GENERAL PRINCIPLES 2.

Labor Code
3. Implementing rules of Labor Code
LABOR CODE OF THE PHILIPPINES: a) General Rule: DOLE is the primary agency that implements labor
 Governs employment practices and labor relations in the Philippines rules and regulations
 Identifies the rules and standards regarding employment such as pre- b) Department Order 174 - Contractualization
employment policies, labor conditions, wage rate, work hours, employee i. ENDO defeats the rights of workers to secure tenure
benefits, termination of employee 4. Jurisprudence
a) Supreme Court decisions
AIM OF LABOR LAW b) Justice Fernan, as a ponente of a case, clarified that the workers
 Labor laws seek to advance the cause of social justice to distribute must be given ample period to explain which is 5 days
wealth, to protect workers from exploitation, to multiply and equalize work 5. ILO
opportunities, and, also, to assist business growth a) Keeps on monitoring several cases such as child labor
i. Tolerated by families with unjust wages
BASIC POLICY ON LABOR 6. Civil Code
 Art. 3: Declaration of Basic Policy - The State shall afford protection to a) Article 702
labor, promote full employment, ensure equal work opportunities 7. Revised Penal Code
regardless of sex, race or creed, and regulate the relations between 8. Company Policies, CBA, company practices
workers and employees. a) Policies issued by the company will become a source of right
 The State shall assure the rights of workers to self-organization, collective issued by the workers
bargaining, security of tenure, and just and humane conditions of work b) CBA - agreement between the union and employer

ART. XIII, SEC. 3 OF CONSTITUTION

 Section 3. The State shall afford full protection to labor, local and CONSTITUTIONAL PROVISIONS
overseas, organized and unorganized, and promote full employment and  Article II - Declaration of Principles and State Policies
equality of employment opportunities for all.  Sections 9, 10, 18, 20
 It shall guarantee the rights of all workers to self-organization, collective  Article III - Bill of Rights
bargaining and negotiations, and peaceful concerted activities, including  Sections 4, 8, 10, 16, 18
the right to strike in accordance with law. They shall be entitled to security  Article XIII - Social Justice and Human Rights
of tenure, humane conditions of work, and a living wage. They shall also  Sections 2, 3, 14
participate in policy and decision-making processes affecting their rights  PRINCIPLE OF CO-DETERMINATION:
and benefits as may be provided by law.  Grants the workers the right to participate in policy and decision-
 The State shall promote the principle of shared responsibility between making processing affecting their rights and benefits
workers and employers and the preferential use of voluntary modes in  Section 3, Article XIII
settling disputes, including conciliation, and shall enforce their mutual
compliance therewith to foster industrial peace. LAWS PROMOTING AND PROTECTING WOMEN EMPLOYEES
 The State shall regulate the relations between workers and employers,  RA 6725
recognizing the right of labor to its just share in the fruits of production and  Prohibits discrimination against women with respect to the terms
the right of enterprises to reasonable returns to investments, and to and conditions of employment
expansion and growth.  RA 7192
 Women in Development and Nation Building
PRINCIPLES IN CONS AND LC  RA 7877
1. Full protection to labor  Anti-Sexual Harassment
2. Promotion of full employment  RA 8042
3. Promotion of equal work opportunities regardless of sex, race, or creed  Migrant Welfare Act
4. Regulation of the relations between workers and employers  RA 10151
5. Protection of the right of workers to self-organization; collective bargaining,  Allowing and employment of night workers
security of tenure and just and humane conditions of work  RA 11210
 105-day maternity leave
ARTICLE II, SECTION 20  RA 9208
 The State recognizes the indispensable role of the private sector,  Anti-Trafficking of Person Act
encourages private enterprise, and provides incentives to needed  RA 9262
investments.  VAWCHI

INTERPRETATION INAPPLICABILITY OF SOME PRINCIPLES

 Art. 4. Construction in Favor of Labor  Certain Constitutional rights and precepts may not be invoked in labor
 All doubts in the implementation and interpretation of the provisions cases leading to termination of employment
of this Code, including its implementing rules and regulations, shall  They can only be asserted against the government or the state
be resolved in favor of labor but not against private like an employer
 Art. 1702 of the Civil Code  Right to constitutional due process
 In case of doubt, all labor legislation and all labor contracts shall be  What applies is the statutory due process (Agabon; GR 158693)
construed in favor of the safety and decent living for the laborer  CONSTITUIONAL DUE PROCESS
 Protects the individual from the government and assures
POLICE POWER him of his rights in criminal, civil, or administrative
 Even without the applicable provisions of the Constitution mandating the proceedings.
protection and promotion of the interest of labor, the State is empowered  STATUTORY DUE PROCESS
to enact labor laws and social legislations based on the immemorially  Protects the employee from unjustly terminated
honored principle of police power.  Right to equal protection of the laws
 The right to work is subject to the paramount right of the government to  Erects no shield against merely private conduct however
impose such regulations and restrictions as the protection of the public discriminatory or wrongful it may be
may require  Duncan Association of Detailman; GR 162994
 Right to Counsel
JESUS P. MORFE VS. AMELITO R. MUTUC  No under custodial investigation
 What is police power?  Manuel vs. Construction; GR 127553
 As currently in use both in Philippine and American decisions then,
police power legislation usually has reference to regulatory CIVIL CODE PROVISIONS
measures restraining either the rights to property or liberty of  Article 1700
private individuals.  Relations between capital and labor
 It is undeniable however that one of its earliest definitions, valid  Article 1701
then as well as now, given by Marshall’s successor, Chief Justice  Neither capital or labor shall act oppressively against each other
Taney does not limit its scope to curtailment of rights whether of  Article 1702
liberty or property of private individuals.  In case of doubt
 “But what are the police powers of a State? They are nothing more  Article 1703
or less than the powers of government inherent in every  No contract which practically amounts to involuntary servitude
sovereignty to the extent of its dominions. And whether a State under any guise shall be valid
passes a quarantine law, or a law to punish offenses, or to  Involuntary servitude
establish courts of justice, or requiring certain instruments to be
recorded, or to regulate commerce within its own limits in every ILO
case it exercises the same power; that is to say, the power of  Being a member of ILO, the Philippines subscribes to the fundamental
sovereignty, the power to govern men and things within its principles that:
domain.”  Labor is not a commodity
 Freedom of expression and of association are essential to sustain
PRINCIPLE 2 progress
 Poverty anywhere constitutes a danger to prosperity everywhere
SOURCES OF LABOR LAWS  Full employment and raising the standards of living
1. Constitution
 In 1999, ILO adopted a DECLARATION ON FUNDAMENTAL  One’s property right is within the mantle of Constitutional
PRINCIPLES AND RIGHTS AT WORK protection.
 Concerning an obligation of all ILO members to respect and  Hence, the employee enjoys security of tenure
promote the fundamental rights even if they have conventions 
ARTICLE 3 OF LABOR CODE IS NOT STATEMENT OF POLICY 
DIRECTIONS TOWARDS THE GOALS  He cannot be dismissed except for cause and only after due
 The goals of the national economy are a more equitable distribution of process
opportunities, income and wealth  The worker is thus protected and insulated against any arbitrary
 A sustained increase in the amount of goods and services produced by deprivation of his job
the nation for the benefit of the people  The right to employment becomes a property and no one can be
 We have to expand productivity as the key to raising the quality of life for deprived of life, liberty, and property without due process (Sec. 1,
all, especially the underprivileged. Art. III)
 “You are fired!”: Not applicable in the Philippines
LABSTAN AND LABREL  Employee can file a complaint for illegal dismissal and if the
 Difference between labor standards law from labor relations law employer is found guilty, the employee is entitled to
 LABSTAN: Prescribes terms and conditions of employment like reinstatement and payment of full backwages from the time
Book IV, Title I and Book VI of the Labor Code he was terminated
 These books deal with working conditions, wages, working
conditions for women, minors, household helpers and ARTICLE 5 OF LABOR CODE
homeworkers, medical and dental services, occupational  The DOLE shall issue the necessary rules to implement the provisions of
health and safety, retirement the Labor Code
 LABOR RELATIONS  DO NO. 174
 Labor law which regulates the relations between employers  Contractualization
and workers  POLICY INSTRUCTION NO. 6
 Book V of the LC  Project Employment: Once the project is complete, the
 Deals with labor organizations, collective bargaining, employer must report it to DOLE. Otherwise, the employee
unfair labor practices and strikes and lockouts shall be considered a regular employee
 They are not mutually exclusive
 Complement each other JURISDICTION OF LABOR TRIBUNALS
 Law on strikes and lockouts (labrel) includes provisions on the  Illegal dismissal cases and others
security of tenure of workers who go on strike or who are locked  Labor Arbiter
out (labstan)  Article 224 of LC
 Read book of Azucena  No more employer-employee relationship
 Violation of Labor Standards
SOCIAL LEGISLATION  DOLE/Regional Office
 Those laws that provide particular kinds of protection or benefits to society  Article 128 and 129
or segments thereof in furtherance of social justice  Disciplinary Action ofw for breach
 Agrarian Laws  POEA
 State Insurance Fund  RA 8042
 OWWA - Focuses on the welfare of the OFWs and their families .
TWO PARTS OF LABOR LEGISLATION  It is present in all three stages of migration
 Labor Standards and Labor Relations  Pre-departure
 Labor Relations:  On-site
 Defines the status, rights and duties and the institutional  Upon arrival
mechanisms that govern the individual and collective interaction of  Before the first-time workers leave, OWWA educates them on the
employers, employees or their representatives realities of overseas work
 They also undergo basic language training
CASES UNDER LABSTAN AND LABREL  Abroad, OWWA assists OFWs whenever they encounter concerns
 LabStan: Non or Underpayment of wages, 13 th month pay, service with their employers
incentive leave, hours of work  When the employee is back, OWWA is ready for its livelihood
 LabRel: CBA, Termination of Employment, Union trainings and programs for the reintegration of the OFW
 SOCIAL JUSTICS is the aim and the reason and therefore the  RA 10801
justification of labor laws is Social Justice  NCMB
 Calalang vs. Williams, 70 Phil 726  Not a quasi-judicial agency exercising quasi-judicial functions
 Defintion of Social Justice  It is merely a conciliatory body for the purpose of facilitating
 PLDT vs. NLRC and ABUCAY (1989) settlement of disputes between parties
 It is attached to the DOLE principally in-charge of the settlement of
PURPOSE OF LABOR LEGISLATION labor disputes through conciliation, mediation and the promotion of
 An exercise of police power voluntary approaches on labor disputes
 Its purpose is to regulate the relations between employers and employees  Receives NOTICE OF STRIKE OR LOCKOUTS filed by the union
respecting the terms and conditions of employment, either by providing for  They shall conduct conciliation to avoid the strike
certain standards or for a legal framework within which better terms and
conditions of work could be negotiated through collective bargaining. PROCESS ONCE A CASE IS FILED
 It is intended to correct the injustices inherent in employer-employee  Regional Director - Secretary of Labor - CA - SC
relationship  Labor Arbiter - NLRC - CA - SC
 GENERAL RULE: The State can intervene  NCMB - finds voluntary Arbitrator (Handles implementation/interpretation
of company policies)
DISTINCTION BETWEEN LABOR LEGISLATION AND SOCIAL  VA - CA - SC
LEGISLATION  Grievance Machiner - VA - CA - SC
 Labor Legislation: Sometimes distinguished from social legislation by the  Compare with Regular Courts
former referring to labor statutes, like labrel and labstan, and the latter to  MTC - RTC - CA - SC
Social Security Laws  RTC - CA - SC
 It focuses on the rights of the workers in the workplace  Labor Tribunals 0 No filing fees required
 Social Legislation: A broad term and mau include not only laws that give
social security protection, but also those that help the worker secure FOUR ELEMENTS OF EMPLOYMENT RELATIONSHIP
housing and basic necessities  The selection and engagement of the employee
 Comprehensive Agrarian Reform Law is a social legislation  Who hired/selected/engaged the employee
 The payment of wages
GUIDING PRINCIPLES, SYMPATHY  The power of dismissal
 May social justice as a guiding principle in labor law be so used by the  Employer’s power to control the employee’s conduct
courts in sympathy with the working man if it collides with the equal  Control Test
protection clause of the Constitution?  AFP Mutual Benefit Association, Inc. Vs. NLRC et al
 The State is bound under the Constitution to afford full protection to  GR 102199
labor  NOTE: The elements do not involve a written contract
 When conflicting interests collide and they are to be weighed on
the scales of social justice, the law should accord more sympathy NECESSITY TO ESTABLISH EMPLOYER-EMPLOYEE RELATIONSHIP
and passion to the less privileged workingman.  The application of the provisions of Book III of the labor code specifically
 It should be borne in mind that social justice ceases to be an on “Conditions of Employment” is anchored upon the existence of the
instrument for the equalization of the social and economic forces employer-employee relationship
by the State when it is used to shield wrongdoing  Without this relationship, BOOK III DOES NOT APPLY
 What property right is conferred upon an employee once there is an
employer-employee relationship? CONTROL TEST
 His employment is not merely a contractual relationship  It is the so-called “control test”
 Whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also to the CONCEPT OF BURDEN OF PROOF
means and methods by which the same is to be accomplished  Burden of proof refers to the rule dictating which party has the
 It constitutes the most important index of the existence of the employer- responsibility to show proof over an issue or controversy
employee relationship  In labor cases, this can either be the employer or employee
 GR 102199  The quantum of proof required is substantial evidence
 That amount of relevant evidence, which a reasonable mind might
2-TIRED TEST (FRANCISCO RULING) accept as adequate to justify a conclusion
 Under the broader economic reality test, the petitioner can likewise be
said to be an employee of respondent corporation because she had MONEY CLAIMS
served the company for six years before her dismissal, receiving check  In determining the employee’s entitlement to monetary claims, the burden
vouchers indicating her salaries/wages, benefits, 13 th month pay, of proof is shifted from the employer or the employee, depending on the
bonuses, and allowances, as well as deductions and SSS contributions monetary claim sought
from August 1, 1999 to December 18, 2000.  In claims for payment of salary differential, service incentive leave, holiday
 When Francisco was designated General Manager, respondent pay and 13th month pay, the burden rests on the employer to prove
corporation made a report to the SSS signed by Irene Ballesteros that the payment
former’s membershio in the SSS as manifested by a copy of the SSS  This likewise stems from the fact that all pertinent personnel files, payrolls,
specimen signature card which was signed by the President of Kasei Corp records, remittances and other similar documents which will show that the
and the inclusion of her name in the on-line inquiry system of the SSS differentials, service incentive leave and other claims of workers have
evinces the existence of an employer-employee relationship between been paid are not in the possession of the worker but are in the custody
Francisco and Kasei and control of the employer
 She is economically dependent on respondent corporation for her  Minsola vs. New City Builders
continued employment in the latter’s line of business
 The proper standard of economic dependence is whether the worker is
BURDEN OF PROOF
dependent on the alleged employer for his continued employment in that
 The employer has the burden of proof over:
line of business
 Salary differential
 In the US, the touchstone of economic reality in analyzing possible
 Service incentive leave
employment relationships for purposes of the Federal Labor Standards
 Holiday pay
Act is DEPENDENCY.
 13th month pay
 By analogy, the benchmark economic reality in analyzing possible
 The employee has the burden of proof over
employment relationships for purposes of the LC ought to be the
 Overtime pay
economic dependence of the worker on his employer
 Premium pay for holidays
 Premium pay for rest days
CASES
 OROZCO VS. SA (GR 155207)
THERE MUST BE ER-EE
 Economic reality test
 The law on conditions of employment cannot apply if employer-employee
 Not an employee
relationship does not exist between the parties
 Following the broader economic reality test, Orozco, a columnist of
 Note: Employer/Principal is an Indirect Employer with respect to unpaid
Inquirer was not an employee but an independent contractor
wages of the contractor’s employees
 Her main occupation is women’s right advocate working in various
 Contractor and the company - Civil Code provisions
women’s organizations
 Employer-employee - Labor Code
 She was not dependent on PDI for her continued employment
 Daykabing case (Kaang owner)
NOT EMPLOYEE
 Singer Sewing Maching Company vs Hon. Franklin Drilon
**Start from Article 82
 Not all collecting agents are employees and neither are all
collecting agents independent contractors.
