The Labor Code of the Philippines; Applicability

Coverage Clause

While government owned and controlled corporations (GOCCs) without original charters are covered by the Labor Code of the Philippines, employees of GOCCs are bereft of any right to negotiate the economic terms of their employment, i.e., salaries, emoluments, incentives and other benefits, with their employers since these matters are covered by compensation and position standards issued by the Department of Budget and Management and applicable laws.

The GOCC Governance Act of 2011 (R.A. No. 10149) applies to both chartered and non-chartered GOCCs (Philippine National Construction Corp. v. National Labor Relations Commission, G.R. No. 248401, 23 June 2021)

Employer-Employee Relationship

The employment status of a person is not defined by what the parties say it should be.

Rather, the employment relationship of parties is prescribed by law. (Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024)

It is not the title of the contract or the designation of the position given to a person which determines the nature of his or her engagement.

It is how the law defines it (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, 26 February 2024)

Four-fold test

Under the four-fold test, to establish an employer-employee relationship, four factors must be proven:

• the employer’s selection and engagement of the employee;
• the payment of wages;
• the power to dismiss; and
• the power to control the employee’s conduct. (Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024; Upod v. Onon Trucking and Marketing Corp., G.R. No. 248299, 14 July 2021)

Under the four-fold test, the right to control is the dominant factor in determining whether one is an employee or an independent contractor.

The so-called control test is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee relationship.

Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.

Economic Dependence Test

In the economic dependence test, the circumstances of the whole economic activity are considered in the determination of the relationship between employer and employee such as:

• the extent to which the services performed are an integral part of the employer’s business;
• the extent of the worker’s investment in equipment and facilities;
• the nature and degree of control exercised by the employer;
• the worker’s opportunity for profit and loss;
• the amount of initiative, skill, judgment[,] or foresight required for the success of the claimed independent enterprise;
• the permanency and duration of the relationship between the worker and the employer; and
• the degree of dependency of the worker upon the employer for his continued employment in that line of business. (Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024)

There is no hard and fast rule designed to establish the elements of an employer-employee relationship.

Some forms of evidence that have been accepted to establish the elements include, but are not limited to, identification cards, cash vouchers, social security registration, appointment letters or employment contracts, payroll, organization charts, and personnel lists, among others (Tapia v. GA2 Pharmaceutical, Inc., G.R. No. 235725, 28 September 2022)

Independent Contractor (Bilateral Arrangements)

An independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on one’s own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.

The independent contractor consists of individuals who possess unique skills and talents which set them apart from ordinary employees and whose means and methods of work are free from the control of the employer.

Under this arrangement, there is no trilateral relationship but a bilateral relationship because independent contractors are directly engaged by the principal.

An independent contractor enjoys independence and freedom from the control and supervision of his or her principal as opposed to an employee who is subject to the employer’s power to control the means and methods by which the employee’s work is to be performed and accomplished.

The rule is that where a person who works for another performs his or her job more or less at his or her own pleasure, in the manner he or she sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his or her efforts and not the amount thereof, no employer-employee relationship exists.

When the status of the employment is in dispute, the employer bears the burden to prove that the person whose service it pays for is an independent contractor rather than a regular employee with or without fixed terms. (Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024)

Categories of Employment

Regular Employment

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. (Art. 295, Labor Code of the Philippines)

The repeated engagement under a fixed-term contract is indicative of the necessity and desirability of the employee’s work in the employer’s business.

And where the employee’s contract has been continuously extended or renewed to the same position, with the same duties and remained in the employ without any interruption, then such employee is a regular employee. (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, 26 February 2024)

Fixed Term Employment

The Supreme Court has laid down the criteria of a valid fixed-term employment, to wit:

• The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or
• It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter. (Brent School, Inc. v. Zamora, G.R. No. L-48494, 05 February 1990.)

Where from the circumstances, it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to law and public policy. (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, (26 February 2024))

Although the Supreme Court recognized the validity of fixed-term employment contracts in a number of cases, it emphasized that when the circumstances of a case show that the periods were imposed to block the acquisition of security of tenure, they should be struck down for being contrary to law, morals, good customs, public order, or public policy. (Escauriaga v. Fitness First, Phil., Inc., G.R. No. 266552, 22 January 2024)

A contract indicating a fixed term does not automatically mean that an employee could never be a regular employee, as this is precisely what Article [295] seeks to avoid.

