2016 LABOR PRE WEEK - DEAN ADA ABAD

2016 LABOR LAW BAR REVIEW HAND-OUTS FOR 2016 JOINT LYCEUM-ADAMSON BAR OPERATIONS

THE AB AD NOTES (COMPLETED 03 OCT 2016)

HAND-OUTS FOR

2016 2016 LABOR LA BOR BAR B AR EXAMS PRE-WEEK USE From the notes of Dean Ada D. Abad and additional 2015 2015 Cases/Bar Cases/Bar Answers of Dean Anton io H. Abad, Jr. For 2016 Bar Examinations: 1 st Sunday PM, 06 November 2016

Including 2015 Bar questions, pertinent SC 2012-May 2015 and Bar Chairman SC Justice Presbiterio Velasco cases in Labor Law. 1

A. GENERAL PRINCIPLS AND CONCEPTS 1. CONSTITUTIONAL AND STATUTORY BASIS OF LABOR LAW AND SOCIAL LEGISLATION 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 

Promotion of human human dignity (Art 2, sec 2) Freedom from poverty (Art 2, sec sec 9) Principle of distributive justice (Art. (Art. 2, sec 9) Freedom of Initiative and Self-reliance (Art. 12, sec. 2) Right to due process Right to equal protection protection of the the law Right to self-organization Right against involuntary servitude Right against imprisonment for debt Contrary to the concept of “laissez faire”, which is an economic theory that government

should NOT interfere in business affairs, the peculiarity in Philippine labor law is that the State is mandated to balance the conflicting yet intimately intertwined interests 2 between management to its profit, as against the employees’ right to self -organization and security of tenure, through the exercise of its police power, as well as the application of the social justice and protection to labor clauses in the Constitution. 

Hence, under the PRINCIPLE OF INCORPORATION , the minimum labor standards and benefits in Labor Code are considered inherent in every employer-employee relationship even absent a written employment contract .

2. DISTINCTION DISTINCTION BETWEEN LABOR LA BOR LAW LA W AND SOCIAL LEGISLATION LABOR LAB OR LAW

SOCIAL SOCIAL LEGISLATION

Affects directly actual employment, employment, e.g., wages Meets the daily needs of workers Paid by the employer

Governs effects of employment, e.g., compensation for death Involves long range benefits Paid by government agencies

1

With special thanks to our Ablelaw OJTs from Lyceum Paolo Ricasio, Ana Minelle Laxamana, Rizel Adlawan, Hanna Almario and Gil Camaymayan, FEU’s Atty. Janeth Habana and Ablelaw Sabanal- Adlawan, researcher Rigel Villacarlos for the digests of the J. Velasco cases and 2015 latest cases. 2 Cebu Institute of Technology vs. Ople, 156 SCRA 620 (1987). Ponente: J. Irene Cortes. 1



3. MEMORIZE MEMORIZE ARTICLE 3, 3, LAB OR CODE: DECLARATION DECLARA TION OF POLICY (Mnemonic: APE-SC-SJ) ART. 3. Declaration of basic policy. - The State shall Aff or d Pro tecti tec ti on to labor, promote full Employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall assure the rights of workers to Self-organization , Collective bargaining , Security of tenure , and Just and humane conditions of work.

4. Princ iple of Social Social and and Distr Distr ibuti ve Justi ce: Balancing of interests in case workers’ and management’s rights collide. -- 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 it 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 [a] 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. (Tirazona vs. Phil. Eds Techno-Service (PET INC.), G.R. No. 169712, 20 January 2009). 5. HOW TO BALANCE CONFLICTING INTERESTS IN PROBLEM SOLVING:

REMEMBER THE BASIC PRINCIPLES OF LABOR LAW

MANAGEMENT MANAGEMENT

VS.

L ABOR

Capital



Work

Profit



Equitable share in the profits



Worker’s rights







Management prerogatives - hiring, employee classification, - control of working methods - right to make rules and regulations

- minimum standards - constitutional rights security of tenure, unionize and to collective bargaining, strike

STATE Police power/social justice Interpretation in favor of labor

2



3. MEMORIZE MEMORIZE ARTICLE 3, 3, LAB OR CODE: DECLARATION DECLARA TION OF POLICY (Mnemonic: APE-SC-SJ) ART. 3. Declaration of basic policy. - The State shall Aff or d Pro tecti tec ti on to labor, promote full Employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall assure the rights of workers to Self-organization , Collective bargaining , Security of tenure , and Just and humane conditions of work.

4. Princ iple of Social Social and and Distr Distr ibuti ve Justi ce: Balancing of interests in case workers’ and management’s rights collide. -- 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 it 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 [a] 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. (Tirazona vs. Phil. Eds Techno-Service (PET INC.), G.R. No. 169712, 20 January 2009). 5. HOW TO BALANCE CONFLICTING INTERESTS IN PROBLEM SOLVING:

REMEMBER THE BASIC PRINCIPLES OF LABOR LAW

MANAGEMENT MANAGEMENT

VS.

L ABOR

Capital



Work

Profit



Equitable share in the profits



Worker’s rights







Management prerogatives - hiring, employee classification, - control of working methods - right to make rules and regulations

- minimum standards - constitutional rights security of tenure, unionize and to collective bargaining, strike

STATE Police power/social justice Interpretation in favor of labor

2



6. GENERAL RULES TO REMEMBER FOR

THE BALANCING OF INTEREST IN ANSWERING PROBLEM SOLVING QUESTIONS 6.1. 6.1. Existence of Employer-Emplo Employer-Emplo yee relationship 6.1.1 Four tests to determine the existence e xistence of an employer-employee relationship (MEMORY AID: SOUTH WEST DISASTER CONTROL)

a. Selection and hiring; b. payment of Wages; c. power of Dismissal; d. Control test. 



Of these four tests however, the most important test is the element of control, which has been defined as [MEMORIZE THIS] “one where the employer has reserved the right to control not only the work to be achieved, but the manner and method by which such work is to be achieved.”. achieved .”. (LVN Pictures vs. LVN Musician’s Guild, 1 SCRA 132).

Import ant VELAS VELASCO CO cases on the power of con tro l Navarette vs. Manila Intl Frieght Forwarders, G.R. No. 200580, 11 Feb present, or where not exercised exercised by 2015. -- Where all the four tests are not present,

a single entity, the determinative factor for establishing empoyer-employee relationship is the control test. Raul Locsin et. al. vs PLDT,

G.R. No. 185251 185251,, 02 Octob Oct ober er 2009 2009 . --

Locsin and Tomaquin were security guards of SSCP, a security agency, who were were assigned to PLDT as principal. When the security service agreement between PLDT and SSCP ended, Locsin and Tomaquin were allowed to continue working for one more year; their wages were still however paid by SSCP. Thereafter, they were eventually terminated, for which reason, Locsin and Tomaquin filed this illegal termination case plus monetary claims. Question: Did the complainants become employees of PLDT when their services were extended for a period of one year AFTER the termination of the SSCP Contract? Note: SSCP contract not renewed but SSCP still continued paying the complainants. SC Decision: Locsin and Tomaquin are employees of PLDT. While respondent and SSCP no longer had any legal relationship with the termination of the Agreement, petitioners remained at their post securing the premises of respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia of control that respondent exercised over petitioners . With the conclusion that respondent directed petitioners to remain at their posts and continue with their duties, it is clear that respondent exercised the power of control over them; thus, the existence of an employer-employee relationship. 3





2015 BAR EXAMINATION QUESTION (V) Ador is a student working on his master's degree in horticulture. To make ends meet, he takes on jobs to come up with flower arrangements for friends. His neighbor, Nico, is about to get married to Lucia and needs a floral arranger. Ador offers his services and Nico agrees. They shake hands on it, agreeing that Nico will pay Ador P20,000.00 for his services but that Ador will take care of everything. As Ador sets about to decorate the venue, Nico changes all of Ador's plans and ends up designing the arrangements himself with Ador simply executing Nico's instructions. (a) Is there an employer-employee relationship between Nico and Ador? (4%) (b) Will Nico need to register Ador with the Social Security System (SSS)? (2%) ANSWER: A. Yes. By changing Ador’s plans and designing the arrangements himself

with Ador merely executing his instructions, Nico exercised control over Ador in the manner by which he (Ador) will work. B. No. Casual employees are not subject to the compulsory coverage of the SSS by express provision of law. (Section 8 (-5) (3), RA1161, as amended.) The relationship between Nico and Ador is one of casual employment. This is so because employment is not permanent nor periodically regular, but occasional or by chance, and not in the usual course of the employer’s business. (Joco v. Aguilar, 55 OG 1946, cited in Philippine Law Dictionary by Moreno, 2nd Ed.) ALTERNATIVE ANSWER:

A. YES. Ador is a worker paid on task basis; hence, there is employeremployee relationship between him and Nico. When the latter assumed the control of both result and manner of performance from Ador, all vestiges of independent contractorship disappeared. What replaced it was employer- employee relationship. B. Ador is a purely casual employee; hence, Nico need not report him for SSS coverage.



DISTINGUISH BETWEEN “RULES THAT FIX METHODOLOGY” VS. “RULES THAT ARE MERE GUIDELINES.”

4



EXAMPLE: INSURANCE AGENTS; TWO CASES:

Insurance agents are not employees of the insurance companies, in the absence of evidence that rules or regulations were promulgated or issued which effectively controlled or restricted the agent’s choice of methods — or the methods themselves — of selling insurance. (Insular Life Assurance Co., Ltd., vs. NLRC and Melecio Basiao, G.R. 84484, 15 November 1989, 179 SCRA 459).

But this is not to say that ALL insurance agents are NOT employees of t he insurance company.

As the Supreme Court clarified in the case of

Tongko vs. Manufacturers' Life Insurance Company (Phils.) Inc . (G.R. No. 167622, 29 June 2010, En Banc; VELASCO PONENTE), the Insular

Life ruling above was tempered with the qualification that had there been evidence that the company promulgated rules or regulations that effectively controlled or restricted an insurance agent's choice of methods or the methods themselves in selling insurance, an employer-employee relationship would have existed. In other words, the Court in Insular in no way definitively held that insurance agents are not employees of insurance companies, but rather made the same on a case-to-case basis. 6.1.2 Existence of an emplo yer-employee relationsh ip is a conditi on sin e qua non for th e applic ation of labor laws. 



There must be a REASONABLE CAUSA L CONNECTION between the parties and the claim. Under this rule, if there is a reasonable causal connection between the claim asserted and the employer-employee relations, then the case is within the jurisdiction of our labor courts. In the absence of such nexus, it is the regular courts that have jurisdiction. GOOD EXAMPLE: Indophil Textile Mills Vs. Adviento, G.R. No. 171212, 04 August 2014

Facts: Adviento was hired as Civil Engineer (for maintenance of facilities) of Indophil, whose primary business is the manufacture of textiles. Adviento developed a chronic allergy on account of the textile dust. He was eventually dismissed from employment, for which reason he filed two cases against the company, viz: (a) NLRC for illegal termination; and (b) Regional Trial Court for damages arising from gross negligence and failure of company to provide a safe, workable and healthy environment. Company sought to dismiss the RTC case on account of litis pendencia and lack of jurisdiction, considering that the claim arises from an employer-employee relationship. Question: Whether or not RTC has jurisdiction? Answer: YES. No reasonable causal connection between claim and employeremployee relationship. Although Adviento contracted the occupational disease during his employment with the company, there is no reasonable causal connection between the claim asserted and the employer-employee relations. As such, the case does not fall 5



within the jurisdiction of the labor courts; but rather with the regular courts that have jurisdiction. While the maintenance of a safe and healthy workplace may be a subject of a labor case, note that the cause of action is one for torts/quasidelict and that relief prayed for is the payment for damages arising from alleged gross negligence on the part of the company to provide a safe, healthy and workable environment for its employees. 

Important VELASCO case on jurisdiction to determine er-ee relationship ; People’s Broadcasting Service [Bombo Radio Phils. Inc.] vs. The Secretary of Labor, etc., G.R. No. 179652, 06 March 2012 En Banc . -- In the exercise of the DOLE’s visitorial and enforcement power, the Labor Secretary or the latter’s authorized representative shall have the power to

determine the existence of an employer-employee relationship to the exclusion of the NLRC. The determination of the existence of an employer-employee relationship by the DOLE must be respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would be rendered nugatory if the alleged employer could, by the simple expedient of disputing the employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the declaration that at least a prima facie showing of the absence of an employer-employee relationship be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the existence of an employer-employee relationship.

6.2. Burden of proof is always upon employer to show validity of its exercise of management prerogatives, especially as regards termination of employment. NOTE: HOWEVER COMPLAINANT EMPLOYEE INITIALL Y HAS THE BURDEN OF PROVING THAT HE IS AN EMPLOYEE OF THE COMPANY. (Danilo “Bitoy” Javier vs. CA, G.R. No. 192558, 15 February

2012) In sum, the rule of thumb remains: the onus probandi falls on petitioner (EMPLOYEE) to establish or substantiate such claim by the requisite quantum of evidence. “Whoever claims en titlement to the benefits provided by law should establish his or her right thereto x x x.” Sadly, Javier failed to adduce substantial evidence as basis for the grant of relief. In this case, the LA and the CA both concluded that Javier failed to establish his employment with Fly Ace. By way of evidence on this point, all that Javier presented were his self-serving statements purportedly showing his activities as an employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to support his claim. Hence, the Court sees no reason to depart from the findings of the CA. (Danilo “Bitoy” Javier vs. CA, ibid.)

6.3. There must exist SUBSTANTIAL EVIDENCE to prove valid exercise of management prerogatives, viz., just or authorized cause of termination. Proof beyond reasonable doubt n ot required in admini strative cases . QUESTION: Are sworn statements of relatives and friends of respondent

attesting to the existence of an extra-marital affair considered sufficient evidence to prove immorality, as a just cause for termination? ANSWER: YES. The employer’s evidence consists of sworn statements

of either relatives or friends of Thelma and respondent. They either had direct personal knowledge of the illicit relationship or revealed 6



circumstances indicating the existence of such relationship. (Alilem Credit Cooperative vs. Bandiola, G.R. No. 173489, 25 February 2013) Note: Failure of employer to submit documents which are presumed to

be in its possession, inspite of an Order to do so, implies that the presentation of said documents is prejudicial to its case. (De Guzman vs. NLRC, 540 SCRA 210 [Dec. 2007]).

6.4 In cases of ambiguity, interpretation shall be made in favor of labor. -- “Where the contract of employment, being a contract of adhes ion, is ambiguous, any ambiguity therein should be construed strictly against the party who prepared it.” (Price vs. Innodata Phils., 567 SCRA 122 [2008]) General Rule:

Art. 223, Labor Code is given liberal interpretation in line with the desired objective of resolving controversies on the merits, to achieve substantial justice. (Aujero vs. Philcomsat, G.R. No. 193484, 18 January 2012.) Exception: When the Labor Arbiter’s Decision became final, the petitioner attained a

vested right to said judgment. They had the right to rely fully on the immutability of said Decision. In Sofio vs. Valenzuela (666 SCRA 55 [2012]), it was amply stressed that: “The Court will not override the finality and immutability of a judgment based on the negligence of a pa rty’s counsel in timely taking all the proper recourses from the judgment to justify an override, the counsel’s negligence must only be gross but also be shown to have deprived the party the right to due process.” ( Building Care Corporation, etc. vs. Myrna Macaraeg, G.R. No. 198357, 10 December 2012. ) CASES ON INTERPRETATION OF LABOR CONTRACTS: IMPORTANT J. VELASCO CASE: Land Bank of the Phils vs. Naval, G.R. No. 195687, 07 April 2015. -- Where the law is clear, then there is no need for

interpretation. It is only in cases of doubt or ambiguity that there is a favorable interpretation slanted towards labor. The law remains valid, notwithstanding the nonpublication of its Implementing Rules. Facts: In this case, LBP officers and staff were previously receiving Cost of Living

Allowances and Bank Equity pay monthly, the amount of which depended on their respective ranking since 1979. Ten years later in 1989, Rep. Act 6758 (Salary Standardization Law) was promulgated, which integrated all allowances for govt employees into their basic salary. The Department of Budget thereafter issued its DBM-CCC No. 10 (Implementing Rules on the Salary Standardization Act), which was later on ruled to be invalid by the Supreme Court in the caes of De Jesus vs. COA, because of lack of publication. DBM later on published the same DBM CCC No. 10 a year after. Immediately after the De Jesus case ruling came out, the LBP officers and staff demanded for the payment of their allowances which had been integrated into the basic salary. It is their position that by the nullification of DBM-CCC No. 10 which expressly named the COLA and BEP as integrated into the basic salary, LBP’s integration of the COLA and the BEP is likewise invalid. In other words, respondents equate the nullification of the implementing rules with the nullification of the very law which orders the integration of these allowances into the basic salary.

7



Question: Are the LBP officers and staff entitled to the payment of their allowances?

Will the integration into the salary constitute a diminution of their benefits? NO, the LBP officers and staff are NOT entitled to the payment of the allowances, as the Salary Standardization Law which ordered the integration thereof continues to be valid.