PRINCIPLES ON EMPLOYER-EMPLOYEE RELATIONSHIP
 The agreement confirms the status of the collecting agents as
 Only when there is employer-employee relationship when cases are
independent contractor
cognizable under the LC
 The requirement that collection agents utilize only receipt forms
 Written contract is not necessary for the creation of that relationship
and report forms issued by the company and that reports shall be
 Relationship is contractual in nature
submitted at least once a week is not necessarily an indication of
 Employment status is defined by law and not by what the parties say it
control over the means by which the job collection is to be
should be
performed
 Mode of compensation does not preclude the existence of that
 Manila Golf Club, Inc vs. Intermediate Appellate Court
relationship
 In the very nature of things, caddies must submit to some
 Paid by piece or commission
supervision of their conduct while enjoying the privilege of pursuing
 Absence of name payroll will not disprove his being as an employee
their occupation within the premises and grounds of whatever club
they do work in
WHY THEY ARE EMPLOYEES
 They work for the club to which they attach themselves on
 Drivers of PUJs or taxis are employees
sufferance but, on the other hand, also without having to observe
 Operators exercise control and supervision
any working hours, free to leave anytime they please, to stay away
 Holders of CPC must see to it that the drivers follow the route
for as long as they like
prescribed by CPC
 These considerations clash frontally with the concept of
 Certificate of Public Convenience is issued by LTFRB
employment. It can happen that a caddy who has rendered
 Barbers are employees
services to a player on one day may still leave the premises and to
 They work in a barbershop owned and operated by the owner
go to such other place of work that he wishes
 Required to work everyday and observe definite hours of work
 These are beyond things that are beyond the control of the
petitioner
KINDS OF EMPLOYMENT
 The caddy (Llamar) is not an employee of petitioner Manila Golf
 Art. 295 of the LC
and Country Club and the petitioner is under no obligation to report
 An employment is deemed regular where he is engaged to perform
him for compulsory coverage of SSS
activities which are usually necessary and desirable in the usual
Susan Carungcong vs. NLRC
business or trade
 Carungcong is an independent contractor
 Presupposes existence of employee-employer relationship
 It was indicated in the very face of the contract
 Kinds
 The rules and regulations of the company is not sufficient to establish an
 Regular
employer-employee relationship where the employer’s controls have to
 Performs tasks that are usually necessary and desirable to
interfere in the methods and means by which employee would like to be
the conduct of business of the employer
employed to arrive at the desired results
 Casual
 Carungcong admitted that she was free to work as she pleases, at the
 Project
place and time she felt convenient for her to do so.
 Fixed Term
 She was not paid to fixed salary and was mainly paid by commissions
 Probationary
depending on the volume of her performance
 Seasonal
 She was not an employee
 Jose Sonza vs. ABS-CBN Broadcasting Corporation
BURDEN OF PROOF IN LABOR CASES
 Sonza’s services to co-host its television and radio programs are
 Employer has the burden of proof for monetary claims that are incurred in
because of his peculiar talents, skills and celebrity status.
the normal course of business
 Independent contractors often present themselves to possess
 He has the duty to prove that he has paid the correct wages to his
unique skills, expertise or talent to distinguish them from ordinary
workers
employees.
 The employee has the burden of proof if the monetary claims are not
 The specific selection and hiring of SONZA because of his unique
incurred in the normal course of business
skills, talent, and celebrity status not possessed by ordinary
 In Illegal dismissal, the employee has the burden of proof on the fact of
employees, is a circumstance indicative, but not conclusive, of an
dismissal
independent contractual relationship.
 The employer has the burden of proof to show that the dismissal was for a
 All the talent fees and benefits paid to SONZA were the result of
just or valid cause
negotiations that led to the Agreement
  For violation of any provision of the Agreement, either party may subdivision thereof, and to other officers or members of the managerial
terminate their relationship. staff
 Applying the control test to the present case, we find that SONZA is  Art. 82, Labor Code
not an employee but an independent contractor  ARTICLE 219
 The one who is vested with the powers or prerogatives to lay down
ABS-CBN BROADCASTING CORPORATION VS. MARLYN NAZARENO ET and execute management policies and/or to hire, transfer,
AL suspend, etc.
 Ineligible to form or join a union
 In the case at bar, however, the employer-employee relationship between  Some managers do not fall to the definition of managerial
petitioner and respondents has been proven. In the selection and employees and are entitled to the benefits enumerated in Art. 82
engagement of respondents, no peculiar or unique skills, talent or  Designation is not important but the tasks to be
celebrity status was required from them because they were merely hired accomplished
through petitioner’s personnel department just like any ordinary employee.  READ IRR OF BOOK 3
 Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship. FIELD PERSONNEL
 Respondents are highly dependent on the petitioner for continued work.  Non-agricultural field personnel are excluded, if they regularly perform
 The degree of control and supervision exercised by petitioner over their duties away from the principal or branch office or place of business
respondents through its supervisors negates the allegation that of the employer
respondents are independent contractors  Actual hours of work in the field cannot be determined with reasonable
certainty
RETAINERSHIP AGREEMENT WITH DOCTOR  Sec. 2 (f), Rule I, Book III, Rules to Implement the Labor Code
 Coca-Cola Bottlers Phils., Inc. vs. Dr. Dean Climaco
 The Court agrees with the finding of the Labor Arbiter and the MANAGEMENT PREROGATIVES (EMPLOYER)
NLRC that the circumstances of this case show that no employer-  Except as limited by special laws, an employer is free to regulate,
employee relationship exists between the parties. according to his own discretion and judgment, all aspects of employment
 The Comprehensive Medical Plan provided guidelines merely to including:
ensure that the end result was achieves, but did not control the  Hiring
means and methods by which respondent performed his assigned  Work assignment and working methods
tasks.  Time, place, and manner of work
 In addition, the Court finds that the schedule of work and the  Tools to be used and processes to be followed
requirement to be on call for emergency cases do not amount to  Supervision of workers
such control, but are necessary incidents to the Retainership  Working regulations
Agreement  Transfer of employees
 Considering that there is no employer-employee relationship  Work supervision
between the parties, the termination fo the Retainership  Layoff of workers
Agreement, which is in accordance with the provisions of the  Discipline, dismissal and recall of workers
Agreement, does not constitute illegal dismissal of respondent  CASE: San Miguel Brewery Sales vs. Ople , GR 53615, February 8, 1989

SALES AGENT - EMPLOYEE OR NOT MANAGEMENT PREROGATIVE ON STRUCTURAL CHANGES (EMPLOYER)

 Royale Homes Marketing Corporation vs. Fidel Alcantara  Reorganization
 Not every form of control that a hiring party imposes on the hired party is  Rightsizing
indicative of employee-employer relationship.  Retrenchment
 Rules and regulations that merely serve as guidelines towards the  Redundancy
achievement of a mutually desired result without dictating the means and  Mergers
methods of accomplishing it do not establish employer-employee  Takeovers
relationship  Spinoffs
 The element of payment of wages is also absent in this case.  Abolition of Deparments
 As provided in the contract, Alcantara’s remunerations consist only of  Abolition of Positions
commission override of 0.5%, budget allocation, sales incentive and other  Sales of the Business
forms of company support.  Closure
 There is no proof that he received fixed monthly salary. No payslip or  Cessation of Operation
payroll was ever presented and there is no proof that Royale Homes
deducted from his supposed salary withholding tax or that it registered **The best interest of the employee is paramount, not only to the State, but also
him with the SSS, PhilHealth, or Pag-ibig. to the employers.
 It does not prevent the company to do something good for the business
QUESTION OF FACT
MANAGEMENT PREROGRATIVES AND LIMITATIONS
 Employer-employee relationship is a question of fact
 It is not important what the contract provides, but what matters is 1. Prerogative to Hire
that conditions of their relationship a) Can hire anybody at certain wage, terms, or working conditions
 Two-tiered Approach: Economic Independence Test b) Cannot be compelled to hire anybody against employer wishes
 Angelina Francisco Case
 Mode of Compensation does not determine the existence or non- LIMITATIONS:
existence of employer-employee relationship  Starting wage cannot be lower than minimum wage, except in traineeship
 There are instances when the employee is paid on a agreement duly registered with DOLE
PAKYAW basis  Cannot discriminate against women over terms or conditions of work (Art.
 Absence of name in the payroll does not establish employer- 135)
employee relationship  If unionized, collective bargaining contract may specify higher wage rates
and higher terms
BOOK 3: CONDITIONS ON EMPLOYMENT  Conditions of work subject to the various labor laws, overtime law, etc.
 Working conditions and rest periods
 Normal hours of work 2. Prerogative to Hire on a Probationary Basis
 Meal periods a) An employer can set a trial or probationary period before an
 Night shift differentials employee’s job is regularized or made permanent
 Overtime work
 Weekly rest periods LIMITATIONS:
 Holidays, service incentive leaves, and service charges  Probationary period cannot exceed six months, except in highly
 Wages meritorious cases
 During period of probationary contract, he/she cannot be terminated
COVERAGE OF CONDITIONS OF EMPLOYMENT except for just cause (or upon the termination of contract)
 ARTICLE 82: The provisions of this Title shall apply to employees in all
establishments and undertakings whether for profit or not, BUT NOT TO: 3. Prerogative to promulgate Rules and Regulations
 Government employees a) An employer can develop work policies and rules as general
 Managerial employees guidance in the conduct of the work of the employees
 Field personnel Members of the family of the employer who are
dependent on him for support LIMITATION
 Domestic helpers  Rules subject to test of fairness and reasonableness
 Persons in the personal services of another  Usually measured in terms of industry and society’s standards
 Workers who are paid by result as determined by the Secretary of
Labor in appropriate regulations 4. Prerogative to Discipline Employees
a) An employer, to maintain order in the company, may impose
MANAGERIAL EMPLOYEES disciplinary sanctions against employees violating the rules and
 Refer to those whose primary duty consists of the management of the policies of the company
establishment in which they are employed or of a department or
LIMITATIONS
 Subject to the test of good faith, meaning sanction imposed not to defeat
certain rights of employees or discriminate against certain employees
 Subject to the test of DUE PROCESS
 Establishing basis for sanction
 Going through correct procedure of investigation and hearing
5. Prerogative to Transfer Employees
a) An employer may transfer or move around employees in in various
areas based on what the employer things is the most beneficial for
the company
LIMITATIONS:
 Transfer not prejudicial, meaning not discriminatory or meant to dismiss
employees CONSTRUCTIVELY
 Creating conditions to force out employees
 Subject to test of reasonableness
6. Prerogative Not to Absorb Old Employees in Change of Ownership
a) A new owner of a company is not compelled to absorb employees
of the former owner
b) EXCECPT: If it is indicated in the contract of sale or if the new
owner is in reality a mere alter ego of the previous owner
7. Prerogative to Terminate Employment for Cause
a) Article 282: Termination by Employer - An employer may
terminate an employment for any of the following causes:
i. Serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or representative in
connection with his work
ii. Gross and habitual neglect by the employee of his duties
iii. Fraud or willful breach by the employee of the trust reposed
in him by his employer or duly authorized representative
iv. Commission of a crime or offense by the employee against
the person of his employer or any immediate persons of his
family or his duly authorized representative
v. Other causes analogous to the foregoing
8. Prerogative to Reduce Personnel for Authorized Cause
a) The employer has the right and prerogative to terminate the
services of his employees even without the fault of the latter if, in
his judgment, he feels that a reduction of personnel is the most
prudent thing to do.
TWO KINDS OF TERMINATION BY THE EMPLOYER
1. Just Causes: Art. 282 (Termination by Employer)
2. Authorized Causes: Art. 283 (Closure of Establishment and Reduction of
Personnel)
SECURITY OF TENURE
 ART. 279
 In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when
authorized by this Title
EFFECT OF UNJUST DISMISSAL
 ARTICLE 279:
 An employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from him up to the
tie of his actual reinstatement
 Sec. 37, RA 6715, March 21, 1989
TWO FACES OF VALID TERMINATION
1. The legality of the act of dismissal
a) Substantive due process - just or authorized causes
2. The legality of the manner of dismissal
a) Procedural due process
APPLICATION OF SECURITY OF TENURE
 Security of tenure applies also to probationary employees and not just
regular employees
 ART. 281: The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
engagement.
 The probationary employee must know the standards that he needs to
pass before becoming a regular employee
APPLICATION OF SECURITY OF TENURE
 Security of tenure applies also to probationary employees and not just
regular employees
 Department Order Nos. 09 and 10, Series of 1997 of the Sec. Of
Labor and Employment
 Security of tenure shall also apply in cases of probationary
employment
MANAGERIAL EMPLOYEES
 Security of tenure applies also to managerial employees
 Villarama vs. NLRC and Golden Donuts, Inc. GR106341,
September 2, 1994
 Managerial employees may not be terminated without just cause
although there are causes valid for terminating managerial
employees other than those applicable to the rank-and-file
employees
REQUIREMENTS IN TERMINATIONS FOR JUST CAUSE
 Compliance with substantive and procedural due process
 Procedural: Notice-Hearing-Decision process
 Giving the affected party opportunity to present side
 Substantive: Establishing basis or proof of:
A. Misconduct: Act is serious and not trivial
B. Willful Disobedience: Employer’s rules and orders are
reasonable, lawful, sufficiently known to employee, and connected
to duties
C. Neglect of Duties: Gross and habitual, not just one single act
D. Fraud or Loss of Confidence: Act is work-related
E. Crime Against Employer and Family
ANALOGOUS CASES
 With ELEMENTS similar to other just causses specified by law
 GR 97239, May 12, 1993, International Rice Research Institute vs.
NLRC
 Examples:
 “Gross Inefficiency” and “Abandonment of Work” closely related to
“Gross Neglect, as all involve acts of omission resulting in damage
to business
 “Violation of CRR” closely related to “willful disobedience to
employer’s lawful orders, regulations or instructions” but such rules,
regulations, orders, etc must be:
1. Reasonable and lawful
2. Sufficiently known to the employee and employer
3. Connected with work duties
TWO-NOTICE RULE
 First Notice: Informs the employee of the particular acts or omissions for
which his dismissal is sought
 Second Notice: Informs him of the decision to terminate his employment,
clearly stating the reasons therefor
 Austria vs. Hon. NLRC, et al., GR 24382, August 16, 1999
 Coca-Cola Bottlers Phils., Inc. Vs. NLRC, GR 120466, May 17,
1999
 These pre and post notice requirements are not mere technicalities but
are requirements of due process
 Kingsize Manufacturing Corp. vs. NLRC
WORKING HOURS
CONDITIOONS OF EMPLOYMENT, BOOK THREE
WORKING CONDITIONS AND REST PERIODS (TITLE I: ARTICLES 82 TO
96)
 Art. 82. Coverage: The provisions of this Title shall apply to employees in
all establishments and undertakings whether for profit or not, but not to
government employees, managerial employees, field personnel, members
of the family of the employer who are dependent on him for support,
domestic helpers, persons in the personal service of another, and workers
who are paid by results as determined by the Secretary of Labor in
appropriate regulations.
 Managerial Employees: Those whose primary duty consists of the
management of the establishment in which they are employed or of
a department or subdivision thereof, and to other officers or
members of the managerial staff
 Field Personnel: Non-agricultural employees who regularly
perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in
the field cannot be determined with reasonable certainty
 Atty’s Discussion:
 Managerial employees are excluded because they receive work
packages that are higher than the rank-and-file employees
 They were hired because of their intelligence and skills
 Not required to go to work at a given time but extends
beyond the regular working hours of other employees
 Family members of employers cannot be covered by Title I
because they are directly receiving support from said employers
IRR OF BOOK 3 - MANAGERIAL EMPLOYEE AND MEMBERS OF A
MANAGERIAL STAFF
 Manager
 Primary duty consist of the establishment in which they are
employed or a department of subdivision thereof
 They customarily and regularly direct the work of two or more
employees therein
 They have the authority to hire or fire employees of a lower rank or
their suggestions and recommendations as to hiring and firing and
as to promotion or any other change of status of other employees,
are given particular weights
 Officers or Members of a Managerial Staff
 Primary duty consist of the performance of work directly related to
management policies of their employer
 Customarily and regularly exercise discretion and independent
judgment
 Regularly and directly assist a proprietor or a managerial employee
whose primary duty consist of the management of the
establishment in which he is employed or subdivision thereof
  Execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge
 Execute under general supervision, special assignments and task
 Who do not devote more than 20% of their hours of work in a work
week to activities which are not directly and closely related to the
performance of the work described above
 READ: PENARANDA VS. BAGANGA PLYWOOD
KASAMBAHAY AND PERSONS IN PERSONAL SERVICE OF ANOTHER
 Domestic servants - Kasambahay Law
 Persons in personal service
 If they perform such services in the employer’s home which are
usually necessary or desirable for the maintenance and enjoyment
thereof or minister to the personal comfort, convenience or safety
of the employer as well as the members of his household
 NOTE:
 There are drivers hired by the company who stay-in at the
house of their boss
 Security guards in residential houses who water the plants,
undertake gardening, watering the plants
 Company drivers who bring the children of their boss to
school or drive the wives to department stores
QUESTION OF FACT AND LAW
 When there is doubt as to what law is on a certain state of facts: THERE
IS A QUESTION OF LAW
 When the doubt arises as to the truth or falsity of the alleged facts -
THERE IS A QUESTION OF FACT
 The character of the relations between the parties is not whatever they
call it in their contract what the law calls it after examination of the facts
 If the facts show an employer-employee relationship relationship,
the conclusion shall stand even if the contract states
otherwise
 The recognition of the existence of employer-employee relationship
is not dependent upon the agreement of the parties.
