Notes on Labor Law / #BestBarEver20_21 / 2022 / Marlon J.

Manuel

• The control test calls merely for the existence of the right to control the manner of doing the work and not
the actual exercise of the right. The power of control, particularly over personnel working under the
employer, is deemed inferred, more so when said personnel are working at the employer's establishment.

• Not all rules are equivalent to control, that gives rise to an employer-employee relationship. There is a
difference between rules and guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first create no employer-
employee relationship. Exclusivity of service does not necessarily mean that the purported employer
exercised control over the means and methods of the purported employee’s work.

• Article 295 of the Labor Code merely distinguishes between certain kinds of employees, particularly,
regular and casual employees, for purposes of determining their rights to certain benefits, such as to join
or form a union, or to security of tenure. Moreover, an employer-employee relationship may cover
peripheral or core activities of the employer's business. Thus, while a worker's task is not directly related,
or necessary and desirable to the business of the employer, this does not mean, however, that no
employer-employee relationship exists between the worker and the employer. Article 295 should,
therefore, not be used as a criterion to determine the existence of an employer-employee relationship.

• It is possible for “dual juridical relationship” to exist – that of employer-employee and vendor-vendee, or
that of employer-employee and corporation-stockholder. Control of the employee’s conduct is the most
crucial and determinative indicator of the presence or absence of an employer-employee relationship. The
existence of a different kind of juridical relationship between the parties does not necessarily extinguish
the employer-employee relationship. In the same way, the existence of an employer-employee
relationship cannot be negated by expressly repudiating it in a contract.

• A person may be paid on the basis of results or time expended on the work, and may or may not acquire
an employment status. Payment by results is merely a method of computing compensation and not a
basis for determining the existence of employer-employee relationship. Hence, payment by commission
or on per-trip basis will not negate the existence of an employer-employee relationship.

• The test to determine independent contractorship is whether one claming to be an independent contractor
has contracted to do the work on its own account, under its own responsibility, according to its own
methods, without being subject to the control of the principal, except only as to the results.

• It is not enough to show substantial capitalization or investment in the form of tools and equipment, to be
considered as an independent contractor. The possession of sufficient capital/investment is only one
element. Labor-only contracting exists when any of the two elements is present. Even if the contractor
had more than sufficient capital or investment in the form of tools, equipment, machineries, work
premises, if the workers were performing activities which were directly related to the principal business of
such employer, there is labor-only contracting. In determining the existence of an independent contractor
relationship, several factors might be considered such as: whether the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of specified pieces of work; the control of the premises;
the duty to supply premises, tools, materials and labor; and the mode, manner and terms of payment.

• A Certificate of Registration is not conclusive evidence of being a legitimate independent contractor. It

merely prevents the presumption of labor-only contracting and gives rise to a disputable presumption that
the contractor is legitimate.

• In legitimate job-contracting, the law creates an employer-employee relationship for a limited purpose, i.e.,
to ensure that the employees are paid their wages. The principal employer becomes jointly and severally
liable with the job contractor, only for the payment of the employees’ wages whenever the contractor fails
to pay the same. In labor-only contracting, the law creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the employees of the contractor as if such
employees had been directly employed by the principal.

• The right to self-organization is not limited to unionism. Workers may also form or join an association for
mutual aid and protection and for other legitimate purposes. Right to self-organization includes right to
form a union, workers' association and labor management councils. While every labor union is a labor
organization, not every labor organization is a labor union. Collective bargaining is not the end-goal of
employee representation, but employee participation.

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 Notes on Labor Law / #BestBarEver20_21 / 2022 / Marlon J. Manuel

• The inclusion as union members of employees who are outside the bargaining unit shall not be a ground to
cancel the union registration. The ineligible employees are automatically deemed removed from the list of
membership of the union. The employer’s claim that the Union is composed of managerial employees who
are forbidden to join, assist, or form a labor union is not a ground for cancellation of a union's registration.

• The test of supervisory or managerial status depends on whether a person possesses authority to act in
the interest of his/her employer and whether such authority is not merely routinary or clerical in nature but
requires the use of independent judgment. “Policy-determining” refers to policy-determination in matters
that may be the subject of negotiation between management and labor.

• The prohibition to join labor organizations extends to confidential employees or those who by reason of
their positions or nature of work are required to assist or act in a fiduciary manner to managerial
employees. Two criteria must concur: (a) the confidential relationship must exist between the employee
and his/her superior officer; and (2) the officer must handle responsibilities relating to labor relations. A
key element that must be considered is the employee’s necessary access to confidential labor relations
information - access must not only be incidental but necessary in the performance of the duties.

