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JULY 16, 2008 the same calendar day, pagkagabii, nireport na sad ka 11 to 7.

So, there
will be an overlapping.
RIGHTS OF WORKERS So, on your last day, you are finished at 3. On the same calendar day,
you report at 11 and finish at 7. So, you are entitled to overtime and night-
ARTICLE 83. Normal hours of work. — The normal hours of shift differential up to 6 o’clock (?) in the morning (?). Why? Because it
work of any employee shall not exceed eight (8) hours a day. still falls within your working day.
Health personnel in cities and municipalities with a population of When you reported at 7 o’clock in the evening, that is the start of your
at least one million (1,000,000) or in hospitals and clinics with a bed new working day. Your first day of work in the change of shift is overtime
capacity of at least one hundred (100) shall hold regular office hours because you exceeded 8 hours in your continuous 24-hour working day.
for eight (8) hours a day, for five (5) days a week, exclusive of time
for meals, except where the exigencies of the service require that such Suppose you are a white-collar worker, with regular schedule of
personnel work for six (6) days or forty-eight (48) hours, in which case working hours. You report at 8, lunch break for 1 hour (demanded by law)
they shall be entitled to an additional compensation of at least thirty and then, 1 to 5. That is your ordinary working hours.
per cent (30%) of their regular wage for work on the sixth day. For Suppose one day, na-late ka. Nagsugod ka 10. Nalate ka kay
purposes of this Article, "health personnel" shall include: resident giubanan nimo imong anak sa principal kay nangaway. So, undertime ka 2
physicians, nurses, nutritionists, dietitians, pharmacists, social workers, hours. Wala pa gani nainit imong lingkuranan, tindog na sab ka kay
laboratory technicians, paramedical technicians, psychologists, maniudto na sab mo. Unya balik ka ug trabaho. Pagka-ala-5, niingon
midwives, attendants and all other hospital or clinic personnel. imong boss, we have to finish work because I am going to report on this. 2
more hours of work, we will finish this. So, up to 7. So, overtime na.
Article 83 says that the normal hours of work of any employee Pag-abot sa sweldo, sila tanan gibayranan ug overtime. Ikaw, maka-
should not be more than 8 hours. If you are asked a question, how claim ka ug overtime? You cannot because within your 24-hour period, you
many hours of work is an employee need to do for a full day’s wage? did not work for more than 8 hours. You only worked for 8 hours. So, you
The answer is not 8 hours. are not entitled to overtime pay.
The answer is not more than 8 hours because an employee may So, you called the office because you reported that you worked for 10
that we are working 8 to 12 and 2 to 5 - 4 hours in the morning and 3 hours. So, they added overtime. Suppose, inadvertently, na-apil ka
hours in the afternoon, because the lunch break is 2 hours, instead of paghatag overtime sa imong sweldo. Nadiskubrehan sa imong boss. And
1. Let us say that has been a practice – you show up at 2 o’clock then, your boss says, alkanse ko ana. Nabayran ka unya di man ka dapat
instead of 1. That is a de facto company practice that ripens into a bayran. Unya muingon ka na bayran ra nako ug 2 ka oras – overtime ba.
right. Dili nimo buyagon. So, 7 hours of work. Unya karon na galisod So, the following day, instead of going home at 5, you worked extra
na muingon ka, balik report at 1 o’clock. No more! One of the for 2 hours. But you are not paid for the overtime of 2 hours. You are just
sources of an employee’s rights is company practice. For 7 hours of paid for 8 hours. Is that allowed? NO, because of Article 88.
work, you are paid a full day’s wage. That ripens into a right.
If you do the opposite, suppose you tell the workers – 8 to 12 ARTICLE 88. Undertime not offset by overtime. — Undertime
and 1 to 6. And they earn a full day’s wage. You have been doing work on any particular day shall not be offset by overtime work on any
that for 3 years. Does that ripen a right on the part of the employer to other day. Permission given to the employee to go on leave on some other
demand that? Never! The workers can still collect, all the way back day of the week shall not exempt the employer from paying the additional
for 3 years for the underpayment of 1 hour. That 1 hour is already compensation required in this Chapter.
overtime rate. If you are made to work in excess of 8 hours for every
working day, then, you must be paid overtime. Article 88 says prohibition from offsetting undertime with overtime.
Why is offsetting undertime with overtime disallowed? Because the
What is the referend? Is it the working day or the work week? employee is at the losing end. For undertime, they are penalized, straight-
The referend (?) is the working day. time pay. For overtime, they should be paid more than the straight-time
What is the working day? Under the Rules to Implement the pay. He or she loses in the exchange. Mas mahal imong gibayad.
Labor Code, Rule I-A of Labor Standards, the working days is 24 Article 88, until that is repealed, makes what the Department of Labor
consecutive hours beginning each day at the same time on the first says of compressed work week - trabaho ka 10 oras 4 ka adlaw, pagka-ika
hour of work. It is not work week. 5 na adlaw 8 oras na lang, 48 hours. Na-comply nimo ang work week. Dili
na mutunga sa Sabado ug Domingo – (bitin .. hehe ) Alkanse ka ana! In
SECTION 5. Regular working hours. — The regular working the 4 days that you worked for 10 hours those 2 extra hours should be
hours of any person covered by this Rule shall not be more than eight overtime rate. But that is only counted as regular time.
(8) hours in any one day nor more than forty (40) hours in any one
week. Can workers waive their right? Waiving rights in Labor Standards can
For purposes of this Rule a "day" shall mean a work day of only be done in backward direction, never in forward direction. Unya
twenty-four (24) consecutive hours beginning at the same time each musulat ka ug waiver kay kinahanglan man ka ug kwarta.
calendar year. A "week" shall mean the work of 168 consecutive hours, Would that preclude you from filing money claims complaint? NO, you
or seven consecutive 24-hour work days, beginning at the same hour can file because your waiver is contrary to public policy.
and on the same calendar day each calendar week. The aim of the law is so that nobody will be paid lower than the
standard.
I am emphasizing this because there is a government of the
Department of Labor of compressed work week, by which the workers Let us say you are with the Labor Arbiter. Nag-file na ka ug kaso –
will only work 5 days and for 48 hours only for those 5 days. There underpayment of straight-time pay. First meeting with the Labor Arbiter –
will be 4 days for 10 hours plus 1 day for 8 hours. So, you have 48 the employer is willing to pay. So, magcompute ang Labor Arbiter. Pila
hours because that is the maximum number of working days (hours man ka days na nagtrabaho tag-2 oras overtime? Ang imong kubrahunon
ata ang pasabot dito .. pero sa rules kay 40 hours man ang max .. kay P 7,000. Pila man imong ihatag? Mga katunga ana arun mahumana.
hmmm. .. verify niyo lang ) in a work week according to the Labor Can he do that? YES, because now what you are claiming is reduced to a
Code. The work week is 6 consecutive working days. money claim. Backward ba! Ug musugot ka, pirmahanay dayon with the
Labor Arbiter. The Labor Arbiter will adopt your compromise agreement
Remember the definition of a working day – 24 consecutive hours and make it as a basis for decision. So, it becomes final and executory.
beginning at the same time each day on the first hour of work. You cannot say later on, alkanse ko ato ah. Katunga ra akong nakuha.

If you are an ordinary white-collar employee, you begin at 8 The compressed work week is again being revived because of the high
o’clock. So, your working day begins at 8 and 24 consecutive hours – cost of petroleum. Naa ganiy proposal na 4 na lang ka adlaw ang trabaho.
meaning kaduha mutuyok sa relo. So, your working day is not co-
terminus with the calendar day. In the United States, that can be done because the referend for
If you are made to work in excess of 8 hours during the 24-hour overtime is the total number of work hours during the week, not the
period beginning from your first hour, then, you are entitled to working day, but the working week. The working week now in the United
overtime. States is just 5 consecutive working days. 40 hours ra man na sa America.
Sa Australia, 37.5
Let us make this a 3-shift working day: 7 to 3 (1 st/day shift), 3 to That is why the nurses work 12-hour shifts.
11 (2nd/night shift) and 11 to 7 (3 rd/graveyard shift). In medical
parlance, they never use graveyard – day, afternoon and night shift. Flexi-time is allowed in the US because the Fair Labor Standards Act
Suppose you are assigned to the 1 st shift (7 to 3). You report for allows the determination of working hours on the basis of the working
work following the working hours for one month. In the end of the week, not the working day.
month, you are shifted. Ang ato, gikuha nato sa Fair Labor Standards Act, gi-amend man to.
Let us say, on the last day of the month, having been informed of Wala man nato sundan tong sa ilaha.
the memo of your schedule in the past week, you are shifted to the
graveyard shift (11 to 7). So, on the last day, nireport ka 7 to 3. On
1
Pangutan-on mo sa bar, tagaan mog problem na naay
compressed work week. You better put there the legal difficulties: Let us say you work overtime from 10 to 12 in the evening. There are
1. 8-hour labor law – increase from the maximum 8-hours for a 2 kinds of pay there – there is overtime pay for working in excess of 8
full day’s payment hours and there is premium pay of night differential.
2. Prohibition from offsetting undertime with overtime – that is According to the Supreme Court, the night was not made for working
a concrete barrier but made for rest 
3. The notion of the working day, which is 24 consecutive
hours beginning at the same time each day on the first hour What do you add first? Do you compute first the overtime rate and
of work then you add the night shift differential? Regular pay 25% and then, 10%
of that night shift differential? Or regular pay plus 10% night shift
ARTICLE 84. Hours worked. — Hours worked shall include (a) differential, then, 25% overtime? It does not matter! Either way, it is the
all time during which an employee is required to be on duty or to be at same. You compute it 
a prescribed workplace, and (b) all time during which an employee is
suffered or permitted to work. ARTICLE 91. Right to weekly rest day. — (a) It shall be the duty
Rest period of short duration during working hours shall be of every employer, whether operating for profit or not, to provide each of
counted as hours worked. his employees a rest period of not less than twenty-four (24) consecutive
hours after every six (6) consecutive normal work days.
Article 84 has rest period. What are rest periods? Rest period (b) The employer shall determine and schedule the weekly rest day
are 5 to 20 minutes during which, in a working day, the employee can of his employees, subject to collective bargaining agreement and to such
stop working and rest. And that time is compensable working time rules and regulations as the Secretary of Labor may provide. However, the
although he is not working. employer shall respect the preference of employees as to their weekly rest
When can you be deprived of that right? If the establishment is day when such preference is based on religious grounds.
operating on a 2-shift basis, with the more reason if the establishment
is on a 3-shift basis. The employer can refuse from giving rest periods Rest day is 24 consecutive hours after every 6 consecutive working
or meal periods. days.
Suppose you work everyday. For example, security guards work every
ARTICLE 85. Meal periods. — Subject to such regulations as day. Other persons who work everyday are the lagare boys. (Basta iyong
the Secretary of Labor may prescribe, it shall be the duty of every gadala ng film from one sine to another .. trabaho ni Piolo Pascual sa
employer to give his employees not less than sixty (60) minutes time- Lagarista .. haha .. hindi ko napanood iyon ) Kada-adlaw na sige
off for their regular meals. gatrabaho kay ang sine dili man mapugnan.
The assumption under the law is that every Sunday, you will be paid
Article 85 provides the Labor Standards benefit of 1-hour meal 130% because that is your rest day. The assumption is Sunday is your rest
periods. What is this meal? It is the Anglo-Saxon custom – only 3 day.
meals a day. Sunday is not necessarily your rest day. If your work week begins on
If you are assigned on a night-shift, can you claim a meal period? a Wednesday, your rest day is on Tuesday. If you work on a Sunday, it is
You might claim a break, but you cannot claim a meal period because like any ordinary day. If you work on a Tuesday, since that is your rest
our Labor Standards is patterned after the Anglo-Saxon, the Fair Labor day, you get a form of a premium.
Standards Act.
Work may be required on your rest day for almost identical reasons as
overtime work may be required:
ARTICLE 86. Night shift differential. — Every employee shall
1. emergency
be paid a night shift differential of not less than ten percent (10%) of
2. inclement weather
his regular wage for each hour of work performed between ten o'clock
3. perishable goods
in the evening and six o'clock in the morning.
4 necessary repairs of machines, etc
5. other analogous reasons.
Article 86 mandates a night shift differential. How much is night There can be local or national emergency.
shift differential? Please do not answer 10%. The correct answer is There can be loss of perishable goods. To prevent loss of perishable
not less than 10%. That means it could be higher than 10%, as in goods, you can be made to report for work.
other specific industries. There are necessary repairs of machines. You can be made to report
Night shift differential for pilots is close to 100%. It is more than for work.
the ordinary 10% because you have no more excuse. If you fly at
night, you must fly instrumental rules.
ARTICLE 92. When employer may require work on a rest day.
— The employer may require his employees to work on any day:
Night shift differential operates from 10 in the evening to 6 in the
(a) In case of actual or impending emergencies caused by serious
morning.
accidents, fire, flood, typhoon, earthquake, epidemic or other disaster
or calamity to prevent loss of life and property, or imminent danger to
ARTICLE 87. Overtime work. — Work may be performed public safety;
beyond eight (8) hours a day provided that the employee is paid for (b) In cases of urgent work to be performed on the machinery,
the overtime work, an additional compensation equivalent to his equipment, or installation, to avoid serious loss which the employer
regular wage plus at least twenty-five (25%) per cent thereof. Work would otherwise suffer;
performed beyond eight hours on a holiday or rest day shall be paid an (c) In the event of abnormal pressure of work due to special
additional compensation equivalent to the rate of the first eight hours circumstances, where the employer cannot ordinarily be expected to
on a holiday or rest day plus at least thirty percent thereof. resort to other measures;
(d) To prevent loss or damage to perishable goods;
Article 87 gives you overtime pay. If you are made to work in (e) Where the nature of the work requires continuous operations and the
excess of 8 hours during the work day, then, you are paid 25% more stoppage of work may result in irreparable injury or loss to the
than the straight-time pay. employer; and
Remember these terminologies. Do not use ordinary pay. (f) Under other circumstances analogous or similar to the foregoing as
Straight-time pay is the technical term for ordinary pay. determined by the Secretary of Labor.
Overtime rate is payment in excess of 8 hours.
IBM vs. NLRC
It has been asked: What is premium pay and what overtime The Supreme Court gave its imprimatur to a collective bargaining
pay? Overtime pay is additional compensation just like premium pay agreement where there is a built-in overtime of each worker in the
is additional compensation. Additional to the regular rates. bargaining unit. The Supreme Court allowed that. And the Supreme Court
Overtime pay is additional compensation paid for working in rendered the strike illegal because they were asking for a higher rate on the
excess of regular working hours or 8 hours for the working day. agreed built-in overtime. That is also extra-ordinary.
Premium pay is additional compensation paid for working on days
when you should not be working. Let us say –regular holiday, special
holiday, rest day. Those are days when you should not be working.
But if you are made to work, then, you are paid premium pay for
working, in excess of your regular pay.
IBM vs. NLRC (June 27, 1991)
Can it happen that you are paid both the premium and overtime?
FACTS: The Union's position was that the workers' refusal "to work
YES, if you worked more than 8 hours during the days when you are
beyond 8 hours everyday starting October 16, 1989" as a legitimate means
not supposed to work. Then, it becomes both premium and overtime
of compelling SMC to correct "the distortion in their wages brought about by
pay.

