Labor Law 1 Reviewer 3A Cadiz

ATENEO LAW SCHOOL 3-A L.T.J.F.

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014

LABOR LAW REVIEWER I. GENERAL PROVISIONS Constitutional Provisions State Policies  Promotion of a just social order and free the people from poverty, promote full employment and an improved quality of life for all  State values the dignity of every human person and guarantees full respect of human rights  State recognizes the vital role of the youth in nation building and shall protect their well-being  State recognizes the role of women in nation-building and shall ensure their equality before the law  State affirms labor as a primary social economic force and shall protect the rights of workers  State recognizes the indispensable role of the private sector, encourages private enterprise and provides incentives to needed investments Bill of Rights  Guarantee of due process and equal protection of the law  No law shall be passed abridging the freedom of speech, right to peaceably to assemble and petition the government for redress of grievances  Right to information on matters of public concern  Right to form unions, associations and societies for purposes not contrary to law  Non-impairment of contracts  Right to a speedy disposition of cases before all judicial, quasi-judicial and administrative bodies  No involuntary servitude in any form shall exist except as a punishment for a crime whereof the party shall have been duly convicted Social Justice  Congress shall prioritize the enactment of

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measures that protect and enhance the right of all people to human dignity, reduce social, political and economic inequalities, by diffusing wealth and political power for the common good. State shall regulate the acquisition, ownership, use and disposition of property and its increments Commitment to create economic opportunities based on freedom of initiative and self-reliance State shall afford: o Full protection of labor, local and overseas, organized and unorganized o Promote full employment and equality of employment opportunities for all Guarantee the rights of workers to: o self-organization o collective bargaining and negotiations o peaceful concerted activities o security of tenure o humane working conditions o living wage o participate in policy-making decisions State shall promote: o shared responsibility between employers and workers o preferential use of voluntary modes in settling disputes and shall enforce their mutual compliance to foster industrial peace Regulation of worker-employer relations end recognizing: o right of labor to its just share in the fruits of production o right of enterprises to reasonable returns on investments and growth Establishment of an agency for disabled persons for their rehabilitation, selfdevelopment and self-reliance Protection of working women; taking into account their maternal functions

Civil Code Provisions  Abuse of Right Doctrine – Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due and

Sources: Labor and Social Legislation Reviewer, Ateneo Central Bar Operations 2007 Azucena, Cesario, Everyone's Labor Code (2012 ed.). Abad, Antonio, Compendium on Labor Law (2011 ed.). Azucena, Cesario, Labor Code with Comments and Cases, Vol. 1 (2010 ed.)

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ATENEO LAW SCHOOL 3-A L.T.J.F. observe honesty and good faith  Relation between capital and labor are not merely contractual but is impressed with public interest  Labor contracts must yield to the common good  In case of doubt, all labor legislation and contracts shall be construed in favor of the safety and decent living for the laborer II. RECRUITMENT AND PLACEMENT State Policies (Art. 12 Labor Code)  Promote and maintain a state of full employment through improved manpower training  Protect every citizen by securing the best possible terms and conditions of employment  Facilitate a free choice of available employment  Facilitate and regulate the movement of workers  Regulate the employment of aliens  Strengthen the network of public employment offices  Insure careful selection of Filipino workers for overseas employment in order to protect the name of the Philippines abroad RA 8042 – Migrant Workers Act  Establishes a higher standard of protection of migrant workers, their families and of OFW's in distress  Declares the policy that the State does not promote overseas employment as a means to sustain economic growth.  State shall continuously create local employment opportunities RA 10022 – Amendments to RA 8042  Extended the protection of the law to all OFW's whether documented/ regular or undocumented/ irregular  Expanded definition of OFW – “who is to be engaged, is engaged or has been engaged in a remunerated activity in a

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 state of which he or she is not a citizen or on board a vessel navigating the foreign seas other than a government ship or on an installation located offshore or on the high seas” Recruitment and Placement  Any act of: o canvassing o enlisting o contracting o transporting o utilizing o hiring o procuring workers  Includes: o referrals o contact services o promising or advertising for employment locally or abroad, whether for profit or not  Any person or entity which offers or promises employment for a fee to two or more persons shall be deemed engaged in recruitment  The number of persons dealt with is NOT the determinative factor in considering whether or not an act constitutes as recruitment – the number of persons merely laws down a rule of evidence (presumptions) Name Hires and Direct Hires  Direct Hiring is when a foreign employer engages the services of the Filipino agency directly or without going through a legitimate employment agency  General Rule: Direct hiring is prohibited Exception: When done by members of the diplomatic corps, international organizations and other employers allowed by the DOLE  Name Hiring is when an individual worker is able to secure contracts for overseas employment on their own efforts without the assistance of any agency  Name Hiring is not a prohibited practice thus it is another exception to Art. 18


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ATENEO LAW SCHOOL 3-A L.T.J.F. (Ban on Direct Hiring), however, their employment must be processed and registered with the POEA POEA and NLRC  Employer-employee relation cases are under the jurisdiction of the NLRC  POEA jurisdiction: o Cases which are administrative in character o Violations of rules relating to licensing and registration of recruitment agencies o Disciplinary action cases, which are administrative in character, involving employers, principals, contracting partners and OFW's. POEA Minimum Employment Conditions 1. Guaranteed wages based on (whichever is highest):  Prescribed minimum wage in host country  Minimum wage standard set in a bilateral agreement or international convention  Minimum wage in the Philippines 2. Free food and accommodation or offsetting benefit 3. Free transportation to and from work site, or offsetting benefit 4. Just/authorized causes for termination of contract 5. Stipulations of the labor contract should not contradict Philippine law, public policy and morals OWWA Functions: Provide to OFW's:  Social and welfare services  Legal assistance  Insurance coverage  Placement assistance  Remittance services  Repatriation Repatriation General Rule: All costs shall be borne by or

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 charged to the agency and/or its principal Exception: If termination is due to the sole fault of the employee, the principal or agency shall not be responsible for the repatriation  Automatic repatriation of underage or minor workers  Responsibility of repatriation falls on the agency/principal but it may be undertaken by the OWWA without prejudice to reimbursement by the principal/agency concerned  Repatriation bond is abolished Recruitment Regulations  Travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers, whether for profit or not  Only Filipino Citizens or juridical entities at least 75% of voting capital stock is Filipino-owned shall be allowed in the recruitment of workers  License or authority is non-transferable. Any transfer is subject to prior approval of DOLE  All applicants for license or authority shall post bonds to ensure compliance with recruitment procedures  Direct hiring of Filipino workers is prohibited except through entities authorized by the DOLE  Exception on the ban on direct hiring: hiring by diplomatic corps, international organizations and other employers allowed by DOLE Illegal Recruitment  Act of recruitment (under Art. 13(b)), including the prohibited acts under Art. 34 undertaken by a non-license or nonholder of authority (Labor Code)  RA 8042 – expanded the offenders liable for illegal recruitment. It holds even licensed persons or holders of authority, who committed the prohibited acts, liable for the crime.


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ATENEO LAW SCHOOL 3-A L.T.J.F.  Illegal recruitment is malum prohibita: intent is not an element  Active and conscious participation of the accused must be shown for him to be held liable as a principal  Syndicated Illegal Recruitment: o If carried out by a group of 3 or more persons conspiring in carrying out the offense o Considered as economic sabotage  Large Scale Illegal Recruitment: o If committed against 3 or more persons individually or as a group o Considered as economic sabotage Prohibited Acts a) To charge or accept any amount greater than the allowable fees prescribed by Secretary of Labor b) Publish false information or notice or document inn relation to recruitment c) Give any false information, testimony, document or do any act of misrepresentation for purposes of securing a license or authority d) To induce/ attempt to induce a worker already employed to quit his employment in order to offer him another, EXCEPT when the transfer is designed to liberate the worker from the oppressive conditions of his work e) To influence/ attempt to influence any person not to employ any worker who has not applied through his agency f) Recruitment of workers in jobs harmful to public health, morality or to the dignity of the Republic g) Obstruct inspection by the Secretary of Labor h) Failure to file reports in the status of employment, placement, vacancies or other matters and information as may be required by the Secretary of Labor i) Substitute or alter employment contracts without the approval of the Secretary of Labor (but the alteration must be prejudicial to the employee) j) To be an officer or member of the Board

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 of any travel agency corporation or be directly or indirectly engaged in the management of a travel agency k) To withhold or deny travel documents from applicant workers for monetary considerations other than what is authorized by the Code l) Failure to actually deploy a contracted worker without valid reason m) Failure to reimburse expenses incurred by worker in connection with his deployment, in cases where deployment does not take place without the worker's fault. n) To allow a non-Filipino citizen to head or manage a licensed recruitment agency  Prohibitions A-K – from the labor code  Prohibitions L-M – from RA 8042  Prohibition N – from RA 10022 Prescriptive Periods Case

Period

Illegal Recruitment

5 years

Economic Sabotage

20 years

Claims arising from employeremployee relationship

3 years

Case Doctrines Sunace v. NLRC – Theory of Imputed Knowledge  Knowledge of the agent is knowledge to the principal, thus binding to the latter  However, knowledge to the principal is NOT knowledge to the agent EDI Staff Builders v. NLRC – Presumed Identity Approach  What law governs the relationship of the employer and employee – local or foreign laws?  The party invoking the application of a foreign law has the burden of proving the same  If foreign law is not pleaded or proved it is presumed that Philippine law is the same as the foreign law, thus Philippine


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ATENEO LAW SCHOOL 3-A L.T.J.F. law is applied South Eastern Shipping v. Navarra  For benefit claims to prosper, seafarer's death or injury must occur during the period of his contract or employment  Burden of proof lies on the party asserting that the disease/injury occurred during the course of the employment or it increased the risk of the injury Catan v. NLRC  Liability of the principal and agent over the employee is dependent on the term of the employment contract and NOT on the agency contract between the agent and principal.  Employment contract is not coterminous with the agency contract  Even if the agency contract is terminated, the solidary liability over the employee still subsists since the employment or recruitment contract has not expired yet. III. SPECIAL WORKERS Apprenticeship  Practical training supplemented by theoretical instruction  Occupations which requires more than 3 months of practical training with theoretical instruction  Only employers in highly technical industries may employ apprentices  Maximum apprenticeship period – 6 months  Wage – not less than 75% of applicable minimum wage  Apprenticeship program needs prior approval from DOLE, otherwise apprentice is deemed a regular employee  Tax deduction: o Additional deduction of ½ of value of training expenses o Program must be approved by DOLE o Deduction shall not exceed 10% of direct labor wage o Apprentice must be paid the minimum

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 wage Q: May apprentices be hired without compensation? A: Yes, if the apprenticeship is required by the school, training program curriculum or as a requisite for graduation or board examination – subject to the approval of the Secretary of Labor Learners  Trainees in semi-skilled and other industrial occupations which are not apprenticeable  Learners may only be employed when no experienced workers are available  Maximum period of learnership – 3 months  Wages – not less than 75% of applicable minimum wage  Employer is committed to hire the learner as a regular employee after the training period Apprentice

Learner

Highly skilled or technical industry

Semi-skilled or industrial occupation

Max term of 6 months

Max term of 3 months

75% of minimum wage 75% of minimum wage Apprentice program is approved by DOLE

No prior approval by DOLE is required

Employer is NOT committed to hire apprentice at end of training period

Employer is committed to hire learner at end of training period

Handicapped Workers  Those whose earning capacity is impaired by age or physical or mental deficiency or injury  Entitled to be wages not less than 75% of the legal minimum wage  May be hired as apprentices or learners if their handicap does not impede the performance of job operations  May even acquire the status of a regular


