c.

LABOR LAW

i. BASIC PRINCIPLES

1. Why is the right to labor treated as the right to property?

A profession, trade or calling is a property right within the meaning of our constitutional guarantees.
One cannot be deprived of the right to work and right to make a living because these rights are property
rights, the arbitrary and unwarranted deprivation of which normally constitutes an actionable wrong.
(JMM Promotion and Management, Inc. vs. Court of Appeals, G.R. No.120095, August 5, 1996, J.
Kapunan)

2. Are the rules of procedure strictly applied in labor cases?

No. In labor cases, rules of procedure should not be applied in a very rigid and technical sense. They
are merely tools designed to facilitate the attainment of justice, and where their strict application would
result in the frustration rather than promotion of substantial justice, technicalities must be avoided.
Technicalities should not be permitted to stand in the way of equitably and completely resolving the
rights and obligations of the parties. Where the ends of substantial justice shall be better served, the
application of technical rules of procedure may be relaxed. (Millenium Erectors Corporation vs.
Magallanes, G.R. no. 184362, November 15, 2010, J. Carpio Morales)

ii. EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP; TESTS

3. What is the two-tiered test of employer-employee relationship?

The two-tiered test is composed of:

a. The putative employer’s power to control the employee with respect to the means and methods
by which the work is to be accomplished (control test); and
b. The underlying economic realities of the activity or relationship (broader economic reality test).

These two-tiered tests apply to cases where there are several parties alleged to be employers of one
individual. The determinant factor is economic dependency of such individuals. In other words, under
the economic reality test, the question to ask is - among the parties alleged to be the employer, to
whom is the individual economically dependent? (Francisco vs. NLRC, G.R. No. 170087 August 31,
2006).

4. State the elements of the four-fold test in determining the existence of employer-
employee relationship

a. The selection and engagement of the employee;

b. Payment of wages or salaries;
c. Exercise of the power of dismissal; or
d. Exercise of the power to control the employee's conduct . (Fuji Television Network, Inc. vs. Arlene
S. Espiritu, G.R. No. 204944-45, December 03, 2014)
 There is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers, social
security registration, appointment letters or employment contracts, payrolls, organization charts, and
personnel lists, serve as evidence of employee status (Marsman & Company, Inc., vs Rodil C. Sta.
Rita, G.R. No. 194765, April 23, 2018).

5. What kind of control is needed to establish an employer-employee relationship?

Under the control test, in order to establish an employer-employee relationship, the employer must
have reserved the right to control the employee as to the result of the work to be done and the means
and methods by which the same is to be accomplished ( Chan, Pre-week notes on Labor Law, 2018, p.
40).

Note: The power of control refers to the existence of the power and not necessarily to the actual
exercise thereof. It is not essential, in other words, for the employer to actually supervise the
performance of duties of the employee; it is enough that the former has the right to wield the power
(Equitable Banking Corporations vs. NLRC, G.R. No. 102467, June 13, 1997; Felicilda vs. Uy, G.R. No.
221241, September 14, 2016).

iii. TERMINATION OF EMPLOYMENT

6. What are the distinctions between Just Causes and Authorized Causes?

Just Causes Authorized Causes

The dismissal process is initiated by the employee.
Payment of separation pay is not required (Sec.
7, Rule I, Book VI, Title I, Omnibus Rules
Implementing the Labor Code).
For failure to comply with the due process
requirement in just cause dismissal, the employer
is liable to pay indemnity amounting to
Php30,000, which is tempered (Agabon vs. NLRC,
G. R. No. 158693, November 17, 2004).
The dismissal process is initiated by the employer.
Payment of separation pay is required subject to
certain exceptions (Art. 298, Labor Code as
amended).
For the violation of due process requirement by
the employer in authorized cause dismissal, he is
liable to pay indemnity in the amount of Php
50,000, which is stiffer (Jaka Food Processing
Corporation vs. Pacot, G.R. No. 151378, March
28, 2005).

7. What are the just causes under the Labor Code?

a. Article 297 [282] (Termination by the Employer) -which provides for the following grounds:
1. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;
2. Gross and habitual neglect by the employee of his duties;
3. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
4. Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
 5. Other causes analogous to the foregoing;

b. Article 279(a) [264(a)] (Prohibited Activities) - which provides for the termination of the
following:
1. Union officers who knowingly participate in an illegal strike and therefore deemed to have lost
their employment status; and
2. Any employee, union officer or ordinary member who knowingly participates in the commission
of illegal acts during a strike (irrespective of whether the strike is legal or illegal), is also deemed
to have lost his employment status;

c. Article 278(g) [263(g)] (National Interest Cases) - where strikers who violate orders,
prohibitions and/or injunctions as are issued by the DOLE Secretary or the NLRC, may be imposed
immediate disciplinary action, including dismissal or loss of employment status; and

d. Article 259(e) [248(e)] (Union Security Clause) - where violation of the union security
agreement in the CBA may result in termination of employment. Under this clause, the bargaining
union can demand from the employer the dismissal of an employee who commits a breach of union
security arrangement, such as failure to join the union or to maintain his membership in good
standing therein. The same union can also demand the dismissal of a member who commits an act
of disloyalty against it, such as when the member organizes a rival union.

8. What are just causes under established jurisprudence?

a. Violation of Company Rules and Regulations or Company Code of Discipline;

b. Theft of property owned by a co-employee as distinguished from company-owned property which
is considered serious misconduct;
c. Incompetence, inefficiency or ineptitude;
d. Failure to attain work quota;
e. Failure to comply with weight standards of employer; and
f. Attitude problem (Chan, Bar Reviewer on Labor Law, 2017) .

9. What are the conditions for the valid termination of employment due to union security
clause?

a. The union security clause is applicable;

b. The union is requesting for the enforcement of the union security provision in the CBA; and
c. There is sufficient evidence to support the Union’s decision to expel the employee from the union
or company (Inguillo vs. First Philippines Scales, Inc., G.R. No. 165407, June 5, 2009See also:
PICOP Resources, Inc. (PRI) vs. Anacleto Taneca et.al, G.R. No. 160828, 09 August 2010).

10. Juan Makilan was hired by Ting-Ting Trucking as a driver. Makilan claimed that while on
his way to work, the owner of Ting-Ting Trucking, Violet Ting, called to inform him to stop
reporting for work, prompting him to file a complaint for illegal dismissal. Ting claimed
that Makilan abused the trust and confidence reposed on him after learning from Chavy,
Makilan’s helper, the several anomalies Makilan had committed while in the performance
of his duties, namely: misappropriating fuel allowance, theft of fuel and corn, and sale of
spare parts while in the performance of his duties. Such anomalies were also confirmed
by Ting’s secretary and the other employees. Makilan claimed that Chavy’s statements
 against him were biased and baseless, however, he was not able to present proof to show
otherwise. Was Makilan’s dismissal valid?

Yes. An employee can be dismissed from employment only for a valid cause. Serious misconduct is
one of the just causes for termination under Article 297 of the Labor Code. For serious misconduct to
be a just cause for dismissal, the concurrence of the following elements is required: (a) the misconduct
must be serious; (b) it must relate to the performance of the employee's duties showing that the
employee has become unfit to continue working for the employer; and (c) it must have been performed
with wrongful intent. Here, all of the foregoing requisites have been duly established. While there may
be no direct evidence to prove that respondent actually committed the offenses charged, there was
substantial proof of the existence of the irregularities committed by him. The standard of substantial
evidence is satisfied where the employer has reasonable ground to believe that the employee is
responsible for the misconduct and his participation therein renders him unworthy of the trust and
confidence demanded by his position, as in this case (Ting Trucking vs. Makilan, G.R. No. 216452,
June 20, 2016, J. Perlas-Bernabe).

11. Grace was employed by BIR Multi-Purpose Cooperative (BIRMPC) as cashier. Her duties,
among others, were to receive remittances and payments, deposit all collections daily,
record fixed deposits, determine cash positions, issue checks for loans, collect cash
receipts, and perform such other duties that the general manager may assign to her.
Subsequently, she was dismissed from service on the ground of loss of trust and
confidence for her failure to deposit checks on due dates. She then filed a complaint for
illegal dismissal.

a. Does Grace hold a position requiring trust and confidence?