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the implementation of the said laws to newly-hired employees." There The Wage Order has minimum wages for each worker. There is non-
ensued thereby a change in the work schedule which had been agricultural and agricultural. Non-agricultural – there is commercial or
observed by daily-paid workers at the Polo Plant for the past 5 years, industrial. First class cities, municipalities, provinces.
i.e., "10 hours for the first shift and 10 to 14 hours for the second
shift, from Mondays to Fridays; and on Saturdays, 8 hours for both This (Applicable Daily Rate) is a combination of the kind of
shifts" — a work schedule which, SMC says, the workers had worker/employee you are and the place where you are working because
"welcomed, and encouraged" because the automatic overtime built that is how workers are classified (?) in the wage order. You are working in
into the schedule "gave them a steady source of extra-income," and the city or in a first-class municipality or province.
pursuant to which it (SMC) "planned its production targets and
budgets." And the total working days is determined. You begin with 365 days.
This abandonment of the long-standing schedule of work and the You deduct from that 52 days because there are 52 weeks in a year. Non-
reversion to the 8-hour shift apparently caused substantial losses to working man na, rest day. Kuhaon nimo ug regular holiday – 11. You must
SMC. It claimed that there ensued work disruption and lower memorize that.
efficiency resulting in low production. These losses occurred despite What is the 11th holiday? The day designated for election? That is no
such measures taken by SMC as organizing "a third shift composed of longer a regular holiday. That is a special holiday. The 11 th holiday is Eidul
regular employees and some contractuals," and appeals "to the Union Fitr – the first day of the end of the Ramadan. That is the technical word
members, through letters and memoranda and dialogues with their given by the law. You do not say end of the Ramadan. That is the 11 th
plant delegates and shop stewards," to adhere to the existing work holiday. So, iphon nimo tanan.
schedule.
365 days
HELD: The work schedule had not been forced upon the workers; it - 52 days (rest days)
had been agreed upon between SMC and its workers at the Polo Plant - 11 days (regular holidays)
and indeed, had been religiously followed with mutually beneficial ---------------------------------------------------
results for the 5 years. The workers never asked, nor were there ever 302 TOTAL NO. OF WORKING DAYS
any negotiations at their instance, for a change in that work schedule
prior to the strike. What really bothered them, and was in fact the If you are a security guard who works everyday, mausab ang imong
subject of talks between their representatives and management, was working days. Why will the computation be changed?
the "wage distortion" question, a fact made even more apparent by Ang 365 days dungagan nimo ug 22. Ngano man nimo dungagan ug
the joint notice circulated by them prior to the strike, i.e., that they 22? Because the 11 regular holidays, 200% man. 100% if they do not
would adopt the eight-hour work shift in the meantime pending work. If they work, 200%. And 52 weeks – if you are working on your rest
correction by management of the wage distortion. day, pila man na? Times 1.3 man na?

JULY 17, 2008 365


+ 22 (Holiday – 200%)
Q: May an employer convert a daily wage scheme of compensation 67. 6 (52 days x 1.3)
to monthly paid compensation? Can he do that? Change from daily to -------------------------------------------------------
monthly? 454.6 TOTAL NO. OF WORKING DAYS
A: YES, he cannot do it. The only limitation being Article 100 – the
prohibition against diminution of wages and benefits. If you are given the monthly rate, and you are asked whether or not
this results in the receiving at least the minimum daily wage, how do you
compute?
ARTICLE 100. Prohibition against elimination or
You begin with the applicable monthly rate. Multiply by 12 because
diminution of benefits. — Nothing in this Book shall be construed to
there are 12 months in a year. Divide nimo sa total number of working
eliminate or in any way diminish supplements, or other employee
days. And then, that is the Applicable Daily Rate.
benefits being enjoyed at the time of promulgation of this Code.
Applicable Applicable
How do you measure whether or not there is diminution? Monthly Rate x 12 = Daily Rate
The measurement, according to the Supreme Court is not the -------------------------------------
gross pay. The measurement is the take home pay. In other words, Total # of Working Days
the pay net of taxes.
If ang mugawas gani kay mubo pa sa minimum wage na giingon sa
Q: Is there diminution if after change of scheme, the employee is no Wage Order, sa ato pa, mubo ang daily wage na gihatag. Sa ato pa, naay
longer awarded overtime work? diminution. If mas taas gani, walay diminution.
A: According to the Supreme Court, NO. The basis for comparison is That is the way to find out mathematically.
the regular wage and not the regular wage plus overtime. That is the
basis. The Supreme Court said that no employee has a vested right Ayaw ingni ha na if tagaan mo ug computation, si Father wala man 
over overtime. But the last time, I think, the bar examiners gave a computational problem
in Labor Standards was more than 50 (?) years ago because all the deans
What do you mean by vested right? The meaning of vested protested.
right is just because in the past year you have been granted 5 hours of
overtime work every week, it does not mean that that practice has TIP: If you are in the bar examination and suddenly you see a
grown into a matter of right. computational problem, you must read it twice, three times, four times. Be
sure that it is computational because chances are you are not being asked
Let us say you are changed from daily pay to monthly pay. You to compute. Ikaw ray gadamgo 
are given an increase but you are no longer entitled to overtime. If
your basis is regular wage without overtime, you are actually bringing Let us go to 5-day service incentive leave.
home more pay than before. But if you add overtime, you are actually What is this 5-day service incentive leave?
brining less. Those who work for at least 1 year are entitled to 5 days leave with
Is that diminution of wage? The Supreme Court says NO, that is pay. Is that for vacation or for sick leave? Either. But you are entitled to 5
not a diminution of wage because no employee has a vested right over days?
overtime. Where is it located in law where employers should grant 15 days in
vacation or sick leave? That is nowhere to be found. The only right in
The problem is given to you. You are given daily wage. And Labor Standards law is 5 days after service for 1 year.
then, you are asked the monthly pay on the basis of the daily wage.
Or you are given monthly pay and you are asked if the equivalent daily How about workers with a fixed term of 10 months? Are they not
wage is the minimum wage. How will you find out? entitled to 5 days service incentive leave? YES, they are entitled to
To arrive at the monthly pay, you have applicable daily rate times proportionate share of the 5-day service incentive leave. Proportionate
total no. of working days in a year divided by 12 equals applicable meaning 5 is to 12 as to X is to 10. And then, you solve what X is. So,
monthly rate. 50/12. So, 4 days.

ARTICLE 95. Right to service incentive leave. — (a) Every


Applicable Total # of Working Applicable
employee who has rendered at least one year of service shall be entitled to
Daily Rate x Days in a Year = Monthly Rate
a yearly service incentive leave of five days with pay.
----------------------------------------------
(b) This provision shall not apply to those who are already enjoying the
12
benefit herein provided, those enjoying vacation leave with pay of at least
five days and those employed in establishments regularly employing less

3
than ten employees or in establishments exempted from granting this The opposite of facilities are supplements. What are supplements?
benefit by the Secretary of Labor after considering the viability or They are extra remuneration or special privileges or benefits given to or
financial condition of such establishment. received by the worker over and above his ordinary earnings or wages.
(c) The grant of benefit in excess of that provided herein shall not be They cannot be considered as part of wages. They are over and above
made a subject of arbitration or any court of administrative action. wages.

What are service charges? Service charges are benefits PHILIPPINE STEAM NAVIGATION CO. vs. CIR.
belonging, first and foremost, to restaurants, hotels and similar In 1952, the first minimum wage law was passed. It was to be
establishments. For benefits of service charges to apply, it is a effective in 1953. It decreed the gargantuan sum of P 4 daily minimum
condition that clients or customers of these restaurants and hotels wage. At that time, the peso-dollar exchange rate is P 2 to $ 1.
must be charged as a separate item in their bill with the so-called When they put that first minimum wage law (P 4 a day), Philippine
service charge – 10% or 15% of the total bill. Steam Navigation was paying below that. To comply with that, they
If that is the case where the restaurant slaps (?) a service charge counted the value of meals that they were giving to their crew men. Then,
to the customer, then, it must follow the law. 85% of the service that would be more than the minimum wage. At that time, for 10 centavos,
charge must be given out to the rank and file and the remaining 15% you would already have a decent meal.
is the employer’s share or the management. You count the value there of the meals. Then, according to Philippine
Steam Navigation, we fulfill already the increase in minimum wage. If we
do not provide that, they will spend anyway to prepare their meal. Do we
ARTICLE 96. Service charges. — All service charges collected
not count it as wages? They are facilities, according to Philippine Steam
by hotels, restaurants and similar establishments shall be distributed at
Navigation.
the rate of eighty-five percent (85%) for all covered employees and
But the Supreme Court disagreed. They cannot be called facilities.
fifteen percent (15%) for management. The share of the employees
They are given for your benefit. How? If you do not give them meals in
shall be equally distributed among them. In case the service charge is
the boat, each one has to cook. So, they are not facilities. They are
abolished, the share of the covered employees shall be considered
supplements, over and above regular wage which you have to pay or to
integrated in their wages.
give them.
If the restaurant should change its set-up, it no longer charging That is the exception to the rule that wages must be paid in legal
service charge, what happens? The employer is under the obligation tender. Although the law says it is payable in cash, the more accurate
to incorporate into the salary of the employee the average rate of description is legal tender. Ug muingon ka ug cash, ang bayad sa imo isa
service charges that he used to earn. So, you compute for the past ka dako na sako 1 centavo coins. Kihanglan pa ka magtaxi paadto sa
year. That is his imputed (?) service charges that is now considered as inyoha.
part of his regular rate under the new establishment. You know very well that coins 5 centavos and below is only legal
So, fine dining ka. Naa kay 15% service charge. Karon usbon tender up to P 20 pesos. It cannot be higher than that. The rest must be
nimo ang imong fine dining – Turo Turo ni Mang Tura. You are forced paid in higher denominations.
to incorporate the shares. In order to do that, you might as well close
down and then, you open a new establishment because you might not What is the correct example of facilities?
be able to sustain the imputed salary. 1. Customary in that particular trade or industry
2. There is prior consent on the part of the employee and the consent is
We have seen the basic Labor Standards benefits, in terms of written
hours of work, rates of pay, leaves, rest days and other specialized 3. The employer does not obtain any pecuniary gain in giving the
benefits. facilities
4. In no case shall the meals or board and lodging be computed except
Let us now go to WAGES. for fair and reasonable value
The important things to remember about wages are the 22 In Region 11, they have not changed the value of meals. You cannot
PROHIBITIONS with respect to wages. It is easier to remember value meals as facilities above P 5.
that way.
Give me a trade or occupation where facilities are customary.
1. Article 99 – Prohibition against non-payment of minimum If you ask the waiters or cooks in a restaurant, the meals apart from
Wage their wages are facilities. Ang sabot ana kay libre ang kaon. Dili di ai na
libre! Part di ai na siya sa wage and that is allowed because that is
ARTICLE 99. Regional minimum wages. — The minimum customary. If you do not make it customary, it will be a big headache (not
wage rates for agricultural and non-agricultural employees and sure if tama to pagkarinig .. hehe .. pero it makes sense man, I think )
workers in each and every region of the country shall be those If panahon na ug tingkaon mao pa pud ang tigluto, mubiya siya.
prescribed by the Regional Tripartite Wages and Productivity Boards. Muadto siya sa carenderia arun didto mukaon. Di na mahimo. You cannot
do that. So, you might as well count it.
The waiters – the same. Part of their salaries is their meals.
2. Articles 100 and 127 – Prohibition against diminution of
supplements, wages and benefits MABEZA vs. NLRC (271 SCRA 670 1997)
The Supreme Court gives the requisites or rules for the valuation of
ARTICLE 100. Prohibition against elimination or facilities.
diminution of benefits. — Nothing in this Book shall be construed to Mabeza was a chambermaid for a small inn in Baguio. She was given
eliminate or in any way diminish supplements, or other employee a room just above the lodge where she could stay free of charge. She was
benefits being enjoyed at the time of promulgation of this Code. also given meals.
There was an adjustment in minimum wage. The employer now
ARTICLE 127. Non-diminution of Benefits. — No Wage Order counted the value of the room she was staying in all by herself and the
issued by any regional board shall provide for wage rates lower than meals that she was allowed to take from the inn. She complained. When
the statutory minimum wages rates prescribed by Congress. the examiner went there for inspection, the examiner found out that her
cash wage is lower than the minimum wage. So, the company was
You are familiar with prohibition against diminution of wages. indicted.
When you read Article 127, it says prohibition against diminution – What is the contention of employer? The wage is not only the cash
nothing in the Labor Code should be understood to mean a diminution wage. You also have to count the value of the room where she is staying.
as a result of the application of a new wage order of the supplements, Anyway, she will have to pay a room somewhere else. She is also given the
wages and other benefits of the employee. meals. You count the meals.
Is that a valid computation of facilities?
Here comes the issue. What is wage? What is the The Supreme Court said they are not facilities because you have made
characteristic of wage? Should wages be entirely in cash? her stay within the compound of the inn for the employer’s benefit. If there
And the answer is, as a general rule, wages should be not just in are guests who come late in the evening, ibuzzer nimo. Dali-dalii ni day kay
cash but in legal tender. naa tay guests. So, those are not facilities. They were necessary
The only exceptions are facilities. What are facilities? supplements for the benefit of the employer.
Facilities are items of expenses necessary for the laborers and his Then, the Supreme Court said that for it to be considered facilities,
family’s existence and subsistence, they form part of the wage and one, it must be customary. They are not customary because she is a
when furnished by the employer, are deductible therefrom, since if chambermaid.
they are not furnished to the laborers, he would have to spend and Second, they must be prior consent. There is no prior consent much
pay for them just the same. less is there a written consent.

4
And the employer must not pecuniarily profit from the there is no ER-EE relationship, you are entitled to the minimum wage. The
arrangement. You are profiting from the arrangement because she, minimum wage does not require the existence of ER-EE relationship.
being close by, is at your beck and call.
Therefore, you violate all the four requisites (murag 3 ra lagi ang The implementing rules are so audacious as to say that trainings in a
namention .. hehe) of the facilities. school set-up will not be paid minimum wage. But that is true if that is a
required training on the part of the school.
MABEZA vs. NLRC (April 18, 1997) But if you are a nurse student and you go to another hospital that
FACTS: Mabeza contends that she and her co-employees at the Hotel does not know you and you go there as a nurse assistant, and you work for
Supreme in Baguio City were asked by the management to sign an how many hours – you have to be paid minimum wage in the very least.
instrument attesting to the latter's compliance with minimum wage Does the law says that for as long as you are in training you can be
and other labor standard provisions of law. paid less than the minimum? NO.
Mabeza signed the affidavit but refused to go to the City
Prosecutor's Office to swear to the veracity and contents of the The exceptions are:
affidavit as instructed by management. The affidavit was drawn by 1. Learnership agreements
management for the sole purpose of refuting findings of the Labor 2. Apprenticeship agreements
Inspector of DOLE. 3. Trainings for the handicap
After she refused to proceed to the City Prosecutor's Office,
Mabeza avers that she was ordered by the hotel management to turn Before you can be paid less than the minimum wage in these 3
over the keys to her living quarters and to remove her belongings from instances, you must be sure that they are bonafide programs of learnership,
the hotel premises. She was told not to report to work and continue apprenticeship and handicap trainings. They must register it with TESDA,
with her unofficial leave of absence. Thus, Mabeza filed a complaint no longer with the Department of Labor.
for illegal dismissal. In addition thereto, she alleged underpayment of But in no instance, less than 75% of the minimum wage.
wages, non-payment of holiday pay, service incentive leave pay, 13th So, there are only few exceptions.
month pay, night differential and other benefits.
Respondent maintained that there was no basis for the money So, if tagaan mo ug kaso na ingana, gi pitik mo ana. The moment it
claims for underpayment and other benefits as these were paid in the gives a classification of workers that has nothing to do with whether or not
form of facilities to petitioner and the hotel's other employees.. you are a time-worker – ingnon nila na regular ka ba, probationary ka ba,
allowance ka lang, maregular gani ka, diha na – you ask yourself what law
ISSUE: Whether or not there was underpayment of wages and other is there to justify it. If you can find a law to justify it, by all means uphold
benefits the law because tan-awon man na sa corrector.
Understand and apply the law. And if you can find any exceptions
HELD: YES, there was underpayment of wages and benefits. written in the law itselt or in the decided cases, you uphold the law. Stick
Granting that meals and lodging were provided and indeed to the law.
constituted facilities, such facilities could not be deducted without the
employer complying first with certain legal requirements. Without 2. Prohibition against diminution of supplements, wages or
satisfying these requirements, the employer simply cannot deduct the benefits
value from the employee's wages.
First, proof must be shown that such facilities are customarily For this principle to apply:
furnished by the trade. a. First, there must be correct payment
Second, the provision of deductible facilities must be voluntarily b. Subsequent to the correct payment, there is payment for less
accepted in writing by the employee.
Finally, facilities must be charged at fair and reasonable value. Article 100 or 127 cannot apply unless there are these 2 payments –
These requirements were not met in the instant case. one, there is correct payment and second, that is payment for less than
More significantly, the food and lodging, or the electricity and what was correct.
water consumed by the petitioner were not facilities but supplements. The second one is what is prohibited.
A benefit or privilege granted to an employee for the convenience of Normally, the second payment is occasioned by a new law. That is
the employer is not a facility. The criterion in making a distinction why Article 127 says that no wage order can be understood in a manner
between the two not so much lies in the kind (food, lodging) but the that will diminish any supplement, benefits or wages.
purpose. From this provision, you know that wages have only one direction to
Considering, therefore, that hotel workers are required to work go – that is upwards. Minimum wages have only one direction to go,
different shifts and are expected to be available at various odd hours, upward. And minimum wage dili muubos, puros na siya paingon sa taas.
their ready availability is a necessary matter in the operations of a The law prohibits the diminution of supplements, wages and benefits.
small hotel, such as the private respondent's hotel. Article 100 says that this code cannot be interpreted as to diminish
wages, supplements and benefits. That is in relation to the wage before
JULY 23, 2008 the enactment of the Labor Code. Ang resulta ang imong sweldo musaka
tingali, pero dili momenos. Mupermanent pero dili mamenos.
WAGES Article 127 also says that wage order cannot be interpreted as to
diminish wages, benefits and supplements.
The best way to remember wages is to remember it negatively –
what are prohibited with respect to wages. Is there any exception to the rule of wages, supplements and benefits
decreasing? There is an exception!
1. It is prohibited to engage an employee for less than the This time we will go ahead to Labor Relations. If you are in a regime
minimum wage of Labor Relations, you have a CBA.
Can the CBA provide lower than minimum wage? It cannot. It is
Suppose you are given a question: Ms. X is a recent passer of the contrary to public policy to agree to receive less than the minimum wage.
National Licensure Examination for Registered Nurses. Due to the fact That is an illegal agreement. That is contrary to public policy. That is void.
that there are 49,000 passers out of the 100,000 who took the exam Suppose you are only paid minimum wage and it is enshrined in the
and limited number of hospitals, there is an oversupply of nurses. Our CBA? Is that a valid CBA?
Lady of Perpetual Help Clinic engages Ms. X and told her that she will It is a sweetheart contract, regarded as an unfair labor practice.
be working at least 1 shift (8 hours) but you will be under training Because you do not need to go through the rigor (?) of certification
only. So, you will only be given an allowance. Your allowance will election, bargaining proposal, CBA just to arrive at the minimum wage
constitute free meals plus P 1,000 a month. because it is already provided for law. Ngano gihago-hago ra ang
Q: Is there a law that has been violated? Explain with reasons. Department of Labor, gihago-hago ang workers, unya ang inyong sabutan
That is just for one prohibition – prohibition against non-payment kay minimum wage ra man di ai.
of minimum wage. The CBA must provide higher than minimum wage in order for it to be
a bonafide CBA.
There is only diminution if you were paid the correct wage, and If it provides already a higher minimum wage, can it agree in a
subsequently, you are paid lower – that is diminution, kulang ang subsequent period of the CBA, lower than what they agreed before? Is that
sweldo. (So, walang diminution sa problem na to ) a valuation of Article 100 or 127?
The answer is they can agree, provided it is not lower than the
In this case, you are in training you are only given an allowance – minimum wage. It is higher than minimum wage but lower than what they
magulang lang gamay sa hangyo nga volunteer. Is that allowed? were receiving in the past. And they agree to that in exchange for another
For as long as you are a time-worker, you are entitled to the substantial benefit.
minimum wage. Even if you are an independent contractor, where What is an example of a substantial benefit? Let us say, the
management will agree to a no lay-off policy for the next 5 years in

