LABOR LAW AND SOCIAL LEGISLATION

CHAPTER ONE:

FUNDAMENTAL PRINCIPLES AND CONCEPTS

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 I (10) Career civil service employees separated from
LEGAL BASIS the service not for cause but as a result of the reorganization
shall be entitled to appropriate separation pay and to retirement
A. 1987 CONSTITUTION and other benefits under existing laws. In lieu thereof, they may
The basic rights of workers guaranteed by the also be considered for reemployment in the Government. Those
Constitution are: the rights to organize themselves; to conduct whose resignations have been accepted in line with the existing
collective bargaining or negotiation with management; to policy shall also have this right [Article XVIII, Section 16].
engage in peaceful concerted activities, including to strike in
accordance with law; to enjoy security of tenure; to work under Police Power of the State
humane conditions; to receive a living wage; and to participate The police power of the State. It is the power of
in policy and decision- making processes affecting their rights Government to enact laws, within constitutional limits, to
and benefits as may be provided by law. promote the order, safety, health, morals and general welfare of
Other provisions in the new Constitution protect the society [People v. Vera Reyes]. It is settled that state
rights or promote the welfare of workers. Among these legislatures may enact laws for the protection of the safety and
provisions are: health of employees as an exercise of the police power, and this
(1) The right of the people, including those employed is true even though such laws affect, not the health of the
in the public and private sectors, to form unions, associations, community generally, but the health or welfare of operatives in
or societies for purposes not contrary to law shall not be any given situation.
abridged [Article III, Section 8]. An example of valid regulation as an exercise of
(2) The right of self-organization shall not be denied police power is Department Order No. 1 (Series of 1988) which
to government employees. No officer or employee of the civil temporarily suspended the deployment of female domestic
service shall be removed or suspended except for cause workers abroad. The petitioner, an association of service
provided by law. Temporary employees of the Government exporters, challenged the constitutional validity of the
shall be given such protection as may be provided by law department order because "it does not apply to all Filipino
[Article IX-B, Section (2), (5) and (6)]. workers but only to domestic helpers and females with similar
(3) Regular farmworkers shall have the right to own skills," and that it violates the right to travel.
directly or collectively the lands they till. Other farmworkers
shall receive a just share of the fruits of the land they till. The Philippine Association of Service Exporters v.
State recognizes the right of farmworkers, along with other Drilon
groups, to take part in the planning, organization and Held: The Court denied the petition by explaining that the
concept of police power is well established in this jurisdiction. It has
management of the agrarian reform program. Landless
been defined as the "state authority to enact legislation that may
farmworkers may be resettled by the Government in its own interfere with personal liberty or property in order to promote the
agricultural estates' [Article XIII, Sections (4), (5) and (6)]. general welfare." The Court further ruled that the petitioner has shown
4) The State shall, by law, and for the common good, no satisfactory reason why the contested measure should be nullified.
undertake, in cooperation with the private sector, a continuing There is no question that Department Order No. 1 applies only to
program of urban land reform and housing which will make "female contract workers," but it does not thereby make an undue
available at affordable cost decent housing and basic services discrimination between the sexes. It is well-settled that "equality before
to underprivileged and homeless citizens in urban centers and the law" under the Constitution does not import a perfect identity of
rights among all men and women. It admits of classifications, provided
resettlement areas. It shall also promote adequate employment
that (1) such classifications rest on substantial distinctions; (2) they are
opportunities to such citizens [Article XIII, Section 9]. germane to the purposes of the law; (3) they are not confined to existing
(5) The State shall protect working women by conditions; and (4) they apply equally to all members of the same class.
providing safe and healthful working conditions taking into The Court is satisfied that the classification made — the preference for
account their maternal functions, and such facilities and female workers — rests on substantial distinctions.
opportunities that will enhance their welfare and enable them
to realize their full potential in the service of the nation [Article B. THE CIVIL CODE
XIII, Section 14]. It is the Civil Code, not the Labor Code, that
(6) Along with other sectors, labor is entitled to seats describes the nature of labor management relations. It states
allotted to party-list representatives for three consecutive terms that:
after the ratification of the Constitution [Article VI].
(7) The goals of the national economy are a more 'The relations between capital and labor are not
equitable distribution of opportunities, income, and wealth; a merely contractual. They are so impressed with public
sustained increase in the amount of goods and services interest that labor contracts must yield to the common good.
produced by the nation for the benefit of the people; and an Therefore, such contracts are subject to the special laws on
expanding productivity as the key to raising the quality of life labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and
for all, especially the underprivileged. The State shall promote
similar subjects." (Article 1700.)
industrialization and full employment based on sound This being so, "Neither capital nor labor shall act
agricultural development and agrarian reform, through oppressively against the other, or impair the interest or
industries that make full and efficient use of human and natural convenience of the public." (Article 1701.)
resources [Article XII, Section 1].
(8) Congress shall create an agency to promote the Similarly, no provision in the Labor Code requires
viability and growth of cooperatives as instruments for social that employment relationship should be voluntary. This is not
justice and economic development [Article XII, Section 15]. needed in the Labor Code because involuntary servitude is
(9) At the earliest possible time, the Government already proscribed in the Constitution's Bill of Rights and in
shall increase the salary scales of the other officials and Article 1703 of the Civil Code. It states: "No contract which
employees of the National Government [Article XVIII, Section practically amounts to involuntary servitude, under any guise
18]. whatsoever, shall be valid." Because of this law an employer
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cannot forbid an employee from resigning from his job, subject technically, and the courts must place a special and realistic
to the observance of the terms of the employment contract itself construction upon it, giving due consideration to the context in
and the procedure on resignation under Article 285 of the Labor which it is negotiated and the purpose for which it is intended
Code. to serve [Marcopper Mining v. NLRC].
The Civil Code further contains provisions regarding
wages, househelpers, and injuries sustained by employees. c. Quitclaims/Waivers
These provisions will be mentioned in the chapters of the Labor Courts must undertake a meticulous and rigorous
Code where they pertain. Among the labor-related issues that review of quitclaims or waivers, more particularly those
call for application of the Civil Code instead of the Labor Code executed by employees Quitclaims, releases and other waivers
are those relating to awards of damages, interpretation of a of benefits granted by laws or contracts in favor of workers
collective bargaining agreement, validity of a waiver, should be strictly scrutinized to protect the weak and the
preference of workers' claims, and fixed-period employment. disadvantaged. The waivers should be carefully examined, in
regard not only to the words and terms used, but also the factual
C. LABOR CODE circumstances under which they have been executed. Not all
waivers and quitclaims are invalid as against public policy. If
Article 4. Construction in favor of labor. - All doubts in the agreement was voluntarily entered into and represents a
the implementation and interpretation of the provisions of this reasonable settlement, it is binding on the parties and may not
Code, including its implementing rules and regulations, shall be later be disowned simply because of a change of mind. It is only
resolved in favor of labor. where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are
In interpreting the Constitution's protection to labor unconscionable on its face, that the law will step in to annul the
and social justice provisions and the labor laws and rules and questionable transaction. But where it is shown that the person
regulations implementing the constitutional mandate, the making the waiver did so voluntarily, with full understanding
Supreme Court adopts the liberal approach which favors the of what he was doing, and the consideration for the quitclaim
exercise of labor rights [Euro-Linea Phils. Inc. v NLRC]. is credible and reasonable, the transaction must be recognized
In the matter of employment bargaining, there is no as a valid and binding undertaking [Periquet v. NLRC].
doubt that the employer stands on higher footing than the
employee. First of all, there is greater supply than demand for EDI-Staffbuilders v. NLRC
labor. Second, the need for employment by labor comes from Held: The Court finds the waiver and quitclaim null and
vital, and even desperate, necessity. Consequently, the law void for the following reasons:
must protect labor, at least, to the extent of raising him to equal 1. The salary paid to Gran upon his termination, in
footing in bargaining relations with capital and to shield him the amount of SR 2,948.00, is unreasonably low. As correctly pointed
from abuses brought about by the necessity for survival. It is out by the court a quo, the payment of SR 2,948.00 is even lower than
safe to presume, therefore, that an employee or laborer who his monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also
very much less than the USD 16,150.00 which is the amount Gran is
waives in advance any benefit granted him by law does so,
legally entitled to get from petitioner EDI as backwages.
certainly not in his interest or through generosity but under the 2. The Declaration reveals that the payment of SR
forceful intimidation of urgent need, and hence, he could not 2,948.00 is actually the payment for Gran’s salary for the services he
have so acted freely and voluntarily [Sanchez v. Harry-Lyons rendered to OAB as Computer Specialist. If the Declaration is a
Construction]. quitclaim, then the consideration should be much much more than the
monthly salary of SR 3,190.00 (USD 850.00)—although possibly less
a. Rule in case of employment contracts than the estimated Gran’s salaries for the remaining duration of his
contract and other benefits as employee of OAB. A quitclaim will
The general rule remains that where the law speaks
understandably be lower than the sum total of the amounts and benefits
in clear and categorical language, there is no room for that can possibly be awarded to employees or to be earned for the
interpretations; there is only room for application [Leoncio v. remainder of the contract period since it is a compromise where the
MST Marine Services]. Contracts which are not ambiguous are employees will have to forfeit a certain portion of the amounts they are
to be interpreted according to their literal meaning and not claiming in exchange for the early payment of a compromise amount.
beyond their obvious intendment. Only when the law is The court may however step in when such amount is unconscionably
ambiguous or of doubtful meaning may the court interpret or low or unreasonable although the employee voluntarily agreed to it. In
construe its true intent. Thus, the liberal interpretation of the the case of the Declaration, the amount is unreasonably small compared
to the future wages of Gran.
Labor Code and its Implementing Rules in its Article 4 has been
3. The factual circumstances surrounding the
applied to employment contracts by virtue of Article 1702 of execution of the Declaration would show that Gran did not voluntarily
the New Civil Code which mandates that “all labor contracts” and freely execute the document. Consider the following chronology of
shall likewise be construed in favor of the labourer. events:

b. Rule in case of collective agreements a. On July 9, 1994, Gran received a copy of his
In the area of employment bargaining, the employer letter of termination;
stands on higher footing than the employee. The law must b. On July 10, 1994, Gran was instructed to depart
Saudi Arabia and required to pay his plane ticket;[65]
protect labor to the extent, at least, of raising him to equal
c. On July 11, 1994, he signed the Declaration;
footing in bargaining relations with capital and to shield him d. On July 12, 1994, Gran departed from Riyadh,
from abuses brought about by the necessity to survive [Sanchez Saudi Arabia; and
v. Harry Lyons Construction]. Thus, the rule is laid that while e. On July 21, 1994, Gran filed the Complaint
a CBA’s terms and conditions constitute the law between the before the NLRC.
parties, it is not an ordinary contract to which is applied the The foregoing events readily reveal that Gran was “forced”
principles of law governing ordinary contracts. Not being an to sign the Declaration and constrained to receive the amount of SR
2,948.00 even if it was against his will—since he was told on July 10,
ordinary contract as it is impressed with public interest, a CBA
1994 to leave Riyadh on July 12, 1994. He had no other choice but to
must be construed liberally rather than narrowly and
sign the Declaration as he needed the amount of SR 2,948.00 for the
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payment of his ticket. He could have entertained some apprehensions II
as to the status of his stay or safety in Saudi Arabia if he would not sign STATE POLICY TOWARDS LABOR
the quitclaim.
4. The court a quo is correct in its finding that the
Declaration is a contract of adhesion which should be construed against Article 3. Declaration of Basic Policy. – The State shall
the employer, OAB. An adhesion contract is contrary to public policy afford protection to labor, promote full employment, ensure equal
as it leaves the weaker party—the employee—in a “take-it-or-leave-it” work opportunities regardless of sex, race or creed and regulate the
situation. Certainly, the employer is being unjust to the employee as relations between workers and employers. The State shall assure
there is no meaningful choice on the part of the employee while the the rights of workers to self-organization, collective bargaining,
terms are unreasonably favorable to the employer. security of tenure, and just and humane conditions of work.
Thus, the Declaration purporting to be a quitclaim and
waiver is unenforceable under Philippine laws in the absence of proof The foregoing principles, being constitutionally
of the applicable law of Saudi Arabia. mandated, should be treated as the standard to which all labor
In order to prevent disputes on the validity and
laws and social legislations should conform and upon which
enforceability of quitclaims and waivers of employees under Philippine
laws, said agreements should contain the following:
their legality and validity should be gauged and measured. Both
1. A fixed amount as full and final compromise under the Constitution and Article 3 of the Labor Code, the
settlement; State is duty-bound to provide and guarantee the following:
2. The benefits of the employees if possible with
the corresponding amounts, which the employees are giving up in a. Full protection to labor;
consideration of the fixed compromise amount; b. Promotion of full employment;
3. A statement that the employer has clearly
c. Promotion of equal work opportunities
explained to the employee in English, Filipino, or in the dialect known
to the employees—that by signing the waiver or quitclaim, they are regardless of sex, race, or creed;
forfeiting or relinquishing their right to receive the benefits which are d. Regulation of relations between workers and
due them under the law; and employers;
4. A statement that the employees signed and e. Protection of the rights of workers to:
executed the document voluntarily, and had fully understood the
ii. Self-organization;
contents of the document and that their consent was freely given
without any threat, violence, duress, intimidation, or undue influence iii. Collective bargaining;
exerted on their person. iv. Security of tenure; and
It is advisable that the stipulations be made in English and v. Just and humane conditions of work.
Tagalog or in the dialect known to the employee. There should be two
(2) witnesses to the execution of the quitclaim who must also sign the
quitclaim. The document should be subscribed and sworn to under oath
preferably before any administering official of the Department of Labor
and Employment or its regional office, the Bureau of Labor Relations,
the NLRC or a labor attaché in a foreign country. Such official shall
assist the parties regarding the execution of the quitclaim and
waiver.[67] This compromise settlement becomes final and binding
under Article 227 of the Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with
the assistance of the Bureau of Labor Relations or the regional office
of the DOLE, shall be final and binding upon the parties and the NLRC
or any court “shall not assume jurisdiction over issues involved therein
except in case of non-compliance thereof or if there is prima facie
evidence that the settlement was obtained through fraud,
misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or
waiver shall apply only to labor contracts of OFWs in the absence of
proof of the laws of the foreign country agreed upon to govern said
contracts. Otherwise, the foreign laws shall apply.

Hanjin v. Ibanez
Held: Finally, the Quitclaims which the respondents signed
cannot bar them from demanding what is legally due them as regular
employees. As a rule, quitclaims and waivers or releases are looked
upon with disfavor and frowned upon as contrary to public policy. They
are thus ineffective to bar claims for the full measure of a worker's legal
rights, particularly when the following conditions are applicable: 1)
where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of settlement
are unconscionable on their face. To determine whether the Quitclaims
signed by respondents are valid, one important factor that must be taken
into account is the consideration accepted by respondents; the amount
must constitute a reasonable settlement equivalent to the full measure
of their legal rights. In this case, the Quitclaims signed by the
respondents do not appear to have been made for valuable
consideration. Respondents, who are regular employees, are entitled to
backwages and separation pay and, therefore, the Quitclaims which
they signed cannot prevent them from seeking claims to which they are
entitled.

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 CHAPTER TWO:

PRE-EMPLOYMENT

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 I “Direct Hiring” refers to the process of directly hiring
RECRUITMENT AND PLACEMENT OF workers by employers for overseas employment as authorized
MIGRANT WORKERS by the DOLE Secretary and processed by the POEA, including:

A. DEFINITION OF RECRUITMENT AND a. Those hired by international organizations;

PLACEMENT b. Those hired by members of the diplomatic
"Recruitment and placement" refers to any act of corps;
canvassing, enlisting, contracting, transporting, utilizing, hiring c. Name hires or workers who are able to secure
or procuring workers, and includes referrals, contract services, overseas employment opportunity with an
promising or advertising for employment, locally or abroad, employer without the assistance or participation
whether for profit or not: Provided, That any person or entity of any agency.
which, in any manner, offers or promises for a fee, employment
to two or more persons shall be deemed engaged in recruitment Unless the employment contract of an OFW is
and placement. processed through the POEA, the same does not bind the
concerned OFW because if the contract is not reviewed by the
B. REGULATION OF RECRUITMENT AND POEA, certainly the State has no means of determining the
PLACEMENT ACTIVITIES suitability of foreign laws to our overseas workers [Dagasdas
v. Grand Placement].
1. Regulatory Authorities
a. Nationality of Employer
a. Philippine Overseas Employment It must be emphasized that pertinent laws and
Administration (POEA) regulations generally make reference to employment of
The POEA’s jurisdiction is now confined to Filipinos overseas, i.e., outside the Philippines. They do not
recruitment or pre-employment cases which are administrative limit the coverage to non-Filipino employers. Filipinos
in nature, involving or arising out of recruitment laws, rules, working overseas share the same risks and burdens whether
and regulations, including money claims arising therefrom or their employers be Filipino or foreign [Philippine-Singapore
violation of the conditions for issuance of license to recruit Ports v. NLRC]. For instance, it is well-known that foreign-
workers. owned and foreign-registered vessels have frequently also
It has original exclusive jurisdiction over the secured Philippine registration where the interest of
following cases: convenience of the owners dictated such second or dual
registration. The underlying regulatory policy is that Filipino
(i) Recruitment violations and other related cases seamen working in ocean-going vessels should receive the
– all cases administrative in character, involving same wages and benefits without regard to the nationality or
or arising out of violation of rules and nationalities of the vessels on which they serve.
regulations relating to licensing and registration
of recruitment and employment agencies or b. Exemption
entities, including refund of fees collected from It is the general rule under Article 18 that no
workers and violation of the conditions for the employer shall directly hire an OFW for overseas employment.
issuance of license to recruit workers. The following, however, are exempted from this ban on direct
(ii) Disciplinary action cases and other special hiring:
cases – which are administrative in character,
involving employers, principals, contracting (i) Members of the diplomatic corps;
partners and Filipino migrant workers. (ii) International organizations;
(iii) Heads of State and government officials with
b. Regulatory and Visitorial Powers of the rank of at least deputy minister; or
the Department of Labor and (iv) Other employers as may be allowed by the
Employment Secretary DOLE Secretary, such as:
(i) Those provided in (a), (b), and (c)
Article 37. Visitorial Power. The Secretary of Labor or above, who bear a lesser rank, if
his duly authorized representatives may, at any time, inspect the endorsed by the Philippine Overseas
premises, books of accounts and records of any person or entity
Labor Office (POLO), or Head of
covered by this Title, require it to submit reports regularly on
prescribed forms, and act on violation of any provisions of this Mission in the absence of the POLO;
Title. (ii) Professionals and skilled works with
duly executed/authenticated contracts
2. Ban on Direct Hiring containing terms and conditions over
and above the standards set by the
Article 18. Ban on Direct-Hiring. No employer may hire POEA. The number of professional and
a Filipino worker for overseas employment except through the skilled OFWs hired for the first time by
Boards and entities authorized by the Secretary of Labor. Direct- the employer shall not exceed five (5).
hiring by members of the diplomatic corps, international
For the purpose of determining the
organizations and such other employers as may be allowed by the
Secretary of Labor is exempted from this provision number, workers hired as a group shall
be counted as one; or

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 (iii) Workers hired by a relative/family The Administrator was also given the power to order
member who is a permanent resident of the dismissal of the case of the suspension of the license or
the host country. authority of the respondent agency or contractor or recommend
to the Minister the cancellation thereof [TransAction v.
3. Entities Prohibited from Recruiting (D.O. Secretary of Labor].
141)
5. Prohibited Practices
Section 5. Disqualification. – The following are not
qualified to engage in the business of recruitment and placement Article 34. Prohibited Practices. It shall be unlawful for
for local employment: any individual, entity, licensee, or holder of authority:
a. Those who are convicted of illegal recruitment, (a) To charge or accept, directly or indirectly, any
trafficking in persons, anti-child labor violation, or crimes amount greater than that specified in the schedule of allowable fees
involving moral turpitude; prescribed by the Secretary of Labor, or to make a worker pay any
b. Those against whom probable cause or prima facie amount greater than that actually received by him as a loan or
finding of guilt for illegal recruitment or other related cases exist advance;
particularly to owners or directors of agencies who have committed (b) To furnish or publish any false notice or information
illegal recruitment or other related cases. or document in relation to recruitment or employment;
c. Those agencies whose licenses have been previously (c) To give any false notice, testimony, information or
revoked or cancelled by the Department under Sec. 54 of these document or commit any act of misrepresentation for the purpose
rules. of securing a license or authority under this Code;
d. Cooperatives whether registered or not under the (d) To induce or attempt to induce a worker already
Cooperative Act of the Philippines. employed to quit his employment in order to offer him to another
e. Law enforcers and any official and employee of the unless the transfer is designed to liberate the worker from
Department of Labor and Employment (DOLE). oppressive terms and conditions of employment;
f. Sole proprietors of duly licensed agencies are (e) To influence or to attempt to influence any person or
prohibited from securing another license to engage in recruitment entity not to employ any worker who has not applied for
and placement. employment through his agency;
g. Sole proprietors, partnerships or corporations (f) To engage in the recruitment or placement of workers
licensed to engage in private recruitment and placement for local in jobs harmful to public health or morality or to the dignity of the
employment are prohibited from engaging in job contracting or Republic of the Philippines;
sub contracting activities. (g) To obstruct or attempt to obstruct inspection by the
Secretary of Labor or by his duly authorized representatives;
(h) To fail to file reports on the status of employment,
4. Suspension or Cancellation of License or
placement vacancies, remittance of foreign exchange earnings,
Authority separation from jobs, departures and such other matters or
information as may be required by the Secretary of Labor;
Article 35. Suspension and/or Cancellation of License or (i) To substitute or alter employment contracts
Authority. The Minister of Labor shall have the power to suspend approved and verified by the Department of Labor from the time
or cancel any license or authority to recruit employees for overseas of actual signing thereof by the parties up to and including the
employment for violation of rules and regulations issued by the periods of expiration of the same without the approval of the
Ministry of Labor, the Overseas Employment Development Board, Secretary of Labor;
or for violation of the provisions of this and other applicable laws, (j) To become an officer or member of the Board of any
General Orders and Letters of Instructions. corporation engaged in travel agency or to be engaged directly or
indirectly in the management of a travel agency; and
(k) To withhold or deny travel documents from
The penalties of suspension and cancellation of
applicant workers before departure for monetary or financial
license or authority are prescribed for violations of the above considerations other than those authorized under this Code and its
quoted provisions, among others. And the Secretary of Labor implementing rules and regulations.
has the power under Section 35 of the law to apply these
sanctions, as well as the authority, conferred by Section 36, not C. ILLEGAL RECRUITMENT
only to "restrict and regulate the recruitment and placement
activities of all agencies," but also to "promulgate rules and 1. Local Illegal Recruitment and Prohibited
regulations to carry out the objectives and implement the
Practices (P.D. No. 442)
provisions" governing said activities. Pursuant to this rule-
making power thus granted, the Secretary of Labor gave the
Section 42. Acts constituting illegal recruitment. – Illegal
POEA,6 "on its own initiative or upon filing of a complaint or
recruitment shall mean any act of canvassing, enlisting,
report or upon request for investigation by any aggrieved contracting, utilizing, hiring or procuring workers and includes
person, . . (authority to) conduct the necessary proceedings for referrals, contract services, promising or advertising for local
the suspension or cancellation of the license or authority of any employment, whether for profit or not, when undertaken by a non-
agency or entity" for certain enumerated offenses including — licensee or non-holder of authority; provided, that any such non-
licensee or non-holder of authority; provided, that any such non-
a. the imposition or acceptance, directly or licensee or non-holder of authority who, in any manner, offer or
promises for a free employment to two or more persons shall be
indirectly, of any amount of money, goods or
deemed so engaged.
services, or any fee or bond in excess of what is The following acts shall be unlawful when committed by
prescribed by the Administration, and any person whether or not a holder of a license or authority:
b. any other violation of pertinent provisions of the a. To charge or accept directly or indirectly any amount
Labor Code and other relevant laws, rules and or to make a worker pay the agency or its representatives any
amount greater than that actually loaned or advanced to him;
regulations.
b. To furnish or publish any false notice or information
in relation to recruitment or employment;

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 c. To give any false notice, testimony, information or same without the approval of the Department of Labor and
document or commit any act of misrepresentation for the purpose Employment;
of securing a license or authority; (j) For an officer or agent of a recruitment or placement
d. To induce or attempt to induce a worker already agency to become an officer or member of the Board of any
employed to quit his employment in order to offer him another corporation engaged in travel agency or to be engaged directly or
unless the transfer is designed to liberate a worker from oppressive indirectly in the management of travel agency;
terms and conditions of employment; (k) To withhold or deny travel documents from
e. To influence or attempt to influence any person or applicant workers before departure for monetary or financial
entity not to employ any worker who has not applied for considerations, or for any other reasons, other than those
employment through his agency; authorized under the Labor Code and its implementing rules and
f. To engage in the recruitment or placement of workers regulations;
in jobs harmful to public health or morality or to the dignity of the (l) Failure to actually deploy a contracted worker
Republic of the Philippines; without valid reason as determined by the Department of Labor
g. To obstruct or attempt to obstruct inspection by the and Employment;
Secretary or by his/her duly authorized representatives; (m) Failure to reimburse expenses incurred by the
h. To substitute or alter to the prejudice of the worker, worker in connection with his documentation and processing for
employment contract prescribed by the Department from the time purposes of deployment, in cases where the deployment does not
of actual signing thereof by the parties up to and including the actually take place without the worker's fault. Illegal recruitment
period of the expiration of the same without the approval of the when committed by a syndicate or in large scale shall be considered
Department. an offense involving economic sabotage; and
(n) To allow a non-Filipino citizen to head or manage a
2. Overseas Illegal Recruitment and Prohibited licensed recruitment/manning agency.
Illegal recruitment is deemed committed by a syndicate
Practices (R.A. No. 8042) if carried out by a group of three (3) or more persons conspiring or
confederating with one another. It is deemed committed in large
Section 6. Definition. - For purposes of this Act, illegal scale if committed against three (3) or more persons individually or
recruitment shall mean any act of canvassing, enlisting, as a group.
contracting, transporting, utilizing, hiring, or procuring workers In addition to the acts enumerated above, it shall also be
and includes referring, contract services, promising or advertising unlawful for any person or entity to commit the following
for employment abroad, whether for profit or not, when prohibited acts:
undertaken by non-licensee or non-holder of authority (1) Grant a loan to an overseas Filipino worker with
contemplated under Article 13(f) of Presidential Decree No. 442, as interest exceeding eight percent (8%) per annum, which will be
amended, otherwise known as the Labor Code of the Philippines: used for payment of legal and allowable placement fees and make
Provided, That any such non-licensee or non-holder who, in any the migrant worker issue, either personally or through a guarantor
manner, offers or promises for a fee employment abroad to two or or accommodation party, postdated checks in relation to the said
more persons shall be deemed so engaged. It shall likewise include loan;
the following acts, whether committed by any person, whether a (2) Impose a compulsory and exclusive arrangement
non-licensee, non-holder, licensee or holder of authority: whereby an overseas Filipino worker is required to avail of a loan
(a) To charge or accept directly or indirectly any amount only from specifically designated institutions, entities or persons;
greater than that specified in the schedule of allowable fees (3) Refuse to condone or renegotiate a loan incurred by
prescribed by the Secretary of Labor and Employment, or to make an overseas Filipino worker after the latter's employment contract
a worker pay or acknowledge any amount greater than that has been prematurely terminated through no fault of his or her
actually received by him as a loan or advance; own;
(b) To furnish or publish any false notice or information (4) Impose a compulsory and exclusive arrangement
or document in relation to recruitment or employment; whereby an overseas Filipino worker is required to undergo health
(c) To give any false notice, testimony, information or examinations only from specifically designated medical clinics,
document or commit any act of misrepresentation for the purpose institutions, entities or persons, except in the case of a seafarer
of securing a license or authority under the Labor Code, or for the whose medical examination cost is shouldered by the
purpose of documenting hired workers with the POEA, which principal/shipowner;
include the act of reprocessing workers through a job order that (5) Impose a compulsory and exclusive arrangement
pertains to nonexistent work, work different from the actual whereby an overseas Filipino worker is required to undergo
overseas work, or work with a different employer whether training, seminar, instruction or schooling of any kind only from
registered or not with the POEA; specifically designated institutions, entities or persons, except fpr
(d) To include or attempt to induce a worker already recommendatory trainings mandated by principals/shipowners
employed to quit his employment in order to offer him another where the latter shoulder the cost of such trainings;
unless the transfer is designed to liberate a worker from oppressive (6) For a suspended recruitment/manning agency to
terms and conditions of employment; engage in any kind of recruitment activity including the processing
(e) To influence or attempt to influence any person or of pending workers' applications; and
entity not to employ any worker who has not applied for (7) For a recruitment/manning agency or a foreign
employment through his agency or who has formed, joined or principal/employer to pass on the overseas Filipino worker or
supported, or has contacted or is supported by any union or deduct from his or her salary the payment of the cost of insurance
workers' organization; fees, premium or other insurance related charges, as provided
(f) To engage in the recruitment or placement of workers under the compulsory worker's insurance coverage.
in jobs harmful to public health or morality or to the dignity of the The persons criminally liable for the above offenses are
Republic of the Philippines; the principals, accomplices and accessories. In case of juridical
(h) To fail to submit reports on the status of persons, the officers having ownership, control, management or
employment, placement vacancies, remittance of foreign exchange direction of their business who are responsible for the commission
earnings, separation from jobs, departures and such other matters of the offense and the responsible employees/agents thereof shall be
or information as may be required by the Secretary of Labor and liable.
Employment; In the filing of cases for illegal recruitment or any of the
(i) To substitute or alter to the prejudice of the worker, prohibited acts under this section, the Secretary of Labor and
employment contracts approved and verified by the Department of Employment, the POEA Administrator or their duly authorized
Labor and Employment from the time of actual signing thereof by representatives, or any aggrieved person may initiate the
the parties up to and including the period of the expiration of the corresponding criminal action with the appropriate office. For this

Page 9 of 191
purpose, the affidavits and testimonies of operatives or personnel under R.A. No. 8042, which, it must be noted, has not been
from the Department of Labor and Employment, POEA and other changed by the latest amendment introduced by R.A. No.
law enforcement agencies who witnessed the acts constituting the 10022, the term illegal recruitment, unlike illegal recruitment
offense shall be sufficient to prosecute the accused.
as defined under the Labor Code which is limited to recruitment
In the prosecution of offenses punishable under this
section, the public prosecutors of the Department of Justice shall
activities undertaken by non-licensees or non-holders of
collaborate with the anti-illegal recruitment branch of the POEA authority [People v. Tolentino], now includes the commission
and, in certain cases, allow the POEA lawyers to take the lead in of the prohibited acts enumerated thereunder, “whether
the prosecution. The POEA lawyers who act as prosecutors in such commited by any person, whether a non-licensee, non-holder,
cases shall be entitled to receive additional allowances as may be licensee, or holder of authority.” Therefore, under Section 6 of
determined by the POEA Administrator. RA 8042 as amended, illegal recruitment (for overseas
The filing of an offense punishable under this Act shall employment) may be committed not only by non-licensees or
be without prejudice to the filing of cases punishable under other
non-holders of authority but also by licensees or holders of
existing laws, rules or regulations.
authority [Ibid]. Section 6 enumerates 14 acts or practices plus
7 additional prohibited acts, which constitute illegal
Section 7. Penalties. -
recruitment, whether committed by any person, whether a non-
(a) Any person found guilty of illegal recruitment shall
suffer the penalty of imprisonment of not less than twelve (12) years
licensee, non-holder, licensee or holder of authority. Except for
and one (1) day but not more than twenty (20) years and a fine of the last three acts [(l), (m), and (n)] as well as the seven
not less than One million pesos (P1,000,000.00) nor more than Two additional prohibited acts, on the list under Section 6, the first
million pesos (P2,000,000.00). eleven (11) acts or practices are also listed in Article 34 of the
(b) The penalty of life imprisonment and a fine of not Labor Code under the heading “Prohibited Practices.”
less than Two million pesos (P2,000,000.00) nor more than Five Simply put, under RA 8042, as amended, a non-
million pesos (P5,000,000.00) shall be imposed if illegal recruitment licensee or non-holder of authority contains illegal recruitment
constitutes economic sabotage as defined therein.
for overseas employment in two ways:
Provided, however, That the maximum penalty shall be
imposed if the person illegally recruited is less than eighteen (18)
years of age or committed by a non-licensee or non-holder of (i) By any act of canvassing, enlisting,
authority. contracting, transporting, utilizing,
(c) Any person found guilty of any of the prohibited acts hiring, or procuring workers, and
shall suffer the penalty of imprisonment of not less than six (6) includes referring, contract services,
years and one (1) day but not more than twelve (12) years and a
promising or advertising for
fine of not less than Five hundred thousand pesos (P500,000.00) nor
more than One million pesos (P1,000,000.00). employment abroad, whether for
If the offender is an alien, he or she shall, in addition to profit or not; and
the penalties herein prescribed, be deported without further (ii) By undertaking any of the acts
proceedings. enumerated under Section 6 of RA
In every case, conviction shall cause and carry the
8042 as amended.
automatic revocation of the license or registration of the
recruitment/mining agency, lending institutions, training school or
medical clinic. On the other hand, a licensee or holder of authority is
also liable for illegal recruitment for overseas employment
Section 12. Prescriptive Periods – Illegal recruitment
when he or she undertakes any of the prohibited acts or practice
cases under this Act shall prescribe in five (5) years: Provided, listed under Section 6 of RA 8042 [Ibid].
however, That illegal recruitment cases involving economic Consequently, if a recruiter is charged with violation
sabotage as defined herein shall prescribe in twenty (20) years. of any of the prohibited acts under Section 6, there is no more
need to prove whether he is a licensee or holder of authority or
3. Types of Illegal Recruitment not because it is no longer an element of the crime [People v.
Ang].
a. Simple Illegal Recruitment Moreover, since illegal recruitment becomes
The following are the 2 elements of simple illegal qualified if committed by 3 or more recruiters (syndicated) or
recruitment: when there are 3 or more recruitees (large-scale), as the case
may be, the total number of recruiters and/or recruitees in order
(i) The offender has no valid license or for a case to remain one for simple illegal recruitment should
authority required by law to enable one to not be more than two (2) persons.
lawfully engage in recruitment and In light of the foregoing, the elements of simple
illegal recruitment should now be re-stated as follows:
placement of workers; and
(ii) He undertakes either any activity within
(i) That the offender engages in acts of
the meaning of “recruitment and
recruitment and placement of workers as
placement” defined under Article 13(b),
defined under Article 13(b) of the Labor
(see above enumeration) or any prohibited
Code, or in any prohibited activities
practices (see above enumeration) under
enumerated under the law, irrespective
Article 34 of the Labor Code.
whether the offender is a non-licensee,
non-holder of authority, licensee or holder
A survey indicates that the criminal cases where the
of authority;
foregoing elements were used as the guidepost in determining
the culpability of the accused for illegal recruitment, involve (ii) That the offender has no valid license or
persons who are non-licensees and non-holders of authority. authority required by law to enable himt o
The above enumeration of the elements curiously failed to lawfully engage in the recruitment and
consider that under the broadened concept of illegal recruit placement of workers; and
Page 10 of 191
 (iii) That the number of recruiter/s who The essential elements of the crime of illegal
committed the unlawful acts and/or recruitment committed by a syndicate are as follows:
recruitee/s who fell victim/s thereto should
not be more than two (2) persons. (i) There are at least three (3) persons who,
conspiring and/or confederating with one
Relevant Principles another, carried out any unlawful or illegal
• Mere impression that a person could deploy recruitment and placement activities as
workers overseas is sufficient to constitute defined under Article 13(b) or committed
illegal recruitment. But if no such impression any prohibited activities under Article 34
is given, the accused should not be convicted of the Labor Code; and
for illegal recruitment. (ii) Said persons are not licensed or authorized
• Mere promise or offer of employment abroad to do so, either locally or overseas.
amounts to recruitment.
• There is no need to show that accused The law does not require that the syndicate should
represented himself as a licensed recruiter. recruit more than one (1) person in order to constitute the crime
of illegal recruitment by a syndicate. Recruitment of one (1)
• Referrals may constitute illegal recruitment.
person would suffice to qualify the illegal recruitment act as
• It is illegal recruitment to induce applicants to having been committed by a syndicate.
part with their money upon false
misrepresentations and promises in assuring People v. Sison
them that after they paid the placement fee, Held: Under RA 8042, a non-licensee or non-holder of
jobs abroad were waiting for them and that authority commits illegal recruitment for overseas employment in two
they would be deployed soon. ways: (1) by any act of canvassing, enlisting, contracting, transporting,
utilizing, hiring, or procuring workers, and includes referring, contract
• Recruitment whether done for profit or not is
services, promising or advertising for employment abroad, whether for
immaterial. profit or not; or (2) by undertaking any of the acts enumerated under
• The act of receiving money far exceeding the Section 6 of RA 8042.41
amount as required by law is not considered as In this case, Sison herself admits that she has no license or
“recruitment and placement” as this phrase is authority to undertake recruitment and placement activities'. The Court
has held in several cases that an accused who represents to others that
contemplated under the law.
he or she could send workers abroad for employment, even without the
• Actual receipt of fee is not an element of the authority or license to do so, commits illegal recruitment.42
crime of illegal recruitment. It is the absence of the necessary license or authority to
• Conduct of interviews amountsto illegal recruit and deploy workers that renders the recruitment activity
recruitment. unlawful. To prove illegal recruitment, it must be shown that "the
accused gave the complainants the distinct impression that she had the
• Absence of receipt is not essential to hold a power or ability to deploy the complainants abroad in a manner that
person guilty of illegal recruitment. they were convinced to part with their money for that end."43
• Conviction for illegal recruitment may be On the other hand, illegal recruitment committed by a
made on the strength of the testimonies of the syndicate, as in the present case, has the following elements: (a) the
offender does not have the valid license or authority required by law to
complainants.
engage in recruitment and placement of workers; (b) the offender
• Absence of documents evidencing the undertakes any of the "recruitment and placement" activities defined in
recruitment activities strengthens, not Article 13(b) of the Labor Code, or engages in any of the prohibited
weakens, the case for illegal recruitment. practices enumerated under now Section 6 of RA 8042; and (c) the
illegal recruitment is "carried out by a group of three or more persons
• Only one person recruited is sufficient to
conspiring and/or confederating with one another in carrying out any
convict one for illegal recruitment. unlawful or illegal transaction, enterprise or scheme."44 In the third
• Non-prosecution of another suspect is element, it "is not essential that there be actual proof that all the
immaterial. conspirators took a direct part in every act. It is sufficient that they acted
• Execution of affidavit of desistance affects in concert pursuant to the same objective."45
The acts of Sison, Dedales, and Bacomo show a common
only the civil liability but has no effect on the purpose and and each undertook a part to reach their objective. Their
criminal liability for illegal recruitment. concerted action is evident in that either Sison or Dedales was receiving
• Defense of denial cannot prevail over positive payments from the recruits; that Dedales signed the acknowledgment
identification. Positive identification where receipt from Sison; and that the three accompanied their recruits
together in seeking out their visas in Malaysia and Indonesia. Further,
categorical and consistent and not attended by
the impression given to Castuera and other recruits was that the three
any showing of ill motive on the part of the were indeed working together.
eyewitnesses on the matter prevails over alibi Since it was proven that the three accused were acting in
and denial. Between the categorical concert and conspired with one another, their illegal recruitment
statements of the prosecution witnesses, on the activity is considered done by a syndicate, making the offense illegal
recruitment involving economic sabotage.
one hand, and bare denials of the accused, on
the other hand, the former must prevail.
c.
Illegal Recruitment Involving
b. Illegal Recruitment Involving Economic Sabotage (Large-Scale)
Economic Sabotage (By a Syndicate) Illegal recruitment considered in large scale if
Illegal recruitment committed by a syndicate if it is committed against three (3) or more persons individually or as
carried out by a group of three (3) or more persons conspiring a group.
or confederating with one another.
Page 11 of 191
 The elements of illegal recruitment in large scale, as
distinguished from simple illegal recruitment, are as D. LIABILITY OF LOCAL RECRUITMENT AGENCY
AND FOREIGN EMPLOYER (R.A. 8042)
(i) The accused engages in the recruitment
and placement of workers as defined under 1. Solidary Liability
Article 13(b) or committed any prohibited
activities under Article 34 of the Labor Section 10. Money Claims. - Notwithstanding any
Code; and provision of law to the contrary, the Labor Arbiters of the National
(ii) The accused commits the same against Labor Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
three (3) or more persons, individually or calendar days after the filing of the complaint, the claims arising
as a group. out of an employer-employee relationship or by virtue of any law
or contract involving Filipino workers for overseas deployment
People v. Abellanosa including claims for actual, moral, exemplary and other forms of
Held: We agree with the trial court and the CA that the damage. Consistent with this mandate, the NLRC shall endeavor
prosecution was able to establish that appellant was engaged in illegal to update and keep abreast with the developments in the global
recruitment in large scale. It was proved that appellant was a non- services industry.
licensee or non-holder of authority to recruit workers for deployment "The liability of the principal/employer and the
abroad; she offered or promised employment abroad to private recruitment/placement agency for any and all claims under this
complainants; she received monies from private complainants section shall be joint and several. This provision shall be
purportedly as placement or processing fees; that private complainants incorporated in the contract for overseas employment and shall be
were not actually deployed to Brunei; that despite demands, appellant a condition precedent for its approval. The performance bond to
failed to reimburse or refund to private complainants their monies; and de filed by the recruitment/placement agency, as provided by law,
that appellant committed these prohibited acts against three or more shall be answerable for all money claims or damages that may be
persons, individually or as a group. awarded to the workers. If the recruitment/placement agency is a
To recall, private complainants Pomar, Pastolero, juridical being, the corporate officers and directors and partners
Cathedral, Orias, Suobiron, Bueron, and Pelipog testified that appellant as the case may be, shall themselves be jointly and solidarily liable
went to Pavia, Iloilo and represented herself as a recruiter who could with the corporation or partnership for the aforesaid claims and
send them to Brunei for work; that appellant impressed upon them that damages.
she had the authority or ability to send them overseas for work by "Such liabilities shall continue during the entire period
showing them a job order from Brunei and a calling card; and appellant or duration of the employment contract and shall not be affected
collected processing or placement fees from the private complainants by any substitution, amendment or modification made locally or in
in various amounts ranging from P5,000.00 to P20,000.00; and that she a foreign country of the said contract.
did not reimburse said amounts despite demands. "Any compromise/amicable settlement or voluntary
In addition, it was proved that appellant does not have any agreement on money claims inclusive of damages under this section
license or authority to recruit workers for overseas employment as shall be paid within thirty (30) days from approval of the settlement
shown by the certification issued by the Philippine Overseas by the appropriate authority.
Employment Administration.16 "In case of termination of overseas employment without
Finally, appellant recruited seven persons, or more than the just, valid or authorized cause as defined by law or contract, or any
minimum of three persons required by law, for illegal recruitment to be unauthorized deductions from the migrant worker's salary, the
considered in large scale. worker shall be entitled to the full reimbursement if his placement
Verily, the RTC and the CA correctly found the appellant fee and the deductions made with interest at twelve percent (12%)
guilty of large scale illegal recruitment. per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the
unexpired term, whichever is less.
Distinguished from illegal recruitment by a "In case of a final and executory judgement against a
syndicate foreign employer/principal, it shall be automatically disqualified,
As distinguished from illegal recruitment committed without further proceedings, from participating in the Philippine
by a syndicate, illegal recruitment in large scale may be Overseas Employment Program and from recruiting and hiring
committed by only one (1) person. What is important as Filipino workers until and unless it fully satisfies the judgement
qualifying element is that there should be at least three (3) award.
victims of such illegal recruitment, individually or as a group. "Noncompliance with the mandatory periods for
resolutions of case provided under this section shall subject the
Recruitment in large scale or by a syndicate is malum
responsible officials to any or all of the following penalties:
prohibitum and not malum in se. "(a) The salary of any such official who fails to render
his decision or resolution within the prescribed period shall be, or
2. Illegal Recruitment and Estafa caused to be, withheld until the said official complies therewith;
Illegal recruitment and estafa cases may be filed "(b) Suspension for not more than ninety (90) days; or
simultaneously or separately. The filing of charges for illegal "(c) Dismissal from the service with disqualification to
recruitment does not bar the filing of estafa, and vice versa. Sy's hold any appointive public office for five (5) years.
"Provided, however, That the penalties herein provided
acquittal in the illegal recruitment case does not prove that she
shall be without prejudice to any liability which any such official
is not guilty of estafa. Illegal recruitment and estafa are entirely may have incured under other existing laws or rules and
different offenses and neither one necessarily includes or is regulations as a consequence of violating the provisions of this
necessarily included in the other. A person who is convicted of paragraph."
illegal recruitment may, in addition, be convicted
of estafa under Article 315, paragraph 2(a) of the RPC. In the Employees of a licensed recruitment agency may be
same manner, a person acquitted of illegal recruitment may be held liable for illegal recruitment as principal by direct
held liable for estafa. Double jeopardy will not set in because participation, together with his employer, if it is shown that he
illegal recruitment is malum prohibitum, in which there is no actively and consciously participated in illegal recruitment.
necessity to prove criminal intent, whereas estafa is malum in Good faith and merely following orders of superiors
se, in the prosecution of which, proof of criminal intent is are not valid defenses of an employee.
necessary [Sy v. People].
Page 12 of 191
 A manager of a recruitment/manning agency is not a (b) Suspension for not more than ninety (90) days; or
mere employee. As such, he receives job applications, (c) Dismissal from the service with disqualifications
interviews applicants and informs them of the agency’s to hold any appointive public office for five (5) years.
requirement of payment of performance or cash bond prior to Provided, however, that the penalties herein provided
the applicant’s deployment. As the crewing manager, he was at shall be without prejudice to any liability which any such
the forefront of the company’s recruitment activities. official may have incurred under other existing laws or rules
and regulations as a consequence of violating the provisions of
2. Theory of Imputed Knowledge this paragraph.
Knowledge of the agent is deemed knowledge of the
principal but not the other way around. The theory of imputed II
knowledge is a rule that any information material to the EMPLOYMENT OF NON-RESIDENT ALIENS
transaction, either possessed by the agent at the time of the
transaction or acquired by him before its completion, is deemed A. ALIEN EMPLOYMENT PERMIT (AEP)
to be the knowledge of the principal, at least insofar as the
transaction is concerned, even though the knowledge, in fact, is Article 40. Employment Permit of Non-resident Aliens.
not communicated to the principal at all. Any alien seeking admission to the Philippines for employment
Sunace International Management Services, Inc. v. purposes and any domestic or foreign employer who desires to
NLRC - The High Court here has the opportunity to discuss the engage an alien for employment in the Philippines shall obtain an
application of the theory of imputed knowledge. The OFW employment permit from the Department of Labor.
(Divina), a domestic helper in Taiwan, has extended her 12- The employment permit may be issued to a non-resident
alien or to the applicant employer after a determination of the non-
month contract, after its expiration, for two (2) more years after
availability of a person in the Philippines who is competent, able
which she returned to the Philippines. It was established by
and willing at the time of application to perform the services for
evidence that the extension was without the knowledge of the which the alien is desired.
local recruitment agency, petitioner Sunace. The Court of For an enterprise registered in preferred areas of
Appeals, however, affirmed the Labor Arbiter’s and NLRC’s investments, said employment permit may be issued upon
finding that Sunace knew of and impliedly consented to the recommendation of the government agency charged with the
extension of Divina’s 2-year contract. It went on to state that supervision of said registered enterprise.
“It is undisputed that [Sunace] was continually communicating
with [Divina’s] foreign employer.” It thus concluded that “[a]s B. EXEMPTION
agent of the foreign principal, ‘petitioner cannot profess The following categories of foreign nationals are
ignorance of such extension as obviously, the act of the exempt from securing an AEP:
principal extending complainant (sic) employment contract
necessarily bound it.’” a. All members of the diplomatic service and
In finding that the application by the CA of this foreign government officials accredited by and
theory of imputed knowledge was misplaced, the High Court with reciprocity arrangement with the Philippine
ruled that this theory ascribes the knowledge of the agent, government;
Sunace, to the principal, employer Xiong, not the other way b. Officers and staff of international organizations
around. The knowledge of the principal-foreign employer of which the Philippine government is a
cannot, therefore, be imputed to its agent, Sunace. There being
member, and their legitimate spouses desiring to
no substantial proof that Sunace knew of and consented to be
work in the Philippines;
bound under the 2-year employment contract extension, it
c. Owners and representatives of foreign principals
cannot be said to be privy thereto. As such, Sunace and its
owner cannot be held solidarily liable for any of Divina’s whose companies are accredited by the POEA,
claims arising from the 2-year employment extension. As the who come to the Philippines for a limited period
New Civil Code provides: “Contracts take effect only between and solely for the purpose of interviewing
the parties, their assigns, and heirs, except in case where the Filipino applicants for employment abroad;
rights and obligations arising from the contract are not d. Foreign nationals who come to the Philippines
transmissible by their nature, or by stipulation or by provision to teach, present and/or conduct research studies
of law.” in universities and colleges as visiting, exchange
or adjunct professors under formal agreements
E. TERMINATION OF CONTRACT OF MIGRANT between the universities or colleges in the
WORKER Philippines and foreign universities or colleges;
In case of termination of overseas employment or between the Philippine government and
without just, valid or authorized cause as defined by law or foreign government, provided that the
contract, the workers shall be entitled to the full reimbursement exemption is on reciprocal basis;
of his placement fee with interest of twelve percent (12%) per e. Permanent resident foreign nationals and
annum, plus his salaries for the unexpired portion of his
probationary or temporary resident VISA
employment contract or for three (3) months for every year of
holders under Section 13(a-f) of the Philippine
the unexpired term, whichever is less.
Immigration Act of 1940 and Section 3 of the
Non-compliance with the mandatory periods for
resolutions of cases provided under this section shall subject the Alien Social Integration Act of 1995 (R.A.
responsible officials to any or all of the following penalties: 7917);
(a) The salary of any such official who fails to render f. Refugees and Stateless Persons recognized by
his decision or resolutions within the prescribed period shall be, DOJ pursuant to Article 17 of the UN
or caused to be, withheld until the said official complies Convention and Protocol Relating to status of
therewith; Refugees and Stateless Persons; and

Page 13 of 191
 g. All foreign nationals granted exemption by law. foreign and local addresses, nature of employment and status of
stay in the country. The Secretary of Labor shall then determine if
they are entitled to an employment permit.
C. EXCLUSION
The following categories of foreign nationals are
excluded securing an AEP: III
DISCRIMINATORY PRACTICES
a. Members of the governing board with voting
rights only and do not intervene in the A. AGE (R.A. 10911)
management of the corporation or in the day to
day operation of the enterprise. Section 5. Prohibition of Discrimination in Employment
b. President and Treasurer, who are part-owners of on Account of Age -
(a) It shall be unlawful for an employer to:
the company. (1) Print or publish, or cause to be printed or published,
c. Those providing consultancy services who do in any form of media, including the internet, any notice of
not have employers in the Philippines. advertisement relating to employment suggesting preferences,
d. Intra-corporate transferee who is a manager, limitations, specifications, and discrimination based on age;
executive or specialist as defined below in (2) Require the declaration of age or birth date during
the application process;
accordance with Trade Agreements and an (3) Decline any employment application because of the
employee of the foreign service supplier for at individual’s age;
least one (1) year continuous employment prior (4) Discriminate against an individual in terms of
to deployment to a branch, subsidiary, affiliate compensation, terms and conditions or privileges of employment
or representative office in the Philippines. on account of such individual’s age;
(5) Deny any employee’s or worker’s promotion or
e. Contractual service supplier who is a manager, opportunity for training because of age;
executive or specialist and an employee of a (6) Forcibly lay off an employee or worker because of
foreign service supplier which has no old age; or
commercial presence in the Philippines: (7) Impose early retirement on the basis of such
(i) Who enters the Philippines employee’s or worker’s age.
(b) It shall be unlawful for a labor contractor or
temporarily to supply a service subcontractor, if any, to refuse to refer for employment or
pursuant to a contract between otherwise discriminate against any individual because of such
his/her employer and a service person’s age.
consumer in the Philippines; (c) It shall be unlawful for a labor organization to:
(ii) Must possess the appropriate (1) Deny membership to any individual because of such
individual’s age;
educational and professional
(2) Exclude from its membership any individual because
qualifications; and of such individual’s age; or
(iii) Must be employed by the foreign (3) Cause or attempt to cause an employer to
service supplier for at least one year discriminate against an individual in violation of this Act.
prior to the supply of service in the (d) It shall be unlawful for a publisher to print or publish
any notice of advertisement relating to employment suggesting
Philippines.
preferences, limitations, specifications, and discrimination based
on age.
f. Representative of the Foreign
Principal/Employer assigned in the Office of Section 6. Exceptions. - It shall not be unlawful for an
Licensed Manning Agency (OLMA) in employer to set age limitations in employment if:
accordance with the POEA law, rules and (a) Age is a bona fide occupational qualification
regulations. reasonably necessary in the normal operation of a particular
business or where the differentiation is based on reasonable factors
other than age;
D. PROHIBITION AGAINST TRANSFER OF
(b) The intent is to observe the terms of a bona fide
EMPLOYMENT seniority system that is not intended to evade the purpose of this
Act;
Article 41. Prohibition Against Transfer of Employment. (c) The intent is to observe the terms of a bona fide
(a) After the issuance of an employment permit, the alien shall not employee retirement or a voluntary early retirement plan
transfer to another job or change his employer without prior consistent with the purpose of this Act: Provided, That such
approval of the Secretary of Labor. retirement or voluntary retirement plan is in accordance with the
(b) Any non-resident alien who shall take up Labor Code, as amended, and other related laws; or
employment in violation of the provision of this Title and its (d) The action is duly certified by the Secretary of Labor
implementing rules and regulations shall be punished in and Employment in accordance with the purpose of this Act.
accordance with the provisions of Articles 289 and 29043 of the
Labor Code. B. GENDER AND/OR MARITAL STATUS (RA 9710)
In addition, the alien worker shall be subject to
deportation after service of his sentence.
SECTION 22. Right to Decent Work. — The State
shall progressively realize and ensure decent work standards for
E. SUBMISSION OF LIST women that involve the creation of jobs of acceptable quality in
conditions of freedom, equity, security, and human dignity.
Article 42. Submission of List. Any employer employing (a) Decent work involves opportunities for work
non-resident foreign nationals on the effective date of this Code that are productive and fairly remunerative as family living wage,
shall submit a list of such nationals to the Secretary of Labor within security in the workplace, and social protection for families, better
thirty (30) days after such date indicating their names, citizenship, prospects for personal development and social integration,
Page 14 of 191
freedom for people to express their concerns, organize, participate (i). Excluding disabled persons from membership in
in the decisions that affect their lives, and equality of opportunity labor unions or similar organization.
and treatment for all women and men.
(b) The State shall further ensure:
SECTION 33. Employment Entrance Examination :
(1) Support services and gears to protect them
Upon an offer of employment, a disabled applicant may be
from occupational and health hazards taking into account women’s
subjected to medical examination, on the following occasions:
maternal functions;
(a). all entering employees are subjected to such an
(2) Support services that will enable women to
examination regardless of disability;
balance their family obligations and work responsibilities
(b). information obtained during the medical condition
including, but not limited to, the establishment of day care centers
or history of the applicant is collected and maintained on separate
and breast-feeding stations at the workplace, and providing
forms and in separate medical files and is treated as a confidential
maternity leave pursuant to the Labor Code and other pertinent
medical record, Provided, however, That:
laws;
1). supervisors and managers may be informed
(3) Membership in unions regardless of status of
regarding necessary restrictions on the work or duties of the
employment and place of employment; and
employees and necessary accommodations;
(4) Respect for the observance of indigenous
2). first aid and safety personnel my be informed, when
peoples’ cultural practices even in the workplace.
appropriate, if the disability might require emergency treatment;
(c) In recognition of the temporary nature of
3). government officials investigating compliance with
overseas work, the State shall exert all efforts to address the causes
this Act shall be provided relevant information on request; and
of out-migration by developing local employment and other
4). the results of such examination are used only
economic opportunities for women and by introducing measures to
accordance with this Act.
curb violence and forced and involuntary displacement of local
women. The State shall ensure the protection and promotion of the
rights and welfare of migrant women regardless of their work D. SOLO PARENTS (R.A. 8972)
status, and protect them against discrimination in wages,
conditions of work, and employment opportunities in host Section 7. Work Discrimination. - No employer shall
countries. discriminate against any solo parent employee with respect to
terms and conditions of employment on account of his/her status.
C. HEALTH CONDITION (R.A. 7277)

SECTION 32. Discrimination on Employment : No

entity, whether public or private, shall discriminate against a
qualified disabled person by reason of disability in regard to job
application procedures, the hiring, promotion, or discharge of
employees, employee compensation, job training, and other terms,
conditions, and privileges of employment. The following constitute
acts of discrimination:
(a). Limiting, segregating or classifying a disabled job
applicant in such a manner that adversely affects his work
opportunities;
(b). Using qualification standards, employment tests or
other selection criteria that screen out or tend to screen out a
disabled person unless such standards, tests or other selection
criteria are shown to be jobrelated for the position on question and
are consistent with business necessity;
(c). Utilizing standards, criteria, or methods of
administration that:
1). have the effect of discrimination on the basis of
disability; or
2). perpetuate the discrimination of others who are
subject to common administrative control;
(d). Providing less compensation, such as salary, wage or
other forms of remuneration and fringe benefits, to a qualified
disabled employee, by reason of his disability, than the amount to
which a non-disabled person performing the same work is entitled;
(e). Favoring a non-disabled employee over a qualified
disabled employee with respect to promotion, training
opportunities, study and scholarship grants, solely on account of
the latter’s disability;
(f). Re-assigning or transferring a disabled employee to
a job or position he cannot perform by reason of his disability;
(g). Dismissing or terminating the services of a disabled
employee by reason of his disability unless the employer can prove
that he impairs the satisfactory performance of the work involve to
the prejudice of the business entities; Provided, however, That the
employer first sought provide reasonable accommodations for
disabled persons;
(h). Failing to select or administer in the effective
manner employment tests which accurately reflect the skills,
aptitude or other factor of the disabled applicant or employee that
such test purports to measure, rather than the impaired sensory,
manual or speaking skills of such applicant or employee, if any;
and

Page 15 of 191
 CHAPTER THREE:

EMPLOYMENT PROPER

Page 16 of 191
 I or prejudicial to the employee; nor does it involve a demotion
MANAGEMENT PREROGATIVE in rank or a diminution of his salaries, privileges and other
benefits.[10] Should the employer fail to overcome this burden
It is the employer’s prerogative, based on its of proof, the employee’s transfer shall be tantamount to
assessment and perception of its employees’ qualifications, constructive dismissal, which has been defined as a quitting
aptitudes, and competence, to move them around in the various because continued employment is rendered impossible,
areas of its business operations in order to ascertain where they unreasonable or unlikely; as an offer involving a demotion in
will function with maximum benefit to the company [Pecson v. rank and diminution in pay. Likewise, constructive dismissal
Robinson]. exists when an act of clear discrimination, insensibility or
Management is free to regulate, according to its own disdain by an employer has become so unbearable to the
discretion and judgment, all aspects of employment, including employee leaving him with no option but to forego with his
hiring, work assignments, working methods, time, place and continued employment [Blue Dairy v. NLRC].
manner of work, processes to be followed, supervision of In the resolution of whether the transfer of the
workers, working regulations, transfer of employees, work respondents from one area of operation to another was valid,
supervision, lay off of workers and discipline, dismissal and finding a balance between the scope and limitation of the
recall of workers. The exercise of management prerogative, exercise of management prerogative and the employees' right
however, is not absolute as it must be exercised in good faith to security of tenure is necessary. We have to weigh and
and with due regard to the rights of labor [Julie’s Bakeshop v. consider, on the one hand, that management has a wide
Arnaiz]. discretion to regulate all aspects of employment, including the
transfer and re-assignment of employees according to the
A. DISCIPLINE exigencies of the business; and, on the other, that the transfer
Management has the prerogative to discipline its constitutes constructive dismissal when it is unreasonable,
employees and to impose appropriate penalties on erring inconvenient or prejudicial to the employee, or involves a
workers pursuant to company rules and regulations [Artificio v. demotion in rank or diminution of salaries, benefits and other
NLRC]. privileges, or when the acts of discrimination, insensibility or
Among the employer’s management prerogatives is disdain on the part of the employer become unbearable for the
the right to prescribe reasonable rules and regulations necessary employee, forcing him to forego her employment [Chateau v.
or proper for the conduct of its business or concern, to provide Balba].
certain disciplinary measures to implement said rules and to Concerning the transfer of employees, these are the
assure that the same would be complied with [St. Luke’s following jurisprudential guidelines: (a) a transfer is a
Medical Center, Inc. v. Sanchez]. movement from one position to another of equivalent rank,
The employer’s right to conduct the affairs of his level or salary without break in the service or a lateral
business, according to its own discretion and judgment, movement from one position to another of equivalent rank or
includes the prerogative to instill discipline in its employees salary; (b) the employer has the inherent right to transfer or
and to impose penalties, including dismissal, upon erring reassign an
employees [Consolidated Food Corporation v. NRLC]. employee for legitimate business purposes; (c) a transfe
Right to dismiss or otherwise impose disciplinary r becomes unlawful where it is motivated by discrimination or
sanctions upon an employee for just and valid cause, pertains bad faith or is effected as a form of punishment or is a demotion
in the first place to the employer, as well as the authority to without sufficient cause; (d) the employer must be able to show
determine the existence of said cause in accordance with the that the transfer is not unreasonable, inconvenient, or
norms of due process [Makati Haberdashery, Inc. v. NLRC]. prejudicial to the employee [Automatic v. Deguildo].

B. TRANSFER OF EMPLOYEES Blue Dairy v. NLRC

Held: In the present case, petitioners failed to justify
An employee’s right to security of tenure does not
Recalde’s transfer from the position of food technologist in the
give him such a vested right in his position as would deprive
laboratory to a worker in the vegetable processing section. We recall
the company of its prerogative to change his assignment or that what triggered Recalde’s transfer was the 21 October incident
transfer him where he will be most useful. When his transfer is where she was found to have allegedly utilized company vehicle in
not unreasonable, nor inconvenient, nor prejudicial to him, and looking for a new residence during office hours without permission
it does not involve a demotion in rank or a diminution of his from management. In petitioners’ view, she was dishonest such that
salaries, benefits, and other privileges, the employee may not they lost their trust and confidence in her. Yet, it does not appear that
complain that it amounts to a constructive dismissal [Pecson v. Recalde was provided an opportunity to refute the reason for the
transfer. Petitioners merely relied on the narrations of the company
Robinsons].
driver. Nor was Recalde notified in advance of her impending transfer
Thus, as further held in Philippine Japan Active
which was, as we shall elucidate later, a demotion in rank.
Carbon Corporation, when the transfer of an employee is not
unreasonable, or inconvenient, or prejudicial to him, and it does
not involve a demotion in rank or a diminution of his salaries, Chateau v. Balba
Held: In this case of constructive dismissal, the burden of
benefits and other privileges, the employee may not complain
proof lies in the petitioner as the employer to prove that the transfer of
that it amounts to a constructive dismissal. the employee from one area of operation to another was for a valid and
But, like other rights, there are limits thereto. The legitimate ground, like genuine business necessity. We are satisfied that
managerial prerogative to transfer personnel must be exercised the petitioner duly discharged its burden, and thus established that,
without grave abuse of discretion, bearing in mind the basic contrary to the claim of the respondents that they had been
elements of justice and fair play. Having the right should not be constructively dismissed, their transfer had been an exercise of the
confused with the manner in which that right is exercised. Thus, petitioner's legitimate management prerogative.
it cannot be used as a subterfuge by the employer to rid himself To start with, the resignations of the account managers and
the director of sales and marketing in the Manila office brought about
of an undesirable worker.[9] In particular, the employer must be
the immediate need for their replacements with personnel having
able to show that the transfer is not unreasonable, inconvenient
Page 17 of 191
commensurate experiences and skills. With the positions held by the for the success of the business and realization of bigger
resigned sales personnel being undoubtedly crucial to the operations profits. The granting of a bonus is a management prerogative,
and business of the petitioner, the resignations gave rise to an urgent something given in addition to what is ordinarily received by
and genuine business necessity that fully warranted the transfer from
or strictly due the recipient. Thus, a bonus is not a demandable
the Nasugbu, Batangas office to the main office in Manila of the
respondents, undoubtedly the best suited to perform the tasks assigned
and enforceable obligation, except when it is made part of the
to the resigned employees because of their being themselves account wage, salary or compensation of the employee [Producer’s
managers who had recently attended seminars and trainings as such. Bank v. NLRC].
The transfer could not be validly assailed as a form of constructive However, an employer cannot be forced to distribute
dismissal, for, as held in Benguet Electric Cooperative v. bonuses which it can no longer afford to pay. To hold otherwise
Fianza, management had the prerogative to determine the place where would be to penalize the employer for his past generosity. Thus,
the employee is best qualified to serve the interests of the business in Traders Royal Bank v. NLRC,16 we held that -
given the qualifications, training and performance of the affected
It is clear x x x that the petitioner may not be obliged
employee.
Secondly, although the respondents' transfer to Manila to pay bonuses to its employees. The matter of giving them
might be potentially inconvenient for them because it would entail bonuses over and above their lawful salaries and allowances is
additional expenses on their part aside from their being forced to be entirely dependent on the profits, if any, realized by the Bank
away from their families, it was neither unreasonable nor oppressive. from its operations during the past year.
The petitioner rightly points out that the transfer would be without From 1979-1985, the bonuses were less because the
demotion in rank, or without diminution of benefits and salaries. income of the Bank had decreased. In 1986, the income of the
Instead, the transfer would open the way for their eventual career Bank was only 20.2 million pesos, but the Bank still gave out
growth, with the corresponding increases in pay. It is noted that their
the usual two (2) months basic mid-year and two months gross
prompt and repeated opposition to the transfer effectively stalled the
possibility of any agreement between the parties regarding benefits or year-end bonuses. The petitioner pointed out, however, that the
salary adjustments. Bank weakened considerably after 1986 on account of political
Thirdly, the respondents did not show by substantial developments in the country. Suspected to be a Marcos-owned
evidence that the petitioner was acting in bad faith or had ill-motive in or controlled bank, it was placed under sequestration by the
ordering their transfer. In contrast, the urgency and genuine business present administration and is now managed by the Presidential
necessity justifying the transfer negated bad faith on the part of the Commission on Good Government (PCGG).
petitioner. In light of these submissions of the petitioner, the
Lastly, the respondents, by having voluntarily affixed their
contention of the Union that the granting of bonuses to the
signatures on their respective letters of appointment, acceded to the
terms and conditions of employment incorporated therein. One of the employees had ripened into a company practice that may not be
terms and conditions thus incorporated was the prerogative of adjusted to the prevailing financial condition of the Bank has
management to transfer and re-assign its employees from one job to no legal and moral bases. Its fiscal condition having declined,
another "as it may deem necessary or advisable. the Bank may not be forced to distribute bonuses which it can
no longer afford to pay and, in effect, be penalized for its past
C. PRODUCTIVITY STANDARD generosity to its employees. -
The employer has the right to demote and transfer an Private respondent's contention, that the decrease in
employee who has failed to observe proper diligence in his the mid-year and year-end bonuses constituted a diminution of
work and incurred habitual tardiness and absences and the employees' salaries, is not correct, for bonuses are not part
indolence in his assigned work [Petrophil Corporation v. of labor standards in the same class as salaries, cost of living
NLRC]. allowances, holiday pay, and leave benefits, which are provided
Promotion is the advancement from one position to by the Labor Code.
another with an increase in duties and responsibilities as This doctrine was reiterated in the more recent case
authorized by law, and usually accompanied by an increase of Manila Banking Corporation v. NLR 17 wherein the Court
in salary. Conversely, demotion involves a situation where an made the following pronouncements –
employee is relegated to a subordinate or less important
position constituting a reduction to a lower grade or rank, with By definition, a "bonus" is a gratuity or act of
liberality of the giver which the recipient has no right to
a corresponding decrease in duties and responsibilities, and
demand as a matter of right. It is something given in
usually accompanied by a decrease in salary [Echo 2000 v. addition to what is ordinarily received by or strictly due the
Obrero]. recipient. The granting of a bonus is basically a
For promotion to occur, there must be an management prerogative which cannot be forced upon the
advancement from one position to another or an upward employer who may not be obliged to assume the onerous
vertical movement of the employee's rank or position. Any burden of granting bonuses or other benefits aside from the
increase in salary should only be considered incidental but employee's basic salaries or wages, especially so if it is
never determinative of whether or not a promotion is bestowed incapable of doing so.
Clearly then, a bonus is an amount given ex
upon an employee. An employee is not bound to accept a
gratia to an employee by an employer on account of success
promotion, which is in the nature of a gift or reward. Refusal to in business or realization of profits. How then can an
be promoted is a valid exercise of a right. Such exercise cannot employer be made liable to pay additional benefits in the
be considered in law as insubordination, or willful disobedience nature of bonuses to its employees when it has been
of a lawful order of the employer, hence, it cannot be the basis operating on considerable net losses for a given period of
of an employee's dismissal from service [Ibid]. time?
Records bear out that petitioner Manilabank was
D. BONUS already in dire financial straits in the mid-80's. As early as
1984, the Central Bank found that Manila bank had been
A bonus is an amount granted and paid to an
suffering financial losses. Presumably, the problems
employee for his industry and loyalty which contributed to the commenced even before their discovery in 1984. As earlier
success of the employer's business and made possible the chronicled, the Central Bank placed petitioner bank under
realization of profits. It is an act of generosity granted by an comptrollership in 1984 because of liquidity problems and
enlightened employer to spur the employee to greater efforts excessive interbank borrowings. In 1987, it was placed

Page 18 of 191
 under receivership and ordered to close operation. In 1988, and other confidential programs and information from
it was ordered liquidated. competitors. We considered the prohibition against personal or
It is evident, therefore, that petitioner bank was marital relationships with employees of competitor companies
operating on net losses from the years 1984, 1985 and 1986,
upon Glaxo's employees reasonable under the circumstances
thus, resulting to its eventual closure in 1987 and liquidation
in 1988. Clearly, there was no success in business or
because relationships of that nature might compromise the
realization of profits to speak of that would warrant the interests of Glaxo. In laying down the assailed company policy,
conferment of additional benefits sought by private we recognized that Glaxo only aims to protect its interests
respondents. No company should be compelled to act against the possibility that a competitor company will gain
liberally and confer upon its employees’ additional benefits access to its secrets and procedures.
over and above those mandated by law when it is plagued The requirement that a company policy must
by economic difficulties and financial losses. No act of be reasonable under the circumstances to qualify as a valid
enlightened generosity and self-interest can be exacted from
exercise of management prerogative was also at issue in the
near empty, if not empty coffers.
1997 case of Philippine Telegraph and Telephone Company
v. NLRC. In said case, the employee was dismissed in
E. CHANGE OF WORKING HOURS
violation of petitioner's policy of disqualifying from work any
Management retains the prerogative, whenever
woman worker who contracts marriage. We held that the
exigencies of the service so require, to change the working
company policy violates the right against discrimination
hours of its employees. So long as such prerogative is exercised
afforded all women workers under Article 136 of the Labor
in good faith for the advancement of the employer’s interest
Code, but established a permissible exception, viz.:
and not for the purpose of defeating or circumventing the rights
[A] requirement that a woman employee must remain
of the employees under special laws or under valid agreements,
unmarried could be justified as a "bona fide occupational
this Court will uphold such exercise [Sime Darby Pilipinas Inc.
qualification," or BFOQ, where the particular requirements of
v. NLRC].
the job would justify the same, but not on the ground of a
general principle, such as the desirability of spreading work in
F. BONA FIDE OCCUPATIONAL QUALIFICATIONS
the workplace. A requirement of that nature would be valid
According to the Supreme Court, to justify a bona
provided it reflects an inherent quality reasonably
fide occupational qualification the employer must the two (2)
necessary for satisfactory job performance.
factors:
The cases of Duncan and PT&T instruct us that the
requirement of reasonableness must be clearly established to
a. That the employment qualification is reasonably
uphold the questioned employment policy. The employer has
related to the essential operation of the job the burden to prove the existence of a reasonable business
involved. necessity. The burden was successfully discharged in Duncan
b. That there is a factual basis for believing that all but not in PT&T [Star Paper v. Simbol].
persons meeting the qualification would be
unable to properly perform the duties of the job. G. POST-EMPLOYMENT RESTRICTIONS
In cases where an employee assails a contract
containing a provision prohibiting him or her from accepting
Anti-Marriage Clause competitive employment as against public policy, the employer
has to adduce evidence to prove that the restriction is
Article 134. Stipulation Against Marriage. It shall be reasonable and not greater than necessary to protect the
unlawful for an employer to require as a condition of employment employer's legitimate business interests. The restraint may not
or continuation of employment that a woman employee shall not be unduly harsh or oppressive in curtailing the employee's
get married, or to stipulate expressly or tacitly that upon getting
legitimate efforts to earn a livelihood and must be reasonable
married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or
in light of sound public policy [Rivera v. Solidbank].
otherwise prejudice a woman employee merely by reason of her Thus, in determining whether the contract is
marriage. reasonable or not, the trial court should consider the following
factors: (a) whether the covenant protects a legitimate business
While a marriage or no-marriage qualification may interest of the employer; (b) whether the covenant creates an
be justified as a "bona fide occupational qualification," The undue burden on the employee; (c) whether the covenant is
employer must prove two factors necessitating its injurious to the public welfare; (d) whether the time and
imposition, viz: (1) that the employment qualification territorial limitations contained in the covenant are reasonable;
is reasonably related to the essential operation of the job and (e) whether the restraint is reasonable from the standpoint
involved; and (2) that there is a factual basis for believing that of public policy. Not to be ignored is the fact that the banking
all or substantially all persons meeting the qualification would business is so impressed with public interest where the trust and
be unable to properly perform the duties of the job [Capin- interest of the public in general is of paramount importance
Cadiz v. Brent]. such that the appropriate standard of diligence must be very
The concept of a bona fide occupational qualification high, if not the highest degree of diligence [Rivera v.
is not foreign in our jurisdiction. We employ the standard Solidbank].
of reasonableness of the company policy which is parallel to
the bona fide occupational qualification requirement. In the Rivera v. Solidbank
recent case of Duncan Association of Detailman-PTGWO and Held: A post-retirement competitive employment
restriction is designed to protect the employer against competition by
Pedro Tecson v. Glaxo Wellcome Philippines, Inc., we passed
former employees who may retire and obtain retirement or pension
on the validity of the policy of a pharmaceutical company
benefits and, at the same time, engage in competitive employment.
prohibiting its employees from marrying employees of any We have reviewed the Undertaking which respondent
competitor company. We held that Glaxo has a right to guard impelled petitioner to sign, and find that in case of failure to comply
its trade secrets, manufacturing formulas, marketing strategies with the promise not to accept competitive employment within one year
Page 19 of 191
from February 28, 1995, respondent will have a cause of action against Considering the nature of the business in which the
petitioner for "protection in the courts of law." The words "cause of defendant is engaged, in relation with the limitation placed upon the
action for protection in the courts of law" are so broad and plaintiff both as to time and place, we are of the opinion, .and so decide,
comprehensive, that they may also include a cause of action for that such limitation is legal and reasonable and not contrary to public
prohibitory and mandatory injunction against petitioner, specific policy. Therefore the judgment appealed from should be and is hereby
performance plus damages, or a damage suit (for actual, moral and/or affirmed, with costs. So ordered.
exemplary damages), all inclusive of the restitution of the P963,619.28
which petitioner received from respondent. The Undertaking and the
Consulta v. Court of Appeals
Release, Waiver and Quitclaim do not provide for the automatic
Held: Consulta’s appointment had an exclusivity
forfeiture of the benefits petitioner received under the SRP upon his
provision. The appointment provided that Consulta must represent
breach of said deeds. Thus, the post-retirement competitive
Pamana on an exclusive basis. She must not engage directly or
employment ban incorporated in the Undertaking of respondent does
indirectly in activities of other companies that compete with the
not, on its face, appear to be of the same class or genre as that
business of Pamana. However, the fact that the appointment required
contemplated in Rochester.
Consulta to solicit business exclusively for Pamana did not mean that
Pamana exercised control over the means and methods of Consulta’s
Del Castillo v. Richmonde work as the term control is understood in labor
Held: placed upon the right of the plaintiff is, that he shall jurisprudence.[20] Neither did it make Consulta an employee of
"not open, nor own, nor have any interest directly or indirectly in any Pamana. Pamana did not prohibit Consulta from engaging in any other
other drugstore either in his own name or in the name of another; nor business, or from being connected with any other company, for as long
have any connection with or be employed by any other drugstore as as the business or company did not compete with Pamana’s business.
pharmacist or in any capacity in any drugstore situated within a radius The prohibition applied for one year after the termination of
of four miles from the district of Legaspi, municipality and Province of the contract with Pamana. In one of their meetings, one of the
Albay, while the said Shannon Richmond or his heirs may own or have Managing Associates reported that he was transferring his sales force
open a drugstore, or have an interest in any other one within the limits and account from another company to Pamana.[21] The exclusivity
of the districts of Legaspi, Albay, and Daraga of the municipality of provision was a reasonable restriction designed to prevent similar acts
Albay, Province of Albay." It will be noted that the restrictions placed prejudicial to Pamana’s business interest. Article 1306 of the Civil
upon the plaintiff are strictly limited (a) to a limited district or districts, Code provides that “[t]he contracting parties may establish such
and (b) during the time while the defendant or his heirs may own or stipulations, clauses, terms and conditions as they may deem
have open a drugstore, or have an interest in any other one within said convenient, provided they are not contrary to law, morals, good
limited district. customs, public order, or public policy.”
The law concerning contracts which tend to restrain
business or trade has gone through a long series of changes from time
II
to time with the changing conditions of trade and commerce. With
trifling exceptions, said changes have been a continuous development LABOR STANDARDS
of a general rule. The early cases show plainly a disposition to avoid
and annul all contract which prohibited or restrained any one from A. CONDITIONS OF EMPLOYMENT
using a lawful trade "at any time or at any place," as being against the
benefit of the state. Later, however, the rule became well established 1. Coverage
that if the restraint was limited to "a certain time" and within "a certain
place," such contracts were valid and not "against the benefit of the
state." Later cases, and we think the rule is now well established, have Article 82. Coverage. The provisions of this Title shall
held that a contract in restraint of trade is valid providing there is a apply to employees in all establishments and undertakings whether
limitation upon either time or place. A contract, however, which for profit or not, but not to government employees, managerial
restrains a man from entering into a business or trade without either a employees, field personnel, members of the family of the employer
limitation as to time or place, will be held invalid. (Anchor Electric Co. who are dependent on him for support, domestic helpers, persons
vs. Hawkes, 171 Mass., 101; Alger vs. Thacher, 19 Pickering [Mass.], in the personal service of another, and workers who are paid by
51; Taylor vs. Blanchard, 13 Allen [Mass.], 370; Lufkin Rule Co. vs. results as determined by the Secretary of Labor in appropriate
Fringeli, 57 Ohio State, 596; Fowle vs. Park, 131 U. S., 88, 97; regulations.
Diamond Match Co. vs. Roeber, 106 N. Y., 473; National Benefit Co. As used herein, "managerial employees" refer to those
vs. Union Hospital Co., 45 Minn., 272; Swigert and Howard vs. Tilden, whose primary duty consists of the management of the
121 Iowa, 650.) establishment in which they are employed or of a department or
The public welfare of course must always be considered, subdivision thereof, and to other officers or members of the
and if it be not involved and the restraint upon one party is not greater managerial staff.
than protection to the other requires, contracts like the one we are "Field personnel" shall refer to non-agricultural
discussing will be sustained. The general tendency, we believe, of employees who regularly perform their duties away from the
modern authority, is to make the test whether the restraint is reasonably principal place of business or branch office of the employer and
necessary for the protection of the contracting parties. If the contract is whose actual hours of work in the field cannot be determined with
reasonably necessary to protect the interest of the parties, it will be reasonable certainty.
upheld. (Ollendorff vs. Abrahamson, 38 Phil., 585.)
In that case we held that a contract by which an employee In the situation where employment relationship
agrees to refrain for a given length of time, after the expiration of the exists* the next matter of concern is coverage, that is, who are
term of his employment, from engaging in a business, competitive with the employees that are or are not covered by the law on
that of his employer, is not void as being in restraint of trade if the
conditions of employment. Article 82 says that the whole Title
restraint imposed is not greater than that which is necessary to afford a
reasonable protection. In all cases like the present, the question is I — from Articles 82 to 96 (Working Conditions and Rest
whether, under the particular circumstances of the case and the nature Periods) — applies to all employees in all establishments,
of the particular contract involved in it, the contract is, or is not, except the following: (1) government employees, (2)
unreasonable. Of course in establishing whether the contract is a managerial employees, including other officers or members of
reasonable or unreasonable one, the nature of the business must also be the managerial staff, (3) field personnel, (4) the employer's
considered. What would be a reasonable restriction as to time and place family members who depend on him for support, (5) domestic
upon the manufacture of railway locomotive engines might be a very helpers, (6) persons in the personal service of another, (7)
unreasonable restriction when imposed upon the employment of a day
workers who are paid by results as determined under DOLE
laborer.
regulations.

Page 20 of 191
 or P1,000 for the year.[20] Even foreigners, whether residents or
a. Government Employees not, can be members of the PNRC. Section 5 of the PNRC
As noted in the Preliminary Title, government Charter, as amended by Presidential Decree No. 1264, reads:
employees are governed by the Civil Service rules and
regulations, not by the Labor Code, particularly this Title on SEC. 5. Membership in the Philippine National
employment conditions. But this exclusion does not refer to Red Cross shall be open to the entire population in the
Philippines regardless of citizenship. Any contribution to
employees of government agencies and government
the Philippine National Red Cross Annual Fund Campaign
corporations that are incorporated under the Corporation Code. shall entitle the contributor to membership for one year and
To them the Labor Code applies. said contribution shall be deductible in full for taxation
Government employees are those in the national purposes.
government, its agencies, instrumentalities, local governments,
provincial, city, municipal governments, and government Thus, the PNRC is a privately owned, privately
owned and controlled corporations with original charter. And funded, and privately run charitable organization. The PNRC is
that last category is the problematic category, those that are not a government-owned or controlled corporation [Liban v.
employed by government owned and controlled corporations Gordon].
with original charter. With original charter came only in the
1987 Constitution. It was not in the 1973 constitution. All of b. Managerial Employees
the sudden in the 1987 Constitution, they broadened They are employees, there is ER EE relationship but
government employees, so that they will be under the labor not covered by labor standards. Hours of work, rates of pay,
code. leaves, and so on. They are not covered because managerial
As noted in the Preliminary Title, government employees are not engaged for the time that they put in. They
employees are governed by the Civil Service rules and are not time employees. They are engaged for their specific
regulations, not by the Labor Code, particularly this Title on qualifications, technical qualifications or the results that they
employment conditions. But this exclusion does not refer to would produce.
employees of government agencies and government Managerial employees and other officers or members
corporations that are incorporated under the Corporation Code. of the managerial staff are also excluded from the coverage of
To them the Labor Code applies. Articles 82 to 96. The Implementing Rules of Book III defines
The test to determine whether a corporation is the workers that belong to these categories. Since "managerial
government owned or controlled, or private in nature is employees" include managerial staff, the definition therefore
simple. Is it created by its own charter for the exercise of a covers more people than does the definition in Article 212(m).
public function, or by incorporation under the general "Managerial employee" in Article 82 includes supervisors, but
corporation law? Those with special charters are government "managerial employee" under Article 212(m) does not. In
corporations subject to its provisions, and its employees are effect, a supervisor is manager for purposes of Book III, but he
under the jurisdiction of the Civil Service Commission, and are is not so for purposes of Book V. It follows that under Book V,
compulsory members of the Government Service Insurance supervisors, unlike managers, are allowed to form, join or assist
System [PSPCA v. Court of Appeals]. the labor union of fellow supervisors. But under Book III,
The Boy Scouts of the Philippines is a public supervisors, like managers, are riot entitled to the benefits
corporation created by law for a public purpose attached to under Articles 83 through 96, such as overtime pay or rest day
DepEd under its charter (CA 111 as amended by RA 7278) and or holiday pay. If a supervisor is given these benefits, it is not
EO 292. Its funds are subject to COA audit. The BSP is a because of law but the employer's voluntary act or contractual
Public Corporation Not obligation.
Subject to the Test of Government The following are the Kinds of Managerial
Ownership or Control and Economic Employees:
Viability. The BSP is a public corporation or a government
agency or instrumentality with juridical personality, which (i) Those who manage the establishment
does not fall within the constitutional prohibition in Article XII, in which they are employed;
Section 16, notwithstanding the amendments to its charter. Not (ii) Other officers or members of the
all corporations, which are not government owned or
managerial staff
controlled, are ipso facto to be considered private corporations
as there exists another distinct class of corporations or chartered
(i)
Those who manage the establishment in
institutions which are otherwise known as "public
which they are employed.
corporations." These corporations are treated by law as
agencies or instrumentalities of the government which are not Employees are considered occupying managerial
subject to the tests of ownership or control and economic positions if they meet all of the following conditions, namely:
viability but to different criteria relating to their public
purposes/interests or constitutional policies and objectives and • Their primary duty consists of
their administrative relationship to the government or any of its management of the establishment in which
Departments or Offices [BSP v. COA]. they are employed or of a department or
PNRC is a Private Organization Performing Public subdivision thereof;
Functions. The PNRC is not government-owned but privately • They customarily and regularly direct the
owned. The vast majority of the thousands of PNRC members work of two or more employees therein;
are private individuals, including students. Under the PNRC • They have the authority to hire or fire other
Charter, those who contribute to the annual fund campaign of employees of lower rank; or their
the PNRC are entitled to membership in the PNRC for one year. suggestions and recommendations as to the
Thus, any one between 6 and 65 years of age can be a PNRC hiring and firing and as to the promotion or
member for one year upon contributing P35, P100, P300, P500
any other change of status of other
Page 21 of 191
 employees are given particular weight assignment and tasks [Clientlogic v.
[Clientlogic v. Castro]. Castro].

Dela Cruz v. NLRC c. Field Personnel

Held: A managerial employee is therefore excluded from It has a specific definition. The definition contains 3
the coverage of the law as regards conditions of employment which requisites: 1. they are non-agricultural; 2. they regularly
include hours of work, weekly rest periods, holidays, service incentive perform their duties away from the principal place of business;
leaves and service charges. 3. their hours of work cannot be determined with reasonable
The labor arbiter classified petitioner as a managerial
certainty.
employee. We have not been provided with any compelling reason to
overturn this factual finding. As chief patron of the M/DCA Sheenly
As a general rule; "field personnel" are those whose
Joy, albeit an unlicensed one, petitioner was tasked to take complete performance of their job/service is not supervised by the
charge and command of the vessel and perform the responsibilities and employer or his representative, the workplace being away from
duties of a ship captain. Petitioner, an employee who falls squarely the principal office and whose hours and days of work cannot
within the category of officers or members of a managerial staff, is thus be determined with reasonable certainty; hence, they are paid
exempted from payment of overtime pay, premium pay for holidays specific amount for rendering specific service or performing
and rest days and service incentive leave pay. Therefore, the labor specific work. If required to be at specific places at specific
arbiter was correct in holding that petitioner was not entitled to
times, employees including drivers cannot be said to be field
overtime pay, legal holiday pay, premium pay for holidays and rest
days.
personnel despite the fact that they are performing work away
from the principal office of the employer.

Cruz v. BPI
Held: The test of “supervisory” or “managerial status”
San Miguel Brewery v. Democratic Labor
depends on whether a person possesses authority to act in the interest Organization
of his employer and whether such authority is not merely routinary or Held: Where after the morning roll call the outside or field
clerical in nature, but requires the use of independent judgment. sales personnel leave the plant of the company to go on their respective
In respondent's Position Paper before the NLRC and its sales routes and they do not have a daily time record but the sales routes
Memorandum,24 respondent stated that the responsibility of petitioner, are so planned that they can be completed within 8 hours at most, and
among others, were as follows: (1) to maintain the integrity of the they receive monthly salaries and sales commissions in variable
signature card files of certificates of deposits and/or detect spurious amounts, so that they are made to work beyond the required eight hours
signature cards in the same files; (2) to ensure that releases of original similar to piece-work, pakiao, or commission basis regardless of the
CDS are done only against valid considerations and made only to the time employed, and the employees' participation depends on their
legitimate depositors or their duly authorized representatives; (3) to industry, it is held that the Eighthour Labor Law has no application to
approve payments or withdrawals of deposits by clients to ensure that said outside or field sales personnel and that they are not entitled to
such withdrawals are valid transactions of the bank; and (4) to supervise overtime compensation.
the performance of certain rank-and-file employees of the branch. In our opinion, the Eight-hour Labor Law only has
Petitioner holds a managerial status since she is tasked to application where an employee or laborer is paid on a monthly or daily
act in the interest of her employer as she exercises independent basis, or is paid a monthly or daily compensation, in which case, if he
judgment when she approves pre-termination of USD CDs or the is made to work beyond the requisite period of eight hours, he should
withdrawal of deposits. In fact, petitioner admitted the exercise of be paid the additional compensation prescribed by law. This law has no
independent judgment when she explained that as regards the pre- application when the employee or laborer is paid on a piece-work,
termination of the USD CDs of Uymatiao and Caluag, the transactions pakiao, or commission basis, regardless of the time employed. The
were approved on the basis of her independent judgment that the philosophy behind this exemption is that his earnings in the form of
signatures in all the documents presented to her by the traders matched, commission is based on the gross receipts of the day. His participation
as shown in her reply dated April 23, 2002 to respondent's depends upon his industry so that the more hours he employs in the
memorandum asking her to explain the unauthorized work, the greater are his gross returns and the higher his commission.
preterminations/withdrawals of U.S. dollar deposits in the BPI Ayala This philosophy is better explained in Jewel Tea Co. vs. Williams,
Avenue Branch. CCA. Okla., 118 F. 2d 202, as follows:
The reasons for excluding an outside salesman are fairly
apparent. Such salesman, to a greater extent, works individually. There
(ii) Officers or Members of the Managerial are no restrictions respecting the time he shall work and he can earn as
Staff much or as little, within the range of his ability, as his ambition dictates.
They are considered as officers or members of a In lieu of overtime, he ordinarily receives commissions as extra
managerial staff if they perform the following duties and compensation. He works away from his employer's place of business,
responsibilities: is not subject to the personal supervision of his employer, and his
employer has no way of knowing the number of hours he works per
day.
• The primary duty consists of the
performance of work directly related to
Union of Filipino Employees v. Vivar
management policies of their employer;
Held: It is undisputed that these sales personnel start their
• Customarily and regularly exercise field work at 8:00 a.m. after having reported to the office and come
discretion and independent judgment; back to the office at 4:00 p.m. if they are Makati-based. The petitioner
• (i) Regularly and directly assist a [union] maintains that the period between 8:00 a.m. [and] 4:00 or 4:30
p.m. comprises the sales personnel's working hours which can be
proprietor or a managerial employee whose
determined with reasonable certainty. The Court does not agree. The
primary duty consists of management of law requires that the actual hours of work in the field be reasonably
the establishment in which he is employed ascertained. The company has no way of determining whether or not
or subdivision thereof; or (ii) execute under these sales personnel, even if they report to the office before 8:00 a.m.
general supervision work along specialized prior to field work and come back at 4:30 p.m., really spend the hours
in between in actual field work. Despite the above ruling, the
or technical lines requiring special training,
entitlement to overtime pay of piece-work employees has to be
experience, or knowledge; or (iii) execute, reexamined under Article 101 where the different kinds of piece-work
under general supervision, special employees are explained.
Page 22 of 191
 [I]t is undisputed that [the petitioners] as bus
Auto Bus Transport System v. Bautista drivers/conductors ply specific routes of [PSEI], x x x averaging 2 to 5
days per round trip. They follow fixed time schedules of travel and
Held: Bus drivers and conductors are supervised; their
follow the designated route of [PSEI]. Thus, in carrying out their
actual work hours are monitored. The definition of a "field personnel"
is not merely concerned with the location where the employee regularly functions as bus drivers/conductors, they are not at liberty to deviate
from the fixed time schedules for departure or arrival or change the
performs his duties but also with the fact that the employee's
routes other than those specifically designated for [PSEI], in
performance is unsupervised by the employer. As discussed above,
accordance with the franchise granted to the [PSEI] as a public utility
field personnel are those who regularly perform their duties away
provider. In other words, [the petitioners] are clearly under the strict
from the principal place of business of the employer and whose
supervision and control of [PSEI] in the performance of their functions
actual hours of work in the field cannot be determined with
otherwise the latter will not be able to carry out its business as public
reasonable certainty. Thus, in order to conclude whether an employee
utility service provider in accordance with its franchise.
is a field employee, it is also necessary to ascertain if actual hours of
The Court agrees with the above-quoted findings of the
work in the field can be determined with reasonable certainty by the
NLRC. Clearly, the petitioners, as bus drivers and/or conductors, are
employer. In so doing, an inquiry must be made as to whether or not
left alone in the field with the duty to comply with the conditions of the
the employee's time and performance are constantly supervised by the
employer. respondents' franchise, as well as to take proper care and custody of the
bus they are using. Since the respondents are engaged in the public
As observed by the Labor Arbiter and concurred in by the
utility business, the petitioners, as bus drivers and/or conductors,
Court of Appeals: It is of judicial notice that along the routes that are
should be considered as regular employees of the respondents because
plied by these bus companies, there are its inspectors assigned at
they perform tasks which are directly and necessarily connected with
strategic places who board the bus and inspect the passengers, the
the respondents' business. Thus, they are consequently entitled to the
punched tickets, and the conductor's reports. There is also the
benefits accorded to regular employees of the respondents, including
mandatory once-a-week car barn or shop day, where the bus is regularly
overtime pay and SIL pay.
checked as to its mechanical, electrical, and hydraulic aspects, whether
or not there are problems thereon as reported by the driver and/or
conductor. They too, must be at specific place as [sic] specified time, If usage of work hours is supervised, the employee
as they generally observe prompt departure and arrival from their point is not a "field personnel." Same rule applies to an employee
of origin to their point of destination. In each and every depot, there is paid on task or commission basis.
always the Dispatcher whose function is precisely to see to it that the The clause "whose time and performance is
bus and its crew leave the premises at specific times and arrive at the
unsupervised by the employer" did not amplify but merely
estimated proper time. These are present in the case at bar. The driver,
the complainant herein, was therefore under constant supervision while interpreted and expounded the clause "whose actual hours of
in the performance of this work. He cannot be considered a field work in the field cannot be determined with reasonable
personnel. certainty." The former clause is still within the scope and
The same is true with respect to the phrase "those who are purview of Article 82 which defines field personnel. Hence, in
engaged on task or contract basis, purely commission basis. "Said deciding whether or not an employee's actual working hours in
phrase should be related with "field personnel," applying the rule on the field can be determined with reasonable certainty, query
ejusdem generis that general and unlimited terms are restrained and must be made as to whether or not such employee's time and
limited by the particular terms that they follow. Hence, employees
performance is constantly supervised by the employer.
engaged on task or contract basis or paid on purely commission basis
are not automatically exempted from the grant of service incentive
leave, unless they fall under the classification of field personnel. Mercidar Fishing Corporation v. NLRC
Therefore, petitioner's contention that respondent [a driver- Held: In the case at bar, during the entire course of their
conductor plying Manila-Tuguegarao-Baguio] is not entided to the fishing voyage, fishermen employed by petitioner have no choice but
grant of service incentive leave just because he was paid on purely to remain on board its vessel. Although they perform non-agricultural
commission basis [7% of gross income per trip] is misplaced. What work away from petitioners business offices, the fact remains that
must be ascertained in order to resolve the issue of propriety of the grant throughout the duration of their work they are under the effective
of service incentive leave to respondent is whether or not he is a field control and supervision of petitioner through the vessel's patron or
personnel. master as the NLRC correcdy held. 2 Hence, the fishermen are not
"field personnel.".

Dasco v. Philtranco
Held: Guided by the foregoing norms, the NLRC properly Union Filipro v. Vivar
concluded that the petitioners are not field personnel but regular Held: The law requires that the actual hours of work in the
employees who perform tasks usually necessary and desirable to the field be reasonably ascertained. The company has no way of
respondents' business. Evidently, the petitioners are not field personnel determining whether or not these sales personnel, even if they report to
as defined above and the NLRC's finding in this regard is supported by the office before 8:00 a.m. prior to field work and come back at 4:30
the established facts of this case: (1) the petitioners, as bus drivers p.m., really spend the hours in between in actual field work. The
and/or conductors, are directed to transport their passengers at a requirement that "actual hours of work in the field cannot be determined
specified time and place; (2) they are not given the discretion to select with reasonable certainty" must be read in conjunction with Rule IV,
and contract with prospective passengers; (3) their actual work hours Book III of the Implementing Rules which provides: "Rule IV Holidays
could be determined with reasonable certainty, as well as their average with Pay Section 1. Coverage — This rule shall apply to all employees
trips per month; and (4) the respondents supervised their time and except: . . . (e) Field personnel and other employees whose time and
performance of duties. performance is unsupervised by the employer . . . The aforementioned
In order to monitor their drivers and/or conductors, as well rule did not add another element to the Labor Code definition of field
as the passengers and the bus itself, the bus companies put checkers, personnel. The clause "whose time and performance is unsupervised by
who are assigned at tactical places along the travel routes that are plied the employer" did not amplify but merely interpreted and expounded
by their buses. The drivers and/or conductors are required to be at the the clause "whose actual hours of work in the field cannot be
specific bus terminals at a specified time. In addition, there are always determined with reasonable certainty." The former clause is still within
dispatchers in each and every bus terminal, who supervise and ensure the scope and purview of Article 82 which defines field personnel.
prompt departure at specified times and arrival at the estimated proper Hence, in deciding whether or not an employee’s actual working hours
time. Obviously, these drivers and/or conductors cannot be considered in the field can be determined with reasonable certainty, query must be
as field personnel because they are under the control and constant made as to whether or not such employee’s time and performance is
supervision of the bus companies while in the performance of their constantly supervised by the employer.
work.

Page 23 of 191
 d. Employer’s Family Members Petitioner contends that it is only when the househelper or
Workers who are family members of the employer, domestic servant is assigned to certain aspects of the business of the
employer that such househelper or domestic servant may be considered
and dependent on him for their support, are outside the
as such an employee. The Court finds no merit in making any such
coverage of this Tide on working conditions and rest periods.
distinction. The mere fact that the househelper or domestic servant is
working within the premises of the business of the employer and in
e. Kasambahays relation to or in connection with its business, as in its staffhouses for its
Then the fifth group belong to the “domestics” guest or even for its officers and employees, warrants the conclusion
according to article 82, but because there has been a new law that such househelper or domestic servant is and should be considered
covering domestics. They are now called “kasambahay.” as a regular employee of the employer and not as a mere family
Domestic worker or "Kasambahay" refers to any househelper or domestic servant as contemplated in Rule XIII, Section
1(b), Book 3 of the Labor Code, as amended.
person engaged in domestic work within an employment
In the case at bar, the petitioner itself admits in its position
relationship such as, but not limited to, the following: general paper33 that respondent worked at the company premises and her duty
househelp, nursemaid or "yaya", cook, gardener, or laundry was to cook and prepare its employees’ lunch and merienda. Clearly,
person, but shall exclude any person who performs domestic the situs, as well as the nature of respondent’s work as a cook, who
work only occasionally or sporadically and not on an caters not only to the needs of Mr. Tan and his family but also to that
occupational basis. The term shall not include children who are of the petitioner’s employees, makes her fall squarely within the
under foster family arrangement, and are provided access to definition of a regular employee under the doctrine enunciated in the
education and given an allowance incidental to education, i.e. Apex Mining case. That she works within company premises, and that
she does not cater exclusively to the personal comfort of Mr. Tan and
"baon", transportation, school projects and school activities.
his family, is reflective of the existence of the petitioner’s right of
Excluded also from the coverage of the law on control over her functions, which is the primary indicator of the
working conditions are domestic servants and persons in the existence of an employer-employee relationship.
personal service of another if they perform such services in the Moreover, it is wrong to say that if the work is not directly
employer's home which are usually necessary or desirable for related to the employer's business, then the person performing such
the maintenance or the enjoyment thereof, or minister to the work could not be considered an employee of the latter. The
personal comfort, convenience or safety of the employer, as determination of the existence of an employer-employee relationship is
well as the members of the employer's household. defined by law according to the facts of each case, regardless of the
nature of the activities involved.34 Indeed, it would be the height of
However, house personnel hired by a ranking
injustice if we were to hold that despite the fact that respondent was
company official, a foreigner, but paid for by the company made to cook lunch and merienda for the petitioner’s employees, which
itself, to maintain a staff house provided for the official, are not work ultimately redounded to the benefit of the petitioner corporation,
the latter's domestic helpers but regular employees of the she was merely a domestic worker of the family of Mr. Tan.
company [Cadiz v. Philippine Sinter Corporation]. Since the We note the findings of the NLRC, affirmed by the Court of
rules require that domestic servants must perform their services Appeals, that no less than the company’s corporate secretary has
in the employer's home, a family cook, who is later assigned to certified that respondent is a bonafide company employee;35 she had a
work as a watcher and cleaner of the employer's business fixed schedule and routine of work and was paid a monthly salary of
₱4,000.00;36 she served with the company for 15 years starting in 1983,
establishment, becomes an industrial worker entlitled to receive
buying and cooking food served to company employees at lunch
the wages and benefits flowing from such status. Waiters of a and merienda, and that this service was a regular feature of
hotel do not fall under the term "domestic servants and persons employment with the company.37
in the personal service of another," nor under the terms "farm Indubitably, the Court of Appeals, as well as the NLRC,
laborers," "laborers who prefer to be paid on piece work basis," correctly held that based on the given circumstances, the respondent is
and "members of the family of the employer working for him;" a regular employee of the petitioner.
therefore, they do not fall within any of the exceptions provided
for in Section 2 of CA. No. 44, and their work is within the f. Workers paid by result
scope of the Eight-hour Labor Law. Workers paid by result are not covered by the law on
Section 4(d) of the Kasambahay Law pertaining to working conditions.
who are included in the enumeration of domestic or household There are two categories of employees paid by
help cannot also be interpreted to include family drivers results: (1) those whose time and performance
because the latter category of worker is clearly not included. It are supervised by the employer. (Here, there is an element of
is a settled rule of statutory construction that the express control and supervision over the manner as to how the work is
mention of one person, thing, or consequence implies the to be performed. A piece-rate worker belongs to this category
exclusion of all others — this is expressed in the familiar especially if he performs his work in the company premises.);
maxim, expressio unius est exclusio alterius [Atienza v. and (2) those whose time and performance are unsupervised.
Saluta]. (Here, the employers control is over the result of the work.
Workers on pakyao and takay basis belong to this group.) Both
Remington v. Castaneda classes of workers are paid per unit accomplished. Piece-rate
Held: The criteria is the personal comfort and enjoyment of payment is generally practiced in garment factories where work
the family of the employer in the home of said employer. While it may is done in the company premises, while payment
be true that the nature of the work of a househelper, domestic servant on pakyao and takay basis is commonly observed in the
or laundrywoman in a home or in a company staffhouse may be similar agricultural industry, such as in sugar plantations where the
in nature, the difference in their circumstances is that in the former
work is performed in bulk or in volumes difficult to quantify
instance they are actually serving the family while in the latter case,
whether it is a corporation or a single proprietorship engaged in [Lambo v. NLRC].
business or industry or any other agricultural or similar pursuit, service Examples are workers paid per piece and those paid
is being rendered in the staffhouses or within the premises of the per task. Their common denominator is that they are paid by
business of the employer. In such instance, they are employees of the results and not on the basis of the time spent in working, such
company or employer in the business concerned entitled to the as those being paid straight wages by the hour, day, week or
privileges of a regular employee. month. In the case of task work, the emphasis is on the task
itself, in the sense that payment is not reckoned in terms of
Page 24 of 191
numbers of units produced because one task may take hours or eight (48) hours, in which case, they shall be entitled to an
even days to finish, but in terms of completion of the work. additional compensation of at least thirty percent (30%) of their
Examples of this kind of work are plowing a piece of land at a regular wage for work on the sixth day. For purposes of this
Article, "health personnel" shall include resident physicians,
specific price, painting a barn, or digging a ditch, at so much a
nurses, nutritionists, dieticians, pharmacists, social workers,
cost. Pursuant to the statutory exclusion, piece-rate workers in laboratory technicians, paramedical technicians, psychologists,
the coconut industry whose rate was fixed by the Wage midwives, attendants and all other hospital or clinic personnel.
Commission are not entitled to overtime pay for work in excess
of eight hours a day. The Eight-hour Labor Law was enacted not only to
The reasons for excluding an outside salesman are safeguard the health and welfare of the laborer or employee, but
fairly apparent. Such salesman, to a greater extent, works in a way to minimize unemployment by forcing employers, in
individually. There are no restrictions respecting the time he cases where more than 8-hour operation is necessary, to utilize
shall work and he can earn as much or as little, within the range different shifts of laborers or employees working only for 8
of his ability, as his ambition dictates. In lieu of overtime he hours each [Manila Terminal v. Court of Industrial Relations].
ordinarily receives commissions as extra compensation. He Considering the purpose of the law, as mentioned
works away from his employer's place of business, is not above, it is not prohibited to have "normal hours of work" of
subject to the personal supervision of his employer, and his less than eight hours a day. What the law regulates is work
employer has no way of knowing the number of hours he works hours exceeding eight. It prescribes a maximum but not a
per day [San Miguel v. Democratic Labor Organization]. minimum. Article 83 does not say that the normal hours of work
Similarly, a taxi driver who is not observing any is or should be eight hours but that it shall not exceed eight.
working hours is not covered by the Eight-hour Labor Law [or Therefore, part-time work, or a day's work of less than eight
Article 87 of the Labor Code]. hours, is not prohibited.
It bears emphasizing that the employer retains the
Red V Coconut v. CIR management prerogative, whenever exigencies of the service
Held: Although the Eight-Hour Labor Law provides that it so require, to change the working house of its employees
does not cover those workers who prefer to be paid on piece-work basis
[Union Carbide Labor Union v. Union Carbide Philippines].
(Sec. 2, CA 444), nothing in said law precludes an agreement for the
payment of overtime compensation to piece-workers. And in agreeing
Moreover, the age-old rule which governs the relationship
to the provision for payment of shift differentials to the petitioners- between labor and capital or management and employee of “no
workers aforementioned. In the bargaining agreement, as well as work, no pay” or a “fair day’s wage for a fair day’s labor,”
in actually paying to them said differentials, though not in full, the remains the basic factor in determining the employees’ wages
company in effect freely adhered to an application and implementation and backwages [Durabilt Recapping Plant Company v. NLRC].
of the Eight-Hour Labor Law, or its objectives, to said workers. It The second paragraph of Article 83 applies
should be observed that while the provision in the bargaining particularly to health personnel. Health personnel covered by
agreements speaks of shift differentials for the "second shift" and the
the forty-hour workweek shall include, but not be limited to,
"third shift" and Group B has no third shift, said Group B has a second
shift, which performs work equivalent to that of the corresponding resident physicians, nurses, nutritionists, dieticians,
shifts of Group A. It follows that respondent court did not err in pharmacists, social workers, laboratory technicians,
ordering the company to pay the full and equivalent amount of said paramedical technicians, psychologists, midwives, attendants,
differentials (P.90) corresponding, under the bargaining agreements, to and all other hospital or clinic personnel.
the workers who performed 12 hours of work, from 4 P.M. to 4 A.M.
And, finally, the laborers in question are not strictly under San Juan De Dios Hospital Employees Assn v. NLRC
the full concept of piece-workers as contemplated by law for the reason Held: A cursory reading of Article 83 of the Labor Code
that their hours of work - that is, 12 hours per shift - are fixed by the betrays petitioners' position that "hospital employees" are entided to "a
employer. As ruled by this Court in Lara vs. Del Rosario, 94 Phil. 780, full weekly salary with paid two (2) days' off if they have completed
781-782, the philosophy underlying the exclusion of piece workers the 40-hour/5-day workweek." In other words they want seven days'
from the Eight-Hour Labor Law is that said workers are paid depending pay for five days' work. What Article 83 merely provides are: (1) the
upon the work they do "irrespective of the amount of time employed" regular office hour of eight hours a day, five days per week for health
in doing said work. Such freedom as to hours of work does not obtain personnel, and (2) where the exigencies of service require that health
in the case of the laborers herein involved, since they are assigned by personnel work for six days or forty-eight hours then such health
the employer to work in two shifts for 12 hours each shift. Thus it personnel shall be entided to an additional compensation of at least
cannot be said that for all purposes these workers fall outside the law thirty percent of their regular wage for work on the sixth day. There is
requiring payment of compensation for work done in excess of eight nothing in the law that supports then Secretary of Labor's assertion that
hours. At least for the purpose of recovering the full differential pay "personnel in subject hospitals and clinics are entitled to a full weekly
stipulated in the bargaining agreement as due to laborers who wage for seven (7) days if they have completed the 40-hour/5-day
perform 12 hours of work under the night shift, said laborers should be workweek in any given workweek." Needless to say, the Secretary of
deemed pro tanto or to that extent within the scope of the aforestated Labor exceeded his authority by including [in P.I. No. 54] two days off
law. with pay in contravention of the clear mandate of the statute. Such act
the Court shall not countenance. Administrative interpretation of the
2. Hours of Work law, we reiterate, is at best merely advisory, and the Court will not
hesitate to strike down an administrative interpretation that deviates
from the provision of the statute... Policy Instructions No. 54 being
a. Normal Hours of Work
inconsistent with and repugnant to the provision of Article 83 of the
Labor Code, as well as to Republic Act No. 5901, should be, as it is
Article 83. Normal Hours of Work. The normal hours of hereby, declared void.
work of any employee shall not exceed eight (8) hours a day.
Health personnel in cities and municipalities with a
population of at least one million (1,000,000) or in hospitals and
b. Hours Worked
clinics with a bed capacity of at least one hundred (100) shall hold
regular office hours for eight (8) hours a day, for five (5) days a Article 84. Hours Worked. Hours worked shall include
week, exclusive of time for meals, except where the exigencies of the (a) all time during which an employee is required to be on duty or
service require that such personnel work for six (6) days or forty-

Page 25 of 191
to be at a prescribed workplace; and (b) all time during which an should be counted as working time for purposes of overtime
employee is suffered or permitted to work. compensation.
Rest periods of short duration during working hours
shall be counted as hours worked. (i) Broken Hours
The normal eight working hours mandated by law do
Sections 3 and 4, Rule 1, Book III of the IRR not always mean continuous and interrupted eight hours of
provides: work. As may be required by peculiar circumstances of
employment, it may mean broken hours of, say, for hours in the
SECTION 3. Hours worked. — The following
morning and four hours in the evening or a variation thereof,
shall be considered as compensable hours worked:
provided the total of eight hours is accomplished within one
(a) All time during which an employee is
required to be on duty or to be at the employer's premises or work day as this term is understood in law.
to be at a prescribed work place; and
(b) All time during which an employee is (ii) Waiting time
suffered or permitted to work. Section 5, Rule 1, Book III of the IRR provides:
SECTION 4. Principles in determining hours
worked. — The following general principles shall govern in SECTION 5. Waiting time. — (a) Waiting time
determining whether the time spent by an employee is spent by an employee shall be considered as working time
considered hours worked for purposes of this Rule: if waiting is an integral part of his work or the employee is
(a) All hours are hours worked which the required or engaged by the employer to wait.cralaw
employee is required to give his employer, regardless of (b) An employee who is required to remain on
whether or not such hours are spent in productive labor or call in the employer's premises or so close thereto that he
involve physical or mental exertion. cannot use the time effectively and gainfully for his own
(b) An employee need not leave the premises of purpose shall be considered as working while on call. An
the work place in order that his rest period shall not be employee who is not required to leave word at his home or
counted, it being enough that he stops working, may rest with company officials where he may be reached is not
completely and may leave his work place, to go elsewhere, working while on call.
whether within or outside the premises of his work place.
(c) If the work performed was necessary, or it
Whether waiting time constitutes working time
benefited the employer, or the employee could not abandon
his work at the end of his normal working hours because he depends upon the circumstances of each particular case and is
had no replacement, all time spent for such work shall be a question of fact to be resolved by appropriate findings of the
considered as hours worked, if the work was with the trial court. The facts may show that the employee was engaged
knowledge of his employer or immediate supervisor. to wait or may show that he waited to be engaged. The
(d) The time during which an employee is controlling factor is whether waiting time spent in idleness is
inactive by reason of interruptions in his work beyond his so spent predominandy for the employer's benefit or for the
control shall be considered working time either if the employee's. For instance, the mere fact that a large part of the
imminence of the resumption of work requires the
time of the employees engaged in a stand-by capacity in the
employee's presence at the place of work or if the interval is
too brief to be utilized effectively and gainfully in the employer's auxiliary fire-fighting service was spent in idleness
employee's own interest. or in playing cards and other amusement, the facilities for
which were provided by the employer, did not render
The term “work day” means the twenty-four inapplicable the overtime provisions of the Act [Armour v.
consecutive-hour period which commences from the time the Wantock].
employee regularly starts to work. It must be emphasized that Similarly, a truck driver who has to wait at or near
“work day” does not necessarily mean the ordinary calendar the jobsite for goods to be loaded is working during the loading
day from 12:00 midnight to 12:00 midnight unless the period. If the driver reaches his destination and while awaiting
employee starts working at the unusual hour of 12:00 midnight, the return trip is required to take care of his employer's
in which case, his “work day” is the calendar day. property, he is also working while waiting. In both cases, the
employee is engaged to wait. Waiting is an integral part of the
NDC v. CIR job. On the other hand, for example, if the truck driver is sent
Held: Indeed, it has been said that no general rule can be from Manila to Dagupan, leaving at 6 a.m. and arriving at 12
laid down is to what constitutes compensable work, rather the question noon, and is completely and specifically relieved from all duty
is one of fact depending upon particular circumstances, to be until 6 p.m. when he again goes on duty for the return trip, the
determined by the controverted in cases. (31 Am. Jurisdiction Sec. 626 idle time is not working time. He is waiting to be engaged.
pp. 878.)
In this case, the CIR's finding that work in the petitioner (iii) Sleeping time
company was continuous and did not permit employees and laborers to
The rule is that sleeping time may be considered
rest completely is not without basis in evidence and following our
earlier rulings, shall not disturb the same. Thus, the CIR found: working time if it is subject to serious interruption or takes
While it may be correct to say that it is well-high impossible place under conditions substantially less desirable than would
for an employee to work while he is eating, yet under Section 1 of Com. be likely to exist at the employee's home. However, sleeping
Act No. 444 such a time for eating can be segregated or deducted from time will not be regarded as working time within the meaning
his work, if the same is continuous and the employee can leave his of the Act if there is an opportunity for comparatively
working place rest completely. The time cards show that the work was uninterrupted sleep under fairly desirable conditions, even
continuous and without interruption. There is also the evidence
though the employee is required to remain on or near the
adduced by the petitioner that the pertinent employees can freely leave
employer's premises and must hold himself in readiness for a
their working place nor rest completely. There is furthermore the aspect
that during the period covered the computation the work was on a 24- call to action employment [Skid v. Swift Co.].
hour basis and previously stated divided into shifts.
From these facts, the CIR correctly concluded that work in (iv) On-Call
petitioner company was continuous and therefore the mealtime breaks

Page 26 of 191
 The time when a public health worker is placed on comparable workers at the employer's premises,
"On Call" status shall not be considered as hours worked but and be subject to the same appraisal policies
shall entitle the public health worker to an "On Call" pay covering these workers.
equivalent to fifty percent (50%) of his/her regular wage. "On • Receive appropriate training on the technical
call" status refers to a condition when public health workers are equipment at their disposal, and the
called upon to respond to urgent or immediate need for characteristics and conditions of
health/medical assistance or relief work during emergencies
telecommuting.
such that he/she cannot devote the time for his/her own use.
• Have the same collectible rights as the workers
(Sec. 15, R.A. No. 7305)
at the employer's premises, and shall not be
(v) Travel Time barred from communicating with workers'
As for travel time, travel from home to office and representatives.
vice-versa is not compensable. However, travel away from
home on official duty is considered as compensable. The employer shall also ensure that measures are
taken to prevent the telecommuting employee from being
(vi) Lectures, Meetings, Training isolated from the rest of the working community in the
Programs company by giving the telecommuting employee the
Section 6, Rule 1, Book III of the IRR provides: opportunity to meet with colleagues on a regular basis, and
opportunity to meet with colleagues on a regular basis, and
SECTION 6. Lectures, meetings, training allowing access to company information.
programs. — Attendance at lectures, meetings, training
programs, and other similar activities shall not be counted c. Meal Periods
as working time if all of the following conditions are met:
(a) Attendance is outside of the employee's Article 85. Meal Periods. Subject to such regulations as
regular working hours; the Secretary of Labor may prescribe, it shall be the duty of every
(b) Attendance is in fact voluntary; and employer to give his employees not less than sixty (60) minutes
(c) The employee does not perform any time-off for their regular meals.
productive work during such attendance.

