.

Lesson 3: Employment; Employer-Employee Relationship

Employment

Employment is a relationship between two parties, usually based

on contract where work is paid for, where one party, which may be
a corporation, for profit, not-for-profit organization, co-operative or other entity
is the employer and the other is the employee. Employees work in return
for payment, which may be in the form of an hourly wage, by piecework or an
annual salary, depending on the type of work an employee does or which sector
they are working in. Employees in some fields or sectors may
receive gratuities, bonus payment or stock options. In some types of
employment, employees may receive benefits in addition to payment. Benefits
can include health insurance, housing, disability insurance or use of a gym.
Employment is typically governed by employment laws organisation or legal
contracts.

Employer

An employer is one for whom employees work in consideration of wages or

salaries. An employer may either be natural or juridical.

Employee
An employee is one who works for an employer, a person working for salary or
wages, any person in the service of another under a contract for hire, express or
implied, oral or written. An employee is always a natural person.

Relationship between the Employer and an Employee

1. Contractual in Character

The employer-employee relationship is contractual in character. It arises from

the agreement of the parties. But such relationship is so impressed with public
interest that labor contracts must yield to the common good; they are subject to
special laws on labor unions, collective bargaining, strikes and lock-outs, closed
shop, wages, working conditions, hours of labor and similar subjects (Art. 1700,
Civil Code). The parties, furthermore, are enjoined not to act oppressively
against each other, or impair the interest or convenience of the public (Art.
1701, Civil Code).

2. In Personam

The employer-employee relationship is in personam. It involves the rendition of

personal service by the employee, and partakes of master and servant
relationship.

Elements of Employer-Employee Relationship

The elements that are generally considered are the following:

1. the selection and engagement of the employee;

2. the payment of wages;

3. the power of dismissal; and

4. the employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished.

The most important index of the employer-employee relationship is so called the

“control test”, and that is, whether the employer controls or has reserved the
right to control the employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be accomplished
(Investment Planning Corporation of the Philippines vs. Social Security System,
GR No. L-19124, November 18, 1967). Stated otherwise, an employer-employee
relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved but also the means
to be used in reaching such end (Dy Keh Beng vs. International Labor and
Maritime Union of the Philippines et. al., GR No. L-32205, May 25, 1979). It is
essentially the relationship of master and servant.

Significance in Determining the Employer-Employee Relationship

This is to determine what laws will govern the rights and liabilities of the parties,
and what tribunal or court will have jurisdiction over their disputes. Where there
exists an employer-employee relationship, labor laws will govern the rights and
liabilities of the parties, and labor tribunals will have jurisdiction over their
disputes.

On the other hand, if the relationship be one of principal and independent

contractor, the ordinary rules on obligations and contract will apply and the
regular courts will have jurisdiction over the disputes.

Lesson 4: Social Justice; Compassionate Justice

The term “labor law” covers the following:

1. Statutes passed by the state to promote the welfare of workers and

employees and regulate their relations with their employers.

2. Judicial decisions applying and interpreting the aforesaid statutes.

3. Rules and regulations issued by administrative agencies, within their legal
competence, to implement labor statutes.

Classification of Labor Statutes

1. Labor Standard Laws - those that provide for the pay and other legal
benefits to which the worker, while at work, is entitled to receive from his
employer

Example:

A law providing for the minimum rates of pay to which workers are entitled for a
day’s work

2. Welfare Legislation - those that require payment of benefits by

government agencies to the worker or his family when and while he cannot
work, by reason of sickness, disability, old age, death and similar hazards

Example:

The Social Security Law (RA 1161, as amended) which provides for payment of
sickness, maternity, disability, old age and death benefits

3. Labor Relations Laws - those intended to stabilize the relations of

employees and their employers, adjust differences between them thru collective
bargaining, and settle labor disputes through conciliation, mediation, and
arbitration

Labor Provision of the 1987 Constitution

Section 3 of Article XIII (Social Justice and Human Rights) provides:

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations and peaceful concerted activities, including the
right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and
benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.

