The Law and Cases

on Wages, Hours of Work

and Benefits
(Part 1)
Wages
As defined in Article 97(f) of the Labor Code, wages means:
• Remuneration or earnings,
• However designated,
• Capable of being expressed in terms of money,
• Whether fixed on time, task, piece, commission, or other
method of calculating the same,
• Payable by an employer to an employee,
• Under a written or unwritten contract of employment for
services rendered or to be rendered.
To be considered as “ wages”, the remuneration should arise from a
relationship of employer-employee. If the remuneration is not the
product of an employer-employee relationship but of some other
relationship such as principal-contractor, attorney-client,
doctor-patient, etc., the remuneration is not considered as
“wages”.
Not Covered By The Law on Wages
(a) Farm tenancy or leasehold;
(b) House helpers and persons in the personal service of
another;
(c) Homeworkers engaged in needlework;
(d) Workers in any registered cottage industry who perform the
work in their respective homes;
(e) Workers in any registered cooperative when so
recommended by the Bureau of Cooperative Development and
approved by the Secretary of Labor and Employment;
Distinction Between Wage and Salary

There is a fine distinction between “wage” and “salary”, to wit:

• “Wage” refers to compensation for manual labor, skilled or
unskilled;
• “Salary” denotes a higher grade of employment, or a superior
grade of services and implies a position of office.
Significance of the Distinction

Wages are exempt from execution or attachment except for

debts incurred for food, shelter, clothing, and medical attendance
as per Article 1708 of the Civil Code.

Salaries are not exempt from execution or attachment as held

in the case of Gaa v. CA, 140 SCRA 304.
Facilities
Facilities are items of expense, necessary for the laborer’s and
his family’s existence and subsistence.

Examples: board and lodging, rice ration, housing, recreation

facilities, medical treatment to dependents, school facilities, cost
of water, light, fuel or subsidized meals [Atok Big Wedge Mutual
Benefit Association v. Atok Big Wedge Mining Co., 97 Phil. 294].
Facilities Are Part of Wages
The term “wages” as defined by the law includes the fair and
reasonable value of facilities customarily furnished by the
employer. Considering that facilities are part of wages, the
employer can deduct the value of facilities from the wages of an
employee, on the following conditions:
(a) The facilities must be customarily furnished by the employer;
(b) The value of the facilities must be fair and reasonable;
(c) The employee must voluntarily accept the facilities; and
(d) The employee must authorize the deduction in writing.
Supplements
Supplements are benefits given to or received by the laborers
over and above their ordinary wages.

Examples: vacation leave pay, sick leave pay, overtime pay in

excess of what is required by law, pension, profit sharing, family
allowances, housing benefit, car plan, household personnel
benefit, membership fees in social athletic clubs or other similar
organization, expenses for foreign travel, educational assistance,
and insurance[Atok Big Wedge Mutual Benefit Association v. Atok
Big Wedge Mining Co., 97 Phil. 294]
Supplements Are Not Part of Wages

Supplements are not part of wages. They are given precisely to

augment the earnings of an employee. Hence, supplements
cannot be deducted from the wages of an employee.
Criterion for Determination of
Supplement/Facility

The criterion for determining whether a benefit is a supplement

or a facility is not so much with the kind of benefit or item( food,
lodging, bonus or sick leave) given, but its purpose. If the purpose
is primarily for the benefit of the employer or necessary to the
conduct of the employer’s business, then it is not considered as
facility. [Sec. 5, Rule VII, Book III, Rules implementing the Labor
Code]
 Example: Meals given free to crew members of a ship, out of necessity,
while they are on high seas are not facilities because the purpose of
the grant of free meals is to maintain the health and efficiency of the
crew members during the voyage[State Marine Corp. v. Cebu Seamen’s
Association, 7 SCRA 294].
Bonus
Bonus is an amount granted and paid to an employee for his
industry and loyalty which contributed to the success of the
employer’s business and made possible the realization of profits. It
is an act of generosity granted by an enlightened employer to spur
the employee to greater efforts for the success of the business and
the realization of profits[Philippine Education Co. v. CIR, 92 Phil.
381].
Bonus not a demandable obligation. It becomes a demandable
obligation only when:
(a) the grant thereof arises from contract; or
(b) it is made part of the wages.
 Bonus is considered part of wages:
(a) If unconditionally given regardless of realization of profits; or
(b) If it has ripened into a regular practice.
To be considered regular practice, the bonus should have been
granted:
(a) consistently,
(b) voluntarily, and
(c) deliberately over long period of time.
The Principle of Non-Diminution of Benefits
Benefits granted voluntarily, regularly and unconditionally
cannot be reduced or withdrawn because benefits given regularly,
voluntarily, and unconditionally become part of the terms and
conditions of employment. Article 100 of the Labor Code provides
that:

“ART. 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 the promulgation of this Code”
 No vested right if payment of benefits was done by mistake. An
employer, therefore, can stop a benefit that has been erroneously
granted without violating the principle of non-diminution of
benefits.
The mistake may be a mistake of fact, i.e., belief that the
employees are entitled to the benefit when they are not so entitled
, or a mistake of law, i.e., erroneous construction or application of
doubtful or difficult question of law.
Mistake is presumed if something which had never been due was
given. Under the circumstances, the employer cannot only
discontinue the benefit but may even recover what it has
erroneously paid, under the principle of solutio indebiti.
MINIMUM WAGE
Fixing of Minimum Wage
Wage-fixing is a power that inherently belongs to Congress.
However, Congress has delegated the said power to the Regional
Tripartite Wages and Productivity Board.
The Regional Tripartite Wages and Productivity Board (RTWPB) is
composed of the following:
Chairman – Regional Director of the DOLE
Vice-Chairman – Regional Director of the NEDA
– Regional Director of the DTI
Members – two (2) from workers sector
– two (2) from employers sector
 Under the present set-up, the minimum wage will vary from
region to region, considering the regional disparities in the cost of
living and other socio-economic factors. Provinces within a
particular region, municipalities within a particular province, and
even industries within a particular city or municipality can have
different minimum wage rates.
Payment of Minimum Wage Mandatory

Compliance with the minimum wage law is mandatory. It cannot

be the subject of negotiations. Not even the consent of the
employees can defeat its operations. The minimum wage cannot
be waived.
Sanctions for Failure to Pay the Prescribed
Minimum Wage
As provided for in Section 12 of the Wage Rationalization Act as
amended by Republic Act 8188, failure or refusal to pay the
prescribed increase or adjustments in wage rates will subject the
employer to the following sanctions:
(a) Double indemnity, i.e., double the unpaid benefits owing to
the employee; and
(b) Criminal liability, i.e., fine ranging from P25,000.00 to
P100,000.00 or imprisonment ranging from two (2) to four (4)
years, or both without the benefit of probation.
Standards for Minimum Wage Fixing

Under Article 124 of the Labor Code, the factors that are
considered in fixing the minimum wage are:
• Demand for living wages;
• Consumer price index;
• Changes in the cost of living;
• Needs of workers and their families;
• Need to induce industries to invest the countryside;
• Improvements in standards of living;
• Prevailing wage levels;
• Fair return of capital invested and capacity to pay of
employees;
• Effects on employment generation and family income; and
• Equitable distribution of income and wealth.
Wage Order

The minimum wage fixed by the RTWPB is promulgated by

means of a wage order. A wage order takes effect after 15 days
from publication in a newspaper of general circulation in the
region.
Appeal from a Wage Order
Under Article 123 of the Labor Code, a wage order may be
appealed to the National Wages and Productivity Commission
within 10 calendar days from publication of such order. The appeal
does not stay the effectivity of the Wage Order unless the appellant
files surety bond.
The National Wages and Productivity Commission (NWPC) is
composed of the following:
Ex officio chairman – Secretary of Labor and Employment
Ex officio vice-chairman – Director-General of NEDA
Members – two (2) from the workers sector
– two (2) employers sector
WAGE DISTORTION
Wage Distortion