5
exchange for a wage cut. That is a fair exchange. And that is not a 4. The company or the employer must not obtain any pecuniary
violation of Article 100 or 127. benefit from such arrangement

3. Prohibition against paying piece rate to escape minimum These are the 4 requisites for allowing the payment of checks through
wage payment the bank.

An employer cannot resort to a piece rate system in order to How about ATM? Can it pay through the ATM? YES, and the
escape the effects of the minimum wage low. requisites are more simple.
Piece rate workers (pakiao workers) are exempted from the All they have to do is serve notice to the Department of Labor and it is
minimum wage. But the piece rate system cannot be used to escape already allowed because ATMs are deemed to be within reach of all workers
the burdens of minimum wage. in an urban city.
How do you know that the piece rate system is used escape the It does not require that there is an ATM with a 1 km radius because
minimum wage? The only way to know is by asking for an official time ATMs are more ubiquitous than banks.
and motion studies conducted by the Department of Labor.
After the time and motion study is conducted by the Department 5. Prohibition against of wages at intervals longer than 16 days
of Labor, then, you will know that the rate used per piece of output
that is reported is based not on the slowest worker’s pace, not on the Suppose you are a piece rate worker and you decided to weave hats
fastest worker’s pace, but on the average worker’s speed. for 24 hours because you are catching the deadline, not of the hats, but of
That is the correct basis for the determination of the piece rate. your child to be enrolled. Before, you could finish 20 hats in an 8-hour
After that study, then, you can go to the Labor Arbiter on money working day. But because you worked 24 hours, you weaved 100.
claims complaint for payment below minimum wage as a result of the Q: Can you now demand payment and say pay me for the hats?
piece rate system. The answer is NO. The employer has 16 days to pay you. And it is
regardless whether you are paid piece-rate, task basis or daily basis.
Pareha lang na siya taripa. Minimum musakay ka ug jeep karon Remember that wages are already in another title of the Labor Code.
kay P 8. Unsa man ang basehan ana sa P 8? Kanang puno jud ang
jeep or kanang tunga ra ang sakay sa jeep? Dili mahimo na puno jud Why is it 16 days? Because sometimes the interval in a month can be
kay dili mudagan ang jeep ug dili pun okay dili man siya makabawi. 16. There is one day more than 30 in a month. So, the first half is 15 and
Kung 1/3 ang gasakay, mahimo na ireduce niya ang iyang trips 1/3 sa the second half is 16 days. So, that is allowed.
tibuok adlaw basta puno ra permanente ang iyang sakyanan,
makabawi na siya. Ang maalkanse kay ang mga tao, public utility gud Q: If the 16 th day is a Sunday, when should the pay be released? And
na. Sunday is a rest day.
That is why tariff rates are based on ½. That P8 is based on ½. The pay should be released on the last working day immediately
Karong mahal na ang gasolina, katunga na lang ng mga kotse ang preceding the last day when the payment should be made.
gadagan diha. Is it not fair for the LTFRB to take that into If the last working day is Saturday noon, then, it should be paid not
consideration? Where before the passengers was only this much, now, later. It should not be paid on Monday because that is already the 17 th day.
it has increased because they have abandoned riding their private So, it must be the last working day immediately preceding the 16th day.
vehicles.
6. Prohibition against payment of wages away from the
Ignorance has a way of betraying those who are unwilling to workplace
learn.
The issue is the worker should not be made to spent travel time and
4. Prohibition against payment of wages other than cash money to collect his salary. That is why the rule is it should be the
employer who should go to the workplace to go to pay the employee.
The more accurate term is legal tender. Suppose the employee is a member of a construction crew. The main
office of the construction company of which the employee belongs to is in
Exception to the rule: facilities. These are items of expenses San Pedro St., Davao City. The working site is in Sta. Cruz, Digos, where a
necessary for the laborers and his family’s existence and subsistence. highway is being repaired.
They form part of the wage and when furnished by the employer, are Where should be the pay site? In the office in San Pedro or in Sta.
deductible therefrom, since if they are not furnished to the laborers, he Cruz? The answer is in Sta. Cruz. That is where it should be paid.
would have to spend and pay for them just the same. What are the exceptions to the rule when the employer need not pay
the wages at the place of work?
4 requisites, according to the SC, for facilities:
a. Customary in the trade or business a. If the place of work is close to gambling houses, massage
b. Given at their fair and reasonable value parlors and other similar establishments
c. There is prior written consent on the part of the employee That is a very important section in the implementing rules
d. There is no pecuniary benefit that will be earned by the ER because the money will be easily dissipated as they pass by these
houses of temptation.
Those are the 4 requisites in the Implementing Rules that were Exception to the exception: If you are working in the
violated and affirmed by the Supreme Court in the decided case of gambling house, massage parlors and other similar establishments.
MABEZA vs. NLRC (271 SCRA 670 1997) If you are a card dealer of PAGCOR, that is where you are paid
because that is where you work.
The classic case of facilities is normally board and lodging.
The classic case with respect to board is restaurant waiters and b. For the greater protection of wages
waitresses and cooks. Normally, part of their wage is the meals that Suppose the workplace is so unsafe for this purpose, then, you
are provided by the employer. That does not exempt from written will be required to move to another place to receive your salary.
consent. When they are hired, they must sign that they are accepting And there is already a decided case here: NORTH DAVAO
the practice of receiving a part of their wages in the form of meals. MINING vs. NLRC. After so many hold-ups of their paymaster,
And then, the valuation of the meals must not be inconsistent North Davao Mining has finally requested their employees to go out
with the directive of the Regional Director of Department of Labor. Dili from their site to Tagum collect their pay because the company, at
mulapas P 5 ang value sa meal na i-charge sa empleyado if facilities that time it had already declared bankruptcy and it was already PNB
are warranted. P 5 – which was the cost of meals when Judge Cañete taking over the operations of North Davao Mining, was spending so
was still a student at RMC. Judge Cañete loves to recall that  much for guarding the payroll going there because it could no longer
be insured. No insurance company was willing accept the insurance.
May the workers be paid their salaries in checks? So, they requested their employees to go down to Tagum to collect
There is an implementing rule which outlines the requisites of their salaries for the greater safety of the wages. That is another
payment in checks. It is necessary that in payment of checks, you exception to the rule.
must go to the bank to encash the check. There are 4 rules: NORTH DAVAO MINING vs. NLRC (March 13, 1996)
1. There must be a bank within 1 km radius of the workplace
2. That you must be allowed to go to the bank to encash the FACTS: North Davao Mining was private-owned company. In May 1992, it
check during working hours and going there and coming ceased operations due to serious business reverses.
back is to be Respondent is one among several employees of North Davao who
considered as compensable working time were separated by reason of the company’s closure. Inasmuch as the
3. You must be given free transportation if there is a need for region where North Davao operated was plagued by insurgency and other
the peace and order problems, the employees had to collect their salaries at a
Transportation bank in Tagum, Davao del Norte, some 58 kilometers from their workplace

6
and about 2 ½hours’ travel time by public transportation. This
arrangement lasted from 1981 up to 1990. 9. Prohibition against deduction from wages

ISSUES: Whether or not time spent in collecting wages in a place ARTICLE 113. Wage deduction. — No employer, in his own behalf
other than the place of employment is compensable notwithstanding or in behalf of any person, shall make any deduction from the wages of his
that the same is done during official time. employees, except:
Whether or not private respondents are entitled to transportation (a) In cases where the worker is insured with his consent by the
expenses in the absence of evidence that these expenses were employer, and the deduction is to recompense the employer for the
incurred amount paid by him as premium on the insurance;
(b) For union dues, in cases where the right of the worker or his
HELD: YES, it is compensable and respondents are entitled to union to check-off has been recognized by the employer or
transportation expenses. authorized in writing by the individual worker concerned; and
Section 4, Rule VIII, Book III of the Omnibus Rules Implementing (c) In cases where the employer is authorized by law or regulations
the Labor Code provides that: issued by the Secretary of Labor.
Section 4. Place of payment. - (a) As a general rule, the place of
payment shall be at or near the place of undertaking. Payment in a Article 113 provides for the following allowable deductions:
place other than the workplace shall be permissible only under the
following circumstances: xxx 1. Premiums on industrial insurance
(2) When the employer provides free transportation to the If you have an industrial insurance, insurance of small
employees back and forth; and amounts of premium but enjoying a high return, that is allowed.
Hours spent by complainants in collecting salaries at a bank in The premiums may be deducted from your salaries.
Tagum shall be considered compensable hours worked. Considering
further the distance between Amacan, Maco to Tagum which is 2½ 2. Union dues provided in the CBA
hours by travel and the risks in commuting all the time in collecting They are checked-off from your salaries at source.
complainants’ salaries, would justify the granting of backwages
equivalent to 2 days in a month as prayed for. Respondents are liable 3. Deductions that are authorized by law
for the transportation expenses incurred by complainants at P40.00 Withholding tax, SSS counterpart contribution of the
round trip fare during pay days. employee, PhilHealth contribution, PAG-IBIG.
But Employees’ Compensation you cannot deduct. Only the
7. Prohibition of payment of wages other than to the employer contributes P 10 per head. Any provision to the
employee himself or herself contrary is void.
You cannot pay the wages except to the employee.
Those are the deductions allowable from the employee’s salary.
Exceptions:
1. Force majeure 10. Prohibitions against deductions from deposits
Dili na makalakaw ang employee – naparalyze, nastroke.
Naa siyay kuhaon na sweldo. Musulat siya karon ug power of How about deductions from deposits? May an employee be required
attorney. That power of attorney need not be notarized. There deposits in case of loss of equipment or breakage in a job? The answer is
is no requirement of notarization. A power of attorney can exist as follows. There are 5 requisites when you allow for deposits to answer
without notarization. Only when the law requires a notarization is for breakage:
their a need for notarization.
1. Industry is one where deductions for breakage is recognized.
2. When the employee dies What is an example? Waiters in restaurants and hotesl.
Suppose the employee dies the day before the payday. So, They must provide for deposits for breakage of china and other
he has a complete pay period. Naa pa siyay overtime. equipment. Kung dili, mudistansya sila mag-arrange ug table.
Q: Is the salary receivable part of the estate? That is customary in that particular instance.
NO, it is not part of his estate.
What is needed? All that is needed is the intervention of the 2. The employee is shown to be clearly responsible for the loss
Department of Labor official. And then, all the putative (?) forced There must be an investigation.
heirs come – his wife, all the children. They come so long as they
are contained in his official record. And the parent signs for 3. The employee must be given an opportunity to be heard, to
herself and for the minors, being the natural guardian of the present his side
minors. As so declaring, they are the heirs and no one else.
Then, the employer can release the full pay to them and they are 4. The deduction must not exceed the actual value of loss or
excused of whatever liability that may arise therefrom. damage
The Department of Labor official will witness it. That is a technical term. Delivery boy ka sa Jollibee.
Nagdeliver ug 25 ka cheese burger and 25 ka Coke. Gideliver
Please be careful: this is with respect to wages and benefits. nimo sa Agdao, suot sa eskinita. Pagbalik nimo wala na imong
motor. – nawala, loss.
Suppose he has a provident fund contribution as president. It is Can the acquisition cost of the motorcycle be deducted from
already now P 60,000 with accrued interests. That is not covered by your salary? NO.
the labor provision of payment of wages to the survivors of a deceased What is the value to be deducted? Acquisition cost less
employee. That is covered by his estate. accumulated depreciation. Therefore, it is the equal to the actual
You have to execute an extra-judicial partition for settlement and value of the loss, not just straight acquisition cost.
partition (?).
5. The deduction cannot be more than 20% of the weekly wage of
Suppose you have other benefits. It is covered by the CBA. The the employee
CBA says any covered employee who dies while still an employee will For that reason, you must study FIVE J TAXI vs. NLRC
receive P 10,000. That the survivors will receive it is not indicated. (235 SCRA 556 1995).
That is still benefit. That is covered by payment of benefits to the
survivors of the deceased.

But I am talking about provident fund – kanang hulog-hulogan.


That is not covered by this (Labor Code).

JULY 24, 2008


8. Prohibition against interference in the disposal of wages
The employee cannot be told to do with his wages. The amount of attention that you should place is in the following
Canteens in isolated workplaces cannot be owned by the order:
employers themselves. 1. The text of the Code itself – You have to be familiar because it is
Canteens from which the employee or his family can withdraw on the source of terminology and technicalities (?)
a vale system essentials for the household – that cannot be under the 2. The implementing rules
control of the employer. 3. Decided cases
Normally, canteens are run by cooperatives or by outside parties
because if it is the employer, it will run afoul with this prohibition We were last in Article 113 and Article 114 – the deductions from
against the interference in the disposal of wages. wages and deductions from deposits.