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ATENEO LAW SCHOOL 3-A L.T.J.F. employee RA 7277 – Magna Carta for Disabled Persons Forms of discrimination on employment 1. Limiting, classifying or segregating a disabled job applicant in a manner that adversely affects his work opportunities 2. Using standards and tests that screen out a disabled person unless such tests are job-related and consistent with business necessity 3. Using standards that: 1. have the effect of discrimination on the basis of disability 2. perpetuate the discrimination of others who are subject to common administrative control 4. Providing less compensation and benefits by reason of his disability 5. Deprivation of training opportunities and promotion solely on account of disability 6. Transferring a disabled employee to a job he cannot perform be reason of his disability 7. Dismissing a disabled employee by reason of his disability unless the employer proves that the work is impaired to the prejudice of the business: Provided that the employer first sought to provide reasonable accommodations for disabled persons 8. Failing to administer employment tests which accurately reflect the skills of the disabled applicant 9. Excluding disabled persons from membership in labor unions IV. EMPLOYER-EMPLOYEE RELATIONSHIP Jurisprudential Tests Economic Reality Test (Francisco v. NLRC) 1. Extent to which the services performed are an integral part of the employer's business 2. Extent of worker's investment in equipment and facilities 3. Nature and degree of employer's control 4. Worker's opportunity for profit and loss 5. Amount of initiative, skill and judgment

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 required for the success of the independent enterprise 6. Permanency and duration of the relationship of worker and employer 7. Degree of dependency of worker upon employer for his continued employment Four-Fold Test (Manila Water v. Pena) 1. Selection and engagement of employees 2. Payment of wages 3. Power of dismissal 4. Power of control over:  as to the result of the work to be done -AND as to the means to accomplish it Control Test  Most important test in the 4-fold test  Where employer has a right to control the conduct of the employee in relation to his work  Power of control refers to the existence of such right/power and not the actual exercise thereof (Republic v. Asiapro)  Existence of right/power of control is sufficient proof of EER. Such right/power need not to be actually exercised.  If the worker (TV commentator) had a free hand on what to say or discuss in his shows, the TV Network is deemed to have no control over the performance of the commentator’s work (Sonza v. ABS-CBN) Management Prerogative  Work reassignment as a response to an unfavorable business climate is a legitimate exercise of management prerogative (Pantoja v. SCA Hygiene)  There is no obligation on the part of the employer to reinstate an employee when: o The employee himself resigned o There is a need to protect the unbiased image of the company (Ymbong v. ABS-CBN Corp)  The transfer or reassignment of an employee is a legitimate exercise of management prerogative provided: o There is no demotion in rank


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ATENEO LAW SCHOOL 3-A L.T.J.F. There is no diminution of salary The action is not motivated by bad faith, or is not a demotion without valid cause (Herida v. F&C Pawnshop)  In the absence of proof that the act of the employer is ill-motivated, it is presumed that the employer acted in good faith (San Miguel Corp v. NLRC)  But management prerogative cannot be used as an excuse to abandon or violate the CBA (San Miguel Corp v. NLRC)  A job evaluation conducted for the purpose of evaluating the positions of the employees, absent the intent to adjust the salaries, is a valid exercise of management prerogative (SCA Employees Association v. SCA Corp) o o

V. SPECIAL CLASS OF WORKERS Women Maternity Leave Benefits (Art. 131 Labor Code)  Woman employee must have rendered an aggregate service of at least 6 months for the last 12 months  At least 2 weeks – prior to the expected date of delivery  Another 4 weeks – after normal delivery or abortion with full pay  Employer may require the production of a medical certificate  General Rule: If employee falls ill due to the pregnancy, abortion, delivery or miscarriage, maternity leave shall be extended without pay  Exception: If employee has unused leave credits, such extended leave may be off-set or charged to it  Maternity leave shall be paid only for the first 4 deliveries. Maternity Leave (SSS Law)  Must be a female SSS member  Has paid at least 3 monthly contributions in the 12-month period immediately preceding the semester of her childbirth  Shall be paid a daily maternity benefit

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 (100% of average daily salary) for: o 60 days for normal delivery o 78 days for caesarian delivery, subject to certain conditions  Maternity leave shall be paid only for the first 4 deliveries  Legitimacy of the marriage (whether or not the woman is married) is immaterial in order to avail of the benefit NOTE: Since there is compulsory membership of every employee with the SSS, the provisions of the SSS Law essentially set aside Arts. 133(a) and (b) of the Labor Code. However, if the employee is proved to be a non-member, the SSS Law cannot and will not apply since membership is a pre-requisite. Paternity Leave (R.A. 8187)  7 calendar days with full pay  Must be in relation to the childbirth of his legitimate wife with whom he is cohabiting  May be availed of 4 times (entitlement is for the first 4 deliveries or miscarriage) Battered Woman Leave - VAWC (R.A. 9262)  Victims of physical, psychological or sexual violence  Paid leave of up to 10 days  Victim must apply for a Baranggay Protection Order to avail of the reliefs provided by R.A. 9262  Victim must apply for a certificate from the clerk of court that a case under R.A. 9262 is pending in court to avail of the paid leaves  The Protection Order may extend the leave period depending on its necessity Special Leave for Women (R.A. 9710)  Special leave benefit of 2 months with full pay after a surgery caused by gynecological disorders Parental Leave for Solo Parents (R.A. 8972)  An addition to the leave privileges under existing laws


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 Leave of not more than 7 working days every year  Granted to any solo parent employee who has rendered service of at least 1 year Summary Leave

Statute

Days

Maternity

SSS Law

60 days (normal) 78 days (caesarian)

Paternity

R.A. 8187

7 calendar days

VAWC

R.A. 9262

10 days (extendable)

Special

R.A. 9710

60 days (2 months)

Solo Parents R.A. 8972

7 days annually

Minors General Rule: No child below 15 years of age shall be employed Exception: When the child works under the sole responsibility of his parents or guardian AND his employment doesn't interfere with his schooling.  Any person between 15 and 18 years old may be employed for such number of hours and periods of the day as determined by the Secretary of Labor  No person below 18 years of age may be employed in an undertaking which is hazardous or deleterious in nature Homeworkers  One who performs in or about his home any processing of goods or materials which have been furnished directly or indirectly, by an employer and thereafter to be returned to the latter  Employer must remit SSS, Philhealth and ECC Premiums for the homeworker  For homeworker's organization, the organization shall acquire legal personality and acquire all the rights and privileges granted by law upon registration with the DOLE  In case the homeworker is employed through a contractor and such contractor or subcontractor fails to pay the wages of

the homeworker, the employer shall be jointly and severally liable with the contractor or subcontractor Employer of a homeworker – any person, natural or juridical, who for his account, or on behalf of any person residing outside the country or through any other person: 1. Delivers any goods or materials to be processed in or about a home and thereafter be returned or to be distributed in accordance with his directions 2. Sells any goods to be processed in or about the home and then rebuys them after such processing Prohibitions No homework shall be performed on: 1. Explosives, fireworks and the like 2. Drugs and poisons 3. Other articles, the processing of which requires exposure to toxic substances Kasambahay Law Rights and Privileges  Employer shall provide 3 adequate meals a day, human sleeping arrangements and medical assistance  The withholding of the basic necessities as a form of disciplinary action shall be prohibited  Right to privacy of domestic workers shall be guaranteed at all times and shall extend to all forms of communications and personal effects  In case of emergencies, access to outside communication shall be granted even during work time. Should domestic worker make use of the employer's telephone, cost shall be borne by the domestic worker  Employer shall afford the worker the opportunity to finish basic education and may allow access to alternative learning systems  All communication and information pertaining to the employer shall not be


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ATENEO LAW SCHOOL 3-A L.T.J.F. disclosed by the domestic worker during and after employment  Such privileged information shall be inadmissible in evidence except when the suit involves the employer or any member of the household in a crime against persons, property, personal liberty and security and chastity Pre-Employment  Prior to the execution of the employment contract, the employer may require: o Medical certificate o Barangay and police clearance o NBI Clearance o Birth certificate, voter's ID or passport (for purposes of identifying the worker's age)  Prohibited practices o Charging recruitment or agent's fees to the domestic worker o Requiring deposits from which deductions may be made for losses and damages o Debt Bondage  Minimum employment age of domestic workers: 15 years old  Employer shall register all domestic workers in the Registry of Domestic Workers in their respective baranggays Employment  Domestic worker is entitled to an aggregate daily rest of 8 hours per day  Worker is entitled to at least 24 consecutive hours of rest in a week  Permissible arrangements: o Offsetting a day of absence with a particular rest day o Waiving a rest day for a paid day o Accumulating rest days not exceeding 5 days o Other similar arrangements  Work outside the household (for the benefit of another household) shall entitle the worker to additional payment of not less than the minimum wage and any liability incurred shall be borne by the

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 original employer  Domestic worker is entitled to 13th month pay  If worker leaves without any justifiable reason, any unpaid salary for a period of not exceeding 15 days shall be forfeited  Service Incentive Leaves: o Granted to worker who has rendered at least 1 year of service o Paid leaves of 5 days o Unused leaves shall NOT be convertible to cash o Unused leaves shall not be cumulative or carried over to the succeeding years  Entitlement to SSS, PhilHealth and PagIBIG: o Domestic worker has rendered at least 1 month of service o General Rule: Premium payments shall be shouldered by employer o Exception: Domestic worker shoulders the proportionate share in premium payments if the worker is receiving a wage of Php5,000 or more per month Post-Employment  Termination of Service o Grounds stated by the law are NOT exclusive (allows analogous causes) o If unjustly dismissed, worker is entitled to compensation already earned plus wages equivalent to 15 days of work by way of indemnity o If worker leaves without any justifiable reason, any unpaid salary for a period of not exceeding 15 days shall be forfeited o Employer may recover from the domestic worker costs incurred related to deployment expenses provided, the service has been terminated within 6 months from time of employment  Termination Initiated by Worker o Verbal or emotional abuse o Inhumane treatment and physical


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ATENEO LAW SCHOOL 3-A L.T.J.F. abuse Commission of a crime against the domestic worker o Violation of the employment contract or the standards set by law o Any disease prejudicial to the health of the worker, the employer or members of the household o Other analogous causes  Termination Initiated by Employer o Misconduct or willful disobedience of the lawful order of the employer in relation with the worker's duties o Gross or habitual neglect or inefficiency in the performance of duties o Commission of a crime against the person of the employer or any immediate member of the employer's family (NOTE: the provision does not cover crimes against the property of the employer) o Violation of the employment contract or the standards set by law o Any disease prejudicial to the health of the worker, the employer or members of the household o Other analogous causes  Upon severance of the employment relationship, the employer shall issue a certificate of employment indicating the nature, duration of service and work performance  Employment certification is issued within 5 days from request of domestic worker o

Settlement of Disputes  All labor-related disputes shall be elevated to the DOLE Regional Office  DOLE Regional Office shall act both as conciliator and arbitrator (All conciliation and mediation efforts shall be exhausted first before a decision is rendered)  Ordinary crimes committed under the RPC or special laws shall be filed with the regular courts Case Doctrines


Apex Mining v NLRC – A house helper is employed in the employer's home to minister exclusively to the personal comfort and enjoyment of the employer's family. Barcenas v NLRC – Activities done which are essential and important to the operation and functions of the temple are not deemed activities of a household helper Duncan v Glaxo – The policy of prohibiting employees from having personal relationships with employees of competitor companies in order to protect trade secrets is a valid exercise of management prerogatives PTT v NLRC – A company policy prohibiting the employment of married women, without valid or justifiable reasons, is a blatant form of discrimination Star Paper Inc v Simbol – The failure to prove a legitimate business concern in prohibiting employees from marrying their co-employees cannot prejudice the worker's right against discrimination based upon stereotypes of married persons working together in one company VI. WORKING CONDITIONS AND REST PERIODS Coverage General Rule: This shall apply to employees in all establishments whether for profit or not Exceptions:  Government employees  Managerial employees  Field personnel  Members of the family of the employer who are dependent on him for support  Domestic helpers  Persons in the personal service of another  Workers paid by results Definitions