Yes, a company cashier is a position that requires trust and confidence. Jurisprudence provides for
two classes of positions of trust. First, managerial employees whose primary duty consists of the
management of the establishment in which they are employed or of a department or a subdivision
thereof, and to other officers or members of the managerial staff; and second, fiduciary rank-and-
file employees or those who, in the normal exercise of their functions, regularly handle significant
amounts of money or property. These employees, though rank-and-file, are routinely charged with
the care and custody of the employer's money or property, and are thus classified as occupying
positions of trust and confidence.

Being a cashier charged with the collection of remittances and payments, Grace, undoubtedly
occupied a position of trust and confidence.

b. Was her dismissal valid on the ground of loss of trust and confidence?

Yes. The requisites for the existence of such ground are as follows: (a) the employee concerned
holds a position of trust and confidence; and (b) he performs an act that would justify such loss of
trust and confidence.

In this case, one of the infractions that BIRMPC cited in justifying Grace’s dismissal is her failure to
deposit checks on due dates. The cashier failed to regularly report Post-Dated Checks received and
 did not observe proper monitoring of checks due to be deposited. Grace’s failure to deposit the
checks on their due dates means that she failed to deliver on her task to safeguard BIRMPC's
finances. It is also well to note that she was not given any discretion to determine whether or not
to deposit the checks. Under these circumstances, BIRMPC had ample reason to lose the trust and
confidence it reposed upon her and thereby, terminate her employment (Aluag vs. BIRMPC, G.R.
No. 228449, December 6, 2017, J. Perlas-Bernabe).

12. What are the authorized causes under the Labor Code?

a. Article 298 [283] (Business-related causes) –

1. Installation of labor-saving device;
2. Redundancy;
3. Retrenchment;
4. Closure or cessation of business operations not due to serious business losses or financial
reverses; and
5. Closure or cessation of business operations due to serious business losses or financial
reverses; and
b. Article 299 [284] (Health-related causes)

13. What are these authorized causes under Article 298 [293]?

1. Installation of labor-saving devices — The reduction of the number of workers in any

workplace made necessary by the introduction of labor-saving machinery or devices.
2. Redundancy — The condition when the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise or superfluous.
3. Retrenchment — The economic ground for dismissing employees and is resorted to primarily to
avoid or minimize business losses.
4. Closure or Cessation of Operation — The complete or partial cessation of the operations and/or
shut-down of the establishment of the employer (Sec. 4, D.O. No. 147-15).

14. What are the requisites to effect a valid authorized cause under Articles Article 298 [293]
and 299 [284]?

1. Installation of labor-saving devices

a. There must be introduction of machinery, equipment or other devices;
b. The introduction must be done in good faith;
c. The purpose for such introduction must be valid such as to save, cost, enhance efficiency,
and other justifiable economic reasons;
d. There is no other option available to the employer than the introduction of machinery,
equipment or device and the consequent termination of employment of those affected
thereby; and
e. There must be fair and reasonable criteria in selecting employees to be terminated (Sec.
5.4(a), D.O. No. 147-15).
2. Redundancy
a. There must be superfluous positions or services of employees;
b. The positions or services are in excess of what is reasonably demanded by the actual
requirements of the enterprise to operate in an economical and efficient manner;
c. There must be good faith in abolishing redundant positions;
 d. There must be fair and reasonable criteria in selecting the employees to be terminated;
and
e. There must be an adequate proof of redundancy such as but not limited to the new staffing
pattern, feasibility studies/proposal, on the viability of the newly created positions, job
description and the approval by the management of the restructuring (Sec. 5.4(b), D.O.
No. 147-15).
3. Retrenchment
a. The retrenchment must be reasonably necessary and likely to prevent business losses;
b. The losses, if already incurred, are not merely de minimis, but substantial, serious, actual
and real, or if only expected, are reasonably imminent;
c. The expected or actual losses must be proved by sufficient and convincing evidence;
d. The retrenchment must be in good faith for the advancement for the advancement of its
interest and not to defeat or circumvent the employees’ right to security of tenure; and
e. There must be fair and reasonable criteria in ascertaining who would be dismissed and
who would be retained among the employees, such as status, efficiency, seniority, physical
fitness, age, and financial hardship for certain workers (Sec. 5.4(c), D.O. No. 147-15).
4. Closure or Cessation of Operation
a. There must be a decision to close or cease operation of the enterprise by the management;
b. The decision was made in good faith; and
c. There is no other option available to the employer except to close or cease operations
(Sec. 5.4(d), D.O. No. 147-15).
5. Disease
a. The employee must be suffering from any disease;
b. The continued employment of the employee is prohibited by law or prejudicial to his/her
health as well as to the health of his/her co-employees; and
c. There must be certification by a competent public health authority that the disease is
incurable within a period of six (6) months even with proper medical treatment (Sec.
5.4(e), D.O. No. 147-15).

15. What is the “Last-In, First-Out (LIFO) Rule”?

When there are two employees occupying the same position in the company affected by the
retrenchment program, the last one employed will necessarily be the first to go (Maya Farms Employees
Organization v. NLRC, G.R. No. 106256, December 28, 1994).

In cases of labor-saving devices, redundancy, and retrenchment, this rule shall apply except when an
employee volunteers to be separated from employment (Sec. 5.4, D.O. No. 147-15).

16. What is the duty of the employer when the employee, who was afflicted with disease, was
cured within six months?

If the disease or ailment can be cured within the period, the employee shall not terminate the employee
but shall ask the employee to take a leave of absence. The employer shall reinstate such employee to
his former position immediately upon the restoration of his normal health (Sec. 8, Book VI, Title I,
Omnibus Rules Implementing the Labor Code).
17. What is the Deoferio Doctrine?

This doctrine states that there are two requisites that must be complied with before termination of
employment due to disease may be justified, namely:

a. Substantive requisites; and

b. Procedural requisites.

The following are the three (3) substantive requisites:

a. An employee has been found to be suffering from any disease;

b. His continued employment is prohibited by law or prejudicial to his health, as well as to the health
of his co-employees; and
c. A competent public health authority issues a medical certificate that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with proper
medical treatment.

Meanwhile, the following are the Procedural Requirements or Two-Notice Requirement:

a. The notice to apprise the employee of the ground for which his dismissal is sought; and
b. The notice informing the employee of his dismissal, to be issued after the employee has been
given reasonable opportunity to answer and to be heard on his defense (Deoferio vs. Intel
Technology Philippines, Inc. G.R. No. 202996, June 18, 2014).

18. In 2005, Fuji Television Network (Fuji) hired Arlene as a news producer under a fixed-
term contract, which was renewed on a yearly basis. Sometime in 2009, Fuji, after having
learned that Arlene was diagnosed with lung cancer, informed the latter that her contract
will no longer be renewed. Fuji argued that it would be difficult for her to perform her job
because of her medical condition. Immediately thereafter, Arlene’s service was
terminated after Fuji asked her to sign a non-renewal contract. Arlene admitted that she
did sign said contract otherwise Fuji will withhold her salaries and other benefits. Was
Arlene’s dismissal valid? Explain.

No. Article 294 of the Labor Code provides that no employee shall be dismissed, unless there are just
or authorized cause and only after compliance with procedural and substantive due process. In
connection with this, Article 299 of the Labor Code provides two requirements for disease as a valid
ground for dismissal, to wit: (1) the employee’s disease cannot be cured within six (6) months and
his continued employment is prohibited by law or prejudicial to his health as well as to the health of
his co-employees; and (2) certification issued by a competent public health authority that even with
proper medical treatment, the disease cannot be cured within six (6) months.

Here, the manner by which Fuji informed Arlene that her contract would no longer be renewed is
tantamount to constructive dismissal. To make matters worse, Arlene was asked to sign a letter of
resignation prepared by Fuji. Indeed, there is no evidence showing that Arlene was accorded due
process because after informing her employer of her lung cancer, she was not given the chance to
present medical certificates. Fuji immediately concluded that Arlene could no longer perform her
 duties. Thus, Arlene’s dismissal was not vaild for Fuji’s failure to comply with due process (Fuji
Television Network, Inc. vs. Espiritu, G.R. Nos. 204944-45, December 3, 2014).