Thus, the Brent ruling on fixed-term employment remains as the exception rather than the general rule. (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, 26 February 2024)

Project Employment

A project employee is assigned to a project that starts and ends at a determined or determinable time.

The principal test to determine if employees are project employees is whether they have been assigned to carry out a specific project or undertaking, the duration or scope of which was specified at the time the employees were engaged for that project. (Steelweld Construction v. Echano, G.R. No. 200986, 29 September 2021)

Trilateral Contracting Arrangements

As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has substantial capital, investment, tools, and the like.

As a regulated industry, the law requires registration of labor contractors with the Department of Labor and Employment (DOLE).

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting. (Martinez v. Magnolia Poultry Processing Plant, G.R. Nos. 231579 & 231636, 16 June 2021)

Recruitment and Placement

“Recruitment and placement”

“Recruitment and placement” refer to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring, or procuring workers, contract services, referrals, promising or advertising for employment, locally or abroad, whether for profit or not. (Art. 13 (b), Labor Code of the Philippines)

The basic element of recruitment and placement is an offer or promise of employment.

Without an offer or promise of employment, there is no recruitment activity, and therefore, there can be no illegal recruitment.

Money is not an essential element of recruitment and placement.

As to whether money changed hands will not negate the commission of recruitment activities, because under the legal definition, recruitment and placement can take place even if it is done for profit or not. (People v. Jamilosa, 512 SCRA 34)

Those Disqualified from Operating a Recruitment or Manning Agency (for Overseas Employment [Let’s pick 3])

• Travel agencies including their officers or board of directors (in case of corporation) or partners (in case of partnership); (Art. 26, Labor Code of the Philippines)
• Sales agents of airline companies; (Art. 26, Labor Code of the Philippines)
• Persons, partners, officers or directors of an insurance company who propose or provide an insurance contract under the compulsory insurance coverage for overseas Filipino workers; (Sec. 3, Rule I, Part II, Revised POEA Rules Governing the Recruitment and Employment of Seafarers (2016)

Ban on direct hiring

Foreign employers cannot directly hire Filipino workers for overseas employment.

They can hire workers only through public employment offices or through licensed or authorized recruitment agencies or entities. (Art. 18, Labor Code of the Philippines)

Prohibited practice

To substitute or alter to the prejudice of the worker, employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the Department of Labor and Employment. (Sec. 6 (i) Migrant Workers and Overseas Filipinos Act of 1995)

Illegal Recruitment

To sustain a conviction for illegal recruitment in large scale, the following elements must concur:

• the offender has no valid license or authority to enable him or her to lawfully engage in recruitment and placement of workers;
• he or she undertakes any of the activities within the meaning of “recruitment and placement” under Article 13(b) of the Labor Code of the Philippines or any prohibited practices enumerated under Article 34 of the Labor Code of the Philippines [or Section 6 of the Migrant Workers and Overseas Filipinos Act of 1995]; and
• he or she commits the same against three or more persons, individually or as a group. Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage. (People v. Marzan, G.R. No. 227093, 21 September 2022)

General Labor Standards

Hours Worked

Hours Worked shall include:

• all time during which an employee is required to be on duty or to be at a prescribed workplace, and
• all time during which an employee is suffered or permitted to work. (Art. 84, Labor Code of the Philippines)

Compressed Workweek

Conditions for Adoption of Compressed Workweek

• Consent – Majority of the covered employees or their duly authorized representatives must expressly and voluntarily give their consent.
• Certification – The employer must get a certification (from an accredited health and safety organization or from the firm’s safety committee), that work beyond eight (8) hours is within threshold limits or tolerable levels of exposure, as set in the Occupational Safety and Health Standards.
• Notice – The employer must notify the DOLE  Regional Office about the adoption of the compressed workweek scheme. (DOLE Advisory No. 02 issued on December 2, 2004)

Wages

Articles 112 and 113 of the Labor Code of the Philippines:

Art. 112. Non-interference in disposal of wages. — No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages. He shall not in any manner force, compel, or oblige his employees to purchase merchandise, commodities[,] or other property from any other person, or otherwise make use of any store or services of such employer or any other person.