Wage distortion is a situation where an increase in the minimum

wages prescribed by law or wage order:
• results in the elimination or severe contraction of intentional
quantitative differences in salary rates,
• between and among employee groups in the same
establishment within the region,
• thereby effectively obliterating the distinctions embodied in
the wage structure based on skills, length of service, or other
logical bases of differentiation. [Art. 124, Labor Code].
Elements of Wage Distortion
(a) A wage order increasing the minimum wage has been issued;
(b) The establishment has an existing hierarchy of positions with
corresponding salary rates;
(c) The new minimum wage results in significant increase in the
salary rate of the lower pay class (in the existing hierarchy of
positions) without a concomitant increase in the salary rate of a
higher one;
(d) The new minimum wage eliminated or severely contracted
distinction between the two levels.
(e) The resulting distortion must be in the same establishment
within the region
The Wage Increase Must Come From Law or
Wage Order

For wage distortion to exist, the wage increase must result from
the implementation of a law or wage order. Wage distortion under
Article 124 of the Labor Code does not contemplate wage increase
brought about by implementation of a collective bargaining
agreement. Neither does it contemplate wage adjustment brought
about by merit increase.
The Establishment Must Have an Existing
Hierarchy of Positions

In a problem dealing with wage distortion, the basic assumption

is that there exists a grouping or classification of employees which
establishes distinctions among such employees on some relevant
or legitimate basis [NFL v. NLRC, 234 SCRA 311].
The Wage Increase Eliminated or Severely
Contracted the Wage Distinction

The quantitative wage distinction need not be obliterated. It is

enough that the quantitative wage distinction was severely
contracted [Metropolitan Bank v. NLRC, 226 SCRA 268].
The Distortion Should Be in the Same
Establishment Within the Same Region

The grant of higher wages in the same establishment in one

region than in the same establishment in another region is not
wage distortion [Prubankers Association v. Prudential Bank, 302
SCRA 74].
Procedure For Correction of Wage
Distortion:
(a) In Organized Establishment –

(b) In Unorganized Establishment –

Restoration of Precise Historical Gap Not
Required
In the correction of wage distortion, it is not required that the
historical gap that existed before the implementation of the wage
order be restored in the exactly the same amount.

Wage increase given unilaterally or through CBA should be

recognized in the correction of wage distortion [ECOP v. National
Wages and Productivity Commission, 201 SCRA 759]
PAYMENT OF WAGES
Form of Payment of Wages
Article 102 of the Labor Code obliges employers to pay wages in
legal tender. Wages should be paid in legal tender. This is
mandatory. Payment of wages in a medium other than legal tender
will not discharge the employer from the liability for unpaid wages.

Legal tender is that currency which has been made suitable by

law for the purpose of tender of payment of debts. All notes and
coins issued by the Bangko Sentral are legal tender.
 A check, whether it is manager’s check or an ordinary check
is not legal tender. But payment of wages by check or money
order may be allowed:
(a) if it was customarily when the Labor Code took effect;
(b) if so stipulated in a collective bargaining agreement; or
(c) if there is a bank or facility for encashment within a radius of
one kilometer from the workplace, provided that:
• the employee consents to such an arrangement;
• the employees are given reasonable time to withdraw
their wages; and
• the employer does not receive any pecuniary benefit from
the arrangement [Sec. 2 Rule VIII, Book III, Rules
Implementing the Labor Code]
Time of Payment of Wages
Article 103 of the Labor Code requires that wages should be
paid at least once every two (2) weeks at intervals not exceeding
sixteen (16) days.
If the employees were engaged to perform a task which cannot
be completed in two weeks, the wages should be paid at intervals
not exceeding sixteen (16) days, in proportion to the amount of
work completed.
Delayed payments of wages can only be excused on the ground
of:
(a) force majeure (acts of man); or
(b) fortuitous events (acts of god).
 Place of Payment Wages
Under Article 104 of the Labor Code, wages should be paid at or
near the place of undertaking.
Exceptionally, wages may be paid in a place outside of the
undertaking under the following:
(a) When the employer provides free transportation to the
employees back and forth;
(b) When payment cannot be effected at or near the place of
work by the reason of:
• Deterioration of peace and order conditions, or
• Actual or impending emergencies caused by calamity. [Sec. 4
(a) Rule VIII, Book III, Rules Implementing the Labor Code]
To Whom Should Wages Be Paid?
Article 105 of Labor Code requires that wages should be paid
direct to the workers to whom they are due.
Exceptionally, wages may be paid to another person under the
following circumstances:
(a) if direct payment is rendered impossible by force majeure,
provided the employee executes a written authorization to deliver
his wages to another person;
(b) if the employee authorizes the employer in writing to pay his
wages to a member of the family;
(c) if the law authorizes payment to another person; and
(d) in case of death of the employee. [Sec. 5, Rule VIII, Rules of
Implementing the Labor Code]
Payment of Wages In Case of Death of
Employee
Under Article 105 (b) of the Labor Code, in case of death of an
employee, the wages shall be paid to the heirs without the
necessity of intestate proceedings. The employer should require
the heirs to submit to the an affidavit attesting to:
• Their relationship with the deceased; and
• The fact that they are the only heirs. ( Art. 105 Labor Code)
Payment of Wages in Case of Bankruptcy