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1. Overtime Work – work performed beyond 8 hours a day 2. Compressed Work Week – each workday is extended beyond the 8-hour limit but the total weekly work hours does not exceed the statutory limit (48 Hours) 3. Night Work – work done at night for a period of not less than 7 hours (Art. 154 as amended by R.A. 10151) 4. Night Worker – any employed person whose work covers the period from 10PM to 6AM provided the period is no less than 7 consecutive hours of work (I.R.R. of R.A. 10151) 5. Night Shift Differential – work done between 10PM and 6AM 6. Weekly Rest Day – a rest period of not less than 24 consecutive hours after every 6 consecutive normal work days 7. Holiday Pay – A full day's wage paid for each of the 11 regular holidays set by law 8. Premium Pay – Additional compensation (30% of regular wage) for work performed on the employee's rest day or holidays 9. Service Incentive Leave – Paid leaves for employees who have rendered service for at least 1 year. Equivalent to 5 days per year. 10. Service Charges – Charges (additional income) collected by restaurants, hotels and similar establishments. Art. 96 of the Labor Code mandates that employees have a share of 85% on such service charges. 11. 13th Month Pay – One twelfth (1/12) of the basic salary of an employee within a calendar year 12. Special/ Non-working Holiday – Employee is not required to work but at the same time, employer is not obliged to give any premiums or regular pay. Follows the “no workno pay” rule. Compensation, Rates and Premiums Compensation

Premium

Night Shift Differential

10% of regular wage for each hour worked between 10PM and 6AM

Overtime Work

25% of regular wage for ordinary work days 30% for holidays or rest days

Work done on

30% of regular wage

rest day or holiday* Work done on a 50% of regular wage (both holiday holiday AND rest and rest day must fall on the same day day) *Holidays in this chart refer to Special Non-Working Holidays. Premium for Regular/Legal Holidays is 200%

NOTES:  Premiums are computed on an hourly rate unless a valid contract states otherwise  The law entitles the employee to two possible premiums for work done on a rest day or holiday – 30% for the 1st 8 hours and another 30% for overtime. Thus if an employee works during a rest day AND renders overtime, the total premium is 60% Emergency Rest Day Work (Art. 92)  In case of actual or impending emergencies caused by calamities  When there is urgent work to be performed on machines and equipment to avoid serious loss or damage  Abnormal pressure of work where the employer cannot ordinarily be expected to resort to other measures  To prevent loss or damage to perishable goods  When nature of work requires continuous operations and stoppage may result in irreparable injury or loss  Under any other analogous circumstances Emergency Overtime Work (Art. 89)  When country is at war or when any other national emergency is declared  When it is necessary to prevent loss of life or property or in case of imminent danger to public safety  When there is urgent work to be performed on machines and equipment to avoid serious loss or damage  To prevent loss or damage to perishable goods  When continuation or completion of the


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ATENEO LAW SCHOOL 3-A L.T.J.F. work started before the 8th hour is necessary to prevent serious prejudice to the business operations NOTES:  The exceptions are instances when overtime work becomes obligatory. However, the employee is still entitled to the additional compensation (premium pay) mandated by law.  Emergency overtime work (Art. 89) is exclusive as to its applicable situations. Emergency rest day work (Art. 92) is NOT exclusive since it is applicable to “any analogous circumstances.” Service Incentive Leaves (SIL)  5 days of paid leave each year  Available to employees who have rendered at least 1 year of service  Unused SIL credits at the end of the year should be converted into cash (I.R.R.)  The required 1 year period may be continuous or broken.  For less than 1 year of service, SIL may not be granted nor pro-rated. NOTE: Under the Kasambahay Law, the SIL is NOT convertible to cash. Holidays and Employees Regular/Legal Holidays 1. New Year's Day 2. Maundy Thursday 3. Good Friday 4. Eidul Fitr 5. Araw ng Kagitingan (Bataan Day) 6. Labor Day 7. Independence Day 8. National Heroes Day 9. Bonifacio Day 10. Christmas Day 11. Rizal Day 12. Eidul Adha Special Holidays 1. Ninoy Aquino Day 2. All Saints Day 3. Last Day of the Year


Implementing Rules on Holiday Pay General Rule: Employees who are absent on the day immediately preceding a regular holiday may NOT be paid the holiday pay Exceptions: 1. If he has worked on such holiday 2. If the day immediately preceding the holiday is a nonworking day in the establishment 3. If the day immediately preceding the holiday is the scheduled rest day of the employee (leave of absence with pay) provided he has worked on the day immediately preceding such rest day or nonworking day Monthly-paid Employees  They are included in the benefits of holiday pay  It cannot be presumed that holiday pay is already included in the monthly wages  If all nonworking days are paid: o Divisor of monthly salary to obtain daily rate is 365 o 365 – all days in the year are paid  If only the worked days are paid (assuming it is from Monday to Friday) o Divisor to be used is 251 o 251 – Saturdays, Sundays and the 10 legal holidays are subtracted already o 249 – if there are 12 legal holidays Hourly-paid Employees (Teachers)  When a special holiday is declared (nonworking) the teacher is deprived of expected income  Hourly-paid teacher is entitled to their regular rate on days declared as nonworking holidays or for some reason classes are suspended or shortened.  Hourly-paid teacher is NOT entitled to their regular rate for regular holidays, whether the same be during the regular semester or during semestral vacations  In case of extended work, they are paid


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ATENEO LAW SCHOOL 3-A L.T.J.F. their regular rates – no premium. Field Personnel  Not entitled to holiday pay (Art. 82 specifically excludes them)  “whose actual hours of work xxx cannot be determined with reasonable certainty” - ability to ascertain that the field personnel actually performed work  Whether or not the employer is still able to exercise supervision and control over the field personnel  If control is still exercised, then such employee is NOT a field personnel Piece-rate Workers  2 kinds of piece-rate workers: o Who are paid rates (standards) as prescribed by the DOLE o Who are paid rates as prescribed by employer and NOT approved by DOLE  1st kind – NOT entitled to overtime pay and premium rates  2nd kind – entitled to overtime pay and premium pay (it is the difference between the legal rate and the employee's rate)  Common benefits to both kinds of piecerate workers: o Statutory Minimum Daily Rate o Service Incentive Leave o Night shift differential o Holiday pay o Meal and rest periods o 13th Month pay o Other benefits granted by law or CBA NOTE: Default rule is that a piece-rate worker is entitled to overtime and premium pay. It is presumed that the employer is not following the standards prescribed by DOLE. Employer has burden of proving that there is adherence to the DOLE Standards (Labor Congress v. NLRC) Double Holiday Rules  2 Successive Regular Holidays – General Rule: an employee may not be paid for both holidays if he absents himself on the day immediately preceding the first

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 holiday. Exception: If the employee works on the 1st holiday, then he is entitled to holiday pay on the 2nd holiday  2 Regular Holidays on the Same Day – an employee is entitled to 200% of his basic wage provided he worked on the immediately preceding day.  If he worked on such day, he is entitled to 300% of his basic wage Summary Benefit

Regular

Hourly

Piecerate A

Piecerate B

Overtime

Y

N

N

Y

Premium

Y

N

Y

N.S.D.

Y

Y

Y

Holiday

Y

Y

Y

S.I.L.

Y

Y

Y

Y

13th MP

Y

Y

Y

N

N

Contractual

“Piece Rate A” - Following the DOLE Standard “Piece Rate B” - Following the employer's standard Holiday – refers only to LEGAL HOLIDAY

Case Doctrines Bisig ng Manggagawa v. Phil Refining Co – Absent any contrary agreement, the “regular base pay” excludes bonus pay and fringe benefits Cebu Institute v Ople  Proceeds of schools must be allocated accordingly: 60% to teachers’ salaries and 40% administrative expenses.  The 60% is the minimum amount thus a bigger allocation may be agreed upon  The current rule in allocation is 70% salaries and 30% administrative expense  Benefits and holiday pay are chargeable to the 70% allocation Chartered Bank EA v Ople  When monthly paid employees work on a holiday, they are given an additional 100% base pay on top of a premium pay of 50%  If their monthly pay already includes their


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ATENEO LAW SCHOOL 3-A L.T.J.F. salaries for holidays, they should be paid only premium pay but NOT both premium and base pay Framanlis Farms v Minister of Labor – Nonmonetary benefits (free food or electricity) are not proper substitutes for the 13th month pay. Neither may year-end rewards for loyalty be considered in lieu of 13th month pay. JRC v NLRC  Teachers paid by the hour are NOT entitled to holiday pay whether the same may be during regular semesters, semestral break, Christmas break or Holy Week Vacations.  However they are entitled to their regular hourly rate on special holidays (nonworking) or on days classes are suspended or shortened  In case of extensions in work hours, the teacher is entitled to their hourly rates (not overtime pay/premium) NOTE: Private school teachers are not paid for the regular holidays during semestral vacations. However, they shall be paid for regular holidays during Christmas vacation (Sec. 8 Rule IV, Implementing Rules of Book III) ~ I assume that the IRR refers to teachers NOT paid by the hour Kwok v Phil Carpet Mfg Corp – Absent any agreement to the contrary, Sick Leaves and Vacation Leaves are not convertible to cash since these benefits are voluntary in nature; NOT statutory requirements. Labor Congress v NLRC – Piece-rate Workers:  Entitled to 13th month pay  If they are paid according to the standards issued by DOLE – NOT entitled to premium or overtime pay  If they are NOT paid according to the DOLE standards – entitled to the difference between the legal rate and the employer's rate (if employer's rate is lower)

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 Meralco Workers Union v Meralco – General Rule: Overtime pay cannot be waived. Exception: When the total benefits are over and above the legal amount Mercidar v NLRC – Fishing crew members are not field personnel since the employer still exercised control over the crew even aboard the vessel through its ship master. National Semiconductor v NLRC – The employee's allegation that he is not paid is a negative allegation, thus the burden of proof does not rest upon him. Employee is also not in a position to prove non-payment since the payrolls and records are in the possession of the employer. Burden of proof lies on the employer National Sugar Refineries v NLRC – Supervisors are considered managerial staff not by their title but by the duties and responsibilities they exercise (authority to hire and fire, decision making, training of subordinates, exercise of independent judgment and discretion) National Federation of Sugar Workers v Ovejera – Christmas bonuses, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary are considered “equivalents” of the 13th month pay. Nonmonetary benefits and allowances already enjoyed by the employee are NOT considered as “equivalents” Petroleum Shipping v NLRC – Seafarers are not regular employees but contractual employees, thus they are not entitled to 13th month pay Philippine Duplicators v NLRC – Commissions of salesmen are part of their basic salary for purposes of computing their 13th month pay. However, medical representatives, are not salesmen, thus their “commissions” are productivity bonuses, thus not included in their basic salary (citing Boie-Takeda Case) San Miguel v Inciong – The following are not deemed part of the basic salary:  Cost of Living Allowances (COLA)


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ATENEO LAW SCHOOL 3-A L.T.J.F.    