The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and
growth.

Social Justice

Under the 1987 Constitution, Social Justice envisions equitable diffusion of

wealth and political power for the common good, regulation of the acquisition,
ownership, use and disposition of property and its increments; and creation of
economic opportunities based on freedom of initiative and self-reliance (Section
1 & 2, Article XIII).

Social Justice is a means to insure equality between labor and capital. Labor
occupies a position which is weaker than capital. Through social justice, the
State is able to make labor as strong as capital, thereby providing equal
protection. Social justice is a means to equal protection.

Definition

Social Justice is neither communism, nor despotism, nor atomism, nor

anarchy, but the humanization of laws and the equalization of the social
economic forces by the State so that justice in its rational and objectively
secular conception may at least be approximated. Social Justice means the
promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the component elements
of society, through maintenance of proper economic and social equilibrium in
the interrelations of the members of the community; constitutionally, through
the adoption of the measures legally justifiable; or extra-constitutionally,
through the exercise of powers underlying the existence of all governments on
the time-honored principle of salus populi est suprema lex (Calalang vs.
Williams, 70 Phil. 728).

Guarantee of Social Justice

Social Justice does not champion division of property or equality of economic

status; what it and the Constitution do guarantee are equality of opportunity,
equality of political rights, equality before the law, equality between values
given and received, equitable sharing of the social and material goods on the
basis of efforts exerted in the production. It is a command to devise measures,
but it cannot be used to trample upon the rights of others (Guido vs. Rural
Progress Administration, GR No. L-2089, October 31, 1949).

True Concept of Social Justice

In our scheme of government, social justice as a fundamental principle

enshrined in the 1935 Constitution, reiterated and revitalized in the 1973
Constitution, is formulated and implemented by the legislative and executive
departments, respectively. It is the specific duty of the judiciary in turn to
examine and determine - in appropriate cases coming before the courts - the
intendment and scope - or the constitutionality, where raised - of tenancy, labor
and other social legislation and/or measures. This responsibility the judiciary
has discharged, ever mindful and always aware in proper cases that in the
words of the famous grass-roots slogan of the late President Magsaysay “…
those who have less in life should have more in law.” A cursory study of the
long line of decisions on social justice will readily reveal, however, that the
concept has been fleshed out - the principle, conceptualized - as Justice Laurel
enjoined in the celebrated case of Calalang vs. Williams - no thru mistaken
sympathy for or misplaced antipathy against any group - whether labor or
capital, landlord or tenant - but even-handedly and fairly, thru the observance of
the principle of “equal justice under the law”, for all and each and every
element of the body politic (Cabalan vs. Court of Appeals, GR Nos. L-44875-76;
L-45160; L-46211-12, January 22, 1980).

Should the policy of social justice countenance wrongdoing by the

underprivileged?
The policy of social justice is not intended to countenance wrongdoing simply
because it is committed by the underprivileged. At best it may mitigate the
penalty but certainly will not condone the offense. Compassion for the poor is
an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to
be the refuge of scoundrels any more than can equity be an impediment to the
punishment of the guilty. Those who invoke social justice may do so only if their
hands are clean and their motives blameless and not simply because they
happen to be poor. This great policy of our Constitution is not meant for the
protection of those who have proved they are not worthy of it, like the workers
who have tainted the cause of labor with the blemishes of their own character
(PLDT Co. Vs. NLRC et al., GR No. L-80609, August 23, 1988).

Relevance of Compassionate Justice in Labor Cases

Relying on the constitutional mandate on the protection to labor, courts and

labor tribunals dispensed what is known as “compassionate justice”,
disregarding rigid rules and giving due weight to all the equities of the case. For
labor law determinations are only secumdum rationem but secundum caritatem
(Almira et al. vs. BF Goodrich Philippines, Inc. Et al., GR No. L-34974, July 25,
1974).