Section 7, Rule 1, Book III of the IRR provides:

(vii) Semestral Breaks
The Court has enunciated in the case of University of SECTION 7. Meal and Rest Periods. — Every
Pangasinan Faculty Union v. University of Pangasinan that employer shall give his employees, regardless of sex, not
semestral breaks may be considered as "hours worked" under less than one (1) hour time-off for regular meals, except in
the Rules implementing the Labor Code and that regular the following cases when a meal period of not less than
professors and teachers are entitled to ECOLA during the twenty (20) minutes may be given by the employer provided
semestral breaks, their "absence" from work not being of their that such shorter meal period is credited as compensable
own will. hours worked of the employee:
a. Where the work is non-manual work in nature
or does not involve strenuous physical exertion;
(viii)Telecommuting Programs (R.A. b. Where the establishment regularly operates
11165) not less than sixteen (16) hours a day;
Telecommuting- work arrangement in the private c. In case of actual or impending emergencies or
sector that allows an employee to work from an alternative there is urgent work to be performed on machineries,
workplace, with the use of telecommunications and/or equipment or installations to avoid serious loss which the
computer technologies employer would otherwise suffer; and
d. Where the work is necessary to prevent
The employer in the private sector may offer a
serious loss of perishable goods. Rest periods or coffee
Telecommuting Program to an employee on voluntary basis, breaks running from five (5) to twenty (20) minutes shall be
but granting the same labor standards benefits required by law considered as compensable working time.
such as minimum wage, overtime pay and others.
The employer shall ensure that the telecommuting The employee must be completely relieved from duty
employee are given the same treatment as that of comparable for the purpose of eating regular meals. The meal time is not
employees are given the same treatment as that of comparable compensable if he is completely freed from duties during his
employees working at the time employer's premises. All meal period even though he remains in the workplace. But the
telecommuting employee shall: employee is not relieved if he is required to perform his duties,
whether active or inactive, while eating. For example, an office
• Receive a rate of pay, including overtime and employee who is required to eat at his desk or a factory worker
night shift differential, and other similar who is required to be at his machine is working while eating. In
monetary benefits not lower than those provided one case, the Supreme Court held that when "during the so-
in applicable laws, and collective bargaining called onehour meal period, the mechanics were required to
agreements. stand-by for emergency work; that if they happened not to be
• Have the right to rest periods, regular holidays, available when called, they were reprimanded by the leadman;
and special nonworking days. that as in fact it happened on many occasions, the mechanics
had been called from their meals or told to hurry up eating to
• Have the same or equivalent workload and
perform work during this period," such meal period (after
performance standards as those of comparable
deducting 15 minutes) is not rest period but overtime work [Pan
worker at the employer's premises.
American World Airways System v. PAWAS Employees
• Have the same access to training and career Association].
development opportunities as those of
Page 27 of 191
 National Development Company v. CIR The law does not allow that meal time be shortened
Facts: At the petitioner company, there were four work to less than twenty minutes. If so reduced, the same shall no
shifts of eight hours each with one-hour meal time per shift. Petitioner longer be considered as meal time but merely as rest period or
credited the workers with eight hours of work per shift and paid them coffee break and, therefore, becomes compensable working
for that number of hours. But since 1953 whenever workers in one shift time.
were required to continue working until the next shift, petitioner,
instead of crediting them with 8 hours of overtime work, has been
paying them for only six hours. The employer claimed that the two
(iii) Changing from 30-minute paid “on
hours corresponding to the meal time periods should not be included in call” lunch break to one hour meal
computing compensation. The employees maintained the opposite time without pay, effect
view. Where the practice has been to give employees only
Held: The idle time that an employee may spend for resting thirty minutes meal break, with pay, can the employer change
during which he may leave the spot or place of work (though not the
this to one hour without pay?
premises of his employer), is not counted as working time only where
The case of Sime Darby Pilipinas v. NLRC is
the work is broken or not continuous.
In this case, evidence showed that the work in the petitioner illustrative:
company is continuous, to wit, time cards showed work was
uninterrupted; employees cannot freely leave their working places nor In the company in whose case this question was
rest completely; and during the period covered by the computation, the raised, the work schedule was 7:45 a.m. to 3:45 p.m. with a
work was on a 24-hour basis divided into shifts. 30-minute paid 'on call' lunch break. Sometime in 1992 the
The work being continuous, the meal time breaks should be employer changed this to 7:45 a.m. to 4:45 p.m. The lunch
counted as working time for purposes of overtime compensation. break from 12:00 noon to 1:00 p.m. would be without pay.
Petitioner should therefore credit employees sixteen (16) hours when The union of the affected employees complained against the
they work in two shifts and not fourteen. change. The labor arbiter dismissed the complaint on the
ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory
(i) Shortening of Meal Time to not less workers constituted a valid exercise of management
than 20 minutes, when not prerogative and that the new work schedule, break time and
compensable one-hour lunch break did not have the effect of diminishing
The law allows a situation where the employees the benefits granted to factory workers as the working time
themselves request for the shortening of meal period to not less did not exceed eight (8) hours.
On appeal the NLRC ultimately reversed the
than 20 minutes for the purpose of allowing them to leave work
arbiter's decision, invoking a 1990 case involving the same
earlier than the lapse of the eight hours required by law. This
company and further declaring that the new work schedule
shortened period, however, shall not be considered deprived the employees of the benefits of a time-honored
compensable working time provided the following conditions company practice of providing its employees a 30-minute
are complied with: paid lunch break. The change, said the NLRC, was an unjust
diminution of company privileges prohibited by Article 100
• The employees voluntarily agree in writing of the Labor Code, as amended.
On review, the Supreme Court sustained the
to a shortened meal period of 30 minutes
change. Speaking through Justice Bellosillo, the Court
and are willing to waive the overtime pay ruled:
for such shortened meal period; The right to fix the work schedules of the
• There will be no diminution whatsoever in employees rests principally on their employer. In the instant
the salary and other fringe benefits of the case petitioner, as the employer, cites as reason for the
adjustment the efficient conduct of its business operations
employees existing before the effectivity of
and its improved production. It rationalizes that while the
the shortened meal period; old work schedule included a 30-minute paid lunch break,
• The work of the employees does not the employees could be called upon to do jobs during that
involve strenuous physical exertion and period as they were "on call." Even if denominated as lunch
they are provided with adequate "coffee break, this period could very well be considered as working
time because the factory employees were required to work
breaks" in the morning and afternoon;
if necessary and were paid accordingly for working. With
• The value of the benefits derived by the the new work schedule, the employees are now given a one-
employees from the proposed work hour lunch break without any interruption from their
arrangement is equal to or commensurate employer. For a full one-hour undisturbed lunch break, the
employees can freely and effectively use this hour not only
with the compensation due them for the
for eating but also for their rest and comfort which are
shortened meal period as well as the conducive to more efficiency and better performance in
overtime pay for 30 minutes as determined their work. Since the employees are no longer required to
by the employees concerned; work during this one-hour lunch break, there is no more
• The overtime pay of the employees will need for them to be compensated for this period. We agree
with the Labor Arbiter that the new work schedule fully
become due and demandable if ever they
complies with the daily work period of eight (8) hours
are permitted or made to work beyond 4:30 without violating the Labor Code. Besides, the new
pm; and schedule applies to all employees in the factory similarly
• The effectivity of the proposed working situated, whether they are union members or not.
time arrangement shall be of temporary Necessarily, the Court dimissed the union's
contention that the change in work schedule constituted
duration as determined by the Secretary of
unfair labor practice. Because the change applied to all
Labor and Employment. factory employees engaged in the same line of work
whether or not they are union members, it cannot be said
(ii) Effect of shortening of meal time to that the new scheme prejudices the right to self-
less than 20 minutes organization.

Page 28 of 191
 • On a rest day, or special holiday or regular holiday:
d. Night Shift Differential plus 10% of the overtime hourly rate on a rest day
or special day or regular holiday.
Article 86. Night Shift Differential. Every employee shall • For overtime work in the night shift. Since overtime
be paid a night shift differential of not less than ten percent (10%)
work is not usually 8 hours, the compensation for
of his regular wage for each hour of work performed between ten
o'clock in the evening and six o'clock in the morning. overtime night shift work is also computed on the
basis of the hourly rate.
(i) Rationale • On an ordinary day: plus 10% of 125% of basic
Night work cannot be regarded as desirable, either hourly rate or a total of 110% of 125% of basic
from the point of view of the employer or the wage earner. It is hourly rate.
uneconomical unless overhead costs are unusually heavy. • On a rest day or special holiday or regular holiday:
Frequendy the scale of wages is higher as an inducement to plus 10% of 130% of regular hourly rate on said
employment on the night shift, and the rate of production is days or a total of 110% of 130% of the applicable
generally lower. The lack of sunlight tends to produce anemia regular hourly rate.
and tuberculosis and to predispose to other ills. Night work
brings increased liability to eyestrain and accident. Serious If it has been established in this case that their work
moral dangers also are likely to result from the necessity of is from 8am-5pm but extends from 5pm-12midnight. There is
traveling the street alone at night, and from the interference overtime and night shift differential. But who has the burden
with normal home life. From an economic point of view, of proof that the employee actually worked for that
moreover, the investigations showed that night work was additional hours? It is the employee. You must show proof
unprofitable, being inferior to day work both in quality and in as to what days you worked beyond 8 hours to be entitled to
quantity. Wherever it had been abolished, in the long run the night shift differential. Once it is established, the burden of
efficiency both of the management and of the workers was proof is now upon the employer to show that he has paid the
raised. Furthermore, it was found that night work laws are a corresponding labor standard benefit. The ruling in National
valuable aid in enforcing acts fixing the maximum period of Semiconductor vs. NLRC is correct because it has already been
employment [Shell Company v. NLRC]. established that the working schedule of the employee is from
10pm-6am. So, the burden of proof is with the employer that he
(ii) Not waivable has paid that additional 10% of his regular wage for the night
In Mercury Drug v. Dayao, the Supreme Court said shift differential.
that the "waiver rule" is not applicable in the case at bar.
Additional compensation for nighttime work is founded on e. Overtime Work
public policy, hence the same cannot be waived (Article 6, Civil
Code). On this matter, we believe that the respondent court Article 87. Overtime Work. Work may be performed
acted according to justice and equity and the substantial merits beyond eight (8) hours a day provided that the employee is paid for
of the case, without regard to technicalities or legal forms and the overtime work, an additional compensation equivalent to his
should be sustained. regular wage plus at least twenty-five percent (25%) thereof. Work
performed beyond eight hours on a holiday or rest day shall be paid
an additional compensation equivalent to the rate of the first eight
(iii) Night shift differential v. Overtime pay
hours on a holiday or rest day plus at least thirty percent (30%)
When the work of an employee falls at night time, the thereof.
receipt of overtime pay shall not preclude the right to receive
night differential pay. The reason is the payment of the night
Work rendered after or beyond the normal 8 hours of
differential pay is for the work done during the night; while the
work is called “overtime work.” An express instruction from
payment of the overtime pay is for work in excess of the regular
the employer to the employee to render overtime work is not
8 working hours.
required for the employee to be entitled to overtime pay; it is
sufficient that the employee is permitted or suffered to work.
(iv) Computation
In AL Ammen Transportation v. Borja, it was held
that a verbal instruction to render overtime work prevails over
• Where night shift (10pm-6am) work is regular work. a memorandum prohibiting such work. Petitioner claims that
the Court of Industrial Relations erred in disregarding the
• On an ordinary day: Plus 10% of the basic memorandum of the company prohibiting respondent from
hourly rate or a total of 110% of the basic working in excess of eight hours daily. Such memorandum
hourly rate. could not fairly apply to respondent because there was
• On a rest day, special holiday, or regular sufficient evidence showing that in spite of it, respondent had
holiday: Plus 10% of the regular hourly rate on received verbal instructions from superior authority to inspect
a rest day, special day or regular holiday or a the first trip, noon trip, and last trip; that he had submitted to
total of 110% of the regular hourly rate. petitioner a daily report of inspection which stated the period or
number of hours he had worked for the day; that respondent had
• Where night shift (10pm-6am) work is overtime been rendering overtime service with full knowledge of
petitioner. All these show conclusively that the Court of
work
Industrial Relations was right in awarding to respondent the
• On an ordinary day: plus 10% of the overtime hourly
corresponding overtime compensation.
rate on an ordinary day or a total of 110% of the
overtime hourly rate on an ordinary day. (i) Computation

Page 29 of 191
 In computing overtime work, “regular wage” or Services (now Bureau of Local Employment), the non-payment
“basic salary” means “cash” wage only without deduction for by the employer of any overtime pay for overtime work is
facilities provided by the employer. justified and valid [Engineering Equipment, Inc. v. Minister of
Labor].
• For overtime work performed on an ordinary In PESALA v. NLRC, where the period of normal
day, the overtime pay is plus 25% of the basic working hours per day was increase to 12 hours, it was held that
hourly rate. the employer remains liable for whatever deficiency in the
• For overtime work performed on a rest day or amount for overtime work in excess of the first 8 hours, after
on a special day, the overtime pay is plus 30% recomputation shows such deficiency.
of the basic hourly rate which includes 30%
f. Undertime Not Offset by Overtime
additional compensation as provided in Article
93[a] of the Labor Code.
Article 88. Undertime Not Offset by Overtime. Undertime
• For overtime work performed on a rest day work on any particular day shall not be offset by overtime work on
which falls on a special day, the overtime pay any other day. Permission given to the employee to go on leave on
is plus 30% of the basic hourly rate which some other day of the week shall not exempt the employer from
includes 50% additional compensation as paying the additional compensation required in this Chapter.
provided in Article 93[c] of the Labor Code.
• For overtime work performed on a regular Where a worker incurs undertime hours during his
holiday, the overtime pay is plus 30% of the regular daily work, said undertime hours should not be offset
against the overtime hours. If it were otherwise, the unfairness
basic hourly rate which includes 100%
would be evident from the fact that the undertime hours
additional compensation as provided in Article
represent only the employee's hourly rate of pay while the
94[b] of the Labor Code.
overtime hours reflect both the employee's hourly rate of pay
• For overtime work performed on a rest day and the appropriate overtime premium such that, not being of
which falls on a regular holiday, the overtime equal value, offsetting the undertime hours against the overtime
pay is plus 30% of the basic hourly rate which hours would result in the undue deprivation of the employees'
includes 160% additional compensation. overtime premium. The situation is even more unacceptable
where the undertime hours are not only offset against the
(ii) Premium pay vs. Overtime pay overtime hours but are also charged against the accrued leave
Premium pay refers to the additional compensation of the employee, for under this method the employee is made
required by law for work performed within 8 hours on non- to pay twice for his undertime hours because his leave is
working days, such as rest days and regular and special reduced to that extent while he is made to pay for the undertime
holidays. On the other hand, overtime pay refers to the hours with work beyond the regular working hours. The proper
additional compensation for work performed beyond 8 hours a method should be to deduct the undertime hours from the
day. Every employee who is entitled to premium pay may accrued leave but to pay the employee the overtime
likewise be entitled to the benefit of overtime pay if he/she has compensation to which he is entided. Where the employee has
rendered overtime work on such premium days as rest days and exhausted his leave credits, his undertime hours may simply be
regular and special holidays. deducted from his day's wage, but he should still be paid his
RULE: Simultaneous premium and overtime pay is overtime compensation for work in excess of eight hours a day
possible; but it shall not be included in the computation of 13th [NWSA v. NWSA Consolidated Unions].
month pay, retirement pay, and separation pay
g. Emergency Overtime Work
(iii) Waiver or Quitclaim
The right to overtime pay cannot be waived. The right Article 89. Emergency Overtime Work. - Any employee
is intended for the benefit of the laborers and employees. Any may be required by the employer to perform overtime work in any
stipulation in the contract that the laborer shall work beyond the of the following cases:
regular eight hours without additional compensation for the (a) When the country is at war or when any other
national or local emergency has been declared by the National
extra hours is contrary to law and null and void. Thus, in a case
Assembly or the Chief Executive;
where the appellant allegedly signed a quitclaim deed in favor (b) When it is necessary to prevent loss of life or
of the appellee to the effect that he was renouncing any and all property or in case of imminent danger to public safety due to an
kinds of claim against the appellee, the Supreme Court held that actual or impending emergency in the locality caused by serious
said quitclaim deed cannot deprive the appellant of his right to accidents, fire, flood, typhoon, earthquake, epidemic, or other
collect overtime and legal holiday wages under the provisions disaster or calamity;
of the Eight-hour Labor Law [Cruz v. Yee Sing]. (c) When there is urgent work to be performed on
But if the waiver is one in exchange for and in machines, installations, or equipment, in order to avoid serious loss
or damage to the employer or some other cause of similar nature;
consideration of certain valuable privileges, among them that
(d) When the work is necessary to prevent loss or
of being given tips when doing overtime work, there being no damage to perishable goods; and
proof that the value of said privileges did not compensate for (e) Where the completion or continuation of the work
such work, such waiver may be considered valid [Meralco started before the eighth hour is necessary to prevent serious
Workers Union v. MERALCO]. obstruction or prejudice to the business or operations of the
employer.
(iv) Built-in overtime pay Any employee required to render overtime work under
this Article shall be paid the additional compensation required in
In case of the employment contract stipulates that the
this Chapter.
compensation includes built-in overtime pay and the same is
duly approved by the Director of the Bureau of Employment

Page 30 of 191
 The general rule remains that no employee may be (b) In cases of urgent work to be performed on the
compelled to render overtime work against his will. The machinery, equipment, or installation, to avoid serious loss which
existence of the abovementioned are the exceptions and an the employer would otherwise suffer;
(c) In the event of abnormal pressure of work due to
employee cannot validly refuse to render overtime work under
special circumstances, where the employer cannot ordinarily be
any of the foregoing circumstances. When an employee refuses expected to resort to other measures;
to ender emergency overtime work, he may be dismissed on the (d) To prevent loss or damage to perishable goods;
ground of insubordination or willful disobedience of the lawful (e) Where the nature of the work requires continuous
order of the employer. operations and the stoppage of work may result in irreparable
injury or loss to the employer; and (f) Under other circumstances
h. Computation analogous or similar to the foregoing as determined by the
Secretary of Labor and Employment.

Article 90. Computation of Additional Compensation. -

For purposes of computing overtime and other additional No employee shall be required against his will to
remuneration as required by this Chapter the "regular wage" of work on his scheduled rest day except under the circumstances
an employee shall include the cash wage only, without deduction on provided therein where work on such day may be compelled.
account of faculties provided by the employer. However, in case work on rest day is required and not one of
the said circumstances is present, the employee may work on
This provision should be clarified or modified. "Cash such rest day but only on voluntary basis. And once an
wage" necessarily excludes noncash value of facilities; hence, employee volunteers to work on his rest day, he should express
saying "without deduction on account of facilities" is such willingness and desire to work in writing. Accordingly, he
contradictory. But if only the cash wage is the basis of overtime should be paid the additional compensation for working on his
rate, this is unfair to the worker because as defined in Article rest day under the law
97(f), "wage" includes the value of facilities, hence the value of
facilities should not be excluded when computing overtime d. Compensation on Rest Day, Sunday or
pay. Therefore, overtime rate should be based on the "regular Holiday Work
wage" which is understood to include the value of facilities.
Article 93. Compensation on Rest Day, Sunday, or
3. Rest Periods Holiday Work. - (a) Where an employee is made or permitted to
work on his scheduled rest day, he shall be paid an additional
a. Right to Weekly Rest Day compensation of at least thirty percent (30%) of his regular wage.
An employee shall be entitled to such additional compensation for
work performed on Sunday only when it is his established rest day.
Article 91. Right to Weekly Rest Day. (a) It shall be the (b) When the nature of the work of the employee is such
duty of every employer, whether operating for profit or not, to that he has no regular workdays and no regular rest days can be
provide each of his employees a rest period of not less than twenty- scheduled, he shall be paid an additional compensation of at least
four (24) consecutive hours after every six (6) consecutive normal thirty percent (30%) of his regular wage for work performed on
work days. Sundays and holidays.
(b) The employer shall determine and schedule the (c) Work performed on any special holiday shall be paid
weekly rest day of his employees subject to collective bargaining an additional compensation of at least thirty percent (30%) of the
agreement and to such rules and regulations as the Secretary of regular wage of the employee. Where such holiday work falls on
Labor and Employment may provide. However, the employer shall
the employee's scheduled rest day, he shall be entitled to an
respect the preference of employees as to their weekly rest day additional compensation of at least fifty percent (50%) of his
when such preference is based on religious grounds. regular wage.
(d) Where the collective bargaining agreement or other
b. Employee Preference applicable employment contract stipulates the payment of a higher
Section 4, Rule III, Book III of the IRR provides: premium pay than that prescribed under this Article, the employer
shall pay such higher rate.
SECTION 4. Preference of employee. — The
preference of the employee as to his weekly day of rest shall Where the weekly rest is given to all employees
be respected by the employer if the same is based on simultaneously, the employer should make known such rest
religious grounds. The employee shall make known his period by means of a written notice posted conspicuously in the
preference to the employer in writing at least seven (7) days
workplace at least one week before it becomes effective.
before the desired effectivity of the initial rest day so
preferred.
Where the rest period is not granted to all employees
Where, however, the choice of the employee as simultaneously and collectively, the employer shall make
to his rest day based on religious grounds will inevitably known to the employees their respective schedules of weekly
result in serious prejudice or obstruction to the operations of rest day through written notices posted conspicuously in the
the undertaking and the employer cannot normally be workplace at least one week before they become effective.
expected to resort to other remedial measures, the employer An express waiver of compensation for work on rest
may so schedule the weekly rest day of his choice for at least days and holidays provided in an employment contract which
two (2) days in a month.
fixes annual compensation of the employees is not valid and
does not operate to bar claims for extra compensation therefor
c. Work on a Rest Day [Mercury Drug v. Dayao].
Rest day cannot be offset by regular workdays
Article 92. When Employer May Require Work on a Rest [Lagatic v. NLRC].
Day. The employer may require his employees to work on any day:
(a) In case of actual or impending emergencies caused
by serious accident, fire, flood, typhoon, earthquake, epidemic or
4. Holidays
other disaster or calamity to prevent loss of life and property, or
imminent danger to public safety;

Page 31 of 191
 Article 94. Right to Holiday Pay. (a) Every worker shall execute, under general supervision,
be paid his regular daily wage during regular holidays, except in special assignments and tasks; and
retail and service establishments regularly employing less than ten (iv) Do not devote more than 20% of
(10) workers;
(b) The employer may require an employee to work on
their hours worked in a workweek
any holiday but such employee shall be paid a compensation to activities which are not directly
equivalent to twice his regular rate; and and closely related to the
(c) As used in this Article, "holiday" includes: New performance of the work described
Year's Day, Maundy Thursday, Good Friday, the ninth of April, in paragraphs (a), (b), and (c)
the first of May, the twelfth of June, the fourth of July, the thirtieth
above;
of November, the twenty-fifth of December and the day designated
by law for holding a general election.
(vi) Field personnel and those whose time and
a. Coverage performance are unsupervised by the employer,
Applies to all employees except: including those who are engaged on task or contract
basis, purely commission basis, or those who are paid a
(i) Government employees, whether fixed amount of performing work irrespective of the
employed by the National Government or any of its time consumed in the performance thereof.
political subdivisions, including those employed in
government-owner and/or controlled corporations with b. Overtime Pay on a Holiday
original charters or created under special laws; Section 5, Rule IV, Book III of the IRR provides:
(ii) Those of retail and service establishments
SECTION 5. Overtime pay for holiday work. —
regularly employing not more than 5 workers;
For work performed in excess of eight hours on a regular
(iii) Kasambahay and persons in the personal holiday, an employee shall be paid an additional
service of another; compensation for the overtime work equivalent to his rate
(iv) Managerial employees, if they meet all of for the first eight hours on such holiday work plus at least
the following conditions: 30% thereof.
Where the regular holiday work exceeding eight
hours falls on the scheduled rest day of the employee, he
(i) Their primary duty is to manage the shall be paid an additional compensation for the overtime
establishment in which they are work equivalent to his regular holiday-rest day for the first
employed or of a department or 8 hours plus 30% thereof. The regular holiday rest day rate
subdivision thereof; of an employee shall consist of 200% of his regular daily
wage rate plus 30% thereof.
(ii) They customarily and regularly
direct the work of two or more
c. Absences
employees therein; and
Section 6, Rule IV, Book III of the IRR provides:
(iii) They have the authority to hire or
fire other employees of lower rank; SECTION 6. Absences. — (a) All covered
or their suggestions and employees shall be entitled to the benefit provided herein
recommendations as to hiring, when they are on leave of absence with pay. Employees who
firing, and promotion, or any other are on leave of absence without pay on the day immediately
preceding a regular holiday may not be paid the required
change of status of other
holiday pay if he has not worked on such regular holiday.
employees are given particular (b) Employees shall grant the same percentage
weight. of the holiday pay as the benefit granted by competent
authority in the form of employee's compensation or social
(v) Officers or members of a managerial staff, security payment, whichever is higher, if they are not
reporting for work while on such benefits.
if they perform the following duties and
(c) Where the day immediately preceding the
responsibilities: holiday is a non-working day in the establishment or the
scheduled rest day of the employee, he shall not be deemed
(i) Primarily perform work directly to be on leave of absence on that day, in which case he shall
related to management policies of be entitled to the holiday pay if he worked on the day
immediately preceding the non-working day or rest day.
their employer;
(ii) Customarily and regularly exercise
d. Holiday During Shutdown
discretion and independent
Section 7, Rule IV, Book III of the IRR provides:
judgement;
(iii) Regularly and directly assist a SECTION 7. Temporary or periodic shutdown
proprietor or managerial employee and temporary cessation of work. — (a) In cases of
in the management of the temporary or periodic shutdown and temporary cessation of
establishment or subdivision work of an establishment, as when a yearly inventory or
when the repair or cleaning of machineries and equipment
thereof in which he or she is
is undertaken, the regular holidays falling within the period
employed; or execute under shall be compensated in accordance with this Rule.
general supervision, work along (b) The regular holiday during the cessation of
specialized or technical lines operation of an enterprise due to business reverses as
requiring special training, authorized by the Secretary of Labor and Employment may
not be paid by the employer.
experience, or knowledge; or

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 e. Monthly-Paid Employees
In Insular Asia v. Inciong, it was held that monthly g. Holiday for Certain Employees
paid employees are not excluded from the benefits of holiday Section 8, Rule IV, Book III of the IRR provides:
pay. However, the implementing rules on holiday pay
promulgated by the then Secretary of Labor excludes monthly SECTION 8. Holiday pay of certain employees.
paid employees from the said benefits by inserting, under Rule — (a) Private school teachers, including faculty members of
IV, Book Ill of the implementing rules, Section 2, which colleges and universities, may not be paid for the regular
holidays during semestral vacations. They shall, however,
provides that: "employees who are uniformly paid by the
be paid for the regular holidays during Christmas vacation;
month, irrespective of the number of working days therein, with (b) Where a covered employee, is paid by results
a salary of not less than the statutory or established minimum or output, such as payment on piece work, his holiday pay
wage shall be presumed to be paid for all days in the month shall not be less than his average daily earnings for the last
whether worked or not. " seven (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
Manstrade v. Bacungan
wage rate.
Held: Respondent arbitrator opined that respondent
(c) Seasonal workers may not be paid the
corporation does not have any legal obligation to grant its monthly
required holiday pay during off-season when they are not at
salaried employees holiday pay, unless it is argued that the pertinent
work.
section of the Rule and Regulations implementing Section 94 of the
(d) Workers who have no regular working days
Labor Code is not in conformity with the law, and thus, without force
shall be entitled to the benefits provided in this Rule.
and effect. This issue was subsequently decided on October 24, 1984
by a division of this court in the case of Insular Bank of Asia and
American Employees’ Union (IBAAEU) v. Inciong, wherein it held as In Jose Rizal College v. NLRC, the Supreme Court
follows: "We agree with petitioner’s contention that Section 2, Rule IV, held:
Book III of the implementing rules and Policy Instruction No. 9 issued
by the then Secretary of Labor are null and void since in the guise of The problem, however, lies with its faculty
clarifying the Labor Code’s provisions on holiday pay, they in effect members, who are paid on an hourly basis, for while the
amended them enlarging the scope of their exclusion (p. 11, rec.). . . . Labor Arbiter sustains the view that said instructors and
"From the above-cited provisions, it is clear that monthly paid professors are not entitled to holiday pay, his decision was
employees are not excluded from the benefits of holiday pay. However, modified by the National Labor Relations Commission
the implementing rules on holiday pay promulgated by the then holding the contrary. Otherwise stated, on appeal the NLRC
Secretary of Labor excludes monthly paid employees from the said ruled that teaching personnel paid by the hour are declared
benefits by inserting under Rule IV, Book III of the implementing rules, to be entitled to holiday pay.
section 2, which provides that: ‘employees who are uniformly paid by Under [Article 94(a) and (b) of the Labor Code,
the month, irrespective of the number of working days therein , with and the Omnibus Rules, Book III, Rule IV, Section 8],
the salary of not less than the statutory or established minimum wage apparently, the JRC, although a non-profit institution is
shall be presumed to be paid for all days in the month whether worked under obligation to give pay even on unworked regular
or not." (132 SCRA 663, 672-673) This ruling was reiterated by the holidays to hourly paid faculty members subject to the terms
court en banc on August 28, 1985 in the case of Chartered Bank and conditions provided for therein.
Employees Association v. Ople, wherein it added that: "The questioned We believe that the aforementioned
Sec. 2, Rule IV, Book III of the Integrated Rules and the Secretary’s implementing rule is not justified by the provisions of the
Policy Instruction No. 9 add another excluded group, namely law which after all is silent with respect to faculty members
‘employees who are uniformly paid by the month’. While additional paid by the hour who because of their teaching contracts are
exclusion is only in the form of a presumption that all monthly paid obliged to work and consent to be paid only for work
employees have already been paid holiday paid, it constitutes a taking actually done (except when an emergency or a fortuitous
away or a deprivation which must be in the law if it is to be valid. An event or a national need calls for the declaration of special
administrative interpretation which diminishes the benefits of labor holidays). Regular holidays specified as such by law are
more than what the statute delimits or withholds is obviously ultra known to both school and faculty members as "no class
vires." (138 SCRA 273, 282. See also CBTC Employees Union v. days;" certainly the latter do not expect payment for said
Clave, January 7, 1986, 141 SCRA 9.) unworked days, and this was clearly in their minds when
they entered into the teaching contracts. On the other hand,
f. Field Personnel both the law and the Implementing Rules governing holiday
pay are silent as to payment on Special Public Holidays.
The requirement that "actual hours of work in the
It is readily apparent that the declared purpose of
field cannot be determined with reasonable certainty" must be the holiday pay which is the prevention of diminution of the
read in conjunction with Rule IV, Book III of the Implementing monthly income of the employees on account of work
Rules which provides: "Rule IV Holidays with Pay Section 1. interruptions is defeated when a regular class day is
Coverage — This rule shall apply to all employees except: . . . cancelled on account of a special public holiday and class
(e) Field personnel and other employees whose time and hours are held on another working day to make up for time
performance is unsupervised by the employer . . . The lost in the school calendar. Otherwise stated, the faculty
aforementioned rule did not add another element to the Labor member, although forced to take a rest, does not earn what
he should earn on that day. Be it noted that when a special
Code definition of field personnel. The clause "whose time and
public holiday is declared, the faculty member paid by the
performance is unsupervised by the employer" did not amplify hour is deprived of expected income, and it does not matter
but merely interpreted and expounded the clause "whose actual that the school calendar is extended in view of the days or
hours of work in the field cannot be determined with reasonable hours lost, for their income that could be earned from other
certainty." The former clause is still within the scope and sources is lost during the extended days. Similarly, when
purview of Article 82 which defines field personnel. Hence, in classes are called off or shortened on account of typhoons,
deciding whether or not an employee’s actual working hours in floods, rallies, and the like, these faculty members must
the field can be determined with reasonable certainty, query likewise be paid, whether or not extensions are ordered.
ORDER: (a) Exempting JRC from paying
must be made as to whether or not such employee’s time and
hourly paid faculty members their pay for regular holidays,
performance is constantly supervised by the employer [Union whether the same be during the regular semesters of the
of Filipro Employees v. Vivar].
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 school year or during semestral, Christmas, or Holy Week Holiday, in addition to the two (2) nationwide special days, the
vacations; (b) but ordering JRC to pay said faculty members following rules shall apply:
their regular hourly rate on days declared as special holidays a) If unworked
or for some reason classes are called off or shortened for the
• No pay, unless there is a favorable
hours they are supposed to have taught, whether extensions
of class days be ordered or not; in case of extensions said company policy, practice or collective
faculty members shall likewise be paid their hourly rates bargaining agreement (CBA) granting
should they teach during said extensions. payment of wages, on special days even if
unworked.
h. Holiday on a Sunday b) If worked
Section 9, Rule IV, Book III of the IRR provides: • 1st 8 hrs. — plus 30% of the daily rate of
100%
SECTION 9. Regular holiday falling on rest
days or Sundays. — (a) A regular holiday falling on the • excess of 8 hrs. — plus 30% of hourly rate
employee's rest day shall be compensated accordingly. on said day
(b) Where a regular holiday falls on a Sunday,
the following day shall be considered a special holiday for c) Falling on the employee's rest day and if
purposes of the Labor Code, unless said day is also a regular worked
holiday.
• 1st hrs. — plus 50% of the daily rate of
100%
In Wellington v. Trajano, the basic issue raised in this
case is "whether or not a monthly-paid employee receiving a • excess of 8 hrs. — plus 30% of hourly rate
fixed monthly compensation, is entitled to an additional pay on said day
aside from his usual holiday pay, whenever a regular holiday
falls on a Sunday. The monthly salary in Wellington-which is 3) For those declared as special working holidays,
based on the so-called "314 factor" accounts for all 365 days of the following rules shall apply:
a year; with the exception only of 51 Sundays. The For work performed, an employee is entided only to
respondents’ theory that there was "an increase of three (3) his basic rate. No premium pay is required since work
working days resulting from regular holidays falling on performed on said days is considered work on ordinary working
Sundays" ; hence Wellington "should pay for 317 days, instead day.
of 315 days" would make each of the year in question (1988,
1989, 1990), a year of 368 days. Pursuant to this theory, no B. WAGES
employer opting to pay his employees by the month would have
any definite basis to determine the number of days in a year for 1. Definition
which compensation should be given to his work force. There "Wage" paid to any employee shall mean the
is no provision of law requiring any employer to make such remuneration or earnings, however designated, capable of
adjustments in the monthly salary rate set by him to take being expressed in terms of money, whether fixed or
account of legal holidays falling on Sundays in a given year, or, ascertained on a time, task, piece, or commission basis, or other
contrary to the legal provisions bearing on the point, otherwise method of calculating the same, which is payable by an
to reckon a year at more than 365 days. employer to an employee under a written or unwritten contract
of employment for work done or to be done, or for services
i. Double Holiday rendered or to be rendered and includes the fair and reasonable
Section 10, Rule IV, Book III of the IRR provides: value, as determined by the Secretary of Labor and
Employment, of board, lodging, or other facilities customarily
SECTION 10. Successive regular holidays. — furnished by the employer to the employee. "Fair and
Where there are two (2) successive regular holidays, like reasonable value" shall not include any profit to the employer,
Holy Thursday and Good Friday, an employee may not be or to any person affiliated with the employer.
paid for both holidays if he absents himself from work on The term facilities includes articles or services for the
the day immediately preceding the first holiday, unless he benefit of the employee of his family but does not include tools
works on the first holiday, in which case he is entitled to his
of the trade or articles or services primarily for the benefit of
holiday pay on the second holiday.
the employer of necessary to the conduct of the employer’s
business. They are items of expense necessary for the laborer’s
SUMMARY
and his family’s existence and subsistence which form part of
the wage when furnished by the employer, are deductible
1) For regular holidays
therefrom, since if they are not o furnished, the labourer would
a) If it is an employee's regular workday
spend and pay for them just the same [State Marine
• If unworked — 100%
Cooperation v. Cebu Seamen’s Association].
• If worked lst 8hrs. — 200%
Example of an occupation where facilities are
• excess of 8 hrs — plus 30% of hourly rate customary: Waiter of a famous restaurant, part of your wages
on said day can be the meals that are granted to you. House helpers, waiters,
b) If it is an employee's rest day waitresses.
• If unworked — 100%
• If worked - 1st 8 hrs. — plus 30% of 200 What about supplements?
• excess of 8 hrs — plus 30% of hourly rate The term “supplements” means extra remuneration
on said day or special privilege or benefits given to or received by the
2) For declared special days such as Special Non- laborers over and above their ordinary earnings or wages [Atok
Working Day, Special Public Holiday, Special National Big Wedge Mining v. ABW Mutual Benefit Association].

Page 34 of 191
 Facilities v. Supplements day's wage for a fair day's labor." It is hardly fair or just for an
The benefit or privilege given to the employee which employee or laborer to fight or litigate against his employer on
constitutes an extra remuneration over and above his basic or the employer's time [Sugue v. Triumph International].
ordinary earning or wage is supplement; and when said benefit Exception: When the laborer was able, willing and
or privilege is made part of the laborer’s basic wage, it is a ready to work but was illegally locked out, suspended or
facility. The criterion is not so much with the kind of benefit or dismissed, or otherwise illegally prevented from working
item (food, lodging, bonus or sick leave) given but its purpose. [Ibid].
Thus, free meals suspplied by the ship operator to crew
members, out of necessity, cannot be considered as facilities 3. Payment of Wages
btu supplmenets which could not be reduced having been given
not as part of wages btu as a necessary matter in the a. Payment By Results
maintenance of the health and efficiency of the crew during the
voyage [Mayon Hotel & Restaurant v. Adana]. Article 101. Payment by Results. - The Secretary of
Labor shall regulate the payment of wages by results, including
Some Principles on Facilities and Supplements: pakyao, piecework and other nontime work, in order to ensure the
payment of fair and reasonable wage rates, preferably through
• Facilities are deductible from wage but not supplements. time and motion studies or in consultation with representatives of
workers and employer's organizations.
• Legal requirements must be complied with before
facilities may be deducted from wages. The employer
Section 9, Rule VII, Book III of the IRR provides:
simply cannot deduct the value from the employee’s
wages without satisfying the following: SECTION 9. Workers Paid by Results. —
(1) Proof that such facilities are customarily a) All workers paid by results, including those
furnished by the trade; who are paid on piecework, takay, pakyaw, or task basis,
(2) The provision of deductible facilities is shall receive not less than the applicable statutory minimum
wage rates prescribed under the Act for the normal working
voluntarily accepted in writing by the employee;
hours which shall not exceed eight hours work a day, or a
(3) The facilities are charged at fair and reasonable proportion thereof for work of less than the normal working
value; and hours.
(4) There must be no financial or material gain on The adjusted minimum wage rates for workers
the part of the employer or anyone who is paid by results shall be computed in accordance with the
following steps:
affiliated with the employer.
1) Amount of increase in AMW - Previous
AMW x 100 = % Increase;
• An employer may provide subsidized meals and snacks to 2) Existing rate/piece x % increase = increase in
his employees provided that the subsidy shall not be less rate/piece;
than 30% of the fair and reasonable value of such 3) Existing rate/piece + increase in rate/piece =
Adjusted rate/piece.
facilities. In such a case, the employer may deduct from
Where AMW is the applicable minimum wage
the wages of the employees not more than 70% of the rate.cralaw
value of the meals and snacks enjoyed by the employees, b) The wage rates of workers who are paid by
provided that such deduction is with the written results shall continue to be established in accordance with
authorization of the employees concerned. Article 101 of the Labor Code, as amended and its
implementing regulations.
• The free board and lodging petitioner SIP furnished its
employees cannot operate as a sef-off for the
b. Forms Of Payment
underpayment of their wages [Art. 124].
Article 102. Forms of Payment. No employer shall pay
2. Principles the wages of an employee by means of promissory notes, vouchers,
coupons, tokens, tickets, chits, or any object other than legal
a. No Work, No Pay tender, even when expressly requested by the employee.
General Rule: If there is no work performed by the Payment of wages by check or money order shall be
employee, there can be no wage or pay. allowed when such manner of payment is customary on the date of
effectivity of this Code, or is necessary because of special
Exception: Unless the laborer was able, willing and
circumstances as specified in appropriate regulations to be issued
ready to work but was prevented by management or was by the Secretary of Labor and Employment or as stipulated in a
illegally locked out, suspended or dismissed [Philippine collective bargaining agreement.
Airlines v. NLRC].
Section 2, Rule VIII, Book III of the IRR provides:
b. Equal Pay for Equal Work
Employees working in the Philippines, if they are SECTION 2. Payment by check. — Payment of
performing similar functions and responsibilities under similar wages by bank checks, postal checks or money orders is
working conditions, should be paid equally. If an employer allowed where such manner of wage payment is customary
accords employees the same position and rank, the presumption on the date of the effectivity of the Code, where it is so
is that these employees perform equal work [International stipulated in a collective agreement, or where all of the
School Alliance of Educators v. Quisumbing]. following conditions are met:
a. There is a bank or other facility for
encashment within a radius of one (1) kilometer from the
c. Fair Wage for Fair Work workplace;
The age-old rule governing the relation between
labor and capital or management and employee is that a "fair

Page 35 of 191
 b. The employer or any of his agents or "It is undisputed that because of security reasons, from the
representatives does not receive any pecuniary benefit time of its operations, petitioner NDMC maintained its policy of paying
directly or indirectly from the arrangement; its workers at a bank in Tagum, Davao del Norte, which usually took
c. The employees are given reasonable time the workers about two and a half (2 1/2) hours of travel from the place
during banking hours to withdraw their wages from the bank of work and such travel time is not official.
which time shall be considered as compensable hours Records also show that on February 12,1992, when an
worked if done during working hours; and inspection was conducted by the Department of Labor and Employment
d. The payment by check is with the written at the premises of petitioner NDMC at Amacan, Maco, Davao del
consent of the employees concerned if there is no collective Norte, it was found out that petitioners had violated labor standards law,
agreement authorizing the payment of wages by bank one of which is the place of payment of wages (p.109, Vol. 1, Record).
checks. Section 4, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code provides that:
c. Time of Payment ‘Section 4. Place of payment. - (a) 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
Article 103. Time of Payment. - Wages shall be paid at following circumstances:
least once every two (2) weeks or twice a month at intervals not (1) When payment cannot be effected at or near the place of
exceeding sixteen (16) days. If on account of force majeure or work by reason of the deterioration of peace and order conditions, or
circumstances beyond the employers control, payment of wages on by reason of actual or impending emergencies caused by fire, flood,
or within the time herein provided cannot be made, the employer epidemic or other calamity rendering payment thereat impossible;
shall pay the wages immediately after such force majeure or (2) When the employer provides free transportation to the
circumstances have ceased. No employer shall make payment with employees back and forth; and
less frequency than once a month. (3) Under any analogous circumstances; provided that the
The payment of wages of employees engaged to perform time spent by the employees in collecting their wages shall be
a task which cannot be completed in two (2) weeks shall be subject considered as compensable hours worked.
to the following conditions, in the absence of a collective bargaining (b) xxx xxx xxx.’
agreement or arbitration award: (Italics supplied)
(1) That payments are made at intervals not exceeding
Accordingly, in his Order dated April 14, 1992 (p. 109, Vol.
sixteen (16) days, in proportion to the amount of work completed; 1, Record), the Regional Director, Regional Office No. XI, Department
(2) That final settlement is made upon completion of the of Labor and Employment, Davao City, ordered petitioner NDMC,
work. among others, as follows:
‘WHEREFORE, x x x. Respondent is further ordered to pay
d. Place of Payment its workers salaries at the plantsite at Amacan, New Leyte, Maco,
Davao del Norte or whenever not possible, through the bank in Tagum,
Article 104. Place of Payment. Payment of wages shall be Davao del Norte as already been practiced subject, however to the
made at or near the place of undertaking, except as otherwise provisions of Section 4 of Rule VIII, Book III of the rules implementing
provided by such regulations as the Secretary of Labor and the Labor Code as amended.’
Employment may prescribe under conditions to ensure greater Thus, public respondent Labor Arbiter Antonio M.
protection of wages. Villanueva correctly held that
‘From the evidence on record, we find that the hours spent
by complainants in collecting salaries at a bank in Tagum, Davao del
Section 4, Rule VII, Book III of the IRR provides: Norte shall be considered compensable hours worked. Considering
further the distance between Amacan, Maco to Tagum which is 2½
SECTION 4. Place of payment. — As a general hours by travel and the risks in commuting all the time in collecting
rule, the place of payment shall be at or near the place of complainants’ salaries, would justify the granting of backwages
undertaking. Payment in a place other than the work place equivalent to two (2) days in a month as prayed for.
shall be permissible only under the following ‘Corollary to the above findings, and for equitable reasons,
circumstances: we likewise hold respondents liable for the transportation expenses
(a) When payment cannot be effected at or near incurred by complainants at P40.00 round trip fare during pay days.’
the place of work by reason of the deterioration of peace and On the contrary, it will be petitioners’ burden or duty to
order conditions, or by reason of actual or impending present evidence of compliance of the law on labor standards, rather
emergencies caused by fire, flood, epidemic or other than for private respondents to prove that they were not paid/provided
calamity rendering payment thereat impossible; by petitioners of their backwages and transportation expenses."
(b) When the employer provides free Other than the bare denials of petitioners, the above findings
transportation to the employees back and forth; and stands uncontradicted. Indeed we are not at liberty to set aside findings
(c) Under any other analogous circumstances; of facts of the NLRC, absent any capriciousness, arbitrariness, or abuse
Provided, That the time spent by the employees in collecting or complete lack of basis. In Maya Farms Employees Organizations vs.
their wages shall be considered as compensable hours NLRC,[16] we held:
worked; "This Court has consistently ruled that findings of fact of
(d) No employer shall pay his employees in any administrative agencies and quasi-judicial bodies which have acquired
bar, night or day club, drinking establishment, massage expertise because their jurisdiction is confined to specific matters are
clinic, dance hall, or other similar places or in places where generally accorded not only respect but even finality and are binding
games are played with stakes of money or things upon this Court unless there is a showing of grave abuse of discretion,
representing money except in the case of persons employed or where it is clearly shown that they were arrived at arbitrarily or in
in said places. disregard of the evidence on record."

North Davao Mining v. NLRC e. Direct Payment of Wages

Held: Anent the award of back wages and transportation
allowance, the issues raised in connection therewith are factual, the
Article 105. Direct Payment of Wages. Wages shall be
determination of which is best left to the respondent NLRC. It is well
paid directly to the workers to whom they are due, except:
settled that this Court is bound by the findings of fact of the NLRC, so
(a) In cases of force majeure rendering such payment
long as said findings are supported by substantial evidence.
impossible or under other special circumstances to be determined
As the Solicitor General pointed out in his comment:
by the Secretary of Labor and Employment in appropriate
regulations, in which case, the worker may be paid through
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another person under written authority given by the worker for the a. Non-Diminution of Benefits
purpose; or
(b) Where the worker has died, in which case, the
Article 100. Prohibition Against Elimination or
employer may pay the wages of the deceased worker to the heirs of
Diminution of Benefits. Nothing in this Book shall be construed to
the latter without the necessity of intestate proceedings. The
eliminate or in any way diminish supplements, or other employee
claimants, if they are all of age, shall execute an affidavit attesting
benefits being enjoyed at the time of promulgation of this Code.
to their relationship to the deceased and the fact that they are his
heirs, to the exclusion of all other persons. If any of the heirs is a
minor, the affidavit shall be executed on his behalf by his natural Article 127. Non-Diminution of Benefits. No wage order
guardian or next-of-kin. The affidavit shall be presented to the issued by any regional board shall provide for wage rates lower
employer who shall make payment through the Secretary of Labor than the statutory minimum wage rates prescribed by Congress.
and Employment or his representative. The representative of the
Secretary of Labor and Employment shall act as referee in dividing (i) Benefits
the amount paid among the heirs. The payment of wages under this
In Royal Plant Workers Union v. Coca-Cola Bottlers
Article shall absolve the employer of any further liability with
respect to the amount paid. Philippines, Inc.-Cebu Plant, the Court had the occasion to rule
that the term "benefits" mentioned in the non-diminution rule
refers to monetary benefits or privileges given to the employee
f. Payment of Wages in Case of
with monetary equivalents. Stated otherwise, the employee
Contracting
benefits contemplated by Article 100 are those which are
capable of being measured in terms of money. Thus, it can be
Article 109. Solidary Liability. The provisions of existing readily concluded from past jurisprudential pronouncements
laws to the contrary notwithstanding, every employer or indirect
that these privileges constituted money in themselves or were
employer shall be held responsible with his contractor or
subcontractor for any violation of any provision of this Code. For convertible into monetary equivalents.
purposes of determining the extent of their civil liability under this In Royal Plant Workers Union v. Coca-Cola Bottlers
Chapter, they shall be considered as direct employers. Philippines, Inc.-Cebu Plant, the Court had the occasion to rule
that the term "benefits" mentioned in the non-diminution rule
Article 107. Indirect Employer. The provisions of the refers to monetary benefits or privileges given to the employee
immediately preceding article shall likewise apply to any person, with monetary equivalents. Stated otherwise, the employee
partnership, association or corporation which, not being an benefits contemplated by Article 100 are those which are
employer, contracts with an independent contractor for the capable of being measured in terms of money. Thus, it can be
performance of any work, task, job or project. readily concluded from past jurisprudential pronouncements
that these privileges constituted money in themselves or were
“Contracting” or “subcontracting” refers to an convertible into monetary equivalents.
arrangement whereby a principal agrees to farm out to a
contractor the performance or completion of a specific job or Coca-Cola Bottlers v. ICCPELU
work within a definite or predetermined period, regardless of Held: As compared to the factual milieu in the Eastern
whether such job or work is to be performed or completed Telecommunications case, the CBA between CCBPI and the
within or outside the premises of the principal. respondent has no analogous provision which grants that the 50%
This Court held in Eagle Security, Inc. vs. premium pay would have to be paid regardless of the occurrence of
NLRC and Spartan Security and Detective Agency, Inc. vs. Saturday work. Thus, the non-payment of the same would not
constitute a violation of the diminution of benefits rule.
NLRC that the joint and several liability of the contractor and
Also, even assuming arguendo that the Saturday work
the principal is mandated by the Labor Code to assure involved in this case falls within the definition of a "benefit" protected
compliance with the provisions therein including the minimum by law, the fact that it was made subject to a condition (i.e., the
wage. The contractor is made liable by virtue of his status as existence of operational necessity) negates the application of Article
direct employer. The principal, on the other hand, is made the 100 pursuant to the established doctrine that when the grant of a benefit
indirect employer of the contractor’s employees to secure is made subject to a condition and such condition prevails, the rule on
payment of their wages should the contractor be unable to pay non-diminution finds no application. Otherwise stated, if Saturday
them. Even in the absence of an employer-employee work and its corresponding premium pay were granted to CCBPI's
employees without qualification, then the company's policy of
relationship, the law itself establishes one between the
permitting its employees to suffer work on Saturdays could have
principal and the employees of the agency for a limited perhaps ripened into company practice protected by the non-diminution
purpose i.e. in order to ensure that the employees are paid the rule.
wages due them. Lastly, the Court agrees with the assertion of CCBPI that
This joint and several liability of the contractor and since the affected employees are daily-paid employees, they should be
the principal is mandated by the Labor Code to assure given their wages and corresponding premiums for Saturday work only
compliance of the provisions therein including the statutory if they are permitted to suffer work. Invoking the time-honored rule of
minimum wage (Article 99, Labor Code). The contractor is "a fair day's work for a fair day's pay," the CCBPI argues that the CA's
ruling that such unworked Saturdays should be compensated is contrary
made liable by virtue of his status as direct employer. The
to law and the evidence on record.
principal, on the other hand, is made the indirect employer of The CA, for its part, ruled that the principle of "a fair day's
the contractor's employees for purposes of paying the work for a fair day's pay" was irrelevant to the instant case. According
employees their wages should the contractor be unable to pay to the appellate court, since CCBPI's employees are daily-paid workers,
them. This joint and several liability facilitates, if not they should be paid their whole daily rate plus the corresponding
guarantees, payment of the workers’ performance of any work, premium pay in the absence of a specific CBA provision that directed
task, job or project, thus giving the workers ample protection wages to be paid on a different rate on Saturdays. This was
as mandated by the 1987 Constitution [Rabago v. NLRC]. notwithstanding the fact that the duration of Saturday work lasted only
for four hours or half the time spent on other workdays.
The CA erred in this pronouncement. The age-old rule
4. Prohibitions Regarding Wages governing the relation between labor and capital, or management and
employee, of a "fair day's,wage for a fair day's labor" remains the basic

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factor in determining employees' wages.67 If there is no work computation of the 13th month pay, items
performed by the employee, there can be no wage.68 In cases where the that were expressly excluded by law has
employee's failure to work was occasioned neither by his abandonment
lasted for six (6) years, hence, was
nor by termination, the burden of economic loss is not rightfully shifted
to the employer; each party must bear his own loss.69 In other words, considered indicative of company practice.
where the employee is willing and able to work and is not illegally • Sevilla Trading Company v. A. V. A.
prevented from doing so, no wage is due to him. To hold otherwise Semana. - The act of including non-basic
would be to grant to the employee that which he did not earn at the benefits such as paid leaves for unused sick
prejudice of the employer.
In the case at bar, CCBPI's employees were not illegally
leave and vacation leave in the
prevented from working on Saturdays. The company was simply computation of the employees’ 13th month
exercising its option not to schedule work pursuant to the CBA pay for at least two (2) years was
provision which gave it the prerogative to do so. It therefore follows considered a company practice.
that the principle of "no work, no pay" finds application in the instant
• The 2010 case of Central Azucarera de
case.
Having disposed of the issue on wages for unworked Tarlac v. Central Azucarera de Tarlac
Saturdays in consonance with the well-settled rule of "no work, no Labor Union-NLU, also ruled as company
pay," this Court deems it unnecessary to belabor on the CA ruling that practice the act of petitioner of granting for
the concerned employees should be paid their whole daily rate, and not thirty (30) years, its workers the mandatory
the amount equivalent to one-half day's wage, plus corresponding
13th month pay computed in accordance
premium.
with the following formula: Total Basic
Annual Salary divided by twelve (12) and
(ii) Company Practice
Including in the computation of the Total
The 2014 case of Wesleyan University-Philippines v.
Basic Annual Salary the following: basic
Wesleyan University-Philippines Faculty and Staff
Association, succinctly pointed out that the Non-Diminution monthly salary; first eight (8) hours
Rule found in Article 100 of the Labor Code explicitly prohibits overtime pay on Sunday and legal/special
employers from eliminating or reducing the benefits received holiday; night premium pay; and vacation
by their employees. This rule, however, applies only if the and sick leaves for each year.
benefit is based on any of the following:
(iv) Consistency and Intention
• An express policy; In Tiangco v. Leogardo, Jr., where the employer has
• A written contract; or consistently been granting fixed monthly emergency allowance
• A company practice. to the employees from November, 1976 but discontinued this
practice effective February, 1980 insofar as non-working days
are concerned based on the principle of “no work, no pay.” The
Company practice is a custom or habit shown by an
Supreme Court ruled that the discontinuance of said benefit
employer’s repeated, habitual customary or succession of acts
contravened Article 100 of the Labor Code which prohibits the
of similar kind by reason of which, it gains the status of a
diminution of existing benefits.
company policy that can no longer be disturbed or withdrawn.
Since there is no hard and fast rule which may be
(v) Not a Product of Erroneous
used and applied in determining whether a certain act of the
employer may be considered as having ripened into a practice, Interpretation or Construction of a
the following criteria may be used to determine whether an act Doubtful or Difficult Question of Law
has ripened into a company practice: or Provision in the CBA
The general rule is that if it is a past error that is being
• The act of the employer has been done for corrected, no vested right may be said to have arisen therefrom
a considerable period of time; nor any diminution of benefit may have resulted by virtue of
• The act should be done consistently and the correction thereof. The error, however, must be corrected
immediately after its discovery; otherwise, the rule on non-
intentionally; and
diminution of benefits would still apply.
• The act should not be a product of
The following cases would illuminate this principle:
erroneous interpretation or construction of
a doubtful or difficult question of law or • Globe Mackay Cable and Radio
provision in the CBA. Corporation v. NLRC, where the Supreme
Court ruled on the proper computation of
(iii) Considerable Period of Time
the cost-of-living allowance (COLA) for
If done only once as in the case of Philippine monthly-paid employees. Petitioner
Appliance Corporation (Philacor) v. Court of Appeals, where
corporation, pursuant to Wage Order No. 6
the CBA signing bonus was granted only once during the 1997
(effective October 30, 1984), increased the
CBA negotiation, the same cannot be considered as having
ripened into a company practice. COLA of its monthly-paid employees by
In the following cases, the act of the employer was multiplying the P3.00 daily COLA by 22
declared company practice because of the considerable period days which is the number of working days
of time it has been practiced: in the company. The union disagreed with
the computation, claiming that the daily
• Davao Fruits Corporation v. Associated COLA rate of P3.00 should be multiplied
Labor Unions. - The act of the company of by 30 days which has been the practice of
freely and continuously including in the the company for several years. The

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 Supreme Court, however, upheld the the Labor Code allows such a deduction from the wages of the
contention of the petitioner corporation. It employees by the employer, only in three instances.
held that the grant by the employer of
benefits through an erroneous application Other permissible deductions from wages aside
of the law due to absence of clear from those enumerated under Article 113:
administrative guidelines is not considered
• Deductions for loss or damage under Article
a voluntary act which cannot be
114;
unilaterally discontinued.
• Deductions made for agency fees from non-
• TSPIC Corp. v. TSPIC Employees Union
union members who accept the benefits under
[FFW], where the Supreme Court
the CBA negotiated by the bargaining union.
reiterated the rule enunciated in Globe-
This form of deduction does not require the
Mackay, that an erroneously granted
written authorization of the non-bargaining
benefit may be withdrawn without
union member concerned;
violating the prohibition against non-
diminution of benefits. No vested right • Union service fees;
accrued to individual respondents when • When the deductions are with the written
TSPIC corrected its error by crediting the authorization of the employee for payment to a
salary increase for the year 2001 against third person and the employer agrees to do so,
the salary increase granted under Wage provided that the latter does not receive any
Order No. 8, all in accordance with the pecuniary benefit, directly or indirectly from the
CBA. Hence, any amount given to the transaction;
employees in excess of what they were • Deductions for value of meal and other
entitled to, as computed above, may be facilities;
legally deducted by TSPIC from the • Deductions for premiums for SSS, PhilHealth,
employees’ salaries. employees’ compensation and Pag-IBIG;
• Withholding tax mandated under the NIRC;
But if the error does not proceed from the • Withholding of wages because of the
interpretation or construction of a law or a provision in the employee’s debt to the employer which is
CBA, the same may ripen into a company practice. already due;
• Deductions made pursuant to a court judgement
b. Wage Deduction against a worker under circumstances where the
wages may be the subject of attachment or
Article 113. Wage Deduction. No employer, in his own execution but only for debts incurred for food,
behalf or in behalf of any person, shall make any deduction from
the wages of his employees, except:
clothing, shelter, and medical attendance;
(a) In cases where the worker is insured with his consent • When deductions from wages are ordered by a
by the employer, and the deduction is to recompense the employer court;
for the amount paid by him as premium on the insurance; • Salary deductions of a member of a
(b) For union dues, in cases where the right of the
cooperative.
worker or his union to check-off has been recognized by the
employer or authorized in writing by the individual worker
concerned; and c. Withholding of Wages and Kickbacks
(c) In cases where the employer is authorized by law or
regulations issued by the Secretary of Labor and Employment. Article 116. Withholding of Wages and Kickbacks
Prohibited. It shall be unlawful for any person, directly or
The general rule is that an employer, by himself or indirectly, to withhold any amount from the wages of a worker or
through his representative, is prohibited from making any induce him to give up any part of his wages by force, stealth,
intimidation, threat or by any other.
deduction from the wages of his employees. The employer is
not allowed to make unnecessary deductions without the
knowledge or authorizations of the employees [Galvadores v. Although management prerogative refers to "the
Trajano]. right to regulate all aspects of employment," it cannot be
understood to include the right to temporarily withhold
salary/wages without the consent of the employee. To sanction
Apodaca v. NLRC
Held: The question is whether the nonpayment of stock such an interpretation would be contrary to Article 116 of the
subscriptions can be offset against a money claim of an employee Labor Code [SHS Perforated v. Diaz].
against the employer.
The corporation admitted that there was due to the employee d. Non-Interference in Disposal of Wages
the amount of PI 7,060.07, but this was applied to the unpaid balance
of his subscription in the amount of P95.439.93. The employee Article 112. Non-Interference in Disposal of Wages. No
questioned the set-off, alleging that there was no call or notice for the employer shall limit or otherwise interfere with the freedom of any
payment of the unpaid subscription and that, accordingly, the alleged employee to dispose of his wages. He shall not in any manner force,
obligation was not enforceable. compel, or oblige his employees to purchase merchandise,
The the set-off was without lawful basis, if not premature. commodities or other property from any other person, or otherwise
As there was no notice or call for the payment of unpaid subscriptions, make use of any store or services of such employer or any other
the same is not yet due and payable. Assuming that there was a call for person.
payment of the unpaid subscription, the NLRC cannot validly set it off
against the wages and other benefits due the petitioner. Article 113 of

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 In addition to the Labor Code provisions on (b) Length of service; or
prohibitions regarding wages, the following provisions of the (c) Other logical bases of differentiation.
Civil Code should be noted:
Wage distortion presupposes a classification of
Article 1705. The laborer's wages shall be paid positions and ranking of these positions at various levels. One
in legal currency.
visualizes a hierarchy of positions with corresponding ranks
Article 1706. Withholding of the wages, except
for a debt due, shall not be made by the employer. basically in terms of wages and other emoluments. Where a
Article 1707. The laborer's wages shall be a lien significant change occurs at the lowest level of positions in
on the goods manufactured or the work done. terms of basic wage without a corresponding change in the
Article 1708. The laborer's wages shall not be other level in the hierarchy of positions, negating as a result
subject to execution or attachment, except for debts incurred thereof the distinction between one level of position from the
for food, shelter, clothing and medical attendance. next higher level, and resulting in a parity between the lowest
Article 1709. The employer shall neither seize level and he next higher level or rank, between new entrants
nor retain any tool or other articles belonging to the laborer.
and old hires, there exists a wage distinction. The concept of
wage distortion assumes an existing grouping or classification
e. Deposits for Loss or Damage
of employees which establishes distinctions among such
employees on some relevant or legitimate basis. This
Article 114. Deposits for Loss or Damage. No employer classification is reflected in a differing wage rate for each of the
shall require his worker to make deposits from which deductions
existing classes of employees [National Federation of Labor v.
shall be made for the reimbursement of loss of or damage to tools,
materials, or equipment supplied by the employer, except when the NLRC].
employer is engaged in such trades, occupations or business where The following are the elements of wage distortion:
the practice of making deductions or requiring deposits is a
recognized one, or is necessary or desirable as determined by the a. An existing hierarchy of positions with
Secretary of Labor and Employment in appropriate rules and corresponding salary rates;
regulations. ART. 115. Limitations. No deduction from the deposits
b. A significant change in the salary of a lower
of an employee for the actual amount of the loss or damage shall be
made unless the employee has been heard thereon, and his pay class without concomitant increase in the
responsibility has been clearly shown. salary rate of a higher one;
c. The elimination of the distinction between the
f. Deduction to Ensure Employment two levels; and
d. The existence of the distortion in the same
Article 117. Deduction to Ensure Employment. It shall be region of the country [Prubankers Association
unlawful to make any deduction from the wages of any employee v. Prudential Bank].
for the benefit of the employer or his representative or
intermediary as consideration of a promise of employment or Normally, a company has a wage structure or method
retention in employment.
of determining the wage of its employees. In a problem dealing
with wage distortion, the basic assumption is that there exists a
g. Retaliatory Measures grouping or classification of employees that establishes
distinctions among them on some relevant or legitimate bases
Article 118. Retaliatory Measures. It shall be unlawful [National Federation of Labor v. NLRC].
for an employer to refuse to pay or reduce the wages and benefits, Involved in the classification of employees are
discharge or in any manner discriminate against any employee who
various factors such as degrees of responsibility, the skills and
has filed any complaint or instituted any proceeding under this
Title or has testified or is about to testify in such proceedings. knowledge required, the complexity of the job, or other logical
basis of differentiation. The differing wage rate for each of the
existing classes of employees reflects this classification.
h. False Reporting
Elimination vs. Severe Contraction
Article 119. False Reporting. It shall be unlawful for any
In order to justify adjustment in wage rates, it is not
person to make any statement, report, or record filed or kept
pursuant to the provisions of this Code knowing such statement, required that there should be a complete elimination of
report or record to be false in any material respect. quantitative wage differences. The existence of “sever
contraction” of such quantitative wage differences is sufficient.
5. Wage Distortion The law mentions “intentional quantitative
Wage distortion contemplates a situation where an differences” in wage or salary rates between and among
increase in prescribed wage rates results in either of the employee-groups in an establishment. By term “intentional”
following: means that the quantitative differences had been arrived at
through the collective bargaining process and concluded by the
a. Elimination of the quantitative differences in the parties. The intention of the parties on the issue whether or not
the benefits under the CBA should be equated with those
rates of wages or salaries; or
granted by law must prevail and should be given full effect.
b. Severe contraction of intentional quantitative
differences in wage or salary rates between and
Prubankers v. Prudential Bank
among employee groups in an establishment as FACTS: On Nov 18 1993 the Regional Tripartite Wages
to effectively obliterate the distinctions and Productivity Board of Region V issued Wage Order No. RB 05-03
embodied in such wage structure based on the which provided for a Cost of Living Allowance (COLA) to workers in
following criteria: the private sector who had rendered service for at least 3 months before
(a) Skills; its effectivity, and for the same period thereafter, in the following
categories:

Page 40 of 191
  P17.50 in Naga & Legaspi; Held: In this case, the majority of the members of the
 P15.50 in the municipalities of Tabaco, Daraga & Pili and NLRC, as well as its dissenting member, agree that there is a wage
the city of Iriga; distortion arising from the bank’s implementation of the P25 wage
 P10.00 in all other areas of the Bicol Region. On Nov 23 increase; they do differ, however, on the extent of the distortion that
1993 the Regional Tripartite Wages and Productivity Board of Region can warrant the adoption of corrective measures required by the law.
VII issued Wage Order No. RB VII-03, which directed the integration The "intentional quantitative differences" in wage among employees of
of the COLA mandated pursuant to Wage Order No. RO VII-02-A into the bank has been set by the CBA to about P900 per month as of 01
the basic pay of all workers. The wage order also called for an increase January 1989. It is intentional as it has been arrived at through the
in the minimum wage rates for all workers and employees in the private collective bargaining process to which the parties are thereby
sector as follows: concluded. The Solicitor General, in recommending the grant of due
 P10.00 in Cebu, Mandaue & Lapulapu; course to the petition, has correctly emphasized that the intention of the
 P5.00 in the municipalities of Compostela, Liloan, parties, whether the benefits under a collective bargaining agreement
Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities of should be equated with those granted by law or not, unless there are
Davao, Toledo, Dumaguete, Bais, Canlaon and Tagbilaran. Pursuant to compelling reasons otherwise, must prevail and be given effect. In
the said wage orders, RESP granted a COLA of P17.50 to its employees keeping then with the intendment of the law and the agreement of the
at its Naga branch and integrated the P150.00 per month COLA into parties themselves, along with the often repeated rule that all doubts in
the basic pay of its rank-and-file employees at its Cebu, Mabolo and P. the interpretation and implementation of labor laws should be resolved
del Rosario branches. On June 7 1994, PET wrote to RESP requesting in favor of labor, we must approximate an acceptable quantitative
that a Labor Management Committee be convened to discuss and difference between and among the CBA agreed work levels.
resolve the wage distortions that resulted from the implementation of
the wage orders. PET also demanded that PET extend the application a. In organized establishments. – Where the
of the wage orders to its employees outside Region V & Region VII, application of any prescribed wage increase by
claiming that the regional implementation of the said orders resulted in
virtue of a Wage Order issued by the RTWPB results
a wage distortion.
VA: Ruled that the regional implementation of the wage in the distortions of the wage structure within an
orders by PET resulted in a wage distortion nationwide which should establishment, the employer and the union should
be resolved in accordance with Art. 124 of Labor Code. negotiate to correct the distortions. Any dispute
CA: Ruled that there was no wage distortion on the arising from wage distortions should be resolved
following grounds:
through the grievance procedure under their CBA
 The variance in the salary rates in different regions are
justified by R.A. 6727.
and, if it remains unresolved, through voluntary
 The distinctions between each employee group in the arbitration. Unless otherwise agreed by the parties in
region are maintained, as all employees were granted an increase in writing, such dispute should be decided by the
minimum wage rate. Voluntary Arbitrator or panel of Voluntary
PET’s contentions: RESP’s regional implementation: Arbitrators within ten (10) days from the time said
1. A wage distortion exists, because the implementation of
dispute was referred to voluntary arbitration.
the two Wage Orders has resulted in the discrepancy in the
compensation of employees of similar pay classification in different
regions. b. In unorganized establishments. – In cases where
2. Implementation violated the principle of equal work, there are no collective agreements or recognized
equal pay; labor unions, the employers and workers should
3. RESP-Bank when it adopted a uniform wage policy has
endeavour to correct such distortions. Any dispute
sufficiently established a management practice thus, it is estopped from
implementing a wage order for a specific region only. arising therefrom should be settled through the
ISSUE: WON a wage distortion resulted from RESP’s National Conciliation and Mediation Board
implementation of the aforecited Wage Orders? (NO) (NCMB) and, if it remains unresolved after ten (10)
HELD: NO. There was no wage distortion as there is no days of conciliation, should be referred to any of the
wage parity between employees in different rungs, instead there is a
Labor Arbiters of the appropriate branch of the
wage disparity between employees in the same rung but located in
different regions of the country. NLRC. It shall be mandatory for the NLRC to
A disparity in wages between employees holding similar conduct continuous hearings and decide the dispute
positions but in different regions does not constitute wage distortion as within twenty (20) days from the time said dispute
contemplated by law. – Different regional wages are mandated by the is submitted for compulsory arbitration.
law (specifically RA 6727) as there is recognition that there exist
regional disparities in the cost of living. RA 6727 recognizes that there
are different needs for the different situations in different regions of the c. Effect of pendency of a wage distortion dispute. –
country. The pendency of a dispute arising from wage
EQUAL PAY, EQUAL WORK: RA 6727 mandates that distortion shall not, in any way, delay the
wages in every region must be set by the particular wage board of that applicability of any increase in prescribed wage
region, based on the prevailing situation therein. Necessarily, the wages
rates pursuant to the provisions of the Wage Order.
in different regions will not be uniform. Thus, under RA 6727, the
minimum wage in Region 1 may be different from that in Region 13,
because the socioeconomic conditions in the two regions are different. Ilaw at Buklod v. NLRC
In this case, the fourth element of wage distortion is absent. Held: The strike involving the issue of wage distortion is
The Supreme Court emphasized that we are talking about different illegal as a means of resolving it. The legality of these activities is
regions with different minimum wages. This disparity in wages usually dependent on the legality of the purposes sought to be attained
between employees holding similar positions but in different regions and the means employed therefore. It goes without saying that these
does not constitute wage distortion. It is the hierarchy of positions and joint or coordinated activities may be forbidden or restricted by law or
disparity of their corresponding wages and other emoluments that are contract. In the instance of "distortions of the wage structure within an
sought to be preserved by the concept of wage distortion. Petition is establishment" resulting from "the application of any prescribed wage
DENIED. increase by virtue of a law or wage order," Section 3 of Republic Act
No. 6727 prescribes a specific, detailed and comprehensive procedure
for the correction thereof, thereby implicitly excluding strikes or
Metrobank v. NLRC

Page 41 of 191
lockouts or other concerted activities as modes of settlement of the supervisory employees a salary increase whenever rank-and-file
issue. employee are granted an increase is, in this case, unavailing.
The provision states that the employer and the union shall Basically, Metro's argument is that such increase was
negotiate to correct the distortions. Any dispute arising from wage merely a bonus given to supervisory employees. A "bonus" is an
distortions shall be resolved through the grievance procedure under amount granted and paid to an employee for his industry and loyalty
their collective bargaining agreement and, if it remains unresolved, which contributed to the success of the employer's business and made
through voluntary arbitration. Unless otherwise agreed by the parties in possible the realization of profits. It is something given in addition to
writing, such dispute shall be decided by the voluntary arbitrator or what is ordinarily received by or strictly due to the recipient.
panel of voluntary arbitrators within ten (10) calendar days from the The general rule is that a bonus is a gratuity or an act of
time said dispute was referred to voluntary arbitration. In cases where liberality which the recipient has no right to demand as a matter of
there are no collective agreements or recognized labor unions, the right.[8] A bonus, however, is a demandable or enforceable obligation
employers and workers shall endeavor to correct such distortions. Any when it is made part of the wage or salary or compensation of the
dispute arising there from shall be settled through the National employee.[9] Whether or not a bonus forms part of wages depends upon
Conciliation and Mediation Board and, if it remains unresolved after the circumstances and conditions for its payment. If it is additional
ten (10) calendar days of conciliation, shall be referred to the compensation which the employer promised and agreed to give without
appropriate branch of the National Labor Relations Commission any conditions imposed for its payment, such as success of business or
(NLRC). It shall be mandatory for the NLRC to conduct continuous greater production or output, then it is part of the wage. But if it is paid
hearings and decide the dispute within twenty (20) calendar days from only if profits are realized or if a certain level of productivity is
the time said dispute is submitted for compulsory arbitration. The achieved, it can not be considered part of the wage. Where it is not
pendency of a dispute arising from a wage distortion shall not in any payable to all but only to some employees and only when their labor
way delay the applicability of any increase in prescribed wage rates becomes more efficient or more productive, it is only an inducement
pursuant to the provisions of law or Wage Order. for efficiency, a prize therefor, not a part of the wage.
The legislative intent that solution of the problem of wage In the case at bar, the increase of P550.00 sought by private
distortions shall be sought by voluntary negotiation or arbitration, and respondent SEAM was neither an inducement nor was it contingent on
not by strikes, lockouts, or other concerted activities of the employees (a) the success of the business of petitioner Metro; or (b) the increased
or management, is made clear in the rules implementing RA 6727 production or work output of the company or (c) the realization of
issued by the Secretary of Labor and Employment pursuant to the profits. The demand for this increase was based on a company practice,
authority granted by Section 13 of the Act. Section 16, Chapter I of admitted by Metro, of granting a salary increase (and a premium) to
these implementing rules, after reiterating the policy that wage supervisory employees whenever rank-and-file employees were
distortions be first settled voluntarily by the parties and eventually by granted a salary increase. That those increases were precisely designed
compulsory arbitration, declares that, "Any issue involving wage to correct or minimize the wage distortion effects of increases given to
distortion shall not be a ground for a strike/lockout." rank-and-file employees (under their CBA or under Wage Orders),
highlights the fact that those increases were part of the wage structure
Wage Distortion, When Correctible of supervisory employees. The demanded increase therefore is not a
bonus that is generally not demandable as a matter of right. The
The employer cannot legally be obligated to correct
demanded increase, in this instance, is an enforceable obligation so far
“wage distortion” if the increase in the wages and salaries of as the supervisory employees of Metro are concerned.
the newly-hired employees was not due to a prescribed law or We conclude that the supervisory employees, who then (i.e.,
wage order but due to increases it voluntarily granted to them. on 17 April 1989) had, unlike the rank-and-file employees, no CBA
The wordings of Article 124 are clear. If it was the intention of governing the terms and conditions of their employment, had the right
the legislators to cover all kinds of wage adjustments, then the to rely on the company practice of unilaterally correcting the wage
language of the law should have been broad, not restrictive, as distortion effects of a salary increase given to the rank-and-file
it is currently phrased. employees, by giving the supervisory employees a corresponding
salary increase plus a premium. For reasons, however, shortly to be
The mere factual existence of wage distortion does
stated in the disposition of the second issue, we hold that the P550.00
not ipso facto result to an obligation to rectify it absent a law or increase is demandable by SEAM only in respect of the period
other source of obligation which requires its rectification. beginning 17 April 1989 and ending on 30 November 1989.
In the case of Bankard Employees Union v. NLRC, It is true enough that, in the present case, the wage distortion
the petitioner cited Metro Transit v. NLRC to support its claim to be corrected by the award of P550.00 increase for supervisory
that the obligation to rectify wage distortion is not confined to employees beginning 17 April 1989, was due to the time gap between
wage distortion resulting from government decreed law or the effectivity date (17 April 1989) of the increase of P500.00 per
wage order. Reliance on Metro Transit is, however, misplaced month given to rank-and-file employees under their CBA end the
effectivity date (1 December 1989) of the P800.00 increase given to
as the obligation therein to rectify the wage distortion was not
supervisory employees under their own CBA. It is also true that had
by virtue of Article 124 of the Labor Code but on account of a the P800.00 increase to supervisory employees been made retroactive
then existing “company practice” that whenever rank-and-file to 17 April 1989 by an appropriate synchronizing provision in the
employees were paid a statutorily mandated salary increase, Metro-SEAM CBA, no wage distortion would have arisen. The fact,
supervisory employees were, as a matter of practice, also paid however, remains that Metro and SEAM did not agree upon such
the same amount plus an added premium. remedy in their CBA and that the CBA increase given to rank-and-file
employees did produce a distortion effect by obliterating or drastically
reducing the previous gap between the salary rates of rank-and-file and
Metro Transit v. NLRC
supervisory employees. The point to be stressed is that considering the
Held: In respect of the issue of existence of a wage
prior practice of petitioner Metro, its supervisory employees had the
distortion, the Court finds and so holds that a wage distortion did occur
right to expect rectification of that distortion.
when the salaries of rank-and-file employees were increased by
We turn to the issue of whether the wage distortion referred
P500.00 per month on 17 April 1989 as stipulated in their CBA and no
to above was effectively rectified by petitioner Metro in accordance
corresponding increase was paid to the supervisory employees. This
with law.
fact was admitted by Atty. Virgilio C. Abejo, counsel for petitioner
This issue arises because, as already noted, the NLRC in its
Metro, during the oral hearing and Metro is bound by that admission.
30 March 1994 Decision decreed that Metro shall pay the "P550.00 per
In addition, Atty. Abejo explained that his client, as a matter
month wage increase effective April 17, 1989 and onwards" and
of practice, granted its supervisory employees a salary increase (and a
similarly ordered the payment of P600.00 per month which it found to
premium) whenever it paid its rank-and-file employees a salary
have been underpaid "effective December 1, 1990 and onwards."
increase.
It is helpful to recall the general principles laid down in
The defense of management prerogative or discretion
National Federation of Labor v. National Labor Relations
invoked by petitioner Metro in asserting that it is not obligated to grant

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Commission,[11] where the Court discussed at some length the determination of appropriate minimum wage and productivity
relatively obscure concept of wage distortion. Those principles may be measures at the regional, provincial or industry levels; and authorized
summarily stated in the following manner: the RTWPB to determine and fix the minimum wage rates applicable
(a) The concept of wage distortion assumes an existing in their respective regions, provinces, or industries therein and issue the
grouping or classification of employees which establishes distinctions corresponding wage orders, subject to the guidelines issued by the
among such employees on some relevant or legitimate basis. This NWPC. Pursuant to its wage fixing authority, the RTWPB may issue
classification is reflected in a differing wage rate for each of the existing wage orders which set the daily minimum wage rates, based on the
classes of employees. standards or criteria set by Article 124 of the Labor Code.
(b)Wage distortions have often been the result of Interpretation of the CBA Provision
government-decreed increases in minimum wages. There are, however, Furthermore, the Union’s reliance on the above quoted CBA
other causes of wage distortions, like the merger of two (2) companies provision and on the flawed arbitrator’s case disposition is really
(with differing classifications of employees and different wage rates) misplaced. Consider that in his decision, Chavez, after admitting that
where the surviving company absorbs all the employees of the NIASSI’s employees were receiving a wage rate higher than the
dissolved corporation. (In the present Metro case, as already noted, the prescribed minimum wage, proceeded to fault NIASSI for not
wage distortion arose because the effectivity dates of wage increases presenting evidence to show that the overage or excess resulted from
given to each of the two (2) classes of employees (rank-and-file and general wage increases granted by the company itself within one year
supervisory) had not been synchronized in their respective CBAs.) from the effectivity of the CBA in 1997. By simplistically utilizing the
(c) Should a wage distortion exist, there is no legal adage "doubt is resolved in labor," instead of relying on the case records
requirement that, in the rectification of that distortion by re-adjustment and the evidence adduced, the voluntary arbitrator extended the
of the wage rates of the differing classes of employees, the gap which coverage of WO RXIII-02 to include those who, by the terms of the
had previously or historically existed be restored in precisely the same order, are not supposed to receive the benefit. If only the voluntary
amount. In other words, correction of wage distortion may be done by arbitrator was circumspect enough to consider the facts on hand, he
re-establishing a substantial or significant gap (as distinguished from would have seen that the CBA provision on noncreditability finds no
the historical gap) between the wage rates of the differing classes of application in the present case, because creditability is not the real issue
employees. in this case. And neither is the interpretation of the CBA provision.
(d) The re-establishment of a significant difference in wage
rates may be the result of resort to grievance procedures or collective Restoration of Substantial Differentiation
bargaining negotiations.
It must be noted that in correcting wage distortion,
In the present case, the Court must confront the task of
determining whether the CBA forged by Metro and SEAM had, along the law does not require the difference which had previously
with the award of P550.00 per month from 17 April 1989 to 1 existed between and among the employees of different classes
December 1989, referred to in Part I above, adequately corrected the be restored in exactly the same amount. What is required is
wage distortion. substantial difference in such wage rates [National Federation
After careful examination of the provisions of the CBA of Labor v. NLRC].
between Metro and SEAM, in particular the provisions relating to
anniversary salary increases every 1 December beginning 1989 to 6. Minimum Wage
1991, we believe and so hold that together with the increase of P550.00
referred to in Part I above, those provisions will have adequately
rectified the wage distortion which arose in respect of rank-and-file and Article 99. Regional Minimum Wages. - The minimum
supervisory employees. wage rates for agricultural and non-agricultural employees and
workers in each and every region of the country shall be those
prescribed by the Regional Tripartite Wages and Productivity
Nasipit v. Nasipit Boards.
Held: Wage Order RXIII-02’s coverage is specific Section
1 of WO RXIII-02, an Section 1(a) of the IRR provides the Coverage
which states that “The minimum wage rates prescribed under the Order
"Statutory minimum wage" is the lowest wage rate
shall apply to the minimum wage earners in the private sector fixed by law that an employer can pay his workers.
regardless of their position, designation or status and irrespective of the Compensation which is less than such minimum rate is
method by which their wages are paid.” considered an underpayment that violates the law.
Moreover, Section 1(c) of the IRR provides that “Workers Regional minimum wage rates refer to the lowest
and employees who, prior to the effectivity of the Order were receiving basic wage rates that an employer can pay his workers, as fixed
a basic wage rate per day or its monthly equivalent of more than those by the RTWPBs, and which shall not be lower than the
prescribed under the Order, may receive wage increases through the
applicable statutory minimum wage rates.
correction of wage distortions in accordance with Section 1, Rule IV of
this Rules.
The employer cannot exempt himself from liability
Under the principle of expressio unius est exclusio alterius, to pay minimum wages because of poor financial condition of
the express mention of one excludes all others. The wage order is the company, the payment of minimum wages not being
specific enough to cover only minimum wage earners. Necessarily dependent on the employer's ability to pay. Thus, in one case,
excluded are those receiving rates above the prescribed minimum the heirs of a market cleaner of the Municipality of Ilagan sued
wage. The only situation when employees receiving a wage rate higher for underpayments under the Minimum Wage Law. The
than that prescribed by the Wage Order may still benefit from such municipality raised the defense that it was not liable for lack of
order is through the correction of wage distortions.
funds. It was held that the lack of funds is not a valid defense
Authority of RTWPB
Moreover, as discussed in Metropolitan Bank and Trust
on the part of the municipality to excuse the latter from paying
Company, Inc. vs National Wages and Productivity Commission: the minimum wage because the payment of such wage is
R.A. No. 6727 declared it a policy of the State to rationalize mandatory statutory obligation that is not dependent upon one's
the fixing of minimum wages and to promote productivity ability to pay [De Radio v. Municipality of Ilagan].
improvement and gain-sharing measures to ensure a decent standard of The acceptance by an employee of the wages paid
living for the workers and their families; to guarantee the rights of labor him without objection does not give rise to estoppel precluding
to its just share in the fruits of production; to enhance employment him from suing for the difference between the amount received
generation in the countryside through industrial dispersal; and to allow
and the amount he should have received pursuant to a valid
business and industry reasonable returns on investment, expansion and
growth.
minimum wage law where it does not appear that the employer
In line with its declared policy, R.A. No. 6727 created the changed his position to his own prejudice.
NWPC, vested with the power to prescribe rules and guidelines for the

Page 43 of 191
 7. 13th Month Pay (P.D. 851) replicated, without regard to the time spent in producing the
same.
a. Coverage The term "its equivalent" as used in item D.2 above
All employers are required to pay their rank-and-file shall include Christmas bonus, midyear bonus, cash bonuses,
employees thirteenth-month pay, regardless of the nature of and other payments amounting to not less than one-twelfth
their employment and irrespective of the methods by which (1/12) of the basic salary but shall not include cash and stock
their wages are paid, provided they worked for at least one (1) dividends, cost of living allowance, and all other allowances
month during a calendar year. The thirteenth-month pay should regularly enjoyed by the employee, as well as non-monetary
be given to the employees not later than December 24 of every benefits.
year. PD 851 contemplates the situation of land-based
The Labor Code, as amended, distinguishes a rank- workers, and not of seafarers who generally earn more than
and-file employee from a managerial employee. A managerial domestic land-based workers [Petroleum v. NLRC].
employee is one who is vested with powers or prerogatives to
lay down and execute management policies and/or to hire, d. Time of Payment
transfer, suspend, layoff, recall, discharge, assign, or discipline The thirteenth-month pay shall be paid not later than
employees, or to effectively recommend such managerial December 24 of every year. An employer, however, may give
actions. All employees not falling within this definition are to his or her employees one-half (1/2) of the thirteenth month
considered rank-and-file employees. The above distinction pay before the opening of the regular school year and the
shall be used as guide for the purpose of determining who are remaining half on or before December 24 of every year. The
rank-and-file employees entitled to the thirteenth-month pay. frequency of payment of this monetary benefit may be the
subject of an agreement between the employer and the
b. Minimum Amount recognized/collective bargaining agent of the employees.
The thirteenth-month pay shall not be less than one-
twelfth (1/12) of the total basic salary earned by an employee e. Thirteenth-Month Pay for Certain
in a calendar year. The "basic salary" of an employee for the Types of Employees
purpose of computing the thirteenthmonth pay shall include all Employees who are paid on piecework basis are
remunerations or earnings paid by his or her employer for entitled to the thirteenth-month pay.
services rendered. It does not include allowances and monetary Government employees working part-time in a
benefits which are not considered or integrated as part of the private enterprise, including private educational institutions, as
regular or basic salary, such as the cash equivalent of unused well as employees working in two or more private firms,
vacation and sick leave credits, overtime, premium, night shift whether on full-time or part-time basis, are entitled to the
differential and holiday pay, and cost of living allowance thirteenth- month pay from all their private employers,
(COLA). However, these salary-related benefits should be regardless of their total earnings from each of their employers.
included as part of the basic salary in the computation of the Employees who are paid a fixed or guaranteed wage
thirteenth-month pay if these are treated as part of the basic plus commission are also entitled to the thirteenth-month pay,
salary of the employees, through individual or collective based on their earnings during the calendar year (i.e., on both
agreement, company practice or policy. their fixed or guaranteed wage and commission).
In the consolidated cases of Boie Takeda Chemicals,
c. Exempted Employers Inc. vs. Dionisio de la Serna, and Philippine Fuji Xerox
The following employers are not covered by PD 851: Corporation vs. Cresenciano B. Trajano, the Supreme Court
ruled that commissions, while included in the generic term
(i) The government and any of its political wage, are not part of "basic salary/wage" and therefore should
subdivisions, including government-owned not be included in computing the thirteenth-month pay. Thus:
and controlled corporations, except those
In remunerative schemes consisting of a fixed or
corporations operating essentially as private
guaranteed wage plus commission, the fixed or guaranteed
subsidiaries of the government; wage is patently the "basic salary" for this is what the
(ii) Employers who are already paying their employee receives for a standard work period.
employees thirteenth- month pay or more in a Commissions are given for extra efforts exerted in
calendar year or its equivalent at the time of consummating sales or other related transactions. They are,
the issuance of PD 851; as such, additional pay, which this Court has made clear do
not form part of the "basic salary" (228 SCRA 329 [1993]).
(iii) Persons in the personal service of another in
relation to such workers; and f. Resigned or Separated Employee
(iv) Employers of those who are paid on purely An employee who has resigned or whose services are
commission, boundary or task basis, and those terminated at any time before the time of payment of the
who are paid a fixed amount for performing thirteenth-month pay is entitled to this monetary benefit in
specific work, irrespective of the time proportion to the length of time he or she has worked during the
consumed in the performance thereof (except year, reckoned from the time he or she has started working
those workers who are paid on piece-rate during the calendar year up to the time of his or her resignation
basis, in which case their employer shall grant or termination from the service. Thus, if he or she worked only
them thirteenth-month pay. from January to September, his or her proportionate thirteenth-
month pay should be equal to one-twelfth (1/12) of his or her
As used herein, “workers paid on piece-rate basis” total basic salary earned during that period.
shall refer to those who are paid a standard amount for every
piece or unit of work produced that is more or less regularly C. LEAVES

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 1. Service Incentive Leave reckoned from the date the employee started working,
including authorized absences and paid regular holidays
unless the working days in the establishment as a matter of
Article 95. Right to Service Incentive Leave. (a) Every
practice or policy, or that provided in the employment
employee who has rendered at least one year of service shall be
contract is less than 12 months, in which case said period
entitled to a yearly service incentive leave of five days with pay.
shall be considered as one year.
(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 The phrase “leave with pay” means that the employee
establishments regularly employing less than ten employees or in is entitled to his full compensation during his leave of absence
establishments exempted from granting this benefit by the from work.
Secretary of Labor and Employment after considering the viability The term “at least one year of service” should mean
or financial condition of such establishment. service within 12 months, whether continuous or broken,
(c) The grant of benefit in excess of that provided herein reckoned from the date the employee started working,
shall not be made a subject of arbitration or any court or
including authorized absences and paid regular holidays, unless
administrative action.
the number of working days in the establishment as a matter of
practice or policy, or that provided in the employment contract,
a. Coverage
is less than 12 months, in which case, said period should be
Section 1, Rule V, Book III of the IRR provides: considered as 1 year for the purpose of determining entitlement
to the service incentive leave benefit [Integrated Contractor
SECTION 1. Coverage. — This rule shall apply
and Plumbing Works v. NLRC].
to all employees except:
(a) Those of the government and any of its In JPL Marketing v. Court of Appeals, where an
political subdivisions, including government-owned and employee was never paid his service incentive leave during all
controlled corporations; the time he was employed, it was held that the same should be
(b) Domestic helpers and persons in the personal computed not from the start of employment but a year after
service of another; commencement of service, for it is only then that the employee
(c) Managerial employees as defined in Book is entitled to said benefit. This is because the entitlement to said
Three of this Code;
benefit accrues only from the time he has rendered at least one
(d) Field personnel and other employees whose
year of service to his employer. The computation thereof should
performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely only be up to the date of termination of employment. There is
commission basis, or those who are paid a fixed amount for no cause for granting said incentive to one who has already
performing work irrespective of the time consumed in the terminated his relationship with the employer.
performance thereof;
(e) Those who are already enjoying the benefit 2. Maternity Leave (R.A. 11210)
herein provided;
(f) Those enjoying vacation leave with pay of at
Section 3. Grant of Maternity Leave.— All covered
least five days; and
female workers in government and the private sector, including
(g) Those employed in establishments regularly
those in the informal economy, regardless of civil status or the
employing less than ten employees.
legitimacy of her child, shall be granted one hundred five (105)
days maternity leave with full pay and an option to extend for an
In David v. Macasio, the payment of an employee on additional thirty (30) days without pay: Provided, That in case the
task or pakyaw basis alone is insufficient to exclude one from worker qualifies as a solo parent under Republic Act No. 8972, or
the coverage of SIL and holiday pay. They are exempted from the "Solo Parents’ Welfare Act", the worker shall be granted an
the coverage of Title I (including the holiday and SIL pay) only additional fifteen (15) days maternity leave with full pay.
if they qualify as “field personnel.” The IRR therefore validly Enjoyment of maternity leave cannot be deferred but
qualifies and limits the general exclusion of “workers paid by should be availed of either before or after the actual period of
delivery in a continuous and uninterrupted manner, not exceeding
results” found in Article 82 from the coverage of holiday and
one hundred five (105) days, as the case may be.
SIL pay. This is the only reasonable interpretation since the Maternity leave shall be granted to female workers in
determination of excluded workers who are paid by results every instance of pregnancy, miscarriage or emergency
from the coverage of Title I is “determined by the Secretary of termination of pregnancy, regardless of frequency: Provided, That
Labor in appropriate regulations.” for cases of miscarriage or emergency termination of pregnancy,
The Court has already held that company drivers who sixty (60) days maternity leave with full pay shall be granted.
are under the control and supervision of management officers
— like respondent herein — are regular employees entitled to Section 4. Maternity Leave for Female Workers in the
benefits including service incentive leave pay [HSY Marketing Public Sector.— Any pregnant female worker in the government
v. Villastique]. service, regardless of employment status, in National Government
Agencies (NGAs), Local Government Units (LGUs), Government-
Owned or -Controlled Corporations (GOCCs), or State
b. Right to Service Incentive Leave
Universities and Colleges (SUCs), shall be granted a maternity
Sections 2 and 3, Rule V, Book III of the IRR leave of one hundred five (105) days with full pay regardless if the
provides: delivery was normal or caesarian: Provided, That, in case the
employee qualifies as a solo parent under Republic Act No. 8972,
SECTION 2. Right to service incentive leave. — or the "Solo Parents’ Welfare Act", the employee shall be paid an
Every employee who has rendered at least one year of additional maternity benefit of fifteen (15) days. An additional
service shall be entitled to a yearly service incentive leave maternity leave of thirty (30) days, without pay, can be availed of,
of five days with pay. at the option of the female worker: Provided, further, That, the
head of the agency shall be given due notice, in writing, at least
SECTION 3. Definition of certain terms. — The forty-five (45) days before the end of her maternity leave: Provided,
term "at least one-year service" shall mean service for not finally, That no prior notice shall be necessary in the event of a
less than 12 months, whether continuous or broken

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medical emergency but subsequent notice shall be given to the head
of the agency. Section 6. Allocation of Maternity Leave Credits.— Any
Maternity leave of sixty (60) days, with full pay, shall be female worker entitled to maternity leave benefits as provided for
granted for miscarriage or emergency termination of pregnancy. herein may, at her option, allocate up to seven (7) days of said
benefits to the child’s father, whether or not the same is married to
Section 5. Maternity Leave for Female Workers in the the female worker: Provided, That in the death, absence, or
Private Sector.— Any pregnant female worker in the private sector incapacity of the former, the benefit may be allocated to an
shall be granted a maternity leave of one hundred five (105) days alternate caregiver who may be a relative within the fourth degree
with full pay, regardless of whether she gave birth via caesarian of consanguinity or the current partner of the female worker
section or natural delivery, while maternity leave of sixty (60) days sharing the same household, upon the election of the mother taking
with full pay shall be granted for miscarriage or emergency into account the best interests of the child: Provided, further, That
termination of pregnancy. written notice thereof is provided to the employers of the female
(a) A female Social Security System (SSS) member who worker and alternate caregiver: Provided, furthermore, That this
has paid at least three (3) monthly contributions in the twelve (12)- benefit is over and above that which is provided under Republic
month period immediately preceding the semester of her Act No. 8187, or the "Paternity Leave Act of 1996": Provided,
childbirth, miscarriage, or emergency termination of pregnancy finally, That in the event the beneficiary female worker dies or is
shall be paid her daily maternity benefit which shall be computed permanently incapacitated, the balance of her maternity leave
based on her average monthly salary credit for one hundred five benefits shall accrue to the father of the child or to a qualified
(105) days, regardless of whether she gave birth via caesarian caregiver as provided above.
section or natural delivery, subject to the following conditions:
(1) That the female worker shall have notified her Section 7. Maternity Leave for Women Regardless of Civil
employer of her pregnancy and the probable date of her childbirth, Status.— All female workers in the government and female
which notice shall be transmitted to the SSS in accordance with the members of the SSS, regardless of their civil status, shall be granted
rules and regulations it may provide; maternity leave, with full pay, upon compliance with the preceding
(2) That the full payment shall be advanced by the section.
employer within thirty (30) days from the filing of the maternity
leave application;
Section 8. Maternity Leave With Pay in Case of
(3) That payment of daily maternity benefits shall be a
Childbirth, Miscarriage, or Emergency Termination of Pregnancy
bar to the recovery of sickness benefits provided under Republic
After the Termination of an Employee’s Service.— Maternity leave
Act No. 1161, as amended, for the same period for which daily
with full pay shall be granted even if the childbirth, miscarriage, or
maternity benefits have been received;
emergency termination of pregnancy occurs not more than fifteen
(4) That the SSS shall immediately reimburse the
(15) calendar days after the termination of an employee’s service,
employer of one hundred percent (100%) of the amount of
as her right thereto has already accrued: Provided, That such
maternity benefits advanced to the female worker by the employer
period is not applicable when the employment of the pregnant
upon receipt of satisfactory and legal proof of such payment; and
woman worker has been terminated without just cause, in which
(5) That if a female worker should give birth or suffer a
case the employer will pay her the full amount equivalent to her
miscarriage or emergency termination of pregnancy without the
salary for one hundred five (105) days for childbirth and sixty (60)
required contributions having been remitted for her by her
days for miscarriage or emergency termination of pregnancy based
employer to the SSS, or without the latter having been previously
on her full pay, in addition to the other applicable daily cash
notified by the employer of the time of the pregnancy, the employer
maternity benefits that she should have received had her
shall pay to the SSS damages equivalent to the benefits which said
employment not been illegally terminated.
female member would otherwise have been entitled to.
In case the employee qualifies as a solo parent under
Republic Act No. 8972, or the "Solo Parents’ Welfare Act", the Section 9. Maternity Leave Credits.— The maternity
employee shall be paid an additional maternity benefit of fifteen leave can be credited as combinations of prenatal and postnatal
(15) days. leave as long as it does not exceed one hundred five (105) days and
(b) An additional maternity leave of thirty (30) days, provided that compulsory postnatal leave shall not be less than
without pay, can be availed of, at the option of the female sixty (60) days.
worker: Provided, That the employer shall be given due notice, in
writing, at least forty-five (45) days before the end of her maternity Section 10. Maternity Leave Benefits for Women in the
leave: Provided, further, That no prior notice shall be necessary in Informal Economy and Voluntary Contributors to the SSS.—
the event of a medical emergency but subsequent notice shall be Maternity benefits shall cover all married and unmarried women,
given to the head of the agency. including female workers in the informal economy.
(c) Workers availing of the maternity leave period and Female workers in the informal economy are entitled to
benefits must receive their full pay. Employers from the private maternity leave benefits if they have remitted to the SSS at least
sector shall be responsible for payment of the salary differential three (3) monthly contributions in the .twelve (12)-month period
between the actual cash benefits received from the SSS by the immediately preceding the semester of her childbirth, miscarriage,
covered female workers and their average weekly or regular wages, or emergency termination of pregnancy.
for the entire duration of the maternity leave, with the following
exceptions, subject to the guidelines to be issued by the Department Section 11. Maternity Benefits for Female Workers Who
of Labor and Employment (DOLE): are Non-Members of the SSS.— Female workers who are neither
(1) Those operating distressed establishments; voluntary nor regular members of the SSS shall be governed by the
(2) Those retail/service establishments and other Philippine Health Insurance Corporation (PhilHealth) Circular
enterprises employing not more than ten (10) workers; No. 022-2014 or the "Social Health Insurance Coverage and
(3) Those considered as micro-business enterprises and Benefits for Women About to Give Birth".
engaged in the production, processing, or manufacturing of
products or commodities including agro-processing, trading, and
services, whose total assets are not more than Three million pesos Section 12. Maternity Leave of a Female Worker With
(₱3,000,000.00); and Pending Administrative Case. — The maternity leave benefits
(4) Those who are already providing similar or more granted under this Act shall be enjoyed by a female worker in the
than the benefits herein provided. government service and in the private sector even if she has a
Provided, That said exemptions shall be subject to an pending administrative case.
annual submission of a justification by the employer claiming
exemption for the approval of the DOLE.

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 Section 13. Maternity Leave for Female National
Athletes.— In the event a national athlete becomes pregnant, she a. Under Magna Carta of Women (RA
will be referred to the team physician or an accredited physician of 9710)
the Philippine Sports Commission (PSC) or an obstetrician-
gynecologist to determine her fitness to continue training. She will
be allowed to participate in all team-related activities, unless the SECTION 18. Special Leave Benefits for Women. —
physician advises that participation is not medically safe or should A woman employee having rendered continuous aggregate
be limited. Upon medical advice, she shall go on maternity leave employment service of at least six (6) months for the last twelve (12)
until cleared to return to training. She shall continue receiving her months shall be entitled to a special leave benefit of two (2) months
allowance and be entitled to the same benefits while on maternity with full pay based on her gross monthly compensation following
leave prior to childbirth and up to six (6) months after, unless she surgery caused by gynecological disorders.
can resume sooner as advised by her physician, in which case, she
will be entitled to the allowance and benefits she had prior to b. Under Anti-Violence Against Women
pregnancy: Provided, That a female national athlete employed in and their Children of 2004 (RA 9262)
the public sector shall not receive double compensation or benefits.

SECTION 43. Entitled to Leave. – Victims under this Act

Section 14. Non-Diminution of Benefits. - Nothing in this shall be entitled to take a paid leave of absence up to ten (10) days
Act shall be construed as to diminish existing maternity benefits in addition to other paid leaves under the Labor Code and Civil
currently enjoyed whether or not these are granted under collective Service Rules and Regulations, extendible when the necessity arises
bargaining agreements (CBA) or present laws, if the same are more as specified in the protection order.
beneficial to the female worker. Any other working arrangement Any employer who shall prejudice the right of the
which the female worker shall agree to, during the additional person under this section shall be penalized in accordance with the
maternity leave period, shall be allowed: Provided, That this shall provisions of the Labor Code and Civil Service Rules and
be consented to in writing by the female worker and shall primarily Regulations. Likewise, an employer who shall prejudice any person
uphold her maternal functions and the requirements of postnatal for assisting a co-employee who is a victim under this Act shall
care. likewise be liable for discrimination.

Section 15. Security of Tenure. - Those who avail of the 6. Compassionate Leaves
benefits of this Act, whether in the government service or private
sector, shall be assured of security of tenure. As such, the exercise
As proposed by Rillo in House Bill No. 4340, private
of this option by them shall not be used as basis for demotion in and public sector employees would be entitled to seven days of
employment or termination. The transfer to a parallel position or paid bereavement leave following the death of a spouse,
reassignment from one organizational unit to another in the same biological or adoptive parent or child, or a full or half-blood
agency or private enterprise shall be allowed: Provided, That it brother or sister.
shall not involve a reduction in rank, status, salary, or otherwise
amount to constructive dismissal. D. SPECIAL GROUPS OF EMPLOYEES

3. Paternity Leave (R.A. 8187) 1. Women

Section 2. Notwithstanding any law, rules and a. Discrimination

regulations to the contrary, every married male employee in the
private and public sectors shall be entitled to a paternity leave of
Article 133. Discrimination Prohibited. It shall be
seven (7) days with full pay for the first four (4) deliveries of the
legitimate spouse with whom he is cohabiting. The male employee unlawful for any employer to discriminate against any woman
employee with respect to terms and conditions of employment
applying for paternity leave shall notify his employer of the
solely on account of her sex.
pregnancy of his legitimate spouse and the expected date of such
delivery. The following are acts of discrimination:
(a) Payment of a lesser compensation, including wage,
For purposes of this Act, delivery shall include
salary or other form of remuneration and fringe benefits, to a
childbirth or any miscarriage.
female employee as against a male employee, for work of equal
value; and
Section 3. Definition of Term. – For purposes of this (b) Favoring a male employee over a female employee
Act, Paternity Leave refers to the benefits granted to a married with respect to promotion, training opportunities, study and
male employee allowing him not to report for work for seven (7) scholarship grants solely on account of their sexes.
days but continues to earn the compensation therefor, on the Criminal liability for the willful commission of any
condition that his spouse has delivered a child or suffered a unlawful act as provided in this article or any violation of the rules
miscarriage for purposes of enabling him to effectively lend and regulations issued pursuant to Section 2 hereof96 shall be
support to his wife in her period of recovery and/or in the nursing penalized as provided in Articles 288 and 289 of this Code:
of the newly-born child. Provided, That the institution of any criminal action under this
provision shall not bar the aggrieved employee from filing an
4. Solo Parent Leave (R.A. 8972) entirely separate and distinct action for money claims, which may
include claims for damages and other affirmative reliefs. The
actions hereby authorized shall proceed independently of each
Section 8. Parental Leave. - In addition to leave
other.
privileges under exiting laws, a forfeitable and noncumulative
parental leave of not more than seven (7) working days with pay
every year shall be granted to any solo parent employee, regardless b. Stipulation Against Marriage
of employment status, who has rendered service of at least six (6)
months: Provided, That the parental leave benefit may be availed Article 134. Stipulation Against Marriage. It shall be
of by the solo parent employees in the government and the private unlawful for an employer to require as a condition of employment
sector. or continuation of employment that a woman employee shall not
get married, or to stipulate expressly or tacitly that upon getting
5. Leave Benefits for Women Workers married, a woman employee shall be deemed resigned or
separated, or to actually dismiss, discharge, discriminate or
Page 47 of 191
otherwise prejudice a woman employee merely by reason of her be valid provided it reflects an inherent quality reasonably
marriage. necessary for satisfactory job performance. Petitioner's
policy is not only in derogation of the provisions of Article
The doctrine of management prerogative gives an 136 of the Labor Code on the right of a woman to be free
from any kind of stipulation against marriage in connection
employer the right to "regulate, according to his own discretion
with her employment, but it likewise assaults good morals
and judgment, all aspects of employment, including hiring, and public policy, tending as it does to deprive a woman of
work assignments, working methods, the time, place and the freedom to choose her status, a privilege that by all
manner of work, work supervision, transfer of employees, lay- accounts inheres in the individual as an intangible and
off of workers, and discipline, dismissal, and recall of inalienable right
employees." In Cadiz v. Brent, Brent imposed on Cadiz the
condition that she subsequently contract marriage with her then According to the Supreme Court, to justify a bona
boyfriend for her to be reinstated. According to Brent, this is fide occupational qualification the employer must the two
"in consonance with the policy against encouraging illicit or (2) factors:
common-law relations that would subvert the sacrament of
marriage." eighed against these safeguards, it becomes apparent c. That the employment qualification is reasonably
that Brent's condition is coercive, oppressive and related to the essential operation of the job
discriminatory. There is no rhyme or reason for it. It forces involved.
Cadiz to marry for economic reasons and deprives her of the d. That there is a factual basis for believing that all
freedom to choose her status, which is a privilege that inheres persons meeting the qualification would be
in her as an intangible and inalienable right. While a marriage unable to properly perform the duties of the job.
or no-marriage qualification may be justified as a "bona fide
occupational qualification," Brent must prove two factors In Duncan v. Glaxo Welcome, the prohibition against
necessitating its imposition, viz: (1) that the employment marriage embodied in the following stipulation in the
qualification is reasonably related to the essential operation employment contract was declared valid:
of the job involved; and (2) that there is a factual basis for
believing that all or substantially all persons meeting the “10. You agree to disclose to management any
qualification would be unable to properly perform the duties of existing or future relationship you may have, either by
the job. Brent has not shown the presence of neither of these consanguinity or affinity or co-employees or employees of
factors. Perforce, the Court cannot uphold the validity of said competing drug companies. Should it pose a possible
condition. conflict of interest in management discretion, you agree to
A requirement that a woman employee must remain resign voluntarily from the Company as a matter of
Company policy.”
unmarried could be justified as a "bona fide occupational
qualification," or BFOQ, where the particular requirements of
The Supreme Court ruled that the dismissal based on
the job would justify the same, but not on the ground of a
above stipulation in the employment contract is a valid exercise
general principle, such as the desirability of spreading work in
of management prerogative. The prohibition against personal
the workplace. A requirement of that nature would be valid
provided it reflects an inherent quality reasonably necessary or marital relationships with employees of competitor
for satisfactory job performance. The cases of Duncan and companies upon its employees was held reasonable under the
circumstances because relationships of this nature might
PT&T instruct us that the requirement of reasonableness must
compromise the interests of the company. In laying down the
be clearly established to uphold the questioned employment
assailed company policy, the employer only aims to protect its
policy. The employer has the burden to prove the existence of
interests against the possibility that a competitor company will
a reasonable business necessity. The burden was successfully
discharged in Duncan but not in PT&T. gain access to its secrets and procedures. Thus:
In PT&T v. NLRC, the Supreme Court held that
Tecon’s wife holds a sensitive supervisory
position as Branch Coordinator in her employer-company
Private respondent Grace de Guzman was
which requires her to work in close coordination with
illegally dismissed. In this case, petitioner's policy of not District Managers and Medical Representatives. She
accepting or considering as disqualified from work any
therefore takes an active participation in the market war
woman worker who contracts marriage runs afoul of the test
characterized as it is by stiff competition among
of, and the right against discrimination, afforded all women pharmaceutical companies. Moreover, and this is
workers by our labor laws and by no less than the
significant, petitioner’s sales territory covers Camarines Sur
Constitution. Contrary to petitioner's assertion that it
and Camarines Norte while his wife is supervising a branch
dismissed private respondent from employment on account
of her employer in Albay. The proximity of their areas of
of her dishonesty, the record discloses clearly that her ties
responsibility, all in the same Bicol Region, renders the
with the company were dissolved principally because of the conflict of interest not only possible, but actual, as learning
company's policy that married women are not qualified for
by one spouse of the other’s market strategies in the region
employment in PT&T, and not merely because of her
would be inevitable.
supposed acts of dishonesty. By the very nature of his employment, a drug
It is not relevant that the rule is not directed
salesman or medical representative is expected to travel. He
against all women but just against married women. And,
should anticipate reassignment according to the demands of
where the employer discriminates against married women, their business. It would be a poor drug corporation which
but not against married men, the variable is sex and the
cannot even assign its representatives or detail men to new
discrimination is unlawful. Upon the other hand, a
markets calling for opening or expansion or to areas where
requirement that a woman employee must remain
the need for pushing its products is great. More so if such
unmarried could be justified as a "bona fide occupational
reassignments are part of the employment contract.
qualification," or BFOQ, where the particular requirements
of the job would justify the same, but not on the ground of
a general principle, such as the desirability of spreading Star Paper v. Simbol
work in the workplace. A requirement of that nature would

Page 48 of 191
 Held: We do not find a reasonable business necessity in this
case. Petitioners’ sole contention that "the company did not just want Section 12. Employment of Children - Children below
to have two (2) or more of its employees related between the third fifteen (15) years of age shall not be employed except:
degree by affinity and/or consanguinity" is lame. That the second 1) When a child works directly under the sole
paragraph was meant to give teeth to the first paragraph of the responsibility of his/her parents or legal guardian and where only
questioned rule is evidently not the valid reasonable business necessity members of his/her family are employed: Provided, however, That
required by the law. his/her employment neither endangers his/her life, safety, health,
It is significant to note that in the case at bar, respondents and morals, nor impairs his/her normal development: Provided,
were hired after they were found fit for the job, but were asked to resign further, That the parent or legal guardian shall provide the said
when they married a co-employee. Petitioners failed to show how the child with the prescribed primary and/or secondary education; or
marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, 2) Where a child's employment or participation in
then an employee of the Repacking Section, could be detrimental to its public entertainment or information through cinema, theater,
business operations. Neither did petitioners explain how this detriment radio, television or other forms of media is essential: Provided, That
will happen in the case of Wilfreda Comia, then a Production Helper in the employment contract is concluded by the child's parents or
the Selecting Department, who married Howard Comia, then a helper legal guardian, with the express agreement of the child concerned,
in the cutter-machine. The policy is premised on the mere fear that if possible, and the approval of the Department of Labor and
employees married to each other will be less efficient. If we uphold the Employment: Provided, further, That the following requirements in
questioned rule without valid justification, the employer can create all instances are strictly complied with:
policies based on an unproven presumption of a perceived danger at the (a) The employer shall ensure the protection, health,
expense of an employee’s right to security of tenure. safety, morals and normal development of the child;
Disparate Impact Theory (b) The employer shall institute measures to prevent the
Petitioners contend that their policy will apply only when child's exploitation or discrimination taking into account the
one employee marries a co-employee, but they are free to marry system and level of remuneration, and the duration and
persons other than co-employees. The questioned policy may not arrangement of working time; and
facially violate Article 136 of the Labor Code but it creates a (c) The employer shall formulate and implement,
disproportionate effect and under the disparate impact theory, the only subject to the approval and supervision of competent authorities, a
way it could pass judicial scrutiny is a showing that it is reasonable continuing program for training and skills acquisition of the child.
despite the discriminatory, albeit disproportionate, effect. The failure In the above-exceptional cases where any such child may
of petitioners to prove a legitimate business concern in imposing the be employed, the employer shall first secure, before engaging such
questioned policy cannot prejudice the employee’s right to be free from child, a work permit from the Department of Labor and
arbitrary discrimination based upon stereotypes of married persons Employment which shall ensure observance of the above
working together in one company. requirements.
Lastly, the absence of a statute expressly prohibiting marital For purposes of this Article, the term "child" shall apply
discrimination in our jurisdiction cannot benefit the petitioners. The to all persons under eighteen (18) years of age.
protection given to labor in our jurisdiction is vast and extensive that
we cannot prudently draw inferences from the legislature’s silence that
married persons are not protected under our Constitution and declare Section 12-A. Hours of Work of a Working Child. - Under
valid a policy based on a prejudice or stereotype. Thus, for failure of the exceptions provided in Section 12 of this Act, as amended:
petitioners to present undisputed proof of a reasonable business (1) A child below fifteen (15) years of age may be allowed
necessity, we rule that the questioned policy is an invalid exercise of to work for not more than twenty (20) hours a week: Provided, That
management prerogative. Corollarily, the issue as to whether the work shall not be more than four (4) hours at any given day;
respondents Simbol and Comia resigned voluntarily has become moot (2) A child fifteen (15) years of age but below eighteen
and academic. (18) shall not be allowed to work for more than eight (8) hours a
day, and in no case beyond forty (40) hours a week;
(3) No child below fifteen (15) years of age shall be
c. Prohibited Acts allowed to work between eight o'clock in the evening and six o'clock
in the morning of the following day and no child fifteen (15) years
Article 135. Prohibited Acts. It shall be unlawful for any of age but below eighteen (18) shall be allowed to work between ten
employer: o'clock in the evening and six o'clock in the morning of the
(1) To deny any woman employee the benefits provided following day."
for in this Chapter or to discharge any woman employed by him Section 12-B. Ownership, Usage and Administration of
for the purpose of preventing her from enjoying any of the benefits the Working Child's Income. - The wages, salaries, earnings and
provided under this Code; other income of the working child shall belong to him/her in
(2) To discharge such woman on account of her ownership and shall be set aside primarily for his/her support,
pregnancy, or while on leave or in confinement due to her education or skills acquisition and secondarily to the collective
pregnancy; needs of the family: Provided, That not more than twenty percent
(3) To discharge or refuse the admission of such woman (20%) of the child's income may be used for the collective needs of
upon returning to her work for fear that she may again be the family.
pregnant. The income of the working child and/or the property
acquired through the work of the child shall be administered by
both parents. In the absence or incapacity of either of the parents,
d. Classification of Certain Women
the other parent shall administer the same. In case both parents
Workers are absent or incapacitated, the order of preference on parental
authority as provided for under the Family Code shall apply.
Article 136. Classification of Certain Women Workers. Section 12-C. Trust Fund to Preserve Part of the Working
Any woman who is permitted or suffered to work, with or without Child's Income. - The parent or legal guardian of a working child
compensation, in any night club, cocktail lounge, massage clinic, below eighteen (18) years of age shall set up a trust fund for at least
bar or similar establishments under the effective control or thirty percent (30%) of the earnings of the child whose wages and
supervision of the employer for a substantial period of time as salaries from work and other income amount to at least two
determined by the Secretary of Labor and Employment, shall be hundred thousand pesos (P200,000.00) annually, for which he/she
considered as an employee of such establishment for purposes of shall render a semi-annual accounting of the fund to the
labor and social legislation. Department of Labor and Employment, in compliance with the
provisions of this Act. The child shall have full control over the
2. Minors trust fund upon reaching the age of majority.

Page 49 of 191
 Section 12-D. Prohibition Against Worst Forms of Child Section 7. Guarantee of Privacy. – Respect for the
Labor. - No child shall be engaged in the worst forms of child labor. privacy of the domestic worker shall be guaranteed at all times and
The phrase "worst forms of child labor" shall refer to any of the shall extend to all forms of communication and personal effects.
following: This guarantee equally recognizes that the domestic worker is
(1) All forms of slavery, as defined under the "Anti- obliged to render satisfactory service at all times.
trafficking in Persons Act of 2003", or practices similar to slavery
such as sale and trafficking of children, debt bondage and serfdom
Section 8. Access to Outside Communication. – The
and forced or compulsory labor, including recruitment of children
employer shall grant the domestic worker access to outside
for use in armed conflict; or
communication during free time: Provided, That in case of
(2) The use, procuring, offering or exposing of a child for
emergency, access to communication shall be granted even during
prostitution, for the production of pornography or for
work time. Should the domestic worker make use of the employer’s
pornographic performances; or
telephone or other communication facilities, the costs shall be
(3) The use, procuring or offering of a child for illegal or
borne by the domestic worker, unless such charges are waived by
illicit activities, including the production and trafficking of
the employer.
dangerous drugs and volatile substances prohibited under existing
laws; or
(4) Work which, by its nature or the circumstances in Section 9. Right to Education and Training. – The
which it is carried out, is hazardous or likely to be harmful to the employer shall afford the domestic worker the opportunity to finish
health, safety or morals of children, such that it: basic education and may allow access to alternative learning
a) Debases, degrades or demeans the intrinsic worth and systems and, as far as practicable, higher education or technical
dignity of a child as a human being; or and vocational training. The employer shall adjust the work
b) Exposes the child to physical, emotional or sexual schedule of the domestic worker to allow such access to education
abuse, or is found to be highly stressful psychologically or may or training without hampering the services required by the
prejudice morals; or employer.
c) Is performed underground, underwater or at
dangerous heights; or
Section 10. Prohibition Against Privileged Information. –
d) Involves the use of dangerous machinery, equipment
All communication and information pertaining to the employer or
and tools such as power-driven or explosive power-actuated tools;
members of the household shall be treated as privileged and
or
confidential, and shall not be publicly disclosed by the domestic
e) Exposes the child to physical danger such as, but not
worker during and after employment. Such privileged information
limited to the dangerous feats of balancing, physical strength or
shall be inadmissible in evidence except when the suit involves the
contortion, or which requires the manual transport of heavy loads;
employer or any member of the household in a crime against
or
persons, property, personal liberty and security, and chastity.
f) Is performed in an unhealthy environment exposing
the child to hazardous working conditions, elements, substances,
co-agents or processes involving ionizing, radiation, fire, b. Pre-Employment
flammable substances, noxious components and the like, or to
extreme temperatures, noise levels, or vibrations; or Section 11. Employment Contract. – An employment
g) Is performed under particularly difficult conditions; contract shall be executed by and between the domestic worker and
or the employer before the commencement of the service in a language
h) Exposes the child to biological agents such as bacteria, or dialect understood by both the domestic worker and the
fungi, viruses, protozoans, nematodes and other parasites; or employer. The domestic worker shall be provided a copy of the
i) Involves the manufacture or handling of explosives duly signed employment contract which must include the
and other pyrotechnic products." following:
(a) Duties and responsibilities of the domestic worker;
Section 14. Prohibition on the Employment of Children in (b) Period of employment;
Certain Advertisements. - No child shall be employed as a model in (c) Compensation;
any advertisement directly or indirectly promoting alcoholic (d) Authorized deductions;
beverages, intoxicating drinks, tobacco and its byproducts, (e) Hours of work and proportionate additional
gambling or any form of violence or pornography. payment;
(f) Rest days and allowable leaves;
(g) Board, lodging and medical attention;
3. Kasambahays (R.A. 10361) (h) Agreements on deployment expenses, if any;
(i) Loan agreement;
a. Rights And Privileges (j) Termination of employment; and
(k) Any other lawful condition agreed upon by both
Section 5. Standard of Treatment. – The employer or any parties.
member of the household shall not subject a domestic worker or The Department of Labor and Employment (DOLE)
“kasambahay” to any kind of abuse nor inflict any form of physical shall develop a model employment contract for domestic workers
violence or harassment or any act tending to degrade the dignity of which shall, at all times, be made available free of charge to
a domestic worker. domestic workers, employers, representative organizations and the
general public. The DOLE shall widely disseminate information to
domestic workers and employers on the use of such model
Section 6. Board, Lodging and Medical Attendance. – The employment contract.
employer shall provide for the basic necessities of the domestic In cases where the employment of the domestic worker
worker to include at least three (3) adequate meals a day and is facilitated through a private employment agency, the PEA shall
humane sleeping arrangements that ensure safety. keep a copy of all employment contracts of domestic workers and
The employer shall provide appropriate rest and shall be made available for verification and inspection by the
assistance to the domestic worker in case of illnesses and injuries DOLE.
sustained during service without loss of benefits.
At no instance shall the employer withdraw or hold in
abeyance the provision of these basic necessities as punishment or Section 12. Pre-Employment Requirement. – Prior to the
disciplinary action to the domestic worker. execution of the employment contract, the employer may require
the following from the domestic worker:

Page 50 of 191
 (a) Medical certificate or a health certificate issued by a shall deprive the domestic worker and the employer from agreeing
local government health officer; to the following:
(b) Barangay and police clearance; (a) Offsetting a day of absence with a particular rest
(c) National Bureau of Investigation (NBI) clearance; day;
and (b) Waiving a particular rest day in return for an
(d) Duly authenticated birth certificate or if not equivalent daily rate of pay;
available, any other document showing the age of the domestic (c) Accumulating rest days not exceeding five (5) days;
worker such as voter’s identification card, baptismal record or or
passport. (d) Other similar arrangements.
However, Section 12(a), (b), (c) and (d) shall be standard
requirements when the employment of the domestic worker is (iv) Assignment to Non-Household
facilitated through the PEA.
The cost of the foregoing shall be borne by the
Work
prospective employer or agency, as the case may be.
Section 22. Assignment to Nonhousehold Work. – No
domestic worker shall be assigned to work in a commercial,
Section 13. Recruitment and Finder’s Fees. – Regardless
industrial or agricultural enterprise at a wage rate lower than that
of whether the domestic worker was hired through a private
provided for agricultural or nonagricultural workers. In such
employment agency or a third party, no share in the recruitment
cases, the domestic worker shall be paid the applicable minimum
or finder’s fees shall be charged against the domestic worker by the
wage.
said private employment agency or third party.