• The test of whether an employer has interfered with and coerced employees in the exercise of their rights
to self-organization is whether the employer has engaged in conduct which it may reasonably be said
tends to interfere with the free exercise of the employees’ rights. It is not necessary that there be direct
evidence that any employee was in fact coerced. It is only necessary that there is a reasonable inference
that anti-union conduct of the employer does have an adverse effect on self-organization and collective
bargaining. Under the “totality of conduct doctrine,” the culpability of the employer should be evaluated
against the background of and in conjunction with all collateral circumstances.

• Report of violations of rights and conditions of union membership does not always require the support of
30% of the union membership. A report of a violation of rights and conditions of membership in a labor
organization may be made by any member or members especially concerned.

• Gross misconduct is improper or wrong conduct, the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment. The misconduct must be of such a grave and aggravated character and not merely
trivial and unimportant. The misconduct must be work-related.

• Willful disobedience, to justify termination, requires the concurrence of two factors: (a) the employee’s
conduct must have been willful or intentional, the willfulness being characterized by a wrongful and
perverse attitude; and (b) the order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties of the employee.

• Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire
absence of care. It is a thoughtless disregard of consequences without exerting any effort to avoid them.
To constitute a valid ground for dismissal, the negligence must not only be gross, it should also be habitual
in character. A first-time infraction will not justify termination.

• Loss of trust and confidence applies only when the employee concerned holds a position of trust and
confidence. It is the breach of this trust that results in the employer’s loss of confidence. The breach of
trust must be related to the performance of the employee’s function and must be willful. A breach is
willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as opposed to an act
done carelessly or inadvertently. The allegation of breach of trust must rest on substantial ground and
cannot be dependent on the employer’s arbitrariness. It should be genuine, not simulated.

• Different rules apply in determining whether loss of trust and confidence may validly be used as a
justification in termination cases. Managerial employees are treated differently than fiduciary rank-and-file
employees. The employer must adduce proof of actual involvement in the alleged misconduct for loss of
trust and confidence to warrant the dismissal of fiduciary rank-and-file employees. However, "mere
existence of a basis for believing that [the] employee has breached the trust [and confidence] of [the]
employer" is sufficient for managerial employees.

• Abandonment means the deliberate, unjustified refusal of the employee to resume his/her employment.
For abandonment to be a valid ground for termination, two elements must concur: (a) the employee’s
intention to abandon; and (b) overt act from which it may be inferred that the employee has no more
intent to resume his/her work. The immediate filing of an illegal dismissal complaint generally negates the
employer’s claim of abandonment. As an exception, this principle does not apply when the employee does
not ask for reinstatement in his/her complaint for illegal dismissal.

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 Notes on Labor Law / #BestBarEver20_21 / 2022 / Marlon J. Manuel

• Retrenchment is a management prerogative resorted to by employers to avoid or minimize business losses.

To justify retrenchment, the employer must prove by sufficient and convincing evidence: (a) the losses
expected, which must be substantial; (b) the reasonable imminence of the losses and the urgency of the
retrenchment; and (c) other measures taken by the employer prior or parallel to the retrenchment. There
must be fair and reasonable criteria in the selection of employees who will be affected by the retrenchment
program. The retrenchment must be reasonably necessary and likely to prevent business losses.

• In termination based on redundancy, the law requires the employer to prove: (1) its good faith in
abolishing the redundant positions, and (2) the existence of fair and reasonable criteria in ascertaining
what positions are to be declared redundant and accordingly abolished. It is not enough for a company to
merely declare that it has become overmanned. It must produce adequate proof of such redundancy to
justify the dismissal of the affected employees, 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. The presence of the fair and reasonable criteria used by the
employer shows good faith on its part.

• For termination on the ground of disease to be valid, two requisites must concur: (a) the disease cannot be
cured within 6 months and the continued employment of the concerned employee is prohibited by law or
prejudicial to his/her health or to the health of the co-employees; and (b) a certification to that effect must
be issued by a competent public health authority. The certification is a substantive requirement (it is the
proof of the cause), not merely a procedural requirement. Without the certification, the dismissal is illegal.

• Preventive suspension is justified where the employee’s continued employment poses a serious and
imminent threat to the life or property of the employer or the employee’s co-workers. Without this kind of
threat, preventive suspension is not proper. No preventive suspension shall last longer than 30 days. An
extension of the suspension beyond 30 days shall be with pay. Any violation of this requirement amounts
to constructive dismissal.

• Reinstatement is intended by law as the general rule, i.e., the primary remedy for an illegally dismissed
employee. It is only when reinstatement is not possible that payment of separation pay is awarded to the
employee. Payment of separation pay in lieu of reinstatement is allowed due to: (a) reasons not
attributable to the fault of the employer, e.g., closure of the company; (b) the position has already been
abolished and reinstatement to an equivalent position is also not feasible; or (c) strained relationship exists
between the parties.