Compassionate Justice has been applied to bar the dismissal of workers guilty
of certain offenses but who have rendered long year of service and without
previous derogatory records (Philippine Airlines, Inc. vs. Philippine Airlines
Employee Association et al., GR No. L-24626, June 28, 1974; Gelmart Industries
Phils., Inc. vs. NLRC et al., GR No. 85668, August 10, 1989).

Illustrations:

The dismissal of the branch accountant of a bank, for violation of the bank’s
housing plan for employees has been ruled to be unduly harsh in view of the
accountant’s eight (8) years of service with no previous derogatory record and
considering that he repaid the loan amount in full (yap vs. NLRC et al., GR No.
123492, August, 1997).
The dismissal of an employee for theft of lighter fluid valued at P8.00 has been
held to be severe, in view of his length of service (8 years) and lack of previous
derogatory record, and considering that the company did not lose anything as
the bottle of lighter fluid was retrieved on time, that there was no showing that
the employee’s retention in the service would work undue prejudice to the
viability of the employer’s operations or is patently inimical to its interest, and
that he had been preventively suspended and had undergone mental torture
(Caltex refine Employees’ Association vs. NLRC et al., GR No. 102993, July 14,
1995).

After seventeen (17) years of untarnished service, an employee in the

production department of a pharmaceutical firm was dismissed for allegedly
being caught in possession of a plastic bag which belonged to the company.
Under the company rules, unauthorized possession of company property was
punishable by outright dismissal. But even assuming that the offense was
committed, the penalty of dismissal is unduly harsh and grossly disproportionate
to the act done (Dela Cruz vs. NLRC et al., GR No. 119536, February 17, 1997).

The dismissal of an employee of a food company for theft of fifteen (15) pieces
of hamburger patties, one (1) pair of boots, and one (1) empty aluminum
container has been held to be harsh, in view of his two (2) years of service
without previous derogatory record (Associated labor Unions et al. vs. NLRC et
al., GR No. 120450, February 10, 1999).

Although an employee has been validly dismissed, the employer may still be
required to pay the former severance compensation as a measure of
compassionate justice as long as the dismissal is not for serious misconduct or
for reasons reflecting on the employee’s moral character (Philippine Long
Distance Telephone Co. vs. NLRC et al., GR No. 80609, August 23, 1988).
It has been held that although the dismissal of a bus conductor for gross
negligence was justified, he should be given financial assistance taking into
account his twenty (20) years of service and there being no showing of
dishonesty on his part (Philippine Rabbit Bus Lines, Inc. vs. NLRC et al., GR No.
98137, September 15, 1997).

5. Lesson 5: Types of Employment and Related Topics

Art. 139 – Minimum Employable Age

“(a) No child below fifteen (15) years of age shall be employed, except when he
works directly under the sole responsibility of his parents or guardian, and his
employment does not in any way interfere with his schooling.” (See also Sec. 3
of RA 9231.)

Minimum Employable Age in Hazardous and Deleterious Jobs

“The foregoing provisions shall in no case allow the employment of a person

below eighteen (18) years of age in an undertaking which is hazardous or
deleterious in nature as determined by the Secretary of Labor.”

Employment of Minors

GR: Children below fifteen years of age shall not be employed.

XPNS:

a. When a child works directly under the sole responsibility of his / her parents
or legal guardian and where only members of his / her family are employed; and

b. Where the child’s employment or participation in public entertainment

or information through cinema, theatre, radio, television or other forms of media
is essential (RA No. 9231, Sec. 2).
Art. 140 – On Account of Age

“No employer shall discriminate against any person in respect to terms and
conditions of employment on account of his age.”

Types of Employment

MANAGERIAL SUPERVISORY
EMPLOYEES EMPLOYEES
“(m) one who is vested Those who, in the
with powers or interest of the employer,
prerogatives to lay down effectively recommend
and execute such managerial
management actions if the exercise of
policies and/or to hire, such authority is not
transfer, suspend, lay- merely routinary or
off, recall, discharge, clerical in
assign or discipline nature but requires the
employees use of independent
judgment.