7
ARTICLE 116. Withholding of wages and kickbacks prohibited.
ARTICLE 114. Deposits for loss or damage. — No employer — It shall be unlawful for any person, directly or indirectly, to withhold any
shall require his worker to make deposits from which deductions shall amount from the wages of a worker or induce him to give up any part of his
be made for the reimbursement of loss of or damage to tools, wages by force, stealth, intimidation, threat or by any other means
materials, or equipment supplied by the employer, except when the whatsoever without the worker's consent.
employer is engaged in such trades, occupations or business where
the practice of making deductions or requiring deposits is a recognized Article 116 is the prohibition against withholding of kickbacks.
one, or is necessary or desirable as determined by the Secretary of
Labor in appropriate rules and regulations. ARTICLE 117. Deduction to ensure employment. — It shall be
unlawful to make any deduction from the wages of any employee for the
For deductions from deposits to be allowed: benefit of the employer or his representative or intermediary as
1. It must be an industry where deductions from deposits is consideration of a promise of employment or retention in employment.
recognized
2. The employee must be shown to be clearly responsible for 11. Prohibitions against deduction to ensure employment
the loss
3. The employee is given the opportunity to be heard Article 116 and Article 117 (prohibition against deduction to ensure
4. The deduction must not exceed actual loss or damages employment) are common practices in workplaces where the manpower
5. The deduction should not exceed 20% of the weekly wage that is requires does not demand education. What are those? In the
of the employee arrastre, you are a stevedore. Ang imong capital ana kay liug ur imong
kusog.
FIVE J TAXI vs. NLRC (235 SCRA 556 1985)
Where the Supreme Court validated these foregoing rules found What happens in the workplace? You rely on a kapatas (?) In the
in the Rules Implementing the Labor Code. Labor Code, the kapatas is called cabo. That technical term is allowed in
The deductions that were at issue were deductions for shortage the Labor Code. Kana sila musulay (?) ug mga tao. Ang ilang mga tao no
deposit and deductions for the washing of the taxi. This was the rule read, no write.
of Five J Taxi. Suppose there is a kickback by the cabo. Muabot ang sweldo, nay
Everyday when you return the taxi, aside from the boundary that pahalipay. That is illegal - deductions to ensure employment or the
is turned in, you are deducted. One is deductions for shortage. Bisan withholding of the wages. If cabo is the paymaster unya kuhaan niya or
sakto imong paghatag sa boundary, deductan ka ug P 25 para withhold niya, mao na na.
shortage allowance. Arun kung muabot ang adlaw na dili ka
makahatag sa boundary, adto kuhaon sa shortage allowance ang These are practices which are sought to be protected by Articles 116
kulang. and 117. These are age old practices by which the wage of the employee is
The other deduction is washing of the taxi. Gikuha nimo ang taxi, deducted unbeknownst to them or with their tolerance because they do not
limpyo na. know better. That is what they have known. That is actually contrary to
The Supreme Court said that the first deduction (for shortage) is law.
a violation. That is not what is provided (?) in Article 113.
The second deduction for washing, according to the Supreme 12. Prohibitions against retaliatory measures
Court, is an obligation in equity because you got the taxi washed and
clean. This deduction is in accordance with the law.
ARTICLE 118. Retaliatory measures. — It shall be unlawful for an
employer to refuse to pay or reduce the wages and benefits, discharge or in
FIVE J TAXI vs. NLRC (August 22, 1994) any manner discriminate against any employee who has filed any complaint
or instituted any proceeding under this Title or has testified or is about to
FACTS: Private respondents Maldigan and Sabsalon were hired by testify in such proceedings.
the petitioners as taxi drivers and they worked for 4 days on a 24-hour
shifting schedule. Aside from the daily boundary, they were also
Article 118 – prohibition against retaliatory measure.
required to pay P20 for car washing and to further make a P15 deposit
to answer for any deficiency in their “boundary” for very actual
Let me just recall to you, Article 248 (f) when you dismiss the
working day. In les than 4 months, petitioners learned that Maldigan
employee about to complain or to testify against the employer. This is it.
rarely reported for work since he was working for “Mine of Gold” Taxi
Only in this case, he is complaining or testifying interference or coercion of
Company. Sabsalon, on the other hand, was hospitalized but was re-
the employer in the exercise of his self-organization. Therefore, that is an
admitted by petitioners. He failed to report for work and it was
unfair labor practice.
revealed that he was driving a taxi for “Bulaklak” company. In 1989,
Maldigan requested for the reimbursement of his daily cash deposits
for 2 years but petitioners told him that not a single centavo was left ARTICLE 248. Unfair labor practices of employers. — It shall be
of his deposits as these were spent for the repairs of the taxi he was unlawful for an employer to commit any of the following unfair labor
driving. This was allegedly the practice adopted by petitioners. When practice: xxx
Maldigan insisted on the refund, petitioners terminated his services. (f) To dismiss, discharge, or otherwise prejudice or discriminate against
Sabsalon claimed that his termination was effected when he refused to an employee for having given or being about to give testimony under this
pay for the washing of his taxi seat covers. In 1991, private Code; xxx
respondents filed a complaint charging petitioners with illegal dismissal
and illegal deductions. Here (Article 118), there is no right to self-organization involved. What
is involved here are just labor standards rights. And because the employee
ISSUE: Whether or not the deductions were illegal complains, the employer retaliates by dismissing him or changing the terms
and conditions of work because the worker has filed a complaint or is about
RULING: Article 114 of the Labor Code provides the rule on deposits to testify in a case of labor standard. That is prohibited.
for loss or damage to tools, materials or equipment supplied by the
employer. Clearly the same does not apply to or permit deposits not
do defray any deficiency which the taxi driver may incur in the The action of the employer becomes malicious, whimsical and
remittance of his boundary. When private respondents stopped capricious, which in turn means that the employer becomes liable to moral
working for petitioners, the alleged purpose for which petitioners were damages.
required such unauthorized deposits no longer existed. Any balance
due to private respondents after proper accounting must be returned
to them with legal interest.
The accounting shows that Sabsalon incurred shortages such 13. Prohibitions against false reporting
that he mentioned questioning the same. The evidence shows that he
had not withdrawn the same, thus, he should be reimbursed the ARTICLE 119. False reporting. — It shall be unlawful for any person
amount of his accumulated cash deposits. to make any statement, report, or record filed or kept pursuant to the
Private respondents are not entitled to the refund of the P20 car provisions of this Code knowing such statement, report or record to be false
wash payment they made. There was nothing to prevent private in any material respect.
respondents from cleaning the taxi units themselves. Car washing as a
tour of duty is a practice in the industry and is in fact, dictated by fair The most common false reporting is making the employee sign a blank
play. payroll. After everybody signs, they fill in the blanks. What are the blanks
to be filled? The name of the establishment kay naa man nang payroll
11. Prohibitions against withholding of wages and kickbacks forms for sale sa National Bookstore.

8
Papirmahan nimo ang mga empleyado. The amounts that are put The national body does not promulgate or pass any wage order
there are not the actual amount that they receive. It is the amount because there is no universal language in wage order. The wage order is
that is in accordance with law. regional in nature, admitting for differences in cost of living and living
This comes to light when there is a workplace inspection, when standards among various regions in the Philippines.
the Department of Labor comes unannounced. Part of the inspection
is interviewing workers. “Pila imong nadawat karon?” Kanang It is the local board, the RTWPB, that determines the minimum wage
empleyado under instruction na sila. “Minimum sir.” “Pila man nang level.
minimum?” “Basta minimum.”
Ang panlaban ana kay kanang inspection under Articles 128 and How is it determined? By the decision of the Board which is composed
129. Manggawas jud na. of 2 representatives from labor, 2 representatives from capital or
management or 4 of which appointed by the President and 2
Please remember what has to be contained in the payroll: representatives from the Government, the Regional Director of Labor being
1. Pay period ex-officio chairman of RTWPB.
2. Regular rate So, 2 employees’ representatives, 2 management and 2 government.
3. Gross Pay The Board decides the wage order and limits increases by majority
4. Additional pay – overtime pay, premium pay, night-shift vote.
differential So, whoever the 2 government representatives side with, that is the
5. Deductions – cash advance, SSS contributions, PAG-IBIG, proposal that will be accepted. If it sides with the management, it is the
Withholding tax management’s proposal. If it sides with the workers, it is the laborers’
6. Take home pay proposal that will be accepted. So, in the end, it is still the government who
really determines the minimum wage levels.
How long will the employer maintain the payroll records? Under
the Labor Code, 3 years. But under the National Internal Revenue Before such determination, there must be a hearing that is conducted.
Code in Taxation, it is 5 years. The purpose is this is to inform the Board of the various conditions that are
Why is it just 3 years for Labor Code? Because money claims obtaining in the region.
prescribe in 3 years from the date of accrual. It conducts a hearing at which anyone who is interested may
participate. You can go there and raise questions and submit position
WAGE ORDERS papers to the RTWPB.
RA 6727 – Wage Rationalization Act, which became effective on
June 25, 1989, amending Articles 120 to 127 of the Labor Code. Remember that under Article 127 can only be raise wages. It cannot
go lower. No wage order may be interpreted to mean a diminution of
The Wage Rationalization Act provides for the creation of 2 benefits. Kanang wages, pataas jud na.
bodies:
It is therefore safe to say, although the law does not say that, that the
1. Regional Tripartite Wage and Productivity Board RTWPB has power only to raise not reduce wages.
(RTWPB)
That is regional in nature, created by Article 122 It can segment regions in anyway they want. They can decree wages
per industry. They can decree wages per occupation or per locality as to
ARTICLE 122. Creation of Regional Tripartite Wages and cities, municipalities and provinces. Under categories, which they
Productivity Boards. — There is hereby created Regional Tripartite themselves can decide it – agricultural, non-agricultural. With agricultural,
Wages and Productivity Boards, hereinafter referred to as Regional they can divide it into plantation or non-plantation. The moment it is more
Boards, in all regions, including autonomous regions as may be than 25 hectares, you are considered as a plantation. So, the plantation
established by law. The Commission shall determine the agricultural worker has slightly higher minimum wage than the non-
offices/headquarters of the respective Regional Boards. plantation. Then, you have various categories like retail and service
The Regional Boards shall have the following powers and establishments employing not more than 5, etc. Those non-agricultural
functions in their respective territorial jurisdiction: workers in cities and they list the cities. Regional 11 they normally lump it
(a) To develop plans, programs and projects relative to wages, there – Davao, Tagum, Panabo, etc.
incomes and productivity improvement for their respective regions;
(b) To determine and fix minimum wage rates applicable in their What is the minimum wage? The minimum wage rate now has 2
respective regions, provinces or industries therein and to issue components: wage and ECOLA. The ECOLA is the Emergency Cost of Living
the corresponding wage orders, subject to guidelines issued by the Allowance.
Commission; Why do they have ECOLA and regular wage? Because ECOLA is
(c) To undertake studies, researches, and surveys necessary for the supposed to answer the sudden rise in the cost of living. Regular wage is
attainment of their functions, objectives and programs, and to supposed to be that wage which is subject of computation in rendering
collect and compile data on wages, incomes, productivity and other overtime pay, rest day pay, premium pay such as night-shift differential and
related information and periodically disseminate the same; 13th month pay. ECOLA is not counted in the definition of overtime,
(d) To coordinate with the other Regional Boards as may be premium pay, 13th month pay.
necessary to attain the policy and intention of this Code; Where is that found? That is not found in the Labor Code. It is found
(e) To receive, process and act on applications for exemption from in a separate law, which is now Wage Order 15. Wage Order 15 has
prescribed wage rates as may be provided by law or any Wage decreed an additional ECOLA of P15 effective June 16, 2008.
Order; and So, the old ECOLA was P 16, gidungagan ug P 16, P 31 na karon ang
(f) To exercise such other powers and functions as may be necessary ECOLA. Starting August 1, I think, P 15 of that ECOLA willl be integrated
to carry out their mandate under this Code. into the regular wage so that, starting August 1, it is no longer a P 31
Implementation of the plans, programs and projects of the ECOLA. It will just be a P 15 ECOLA and the pay will now be P 250 regular
Regional Boards referred to in the second paragraph, letter (a) of this wage. I am talking of the City of Davao – Region 11.
Article, shall be through the respective regional offices of the The others, tan-awa na ninyo sa internet.
Department of Labor and Employment within their territorial
jurisdiction; Provided, however, That the Regional Boards shall have What happens if you disagree with the wage order? When that
technical supervision over the regional office of the Department of happens or if that happens, you appeal the wage order to the national
Labor and Employment with respect to the implementation of said body, NPWC.
plans, programs and projects. Does the appeal to the national body suspend the effectivity of the
Each Regional Board shall be composed of the Regional Director wage order? NO, unless you put up a bond in such amount to be
of the Department of Labor and Employment as chairman, the determined by the council, the national body.
Regional Directors of the National Economic and Development
Authority and the Department of Trade and Industry as vice-chairmen The perennial objector everytime a wage order comes out is the
and two (2) members each from workers and employers sectors who Philippine Banana Producers and Exporters Association.
shall be appointed by the President of the Philippines, upon The law says that the appeal does not stay the wage order. The board
recommendation of the Secretary of Labor and Employment, to be says put up a bond and the bond is not less than P 60 M because that is the
made on the basis of the list of nominees submitted by the workers wages for one month of the banana workers, assuming 1 worker per
and employers sectors, respectively, and who shall serve for a term of hectare.
five (5) years. They cannot put up the bond. A bonding company is covered by
Each Regional Board to be headed by its chairman shall be insurance. What is the capitalization of insurance? P 25 M ra man na ilang
assisted by a Secretariat. capital. Dili man gani na kaabot ug katunga sa bond na kinahanglan. Kinsa
may musukol ana?
2. National Wage and Productivity Council (NWPC) Every year they oppose the wage order. But they failed to obtain the
bond because the bond that is required is huge.

9
But does that stop them from complaining? No, they still Moreover, the CBA also prescribes a similar eschewal of strikes or
complain because it has been a matter of reflex  So, what happens? other similar or related concerted activities as a mode of resolving disputes
There is no staying of the wage order. or controversies, generally, said agreement clearly stating that settlement of
"all disputes, disagreements or controversies of any kind" should be
WAGE DISTORTION achieved by the stipulated grievance procedure and ultimately by
What is wage distortion? There is a long definition in Article 124. arbitration. It was also stipulated that the union agrees that there shall be
I suggest you memorize that like a mantra. no strikes, walkouts, stoppage or slowdown of work, boycotts, secondary
boycotts, refusal to handle any merchandise, picketing, sit-down strikes of
ARTICLE 124. Standards/Criteria for Minimum Wage any kind, sympathetic or general strikes, or any other interference with any
Fixing. xxx of the operations of the company during the terms of the CBA.
As used herein, a wage distortion shall mean a situation where The Union was thus prohibited to declare and hold a strike or
an increase in prescribed wage rates results in the elimination or otherwise engage in non-peaceful concerted activities for the settlement of
severe contraction of intentional quantitative differences in wage or its controversy with SMC in respect of wage distortions. The partial strike or
salary rates between and among employee groups in an establishment concerted refusal by the Union members to follow the 5-year-old work
as to effectively obliterate the distinctions embodied in such wage schedule which they had therefore been observing, resorted to as a means
structure based on skills, length of service, or other logical bases of of coercing correction of "wage distortions," was therefore
differentiation. xxx forbidden by law and contract and, on this account, illegal.

That is the definition.