 The characterization of the law prevails over that in contracts.
 In this sense, the existence of an employer-employee relationship
is not a matter of stipulation - IT IS A QUESTION OF LAW
 A lawyer or doctor may be considered an employer an in another
situation, the lawyer/doctor can be considered a consultant
NORMAL HOURS OF WORK
 Art. 83. NORMAL HOURS OF WORK
 The normal hours of work of any employee shall not exceed 8
hours a day
 The normal 8 working hours mandated by law does not
always mean continuous and uninterrupted 8 hours of work
 As may be required by peculiar circumstances of
employment, it may mean broken hours of say, four hours in
the morning and four hours in the evening or a variation
thereof
 Provided the total of 8 hours is accomplished within one
“work day”
 NOTE: It may be broken or continuous 8 hours work (Ex: Drivers)
HEALTH PERSONNEL
 Health personnel in cities and municipalities with a population of at least
one million or in hospitals and clinics with a bed capacity of at least 100
shall hold regular office hours for 8 hours a day, for five days a
week, exclusive of time for meals
 Except where the exigencies of the service require that such personnel
work for six days or 48 hours, in which case, they shall be entitled to an
additional compensation of at least 30% of their regular wage for
work on the 6th day
 “Health Personnel”: Include resident physicians, nurses, nutritionists,
dietitians, pharmacists, social workers, laboratory technicians,
paramedical technicians, psychologists, midwives, attendants, and other
hospital or clinic personnel
HOURS WORK
 Art. 84. Hours Worked: Hours worked shall include
 All the time during which an employee is required to be on duty or
to be at a prescribed workplace
 All time during which an employee is suffered or permitted to work
 NOTE: IN BOTH INSTANCES, WORKER IS NOT DOING
ANYTHING
 Rest periods of short duration during working hours shall be
counted as hours worked
 NOTE:
 Not doing anything since there is nothing to be
procesed but he cannot leave post
 A driver who is forced to wait for his boss while
having a dinner after meeting held inside a
restaurant
 Waiting time is considered hours worked
 Hilario Rada vs NLRC
 Anent the claim for OT compensation, we hold that petitioner is
entitled to the same. The fact that he picks up employees of
Philmor at certain specified points along EDSA in going to the
project site and drops them off at the same points on his way back
from the field office going home to Marikina, Metro Manila is not
merely incidental to his job as driver
 On the contrary, said transportation arrangement had been
adopted, not so much for the convenience of the employees, but
primarily for the benefit of the employer, herein private respondent
 But since the assigned task of fetching and delivering employees in
indispensable and consequently mandatory, then the time required
of and used by petitioner in going from his residence to the field
office and back, that is from 5:30 AM to 7:00 AM and from 4:00 PM
to 6:00 PM, which the labor arbiter rounded off as averaging the
hours each working day, should be paid OT work. Quintessentially,
petitioner should be given OT pay for the three excess hours
performed
 Bernardino V. Navarro vs. PV Pajarillo Liner, Inc
 PV Pajarillo Liner, Inc. a corporation engaged in the business of
land transportation, employed Bernardino as a bus driver on April
20, 1995. Sometime in March 1996, Bernardino, while on duty, was
apprehended for picking up passengers in a non-loading zone
(illegitimate terminal) along Ayala Avenue, Makati.
 His driver’s license was confiscated by MMDA enforcer and a
corresponding traffic violation receipt (TVR) was issued to him,
which was valid as a temporary driver’s license for seven days from
date of apprehension.
 Before the expiration of the TVR, Bernardino allegedly gave the
same to Arnel Hegina (Operations Manager) and requested him to
redeem his license from the MMDA.
 Hegina was not able to redeem the license from MMDA but merely
secured a 2-month extension for the validity of the TVR.
 Sometime in May 1996, Bernardino was again apprehended along
Shoemart, Makati by highway patrol operatives who demanded his
license. The record does not specifiy the violation.
 When petitioner presented his TVR, the operatives ordered him to
drive the bus directly to the garage. After the incident, Bernardino
was not able to work for the respondent again
 He never bothered to redeem his license at the soonest possible
time when there was no showing that he was unlawfully prevented
by Hegina from doing so. Thus, Bernardino should not be paid for
the time he was not working. The Court has held that where the
failure of employees to work was not due to the employer’s fault,
the burden of economic suffering by the employees should not be
shifted to the employer. Each party must bear his own loss
 It would be unfair for the petitioner to recover something he has not
earned and could not have earned, since he could not discharge
his duty as driver without his driver’s license. Respondent should
be exempted from the burden of paying backwages
PRINCIPLED IN DETERMINING HOURS WORKED (including working while
eating, working while sleeping)
A. All hours are hours worked
 The employee is required to give his employer, regardless of
whether or not such hours are spent in productive labor or involve
physical or mental exertion
B. An employee need not leave the premises of the workplace in order that his
rest period shall not be counted, it being enough that he stops working,
may rest completely and may leave his workplace, to go elsewhere, whether
within or outside the premises of his workplace
C. If the work performed was necessary, or it benefited the employer, or the
employee could not abandon his work at the end of his normal working hours
because he had no replacement, all tome spent for such work shall be
considered as HOURS WORKED, if the work was with the knowledge of his
employer or immediate supervisor
D. The time during which an employee is inactive by reason of interruptions
in his work beyond his control shall be considered working time either if the
imminence of the resumption of work requires the employee’s presence at the
place of work or if the interval is too brief to be utilized effectively and gainfully in
the employee’s own interest
WAITING TIME
 Waiting time spent by an employee shall be considered as working time if
waiting is an integral part of his work or the employee is engaged by
the employer to wait
 Sec. 5 (a), Rule I, Book III, Rules to Implement the Labor Code)
 Engaged to Wait or Waiting to be Engaged?
 The controlling factor is whether waiting time spent in idleness is
so spent predominantly for the employer’s benefit or for the
employee
 A truck driver who has to wait at or near the jobsite for goods to be
loaded is working during the laoding period. If the driver reaches
his destination and while awaiting the return trip is requird to take
care of his employer’s property, HE IS WORKING WHILE
WAITING.
 Waiting is an integral part of his job
 Waiting to be engaged
 After arrival in his destination and completely relieved of his
responsibility, the idle time is not working time.
 HE IS ONLY WAITING TO BE ENGAGED (NO OT)
CASE WHERE WAITING TIME IS NOT COMPENSABLE
 Teofilo Arica et al vs. NLRC et al
 The 30-minute assembly time long practices and institutionalized
by mutual consent of the parties under Article IV, Section 3, of the
Collective Bargaining Agreement cannot be considered as waiting
time within the purview of Section 5, Rule I, Book III of the Rules
and Regulations Implementing the Labor Code
 Furthermore, the 30-minute assembly is deeply rooted, routinary
practice of the employees, and the proceedings attendant thereto
are not infected with complexities as to deprive the workers the
time to attend to other personal pursuits.
 They are not new employees as to require the company to deliver
long briefings regarding their respective work assignments.
  Their houses are situated right on the area where the farm is
located, such that after the roll call, which does not necessarily
require the personal presence, they can go back to their houses to
attend to some chores.
 In short, they are not subject to the absolute policy of the company
during this period, otherwise, their failure to report in the assembly
would justify the company to impose disciplinary measures.
 The CBA does not comply in the provision to this effect and the
record is also bare of any proof on this point.
 This, therefore, demonstrates the indubitable fact that the 30-
minute assembly time was not intended for the interests of the
employer but ultimately for the employees
WORK DAY AND REGULAR WORKING HOURS, PART-TIME WORKERS,
REDUCTION OF EIGHT-HOUR WORKING DAY
1. Work Day and Regular Working Hours
a) Work Day: 8 AM to 8 AM the following day
b) Regular Working Hours/Shift: 8 AM to 5 PM
**It is important to know what is working day for purposes of
claiming overtime
2. Part-time Workers
a) Advisory Opinion on Condition of Employment of Part-time Workers
issued by DOLE’s Bureau of Working Conditions
i. The compensation in proportion to the time they actually
rendered or equivalent to only 4 hours a day must be give
to part-time workers
3. Reduction of eight-hour working day
a) The employer in the lawful exercise of his prerogative is not
prohibited from reducing the 8-hour normal working time of his
work day provided that no reduction is made on the employee’s
wage or salary equivalent to an eight-hour working day. In
instances where the number of hours the nature of work is less
than 8 hours, such number of hours is regarded as his full working
days
TRAVEL TIME
 Travel from home to work
 Engaged in ordinary home-to-work travel which is a normal incident
of employment
 It is not compensable because the normal travel time in this
instance is not worktime
 But when the employee is required to perform in relation to his
work but outside of his regular working hours, all such time spent is
working time.
 Travel that fall in the day’s work
 Travel from one jobsite to another is compensable
 Travel away from home
 Worktime if cuts across the employee’s workday. The time is hours
worked not only on regular working days during normal hours but
also during the corresponding hours on nonworking days.
 Regular meal period is not included
 DOLE will not consider as worktime those times spent in
travel away from home outside of the regular working hours
AS A PASSENGER on an airplane, train, boat, bus, or
automobile
 DOLE Department of Labor Manual
LECTURES, MEETING, TRAINING PROGRAMS
 Section 6. Lectures, Meetings, Training Programs
 Attendance at lectures, meetings, training programs, and other
similar activities shall not be counted as working time if all of the
following conditions are met:
A. Attendance is outside of the the employee’s regular working
hours
B. Attendance is in fact voluntary
C. The employee does nor perform any productive work in such
attendance
WORKING HOURS OF SEAMEN
 Philippine Transmarine Carriers, Inc. vs. Felicisimo Carilla
 We can not agree with the Court below that respondents
Malondras should be paid OT compensation for every hour in
excess of the regular working hours that he was on board his
vessel or barge each day, irrespective of whether or not he actually
put in work during those hours.
 Seamen are required to stay on board their vessels by the very
nature of their duties, and it is for this reason that, in addition to
their regular compensation, they are given free living quarters and
subsistence allowances when requires to be on board.
 It could not have been the purpose of our law to require their
employers to pay them OT even when they are not actually working
 Otherwise, every sailor on board a vessel would be entitled to OT
for 16 hours each day even if he spent all those hours resting or
sleeping in his bunk, after his regular tour of duty.
 The correct criterion in determining whether or not sailor are
entitled to overtime pay is not therefore, whether they were on
board and cannot leave ship beyond the regular eight working
hours a day
 IT SHOULD BE WHETHER THEY ACTUALLY RENDERED
SERVICE IN EXCESS OF SAID NUMBER OF HOURSE
REDUCTION OF WORKING HOURS DUE TO LOSSES
 VALID REDUCTION - Phil. Graphics Arts, Inc. vs. NLRC
 The reduction is valid because the arrangement was temporary
 It was a more humane solution instead of the retrenchment of
personnel
 There were notices and consultation with the workers and
supervisors
 A consensus was reached on how to deal with the deterioration of
economic condition and it was proven that the company was
suffering from losses
 ILLEGAL REDUCTION - Linton Commercial Co. vs Herrera and Fe la
Rosa vs Ambassador Hotel
 It was not proven that the company was suffering from financial
losses
 While the company suffered from losses the previous year, it
retained enough earnings to sufficiently sustain its operations
 Fe la Rosa: It was a constructive dismissal in the absence of proof
that the reduction scheme was adopted due to business losses.
 Article 3, Section 13, Security of Tenure
SHORTENED MEAL PERIOD UPON EMPLOYEES REQUEST
1. Employees voluntarily agree in writing to a shortened meal period of 30
minutes and waive the OT for such meal period (8 to 5 schedule and 12 to 1
meal; Employee shortened the meal period)
2. No diminution of benefits in salary and other fringe benefit
3. Not involve strenuous activity
4. Value of the benefits is equal to or commensurate with the compensation due
them for the shortened meal period
5. OT will become due and payable for beyond 4:30 PM
 Reference: Letter of Drilon to Kodal Phil. Cited by Prof. Azucena
CHANGING LUNCH BREAK TO UNPAID
 Pursuant to management prerogative to fix the work schedule
 It can be done
 When the employer decides to change the 30-minute lunch break period
to one hour and is no longer compensable, is there a non-diminution of
benefits?
 Answer: No, because that is under the management’s
prerogative.
PAL CASE ON MEAL PERIOD
 Philippine Airlines, Inc. vs NLRC et al
 Sec. 5, Rule I, Book III of the Omnibus Rules Implementing the
Labor Code further states:
 Meal and Rest Periods - Every employer shall give his
employees, regardless of sex, not less than one hour time-
off for regular meals, except in the following cases when a
meal period of not less than 20 minutes may be given by the
employer provided that such shorter meal period is credited
as compensable hours worked of the employee
 Rest periods or coffee breaks running from 5 to 20 minutes
shall be considered as compensable working time
 Where shall you take your lunch?
 Article 85. Meal Period
 The eight-hour work period does not include the meal
break.
 Nowhere in the law may it be inferred that employees
must take their meals within the company premises.
 Employees are not prohibited from going out of the
premises as long as they return to their posts on time.
 The respondents’ act of going home to take his dinner
does not constitute abandonment
POWER INTERRUPTIONS/RAINING (RULE ON FAIR’S DAY WAGE FOR A
FAIR DAY’S LABOR)
 Durabuilt Recapping Plant & Company et al vs NLRC et al
 The Ministry of Labor and Employment, thru Policy Instruction No. 36
 Brownouts running for more than 20 minutes may not be treated
as hours worked provided that any of the following conditions are
present
A. The employees can leave their workplace or go elsewhere within
or without the work premises
B. The employees can use the time effectively for their own interest
 It is of record that during electrical power interruptions, petitioners’s
business was not in operation. Thus, we have held that where the failure
of workers to work was not due to the employer’s fault.
 The burden of economic loss suffered by the employees should not be
shifted to the employer
 Each party must bear his own
NIGHT SHIFT DIFFERENTIAL
 Art. 86. Night Shift Differential
 Every employee shall be paid a night shift differential of not less
than 10% of his regular wage for each hour of work performed
between 10:00 PM to 6:00 PM in the morning
 Night work cannot be regarded as desirable, either from the point
of view of the employer or the wage earner
 Frequently, the scale of wages is higher as an inducement to
employment in the night shift
 Each employee is entitled to NSD of not less than 10% of his
regular wage for each hour of work performed between 10:00 PM
to 6:00 AM
NIGHT SHIFT DIFFERENTIAL AND OT PAY ARE NOT THE SAME (NO
DOUBLE COMPENSATION)
 When the work falls at nighttime, the receipt of OT pay shall not preclude
the right to receive night differential pay
 The reason is, the payment of the night differential is for the work done
during the night while the payment of the OT pay is for work in excess of
the regular 8 working hours
 NARIC vs NARIC Workers Union
 Also, remember the definition of work day
 The employee is required to be back to his work station at 10 PM
after rendering 8 hours of work
GMA NETWORK, INC VS CARLOS P. PABRIGA ET AL
 As regards night shift differential, the Labor Code provides that every
employee shall be paid not less than 10% of his regular wage for each
hour of work performed between 10:00 PM to 6:00 AM.