Article 110 of the Labor Code provides that “(i)n the event of
bankruptcy or liquidation of an employer’s business, his workers
shall enjoy first preferences as regards their unpaid wages and
other monetary, any provision of law of 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.”
 Article 110 of the Labor Code will apply only when there is a
formal declaration of bankruptcy or judicial liquidation of the
business [DBP v. Secretary, 179 SCRA 630]. The reason is because
an employer who declares bankruptcy or insolvency does not have
sufficient properties and assets to pay his debts in full. Insolvency
proceedings are necessary so that all creditors could be convened,
their claims ascertained, inventoried, and the preferences
determined [DBP v. Secretary of Labor, 179 SCRA 630]. Thus, Article
110 of the Labor Code does not apply to rehabilitation proceedings
because a company under rehabilitation continues to operate,
hence, its assets are not up for distribution to creditors
[Rubberworld v. NLRC, 305 SCRA 721].
 The phrase “ shall enjoy first preference as regards their unpaid
wages and other monetary claim, does not mean that unpaid
wages of employees shall automatically be paid ahead of the
claims of other creditors. Article 110 of the Labor Code must be
read in relation to the Civil Code scheme on classification and
preference of credits because of its impact on the entire credit
system. The Civil Code classifies credits against a particular
insolvent into three (3) general categories, namely:
• Special preferred credits, i.e., those listed in Articles 2241
and 2242 of the Civil Code
• Ordinary preferred credits, i.e., those listed in Article 2244 of
the Civil Code
• Common credits, i.e., those listed under Article 2245 of the
Civil Code
 Special preferred credits constitute liens or encumbrances on the
specific property to which they relate. Special preferred credits
take precedence over ordinary preferred credits, hence, special
preferred credits must first be discharged out of the proceeds of
the property to which they relate, before ordinary preferred
creditors may lay claim to any part of such proceeds.
Ordinary preferred credits do not create any lien on specific
property. They simply create rights in favor of certain creditors to
have cash and other assets of the insolvent applied in a certain
sequence or order of priority.
Common credits do not enjoy any preference.
To what category of credit do monetary claims of workers fall?
It depends:
(a) Claims of workers specified in Article 2241 (6) and Article
2242 (3) of the Civil Code are special preferred credits. These
claims are:
• Claims for laborer’s wages, on the goods manufactured or
the work done;
• Claims of laborers, masons, mechanics and other
workmen, as well as architects, engineers and contractors,
engaged in the construction, reconstruction or repair of
buildings, canals or other works, upon said buildings,
canals or other works.
(b) Claims of workers specified in Article 2244 (2) and (4) of the
Civil Code are ordinary preferred credits. These claims are:
• Credits for services rendered the insolvent by the
employees, laborers, or household helpers [for one year
preceding the commencement of the proceedings in
insolvency]; and
• Compensation due the laborers or their dependents under
laws providing for indemnity from the nature of their
employment.
 Unpaid wages and other monetary claims of workers under
Article 110 of the Labor Code fall under the category of ordinary
preferred credits. Hence, the special preferred credits will take
precedence over the said claims. Consequently, taxes and
mortgage credits which fall under special preferred credits are to
be paid ahead of unpaid wages and monetary claims of workers
under Article 110 of the Labor Code.

