. Access to education and training
12. Right to form, join or assist labor organization
13. Right to be provided a copy of the employment contract BENEFITS
14. Right to Certificate of Employment
15. Right to terminate the employment; and
16. Right to exercise their own religious beliefs and cultural practices. 105 DAYS 7 DAYS 15 DAYS 30 DAYS 60 DAYS
Paid leave Leave Additional Additional Paid leave
for live birth transferable paid leave for leave without for
HOMEWORKERS (regardless to fathers solo parents pay miscarriage
of the mode (not limited to under RA (Optional) and
of delivery) the father, it 8972 Emergency
can be termination of
Chapter IV anyone who pregnancy
can give
EMPLOYMENT OF HOMEWORKERS support to
the female
Article 153. Regulation of industrial homeworkers. The employment of worker)
industrial homeworkers and field personnel shall be regulated by the government
through the appropriate regulations issued by the Secretary of Labor and AMOUNT OF BENEFITS: Employer shall pay the salary differential which is the
Employment to ensure the general welfare and protection of homeworkers and difference between the full salary and the actual cash benefit received from SSS
field personnel and the industries employing them.
REQUIREMENTS:
What is Industrial Homework? A system of production under which the work for ● Female employee must have paid at least 3 monthly contributions to
an employer or contractor is carried out by a homeworkers at his/her home. the SSS in the 12-month period immediately preceding the semester
Materials may or may not be furnished by the employer or contractor. It is a of her childbirth, miscarriage, or emergency terminiation of pregnancy
decentralized form of production where there is ordinarily very little supervision or ● Female employee must have notified the employer of her pregnancy
regulation of methods of work. (Take note: it differs from a regular factory and the probable date of her childbirth
production since it is decentralized where there is little supervision on methods of
work)
● No prior notice required in case of emergency.
● The enjoyment of the maternity leave cannot be deferred.
What does home mean? Any home, house, apartment, or other premises used ● Can be credited at combinations of pre or post natal leave.
regularly in whole or in part as dwelling place except those situated within the ● As long as it does not exceed 105 days or 60 days, as the case may
premises or compound of an employer, contractor, or sub-contractor and the work be.
performed therein is under the supervision of the latter.

The employer has the duty to remit the necessary SSS, Philhealth, Pag-Ibig PATERNITY LEAVE ACT OF 1996
premiums. If there are complaints, these can be raised before the regional director Republic Act 8187
of DOLE.

Note: This is different from work from home. This only applies to industrial work.
There are materials that instead of working at the factory, you do it at home.
Article 154. Regulations of Secretary of Labor. The regulations or orders to be
issued pursuant to this Chapter shall be designed to assure the minimum terms
and conditions of employment applicable to the industrial homeworkers or field
personnel involved.
Article 155. Distribution of homework. For purposes of this Chapter, the
"employer" of homeworkers includes any person, natural or artificial who, for his
account or benefit, or on behalf of any person residing outside the country, directly
or indirectly, or through an employee, agent contractor, sub-contractor or any
other person:
Delivers, or causes to be delivered, any goods, articles or materials to be
processed or fabricated in or about a home and thereafter to be returned or to be
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LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020
SEC. 2. Notwithstanding any law, rules and regulations to the contrary, every
married male employee in the private and public sectors shall be entitled to a
paternity leave of seven (7) days with full pay for the first four (4) deliveries of
the legitimate spouse with whom he is cohabiting. The male employee applying
for paternity leave shall notify his employer of the pregnancy of his legitimate
spouse and the expected date of such delivery.
For purposes of this Act, delivery shall include childbirth or any miscarriage.
Purpose: To enable the husband to lend support to his wife during the period of
recovery or nursing to their newly-born child.
Limitation: It is only for the first four deliveries, legitimate spouse, whom the
husband is living together or cohabiting with. If they are not living together, the