 As employees of petitioner, respondents are entitles to the payment of this
benefit in accordance with the number of hours they worked from 10 PM
and 6 AM, if any
 While we are affirming that respondents are entitled to night shift
differential in accordance with the number of hours they worked, it is the
Regional Arbitration Branch of origin which should determine the
computation thereof for each of the respondents, and award no NSD to
those of them who never worked from 10PM to 6AM
 In Dansart Security Force & Allied Services Company vs Bagoy, where
we held that it is entirely within the employer’s power to present such
employment records that should necessarily be in their possession, and
that failure to present such evidence must be taken against them
 BURDEN OF PROOF: In National Semiconductor Distribution, Ltd. vs
NLRC, the burden is on the employer
 They are in possession of the documents
 Under the Rules of the Labor Code, employers are required to
keep a record of their payroll which contains the salaries and other
benefits paid to the employee
WHO ARE NOT ENTITLED TO NIGHT SHIFT DIFFERENTIAL
 Section 1. Coverage: This rule shall apply to all employees except:
A. Those of the government and any of its political subdivisions, including
GOCCs
B. Those of retail and service establishments regularly employing not
more than 5 workers
C. Domestic helpers and persons in the personal service of another
D. Managerial employees as defined in Book III
E. Field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engage on task or
contract basis, purely commission basis, or those who are paid a fixed
amount in performing work irrespective of the time consumed in the
performance therewith
COMPUTATION OF NIGHT SHIFT DIFFERENTIAL
 Section 3. Additional Compensation: Where an employee is permitted or
suffered to work on the period covered after his work schedule, he shall
be entitled to his regular wage plus at least 25% and an additional amount
of no less than 10% of such OT rate for each hour or work performed
between 10PM to 6Am
 Section 4. Additional Compensation on Scheduled Rest Day/Special
Holiday
 An employee who is required or permitted to work on the period
covered during rest days and/or special holidays not falling on
regular holidays, shall be paid a compensation equivalent to his
regular wage plus at least 30% and an additional amount of not
less than 10% of such premium pat rate for each hour of work
performed
 Section 5. Additional Compensation on Regular Holidays
 For work on the period covered during regular holidays, an
employee shall be entitled to his regular wage during these
days plus an additional compensation of no less than 10% of
such premium rate for each hour of work performed
 Pursuant to ARTICLE V OF THE LABOR CODE
OVERTIME WORK
 Art. 87. Overtime Work
 Work may be performed beyond 8 hours a day provided that the
employee is paid for the OT work, an additional compensation
equivalent to his regular wage plus at least 25% thereof.
 Work performed beyond 8 hours on a holiday or rest day shall be
paid an additional compensation equivalent to the rate of the first 8
hours on a holiday or rest day plus at least 30%
ARE YOU REQUIRED TO RENDER OVERTIME AGAINST YOUR WILL?
(TAKE NOTE OF 8-HOUR LABOR LAW)
 Section 10. Compulsory Overtime Work
 In any of the following cases, an employer may require any of his
employees to work beyond 8 hours a day, provided that the
employee required to render OT work is paid the additional
compensation requires by these regulations
A. When the country is at war or when any other national or
local emergency has been declared by Congress or the
Chief Executive
B. When overtime work is necessary to prevent loss of life or
property, or in case of imminent danger to public safety due
to actual or impending emergency in the locality caused by
serious accident, fire, flood, typhoons, earthquakes,
epidemic, or other disaster or calamities
C. When there is urgent work to be performed on machines,
installations, or equipment, in order to avoid serious loss or
damage to the employer or some other causes of similar
nature
D. When the work is necessary to prevent loss or damage to
perishable goods
E. When the completion or continuation of work started
before the 8th hour is necessary to prevent serious
obstruction or prejudice to the business or operations of the
employer; or
F. When OT work is necessary to avail of favorable weather
or environment where performance or quality of work is
dependent thereon
 In cases not falling within any of these enumerated in this Section,
no employee shall be forced to work beyond 8 hours a day against
his will
ROMEO LAGATIC VS NLRC ET AL (OT IS EXTRAORDINARY BENEFIT)
 Notwithstanding the foregoing discussion, petitioner failed to show
his entitlement to OT and rest day pay due to the lack of sufficient
evidence as to the number of days and hours when he rendered
OT and rest day work
 Entitlement to OT must first be established by proof that said OT
work was actually performed before an employee may avail of said
benefit
 To support his allegations, petitioner submitted in evidence minutes
of meetings wherein he was assigned to work on weekends and
holidays at Cityland’s housing projects. Suffice it to say that said
minutes do not prove that petitioner actually worked on said dates.
It is a basic rule in evidence that each party must prove his
affirmative allegations
 This petitioner failed to do. He explains his failure to submit more
concrete evidence as being due to the decision rendered by the
labor arbiter without resolving his motion for the production and
inspection of documents in the control of Cityland. Petitioner
forgets that on January 27, 1994, he agreed to submit the case for
decision on records available to the labor arbiter. This amounted to
an abandonment of his motion, which was then pending resolution
WILGEN LOON ET AL VS POWER MASTER ET AL
 Petitioners are not entitled to overtime and premium pays
 However, the CA was correct in its finding that the petitioners failed to
provide sufficient factual basis for the award of OT and premium pays for
holidays and rest days.
 The burden of proving entitlement to OT pay and premium pay for holidays
and rest days rests on the employee because these are not incurred in the
normal course of business
 In the present case, the petitioners failed to adduce an evidence that
would show that they actually rendered services in the regular eight
working hours a day, and that they in fact worked
COMPUTATION OF OT (PLEASE SEE HANDBOOK PREPARED BY DOLE 2)
 Computation will vary if the work is rendered during ordinary working days,
scheduled rest day or special day, regular holidays, regular holiday which
is scheduled as rest day
 Retail/Service establishment employing less than 10 not covered by the
rule on holiday pay
OT DURING HOLIDAY
 Holiday or rest day premium should first be added to the regular base pay
before computing the OT pay on such day
CONVERISON OF MONTHLY TO DAILY (ACTUAL WORK AS DIVISOR)
 In Palea vs PAL, the Supreme Court said that the divisor in computing the
employee’s basic daily rate should be the actual working days in a year
 The number of off days are not to be computed precisely because of such
off day, an employee is not required to work
 The bigger divisor, the smaller the daily rate
 The smaller the divisor, the bigger the daily rate in the basis in computing
OT Pay
 Divisor = number of days worked excluding off days
 SIR: MIGHT BE INCLUDED IN YOUR PRELIM EXAM
OT SERVICES OF MANAGERS
 San Miguel Corporation et al vs Layoc et al
 Article 82 of the Labor Code states that the provisions of the Labor
Code on working conditions and rest periods shall not apply to
managerial employees.
 The other provisions in the Title include normal hours of work (Art.
83), hours worked (Art. 84), meal periods (Art. 85), night shift
differential (Art. 86), OT work (Art. 87), undertime not offset by OT
(Art. 90).
 It is thus clear that, generally, managerial employees such as
respondents are not entitled to OT pay for services rendered in
excess of 8 hours a day
 Aside from their allegations, respondents were not able to present
anything to prove that petitioners were obliged to permit
respondents to render OT work and give them the corresponding
OT pay.
 Even if petitioners did not institute a “no time card policy”,
respondents could not demand OT pay from petitioners if
respondents did not render OT work
 The requirement of rendering additional service differentiates OT
pay from benefits such as 13th month pay or yearly merit increase.
These benefits do not require any additional service from their
beneficiaries
  Thus, OT pay does not fall in the definition of benefits under Art.
100 of the Labor Code
COMPRESSED WORK WEEK
 Bisig Manggagawa sa Tryco, Et al vs NLRC et al
 Under DO No. 21, to protect the interest of the employees in the
implementation of a compressed workweek scheme:
1. The employees voluntarily agree to work more than 8 hours a
day the total in a week of which shall not exceed their normal
weekly hours of work prior to the adoption of the compressed
workweek arrangement
2. There will not be any diminution whatsoever in the weekly or
monthly take-home pay and fringe benefits of the employees
3. If an employee is permitted or required to wokr in excess of his
normal weekly hours of work prior to the adoption of the
compressed workweek scheme, all such excess hours shall be
considered OT work and shall be compensated in accordance with
the provisions of the Labor Code or applicable CBA
4. Appropriate waivers with respect to OT premium pay for work
performed in excess of 8 hours a day may be devised by the
parties to the agreement
5. The effectivity and implementation of the new working time
arrangement shall be by agreement of the parties
ATTY. BATA’S EXPLANATION:
 Example of a compressed workweek is when the employer reduces
the lunch break to 30 minutes, which becomes compensable, and
the regular daily working hours for five days is from 8:00 AM to
4:00 PM. However, the employer adds another 1 1/2 to 2 hours
daily instead of having a 6 th working day. The extended hour is not
considered an OT, but it is a staggered hours of one working day
spread to the entire 5 days to meet the company’s normal working
hours
OT INTEGRATED INTO BASIC SALARY
 Damasco vs. NLRC
 There should be an express agreement to that effect
 Requirements:
A. Clear written agreement knowingly and freely entered into
by the employee
B. The mathematical result show that the agreed legal wage
rate and OT computed separately are equal or higher than
the separate amounts legally due
 Why do some EE and ER Resort to This?
 To do away with submission of OT authorization,
computation, etc.
 Example of workers: Drivers of tankers, prime movers, etc
UNDERTIME NOT OFFSET BY OVERTIME
 Art. 88. Undertime Not Offset by Overtime
 Undertime work on any particular day shall not be offset by OT
work on any other day.
 Permission given to the employee to go on leave on some other
day of the week shall not exempt the employer from paying the
additional compensation required in this Chapter
 Reason why there is no offsetting
 Rate for OT pay is higher than the rate for regular working
hours
 Article 90: OT regular wage shall include the cash wage only
SCHEDULE OF REST DAY (SECTION 5, RULE III, BOOK 3)
 Preference of Employee: The preference of the employee as to his weekly
day of rest shall be respected by the employer if the same is based on
religious grounds. The employee shall make known his preference to the
employer in writing at least seven days before the desired effectivity of the
initial rest day so preferred
 Where, however, the choice of the employee as to his rest day based on
religious grounds will inevitably result in serious prejudice or obstruction to
the operations of the undertaking and the employer cannot normally be
expected to resort to other remedial measures, the employer may so
schedule the weekly rest day of his choice for at least 2 days in a month
 WEEKLY REST PERIODS:
 Article 91: Employing for profit or not, all employers must provide
each employee a rest period or not less than 24 CONSECUTIVE
HOURS after 6 CONSECUTIVE NORMAL WORK DAYS
 Employer shall determine and schedule the weekly rest day
of his employees
 Employer shall respect the preference of employees as to
their weekly rest day when such preference is based on
religious grounds (Article 91b)
 Compensation: Employee shall be paid with an additional
compensation of at least 30% of his regular wage (READ
SECTION 7)
RULES ON REST DAY (NO WORKER SHALL BE REQURED AGAINST HIS
WILL TO WORK ON HIS SCHEDULED REST DAY EXCEPT UNDER THE
CIRCUMSTANCES PROVIDED IN ARTICLE 92)
 Section 6. When work on rest day authorized: An employer may require
any of his employees to work on his scheduled day for the duration of the
following emergencies and exceptional conditions
A. In case of actual or impending emergencies caused by serious
accident, fire, flood, typhoon, earthquake, epidemic or other disaster or
calamity, to prevent loss of life or property, or in cases of force majeur or
imminent danger to public safety
B. In case or urgent work to be performed on machineries, equipment or
installations to avoid serious loss which the employer would otherwise
suffer
C. In the event of abnormal pressure of work due to special
circumstances, where the employer cannot ordinarily be expected to
resort to other measures
D. To prevent serious loss or perishable goods
E. Where the nature of the work is such that employees have to work
continuously for 7 days in a week or more, as in the case of the crew
members of a vessel to complete a voyage and in other similar cases
F. When the work is necessary to avail of favorable weather or
environmental catastrophes where performance or quality of work is
dependent thereon
 No employee shall be required against his will to work on his scheduled
rest day unless the circumstances provided in this Section: Provided,
however, that where an employee volunteers to work on his rest day
under other circumstances, he shall express such through writing,
following the provisions of Section 7 hereof regarding additional
compensation
HOLIDAY PREMIUMS
 12 guaranteed paid regular holidays. These days are designated by law
 Work on holiday compensated at 200%
 Regular Holidays: New Year’s Day, Maundy Thursday, Good Friday, Araw
ng Kagitingan, Labor Day, Independence Day, National Heroes Day,
Bonifacio Day, Christmas Day, Rizal Day, Muslim Holidays
 Work on rest day coinciding with special day: Additional 50% of regular
pay
 Work on rest day coinciding with holiday, additional 30% of holiday rate
(200%)
ARTICLE 94 RIGHT TO HOLIDAY PAY
A. Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than 10
workers
B. The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate
IRR - WHO ARE NOT ENTITLED TO HOLIDAY PAY
 Rule IV, Section 1. This rule shall apply to all employees except:
A. Those of the government and any of the political subdivision, including
GOCCs
B. Those of retail and service establishments regularly employing less
than 10 workers
C. Domestic helpers and persons in the personal service of another
D. Managerial employees as defined in Book Three of the Code
E. Field personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged in a
contract basis, purely commission basis, or those who are paid in a fixed
amount for performing work irrespective of the time consumed in the
performance thereof
MONTHLY PAID EMPLOYEES ARE ENTITLED TO HOLIDAY PAY
 In the case of IBAAEU vs Ople, the Supreme Court rules that monthly
paid employees are not excluded from the benefit of holiday pay
 In Chartered bank case, the Supreme Court said that the divisor used to
compute a holiday pay should be the same divisor for computing OT rate
or SL/VL
 The bigger the divisor, the smaller the daily equivalent
 Example: A divisor of 365 yields a P657.53 equivalent. If the divisor is
251, the equivalent is P956.16
 When a claim cash value of accrued VL or OT, the employee prefers the
bigger percentage if the bigger pay equivalent is unfavorable when pay
deduction will be done because of absence without pay or for other valid
deductions
HOLIDAY AND PREMIUM PAY
 Holiday pay refers to the payment of the regular daily wage for any
unworked regular holidays. It applies to entitlement to holiday pay during
regular holidays and not during special non-working days
 Holiday Pay Rule: Every employee is entitled to at least 100% of his
minimum wage rate even if he did not work
 If there is work performed on a regular holiday which is also a rest day, a
covered employee is entitled to a premium pay of 30% of the regular
holiday rate of 200% based on his/her daily basic wage or a total of 260%
 How premium pay is computed:
 For work performed on rest days/special days: +30% of the daily
basic wage rate of 100% or a total of 130%
 For work performed on a rest day which is also a special day:
+50% of the daily basic rate or a total of 150%
 For work performed on a regular holiday which is also employee’s
rest day: +30% of the regular rate of 200% based on his daily basic
wage rate or a total of 260%
COMPUTATION OF HOLIDAY PAY AND PREMIUM PAY
 Reference: Bureau of Working Conditions
 How much is the holiday pay of an employee?
 For any unworked regular holiday, 100% of the employee’s daily
wage rate (BASIC pay + COLA)
 For work performed on a regular holiday, +100% or a total of 200%
of the employee’s daily wage rate (Basic Pay + COLA)
 What is Premium Pay?
  Premium pay refers to the additional payment for work within 8
hours on rest days or special days
 How much is the premium pay of an employee?
A. +30% of the daily basic rate or a total of 130% for work performed on
rest day or special day
B. +50% of the daily basic rate or a total of 150% for work performed on
special day falling on the employee’s rest dat
C. Plus 30% of the daily basic rate or a total of 260% for work performed
on a regular holiday falling on the employee’s rest day
 PREMIUM PAY IS SYNONYMOUS TO ADDITIONAL
SHUT DOWN AND BUSINESS REVERSES (HOLIDAY PAY)
 Temporary or periodic shutdown and temporary cessation of work (Sec. 7,
Rule IV, Book III)
 The regular holidays falling within the period shall be compensated
in accordance with this rule
 But in case of business reverses as authorized by SOL, regular holiday
pay may not be paid (Sec. 7b)
 Section 7: Temporary of periodic shurdown and temporary
cessation of work
A. In cases of temporary or periodic shutdown and temporary
cessation of work of an establishment, as when a yearly inventory
or when the repair or cleaning of machineries and equipment is
undertaken, the regular holidays falling within the period shall be
compensated in accordance with this Rule
i. Example: Christmad period when the plant is
undergoing preventive maintenance
B. The regular holiday during the cessation of operation of an
enterprise due to business reverses as authorized by the Secretary
of Labor and Employment may not be paid by the employer
HOLIDAY PAY OF CERTAIN EMPLOYEES
 Section 8. Holiday Pay of Certain Employees
A. Private school teachers, including faculty members of colleges and
universities, may not be paid for the regular holidays during semestral vacations.