19. What are the kinds of procedural due process that may be asserted in labor cases?

a. Statutory Due Process – This refers to the due process provision in Article 292(b) of the Labor
Code, which provides: “Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause and without prejudice
to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment” (Agabon vs. NLRC, G. R. No. 158693, November 17, 2004).

b. Contractual Due Process – This refers to the specific company policy and procedure in
evaluating the performance of an employee. The Supreme Court has ruled that a company policy
partakes of the nature of an implied contract between the employer and employee (Abbott
Laboratories vs. Alcaraz, G. R. No. 192571, July 23, 2013).

c. Constitutional Due Process - This refers to Section 1, Article III of the 1987 Constitution which
provides: “No person shall be deprived of life, liberty, or property without due process of law xxx.”
Note: Constitutional due process is generally not invoked in labor cases.

20. What is the procedural due process that may be invoked against the employer during the
investigation of the employee’s administrative case at the company-level that may lead
to his dismissal?

Only statutory due process and contractual due process may be invoked by the employee during the
investigation in the administrative level. In Agabon v. NLRC, compliance with the statutorily-prescribed
procedural due process alone would suffice. However, in the 2013 case of Abbott Laboratories
Philippines vs. Alcaraz, it is now required that in addition to compliance with the statutory due process,
the employer should still comply with the due process procedure prescribed in its own company rules.
The employer’s failure to observe its own company-prescribed due process/contractual due process in
addition to statutory due process will make it liable to pay an indemnity in the form of nominal damages
(Chan, Bar Reviewer on Labor Law, 2017).

Note: Constitutional due process cannot be invoked against the private employer but only against the
State or government as represented by Labor Arbiters, NLRC, CA and SC.

21. Are the twin-notice requirement and hearing applicable to authorized cause termination?

No. Due process in authorized cause termination is deemed complied with upon the separate and
simultaneous service of a written notice of the intended termination to both:

a. the employee to be terminated; and

 b. the appropriate DOLE Regional Office, at least one (1) month before the intended date of the
termination specifying the ground/s therefor and the undertaking to pay the separation pay
required under Article 283 of the Labor Code.

22. Punto works as a Marketing Professional for Toyota Shaw. Punto was asked to sell seven
(7) vehicles as his monthly quota. Punto failed to achieve the monthly quota, as a result,
Toyota sent him a Notice to Explain. Punto was also able to submit a letter explaining his
side but he failed to appear during the hearing. Subsequently, Toyota sent Armando a
Notice of Termination, dismissing him on the ground of insubordination for his failure to
attend the scheduled hearing and justify his absence. Assuming that Toyota has a valid
cause for terminating Punto, did Toyota properly observe procedural due process in
terminating him? What is the effect of non-observance of procedural due process?

No. At first glance, it seemed like Toyota afforded Punto procedural due process, considering that:
Puncto was given a Notice to Explain. Likewise, Toyota scheduled a hearing regarding the charge
stated in the Notice to Explain. Punto was also able to submit a letter explaining his side, albeit he
failed to attend said hearing and Toyota served a written Notice of Termination informing him of his
dismissal from work. While Toyota afforded Punto the opportunity to refute the charge of gross
inefficiency against him, the latter was completely deprived of the same when he was dismissed for
gross insubordination - a completely different ground from what was stated in the Notice to Explain.
As such, Punto's right to procedural due process was violated.

In view of Toyota’s non-compliance with procedural due process in terminating Punto, Toyota shall be
liable for nominal damages. But the dismissal shall remain (Puncia vs. Toyota Pasig, G.R. No. 214399,
June 28, 2016, J. Perlas-Bernabe).
23. ABC filed with the Department of Labor and Employment a notice of temporary suspension
of operations for one and posted, in conspicuous places within the company premises,
notices of its permanent closure and cessation of business operations due to serious
economic losses and financial reverses. ABC offered separation benefits of one-half (½)
month pay for every year of service to each of its employees. 234 employees of ABC
accepted the offer, received the said sums and executed quitclaims. The other employees
refused the offer and filed a complaint for unfair labor practice and illegal closure.

a. Are the refusing employees entitled to separation pay?

No. Art. 297 of the Labor Code does not obligate an employer to pay separation benefits when
the closure is due to serious losses. To require an employer to be generous when it is no longer
in a position to do so, would be unduly oppressive, unjust, and unfair to the employer.

b. Did ABC comply with the notice requirement of Art. 297[283] of the Labor Code?

No. The notice requirement under Art. 297 was not complied with, which provides that before any
employee is terminated due to closure of business, it must give a one (1) month prior written
notice to the employee and to the DOLE. According to jurisprudence, it is the personal right of the
employee to be personally informed of his proposed dismissal as well as the reasons therefor; and
such requirement of notice is not a mere technicality or formality which the employer may dispense
with. Since the purpose of previous notice is to, among others, give the employee some time to
 prepare for the eventual loss of his job, the employer has the positive duty to inform each and
every employee of their impending termination of employment. To this end, an employer’s act of
posting notices to this effect in conspicuous areas in the workplace is not enough. Verily, for
something as significant as the involuntary loss of one’s employment, nothing less than an
individually-addressed notice of dismissal supplied to each worker is proper (Sangwoo vs. Sangwoo
Phil. Inc. Employees Union, G.R. No. 173154, December 9, 2013, J. Perlas-Bernabe).

24. What are the seven (7) standard situations in termination cases?

1. The dismissal was for a just cause under Article Termination is LEGAL
282, for an authorized cause under Article 283, or
for health reasons under Article 284, and due
process was observed.
2. The dismissal was without a just or authorized Termination is ILLEGAL
cause but due process was observed.
3. The dismissal was without a just or authorized Termination is ILLEGAL
cause and due process was not observed.
4. The dismissal was for a just or authorized cause Termination is LEGAL but the employer is
but due process was not observed. liable to pay indemnity in the form of
nominal damages. The amount of nominal
damages varies from case to case:
If
If dismissal is for
dismissal
an authorized
is for a
cause
just cause
P30,000.00 P50,000.00 (Penalty
(Per Agabon is stiffer per Jaka
Case Food Processing
because Corporation vs.
employee Pacot, G.R. No.
has 151378, March 28,
committed a 2005, because
wrongful employee dismissed
act) has not committed
any wrongful act)
5. The dismissal was for a non-existent cause. Termination is ILLEGAL
6. The dismissal was not supported by any evidence Termination is NEITHER LEGAL NOR
of termination. ILLEGAL as there is no dismissal to speak
of. Remedy is reinstatement but without
backwages. (Asia Fancy Plywood Corp. vs.
NLRC, G.R. No. 113099, January 20, 1999)

7. The dismissal was brought about by the Termination is LEGAL

implementation of a law.
25. When is preventive suspension justified?

Preventive suspension is justified when the employee’s continued employment poses a serious and
imminent threat to the life or property of the employer or of the employee’s co-workers (Section 8,
Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code).

26. JFCI hired Loralei as its Consultant Program Coordinator. An Employment Contract was
executed with Loralei for a term of one year, with the condition that either party may
terminate the same “at any time by giving four weeks written notice.” On July 13, 2016,
JFCI, without any reason, enforced the termination clause by informing Loralei that they
are terminating her services as Consultant Program Coordinator, effective August 16,
2016. Was the dismissal valid?

No. The contract entered into by JFCI and Loralei is a fixed-term employment contract, covering a
period of one year. The peculiar feature, however, of this contract lies in its termination clause which
reads that either party may terminate the same “at any time by giving four weeks written notice.”
While said clause is silent on the requirement of a legal cause for the same to be operative, the
fundamental principle is that the law is read into every contract. Hence, the contract’s termination
clause should not be interpreted as a form of blanket-license by which each of the parties may just
abdicate the contract at will. Rather, it is a clause which allows any of the parties to pre-terminate the
employment contract within the stipulated fixed-term period of one year, provided that the party
invoking the same has: (a) a legal cause for terminating it; and (b) notifies the other party in writing
four weeks prior to the intended date of termination.

