As a general rule, Article 116 of the Labor Code prohibits employers from

withholding wages from employees.1 Nonetheless, the law allows certain

exceptions, to wit:

1) Those authorized by law;

2) Insurance premiums advanced by the employer;
3) Those authorized by the employee in writing;2
4) Deposits for loss and damage to tools, materials or equipment supplied
by employer3 and for missing funds4;
5) Debts due from the employee to the employer;5
6) Attachment or execution on wages for debts incurred for food, shelter,
clothing and medical attendance;6
7) Union dues;7
8) Agency fees;8 and
9) Deductions for meals and other facilities.9

Automatic salary deductions for loss or

damage to company property, or for
missing funds are not allowed.

For deductions for loss and damage to be valid, Section 14 of the

Omnibus Rules Implementing the Labor Code provides that the employer must
establish the following conditions:

(1) That employer is engaged in a business where deposits by employees

is a recognized practice or that the deposit is necessary or desirable as
determined by the Secretary of Labor;
(2) That the employee is clearly shown to be responsible for the loss or
damage;
(3) That the employee is given reasonable opportunity to show cause why
deduction should not be made;
(4) That the amount is fair and reasonable and shall not exceed actual
loss or damage; and

1 Milan vs. NLRC, G.R. No. 202961, 4 February 2015; Article 116 of the Labor Code
2 Article 113 of Labor Code
3 Article 114 of Labor Code
4 In Bluer than Blue JV vs. Esteban, G.R. No. 192582, 7 April 2014
5 Article 1706 of New Civil Code
6 Article 1708 of the New Civil Code
7 Article 241 and 277 of the Labor Code
8 Article 248 of the Labor Code
9 Rule 7-A, Section 7, Omnibus Rules Implementing the Labor Code
 (5) That the deduction does not exceed 20% of the employees weekly
wage.

In Bluer than Blue JV vs. Esteban,10 the Supreme Court invalidated the
deduction representing the negative variance of P8,304.93 for failure of the
employer to establish that the employee was responsible therefor. Moreover, in
Nia vs. Montecillo,11 the Supreme Court emphasized that the employer must first
establish: (1) that the making of deductions is authorized by law or regulations
issued by the Secretary of Labor; (2) that the posting of cash bonds is a
recognized practice in its industry, or alternatively, seek determination by the
Secretary of Labor that the deduction or deposit is necessary or desirable in the
conduct of its business.

Thus, before imposing a policy on salary deductions or requiring deposits,

the employer must establish that it is either authorized by law or that its engaged
in a business where the same is a recognized practice.

Second, while employees may be required to post cash bonds for loss or
damage to company property or for missing funds, an automatic deduction
from said deposit is not allowed. The employer must accord the employee due
process and show proof that the employee was responsible for the loss before
causing a reimbursement from the employees deposit or before deducting the
amount from the salary.

Concomitantly, the value of the loss, damage or missing funds cannot be

automatically charged to all employees equally. It can only be charged to the
employee responsible for the loss or damage.

10 Supra note 4
11 G.R. No. 188169, 28 November 2011