They shall, however, be paid for the regular holidays during Christmas vacation
B. Where a covered employee, is paid by results or output, such as payment on
piece work, his holiday pay shall not be less than his average daily earnings for
the last 7 actual working days preceding the regular holiday. Provided, however,
that in no case shall the holiday pay be less than the applicable statutory
minimum wage rate
C. Seasonal workers may not be paid the required holiday pay during off-season
when they are not at work
D. Workers who have no regular working days shall be entitled to the benefits
provided in this Rule
SOME RULES ON HOLIDAY PAY
 Double Holiday
 If unworked: 2 regular holidays on the same day (200%)
 If worked: 300%
 Successive Regular Holidays (Holy Thursday and Good Friday)
 The employee may not be paid for both holidays if he absent
himself from work on the day immediately preceding the first
holiday unless he works on the first holiday in which case, he is
entitled to his holiday pay on the second day
 Field Personnel: Not entitled to holiday pay
 Holiday pay for a part-time worker: DOLE explanatory bulleting (Azucena)
 Non-Muslims are entitled to Muslim Holiday pay
 Offsetting of holiday work on regular holiday not allowed
SERVICE INCENTIVE LEAVE IS DIFFERENT FROM VACATION LEAVE
 Art. 95. Right to Service Incentive Leave
A. Every employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay
B. This provision shall not apply to those who are already enjoying the
benefit herein provided, those enjoying vacation leave with pay of at least
five days and those employed in establishments regularly employing less
than ten employees or in establishments exempted from granting this
benefit by the Secretary of Labor and Employment after considering the
viability of financial condition of such establishment
C. The grant of benefit in excess of that provided herein shall not be made
a subject or arbitration or any court of administrative action
 Employees who already used the 5 vacation leaves cannot anymore
demand the payment of Service Incentive Leave
 Vacation leave is not granted by the Labor Code but it is usually granted
by the CBA or the company itself
 Companies with less than 10 employees cannot enjoy SIL
SOME RULES ON SIL
 “At least one year of service”: Service within 12 months whether
continuous or broken reckoned from the date the employee started
working including authorized absences and paid regular holidays
 NOTE:
 Under Section 4, Rule V: Unused SIL is commutable to its money
equivalent if not used or exhausted at the end of the year
 Kasambahay under RA 10361 are now entitled to SIL and those
unused
 Prescription of money claims: 3 years
 Including OT, 13th month pay, NSD, etc
 SILP will not prescribe even if it has lapsed for more than 2 years
AUTO BUS CASE
 Correspondingly, it can be conscientiously deduced that the case of action
of an entitled employee to claim his service incentive leave pay 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 his leave credits and
opts for its commutation upon his resignation or separation from
employment, his cause of action to claim the whole amount of his
accumulated service incentive shall arise when the employer fails to pay
such amount at the time his resignation or separation from employment
SERVICE CHARGES
 Collected by most hotels, restaurants, and similar establishments
 RA 11360: An Act Providing that Service Charges Collected by hotels,
Restaurants and Other Similar Establishments be Distributed in Full to All
Covered Employees, Amending for the Purpose PD No. 442, as
Amended, Otherwise Known as the Labor Code of the Philippines
SERVICE CHARGE NOT THE SAME AS TIP
 RA 11360 amends Article 96 of the Labor Code of the Philippines
 It previously provided that 85% of the total service charge collected by the
establishments would be distributed to covered employees, while 15%
would account for losses and breakages and be given to managerial
employees, at the discretion of the management in the latter case
SOME RULES ON SERVICE CHARGE
 Under RA 11360, managerial employees refers to those who lay down
and execute management policies or to effectively recommend such
managerial actions
 They are excluded from getting a share in the service charges
under the new law
 DO No. 226 (IRR of RA 11360)
 Employees who fall under the definition of supervisory employees
in the Labor Code are subsumed under the definition of managerial
employees and excluded from the distribution of service charges
 Only rank-and-file employees ARE ENTITLED to the
distribution of service charges under RA No. 11360
 Section 3. Distribution of charges. Shall be distributed equally and
completely based on actual hours days of work or service rendered
among the covered employees.
WAGES
TITLE II, ARTICLES 97 TO 129
COVERAGE:
 WAGES - DEFINITION
 MINIMUM WAGES
 PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS
 PAYMENT OF WAGES
 WAGE STUDIES, WAGE AGREEMENTS, AND WAGE
DETERMINATION
 ADMINISTRATION AND ENFORCEMENT
The purpose why wages in the Labor Code covers many articles is because
people go to work to have an income or salary. Wage is the lifeblood of every
worker.
ARTICLE 97 - DEFINITIONS
A. “Persons”
a) An individual, partnership, association, corporation, business trust,
legal representatives, or organized group of persons
B. “Employer”
a) Includes any person acting directly or indirectly in the interest of an
employer in relation to an employee and shall include the
government and all its branches, subdivisions, and
instrumentalities, all GOCCs and institutions, ad well as non-profit
private institutions, or organizations.
NOTE: A supervisor hired by a company can be
considered an employer
C. “Employee”
a) Includes any individual employed by an employer
D. “Agriculture”
a) Includes farming in all its branches and, among other things,
includes cultivation and tillage of soil, dairying, the production,
cultivation, growing, and harvesting of any agricultural and
horticultural commodities, the raising of livestock or poultry, and
any practices performed by a farmer on a farm as an incident to or
in conjunction with such farming operations, but does not include
the manufacturing or processing of sugar, coconuts, abaca,
tobacco, pineapples or other farm products (MEMORIZE)
 It is important to know the definition of agriculture because there is a
difference between the wages of agriculture and non-agriculture
employees
E. “Wages” (IMPORTANT)
a) The remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission bases, or other
method of calculating the same, which is payable by an employer
to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered
or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor and Employment, of board,
lodging, or other facilities customarily furnished by the
employer to the employee.
 b) Fair and Reasonable shall not include any profit to the employer,
or to any person affiliated with the employer (Art. 97)
IRAN VS NLRC ET AL
 As part of their compensation, the driver/salesmen and truck helpers of
petitioner received commissions per case of softdrinks
 Issue: Whether or not commissions are included in determining
compliance with the minimum wage requirement
 Labor Arbiter ruled that petitioner had not complied with the minimum
wage requirements in compensating private respondents.
 On appeal, the NLRC denied petitioner’s claim that commissions be
included in determining the compliance with the minimum wage
 SC’s Ruling:
 Art. 97 (f): “Wage” paid to an employee shall mean the
remuneration or earnings, however designated, capable of being
expressed in terms of money, whether fixed or ascertained on a
time, task, piece, or commission basis, etc
 This definition explicitly includes commissions as part of wages.
While commissions are, indeed, incentives or forms of
encouragement to inspire employees to put a little more industry on
the jobs particularly assigned to them, still these commissions are
direct remunerations for services rendered.
 In fact, commissions have been defined as the recompense,
compensation or reward of an agent, salesman, executor,
trustee, receiver, factor, broker, or bailee, when the same is
calculated as a percentage on the amount of his transactions
or on the profit to the principal (underlined is the reckoning
point)
 The nature of the work of a salesman and the reason for such type
of remuneration for services rendered demonstrate clearly that
commissions are part of a salesman’s wage or salary
 Thus, the commissions earned by private respondents in selling
softdrinks constitute part of the remuneration paid to
drivers/salesmen and truck helpers for serving as such, and hence,
must include in the wages paid to them
 COMMISSIONS MUST BE EXPLICITYLY STATED ON THE
CONTRACT
WHAT ARE NOT INCLUDED
 Basic wage does not include
A. COLA
B. Profit sharing payments
C. Premium payments
D. 13th month pay
E. Other monetary benefits which are not c onsidered or
integrated into the regular wage of the workers (IRR of RA 6727 (N))
 Existing laws excludes allowances from the basic salary or wage in
the computation of the amount of retirement and other benefits
 SC will not adopt a different meaning of the terms “salary or wages”
to mean the opposite
 Example: to include allowances in the concept of salary and
wages
 See CIT vs. Ople (1987)
 Question: Why is it beneficial to the employer to include all of its
benefits on his basic pay?
 His base pay will increase, but it will be unjust on the part of the
employer as it will form part of the labor cost
INTEGRATION OF COLA TO WAGES
 There are instances where COLA are integrated into basic pay
 Some Wage Orders issued by Regional Tripartite Wage and Productivity
Boards (RTWPBs) would require that the existing COLA shall be
integrated into the basic pay
 Illustration: basic pay is P400 and COLA is P20. Under new Wage
Order, the basic pay is now P420/day
 Atty. Bata’s Comment:
 There are times when employees may not feel the increase of
integrating COLA to the basic wage, but it is more felt with OT pays
because of the higher base rate
 READ HONDA VS. SAMAHAN NG MANGGAGAWA SA HONDA (2006)
 Excluded from the basic salary are payments of SL, VL, and
maternity benefits
 Note: If the basic pay will include all benefits, the OT, holiday pay,
SSS, etc, payments or expenses will increase
EARNED SALES COMMISSION
 Songco vs. NLRC
 Earned sales commission and allowances should be included in
the monthly salary of Songco et al for purposes of computing their
separation pay
 The SC further said in Songco that in Soriano vs NLRC,
commissions are not included in such base figure since such
commissions must be earned by actual market transactions
attributable to salesman.
 Since the commissions in the present case were earned by actual
transaction attributable to Songco et al, these should be included in
their separation pay. In the computation thereof, what should be
taken into account is the average commission earned during their
last year of employment
ATTRIBUTES OF WAGE
1. Remuneration or earnings for work done
 Not dependent on another to receive money
2. Capable of being expressed in terms of money
 Salary should be in the form of cash
3. Payable by employer to employee
4. Includes the fair and reasonable value of board, lodging, and other facilities
SALARY DISTINGUISHED FROM GRATUITY
 Looking into the definition of gratuity, we find the following in Moreno’s
Philippine Law Dictionary, to wit:
 Something given freely, or without recompense; a gift; something
voluntarily given in return for a favor or services; a bounty; a tip
(Pirovano vs. De la Rama Steamship, Co.)
 That paid to the beneficiary for past services rendered purely out of
the generosity of the giver or grantor (Peralta vs Auditor General)
 Salary or compensation
 The very term ‘gratuity’ differs from the words ‘salary’ or
‘compensation’ in leaving the amount thereof, within the
limits of reason, to the arvitrament of the giver (Heeranz &
Garriz vs Barbudo)
 From the foregoing, gratuity is therefore, not intended to pay a worker for
actual services rendered.
 Plastic Town Center Corporation vs. NLRC
 It is a money benefit given to the workers whose purpose is “to
reward employees or laborers, who have rendered satisfactory and
efficient service to the company” (Sec. 2, CBA)
 While it may be enforced once it forms part of a contractual
undertaking, the grant of such benefit is not mandatory so as to be
considered a part of labor standard law unlike the salary, cost of
living allowances, holiday pay, leave benefits, etc., which are
covered by the Labor Code.
AGRI IS HIGHLY MECHANIZED
 Del Rosario vs CIR
 Where the enterprise is highly mechanized and carries on
processing activities nor merely incidental to purely farming
operations, employees employed in operations other than purely
agricultural work are deemed industrial
 Atty. Bata’s Comment:
 There are people working in Del Monte, but are under the
engineering department.
 If you are not there to do agricultural work, then you are
considered an industrial worker
AGRI WORKERS
 Victorias Milling vs. CIR
 The nature of the work which classifies a worker as one falling
under the exemption as “agricultural laborers” in petitioner’s
haciendas, the principal work of which is planting and harvesting
sugar canes and other chores incidental to farming operations.
 They are agricultural workers
FACILITIES AND SUPPLEMENTS
 The law guarantees the laborer a fair and just wage.
 The “minimum wage” can by no means imply only the actual minimum.
 Some margin or leeway must be provided, over and above the minimum,
to take care of contingencies, such as increase in wants, and to provide
means for a desirable improvement in his mode of living
 Atok Big Wedge vs. Atok Big Wedge Mutual Benefit Association - READ
THIS CASE
DISTINGUISH SUPPLEMENT AND FACILITIES
 “Supplements”
 Extra remuneration or special privileges or benefits given to or
received by the worker over and above his ordinary earnings or
wages
 Granted for the convenience of the ER
 “Facilities”
 Items of expense necessary for the laborer’s and his family’s
existence and subsistence.
 They form part of the wage and when furnished by the ER are
deductible therefrom since if they are not furnished, the laborer
would spend and pay for them just the same
 Example:
 Meals
 Housing for dwelling purposes
 Fuel including electricity
 Gas
 Water for the non-commercial personal use of the EE
 Other articles and services given primarily for the benefit of
the worker or his family
 IMPORTANT: The same benefits granted by the employer may be
considered as facilities or supplements
 Example: Worker is hired in a gasoline station and the government
opened the market competition to local and small-time gas
operators to compete with big companies. The former may include
facilities, such as bunk house with free meals, to be included on its
employee’s minimum wage as long as it is put into writing.
 If the employee does not agree, the employer is required to
pay them in cash
 You should also base your payment considering the benefits
such as SSS, PhilHealth, Pag-ibig
 The employee must agree that the facilities are included to
his salary
 In the absence of a written agreement, facilities cannot be
considered included to the employee’s minimum wage
 Example: An employee is giving snacks to the employees regularly
because the nature of their work is construction. Can the employer
 decide to immediately stop giving such snacks because he cannot
cover it anymore?
 Providing snacks has become part of the supplements that
the employer is giving to his employees. Thus, he cannot
take it away
 Supplements, once given, cannot be taken back because it
is tantamount to diminution of benefits
CRITERION - TO WHOSE BENEFIT
 The criterion in determining whether an item is a supplement or facility is
not so much with the kind of benefits or item given, but its PURPOSE
 State Marine vs Cebu Seamen’s Association
 Issue: Whether the food or meals given to deck officers, etc were
facilities which should be deducted from their wages or
supplements which should not be deducted from their wages
 SC ruled that they are supplements
REQUIREMENT FOR VALID DEDUCTION OF FACILITIES
1. Facilities are customarily given
2. Must be voluntarily accepted in writing by the employee
3. Must be charged at fair and reasonable value
 ATTY. BATA’S DISCUSSION:
 If the employer provides food to the workers but the requisites
above are not present, it shall not be considered as facilities, but it
will be treated as supplements.
 It must not be deducted from the basic salary of the worker
 Some employers are afraid to give extra benefits to their
employees because eventually they will not agree that it will be
deducted from their salaries
 Supplements are over and above the minimum wage while facilities
is part of the wage
SUPPLEMENT CANNOT BE ELIMINATED
 Test on whether or not items are facilities
A. Are these items automatically furnished by the trade?
B. Did the employee voluntarily accepted the same in writing?
C. Is the value thereof fair and reasonable?
 If the employer fails to prove this:
A. Then it is a supplement not a facility
B. Once given, a supplement cannot be eliminated or diminished
C. Grant of bonus may be unilaterally be reduced by the employer if it
depends on profits acquired
 Atty. Bata’s Discussion:
 In case of doubt, the facility shall be considered a supplement and
it cannot be eliminated or diminished
FORMULA
 As regards meals and snacks, the employer may deduct from the wages
not more than 70% of the value and 30% must be subsidized by the
employer
 As regards lodging, its fair and reasonable value is determined of
operation and maintenance, including adequate depreciation plus
reasonable allowance
EQUAL PAY FOR EQUAL WORK
 International School Alliance of School vs. Quisombing
 Foreigner-teachers were paid higher than their Filipino counterparts
CHAPTER II, MINIMUM WAGE RATES
 Art. 99. Regional Minimum Wages.
 The minimum wage rates for agricultural and non-agricultural
employees and workers in each and every region of the country
shall be those prescribes by the Regional Tripartite Wages and
Productivity Boards (As amended by Section 3, RA 6727, June 9,
1989)
PURPOSE OF MINIMUM WAGE
 The purpose of minimum wages is to protect workers against unduly low
pay. They help ensure a just and equitable share of the fruits of progress
to all, and a minimum living wage to all who are employed and in need of
such protection.