Here, there is no showing that there was a legal cause to support the enforcement of the termination
clause. Failure to show such is repugnant to the basic tenet in labor law that no employee may be
terminated except for just or authorized cause. Hence, Loralei was illegally dismissed (Halili vs.
JFCI, G.R. No. 194906, September 9, 2015, J. Perlas-Bernabe).

27. Abot hired Pearl as Regulatory Affairs Manager on a probationary basis. Abot’s procedure
mandates, that the job performance of a probationary employee should be formally
reviewed and discussed with the employee at least twice: first on the third month and
second on the fifth month from the date of employment. Three months in her probationary
employment with Abot, Pearl was called to a meeting with Abot’s officers where she was
informed that she failed to meet the regularization standards for the position of
Regulatory Affairs Manager. The letter detailed the reasons for Pearl’s termination –
particularly, that she: (a) did not manage her time effectively; (b) failed to gain the trust
of her staff and to build an effective rapport with them; (c) failed to train her staff
effectively; and (d) was not able to obtain the knowledge and ability to make sound
judgments on case processing and article review which were necessary for the proper
performance of her duties. Pearl felt that she was unjustly terminated from her
employment and thus filed a complaint for illegal dismissal, alleging that she was not
informed of the reasonable standards to qualify her as a regular employee. On the
contrary, Abot’s officers maintained that Pearl was validly terminated from her
probationary employment given her failure to satisfy the prescribed standards for her
regularization which were made known to her at the time of her engagement. Was Pearl’s
dismissal valid?
 Yes. A probationary employee, like a regular employee, enjoys security of tenure. Thus, the services
of an employee who has been engaged on probationary basis may be terminated for any of the
following: (a) a just cause; (b) an authorized cause; or (c) when he fails to qualify as a regular
employee in accordance with the reasonable standards made known by the employer to the employee
at the time of the engagement. If the employer fails to comply with the communication of the
regularization standards to the probationary employee at the time of the probationary employee’s
engagement, the employee is deemed as a regular and not a probationary employee. The exception
to the foregoing is when the job is self-descriptive in nature, for instance, in the case of maids, cooks,
drivers, or messengers. Here, Abot complied with the above-stated requirements. Abot clearly
conveyed to Pearl that she was a probationary employee, as well as her duties and responsibilities as
Regulatory Affairs Manager prior to, during the time of her engagement, and during the incipient
stages of her employment. Pearl’s status as a probationary employee and her consequent dismissal
must stand (Abbott Laboratories Philippines vs. Alcaraz, G.R. No. 192571, July 23, 2013, J. Perlas-
Bernabe).

28. Distinguish illegal dismissal and constructive dismissal.

In illegal dismissal, the employer openly shows his intention to dismiss the employee. In fact, the
employer, in compliance with due process, asks the employee to explain why he should not be
dismissed for committing a wrongful act and he is given due process prior to terminating him. On the
other hand, constructive dismissal is an employer’s act amounting to dismissal but made to appear
as if it were not – a dismissal in disguise. In most cases of constructive dismissal, the employee is
allowed to continue to work, but is simply reassigned, demoted, or his pay diminished without a valid
reason to do so. It does not always involve forthright dismissal or diminution in rank, compensation,
benefit and privileges. There may be constructive dismissal if an act of clear discrimination, insensibility
or disdain by an employer becomes so unbearable on the part or the employee that it could foreclose
any choice by him except to forego his continued employment (Hyatt Taxi Services case, G.R. No.
143204, June 26, 2001).

29. What is forced resignation?

The employee is made to do or perform an involuntary act, that is, the submission or tender of
resignation letter meant to validate the action of the employer in inveigling, luring or influencing or
practically forcing the employee to resign. It is therefore a form of involuntary resignation (Chan, Bar
Reviewer on Labor Law, 2017, p.50).

30. Girly is the Chief Operating Officer (COO) of STI College Makati. Subsequently, STI College
Makati was absorbed by STI, Inc. STI, Inc. then informed Girly to vacate her position as
COO as she was being transferred as Compliance Manager as a result of its decision to
restructure and streamline its operations. However, Girly found out that another person,
Monico, was appointed to her former position. Girly claims that she was constructively
dismissed. Is she correct?

Yes. Constructive dismissal exists where there is cessation of work because continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a diminution
 in pay and other benefits. In cases of a transfer of an employee, the rule is settled that the employer
is charged with the burden of proving that its conduct and action are for valid and legitimate grounds
such as genuine business necessity and that the transfer is not unreasonable, inconvenient or
prejudicial to the employee. If the employer cannot overcome this burden of proof, the employee’s
transfer shall be tantamount to unlawful constructive dismissal. In the present case, the position of
COO was never abolished and that Girly’s appointment to another position was not shown to be a
matter of necessity. Evidently, she became the subject of an illegal constructive dismissal in the guise
of a transfer (Ico vs. STI, G. R. No. 185100, July 9, 2014).

31. Janet was hired by CABI as a Purchasing Assistant, and eventually, promoted her to the
position of Purchasing Officer. Janet was then confronted by Antonio Chan, owner of
CABI, on the propriety of the delivery of a machine part via air freight in lieu of a
previously approved sea freight. Later that day, Janet received a letter signed by Chan
informing her that she had been committing various purchasing policy violations over the
past 12 months which are very unfavorable to CABI, and that the management could no
longer turn a blind eye on such violations; as such, she should tender her immediate
resignation from CABI. Janet then received another letter, this time from CABI's legal
officer, following up the former's action regarding CABI’s letter. Janet was then
constrained to draft a resignation letter. Janet then filed a complaint claiming that he was
constructively dismissed because her employers from CABI forced her to resign. Was
there constructive dismissal in this case?

None. Constructive dismissal exists where there is cessation of work because continued employment
is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a
diminution in pay and other benefits. Aptly called a dismissal in disguise or an act amounting to
dismissal but made to appear as if it were not, constructive dismissal may, likewise, exist if an act of
clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it could foreclose any choice by him except to forego his continued employment. Here,
Janet was given the option to voluntarily resign from CABI, instead of dealing with an investigation
which might result in her dismissal. Verily, CABI’s decision to give Janet a graceful exit rather than to
file an action for redress is perfectly within the discretion of the former; as it is not uncommon that
an employee is permitted to resign to avoid the humiliation and embarrassment of being terminated
for just cause after the exposure of her malfeasance. Thus, CABI did not constructively dismiss Janet;
but rather, the latter voluntarily resigned from her job in order to avoid a full-blown administrative
trial regarding her misdeeds which could potentially result in her termination for just cause. While it
may be said that she did not tender her resignation wholeheartedly, circumstances of her own making
did not give her any other option but to voluntarily do so (CABI vs. Siason, G. R. No. 215555, July 29,
2015, J. Perlas-Bernabe).

32. What are the reliefs of an employee who was illegally dismissed?

As a general rule, an illegally dismissed employee is entitled to the following:

a. Reinstatement OR separation pay in lieu of reinstatement, if reinstatement is not viable; and

b. Payment of full backwages.
 However, the doctrine on strained relations cannot be applied indiscriminately since every labor dispute
almost invariably results in “strained relations”; otherwise, reinstatement can never be possible.
Strained relations must be demonstrated as a fact and adequately supported by substantial evidence
(Holcim Philippines, Inc. vs. Obra, G.R. No. 220998, August 8, 2016) .

33. What is the Doctrine of Strained Relations?

When the employer can no longer trust the employee and vice-versa, reinstatement could not
effectively serve as a remedy. This applies only to (1) positions which require trust and confidence, or
(2) managerial employees. It does not apply to rank-and-file employees (Globe-Mackay Cable and
Radio Corporation vs. NLRC, G.R. No. 82511, March 3, 1992).

34. When may reinstatement of an illegally dismissed employee without backwages be

considered proper?

As a general rule, an illegally dismissed employee is entitled to reinstatement (or separation pay, if
reinstatement is not viable) and payment of full backwages. An exception is the reinstatement of the
employee without backwages on account of: (a) the fact that the dismissal of the employee would be
too harsh of a penalty; and (b) that the employer was in good faith in terminating the employee.