Please bear in mind that the key requisite of wage distortion is that
Elements: there is a mandatory minimum wage distortion that causes the distortion.
Suppose, by a unilateral act of management, a group of workers’ wage
1. There is a hierarchical difference in wages was adjusted. In doing so, it creates a distortion.
Hierarchical – wage is not the same. It is not homogenous. Is the management now obliged to go through the remedial measures
Naay taas, taas-taas, nay kinatas-an. of either grievance or a case before the NLRC? NO.
Although, the Supreme Court does not use a different term. The
2. There is a mandatory minimum wage increase mandated by law Supreme Court says that this is still wage distortion. But in ordinary
parlance of labor relations, this is not a wage distortion. This is called a
3. The minimum wage law applies only to one or more of the WAGE COMPRESSION because the reason for the truncating or severing
categories, but does not apply to all in the hierarchy. or reduction or elimination of differences is not a wage order but the
unilateral act of the management.
4. As a result, there is an obliteration or severe contraction in the
wage differences. Suppose you have a machine shop. The machine shop has regular lith
(?) operators and probationary. There is a substantial difference between
5. Employees affected belong to the same region the salaries of the regular operators and the probationary. There are also
This is a new case: PRUBANKERS ASSOCIATION vs. master lith operators.
PRUDENTIAL BANK (302 SCRA 74 1999) So, you have a hierarchy – probationary, regular, master.
Suppose the difference between regular and probationary is P 50 a
How to remedy a wage distortion? There are 2 ways: day. The regulars are paid P 300 a day and the probationary P 250 a day.
Now, all of a sudden, the management finds out that there are no
a. If there is a CBA or an EBA, then, wage distortion should be more regular operators because they are applying abroad. Recruiters from
processed like an ordinary grievance. It goes through the Manila recruit them to work in Nigeria.
grievance machinery and ends with voluntary arbitration. So, management increases. So, there is now a severe reduction.
b. If there is no union or there is no union, then, it may be adjusted Naay difference na P 10 but before it was P 50.
by: Can the regular operators now cry wage distortion? The Supreme
1. With the assistance of National Conciliation and Mediation Court says NO. The wage distortion is caused not by a wage order but by
Board (NCMB) the unilateral act of the management.
2. If the NCMB cannot resolve the disagreement to the
satisfaction of the parties, then, the aggrieved party may raise Let us say that there is situation where it decreases. The wage
the issue with the Labor Arbiter. Then, it follows the remedial difference between the probationary and the regular operators is P 10.
stages: LA, NLRC, CA, SC. In the adjustment of the grievance, is management obliged to restore
the historical difference of P 50? Can the voluntary arbitrator order the
Can a wage distortion be a ground for a strike? The Supreme management to adjust the regular so that the historical difference of P 50?
Court says NO, because of the law. After giving all these remedial The Supreme Court says NO. If management out of the goodness of its
measures, it is intended that this be disseminated (?) from a strike. heart adjusts the pay just as P 5 more, so it will be P 15, then, that will be
The law itself providing these 2 measures has eliminated wage sufficient.
distortion as a strikeable (?) issue. This was ruled upon the by the
court in ILAW AT BUKLOD NG MANGGAGAGAWA (IBM) vs. Suppose the management, because there is a conflict between the
NLRC. regular and probationary, says there is no more probationary. All of you
will be regular. So katong increase na P 40, na increase pa jud ug P 10
IBM vs. NLRC (June 27, 1991) arun mahimo na regular. Reklamo ang regular. Is that allowed? The
Supreme Court says YES, that is allowed because that is part of
HELD: These joint or coordinated activities may be forbidden management prerogative. In the first place, who created the hierarchy? It
or restricted by law or contract. In the particular instance of wage is the management and the management can also do away with the tiered
distortions, Section 3 of RA 6727 prescribes a specific, detailed and hierarchy.
comprehensive procedure for the correction thereof, thereby implicitly
excluding strikes or lockouts or other concerted activities as modes of That is wage distortion. Every 3 years, the Bar Examination asks wage
settlement of the issue. The provision states that the employer and distortion. What is wage distortion? Is there a wage distortion? That has
the union shall negotiate to correct the distortions. Any dispute arising now been a favorite question. Bantayi na ninyo. Memorize that wage
from wage distortions shall be resolved through the grievance distortion.
procedure under their collective bargaining agreement and, if it
remains unresolved, through voluntary arbitration. In cases where
there are no collective agreements or recognized labor unions, the JULY 30, 2008
employers and workers shall endeavor to correct such distortions. Any
dispute arising therefrom shall be settled through the NCMB and, if it Even if the employee is lawfully paid through an ATM, you must have a
remains unresolved after 10 calendar days of conciliation, shall be separate record of the payroll that must be given to him or her.
referred to the appropriate branch of the NLRC.
The legislative intent that solution of the problem of wage The requisites of what the payroll should contain:
distortions shall be sought by voluntary negotiation or arbitration, and 1. length of time covered
not by strikes, lockouts, or other concerted activities of the employees 2. rate of pay (monthly, weekly, daily, piece-rate)
or management, is made clear in the rules implementing RA 6727. 3. straight time pay
Section 16, Chapter I of these implementing rules, after reiterating the 4. additional pay (premium, overtime)
policy that wage distortions be first settled voluntarily by the parties 5. deductions
and eventually by compulsory arbitration, declares that, "Any issue 6. actual take home pay
involving wage distortion shall not be a ground for a
strike/lockout."
10
That must be contained in the payroll which the employee is objectors of wage orders of the Region XI. Kada nay wage order, oppose
supposed to have. jud na sila.
The exception there is that if the employee signs the payroll, it Their opposition cannot stay the execution of the wage order because
means that he has already received what he signs up in the payroll. If they cannot put the bond to stay the wage order because the bond is in the
he should object, then, he should not sign. That is the assumption of vicinity of P 70M to P 100M.
the law. Mao na ang kinaraan. If you can raise the bond, then, you can stay the order.
Pero karon na naay payroll account, the payroll account is
distinguished from a regular bank account in that the payroll account Q: May a wage order be issued even without the conduct of a hearing?
does not require a minimum balance. You can withdraw the whole RA 6727 requires that RTWPB must conduct hearings for
thing. determination of the proper level of the wage order.
A payroll account is not really in the nature of an actual deposit The Supreme Court has said that for regulating bodies to conduct
because there is only one client there that exists. These are the hearings before they can issue a standard, that is not the same as the
amounts that should be credited in the following accounts and the requirement of a hearing for due process.
bank does the transfer. The employees have an ATM card. Expect The requirement of the hearing is for the benefit of the Board itself to
that on that day, kusog na ng ATM. inform itself as to the various contending forces with respect to a given
issue. But it is not like the requirement of a hearing to settle an adversarial
(The following discussions were already discussed in the previous dispute which you have to give a day in court to each party of the dispute.
lecture but I included it here nevertheless just in case I missed So, therefore, the requirement of hearing in RA 6727 is merely
something ) directory. That is not the sole means by which therefore it can inform
itself for purposes of determining the proper level of the minimum wage.
WAGE RATIONALIZATION ACT
Republic Act 6727, made effective on June 25, 1989. What is WAGE DISTORTION?

That Republic Act amended Articles 120-127 of the Labor Code. ARTICLE 124. Standards/Criteria for Minimum Wage Fixing. xxx
Originally, Articles 120-127 provided for minimum wage but on the As used herein, a wage distortion shall mean a situation where an
premise that it was Congress who pass the wage law. But after increase in prescribed wage rates results in the elimination or severe
awhile, Congress got fed up. Every year, there are all these contraction of intentional quantitative differences in wage or salary rates
demonstrations. between and among employee groups in an establishment as to effectively
So, what they did was they created Regional Wage Boards. The obliterate the distinctions embodied in such wage structure based on skills,
Regional Wage Boards would determine the wages of a particular length of service, or other logical bases of differentiation. xxx
region on the premise that the wages in Manila should be
quantitatively and qualitatively higher than the wages outside Metro In wage distortion, there are at least 4 elements:
Manila. And even between other regions, there are differences 1. There is a hierarchical difference in wages among the employees
because there are differences in cost of living. 2. There is a mandatory wage increased that does not apply to all
So, that is what Congress did. employees
3. There is an obliteration or severe contraction of wage differences
There were 2 bodies created: 4. The employees affected must belong to the same region.
1. Regional Tripartite Wages and Productivity Board
(RTWPB) The fourth one is supplied by jurisprudence – PRUBANKERS
2. National Wages and Productivity Commission (NWPC) ASSOCIATION vs. PRUDENTIAL BANK 372 SCRA 74 (1999).

It was the job of RTWPB to enact wage orders within regions. The ordinary rank and file employees in Manila branches of Prudential
If there is someone who is aggrieved with the wage order, you Bank are already pretty much higher than the supervisory employees of, let
appeal to the NWPC. But the Commission does not issue wage orders. us say, Zambales.
The Commission merely reviews the wage orders. The supervisory employees in Zambales complained that their salaries
are just the same as the rank and file employees of Metro Manila.
ARTICLE 124. Standards/Criteria for Minimum Wage The Supreme Court says that is not the proper comparison. The
Fixing. — The regional minimum wages to be established by the proper comparison is whether or not there is distortion within your region
Regional Board shall be as nearly adequate as is economically feasible because now, with RA 6727, wages are regionalized for obvious reasons in
to maintain the minimum standards of living necessary for the health, that there are differences in the cost of living and proper salary scales
efficiency and general well-being of the employees within the standards according to the various regions of the Philippines.
framework of the national economic and social development program.
In the determination of such regional minimum wages, the Regional PRUBANKERS ASSOCIATION vs. PRUDENTIAL BANK & TRUST
Board shall, among other relevant factors, consider the following: COMPANY (January 25, 1999)
(a) The demand for living wages;
(b) Wage adjustment vis-à-vis the consumer price index; FACTS: The RTWPB of Region V issued Wage Order No. RB 05-03 provided
(c) The cost of living and changes or increases therein; COLA to workers in the private sector who had rendered service for at least
(d) The needs of workers and their families; 3 months. Subsequently, the RTWPB of Region VII issued Wage Order No.
(e) The need to induce industries to invest in the countryside; RB VII-03, which directed the integration of the COLA mandated pursuant
(f) Improvements in standards of living; to Wage Order No. RO VII-02-A into the basic pay of all workers. It also
(g) The prevailing wage levels; established an increase in the minimum wage rates for all workers and and
(h) Fair return of the capital invested and capacity to pay of employees in the private sector.
employers; Respondent then granted a COLA of P17.50 to its employees at its
(i) Effects on employment generation and family income; and Naga Branch, the only branch covered by Wage Order No. RB 5-03, and
(j) The equitable distribution of income and wealth along with the integrated the P150.00 per month COLA into the basic pay of its rank-and-
imperatives of economic and social development. file employees at its Cebu, Mabolo and P. del Rosario branches, the
The wages prescribed in accordance with the provisions of this branches covered by Wage Order No. RB VII-03.
Title shall be the standard prevailing minimum wages in every region. Prubankers Association wrote the respondent requesting that the
These wages shall include wages varying within industries, provinces Labor Management Committee be immediately convened to discuss and
or localities if in the judgment of the Regional Board conditions make resolve the alleged wage distortion created in the salary structure upon the
such local differentiation proper and necessary to effectuate the implementation of the said wage orders. Petitioner then demanded that the
purpose of this Title. respondent extend the application of the wage orders to its employees
outside Regions V and VII, claiming that the regional implementation of the
Under Article 124, there are several criteria for the determination said orders created a wage distortion in the wage rates of respondent's
of the propriety of the wage order. The list is long – cost of living, the employees nationwide.
consumer price index (CPI), the demand for increases of the various
sectors, and the just share on the cost of capital. ISSUE: whether or not a wage distortion resulted from respondent's
Those are the criteria for the determination of the minimum wage implementation of the aforecited Wage Orders.
order. You might be asked what are some of the criteria. Maayo
magbaon mo ug 3 or 4 kabuok arun naa moy ikabuga  RULING: No. The statutory definition of wage distortion is found in Article
124 of the Labor Code, as amended by Republic Act No. 6727, which reads:
An appeal of the wage order does not stay the wage order, As used herein, a wage distortion shall mean a situation where an
unless you can put up a bond. And the bond is to be determined by increase in prescribed wage results in the elimination of severe contraction
the Commission. of intentional quantitative differences in wage or salary rates between and
The Association of Banana Exporters and Producers of the among employee groups in an establishment as to effectively obliterate the
Philippines, which has headquarters here in Davao, are perennial

11
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE
Wage distortion involves four elements: UNIONS vs. NATIONAL LABOR RELATIONS COMMISSION and
1. An existing hierarchy of positions with corresponding salary BANKARD, INC(February 17, 2004)
rates
2. A significant change in the salary rate of a lower pay class FACTS: Bankard classifies its employees by levels. Its Board of Directors
without a concomitant increase in the salary rate of a higher approved a "New Salary Scale", for the purpose of making its hiring rate
one competitive in the industry’s labor market. The "New Salary Scale"
3. The elimination of the distinction between the two levels increased the hiring rates of new employees, to wit: Levels I and V by
4. The existence of the distortion in the same region of the P1,000.00, and Levels II, III and IV by P900.00. Bankard Employees Union-
country WATU pressed for the increase in the salary of its old, regular employees.
It is clear that no wage distortion resulted when respondent Bankard took the position, however, that there was no obligation on the
implemented the subject Wage Orders in the covered branches. In the part of the management to grant to all its employees the same increase.
said branches, there was an increase in the salary rates of all pay
classes. Furthermore, the hierarchy of positions based on skills, length ISSUE: Whether the unilateral adoption by an employer of an upgraded
of service and other logical bases of differentiation was preserved. In salary scale that increased the hiring rates of new employees without
other words, the quantitative difference in compensation between increasing the salary rates of old employees resulted in wage distortion
different pay classes remained the same in all branches in the affected within the contemplation of Article 124 of the Labor Code.
region.
Petitioner argues that a wage distortion exists, because the RULING: No. To determine the existence of wage distortion, the
implementation of the two Wage Orders has resulted in the "historical" classification of the employees prior to the wage increase must
discrepancy in the compensation of employees of similar pay be established. Likewise, it must be shown that as between the different
classification in different regions. The Court is not persuaded. A wage classification of employees, there exists a "historical" gap or difference. The
parity between employees in different rungs, is not at issue here, but a employees of private respondent have been "historically" classified into
wage disparity between employees in the same rung but located in levels, i.e. I to V, and not on the basis of their length of service. It is thus
different regions of the country. A disparity in wages between clear that there is no hierarchy of positions between the newly hired and
employees holding similar positions but in different regions does not regular employees of Bankard, hence, the first element of wage distortion
constitute wage distortion as contemplated by law. It is the hierarchy provided in Prubankers is wanting.
of positions and the disparity of their corresponding wages and other While seniority may be a factor in determining the wages of
emoluments that are sought to be preserved by the concept of wage employees, it cannot be made the sole basis in cases where the nature of
distortion. A wage distortion arises when a wage order engenders their work differs. Moreover, for purposes of determining the existence of
wage parity between employees in different rungs of the wage distortion, employees cannot create their own independent
organizational ladder of the same establishment. Wage distortion classification and use it as a basis to demand an across-the-board increase
involves a parity in the salary rates of different pay classes which, in salary. It is properly a matter of management judgment and discretion,
eliminates the distinction between the different ranks in the same and subject, perhaps, for bargaining negotiations
region. The third element provided in Prubankers is also wanting. Even
Petitioner's claim of wage distortion must also be denied for one assuming that there is a decrease in the wage gap between the pay of the
other reason. The difference in wages between employees in the same old employees and the newly hired employees, said gap is not significant as
pay scale in different regions is not the mischief sought to be banished to obliterate or result in severe contraction of the intentional quantitative
by the law. A disparity in wages between employees with similar differences in the salary rates between the employee group. As already
positions in different regions is necessarily expected. In insisting that stated, the classification under the wage structure is based on the rank of
the employees of the same pay class in different regions should an employee, not on seniority.
receive the same compensation, petitioner has apparently Petitioner cannot legally obligate Bankard to correct the alleged "wage
misunderstood both the meaning of wage distortion and the intent of distortion" as the increase in the wages and salaries of the newly-hired was
the law to regionalize wage rates. RA 6727 recognizes that there are not due to a prescribed law or wage order. The wordings of Article 124 are
different needs for the different situations in different regions of the clear. The mere factual existence of wage distortion does not, ipso facto
country. The fact that a person is receiving more in one region does result to an obligation to rectify it, absent a law or other source of
not necessarily mean that he or she is better off than a person obligation which requires its rectification. Bankard’s right to increase its
receiving less in another region. We must consider, among others, hiring rate, to establish minimum salaries for specific jobs, and to adjust the
such factors as cost of living, fulfillment of national economic goals, rates of employees affected thereby is embodied in the parties’ CBA, to wit:
and standard of living. Section 2. Any salary increase granted under this Article shall be without
Petitioner also avers that the implementation of the Wage Order prejudice to the right of the Company to establish such minimum salaries as
in only one region violates the equal-pay-for-equal-work principle. At it may hereafter find appropriate for specific jobs, and to adjust the rates of
the risk of being repetitive, we stress that RA 6727 mandates that the employees thereby affected to such minimum salaries thus established.
wages in every region must be set by the particular wage board of that In fine, absent any indication that the voluntary increase of salary
region, based on the prevailing situation therein. (Lendl Floyd Montes rates by an employer was done arbitrarily and illegally for the purpose of
) circumventing the laws or was devoid of any legitimate purpose other than
to discriminate against the regular employees, this Court will not step in to
There is this new case: BANKARD EMPLOYEES UNION-WATU interfere with this management prerogative. (Lendl Floyd Montes )
vs. NLRC 423 SCRA 148 (2004)
In this particular case, there was a severe contraction of the There are 2 ways of resolving wage distortions:
wage differences among the group of workers but it was not the result 1. If there is a union (CBA/EBA), you process it as if it is a grievance. So,
of a mandatory statutory wage increase. It was the result of a it goes to the grievance machinery, then finally, it undergoes (?) voluntary
unilateral practice of management. The management raised the entry arbitration.
level group of workers into the Bankard Company. 2. If there is EBA/CBA/union, then, representatives of the management
According to this employer, if we do not increase the entry level and representatives of the employees meet together to resolve the dispute.
salary, we will not be able to get the kind of talent we need. With so You invite the NCMB. If after 10 days, NCMB cannot solve the dispute, the
increasing, the regular members of their workforce, their salaries were aggrieved party files a complaint with the appropriate branch of NLRC,
just slightly higher than the entry level employees. So, they which is the Labor Arbiter. Then, Labor Arbiter, NLRC, Court of Appeals,
complained. Isn’t this a wage distortion and management should Supreme Court.
adjust our wages so that the historical gap will be restored?
Is that correct? Take note that the Supreme Court says that there is no obligation to
The Supreme Court said that is NOT CORRECT because there is correct the wage distortion that occurred because of the unilateral action of
no wage distortion. Why is there no wage distortion? Because there the management.
is no mandatory statutory wage increase.
So, that is an essential requirement – to have a statutory wage There is also the case of METRO TRANSIT vs. NLRC 245 SCRA
increase. 767 (1995).
Then, the Supreme Court said that the nature of wage distortion It has been a practice there that whatever has been granted to the
is such that it is a factual and economic condition that is brought about rank and file, they automatically grant the supervisory. Every time there
by different forces. was increase in the rank and file, the supervisors are also normally included
Actually, the more accurate term of what happened in Bankard is in the increase, established not just one or two but several times.
wage compression, where the truncated and eliminated differences Now, there is a wage increase only affecting the rank and file. The
occur because of a unilateral action of management. That is not wage rank and file wages were adjusted as mandated by law, but they did not
distortion. That is wage compression. adjust the wages of the supervisory. So, they complained. Finally, it went
Wage distortion happens if there is a new law and it does not all the way to the Supreme Court.
apply to everybody.