 The purpose of minimum wage laws is to prevent emplouers from
exploiting desperate workers. The minimum wage should provide enough
income to afford a living wage. That is the amount needed to provide
enough food, clothing, and shelter
 NOTE: Minimum wage is not the living wage. It only affords a living wage.
HISTORY OF MINIMUM WAGE
 The Fair Labor Standards Act set the first US minimum wage in 1938
 Pres. Franklin D. Roosevelt passed it as part of the new deal to protect
workers during the Great Depression. The Depression had caused wages
for many to drop to pennies a day. Roosevelt set the minimum wage at
$0.25/hour, which is equivalent to $4.36/hour in 2018
 The fierce competition during the Depression forced companies to slash
pay and extend hours just to stay in business.
 As a result, 25% of American children were working 60 hours a week or
more, according to Labor Department survey at the time.
 To address this, the FLSA also banned child labor and limited the
workweek to 44 hours
LOWEST REMUNERATION
 A minimum wage is the lowest remuneration that employers can legally
pay their workers
 The price floor below which workers may not sell their labor. Most
countries had introduced minimum wage legislation by the end of the 20 th
century.
 The movement for minimum wages was first motivated as a way to stop
the exploitation of workers in sweatshops, by employers who were
thought ti have unfair bargaining power over them.
 Over time, minimum wages came to be seen as a way to help lower-
income families.
 Modern national laws enforcing compulsory union membership which
prescribed minimum wages for their members were first passed in New
Zealand in the 1890s.
POOR EMPLOYERS
 Ability to pay is immaterial
 If the employer cannot pay a subsistence wage, then he should not
continue his operation unless he improves his methods
 Even if you are poor or the load of work is less, you are obliged to
pay the proper minimum wage.
 MAYON HOTEL VS ADARNA
 Serious business losses is NOT a defense to payment of labor
standard benefits. Payment of minimum wages is not dependent on
the employer’s ability to pay
 The acceptance of a lower rate does not preclude the worker from
suing for deficiency.
 The principle of estoppel or laches does not apply in this situation
 Legislated wage increase: To prevent the exploitation of
defenseless workers when situated in an unequal position vis-a-vis
their employers in terms of bargaining
NO WORK NO PAY
 Principle of “No Work No Pay”
 General Rule: If the worker does not work, he is entitled to any
wage or pay
 EXCEPTION: When it was the employer who prevented him from
working despite ableness or willingness to work or otherwise
illegally prevented from working in which case he is entitled to his
wage
PERSONS EXEMPTED FROM MINIMUM WAGE
 Exemptions from minimum wage under IRR
1. Household helpers and persons in personal service
2. Homeworkers engaged in needle-work
3. Workers employed in any establishment duly registered with the
National Cottage Industries and Development per RA 3470
4. Workers in any duly registered cooperative
5. Establishments labeled as Barangay Micro Business Eneterprises
whose capitalization does not exceed 3 million
a) Must get certification from DTI that you are a BMBE
b) Still required to pay benefits (SSS, PHIC, Pag-ibig)
6. Exemption of Retail and Service Establishments upon application with
RTWPB
7. Distressed establishments
8. Cooperative
LOWLY PAID EMPLOYEES
 Beneficiary of the Minimum Wage Law
 The minimum wage law directly benefits the lowly paid EEs who
receive inadequate wages on which they support themselves and
their families.
 It benefits all wage earners indirectly by setting a floor below which
their remuneration cannot fall. It increases the standard of
competition among ERs since it would protect the fair-minded ER
who operates at lower costs by reason of paying his workers a
wage below subsistence
 NOTE: Minimum wage orders that sets the minimum wage affects
only the minimum wage earners
DIMINUTION OF BENEFITS
DIMINUTION OF BENEFITS 1
PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS
Article 100. Prohibition against elimination or diminution of benefits. Nothing in
this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.
Two principles in Art. 100:
(1) Non-elimination
(2) Non-diminution
CASE: RICARDO VERGARA, JR. v. COCA-COLA, G.R. No. 176985, April 1,
2013
Generally, employees have a vested right over existing benefits voluntarily
granted to them by their employer. Thus, any benefit and supplement being
enjoyed by the employees cannot be reduced, diminished, discontinued or
eliminated by the employer. The principle of non-diminution of benefits is actually
founded on the Constitutional mandate to protect the rights of workers, to
promote their welfare, and to afford them full protection. In turn, said mandate is
the basis of Article 4 of the Labor Code which states that "all doubts in the
implementation and interpretation of this Code, including its implementing rules
and regulations, shall be rendered in favor of labor."
There is diminution of benefits when the following requisites are present: (1) the
grant or benefit is founded on a policy or has ripened into a practice over a long
period of time; (2) the practice is consistent and deliberate; (3) the practice is not
due to error in the construction or application of a doubtful or difficult question of
law; and (4) the diminution or discontinuance is done unilaterally by the
employer.18
To be considered as a regular company practice, the employee must prove by
substantial evidence that the giving of the benefit is done over a long period of
time, and that it has been made consistently and deliberately. 19 Jurisprudence
has not laid down any hard-and-fast rule as to the length of time that company
practice should have been exercised in order to constitute voluntary employer
practice. The common denominator in previously decided cases appears to be
the regularity and deliberateness of the grant of benefits over a significant period
of time. It requires an indubitable showing that the employer agreed to continue
giving the benefit knowing fully well that the employees are not covered by any
provision of the law or agreement requiring payment thereof. In sum, the benefit
must be characterized by regularity, voluntary and deliberate intent of the
employer to grant the benefit over a considerable period of time.
CONCURRING OPINION OF J. BRION IN ARCO METAL CASE, G.R. No.
170734
(1) Express policy
(2) Written contract
(3) Company practice
When the grant to employees of certain benefits has evolved into company
practice, said benefits cannot unilaterally be withdrawn or reduced by the
employer. The employees have a vested and demandable right over them. 4
CASES
To be considered as a company practice which cannot subsequently be
withdrawn by the employer, the grant of the benefit must be shown to have been:
(a) Practiced over a long period of time 5
(b) Done consistently and deliberately6
(c) Not a product of erroneous interpretation or construction of a doubtful
or difficult question of law7
There is no hard and fast rule in determining the practice over a period of time.
Thus, “with regard to the length of time the company practice should have been
exercised to constitute voluntary employer practice which cannot be unilaterally
withdrawn by the employer, jurisprudence has not laid down any hard and fast
rule. Xxx The common denominator in these cases appears to be the regularity
and deliberateness of the grant of benefits over a significant period of time.”

Labor Code and Civil Code MUTUALITY OF CONTRACTS

I concur separately to clarify that the basis for the prohibition against Why apply Article 100 to benefits long after promulgation of the Labor Code?
diminution of established benefits is not really Article 100 of the Labor
Code as the respondents claimed and as the cases cited in the Justice Brion in Arco Metal, under the principle of mutuality of contracts (Art.
ponencia mentioned. Article 100 refers solely to the non-diminution of 1308, CC), the terms of contract both express and implied cannot be withdrawn
benefits enjoyed at the time of the promulgation of the Labor Code. except by mutual consent or agreement of the contracting parties.
Employer-employee relationship is contractual and is based on the
express terms of the employment contract as well as on its implied EXCEPTIONS TO THE NON-DIMINUTION RULE
terms, among them, those not expressly agreed upon but which the See Azucena:
employer has freely, voluntarily and consistently extended to its (1) Correction of error8
employees. Under the principle of mutuality of contracts embodied in (2) Negotiated benefits – CBA
Article 1308 of the Civil Code, the terms of a contract - both express and (3) Wage order compliance9
implied - cannot be withdrawn except by mutual consent or agreement (4) Benefits on reimbursement basis
of the contracting parties. In the present case, the lack of consent or (5) Reclassification of position10
agreement was precisely the basis for the employees' complaint. (6) Contingent or conditional bonus11
(7) Productivity incentives12
IT MUST BE SHOWN THAT…
(A) The grant of benefit is founded on policy or ripened into a practice NO DIMINUTION CASES
over a long period of time 1. If done only once where the CBA signing bonus was granted only
(B) Practice is consistent and deliberate once, the same cannot be considered as having been practiced over
(C) Practice is not due to error in the construction or application of a long period of time
doubtful or difficult question of law 2. Or the implementation of wage order was erroneously done for less
(D) The diminution or elimination is unilaterally done by the employer than a year –same rule above
3. The giving of separation pay previously given to worker who
LENGTH OF TIME voluntarily resigned – employer is not estopped. Under the LC, no
1. DFC v. ALU – 6 years separation pay is given to resigning employee and there is no
2. DVO PORT STEVEDORING – 3 years company policy that effect.13
3. TIANGCO v. LEOGARDO – 3 years 4. No company practice if the company has given separation pay to the
previously resigned employee since it was an isolated case. Even
Voluntary practice of the employer cannot be unilaterally withdrawn by the with the submission of the affidavit of the worker who resigned ahead
employer. of the complainant.14

SOME PRINCIPLES DIMINUTION OF BENEFITS 3

Where the employer practice or usage confers greater benefits than what the law
actually provides, its validity is not affected by law and, more importantly, the First Requisite: Founded on policy or company practice
employer may not cite the law as an excuse or justification for reducing the
benefits under such contract or practice. Second Requisite: Done consistently and deliberately; The intention to make a
certain act a company practice may be logically inferred from the peculiar
Meaning of “supplements and other employee benefits” – mean compensation circumstances obtaining in each case.15
and privileges received by an employee aside from regular salaries or wage. Third Requisite: The practice is not due to error in the construction or
application of a doubtful or difficult question of law. The error must be corrected
REMOVAL OF CHAIRS immediately after its discovery otherwise the rule on non-diminution would apply.
Benefits mentioned in the non-diminution rule refers to monetary benefits or
privileges given to the employee with monetary equivalents. Thus the company THE ERROR WAS NOT IMMEDIATELY COLLECTED; IT HAS BECOME A
has the right to remove the chairs previously given to the operators. 1 PRACTICE
The giving of separation pay to resigning employee was considered a company
DIMINUTION OF BENEFITS 2 practice despite the fact that the Labor Code does not grant it because if there
was an error, it was not corrected immediately.
MEANING OF BENEFITS (monetary considerations only)
Cases that prove “benefits” means monetary considerations: WORKERS PAID BY RESULTS
(1) Eastern Telecom v. ETEU, G.R. No. 185665 – 14th, 15th, 16th month Article 101. Payment by results.
pay
(2) Centra Azucarera case – G.R. No. 188949 – 13th month pay, holiday 4
Nestle Philippines v. NLRC, 193 SCRA 504
pay, VL and SL 5
(3) American wire, etc., G.R. No. 155059 – cash incentives, premium Davao Integrated Ports Stevedoring Services v. Abarquez, et al., 220
pay SCRA 197
6
Globe Mackay Cable v. NLRC, 163 SCRA 71
Other monetary benefits that cannot be considered within the definition of benefit 7
under Art. 100: Globe Mackay Cable v. NLRC, 163 SCRA 71
 Overtime pay – since it will be proven that the employees render OT 8
Globe Mackay Cable v. NLRC, 163 SCRA 71; Samahan ng
services.2
Manggagawa sa Top Form
9
BAWAL MAG-BAWAS NG BENEFITS Pagasa Steel Works v. CA
Art. 100 expressly prohibits employers from eliminating or reducing the benefits 10
received based on the following3:
National Sugar Refineries Corp v. NLRC
11
Phil. Duplciators v. NLRC; American Wire and Cable
1 12
Royal Plant Workers v. Coca Cola, April 15, 2013 Eastern Telecommunications Phil. V. Telecom Employees
2 13
SMC v. Layoc, Oct 19 2007; Manila Jockey Club etc., March 7, 2007. Del Rio v. DPO Phil, Dec. 10, 2018
14
Coseteng v. Perez, Sept. 6, 2017
3 15
Wesleyan University Philippines v. Wesleyan, etc., March 12, 2014 Globe Mackay Cable v. NLRC, 163 SCRA 71
The Secretary of Labor and Employment shall regulate the payment of wages by
results, including pakyao, piecework, and other non-time work, in order to ensure
the payment of fair and reasonable wage rates, preferably through time and
motion studies or in consultation with representatives of workers’ and employers’
organizations.
Article 101 speaks of workers whose pay is calculated not on the basis of time
on the job but on the quantity and quality or kind of work they turn out. In other
words, they are paid by results; they do nontime work.
PIECE RATE WORKERS
Legal sufficiency of the Piece Rate
(1) Those who are paid piece rates which are prescribed in Piece Rate
Orders issued by DOLE
(2) Those who are paid output rates which are prescribed by employer
and are not yet approved by DOLE
The usual point of disagreement in payment arrangements is whether the output-
to-pay-ratio is fair and reasonable. If the required quota is too high, the worker
may not even earn the minimum wage at the end of the eight hours. If the quota
is low, the earnings will be disproportionately high for the output and this is unfair
to the employer.
To remedy the situation, a time and motion study must be conducted at the
instance of any interested party or upon its initiative the DOLE.
PAYMENT BY RESULTS
SECTION 9. Workers Paid by Results. —
a) All workers paid by results, including those who are paid on
piecework, takay, pakyaw, or task basis, shall receive not less than
the applicable statutory minimum wage rates prescribed under the
Act for the normal working hours which shall not exceed eight hours
work a day, or a proportion thereof for work of less than the normal
working hours.
TWO CLASSES OF WORKERS PAID BY RESULTS
There are two categories of employees paid by results: (1) those whose time and
performance are supervised by the employer. (Here, there is an element of
control and supervision over the manner as to how the work is to be performed.
A piece-rate worker belongs to this category especially if he performs his work in
the company premises.); and (2) those whose time and performance
are unsupervised. (Here, the employers control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both classes of
workers are paid per unit accomplished. Piece-rate payment is generally
practiced in garment factories where work is done in the company premises,
while payment on pakyao and takay basis is commonly observed in the
agricultural industry, such as in sugar plantations where the work is performed in
bulk or in volumes difficult to quantify. 4 Petitioners belong to the first
category, i.e., supervised employees.16
BENEFITS PAYABLE TO PIECE RATE WORKERS
Benefits payable to piece rate workers (Azucena)
(1) Applicable minimum wage
(2) SILP
(3) NSD
(4) Holiday pay
(5) Meals and Rest Periods
(6) 13th month pay
PAYMENT OF WAGES
 Art. 102. Forms of Payment.
 No employer shall pay the wages of an employee by means of
promissory notes, vouchers, cuopons, tokens, tickets, chits, or any
object other than legal tender, even when expressly requested by
the employee.
 Payment of wages by check or money shall be allowed when such
manner of payment is customary on the date of effectivity of this
Code, or is necessary because of special circumstances as
specified in appropriate regulations to be issued by the Secretary of
Labor and Employment or as stipulated in a collective bargaining
agreement.
 NOTE: Usual manner of payment today is through ATM
PAYMENT BY CHECK
 Section 2. Payment by Check.
 Payment of wages by bank checks, postal checks or money orders
is allowed where such manner of wage payment is customary on
the date of the effectivity of the Code, where it is so stipulated in a
collective agreement, or where all of the following conditions are
met:
a. There is a bank or other facility for encashment within a
radius of 1 kilometer from the workplace;
b. The employer or any of his agents or representatives
does not receive any pecuniary benefit directly or indirectly
from the arrangement
c. The employees are given reasonable time during banking
hours to withdraw their wages from the bank which time
shall be considered as compensable hours worked if done
during working hours
16
Lambo, et al. v. NLRC v. October 26, 1999
d. The payment by check is with the written consent of the
employees concerned if there is no collective agreement
authorizing the payment of wages by bank checks
 Payment of wages through ATMs is allowed under labor advisory dated
November 25
 Some workers surrender their ATM cards to lenders
 To stop them from using the card, execute an affidavit of loss and
submit the same to the bank.
TIME OF PAYMENT OF WAGES
 Art. 103. Time of Payment.