Answ er:

We hold that Rep. Act No. 6758 (Salary Standardization Law) can be implemented notwithstanding our ruling in De Jesus vs. Commission on Audit. While it is true that in said case, this Court declared the nullity of DBM-CCC No. 10, yet there is nothing in our decision thereon suggesting or intimating the suspension of the effectivity of Rep. Act No. 6758 pending the publication in the Official Gazette of DBM-CCC No. 10. The nullity of DBM-CCC No. 10 Implementing Rules, will not affect the validity of R.A. No. 6758 . It is a cardinal rule in statutory construction that statutory provisions control the rules and regulations which may be issued pursuant thereto. Such rules and regulations must be consistent with and must not defeat the purpose of the statute. The validity of R.A. No. 6758 should not be made to depend on the validity of its implementing rules. What is more significant is that respondents and intervenors have not questioned the fact of integration. Similarly, the appellate court found there was in

fact an integration of the subject allowances to the basic pay of the employees of LBP, albeit supposedly insufficient. The observation of the appellate court regarding the resulting amount notwithstanding, the actual integration of these allowances to the basic salary of the respondents and the intervenors defeats the allegation of a total deprivation and/or withhold ing of t hese allowances . As su ch , to or der the payment of the COLA and the BEP on top of what has already been paid by LBP—the basic pay with the COLA and the BEP incorporated —will constitute a prohibited double compensation . 2014 CASE: National Union Of Workers In Hotel Restaurant And Allied Industries (NUWHRAIN) - Philippine Plaza Chapter Vs. Philippines Plaza Inc., G.R. No. 177524, 23 July 2014. – The Union anchors its claim for unpaid services

charges on Sections 68 and 69 of the CBA, in relation with Article 96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation, laundry and rooms are subject to service charge at the rate of ten percent (10%). Excepted from the coverage of the 10% service charge are the so- called “negotiated contracts” and “special rates.” Issue: Can the Union validly cl aim proport ionate share of service charges from “non-sales” (example: free benefits from hotel and credit cards; and similar arrangements)? Answ er: NO. Hotel does not have any obligation to the Union, inasmuch as their claims arises from “non -sale” transactions like “Westin Gold Cards Revenue” and “Maxi Media Barter” to be negotiated contracts or contracts under special rates, and the entries “Business Promotions” and “Gift Certificates” as contracts that did not

involve a sale of food, beverage, etc. A collective bargaining agreement, as used in Article 252 (now Article 262) , the Labor Code, is a contract executed at the request of either the employer or the employees’ exclusive bargaining representative with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting any grievances or questions under such agreement. Jurisprudence settles that a CBA is the law between the contracting parties who are obliged under the law to comply with its provisions. Thus, if the terms of the CBA are plain, clear and leave no doubt on the intention of th e contracting parties, the literal meaning of i ts sti pulations, as they appear on th e face of the contract, shall pr evail. Only when the words used 8



are ambiguous and doubtful or leading to several interpretations of the parties’

agreement that a resort to interpretation and construction is called for. CASE3. BPI vs. BPI Emplo yees Unio n – Metro Manila, G.R. No. 175678 [22 August 2012]: Issue: In a CBA which provides for multipurpose loans which may be availed of by the employees, is the imposition of a “NO NEGATIVE DATA BANK (No NDB)” policy

after CBA is signed and executed, violative of the CBA obligation? Position of the Union and Voluntary Arbitrator: The imposition of “No NDB” is a

new condition for the implementation and availment of loans and in contravention of CBA provision. Position of BPI: “No NDB” policy is not violative of the CBA, but is a valid and

reasonable requirement consistent with sound banking practice. It is meant to inculcate among both officers and employees the need for responsibility and discipline, especially in an industry where trust is paramount. SUPREME COURT DECISION: YES, it is violative of CBA. For the Union.

A CBA refers to the negotiated contract between the Union and the Employer regarding terms and conditions of work. As in all other contracts,, there must be clear indications that the parties reached a meeting of the minds, as the CBA is considered the law between the parties. The CBA in this case contains no provision on the “No Negative Data Bank” policy as a prerequisite for the entitlement of the benefits it set forth for the employees. IN fact, a close reading of the CBA would show that the terms and conditions contained therein relative to the availment of the loans are plain and clear, thus all they need is thus all they need is the proper implementation in order to reach their objective. The CA was therefore correct when it ruled that, although the Bank is authorized to issue rules and regulations pertinent to the availment and administration of loans under the CBA, the additional rules and regulations must NOT impose new conditions which are not contemplated in the CBA and should be within the realm of reasonableness. The “No NDB policy” is a new condition which is NEVER contemplated in the CBA and at some points, unreasonable to the employees because it provides that before an employee or his/her spouse can avail of the loan benefits under the CBA, the said employee or his/her spouse must not be listed in the Negative Data Bank, or if previously listed therein, must obtain clearance of at least one (1) year or six months, s the case may be, prior to a loan application. If the Bank intended to include the No NDB policy in the CBA, it should have presented such pr oposal to the union duri ng negotiations. To incl ude such policy after the effectivity of the CBA is deceptive and goes beyond the original agreement between the parties. CASE4 ON FUNERAL AND BEREAVEMENT AID FOR DEATH OF LEGAL DEPENDENTS: (Philippine Journalist Inc. vs.Journal Employees Union, G.R. No. 192601, 26 June 2013) ISSUE: In the availment of funeral and bereavement aid under the CBA, may the Company interpret “ legal dependent” in accordance with the SSS definition of “beneficiary” and hence, refuse payment of the benef it?

Married employee sought payment of funeral/bereavement aid under CBA when one of his parents died. Company denied the claim, based on its interpretation that a married employee’s “legal dependent” is limited only to “legitimate spouse and minor childr en”; while the legal dependents of a single employee are the parents and 9



siblings 18 yrs old and below, in accordance with SSS definitions . CBA provision states: SECTION 4. Funeral/ Bereavement Aid. The COMPANY agrees to grant a funeral/bereavement aid in the following instances: a. Death of a regular employee in line of duty – P50,000 b. Death of a regular employee not in line of duty – P40,000 c. Death of legal dependent of a regular employee – P15,000. SUPREME COURT DECISION: NO, the Company cannot do so.

Citing statutory definitions, the Supreme Court concluded that the civil status of the employee as either married or single is not the controlling consideration in order that a person may qualify as the employee’s legal dependent. What is rather decidedly controlling is the fact that the spouse, child, or parent is actually dependent for support upon the employee. The Court defined a dependent as "one who derives his or her main support from another. Meaning, relying on, or subject to, someone else for support; not able to exist or sustain oneself, or to perform anything without the will, power, or aid of someone else." The coverage of the term legal dependent as used in a stipulation in a collective bargaining agreement (CBA) granting funeral or bereavement benefit to a regular employee for the death of a legal dependent, if the CBA is silent about it, is to be construed as similar to the meaning that contemporaneous social legislations have set. This is because the terms of such social legislations are deemed incor porated in or adopted by the CBA . Considering that existing laws always form part of any contract, and are deemed incorporated in each and every contract, the definition of legal dependents under the aforecited social legislations applies herein in the absence of a contrary or different definition mutually intended and adopted by the parties in the CBA. Accordingly, the concurrence of a legitimate spouse does not disqualify a child or a parent of the employee from being a legal dependent, provided substantial evidence is adduced to prove the actual dependency of the child or parent on the support of the employee.” CASE5 EN CONTRA: Mitsubishi Motors Phils. Salaried Employees Union (MMPSEU) vs. Mitsubishi Motors Phils Corp., G.R. No. 175773, 17 June 2013. ISSUE: In a CBA which provides for reimbursement of hospitalization benefits to

dependents, is the employer company under obligation to reimburse employee if the dependent’s hospital expenses had already been covered by another Health Maintenance Organization (HMO) provider? Position of Voluntary Arbitrator: CBA has no express provision barring claims for

hospitalization expenses already paid by other insurers. Hence, the covered employees can recover from both. Position of Court of Appeals and Company: The CA did not agree with Voluntary

Arbitrator, saying that the conditions set forth in the CBA implied an intention of the parties to limit MMPC’s liability only to the extent of the expenses actually incurred by their dependents which excludes the amounts shouldered by other health insurance companies. SUPREME COURT DECISION: NO, Mitsubishi Company is under NO OBLIGATION to reimburse employee for hospital expenses of dependents whi ch had already been covered by anot her HMO. 10



We agree with the CA. The condition that payment should be direct to the hospital and doctor implies that MMPC is only liable to pay medical expenses actually shouldered by the employees’ dependents. It follows that MMPC’s liability is limited, that is, it does not include the amounts paid by other health insurance providers. This condition is obviously intended to thwart not only fraudulent claims but also double claims for the same loss of the dependents of covered employees. It is well to note at this point that the CBA constitutes a contract between the parties and as such, it should be strictly construed for the purpose of limiting the amount of the employer’s liability. The terms of the subject provision are clear and provide no room for any other interpretation. As there is no ambiguity, the terms must be taken in their plain, ordinary and popular sense. Consequently, MMPSEU cannot rely on the rule that a contract of insurance is to be liberally construed in favor of the insured. Neither can it rely on the theory that any doubt must be resolved in favor of labor.

6.5 In the imposition of penalty, whether suspension or termination, the same must be commensurate to the offense committed. (Sagales v. Rustan’s Commercial Corporation (G.R. No. 166554, 27 No vember 2008) 2012 CASE: Negros Slashers vs. Alvin Teng, G.R. No. 187122, 22 Feb 2012

Facts: Basketball player Alvin Teng had a below-par performance during

Game Number 4 of Championship Round for which he was pulled out from the game, and then he untied his shoelaces and donned his practice jersey. In Game Number 5, he did not play. Case for Negros Slashers: (a) basketball organization is a "team-based"

enterprise and that a harmonious working relationship among team players is essential to the success of the organization; (b) Teng "abandoned" them during a crucial Game Number 5 in the MBA championship round. Supreme Court: We find that the penalty of dismissal handed out against

Teng was indeed too harsh. As an employee of the Negros Slashers, Teng was expected to report for work regularly. Missing a team game is indeed a punishable offense. Untying of shoelaces when the game is not yet finished is also irresponsible and unprofessional. However, we agree with the Labor Arbiter th at such iso lated fool ishness of an employee does not justify the extreme penalty of dismissal from service. Petitioners could have opted to impose a fine or suspension on Teng for his unacceptable cond uct .

6.6 But management prerogatives are likewise to be equally protected when circ umstances show the validity of the exercis e. MEMORIZE ELEMENTS: Valid exercise of m anagement prerog atives The free will of the management to conduct its own affairs to achieve its purpose cannot be denied, PROVIDED THAT THE SAME IS EXERCISED: • •

•

IN GOOD FAITH (BONA-FIDE IN CHARACTER ), FOR THE ADVANCEMENT OF THE EMPLOYER’S INTEREST ;

AND NOT TO CIRCUMVENT THE RIGHTS OF THE EMPLOYEES . (Capitol Medical Center vs. Meriz; San Miguel Brewery and Union Carbide cases). 11



6.7 Paradigm shift tow ards mutual cooperation - It is high time that employer and employee cease to view each other as adversaries and instead recognize that there is a symbiotic relationship, wherein they must rely on each other to ensure the success of the business. ( Toyota Motor Phils. Workers vs. NLRC, 537 SCRA 171)

B. EMPLOYER-EMPLOYEE RELATIONSHIP Vis-à-vis Issues of Juris dicti on 1. ADA’S COMMENT AS REGARDS JURISDICTION IN CASE OF ESSAY QUESTION: In determining the nature of the case, check the principal relief sought by the complainant. That is the main factor that determines jurisdiction.

2. EMPLOYEE BENEFIT: IS IT A LABOR DISPUTE OR A CIVIL DISPUTE? SMART Communications vs. Astorga, G.R. 148132, 28 Jan 2008. -- An employer’s

demand for the payment of the market value of the car, or in the alternative, the surrender of a car, is not a labor dispute but a civil one. Hence, this demand properly falls within the jurisdiction of the civil courts. No reasonable causal connection between the cl aim to the issu e of an employer-employee relationship. Contra: Car Loan Agreement with Forfeiture clause in case of resignation. – Grandteq Industrial Steel Products vs. Edna Margallo, G.R. No. 181393, 28 July 2009. – In a termination case, the claim by employee for reimbursement of car loan

payments under car loan agreement with employer was dismissed by Labor Arbiter, finding that the contract stipulation should be strictly followed as the law between the parties. On appeal, NLRC/CA and Supreme Court all reversed th e Labor Arbiter’s decision, and declared the forfeiture provision of the car loan agreement as null and void. “ Alth ough not stri ctly a lab or co ntrac t, a car lo an agreement herein in volv es a benefit extended by the employers, Grandteq and Gonzeles, to their employee Margallo . It should benefit, and not unduly unburden Margallo. The court cannot, in

any way, uphold a car loan agreement that threatens the employee with the forfeiture of all the car loan payments he/she had previously made, plus loss of the possession of the car, should the employee wish to resign; otherwise, said agreement can then be used by employer as an instrument to either hold said employee hostage to the job or punish him/her for resigning.” 3. CORPORATE OFFICER OR ORDINARY EMPLOYEE? Sub-is sue: IS THE TERMINATION OF A HIGHER MANAGEMENT OFFICER “ASST. VICE-PRESIDENT” “EXECUTIVE VICE-PRESIDENT”, OR SIMPLY “VICEPRESIDENT” A LABOR CASE OR A CORPORATE CASE?

If the complainant is named as a corporate officer per Articles and/or by-laws, then the removal of the person is an intra-corporate controversy and within the jurisdiction of the ordinary courts. If not, then the person is an ordinary employee who may only be terminated for just or authorized cause, and after due process compliance.

12



Notes : 1. Who are corporate officers? Corporation Code, Section 25. Corporate officers, quorum. - Immediately after

their election, the directors of a corporation must formally organize by the election of a president , who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided 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 president and secretary or as president and treasurer at the same time. 2. How are corporate offices created? Corporate offices are created in two (2) distinct ways: (a) by virtue of the Charter or the By-laws of the Corporation; or (b) by resolution of the Board of Directors duly empowered under the by-laws to create additional offices as may be necessary under the circumstances. (WPP Communications vs. Galera, G.R. No. 169207 and Galera vs. WPP Communications, G.R. No. 169239, 25 March 2010)

3. General Rule: Under Corporation Code, the following are corporate officers: President, Treasurer and Corporate Secretary Exceptions to the above general r ule are as fol lows:  

When the articles or by-laws provide for officers other than those positions specifically mentioned in the Corporation, Articles and By-laws. When the Board of Directors, duly empowered and authorized to create such additional corporate offices in the articles or by-laws, create said additional corporate offices by board resolution. Note further that the by-laws m ust it self have been amended to i nclude such corporate offic e.

Thus: Marc II Mark etin g, Inc. v. Joson, G.R.. G.R. No. 171993, 12 December 2011 [662 SCRA 35). – The Supreme Court held that an enabling clause in a corporation/s by-

laws empowering its Board of Directors to create additional officers, even with the subsequently passage of a board resolution of that effect, cannot make such position a corporate office. The Board of Directors has no power to create other corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate office. To allow the creation of a corporate officer position by a simple inclusion in the corporate by-laws of an enabling clause empowering the board of directors to do so can result in the circumvention of that constitutionally well-protected right of every employee to security of tenure. Matling Industrial and Commercial Corp., et al. vs. Ricardo R. Coros, G.R. No. 157802, 13 October 2010 . -- It is not t he nature of the services performed, but on the manner of creation of the office that distinguishes corporate officers who may be ousted from office at will and ordinary corpor ate employees who may only be terminated for just cause. Under Section 25 of the Corporation

Code, a position must be expressly mentioned in the By-Laws in order to be considered as a corporate office. Thus, the creation of an office pursuant to a ByLaw provision giving a president the power to create an office does not qualify as a By-Law position. In the present case, the position of Vice President for Finance and Administration which respondent held was merely cre ated by Matling’s President pursuant to the company’s By -Laws. It is not a corporate office or By-Law position, and therefore, respondent was not a corporate officer who could be ousted from office at will.