Profit-sharing payments Overtime pay Premium pay All monetary benefits and allowances not considered part of the basic salary at the time PD 851 was promulgated

Sime Darby v NLRC – A change in work schedule (from one with a paid 30-minute lunch break to a one with a full 1-hour, but unpaid, lunch break) is not considered a diminution of their benefits since such management prerogative was exercised in good faith Union of Filipro Workers v Vivar – The phrase “whose actual hours of work in the field cannot be determined with reasonable certainty” means that the employer has no way of determining whether or not the employee really spends actual work in the field. It means that their time and performance in the field is unsupervised by the employer. UP Union v UP – Teachers paid on monthly or daily basis are entitled to ECOLA pay and their regular pay during semestral breaks NOTE: There are differences between hourly paid and monthly/daily paid teachers when it comes to their regular pay during school breaks Hourly Paid Teachers

Monthly Paid Teachers

Paid only for actual hours worked

Entitled to regular pay during semestral breaks

Not entitled to holiday pay during Christmas vacations or semestral breaks

Not entitled to holiday pay during semestral breaks except during the Christmas vacation

Universal Corn v NLRC – A Christmas bonus given for employee loyalty (and as provided for in the CBA) cannot be considered equivalents of 13th Month Pay since it has a different purpose from P.D. 851 (rewarding employee loyalty) Villuga v NLRC – The test of “managerial status” depends on whether a person possesses

authority that is not merely routinary or clerical in nature but one that requires the use of independent judgment. VII. WAGES Application and Coverage Title on Wages does not cover:  Farm tenancy or leasehold  Domestic service  Persons working in their respective homes in needlework  Cottage industries duly registered (small business enterprise)  Cooperatives (I.R.R. and DOJ Opinion) Barangay Micro Business Enterprise (R.A. 9178)  Engaged in the processing or manufacturing of products including agroprocessing, trading and services  Total assets, including loans BUT exclusive of land where the business is situated, is not more than Php3,000,000.00. What Constitutes as Wages or Basic Pay?  Remuneration or earnings capable of being expressed in money  Salesmen's commission  Facilities or Commodities furnished for the benefit of employees o Value is to be determined by Secretary of Labor o Facilities must be for the benefit of the employee or his family o Items of expense necessary for the employee’s subsistence o Eg: Food and housing o NOT the same as supplements What are Deemed Excluded?  Overtime pay  Any compensation for work rendered beyond the normal workload or hours  Cost of Living Allowances  13th Month Pay  Profit-sharing agreements


Page 15 of 41



 Other monetary benefits not considered integrated as part of the basic salary Facilities Food, housing Wage-deductible For benefit of employee Necessary for laborer’s subsistence

Supplements Tools of trade Not wage-deductible For benefit of employer Extra remunerations and privileges

Legal requirements before deducting value of facilities 1. Proof that such facilities are customarily furnished by the trade 2. Provision of deductible facilities are VOLUNTARILY accepted by employee in writing 3. Facilities are charged or deducted at a reasonable value Minimum Wage Rates  Lowest wage rate fixed by law  Prescribed by the Regional Tripartite Wage and Productivity Boards  Rates differ per region and are dependent on the following factors: o Cost of living o Consumer price index o Needs of the workers and their families o Demand for living wages o Fair return of capital invested and capacity to pay of employers o Need to induce industries to invest in country side (incentives to investors) o Prevailing wage rates Daily-Paid vs. Monthly-Paid Daily-Paid Monthly-Paid Paid only for the Uniformly paid by the days actually month worked Worked days are Presumed to be paid for easier to count ALL days in the month whether worked or not

Minimum legal rates are easier to compute (daily rate)

Monthly wage >= Legal minimum x (365/12)

Computation of Daily Rate for Monthly Paid Employees Daily Rate = (Monthly Wage x 12/365)  Divisor shows the number of days covered  Divisor must be 365, to show that all days are paid, even unworked rest days. This determines the legal minimum rate.  If divisor is less than 365, it means: o Daily rate is higher BUT o It indicates that not all days of the year are covered o If divisor is 314, it means only 6 days out of a week are paid o If divisor is 261, it means only 5 days out a week are paid o Regular holidays are to be subtracted or added to the divisor accordingly 13th Month Pay  A statutory obligation  1/12 of the total basic salary earned by the employee within the calendar year  All rank-and-file employees are entitled to 13th month pay provided they have worked at least 1 month during the calendar year  P.D. 851 exempts employers who are already paying their employees 13th month pay or its equivalent Payment of Wages Permissible forms of Payment  Cash (legal tender)  Check or money order when such manner of payment is customary on the date of effectivity of the Labor Code (Art. 102)  Payment through ATM (Labor Advisory) NOTE: Other forms (promissory note, coupons,


Page 16 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. tokens, etc.) of payment shall NOT be allowed even when expressly requested by the employee Time of Payment  At least once every 2 weeks or twice a month  In case of force majeure, employer must pay the wages immediately after such force majeure has ceased  No employer shall make payment with less frequency than once a month Q: What if the employees' is engaged to work a specific task which cannot be completed in 2 weeks? How will the wages be paid?

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 regards to their wages  Unpaid wages shall be paid in full before the claims of the government or creditors  A declaration of bankruptcy or a judicial liquidation is a prerequisite in the enforcement of worker's preference Attorney's Fees  10% of the amount of wages recovered is the MAXIMUM allowable for attorney's fees. Anything lower than 10% is permissible  What is prohibited is fees exceeding 10% Prohibitions Regarding Wages

A: Payments are made at intervals not exceeding 16 days (in proportion to the amount of work completed) and the final settlement is made upon completion of the work

Wage Deductions

Q: Is there an exception to this rule?

Exceptions: Labor Code Exceptions: 1. Worker is insured with his consent by the employer and deduction is for payment of the insurance premium 2. Payment of Union Dues 3. Other cases authorized by law or the Secretary of Labor

A: Yes. If a Collective Bargaining Agreement or arbitration award states a contrary manner of payment of wages Direct Payment of Wages General Rule: Wages shall be paid directly to the workers to whom they are due Exceptions: 1. Force Majeure – worker may be paid through another person under written authority given by the worker 2. Where worker has died – wages are paid to the heirs of the deceased worker:  Claimants shall execute an affidavit  Affidavit is presented to employer  Employer pays to the Secretary of Labor and the latter shall act as referee in dividing the amount among the heirs  Employer is then absolved from any further liability with respect to the amount paid Employers Bankruptcy  Employees shall enjoy first preference as

General Rule: No employer shall make any deduction from the wages of his employees

Other Exceptions Authorized by Existing Laws: 1. Where employee is indebted to the employer and such debt has become due and demandable (Civil Code Art. 1706) 2. Court Awards (execution and attachment) 3. Withholding Tax 4. Salary deductions of a legally established cooperative 5. Deductions for payment to 3rd persons, upon written authorization of employee 6. Union Dues 7. Agency Fee 8. Deductions for value of meals and other facilities 9. Deductions for loss or damage (Art. 114) 10. SSS, Philhealth, Pag-IBIG Premiums Deductions for Loss or Damage


Page 17 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. General Rule: No employer shall require his worker to make deposits for the reimbursement of loss or damage to materials, tools or equipment supplied by employer Exception: When the trade, occupation or business of the employer recognizes such practice, or the practice is necessary or desirable as determined by the Secretary of Labor Requisites for Payment for Loss/Damage: 1. Employee is shown to be responsible for such loss or damage 2. Employee is given ample opportunity to show cause why deduction should not be made 3. Amount of deduction is fair and reasonable and shall not exceed actual loss or damage 4. Deduction does not exceed 20% of the employee's wages in a week Other Prohibitions  Withholding any amount of the wages or inducing the worker to give up any part of his wages by force, intimidation or threat  Withholding of wages because the worker has not completed an assigned task or has violated company rules  Deduction of wages as consideration of a promise of employment or retention in employment  Withholding or reduction of wages as a retaliatory measure against an employee who has filed any complaint against the employer  False reporting Wage Orders and Wage Fixing National Wages and Productivity Commission  National consultative and advisory body on matters on wages, income and productivity  Exercise supervision over the Regional Tripartite Wages and Productivity Boards  Review regional wage levels set by the Regional Tripartite Wages and

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 Productivity Boards  Undertake studies and research on information regarding employment, cost of living, labor costs, investments and returns Regional Tripartite Wages and Productivity Board  Develop plans, programs and projects relative to wages, income and productivity improvement for their respective regions  Determine and fix the minimum wage rates applicable in their region, provinces or industries and issue the wage orders  Receive and process applications for exemption from prescribed wage rates  Exercise technical supervision over the regional office of the DOLE  Conduct public hearings, consultations and give notices to interested parties in determining the appropriate wages Wage Orders  Issued by the Regional Boards  Aggrieved parties may appeal the wage order to the Commission within 10 days from the publication of such order  Filing of appeal does NOT stay the order unless the person appealing shall file an undertaking with a surety or sureties Wage Distortion  If the pay advantage is of a position over another is removed or significantly reduced by a pay adjustment required by a wage order, such pay advantage should somehow be restored  For salary distortion to exist, the law does not require FULL elimination of salary differences; a severe contraction is enough  Full compliance with the wage order and upward adjustment of the distorted salaries is prejudicial to the employer  Wage orders adjusts the minimum level but not the levels above the minimum – it DOES NOT mandate across-the-board salary increase


Page 18 of 41



Supreme Court formula to correct a salary distortion: Prescribed Increase = Minimum Wage x 100 Actual Salary Elements of Wage Distortion 1. Existing hierarchy of positions with corresponding salary rates 2. Significant change in the salary rate of lower pay class without a concomitant increase in salary rate of a higher one 3. Elimination of distinction between the two levels 4. Existence of the distortion in the same region of the country How to Resolve Wage Distortion Disputes No Union With Union NCMB

CBA Arbitration Process

NLRC

Voluntary Arbitration

Court of Appeals

Court of Appeals

Supreme Court

Supreme Court

*NCMB – National Conciliation and Mediation Board (A conciliator; NOT an arbitrator)

Case Doctrines American Wire Employees v American Wire – The withdrawal of benefits gratuitously given by the employer is not violative of the Nondiminution of benefits (Art. 100) and such benefits may not ripen into a demandable obligation Apodaca v NLRC – The wages of an employee may not be applied to satisfy his obligation to pay his stock subscriptions. The employee is indebted to the employer-corporation not as a worker but as a stock purchaser Bankard Employees v NLRC – While seniority may be a factor in determining the wages of

employees, it cannot be the SOLE basis in cases where the nature of their work differs (for wage distortion cases) Commando Security v NLRC – An employer may not deduct its so-called “share” from the wages of its employees even if such deduction has been agreed by them being contrary to law. This is especially true if the employer is placed in a contractually disadvantaged position and signs a waiver contrary to law and public policy Eastern Telecom v Eastern Telecom Union – The practice of giving bonuses beyond the legal requirement, whether the company has earned profits or not, may not be withdrawn since it will be against Art. 100 (non-diminution of benefits) Gaa v CA – The salaries of managers and those holding supervisory positions may be the subject of judicial execution since they are not “laborers” as contemplated by Art. 1708 of the Civil Code Lingkod Manggagawa v Rubberworld – Upon the appointment of a rehabilitation receiver, for bankruptcy and liquidation proceedings, all claims for actions, including labor claims, shall be suspended accordingly Metrobank Employees Union v NLRC – In mandating an adjustment in wage distortion cases, the law does not require that there be a total elimination of wage differences; a severe contraction is enough Millares v NLRC – Transportation allowance given primarily for the benefit of the employer or necessary to the conduct of the employer's business does NOT form part of the employer's wages Nasipit Lumber v NWPC – Guidelines issued by the Regional Tripartite Wages and Productivity Board (RTWPB) without the approval of the National Wages and Productivity Commission (NWPC) are ineffectual, void and cannot be a source of rights and privileges PNB v Cruz – Art. 110 (Preference of worker's


Page 19 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. claims in case of bankruptcy) covers not only unpaid wages but also separation pay. Separation pay must be considered as part of remuneration for services rendered or to be rendered. Prubankers Association v Prudential Bank – A wage disparity between employees in the same rung but located in different regions of the country is NOT the situation the law contemplates regarding wage distortion. The distortion must exist in the same region of the country VIII. CONTRACTORS OR SUBCONTRACTORS Contracting in General  An arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job within a definite or predetermined period (D.O. No. 18-A)  Creates a trilateral relationship: o Contractor and its employees (Employment) o Contractor and Principal (Agency)  The principal-employer is deemed to be an “indirect employer” in such a way that he is joint and severally liable with the contractor in the event the latter fails to pay wages to its employees  The employer may require the contractor to post a bond to answer for the unpaid wages of the employees Requisites of Legitimate Contracting (D.O. 18-A) 1. Registration with DOLE 2. Carries on a distinct and independent business and undertakes to perform the work or service in its own responsibility, free from the control and direction of the principal in all matters except as to the results thereof 3. Possesses substantial capital/investment 4. Engaged through a Service Agreement that ensures compliance with all the rights and benefits under Labor Laws


NOTE: Under the current I.R.R. (D.O. 18-A), “substantial capital” refers to at least:  Php3,000,000 paid-up capital stocks (corporations, partnerships and cooperatives)  Php3,000,000 net worth for single proprietorship “Labor Only” Contracting  Where the person supplying the workers does not have substantial capital or investment and the workers placed by such persons are performing activities which are directly related to the principal business of the employer (ART. 106 (4))  Where the contractor does not have substantial capital or investment and the employees recruited are performing activities usually necessary or desirable to the operation of the company –OR–  Contractor does not exercise right of control over the performance of the work of the employee (D.O. No. 18-A)  Intent to create or engage in a “laboronly” contracting is immaterial “Labor-Only” Contracting as defined by: Labor Code Relevance of work + Capital I.R.R. (D.O. No. 18-A)