What then is the import of the phrase “ first preference” as used

in Article 110 of the Labor Code?
 The phrase “ first preference” in Article 110 of the Labor Code
merely modifies the order of preference found in Article 2244 of
the Civil Code. The modification consist in:
(a) Removing the one year limitation in Article 2244 (2) of the
Civil Code; and
(b) Moving up claims for unpaid wages and other monetary
claims if workers from second priority to first priority in the order
of preference established by Article 2244 of the Civil Code.
Therefore, unpaid wages and other monetary claims of workers
will now take precedence over claims for funeral expenses.
PROHIBITIONS REGARDING WAGES
Prohibition Against Interference in Disposal
of Wages
Article 112 of the Labor Code prohibits an employer from:
(a) interfering with the freedom of an employee to dispose of
his wages;
(b) obliging employees to buy commodities from the
employer or from other persons;
(c) obliging employees to patronize the store of the employer
or any other person.
Prohibition Against Deposits for Loss or
Damage to Tools or Equipment
Article 114 of the Labor Code prohibits an employer from
requiring his worker to make deposits from which deductions shall
be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer.

The only instance when an employer can require its employees

to put up deposit is when it is an industry practice.
 Example: In the taxi industry, it is a practice to wash the taxicab
after a tour of duty and it is incumbent upon the driver to restore
the unit he has driven to the same clean condition when he took it
out. Consequently, a taxi cab operator can validly require its
drivers to deposit P20.00 for car washing. But a taxicab operator
who requires its drivers to deposit P15.00 to answer for any
deficiency in their “boundary”, commits a violation of Article 114
of the Labor Code.
In this situations where industry practice allows deposits for loss
or damage to tools or equipment, the employer must comply with
the following conditions before effecting the deduction:
 (a) the employee must be given the opportunity to explain;
(b) the employee must be proven to be responsible for the loss
or damage;
(c) the deduction must not exceed the actual loss or damage;
and
(d) the deduction must not exceed 20% of the wages in a week.
Prohibition Against Withholding of Wages
Article 116 of the Labor Code prohibits any person from:
(a) Withholding any amount from the wages of a worker
without his consent; or
(b) Inducing an employee to give up any part of his wages.
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 is unlawful for any person to
demand or accept attorney’s fees exceeding ten percent (10%) of
the amount of wages recovered [Art. 111, Labor Code].
Prohibition Against Deduction to Ensure
Employment
Article 117 of the Labor Code prohibits deduction from wages as
consideration for:
(a) promise of employment; or
(b) retention of employment.
The practice of a security agency in deducting 25% from salary of
its security guards as the agency’s share in procuring job placement
for the guard is a violation of Article 117, even if the guards agreed
to the arrangement [Commando Security v. NLRC, 211 SCRA 645].
Prohibition Against Retaliatory Measures
Article 118 of the Labor Code prohibits an employer from:
(a) refusing to pay or reducing the wages and benefits,
(b) discharging, or discriminating against the employee who:

– has filed a complaint for non-payment or underpayment

of wages; or

– has testified or is about to testify in such proceedings.

Prohibition Against False Reporting
Article 119 of the Labor Code prohibits an employer or any
person from knowingly making false material entries in the payroll;
and individual-time record.

Prohibition Against Wage Deduction

Wage deduction is prohibited under Article 113 of the Labor
Code. An employer can make deduction from the wages of an
employee only when:
(a) authorized by law; or
(b) authorized in writing by the employee himself.
Deductions Authorized By Law
(a) Cost of insurance premiums advanced by the employer in
behalf of an employee who, the employer insured with the
employee’s consent; [Art. 113(a) Labor Code]
(b) Cost of fair and reasonable value of facilities customarily
furnished by the employer and voluntarily accepted by the
employee; [Art. 97(f), Labor Code]
(c) Due and demandable debt of an employee to his employer
[Art. 1706, Civil Code]
(d) Deductions made in compliance with writs of execution or
attachment for debts incurred for food, shelter, clothing and
medical attendance; [Art. 1708, Civil Code]
(e) Agency fees assessed by the collective bargaining agent against
non-union members who accept the benefits under the collective
bargaining agreement; [Art. 253(e), Labor Code]
(f) Income tax; [Sec. 91, National Internal Revenue Code]
(g) Employee’s premium contributions to:
– Social Security System;
– National Health Insurance;
– Home Development Mutual Fund
Deductions That Require Written
Authorization