The work that petitioner performed in the temple

Section 14. Deposits for Loss or Damage. – It shall be
unlawful for the employer or any other person to require a could not be categorized as mere domestic work. The petitioner
domestic worker to make deposits from which deductions shall be attended to the visitors, mostly Chinese, who came to pray or
made for the reimbursement of loss or damage to tools, materials, seek advice before Buddha for personal or business problems;
furniture and equipment in the household. arranged meetings between these visitors and Su and
supervised the preparation of the food for the temple visitors;
Section 15. Prohibition on Debt Bondage. – It shall be acted as tourist guide of foreign visitors; acted as liaison with
unlawful for the employer or any person acting on behalf of the some government offices; and made the payment for the
employer to place the domestic worker under debt bondage. temple’s Meralco, MWSS and PLDT bills. Indeed, these tasks
may NOT be deemed activities of a household helper. They
Section 16. Employment Age of Domestic Workers. – It were essential and important to the operation and religious
shall be unlawful to employ any person below fifteen (15) years of functions of the temple [Barcenas v. NLRC].
age as a domestic worker. Employment of working children, as The employee provided laundry services at the staff
defined under this Act, shall be subject to the provisions of Section house of the company. A househelper is are actually serving the
10(A), paragraph 2 of Section 12-A, paragraph 4 of Section 12-D, family while the employee here renders service in the
and Section 13 of Republic Act No. 7610, as amended, otherwise
staffhouses or within the premises of the business of the
known as the “Special Protection of Children Against Child Abuse,
Exploitation and Discrimination Act”. employer. In such instance, she is an employee of the company
Working children shall be entitled to minimum wage, or employer in the business concerned entitled to the privileges
and all benefits provided under this Act. of a regular employee [Apex Mining v. NLRC].
Any employer who has been sentenced by a court of law
of any offense against a working child under this Act shall be meted (v) Extent of Duty
out with a penalty one degree higher and shall be prohibited from
hiring a working child.
Section 23. Extent of Duty. – The domestic worker and
the employer may mutually agree for the former to temporarily
c. Employment – Terms and Conditions perform a task that is outside the latter’s household for the benefit
of another household. However, any liability that will be incurred
(i) Health and Safety by the domestic worker on account of such arrangement shall be
borne by the original employer. In addition, such work performed
outside the household shall entitle the domestic worker to an
Section 19. Health and Safety. – The employer shall
additional payment of not less than the existing minimum wage
safeguard the health and safety of the domestic worker in rate of a domestic worker. It shall be unlawful for the original
accordance with laws, rules and regulations, with due
employer to charge any amount from the said household where the
consideration of the peculiar nature of domestic work.
service of the domestic worker was temporarily performed.

(ii) Daily Rest Period (vi) Minimum Wage

Section 20. Daily Rest Period. – The domestic worker

Section 24. Minimum Wage. – The minimum wage of
shall be entitled to an aggregate daily rest period of eight (8) hours
domestic workers shall not be less than the following:
per day.
(a) Two thousand five hundred pesos (P2,500.00) a
month for those employed in the National Capital Region (NCR);
(iii) Weekly Rest Period (b) Two thousand pesos (P2,000.00) a month for those
employed in chartered cities and first class municipalities; and
Section 21. Weekly Rest Period. – The domestic worker (c) One thousand five hundred pesos (P1,500.00) a
shall be entitled to at least twenty-four (24) consecutive hours of month for those employed in other municipalities.
rest in a week. The employer and the domestic worker shall agree After one (1) year from the effectivity of this Act, and
in writing on the schedule of the weekly rest day of the domestic periodically thereafter, the Regional Tripartite and Productivity
worker: Provided, That the employer shall respect the preference Wage Boards (RTPWBs) shall review, and if proper, determine
of the domestic worker as to the weekly rest day when such and adjust the minimum wage rates of domestic workers.
preference is based on religious grounds. Nothing in this provision

Page 51 of 191
 (vii) Payment of Wages 4. Homeworkers

Section 25. Payment of Wages. – Payment of wages shall a. Regulation of Industrial Homeworkers
be made on time directly to the domestic worker to whom they are
due in cash at least once a month. The employer, unless allowed by Article 151. Regulation of Industrial Homeworkers. The
the domestic worker through a written consent, shall make no employment of industrial homeworkers and field personnel shall
deductions from the wages other than that which is mandated by be regulated by the government through the appropriate
law. No employer shall pay the wages of a domestic worker by regulations issued by the Secretary of Labor and Employment to
means of promissory notes, vouchers, coupons, tokens, tickets, ensure the general welfare and protection of homeworkers and
chits, or any object other than the cash wage as provided for under field personnel and the industries employing them.
this Act.
The domestic worker is entitled to a thirteenth month
pay as provided for by law. b. Distribution of Homework

(viii)Pay Slip Article 153. Distribution of Homework. For purposes of

this Chapter, the "employer" of homeworkers includes any person,
natural or artificial who, for his account or benefit, or on behalf of
Section 26. Pay Slip. – The employer shall at all times any person residing outside the country, directly or indirectly, or
provide the domestic worker with a copy of the pay slip containing through an employee, agent contractor, sub-contractor or any
the amount paid in cash every pay day, and indicating all other person:
deductions made, if any. The copies of the pay slip shall be kept by (1) Delivers, or causes to be delivered, any goods, articles
the employer for a period of three (3) years. or materials to be processed or fabricated in or about a home and
thereafter to be returned or to be disposed of or distributed in
(ix) Prohibition on Interference in the accordance with his directions; or
Disposal of Wages (2) Sells any goods, articles or materials to be processed
or fabricated in or about a home and then rebuys them after such
processing or fabrication, either by himself or through some other
Section 27. Prohibition on Interference in the Disposal of person
Wages. – It shall be unlawful for the employer to interfere with the
freedom of any domestic worker to dispose of the latter’s wages.
The employer shall not force, compel or oblige the domestic worker 5. Night Workers
to purchase merchandise, commodities or other properties from
the employer or from any other person, or otherwise make use of Article 154. Coverage. - This chapter' shall apply to all
any store or services of such employer or any other person. persons, who shall be employed or permitted or suffered to work
at night, except those employed in agriculture, stock raising,
(x) Prohibition Against Withholding fishing, maritime transport and inland navigation, during a period
of not less than seven (7) consecutive hours, including the interval
of Wages
from midnight to five o'clock in the morning, to be determined by
the Secretary of Labor and Employment, after consulting the
Section 28. Prohibition Against Withholding of Wages. workers' representatives/labor organizations and employers.
– It shall be unlawful for an employer, directly or indirectly, to 'Night worker' means any employed person whose work
withhold the wages of the domestic worker. If the domestic worker requires performance of a substantial number of hours of night
leaves without any justifiable reason, any unpaid salary for a work which exceeds a specified limit. This limit shall be fixed by
period not exceeding fifteen (15) days shall be forfeited. Likewise, the Secretary of Labor after consulting the workers'
the employer shall not induce the domestic worker to give up any representatives/labor organizations and employers.
part of the wages by force, stealth, intimidation, threat or by any
other means whatsoever.
Article 155. Health Assessment. - At their request,
workers shall have the right to undergo a health assessment
(xi) Leave Benefits without charge and to receive advice on how to reduce or avoid
health problems associated with their work:
Section 29. Leave Benefits. – A domestic worker who has (a) Before taking up an assignment as a night worker;
rendered at least one (1) year of service shall be entitled to an (b) At regular intervals during such an assignment; and
annual service incentive leave of five (5) days with (c) If they experience health problems during such, an
pay: Provided, That any unused portion of said annual leave shall assignment which are not caused by factors other than the
not be cumulative or carried over to the succeeding years. Unused performance of night work.
leaves shall not be convertible to cash. With the exception of a finding of unfitness for night
work, the findings of such assessments shall not be transmitted to
others without the workers' consent and shall not be used to their
(xii) Social and Other Benefits
detriment.

Section 30. Social and Other Benefits. – A domestic Article 156. Mandatory Facilities. - Suitable first·aid
worker who has rendered at least one (1) month of service shall be facilities shall be made available for workers performing night
covered by the Social Security System (SSS), the Philippine Health work, including arrangements where such workers, where
Insurance Corporation (PhilHealth), and the Home Development necessary, can be taken immediately to a place for appropriate
Mutual Fund or Pag-IBIG, and shall be entitled to all the benefits treatment. The employers are likewise required to provide safe and
in accordance with the pertinent provisions provided by law. healthful working conditions and adequate or reasonable facilities
Premium payments or contributions shall be shouldered such as sleeping or resting quarters in the establishment and
by the employer. However, if the domestic worker is receiving a transportation from the work premises to the nearest point of their
wage of Five thousand pesos (P5,000.00) and above per month, the residence subject to exceptions and guidelines to be provided by the
domestic worker shall pay the proportionate share in the premium DOLE.
payments or contributions, as provided by law.
The domestic worker shall be entitled to all other
benefits under existing laws. Article 157. Transfer. - Night workers who are certified
as unfit for night work, due to health reasons, shall be transferred,

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whenever practicable, to a similar job for which they are fit to between an apprentice and an employer on an approved
work. apprenticeable occupation.
If such transfer to a similar job is not practicable, these “Apprenticeable Occupation” is an occupation
workers shall be granted the same benefits as other workers who
officially endorsed by a tripartite body and approved for
are unable to work, or to secure employment during such period.
A night worker certified as temporarily unfit for night work shall
apprenticeship by the Authority (RA 7796).
be given the same protection against dismissal or notice of dismissal
as other workers who are prevented from working for reasons of (i) Qualification
health.
Article 59. Qualifications of Apprentice. To qualify as an
Article 158. Women Night Workers. - Measures shall be apprentice, a person shall:
taken to ensure that an alternative to night work is available to (a) Be at least fourteen (14) years of age;
women workers who would otherwise be called upon to perform (b) Possess vocational aptitude and capacity for
such work: appropriate tests; and
(a) Before and after childbirth, for a period of at least (c) Possess the ability to comprehend and follow oral and
sixteen (16) weeks, which shall be divided between the time before written instructions.
and after childbirth; Trade and industry associations may recommend to the
(b) For additional periods, in respect of winch a medical Secretary of Labor appropriate educational requirements for
certificate IS produced stating that said additional periods are different occupations.
necessary for the health of the mother or child:
(1) During pregnancy; (ii) Apprenticeship Agreement
(2) During a specified time beyond the period, after
“Apprenticeship Agreement” is a contract wherein a
childbirth is fixed pursuant to subparagraph (a) above, the length
of which shall be determined by the DOLE after consulting the prospective employer binds himself to train the apprentice who
labor organizations and employers. in turn accepts the terms of training for a recognized
During the periods referred to in this article: apprenticeable occupation emphasizing the rights, duties and
(i) A woman worker shall not be dismissed or given responsibilities of each party.
notice of dismissal, except for just or authorized causes provided
for in this Code that are not connected with pregnancy, childbirth • Contents
and childcare responsibilities.
(ii) A woman worker shall not lose the benefits regarding
her status, seniority, and access to promotion which may attach to Article 61. Contents of Apprenticeship Agreements. 62
her regular night work position. Apprenticeship agreements, including wage rates of apprentices,
Pregnant women and nursing mothers may be allowed shall conform to the rules issued by the Minister of Labor and
to work .at night only if a competent physician, other than the Employment. The period of apprenticeship shall not exceed six
company physician, shall certify their fitness to render night work, months. Apprenticeship agreements providing for wage rates
and specify, in the case of pregnant employees, the period of the below the legal minimum wage, which in no case shall start below
pregnancy that they can safely work. 75 per cent of the applicable minimum wage, may be entered into
The measures referred to in this article may include only in accordance with apprenticeship programs duly approved
transfer to day work where this is possible, the provision of social by the Minister of Labor and Employment. The Ministry shall
security benefits or an extension of maternity leave. develop standard model programs of apprenticeship.
The provisions of this article shall not leave the effect of
reducing the protection and benefits connected with maternity Republic Act No. 7796 (RA 7796), which created the
leave under existing laws. TESDA, has transferred the authority over apprenticeship
programs from the Bureau of Local Employment of the DOLE
Article 159. Compensation. The compensation for night to the TESDA. RA 7796 emphasizes TESDA's approval of the
workers in the form of working time, pay or similar benefits shall apprenticeship program as a pre-requisite for the hiring of
recognize the exceptional nature of night work." apprentices.
In Century Canning v. Court of Appeals, the
Article 160. Social Services. - Appropriate social services apprenticeship agreement was entered into between the parties
shall be provided for night workers and, where necessary, for
before petitioner filed its apprenticeship program with the
workers performing night work.
TESDA for approval. Petitioner and Palad executed the
apprenticeship agreement on 17 July 1997 wherein it was stated
Article 161. Night Work Schedules. - Before introducing
that the training would start on 17 July 1997 and would end
work schedules requiring the services of night workers, the
employer shall consult the workers' representatives/labor approximately in December 1997. On 25 July 1997, petitioner
organizations concerned on the details of such schedules and the submitted for approval its apprenticeship program, which the
forms of organization of night work that are best adapted to the TESDA subsequently approved on 26 September 1997.
establishment and its personnel, as well as on the occupational Clearly, the apprenticeship agreement was enforced even
health measures and social services which are required. In before the TESDA approved petitioner's apprenticeship
establishments employing night workers, consultation shall take program. Thus, the apprenticeship agreement is void because it
place regularly. lacked prior approval from the TESDA. The TESDA's approval
of the employer's apprenticeship program is required before the
6. Apprentices and Learners employer is allowed to hire apprentices. Prior approval from
the TESDA is necessary to ensure that only employers in the
a. Apprentices highly technical industries may employ apprentices and only in
“Apprentice” is a person undergoing training for an apprenticeable occupations. Thus, under RA 7796, employers
approved apprenticeable occupation during an established can only hire apprentices for apprenticeable occupations which
period assured by an apprenticeship agreement. must be officially endorsed by a tripartite body and approved
“Apprenticeship” training within employment with for apprenticeship by the TESDA.
compulsory related theoretical instructions involving a contract
• Signing of Agreement
Page 53 of 191
 agreement, unless he has exhausted all available administrative
Article 62. Signing of Apprenticeship Agreement. Every remedies.
apprenticeship agreement shall be signed by the employer or his
agent, or by an authorized representative of any of the recognized • Deductibility of Training Costs
organizations, associations or groups and by the apprentice.
An apprenticeship agreement with a minor shall be
Article 71. Deductibility of Training Costs. An additional
signed in his behalf by his parent or guardian or, if the latter is not
deduction from taxable income of one-half (1/2) of the value of
available, by an authorized representative of the Department of
labor training expenses incurred for developing the productivity
Labor, and the same shall be binding during its lifetime.
and efficiency of apprentices shall be granted to the person or
Every apprenticeship agreement entered into under this
enterprise organizing an apprenticeship program: Provided, That
Title shall be ratified by the appropriate apprenticeship
such program is duly recognized by the Department of Labor and
committees, if any, and a copy thereof shall be furnished both the
Employment: Provided, further, That such deduction shall not
employer and the apprentice.
exceed ten (10%) percent of direct labor wage: and Provided,
finally, That the person or enterprise who wishes to avail himself
• Venue of Programs or itself of this incentive should pay his apprentices the minimum
wage.
Article 63. Venue of Apprenticeship Programs. Any
firm, employer, group or association, industry organization or civic (iii) Apprentices Without
group wishing to organize an apprenticeship program may choose Compensation
from any of the following apprenticeship schemes as the training
venue for apprentice:
(a) Apprenticeship conducted entirely by and within the Article 72. Apprentices Without Compensation. The
sponsoring firm, establishment or entity; Secretary of Labor and Employment may authorize the hiring of
(b) Apprenticeship entirely within a Department of apprentices without compensation whose training on the job is
Labor and Employment training center or other public training required by the school or training program curriculum or as
institution; or requisite for graduation or board examination.
(c) Initial training in trade fundamentals in a training
center or other institution with subsequent actual work b. Learners
participation within the sponsoring firm or entity during the final
stage of training.
Article 73. Learners Defined. Learners are persons hired
as trainees in semi-skilled and other industrial occupations which
• Sponsoring are non-apprenticeable and which may be learned through
practical training on the job in a relatively short period of time
which shall not exceed three (3) months.
Article 64. Sponsoring of Apprenticeship Program. Any
of the apprenticeship schemes recognized herein may be
undertaken or sponsored by a single employer or firm or by a “Learners” refer to persons hired as trainees in semi-
group or association thereof or by a civic organization. Actual skilled and other industrial occupations which are non-
training of apprentices may be undertaken: apprenticeable. Learnership programs must be approved by the
(a) In the premises of the sponsoring employer in the Authority.
case of individual apprenticeship programs;
(b) In the premises of one or several designated firms in
the case of programs sponsored by a group or association of (i) When Learners May Be Hired
employers or by a civic organization; or
(c) In a Department of Labor and Employment training Article 74. When Learners May Be Hired. Learners may
center or other public training institution. be employed when no experienced workers are available, the
employment of learners is necessary to prevent curtailment of
employment opportunities, and the employment does not create
• Investigation of Violation
unfair competition in terms of labor costs or impair or lower
working standards.
Article 65. Investigation of Violation of Apprenticeship
Agreement. Upon complaint of any interested person or upon its
own initiative, the appropriate agency of the Department of Labor
(ii) Learnership Agreement
and Employment or its authorized representative shall investigate
any violation of an apprenticeship agreement pursuant to such Article 75. Learnership Agreement. Any employer
rules and regulations as may be prescribed by the Secretary of desiring to employ learners shall enter into a learnership
Labor and Employment. agreement with them, which agreement shall include:
(a) The names and addresses of the learners;
(b) The duration of the learnership period, which shall
• Appeal
not exceed three (3) months;
(c) The wages or salary rates of the learners which shall
Article 66. Appeal to the Secretary of Labor and begin at not less than seventy-five percent (75%) of the applicable
Employment. The decision of the authorized agency of the minimum wage; and
Department of Labor and Employment may be appealed by any (d) A commitment to employ the learners if they so
aggrieved person to the Secretary of Labor and Employment desire, as regular employees upon completion of the learnership.
within five (5) days from receipt of the decision. The decision of the All learners who have been allowed or suffered to work
Secretary of Labor and Employment shall be final and executory. during the first two (2) months shall be deemed regular employees
if training is terminated by the employer before the end of the
• Exhaustion of Administrative Remedies stipulated period through no fault of the learners. The learnership
agreement shall be subject to inspection by the Secretary of Labor
and Employment or his duly authorized representative.
Article 67. Exhaustion of Administrative Remedies. No
person shall institute any action for the enforcement of any
apprenticeship agreement or damages for breach of any such (iii) Learners in Piecework

Page 54 of 191
 (c) Discrimination against a person with mental-health
Article 76. Learners in Piecework. Learners employed in condition, as defined under Section 4(e) of this Act; and
piece or incentive-rate jobs during the training period shall be paid (d) Administering inhumane, cruel, degrading or
in full for the work done. harmful treatment not based on medical or scientific evidence as
indicated in Section 5(h) of this Act;
If the violation is committed by a juridical person, the
7. Persons with Disabilities penalty provided for in this Act shall be imposed the directors,
officers, employees or other officials or persons therein responsible
a. Discrimination for the offense.
If the violation is committed by an alien, the alien
(i) Magna Carta for Disabled Persons offender shall be immediately deported after service of sentence
without need of further proceedings.
(RA 7277)
These penalties shall be without prejudice to the
administrative or civil liability of the offender, or the facility where
SECTION 32. Discrimination on Employment : No such violation occurred.
entity, whether public or private, shall discriminate against a
qualified disabled person by reason of disability in regard to job
Discrimination refers to any distinction, exclusion or
application procedures, the hiring, promotion, or discharge of
employees, employee compensation, job training, and other terms, restriction which has the purpose or effect of nullifying the
conditions, and privileges of employment. The following constitute recognition, enjoyment or exercise, on an equal basis with
acts of discrimination: others, of all human rights and fundamental freedoms in the
(a). Limiting, segregating or classifying a disabled job political, economic, social cultural, civil or any other field. It
applicant in such a manner that adversely affects his work includes all forms of discrimination, including denial of
opportunities; reasonable accommodation. Special measure solely to protect
(b). Using qualification standards, employment tests or the rights or secure the advancement of persons with decision-
other selection criteria that screen out or tend to screen out a
making impairment capacity shall not be deemed to be
disabled person unless such standards, tests or other selection
criteria are shown to be jobrelated for the position on question and discriminatory
are consistent with business necessity;
(c). Utilizing standards, criteria, or methods of b. Incentive for Employers (R.A. 7277)
administration that:
1). have the effect of discrimination on the basis of SECTION 8. Incentives for Employer :
disability; or (a) To encourage the active participation of the private
2). perpetuate the discrimination of others who are sector in promoting the welfare of disabled persons and to ensure
subject to common administrative control; gainful employment for qualified disabled persons, adequate
(d). Providing less compensation, such as salary, wage or incentives shall be provided to private entities which employ
other forms of remuneration and fringe benefits, to a qualified disabled persons.
disabled employee, by reason of his disability, than the amount to (b). Private entities that employ disabled persons who
which a non-disabled person performing the same work is entitled; meet the required skills or qualifications, either as regular
(e). Favoring a non-disabled employee over a qualified employee, apprentice or learner, shall be entitled to an additional
disabled employee with respect to promotion, training deduction, from their gross income, equivalent to twenty-five
opportunities, study and scholarship grants, solely on account of percent (25%) of the total amount paid as salaries and wages to
the latter’s disability; disabled persons: Provided, however, That such entities present
(f). Re-assigning or transferring a disabled employee to proof as certified by the Department of Labor and Employment
a job or position he cannot perform by reason of his disability; that disabled person are under their employ. Provided, further,
(g). Dismissing or terminating the services of a disabled That the disabled employee is accredited with the Department of
employee by reason of his disability unless the employer can prove Labor and Employment and the Department of Health as to his
that he impairs the satisfactory performance of the work involve to disability, skills and qualifications.
the prejudice of the business entities; Provided, however, That the (c). Private entities that improved or modify their
employer first sought provide reasonable accommodations for physical facilities in order to provide reasonable accommodation
disabled persons; for disabled persons shall also be entitled to an additional
(h). Failing to select or administer in the effective deduction from their net taxable income, equivalent to fifty percent
manner employment tests which accurately reflect the skills, (50%) of the direct costs of the improvements or modifications.
aptitude or other factor of the disabled applicant or employee that This section, however, does not apply to improvements or
such test purports to measure, rather than the impaired sensory, modifications of facilities required under Batas Pambansa Bilang
manual or speaking skills of such applicant or employee, if any; 344.
and
(i). Excluding disabled persons from membership in
labor unions or similar organization. E. SEXUAL HARASSMENT IN THE WORK
ENVIRONMENT
(ii) Mental Health Act (RA 11036)
1. Anti-Sexual Harassment Act (R.A. 7877)
Section 44. Penalty Clause. - Any person who commits
any of the following acts shall, upon conviction by final judgment, a. Work, Education or Training-Related
be punished by imprisonment of not less than six (6) months, but Sexual Harassment
not more than two (2) years, or a fine of not less than Ten thousand
pesos (P10,000.00), but not more than Two hundred thousand Section 3. Work, Education or Training-related Sexual
pesos (P200,000.00), or both, at the discretion of the court: Harassment Defined. – Work, education or training-related sexual
(a) Failure to secure informed consent of the service harassment is committed by an employer, employee, manager,
user, unless it falls under the exceptions provided under Section 18 supervisor, agent of the employer, teacher, instructor, professor,
of this Act; coach, trainor, or any other person who, having authority,
(b) Violation of confidentiality of information, as defined influence or moral ascendancy over another in a work or training
under Section 4(c) of this Act; or education environment, demands, requests or otherwise
requires any sexual favor from the other, regardless of whether the
Page 55 of 191
demand, request or requirement for submission is accepted by the
object of said Act. c. Liability of Employer, Head of Office,
(a) In a work-related or employment environment,
Education or Training Institution
sexual
harassment is committed when:
(1) The sexual favor is made as a condition in the hiring Section 5. Liability of the Employer, Head of Office,
or in the employment, re-employment or continued employment of Educational or Training Institution. – The employer or head of
said individual, or in granting said individual favorable office, educational or training institution shall be solidarily liable
compensation, terms, conditions, promotions, or privileges; or the for damages arising from the acts of sexual harassment committed
refusal to grant the sexual favor results in limiting, segregating or in the employment, education or training environment if the
classifying the employee which in any way would discriminate, employer or head of office, educational or training institution is
deprive or diminish employment opportunities or otherwise informed of such acts by the offended party and no immediate
adversely affect said employee; action is taken thereon.
(2) The above acts would impair the employee’s rights
or privileges under existing labor laws; or 2. Gender-Based Sexual Harassment In The
(3) The above acts would result in an intimidating, Workplace (R.A. 11313)
hostile, or offensive environment for the employee.
(b) In an education or training environment, sexual
harassment is committed: Section 16. Gender-Based Sexual Harassment in the
(1) Against one who is under the care, custody or Workplace. -The crime of gender-based sexual harassment in the
supervision of the offender; workplace includes the following:
(2) Against one whose education, training, (a) An act or series of acts involving any unwelcome
apprenticeship or tutorship is entrusted to the offender; sexual advances, requests or demand for sexual favors or any act
(3) When the sexual favor is made a condition to the of sexual nature, whether done verbally, physically or through the
giving of a passing grade, or the granting of honors and use of technology such as text messaging or electronic mail or
scholarships, or the payment of a stipend, allowance or other through any other forms of information and communication
benefits, privileges, or considerations; or systems, that has or could have a detrimental effect on the
(4) When the sexual advances result in an intimidating, conditions of an individual’s employment or education, job
hostile or offensive environment for the student, trainee or performance or opportunities;
apprentice. (b) A conduct of sexual nature and other conduct-based
Any person who directs or induces another to commit on sex affecting the dignity of a person, which is unwelcome,
any act of sexual harassment as herein defined, or who cooperates unreasonable, and offensive to the recipient, whether done
in the commission thereof by another without which it would not verbally, physically or through the use of technology such as text
have been committed, shall also be held liable under this Act. messaging or electronic mail or through any other forms of
information and communication systems;
(c) A conduct that is unwelcome and pervasive and
b. Duty of Employer or Head of Office creates an intimidating, hostile or humiliating environment for the
recipient: Provided, That the crime of gender-based sexual
Section 4. Duty of the Employer or Head of Office in a harassment may also be committed between peers and those
Work-related, Education or Training Environment. – It shall be the committed to a superior officer by a subordinate, or to a teacher by
duty of the employer or the head of the work-related, educational a student, or to a trainer by a trainee; and
or training environment or institution, to prevent or deter the (d) Information and communication system refers to a
commission of acts of sexual harassment and to provide the system for generating, sending, receiving, storing or otherwise
procedures for the resolution, settlement or prosecution of acts of processing electronic data messages or electronic documents and
sexual harassment. Towards this end, the employer or head of includes the computer system or other similar devices by or in
office shall: which data are recorded or stored and any procedure related to the
(a) Promulgate appropriate rules and regulations in recording or storage of electronic data messages or electronic
consultation with and jointly approved by the employees or documents.
students or trainees, through their duly designated representatives,
prescribing the procedure for the investigation of sexual a. Duties of Employers
harassment cases and the administrative sanctions therefor.
Administrative sanctions shall not be a bar to
prosecution in the proper courts for unlawful acts of sexual Section 17. Duties of Employers. -Employers or other
harassment. persons of authority, influence or moral ascendancy in a workplace
The said rules and regulations issued pursuant to this shall have the duty to prevent, deter, or punish the performance of
subsection (a) shall include, among others, guidelines on proper acts of gender-based sexual harassment in the workplace. Towards
decorum in the workplace and educational or training institutions. this end, the employer or person of authority, influence or moral
(b) Create a committee on decorum and investigation of ascendancy shall:
cases on sexual harassment. The committee shall conduct meetings, (a) Disseminate or post in a conspicuous place a copy of
as the case may be, with officers and employees, teachers, this Act to all persons in the workplace;
instructors, professors, coaches, trainors and students or trainees (b) Provide measures to prevent gender-based sexual
to increase understanding and prevent incidents of sexual harassment in the workplace, such as the conduct of anti-sexual
harassment. It shall also conduct the investigation of alleged cases harassment seminars;
constituting sexual harassment. (c) Create an independent internal mechanism or a
In the case of a work-related environment, the committee on decorum and investigation to investigate and address
committee shall be composed of at least one (1) representative each complaints of gender-based sexual harassment which shall:
from the management, the union, if any, the employees from the (1) Adequately represent the management, the
supervisory rank, and from the rank and file employees. employees from the supervisory rank, the rank-and-file employees,
In the case of the educational or training institution, the and the union, if any;
committee shall be composed of at least one (1) representative from (2) Designate a woman as its head and not less than half
the administration, the trainors, teachers, instructors, professors of its members should be women;
or coaches and students or trainees, as the case may be. (3) Be composed of members who should be impartial
The employer or head of office, educational or training and not connected or related to the alleged perpetrator;
institution shall disseminate or post . copy of this Act for the (4) Investigate and decide on the complaints within ten
information of all concerned. (10) days or less upon receipt thereof;

Page 56 of 191
 (5) Observe due process; (b) Provide measures to prevent gender-based sexual
(6) Protect the complainant from retaliation; and harassment in educational institutions, like information
(7) Guarantee confidentiality to the greatest extent campaigns;
possible; (c) Create an independent internal mechanism or a
(d) Provide and disseminate, in consultation with all CODI to investigate and address complaints of gender-based
persons in the workplace, a code of conduct or workplace policy sexual harassment which shall:
which shall: (1) Adequately represent the school administration, the
(1) Expressly reiterate the prohibition on gender-based trainers, instructors, professors or coaches and students or
sexual harassment; trainees, students and parents, as the case may be;
(2) Describe the procedures of the internal mechanism (2) Designate a woman as its head and not less than half
created under Section 17(c) of this Act; and of its members should be women;
(3) Set administrative penalties. (3) Ensure equal representation of persons of diverse
sexual orientation, identity and/or expression, in the CODI as far
b. Liability of Employers as practicable;
(4) Be composed of members who should be impartial
and not connected or related to the alleged perpetrator;
Section 19. Liability of Employers.— In addition to (5) Investigate and decide on complaints within ten (10)
liabilities for committing acts of gender-based sexual harassment, days or less upon receipt, thereof;
employers may also be held responsible for: (6) Observe due process;
(a) Non-implementation of their duties under Section 17 (7) Protect the complainant from retaliation; and
of this Act, as provided in the penal provisions; or (8) Guarantee confidentiality to the greatest extent
(b) Not taking action on reported acts of gender-based possible.
sexual harassment committed in the workplace. (d) Provide and disseminate, in consultation with all
Any person who violates subsection (a) of this section, persons in the educational institution, a code of conduct or school
shall upon conviction, be penalized with a fine of not less than Five policy which shall:
thousand pesos (₱5,000.00) nor more than Ten thousand pesos (1) Expressly reiterate the prohibition on gender-based
(₱10,000.00). sexual harassment;
Any person who violates subsection (b) of this section, (2) Prescribe the procedures of the internal mechanism
shall upon conviction, be penalized with a fine of not less than Ten created under this Act; and
thousand pesos (₱10,000.00) nor more than Fifteen thousand pesos (3) Set administrative penalties.
(₱15,000.00).

b. Liability of School Heads

3. Gender-Based Sexual Harassment In
Educational And Training Institutions (R.A. Section 23. Liability of School Heads.— In addition to
11313) liability for committing acts of gender-based sexual harassment,
principals, school heads, teachers, instructors, professors, coaches,
Section 21. Gender-Based Sexual Harassment in trainers, or any odier person who has authority, influence or moral
Educational and Training Institutions.— All schools, whether ascendancy over another in an educational or training institution
public or private, shall designate an officer-in-charge to receive may also be held responsible for:
complaints regarding violations of this Act, and shall, ensure that (a) Non-implementation of their duties under Section 22
the victims are provided with a gender-sensitive environment that of this Act, as provided in the penal provisions; or
is both respectful to the victims’ needs and conducive to truth- (b) Failure to act on reported acts of gender-based
telling. sexual harassment committed in the educational institution.
Every school must adopt and publish grievance Any person who violates subsection (a) of this section,
procedures to facilitate the filing of complaints by students and shall upon conviction, be penalized with a fine of not less than Five
faculty members. Even if an individual does not want to file a thousand pesos (₱5,000.00) nor more than Ten thousand pesos
complaint or does not request that the school take any action on (₱10,000.00).
behalf of a student or faculty member and school authorities have Any person who violates subsection (b) of this section,
knowledge or reasonably know about a possible or impending act shall upon conviction, be penalized with a fine of not less than Ten
of gender-based sexual harassment or sexual violence, the school thousand pesos (₱10,000.00) nor more than Fifteen thousand pesos
should promptly investigate to determine the veracity of such (₱15,000.00).
information or knowledge and the circumstances under which the
act of gender-based sexual harassment or sexual violence were III
committed, and take appropriate steps to resolve the situation. If a
SOCIAL WELFARE LEGISLATION
school knows or reasonably should know about acts of gender-
based sexual harassment or sexual violence being committed that
creates a hostile environment, the school must take immediate A. SSS LAW (R.A. 11199)
action to eliminate the same acts, prevent their recurrence, and
address their effects. 1. Coverage
Once a perpetrator is found guilty, the educational
institution may reserve the right to strip the diploma from the
Section 9. Coverage -
perpetrator or issue an expulsion order.
(a) Coverage in the SSS shall be compulsory upon all
The Committee on Decorum and Investigation (CODI)
employees including kasambahays or domestic workers not over
of all educational institutions shall address gender-based sexual
harassment and online sexual harassment in accordance with the sixty (60) years of age and their employers: Provided, That any
benefit already earned by the employees under private benefit
rules and procedures contained in their CODI manual.
plans existing at the time of the approval of this Act shall not be
discontinued, reduced or otherwise impaired: Provided,
a. Duties of School Heads further, That private plans which are existing and in force at the
time of compulsory coverage shall be integrated with the plan of
Section 22. Duties of School Heads. -School heads shall the SSS in such a way where the employers contribution to his
have the following duties: private plan is more than that required of him in this Act, he shall
(a) Disseminate or post a copy of this Act in a pay to the SSS only the contribution required of him and he shall
conspicuous place in the educational institution; continue his contribution to such private plan less his contribution

Page 57 of 191
to the SSS so that the employer’s total contribution to his benefit the DFA through the Philippine embassies and the DOLE shall
plan and to the SSS shall be the same as his contribution to his negotiate further agreements to serve the best interests of the
private benefit plan before the compulsory coverage: Provided, OFWs.
further, That any changes, adjustments, modifications, (e) The DFA, the DOLE and, the SSS shall ensure
eliminations or improvements in the benefits to be available under compulsory coverage of OFWs through bilateral social security
the remaining private plan, which may be necessary to adopt by and labor agreements and other measures for enforcement.
reason of the reduced contributions thereto as a result of the (f) Upon the termination of their employment overseas,
integration, shall be subject to agreements between the employers OFWs may continue to pay contributions on a voluntary basis to
and employees concerned: Provided, further, That the private maintain their rights to full benefits.
benefit plan which the employer shall continue for his employees (g) Filipino permanent migrants, including Filipino
shall remain under the employer‘s management and control unless immigrants, permanent residents and naturalized citizens of their
there is an existing agreement to the contrary: Provided, host countries may be covered by the SSS on a voluntary basis.
finally, That nothing in this Act shall be construed as a limitation
on the right of employers and employees to agree on and adopt 2. Beneficiaries
benefits which are over and above those provided under this Act.
(b) Spouses who devote full time to managing the
The following are the beneficiaries –
household and family affairs, unless they are also engaged in other
vocation or employment which is subject to mandatory coverage, a. The dependent spouse until he or she
may be covered by the SSS on a voluntary basis. remarries,
b. the dependent legitimate, legitimated or
Section 9-A. Compulsory Coverage of the Self- legally adopted, and
Employed. — Coverage in the SSS shall also be compulsory upon c. illegitimate children, who shall be the primary
such self-employed persons as may be determined by the beneficiaries of the member:
Commission under such rules and regulations as it may prescribe,
including, but not limited to the following:
(a) All seif-empioyed professionals; Provided, That the dependent illegitimate children
(b) Partners and single proprietors of businesses; shall be entitled to fifty percent (50%) of the share of the
(c) Actors and actresses, directors, scriptwriters and legitimate, legitimated or legally adopted children: Provided,
news correspondents who do not fall within the definition of the further, That in the absence of the dependent legitimate,
term "employee" in Section 8(d) of this Act;
(d) Professional athletes, coaches, trainers and jockeys;
legitimated or legally adopted children of the member, his/her
and dependent illegitimate children shall be entitled to one hundred
(e) Individual farmers and fishermen. percent (100%) of the benefits. In their absence, the dependent
Unless otherwise specified herein, all provisions of this parents who shall be the secondary beneficiaries of the member.
Act applicable to covered employees shall also be applicable to the In the absence of all the foregoing, any other person designated
covered self-employed persons.
by the member as his/her secondary beneficiary.

Section 9-B. Compulsory Coverage of Overseas Filipino

3. Benefits
Workers (OFWs) -
(a) Coverage in the SSS shall be compulsory upon all
sea-based and land-based OFWs as defined under Republic Act a. Death Benefits
No. 8042, otherwise known as the Migrant Workers and Overseas
Filipinos Act of 1995. as amended by Republic Act No. Section 13. Death Benefits. - Upon the death of a
10022: Provided, That they are not over sixty (60) years of age. member who has paid at least thirty-six (36) monthly contributions
All benefit provisions under this Act shall apply to all prior to the semester of death, his primary beneficiaries shall be
covered OFWs. The benefits include, among others, retirement, entitled to the monthly pension: Provided, That if he has no
death, disability, funeral, sickness and maternity. primary beneficiaries, his secondary beneficiaries shall be entitled
(b) Manning agencies are agents of their principals and to a lump sum benefit equivalent to thirty-six (36) times the
are considered as employers of sea-based OFWs. monthly pension. If he has not paid the required thirty-six (36)
For purposes of the implementation of this Act, any law monthly contributions, his primary or secondary beneficiaries
to the contrary notwithstanding manning agencies are jointly and shall be entitled to a lump sum benefit equivalent to the monthly
severally or solidarity liable with their principals with respect to pension times the number of monthly contributions paid to the SSS
the civil liabilities incurred for any violation of this Act. or twelve (12) times the monthly pension, whichever is higher.
The persons having direct control, management or
direction of the manning agencies shall be held criminally liable for
any act or omission penalized under this Act notwithstanding
b. Permanent Disability Benefits
Section 28(f) hereof.
(c) Land-based OFWs are compulsory members of the Section 13-A. Permanent Disability Benefits. -
SSS and considered in the same manner as self-employed persons (a) Upon the permanent total disability of a member who
under such rules and regulations that the Commission shall has paid at least thirty-six (36) monthly contributions prior to the
prescribe. semester of disability, he shall be entitled to the monthly
(d) The Department of Foreign Affairs (DFA), the pension: Provided, That if he has not paid the required thirty-six
Department of Labor and Employment (DOLE) and all its agencies (36) monthly contributions, he shall be entitled to a lump sum
involved in deploying OFWs for employment abroad are mandated benefit equivalent to the monthly pension times the number of
to negotiate bilateral labor agreements with the OFWs’ host monthly contributions paid to the SSS or twelve (12) times the
countries to ensure that the employers of land-based OFWs, monthly pension, whichever is higher. A member who (1) has
similar to the principals of sea-based OFWs, pay the required SSS received a lump sum benefit; and (2) is reemployed or has resumed
contributions, in which case these land-based OFWs shall no longer self-employment not earlier than one (1) year from the date of his
be considered in the same manner as self-employed persons in this disability shall again be subject to compulsory coverage and shall
Act. Instead, they shall be considered as compulsorily covered be considered a new member.
employees with employer and employee shares in contributions (b) The monthly pension and dependents’ pension shall
that shall be provided for in the bilateral labor agreements and be suspended upon the reemployment or resumption of self-
their implementing administrative agreements: Provided, That in employment or the recovery of the disabled member from his
countries which already extend social security coverage to OFWs,
Page 58 of 191
permanent total disability or his failure to present himself for days of sickness benefit granted under this section be carried
examination at least once a year upon notice by the SSS. forward and added to the total number of compensable days
(c) Upon the death of the permanent total disability allowable in the subsequent year;
pensioner, his primary beneficiaries as of the date of disability shall (2) The daily sickness benefit shall not be paid for more
be entitled to receive the monthly pension: Provided, That if he has than two hundred forty (240) days on account of the same
no primary beneficiaries and he dies within sixty (60) months from confinement; and
the start of his monthly pension, his secondary beneficiaries shall (3) The employee member shall notify his employer of
be entitled to a lump sum benefit equivalent to the total monthly the fact of his sickness or injury within five (5) calendar days after
pensions corresponding to the balance of the five-year guaranteed the start of his confinement unless such confinement is in a hospital
period excluding the dependents’ pension. or the employee became sick or was injured while working or
(d) The following disabilities shall be deemed permanent within the premises of the employer in which case, notification to
total: the employer is not necessary: Provided, That if the member is
(1) Complete loss of sight of both eyes; unemployed or self-employed, he shall directly notify the SSS of his
(2) Loss of two limbs at or above the ankle or wrists; confinement within five (5) calendar days after the start thereof
(3) Permanent complete paralysis of two limbs; unless such confinement is in a hospital in which case notification
(4) Brain injury resulting to incurable imbecility or is also not necessary: Provided, further, That in cases where
insanity; and notification is necessary, the confinement shall be deemed to have
(5) Such cases as determined and approved by the SSS. started not earlier than the fifth day immediately preceding the
(e) If the disability is permanent partial, and such date of notification.
disability occurs before thirty-six (36) monthly contributions have (b) The compensable confinement shall begin on the first
been paid prior to the semester of disability, the benefit shall be day of sickness, and the payment of such allowances shall be
such percentage of the lump sum benefit described in the preceding promptly made by the employer every regular payday or on the
paragraph with due regard to the degree of disability as the fifteenth and last day of each month, and similarly in the case of
Commission may determine. direct payment by the SSS, for as long as such allowances are due
(f) If the disability is permanent partial and such and payable: Provided, That such allowance shall begin only after
disability occurs after thirty-six (36) monthly contributions have all sick leaves of absence with full pay to the credit of the employee
been paid prior to the semester of disability, the benefit shall be the member shall have been exhausted.
monthly pension for permanent total disability payable not longer (c) One hundred percent (100%) of the daily benefits
than the period designated in the following schedule: provided in the preceding paragraph shall be reimbursed by the
xxx SSS to said employer upon receipt of satisfactory proof of such
(g) The percentage degree of disability which is payment and legality thereof: Provided, That the employer has
equivalent to the ratio that the designated number of months of notified the SSS of the confinement within five (5) calendar days
compensability bears to seventy-five (75), rounded to the next after receipt of the notification from the employee
higher integer, shall not be additive for distinct, separate and member: Provided, further, That if the notification to the SSS is
unrelated permanent partial disabilities, but shall be additive for made by the employer beyond five (5) calendar days after receipt
deteriorating and related permanent partial disabilities, to a of the notification from the employee member, said employer shall
maximum of one hundred percent (100%), in which case, the be reimbursed only for each day of confinement starting from the
member shall be deemed as permanently totally disabled. tenth calendar day immediately preceding the date of notification
(h) In case of permanent partial disability, the monthly to the SSS: Provided, finally, That the SSS shall reimburse the
pension benefit shall be given in lump sum if it is payable for less employer or pay the unemployed member only for confinement
than twelve (12) months. within the one-year period immediately preceding the date the
(i) For the purpose of adjudicating retirement, death claim for benefit or reimbursement is received by the SSS, except
and permanent total disability pension benefits, contributions shall confinement in a hospital in which case the claim for benefit or
be deemed paid for the months during which the member received reimbursement must be filed within one (1) year from the last day
partial disability pension: Provided, That such contributions shall of confinement.
be based on his last contribution prior to his disability. (d) Where the employee member has given the required
(j) Should a member who is on partial disability pension notification but the employer fails to notify the SSS of the
retire or die, his disability pension shall cease upon his retirement confinement or to file the claim for reimbursement within the
or death. period prescribed in this section resulting in the reduction of the
benefit or denial of the claim, such employer shall have no right to
c. Funeral Benefit recover the corresponding daily allowance he advanced to the
employee member as required in this section.
(e) The claim of reimbursement shall be adjudicated by
Section 13-B. Funeral Benefit. - A funeral grant the SSS within a period of two (2) months from receipt
equivalent to Twelve thousand pesos (₱12,000.00) shall be paid, in thereof: Provided, That should no payment be received by the
cash or in kind, to help defray the cost of funeral expenses upon the employer within one (1) month after the period prescribed herein
death of a member, including permanently totally disabled for adjudication, the reimbursement shall thereafter earn simple
member or retiree. interest of one percent (1%) per month until paid.
(f) The provisions regarding the notification required of
d. Sickness Benefit the member and the employer as well as the period within which
the claim for benefit or reimbursement may be filed shall apply to
all claims filed with the SSS.
Section 14. Sickness Benefit. - (a) A member who has
paid at least three (3) monthly contributions in the twelve-month
period immediately preceding the semester of sickness or injury e. Unemployment, Insurance, or
and is confined therefor for more than three (3) days in a hospital Involuntary Separation Benefits
or elsewhere with the approval of the SSS, shall, for each day of
compensable confinement or a fraction thereof, be paid by his
Section 14-B. Unemployment. Insurance or Involuntary
employer, or the SSS, if such person is unemployed or self-
Separation Benefits. - A member who is not over sixty (60) years of
employed, a daily sickness benefit equivalent to ninety percent
age who has paid at least thirty-six (36) months contributions
(90%) of his average daily salary credit, subject to the following
twelve (12) months of which should be in the eighteen-month
conditions:
period immediately preceding the involuntary unemployment or
(1) In no case shall the daily sickness benefit be paid
separation shall be paid benefits in the form of monthly cash
longer than one hundred twenty (120) days in one (1) calendar
payments equivalent to fifty percent (50%) of the average monthly
year, nor shall any unused portion of the one hundred twenty (120)

Page 59 of 191
salary credit for a maximum of two (2) months: Provided, That an Secondary beneficiaries are the dependent parents
employee who is involuntarily unemployed can only claim and, subject to the restrictions on dependent children, the
unemployment benefits once every three (3) years: Provided, legitimate descendants;
further, That in case of concurrence of two or more compensable
contingencies, only the highest benefit shall be paid, subject to the
rules and regulations that the Commission may prescribe.
3. Benefits

a. Monthly Pension
f. Non-Transferability

SECTION 9. Computation of the Basic Monthly

Section 15. Non-Transferability of Benefits. - The SSS
Pension. — (a) the basic monthly pension is equal to:
shall promptly pay the benefits provided in this Act to such persons
(1) thirty-seven and one-half percent (37.5%) of the
as may be entitled thereto in accordance with the provisions of this
revalued average monthly compensation; plus
Act: Provided, That the SSS shall pay the retirement benefits on the
“2) two and one-half percent (2.5%) of said revalued
day of contingency to qualified members who have submitted the
average monthly compensation for each year of service in excess of
necessary documents at least six (6) months before: Provided,
fifteen (15) years: Provided, That the basic monthly pension shall
further, That the beneficiary who is a national of a foreign country
not exceed ninety percent (90%) of the average monthly
which does not extend benefits to a Filipino beneficiary residing in
compensation.
the Philippines, or which is not recognized by the Philippines, shall
“(b) The basic monthly pension may be adjusted upon
not be entitled to receive any benefit under this Act: Provided,
the recommendation of the President and General Manager of the
further, That notwithstanding the foregoing, where the best
GSIS and approved by the President of the Philippines in
interest of the SSS will be served, the Commission may direct
accordance with the rules and regulations prescribed by the GSIS:
payments without regard to nationality or country of
Provided, however, That the basic monthly pension shall not be less
residence: Provided, further, That if the recipient is a minor or a
than One thousand and three hundred pesos (P1,300.00): Provided,
person incapable of administering his own affairs, the Commission
further, That the basic monthly pension for those who have
shall appoint a representative under such terms and conditions as
rendered at least twenty (20) years of service after the effectivity of
it may deem proper: Provided, further, That such appointment
this Act shall not be less than Two thousand four hundred pesos
shall not be necessary in case the recipient is under the custody of
(P2,400.00) a month.
or living with the parents or spouse of the member in which case
the benefits shall be paid to such parents or spouse, as
representative payee of the recipient. Such benefits are not SECTION 10. Computation of Service. — (a) The
transferable and no power of attorney or other document executed computation of service for the purpose of determining the amount
by those entitled thereto in favor of any agent, attorney or any of benefits payable under this Act shall be from the date of original
other person for the collection thereof on their behalf shall be appointment/election, including periods of service at different
recognized, except when they are physically unable to collect times under one or more employers, those performed overseas
personally such benefits: Provided, further That in case of death under the authority of the Republic of the Philippines, and those
benefits, if no beneficiary qualifies under this Act, said benefits that may be prescribed by the GSIS in coordination with the Civil
shall be paid to the legal heirs in accordance with the law of Service Commission.
succession. (b) All service credited for retirement, resignation or
separation for which corresponding benefits have been awarded
under this Act or other laws shall be excluded in the computation
B. GSIS LAW (R.A. 8291) of service in case of reinstatement in the service of an employer and
subsequent retirement or separation which is compensable under
1. Coverage this Act.
For the purpose of this section the term service shall
SECTION 3. Compulsory Membership. — Membership include full time service with compensation: Provided, That part
in the GSIS shall be compulsory for all employees receiving time and other services with compensation may be included under
compensation who have not reached the compulsory retirement such rules and regulations as may be prescribed by the GSIS.
age, irrespective of employment status, except members of the
Armed Forces of the Philippines and the Philippine National b. Separation Benefits
Police, subject to the condition that they must settle first their
financial obligation with the GSIS, and contractuals who have no
SECTION 11. Separation Benefits. — The separation
employer and employee relationship with the agencies they serve.
benefit shall consist of: (a) a cash payment equivalent to one
Except for the members of the judiciary and
hundred percent (100%) of his average monthly compensation for
constitutional commissions who shall have life insurance only, all
each year of service he paid contributions, but not less than Twelve
members of the GSIS shall have life insurance, retirement, and all
thousand pesos (P12,000) payable upon reaching sixty (60) years of
other social security protection such as disability, survivorship,
age or upon separation, whichever comes later: Provided, That the
separation, and unemployment benefits.
member resigns or separates from the service after he has rendered
at least three (3) years of service but less than fifteen (15) years; or
2. Dependents and Beneficiaries (b) A cash payment equivalent to eighteen (18) times his
Dependents shall be the following: (a) the legitimate basic monthly pension payable at the time of resignation or
spouse dependent for support upon the member or pensioner; separation, plus an old-age pension benefit equal to the basic
(b) the legitimate, legitimated, legally adopted child, including monthly pension payable monthly for life upon reaching the age of
sixty (60): Provided, That the member resigns or separates from
the illegitimate child, who is unmarried, not gainfully
the service after he has rendered at least fifteen (15) years of service
employed, not over the age of majority, or is over the age of and is below sixty (60) years of age at the time of resignation or
majority but incapacitated and incapable of self-support due to separation.
a mental or physical defect acquired prior to age of majority;
and (c) the parents dependent upon the member for support; SECTION 12. Unemployment or Involuntary
Primary beneficiaries are the legal dependent spouse Separation Benefits. — Unemployment benefits in the form of
until he/she remarries and the dependent children; monthly cash payments equivalent to fifty percent (50%) of the
average monthly compensation shall be paid to a permanent
employee who is involuntarily separated from the service due to the
abolition of his office or position usually resulting from
Page 60 of 191
reorganization: Provided, That he has been paying integrated (b) If a member who suffers permanent total disability
contributions for at least one (1) year prior to separation. does not satisfy conditions (1) and (2) in paragraph (a) of this
Unemployment benefits shall be paid in accordance with the section but has rendered at least three (3) years service at the time
following schedule: of his disability, he shall be advanced the cash payment equivalent
“Contributions Made Benefit Duration to one hundred percent (100%) of his average monthly
1 year but less than 3 years 2 months compensation for each year of service he paid contributions, but
3 or more years but less than 6 years 3 months not less than Twelve Thousand pesos (P12,000) which should have
6 or more years but less than 9 years 4 months been his separation benefit.
9 or more years but less than 11 years 5 months (c) Unless the member has reached the minimum
11 or more years but less than 15 years 6 months retirement age, disability benefit shall be suspended when:
“The first payment shall be equivalent to two (2) (1) he is reemployed or
monthly benefits. A seven-day (7) waiting period shall be imposed (2) he recovers from disability as determined by the
on succeeding monthly payments. GSIS, whose decision shall be final and binding; or
“All accumulated unemployment benefits paid to the (3) he fails to present himself for medical examination
employee during his entire membership with the GSIS shall be when required by the GSIS.
deducted from voluntary separation benefits. (d) The following disabilities shall be deemed total and
“The GSIS shall prescribe the detailed guidelines in the permanent:
operationalization of this section in the rules and regulations (1) complete loss of sight of both eyes;
implementing this Act. (2) loss of two (2) limbs at or above the ankle or wrist;
(3) permanent complete paralysis of two(2) limbs;
c. Retirement Benefits (4) brain injury resulting in incurable imbecility or
insanity; and
(5) such other cases as may be determined by the GSIS.
SECTION 13. Retirement Benefits. — (a) Retirement
benefit shall be:
(1) the lump sum payment as defined in this Act payable SECTION 17. Permanent Partial Disability Benefits. —
at the time of retirement plus an old-age pension benefit equal to (a) If the disability is partial, he shall receive a cash payment in
the basic monthly pension payable monthly for life, starting upon accordance with a schedule of disabilities to be prescribed by the
expiration of the five-year (5) guaranteed period covered by the GSIS: Provided, That he satisfies either conditions (1) or (2) of
lump sum; or Section 16(a);
(2) cash payment equivalent to eighteen (18) months of (b) The following disabilities shall be deemed permanent
his basic monthly pension plus monthly pension for life payable and partial:
immediately with no five-year (5) guarantee. (1) complete and permanent loss of the use of:
(b) Unless the service is extended by appropriate (i) any finger
authorities, retirement shall be compulsory for an employee at (ii) any toe
sixty-five (65) years of age with at least fifteen (15) years of service: (iii) one arm
Provided, That if he has less than fifteen (15) years of service, he (iv) one hand
may be allowed to continue in the service in accordance with (v) one foot
existing civil service rules and regulations. (vi) one leg
SECTION 13-A. Conditions for Entitlement. — A (vii) one or both ears
member who retires from the service shall be entitled to the (viii) hearing of one or both ears
retirement benefits in paragraph (a) of Section 13 hereof: (ix) sight of one eye
Provided, That: (2) such other cases as may be determined by the GSIS.
(1) he has rendered at least fifteen (15) years of service;
(2) he is at least sixty (60) years of age at the time of e. Temporary Disability Benefits
retirement; and
(3) he is not receiving a monthly pension benefit from
SECTION 18. Temporary Total Disability Benefit. —
permanent total disability.
(a) A member who suffers temporary total disability for reasons
not due to any of the conditions enumerated in Section 15 hereof
d. Permanent Disability Benefits shall be entitled to seventy-five percent (75%) of his current daily
compensation for each day or fraction thereof of temporary
SECTION 15. General Conditions for Entitlement. — A disability benefit not exceeding one hundred twenty (120) days in
member who suffers permanent disability for reasons not due to one calendar year after exhausting all his sick leave credits and
his grave misconduct, notorious negligence, habitual intoxication, collective bargaining agreement sick leave benefits, if any, but not
or willful intention to kill himself or another, shall be entitled to the earlier than the fourth day of his temporary total disability:
benefits provided for under Sections 16 and 17 immediately Provided, That:
following, subject to the corresponding conditions therefor. (1) he is in the service at the time of his disability; or
(2) if separated, he has rendered at least three (3) years
of service and has paid at least six (6) monthly contributions in the
SECTION 16. Permanent Total Disability Benefits. — twelve-month period immediately preceding his disability.
(a) If the permanent disability is total, he shall receive a monthly Provided, however, That a member cannot enjoy the
income benefit for life equal to the basic monthly pension effective temporary total disability benefit and sick leave pay
from the date of disability: Provided, That: simultaneously: Provided, further, That if the disability requires
(1) he is in the service at the time of disability; or more extensive treatment that lasts beyond one hundred twenty
(2) if separated from the service, he has paid at least (120) days, the payment of the temporary total disability benefit
thirty-six (36) monthly contributions within the five (5) year period may be extended by the GSIS but not to exceed a total of two
immediately preceding his disability, or has paid a total of at least hundred forty (240) days.
one hundred eighty (180) monthly contributions, prior to his (b) The temporary total disability benefit shall in no case
disability: Provided, further, That if at the time of disability, he was be less than Seventy pesos (P70.00) a day.
in the service and has paid a total of at least one hundred eighty (c) The notices required of the member and the
(180) monthly contributions, in addition to the monthly income employer, the mode of payment, and the other requirements for
benefit, he shall receive a cash payment equivalent to eighteen (18) entitlement to temporary total disability benefits shall be provided
times his basic monthly pension: Provided, finally, That a member in the rules and regulations to be prescribed by the GSIS.
cannot enjoy the monthly income benefit for permanent disability
and the old-age retirement simultaneously.
Page 61 of 191
 SECTION 19. Non-scheduled Disability. — For injuries sum, the survivorship pension shall be paid only after the
or illnesses resulting in a disability not listed in the schedule of expiration of the said period.
partial/total disability, as provided herein, the GSIS shall
determine the nature of the disability and the corresponding g. Funeral Benefits
benefits therefor.

SECTION 23. Funeral Benefit. — The amount of

f. Survivorship Benefits funeral benefit shall be determined and specified by the GSIS in
the rules and regulations but shall not be less than Twelve thousand
“SECTION 20. Survivorship Benefits. — When a pesos (P12,000.00): Provided, That it shall be increased to at least
member or pensioner dies, the beneficiaries shall be entitled to Eighteen thousand pesos (P18,000.00) after five (5) years and shall
survivorship benefits provided in Sections 21 and 22 hereunder be paid upon the death of:
subject to the conditions therein provided for. The survivorship (a) an active member as defined under Section 2(e) of
pension shall consist of: this Act; or
(1) the basic survivorship pension which is fifty percent (b) a member who has been separated from the service,
(50%) of the basic monthly pension; and but who may be entitled to future benefit pursuant to Section 4 of
(2) the dependent children’s pension not exceeding fifty this Act; or
percent (50%) of the basic monthly pension. (c) a pensioner, as defined in Section 2(o) of this Act; or
(3) (d) a retiree who at the time of his retirement was of
pensionable age under this Act but who opted to retire under
Republic Act No. 1616.
SECTION 21. Death of a Member. — (a) Upon the death
of a member, the primary beneficiaries shall be entitled to:
(1) survivorship pension: Provided, That the deceased: h. Life Insurance Benefits
(i) was in the service at the time of his death; or
(ii) if separated from the service, has at least three (3) SECTION 24. Compulsory Life Insurance. — All
years of service at the time of his death and has paid thirty-six (36) employees except for Members of the Armed Forces of the
monthly contributions within the five-year period immediately Philippines (AFP) and the Philippine National Police (PNP) shall,
preceding his death; or has paid a total of at least one hundred under such terms and conditions as may be promulgated by the
eighty (180) monthly contributions prior to his death; or GSIS, be compulsorily covered with life insurance, which shall
(2) the survivorship pension plus a cash payment automatically take effect as follows:
equivalent to one hundred percent (100%) of his average monthly (1) for those employed after the effectivity of this Act,
compensation for every year of service: Provided, That the their insurance shall take effect on the date of their employment;
deceased was in the service at the time of his death with at least (2) for those whose insurance will mature after the
three (3) years of service; or effectivity of this Act, their insurance shall be deemed renewed on
(3) a cash payment equivalent to one hundred percent the day following the maturity or expiry date of their insurance;
(100%) of his average monthly compensation for each year of (3) for those without any life insurance as of the
service he paid contributions, but not less than Twelve thousand effectivity of this Act, their insurance shall take effect following
pesos (P12,000.00): Provided, That the deceased has rendered at said effectivity.
least three (3) years of service prior to his death but does not qualify
for the benefits under the item (1) or (2) of this paragraph.
SECTION 25. Dividends. — An annual dividend may be
(b) The survivorship pension shall be paid as follows:
(1) when the dependent spouse is the only survivor, granted to all members of the GSIS whose life insurance is in force
for at least one (1) year in accordance with a dividend allocation
he/she shall receive the basic survivorship pension for life or until
formula to be determined by the GSIS.
he/she remarries;
(2) when only dependent children are the survivors, they
shall be entitled to the basic survivorship pension for as long as they SECTION 26. Optional Insurance. — Subject to the
are qualified, plus the dependent children’s pension equivalent to rules and regulations prescribed by the GSIS, a member may apply
ten percent (10%) of the basic monthly pension for every for insurance and/or pre-need coverage embracing life, health,
dependent child not exceeding five (5), counted from the youngest hospitalization, education, memorial plans, and such other plans as
and without substitution; may be designed by the GSIS, for himself and/or his dependents.
(3) when the survivors are the dependent spouse and the Any employer may likewise apply for group insurance coverage for
dependent children, the dependent spouse shall receive the basic its employees. The payment of the premiums/installments for
survivorship pension for life or until he/she remarries, and the optional insurance and pre-need products may be made by the
dependent children shall receive the dependent children’s pension insured or his employer and/or any person acceptable to the GSIS.
mentioned in the immediately preceding paragraph (2) hereof.
(c) In the absence of primary beneficiaries, the C. DISABILITY AND DEATH BENEFITS
secondary beneficiaries shall be entitled to:
(1) the cash payment equivalent to one hundred percent
(100%) of his average monthly compensation for each year of 1. Labor Code
service he paid contributions, but not less than Twelve thousand
pesos (P12,000): Provided, That the member is in the service at the a. Temporary Total Disability
time of his death and has at least three (3) years of service; or
(2) in the absence of secondary beneficiaries, the benefits
Article 197. Temporary Total Disability. (a) Under such
under this paragraph shall be paid to his legal heirs.
regulations as the Commission may approve, any employee under
(d) For purposes of the survivorship benefits, legitimate
this Title who sustains an injury or contracts sickness resulting in
children shall include legally adopted and legitimate children.
temporary total disability shall, for each day of such a disability or
fraction thereof, be paid by the System an income benefit
SECTION 22. Death of a Pensioner. — Upon the death equivalent to ninety percent of his average daily salary credit,
of an old-age pensioner or a member receiving the monthly income subject to the following conditions: the daily income benefit shall
benefit for permanent disability, the qualified beneficiaries shall be not be less than Ten Pesos nor more than Ninety Pesos, nor paid
entitled to the survivorship pension defined in Section 20 of this for a continuous period longer than one hundred twenty days,
Act, subject to the provisions of paragraph (b) of Section 21 hereof. except as otherwise provided for in the Rules, and the System shall
When the pensioner dies within the period covered by the lump be notified of the injury or sickness.

Page 62 of 191
 (b) The payment of such income benefit shall be in c) A loss of a wrist shall be considered as a loss of the
accordance with the regulations of the Commission. hand, and a loss of an elbow shall be considered as a loss of the arm.
A loss of an ankle shall be considered as loss of a foot, and a loss of
b. Permanent Total Disability a knee shall be considered as a loss of the leg. A loss of more than
one joint shall be considered as a loss of one-half of the whole finger
or toe: Provided, That such a loss shall be either the functional loss
Article 198. Permanent Total Disability. (a) Under such of the use or physical loss of the member.
regulations as the Commission may approve, any employee under (d) In case of permanent partial disability less than the
this Title who contracts sickness or sustains an injury resulting in total loss of the member specified in the preceding paragraph, the
his permanent total disability shall, for each month until his death, same monthly income benefit shall be paid for a portion of the
be paid by the System during such a disability, an amount period established for the total loss of the member in accordance
equivalent to the monthly income benefit, plus ten percent thereof with the proportion that the partial loss bears to the total loss. If
for each dependent child, but not exceeding five, beginning with the the result is a decimal fraction, the same shall be rounded off to the
youngest and without substitution: Provided, That the monthly next higher integer.
income benefit shall be the new amount of the monthly benefit for (e) In cases of simultaneous loss of more than one
all covered pensioners, effective upon approval of this Decree. member or a part thereof as specified in this Article, the same
(b) The monthly income benefit shall be guaranteed for monthly income benefit shall be paid for a period equivalent to the
five years, and shall be suspended if the employee is gainfully sum of the periods established for the loss of the member or the
employed, or recovers from his permanent total disability, or fails part thereof. If the result is a decimal fraction, the same shall be
to present himself for examination at least once a year upon notice rounded off to the next higher integer.
by the System, except as otherwise provided for in other laws, (f) In cases of injuries or illnesses resulting in a
decrees, orders or Letters of Instructions. permanent partial disability not listed in the preceding schedule,
(c) The following disabilities shall be deemed total and the benefit shall be an income benefit equivalent to the percentage
permanent: of the permanent loss of the capacity to work.
(1) Temporary total disability lasting continuously for (g) Under such regulations as the Commission may
more than one hundred twenty days, except as otherwise provided approve, the income benefit payable in case of permanent partial
for in the Rules; disability may be paid in monthly pension or in lump sum if the
(2) Complete loss of sight of both eyes; period covered does not exceed one year.
(3) Loss of two limbs at or above the ankle or wrist;
(4) Permanent complete paralysis of two limbs;
(5) Brain injury resulting in incurable imbecility or 2. Philippine Overseas Employment
insanity; and Administration-Standard Employment
(6) Such cases as determined by the Medical Director of Contract for Seafarers
the System and approved by the Commission. As part of a seafarer's deployment for overseas work,
(d) The number of months of paid coverage shall be he and the vessel owner or its representative local manning
defined and approximated by a formula to be approved by the
agency are required to execute the POEA-SEC. Containing the
Commission.
standard terms and conditions of seafarers' employment, the
POEA-SEC is deemed included in their contracts of
In Government Service Insurance System v. Court of
employment in foreign ocean-going vessels [Sharpe Sea
Appeals, it was held that while permanent total disability
Personnel Inc. v. Mabunay].
invariably results in an employees loss of work or inability to
perform his usual work, permanent partial disability occurs
a. Compensation for Benefits for Injury
when an employee loses the use of any particular anatomical
or Illness
part of his body which disables him to continue with his former
work. Stated otherwise, the test of whether or not an employee
suffers from permanent total disability is the capacity of the (i) Medical Expenses
employee to continue performing his work notwithstanding the If the injury or illness requires medical and/or dental
disability he incurred. If by reason of the injury or sickness he treatment in a foreign port, the employer shall be liable for the
sustained, the employee is unable to perform his customary job full cost of such medical, serious dental, surgical and hospital
for more than 120 days and he does not come within the treatment as well as board and lodging until the seafarer is
coverage of Rule X of the Amended Rules on Employees declared fit to work or to be repatriated. However, if after
Compensability (which, in a more detailed manner, describes repatriation, the seafarer still requires medical attention arising
what constitutes temporary total disability), then the said from said injury or illness, he/she shall be so provided at cost
employee undoubtedly suffers from a permanent total disability to the employer until such time he/she is declared fit or the
regardless of whether or not he loses the use of any part of his degree of his/her disability has been established by the
body. Permanent total disability does not mean a state of company-designated physician [Sec. 20, A.2, POEASEC].
absolute helplessness, but means disablement of an employee
to earn wages in the same kind of work, or work of similar (ii) Sickness Allowance
nature, that he was trained for, or any work which a person of The seafarer shall also receive sickness allowance
similar mentality and attainment could do. from his/her employer in an amount equivalent to his/her basic
wage computed from the time he/she signed off until he is
c. Permanent Partial Disability declared fit to work or the degree of disability has been assessed
by the company-designated physician. The period within the
Article 199. Permanent Partial Disability. (a) Under such
seafarer shall be entitled to sickness allowance shall not exceed
regulations as the Commission may approve, any employee under 120 days. Payment of the sickness allowance shall be made on
this Title who contracts sickness or sustains an injury resulting in a regular basis, but not less than once a month [Sec. 20. A.3,
permanent partial disability shall, for each month not exceeding POEA-SEC].
the period designated herein, be paid by the System during such a
disability an income benefit for permanent total disability. (iii) Other Expenses
xxx The seafarer shall be entitled to reimbursement of the
cost of medicines prescribed by the company-designated
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physician. In case treatment of the seafarer is on an out-patient has sufficient justification to extend the
basis as determined by the company-designated physician, the period; and
company shall approve the appropriate mode of transportation • If the company-designated physician still fails
and accommodation. The reasonable cost of actual traveling to give his assessment within the extended
expenses and/or accommodation shall be paid subject to period of 240 days, then the seafarer's
liquidation and submission of official receipts and/or proof of disability becomes permanent and total,
expenses [Sec. 20, A.3, POEA-SEC].
regardless of any justification [Jebsens
Maritime Inc. v. Rapiz].
(iv) Post-Employment Medical
Examination
Total disability refers to an employee’s inability to
General Rule: The seafarer shall submit
perform his or her usual work. It does not require total paralysis
himself/herself to a post-medical examination by a company-
or complete helplessness. Permanent disability, on the other
designated physician within three working days upon his
hand, is a worker’s inability to perform his or her job for more
return.
than one hundred twenty (120) days, or two hundred forty (240)
Exception: When the seafarer is physically
days if the seafarer required further medical attention justifying
incapacitated to do so. In which case, a written notice to the
the extension of the temporary total disability period, regardless
agency within the same period is deemed as compliance [Sec.
of whether or not he loses the use of any part of his body. The
20, A.3, POEA-SEC].
third-doctor rule does not apply when there is no valid final and
definitive assessment from a company designated physician
(v) Mandatory Reporting
[Talaroc v. Arpaphil Shipping Corp].
Requirement
In the course of the treatment, the seafarer shall also b. Compensation and Benefits for Death
report regularly to the companydesignated physician In case of work-related death of the seafarer, during
specifically on the dates as prescribed by the company- the term of his contract, the employer shall pay his/her
designated physician and agreed to by the seafarer. beneficiaries the Philippine currency equivalent to the amount
Failure of the seafarer to comply with the mandatory of Fifty Thousand US dollars (US$50,000) and an additional
reporting requirement shall result in his forfeiture of the right amount of Seven Thousand US dollars (US$7,000) to each
to claim the above benefits [Sec. 20, A.3, POEA-SEC] child under the age of twenty-one (21) but not exceeding four
(4) children, at the exchange rate prevailing during the time of
(vi) Repatriation payment [Sec. 20, B.1, POEA-SEC].
In case a seafarer is disembarked from the ship for
medical reasons, the employer shall bear the full cost of (i) When Compensation Payable
repatriation in the event the seafarer is declared: 1. Fit for is Double
repatriation; or 2. Fit to work but the employer is unable to find
Where death is caused by warlike activity while
employment for the seafarer on board his/her former ship or
sailing within a declared war zone or war risk area, the
another ship of the employer [Sec. 20, A.5, POEA-SEC].
compensation payable shall be doubled [Sec. 20, B.2, POEA-
SEC].
(vii) Guidelines for the Claim of
Other liabilities of the employer when the seafarer
Permanent Total Disability dies as a result of work-related injury or illness during the term
Benefits of employment are as follows:
The employer must also compensate the seafarer for
his/her permanent total or partial disability as finally • The employer shall pay the deceased’s
determined by the companydesignated physician. The beneficiary all outstanding obligations due the
following guidelines shall govern seafarers' claims for
seafarer under this Contract.
permanent and total disability benefits:
• The employer shall transport the remains and
personal effects of the seafarer to the
• The company-designated physician must issue
Philippines at employer’s expense except if
a final medical assessment on the seafarer's
the death occurred in a port where local
disability grading within a period of 120 days
government laws or regulations do not permit
from the time the seafarer reported to him;
the transport of such remains. In case death
• If the company-designated physician fails to
occurs at sea, the disposition of the remains
give his/her assessment within the period of
shall be handled or dealt with in accordance
120 days, without any justifiable reason, then
with the master’s best judgment. In all cases,
the seafarer's disability becomes permanent
the employer/master shall communicate with
and total;
the manning agency to advise for disposition
• If the company-designated physician fails to
of seafarer’s remains.
give his/her assessment within the period of
• The employer shall pay the beneficiaries of the
120 days with a sufficient justification (e.g.
seafarer the Philippine currency equivalent to
seafarer required further medical treatment or
the amount of US$1,000.00 for burial
seafarer was uncooperative), then the period
expenses at the exchange rate prevailing
of diagnosis and treatment shall be extended
during the time of payment [Sec. 20, B.4,
to 240 days. The employer has the burden to
POEA-SEC]
prove that the company-designated physician

Page 64 of 191
 (ii) When Compensation is Not on a regular basis, and opportunity to meet with colleagues on a
Payable regular basis, and allowing access to company information.
No compensation and benefits shall be payable in
respect of any injury, incapacity, disability or death of the
seafarer resulting from his willful or criminal act or intentional
breach of his duties, provided however, that the employer can
prove that such injury, incapacity, disability or death is directly
attributable to the seafarer [Sec. 20, D, POEA-SEC].

NOTE: Applies to both disability and death benefits.

c. Prescription of Claims
All claims arising from this contract shall be made
within three (3) years from the date the cause of action arises,
otherwise the same shall be barred [Sec. 30, POEA-SEC].

D. TELECOMMUTING ACT (R.A. 11165)

1. Definition

Section 3. Telecommuting Defined. - As used in this Act

the term "telecommuting" refers to a work from an alternative
workplace with the use of telecommunications and/or computer
technologies.

2. Telecommuting Program

Section 4. telecommuting Program. - An employer in

private sector may offer a telecommuting program to its employees
on a voluntary bases, and upon such terms and conditions as they
may mutually agree upon: Provided, That such terms and
conditions shall not be less than the minimum labor standards set
by law, and shall include compensable work hours, minimum
number of work hours, overtime, rest days, and entitlement to
leave benefits. In all cases, the employer shall provide the
telecommuting employee with relevant written information in
order to adequately apprise the individual of the terms and
conditions of the telecommuting program, and the responsibilities
of employee.

3. Fair Treatment

Section 5. Fair Treatment. - The employer shall ensure

that the telecommuting employee are given the same treatment as
that of comparable employees are given the same treatment as that
of comparable employees working at the time employer's premises.
All telecommuting employee shall:
(a) Receive a rate of pay, including overtime and night
shift differential, and other similar monetary benefits not lower
than those provided in applicable laws, and collective bargaining
agreements.
(b) Have the right to rest periods, regular holidays, and
special nonworking days.
(c) Have the same or equivalent workload and
performance standards as those of comparable workerat the
employer's premises.
(d) Have the same access to training and career
development opportunities as those of comparable workers at the
employer's premises, and be subject to the same appraisal policies
covering these workers.
(e) Receive appropriate training on the technical
equipment at their disposal, and the characteristics and conditions
of telecommuting.
(f) Have the same collectible rights as the workers at the
employer's premises, and shall not be barred from communicating
with workers' representatives.
The employer shall also ensure that measures are taken
to prevent the telecommuting employee from being isolated from
the rest of the working community in the company by giving the
telecommuting employee the opportunity to meet with colleagues

Page 65 of 191
 CHAPTER FOUR:

LABOR RELATIONS

Page 66 of 191
 I employers may form labor organizations for their mutual aid and
RIGHT TO SELF-ORGANIZATION protection.

The Right to Self-Organization includes: Article 254. [244] Right of Employees in the Public
Service. Employees of government corporations established under
the Corporation Code shall have the right to organize and to
a. The right to form, join, or assist labor bargain collectively with their respective employers. All other
organizations of their own choosing for employees in the civil service shall have the right to form
purposes of collective bargaining; associations for purposes not contrary to law.
b. The right not to join any union;
c. The right to vote by 2/3 majority of its general Article 255. [245] Ineligibility of Managerial Employees
membership to cancel registration of its union in to Join any Labor Organization; Right of Supervisory Employees.
a meeting called for the purpose; Managerial employees are not eligible to join, assist or form any
d. The right to file a petition for cancellation of labor organization. Supervisory employees shall not be eligible for
union registration and/or de-certification of the membership in the collective bargaining unit of the rank-and-file
union on grounds provided for by law. employees but may join, assist or form separate collective
bargaining units and/or legitimate labor organizations of their
own. The rank and file union and the supervisors' union operating
A. COVERAGE
within the same establishment may join the same federation or
Rule II, Section 2 of DO 40-03 provides: national union.

Section 2. Who may join labor unions and

workers’ associations. – All persons employed in
The following are eligible to join, form or assist a
commercial, industrial and agricultural enterprises, labor organization in the private sector:
including employees of government owned or controlled
corporations without original charters established under the a. All persons employed in commercial,
Corporation Code, as well as employees of religious, industrial and agricultural enterprises;
charitable, medical or educational institutions whether
operating for profit or not, shall have the right to self- b. Employees of religious, charitable,
organization and to form, join or assist labor unions for
medical or educational institutions,
purposes of collective bargaining: provided, however, that
supervisory employees shall not be eligible for membership whether operating for profit or not;
in a labor union of the rank-and-file employees but may
form, join or assist separate labor unions of their own. c. Front-line managers, commonly known
Managerial employees shall not be eligible to form, join or as supervisory employees;
assist any labor unions for purposes of collective There is no prohibition in the law or in the
bargaining. implementing rules regarding the right of supervisory
Alien employees with valid working permits employees to organize a labor organization or workers’
issued by the Department may exercise the right to self-
association of their own. They are, however, not allowed to
organization and join or assist labor unions for purposes of
collective bargaining if they are nationals of a country become members of a labor union composed of rank-and-file
which grants the same or similar rights to Filipino workers, employees. This is clear under Article 255 of the Labor Code.
as certified by the Department of Foreign Affairs, or which In case there is mixed membership of supervisors and rank-and-
has ratified either ILO Convention No. 87 and ILO file employees in one union, the new rule enunciated in Article
Convention No. 98. 256 of the Labor Code, unlike in the old law, is that it cannot
For purposes of this section, any employee, be invoked as a ground for the cancellation of the registration
whether employed for a definite period or not, shall of the union. The employees so improperly included are
beginning on the first day of his/her service, be eligible for
automatically deemed removed from the list of members of said
membership in any labor organization.
All other workers, including ambulant, union. In other words, their removal from the said list is by
intermittent and other workers, the self-employed, rural operation of law.
workers and those without any definite employers may form
labor organizations for their mutual aid and protection and d. Alien employees;
other legitimate purposes except collective bargaining.”
Article. 284. [269] Prohibition Against Aliens;
1. Labor Organization and Its Purpose Exceptions. - All aliens, natural or juridical, as well as foreign
Article 219(g) of the Labor Code provides: organizations are strictly prohibited from engaging directly or
indirectly in all forms of trade union activities without prejudice to
(g) "Labor organization" means any union or normal contacts between Philippine labor unions and recognized
association of employees which exists in whole or in part international labor centers: Provided, however, That aliens
for the purpose of collective bargaining or of dealing with working in the country with valid permits issued by the
employers concerning terms and conditions of employment. Department of Labor and Employment, may exercise the right to
self-organization and join or assist labor organizations of their own
choosing for purposes of collective bargaining: Provided, further,
2. In the Private Sector
That said aliens are nationals of a country which grants the same
or similar rights to Filipino workers.
Article 253. [243] Coverage and Employees' Right to Self-
Organization. All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical, or As a general rule, all aliens, natural or juridical, as
educational institutions, whether operating for profit or not, shall well as foreign organizations are strictly prohibited from
have the right to self-organization and to form, join, or assist labor engaging directly or indirectly in all forms of trade union
organizations of their own choosing for purposes of collective activities without prejudice to normal contacts between
bargaining. Ambulant, intermittent and itinerant workers, self-
employed people, rural workers and those without any definite
Page 67 of 191
Philippine labor unions and recognized international labor An employee of a legitimate job contractor is entitled
centers. to all the rights and privileges due a regular employee as
For an alien employee to exercise his right to self- provided in the Labor Code, such as the right to self-
organize, the following requisites should be complied with: organization, collective bargaining and peaceful concerted
activities, including the right to strike. But this right cannot be
(i) He should have a valid working permit exercised and invoked against the principal but only against the
issued by the DOLE; and independent contractor which employed them, except if there
(ii) He is a national of a country which grants is labor-only contracting.
the same or similar rights to Filipino
workers or which has ratified either ILO i.Employees of GOCCs without original
Convention No. 87 or ILO Convention No. charters established under the
98, as certified by the Philippine Corporation Code; Charter Test
Department of Foreign Affairs. Under the present state of the law, the test in
determining whether a government–owned or controlled
e. Working children; corporation is subject to the Civil Service Law is the manner of
Working children have the same freedom as adults to its creation such that government corporations created by
join the collective bargaining union of their own choosing in special charter are subject to its provisions while those
accordance with existing law. Under PD 603, it is clearly incorporated under the general Corporation Law are not within
provided that neither management nor any collective its coverage.
bargaining union shall threaten or coerce working children to However, the Philippine Society for Prevention of
join, continue or withdraw as members of such union. Cruelty to Animals, GOCCs with original charters severally
However, children cannot be officers of a union or liable under Article 106 and 107 of the Labor Code, and the
labor organization. Philippine National Red Cross are within the coverage of the
Labor Code, despite having original charters.
f. Homeworkers;
Homeworkers have the right to form, join or assist Philippine Society for Prevention of Cruelty to Animals
organizations of their own choosing in accordance with law. v. Commission on Audit
The registration of homeworkers’ organizations or associations Held: The petitioner is correct in stating that the charter test
following the requirements prescribed by law will vest legal is predicated, at best, on the legal regime established by the 1935
Constitution, Section 7, Article XIII, which states:
personality thereto.
Sec. 7. The National Assembly shall not, except by general
Household workers or domestic workers are law, provide for the formation, organization, or regulation of private
excluded. corporations, unless such corporations are owned or controlled by the
Government or any subdivision or instrumentality thereof.
Homeworkers Household The foregoing proscription has been carried over to the 1973
workers and the 1987 Constitutions. Section 16 of Article XII of the present
Place of work Home of employee Home of the Constitution provides:
employer Sec. 16. The Congress shall not, except by general law,
Classification Industrial worker Non-industrial provide for the formation, organization, or regulation of private
History Product of Industrial Antedates corporations. Government-owned or controlled corporations may be
Revolution Industrial created or established by special charters in the interest of the common
Revolution
good and subject to the test of economic viability.
DOLE Inspection Subject to Not subject to
Section 16 is essentially a re-enactment of Section 7 of
and Visitorial
Powers Article XVI of the 1935 Constitution and Section 4 of Article XIV of
Right to self- Yes No the 1973 Constitution.
organization During the formulation of the 1935 Constitution, the
Committee on Franchises recommended the foregoing proscription to
prevent the pressure of special interests upon the lawmaking body in
g. Employees of cooperatives;
the creation of corporations or in the regulation of the same. To permit
Members of a cooperative have no right to form or the lawmaking body by special law to provide for the organization,
join labor organizations for purposes of collective bargaining formation, or regulation of private corporations would be in effect to
for being themselves co-owners of the cooperative. This offer to it the temptation in many cases to favor certain groups, to the
prohibition covers employees of the cooperative who are at the prejudice of others or to the prejudice of the interests of the country.
same time members thereof [Cooperative Rural Bank v. And since the underpinnings of the charter test had been
Ferrer-Calleja]. However, insofar as the cooperative’s introduced by the 1935 Constitution and not earlier, it follows that the
employees who are not members or co-owners thereof are test cannot apply to the petitioner, which was incorporated by virtue of
Act No. 1285, enacted on January 19, 1905. Settled is the rule that laws
concerned, they are entitled to exercise their right to self-
in general have no retroactive effect, unless the contrary is provided.
organization and collective bargaining as guaranteed in the All statutes are to be construed as having only a prospective operation,
Constitution and existing laws. It is the fact of ownership of the unless the purpose and intention of the legislature to give them a
cooperative and not involvement in the management thereof retrospective effect is expressly declared or is necessarily implied from
which disqualifies a member from joining any labor the language used. In case of doubt, the doubt must be resolved against
organization within the cooperative. But employee-members of the retrospective effect.
a cooperative may withdraw as members of the cooperative for There are a few exceptions. Statutes can be given
purposes of joining a labor union [Central negros Electric retroactive effect in the following cases: (1) when the law itself so
expressly provides; (2) in case of remedial statutes; (3) in case of
Corporation v. Secretary of Labor].
curative statutes; (4) in case of laws interpreting others; and (5) in case
of laws creating new rights. None of the exceptions is present in the
h. Employees of legitimate contractors – instant case.
not with the principals but with the The general principle of prospectivity of the law likewise
contractors. applies to Act No. 1459, otherwise known as the Corporation Law,

Page 68 of 191
which had been enacted by virtue of the plenary powers of the institutions which can afford to pay two weeks, three weeks, or
Philippine Commission on March 1, 1906, a little over a year after even 13th-month salaries to their personnel from their
January 19, 1905, the time the petitioner emerged as a juridical budgetary appropriations. However, these payments must be
entity. Even the Corporation Law respects the rights and powers of
pursuant to law or regulation [Alliance of Government Workers
juridical entities organized beforehand, viz:
SEC. 75. Any corporation or sociedad anonima formed,
v. Minister of Labor].
organized, and existing under the laws of the Philippine Islands The general rule in the past and up to the present is
and lawfully transacting business in the Philippine Islands on the that "the terms and conditions of employment in the
date of the passage of this Act, shall be subject to the provisions hereof Government, including any political subdivision or
so far as such provisions may be applicable and shall be instrumentality thereof are governed by law" (Section 11, the
entitled at its option either to continue business as such corporation Industrial Peace Act, R.A. No. 875, as amended and Article
or to reform and organize under and by virtue of the provisions of this 277, the Labor Code, P.D. No. 442, as amended). Since the
Act, transferring all corporate interests to the new corporation which, if
terms and conditions of government employment are fixed by
a stock corporation, is authorized to issue its shares of stock at par to
the stockholders or members of the old corporation according to their law, government workers cannot use the same weapons
interests. (Emphasis supplied). employed by workers in the private sector to secure
As pointed out by the OSG, both the 1935 and 1987 concessions from their employers. The principle behind labor
Constitutions contain transitory provisions maintaining all laws issued unionism in private industry is that industrial peace cannot be
not inconsistent therewith until amended, modified or repealed. secured through compulsion by law. Relations between private
In a legal regime where the charter test doctrine cannot be employers and their employees rest on an essentially voluntary
applied, the mere fact that a corporation has been created by virtue of a basis. Subject to the minimum requirements of wage laws and
special law does not necessarily qualify it as a public corporation.
other labor and welfare legislation, the terms and conditions of
What then is the nature of the petitioner as a corporate
entity? What legal regime governs its rights, powers, and duties? employment in the unionized private sector are settled through
As stated, at the time the petitioner was formed, the the process of collective bargaining. In government
applicable law was the Philippine Bill of 1902, and, emphatically, as employment, however, it is the legislature and, where properly
also stated above, no proscription similar to the charter test can be given delegated power, the administrative heads of government
found therein. which fix the terms and conditions of employment. And this is
The textual foundation of the charter test, which placed a effected through statutes or administrative circulars, rules, and
limitation on the power of the legislature, first appeared in the 1935 regulations, not through collective bargaining agreements
Constitution. However, the petitioner was incorporated in 1905 by
[Ibid].
virtue of Act No. 1258, a law antedating the Corporation Law (Act No.
1459) by a year, and the 1935 Constitution, by thirty years. There being In GSIS v. Villanueva, it was held that the right to
neither a general law on the formation and organization of private self-organization is not limited to private employees and
corporations nor a restriction on the legislature to create private encompasses all workers in both the public and private sectors,
corporations by direct legislation, the Philippine Commission at that as shown by the clear declaration in Article IX(B), Section 2(5)
moment in history was well within its powers in 1905 to constitute the that "the right to self organization shall not be denied to
petitioner as a private juridical entity. government employees." Article III, Section 8 of the Bill of
Time and again the Court must caution even the most Rights likewise states, "[t]he right of the people, including
brilliant scholars of the law and all constitutional historians on the
those employed in the public and private sectors, to form
danger of imposing legal concepts of a later date on facts of an earlier
date. unions, associations, or societies for purposes not contrary to
The amendments introduced by C.A. No. 148 made it clear law shall not be abridged."
that the petitioner was a private corporation and not an agency of the While the right to self-organization is absolute, the
government. This was evident in Executive Order No. 63, issued by right of government employees to collective bargaining and
then President of the Philippines Manuel L. Quezon, declaring that the negotiation is subject to limitations. Collective bargaining is a
revocation of the powers of the petitioner to appoint agents with powers series of negotiations between an employer and a representative
of arrest "corrected a serious defect" in one of the laws existing in the of the employees to regulate the various aspects of the
statute books.
employer-employee relationship such as working hours,
working conditions, benefits, economic provisions, and others
3. In the Public Sector [Ibid].
Social Security System Employees Association v.
Article 254. Right of Employees in the Public Service. Court of Appeals explains that instead of a collective
Employees of government corporations established under the
bargaining agreement or negotiation, government employees
Corporation Code shall have the right to organize and to bargain
must course their petitions for a change in the terms and
collectively with their respective employers. All other employees in
the civil service shall have the right to form associations for conditions of their employment through the Congress for the
purposes not contrary to law, issuance of new laws, rules, or regulations to that effect:
Government employees may, therefore, through their unions or
In the public sector, all rank-and-file employees of all associations, either petition the Congress for the betterment of
branches, subdivisions, instrumentalities, and agencies of the terms and conditions of employment which are within the
government, including government-owned and/or controlled ambit of legislation or negotiate with the appropriate
corporations with original charters, can form, join or assist government agencies for the improvement of those which are
labor organizations called “employees organizations” of their not fixed by law.
own choosing. In PCSO v. Chairperson Pulido-Tan, et al., the
As to collective bargaining, it is the legislature or, in Commission on Audit disallowed the monthly cost of living
proper cases, the administrative heads of government and not allowance being received by Philippine Charity Sweepstakes
the collective bargaining process nor the concessions wrung by Office's officials and employees. This Court held that the
labor unions from management that determine how much the Philippine Charity Sweepstakes Office's charter does not allow
workers in government-owned or controlled corporations may its Board complete liberty to set the salaries and benefits of its
receive in terms of salaries, 13th-month pay, and other officials and employees. This Court emphasized that as a
conditions or terms of employment. There are government government-owned and controlled corporation, the Philippine

Page 69 of 191
Charity Sweepstakes Office is covered by the compensation
and position standards issued by the Department of Budget and (m) "Managerial employee" is one who is vested
Management and applicable laws. PCSO underscored that the with the powers or prerogatives to lay down and execute
power of a government-owned or controlled corporation to fix management policies and/or to hire, transfer, suspend, lay-
off, recall, discharge, assign or discipline employees.
salaries or allowances of its employees is subject to and must
Supervisory employees are those who, in the interest of the
conform to the compensation and classification standards laid employer, effectively recommend such managerial actions
down by applicable law: Upon the effectivity of R.A. No. 6758, if the exercise of such authority is not merely routinary or
GOCCs like the PCSO are included in the Compensation and clerical in nature but requires the use of independent
Position Classification System because Section 16 of the law judgment. All employees not falling within any of the above
repeals all laws, decrees, executive orders, corporate charters, definitions are considered rank-and-file employees for
and other issuances or parts thereof, that exempt agencies from purposes of this Book
the coverage of the System, or that authorize and fix position
classification, salaries, pay rates or allowances of specified Article 255 is constitutional
positions, or groups of officials and employees or of agencies, Although the definition of "supervisory employees"
which are inconsistent with the System, including seems to have been unduly restricted to the last phrase of the
the proviso under Section 2 and Section 16 of P.D. No. 985. definition in the Industrial Peace Act, the legal significance
given to the phrase "effectively recommends" remains the
4. Labor Organization Only For Mutual Aid same. In fact, the distinction between top and middle managers,
And Protection and Not For Collective who set management policy, and front-line supervisors, who
Bargaining Purposes are merely responsible for ensuring that such policies are
carried out by the rank and file, is articulated in the present
Article 253. [243] Coverage and Employees' Right to definition. When read in relation to this definition in Art.
Self-Organization. All persons employed in commercial, industrial 212(m), it will be seen that Art. 245 faithfully carries out the
and agricultural enterprises and in religious, charitable, medical, intent of the Constitutional Commission in framing Art. III, 8
or educational institutions, whether operating for profit or not, of the fundamental law [United Pepsi-Cola v. Laguesma].
shall have the right to self-organization and to form, join, or assist Nor is the guarantee of organizational right in Art. III,
labor organizations of their own choosing for purposes of collective 8 infringed by a ban against managerial employees forming a
bargaining. Ambulant, intermittent and itinerant workers, self-
union. The right guaranteed in Art. III, 8 " is subject to the
employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and
condition that its exercise should be for purposes not contrary
protection. to law."

This refers to the right to engage in group action, Rational Basis of prohibiting managerial
provided it is peaceful, to support the organization's objective employees
which is not necessarily collective bargaining but, simply, to In the case of Art. 245, there is a rational basis for
aid and protect its members. But this kind of group action must prohibiting managerial employees from forming or joining
be differentiated from strike which, because it is work labor organizations.
stoppage, must observe certain regulations; otherwise, the As Justice Davide, Jr., himself a constitutional
strike may be declared illegal and its leaders may be thrown out commissioner, said in his ponencia in Philips Industrial
of their jobs. Development, Inc. v. NLRC:
However, nothing in the foregoing implementing
In the first place, all these employees, with the
rules which provides that workers, with definite employers,
exception of the service engineers and the sales force personnel,
cannot form or join a workers' association for mutual aid and are confidential employees. Their classification as such is not
protection. Section 2 thereof even broadens the coverage of seriously disputed by PEO-FFW; the five (5) previous CBAs
workers who can form or join a workers'... association. Thus, between PIDI and PEO-FFW explicitly considered them as
the Court agrees with Samahan's argument that the right to form confidential employees. By the very nature of their functions,
a workers' association is not exclusive to ambulant, intermittent they assist and act in a confidential capacity to, or have access to
and itinerant workers. The option to form or join a union or a confidential matters of, persons who exercise managerial
functions in the field of labor relations. As such, the rationale
workers' association lies with the workers themselves, and
behind the ineligibility of managerial employees to form, assist or
whether... they have definite employers or not [Samahan v.
joint a labor union equally applies to them.
BLR].
In Bulletin Publishing
B. PERSONS INELIGIBLE Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on
this rationale, thus:
1. Managerial Employees
. . . The rationale for this inhibition has been
Article 255. [245] Ineligibility of Managerial Employees stated to be, because if these managerial employees would
to Join any Labor Organization; Right of Supervisory Employees. belong to or be affiliated with a Union, the latter might not
Managerial employees are not eligible to join, assist or form any be assured of their loyalty to the Union in view of evident
labor organization. Supervisory employees shall not be eligible for conflict of interests. The Union can also become company-
membership in the collective bargaining unit of the rank-and-file dominated with the presence of managerial employees in
employees but may join, assist or form separate collective Union membership.
bargaining units and/or legitimate labor organizations of their To be sure, the Court in Philips Industrial was
own. The rank-and-file union and the supervisors' union operating dealing with the right of confidential employees to organize.
within the same establishment may join the same federation or But the same reason for denying them the right to organize
national union. justifies even more the ban on managerial employees from
forming unions. After all, those who qualify as top or
middle managers are executives who receive from their
Article 219(m) provides:
Page 70 of 191
 employers information that not only is confidential but also Not allowed to join any labor Allowed to join a supervisory
is not generally available to the public, or to their organization union but not the union of rank-
competitors, or to other employees. It is hardly necessary to and-file employees and vice
point out that to say that the first sentence of Art. 245 is versa
unconstitutional would be to contradict the decision in that
case. Under Labor Standards, a supervisory employee is a
managerial employee. In Labor Relations, however, a
a. Types of Managerial Employees managerial employee is not a supervisory employee in the
There are three (3) types of managerial employees for sense that he cannot join any labor organization because
purposes of determining whether they could exercise their right supervisory employees can join unions different from rank-
to self-organization. and-file employees.

(i) Top Management PMTI v. Ferrer-Calleja

Top management is composed of a comparatively Held: Members of the union are rank and file and not
small group of executives. It is responsible for the overall managerial employees notwithstanding their title or nomenclature in
management of the organization. It establishes operating position because:
policies and guides the organization’s interactions with its They do not have the power to lay down and execute
environment. Typical titles of top managers are CEO, management policies as they are given ready policies merely to execute
and standard practices to observe;
President, or Senior VP. Actual titles vary from one
They do not have the power to hire, transfer, suspend, lay-
organization to another and are not always a reliable guide to off, recall, discharge, assign or discipline employees but only to
membership in the management classification. recommend for such actions as the power rests upon the personnel
manager; and
(ii) Middle Management They do not have the power to effectively recommend any
Middle management refers to more than one level in managerial actions as their recommendations have to pass through the
an organization. Middle managers direct the activities of other department manager for review, the personnel manager for attestation
managers and sometimes also those of operating employees. and general manager/president for final actions.
The recent amendments to the Labor Code contain separate
The middle managers’ principal responsibilities are to direct the
definitions for managerial and supervisory employees. Section 4 of
activities that implement their organization’s policies and to Republic Act No. 6715 states that:
balance the demands of their superiors with the capacities of "Managerial Employee"- is one who is vested with powers
their subordinates. A plant manager in an electronic firm is an or prerogatives to lay down and execute management policies and/or to
example of a middle manager. hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees.
(iii) First-Line Management “Supervisory Employees”- are those who, in the interest of
the employer, effectively recommend such management actions if the
First-line management is the lowest level in an
exercise of such authority is not merely routinary or clerical in nature
organization at which individuals are responsible for the work
but requires the use of independent judgment.
of others. First-line managers direct operating employees only; All employees not falling within any of the above
they do not supervise other managers. Examples are the definitions are considered rank and file employees for purposes of this
“foreman” or production supervisor in a manufacturing plant, Book. Section 18 retains the provision on the ineligibility of managerial
the technical supervisor in a research department, and the employees to join any labor organization. Supervisory employees shall
clerical supervisor in a large office. First-level managers are not be eligible for membership in a labor organization of the rank-and-
often called supervisors. file employees but may join, assist or form separate labor organizations
of their own.
b. Supervisory Employee Rule
Supervisors may organize their own union but are United Pepsi Cola v. Laguesma
prohibited from joining the rank-and-file union. The reason for Held: The Court with the finding of the Secretary of Labor
the segregation of supervisory and rank-and-file employees that the route managers are managerial employees as this is supported
by substantial evidence
with respect to the exercise of their right to self-organization is
The Court now finds that the job evaluation made by the
the difference in interests. Supervisory employees are more Secretary of Labor is indeed supported by substantial evidence. The
closely identified with the employer than with the rank-and-file nature of the job of route managers is given in a four-page pamphlet,
employees. If supervisory and rank-and-file employees in a prepared by the company, called "Route Manager Position Description.
company are allowed to form a single union, the conflicting The route managers as compared to the supervisors in this
interests of these groups impair their relationship and adversely case
affect discipline, collective bargaining, and strikes. These Unlike supervisors who basically merely direct operating
consequences can obtain not only in cases where supervisory employees in line with set tasks assigned to them, route managers are
responsible for the success of the company's main line of business
and rank-and-file employees in the same company belonging to
through management of their respective sales teams. Such management
a single union but also where unions formed independently by necessarily involves the planning, direction, operation and evaluation
supervisory and rank-and-file employees of a company are of their individual teams and areas which the work of supervisors does
allowed to affiliate with the same national federation [La Salle not entail.
University v. Laguesma]. The route managers cannot thus possibly be classified as
mere supervisors because their work does not only involve, but goes far
Managerial Employees vs. Supervisory Employees beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere
functionaries with simple oversight functions but business
Managerial Supervisory
administrators in their own right. Thus, the route managers in this case
Have the power to decide and Have the power only to
are managerial employees.
do managerial acts recommend managerial acts
such as laying down policy,
hiring, and dismissal of c. Separation of Unions Doctrine
employees and the like
Page 71 of 191
 RA 9481 amended Article 255 by adding the phrase: The right to collective bargaining is not available to
“The rank-and-file union and the supervisors’ union operating an employee of a cooperative who at the same time is a member
within the same establishment may join the same federation or and co-owner thereof. With respect, however, to employees
national union.” By reason of this amendment, the so-called who are neither members nor co-owners of the cooperative they
“separation of unions doctrine” enunciated in Atlas Litographic are entitled to exercise the rights to self-organization, collective
Services v. Laguesma, and in other related cases no longer bargaining and negotiation as mandated by the 1987
applies. This doctrine prohibits the situation where the Constitution and applicable statutes. It is the fact of ownership
supervisory union and the rank-and-file union operating within of the cooperative, and not involvement in the management
the same establishment are both affiliated with one and the thereof, which disqualifies a member from joining any labor
same federation because of the possible conflict of interest organization within the cooperative. Thus, irrespective of the
which may arise in the areas, inter alia, of discipline, collective degree of their participation in the actual management of the
bargaining and strike. Thus, if the intent of the law is to avoid cooperative, all members thereof cannot form, assist or join a
a situation where supervisors would merge with the rank-and- labor organization for the purpose of collective bargaining
file or where the supervisors’ labor union would represent [BENECO v. Calleja].
conflicting interests, then a local supervisors’ union should not
be allowed to affiliate with the federation with which the rank- Membership in the cooperative; distinguished from
and-file union is also affiliated and where the federation stockholders of ordinary corporations
actively participates in the union activities in the company. The While cooperatives may exercise some of the rights
intent of the law is clear especially where the supervisors will and privileges given to ordinary corporations provided under
be co-mingling with the rank-and-file employees whom they existing laws, such cooperatives enjoy other privileges not
directly supervise in their own bargaining unit [Pepsi Cola v. granted to the latter [Cooperative Rural Bank of Davao City v.
Secretary of Labor]. Ferrer-Calleja]. Similarly, members of cooperatives have
The law now explicitly allows the more extreme rights and obligations different from those of stockholders of
situation of a rank-and-file union and a supervisors’ union ordinary corporations. The Court held that: A cooperative . . .
operating within the same establishment joining one and the is by its nature different from an ordinary business concern
same federation or national union as affiliates thereof. being run either by persons, partnerships, or corporations. Its
owners and/or members are the ones who run and operate the
d. Managerial Employees in the Public Sector business while the others are its employees. As above stated,
irrespective of the number of shares owned by each member
Executive Order No. 180 they are entitled to cast one vote each in deciding upon the
Sec. 1. This Executive Order applies to all employees of all affairs of the cooperative. Their share capital earn limited
branches, subdivisions, instrumentalities, and agencies, of the interest. They enjoy special privileges as — exemption from
Government, including government-owned or controlled corporations income tax and sales taxes, preferential light to supply their
with original charters. For this purpose, employees, covered by this products to State agencies and even exemption from the
Executive Order shall be referred to as "government employees".
minimum wage laws. An employee therefore of such a
Sec. 2. All government employees can form, join or assist
employees' organizations of their own choosing for the furtherance and
cooperative who is a member and co-owner thereof cannot
protection of their interests. They can also form, in conjunction with invoke the right to collective bargaining for certainly an owner
appropriate government authorities, labor-management committees, cannot bargain with himself or his co-owners [Ibid].
works councils and other forms of workers' participation schemes to
achieve the same objectives. C. DOCTRINE OF NECESSARY IMPLICATION
Sec. 3. High-level employees whose functions are normally The doctrine of necessary implication is the legal
considered as policy-making or managerial or whose duties are of a basis for the ineligibility of a confidential employee to join a
highly confidential nature shall not be eligible to join the organization
union. The disqualification of managerial and confidential
of rank-and-file government employees.
Sec. 4. The Executive Order shall not apply to the members employees from joining a bargaining unit of rank-and-file
of the Armed Forces of the Philippines, including police officers, employees or supervisory employees is already well-
policemen, firemen and jail guards. entrenched in jurisprudence. While Article 255 of the Labor
Sec. 15. A Public Sector Labor Management Council, Code limits the ineligibility to join, assist, or form a labor
hereinafter referred to as the Council, is hereby constituted to be organization to managerial employees, jurisprudence has
composed of the following: extended this prohibition to confidential employees or those
1) Chairman, Civil Service Commission Chairman who, by reason of their positions or nature of work, are required
2) Secretary, Department of Labor and Employment Vice
to assist or act in a fiduciary manner to managerial employees,
Chairman
3) Secretary, Department of Finance Member and, therefore, are likewise privy to sensitive and highly
4) Secretary, Department of Justice Member confidential records [Standard Chartered Bank Employees
5) Secretary, Department of Budget and Management Union v. Standard Chartered Bank].
Member Article 255 of the Labor Code does not directly
The Council shall implement and administer the provisions prohibit confidential employees from engaging in union
of this Executive Order. For this purpose, the Council shall promulgate activities. Their disqualification proceeds merely from the
the necessary rules and regulations to implement this Executive Order. application of this doctrine because what Article 255 singles
Sec. 16. The Civil Service and labor laws and procedures,
out as ineligible to join, assist or form any labor organization
whenever applicable, shall be followed in the resolution of complaints,
grievances and cases involving government employees. In case any are managerial employees. By necessary implication,
dispute remains unresolved after exhausting all the available remedies confidential employees are similarly disqualified. This doctrine
under existing laws and procedures, the parties may jointly refer the states that what is implied in a statute is as much a part thereof
dispute to the Council, for appropriate action. as that which is expressed [Chua v. Civil Service Commission].
Within the context of labor relations, confidential
2. Members-Employees of Cooperatives employees are those who meet the following criteria:

Page 72 of 191
 a. They assist or act in a confidential capacity; "(3) the Accountant, who heads the Accounting
b. To persons or officers who formulate, Department, is also one of the authorized signatories of petitioner and,
determine, and effectuate management policies in the absence of the Manager or Cashier, acts as substitute approving
officer and assumes the management of the entire office. She handles
specifically in the field of labor relations.
the financial reports and reviews the debit/credit tickets submitted by
the other departments."
The two (2) criteria are cumulative and both must be Petitioner's explanation, however, does not state who
met if an employee is to be considered a confidential employee among the employees has access to information specifically relating to
that would deprive him of his right to form, join, or assist a its labor relations policies. Even Cashier Patricia Maluya, who serves
labor organization [TPMAB v. Asia Brewery]. as the secretary of the bank's Board of Directors may not be so
A confidential employee may be a rank-and-file or classified. True, the board of directors is responsible for corporate
supervisory employee but because in the normal course of his policies, the exercise of corporate powers, and the general management
of the business and affairs of the corporation. As secretary of the bank's
duties, he becomes aware of management policies relating to
governing body, Patricia Maluya serves the bank's management, but
labor relations, he is not allowed to assist, form or join a rank- could not be deemed to have access to confidential information
and-file union or supervisory union, as the case may be. To specifically relating to SRBI's labor relations policies, absent a clear
allow him to join a union would give rise to a potential conflict showing on this matter. Thus, while petitioner's explanation confirms
of interest. Management should not be required to handle labor the regular duties of the concerned employees, it shows nothing about
relations matters through employees who are represented by the any duties specifically connected to labor relations.
union with which the company is required to deal and who, in
the normal performance of their duties, may obtain advance Southern Philippines Federation of Labor v.
information on the company’sn position with regard to Ferrer-Calleja
collective bargaining negotiations, the disposition of Held: As regards the employees in the confidential payroll,
grievances, or other labor relations matter [San Miguel the petitioner has not shown that the nature of their jobs is classified as
Supervisors and Exempt Employees Union v. Laguesma]. managerial except for its allegation that they are considered by
However, the mere access of an employee to management as occupying managerial positions and highly
confidential. Neither can payment or non-payment of union dues be
confidential labor relations information which is merely
the determining factor of whether the challenged employees should be
incidental to his duties and, therefore, knowledge thereof is not excluded from the bargaining unit since the union shop provision in the
necessary in the performance of said duties, does not make such CBA applies only to newly hired employees but not to members of the
employee a confidential employee. If access to confidential bargaining unit who were not members of the union at the time of the
labor relations information is to be a factor in the determination signing of the CBA. It is, therefore, not impossible for employees to
of an employee’s confidential status, such information must be members of the bargaining unit even though they are non-union
relate to the employer’s labor relations policies. Therefore, members or not paying union dues.
access to information which is regarded by the employer to be
confidential from the business standpoint, such as financial Filoil Refinery v. Filoil Supervisory &
information or technical trade secrets, will not render an Confidential Employees Association
employee a confidential employee under this rule. An Held: The other principal ground of petitioner's appeal
employee may not be excluded from an appropriate bargaining questioning the confidential employees' inclusion in the supervisors'
unit merely because he has access to confidential information bargaining unit is equally untenable. Respondent court correctly held
concerning the employer’s internal business operations which that since the confidential employees are very few in number and are
by practice and tradition identified with the supervisors in their role as
is not related to the field of labor relations [NATU-Republic
representatives of management vis-a-vis the rank and file employees,
Planters Bank Supervisors v. Secretary]. such identity of interest has allowed their inclusion in the bargaining
Confidential employees cannot be classified as rank unit of supervisors-managers for purposes of collective bargaining in
and file. As previously discussed, the nature of employment of turn as employees in relation to the company as their employer.
confidential employees is quite distinct from the rank and file, No arbitrariness or grave abuse of discretion can be
thus, warranting a separate category. Excluding confidential attributed against respondent court's allowing the inclusion of the
employees from the rank and file bargaining unit, therefore, is confidential employees in the supervisors' association for as admitted
not tantamount to discrimination [Metrolab v. Confesor]. by petitioner itself, supra, the supervisors and confidential employees
enjoy its trust and confidence. This identity of interest logically calls
for their inclusion in the same bargaining unit and at the same time
Sugbuanon Rural Bank v. Laguesma fulfills the law's objective of insuring to them the full benefit of their
Held: Petitioner contends that it has only 5 officers running right to self-organization and to collective bargaining, which could
its day-to-day affairs. They assist in confidential capacities and have hardly be accomplished if the respondent association's membership
complete access to the bank's confidential data. They form the core of were to be broken up into five separate ineffective tiny units, as urged
the bank's management team. Petitioner explains that: by petitioner.
"...Specifically: (1) the Head or the Loans Department
initially approves the loan applications before they are passed on to the
Board for confirmation. As such, no loan application is even considered NATU-Republic Planters Bank Supervisors v.
by the Board and approved by petitioner without his stamp of approval Secretary
based upon his interview of the applicant and determination of his Held: As regards the other claim of respondent Bank that
(applicant's) credit standing and financial capacity. The same holds true Branch Managers/OICs, Cashiers and Controllers are confidential
with respect to renewals or restructuring of loan accounts. He himself employees, having control, custody and/or access to confidential
determines what account should be collected, whether extrajudicially matters, e.g., the branch's cash position, statements of financial
or judicially, and settles the problem or complaints of borrowers condition, vault combination, cash codes for telegraphic transfers,
regarding their accounts; demand drafts and other negotiable instruments, pursuant to Sec.
"(2) the Cashier is one of the approving officers and 1166.4 of the Central Bank Manual regarding joint custody, this claim
authorized signatories of petitioner. He approves the opening of is not even disputed by petitioner. A confidential employee is one
accounts, withdrawals and encashment, and acceptance of check entrusted with confidence on delicate matters, or with the custody,
deposits, He deals with other banks and, in the absence of the regular handling, or care and protection of the employer's property. While Art.
Manager, manages the entire office or branch and approves 245 of the Labor Code singles out managerial employees as ineligible
disbursements of funds for expenses; and to join, assist or form any labor organization, under the doctrine of

Page 73 of 191
necessary implication, confidential employees are similarly be allowed to affiliate with the federation with which the rank-
disqualified. This doctrine states that what is implied in a statute is as and-file union is also affiliated and where the federation
much a part thereof as that which is expressed, as elucidated in several actively participates in the union activities in the company. The
cases the latest of which is Chua v. Civil Service Commission where
intent of the law is clear especially where the supervisors will
we said:
No statute can be enacted that can provide all the details
be co-mingling with the rank-and-file employees whom they
involved in its application. There is always an omission that may not directly supervise in their own bargaining unit [Pepsi Cola v.
meet a particular situation. What is thought, at the time of enactment, Secretary of Labor].
to be an all-embracing legislation may be inadequate to provide for the The law now explicitly allows the more extreme
unfolding events of the future. So-called gaps in the law develop as the situation of a rank-and-file union and a supervisors’ union
law is enforced. One of the rules of statutory construction used to fill in operating within the same establishment joining one and the
the gap is the doctrine of necessary implication x x x x Every statute is same federation or national union as affiliates thereof.
understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective
rights, powers, privileges or jurisdiction which it grants, including all E. EFFECT OF INCLUSION AS MEMBERS OF
such collateral and subsidiary consequences as may be fairly and EMPLOYEES OUTSIDE OF THE BARGAINING
logically inferred from its terms. Ex necessitate legis x x x x UNIT
In applying the doctrine of necessary implication, we took
into consideration the rationale behind the disqualification of
Article 256. [245-A] Effect of Inclusion as Members of
managerial employees expressed in Bulletin Publishing Corporation
Employees Outside the Bargaining Unit. - The inclusion as union
v. Sanchez thus: "x x x if these managerial employees would belong to
members of employees outside the bargaining unit shall not be a
or be affiliated with a Union, the latter might not be assured of their
ground for the cancellation of the registration of the union. Said
loyalty to the Union in view of evident conflict of interests. The Union
employees are automatically deemed removed from the list of
can also become company-dominated with the presence of managerial
membership of said union.
employees in Union membership." Stated differently, in the collective
bargaining process, managerial employees are supposed to be on the
side of the employer, to act as its representatives, and to see to it that The inclusion in a union of disqualified employees is
its interests are well protected. The employer is not assured of such not among the grounds for cancellation, unless such inclusion
protection if these employees themselves are union members. is due to misrepresentation, false statement or fraud under the
Collective bargaining in such a situation can become one-sided. It is circumstances enumerated in Sections (a) and (c) of Article
the same reason that impelled this Court to consider the position of 247 of the Labor Code [Air Philippines v. Bureau of Labor
confidential employees as included in the disqualification found in Art.
Relations].
245 as if the disqualification of confidential employees were written in
the provision. If confidential employees could unionize in order to
Clearly then, for the purpose of de-certifying a union,
bargain for advantages for themselves, then they could be governed by it is not enough to establish that the rank-and-file union
their own motives rather than the interest of the employers. Moreover, includes ineligible employees in its membership. Pursuant to
unionization of confidential employees for the purpose of collective Article 247 (a) and (c) of the Labor Code, it must be shown that
bargaining would mean the extension of the law to persons or there was misrepresentation, false statement or fraud in
individuals who are supposed to act "in the interest of" the employers. It connection with the adoption or ratification of the constitution
is not farfetched that in the course of collective bargaining, they might and by-laws or amendments thereto, the minutes of ratification,
jeopardize that interest which they are duty-bound to protect. Along the
or in connection with the election of officers, minutes of the
same line of reasoning we held in Golden Farms, Inc. v. Ferrer-
Calleja reiterated in Philips Industrial Development, Inc. v. NLRC, that
election of officers, the list of voters, or failure to submit these
"confidential employees such as accounting personnel, radio and documents together with the list of the newly elected-appointed
telegraph operators who, having access to confidential information, officers and their postal addresses to the BLR [Ibid].
may become the source of undue advantage. Said employee(s) may act
as spy or spies of either party to a collective bargaining agreement." II
In fine, only the Branch Managers/OICs, Cashiers and BARGAINING UNIT
Controllers of respondent Bank, being confidential employees, are
disqualified from joining or assisting petitioner Union, or joining,
assisting or forming any other labor organization. But this ruling should As defined in Department Order No. 40-03 which is
be understood to apply only to the present case based on the evidence now the revised Book V of the Rules Implementing the Labor
of the parties, as well as to those similarly situated. It should not be Code, "bargaining unit" refers to a group of employees sharing
understood in any way to apply to banks in general. mutual interests within a given employer unit, comprised of all
or less than all of the entire body of employees in the employer
D. COMMINGLING OR MIXED MEMBERSHIP unit or any specific occupational or geographical grouping
within such employer unit.
RA 9481 amended Article 255 by adding the phrase: It may also refer to a group of employees of a given
“The rank-and-file union and the supervisors’ union operating employer, comprise of all or less than all of the entire body of
within the same establishment may join the same federation or employees, which the collective interests of all the employees,
national union.” By reason of this amendment, the so-called consistent with equity to the employer, indicated to be best
“separation of unions doctrine” enunciated in Atlas Litographic suited to serve reciprocal rights and duties of the parties under
Services v. Laguesma, and in other related cases no longer the collective bargaining provisions of the law [Belyca
applies. This doctrine prohibits the situation where the Corporation v. Ferrer-Calleja].
supervisory union and the rank-and-file union operating within An employee does not become a member of a
the same establishment are both affiliated with one and the bargaining unit. He becomes a member of the union. His
same federation because of the possible conflict of interest position falls under the positions covered by the bargaining unit
which may arise in the areas, inter alia, of discipline, collective being represented by the union. If the employee does not belong
bargaining and strike. Thus, if the intent of the law is to avoid to that community of interest represented by the bargaining
a situation where supervisors would merge with the rank-and- unit, the union has the freedom to reject him. The union may,
file or where the supervisors’ labor union would represent however, accept him but he is not covered by the benefits of the
conflicting interests, then a local supervisors’ union should not CBA.

