Article 110.

Worker’s 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.
Article 110. Worker’s Preference in
Case of Bankruptcy
 It is humane and partakes of the divine that labor, as human beings, must
be treated over and above chattels, machineries and other kinds of
properties and the interests of the employer who can afford to survive the
hardships of life better than their worker.
Article 110. Worker’s Preference in
Case of Bankruptcy
 This article may not be invoked in the absence of a formal declaration of a
bankruptcy or judicial liquidation order.

Because of its impact on the entire system of credit, the subject provision
cannot be viewed in isolation of, and must always be reckoned with the
provisions of the Civil Code on concurrence and preference of credits, which
provisions find particular application in insolvency proceedings where the
claims of all creditors, preferred or non-preferred, may be adjudicated in a
binding manner.
Article 110. Worker’s Preference in
Case of Bankruptcy
What is the reason behind the necessity for a judicial proceeding or a
proceeding in rem before the concurrence and preference of credits may be
applied?
 These proceedings are binding against the whole world.
Article 110. Worker’s Preference in
Case of Bankruptcy
It is not applicable in extrajudicial proceedings. Otherwise, it would put the
worker in a better position than the state which could only assert its own
preference in case of a judicial proceeding.
Article 110. Worker’s Preference in
Case of Bankruptcy
 Art. 110 of the Labor Code contemplates a PREFERENCE OF CREDIT IN
FAVOR OF EMPLOYEES and not a LIEN!
 Bestows upon the preferred creditor an advantage of having his credit
satisfied first ahead of other claims which may be established against the
debtor, after formal declaration of bankruptcy or judicial declaration.
 In the absence of bankruptcy or judicial liquidation of the employer, the
claim of the government predicated on a tax lien is superior to the claim of
a private litigant predicated on a judgment.
Article 110. Worker’s Preference in
Case of Bankruptcy
MORTGAGE VS. PREFERENCE OF CREDIT

GENERAL RULE:
 A mortgage is superior to a worker’s preference, for a preference of credit
applies only to claims which do not attach to specific properties.

EXCEPTION:
 If there is a formal declaration of bankruptcy or judicial liquidation, mortgage
credits are subordinate to worker’s claim
Article 111. Attorney’s fees

a) In cases of unlawful withholding of wages, the culpable party may be

assessed attorney’s fees equivalent to ten percent of the amount of wages
covered.
b) It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of the wages, attorney’s fees,
which exceed ten percent of the amount of wages recovered.
Article 111. Attorney’s fees

 The provision envisions a situation where there is a judicial or administrative

proceeding for the recovery of wages. Upon termination of the
proceedings, the law allows deduction for attorney’s fees of 10% from the
total amount due to a winning party.

Remember: Attorney’s fees may be awarded only when the withholding of

wages is unlawful and where an employee was forced to litigate and thus,
incur expenses to protect his rights and interests.
Article 111. Attorney’s fees

Two Concepts of Attorney’s fees:

1. In its extraordinary concept- are fees deemed indemnity for damages

ordered by the court to be paid by the losing party to the winning party.

2. In its ordinary concept- attorney’s fee is the reasonable compensation paid

to a lawyer by his client for the legal services the former renders.
Article 111. Attorney’s fees

Attorney’s fees under art. 111 and art. 228(b) distinctions.

1. Amount of attorney’s fees
a) Under art. 111, an illegally dismissed employee is entitled to an award of 10%
attorney’s fees, because he was compelled to litigate his case; while
b) Under art. 228(b), it prohibits payment of attorney’s fees imposed upon
union members.
2. Reason for the award
a) Under art. 111, attorney’s fees are awarded in cases of unlawful
withholding of wages; while
b) Under art. 228(b), it prohibits the payment of such fees when it is
effected through forced contributions of the workers from their own funds.
Article 111. Attorney’s fees

3. Concept of attorney’s fees

a) under art. 111, it contemplates the extraordinary concept of attorney’s
fees
b) under art, 228(b), prohibits the payment of attorney’s fees only when it
is effected through forced contributions of the worker’s from their own fund.
Article 111. Attorney’s fees

Check-off
 Is a process or device whereby the employer, on agreement with the Union,
recognized as the proper bargaining representative, or on prior authorization
from the employees, deducts union dues or agency fees from the latter’s wages
and remits them directly to the Union.
Article 111. Attorney’s fees

Rule on System Check-Off

General Rule:
Attorney’s fees, negotiation fees, and other similar charges may only be
collected from union funds, not from the amounts that pertain to individual
union members

Exception:
Special assessments or other extraordinary fees may be levied upon or
checked off from any amount due an employees for as long as there is proper
authorization by the employer
Article 111. Attorney’s fees

To test the validity of a levy and check-off of special assessments, the requisites
are:

1. An authorization by a written resolution of the majority of all union members

at the general membership meeting duly called for the purpose;
2. Secretary’s record for the minutes of the meeting; and
3. Individual written authorization for check-off duly signed by the employee
concerned.
Article 111. Attorney’s fees

Court may fix attorney’s fees below 10%.

Standards for payment of attorney's fees are:
1. They must be reasonable, that is, they must have a bearing on the
importance of the subject matter in controversy;
2. The extent of the services rendered; and
3. The professional standing of the lawyer.