Capital AND relevance of work + Control of principal

Atty. Azucena EE + CE1 or CE2 EE (Essential Element) – to place or recruit workers to perform a job for the principal CE (Confirming Element): CE1 – Capital AND Relevance of Work CE2 – Control of Principal

Consequences and Liabilities  The labor-only contractor shall be considered merely as an agent of the principal  The employees of the contractor shall be treated as regular employees of the principal  The principal becomes liable as a direct employer  Principal becomes solidarily liable with


Page 20 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. the contractor for any violation of any provision of the Labor Code Other Prohibitions Under D.O. No. 18-A Contracting out of jobs not done in good faith:  Contracting out when the same results in the termination of regular employees  Contracting out of work with a “Cabo”  Taking undue advantage of the economic situation or circumventing the provisions of regular employment by: o Requiring them to perform functions currently being performed by regular employees of the principal o Requiring the contractor's employees to sign an antedated resignation letter, a blank payroll or a waiver of labor standards  Contracting out of a job through an inhouse agency  Contracting out of a job by reason of a strike or lockout  Contracting out of a job in order to interfere, restrain or coerce union members in the exercise of their rights to self-organization  Repeated hiring of employees under an employment contract of short duration  Fixing the period of employment to a term shorter than the term of the service agreement, unless the contract is divisible unto phases for which different skills are required  Refusal to provide a copy of the Service Agreement to the Sole and Exclusive Bargaining Agent  Maintaining subcontracted employees in excess of those provided in the CBA  Contracting out of jobs analogous to the above Q: Is it possible to contract out the core processes of a business (activities which are relevant or necessary to the business of the principal)? A: Yes, provided that the contractor is legitimate

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 Case Doctrines Aliviado v PnG (2010) – Even if the work of the employees recruited is necessarily desirable to the business of the principal, as long as the contractor has substantial capital and retains control over its employees, the contractor is a legitimate one. Baguio v NLRC – The mere fact that the independent contractor ran out of capital (as an after-the-fact development) does not detract his status as an independent contractor. Bernarte v PBA – Basketball referees are independent contractors since the PBA does not exercise control as to how the referees exercise its authority or judgment on the playing court Coca Cola v Agito – For contractor corporations, “substantial capital” refers not to the authorized capital stock but to the paid up capital. Capital is deemed to be substantial if it can meet the demands of the principal Coca Cola v Climaco – Since the respondent doctor is only required to be in the company premises for 2 hours a day and that the company does not dictate how he does his work, there is no employer-employee relationship. The company never exercised control over the respondent doctor DOLE v Esteva – Primary standard of determining regular employment is the reasonable connection between the activities performed by the employer in relation to the usual business of the employer. If the employee has been performing the job for at least a year, whether continuous or intermittent, the law deems it as sufficient evidence of the indispensability of the activity to the business Emmanuel Babas v Lorenzo Shipping Co – The mere possession of a Certificate of Registration is not conclusive proof that the contractor is a legitimate contractor GSIS v NLRC – The principal is solidarily liable


Page 21 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. with the contractor, regardless of whether or not the latter is legitimate or “labor-only”, in the event the contractor fails to pay its employees. Jaguar Security v Sales – The jurisdiction of the labor courts extends only to cases where an employer-employee relationship exists. In the event that the principal seeks reimbursement from the contractor after paying its obligations to the contractor’s employees, such claim must be filed as an ordinary civil action in the regular civil courts Kaisahan at Kapatiran v Manila Water – The 10% attorney’s fees in Art. 111 of the Labor Code refer to extraordinary fees, which are paid as indemnity to the prevailing party. The fees arising from the relationship between the lawyer and the client is not covered by Art. 111 and may exceed 10% on the basis of quantum meruit. Meralco Industrial v NLRC – General Rule: The principal's solidary liability with the contractor is only up to the payment of wages and overtime pay. Separation pay and other liabilities arising from illegal dismissal are NOT included. Exceptions: When the principal has conspired with the contractor in the acts giving rise to the illegal dismissal. When the contractor is a “laboronly” contractor, the principal is now deemed the employer thus the latter is liable for separation pay. Neri v NLRC – Once substantial capital is established or proved, it is no longer necessary for the contractor to show evidence that it has investment in the form of tools, machineries, equipment, work premises, among others. Sonza v ABS CBN – Radio and TV talents are deemed to be independent contractors since the employer-network has no control over what they say or discuss on their shows. Even if the network supplied the equipment and crew, they are not the “tools and instrumentalities” Sonza needed to perform his job. What Sonza principally needed were his talent, skills or costumes necessary for his appearances.


Urbanes v Secretary of Labor – The Regional Director has no jurisdiction over a claim for reimbursement by a principal employer from a contractor since it is a civil action, which must be ventilated in the proper civil courts. Vinoya v NLRC – It is not enough to show substantial capitalization or investment in the form of tools, equipment and work premises to be considered as an independent contractor. NOTES: Cadiz Sez:  Once investment or substantial capital is proved, there is no need to prove the existence or absence of the other elements (relevance of employee's work and control of principal may be dispensed with) – Neri v NLRC  The Vinoya Case has an opposite stand from the Neri Case. It says that substantial capitalization is not enough to prove contractor independence IX. ADMINISTRATION AND ENFORCEMENT Secretary of Labor (Art. 128)  Has access to employer's records and premises at any time of the day or night whenever work is being undertaken  Authority to question any employee  Investigate any fact which may aid in the enforcement of any labor law  Right to copy records  Power to issue compliance orders based on findings made in the course of inspection  May order stoppage of work or suspension of operations when the noncompliance poses a grave and imminent danger to the safety of the employees  Issue writs of execution for the enforcement of their orders, EXCEPT, in cases where the employer contests the findings of the labor employment and enforcement officer and raises issues supported by documentary proofs which were not considered in the course of inspection


Page 22 of 41


Process of Suspension of Operations 1. Issuance of order suspending operations or stopping work 2. Within 24 hours, a hearing shall be conducted to determine whether the order shall be lifted or not 3. If violation is attributable to the fault of the employer, he shall pay the employees concerned their wages during the period of such stoppage or suspension Appeals  Orders issued by authorized representatives of the DOLE Secretary may be appealed to the latter  Appeal period: 10 calendar days  If order involves monetary award, appeal by employer is perfected only upon the posting of a bond equivalent to the award in the order appealed from Limits of the Enforcement Power  Case does not arise from the exercise of the visitorial power  When employer-employee relationship ceased to exist at the time of inspection  If employer contests the finding of the labor officer and such contestable issue is not verifiable in the normal course of inspection Regional Director (Art. 129)  Jurisdiction over recovery of wages, simple money claims and other benefits including legal interest  Proceeding is summary and non-litigious in character  Aggregate claims of each employee nor househelper does NOT exceed Php5,000  Complaint must NOT include: o a claim for reinstatement o claims for Employee’s Compensation, SSS, PhilHealth and Maternity benefits  Claims arise from an employer-employee relationship


Appeals  Appeal to NLRC within 5 calendar days  NLRC to resolve appeal within 10 calendar days from submission of last pleading Summary WHO EXERCISES POWER NATURE OF POWER

EXISTENCE OF E.E.R.

HOW INITIATED LIMITS TO CLAIM

APPEAL

Art. 128 DOLE Secretary or his authorized representative Visitorial and enforcement power exercised through routine inspections of establishment Requires existence of EER

Enforcement power is an offshoot of visitorial power No limit

Appeal to Secretary of Labor within 10 calendar days

Art. 129 Regional director or any authorized hearing officer of DOLE Adjudicatory power on matter involving recovery of wages EER not necessary since it should not include a claim for reinstatement Sworn complaint filed by any interested party Aggregate claim of each complainant does not exceed Php5,000 Appeal to NLRC within 5 calendar days

Procedures Art. 128 DOLE Secretary Visitorial Power Initiated by DOLE Secretary or his duly authorized representative Issues Compliance Order

Appeal Compliance Order to DOLE Secretary

Employer contests findings of enforcement officer Appeal to NLRC


Page 23 of 41



Filing of sworn complaint to the Regional Director or any authorized hearing officer

his duly authorized representatives. The failure to keep payrolls and daily time records in the work premises (Laguna), since the same is kept in their head office (Quezon City), is not an acceptable excuse.

Claim does not exceed Php5,000.00 and no reinstatement is demanded

People's Broadcasting v Secretary of Labor (2009) – Power to determine the existence of an employer-employee relationship lies with the NLRC and NOT with the Secretary of Labor

Art. 129 Regional Director

Conducts summary proceeding

Claim exceeds Php5,000.00 or reinstatement is demanded

[Appeal]

Case is indorsed to NLRC

Case Doctrines Aboitiz v Dela Serna – The Regional Director has jurisdiction over cases involving recovery of wages and other monetary claims provided: 1. the claim is presented by an employee or househelper 2. claim arises from an employer-employee relationship 3. claimant does not seek reinstatement 4. aggregate money claim does not exceed Php5,000.00 In the absence of any of the requisites, it is the Labor Arbiter who shall have exclusive jurisdiction, EXCEPT claims for employee's compensation, social security, medicare and maternity benefits. Ex-Bataan Security v Secretary of Labor – The visitorial power of the DOLE Regional Director, in his capacity as the representative of the Secretary of Labor, to enforce compliance with labor laws can be exercised even where the individual claim exceeds Php5,000.00. However, if the case is covered by the exception clause in Art. 128(b) of the Labor Code, then the Regional Director will gave to endorse the case to the appropriate Arbitration Branch of the NLRC. Jethro Intelligence v Secretary of Labor – The Php5,000.00 monetary claim limit in Art. 129 of the Labor Code does not cover the visitorial and enforcement power of the Secretary of Labor or

People's Broadcasting v Secretary of Labor (2012) – (overturned the 2009 case) In the exercise of the DOLE visitorial and enforcement power, the Secretary or his authorized representative, shall have the power to determine the existence of an employeremployee relationship (EER), to the exclusion of the NLRC. The determination of the EER in the exercise of its visitorial and enforcement power is subject to judicial review, NOT review by the NLRC. X. CLASSIFICATION OF EMPLOYMENT Security of Tenure  It is the right not to be removed from one's job except for a valid reason and through proper procedure  Applies not only to regular employees but also to non-regular employees (eg: fixedperiod employment, project employment, probationary employment)  Managerial employees are entitled to security of tenure  An employee unjustly dismissed is entitled to reinstatement and to his full backwages and other benefits NOTE: Security of tenure for non-regular employees means that they may not be terminated without a valid cause during the period in which they are hired. Classifications of Employment  As to Nature o Regular o Probationary


Page 24 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. o o o o  As o o o

Project Fixed-Term Seasonal Casual to Rank Managerial Supervisory Rank-and-File

Managerial – Vested with powers or prerogatives to lay down and execute management policies, to hire, transfer, suspend and lay-off employees Supervisory – Those who effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires independent judgment Rank-and-File – Everybody else General Rule: Employment is deemed regular Exception: Probationary, seasonal, fixed-term, casual and project employment Exceptions to the Exception: 1. Probationary employees allowed to work after probationary period 2. Casual workers rendering service for more than 1 year 3. Seasonal workers hired repeatedly for the same tasks every season 4. Fixed-term employees who entered the contract on unequal terms with the employer 5. Project employees hired even after the completion of the project they engaged in Types of Employment Regular Employment  Those who are hired for activities which are necessary or desirable in the usual trade or business of the employer  2 kinds of regular employees: 1. Those engaged in labor which is necessary or desirable in the usual trade or business of the employer