13



2014-2015 CASES: Raul C. Cosare vs. Bro adco m Asi a, Inc. and Dante Arevalo, G.R. No. 201298, 05 February 2014. -- Two circumstances which must concur for an a person to be

considered a corporate officer , as against an ordinary employee or officer, namely; (1) the creation of the position is under t he corporation’s charter or by -laws; and (2) the election of the officer is by the directors of stockholder. It is only when the officer claiming to have been illegally dismissed is classified as such corporate officer that the issue is deemed an intra-corporate dispute which falls within the jurisdiction of the trial courts . The mere fact that Cosare was a stockholder of Broadcom at the time of the case’s filing did not necessarily make the action an intra – corporate controversy. “[N]ot all conflicts between the stockholders and the corporation are classified as intra – corporate. There are other facts to consider in determining whether the dispute involves corporate matters as to consider them as intra –corporate controversies.”42 Time and again, the Court has ruled that in determining the existence of an intra –corporate dispute, the status or relationship of the parties and the nature of the question that is the subject of the controversy must be taken into account. 43 Considering that the pending dispute particularly relates to Cosare’s rights and obligations as a regular officer of Broadcom, instead of as a stockholder of the corporation, the controversy cannot be deemed intra –corporate. This is consistent with the “controversy test” explained by the Court i n Reyes v. Hon. RTC, Br. 142 ,44 to wit:ch anRoblesvirtualLawlibrary Under the nature of the controversy test, the incidents of that relationship must also be considered for the purpose of ascertaining whether the controversy itself is intra –corporate. The controversy must not only be rooted in the existence of an intra –corporate relationship, but must as well pertain to the enforcement of the parties’ correlative rights and obligations under the Corporation Code and the internal and intra –corporate regulatory rules of the corporation. If the relationship and its incidents are merely incidental to the controversy or if there will still be conflict even if the relationship does not exist, then no intra –corporate controversy exists.45 (Citation omitted)chanroblesvirtualawlibrary

Essencia Q. Manarpiis vs. Texan Philippines, Inc., et al., G.R. No. 197011, 28 January 2015. -- On solidary li ability o f cor porate officers. In labor cases, the

SC has held corporate directors and officers solidarily liable with the corporation for the termination of employment of employees done with malice or bad faith. The Coffee Bean and Tea Leaf Philippines, Inc. vs. Rolly P. Arenas, G.R. No. 208908, 11 March 2015. -- An officer of the company may not be held liable for the corporation’s labor obligations unless he acted with evident malice and/or bad faith

in dismissing an employee

4. RECAPITUATION ON CASES REGARDING JURISDICTION :

In determining the nature of the case, check the principal relief sought by the complainant. That is the main factor that determin es juris dicti on. In the Smart case, the case filed was one of replevin, and hence, jurisdiction lies with the regular courts. In the Margallo case, the principal case was one of illegal 14



termination with claim for reimbursement as well as damages, and hence, properly falls within the jurisdiction of the Labor Arbiter . Same also with the Indophil case, which was a case for damages arising from alleged negligence on the part of the company to provide a safe, healthy and workable environment for its employees . As such, jurisdiction properly lies with the regular courts. As regards termination of an employee who is a corporate officer, or vice-versa: It is only when the dismissed employee is actually classified as a corporate officer, that the issue may be considered an intra-corporate dispute and hence, cognizable by the regular courts and NOT the labor courts. CASE

RELIEF

JURISDICTION

SMART VS. ASTORGA

REPLEVIN; RETURN OF THE CAR OF THE MANAGER

REGIONAL TRIAL COURT

GRANDTEQ VS. MARGALLO

ILLEGAL TERMINATION WITH PRAYER FOR REIMBURSEMENT OF DOWNPAYMENT FOR CAR

LABOR ARB ITER

INDOTEXTILE VS. ADVIENTO

DAMAGES FOR COMPANY’S FAILURE TO PROVIDE SAFE AND HEALTHY WORK ING ENVIRONMENT

REGIONAL TRIAL COURT

MATLING VS. COROS

TERMINATION OF VP FOR FINANCE AND ADMINISTRATION, WHICH POSITION IS NOT IN ARTICL ES OR BY-L AWS

LABOR ARB ITER

COSARE VS BROADCOM

TERMINATION OF ASST VICEPRESIDENT FOR SAL ES, WHO WAS ALSO A STOCKHOLDER. AVP-SAL ES NOT A CORP OFFICER

LABOR ARB ITER

C. MANAGEMENT PREROGATIVES: 1.

GENERAL PRINCIPLE: Management is free to regulate, according to its discretion and

judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. Julie’s Bakeshop vs. Arnaiz, 666 SCRA 1010 [2012]; see also: Reyes-Rayal vs. Phi li ppin e Luen Thai Holdi ngs, 676 SCRA 183 [2012].

2.

MEMORIZE ELEMENTS: Valid exercise of management prerog atives The free will of the management to conduct its own affairs to achieve its purpose cannot be denied, PROVIDED THAT THE SAME IS EXERCISED: • • •

IN GOOD FAITH (BONA-FIDE IN CHARACTER ), FOR THE ADVANCEMENT OF THE EMPLOYER’S INTEREST ; AND NOT TO CIRCUMVENT THE RIGHTS OF THE EMPLOYEES . (Capitol Medical Center vs. Meriz; San Miguel Brewery and Union Carbide cases). 15



3. 2013-2015 CASES : 3.1

RULES ON TRANSFER: It is the prerogativ e of management to transfer an employee where he can be most useful to the company; Insubordination if not followed.

Juris prudential guidelines in th e transfer of employees: [ou tside coverage but principles good to remember for the Bar Exam] ICT Marketing Services, Inc., etc. vs. Mari phi l L . Sales, G.R. No. 202090, 09 September 2015 . i. Transfer is a movement from one position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another of equivalent rank or salary; ii. The employer has the inherent right to transfer or reassign an employee for legitimate business purposes; iii. A transfer becomes unlawful where it is motivated by discrimination or bad faith or is affected as a form of punishment or is a demotion without sufficient cause; iv. The employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee . Question: May an employee refuse to comply with transfer order of Management by raising this as a grievance issue? Manila Pavillion vs. Henry Delada, GR 189947, 25 Janu ary 2012, CJ Sereno

Supreme Court: NO!!! The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an employer. Employees may object to, negotiate and seek redress against employers for rules or orders that they regard as unjust or illegal. However, until and unless these rules or orders are declared illegal or improper by competent authority, the employees ignore or disobey them at their peril. In fact, Delada cannot hide under the legal cloak of he grievance machinery of the CBA or the voluntary arbitration proceedings to disobey a valid order of transfer from the management of the hotel. While it is true that Delada’s transfer to Seasons is the subject of the grievance machinery in accordance with the provisi ons of their CBA, Delada is expected to comp ly fi rst with the said lawful directive while awaiting the results of the decision in the grievance pr oceedings.

2014 BAR QUESTION: Lionel, an American citizen whose parents migrated to the U.S. from the Philippines, was hired by JP Morgan in New York as a call center specialist. Hearing about the phenomenal growth of the call center industry in his parents’ native land, Lionel sought and was granted a transfer as a call center manager for JP Morgan’s operations in Taguig City. Lionel’s employment contract did not specify a period for his stay in the Philippines. After three years of working in the Philippines, Lionel was advised that he was being recalled to New York and being promoted to the position of director of international call center operations. However, because of certain "family reasons," Lionel advised the company of his preference to stay in the Philippines. He was dismissed by the company. Lionel now seeks your legal advice on: (6%) (A) whether he has a cause of action (B) whether he can file a case in the Philippines (C) what are his chances of winning 16



ANSWER:

For illegal dismissal, Lionel has no cause of action because J.P. Morgan has the right to transfer an employee to another office in the exercise of management prerogative of sound business judgment and in accordance with pre-determined and established company policy and practice, particularly so when no illicit, improper or underhanded purpose can be ascribed to the company. (Philippine Industrial Security Agency Corp. vs. Dapiton, 320 SCRA 124 [1999].) (A)

(B) Yes, he can file a case in the Philippines because JP Morgan is doing business in

the Philippines. (C) His chances of winning is NIL because the objection to the transfer was grounded solely on personal “family reasons” that will be caused to him by virtue of the transfer.

(OSS Security vs. NLRC, 325 SCRA 157 [2000]; Phil. Industrial Security Agency Corp. vs. Dapiton, ibid.) 3.2 G.J.T. Rebuil ders Machin e Shop et al. vs. Ric ardo Ambos et. al., G.R. No. 174184, 28 January 2015. – GJT Rebuilders is a single proprietorship engaged in steel works

and metal fabrications which employed Ambos as machinist. A fire partially destroyed the building where GJT’s leased machine shop premises was located, for which reason the owner of the building notified them to vacate the premises “to avoid any unforeseen accidents that may arise due to the damage.” Eventually, G.J.T. Rebuilders left its rented space and closed the machine shop on December 15, 1997. It then filed an Affidavit of Closure before the Department of Labor and Employment on Febru s before the Mandaluyong City Treasurer’ s Office on February 25, 1998.ary 16, 1998 and a sworn application to retire its business operation. The employees were not paid separation pay, on account of alleged closure due to serious business losses and financial reverses. Issue: WON complainants are entitled to separation pay despite closure on alleged

serious business losses. Answ er : Yes.

Although the employer may close its business as an exercise of management prerogative that courts cannot interfere with, it failed to sufficiently prove its alleged serious business losses. Thus, it must pay respondents their separation pay equivalent to one-month pay or at least one-half-month pay for every year of service, whichever is higher.

3.3 Mirant Phil ippi nes vs. Jo selit o A. Caro, G.R. No. 181490, 23 April 2014. – Mirant

Phils conducted a drug test where Caro was randomly chosen among its employees who would be tested for illegal drug use. Caro and the selected employees duly received an Intracompany Correspondence that the random drug testing was to be conducted after lunch on the same day. However at 11:30 a.m. of the same day, Caro received an emergency phone call from his wife’s colleague who informed him that a bombing incident occurred near his wife’s work station in Tel Aviv, Israel where his wife was then working as a caregiver. Caro thereafter informed the company that he will go to the Israeli Embassy first to attend to his wife’s concerns, and that he will submit to a drug test the following day at his own expense. On account of his alleged refusal to submit to a random drug test, the company terminated his services. During admin investigation however, the Company secured evidence that: (a) there was no such bombing; and (b) Caro did not go to the Israeli Embassy on the day of the drug test. Issue: Whether or not the failure to subject himself to a drug test may be considered as “willful refusal ” to comply with the reasonable orders of the company? 17



Decision: NO. Caro was illegally dismissed.

While the adoption and enforcement by petitioner corporation of its Anti-Drugs Policy is recognized as a valid exercise of its management prerogative as an employer, such exercise is not absolute and unbridled. In the exercise of its management prerogative, an employer must therefore ensure that the policies, rules and regulations on workrelated activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.47 The Anti-Drugs Policy of Mirant fell short of these requirements. (a) The policy was not clear on what constitutes "unjustified refusal" when the subject drug policy prescribed that an employee’s "unjustified refusal" to submit to a random drug test shall be punishable by the penalty of termination for the first offense. To be sure, the term "unjustified refusal" could not possibly cover all forms of "refusal" as the employee’s resistance, to be punishable by termination, must be "unjustified." To the mind of the Court, it is on this area where petitioner corporation had fallen short of making it clear to its employees – as well as to management – as to what types of acts would fall under the purview of "unjustified refusal." (b) The penalty of termination is too harsh under the circumstances, considering that in the ten-year employment of Caro, this is his first offense. 3.4 Royal Plant Workers Unio n vs. Coca-Cola Bottl ers Phils., G.R. 198783, 15 April 2013. QUESTION: Is the decision of Coca-Cola Bottlers to take out the chairs of employees

in an assembly line in exchange for additional periods of rest/breaks, a valid exercise of management prerogatives, or is it a diminution of benefit which cannot be withdrawn without employees’ consent? UNION’S POSITION : The use of chairs by the operators had been a company practice

for 34 years, and cannot be withdrawn without consent of affected employees. Having chairs are favourable to the assembly line operators who get tired and exhausted; the frequency of the break period is not advantageous to the operators because it cannot compensate for the time they are made to stand throughout their working time. MANAGEMENT POSITION : The directive to take out the chairs is in line with the “I Operate, I Maintain, I Clean” program of petitioner for bottling operators, wherein every

bottling operator is given the responsibility to keep the machinery and equipment assigned to him clean and safe, and to constantly move about in the performance of their duties and responsibilities. The removal of the chairs was implemented so that the bottling operators will avoid sleeping, and thus, prevent injuries to their persons. ANSWER: For Managem ent . Valid exercise of management prerogatives. The

decision to remove the chairs was done with good intentions as Company wanted to avoid instances of operators sleeping on the job while in the performance of their duties and responsibilities and because of the fact that the chairs were not necessary considering that the operators constantly move about while working. In short, the removal of the chairs was designed to increase work efficiency. Hence, company ’s exercise of its management prerogative was made in good faith without doing any harm to the workers’ rights. The rights of the Union under any labor law were not violated. There is no law that requires employers to provide chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article 132 thereof, only requires employers to provide seats for women. No similar requirement is mandated for men or male workers. It must be stressed that all concerned bottling operators in this case are men. 18



The Union should also not complain too much about standing and moving about for one and one-half (1 ½) hours because studies show that sitting in workplaces for a long time is hazardous to one’s health. The report of VicHealth, Australia,12 disclosed that “prolonged workplace sitting is an emerging public health and occupational health issue with serious implications for the health of our working population. Importantly, prolonged sitting is a risk factor for poor health and early death, even among those who meet, or exceed, national activi ty guidelines.” 3.5 NOT ASKED IN 2013, 2014 AND 2015 BAR, BUT STILL TIMELY NOW BECAUSE OF PREVIOUS ELECTIONS): Management may validly impose a prohibition against elective offi ce as an exercise of its prerogatives. Ymbo ng v s. AB S-CBN, G.R. 184885, 07 March 2012. — Company policy to the effect

that any employee who wishes to run for public office, must resign. On the other hand, if anyone wishes to campaign for a political person or party, he/she must file for a leave of absence. Manager misinterpreted the company policy and made his own, viz., “any person who wishes to run for public office, must file for a leave of absence.” Ymbong filed candidacy to public office and filed leave of absence, in consonance with Manager’s erroneous interpretat ion. ABS-CBN refused to allow him to return to work (Ymbong lost elections), as it considered him resigned. ISSUES: WON ABS-CBN bound by erroneous interpretation of manager? WON ABS-CBN may validly impose this policy, in contravention of Ymbong’s polit ical right to

seek public office? DECISION : For ABS-CBN. ABS-CBN not bound by the erroneous interpretation of

the manager, considering that the latter went beyond his authority in modifying a directive from the head office. In any event, ABS-CBN validly justified the implementation of Policy No. HR-ER-016. It is well within its rights to ensure that it maintains its objectivity and credibility and freeing itself from any appearance of impartiality so that the confidence of the viewing and listening public in it will not be in any way eroded. ABS-CBN strongly believes that it is to the best interest of the company to continuously remain apolitical. While it encourages and supports its employees to have greater political awareness and for them to exercise their right to suffrage, the company, however, prefers to remain politically independent and unattached to any political individual or entity. (POSSIBLE BAR QUESTION: What if employer is NOT a company involved in public information? Depends if company may validly justify the same in relation to work.)

3.6 CONTRACTING OUT OF SERVICES. (See also discussion on Valid job-contracting vs. Labor -onl y con tract ing on SECTION F, PAGE __ HEREUNDER.)

GENERAL RULE: Management may contact out services in the exercise of its

anagement prerogatives. Doctrinal case: Asi an Alco hol Corporat io n vs. NLRC, 305 SCRA 416, at 435-436 [1999], cf. Serrano vs. NLRC, G.R. No. 117040 [27 Jan 2000]). – The Supreme Court

has held in a number of cases that an employer's good faith in implementing a redundancy program is NOT necessarily destroyed by the availment of the services of an independent contractor, to replace the services of the terminated employees. The reduction of employees in a company made necessary by the introduction of the services of an independent contractor is justified when the latter is undertaken in order to effectuate more economic and efficient methods of production . Burden of proof is thus on the complaining employees to show proof that the management acted in a malicious or arbitrary manner in engaging the services of an independent contractor to do a specific activity. Absent such proof, the Supreme 19



Court has no basis to interfere with the bona fide decision of management to effect a more economic and efficient methods of production. MERALCO vs. Quisumbing, 22 Feb 2000 -- The added requirement of consultation

imposed by the Secretary of Labor in cases of contracting out for six months or more was rejected by the Supreme Court. “Suffice it to say that the employer is allowed to contract out services for six months or more. However, a line must be drawn drawn between management prerogatives regarding business operations per se, and those which affect the rights of the employees. In treating the latter, the employer should should see to it that its employees are at least properly informed of its decision or modes of action in order to attain harmonious labor-mgmt relationship. Management cannot be denied the faculty of promoting efficiency and attai ning economy by a study of what units are essential for its operations. It has the ultimate determination whether services should be performed by its personnel or contracted out to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what management decides. Contracting out of services is an exercise of business judgment or management prerogative; Absent proof that management acted maliciously or arbitrarily, the Court will not interfere in the exercise of such judgment by the employer.”

2014 BAR QUESTION: Luisa Court is a popular chain of motels. It employs over 30 chambermaids who, among others, help clean and maintain the rooms. These chambermaids are part of the union rank-and-file employees which has an existing collective bargaining agreement (CBA) with the company. While the CBA was in force, Luisa Court decided to abolish the position of chambermaids and outsource the cleaning of the rooms to Malinis Janitorial Services, a bona fide independent contractor which has invested in substantial equipment and sufficient manpower. The chambermaids filed a case of illegal dismissal against Luisa Court. In response, the company argued that the decision to outsource resulted from the new management’s directive to streamlin e operations and save on costs. If you were the Labor Arbiter assigned to the case, how would you decide? (4%) ANSWER:

The abolition of position of Chambermaids and outsourcing the same to a bona fide contractor in order to streamline operations and save on costs is a valid exercise of management prerogative. As such, it does not preclude Luisa Court from availing itself of the services of agency-hired employees to replace the Chambermaids who were union members. Absent proof that Luisa Court acted in a malicious or arbitrary manner in engaging the services of Malinis Janitorial Services, the bona fide decision of the company to effect more economic and efficient operation of its business, should not be interfered with by the courts. (Asian Alcohol Corporation v. NLRC, 305 SCRA 416 [1999].)