Only employees discriminately dismissed are entitled to backpay (Integrated Microelectronics, Inc. vs.
Pionilla, G.R. No. 200222, August 28, 2013).

35. What is the new rule on reinstatement pending appeal abandoning the refund doctrine?

The employer is given (2) options under the law, that is, to reinstate the employee actually or in the
payroll. If the Supreme Court finally finds legal dismissal and sets aside the decision a quo finding
illegal dismissal, the employee reinstated in the payroll is not required to reimburse the salaries
received pending appeal because the principle of social justice renders inapplicable to the civil law the
doctrine of unjust enrichment (Garcia vs. PAL, G.R. 164856, January 20, 2009).

36. What is the prescriptive period for filing an illegal dismissal complaint?

The prescriptive period for filing an illegal dismissal complaint is four years from the time the cause of
action accrued. This is pursuant to Art. 1146 of the Civil Code which governs an action based upon an
injury to the rights of a plaintiff. Indeed, when one is arbitrarily and unjustly deprived of his job or
means of livelihood, the action instituted to contest the legality of one’s dismissal from employment
constitutes, in essence, an action predicated “upon an injury to the rights of the plaintiff” (Arriola vs.
Pilipino Star Ngayon, Inc., G. R. No. 175689, August 13, 2014).

37. Juan, an employee of Maroons Company, files an illegal dismissal case against Maroons
Company. In its defense, Maroons Company contends that Juan was not dismissed but
actually abandoned his work. The Labor Arbiter (LA) found that there was neither a
dismissal nor abandonment. The LA also pronounced that there were strained relations
between the parties, thus, it ordered Maroons Company to pay Juan a separation pay in
lieu of reinstatement. Was the award of separation pay proper?
 No. Liability for the payment of separation pay is but a legal consequence of illegal dismissal where
reinstatement is no longer viable or feasible. As a relief granted in lieu of reinstatement, it goes without
saying that an award of separation pay is inconsistent with a finding that there was no illegal dismissal.
This is because an employee who had not been dismissed, much less illegally dismissed, cannot be
reinstated. Moreover, as there is no reinstatement to speak of, the invocation of the doctrine of
strained relations to support the award of separation pay was not proper (HSY Marketing Ltd., Co. vs.
Villastique, G.R. No. 219569, August 17, 2016, J. Perlas-Bernabe).

38. Under what circumstances or instances may an employee who is found to have been
illegally dismissed and, therefore, entitled to reinstatement, be nevertheless, NOT ordered
reinstated but merely awarded (a) separation pay in lieu of reinstatement and (b) back
wages?

An employee who is found to have been illegally dismissed shall be awarded separation pay in lieu of
reinstatement if reinstatement is no longer viable in view of the strained relations between the
employee and his employer (Valenzuela vs Alexandra Mining , G.R. No. 222419, October 5, 2016).
Also, when reinstatement is no longer feasible in view of the advanced age of the employees who
were illegally dismissed, they should instead receive separation pay (Benguet Corporation vs. NLRC
and Felizardo A. Guianan, G. R. No. 124166, Nov. 16, 1999).

39. Quality Guardians Services hired Raffy Quinto as a security guard. Quality Guardians
placed Quinto on a floating status for 11 months. Due to the long period of remaining on
floating status, Quinto filed a complaint against Quality Guardians for illegal dismissal.
Will the complaint prosper?

Yes. The act of placing Quinto on a floating status for more than 6 months constitutes an illegal
dismissal. Placing a security guard in temporary "off-detail" or "floating status" is part of management
prerogative of the employer-security agency and does not, per se, constitute a severance of the
employer-employee relationship. However, being an exercise of management prerogative, it must be
exercised in good faith - that is, one which is intended 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 employer-security agency should bear the burden of proving that
there are no posts available to which the security guard temporarily out of work can be assigned.
Furthermore, the security guard must not remain in such status for a period of more than six (6)
months; otherwise, he is deemed terminated (Quillopa, vs. Quality Guards Services and Investigation
Agency, G.R. No. 213814, December 2, 2015, J. Perlas-Bernabe).

40. X, Y, and Z were employed by ABCL, a common carrier engaged in transporting cargoes to
and from the different parts of the world. However, after some time they tendered their
resignation letter upon belief that their company is downsizing due to productivity and
profitability volume. X, Y, and Z also signed quitclaims after their separation pay and other
benefits were given. However, after 15 months, they filed Complaints for Illegal Dismissal
alleging that their consent to resign was not voluntarily given but obtained through
mistake and fraud. Decide.
 The complaints for illegal dismissal will not prosper. Resignation is the formal pronouncement or
relinquishment of an office. The overt act of relinquishment should be coupled with intent to relinquish,
which intent could be inferred from the acts of the employee before and after the alleged resignation.
In the present case, it appears that the employees, on their own volition, decided to resign from their
positions when they tendered their resignation letter (Auza, Jr. vs. MOL Philippines, Inc., G. R. No.
175481, 21 November 2012).

iv. REQUIREMENTS FOR VALID LABOR-ONLY CONTRACTING (SECTION 8, DO 174-17)

41. When is there labor-only contracting?

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 [Art. 106(4), Labor Code].

42. When is contracting or subcontracting allowed?

Contracting or subcontracting arrangements 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. (Section 8, Department Order No. 174-17)

v. RIGHTS OF EMPLOYEES AND OF LABOR ORGANIZATIONS; MEMBERSHIP IN UNIONS

Right to self-organization

43. How does the concept of the government employees’ right of self-organization differ from
that of employees in the private sector?

The private sector employees’ right of self-organization includes the right to deal and negotiate with
their respective employers in order to fix the terms and conditions of employment and also, to engage
in concerted activities for the attainment of their objectives, such as strikes, picketing or boycotts.
 Meanwhile, the right of government employees to self-organization is not regarded as available for
“purposes of collective bargaining,” but simply for the furtherance and protection of their interests
(Arizala vs. CA, G. R. No. 43633-34, September 14, 1990).

44. Are all rank-and-file employees eligible to join a union?

No. As an exception, rank-and-file employees who have access to confidential information related to
labor relations are not eligible to join a union because said employees are considered as confidential
employees. The Labor Code does not directly prohibit confidential employees from engaging in union
activities. However, under the doctrine of necessary implication, the disqualification of managerial
employees equally applies to confidential employees. This confidential-employee rule justified
exclusion of confidential employees because in the normal course of their duties, they become aware
of management policies relating to labor relations (Sugbuanon Rural Bank, Inc. vs. Laguesma, G. R.
No. 116194, February 2, 2000).

45. Who cannot join a labor organization?

a. Supervisors cannot join a rank-and-file union, co-mingling is prohibited;

b. Employees-members of a cooperative cannot join a labor organization. An employee cannot
bargain with himself or his co-ownerConfidential employees performing managerial functions;
c. Confidential employees who have access to confidential matters of persons who exercise
managerial functions in the field of labor relations (NATU vs. Torres, G.R. No. 93468, December
29, 1994).

NOTE: However, confidential employees without access to confidential labor relations matters
can join labor organizations;

d. In the government sector, the following cannot form or join a rank and file union:
1. Members of the AFP, PNP, BJMP, BFP; and
2. High level employees exercising managerial function (Executive Order 180);
e. Alien employees, unless their country extends the right to self-organization and join or assist labor
unions for purposes of collective bargaining to Filipino workers (D.O. 40-03); and
f. Managerial employees (Article 251, Labor Code).

Rights of labor organizations

46. What are the requisites for validity of union and special assessments?

The following requisites must concur in order for union dues and special assessments for the union’s
incidental expenses, attorney’s fees and representation expenses to be valid, namely:

a. Authorization by a written resolution of the majority of all members at the general

membership meeting duly called for that purpose;
b. Secretary’s record of the minutes of said meeting which must include the:
1. List of members present;
2. Votes cast;
 3. Purpose of the special assessments;
4. Recipient of such assessments; and
c. Individual written authorizations for check-off duly signed by the employees concerned (Art. 250
[241], Labor Code, as amended).