Art. 113. Wage deduction. — No employer, in his own behalf or in behalf of any person, shall make any deduction from the wages of his employees, except:

(a) In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;

(b) For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment. (Agapito v. Aeroplus Multi-Services, Inc., G.R. No. 248304, (20 April 2022))

Payment of Wages in Case of Bankruptcy

In the event of bankruptcy or liquidation of an employer’s business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding.

Such unpaid wages and monetary claims shall be paid in full before claims of the government and other creditors may be paid. (Art 110, Labor Code of the Philippines)

Article 110 of the Labor Code of the Philippines will apply only in cases of bankruptcy or liquidation of the employer’s business. (Commissioner of Internal Revenue v. NLRC, 238 SCRA 42, 51; ALU v. Court of Appeals, 570 SCRA 332)

This is clear from the opening phrase of Article 110 which reads “(i)n the event of bankruptcy or liquidation of employer’s business.”

This means that before the workers’ preference may be invoked, there must first be an insolvency proceeding or judicial liquidation of the employer’s business. (DBP v. Secretary, 179 SCRA 630)

Without an insolvency proceeding or judicial liquidation order, Article 110 of the Labor Code of the Philippines will not apply. (DBP v. Santos, 171 SCRA 138; DBP v. Minister of Labor, 195 SCRA 463)

Special Standards for Specific Workers

Non-Resident Aliens

Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor. (Art. 40, Labor Code of the Philippines)

Gainful employment presupposes the existence of an employer-employee relationship between the Philippine-based employer and the foreign national. [Sec. 2, Department Order No. 221-21]

Seafarers

The employment of seafarers is governed by the contracts they enter into at the time of their engagement.

So long as the contract is not contrary to law, morals, public order, or public policy, they have the force of law as between the parties themselves.

The POEA Rules and Regulations require that the POEA-SEC be integrated in every seafarer’s contract, therefore, it is also integrated into the provisions of petitioner’s employment contract with respondents.

Guidelines to determine a seafarer’s disability, viz.:

• The company-designated physician must issue a final medical assessment on the seafarer’s disability grading within a period of 120 days from the time the seafarer reported to [it];
• If the company-designated physician fails to give its assessment within the period of 120 days, without any justifiable reason, then the seafarer’s disability becomes (total and permanent);
• If the company-designated physician fails to give its assessment within the period of 120 days with a sufficient justification (e.g., seafarer required further medical treatment or seafarer was uncooperative), then the period of diagnosis and treatment shall be extended to 240 days. The employer has the burden to prove that the company-designated physician has sufficient justification to extend the period; and
• If the company-designated physician still fails to give its assessment within the extended period of 240 days, then the seafarer’s disability becomes permanent and total, regardless of any justification.

The POEA-SEC provides that if the employee is suffering from any of the occupational diseases or illnesses listed under its Section 32 (A), such disease is deemed to be work-related, provided the conditions set therein are satisfied.

Section 20 (B) (4) of the POEA-SEC, on the other hand, states that if the illness is not listed as an occupational disease under Section 32 (A), there is still a disputable presumption that the ailment is work-related.

This means that there is a legal presumption in favor of the seafarer that their illness is work-related, and the employer has the burden of presenting evidence to overcome such presumption. (Celestino v. Belchem Philippines, Inc., G.R. No. 246929, 02 March 2022)

Pursuant to the 2010 POEA-SEC, an illness shall be considered as pre-existing if prior to the processing of the POEA contract, any of the following conditions is present:

• the advice of a medical doctor on treatment given for such continuing illness or condition; or
• the seafarer had been diagnosed and has knowledge of such illness or condition but failed to disclose the same during the PEME, and such cannot be diagnosed during the PEME.

More, to speak of fraudulent misrepresentation is not only to say that a person failed to disclose the truth but that he or she deliberately concealed it for a malicious purpose.