E. KINDS OF EMPLOYMENT 1.

REGULAR EMPLOYEES – those who are hired for activities which are necessary necessary or desirable in the usual trade or business of the employer. 2014-2015 2014-2015 CASES: 1.1

Romeo Basau, et et al., vs. Coca-Cola Bottlers Phili ppin es, G.R. G.R. No. No. 174365-66, 04 February 2015. -- Route helpers are regular employees; their 20



nature of work are necessary and desirable in the usual trade or business of the employer; hence, entitled to security of tenure. 1.2 Hacienda Leddy, et al. vs. Paquito Villegas, G.R. No. 179654, 22 September 2014. – 2014. – A perusal of the records show that Villegas was employed in the hacienda while the same was still managed by Gamboa’s father until the latter’s death in 1993, which fact is undisputed as the same was even

admitted by the former in his earlier pleadings. While refuting that Villegas was a regular employee, Gamboa did not categorically deny that Villegas was indeed employed in the hacienda albeit merely as a casual employee doing odd jobs and paid on a piece- rate basis. basis. Villegas’ length of of service for for more than twenty (20) years is an indication of the regularity of his employment. Even assuming that he was doing odd jobs around the farm, such lon g period of doing odd jobs is indicative that the same is necessary and desirable to Gamboa’s trade or business. Owing to the length of service alone, Villegas became a regular employee, by operation of law, one year after he was employed. 1.3 ABS-CB N CASES: (a) ON-CAMERA TALENT IS AN INDEPENDENT INDEPENDENT CONTRACTOR: Jos e Sonza vs . ABS-CBN, G.R. 138051 138051,, 10 Jun e 2004. 2004. – Relationship of

a big name talent (Jay Sonza) and a television-radio broadcasting company is one of an independent contracting contracting arrangement. arrangement. ABS-CBN engaged SONZA’s services specificall y to co-host the "Mel & Jay" programs. ABSCBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS- CBN’s control. SONZA did not have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff meetings. ABS-CBN could not dictate the contents of SONZA’s script. Howeve r, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests. The clear implication is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests. We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s work. 33 ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective programming." ABS-CBN’s sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZA’s work. (b) “OFF“OFF-CAMERA TALENTS” ARE EMPLOYEES. Farley Fulache et al vs. ABS-CBN, G.R. No. 183810, 21 January 2010. . – Complainants were drivers, cameramen, editors, teleprompter and VTR

man who sought inclusion in the appropriate bargaining unit of the rankand-file employees and availment of CBA benefits. ABS-CBN denied employment relationship, on the ground that they were “off -camera talents” in the nature of independent contractors. Pending the regularization case filed before the NLRC, ABS-CBN dismissed the drivers for their refusal to sign up employment contracts with service contractor ABLE services. Supreme Court affirmed affirmed CA and Labor tribunals findings, re: existence existence of employer-employee relationship and hence, to be considered as regular employees who may be included in the CBA availments.

21



(c) Nelson Begino, et al., vs. ABS-CBN , etc., G.R. No. 199166, 20 April 2015. -- The Court finds that, notwithstanding the nomenclature of their

Talent Contracts and/or Project Assignment Forms and the terms and conditions embodied therein, petitioners are regular employees of ABSCBN. As cameraman/editors and reporters, petitioners were performing functions necessary and essential to ABS- CBN’s business of broadcasting television and radio content. It matters little that petitioners’ services were engaged for specified periods for TV Patrol Bicol and that they were paid according to the budget allocated therefor. Respondents’ repeated rehiring of petitioners for its long-running news program positively indicates that the latter were ABS- CBN’s regular employees.

2.

PROBATIONARY EMPLOYEES – those who are hired generally f or or regular positions but are placed on a probationary status for a period of 6 months (as a general rule). May become regular once he has has qualified as such in accordance accordance with reasonable standards standards made known to him at the time of of hiring. They are considered regular if they are allowed to work beyond the probationary period. 2.1 2012-2014 2012-2014 CASES ON PROBATIONARY EMPLOYEES: EMPLOYEES: Universidad de Sta. Isabel vs. Sambajon, G.R. Nos. 196280 & 196286, 02 Apri Ap ri l 2014 . – It is the Manual of Regulations for Private Schools, and not the

Labor Code, that determines whether or not a faculty member in an educational institution has attained regular or permanent status. Abbo Ab bott Labor Lab or atori ato ri es, Phili Phi li ppin pp in es, et al., vs . Pearl ie Ann Alcar Al caraz, az, G.R. No. 192571, 192571, 22 Apri l 2014. 2014. En Banc . - If a probationary employee was apprised of

the performance standards for his regularization, his failure to perform the duties and responsibilities which have been clearly made known to him constitutes a justifiable basis for a probationary employee’s non -regularization. The determination of “adequate performance” is not in all cases, measurable by quantitative specification. It also hinges on the qualitative assessment of the employee’s work; by its nature, this largely rests on the reasonable exercise of the employer’s management prerogative. In the ultimate analysis, the communication of performance standards should be perceived within the context of the nature of the probationary employee ’s duties and responsibilities. The performance standard contemplated by law law should not, in all cases, be contained in a specialized system of feedbacks or evaluation. In fact, even if a system of such kind is employed and the procedures for its implementation are NOT followed, once an employer determines that the probationary employee fails to meet the standards required for his regularization, the former is not precluded from dismissing the latter. The rule is that when a valid cause for termination exists, the procedural infirmity attending the termination only warrants the payment of nominal damages. (Agabon vs. NLRC & Jaka vs. Pacot.) Canadian Opportunities Unlimited, Inc. vs. Bart Q. Dalangin, Jr., G.R. No. 172223, 06 February 2012 , where Supreme Court found that probationary

employee was validly dismissed after one month of employment for reasons of obstinacy and utter disregard of company policies, propensity to take prolonged and extended lunch breaks, shows no interest in familiarizing oneself with the policies and objectives, lack of concern for the company’s interest in refusing to attend company seminars intended to familiarize company employees with Management objectives and enhancement of company interest and objectives, lack of enthusiasm toward work, and lack of interest in fostering relationship with his co-employees . 22



QUESTION: May a probationary lin eman validly claim that being a subordinate, he cannot be considered a conspirator in the commission of pilferage committed by his superior? Manila Electric Company vs. Jan Carlo Gala, G.R. No. 191288. 07 March 2012 . Facts: Complainant Gala insists that he cannot be sanctioned for the theft of

company property on May 25, 2006. He maintains that: • He had no direct participation in the incident • He was not aware that an illegal activity was going on as he was at some distance from the trucks when the alleged theft was being committed. • He did not call the attention of the foremen because he was a mere lineman and he was focused on what he was doing at the time. Gala misses the point. He forgets that as a probationary employee, his overall job performance and his behavior were being monitored and measured in accordance with the standards (i.e., the terms and conditions) laid down in his probationary employment agreement, viz. • non-violation of the Company Code on Employee Discipline, Safety Code, rules and regulations and existing policies. • to observe at all times the highest degree of transparency, selflessness and integrity in the performance of his duties and responsibilities, free from any form of conflict or contradicting with his own personal interest. Supreme Court:

2.2

TERMINATION OF EMPLOYEES GUIDING PRINCIPLES:

ON

PROBATIONARY

STATUS,

2.2.1 Burden of proof upon employer to show that the employee failed to qualify as a regular emplo yee in accordance with reasonable standards made known to him at the time of engagement. 2.2.2 While the probationary employee is required to be appraised of the standards against which his performance shall be assessed, there is however no need to inf orm the probationary employee that he has to follow company rules and regulations – such requirement strains credulity. (Philippine Daily Inquirer vs. Magtibay, 528 SCRA 355 [2007]). 2.2.3 Ruling on Probationary employment on fixed-term contract; expiration of contract NO LONGER valid ground. (Colegio del Santissimo Rosario vs. Rojo, G.R. No. 170388, 03 September 2013, reiterating Yolanda Mercado vs. AMA Computer College-Paranaque 618 SCRA 218 [2010].) Situation: High School teacher on probationary status with fixed term

contracts who was able to complete three consecutive years of service. Teacher no longer rehired on the ground that with the expiration of the contract to teach, the employment contract would no long er be renewed. Issue: May the probationary teacher be validl y dis missed fo r expiration of the contract to teach? Answ er: NO! Termination of a probationary employee must be for his/her

failure to comply with the reasonable standards for regular employment made known at the time of the engagement, and NOT simply because the probationary period has expired. SC rationale: The fixed-term character of employment essentially refers to

the period agreed upon between the employer and the employee; employment exists only for the duration of the term and ends on its own when the term expires. In a sense, employment on probationary status also 23



refers to a period because of the technical meaning "probation" carries in Philippine labor law – a maximum period of six months, or in the academe, a period of three years for those engaged in teaching jobs. Their similarity ends there, however, because of the overri ding meaning that being " on probation" connotes, i.e., a process of testing and observing the character or abilit ies of a person who is new to a role or jo b. However, for teachers on probationary employment, in which case a fixed term contract is not specifically used for the fixed term it offers, it is incumbent upon the school to have not only set reasonable standards to be followed by said teachers in determining qualification for regular employment, the same must have also been comm unicated to the teachers at the start of the probationary period, or at the very least, at the start of the period when they were to be applied. These

terms, in addition to those expressly provided by the Labor Code, would serve as the just cause for the termination of the probationary contract. The specific details of this finding of just cause must be communicated to the affected teachers as a matter of due process . 42 Corollarily, should the teachers not have been apprised of such reasonable standards at the time specified above, they shall be deemed regular employees. Yolanda Mercado, et al. vs. AMA Computer College Parañaque City, Inc. 618 SCRA 218 [2010].- The Supreme Court stated that nothing is

illegitimate in defining the school-teacher on fixed term basis. HOWEVER, the school should not forget that its system of fixed-term contract is a system that operates during the probationary period and for this reason i s subj ect to the terms of Article 281 of the Labor Code. Unless this reconciliation is made, the requirements of this Article on probationary status would be fully negated as the school may freely choose not to renew contracts simply because their terms have expired. Given the clear constitutional and statutory intents, the Supreme Court concluded that in a situation where the probationary status overlaps with a fixed-term contract not specifically used for the fixed term it offers , Arti cl e 281 should assume primacy and the fixed-period character of the contract must give way. In this instance therefore, the School illegally dismissed the teachers because it simply refused to renew the employment contract. Because the teachers were under a probationary period, it was incumbent upon the School to have evaluated said teachers, and to have informed them of their failure to qualify as regular employees in accordance with standards made known to them at the time of hiring. NOTE1:

To highlight what the Supreme Court meant by a fixed-term contract specifically used for the fixed term it offers , a replacement teacher, for example, may be contracted for a period of one year to temporarily take the place of a permanent teacher on a one-year study leave. The expiration of the replacement teacher’s contracted term, under the circumstances, leads to no probationary status implications as she was never employed on probationary basis; her employment is for a specific purpose with particular focus on the term and with every intent to end her teaching relationship with the school upon expiration of this term. (Mercado, et al. vs. AMA Computer College Parañaque City, Inc. 618 SCRA 218 [2010]. Emphasis supplied.) NOTE2:

3.

TERM EMPLOYEES – those who are hired for a specific period, the arrival of the date specified in the contract of which automatically terminates the employer24



employee relationship. (Brent School vs. NLRC, 181 SCRA 702 [1989], reiterated in AMA Computer – Paranaque vs. Austria, 538 SCRA 438 [November 2007]). 3.1 A contract of employment for a definite period terminates by its own terms at the end of such period 3.2 The decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and the termination of their employment r elation. 3.3 Criteria for fixed term employment contracts so that the same will not circumvent security of tenure:

A. The fixed period of employment was KNOWINGLY AND VOLUNTARILY AGREED UPON by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; AND B. It satisfactorily appears that the employer and employee DEALT WITH EACH OTHER ON MORE OR LESS EQUAL TERMS with no moral dominance whatever being exercised by the former on the latter.(PNOC vs. NLRC [G.R. No. 97747, 31 March 1993] and Brent School vs. NRLC, 181 SCRA 702] 3.4 QUESTION: Whether or not fi shi ng boat crew individually hired on a “por viaje” basis with contracts per trip are term employees or regular employees? Lynvi l Fishing Enterprises, Inc. vs. Andres G. Ariola, et al., G.R. No. 181974, 01 Febru ary 2012

REGULAR EMPLOYEES, where it was established that the term contracts were used to circumvent security of tenure.

Answ er:

Textually, the provision that: “NA ako ay sumasang -ayon na maglingkod at gumawa ng mga gawain sang- ayon sa patakarang “por viaje” na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila” is for a fixed period of employment. In the context, however, of the facts that: (1) the respondents were doing tasks necessarily to Lynvil’s fishing business with positions ranging from captain of the vessel to bodegero ; (2) after the end of a trip, they will again be hired for another trip with new contracts; and (3) this arrangement continued for more than ten years, the clear intention is to go around the security of tenure of the respon dents as regular employees . And respondents are so by the express provisions of the second paragraph of Article 280, thus: xxx Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.” Do not agree with the reasoning made by the Supreme Court, viz., application of the collatilla in Par 2 of Article 280, Labor Code. Following the doctrinal case of Mercado vs. NLRC , said collatilla should only apply to casual employees, and not to the classification of project or seasonal employees in first paragraph. If at all, argument that the term contract was not entered into by the parties on equal footing, would be more appropriate. N.B.

ADA’S CRITIQUE:

25



2014 BAR QUESTION: Lucy was one of approximately 500 call center agents at Hambergis, Inc. She was hired as a contractual employee four years ago. Her contracts would be for a duration of five (5) months at a time, usually after a one month interval. Her re-hiring was contingent on her performance for the immediately preceding contract. Six (6) months after the expiration of her last contract, Lucy went to Hambergis personnel department to inquire why she was not yet being recalled to work. She was told that her performance during her last contract was "below average." Lucy seeks your legal advice about her chances of getting her job back. What will your advice be? (4%)

ANSWER: Lucy is to be considered a regular employee, and is entitled to security of tenure. The facts of the case will readily show that Lucy had served Hambergis for an aggregate period of more than one year. The repetitive hiring of Lucy for the same position as a call center agent, is indicative of the necessity or desirability of the activities for which she was hired. Even assuming that she was hired as a casual, having rendered at least one (1) year of service, whether such service be continuous or broken, shall be considered a regular employee with respect to the activity for which he is employed, and his employment shall continue while such activity exists. Moreover, hiring Lucy as a contractual employee for a duration of five (5) months at a time, after interval of one (1) month, was designed by Hambergis to preclude tenurial security. As such it showed be struck down as being contrary to law, good customs, public order and public policy. (Magsalin, et al. vs. NOWM, G.R. No. 148492, 09 May 2003.) In view of the following, my advice to Lucy is to file a case for illegal dismissal with a prayer for reinstatement without loss of seniority rights, payment of backwages plus interests thereon, damages and attorney’s fees. 2015 BAR QUESTION: (VII)

Don Don is hired as a contractual employee of CALLHELP, a call center. His contract is expressly for a term of 4 months. Don Don is hired for 3 straight contracts of 4 months each but at 2-week intervals between contracts. After the third contract ended, Don Don is told that he will no longer be given another contract because of "poor performance." Don Don files a suit for "regularization" and for illegal dismissal, claiming that he is a regular employee of CALLHELP and that he was dismissed without cause. You are the Labor Arbiter. How would you decide the case? (4%) ANSWER:

I will decide the case in favor of Don Don. While the Supreme Court in Brent School vs. Zamora upheld the validity of fixedterm employment, it has done so, however with a stern admonition that where from the circumstances it is apparent that the period has been imposed to preclude the acquisition of tenurial security by the employee, then it should be struck down as being contrary to law, morals, good customs, public order and public policy. In the present case, Don Don was “hired for 3 straight contracts of 4 months each but at 2-week intervals betwee n contracts”, short of the normal six -month

probationary period of employment. The circumstances clearly show the ill intent of 26



CALLHELP to preclude Don Don from acquiring tenurial security. The obvious circumvention of the law should not be countenanced. ALTERNATIVE AL TERNATIVE ANSWER :

As Labor Arbiter, I will decide the case by applying the Contract of Adhesion rule. Given the nature of Don Don’s work , which is usually necessary and desirable to the usual trade of HELPCALL, as well as the short intervals between his fixed-term contracts, there is no doubt that periods were resorted to for purposes of circumventing the law on tenure. Therefore, since it was the company that prepared the three contracts, with Don Don’s participation being limited to affixing his sign ature thereto only, the 4-month periods must be taken against it. Having attained tenure, therefore, Don Don cannot be dismissed for poor performance because said ground is neither a just nor authorized cause. 4. PROJECT EMPLOYEES – The principal test for determining whether particular employees are properly characterized as "project employees" as distinguished from "regular employees" is whether or not the project employees were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time the employees were engaged for that project. 4.1

The length of service or the re-hiring of construction workers on a project-to-project basis does not confer upon them regular employment status, since their re-hiring is onl y a natural consequence of the fact that experienced experienced constr uction work ers are preferred preferred . Employees who are hired

for carrying out a separate job, distinct from the other undertakings of the company, the scope and duration of which has been determined and made known to the employees at the time of the employment , are properly treated as project employees and their services may be lawfully terminated upon the completion of a project. Should the terms of their employment employment fail to comply with this standard, they cannot be considered project employees. (Hanjin Heavy Industries vs. Ibanez et., al., G.R. 170181, 26 June 2008.) 4.2

Indicators of Project Employment is found in Section 2.2(e) and (f) of DOLE Department Order No. 19, Series of 1993, entitled Guidelines Governing the Employment of Workers in the Construction Industry , to wit: “2.2 Indicators of project employment. - Either one or more of the following circumstances, among others, may be considered as indicators that an employee is a project employee. (a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable. (b) Such duration, as well as the specific specific work/service to be performed, is defined in an employment agreement and is made clear to the employee at the time of hiring. (c) The work/service performed by the employee is in connection with the particular project/undertaking for which he is engaged. (d) The employee, while not employed and awaiting engagement, is free to offer his services to any other employer. (e) The termination of his employment in the particular project/undertaking is reported to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the workplace within 30 days following the date of his separation from work, using the prescribed form on employees' terminations/dismissals/suspensions. (f) An undertaking in the employment contract by the employer to pay completion bonus to the project employee as practiced by most construction companies.