Page 74 of 191
 There is no hard and fast rule in how the Med-Arbiter it would not be for the best interest of these employees if they
should determine an appropriate (not most appropriate) would further be fractionalized. The adage ‘there is strength in
bargaining unit. The test whether the designation of a number’ is the very rationale underlying the formation of a
bargaining unit is appropriate is whether it will best assure to labor union.”
all employees the exercise of their collective bargaining rights. In San Miguel Corporation Supervisors and Exempt
There should be a community of interest which should be Employees Union v. Laguesma, the fact that the 3 plants
reflected in groups having substantial similarity of work and comprising the bargaining unit are located in 3 different places
duties or similarity of compensation and working conditions, was declared immaterial. Geographical location can be
among other criteria [Democratic Labor Association v. Cebu completely disregarded if the communal or mutual interests of
Stevedoring]. the employees are not sacrificed. The distance among the 3
In International School Alliance of Educators v. plants is not productive of insurmountable difficulties in the
Quisumbing, there are certain tests which may be used in administration of union affairs. Neither are there regional
determining the appropriate collective bargaining unit, to wit: differences that are likely to impede the operations of a single
bargaining representative.
a. Community or mutuality of interest doctrine; In University of the Philippines v. Ferrer-Calleja, all
b. Globe doctrine; non-academic rank-and-file employees of UP Diliman, Quezon
c. Collective bargaining history doctrine; and City, Padre Faura, Manila, Los Banos, Laguna and the Visayas
d. Employment status doctrine were allowed to participate in a certification election as one
bargaining unit.
Inclusion of excluded employees
In DLSU v. DLSU Employees Association, it was San Miguel Corporation v. San Miguel
held: Supervisors
Held: Thus, applying the ruling to the present case, the
The Court agrees with the Solicitor General that the Court affirms the finding of the CA that there should be only one
express exclusion of the computer operators and discipline bargaining unit for
officers from the bargaining unit of rank-and-file employees in the employees in Cabuyao, San Fernando, and Otis 25 of
the 1986 collective bargaining agreement does not bar any re- Magnolia Poultry Products Plant involved in "dressed" chicken
negotiation for the future inclusion of the said employees in the processing and Magnolia Poultry Farms engaged in "live" chicken
bargaining unit. During the freedom period, the parties may not operations. Certain factors, such as specific line of work, working
only renew the existing collective bargaining agreement but may conditions, location of work, mode of compensation, and other relevant
also propose and discuss modifications or amendments thereto. conditions do not affect or impede their commonality of interest.
With regard to the alleged confidential nature of the said Although they seem separate and distinct from each other, the specific
employees’ functions, after a careful consideration of the tasks of each division are actually interrelated and there exists
pleadings filed before this Court, we rule that the said computer mutuality of interests which warrants the formation of a single
operators and discipline officers are not confidential employees. bargaining unit.
As carefully examined by the Solicitor General, the service record Petitioner asserts that the CA erred in not excluding the
of a computer operator reveals that his duties are basically clerical position of Payroll Master in the definition of a confidential employee
and non-confidential in nature. As to the discipline officers, we and, thus, prays that the said position and all other positions with access
agree with the voluntary arbitrator that based on the nature of their to salary and compensation data be excluded from the bargaining unit.
duties, they are not confidential employees and should therefore This argument must fail. Confidential employees are
be included in the bargaining unit of rank-and-file employees. defined as those who (1) assist or act in a confidential capacity, in
The Court also affirms the findings of the voluntary regard (2) to persons who formulate, determine, and effectuate
arbitrator that the employees of the College of St. Benilde should management policies in the field of labor relations.26 The two criteria
be excluded from the bargaining unit of the rank-and-file are cumulative, and both must be met if an employee is to be considered
employees of Dela Salle University, because the two educational a confidential employee - that is, the confidential relationship must
institutions have their own separate juridical personality and no exist between the employee and his supervisor, and the supervisor must
sufficient evidence was shown to justify the piercing of the veil handle the prescribed responsibilities relating to labor relations. The
of corporate fiction. exclusion from bargaining units of employees who, in the normal
course of their duties, become aware of management policies relating
A. SUBSTANTIAL MUTUAL INTERESTS RULE to labor relations is a principal objective sought to be accomplished by
Under this doctrine, the employees sought to be the "confidential employee rule."
represented by the collective bargaining agent must have
community or mutuality of interest in terms of employment and San Miguel Corporation Employees Union v. Confesor
working conditions as evinced by the type of work they Held: With respect to the second issue, there is, likewise, no
perform. It is characterized by similarity of employment status, merit in petitioner-union’s assertion that the employees of Magnolia
and SMFI should still be considered part of the bargaining unit of SMC.
same duties and responsibilities and substantially similar
Magnolia and SMFI were spun-off to operate as distinct
compensation and working conditions [San Miguel companies on October 1, 1991. Management saw the need for these
Corporation Employees Union v. Confesor]. transformations in keeping with its vision and long term strategy as it
In San Miguel Corporation v. Laguesma, the explained in its letter addressed to the employees dated August 13,
Supreme Court applied this principle in the petition of the union 1991:
which seeks to represent the sales personnel in the various x x x As early as 1986, we announced the decentralization
Magnolia sales office in Northern Luzon. Petitioner took the program and spoke of the need for structures that can react fast to
competition, a changing environment, shorter product life cycles and
position that each sales office should constitute one bargaining
shifts in consumer preference. We further stated in the 1987 Annual
unit. In disagreeing this proposition of petitioner, the Court
Report to Stockholders that San Miguel’s businesses will be more
said: “What greatly militates against this position is the meager autonomous and self sufficient so as to better acquire and master new
number of sales personnel in each of the Magnolia sales office technologies, cope with a labor force with different expertises and
in Northern Luzon. Even the bargaining unit sought to be expectations, and master and satisfy the changing needs of our
represented by respondent union in the entire Northern Luzon customers and end-consumers. As subsidiaries, Magnolia and FLD
sales area consists only of approximately 55 employees. Surely,
Page 75 of 191
will gain better industry focus and flexibility, greater awareness of [T]here are various factors which must be satisfied and
operating results, and speedier, more responsive decision making. considered in determining the proper constituency of a bargaining
xxx unit. No one particular factor is itself decisive of the
We only have to look at the experience of Coca-Cola determination. The weight accorded to any particular factor varies in
Bottlers Philippines, Inc., since this company was organized about ten accordance with the particular question or questions that may arise in a
years ago, to see the benefits that arise from restructuring a division of given case. What are these factors? Rothenberg mentions a good
San Miguel into a more competitive organization. As a stand-alone number, but the most pertinent to our case are: (1) will of the employees
enterprise, CCBPI engineered a dramatic turnaround and has sustained (Globe Doctrine); (2) affinity and unit of employees’ interest, such as
its sales and market share leadership ever since. substantial similarity of work and duties, or similarity of compensation
We are confident that history will repeat itself, and the and working conditions; (3) prior collective bargaining history; and (4)
transformation of Magnolia and FLD will be successful as that of employment status, such as temporary, seasonal and probationary
CCBPI.[17] employees x x.
Undeniably, the transformation of the companies was a xxx
management prerogative and business judgment which the courts can An enlightening appraisal of the problem of defining an
not look into unless it is contrary to law, public policy or appropriate bargaining unit is given in the 10th Annual Report of the
morals. Neither can we impute any bad faith on the part of SMC so as National Labor Relations Board wherein it is emphasized that the
to justify the application of the doctrine of piercing the corporate factors which said board may consider and weigh in fixing appropriate
veil.[18] Ever mindful of the employees’ interests, management has units are: the history, extent and type of organization of employees; the
assured the concerned employees that they will be absorbed by the new history of their collective bargaining; the history, extent and type of
corporations without loss of tenure and retaining their present pay and organization of employees in other plants of the same employer, or
benefits according to the existing CBAs.[19] They were advised that other employers in the same industry; the skill wages, work, and
upon the expiration of the CBAs, new agreements will be negotiated working conditions of the employees; the desires of the employees; the
between the management of the new corporations and the bargaining eligibility of the employees for membership in the union or unions
representatives of the employees concerned. As a result of the spin- involved; and the relationship between the unit or units proposed and
offs: the employer’s organization, management, and operation x x.
1. Each of the companies are run by, supervised and x x In said report, it is likewise emphasized that the basic
controlled by different management teams including separate human test in determining the appropriate bargaining unit is that a unit, to be
resource/personnel managers. appropriate, must affect a grouping of employees who have substantial,
2. Each Company enforces its own administrative and mutual interests in wages, hours, working conditions and other subjects
operational rules and policies and are not dependent on each other in of collective bargaining (citing Smith on Labor Laws, 316-317;
their operations. Francisco, Labor Laws, 162) x x.
3. Each entity maintains separate financial statements and Finally, we take note of the fact that the separate interests of
are audited separately from each other. the employees of Magnolia and SMFI from those of SMC has been
Indubitably, therefore, Magnolia and SMFI became distinct recognized in the case of Daniel Borbon v. Laguesma.[26] We quote:
entities with separate juridical personalities. Thus, they can not belong Even assuming in gratia argumenti that at the time of the
to a single bargaining unit as held in the case of Diatagon Labor election they were regular employees of San Miguel, nonetheless, these
Federation Local 110 of the ULGWP v. Ople. We elucidate: workers are no longer connected with San Miguel Corporation in any
The fact that their businesses are related and that the 236 manner because Magnolia has ceased to be a division of San Miguel
employees of Georgia Pacific International Corporation were originally Corporation and has been formed into a separate corporation with a
employees of Lianga Bay Logging Co., Inc. is not a justification for personality of its own (p. 305, Rollo). This development, which was
disregarding their separate personalities. Hence, the 236 employees, brought to our attention by private respondents, necessarily renders
who are now attached to Georgia Pacific International Corporation, moot and academic any further discourse on the propriety of the
should not be allowed to vote in the certification election at the Lianga elections which petitioners impugn via the present recourse (p. 319,
Bay Logging Co., Inc. They should vote at a separate certification Rollo).
election to determine the collective bargaining representative of the
employees of Georgia Pacific International Corporation.
University of the Philippines v. Ferrer-Calleja
Petitioner-union’s attempt to include the employees of
Held: When first confronted with the task of determining
Magnolia and SMFI in the SMC bargaining unit so as to have a bigger
the proper collective bargaining unit in a particular controversy, the
mass base of employees has, therefore, no more valid ground.
Court had perforce to rely on American jurisprudence. In Democratic
Moreover, in determining an appropriate bargaining unit,
Labor Association vs. Cebu Stevedoring Company, Inc., decided on
the test of grouping is mutuality or commonality of interests. The
February 28, 1958, the Court observed that "the issue of how to
employees sought to be represented by the collective bargaining agent
determine the proper collective bargaining unit and what unit would be
must have substantial mutual interests in terms of employment and
appropriate to be the collective bargaining agency" * * * "is novel in
working conditions as evinced by the type of work they
this jurisdiction; however, American precedents on the matter abound
performed.[22] Considering the spin-offs, the companies would
** (to which resort may be had) considering that our present Magna
consequently have their respective and distinctive concerns in terms of
Carta has been patterned after the American law on the subject." Said
the nature of work, wages, hours of work and other conditions of
the Court:
employment. Interests of employees in the different companies
" * * Under these precedents, there are various factors which
perforce differ. SMC is engaged in the business of beer
must be satisfied and considered in determining the proper constituency
manufacturing. Magnolia is involved in the manufacturing and
of a bargaining unit. No one particular factor is itself decisive of the
processing of dairy products[23] while SMFI is involved in the
determination. The weight accorded to any particular factor varies in
production of feeds and the processing of chicken.[24] The nature of
accordance with the particular question or questions that may arise in a
their products and scales of business may require different skills which
given case. What are these factors? Rothenberg mentions a good
must necessarily be commensurated by different compensation
number, but the most pertinent to our case are: (1) will of the employees
packages. The different companies may have different volumes of
(Globe Doctrine); (2) affinity and unit of employees' interest, such as
work and different working conditions. For such reason, the employees
substantial similarity of work and duties, or similarity of compensation
of the different companies see the need to group themselves together
and working conditions; (3) prior collective bargaining history; and (4)
and organize themselves into distinctive and different groups. It would
employment status, such as temporary, seasonal and probationary
then be best to have separate bargaining units for the different
employees. * *.
companies where the employees can bargain separately according to
"******
their needs and according to their own working conditions.
"An enlightening appraisal of the problem of defining an
appropriate bargaining unit is given in the 10th Annual Report of the
We reiterate what we have explained in the case of University of the
National Labor Relations Board wherein it is emphasized that the
Philippines v. Ferrer-Calleja that:
factors which said board may consider and weigh in fixing appropriate

Page 76 of 191
units are: the history, extent and type of organization of employees; the two separate bargaining units, the first consisting of the rank-and-file
history of their collective bargaining; the history, extent and type of non-academic personnel, and the second, of the rank-and-file academic
organization of employees in other plants of the same employer, or employees, is the set-up that will best assure to all the employees the
other employers in the same industry; the skill, wages, work, and exercise of their collective bargaining rights. These special
working conditions of the employees; the desires of the employees; the circumstances, i.e., the dichotomy of interests and concerns as well as
eligibility of the employees for membership in the union or unions the dissimilarity in the nature and conditions of work, wages and
involved; and the relationship between the unit or units proposed and compensation between the academic and non-academic personnel,
the employer's organization, management, and operation. * *. bring the case at bar within the exception contemplated in Section 9 of
" * * In said report, it is likewise emphasized that the basic Executive Order No. 180. It was grave abuse of discretion on the part
test in determining the appropriate bargaining unit is that a unit, to be of the Labor Relations Director to have ruled otherwise, ignoring plain
appropriate, must affect a grouping of employees who have substantial, and patent realities.
mutual interests in wages, hours, working conditions and other subjects
of collective bargaining (citing Smith on Labor Laws, 316-317;
Belyca Corporation v. Ferrer-Calleja
Francisco, Labor Laws, 162). * *. "
Held: Hence, still later following the substantial-mutual
The Court further explained that "(t)he test of the grouping
interest test, the Court ruled that there is a substantial difference
is community or mutuality of interests. And this is so because ‘the basic
between the work performed by musicians and that of other persons
test of an asserted bargaining unit's acceptability is whether or not it is
who participate in the production of a film which suffice to show that
fundamentally the combination which will best assure to all employees
they constitute a proper bargaining unit. (LVN Pictures, Inc. v.
the exercise of their collective bargaining rights’ (Rothenberg on Labor
Philippine Musicians Guild 1 SCRA 132 (1961]).
Relations, 490)." Hence, in that case, the Court upheld the trial court's
Coming back to the case at bar, it is beyond question that
conclusion that two separate bargaining units should be formed, one
the employees of the livestock and agro division of petitioner
consisting of regular and permanent employees and another consisting
corporation perform work entirely different from those performed by
of casual laborers or stevedores.
employees in the supermarts and cinema. Among others, the noted
Since then, the "community or mutuality of interests"
difference are: their working conditions, hours of work, rates of pay,
test has provided the standard in determining the proper constituency
including the categories of their positions and employment status. As
of a collective bargaining unit. In Alhambra Cigar & Cigarette
stated by petitioner corporation in its position paper, due to the nature
Manufacturing Company, et al. vs. Alhambra Employees' Association
of the business in which its livestock-agro division is engaged very few
(PAFLU), 107 Phil. 23, the Court, noting that the employees in the
of its employees in the division are permanent, the overwhelming
administrative, sales and dispensary departments of a cigar and
majority of which are seasonal and casual and not regular employees
cigarette manufacturing firm perform work which have nothing to do
(Rollo, p. 26). Definitely, they have very little in common with the
with production and maintenance, unlike those in the raw lead
employees of the supermarts and cinemas. To lump all the employees
(malalasi), cigar, cigarette, packing (precintera) and engineering and
of petitioner in its integrated business concerns cannot result in an
garage departments, authorized the formation of the former set of
efficacious bargaining unit comprised of constituents enjoying a
employees into a separate collective bargaining unit. The ruling in
community or mutuality of interest. Undeniably, the rank and file
the Democratic Labor Association case, supra, was reiterated
employees of the livestock-agro division fully constitute a bargaining
in Philippine Land-Air-Sea Labor Union vs. Court of Industrial
unit that satisfies both requirements of classification according to
Relations, 110 Phil. 176, where casual employees were barred from
employment status and of the substantial, similarity of work and duties
joining the union of the permanent and regular employees.
which will ultimately assure its members the exercise of their collective
Applying the same "community or mutuality of interests"
bargaining rights.
test, but resulting in the formation of only one collective bargaining unit
is the case of National Association of Free Trade Unions vs. Mainit
Lumber Development Company Workers Union-United Lumber and B. GLOBE DOCTRINE
General Workers of the Phils., G.R. No. 79526, December 21, 1990, This principle is based on the will of the employees.
192 SCRA 598. In said case, the Court ordered the formation of a single It is called Globe doctrine because this principle was first
bargaining unit consisting of the Sawmill Division in Butuan City and enunciated in the United States case of Globe Machine and
the Logging Division in Zapanta Valley, Kitcharao, Agusan Norte of
Stamping Co., where it was ruled, in defining the appropriate
the Mainit Lumber Development Company. The Court reasoned:
"Certainly, there is a mutuality of interest among the bargaining unit, that in a case where the company’s production
employees of the Sawmill Division and the Logging Division. Their workers can be considered either as a single bargaining unit
functions mesh with one another. One group needs the other in the same appropriate for purposes of collective bargaining or as three (3)
way that the company needs them both. There may be difference as to separate and distinct bargaining units, the determining factor is
the nature of their individual assignments but the distinctions are not the desire of the workers themselves consequently, a
enough to warrant the formation of a separate bargaining unit." certification election should be held separately to choose which
In the case at bar, the University employees may, as already representative union will be chosen by the workers
suggested, quite easily be categorized into two general classes: one, the
[Mechanical Department Labor Union v. CIR].
group composed of employees whose functions are non-academic, i.e.,
janitors, messengers, typists, clerks, receptionists, carpenters, In International School Alliance of Educators v.
electricians, grounds-keepers, chauffeurs, mechanics, plumbers; Quisumbing, the High Court ruled that foreign-hired teachers
and two, the group made up of those performing academic functions, do not belong to the bargaining unit of the local hires because
i.e., full professors, associate professors, assistant professors, the former have not indicated their intention to be grouped with
instructors -- who may be judges or government executives -- and the latter for purposes of collective bargaining. Moreover, the
research, extension and professorial staff. Not much reflection is collective bargaining history of the school also shows that these
needed to perceive that the community or mutuality of interests which groups were always treated separately.
justifies the formation of a single collective bargaining unit is wanting
between the academic and non-academic personnel of the university. It
would seem obvious that teachers would find very little in common C. COLLECTIVE BARGAINING HISTORY
with the University clerks and other non-academic employees as DOCTRINE
regards responsibilities and functions, working conditions, This principle puts premium to the prior collective
compensation rates, social life and interests, skills and intellectual bargaining history and affinity of the employees in determining
pursuits, cultural activities, etc. On the contrary, the dichotomy of the appropriate bargaining unit. However, the existence of a
interests, the dissimilarity in the nature of the work and duties as well prior collective bargaining history has been held as neither
as in the compensation and working conditions of the academic and decisive nor conclusive in the determination of what constitutes
non-academic personnel dictate the separation of these two categories
an appropriate bargaining unit [San Miguel Corporation v.
of employees for purposes of collective bargaining. The formation of
Laguesma].
Page 77 of 191
 It was ruled in National Association of Free Trade Once certified, what is represented by the SEBA are
Unions v. Mainit Lumber Development Company Workers not only its members but also those who are members of other
Union that there is mutuality of interest among the workers in unions, called “minority” unions, who are included in the CBU
the sawmill division and logging division as to justify their [National Brewery & Allied Industries Labor Union v. San
formation of a single bargaining unit. This holds true despite Miguel Brewery].
the history of said two divisions being treated as separate units An unorganized establishment becomes an
and notwithstanding their geographical distance from each “Organized Establishment” where there exists a recognized or
other. certified sole and exclusive bargaining agent.
In San Miguel v. Laguesma, despite the collective The SEBA of the employees in a CBU may be
bargaining history of having a separate bargaining unit for each determined through any of the following modes:
sales office, the Supreme Court applied the principle of
mutuality or commonality of interests in holding that the (a) Request for SEBA certification (which repealed
appropriate bargaining unit is comprised of all the sales force and replaced “Voluntary Recognition” as a
in the whole of Northern Luzon. mode of securing SEBA status);
(b) Certification election;
D. EMPLOYMENT STATUS DOCTRINE (c) Consent election;
The determination of the appropriate bargaining unit (d) Run-off election.
based on the employment status of the employees is considered
an acceptable mode. For instance, casual employees and those A. SEBA CERTIFICATION
employed on a day-to-day basis do not have the mutuality or Before, it was voluntary recognition, which refers to
community of interest with regular and permanent employees. the free and voluntary act of the employer of extending and
Hence, their inclusion in the bargaining unit composed of the conferring full recognition to a union as the sole and exclusive
latter is not justified [Philippine Land-Air-Sea Labor Union v. bargaining representative of the employees in an appropriate
CIR]. bargaining unit, for purposes of collective bargaining.
Department Order No. 40-I-15, Series of 2015 has
International School Alliance of Educators v. expressly repealed the entire set of Rules applicable to
Quisumbing Voluntary Recognition in the Labor Code’s Implementing
Held: A bargaining unit is "a group of employees of a given Rules and replaced it with the freshly-minted mode of securing
employer, comprised of all or less than all of the entire body of the status of a SEBA through a Request for SEBA Certification
employees, consistent with equity to the employer indicate to be the
or simply “Request.”
best suited to serve the reciprocal rights and duties of the parties under
the collective bargaining provisions of the law." The factors in
Any legitimate labor organization may file a Request
determining the appropriate collective bargaining unit are (1) the will in the DOLE Regional Office which issued to it its Certificate
of the employees (Globe Doctrine); (2) affinity and unity of the of Registration or Certificate of Creation of Chartered Local, as
employees' interest, such as substantial similarity of work and duties, the case may be [IRR].
or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) B. CONSENT ELECTION
similarity of employment status. The basic test of an asserted Consent election refers to the process, voluntarily
bargaining unit's acceptability is whether or not it is fundamentally the
and mutually agreed upon by the contending unions, of
combination which will best assure to all employees the exercise of
their collective bargaining rights.
determining through secret ballot the SEBA of the employees
It does not appear that foreign-hires have indicated their in an appropriate CBU for purposes of collective bargaining
intention to be grouped together with local-hires for purposes of with the employer. It is conducted with or without the
collective bargaining. The collective bargaining history in the School intervention of the DOLE [IRR].
also shows that these groups were always treated separately. Foreign-
hires have limited tenure; local-hires enjoy security of tenure. Although Consent Election vs. Certification Election
foreign-hires perform similar functions under the same working Consent election is but a form of certification
conditions as the local-hires, foreign-hires are accorded certain benefits
election. They may be distinguished from each other in the
not granted to local-hires. These benefits, such as housing,
transportation, shipping costs, taxes, and home leave travel allowance,
following manner:
are reasonably related to their status as foreign-hires, and justify the
exclusion of the former from the latter. To include foreign-hires in a a. The former is held upon the mutual agreement
bargaining unit with local-hires would not assure either group the of the contending unions; while the latter does
exercise of their respective collective bargaining rights. not require the mutual consent of the parties as
it is conducted upon the order of the Med-
III Arbiter [IRR].
BARGAINING REPRESENTATIVE b. The former may be conducted with or without
the control and supervision of the DOLE; while
The term sole and exclusive bargaining agent the latter is always conducted under the control
(SEBA) refers to a legitimate labor union duly certified as the and supervision of the DOLE [IRR].
sole and exclusive bargaining representative or agent of all the c. The former is being conducted as a voluntary
employees in a collective bargaining unit (CBU). A labor union mode of resolving labor dispute; while the latter,
certified as a SEBA means that it shall remain as such during although non-adversarial, is a compulsory
the existence of the CBA, to the exclusion of all other labor method of adjudicating a labor dispute.
organizations existing and operating in the same CBU, and no d. The former is given the highest priority; while
petition for certification election (PCE) questioning its majority the latter is resorted only when the contending
status shall be entertained nor shall certification election be unions fail or refuse to submit their
conducted outside the 60-day freedom period immediately representation dispute through the former
before the expiry date of the 5-year term of the CBA. [IRR]. This is so because under the

Page 78 of 191
 Implementing Rules, as amended, even in cases representative [PAL Employees’ Association v. Ferrer-
where a PCE is filed, the Med-Arbiter, during Calleja]. It is held to ensure that the employees are properly
the preliminary conference and hearing thereon, represented in the exercise of their right to collective bargaining
is tasked to determine the possibility of a with their employer [FOITAF v. Noriel]. No obstacle must be
consent election. It is only when the contending placed to the holding of a certification election for it is the
unions fail to agree to the conduct of a consent statutory policy that it should not be circumvented [Trade
election during the preliminary conference that Unions of the Philippines v. Laguesma]. It is not a litigation
the Med-Arbiter will proceed with the process proceeding in a sense in which this term is commonly
of certification election by conducting as many understood. It is a mere investigation of a non-adversary fact-
hearings as he may deem necessary up to its finding character in which the DOLE plays the part of a
actual holding. But in no case shall the conduct disinterested investigator seeking merely to ascertain the
of the certification election exceed 15 days from desires of the employees as to the matter of determining which
the date of the scheduled preliminary labor organization will represent the employees in their
conference/hearing after which time, the PCE is collective bargaining with the employer [The Heritage Hotel v.
considered submitted for decision. Secretary of Labor]. It is not therefore bound by the technical
e. The former necessarily involves at least 2 or rules of evidence [Associated Labor Unions v. Ferrer-Calleja].
more contending unions; while the latter may In case of doubt, the PCE should be resolved in favor of the
only involve 1 petitioner union. holding of a certification election [National Federation of
f. The former may be conducted in the course of Labor v. Secretary of Labor].
the proceeding in the latter or during its The facts sought to be determined in a certification
pendency. election are: first, whether the Bargaining Unit wants
g. The purpose of the former is only to determine representation; and second, who will represent them if they
(i) who has the majority representation of all the want representation.
workers in the appropriate collective bargaining A certification election proceeding directly involves
unit; where as the purpose of the latter is to two (2) issues, namely: (a) the proper composition and
determine (i) whether the bargaining unit wants constituency of the bargaining unit; and (b) the validity of
representation; and (ii) who will represent them majority representation claims. It is therefore incumbent upon
if they want representation. the Med-Arbiter to rule on the appropriateness of the
bargaining unit once its composition and constituency is
Warren v. BLR questioned [Holy Child v. Sto. Tomas].
Held: The records show that petitioner admitted that what
was held on August 25, 1985 at the Company’s premises and which 2. Where to File
became the root of this controversy, was a consent election and not a A petition for certification election shall be filed with
certification election (underscoring supplied). The election held on the Regional Office which has jurisdiction over the principal
August 25, 1985 was not for the purpose of determining which labor
office of the petitioner. The petition shall be in writing and
union should be the bargaining representative in the negotiation for a
collective contract, there being an existing collective bargaining
under oath [IRR].
agreement yet to expire on July 31, 1986; but only to determine which Under the omnibus rules implementing the Labor
labor union shall administer the said existing contract. Code as amended by D.O. No. 9, it is supposed to be filed in
As correctly distinguished by private respondent, a consent the Regional Office which has jurisdiction over the principal
election is an agreed one, its purpose being merely to determine the office of the employer or where the bargaining unit is
issue of majority representation of all the workers in the appropriate principally situated. The rules further provide that where two or
collective bargaining unit while a certification election is aimed at more petitions involving the same bargaining unit are filed in
determining the sole and exclusive bargaining agent of all the
one Regional Office, the same shall be automatically
employees in an appropriate bargaining unit for the purpose of
collective bargaining. From the very nature of consent election, it is a
consolidated. Hence, the filing of multiple suits and the
separate and distinct process and has nothing to do with the import and possibility of conflicting decisions will rarely happen in this
effect of a certification election. Neither does it shorten the terms of an proceeding and, if it does, will be easy to discover. Notably,
existing CBA nor entitle the participants thereof to immediately under the Labor Code and the rules pertaining to the form of
renegotiate an existing CBA although it does not preclude the workers the petition for certification election, there is no requirement for
from exercising their right to choose their sole and exclusive bargaining a certificate of non-forum shopping either in D.O. No. 9, series
representative after the expiration of the sixty (60) day freedom period. of 1997 or in D.O. No. 40-03, series of 2003 which replaced the
former. Considering the nature of a petition for certification
C. CERTIFICATION ELECTION election and the rules governing it, we therefore hold that the
Certification election refers to the process of requirement for a certificate of non-forum shopping is
determining through secret ballot the SEBA of the employees inapplicable to such a petition [SAMMA-LIKHA v. SAMMA].
in an appropriate CBU for purposes of collective bargaining
with the employer. A certification election is conducted only 3. Who may File
upon the order of the Med-Arbiter of the BLR [IRR].
a. Organized Establishments
Pendency of a petition for cancellation
The pendency of a petition for cancellation of union Article 268. [256] Representation Issue in Organized
registration does not preclude certification election or Establishments. In organized establishments, when a verified
collective bargaining. petition questioning the majority status of the incumbent
bargaining agent is filed by any legitimate labor organization
1. Nature of Certification Election including a national union or federation which has already issued
Certification election is the most democratic method a charter certificate to its local chapter participating in the
certification election or a local chapter which has been issued a
of determining the choice of the employees of their bargaining
charter certificate by the national union or federation before the

Page 79 of 191
Department of Labor and Employment within the sixty (60)-day Role of Employer in Certification Election
period before the expiration of the collective bargaining agreement,
the Med-Arbiter shall automatically order an election by secret
Article 271. [258-A] Employer as Bystander. - In all cases,
ballot when the verified petition is supported by the written consent
whether the petition for certification election is filed by an
of at least twenty-five percent (25%) of all the employees in the employer or a legitimate labor organization, the employer shall not
bargaining unit to ascertain the will of the employees in the be considered a party thereto with a concomitant right to oppose a
appropriate bargaining unit. To have a valid election, at least a in such proceedings shall be limited to: (1) being notified or
majority of all eligible voters in the unit must have cast their votes. informed of petitions of such nature; and (2) submitting the list of
The labor union receiving the majority of the valid votes cast shall employees during the pre-election conference should the Med-
be certified as the exclusive bargaining agent of all the workers in Arbiter act favorably on the petition.
the unit. When an election which provides for three or more choices
results in no choice receiving a majority of the valid votes cast, a
run-off election shall be conducted between the labor unions In issues as to the appropriateness of employees in a
receiving the two highest number of votes: Provided, That the total bargaining unit, the employer has a proper role. He can object
number of votes for all contending unions is at least fifty percent to the appropriateness of the bargaining unit through a motion
(50%) of the number of votes cast. In cases where the petition was or a manifestation. Once the bargaining unit is already
filed by a national union or federation, it shall not be required to established, neither the employer nor the employees can change
disclose the names of the local chapter’s officers and members. its configuration.
At the expiration of the freedom period, the employer
shall continue to recognize the majority status of the incumbent
bargaining agent where no petition for certification election is filed. 4. When to File the Petition for Certification
Election
In the absence of a CBA duly registered in
b. Unorganized Establishments
accordance with Article 237, a petition for certification lection
may be filed at any time.
Article 269. [257] Petitions in Unorganized
Establishments. In any establishment where there is no certified However, no certification lection may be held under
bargaining agent, a certification election shall automatically be the following rules:
conducted by the Med-Arbiter upon the filing of a petition by any
legitimate labor organization, including a national union or (a) Certification year-bar rule;
federation which has already issued a charter certificate to its (b) Negotiations-bar rule;
local/chapter participating in the certification election or a (c) Bargaining deadlock-bar rule; or
local/chapter which has been issued a charter certificate by the (d) Contract-bar rule.
national union or federation. In cases where the petition was filed
by a national union or federation, it shall not be required to disclose
the names of the local chapter’s officers and members. a. Certification Year Bar Rule
Although the Labor Code does not contain any
provision on when the CBA negotiation process should start
When a duly organized union files a petition for
after a union is duly certified as the SEBA of the employees it
certification election, the Med-Arbiter has the duty to
seeks to represent in a given bargaining unit, there is, however,
automatically conduct an election. He has no discretion on the
this provision in the Rules when the Med-Arbiter may dismiss
matter [Philippine Scout Veterans v. Secretary of Labor].
the PCE if the same is filed within one (1) year reckoned and
counted:
c. When an Employer May File
(i) From the date the SEBA certification is
Article 270. [258] When an Employer May File Petition.
When requested to bargain collectively, an employer may petition
issued by the DOLE Regional Director in
the Bureau for an election. If there is no existing certified collective cases of Request for SEBA Certification
bargaining agreement in the unit, the Bureau shall, after hearing, filed in an unorganized establishment with
order a certification election. only one (1) legitimate labor organization;
All certification cases shall be decided within twenty (20) or
working days. (ii) From the date of issuance of certification
The Bureau shall conduct a certification election within as SEBA and not from the date of the
twenty (20) days in accordance with the rules and regulations
conduct of valid certification, consent, run-
prescribed by the Secretary of Labor.
off or re-run election [IRR].

A petition for certification election may be filed by: In the first instance, the period is counted from the
issuance of the SEBA certification which shall have the effect
(i) A legitimate labor organization, including: (i) a of barring the filing of a PCE by any labor organization. It is
national union or federation that has issued a only upon the expiration of this 1-year period that any
charter certificate to its local chapter/chartered legitimate labor organization may file a PCE in the same
local. The former is filing the PCE for and on collective bargaining unit (CBU) represented by the certified
behalf of the latter; or (ii) the local SEBA, unless a CBA between the employer and the certified
chapter/chartered local itself which has been SEBA was executed and registered with the DOLE Regional
issued a charter certificate by the national union Office [IRR].
or federation; or (iii) an independently In the second, there must be a distinction made
registered union; between the reckoning of the 1-year statutory bar and the 1-year
(ii) An employer, when requested to bargain certification year bar. The 1-year period in the former should
collectively in a bargaining unit where no be counted from the date of election; while the 1-year period in
registered CBA exists and the status of the union the latter should be from the date of certification of the SEBA.
is in doubt. The union will be deprived of its entitlement to the critical one
(1) year as a certified SEBA if this period is reckoned from the
Page 80 of 191
actual date when the certification, consent, run-off or re-run Held: Was there a bargaining deadlock between CMC and
election was conducted. The union is certainly entitled to a full respondent union, before the filing of petitioner of a petition for
12 months as SEBA. Until certification is made in its favor, its certification election, which had been submitted to conciliation or had
become the subject of a valid notice of strike or lockout?
status as SEBA is not definite.
In the case of Divine Word University of Tacloban v.
Where an appeal has been filed from the order of the Secretary of Labor and Employment, we had the occasion to define
Med-Arbiter certifying the results of the election, the running what a deadlock is, viz:
of the one (1) year period is deemed suspended until the "A 'deadlock' is xxx the counteraction of things producing
decision on the appeal has become final and executory [IRR]. entire stoppage; xxx There is a deadlock when there is a complete
If the SEBA fails to commence the collective blocking or stoppage resulting from the action of equal and opposed
bargaining process within said period, its being the SEBA may forces xxx. The word is synonymous with the word impasse, which xxx
be questioned by another union through the filing of a new 'presupposes reasonable effort at good faith bargaining which, despite
noble intentions, does not conclude in agreement between the parties. '
PCE. This is best illustrated by the case of KAMPIL-
"
KATIPUNAN v. Trajano, where the SEBA failed to initiate the Although there is no "deadlock" in its strict sense as there is
collective bargaining process within a period of more than 4 no "counteraction" of forces present in this case nor "reasonable effort
years thereby enabling another union to file a new petition for at good faith bargaining, "such can be attributed to CMC's fault as the
certification election. bargaining proposals of respondent union were never answered by
CMC. In fact, what happened in this case is worse than a bargaining
b. Negotiations Bar Rule deadlock for CMC employed all legal means to block the certification
Under the negotiations bar rule, a certification of respondent union as the bargaining agent of the rank-and-file; and
use it as its leverage for its failure to bargain with respondent union.
election petition may not be filed while the SEBA and employer
Thus, we can only conclude that CMC was unwilling to negotiate and
have commenced and sustained negotiations in good faith in reach an agreement with respondent union. CMC has not at any
accordance with Article 261 within one (1) year from the date instance shown willingness to discuss the economic proposals given by
of entry of SEBA certification, or from the date of a valid respondent union.
certification, consent, or run-off election or from the date of As correctly ratiocinated by public respondent, to wit:
issuance of the SEBA certification by the DOLE Regional "For herein petitioner to capitalize on the ensuing delay
Director in cases of Request for SEBA Certification. which was caused by the hospital and which resulted in the non-
Once the CBA negotiations have commenced and conclusion of a CBA within the certification year, would be to negate
and render a mockery of the proceedings undertaken before this
while the parties are engaged in this process, no challenging
Department and to put an unjustified premium on the failure of the
union is allowed file a PCE that would disturb the negotiation respondent hospital to perform its duty to bargain collectively as
process and unduly delay, preempt or forestall the prompt and mandated in Article 252 of the Labor Code, as amended, which states."
timely conclusion thereof. "Article 252. Meaning of duty to bargain collectively - the
It must be noted that there is no law or rule that duty to bargain collectively means the performance of a mutual
imposes a time limitation or caps as to when the parties should obligation to meet and convene promptly and expeditiously in good
negotiate and conclude a CBA. The parties have all the freedom faith for the purpose of negotiating an agreement with respect to wages,
and leeway to negotiate the CBA’s terms and conditions hours of work and all other terms and conditions of employment
including proposals for adjusting any grievance or questions arising
without being constrained by any time restriction. In other
under such agreement and executing a contract incorporating such
words, the negotiation process may last for days, weeks, agreements if requested by either party but such duty does not compel
months, even years, and during the entire duration thereof, no any party to agree to a proposal or to make any concession."
PCE may be filed by any challenging union. The duly certified bargaining agent, CMCEA - AFW,
should not be made to further bear the brunt flowing from the
c. Bargaining Deadlock Bar Rule respondent hospital's reluctance and thinly disguised refusal to
Collective bargaining deadlock refers to a situation bargain."
where there is failure in the collective bargaining negotiations If the law proscribes the conduct of a certification election
when there is a bargaining deadlock submitted to conciliation or
between the SEBA and the employer resulting in an impasse or
arbitration, with more reason should it not be conducted if, despite
stalemate [San Miguel Corporation v. NLRC]. This happens attempts to bring an employer to the negotiation table by the certified
when, despite their efforts at bargaining in good faith, the bargaining agent, there was "no reasonable effort in good faith" on the
parties have failed to resolve the issues and it appears that there employer to bargain collectively.
are no other definite options or plans in sight to break the In the case of Kaisahan ng Manggagawang Pilipino vs.
standoff. Simply stated, there is a deadlock when there is a Trajano, 201 SCRA 453 (1991), penned by Chief Justice Andres R.
complete blocking or stoppage in the negotiation resulting from Narvasa, the factual milieu of which is similar to this case, this Court
the action of equal and opposing forces [Capitol Medical allowed the holding of a certification election and ruled that the one
year period known as the "certification year" has long since expired.
Center Alliance of Concerned Employees v. Laguesma].
We also ruled, that:
Under this rule, a certification election petition may "xxx prior to the filing of the petition for election in this
not be filed when a bargaining deadlock to which an incumbent case, there was no such 'bargaining deadlock xx (which) had been
SEBA is a party has been submitted to conciliation, compulsory submitted to conciliation or arbitration or had become the subject of a
or voluntary arbitration or has become the subject of a valid valid notice of strike or lockout.' To be sure, there are in the record
notice of strike or lockout [IRR]. assertions by NAFLU that its attempts to bring VIRON to the
The Deadlock Bar Rule simply provides that a negotiation table had been unsuccessful because of the latter's
petition for certification election can only be entertained if there recalcitrance, and unfulfilled promises to bargain collectively; but there
is no proof that it had taken any action to legally coerce VIRON to
is no pending bargaining deadlock submitted to conciliation or
comply with its statutory duty to bargain collectively. It could have
arbitration or had become the subject of a valid notice of strike charged VIRON with unfair labor practice; but it did not. It could have
or lockout. The principal purpose is to ensure stability in the gone on a legitimate strike in protest against VIRON's refusal to bargain
relationship of the workers and the management [NACUSIP v. collectively and compel it to do so; but it did not. There are assertions
Trajano]. by NAFLU, too, that its attempts to bargain collectively had been
delayed by continuing challenges to the resolution pronouncing it the
CMCEA-AFW v. Laguesma sole bargaining representative in VIRON; but there is no adequate

Page 81 of 191
substantiation thereof , or of how it did in fact prevent initiation of the (vii) When there is a schism in the union
bargaining process between it and VIRON." resulting in an industrial dispute wherein
Although the statements pertinent to this case are merely the CBA can no longer foster industrial
obiter, still the fact remains that in the Kaisahan case, NAFLU was
peace. The conduct of a certification
counselled by this Court on the steps that it should have undertaken to
protect its interest, but which it failed to do so.
election in such a situation becomes
This is what is strikingly different between the Kaisahan imperative to clear any doubt as to the real
case and the case at bench for in the latter case, there was proof that the and legitimate representative of the
certified bargaining agent, respondent union, had taken an action to employees [Firestone Tire and Rubber
legally coerce the employer to comply with its statutory duty to bargain Company Employees Union v. Estrella].
collectively, i. e., charging the employer with unfair labor practice and (viii) When there is an automatic renewal
conducting a strike in protest against the employer's refusal to provision in the CBA but prior to the date
bargain.[25] It is only just and equitable that the circumstances in this
when such automatic renewal became
case should be considered as similar in nature to a "bargaining
deadlock" when no certification election could be held. This is also to effective, the employer seasonably filed a
make sure that no floodgates will be opened for the circumvention of manifestation with the BLR of its intention
the law by unscrupulous employers to prevent any certified bargaining to terminate the said agreement if and when
agent from negotiating a CBA. Thus, Section 3, Rule V, Book V of the it is established that the SEBA does not
Implement Rules should be interpreted liberally so as to include a represent anymore the majority of the
circumstance, e. g. where a CBA could not be concluded due to the workers in the bargaining unit [PLDT
failure of one party to willingly perform its duty to bargain collectively. Employees’ Union v. PLDT].

d. Contract Bar Rule 60-Day Freedom Period

Under this rule, the existence of the CBA, the The 60-day freedom period is superior to all other
contract referred to therein, bars the filing of a PCE. Once a rules. During this period, a petition for certification election and
CBA is duly registered and validly subsisting, no PCE or any a motion or intervention can be filed. Outside of this, the
other action should be entertained that may disturb the petition should be dismissed outright.
administration of the duly registered existing CBA [IRR]. During this period, the union security clause is not
Neither party should terminate nor modify such agreement effective and the employees are free to form or join another
during its lifetime. Inter-union electoral contests are therefore union without fear of getting fired. However, they are not free
not allowed [Foamtex Labor Union v. Noriel]. from paying union dues and agency fees because the EBA
For the entire 5-year lifetime of the CBA, no PCE representation status is still conclusive up to the expiration of
questioning the majority status of the incumbent SEBA shall be the CBA term.
entertained and no certification election shall be conducted by Upon the expiration of the period, the employer
the DOLE outside of the 60-day freedom period immediately should continue to recognize the majority status of the
before the date of expiry of such five-year term of the CBA. incumbent EBA where no petition for certification election
challenging such majority status is filed by any other union.
Exceptions In PMTI-ULGP v. Calleja, respondent union’s
The contract bar rule admits of several exceptions petition for certification election was filed on November 25,
where a PCE may be validly filed: 1987. At the time of the filing of the said petition, a valid and
existing CBA was present between petitioner and Triumph
(i) During the 60-day freedom period International. The CBA was effective up to September 24,
immediately prior to the expiry date of a 1989. There is no doubt that the respondent union’s CBA
CBA. constituted a bar to the holding of the certification election as
(ii) When the CBA is not registered with the petitioned by the respondent union with public Respondent.
BLR or any of the DOLE Regional Offices. The members of the respondent union should wait for the
(iii) When the CBA, although registered, proper time.
contains provisions lower than the
standards fixed by law or illegal per se Oriental Tin v. Secretary of Labor
clauses. Held: It is uncontroverted that the petition for certification
(iv) When the documents supporting the election in this case was filed on March 18, 1994, twenty-eight days
CBA’s registration are falsified, fraudulent before the expiration of the existing CBA on April 15, 1994, and well
or tainted with misrepresentation. within the 60-day period provided for by the Code. The OTCLU,
(v) When the CBA is not complete as it does however, is concerned with the effect of the employees' ratification of
not contain any of the mandatory the new CBA on the timely filing of the petition for certification
election. Would such ratification nullify the petition?
provisions which the law requires. Such
The law dictates a negative reply. The filing of a petition for
kind of agreement cannot promote certification election during the 60-day freedom period gives rise to a
industrial peace as it leaves out matters representation case that must be resolved even though a new CBA has
which the parties should have stipulated been entered into within that period. This is clearly provided for in the
[Buklod ng Saulog Transit v. Casalla]. aforequoted Section 4, Rule V, Book V of the Omnibus Rules
(vi) When the CBA was extended during its Implementing the Labor Code. The reason behind this rule is obvious.
term as when it was negotiated and entered A petition for certification election is not necessary where the
into prior to the 60-day freedom period. employees are one in their choice of a representative in the bargaining
process. Moreover, said provision of the Omnibus Rules manifests the
The agreement in this case is deemed
intent of the legislative authority to allow, if not encourage, the
hastily entered into in order to frustrate the contending unions in a bargaining unit to hold a certification election
will of the employees in choosing their during the freedom period. Hence, the Court held in the case of Warren
bargaining representative [Associated Manufacturing Workers Union (WMWU) v. Bureau of Labor Relations,
Trade Union v. Noriel]. that the agreement prematurely signed by the union and the company

Page 82 of 191
during the freedom period does not affect the petition for certification
election filed by another union. Substitutionary Doctrine
Under this doctrine, employees are allowed to change
Schism their SEBA, but the CBA continues to bind them up to its
Excepted from the contract bar rule are certain types expiration date. They may bargain however for the shortening
of contracts which do not foster industrial stability, such as of said expriation date.
contracts where the identity of the representative is in doubt. Thus, the new SEBA cannot negotiate a new CBA, it
Any stability derived from such contracts must be subordinated can only administer the old CBA, but the new SEBA is not
to the employees’ freedom of choice because it does not bound by the personal obligations imposed by the old CBA
establish the type of industrial peace contemplated by law. such as the “no strike, no lockout rule.”
Where, therefore, the fact of disaffiliation has been
demonstrated beyond doubt, a certification election is the most Benguet Consolidated v. BCI Employees
expeditious way of determining which labor organization is to Held: In support of an affirmative answer to the first
be the exclusive bargaining representative [Firestone Tire and question, BENGUET first invokes the so-called “Doctrine of
Rubber Company Employees Union v. Estrella]. Substitution" referred to in General Maritime Stevedore's Union v.
South Sea Shipping Lines, L-14689, July 26, 1960. There it was
remarked:
Associated Workers Union-PTGWO v. NLRC
“We also hold that where the bargaining contract is to run
Held: While it is true that AWUM as a local union, being an
for more than two years, the principle of substitution may well be
entity separate and distinct from AWU, is free to serve the interest of
adopted and enforced by the CIR to the effect that after two years of
all its members and enjoys the freedom to disaffiliate, such right to
the life of a bargaining agreement, a certification election may be
disaffiliate may be exercised, and is thus considered a protected labor
allowed by the CIR; that if a bargaining agent other than the union or
activity, only when warranted by circumstances. Generally, a labor
organization that executed the contract, is elected, said new agent
union may disaffiliate from the mother union to form a local or
would have to respect said contract, but that it may bargain with the
independent union only during the 60-day freedom period immediately
management for the shortening of the life of the contract if it considers
preceding the expiration of the CBA. Even before the onset of the
it too long, or refuse to renew the contract pursuant to an automatic
freedom period (and despite the closed-shop provision in the CBA
renewal clause.” (Italics supplied)
between the mother union and management) disaffiliation may still be
The submission utterly fails to persuade Us. The above-
carried out, but such disaffiliation must be effected by a majority of the
quoted pronouncement was obiter dictum. The only issue in the
members in the bargaining unit. This happens when there is a
General Maritime Stevedores’ Union case was whether a collective
substantial shift in allegiance on the part of the majority of the members
bargaining agreement which had practically run for 5 years constituted
of the union. In such a case, however, the CBA continues to bind the
a bar to certification proceedings. We held it did not and accordingly
members of the new or disaffiliated and independent union up to
directed the court a quo to order certification elections. With that,
the CBA's expiration date.
nothing more was necessary for the disposition of the case. Moreover,
the pronouncement adverted to was rather premature. The possible
ALU v. Calleja certification of a union different from that which signed the bargaining
Held: The Court has long since declared that: contract was a mere contingency then since the elections were still to
... Basic to the contract bar rule is the proposition that the be held. Clearly, the Court was not called upon to rule on the possible
delay of the right to select represen tatives can be justified only where effects of such proceedings on the bargaining agreement
stability is deemed paramount. Excepted from the contract which do But worse, BENGUET’s reliance upon the Principle of
not foster industrial stability, such as contracts where the identity of the Substitution is totally misplaced. This principle, formulated by the
representative is in doubt. Any stability derived from such contracts NLRB[7] as its initial compromise solution to the problem facing it
must be subordinated to the employees' freedom of choice because it when there occurs a shift in employees’ union allegiance after the
does nto establish the type of industrial peace contemplated by the execution of a bargaining contract with their employer, merely states
law. 11 that even during the effectivity of a collective bargaining agreement
At this juncture, petitioner should be reminded that the executed between employer and employees thru their agent, the
technical rules of rpocedure do not strictly apply in the adjudication of employees can change said agent but the contract continues to bind
labor disputes. 12 Consequently, its objection that the evidence with them up to its expiration date. They may bargain however for the
respect to the aforesaid repudiiation of the supposed collective shortening of said expiration date.
bargaining agreement cannot be considered for the first time on appeal In formulating the “substitutionary” doctrine, the only
on the Bureau of Labor Relations should be disregarded, especially consideration involved was the employees’ interest in the existing
considering the weighty significance thereof. bargaining agreement. The agent’s interest never entered the picture. In
Both petitioner and private respondent GAW Trading, Inc. fact, the justification for said doctrine was:
allege that the employees of the latter are now enjoying the benefits of ". . . that the majority of the employees, as an entity under
the collective bargaining agreement that both parties had forged. the statute, is the true party in interest to the contract, holding rights
However, We cannot find sufficient evidence of record to support this through the agency of the union representative. Thus, any exclusive
contention. The only evidence cited by petitioner is supposed payment interest claimed by the agent is defeasible at the will of the principal..
of union fees by said employees, a premise too tenuous to sustain the .” (Italics supplied)
desired conclusion. Even the actual number of workers in the Stated otherwise, the “substitutionary” doctrine only
respondent company is not clear from the records. Said private provides that the employees cannot revoke the validly executed
respondent claims that it is two hundred eighty-one (281)13 but collective bargaining contract with their employer by the simple
petitioner suggests that it is more than that number. The said parties expedient of changing their bargaining agent. And it is in the light of
should be aware that this Court is not an adjudicator of facts. Worse, to this that the phrase “said new agent would have to respect said contract”
borrow a trite but apt phrase, they would heap the Ossa of confusion must be understood. It only means that the employees, thru their new
upon the Pelion of uncertainty and still expect a definitive ruling on the bargaining agent, cannot renege on their collective bargaining contract,
matter thus confounded. except of course to negotiate with management for the shortening
Additionally, the inapplicability of the contract bar rule is thereof.
further underscored by the fact that when the disputed agreement was The “substitutionary” doctrine, therefore, cannot be invoked
filed before the Labor Regional Office on May 27, 1986, a petition for to support the contention that a newly certified collective bargaining
certification election had already been filed on May 19, 1986. Although agent automatically assumes all the personal undertakings — like the
the petition was not supported by the signatures of thirty percent (30%) no-strike stipulation here — in the collective bargaining agreement
of the workers in the bargaining unit, the same was enough to initiate made by the deposed union. When BBWU bound itself and its officers
said certification election. not to strike, it could not have validly bound also all the other rival
Page 83 of 191
unions existing in the bargaining units in question. BBWU was the when a certification election which provides for three (3) or
agent of the employees, not of the other unions which possess distinct more choices result in no choice receiving a majority of the
personalities. To consider UNION contractually bound to the no-strike valid votes cast; provided, that the total number of votes for all
stipulation would therefore violate the legal maxim that res inter alios
contending unions is at least fifty percent (50%) of the number
acta alios nec prodest nec nocet.
Of course, UNION, as the newly certified bargaining agent,
of votes cast.
could always voluntarily assume all the personal undertakings made by Thus, a run-off election may only be conducted under
the displaced agent. But as the lower court found, there was no showing the following elements:
at all that, prior to the strike,[11] UNION formally adopted the existing
CONTRACT as its own and assumed all the liabilities imposed by the (i) There are three (3) or more unions competing in
same upon BBWU. a certification or consent election;
(ii) None of the contending unions garnered the
5. Appeal majority of the valid votes cast;
(iii) But the total number of votes for all contending
Article 272. [259] Appeal from Certification Election unions, if added, is at least fifty (50%) of the
Orders. Any party to an election may appeal the order or results of number of valid votes cast;
the election as determined by the Med-Arbiter directly to the (iv) If the above three (3) elements are present, a
Secretary of Labor and Employment on the ground that the rules
run-off election will be conducted between the
and regulations or parts thereof established by the Secretary of
labor unions receiving the two (2) highest
Labor and Employment for the conduct of the election have been
violated. Such appeal shall be decided within fifteen (15) calendar number of votes in such certification election or
days. consent election. The third union and the others,
if any, will no longer be allowed to participate
6. Conduct of Certification Election in such election. And for obvious reason, the
The process of certification election requires the choice of “No Union” should no longer be
application of the double majority rule for the following twin included in the run-off election [IRR].
purposes:
If the above conditions that justify the conduct of a
(i) To have a valid certification election; and run-off election are present and there are no objections or
(ii) To declare the winning union that will be challenges which, if sustained, can materially alter the election
certified as a SEBA. results, the Election Officer should motu proprio conduct a run-
off election within 10 days form the close of the election
a. First Majority: To be a valid proceeding between the labor unions receiving the two highest
certification election, at least a majority number of votes [IRR].
of all eligible voters in the bargaining
unit should have cast their votes E. RE-RUN ELECTION
The first majority is essential to validate the This mode of choosing the SEBA is not expressly
certification election process itself. According to Article 268, provided in the Labor Code nor in the rendering of its
in order to have a valid certification election, it is required that implementing rules. It was only in 2015 that an issuance of the
at least a majority of all eligible voters in the bargaining unit DOLE Secretary has introduced this term for the first time as
must have cast their votes [Samahan ng Manggagawa v. an amendment to the Rules to Implement the Labor Code and
Laguesma]. If less than such majority have cast their votes, the defines it as follows:
certification election process itself is not valid and, therefore,
“‘Re-run election’ refers to an election doncuted
not one of the contending unions therein, even if chosen by the
to break a tie between contending unions, including between
majority of the votes cast, can be certified as the SEBA to ‘no union’ and one of the unions. It shall likewise refer to
represent the CBU. an election doncuted after a failure of election has been
declared by the Election Officer and/or affirmed by the
b. Second Majority: Majority vote of the Mediator-Arbiter.”
valid votes cast in order to be chosen as
the SEBA A re-run election is obviously in the nature of a
After establishing the validity of the certification corrective action meant to cure a seriously defective and
election process itself, the next point to ascertain and establish distorted certification election. Consequently, a third ground
is whether the petitioning union, in a single-union contest, or that may be cited as would justify the conduct of a fair re-run
any of the unions, in a multi-union election, has garnered the election is when the certification, consent or run-off election
majority of the valid votes cast. has been invalidated or nullified due to certain serious
Under the same Article 268, it is required that only irregularities that have been committed during the conduct
“the labor union receiving the majority of the valid votes cast thereof, such as, inter alia, disenfranchisement of the voters,
shall be certified as the exclusive bargaining agent of all the lack of secrecy in the voting, fraud or bribery or acts of
workers in the unit” and under Article 267, it is likewise terrorism, force, threat and intimidation employed by any of the
provided that the labor organization designated or selected by contending unions or the employer. Such invalidation would
the majority of the employees in an appropriate CBU is the necessitate the conduct of a re-run election among the
exclusive representative of the employees in such unit for contending unions to determine the true will and desire of the
purposes of collective bargaining [Peral v. United Employees employees-electorate [Confederation of Citizens Labor Unions
Welfare Association]. v. Noriel].

D. RUN-OFF ELECTION Re-Run Election vs. Failure of Election

A run-off election refers to an election between the
labor unions receiving the two (2) highest number of votes Re-Run Election Failure of Election
Page 84 of 191
 There is a valid certification There is no valid certification every opportunity to choose, and they voluntarily exercised
election but because of certain election because the number of their choice. The union cannot pretend to know better; it cannot
circumstances, the election is votes cast is less than the
impose its will on them [Caltex Refinery Employees
nullified and another one is majority of the number of
ordered to truly reflect the will eligible voters and there are no Association v. Brillantes].
and sentiment of the electorate- challenged votes that could
employees. materially change the results. b. Right to be Certified as Exclusive
Bargaining Agent
IV In order to represent its members in collective
RIGHTS OF LABOR ORGANIZATIONS bargaining, it is an LLO’s inherent right that it be allowed to
file a Petition for Certification Election.
A. RIGHTS OF LABOR ORGANIZATIONS
c. Right to Request for Audited
1. Rights of Legitimate Labor Organizations Financial Statement
In order to request for the Employer’s Audited
Article 251. [242] Rights of Legitimate Labor Financial Statement, the LLO must generally be an Exclusive
Organizations. - A legitimate labor organization shall have the Bargaining Agent. This right includes the right to the notes and
right: other documents in support thereof.
(a) To act as the representative of its members for the To better equip the union in preparing for or in
purpose of collective bargaining; negotiating with the employer, the law gives it the right to be
(b) To be certified as the exclusive representative of all furnished with the employer's audited financial statements.
the employees in an appropriate bargaining unit for purposes of
There are four points in time when the union may ask in writing
collective bargaining;
(c) To be furnished by the employer, upon written for these statements:
request, with its annual audited financial statements, including the
balance sheet and the profit and loss statement, within thirty (30) (i) after the union has been recognized by the
calendar days from the date of receipt of the request, after the employer as sole bargaining representative
union has been duly recognized by the employer or certified as the of the employees in the bargaining unit; or
sole and exclusive bargaining representative of the employees in the (ii) after the union is certified by DOLE as
bargaining unit, or within sixty (60) calendar days before the such sole bargaining representative; or
expiration of the existing collective bargaining agreement, or
(iii) within the last 60 days of the life of a CBA;
during the collective bargaining negotiation;
(d) To own property, real or personal, for the use and or
benefit of the labor organization and its members; (iv) during the collective bargaining
(e) To sue and be sued in its registered name; and negotiation.
(f) To undertake all other activities designed to benefit
the organization and its members, including cooperative, housing, The audited financial statements, including the
welfare and other projects not contrary to law. balance sheet and the profit and loss statement, should be
Notwithstanding any provision of a general or special provided by the employer within 30 calendar days after receipt
law to the contrary, the income and the properties of legitimate
of the union's request.
labor organizations, including grants, endowments, gifts, donations
and contributions they may receive from fraternal and similar
organizations, local or foreign, which are actually, directly and Standard Chartered Bank Employees Union v.
exclusively used for their lawful purposes, shall be free from taxes, Confesor
duties and other assessments. The exemptions provided herein may Held: We, likewise, find that the Union failed to substantiate
be withdrawn only by a special law expressly repealing this its claim that the Bank refused to furnish the information it needed.
provision. While the refusal to furnish requested information is in itself
an unfair labor practice, and also supports the inference of surface
bargaining, in the case at bar, Umali, in a meeting dated May 18, 1993,
The first three rights mentioned in this article do not requested the Bank to validate its guestimates on the data of the rank
pertain to just about any union but only to the union that has and file. However, Umali failed to put his request in writing as provided
been selected as the bargaining representative of the employees for in Article 242(c) of the Labor Code:
in the bargaining unit. Article 242. Rights of Legitimate Labor Organization…
(c) To be furnished by the employer, upon written request,
a. Right to Act as Representative with the annual audited financial statements, including the balance
In order to act as a representative for purposes of sheet and the profit and loss statement, within thirty (30) calendar days
from the date of receipt of the request, after the union has been duly
collective bargaining, the LLO must generally be the exclusive
recognized by the employer or certified as the sole and exclusive
bargaining agent. bargaining representatives of the employees in the bargaining unit, or
The union whose demand for collective bargaining within sixty (60) calendar days before the expiration of the existing
was rebuffed by the employer, because the union was not the collective bargaining agreement, or during the collective negotiation;
certified bargaining agent, has no right to stage a strike. The The Union, did not, as the Labor Code requires, send a
strike is illegal. Such illegality is reason enough for the NLRC written request for the issuance of a copy of the data about the Bank’s
to declare that the union officers have lost their employment rank and file employees. Moreover, as alleged by the Union, the fact
status [Philippine Diamond Hotel v. Manila Diamond Hotel that the Bank made use of the aforesaid guestimates, amounts to a
validation of the data it had used in its presentation.
Employees Union].
Although the union has every right to represent its
members in the negotiation regarding the terms and conditions d. Right to Own Property
of their employment, it cannot negate their wishes on matters As a consequence of having a separate personality,
which are purely personal and individual to them. In this case, LLOs can acquire personal and real property under its name.
the forty employees freely opted to be covered by the Old Plan;
their decision should be respected. The company gave them e. Right to Sue and be Sued in its
Registered Name
Page 85 of 191
 It is the function of a labor union to represent its by their union. The intervention may be allowed, however,
members against the employer's unfair labor practices. It can when there is a suggestion of fraud or collusion or that the
file an action in their behalf without the cumbersome procedure representative will not act in good faith for the protection of all
of joining each and every member as a separate party [Davao interests represented by [the union]. In this case the members
Free Workers v. CIR]. who desire to intervene have not shown fraud, collusion, or lack
The union and its attorney should be allowed to of good faith on the part of their union [Acedera v. International
participate in making compromise settlements with employees Container Terminal Services].
who are union members. In one case, the company was
adjudged to have acted with evident bad faith and malice when Negotiation Phase vs. Administration Phase
it secured the 53 quitclaim agreements individually with the While in the negotiation phase, the union is the EBA
complainant workers without the intervention of court and for the purpose of collective bargaining. Thus, the employee
without involving the union. This subterfuge is tantamount to a can compel representation.
sabotage of the interest of the association. Needless to say, the However, during the administration proceedings (i.e.,
means employed by the employer in dealing with the workers filing complaints arising from the CBA), the union is no longer
individually, instead of collectively through the union and its the EBA because any group of employees or a single employee
counsel, violates good morals as they undermine the unity of can bring a grievance to management. Hence, the employee
the union and fuels industrial disputes, contrary to the declared cannot compel representation. He can do so by himself.
policy in the Industrial Peace Act [Pampanga Sugar v. CIR].
f. Right to Undertake all other
LAKAS v. Marcelo Enterprises Activities not Contrary to Law
Held: In NARIC Workers' Union vs. CIR, We ruled that, This is the right to undertake all other activities
"(a) labor union would go beyond the limits of its legitimate purposes designed to benefit the organization and its members, including
if it is given the unrestrained liberty to prosecute any case even for cooperative, housing, welfare and other projects not contrary to
employees who are not members of any union at all. A suit brought by law.
another in representation of a real party in interest is defective." Under
the uncontroverted facts obtaining herein, the aforestated ruling is
applicable, the only difference being that, here, a labor federation seeks
g. Right to Tax Exemption
to represent members of a registered local union never affiliated with it Notwithstanding any provision of a general or special
and members of registered local unions which, in the course of the law to the contrary, the income and the properties of legitimate
proceedings before the industrial court, disaffiliated from it. labor organizations, including grants, endowments, gifts,
This is not to say that the complaining employees were donations and contributions they may receive from fraternal
without any venue for redress. Under the aforestated considerations, the and similar organizations, local or foreign, which are actually,
respondent court should have directed the amendment of the complaint directly and exclusively used for their lawful purposes, shall be
by dropping LAKAS as the complainant and allowing the suit to be
free from taxes, duties and other assessments. The exemptions
further prosecuted in the individual names of those who had grievances.
A class suit under Rule 3, Section 12 of the Rules of Court is authorized
provided herein may be withdrawn only by a special law
and should suffice for the purpose. expressly repealing this provision.

Money Claims 2. Rights and Conditions of Membership

The rule in this jurisdiction is that money claims due
to laborers cannot be the object of settlement or compromise Article 250. [241] Rights and Conditions of Membership
in a Labor Organization. - The following are the rights and
effected by the union, union officers or counsel without the
conditions of membership in a labor organization:
specific individual consent of each laborer concerned. This is (a) No arbitrary or excessive initiation fees shall be
so because the aggrieved parties are the individual required of the members of a legitimate labor organization nor
complainants themselves. Their representative can only assist shall arbitrary, excessive or oppressive fine and forfeiture be
but not decide for them. In the light of the categorical denial by imposed;
the employees that Peran was authorized to enter into an (b) The members shall be entitled to full and detailed
amicable settlement as regards their claims, the Court holds that reports from their officers and representatives of all financial
public respondent Secretary of labor ruled correctly in transactions as provided for in the constitution and by-laws of the
organization;
upholding the Regional Director's rejection of the agreement
(c) The members shall directly elect their officers in the
[Marquez v. Secretary of Labor]. local union, as well as their national officers in the national union
For a waiver thereof to be legally effective, the or federation to which they or their local union is affiliated, by
individual consent or ratification of the workers or employees secret ballot at intervals of five (5) years. No qualification
involved must be shown. Neither the officers nor the majority requirement for candidacy to any position shall be imposed other
of the union had any authority to waive the accrued rights than membership in good standing in subject labor organization.
pertaining to the dissenting minority members, even under a The secretary or any other responsible union officer shall furnish
collective bargaining agreement which provided for a "union the Secretary of Labor and Employment with a list of the newly-
elected officers, together with the appointive officers or agents who
shop." [General Rubber v. Drilon]
are entrusted with the handling of funds within thirty (30) calendar
The authority of a union under Article 251 to act as days after the election of officers or from the occurrence of any
representative of its members for the purposes of collective change in the list of officers of the labor organization;
bargaining includes the power to represent its members for the (d) The members shall determine by secret ballot, after
purpose of enforcing the provisions of the CBA. When a union due deliberation, any question of major policy affecting the entire
files a case "for and in behalf of its members," a member or membership of the organization, unless the nature of the
several members of that union will not be permitted to file in organization or force majeure renders such secret ballot
the same case a complaint-in-intervention even if it alleges that impractical, in which case, the board of directors of the
organization may make the decision in behalf of the general
the union was not pursuing the case diligently. Such complaint,
membership;
together with the motion for intervention, will have to be denied (e) No labor organization shall knowingly admit as
upon a finding that those members are already well represented members or continue in membership any individual who belongs
Page 86 of 191
to a subversive organization or who is engaged directly or purpose of the special assessment or fees and the recipient of such
indirectly in any subversive activity; assessment or fees. The record shall be attested to by the president.
(f) No person who has been convicted of a crime (o) Other than for mandatory activities under the Code,
involving moral turpitude shall be eligible for election as a union no special assessments, from any amount due to an employee
officer or for appointment to any position in the union; without an individual written authorization duly signed by the
(g) No officer, agent or member of a labor organization employee. The authorization should specifically state the amount,
shall collect any fees, dues, or other contributions in its behalf or purpose and beneficiary of the deduction; and
make any disbursement of its money or funds unless he is duly (p) It shall be the duty of any labor organization and its
authorized pursuant to its constitution and by-laws; officers to inform its members on the provisions of its constitution
(h) Every payment of fees, dues or other contributions and by-laws, collective bargaining agreement, the prevailing labor
by a member shall be evidenced by a receipt signed by the officer relations system and all their rights and obligations under existing
or agent making the collection and entered into the record of the labor laws.
organization to be kept and maintained for the purpose; For this purpose, registered labor organizations may
(i) The funds of the organization shall not be applied for assess reasonable dues to finance labor relations seminars and
any purpose or object other than those expressly provided by its other labor education activities.
constitution and by-laws or those expressly authorized by written Any violation of the above rights and conditions of
resolution adopted by the majority of the members at a general membership shall be a ground for cancellation of union
meeting duly called for the purpose; registration or expulsion of officers from office, whichever is
(j) Every income or revenue of the organization shall be appropriate. At least thirty percent (30%) of the members of a
evidenced by a record showing its source, and every expenditure of union or any member or members specially concerned may report
its funds shall be evidenced by a receipt from the person to whom such violation to the Bureau. The Bureau shall have the power to
the payment is made, which shall state the date, place and purpose hear and decide any reported violation to mete the appropriate
of such payment. Such record or receipt shall form part of the penalty.
financial records of the organization. Criminal and civil liabilities arising from violations of
Any action involving the funds of the organization shall above rights and conditions of membership shall continue to be
prescribe after three (3) years from the date of submission of the under the jurisdiction of ordinary courts.
annual financial report to the Department of Labor and
Employment or from the date the same should have been submitted a. Rights of Membership
as required by law, whichever comes earlier: Provided, That this
provision shall apply only to a legitimate labor organization which
has submitted the financial report requirements under this Code: (i) Right against arbitrary or excessive
Provided, further, That failure of any labor organization to comply initiation fees, fines, and forfeiture
with the periodic financial reports required by law and such rules No arbitrary or excessive initiation fees shall be
and regulations promulgated thereunder six (6) months after the required of the members of a legitimate labor organization nor
effectivity of this Act shall automatically result in the cancellation shall arbitrary, excessive or oppressive fine and forfeiture be
of union registration of such labor organization; imposed.
(k) The officers of any labor organization shall not be Article 292 (a) provides:
paid any compensation other than the salaries and expenses due to
their positions as specifically provided for in its constitution and
(a) All unions are authorized to collect
by-laws, or in a written resolution duly authorized by a majority of
reasonable membership fees, union dues, assessments and
all the members at a general membership meeting duly called for
fines and other contributions for labor education and
the purpose. The minutes of the meeting and the list of participants
research, mutual death and hospitalization benefits, welfare
and ballots cast shall be subject to inspection by the Secretary of
fund, strike fund and credit and cooperative undertakings
Labor or his duly authorized representatives. Any irregularities in
the approval of the resolutions shall be a ground for impeachment
or expulsion from the organization; (ii) Right to full and detailed reports
(l) The treasurer of any labor organization and every The members shall be entitled to full and detailed
officer thereof who is responsible for the account of such reports from their officers and representatives of all financial
organization or for the collection, management, disbursement, transactions as provided for in the constitution and by-laws of
custody or control of the funds, moneys and other properties of the the organization such as financial statements, balanced sheet,
organization, shall render to the organization and to its members a and income statements.
true and correct account of all moneys received and paid by him
since he assumed office or since the last day on which he rendered
such account, and of all bonds, securities and other properties of (iii) Right to election of officers by secret
the organization entrusted to his custody or under his control. The ballot
rendering of such account shall be made: The members shall directly elect their officers in the
(1) At least once a year within thirty (30) days after the local union, as well as their national officers in the national
close of its fiscal year; union or federation to which they or their local union is
(2) At such other times as may be required by a affiliated at intervals of five (5) years.
resolution of the majority of the members of the organization; and No qualification requirement for candidacy to any
(3) Upon vacating his office.
position shall be imposed other than membership in good
The account shall be duly audited and verified by
affidavit and a copy thereof shall be furnished the Secretary of standing in subject labor organization.
Labor. The secretary or any other responsible union officer
(m) The books of accounts and other records of the shall furnish the Secretary of Labor and Employment with a list
financial activities of any labor organization shall be open to of the newly-elected officers, together with the appointive
inspection by any officer or member thereof during office hours; officers or agents who are entrusted with the handling of funds
(n) No special assessment or other extraordinary fees within thirty (30) calendar days after the election officers or
may be levied upon the members of a labor organization unless form the occurrence of any change in the list of officers of the
authorized by a written resolution of a majority of all the members
labor organization.
in a general membership meeting duly called for the purpose. The
secretary of the organization shall record the minutes of the Only members of the union can participate in the
meeting including the list of all members present, the votes cast, the election of union officers. The question of eligibility to vote
may be determined through the use of the applicable payroll

Page 87 of 191
period and employee's status during the applicable payroll (ix) Right against unauthorized
period. The payroll of the month next preceding the labor assessment or fees
dispute in case of regular employees and the payroll period at No special assessment or other extraordinary fees
or near the peak of operations in case of employees in seasonal may be levied upon the members of a labor organization unless
industries [Tancinco v. Ferrer-Calleja]. authorized by a written resolution of a majority of all the
members in a general membership meeting duly called for the
(iv) Right to vote in determination of purpose.
major policies by secret ballot
The members shall determine by secr3et ballot, after (x) Right against unauthorized
due deliberation, any question of major policy affecting the deductions from salary
entire membership of the organization, unless the nature of the Other than mandatory activities under the Code, no
organization or force majeure renders such secret ballot special assessments, attorney’s fees, negotiation fees or any
impractical, in which case, the Board of Directors of the other extraordinary fees may be checked off from any amount
organization may make the decision on behalf of the general due to an employee without an individual written authorization
membership. duly signed by the employee. The authorization should
specifically state the amount, purpose and beneficiary of the
(v) Right to a receipt of any payment to deduction.
the union It is very clear from the above-quoted provision that
Every payment of fees, dues, or other contributions attorney's fees may not be deducted or checked off from any
by a member shall be evidenced by a receipt signed by the amount due to an employee without his written consent except
officer or agent making the collection and entered into the for mandatory activities under the Code. A mandatory activity
record of the organization to be kept and maintained for that has been defined as a judicial process of settling dispute laid
purpose. down by the law. In the instant case, the amicable settlement
entered into by the management and the union cannot be
(vi) Right against unauthorized considered as a mandatory activity under the Code. It is true
expenditures that the union filed a claim for emergency cost of living
The funds of the organization shall not be applied for allowance and other benefits before the Ministry of Labor. But
any purpose or object other than (a) those expressly provided this case never reached its conclusion in view of the parties’
by its constitution and by-laws or (b) those expressly authorized agreement. It is not also shown from the records that Atty.
by written resolution adopted by the majority of the members Benjamin Sebastian was instrumental in forging the said
at a general meeting duly called for the purpose. agreement on behalf of the union members [Vengco v.
For this purpose, registered labor organizations may Trajano].
assess reasonable dues to finance labor relations seminars and For special assessment, attorney’s fees, negotiation
other labor education activities. fees, and other extraordinary fees, automatic check-offs require
(1) written resolution of the majority of all the members at a
(vii) Right to report from the treasurer general membership meeting called for the purpose; and (2)
or other responsible officer to individual written authorization for check-off duly signed by
render an account the employee concerned.
The treasurer of any labor organization and every Article 228 provides:
officer thereof who is responsible for the account of such
organization or for the collection, management, disbursement, Article 228. [222] Appearances and Fees. - (a)
custody or control of the funds, monies, and other properties of Non-lawyers may appear before the Commission or any
the organization, shall render to the organization and to its Labor Arbiter only:
1. If they represent themselves; or
members a true and correct account of all moneys received and
2. If they represent their organization or
paid by him since he assumed office or since the last day on members thereof.
which he rendered such account, and of all bonds, securities (b) No attorney’s fees, negotiation fees or
and other properties of the organization entrusted to his custody similar charges of any kind arising from any collective
or under his control. The rendering of such account shall be bargaining agreement shall be imposed on any individual
made: charged against union funds in an amount to be agreed upon
(1) At least once a year within thirty (30) days after by the parties. Any contract, agreement or arrangement of
the close of its fiscal year; any sort to the contrary shall be null and void.
(2) At such other times as may be required by a
resolution of the majority of the members of the organization; Article 222(b) of the Labor Code, as amended,
and prohibits the payment of attorney's fees only when it is effected
(3) Upon vacating his office. through forced contributions from the employees from their
The account shall be duly audited and verified by own funds as distinguished from union funds. Hence, the
affidavit and a copy thereof shall be furnished the Secretary of general rule is that attorney's fees, negotiation fees, and other
Labor. similar charges may only be collected from union funds, not
from the amounts that pertain to individual union members. As
(viii) Right to inspect financial records an exception to the general rule, special assessments or other
during office hours extraordinary fees may be levied upon or checked off from any
The books of accounts and other records of the amount due an employee for as long as there is proper
financial activities of any labor organization shall be open to authorization by the employee [Marino v. Gamilla].
inspection by any officer or member thereof during office
hours. When individual authorization not required

Page 88 of 191
 i. Assessment from non-members of the wages and remits them directly to the union [Gabriel v.
bargaining agent of “Agency Fees;” Secretary of Labor].
ii. Deductions for fees for mandatory This only applies to the SEBA and not to the minority
activities; union.
iii. Check-off for union service fees authorized Check-off may refer to two (2) things:
by law;
iv. Deductions for withholding tax (NIRC); i. Collection of union dues, special
v. Deductions for withholding of wages assessments and fees (such as attorney’s
because of employee’s deb to the employer fees, negotiation fees or any other
which is already due; extraordinary fees by the SEBA from its
vi. Deductions made pursuant to a judgment members; and
against the worker under circumstances ii. Collection of agency fees from non-
where the wages may be subject to members of the SEBA but covered by and
attachment or execution but only for debts included in the collective bargaining unit
incurred for food, clothing, shelter, and (CBU) who accept the benefits provided in
medical attendance; the Collective Bargaining Agreement
vii. Deductions from wages ordered by the (CBA).
court;
viii. Deductions authorized by law such as The first kind mentioned requires for its validity, the
premiums for PhilHealth, SSS, Pag-IBIG, execution by the employees of individual written authorization
ECC and the like. which should specifically state the amount, purpose,
beneficiary of the deduction; but the second kind does not
Agency Fee require any such authorization since the law itself recognizes
Article 259(e) provides: and allows it upon the non-SEBA member’s acceptance of
benefits resulting from the CBA [Holy Cross v. Joaquin].
(e) x x x. Employees of an appropriate To effect the check-off of agency fees, no individual
bargaining unit who are not members of the recognized authorization is necessary unlike members under Article
collective bargaining agent may be assessed a reasonable 250(o).
fee equivalent to the dues and other fees paid by members
In ABS-CBN Supervisors-Employees Union
of the recognized collective bargaining agent, if such non-
union members accept the benefits under the collective Members v. ABS-CBN Broadcasting Corporation, the Supreme
bargaining agreement: Provided, That the individual Court declared that Article 250 of the Labor Code, as amended,
authorization required under Article 250, paragraph (o) of speaks of three (3) requisites, to wit: (1) authorization by a
this Code shall not apply to the non-members of the written resolution of the majority of all members at the general
recognized collective bargaining agent; membership meeting called for the purpose; (2) secretary's
record of the minutes of the meeting; and (3) individual written
Agency Fee means a fee deducted by an employer authorization for check-off duly signed by the employee
from the salary or wages of an employee who is not a member concerned.
of an employee organization, which is paid to the employee
organization that is the exclusive bargaining agent for the (xi) Right to information
bargaining unit of the employee [IRR]. It shall be the duty of any labor organization and its
This fee is collected when the bargaining agent officers to inform its members on the provisions of its
successfully negotiates a CBA with the employer. It is imposed constitution and by-laws, collective bargaining agreement, the
on non-members who are employees covered by the bargaining prevailing labor relations system and all their rights and
unit being represented by the bargaining agent – in case they obligations under existing labor laws.
accept the benefits under the CBA.
The fact that the non-member is also paying union b. Conditions of Membership
dues to their own unions does not free them from their
obligations to pay the agency fee, and vice versa. Thus they are (i)Individuals belonging to subversive
required to pay (a) union dues and special assessments of their organization or engaged in
own union; and (b) agency fee to the bargaining agent. subversive activity
It is neither contractual nor statutory but quasi- No labor organization shall knowingly admit as
contractual. Payment of agency fee to the bargaining members or continue in membership any individual who
union/agent which negotiated the CBA is but a reasonable belongs to a subversive organization or who is engaged directly
requirement recognized by law, to prevent non-union members or indirectly in any subversive activity.
from enriching themselves at the expense of union members
[Holy Cross of Davao v. Joaquin]. The non-member does not (ii) Persons convicted of a crime
become a member when he pays the agency fee. involving moral turpitude
No person who has been convicted of a crime
Check-Off involving moral turpitude shall be eligible for election as a
Check-off is a method of deducting by the employer union officer or for appointment to any position in the union.
from the employee’s pay at prescribed periods, any amount due
for fees, fines or assessments [AL Ammen Transportation v. (iii) Collection or disbursement of funds
Bicol Transportation Employees]. Strictly speaking, it is a No officer, agent or member of a labor organization
process or device whereby the employer, on agreement with the shall collect any fees, dues, or other contributions in its behalf
union certified as the SEBA, or on prior authorization from its or make any disbursement of its money or funds unless he is
employees, deducts union dues or agency fees from the latter’s duly authorized pursuant to its constitution and by-laws.

Page 89 of 191
 report such violation to the Bureau. The Bureau shall have the
(iv) Action involving funds power to hear and decide any reported violation to mete the
Any action involving the funds of the organization appropriate penalty. Criminal and civil liabilities arising from
shall prescribe after three (3) years from the date of submission violations of above rights and conditions of membership shall
of the annual financial report to the Department of Labor and continue to be under the jurisdiction of ordinary courts.
Employment or from the date the same should have been
submitted as required by law, whichever comes earlier: B. COLLECTIVE BARGAINING
Provided, That this provision shall apply only to a legitimate
labor organization which has submitted the financial report 1. Duty To Bargain Collectively
requirements under this Code: Provided, further, That failure of
any labor organization to comply with the periodic financial Article 263. [252] Meaning of Duty to Bargain
reports required by law and such rules and regulations Collectively. - The duty to bargain collectively means the
promulgated thereunder six (6) months after the effectivity of performance of a mutual obligation to meet and convene promptly
this Act shall automatically result in the cancellation of union and expeditiously in good faith for the purpose of negotiating an
registration of such labor organization; agreement with respect to wages, hours of work and all other terms
and conditions of employment including proposals for adjusting
any grievances or questions arising under such agreement and
Who can file a complaint executing a contract incorporating such agreements if requested by
If it is a general complaint, the complaint must be either party but such duty does not compel any party to agree to a
under oath with written consent of at least 20% of the total proposal or to make any concession
membership of the labor organization, or it may be exercised
by the Secretary of DOLE motu proprio. Noteworthy in the above definition is the requirement
The Regional or Bureau Director may inquire into the on both parties of the performance of the mutual obligation to
financial activities of any legitimate labor organization and meet and convene promptly and expeditiously in good faith for
examine their books of accounts and other records to determine the purpose of negotiating an agreement [Colegio de San Juan
compliance with the law and the organization’s constitution and de Letran v. Association of Employees and Faculties of Letran].
by-laws. Such examination shall be made upon the filing of a The duty does not compel any party to agree blindly
request or complaint for the conduct of an accounts to a proposal nor to make concession. While the law imposes
examination by any member of the labor organization, on both the employer and the bargaining union the mutual duty
supported by the written consent of at least 20% of its total to bargain collectively, the employer is not under any legal
membership [IRR]. obligation to initiate collective bargaining negotiations [Kiok
If it is a specific complaint and it involves the Loy v. NLRC].
member only, there is no need for the written consent of 20% The duty to bargain collectively does not exist when
of the members. If it involves the entire membership, it must be the majority status of the employees’ representative is not
supported by the written consent of 30% of the total established. The employer has no such duty to bargain with the
membership. individual workers or with the minority union [Lakas ng
Any complaint or petition with allegations of Manggagawang Makabayan v. Marcelo Enterprises]. In
mishandling, misappropriation, or non-accounting of funds in Philippine Diamond Hotel v. Manila Diamond Hotel
violation of Article 250 shall be treated as an intra-union Employees Union, it was held that since the respondent union
dispute. It shall be heard and resolved by the Mediator-Arbiter is not the exclusive representative of the majority of the
pursuant to the provisions or Rule XI [IRR]. employees of petitioner, it could not demand from petitioner
Where the issue involves the entire membership of the right to bargain collectively in their behalf. Petitioner’s
the labor organization, the complaint or petition shall be refusal, therefore, to bargain collectively with respondent union
supported by at least 30% of its members [IRR]. cannot be considered ULP.
Obviously, the ultimate purpose of collective
(v) Compensation of officers bargaining is to reach an agreement resulting in a contract
Any action involving the funds of the organization binding on the parties; but the failure to reach an agreement
shall prescribe after three (3) years from the date of submission after negotiations continued for a reasonable period does not
of the annual financial report to the Department of Labor and establish a lack of good faith. The statutes invite and
Employment or from the date the same should have been contemplate a collective bargaining contract, but they do not
submitted as required by law, whichever comes earlier: compel one. The duty to bargain does not include the obligation
Provided, That this provision shall apply only to a legitimate to reach an agreement [Union of Filipino Employees v. Nestle
labor organization which has submitted the financial report Philippines].
requirements under this Code: Provided, further, That failure of
any labor organization to comply with the periodic financial a. Duty to Bargain Collectively in the
reports required by law and such rules and regulations Absence of a CBA
promulgated thereunder six (6) months after the effectivity of
this Act shall automatically result in the cancellation of union Article 262. [251] Duty to Bargain Collectively in the
registration of such labor organization; Absence of Collective Bargaining Agreements. - In the absence of an
agreement or other voluntary arrangement providing for a more
c. Effect of Violation of Rights and expeditious manner of collective bargaining, it shall be the duty of
Conditions of Membership employer and the representatives of the employees to bargain
Any violation of the above rights and conditions of collectively in accordance with the provisions of this Code
membership shall be a ground for cancellation of union
registration or expulsion of officers from office, whichever is Clearly, the law gives utmost premium and extends
appropriate. At least thirty percent (30%) of the members of a due respect to the voluntary arrangement between the parties
union or any member or members specially concerned may on how they will discharge their respective duties to bargain

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collectively before resort to the procedure laid down in the of labor-management relations in order to create a climate of a
Labor Code may be made. In other words, it is only when there sound and stable industrial peace. In construing a CBA, the
is no such voluntary arrangement that the procedure laid down courts must be practical and realistic and give due consideration
in Article 261 of the Labor Code should be followed. to the context in which it is negotiated and the purpose which it
is intended to serve [Rivera v. Espiritu].
b. Duty to Bargain Collectively When The CBA embodies all the agreements reached after
There Exists a CBA negotiations between the employer and the SEBA with respect
to the terms and conditions of their employment relationship
Article 264. [253] Duty to Bargain Collectively When [Pantranco North Express v. NLRC]. Consequently, from the
There Exists a Collective Bargaining Agreement. - When there is a moment it is perfected and during its lifetime, it is considered
collective bargaining agreement, the duty to bargain collectively the law between the parties [SMTFM-UWP v. NLRC] and as
shall also mean that neither party shall terminate nor modify such such, they are bound not only to the fulfillment of what has been
agreement during its lifetime. However, either party can serve a
expressly stipulated but also to all consequences which,
written notice to terminate or modify the agreement at least sixty
(60) days prior to its expiration date. It shall be the duty of both
according to their nature, may be in keeping with good faith
parties to keep the status quo and to continue in full force and effect [Goya v. Goya Employees Union] and the mandate of the law
the terms and conditions of the existing agreement during the 60- [Supreme Steel v. NMS-IND-APL]. Being the law between the
day period and/or until a new agreement is reached by the parties. parties, any violation thereof can be subject of redress in the
court [Faculty Association of Mapua v. Court of Appeals].
This last 60-day period is the freedom period. It is In United Kimberly-Clark Employees Union
denominated as such because it is the only time when the law Philippine Transport General Workers Organization
allows the parties to freely serve a notice to terminate, alter or (UKCEU-PTGWO) v. Kimberly-Clark Philippines, Inc., this
modify the existing CBA. It is also the time when the majority Court emphasized that:
status of the SEBA may be challenged by another union by
filing the appropriate petition for certification election [MRR As a general proposition, an arbitrator is
confined to the interpretation and application of the
Yard Crew v. PNR].
collective bargaining agreement. He does not sit to dispense
Another exception is the so-called Fractual
his own brand of industrial justice: his award is legitimate
Bargaining. This is when the change that gradually occurs only in so far as it draws its essence from the
because of the actual practice of the employer which in fact CBA, i.e., when there is a rational nexus between the award
increases the benefits provided in the CBA. and the CBA under consideration. It is said that an arbitral
award does not draw its essence from the CBA; hence, there
Automatic Renewal Clause is an unauthorized amendment or alteration thereof, if:
The last sentence of Article 253 refers to the so-called 1. It is so unfounded in reason and fact;
2. It is so unconnected with the working and
"automatic renewal" of a CBA. The parties shall continue the
purpose of the agreement;
CBA in "full force and effect" until they reach a new
3. It is without factual support in view of its
agreement. language, its context, and any other indicia of the parties'
It is clear from the above provision of law that until intention;
a new Collective Bargaining Agreement has been executed by 4. It ignores or abandons the plain language of
and between the parties, they are duty-bound to keep the status the contract;
quo and to continue in full force and effect the terms and 5. It is mistakenly based on a crucial assumption
conditions of the existing agreement. The law does not provide which concededly is a nonfact;
for any exception nor qualification as to which of the economic 6. It is unlawful, arbitrary or capricious; and
7. It is contrary to public policy.
provisions of the existing agreement are to retain force and
xx xx
effect, therefore, it must be understood as encompassing all the If the terms of a CBA are clear and [leave] no
terms and conditions in the said agreement [New Pacific doubt upon the intention of the contracting parties, the
Timber v. NLRC]. literal meaning of its stipulation shall prevail. However, if,
in a CBA, the parties stipulate that the hirees must be
Effect of CBA Renewal or Registration Before or presumed of employment qualification standards but fail to
During the 60-Day Freedom Period state such qualification standards in said CBA, the VA may
resort to evidence extrinsic of the CBA to determine the full
It is well settled that the 60-day freedom period based
agreement intended by the parties. When a CBA may be
on the original CBA shall not be affected by any amendment,
expected to speak on a matter, but does not, its sentence
extension or renewal of the CBA for purposes of certification imports .ambiguity on that subject. The VA is not merely to
election. rely on the cold and cryptic words on the face of the CBA
In the case of Warren Manufacturing Workers Union but is mandated to discover the intention of the
v. Bureau of Labor Relations, it was held that an agreement parties. Recognizing the inability of the parties to anticipate
prematurely signed by the union and the company during the or address all future problems, gaps may be left to be filled
freedom period does not affect the petition for certification in by reference to the practices of the industry, and the step
which is equally a part of the CBA although not expressed
election filed by another union.
in it. In order to ascertain the intention of the contracting
parties, their contemporaneous and subsequent acts shall
2. Collective Bargaining Agreement be principally considered The VA may also consider and
A Collective Bargaining Agreement is “a contract rely upon negotiating and contractual history of the parties,
executed upon request of either the employer or the exclusive evidence of past practices interpreting ambiguous
bargaining representative incorporating the agreement reached provisions. The VA has to examine such practices to
after negotiations with respect to wages, hours of work and all determine the scope of their agreement, as where the
other terms and conditions of employment, including proposals provision of the CBA has been loosely formulated.
Moreover, the CBA must be construed liberally rather than
for adjusting any grievances or questions arising under such
narrowly and technically and the Court must place a
agreement.” The primary purpose of a CBA is the stabilization
practical and realistic construction upon it
Page 91 of 191
 binding only between the parties. A labor contract merely
a. Law Deemed Written or Incorporated creates an action in personally and does not create any real right
As in all contracts, the parties in a CBA may establish which should be respected by third parties. This conclusion
such stipulations, clauses, terms and conditions as they may draws its force from the right of an employer to select his
deem convenient provided these are not contrary to law, employees and to decide when to engage them as protected
morals, good customs, public order or public policy. Thus, under our Constitution, and the same can only be restricted by
where the CBA is clear and unambiguous, it becomes the law law through the exercise of the police power. As a general rule,
between the parties and compliance therewith is mandated by there is no law requiring a bona fide purchaser of assets of an
the express policy of the law [Hongkong Union v. HSBC]. on-going concern to absorb in its employ the employees of the
Parties may validly agree in the CBA to reduce wages latter. However, although the purchaser of the assets or
and benefits provided such reduction does not go below the enterprise is not legally bound to absorb in its employ the
minimum standards [Manila Fashions v. NLRC]. employers of the seller of such assets or enterprise, the parties
If the CBA provides for just the minimum wage rates, are liable to the employees if the transaction between the parties
the CBA is void for being a Sweetheart contract. is colored or clothed with bad faith [Sundowner v. Drilon].

b. Entitlement to Benefits d. Effectivity in Case of

The following are entitled to the benefits stipulated Merger/Consolidation; Wiley Doctrine
in the CBA: The lack of a provision in the plan of merger
regarding the transfer of employment contracts to the surviving
a. Members of the Bargaining Union; corporation could have very well been deliberate on the part of
b. Non-members of the bargaining union but are the parties to the merger, in order to grant the surviving
members of the bargaining unit; corporation the freedom to choose who among the dissolved
c. Members of the minority union/s who paid corporation's employees to retain, in accordance with the
agency fees to the bargaining union; and surviving corporation's business needs. If terminations, for
d. New employees hired after the conclusion of the instance due to redundancy or labor-saving devices or to
CBA and during its effectivity or even after its prevent losses, are done in good faith, they would be valid. The
expiration. surviving corporation too is duty-bound to protect the rights of
its own employees who may be affected by the merger in terms
Employees excluded from the bargaining unit, like of seniority and other conditions of their employment due to the
confidential employees or managerial employees or merger. Thus, we are not convinced that in the absence of a
supervisory employees, in the case of rank-and-file CBU, or stipulation in the merger plan the surviving corporation was
vice versa, are not entitled to the benefits flowing from the compelled, or may be judicially compelled, to absorb all
CBA. But two exceptions may be cited, to wit: employees under the same terms and conditions obtaining in
the dissolved corporation as the surviving corporation should
a. When the CBA benefits are granted to also take into consideration the state of its business and its
managerial employees by reason of company obligations to its own employees, and to their certified
policy or company practice; collective bargaining agent or labor union [BPI v. BPI
b. When adjustments are made to avoid distortion Employees].
in the levels of wages or benefits.
e. Substitutionary Doctrine
In the first, in order to make it an enforceable and Under this doctrine, employees are allowed to change
demandable right, there should be evidence of existence of such their SEBA, but the CBA continues to bind them up to its
policy or practice; otherwise, the absence thereof would not expiration date. They may bargain however for the shortening
justify any claim or demand therefor. of said expriation date.
In the second, certain economic benefits may be Thus, the new SEBA cannot negotiate a new CBA, it
voluntarily extended to excluded employees such as increases can only administer the old CBA, but the new SEBA is not
in wages and other monetary benefits because a CBA was bound by the personal obligations imposed by the old CBA
concluded with the rank-and-file employees. But if so given, such as the “no strike, no lockout rule.”
the same cannot, strictly speaking, be considered as having
been based on the CBA but simply as adjustments to prevent Benguet Consolidated v. BCI Employees
distortion in the levels of wages and benefits among the Held: In support of an affirmative answer to the first
employees included in the CBU, in particular, and all the question, BENGUET first invokes the so-called “Doctrine of
employees of the establishment, in general. Substitution" referred to in General Maritime Stevedore's Union v.
There is nothing to prevent the employer from South Sea Shipping Lines, L-14689, July 26, 1960. There it was
remarked:
granting benefits to managerial employees equal to or higher
“We also hold that where the bargaining contract is to run
than those afforded to union members. There can be no conflict for more than two years, the principle of substitution may well be
of interest where the employer himself voluntarily agrees to adopted and enforced by the CIR to the effect that after two years of
grant such benefits to managerial employees [Martinez v. the life of a bargaining agreement, a certification election may be
NLRC]. allowed by the CIR; that if a bargaining agent other than the union or
organization that executed the contract, is elected, said new agent
c. In case of change of ownership of would have to respect said contract, but that it may bargain with the
establishment management for the shortening of the life of the contract if it considers
it too long, or refuse to renew the contract pursuant to an automatic
The rule is that unless expressly assumed, labor
renewal clause.” (Italics supplied)
contracts such as employment contracts and collective The submission utterly fails to persuade Us. The above-
bargaining agreements are not enforceable against a transferee quoted pronouncement was obiter dictum. The only issue in the
of an enterprise, labor contracts being in personam, thus General Maritime Stevedores’ Union case was whether a collective

Page 92 of 191
bargaining agreement which had practically run for 5 years constituted the law. Moreover, it is a familiar rule in
a bar to certification proceedings. We held it did not and accordingly interpretation of contracts that the various
directed the court a quo to order certification elections. With that, stipulations of a contract shall be interpreted
nothing more was necessary for the disposition of the case. Moreover,
together, attributing to the doubtful ones that
the pronouncement adverted to was rather premature. The possible
certification of a union different from that which signed the bargaining
sense which may result from all of them taken
contract was a mere contingency then since the elections were still to jointly [Coca-Cola v. Ilo-Ilo Coca Cola Plant
be held. Clearly, the Court was not called upon to rule on the possible Employees].
effects of such proceedings on the bargaining agreement
But worse, BENGUET’s reliance upon the Principle of 3. Provisions Subject To Collective Bargaining
Substitution is totally misplaced. This principle, formulated by the
NLRB[7] as its initial compromise solution to the problem facing it
Article 263. [252] Meaning of Duty to Bargain
when there occurs a shift in employees’ union allegiance after the Collectively. - The duty to bargain collectively means the
execution of a bargaining contract with their employer, merely states performance of a mutual obligation to meet and convene promptly
that even during the effectivity of a collective bargaining agreement and expeditiously in good faith for the purpose of negotiating an
executed between employer and employees thru their agent, the agreement with respect to wages, hours of work and all other terms
employees can change said agent but the contract continues to bind and conditions of employment including proposals for adjusting
them up to its expiration date. They may bargain however for the any grievances or questions arising under such agreement and
shortening of said expiration date. executing a contract incorporating such agreements if requested by
In formulating the “substitutionary” doctrine, the only either party but such duty does not compel any party to agree to a
consideration involved was the employees’ interest in the existing proposal or to make any concession.
bargaining agreement. The agent’s interest never entered the picture. In
fact, the justification for said doctrine was:
". . . that the majority of the employees, as an entity under a. Non-Economic/Non-Monetary/Political
the statute, is the true party in interest to the contract, holding rights This covers the following provisions that the parties
through the agency of the union representative. Thus, any exclusive to a CBA usually stipulate: (a) Coverage or Scope of the
interest claimed by the agent is defeasible at the will of the principal.. Agreement; (b) Exclusions; (c) Rights and Responsibilities of
.” (Italics supplied) Parties; (d) Union Security Arrangement; (e) Job Security
Stated otherwise, the “substitutionary” doctrine only (Security of Tenure); (f) Management Rights and Prerogatives;
provides that the employees cannot revoke the validly executed
(g) Company Rules and Regulations; (h) Discipline of
collective bargaining contract with their employer by the simple
expedient of changing their bargaining agent. And it is in the light of Employees; (i) Union Dues and Special Assessments; (j)
this that the phrase “said new agent would have to respect said contract” Agency Fee; (k) Check-Off; (l) Grievance Machinery; (m)
must be understood. It only means that the employees, thru their new Voluntary Arbitration; (n) Labor-Management Council (LMC);
bargaining agent, cannot renege on their collective bargaining contract, (o) No-Strike, No-Lockout; (v) Waiver and Completeness of
except of course to negotiate with management for the shortening Agreement; and (q) Duration and Effectivity of Agreement.
thereof.
The “substitutionary” doctrine, therefore, cannot be invoked b. Economic/Monetary/Non-Political
to support the contention that a newly certified collective bargaining
This includes: (a) Wage Increases; (b) Allowances;
agent automatically assumes all the personal undertakings — like the
no-strike stipulation here — in the collective bargaining agreement (c) Premiums for Work on Rest Days, Holidays, etc.; (d) Meal,
made by the deposed union. When BBWU bound itself and its officers Rice and other Subsidies; (e) Leave Benefits; (f) Union Leave;
not to strike, it could not have validly bound also all the other rival (g) Uniforms; (h) Union Office; (i) Promotions; (j) Bonuses;
unions existing in the bargaining units in question. BBWU was the (k) Insurance; (l) Hospitalization; (m) Retirement; (n)
agent of the employees, not of the other unions which possess distinct Excursion; and (o) Others which have monetary values.
personalities. To consider UNION contractually bound to the no-strike
stipulation would therefore violate the legal maxim that res inter alios c. Personal
acta alios nec prodest nec nocet.
These are provisions solely for the benefit of the
Of course, UNION, as the newly certified bargaining agent,
could always voluntarily assume all the personal undertakings made by union and which the new EBA are not bound to.
the displaced agent. But as the lower court found, there was no showing
at all that, prior to the strike,[11] UNION formally adopted the existing 4. Procedure In Collective Bargaining
CONTRACT as its own and assumed all the liabilities imposed by the
same upon BBWU. Article 261. [250] Procedure in Collective Bargaining. -
The following procedures shall be observed in collective
f. Principles bargaining:
(a) When a party desires to negotiate an agreement, it
shall serve a written notice upon the other party with a statement
• The CBA is executed not only upon the request of its proposals. The other party shall make a reply thereto not later
of the EBA but also upon request of the than ten (10) calendar days from receipt of such notice;
employer. (b) Should differences arise on the basis of such notice
• Unilateral changes in the CBA are not allowed and reply, either party may request for a conference which shall
• CBA should be construed liberally begin not later than ten (10) calendar days from the date of request.
• Workers are allowed to negotiate wage (c) If the dispute is not settled, the Board shall intervene
upon request of either or both parties or at its own initiative and
increases separately and distinctly from
immediately call the parties to conciliation meetings. The Board
legislated wage increase. shall have the power to issue subpoenas requiring the attendance
• The literal meaning of the stipulations of the of the parties to such meetings. It shall be the duty of the parties to
CBA, as with every other contract, control if participate fully and promptly in the conciliation meetings the
they are clear and leave no doubt upon the Board may call;
intention of the contracting parties. Thus, where (d) During the conciliation proceedings in the Board, the
the CBA is clear and unambiguous, it, becomes parties are prohibited from doing any act which may disrupt or
impede the early settlement of the disputes; and
the law between the parties and compliance
therewith is mandated by the express policy of
Page 93 of 191
 (e) The Board shall exert all efforts to settle disputes be for six months only. In the absence of any other
amicably and encourage the parties to submit their case to a information, the plain and natural presumption will be that
voluntary arbitrator. petitioner would resume operations after six months, and
therefore, it follows that a new CBA will be needed to
a. Phases of the Collective Bargaining govern the employment relations of the parties, the old one
having already expired. Clearly then, under the
Process
circumstances, the respondent Secretary cannot be faulted
nor considered to have gravely abused his discretion for
(i) Negotiation Phase ordering the parties to enter into a new CBA.
Collective bargaining formally takes the fort of
negotiations when major conditions of employment to be (ii) Administration Phase
written into an agreement are under consideration and of The duty to bargain imposes on the parties during the
grievance committee meetings and arbitration when questions term of their agreement the mutual obligation "to meet and
arising in the administration of an agreement are at stake confer promptly and expeditiously and to good faith for the
[Republic Savings Bank v. Court of Industrial Relations]. purpose off adjusting any grievances or question arising under
such agreement and a violation of this obligation is an unfair
Some Principles labor practice [Ibid].
i. A proposal not embodied in the CBA is not part
thereof. (iii) Renegotiation Phase
ii. Minutes of CBA negotiation has no effect if its This is the phase where the duties in phase 1 and 2
contents are not incorporated in the CBA. are carried over.
iii. Making a promise during the CBA negotiation
is not considered bad faith. b. Procedure is Mandatory
iv. Adamant stance resulting in impasse is not bad The procedure in collective bargaining prescribed by
faith. the Labor Code is mandatory because of the basic interest of
v. The DOLE Secretary cannot order inclusion of the State in ensuring lasting industrial peace. As held in the case
terms and conditions in CBA which the law and of Kiok Loy vs. NLRC, the company's refusal to make counter-
the parties did not intend to reflect therein. proposal to the union's proposed CBA is an indication of its bad
vi. Signing bonus is not demandable under the law. faith. Where the employer did not even bother to submit an
vii. Allegations of bad faith are wiped out with the answer to the bargaining proposals of the union, there is a clear
signing of the CBA. evasion of the duty to bargain collectively. In the case at bar,
petitioner's actuation show a lack of sincere desire to negotiate
Effect of the Refusal of a Party to Sign the CBA rendering it guilty of unfair labor practice [Colegio de San Juan
A party to a fully-concluded CBA may be compelled de Letran v. Association of Employees and Faculty of Letran].
to sign it, especially if said refusal to sign is the only remaining
hitch to its being implemented. Such refusal is considered c. Kiok Loy Doctrine
unfair labor practice [Roadway Express v. General Teamster]. The doctrine is based on the ruling in Kiok Loy v.
NLRC, where the petitioner, Sweden Ice Cream Plant, refused
CBA negotiated and concluded during suspension to submit any counter-proposal to the CBA proposed by its
of operations employees’ certified SEBA. The Court rules that the employer
In San Pedro Hospital of Digos v. Secretary of Labor, had thereby lost its right to bargain the terms and conditions of
it was held: the CBA. Consequently, all the terms and conditions of the
CBA as proposed by the SEBA are deemed approved and
Temporary suspension of operations is accepted lock, stock and barrel (LSB) by the erring employer.
reorganized as a valid exercise of management prerogative
This case epitomizes the classic case of negotiating a
provided it is not carried out in order to circumvent
provisions of the Labor Code or to defeat the rights of the CBA in bad faith consisting of the employer’s refusal to bargain
employees under the Code. The determination to cease or with the SEBA by ignoring all notices for negotiations and
suspend operations is a prerogative of management that the requests for counter-proposals made to the former by the latter.
State usually does not interfere with, as no business can be Such refusal to send its counter-proposals to the SEBA’s
required to continue operating at a loss simply to maintain proposals and to bargain on the economic terms of the CBA
the workers in employment. Such an act would be constitutes an unfair labor practice [General Milling
tantamount to a taking of property without due process of Corporation v, Court of Appeals].
law, which the employer has a right to resist. But where it
In Divine Word University of Tacloban v. Secretary
is shown that the closure is motivated not by a desire to
prevent further losses, but to discourage the workers from of Labor and Employment, the university refused to perform its
organizing themselves into a union for more effective duty to bargain collectively. Hence, the Court upheld the
negotiations with management, the State is bound to unilateral imposition on the university of the CBA proposed by
intervene. the Divine Word University Employees Union.
If a legitimate, valid and legal suspension of In General Milling Corporation v. Court of Appeals,
operations does not terminate but merely suspends the the Supreme Court imposed on the employer the draft CBA
employee-employer relationship, with more reason will an
proposed by the SEBA for the last 2 years commencing from
invalid and illegal suspension of operations, as in this case,
the expiration of the 3-year term of the original CBA. This was
not affect the employment relationship.
The foregoing premises considered, it is clear because of the employer’s refusal to counter-propose to the
that there is no basis for petitioner to claim that a new CBA SEBA’s proposals which was declared as an ULP.
should not be entered into or that collective bargaining
should not be conducted during the effectivity of a d. CBA Deadlock
temporary suspension of operations. In this instance, In case of a deadlock in the initial negotiation or re-
petitioner expressly represented that the suspension was to negotiation or renewal of the CBA, the law provides that the

Page 94 of 191
parties may exercise their respective rights under the Labor instrument to promote industrial peace. Hence, it bears the
Code which include the following: blessings not only of the employer and employees
concerned but even the Department of Labor and
Employment. To set it aside on technical grounds is not
a. Submission of the deadlocked issue to
conducive to the public good.
conciliation and mediation by the NCMB. This
means that the deadlock may be taken
6. Duration of the CBA; Retroactivity
cognizance of motu proprio by the NCMB or
through the filing of a notice of strike by the
Article 265. [253-A] Terms of a Collective Bargaining
union or notice of lockout by the employer or Agreement. Any Collective Bargaining Agreement that the parties
notice of preventive mediation by any of the may enter into shall, insofar as the representation aspect is
parties, concerned, be for a term of five (5) years. No petition questioning
b. Declaration and actual staging of a strike by the the majority status of the incumbent bargaining agent shall be
union or lockout by the employer. entertained and no certification election shall be conducted by the
c. Referral of case to compulsory or voluntary Department of Labor and Employment outside of the sixty-day
arbitration. period immediately before the date of expiry of such five-year term
of the Collective Bargaining Agreement. All other provisions of the
d. In case of industries indispensable to the
Collective Bargaining Agreement shall be renegotiated not later
national interest, filing of petition for than three (3) years after its execution. Any agreement on such
assumption of jurisdiction over the labor dispute other provisions of the Collective Bargaining Agreement entered
or certification thereof to the NLRC for into within six (6) months from the date of expiry of the term of
compulsory arbitration. such other provisions as fixed in such Collective Bargaining
Agreement, shall retroact to the day immediately following such
5. Publication, Ratification, and Registration of date. If any such agreement is entered into beyond six months, the
The CBA parties shall agree on the duration of retroactivity thereof. In case
of a deadlock in the renegotiation of the Collective Bargaining
Article 237, Paragraph 2 of the Labor Code provides;
Agreement, the parties may exercise their rights under this Code.
Within thirty (30) days from the execution of a
Collective Bargaining Agreement, the parties shall submit Under this provision, insofar as representation is
copies of the same directly to the Bureau or the Regional concerned, a CBA has a term of five years, while the other
Offices of the Department of Labor and Employment for provisions, except for representation, may be negotiated not
registration accompanied with verified proofs of its posting later than three years after the execution [Rivera v. Espiritu].
in two conspicuous places in the place of work and The duty to renegotiate not later than 3 years after its
ratification by the majority of all the workers in the execution is more serious than the duty to negotiate the CBA
bargaining unit. The Bureau or Regional Offices shall act
during the 60-day freedom period. During the 3-year period, the
upon the application for registration of such Collective
Bargaining Agreement within five (5) calendar days from duty to bargain is mandatory. However, during the 60-day
receipt thereof. The Regional Offices shall furnish the period, the duty to bargain is permissive.
Bureau with a copy of the Collective Bargaining Agreement The "representation aspect" refers to the identity and
within five (5) days from its submission. majority status of the union that negotiated the CBA as the
exclusive bargaining representative of the appropriate
If the CBA is not registered, will it bar a petition for bargaining unit concerned. "All other provisions" simply refers
certification election? to the rest of the CBA, economic as well as non-economic
No. In Trade Unions of the Philippines v. Laguesma, provisions, except representation [San Miguel Employees v.
it was held: Confesor].