To equate with fraudulent misrepresentation, the falsity must be coupled with intent to deceive and to profit from that deception. (Carandan v. Dohle Seafront Crewing Manila, Inc., G.R. No. 252195, 30 June 2021)

Child Workers

When Children Below 15 Years Old Can Be Employed

(1) When a child works directly under his parents or legal guardian, subject to the following conditions:

• Only members of his family  are employed thereat;
• The job does not impair the child’s normal development or endanger his life, safety, health, and morals;
• The child is provided with primary or secondary education; and
• A child work permit is obtained from the DOLE. (Sec. 12, R.A. 7610 as amended)

(2) When the employment of the child is essential in public entertainment or information,  subject to the following conditions:

• An employment contract must be executed by the employer and the parents or legal guardian of the child, and approved by the DOLE;
• The employer must ensure the protection and normal development of the child.
• The employer must implement a continuing program for training and skills acquisition of the child, subject to the approval and supervision of competent authorities; and
• A child work permit is obtained from the DOLE. (Sec. 12, R.A. 7610 as amended)

Right to Self-Organization

Art. 253. Coverage and Employees Right to Self-Organization. – All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions, whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining. x x x

Unfair Labor Practice

The prescriptive period for unfair labor practice is one (1) year.

Reckoning Period –

(1) For the administrative aspect – the one (1)-year period is reckoned from the commission of such unfair labor practice. Article 305 of the Labor Code of the Philippines provides that:

“Art. 305. Offenses. – xxx All unfair labor practices arising from Book V shall be filed with the appropriate agency within one (1) year from accrual of such unfair labor practice; otherwise, they shall be forever barred.”

(2) For the criminal aspect – the one (1)-year period is  reckoned from the finality of the judgment in the administrative proceedings.

This is so because the prescriptive period does not run during the pendency of the administrative proceedings. Article 258 of the Labor Code of the Philippines provides that:

“Art. 258. Concept of Unfair Labor Practice and Procedure for Prosecution Thereof- xxx No criminal prosecution under this Title may be instituted without a final judgment, finding that an unfair labor practice was committed, having been first obtained in the preceding paragraph. During the pendency of such administrative proceeding, the running of the period of prescription of the criminal offense herein penalized shall be considered interrupted: xxx”

Labor Organizations

A legitimate labor organization is a union (or any branch or local thereof) duly registered with the Department of Labor and Employment. (Art. 219 (h), Labor Code of the Philippines)

Grounds for Cancellation of Union Registration

Art. 247. Grounds for Cancellation of Union Registration. – The following shall constitute grounds for cancellation of union registration:

(a) Misrepresentation, False statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification and the list of members who took part in the ratification;

(b) Misrepresentation, false statements or fraud in connection with the election of officers, minutes of the election of officers, and the list of voters.

(c) Voluntary dissolution by its members.

Art. 250. Rights and Conditions of Membership in a Labor  Organization – xxx Any violation of the rights and conditions of membership shall be a ground for cancellation of union registration or expulsion of officer from office, whichever is appropriate.

The legitimacy of a labor organization may not be attacked in a petition for certification election. (Asian Institute of Management Faculty Association v. Asian Institute of Management, G.R. Nos. 197089 & 207971, 31 August 2022)

The Certification Process

In a certification proceeding, the employer is generally considered a mere by-stander, because certification election is the sole concern of workers.

The role of the employer is limited to:

• Being notified of the proceedings; and
• Submitting the list of employees during the pre-election conference. (Art. 271, Labor Code of the Philippines)

Collective Bargaining

Term of a CBA

Insofar as the representation aspect of a duly registered CBA is concerned, the term is five (5) years reckoned from the date of its effectivity. 

During this 5-year period, no union can challenge the majority representation of the incumbent bargaining agent through a petition for certification election except during the 60-day freedom period.

The reason is because of the contract bar rule where the duly registered CBA (contract) bars any union from questioning the majority status of the certified bargaining agent.

Legal Basis:

“Art. 265.  Terms of a Collective Bargaining Agreement – Any Collective Bargaining Agreement that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5) years. No petition questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the Department of Labor and Employment outside of the sixty-day period immediately before the date of expiry of such five year term of the Collective Bargaining Agreement. xxx”

Strikes

The Labor Code of the Philippines and its implementing rules limit the grounds for a valid strike to:

• a bargaining deadlock in the course of collective bargaining, or
• the conduct of unfair labor practices by the employer.

Only a certified or duly recognized bargaining representative may declare a strike in case of a bargaining deadlock. However, in cases of unfair labor practices, the strike may be declared by any legitimate labor organization. (Bigg’s, Inc. v. Boncacas, G.R. Nos. 200487 & 200636, March 6, 2019.)