27



4.3 Purely Project employees – are those employed in connection with a

particular construction project. Effect: (a) not entitled to separation pay if terminated as a result of the completion of the project or any phase thereof in which they are hired; (b) no prior clearance for termination is necessary, but termination must be reported to DOLE; (c) however, if the project or phase lasts for more than one (1) year, he may not be terminated prior to completion of project or phase without previous written clearance from DOLE. 4.4 Emplo yees yees from Labor Pool Pool -- those employed employed by a construction company

without reference to any particular project. probationary and regular .

May be further classified into

Effect: (a) right to organize and to collectively bargain, or join rank-and-file union of the construction company may not be curtailed; (b) completion of project or phase will not sever employer-employee employer- employee relationship, as they are to be considered employees for an indefinite term. 4.5 4.5 Report Report of termination of project employers compul sory. – Failure to file termination reports, particularly on the cessation of petitioner’s employment,

was an indication that the petitioner was not a project employee but a regular employee. Goma vs. Pamplona Plantation, Inc., 557 SCRA 124 (2007)

2012-2015 CASES ON PROJECT EMPLOYMENT: 4.6 2012-2015 Ma. Charito C. Gadia, et al. vs. Sykes Asia, Inc. et al., G.R. No. 209499, 28 January 2015 . - Requisites for an employee to be considered project-based

BPO employee: (a) the employee was assigned to carry out a specific project or undertaking; and (b) the duration and scope of which were specified at the time they were engaged for such project. In this case, Sykes BPO informed the petitioner of their employment status at the time of their engagement, as evidenced by their employment contracts which provided that they were hired in connection with the Alltel Project, and that their positions were “ project-based and as such is co-terminus to the project.” To the mind of the Court, this caveat sufficiently apprised petitioners that their security of tenure with Sykes would only last as long as the Alltel Project was subsisting. In other words, when the Alltel Project was terminated, petitioners no longer had any project to work on, and hence, Sykes may validly terminate them from employment. Sykes duly submitted an Establishment Employment Report and an Establishment Termination Report to the DOLE Makati Field Office regarding the cessation of the Alltel Project and the list of employees affected thereby. Case law deems such submission as an indication that the employment was indeed project-based. . Omni Hauling Servic es, Inc., et al al vs. Bernardo Bon , et et al., G.R. G.R. No. No. 199388, 03 September 2014 . - Project Employee vs. Regular Employee. A project employee is assigned to a project which begins and ends at determined or determinable times (Goma v. Pamplona Plantation, Incorporated, 579 Phil. 402, 412 [2008]). Unlike regular employees who may only be dismissed for just and/or authorized causes under the Labor Code, the 28



services of employees who are hired as “project employees” may be lawfully

terminated at the completion of the project. (GMA Network, Inc. v. Pabriga, G.R. No. 176419, November 27, 2013, 710 SCRA 690,703). According to jurisprudence, the principal test for determining whether particular employees are properly characterized as project employees” as distinguished from “regular employees,” is whether or not the employees were assigned to carry out a “specific project or undertaking,” the duration (and scope) of which were specified at the time they were engaged for that project. In order to safeguard the rights of workers against the arbitrary use of the word “project” to prevent employees from attaining a regular status, employers claiming that their workers are project employees should not only prove that the duration and scope of the employment was specified at the time they were engaged, but als o that th ere was indeed a pro ject. In this case, records are bereft of any evidence to show that respondents were made to sign employment contracts explicitly stating that they were going to be hired as project employees, with the period of their employment to be coterminus with the original period of Omni’s service contract with the Quezon City government. Neither is petitioners’ allegation that respondents were duly apprised of the project-based nature of their employment supported by any other evidentiary proof. Thus, the logical conclusion is that respondents were not clearly and knowingly informed of their employment. MacArthur Malicdem and Hermenigildo Flores vs. Marulas Industrial Corp orat io n, et al., al., G.R. G.R. No. 2044 204406, 06, 26 Februar y 2014 2014 . -- Malicdem and

Flores were hired as extruder operators (operate the machines that produces the sacks) for a period of one (1) year under a “Project Employment Contract” which stipulates a probationary period of six (6) months from its commencement, wherein they would be reclassified as project employees with respect to the remaining remaining period of the effectivity effectivity of the contract. Every year thereafter, they would sign a Resignation/Quitclaim in favor of Marulas a day after their contracts ended, then sign another contract for another year, and so on. Malicdem and Flores are regular employees for the following reasons: a. An employee who is allowed to work after a probationary period shall be considered a regular employee. (Article 281, Labor Code.) b. A project or work work pool employee, employee, who has been continuously, as opposed opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and whose task are vital, necessary and indispensable to the usual trade or business of the employer, must be deemed a regular employee. (Maraguimot, Jr. v. NLRC, 248 Phil. 580 [1998].) c. There is no actual project; hence, Marulas cannot invoke the exception in Art. 280 of the Labor Code. Roy Pasos vs. PNCC, G.R. No. 192394, 03 July 2013. – While Pasos was

unquestionably hired as a project employee for three months at the start of his engagement with PNCC, his employment thereafter was extended without subsequent contract or appointment that specified a particular duration for the extension. As such, he was then to be considered a regular employee of PNCC. PNCC. His status as a regular employee was NOT affected by the fact that he was assigned to several other projects thereafter, and that there were intervals in between said project, because he enjoys security of tenure. tenure. The termination by PNCC of Pasos‘ employment by reason of contract expira tion or project completion at this point therefore, is illegal because these are not the grounds for the dismissal of a regular employee. e mployee. Wilfr edo Aro, Ronilo Tir ol, et al. vs. NLRC, NLRC, Fourt Fourt h Divis ion , et et al., G.R. G.R. No. 174792. 07 March 2012.-The length of service or the re-hiring of construction workers on a project-to-project basis does not confer upon 29



them regular employment status, since their re-hiring is only a natural consequence of the fact that experienced construction workers are preferred. Employees who are hired for carrying out a separate job, distinct from the other undertakings of the company, the scope and duration of which has been determined and made known to the employees at the time of the employment , are properly treated as project employees and their services may

be lawfully terminated upon the completion of a project. Should the terms of their employment fail to comply with this standard, they cannot be considered project employees. CONTRA: D.M. Consunji vs. Estelito Jamin, G.R. No. 192514, 18 April 2012.

-- We agree with the CA. In Liganza v. RBL Shipyard Corporation wher e this Court held that “[a]ssuming, without granting[,] that [the] petitioner was initially hired for specific projects or undertakings, the repeated re-hiring and continuing need for his services for over eight (8) years have undeniably made him a regular employee.” We find the Liganza ruling squarely applicable to this case, considering that for almost 31 years, DMCI had repeatedly, continuously and successively e ngaged Jamin’s services since he was hired on December 17, 1968 or for a total of 38 times — as shown by the schedule of projects submitted by DMCI to the labor arbiter[ and three more projects or engagements added by Jamin, which he claimed DMCI intentionally did not include in its schedule so as to make it appear that there were wide gaps in his engagements. Xxx While the contracts indeed show that Jamin had been engaged as a project employee, there was an almost unbroken string of Jamin’s rehiring from December 17, 1968 up to the termination of his employment on March 20, 1999. With our ruling that Jamin had been a regular employee, the issue of whether DMCI submitted termination of employment reports, pursuant to Policy Instructions No. 20 (Undated[46]), as superseded by DOLE Department Order No. 19 (series of 1993), has become academic. To set the records straight, DMCI indeed submitted reports to the DOLE but as pointed out by Jamin, the submissions started only in 1992 .[48] DMCI explained that it submitted the earlier reports (1982), but it lost and never recovered the reports . It reconstituted the lost reports and submitted them to the DOLE in October 1992; thus, the dates appearing in the reports.

5.

SEASONAL EMPLOYEES -- those hired for work or services which is seasonal in nature, and the employment is for the duration of the season. IMPORTANT NOTE ON EMERGING TREND OF SUPREME COURT CASES CIRCA 2013-2015: REGULAR SEASONAL WORKERS . -Where the seasonal employees had been hired repeatedly and continuously to perform the same tasks or activities for several seasons or even after the cessation of the season, this length of time may likewise serve as badge of regular employment. In fact, even though denominated as “seasonal workers,” if these

workers are called to work from time to time and are only temporarily laid off during the offseason, the law does not consider them separated from the service during the off-season period. The law simply considers these seasonal workers on leave until re-employed. CASE 1: Gapayao vs. Ful o and SSS, G.R. No. 193493, 13 June 2013 (Sereno, C.J.) -- Farm workers are considered seasonal employees so long as there is a reasonable causal connection between nature of employer’s business and that

work should have been rendered for more than one continuous or accumulated year Jaime Fulo died due to 1st degree burns from electrocution while doing repairs at the residence of Gapayao. Due to his alleged compassion, the latter extended financial help to the heirs of Jaime Fulo. The deceased wife of Jaime then 30



executed a document waiving her right and desisting from filing of criminal and/or civil action/s against Gapayao. Deceased’s wife then went to the SSS in order to claim her husband’s death

benefits. It was however discovered that deceased was not a registered member of the SSS. After proper investigation, the SSC found an existence of employeremployee relationship between Jaime Fulo and Gapayao. It ordered the payment of deceased’s death benefits, the remittance of employer’s contributions to the SSS plus penalties for late payment of such remittances. Gapayao then appealed the case to the Court of Appeals, but the latter affirmed the decision of the SSC . Gapayao’s position: Gapayao insists that the deceased was not his employee, but that of another person. Gapayao contends that he is merely the landlord of the farm which Jaime Fulo tilled. And that it was Gapayao’s tenant, Amado Gacelo who was Fulo’s employer. Her likewise contends that the deceased was really a freelance worker Issue: Was there an employer-empl oyee relati onsh ip between Jaime Fulo and Gapayao? Yes. Decision: YES, Fulo was Gapayao’s employee. Farm workers generally fall under the definition of seasonal employees . We

have consistently held that seasonal employees may be considered as regular employees. Regular seasonal employees are those called to work from time to time. The nature of their relationship w ith the employer is such that duri ng the off season, they are temporarily laid off; but reemployed during the summer season or when their services may be needed. They are in regular employment because of the nature of their job, and not because of the length of time they have worked. A reading of the records reveals that the deceased was indeed a farm worker who was in the regular employ of petitioner. From year to year, starting January 1983 up until his death, the deceased had been working on petitioner’s land by harvesting abaca and coconut, processing copra, and clearing weeds. His employment was continuous in the sense that it was done for more than one harvesting season. Moreover, no amount of reasoning could detract from the fact that these tasks were necessary or desirable in the usual business of petitioner. The other tasks allegedly done by the deceased outside his usual farm work only bolster the existence of an employer-employee relationship. As found by the SSC, the deceased was a construction worker in the building and a helper in the bakery, grocery, hardware, and piggery – all owned by petitioner. This fact only proves that even dur ing the off season, the deceased was still in the employ of petitioner.” CASE2: Universal Robin a Sugar Mill ing Corpo ratio n and Rene Cabati, G.R. No. 186439. 15 January 2014. J Bri on.

Facts: The complainants hired as employees of URSUMCO, on various dates (between February 1988 and April 1996) and on different capacities,8 i.e., drivers, crane operators, bucket hookers, welders,mechanics, laboratory attendants and aides, steel workers, laborers, carpenters and masons, among others. At the start of their respective engagements, the complainants signed contracts of employment for a period of one (1) month or for a given season. URSUMCO repeatedly hired the complainants to perform the same duties and, for every engagement, required the latter to sign new employment contracts for the same duration of one month or a given season.

31



Complainants filed for regularization plus entitlement to CBA benefits. Labor Arbiter dismissed the complaints and ruled that they were project or seasonal employees. On appeal, NLRC reversed the Labor Arbiter and ruled that the complainants were regular employees entitled to the monetary benefits under the CBA. On petition for review on certiorari, CA ruled that complainants were regular – albeit seasonal -employees, but deleted the monetary CBA benefits because the CBA benefits are for regular workers only. Issue: Whether or not complainants are regular workers or seasonal workers?

Are they entitled to CBA benefits accorded the regular employees? Ans wer: Complainants are REGULAR SEASONAL WORKER

Complainants are NOT entitled to CBA benefits which are for regular workers only. The respondents are neither project, seasonal nor fixed-term employees, but regular seasonal workers of URSUMCO.xxx THEIR SEASONAL WORK, HOWEVER, DOES NOT DETRACT FROM CONSIDERING THEM IN REGULAR EMPLOYMENT since in a litany of cases, this Court has already settled that seasonal workers who are called to work from time to time and are temporarily laid o ff duri ng th e off-season are not separated from the service in s aid period, but are merely consi dered on leave until re-employment Be this as it may, REGULAR SEASONAL EMPLOYEES, LIKE THE RESPONDENTS IN THIS CASE, SHOULD NOT BE CONFUSED WITH THE REGULAR EMPLOYEES OF THE SUGAR MILL such as the administrative or

office personnel who perform their tasks for the entire year regardless of the season. The NLRC, therefore, gravely erred when it declared the respondents regular employees of URSUMCO without qualification and that they were entitled to the benefits granted, under the CBA, to URSUMCO’S regular employees. CASE 3: Haciend a Catayw a, et al. vs. Rosari o Lor ezo, G.R. No. 179640, 18 March 2015. -- The existence of an employer-employee relationship may be

proved by any competent and relevant evidence. It may entirely be testimonial. (Martinez vs. NLRC, et al. 339 Phil. 176 [1997].) If only documentary evidence is required, no scheming employer would be brought before the bar justice. (Vinoya vs. NLRC, et al., 381 Phil. 460 [2000].) Farm workers generally are seasonal workers. Seasonal employees may become regular employees when they are called to work from time to time. They acquire regular employment because of the nature of their work, not because of the length of time they have worked. However, seasonal workers who work only for one season, cannot become regular employees. (Hacienda Fatima vs. NFSW, 444 Phil. 587[2003].) Respondent performed hacienda work, such as planting sugarcane point, fertilizing, weeding, replanting dead sugarcane fields and routine miscellaneous hacienda work. Thus, he is considered a regular seasonal worker. Since cultivation of sugarcane is only for six months, he cannot be considered a regular employee during the months when there is no cultivation.

6.

CASUAL EMPLOYEES – those who are hired to perform work or service which is merely incidental to the business of the employer. Any casual employee who has rendered at least one (1) year of service, whether it be continuous or broken, shall be considered a regular employee with respect to the activity for which he is employed, and his employment shall continue while such activity exists.

32



2014 BAR QUESTION: Don Luis, a widower, lived alone in a house with a large garden. One day, he noticed that the plants in his garden needed trimming. He remembered that Lando, a 17-year old out-of-school youth, had contacted him in church the other day looking for work. He contacted Lando who immediately attended to Don Luis’s garden a nd finished the job in three days. (4%) (A) Is there an employer-employee relationship between Don Luis and Lando? (B) Does Don Luis need to register Lando with the Social Security System (SSS)?

ANSWER: (A) Yes, casual employment. (B) No, Lando’s employment is purely casual as it is not for the purpose of the

occupation or business of the employer Don Luis. (Sec. 8 [J] [3], RA 1161, as amended.)

EMPLOYEE CLASSIFICATION AS TO RANK 7.