father can still avail of this if the reason that they are not living together is because
of the occupation or work station to which the male employee is assigned to.
Delivery includes childbirth, miscarriage, or abortion (not illegal abortion).
This is without prejudice to the employer’s policy of allowing the employee to avail
of the benefit before or during delivery provided not more than 7 calendar days.
Take note: This is not convertible to cash.
Requirements:
● Employed at the time of delivery.
● Married or cohabiting with such spouse who gave birth at the time of birth
or miscarriage.
● Applied for paternity leave within a reasonable time from the expected
date of delivery or within that period as provided by the company rules
and regulations or the CBA.
SOLO PARENT LEAVE
Republic Act 8972
Section 8. Parental Leave. - In addition to leave privileges under existing laws,
parental leave of not more than seven (7) working days every year shall be
granted to any solo parent employee who has rendered service of at least one
(1) year.
Conditions:
● Must be a solo parent.
● One who has given birth as a result of rape or other crimes of chastity.
● In case of death of a spouse.
● If the spouse is obtained from criminal detention for at least one year.
● In case of physical or mental incapacity of the spouse as certified by a
public medical practitioner.
● Legal separation or separation de facto from the spouse for at least one
year.
● In cases of declaration of nullity of marriage or annulment with custody of
children.
● In case of abandonment of the other spouse for at least one year.
● In cases of those unmarried.
● Any person who solely provides parental care and support to a child
provided licensed as a foster parent by DSWD or he or she is duly
appointed as a legal guardian by the court.
● Any family member who assumes responsibility as the head of the family.
Requirements:
● Service of at least one year whether continuous or broken.
● Notify, within a reasonable time, the employer that the employee will avail
of it.
● A solo parent ID from the DSWD.
Take Note: No employer shall discriminate any solo parent employee with respect
to terms and conditions of employment on account of his/her being a solo parent.
LEAVE BENEFITS FOR WOMEN WORKERS
Republic Act 9710 (The Magna Carta for Women)
SECTION 18. Special Leave Benefits for Women. — A woman employee having
rendered continuous aggregate employment service of at least six (6) months for the
last twelve (12) months shall be entitled to a special leave benefit of two (2) months
with full pay based on her gross monthly compensation following surgery caused by
gynecological disorders.
● This is regardless of age and civil status.
● Requirement: Continuous, aggregate employment of at least 6 months for
the last 12 months.
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LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020
63
● Granted after the female employee has undergone surgery but without
prejudice to the employer allowing the employee to receive pay before or
during surgery.
● Non-cumulative and non-convertible to cash.
Gynecological disorders:
● Disorders that would require surgical procedures such as dilation involving
a surgery of the female reproductive organ as certified by a competent
physician.
LEAVE BENEFITS FOR WOMEN WORKERS
Republic Act 9262 (Anti-Violence Against Women and their Children Act of
2004)
Section 43. Entitled to Leave. – Victims under this Act shall be entitled to take a
paid leave of absence up to ten (10) days in addition to other paid leaves under
the Labor Code and Civil Service Rules and Regulations, extendible when the
necessity arises as specified in the protection order.
Any employer who shall prejudice the right of the person under this section shall
be penalized in accordance with the provisions of the Labor Code and Civil Service
Rules and Regulations. Likewise, an employer who shall prejudice any person for
assisting a co-employee who is a victim under this Act shall likewise be liable for
discrimination.
10 days is for the female employee to attend to medical concerns or legal concerns.
This can be exercised at the option of the employee.
Requirement: A Certification from the barangay chairman or councilor or prosecutor
or clerk of court that an action relative to this matter is pending. This is non-cumulative
and non-convertible.
Discussion: You would see that there is favor, not a total bias, in favor of the
employees. If you are an employer you should take into consideration these leaves
to which the employees are entitled to. At times, you cannot fault the employer that
they are giving these leaves to the employees who are entitled to such under the law.
At the same time, the employer needs to consider how the grant of such leaves will
affect the operation of the business.
ANTI-SEXUAL HARASSMENT ACT OF 1995
Republic Act 7877
Take note when is there sexual harassment.
SECTION 3. Work, Education or Training -Related, Sexual Harassment
Defined. – Work, education or training-related sexual harassment is committed
by an employer, employee, manager, supervisor, agent of the employer,
teacher, instructor, professor, coach, trainor, or any other person who, having
authority, influence or moral ascendancy over another in a work or training
or education environment, demands, requests or otherwise requires any sexual
favor from the other, regardless of whether the demand, request or requirement
for submission is accepted by the object of said Act.
(a) In a work-related or employment environment, sexual harassment is
committed when:
(1) The sexual favor is made as a condition in the hiring or in the employment,
re-employment or continued employment of said individual, or in granting said
individual favorable compensation, terms of conditions, promotions, or
privileges; or the refusal to grant the sexual favor results in limiting, segregating
or classifying the employee which in any way would discriminate, deprive
ordiminish employment opportunities or otherwise adversely affect said
employee;
(2) The above acts would impair the employee’s rights or privileges under
 64
existing labor laws; or

(3) The above acts would result in an intimidating, hostile, or offensive

environment for the employee.

(b) In an education or training environment, sexual harassment is

committed:

(1) Against one who is under the care, custody or supervision of the offender;

(2) Against one whose education, training, apprenticeship or tutorship is

entrusted to the offender;

(3) When the sexual favor is made a condition to the giving of a passing grade,
or the granting of honors and scholarships, or the payment of a stipend,
allowance or other benefits, privileges, or consideration; or

(4) When the sexual advances result in an intimidating, hostile or offensive

environment for the student, trainee or apprentice.

Any person who directs or induces another to commit any act of sexual
harassment as herein defined, or who cooperates in the commission thereof by
another without which it would not have been committed, shall also be held
liable under this Act.

SECTION 5. Liability of the Employer, Head of Office, Educational or

Training Institution. – The employer or head of office, educational or training
institution shall be solidarily liable for damages arising from the acts of sexual
harassment committed in the employment, education or training environment if
the employer or head of office, educational or training institution is informed of
such acts by the offended party and no immediate action is taken.

Under this Law, you can also file a separate action for civil aspect and criminal
aspect.

Libres v. NLRC

Held: There was no illegal suspension because it was based on established facts.

Republic Act No. 7877 was not yet in effect at the time of the occurrence of the act
complained of. It was still being deliberated upon in Congress when petitioner's
case was decided by the Labor Arbiter. As a rule, laws shall have no retroactive
effect unless otherwise provided, or except in a criminal case when their application
will favor the accused. Hence, the Labor Arbiter have to rely on the MEC report and
the common connotation of sexual harassment as it is generally as understood by
the public. Faced with the same predicament, the NLRC had to agree with the
Labor Arbiter. In so doing, the NLRC did not commit any abuse of discretion in
affirming the decision of the Labor Arbiter.

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LABOR STANDARDS · ATTY. JAZZIE SARONA-LOZARE · 2020
AMPATUAN · MASAPOL · with notes from SR 2019-2020