12
The Supreme Court said that supervisors must be adjusted indeed the distortion caused by the CBA-stipulated wage increase granted
because they have earned it as a matter of right. That practice of rank-and-file employees on 17 April 1989 was rectified by 1 December
increasing one and increasing the rest is a common practice for this 1991. (Cherry Canda-Melodias )
particular employer.
Q: Suppose there is no such practice and there is a mandated wage
METRO TRANSIT vs. NLRC (JULY 11, 1995) increase and only one group is increased and the other is not increased.
Let us say probationary welders are increased because they adjust the
FACTS: Metro is the operator and manager of the LRT System in minimum wage. Now, the salaries of the probationary welders is the same
Metro Manila. Private respondent SEAM is a union composed of except for a P2 or P3 difference with the regular welders. Before, there
supervisory employees of petitioner Metro. In May 1989, SEAM was was a P20 – P25 difference. Must the employer restore the previous
certified as the sole bargaining unit for the supervisory employees of historical gap of P 25?
Metro. The Supreme Court says that there is no such obligation. The
On 1 December 1989, the first CBA between Metro and SEAM employer cannot be ordered by the voluntary arbitrator or the Labor Arbiter.
took effect. Prior to December 1989, Metro had a CBA only with its What is required? Only good faith attempt at resolving the issue is needed
rank-and-file employees. During the period when no CBA governed the of the employer.
terms and conditions of employment between Metro and its Let us say he restores up to P7 difference. There is now a bonafide
supervisory employees, whenever rank-and-file employees were paid a attempt to restore it.
statutorily mandated salary increase, supervisory employees were, as a
matter of practice, also paid the same amount plus P50.00. Let us say only the probationary employees are affected by the new
On 17 April 1989, Metro paid its rank-and-file employees a salary wage orders. The regular employees are not. The regular goes to the
increase of P500.00 per month in accordance with the terms of their employer to complain. Ang diperensiya karon kay P 2 na lang. There is no
CBA. Metro, however, did not extend a corresponding salary increase more difference.
to its supervisory employees. Now, the employer says arun wala na tay diperensiya, kanang
On 1 December 1989, Metro, in compliance with its CBA with probationary employees buhaton nako ug regular. Wala nay probationary
SEAM, paid its supervisory employees a salary increase of P800.00 per diha.
month. Is that a valid way of resolving a wage distortion?
The Supreme Court says YES, that is valid. In the first place, it is the
ISSUES: management’s prerogative that gives management the right to create a
1. W/N supervisory employees should be given wage increases hierarchy, several groups hierarchies with pay differentials. If the law
based on company practice (50 more to the increases given to grants the power to create, the law has also granted the power to abolish.
rank and file) even when they already have their own CBA which
provides for their annual salary increases? Workers’ preference in case of bankruptcy
2. W/N the wage distortion was effectively corrected after the grant
of increases to supervisory employees based on their CBA? ARTICLE 110. Worker preference in case of bankruptcy. — In
the event of bankruptcy or liquidation of an employer's business, his
DECISION: workers shall enjoy first preference as regards their wages and other
1. No. The issue of whether increases in wages essential for correcting monetary claims, any provisions of law to the contrary notwithstanding.
wage distortions may be credited against CBA-mandated increases, is Such unpaid wages and monetary claims shall be paid in full before claims
not an issue of first impression. In National Federation of Labor v. of the government and other creditors may be paid.
National Labor Relations Commission , the Court rejected the argument
of the NLRC that wage increases resulting from collective bargaining Please take note that the Supreme Court has laid down the elements
negotiations should not be regarded as constituting compliance with as to the proper interpretation of Article 110.
the direction to correct wage distortions arising from the effectivity of Article 110 of the Labor Code grants preference to the workers over
Wage Orders. In National Federation of Labor, the Court: other creditors, including the government, to claim their unpaid wages from
their employer ahead of other creditors, and even the government.
It is important to note that the creditability provisions of
This can only be applied if there has been an in rem proceeding
Wage Orders Nos. 5 and 6 (as well as the parallel provisions in
declaring the employer insolvent.
Wage Orders Nos. 2, 3 and 4) are grounded in an important public
If there is none, Article 110 has no application.
policy. The public policy may be seen to be the encouragement of
employers to grant wage and allowance increases to their
1. Required to present proof that the employer has been
employees higher than the minimum rates of increases prescribed
adjudicated in an insolvency proceeding as insolvent or otherwise
by statute or administrative regulation. To obliterate the creditability
known as bankrupt
provisions in Wage Orders through interpretation or otherwise, and
to compel employers simply to add legislated increases in salaries or
2. If that is the case, Article 110 must be interpreted together
allowances without regard to what is already being paid, would be
with all the other Civil Code provisions on concurrence and
to penalize employers who grant their workers more than the
preference of credits
statutorily prescribed minimum rates of increases . Clearly, this
would be counter-productive so far as securing the interests of labor
Article 110 actually applies only to the so-called free property. It does
is concerned. The creditability provisions in the Wage Orders
not apply to properties of the employer that are specifically mortgaged or
prevent the penalizing of employers who are industry leaders and
encumbered in favor of a specific creditor. It only applies to the so-called
who do not wait for statutorily prescribed increases in salary or
free property.
allowances and pay their workers more than what the law or
regulations require.
3. Wages of workers’ claims of unpaid wages and other benefits
In the instant case, the CBA-stipulated increase of P800.00 a are superior to government claims
month was intended as the countervailing increase for supervisory
employees, the rank-and-file employees having already received their
own increase approximately 8 months earlier. In other words, the This must be interpreted as claims of government that are proprietary
wage distortion in the present case arose not because of a in nature. They are not claims that are sovereign in nature – example are
government-decreed increase in minimum wages or because Metro taxes. In the payment of taxes and the unpaid wages of worker, it is still
simply refused to treat its supervisory employees, differently from its taxes that is favored. There is no government employee that can waived
rank-and-file workers, but rather because of a failure to synchronize taxes unless it is specifically provided by law.
the CBA-stipulated increases for rank-and-file and for supervisory If you say that these workers’ preference in Article 110 is superior to
employees. Moreover, as more than once pointed out above, the government claims, it must be government proprietary in nature.
P800.00 monthly increase given to supervisory employees should be
taken in conjunction with the P550.00 month increase already awarded 4. Article 110 preference, brought about by RA 6715, became
to supervisory employees under Part I above. When these are taken effective March 21, 1989 and can only be given prospective effect.
together, the wage distortion which occurred on 17 April 1989 was It cannot be given retroactive effect.
completely and permanently corrected. There is no legal basis for
requiring Metro to pay not only the P800.00 month increase, but also, Contracting and Sub-Contracting
on top thereof, the P550.00 monthly increase to supervisory
employees, after 1 December 1989 and forever after. ARTICLE 106. Contractor or sub-contractor. — Whenever an
2. Yes. We consider the difference of P1,500.00 per month a employer enters into a contract with another person for the performance of
significant differential that clearly distinguishes, on the basis of pay the formers work, the employees of the contractor and of the latter's sub-
scales, a rank-and-file employee from a supervisory employee. contractor, if any, shall be paid in accordance with the provisions of this
Applying the above increases to the actual salaries being received Code.
by rank-and-file and supervisory employees of Metro, we find that
13
In the event that the contractor or sub-contractor fails to pay the provisions of regular employment, in any of the following
wages of his employees in accordance with this Code, the employer instances:
shall be jointly and severally liable with his contractor or sub-contractor i) In addition to his assigned functions, requiring the
to such employees to the extent of the work performed under the contractual employee to perform functions which are currently
contract, in the same manner and extent that he is liable to employees being performed by the regular employees of the principal or of the
directly employed by him. contractor or subcontractor;
The Secretary of Labor may, by appropriate regulations, restrict ii) Requiring him to sign, as a precondition to employment
or prohibit the contracting out of labor to protect the rights of workers or continued employment, an antedated resignation letter; a
established under this Code. In so prohibiting or restricting, he may blank payroll; a waiver of labor standards including minimum wages
make appropriate distinctions between labor-only contracting and job and social or welfare benefits; or a quitclaim releasing the principal,
contracting as well as differentiations within these types of contracting contractor or subcontractor from any liability as to payment of future
and determine who among the parties involved shall be considered the claims; and
employer for purposes of this Code, to prevent any violation or iii) Requiring him to sign a contract fixing the period of
circumvention of any provision of this Code. employment to a term shorter than the term of the contract between
There is "labor-only" contracting where the person supplying the principal and the contractor or sub-contractor, unless the latter
workers to an employer does not have substantial capital or contract is divisible into phases for which substantially different skills
investment in the form of tools, equipment, machineries, work are required and this is made known to the employee at the time of
premises, among others, and the workers recruited and placed by such engagement;
person are performing activities which are directly related to the
principal business of such employer. In such cases, the person or What is an example (iii)? Let us say, EEI was contracted by Marco
intermediary shall be considered merely as an agent of the employer Polo Hotels to construct Marco Polo. EEI, the construction company,
who shall be responsible to the workers in the same manner and subcontract the finishing carpentry and electrical and plumbing works to
extent as if the latter were directly employed by him. another construction company, let us say, Santos and Santos Engineering
Works.
ARTICLE 109. Solidary liability. — The provisions of existing So, they have a contract to do this in 8 months. So, they hire
laws to the contrary notwithstanding, every employer or indirect carpenters, plumbers, electricians.
employer shall be held responsible with his contractor or subcontractor Now, these electricians complained. Nganong giterminate naman mi
for any violation of any provision of this Code. For purposes of na sige pa man ug trabaho ang mga karpentero? The contract is for 8
determining the extent of their civil liability under this Chapter, they months. Kami, 4 lang mi kabulan. Nganong giterminate naman mi?
shall be considered as direct employers. Is it not the rule that the employees of the contractor should have the
same tenure as the contract with the indirect employer?
What you have to remember about contracting or sub-contracting YES, but if the job is divisible you cannot claim to have been illegally
is that there is such a thing as bonafide contracting and there is terminated.
labor only contracting.
(d) Contracting out of a job, work or service through an in-house agency
BONAFIDE CONTRACTING means that the job contracted out which refers to a contractor or subcontractor engaged in the supply of
is susceptible in being contracted out. That it is not directly related to labor which is owned, managed or controlled by the principal and
the business of the employer. which operates solely for the principal;
The one contracting, the contractor, has an independent business
as a contractor. He has sufficient capital, he has an office, he has What is an in-house agency? It is an agency providing contract
sufficient equipment. In other words, he is not a conduit. He is a workers to only one particular indirect employer.
bonafide contractor. Example: SM. Unya naa silay contracting agency – MS Manpower
Otherwise, he is a cabo. And if it is a cabo, the law disregards providing janitorial services. There are many SM stores that they are
him. And there is only one employer, namely the indirect employer – providing with their services. But there is only one indirect employer that
the client of a cabo. That is LABOR-ONLY CONTRACTING. they are providing janitorial services thereto. That is illegal. That is
If there is only labor-only contracting, the indirect employer prohibited because that is an in-house agency. Actually, that is owned by
becomes the only employer and he is the employer for all purposes of the same controlling interest as SM and that is verifiable in the name – MS.
social and labor legislation. So, in-house agency is prohibited.
As to minimum wage, he is liable. As to SSS and contributions of
social welfare, he is liable. (e) Contracting out of a job, work or service directly related to the
business or operation of the principal by reason of a strike or lockout
In bonafide contracting, the indirect employer is only liable for whether actual or imminent;
underpayment or non-payment of wages and other benefits. He is not
liable for SSS contributions, etc. He is only liable for labor legislation, Example: Coca-Cola Bottlers Phil. Inc. By law, the operating word
not social legislation. there is Bottlers. Dili nang Coca-Cola. Tagaan lang na sila ug formula.
The Department of Labor has issued DO 18-02 February 21, Padad-an lang na sila ug concentrate sa Coca-Cola, ila na gamiton paghimo
2002. In that particular order, there are prohibitions relating to ug Coke na binotilya.
contracting and sub-contracting. What is the main job? To bottle.
Karon ang imong tao sa bottling line, contracted out. That is your
SECTION 6. Prohibitions. — Notwithstanding Section 5 of these business. Mao gani imong ngalan. Sa ato pa, you are contracting out a
Rules, the following are hereby declared prohibited for being contrary service directly related to your business or operation. That is prohibited.
to law or public policy: Likewise, if you go to the General Banking Law of 2000, there are acts
(a) Contracting out of a job, work or service when not done in good enumerated there of the work of the bank which cannot be contracted out
faith and not justified by the exigencies of the business and the because they are constituting the principal work or service line.
same results in the termination of regular employees and One example is tellering. Kanang teller dili na ma-contract out. That
reduction of work hours or reduction or splitting of the bargaining is one of the main functions of the bank.
unit;
So, contracting is only made an excuse but the aim is really to Let me just bring you the refinement in the law (?).
terminate regular employees or reduce work hours or split the The Supreme Court does not use these yardsticks in determining on
bargaining unit. whether there is or there is no valid contracting or sub-contracting. It does
not use the yardstick that is created in Articles 106.
(b) Contracting out of work, with a "cabo" as defined in Section 1 (ii), What does the Supreme Court use? The Supreme Court uses another
Rule 1, Book V of these Rules. "Cabo" refers to a person or group yardstick found in Article 280 – whether or not you are engaged to perform
of persons or to a labor group which, in the guise of labor activities which are usual and necessary to the trade and business.
organization, supplies workers to an employer, with or without
any monetary or other consideration whether in the capacity of ARTICLE 280. Regular and Casual Employment. — The provisions
an agent of the employer or as an ostensible independent of written agreement to the contrary notwithstanding and regardless of the
contractor; oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which
(c) Taking undue advantage of the economic situation 1 or lack of are usually necessary or desirable in the usual business or trade of the
bargaining strength of the contractual employee, or undermining employer, except where the employment has been fixed for a specific
his security of tenure or basic rights, or circumventing the project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
1 is for the duration of the season.
And thereby, exaggerating needs of contracting or sub-contracting
14
An employment shall be deemed to be casual if it is not covered BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job
by the preceding paragraph: Provided, That any employee who has description which detailed her functions as a radio/telex operator. However,
rendered at least one year of service, whether such service is a cursory reading of the job description shows that what was sought to be
continuous or broken, shall be considered a regular employee with controlled by FEBTC was actually the end-result of the task, e.g., that the
respect to the activity in which he is employed and his employment daily incoming and outgoing telegraphic transfer of funds received and
shall continue while such activity exist. relayed by her, respectively, tallies with that of the register. The guidelines
were laid down merely to ensure that the desired end-result was achieved.
The Supreme Court admits that. Where does the Supreme Court It did not, however, tell Neri how the radio/telex machine should be
admit that? It admitted that in the en banc ruling of NERI vs. NLRC operated.
224 SCRA 717 (1993). Besides, petitioners do not deny that they were selected and hired by
At issue here is the job of the telephone operator. It is a banking BCC before being assigned to work in the Cagayan de Oro Branch of FEBTC.
business. Is he or is he not in the position that can be contracted out? BCC likewise acknowledges that petitioners are its employees. The record is
The bank corporation contracted out the telephone operators’ job. replete with evidence disclosing that BCC maintained supervision and
The Supreme Court said be that as it may, the Court has already control over petitioners through its Housekeeping and Special Services
taken judicial notice of the general practice adopted in several Division: petitioners reported for work wearing the prescribed uniform of
government and private institutions and industries of hiring BCC; leaves of absence were filed directly with BCC; and, salaries were
independent contractors to perform special services. These services drawn only from BCC. (Kim Mamontuan )
range from janitorial, security and even technical or other specific
services such as those performed by petitioners Neri and Cabelin. Why did the Supreme Court decide that? Because there are many
While these services may be considered directly related to the principal activities that are directly related and should be contracted out.
business of the employer, nevertheless, they are not necessary in the Let us go to the bank again. The bank’s main function is to secure the
conduct of the principal business of the employer. money that has been deposited. Mao man na ang job sa bangko.
Is the security guard an employee of the bank? NO, it is sub-
NERI vs. NLRC (July 23, 1993) contracted to a security agency. And yet, it is related directly to the
function of the bank to safeguard (?) the money.
FACTS: Respondents are sued by two employees of BBC to compel Why is it sub-contracted? It is sub-contracted out and it is allowed
Far Eastern Banking Corporation (FEBTC) to recognize them as its because if you assume the contrary where the bank hires its own security
regular employees and be paid the same wages which its employees guards, then, it will take the bank out of its normal functions.
receive. So, directly related in the principal business has been disregarded by
It was established in the proceedings that BBC had substantial the Supreme Court in the Neri case and subsequently in the ESCARIO, et
capitalization of P1M or stockholders equity of P1.5M. Thus, the Labor al vs. NLRC 333 SCRA 257 (2000), in favor of Article 280, activities
Arbiter ruled that BBC was only job contracting and that its employees which are usual and necessary to the trade or business.
were not of FEBTC. The factual findings were affirmed by NLRC.
BBC is a corporation engaged in providing technical, ESCARIO vs. NLRC (June 8, 2000)
maintenance, engineering, housekeeping, security and other specific
services to its clientele. Petitioners were assigned to work in Cagayan FACTS: California Marketing Co. Inc. (CMC) is a domestic corporation
Branch of FEBTC as radio telex operator and janitor. principally engaged in the manufacturing of food products and distribution
Petitioners instituted complaints against FEBTC and BBC to of such products to wholesalers and retailers. Private respondent Donna
compel the bank to accept them as regular employees and for it to pay Louise Advertising and Marketing Associates, Inc. (D.L. Admark) is a duly
the differential of between the wages being paid by BBC and those registered promotional firm. Petitioners worked as merchandisers for the
received by FEBTC employees with similar length of service. It is the products of CMC. Their services were terminated on 16 March 1992.
petitioner’s assertion that BBC is engaged in “labor-only” contracting, Petitioners allege that they were employed by CMC as merchandisers.
hence, they conclude, they are employees of the respondent FEBTC; Among the tasks assigned to them were the withdrawing of stocks from the
that it failed to adduce evidence purporting to show that it invested in warehouse, the fixing of prices, price-tagging, displaying of merchandise,
the form of tools, equipment, machineries, work premises and other and the inventory of stocks. These were done under the control,
materials which are necessary in the conduct of its business; that they management and supervision of CMC. Materials were provided by CMC.
perform duties directly related to the principal business or operation of Their salaries were paid by CMC.
FEBTC. Petitioners filed a case against CMC before the Labor Arbiter for the
The Labor Arbiter dismissed the complaint for lack of merit. On regularization of their employment status.
appeal, the NLRC affirmed the decision of the Labor Arbiter. During the pendency of the case, D.L. Admark sent to petitioners
notice of termination of their employment. Thereafter, 27 more persons
ISSUE: WON BBC is an independent job-contractor or not? joined as complainants. CMC filed a motion to implead as party-defendant
D. L. Admark and at the same time the latter filed a motion to intervene.
RULING: NO, BBC is not an independent job-contractor. BBC need Both motions were granted.
not prove that it made investments in the form of tools, equipment, CMC, on the other hand, denied the existence of an employer-
machineries, work premises, among others, because it has established employee relationship between petitioner, and itself. Rather, CMC
that it has sufficient capitalization; it was no longer necessary for BBC contended that it is D.L. Admark who is the employer of the petitioners.
TO further adduce evidence to prove that it does not fall within the D.L. Admark asserted that it is the employer of the petitioners.
purview of labor-only contracting. There is even no need for it to Labor Arbiter found that petitioners are employees of CMC. On
refute petitioners’ contention that the activities they perform are appeal, the NLRC set aside the decision of the Labor Arbiter.
directly related to the principal business of the respondent bank.
It is well-settled that there is labor-only contracting where: (a) ISSUE: Whether petitioners are employees of CMC or D.L. Admark.
the person supplying the workers to an employer does not have
substantial capital OR investment in the form of tools, equipment, HELD: Petitioners are employees of D.L. Admark.
machineries, work premises, among others; and, (b) the workers D.L. Admark is a legitimate independent contractor. CMC can validly
recruited and placed by such person are performing activities which farm out its merchandising activities to a legitimate independent contractor.
are directly related to the principal business of the employer. Petitioners themselves admitted that they were selected and hired by
Based on the foregoing, BBC cannot be considered engaged only D.L. Admark. D.L. Admark was able to present in evidence the payroll of
in labor only contracting because the law does not require both petitioners. Petitioners admitted that it was D.L. Admark who terminated
substantial capital and investment in the form of tools, equipment, their employment. Complainants were under the supervision and control of
machineries, etc. This is clear from the use of the conjunction “or”. If the CMC.
the intention was to require the contractor to prove that he has both Having proven the existence of an employer-employee relationship
capital and the requisite investment, then the conjunction “and” should between D.L. Admark and petitioners, it is no longer relevant to determine
have been used. whether the activities performed by the latter are necessary or desirable to
Be that as it may, the Court has already taken judicial notice of the usual business or trade of CMC. (eto talaga nakalagay sa case .. hehe
the general practice adopted in several government and private )
institutions and industries of hiring independent contractors to perform
special services. These services range from janitorial, security and Other Prohibitions mentioned in DO 18-02, not mentioned in class:
even technical or other specific services such as those performed by (e) Contracting out of a job, work or service directly related to the
petitioners Neri and Cabelin. While these services may be considered business or operation of the principal by reason of a strike or
directly related to the principal business of the employer, lockout whether actual or imminent;
nevertheless, they are not necessary in the conduct of the principal
business of the employer. (f) Contracting out of a job, work or service being performed by
Even assuming ex argumenti that petitioners were performing union members when such will interfere with, restrain or coerce
activities directly related to the principal business of the bank, under
the "right of control" test they must still be considered employees of
15
employees in the exercise of their rights to self-organization as Make sure that DO 18-02 (February 21, 2002) is the implementing
provided in Art. 248 (c) of the Labor Code, as amended. rules in your text because if it is not then you are reading the wrong
implementing rules.
SECTION 8. Rights of Contractual Employees. — Consistent
The rule that was replaced by 18-02 is similar to this. But it is not the
with Section 7 of these Rules, the contractual employee shall be
same. In the old rule, there was a requirement of registration of
entitled to all the rights and privileges due a regular employee as
contractors. Now, this requirement of registration of contractors or sub-
provided for in the Labor Code, as amended, to include the following:
contractors is no longer deemed as essential. But the contractor may be
(a) Safe and healthful working conditions;
made to produce the contract that it enters into with its client.
(b) Labor standards such as service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay and separation pay;
Let us go to the new cases on Articles 105, 106 and 107.
(c) Social security and welfare benefits;
(d) Self-organization, collective bargaining and peaceful concerted
You are well aware of course that even if the indirect employer is
action; and
government, the indirect employer may be made to answer for non-
(e) Security of tenure.
payment or underpayment of wages in cases of failure on the part of the
contractor. You have seen that in the past.
There is also a requirement that contractual employees are also However, there is this case of NFA vs. MASADA SECURITY (March
entitled to service incentive leave, rest days, overtime pay, holiday 8, 2005) – First Division, Justice Ynares-Santiago.
pay, 13th month pay and separation pay. The NFA had a contract with Masada for the latter to provide security
services to the NFA warehouses and installations in Region 1 – Pangasinan,
SECTION 9. Contract Between Contractor or Subcontractor La Union, Ilocos Sur and Ilocos Norte.
and Contractual Employee. — Notwithstanding oral or written And then, during the effectivity of the contract, the RTWPB of that
stipulations to the contrary, the contract between the contractor or particular wage region issued a wage order increasing the minimum wage
subcontractor and the contractual employee, which shall be in writing, rate. Masada requested NFA for the corollary upward adjustment in the
shall include the following terms and conditions: monthly contract rate consisting of the increases in the daily minimum wage
(a) The specific description of the job, work or service to be of the security guards as well as for the corresponding rate in overtime pay,
performed by the contractual employee; holiday pay, 13th month pay, rest day pay, SSS and PAG-IBIG premiums.
(b) The place of work and terms and conditions of employment, The NFA granted the request only with respect to the increase in the
including a statement of the wage rate applicable to the individual daily wage by multiplying the amount of the mandated increase by the
contractual employee; and number of days. The NFA denied the request for the adjustment in the
(c) The term or duration of employment, which shall be coextensive other benefits computed on the basis of the daily wage. Those are the so-
with the contract of the principal and subcontractor, or with the called roll-up costs. Musaka ang imong costs kay nisaka man ang imong
specific phase for which the contractual employee is engaged, as basic. Musaka ang imong regular wage, ang imong overtime which is based
the case may be. on the regular wage musaka. Wa man gihatag sa NFA.
The contractor or subcontractor shall inform the contractual So, Masada filed a money claim complaint with the RTC, Quezon City
employee of the foregoing terms and conditions on or before the first asking NFA to pay all the money claims.
day of his employment. Why trial court? Because this is not an issue of wages. This is an
issue of a contract of providing services.
The contract between the contractor and the sub-contractor with The trial court ruled that NFA is liable because the basis of the
the contractual employees shall be in writing which shall include the computation of the other benefits like overtime, holiday, SSS, PAG-IBIG is
description of the job, statement of the wage rate, duration of the the increase in the minimum wage. The Regional Trial Court said that it
employment which must be co-extensive with contract of the principal stands to reason that they are also liable of the consequences of the raise.
and subcontractor. NFA appealed to the CA. But the appeal of the NFA was dismissed.
The CA ruled that the proper remedy was Rule 45 – Petition for Review to
SECTION 11. Registration of Contractors or Subcontractors. — the Supreme Court considering that the appeal raised a pure question of
Consistent with the authority of the Secretary of Labor and law.
Employment to restrict or prohibit the contracting out of labor through So, NFA went to the SC. How did the SC rule on this particular
appropriate regulations, a registration system to govern contracting interpretation of Section 6 of RA 6727?
arrangements and to be implemented by the Regional Offices is hereby
established. Section 6 says:
The registration of contractors and subcontractors shall be SECTION 6. In the case of contracts for construction projects and
necessary for purposes of establishing an effective labor market for security, janitorial and similar services, the prescribed increases in the
information and monitoring. wage rates of the workers shall be borne by the principals or clients of the
Failure to register shall give rise to the presumption that the construction/service contractors and the contract shall be deemed amended
contractor is engaged in labor-only contracting. accordingly. In the event, however, that the principal or client fails to pay
the prescribed wage rates, the construction/service contractor shall be
The contractor is required to register his corporation or jointly and severally liable with his principal or client.
partnership.
The Supreme Court said in construing the word "wage" in Section 6 of
The contractual employees may form a union vis-à-vis their RA 6727, reference must be had to Section 4 (a) of the same Act.
employer who is their contractor, although it cannot form a union vis- Section 4 (a) states upon the effectivity of this Act, the statutory minimum
à-vis the indirect employer because there is no employer-employee wage rates for all workers and employees in the private sector, whether
relationship. agricultural or non-agricultural, shall be increased by twenty-five pesos
(P25) per day.
Hence, the additional liability to be borne by the principal under
Section 6 of RA 6727 is the increment or amount added to the remuneration
SECTION 14. Duty to Produce Copy of Contract Between the of an employee for an 8-hour work.
Principal and the Contractor or Subcontractor. — The principal Then, the Supreme Court said if it was the intention of the lawmakers
or the contractor or subcontractor shall be under an obligation to to extend the obligation of principals in service contracts to the payment of
produce a copy of the contract between the principal and the the increment in the other benefits and remuneration of workers, it would
contractor in the ordinary course of inspection. The contractor shall have so expressly specified. In not so doing, the only logical conclusion is
likewise be under an obligation to produce a copy of the contract of that the legislature intended to limit the additional obligation imposed on
employment of the contractual worker when directed to do so by the principals in service contracts to the payment of the increment in the
Regional Director or his authorized representative. statutory minimum wage.
A copy of the contract between the contractual employee and the Expresio unius est exclusio alterius. That is a standard statutory
contractor or subcontractor shall be furnished the certified bargaining construction dictum.
agent, if there is any. Then, it is not within the province of this Court to inquire into the
wisdom of the law for indeed, we are bound by the words of the statute.
The contractor is furthermore enjoined to readily produce a copy The law is applied as it is. At any rate, the interest of the employees will not
of the contract between the principal and the contractor in the be adversely affected if the obligation of principals under the subject
ordinary course of inspection. provision will be limited to the increase in the statutory minimum wage.
This is so because all remuneration and benefits other than the increased
JULY 31, 2008 statutory minimum wage would be shouldered and paid by the employer or
service contractor to the workers concerned. Thus, in the end, all
allowances and benefits as computed under the increased rate mandated by
RA 6727 and the wage orders will be received by the workers.