MANAGERIAL EMPLOYEES – those vested with powers or prerogatives to lay

down and execute management policies and/or to hire, transfer, suspend, lay-off, recall employees. (Art. 212, par. m, Labor Code) 7.1 CONFIDENTIAL EMPLOYEES: Doctrine of necessary implication and/or confi dential employee rule r eiterated. Confidential employees are those who: (1) assist or act in a confidential capacity, (2) to persons who formulate, determine, and effectuate management policies in the field of labor relations. The two criteria are cumulative, and both must be met if an employee is to be considered a confidential employee — e.g., the confidential relationship must exist between the employee and his supervisor, and the supervisor must handle the prescribed responsibilities relating to labor relations. The exclusion from bargaining units of the employees who, in the normal course of their duties, become aware of management policies relating to labor relations is a principal objective sought to be accomplished by the “confidential employee rule”. Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery vs. Asia Brewery, G.R. No. 162025, 03 Augu st 2010 .; See also: San Miguel Corporation Supervisors and Exempt Employees Union vs. Laguesma, 277 SCRA 370 [1997].

8.

SUPERVISORY EMPLOYEES – those who, in the interest of management,

effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature, but requires use of independent judgment. (Art. 212, par. N, Labor Code). Note: Supervisory employees form part of the managerial staff, which are not covered by the rules on hours of work, viz., night shift differentials, overtime pay, etc. (See Art. 82, Labor Code cf. Art. 212 [m]). 9.

RANK-AND-FILE EMPLOYEES - All other employees not falling within the definition of “managerial” or “supervisory” employees, are considered rank -and-file

employees for purposes of Book V of the Labor Code.

33



FRAMEWORK : General rule: Employment is deemed regular Exception:

Probationary Term Project

Seasonal Casual

Exception to exception: Probationary employees allowed to work after probn. period Casual workers rendering service for more than one year Term employee allowed to work after term has expired/ended Project employee allowed to work after project without any contrac t; or project employee allowed to work project after project but no termination reports.

F. INDEPENDENT CONTRACTORSHIP ARRANGEMENTS VS. LABOR ONLY CONTRACTING Employees of an in dependent contr actor are not your employees

Fuji Televis ion Network, Inc. vs . Arlene S. Espi rit u G.R. No. 204944-45, 03 December 2014 citing DOLE D.O. 18-A [2011], sec. 5 (b); Sonza vs. ABS-CBN, supra, see page __ hereof . -- There are different kinds of independent contractors: those engaged in legitimate

job contracting, and those who have unique skills and talents that set them apart from ordinary employees. Since no employer-employee exist between independent contractors and their principals, their contracts are governed by the Civil Code provis ions on c ontracts and other applicable laws . ADA’S NOTE: In the above 2014 case of Fuji Television Network vs. Arlene Espiritu, the

Supreme Court made an exhaustive distinction between Independent Contractor vs. Fixed-term employment and/or regular employment. The main factor that distinguishes independent contracting from fixed-term or regular employment is that of CONTROL. Where the alleged “employer” has no actual control over the conduct of the work of the complainant, then there is no employer-employee relationship. However, if control over the conduct of work can be established, then this is one of fixed-term or regular employment depending on the circumstances of the case..

34



F.1 VALID INDEPENDENT CONTRACTING OR SUB-CONTRACTING ARRANGEMENTS Article 106, LB; IRR S8R8B3;

ELEMENTS: (MEMORY AID: I ARM FREE CAPITAL TEMWORK R&B) 

There is a job-contracting permissible by law where the contractor/agency carries on an INDEPENDENT business and undertakes the contract work on

A CCOUNT,

RESPONSIBILITY , using his own M ANNER AND METHODS, FREE from the control of the principal in all his

under his own

matters connected with the performance of work excepting the results thereof.

CAPITAL in the form of TOOLS, EQUIPMENT, M ACHINERY, WORK PREMISES, and that the agreement between the contractor and principal assures the former’s employees of ALL RIGHTS AND B ENEFITS under the law.

He has his own



F.2 ELEMENTS OF LABOR-ONLY CONTRACTING PROHIBITED UNDER THE LAW -- Philippine Airlines vs. Ligan, 548 SCRA 181 (2008). There is labor-only contracting where the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal.

TWO WAYS OF PROVING LABOR-ONLY CONTRACTING: (Memor y Aid : No Cap Dir ect OR No Contr ol)

For labor-only to exist, Sec. 5 of Department Order No. 18-02 requires any two of the elements to be present, viz.: 

The

contractor

SUBSTANTIAL

or

sub-contractor

DOES

NOT

HAVE

CAPITAL

or investment to actually perform the job, work or service under its own account and responsibility; and the employees recruited, supplied or placed by such contractors are performing activities which are business of the principal;

DIRECTLY

RELATED to the main

OR 

The CONTRACTOR has done by his employees.

NO CONTROL over the conduct of the work to be

To emphasize, a finding that a job contractor is a labor-only contractor is equivalent to declaring that there is an employer-employee relationship between the company and the employees of the labor-only contractor .(Industrial Timer Corp., vs. NLRC, 169 SCRA 341). This is because the labor-only contractor is considered as a mere agent of the EMPLOYER and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. ( Alviado et. al. vs. Procter & Gamble, and Promm Gemm, G.R. No. 160506, 09 March 2010). 35



F.3 EFFECT OF LABOR-ONLY CONTRACTING AND VALID JOB CONTRACTING AGREEMENTS -- San Miguel Corp. vs. MAERC Integrated Systems, 405 SCRA 579 [10 July 2003] 



If labor only contract ing: ILLEGAL . The employer is deemed the DIRECT employer and is made liable to the employees of the contractor for a more comprehensive purpose (wages, monetary claims, and all other benefits in the Labor Code such as SSS/Medicare/Pag-Ibig). The labor-only contractor is deemed merely an agent. If job-contracting: LEGAL. The employer is considered an INDIRECT EMPLOYER, and is made solidarily liable with the contractor to the employees of the latter for a more limited purpose, viz.: payment of unpaid wages and other monetary claims, including 13 th month pay, service incentive leave pay. (New Golden Builders case)

IMPORTANT J. VELASCO CASES: Marian B. Navarette vs. Manila International Freight Forwarders, Inc./MIFFI Logistics Company, Inc., Mr. Harada, and MBI Millennium Experts, Inc., G.R. No. 200580, 11 February 2015 (Velasc o) – A finding that a contractor is engaged in labor-only contracting is then equivalent to declaring that there exists an employer-employee relationship between the supposed principal and the employee of the purported contractor . It also results in the following:

(1) the subcontractor will be treated as the agent of the principal whose acts and representations bind the latter; (2) the principal, being the employer, will be responsible to the employees for all their entitlements and beneﬁts under labor laws; and (3) the principal and the subcontractor will be solidarily treated as the employer. On the contrary, in this case, there is already a previous Supreme Court ruling in a similar case (Manlangit) finding that MBI is a legitimate job contractor. Under the doctrine of conclusiveness of judgment, the Supreme Court’s ruling on the issue of the legitimacy of MBI’s contract with respondents, must not be disturbed. Consequently, complainant Navarette is MBI's employee and not of MIFF. W.M. Manufacturing, Inc. vs. Richard R. Dalag and Golden Rock Manpower Services, G.R. No. 209418, 07 December 2015 (Velasco). -- WMM and Golden

Rock engaged in labor-only contracting. 36



The essential element in labor-only contracting is that the contractor merely recruits, supplies or places workers to perform a job, work or service for a principal. However, the presence of this element is not enough and must, in fact, be accompanied by any one of the confirmatory elements to be considered a labor-only contractor within the contemplation of Section 5 of DO 18-02, being the applicable issuance at the time Dalag complained of his alleged illegal dismissal. As to the presence of the confirmatory elements, attention is drawn to (1) Golden Rock’s lack of substantial capital, coupled with the necessity and desirability of the job Dalag performed in WMM; and (2) Golden Rock’s lack of control over the employees it supplied WMM. The Certificate of Registration only gives rise to the disputable presumption that Golden Rock is an independent contractor with substantial capital as reflected in its financial documents. However, the basis for determining the substantiality of a company’s “capital” rests not only thereon but also on the tools and equipmen t it owns in relation to the job, work or service it provides. Moreover, WMM exercised control over the employees supplied by Golden Rock. The “right to control” refers to the right to determine not only the end to be

achieved, but also the manner and means to be used in reaching that end. (E.g. Dalag was supervised by WMM’s employees; furnishing Dalag with no less than 7 memos directing, him to explain his work infractions; conducting an investigation to determine Dalag’s culpability.)

2015 BAR EXAMINATION QUESTION: (VIII) Star Crafts is a lantern maker based in Pampanga. It supplies Christmas lanterns to stores in Luzon, Metro Manila, and parts of Visayas, with the months of August to November being the busiest months. Its factory employs a workforce of 2,000 workers who make different lanterns daily for the whole year. Because of increased demand, Star Crafts entered into a contractual arrangement with People Plus, a service contractor, to supply the former with I 00 workers for only 4 months, August to November, at a rate different from what they pay their regular employees. The contract with People Plus stipulates that all equipment and raw materials will be supplied by Star Crafts with the express condition that the workers cannot take any of the designs home and must complete their tasks within the premises of Star Crafts. Is there an employer-employee relationship between Star Crafts and the 100 workers from People Plus? Explain. (4%) Answ er:

Yes, there is an employer-employee relationship between Star Crafts and the 100 workers from People Plus. This is so because People Plus is engaged in laboronly contracting inasmuch as it appears NOT to have any capital in the form of tools, equipment machineries and work premises. Moreover, it does NOT have any control over its own employees, the control being exercised by Star Crafts. Labor-only contracting is illegal and, in this case, the principal Star Craft is deemed the direct employer of the 100 workers, while People Plus is deemed merely an agent. (Ada’s note: Memo aid – No CAP + DIRECT or No CONTROL. In both tests, Star Crafts fall within the elements of labor-only contracting under Dept Order No 18 and 18-A).

37



F.4 SALIENT FEATURES OF DEPARTMENT ORDER NO. 18-02, SERIES 2002. MANDATORY REGISTRATION OF INDEPENDENT CONTRACTORS (D.O.

•

18, S11) - Establishment of a registration system to govern contracting arrangements. Registration of the contractors and sub-contractors shall be necessary for purposes of establishing an effective labor market information and monitoring. Failure to register shall give rise to a presumption that contractor is engaged in LABOR ONLY CONTRACTING REQUIREMENTS FOR REGISTRATION (per DOLE Application Form)

•

      

 

•

OTHER OBLIGATIONS OF INDEPENDENT CONTRACTOR: 



•

Name and business address of contractor Names and addresses of the officers of the contractor Nature of the contractor’s business, and the industry where the contractor seeks to operate Number of regular workers; list of clients, if any; number of personnel assigned to each client and the services provided to the client Description of the phases of the contract, and number of employees covered in each phase, when appropriate Copy of audited financial statements (companies/partnership/cooperative or union), or ITR (sole proprietorship) Certified copy of the certificate of registration of firm or business name from the Securities and Exchange Commission, Department of Trade and Industry, Cooperative Development Authority or from the DOLE Certified copy of the license or business permit issued by the local government unit or units where the contractor or subcontractor operates. The application shall be verified, and shall contain an undertaking that the contractor or sub-contractor shall abide by all applicable labor laws and regulations

Duty to produce copy of the contract between the principal and the contractor, if required during regular inspection; also, the contractor of employment of the contractual employee Annual reporting of the registered contractors not later than 15th of January of every year. Report shall include: (a) list of contracts entered with principal during the subject reporting period; (b) number of workers covered by each contract with principal; and © sworn undertaking that the mandatory government-imposed benefits (SSS, HDMF, Philhealth, ECC and withholding taxes) due the contractual employees have been made during the subject reporting period .

EFFECT OF NON-COMPLIANCE – DELISTING OF CONTRACTORS. (Ada’s

opinion: Logically therefore, and in conjunction with Supreme Court decisions, there arises a prima facie (rebuttable) presumption that there being no certification, the contractor is a labor-only contra ctor).

F.5 NEW REQUIREMENTS UNDER DEPT. ORDER NO. 18-A, SERIES 2011 (14 NOV 2011). NOTE: Dept Order No. 18-A is NOT appl icabl e to BPO or know ledge-based outsourcing and construction industry, per DOLE Dept Order No. 1 s 2012.

38



1. Declaration of of the Independent Contractor’s

net financial contracting

capacity (NFCC) to be incorporated in the service contract (sec 3 [g]) “CURRENT ASSETS LESS CURRENT LIABILITIES X K [CONTRACT DURATION] EQUIVALENT, MINUS VALUE OF ALL OUTSTANDING, ONGOING OR STARTING PROJECTS”

where K = 10, if contract is one year or less; = 15, for more than one (1) year up to two (2) years; = 20, for more than two (2) years

2. Substantial capital of at least Three Million Pesos (P3,000,000.00) in case of corporations, partnerships, cooperatives or single proprietorship (sec 13[ l]) 3. Registrati on f ee of Twenty Five Thousand Pesos (P25,00 (P25,000. 0.00 00)) plus renewal fee of Twenty Five Thousand Pesos (P25,000.00) every three years (sections 19 and 21)

F.6 THE NEGATIVE NEGATIVE LIST: WHAT CANNOT BE VALIDLY SUBSUBCONTRACTED OUT? (Dept. Order No. 18-02 as amended by Dept Order No. 18-A, series of 2011) 1. Contracting out of a job, work or service when not done in good faith and not justified by the exigencies of the business and the same results in the termination of regular employees and reduction of work hours or reduction or splitting of the bargaining unit 2. Contracting out to a “Cabo.” Under the “cabo” system, (a) the union is the independent contractor that

engages the services of its members who are seconded to the principal; (b) the charges against the principal are made by the Union; and © the workers are paid on union payroll without intervention of the principal. 3. Taking undue advantage of the economic situation or lack of of bargaining strength of the contractual employee, or undermining his security of tenure or basic rights, or circumventing the provisions of regular employment, in any of the following instances: i)

In addition to his assigned functions, requiring the contractual employee to perform functions which are currently being performed by the regular employees of the principal or of the contractor or subcontractor;

ii)

Requiring him to sign, sign, as a precondition to employment employment or continued employment, an antedated resignation letter; a blank payroll; a waiver of labor standards including minimum wages and social or welfare benefits; or a quitclaim releasing the principal, contractor or subcontractor from any liability as to payment of future claims; and

iii)

Requiring him to sign a contract fixing the period of employment to a term shorter than the term of the contract between the principal and the contractor or subcontractor, unless the latter contract is divisible into phases for which substantially different skills are required and this is made known to the employee at the time of engag ement.”

4. Contracting out of a job, work or service through an IN-HOUSE AGENCY 39



5. Contracting out of a job, work or service directly related to the business business or operation of the principal by reason of a strike or lockout whether actual or imminent. 6. Contracting out of a job, work or service being performed by union members when such will interfere with, restrain or o r coerce employees in the exercise of their rights to self-organization as provided in Art. 248 (c) of the Labor Code, as amended. NEW PROHIBITIONS TO THE ORIGINAL ORIGINAL NEGATIVE LIST PROVIDED UNDER DEPT ORDER 18-A SERIES OF 2011 (SECTION 7):

7. REPEATED HIRING OF EMPOYEES UNDER AN EMP LOYMENT CONTRACT of short duration or under a service agreement of short duration with the same or different contractors, which circumvents the Labor Code provisions on security of tenure 8. Requiring employees under a sub-contracting arrangement to sign a contract contract fixing the period of employment to a term SHORTER THAN THE TERM OF THE SERVICE AGREEMENT, except when when the contract is divisible divisible into phases xxx and this is made known to the employee 9. Refusal to provide a copy of the Service Agreement and employment contracts between the contractor and employees, to the principal’s certified bargaining agent. 10. Engaging or maintaining by the principal of subcontracted employees IN EXCESS OF THOSE PROVIDED FOR IN APPLICABLE COLLECTIVE BARGAINING AGREEMENTS OR SET BY THE INDUSTRY TRIPARTITE COUNCIL (ITC)

F.7 SYNTHESIS SYNTHESIS AND CLARIFICATION CL ARIFICATION OF DOCTRINES DOCTRINES ON JOB-CONTRACTING J OB-CONTRACTING PER 2013-2015 2013-2015 CASES 7.1

Job contracting is a trilateral work arrangement arising out of two different contracts:

a) Contract between Principal and the Agency: CIVIL CONTRACT b) Contract between Agency and its its employees: employees: LABOR LAB OR CONTRACT CONTRACT But note – 

7.2

There should be NO CONTROL between Principal and Agency or Principal and employees of the agency; otherwise, an employer-employee relationship is established in either case.