 Wages shall be paid at least once every 2 weeks or twice a month
at intervals not exceeding 16 days. If on account of force majeure
or circumstances beyond the employer’s control, payment of wages
on or within the time herein provided cannot be made, the
employer shall pay the wages immediately after such force majeure
or circumstances have ceased. No employer shall make payment
with less frequency than once a month
 IMPLEMENTING RULES
 Section 3. Time of Payment
A. Wages shall be paid not less than once every 2 weeks or twice a
month at intervals not exceeding 16 days, unless payment cannot
be made with such regularity due to force majeure or
circumstances beyond the employer’s control in which case the
employer shall pay the wages immediately after such force majeure
or circumstances have ceased
B. In case of payment of wages by results involving work which
cannot be finished in 2 weeks, payment shall be made at intervals
not exceeding 16 days in proportion to the amount of work
completed. Final settlement shall be made immediately upon
completion of work.
PLACE OF PAYMENT
 Section 4. Place of Payment.
 As a general rule, the place of payment shall be at or near the
place of undertaking. Payment in a place other than the workplace
shall be permissible only under the following circumstances
A. When payment cannot be effected at or near the place of
work by reason of the deterioration of peace and order
conditions, or by reason of actual or impending emergencies
caused by fire, flood, epidemic or other calamity rendering
payment thereat impossible
B. When the employer provides free transportation to the
employees back and forth
C. Under any other analogous circumstances; Provided, that
the time spent by the employees in collecting their wages
shall be considered as compensable hours worked
D. No employer shall pay his employees in any bar, night or
day club, drinking establishments, dance hall, or other
similar places or in places where games are played with
stakes of money or things representing money except in the
case of persons employed in said place.
DIRECT PAYMENT OF WAGES
 Section 5. Direct Payment of Wages
 Payment of wages shall be made direct to the employee entitled
thereto except in the following cases:
A. Where the employer is authorized in writing by the
employee to pay his wages to a member of his family
B. Where payment to another person of any part of the
employee’s wages is authorized by existing law, including
payments for the insurance premiums of the employee and
union dues where the right to check-off has been recognized
by the employer in accordance with a collective agreement
in writing by the individual employees concerned; or
C. In case of death of the employee as provided in the
succeeding Section
 If the salary received by an authorized person or the company has no
record that the he received the salary duly authorized, the employee may
initiate a complaint for the salary
WAGES OF DECEASED EMPLOYEE
 Section 6
 The payment of the wages of a deceased employee shall be made
to his heirs without the necessity of intestate proceedings.
 When the heirs are of age, they shall execute an affidavit attesting
to their relationship to the deceased and the fact that they are his
heirs to the exclusion of all other persons.
 In case any of the heirs is a minor, such affidavit shall be executed
in his behalf by his natural guardian or next of kin.
 Upon presentation of the affidavit to the employer, he shall make
payment to the heirs as representative of the Secretary of Labor
and Employment
 Affidavit of Extrajudicial Settlement of Estate not needed
 It takes a long time to process
 Requires publication
PAYROLLS (EVIDENCE TO PROVE PAYMENT, CORRECT SALARY, ETC. IN
POSSESSION OF ER)
 Section 6
A. Every employer shall pay his employees by means of a payroll wherein
the following information and data shall be individually shown:
i. Length of time to be paid
ii. The rate of pay per month, week, day, or hour piece, etc
iii. The amount due for regular work
 iv. The amount due for overtime work
v. Deductions made from the wages of the employees
vi. Amount actually paid
B. Every employee in the payroll shall sign or place his thumbmark, as the
case may be, at the end of the line opposite his name where a blank
space shall be provided for the purpose. His signature shall be made in
ink, or his thumbmark placed with the use of the regular stamping ink and
pad
TIME RECORDS
 Section 7
 Every employer shall keep an individual time record of all his
employees bearing the signature or thumbmark of the employee
concerned for each daily entry therein by means of any of the
following methods
A. Through the use of bundy clock by means of which an employee
can punch in his individual card the time of arrival and departure
from work
B. Through the employment of a timekeeper whose duty is to time
in and out every employee in a record book
C. By furnishing the employees individually with a daily time record
form in which they can note the time of their respective arrival and
departure from work
PLACE OR RECORDS
 Section 11
 All employment records of the employees shall be kept and
maintained by the employer in or about the premises of the work
place. The premises of a workplace shall be understood to mean
the main or branch office of the establishment, if any, depending
upon where the employees are regularly assigned. The keeping of
the employee’s records in another place is prohibited
 Section 12 - Preservation of Records
 All employment records required to be kept and maintained by
employers shall be preserved for at least 3 years from the date of
the last entry in the records
 Section 13 - False Reporting
 It shall be unlawful for any empoyer or any person to make any
false statement, report or record on matters required to be kept or
maintained pursuant to the provisions of this Rule
 RATIONALE:
 The Labor Inspectors, under their visitorial powers in Art. 128 of the
Labor Code, are allowed to see and get copies of such records
CONTRACTING
LABOR-ONLY CONTRACTING OR JOB CONTRACTING
Article 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
WHY DO COMPANIES HIRE CONTRACTORS (FROM THE INTERNET)
REDUCED OVERHEAD: The attraction of hiring an independent contractor is
the reduced cost in: expenses, payroll, benefits and other overhead. Lower
overhead means less stress to bring in new business revenue to cover costs.
There are several major advantages to using independent contractors rather
than employees, with financial savings topping with list.
You will probably save money.
You have staffing flexibility.
You reduce your exposure to lawsuits.
You have less control over your workers.
Your workers will come and go.
COMPARISON BETWEEN HIRING AN EMPLOYEE AND CONTRACTOR
EMPLOYEE CONTRACTOR
There is employee-employer No EER between
relationship. Employee enjoys client/principal and worker. He
security of tenure and cannot is employed by the contractor.
be terminated without just or The contractor handles all
authorized cause benefits payable to his worker.
Client can always ask for his
replacement
Can join the existing union The contractor’s workers
cannot join the existing union
formed by clients employees
Employer pays ER contribution
to SSS, etc.
GUIDING PRINCIPLES AND DEFINITION
Contracting and subcontracting arrangements are expressly allowed by law and
are subject to regulation for the promotion of employment and observance of the
right of the workers to just and humane conditions of work, security of tenure,
self-organization and collective bargaining.
Contracting and subcontracting is an arrangement whereby the principal agrees
to put or farm out with a contractor or subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined
period regarldless of whether such job, work or service is to be performed or
completed within or outside the premises of the principal.
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.
Employer-employee may be declared to exist between the principal and
contractor’s workers where the contracting arrangement is not legitimate.
Note: Advantage to the contractor’s workers because they will receive the same
benefit being enjoyed by incumbent employees of the client/principal.
ENDO
Comment from the internet: “Contractualization actually enables capitalists to
pay workers less for the same work, stunt economic development, and therefore
harm the interests of all Filipinos – including of capitalists themselves. Some of
the disadvantages of contractualization include unemployment, no employer
benefits and lack of job security.”
DEFINITION
Department Order No. 174, Section 3 defines the following:
(1) Cabo – under the guise of a labor organization, supplies workers to
employers
(2) Contracting or subcontracting – principals agrees to farm out to a
contractor the specific performance of a specific job
(3) Contractor – person or entity engaged in a legitimate contracting or
subcontracting
(4) In-house agency – managed or controlled directly or indirectly by the
principal
(5) Labor-only contracting – contractor merely recruits, supplies or place
workers
(6) Substantial capital – refers to paid up capital or net worth
(7) Service agreement – contract between the principal and contractor
(8) Solidary liability – liability of the principal, pursuant to the provision of
Article 109 of the Labor Code, as direct employer together with the
contractor for any violation of any provision of the LC. It also refers to
the liability of the principal, in the same manner and extent that
he/she is liable to his /her direct employer, to the extent of the work
performed under the contract when the contractor fails to pay the
waged of his/her employees, as provided in Art. 106 of the LC, as
amended.
ABSOLUTE PROHIBITION UNDER DO 174
DO 174, Section 5. Absolute Prohibition against Labor-only Contracting:
(1) does not have substantial capital or
(2) does not have investments, etc
and
(3) performing activities directly related to the main business operations
etc or
(4) does not exercise right to control
When there is a finding of labor-only contracting or other illicit forms of
employment or arrangement – principal shall be deemed the direct employer of
the contractor/subcontractor.17
LABOR-ONLY CONTRACTING
The contractor or sub-contractor does not have substantial capital. DO 174-17
increased the amount of substantial capital, from at least PHP 3-M to at least
PHP 5-M in case of corporations, partnerships, and cooperatives. As for a single
proprietorship, the owner must have a net worth of at least PHP 5-M.
The contractor or subcontractor does not have investments in the form of tools,
equipment, machineries, supervision work premises, among others.
The contractor’s or subcontractor’s employees recruited and placed are
performing activities which are directly related to the main business operation of
the principal.
The contractor or subcontractor does not exercise the right to control over the
performance of the work of the employee.
ILLICIT FORMS OF EMPLOYMENT ARRANGEMENT
When the principal farms out work to a CABO, which is a person or group of
persons or a labor group which under the guise of a labor organization,
cooperative or any entity, supplies workers to an employer, with or without any
monetary or other consideration, whether in the capacity of an agent of the
employer or as an ostensible independent contractor;
Contracting out of job or work through an in-house agency;
Contracting out of job or work through an in-house cooperative which merely
workers to the principal;
17
Section 7, DO 174
Contracting out of job or work by reason of a strike or lockout whether actual or
imminent;
Contracting out of job or work being performed by union members and such will
interfere with restrain or coerce employees in the exercise of their rights to self-
organization.
Requiring the contractor’s/subcontractor’s employees to perform functions which
are currently being performed by the regular employees of the principal;
Requiring the contractor’s/subcontractor’s employees to sign, as a precondition
to employment or continued employment, an antedated resignation letter; a
blank payroll; a waiver of payroll standards including minimum wages and social
or welfare benefits; or a quitclaim releasing the principal or contractor from
liability as to payment of future claims; or require the employee to become a
member of the cooperative;
Repeated hiring by the contractor or subcontractor of employees under an
employment contract or short duration;
Requiring employees under a contracting or subcontracting arrangement to sign
a contract fixing the period of employment to a term shorter than the term of the
Service Agreement, unless the Contract is divisible into phases for which
substantially different skills are required and this is made known to the employee
at the time of the engagement; and
Other practices, schemes or employment arrangements designed to circumvent
the right of workers to security of tenure.
WHN THE PRINCIPAL IS DEEMED THE DIRECT EMPLOYER
In the event there is a finding that the contractor or the subcontractor is engaged
in labor-only contracting under Sec. 5 and other illicit forms of employment
arrangements under Sec. 6 of these Rules, the principal shall be deemed the
direct employer of the contractor’s or subcontractor’s employees.
CASE: MARVIN DAGUINOD v. SOUTHGATE FOODS, INC., et al., G.R. No.
227795, February 20, 20-19
Section 7. Existence of an employer-employee relationship. The contractor
or subcontractor shall be considered the employer of the contractual employee
for purposes of enforcing the provisions of the Labor Code and other social
legislation. The principal, however, shall be solidarity liable with the contractor in
the event of any violation of any provision of the Labor Code, including the failure
to pay wages.
The principal shall be deemed the employer of the contractual employee in
any of the following case, as declared by a competent authority: xxx
On the other hand, there is labor-only contracting where: (a) 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 (b) the workers recruited and placed by such person
are performing activities which are directly related to the principal
business of the employer.
In this particular case, it was established that Daguinod was assigned as a
counter crew/cashier in Jollibee Alphaland. The Service Contract of Daguinod
with Generation One does not disclose the specific tasks and functions that he
was assigned to do as counter crew/cashier. Thus, the Court must refer to Annex
"A" of the Service Agreement between Generation One and Southgate which
lists the “non-core" functions contracted out by Southgate.
Daguinod was assigned to perform cash control activities which entails gathering
of orders and assembling food on the tray for dine-in customers or for take-out.
As cashier, Daguinod was also tasked to receive payments and give change.
These tasks are undoubtedly necessary and desirable to the business of a fast
food restaurant such as Jollibee. The service of food to customers is the main
line of business of any restaurant. It is not merely a non-core or peripheral
activity as Generation One and Southgate claim. It is in the interest of Southgate,
franchise owner of Jollibee, that its customers be served food in a timely manner.
Respondents' position that the gathering of orders and service of food to
customers are "non-core" functions or peripheral activities is simply preposterous
and is contrary to the basic business model of a fast food restaurant. These
circumstances lead to no other conclusion than that Daguinod was a regular
employee of Southgate and that Generation One was a mere agent of
Southgate.
REQUIREMENTS UNDER DO 174
Employment contract to be issued to contractor’s employee shall contain
(Section 11)
(1) specific job description
(2) place of work and terms and conditions of employment
Service agreement bet principal and contractor shall contain what are those
stated in Section 11(b)
EFFECT OF TERMINATION OF EMPLOYMENT
Section 13. Effect of termination of employment:
(a) prior to the expiration of service agreement – apply Art. 297
(termination based on just causes), 298 (authorized causes) and 299
(disease as a ground for termination) of the LC. Rule against party in
fault
(b) termination results from the expiration of the service agreement –
waiting time 3 months. After 3 months, worker shall be paid of
separation pay.
PRE-TERMINATION OF THE SERVICE AGREEMENT NOT DUE TO
AUTHORIZED CAUSE (e.g. retrenchment, redundancy, labor-saving
devices)
The right of the contractor’s/subcontractor’s employee to unpaid wages and
other legal benefits including unremitted legal mandatory contributions, e.g. SSS,
PhilHealth, Pag-ibig, shall be borned by the party at fault without prejudice to the
solidary liability of the parties to the service agreement.
Note: Because of this, contractors or principals are hesitant to pre-terminate their
agreement – shall be borne by the party at fault.
TERMINATION OF SERVICE AGREEMENT OR COMPLETION OF THE
PHASE OF THE JOB
(1) The employee may opt to wait for reemployment within three (3)
months to resign and transfer to another contractor-employer. Failure
of the contractor to provide new employment for the employee shall
entitle the latter to payment of separation benefits as may be
provided by law or service agreement. The mere expiration of the
service agreement shall not be deemed as a termination of
employment of the contractor’s employees who are regular
employees of the latter.
Note: problem with the contractor is to find another client where to
assign the workers. Waiting period is 3 months for redeployment. But
during this period worker may look for another job and anytime he or
she will be called back to active duty and the option is his whether or
not to accept the offer or continue to work on his new job.
CONSTRUCTION CONTRACTORS
Section 33. Contracting in construction industry licensed under PCAB shall not
be covered by DO 174 but by DO Nos. 19 and 13 and MOA-Joint AO No. 1, etc.
Department Circular No. 01, Series of 2017
Clarifying the Applicability of DO No. 174, Series of 2017
Pursuant to PD 1746, S. 1980, licensing and the exercise of regulatory powers
over the construction industry is lodged with the Philippine Contractors
Accreditation Board (PCAB) of the Construction Industry Authority of the
Philippines (CIAP).
The PCAB registers all types of contractors in the construction history and
regulates the same by ensuring compliance with DOLE issuance. Thus, the
DOLE through its Regional Offices shall not require contractors licensed by
PCAB to register under DO 174. However, findings of violations on labor
standards and occupational health and safety standards shall be coordinated
with PCAB for its appropriate action, including possible cancellation/suspension
of the contractor’s license.
Contractors licensed by PCAB which are engaged in other contracting or
subcontracting arrangement in addition to, other than construction activities shall
be required to register under DO 174.
NON-APPLICABILITY OF DO NO. 174, S. 2017, TO BPO/LPO/KPO 18
D.O No. 174, S. 2017 applies only to trilateral relationship which characterizes
contracting or subcontracting arrangement. It does not contemplate to cover
information technology-enabled services involving an entire or specific business
process such as:
 Business Process Outsourcing
 Knowledge Process Outsourcing
 Legal Process Outsourcing
 IT Infrastructure Outsourcing
 Application Development
 Hardware and/or Software Support
 Medical Transcription
 Animation Services
 Back Office Operations/Support
LEGITIMATE JOB CONTRACTING
Section 8, DO No. 174. Permissible Contracting or Subcontracting Agreements:
(1) 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
(2) With substantial capital to carry out the job farmed out
(3) Free from control and direction except as to the result thereof
(4) There is a service agreement
(5) Absence of any of the foregoing requisites makes the arrangement a
labor-only contracting arrangement
Labor-contracting only. Compare this with Sec. 5 and other forms of employment
arrangement Sec. 7.