(a) Deductions for an employee’s debt to a third person;

(b) Deductions for cost of fair and reasonable value of facilities;
(c) Deductions for union dues;
(d) Deductions for special assessments levied by the union.
CONTRACTING OR SUBCONTRACTING
Contracting or Subcontracting
Contracting or subcontracting is an arrangement whereby an
employer engages the services of a contractor who undertakes to
perform work, task or job on his own account under his own
responsibility free from the control and direction of his employer
in all matters except as to the result of the work.

Contractor Must Be Registered

The contractor must be registered with Department of Labor and
Employment. This is a mandatory requirement. Failure to register
shall give rise to the presumption that the contractor is engaged in
labor-only contracting.
Requisites of Valid Contracting or
Subcontracting
(a) The contractor must have: a distinct and independent
business; with substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials
which are necessary in the conduct of his business; and
(b) The contractor must undertake to perform the job, work or
service on his own account, under his own responsibility,
according to his own manner and method, free from control and
direction of the principal in all matters, except as to the results
thereof.
The Legal of Contracting or Subcontracting
In the legitimate contracting or subcontracting,
employer-employee relationship not created between the
principal and the employees of the contractor.
But if the contractor does not [pay the wages of his employees,
the principal becomes jointly and severally liable “to the extent of
the work performed under the contract”. Articles 106 and 109 of
the Labor Code provides that:
“ART. 106. Contractor or subcontractor – x x x 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 to him.
 ART. 109. Solidarity Liability – The provisions of existing laws to
the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or
subcontractor for any violation of provision of this Code. For
purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.”
Extent of Solidarity Liability
The solidarity liability of the principal is limited only to unpaid
wages. The principal is not solidarily liable for:
• Back wages [Roosewood Processing Inc. v. NLRC, 290 SCRA
408];
• Separation pay [ FILSYSTEMS v. NLRC, 418 SCRA 404]; or
• Damages [Pilipinas Shell Petroleum Corp. v. CA, 221 SCRA
389].
Can the NLRC hold the Government
solidarily liable for unpaid wages?
Yes. Article 97(b) of the Labor Code defines “employer” as
including the Government and all its branches, subdivision,
instrumentalities, and all government-owned or controlled
corporations and institutions. Such being the case, the NLRC can
validly exercise jurisdiction over a claim for non-payment or
underpayment of wages by the contractor’s employees against
Government or government owned or controlled corporations
with the special charters and impose the solidarity liability of an
indirect employer against them [Philippine Fisheries Development
Authority v. NLRC, 213 SCRA 621].
When Contracting or Subcontracting is illegal
(a) When entered into with a labor-only contractor; and
(b) When the engagement of a contractor:
• Was done in bad faith; and
• not justified by exigencies of the business
When Contracting or Subcontracting is Deemed In Bad Faith
and Not Justified Business Exigencies

(a) when the contract was entered into with a “cabo”;

(b) when the contract was entered into with an “in-house agency”;
(c) when the engagement of the contractor results in:
• the termination of regular employees;
• reduction of work hours; or
• reduction or splitting of the bargaining unit;
 (d) when the contractual employees are required to sign:
• antedated resignation letter;
• blank payroll;
• waiver of labor standards
• waiver of minimum wages;
• waiver of social or welfare benefits; or
• quitclaim releasing the contractor from liability for future
claims;
(e) when the contract was entered into by reason of a strike or
lockout;
(f) when the contract interferes with the exercise of their right to
self- organization;
(g) when the employees are repeatedly hired under an
employment contract or service agreement of short duration with
the same or different contractors, in circumvention of the Labor
Code on the security of tenure;
 (h) when the employees are required to sign a contract fixing the
period of employment to a term shorter than the term of the Service
Agreement;
(i) when the contractual employees engaged are in excess of those
provide for in the applicable Collective Bargaining Agreement or as set
by the Industry Tripartite Council.
(j) when the contracting parties refuse to provide the collective
bargaining agent with copies of the:
• Service Agreement; and
• Employment Contracts of the employees deployed to work in the
bargaining unit;
(k) Any other act analogous to the above. [ Sec. 7, D.O. 18-A, Series of
2011]
Labor-Only Contracting
Labor-only contracting is an arrangement whereby the
contractor who has no substantial capital/investment in the form
of tools, equipment, and work premises, merely recruits or
supplies worker’s only, to a principal employer to perform a job
that is directly related to the main business of the principal
employer.