47. X is employed by A Company where AA Employees Union is the recognized exclusive

bargaining agent. Jacob is a member of the rival union AB-EU but he receives the benefits
under the CBA that AA-EU had negotiated with the company.

AA-EU assessed X a fee equivalent to the dues and other fees paid by its members but
Jacob insisted that he has no obligation to pay said dues and fees because he is not a
member and he has not issued an authorization to the collection. Is X’s claim meritorious?

No. The fee collected from X takes the form of an agency fee. The collection of agency fee in an
amount equivalent to union dues and fees from employees who are not union members is recognized
under Art. 248(e) (now Art 259 [248], Labor Code, as amended). The union may collect such fees
even without any written authorization from the non-union member employees, if said employees
accept the benefits resulting from the CBA (Del Pilar Academy vs. Del Pilar Academy Employees Union,
G.R. No. 170112, April 30, 2008).

48. In case there is an absence of a stipulation for agency fee, can the union exercise its right
to a check-off?

Yes. The union’s right to a check-off of any fee, being a legal right, arises even in the absence of a
stipulation for agency fee, provided the requisites are present: (1) authorization by a written
resolution of the majority of all members at the general membership meeting duly called for that
purpose; (2) secretary’s record of the minutes of said meeting; and (3) individual written
authorizations for check-off duly signed by the employees concerned. The basis of agency fee is that
non-union employees are enjoying the benefits of the CBA, which was obtained by the union, without
providing financial or other support to the union, since they are not union members. Hence, agency
fee is justified as the consideration for the benefits they enjoy under the CBA (JA. Sibal, Labor
Jurisprudence and Practice, 4thEd., p. 12).

49. What are the jurisdictional preconditions of collective bargaining?

The following are the jurisdictional preconditions of collective bargaining:

a. Possession of the status of majority representation of the employees’ representative in accordance
with any of the means of selection or designation provided for by the Labor Code;
b. Proof of majority representation; and
c. A demand to bargain (Kiok Loy vs. NLRC, G.R. No. L-54334 January 22, 1986).

50. What is the effect of the employer’s refusal to submit any counter-proposal to the CBA
proposed by its employees?

The effect of refusal to submit a counter-proposal constitutes an unfair labor practice under Article
248(g) of the Labor Code. It is also called the Kiok Loy doctrine. This doctrine is based on the ruling
in Kiok Loy vs. NLRC, where the petitioner, Sweden Ice Cream Plant, refused to submit any counter-
 proposal to the CBA proposed by its employees’ certified bargaining agent. The Court ruled that the
employer had thereby lost its right to bargain the terms and conditions of the CBA. Thus, the CBA
proposed by the union imposed lock, stock, and barrel on the erring company (Kiok Loy vs. NLRC,
G.R. No. L-54334, January 22, 1986).

51. What are the mandatory provisions of a CBA?

The following are the mandatory provisions of a CBA, namely:

a. Grievance Procedure;
b. Voluntary Arbitration;
c. No Strike-No Lockout Clause;
d. Labor-Management Council.

Absent any mandatory provisions stated above, the CBA shall be denied by the BLR.

Note: The no strike, no lockout clause is an expression of the firm commitment of the parties thereto
that, on the part of the union, it will not mount a strike during the effectivity of the CBA, and on the
part of the employer, that it will not stage a lockout during the lifetime thereof.

52. May a CBA be suspended for a period longer than 5 years?

Yes. It was held that the suspension of the CBA for ten (10) years in order to resolve the strike is not
a violation of the Constitution or the law. This is so because the right to free collective bargaining
includes the right to suspend it. Nothing in Article 253-A prohibits the parties from waiving or
suspending the mandatory timetables and agreeing on the remedies to enforce the same. The
suspension agreement is a valid exercise of the freedom to contract. Under the principle of inviolability
of contracts guaranteed by the Constitution, the contract must be upheld. The agreement afforded
full protection to labor, promoted the shared responsibility between workers and employers, and
exercised the voluntary modes in settling disputes, including conciliation to foster industrial peace
(Rivera vs. Espiritu, G.R. No. 135547, January 23, 2002).

53. What is the remedy of the employer in case of alleged inclusion of disqualified employees
in a union?

The proper procedure for an employer is to directly file a petition for cancellation of the union’s
certificate of registration due to misrepresentation, false statement or fraud (Asian Institute
Management vs. Asian Institute of Management Faculty Association, G. R. No. 207971, January 23,
2017).

vi. MANAGEMENT PREROGATIVE

54. Discuss the concept of management prerogative.

Under the doctrine of management prerogative, every employer as the inherent right to regulate,
according to his own discretion and judgement, all aspects of employment, including hiring, work
 assignments, working methods, time, place and manner of work, work supervision, transfer of
employees, lay-off of workers, and discipline, dismissal, and recall of employees (Poquiz, Labor
Relations and Law on Dismissal with Notes and Comments, 2018, p. 434-435).

55. May courts interfere in the employer’s exercise of management prerogative?

As a general rule, the courts may not interfere as long as management prerogative is not performed
in malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite. The exercise of
management prerogative flows from the established rule that labor laws do not authorize substitution
of judgement of the employer in the conduct of his business. The employer can exercise this
prerogative without fear of liability so long as it is done in good faith for the advancement of his
interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or valid agreements (Great Pacific Employees Union vs. Great Pacific Life Insurance, G.R.
No. 126717, February 11, 1999; Poquiz, Labor Relations and Law on Dismissal with Notes and
Comments, 2018, p. 436).

However, the following are the limitations on the exercise of Management Prerogatives:
1. Law;
2. the Employment contract
3. Collective Bargaining Agreements;
4. Employer policy or practice; and
5. General Principles of fair play and justice.

The exercise of management prerogatives shall be subject to police power and it should be done in
good faith and with due regard to the rights of labor.

56. C&C Bottlers Co. (CCBC) has several bottling plants all over the country. Numerous
bottling operators are employed by CCBC. Upon their request, the bottling operators were
provided with chairs. However, the said chairs were subsequently removed by CCBC
pursuant to the “Operate, Maintain, Clean” program of CCBC for bottling operators. The
program reinforces the task of bottling operators to constantly move about in the
performance of their duties and responsibilities. CCBC rationalized that the removal of the
chairs is implemented so that the bottling operators will avoid sleeping, thus, prevent
injuries to their persons. As bottling operators are working with machines which consist
of moving parts, it is imperative that they should not fall asleep as to do so would expose
them to hazards and injuries. In addition, sleeping will hamper the efficient flow of
operations as the bottling operators would be unable to perform their duties competently.
The bottling operators took issue with the removal of the chairs. Is it a valid management
prerogative to replace chairs of employees in exchange for additional rest periods or
breaks?

Yes. The 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. The exercise of
 management prerogative, however, is not absolute as it must be exercised in good faith and with due
regard to the rights of labor.

Here, the decision to remove the chairs was done with good intentions as CCBC wanted to avoid
instances of operators in an assembly line sleeping on the job while in the performance of their duties
and responsibilities and while working. The removal of the chairs was designed to increase work
efficiency and was made in good faith without doing any harm to the worker’s rights (Royal Plant
Workers Union vs. Coca-Cola Bottlers Phils., G.R. No. 198783, April 15, 2013).

A. Discipline

57. What is proportionality rule?

The proportionality rule simply means that the penalty to be imposed should be commensurate to the
offense committed. For example, dismissal for committing tardiness or absence for the first time is too
harsh a penalty. A warning, a reprimand would suffice for the first offense, punitive suspension of a
day or two, for the second offense, a longer suspension for a third offense, and finally, dismissal for
a fourth offense. Meanwhile, for committing serious offenses, such as stealing a company-owned
property, or stabbing a co-employee, because of their nature, would certainly deserve the imposition
of the supreme penalty of dismissal, and not just a warning, a reprimand or punitive suspension (Chan,
Bar Reviewer on Labor Law, 2017, p. 71).