It appears that the procedural requirement of a. Waiver of Right to Renegotiation

filing the CBA within 30 days from date of execution under As a general rule, no. The basic rights of labor are not
Article 231 was not met. The subject CBA was executed on waivable because it is contrary to public policy. However, if
November 28, 1989. It was ratified on December 8, 1989,
there is already adequate consideration such as higher benefit
and then filed with DOLE for registration purposes on
March 14, 1990. Be that as it may, the delay in the filing of of some sort, the union can waive such right to renegotiate in
the CBA was sufficiently explained, i.e., there was an inter- certain circumstances.
union conflict on who would succeed to the presidency of
ILO?PHILS. The CBA was registered by the DOLE only on b. Suspension of a CBA
May 4, 1990. It would be injudicious for us to assume, as In Rivera v. Espiritu, it was held:
what petitioner did, that the said CBA was filed only on
April 30, 1990, or five (5) days before its registration, on The assailed PAL-PALEA agreement was the result
the unsupported surmise that it was done to suit the law that of voluntary collective bargaining negotiations undertaken in the
enjoins Regional Offices of DOLE to act upon an light of the severe financial situation faced by the employer, with
application for registration of a CBA within five (5) days the peculiar and unique intention of not merely promoting
from its receipt thereof. In the absence of any substantial industrial peace at PAL, but preventing the latter’s closure. We
evidence that DOLE officials or personnel, in collusion with find no conflict between said agreement and Article 253-A of the
private respondent, had antedated the filing date of the Labor Code. Article 253-A has a two-fold purpose. One is to
CBA, the presumption on regularity in the performance of promote industrial stability and predictability. Inasmuch as the
official functions holds. agreement sought to promote industrial peace at PAL during its
More importantly, non-compliance with the rehabilitation, said agreement satisfies the first purpose of Article
cited procedural requirement should not adversely affect the 253-A. The other is to assign specific timetables wherein
substantive validity of the CBA between ILO-PHILS and negotiations become a matter of right and requirement. Nothing
the Transunion Corporation-Glassware Division covering in Article 253-A, prohibits the parties from waiving or suspending
the company's rank and file employees. A collective the mandatory timetables and agreeing on the remedies to enforce
bargaining agreement is more than a contract. It is highly the same.
impressed with public interest for it is an essential
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 In the instant case, it was PALEA, as the exclusive affirmative relief, shall be under the jurisdiction of the Labor
bargaining agent of PAL’s ground employees, that voluntarily Arbiters. The Labor Arbiters shall give utmost priority to the
entered into the CBA with PAL. It was also PALEA that hearing and resolution of all cases involving unfair labor practices.
voluntarily opted for the 10-year suspension of the CBA. Either They shall resolve such cases within thirty (30) calendar days from
case was the union’s exercise of its right to collective the time they are submitted for decision.
bargaining. The right to free collective bargaining, after all, Recovery of civil liability in the administrative
includes the right to suspend it. proceedings shall bar recovery under the Civil Code.
The acts of public respondents in sanctioning the 10- No criminal prosecution under this Title may be
year suspension of the PAL-PALEA CBA did not contravene the instituted without a final judgment finding that an unfair labor
“protection to labor” policy of the Constitution. The agreement practice was committed, having been first obtained in the
afforded full protection to labor; promoted the shared preceding paragraph. During the pendency of such administrative
responsibility between workers and employers; and the proceeding, the running of the period of prescription of the
exercised voluntary modes in settling disputes, including criminal offense herein penalized shall be considered interrupted:
conciliation to foster industrial peace." Provided, however, That the final judgment in the administrative
proceedings shall not be binding in the criminal case nor be
c. Extension of CBA considered as evidence of guilt but merely as proof of compliance
While the parties may agree to extend the CBA's of the requirements therein set forth.
original five-year term together with all other CBA provisions,
any such amendment or term in excess of five years will not ULP relates to the commission of acts that transgress
carry with it a change in the union's exclusive collective the workers’ right to organize [T&H v. T&H Union].
bargaining status. By express provision of the above-quoted At the outset, it must be clarified that not all unfair
Article 253-A, the exclusive bargaining status cannot go acts constitute ULPs. While an act or decision of an employer
beyond five years and the representation status is a legal matter or a union may be unfair, certainly not every unfair act or
not for the workplace parties to agree upon. In other words, decision thereof may constitute ULP as defined and enumerated
despite an agreement for a CBA with a life of more than five under Articles 259 and 260 of the Labor Code [Galaxie Steel
years, either as an original provision or by amendment, the Workers Union v. NLRC].
bargaining union's exclusive bargaining status is effective only The act complained of as ULP must have a proximate
for five years and can be challenged within sixty (60) days prior and casual connection with the following:
to the expiration of the CBA's first five years [FVC Labor
Union v. SANAMA-FVC-SIGLO]. a. Exercise of the right to self-organization;
b. Exercise of the right to collective bargaining; or
d. Retroactivity c. Compliance with the CBA.
In general, a CBA negotiated within six months after
the expiration of the existing CBA retroacts to the day Sans this connection, the unfair acts do not fall within
immediately following such date and if agreed thereafter, the the technical signification of the term unfair labor practice
effectivity depends on the agreement of the parties.18 On the [Allied Banking v. Court of Appeals].
other hand, the law is silent as to the retroactivity of a CBA The only ULP which is the exception as it may or
arbitral award or that granted not by virtue of the mutual may not relate to the exercise of the right to self-organization
agreement of the parties but by intervention of the government. and collective bargaining is the act described under paragraph
Despite the silence of the law, the Court rules herein that CBA (f) of Article 259, i.e., to dismiss, discharge or otherwise
arbitral awards granted after six months from the expiration of prejudice or discriminate against an employee for having given
the last CBA shall retroact to such time agreed upon by both or being about to give testimony under the Labor Code
employer and the employees or their union. Absent such an [Philcom Employees Union v. Philippine Global
agreement as to retroactivity, the award shall retroact to the first Communications].
day after the six-month period following the expiration of the
last day of the CBA should there be one [MERALCO v. 1. Aspects of ULP
Quisimbing]. Under Article 258, an Unfair Labor Practice has two
(2) aspects, namely:
V
UNFAIR LABOR PRACTICES a. Civil aspect; and
b. Criminal aspect.
A. CONCEPT OF UNFAIR LABOR PRACTICE
The civil aspect of ULP includes claims for actual,
moral and exemplary damages, attorney’s fees and other
Article 258. [247] Concept of Unfair Labor Practice and
Procedure for Prosecution Thereof. - Unfair labor practices violate
affirmative reliefs. Generally, these civil claims should be
the constitutional right of workers and employees to self- asserted in the labor case before the Labor Arbiters who have
organization, are inimical to the legitimate interests of both labor original and exclusive jurisdiction over ULP cases. the criminal
and management, including their right to bargain collectively and aspect, on the other hand, can only be asserted before the
otherwise deal with each other in an atmosphere of freedom and regular courts.
mutual respect, disrupt industrial peace and hinder the promotion
of healthy and stable labor-management relations. 2. Labor Code Provisions
Consequently, unfair labor practices are not only
There are only five (5) articles in the Labor Code
violations of the civil rights of both labor and management but are
related to ULP, to wit:
also criminal offenses against the State which shall be subject to
prosecution and punishment as herein provided.
Subject to the exercise by the President or by the a. Article 258 which describes the concept of
Secretary of Labor and Employment of the powers vested in them ULPs and prescribes the procedure for their
by Articles 263 and 264 of this Code,201 the civil aspects of all cases prosecution;
involving unfair labor practices, which may include claims

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 b. Article 259 which enumerates the ULPs that
may be committed by employers; Article 305. [290] Offenses. Offenses penalized under
c. Article 260 which enumerates the ULPs that this Code and the rules and regulations issued pursuant thereto
may be committed by labor organizations; shall prescribe in three (3) years.
d. Article 274 which considers violations of the All unfair labor practice arising from Book V shall be
filed with the appropriate agency within one (1) year from accrual
CBA as no longer ULPs unless the same are
of such unfair labor practice; otherwise, they shall be forever
gross in character which means flagrant and/or barred.
malicious refusal to comply with the economic
provisions thereof;
B. ULP IN COLLECTIVE BARGAINING
e. Article 278(c) which refers to union-busting, a
form of ULP, involving the dismissal from
1. Bad Faith Bargaining
employment of union officers duly elected in
It is essential that the employer and employees
accordance with the union constitution and by-
should both act in good faith when it comes to collective
laws, where the existence of the union is
bargaining. Good faith bargaining requires that claims made by
threatened thereby.
either bargainer should be honest.
In Union of Filipro Employees v. Nestle Philippines,
3. Parties Who May Commit ULP
it was held:
An Unfair Labor Practice may be committed by an
employer or by a labor organization. Article 259 describes the
Obviously, the purpose of collective bargaining
ULPs that may be committed by the employer; while Article is the reaching of an agreement resulting in a contract
260 enumerates those which may be committed by the Labor binding on the parties; but the failure to reach an agreement
Organization. after negotiations have continued for a reasonable period
On the part of the employer, only the officers and does not establish a lack of good faith. The statutes invite
agents of corporations, associations or partnerships who have and contemplate a collective bargaining contract, but they
actually participated in or authorized or ratified the ULPs are do not compel one. The duty to bargain does not include the
obligation to reach an agreement.
criminally liable.
The crucial question, therefore, of whether or
On the part of the union, only the officers, members not a party has met his statutory duty to bargain in good faith
of governing boards, representatives or agents or members of typically turns on the facts of the individual case. As we
the labor associations or organizations who have actually have said, there is no per se test of good faith in bargaining.
participated in or authorized or ratified the ULPs are criminally Good faith or bad faith is an inference to be drawn from the
liable. facts. To some degree, the question of good faith may be a
question of credibility. The effect of an employer’s or a
4. Elements of ULP union’s individual actions is not the test of good-faith
bargaining, but the impact of all such occasions or actions,
Before an employer or labor organization may be said
considered as a whole, and the inferences fairly drawn
to have committed ULP, the following elements must concur: therefrom collectively may offer a basis for the finding of
the NLRC.
a. There should exist an employer-employee For a charge of unfair labor practice to prosper,
relationship between the offended party and the it must be shown that Nestlé was motivated by ill will, “bad
offender; and faith, or fraud, or was oppressive to labor, or done in a
b. The act complained of must be expressly manner contrary to morals, good customs, or public policy,
mentioned and defined in the Labor Code as a and, of course, that social humiliation, wounded feelings, or
grave anxiety resulted x x x” in disclaiming unilateral grants
ULP.
as proper subjects in their collective bargaining
negotiations. While the law makes it an obligation for the
Absent one of the elements aforementioned will not employer and the employees to bargain collectively with
make the act an unfair labor practice. each other, such compulsion does not include the
The first requisite is necessary because ULP may commitment to precipitately accept or agree to the proposals
only be committed in connection with the right to self- of the other. All it contemplates is that both parties should
organization and collective bargaining by employees. approach the negotiation with an open mind and make
Necessarily, there must be an employment relationship in order reasonable effort to reach a common ground of agreement.
Herein, the union merely bases its claim of
for the organizational right to be validly and lawfully invoked.
refusal to bargain on a letter dated 29 May 2001 written by
The second requisite should be present since the
Nestlé where the latter laid down its position that “unilateral
Labor Code itself requires that the ULP be “expressly defined grants, one-time company grants, company-initiated
by this Code.” If an act is not covered by any of the ULPs policies and programs, which include, but are not limited to
expressly mentioned in the law, it cannot be so deemed a ULP the Retirement Plan, Incidental Straight Duty Pay and
act. Calling Pay Premium, are by their very nature not proper
subjects of CBA negotiations and therefore shall be
5. Closure of Business excluded therefrom.” But as we have stated in this Court’s
Decision, said letter is not tantamount to refusal to bargain.
In the case of Chronicle Securities Corp. v.
In thinking to exclude the issue of Retirement Plan from the
NLRC, we ruled that even an employer who is “found guilty of CBA negotiations, Nestlé, cannot be faulted for considering
unfair labor practice in dismissing his employee may not be the same benefit as unilaterally granted, considering that
ordered so to pay backwages beyond the date of closure of eight out of nine bargaining units have allegedly agreed to
business where such closure was due to legitimate business treat the Retirement Plan as a unilaterally granted benefit.
reasons and not merely an attempt to defeat the order of This is not a case where the employer exhibited an
reinstatement.” indifferent attitude towards collective bargaining, because
the negotiations were not the unilateral activity of the
bargaining representative. Nestlé’s desire to settle the
6. Prescription
dispute and proceed with the negotiation being evident in its
Page 97 of 191
 cry for compulsory arbitration is proof enough of its based its economic proposals on data of rank-and-file
exertion of reasonable effort at good-faith bargaining. employees and the prevailing economic benefits received by
In the case at bar, Nestle never refused to bargain bank employees from other foreign banks doing business in the
collectively with UFE-DFA-KMU. The corporation simply
Philippines and other branches of the bank in the Asian region,
wanted to exclude the Retirement Plan from the issues to be
taken up during CBA negotiations, on the postulation that
hence, it cannot be said that the union was guilty of ULP for
such was in the nature of a unilaterally granted benefit. An blue-sky bargaining.
employer’s steadfast insistence to exclude a particular
substantive provision is no different from a bargaining 5. Surface Bargaining
representative’s perseverance to include one that they deem Surface bargaining is defined as going through the
of absolute necessity. Indeed, an adamant insistence on a motions of negotiating without any legal intent to reach an
bargaining position to the point where the negotiations agreement. It is a form of ULP that may only be committed by
reach an impasse does not establish bad faith.[fn24 p.10] It
the employer. In the same case of Standard Chartered Bank
is but natural that at negotiations, management and labor
adopt positions or make demands and offer proposals and Employees Union, it involves the question of whether an
counter-proposals. On account of the importance of the employer’s conduct demonstrates an unwillingness to bargain
economic issue proposed by UFE-DFA-KMU, Nestle could in good faith or is merely hard bargaining. There can be no
have refused to bargain with the former – but it did not. And surface bargaining, absent any evidence that management had
the management’s firm stand against the issue of the done acts, both at and away from the bargaining table, which
Retirement Plan did not mean that it was bargaining in bad tend to show that it did not want to reach an agreement with the
faith. It had a right to insist on its position to the point of union or to settle the differences between it and the union. Here,
stalemate.
admittedly, the parties were not able to agree and thus reached
a deadlock. However, it must be emphasized that the duty to
Boulwarism
bargain does not compel either party to agree to a proposal or
Boulwarism is a negotiation tactic named after the
require the making of a concession. Hence, the parties’ failure
former vice president of General Electric, Lemuel Boulware,
to agree does not amount to ULP under Article 259(g)
who pioneered this strategy. It is a labor law principle in which
[Standard v. Confesor].
management opens the negotiation with a generous effort that
is not meant to be negotiated. In other words, it is an offer which
C. ULP OF EMPLOYERS
is ultimate and to which no further revisions will be made. This
“take it or leave it” offer or counter-offer does not constitute
Article 259. [248] Unfair Labor Practices of Employers. -
proper collective bargaining not only within the contemplation It shall be unlawful for an employer to commit any of the following
of United States laws but also under Philippine law [Philippine unfair labor practices:
National Railways v. Union de Maquinistas]. (a) To interfere with, restrain or coerce employees in the
exercise of their right to self-organization;
2. Refusal to Bargain (b) To require as a condition of employment that a
The failure of the employer to submit its counter- person or an employee shall not join a labor organization or shall
proposals to the demands of the SEBA does not, by itself, withdraw from one to which he belongs;
(c) To contract out services or functions being
constitute refusal to bargain as would amount to ULP
performed by union members when such will interfere with,
[Philippine Marine Radio Officers Association v. CIR]. restrain or coerce employees in the exercise of their right to self-
However, it is different if the employer refuses to submit an organization;
answer or reply to the written bargaining proposals of the (d) To initiate, dominate, assist or otherwise interfere
SEBA. In this case, unfair labor practice is committed. While with the formation or administration of any labor organization,
the law does not compel the parties to reach an agreement, it including the giving of financial or other support to it or its
does not contemplate that both parties will approach the organizers or supporters;
negotiation with an open mind and make a reasonable effort to (e) To discriminate in regard to wages, hours of work
and other terms and conditions of employment in order to
reach a common ground of agreement [Kiok Loy v. NLRC].
encourage or discourage membership in any labor organization.
Other examples of ULP are: (a) stonewalling, or the Nothing in this Code or in any other law shall stop the parties from
refusal to communicate or cooperate; and (b) giving flimsy requiring membership in a recognized collective bargaining agent
excuses for the delay in the negotiation. as a condition for employment, except those employees who are
already members of another union at the time of the signing of the
3. Individual Bargaining collective bargaining agreement. Employees of an appropriate
To negotiate or attempt to negotiate with individual bargaining unit who are not members of the recognized collective
workers rather than with the SEBA is ULP. For instance, the bargaining agent may be assessed a reasonable fee equivalent to the
dues and other fees paid by members of the recognized collective
act of the employer in notifying absent employees individually
bargaining agent, if such non-union members accept the benefits
during a strike following unproductive efforts at collective under the collective bargaining agreement: Provided, That the
bargaining that the plant would be operated the next day and individual authorization required under Article 250, paragraph (o)
that their jobs were open for them should they want to come in of this Code shall not apply to the non-members of the recognized
has been held to be a ULP, an active inference with the right of collective bargaining agent;
collective bargaining through dealing with the employees (f) To dismiss, discharge or otherwise prejudice or
individually instead of through their collective bargaining discriminate against an employee for having given or being about
representative. to give testimony under this Code;
(g) To violate the duty to bargain collectively as
prescribed by this Code;
4. Blue-Sky Bargaining (h) To pay negotiation or attorney’s fees to the union or
Blue-Sky Bargaining means making exaggerated or its officers or agents as part of the settlement of any issue in
unreasonable proposals. This is a kind of ULP which can only collective bargaining or any other dispute; or
be committed by a SEBA. (i) To violate a collective bargaining agreement.
In Standard Chartered Bank Employees Union v. The provisions of the preceding paragraph
Confesor, the minutes of the meeting show that the SEBA notwithstanding, only the officers and agents of corporations,
Page 98 of 191
associations or partnerships who have actually participated in, b. The act of the employer in presenting the letters
authorized or ratified unfair labor practices shall be held by 13 union members signifying resignation
criminally liable. from the union clearly indicative of the
employer’s pressure on its employees to prove
In summarized form, the nine U.L.P. acts of an that the union no longer enjoyed the support of
employer under Article 248 are: (1) interference, (2) fellow the workers [General Milling v. Court of
dog" condition, (3) contracting out, (4) company unionism, (5) Appeals].
discrimination for or against union membership, (6) c. The employer’s refusal to bargain to its acts of
discrimination because of testimony, (7) violation of duty to economic inducements resulting in the
bargain, (8) paid negotiation, and (9) violation of CBA. promotion of those who withdrew from the
It is the union which has the burden of proof to union, the use of armed guards to prevent the
present substantial evidence to support its allegations of unfair organizers to come in, and the dismissal of
labor practices committed by the employer. union officials and members [Hacienda Fatima
By the very nature of an unfair labor practice, it is not v. National Federation of Sugarcane Workers].
only a violation of the civil rights of both labor and d. Termination of employee in order to strip the
management but is also a criminal offense against the State union of a leader who would fight for the right
which is subject to prosecution and punishment [Hongkong and of her co-workers at the bargaining table
Shang Hai Banking v. NLRC]. [Colegio de San Juan de Letran v. Association
of Employees and Faculty of Letran].
1. Interference e. Dismissing a supervisory employee on account
The employer commits interference by way of speech of his union activities related to the formation of
when it contains a promise of a reward or a threat of reprisal. the supervisory union [Cathay Pacific Steel
This kind of speech is no longer protected by the Constitutional Corp. v. Court of Appeals].
right to free speech except if done in the Conciliation f. Employer assigns active union members to do
Proceedings in the NCMB under Article 239. overtime work on the day of the union meeting
According to the case of Insular Life Co., Ltd., to prevent them from attending.
Employees Association v. Insular Life, the test of the g. The employer unilaterally closing its
employer’s interference with, restraint or coercion of establishment on the pretext that the demands of
employees within the meaning of the law is whether the its employees are excessive [St John’s Colleges
employer has engaged in conduct which may reasonably tend v. St. Johns Academy Faculty and Employees
to interfere with the free exercise of the employees’ twin rights Union].
to self-organization and collective bargaining. It is not h. Offer of reinstatement and attempt to bribe the
necessary that there be direct evidence that any employee was strikers with comfortable cots, free coffee and
in fact restrained, intimidated or coerced by the statements or occasional movies, overtime pay for work
threats of the employer; what matters is that there is a performed in excess of 8 hours and offer of
reasonable inference that the anti-union conduct of the arrangements for their families so they would
employer does have an adverse effect on the exercise of said abandon the strike and return to work, which
rights. constitute strike-breaking which is a ULP
[Insular Life Assurance Co., Ltd., Employees
Totality of Conduct Doctrine Association v. Insular Life Assurance].
The totality of conduct doctrine means that i. Dismissal of employees after they have
expressions of opinion by an employer, though innocent by organized their union and about to start with the
themselves, may be held to constitute ULP because of the effort at having it certified as their SEBA
circumstances under which they were uttered, the history of the [Samahan ng Manggagawa sa Bandolino v.
particular employer’s labor relations or anti-union bias or NLRC].
because of their connection with an established collateral plan j. Transferring, laying off or assigning employees
of coercion or interference. An expression which may be more difficult work or tasks, or otherwise
permissibly uttered by one employer might, in the mouth of a punishing them because they engaged in
more hostile employer, be deemed improper and consequently organizing and forming a union [T&H
actionable as ULP [Samahan ng Manggagawa sa Bandolino v. Shopfitters Corporation/Gin Queen Corp. v.
NLRC]. The past conduct of the employer and like T&H Shopfitters/Gin Queen Workers Union].
considerations, coupled with an intimate connection between k. Establishing a savings account for the union
the employer’s action and the union affiliation or activities of where all collected union dues and agency fees
the particular employee or employees taken as a whole, may will be deposited and held in trust and
raise a suspicion as to the motivation for the employer’s discontinuing normal relations with any group
conduct. The failure of the employer to ascribe a valid reason within the union including the incumbent sets of
therefor may justify an inference that his unexplained conduct officers at the height of an intra-union dispute
in respect of the particular employee or employees was inspired involving the election of officers of the union
by the latter’s union membership and activities [Royal [De La Salle University v. De La Salle
Undergarment Corporation v. CIR]. University Employees Association].
Examples are: l. In RMC Faculty Union v. NLRC, it was
established that said teachers were permanent
a. Interference in the choice of union’s bargaining employees who had rendered six (6) to twenty
panel [Standard Chartered Bank Employees (20) years of service. Their permanent status
Union v. Confesor]. notwithstanding, they were dismissed because
Abellera feared that if their contracts were

Page 99 of 191
 renewed, there would be a strike in the school sections of the company, is violative of the existing CBA. It
the following semester. This is indisputably an could have been purely an exercise of management prerogative
unwarranted interference with the right of on the part of the company if it were not bound by what was
workers to self-organization and to engage in stipulated in the CBA to continue to maintain a security guard
concerted activities. An apprehension that there section at least during the lifetime of the agreement.
might be a future strike in the school is not a
ground for dismissal of the workers. While a BPI Employees Union v. BPI
strike may result in hardships or prejudice to the Held: It is to be emphasized that contracting out of services
school and the studentry, the employer is not is not illegal perse. It is an exercise of business judgment or
without recourse. If the employer feels that the management prerogative. Absent proof that the management acted in a
action is tainted with illegality, the law provides malicious or arbitrary manner, the Court will not interfere with the
exercise of judgment by an employer. In this case, bad faith cannot be
the employer with ample remedies to protect his
attributed to BPI because its actions were authorized by CBP Circular
interests. Decidedly, dismissal of employees in No. 1388, Series of 1993 issued by the Monetary Board of the then
anticipation of an exercise of a constitutionally Central Bank of the Philippines (now Bangko Sentral ng Pilipinas). The
protected right is not one of them. circular covered amendments in Book I of the Manual of Regulations
for Banks and Other Financial Intermediaries, particularly on the matter
2. Yellow Dog Contract of bank service contracts. A finding of ULP necessarily requires the
Paragraph [b] of Article 259 describes what is alleging party to prove it with substantial evidence. Unfortunately, the
commonly known as yellow dog contract. It is one which exacts Union failed to discharge this burden.
Much has been said about the applicability of D.O. No. 10.
from workers as a condition of employment that they shall not
Both the NLRC and the CA agreed with BPI that the said order does
join or belong to a labor organization, or attempt to organize not apply. With BPI, as a commercial bank, its transactions are subject
one during their period of employment or that they shall to the rules and regulations of the governing agency which is the
withdraw therefrom in case they are already members of a labor Bangko Sentral ng Pilipinas. The Union insists that D.O. No. 10 should
organization. prevail.
A typical yellow dog contract embodies the The Court is of the view, however, that there is no conflict
following stipulations: between D.O. No. 10 and CBP Circular No. 1388. In fact, they
complement each other.
Consistent with the maxim, interpretare et concordare leges
(a) A representation by the employee that he is not
legibus est optimus interpretandi modus, a statute should be construed
a member of a labor organization; not only to be consistent with itself but also to harmonize with other
(b) A promise by the employee that he will not join laws on the same subject matter, as to form a complete, coherent and
a union; and intelligible system of jurisprudence. The seemingly conflicting
(c) A promise by the employee that upon joining a provisions of a law or of two laws must be harmonized to render each
labor organization, he will quit his employment. effective. It is only when harmonization is impossible that resort must
be made to choosing which law to apply.
The act of the employer in imposing such a condition In the case at bench, the Union submits that while the
Central Bank regulates banking, the Labor Code and its implementing
constitutes ULP. Such stipulation in the contract is null and
rules regulate the employment relationship. To this, the Court agrees.
void. The fact that banks are of a specialized industry must, however, be
taken into account. The competence in determining which banking
3. Contracting Out of Services and Functions functions may or may not be outsourced lies with the BSP. This does
This is also called “ULP Contracting.” Paragraph [c] not mean that banks can simply outsource banking functions allowed
of Article 259 describes when the act of the employer of by the BSP through its circulars, without giving regard to the guidelines
contracting out of services or functions being performed by set forth under D.O. No. 10 issued by the DOLE.
SEBA members is considered ULP. While D.O. No. 10, Series of 1997, enumerates the
permissible contracting or subcontracting activities, it is to be observed
As a general rule, the act of an employer in having
that, particularly in Sec. 6(d) invoked by the Union, the provision is
work or certain services or functions being performed by SEBA general in character – "x x x Works or services not directly related or
members contracted out is not per se ULP. This is so because not integral to the main business or operation of the principal… x x x."
contracting-out of a job, work or service is clearly an exercise This does not limit or prohibit the appropriate government agency, such
by the employer of its business judgment and its inherent as the BSP, to issue rules, regulations or circulars to further and
management rights and prerogatives. Hiring of workers is specifically determine the permissible services to be contracted out.
within the employer’s inherent freedom to regulate its business CBP Circular No. 1388 enumerated functions which are ancillary to the
and is a valid exercise of its management prerogative subject business of banks, hence, allowed to be outsourced. Thus, sanctioned
by said circular, BPI outsourced the cashiering (i.e., cash-delivery and
only to special laws and agreements on the matter and the fair
deposit pick-up) and accounting requirements of its Davao City
standards of justice. The employer cannot be denied the faculty branches. The Union even described the extent of BPI’s actual and
of promoting efficiency and attaining economy by a study of intended contracting out to BOMC as follows:
what units are essential for its operation. It has the ultimate right "As an initiatory move, the functions of the Cashiering Unit
to determine whether services should be performed by its of the Processing Center of BPI, handled by its regular rank and file
personnel or contracted to outside agencies [Manila Electric employees who are members of the Union, xxx [were] transferred to
Company v. Quisumbing]. BOMC with the Accounting Department as next in line. The
It is only when the contracting out of a job, work or Distributing, Clearing and Bookkeeping functions of the Processing
Center of the former FEBTC were likewise contracted out to BOMC."
service being performed by the SEBA members will interfere
Thus, the subject functions appear to be not in any way
with, restrain or coerce employees in the exercise of their right directly related to the core activities of banks. They are functions in a
to self-organization that it shall constitute ULP. processing center of BPI which does not handle or manage deposit
In Shell Oil Workers Union v. Shell Oil Company, the transactions. Clearly, the functions outsourced are not inherent banking
Court ruled that the contracting out of security services to an functions, and, thus, are well within the permissible services under the
outside private security agency to undertake the work of the circular.
company security guards who were re-assigned to other

Page 100 of 191

 The Court agrees with BPI that D.O. No. 10 is but a guide substantial capital at the time the contract therefor was entered into.
to determine what functions may be contracted out, subject to the rules Furthermore, the list78 of CESCO's office equipment, furniture and
and established jurisprudence on legitimate job contracting and fixtures, and vehicles offered in evidence by petitioners does not satisfy
prohibited labor-only contracting. Even if the Court considers D.O. No. the requirement that they could have been used in the performance of
10 only, BPI would still be within the bounds of D.O. No. 10 when it the specific work contracted out, i.e., meter-reading service. As the CA
contracted out the subject functions. This is because the subject aptly pointed out,79 the tools and equipment utilized by CESCO in the
functions were not related or not integral to the main business or meter-reading activities are owned by CEPALCO, emphasizing the fact
operation of the principal which is the lending of funds obtained in the that CESCO has no basic equipment to carry out the service contracted
form of deposits. From the very definition of "banks" as provided under out by CEPALCO.
the General Banking Law, it can easily be discerned that banks perform On the other hand, although it may be said that CESCO had
only two (2) main or basic functions – deposit and loan functions. Thus, substantial capital when CEPALCO contracted out
cashiering, distribution and bookkeeping are but ancillary functions its warehousing works on January 5, 2010, there is, however, lack of
whose outsourcing is sanctioned under CBP Circular No. 1388 as well credible evidence to show that CESCO had the aforesaid substantial
as D.O. No. 10. Even BPI itself recognizes that deposit and loan investment in the form of equipment, tools, implements, machineries,
functions cannot be legally contracted out as they are directly related or and work premises to perform the warehousing activities on its own
integral to the main business or operation of banks. The CBP's Manual account. Similarly, the job contracted out is directly related to
of Regulations has even categorically stated and emphasized on the CEPALCO's electric distribution business, which involves logistics,
prohibition against outsourcing inherent banking functions, which refer inventories, accounting, billing services, and other related operations.
to any contract between the bank and a service provider for the latter to Lastly, same as above, no evidence has been offered to establish that
supply, or any act whereby the latter supplies, the manpower to service CESCO exercised control with respect to the manner and methods of
the deposit transactions of the former. achieving the warehousing works, or that it supervised the workers
assigned to perform the same.
At this juncture, it should be made clear that the disposition
CEPALCO v. CEPALCO Union
of these cases should be limited only to the foregoing declaration.
Held: The need to determine whether or not the contracting
Again, the complaints filed by respondent were only for ULP. While
out of services (or any particular activity or scheme devised by the
there is nothing infirm in passing upon the matter of labor-only
employer for that matter) was intended to defeat the workers' right to
contracting since it was vigorously litigated in these proceedings, the
self-organization is impelled by the underlying concept of ULP. This is
resolution of the same must only be read in relation to the charges of
stated in Article 258 of the Labor Code, as amended, to wit:
ULP. As earlier stated, labor-only contracting was invoked by
Article 258. Concept of Unfair Labor Practice and
respondent as a prohibited act under Article 259 (c) of the Labor Code,
Procedure for Prosecution Thereof. - Unfair labor practices violate
as amended. As it turned out, however, respondent failed to relate the
the constitutional right of workers and employees to self-
arrangement to the defining element of ULP, i.e., that it violated the
organization, are inimical to the legitimate interests of both labor and
workers' right to self-organization. Hence, being a preliminary matter
management, including their right to bargain collectively and
actively argued by respondent to prove the charges of ULP, the same
otherwise deal with each other in an atmosphere of freedom and mutual
was not rendered moot and academic by the eventual dismissal of the
respect, disrupt industrial peace and hinder the promotion of healthy
complaints as an issue only becomes moot and academic if it becomes
and stable labor-management relations.
a "dead" issue, devoid of any practical value or use to be passed upon.
Thus, in Great Pacific Employees Union v. Great Pacific
In Pormento v. Estrada:
Life Assurance Corporation,69 the Court observed:
An action is considered "moot" when it no longer presents
There should be no dispute that all the prohibited acts
a justiciable controversy because the issues involved have become
constituting unfair labor practice in essence relate to the workers'
academic or dead or when the matter in dispute has already been
right to self-organization. Thus, an employer may be held liable under
resolved and hence, one is not entitled to judicial intervention unless
this provision if his conduct affects in whatever manner the right of an
the issue is likely to be raised again between the parties. There is
employee to self-organize.
nothing for the court to resolve as the determination thereof has been
Similarly, in Bankard, Inc. v. NLRC:
overtaken by subsequent events.83chanroblesvirtuallawlibrary
The Court has ruled that the prohibited acts considered as
For another, the Court also observes that while respondent
ULP relate to the workers' right to self-organization and to the
did ask for the nullification of the subject contracts between petitioners,
observance of a CBA. It refers to "acts that violate the workers'
and even sought that the employees provided by CESCO to CEPALCO
right to organize." Without that element, the acts, even if unfair,
be declared as the latter's own employees, petitioners correctly argue
are not ULP. Thus, an employer may only be held liable for unfair
that respondent is not a real party-in-interest and hence, had no legal
labor practice if it can be shown that his acts affect in whatever manner
standing insofar as these matters are concerned. This is because
the right of his employees to self-organize.
respondent failed to demonstrate how it stands to be benefited or
In these cases, the Court agrees with the CA that CEPALCO
injured by a judgment on the same, or that any personal or direct injury
was engaged in labor-only contracting as its Contract for Meter-
would be sustained by it if these reliefs were not granted. In Joya v.
Reading Work dated February 19, 2007 and Contract of Service To
Presidential Commission on Good Government,84 the Court explained:
Perform Warehousing Works dated January 5, 2010 (subject contracts)
"Legal standing" means a personal and substantial interest
with CESCO fit the criteria provided for in Section 5 of DO 18-02, as
in the case such that the party has sustained or will sustain direct injury
above-highlighted.
as a result of the x x x act being challenged. The term "interest" is
To be specific, petitioners failed to show that CESCO has
material interest, an interest in issue and to be affected by the decree,
substantial capital or investment which relates to the job, work or
as distinguished from mere interest in the question involved, or a mere
service to be performed. While it is true that: (a) CESCO's Amended
incidental interest. Moreover, the interest of the party plaintiff must be
Articles of Incorporation73 as of November 26, 2008 shows that
personal and not one based on a desire to vindicate the constitutional
CESCO's authorized capital stock is P200,000,000.00 as of September
right of some third and unrelated party.85chanroblesvirtuallawlibrary
26, 2008,74 which was increased from P100,000,000.0075 on May 30,
If at all, it would be the employees of CESCO who are
2007; and (b) its financial statement76 as of 2010 and 2011 shows that
entitled to seek the foregoing reliefs since in cases of labor-only
its paid-up capital stock is in the sum of P81,063,000.00,77 there is no
contracting, "the person or intermediary shall be considered merely as
available document to show CESCO's authorized capital stock at the
an agent of the employer who shall be responsible to the workers in the
time of the contracting out of CEPALCO's meter-
same manner and extent as if the latter were directly employed by
reading activities to CESCO on February 19, 2007. As it is, the
him."86 However, they have not been impleaded in these cases. Thus,
increases in its authorized capital stock and paid-up capital were only
as prayed for by petitioners, the Court must set aside the portions of the
made after November 26, 2008, hence, are only relevant with regard to
assailed CA Decisions declaring: (a) the workers hired by CESCO,
the time CEPALCO contracted out its warehousing works to CESCO
pursuant to the contracts subject of these cases, as regular employees
on January 5, 2010. Since the amount of CESCO's authorized capital
of CEPALCO; and (b) the latter responsible to said workers in the same
stock at the time CEPALCO contracted out its meter-reading activities
manner and extent as if they were directly employed by it. This
was not shown, the Court has no means of determining whether it had

Page 101 of 191

pronouncement not only squares with the rules on real party-in-interest reserved its right under the CBA to grant better bonus to those
and legal standing, but also with the precept that no one shall be who are exceptionally good or efficient, it was held that it is not
affected by any proceeding to which he is a stranger, and that strangers discriminatory or ULP for said employer to give such bonus to
to a case are not bound by any judgment rendered by the court.
non-union members, it being clear that many union members
were also given the bonus and it was purely a valid exercise of
4. Company Union management prerogative.
"Company union" means any labor organization But in Manila Hotel v. Pines Hotel Employees
whose formation, function or administration has been assisted Association, it was enunciated that there was unjust
by any act defined as unfair labor practice by this Code. discrimination when management departed from its previous
Paragraph [d] of Article 259 considers it a ULP to practice of dividing equally to all employees certain percentage
initiate, dominate, assist or otherwise interfere with the of its net profits as Christmas bonus – giving only to its
formation or administration of any labor organization, employees in the operation where there was no union and not
including the giving of financial or other support to it or its giving any to its unionized departments.
organizers or supports. Such union is called “company union” In Davao Free Workers Front v. CIR, it was held that
as its formation, function or administration has been assisted by requiring medical examination as a pre-condition to re-
any act of the employer defined as ULP under the Labor Code admission to work after a strike is improper. They may be
[IRR]. subjected to periodic physical exam as old reinstated workers
While generally, the pendency of a ULP case filed but not as a precondition to their reinstatement. And if they are
against a labor organization participating in the certification ill or suffering from disability, they are entitled to all the
election does not stay the holding thereof [Barrera v. CIR], benefits that the laws and company practices provide.
however, the pendency of a formal charge of company In Manila Pencil Co. v. CIR, this Court had occasion
domination against one of the unions which is participating in to observe that even where business conditions justified a lay-
the certification election is a prejudicial question that bars the off of employees, unfair labor practices were committed in the
holding thereof until its final resolution [United CMC Workers form of discriminatory dismissal where only unionists were
Union v. BLR]. permanently dismissed. This was despite the valid excuse given
by the Manila Pencil Company that the dismissal of the
Examples: employees was due to the reduction of the company's dollar
allocations for importation and that both union members and
a. Management files a joint motion with the non-union members were laid-off. The Court, thru Justice
defeated union to nullify the result of the Makalintal, rebuffed the petitioner Company and said:
certification election.
b. No member of the union is dismissed despite a . . . The explanation, however, does not by any
retrenchment policy which resulted in the means account for the permanent dismissal of five of the
dismissal of other employees who are officers unionists, where it does not appear that non-unionists were
and members of another union [Oceanic Arc similarly dismissed.
Products v. CIR]. xxx xxx xxx
c. Dismissing employees for not joining the union And the discrimination shown by the Company
strongly is confirmed by the fact that during the period from
being supported by the company [Progressive
October 1958 to August 17, 1959 it hired from fifteen to
Development Corporation v. CIR]. twenty new employees and ten apprentices. It says these
employees were for its new lead factory, but is (sic) not
5. Discrimination shown that the five who had been permanently dismissed
It is ULP to discriminate in regard to wages, hours of were not suitable for work in that new factory.
work and other terms and conditions of employment in order to
encourage or discourage membership in any labor organization. In Bataan Shipyard and Engineering
Discrimination has been defined as the failure to treat Co., Inc. v. NLRC, under the circumstances obtaining in this
all persons equally when no reasonable distinction can be found case, We are inclined to believe that the company had indeed
between those favored and those not favored [Sugue v. Triumph been discriminatory in selecting the employees who were to be
International]. There is discrimination only when one is denied retrenched. All of the retrenched employees are officers and
privileges which are granted to others under similar conditions members of the NAFLU. The record of the case is bereft of any
and circumstances [Caltex v. Philippine Labor Organization]. satisfactory explanation from the Company regarding this
Thus, before a claim for discrimination can prosper, it must be situation. As such, the action taken by the firm becomes highly
established that first, there is no reasonable distinction or suspect. It leads Us to conclude that the firm had been
classification that can be obtained between persons belonging discriminating against membership in the NAFLU, an act
to the same class; and, second, persons belonging to the same which amounts to interference in the employees' exercise of
class have not been treated alike. It must be stressed, however, their right of self-organization. Under Art. 249 (now Art. 248)
that discrimination per se is not unlawful. Further, there can be of the Labor Code of the Philippines, such interference is
no discrimination where the employees concerned are not considered an act of unfair labor practice on the part of the
similarly situated [Wise and Co. v. Wise and Co., Inc. Company
Employees Union].
In Manila Railroad v. Kapisanan ng Manggagawa sa a. Closed-Shop Agreement
Manila Railroad, the non-regularization of long-time A closed-shop arrangement may be defined as a
employees because of their affiliation with the union while new scheme in which, by agreement between the employer and its
employees were immediately regularized was declared an act employees or their representatives, no person is allowed to be
of discrimination. employed in any departments of the enterprise unless he/she is,
In Philippine Blooming Mills Employees becomes and, for the duration of the agreement, remains a
Organization v. Philippine Blooming Mills, the employer member in good standing of a SEBA entirely comprised of or

Page 102 of 191

of which the employees in interest are a part [Del Monte e. Agency Shop Agreement
Philippines v. Saldivar]. Under this scheme, there is no requirement for non-
Basically, this kind of agreement stipulates the members of the SEBA to become its members. However, it is
undertaking by the employer not to hire or employ any person required that such non-SEBA members should pay the SEBA
who is not a member of the SEBA. Once employed, it is an agency fee as a condition or their continued employment.
required that the said person should remain a member of the The third sentence of Article 259[e] of the Labor Code validates
SEBA in good standing as a condition for his/her continued this arrangement.
employment, at least during the whole duration of the CBA.
This requirement for employees to become members of the f. Termination for Violation of Union
SEBA as a condition for their continued employment redounds Security Clause
to their benefit and advantage because by holding out to loyal It cannot be said that the stipulation providing that the
members a promise of employment in the closed shop, the employer may dismiss an employee whenever the union
union wields group solidarity. In fact, it is said that “the closed recommends his expulsion either for disloyalty or for any
shop contract is the most prized achievement of unionism.” It violation of its by-laws and constitution is illegal or constitute
adds membership and compulsory dues [Manila Mandarin of unfair labor practice, for such is one of the matters on which
Employees Union v. NLRC]. management and labor can agree in order to bring about
harmonious relations between them and the union, and
b. Maintenance of Membership cohesion and integrity of their organization. And as an act of
Agreement loyalty a union may certainly require its members not to
There is a maintenance of membership arrangement affiliate with any other labor union and to consider its
when employees who are SEBA members as of the effective infringement as a reasonable cause for separation [Tanduay v.
date of the agreement, or who thereafter become its members, NLRC].
must maintain their union membership as a condition for their Alabang Country Club v. NLRC has enunciated the
continued employment until they are promoted or transferred following requisites that the employer should determine, prove
out of the bargaining unit, or the agreement is terminated [Pico and comply with prior to terminating the employment of an
Resources v. Dequilla]. Its role is to protect the SEBA’s current employee by virtue of the enforcement of the union security
membership. By its express terms, it covers and renders clause:
continued membership compulsory for: (1) those who were
already SEBA members at the time the CBA was signed; and a. The union security clause is applicable;
(2) the newly-hired employees who will become regular during b. The SEBA is requesting for the enforcement of
the lifetime of the CBA. such clause;
This form of union security clause is considered the c. There is sufficient evidence to support the
mildest because it does not require non-members of the SEBA SEBA’s decision to expel the employee from
to moin the latter but simply stipulates that those who are its membership.
members at the time of the execution of the CBA and those who
may, after its execution, on their own, voluntarily join it, should In the case of Cariño vs. National Labor Relations
maintain their membership in good standing therein for the Commission, the Court pronounced that while the company,
whole duration of the CBA as a condition for their continued under a maintenance of membership provision of the collective
employment until they are promoted or transferred out of the bargaining agreement, is bound to dismiss any employee
bargaining unit or the agreement is terminated. Simply put, expelled by the union for disloyalty upon its written request,
employees who are not members of the SEBA at the time of the this undertaking should not be done hastily and summarily. The
execution of the CBA are not, in any manner, required to company acts in bad faith in dismissing a worker without giving
become its members. Employees hired after the execution of him the benefit of a hearing.
the CBA are likewise not duty-bound to join it. They may or
may not join it. "The power to dismiss is a normal prerogative of
the employer. However, this is not without limitation. The
c. Union Shop Agreement employer is bound to exercise caution in terminating the
services of his employees especially so when it is made
There is union shop arrangement when all new
upon the request of a labor union pursuant to the Collective
regular employees are required to join the SEBA within a Bargaining Agreement, xxx. Dismissals must not be
certain period as a condition for their continued employment arbitrary and capricious. Due process must be observed in
[Picop Resources v. Taneca]. Its role is to compel membership dismissing an employee because it affects not only his
of those who are not yet SEBA members. Under this scheme, position but also his means of livelihood. Employers should
the employer is given the freedom to hire and employ any respect and protect the rights of their employees, which
person who is not a member of the SEBA. Once such person include the right to labor."
becomes an employee, he is required to become a member of
the SEBA and to remain as such member in good standing for MSMG-UWP v. Ramos
the whole duration of the effectivity of the CBA as a condition Held: In the case under scrutiny, petitioner union officers
for his continued employment. were expelled by the federation for allegedly commiting acts of
disloyalty and/or inimical to the interest of ULGWP and in violation of
its Constitution and By-laws. Upon demand of the federation, the
d. Modified Union Shop Agreement company terminated the petitioners without conducting a separate and
Employees under this arrangement who are not independent investigation. Respondent company did not inquire into
SEBA members at the time of the signing or execution of the the cause of the expulsion and whether or not the federation had
CBA are not required to join it. However, any and all workers sufficient grounds to effect the same. Relying merely upon the
hired or employed after the signing or the execution of the CBA federation’s allegations, respondent company terminated petitioners
are required to join the SEBA. from employment when a separate inquiry could have revealed if the
federation had acted arbitrarily and capriciously in expelling the union
officers. Respondent company’s allegation that petitioners were
Page 103 of 191
accorded due process is belied by the termination letters received by 2000. Strictly speaking, what is prohibited is the filing of a petition for
the petitioners which state that the dismissal shall certification election outside the 60-day freedom period. This is not the
be immediately effective. situation in this case. If at all, the signing of the authorization to file a
As held in the aforecited case of Cariño, "the right of an certification election was merely preparatory to the filing of the petition
employee to be informed of the charges against him and to reasonable for certification election, or an exercise of respondents' right to self-
opportunity to present his side in a controversy with either the company organization.
or his own union is not wiped away by a union security clause or a
union shop clause in a collective bargaining agreement. An employee 6. Retaliatory Measures
is entitled to be protected not only from a company which disregards
Under paragraph [f] of Article 259, it is an unfair
his rights but also from his own union the leadership of which could
yield to the temptation of swift and arbitrary expulsion from labor practice for an employer to dismiss, discharge or
membership and mere dismissal from his job. otherwise prejudice or discriminate against an employee for
While respondent company may validly dismiss the having given or being about to give testimony under the Labor
employees expelled by the union for disloyalty under the union security Code pertaining to labor relations.
clause of the collective bargaining agreement upon the In Mabesa v. NLRC, the acts of the employer in
recommendation by the union, this dismissal should not be done hastily forcing the employees to sign an instrument indicating that the
and summarily thereby eroding the employees’ right to due process, employer observed labor standards provisions when he might
self-organization and security of tenure. The enforcement of union
not have not, together with terminating or coercing those who
security clauses is authorized by law provided such enforcement is not
characterized by arbitrariness, and always with due process. Even on refuse to cooperate with the employer’s schemes constitute
the assumption that the federation had valid grounds to expell the union ULP. The act clearly preempts the right of the hotel workers to
officers, due process requires that these union officers be accorded a seek better terms and conditions of employment through
separate hearing by respondent company. concerted action.

Picop Resources v. Taneca Ordinary Illegal Dismissal vs. ULP Dismissal

Held: However, in terminating the employment of an
employee by enforcing the union security clause, the employer needs ULP Dismissal (259) Ordinary Illegal Dismissal
to determine and prove that: (1) the union security clause is applicable; (118/294)
(2) the union is requesting for the enforcement of the union security Ground for strike Not a ground for strike
provision in the CBA; and (3) there is sufficient evidence to support the Motivated to prevent an Arises if the dismissal is
decision of the union to expel the employee from the union. These employee from exercising his without just cause
requisites constitute just cause for terminating an employee based on right to self-organization
In labor relations, the action for In labor standards, the action for
the union security provision of the CBA.
ULP dismissal prescribes illegal dismissal prescribes
As to the first requisite, there is no question that the CBA
within 1 year within 4 years
between PRI and respondents included a union security clause,
A ULP dismissal can be An ordinary dismissal cannot be
specifically, a maintenance of membership as stipulated in Sections 6 transformed into an ordinary transformed into a ULP
of Article II, Union Security and Check-Off. Following the same illegal dismissal case dismissal case
provision, PRI, upon written request from the Union, can indeed Only Article 259 ripens into a The dismissal does not ripen
terminate the employment of the employee who failed to maintain its criminal action into a criminal action
good standing as a union member.
Secondly, it is likewise undisputed that NAMAPRI-SPFL, 7. Payment of Negotiation Fees or Attorney’s
in two (2) occasions demanded from PRI, in their letters dated May 16
Fees
and 23, 2000, to terminate the employment of respondents due to their
acts of disloyalty to the Union. Article 259[h] considers as ULP the act of the
However, as to the third requisite, we find that there is no employer in paying negotiation fees or attorney’s fees to the
sufficient evidence to support the decision of PRI to terminate the SEBA or its officers or agents as part of the settlement of any
employment of the respondents. issue in collective bargaining or any other dispute.
PRI alleged that respondents were terminated from Article 228[b] requires that such attorney’s fees,
employment based on the alleged acts of disloyalty they committed negotiations fees, or similar charges should be paid from the
when they signed an authorization for the Federation of Free Workers union funds. These fees cannot be collected from the employees
(FFW) to file a Petition for Certification Election among all rank-and-
individually [Pacific Banking Corporation v. Clave].
file employees of PRI. It contends that the acts of respondents are a
violation of the Union Security Clause, as provided in their Collective
Bargaining Agreement. 8. Violation of the Collective Bargaining
We are unconvinced. Agreement
We are in consonance with the Court of Appeals when it Article 259[i] should be read in relation to Article
held that the mere signing of the authorization in support of the Petition 274. Under the latter article, as amended, violations of the
for Certification Election of FFW on March 19, 20 and 21, or before CBA, except those which are gross in character, are no longer
the "freedom period," is not sufficient ground to terminate the considered as ULPs but merely as grievances that must be
employment of respondents inasmuch as the petition itself was actually
resolved through the grievance machinery provided in the
filed during the freedom period. Nothing in the records would show
that respondents failed to maintain their membership in good standing CBA. Gross violation of CBA means flagrant and/or malicious
in the Union. Respondents did not resign or withdraw their membership refusal to comply with its economic provisions [Flight
from the Union to which they belong. Respondents continued to pay Attendant and Stewards Association of the Philippines v.
their union dues and never joined the FFW. Philippine Airlines].
Significantly, petitioner's act of dismissing respondents In other words, (a) ordinary violations of a CBA
stemmed from the latter's act of signing an authorization letter to file a which involves non-economic provisions thereof; (b) violations
petition for certification election as they signed it outside the freedom of its non-economic provisions, even if gross in nature; or (c)
period. However, we are constrained to believe that an "authorization
violations of its economic provisions which are not gross in
letter to file a petition for certification election" is different from an
actual "Petition for Certification Election." Likewise, as per records, it character, are no longer treated as ULP. Consequently, they
was clear that the actual Petition for Certification Election of FFW was should be resolved as ordinary grievances properly cognizable
filed only on May 18, 2000. Thus, it was within the ambit of the under the grievance machinery and voluntary arbitration clause
freedom period which commenced from March 21, 2000 until May 21, of a CBA.
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 The act of the employer in refusing to implement the
negotiated wage increase stipulated in the CBA is ULP D. ULP OF LABOR ORGANIZATIONS
[Philippine Apparel Workers Union v. NLRC].
Refusal for a considerable number of years to give Article 260. [249] Unfair Labor Practices of Labor
salary adjustments according to the improved salary scaled in Organizations. - It shall be unfair labor practice for a labor
the CBAs is unfair labor practice [Benguet Consolidated v. BCI organization, its officers, agents or representatives:
Employees and Workers Union]. (a) To restrain or coerce employees in the exercise of
their right to self-organization. However, a labor organization shall
have the right to prescribe its own rules with respect to the
Runaway Shop acquisition or retention of membership;
A "runaway shop" is defined as an industrial plant (b) To cause or attempt to cause an employer to
moved by its owners from one location to another to escape discriminate against an employee, including discrimination against
union labor regulations or state laws, but the term is also used an employee with respect to whom membership in such
to describe a plant removed to a new location in order to organization has been denied or to terminate an employee on any
discriminate against employees at the old plant because of their ground other than the usual terms and conditions under which
union activities. It is one wherein the employer moves its membership or continuation of membership is made available to
other members;
business to another location or it temporarily closes its business
(c) To violate the duty, or refuse to bargain collectively
for anti-union purposes. A "runaway shop" in this sense, is a with the employer, provided it is the representative of the
relocation motivated by anti-union animus rather than for employees;
business reasons. [Complex Electronics Employees v. (d) To cause or attempt to cause an employer to pay or
Complex]. deliver or agree to pay or deliver any money or other things of
value, in the nature of an exaction, for services which are not
AC Ransom Labor Union v. NLRC performed or not to be performed, including the demand for fee
Held: Aggravating RANSOM's clear evasion of payment of for union negotiations;
its financial obligations is the organization of a "run-away corporation", (e) To ask for or accept negotiation or attorney’s fees
ROSARIO, in 1969 at the time the unfair labor practice case was from employers as part of the settlement of any issue in collective
pending before the CIR by the same persons who were the officers and bargaining or any other dispute; or
stockholders of RANSOM, engaged in the same line of business as (f) To violate a collective bargaining agreement. The
RANSOM, producing the same line of products, occupying the same provisions of the preceding paragraph notwithstanding, only the
compound, using the same machineries, buildings, laboratory, bodega officers, members of governing boards, representatives or agents
and sales and accounts departments used by RANSOM, and which is or members of labor associations or organizations who have
still in existence. Both corporations were closed corporations owned actually participated in, authorized or ratified unfair labor
and managed by members of the same family. Its organization proved practices shall be held criminally liable
to be a convenience instrument to avoid payment of backwages and the
reinstatement of the 22 workers. This is another instance where the 1. Restraint and Coercion
fiction of separate and distinct corporate entities should be disregarded. Under paragraph [a], it is ULP for a labor
“It is very obvious that the second corporation seeks the organization, its officers, agents, or representatives, to restrain
protective shield of a corporate fiction whose veil in the present or coerce employees in the exercise of their right to self-
case could, and should, be pierced as it was deliberately and
organization. Compared to similar provision of paragraph [a]
maliciously designed to evade its financial obligation to its employees.
"x x x x When a notion of legal entity is used to defeat public of Article 259, notably lacking is the use of the word “interfere”
convenience, justify wrong, protect fraud, or defend crime, the law will in the exercise of the employees’ right to self-organize. The
regard the corporation as an association or persons, or, in the case of significance in the omission of this term lies in the grant of
two corporations, will merge them into one." unrestricted license to the labor organization, its officers, agents
"The corporation will be treated merely as an aggregation or representatives to interfere with the exercise by the
of individuals or, where there are two corporations, they will be merged employees of their right to self-organization. Such interference
as one, the one being merely regarded as part of the instrumentality of is not lawful since without it, no labor organization can be
the other."
formed ads the act of recruiting and convincing the employees
to join it is definitely an act of interference. It becomes unlawful
Complex Electronics Employees v. Complex within the context of paragraph [a] only when it amounts to
The mere fact that one or more corporations are owned or restrain or coercion which is expressly prohibited thereunder.
controlled by the same or single stockholder is not a sufficient ground
for disregarding separate corporate personalities. Thus, in Indophil
Textile Mill Workers Union v. Calica, we ruled that:chanrob1es virtual Mendoza v. Officers
1aw library Held: The right of self-organization includes the right to
[I]n the case at bar, petitioner seeks to pierce the veil of organize or affiliate with a labor union or determine which of two or
corporate entity of Acrylic, alleging that the creation of the corporation more unions in an establishment to join, and to engage in concerted
is a devise to evade the application of the CBA between petitioner activities with co-workers for purposes of collective bargaining through
Union and private respondent company. While we do not discount the representatives of their own choosing, or for their mutual aid and
possibility of the similarities of the businesses of private respondent protection, i.e., the protection, promotion, or enhancement of their
and Acrylic, neither are we inclined to apply the doctrine invoked by rights and interests.
petitioner in granting the relief sought. The fact that the businesses of As members of the governing board of MWEU, respondents
private respondent and Acrylic are related, that some of the employees are presumed to know, observe, and apply the union’s constitution and
of the private respondent are the same persons manning and providing by-laws. Thus, their repeated violations thereof and their disregard of
for auxiliary services to the units of Acrylic, and that the physical petitioner’s rights as a union member – their inaction on his two appeals
plants, offices and facilities are situated in the same compound, it is our which resulted in his suspension, disqualification from running as
considered opinion that these facts are not sufficient to justify the MWEU officer, and subsequent expulsion without being accorded the
piercing of the corporate veil of Acrylic. full benefits of due process – connote willfulness and bad faith, a gross
Likewise, in Del Rosario v. National Labor Relations disregard of his rights thus causing untold suffering, oppression and,
Commission, the Court stated that substantial identity of the ultimately, ostracism from MWEU. "Bad faith implies breach of faith
incorporators of two corporations does not necessarily imply that there and willful failure to respond to plain and well understood obligation."
was fraud committed to justify piercing the veil of corporate fiction.

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 2. Discrimination leaders. The Constitution enjoins the State to afford protection
There are three (3) kinds of discrimination that a to labor. Fair dealing is equally demanded of unions as well as
union may commit under this article, thus: of employers in their dealings with employees [Heirs of Cruz
v. CIR].
a. The act of the union to cause or attempt to cause
an employer to discriminate against an 3. Violation of Union to Bargain Collectively
employee, in general, irrespective of whether he The purpose of the law in imposing it as a duty on the
or she is a member or non-member of the union. part of the SEBA to bargain collectively is to ensure that it will
b. The discriminatory act of the union against an negotiate with management in good faith in order for them to
employee “with respect to whom membership in conclude a mutually beneficial agreement on the terms and
such organization has been denied.” conditions of their employment relationship.
c. The discriminatory act of the union against an The requisites before a union may be held liable for
employee whose membership therein has been ULP are as follows:
terminated based “on any ground other than the
usual terms and conditions under which a. The union is a duly certified SEBA; and
membership or continuation of membership is b. It commits any of the following:
made available to other members.” i. it violates the duty to bargain
collectively; or
It is the basic characteristic of the first kind of union ii. it refuses to bargain collectively with
discrimination mentioned above that the union’s act which the employer.
constitutes ULP consists in inducing or instigating the
employer to commit discrimination against an employee who 4. Featherbedding Law
may or may not be its member. The purpose is to encourage or Paragraph [d] is the featherbedding provision.
discourage union membership. An example is the act of the Featherbedding or “make-work” refers to the practice, cause
union in convincing an employer to penalize employees who and induced by a union, of hiring more workers than are needed
engage in anti-union activities. to perform a given work, job or task or to adopt work
The discriminatory ULP act under the second and procedures which is evidently senseless, wasteful, inefficient
third kinds of discrimination mentioned above is perpetrated by and without legitimate justifications since it is meant purely for
the union itself against an employee whose membership the purpose of employing additional workers than necessary.
therewith has been either: (1) denied by the union; or (2) This is resorted to by the union as a response to laying-off
terminated by the union. workers occasioned by their obsolescence because of the
The first involves an employee who has not become introduction of machines, robots or new innovative
a member of the union because his membership therein has technological changes and improvements in the workplace or
been discriminatorily denied by the union; while the second as required by minimum health and safety standards, among
refers to the case of an employee who is already a member of other reasons. Its purpose is to unduly secure the jobs of the
the union but whose membership therein is discriminatorily workers. Because of these lay-offs, the unions are constrained
terminated based on any ground other than the usual terms and to resort to some featherbedding practices. Accordingly, they
conditions under which membership or continuation of usually request that the technological changes be introduced
membership is made available to other members. gradually, or not at all, or that a minimum number of retaining
Excepted from this coverage is the union security workers even though there may be little work left for them to
provision of the CBA. The law allows a union which has been do and perform. It therefore unnecessarily maintains or
designated as SEBA, to bargain collectively for a contract that increases the number of employees used or the amount of time
permits it to cause an employer to discharge employees who consumed to work on a specific job, work, or undertaking. By
fail to join or maintain membership in good standing therein as so increasing the demand for workers, featherbedding
a condition for continued employment. This certainly is an obviously keeps the wages higher.
exception to the general rule that unions may not cause or
attempt to cause an employer to discriminate against (or in 5. Kickbacks
favor of) employees on union-related grounds. However, if the Paragraph [e] is the counterpart provision of Article
employee discharged on the basis of the recommendation of a 259(h) regarding the payment, on the part of the employer, of
union is a religious objector, hence exempted from the coverage negotiation fees or attorney’s fees to the union or its officers or
of any form of union security clause, the same may be agents as part of the settlement of any issue in collective
considered ULP of the labor organization so recommending bargaining or any other dispute.
[Lakas ng Manggagawang Makabayan v. Abiera]. The reason for this policy of the law is to prevent
The broad rule is that the union has the right to undue influence by the employer on the independence of the
determine its membership and to prescribe the conditions for union in its decision-making over any issues it may have with
the acquisition and retention thereof. Consequently, admission the former. Moreover, it is possible that the matter of fixing the
to membership may not be compelled. This rule, however, is amount of negotiation fees or attorney’s fees alone would
qualified in the case of labor unions holding a monopoly in the present a problem much complicated than the more substantive
supply of labor, either in a given locality, or as regards a issues involving the terms and conditions of employment and
particular employer by reason of a closed-shop or similar the rights, benefits or welfare of the workers.
agreements. In such case, qualified applicants may not be
arbitrarily excluded from membership and their admission may 6. Gross Violation of Economic Provisions of
not be barred by unreasonable rules [Salunga v. CIR]. the CBA
Just as the Court has stricken down unjust Paragraph [f] is the counterpart provision of Article
exploitation of laborers by oppressive employers, so will it 259(i) regarding the employer’s act of violating a CBA. But it
strike down their unfair treatment by their own unworthy must be noted that under Article 274 of the Labor Code, simple

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violating of the CBA is generally considered no longer a ULP and lockouts in hospitals, clinics and similar medical institutions
but merely a grievable issue. It becomes ULP only if the shall, to every extent possible, be avoided, and all serious efforts,
violation is gross in character which means that there is flagrant not only by labor and management but government as well, be
exhausted to substantially minimize, if not prevent, their adverse
and/or malicious refusal to comply with the economic
effects on such life and health, through the exercise, however
stipulations in the CBA. This principle applies not only to the legitimate, by labor of its right to strike and by management to
employer but with equal force to the labor organization as well. lockout. In labor disputes adversely affecting the continued
operation of such hospitals, clinics or medical institutions, it shall
VI be the duty of the striking union or locking-out employer to provide
PEACEFUL AND CONCERTED ACTIVITIES and maintain an effective skeletal workforce of medical and other
health personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure the
Article 278. [263] Strikes, Picketing, and Lockouts. (a) It proper and adequate protection of the life and health of its patients,
is the policy of the State to encourage free trade unionism and free most especially emergency cases, for the duration of the strike or
collective bargaining. (b) Workers shall have the right to engage in lockout. In such cases, therefore, the Secretary of Labor and
concerted activities for purposes of collective bargaining or for Employment may immediately assume, within twenty four (24)
their mutual benefit and protection. The right of legitimate labor hours from knowledge of the occurrence of such a strike or lockout,
organizations to strike and picket and of employers to lockout, jurisdiction over the same or certify it to the Commission for
consistent with the national interest, shall continue to be recognized compulsory arbitration. For this purpose, the contending parties
and respected. However, no labor union may strike and no are strictly enjoined to comply with such orders, prohibitions
employer may declare a lockout on grounds involving inter-union and/or injunctions as are issued by the Secretary of Labor and
and intra-union disputes. (c) In cases of bargaining deadlocks, the Employment or the Commission, under pain of immediate
duly certified or recognized bargaining agent may file a notice of disciplinary action, including dismissal or loss of employment
strike or the employer may file a notice of lockout with the Ministry status or payment by the locking-out employer of backwages,
at least 30 days before the intended date thereof. In cases of unfair damages and other affirmative relief, even criminal prosecution
labor practice, the period of notice shall be 15 days and in the against either or both of them.
absence of a duly certified or recognized bargaining agent, the The foregoing notwithstanding, the President of the
notice of strike may be filed by any legitimate labor organization Philippines shall not be precluded from determining the industries
in behalf of its members. However, in case of dismissal from that, in his opinion, are indispensable to the national interest, and
employment of union officers duly elected in accordance with the from intervening at any time and assuming jurisdiction over any
union constitution and by-laws, which may constitute union such labor dispute in order to settle or terminate the same.
busting where the existence of the union is threatened, the 15-day (h) Before or at any stage of the compulsory arbitration
cooling-off period shall not apply and the union may take action process, the parties may opt to submit their dispute to voluntary
immediately. arbitration.
(d) The notice must be in accordance with such (i) The Secretary of Labor and Employment, the
implementing rules and regulations as the Minister of Labor and Commission or the voluntary arbitrator or panel of voluntary
Employment may promulgate. arbitrators shall decide or resolve the dispute within thirty (30)
(e) During the cooling-off period, it shall be the duty of calendar days from the date of the assumption of jurisdiction or the
the Ministry to exert all efforts at mediation and conciliation to certification or submission of the dispute, as the case may be. The
effect a voluntary settlement. Should the dispute remain unsettled decision of the President, the Secretary of Labor and Employment,
until the lapse of the requisite number of days from the mandatory the Commission or the voluntary arbitrator shall be final and
filing of the notice, the labor union may strike or the employer may executory ten (10) calendar days after receipt thereof by the
declare a lockout. parties.
(f) A decision to declare a strike must be approved by a
majority of the total union membership in the bargaining unit
concerned, obtained by secret ballot in meetings or referenda One of the most fundamental elements of a strike or
called for that purpose. A decision to declare a lockout must be picketing is its being a “concerted activity” of the employees.
approved by a majority of the board of directors of the corporation If not concerted, an activity cannot be characterized as a strike
or association or of the partners in a partnership, obtained by or picket. First and foremost, among the most significant
secret ballot in a meeting called for that purpose. The decision shall guarantees in the Constitution is the assurance that is given by
be valid for the duration of the dispute based on substantially the the State to workers that, under Section 18, Article II, “the State
same grounds considered when the strike or lockout vote was
shall affirm labor as a primary social economic force and
taken. The Ministry may, at its own initiative or upon the request
of any affected party, supervise the conduct of the secret balloting.
protect the rights of works and promote their welfare.” The twin
In every case, the union or the employer shall furnish the Ministry rights to strike and to picket certainly fall under the ambit of
the results of the voting at least seven days before the intended protection of this provision.
strike or lockout, subject to the cooling-off period herein provided. The second applies solely to picketing which, under
(g) When, in his opinion, there exists a labor dispute Section 4, Article III of the Constitution, is considered part of
causing or likely to cause a strike or lockout in an industry the twin freedoms of speech and of expression.
indispensable to the national interest, the Secretary of Labor and The third is the State’s guarantee under Section 8,
Employment may assume jurisdiction over the dispute and decide
Article III of the Constitution to employees in both the public
it or certify the same to the Commission for compulsory
and private sectors that their right to form unions shall not be
arbitration. Such assumption or certification shall have the effect
of automatically enjoining the intended or impending strike or abridged. Towards this end, Section 3, Article XIII guarantees
lockout as specified in the assumption or certification order. If one the rights of all workers to self-organization, then to engage in
has already taken place at the time of assumption or certification, collective bargaining and negotiations and should there be
all striking or locked out employees shall immediately return to conflict, to conduct peaceful concerted activities, including the
work and the employer shall immediately resume operations and right to strike in accordance with law.
readmit all workers under the same terms and conditions
prevailing before the strike or lockout. The Secretary of Labor and
A. PICKETING
Employment or the Commission may seek the assistance of law
Picketing is a concerted activity of workers
enforcement agencies to ensure compliance with this provision as
well as with such orders as he may issue to enforce the same. consisting in peacefully marching to and fro before an
In line with the national concern for and the highest establishment involved in a labor dispute generally
respect accorded to the right of patients to life and health, strikes accompanied by the carrying and display of signs, placards and
Page 107 of 191
banners intended to inform the public about the dispute [Ilaw organization, or country as an expression of protest, usually for
at Buklod ng Manggagawa v. NLRC]. moral, social, political or environmental reasons.
Unlike the Right to Strike which is guaranteed under As applied to labor unions, a "boycott" has been
the Constitutional provision on the right of workers to conduct defined as an attempt, by arousing a fear of loss, to coerce
peaceful concerted activities under Section 3, Article XIII, the others, against their will to withhold from one denominated
Right to Picket is guaranteed under the Freedom of Speech "unfriendly to labor" their beneficial business intercourse.
Clause under the Bill of Rights.
Picketing, if peacefully carried out, cannot be 1. Primary Boycott
prohibited even in the absence of employer-employee A primary boycott is an organized effort of a labor
relationship between the picketers and the employer being union and its members to discourage consumers from buying
picketed [Philippine Association of Free Labor Unions v. CFI]. the products of a particular employer. It is applied directly and
alone to the offending person by withdrawing from him all
1. Limitation on the Right to Picket business relations on the part of the organization that initiated
As a general rule, injunction cannot be issued against the boycott. This is legal.
the conduct of picketing by the workers., under our
constitutional set up, picketing is considered part of the 2. Secondary Boycott
freedom of speech duly guaranteed by the Constitution. A Secondary Boycott is a boycott of a secondary
However, excepted from this legal proscription are employer with which a union does not have a dispute that is
the following situations: intended to induce the secondary employer to cease doing
business with the primary employer with which the union does
a. Where picketing is carried out through the use have a dispute. A secondary boycott is an attempt to influence
of illegal means; the actions of one business by exerting pressure on another
b. Where picketing involves the use of violence business. This is illegal.
and other illegal acts; or
c. Where injunction becomes necessary to protect Distinction Between Strike and Picketing
the rights of third parties In distinguishing between a picket and a strike, the
totality of the circumstances obtaining in a case should be taken
It is important to stress that the right to peaceful into account. For instance, the petitioners in Santa Rosa Coca-
picketing should be exercised by the workers with due respect Cola Plant Employees Union v. Coca-Cola bottlers, contend
for the rights of others. Hence, commission by any picketing that what they conducted was a mere picketing and not a strike.
employee of any act of violence, coercion or intimidation is In disagreeing to this contention, the Court emphasized that it
prohibited. Similarly, stationary picket and the use of means is not an issue in this case that there was a labor dispute between
like placing of objects to constitute permanent blockade or to the parties as petitioners had notified the respondent of their
effectively close points of entry or exit in company premises intention to stage a strike, and not merely to picket. Petitioner’s
are likewise not allowed by law [IRR]. The strikers staging the insistence to stage a strike is evident in the fact that an amended
picket cannot also rightfully prevent employees of another notice of strike was filed even as respondent moved to dismiss
company which is not their employer, from getting in and out the first notice. The basic elements of a strike are present in this
of its rented premises since this will violate the right of innocent case: 106 members of petitioner Union, whose respective
bystanders [Liwayway Publications v. Permanent Concrete applications for leave of absence on September 21, 1999 were
Workers Union]. In fact, under the so-called “Innocent disapproved, opted not to report for work on said date, and
Bystander Rule,” such employer is considered an innocent gathered in front of the company premises to hold a mass
bystander who has no employer-employee relationship with the protest action. Petitioners deliberately absented themselves and
picketing strikers and thus may file for an injunctive relief with instead wore ribbons and carried placards with slogans such as:
the regular courts to enjoin the conduct of the picket. The “YES KAMI SA STRIKE,” “PROTESTA KAMI,” “SAHOD
NLRC has no jurisdiction to issue an injunction in favor of the KARAPATAN NG MANGGAGAWA IPAGLABAN,”
innocent bystander because of the absence of such relationship. “CBA-WAG BABOYIN,” “STOP UNION BUSTING.” They
According to Phimco Industries v. Phimco Industries marched to and fro in front of the company’s premises during
Labor Association, while the right of employees to publicize working hours. Thus, petitioners engaged in a concerted
their dispute falls within the protection of freedom of activity which already affected the company’s operations. The
expression and the right to peacably assemble to air grievances, mass concerted activity obviously constitutes a strike. The
these rights are by no means absolute. Protected picketing does Mayor’s description of what activities petitioners were allowed
not extend to blocking ingress to and egress from the company to conduct is inconsequential. To repeat, what is definitive of
premises. That the picket was moving, was peaceful and was whether the action staged by petitioners is a strike and not
not attended by actual violence may not free it from taints of merely a picket is the totality of circumstances surrounding the
illegality if the picket effectively blocked entry to and exit from situation.
the company premises.
Picketing Strike
2. Use of Foul Language Marching to and for before the Temporary stoppage of work by
In the event the picketers employ discourteous and premises of an establishment the concerted action of the
involved in a labor dispute employees as a result of an
impolite language in their picket, such may not result in, or give industrial or labor dispute
rise to, libel or action for damages [Philippine Commercial and Purpose is to publicize a labor Purpose is stoppage of work
Industrial Bank v. Philnabank Employees Association]. dispute
Emanates from freedom of Emanates from the right to self-
B. BOYCOTT Speech organization
Privilege right, thus cannot be Protected right, can be enjoined
A boycott is an act of voluntary and intentional
enjoined
abstention from using, buying, or dealing with a person,

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 Government employees can Government employees can’t Strikers are not entitled to pay during strikes. Even if
picket strike the strike is legal, strikers may not collect their wages during
Can be done by 1 person Can’t be done by only 1 person, the days they did not go to work, for the same reasons that
must be a concerted action
Does not require formalities Requires notice of strike, laborers who voluntarily absent themselves from work are not
cooling off period, strike vote, entitled to pay during the period of such absence. The age-old
waiting period rule governing the relation between labor and capital or
No need ER-EE relationship Needs ER-EE relationship. management and employee is that of a "fair day's wage for a
fair day labor." If there is no work performed by the employee
C. SLOWDOWN there can be no wage or pay, unless of course, the laborer was
Slowdown is a "strike on the installment plan;" as able, willing and ready to work but was illegally locked out,
a willful reduction in the rate of work by concerted action of dismissed or suspended. It is hardly fair or just for an employee
workers for the purpose of restricting the output of the or laborer to fight or litigate against his employer on the
employer, in relation to a labor dispute; as an activity by which employer's time [JP Helibronn Co. v. National Labor Union].
workers, without a complete stoppage of work, retard In a case where a laborer absents himself from work
production or their performance of duties and functions to because of a strike or to attend a conference or hearing in a case
compel management to grant their demands. The Court also or incident between him and his employer, he might seek
agrees that such a slowdown is generally condemned as reimbursement of his wages from his union which had declared
inherently illicit and unjustifiable, because while the the strike or filed the case in the industrial court. Or, in the
employees "continue to work and remain at their positions and present case, he might have his absence from his work charged
accept the wages paid to them," they at the same time "select against his vacation leave [Ibid].
what part of their allotted tasks they care to perform of their However, if both parties have acted in pari delicto in
own volition or refuse openly or secretly, to the employer's that the employer is guilty of illegal lockout and the union is
damage, to do other work;" in other words, they "work on their culpable for illegal strike, the dismissal of the striking
own terms [Ramirez v. Polyson]. employees is unwarranted and their reinstatement should be
A slowdown is an inherently illegal activity ordered as a matter of courses. They should be restored to their
essentially illegal even in the absence of a no-strike clause in a respective positions prior to the illegal strike and illegal
collective bargaining contract, or statute or rule [IBM v. NLRC]. lockout. Nonetheless, if reinstatement is no longer feasible, the
A slowdown is generally condemned as inherently concerned employees should be given separation pay up to the
illicit and unjustifiable, because while the employees "continue date set for the return of the complaining employees in lieu of
to work and remain at their positions and accept the wages paid reinstatement [AER v. Progresibong Unyon].
to them," they at the same time "select what part of their allotted If the strikers are not guilty of illegal strike, the
tasks they care to perform of their own volition or refuse openly general rule that strikers are not entitled to backwages is not
or secretly, to the employer’s damage, to do other work;" in applicable where the employer is guilty of oppression and
other words, they "work on their own terms [Interphil Union v. union-busting activities and strikers ordered reinstated are
Interphil]. denied such reinstatement and therefore are declared entitled to
backwages from the date of such denial [Philippines Inter-
D. STRIKES Fashion v. NLRC].
Strike means any temporary stoppage of work by the
concerted action of the employees as a result of an industrial or 1. Forms of Strike
labor dispute [Article 219(o)].
The term “strike” is a very broad and comprehensive a. As to Nature
term. It encompasses not only concerted work stoppages but
also slowdowns, mass leaves, overtime boycott, sitdowns, (i) Legal Strike – one called for a
attempts to damage, destroy or sabotage plant equipment and valid purpose and conducted
facilities, and similar activities [Solidbank Corporation v. through means allowed by law.
Garrier]. It is axiomatic, therefore, that the fact that the (ii) Illegal Strike – one staged for a
conventional term “strike” was not used by the striking purpose not recognized by law or,
employees to describe their common course of action is if for a valid purpose, it is
inconsequential since the substance of the situation and not its conducted through means not
appearance, is deemed controlling [Gesite v. Court of Appeals]. sanctioned by law.
Strike is the most preeminent of the economic
weapons of workers which they unsheathe to force b. As to Purpose
management to agree to an equitable sharing of the joint
product of labor and capital. Undeniably, strikes exert some (i) Economic Strike – one declared to
disquieting effects not only on the relationship between labor demand higher wages, overtime
and management but also on the general peace and progress of pay, holiday pay, vacation pay, etc.
society. Our laws thus regulate their exercise within reason by it is declared for the purpose of
balancing the interests of labor and management together with forcing wage or other concessions
the overarching public interest [Lapanday Workers Union v. from the employer which he is not
NLRC]. required by law to grant
Strikes are construed strictly against labor because [Consolidated Labor v. Marsman].
strikes are inimical to the General Welfare Clause of the It is a strike which arose out of a
Constitution. bargaining deadlock in the CBA
negotiations [NUHWHRAIN-APL-
Entitlement to Pay IUF v. Court of Appeals].

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 (ii) Unfair Labor Practice or union on the issues involving it and
Political Strike – one called to said third person.
protest against the employer’s (iii) Sympathy Strike – refers to a
ULPs enumerated in Article 259 of strike where the strikers have no
the Labor Code, including gross demands or grievances or labor
violation of the CBA under Article dispute of their own against their
274 and union-busting under employer but nonetheless stage the
Article 278(c). strike for the purpose of aiding,
directly or indirectly, other strikers
c. As to Nature of the Strikers’ Action in other establishments or
companies, without necessarily
(i) Slowdown Strike – one staged having any direct relation to the
where the workers do not quit their advancement of the strikers’
work but merely slacked or interest. This is patently an illegal
reduced their normal work output strike [Dee C. Chuan & Sons v.
[Fadriquelan v. Monterey Foods]. Kaisahan ng Manggagawa]. An
(ii) Sit-Down Strike- one where the example is the “welga ng bayan”
workers stop working but do not where workers refuse to render
leave their place of work [G&S work to join a general strike which
Transport v. Infante]. does not involve a labor or
industrial dispute between the
d. As to Coverage strikers and the employer struck
against but it is staged in pursuit of
(i) General Strike – one which covers certain ends, such as reduction in
and extends over a whole province the electric power rates, increase in
or country. In this kind of strike, the legislated wages, etc.
the employees of various
companies and industries cease to f. As to Approval of Union
work in sympathy with striking
workers of another company. It is (i) Wildcat Strike – one declared and
also resorted to for the purpose of staged without the majority
putting pressure on the government approval of the certified bargaining
to enact certain labor-related agent. Is it a spontaneous or
measures such as mandated wage unannounced illegal concerted
increases or to cease from action by a section or group of
implementing a law which workers employees without the sanction or
consider inimical to their interest. It authorization of the union or in
is also mounted for purposes of violation of the union’s
paralyzing or crippling the entire constitution and by-laws, or
economic dispensation. without following the proper
(ii) Particular Strike – one which procedure for striking such as
covers a particular establishment or majority approval of the union
employer or one industry involving members through appropriate
one union or federation. union balloting. It is also called an
“outlaw strike” or “quickie strike.”
e. As to the Extent of the Interest of the
Employees 2. Elements of a Strike
The following are the elements of strike:
(i) Primary strike – refers to a strike
conducted by the workers against a. Temporary stoppage of work by the employees;
their employer, involving a labor b. Through their concerted action;
dispute directly affecting them. c. Occasioned by an industrial or labor dispute;
(ii) Secondary Strike – refers to a and
strike staged by the workers of an d. Work stoppage must be directly intended.
employer involving an issue which
does not directly concern or affect A labor dispute, in turn, includes any controversy or
their relationship but rather, by matter concerning terms or conditions of employment or the
some other circumstances, affect association or representation of persons in negotiating, fixing,
the workers, such as when the maintaining, changing, or arranging the terms and conditions of
employer persists to deal with a employment, regardless of whether the disputants stand in the
third person against whom the proximate relation of the employer and the employee
workers have an existing [TMPCWA v. NLRC].
grievance. Workers stage this kind
of strike to secure the economic TMPCWA v. NLRC
assistance of their employer to Held: Petitioner Union contends that the protests or rallies
force the third person to yield to the conducted on February 21 and 23, 2001 are not within the ambit of

Page 110 of 191

strikes as defined in the Labor Code, since they were legitimate staged on such dates as illegal and all employees who participated in
exercises of their right to peaceably assemble and petition the the concerted actions to have consequently lost their employment
government for redress of grievances. Mainly relying on the doctrine status.
laid down in the case of Philippine Blooming Mills Employees If we are going to stamp a color of legality on the two (2)
Organization v. Philippine Blooming Mills Co., Inc.,[34] it argues that [day-] walk out/strike of respondents without filing a notice of
the protest was not directed at Toyota but towards the Government strike, in effect we are giving license to all the unions in the country
(DOLE and BLR). It explains that the protest is not a strike as to paralyze the operations of their companies/employers every time
contemplated in the Labor Code. The Union points out that they wish to hold a demonstration in front of any government
in Philippine Blooming Mills Employees Organization, the mass action agency. While we recognize the right of every person or a group to
staged in Malacañang to petition the Chief Executive against the peaceably assemble and petition the government for redress of
abusive behavior of some police officers was a proper exercise of the grievances, the exercise of such right is governed by existing laws, rules
employees’ right to speak out and to peaceably gather and ask and regulations.
government for redress of their grievances. Although the respondent union admittedly made earnest
The Union’s position fails to convince us. representations with the company to hold a mass protest before the
While the facts in Philippine Blooming Mills Employees BLR, together with their officers and members, the denial of the request
Organization are similar in some respects to that of the present case, by the management should have been heeded and ended their insistence
the Union fails to realize one major difference: there was no labor to hold the planned mass demonstration. Verily, the violation of the
dispute in Philippine Blooming Mills Employees Organization. In the company rule cannot be dismissed as mere absences of two days as
present case, there was an on-going labor dispute arising from Toyota’s being suggested by the union [are but] concerted actions detrimental to
refusal to recognize and negotiate with the Union, which was the Petitioner Toyota’s interest. (Emphasis supplied.)
subject of the notice of strike filed by the Union on January 16, 2001.
Thus, the Union’s reliance on Phililippine Blooming Mills Employees 3. Lawful Purpose
Organization is misplaced, as it cannot be considered a precedent to the
The right to strike is not absolute. It comes into being
case at bar.
A strike means any temporary stoppage of work by the and is safeguarded by law only if the acts intended to render
concerted action of employees as a result of an industrial or labor material aid or protection to a labor union arise from a lawful
dispute. A labor dispute, in turn, includes any controversy or matter ground, reason or motive. But if the motive which had
concerning terms or conditions of employment or the association or impelled, prompted, moved or led members of a labor union or
representation of persons in negotiating, fixing, maintaining, changing, organization to stage a strike, even if they had acted in good
or arranging the terms and conditions of employment, regardless of faith in staging it, be unlawful, illegitimate, unjust,
whether the disputants stand in the proximate relation of the employer unreasonable or trivial, the strike may be declared illegal
and the employee.
[Filcon Manufacturing v. Lakas Manggagawa]. One example
In Bangalisan v. Court of Appeals, it was explained that
“[t]he fact that the conventional term ‘strike’ was not used by the of a strike conducted for unlawful purposes is a strike to compel
striking employees to describe their common course of action is the dismissal of an employee [Insurefco Paper Pulp v. Sugar
inconsequential, since the substance of the situation and not its Refining] or a union-recognition strike, which is calculated to
appearance, will be deemed controlling.” The term “strike” has been compel the employer to recognize a union as the employees’
elucidated to encompass not only concerted work stoppages, but also bargaining representative to work out a CBA despite the
slowdowns, mass leaves, sit-downs, attempts to damage, destroy, or union’s doubtful majority status.
sabotage plant equipment and facilities, and similar activities.
Applying pertinent legal provisions and jurisprudence, we
rule that the protest actions undertaken by the Union officials and Filcon Manufacturing v. Lakas Manggagawa
members on February 21 to 23, 2001 are not valid and proper exercises Held; As borne out by the record, respondent SWAT was
of their right to assemble and ask government for redress of their certified as the sole and (sic) bargaining agent of all the rank-and-file
complaints, but are illegal strikes in breach of the Labor Code. The employees of complainant Filcon Manufacturing Corporation whose
Union’s position is weakened by the lack of permit from the City of Collective Bargaining Agreement expired last 15 January 1990 and was
Manila to hold “rallies.” Shrouded as demonstrations, they were in not renewed due to the filing of Petition for Certification Election by
reality temporary stoppages of work perpetrated through the concerted three (3) unions, namely: 1) Lakas Manggagawa sa Filcon-Lakas
action of the employees who deliberately failed to report for work on Manggagawa Labor Center; 2) Bisig ng Manggagawa; and 3) Kampli-
the convenient excuse that they will hold a rally at the BLR and DOLE Katipunan, which up to present is still pending before the Bureau of
offices in Intramuros, Manila, on February 21 to 23, 2001. The Labor Relations. In its Collective Bargaining Agreement, it provides
purported reason for these protest actions was to safeguard their rights that the provisions contained therein shall be in full force and effect
against any abuse which the med-arbiter may commit against their until a new one has been entered into and one of the provisions therein
cause. However, the Union failed to advance convincing proof that the reads that there shall be no strike nor lock-out. This provision must be
med-arbiter was biased against them. The acts of the med-arbiter in the given due respect by all the parties concerned. Thus, it is evident,
performance of his duties are presumed regular. Sans ample evidence therefore, that the contract bar rule applies, thereby, rendering the strike
to the contrary, the Union was unable to justify the February 2001 mass staged by respondent LMF-LMLC illegal.
actions. What comes to the fore is that the decision not to work for two
days was designed and calculated to cripple the manufacturing arm of 4. Procedural Requisites for a Valid Strike
Toyota. It becomes obvious that the real and ultimate goal of the Union Because of its potential adverse consequences to the
is to coerce Toyota to finally acknowledge the Union as the sole striking workers, the employer and the community, a strike
bargaining agent of the company. This is not a legal and valid exercise
enjoys recognition and respect only when it complies with the
of the right of assembly and to demand redress of grievance.
We sustain the CA’s affirmance of the NLRC’s finding that
conditions laid down by law [Libongcogon v. Phimco
the protest rallies staged on February 21 to 23, 2001 were actually Industries] and pertinent prevailing jurisprudence. Following
illegal strikes. The illegality of the Union’s mass actions was succinctly are the procedural but mandatory requisites for a valid and legal
elaborated by the labor tribunal, thus: strike:
We have stated in our questioned decision that such mass
actions staged before the Bureau of Labor Relations on February 21- a. It must be based on a valid and factual ground;
23, 2001 by the union officers and members fall squarely within the b. A notice of strike must be filed with the NCMB-
definition of a strike (Article 212 (o), Labor Code). These concerted
DOLE;
actions resulted in the temporary stoppage of work causing the latter
substantial losses. Thus, without the requirements for a valid strike
c. A notice must be served to the NCMB-DOLE at
having been complied with, we were constrained to consider the strike least twenty-four (24) hours prior to the taking
of the strike vote by secret balloting, informing
Page 111 of 191
 said office of the decision to conduct a strike where the striking employees have no demands or grievances
vote, and the date, place, and time thereof and of their own, but they strike for the purpose of directly or
asking it to supervise the taking of the strike indirectly aiding others, without direct relation to the
vote; advancement of the interest of the strikers.31 It is indubitable
d. A strike vote must be taken where a majority of that an illegal strike in the form of a sit-down strike occurred in
the members of the union obtained by secret petitioner's premises, as a show of sympathy to the two
ballot in a meeting called for the purpose must employees who were dismissed by petitioner. Apart from the
approve it; allegations in its complaint for illegal strike filed before the
e. A strike vote report must be submitted to the Labor Arbiter, petitioner presented the affidavits and
NCMB-DOLE at least seven (7) days before the testimonies of their other employees which confirm the
intended date of the strike; participation of respondents in the illegal strike. Petitioner has
f. Except in cases of union busting, observance of sufficiently established that respondents remained in the work
the cooling-off period of 15 days from the filing premises in the guise of waiting for orders from management
of the notice of strike, in case of ULP of the to resume operations when, in fact, they were actively
employer, or 30 days, in case of collective participating in the illegal strike.
bargaining deadlock, should be fully observed;
and Doctrine of Privilege of Good Faith Error
g. The 7-day waiting period or strike ban reckoned In a situation where ULP is alleged, it is not essential
after the submission of the strike vote report to that the unfair labor practice act has, in fact, been committed; it
the NCMB-DOLE should be fully observed in suffices that the striking workers are shown to have acted
all cases. honestly on an impression that the company has committed
such unfair labor practice and the surrounding circumstances
a. Valid and Factual Grounds could warrant such a belief in good faith.
The law recognizes only two (2) grounds in support
of a valid strike, viz: b. Notice of Strike
Article 278(c) of the Labor Code provides:
(i) Unfair Labor Practice (ULP or Political
Strike); or Article 278. xxx
(ii) Collective bargaining deadlock (economic (c) In cases of bargaining deadlocks, the duly
strike), certified or recognized bargaining agent may file a notice of
strike or the employer may file a notice of lockout with the
Ministry at least 30 days before the intended date thereof.
Collective bargaining deadlock refers to a situation In cases of unfair labor practice, the period of notice shall
where there is failure in the collective bargaining negotiations be 15 days and in the absence of a duly certified or
between the SEBA and the employer resulting in an impasse or recognized bargaining agent, the notice of strike may be
stalemate [San Miguel Corporation v. NLRC]. This happens filed by any legitimate labor organization in behalf of its
when, despite their efforts at bargaining in good faith, the members. However, in case of dismissal from employment
parties have failed to resolve the issues and it appears that there of union officers duly elected in accordance with the union
are no other definite options or plans in sight to break the constitution and by-laws, which may constitute union
busting where the existence of the union is threatened, the
standoff. Simply stated, there is a deadlock when there is a
15-day cooling-off period shall not apply and the union may
complete blocking or stoppage in the negotiation resulting from take action immediately.
the action of equal and opposing forces [Capitol Medical xxx
Center Alliance of Concerned Employees v. Laguesma].
No other grounds may be invoked in a notice of A notice of strike refers to the notification filed by a
strike. A strike not based on any of the two (2) grounds duly registered union, after service of notice to the other party
discussed above is illegal [San Miguel Corporation v. NLRC]. concerned, with the NCMB-DOLE, informing the latter of its
Therefore, the following are not valid grounds: intention to go on strike because of the alleged commission by
the employer of ULP or because of a deadlock in the collective
(i) Violation of CBAs (GM>VA); bargaining negotiations.
(ii) Inter-union and internal union disputes The notice should state, among others, the names and
(BLR/MedArb); addresses of the employer and the union involved, the nature of
(iii) Issues already brought before grievance the industry to which the employer belongs, the number of
machinery or voluntary arbitration union members and workers in the bargaining unit, and such
(GM>VA) other relevant data as may facilitate the settlement of the
(iv) Issues brought to compulsory arbitration dispute, such as a brief statement or enumeration of all pending
(NLRC/LA); labor disputes involving the same parties.
(v) Issues already assumed by the DOLE
Secretary or certified by him to the NLRC c. Service of 24-Hour Prior Notice to
for compulsory arbitration (DOLE NCMB-DOLE
Sec./NLRC/LA) The third requisite requires that a 24-hour notice be
(vi) Legislated wage orders (GM>VA); and served to the NCMB-DOLE prior to the taking of the strike vote
(vii) Labor standard cases (LA). by secret balloting, informing it of the union’s decision to
conduct a strike vote, as well as the date, place, and time
In G&T Transport v. Infante, it was held that a valid thereof. This requisite was enunciated in Capitol Medical
strike therefore presupposes the existence of a labor dispute. Center, Inc. v. NLRC. The requirement of giving notice of the
The strike undertaken by respondents took the form of a sit- conduct of a strike vote to the NCMB at least 24 hours before
down strike, or more aptly termed as a sympathetic strike, the meeting for the said purpose is designed to (a) inform the
Page 112 of 191
NCMB of the intent of the union to conduct a strike vote; (b) DOLE. Its submission is meant to ensure that a strike vote was
give the NCMB ample time to decide on whether or not there indeed taken and in the event that the report is false, to afford
is a need to supervise the conduct of the strike vote to prevent the members an opportunity to take the appropriate remedy
any acts of violence and/or irregularities attendant thereto; and before it is too late. It is a fact, for instance, that many disastrous
(c) should the NCMB decide on its own initiative or upon the strikes have been staged based merely on the insistence of
request of an interested party including the employer, to minority groups within the union. The submission of the report
supervise the strike vote, to give it ample time to prepare for gives assurance that a strike vote has been taken and that, if the
the deployment of the requisite personnel, including peace report concerning it is false, the majority of the members can
officers if need be. Unless and until the NCMB is notified at take appropriate remedy before it is too late [NFW v. Ovejara].
least 24 hours of the union’s decision to conduct a strike vote, A strike vote should be reported at least seven (7)
and the date, place, and time thereof, the NCMB cannot days before the actual staging of the intended strike/lockout,
determine for itself whether to supervise a strike vote meeting subject to the observance of the cooling-off periods provided
or not and insure its peaceful and regular conduct. The failure under the law. The failure of the union to prove that it obtained
of a union to comply with the requirement of the giving of the required strike vote among its members and that the results
notice to the NCMB at least 24 hours prior to the holding of a thereof were submitted to the NCMB would render the strike
strike vote meeting will render the subsequent strike staged by illegal [Pinero v. NLRC].
the union illegal. In the event the result of the strike vote report is filed
within the cooling-off period, the 7-day waiting period shall be
Preventive Mediation counted from the day following the expiration of the cooling-
The NCMB has the authority to convert a notice of off period. It must be stressed that the requirements of cooling-
strike filed by the union into a preventive mediation case if it off period and 7-day strike ban must both be complied with,
finds that the real issues raised therein are non-strikeable in although the labor union may take a strike vote and report the
character. same within the statutory cooling-off period. If only the filing
Once a notice of strike/lockout is converted into a of the strike notice and the strike-vote report would be deemed
preventive mediation case, it will be dropped from the docket mandatory, but not the waiting periods so specifically and
of notices of strikes/lockouts. Once dropped therefrom, a emphatically prescribed by law, the purposes (hereafter
strike/lockout can no longer be legally staged based on the same discussed) for which the filing of the strike notice and strike-
notice. The conversion has the effect of dismissing the notice. vote report is required would not be achieved, as when a strike
is declared immediately after a strike notice is served, or when
Philippine Airlines v. Secretary of Labor - as in the instant case - the strike-vote report is filed with
Held: The NCMB had declared the notice of strike as MOLE after the strike had actually commenced. Such
“appropriate for preventive mediation.” The effect of that declaration interpretation of the law ought not and cannot be countenanced.
(which PALEA did not ask to be reconsidered or set aside) was to drop It would indeed be self-defeating for the law to imperatively
the case from the docket of notice of strikes, as provided in Rule 41 of require the filing on a strike notice and strike-vote report
the NCMB Rules, as if there was no notice of strike. During the
without at the same time making the prescribed waiting periods
pendency of preventive mediation proceedings no strike could be
legally declared. The Secretary must have thought so too, that is why
mandatory [NSFW v. Ovejera].
he failed to act, for a period of seven (7) days, on PAL'S petition for
him to assume jurisdiction over the labor dispute. The strike which the f. Cooling-Off Period
union mounted, while preventive mediation proceedings were ongoing, The cooling off periods before a strike may be
was aptly described by the petitioner as "an ambush" (p. 21. Rollo). conducted are as follows:
Since the strike was illegal, the company has a right to take
disciplinary action against the union officers who participated in it, and (i) In case of bargaining deadlock, the
against any union members who committed illegal acts during the
cooling-off period is 30 days;
strike.
(ii) In case of unfair labor practice, the
cooling-off period is 15 days.
Withdrawal of Notice
If the union or the employer withdraws the Notice of In requiring the cooling-off period, the avowed intent
Strike or Lockout, the process goes back to square one. But it
of the law is to provide an opportunity for mediation and
would not amount to a waiver of their right to strike based on conciliation by the NCMB-DOLE. It is designed to afford the
that ground. parties the opportunity to amicably resolve the dispute with the
assistance of the Conciliators-Mediators of the NCMB-DOLE
d. Strike Vote [NSFW v. Ovejara].
It is a requirement that no labor organization shall These requirements are mandatory, and the union's
declare a strike without the necessary strike vote first having
failure to comply renders the strike illegal. The 15 to 30-day
been obtained and reported to the NCMB-DOLE. A decision to cooling-off period is designed to afford the parties the
declare a strike must be approved by a majority of the total opportunity to amicably resolve the dispute with the assistance
union membership in the bargaining unit concerned, obtained of the NCMB conciliator/mediator, while the seven-day strike
by secret ballot in meetings or referenda called for that purpose. ban is intended to give the DOLE an opportunity to verify
This process is called “strike vote balloting.” whether the projected strike really carries the imprimatur of the
The duration of the validity of the majority approval
majority of the union members.
of a strike is for the whole duration of the dispute based on
In Phimco Industries v. Phimco Industries Labor Association ,
substantially the same grounds considered when the strike vote the respondents fully satisfied the legal procedural
was taken. requirements; a strike notice was filed on March 9, 1995; a
strike vote was reached on March 16, 1995; notification of the
e. Strike Vote Report strike vote was filed with the DOLE on March 17, 1995; and
In every case of strike vote, the union is required to the actual strike was launched only on April 25, 1995.
furnish a report on the results of the voting to the NCMB-
Page 113 of 191
 both sides, the management and the employees, such violence cannot
Union-Busting be a ground for declaring the strike as illegal.
The exception to the rule on the observance of the
cooling-off period is in cases of union-busting which is 6. Some Principles on Strike
considered an unfair labor practice where the said 15-day
cooling-off period may be disregarded completely. • A strike or lockout is illegal if the issues
To constitute union-busting under Article 278(c), involved are already subject of compulsory or
there must be: voluntary arbitration or conciliation or the steps
in grievance machinery are not exhausted.
(i) A dismissal from employment of union • A strike or lockout is illegal if unlawful means
officers duly elected in accordance with the were employed or prohibited acts or practices
union’s constitution and by-laws; and were committed
(ii) The existence of the union is threatened by • A strike or lockout is illegal if staged in violation
such dismissal. of the “No-Strike, No-Lockout” clause in the
CBA. This clause may be invoked by the
The act of union-busting by an employer is an unfair employer only when the strike is economic in
labor practice which may be invoked as a valid ground for a nature or one which is conducted to force wage
strike [Zamboanga Wood Products v. NLRC]. or other concessions from the employer that are
not mandated to be granted by the law itself. It
g. 7- Day Waiting Period or Strike Ban does not bar strikes grounded on ULP
After the taking of the strike vote, the union, in every [Malayang Samahan v. Ramos].
case, should furnish the NCMB-DOLE, the results of the voting • A strike or lockout is illegal if staged in violation
at least 7 days before the actual staging of the intended strike of a TRO or an injunction order issued for the
or lockout, subject to the cooling-off period provided therein. purpose of enjoining the union and/or its
The cooling-off period and the 7-day waiting period members from committing illegal and
or strike ban after the submission of the strike vote report, are prohibited acts in the course of a strike, such as,
meant to be, and should be deemed, both mandatory [CCBPI among others, the act of obstructing the free
Postmix Workers Union v. NLRC]. It would indeed be self- ingress to or egress from the company premises
defeating for the law to imperatively require the filing of a [Association of Independent Unions v. NRLC].
strike notice and strike vote report without at the same time • A strike or lockout is illegal if conducted for
making the prescribed waiting periods mandatory [Coca Cola unlawful purposes. This principle applies even
Bottlers v. NLRC]. if the strikers had acted in good faith in staging
it [Filcon Manufacturing v. Lakas
Waiting Period vs. Cooling-Off Period Manggagawa]. A strike staged for the purpose
The 7-day waiting period or strike ban is a distinct of unreasonably demanding the dismissal of an
and separate requirement from the 15-day or 30-day-cooling- employee like a factory foreman is illegal
off period prescribed by law. The latter cannot be substituted [Toyota Motor Phils. Corp Woprkers
for the former. This is clear from the provision of Article 278(f) Association v. NLRC].
which states that the 7-day requirement is subject to the • A one-day strike without complying with the 7-
cooling-off period herein provided [Samahang Manggagawa v. day strike ban is illegal.
Sulpicio Lines].
The cooling-off period, on the other hand, is counted 7. Illegal Strikes
from the time of the filing of the notice of strike up to the
intended or actual staging thereof, in case of deadlock, such • Without complying with the procedural but
period is 30 days. The 7-day waiting period strike ban, on the mandatory requisites
other hand, is reckoned from the time the strike vote report is • For unlawful purpose
submitted to the NCMB-DOLE. Consequently, a strike is
• Based on non-strikeable or invalid grounds
illegal for failure to comply with the prescribed mandatory
• In violation of no-strike, no-lockout clause in the
cooling-off period and the 7-day waiting period or strike ban
CBA.
after the submission of the report on the strike/lockout vote
• Without submitting the issues to the Grievance
[Union of Filipro employees v. Nestle Philippines].
Machinery or Voluntary Arbitrator or failing to
exhaust the steps provided therein
5. Violence
• Without first having bargained collectively
If the union intended to use violence as a method of
strike from the very beginning of the strike, the union is liable. • While the conciliation and mediation
If the union intended it to be a peaceful strike, but it proceeding is on-going at the NCMB. The
eventually became violent, the individual employees are liable. disregard of such proceedings is a blatant
violation of the IRR, which explicitly obliges the
parties to bargain collectively in good faith and
Malayang Samahan v. Ramos
Held: On the allegation of violence committed in the course
prohibits them from impeding or disrupting the
of the strike, it must be remembered that the Labor Arbiter and the proceedings [Filipino Pipe v. NLRC].
Commission found that "the parties are agreed that there were violent • Based on issues already brought to the VA or
incidents x x x resulting to injuries to both sides, the union and CA. The rationale behind this prohibition is that
management." The evidence on record show that the violence cannot once jurisdiction over the labor dispute has been
be attributed to the striking employees alone for the company itself properly acquired by competent authority, that
employed hired men to pacify the strikers. With violence committed on jurisdiction should not be interfered with by the

Page 114 of 191

 application of coercive process of a strike or Lockout consists of shutdowns, mass retrenchment
lockout [Telefunken Semiconductors v. Court of and dismissals initiated by the employer [PD 823]. It, however,
Appeals]. Thus, a strike conducted during the may take other forms such as the employer’s act of excluding
pendency of the compulsory arbitration employees who are union members [Complex Electronics
proceedings on a labor dispute certified to the Employees v. NLRC].
NLRC by the DOLE Secretary for compulsory
arbitration is illegal [Philippine Diamond Hotel Shutdown vs. Lockout
v. Manila Diamond Hotel Employees Union]. In a shutdown, the plant ceases to operate. It is a
• During the pendency of a case involving the willful act of the employer himself. While a lockout is a
same grounds cited in the notice of strike compulsory stoppage of operations as a result of a strike and
• In defiance of an assumption or certification or walkout. In a lockout the plant continues to operate. The
return-to-work order employee-union members who are locked out are replaced by
• After the conversion of the notice of strike into non-union substitutes, but the plant continues to function.
a preventive mediation case
• Against the prohibition of law 1. Requisites of a Valid Lockout
• By a minority union. This is so because no labor To be valid, a lockout should comply with the
dispute which will justify the conduct of a strike following requisites:
can exist between the employer and a minority
union. To permit the union’s picketing activities a. It must be based on any or both of the following
would be to flaunt at the will of the majority grounds:
[United Restauror’s Employees v. Torres].
• By an illegitimate union. Under Article 278(c), (i) Unfair Labor Practice of Labor
only a LLO is entitled to file a notice of strike Organization
on behalf of its members. Absent sowing as to (ii) Collective Bargaining Deadlock
the legitimate status of the labor organization,
the strike it conducted would have to be b. A notice of lockout should be filed with the
considered as illegal [Stamford Marketing v. NCMB-DOLE;
Julian]. c. A notice must be served to the NCMB-DOLE at
• By dismissed employees [Toyota Motor v. least twenty-four (24) hours prior to the taking
of the lockout vote by secret balloting,
NLRC].
informing said office of the decision to conduct
• In violation of company code of conduct
a lockout vote, and the date, place, and time
[Toyota Motor v. NLRC].
thereof and asking it to supervise the taking of
• As a protest in front of government offices
the lockout vote;
• As welga ng bayan. Stoppage of work due to
d. A lockout vote must be taken where a majority
welga ng bayan is in the nature of a general
of the members of the Board of Directors of the
strike and an extended sympathy strike which
corporation or association or of the partners in a
are illegal since the striking employees have no
partnership, obtained by secret ballot in a
labor dispute with their employer but who, on a
meeting called for the purpose, must approve it;
day they are scheduled to work, refuse to work
e. A lockout vote report should be submitted to the
and instead join a welga ng bayan [Biflex Labor
NCMB-DOLE at least (7) days before the
Union v. Filiflex Industrial].
intended date of the lockout;
• In violation of the rules on picketing, such as f. Observance of the cooling-off period of 15 days,
commission of prohibited acts like: obstructing, in case of ULP of the labor organization, or 30
impeding or interfering with, by force, violence, days, in case of CBD, reckoned from the date of
coercion, threats or intimidation, any peaceful filing of the notice of lockout; and
picketing; conducting a stationary picket; g. The 7-day waiting period reckoned after the
committing any act of violence, coercion or submission of the lockout vote report to the
intimidation by any picketer; obstructing the NCMB-DOLE should be fully complied with in
free ingress to or egress from the employer’s all cases.
premises from lawful purposes; obstructing
public thoroughfares. 2. Reduced Offer Balloting
In case of a lockout, the Regional Branch of the
8. Improved Offer Balloting NCMB shall conduct a REFERENDUM by secret balloting on
In case of a strike, the Regional Branch of the NCMB the reduced offer of the union or or before the 30th day of the
shall conduct a REFERENDUM by secret balloting on the lockout.
improved offer of the employer on or before the 30 th day of the When at least a majority of the board of directors or
strike. trustees or the partners holding the controlling interest in the
When at least a majority of the union members vote case of partnership, vote to accept the reduced offer, the
to accept the improved offer, the striking workers shall workers shall immediately return to work and the employer
immediately return to work and the employer shall thereupon shall thereupon readmit them upon the signing of the
readmit them upon the signing of the agreement. agreement.

E. LOCKOUTS F. INJUNCTIONS
Lockout means the temporary refusal of an employer As a general rule, strikes or lockouts that are validly
to furnish work to its employees as a result of an industrial or declared enjoy the protection of the law and cannot be enjoined
labor dispute [Article 219(p)].
Page 115 of 191
unless illegal acts are committed or threatened to be committed Thus, an "innocent bystander," who seeks to enjoin a labor
in the course thereof. This policy applies even if the strike strike, must satisfy the court that aside from the grounds specified in
appears to be illegal in nature. The rationale for this policy is Rule 58 of the Rules of Court, it is entirely different from, without any
connection whatsoever to, either party to the dispute and, therefore, its
the protection extended to the right to strike under the
interests are totally foreign to the context thereof. For instance,
Constitution and the law. It is basically treated as a weapon that in PAFLU v. Cloribel, supra, this Court held that Wellington and
the law guarantees to employees for the advancement of their Galang were entirely separate entities, different from, and without any
interest and for their protection [Caltex Refinery Employees connection whatsoever to, the Metropolitan Bank and Trust Company,
Association v. Lucero]. against whom the strike was directed, other than the incidental fact that
However, in some cases, injunctions issued to enjoin they are the bank's landlord and co-lessee housed in the same building,
the conduct of the strike itself and not only the commission of respectively. Similarly, in Liwayway Publications, Inc. v. Permanent
illegal or prohibited acts in the course thereof, were held to be Concrete Workers Union, this Court ruled that Liwayway was an
"innocent bystander" and thus entitled to enjoin the union's strike
valid. In IBM v. NLRC, it was held that it is the legal duty and
because Liwayway's only connection with the employer company was
obligation of the NLRC to enjoin a partial strike staged in the fact that both were situated in the same premises.
violation of the law. Failure to promptly issue an injunction by In the case at bar, petitioner cannot be said not to have such
the NLRC was held therein to be an abuse of discretion. connection to the dispute. As correctly observed by the appellate court:
Coming now to the case before us, we find that the
1. When Equity and Justice Requires "negotiation, contract of sale, and the post transaction" between
In Bulletin Publishing v. Sanchez, an injunction was Philtread, as vendor, and Siam Tyre, as vendee, reveals a legal relation
allowed against the strike which was staged to compel the between them which, in the interest of petitioner, we cannot ignore. To
be sure, the transaction between Philtread and Siam Tyre, was not a
employer to ignore the law. The reason is that when trade
simple sale whereby Philtread ceased to have any proprietary rights
unionism and strikes are used in violation of the law, misuse over its sold assets. On the contrary, Philtread remains as 20% owner
thereof can be subject of judicial intervention. of private respondent and 60% owner of Sucat Land Corporation which
was likewise incorporated in accordance with the terms of the
2. Innocent Bystander Rule Memorandum of Agreement with Siam Tyre, and which now owns the
In situations where the picket affects not only the land were subject plant is located. This, together with the fact that
employer but also the business operations of other private respondent uses the same plant or factory; similar or
establishments owned by third parties, an injunction may be substantially the same working conditions; same machinery, tools, and
equipment; and manufacture the same products as Philtread, lead us to
secured by the latter from the regular courts to enjoin the picket.
safely conclude that private respondent's personality is so closely
Picketing strikers cannot prevent employees of other linked to Philtread as to bar its entitlement to an injunctive writ. Stated
companies from using the same premises being picketed. A differently, given its close links with Philtread as to bar its entitlement
picketing labor union has no right to prevent employees of to an injunctive writ. Stated differently, given its close links with
another company which is not their employer, from getting in Philtread, we find no clear and unmistakable right on the part of private
and out of its rented premises; otherwise, it will be held liable respondent to entitle it to the writ of preliminary injunction it prayed
for damages for its acts against an innocent bystander for below.
[Liwayway Publications v. Permanent Concrete Workers ....
We stress that that in so ruling, we have not touched on the
Union].
issue of . . . whether or not private respondent is a mere dummy or
continuation of Philtread. . . .
MSF Tire & Rubber v. Court of Appeals Although, as petitioner contends, the corporate fiction may
Held: In Philippine Association of Free Labor Unions be disregarded where it is used to defeat public convenience, justify
(PAFLU) v. Cloribel, this Court, through Justice J.B.L. Reyes, stated wrong, protect fraud, defend crime, or where the corporation is used as
the "innocent bystander" rule as follows: a mere alter-ego or business conduit, it is not these standards but those
The right to picket as a means of communicating the facts of the "innocent bystander" rule which govern whether or not petitioner
of a labor dispute is a phase of the freedom of speech guaranteed by the is entitled to an injunctive writ. Since petitioner is not an "innocent
constitution. If peacefully carried out, it can not be curtailed even in the bystander", the trial court's order, dated July 2, 1996, is a patent nullity,
absence of employer-employee relationship. the trial court having no jurisdiction to issue the writ of injunction. No
The right is, however, not an absolute one. While peaceful motion for reconsideration need be filed where the order is null and
picketing is entitled to protection as an exercise of free speech, we void.
believe the courts are not without power to confine or localize the
sphere of communication or the demonstration to the parties to the
3. Industry Indispensable to the National
labor dispute, including those with related interest, and to insulate
establishments or persons with no industrial connection or having Interest
interest totally foreign to the context of the dispute. Thus the right
may be regulated at the instance of third parties or "innocent a.Hospitals, Clinics, or Medical
bystanders" if it appears that the inevitable result of its exercise is Institutions
to create an impression that a labor dispute with which they have The second paragraph of Article 278(g) provides:
no connection or interest exists between them and the picketing
union or constitute an invasion of their rights. In one case decided (g) xxx
by this Court, we upheld a trial court's injunction prohibiting the union In line with the national concern for and the
from blocking the entrance to a feed mill located within the compound highest respect accorded to the right of patients to life and
of a flour mill with which the union had a dispute. Although sustained health, strikes and lockouts in hospitals, clinics and similar
on a different ground, no connection was found between the two mills medical institutions shall, to every extent possible, be
owned by two different corporations other than their being situated in avoided, and all serious efforts, not only by labor and
the same premises. It is to be noted that in the instances cited, peaceful management but government as well, be exhausted to
picketing has not been totally banned but merely regulated. And in one substantially minimize, if not prevent, their adverse effects
American case, a picket by a labor union in front of a motion picture on such life and health, through the exercise, however
theater with which the union had a labor dispute was enjoined by the legitimate, by labor of its right to strike and by management
court from being extended in front of the main entrance of the building to lockout. In labor disputes adversely affecting the
housing the theater wherein other stores operated by third persons were continued operation of such hospitals, clinics or medical
located. (Emphasis added) institutions, it shall be the duty of the striking union or

Page 116 of 191

 locking-out employer to provide and maintain an effective Notwithstanding the power granted to the DOLE
skeletal workforce of medical and other health personnel, Secretary to assume jurisdiction over national interest labor
whose movement and services shall be unhampered and disputes or to certify them to the NLRC for compulsory
unrestricted, as are necessary to insure the proper and
arbitration, the President of the Philippines shall not be
adequate protection of the life and health of its patients,
most especially emergency cases, for the duration of the
precluded from doing any of the following:
strike or lockout. In such cases, therefore, the Secretary of
Labor and Employment may immediately assume, within a. To determine the industries that, in his opinion,
twenty four (24) hours from knowledge of the occurrence of are indispensable to the national interest;
such a strike or lockout, jurisdiction over the same or certify b. To intervene at any time and assume jurisdiction
it to the Commission for compulsory arbitration. For this over any such labor dispute in order to settle or
purpose, the contending parties are strictly enjoined to terminate it [Article 278(g)].
comply with such orders, prohibitions.
xxx
Unlike his alter ego, the DOLE Secretary, the
President, while possessed of the power of assumption, has no
b. Banking Institutions
similar power to “certify the labor dispute to the Commission
Section 22 of Republic Act No. 8791 provides:
for Compulsory arbitration,” this power being granted solely to
Section 22. Strikes and Lockouts. - The banking the DOLE Secretary. His role is confined to assuming
industry is hereby declared as indispensable to the national jurisdiction thereover, thus: “The President of the Philippines
interest and, notwithstanding the provisions of any law to shall not be precluded from determining the industries that, in
the contrary, any strike or lockout involving banks, if his opinion, are indispensable to the national interest, and from
unsettled after seven (7) calendar days shall be reported by intervening at any time and assuming jurisdiction over any such
the Bangko Sentral to the secretary of Labor who may labor dispute in order to settle or terminate the same.
assume jurisdiction over the dispute or decide it or certify The DOLE Secretary or the NLRC, as the case may
the same to the National Labor Relations Commission for
be, may seek assistance of law enforcement agencies to seek
compulsory arbitration. However, the President of the
Philippines may at any time intervene and assume assistance of law enforcement agencies to ensure compliance
jurisdiction over such labor dispute in order to settle or with the assumption or certification orders as well as with such
terminate the same. (6-E) orders which may forthwith be issued to enforce them.