16
precedent to the payment of wages. Besides that, the SSS deductions of
So, strict implementation as to the liability of the indirect the PSI are deducted by PSI, not by PLDT. So, the sources of the fund is
employer – only what the law says is the liability of the indirect PSI because how could they deduct it if it did not originate from them?
employer.
d. As to whether or not PLDT directly supervises them and controls their
Suppose, the security guard themselves sued the NFA for the means and methods
money claims on the wage increase, and the allowances and benefits The Supreme Court says that the fact reports (?) were drawn up by
as computed under the increase. Can the NFA be liable (?) virtue of PLDT are made the basis for disciplinary actions on the part of the guards is
Section 6, RA 6727? not proof of supervision. These are just records for the basis of
NO, if it is the workers themselves who sued, the proper forum is recommending disciplinary action and/or termination. The fact that PLDT
no longer the RTC. authorizes and funds and provides for special trainings – fire fighting, CPR,
What forum would be that? Labor Arbiter. The applicable traffic control, etc – is not proof that the PLDT employer because PLDT
provision is Article 109 of the Labor Code which provides solidary even gives these trainings to barangay officials and some PNP Personnel.
liability. The provisions of existing laws to the contrary In fact, there is a PNP command that has received certifications of good
notwithstanding, every employer or indirect employer shall be held performance in training by PLDT. And it does not make the PNP Personnel
responsible with his contractor or subcontractor for any violation of the employees of PLDT.
any provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as direct e. They alleged direct supervision by PLDT of the guards by denied by
employers. individual applications of the guards themselves filed to the PSI, not PLDT -
So, if contractors have difficulty meeting the requirement of that they go on leave, on vacations, be paid, showing that it is PSI that the
substantial capital or investment requirement, that is the possible guards clearly recognize as the one supervising them, not PLDT. They do
ruling if the it is the workers themselves who complained. Remember, not ask to go on vacation to PLDT. It is PSI.
it is already the labor tribunal who will decide the claim and not the
regular courts. ABELLA, et al vs. PLDT (June 8, 2005)
FACTS: PSI entered into an agreement with the PLDT to provide the latter
Another contracting case is the case of ABELLA, et al vs. PLDT, with such number of qualified uniformed and properly armed security
PEOPLE’S SECURITY INC L-159469 (June 8, 2005). – 2nd guards. Under the agreement, it was expressly provided that there shall be
Division, Justice Chico-Nazareno no employer-employee relationship between the PLDT and the security
PLDT engages People’s Security to provide security guards. The guards, which may be supplied to it by PSI, and that the latter shall have
security guards are the complainants in this case. They are saying the entire charge, control and supervision over the work and services of the
that they no longer accept the security agency as their true employer. supplied security guards. It was likewise stipulated therein that PSI shall
It is the PLDT. also have the exclusive authority to select, engage, and discharge its
Why? Because they have been serving for PLDT for so many security guards, with full control over their wages, salaries or compensation.
years. Some for 5 years, some for 6 years. And these are the PLDT interviewed these security guards and asked them to fill out
grounds for which they say that the security agency should be personal data sheets. Those who did not meet the height requirements
disregarded and there will only be one employer, that is PLDT: were sent back by PLDT to PSI.
65 guards filed a complaint for regularization against the PLDT with
a. We, when we were applicants, were interviewed by PLDT. They the Labor Arbiter.
were first interviewed by PLDT, not the security agency. And PLDT LA dismissed the complaint for lack of merit. On appeal, the NLRC
enforced standards. Therefore, it was PLDT who hired us as guards. affirmed in toto the Labor Arbiter’s decision. CA affirmed NLRC’s decision.