All employees not falling

within any of the above
definitions are
considered rank-and-file
employees for purposes
of this Book.”

NOTE: Managerial employees are not entitled to overtime and holiday

pay.
Regular Employment

Test of Regularity:

a. Regular employee by nature of work –

those performing a particular activity which is necessary or desirable in the

usual trade or business of the employer, regardless of their length of
service (Art. 295)

b. Regular employee by years of service –

those who have been performing the job, regardless of the nature thereof, for at
least one (1) year of service (Art. 295);

NOTE: The term at least 1-year of service shall mean service for not less than
12 months, whether continuous or broken, reckoned from the date the
employee started working (IRR of the Labor Code, Book III, Rule V, Sec. 3).

c. Regular employee by probationary employment –

those allowed to work after the probationary period (Art. 296).

Art. 281. Probationary Employment

Probationary employment shall not exceed six (6) months from the date the
employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged
on a probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with the reasonable standards
made known by the employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary period shall be
considered a regular employee.
NOTE: As provided for in the law, probationary employment shall not exceed
six (6) months. But probationary period could be extended with the consent of
the probationary employee to give him an opportunity to improve his
performance.

If a CBA (Collective Bargaining Agreement) provides that only regular employees

be entitled to the benefits stipulated thereunder, it should be construed strictly.
Hence, it extends only to probationary employees from the time they acquire
regular status.

Termination of probationary employees must be for a just cause after

observance of due process as they also enjoy security of tenure during the
effectivity of their probationary status. See also Biboso vs,. Victoria Milling, GR
No. L-44360, March 31, 1977.

Probationary employees who are unjustly dismissed from work during the
probationary period shall be entitled to reinstatement and payment of full
backwages, inclusive of allowances, and to other benefits or their monetary
equivalent computed from the time their compensation was withheld from them
up to the time of their actual reinstatement, conformably with Article 279 of the
Labor Code (Cebu Marine Beach resort, et al vs. NLRC, GR No. 143252, Oct 23,
2003).

Art. 78 – Handicapped Workers; Definition

Handicapped workers are those whose earning capacity is impaired (1) by

age or (2) physical or (3) mental deficiency.

NOTE: Low IQ or low efficiency does not make the worker “handicapped” in the
contemplation of law.

Art. 80 (B) – Wage Rate of Handicapped Workers

(b) The rate to be paid the handicapped workers shall be not less than
seventy-five percent (75%) of the applicable legal minimum wage.

Qualified Disabled Person

A qualified disabled person is an employee who can perform, with or

without reasonable accommodations, the essential functions of her
employment. A qualified disabled employee shall be subject to the same
terms and conditions and the same compensation, privileges, benefits,
fringe benefits, incentives or allowances as a qualified able-bodied
person (RA No. 7277, Sec. 5)

Art. 279. Security of Tenure

Reinstated Employees’ Right to Benefits and Increases during the

Period of Lay-off

XXX “An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up
to the time of his actual reinstatement.”

In the case of Sigma Personnel Services vs. NLRC, 2224 SCRA 181, “Backwages
are granted for earnings a worker lost due to his illegal dismissal and an
employer is obliged to pay an illegally dismissed the whole amount of salaries
plus all other benefits and bonuses and general increases to which the latter
should have been normally had he not been dismissed.”

Economic Components of Backwages

Art. 279 provides that “In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or
monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.” (See also Art. 245 of LC
and Art. XIII, Sec. 3 of the Constitution)

NOTE: Backwages also include 13th month pay as well as benefits under the
CBA. Managerial employees are not entitled to such benefits as they are
ineligible to join a labor organization.

Benefits to be considered in computing the backwages:

1. Fringe benefits or their monetary equivalent (Acesite Corporation vs. NLRC,

GR No. 152308, Jan. 26, 2005).

2. Increases in compensation and other benefits, including 13 th month pay (Food

Traders House, Inc. vs. NLRC, GR No. 120677, Dec. 21, 1998).