Contracting out is valid valid as as an an exercise exercise of management management prerogative for as as long as it complies with the limits and standards provided by the Labor Code. [ COCA-COLA BOTTLERS VS. DELA CRUZ ET AL, G.R. No. 184977, 07 December 2009 (BRION, J )] , -- Essentially, there must be proof of capitalization, and of control over his employees on the part of the independent contractor. The law allows contracting and subcontracting involving services but closely regulates regulates these activit activit ies for the protection of wor kers . Thus, an employer

can contract out part of its operations, provided it complies with the limits and standards provided in the Code and in its implementing rules. xxx In strictly layman’s terms, a manufacturer can sell its products on its own, or allow contractors, independently operating on their own, to sell and distribute these products in a manner that does not violate the regulations. From 40



the terms of the above-quoted D.O. 18-02, the legitimate job contractor must have the capitalization and equipment to undertake the sale and distribution of the manufacturer’s pro ducts, and must do it on its own using its own means and selling methods.xxx” Temic Automotive Phils. Vs. Temic Automotive Phils Inc. Employees Union – Union – FFW, FFW, G.R. No. 186965, 23 December 2009. – Company is engaged

in the manufacture of electronic brake systems and comfort body electronics for automotive vehicles. Union members are regular rank-and-file employees working in warehouse receiving section, raw materials, and finished goods section. Management however however contracts out forwarding, packing, loading of raw materials and finished goods to independent contractors. Issue raised on validity of contracting out of said jobs, to the detriment of the regular workers. Supreme Court ruled in favor of management, where it is shown that it is done in good faith, for the furtherance of the valid interests of the company and not for the circumvention of the rights of its employees. 7.3

IMPORTANT CASE: The right of management to outsource parts of its operations is within the purview of management prerogative, but said right may limited by law, CBA provisions or the general principles of fair play and justice. Goya Inc. vs. Goya Employees Union – FFW, – FFW, G.R. No. 170054 21 January 2013. Question :

May the Company however validly engage an independent contractor for such purpose, despite an explicit provision in the CBA limiting the company’s free exercise of management prerogative pertaining to the hiring of contractual employees. Short Answer: NO, it may not. The CBA is the law between the parties, and

having agreed to the provision, management also agreed to limit its exercise of its prerogatives to this extent SC Rationale : The company kept on harping that both the VA and the CA

conceded that its engagement of contractual workers from PESO was a valid exercise of management prerogative. It is confused. To emphasize, declaring that a particular act falls within the concept of management prerogative is significantly different from acknowledging that such act is a valid exercise thereof. What the VA and the CA correctly ruled was that the Company’s act of contracting out/outsourcing is within the purview of management prerogative. Both did not say, however, that such act is a valid exercise thereof. Obviously, this is due to the recognition that the CBA provisions agreed upon by the Company and the Union delimit the free exercise of management prerogative pertaining to the hiring of contractual employees. Indeed, the VA opined that “the right of the management to outsource parts of its operations is not totally eliminated but is merely limited by the CBA,” while the CA held that “[t]his management prerogative of contracting out services, however, is not without limitation. x x x [These] categories of employees particularly with respect to casual employees [serve] as limitation to [the Company’s] prerogative to outsource parts of its operations especially when hiring contractual employees.” 7.4

The law and its imp lementin g rul es recogn ize that management may rightfully exercise its prerogatives in determining what activities may be contracted out, REGARDLESS OF WHETHER SUCH ACTIVITY IS PERIPHERAL OR CORE IN NATURE. ( Alviado Alviado et. al. vs. Procter & Gamble, and Promm Gemm, G.R. No. 160506, 09 March 2010, Del Castillo, J).

41



7.5

HOWEVER, PRELIMINARY PRESUMPTION IS THAT CONTRACTOR IS LABOR-ONLY CONTRACTING UNLESS such contractor overcomes the

burden of proving that it has substantial capital, investment, tools and the like. IMPT 2014 CASE: Fuji Televisio n Network , Inc. vs. Arlene S. Espi rit u G.R. No. 204944-45, 03 Decemb er 2014 - The employer has the burden of proof to

show that the person concerned is an independent contractor rather than a regular employee. Garden of Memories Park and Li fe Plan vs. NLRC 2 nd Division, GR 160278, 08 Feb 2012, 665 SCRA 293 citing 7K Corporation vs. NLRC, GR 148490, 22 Nov 2006, 507 SCRA 509, 523. -- In the present case, although Garden of Memories

is not the contractor, it has the burden of proving that Requizo has suf ficient capita or investment since it is claiming the supposed status of REquino as independent contractor. Garden of Memories failed to adduce evidence purporting to show that Requizo had sufficient capitaliizatin. Neither did it show that she invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the completion of the service contract. NOTE: A cooperative may likewise engage in sub-contracting arrangements

but it must comply with the requirements for an independent contractor. The fact that it was a duly registered cooperative does not preclude the possibility that it was engaged in labor-only contracting as confirmed by the findings of the Regional Director. (Norkis Trading Corporation vs. Buenavista et al., GR No. 182018, 10 October 2012).

7.6

WHETHER DOLE CERTIFICATION THAT ONE IS A LEGITIMATE JOB -CONTRACTOR, IS SUFFICIENT TO PROVE STATUS AS JOB CONTRACTOR .— The DOLE certification simply gives rise to a presumption that the contractor is a legitimate one . It does NOT prohibit the Supreme Court, in the exercise of its plenary judicial powers of review, to determine sufficiency of evidence other than the certification, in ruling that one is, or is not, an independent contractor. Thus -General Rule:

In the absence of evidence to t he contrary presented by the complainants , then the Supreme Court had ruled that in the case of RAMY GALLEGO VS. BAYER PHILS. G.R. No. 179807, 31 July 2009, Carpio-Morales, J that “(T)he

DOLE certificate having been issued by a public officer, it carries with it the presumption that it was issued in the regular performance of official duty. Petitioner’s bare assertions fail to rebut this presumption. Further, since the DOLE is the agency primarily responsible for regulating the business of independent job contractors, the Court can presume, in the absence of evidence to the contrary , that it had thoroughly evaluated the requirements submitted by PRODUCT IMAGE before issuing the Certificate of Registration.” In this case, the Supreme Court found Product Image to be an independent contractor as it had shown proof of substantial capitalization and control over the employees. Exception: COCA COLA BOTTLERS VS. RICKY DELA CRUZ, ET AL. (G.R. No. 184977, 07 December 2009) and COCA COLA BOTTLERS VS. AGITO ET AL (G.R. 179546, 13 Feb 2009, J. Chico-Nazario), However, apart and separate from the existence of said DOLE certification ,

and especially in instances where there are contradictory findings between the 42



Court of Appeals and the NLRC/Labor Arbiter, the Supreme Court may consider other factors in the determination of whether or not a contractor complies with the requisite elements of a legitimate sub-contracting as enumerated in the Labor Code and the Dept. Order No. 18-02. In these cases, the Supreme Court reviewed the records and found that the so-called independent contractors had no substantial capitalization and investment , and that the workers supplied by it were performing activities which were necessary and desirable in the usual trade or business of the employer.

2014 BAR QUESTION: Linis Manpower, Inc. (LMI) had provided janitorial services to the Phil ippine Overseas Employment Administration (POEA) since March 2009. Its service contract was renewed every three months. However, in the bidding held in June 2012, LMI was disqualified and excluded. In 2013, six janitors of LMI formerly assigned at POEA filed a complaint for underpayment of wages. Both LMI and POEA were impleaded as respondents. Should POEA, a government agency subject to budgetary appropriations from Congress, be held liable solidarily with LMI for the payment of salary differentials due to the complainant? Cite the legal basis of your answer. (4%)

ANSWER: Yes, POEA may still be held liable . DOLE Order No. 14, Series of 2001, on Solidary Liability, provides as follows: “Government agencies or instrumentalities engaging security services from private security agencies shall likewise observe compliance with all labor laws xxx” Moreover, Article 106 of the Labor Code provides that in the event the contractor fails to pay the wages of his employees the principal shall be jointly and severally liable with the contractor.

7.7 IMPORTANT J. VELASCO CASE: Fonterra Brands Phils. Vs. Largado and Estrellado, G.R. No. 205300, 18 March 2015 QUESTION: Whether or not fixed-term employees who were repeatedly hired

by a contractor, but had resigned and transferred to another contractor to work with the same principal, may claim regular employment status and illegal dismissal?

43



ANSWER: NO. They cannot claim to be regular employees of the principal.

As correctly held by the Labor Arbiter and the NLRC, the termination of respondents’ employment with Zytron was brought about by the cessation of their contracts with the latter . We give credence to the Labor Arbiter’s conclusion that respondents were the ones who refused to renew their contracts with Zytron, and the NLRC’s finding that they themselves acquiesced to their transfer to A.C. Sicat. By refusing to renew their contracts with Zytron, respondents effectively resigned from the latter. Resignation is the voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment, done with the intention of relinquishing an office, accompanied by t he act of abandonment. Here, it is obvious that respondents were no longer interested in continuing their employment with Zytron. Their voluntary refusal to renew their contracts was brought about by their desire to continue their assignment in Fonterra which could not happen in view of the c onclusion of Zytron’s contract with Fonterra. Hence, to be able to continue with their assignment, they applied for work with A.C. Sicat with the hope that they will be able to continue rendering services as TMRs at Fonterra since A.C. Sicat is Fonterra’s new manpower supplier.

G. SPECIFIC ISSUES ON LABOR STANDARDS 1.

WAGES. 1.1 Arti cl e 97 (f) Labor Code, defi niti on: Remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under the written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. Fair and reasonable value shall not include any profit to the employer or to any person affiliated with the employer. 1.2. EMPLOYEES NOT COVERED BY PROVISIONS ON WAGES:    

1.3

farm tenancy / leasehold; domestic service (household or domestic helpers); persons working in their respective homes in needle work or in any cottage industry duly registered in accordance with law; Barangay micro business enterprise (BMBE) under RA 9178, the BMBE Law. BMBE – any business entity or enterprise engaged in the production, processing, or manufacturing of products or commodities, including agroprocessing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than P3M.

Wages; facilities and supplements . SLL International Cables Specialist and Sonny L. Lagon v. NLRC, Roldan Lopez, et al., G.R. No. 172161, 02 March 2011. --

Respondent employees alleged underpayment of their wages. Petitioner employer claimed that the cost of food and lodging provided by petitioner to the respondent employees should be included in the computation of the wages received by 44



respondents. The “supplements.”

Court

makes

a

distinction

between

“facilities”

a nd

Supplements constitute extra remuneration or special privileges or benefits given to or received by the laborers over and above their ordinary earnings or wages. Facilities, on the other hand, are items of expense necessary for the l aborer’s and his family’s existence and subsistence so that by express provision of law, they form part of the wage and when furnished by the employer are deductible therefrom, since if they are not so furnished, the laborer would spend and pay for them just the same. In short, the benefit or privilege given to the employee which constitutes an extra remuneration above and over his basic or ordinary earning or wage is supplement; and when said benefit or privilege is part of the laborers’ basic wages, it is a facili ty. The distinction lies not so much in the kind of benefit or item

(food, lodging, bonus or sick leave) given, but in the purpose for which it is given. In the case at bench, the items provided were given freely by petitioner employer for the purpose of maintaining the efficiency and health of its workers while they were working at their respective projects. Thus, the Court is of the view that the food and lodging, or the electricity and water allegedly consumed by respondents in this case were not facilities but supplements which should not be included in the computation of wages received by respondent employees. 2014 CASE: Our Haus Realty ss . Alexander Pari an, et. al., G.R. No. 204651, 06 August 2014. – The requirements of law for the deductibility of facility from the

wages of employees are as follows: a. proof must be shown that such facilities are customarily furnished by the trade; b. the provision of deductible facilities must be voluntarily accepted in writing by the employee; and c. The facilities must be charged at fair and reasonable value (Mabeza vs. NLRC, 338 Phil. 386 [1997]) Badges to show that a facility is customarily furnished by the trade: a. The existence of a company policy or guideline showing that provisions for a facility were designated as part of the employee’s salaries. (SLL International Cables Specialist v. NLRC, supra., 644 SCRA 411.) b. The existence of an industry-wide practice of furnishing the benefits in question among enterprises engaged in the same line of business. NOTE1: Even if a benefit is customarily provided by the trade, it must still pass the purpose test set by jurisprudence. Under this test, if a benefit or privilege granted to the employee is clearly for the employer’s convenience , it will not be

considered as a facility but a supplement. Here, careful consideration is given to the nature of the employer’s business in relation to the work performed by the employee. This test is used to address inequitable situations wherein employers consider a benefit deductible from the wages even if the factual circumstances show that it clearly redounds to the employers’ greater advantage. NOTE2: The distinction lies not so much in the kind of benefit or item (food,

lodging, bonus or sick leave) given, but in the purpose for which it is given. If the purpose is primarily for the employee’s gain, then the benefit is a facility; if it is mainly for the employer’s advantage, then it is a supplement. 45



NOTE3: In the ultimate analysis, the purpose test seeks to prevent a

circumvention of the minimum wage law.

1.4 PAYMENT OF WAGES  

 

Wages shall be paid in cash, legal tender at or near the place of work Payment may be made through a bank upon written petition of majority of the workers in establishments with 25 or more employees and within one kilometer radius to a bank Payment shall be made directly to the employees Wages shall be given not less than once every two (2) weeks or twice within a month at intervals not exceeding 16 days

2014 CASE: Haciend a Leddy, et al. vs. Paqui to Vil legas, G.R. No. 179654, 22 September 2014. -- Payment on a piece-rate basis does not negate regular

employment. Payment by the piece is just a method of compensation and does not define the essence of the relation. (Lambo vs. NLRC, 375 Phil. 855 [1999]).

1.5 SOME GOVERNING RULES: 

FAIR AND REASONABLE VALUE shall not include any profit to the employer,

or to any person affiliated with the employer. 

“NO WORK NO PAY” PRINCIPLE. -- If there is no work performed by the

employee, there can be no wage or pay unless the laborer was able, willing, and ready to work but was prevented by management or was illegally locked out, suspended or dismissed. But where the failure of employees to work was not due to the employer’s fault, the burden of economic lo ss suffered by the employers should not be shifted to the employer. Each party must bear his own loss. 

EQUAL PAY FOR EQUAL WORK. -- Employees who work with substantially

equal qualifications, skill, effort and responsibility, under similar conditions should be paid similar salaries (International School Alliance of Educators vs. Quisumbing, GR No.128845, June 1, 2000) . 

CIVIL CODE PROVISIONS: Art. 1705. The laborer’s wages shall be paid in legal currency. Art. 1706. Withholding of the wages, except for a debt due, shall not be made by

the employer. Art. 1707. The laborer’s wages shall be a lien on the goods manufactured or the

work done. Art. 1708. The laborer’s wages shall not be subject to execution or attachment

except for debts incurred for food, shelter, clothing, and medical attendance. Art. 1709. The employer shall neither seize nor retain any tool or other articles

belonging to the laborer. 

Art. 110, Lab or Code. Worker’s preference in case of bankruptcy . — In the event of bankruptcy or liquida tion of an employer’s business, his workers shall

enjoy first preference as regards their wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid.

46



IMPORTANT J. VELASCO CASE: Associated Labor Union – Divine Word University Employees’ Union vs. Court of Appeals and Divine Word Universi ty, G.R. No. 156882, 31 October 2008. -- reiterati ng pri nci ples of wo rkers’ preference in case of bankruptcy. .

Bankruptcy proceedings must first be instituted for Article 110 to apply. --

The application of Article 110 of the Labor Code is contingent upon the institution of bankruptcy or insolvency proceedings against the employer. Hence, preferential right given to workers under Art. 110 may be invoked only during bankruptcy or insolvency proceedings against the employer. (Development Bank of the Philippines vs. Secretary of Labor, 179 SCRA 630 [1989]).

What Article 110 of the Labor Code establishes is not a lien, but a preference of credit in favor of employees. Unlike a lien, a preference of credit does not create a charge upon any particular property of the debtor. This simply means that during bankruptcy or insolvency proceedings against the properties of the employer, the employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be proved therein. (DBP vs. Secretary, ibid.; See also DBP vs. NLRC, 222 SCRA 264 [1993]; DBP vs. NLRC, 229 SCRA 350 [1994]; Hautea vs. NLRC, 230 SCRA 119 [1994]).

2015 BAR EXAM QUESTION: (III) Benito is the owner of an eponymous clothing brand that is a top seller. He employs a number of male and female models who wear Benito's clothes in promotional shoots and videos. His deal with the models is that Benito will pay them with 3 sets of free clothes per week. Is this arrangement allowed? (2%) Answ er:

No, the arrangement is not allowed. Under Article 102 of the Labor Code, wages of an employee are to be paid only in legal tender, even when expressly requested by the employee. Hence, no lawful deal in this regard can be entered into by and between Benito and his models. Alter nativ e answ er: No. The models are Benito’s employees. As such, their services require compensation in legal tender (Art. 102, Labor Code). The three sets of clothes, regardless of value, are in kind; hence, the former’s compensation is not in the form prescribed by law.

1.6 WAGE AND WAGE-RELATED BENEFITS 

Minimum wages must always be complied with . -- Wage Order No.