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 2. Those who have rendered at least 1 year of service, whether continuous or broken, with respect to the activity in which they are employed  Standards for determining regular employment: o Reasonable connection between the work performed and the usual trade or business of the employer o Length of service Casual Employment  When employment is neither regular, seasonal, fixed or for a specific project  When employment is irregular, sporadic, occasional, unpredictable and brief in nature  When the work performed is NOT in the usual course of the employer's business  Legally, the period is only for 1 year  Regularization of a casual employee: o Rendered service for at least 1 year, whether continuous or broken o The activity for which he is hired still exists (regularization is only with respect to such activity)  Casual employees who are dismissed from their employment before the expiration of the 1-year period CANNOT lawfully claim that their dismissal is illegal Fixed-Term Employment  Contract of employment that lasts for a definite period as agreed by the parties  Employment is not terminated; it merely expires along with the contract  Standards for validity: 1. Contract was entered into knowingly and voluntarily by the parties 2. Both parties dealt with each other on more or less equal terms  Must not be used to circumvent the law granting security of tenure  If the fixed-term employee is dismissed without a valid cause prior to the expiration of said contract, the employee is entitled to the payment of salaries corresponding to the unexpired portion of


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ATENEO LAW SCHOOL 3-A L.T.J.F. the employment contract (Medenilla v. Phil Veterans Bank) Project Employment  When employment is fixed for a specific project or undertaking  Period of employment is coterminous with the project for which the employee was hired  Standards for validity: 1. The employees were assigned to carry out a specific project or undertaking 2. The duration and scope of which were specified at the time the employees were engaged in said project (employees were duly informed)  2 types of “projects” as determined by the Supreme Court: 1. A particular undertaking that is within the usual business of the employer BUT which is distinct, separate and identifiable as such, from the other undertakings of the company (eg: different construction projects of a construction firm) 2. A particular undertaking which is NOT within the regular business of the employer, separate and distinct from the ordinary business or operations  Separation Pay for Project Employment o General Rule: Project employees are not entitled to separation pay upon the completion of the project o Exception: When the employee has been terminated before the completion of the project  Employees from Labor Pool o Those employed (eg: construction company) without reference to any particular project in which they are hired o Considered as regular or probationary employees – NOT project employees o Employee is thus obligated to be always available o/n call of the employer – employee may not offer his services to other employers  Policy Instruction No. 20

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 Covers the construction industry Employer is mandated to report to the nearest public employment office the termination of employees every time a project is completed o Failure to comply is an indication that the petitioner is a regular employee  When project employee is presumed to be a regular employee: o When employee is not duly informed of their status as such or the specific project or undertaking to be done o When employee, while not engaged in a project, is not free to offer his services to another employer o When employment is extended after the supposed project is completed o When there is a continuous rehiring even after the cessation of a project AND the tasks performed is necessary and indispensable to the usual trade or business of the employer o Failure to report the termination to the DOLE pursuant to Policy Instruction No. 20 o o

General Rule: Length of employment is NOT the controlling determinant of the employment tenure of a project employee Exception: When the project or work is done for a very long period (see DMCI v Jamin) Seasonal Employment  Employment is from time to time according to the occurrence of varying need during a season  Jurisprudential tests and standards: o The worker is seasonal if the duration of the employment is for one season only o When the workers are not hired regularly for the same phases of the work, but only for a single phase thereof  Regularization of seasonal employee o Continuous rehiring of workers for the same tasks for several years or for


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ATENEO LAW SCHOOL 3-A L.T.J.F. more than 1 season Such workers during the off-season are merely considered on leave o The employer-employee relationship is merely suspended and NOT severed  Separation pay – When the business establishment is sold which effectively terminated the employment of the seasonal worker

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 o

o

Probationary Employment  When employee is on tentative employment during which the employer determines whether he is qualified for permanent employment  Standards for Validity: o Employee is informed of the standards by which he will qualify as a regular employee o Probationary period shall not exceed 6 months (subject to exceptions)  Regularization of probationary employee o When employee is allowed to work beyond the probationary period o When employee is not appraised of his probationary status o When employee is not informed of the standards he needs to comply with to be a regular employee  Security of Tenure and Termination o Except for just causes provided by law or employment contract, a probationary employee cannot be terminated o Valid grounds for termination: ▪ Just cause ▪ Failure to comply with the reasonable standards made known to the employee at the time of his engagement o Limits to terminating probationary employee: ▪ Must accord with the requirements of the employment contract ▪ Dissatisfaction of employer is real and in good faith ▪ No unlawful discrimination against the employee

Due Process ▪ Termination due to just cause – notice and hearing is required ▪ Termination for failure to comply with company standards – no notice required

General Rule: Probationary period cannot exceed 6 months Exceptions: 1. Learnership or apprenticeship period 2. 3 years in case of teachers 3. When the parties agree to a longer term: o by virtue of company policy -ORo when it is required by the nature of the work Summary Employee

Standard/Validity

Regularization

Regular

Relevance of work to the employer's business OR employed for at least 1 year

N/A

Casual

Work is not in the usual course of employer's business

Working for at least 1 year; the task or work still exists after such period

Probationary Employee is informed of standards for qualification

Working beyond the probationary term

Fixed Term

Parties entered contract freely, voluntarily and on equal terms

When contract is used to circumvent security of tenure

Seasonal

Worker is hired for a specific phase and for one season only

Continuous rehiring for more than 1 season for the same phase

Project

Project, scope and duration is specified at the time contract is entered into

When employment is extended even after end of project


Page 27 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. Employee Regular

Casual


Termination

Separation Pay

Notice and Hearing required based on just and valid causes

If cause is due to employee's fault – no separation pay If cause is not related to moral character of worker – separation pay is appropriate

Entitled to notice and hearing

Possibly the same as a regular worker

Probationary Just cause – Possibly the same notice and reasons or causes hearing required as a regular worker Failure to comply with standards – no notice required Fixed Term

Employment expires along with contract (notice and hearing NOT required)

Generally not required unless it is stipulated in the contract

Seasonal

Employment is terminated upon end of season

Yes, when business is sold resulting in termination

Project

Employment is terminated upon completion of the project AND termination is reported to DOLE

GR: Not entitled to separation pay Except: when terminated before project is completed

Case Doctrines Aliling v Feliciano – If a probationary employee has been informed of the standards of his job but was subsequently transferred to a different department or ordered to do a job different from what he was informed of, the he is deemed to be a regular employee

submitted a report of termination to the nearest DOLE office every time a project is completed. The failure to do so is proof that the worker is not a project employee Buiser v Leogardo – When the nature of the job requires a longer period for the employer to evaluate the employee's performance, the probationary period may be longer than 6 months. In this case, since the solicited ads are published only 1 year after the sale has been made, only then will the company be able to evaluate the ability of its sales representatives Caseres v URC – The fact that the employees were constantly re-hired does not ipso facto establish that they became regular employees when it is proved that they are hired to perform different phases of special projects for a definite period (eg: crane operator assistant for one season and underchassis reconditioning assistant in another season) Cocomangas Hotel v Visca – In cases where the employees were hired without any mention of a “project” to which they are specifically assigned and where no project reports were submitted at the end of each alleged project, then the workers are regular employees DMCI v Jamin – The continuous re-hiring of the employee for a very long period (8 years) to perform tasks necessary or desirable in the employer's business made the worker a regular employee despite the specification of the project in the employment contract and the submission of termination reports to the DOLE

AM Oreta v NLRC – Probationary employees should be informed of their probationary status AND the standards or qualifications to be a regular employee. Absent such requisites, the employee is deemed to be a regular employee

Hacienda Fatima v NFSW – To be classified as seasonal workers, is not enough that they perform work that are seasonal in nature. They must have also been employed only for the duration of 1 season. The fact that the workers have been hired to perform the same tasks every season for several years makes them regular employees.

Aurora Land v NLRC – If the worker is indeed a project employee, the employer should have

Hanjin v Ibanez – Employees who are hired for a separate job, distinct from the other


Page 28 of 41

ATENEO LAW SCHOOL 3-A L.T.J.F. 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; otherwise, they cannot be considered project employees. Holiday Inn v NLRC – A period of on-the-job training in addition to a six-month probationary period should be considered as 1 probationary period only (thus it may not exceed a total of 6 months) since a system of double probation clearly circumvents the plain mandate of the law Mariwasa Mfg v Leogardo – The probationary period may be extended beyond 6 months when it is an act of liberality on the part of the employer affording the employee a second chance to make good after having initially failed to prove his worth as an employee Millares v NLRC – Seafarers are contractual employees (fixed-term employment) pursuant to the accepted maritime industry practice and the fact that there was continuous re-hiring for a very long period does not and cannot make them regular employees Mylene Carvajal v Luzon Bank – If the ground for terminating a probationary employee is the failure to qualify in accordance with the standards prescribed by the employer, notice and hearing of termination is NOT required Pangilinan v General Milling Corp – Lack of notice of termination for fixed-term employment is of no consequence since the employment expires by its own terms at the end of the period expressly stated in the contract PDI v Magtibay – Due process for the second ground of termination (failure to comply with the prescribed standards) consists of making the reasonable standards known to the employee at the time of his probationary employment. Hearing and notice of termination is not required for the second ground Pine City v NLRC – Where a probationary

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 employee is dismissed for failure to comply with standards, and they were NOT informed of such standards and qualifications, they must be given ample opportunity to refute the allegations that they failed to meet such standards Price v Innodata – Applicable test to determine whether an employment is regular or nonregular is the reasonable connection between the task performed by the employee with the usual business of the employer Purefoods Corp v NLRC – The failure to prove that the parties entered the contract voluntarily and on equal terms with each other negates the contention that an employment contract is a fixed-term employment. In this case, cannery workers are NEVER on equal terms with their employer. Woodridge v Pe Benito – As probationary employees, their security of tenure is limited to the period of their probation. They cannot claim security of tenure and compel their employers to renew their employment contracts upon expiration of said period XI. TERMINATION OF EMPLOYMENT Due Process  Substantive due process – dismissal is justified by a valid and lawful cause o Just cause (Art. 296) o Authorized cause (Arts. 297-298)  Procedural due process o 2 Notice Rule ▪ Notice specifying the ground/s for termination and giving employee to explain his side ▪ Notice of termination indicating the circumstances and grounds which have been established to justify the termination o Opportunity to be heard ▪ An actual face-to-face hearing or conference is NOT always required ▪ Any meaningful opportunity given to the employee to answer the


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ATENEO LAW SCHOOL 3-A L.T.J.F. charges against him, whether verbal or written will suffice Just Causes  Refers to the faults and misdeeds of the employee  Just Causes under Art. 296 o Serious Misconduct o Willful Disobedience o Gross and Habitual Neglect o Fraud, breach or loss of trust o Commission of a Crime or Offense o Analogous Causes General Rule: Employer is not liable for separation pay based on just causes of termination Exception: Separation pay as a form of financial assistance may be given out of compassion of the employer OR if such benefits are stipulated in the CBA A. Serious Misconduct  Transgression of some established and definite rule of action; a forbidden act  Act must be of a grave and aggravated character and not merely trivial  It is not enough that the act violated some established rules of policies – the act or conduct must have been performed with wrongful intent  Requisites:  The act must be serious (there is wrongful intent)  It must be related to the work of the employee  It must show that employee is unfit to continue working for the employer  Examples:  Sexual harassment  Fighting within the company premises  Intimidating a co-employee  Immorality  Negative attitude – eroding employee morale  Theft – whether it may be against the employer or a co-employee


NOTE: Sleeping on the job is NOT always a valid ground for dismissal, EXCEPT when the job necessitates the alertness of the employee (eg: security guards) B. Willful Disobedience  Insubordination or refusal to follow the instruction of a superior  Requisites:  Orders or instructions are reasonable and lawful  They are sufficiently made known to the employee  They must be in connection with the duties which the employee has been engaged to discharge  Reasonableness as to both:  The kind and character of the instruction or command  The manner in which they are made or communicated  Examples: o Refusal to transfer to another job assignment or location (but this presupposes that the transfer is reasonable and lawful)  Failure to follow order to deliver merchandise without justification Totality of Infractions Doctrine General Rule: The totality of the infractions that the employee has committed may justify the penalty of dismissal Exception: Past infractions for which the employee has already been penalized may NOT be collectively used to justify the dismissal Exception to the Exception: Such past infractions may be used as justification only if in connection with a subsequent similar offense. C. Gross and Habitual Neglect  Gross Neglect o Absence of diligence that a prudent man would use