TRILATERAL RELATIONSHIP
I. Parties:
 Principal which refers to any natural or juridical entity whether
an employer or not who puts out or farms out a job or work to a
contractor
 Contractor
 Contractor’s employee
Two Kinds of Contracts in Trilateral RelationshiP;
(a) Service contract – between the principal and contractor (governed by
the Civil Code)
18
D.O. No. 1, S. 2017
 (b) Employment contract – between the employee and the contractor
(governed by the Labor Code)
RELATIONSHIP BETWEEN PARTIES
No contractual relationship between the contractor’s employees and the principal
in legitimate contracting arrangement. No employer-employee relationship.
But the principal is treated as indirect employer in case the contractor fails to pay
the wages of its employees supplied to the principal.
Client or principal is considered an indirect employer in case of failure of
contractor to pay wages.
But the principal shall not be liable for those claims which are considered
p[unitive in nature like separation pay and back wages except when the principal
acted in bad faith.
CONTROL TEST
PRINCIPAL OR CLIENT
Right of control test – the manner and method of performing the contracted job,
work or service. Completely free from the control and direction except as to the
result thereof.
CASE: Manila Water Co v. Peña, July 8, 2004
MWSS contracted Manila Water Co to manage water distribution system. MWC
absorbed some MWSS employees but 121 contractual collectors of MWSS were
not absorbed but retained on contractual basis only who formed Association
Collectors Group, Inc. ACGI contracted by MWC to collect water charged. The
contract with ACGIO was terminated by MWC.
Ruling: ACGI is not a legitimate contracted. It being a labor-only contractor and
they remained employees of WMC because the latter has not relinquished
control over them. ACGI has no substantial capital investment in tools,
equipment, etc. to qualify as an independent contractor and their work was
directly related to the principal business or operation of MWC.
SUBSTANTIAL CAPITAL
 Under DO 174 substantial capital
 P5M for corporations, partnership or cooperative, paid up capital
stocks/shares of stock
 P5M for single proprietorship
Substantial capital or investment – in the form of tools, equipment, machineries,
work premises and other material which are necessary in the conduct of its
business.
FINDING OF LABOR-ONLY CONTRACTING
CASE: ALILIN et al. v. PETRON CORPORATION, G.R. No. 177592, June 9,
2014
Petron’s power of control over petitioners exists in this case.
"[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring
that there is an employer-employee relationship between the principal and the
employees of the supposed contractor." In this case, the employer employee
relationship between Petron and petitioners becomes all the more apparent due
to the presence of the power of control on the part of the former over the latter.
However, where the principal is the one claiming that the contractor is a
legitimate contractor, as in the present case, said principal has the burden of
proving that supposed status. It is thus incumbent upon Petron, and not upon
petitioners as Petron insists, to prove that RDG is an independent contractor.
PRESUMPTION: CONTRACTOR IS A LABOR-ONLY CONTRACTOR
CASE: 7K CORPORATION v. NLRC et al., G.R. No. 148490, November 22,
2006
The SC said that the presumption is that a contractor is a labor only contractor
unless such contractor overcomes the burden of proving that it has substantial
capital, tools and the like.
In the case of San Miguel Corp v. Aballa, June 28, 2005, while Sunflower Multi-
purpose cooperative was issued Certificate of Registration, it has paid-up capital
of P2,000.00 only. The lot, building, tools, equipment, machineries, and work
premises were provided by SMC.
COOPERATIVE AS A JOB CONTRACTOR
When is a cooperative a contractor-employer?
CASE: RP, represented by the SSC et al. v. ASIAPRO COOPERATIVE, G.R.
No. 172101, November 23, 2007
In the present case, it is not disputed that the respondent cooperative had
registered itself with the Cooperative Development Authority, as evidenced by its
Certificate of Registration No. 0-623-2460. In its by-laws, 41 its Board of Directors
directs, controls, and supervises the business and manages the property of the
respondent cooperative. Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its owners-
members as a whole. Therefore, it is completely logical that the respondent
cooperative, as a juridical person represented by its Board of Directors, can
enter into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship
between the respondent cooperative and its owners-member, we conclude that
the petitioner SSC has jurisdiction over the petition-complaint filed before it by
the petitioner SSS. This being our conclusion, it is no longer necessary to
discuss the issue of whether the respondent cooperative was estopped from
assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion
to Dismiss.
CASE: ALASKA MILK CORP v. PAEZ/ASIAPRO MULTIPURPOSE
COOPERATIVE, G.R. No. 237317, Nov. 27, 2019
Asiapro’s failure to register in accordance with law give rise to the presumption
that it is a labor only contractor. It was able to prove that it has substantial
capital. Asiapro controlled the means and methods used by its work members.
Asiapro was able to prove that it carried an independent business.
PERMISSIBLE JOB CONTRACTING
CASE: ALLIED BANKING CORPORATION, now merged with PNB v.
CALUMPANG, G.R. No. 219435, Jan. 17, 2018
Permissible job contracting or subcontracting has been distinguished from labor-
only contracting such that permissible job contracting or subcontracting refers to
an arrangement whereby a principal agrees to put out or farm out to a contractor
or subcontractor the performance or completion of a specific job, work or service
within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the
principal, while labor-only contracting, on the other hand, pertains to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal.
LABOR ONLY CONTRACTOR
CASE: DOLE v. MEDEL ESTEVA, et al., G.R. No. 161115, November 30,
2006
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the forms 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 the employer. In such cases, the person or
the 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.”
Note: as a general rule, a contractor is presumed to be a labor only contractor,
unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like.
A finding that a contractor is a labor only contractor, as opposed to permissible
job contracting, is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor
and the labor-only contractor is considered as a mere agent of the principal, the
real employer.19
CONSEQUENCES: EMPLOYEES OF LC WILL BE CONSIDERED AS EES OF
THE PRINCIPAL OR CLIENT
A finding that a contractor is a labor only contractor, as opposed to permissible
job contracting, is equivalent to declaring that there is an employer-employee
relationship between the principal and the employees of the supposed contractor
and the labor-only contractor is considered as a mere agent of the principal, the
real employer.20
Agency-hired employee becomes entitled to benefits under the CBA of the client
company.21
WHAT DO YOU MEAN BY DIRECT EMPLOYER
Article 107. Indirect employer. The provisions of the immediately preceding
article shall likewise apply to any person, partnership, association or corporation
which, not being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.
Extent of principal’s liability in legitimate contracting – qualified and limited
liability. Principal is equally liable with the contactor as if the former were the
direct employer with respect to wages, SIL or other benefits provided by law. But
if the liability is invested with punitive character such as award for backwages
and separation pay because of an illegal dismissal in the absence of proof that
the principal conspired with the contractor, principal is not liable.
WHAT IF THE CLIENT/PRINCIPAL HAS ALREADY PAID THE CONTRACT
RATE
The indirect employer cannot escape this liability even if he has paid the worker’s
wage rates in accordance with the stipulations in the contract with the contractor
or agency. The employees are not privy to the contract. Labor standards
legislations are intended to alleviate the plight of workers whose wages barely
meet the spiraling costs of their basic needs. They are considered written in
every contract and stipulations in violation thereof are considered not written
(Azucena).
Note: principal may require the contractor to submit proof of full payment of
salaries before the billing is paid or furnish a copy of the payroll duly received by
workers.
QUALIFIED OR LIMITED LIABILITY
19
Allied Banking v. Calumpang
20
Allied Banking v. Calumpang
21
Tabas et al v. California Mfg. Co., et al., Jan. 26, 1989.
Qualified or limited liability (Azucena) for failure to pay the minimum wage or
other benefits provided by law, the principal is equally liable with the contractor
as if the principal were the direct employer. But if the liability is invested with
punitive character such as an award for backwages and separation pay because
of illegal dismissal, the liability should be solely that of the contractor in the
absence of proof that the principal is conspired with the contractor in the
commission of the illegal dismissal.
Effect of Non-registration – gives rise to the presumption that the contractor is
engaged in labor-only contracting. 22 If the contractor has paid his workers the
correct salary and he is controlled by the client as to the result only, no problem.
REIMBURSEMENT
If the principal is made to pay the wages of the contractor’s wages, it can seek
reimbursement from the contractor. But it cannot be used as a cross-claim in a
labor case pursuant to Jaguar Security v. Sales. The claim for reimbursement is
within the realm of Civil Law.
But the contractor may seek reimbursement only after it has paid its employees.
Private respondent has no cause of action against petitioner to recover wage
increases that it has not paid to its own employees.
REPUBLIC ACT NO. 6727
WAGE RATIONALIZATION ACT
JUNE 9, 1989
Wage Increases
Section 6. In the case of contracts for construction projects and for security,
janitorial and similar services, the prescribed increases in the wage rates of the
workers shall be borne by the principals or clients of the construction/service
contractors and the contract shall be deemed amended accordingly. In the event,
however, that the principal or client fails to pay the prescribed wage rates, the
construction/service contractor shall be jointly and severally liable with his
principal or client.
CASE: RP v. NLRC, et al., G.R. No. 174747, March 9, 2016
What is the procedure to collect from a government agency which is an
indirect employer?
It is settled jurisprudence that upon determination of State liability, the
prosecution, enforcement or satisfaction thereof must still be pursued in
accordance with the rules and procedures laid down in P.D. No. 1445, otherwise
known as the Government Auditing Code of the Philippines (Department of
Agriculture v. NLRC, 227 SCRA 693, 701-02 [1993] citing Republic vs. Villasor,
54 SCRA 84 [1973]). All money claims against the Government must first be filed
with the Commission on Audit which must act upon it within sixty days. Rejection
of the claim will authorize the claimant to elevate the matter to the Supreme
Court on certiorari and in effect sue the State thereby (P.D. 1445, Sections 49-
50)
INDIRECT EMPLOYER NOT IMMUNE FROM SUIT
CASE: GSIS v. NLRC, et al., G.R. No. 180045, November 17, 2010
Furthermore, the declared policy of the State in Section 39 of the GSIS Charter
granting GSIS an exemption from tax, lien, attachment, levy, execution, and
other legal processes should be read together with the grant of power to the
GSIS to invest its "excess funds" under Section 36 of the same Act. Under
Section 36, the GSIS is granted the ancillary power to invest in business and
other ventures for the benefit of the employees, by using its excess funds for
investment purposes. In the exercise of such function and power, the GSIS is
allowed to assume a character similar to a private corporation. Thus, it may sue
and be sued, as also, explicitly granted by its charter x x x
To be sure, petitioner’s charter should not be used to evade its liabilities to its
employees, even to its indirect employees, as mandated by the Labor Code.
FOR SECURITY GUARDS
D.O. No. 150, S. 2016
Revised Guidelines Governing the Employment and Working Conditions of
Security Guards and other Private Security Personnel in the private security
industry
Section 2. Definition of Terms – xxx
(e) Principal – any individual, company, cooperative, establishment, including
government agencies and GOCCs who or which puts out or farms out a security
and/or detective job, service, or work to a private SSC
(h) Security guard – any person who offers or renders personal service to watch
or secure a residence, business establishment, building, compound, any other
area or property; or inspects, monitors, or performs body checks or searches of
individuals or baggage and other forms of security inspection
(i) Security service contractor – synonymous with Private Security Agency (PSA)
which refers to any person, association, partnership, firm, or private corporation
engaged in contracting, recruitment, training, furnishing, or posting of security
guard and other private security personnel to individual, corporations, offices and
organizations, whether private or public, for their security needs as the PNP may
approve
(j) Service agreement – contract between the principal and the SSC/PSA
containing the terms and conditions governing the performance or completion of
security service, job, or work being farmed out for a definite or predetermined
period
(k) Solidary liability – liability of the principal, in the same manner and extent that
he/she is liable to his/her direct employees, to the extent of the work performed
under the contract when the SSC/PSA fails to pay wages of his/her employees,
as provided for in Art. 106, LC, as amended.
22
SMC v. Semillan, July 5, 2010
(m) Trilateral arrangement – the relationship in contracting or subcontracting
arrangement where there is a contract for a specific security job, work, or service
between the principal and the SSC/PSA, and a contract of employment between
the latter and its security guards
RELATION BETWEEN SECURITY AGENCY, PRINCIPAL AND GUARDS
 Contractual relationship under D.O. No. 150
 Between the principal and agency – security agreement
 Between the agency and guard – employment contract
 Between principal and guard – none
EMPLOYMENT STATUS OF GUARDS
(1) Probationary
(2) Regular
Repeated hiring, the aggregate duration of which is at least 6 months shall be
considered as regular employees.
FLOATING STATUS OF SECURITY GUARDS
Floating status/off detail status or waiting to be posted
The guards may be placed under floating status as their assignments primarily
depend on the contracts entered into by the agency.
Instances when floating status may occur:
(a) Non-renewal of contract with principal
(b) Replacement of guards or return to barracks
In case of floating status – the agency must prove that it notified the guard of
such floating status; there is no available post where he will be assigned.
This “floating status” cannot be used indiscriminately lest the agency will be held
liable for constructive or illegal dismissal.
After six months, no posting, the guard is considered constructively dismissed
and entitled to separation pay.
WORKERS PREFERENCE
Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy
or liquidation of an employer’s business, his workers shall enjoy first preference
as regards their wages and other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid
in full before claims of the government and other creditors may be paid. (As
amended by Section 1, Republic Act No. 6715, March 21, 1989)
DBP CASES v. ART. 110
A declaration of bankruptcy or judicial liquidation must be presented before the
worker’s preference may be accorded. Art. 110 cannot be invoked without court
order.
 Art. 110 is not a lien but a preference of credit in favor of employees
 Art. 110 did not sweep away the overriding preference accorded
under the scheme of the Civil Code, etc.
ATTORNEY’S FEES
Article 111. Attorney’s fees.
In cases of unlawful withholding of wages, the culpable party may be assessed
attorney’s fees equivalent to ten percent of the amount of wages recovered.
It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of wages, attorney’s fees which
exceed ten percent of the amount of wages recovered. 23
ATTORNEY’S FEE TO PAO LAWYER
CASE: ALVA v. HIGH CAPACITY SECURITY FORCE AND VILLANUEVA,
G.R. No. 203328
Alva filed a complaint for illegal dismissal, underpayment of wages, non-payment
of 13th month pay, etc. He was assisted in his case by a PAO lawyer. Is he
entitled to attorney’s fees?
Attorney's fees partake of an indemnity for damages awarded to the employee,
there is nothing that prevents Alva and the PAO from entering into an agreement
assigning attorney's fees in favor of the latter. 
RA 9406 inserted new sections in the Administrative Code of 1987. RA 9406
sanctions the receipt by the PAO of attorney’s fees, and provides that such fees
shall constitute a trust fund to be used for the special allowances of their officials
and lawyers.
The costs of the suit, attorney's fees and contingent fees imposed upon the
adversary of the PAO clients after a successful litigation shall be deposited in the
National Treasury as trust fund and shall be disbursed for special allowances of
authorized officials and lawyers of the PAO.24
In fact, the matter of entitlement to attorney's fees by a claimant who was
represented by the PAO has already been settled in Our Haus Realty
Development Corporation v. Alexander Parian, et al. The Court, speaking
through Associate Justice Arturo D. Brion ruled that the employees are entitled to
attorney's fees, notwithstanding their availment of the free legal services offered
by the PAO. The Court ruled that the amount of attorney's fees shall be awarded
to the PAO as a token recompense to them for their provision of free legal
services to litigants who have no means of hiring a private lawyer.
23
not limited to case of wagery
24
SEC. 16-D. Exemption from Fees and Costs of the Suit
LAWFUL WAGES NOT PAID ACCORDINGLY TO BE ENTITELD TO
ATTORNEY’S FEES
CASE: TANGGA-AN v. PIDLIPPINE TRANSMARINE CARRIERS, G.R. No.
180636, March 13, 2013

We similarly so ruled in RTG Construction, Inc. v. Facto and in Ortiz v. San

Miguel Corporation. In RTG Construction, we specifically stated:

'Settled is the rule that in actions for recovery of wages, or where an employee
was forced to litigate and, thus, incur expenses to protect his rights and interests,
a monetary award by way of attorney's fees is justifiable under Article Ill of the
Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and
paragraph 7, Article 208 of the Civil Code. The award of attorney's fees is
proper, and there need not be any showing that the employer acted maliciously
or in bad faith when it withheld the wages. There need only be a showing that the
lawful wages were not paid accordingly.'