NCR-19 for Metro Manila effective 04 April 2015. SECTOR/ INDUSTRY

BASIC WAGE

COLA INTEGRA TION

NEW BASIC WAGE

NEW COLA

NEW MINIMUM WAGE RATES

Non-agricultural (Incl hospitals with 100 bed capacity or less)

P466.00

P15.00

P481.00

P10.00

P491.00

429.00

15.00

444.00

10.00

454.00

429.00

15.00

444.00

10.00

454.00

429.00

15.00

444.00

10.00

454.00

Agr ic ul tu re (p lan tatio n and n on-plantation Retail/Service establishmts employing 15 persons or less Manufacturing establishments regularly employing less than 10 workers

47



IMPORTANT J. VELASCO CASE ON MINIMUM WAGE APPLICATION: Nasipi t Integrated Arrastr e vs. NAsipit Employees Labor Union – ALUTUCP, G.R. No. 162411, 30 June 2008. – As explicitly stated in the

Minimum Wage Order itself, only employees who are receiving salaries below the prescribed minimum wage, are entitled to the wage increase granted under the Wage Order. This is without prejudice to any wage distortion adjustment that may be had as regards other employees that may be affected as a consequence of the application thereof. Inasmuch as the Union employees are already receiving wages higher than that prescribed by the Wage Order, there can be no argument that the company is NOT obliged to grant them any wage increase.. 

Hours of work: Hours of work shall include: (a) all time during which an

employee is required to be on duty or to be at the prescribed workplace, and (b) all time during which an employee is suffered or permitted to work. The normal working hours shall be no more than eight (8) hours a day. Meal and rest period: meal break of less than one (1) hour and short rest periods shall be considered compensable working time 

Holid ay pay. -- The employee is entitled to the payment of his regular daily

basic wage (100%) during said holidays, even if the worker did not report for work on said days; PROVIDED THAT HE WAS PRESENT OR WAS ON LEAVE OF ABSENCE WITH PAY ON THE WORK DAY If the employee was IMMEDIATELY PRECEDING THE HOLIDAY. suffered to work during the said holidays, they will be entitled to payment of holiday premium of 200% of his basic wage (100% of basic wage PLUS 100%). 2014 CASES: Ariel L. David, doin g busi ness under th e name and st y le “Yiels Hog Dealer” vs. John G. Macasio, G.R. No. 195466, 02 July 2014 . -- General Rule: Employees on task or “pakyaw” basis are entitled to holiday pay and

SIL pay; unless they qualify as field personnel. Conrado A. Lim vs. HMR Philippines, Inc., et al, G.R. No. 201483, 04 August 2014. – Will illegally dismissed employee be entitled to payment of

holiday pay in the computation of backwages? Answer: It depends whether the monthly salary of the employee is inclusive or exclusive of holiday pay as shown by divisors used by the company in the computation of overtime pay and employees’ absences. To illustrate, if all nonworking days are paid, the divisor of the monthly salary to obtain daily rate should be 365. If nonworking days are not paid, the divisor is 251, which is a result of subtracting all Saturdays, Sundays, and the ten legal holidays. Hence, if the petitioner’s base pay does not yet include holiday pay, then it must be added to his monetary award. (ADA’s NOTES: If the divisor is 261, then the ten (10) legal holidays are already included in the monthly salary. In this case, the dismissed employee is no longer entitled to payment of holiday pay as it is already considered paid.) 

Premium p ay for work with in 8 hours on a:

1. Special or rest day: plus 30% of basic daily rate (BDR) 2. Rest day falling on a special day: plus 50% of BDR 3. Rest day falling on a regular holiday: plus 30% of 200% of BDR

48





Overtime pay for wor k in excess of 8 hours on:

1. Ordinary days: plus 25% of the basic hourly rate 2. Special days, rest days and holidays: plus 30% of the regular hourly rate on said days Overtime is NOT a benefit; rather it is simply compensation for services rendered AFTER the eight hours of work. The requirement of rendering additional service differentiates overtime pay from benefits such as thirteenth month pay or yearly merit increase. BENEFITS DO NOT REQUIRE ANY ADDITIONAL SERVICE FROM THEIR BENEFICIARIES . Thus, overtime pay does not fall within the definition of benefits under Article 100 of the Labor Code. (San Miguel Corporation vs. Numeriano Layoc, Jr., et al. G.R. No. 149640, 19 October 2007.)

2015 BAR EXAM QUESTION: (II) LKG Garments Inc. makes baby clothes for export. As part of its measures to meet its orders, LKG requires its employees to work beyond eight (8) hours everyday, from Monday to Saturday. It pays its employees an additional 35% of their regular hourly wage for work rendered in excess of eight (8) hours per day. Because of additional orders, LKG now requires two (2) shifts of workers with both shifts working beyond eight (8) hours but only up to a maximum of four (4) hours. Carding is an employee who used to render up to six (6) hours of overtime work before the change in schedule. He complains that the change adversely affected him because now he can only earn up to a maximum of four (4) hours' worth of overtime pay. Does Carding have a cause of action against the company? (4%) Answ er : No, Carding has no cause of action.

There is no diminution of benefits. Overtime pay is simply additional compensation for work done beyond the eight-hour work day. In the exercise of its management prerogatives, and absent proof that the decision to create two shifts was done in circumvention of the employees’s rights, management may change schedule of its employees. (Manila Jockey Club Employees Union vs Manila Jockey Club, GR 16770, 07 March 2001) Alter nativ e answ er : No, Carding has no cause of action.

Rendition of overtime is a decision within the valid exercise of management prerogatives. LKG has the right to determine whether or not the same is intended to be permanent and regular, not contingent nor temporary, and given only to remedy a situation which can change anytime. (Philippine National Bank v. Philippine National Bank Employees Association (PEMA), 115 SCRA 507 [1982]). 

Nightshift differential pay : plus 10% of the basic/regular rate for work between 10PM – 6AM (For further discussions under Republic Act No

10151, Repealing the Nightshift Prohibition on Women, see page 61). 



Service incentive leave : 5 days with pay per year of service

. Service charges : 85% for distribution to rank-and-file employees; 15% for losses, breakages, or distribution to managerial employees (applicable only in establishments collecting service charges) 2014 CASE: National Union of Workers In Hotel Restaurant And Allied Industries (NUWHRAIN), Philippine Plaza Chapter Vs. Philippines Plaza Inc., G.R. No. 177524, 23 July 2014. – The Union anchors its claim for 49



unpaid services charges on Sections 68 and 69 of the CBA, in relation with Article 96 of the Labor Code. Section 68 states that the sale of food, beverage, transportation, laundry and rooms are subject to service charge at the rate of ten percent (10%). Excepted from the coverage of the 10% service charge are the so- called “negotiated contracts” and “special rates.” Supreme Court decision : Hotel does not have any obligation to the Union, inasmuch as their claims arises from “non -sale” transactions like “Westin Gold Cards Revenue” and “Maxi Media Barter” t o be negotiated contracts or contracts under special rates, and the entries “Business Promotions” and “Gift Certificates” as contracts that did not involve a sale of food, beverage,

etc. 1.7

GENERAL RULE: WAGE DEDUCTIONS ARE NOT ALLOWED EXCEPTIONS: ALLOWAB LE DEDUCTIONS WITHOUT EMPLOYEE’S CONSENT:

a. SSS, Philhealth and PAG-IBIG contributions; b. Withholding taxes on income c. Where the employer is authorized by law or regulations issued by the Secretary of Labor; d. Agency fees, where the employee who is not a member of the exclusive bargaining agent but a member of the appropriate bargaining unit, may be assessed a reasonable fee for benefits received under a CBA. ALLOWAB LE DEDUCTIONS WITH THE EMPLOYEE’S CONSENT :

a. b. c. d.

Reasonable value of meals and other facilities; Payment of union dues, which may or may not be under an automatic charging-off arrangement Debt payments to the employer or third persons with employee’s explicit written consent Worker’s insurance acquired by the employer with employee’s consent;

2015 CASE: Emer Mil an, et al. vs. NLRC, et al., G.R. No. 202961, February 04, 2015. -- An employer can withhold terminal pay and benefits pending the employees’ return of its properties.

An employer is allowed to withhold terminal pay and benefits pending the employees’ return of its properties. The return of the property’s possession became an obligation or liability on the part of the employees when the employer-employee relationship ceased. The NLRC has jurisdiction to determine, preliminarily, the pa rties’ right over a property, when it is necessary to determine an issue related to rights or claims arising from an employer-employee relationship. 1.8

NON-DIMINUTION OF BENEFITS, EXPLAINED: Art. 100, Labor Code. Prohibition against elimination or diminution of benefits . — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. 

Benefits being given to employees shall not be taken back or reduced unilaterally by the employer because the benefit has become part of the employment contract, written or unwritten GENERAL RULE:

50



EXCEPTIONS:

1. If the employee also consents to the deduction. 2. If the deduction is made to correct an error. EXCEPTION TO THE EXCEPTION:

If the error is left uncorrected for a reasonable period of time, it ripens into a company policy and employees can demand for it as a matter of right. 

Requisites for voluntary employer practice such that the same cannot be unilaterally w ithdrawn anymore: (a) It should have been practiced over

a long period of time; and (b) It must be shown to have been consistent and deliberate. (Sevilla Trading Company vs. Semana, 428 SCRA 239 [2004], citing Globe Mackay Cable and Radio Corp. vs. NLRC, 163 SCRA 71 [1988]. 

The Supreme Court has not laid down any specific rule requiring a specific minimum number of years. Rather, the test of long practice has been enunciated thus: where the company agreed to continue giving a benefit knowing fully well that said employees are not covered by the law requiring payment of said. (Oceanic Pharmacal Employees Union (FFW) vs. Inciong, 94 SCRA 270 [1979]). Hence, the Supreme Court has ruled in specific cases as follows: a. Davao Fruits Corporation vs. Associated Labor Unions (225 SCRA 562 [1993]): six (6) years. b. Davao Integrated Port Stevedoring Services vs. Abarquez (220 SCRA 197 [1983]): three (3) years and nine (9) months c. Sevilla Trading Company vs. Semana, ( 428 SCRA 239 [2004]: two (2) years.

As to lengt h of ti me requi red to ri pen in to a corp or ate poli cy:

IMPORTANT 2013 CASE: Vergara vs . Coca Cola Bot tl ers, G.R. No. 176985, 01 April 2013

Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS). As stipulated in respondent’s existing Retirement Plan Rules and Regulations at the time, the Annual Performance Incentive Pay of DSSs shall be considered in the computation of retirement benefits, as follows: Basic Monthly Salary + Monthly Average Performance Incentive (which is the total performance incentive earned during the year immediately preceding ÷ 12 months) × No. of Years in Service. Claiming his entitlement to an additional Php 474, 600 as Sales Management Incentives (SMI) and to the amount of Php 496, 016 which respondent allegedly deducted illegally, representing the unpaid accounts of two dealers within his jurisdiction, petitioner filed a complaint before the NLR C for “Full Retirement Benefits, Merit Increase, Commission/Incentives, Length of Service, Actual, Moral and Exemplary Damages, and Attorney’s Fees.” Question1: Whether or not the exclusion of Sales Management Incentives in the computation of retirement b enefits is a diminution of Vergara’s benefits. Answ er1 :

NO. SMI could not be included in computation, there being no evidence that the inclusion thereof into the retirement pay has ripened into a corporate policy. General rule : Employees have a vested right over existing benefits voluntarily

granted to them by their employer. Thus, any benefit and supplement being 51



enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. Elements for diminut ion of benefits:

(1) the grant or benefit is founded on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer. When can a policy be considered to have ripened into a regular company practice?

Question2:

The employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time.

Answ er2:

IMPORTANT 2013 CASE: TSpic Cor por ation vs. TSpic Empl oyees UnionFFW, G.R. No. 163419, 13 February 2008. – No diminution of wages where the

deduction is to correct an error, and such was done within a reasonable time. Company and Union entered into a CBA with increases in wages. During the first year of the effectivity of the CBA, the Regional Wage Board issued a Wage Order prescribing increases in minimum wages. Company thereafter complied with said Wage Order and increased wages of the probationary employees. Said probationary employees received additional wage increase when they became regular. With the second wave of increase, nine employees who were senior to the recently regularized employees, received less wages. After three months from the second wave, the company HRD notified the complainant employees that due to an error in the automated payroll system, deductions will be made on their monthly salary as they had been previously overpaid. The Union protested as the deduction is a diminution of the salaries. Question: Is there diminution of salaries and benefits in this case? Answ er: NO. No vested right accrued to the additional salary inasmuch as the

payment was made erroneously, and more so as the company sought to correct the error as soon as it learned about it.

2014 BAR QUESTION: Lolong Law Firm (LLF), which employs around 50 lawyers and 100 regular staff, suffered losses for the first time in its history. The management informed its employees that it could no longer afford to provide them free lunch. Consequently, it announced that a nominal fee would henceforth be charged. Was LLF justified in withdrawing this benefit which it had unilaterally been providing to its employees? (1%) 52



(A) Yes, because it is suffering losses for the first time. (B) Yes, because this is a management prerogative which is not due to any legal or contractual obligation. (C) No, because this amounts to a diminution of benefits which is prohibited by the Labor Code. (D) No, because it is a fringe benefit that has already ripened into a demandable right.

2.

THIRTEENTH MONTH PAY 2.1 How muc h: 1/12th of the basic salary of an employee within a calendar

year. 2.2 COVERAGE 



All employers are required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year. Such employees are entitled to the benefit regardless of their designation or employment status and irrespective of the method by which their wages are paid, provided that they have worked for at least 1 month during a calendar year;

2.3 EXCLUSIONS or EXEMPTIONS FROM COVERAGE

1. Government and any of its political subdivisions, including GOCCs. Exception: Corporations operating essentially as private subsidiaries of the

Government; 2. Employers already paying their employees 13 th month pay or more in a calendar year or its equivalent at the time of issuance of PD 851; 

“Its equivalent” includes Christmas bonus, mid-year bonus, cash

bonuses and other payments amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends, COLA and all other allowances regularly enjoyed by the employees as well as non-monetary benefits. 3. Employers of household helpers and persons in the personal service of another in relation to such workers; 4. Distressed employers: a. currently incurring substantial losses or b. in the case of non-profit institutions and organizations, where their income, whether from donations, contributions, grants and other earnings from any source, has consistently declined by more than forty (40%) percent of their normal income for the last two (2) years, subject to the provision of Section 7 of this issuance; 5. Employers of those who are paid on commission, boundary, or task basis, and those who are paid a fixed amount for performance of a specific work, irrespective of the time consumed in the performance thereof.

53



Exception: Where the workers are paid on a piece-rate basis, in which case the

employer shall grant the required 13 th month pay to such workers. 

Piece Rate – employees who are paid a standard amount for

every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same.

3. BONUS 3.1 Nature of a bonus: a prerogative, not an obligation. -- The matter of giving a bonus over and above the worker’s lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. (Traders Royal Bank vs. NLRC, 189 SCRA 274 [1990]). EXCEPTION: When demandable under a contract. 2012-2014 CASES:

a) Mega Magazine Publ ic atio ns, vs. Margaret Defensor , G.R. No. 162021,16 June 2014 . -- Grant of bonus, rule and exception. The grant of a bonus or special incentive, being a management prerogative, is not a demandable and enforceable obligation, except when the bonus or special incentive is made part of the wage, salary or compensation of the employee, (Protacio v. Laya Mananghaya & Co., G.R. No. 168654, [March 25, 2009, 582 SCRA 417, 429]) or is promised by the employer and expressly agreed upon by the parties (Lepanto Ceramics, Inc. v. Lepanto Ceramics Employees Association, G.R. No. 180866,[ March 2, 2010, 614 SCRA 63, 71]). By its very definition, bonus is a gratuity or act of liberality of the giver, and cannot be considered part of an employee’s wages if it is paid only when profits are realized or a certain amount of productivity is achieved. If the desired goal of production or actual work is not accomplished, the bonus does not accrue. Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part of the giver, the respondent could not validly insist on the schedule proposed in her memorandum of April 5, 1999 considering that the grant of the bonus or special incentive remained a management prerogative. However, the Court agrees with the CA’s ruling that the petitioners had already exercised the management prerogative to grant the bonus or special incentive. At no instance did Yap flatly refuse or reject the respondent’s request for commissions and the bonus or incentive. This is plain from the fact that Yap even “bargained” with the respondent on the schedule of the rates and the revenues on which the bonus or incentive would be pegged. What remained contested was only the schedule of the rates and the revenues. b) Eastern Telecom Phils. Vs. Eastern Telecom Employees Uni on, GR 185665, 08 Feb 2012. – Company has an existing collective bargaining agreement with the Union, including a Side Agreement to the effect that “ 14th, 15th and 16th

month bonuses (other than 13th month pay) are granted." Company plan to defer payment of the 14th, 15th and 16th month bonuses due to alleged continuing deterioration of company’s finan cial position. ISSUE: Is Company bound to pay for the bonuses as per CBA? ANSWER: YES! A reading of the provision in the agreement reveals that the same provides for the giving of 14th, 15th and 16th month bonuses without qualification. The wording of the provision does not allow any other

interpretation. There were no conditions specified in the CBA Side Agreements 54

2016 LABOR PRE WEEK - DEAN ADA ABAD

Recommend Documents