G. ASSUMPTION OF JURISDICTION BY THE DOLE 1. Industries Indispensable to National Interest

SECRETARY The determination of specific industries
Article 278(g) provides that when in the opinion of indispensable to the national interest is left to the discretion of
the DOLE Secretary, the labor dispute causes or will likely to the DOLE Secretary. Section 16 to Rule XXII, Book V of the
cause a strike or lockout in an industry indispensable to the Omnibus Rules provides:
national interest, he is empowered to do either of the 2 things:
Section 16. Industries Indispensable to the
a. He may assume jurisdiction over the labor National Interest. - For the guidance of the workers and
employers in the filing of petition for assumption of
dispute and decide it for himself; or
jurisdiction, the following industries/services are hereby
b. He may certify it to the NLRC for compulsory recognized as deemed indispensable to the national interest:
arbitration, in which case, it will be the NLRC a. Hospital Sector;
which shall hear and decide. b. Electric Power Industry;
c. Water Supply Services, to exclude small water
The foregoing article clearly does not interfere with supply services such as Bottling and Refilling Refilling
the workers' right to strike but merely regulates it, when in the Stations;
exercise of such right, national interests will be affected. The d. Air Traffic Control; and
e. Such other industries as maybe recommended
rights granted by the Constitution are not absolute. They are
by the National Tripartite Industrial Peace Council
still subject to control and limitation to ensure that they are not (NTIPC).
exercised arbitrarily. The interests of both the employers and
employees are intended to be protected and not one of them is The above enumeration is not exclusive as other
given undue preference [Philtread v. Confesor]. companies or firms or industries may be considered
Both parties may request the Secretary of DOLE to indispensable to the national interest based on the appreciated
assume jurisdiction over the labor dispute or after a conference and discretion of the DOLE Secretary, or as may be
is called by the DOLE Secretary on the propriety of the recommended by the TIPC, or because they have already been
issuance, the Secretary may motu proprio or upon a request or judicially adjudged as being indispensable to the national
petition by either of the parties to the labor dispute assume interest.
jurisdiction.
Having the two (2) options above, the DOLE
Philtread v. Confesor
Secretary may do the following variations thereof: Held: The Labor Code vests upon the Secretary of Labor the
discretion to determine what industries are indispensable to national
a. Assume jurisdiction over a labor dispute and at interest. Thus, upon the determination of the Secretary of Labor that
the same time certify it to the NLRC for such industry is indispensable to the national interest, it will assume
compulsory arbitration [NAFLU v. NLRC]. jurisdiction over the labor dispute of said industry. The assumption of
b. Initially assume jurisdiction over a labor dispute jurisdiction is in the nature of police power measure. This is done for
and later, on a different date, certify the same the promotion of the common good considering that a prolonged strike
or lockout can be inimical to the national economy. The Secretary of
labor dispute to the NLRC for compulsory
Labor acts to maintain industrial peace. Thus, his certification for
arbitration [NAFLU v. Sulpicio Lines]. compulsory arbitration is not intended to impede the workers' right to
strike but to obtain a speedy settlement of the dispute. This is well-
Page 117 of 191
articulated in International Pharmaceuticals, Inc. vs. Secretary of management but government as well, be exhausted to
Labor, in this wise: substantially minimize, if not prevent, their adverse effects
Plainly, Article 263 (g) of the Labor Code was meant to on such life and health, through the exercise, however
make both the Secretary (or the various regional directors) and the labor legitimate, by labor of its right to strike and by management
arbiters share jurisdiction, subject to certain conditions. Otherwise, the to lockout. In labor disputes adversely affecting the
Secretary would not be able to effectively and efficiently dispose of the continued operation of such hospitals, clinics or medical
primary dispute. To hold the contrary may even lead to the absurd and institutions, it shall be the duty of the striking union or
undesirable result wherein the Secretary and the labor arbiter concerned locking-out employer to provide and maintain an effective
may have diametrically opposed rulings. As we have said, "(i)t is skeletal workforce of medical and other health personnel,
fundamental that a statute is to be read in a manner that would breathe whose movement and services shall be unhampered and
life into it, rather than defeat it.8 unrestricted, as are necessary to insure the proper and
On the second issue raised by the petitioners, We find that adequate protection of the life and health of its patients,
the Secretary of Labor did not act with grave abuse of discretion in most especially emergency cases, for the duration of the
issuing the certification for compulsory arbitration. It had been strike or lockout. In such cases, therefore, the Secretary of
determined by the Labor Arbiter in NLRC-NCR Case No. 00-05- Labor and Employment may immediately assume, within
04156-94 that the work slowdowns conducted by the petitioner twenty four (24) hours from knowledge of the occurrence of
amounted to illegal strikes. It was shown that every time the respondent such a strike or lockout, jurisdiction over the same or certify
company failed to accede to the petitioner's demands, production it to the Commission for compulsory arbitration. For this
always declined. This resulted to the significant drops in the figures of purpose, the contending parties are strictly enjoined to
tires made, cured, and warehoused. However, when the demand of the comply with such orders, prohibitions and/or injunctions as
petitioner union for the restoration of overtime work was allowed, are issued by the Secretary of Labor and Employment or the
production improved. The work slowdowns, which were in effect, Commission, under pain of immediate disciplinary action,
strikes on installment basis, were apparently a pattern of manipulating including dismissal or loss of employment status or
production depending on whether the petitioner union's demands were payment by the locking-out employer of backwages,
met. These strikes, however, had greatly affected the respondent damages and other affirmative relief, even criminal
company that on November 11, 1994, it had indefinitely ceased prosecution against either or both of them.
operations because of tremendous financial losses.
We do not agree with the petitioners that the respondent 3. Effect on Strike or Lockout
company is not indispensable to national interest considering that the The assumption of jurisdiction or certification to the
tire industry has already been liberalized. Philtread supplies 22% of the
NLRC of a labor dispute has the following effects:
tire products in the country. Moreover, it employs about 700 people. As
observed by the Secretary of Labor, viz.:
The Company is one of the tire manufacturers in the country a. On the intended or impending strike or
employing more or less 700 workers. Any work disruption thereat, as a lockout
result of a labor dispute will certainly prejudice the employment and Upon assumption/certification, the intended or
livelihood of its workers and their dependents. Furthermore, the labor impending strike or lockout is automatically enjoined,
dispute may lead to the possible closure of the Company and loss of notwithstanding the filing of any motion for reconsideration of
employment to hundreds of its workers. This will definitely aggravate the assumption/certification order or the non-resolution of any
the already worsening unemployment situation in the country and
such motion which may have been duly submitted to the Office
discourage foreign and domestic investors from further investing in the
country. There is no doubt, therefore, that the labor dispute in the of the DOLE Secretary [NLRC Rules of Procedure].
Country is imbued with national interest.
At this point in time when all government efforts are geared b. On the actual strike or lockout
towards economic recovery and development by encouraging both If a work stoppage has already been taken place at the
foreign and domestic investments to generate employment, we cannot time of the assumption/certification, all striking or locked-out
afford to derail the same as a result of a labor dispute considering that employees shall immediately return to work and the employer
there are alternative dispute resolution machineries available to address shall immediately resume operations and readmit all workers
labor problems of this nature.9
under the same terms and conditions prevailing before the
The intervention of the Secretary of Labor was therefore
necessary to settle the labor dispute which had lingered and which had strike or lockout [NLRC Rules of Procedure].
affected both respondent company and petitioner union. Had it not been
so, the deadlock will remain and the situation will remain uncertain. c. On cases already filed or may be filed
Thus, it cannot be deemed that the Secretary of Labor had acted with All cases between the same parties, except where the
grave abuse of discretion in issuing the assailed order as she had a well- assumption/certification order specifies otherwise, including
founded basis in issuing the assailed order. It is significant at this point the issues submitted for arbitration which already filed or may
to point out that grave abuse of discretion implies capricious and be filed and are relevant to or are proper incidents of the
whimsical exercise of judgment. Thus, an act may be considered as
certified case, are considered subsumed or absorbed by the
committed in grave abuse of discretion when the same was performed
in a capricious or whimsical exercise of judgment which is equivalent assumed/certified case [NLRC Rules of Procedure].
to lack of jurisdiction. The abuse of discretion must be so patent and
gross as to amount to an evasion of positive duty or to a virtual refusal d. On other pending cases
to perform a duty enjoined by law, or to act at all in contemplation of The parties to an assumed/certified case, under pain
law, as where the power is exercised in an arbitrary and despotic of contempt, are required to inform their counsels and the
manner by reason of passion or personal hostility. DOLE Secretary/NLRC Division concerned, as the case may
be, of all pending cases that are related or incident to the
2. Strikes in Hospitals, Clinics and Medical assumed/certified case before it [NLRC Rules of Procedure].
Institutions
The second paragraph of Article 278(g) provides: Submission of National Interest Dispute to
Voluntary Arbitration
In line with the national concern for and the Before or at any stage of the compulsory arbitration
highest respect accorded to the right of patients to life and process, the parties may, by mutual agreement, decide to bring
health, strikes and lockouts in hospitals, clinics and similar
the matter for resolution before an accredited Voluntary
medical institutions shall, to every extent possible, be
avoided, and all serious efforts, not only by labor and
Arbitrator or Panel of Voluntary Arbitrators of their own

Page 118 of 191

choice, in which case, the notice is deemed automatically Secretary’s certification of the labor dispute to the NLRC for
withdrawn and dropped from the docket [NLRC Rules of compulsory arbitration, they could not be given back their
Procedure]. academic assignments since the return-to-work order of the
DOLE Secretary was issued in the middle of the first semester
4. Return-To-Work Order of the academic year. The NLRC, to which the labor dispute
It is clear that under Article 278(g), that the moment was certified, was therefore faced with a situation where the
the DOLE Secretary assumes jurisdiction over a labor dispute striking teachers were entitled to a return-to-work order, but the
involving national interest or certifies it to the NLRC for university could not immediately reinstate them since it would
compulsory arbitration, such assumption or certification has the be impracticable and detrimental to the students to change
effect of automatically enjoining the intended or impending teachers at the point. Thus:
strike. Simple stated, assumption of jurisdiction over a labor
dispute, or the certification of the same to the NLRC for It was error for the NLRC to order the alternative
compulsory arbitration, always co-exists with an order for remedies of payroll reinstatement or actual
workers to return to work immediately and for employers to reinstatement. However, the order did not amount to grave
abuse of discretion. Such error is merely an error of
readmit all of them under the same terms and conditions
judgment which is not correctible by a special civil action
prevailing before the strike or lockout [University of San for certiorari. The NLRC was only trying its best to work
Agustin Employees Union v. Court of Appeals]. out a satisfactory ad hoc solution to a festering and serious
problem. In the light of our rulings on the impropriety of
a. Nature of Return-to-Work Order the substantially equivalent academic assignments and the
It is also important to emphasize that the return-to- need to defer the changes of teachers until the end of the
work order not so much confers a right as it imposes a duty; and first semester, the payroll reinstatements will actually
while as a right it may be waived, it must be discharged as a minimize the petitioner's problems in the payment of
full backwages.
duty even against the worker's will. Returning to work in this
xxx
situation is not a matter of option or voluntariness but of Although we pronounce that the dismissed
obligation. The worker must return to his job together with his faculty members must be actually reinstated while the labor
co-workers so the operations of the company can be resumed dispute is being resolved, we have to take into account the
and it can continue serving the public and promoting its fact that at this time, the first semester for schoolyear 1990-
interest. That is the real reason such return can be 1991 is about to end. To change the faculty members
compelled. So imperative is the order in fact that it is not even around the time of final examinations would adversely
considered violative of the right against involuntary servitude. affect and prejudice the students whose welfare and interest
we consider to be of primordial importance and for whom
The worker can of course give up his work, thus severing his
both the University and the faculty union must subordinate
ties with the company, if he does not want to obey the order; their claims and desires. This Court therefore resolves that
but the order must be obeyed if he wants to retain his work even the actual reinstatement of the non-reinstated faculty
if his inclination is to strike [Asian Transmission v. NLRC]. members, pending resolution of the labor controversy
The assumption/certification order may be served at before the NLRC, may take effect at the start of the second
any time of the day or night [Telefunken Semiconductors semester of the schoolyear 1990-1991 but not later. With
Employees’ union v. Secretary of Labor]. this arrangement, the petitioner's reasoning that it will be
violating contracts with the faculty members who took over
the dismissed professors’ teaching loads becomes moot
b. All Striking or Locked out Employees
considering that, as it alleges in its petition, it operates on
The phrase "all striking or locked out employees" a semestral basis.
and "readmit all workers" does not distinguish or qualify and
emphatically is a catch all-embracing enumeration of who University of Immaculate Concepcion v. Secretary of
should be returned to work. Where the law does not distinguish, Labor
courts should not distinguish [PLDT v. Manggagawa ng Held: With respect to the Secretary’s Order allowing payroll
Komunikasyon]. reinstatement instead of actual reinstatement for the individual
respondents herein, an amendment to the previous Orders issued by her
c. Under the Same Terms and Conditions office, the same is usually not allowed. Article 263(g) of the Labor
Prevailing Before the Strike Code aforementioned states that all workers must immediately return
to work and all employers must readmit all of them under the same
As a general rule, the concept of return-to-work
terms and conditions prevailing before the strike or lockout. The
under Article 278(g) contemplates actual reinstatement and not phrase “under the same terms and conditions” makes it clear that the
payroll reinstatement. This is in accordance with the intent and norm is actual reinstatement. This is consistent with the idea that any
spirit of this Article [NUWHRAIN-APL-IUF v. Court of work stoppage or slowdown in that particular industry can be
Appeals]. detrimental to the national interest.
As with most rules, however, the actual reinstatement In ordering payroll reinstatement in lieu of actual
rule in Article 278(g) is subject to exceptions [Ibid]. reinstatement, then Acting Secretary of Labor Jose S. Brillantes said:
Consequently, there are a number of cases where, instead of Anent the Union’s Motion, we find that superseding
circumstances would not warrant the physical reinstatement of the
actual reinstatement, payroll reinstatement was ordered by the
twelve (12) terminated employees. Hence, they are hereby ordered
Court to implement the return-to-work order in national interest placed under payroll reinstatement until the validity of their termination
cases. but such departure from the norm may only be justified is finally resolved.
in case of existence of certain special circumstances that render As an exception to the rule, payroll reinstatement must rest
actual reinstatement impracticable or otherwise not conducive on special circumstances that render actual reinstatement impracticable
to attaining the purposes of the law [Manila Diamond Hotel or otherwise not conducive to attaining the purposes of the law.
Employees’ Union v. Court of Appeals]. This is best The “superseding circumstances” mentioned by the Acting
exemplified in the case of University of Sto. Tomas v. NLRC, Secretary of Labor no doubt refer to the final decision of the panel of
arbitrators as to the confidential nature of the positions of the twelve
where, by reason of the special circumstance at the time the
private respondents, thereby rendering their actual and physical
teachers were ordered to return to work by reason of the DOLE reinstatement impracticable and more likely to exacerbate the
Page 119 of 191
situation. The payroll reinstatement in lieu of actual reinstatement The refusal to acknowledge receipt of the
ordered in these cases, therefore, appears justified as an exception to assumption/certification orders and other processes is an
the rule until the validity of their termination is finally resolved. This apparent attempt to frustrate the ends of justice, hence, invalid.
Court sees no grave abuse of discretion on the part of the Acting
The union cannot be allowed to thwart the efficacy of the said
Secretary of Labor in ordering the same. Furthermore, the issue has not
been raised by any party in this case.
orders issued in the national interest through the simple
expediency of refusing to acknowledge the receipt thereof
[Navale v. Court of Appeals].
d. Issue Legality of Strike, Immaterial
The brazen disregard of the return-to-work order
Period of Defiance, Not Material
would render the strike illegal [Union of Filipro Employees v.
The length of time within which the assumption or
Nestle]. Where the return-to-work order is issued pending the
certification order or return-to-work order was defied by the
determination of the legality of the strike, it is not correct to say
strikers is not significant in determining their liability therefor.
that it may be enforced only if the strike is legal and may be
In University of San Agustin Employees’ Union v. Court of
disregarded if the strike is illegal. Precisely, the Supreme Court
Appeals, the period of defiance was less than 9 hours.
in Asian Transmission Corporation v. NLRC, the purpose of the
There is no practice of giving 2 hours to strikers
return-to-work order is to maintain the status quo while the
within which to return to work, there is no law or jurisprudence
determination is being made. Otherwise, workers who contend
recognizing this practice [University of San Agustin
that the strike is legal can refuse to return to their work and use
Employees’ Union v. Court of Appeals].
a standstill in the company operations while retaining the
positions they refuse to discharge or allow management to fill.
b. As to Employer
Worse, they will also claim payment for work not done on the
In case of non-compliance by the employer with the
ground that they are still legally employed although actually
RWTO issued, he may be held liable to pay backwages,
engaged in activities inimical to their employer’s interest.
damages and other positive or affirmative reliefs, even criminal
prosecution against him.
e. Effect of Compliance of RTWO
The act of the strikers in voluntarily returning to work
H. PROHIBITED ACTIVITIES
does not result in the waiver of their original demands. Such act
of returning to work only means that they desisted from the
Article 279. [264] Prohibited activities. - (a) No labor
strike which desistance is a personal act of the strikers and
organization or employer shall declare a strike or lockout without
cannot be used against the union and interpreted as a waiver by first having bargained collectively in accordance with Title VII of
it of its original demands for which the strike was adopted as a this Book or without first having filed the notice required in the
weapon [Bisaya Land Transportation v. CIR]. preceding Article or without the necessary strike or lockout vote
In the same breadth, a return-to-work order does not first having been obtained and reported to the Ministry.
generally have the effect of rendering as moot and academic the No strike or lockout shall be declared after assumption
issue of the illegality of the strike [Insurefco Paper v. Insular of jurisdiction by the President or the Minister or after certification
Sugar]. However, according to Trans-Asia Shipping Lines v. or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same
Court of Appeals, an employer may be considered to have
grounds for the strike or lockout.
waived its right to proceed against the striking employees for Any worker whose employment has been terminated as
alleged commission of illegal acts during the strike when, a consequence of any unlawful lockout shall be entitled to
during a conference before the Chairman of the NLRC, it reinstatement with full backwages. Any union officer who
agreed to reinstate them and comply fully with the RTWO knowingly participates in an illegal strike and any worker or union
issued by the DOLE Secretary. officer who knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his employment status:
f. Entitlement to Pay Provided, That mere participation of a worker in a lawful strike
shall not constitute sufficient ground for termination of his
The return-to-work order should benefit only those
employment, even if a replacement had been hired by the employer
workers who complied therewith and, regardless of the during such lawful strike.
outcome of the compulsory arbitration proceedings, are entitled (b) No person shall obstruct, impede, or interfere with
to be paid for work they have actually performed. Conversely, by force, violence, coercion, threats or intimidation, any peaceful
those workers who refused to obey the said order and instead picketing by employees during any labor controversy or in the
waged the restrained strike are not entitled to be paid for work exercise of the right to self-organization or collective bargaining, or
not done or to reinstatement to the positions they have shall aid or abet such obstruction or interference.
abandoned by their refusal to return thereto as ordered [Asian (c) No employer shall use or employ any strike-breaker,
nor shall any person be employed as a strike-breaker.
Transmission v. NLRC].
(d) No public official or employee, including officers and
personnel of the New Armed Forces of the Philippines or the
5. Effect of Defiance of Return-To-Work Order Integrated National Police, or armed person, shall bring in,
introduce or escort in any manner, any individual who seeks to
a. As to the Employees replace strikers in entering or leaving the premises of a strike area,
Any worker or union officer who defies a return-to- or work in place of the strikers. The police force shall keep out of
work order may be subject to immediate disciplinary action, the picket lines unless actual violence or other criminal acts occur
including dismissal or loss of employment status and even to therein: Provided, That nothing herein shall be interpreted to
prevent any public officer from taking any measure necessary to
criminal prosecution.
maintain peace and order, protect life and property, and/or enforce
From the moment a worker defies a return-to-work the law and legal orders.
order, he is deemed to have abandoned his job [Philippine (e) No person engaged in picketing shall commit any act
Airlines v. Brillantes]. By so defying, the workers have of violence, coercion or intimidation or obstruct the ingress to or
forfeited their right to be readmitted to work [Steel Corporation egress from the employer’s premises for lawful purposes, or
v. SCP Employees Union]. The defiant strikers could then be obstruct public thoroughfares.
validly replaced [Marcopper Mining v. Brillantes].
Page 120 of 191
 1. Test of Legality of Strike Second, the Union's concerted action which disrupted the
In Toyota v. NLRC, the Court noted authority on Hotel's operations clearly violated the CBA's "No Strike, No Lockout"
labor law, Ludwig Teller, lists six (6) categories of an illegal provision, which reads:
ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND
strike, viz:
LOCKOUT
SECTION 1. No Strikes
(i) [when it] is contrary to a specific The Union agrees that there shall be no strikes, walkouts,
prohibition of law, such as strike by stoppage or slow-down of work, boycott, refusal to handle accounts,
employees performing governmental picketing, sit-down strikes, sympathy strikes or any other form of
functions; or interference and/or interruptions with any of the normal operations of
(ii) [when it] violates a specific requirement of the HOTEL during the life of this Agreement.
law[, such as Article 263 of the Labor Code The facts are clear that the strike arose out of a bargaining
deadlock in the CBA negotiations with the Hotel. The concerted action
on the requisites of a valid strike]; or
is an economic strike upon which the afore-quoted "no strike/work
(iii) [when it] is declared for an unlawful stoppage and lockout" prohibition is squarely applicable and legally
purpose, such as inducing the employer to binding.19
commit an unfair labor practice against Third, the Union officers and members' concerted action to
non-union employees; or shave their heads and crop their hair not only violated the Hotel's
(iv) [when it] employs unlawful means in the Grooming Standards but also violated the Union's duty and
pursuit of its objective, such as a responsibility to bargain in good faith. By shaving their heads and
widespread terrorism of non-strikers [for cropping their hair, the Union officers and members violated then
Section 6, Rule XIII of the Implementing Rules of Book V of the Labor
example, prohibited acts under Art. 279(e)
Code.20 This rule prohibits the commission of any act which will
of the Labor Code]; or disrupt or impede the early settlement of the labor disputes that are
(v) [when it] is declared in violation of an under conciliation. Since the bargaining deadlock is being conciliated
existing injunction[, such as injunction, by the NCMB, the Union's action to have their officers and members'
prohibition, or order issued by the DOLE heads shaved was manifestly calculated to antagonize and embarrass
Secretary and the NLRC under Art. 263 of the Hotel management and in doing so effectively disrupted the
the Labor Code]; or operations of the Hotel and violated their duty to bargain collectively
(vi) [when it] is contrary to an existing in good faith.
Fourth, the Union failed to observe the mandatory 30-day
agreement, such as a no-strike clause or
cooling-off period and the seven-day strike ban before it conducted
conclusive arbitration clause. the strike on January 18, 2002. The NLRC correctly held that the Union
failed to observe the mandatory periods before conducting or holding a
NUWHRAIN-APL-IUF Dusit v. Court of strike. Records reveal that the Union filed its Notice of Strike on the
Appeals ground of bargaining deadlock on December 20, 2001. The 30-day
Held: With the foregoing parameters as guide and the cooling-off period should have been until January 19, 2002. On top of
following grounds as basis, we hold that the Union is liable for that, the strike vote was held on January 14, 2002 and was submitted to
conducting an illegal strike for the following reasons: the NCMB only on January 18, 2002; therefore, the 7-day strike ban
First, the Union's violation of the Hotel's Grooming should have prevented them from holding a strike until January 25,
Standards was clearly a deliberate and concerted action to undermine 2002. The concerted action committed by the Union on January 18,
the authority of and to embarrass the Hotel and was, therefore, not a 2002 which resulted in the disruption of the Hotel's operations clearly
protected action. The appearances of the Hotel employees directly violated the above-stated mandatory periods.
reflect the character and well-being of the Hotel, being a five-star hotel Last, the Union committed illegal acts in the conduct of its
that provides service to top-notch clients. Being bald or having cropped strike. The NLRC ruled that the strike was illegal since, as shown by
hair per se does not evoke negative or unpleasant feelings. The reality the pictures21 presented by the Hotel, the Union officers and members
that a substantial number of employees assigned to the food and formed human barricades and obstructed the driveway of the Hotel.
beverage outlets of the Hotel with full heads of hair suddenly decided There is no merit in the Union's argument that it was not its members
to come to work bald-headed or with cropped hair, however, suggests but the Hotel's security guards and the police officers who blocked the
that something is amiss and insinuates a sense that something out of the driveway, as it can be seen that the guards and/or police officers were
ordinary is afoot. Obviously, the Hotel does not need to advertise its just trying to secure the entrance to the Hotel. The pictures clearly
labor problems with its clients. It can be gleaned from the records demonstrate the tense and highly explosive situation brought about by
before us that the Union officers and members deliberately and in the strikers' presence in the Hotel's driveway.
apparent concert shaved their heads or cropped their hair. This was
shown by the fact that after coming to work on January 18, 2002, some 2. Employment of Strike-Breaker
Union members even had their heads shaved or their hair cropped at "Strike-breaker" means any person who obstructs,
the Union office in the Hotel's basement. Clearly, the decision to violate
impedes, or interferes with by force, violence, coercion, threats,
the company rule on grooming was designed and calculated to place
the Hotel management on its heels and to force it to agree to the Union's or intimidation any peaceful picketing affecting wages, hours
proposals. or conditions of work or in the exercise of the right of self-
In view of the Union's collaborative effort to violate the organization or collective bargaining [Article 219(r)].
Hotel's Grooming Standards, it succeeded in forcing the Hotel to
choose between allowing its inappropriately hair styled employees to 3. Role of PNP/AFP Personnel
continue working, to the detriment of its reputation, or to refuse them
work, even if it had to cease operations in affected departments or
REVISED PHILIPPINE NATIONAL POLICE
service units, which in either way would disrupt the operations of the OPERATIONAL PROCEDURES
Hotel. This Court is of the opinion, therefore, that the act of the Union RULE 24. RULES ON LABOR DISPUTES
was not merely an expression of their grievance or displeasure but,
24.1 General Policy and Guidelines
indeed, a calibrated and calculated act designed to inflict serious a. The involvement of PNP personnel during strikes,
damage to the Hotel's finances or its reputation. Thus, we hold that the
lockouts and labor disputes in general shall be limited to the
Union's concerted violation of the Hotel's Grooming Standards which
maintenance of peace and order, enforcement of laws, and
resulted in the temporary cessation and disruption of the Hotel's implementation of legal orders of the duly constituted authorities.
operations is an unprotected act and should be considered as an illegal b. The PNP shall only render assistance to labor disputes
strike. upon written request addressed to the Regional Director/ District

Page 121 of 191

Director concerned. In case of actual violence, the police can xxx
respond without the written request. (5) Cases arising from any violation of Article
c. Insofar as practicable, no PNP personnel shall be 279 of this Code, including questions involving the legality
allowed to render police assistance in connection with a strike or of strikes and lockouts; and
lockout if there is question or complaint as regards his relationship xxx
by affinity or consanguinity to any official/leader of the parties in
the controversy or if he has financial or pecuniary interest therein. In general, the Labor Arbiter in the appropriate
d. PNP personnel detailed as peace-keeping force in Arbitration Branch of the NLRC has the power to determine
strike or lockout areas shall be in prescribed uniform at all times.
questions involving the legality or illegality of a strike or
e. They shall exercise maximum tolerance and when
called for by the situation or when all other peaceful and non- lockout upon the filing of a proper complaint and after due
violent means have been exhausted, police officers may employ hearing.
such means as may be necessary and reasonable to prevent or repel Where the matter of legality or illegality of a strike is
an aggression. raised in the dispute which the Secretary assumed jurisdiction
f. The matter of determining whether a strike, picket or or in a compulsory arbitration, the same may be resolved by the
lockout is legal or not should be left to Department of Labor and Secretary or the Commission, respectively [IPI v. Secretary of
Employment (DOLE) and its appropriate agencies. PNP personnel Labor and Associated Labor Unions].
should not interfere in a strike, picket or lockout, except as herein
Other remedies against prohibited acts are:
provided.
g. No personal escort shall be provided to any of the
parties to the controversy unless upon written request from DOLE. a. Filing a case for ULP or Prohibited before the
Whenever escorts are to be provided, the other party shall be Labor Arbiter; or
informed accordingly. All escorts shall be in prescribed uniform at b. Filing a civil case for damages under the Civil
all times. Code or a criminal case under the Labor Code
h. During the pendency of a strike/lockout, the police before the regular courts; or
personnel concerned are prohibited from socializing with any of c. File an injunction under the Labor Code before
the parties involved in the controversy.
the NLRC.
i. Liaison shall be established and maintained with the
representatives of DOLE, management and the union in the
strike/lockout area for the purpose of maintaining peace and order, 6. Liability of Union Officers and Ordinary
as well as to maintain a continuing peaceful dialogue between the Workers/Members
parties to the strike/ lockout.
j. The peace-keeping detail shall not be stationed in the a. Illegal Strike
picket line (or confrontation line) but should be stationed in such
manner that their presence may deter the commission of criminal (i) Union Officers
acts or any untoward incident from either side. The members of
The mere finding or declaration of illegality of the
the peacekeeping detail shall stay outside a 50-meter radius from
the picket line. In cases wherein the 50-meter radius includes a strike will result in the termination of all union officers who
public thoroughfare, they may station themselves in such public knowingly participated in the illegal strike [Lapanday Workers
thoroughfare for the purpose of ensuring the free flow of traffic. Union v. NLRC]. Unlike ordinary members, it is not required,
xxx for purposes of termination, that the officers should be proven
to have committed illegal acts during the strike in order to be
4. Hiring of Scabs held liable therefor [Phimco Industris v. Phimco Industries
A scab is a person who works despite an ongoing Labor Union]. Otherwise stated, the services of a participating
strike. Scabs are usually individuals who were not employed by union officer may be terminated not only when he actually
the company prior to the trade union dispute, but rather hired commits an illegal act during a strike, but also if he knowingly
after or during the strike to keep the organization running. participates in the conduct and staging of an illegal strike. This
The hiring of scabs is not illegal per se. As a general is the most logical consequence for knowingly participating in
rule, the hiring of replacements for the strikers during a strike an illegal strike [Abaria v. NLRC].
is not an unfair labor practice act of an employer. He is entitled For purposes of identifying the union officers, the
to do it in his effort to carry on the business. Such hiring may certifications as to the names of the union officers issued by the
even be done on a permanent basis in the case of an economic Chief of the Labor Organization Division of the Bureau of
strike. And in the event that the strikers decide to resume their Labor Relations (BLR), being public records, enjoy the
work, the employer is not duty-bound to dismiss said presumption of regularity and deserve weight and probative
permanent replacements [Consolidated Labor v. Marsman]. value. Thus, in the absence of a clear and convincing evidence
But in an ULP strike, such replacements may not be that said certifications are flawed, they should be taken on their
permanently employed. The employer is duty-bound to face value [Coca-Cola Bottlers v. NLRC].
discharge them when the strikers are reinstated to their former Note that the verb "participates" is preceded by the
positions [Insular Life Employees v. Insular Life]. adverb "knowingly." This reflects the intent of the legislature
to require "knowledge" as a condition sine qua non before a
5. Jurisdiction Over Prohibited Acts union officer can be dismissed from employment for
Article 224(a)(5) of the Labor Code provides: participating in an illegal strike. The provision is worded in
such a way as to make it very difficult for employers to
Article 224. [217] Jurisdiction of the Labor circumvent the law by arbitrarily dismissing employees in the
Arbiters and the Commission. (a) Except as otherwise guise of exercising management prerogative. This is but one
provided under this Code, the Labor Arbiters shall have aspect of the State’s constitutional and statutory mandate to
original and exclusive jurisdiction to hear and decide, within protect the rights of employees to self-organization [Club
thirty (30) calendar days after the submission of the case by
Filipino v. Bautista].
the parties for decision without extension, even in the
absence of stenographic notes, the following cases
involving all workers, whether agricultural or non- (ii) Ordinary Union Members
agricultural:
Page 122 of 191
 The fate of ordinary union members is different. by the workers’ continued employment; (f) facts that make
Mere participation in an illegal strike is not a sufficient ground execution unjust or inequitable have supervened; or (g) strained
to terminate their employment. The mere finding or declaration relations between the employer and employee.
of illegality of a strike will not result in their termination. For a
union member to suffer the consequence of loss of Waiver
employment, it must be shown by substantial evidence that he The grant of separation benefits is not condonation
has knowingly participated in the commission of illegal acts while the determination of illegality of strike was still pending
during the strike [Fadriquelan v. Monterey Foods]. Obviously, because it was paid only to comply with the employer’s legal
the Labor Code protects ordinary union members who obligation [Interphil Lab Employees v. Interphil].
participated in such an illegal strike from losing their jobs However, in Citizens Labor Union v. Standard
provided that they did not commit illegal acts in the course Vacuum Oil, it was held that the act of voluntary reinstatement
thereof [G&S Transport v. Infante]. of workers constitutes a waiver of the illegality of the strike.
Absent any showing that the employees are union The difference between the two cases is that in the latter, the
officers, they cannot be dismissed based sole on the declaration act of the employer is voluntary, whereas in the former the act
of the illegality of the strike [Gold City Integrated v. NLRC]. of the employer was done in compliance of its legal obligation.

b. Illegal Acts c. Payment of Backwages

As far as liability for commission of illegal acts Generally, strikers are not entitled to backwages. The
during the strike is concerned, the issue of legality or illegality following are the exceptions:
of the strike is irrelevant. As long as the union officer or
member commits an illegal act in the course of the strike, be it a. If ordered by the labor court in case of a legal
legal or illegal, his employment can be validly terminated strike only (not if illegal strike);
[Toyota Motor Phils. Corp. Workers Association v. NLRC]. b. If striker is not guilty of illegal strike and is not
Mere substantial evidence is required to hold strikers guilty of in pari delicto with the employer;
commission of illegal acts [Phimco Industries v. Phimco c. If strikers voluntarily abandon the legal strike to
Industries Labor Association]. return to work but are illegally locked out,
Liability for illegal acts should be determined on an suspended or dismissed by the employer;
individual basis. For this purpose, the individual identity of the d. If employee is not reinstated despite RTWO;
union members who participated in the commission of illegal e. If ULP termination (by reason of
acts may be proved thru affidavits and photographs [Ibid]. discrimination).
Simply referring to them as “strikers,” or “complainants in this
case” is not enough to justify their dismissal [G&S Transport PMR Officers’ Association v. CIR
v. Infante]. Held: The basic facts are stated in the opinion of the three
Only members who are identified as having judges who denied the backpay claim:jgc:chanrobles.com.ph
participated in the commission of illegal acts are liable. Those "On February 25, 1954, this court issued an order setting the
who did not participate should be blamed therefor [Phimco hearing of the case on March 1, 1954. At the hearing, Atty. Cipriano
Cid, then counsel for the petitioner, was asked several times by the trial
Industries v. Phimco Industries Labor Association].
Court and by counsel of Compañia Maritima whether he wanted the
However, a different conclusion would be called for strikers to be ordered back to work, and his reply was: ‘We have not
if the existence of force or other prohibited activities is asked that yet. (p. 15-19 hearing on March 1, 1954). And when counsel
pervasive and widespread, consistently and deliberately for PSNCO directly asked him if he wanted the strikers to go back to
resorted to as a matter of policy by the union. In which case, work, his answer in effect was, if ordered by the Court. . . ." (p. 5, Annex
the strike becomes illegal even if the strike is justified as to its F-1 to Petition.)
ends [Shell Oil Workers v. Shell Oil]. It is clear from the above that the petitioner union never
demanded the privilege to have its members reinstated to their positions
immediately, but that they left this matter of their return to the
7. Liability of Employers In Case of Strikes
discretion of the court. The court, on the other hand, did not order the
return of the strikers; it did so only in its decision after the hearing and
a. Liability for Reinstatement (Illegal termination of the case.
Strike) Under the circumstances as above indicated it is apparent
If the employee participated in prohibited acts, the that the strikers never expressed a desire or willingness to return back
employer may not reinstate the dismissed employee. However, to work, leaving that to the court’s discretion. The denial of backpay to
if the employee did not participate in the prohibited acts, the the strikers is clearly justified, in accordance with previous decisions of
employer must reinstate, this Court.

b. Separation Pay Philippine Diamond v. Manila Diamond Hotel

If the employee participated in prohibited acts, the Employees
employer, even if as a financial assistance, the employer is not Held: This Court must thus hearken to its policy that "when
liable for payment of separation pay. employees voluntarily go on strike, even if in protest against unfair
The alternative relief for union members who were labor practices," no backwages during the strike is awarded.
In Cromwell Commercial Employees and Laborers Union
dismissed for having participated in an illegal strike is the
(PTUC) v. Court of Industrial Relations, this Court made a distinction
payment of separation pay in lieu of reinstatement under the between two types of employees involved in a ULP: those who are
following circumstances: (a) when reinstatement can no longer discriminatorily dismissed for union activities, and those who
be effected in view of the passage of a long period of time or voluntarily go on strike even if it is in protest of an ULP.
because of the realities of the situation; (b) reinstatement is Discriminatorily dismissed employees were ordered entitled to
inimical to the employer’s interest; (c) reinstatement is no backpay from the date of the act of discrimination, that is, from the day
longer feasible; (d) reinstatement does not serve the best of their discharge, whereas employees who struck as a voluntary act of
protest against what they considered a ULP of their employer were held
interests of the parties involved; (e) the employer is prejudiced
generally not entitled to backpay.
Page 123 of 191
 Jurisprudential law, however, recognizes several exceptions
to the "no backwages rule," to wit: when the employees were illegally
locked to thus compel them to stage a strike; when the employer is
guilty of the grossest form of ULP; when the employer committed
discrimination in the rehiring of strikers refusing to readmit those
against whom there were pending criminal cases while admitting
nonstrikers who were also criminally charged in court; or when the
workers who staged a voluntary ULP strike offered to return to work
unconditionally but the employer refused to reinstate them. Not any of
these or analogous instances is, however, present in the instant case.
Respondent urges this Court to apply the exceptional rule
enunciated in Philippine Marine Officers’ Guild v. Compañia
Maritima and similar cases where the employees unconditionally
offered to return to work, it arguing that there was such an offer on its
part to return to work but the Hotel screened the returning strikers and
refused to readmit those whom it found to have perpetrated prohibited
acts during the strike.
It must be stressed, however, that for the exception
in Philippine Marine Officers’ Guild to apply, it is required that the
strike must be legal.65
Reinstatement without backwages of striking members of
respondent who did not commit illegal acts would thus suffice under
the circumstances of the case. If reinstatement is no longer possible,
given the lapse of considerable time from the occurrence of the strike,
the award of separation pay of one (1) month salary for each year of
service, in lieu of reinstatement, is in order.

d. Payment of Attorney’s Fees

Strikers who are illegally dismissed are entitled to
Attorney’s Fees.

Page 124 of 191

 CHAPTER FIVE:

POST-EMPLOYMENT

Page 125 of 191

 I musicians; and (4) by supervising and directing in detail, through the
EMPLOYER-EMPLOYEE RELATIONSHIP motion picture director, the performance of the musicians before the
camera, in order to suit the music they are playing to the picture which
is being flashed on the screen.
A. TESTS TO DETERMINE EMPLOYER-
EMPLOYEE RELATIONSHIP Does the mere fact that the employee is not under
supervision while performing his duties render him a
1. Four-Fold Test contractor?
In determining the existence of employer-employee No. The Supreme Court held in Sterling Products v.
relationship, the following elements are generally considered, Sol:
namely: (1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the We cannot accept this argument. Respondent Sol was
power to control the employees' conduct – although the latter is directed to listen to certain broadcasts, directing her, in the
the most important element [Viana v. Al-Lagadan] instructions given her, when to listen and what to listen,
The quantum of proof necessary is substantial petitioners herein naming the stations to be listened to, the
evidence, or such amount of relevant evidence which a hours of broadcasts, and the days when listening was to be
reasonable mind might accept as adequate to justify a done. Respondent Sol had to follow these directions. The mere
conclusion.’ The burden of proof rests upon the party who fact that while performing the duties assigned to her she was
asserts the affirmative of an issue’ [Valencia v. Classic]. not under the supervision of the petitioners does not render her
The difference in the manner of "selection and a contractor, because what she has to do, the hours that she has
engagement" does not prove, however, the alleged absence of to work and the report that she has to submit—all these are
employer-employee relationship. Most business enterprises according to instructions given by the employer. It is not correct
have employees of different classes, necessarily requiring to say, therefore, that she was an independent contractor, for an
different methods of selection and contracts of services of independent contractor is one who does not receive instructions
various types, without detracting from the existence of said as to what to do, how to do, without specific instructions.
relationship [Ysmael v. Court of Industrial Relations]. Finally, the very act of respondent Sol in demanding
An employee-employer relationship actually exists vacation leave, Christmas bonus and additional wages shows
between the respondent cooperative and its owners-members. that she considered herself an employee. A contractor is not
The four elements in the four-fold test have been complied entitled to a vacation leave or to a bonus nor to a minimum
with. The existence of an employer-employee relationship wage. This act of hers in demanding these privileges are
cannot be negated by expressly repudiating it in a contract, inconsistent with the claim that she was an independent
when the terms and surrounding circumstances show contractor.
otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be Actual exercise of control, not necessary
[Republic v. SSC]. It should be borne in mind that the control test calls
The mere fact that the respondent is a labor union merely for the existence of the right to control the manner of
does not mean that it cannot be considered an employer of the doing the work, not the actual exercise of the right [Dy Keh
persons who work for it. Much less should it be exempted from Beng v. International Labor].
the very labor laws which it espouses as labor organization
[Bautista v. ALU].
Dy Keh Beng v. International Labor
Petitioner contends that the private respondents "did not
2. Control Test meet the control test in the light of the ... definition of the terms
It is well settled that "an employer-employee employer and employee, because there was no evidence to show that
relationship exists where the person for whom the services are petitioner had the right to direct the manner and method of respondent's
performed reserves a right to control not only the end to be work."[ Moreover, it is argued that petitioner's evidence showed that
achieved but also the means to be used in reaching such end. "Solano worked on a pakiaw basis" and that he stayed in the
The decisive nature of said control over the "means to be used", establishment only when there was work.
Held: While this Court upholds the control test under which
is illustrated in the case of Gilchrist Timber Co., et al., Local
an employer-employee relationship exists "where the person for whom
No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, the services are performed reserves a right to control not only the end
by reason of said control, the employer-employee relationship to be achieved but also the means to be used in reaching such end," it
was held to exist between the management and the workers, finds no merit with petitioner's arguments as stated above. It should be
notwithstanding the intervention of an alleged independent borne in mind that the control test calls merely for the existence of the
contractor, who had, and exercised, the power to hire and fire right to control the manner of doing the work, not the actual exercise of
said workers [LVN v. Philippine Musicians Guild]. the right. Considering the finding by the Hearing Examiner that the
The test of the existence of employee and employer establishment of Dy Keh Beng is "engaged in the manufacture of
baskets known as kaing,"[ it is natural to expect that those working
relationship is whether there is an understanding between the
under Dy would have to observe, among others, Dy's requirements of
parties that one is to render personal services to or for the size and quality of the kaing. Some control would necessarily be
benefit of the other, and recognition by them of the right of one exercised by Dy as the making of the kaing would be subject
to order and control the other in the performance of the work to Dy's specifications. Parenthetically, since the work on the baskets is
and to direct the manner and method of its performance [Dy done at Dy's establishments, it can be inferred that the
Keh Beng v. International Labor]. proprietor Dy could easily exercise control on the men he employed.
As to the contention that Solano was not an employee
because he worked on piece basis, this Court agrees with the Hearing
LVN v. Philippine Musicians Guild
Examiner that
Held: The right of control of the film company over the
"circumstances must be construed to determine indeed if
musicians is shown (1) by calling the musicians through 'call slips' in
payment by the piece is just a method of compensation and does not
the name of the company; (2) by arranging schedules in its studio for
define the essence of the relation. Units of time ... and units of work
recording sessions; (3) by furnishing transportation and meals to
are in establishments like respondent (sic) just yardsticks whereby to
Page 126 of 191
determine rate of compensation, to be applied whenever agreed Now, the Supreme Court further said that in order to
upon. We cannot construe payment by the piece where work is done in arrive at a conclusion that there exists an employee-employer
such an establishment so as to put the worker completely at liberty to relationship by virtue of the satisfaction of the control test that
turn him out and take in another at pleasure."
it is not necessary to proffer evidence of actual exercise of
At this juncture, it is worthy to note that Justice Perfecto,
concurring with Chief Justice Ricardo Paras who penned the decision
control. All you need is evidence that there is RESERVATION
in "Sunripe Coconut Products Co. v. Court of Industrial Relations" (83 OF THE POWER TO CONTROL. Namely that the employer
Phil. 518, 523), opined that COULD HAVE exercised the control because he deserves that
"judicial notice of the fact that the so-called 'pakyaw' system right to control. The issue in the specks of the baskets that Dy
mentioned in this case as generally practiced in our country, is, in fact, Keh Beng paid for those two so called “Employees” of his
a labor contract between employers and employees, between capitalists whom he claimed he was just buying Kaings from them.
and laborers." Kaings, big baskets, according to Dy Keh Beng’s specification.
In RJL Martinez fishing, the test of power of control
Continuity of Control, not necessary can be met even if the exercise is not continuous. It need not be
In the case of Industrial-Commercial-Agricultural uninterrupted.
Workers Organization vs. CIR, the Supreme Court held 'that
during the temporary layoff the laborers are considered free to 3. Economic Reality/Dependence Test
seek other employment is natural, since the laborers are not In addition to the standard of right-of-control, the
being paid, yet must find means of support' and such temporary existing economic conditions prevailing between the parties,
cessation of operations 'should not mean starvation for like the inclusion of the employee in the payrolls, can help in
employees and their families'." determining the existence of an employer-employee
Thus, in RJL Martinez Fishing v. NLRC, the relationship. However, in certain cases the control test is not
Supreme Court held: sufficient to give a complete picture of the relationship between
the parties, owing to the complexity of such a relationship
We further find that the employer-employee where several positions have been held by the worker. There
relationship between the parties herein is not co-terminous
are instances when, aside from the employer’s power to control
with each loading and unloading job. As earlier shown,
respondents are engaged in the business of fishing. For this the employee with respect to the means and methods by which
purpose, they have a fleet of fishing vessels. Under this the work is to be accomplished, economic realities of the
situation, respondents' activity of catching fish is a employment relations help provide a comprehensive analysis
continuous process and could hardly be considered as of the true classification of the individual, whether as
seasonal in nature. So that the activities performed by herein employee, independent contractor, corporate officer or some
complainants, i.e. unloading the catch of tuna fish from other capacity [Francisco v. NLRC].
respondents' vessels and then loading the same to The better approach would therefore be to adopt a
refrigerated vans, are necessary or desirable in the business
two-tiered test involving: (1) the putative employer’s power to
of respondents. This circumstance makes the employment
of complainants a regular one, in the sense that it does not control the employee with respect to the means and methods by
depend on any specific project or seasonal activity. which the work is to be accomplished; and (2) the underlying
xxx economic realities of the activity or relationship. This two-
"The Court holds, therefore, that the employer- tiered test would provide us with a framework of analysis,
employee relationship existed between the parties which would take into consideration the totality of
notwithstanding evidence to the fact that petitioners Visayas circumstances surrounding the true nature of the relationship
and Bergado, even during the time that they worked with between the parties. This is especially appropriate in this case
respondent company alternated their employment on
where there is no written agreement or terms of reference to
different vessels when they were not assigned on the
company's vessels. For, as was stressed in the above-quoted base the relationship on; and due to the complexity of the
case of Industrial-Commercial-Agricultural Workers relationship based on the various positions and responsibilities
Organization vs. CIR, (16 SCRA 562 (1966), 'that during given to the worker over the period of the latter’s employment
the temporary layoff the laborers are considered free to seek [Ibid].
other employment is natural, since the laborers are not being In Sevilla v. Court of Appeals, we observed the need
paid, yet must find means of support' and such temporary to consider the existing economic conditions prevailing
cessation of operations 'should not mean starvation for
between the parties, in addition to the standard of right-of-
employees and their families'."
control like the inclusion of the employee in the payrolls, to
Indeed, considering the length of time that
private respondents have worked for petitioner - since 1978 give a clearer picture in determining the existence of an
- there is justification to conclude that they were engaged to employer-employee relationship based on an analysis of the
perform activities usually necessary or desirable in the usual totality of economic circumstances of the worker.
business or trade of petitioners and are, therefore, regular Thus, the determination of the relationship between
employees.As such, they are entitled to the benefits awarded employer and employee depends upon the circumstances of the
them by respondent NLRC. whole economic activity, such as: (1) the extent to which the
services performed are an integral part of the employer’s
Sterling products vs. Sol says that there is no need for business; (2) the extent of the worker’s investment in
the employer and the employee to be in the same place for equipment and facilities; (3) the nature and degree of control
control to take place. Control that satisfies employer-employee exercised by the employer; (4) the worker’s opportunity for
relationship can be met even if the employee is not juxtaposed profit and loss; (5) the amount of initiative, skill, judgment or
with the employer in the same physical location. foresight required for the success of the claimed independent
And then in Dy keh beng vs International labor, the enterprise; (6) the permanency and duration of the relationship
Supreme Court has said that piece-rate system, a payment on a between the worker and the employer; and (7) the degree of
piece-rate basis, neither affirms nor negates the existence of dependency of the worker upon the employer for his continued
employer-employee relationship. It is neutral. It does not prove employment in that line of business [Francisco v. NLRC].
or disprove. It merely proves payment.

Page 127 of 191

B. KINDS OF EMPLOYMENT Thus, contrary agreements notwithstanding, an
employment is deemed regular when the activities performed
Article 295. Regular and Casual Employment. The by the employee are usually necessary or desirable in the usual
provisions of written agreement to the contrary notwithstanding business or trade of the employer. Not considered regular are
and regardless of the oral agreement of the parties, an employment the so-called "project employment" the completion or
shall be deemed to be regular where the employee has been engaged termination of which is more or less determinable at the time of
to perform activities which are usually necessary or desirable in the employment, such as those employed in connection with a
usual business or trade of the employer, except where the
particular construction project, and seasonal employment
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the which by its nature is only desirable for a limited period of time.
time of the engagement of the employee or where the work or However, any employee who has rendered at least one year of
service to be performed is seasonal in nature and the employment service, whether continuous or intermittent, is deemed regular
is for the duration of the season. with respect to the activity he performed and while such activity
An employment shall be deemed to be casual if it is not actually exists [Baguio Country Club v. NLRC].
covered by the preceding paragraph: Provided, That any employee
who has rendered at least one year of service, whether such service
Beta v. NLRC
is continuous or broken, shall be considered a regular employee
Held: That she had been hired merely on a "temporary
with respect to the activity in which he is employed and his
basis" "for purposes of meeting the seasonal or peak demands of the
employment shall continue while such activity exists.
business,"[9] and as such, her services may lawfully be terminated "after
the accomplishment of [her] task"[10] is untenable. The private
There are five (5) classifications of employees and respondent was to all intents and purposes, and at the very least, a
Article 295 provides for four (4) of them. probationary employee, who became regular upon the expiration of six
months. Under Article 281 of the Labor Code, a probationary employee
1. Regular Employees is "considered a regular employee" if he has been "allowed to work
Regular employees are those who have been engaged after [the] probationary period.” The fact that her employment has been
on a contract-to-contract basis can not alter the character of
to perform activities which are usually necessary or desirable
employment, because contracts can not override the mandate of law.
in the usual business or trade of the employer. Hence, by operation of law, she has become a regular employee.
There are two kinds of regular employees, to wit: In the case at bar, the private employee was employed from
December 15, 1986 until June 22, 1987 when she was ordered laid-off.
a. Those engaged to perform activities which are Her tenure having exceeded six months, she attained regular
usually necessary or desirable in the usual employment.
business or trade of the employer; and The petitioner can not rightfully say that since the private
b. Those who have rendered at least one (1) year of respondent’s employment hinged from contract to contract, it was ergo,
"temporary", depending on the term of each agreement. Under the
service, whether such service is continuous or
Labor Code, an employment may only be said to be “temporary"
broken, with respect to the activity which they "where [it] has been fixed for a specific undertaking the completion of
are employed. or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be
The law presumes regularity of employment. No performed is seasonal in nature and the employment is for the duration
declaration or appointment paper is necessary to make one a of the season.” Quite to the contrary, the private respondent's work, that
regular employee [Philips Semiconductors v. Fadriquela]. of "typist-clerk" is far from being "specific" or "seasonal", but rather,
Written or oral agreement is immaterial to determine one, according to the Code, "where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual
regularity of employment [Association of Trade Unions v.
business.”
Abella]. However, there is a need to execute a written The petitioner can not insist that the private respondent had
employment contract if the intention is to stipulate on such been hired "for a specific undertaking i.e. to handle the backlogs
other kinds of employment such as probationary, project, brought about by the seasonal increase in the volume of her work.” The
seasonal, casual, or fixed-term because in the absence thereof, fact that she had been employed purportedly for the simple purpose of
it will be presumed regular. unclogging the petitioner's files does not make such an undertaking
The Doctrine of Adhesion applies to employment "specific" from the standpoint of law because in the first place, it is
contracts. However, it does not apply if the contract is clear and "usually necessary or desirable in the usual business or trade of the
employer," a development which disqualifies it outrightly as a "specific
unambiguous because a contract of adhesion is not prohibited
undertaking", and in the second place, because a "specific undertaking"
per se [RCBC v. Court of Appeals]. is meant, in its ordinary acceptation, a special type of venture or project
The primary standard, therefore, of determining a whose duration is coterminous with the completion of the project, e.g.,
regular employment is the reasonable connection between the project work. It is not the case in the proceeding at bar.
particular activity performed by the employee in relation to the
usual business or trade of the employer. The test is whether the
Manalo v. TNS
former is usually necessary or desirable in the usual business or Held: In Maraguinot, Jr. v. NLRC, the Court held that once
trade of the employer. The connection can be determined by a project or work pool employee has been: (1) continuously, as opposed
considering the nature of the work performed and its relation to to intermittently, rehired by the same employer for the same tasks or
the scheme of the particular business or trade in its nature of tasks; and (2) these tasks are vital, necessary and
entirety. Also, if the employee has been performing the job for indispensable to the usual business or trade of the employer, then the
at least one year, even if the performance is not continuous or employee must be deemed a regular employee.
merely intermittent, the law deems the repeated and continuing Although it is true that the length of time of the employee’s
service is not a controlling determinant of project employment, it is
need for its performance as sufficient evidence of the necessity
vital in determining whether he was hired for a specific undertaking or
if not indispensability of that activity to the business. Hence, in fact tasked to perform functions vital, necessary and indispensable
the employment is also considered regular, but only with to the usual business or trade of the employer. Petitioners’ successive
respect to such activity and while such activity exists [De Leon re-engagement in order to perform the same kind of work firmly
v. NLRC]. manifested the necessity and desirability of their work in the usual
business of TNS as a market research facility. Undisputed also is the

Page 128 of 191

fact that the petitioners were assigned office-based tasks from 9:00 such, from the other undertakings of the company; or (2) a
o’clock in the morning up to 6:00 o’clock in the evening, at the earliest, particular job or undertaking that is not within the regular
without any corresponding remuneration. business of the corporation. As it was with regard to the
The project employment scheme used by TNS easily
distinction between a regular and casual employee, the purpose
circumvented the law and precluded its employees from attaining
regular employment status in the subtlest way possible.Petitioners were
of this requirement is to delineate whether or not the employer
rehired not intermittently, but continuously,contract after contract, is in constant need of the services of the specified employee. If
month after month, involving the very same tasks. the particular job or undertaking is within the regular or usual
business of the employer company and it is not identifiably
Settled Principles distinct or separate from the other undertakings of the company,
there is clearly a constant necessity for the performance of the
• The act of hiring and rehiring employees over a task in question, and therefore said job or undertaking should
period of time without considering them as regular not be considered a project [GMA v. Pabriga].
evidences bad faith on the part of the employer
[Bustamante v. NLRC]. Fegurin v. NLRC
• Manner and method of payment of wage or salary is Held: We find merit in petitioners' stand that they are
immaterial to the issue of whether the employee is regular and permanent employees. Under Article 281 of the Labor
Code, any employee who has rendered at least one year of service, or
regular or not [Columbus Philippines v. NLRC].
who performs activities usually necessary or desirable in the usual
business of the employer, is considered a regular employee, the
2. Project Employees provision of written agreement to the contrary notwithstanding.
Project employees are those whose employment has In this case, four of the petitioners had been working with
been fixed for a specific project or undertaking, the completion the Company for nine years, one 4 for 8 years, another for 6 years, the
or termination of which has been determined at the time of the shortest term being 3 years. The Company has not rebutted petitioners'
engagement of the employee. Employment automatically averments that they had been employed for several years before their
terminates upon completion of the project. services were terminated. The Notices of Employment, therefore, do
not reflect accurately petitioners' respective lengths of service as they
If the project or the phase of the project the project
give the starting point of petitioners' employment as between 1975 and
employee is working on has not yet been completed and his 1977, or just a few months before their dismissal. Moreover, they
services are terminated without just or authorized cause and performed activities usually necessary or desirable in the usual business
there is no showing that his services are unsatisfactory, the of the Company, their employer, hence, their employment is deemed
project employee is entitled to reinstatement with backwages to regular.
his former position or substantially equivalent position. If the Policy Instructions No. 20 of the Minister of Labor,
reinstatement is no longer possible, the employee is entitled to intended to stabilize employer-employee relations in the construction
his salaries for the unexpired portion of the agreement industry, also lays down the distinction between project employees and
non-project employees, thus:
[FilSystems, Inc. v. Puente].
Generally, there are two types of employees in the
The principal test for determining whether particular construction industry, namely: 1) Project employees, and 2) Non-
employees are properly characterized as "project employees" as Project employees.
distinguished from "regular employees," is whether or not the Project employees are those employed in connection with a
"project employees" were assigned to carry out a "specific particular construction project. Non-project employees are those
project or undertaking," the duration (and scope) of which were employed by a construction company without reference to any
specified at the time the employees were engaged for that particular project.
project. In the realm of business and industry, we note that xxx xxx xxx
Members of a work pool from which a construction
"project" could refer to one or the other of at least two (2)
company draws its project employees, if considered employees of the
distinguishable types of activities. Firstly, a project could refer construction company while in the work pool, are non-project
to a particular job or undertaking that is within the regular or employees or employees for an indefinite period. If they are employed
usual business of the employer company, but which is distinct in a particular project, the completion of the project or of any phase
and separate, and identifiable as such, from the other thereof will not mean severance of employer-employee relationship.
undertakings of the company. Such job or undertaking begins Considering the nature of the work of petitioners, that of
and ends at determined or determinable times. The typical carpenter, laborer or mason, their respective jobs would actually be
example of this first type of project is a particular construction continuous and on-going. When a project to which they are individually
assigned is completed, they would be assigned to the next project or a
job or project of a construction company [ALU-TUCP v.
phase thereof. In other words, they belonged to a "work pool" from
NLRC]. which the Company would draw workers for assignment to other
It is not enough that an employee is hired for a projects at its discretion. They are, therefore, actually "non-project
specific project or phase of work. There must also be a employees".
determination of, or a clear agreement on, the completion or Moreover, as brought out by the Solicitor General, in the
termination of the project at the time the employee was engaged Collective Bargaining Agreement between petitioners' Union and the
if the objectives of Article 280 are to be achieved [Chua v. Company, the latter had categorically recognized petitioners as regular
NLRC]. and permanent employees effective May 1, 1976 "for the purpose of
forming a core group of permanent and regular construction workers"
Thus, in order to safeguard the rights of workers
for the Company. Thus, Section 1, Article I of the CBA provides:
against the arbitrary use of the word “project” to prevent Section 1. The Company recognizes the Union as the only
employees from attaining the status of regular employees, and properly designated and authorized representative for the
employers claiming that their workers are project employees permanent and regular employees of the company, except the
should not only prove that the duration and scope of the following:
employment was specified at the time they were engaged, but a. Supervisory personnel;
also that there was indeed a project. As discussed above, the b. Workers hired on casual basis;
project could either be (1) a particular job or undertaking that c. Workers hired on contract basis for the construction of
company's projects;
is within the regular or usual business of the employer
d. Company watchmen and security guards.
company, but which is distinct and separate, and identifiable as
Page 129 of 191
 For the purpose of forming a core group of permanent and "Considering the nature of the work of petitioners, that of
regular construction workers, the Company hereby extends permanent carpenter, laborer or mason, their respective jobs would actually be
and regular employment effective May 1, 1976 to the individuals named continuous and on-going. When a project to which they are individually
in Annex 'A' (Annex 'B-l' of this Petition) hereof; and effective assigned is completed, they would be assigned to the next project or a
November 1, 1974 to the individuals named in Annex 'B' (Annex 'B-2' phase thereof. In other words, they belonged to a ‘work pool’ from
of this Petition) hereof. Vacancies in the said core group occassioned which the company would draw workers for assignment to other
by retirement, dismissal, death or permanent disability may be filled by projects at its discretion. They are, therefore, actually ‘non-project
the Company at its option, upon consultation with the Union, whose employees’."
opinion shall be regarded as advisory. From the foregoing, it is clear that petitioner is a project
The names of petitioners appear in Annex "A" of the employee considering that he does not belong to a "work pool" from
CBA except in respect of petitioner Pedro B. Barber who obtained which the company would draw workers for assignment to other
employment with the Company in August, 1968. Having been in the projects at its discretion. It is likewise apparent from the facts obtaining
Company's employ for several years, even the Notices of Employment herein that petitioner was utilized only for one particular project, the
(supra) would show a clear violation of the CBA, which recognizes MNEE Stage 2 Project of respondent company. Hence, the termination
petitioners as "regular and permanent" employees of the Company. The of herein petitioner is valid by reason of the completion of the project
terms and conditions of the CBA must be complied with as they and the expiration of his employment contract.
constitute the law between the parties.
The fact that petitioners did not present the CBA as a. Becoming a Regular Employee
evidence before the agencies below will not alter the conclusion arrived
at because the Supreme Court has the authority to review matters even
A project employee or a member of a work pool may
if they are not assigned as errors in the appeal, if it is found that their acquire the status of a regular employee when the following
consideration is necessary in arriving at a just decision of the case. concur:

(i) There is a continuous rehiring of project

ALU-TUCP v. NLRC
Held: The term "project" could also refer to, secondly, a employees even after cessation of a
particular job or undertaking that is not within the regular business of project; and
the corporation. Such a job or undertaking must also be identifiably (ii) The tasks performed by the alleged
separate and distinct from the ordinary or regular business operations “project employee” are vital, necessary
of the employer. The job or undertaking also begins and ends at
and indispensable to the usual business or
determined or determinable times. The case at bar presents what
appears to our mind as a typical example of this kind of "project." trade of the employer.
NSC undertook the ambitious Five Year Expansion
Program I and II with the ultimate end in view of expanding the volume However, the length of time during which the
and increasing the kinds of products that it may offer for sale to the employee was continuously re-hired is not controlling, but
public. The Five Year Expansion Program had a number of component merely serves as a badge of regular employment [Maraguinot,
projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Jr. v. NLRC].
Project"; (b) the establishment of a "Billet Steel-Making Plant" (BSP);
(c) the acquisition and installation of a "Five Stand TDM"; and (d) the
"Cold Mill Peripherals Project." Instead of contracting out to an outside d. Workpool
or independent contractor the tasks of constructing the buildings with A work pool may exist although the workers in the
related civil and electrical works that would house the new machinery pool do not receive salaries and are free to seek other
and equipment, the installation of the newly acquired mill or plant employment during temporary breaks in the business, provided
machinery and equipment and the commissioning of such machinery that the worker shall be available when called to report for a
and equipment, NSC opted to execute and carry out its Five Year project. Although primarily applicable to regular seasonal
Expansion Projects "in house," as it were, by administration. The
workers, this set-up can likewise be applied to project workers
carrying out of the Five Year Expansion Program (or more precisely,
each of its component projects) constitutes a distinct undertaking insofar as the effect of temporary cessation of work is
identifiable from the ordinary business and activity of NSC. Each concerned. This is beneficial to both the employer and
component project, of course, begins and ends at specified times, which employee for it prevents the unjust situation of “coddling labor
had already been determined by the time petitioners were engaged. We at the expense of capital” and at the same time enables the
also note that NSC did the work here involved -- the construction of workers to attain the status of regular employees [Ibid].
buildings and civil and electrical works, installation of machinery and The Supreme Court ruled that a project employee or
equipment and the commissioning of such machinery -- only for itself. a member of a work pool may acquire the status of a regular
Private respondent NSC was not in the business of constructing
employee when the following concur:
buildings and installing plant machinery for the general business
community, i.e., for unrelated, third party, corporations. NSC
did not hold itself out to the public as a construction company or as an (i) There is a continuous rehiring of
engineering corporation. project employees even after
cessation of a project; and
Rada v. NLRC (ii) The tasks performed by the alleged
Held: It must be stressed herein that although petitioner project employee are vital,
worked with Philnor as a driver for eight years, the fact that his services necessary and indispensable to the
were rendered only for a particular project which took that same period usual business or trade of the
of time to complete categorizes him as a project employee. Petitioner
was employed for one specific project.
employer.
A non-project employee is different in that the employee is
hired for more than one project. A non-project employee, vis-a-vis a The circumstances set forth by law and the
project employee, is best exemplified in the case of Fegurin, et al. vs. jurisprudence is present in this case. In fine, even if private
National Labor Relations Commission, et al. wherein four of the respondents are to be considered as project employees, they
petitioners had been working with the company for nine years, one for attained regular employment status, just the same [GMA v.
eight years, another for six years, the shortest term being three years. Pabriga].
In holding that petitioners are regular employees, this Court therein
explained:
PNCC v. NLRC
Page 130 of 191
 Held: After a careful consideration of the petition and the periodic in nature, the employment itself is not automatically
comment filed by the Solicitor General for the respondents, We hold considered seasonal so as to prevent the employee from
that the NLRC did not abuse its discretion in affirming the Labor attaining regular status. To exclude the asserted “seasonal”
Arbiter's conclusion that the private respondent was a member of the
employee from those classified as regular employees, the
work pool and that he was illegally dismissed from his job.
Members of a work pool from which a construction
employer must show that: (1) the employee must be performing
company draws its project employees, if considered employee of the work or services that are seasonal in nature; and (2) he had been
construction company while in the work pool, are non-project employed for the duration of the season. Hence, when the
employees or employees for an indefinite period. If they are employed “seasonal” workers are continuously and repeatedly hired to
in a particular project, the completion of the project or any phase perform the same tasks or activities for several seasons or even
thereof will not mean severance of employer-employee relationship. after the cessation of the season, this length of time may
.... Any employee who has rendered at least one year of likewise serve as badge of regular employment. In fact, even
service, whether such service is continuous or broken, shall be
though denominated as “seasonal workers,” if these workers
considered a regular employee with respect to the activity which he is
employed and his employment shall continue while such actually are called to work from time to time and are only temporarily
exists. (Art. 280, Labor Code.) laid off during the off-season, the law does not consider them
A project employee is one whose "employment has been separated from the service during the off-season period
fixed for a specific project or undertaking the completion or termination [Universal Robina v. Acibo].
of which has been determined at the time of the engagement of the In Manila Hotel v. CIR, it was held that where it
employee or where the work or services to be performed is seasonal in appears that the questioned employees were never separated
nature and the employment is for the duration of the season." (Sec. 280, from the service but their status is that of regular seasonal
Labor Code; Sandoval Shipping Inc. vs. NLRC, 136 SCRA 674.)
employees who are called to work from time to time, mostly
In finding that Porciuncula was a regular employee, the
Labor Arbiter noted that it was the petitioner's practice to rehire him during summer season, and the nature of their relationship with
after the completion of every project and this re-hiring continued the hotel is such that during off season they are temporarily laid
throughout Porciuncula's 13 years of employment in the company. off but during summer season they are re-employed, or when
The Labor Arbiter also observed that the petitioner never their services are needed, and they are not strictly speaking
reported the completion of its projects and the termination of the separated from the service but are merely considered as on
employees (like Porciuncula) in its finished projects, to the nearest leave of absence without pay until they are re-employed, it is
Public Employment Office as required by Policy Instruction No. 20 of held that their employment relationship is never severed but
the Secretary of Labor. In the case of Ochoco vs. NLRC, 120 SCRA
only suspended, and as such, they can be considered as in the
774, the failure of the employer to report to the nearest employment
office the termination of the workers everytime it completed a project regular employment of the hotel.
was considered by this Court as proof that they were not project
employees. Universal Robina v. Acibo
Held: In light of the above legal parameters laid down by
e. Settled Principles the law and applicable jurisprudence, the respondents are neither
project, seasonal nor fixed-term employees, but regular seasonal
workers of URSUMCO. The following factual considerations from
• Project employees enjoy security of tenure only the records support this conclusion:
during the term of their project employment First, the respondents were made to perform various tasks
• If they are terminate without just or authorized cause that did not at all pertain to any specific phase of URSUMCO’s strict
before the completion of the project, they are entitled milling operations that would ultimately cease upon completion of a
to reinstatement or salaries for the unexpired portion particular phase in the milling of sugar; rather, they were tasked to
of the agreement. perform duties regularly and habitually needed in URSUMCO’s
operations during the milling season. The respondents’ duties as loader
• Project employees are not entitled to separation pay
operators, hookers, crane operators and drivers were necessary to haul
at the completion of the project. and transport the sugarcane from the plantation to the mill; laboratory
• Project employees are presumed to be regular if they attendants, workers and laborers to mill the sugar; and welders,
are allowed to work beyond the completion of the carpenters and utility workers to ensure the smooth and continuous
project. Having become regular employees, they can operation of the mill for the duration of the milling season, as
no longer be terminated on the basis of completion of distinguished from the production of the sugarcane which involves the
the project. planting and raising of the sugarcane until it ripens for milling. The
• Advanced notice of termination of project production of sugarcane, it must be emphasized, requires a different set
of workers who are experienced in farm or agricultural work. Needless
employment is not required.
to say, they perform the activities that are necessary and desirable in
• Report to DOLE on termination of project employees sugarcane production. As in the milling of sugarcane, the plantation
is required. Report should be made after every workers perform their duties only during the planting season.
completion of project or phase thereof. Second, the respondents were regularly and repeatedly
• Payment of completion bonus is an indicator of hired to perform the same tasks year after year. This regular and
project employment. repeated hiring of the same workers (two different sets) for two separate
• Burden of proof in termination of project seasons has put in place, principally through jurisprudence, the system
employment rests on the employer. of regular seasonal employment in the sugar industry and other
industries with a similar nature of operations.
Under the system, the plantation workers or the mill
3. Seasonal Employees employees do not work continuously for one whole year but only for
Seasonal employees are those who work or perform the duration of the growing of the sugarcane or the milling
services which are seasonal in nature, and the employment is season. Their seasonal work, however, does not detract from
for the duration of the season. considering them in regular employment since in a litany of cases, this
Seasonal employment operates much in the same Court has already settled that seasonal workers who are called to work
way as project employment, albeit it involves work or service from time to time and are temporarily laid off during the off-season are
that is seasonal in nature or lasting for the duration of the not separated from the service in said period, but are merely considered
on leave until re-employment. Be this as it may, regular seasonal
season. As with project employment, although the seasonal
employees, like the respondents in this case, should not be confused
employment arrangement involves work that is seasonal or
Page 131 of 191
with the regular employees of the sugar mill such as the • No regular appointment papers necessary for casual
administrative or office personnel who perform their tasks for the employees to become regular.
entire year regardless of the season. The NLRC, therefore, gravely • Repeated rehiring of a casual employee makes him a
erred when it declared the respondents regular employees of
regular employee.
URSUMCO without qualification and that they were entitled to the
benefits granted, under the CBA, to URSUMCO’S regular employees. • The wages and benefits of a casual employee whose
Third, while the petitioners assert that the respondents were status is converted into regular should not be
free to work elsewhere during the off-season, the records do not support diminished.
this assertion. There is no evidence on record showing that after the
completion of their tasks at URSUMCO, the respondents sought and 5. Probationary Employee
obtained employment elsewhere.
Article 296. Probationary Employment. Probationary
Regular seasonal workers, if not rehired for the employment shall not exceed six (6) months from the date the
next season, are deemed illegally dismissed employee started working, unless it is covered by an apprenticeship
Regular seasonal workers are called to work from agreement stipulating a longer period. The services of an employee
time to time, mostly during certain seasons. The nature of their 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
relationship with the employer is such that during off-season,
accordance with reasonable standards made known by the
they are temporarily laid off but they are re-employed during employer to the employee at the time of his engagement. An
the season or when their services may be needed. They are not, employee who is allowed to work after a probationary period shall
strictly speaking, separated from the service but are merely be considered a regular employee.
considered as on leave of absence without pay until they are re-
employed. Their employment relationship is never severed but Regardless of the kind of employment arrangement
only suspended. As such, they can be considered as being in the between the parties, an employer has the right to put a newly-
regular employment of the employer [Abasolo v. NLRC]. hired employee under a probationary period or it may choose
not to do so, as part and parcel of its power to hire. If the
4. Casual Employees employer puts the employee under probationary employment,
Casual employees are those who are not regular, the employee would then be given a certain period of time
project, or seasonal employees. Employment automatically within which to prove that he deserves to be regularized.
terminates upon the lapse of the agreed period. Throughout such probationary period, he will be under constant
There is casual employment where an employee is observation, evaluation and trial by the employer during which
engaged to perform a job, work or service which is merely the employer shall determine whether or not he is qualified for
incidental to the principal business of the employer, and such permanent employment. During the probationary period, the
job, work, or service is for a definite period made known to the employer is given the opportunity to observe the skill,
employee at the time of engagement [Conti v. NLRC]. competence, attitude and fitness of the probationary employee
There is such a thing as qualified security of tenure while the latter seeks to prove to the employer that he has the
of casual employees. Any employee who has rendered at least qualifications to meet the reasonable standards for permanent
one year of service, whether such service is continuous or employment [Dela Cruz v. NLRC].
broken, shall be considered a regular employee with respect to Being in the nature of a "trial period" the essence of
the activity in which he is employed and his employment shall a probationary period of employment fundamentally lies in the
continue while such activity exists. No regular appointment purpose or objective sought to be attained by both the employer
papers are necessary for a casual employee to become regular and the employee during said period. The length of time is
[Kimberly v. Drilon]. immaterial in determining the correlative rights of both in
Repeated rehiring of a casual employee makes him a dealing with each other during said period. While the
regular employee [Tan v. Lagarma]. employer, as stated earlier, observes the fitness, propriety and
efficiency of a probationer to ascertain whether he is qualified
Capule v. NLRC for permanent employment, the probationer, on the other, seeks
Held: The Solicitor General opines that the cutting of the to prove to the employer that he has the qualifications to meet
cogon grass at the back portion of the building of private respondents the reasonable standards for permanent employment. It is well
may be considered to be usually necessary or desirable in the usual
settled that the employer has the right or is at liberty to choose
business or trade of private respondent. The Court disagrees. The
usual business or trade of private respondents is the manufacture of who will be hired and who will be denied employment. In that
cultured milk. The cutting of the cogon grasses in the premises of its sense, it is within the exercise of the right to select his
factory is hardly necessary or desirable in the usual business of the employees that the employer may set or fix a probationary
private respondents. Indeed, it is alien thereto. period within which the latter may test and observe the conduct
Thus, petitioners are casual employees who cannot be of the former before hiring him permanently [International v.
considered regular employees under the aforestated provision of the NLRC].
Labor Code. Nevertheless, they may be considered regular employees The probationary period may be extended but only
if they have rendered services for at least one (1) year. When, as in this
upon the mutual agreement by the employer and the
case, they were dismissed from their employment before the expiration
of the one-year period they cannot lawfully claim that their dismissal probationary employee. Absent such agreement would make
was illegal. the extension invalid, hence, the employee would be considered
Indeed, private respondent had shown that the services of as having become a regular employee after the lapse of the
the petitioners were found to be unsatisfactory, so, their termination. original probationary period [Dusit Hotel Nikko v. Gatbonton].

Settled Principles a. Probationary period, how reckoned

and computed
• Causal employee becomes regular after one year of In Cebu Royal Plant v. Deputy Minister of Labor, it
service by operation of law. One year period was held that if the period is six (6) months, it shall be reckoned
reckoned from the hiring date. “from the date of appointment up to the same calendar date of
Page 132 of 191
the 6th month following.” This means that if a probationary employee. On the contrary, management promoted her to parts
employee is hired on January 1, his probationary period expires clerk. Finally, at the risk of being repetitious, Lina had been re-hired
on July 1 which is the same calendar date of the 6 th month to work not only after her first six-month probationary period from
November 21, 1984 to May 21,1985, she had been also re-hired to work
following the date of appointment.
immediately after her second six-month probationary period from May
22, 1985 to November 21, 1985; and then again on January 20, 1986,
Philips Semiconductors v. Fadriquela she was rehired on a probationary status — her third — and was again
Held: The agreement embodied in the "Minutes of terminated on June 5, 1986. Thus, we can readily see that Lina had
Meeting" between the representative union and private respondent, been hired and again and again rehired and again and again and again
providing that contractual employees shall become regular employees fired. We perceive these successive hirings and firings as a ploy to
only after seventeen months of employment, cannot bind petitioner. avoid the obligations imposed by law on employers for the protection
Such a provision runs contrary to law not only because contractual and benefit of probationary employees, who, more often than not, are
employees do not form part of the collective bargaining unit which kept in the bondage, so to speak, of unending probationary employment
entered into the CBA with private respondent but also because of the without any complaint due to the serious unemployment problem
Labor Code provision on regularization. The law explicitly states that besetting our country today. The Court can not countenance this
an employee who had rendered at least one year of service, whether overreaching. No member of the country's work force must be allowed
such service is continuous or broken, shall be considered a regular to be taken advantage of by any employer.
employee. The period set by law is one year. The seventeen months An employee who is allowed to work after a probationary
provided by the "Minutes of Meeting" is obviously much longer. period, shall be considered a regular employee. The fact that Lina
worked on a contract-to-contract basis can not alter the character of her
b. Exceptions to the 6-Month employment, because contracts can not override the mandate of
law. Hence, by operation of law, she has likewise, become a regular
Probationary Period
employee.
The following are the exceptions to the 6-month
We find self-defeating the private respondent's arguments
probationary period: that the petitioner, while in her probationary periods, had failed to
measure up to the standards of her work and had been found unfit for
(i) When the probationary employment is covered her job, in the light of the circumstance discussed earlier. Second, the
by an apprenticeship agreement stipulating a private respondent failed to establish that there had been reasonable
longer period. standards set forth by the company by which Lina would measure up to
(ii) When the employer and employee agree on a as a regular employee.
shorter or longer period, such as when the same
is established by company policy or when the Mariwasa v. Leogardo
same is required by the nature of work to be Held: The single difference between Buiser and the present
performed by the employee. [Buiser vs. case: that in the former involved an eighteen-month probationary
Leogardo]. period stipulated in the original contract of employment, whereas the
latter refers to an extension agreed upon at or prior to the expiration of
the statutory six-month period, is hardly such as to warrant or even
In the latter case, there is recognition of the exercise suggest a different ruling here. In both cases the parties' agreements in
of managerial prerogatives especially where the employee must fact resulted in extensions of the period prescribed by law. That in this
learn a particular kind of work or when the job requires certain case the inability of the probationer to make the grade became apparent
qualifications, skills, experience or training (131 SCRA 151). only at or about the end of the six-month period, hence an extension
In the Buiser case, for example, the Supreme Court justified the could not have been pre-arranged as was done in Buiser assumes no
18-month probationary period by the fact that the company can adverse significance, given the lack, as pointed out by the Solicitor
only evaluate the efficiency, conduct, and selling ability of its General, of any indication that the extension to which Dequila gave his
agreement was a mere stratagem of petitioners to avoid the legal
sales representatives upon publication of the solicited ads
consequences of a probationary period satisfactorily completed.
which will occur only a year after the sale has been made, and For aught that appears of record, the extension of Dequila's
that such period is provided in the collective bargaining probation was ex gratia, an act of liberality on the part of his employer
agreement of the company and the employee’s union. affording him a second chance to make good after having initially failed
to prove his worth as an employee. Such an act cannot now unjustly be
Octavanio v. NLRC turned against said employer's account to compel it to keep on its
Held: For one, probationary employment should not exceed payroll one who could not perform according to its work
six (6) months from the date the employee started working, unless it is standards. The law, surely, was never meant to produce such an
covered by an apprenticeship agreement stipulating a longer inequitable result.
period.[8] True, the services of an employee who has been engaged on By voluntarily agreeing to an extension of the probationary
a probationary basis may be terminated for a just cause or when he fails period, Dequila in effect waived any benefit attaching to the completion
to qualify as a regular employee in accordance with the reasonable of said period if he still failed to make the grade during the period of
standards made known by the employer to the employee at the time of extension. The Court finds nothing in the law which by any fair
his employment. But the law is explicit that an employee who is interpretation prohibits such a waiver. And no public policy protecting
allowed to work after a probationary period shall be considered a the employee and the security of his tenure is served by proscribing
regular employee. voluntary agreements which, by reasonably extending the period of
It is clear from the foregoing that Lina should be considered probation, actually improve and further a probationary employee's
a regular employee on all counts. First, the nature of her job as a parts prospects of demonstrating his fitness for regular employment.
clerk required her to perform activities which were deemed necessary
and desirable in the usual business of General Diesel Power c.Security of Tenure of Probationary
Corporation, in connection with dealing in parts, sales, and Employees
services. (She was neither contracted for a specified project nor Within the limited 6-month probationary period,
required to perform work that was seasonable in nature.) Under Article
probationary employees are entitled to security of tenure
280 of the Labor Code, when one performs such activities, he is deemed
a regular employee, "[t]he provisions of written agreement to the
notwithstanding their limited tenure and non-permanent status
contrary notwithstanding . . ." Second, her employment was not [Philippine Daily Inquirer v. Magtibay, Jr.]. Hence, during
covered by any apprenticeship agreement. Third, she was rehired on their probationary employment, they cannot be dismissed
May 22, 1985 and on January 20, 1986. This fact of rehiring negates except under any of the following three (3) grounds:
management's claims that she failed to qualify as a regular
Page 133 of 191
 (i) For just cause; or he was dismissed by petitioner. As such, he is entitled to security of
(ii) For authorized cause; or tenure during his period of employment and his services cannot be
(iii) When the probationary employee fails to qualify terminated except for just and authorized causes enumerated under the
Labor Code and under the employment contract.
as a regular employee in accordance with
reasonable standards made known by the
employer to the employee at the start of the Abbott Laboratories v. Alcaraz
employment. Held: A probationary employee, like a regular employee,
enjoys security of tenure. However, in cases of probationary
employment, aside from just or authorized causes of termination, an
Due process for a probationary employee consists in additional ground is provided under Article 295 of the Labor Code, i.e.,
having informed him of the standards against which his the probationary employee may also be terminated for failure to qualify
performance will be continuously assessed during the as a regular employee in accordance with the reasonable standards
probationary period. These work standards should be made known by the employer to the employee at the time of the
understood at the time of his engagement and then, if he fails to engagement. Thus, the services of an employee who has been engaged
meet these standards, a written notice is served to the him by on probationary basis may be terminated for any of the following: (a)
the employer within a reasonable time from the effective date a just or (b) an authorized cause; and (c) when he fails to qualify as a
regular employee in accordance with reasonable standards prescribed
of termination. In all cases of probationary employment, the
by the employer.
employer shall make known to the employee the standards
Corollary thereto, Section 6(d), Rule I, Book VI of the
under which he will qualify as a regular employee at the time Implementing Rules of the Labor Code provides that if the employer
of his engagement. Where no standards are made known to the fails to inform the probationary employee of the reasonable standards
employee at that time, he shall be deemed a regular employee upon which the regularization would be based on at the time of the
[Philippine Daily Inquirer v. Magtibay, Jr]. engagement, then the said employee shall be deemed a regular
Valid severance of the probationary employer- employee, viz.:
employee relationship outside of the just and authorized causes (d) In all cases of probationary employment, the employer
shall make known to the employee the standards under which he will
presupposes that the employer had accomplished the following
qualify as a regular employee at the time of his engagement. Where no
things:
standards are made known to the employee at that time, he shall be
deemed a regular employee.
(i) The employer must communicate to the In other words, the employer is made to comply with two
employee that he is being hired on a (2) requirements when dealing with a probationary employee: first, the
probationary basis; employer must communicate the regularization standards to the
(ii) The employer must convey to the probationary probationary employee; and second, the employer must make such
employee the reasonable standards to qualify for communication at the time of the probationary employee’s
engagement. If the employer fails to comply with either, the employee
regularization;
is deemed as a regular and not a probationary employee.
(iii) The probationary status of the newly-hired Keeping with these rules, an employer is deemed to have
employee must be communicated to him prior to made known the standards that would qualify a probationary employee
the commencement of his employment; to be a regular employee when it has exerted reasonable efforts to
(iv) The employer must convey these reasonable apprise the employee of what he is expected to do or accomplish during
standards at the start of the probationary the trial period of probation. This goes without saying that the
employee’s engagement and not in the course employee is sufficiently made aware of his probationary status as well
thereof or towards its end; otherwise, he as the length of time of the probation.
The exception to the foregoing is when the job is self-
becomes a regular employee from day one of his
descriptive in nature, for instance, in the case of maids, cooks, drivers,
employment. or messengers.[61] Also, in Aberdeen Court, Inc. v. Agustin, it has been
(v) The employer must evaluate the performance of held that the rule on notifying a probationary employee of the standards
the probationary employee in relation to the duly of regularization should not be used to exculpate an employee who acts
communicated reasonable standards; and in a manner contrary to basic knowledge and common sense in regard
(vi) The employee fails to comply with these to which there is no need to spell out a policy or standard to be met. In
reasonable standards before the completion of the same light, an employee’s failure to perform the duties and
the probationary period [Tamson’s Enterprises responsibilities which have been clearly made known to him constitutes
a justifiable basis for a probationary employee’s non-regularization.
v. Court of Appeals].
In this case, petitioners contend that Alcaraz was terminated
because she failed to qualify as a regular employee according to
Failure to qualify as a regular employee in Abbott’s standards which were made known to her at the time of her
accordance with the reasonable standards of the employer is a engagement. Contrarily, Alcaraz claims that Abbott never apprised her
just cause for terminating a probationary employee specifically of these standards and thus, maintains that she is a regular and not a
recognized under Article 296 [International v. NLRC]. mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott
Oreta v. NLRC
had indeed complied with the above-stated requirements. This
Held: The law is clear to the effect that in all cases involving
conclusion is largely impelled by the fact that Abbott clearly conveyed
employees engaged on probationary basis, the employer shall make
to Alcaraz her duties and responsibilities as Regulatory Affairs
known to the employee at the time he is hired, the standards by which
Manager prior to, during the time of her engagement, and the incipient
he will qualify as a regular employee. Nowhere in the employment
stages of her employment. On this score, the Court finds it apt to detail
contract executed between petitioner company and
not only the incidents which point out to the efforts made by Abbott but
respondent Grulla is there a stipulation that the latter shall undergo a
also those circumstances which would show that Alcaraz was well-
probationary period for three months before he can qualify as a regular
apprised of her employer’s expectations that would, in turn, determine
employee. There is also no evidence on record showing that the
her regularization.
respondent Grulla had been apprised of his probationary status and the
Verily, basic knowledge and common sense dictate that the
requirements which he should comply in order to be a regular
adequate performance of one’s duties is, by and of itself, an inherent
employee. In the absence of these requisites, there is justification in
and implied standard for a probationary employee to be regularized;
concluding that respondent Grulla was a regular employee at the time
such is a regularization standard which need not be literally spelled out

Page 134 of 191

or mapped into technical indicators in every case. In this regard, it must termination of their employment relationship, a day certain
be observed that the assessment of adequate duty performance is in the being understood to be “that which must necessarily come,
nature of a management prerogative which when reasonably exercised although it may not be known when” [Pantranco North Expres,
– as Abbott did in this case – should be respected. This is especially
Inc.]. Employment automatically terminates upon he expiration
true of a managerial employee like Alcaraz who was tasked with the
vital responsibility of handling the personnel and important matters of
of the fixed period.
her department. This, however, is not provided in the Labor Code but
In fine, the Court rules that Alcaraz’s status as a recognized only in jurisprudence [Innodata Knowledge
probationary employee and her consequent dismissal must stand. Services v. Inting]. Fixed Term employment must comply with
Consequently, in holding that Alcaraz was illegally dismissed due to at least two criteria: (1) The fixed period employment was
her status as a regular and not a probationary employee, the Court finds knowingly and freely agreed upon by the parties; no
that the NLRC committed a grave abuse of discretion. circumstance such as force, duress or improper pressure vitiates
To elucidate, records show that the NLRC based its decision
the employee’s consent; and (2) employer and the employee
on the premise that Alcaraz’s receipt of her job description and
Abbott’s Code of Conduct and Performance Modules was not dealt with each other on more or less equal terms with no moral
equivalent to being actually informed of the performance standards dominance exercised by the former over the latter [Romares v.
upon which she should have been evaluated on.[64] It, however, NLRC].
overlooked the legal implication of the other attendant circumstances
as detailed herein which should have warranted a contrary finding that Purefoods v. NLRC
Alcaraz was indeed a probationary and not a regular employee – more Held: None of these criteria had been met in the present
particularly the fact that she was well-aware of her duties and case. As pointed out by the private respondents:
responsibilities and that her failure to adequately perform the same [I]t could not be supposed that private respondents and all
would lead to her non-regularization and eventually, her termination. other so-called “casual” workers of [the petitioner] KNOWINGLY and
Accordingly, by affirming the NLRC’s pronouncement VOLUNTARILY agreed to the 5-month employment contract.
which is tainted with grave abuse of discretion, the CA committed a Cannery workers are never on equal terms with their employers.
reversible error which, perforce, necessitates the reversal of its Almost always, they agree to any terms of an employment contract just
decision. to get employed considering that it is difficult to find work given their
C. Probationary employment; termination procedure. ordinary qualifications. Their freedom to contract is empty and hollow
A different procedure is applied when terminating a because theirs is the freedom to starve if they refuse to work as casual
probationary employee; the usual two-notice rule does not or contractual workers. Indeed, to the unemployed, security of tenure
govern. Section 2, Rule I, Book VI of the Implementing Rules of the has no value. It could not then be said that petitioner and private
Labor Code states that “[i]f the termination is brought about by the x x respondents "dealt with each other on more or less equal terms with no
x failure of an employee to meet the standards of the employer in case moral dominance whatever being exercised by the former over the
of probationary employment, it shall be sufficient that a written notice latter.
is served the employee, within a reasonable time from the effective date The petitioner does not deny or rebut private respondents'
of termination.” averments (1) that the main bulk of its workforce consisted of its so-
As the records show, Alcaraz's dismissal was effected called “casual” employees; (2) that as of July 1991, “casual” workers
through a letter dated May 19, 2005 which she received on May 23, numbered 1,835; and regular employees, 263; (3) that the company
2005 and again on May 27, 2005. Stated therein were the reasons for hired “casual” every month for the duration of five months, after which
her termination, i.e., that after proper evaluation, Abbott determined their services were terminated and they were replaced by other “casual”
that she failed to meet the reasonable standards for her regularization employees on the same five-month duration; and (4) that these “casual”
considering her lack of time and people management and decision- employees were actually doing work that were necessary and desirable
making skills, which are necessary in the performance of her functions in petitioner’s usual business.
as Regulatory Affairs Manager.[66] Undeniably, this written notice As a matter of fact, the petitioner even stated in its position
sufficiently meets the criteria set forth above, thereby legitimizing the paper submitted to the Labor Arbiter that, according to its records, the
cause and manner of Alcaraz’s dismissal as a probationary employee previous employees of the company hired on a five-month basis
under the parameters set by the Labor Code.[67] numbered about 10,000 as of July 1990. This confirms private
respondents’ allegation that it was really the practice of the company to
d. Settled Jurisprudential Principles hire workers on a uniformly fixed contract basis and replace them upon
the expiration of their contracts with other workers on the same
• Purpose and not length of the probationary period is employment duration.
This scheme of the petitioner was apparently designed to
material.
prevent the private respondents and the other “casual” employees from
• Employee is deemed regular absent any written attaining the status of a regular employee. It was a clear circumvention
contract to prove probationary employment [San of the employees’ right to security of tenure and to other benefits like
Miguel Corporation v. Del Rosario]. minimum wage, cost-of-living allowance, sick leave, holiday pay, and
• Repetitive rehiring of a probationary employee 13th month pay. Indeed, the petitioner succeeded in evading the
means he has become a regular employee [Octaviano application of labor laws. Also, it saved itself from the trouble or burden
v. NLRC]. of establishing a just cause for terminating employees by the simple
• Regular workers of previous owner of business may expedient of refusing to renew the employment contracts.
The five-month period specified in private respondents’
be hired as probationary employees of a new owner
employment contracts having been imposed precisely to circumvent the
[Espina v. Court of Appeals]. constitutional guarantee on security of tenure should, therefore, be
• Probationary employment cannot be ad infinitum struck down or disregarded as contrary to public policy or morals. To
[Cathay Pacific v. Marin]. uphold the contractual arrangement between the petitioner and the
private respondents would, in effect, permit the former to avoid hiring
6. Fixed-Term Employees permanent or regular employees by simply hiring them on a temporary
This is the exception to the rule that an employee or casual basis, thereby violating the employees’ security of tenure in
becomes regular by reason of nature of work or period of their jobs.
employment [Brent School, Inc. v. Zamora] because in a fixed
period employment, these factors are not decisive indicators of Viernes v. NLRC
regularity of employment. The decisive determinant is the day Held: The principle we have enunciated in Brent applies
certain agreed upon by the parties for the commencement and only with respect to fixed term employments. While it is true that
petitioners were initially employed on a fixed term basis as their
Page 135 of 191
employment contracts were only for October 8 to 31, 1990, after lingual diversity among the crew during the COE is a reality that
October 31, 1990, they were allowed to continue working in the same necessitates the limitation of its period.[22]
capacity as meter readers without the benefit of a new contract or Petitioners make much of the fact that they have been
agreement or without the term of their employment being fixed anew. continually re-hired or their contracts renewed before the contracts
After October 31, 1990, the employment of petitioners is no longer on expired (which has admittedly been going on for twenty (20) years). By
a fixed term basis. The complexion of the employment relationship of such circumstance they claim to have acquired regular status with all
petitioners and private respondent is thereby totally changed. the rights and benefits appurtenant to it.
Petitioners have attained the status of regular employees. Such contention is untenable. Undeniably, this
circumstance of continuous re-hiring was dictated by practical
considerations that experienced crew members are more preferred.
Millares v. NLRC
Petitioners were only given priority or preference because of their
Held: As a Filipino seaman, petitioner is governed by the
experience and qualifications but this does not detract the fact that
Rules and Regulations Governing Overseas Employment and the
herein petitioners are contractual employees. They can not be
said Rules do not provide for separation or termination pay. What
considered regular employees.
is embodied in petitioner’s contract is the payment of compensation
arising from permanent partial disability during the period of
employment. We find that private respondent complied with the terms Settled Principles
of contract when it paid petitioner P42,315.00 which, in our opinion, is
a reasonable amount, as compensation for his illness. • Fixed-term employment is valid even if duties are
Lastly, petitioner claims that he eventually became a regular usually necessary or desirable in the employer’s
employee of private respondent and thus falls within the purview of usual business or trade.
Articles 284 and 95 of the Labor Code. In support of this contention,
• Notice of termination not necessary in fixed-term
petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC,
et al., wherein we held that the crew members of the shipping company employment.
had attained regular status and thus, were entitled to separation pay. • Employee is deemed regular if contract failed to state
However, the facts of said case differ from the present. In Worth, we the specific fixed period of employment, if they are
held that the principal and agent had “operational control and allowed to work beyond the fixed term, if they render
management” over the MV Orient Carrier and thus, were the actual work for more than 1 year, and if they are
employers of their crew members. successively renewed for work.
From the foregoing cases, it is clear that seafarers are • Termination prior to the lapse of the fixed term
considered contractual employees. They can not be considered as
should be for just or authorized cause.
regular employees under Article 280 of the Labor Code. Their
employment is governed by the contracts they sign everytime they are
rehired and their employment is terminated when the contract expires. Probationary v. Fixed-Term Employment
Their employment is contractually fixed for a certain period of time. The distinction between probationary employment
They fall under the exception of Article 280 whose employment has and fixed-term employment lies in the intention of the
been fixed for a specific project or undertaking the completion or employer and employee. Both employments involve fixed
termination of which has been determined at the time of engagement of period in terms of duration of employment. However, in
the employee or where the work or services to be performed is seasonal probationary employment, the parties mutually intend to make
in nature and the employment is for the duration of the season.[19] We
their relationship regular after the lapse of the period; while in
need not depart from the rulings of the Court in the two aforementioned
cases which indeed constitute stare decisis with respect to the fixed-term employment, no such intention exists and the
employment status of seafarers. relationship automatically terminates at the expiration of the
Petitioners insist that they should be considered regular period.
employees, since they have rendered services which are usually
necessary and desirable to the business of their employer, and that they 7. Floating Status
have rendered more than twenty(20) years of service. While this may At the outset, it bears reiterating that although placing
be true, the Brent case has, however, held that there are certain forms
an employee like a security guard on “floating” status (or
of employment which also require the performance of usual and
sometimes called temporary “off-detail” status) is considered a
desirable functions and which exceed one year but do not necessarily
attain regular employment status under Article 280.[20] Overseas temporary retrenchment measure, the Supreme Court, in Exocet
workers including seafarers fall under this type of employment which v. Serrano, recognized the fact that there is similarly no
are governed by the mutual agreements of the parties. provision in the Labor Code which treats of a temporary
In this jurisdiction and as clearly stated in the Coyoca case, retrenchment or lay-off. Neither is there any provision which
Filipino seamen are governed by the Rules and Regulations of the provides for its requisites or its duration. Nevertheless, since an
POEA. The Standard Employment Contract governing the employment employee cannot be laid-off indefinitely, the Court has applied
of All Filipino seamen on Board Ocean-Going Vessels of the POEA,
Article 301 [286] of the Labor Code by analogy to set the
particularly in Part I, Sec. C specifically provides that the contract of
specific period of temporary lay-off to a maximum of six (6)
seamen shall be for a fixed period. And in no case should the contract
of seamen be longer than 12 months. It reads: months. This provision states:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in “Article 301 [286]. When Employment Not
no case to exceed 12 months and shall be stated in the Crew Contract. Deemed Terminated. – The bona-fide suspension of the
Any extension of the Contract period shall be subject to the mutual operation of a business or undertaking for a period not
consent of the parties. exceeding six (6) months, or the fulfillment by the employee
Moreover, it is an accepted maritime industry practice that of a military or civic duty shall not terminate employment.
employment of seafarers are for a fixed period only. Constrained by the In all such cases, the employer shall reinstate the employee
nature of their employment which is quite peculiar and unique in itself, to his former position without loss of seniority rights if he
it is for the mutual interest of both the seafarer and the employer why indicates his desire to resume his work not later than one (1)
the employment status must be contractual only or for a certain period month from the resumption of operations of his employer or
of time. Seafarers spend most of their time at sea and understandably, from his relief from the military or civic duty.”
they can not stay for a long and an indefinite period of time at
sea.[21] Limited access to shore society during the employment will Clearly from the foregoing article, the concept of
have an adverse impact on the seafarer. The national, cultural and “floating status” does not find any direct connection or relation,
except for the six (6)-month period provided therein which has
Page 136 of 191
been held as the defining cut-off period that can be used as a principals. In the meantime that the dislocated employees are
consonant basis in determining the reasonableness of the length waiting for their next assignment, they may be placed on “off
of time when an employee could be deprived of work under this detail” or “floating” status following the same concept
doctrine. applicable to security guards.
For example, in JPL Marketing Promotions v. Court
a. Security Guards of Appeals, this principle was applied to merchandisers hired
Applying Article 301 [286] by analogy, the Supreme by petitioner company which is engaged in the business of
Court has consistently recognized that security guards may be recruitment and placement of workers. After they were notified
temporarily sidelined by their security agency as their of the cancellation of the contract of petitioner with a client
assignments primarily depend on the contracts entered into by where they were assigned and pending their reassignment to
the latter with third parties. This is called the “floating status” other clients, the merchandisers are deemed to have been placed
doctrine which is based on and justified under the said article. under “floating status” for a period of not exceeding six (6)
This status, as applied to security guards, is the period of time months under Article 301 [286]. Such notice, according to the
when security guards are in between assignments or when they Court, should not be treated as a notice of termination but a
are made to wait after being relieved from a previous post until mere note informing them of the termination of the client’s
they are transferred to a new one. In security agency parlance, service contract with petitioner company and their
being placed “off-detail” or on “floating” status means “waiting reassignment to other clients. The 30-day notice rule under
to be posted.” Article 298 [283] does not therefore apply to this case.
“Floating status” takes place under any of the This was likewise applied to the case of:
following circumstances:
(i) A bus driver in Valdez v. NLRC who was
placed on floating status after the air-
(i) When the security agency’s clients decide not to conditioning unit of the bus he was driving
renew their contracts with the agency, resulting suffered a mechanical breakdown; and
in a situation where the available posts under its (ii) A Property Manager in Nippon Housing
existing contracts are less than the number of Phil., Inc. v. Leynes, pending her
guards in its roster; or assignment to another project for the same
(ii) When contracts for security services stipulate position
that the client may request the agency for the
replacement of the guards assigned to it even for c. Some Principles
want of cause and there are no available posts
under the agency’s existing contracts to which (i) When an employee like a security guard is
the replaced security guards may be placed. placed on a “floating” status, he is not
entitled to any salary, financial benefit or
financial assistance provided by law during
As far as No. 2 above is concerned, the Supreme the 6-month period thereof.
Court has recognized the fact that clients of the security agency (ii) As a general rule, “floating status” beyond
have the right to request for the removal of any of the security 6 months amounts to illegal/constructive
guards supplied by the latter to the former without need to dismissal. This is so because “floating
justify the same. The reason for this is the lack of any status” is not equivalent to dismissal so
employment relationship between the security guards and the long as such status does not continue
client.
beyond a reasonable time which means six
Also, under No. 2 above, a relief and transfer order
(6) months. After 6 months, the employee
may be issued by the security agency to the security guard
should be recalled for work, or for a new
concerned in order to effect it. This order in itself does not sever
employment relationship between a security guard and his assignment; otherwise, he is deemed
agency. And the mere fact that the transfer would be terminated.
inconvenient for the former does not by itself make the transfer (iii) The security guard who refused to be re-
illegal. assigned may be dismissed for
insubordination.
b. Other Employees (iv) Multiple “floating status” amount to
While the “floating status” rule is traditionally constructive dismissal.
applicable to security guards who are temporarily sidelined (v) “Floating status” is distinct from
from duty while waiting to be transferred or assigned to a new preventive suspension. In the case of
post or client,1 Article 301 [286] has been applied as well to “floating status,” the employee is out of
other industries when, as a consequence of the bona-fide work because his employer has no
suspension of the operation of a business or undertaking, an available work or job to assign him to. He
employer is constrained to put employees on “floating status” is thus left with no choice but to wait for at
for a period not exceeding six (6) months.
least six (6) months before he could claim
Thus, it may also be applied to employees of
having been constructively dismissed,
legitimate contractors or subcontractors under a valid
should his employer fail to assign him to
independent contracting or subcontracting arrangement under
Article 106 of the Labor Code. The same form of dislocation any work or job within said period. In the
and displacement also affects their employees every time case of preventive suspension, the
contracts of services are terminated by their clients or employee is out of work because he has

Page 137 of 191

 committed a wrongful act and his purpose i.e. in order to ensure that the employees are paid the
continued presence in the company wages due them.
premises poses a serious and imminent This joint and several liability of the contractor and
threat to the life or property of the the principal is mandated by the Labor Code to assure
employer or of his co-workers. Without compliance of the provisions therein including the statutory
this kind of threat, preventive suspension is minimum wage (Article 99, Labor Code). The contractor is
not proper. Further, the period of made liable by virtue of his status as direct employer. The
principal, on the other hand, is made the indirect employer of
preventive suspension under the said
the contractor's employees for purposes of paying the
provisions of the Implementing Rules
employees their wages should the contractor be unable to pay
should not exceed thirty (30) days. them. This joint and several liability facilitates, if not
(vi) A complaint filed before the lapse of the 6- guarantees, payment of the workers’ performance of any work,
month period of floating status is task, job or project, thus giving the workers ample protection
premature, the employee not having been as mandated by the 1987 Constitution [Rabago v. NLRC].
deemed constructively dismissed at that
point. Thus, a complaint filed twenty-nine Rabago v. NLRC
(29) days after the security guard was Held: Our conclusion is that Ace Building Care and the
placed on floating status was declared as Philippine Tuberculosis Society are solidarily liable to the
having been prematurely filed. complainants for their differential pay under Wage Orders Nos. 5 and
6, PTS being considered in the circumstances of this case to be the
(vii) However, the filing of a complaint for
indirect employer of workers in the private sector.
constructive dismissal prior to the lapse of
the 6-month period of “floating status” will
Filipinas Synthetif Fiber v. NLRC
not be held premature in cases where the Held: With respect to its liability, however, petitioner
intent to terminate the employee is evident cannot totally exculpate itself from the fact that respondent DE LIMA
even prior to the lapse of said period. is an independent job contractor. We agree with the Solicitor General
(viii) No procedural due process is required that notwithstanding the lack of a direct employer-employee
before an employee is placed under relationship between FILSYN and Felipe Loterte, the former is still
jointly and severally liable with respondent DE LIMA for Loterte's
“floating status.” The reason is that there is monetary claims under Art. 109 of the Labor Code19 which explicitly
no termination of employment to speak of provides-
at that point. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held
C. LEGITIMATE SUBCONTRACTING VS. LABOR- responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their
ONLY CONTRACTING
civil liability under this Chapter, they shall be considered as direct
employers.
Article 109. Solidary Liability. The provisions of existing
laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or Vigilla v. Philippine College of Criminology
subcontractor for any violation of any provision of this Code. For Held: A Labor-only Contractor is Solidarily
purposes of determining the extent of their civil liability under this Liable with the Employer
Chapter, they shall be considered as direct employers. The issue of whether there is solidary liability between the
labor-only contractor and the employer is crucial in this case. If a labor-
only contractor is solidarily liable with the employer, then the releases,
Article 107. Indirect Employer. The provisions of the waivers and quitclaims in favor of MBMSI will redound to the benefit
immediately preceding article shall likewise apply to any person, of PCCr. On the other hand, if a labor-only contractor is not solidarily
partnership, association or corporation which, not being an liable with the employer, the latter being directly liable, then the
employer, contracts with an independent contractor for the releases, waivers and quitclaims in favor of MBMSI will not extinguish
performance of any work, task, job or project. the liability of PCCr.
On this point, petitioners argue that there is no solidary
“Contracting” or “subcontracting” refers to an liability to speak of in case of an existence of a labor-only contractor.
arrangement whereby a principal agrees to farm out to a Petitioners contend that under Article 10631 of the Labor Code, a labor-
contractor the performance or completion of a specific job or only contractor’s liability is not solidary as it is the employer who
should be directly responsible to the supplied worker. They argue that
work within a definite or predetermined period, regardless of
Article 10932 of the Labor Code (solidary liability of employer/indirect
whether such job or work is to be performed or completed employer and contractor/subcontractor) and Article 1217 of the New
within or outside the premises of the principal. Civil Code (extinguishment of solidary obligation) do not apply in this
This Court held in Eagle Security, Inc. vs. case. Hence, the said releases, waivers and quitclaims which they
NLRC and Spartan Security and Detective Agency, Inc. vs. purportedly issued in favor of MBMSI and Atty. Seril do not
NLRC that the joint and several liability of the contractor and automatically release respondents from their liability.
the principal is mandated by the Labor Code to assure Again, the Court disagrees.
compliance with the provisions therein including the minimum The NLRC and the CA correctly ruled that the releases,
waivers and quitclaims executed by petitioners in favor of MBMSI
wage. The contractor is made liable by virtue of his status as
redounded to the benefit of PCCr pursuant to Article 1217 of the New
direct employer. The principal, on the other hand, is made the Civil Code. The reason is that MBMSI is solidarily liable with the
indirect employer of the contractor’s employees to secure respondents for the valid claims of petitioners pursuant to Article 109
payment of their wages should the contractor be unable to pay of the Labor Code.
them. Even in the absence of an employer-employee As correctly pointed out by the respondents, the basis of the
relationship, the law itself establishes one between the solidary liability of the principal with those engaged in labor-only
principal and the employees of the agency for a limited contracting is the last paragraph of Article 106 of the Labor Code,
which in part provides: "In such cases labor-only contracting, the

Page 138 of 191

person or intermediary shall be considered merely as an agent of the The case of San Miguel Corporation v. MAERC Integrated
employer who shall be responsible to the workers in the same manner Services, Inc. also recognized this solidary liability between a labor-
and extent as if the latter were directly employed by him." only contractor and the employer. In the said case, this Court gave the
Section 19 of Department Order No. 18-02 issued by the distinctions between solidary liability in legitimate job contracting and
Department of Labor and Employment (DOLE), which was still in in labor-only contracting, to wit:
effect at the time of the promulgation of the subject decision and In legitimate job contracting, the law creates an employer-
resolution, interprets Article 106 of the Labor Code in this wise: employee relationship for a limited purpose, i.e., to ensure that the
Section 19. Solidary liability. The principal shall be deemed employees are paid their wages. The principal employer becomes
as the direct employer of the contractual employees and therefore, jointly and severally liable with the job contractor only for the payment
solidarily liable with the contractor or subcontractor for whatever of the employees' wages whenever the contractor fails to pay the same.
monetary claims the contractual employees may have against the Other than that, the principal employer is not responsible for any claim
former in the case of violations as provided for in Sections 5 made by the employees.
(LaborOnly contracting), 6 (Prohibitions), 8 (Rights of Contractual On the other hand, in labor-only contracting, the statute
Employees) and 16 (Delisting) of these Rules. In addition, the principal creates an employer-employee relationship for a comprehensive
shall also be solidarily liable in case the contract between the principal purpose: to prevent a circumvention of labor laws. The contractor is
and contractor or subcontractor is preterminated for reasons not considered merely an agent of the principal employer and the latter is
attributable to the fault of the contractor or subcontractor. [Emphases responsible to the employees of the labor-only contractor as if such
supplied]. employees had been directly employed by the principal employer. The
The DOLE recognized anew this solidary liability of the principal employer therefore becomes solidarily liable with the labor-
principal employer and the labor-only contractor when it issued only contractor for all the rightful claims of the
Department Order No. 18-A, series of 2011, which is the latest set of employees.37 [Emphases supplied; Citations omitted]
rules implementing Articles 106-109 of the Labor Code. Section 27 Recently, this Court reiterated this solidary liability of
thereof reads: labor-only contractor in the case of 7K Corporation v. NLRC where it
Section 27. Effects of finding of labor-only contracting was ruled that the principal employer is solidarily liable with the labor-
and/or violation of Sections 7, 8 or 9 of the Rules. A finding by only contractor for the rightful claims of the employees.
competent authority of labor-only contracting shall render the principal Conclusion
jointly and severally liable with the contractor to the latter’s employees, Considering that MBMSI, as the labor-only contractor, is
in the same manner and extent that the principal is liable to employees solidarily liable with the respondents, as the principal employer, then
directly hired by him/her, as provided in Article 106 of the Labor Code, the NLRC and the CA correctly held that the respondents’ solidary
as amended. liability was already expunged by virtue of the releases, waivers and
A finding of commission of any of the prohibited activities quitclaims executed by each of the petitioners in favor of MBMSI
in Section 7, or violation of either Sections 8 or 9 hereof, shall render pursuant to Article 1217 of the Civil Code which provides that
the principal the direct employer of the employees of the contractor or "payment made by one of the solidary debtors extinguishes the
subcontractor, pursuant to Article 109 of the Labor Code, as amended. obligation."
(Emphasis supplied.) This Court has constantly applied the Civil Code provisions
These legislative rules and regulations designed to on solidary liability, specifically Articles 1217 and 1222, to labor cases.
implement a primary legislation have the force and effect of law. A rule In Varorient Shipping Co., Inc. v. NLRC, this Court held:
is binding on the courts so long as the procedure fixed for its The POEA Rules holds her, as a corporate officer, solidarily
promulgation is followed and its scope is within the statutory authority liable with the local licensed manning agency. Her liability is
granted by the legislature.33 inseparable from those of Varorient and Lagoa. If anyone of them is
Jurisprudence is also replete with pronouncements that a held liable then all of them would be liable for the same obligation.
job-only contractor is solidarily liable with the employer. One of these Each of the solidary debtors, insofar as the creditor/s is/are concerned,
is the case of Philippine Bank of Communications v. NLRC 34 where is the debtor of the entire amount; it is only with respect to his co-
this Court explained the legal effects of a job-only contracting, to wit: debtors that he/she is liable to the extent of his/her share in the
Under the general rule set out in the first and second obligation. Such being the case, the Civil Code allows each solidary
paragraphs of Article 106, an employer who enters into a contract with debtor, in actions filed by the creditor/s, to avail himself of all defenses
a contractor for the performance of work for the employer, does not which are derived from the nature of the obligation and of those which
thereby create an employer-employees relationship between himself are personal to him, or pertaining to his share [citing Section 1222 of
and the employees of the contractor. Thus, the employees of the the Civil Code]. He may also avail of those defenses personally
contractor remain the contractor's employees and his alone. belonging to his co-debtors, but only to the extent of their share in the
Nonetheless when a contractor fails to pay the wages of his employees debt. Thus, Varorient may set up all the defenses pertaining to Colarina
in accordance with the Labor Code, the employer who contracted out and Lagoa; whereas Colarina and Lagoa are liable only to the extent to
the job to the contractor becomes jointly and severally liable with his which Varorient may be found liable by the court.
contractor to the employees of the latter "to the extent of the work xxxx
performed under the contract" as such employer were the employer of If Varorient were to be found liable and made to pay
the contractor's employees. The law itself, in other words, establishes pursuant thereto, the entire obligation would already be extinguished
an employer-employee relationship between the employer and the job [citing Article 1217 of the Civil Code] even if no attempt was made to
contractor's employees for a limited purpose, i.e., in order to ensure that enforce the judgment against Colarina. Because there existed a
the latter get paid the wages due to them. common cause of action against the three solidary obligors, as the acts
A similar situation obtains where there is "labor only" and omissions imputed against them are one and the same, an ultimate
contracting. The "labor-only" contractor-i.e "the person or finding that Varorient was not liable would, under these circumstances,
intermediary" - is considered "merely as an agent of the employer." The logically imply a similar exoneration from liability for Colarina and
employer is made by the statute responsible to the employees of the Lagoa, whether or not they interposed any defense.
"labor only" contractor as if such employees had been directly In light of these conclusions, the Court holds that the
employed by the employer. Thus, where "labor-only" contracting exists releases, waivers and quitclaims executed by petitioners in favor of
in a given case, the statute itself implies or establishes an employer- MBMSI redounded to the respondents' benefit. The liabilities of the
employee relationship between the employer (the owner of the project) respondents to petitioners are now deemed extinguished. The Court
and the employees of the "labor only" contractor, this time for a cannot allow petitioners to reap the benefits given to them by MBMSI
comprehensive purpose: "employer for purposes of this Code, to in exchange for the releases, waivers and quitclaims and, again, claim
prevent any violation or circumvention of any provision of this Code." the same benefits from PCCr.
The law in effect holds both the employer and the "laboronly"
contractor responsible to the latter's employees for the more effective 1. Legitimate Job Contracting
safeguarding of the employees' rights under the Labor Code. [Emphasis
supplied].

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 Article 106. Contractor or Subcontractor. Whenever an • Knowledge Process Outsourcing
employer enters into a contract with another person for the • Legal Process Outsourcing
performance of the former's work, the employees of the contractor
• IT Infrastructure Outsourcing
and of the latters' subcontractor, if any, shall be paid in accordance
with the provisions of this Code. • Application Development
In the event that the contractor or subcontractor fails to • Hardware/Software Support
pay the wages of his employees in accordance with this Code, the • Medical Transcription
employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work
• Animation Services
performed under the contract, in the same manner and extent that • Back office operations/support
he is liable to employees directly employed by him. • Construction industry- except when there are labor
The Secretary of Labor and Employment may, by standards violations
appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code.
• Other contractual relationships such as contract of
In so prohibiting or restricting, he may make appropriate sale, contract of carriage, contract of lease, toll
distinctions between labor-only contracting and job contracting as manufacturing, growership, contract of management
well as differentiations within these types of contracting and • Private Security Agencies-covered by DO 150, s
determine who among the parties involved shall be considered the
2016
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person 2. Labor-Only Contracting
supplying workers to an employer does not have substantial capital Labor-only contracting has the following elements:
or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by a. (i) The contractor or subcontractor does not
such person are performing activities which are directly related to have substantial capital; or (ii) the contractor or
the principal business of such employer. In such cases, the person subcontractor does not have investments in the
or intermediary shall be considered merely as an agent of the
form of tools, equipment, machineries,
employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him. supervision and work premises, among others;
and
b. The contractor’s or subcontractor’s employees
Under Department Order No. 174 Series of 2017, the
recruited and placed are performing activities
concurrence of the following is essential for a contractor to be
which are directly related to the main business
considered as a legitimate job contractor:
operation of the principal; or
c. The contractor or subcontractor does not
a) The contractor must be duly registered with
exercise the right to control the performance of
the DOLE;
the work of the employees.
b) The contractor is engaged in a distinct and
independent business and undertakes to
Where labor-only contracting exists in a given case,
perform the job or work on its own
the law itself implies or establishes an employer-employee
responsibility, according to its own manner
relationship between the employer and the employees of the
and method, and free from control and
labor-only contractor to prevent any violation or circumvention
direction of the principal in all matters
of provisions of the Labor Code [Vallum Security v. NLRC].
connected with the performance of the work
The law does not require both substantial capital and
except as to the results thereof;
investment in the form of tools, equipment, machineries, etc.
c) The contractor has substantial capital to
This is clear from the use of the conjunction "or". If the
carry out the job farmed out by the principal
intention was to require the contractor to prove that he has both
on his account, manner and method,
capital and the requisite investment, then the conjunction "and"
investment in the form of tools, equipment,
should have been used [Neri v. NLRC].
machinery and supervision;
d) The Service Agreement ensures compliance
Examples of Control
with all the rights and benefits for all the
employees of the contractor or subcontractor • There was control when the guards were instructed to
under the labor laws. stay in their posts although the security service
agreement was already terminated [Lopez v. PLDT].
Absence of any of the foregoing requisites makes the • Control was evident since the determination of work
arrangement a labor-only arrangement [Philippine School of assignments and what news to be broadcasted were
Business Administration v. NLRC]. present [Murillo v. NLRC].
In Consolidated Building Maintenance Inc. vs Asprec • PAL exercised control over the agency employees who
Jr., “job contracting is deemed legitimate and permissible when loaded and unloaded cargo and the delivered the
the contractor has substantial capital or investment and runs a baggages. PAL failed to prove that the agency
business that is independent and free from the control of the supervised the employees through an assigned
principal.” This “substantial capital” requirement refers to
supervisor [PAL v. Ligan].
paid-up capital stock/shares of at least P5 million in the case of
• SMC is the real employer because the workers’ loading
corporations and partnerships, and a net worth of at least P5
and unloading of bottles was supervised by SMC and not
million for single proprietorships.
by the agency. The SMC supervisors were also the ones
Exclusions who gave instructions to the worker [SMC v. Semillano]
• Does not include technology-based services • Sumifru exercised control over the employees because
• Business Process Outsourcing it required monitoring sheets and imposed disciplinary

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 action for violations of No ID- No Entry Policy and No IN-HOUSE COOPERATIVE- refers to a cooperative
Helmet-No Entry Policy [Sumifru v. NAMASUFA]. which is managed or controlled directly or indirectly by the
• The cooperative exercised all the rights of an employer. principal, or one where the principal or any of its officers, owns
It was the one who hired the workers and the principal or represents any equity or interest, and which operates solely
did not even know the workers who were engaged. It or mainly for the principal
paid the salaries of workers. It disciplined the workers
and controlled the means and methods of doing the II
work. Hence, there is independent contracting [Travea’o TERMINATION OF EMPLOYMENT BY
EMPLOYER
v. Bobongon Farmers].
• The Contract of Service itself provides that RFC can
Article 294. Security of Tenure. In cases of regular
require the workers assigned by PMCI to render services
employment, the employer shall not terminate the services of an
even beyond the regular eight hour working day when employee except for a just cause or when authorized by this Title.
deemed necessary. Furthermore, RFC undertook to An employee who is unjustly dismissed from work shall be entitled
assist PMCI in making sure that the daily time records to reinstatement without loss of seniority rights and other
of its alleged employees faithfully reflect the actual privileges and to his full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent computed from the
working hours. With regard to petitioner, RFC admitted
time his compensation was withheld from him up to the time of his
that it exercised control and supervision over him actual reinstatement.
[Vinoya v. NLRC].
A. JUST CAUSES
SUMMARY OF FORMS OF LABOR-ONLY
CONTRACTING Article 297.Termination by Employer. An employer may
terminate an employment for any of the following causes:
• Contractor does not have substantial capitalization AND (a) Serious misconduct or willful disobedience by the
employees perform jobs that are directly related to employee of the lawful orders of his employer or representative in
Principal’s business connection with his work;
(b) Gross and habitual neglect by the employee of his
• Contractor does not have substantial capitalization AND duties;
employees are controlled by the Principal (c) Fraud or willful breach by the employee of the trust
• Contractor does not have tools and equipment to render reposed in him by his employer or duly authorized representative;
services AND employees perform jobs that are directly (d) Commission of a crime or offense by the employee
against the person of his employer or any immediate member of his
related to Principal’s business
family or his duly authorized representatives; and
• Contractor does not have tools and equipment to render (e) Other causes analogous to the foregoing.
services AND employees are controlled by the Principal
Dismissal is cessation of an employment due to a just
3. Posting of Bond cause, attributable to the employee. Termination is cessation
of an employment due to an authorized cause, which is not the
Article 108. Posting of Bond. An employer or indirect fault of the employee. Dismissal does not merit separation pay;
employer may require the contractor or subcontractor to furnish a termination carries with it separation pay.
bond equal to the cost of labor under contract, on condition that Tenure is presumed. The burden of proving that the
the bond will answer for the wages due the employees should the
termination was for a valid or authorized cause shall rest on the
contractor or subcontractor, as the case may be, fail to pay the
same.
employer.
The just causes in the Labor Code are found in the
following provisions thereof:
4. Other Illicit Forms of Employment
Arrangements
(1) Article 297 [282] - (Termination by the
Employer) which provides for the following
(a) When the Principal farms out work to a grounds:
Cabo
CABO refers to a person or a group of persons or a (a) Serious misconduct or willful
labor group, under the guise of a labor organization, disobedience by the employee of the
cooperative or any entity, supplies workers to an employer, lawful orders of his employer or
with or without any monetary consideration, whether in the representative in connection with his
capacity of an agent of the employer or as an ostensible work;
independent contractor (b) Gross and habitual neglect by the
employee of his duties;
(b) Contracting out a job or work through (c) Fraud or willful breach by the employee
an in-house agency of the trust reposed in him by his
IN-HOUSE AGENCY refers to a contractor which is employer or duly authorized
owned, managed and controlled directly or indirectly by the representative;
principal, or one where the principal owns/represents any share (d) Commission of a crime or offense by the
of stock, and which operates solely and mainly for the principal. employee against the person of his
employer or any immediate member of
(c) Contracting out of job or work through his family or his duly authorized
an in-house cooperative which merely representatives; and
supplies workers to the principal (e) Other causes analogous to the foregoing.

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 For serious misconduct or improper behavior to be a
(2) Article 279(a) [264(a)] - (Prohibited just cause for dismissal, the following requisites must concur:
Activities) which provides for the termination
of the following: (a) It must be serious;
(b) It must relate to the performance of the
(a) Union officers who knowingly employee’s duties;
participate in an illegal strike and (c) It must show that he has become unfit to
therefore deemed to have lost their continue working for the employer; and
employment status. (d) It must have been performed with wrongful
(b) Any employee, union officer or ordinary intent.
member who knowingly participates in
the commission of illegal acts during a The 2014 case of Imasen v. Alcon added the 4th
strike (irrespective of whether the strike requisite above which, it said, is “equally important and
is legal or illegal), is also deemed to required.” All the above requisites must concur [Coca-Cola
have lost his employment status. Bottlers v. KMMC-FFW].

(3) Article 278(g) [263(g)] - (National Interest Colegio de San Juan de Letran v. Meris
Cases) where strikers who violate orders, Held: The fact that eight students were made beneficiaries
prohibitions and/or injunctions as are issued of such increase does not justify the irregular alteration since the rule
by the DOLE Secretary or the NLRC, may be is, the rating of the pupil should be based on his scholastic record, even
imposed immediate disciplinary action, if the same is non-tested or qualitative in nature, as in the case at bar.
Respondent’s prerogative to give her students the grade that they
including dismissal or loss of employment
deserve is not incoherent with having a fair and reasonable basis
status. therefor.
(4) Article 259(e) [248(e)] - (Union Security To our mind, the acts of the respondent in altering the grades
Clause) where violation of the union security in the Clean Records even after the same were already reviewed and
agreement in the CBA may result in approved by the subject coordinators; of effecting the alterations and
termination of employment. Under this clause, erasures without placing her initials thereon; of not informing the
the bargaining union can demand from the subject coordinators of such alterations and erasures; of allowing the
employer the dismissal of an employee who discrepancies to last without any effort to reconcile the same to avoid
any doubts on the grading system of petitioner; of refusing to accept
commits a breach of union security
the memo informing her of the aforesaid tampering and snubbing any
arrangement, such as failure to join the union explanation relevant thereto, are all acts of transgression of school
or to maintain his membership in good rules, regulations and policies. Truly, then, respondent had committed
standing therein. The same union can also a misconduct, serious enough to warrant her dismissal from
demand the dismissal of a member who employment under paragraph (a) of Article 282 of the Labor Code, as
commits an act of disloyalty against it, such as well as Section 94(b), Article XVII of the Manual of Regulations for
when the member organizes a rival union. Private Schools, which provides that the employment of a teacher may
be terminated for negligence in keeping school or student records, or
tampering with or falsification of the same.
The Secretary of Labor has extraordinary, express
power to intervene in a labor dispute to enjoin a potential
termination Settled Principles
Article 292 [b] of the Labor Code provides:
• Serious misconduct implies that it must be of such
Subject to the constitutional right of workers to grave and aggravated character and not merely trivial
security of tenure and their right to be protected against or unimportant.
dismissal except for a just and authorized cause and without • Simple or minor misconduct would not justify the
prejudice to the requirement of notice under Article 283 of termination of the services of an employee.
this Code, employer shall furnish the worker whose
• Possession or use of shabu or other drugs is a valid
employment is sought to be terminated a written notice
containing a statement of the causes for termination and
ground to terminate employment.
shall afford the latter ample opportunity to be heard and to • Immorality, as a general rule, is not a just ground to
defend himself with the assistance of his representative if he terminate employment. The exception is when such
so desires in accordance with company rules and regulations immoral conduct is prejudicial or detrimental to the
promulgated pursuant to guidelines set by the Department interest of the employer
of Labor and Employment. Any decision taken by the • Immoral act committed beyond office hours is a valid
employer shall be without prejudice to the right of the
ground to terminate employment.
worker to contest the validity or legality of his dismissal by
filing a complaint with the regional branch of the National • Sexual intercourse inside company premises
Labor Relations Commission. The burden of proving that constitutes serious misconduct.
the termination was for a valid or authorized cause shall rest • The act of a 30-year old lady teacher in falling in love
on the employer. The Secretary of the Department of Labor with a 16-year old student is not immoral.
and Employment may suspend the effects of the termination • Fighting is a ground for termination but only the
pending resolution of the dispute in the event of a prima
instigator or aggressor and not the victim who was
facie finding by the appropriate official of the Department
constrained to defend himself should be dismissed.
of Labor and Employment before whom such dispute is
pending that the termination may cause a serious labor • Challenging superiors to a fight is a just cause for
dispute or is in implementation of a mass lay-off. termination.
• Assaulting another employee is a just cause for
1. Serious Misconduct termination.