58. Renante was employed by Holcim Philippines as pack house operator for 19 years. One
day, Renante was about to exit from the company premises when the security guard on
duty asked him to be inspected. Renante refused and confided to the security guard that
he has a piece of scrap electrical wire in his bag which he got from the plant. Renante
requested the security guard not to report the incident to the management, and asked if
he could bring the scrap wire outside the company premises; otherwise, he will return it
inside the plant. The security guard did not agree, so Renante hurriedly went back to the
plant where he took the scrap wire out of his bag. Due to this incident, Renante was
dismissed from service for serious misconduct. Was the dismissal valid?

No. Infractions committed by an employee should merit only the corresponding penalty demanded by
the circumstance. The penalty must be commensurate with the act, conduct or omission imputed to
the employee.

In this case, Renante’s misconduct is not so gross as to deserve the penalty of dismissal from service.
While there is no dispute that Renante took a piece of wire from Holcim’s and tried to bring it outside
the company premises, he did so in the belief that the same was already for disposal. At any rate,
Holcim did not suffer any damage from the incident, given that after being asked to submit himself
and his bag for inspection, Renante had a change of heart and decided to just return the wire. Renante
deserves compassion and humane understanding more than condemnation, especially considering
that he had been in Holcim’s employ for 19 years already, and this is the first time that he had been
involved in taking company property, which item, at the end of the day, is practically of no value
(Holcim Philippines vs. Obra, G.R. No. 220998, August 8, 2016, J. Perlas-Bernabe).
 B. Transfer or employees

59. What are the two (2) concepts of transfers?

a. The transfer from one (1) position to another of equivalent rank, level or salary, without a break
in the service; or
b. Transfer from one (1) office to another within the same business establishment.

The right to transfer covers movement of personnel in terms of reorganization, promotion and
demotion (Poquiz, Labor Relations and Law on Dismissal with Notes and Comments, 2018, p. 438) .

60. Where does the burden of proof in transfer cases lie?

The rule is settled that the employer is charged with the burden of proving that its conduct and action
are for valid and legitimate grounds such as genuine business necessity and that the transfer is not
unreasonable, inconvenient, or prejudicial to the employee. (Poquiz, Labor Relations and Law on
Dismissal with Notes and Comments, 2018, p. 441-442) If the burden of proof cannot be overcome,
the employer’s transfer shall be tantamount to unlawful constructive dismissal (Morales vs. Harbour
Centre Port Terminal, Inc., G.R. No. 174208, Jan. 25, 2012).

61. Distinguish promotion from demotion.

Promotion is 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.

Demotion, on the other hand, involves a situation where an employee, is relegated to a subordinate
or less important position constituting reduction to a lower grade or rank, with a corresponding
decrease in duties and responsibilities, and usually accompanied by a decrease in salary (Poquiz, Labor
Relations and Law on Dismissal with Notes and Comments, 2018, p. 439) .

62. Is demotion a valid management prerogative?

Yes. The employer has the right to demote and transfer an employee who has failed to observe proper
diligence in his work and incurred habitual tardiness and absences and indolence in his assigned work.
Also, demotion may be validly imposed due to failure to comply with productivity standards and quota
(Petrophil Corp. vs. NLRC, G.R. No. L-64048, August 29, 1986; Leonardo vs. NLRC, G.R. No. 125303,
June 16, 2000).

63. Discuss the correlation of security of tenure with management prerogative.

The employee’s right to security of tenure does not give him such a vested right in his position as
would deprive the company of its prerogative to change his assignment or transfer him where he will
be most useful. When his transfer is not unreasonable, inconvenient, or prejudicial to him and it does
not involve a demotion in rank or diminution of his salaries, benefits and other privileges, the employee
 may not complain that it amounts to a constructive dismissal (Phil. Japan Active Carbon Corp. vs.
NLRC, G.R. No. 83239, March 8, 1989).

C. Productivity standards

64. Does the employer have the right to prescribe productivity standards or quota?

Yes. The employer has the right to prescribe productivity standards or quotas which the employees
should comply with. These are designed to increase company viability and profitability. These
standards may be used as an incentive or as disciplinary measures. If an employee was able to attain
his work goals, the management may provide some incentives and benefits. However, failure to
observe the prescribed standards of work, because of inefficiency, may constitute just cause for
dismissal. An employee’s failure to meet sales or work quotas falls under the concept of gross
inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under
Art. 297 of the Labor Code. However, in order for the quota imposed to be considered a valid
productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota
must be exercised in good faith for the advancement of its interest (Aliling vs. Feliciano, G.R. No.
185829, April 25, 2012).

D. Bonus

65. Does an employer have the obligation to grant bonuses?

No. Bonus, as a general rule, is an amount granted and paid ex gratia to the employee. Its payment
constitutes an act of enlightened generosity and self-interest on the part of the employer rather than
as a demandable obligation. It is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of the employer’s business and made possible the realization
of profits (Producer’s Bank vs. NLRC,G.R. No. 100701, March 28, 2001; UST Faculty Union vs. NLRC
G.R. No. 90445 October 2, 1990).

66. When does a bonus become demandable?

Bonus becomes demandable in the following instances:

a. When it is stipulated in an employment contract or CBA; it becomes a contractual obligation;
(Lepanto Ceramics, Inc. vs. Lepanto Ceramics Employees Association, G.R. No. 180866, March 2,
2010);
b. When the grant of bonus is a company policy or practice; and
c. When it is granted as an additional compensation which the employer agreed to give not
contingent on profit becomes part of a wage; therefore a demandable obligation (Poquiz, Labor
Relations and Law on Dismissal with Notes and Comments, 2018, p. 443-444).
 E. Change of working hours

67. Is the rotation of employees from night shift to day shift and vice versa valid?

Yes. The employer has the prerogative of making transfers and reassignment of employees to meet
the requirements of the business. Thus, where the rotation of employees from day shift to night shift
was a standard operating procedure of management, an employee who had been on the day shift for
some time may be transferred to the night shift (Castillo vs. CIR, G.R. No. L-29728 October 30, 1978).

F. Bonafide occupational qualifications

68. What is bona fide occupational qualification?

General Rule: Where the job itself necessarily requires a particular qualification, then the job applicant
or worker who does not possess it may be disqualified on that basis, and such will not be considered
unlawful discrimination.
Exception: To justify a BFOQ, the employer must prove that:
1. The employment qualification is reasonably related to the essential operation of the job involved;
and
2. There is a factual basis for believing that all or substantially all persons meeting the qualification
would be unable to properly perform the duties of the job (Star Paper Corporation, et. al. vs. Simbol,
et. al., G.R. No. 164774, April 12, 2006).

G. Post-employment restrictions

69. Is a Non-Compete Clause valid?

Yes. The employer and the employee are free to stipulate in an employment contract prohibiting the
employee with a certain period from and after the termination of his employment from:

a. Starting similar business, profession or trade; or

b. Working in an entity that is engaged in a similar business that might compete with the employer.
c. Contracts which prohibit an employee from engaging in business in competition with the employer
are not necessarily void for being a restraint of trade (Chan, Bar Reviewer on Labor Law, 2017,
pp. 399-400).

70. What is the purpose of stipulating the Non-Compete Clause?

The Non-Compete Clause is agreed upon to prevent the possibility that upon an employee’s
termination or resignation, he might start a business or work for a competitor with a full competitive
advantage of knowing and exploiting confidential and sensitive information, trade secrets, marketing
plans, customer/client lists, business practices, upcoming products, etc., which he acquired and gained
from his employment with the former employer (Chan, Bar Reviewer on Labor Law, 2017, p. 400).
71. What are the requisites for the validity of a Non-Compete Clause?

A Non-Compete Clause is not necessarily void for being restraint of trade as longs as there are
reasonable limitations as to three things:

a. Time
b. Place; and
c. Trade (Tiu vs Platinum Plans, Inc., G.R. No. 163512 February 28, 2007).

72. X was hired by Century Realty as Vice President for Sales. His employment contract also
contained a "Confidentiality of Documents and Non-Compete Clause" which, among
others, barred him from disclosing confidential information, and from working in any
business enterprise that is in direct competition with Century Realty. Should X breach any
of the terms thereof, his "forms of compensation, including commissions and incentives”
will be forfeited. Century received reports that X provided a competitor with information
regarding the company’s marketing strategies. X tendered his resignation and revealed
that he had been accepted as Vice President of First Global Corporation, a competitor of
Century Realty. Can the Non-Compete Clause on the employment contract be
implemented?