The Mandatory Requirements of a Strike

• notice of strike;
• strike vote; and
• strike vote report. (Art. 278(c) and (f))

A strike declared without a notice of strike, strike vote, or strike vote report is illegal.

Article 279 of the Labor Code of the Philippines expressly provides that:

“Art. 279. Prohibited Activities – (a) No labor organization or employer shall declare a strike xxx without first having filed the notice required in the preceding Article or without the necessary strike or lockout vote first having  been obtained and reported to the Ministry (now Department).”

Security of Tenure

A regular employee enjoys the constitutional right of security of tenure. Consequently, a regular employee cannot be dismissed without just or authorized cause (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, 26 February 2024)

On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct x x x.

The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests.  (St. Benedict Childhood Education Centre, Inc. v. San Jose, G.R. No. 225991, 13 January 2021)

Compassionate justice is not applicable in cases where an employee was validly dismissed due to serious misconduct or those reflecting on his or her moral character. (St. Benedict Childhood Education Centre, Inc. v. San Jose, G.R. No. 225991, 13 January 2021)

Management Prerogatives

Management prerogative is the right of an employer to regulate all aspects of employment, including work assignment, working methods, processes to be followed, working regulations, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. (Reliable Industrial and Commercial Security Agency, Inc. v. Court of Appeals, G.R. No. 190924, (14 September 2021)

The employer has the prerogative to transfer an employee from one office to another within the business establishment.

This is, after all, a privilege inherent in the employer’s right to control and manage its enterprise effectively.

Like all rights, however, management prerogative has certain limits; it cannot be exercised with unbridled discretion.

For instance, the managerial prerogative to transfer personnel must not result in the demotion in rank or diminution of the salary, benefits, and other privileges of said personnel.

Too, it must be exercised without grave abuse of discretion and with due observance of the basic elements of justice and fair play.

It cannot be over-emphasized that the right to transfer should not be confused with the manner in which that right must be exercised.

Surely, it cannot be used as a subterfuge by the employer to rid itself of an undesirable worker. (Reliable Industrial and Commercial Security Agency, Inc. v. Court of Appeals, G.R. No. 190924, 14 September 2021)

Contracting out of services is an exercise of business judgment or management prerogative. x x x

It is within the prerogative of management to farm out any of its activities, regardless whether such activity is peripheral or core in nature.

What is primordially important is that the service agreement does not violate the employee’s right to security of tenure and payment of benefits to which he or she is entitled under the law.

So long as the outsourcing does not fall squarely as labor-only contracting, the arrangement does not ripen into an employer-employee relationship between the principal and the employees of the legitimate labor contractor. (Martinez v. Magnolia Poultry Processing Plant, G.R. Nos. 231579 & 231636, 16 June 2021)

Establishing the Fact of Dismissal

In illegal dismissal cases, the employee must first establish by substantial evidence the fact of his or her dismissal from service before the employer bears the burden of proving that the dismissal was legal.

The evidence to prove the fact of dismissal must be clear, positive and convincing. (Tapia v. GA2 Pharmaceutical, Inc., G.R. No. 235725, 28 September 2022)

When a verbal command not to report for work is uttered by a person who has the capacity and authority to terminate an employee, the same could be construed as an overt act of dismissal (Tapia v. GA2 Pharmaceutical, Inc., G.R. No. 235725, 28 September 2022)

In illegal dismissal cases, before the employer must bear the burden of proving that the dismissal was legal, the employee must first establish by substantial evidence the fact of his dismissal from service.

Obviously, if there is no dismissal, then there can be no question as to its legality or illegality (Agapito v. Aeroplus Multi-Services, Inc., G.R. No. 248304, 20 April 2022; Moll v. Convergys Philippines, Inc., G.R. No. 253715, 28 April 2021)

Just Causes

Serious Misconduct

Misconduct is defined as an improper and wrongful conduct. It is the transgression of established and definite rule of action, a forbidden act, a dereliction of duty, and implies wrongful intent and not mere error of judgment.