3. Transportation and emergency allowances (Santos vs. NLRC, GR No. 76721,

Sept. 21, 1987).

4. Holiday pay, vacation and sick leaves and service incentive leaves (St. Louise
College of Tuguegarao vs. NLRC, GR No. 74214, Aug. 31, 1989; on Service
Incentive Leave, see Fernandez vs. NLRC, GR No. 105892, Jn. 28, 1998).

5. Just share in the service charges (Maranaw Hotels & Resort Corporation vs.
NLRC, GR No. 123880, Feb. 23, 1999).

6. Gasoline, car and representation allowances (Consolidated Rural Bank

[Cagayan Valley], Inc. vs. NLRC, GR No. 123810, Jan. 20, 1999, 301 SCRA 223).

NOTE: In the case of Buhain vs. The Hon. CA, GR No. 143709, July 2, 2002, the
period of preventive suspension is included in the computation of the
backwages (reckoning date from the first day the employee was preventively
suspended).

Questions to Ponder:

Among the prerogatives of the employer is the prerogative to select

his employees. Is this prerogative absolute? Explain.
No. The exercise of this prerogative is subject to constitutional and statutory
limitations.

Among the constitutional restrictions are on the promotion of equality of

employment for all (Sec. 3, Article XIII) and on the fundamental equality before
men and women (sec. 14, Article II).

Among the statutory restrictions are Article 3 of the Labor Code on equal work
opportunities, regardless of race, sex, or creed; Article 135 of the Labor Code
prohibiting discrimination against a woman employee solely on account of her
sex; Article 21 of the Civil Code on abuse of right; Republic Act No. 7277
prohibiting discrimination against qualified disabled workers; Republic Act No.
8504 penalizing discrimination in any form against HIV-positive individuals.

Does promotion of employee automatically entitle him to an increase in

his salary? Explain.

No. While promotion is usually accompanied by an increase in salary, such

increase is dependent upon the employer in the absence of a contractual
stipulation or established company policy. Promotion may denote an
advancement merely in rank without an equivalent increase in salary. The
matter of salary increases is a management prerogative (National Federation of
Labor Unions et. al. Vs. NLRC et. al., GR No. 90739, October 3, 1991).

May an employer transfer an employee on the ground that it feels

“uncomfortable” with the latter?

No. This is a grave abuse of the employer’s prerogative to transfer and reassign
employees. This can be a mere subterfuge on the part of an employer to rid
itself of employees (Pocketbell Philippines, Inc. Vs. NLRC et al., GR No. 106843,
January 20, 1995).

Discuss briefly the employer’s prerogative to transfer and reassign

employees.

Well-settled is the rule that it is the prerogative of the employer to transfer and
reassign employees for valid reasons and according to the requirements of its
business, provided there is no demotion in rank or diminution of his salary,
benefits and other privileges. And in the case of a constructive dismissal, the
employer has the burden of proving that the transfer and demotion of an
employee are for valid and legitimate grounds and not unreasonable,
inconvenient or prejudicial to the employee. It has been ruled that the transfer
of a bank’s foreign remittance clerk for payment order/collection to foreign
remittance clerk for inquiry was a lawful exercise of management prerogative
since these positions were of co-equal footing and co-important and the transfer
did not entail any reduction of wages and other benefits (Castillo vs. NLRC et al.,
GR No. 104319, June 17, 1999).

The transfer of the lady security guard from her post in Makati to Tagaytay, Rizal
has been upheld as a valid exercise of management prerogative where it
appears that the same was prompted by the request of the agency’s client for a
more disciplined service of the guard’s on detail, and the renewal of the security
contract hinged on the action taken by the agency on the client’s request; this,
notwithstanding that the lady guard lived in Sta. Mesa and now she had to travel
to a farther place of work (OSS Security and Allied Services, Inc. Et al vs. NLRC
et al GR No. 122752, February 9, 2000).