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ATENEO LAW SCHOOL 3-A L.T.J.F. o An entire absence of care  Habitual Neglect o Repeated failure to perform one's duties over a period of time o Bad faith or wrongful intent is immaterial  It is not necessary for the employer to show that he is injured or prejudiced by reason of the employee's negligence  Examples: o Habitual absenteeism and tardiness o Abandonment of work (requisites) ▪ Absence without valid reasons ▪ Intent to sever the employeremployee relationship General Rule: Neglect of duties must not only be gross but also habitual. A single or isolated act of negligence does not constitute a just cause for dismissal of the employee Exception: When the negligence also results in the breach of trust or loss of confidence, or the damage caused by such single act is so great, an isolated incident is enough to justify dismissal (see School of Holy Spirit v Taguiam) D. Fraud, Breach of Trust or Loss of Confidence  A breach of legal trust, duty or confidence justly reposed and is injurious to another  Must be committed against the employer or his agent and is a work-related offense  Breach is done intentionally and knowingly; not merely ordinary or casual  2 Classes of Positions of Trust: o Managerial Employees o Employees who handle significant amounts of money or property in the normal and routine exercise of their functions (eg: cashiers, auditors, property custodians)  Requisites: o Employee is holding a position of trust and confidence o Willful breach of trust founded on clearly established facts o The act or omission is work-related

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014  What will NOT negate a valid dismissal for breach of trust o Length of service of the employee o Return of the misappropriated company funds or property E. Commission of a Crime or Offense  Must be against the person of the employer or: o His agent o Immediate members of his family  “Immediate members” are limited to: o Spouse o Ascendants o Descendants o Brothers or Sisters o Relative by affinity in the same degrees (in-laws) o Relative by consanguinity within the fourth civil degree  Conviction of an employee in a criminal case is NOT indispensable to warrant his dismissal  What will NOT negate a valid dismissal for commission of a crime o Acquittal of the employee in the criminal prosecution o Failure to show proof beyond reasonable doubt (substantial evidence is sufficient) F. Analogous Causes  Depends on the circumstances of each case  To be considered analogous to the just causes, a cause must be due to the voluntary or willful act or omission of the employee.  The willful and voluntary act or omission attests to the employee's moral depravity Dismissal Procedure for Just Causes  Twin Notice Rule: Employee is entitled to two written notices before termination o 1st notice informs the employee of the acts or omissions that may warrant his dismissal o 2nd notice informs the employee of the


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ATENEO LAW SCHOOL 3-A L.T.J.F. employer's findings and decision  Opportunity to be heard o Employee is given at least 5 calendar days from receipt of the notice to explain his side o A face-to-face investigation or conference is not always required except: ▪ If requested by employee in writing ▪ If substantial evidentiary dispute exists ▪ If company policy requires it ▪ If similar circumstances necessitates a formal hearing

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 o o o

o

Redundancy Retrenchment Closure or Cessation of Business: ▪ Mere closure NOT due to losses ▪ Sale of the business or mergers ▪ Serious business losses Disease of Employee

A. Automation  Installation of labor-saving devices resulting in the reduction of the number of laborers is justified  The aim to achieve economy and efficiency in business operations is an unquestioned management prerogative

NOTES:  The 5-day period within which an employee is required to explain his side is a rule laid down by jurisprudence – NOT the I.R.R.  While the I.R.R. requires a formal faceto-face hearing, the Supreme Court ruled that a formal hearing or conference is not required. As long as the employee is given ample opportunity to be heard, it satisfies the due process requirement. In case of conflict between the I.R.R. and the law or jurisprudence, the latter must prevail  If the employee voluntarily and expressly admitted his infractions, no formal investigation is necessary. Only thing needed is to inform of the employee of the decision of the employer (2nd notice)

B. Redundancy  Where the services of the employee are in excess of what is demanded by the requirements of the enterprise  Requisites: o Written notice to DOLE and employees at least 1 month prior to termination o Payment of separation pay o Good faith in abolishing redundant positions o Fair and reasonable criteria in ascertaining the positions to be abolished to justify redundancy  Usual criteria in selecting employees: o Less preferred status (eg: temporary employees) o Efficiency and economy o Seniority (Last in-First out)

Authorized Causes  Termination is by reason of the exercise of management prerogatives  General Rule: Employee dismissed for authorized causes is entitled to separation pay  Exceptions: Closure of business due to: o Serious business losses o Compulsory acquisition of the government of the business  Authorized Causes o Automation

C. Retrenchment  When the reduction of the labor supply is resorted to in order to avoid or minimize business losses  Standards or Justifications o Expected losses are substantial not merely de minimis in extent o Losses expected must be reasonably imminent and perceived in good faith o Employer must have taken other measures prior or parallel to retrenchment to forestall losses


Page 32 of 41



Losses, expected or realized, must be proved by sufficient evidence  Evidence of business losses must be proved through an independent auditor  Illegal Retrenchment o Produces no legal effect o Acceptance of retrenchment pay does not place employee in estoppel  Criteria in selecting employees: o Less preferred status (eg: temporary employees) o Efficiency o Seniority (Last in-First out) o

Q: Is a record showing 2 years of net loss sufficient to justify retrenchment? A: Yes. It is enough to be considered as proof of historical losses Redundancy

Retrenchment

Labor supply is in excess A measure to avoid or of what is required minimize business losses Not a means of last A means of last resort. resort but it must still be Other measures must have supported by evidence been resorted to prior to it

D. Closure or Cessation of Business  2 Types of closure or cessation: o Due to business losses o Not due to business losses  Requisites for closure NOT due to losses: o Written notice to DOLE and employees 1 month before intended date of termination o Cessation or closure of business must be bona fide in character o Payment of separation pay Cause of Cessation of Business

Separation Pay

Closure due to business losses

NO

Closure due to act of government

NO

Closure NOT due to business losses

YES

Sale of business in good faith

YES

Sale of business in bad faith

YES + damages

Q: Who pays for the separation pay in case of a sale or transfer of the business in good faith? A: The liability falls on the seller as there is no law which requires the purchaser to absorb the employees of the selling corporation (San Felipe v NLRC) E. Disease of Employee  Requisites  Continued employment of employee is prohibited by law or prejudicial to his health or the health of his coemployees  Certification by a competent public health authority that the disease is cannot be cured within 6 months even with proper treatment  Notice to employee and the DOLE 1 month prior to intended date of termination  Payment of separation pay  A medical certificate issued by the company physician is not valid since said physician is NOT a “competent public health authority” Dismissal Procedure for Authorized Causes General Procedure (common to all) 1. Written notice to DOLE 1 month prior to intended date of termination 2. Written notice to employees 1 month prior to intended date of termination 3. Payment of separation pay (except for closure due to business losses or an act of the government) Separation Pay Authorized Cause

Amount of Payment

Automation, Redundancy

1 month pay or 1 month pay for every year of service whichever is higher

Retrenchment, Closure NOT due to serious losses, Disease

1 month pay or ½ month pay for every year of service whichever is higher


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ATENEO LAW SCHOOL 3-A L.T.J.F. NOTE: A fraction of 6 months or more is considered one year

Termination by Employee  May be with just cause or without just cause  A voluntary act by the employee General Rule: Voluntary resignation may be withdrawn even if the employee has called it “irrevocable” Exception: Once resignation is accepted or approved by the employer, it may not be withdrawn without employer's consent Just Causes of Termination by Employee 1. Serious insult by employer or his agent on the honor and person of the employee 2. Inhumane and unbearable treatment by the employer or his representative 3. Commission of a crime by the employer or his agent against the person of the employee or any of the immediate members of his family 4. Other analogous causes Procedural Requirement  No just cause – serve notice to employer at least 1 month in advance. If no notice is served, employee may be liable for damages  With just cause – no notice necessary Temporary Lay-Off  The following situations do not terminate employment – merely suspends it o Bona fide suspension of business operations for a period not exceeding 6 months o Fulfillment by the employee of a military or civic duty  In all cases, employee shall be reinstated if he indicates his desires to resume work not later than 1 month from resumption of operations or from his relief from duty  If the bona fide suspension exceeds 6 months, employee shall be deemed terminated, thus entitled to separation

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 pay (this is probably the only instance where the employee is entitled to separation pay despite the business losses of the employer since there is constructive dismissal ~ see International Hardware v NLRC) Retirement  Retirement age may be established by: ◦ Collective Bargaining Agreement ◦ Employment contract ◦ Labor Code  Default retirement plan (Labor Code): ◦ Conditions: ▪ Retirement may be exercised upon reaching 60 years but NOT more than 65 years old ▪ Compulsory retirement age: 65 ▪ Employee must have served at least 5 years ◦ Retirement Pay: ▪ ½ month salary for every year of service ▪ A fraction of at least 6 months is considered as 1 whole year ▪ ½ month salary = 15 days pay + 1/12 of 13th month pay + cash equivalent of 5 days of service incentive leaves  Not covered by the retirement provision: ◦ Retail, service and agricultural establishments or operations employing not more than 10 employees NOTE: For underground mining employees:  Retirement may be exercised: 50-60 years of age  Compulsory retirement age: 60 years old  Has served at least 5 years as underground mine worker Monetary Claims and Reliefs General Remedies  Backwages  Separation Pay  Reinstatement


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 Remedies are normally awarded together with one another (backwages + reinstatement or separation pay) BUT they are distinct remedies and independent from one another Backwages Compensation that should have been earned but were not collected because of the unjust dismissal Computed based on actual period when the employee was unlawfully prevented from working

Separation Pay Granted where reinstatement is no longer possible because of the strained relationship between employer and employee Computed based on actual length of employee's service

Doctrine of Strained Relations If an employee is reinstated and an atmosphere of antipathy and antagonism would be generated as to adversely affect the efficiency and productivity of the employee concerned, then the employee will be entitled to separation pay in lieu of reinstatement The “strained relationship” must be proved as a fact otherwise, the doctrine will be applied indiscriminately and an employer can easily get rid of an employee by simply paying the separation pay on the pretext that his relationship with his employee had been strained Backwages  Full backwages includes the basic salary, the statutory and CBA benefits  However, it does NOT include any salary increase or adjustments  But if the wage increase is supported by a lawful decree (such as an order from the Regional Tripartite Wage and Productivity Boards), then such adjustments may be included in the computation (this is implied by Equitable v Sadac)  Reckoning Periods:

o

o

If there is reinstatement – From time actual compensation was withheld until actual date of reinstatement If there is no reinstatement – From time employee was terminated until finality of the Court's/Labor Arbiter's decision finding the dismissal unlawful

Reinstatement  Restoring the dismissed employee to his original position General Rule: An employee that is illegally dismissed is entitled to be reinstated without loss of seniority rights Exceptions: 1. When the relationship between employer and employee is already strained 2. When the position to which the employee is supposed to be reinstated to is no longer available (but see Cabigting v San Miguel as a unique exception to this case) 3. When it has been a long time since the employee has been illegally dismissed Separation Pay  Reckoning Period – From time employee was hired up to the time employee was deemed separated; NOT up to the time he was unjustly dismissed  When employee is “deemed separated” upon receipt of his full separation pay. It is the only time when the employeremployee relationship is effectively terminated (see Sarona v NLRC) Defective Dismissal Defective Dismissal

Illegal Dismissal

Cause for termination is valid but procedural due process is absent

Both substantive and procedural due process are not observed

Termination is still effective but employee is awarded nominal damages

Employee is either reinstated or given separation pay with backwages


Page 35 of 41



Consequences on Employer (see Culili v ETPI)  If dismissal is based on a just cause (Art. 282) but the employer failed to comply with the notice requirement: ◦ The sanction must be tempered ◦ This is because the dismissal process was initiated by the employee  If the dismissal is based on an authorized cause (Art. 283) but the employer failed to comply with the notice requirement ◦ The sanction should be stiffer ◦ This is because the dismissal process was initiated by the employer's exercise of management prerogative

NOTE: The act of government contemplates a situation where the employees actually benefit from such government intervention such as Agrarian Reform (see NFL v NLRC)

Elements of Valid Termination Cause of Termination Serious Misconduct

(there is wrongful intent) work of the employee

It must show that employee is unfit to continue working for the employer Willful Disobedience

Payment of Separation Pay Just

General Rules

Exceptions

No obligation Payment out of to give compassion of employer separation pay OR if stipulated in CBA