In order to justify an employee’s termination of services, the misconduct should be

• serious and not merely trivial or unimportant;
• relate to the performance of the employee’s duties; and
• show that the employee has become unfit to continue working for the employer (St. Benedict Childhood Education Centre, Inc. v. San Jose, G.R. No. 225991, (13 January 2021))

Gross and Habitual Neglect

To warrant removal from employment on ground of [neglect], the [neglect] must not only be gross but habitual. (Steelweld Construction v. Echano, G.R. No. 200986, (29 September 2021))

Reliefs Granted upon a Finding of Illegal Dismissal (Just Causes)

          Reinstatement

Reinstatement in its generally accepted sense refers to restoration to the position from which the employee has been removed or separated. (San Miguel Brewery v. Santos, 2 SCRA 1081)

Illegally dismissed employees cannot be denied the right to reinstatement simply because they have obtained employment elsewhere.

Dismissed employees cannot be expected to remain idle while their claims are pending adjustment, especially if they have dependents looking to them for sustenance.

If ever they obtain employment elsewhere, it is out of necessity rather than choice.

It would be against all justice and equity to force dismissed employees to choose between starvation and loss of reinstatement. (Western Mindanao Lumber v. Mindanao Federation of Labor, 101 Phil.)

          Separation Pay

Jurisprudence allows payment of separation pay if reinstatement is no longer feasible.

The most common reason for payment of separation pay is when the relation between the employer and employee has already been strained.  (Reliable Industrial and Commercial Security Agency, Inc. v. Court of Appeals, G.R. No. 190924, 14 September 2021)

          Backwages

Backwages is a relief that restores the income that was lost by reason of illegal dismissal. (Gold City v. NLRC, 245 SCRA 628)

The rationale for this relief is that employees found to have been illegally dismissed are considered as not having left their employment so that they are entitled to all the rights and privileges that accrue to them by virtue of the job that they held. (Cristobal v. Melchor, 101 SCRA 857)

Backwages to be awarded to an illegally dismissed employees should not, as a general rule, be diminished or reduced by the earnings derived by them elsewhere during the period of their illegal dismissal.

The underlying reason for this ruling is that the employees, while litigating the matter of their dismissal, must still earn a living to support themselves and their families, while full backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. (Bustamante v. NLRC, 265 SCRA 61)

          Re: Salary Increases and benefits

The award of backwages and/or separation pay due to illegally dismissed employees shall include all salary increases and benefits granted under the law and other government issuances, Collective Bargaining Agreements, employment contracts, established company policies and practices, and analogous sources which the employees would have been entitled to had they not been illegally dismissed.

On the other hand, salary increases and other benefits which are contingent or dependent on variables such as an employee’s merit increase based on performance or longevity or the company’s financial status shall not be included in the award. (Dumapis v. Lepanto Consolidated Mining Co., G.R. No. 204060, 15 September 2020)

Authorized Causes

Redundancy

Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the business enterprise. 

A position is redundant where it had become superfluous. 

Superfluity of a position or positions may be the outcome of a number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or service activity previously manufactured or undertaken by the enterprise.

The characterization of an employee’s services as redundant,  and therefore,  properly terminable,  is an exercise of management prerogative,  considering that an employer has no legal obligation to keep more employees than are necessary for the operation of its business. 

But the exercise of such prerogative “must not be in violation of the law,and must not be arbitrary or malicious.”

For a redundancy program to be valid,  the following requisites must concur:

• written notice served on both the employees and the DOLE at least one (1)  month prior to the intended date of termination of employment;
• payment of separation pay equivalent to at least one (1)  month pay for every year of service;
• good faith in abolishing the redundant positions; and
• fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished,  taking into consideration such factors as (i)  preferred status; (ii)  efficiency;  and (iii)  seniority,  among others.

The burden is on the employer to prove by substantial evidence the factual and legal basis for the dismissal of its employees on the ground of redundancy.

An employer cannot simply claim that it has become overmanned and thereafter declare the abolition of an employee’s position without adequate proof of such redundancy. 

Nor can the employer just claim that it has reviewed its organizational structure and decided that a certain position has become redundant. 

Adequate proof of redundancy and criteria in the selection of the employees to be affected must be presented to dispel any suspicion of bad faith on the part of the employer.

An employer’s subsequent creation of new positions or the hiring of additional employees is inconsistent with the termination on the ground of redundancy;  it exhibits the employer’s intent to circumvent the employee’s right to security of tenure. (Aguilera v. Coca-Cola FEMSA Philippines, Inc., G.R. No. 238941, (29 September 2021))

Resignation

Resignation is the voluntary act of an employee who is in a situation where he or she believes that personal reasons cannot be sacrificed in favor of the exigency of the service and has no other choice or is otherwise compelled to dissociate himself or herself from employment.