Yes. Obligations arising from contracts, including employment contracts, have the force of law between
the contracting parties and should be complied with in good faith. Corollarily, absent any ambiguity,
the provision on its face will be read as it is written and treated as the binding law of the parties to
the contract. Here, Vice President for Sales, X held a highly sensitive and confidential managerial
position as he "was tasked, among others, to guarantee the achievement of agreed sales targets for
a project and to ensure that his team has a qualified and competent manpower resources by
conducting recruitment activities, training sessions, sales rallies, motivational activities, and evaluation
programs." Hence, to allow X to freely move to direct competitors during and soon after his
employment with Century Realty would make the latter's trade secrets vulnerable to exposure,
especially in a highly competitive marketing environment. As such, it is only reasonable that Century
and X agree on such stipulation in the latter's employment contract in order to afford a fair and
reasonable protection to CPI. Indubitably, obligations arising from contracts, including employment
contracts, have the force of law between the contracting parties and should be complied with in good
faith (Century Properties, Inc. vs. Edwin J. Babiano G.R. No. 220978, July 5, 2016, J. Perlas-Bernabe).

H. Marriage between employees of competitor-employers

73. X was hired by Yang Industries as an industrial engineer. Upon reading the company
policy, she came across the provision prohibiting Yang Industries employees from having
a relationship with an employee of a competitor company. Since X has a suitor who
works as an industrial engineer in Burke Industries, she questioned the management
regarding the validity of the said policy. If you were the legal counsel of Yang Industries,
what would you tell X?

I would tell X that the policy prohibiting the employees from having a relationship with an employee of
a competitor company is a valid exercise of management prerogative. It is reasonable under the
 circumstances because relationships of that nature might compromise the interests of the company.
Yang only aims to protect its interests against the possibility that a competitor company will gain access
to its secrets and procedures (Duncan Association of Detailman- PTGWO v. Glaxo Wellcome Philippines,
Inc., G.R. No. 162994, September 17, 2004).

vii. ILLEGAL RECRUITMENT OF OVERSEAS FILIPINO WORKERS

74. Discuss the types of illegal recruitment.

a. Simple – illegal recruitment committed by a person who has no valid license or authority against
one or two persons only.

Elements:
i. The offender has no valid license or authority required by law to enable one to lawfully engage in
recruitment and placement of workers; and
ii. He undertakes either any activity within the meaning of “recruitment and placement” defined
under Art. 13(b) or any prohibited practices under Art. 34 of the Labor Code (Sec. 6 of RA No. 8042
as amended by Sec. 5 of RA 10022).

b. Illegal Recruitment as Economic Sabotage:

1. Syndicated – illegal recruitment committed by a syndicate if carried out by a group of three (3)
or more persons in conspiracy or confederation with one another.

Elements:
i. The accused have no valid license or authority required by law to enable them to lawfully engaged
in the recruitment and placement of workers;
ii. The accused engaged in this activity of recruitment and placement by actually recruiting,
deploying and transporting; and
iii. Illegal recruitment was committed by three (3) persons conspiring and confederating with one
another.(People vs. Hashim, G.R. No. 194255, June 13, 2012)

2. Large scale or qualified – illegal recruitment committed against three (3) or more persons,
individually or confederating with one another (People vs. Sadiosa, G.R. No. 107084, May 15,
1998; P.D 2018, Sec 1 Art. 38 of PD 442, as amended)).

Elements:

i. The offender has no valid license or authority required by law to enable him to lawfully engage
in recruitment and placement of workers;
ii. The offender undertakes any of the activities within the meaning of “recruitment and placement”
under Art. 13 (b) of Labor Code, or any of the prohibited practices enumerated under Art. 34 of
the said Code (now Sec. 6 of the R.A. No. 8042); and
iii. The offender committed the same against three (3) or more persons, individually or as a group
(People vs. Taguinay, G.R. No. 186132, February 27, 2012) .
75. Distinguish illegal recruitment from estafa.

Illegal Recruitment Estafa

As to nature of criminal offense
It is malum prohibitum. It is malum in se.
As to necessity of criminal intent
The criminal intent is not necessary. The criminal intent is imperative.
As to the law penalizing the act
It is penalized under the Labor Code. It is penalized under the Revised Penal Code.
As to scope
It is limited in scope. It is wider in scope and covers deceits whether
related or not to recruitment activities.

Note: Illegal recruitment and estafa cases may be filed simultaneously or separately. The filing of charge
for illegal recruitment does not bar the filing of estafa, and vice versa. An acquittal in the illegal
recruitment does not prove that she is not guilty of estafa. Illegal recruitment and estafa are entirely
different offenses and neither one necessarily includes or is necessarily included in the other. Thus,
conviction for illegal recruitment and estafa do not result in double jeopardy (People vs. Bilaber, G.R.
Nos. 114967-68, January 26, 2004).

viii. REMEDIES (LABOR STANDARD VIOLATIONS)

76. What are the respective jurisdictions of the LA and the Regional Director?

LABOR ARBITER DOLE REGIONAL DIRECTORS

1. ULP 1. Visitorial power. (Art. 128, Labor Code)

2. Termination disputes 2. Simple Money Claims not exceeding Php 5,000.
3. Claims for wages, rates of pay, hours of work (Art. 129, Labor Code)
and other terms and conditions of employment – if 3. Violation of the constitution & by–laws and rights
accompanied with a claim for reinstatement & conditions membership.
4. Claims for actual, moral, exemplary and other 4. Inter-union and intra-union disputes involving
forms of damages arising from employer-employee independent unions and chartered
(ER-EE) relationship
5. Cases arising from prohibited activities during
strikes, including questions involving the legality of
strikes and lockouts
6. All other claims arising from ER-EE relationship
involving an amount exceeding P5000 regardless of
whether accompanied by a claim for reinstatement
except claims for ECC, SSS, Medicare, & maternity
benefits
7. Wage distortion cases in unorganized
 establishments
8. All monetary claims of OFWs arising from EER or
by virtue of any law or contract involving Filipino
workers for overseas deployment, including claims
for actual, moral, exemplary and other forms of
damages (RA 8042)
9. Enforcement of compromise agreements when
there is non-compliance by any of the parties
pursuant to Art. 233 of the Code (Sec. 1, Rule V,
2005 NLRC Rules)

77. What are the prescriptive periods in labor law?

Subject Matter Prescriptive Period

Purely money claims arising from employer-
employee relationship
Illegal dismissal cases
Unfair labor practice cases
Offenses penalized under the Labor Code and
its IRR
Reinstatement
Illegal recruitment
Backwages, damages, Attorney’s fees, 6% legal
interest on monetary awards
Incremental proceeds arising from tuition fees
Service Incentive Leave
Criminal cases under the Labor Code
Within three (3) years from the time the cause of
action accrued (Art. 306 [291], Labor Code)
Four (4) years (Art. 1146, NCC)
One (1) year from accrual of such unfair labor
practice (Art. 305 [290], Labor Code)
Three (3) years from the commission (Art. 305
[290], Labor Code)
Four (4) years
Five (5) years
Twenty (20) years for economic sabotage
Four (4) years (Arriola vs. Pilipino Star, G.R. No.
175698, August 13 2014)
Three (3) years
Three (3) years
Three (3) years

Except:
1. Unfair labor practice – 1 year
2. Simple illegal recruitment – 5 years
3. Syndicated illegal recruitment – 20 years
4. Large scale illegal recruitment – 20 years
5. Criminal aspect in Social Security Law – 4 years
Union fund Three (3) years
Employees compensation claims Three (3) years
Social security claims Ten (10) years
Government claims on premiums Twenty (20) years
GSIS claims Four (4) years

Except:
 1. Life insurance claims – imprescriptible
2. Retirement claims – imprescriptible (Poquiz, Bar
Review Notes)

78. Discuss the process flow from the decision of the LA.
79. Discuss the process flow from the decision of the Regional Director on small money claims
under Art. 129.

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