• Substantial evidence is required to show that the relationship was indeed strained as a necessary
consequence of the judicial controversy. The principle of strained relations should not be used so
indiscriminately as to bar the reinstatement of illegally dismissed workers. It must be alleged and proved
during trial. Furthermore, the strained relationship must be between the dismissed employee and the
employer, not between the dismissed employee and his/her co-employees.

• If the dismissal is for just or authorized cause (proved during the trial), the procedural infirmity in the
termination, i.e., failure of the employer to comply with the procedural requirements of termination, will
not invalidate the dismissal. The employer should be held liable, however, for non-compliance with the
procedural requirements of due process. Reinstatement will not be ordered. No backwages will be
awarded. The employee will only be awarded nominal damages. The amount of nominal damages should
be higher in dismissals due to authorized causes, compared to dismissals due to just causes.

• Separation pay as “financial assistance” may be granted to a legally dismissed employee on the grounds of
equity and social justice. This is not allowed, however, when the dismissal is for serious misconduct or
some other cause reflecting on the moral character of the employee.

• It is within the employer’s prerogative and discretion to retain the services of its employees for one month
and to continue paying their salaries and benefits corresponding to that period even when there is no more
work to be done. An employer may opt not to require the dismissed employees to report for work during
the 30-day notice period.

• The award of backwages and/or separation pay due to illegally dismissed employees shall include all salary
increases and benefits granted under the law and other government issuances, Collective Bargaining
Agreements, employment contracts, established company policies and practices, and analogous sources
which the employees would have been entitled to had they not been illegally dismissed. On the other
hand, salary increases and other benefits which are contingent or dependent on variables such as an
employee's merit increase based on performance or longevity or the company's financial status shall not be
included in the award.

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 Notes on Labor Law / #BestBarEver20_21 / 2022 / Marlon J. Manuel

• Updating the computation of awards to include as well backwages and separation pay corresponding to the
period after the rendition of the labor arbiter’s decision up to its finality is not violative of the principle of
immutability of a final and executory judgment. No essential change is made by a re-computation as this
step is a necessary consequence that flows from the nature of the illegality of dismissal declared in that
decision. A re-computation is a part of the law that is read into the decision. By the nature of an illegal
dismissal case, the reliefs continue to add on until full satisfaction.

• Reinstatement without backwages may be ordered on account of the following: (a) 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. In cases where this principle had been applied, the denial of backwages was deemed to be the
penalty sufficient for the infraction committed instead of dismissal. Thus, if the employee had already been
suspended for one month, such suspension would be the more reasonable and commensurate penalty
under the circumstances. To impose a one-month suspension and delete the award of backwages at the
same time would amount to respondent being penalized twice.

• An employee is considered constructively dismissed if he or she was sexually harassed by her superior and
her employer failed to act on his or her complaint with prompt and sensitivity. If the employer has been
informed of the acts of its managerial staff, and does not contest or question it, it is deemed to have
authorized or be complicit to the acts of its erring employee. Constructive dismissal occurs when an
employer makes an employee’s continued employment impossible, unreasonable or unlikely, or has made
an employee's working conditions or environment harsh, hostile and unfavorable, such that the employee
feels obliged to resign from his or her employment. One of the ways by which a hostile or offensive work
environment is created is through the sexual harassment of an employee.

• The reinstatement aspect of the Voluntary Arbitrator's decision/award remains executory regardless of the
filing of a motion for reconsideration or appeal. There is no reason to treat it any less than the
reinstatement that is ordered by the Labor Arbiter. Voluntary arbitration really takes precedence over other
dispute settlement devices. The reinstatement order by the Voluntary Arbitrator should have the same
authority, force and effect as that of the order by the Labor Arbiter not only to encourage parties to settle
their disputes through this mode, but also, and more importantly, to enforce the constitutional mandate to
protect labor, to provide security of tenure, and to enhance social justice.

• Under Article 128 of the Labor Code, the Secretary of Labor or his/her duly authorized representatives shall
have the power to issue compliance orders to give effect to the labor standards provisions of the Code and
other labor legislation based on findings of the labor employment and enforcement officers or industrial
safety engineers made in the course of inspection. The exercise of this visitorial and enforcement powers
can be exercised regardless of the amount of monetary claims. The P5,000 jurisdictional limitation
applicable to simple money claims under Article 129 does not apply.

• The visitorial and enforcement powers are premised on an existing employer-employee relationship. If the
Regional Director’s Order merely noted the discovery of violations of labor standards provisions in the
course of inspection, without making any categorical determination on the existence of an employer-
employee relationship, and without making reference to any concrete evidence to support a finding of an
employer-employee relationship, the DOLE does not have jurisdiction to direct compliance with the
violations of labor standards. Any compliance order in such case shall be void.