It is a formal pronouncement or relinquishment of an office and must be made with the intention of relinquishing the office, accompanied by the act of relinquishment or abandonment.

A resignation must be unconditional and with the intent to operate as such.

To determine whether the employee indeed intended to relinquish his or her employment, the act of the employee before and after the alleged resignation must be considered.

More, the rule is when an employer raises the defense of resignation, the burden to establish the voluntariness of such resignation rests on the employer. (Jacob v. Villaseran Maintenance Service Corp., G.R. No. 243951, (20 January 2021))

Abandonment

Abandonment requires the deliberate and unjustified refusal of the employee to perform his employment responsibilities.

Mere absence or failure to work, even after notice to return, is not tantamount to abandonment.

To justify the dismissal of an employee on this ground, two (2) elements must concur, viz.:

• the failure to report for work or absence without valid or justifiable reason; and
• a clear intention to sever the employer-employee relationship which is manifested through the employee’s overt acts (Steelweld Construction v. Echano, G.R. No. 200986, (29 September 2021))

Retirement

Retirement benefits are a form of reward for an employee’s loyalty and service to an employer and are earned under existing laws, collective bargaining agreements, employment contracts, and company policies.

Article 302 of the Labor Code of the Philippines, as amended by Republic Act No. 7641 provides for two types of retirements, namely:

• optional retirement at age 60; and
• compulsory retirement at age 65.

The law does not make any distinction as for the grant of retirement benefits in either case.

In both cases, the retirement benefit is equivalent to 1/2 month salary for every year of service, the 1/2 month being computed at 22.5 days provided the employee has worked with his or her employer for at least five years prior to retirement.  (Sampana v. Maritime Training Center of the Philippines, G.R. No. 264439, (26 February 2024))

Quitclaims

Quitclaims and waivers are oftentimes frowned upon and are considered as ineffective in barring recovery for the full measure of the worker’s rights and that acceptance of the benefits therefrom does not amount to estoppel. 

The reason being that the employer and employee, obviously do not stand on the same footing. 

But not all waivers and quitclaims are invalid as against public policy. 

If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of change of mind.

There are three (3) instances, however, where a waiver cannot preclude a dismissed employee from questioning the validity of his or her dismissal:

• if the employer used fraud or deceit in obtaining the waivers;
• if the consideration the employer paid is incredible and unreasonable; or
• if the terms of the waiver are contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law.

Before the courts can consider a waiver valid,  the legality of the termination itself should be able to withstand judicial scrutiny. 

Should the court find that either of the foregoing exceptions is attendant, the dismissed employee cannot be deemed barred from contesting the validity of the termination.

The risk of not receiving anything, whatsoever, coupled with the probability of not being able to immediately secure a new job or means of income, constitutes enough pressure upon anyone who is asked to sign a release and quitclaim in exchange for some amount of money. 

That the employee may have held a supervisory position did not make him any less susceptible to accept the separation package forced as he is with the real thread of unemployment. (Aguilera v. Coca-Cola FEMSA Philippines, Inc., G.R. No. 238941, 29 September 2021)

Technical Rules of Procedure

In labor cases, strict adherence to the technical rules of procedure is not required.

Evidence has been allowed to be submitted for the first time on appeal with the National Labor Relations Commission in the interest of substantial justice.

Labor officials should use all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, in the interest of due process.

But this liberal policy must still conform to the basic principles of fair play, justice, and due process.

The liberality of procedural rules is qualified by two requirements:

• a party should adequately explain any delay in the submission of evidence; and
• a party should sufficiently prove the allegations sought to be proven.

For the liberal application of the rules before quasi-judicial agencies cannot be used to perpetuate injustice and hamper the just resolution of the case.