The Legal Effect of Labor-Only Contracting

In labor-only contracting, employer-employee relationship is
created between the principal and the employees of the
contractor. The labor-only contractor will be considered as a mere
agent of the principal. Both the principal and the labor-only
contractor are solidarily liable for all claims of the employees.
 THE VISITORIAL and ENFORCEMENT
POWER
The Visitorial Power Under Article 128(a) of
the Labor Code
The visitorial power under Article 128(a) of the Labor Code refers
to the authority of the Secretary of Labor and Employment or his
duly authorized representatives to:
• Inspect the records and premises of an employer;
• Copy pertinent records or documents;
• Question any employee; and
• Investigate any fact, condition or matter for the purpose of
determining whether an employer is complying with labor
standards.
When the Visitorial Power Can Be Exercised
The visitorial power can be exercised:
• at any time of the day or night,
• whenever work is being undertaken therein.

The Enforcement Power Under Article 128(b) of the

Labor Code
The enforcement power under Article 128(b) of the Labor Code refers to
the authority of the Secretary of Labor and Employment or his duly
authorized representatives, to:
(a) Issue compliance orders upon the findings made in the course of
inspection, that violation of labor standards has been committed; and
(b) Issue writs of execution to enforce their orders.
Essential Features of the Visitorial and
Enforcement Power
The visitorial and enforcement powers are exercisable over
establishments and not over individual employees, because what
is sought to be achieved by its exercise is the observance of, or
compliance by such establishments with labor standards. Such
being the case, the exercise of the said powers is not restricted by
the amount involved. Hence, even if the amount involved is more
than P5,000.00 per employee, the visitorial and enforcement
power can still be exercised. All employees who are still working
with said establishments will benefit therefrom even if they did
not sign the complaint or request for inspection.
Limitations on the Exercise of Enforcement Power
The enforcement power cannot be exercised under the following
circumstances:
• when the employees contests the findings of the Labor
Standards and Welfare Officer; and
• when the employer raises issues supported by documentary
proofs which were not considered in the course of inspection

Remedy From the Orders Issued in the Exercise of the

Enforcement Power
Orders or decisions of the Regional Director in the exercise of the
enforcement power under Article 128(b) of the Labor Code may be
appealed to:
• the Secretary of Labor and Employment
• within ten (10) calendar days from receipt of the Order.
THE ADJUDICATORY POWER
Scope of the Adjudicatory Power
The adjudicatory power under Article 129 of the Labor Code refers to
the authority of the Regional Director to hear and decide complaints:
• for recovery of wages/money claims;
• not exceeding P5,000.00;
• filed by employees who have already been separated from
service; and
• who do not seek reinstatement anymore.
Conditions for the exercise of the
Adjudicatory Power
(a) The claim is purely for recovery of unpaid wages, monetary
claims, and benefits;
(b) The employee has already been separated and does not seek
reinstatement anymore;
(c) The aggregate money claims of each claimant does not
exceed P 5,000.00.

If the foregoing requisites are not complied with, the case will
fall within the exclusive jurisdiction of the Arbitration Branch of
the National Labor Relations Commissions.
Remedy From the Adjudicatory Power
Orders or decisions of the Regional Director in the exercise of his
adjudicatory power under Article 129 of the Labor Code may be
appealed:
• to the National Labor Relations Commission
• within five (5) calendar days from the receipt of the decision.