Authorized Must give Closure due to losses or separation pay government action

Gross and Habitual Neglect

Procedural Due Process Cause

Procedure

Just

1. 1st Notice informing employee of the charges against him and the period in which to explain his side 2. Opportunity to be heard 3. 2nd Notice of the findings and decision of the employee

Authorized

1. Written notice to DOLE 1 month

Termination by Employee

prior to intended date of termination 2. Written notice to employees 1 month prior to intended date of termination 3. Payment of separation pay (except for closure due to business losses or an act of the government)*

No just cause – serve notice to employer at least 1 month in advance With just cause – no notice necessary

The act must be serious It must be related to the

Summary

Cause

Requisites

Orders or instructions are reasonable and lawful  They are sufficiently made known to the employee  They must be in connection with the duties which the employee has been engaged to discharge



Neglect  Total absence of diligence and care  Repeated failure to perform one’s duties Abandonment  Absence without valid reason  Intent to sever employer-employee relationship

Fraud, breach or loss of trust

Employee is holding a

Commission of a Crime or Offense

Must be against the person

Automation

position of trust and confidence Willful breach of trust founded on clearly established facts The act or omission is workrelated of the employer or: o His agent o Immediate members of his family N/A


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ATENEO LAW SCHOOL 3-A L.T.J.F. Redundancy

Retrenchment


Written notice to DOLE and employees at least 1 month prior to termination  Payment of separation pay  Good faith in abolishing redundant positions  Fair and reasonable criteria in ascertaining the positions to be abolished to justify redundancy



Losses are substantial not merely de minimis in extent

Losses are perceived in good faith and proved by evidence Employer must have taken other measures prior or parallel to retrenchment Notice to DOLE and employees concerned 1 month prior to intended date of retrenchment  Payment of separation pay Closure of Business

Disease of Employee

Not due to Losses Bona fide closure of business  Notice to DOLE and employees 1 month prior to date of closure  Payment of separation pay Due to Losses Bona fide closure of business  Notice to DOLE and employees 1 month prior to date of closure Continued employment is prohibited by law or prejudicial to his health or the health of his co-employees  Certification by a competent public health authority that the disease is cannot be cured within 6 months even with proper treatment



Notice to employee and the DOLE 1 month prior to intended date of termination  Payment of separation pay



Case Doctrines – Just Causes Batongbacal v Associated Bank – An employee who refuses to follow an order to tender his courtesy resignation, being an unlawful directive of the employer, may not be terminated for insubordination. This is because resignation is a voluntary relinquishment of a position on the part of the employee. Caltex v Agad – Theft of company property is akin to serious misconduct or willful disobedience of lawful orders of the employer. And since the employee holds a position of trust, the act committed constitutes willful breach of trust, which is another just cause for termination Cosmos Bottling v Fermin – Theft committed against a co-employee is a case analogous to serious misconduct. Proof of material damage to the employer is immaterial since only the moral depravity of the employee is considered in rendering him unfit for employment Duterte v Kingswood – Refusal to get a medical certificate from the company physician, despite the presence of a certificate of fitness to work issued by a public health official, cannot be considered as an act of insubordination. The burden of proof that the disease of the worker can or cannot be treated within 6 months may not shifted to said employee Elcee Farms v NLRC – Leasing the business or its properties, which effectively terminates the original business of the owner, is a cessation of operations which entitles the employees to separation pay Exodus International v Biscocho – Mere absence or failure to report for work is not enough to amount to abandonment of work. Absence must


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ATENEO LAW SCHOOL 3-A L.T.J.F. be coupled with the clear intent to sever the employer-employee relationship, which may not be presumed by the employer Felix v Buenaseda – A residency or resident physician position in a medical specialty is never a permanent one. By its nature and purpose, it is always a temporary position which a physician must relinquish eventually. Hospital Mgt v Hospital Mgt Assoc – The Court considered the factors in absolving the employee from gross and habitual negligence: 1. Incident was not serious – it was not of a magnitude that would require medical intervention on the patient who was not assisted by the employee 2. Duration of employment – employee was working for 9 years without any previous derogatory record 3. Incident was a first offense – even if the act constituted gross negligence, it was not habitual Lopez v Alturas – There is no violation of due process even if no formal hearing was conducted as long as the employee was given a chance to be heard through any other reasonable means. The acquittal of the employee in a criminal case (theft) does not automatically preclude a determination that he has been guilty of acts resulting in loss of trust and confidence Lores Realty v Pacia – A refusal to issue checks due to insufficient funds (and in order to protect the company from B.P. 22) is not a wrongful act and may not amount to insubordination PAL v NLRC – Employers are allowed a wider latitude of discretion in terminating managerial personnel or those who perform functions requiring the employer's full trust and confidence On issue of separation pay – While the dismissal was for a just cause, the employee is entitled to separation pay since the dismissal was neither for serious misconduct nor for an offense involving moral turpitude (based on equitable

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 considerations) Philippine Telegraph v CA – A refusal of an employee to be transferred, as a result of a promotion, may not amount to insubordination since a promotion needs to be accepted by the employee thus it may not be effected without the employee's consent PLDT v Berbano – When the wrongful conduct did not result in economic loss on the part of the employer, and the fact that the employee has worked a long time for the company without any irregularities, such offense is only a simple misconduct which does NOT warrant the penalty of dismissal Press v Galit – The mere fact that the infractions of the employee have not been immediately subjected to sanctions cannot be interpreted as condonation of the offense – this management prerogative to discipline employees cannot be impliedly waived On issue of due process – Employer must still comply with the twin-notice rule even if:  There is preventive suspension (the suspension cannot substitute as a notice)  Employee has been caught in flagrante  Evidence of the commission of the offense is strong Samahan v Magsalin – An employee validly dismissed due to serious misconduct adversely reflecting his moral character may not be given separation pay or financial assistance Sampaguita Garments v NLRC – If an employee is absolved of an offense in an administrative proceeding (NLRC) and is ordered to be reinstated, a subsequent conviction in a criminal prosecution for the same offense renders the previous administrative decision without force and effect School of Holy Spirit v Taguiam – The death of a student is gross negligence on the part of the teacher-employee which resulted in the loss of trust and confidence of the employer. Even if it is


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ATENEO LAW SCHOOL 3-A L.T.J.F. an isolated incident (meaning not habitual), it would be absurd for the employer to wait for many more students to die before terminating the employee just to prove habitual negligence Yrasuegui v PAL – There can be no discrimination in a case where overweight employees are dismissed when reasonable weight standards are required by the nature of the work involved (flight attendants in this case) Case Doctrines – Authorized Causes Alabang Country Club v NLRC – Retrenchment is a reduction of personnel for the purpose of cutting down cost on operations, and it must be proved that losses are substantial or imminent. Closure of a business includes both the complete cessation of operation or only a part thereof. It need not be proved by the same degree of evidence as in retrenchment cases since a business owner may close his business anytime he wants. The law does not compel a person to remain in business if he does not want to. Asian Alcohol Corp v NLRC – An employer's good faith in implementing a redundancy program is not necessarily destroyed by availment of the services of an independent contractor to replace the services of the terminated employees Ever Electrical v Samahan – Closure of a business due to an ejectment case against the corporation is cessation due to a government action and NOT due to business reverses. Since this government action was not for the benefit of the employees (thus not covered by the exception), the employer is still liable to pay separation pay. Flight Attendants v PAL – Guidelines for retrenchment:  Not every loss incurred or expected to be incurred will justify retrenchment  Even assuming that losses were incurred because of a global or regional economic crisis, retrenchment is not completely justified if there is no showing that it was the last recourse resorted to

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014  Financial statements audited by independent external auditors constitute the normal method of proof or evidence  The fact that the corporation underwent corporate rehabilitation does not automatically justify retrenchment  A retrenchment scheme without taking seniority into account renders the retrenchment invalid even as against other factors such as discipline, job performance and attitude towards work International Hardware v NLRC – If an employee consented to his retrenchment or VOLUNTARILY applied for retrenchment due to the installation of labor-saving devices, redundancy or to prevent financial losses, the required notice to the DOLE is not necessary When the bona fide suspension of the operation of a business exceeds 6 months, the employee shall be deemed terminated Mindanao Terminal v Nagkahiusang – Should the temporary lay-off (suspension of operations) exceed 6 months, the employees should either be recalled to work or permanently retrenched following the requirements of law and the failure to comply would be tantamount to dismissing the employees NFL v NLRC – Closure of the employer's business due to a government action, and such act of government is for the benefit of the employees (in this case, agrarian reform), does not entitle the employees to separation pay from their employer San Felipe Neri v NLRC – Absent an agreement to the contrary, the owner of the business who sells the same shall be liable to give due notice and the proper separation pays to his employees since there is no law which requires the buyer to absorb the employees of the selling company. Case Doctrines – Claims and Reliefs Banares v Tabaco Cooperative – Separation pay is made in lieu of reinstatement:


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ATENEO LAW SCHOOL 3-A L.T.J.F. 1. When a long period of time has elapsed since the dismissal of the employee 2. Reinstatement is inimical to the interest of the employer and employee 3. Reinstatement is no longer feasible 4. Reinstatement does not serve the best interests of the parties involved 5. Employer is prejudiced by the worker's continued employment 6. The facts that make execution unjust or inequitable have supervened 7. Strained relations between employer and employee Cabigting v San Miguel – Guidelines on the doctrine of Strained Relations: 1. No strained relations should arise from a valid and legal act of asserting one's right 2. The strained relationship must be proved as a fact if either the employer or employee does not want the employment to remain 3. The fact alone that the employee filed a case against the employer (since it is a legal right) cannot be the basis of a strained relationship NOTE: This case is unique since the Supreme Court directed the employer to create an equivalent position for the employee to be reinstated. Normally, when an employee is to be reinstated to a position no longer available, separation pay is paid in lieu thereof. Cainta Catholic School v CCSEU – A CBA may validly accord management the prerogative to optionally retire an employee under the terms and conditions mutually agreed upon by the parties even if such agreement allows for retirement at an age lower than the optional retirement age or the compulsory retirement age Equitable Bank v Sadac - “Backwages” means that the employee is paid at the wage rate at the time of his dismissal plus bonuses and benefits. However, a salary increases cannot be interpreted as either an allowance or benefit. If the salary increases are a mere expectancy (eg: by reason of excellent performance) or are not

LABOR LAW I [ATTY. CADIZ] 1st Semester S.Y. 2013-2014 supported by a lawful decree or order, such increases may NOT be made a component in the computation of backwages Golden Ace v Talde – While an illegally dismissed employee is normally entitled to 2 reliefs (backwages and reinstatement/separation pay), such reliefs are distinct and independent of each other as their purposes are different. Just because an employee has already been paid backwages does not mean he cannot claim to separation pay Moreno v San Sebastian College – Even if the employer had the right to terminate the employee given the moonlighting activities of the latter, the penalty of dismissal is too harsh given that: 1. The employer was not adversely affected by the disobedience of the employee 2. The employee was forced to violate company policies given serious economic necessities 3. The employees performance was not compromised and her work was not prejudiced 4. The employer had the discretion to impose a lighter penalty Nestle Phils v NLRC – Even if the retirement plan under the CBA is non-contributory, it is still a contractual obligation and may not be considered as merely gratuitous, thus the employees have a demandable right over such retirement plan Perez v PT&T – While the Implementing Rules require a formal hearing, the Labor Code only requires that the employee is given an opportunity to defend his side, whether it may be verbal or written. In case of conflict between the rules and the law, the latter prevails Sarona v NLRC – If a dissolved corporation's successor is merely a continuation of the former one (not a bona fide new entity), then the employee's term of employment should be counted from the time he was hired by the former corporation and not by the successor


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Session Delights v CA – A re-computation by a higher court of the awards and damages made by a lower tribunal, without modifying a final judgment on the rights and status of the prevailing party, does not violate the principle of immutability of final judgments Suico v NLRC – Due process means compliance with the Labor Code, CBA and company policy. No matter how serious the infraction or misconduct of the employee, the due process requirement may not be dispensed with


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Labor Law 1 Reviewer 3A Cadiz

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