• An appeal from the order of the representative of the Secretary under Art. 128 may be perfected only
upon the posting of a cash or surety bond equivalent to the monetary award in the order appealed from.
There is no reduction allowed. The reduction of bond in the NLRC is expressly authorized under the NLRC
Rules of Procedure. On the other hand, there is no similar authority given to the DOLE Secretary. In other
words, the DOLE has no authority to accept an appeal under a reduced bond.

• The prescriptive period for filing an illegal dismissal complaint is four years from the time the cause of
action accrued. This four-year prescriptive period, not the three-year period for filing money claims under
Article 291 of the Labor Code, applies to claims for backwages and damages due to illegal dismissal. An
award of backwages is merely one of the remedies for an illegal dismissal. Similarly, actions for damages
due to illegal dismissal are likewise actions "upon an injury to the rights of the plaintiff." If there are
claims for unpaid salaries that are instituted with the illegal dismissal complaint, however, such claims for
unpaid salaries shall follow the three-year prescriptive period.

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 Notes on Labor Law / #BestBarEver20_21 / 2022 / Marlon J. Manuel

• The cause of action of an entitled employee to claim the service incentive leave pay (SIL) accrues from the
moment the employer refuses to remunerate its monetary equivalent if the employee did not make use of
said leave credits but instead chose to avail of its commutation. Accordingly, if the employee wishes to
accumulate the leave credits and opts for its commutation upon his/her resignation or separation, the
cause of action to claim the whole amount of the SIL shall arise when the employer fails to pay such
amount at the time of the resignation or separation from employment. The 3 year prescriptive period
commences from the time when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employee’s services.

• The granting of a bonus is basically a management prerogative which cannot be forced upon the employer
who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside from
the employee’s basic salaries or wages, especially so if it is incapable of doing so. As an exception, a bonus
is demandable only when there is clear proof that it is made part of the wage or salary or compensation,
or when mandated by a CBA provision.

• A policy requiring employees to remain single and providing that they will be separated from the service
once they marry was declared void, it being violative of the Labor Code’s policy with regard to
discrimination against marriage. A policy prohibiting employees from marrying co-employees, and
requiring one of the spouses to resign from the company, was likewise held invalid. However, a policy
prohibiting employees from marrying employees of a competitor company was upheld.

• Fixing of the work schedule of employees is the employer’s prerogative. Absent discrimination, as in a
situation where the change effected by management with regard to working time is made to apply to all
employees whether or not they are members of the union, it cannot be said that the new schedule
prejudices the right to self-organization.

• If there is no reason to implement a cost-cutting measure in the form of reducing the employees’ working
days from 6 to 2-4 days, the employer committed illegal reduction of work hours. This constitutes
constructive dismissal. The employer’s unilateral and arbitrary reduction of the work day scheme had
significantly greatly reduced the workers’ salaries, rendering it liable for constructive dismissal. The Court
only upholds management prerogative as long as it is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the employees' rights under
special laws and valid agreements.

• Transfer of employees is within the inherent right of employers to manage their business. This is subject
to the condition that it must not be motivated by discrimination or bad faith. Furthermore, the transfer
may amount to constructive dismissal when the transfer is unreasonable, inconvenient, or prejudicial to the
employee, and involves a demotion in rank or diminution of salaries, benefits, and other privileges. An act
of clear discrimination, insensibility, or disdain by an employer may become so unbearable on the part of
the employee that it will force the employee to quit work.

• In illegal recruitment, the recruiter gives the impression that s/he has the power to send workers abroad.
The number of persons dealt with is not an essential ingredient of the act of recruitment and placement.
There can be recruitment even if only one prospective worker is involved. Recruitment is deemed
committed in large scale, however, if committed against three (3) or more persons.

• The obligation of the recruitment agency and the foreign principal to the employee does not end upon the
expiration of their contract (manning agreement between agency and principal) but continues up to the
termination of the employment contract. In fact, such liability does not necessarily end upon the
termination of employment but upon the repatriation of the employee to the Philippines.

• Under the “country-team approach,” all officers, representatives and personnel of the Philippine
government posted abroad regardless of their mother agencies shall, on a per country basis, act as one
country-team with a mission under the leadership of the ambassador.

• The Constitution declares that the State affirms labor as a primary social economic force. It shall protect
the rights of workers and promote their welfare. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment and equality of employment
opportunities for all.

• The State shall regulate the relations between workers and employers, recognizing the right of labor to its
just share in the fruits of production and the right of enterprises to reasonable returns on investments.
Workers shall participate in policy and decision-making processes affecting their rights and benefits as may
be provided by law.

pg. 5