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 • Utterance of obscene, insulting or offensive words the refusal of the employee to comply with the rule, regulation,
constitutes serious misconduct. or policy justified and not constitutive of “willful disobedience”
• Gambling within company premises is a serious as would warrant the imposition of the penalty of dismissal for
misconduct. such refusal.
• Rendering service to business rival is a just cause to
terminate employment. Settled Principles
• Selling products of a competitor is a just cause for
termination. • Making false allegations in complaint does not constitute
• Organizing a credit union by employees in a bank is a insubordination.
serious misconduct. • Failure to answer memo to explain constitutes willful
• Deceiving a customer for personal gain is a just cause disobedience.
• Another notice is required in case of termination on the
for termination.
• Contracting work in competition with employer ground of failure to answer memo to explain.
• Refusal to undergo random drug testing constitutes both
constitutes serious misconduct.
serious misconduct and insubordination.
• Intoxication which interferes with the employee’s
• Refusal to render overtime to meet production deadline
work constitutes serious misconduct.
constitutes insubordination.
• The act of a teacher in pressuring a colleague to
• Refusal to comply with a lawful transfer constitutes
change the failing grade of a student is serious
insubordination.
misconduct.
• Sexual harassment is a just ground to dismiss.
3. Gross and Habitual Neglect of Duties
• Sleeping while on duty is a ground for termination. The following are the requisites:
• Dismissal is too harsh a penalty for eating while at
work. (a) There must be negligence which is gross and/or
• Pilferage or theft of company-owned property is a just habitual in character; and
cause to terminate. (b) It must be work-related as would make him unfit
• Theft of funds or property not owned by employer is to work for his employer.
not a ground to terminate.
• Act of falsification is a valid ground to terminate Settled Principles
employment.
• Punching-in of time cards of other employees is a just • Simple negligence is not sufficient to terminate employment.
cause for termination. • The negligence must be gross in character which means
absence of that diligence that an ordinarily prudent man
2. Insubordination or Willful Disobedience of would use in his own affairs.
Lawful Orders • As a general rule, negligence must be both gross and
One of the fundamental duties of an employer is to habitual to be a valid ground to dismiss.
obey all reasonable rules, orders and instructions of the • Habituality may be disregarded if negligence is gross or the
employer. In order to validly invoke this ground, the following damage or loss is substantial. “Habitual negligence” implies
requisites must be complied with, to wit: repeated failure to perform one’s duties for a period of time,
depending upon the circumstances.
(a) The employee’s assailed conduct must have • Actual damage, loss or injury is not an essential requisite.
been willful or intentional, the willfulness being • Gross negligence may result to loss of trust and confidence.
characterized by a wrongful and perverse • Absences, if authorized, cannot be cited as a ground to
attitude; and terminate employment.
(b) The order violated must be based on a • Tardiness or absenteeism, if not habitual, cannot be cited as
reasonable and lawful company rule, regulation a ground to terminate employment.
or policy and made known to the employee and • Tardiness or absenteeism, if habitual, may be cited as a
must pertain to the duties for which he has been ground to terminate employment.
engaged to discharge. • Tardiness or absenteeism, if habitual, may be tantamount to
serious misconduct.
Requisites for validity of company rules and • Absences or tardiness due to emergency, ailment or
regulations fortuitous event are justified and may not be cited as just
As far as the second requisite for insubordination or cause to terminate employment.
willful disobedience is concerned, it is required that there • Unsatisfactory or poor performance, inefficiency and
should exist a rule, regulation or policy upon which the order is incompetence are considered just causes for dismissal only if
based which must be: they amount to gross and habitual neglect of duties.
(a) Lawful and reasonable;
(b) Sufficiently known to the employee; and 4. Abandonment of Work
(c) In connection with the duties for which the Abandonment is a form of neglect of duty, hence, a
employee has been engaged to discharge. just cause for termination of employment under Article 297 of
the Labor Code. To constitute abandonment, two (2) elements
An order which is not based on a rule, regulation or must concur, namely:
policy which does not satisfy the foregoing three (3) requisites (a) The employee must have failed to report for
is not lawful and thus may not be invoked as basis for work or must have been absent without valid or
terminating an employee on the ground of insubordination. justifiable reason; and
Needlessly, absent any of the foregoing elements would make

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 (b) There must have been a clear intention on the prescriptive period within which to institute his action for
part of the employee to sever the employer- illegal dismissal.
employee relationship manifested by some overt • Filing of a case to pre-empt investigation of the
act. administrative case is tantamount to abandonment.
• When what is prayed for in the complaint is separation
No hearing is required to validly dismiss an pay and not reinstatement, the filing of complaint does
employee for abandonment [Intertranz Container v. Bautista]. not negate abandonment.
• It is abandonment when what is prayed for in the complaint
a. Due Process is separation pay and it was only in the position paper that
Due process in abandonment cases consists only of reinstatement was prayed for.
the service of two (2) notices to the employee, viz: • Employment in another firm coinciding with the filing of
complaint does not indicate abandonment.
i. First notice directing the employee to explain • Offer of reinstatement by employer during proceedings
why he should not be declared as having before Labor Arbiter and refusal by employee does not
abandoned his job; and indicate abandonment but more of a symptom of strained
ii. Second notice to inform him of the employer’s relations between the parties.
decision to dismiss him on the ground of • An employee may be absolved from the charge of
abandonment. abandonment of work but adjudged guilty of AWOL. These
two grounds are separate and distinct from each other.
Batangas Laguna Tayabas Bus Company v. • An employee who failed to report for work after the
NLRC expiration of the duly approved leave of absence is
Held: The contention of the petitioner that the private considered to have abandoned his job.
respondents abandoned their position is also not acceptable. An • An employee who failed to comply with the order for his
employee who forthwith takes steps to protest his lay-off cannot by any reinstatement is deemed to have abandoned his work.
logic be said to have abandoned his work. • An employee who, after being transferred to a new
For abandonment to constitute a valid cause for termination
assignment, did not report for work anymore is deemed to
of employment, there must be a deliberate, unjustified refusal of the
employee to resume his employment.[4] This refusal must be clearly
have abandoned his job.
established. As we stressed in a recent case, [5] mere absence is not • An employee who deliberately absented from work without
sufficient; it must be accompanied by overt acts unerringly pointing to leave or permission from his employer for the purpose of
the fact that the employee simply does not want to work anymore. In looking for a job elsewhere is deemed to have abandoned his
the case at bar, the affidavit of Eduardo Azucena, BLTBCo operations work.
manager,[6] besides being hearsay, lacks credibility in light of the • Imprisonment or detention by military does not constitute
subsequent acts of the private respondents in complaining about their abandonment.
separation.
• Absence to evade arrest is not a valid justification. To do so
A worker who joins a strike does so precisely to assert or
improve the terms and conditions of his employment. If his purpose is
would be to place an imprimatur on the employee’s attempt
to abandon his work, he would not go to the trouble of joining a strike. to derail the normal course of the administration of justice.

b. Settled Principles 5. Fraud

Fraud is separate and distinct from the other ground
• Mere absence is not enough to constitute abandonment.
provided in the same paragraph, that is, loss of trust and
• Clear intention to sever employment relationship is confidence [Sanden Aircon v. Rosales].
necessary. The following are the requisites of this ground:
• Due process in abandonment cases consists only of the
service of 2 notices to the employee, viz.: (a) The employee has committed fraud, an
intentional deception and used dishonest
i. First notice directing the employee to explain why methods for personal gain or to damage he
he should not be declared as having abandoned his employer; and
job; and (b) The fraud is work-related and rendered him
ii.Second notice to inform him of the employer’s unfit for work for his employer.
decision to dismiss him on the ground of
abandonment. Falsification constitutes not only serious misconduct
but fraud under the Labor Code [San Miguel Corp v. NLRC].
• No hearing is required to validly dismiss an employee for
abandonment. Settled Principles
• Notices in abandonment cases must be sent to employee’s
• Failure to deposit collection constitutes fraud.
last known address per record of the company. The
• Lack of damage or losses is not necessary in fraud cases. The
employer need not look for the employee’s current
whereabouts. fact that the employer did not suffer losses from the
• Immediate filing of a complaint for illegal dismissal praying
dishonesty of the dismissed employee because of its timely
for reinstatement negates abandonment. discovery does not excuse the latter from any culpability.
• Lack of misappropriation or shortage is immaterial in case of
• Lapse of time between dismissal and filing of a case is not a
material indication of abandonment. Hence, lapse of 2 years unauthorized encashment of personal checks by teller and
and 5 months or 20 months or 9 months or 8 months before cashier.
• Restitution does not have absolutory effect.
filing the complaint for illegal dismissal is not an indication
of abandonment. Under the law, the employee has a 4-year
6. Willful Breach of Trust and Confidence

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 For the doctrine of loss of trust and confidence to assertions and accusations by the employer will not be
apply, the following requisites must concur: sufficient. But as regards a managerial employee, the mere
existence of a basis for believing that he has breached the
(a) The employee holds a position of trust and trust of his employer would suffice for his dismissal.
confidence; • There must be “some basis” for the loss of trust and
(b) There exists an act justifying the loss of trust and confidence which means that there is reasonable ground to
confidence, which means that the act that believe, if not to entertain the moral conviction, that the
betrays the employer’s trust must be real, i.e., concerned employee is responsible for the misconduct and
founded on clearly established facts; that the nature of his participation therein rendered him
(c) The employee’s breach of the trust must be absolutely unworthy of trust and confidence demanded by
willful, i.e., it was done intentionally, his position.
knowingly and purposely, without justifiable • Dismissal due to feng shui mismatch is not a valid ground
excuse; and to lose trust and confidence.
(d) The act must be in relation to his work which • Command responsibility of managerial employees is a
would render him unfit to perform it. ground to dismiss.
• Confidential employee may be dismissed for loss of trust
a. Guidelines and confidence.
As a safeguard against employers who • Grant of promotions and bonuses negates loss of trust and
indiscriminately use “loss of trust and confidence” to justify confidence.
arbitrary dismissal of employees, the Court, in addition to the • Long years of service, absence of derogatory record and
above elements, imposes the following guidelines for the small amount involved are deemed inconsequential
doctrine to apply: insofar as loss of trust and confidence is concerned.
(a) The loss of confidence must not be simulated; • Dropping of criminal charges or acquittal in a criminal
(b) It should not be used as a subterfuge for causes
case arising from the same act does not affect the validity
which are illegal, improper or unjustified;
of dismissal based on loss of trust and confidence.
(c) It may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary; and
7. Commission of Crime or Offense
(d) It must be genuine, not a mere afterthought, to The following are the requisites for the valid
justify earlier action taken in bad faith. invocation of this ground:
b. Settled Principles
(a) A crime or offense was committed by the
employee;
• Employee’s position must be reposed with trust and (b) It was committed against any of the following
confidence. persons:
• “Position of trust and confidence” is one where a person (i) His employer;
is entrusted with confidence on delicate matters, or with (ii) Any immediate member of his
the custody, handling, or care and protection of the employer’s family; or
employer’s property. (iii) His employer’s duly authorized
• Two (2) classes of positions of trust. The first class representative.
consists of managerial employees or those who, by the
nature of their position, are entrusted with confidential and Because of its gravity, work-relation is not necessary.
delicate matters and from whom greater fidelity to duty is Neither is it necessary to show that the commission of the
correspondingly expected. They refer to those vested with criminal act would render the employee unfit to perform his
the powers or prerogatives to lay down and execute work for the employer.
management policies and/or to hire, transfer suspend, lay- The conviction of an employee in a criminal case is
off, recall, discharge, assign or discipline employees or to not indispensable to warrant his dismissal by his employer. If
effectively recommend such managerial actions. Their there is sufficient evidence to show that the employee has been
primary duty consists of the management of the guilty of a breach of trust, or that his employer has ample reason
establishment in which they are employed or of a to distrust him, it cannot justly deny to the employer the
department or a subdivision thereof. authority to dismiss such employee. All that is incumbent upon
• The second class consists of fiduciary rank-and-file the Court of Industrial Relations (now National Labor
employees who, though rank-and-file, are routinely Relations Commission) to determine is whether the proposed
charged with the custody, handling or care and protection dismissal is for just cause xxx. It is not necessary for said court
of the employer's money or property, or entrusted with to find that an employee has been guilty of a crime beyond
confidence on delicate matters, and are thus classified as reasonable doubt in order to authorize his dismissal
occupying positions of trust and confidence. Included [Concepcion v. Minex Import Corporation].
under this class are “cashiers, auditors, property In Philippine Long Distance Telephone Co.(BLTB
custodians, or those who, in the normal and routine Co.) vs. NLRC, the Court held that the acquittal of the employee
exercise of their functions, regularly handle significant from the criminal prosecution for a crime committed against the
amounts of [the employer’s] money or property.” interest of the employer did not automatically eliminate loss of
• Rules on termination of managerial and supervisory confidence as a basis for administrative action against the
employees different from those applicable to rank- and- employee; and that in cases where the acts of misconduct
file employees. Thus, with respect to rank-and-file amounted to a crime, a dismissal might still be properly ordered
personnel, loss of trust and confidence as a ground for notwithstanding that the employee was not criminally
valid dismissal requires proof of involvement in the prosecuted or was acquitted after a criminal prosecution.
alleged events in question and that mere uncorroborated
Page 145 of 191
 8. Other Causes members of another union at the time of the signing of the collective
bargaining agreement. (Emphasis supplied.)
It is State policy to promote unionism to enable workers to
a. Union Officers who knowingly
negotiate with management on an even playing field and with more
participate in an Illegal Strike
persuasiveness than if they were to individually and separately bargain
Article 279(a) provides: with the employer. For this reason, the law has allowed stipulations for
"union shop" and "closed shop" as means of encouraging workers to
No labor organization or employer shall declare join and support the union of their choice in the protection of their rights
a strike or lockout without first having bargained and interest vis-à-vis the employer.[24]
collectively in accordance with Title VII of this Book or Moreover, a stipulation in the CBA authorizing the
without first having filed the notice required in the dismissal of employees are of equal import as the statutory provisions
preceding Article or without the necessary strike or lockout on dismissal under the Labor Code, since "a CBA is the law between
vote first having been obtained and reported to the Ministry. the company and the union and compliance therewith is mandated by
No strike or lockout shall be declared after the express policy to give protection to labor."[25]
assumption of jurisdiction by the President or the Minister In terminating the employment of an employee by enforcing
or after certification or submission of the dispute to the union security clause, the employer needs only to determine and
compulsory or voluntary arbitration or during the pendency prove that: (1) the union security clause is applicable; (2) the union is
of cases involving the same grounds for the strike or requesting for the enforcement of the union security provision in the
lockout. CBA; and (3) there is sufficient evidence to support the decision of the
Any worker whose employment has been union to expel the employee from the union. These requisites constitute
terminated as a consequence of any unlawful lockout shall just cause for terminating an employee based on the union security
be entitled to reinstatement with full backwages. Any union provision of the CBA.[26]
officer who knowingly participates in an illegal strike and There is no question that in the present case, the CBA
any worker or union officer who knowingly participates in between GMC and IBM-Local 31 included a maintenance of
the commission of illegal acts during a strike may be membership and closed shop clause as can be gleaned from Sections 3
declared to have lost his employment status: Provided, That and 6 of Article II. IBM-Local 31, by written request, can ask GMC to
mere participation of a worker in a lawful strike shall not terminate the employment of the employee/worker who failed to
constitute sufficient ground for termination of his maintain its good standing as a union member.
employment, even if a replacement had been hired by the It is similarly undisputed that IBM-Local 31, through
employer during such lawful strike. Gabiana, the IBM Regional Director for Visayas and Mindanao, twice
requested GMC, in the letters dated March 10 and 19, 1992, to
Jackbilt Industries v. Jackbilt Employees Workers terminate the employment of Casio, et al. as a necessary consequence
Union of their expulsion from the union.
Held: The principle of conclusiveness of judgment, It is the third requisite - that there is sufficient evidence to
embodied in Section 47(c), Rule 39 of the Rules of Court,[24] holds that support the decision of IBM-Local 31 to expel Casio, et al. - which
the parties to a case are bound by the findings in a previous judgment appears to be lacking in this case.
with respect to matters actually raised and adjudged therein.[25] The provisions of the CBA are clear enough. The
Article 264(e) of the Labor Code prohibits any person termination of employment on the basis of the closed shop provision of
engaged in picketing from obstructing the free ingress to and egress the CBA is well recognized in law and in jurisprudence.
from the employer's premises. Since respondent was found in the July There is no valid ground to refuse to terminate. On the other
17, 1998 decision of the NLRC to have prevented the free entry into hand as pointed out in the union's strongly demanding letter dated
and exit of vehicles from petitioner's compound, respondent's officers March 19, 1992, the company could be sued for unfair labor
and employees clearly committed illegal acts in the course of the March practice. While we would have wanted not to accommodate the
9, 1998 strike union's request, we are left with no other option. The terms of the
The use of unlawful means in the course of a strike renders CBA should be respected. To refuse to enforce the CBA would result
such strike illegal.[26] Therefore, pursuant to the principle of in the breakdown of industrial peace and the end of harmonious
conclusiveness of judgment, the March 9, 1998 strike was ipso relations between the union and management. The company would face
facto illegal. The filing of a petition to declare the strike illegal was thus the collective anger and enmity of its employees who are union
unnecessary. members.
Consequently, we uphold the legality of the dismissal of In the light of the union's very insistent demand, verbal and
respondent's officers and employees. Article 264 of the Labor in writing and to avoid the union accusation of "coddling" you, and
Code[27] further provides that an employer may terminate employees considering the explicitly mandatory language of the closed shop
found to have committed illegal acts in the course of a provision of the CBA, the company is constrained to terminate your
strike.[28] Petitioner clearly had the legal right to terminate respondent's employment, to give you ample time to look and find another
officers and employees employment, and/or exert efforts to become again a member of good
standing of your union, effective April 24, 1992.
In the meantime, to prevent serious danger to the life and
b.
Employees who knowingly violate the
property of the company and of its employees, we are placing you under
union security clause stipulated in the preventive suspension beginning today.
CBA It is apparent from the aforequoted letter that GMC
Another cause for termination is dismissal from terminated the employment of Casio, et al. relying upon the Resolution
employment due to the enforcement of the union security dated February 29, 1992 of Pino, et al. expelling Casio, et al. from
clause in the CBA [Alabang Country Club v. NLRC]. IBM-Local 31; Gabiana's Letters dated March 10 and 19, 1992
demanding that GMC terminate the employment of Casio, et al. on the
basis of the closed shop clause in the CBA; and the threat of being sued
General Milling Corp. v. Casio
by IBM-Local 31 for unfair labor practice. The letter made no mention
Held: Union security clauses are recognized and explicitly
at all of the evidence supporting the decision of IBM-Local 31 to expel
allowed under Article 248(e) of the Labor Code, which provides that:
Casio, et al. from the union. GMC never alleged nor attempted to prove
Art. 248. Unfair Labor Practices of Employers. x x x
that the company actually looked into the evidence of IBM-Local 31
(e) To discriminate in regard to wages, hours of work, and
for expelling Casio, et al. and made a determination on the sufficiency
other terms and conditions of employment in order to encourage or
thereof. Without such a determination, GMC cannot claim that it had
discourage membership in any labor organization. Nothing in this
terminated the employment of Casio, et al. for just cause.
Code or in any other law shall stop the parties from requiring
The failure of GMC to make a determination of the
membership in a recognized collective bargaining agent as a
sufficiency of evidence supporting the decision of IBM-Local 31 to
condition for employment, except those employees who are already

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expel Casio, et al. is a direct consequence of the non-observance by certification election outside the 60-day freedom period.[18] This is not
GMC of procedural due process in the dismissal of employees. the situation in this case. If at all, the signing of the authorization to file
As a defense, GMC contends that is an employer, its only a certification election was merely preparatory to the filing of the
duty was to ascertain that IBM-Local 31 accorded Casio, et al. due petition for certification election, or an exercise of respondents' right to
process; and, it is the finding of the company that IBM-Local 31 did self-organization.
give Casio, et al. the opportunity to answer the charges against them, Moreover, PRI anchored their decision to terminate
but they refused to avail themselves of such opportunity. respondents' employment on Article 253 of the Labor Code which
This argument is without basis. states that "it shall be the duty of both parties to keep the status quo
The Court has stressed time and again that allegations must and to continue in full force and effect the terms and conditions of
be proven by sufficient evidence because mere allegation is definitely the existing agreement during the 60-day period and/or until a new
not evidence.[28] Once more, in Great Southern Maritime Services agreement is reached by the parties." It claimed that they are still
Corporation. v. Acuña,[29] the Court declared: bound by the Union Security Clause of the CBA even after the
Time and again we have ruled that in illegal dismissal cases expiration of the CBA; hence, the need to terminate the employment of
like the present one, the onus of proving that the employee was not respondents.
dismissed or if dismissed, that the dismissal was not illegal, rests on the Petitioner's reliance on Article 253 is misplaced.
employer and failure to discharge the same would mean that the The provision of Article 256 of the Labor Code is
dismissal is not justified and therefore illegal. Thus, petitioners must particularly enlightening. It reads:
not only rely on the weakness of respondents' evidence but must Article 256. Representation issue in organized
stand on the merits of their own defense. A party alleging a critical establishments. - In organized establishments, when a verified petition
fact must support his allegation with substantial evidence for any questioning the majority status of the incumbent bargaining agent is
decision based on unsubstantiated allegation cannot stand as it will filed before the Department of Labor and Employment within the sixty-
offend due process. day period before the expiration of a collective bargaining agreement,
the Med-Arbiter shall automatically order an election by secret ballot
when the verified petition is supported by the written consent of at least
PICOP Resources v. Taneca
twenty-five percent (25%) of all the employees in the bargaining unit
Held: However, in terminating the employment of an
to ascertain the will of the employees in the appropriate bargaining unit.
employee by enforcing the union security clause, the employer needs
To have a valid election, at least a majority of all eligible voters in the
to determine and prove that: (1) the union security clause is applicable;
unit must have cast their votes. The labor union receiving the majority
(2) the union is requesting for the enforcement of the union security
of the valid votes cast shall be certified as the exclusive bargaining
provision in the CBA; and (3) there is sufficient evidence to support the
agent of all the workers in the unit. When an election which provides
decision of the union to expel the employee from the union. These
for three or more choices results in no choice receiving a majority of
requisites constitute just cause for terminating an employee based on
the valid votes cast, a run-off election shall be conducted between the
the union security provision of the CBA.[
labor unions receiving the two highest number of votes: Provided, That
As to the first requisite, there is no question that the CBA
the total number of votes for all contending unions is at least fifty per
between PRI and respondents included a union security clause,
cent (50%) of the number of votes cast.
specifically, a maintenance of membership as stipulated in Sections 6
At the expiration of the freedom period, the employer shall
of Article II, Union Security and Check-Off. Following the same
continue to recognize the majority status of the incumbent bargaining
provision, PRI, upon written request from the Union, can indeed
agent where no petition for certification election is filed.[19]
terminate the employment of the employee who failed to maintain its
Applying the same provision, it can be said that while it is
good standing as a union member.
incumbent for the employer to continue to recognize the majority status
Secondly, it is likewise undisputed that NAMAPRI-SPFL,
of the incumbent bargaining agent even after the expiration of the
in two (2) occasions demanded from PRI, in their letters dated May 16
freedom period, they could only do so when no petition for certification
and 23, 2000, to terminate the employment of respondents due to their
election was filed. The reason is, with a pending petition for
acts of disloyalty to the Union.
certification, any such agreement entered into by management with a
However, as to the third requisite, we find that there is no
labor organization is fraught with the risk that such a labor union may
sufficient evidence to support the decision of PRI to terminate the
not be chosen thereafter as the collective bargaining
employment of the respondents.
representative.[20] The provision for status quo is conditioned on the
PRI alleged that respondents were terminated from
fact that no certification election was filed during the freedom
employment based on the alleged acts of disloyalty they committed
period. Any other view would render nugatory the clear statutory
when they signed an authorization for the Federation of Free Workers
policy to favor certification election as the means of ascertaining the
(FFW) to file a Petition for Certification Election among all rank-and-
true expression of the will of the workers as to which labor organization
file employees of PRI. It contends that the acts of respondents are a
would represent them.[21]
violation of the Union Security Clause, as provided in their Collective
In the instant case, four (4) petitions were filed as early as
Bargaining Agreement.
May 12, 2000. In fact, a petition for certification election was already
We are unconvinced.
ordered by the Med-Arbiter of DOLE Caraga Region on August 23,
We are in consonance with the Court of Appeals when it
2000.[22] Therefore, following Article 256, at the expiration of the
held that the mere signing of the authorization in support of the Petition
freedom period, PRI's obligation to recognize NAMAPRI-SPFL as the
for Certification Election of FFW on March 19, 20 and 21, or before
incumbent bargaining agent does not hold true when petitions for
the "freedom period," is not sufficient ground to terminate the
certification election were filed, as in this case.
employment of respondents inasmuch as the petition itself was actually
Moreover, the last sentence of Article 253 which provides
filed during the freedom period. Nothing in the records would show
for automatic renewal pertains only to the economic provisions of the
that respondents failed to maintain their membership in good standing
CBA, and does not include representational aspect of the CBA. An
in the Union. Respondents did not resign or withdraw their membership
existing CBA cannot constitute a bar to a filing of a petition for
from the Union to which they belong. Respondents continued to pay
certification election. When there is a representational issue,
their union dues and never joined the FFW.
the status quo provision in so far as the need to await the creation of a
Significantly, petitioner's act of dismissing respondents
new agreement will not apply. Otherwise, it will create an absurd
stemmed from the latter's act of signing an authorization letter to file a
situation where the union members will be forced to maintain
petition for certification election as they signed it outside the freedom
membership by virtue of the union security clause existing under the
period. However, we are constrained to believe that an "authorization
CBA and, thereafter, support another union when filing a petition for
letter to file a petition for certification election" is different from an
certification election. If we apply it, there will always be an issue of
actual "Petition for Certification Election." Likewise, as per records, it
disloyalty whenever the employees exercise their right to self-
was clear that the actual Petition for Certification Election of FFW was
organization. The holding of a certification election is a statutory policy
filed only on May 18, 2000.[17] Thus, it was within the ambit of the
that should not be circumvented,[23] or compromised.
freedom period which commenced from March 21, 2000 until May 21,
2000. Strictly speaking, what is prohibited is the filing of a petition for

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 Time and again, we have ruled that we adhere to the policy In addition to the just causes mentioned in the Labor
of enhancing the welfare of the workers. Their freedom to choose who Code, the following are also found to be just causes:
should be their bargaining representative is of paramount importance.
The fact that there already exists a bargaining representative in the unit
a. Violation of Company Rules and Regulations or
concerned is of no moment as long as the petition for certification
election was filed within the freedom period. What is imperative is that
Code of Conduct or Code of Discipline
by such a petition for certification election the employees are given the [Sampaguita Auto Transport v. NLRC].
opportunity to make known of who shall have the right to represent b. Theft of property owned by a co-employee
them thereafter. Not only some, but all of them should have the right to [John Hancock Life Insurance v. Davis], as
do so. What is equally important is that everyone be given a democratic distinguished from company-owned property,
space in the bargaining unit concerned.[24] which is considered serious misconduct.
We will emphasize anew that the power to dismiss is a c. Incompetence, inefficiency or ineptitude
normal prerogative of the employer. This, however, is not without
[Reyes-Rayel v. Philippine Luen Thai
limitations. The employer is bound to exercise caution in terminating
the services of his employees especially so when it is made upon the Holdings].
request of a labor union pursuant to the Collective Bargaining d. Failure to Attain Work Quota [Aliling v.
Agreement. Dismissals must not be arbitrary and capricious. Due Feliciano].
process must be observed in dismissing an employee, because it affects e. Failure to comply with weight standards of
not only his position but also his means of livelihood. Employers employer [Yrasuegui v. Philippine Airlines].
should, therefore, respect and protect the rights of their employees, f. Attitude Problem [Reyes-Rayel v Philippine
which include the right to labor. Luen Thai Holdings].
An employee who is illegally dismissed is entitled to the
twin reliefs of full backwages and reinstatement. If reinstatement is not
viable, separation pay is awarded to the employee. In awarding B. JUST CAUSE TERMINATION DUE PROCESS
separation pay to an illegally dismissed employee, in lieu of The Supreme Court has standardized procedural due
reinstatement, the amount to be awarded shall be equivalent to one process in just cause termination in the 2007 case of King of
month salary for every year of service. Under Republic Act No. 6715, Kings Transport v. Mamac. It proclaimed the following steps
employees who are illegally dismissed are entitled to full backwages, should be complied with:
inclusive of allowances and other benefits, or their monetary
equivalent, computed from the time their actual compensation was 1. Service of First Written Notice (show-cause
withheld from them up to the time of their actual reinstatement. But if
notice).
reinstatement is no longer possible, the backwages shall be computed
from the time of their illegal termination up to the finality of the The first written notice to be served on the employee
decision. Moreover, respondents, having been compelled to litigate in should:
order to seek redress for their illegal dismissal, are entitled to the award
of attorney's fees equivalent to 10% of the total monetary award. (a) Contain the specific causes or grounds for
termination against him;
c. National Interest Cases (b) Contain a directive that the employee is given
Where strikers who violate orders, prohibitions the opportunity to submit his written
and/or injunctions as are issued by the DOLE Secretary or the explanation with in the reasonable period of five
NLRC, dismissal or loss of employment status may be (5) calendar days from receipt of the notice;
imposed.
(i) To enable him to prepare adequately
d. Failure to comply with drug test for his defense;
(ii) To study the accusation against him;
Plantation Bay v. Dubrico (iii) To consult a union official or lawyer;
Held: As reflected in the above matrix, the confirmatory test (iv) To gather data and evidence; and
results were released earlier than those of the drug test, thereby casting (v) To decide on the defenses he will raise
doubts on the veracity of the confirmatory results. against the complainant.
Indeed, how can the presence of shabu be confirmed when
the results of the initial screening were not yet out? Plantation Bay's (c) Contain a detailed narration of the facts and
arguments that it should not be made liable thereof and that the doubt
circumstances that will serve as a basis for the
arising from the time of the conduct of the drug and confirmatory tests
charge against the employee. This is required in
was the result of the big volume of printouts being handled by Martell
do not thus lie. It was Plantation Bay's responsibility to ensure that the order to enable him to intelligently prepare his
tests would be properly administered, the results thereof being the bases explanation and defenses. A general description
in terminating the employees' services. of the charge will not suffice.
Time and again, we have ruled that where there is no (d) Specifically mention which company rules, if
showing of a clear, valid and legal cause for termination of any, are violated and/or which among the
employment, the law considers the case a matter of illegal grounds under Article 297 is being charged
dismissal. The burden is on the employer to prove that the
against the employee.
termination of employment was for a valid and legal cause. For an
employee's dismissal to be valid, (a) the dismissal must be for a valid
cause and (b) the employee must be afforded due process. Remedy if employee refuses to receive notice:
In fine, as petitioners failed to indubitably prove that service by registered mail to last known address
respondents were guilty of drug use in contravention of its drug-free In Nueva Ecija Electric Coop v. NLRC, it was held:
workplace policy amounting to serious misconduct, respondents are
deemed to have been illegally dismissed. That private respondent refused to receive the
memorandum is to us, too self-serving a claim on the part
e. Other Just Causes under Prevailing of petitioner in the absence of any showing of the signature
or initial of the proper serving office. Moreover, petitioner
Jurisprudence
could have easily remedied the situation by the expediency
of sending the memorandum to private respondent by
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 registered mail at his last known address as usually d. When similar circumstances justify it.
contained in the Personal Data Sheet or any personal file
containing his last known address.
Thus, the Supreme Court held:

Employee is given a reasonable period to answer We note a marked difference in the standards of
charges due process to be followed as prescribed in the Labor Code
In R.B. Michael Press v. Galit, the Supreme Court and its implementing rules. The Labor Code, on one hand,
reiterated the rule enunciated in King of Kings Transport v. provides that an employer must provide the
Mamac, that the reasonable period within which an employee employee ample opportunity to be heard and to defend
himself with the assistance of his representative if he so
being cited administratively should submit his written
desires. x x x
explanation is five (5) calendar days from receipt of the first
The omnibus rules implementing the Labor
notice to give him an opportunity to study the accusation Code, on the other hand, require a hearing and
against him, consult a union official or lawyer, or gather data conference during which the employee concerned is given
and evidence, and decide on the defenses he will raise against the opportunity to respond to the charge, present his
the complaint. evidence or rebut the evidence presented against him.
Therefore, while the phrase "ample opportunity
CBA Grievance proceedings, held after employee to be heard" may in fact include an actual hearing, it is not
limited to a formal hearing only. In other words, the
had been dismissed, do not take the place of the required
existence of an actual, formal "trial-type" hearing, although
procedure demanded by the Labor Code before effecting
preferred, is not absolutely necessary to satisfy the
dismissal employee's right to be heard.
In Standard Electric Manufacturing v. Standard
Electric Employees Union, the Court held: In sum, the following are the guiding principles in
connection with the hearing requirement in dismissal cases:
Further, we cannot subscribe to the petitioner's
contention that the due process requirement relative to the
dismissal of respondent Javier was duly complied with
(a) "ample opportunity to be heard" means any
when he was allowed to explain his side during the meaningful opportunity (verbal or written) given
grievance machinery conferences. Indeed, in the case at bar, to the employee to answer the charges against him
the petitioner did not conduct any investigation and submit evidence in support of his defense,
whatsoever prior to his termination, despite being informed whether in a hearing, conference or some other
of respondent Javier's predicament by the latter's siblings, fair, just and reasonable way.
his Union and his counsel. The meetings held pursuant to (b) a formal hearing or conference becomes
the grievance machinery provisions of the collective
mandatory only when requested by the employee
bargaining agreement were only done after his dismissal
in writing or substantial evidentiary disputes exist
had already taken effect on February 5, 1996. Clearly, well-
meaning these conferences might be, they cannot cure an or a company rule or practice requires it, or when
otherwise unlawful termination. similar circumstances justify it.
(c) the "ample opportunity to be heard" standard in
2. Conduct of hearing. the Labor Code prevails over the "hearing or
After serving the first notice above, the employer conference" requirement in the implementing
should schedule and conduct a hearing or conference wherein rules and regulations:
the employee will be given the opportunity to: (i) under Article 292(b) of the Labor Code,
the employer is required to afford the
(a) Explain and clarify his defenses to the charge/s employee “ample opportunity to be heard
against him; and to defend himself with the assistance
(b) Present evidence in support of his defenses; and of his representative if he so desires”;
(c) Rebut the evidence presented against him by the while –
management. (ii) Under Section 2(d), Rule I, Book VI of
the IRR, the employee is required to
During the hearing or conference, the employee afford the employee a “hearing or
should be given the chance to defend himself personally, with conference during which the employee
the assistance of a representative or counsel of his choice. concerned, with the assistance of
Moreover, this conference or hearing could be used by the counsel, if he so desires, is given
parties as an opportunity to come to an amicable settlement. opportunity to respond to the charge,
present his evidence or rebut the
Perez Doctrine: New Guiding Principle on the evidence presented against him.”
Hearing Requirement
The above 2007 King of Kings concept of hearing as If the employee admits his responsibility for the act
part of due process has been significantly changed in 2009 in he was accused of, a formal hearing is no longer necessary, as
the en banc case of Perez v. Philippine Telegraph and held in Bernardo v. NLRC.
Telephone Company. It enunciates the new guiding principles The unilateral confession made by an alleged co-
on the hearing aspect of procedural thus, a formal hearing or conspirator cannot be the basis for terminating an employee.
conference is no longer mandatory. It becomes mandatory only Such confession must be corroborated by other competent and
under any of the following circumstances: convincing evidence. Absent any such corroborative evidence,
the confession must be received with considerable caution
a. When requested by the employee in writing; or [Century Textile Mills, Inc. v. NLRC]. Likewise, it was held that
b. When substantial evidentiary disputes exist; or the act of the employer in making “prior consultation” with the
c. When a company rule or practice requires it; or

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union of which the dismissed employee is a member, is not
sufficient compliance with due process. When hearing is not required

It is important to stress that the rights of an a. Termination of project, seasonal, causal or fixed-
employee whose services are sought to be terminated to be term employment.
informed beforehand of his proposed dismissal (or b. Termination of probationary employment on the
suspension) as well as of the reasons therefor, and to be
ground of failure of the probationary employee to
afforded an adequate opportunity to defend himself from the
charges levelled against him, are rights personal to the qualify as a regular employee in accordance with
employee. Those rights were not satisfied by petitioner reasonable standards made known to him at the start
Corporation's obtaining the consent of or consulting with of the employment.
the labor union; such consultation or consent was not a c. Termination due to abandonment of work.
substitute for actual observance of those rights of private d. Termination due to authorized causes under Article
respondent Calangi. The employee can waive those rights, 298. In such cases, there are no allegations which the
if he so chooses, but the union cannot waive them for him. employees should refute and defend themselves
That the private respondent simply 'kept silent" all the
from by way of a hearing.
while, is not adequate to show an effective waiver of his
rights. Notice and opportunity to be heard must be accorded e. Termination due to disease under Article 299.
by an employer even though the employee does not f. Termination by the employee (resignation) under
affirmatively demand them. Article 300.
g. Termination after 6 months of bona-fide suspension
NOTA BENE: It is surprising that the SC does not of operation under Article 301. For purposes of
quote from a long line of decisions starting from Rabago v. satisfying due process, what is required is simply hat
NLRC (1991); Rase v. NLRC (1994); Libres v. NLRC (1999). notices provided under Article 298 be served to both
Those cases, and many more thereafter, held that personal the affected employees and the DOLE at lease one
confrontation and cross examination cannot be invoked as a (1) month before the termination becomes effective.
matter of right in procedural due process of employee dismissal h. Termination due to retirement under Article 302.
cases. The right to cross-examine belongs to the accused only i. Termination due to expiration of tenure made
in criminal prosecutions by the “people of the state. In coterminous with lease.
Manggagawa ng Komunikasyon v. NLRC (1992), the Court j. Termination due to closure or stoppage of work by
however conceded that “actual adversarial proceedings may be government authorities when non-compliance with
necessary for clarification purposes or when there is need to the law or implementing rules and regulations poses
propound searching questions to unclear witnesses.” That has grave and imminent danger to the health and safety
to do with the duty of the trier of facts, usually the labor arbiter, of workers in the workplace.
to ascertain whether or not there is “substantial evidence” k. Termination of employee who has admitted his guilt
supporting a claim. for the offense charged.

Technol Eight Philippines v. NLRC Confrontation of witnesses, not a matter of right in

Held: The labor arbiter ruled that Technol failed to afford company investigations
Amular procedural due process, since he was not able to present his Confrontation of witnesses is required only in
side regarding the incident; at the time he was called to a hearing, he adversarial criminal prosecutions, and not in company
had already filed the illegal dismissal complaint. The NLRC, on the investigations for the administrative liability of the employee.
other hand, held that the memorandum terminating Amular's Additionally, actual adversarial proceedings become necessary
employment was a mere formality, an afterthought designed to evade
only for clarification, or when there is a need to propound
company liability since Amular had already filed an illegal dismissal
case against Technol.
searching questions to witnesses who give vague testimonies.
We disagree with these conclusions. The notice of This is not an inherent right, and in company investigations,
preventive suspension/notice of discharge served on Amular and Ducay summary proceedings may be conducted [Tuazon v. Wenphil].
required them to explain within forty-eight (48) hours why no
disciplinary action should be taken against them for their involvement If employee refuses to answer/participate,
in the mauling incident. Amular submitted two written statements: the investigation should still proceed
first received by the company on May 19, 2002 and the other received In Hagonoy Rural Bank v. NLRC, the Court held that
on May 20, 2002. On June 8, 2002, Technol management sent Amular
petitioners simply kept silent from the time they were
a memorandum informing him of an administrative hearing on June 14,
2002 at 10:00 a.m., regarding the charges against him. At the bottom
suspended until they were formally dismissed is not adequate
left hand corner of the memorandum, the following notation appears: to constitute a waiver of their rights. Notice and hearing must
"accept the copy of notice but refused to receive, he will study first." A be accorded by an employer, even though the employee does
day before the administrative hearing or on June 13, 2002, Amular filed not affirmatively demand it.
the complaint for illegal suspension/dismissal and did not appear at the
administrative hearing. On July 4, 2002, the company sent Amular a 3. Service of Second Written Notice (Notice of
notice of dismissal. Termination)
What we see in the records belie Amular's claim of denial
After determining that termination of employment is
of procedural due process. He chose not to present his side at the
administrative hearing. In fact, he avoided the investigation into the
justified, the employer shall serve the employees a written
charges against him by filing his illegal dismissal complaint ahead of notice of termination indicating that:
the scheduled investigation. Under these facts, he was given the
opportunity to be heard and he cannot now come to us protesting that (a) All circumstances involving the charge/s
he was denied this opportunity. To belabor a point the Court has against the employee have been
repeatedly made in employee dismissal cases, the essence of due considered; and
process is simply an opportunity to be heard; it is the denial of this (b) Grounds have been established to justify
opportunity that constitutes violation of due process of law.
the severance of his employment.

Page 150 of 191

 reasonable criteria in selecting who to terminate
C. AUTHORIZED CAUSES would render the termination invalid.
The authorized causes provided in the Labor Code
may generally be classified into two (2), namely: Each of the five grounds has its own unique
requisite/s that distinguishes it from the others. For instance, the
(1) Business-related causes. – Referring to the requisite for extreme business losses or financial reverses is
grounds specifically mentioned in Article 298, distinctively applicable to retrenchment in order for termination
to wit: based on this ground to be valid and legal. Termination due to
redundancy does not require existence of losses or financial
(a) Installation of labor-saving device; reverses to validate it. While losses or reverses may be
(b) Redundancy considered as a major factor in cases of closure or cessation of
(c) Retrenchment; business operations, but their relevance is only in relation to the
(d) Closure or cessation of business operations determination of whether the employer is liable for separation
NOT due to serious business losses or pay or not. Consequently, if the closure or cessation of business
financial reverses; and operations is due to serious business losses or financial
(e) Closure or cessation of business reverses, the employer is not liable to pay any separation pay
operations. [North Davao Mining v. NLRC].

(2) Health-related causes. – Referring to disease 1. Installation of Labor-Saving Device

under Article 299.
Article 298. Closure of Establishment and Reduction of
There are certain requisites that are common to the Personnel. The employer may also terminate the employment of
five (5) grounds in Article 298. To simplify the discussion, the any employee due to the installation of labor-saving devices,
following five (5) common requisites are applicable to the said redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
grounds:
the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the workers and the Ministry
1. There is good faith in effecting the termination; of Labor and Employment at least one (1) month before the
2. The termination is a matter of last resort, there intended date thereof. In case of termination due to the installation
being no other option available to the employer of labor-saving devices or redundancy, the worker affected thereby
after resorting to cost-cutting measures; shall be entitled to a separation pay equivalent to at least his one
3. Two (2) separate written notices are served on (1) month pay or to at least one (1) month pay for every year of
both the affected employee and the DOLE at least service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of
one (1) month prior to the intended date of
establishment or undertaking not due to serious business losses or
termination; financial reverses, the separation pay shall be equivalent to one (1)
4. Separation pay is paid to the affected employee, to month pay or at least one-half (1/2) month pay for every year of
wit: service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
(a) If based on (1) installation of labor-saving
device, or (2) redundancy. – One (1) month In addition to the five (5) common requisites above,
pay or at least one (1) month pay for every the unique requisite for this ground is that the purpose for such
year of service, whichever is higher, a installation of labor-saving device/s must be valid, such as to
fraction of at least six (6) months shall be save on cost, enhance efficiency and other justifiable economic
considered as one (1) year. reasons.
(b) If based on (1) retrenchment, or (2) closure The installation of these devices is a management
NOT due serious business losses or financial prerogative and the courts will not interfere with its exercise in
reverses. – One (1) month pay or at lease the absence of abuse of discretion, arbitrariness, or malice on
one-half (1/2) month pay for every year of the part of management [Magnolia Dairy Products v. NLRC].
service, whichever is higher, a fraction of at Redundancy results from installation of labor-saving
least six (6) months shall be considered as device. The installation of labor-saving device will result in
one (1) whole year. making the positions being held by employees who will be
(c) If closure is due to serious business losses or adversely affected thereby redundant and unnecessary [Soriano
financial reverses, NO separation pay is v. NLRC].
required to be paid.
(d) In case the CBA or company policy provides 2. Redundancy
for a higher separation pay, the same must In addition to the five (5) common requisites earlier
be followed instead of he one provided in mentioned, any of the following factors must be present in
Article 298. order for redundancy to be a valid ground to terminate
employment:
5. Fair and reasonable criteria in ascertaining what
positions are to be affected by the termination, a. Where the services of employees are in excess
such as, but not limited to: nature of work; status of what is reasonably demanded by the actual
of employment (whether casual, temporary, or requirements of the enterprise [Nippon Housing
regular); experience; efficiency; seniority; v. Leynes].
dependability; adaptability; flexibility; b. Where the position is superfluous because of a
trainability; job performance; discipline; and number of factors, such as over-hiring of
attitude towards work. Failure to follow fair and workers, decreased volume of business,
Page 151 of 191
 dropping of a particular product line or service prior or parallel to retrenchment to forestall
activity previously manufactured or undertaken losses, i.e., cut other costs other than labor costs.
by the enterprise or phasing out of service d. The alleged losses, if already realized, and the
activity priorly undertaken by the business. expected imminent losses sought to be
c. Where there is duplication of work. Indeed, in forestalled, must be proved by sufficient and
any well-organized business enterprise, it would convincing evidence through presentation of
be surprising to find duplication of work and two externally audited financial statements.
(2) or more people doing the work of one person
[Caltex v. NLRC]. If the above standards are present, the wisdom to
d. Where it is validly resorted to as a cost-cutting retrench cannot be questioned [NDC v. NLRC].
measure and to streamline operations so as to
make them more viable [Maya Farms Retrenchment to prevent losses, meaning
Employees Organization v. NLRC]. In its ordinary connotation, this phrase means that
retrenchment must be undertaken by the employer before the
Time and again, it has been ruled that employer has losses anticipated are actually sustained or realized. The
no legal obligation to keep more employees than are necessary Supreme Court, in a plethora of cases, has thus interpreted it to
for the operation of its business [Morales v. Metrobank]. Thus, mean that the employer need not keep all his employees until
the employer has the prerogative to implement reorganization after its losses shall have materialized [TPI Philippines v.
and redundancy and to adopt such measures as will promote Cajucom]. This is never the intention of the lawmaker. If such
greater efficiency, reduce overhead costs and enhance an intent were expressly written into the law, that law may well
prospects of economic gains, albeit always within the be vulnerable to constitutional attack as unduly taking property
framework of existing laws [Smart Comms v. Astorga]. from one man to be given to another [Asian Alcohol v. NLRC].
However, if there is no proof that the essential requisites for a
valid redundancy program as a ground for the termination of Redundancy v. Retrenchment
the employee are present, the termination should be declared Retrenchment and redundancy are two different
illegal [Lamber Pawnbrokers v. Binamira]. concepts; they are not synonymous; thus, they should not be
used interchangeably [Arabit v. Jardine Pacific].
3. Retrenchment Redundancy exists when the services of an employee
Retrenchment has been defined as the termination of are in excess of what is required by an enterprise.
employment initiated by the employer through no fault of the Retrenchment, on the other hand, is resorted to primarily to
employees and without prejudice to the latter, resorted by avoid or minimize business losses. Thus, a “Redundancy
management during periods of business recession, industrial Program,” while denominated as such, is more precisely termed
depression, or seasonal fluctuations; or during lulls occasioned “retrenchment” if it was primarily intended to prevent serious
by lack of work or orders, shortage of materials or considerable business losses [Atlantic Gulf v. NLRC].
reduction in the volume of the employer’s business, conversion Redundancy does not need to be always triggered by
of the plant for a new production program or the introduction a decline in the business. Primarily, employers resort to
of new methods or more efficient machinery, or of automation redundancy when the functions of an employee have already
[Anabe v. Asian Construction]. become superfluous, duplicitous or in excess of what the
In addition to the five (5) common requisites business requires. Thus, even if a business is doing well, an
mentioned earlier, the unique requisite for this ground is that employer can still validly dismiss an employee from service
there should be proof of actual losses or possible imminent due to redundancy if that employee’s position has already
losses that would justify termination of employment. This is the become in excess of what the employer’s enterprise requires
most singular distinctive requisite of retrenchment. This, in [Andrada v. NLRC].
fact, is the only statutory ground in Article 298 which requires In terms of monetary consequence, the employer
this kind of proof. As stressed earlier, the grounds of stands to pay more separation pay if it denominates the
installation of labor-saving device and redundancy do not personnel reduction program it is implementing as redundancy
impose this requirement. The other ground of closure or and not retrenchment. Under Article 298, redundancy would
cessation of business operations may be resorted to with or require the employer to pay its employees a separation pay
without losses [Precision Electronics v. NLRC]. equivalent to at least their one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher;
Standards to determine validity of losses while retrenchment would only entail half of this amount.
The general standards in terms of which the act of an
employer in retrenching or reducing the number of its 4. Closure or Cessation of Business Operations
employees must be appraised are as follows: Closure or cessation of business is the complete or
partial cessation of the operations and/or shutdown of the
a. The losses expected should be substantial and establishment of the employer. It is carried out to either stave
not merely de minimis or insubstantial and off the financial ruin or promote business interest of the
inconsequential in extent. employer [Eastridge Gold Club v. Eastridge Labor Union].
b. The substantial loss apprehended must be Closure involves two (2) situations:
reasonably imminent, as such imminence can be (a) When NOT due to serious business losses or
perceived objectively and in good faith by the financial reverses; or
employer. (b) When not due to serious business losses or
c. Retrenchment must be reasonably necessary and financial reverses.
likely to effectively prevent the expected losses.
The employer should have taken other measures

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 It is only in the first that payment of separation pay is d. If the closure or cessation of operations of
required. No such requirement is imposed in the second [North establishment or undertaking is due to serious
Davao Mining v. NLRC]. business losses or financial reverses, the employer
Employer may close its business whether its must prove such allegation in order to avoid the
suffering from business losses or not; court cannot order payment of separation pay. Otherwise, the
employer to continue its business [Penafrancia Tours v. affected employees are entitled to separation pay.
Sarmienta]. e. The burden of proving compliance with all the
above-stated falls upon the employer.
Retrenchment v. Closure of business
In a number of cases. Retrenchment has been 5. Disease
confused with closure of the entire business establishment or
department, division or outlet thereof. While the two are often Article 299. Disease as Ground for Termination. An
used interchangeably and are interrelated, they are actually two employer may terminate the services of an employee who has been
separate and independent authorized causes for termination of found to be suffering from any disease and whose continued
employment. Termination of an employment may be employment is prohibited by law or is prejudicial to his health as
well as to the health of his co-employees: Provided, That he is paid
predicated on one without need of resorting to the other.
separation pay equivalent to at least one (1) month salary or to one-
Closure of business, on one hand, is the reversal of half (1/2) month salary for every year of service, whichever is
fortune of the employer whereby there is a complete cessation greater, a fraction of at least six (6) months being considered as one
of business operations and/or an actual locking-up of the doors (1) whole year.
of the establishment, usually due to financial losses. Closure of
business as an authorized cause for termination of employment In the case of Deoferio v. Intel Technology
aims to prevent further financial drain upon an employer who Philippines, Inc., the requisites that must be complied with
cannot pay anymore his employees since business has already before termination of employment due to disease may be
stopped. On the other hand, retrenchment is a reduction of justified were specifically divided into two, namely:
personnel usually due to poor financial returns so as to cut
down on costs of operations in terms of salaries and wages to a. Substantive requisites; and
prevent bankruptcy of the company. It is sometimes also b. Procedural requisites.
referred to as down-sizing. It is an authorizes cause for
termination of employment which the law accords an employer a. Substantive Requisites
who is not making good in its operations in order to cut back Based on the Labor Code and its Implementing
on expenses for salaries and wages by laying off some Rules, the following three (3) substantive elements, according
employees. The purpose of retrenchment is to save a financially to Deoferio v. Intel Technology may be drawn therefrom, to wit:
ailing business establishment from eventually collapsing
[Sanoh Fulon Phils v. Bernardo]. (i) An employee has been found to be suffering
Unlike retrenchment, closure or cessation of from any disease;
business, as an authorized cause of termination of employment, (ii) His continued employment is:
need not depend for its validity on evidence of actual or
imminent reversal of the employer’s fortune. Article 298 • Prohibited by law; or
authorizes termination of employment due to business closure • Prejudicial o his health as well as to the
regardless of the underlying reasons and motivations therefor, health of his co-employees; and
be it financial losses or not [Eastridge Golf Club v. Eastridge
Labor Union]. (iii) A competent public health authority issues a
medical certificate that the disease of such
MPCEU v. Manila Polo Club summarized: nature or at such a stage that it cannot be cured
within a period of six (6) months even with
a. Closure or cessation of operations of proper medical treatment.
establishment or undertaking may either be partial
or total. 1st Substantive Element
b. Closure or cessation of operations of The fact alone that an employee is suffering from a
establishment or undertaking may or may not be disease is not generally a sufficient ground to terminate his
due to serious business losses or financial employment. That a person has a disease does not per se entitle
reverses. However, in both instances, proof must the employer to terminate his or her services. Termination is the
be shown that: (1) it was done in good faith to last resort. Even if the disease is a contagious one, like
advance the employer's interest and not for the pulmonary tuberculosis, mere sufferance thereof by an
purpose of defeating or circumventing the rights employee does not ipso facto make him a sure candidate for
of employees under the law or a valid agreement; dismissal [Tan v. NLRC].
and (2) a written notice on the affected employees
and the DOLE is served at least one month before 2nd Substantive Element
the intended date of termination of employment. Contagious or communicable diseases or infecions,
c. The employer can lawfully close shop even if not like sexually transmitted diseases or infections, tuberculosis,
due to serious business losses or financial reverses hepatitis A, malaria, and among others, are bext examples of
but separation pay, which is equivalent to at least diseases which would render an employee’s “continued
one month pay as provided for by Article 283 of employment prejudicial to his health as well as to the health of
the Labor Code, as amended, must be given to all his co-employees.” This ground may not, however, be solely
the affected employees. confined to these kinds of diseases. Deoferio enunciates that the
phrase “prejudicial to his health as well as to the health of his
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co-employees” should be liberally construed to mean (ii) The notice informing the employee of his
“prejudicial to his health or to the health of his co-employees.” dismissal, to be issued after the employee has
It is clear, therefore, that the intent of the law is to allow the been given reasonable opportunity to answer
termination of an employee if he suffers a disease and his and be heard on his defense.
continued employment will either be prejudicial:
Under this present rule, the employee should be given
(i) To his own health; or reasonable opportunity to answer and to be heard on his
(ii) To the health of his co-employees. defense. Although sufferance of disease is not to be equated
with commission of a wrongful act which is the principal
Consistent with this construction, this provision has requisite of just cause termination, the ailing employee needs
been applied in resolving illegal dismissal cases due to non- to be given “reasonable opportunity to answer and to be heard
contagious diseases such as stroke, heart attack, osteoarthritis, on his defense” before he could validly be dismissed on the
and eye cataract, among others. ground of disease. Consequently, once the substantive
requisites for termination due to disease are complied with, the
3rd Substantive Element employer should comply the other equally important
The third element on presentation of a medical procedural requisite as prescribed in Deoferio.
certificate issued by a competent public health authority Per Deoferio, the 2nd required notice informing the
substantiates the contention that the employee has indeed been employee of his dismissal should be issued “after the employee
suffering from a disease that: has been given reasonable opportunity to answer and to be
heard on his defense.” This requirement, in effect, dictates that
(i) Is prejudicial to his health as well as to the health before an employee may be terminated due to disease, he must
of his co-employees; and first be given a show-cause notice that would afford him “a
(ii) Cannot be cured within a period of six months reasonable opportunity to answer” the charge of his being
even with proper medical treatment. terminable by reason of his suffering a disease, and secondly,
for him to be afforded a hearing on his defense.
Without the medical certificate, there can be no
authorized cause for the employee’s dismissal. The absence of Employee has the right to present countervailing
this element thus renders he dismissal void and illegal. medical certificates
Deoforio instructs that this 3rd element is not merely a The employee has the right to present countervailing
procedural requirement but a substantive one. That certification evidence in the form of medical certificates to prove that his
from a competent public health authority is precisely the dismissal due to disease is not proper and therefore illegal [Fuji
substantial evidence required by law to prove the existence of Television Network v. Espiritu].
the disease itself, its non-curability within a period of 6 months
even with proper medical treatment, and the prejudice it would D. AUTHORIZED CAUSE TERMINATION DUE
cause to the health of the sick employee and to those of his co- PROCESS
employees. Due process in authorized cause termination is
The company’s own physician engaged by the classified into two (2), as follows:
employer as its employee or hired on a retainer fee basis to
whom sick workers are referred for consultation or treatment, 1. Termination due to Business-Related Causes,
is not the “competent public health authority: referred to in the such as: installation of labor-saving device,
law. Hence, a medical certificate issued by the company’s own redundancy, retrenchment and closure of
physician is not an acceptable certificate for purposes of business or establishment.
terminating an employment based on Article 299 [Cebu Royal 2. Termination due to Health-Related Causes
Plant v. Deputy Minister]. (Disease).
As to who should procure the medical certificate, the
Court ruled in Tan v. NLRC, that it devolves upon the employer 1. Due Process in Termination Due to Business-
the obligation to obtain a medical certificate from a competent Related Authorized Causes
public health authority that the employee’s disease is at such Procedural due process in termination due to any of
stage or of such nature that it cannot be cured within 6 months the authorized causes of installation of labor-saving device,
even with proper medical treatment. It is the employer and not redundancy, retrenchment and closure of business or
the employee, who has the burden of proof to justify that the establishment is deemed complied with upon the separate and
termination was supported by said certificate. Clearly, it is only simultaneous service of a written notice of the intended
where there is such prior certification that the employee could termination to both:
be validly terminated from his job. The burden of proving the
existence of the medical certificate required under the law is a. The employee to be terminated; and
upon the employer, not the employee [ATCI Overseas b. The appropriate DOLE Regional Office
Corporation v. Court of Appeals].
At least one (1) month before the intended date of the
b. Procedural Requisites termination specifying the ground/s therefor and the
Deoferio pronounced the rule that due process in undertaking to pay the separation pay required under Article
termination due to disease is similar to due process for just 298 of the Labor Code or the employment contract or the CBA,
cause termination. Thus, the employer must furnish the whichever is higher. To iterate, hearing is required.
employee two (2) written notices, namely:
One-month period is mandatory
(i) The notice to apprise the employee of the The observance of the period of 1 month mentioned
ground for which his dismissal is sought; and in Article 298 is mandatory. There is deprivation of right to

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statutory due process if notice requirement is not complied with Hence, instead of penalty, Serrano now required payment of
at least a month prior to the effectivity of the termination. full backwages from the time of dismissal until the time the
Hence, the dismissal, if properly and validly effected for Court finds the dismissal was for a just or authorized cause.
authorized cause, would still be declared legal but the employer Serrano thus confronted the practice of employers to dismiss
shall be held liable to pay for indemnity in the form of nominal now and pay later by imposing full backwages as penalty.
damages in the stiffer amount of P50,000, per Jaka Food
Processing v. Pacot. 3. Statutory Due Process Rule
About 4 years after Serrano, the Supreme Court, in
E. EFFECT OF LEGAL DISMISSAL WITHOUT DUE the 2004 en banc decision in Agabon v. NLRC, abandoned
PROCESS Serrano and reverted to the Wehnphil doctrine. It thus ruled that
The substantive (just or authorized cause) and where the dismissal is for a just cause, as in the instant case, the
procedural due process requirements in termination of lack of statutory due process should not nullify the dismissal,
employment can only be better understood and appreciated by or render it illegal, or ineffectual. However, the employer
looking at them through the prism of the four (4) standard should indemnify the employee for the violation of his right to
situations provided in the Labor Code and enunciated in statutory due process. Such indemnity or sanction, however,
pertinent jurisprudence. Thus, the dismissal is: must be stiffer than that imposed in Wenphil. Consequently, the
sanction imposed upon the employer in this case was in the
(1) LEGAL if it was done with both substantive and form of nominal damages in the higher amount of P30,000. The
procedural due process. imposition of this form of damages would serve to deter
(2) ILLEGAL if it was done without substantive employers from future violations of the statutory due processs
due process although procedural process was rights of employees. At the very least., it provides a vindication
observed. or recognition of his fundamental right granted to the latter
(3) ILLEGAL if it was done without both under the Labor Code and its Implementing Rules.
substantive and procedural due process.
(4) LEGAL if it was done with substantive due 4. Contractual Due Process Rule
process but without procedural due process. A new doctrine of contractual due process was
pronounced in the 2013 en banc decision in Abbott
1. Belated Due Process Rule Laboratories v. Alcaraz. It was held here that in a situation
Prior to 1989, the rule was that a dismissal or where there is an existing company policy enunciating the
termination is illegal if the employee was not given procedural procedural due process that must be observed in termination of
due process. In the 1989 case of Wenphil Corp v. NLRC (Feb, employment, compliance alone with the statutory due process,
8, 1989), the Court reversed this long-standing rule and held would not suffice. Additionally, there must be compliance too
that the dismissed employee, although not given any notice and with the company-prescribed due process procedure or the so-
hearing, was not entitled to reinstatement and backwages called contractual due process. Otherwise, the same
because the dismissal was for a just cause, i.e., grave consequence as in Agabon case will ensue, that is, the
miscoundct and insubordination, a just ground for termination termination shall be considered legal and valid but for lack of
under Article 297. The employee here had a violent temper and contractual due process, the employer will be penalized with
caused trouble during office hours and defying superiors who the payment of indemnity in the form of nominal damages in
tried to pacify him. The Court concluded that reinstating the the same amount of P30,000 as awarded in Agabon.
employee and awarding backwages may encourage him to do
even worse and will render a mockery of the rules of discipline 5. Indemnity in the Form of Nominal Damages
that employees are required to observe. Termination for a just cause or authorized cause but
However, the employer committed an infraction of without affording the employee procedural due process should
the second requirement; thus, it must be imposed a sanction for no longer be considered illegal or ineffectual [Per Serrano v.
its failure to give a formal notice and conduct an investigation NLRC] but legal. Consequently, the employee will not be
as required by law before dismissing the employee from ordered reinstated but will be awarded an indemnity in the form
employment. Considering the circumstances of this case, the of nominal damages, the amount of which will depend on
employer must indemnify the employee. The measure of this whether the termination is grounded on just cause or authorized
award depends of the facts of each case and the graviy of the cause, thus:
omission committed by the employer.
The rule thus evolved: where the employer had a a. If based on just cause – P30,000.00 per Agabon
valid reason to dismiss an employee but did not follow the due Doctrine
process requirement, the dismissal may be upheld but the b. If based on authorized cause – P50,000.00 per
employer will be penalized to pay an indemnity to the Jaka Doctrine.
employee.
The measure of penalty or indemnity is no longer full
2. Ineffectual Dismissal Rule backwages but nominal damages.
In 2000, the rule on the extent of the sanction was
changed in the en banc decision in Serrano v. NLRC. The Court F. ILLEGAL DISMISSAL
held that the vilation by the employer of the notice requirement Under the Labor Code, the ordinary and proper
in termination for just or authorized causes was not a denial of recourse of an illegally dismissed employee is to file a
due process that will nullify the termination. However, the complaint for illegal dismissal with the labor arbiter [Philippine
dismissal is declared ineffectual and the employer must pay the Airlines v. NLRC].
full backwages from the time of termination until it is judicially
declared that the dismissal was for a just cause or authorized 1. Burden and Degree of Proof
cause. The Court, in effect, re-examined the Wenphil doctrine.

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 It is a basic rule in evidence, however, that the burden Reinstatement, in its generally accepted sense, refers
of proof is on the part of the party who makes the allegations – to a restoration to a state from which one has been removed or
ei incumbit probatio, qui dicit, non qui negat. If he claims a separated, it is the return to the position from which he was
right granted by law, he must prove his claim by competent removed [San Miguel Brewery v. Santos].
evidence, relying on the strength of his own evidence and not
upon the weakness of that of his opponent. While this Court is Reinstatement in Article 229 vs. 294
not unmindful of the rule that in cases of illegal dismissal, the
employer bears the burden of proof to prove that the Article 229 Article 294
termination was for a valid or authorized cause. However, Finality No finality yet. Already final and
before the employer must bear the burden of proving that the Subject of an appeal executory
Employer’s option Employer has the No option but to
dismissal was legal, the employee must first establish by
to reinstate option to actual actually reinstate to
substantial evidence the fact of his dismissal from service. reinstatement or former position or
Logically, if there is no dismissal, then there can be no question payroll to a substantially
as to the legality or illegality thereof [Ledesma, Jr. v. NLRC]. reinstatement. equivalent position
Duty of Labor Ministerial for the Not ministerial.
Arbiter to LA to implement his Requires motion for
2. Quitclaims
implement order reinstatement order. the issuance of writ
Quitclaims are valid provided that these are Reinstatement is of execution before
voluntarily signed by the employee involved, the consideration self-executory LA can implement
is reasonable, and it is not against the law or public policy the reinstatement
[More Maritime Agencies v. NLRC]. order
Necessity of Not necessary Indispensable to
However, quitclaims entered into by union officers
issuance of Writ of effect reinstatement
and some members do not bind those who did not sign it Execution
[Liana’s Supermarket v. NLRC].
b.
Separation Pay in Lieu of
3. Reliefs for Illegal Dismissal Reinstatement
This remedy is not found in the Labor Code but is
Article 294. [279] Security of Tenure. In cases of regular granted in case reinstatement is no longer possible or feasible,
employment, the employer shall not terminate the services of an such as when any of the following circumstances exists:
employee except for a just cause or when authorized by this Title.
An employee who is unjustly dismissed from work shall be entitled
to reinstatement without loss of seniority rights and other (i) Where the continued relationship between
privileges and to his full backwages, inclusive of allowances, and to the employer and the employee is no longer
his other benefits or their monetary equivalent computed from the viable due to the strained relations and
time his compensation was withheld from him up to the time of his antagonism between them (Doctrine of
actual reinstatement Strained Relations).
(ii) When reinstatement proves impossible,
Under Article 294, an illegally dismissed employee impracticable, not feasible or unwarranted
is entitled to the following reliefs: for varied reasons and thus hardly in the
best interest of the parties such as:
a. Reinstatement without loss of seniority rights
and other privileges; • Where the employee has already been
b. Full backwages, inclusive of allowances; and replaced permanently as when his position
c. Other benefits or their monetary equivalent. has already been taken over by a regular
employee and there is no substantially
The following reliefs that are awarded in illegal equivalent position to which he may be
dismissal cases are missing in Article 279: reinstated.
• Where the dismissed employee’s position
a. Award of separation pay in lieu of is no longer available at the time of
reinstatement. reinstatement for reasons not attributable
b. Award of penalty in the form of nominal to the fault of the employer.
damages in case of termination due to just or • When there has been long lapse or passage
authorized cause but without observance of of time that the employee was out of
procedural due process. employer’s employ from the date of the
c. Reliefs to illegally dismissed employee whose dismissal to the final resolution of the case
employment is for a fixed period. The proper or because of the realities of the situation.
relief is only the payment of the employee’s • By reason of the injury suffered by the
salaries corresponding to the unexpired portion employee.
of the employment contract. • The employee has already reached
d. Award of damages and attorney’s fees. retirement age under a Retirement Plan.
e. Award of financial assistance in cases where the • When the illegally dismissed employees
employee’s dismissal is declared legal but are over-age or beyond the compulsory
because of long years of service, and other retirement age and their reinstatement
considerations, financial assistance is awarded. would unjustly prejudice their employer.
f. Imposition of legal interest on separation pay,
backwages and other monetary awards. (iii) Where the employee decides not to be
reinstated as when he does not pray for
a. Reinstatement
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 reinstatement in his complaint or position Principles
paper but asked for separation pay instead.
(iv) When reinstatement is rendered moot and • Award of separation pay and backwages are not
academic due to supervening events, such inconsistent with each other. Hence, both may be awarded
as: to an illegally dismissed employee. The payment of
separation pay is in addition to payment of backwages.
• Death of the illegally dismissed employee. • Reinstatement cannot be granted when what is prayed for
• Declaration of insolvency of the employer by employee is separation pay in lieu thereof.
by the court. • Award of separation pay in lieu of reinstatement is not
• Fire which gutted the employer’s proper if there is no finding of illegal dismissal.
establishment and resulted in its total • Separation pay, as a substitute remedy, is only proper for
destruction. reinstatement but not for backwages.
• In case the establishment where the • Employer has no option to choose between reinstatement
employee is to be reinstated has closed or and separation pay in lieu thereof. Reinstatement is still
ceased operation. the preference.
• To prevent further delay in the execution of • Grant of separation pay in lieu of reinstatement converts
the decision to the prejudice of private the award of reinstatement into a monetary award; hence,
respondent. legal interest may be imposed thereon.
• Other circumstances such as (a) when • An employee is not entitled to separation pay when he or
reinstatement is inimical to the employer’s she resigns voluntarily, unless it is a company practice or
interest; (b) reinstatement does not serve provided in the CBA [Hanford Philippines v. Joseph].
the best interests of the parties involved; (c)
the employer is prejudiced by the workers’ c. Backwages
continued employment; or (d) that it will Backwages is a relief that restores the income that
not serve any prudent purpose as when was lost by reason of the illegal dismissal. It refers to the
supervening facts transpired which made compensation which an employee would have earned had he
execution unjust or inequitable. not been unjustly dismissed. On the other hand, “unpaid wages”
refer to compensation for services already rendered but
Computation withheld by the employer.
Per prevailing jurisprudence, the following are the In 1996, the Supreme Court changed the rule on the
components of separation pay in lieu of reinstatement: reckoning of backwages. It announced a new doctrine in the
case of Bustamante v. NLRC, which is now known as the
(i) The amount equivalent to at least one (1) Bustamante doctrine. Under this rule, the term “full
month salary or to one (1) month salary for backwages” should mean exactly that, i.e., without deducting
every year of service, whichever is higher, from backwages the earnings derived elsewhere by the
a fraction of at least six (6) months being concerned employee during the period of his illegal dismissal.
considered as one (1) whole year. The components of backwages are as follows:
(ii) Allowances that the employee has been
receiving on a regular basis (i) Salaries or wages computed on the basis of
the wage rate level at the time of the illegal
The salary rate prevailing at the end of the period of dismissal and not in accordance with the
putative service should be the basis for computation which latest, current wage level of the employee’s
refers to the period of imputed service for which the employee position.
is entitled to backwages. (ii) Allowances and other benefits regularly
granted to and received by the employee
Period Covered should be made part of backwages.
The period for computation shall be from start of
employment up to the date of finality of decision except: This is computed from the time compensation was
withheld up to the time of the employee’s reinstatement (actual
(i) When the employer has ceased its or payroll) except:
operation earlier, in which case, the same
should be computed up to the date of (i) If reinstatement is not possible (e.g. if what
closure. is awarded is separation pay in lieu of
(ii) When the employee is a fixed term reinstatement) – only up to the date of
employee, in which case, it shall only be up finality of decision.
to the unexpired portion of the fixed-term (ii) If employer ceased operations – only up to
contract. the date of closure.
(iii) When the employee reached retirement or (iii) If fixed-term/probationary employee –
retirement, in which case, it shall only be only up to the unexpired portion of the
up to retirement age or date of fixed-term contract or probationary
retrenchment employment contract.
(iv) When the employee dies during the (iv) If employee was confined in prison – only
pendency of the case, in which case, it shall up to the date of confinement in prison.
only be up to the time of the death of such (v) If employee reached retirement or
employee. retrenchment – only up to retirement age or
date of retrenchment.
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 (vi) If employee becomes physically or oppressive to labor; or c) in a manner contrary to morals, good
mentally incapacitated – only up to the date customs, or public policy [Montinola v. Philippine Airlines].
of incapacity. Bad faith "implies a conscious and intentional design
(vii) If employee dies during the pendency of to do a wrongful act for a dishonest purpose or moral obliquity."
the case – only up to the time of death. Cathay Pacific Airways v. Spouses Vazquez established that
bad faith must be proven through clear and convincing
Settled Principles evidence. This is because "[b]adfaith and fraud . . . are serious
accusations that can be so conveniently and casually invoked,
• Any amount received during payroll reinstatement is and that is why they are never presumed. They amount to mere
deductible from backwages. slogans or mudslinging unless convincingly substantiated by
• Salary increases during period of unemployment are not whoever is alleging them."76 Here, there was clear and
included as component in the computation of backwages. convincing evidence of bad faith adduced in the lower
• Dismissed employee’s ability to earn is irrelevant in the tribunals.
award of backwages.
• Employee is entitled to backwages even if it is not e. Attorney’s Fees
included in his prayer or even if the LA or NLRC failed to To recapitulate, both the Labor Code and the Civil
award backwages. Code provide that attorney's fees may be recovered in the
• Backwages excludes period of valid suspension but following instances, namely, (i) in cases involving the unlawful
includes period of preventive suspension. withholding of wages;[38] (ii) where the defendant's act or
• Employers offer to reinstate does not forestall payment of omission has compelled the plaintiff to litigate with third
full backwages. persons or the plaintiff incurred expenses to protect his
interest;[39] (iii) in actions for the recovery of wages of
Limited Backwages household helpers, laborers and skilled workers;[40] (iv) in
There are also instances where backwages were not actions for indemnity under workmen's compensation and
awarded in full but merely limited for the reason of good faith employer's liability laws;[41] and (v) in cases where the court
on the part of the employer. deems it just and equitable that attorney's fees and expenses of
litigation should be recovered [Alva v. High Capacity Security
No Backwages Force].
Under the following situations, reinstatement of an In a catena of cases, the Court awarded attorney's fees
illegally dismissed employee is granted without the in favor of illegally dismissed employees who were compelled
accompanying backwages: to file an action for the recovery of their lawful wages, which
were withheld by the employer without any valid and legal
(i) When the dismissal is deemed too harsh a basis.[43] A plain showing that the lawful wages were not paid
penalty; without justification was sufficient to warrant an award of
(ii) When the employer acted in good faith; or attorney's fees [Kaisahan v. Manila Water].
(iii) Where there is no evidence that the
employer dismissed the employee. G. PREVENTIVE SUSPENSION
Preventive suspension may be legally imposed
Thus, the backwages will not be granted in full but against an errant employee only while he is undergoing an
limited to 1 year, 2 years or 5 years. investigation for certain serious offenses. Consequently, its
purpose is to prevent him from causing harm or injury to the
As to the first situation, one illustrative case is ALU- company as well as to his fellow employees, hence, his actual
TUCP v. NLRC, where reinstatement with no backwages was presence in the workplace would not be desirable for the
ordered because the penalty imposed on the employee for meaningful conduct of the investigation of his case. Its
committing theft of company property was reduced to imposition is thus justified only in cases where the
suspension due to mitigating circumstances. The justification employee’s continued presence in the company premises
was that the entire period when the employee was out of job during the investigation poses a serious and imminent
because of his dismissal should already be considered as the threat to the life or property of the employer or of the
period of his suspension; hence, he should no longer be entitled employee’s co-workers. Without this threat, preventive
to backwages for the same period. suspension is not proper.
Another case is Yupangco v. NLRC, where, after
finding that the employee was illegally dismissed but at the Settled Principles
same time guilty of misconduct, it was ruled that there was no
grave abuse of discretion in the resolution of the NLRC which • Preventive suspension, by itself, does not signify that the
meted only the penalty of suspension without backwages. company has already adjudged the employee guilty of the
In Pepsi-Cola v. NLRC, where the employee filed a charges for which she was asked to answer and explain.
• Preventive suspension is not a penalty. This is different from
leave of absence for one day after he suffered stomach ache and
upon the advice of his doctor, he took a rest for 25 days without PUNITIVE SUSPENSION which is imposed as a penalty
prior leave. When he reported back for work, he was told he less harsh than dismissal.
had been dismissed for being absent without leave. It was held • Preventive suspension is neither equivalent nor tantamount
that while he was at fault, he could not be dismissed. He was to dismissal.
• If the basis of the preventive suspension is the employee’s
thus ordered reinstated but he was denied backwages.
absences and tardiness, the imposition of preventive
d. Damages suspension on him is not justified as his presence in the
The employee is entitled to moral damages when the company premises does not pose any such serious or
employer acted a) in bad faith or fraud; b) in a manner imminent threat to the life or property of the employer or of

Page 158 of 191

 the employee’s co-workers simply “by incurring repeated In case of voluntary resignation without just cause,
absences and tardiness.” the following requisites must concur:
• Preventive suspension does not mean that due process may
be disregarded. (a) The resigning employee should tender a written
• Preventive suspension should only be for a maximum period (not verbal) notice of the termination
of thirty (30) days. After the lapse of the 30-day period, the (commonly known as “resignation letter”);
employer is required to reinstate the worker to his former (b) Service of such notice to the employer at least
position or to a substantially equivalent position. For the one (1) month in advance; and
construction industry, preventive suspension should only be (c) Written acceptance by the employer of the
for a maximum of 15 days. resignation.
• During the 30-day preventive suspension, the worker is not
entitled to his wages and other benefits. However, if the Written acceptance of resignation is necessary to
employer decides, for a justifiable reason, to extend the make it binding and effective. A duly accepted resignation
period of preventive suspension beyond said 30- day period, effectively terminates the employer-employee relationship
he is obligated to pay the wages and other benefits due the [BMG Records v. Aparecio].
worker during said period of extension. In such a case, the
worker is not bound to reimburse the amount paid to him Phimco v. NLRC
during the extension if the employer decides to dismiss him Held: As regards the validity of the dismissal of Carpio,
after the completion of the investigation. petitioner claims that Carpio received a copy of the company’s
• Extension of period must be justified. During the 30-day Handbook on 26 October 1990 which clearly states that if an employee
period of preventive suspension, the employer is expected to resigns from work he has to serve an advance written notice at least
thirty (30) days before he leaves the service with a proviso that a shorter
conduct and finish the investigation of the employee’s
notification would be acceptable only if authorized by the department
administrative case. The period of thirty (30) days may only head concerned and that he should continue to render service during the
be extended if the employer failed to complete the hearing interim unless he has secured authority to go on leave. Moreover, any
or investigation within said period due to justifiable grounds. resignation shall be effected only upon its proper acceptance by
No extension thereof can be made based on whimsical, management. The penalty prescribed for the violation thereof is
capricious or unreasonable grounds. dismissal. Accordingly, PHIMCO maintains that since Carpio violated
• Preventive suspension lasting longer than 30 days, without the rules and regulations of the company with respect to his leaving the
the benefit of valid extension, amounts to constructive company which resulted in the disruption of its operations, then his
termination was for a just cause based particularly on willful
dismissal.
disobedience under the law. Corollarily, PHIMCO was not obligated to
• Indefinite preventive suspension amounts to constructive give separation pay to Carpio.
dismissal. We find the penalty of dismissal imposed on Carpio for non-
observance of the rules and regulations provided in the Handbook of
III PHIMCO, particularly Rules 7, 7.1 and 7.2 concerning the resignation
TERMINATION OF EMPLOYMENT BY of the employee, too harsh. There is no dispute that Carpio failed to
EMPLOYEE comply with company rules and regulations regarding his resignation.
Nonetheless, it has to be noted and emphasized that he did not
outrightly disregard the same. Looking back at the antecedents, it was
Article 300. [285] Termination by Employee. (a) An on 14 August 1991 that he tendered his resignation to take effect fifteen
employee may terminate without just cause the employee-employer (15) days later or on 30 August 1991. Before that period expired he still
relationship by serving a written notice on the employer at least one reported for work. Significantly, the fact that his letter of resignation
(1) month in advance. The employer upon whom no such notice was was only acted upon after he had left for United States opens the
served may hold the employee liable for damages. avenues for speculations and suspicions. While he continued to work
(b) An employee may put an end to the relationship to await the acceptance of his resignation, he was not even informed of
without serving any notice on the employer for any of the following the status thereof or that he had to stay for fifteen (15) more days. The
just causes: rule could have been easily pointed out or relayed to him by Mr. Lopez
1. Serious insult by the employer or his representative to whom he handed his letter of resignation and who was staying with
on the honor and person of the employee; him in the same office. But management waited until after he had left
2. Inhuman and unbearable treatment accorded the for the United States. Evidently, there was bad faith in the manner his
employee by the employer or his representative; resignation was resolved.
3. Commission of a crime or offense by the employer or Petitioner also avers that Carpio’s termination was for a just
his representative against the person of the employee or any of the cause under the law grounded on his willful disobedience to comply
immediate members of his family; and with the company’s rules and regulation. But to constitute willful
4. Other causes analogous to any of the foregoing. disobedience the employee’s conduct must be willful or intentional, the
willfulness being characterized by a wrongful and perverse attitude and
A. VOLUNTARY RESIGNATION the order violated must have been reasonable, lawful, made known to
Resignation is the voluntary act of an employee who the employee and must pertain to the duties which he has been engaged
to discharge. 10 In the instant case, we find absent any intentional or
finds herself in a situation where she believes that personal
willful conduct on the part of Carpio to disregard the rules regarding
reasons cannot be sacrificed in favor of the exigency of the voluntary resignation. On the contrary, there was earnest and sincere
service and that she has no other choice but to disassociate effort on the part of Carpio to comply.
herself from employment. Employees resign for various In cases of voluntary resignation, the employee finds
reasons. A big salary is certainly no hindrance to a voluntary himself in a situation where he believes that personal reasons cannot be
cessation of employment. Human resource studies reveal that sacrificed in favor of the exigency of the service and he has no other
various factors (in and out of the workplace) affect an choice but to disassociate himself from his employment; 11 hence, the
employee’s employment decision [Globe Telecom v. law affords the employee the right to resign regardless of whether the
company has found an able and competent replacement and whether
Crisologo].
the operation of the company would be affected provided he serves a
written notice on the employer at least one (1) month in advance. The
1. Requisites rule of requiring an employee to stay or complete the 30-day period

Page 159 of 191

prior to the effectivity of his resignation becomes discretionary on the
part of management as an employee who intends to resign may be 4. Separation Pay
allowed a shorter period before his resignation becomes effective. In The general rule is that an employee who voluntarily
the instant case, the noncompliance with the period should not be used
resigns from employment is not entitled to separation pay
by management as a subterfuge to avoid the payment of separation pay.
unless, however. there is a stipulation for payment of such in
the employment contract or Collective Bargaining Agreement
2. Liability for Damages
(CBA), or payment of the amount is sanctioned by established
The failure by the resigning employee to comply with
employer practice or policy [Travelaire & Tours v. NLRC].
the legal requirement of service of a written notice (resignation
letter) at least 30 days from its effectivity does not result in
B. INVOLUNTARY RESIGNATION
making his resignation void but only in making him liable for
The following are the just causes that may justify the
damages [Serrano v. NLRC].
termination by the employee of the employment relationship
without need to comply with the 30-day prior written notice
3. Withdrawal of Resignation
requirement:
Resignations, once accepted, may not be withdrawn
without the consent of the employer. If the employer accepts
(a) Serious insult by the employer or his
the withdrawal, the employee retains his job. If the employer
representative on the honor and person of the
does not, the employee cannot claim illegal dismissal. To say
employee;
that an employee who has resigned is illegally dismissed, is to
(b) Inhuman and unbearable treatment accorded the
encroach upon the right of employers to hire persons who will
employee by the employer or his representative;
be of service to them. Obviously, this is a recognition of the
(c) Commission of a crime or offense by the
contractual nature of employment which requires mutuality of
employer or his representative against the person
consent between the parties. An employment contract is
of the employee or any of the immediate
consensual and voluntary. Hence, if the employee "finds-
members of his family; and
himself in a situation where he believes that personal reasons
(d) Other causes analogous to any of the foregoing.
cannot be sacrificed in favor of the exigency of the service, then
he has no other choice but to disassociate himself from his
C. CONSTRUCTIVE DISMISSAL
employment". If accepted by the employer, the consequent
Constructive dismissal contemplates any of the
effect of resignation is severance of the contract of employment
following situations:
[Philippines Today v. NLRC].
A resigned employee who desires to take his job back
a. An involuntary resignation resorted to when
has to re-apply therefor and he shall have the status of a stranger
continued employment is rendered impossible,
who cannot unilaterally demand an appointment. He cannot
unreasonable or unlikely;
arrogate unto himself the same position which he earlier
b. A demotion in rank and/or a diminution in pay; or
decided to leave. To allow him to do so would be to deprive the
c. A clear discrimination, insensibility or disdain
employer of his basic right to choose whom to employ. Such is
by an employer which becomes unbearable to the
tantamount to undue oppression of the employer. It has been
employee that it could foreclose any choice by him
held that an employer is free to regulate, according to his own
except to forego his continued employment.
discretion and judgment, all aspects of employment including
hiring. The law, in protecting the rights of the laborer, impels
The employer has to prove that such managerial
neither the oppression nor self-destruction of the employer
actions do not constitute constructive dismissal [Blue Dairy
[Ibid].
Corp. v. NLRC].
The test of constructive dismissal is whether a
Intertrod v. NLRC reasonable person in the employee’s position would have felt
Held: Resignations, once accepted and being the sole act of
compelled to give up his position under the circumstances. It is
the employee, may not be withdrawn without the consent of the
employer. In the instant case, the Master had already accepted the
an act amounting to dismissal but made to appear as if it were
resignation and, although the private respondent was being required to not. In fact, the employee who is constructively dismissed may
serve the thirty (30) days notice provided in the contract, his resignation be allowed to keep on coming to work. Constructive dismissal
was already approved. Private respondent cannot claim that his is, therefore, a DISMISSAL IN DISGUISE. The law
resignation ceased to be effective because he was not immediately recognizes and resolves this situation in favor of the employees
discharged in Port Pylos, Greece, for he could no longer unilaterally in order to protect their rights and interests from the coercive
withdraw such resignation. When he later signified his intention of acts of the employer [Ang v. San Joaquin].
continuing his work, it was already up to the petitioners to accept his
withdrawal of his resignation. The mere fact that they did not accept
such withdrawal did not constitute illegal dismissal for acceptance of Singa Ship Management v. NLRC
the withdrawal of the resignation was their (petitioners’) sole Held: Corollarily, the contention of petitioners that
prerogative. respondent Sangil voluntarily quit and was not illegally dismissed is
Once an employee resigns and his resignation is accepted, without merit. We defer to the findings of the NLRC -
he no longer has any right to the job. If the employee later changes his Since complainant is not the aggressor, and since he figured
mind, he must ask for approval of the withdrawal of his resignation a head injury, he is then afraid to go back to the ship and to mix with
from his employer, as if he were re-applying for the job. It will then be his aggressor. This apprehension or fear is normal to an ordinary
up to the employer to determine whether or not his service would be prudent individual and is tantamount to self-preservation. Therefore,
continued. If the employer accepts said withdrawal, the employee his decision to leave the ship "Crown Odyssey" is not voluntary. He did
retains his job. If the employer does not, as in this case, the employee not leave the ship out of his own free will but his departure was
cannot claim illegal dismissal for the employer has the right to precipitated by fear. Without that incident on 20 July 1990 he would
determine who his employees will be. To say that an employee who has have no reason not to go back to the ship but with that incident, he fears
resigned is illegally dismissed, is to encroach upon the right of for his life and limb.
employers to hire persons who will be of service to them. In People's Security, Inc. v. NLRC we said that
"constructive dismissal exists when there is a quitting because
Page 160 of 191
continued employment is rendered impossible, unreasonable or has been rendered moot by petitioner’s resignation tendered a day after
unlikely x x x x" Then in Philippine Advertising Counselors, Inc. v. the suspension was made effective.
NLRC we held that "[c]onstructive dismissal, however, does not Petitioner contests the grounds for her suspension as she
always involve such kinds of diminution; an act of clear discrimination, denies posing a danger on the lives of the officers or employees of
insensibility, or disdain by an employer may become so unbearable on respondent or of their properties. Petitioner adds that she was not in a
the part of the employee that it could foreclose any choice by him position to bind respondent to any contract, therefore, she could not and
except to forego his continued employment." would not be able to sabotage the operations of respondent. Upon the
In the instant case, respondent Sangil quit because he feared other hand, respondent asserts that preventive suspension was
for his life and his fear was well founded. He already figured in an necessary in order to protect the assets and operations of the company
incident with the much taller, bigger and heavier Zakkas who had been pending investigation of the alleged infractions committed by the
intimidating him. He already suffered a cut in his head. Earlier, Zakkas employee concerned.
threatened to pour hot coffee on his head. Indeed, the intense Respondent is correct. Indeed, as sales manager, petitioner
undercurrent between the Filipinos and the Greeks that could erupt into had the power and authority to enter into contracts that would bind
violence at the slightest provocation was apparent as manifested by the respondent, regardless of whether these contracts would prove to be
writings in blood on the wall of the word "magkaisa," as witnessed by beneficial or prejudicial to the interest of respondent. Respondent has
another Greek steward on the day of the incident. And, Sangil could not every right to protect its assets and operations pending investigation of
get any protection from the Greek ship captain, not even the slightest petitioner.
assurance of safety from him. In fine, the decision of respondent Sangil Neither could we consider the acts of disconnection of
to leave the ship was not voluntary at all but was impelled by a computer and internet access privileges as harassment. Respondent
legitimate desire for self-preservation. He did not leave the ship out of clearly explained that the cessation of her internet and network
his own free will, whim or caprice but was moved by fear for his life. privileges were but a consequence of the investigation against her and
Without that incident on 20 July 1990 where he was pushed by the not for the purpose of harassment. The Court of Appeals gave merit to
Greek Zakkas, respondent Sangil would not have had any reason not to respondent’s explanation and held, thus:
return to his ship. After all, he must have worked so hard to get on board x x x while her suspension, cessation of internet privileges,
"Crown Odyssey." and exclusion from local network access were but a consequence of the
investigation against her, and were intended to prevent her from having
further access to the company’s network-based documents and forms.
Mandapat v. Add Force Personnel Services
The acts respondent complains about are just measures
Held: Petitioner reiterates that she was constructively
enforced by respondent to protect itself while the investigation was
dismissed. She harps on the alleged pattern of harassment committed
ongoing.
by respondent as tantamount to constructive dismissal, such as, illegally
Petitioner claims that Longstaff forced her to resign by
placing her under preventive suspension, the disconnection of her
baiting her with the promise of separation pay; but respondent
internet account, and the pressure exerted by respondent to force her to
maintains that there was nothing illegal in giving petitioner the option
resign.
to either resign or be separated for a just cause.
Petitioner claims that the preventive suspension meted upon
We agree with the Court of Appeals that there was no
her is illegal for being indefinite, as the duration of her suspension was
coercion employed on petitioner. The appellate court made the
not stated in the company’s memorandum.
following observation:
On the other hand, respondent employer argues that
Unfortunately, however, before the investigation could
petitioner’s preventive suspension for one day can hardly be considered
proceed to the second step of the termination process into a hearing or
indefinite, given the fact that petitioner immediately resigned one day
conference, Mandapat chose to resign from her job. Mandapat’s bare
after the suspension.
allegation that she was coerced into resigning can hardly be given
We find that there was no act of discrimination committed
credence in the absence of clear evidence proving the same. No doubt,
against petitioner that would render her employment unbearable.
Mandapat read the writing on the wall, knew that she would be fired
Preventive suspension may be legally imposed against an
for her transgressions, and beat the company to it by resigning. Indeed,
employee whose alleged violation is the subject of an investigation. The
by the disrespectful tenor of her memorandum, Mandapat practically
purpose of his suspension is to prevent him from causing harm or injury
indicated that she was no longer interested in continuing cordial
to the company as well as to his fellow employees.
relations, much less gainful employment with Add Force.
The pertinent rules dealing with preventive suspension are
Mere allegations of threat or force do not constitute
found in Section 8 and Section 9 of Rule XXIII, Book V of the Omnibus
evidence to support a finding of forced resignation. In order for
Rules Implementing the Labor Code, as amended by Department Order
intimidation to vitiate consent, the following requisites must concur:
No. 9, Series of 1997, which read as follows:
(1) that the intimidation caused the consent to be given; (2) that the
Section 8. Preventive suspension. The employer may place
threatened act be unjust or unlawful; (3) that the threat be real or
the worker concerned under preventive suspension only if his continued
serious, there being evident disproportion between the evil and the
employment poses a serious and imminent threat to the life or property
resistance which all men can offer, leading to the choice of doing the
of the employer or of his co-workers.
act which is forced on the person to do as the lesser evil; and (4) that it
Section 9. Period of suspension. No preventive suspension
produces a well-grounded fear from the fact that the person from whom
shall last longer than thirty (30) days. The employer shall thereafter
it comes has the necessary means or ability to inflict the threatened
reinstate the worker in his former or in a substantially equivalent
injury to his person or property.
position or the employer may extend the period of suspension provided
None of these requisites was proven by petitioner. No
that during the period of extension, he pays the wages and other benefits
demand was made on petitioner to resign. At most, she was merely
due to the worker. In such case, the worker shall not be bound to
given the option to either resign or face disciplinary investigation,
reimburse the amount paid to him during the extension if the employer
which respondent had every right to conduct in light of the numerous
decides, after completion of the hearing, to dismiss the worker.
infractions committed by petitioner. There is nothing irregular in
When preventive suspension exceeds the maximum period
providing an option to petitioner. Ultimately, the final decision on
allowed without reinstating the employee either by actual or payroll
whether to resign or face disciplinary action rests on petitioner alone.
reinstatement or when preventive suspension is for indefinite
All told, the instances of harassment alleged by petitioner
period, only then will constructive dismissal set in.
appear to be more apparent than real. We find no reason to disturb the
While no period was mentioned in the show-cause
conclusion of the Court of Appeals that petitioner resigned and was not
memorandum, it was wrong for petitioner to infer that her suspension
constructively dismissed.
was for an indefinite period. It must be pointed out that the inclusion of
the phrase "during the course of investigation" would lead to a
reasonable and logical presumption that said suspension in fact has a Consolidated Foods v. NLRC
duration which could very well be not more than 30 days as mandated Held: We find that petitioners acts of conducting audits and
by law. And, as the Court of Appeals correctly observed, the suspension investigation on the alleged irregularities committed by private
respondent and in reassigning him to another place of work pending the

Page 161 of 191

results of the investigation were based on valid and legitimate grounds. what actually transpired on 13 March 2012. The retirement plan
As such, these acts of management cannot amount to constructive for Respondent-ABB only gives a retiree 75% of his monthly pay
dismissal. It is worthy to note that petitioners gave Baron every for every year of service. The Complainant was able to get a higher
opportunity to raise his defense and fully explain the discrepancies in rate equivalent to one (1) month salary for every year of service.
the funds in his possession. In fact private respondent informed The Complainant prepared his resignation letter in his own
petitioners that he would be returning for work on 5 March 1991 after office. His first letter was not accepted by HR Miranda because it gave
his sick leave. But instead of doing so, he filed a complaint for the impression that he was being directed or ordered to resign. HR
constructive dismissal before the Labor Arbiter. Miranda made it clear to him that he is not being ordered to resign as it
By leaving his job without submitting the required final is his own decision whether to resign or not. The Complainant
explanation on the alleged irregularities, private respondent deprived submitted another resignation letter which was accepted by
himself of the opportunity to face his accusers and prove his innocence Respondent-ABB through its Country HR Manager. Thereafter, the
of the charges hurled against him. Complainant no longer reported for work as his resignation was
effective immediately. It was ten (10) days after he submitted his
resignation letter that he again met with HR Miranda to get his
Dangan v. NLRC
retirement benefits. The meeting took place outside the company
Held: Instead of terminating the petitioner’s employment,
premises. If, indeed, the resignation of the Complainant was
the private respondent merely reassigned her to other temporary
involuntary, he could have easily sought legal counsel or advice
positions before giving her a permanent job as secretary in the
right after he left the company premises on 13 March 2012. Instead,
Technical Training Department located at Bicutan, Taguig, Metro
he waited for his clearance to be processed and his check prepared.
Manila. The acts of the company negate the petitioner’s claim of
He cannot claim that he was still under duress from March 14 to
discrimination and illegal constructive dismissal. It tried its best to
22, 2012. The Complainant waited to be given his benefits first, and
continue using her services. Needless to say, no reinstatement can be
three (3) days thereafter filed his complaint before this Office. This
effected because the petitioner has not been dismissed. Neither may she
is hardly the mindset of a person who is not in control of his life.
be reinstated to her former position which no longer exists. Ad
On the other hand, the Court disagrees with the findings of
imposible nemo tenetur. Insofar as this aspect of the petition is
the Labor Arbiter that Doble's resignation was not voluntary based on
concerned, the respondent NLRC committed no abuse of discretion in
the following events, to wit: (1) on March 2, 2012, Doble's Performance
dismissing the petitioner’s appeal.
and Development Approval rating in 2011 is unsatisfactory; (2) there
are no prior circumstances that may show his intention to resign; (3) on
Doble v. ABB, Inc. March 13, 2012, Desai raised the option for him to resign, after
Held: Since Doble claims to have been forced to submit a explaining that due to the extent of losses and level of discontent among
resignation letter, it is incumbent upon him to prove with clear and the ranks of the PS Division, the Global and Regional management
convincing evidence that his resignation was not voluntary, but was have demanded for a change in leadership; (4) from the circumstances
actually a case of constructive dismissal, i.e., a product of coercion or surrounding his resignation, the option to resign did not originate from
intimidation.37 Coercion exists when there is a reasonable or well- Doble but from Desai, whose actuations was not a mere suggestion but
grounded fear of an imminent evil upon a person or his property or upon a directive or order that was effected on the same day of March 13,
the person or property of his spouse, descendants or ascendants. 38 The 2012; (5) HR Manager Miranda's affidavit clearly show that Doble
requisites for intimidation to vitiate one's consent are stated in St. underwent pressure to resign because starting 11:00 a.m. until 6:00 p.m.
Michael Academy v. NLRC, thus: of even date, the option to resign was reiterated and repeated until he
... (1) that the intimidation caused the consent to be given; handed a revised resignation letter; and (6) Doble was not given the
(2) that the threatened act be unjust or unlawful; (3) that the threat be opportunity or option to stay in the service.
real or serious, there being evident disproportion between the evil and Even if the option to resign originated from the employer,
the resistance which all men can offer, leading to the choice of doing what is important for resignation to be deemed voluntary is that the
the act which is forced on the person to do as the lesser evil; and (4) employee's intent to relinquish must concur with the overt act of
that it produces a well-grounded fear from the fact that the person from relinquishment. There can be no doubt as to the drastic and shocking
whom it comes has the necessary means or ability to inflict the nature of the abrupt decision of ABB, Inc. to let Doble resign on March
threatened injury to his person or property x x x. 13, 2012 after almost 19 years of dedicated and satisfactory service, on
After a careful review of the records, the Court finds that account of the extent of losses, the level of discontent among the ranks
the above-stated requisites are absent, and that the NLRC has of PS Division, and the ABB, Inc. Global and Regional management's
exhaustively discussed that Doble was not coerced into submitting a demand for a change in leadership. It bears emphasis, however, that
resignation letter, thus: between the start of the conference at around 11:00 a.m. and about eight
"[c]omplainant has been employed with Respondent-ABB (8) hours later in the evening when he left the company premises, Doble
for nineteen (19) years. He is holding one of the top positions in the negotiated for a higher separation pay, i.e., from 75% of the monthly
company and answerable only to the President, herein Respondent- salary for every year of service allowed under the company retirement
Desai. He is a highly educated man. It is improbable that a man of his plan up to double that amount, or 1.5 month's pay for every year of
stature may be pressured into doing something that he does not want to service. In fact, Doble tendered a resignation letter only after being
do. Being a man of high educational attainment and qualifications, he offered a better separation benefit of 1-month pay for every year of
is expected to know the import of everything he executes. His claim service, and even submitted a separate letter expressing his intent to
that he was forced to resign by HR Miranda is unbelievable. The buy his service vehicle. After considering the acts of Doble before and
Complainant is the Vice-President and Local Division Manager of after his resignation, the Court is convinced of Doble's clear intention
the Power System Division of the Respondent-ABB, while HR to sever his employment with ABB, Inc.
Miranda is the Country HR Manager. The latter docs not outrank Doble claimed that while inside the conference room at
the former. It is likewise unbelievable that the HR Manager would about 2:00 p.m. of March 13, 2012, "he was aware that respondents
prevent the Complainant from leaving the premises of the company were actually terminating his services illegally and without due
nor prevent him from taking his lunch wherever he wants to take process, that the letter of resignation he was being made to prepare was
it. HR Miranda simply docs not have that power and she cannot only a 'palusot' (to borrow the word of Cong. Fariñas) of respondents
possibly do that to a high-ranking officer who has served the (ABB, Inc. and Desai)." Despite being aware of the illegality of his
company for nineteen (19) years. The event of 13 March 2012 is dismissal, Doble submitted a resignation letter and a letter of intent to
undoubtedly stressful to the Complainant as the top management had purchase his service vehicle, allowed Miranda to process his
already expressed displeasure with his performance. But such degree resignation papers, met her outside company premises on March 23,
of tension is expected in a corporation environment where the 2012 to sign a waiver and quitclaim and to receive his separation
primordial consideration is to earn profit. As stated in the sworn benefits. In view of the lapse of considerable period between his
statement of HR Miranda, the Complainant was given the option resignation until the execution of a quitclaim and receipt of his
to resign by Respondent-Desai. Her statement that the separation benefits about ten (10) days later, the Court is inclined to
Complainant negotiated for a higher benefit is more attuned with

Page 162 of 191

rule that the filing of his complaint for illegal dismissal on March 26, not be deemed terminated, should the suspension of operation go
2012 is a mere afterthought, if not a mere pretention. beyond six (6) months as long as the continued suspension is due, as in
this case, to a cause beyond the control of the employer.
Cases where there was constructive dismissal We disagree.
As correctly elucidated upon by the Court of Appeals:
We observe that MMC was forced by the circumstances,
 Denying to the workers entry to their work area and placing hence, it resorted to a temporary suspension of its mining and milling
them on shifts “not by weeks but almost by month” by operations. It is clear that MMC had no choice. It would be well to
reducing their workweek to three days. reiterate at this juncture that the reason for such suspension cannot be
 Reducing employee’s functions attributed to DENR-EMB. It is thus, evident, that the MMC declared
 Blackmailing an employee to resign temporary suspension of operations to avert further losses.
 Delaying when the employee can start working or asking the The decision to suspend operation ultimately lies with the
employee to wait for a long period of time before rehiring employer, who in its desire to avert possible financial losses, declares,
as here, suspension of operations
 Barring the employees from entering the premises whenever
Article 283 of the Labor Code applies to MMC and it
they would report for work in the morning without any provides:
justifiable reason, and they were made to wait for a certain ARTICLE 283.Closure of establishment and reduction of
employee who would arrive in the office at around noon, personnel. - The employer may also terminate the employment of any
after they had waited for a long time and had left. employee due to the installation of labor-saving devices, redundancy,
 Sending to an employee a notice of indefinite suspension retrenchment to prevent losses or the closing or cessation of operation
which is tantamount to dismissal. of the establishment or undertaking unless the closing is for the purpose
 Imposing indefinite preventive suspension without actually of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one
conducting any investigation.
(1) month before the intended date thereof. In case of termination due
 Changing the employee’s status from regular to casual to the installation of labor-saving devices or redundancy, the worker
constitutes constructive dismissal. affected thereby shall be entitled to a separation pay equivalent to at
 Preventing the employee from reporting for work by least his one (1) month pay or to at least one (1) month pay for every
ordering the guards not to let her in. This is clear notice of year of service, whichever is higher. In case of retrenchment to prevent
dismissal. losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or
Illegal Dismissal vs. Constructive Dismissal financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service,
In illegal dismissal, the employer openly shows his
whichever is higher. A fraction of at least six (6) months shall be
intention to dismiss the employee. In fact, the employer, in considered one (1) whole year.
compliance with due process, asks the employee to explain why Said provision is emphatic that an employee, who was
he should not be dismissed for committing a wrongful act and dismissed due to cessation of business operation, is entitled to the
he is given due process prior to terminating him. separation pay equivalent to one (1) month pay or at least one-half (1/2)
In contrast, in constructive dismissal, the employer month pay for every year of service, whichever is higher. And it is
will never indicate that he is terminating the employee. He will jurisprudential that separation pay should also be paid to employees
even allow the employee to report to his work every day. But even if the closure or cessation of operations is not due to losses.
The Court is not impressed with the claim that actual severe
he will do any of the three (3) acts mentioned above that
financial losses exempt MMC from paying separation benefits to
indicates his intention to get rid of the services of the employee. complainants. In the first place, MMC did not appeal the decision of
This is the reason why it is called “dismissal in disguise.” the Court of Appeals which affirmed the NLRC's award of separation
pay to complainants. MMC's failure had the effect of making the
D. WHEN EMPLOYMENT NOT DEEMED awards final so that MMC could no longer seek any other affirmative
TERMINATED relief. In the second place, the non-issuance of a permit forced MMC
to permanently cease its business operations, as confirmed by the Court
of Appeals. Under Article 283, the employer can lawfully close shop
Article 301. [286] When Employment not Deemed
anytime as long as cessation of or withdrawal from business operations
Terminated. The bona fide suspension of the operation of a business
is bona fide in character and not impelled by a motive to defeat or
or undertaking for a period not exceeding six (6) months, or the
circumvent the tenurial rights of employees, and as long as he pays his
fulfillment by the employee of a military or civic duty shall not
employees their termination pay in the amount corresponding to their
terminate employment. In all such cases, the employer shall
length of service.[26] The cessation of operations, in the case at bar is
reinstate the employee to his former position without loss of
of such nature. It was proven that MMC stopped its operations
seniority rights if he indicates his desire to resume his work not
precisely due to failure to secure permit to operate a tailings pond.
later than one (1) month from the resumption of operations of his
Separation pay must nonetheless be given to the separated employees.
employer or from his relief from the military or civic duty.

Article 301 of the Labor Code allows the bona Floating Status
fide suspension of operations for a period not exceeding six (6) At the outset, it bears reiterating that although placing
months. During the suspension, an employee is not deemed an employee like a security guard on “floating” status (or
terminated. As a matter of fact, the employee is entitled to be sometimes called temporary “off-detail” status) is considered a
reinstated once the employer resumes operations within the 6- temporary retrenchment measure, the Supreme Court, in
month period. However, Article 301 is silent with respect to Exocet v. Serrano, recognized the fact that there is similarly no
the rights of the employee if the suspension of operations lasts provision in the Labor Code which treats of a temporary
for more than 6 months [Manila Mining Corp. Employees v. retrenchment or lay-off. Neither is there any provision which
Manila Mining Corp.]. provides for its requisites or its duration.

E. RETIREMENT
Manila Mining Corp. Employees v. Manila
Retirement and dismissal are entirely different from
Mining
each other. Retirement is the result of a bilateral act of the
Held: MMC subscribes to the view that for purposes of
determining employer responsibility, an employment should likewise parties, a voluntary agreement between the employer and the

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employees whereby the latter after reaching a certain age agrees
and/or consents to severe his employment with the former. On 2. Options
the other hand, dismissal refers to the unilateral act of the The two (2) types of retirement under the law (Article
employer in terminating services of an employee with or 302 [287] of the Labor Code) are:
without cause. In fine, in the case of dismissal, it is only the
employer who decides when to terminate the services of an a. Optional retirement upon reaching the age
employee. Moreover, concomitant with the provisions on of sixty (60) years (50 if
retirement in a Labor Agreement is a stipulation regarding underground/surface mine employees).
retirement benefits pertaining to a retired employee. Here b. Compulsory retirement upon reaching the
again, the retirement benefits are subject to stipulation by the age of sixty-five (65) years (60 if
parties unlike in dismissals were separation pay is fixed by law underground/surface mine employees).
in cases of dismissals without just cause. Evident, therefore,
from the foregoing is that retirements which are agreed upon by It is the employee who exercises the option under No.
the employer and the employee in their collective bargaining 1 above. At age 65, there is no more option of the employee to
agreement are not dismissals . . . . To further fortify the speak of. He has to retire as this age is considered compulsory
aforesaid conclusion, it is noteworthy that even the New Labor retirement age.
Code recognizes this distinction when it treats retirement form Article 302 provides for two types of retirement; (a)
service under a separate title from that of dismissal or compulsory and (b) optional. The first takes place at age 65,
termination of employment, aside from expressly recognizing while the second is primarily determined by the collective
the right of the employer to retire any employee who has bargaining agreement or other employment contract or
reached the retirement age established in the collective employer’s retirement plan. In the absence of any provision on
bargaining agreement or other applicable employment contract optional retirement in a collective bargaining agreement, other
and the latter to receive such retirement benefits as he may have employment contract or employer’s retirement plan, an
earned under existing laws and any collective bargaining or employee may optionally retire upon reaching the age of 60
other agreement [Pantranco v. NLRC]. years or more, but not beyond 65 years, provided he has served
at least five years in the establishment concerned. That
1. Coverage prerogative is exclusively lodged in the employee [Capili v.
The following employees are eligible to avail of NLRC].
retirement benefits under Article 302 [287] of the Labor Code: In almost all countries today, early retirement, i.e.,
before age 60, is considered a reward for services rendered
a. All employees in the private sector, regardless since it enables an employee to reap the fruits of his labor —
of their position, designation or status and particularly retirement benefits, whether lump-sum or
irrespective of the method by which their wages otherwise — at an earlier age, when said employee, in
are paid; presumably better physical and mental condition, can enjoy
b. Part-time employees; them better and longer. As a matter of fact, one of the
c. Employees of service and other job contractors; advantages of early retirement is that the corresponding
d. Domestic workers/kasambahays or persons in retirement benefits, usually consisting of a substantial cash
the personal service of another; windfall, can early on be put to productive and profitable uses
e. Underground mine workers; by way of income — generating investments, thereby affording
f. Employees of government-owned and/or a more significant measure of financial security and
controlled corporations organized under the independence for the retiree who, up till then, had to contend
Corporation Code (without original charters). with life’s vicissitudes within the parameters of his fortnightly
or weekly wages. Thus we are now seeing many CBAs with
Article 302 [287], as amended, does not apply to the such early retirement provisions. And the same cannot be
following employees: considered a diminution of employment benefits. Incidentally,
we call attention to Republic Act No. 7641, known as "The
a. Employees of the national government and its Retirement Pay Law," which went into effect on January 7,
political subdivisions, including government- 1993 [Pantranco v. NLRC].
owned and/or controlled corporations, if they are
covered by the Civil Service Law and its Laya v. Court of Appeals
regulations. Held: The CA concluded that the petitioner had agreed to be
b. Employees of retail, service and agricultural bound by the retirement plan of PVB when he accepted the letter of
establishments or operations regularly employing appointment as its Chief Legal Counsel.
not more than ten (10) employees. These terms are We disagree with the conclusion. We declare that based on
the clear circumstances herein the CA erred in so concluding.
defined as follows:
The petitioner's letter of appointment pertinently stated:
3. As a Senior Officer of the Bank, you are entitled to the
(i) “Retail establishment” is one principally following executive benefits:
engaged in the sale of goods to end-users Car Plan limit of P700,000.00, without equity on your part;
for personal or household use. It shall lose a gasoline subsidy of 300 liters per month and subject further to The
its retail character qualified for exemption Car Plan Policy of the Bank.
if it is engaged in both retail and wholesale Membership in a professional organization in relation to
of goods. your profession and/or assigned functions in the Bank.
Membership in the Provident Fund Program/Retirement
(ii) “Service establishment” is one
Program.
principally engaged in the sale of service Entitlement to any and all other basic and fringe benefits
to individuals for their own or household enjoyed by the officers; core of the Bank relative to Insurance covers,
use and is generally recognized as such. Healthcare Insurance, vacation and sick leaves, among others.

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 Obviously, the mere mention of the retirement plan in the Officer of PVB,75 the petitioner could not withdraw from the plan
letter of appointment did not sufficiently inform the petitioner of the except upon his termination from employment.
contents or details of the retirement program. To construe from the It is also notable that the retirement plan had been in
petitioner's acceptance of his appointment that he had acquiesced to be existence since January 1, 1996, or more than five years prior to the
retired earlier than the compulsory age of 65 years would, therefore, petitioner's employment by PVB. The plan was established solely by
not be warranted. This is because retirement should be the result of the the PVB, and approved by its president. As such, the plan was in the
bilateral act of both the employer and the employee based on their nature of a contract of adhesion, in respect to which the petitioner was
voluntary agreement that the employee agrees to sever his employment reduced to mere submission by accepting his employment, and
upon reaching a certain age. automatically became a member of the plan. With the plan being a
That the petitioner might be well aware of the existence of contract of adhesion, to consider him to have voluntarily and freely
the retirement program at the time of his engagement did not suffice. given his consent to the terms thereof as to warrant his being
His implied knowledge, regardless of duration, did not equate to the compulsorily retired at the age of 60 years is factually unwarranted.
voluntary acceptance required by law in granting an early retirement In view of the foregoing, the Court disagrees with the view
age option to the employee. The law demanded more than a passive tendered by Justice Leonen to the effect that the petitioner, because of
acquiescence on the part of the employee, considering that his early his legal expertise and educational attainment, could not now validly
retirement age option involved conceding the constitutional right to claim that he was not informed of the provisions of the retirement
security of tenure. program. The pertinent rule on retirement plans does not presume
In Cercado v. Uniprom, Inc., we have underscored the consent or acquiescence from the high educational attainment or legal
character of the employee's consent in agreeing to the early retirement knowledge of the employee. In fact, the rule provides that the
policy of the employer, viz.: acquiescence by the employee cannot be lightly inferred from his
Acceptance by the employees of an early retirement age acceptance of employment.
option must be explicit, voluntary, free, and uncompelled. While an Moreover, it was incumbent upon PVB to prove that the
employer may unilaterally retire an employee earlier than the legally petitioner had been fully apprised of the terms of the retirement
permissible ages under the Labor Code, this prerogative must be program at the time of his acceptance of the offer of employment. PVB
exercised pursuant to a mutually instituted early retirement plan. In did not discharge its burden, for the petitioner's appointment letter
other words, only the implementation and execution of the option may apparently enumerated only the minimum benefits that he would enjoy
be unilateral, but not the adoption and institution of the retirement plan during his employment by PVB, and contained no indication of PVB
containing such option. For the option to be valid, the retirement plan having given him a copy of the program itself in order to fully apprise
containing it must be voluntarily assented to by the employees or at him of the contents and details thereof. Nonetheless, even assuming
least by a majority of them through a bargaining representative. that he subsequently obtained information about the program in the
Furthermore, the petitioner's membership in the retirement course of his employment, he still could not opt to simply withdraw
plan could not be justifiably attributed to his signing of the letter of from the program due to his membership therein being automatic for
appointment that only listed the minimum benefits provided to PVB's the regular employees of PVB.
employees. Indeed, in Cercado, we have declared that the employee's To stress, company retirement plans must not only comply
consent to the retirement plan that came into being two years after the with the standards set by the prevailing labor laws but must also be
hiring could not be inferred from her signature on the personnel action accepted by the employees as commensurate to their faithful services
forms accepting the terms of her job description, and compliance with to the employer within the requisite period.80 Although the employer
the company policies, rules and regulations, to wit: could be free to impose a retirement age lower than 65 years for as long
We also cannot subscribe to respondent's submission that its employees consented, the retirement of the employee whose intent
petitioner's consent to the retirement plan may be inferred from her to retire was not clearly established, or whose retirement was
signature in the personnel action forms containing the phrase: involuntary is to be treated as a discharge.
"Employee hereby expressly acknowledges receipt of and undertakes
to abide by tile provisions of his/her Job Description, Company Code 3. Amount of Retirement Pay
of Conduct and such other policies, guidelines, rules and regulations
In the absence of a retirement plan or agreement
the company may prescribe."
It should be noted that the personnel action forms relate to providing for retirement benefits of employees in the
the increase in petitioner's salary at various periodic intervals. To establishment, an employee, upon reaching the optional or
conclude that her acceptance of the salary increases was also, compulsory retirement age specified in Article 287, shall be
simultaneously, a concurrence to the retirement plan would be entitled to retirement pay equivalent to at least one-half (½)
tantamount to compelling her to agree to the latter. Moreover, voluntary month salary for every year of service, a fraction of at least six
and equivocal acceptance by an employee of an early retirement age (6) months being considered as one (1) whole year.
option in a retirement plan necessarily connotes that her consent For purposes of determining the minimum retirement
specifically refers to the plan or that she has at least read the same when
pay due an employee under Article 287, the term “one- half
she affixed her conformity thereto.
A perusal of PVB's retirement plan shows that under its month salary” shall include all of the following:
Article III all the regular employees of PVB were automatically
admitted into membership, thus: (i) Fifteen (15) days salary of the employee based
ARTICLE III on his latest salary rate.
MEMBERSHIP IN THE PLAN (ii) The cash equivalent of five (5) days of service
Section 1. Eligibility at Effective Date. Any Employee of incentive leave;
the Bank as of January 1, 1996 shall automatically be a Member of the (iii)One-twelfth (1/12) of the 13th month pay due
Plan as of such date.
the employee; and
Section 2. Eligibility after Effective Date. Any person who
becomes an Employee after January 1, 1996 shall automatically (iv) All other benefits that the employer and
become a Member of the Plan on the date he becomes a regular employee may agree upon that should be
permanent Employee, provided he is less than 55 years old as of such included in the computation of the employee’s
date. retirement pay.
Section 3. Continuation/Termination of Membership.
Membership in the Plan shall be concurrent with employment with the “One-half (½) month salary” means 22.5 days.
Bank, and shall cease automatically upon termination of the Member's “One-half [½] month salary” is equivalent to “22.5
service with the Bank for any reason whatsoever.74 (Bold underscoring
days” arrived at after adding 15 days plus 2.5 days representing
supplied for emphasis)
Having thus automatically become a member of the one-twelfth [1/12] of the 13th month pay plus 5 days of service
retirement plan through his acceptance of employment as Chief Legal incentive leave [Grace Christian High School v. Lavandera].

Page 165 of 191

 CHAPTER SIX:

JURISDICTION AND REMEDIES

Page 166 of 191

 I from employer-employee relations, including those of persons in
LABOR ARBITER domestic or household service, involving an amount exceeding five
thousand pesos (P5,000.00) regardless of whether accompanied
with a claim for reinstatement.
The Labor Arbiter is an official in the Regional xxx
Arbitration Branch of the NLRC who hears and decides cases (c) Cases arising from the interpretation or
falling under his original and exclusive jurisdiction as provided implementation of collective bargaining agreements and those
by law. arising from the interpretation or enforcement of company
Besides their adjudicatory power to hear and decide personnel policies shall be disposed of by the Labor Arbiter by
referring the same to the grievance machinery and voluntary
cases over which they have jurisdiction, the Labor Arbiters
arbitration as may be provided in said agreements.
have (1) contempt power; and (2) power to conduct ocular
inspection. However, the Labor Arbiter has no more injunctive
power. Only the NLRC has that power. 1. Jurisdiction over ULP Cases
The jurisdiction conferred upon the Labor Arbiters is The Labor Arbiters have jurisdiction only on the civil
both original and exclusive. This means that as a general rule, aspect of ULP which may include claims for actual, moral,
no other officers or tribunals can take cognizance of, or hear exemplary and other forms of damages, attorney’s fees and
and decide, any of the cases therein enumerated. other affirmative reliefs. It must be noted that recovery of civil
However, the following are the exceptions to the liability in the administrative proceeding before the LA bars
exercise of original and exclusive jurisdiction of Labor recovery under the Civil Code.
Arbiters:
2. Jurisdiction over Termination Disputes
a. When the DOLE Secretary or the President The validity of the exercise of jurisdiction by Labor
exercises his power under Article 278(g) of the Arbiters over illegal dismissal cases is not dependent on the
Labor Code to assume jurisdiction over national kind or nature of the ground cited in support of the dismissal;
interest cases and decide them himself. hence, whether the dismissal is for just cause or authorized
b. When the NLRC exercises its power of cause, it is of no consequence [C. Alcantara & Sons v. Court of
compulsory arbitration over similar national Appeals].
interest cases that are certified to it by the DOLE In case of conflict of jurisdiction between Labor
Secretary pursuant to the exercise by the latter Arbiter and the Voluntary Arbitrator over termination cases, the
of his certification power under the same former’s jurisdiction shall prevail for the following reasons:
Article.
c. When cases arise from the interpretation or (i) Termination of employment is not a
implementation of collective bargaining grievable issue that must be submitted to
agreements and from the interpretation of the grievance machinery or voluntary
enforcement of company personnel policies arbitration for adjudication [Navarro III v.
which shall be disposed of by the Labor Arbiter Damasco]. The jurisdiction thereover
by referring the same to the grievance remains within the original and exclusive
machinery and voluntary arbitration, as may be ambit of the Labor Arbiter and not of the
provided in said agreements. Voluntary Arbitrator [Maneja v. NLRC].
d. When the parties agree to submit the case to (ii) Even if the CBA provides that termination
voluntary arbitration before a Voluntary disputes are grievable, the same is merely
Arbitrator or panel of Voluntary Arbitrators discretionary on the part of the parties
who, under Articles 274 and 275, are also thereto [San Miguel Corporation v.
possessed of original and exclusive jurisdiction NLRC].
to hear and decide cases mutually submitted to (iii) Once there is actual termination,
them by the parties for arbitration and jurisdiction is conferred upon Labor
adjudication. Arbiters by operation of law [Atlas Farms
v. NLRC].
A. JURISDICTION OF THE LABOR ARBITERS (iv) Interpretation of CBA and enforcement of
company personnel policies are merely
corollary to an illegal dismissal case
Article 224. [217] Jurisdiction of the Labor Arbiters and
the Commission. (a) Except as otherwise provided under this Code, [Maneja v. NLRC].
the Labor Arbiters shall have original and exclusive jurisdiction to (v) Article 224 is deemed written into the CBA
hear and decide, within thirty (30) calendar days after the being an intrinsic part thereof [Landtex
submission of the case by the parties for decision without extension, Industries v. Court of Appeals].
even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural: In other words, a Voluntary Arbitrator will only have
(1) Unfair labor practice cases;
jurisdiction over illegal dismissal cases when there is express
(2) Termination disputes;
agreement of the parties in the CBA, i.e., the employer and the
(3) If accompanied with a claim for reinstatement, those
cases that workers may file involving wages, rates of pay, hours of bargaining agent, to submit the termination case to voluntary
work and other terms and conditions of employment; arbitration. Absent the express mutual agreement of the parties,
(4) Claims for actual, moral, exemplary and other forms the Voluntary Arbitrator cannot acquire jurisdiction over
of damages arising from the employer-employee relations; termination cases [Maneja v. NLRC].
(5) Cases arising from any violation of Article 264 of this The express agreement must be stated in the CBA or,
Code, including questions involving the legality of strikes and in its absence, there must be enough evidence on record
lockouts; and
unmistakably showing that the parties have agreed to resort to
(6) Except claims for Employees Compensation, Social
Security, Medicare and maternity benefits, all other claims arising

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voluntary arbitration [University of the Immaculate Conception voluntary arbitration. But, where there was already actual termination,
v. NLRC]. with alleged violation of the employee’s rights, it is already cognizable
by the labor arbiter.
In sum, we conclude that the labor arbiter and then the
Atlas Farms v. NLRC NLRC had jurisdiction over the cases involving private respondents’
Held: Records show, however, that private respondents dismissal, and no error was committed by the appellate court in
sought without success to avail of the grievance procedure in their upholding their assumption of jurisdiction.
CBA. On this point, petitioner maintains that by so doing, private
respondents recognized that their cases still fell under the grievance
machinery. According to petitioner, without having exhausted said 3. Jurisdiction over Money Claims Cases
machinery, the private respondents filed their action before the NLRC, Money claims falling within the original and
in a clear act of forum-shopping. However, it is worth pointing out that exclusive jurisdiction of the Labor Arbiters may be classified
private respondents went to the NLRC only after the labor arbiter as follows:
dismissed their original complaint for illegal dismissal. Under these
circumstances private respondents had to find another avenue for (i) Any money claim, regardless of amount,
redress. We agree with the NLRC that it was petitioner who failed to
accompanied with a claim for
show proof that it took steps to convene the grievance machinery after
the labor arbiter first dismissed the complaints for illegal dismissal and reinstatement; or
directed the parties to avail of the grievance procedure under Article (ii) Any money claim, regardless of whether
VII of the existing CBA. They could not now be faulted for attempting accompanied with a claim for
to find an impartial forum, after petitioner failed to listen to them and reinstatement, exceeding the amount of
after the intercession of the labor arbiter proved futile. The NLRC had P5,000.00.
aptly concluded in part that private respondents had already exhausted
the remedies under the grievance procedure. It erred only in finding that Money claims must arise out of employer-employee
their cause of action was ripe for arbitration.
relationship [San Miguel Corporation v. NLRC]. If not,
In the case of Maneja vs. NLRC, we held that the dismissal
case does not fall within the phrase “grievances arising from the jurisdiction is with the regular courts [Lapanday Agricultural
interpretation or implementation of the collective bargaining agreement v. Court of Appeals].
and those arising from the interpretation or enforcement of company The money claim in Item (i) above presupposes that
personnel policies.” In Maneja, the hotel employee was dismissed it proceeds from a termination case, it being accompanied with
without hearing. We ruled that her dismissal was unjustified, and her a claim for reinstatement. Hence, it falls within the jurisdiction
right to due process was violated, absent the twin requirements of of the Labor Arbiter since it is principally a termination dispute.
notice and hearing. We also held that the labor arbiter had original and The money claim in item (ii) above does not
exclusive jurisdiction over the termination case, and that it was error to
necessarily arise from or involve a termination case btu because
give the voluntary arbitrator jurisdiction over the illegal dismissal case.
In Vivero vs. CA, private respondents attempted to justify the amount exceeds P5,000.00, it falls within the jurisdiction of
the jurisdiction of the voluntary arbitrator over a termination dispute the Labor Arbiter. If the amount does not exceed P5,000.00, it
alleging that the issue involved the interpretation and implementation is the Regional Director of the DOLE or his duly authorized
of the grievance procedure in the CBA. There, we held that since what hearing officers who have jurisdiction to take cognizance
was challenged was the legality of the employee’s dismissal for lack of thereof [Article 129].
cause and lack of due process, the case was primarily a termination The award of statutory benefits even if not prayed for
dispute. The issue of whether there was proper interpretation and is valid [Oasis Academy v. DOLE].
implementation of the CBA provisions came into play only because the
grievance procedure in the CBA was not observed, after he sought his
union’s assistance. Since the real issue then was whether there was a San Miguel Corporation v. NLRC
valid termination, there was no reason to invoke the need to interpret Held: While paragraph 3 above refers to "all money claims
nor question an implementation of any CBA provision. of workers," it is not necessary to suppose that the entire universe of
One significant fact in the present petition also needs money claims that might be asserted by workers against their
stressing. Pursuant to Article 260 of the Labor Code, the parties to a employers has been absorbed into the original and exclusive
CBA shall name or designate their respective representatives to the jurisdiction of Labor Arbiters. In the first place, paragraph 3 should be
grievance machinery and if the grievance is unsettled in that level, it read not in isolation from but rather within the context formed by
shall automatically be referred to the voluntary arbitrators designated paragraph 1 related to unfair labor practices), paragraph 2 (relating to
in advance by the parties to a CBA. Consequently only disputes claims concerning terms and conditions of employment), paragraph 4
involving the union and the company shall be referred to the grievance (claims relating to household services, a particular species of employer-
machinery or voluntary arbitrators. In these termination cases of private employee relations), and paragraph 5 (relating to certain activities
respondents, the union had no participation, it having failed to object to prohibited to employees or to employers).<äre||anº•1àw> It is evident
the dismissal of the employees concerned by the petitioner. It is obvious that there is a unifying element which runs through paragraphs 1 to 5
that arbitration without the union’s active participation on behalf of the and that is, that they all refer to cases or disputes arising out of or in
dismissed employees would be pointless, or even prejudicial to their connection with an employer-employee relationship. This is, in other
cause. words, a situation where the rule of noscitur a sociis may be usefully
Coming to the merits of the petition, the NLRC found that invoked in clarifying the scope of paragraph 3, and any other paragraph
petitioner did not comply with the requirements of a valid dismissal. of Article 217 of the Labor Code, as amended. We reach the above
For a dismissal to be valid, the employer must show that: (1) the conclusion from an examination of the terms themselves of Article 217,
employee was accorded due process, and (2) the dismissal must be for as last amended by B.P. Blg. 227, and even though earlier versions of
any of the valid causes provided for by law. No evidence was shown Article 217 of the Labor Code expressly brought within the jurisdiction
that private respondents refused, as alleged, to receive the notices of the Labor Arbiters and the NLRC "cases arising from employer
requiring them to show cause why no disciplinary action should be employee relations," 6 which clause was not expressly carried over, in
taken against them. Without proof of notice, private respondents who printer's ink, in Article 217 as it exists today. For it cannot be presumed
were subsequently dismissed without hearing were also deprived of a that money claims of workers which do not arise out of or in connection
chance to air their side at the level of the grievance machinery. Given with their employer-employee relationship, and which would therefore
the fact of dismissal, it can be said that the cases were effectively fall within the general jurisdiction of the regular courts of justice, were
removed from the jurisdiction of the voluntary arbitrator, thus placing intended by the legislative authority to be taken away from the
them within the jurisdiction of the labor arbiter. Where the dispute is jurisdiction of the courts and lodged with Labor Arbiters on an
just in the interpretation, implementation or enforcement stage, it may exclusive basis. The Court, therefore, believes and so holds that the
be referred to the grievance machinery set up in the CBA, or brought to money claims of workers" referred to in paragraph 3 of Article 217

Page 168 of 191

embraces money claims which arise out of or in connection with the (i) That the employer contests the findings of
employer-employee relationship, or some aspect or incident of such the labor inspector and raises issues
relationship. Put a little differently, that money claims of workers thereon;
which now fall within the original and exclusive jurisdiction of Labor
(ii) That in order to resolve such issues, there
Arbiters are those money claims which have some reasonable causal
connection with the employer-employee relationship.
is a need to examine evidentiary matters;
Applying the foregoing reading to the present case, we note and
that petitioner's Innovation Program is an employee incentive scheme (iii) That such matters are not verifiable in the
offered and open only to employees of petitioner Corporation, more normal course of inspection [Ex-Bataan
specifically to employees below the rank of manager. Without the Veterans v. Laguesma].
existing employer-employee relationship between the parties here,
there would have been no occasion to consider the petitioner's Reluctantly, if the said elements are present and
Innovation Program or the submission by Mr. Vega of his proposal
therefore the labor standards case is covered by said exception
concerning beer grande; without that relationship, private respondent
Vega's suit against petitioner Corporation would never have arisen. The clause, then the Regional Director will have to endorse the case
money claim of private respondent Vega in this case, therefore, arose to the Labor Arbiters of the NLRC [Ex-Bataan Veterans v.
out of or in connection with his employment relationship with Laguesma].
petitioner.
4. Jurisdiction over Claims for Damages
Labor Arbiter vs. Voluntary Arbitrator It is now well settled that claims for damages as well
The original and exclusive jurisdiction of the Labor as attorney’s fees in labor cases are cognizable by the Labor
Arbiters under Article 224(c), over cases for money claims is Arbiters, to the exclusion of all other courts. Rulings to the
limited only to those arising from statutes or contracts other contrary are deemed abandoned or modified accordingly
than a CBA. The voluntary Arbitrators, under Article 274, have [Primero v. IAC]. No matter how designated, for as long as the
original and exclusive jurisdiction over money claims “arising action primarily involves an employer-employee relationship,
from the interpretation or implementation of the CBA and, the labor court has jurisdiction over any damage claims
those arising from the interpretation or enforcement of [Rodriguez, Jr. v. Aguilar, Sr.].
company personnel policies.” It is now well settled that money claims of workers
San Jose v. NLRC ruled that it was correct for the provided by law over which the labor arbiter has original and
NLRC to hold that the Labor Arbiter has no jurisdiction to hear exclusive jurisdiction are comprehensive enough to include
and decide the employee’s money claims (underpayment of claims for moral damages of a dismissed employee against his
retirement benefits), as the controversy between the parties employer. The Labor Arbiter has jurisdiction to award to the
involved an issue “arising from the interpretation or dismissed employee not only the reliefs specifically provided
implementation” of a provision of the CBA. The Voluntary by labor laws, but also moral and the forms of damages
Arbitrator has original and exclusive jurisdiction over this governed by the Civil Code. Moral damages would be
controversy under Article 274. recoverable, for example, where the dismissal of the employee
was not only effected without authorized cause and/or due
Jurisdiction over Contested Cases under the process - for which relief is granted by the Labor Code — but
Exception Clause in Article 128(b) was attended by bad faith or fraud, or constituted an act
Article 128(b) provides: oppressive to labor, or was done in a manner contrary to morals,
good customs or public policy — for which the obtainable relief
Article 128. Visitorial and Enforcement Power. is determined by ‘the Civil Code [Suario v. BPI].
xxx
xxx 5. Jurisdiction over Legality of Strikes and
(b) Notwithstanding the provisions of Articles Lockouts
129 and 21789 of this Code to the contrary, and in cases
In general, the Labor Arbiter has the power to
where the relationship of employer-employee still exists,
the Secretary of Labor and Employment or his duly
determine questions involving the legality or illegality of a
authorized representatives shall have the power to issue strike or lockout upon the filing of a proper complaint and after
compliance orders to give effect to the labor standards due proceedings.
provisions of this Code and other labor legislation based on The employer, in case of a strike, or the union, in case
the findings of labor employment and enforcement officers of a lockout, may file the proper petition with the Labor Arbiter
or industrial safety engineers made in the course of to seek a declaration of the illegality thereof. It shall be the duty
inspection. The Secretary or his duly authorized of the Labor Arbiter concerned to act on the case immediately
representatives shall issue writs of execution to the
and dispose of the same, subject only to the requirements of due
appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings
process.
of the labor employment and enforcement officer and
raises issues supported by documentary proofs which B. JURISDICTION OVER CASES INVOLVING
were not considered in the course of inspection. LEGISLATED WAGE INCREASES AND WAGE
xxx DISTORTIONS
In establishments where there are no CBAs or
The above highlighted portion of Article 128(b) certified SEBAs, the Labor Arbiters have jurisdiction to hear
providing for the exception grants jurisdiction to Labor Arbiters and decide wage distortion cases after the parties and the
over contested cases falling thereunder. NCMB failed to correct the distortion [Article 124].
In interpreting the afore-quoted provision of the In establishments where there are existing CBAs or
exception clause, three elements must concur to divest the SEBAs, RA 6727 vests upon the VA the jurisdiction to hear
Regional Directors or their representatives of jurisdiction and decide wage distortion cases, after the grievance procedure
thereunder, to wit: in the CBA failed to settle the same [Ibid].