Neither is the rule on liberal construction a license to disregard the rules of procedure. (Agapito v. Aeroplus Multi-Services, Inc., G.R. No. 248304, (20 April 2022))

Labor Arbiter

Art. 224. Jurisdiction of Labor Arbiters and the Commission. – (a) x x x [T]he Labor Arbiters shall have original and exclusive jurisdiction to hear and decide x x x:

• (4) Claims for actual, moral, exemplary, and other forms of damages arising from employer-employee relations; x x x

There is a unifying element which runs through Article 224 and that is, that they all refer to cases or disputes arising out of or in connection with an employer-employee relationship. (Portillo v. Rudolf Lietz, Inc., G.R. No. 196539, October 10, 2012.)

Without this critical element of employment relationship, the labor tribunals can never acquire jurisdiction over a dispute. (Degamo v. My Citihomes, G.R. No. 249737 (Resolution), September 15, 2021)

[T]he law should also apply with equal force to an employer’s claim for damages against its dismissed employee, provided that the claim arises from or is necessarily connected with the fact of termination and should be entered as a counterclaim in the illegal dismissal case.

Thus, the “reasonable causal connection with the employer-employee relationship” is a requirement not only in employees’ money claims against the employer but is, likewise, a condition when the claimant is the employer. (Comscentre Phils., Inc. v. Rocio, G.R. No. 222212, 22 January 2020)

National Labor Relations Commission (NLRC)

Section 6, Rule VI of the 2011 NLRC Rules provides that an appeal may be perfected by the appellant-employer only by the posting of a bond in the equivalent amount of the full monetary award granted to the appellee-employee.

The perfection of an appeal in the manner and within the period set by law is not only mandatory but jurisdictional.

Consequently, there should be no implied approval of a jurisdictional requirement that has not been complied with.

Otherwise, the ground of lack of jurisdiction becomes a waivable defect in procedure.

Whether the NLRC accepts or rejects the appellant’s motion to reduce bond, the ruling must be unequivocal, and such ruling must be issued before or at the time the NLRC resolves the appeal by final judgment.

Failure to do so shall render the NLRC liable for grave abuse of discretion for having ruled on an appeal without acquiring jurisdiction over the same, and the judgment it had issued shall be vacated as null and void. (Pacific Royal Basic Foods, Inc. v. Noche, G.R. No. 202392, 04 October 2021)

DOLE Secretary

In disputes causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment is empowered to:

• assume jurisdiction over the dispute and decide it; or
• certify the dispute to the National Labor Relations Commission for compulsory arbitration. (Art. 278(g))

Once an assumption or certification order is issued, a strike or lockout, whether actual or intended, is automatically enjoined.

If the strikers do not return to work, an illegal act is committed because Article 279 (a) of the Labor Code of the Philippines prohibits the holding of a strike after assumption of jurisdiction by the Secretary of Labor and Employment.

Considering that an illegal act is committed, all strikers, whether union officers or plain members, may be declared to have lost their employment status. (Art. 279(a))

Voluntary Arbitrators

Voluntary Arbitrators have original and exclusive jurisdiction over:

• Unresolved grievance arising from interpretation or implementation of a CBA or company personnel policies. (Art. 274, Labor Code of the Philippines)
• Wage Distortion disputes in organized establishments. (Art. 124, Labor Code of the Philippines)
• Disputes arising from interpretation and implementation of the productivity incentive programs under Republic Act No. 6971. (Section 9, R.A. 6971)

Social Security System Law – R.A. No. 11199

Dependents

The dependents shall be the following:

• The legal spouse entitled by law to receive support from the member;
• The legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not gainfully employed, and has not reached twenty-one (21) years of age, or if over twenty-one (21) years of age, he is congenitally or while still a minor has been permanently incapacitated and incapable of self-support, physically or mentally; and
• The parent who is receiving regular support from the member. (Section 8 (e), Social Security Act of 2018.)

Beneficiaries

The dependent spouse until he or she remarries, the dependent legitimate, legitimated or legally adopted, and illegitimate children, who shall be the primary beneficiaries of the member: Provided, That the dependent illegitimate children shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or legally adopted children: Provided, further, That in the absence of the dependent legitimate, legitimated or legally adopted children of the member, his/her dependent illegitimate children shall be entitled to one hundred percent (100%) of the benefits.

In their absence, the dependent parents who shall be the secondary beneficiaries of the member.

In the absence of all the foregoing, any other person designated by the member as his/her secondary beneficiary. (Section 8 (k), Social Security Act of 2018)

“As much as talent counts, effort counts twice.”
― Angela Duckworth

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