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C. JURISDICTION OVER ENFORCEMENT OR involving Filipino workers for overseas deployment including claims
ANNULMENT OF COMPROMISE AGREEMENTS for actual, moral, exemplary and other forms of damages.
xxx xxx x x x”
Based on the foregoing provisions, labor arbiters clearly
Article 233. [227] Compromise Agreements. Any
have original and exclusive jurisdiction over claims arising from
compromise settlement, including those involving labor standard
employer-employee relations, including termination
laws, voluntarily agreed upon by the parties with the assistance of
disputes involving all workers, among whom are overseas Filipino
the Bureau or the regional office of the Department of Labor, shall
workers (OFW).[15]
be final and binding upon the parties. The National Labor
We are not unmindful of the fact that respondent was
Relations Commission or any court, shall not assume jurisdiction
directly hired, while on a tourist status in Singapore, by the PNB branch
over issues involved therein except in case of non-compliance
in that city state. Prior to employing respondent, petitioner had to obtain
thereof or if there is prima facie evidence that the settlement was
an employment pass for her from the Singapore Ministry of Manpower.
obtained through fraud, misrepresentation, or coercion.
Securing the pass was a regulatory requirement pursuant to the
immigration regulations of that country.
It is clear from the foregoing provision that although Similarly, the Philippine government requires non-Filipinos
the compromise agreement may have been entered into by the working in the country to first obtain a local work permit in order to be
parties before the BLR or the DOLE Regional office, it is the legally employed here. That permit, however, does not automatically
Labor Arbiter who has jurisdiction to take cognizance of the mean that the non-citizen is thereby bound by local laws only, as
averred by petitioner. It does not at all imply a waiver of one’s national
following issues related thereto, to the exclusion of the BLR
laws on labor. Absent any clear and convincing evidence to the
and the DOLE Regional Directors:
contrary, such permit simply means that its holder has a legal status as
a worker in the issuing country.
a. To enforce the compromise agreement in case Noteworthy is the fact that respondent likewise applied for
of non-compliance therewith by any of the and secured an Overseas Employment Certificate from the POEA
parties thereto; or through the Philippine Embassy in Singapore. The Certificate, issued
b. To nullify it if there is prima facie evidence that on March 8, 1999, declared her a bona fide contract worker for
the settlement was obtained through fraud, Singapore. Under Philippine law, this document authorized her
misrepresentation, or coercion. working status in a foreign country and entitled her to all benefits and
processes under our statutes. Thus, even assuming arguendo that she
was considered at the start of her employment as a “direct hire”
D. JURISDICTION OVER EXECUTION AND governed by and subject to the laws, common practices and customs
ENFORCEMENT OF DECISIONS OF prevailing in Singapore[17] she subsequently became a contract worker
VOLUNTARY ARBITRATORS or an OFW who was covered by Philippine labor laws and policies
Article 276 prescribes the procedures that Voluntary upon certification by the POEA. At the time her employment was
Arbitrators should follow in adjudicating cases filed before illegally terminated, she already possessed the POEA employment
them. Once a decision has been rendered in a case and Certificate.
Moreover, petitioner admits that it is a Philippine
subsequently becomes final and executory, it may be enforced
corporation doing business through a branch office in
through the writ of execution issued by the same Voluntary
Singapore. Significantly, respondent’s employment by the Singapore
Arbitrator who rendered it, addressed to and requiring certain branch office had to be approved by Benjamin P. Palma Gil, the
public officers to execute the final decision, order or award. president of the bank whose principal offices were in Manila. This
In situations, however, where the VA who rendered circumstance militates against petitioner’s contention that respondent
the decision is absent or incapacitated for any reason, Article was “locally hired”; and totally “governed by and subject to the laws,
276 grants jurisdiction to any Labor Arbiter in the region where common practices and customs” of Singapore, not of the Philippines.
the winning party resides, to take cognizance of a motion for Instead, with more reason does this fact reinforce the presumption that
the issuance of the writ of execution filed by such party and respondent falls under the legal definition of migrant worker, in this
case one deployed in Singapore. Hence, petitioner cannot escape the
accordingly issue such writ addressed to and requiring the
application of Philippine laws or the jurisdiction of the NLRC and the
public officers to execute the final decision, order or award of labor arbiter.
the VA. In any event, we recall the following policy pronouncement
of the Court in Royal Crown Internationale v. NLRC:
E. JURISDICTION OVER CASES OF OVERSEAS “x x x. Whether employed locally or overseas, all Filipino
FILIPINO WORKERS workers enjoy the protective mantle of Philippine labor and social
RA 8042 confers original and exclusive jurisdiction legislation, contract stipulations to the contrary notwithstanding. This
pronouncement is in keeping with the basic public policy of the State
upon Labor Arbiters, to hear and decide all claims arising from
to afford protection to labor, promote full employment, ensure equal
employment relationship or by virtue of any law or contract
work opportunities regardless of sex, race or creed, and regulate the
involving OFWs, including claims for actual, moral, exemplary relations between workers and employers. For the State assures the
and other forms of damages. basic rights of all workers to self-organization, collective bargaining,
If there is a CBA between the foreign employer and security of tenure, and just and humane conditions of work [Article 3
the bargaining union of the OFWs, the jurisdiction over of the Labor Code of the Philippines; See also Section 18, Article II and
monetary claims of OFWs is vested in the Voluntary Arbitrator Section 3, Article XIII, 1987 Constitution]. This ruling is likewise
and not in the Labor Arbiter [Ace Navigation v. Fernandez]. rendered imperative by Article 17 of the Civil Code which states that
laws ‘which have for their object public order, public policy and good
customs shall not be rendered ineffective by laws or judgments
PNB v. Cabansag promulgated, or by determination or conventions agreed upon in a
Held: More specifically, Section 10 of RA 8042 reads in foreign country.’”
part:
“SECTION 10. Money Claims. — Notwithstanding any
provision of law to the contrary, the Labor Arbiters of the National F. ISSUANCE OF WRIT OF EXECUTION
Labor Relations Commission (NLRC) shall have the original and Pertinent portions of Sections 4 (a) and 6, Rule III, of
exclusive jurisdiction to hear and decide, within ninety (90) calendar the NLRC Manual on Execution of Judgment, provide as
days after the filing of the complaint, the claims arising out of an follows:
employer-employee relationship or by virtue of any law or contract

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 cannot be faulted for complying with the applicable foreign
law. By so complying, it has discharged its monetary obligation
Section 4. Issuance of a Writ: - Execution shall to the employee [Omanfil International v. NLRC].
issue upon an order, resolution or decision that finally
disposes of the actions or proceedings and after the counsel 3. Priests and ministers;
of record and the parties have been duly furnished with the
The fact that a case involves as parties thereto the
copies of the same in accordance with the NLRC Rules of
Procedure, provided: church and its religious minister does not ipso facto give the
a) The Commission or Labor Arbiter shall, motu case a religious significance. If what is involved is a labor case,
proprio or upon motion of any interested party, issue a writ the relationship of the church, as employer, and the priest or
of execution on a judgment only within five (5) years from minister, as employee is a purely secular matter not related to
the date it becomes final and executory, x x x the practice of faith, worship, or doctrines of the church. Hence,
xxx xxx xxx Labor Arbiters may validly exercise jurisdiction over the labor
Section 6. Execution by Independent Action. - A case.
judgment after the lapse of five (5) years from the date it
The religious minister in Austria v. NLRC was not
becomes final and executory and before it is barred by
prescription, may only be enforced by an independent excommunicated or expelled from the membership of the
action. church but was terminated from employment based on the just
causes provided in Article 297. Indeed, the matter of
Similarly, Section 6, Rule 39 of the Rules of Court, terminating an employee which is purely secular in nature is
which can be applied in a suppletory manner, provides: different from the ecclesiastical act of expelling a member from
the religious congregation. As such, the State, through the
Sec. 6. Execution by motion or by independent Labor Arbiter and the NLRC, has the right to take cognizance
action. - A final and executory judgment or order may be of the case to determine whether the church, as employer,
executed on motion within five (5) years from the date of its rightfully exercised its management prerogative to dismiss the
entry. After the lapse of such time, and before it is barred by religious minister as its employee.
the statute of limitations, a judgment may be enforced by
action. The revived judgment may also be enforced by
4. Employees of cooperatives;
motion within five years from the date of its entry and,
thereafter, by action before it is barred by the statute of The Labor Arbiter has jurisdiction only over
limitations. monetary claims and illegal dismissal cases involving
employees of cooperatives btu not the claims or termination of
A judgment may be executed on motion within five membership of members thereof. Cooperatives organized
years from the date of its entry or from the date it becomes final under RA 6938 (The Cooperative Code of the Philippines) are
and executory. After the lapse of such time, and before it is composed of members; hence, issues on the termination of their
barred by the statute of limitations, a judgment may be enforced membership with the cooperative do not fall within the
by action. If the prevailing party fails to have the decision jurisdiction of the Labor Arbiter but with the Cooperative
enforced by a mere motion after the lapse of five years from the Development Authority (CDA).
date of its entry (or from the date it becomes final and
executory), the said judgment is reduced to a mere right of 5. Counter-claims of employers against
action in favor of the person whom it favors and must be employees.
enforced, as are all ordinary actions, by the institution of a In Banez v. Valdevilla, it was held that the
complaint in a regular form [IBM v. Nestle Philippines]. jurisdiction of the Labor Arbiters and the NLRC is
comprehensive enough to include claims for all forms of
G. JURISDICTION OVER OTHER CASES damages “arising from the employer-employee relations.” By
In accordance with well-entrenched jurisprudence, this clause, Article 224 should apply with equal force to the
the issues, claims or cases of the following fall under the claim of an employer for actual damages against its dismissed
jurisdiction of the Labor Arbiters: employee, where the basis for the claim arises from or is
necessarily connected with the fact of termination, and should
1. Employees in government-owned and/or be entered as a counter-claim in the illegal dismissal case. This
controlled corporations without Original is in accord with paragraph 6 of Article 224(a), which covers
Charters; “all other claims, arising from employer-employee relations.”
The hiring and firing of employees of GOCCs
without original charters are covered by the Labor Code, and H. CASES OVER WHICH LABOR ARBITERS HAVE
therefore, the Labor Arbiters have jurisdiction over illegal NO JURISDICTION
dismissal and other cases that may be filed under this law; while The following issues or cases do not fall under the
those with original charters are basically governed by the Civil jurisdiction of Labor Arbiters:
Service Law, rules and regulations, and therefore, jurisdiction
on any of the cases that may be initiated under this law is vested 1. Claims for Damages Arising from Breach of
in the Civil Service Commission (CSC) [Zamboanga City Non-Compete Clause and Other Post-
Water District v. Buat]. Employment Prohibitions
In case of violation of the non-compete clause and
2. Alien parties; similar post-employment bans or prohibitions, the employer
A basic policy of contract is to protect the can assert his claim for damages against the erring employee
expectations of the parties. Such party expectations are with the regular courts and not with the labor courts, such
protected by giving effect to the parties’ own choice of the breach being civil in nature [Dai-Chi Electronics v. Villarama].
applicable law. The choice of law must, however, bear some
relationship to the parties or their transaction [Asia
International v. Mondejar]. A manning agency, for instance,
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 2. Employer’s Claims for Cash Advances, Car, On Coros’ being a VP for Finance and Admin Section
Appliance and Other Personal loans of 25 of the Corporation Code provides:
Employees Section 25. Corporate officers, quorum.--Immediately after
their election, the directors of a corporation must formally organize by
With respect to resolving issues involving loans
the election of a president, who shall be a director, a treasurer who
availed of by employees from their employers, it has been the may or may not be a director, a secretary who shall be a resident and
consistent ruling of the Supreme Court that the Labor Arbiters citizen of the Philippines, and such other officers as may be provided
have no jurisdiction thereover but the regular courts. for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as
3. Dismissal of Directors and Corporate president and secretary or as president and treasurer at the same time.
Officers Conformably with Section 25 RCCP, a position must be
A corporate officer’s dismissal is always a corporate expressly mentioned in the By-Laws in order to be considered as a
corporate office. Thus, the creation of an office pursuant to or
act, or an intra-corporate controversy, and the nature is not
under a By-Law enabling provision is not enough to make a
altered by the reason or wisdom with which the Board of position a corporate office.
Directors may have in taking such action. Also, an intra- Thus, it was held in Easycall Communications Phils., Inc.
corporate controversy is one which arises between a v. King: An "office" is created by the charter of the corporation and the
stockholder and the corporation. There is no distinction, officer is elected by the directors or stockholders. On the other hand, an
qualification, nor any exemption whatsoever. The provision is employee occupies no office and generally is employed not by the
broad and covers all kinds of controversies between action of the directors or stockholders but by the managing officer of
stockholders and corporations [Tabang v. NLRC]. the corporation who also determines the compensation to be paid to
such employee.
The president, vice-president, secretary and treasurer
In this case, respondent was appointed vice president for
are commonly regarded as the principal or executive officers of nationwide expansion by Malonzo, petitioner’s general manager,
a corporation, and they are usually designated as the officers of not by the board of directors of petitioner.
the corporation. However, other officers are sometimes SEC OPINION on the interpretation of Sec 25 dated
created by the charter or by-laws of a corporation, or the November 25, 1993
board of directors may be empowered under the by-laws of a Corporate officers are those enumerated in the by-laws.
corporation to create additional offices as may be necessary. They are the exclusive Officers of the corporation and the Board has no
This Court expounded that an "office" is created by the charter power to create other Offices without amending first the corporate By-
laws. However, the Board may create appointive positions other
of the corporation and the officer is elected by the directors or
than the positions of corporate Officers, but the persons occupying
stockholders, while an "employee" usually occupies no office such positions are not considered as corporate officers within the
and generally is employed not by action of the directors or meaning of Section 25 of the Corporation Code
stockholders but by the managing officer of the corporation The Board of Directors of Matling could not validly
who also determines the compensation to be paid to such delegate the power to create a corporate office to the President, in light
employee. From the foregoing, that the creation of the position of Section 25 of the Corporation Code requiring the Board of Directors
is under the corporation's charter or by-laws, and that itself to elect the corporate officers.
the election of the officer is by the directors or stockholders Did Coros status as a director/stockholder of the
Corporation convert his dismissal into an intracorporate dispute to
must concur in order for an individual to be considered a
fall under the jurisdiction of the SEC (now RTC)? NO
corporate officer, as against an ordinary employee or officer. It In an intra-corporate controversy, the Court considers two
is only when the officer claiming to have been illegally elements, namely: (a) the status or relationship of the parties; and
dismissed is classified as such corporate officer that the issue is (b) the nature of the question that is the subject of their controversy
deemed an intra-corporate dispute which falls within the Not every conflict between a corporation and its
jurisdiction of the trial courts [Wesleyan University v. stockholders involves corporate matters that only the SEC can
Maglaya]. resolve in the exercise of its adjudicatory or quasi-judicial powers.
If, for example, a person leases an apartment owned by a corporation
of which he is a stockholder, there should be no question that a
Tan v. PNB Life complaint for his ejectment for non-payment of rentals would still come
Held: Here, following Wesleyan, and several other under the jurisdiction of the regular courts
cases, the NLRC was correct in ruling that jurisdiction is not conferred The fact that the parties involved in the controversy are all
by estoppel or agreement of the parties, but by law, following Republic stockholders or that the parties involved are the stockholders and the
Act No. 8799 in relation to Presidential Decree No. 902-A. It is the corporation does not necessarily place the dispute within the ambit of
Regional Trial Courts that exercise exclusive jurisdiction over all the jurisdiction of SEC.
controversies in the election or appointment of directors, trustees, Obviously enough, the respondent was not appointed as
officers or managers of corporations, partnerships or associations. Vice President for Finance and Administration because of his being a
Thus, since petitioner is questioning the validity of her dismissal as the stockholder or Director of Matling. He had started working for Matling
President and CEO of respondent PNB Life Insurance Co., the on September 8, 1966, and had been employed continuously for 33
determination of her rights and the corporation's liability arising from years until his termination on April 17, 2000, first as a bookkeeper, and
her dismissal is an intra-corporate dispute subject to the jurisdiction of his climb in 1987 to his last position as Vice President for Finance and
the regular courts. Administration had been gradual but steady
Coros promotion to the position of Vice President for
Matling Industrial v. Coros Finance and Administration in 1987 was by virtue of the length of
Held: Coros was a regular employee of Matling. And his quality service he had rendered as an employee of Matling. His
complaint for illegal dismissal is within the jurisdiction of the LA. subsequent acquisition of the status of Director/stockholder had no
The illegal dismissal of an officer or other employee of a relation to his promotion. Besides, his status of Director/stockholder
private employer is properly cognizable by the LA. This is pursuant to was unaffected by his dismissal from employment as Vice President for
Article 217 (a) 2 of the Labor Code, as amended. Where the complaint Finance and Administration.
for illegal dismissal concerns a corporate officer, however, the
controversy falls under the jurisdiction of the Securities and Exchange Nacpil v. Intercontinental Broadcasting
Commission (SEC) now with RTC effective August 8, 2000 pursuant Held: The Court has consistently held that there are two
to RA8799 or SRC. elements to be considered in determining whether the SEC has
jurisdiction over the controversy, to wit: (1) the status or relationship

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of the parties; and (2) the nature of the question that is the subject of involves a dispute between a cooperative officer on one hand, and the
their controversy. Board of Directors, on the other.
Even assuming that Nacpil was in fact appointed by the On this score, the Court's pronouncement in Celso F.
General Manager, such appointment was subsequently approved by the Pascual, Sr. and Serafin Terencio v. Caniogan Credit and Development
Board of Directors of the IBC. That the position of comptroller is not Cooperative,46 finds suitable application:
expressly mentioned among the officers of the IBC in the By-Laws is Petitioners clarify that they do not take issue on the power
of no moment, because the IBC’s Board of Directors is empowered of the Board of Directors to remove them. Rather, they dispute the
under Section 25 of the Corporation Code and under the corporation’s "manner, cause[,] and legality" of their removal from their respective
By-Laws to appoint such other officers as it may deem necessary. The offices as General Manager and Collection Manager. Even so, we hold
By-Laws of the IBC categorically provides: that an officer's dismissal is a matter that comes with the conduct and
XII. OFFICERS management of the affairs of a cooperative and/or an intra-cooperative
The officers of the corporation shall consist of a President, controversy, and that nature is not altered by reason or wisdom that the
a Vice-President, a Secretary-Treasurer, a General Manager, and Board of Directors may have in taking such action. Accordingly, the
such other officers as the Board of Directors may from time to time case a quo is not a labor dispute requiring the expertise of the Labor
does fit to provide for. Said officers shall be elected by a majority vote Arbiter or of the National Labor Relations Commission. It is an intra-
of the Board of Directors and shall have such powers and duties as cooperative dispute that is within the jurisdiction of the Regional Trial
shall hereinafter provide. Court xxx.47
The Court has held that in most cases, the “by-laws may and As such, the CA committed no reversible error when it
usually do provide for such other officers,” and that where a corporate ordered the dismissal of Ellao's Complaint for illegal dismissal without
office is not specifically indicated in the roster of corporate offices in prejudice to the latter's filing of his complaint at the proper forum.
the by-laws of a corporation, the Board of directors may also be Considering that the Labor Arbiter and the NLRC were without ample
empowered under the by-laws to create additional officers as may be jurisdiction to take cognizance of Ellao's Complaint, the labor tribunals'
necessary. rulings therein made are resultantly void. There is therefore no need to
In the present case, since Nacpil’s appointment was discuss the issue on illegal dismissal and monetary claims at this point.
approved unanimously by the corporation’s Board of Directors, he is
therefore considered a corporate officer. His claim of illegal
Nacpil v. Intercontinental Broadcasting
dismissal is a controversy that falls under the jurisdiction of the
Held: The Court has consistently held that there are two
SEC as contemplated by Section 5 of P.D. 902-A. The rule is that
elements to be considered in determining whether the SEC has
dismissal or nonappointment of a corporate officer is clearly an
jurisdiction over the controversy, to wit: (1) the status or relationship
intra-corporate matter, and jurisdiction over the case properly
of the parties; and (2) the nature of the question that is the subject of
belongs to the SEC, not to the NLRC.
their controversy.
As to Nacpil’s argument that the nature of his functions is
Even assuming that Nacpil was in fact appointed by the
recommendatory, thereby making him a mere managerial officer, the
General Manager, such appointment was subsequently approved by the
Court has previously held that the relationship of a person to a
Board of Directors of the IBC. That the position of comptroller is not
corporation, whether as officer or agent or employee, is not determined
expressly mentioned among the officers of the IBC in the By-Laws is
by the nature of the services performed, but instead by the incidents of
of no moment, because the IBC’s Board of Directors is empowered
the relationship as they exist.
under Section 25 of the Corporation Code and under the corporation’s
It is likewise of no consequence that petitioner’s complaint
By-Laws to appoint such other officers as it may deem necessary. The
for illegal dismissal includes money claims, for such claims are part of
By-Laws of the IBC categorically provides:
the perquisites of his position in, and therefore linked with his relations
XII. OFFICERS
with, the corporation. The inclusion of such money claims does not
The officers of the corporation shall consist of a President,
convert the issue into a simple labor problem. Clearly, the issues raised
a Vice-President, a Secretary-Treasurer, a General Manager, and
by Nacpil against the IBC are matters that come within the area of
such other officers as the Board of Directors may from time to time
corporate affairs and management and constitute a corporate
does fit to provide for. Said officers shall be elected by a majority vote
controversy in contemplation of the Corporation Code.
of the Board of Directors and shall have such powers and duties as
shall hereinafter provide.
Ellao v. Batangas I Electric Cooperative The Court has held that in most cases, the “by-laws may and
Held: Here, the position of General Manager is expressly usually do provide for such other officers,” and that where a corporate
provided for under Article VI, Section 10 of BATELEC I's By-laws, office is not specifically indicated in the roster of corporate offices in
enumerating the cooperative offices as follows: the by-laws of a corporation, the Board of directors may also be
ARTICLE VI- OFFICERS empowered under the by-laws to create additional officers as may be
xxxx necessary.
SECTION 10. General Manager In the present case, since Nacpil’s appointment was
a. The management of the Cooperative shall be vested in a approved unanimously by the corporation’s Board of Directors, he is
General Manager who shall be appointed by the Board and who shall therefore considered a corporate officer. His claim of illegal
be responsible to the Board for performance of his duties as set forth in dismissal is a controversy that falls under the jurisdiction of the
a position description adopted by the Board, in conformance with SEC as contemplated by Section 5 of P.D. 902-A. The rule is that
guidelines established by the National Electrification Administration. dismissal or nonappointment of a corporate officer is clearly an
It is incumbent upon the Manager to keep the Board fully informed of intra-corporate matter, and jurisdiction over the case properly
all aspects of the operations and activities of the Cooperative. The belongs to the SEC, not to the NLRC.
appointment and dismissal of the General Manager shall require As to Nacpil’s argument that the nature of his functions is
approval of NEA. recommendatory, thereby making him a mere managerial officer, the
b. No member of the board may hold or apply for the Court has previously held that the relationship of a person to a
position of General Manager while serving as a Director or within corporation, whether as officer or agent or employee, is not determined
twelve months following his resignation or the termination of his by the nature of the services performed, but instead by the incidents of
tenure.45 the relationship as they exist.
Evidently, the functions of the office of the General It is likewise of no consequence that petitioner’s complaint
Manager, i.e., management of the Cooperative and to keep the Board for illegal dismissal includes money claims, for such claims are part of
fully informed of all aspects of the operations and activities of the the perquisites of his position in, and therefore linked with his relations
Cooperative are specifically laid down under BATELEC I's By-laws with, the corporation. The inclusion of such money claims does not
itself. It is therefore beyond cavil that Ellao's position as General convert the issue into a simple labor problem. Clearly, the issues raised
Manager is a cooperative office. Accordingly, his complaint for illegal by Nacpil against the IBC are matters that come within the area of
dismissal partakes of the nature of an intra-cooperative controversy; it corporate affairs and management and constitute a corporate
controversy in contemplation of the Corporation Code.

Page 173 of 191

 was established beyond doubt that he had polluted the soup
4. Labor Cases Involving Entities Immune from stock with urine.
Suit
In this jurisdiction, we recognize and adopt the Conversely, if the contract was entered into in the
generally accepted principles of international law as part of the discharge of its governmental functions, the sovereign state
law of the land. Immunity of State from suit is one of these cannot be deemed to have waived its immunity from suit. Such
universally recognized principles. In international law, is the case of JUSMAG v. NLRC, holding thus:
“immunity” is commonly understood as the exemption of the
state and its organs from the judicial jurisdiction of another Prescinding from this premise, we need not
determine whether JUSMAG controls the employment
state.[ This is anchored on the principle of the sovereign
conditions of the private respondent.
equality of states under which one state cannot assert We also hold that there appears to be no basis for
jurisdiction over another in violation of the maxim par in public respondent to rule that JUSMAG is estoppel from
parem non habet imperium (an equal has no power over an denying the existence of employer-employee relationship
equal) [JUSMAG v. NLRC]. with private respondent. On the contrary, in its Opposition
In USA v. Guinto, the Supreme Court ruled: before the public respondent, JUSMAG consistently
contended that the (74) SASP, including private respondent,
The traditional rule of immunity exempts a State working in JUSMAG, are employees of the Armed Forces
from being sued in the courts of another State without its of the Philippines. This can be gleaned from: (1) the
consent or waiver. This rule is a necessary consequence of Military Assistance Agreement, supra, (2) the exchange of
the principles of independence and equality of States. notes between our Government, thru Department of Foreign
However, the rules of International Law are not petrified; Affairs, and the Unites States, thru the US Embassy to the
they are constantly developing and evolving. And because Philippines, and (3) the Agreement on May 21, 1991, supra,
the activities of states have multiplied, it has been necessary between the Armed Forces of the Philippines and
to distinguish them — between sovereign and governmental JUSMAG.
acts (jure imperii) and private, commercial and proprietary
acts (jure gestionis). The result is that State immunity now 5. Doctrine of Forum Non Conveniens
extends only to acts jure imperii. This doctrine is an international law principle which
The restrictive application of State immunity is has been applied to labor cases. The following are the requisites
proper only when the proceedings arise out of commercial for its applicability:
transactions of the foreign sovereign, its commercial
activities or economic affairs. Stated differently, a State
may be said to have descended to the level of an individual (i) That the Philippine court is one to which
and can thus be deemed to have tacitly given its consent to the parties may conveniently resort;
be sued only when it enters into business contracts. It does (ii) That the Philippine court is in a position to
not apply where the contract relates to the exercise of its make an intelligent decision as to the law
sovereign functions. and the facts; and
. From these circumstances, the Court can (iii) That the Philippine court has or is likely to
assume that the restaurant services offered at the John Hay have power to enforce its decision [Bank of
Air Station partake of the nature of a business enterprise
America v. Court of Appeals].
undertaken by the United States government in its
proprietary capacity. Such services are not extended to the
American servicemen for free as a perquisite of membership Manila Hotel v. NLRC
in the Armed Forces of the United States. Neither does it Held: Under the rule, a Philippine court or agency may
appear that they are exclusively offered to these servicemen; assume jurisdiction over the case if it chooses to do so provided:
on the contrary, it is well known that they are available to 1. that the Philippine court is one to which the parties may
the general public as well, including the tourists in Baguio conveniently resort to;
City, many of whom make it a point to visit John Hay for 2. that the Philippine court is in a position to make an intelligent
this reason. All persons availing themselves of this facility decision as to the law and the facts; and
pay for the privilege like all other customers as in ordinary 3. that the Philippine court has or is likely to have power to enforce
restaurants. Although the prices are concededly reasonable its decision
and relatively low, such services are undoubtedly operated LA is not a forum to which the parties may conveniently
for profit, as a commercial and not a governmental activity. resort to
The consequence of this finding is that the The Palace Hotel and Manila Hotel are not nationals of the
petitioners cannot invoke the doctrine of state immunity to Philippines. Neither are they "doing business in the Philippines."
justify the dismissal of the damage suit against them by Likewise, the main witnesses, are non-residents of the Philippines. The
Genove. Such defense will not prosper even if it be only factor tying this case to the Philippines is that Santos was a
established that they were acting as agents of the United Filipino Citizen
States when they investigated and later dismissed Genove. LA is not in a position to make an intelligent decision as
For that matter, not even the United States government itself to the law.
can claim such immunity. The reason is that by entering into Pursuant to lex loci contractus, an intelligent decision
the employment contract with Genove in the discharge of cannot be made as to the law governing the employment contract as
its proprietary functions, it impliedly divested itself of its such was perfected in foreign soil.
sovereign immunity from suit. LA is not in a position to make an intelligent decision as
But these considerations notwithstanding, we to the facts.
hold that the complaint against the petitioners in the court All acts complained of took place in Beijing, People's
below must still be dismissed. While suable, the petitioners Republic of China. The NLRC was not in a position to determine
are nevertheless not liable. It is obvious that the claim for whether the Tiannamen Square incident truly adversely affected
damages cannot be allowed on the strength of the evidence operations of the Palace Hotel as to justify Santos' retrenchment.
before us, which we have carefully examined.
The dismissal of the private respondent was 6. Quasi-Delict or Tort Cases
decided upon only after a thorough investigation where it Damages arising from quasi-delict or tort are often
confused with damages that may be claimed under labor laws
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and labor agreements. Consequently, quasi-delict or tort on an action that has a reasonable causal connection with the Labor
damages are asserted, though erroneously, in labor cases filed Code, other labor statutes, or collective bargaining agreements.
with the Labor Arbiters. As earlier emphasized, however, It must be noted that a worker’s loss of earning capacity and
blacklisting are not to be equated with wages, overtime compensation
Labor Arbiters and the NLRC have no power or authority to
or separation pay, and other labor benefits that are generally cognized
grant reliefs in claims that do not arise from employer- in labor disputes. The loss of earning capacity is a relief or claim
employee relationship such as those emanating from quasi- resulting from a quasi delict or a similar cause within the realm of civil
delict or tort cases per Article 2176 of the Civil Code that have law.
no reasonable causal connection to any of the claims provided “Claims for damages under paragraph 4 of Article 217 must
in the Labor Code, other labor statutes, or collective bargaining have a reasonable causal connection with any of the claims provided
agreements. for in the article in order to be cognizable by the labor arbiter. Only if
there is such a connection with the other claims can the claim for
damages be considered as arising from employer-employee
Tolosa v. NLRC relations.” In the present case, petitioner’s claim for damages is not
Held: We affirm the CA’s ruling that the NLRC and the related to any other claim under Article 217, other labor statutes, or
labor arbiter had no jurisdiction over petitioner’s claim for damages, collective bargaining agreements.
because that ruling was based on a quasi delict or tort per Article 2176 Petitioner cannot anchor her claim for damages to Article
of the Civil Code. 161 of the Labor Code, which does not grant or specify a claim or relief.
Time and time again, we have held that the allegations in This provision is only a safety and health standard under Book IV of
the complaint determine the nature of the action and, consequently, the the same Code. The enforcement of this labor standard rests with the
jurisdiction of the courts. After carefully examining the labor secretary. Thus, claims for an employer’s violation thereof are
complaint/position paper of petitioner, we are convinced that the beyond the jurisdiction of the labor arbiter. In other words, petitioner
allegations therein are in the nature of an action based on a quasi delict cannot enforce the labor standard provided for in Article 161 by suing
or tort. It is evident that she sued Pedro Garate and Mario Asis for gross for damages before the labor arbiter.
negligence. It is not the NLRC but the regular courts that have
Petitioner’s complaint/position paper refers to and jurisdiction over actions for damages, in which the employer-employee
extensively discusses the negligent acts of shipmates Garate and Asis, relation is merely incidental, and in which the cause of action proceeds
who had no employer-employee relation with Captain Tolosa. from a different source of obligation such as a tort. [25] Since
Specifically, the paper alleges the following tortious acts: petitioner’s claim for damages is predicated on a quasi delict or tort that
“x x x [R]espondent Asis was the medical officer of the has no reasonable causal connection with any of the claims provided
Vessel, who failed to regularly monitor Capt. Tolosa’s condition, and for in Article 217, other labor statutes, or collective bargaining
who needed the USCG to prod him to take the latter’s vital signs. In agreements, jurisdiction over the action lies with the regular courts [26] -
fact, he failed to keep a medical record, like a patient’s card or folder, - not with the NLRC or the labor arbiters.
of Capt. Tolosa’s illness.”
“Respondents, however, failed Capt. Tolosa because
Garate never initiated actions to save him. x x x In fact, Garate rarely 7. Criminal and Civil Actions Arising from
checked personally on Capt. Tolosa’s condition, to wit:”[13] Violations of the Penal Provisions of the
“x x x Noticeably, the History (Annex “D”) fails to mention Labor Code
any instance when Garate consulted the other officers, much less Capt. The Labor Code has expressly conferred jurisdiction
Tolosa, regarding the possibility of deviation. To save Capt. Tolosa’s over criminal and civil cases arising from violations of the
life was surely a just cause for the change in course, which the other Labor Code with the regular courts.
officers would have concurred in had they been consulted by
respondent Garate – which he grossly neglected to do.
“Garate’s poor judgement, since he was the officer
8. Constitutionality of CBA Provisions
effectively in command of the vessel, prevented him from undertaking In Halaguena v. Philippine Airlines, it was
these emergency measures, the neglect of which resulted in Capt. pronounced that it is not the Labor Arbiter but the regular court
Tolosa’s untimely demise.” which has jurisdiction to rule on the constitutionality of labor
The labor arbiter himself classified petitioner’s case as “a contracts such as a CBA.
complaint for damages, blacklisting and watchlisting (pending inquiry)
for gross negligence resulting in the death of complainant’s husband, 9. Replevin Intertwined with a Labor Dispute
Capt. Virgilio Tolosa.”[
Replevin is a possessory action, the gist of which is
We stress that the case does not involve the adjudication of
a labor dispute, but the recovery of damages based on a quasi delict. the right of possession in the plaintiff. The primary relief sought
The jurisdiction of labor tribunals is limited to disputes arising from therein is the return of the property in specie wrongfully
employer-employee relations. detained by another person. It is an ordinary statutory
Not every dispute between an employer and employee proceeding to adjudicate rights to the title or possession of
involves matters that only labor arbiters and the NLRC can resolve in personal property. The question of whether or not a party has
the exercise of their adjudicatory or quasi-judicial powers. The the right of possession over the property involved and if so,
jurisdiction of labor arbiters and the NLRC under Article 217 of the whether or not the adverse party has wrongfully taken and
Labor Code is limited to disputes arising from an employer-employee
detained said property as to require its return to plaintiff, is
relationship which can only be resolved by reference to the Labor Code,
other labor statutes, or their collective bargaining agreement. outside the pale of competence of a labor tribunal; it is beyond
The pivotal question is whether the Labor Code has any the field of specialization of Labor Arbiters [Basaya, Jr. v.
relevance to the relief sought by petitioner. From her paper, it is evident Militante].
that the primary reliefs she seeks are as follows: (a) loss of earning
capacity denominated therein as “actual damages” or “lost income” and 10. Cases Arriving from Violation of Training
(b) blacklisting. The loss she claims does not refer to the actual earnings Agreement
of the deceased, but to his earning capacity based on a life expectancy The primary relief sought is for liquidated damages
of 65 years. This amount is recoverable if the action is based on a quasi
for breach of a contractual obligation. The other items
delict as provided for in Article 2206 of the Civil Code, but not in the
Labor Code. demanded are not labor benefits demanded by workers
While it is true that labor arbiters and the NLRC have generally taken cognizance of in labor disputes, such as
jurisdiction to award not only reliefs provided by labor laws, but also payment of wages, overtime compensation or separation pay.
damages governed by the Civil Code, these reliefs must still be based The items claimed are the natural consequences flowing from

Page 175 of 191

breach of an obligation, intrinsically a civil dispute [Singapore In Bello v. NLRC, citing anew Ginete v. Sunrise
Airlines v. Pano]. Manning Agency, et al., the Court held that "the period for
filing a petition for certiorari should be reckoned from the time
I. REQUISITES TO PERFECT AN APPEAL TO THE the counsel of record received a copy of the Resolution denying
NLRC the motion for reconsideration."
The perfection of appeal within the period and in the The periods provided are all calendar days and not
manner prescribed by law is jurisdictional and non-compliance working days [RJL Martinez Fishing v. NLRC]. Consequently,
with the legal requirements is fatal and has the effect of Saturdays, Sundays and legal holidays are included in
rendering the judgment final and executory, hence, reckoning and computing of the reglementary period [Judy
unappealable [Opinaldo v. Ravina]. The date of receipt of Philippines v. NLRC].
decisions, resolutions, or orders by the parties is of no moment. However, certain procedural lapses may be
For purposes of appeal, the reglementary period shall be disregarded where there is an acceptable reason to excuse
counted from receipt of such decisions, resolutions, or orders tardiness in the taking of the appeal [Philippine Airlines v.
by the counsel or representative of record [NLRC Rules of NLRC]. It is always within the power of the court to suspend its
Procedure]. own rules or to except a particular case from its operation,
The date of mailing by registered mail of the appeal whenever the purposes of justice require it [Chronicle
memorandum is the date of its filing [Associated Anglo- Securities v. NLRC]. Thus, procedural rules may be waived,
American Tobacco Corporation v. NLRC]. dispensed with, or relaxed in the interest of substantial justice.
The requisites for perfection of appeal to the NLRC The Court may deign to veer away from the general rule if, on
are as follows: its face, the appeal appears to be absolutely meritorious [Tiger
Construction v. Abay].
(i) Observance of the reglementary period; The following are the specific instances where the
(ii) Payment of appeal and legal research fee; rules on the reckoning of the reglementary period have not been
(iii) Filing of a memorandum of appeal; strictly observed:
(iv) Proof of service to the other party; and
(v) Posting of cash, property or surety bond, in (i) 10th day (or 5th day) falling on a Saturday
case of monetary awards. [Judy Philippines v. NLRC], Sunday or
Holiday [Philippine Geothermal v. NLRC],
1. Reglementary Period in which case, the appeal may be filed the
The reglementary period is mandatory and not a mere next working day.
technicality [Calipay v. NLRC]. (ii) Reliance on erroneous notice of decision
The reglementary period depends on where the [Firestone Tire and Rubber v. Lariosa] as
appeal to the NLRC emanates, viz: when the notice expressly states “working
days” and not “calendar days.”
(i) Ten (10) calendar days in case of appeals (iii) Filing of petition or extraordinary remedies
from decisions of the Labor Arbiters under from orders or resolutions of Labor
Article 229; Arbiters or on third party claims – ten (10)
(ii) Five (5) calendar days in case of appeals in calendar days.
contempt cases decided by Labor Arbiters; (iv) When technical rules are disregarded under
and Article 227 [City Fair Corporation v.
(iii) Five (5) calendar days in case of appeals NLRC].
from decisions of the DOLE Regional (v) When there are some compelling reasons
Director under Article 129 (small money that justify the allowance of the appeal
claims of P5000.00 or less). despite its late filing such as when it is
granted in the interest of substantial justice
Section 4, Rule III of the New Rules of Procedure of [Surima v. NLRC].
the NLRC expressly mandates that "(F)or the purpose(s) of
computing the period of appeal, the same shall be counted from Republic v. Guinmapang
receipt of such decisions, awards, or orders by the counsel of Held: The general rule is that the perfection of an appeal in
record. "Although this rule explicitly contemplates an appeal the manner and within the period prescribed by law is, not only
mandatory, but jurisdictional, and failure to conform to the rules will
before tile Labor Arbiter and tile NLRC, we do not see any
render the judgment sought to be reviewed final and unappealable. By
cogent reason why tile same rule should not apply to petitions way of exception, unintended lapses are disregarded so as to give due
for certiorari filed with the Court of Appeals from decisions course to appeals filed beyond the reglementary period on the basis of
of the NLRC. This procedure is in line with the established rule strong and compelling reasons, such as serving the ends of justice and
that notice to counsel is notice to party and when a party is preventing a grave miscarriage thereof. The purpose behind the
represented by counsel, notices should be made upon the limitation of the period of appeal is to avoid an unreasonable delay in
counsel of record at his given address to which notices of all the administration of justice and to put an end to controversies.
kinds emanating from the court should be sent. It is to be noted In Chronicle Securities Corporation v. NLRC, we ruled:
In not a few instances, we relaxed the rigid application of
also that Section 7 of the NLRC Rules of Procedure provides
the rules of procedure to afford the parties the opportunity to fully
that "(A)ttorneys and other representatives of parties shall ventilate their cases on the merits. This is in line with the time honored
have authority to bind their clients in all matters of procedure"' principle that cases should be decided only after giving all the parties
a provision which is similar to Section 23, Rule 138 of the the chance to argue their causes and defenses. Technicality and
Rules of Court. More importantly, Section 2, Rule 13 of the procedural imperfections should thus not serve as bases of decisions.
1997 Rules of Civil Procedure analogously provides that if any In that way, the ends of justice would be better served. For indeed, the
party has appeared by counsel, service upon him shall be made general objective of procedure is to facilitate the application of justice
upon his counsel [Cervantes v. City Service Corporation].
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to the rival claims of contending parties, bearing always in mind that becomes final and executory upon the expiration the said period
procedure is not to hinder but to promote the administration of justice. [Santos v. Velarde].
Indeed the prevailing trend is to accord party litigants the In case the employer failed to post a bond to perfect
amplest opportunity for the proper and just determination of their
its appeal, the remedy of the employee is to file a motion to
causes, free from the constraints of needless technicalities.
A one-day delay in the perfection of the appeal was excused
dismiss the appeal and not a petition for mandamus for the
in Gana v. NLRC, Surigao del Norte Electric Cooperative v. issuance of writ of execution [Diaz v. Nora].
NLRC, City Fair Corporation v. NLRC, Pacific Asia Overseas
Shipping Corp. v. NLRC, and Insular Life Assurance Co., Ltd. v. NLRC. 3. Motion to Reduce Appeal Bond
We agree with the Court of Appeals that since no intent to No motion to reduce bond shall be entertained except
delay the administration of justice could be attributed to Guinmapang, on meritorious grounds, and only upon the posting of a bond in
a one day delay does not justify the appeal’s denial. More importantly,
a reasonable amount in relation to the monetary award. The
the Court of Appeals declared that Guinmapang’s appeal, on its face,
appears to be impressed with merit. The constitutional mandate to
mere filing of a motion to reduce bond without complying with
accord full protection to labor and to safeguard the employee’s means the requisites in the preceding paragraphs shall not stop the
of livelihood should be given proper attention and sanction. A greater running of the period to perfect an appeal [NLRC Rules of
injustice may occur if said appeal is not given due course than if the Procedure].
reglementary period to appeal were strictly followed.25 In this case, we The general rule is that the appeal bond that should
are inclined to excuse the one day delay in order to fully settle the merits be posted should be equivalent to the monetary award of the
of the case. This is in line with our policy to encourage full adjudication Labor Arbiter [Ramirez v. Court of Appeals]. In practice the
of the merits of an appeal.
NLRC has allowed the reduction of the bond upon showing of
meritorious grounds and filed within the reglementary period
2. Posting of Bond for appeal.
In case the decision of the Labor Arbiter or the The following are principles on reduction of bond:
Regional Director involves a monetary award, an appeal by the
employer may be perfected only upon the posting of a bond, a. Bond may be reduced when the decision
which shall either be in the form of cash deposit or surety bond failed to specify the exact amount of
in an amount equivalent to the monetary award, exclusive of monetary award.
damages and attorney’s fees. b. Monetary award running into millions is
Only in case the decision of the Labor Arbiter or the not justification to reduce bond.
DOLE Regional Director involves a monetary award, that an c. Financial difficulties or financial
appeal by the employer may be perfected upon the posting of a incapacity is not sufficient grounds to
bond. When the judgment of the Labor Arbiter does not involve reduce bond.
any monetary award, no appeal bond is necessary [Aba v. d. Full amount of bond must be posted within
NLRC]. The Labor Arbiter’s decision or order should state the the reglementary period while motion to
amount awarded. If the amount of the monetary award is not reduce bond is pending. Alternatively, a
contained or fixed in the judgment, the appeal bond is not reasonable partial appeal bond may be paid
required to be posted [Orozco v. Court of Appeals]. In case of within the reglementary period.
conflict between the body and the fallo of the decision, the latter
should prevail [Mendoza, Jr. v. San Miguel Foods, Inc.]. Rosewood v. NLRC
The surety bond must be issued by a reputable Held: In Globe General Services and Security Agency
bonding company duly accredited by the NLRC or the Supreme vs. National Labor Relations Commission, 15 the Court observed that
Court [UERM-Memorial medical Center v. NLRC]. the NLRC, in actual practice, allows the reduction of the appeal bond
The amount of such bound should be equivalent to upon motion of the appellant and on meritorious grounds; hence,
the monetary award, exclusive of damages and attorney’s fees petitioners in that case should have filed a motion to reduce the bond
[NLRC Rules of Procedure]. In other words, only monetary within the reglementary period for appeal.
That is the exact situation in the case at bar. Here, petitioner
awards (such as unpaid wages, backwages, separation pay, 13 th
claims to have received the labor arbiter's Decision on April 6,
month pay, etc.) are required to be covered by the bond. Moral 1993. 16 On April 16, 1993, it filed, together with its memorandum on
and exemplary damages and attorney’s fees are excluded. appeal 17 and notice of appeal, a motion to reduce the appeal
There is no conflict between the two provisions. Article 223 bond 18 accompanied by a surety bond for fifty thousand pesos issued
lays down the requirement that an appeal bond should be filed. by prudential Guarantee and Assurance, Inc. 19 Ignoring petitioner's
The implementing rule, on the other hand, explains how the motion (to reduce bond), Respondent Commission rendered its assailed
appeal bond shall be computed. The rule explicitly excludes Resolution dismissing the appeal due to the late filing of the appeal
moral and exemplary damages and attorney's fees from the bond.
The solicitor general argues for the affirmation of the
computation of the appeal bond. This exclusion has been
assailed Resolution for the sole reason that the appeal bond, even if it
recognized by the Court in a number of cases. Hence, was filed on time, was defective, as it was not in an amount "equivalent
in Erectors vs. NLRC, the Court nullified an NLRC order to the monetary award in the judgment appealed from." The Court
requiring the posting of an appeal bond which, among others, disagrees.
"even included in the computation the award of We hold that petitioner's motion to reduce the bond is a
P400,000.00 for moral and exemplary damages." Indeed, the substantial compliance with the Labor Code. This holding is consistent
said implementing rule is a contemporaneous construction of with the norm that letter-perfect rules must yield to the broader interest
Article 223 by the NLRC pursuant to the mandate of the Labor of substantial justice.
Where a decision may be made to rest on informed
Code; hence, it is accorded great respect by this Court.
judgment rather than rigid rules, the equities of the case must be
The cash or surety bond required for the perfection accorded their due weight because labor determinations should not only
appeal should be posted within the reglementary period be "secundum rationem but also secundum caritatem." 21 A judicious
[Gaudia v. NLRC]. If a party failed to perfect his appeal by the reading of the memorandum of appeal would have made it evident to
non-payment of the appeal bond within the 10-calendar day Respondent Commission that the recourse was meritorious.
period provided by law, the decision of the Labor Arbiter Respondent Commission acted with grave abuse of discretion in

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peremptorily dismissing the appeal without passing upon - in fact, failed. That argument is belied by Section 5, Rule IX of the
ignoring - the motion to reduce the appeal bond. Rules of the NLRC which empowers not only the Commission
We repeat: Considering the clear merits which appear, res but also the Labor Arbiter to impose reasonable penalties,
ipsa loquitur, in the appeal from the labor arbiter's Decision, and the
including fines and censures, upon a party for filing a frivolous
petitioner's substantial compliance with rules governing appeals, we
hold that the NLRC gravely abused its discretion in dismissing said
appeal. This implies that even when the appeal is still with the
appeal and in failing to pass upon the grounds alleged in the Motion for Labor Arbiter, and not yet transmitted to the Commission, the
Reconsideration. former may already find it frivolous and, there and then,
terminate that appeal. Had it been as the private respondents
4. Prohibited Motions claim, the Labor Arbiter would not have been given such
Rule V, Section 5 of the NLRC Rules of Procedure power.
provides:
J. REINSTATEMENT PENDING APPEAL
SECTION 5. PROHIBITED PLEADINGS Reinstatement pending appeal applies to all kinds of
AND MOTIONS. – The following pleadings and motions illegal dismissal cases, regardless of the grounds therefor [C.
shall not be allowed and acted upon nor elevated to the Alcantara & Sons v. Court of Appeals].
Commission: An order of reinstatement issued by the Labor Arbiter
(a) Motion to dismiss the complaint except on under Article 229 is self-executory even pending appeal by the
the ground of lack of jurisdiction over the subject matter, employer. This means that while perfection of an appeal shall
improper venue, res judicata, prescription and forum
stay the execution of the decision of the Labor Arbiter the
shopping;
(b) Motion for a bill of particulars; exception is in respect to the execution of the reinstatement
(c) Motion for new trial; order which should proceed even pending appeal by the
(d) Petition for relief from judgment; employer. An order or award for reinstatement does not require
(e) Motion to declare respondent in default; a writ of execution. The employer has no way of staying
(f) Motion for reconsideration of any decision or execution of immediate reinstatement. He cannot post bond to
any order of the Labor Arbiter; prevent its execution [Pioneer Texturizing Corporation v.
(g) Motion to Quash and/or Motion to Lift NLRC].
Garnishment if a Petition had been filed under Rule XII;
When the former position is already filled up, the
(h) Appeal from any interlocutory order of the
Labor Arbiter, such as but not limited to, an order: (1) employee ordered reinstated pending appeal should be
denying a motion to dismiss; (2) denying a motion to reinstated to a substantially equivalent position [Medina v.
inhibit; (3) denying a motion for issuance of writ of Consolidated Broadcasting System]. Reinstatement to a
execution; or (4) denying a motion to quash writ of position lower in rank is not proper [Panuncillo v. CAP
execution; Philippines].
(i) Appeal from the issuance of a certificate of Reinstatement pending appeal is not affected by the
finality of decision by the Labor Arbiter; reinstated employee’s employment elsewhere [Triad Security
(j) Appeal from orders issued by the Labor
v. Ortega]. Such employment elsewhere also does not affect the
Arbiter in the course of execution proceedings; and
(k) Such other pleadings, motions and petitions obligation of the employer to pay reinstatement backwages.
of similar nature intended to circumvent above provisions. The failure of the employee ordered reinstated
(5a, RIII) (As amended by En Banc Resolution No. 02-15, pending appeal to report back to work as directed by the
Series of 2015) employer does not give the employer the right to remove him,
especially when there is a reasonable explanation for his failure
5. Frivolous Appeals [Buenviaje v. Court of Appeals].
– No appeal from an interlocutory order shall be By way of distinction, the rule on reinstatement
entertained. To discourage frivolous or dilatory appeals, pending appeal applies only to the order of reinstatement issued
including those taken from interlocutory orders, the by the Labor Arbiter and to no other. This means that if the
Commission after hearing may censure or cite in contempt the reinstatement order is issued by the NLRC on appeal, or by the
erring parties and their counsels, or subject them to reasonable Court of Appeals or by the Supreme Court, there is a need to
fine or penalty [Section 10, NLRC Rules]. secure a writ of execution from the Labor Arbiter of origin to
Although, as a general rule, an appeal should not be enforce the reinstatement of the employee whose dismissal is
dismissed on a ground which goes to the merits of the cause or declared illegal [Mt. Carmel College v. Resuena].
to the right of plaintiff or defendant to recover, yet; in Moreover, reinstatement pending appeal does not
exceptional instances, an appellate court may order the apply when the dismissal is legal but reinstatement is ordered
dismissal when the appeal appears to be manifestly and for some reasons like equity and compassionate justice
palpably frivolous. And where, as in the instant case, the [Lansangan v. Amkor Technology].
dismissal has been ordered by the trial court, it will not be In case of two successive dismissals, the order of
disturbed in the appellate court if the latter finds the appeal to reinstatement pending appeal under Article 229 issued in the
have been interposed ostensibly for delay. It has been held that first case shall apply only to the first case and should not affect
a frivolous appeal is one presenting no justiciable question, or the second dismissal [Sevilla v. NLRC].
one so readily recognizable as devoid of merit on the face of
record that there is little, if any, prospect that it can ever 1. Options of the Employer
succeed. The instant case is one such instance in which the To implement the reinstatement aspect of a Labor
appeal is evidently without merit, taken manifestly for delay Arbiter’s decision, there are only two (2) options available to
[Dela Cruz v. Blanco]. the employer, to wit:
In Bongay v. Martinez, the contention of the private
respondents that the determination of whether or not their a. Actual reinstatement. – The employee
appeal was filed seasonably should be left to the Commission should be reinstated to his position which
as the latter has exclusive jurisdiction to rule on the question he occupies prior to his illegal dismissal

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 under the same terms and conditions b. He may be cited for contempt, in
prevailing prior to his dismissal or accordance with the NLRC Rules of
separation or, if no longer available, to a Procedure, for his refusal to comply with
substantially-equivalent position; or the writ of execution ordering the
b. Payroll reinstatement. – The employee reinstatement. This remedy, however, is
should be reinstated in the payroll of the available only after the sheriff shall have
company without requiring him to report served the writ of execution upon the
back to his work. employer or any other person required by
law to obey the same.
It is required that in case the decision of the Labor
Arbiter includes an order of reinstatement, it should contain: 2. Roquero Doctrine
Roquero v. Philippine Airlines declared the rule that
a. A statement that the reinstatement aspect is in cases where an employee is ordered reinstated by the Labor
immediately executory; and Arbiter and the employer fails or refuses to obey the
b. A directive for the employer to submit a reinstatement order but initiates an appeal, the employer’s
report of compliance within 10 calendar success in having the decision of the Labor Arbiter’s decision
days from receipt of the said decision reversed on appeal will not exculpate him from the liability to
[NLRC Rules of Procedure]. pay the reinstatement wages and benefits of the employee,
reckoned and computed from the time the employee was
From the moment an employee is ordered reinstated ordered reinstated by the Labor Arbiter until the date of reversal
by the Labor Arbiter on the basis of the finding that his on appeal.
dismissal is illegal, up to the time that an appellate tribunal like
the NLRC, CA or the Supreme Court, as the case may be, No Obligation to Reimburse
reverses the said finding, the reinstated employee is generally In the Roquero case, both the CA and the SC reversed
entitled to his so-called “reinstatement salaries/wages” and the order of reinstatement as they upheld the employee's
regular allowances, benefits, incentives, and bonuses [Bago v. dismissal. Must the employee pay back the salary he received
NLRC]. during the reinstatement? The Court said no.
In cases where the employer totally fails or refuses to
reinstate the employee but nonetheless appeals from the Labor "We reiterate the rule that technicalities have no
Arbiter’s adverse decision, there arises the issue of whether the room in labor cases where the Rules of Court are applied
employee would still be entitled to his accrued salaries/wages, only in a suppletory manner and only to effectuate the
objectives of the Labor Code and not to defeat them. Hence,
allowances and other benefits in the event that the employer is
even if the order of reinstatement of the Labor Arbiter is
subsequently successful in having the reinstatement order
reversed on appeal, it is obligatory on the part of the
reversed in its appeal. employer to reinstate and pay the wages of the dismissed
Section 12, Rule XI of the NLRC Rules of Procedure employee during the period of appeal until reversal by the
provides: higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement
SECTION 12. EXECUTION OF order is reversed with finality, the employee is not required
REINSTATEMENT PENDING APPEAL. – In case the to reimburse whatever salary he received for he is entitled
decision includes an order of reinstatement, and the to such, more so if he actually rendered services during the
employer disobeys the directive under the second paragraph period."
of Section 19 of Rule V or refuses to reinstate the dismissed
employee, the Labor Arbiter shall immediately issue writ of But a deviation occurred in Genuino v. NLRC, also
execution, even pending appeal, directing the employer to known as the Genuino Doctrine. The Court in Genuino said:
immediately reinstate the dismissed employee either
physically or in the payroll, and to pay the accrued salaries
xxx
as a consequence of such non-reinstatement in the amount
If the decision of the labor arbiter is later
specified in the decision.
reversed on appeal upon the finding that the ground for
The Labor Arbiter shall motu proprio issue a
dismissal is valid, then the employer has the right to require
corresponding writ to satisfy the reinstatement wages as
the dismissed employee on payroll reinstatement to refund
they accrue until actual reinstatement or reversal of the
the salaries s/he received while the case was pending appeal,
order of reinstatement. (En Banc Resolution No. 11-12,
or it can be deducted from the accrued benefits that the
Series of 2012)
dismissed employee was entitled to receive from his/her
The Sheriff shall serve the writ of execution
employer under existing laws, collective bargaining
upon the employer or any other person required by law to
agreement provisions, and company practices. However, if
obey the same. If he/she disobeys the writ, such employer
the employee was reinstated to work during the pendency of
or person may be cited for contempt in accordance with
the appeal, then the employee is entitled to the
Rule IX. (6a)
compensation received for actual services rendered without
need of refund.
As a consequence of such disobedience, the xxx
employer has the following liabilities [NLRC Rules of
Procedure]: 3. Garcia Doctrine
The case of Garcia v. Philippine Airlines, also known
a. He shall be liable to pay the accrued as the Garcia Doctrine, downplays the "stray posture" of
salaries of the reinstated employee as a Genuino and reaffirms the no-reimbursement doctrine in
consequence of such non-reinstatement in Roquero and conforming rulings. The court explains in Garcia
the amount specified in the decision; and that pursuant to the police power, the state may authorize an
immediate implementation, pending appeal, of a decision

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reinstating a dismissed or separated employee. The immediate jure be suspended. As stated early on, during the pendency
reinstatement is "a saving act" designed to stop a continuing of petitioners' complaint before the Labor Arbiter, the SEC
threat or danger to the survival or even the life of the employee placed respondent under an Interim Rehabilitation
Receiver. After the Labor Arbiter rendered his decision, the
and his family. Moreover, the social justice principles of labor
SEC replaced the Interim Rehabilitation Receiver with a
law outweigh or render inapplicable the civil law doctrine of Permanent Rehabilitation Receiver.
unjust enrichment. Case law recognizes that unless there is a
However, Garcia modified the doctrine enunciated in restraining order, the implementation of the order of
Roquero, to wit: reinstatement is ministerial and mandatory. This injunction
or suspension of claims by legislative fiat partakes of the
xxx nature of a restraining order that constitutes a legal
After the labor arbiter's decision is reversed justification for respondent's non-compliance with the
by a higher tribunal, the employee may be barred from reinstatement order. Respondent's failure to exercise the
collecting the accrued wages, if it is shown that the delay alternative options of actual reinstatement and payroll
in enforcing the reinstatement pending appeal reinstatement was thus justified. Such being the case,
was without fault on the part of the employer. respondent's obligation to pay the salaries pending appeal,
The test is two-fold: (1) there must be actual as the normal effect of the non-exercise of the options, did
delay or the fact that the order of reinstatement pending not attach.
appeal was not executed prior to its reversal; and (2) the While reinstatement pending appeal aims to
delay must not be due to the employer's unjustified act or avert the continuing threat or danger to the survival or even
omission. If the delay is due to the employer's unjustified the life of the dismissed employee and his family, it does
refusal, the employer may still be required to pay the not contemplate the period when the employer-corporation
salaries notwithstanding the reversal of the Labor Arbiter's itself is similarly in a judicially monitored state of being
decision. resuscitated in order to survive.
In Genuino, there was no showing that the The parallelism between a judicial order of
employer refused to reinstate the employee, who was the corporation rehabilitation as a justification for the non-
Treasury Sales Division Head, during the short span of four exercise of its options, on the one hand, and a claim of actual
months or from the promulgation on May 2, 1994 of the and imminent substantial losses as ground for retrenchment,
Labor Arbiter's Decision up to the promulgation on on the other hand, stops at the red line on the financial
September 3, 1994 of the NLRC Decision. Notably, the statements. Beyond the analogous condition of financial
former NLRC Rules of Procedure did not lay down a gloom, as discussed by Justice Leonardo Quisumbing in his
mechanism to promptly effectuate the self-executory order Separate Opinion, are more salient distinctions. Unlike the
of reinstatement, making it difficult to establish that the ground of substantial losses contemplated in a retrenchment
employer actually refused to comply. case, the state of corporate rehabilitation was judicially pre-
In a situation like that in International Container determined by a competent court and not formulated for the
Terminal Services, Inc. v. NLRC where it was alleged that first time in this case by respondent.
the employer was willing to comply with the order and that More importantly, there are legal effects arising
the employee opted not to pursue the execution of the order, from a judicial order placing a corporation under
the Court upheld the self-executory nature of the rehabilitation. Respondent was, during the period material
reinstatement order and ruled that the salary automatically to the case, effectively deprived of the alternative choices
accrued from notice of the Labor Arbiter's order of under Article 223 of the Labor Code, not only by virtue of
reinstatement until its ultimate reversal by the NLRC. It was the statutory injunction but also in view of the interim
later discovered that the employee indeed moved for the relinquishment of management control to give way to the
issuance of a writ but was not acted upon by the Labor full exercise of the powers of the rehabilitation receiver.
Arbiter. In that scenario where the delay was caused by the Had there been no need to rehabilitate, respondent may have
Labor Arbiter, it was ruled that the inaction of the Labor opted for actual physical reinstatement pending appeal to
Arbiter who failed to act upon the employee's motion for the optimize the utilization of resources. Then again, though the
issuance of a writ of execution may no longer adversely management may think this wise, the rehabilitation receiver
affect the cause of the dismissed employee in view of the may decide otherwise, not to mention the subsistence of the
self-executory nature of the order of reinstatement. injunction on claims.
The new NLRC Rules of Procedure, which took In sum, the obligation to pay the employee's
effect on January 7, 2006, now require the employer to salaries upon the employer's failure to exercise the
submit a report of compliance within 10 calendar days from alternative options under Article 223 of the Labor Code is
receipt of the Labor Arbiter's decision, disobedience to not a hard and fast rule, considering the inherent constraints
which clearly denotes a refusal to reinstate. The employee of corporate rehabilitation.
need not file a motion for the issuance of the writ of xxx
execution since the Labor Arbiter shall thereafter motu
proprio issue the writ. With the new rules in place, there II
is hardly any difficulty in determining the employer's NATIONAL LABOR RELATIONS
intransigence in immediately complying with the order.
COMMISSION
In the case at bar, petitioners exerted efforts to
execute the Labor Arbiter's order of reinstatement until they
were able to secure a writ of execution, albeit issued on The NLRC exercises two (2) kinds of jurisdiction:
October 5, 2000 after the reversal by the NLRC of the
Labor Arbiter's decision. Technically, there was still actual (1) Exclusive original jurisdiction; and
delay which brings to the question of whether the delay was (2) Exclusive appellate jurisdiction.
due to respondent's unjustified act or omission.
It is apparent that there was inaction on the part
A. EXCLUSIVE ORIGINAL JURISDICTION
of respondent to reinstate them, but whether such omission
was justified depends on the onset of the exigency of The NLRC exercises exclusive and original
corporate rehabilitation. jurisdiction over the following cases:
It is settled that upon appointment by the SEC of
a rehabilitation receiver, all actions for claims before any a. Petition for injunction in ordinary labor
court, tribunal or board against the corporation shall ipso disputes to enjoin or restrain any actual or

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 threatened commission of any or all a. All cases decided by the Labor Arbiters
prohibited or unlawful acts or to require [Article 224(b)].
the performance of a particular act in any b. Cases by decided by the DOLE Regional
labor dispute which, if not restrained or Directors or hearing officers involving
performed forthwith, may cause grave small money claims under Article 129 of
irreparable damage to any party [Article the Labor Code.
218(e)]. c. Contempt cases decided by the Labor
b. Petition for injunction in strikes or Arbiters.
lockouts under Article 279 of the Labor
Code. The perfection of an appeal shall stay the execution
c. Certified cases which refer to labor of the decision of the Labor Arbiter except execution for
disputes causing or likely to cause a strike reinstatement pending appeal [NLRC Rules of Procedure].
or lockout in an industry indispensable to
the national interest, certified to it by the C. GROUNDS FOR APPEAL
Secretary of Labor and Employment for The appeal to the NLRC may be entertained only on
compulsory arbitration by virtue of Article any of the following grounds:
278(g) of the Labor Code [Article 278(g)].
d. Petition for extraordinary remedies from (i) If there is prima facie evidence of abuse of
orders or resolutions of Labor Arbiters discretion on the part of the labor arbiter;
(including those issued during execution (ii) If the decision, order or award was secured
proceedings). through fraud or coercion, including graft
and corruption;
B. EXCLUSIVE APPELLATE JURISDICTION (iii) If made purely on questions of law; and/or
(iv) If serious errors in the findings of fact are
Article 229. [223] Appeal. Decisions, awards, or orders raised which, if not corrected, would cause
of the Labor Arbiter are final and executory unless appealed to the grave or irreparable damage or injury to the
Commission by any or both parties within ten (10) calendar days appellant.
from receipt of such decisions, awards, or orders. Such appeal may
be entertained only on any of the following grounds:
The NLRC has certiorari power. The first ground
(a) If there is prima facie evidence of abuse of discretion
on the part of the Labor Arbiter; above regarding prima facie evidence of abuse of discretion on
(b) If the decision, order or award was secured through the part of the Labor Arbiter is actually an exercise of certiorari
fraud or coercion, including graft and corruption; power by the NLRC. The case of Triad Security v. Ortega
(c) If made purely on questions of law; and expressly recognized this certiorari power. Clearly, according
(d) If serious errors in the findings of facts are raised to Auza, Jr. v. MOL Philippines, the NLRC is possessed of the
which would cause grave or irreparable damage or injury to the power to rectify any abuse of discretion committed by the
appellant. Labor Arbiter.
In case of a judgment involving a monetary award, an
appeal by the employer may be perfected only upon the posting of
a cash or surety bond issued by a reputable bonding company duly III
accredited by the Commission in the amount equivalent to the BUREAU OF LABOR RELATIONS (BLR)
monetary award in the judgment appealed from.
In any event, the decision of the Labor Arbiter A. ADMINISTRATIVE FUNCTIONS
reinstating a dismissed or separated employee, insofar as the
The BLR has to exercise its administrative functions
reinstatement aspect is concerned, shall immediately be executory,
even pending appeal. The employee shall either be admitted back
over the following:
to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely a. Applications for registration of federations,
reinstated in the payroll. The posting of a bond by the employer national unions or workers’ associations
shall not stay the execution for reinstatement provided herein. operating in more than one region.
To discourage frivolous or dilatory appeals, the b. Notice for change of name of a registered labor
Commission or the Labor Arbiter shall impose reasonable penalty, organization.
including fines or censures, upon the erring parties.
c. Notice of merger or consolidation of federations
In all cases, the appellant shall furnish a copy of the
memorandum of appeal to the other party who shall file an answer
or national unions
not later than ten (10) calendar days from receipt thereof. d. Keeping of registry of legitimate labor
The Commission shall decide all cases within twenty (20) organizations
calendar days from receipt of the answer of the appellee. e. Petition for the conduct of election of officers of
The decision of the Commission shall be final and federations, national, or industry unions and
executory after ten (10) calendar days from receipt thereof by the trade union centers.
parties. f. Request for examination of books of accounts of
Any law enforcement agency may be deputized by the
federations or national unions and trade union
Secretary of Labor and Employment or the Commission in the
enforcement of decisions, awards or orders.
centers (Article 289)
xxx g. Petition for cancellation or application for
voluntary dissolution of federations, national or
The NLRC has exclusive appellate jurisdiction over industry unions and trade union centers.
the following: h. Registration of multi-employer collective
bargaining agreements.

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 NOTE: All issues pertaining to the (1) validity of the
petitioning union’s certificate of registration or its legal (i) Request for SEBA certification when
personality as a labor organization, (2) validity of registration made in an unorganized establishment
and execution of CBA shall be heard and resolved by the with only one or more than one (1)
Regional Director in an independent petition or cancellation of legitimate union or in an organized
its registration and not by the Mediator-Arbiter in the petition establishment, or
or certification election, unless the petitioning union is not (ii) Petition for certification election,
listed in the Department’s roster of legitimate labor consent election, run-off election or re-
organizations, or an existing collective bargaining agreement is run election;
not registered with the Department.
b. Intra-union disputes;
B. EXCLUSIVE ORIGINAL JURISDICTION c. Other related labor relations disputes;
d. Contempt cases.
Article 232. [226] Bureau of Labor Relations. The
Bureau of Labor Relations and the Labor Relations Divisions in Other related labor relations dispute refers to any
the regional offices of the Department of Labor shall have original conflict between a labor union and the employer or any
and exclusive authority to act, at their own initiative or upon individual, entity or group that is not a labor union or workers’
request of either or both parties, on all inter-union and intra-union
association. More specifically, it may refer to any of the
conflicts, and all disputes, grievances or problems arising from or
affecting labor-management relations in all workplaces, whether
following:
agricultural or non-agricultural, except those arising from the
implementation or interpretation of collective bargaining a. Any conflict between:
agreements which shall be the subject of grievance procedure
and/or voluntary arbitration. (i) A labor union and an employer, or
The Bureau shall have fifteen (15) working days to act (ii) A labor union and a group that is not
on labor cases before it, subject to extension by agreement of the a labor organization; or
parties.
(iii) A labor union and an individual who
is not a member of such union.
The BLR has exclusive original jurisdiction over:
b. Cancellation of registration of unions and
a. Intra/inter-union disputes of federations, workers’ associations filed by individuals other
national or industry unions, trade union centers, than their members, or by a group that is not a
its officers or member organizations. labor organization; and
b. Petitions for cancellation of registration of c. A petition for interpleader involving labor
federations, national or industry unions, trade relations.
union centers.

Labor Relations Division (LRD) refers to the The Mediator-Arbiter has the following
following units in the DOLE Regional Office: (1) Labor administrative functions:
Organization and CBA Registration Unit; and (2) Med-
Arbitration Unit. a. Grant or deny a Petition for Certification
The BLR and the LRDs in the Regional Offices have Election
concurrent jurisdiction over the cases described in Article 232. b. Conduct preliminary conference and hearing to
This concurrent character is stressed not only in the provision determine: (i) the bargaining unit to be
of this article but in Article 219 of the Labor Code which represented; (ii) contending labor unions; (iii)
defines the term “Bureau” as referring to both the BLR and/or possibility of a consent election; (iv) existence
the LRD in the regional offices. of any of the bars to certification election under
For purposes of clarifying the issue of jurisdiction Section 3 of this Rule; and (v) such other matters
over cases mentioned in Article 232, there is a need to cite first as may be relevant for the final disposition of the
the following labor officials who exercise such jurisdiction, to case.
wit:
NOTE: The Med-Arbiter can rule on all issues
a. Mediator-Arbiters (Med-Arbiters); pertaining to the existence of employer-employee relationship
b. DOLE Regional Directors; and raised before the Med-Arbiter during the hearing and in the
c. BLR Director pleadings

C. MEDIATOR-ARBITER D. Appeals from Decisions of Med-Arbiters

The Mediator-Arbiter refers to an officer in the Decisions in cases falling under the original and
Regional Office or in the BLR authorized to hear and decide exclusive jurisdiction of the Med-Arbiters are appealable as
representation cases, inter-union or intraunion disputes and follows:
other related labor relations disputes, except cancellation of
union registration cases. a. Inter-union disputes (representation or
Thus, the cases falling under the original and certification election conflicts) – DOLE
exclusive jurisdiction of the Mediator-Arbiter are as follows: Secretary

a. Inter-union disputes (representation or (i) Request for SEBA Certification

certification election conflicts), such as when made in an unorganized

Page 182 of 191

 establishment with only one or more
than 1 legitimate union or in an IV
organized establishment – DOLE NATIONAL CONCILIATION AND
Secretary MEDIATION BOARD (NCMB)
(ii) Petition for certification election,
consent election, run-off election or The NCMB is an agency attached to the DOLE
re-run election – DOLE Secretary principally in-charge of the settlement of labor disputes through
conciliation, mediation and voluntary arbitration. It is charged
b. Intra-union disputes – BLR Director with the promotion of voluntary approaches to labor dispute
c. Other related labor relations disputes – BLR prevention and settlement. It also administers the voluntary
Director arbitration program; maintains/updates a list of voluntary
d. Injunction cases – BLR Director arbitrators; compiles arbitration awards and decisions; and
e. Contempt Cases – BLR Director provides counselling and preventive mediation assistance
particularly in the administration of collective agreements. It is
E. BLR DIRECTOR with the NCMB that Notices of Strike or Lockout are filed.
The following cases fall under the original The NCMB is not a quasi-judicial agency. Its
jurisdiction of the BLR Director: decisions, not having been rendered in the exercise of its quasi-
judicial functions, cannot be elevated to the Court of Appeals
a. Complaints and petitions involving the under Rule 43 of the Rules of Court [Tabigue v. International
application for registration, revocation or Copra Export Corporation].
cancellation of registration of federations,
national unions, industry unions, trade union A. CONCILIATION AND MEDIATION
centers and their local chapters/chartered locals, Both terms refer to a process whereby a neutral third
affiliates and member organizations; person usually called Conciliator (in case of conciliation) or
b. Request for examination of books of accounts of Mediator (in case of mediation), intervenes in a dispute
said labor organizations under Article 289; involving two or more conflicting parties for the purpose of
c. Intra-union disputes involving said labor reconciling their differences or persuading them into adjusting
organizations; or settling their dispute. The Conciliator or Mediator normally
d. Notice of merger, consolidation, affiliation and does not make or render any decision, his role being confined
change of name of said unions and or petition to the functions afore-described.
for denial thereof;
e. Registration of multi-employer CBAs or Conciliator-Mediator
petitions for deregistration thereof; A Conciliator-Mediator refers to an officer of the
f. Contempt cases. NCMB whose principal function is to assist in the settlement
and disposition of labor-management disputes through
F. APPEALS FROM DECISIONS OF BLR DIRECTOR conciliation and preventive mediation, including the promotion
Decisions in the cases falling under the original and and encouragement of voluntary approaches to labor disputes
exclusive jurisdiction of the BLR Director are all appealable to prevention and settlement [D.O. No. 40-03].
the DOLE Secretary, to wit:
B. PREVENTIVE MEDIATION
a. Complaints and petitions involving the Preventive mediation, as a remedy, is not found in the
application for registration, revocation, or Labor Code. But under the law which created the NCMB, it is
cancellation of registration of federations, expressly stated that one of its functions is to provide
national unions, industry unions, trade union preventive mediation to disputing parties [E.O. No. 126]. It
centers and their local chapters/chartered locals, covers potential labor disputes that are the subject of a formal
affiliates and member organizations; or informal request for conciliation and mediation assistance
b. Request for examination of books of accounts of sought by either or both parties or upon the initiative of the
said labor organizations under Article 289 of the NCMB to avoid the occurrence of actual labor disputes and in
Labor Code; order to remedy, contain or prevent its degeneration into a full-
c. Intra-union disputes involving said labor blown dispute through amicable settlement [NCMB Manual of
organizations; Procedures].
d. Notice of merger, consolidation, affiliation and Preventive mediation proceeding may be intiated in
change of name of said unions and or petition two (2) ways:
for denial thereof;
e. Registration of multi-employer CBAs or a. By filing a notice or request of preventive
petitions for deregistration thereof; and mediation, as distinguished from a notice of
f. Contempt cases. strike/lockout; or
b. By conversion of the notice of strike/lockout
The Secretary of Labor and Employment has no into a preventive mediation case.
jurisdiction over decisions of the Bureau of Labor Relations
rendered in the exercise of its appellate power to review the Procedurally, the filing of the notice of preventive
decision of the Regional Director in a petition to cancel the suspension is the first step to submit a case for mediation. It is
union’s certificate of registration, said decisions being final and only after this step that a submission agreement may be entered
unappealable [Abbott v. Abbot Union]. into by the parties concerned [Insular Hotel Employees Union
v. Waterfront Insular Hotel Davao]. Moreover, just like in
notices of strike or lockout, only certified SEBAs may file a
Page 183 of 191
notice or request for preventive mediation in cases of b. Visitorial (inspection) and enforcement cases
bargaining deadlocks and unfair labor practices, the only two under Article 128, (either routine or initiated
(2) grounds that may be invoked in support of a strike or through a complaint).
lockout [Ibid]. c. Visitorial cases under Article 289, involving
As distinguished from a notice of strike/lockout, examination of books of accounts of
“notice of preventive mediation” refers to the notification filed independent unions, local chapters/chartered
by either an employer or a duly registered labor union with the locals and workers’ associations.
NCMB-DOLE informing the latter of its desire to submit the d. Occupational safety and health violations.
issues between them for preventive mediation and conciliation. e. Small money claims cases arising from labor
The issues that may be submitted for preventive mediation may standards violations in an amount not exceeding
either be strikeable or non-strikeable. P5000.00 and not accompanied with a claim for
In case of strikeable issues, the parties may mutually reinstatement under Article 129.
agree that the same be treated or converted into a preventive f. Cases related to private recruitment and
mediation case, in which event, no strike or lockout may be placement agencies for local employment.
legally and validly mounted based on the same issues since g. Cases submitted for voluntary arbitration in
their conversion into a preventive mediation case has the effect their capacity as Ex-Officio Voluntary
of dismissing the notice of strike/lockout and removing it from Arbitrators under D.O. No. 83-07
the docket of notices of strike/lockout. h. Request for SEBA certification when made in
In case of non-strikeable issues raised in a notice of an unorganized establishment with only one (1)
strike or notice of lockout, the NCMB may, motu proprio, legitimate union.
convert the same into a preventive mediation case or,
alternatively, refer said issues to voluntary arbitration, if they A. SMALL MONEY CLAIMS CASES
are in the nature of unresolved grievances or to the Med- The DOLE Regional Director has original
Arbiter, if they involve representation or inter-union disputes. jurisdiction over small money claims cases arising from labor
standards violations in the amount not exceeding P5000.00 and
C. AUTHORITY TO CONVERT A NOTICE OF not accompanied with a claim for reinstatement under Article
STRIKE/LOCKOUT INTO A PREVENTIVE 129 of the Labor Code.
MEDIATION CASE Article 129 contemplates the recovery of wages and
The NCMB has the authority to convert a notice of other monetary claims and benefits, including legal interest,
strike/lockout filed by the union/employer into a preventive owing to an employee arising from employer-employee
mediation case under any of the following circumstances: relationship provided the claim does not exceed P5000.00
The following requisites for the valid exercise of
a. When the issues raised in the notice of jurisdiction over small money claims must all concur, to wit:
strike/lockout are not strikeable in character.
b. When the party which filed the notice of a. The claim is presented by an employee or
strike/lockout voluntarily asks for the domestic worker or kasambahay;
conversion. b. The claimant, no longer being employed, does
c. When both parties to a labor dispute mutually not seek reinstatement; and
agree to have it subjected to preventive c. The aggregate money claim of the employee
mediation proceeding. does not exceed P5000.00.

Such authority is in pursuance of the NCMB’s duty In the absence of any of the aforesaid three (3)
to exert all efforts at mediation and conciliation to enable the requisites, the Labor Arbiters have original and exclusive
parties to settle their dispute amicably and in line with the State jurisdiction over all claims arising from employer-employee
policy of favoring voluntary modes of settling labor disputes relations, other than claims for employees’ compensation,
[NCMB Primer]. social security, PhilHealth and maternity benefits.

V B. VISITORIAL AND ENFORCEMENT POWERS

DOLE REGIONAL DIRECTORS Article 128 basically enunciates the three kinds of
power which the DOLE Secretary and/or the Regional
The DOLE Regional Directors are the duly Directors, his duly authorized representatives, may exercise in
authorized representatives of the DOLE Secretary referred to in connection with the administration and enforcement of the
Article 128 of the Labor Code which grants to them both labor standards provisions of the Labor Code and of any labor
visitorial and enforcement powers. They are in charge of the law, wage order or rules and regulations issued pursuant
administration and enforcement of labor standards within their thereto.
respective territorial jurisdiction [Atilano v. De la Cruz]. What is being inspected in the exercise of the
The DOLE Regional Directors have original and visitorial and enforcement powers granted to the DOLE
exclusive jurisdiction over the following cases: Secretary or the DOLE Regional Directors under Article 128 is
the employer-establishment and not the employees thereof.
a. Visitorial (inspection) cases under Article 37 of Consequently, in case of a finding of violation of the labor
the Labor Code referring to the inspection of the standards, the awards granted in the inspection case are not
premises, books of accounts and records of any confined to employees who signed the complaint inspection but
person or entity covered by the Title I, Book I, are equally applicable to all those who were employed by the
Labor Code. establishment concerned at the time the complaint was filed,
even if they were not signatories [Maternity Children’s
Hospital v. Secretary of Labor].

Page 184 of 191

 Decisions in the following cases relevant and related
Grant of Another Visitorial Power Under Articles to labor relations are appealable to the BLR Director:
37 and 289
Besides the visitorial power granted under Article a. Visitorial cases under Article 289, involving
128, another visitorial power is granted to the DOLE Secretary examination of books of accounts of
and the DOLE Regional Directors under Article 37 and 289 of independent unions, local chapters/chartered
the Labor Code, to wit: locals and workers’ associations;
b. Union registration-related cases such as:
Article 37. Visitorial Power. The Secretary of
Labor or his duly authorized representatives may, at any (i) Denial of applications for union
time, inspect the premises, books of accounts and records of registration of independent unions,
any person or entity covered by this Title, require it to
local chapters and workers’
submit reports regularly on prescribed forms, and act on
violation of any provisions of this Title. associations;
(ii) Revocation or cancellation of
Article 289. [274] Visitorial Power. The registration of said unions
Secretary of Labor and Employment or his duly authorized
representative is hereby empowered to inquire into financial c. Notice of merger, consolidation, affiliation and
activities of legitimate labor organizations upon the filing of change of name of said unions and or petition
a complaint under oath and duly supported by the written for denial thereof;
consent of at least twenty percent (20%) of the total
d. CBA-related cases, such as:
membership of the labor organization concerned and to
examine their books of accounts and other records to
determine compliance or non-compliance with the law and (i) Applications for registration of
to prosecute any violations of the law and the union single-enterprise CBAs or petition
constitution and by-laws: Provided, That such inquiry or for deregistration thereof;
examination shall not be conducted during the sixty (60) (ii) Petition for denial of registration of
days freedom period nor within the thirty (30) days single-enterprise CBAs or denial of
immediately preceding the date of election of union petition thereof.
officials.

Decisions of the DOLE Regional Directors in the

Article 128 should not be confused with Articles 37
following cases which are not related to labor relations are
and 289 because the purpose and object of the DOLE
appealable to the DOLE Secretary and not to the BLR Director:
Secretary’s exercise of his visitorial power provided thereunder
are completely distinct from each other.
a. Visitorial (inspection) cases under Article 37;
While Article 128 dwells on the visitorial and
b. Visitorial (inspection) and enforcement cases
enforcement powers of the DOLE Secretary to inquire into the
under Article 128, (either routine or initiated
employer’s compliance with labor standards prescribed under
through a complaint);
labor laws and social legislations, the purposes of the other
c. Occupational safety and health violations;
articles are different, thus:
d. Cases related to private recruitment and
placement agencies (PRPAs) for local
a. Article 37 treats of the visitorial power of the
employment, such as:
DOLE Secretary and the DOLE Regional
Directors in relation to recruitment and
(i) Application for license or denial
placement of workers for both local and
thereof;
overseas employment.
(ii) Complaints for suspension or
b. Article 289 treats of the visitorial power of the
cancellation of license by reason of
DOLE Secretary and the DOLE Regional
administrative offenses;
Directors to inquire into the financial activities
(iii) Complaints for illegal recruitment;
of legitimate labor organizations.
and
(iv) Petition for closure of agency.
Article 129 vs. Article 128
Additionally, their decisions on small money claims
Article 129 Article 128
cases arising from labor standards violations in an amount not
Adjudication powers Visitorial and enforcement
powers exceeding P5000.00 and not accompanied with a claim for
Power to hear and decide any Inspection of establishments reinstatement under Article 129 are appealable to the NLRC.
claim for recovery of wages, and the issuance of orders to
simple (small) money claims, comply with labor standards, VI
and other benefits of wage orders, and other labor
employees, domestic worker, or laws and regulations DOLE SECRETARY
kasambahay, arising from a
severed employer-employee A. VISITORIAL AND ENFORCEMENT POWERS
relationship
No employer-employee Employment relationship is
relationship required Article 128. Visitorial and Enforcement Power. (a) The
Appealable to the NLRC Appealable to the DOLE Secretary of Labor and Employment or his duly authorized
Secretary representatives, including labor regulation officers, shall have
access to or night whenever work is being undertaken therein, and
the right to copy therefrom, to question any employee and
C. APPEALS FROM DECISIONS OF DOLE
investigate any fact, condition or matter which may be necessary
REGIONAL DIRECTORS to determine violations or which may aid in the enforcement of this
Page 185 of 191
Code and of any labor law, wage order or rules and regulations As a summary, the DOLE Secretary has the
issued pursuant thereto. following enforcement powers:
(b) Notwithstanding the provisions of Articles 129 and
21789 of this Code to the contrary, and in cases where the
a. To issue compliance orders to give effect to the
relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives
labor standards provisions of the Labor Code
shall have the power to issue compliance orders to give effect to the and other labor legislation [Article 128(b)];
labor standards provisions of this Code and other labor legislation b. To issue writs of execution to the appropriate
based on the findings of labor employment and enforcement authority for the enforcement of their orders,
officers or industrial safety engineers made in the course of except in cases where the employer contests the
inspection. The Secretary or his duly authorized representatives findings of the labor and employment officers
shall issue writs of execution to the appropriate authority for the and raises issues supported by documentary
enforcement of their orders, except in cases where the employer
proofs which were not considered in the course
contests the findings of the labor employment and enforcement
officer and raises issues supported by documentary proofs which of inspection [Ibid].
were not considered in the course of inspection. c. To order stoppage of work or suspension of
An order issued by the duly authorized representative of operations of any unit or department of an
the Secretary of Labor and Employment under this Article may be establishment when non-compliance with the
appealed to the latter. In case said order involves a monetary law or implementing rules and regulations poses
award, an appeal by the employer may be perfected only upon the grave and imminent danger to the health and
posting of a cash or surety bond issued by a reputable bonding safety of workers in the workplace [Article
company duly accredited by the Secretary of Labor and
128(c)];
Employment in the amount equivalent to the monetary award in
the order appealed from. d. To require employers to keep and maintain
(c) The Secretary of Labor and Employment may employment records as may be necessary in aid
likewise order stoppage of work or suspension of operations of any of his visitorial and enforcement powers under
unit or department of an establishment when non-compliance with the Labor Code [Article 128(f)].
the law or implementing rules and regulations poses grave and
imminent danger to the health and safety of workers in the B. POWER TO SUSPEND EFFECTS OF
workplace. Within twenty-four hours, a hearing shall be conducted TERMINATION
to determine whether an order for the stoppage of work or
The DOLE Secretary may suspend the effects of
suspension of operations shall be lifted or not. In case the violation
is attributable to the fault of the employer, he shall pay the termination pending resolution of the dispute in the event of a
employees concerned their salaries or wages during the period of prima facie finding by the appropriate official of the DOLE
such stoppage of work or suspension of operation. before whom the dispute is pending that:
(d) It shall be unlawful for any person or entity to
obstruct, impede, delay or otherwise render ineffective the orders a. The termination may cause a serious labor
of the Secretary of Labor and Employment or his duly authorized dispute; and/or
representatives issued pursuant to the authority granted under this b. The termination is in implementation of a mass
Article, and no inferior court or entity shall issue temporary or
lay-off [Article 292(b)].
permanent injunction or restraining order or otherwise assume
jurisdiction over any case involving the enforcement orders issued
in accordance with this Article. The Labor Arbiters and the Voluntary Arbitrators or
(e) Any government employee found guilty of violation panel of Voluntary Arbitrators, as the case may be, are the
of, or abuse of authority, under this Article shall, after appropriate “appropriate officials” referred to in Article 292(b) who may
administrative investigation, be subject to summary dismissal from make the preliminary determination of the existence of prima
the service. facie evidence that the termination will cause a serious labor
(f) The Secretary of Labor and Employment may, by dispute or is being made in implementation of a mass lay-off.
appropriate regulations, require employers to keep and maintain
Such prima facie finding will then become the basis for the
such employment records as may be necessary in aid of his
visitorial and enforcement powers under this Code. issuance by the DOLE Secretary of his order suspending the
effects of termination which, as earlier emphasized, would
mean the immediate reinstatement of the terminated employees
Article 37. Visitorial Power. The Secretary of Labor or
his duly authorized representatives may, at any time, inspect the
pending the final resolution of their termination case.
premises, books of accounts and records of any person or entity
covered by this Title, require it to submit reports regularly on Suspension of Termination vs. Assumption or
prescribed forms, and act on violation of any provisions of this Certification
Title.
Suspension of Assumption or
Article 289. [274] Visitorial Power. The Secretary of Termination Certification
Labor and Employment or his duly authorized representative is Involves only the issue of Applicable to all labor disputes,
hereby empowered to inquire into financial activities of legitimate termination of employment irrespective of the grounds,
labor organizations upon the filing of a complaint under oath and which may cause serious labor provided it will cause strikes or
dispute or mass lay-off lockouts in industries
duly supported by the written consent of at least twenty percent
indispensable to national
(20%) of the total membership of the labor organization concerned
interest
and to examine their books of accounts and other records to
Requires preliminary Does not require preliminary
determine compliance or non-compliance with the law and to determination of the existence prima facie determination. In
prosecute any violations of the law and the union constitution and of prima facie evidence fact, prior notice and hearing is
by-laws: Provided, That such inquiry or examination shall not be not required
conducted during the sixty (60) days freedom period nor within the Serious labor dispute may or Labor dispute will cause or
thirty (30) days immediately preceding the date of election of union may not involve a strike lockout likely to cause a strike or
officials. lockout
Irrespective of the nature of the Only in industries indispensable
business of the employer to national interest
Page 186 of 191
 Remedy is immediate Remedy is automatic return to may hold any person in direct or indirect contempt and impose the
reinstatement pending work of the strikers or locked- appropriate penalties therefor.
resolution of the termination out employees or enjoining the
case strike or lockout.
E. REMEDIES
It has long been settled that the remedy of an
The case of University of Sto. Tomas v. NLRC and
aggrieved party in a decision or resolution of the Secretary of
UST Faculty Union illustrates the situation where the DOLE
Labor is to timely file a motion for reconsideration as a
Secretary ordered both the suspension of the effects of
precondition for any further or subsequent remedy, and then
termination and the return to work of employees pursuant to a
seasonably file a special civil action for certiorari under Rule
certification order. In this case, all the sixteen (16) officers and
65 of the 1997 Rules on Civil Procedure; it is a condition sine
directors of the faculty union were terminated on the grounds
qua non to afford an opportunity for the correction of the error
of grave misconduct, serious disrespect to a superior and
or mistake complained of [Philtranco Service v. Philtranco
conduct unbecoming a faculty member. As a result of said
Workers Union].
dismissal, some faculty members staged mass leaves of absence
Accordingly, the Secretary of Labor’s Decision is a
for several days, disrupting classes in all levels at the
proper subject of certiorari. In fact, the Court said that there is
university., the faculty union filed a complaint for illegal
no distinction: when the Secretary of Labor assumes
dismissal and unfair labor practice with the Labor Arbiter who,
jurisdiction over a labor case in an industry indispensable to
on a prima facie showing that the termination was causing a
national interest "he exercises great breadth of discretion" in
serious labor dispute, certified the matter to the DOLE
finding a solution to the parties’ dispute. "[T]he authority of the
Secretary for a possible suspension of the effects of
Secretary of Labor to assume jurisdiction over a labor dispute
termination. On this basis, Secretary Franklin Drilon issued an
causing or likely to cause a strike or lockout in an industry
order suspending the effects of the termination of the union
indispensable to national interest includes and extends to all
officers and directors and directing the university to accept
questions and controversies arising therefrom. This power may
them back to work under the same terms and conditions
not be the subject of appeal [Ibid].
prevailing prior to their dismissal. Later, on the asis of a petition
for assumption or certification filed by the university, Drilon
modified said order by certifying the labor dispute to the NLRC VII
for compulsory arbitration pursuant to Article 278(g). He VOLUNTARY ARBITRATOR
accordingly ordered the university to readmit all its faculty
members, including the 16 union officers and directors, under Voluntary arbitration refers to the mode of settling
the same terms and conditions prevailing prior to the dispute. labor-management disputes in which the parties select a
Based on the foregoing, it may be said that competent, trained and impartial third person who is tasked to
suspension of the effects of termination has the same effect as decide on the merits of the case and whose decision is final and
assumption or certification as far as the reinstatement of the executory. It is a third-party settlement of a labor dispute
affected employees is concerned. involving the mutual consent of the representatives of the
employer and the labor union involved in a labor union dispute
C. EXCLUSIVE APPELLATE JURISDICTION to submit their case for arbitration.
The DOLE Secretary has appellate jurisdiction over
the following cases: A. VOLUNTARY ARBITRATOR
A Voluntary Arbitrator refers to:
a. Orders issued by the Regional Director under:
a. Any person who has been accredited by the
(i) Article 128 National Conciliation and Mediation Board as
(ii) Occupational safety and health violations; such; or
(iii) Complaints against private recruitment and b. Any person named or designated in the CBA by
placement agencies (PRPAs) for local the parties as their Voluntary Arbitrator; or
employment. c. One chosen by the parties with or without the
assistance of the NCMB, pursuant to a selection
b. Order of the Med Arbiter granting the petition procedure agreed upon in the CBA; or
for Certification Election (in an organized d. One appointed by the NCMB in case either of
establishment) and denying the petition for the parties to the CBA refuses to submit to
certification election (either in organized or voluntary arbitration.
unorganized establishment);
c. All cases decided by the BLR in its original and Based on the above definition, Voluntary Arbitrators
exclusive jurisdiction including denial of may be classified into two (2) kinds, namely:
application for union registration or cancellation
of union registration of federations, national a. Permanent Arbitrator referring to the VA
unions or workers’ associations operating in specifically named or designated in the CBA by
more than one region; the parties as their Val and
d. All cases decided by the POEA in its original b. Ad Hoc Arbitrator referring to the VA chosen
and exclusive jurisdiction. by the parties in accordance with the established
procedure in the CBA or the one appointed by
D. CONTEMPT POWERS the NCMB in case there is failure in the
selection or in case either of the parties to the
Article 231. [225] Contempt Powers of the Secretary. In CBA refuses to submit to voluntary arbitration.
the exercise of his powers under this Code, the Secretary of Labor

Page 187 of 191

 A Voluntary Arbitrator need not be an employee of from the interpretation and implementation of the
the government. He may be a private individual but authorized productivity incentive programs under RA 6971.
to render arbitration services provided under labor laws. He is The National Labor Relations Commission, its
regional branches and Regional Directors of the Department
not required to be a lawyer. Though he is not a part of the
of Labor and Employment shall not entertain disputes,
government, he is a quasi-judicial officer by nature of his grievances or matters under the exclusive and original
functions, whether acting solely or by a panel. jurisdiction of the voluntary arbitrator or panel of voluntary
arbitrators and shall immediately dispose and refer the same
B. SUBMISSION FOR VOLUNTARY ARBITRATION to the appropriate grievance machinery or voluntary
Section 3, Rule XIX provides: arbitration provided in the collective bargaining agreement.
Upon agreement of the parties, any other labor
Section 3. Submission to voluntary dispute may be submitted to a voluntary arbitrator or panel
arbitration. – Where grievance remains of voluntary arbitrators. Before or at any stage of the
unresolved, either party may serve notice upon compulsory arbitration process, the parties may opt to
the other of its decision to submit the issue to submit their dispute to voluntary arbitration.
voluntary arbitration. The notice shall state the
issue or issues to be arbitrated, copy thereof The Voluntary Arbitrator or panel of Voluntary
furnished the board or the voluntary arbitrator or Arbitrators shall have exclusive and original jurisdiction over
panel of voluntary arbitrators named or the following cases:
designated in the collective bargaining
agreement.
a. Unresolved grievances arising from the
If the party upon whom the notice is
served fails or refuses to respond favorably interpretation or implementation of the CBA
within seven (7) days from receipt thereof, the except if grievance is a gross violation of the
voluntary arbitrator or panel of voluntary CBA (ULP) or if the grievance results in
arbitrators designated in the collective termination.
bargaining agreement shall commence voluntary b. Unresolved grievances arising from the
arbitration proceedings. Where the collective interpretation or enforcement of personnel
bargaining agreement does not so designate, the policies.
board shall call the parties and appoint a
c. Violations of the CBA which are not gross in
voluntary arbitrator or panel of voluntary
arbitrators, who shall thereafter commence character.
arbitration proceedings in accordance with the d. Other labor disputes, including unfair labor
proceeding paragraph. practices and bargaining deadlocks, upon
In instances where parties fail to agreement of the parties.
select a voluntary arbitrator or panel of e. National Interest cases.
voluntary arbitrators, the regional branch of the f. Wage distortion issues arising from the
Board shall designate the voluntary arbitrator or application of any wage orders in organized
panel of voluntary arbitrators, as may be
establishments.
necessary, which shall have the same force and
effect as if the parties have selected the g. Unresolved grievances arising from the
arbitrator. interpretation and implementation of the
Productivity Incentive Programs under RA
C. PARTIES TO A PROCEEDING WITH THE 6971.
VOLUNTARY ARBITRATOR
Well-entrenched is the rule that when a case does not E. POWERS OF THE VOLUNTARY ARBITRATOR
involve the parties to a CBA – the employer and the bargaining Section 5, Rule XIX of the IRR provides:
union – it is not subject to voluntary arbitration.
While an individual employee or group of Section 5. Powers of voluntary
arbitrator or panel of voluntary arbitrators. – The
employees, without participation of the union, are granted the
voluntary arbitrator or panel of voluntary
right to bring a grievance directly to the employer, they cannot arbitrators shall have the power to hold hearings,
submit the same grievance, if unresolved by the employer, for receive evidence and take whatever action is
voluntary arbitration without the union’s approval and necessary to resolve the issue/s subject of the
participation. dispute.
The voluntary arbitrator or panel of
D. JURISDICTION OF THE VOLUNTARY voluntary arbitrators may conciliate or mediate
ARBITRATOR to aid the parties in reaching a voluntary
settlement of the dispute.
Section 4, Rule XIX of the IRR provides:

Section 4. Jurisdiction of voluntary arbitrator or Moreover, the VA has the power to issue a writ of
panel of voluntary arbitrators. - The voluntary arbitrator or execution to enforce final decisions and in connection therwith,
panel of voluntary arbitrators shall have exclusive and it shall be his duty too see that his decision is fully satisfied,
original jurisdiction to hear and decide all grievances arising inquire into the correctness of the execution, consider
from the implementation or interpretation of the collective supervening events during execution, and determine every
bargaining agreements and those arising from the question of fact and law which may be involved in the
interpretation or enforcement of company personnel execution.
policies which remain unresolved after exhaustion of the
As a general proposition, an arbitrator is confined to
grievance procedure.
They shall also have exclusive and original the interpretation and application of the collective bargaining
jurisdiction, to hear and decide wage distortion issues agreement. He does not sit to dispense his own brand of
arising from the application of any wage orders in organized industrial justice: his award is legitimate only in so far as it
establishments, as well as unresolved grievances arising draws its essence from the CBA, i.e., when there is a rational

Page 188 of 191

nexus between the award and the CBA under consideration. It disputes, the arbitrator can assume that he has the power to make a final
is said that an arbitral award does not draw its essence from the settlement. Thus, assuming that the submission empowers the arbitrator
CBA; hence, there is an unauthorized amendment or alteration to decide whether an employee was discharged for just cause, the
arbitrator in this instance can reasonably assume that his powers
thereof, if:
extended beyond giving a yes-or-no answer and included the power to
reinstate him with or without back pay.
a. It is so unfounded in reason and fact; In one case, the Supreme Court stressed that “xxx the
b. It is so unconnected with the working and Voluntary Arbitrator had plenary jurisdiction and authority to interpret
purpose of the agreement; the agreement to arbitrate and to determine the scope of his own
c. It is without factual support in view of its authority subject only, in a proper case, to the certiorari jurisdiction of
language, its context, and any other indicia of this Court. The Arbitrator, as already indicated, viewed his authority as
the parties' intention; embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the
d. It ignores or abandons the plain language of
affirmative case, the amount thereof.
the contract; By the same token, the issue of regularization should be
e. It is mistakenly based on a crucial assumption viewed as two-tiered issue. While the submission agreement mentioned
which concededly is a nonfact; only the determination of the date or regularization, law and
f. It is unlawful, arbitrary or capricious; and jurisprudence give the voluntary arbitrator enough leeway of authority
g. It is contrary to public policy. as well as adequate prerogative to accomplish the reason for which the
law on voluntary arbitration was created – speedy labor justice. It bears
A CBA is more than a contract; it is a generalized stressing that the underlying reason why this case arose is to settle, once
and for all, the ultimate question of whether respondent employees are
code to govern a myriad of cases which the draftsmen cannot
entitled to higher benefits. To require them to file another action for
wholly anticipate. It covers the whole employment relationship payment of such benefits would certainly undermine labor proceedings
and prescribes the rights and duties of the parties. It is a system and contravene the constitutional mandate providing full protection to
of industrial self-government with the grievance machinery at labor.
the very heart of the system. [41] The parties solve their Indubitably, Ludo fortifies, not diminishes, the soundness
problems by molding a system of private law for all the of the questioned VA Decision. Said case reaffirms the plenary
problems which may arise and to provide for their solution in a jurisdiction and authority of the voluntary arbitrator to interpret the
way which will generally accord with the variant needs and CBA and to determine the scope of his/her own authority. Subject to
judicial review, the leeway of authority as well as adequate prerogative
desires of the parties [United Kimberly Clark Employees Union
is aimed at accomplishing the rationale of the law on voluntary
v. Kimberly Clark]. arbitration – speedy labor justice. In this case, a complete and final
If the terms of a CBA are clear and have no doubt adjudication of the dispute between the parties necessarily called for
upon the intention of the contracting parties, the literal meaning the resolution of the related and incidental issue of whether the
of its stipulation shall prevail. However, if, in a CBA, the Company still violated the CBA but without being guilty of ULP as,
parties stipulate that the hirees must be presumed of needless to state, ULP is committed only if there is gross violation of
employment qualification standards but fail to state such the agreement.
qualification standards in said CBA, the VA may resort to
evidence extrinsic of the CBA to determine the full agreement F. PROCEDURE IN VOLUNTARY ARBITRATION
intended by the parties. When a CBA may be expected to speak Section 6, Rule XIX of the IRR provides:
on a matter, but does not, its sentence imports ambiguity on that
subject. The VA is not merely to rely on the cold and cryptic Section 6. Procedure. – All parties to the dispute
words on the face of the CBA but is mandated to discover the shall be entitled to attend the arbitration proceedings. The
attendance of any third party or the exclusion of any witness
intention of the parties. Recognizing the inability of the parties
from the proceedings shall be determined by the voluntary
to anticipate or address all future problems, gaps may be left to arbitrator or panel of voluntary arbitrators. Hearing may be
be filled in by reference to the practices of the industry, and the adjourned for cause or upon agreement by the parties.
step which is equally a part of the CBA although not expressed Unless the parties agree otherwise, it shall be
in it. In order to ascertain the intention of the contracting mandatory for the voluntary arbitrator or panel of voluntary
parties, their contemporaneous and subsequent acts shall be arbitrators to render an award or decision within twenty (20)
principally considered. The VA may also consider and rely calendar days from the date of submission for resolution.
upon negotiating and contractual history of the parties, Failure on the part of the voluntary arbitrator to
render a decision, resolution, order or award within the
evidence of past practices interpreting ambiguous provisions.
prescribed period, shall upon complaint of a party, be
The VA has to examine such practices to determine the scope sufficient ground for the Board to discipline said voluntary
of their agreement, as where the provision of the CBA has been arbitrator, pursuant to the guidelines issued by the
loosely formulated. Moreover, the CBA must be construed Secretary. In cases that the recommended sanction is de-
liberally rather than narrowly and technically and the Court listing, it shall be unlawful for the voluntary arbitrator to
must place a practical and realistic construction upon it [Ibid]. refuse or fail to turn over to the board, for its further
disposition, the records of the case within ten (10) calendar
days from demand thereof.
Goya, Inc. v. Goya Inc. Employees Union
Held: Generally, the arbitrator is expected to decide only
those questions expressly delineated by the submission agreement. G. FINALITY OF THE AWARD OR DECISION
Nevertheless, the arbitrator can assume that he has the necessary power Section 7, Rule XIX of the IRR provides:
to make a final settlement since arbitration is the final resort for the
adjudication of disputes. The succinct reasoning enunciated by the CA Section 7. Finality of
in support of its holding, that the Voluntary Arbitrator in a labor Award/Decision. – The decision, order,
controversy has jurisdiction to render the questioned arbitral awards, resolution or award of the voluntary arbitrator or
deserves our concurrence, thus: panel of voluntary arbitrators shall be final and
In general, the arbitrator is expected to decide those executory after ten (10) calendar days from
questions expressly stated and limited in the submission agreement. receipt of the copy of the award or decision by
However, since arbitration is the final resort for the adjudication of

Page 189 of 191

 the parties and it shall not be subject of a motion Hence, the 10-day period stated in Article 276 should be
for reconsideration. understood as the period within which the party adversely affected by
the ruling of the Voluntary Arbitrators or Panel of Arbitrators may file
The 10-day period stated in Article 276 should be a motion for reconsideration. Only after the resolution of the motion for
understood as the period within which the party adversely reconsideration may the aggrieved party appeal to the CA by filing the
petition for review under Rule 43 of the Rules of Court within 15 days
affected by the ruling of the Voluntary Arbitrators or Panel of
from notice pursuant to Section 4 of Rule 43. (Citations omitted;
Arbitrators may file a motion for reconsideration. Only after the emphasis and underscoring supplied)
resolution of the motion for reconsideration may the aggrieved The Court further noted in Guagua that despite the
party appeal to the CA by filing the petition for review under clarification made in Teng v. Pagahac in 2010, the Department of
Rule 43 of the Rules of Court within 15 days from notice Labor and Employment (DOLE) and NCMB have yet to revise or
pursuant to Section 4 of Rule 43 [Guagua National Colleges v. amend Section 7, Rule VII of the Revised Procedural Guidelines in the
Court of Appeals]. Conduct of Voluntary Arbitration Proceedings and that such inaction
has caused confusion, particularly with respect to the filing of the
motion for reconsideration as a condition precedent to the filing of the
Chin v. Maersk-Filipinas Crewing Inc. petition for review in the CA. Thus, the Court expressly directed the
Held: In the 2018 case of Guagua National Colleges vs. DOLE and the NCMB to cause the revision or amendment of the
CA (Guagua), the Court acknowledged the variance in its rulings and aforesaid section in order to allow the filing of motions for
categorically declared that the correct period to appeal the decision or reconsideration in line with Article 276 of the Labor Code.
award of the Voluntary Arbitrator or Panel of Arbitrators to the Unfortunately, no revision has yet been made in this regard.
CA via a petition for review under Rule 43 of the Rules of Court is the Consequently, the DOLE and the NCMB are again reminded to cause
fifteen (15)-day period set forth in Section 4 thereof reckoned from the revision or amendment of Section 7, Rule VII of the Revised
notice or receipt of the VA's resolution on the motion for Procedural Guidelines in the Conduct of Voluntary Arbitration
reconsideration, and that the ten (10)-day period provided in Article Proceedings insofar as it prohibits the filing of a motion for
276 of the Labor Code refers to the period within which an aggrieved reconsideration, if they have not done so.
party may file said motion for reconsideration, to wit: In view of the foregoing, petitioner in this case had fifteen
Given the variable rulings of the Court, what should now be (15) days from receipt of the Resolution denying his motion for
the period to be followed in appealing the decisions or awards of the reconsideration to file his petition for review with the CA. Having
Voluntary Arbitrators or Panel of Arbitrators? received a copy of the VA's October 29, 2018 Resolution on November
In the 2010 ruling in Teng v. Pagahac, the Court clarified 22, 2018, petitioner therefore had until December 7, 2018 to file his
that the 10-day period set in Article 276 of the Labor Code gave the petition. As the records show that the petition was filed on December
aggrieved parties the opportunity to file their motion for 4, 2018, albeit through a private courier, it was therefore timely filed
reconsideration, which was more in keeping with the principle of and the CA erred in dismissing it outright. To rule otherwise would be
exhaustion of administrative remedies, holding thusly: clearly antithetical to the tenets of fair play, not to mention the undue
In the exercise of its power to promulgate implementing prejudice to petitioner's rights.[30] Thus, in light of the fact that the CA
rules and regulations, an implementing agency, such as the Department dismissed the petition for review outright based solely on procedural
of Labor, is restricted from going beyond the terms of the law it seeks grounds, a remand of the case for a resolution on the merits is
to implement; it should neither modify nor improve the law. The warranted.
agency formulating the rules and guidelines cannot exceed the statutory
authority granted to it by the legislature.
By allowing a 10-day period, the obvious intent of VIII
Congress in amending Article 263 to Article 262-A is to provide an PRESCRIPTION OF ACTIONS
opportunity for the party adversely affected by the VA's decision
to seek recourse via a motion for reconsideration or a petition for
Filing a case with the grievance machinery tolls the
review under Rule 43 of the Rules of Court filed with the CA.
running of the prescriptive period.
Indeed, a motion for reconsideration is the more appropriate
remedy in line with the doctrine of exhaustion of administrative
remedies. For this reason, an appeal from administrative agencies A. MONEY CLAIMS
to the CA via Rule 43 of the Rules of Court requires exhaustion of The prescriptive period of money claims (like
available remedies as a condition precedent to a petition under that separation pay) and benefits arising from employer-employee
Rule. relationship is three (3) years under Article 306 of the Labor
The requirement that administrative remedies be exhausted Code, reckoned from the time the cause of action accrued;
is based on the doctrine that in providing for a remedy before an otherwise, they shall be forever barred [IRR].
administrative agency, every opportunity must be given to the agency
Money claims under Article 306 include those arising
to resolve the matter and to exhaust all opportunities for a resolution
under the given remedy before bringing an action in, or resorting to, the from:
courts of justice. Where Congress has not clearly required exhaustion,
sound judicial discretion governs, guided by congressional intent. a. Law
By disallowing reconsideration of the VA's decision, b. CBA
Section 7, Rule XIX of DO 40-03 and Section 7 of the 2005 c. Incremental proceeds from tuition increases
Procedural Guidelines went directly against the legislative intent d. Overseas employment of OFWs.
behind Article 262-A of the Labor Code. These rules deny the VA
the chance to correct himself and compel the courts of justice to
A cause of action for money claims accrues upon the
prematurely intervene with the action of an administrative agency
entrusted with the adjudication of controversies coming under its categorical denial of a claim. The three-year prescriptive period
special knowledge, training and specific field of expertise. In this era is not applicable to execution of final judgment which should
of clogged court dockets, the need for specialized administrative be done within 5 years.
agencies with the special knowledge, experience and capability to hear
and determine promptly disputes on technical matters or intricate B. ILLEGAL DISMISSAL
questions of facts, subject to judicial review, is indispensable. The 3-year prescriptive period in Article 291 solely
In Industrial Enterprises, Inc. v. Court of Appeals, we ruled that relief applies to money claims but not to illegal dismissal cases which
must first be obtained in an administrative proceeding before a remedy
are not in the nature of money claims. The prescriptive period
will be supplied by the courts even though the matter is within the
proper jurisdiction of a court. (Emphasis supplied) of illegal dismissal cases is 4 years under Article 1146 of the
Civil Code. Article 291 covers claims for overtime
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pay, holiday pay, service incentive leave pay, bonuses, salary
differentials, and illegal deductions by an employer. It also
covers money claims arising from seafarer contracts [Arriola v.
Pilipino Star Ngayon].
Settled is the rule that when one is arbitrarily and
unjustly deprived of his job or means of livelihood, the action
instituted to contest the legality of one’s dismissal from
employment constitutes, in essence, an action predicated upon
an injury to the rights of the plaintiff, as contemplated under
Article 1146 of the New Civil Code, which must be brought
within four years [Montero v. Times Transportation].

C. UNFAIR LABOR PRACTICE (ULP)

The prescriptive period for criminal complaints
involving ULPs is one (1) year from the time the acts
complained of were committed; otherwise, they shall be forever
barred [Article 305].
However, before a criminal case for ULP can be
filed, it is a pre-requisite that a labor case for ULP involving
the same set of facts should first be initiated with the competent
labor court. It is only upon a finding of guilt in the labor case
and after the decision herein has become final and executory
that the one-year prescriptive period to prosecute the criminal
aspect of ULP starts to run.

D. OFFENSES UNDER THE LABOR CODE

The prescriptive period of all criminal offenses
penalized under the Labor Code and its IRR is three (3) years
from the time of commission thereof [Article 305].

E. ILLEGAL RECRUTIMENT CASES

The prescriptive period of simple illegal recruitment
cases is five (5) years [RA 8042].
The prescriptive period of illegal recruitment cases
involving economic sabotage is twenty (20) years [Ibid].

F. ACTIONS INVOLVING UNION FUNDS

Actions involving union funds must be brought
within 3 years from the date of submission of audited financial
statements or from the date they should have been submitted as
required by law, whichever comes first.

-----------------------------END----------------------------

REFERENCES:

1. The Labor Code with Comments and Cases Volume 1 by

C.A. Azucena, Jr. (2010)
2. Bar Reviewer on Labor Law by J.G. Chan (2019)
3. Lectures, Notes and Syllabus of Fr. Agustin Nazareno
(2020)
4. Lectures and Syllabus of Atty. Ralph Mendoza (2020)
5. Syllabus of Atty. Jazzie Sarona-Lozare (2020)
6. Lectures and Syllabus of Atty. Jessielle Ann Fabian
7. Lectures and Syllabus of Atty. Maria Christina Sagmit
(2022)

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