b. People’s Security, Inc. (PSI) is a labor-only contractor. It is an in- ISSUE: Whether or not an employer-employee relationship exists between
house agency. Hence, the doctrine of piercing the veil of corporate petitioners and respondent PLDT
entity should be applied.
HELD: NO employer-employee relationship exists between petitioners and
c. PSI is mere conduit of PLDT because the PLDT supervisors PLDT.
normally countersign their daily time records and only subsequent is PSI is a legitimate job contractor. It has substantial capital and
the only time they are paid the wages. If the supervisor does not sign investment in the form of guns, ammunitions, communication equipments,
their DTR, then, they are not paid. vehicles, office equipments like computer, typewriters, photocopying
machines, etc., and above all, it is servicing clients other than PLDT.
d. PLDT is the one which supervises the guards. PLDT issues Interviews and evaluation were conducted by PLDT to ensure that the
delinquency reports of infractions committed by the guards. They standards it set are met by the security guards. In fact, PLDT rarely failed
issue the certificate of training in fire-fighting, first-aid. It is PLDT that to accept security guards referred to by PSI but on account of height
engages trainors. And as a consequence, it is PLDT which issues deficiency.
certification that these security guards are now qualified as CPR first- The security guards which PSI had assigned to PLDT are already the
aid attendant or as firefighter. It is PLDT that does that. So, former’s employees prior to assignment and if the assigned guards to PLDT
therefore, PLDT is the direct employer. That is the claim of the are rejected by PLDT for reasons germane to the security agreement, then
guards. the rejected or terminated guard may still be assigned to other clients of
PSI.
e. PLDT supervises the employment of the guards, not PSI. It is It is PSI that determined and paid the petitioners’ wages, salaries, and
PLDT which ultimately determines where you are assigned because if compensation. The signature of the PLDT supervisor in the Daily Time
PLDT does not assign you, PSI assign you to your position. Records does not ipso facto make PLDT the employer of complainants
What is the ruling of the Supreme Court? The Supreme Court inasmuch as the Labor Arbiter had found that the record is replete with
was point by point in this sequence: evidence showing that some of the Daily Time Records do not bear the
signature of a PLDT supervisor yet no complaint was lodged for
a. Does the initial interview of PLDT prove that PLDT is the true nonpayment of the guard’s wages evidencing that the signature of the
employer and not PSI? PLDT’s supervisor is not a condition precedent for the payment of wages of
The Supreme Court says that the interview by the PLDT is merely the guards.
to make sure that their requirements are followed. Example, the Delinquency reports were nothing but reminders of the infractions
height requirement. The requirement that they must be licensed and committed by the petitioners while on duty which serve as basis for PLDT to
have completed the training. PLDT does not want the guards to be recommend the termination of the concerned security guard from PLDT.
working on their permits with the PNP as they are already performing Termination of services from PLDT did not ipso facto mean dismissal from
their duties as guards. Those are the standards of PLDT. PSI inasmuch as some of those pulled out from PLDT were merely detailed
All the forms that are used are under the name of PSI, not PLDT. at the other clients of PSI. Delinquency reports merely served as justifiable,
And the final contract signatory is not PLDT but PSI. not arbitrary, basis for PLDT to demand replacement of guards found to
have committed infractions while on their tours of duty at PLDT’s premises.
b. As to whether or not PSI is a labor-only contractor or an in-house While said seminars were conducted at the premises of PLDT, it also
agency? remains uncontroverted that complainants’ participation was done with the
PSI is is able to present proof that it has substantial capital in the approval and at the expense of PSI.
form of weapons, guns, ammos, security equipment and services other
clients – Triumph, PCIBank, etc. So, therefore, it is not an in-house I am bringing this discussion because there is a similar case –
agency. VALLUM SECURITY vs. NLRC 224 SCRA 781 (1993), where Justice
Feliciano said that the security agency can be disregarded as the true
c. As to whether or not PLDT is merely a conduit of PSI employer is, not Vallum Security, but Hyatt Hotels. This was the Hyatt
The Supreme Court said not all records of the guards are Hotel in Baguio before it collapsed.
approved by the PLDT supervisors. Hence, there is no condition

17
Who interviewed the guards? It was the chief security officer of There is even a later case where there was a question of
Hyatt Hotel and they were made to fill-up forms of that hotel. And reimbursement. The security agency claimed that under a new wage order,
they were made to apply in the Hyatt Hotel. the increase as to the minimum wage should be borne by the indirect
Vallum Security had no office in Baguio. The office of Vallum employer.
Security was in Manila. So, they go to the RTC for reimbursement from the indirect employer.
And the chief here really supervised the security guards of the What was the answer of the indirect employer? The indirect employer
hotel. They were paid through an ATM payroll. And that was by an said our contract has already ended. Your completion of the contract is
account put up by Hyatt because Vallum Security did not have any evidenced by supporting papers which we actually asked from you. And
offices in Baguio City. that is the actual payrolls that were paid to the security guards.
That is why the Supreme Court in that case said that Vallum The related payrolls did not pay the adjusted wage which is already
Security can be disregarded. It is just a conduit of Hyatt. new, after they were paid. You are not enforcing reimbursement of which
you did not pay. So, the indirect employer is not liable to reimburse
VALLUM SECURITY vs. NLRC (July 30, 1993) because you did not pay the security guards.
The Supreme Court said that is correct. First pay, and then you can
FACTS: On Sept. 1, 1986, Hyatt and Vallum entered into a contract claim reimbursement. Or you get the security guards to sue the indirect
for security services under the terms of which Vallum agreed to protect employer for the increase in minimum wage and the indirect employer will
the properties and premises of Hyatt Baguio by providing 50 security have to pay.
guards, on a 24-hour basis, a day. Keep that in mind.
On June 1988, Hyatt informed Vallum that the contract would be Even if the indirect employer is directly made liable to pay under the
terminated. Vallum agreed. law to pay the increase and the increase was not paid, he is not liable to
Private respondents, who were security guards provided by the security guards.
Vallum to Hyatt, were informed that the contract between 2 had If the security guards of the contractor sue the employer for
already expired. Private respondents were directed to report to backwages that were not paid, then, the indirect employer is liable.
Vallum's head office at Sucat Road, in Muntinlupa for re-assignment. But in this case, no security guard sued. It is the security agency who
Failure to report at Sucat would be taken to mean that they were no did not pay. So, how can he ask for reimbursement?
longer interested in being re-assigned to some other client of Vallum.
None of them reported for re-assignment. Instead, they filed VISITORIAL POWER
complaints against petitioners in the NLRC for illegal dismissal and
ULP; for violation of labor standards relating to underpayment of 4 provisions in the Labor Code that are called visitorial power
wages, premium holiday and restday pay, uniform allowances and provisions:
meal allowances.
The complaint was dismissed by the Labor Arbiter. NLRC 1. ARTICLE 37
reversed the Labor Arbiter’s decision.
ARTICLE 37. Visitorial Power. — The Secretary of Labor or his duly
ISSUE: Whether or not private respondent security guards are indeed authorized representatives may, at any time, inspect the premises, books of
employees of petitioner Hyatt Baguio accounts and records of any person or entity covered by this Title, require it
to submit reports regularly on prescribed forms, and act on violations of any
HELD: YES, they are employees of Hyatt Baguio. provisions of this Title.
The records here show that private respondents filled up Hyatt
employment application forms and submitted the executed forms The visitorial power of the Secretary or the POEA is direct or his duly
directly to the Security Department of Hyatt Baguio. authorized representative to inspect recruitment or replacement entities.
In respect of the mode or manner of payment of wages, private Whenever they are open during business hours, the Secretary can ask for
respondents submitted in evidence 423 pay slips, which bore Hyatt records or interview if it is a place of recruitment.
Baguio's logo. These pay slips show that it was Hyatt Baguio which The Department Secretary or the POEA Administrator does not require
paid their wages directly and that Hyatt Baguio deducted therefrom a warrant to go there because this is an exercise of visitorial power.
the necessary amounts for SSS premiums, internal revenue
withholding taxes, and medicare contributions. 2. ARTICLE 165
It was Hyatt Baguio's Chief Security Officer
who exercised the power of enforcing disciplinary measures over the The Department of Labor or the Secretary has visitorial powers to
security guards. In the matter of termination of services of particular inspect workplaces for occupational health and safety.
security guards, Hyatt Baguio had merely used Vallum as a channel to
implement its decisions, much as it had done in the process of ARTICLE 165. Administration of safety and health laws. — (a)
selection and recruitment of the guards. The Department of Labor shall be solely responsible for the administration
The assignments of particular security guards was subject to the and enforcement of occupational safety and health laws, regulations and
approval of Hyatt Baguio's Chief Security Officer. Promotions were standards in all establishments and workplaces wherever they may be
approved or ratified by the Chief Security Officer of Hyatt Baguio. located; however, chartered cities may be allowed to conduct industrial
Hyatt Baguio's Chief Security Officer decided who among the various safety inspections of establishments within their respective jurisdictions
security guards should be an duty or on call, as well as who, in cases where they have adequate facilities and competent personnel for the
of disciplinary matters, should be suspended or dismissed. Hyatt purpose as determined by the Department of Labor and subject to national
Baguio, through its Chief Security Officer, awarded citations to standards established by the latter. xxx
individual security guards for meritorious services.
Orders received by private respondent security guards were set
If city personnel do the inspection, it must be deputized by the
forth on paper bearing the letterheads of both Hyatt Baguio and
Department of Labor. And the Department of Labor has the power.
Vallum. It appears to us, therefore, that Hyatt Baguio explicitly
This is a distinction from the inspection conducted by the city with
purported, at the very least, to share with Vallum the exercise of the
respect to the Building Code – do you have a fire extinguisher, fire exit, etc.
power of control and supervision with Vallum over the security guards,
That is the right of the city due to the Building Code – to inspect.
if indeed Vallum was not functioning merely as an alter ego of Hyatt
If there is a new building constructed, you cannot occupy it unless
Baguio in respect of the operations of the security guards. In the case
there is an occupancy permit that is issued by the city. That is not issued
at bar, the functions performed by Hyatt Baguio's Chief Security Officer
by the Department of Labor.
were precisely the duties which the head or senior officer of a
If that building is not a workplace, the Department of Labor cannot
legitimate security agency would be exercising over its own
inspect that. If that building is a residential place, it is not a workplace.
employees.
If mu-claim (?) ang imong housemaids, dili ba na mahimong
Vallum, in the specific circumstances of this case, was not an
inspectionon sa Department of Labor? It cannot because a house is not a
independent contractor but was, rather, a "labor-only" contractor.
workplace. It is a residence. It is outside the jurisdiction of Department of
Vallum did not have a branch office in Baguio City and that Hyatt
Labor. It is not covered by Article 165 because Article 165 says in all
Baguio provided Vallum with offices at Hyatt's own premises and
establishments and workplaces wherever they may be located.
allowed Vallum to use its Security Department in the processing of
applications.
3. ARTICLE 274
The issue of illegal dismissal need not detain us for long. It has
not been alleged by petitioners that a just or authorized cause for
This is the visitorial power of the Secretary to inspect the unions in
terminating private respondents' services had existed. And even if such
their offices.
lawful cause existed, it is not alleged that private respondents' rights
to procedural due process in that connection had been appropriately
observed. ARTICLE 274. Visitorial power. — The Secretary of Labor and
Employment or his duly authorized representative is hereby empowered to
inquire into the financial activities of legitimate labor organizations upon the

18
filing of a complainant under oath and duly supported by the written for an examination of the financial records of the union was made on March
consent of at least twenty per cent (20%) of the total membership of 14, 1989, i.e., seven days before the effectivity of the amendments.
the labor organization concerned and to examine their books of
accounts and other records to determine compliance or non- 4. ARTICLE 128
compliance with the law and to prosecute any violations of the law and
the union constitution and by-laws: Provided, That such inquiry or ARTICLE 128. Visitorial and enforcement power. — (a) The
examination shall not be conducted during the sixty (60)-day freedom Secretary of Labor or his duly authorized representatives, including labor
period nor within thirty (30) days immediately preceding the date of regulation officers, shall have access to employer's records and premises at
election of union officials. any time of the day or night whenever work is being undertaken therein,
and the right to copy therefrom, to question any employee and investigate
This Article 274 has been blunted by RA 9481 because the failure any fact, condition or matter which may be necessary to determine
to file reportorial requirements, financial statements or any omissions violations or which may aid in the enforcement of this Code and of any
of Article 241 (Rights and Conditions of Membership in a Labor labor law, wage order or rules and regulations issued pursuant thereto.
Organization) is no longer a ground for cancellation of union (b) Notwithstanding the provisions of Articles 129 and 217 of this Code to
registration. the contrary, and in cases where the relationship of employer-employee still
Even if that is the case, the Secretary of Labor or his duly exists, the Secretary of Labor and Employment or his duly authorized
authorized representative to visit union offices. Examples – check for representatives shall have the power to issue compliance orders to give
their payrolls, their books of account, etc. At any time during business effect to the labor standards provisions of this Code and other labor
hours. legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. xxx
Q: Does the Director of Bureau of Labor Relations (BLR) have
visitorial power? This is what happens. There is an inspector from the Department who
Article 274 mentions explicitly the Secretary of Labor and goes to the workplace. They start asking. Hain man ang inyong treasurer?
Employment or his duly authorized representative. Does it mean that Where are the copies of your payrolls for the past 6 months?
the Secretary has to deputized the Director of BLR before he can Then, he starts asking around. Ikaw, how long have you been
inspect go out on his own and inspect the principal office and examine working here? Gahapon ra ko sir. Ah, wa kay labot 
books of the union? Ikaw, pila na ka katuig? Pila man imong sweldo? Minimum sir. Pila
The answer is NO. On his own, the Director of BLR has visitorial man nang minimum? Basta minimum sir. Ah, kani, naa na niy instruction.
powers. Where is that found in the Labor Code? It is not found in the Mukuha na siya sa listahan.
Labor Code. It is found in Section 16, Chapter 4, Book 4, Title 7 of the Ipasa na niya ang report sa Department of Labor.
Administrative Code of 1987. The report has 2 parts:
The particular provision grants the BLR the power to inspect the a. Findings of facts
unions. And that grant of power in the Administrative Code has b. Recommendations
received affirmation and confirmation by the Supreme Court in the
case of LA TONDENA WORKERS vs. SECRETARY 239 SCRA 110 What will the Regional Director do? The Regional Director will issue a
(1994). compliance order. By the powers granted to my office under Article 128 of
the Labor Code and in view of the findings of facts and recommendations of
LA TONDEÑA WORKERS UNION vs. SECRETARY (Dec. 9, 1994) the Labor Inspection Officer, you are hereby directed:
a. to pay the following specified amounts by way of backwages and
FACTS: La Tondeña Worker's Union (LTWU) is a duly registered labor underpayment of minimum wage:
organization. In 1989, some of its members petitioned DOLE-NCR for Juan dela Cruz P 1,600
an audit or examination of the funds and financial records of the
union. Accordingly an audit was ordered and a report was submitted After the compliance order, you will receive enforcement order – writ
Ramon de la Cruz and Norma Marin accountable for P367,553.00 for of execution. Ang imong bank account, wala na, frozen. Dili na ka
union dues remitted by La Tondeña Inc. to LTWU. makawithdraw sa bank until you comply with the orders.
De la Cruz and Marin appealed to then DOLE Secretary Drilon,
complaining that they had not been heard before the report was The only way that you can stop the writ of execution is after you have
made. The case was indorsed to the respondent Director of the BLR. received the compliance order, you must produce documentary evidence
BLR Director found that indeed De la Cruz and Marin had not been which were not considered in the course of inspection.
heard. For this reason she set aside the findings and recommendations
of the DOLE-NCR and ordered another audit/examination to be The procedure has been lately affirmed by the Supreme Court in the
conducted. case of EX BATAAN VETERANS’ SECURITY AGENCY vs. LAGUESMA
The union raised a jurisdictional question: That under Art. 274 of 537 SCRA 651 (2007).
the Labor Code, as amended by Republic Act No. 6715, the power to
order an examination of the books of accounts and financial activities
of a union is vested in the Secretary of Labor and Employment or his
representative and the BLR can not be considered the Secretary's
representative.
BLR found the union officers personally accountable and liable. It says that in order to divest the Regional Director of his
representative jurisdiction, the following elements must be present:
ISSUE: Whether or not BLR had no authority to conduct an a. That the employer contests the findings of the Labor Relations
examination of the books of the LTWU and that such authority is Officer and raises issues thereon
vested solely in the Secretary of Labor or his duly authorized b. That in order to resolve such issues, there is a need to examine
representative evidentiary matters
c. That such matters are not verifiable in the normal course of
HELD: BLR has authority to conduct an investigation. investigation
By indorsing the case to the BLR, the Secretary of Labor and When that happens, the regional director has not choice but to
Employment must be presumed to have authorized the BLR to act on endorse it to the Labor Arbiter. And now, there will be an adversarial
his behalf. proceeding because that is such a time where the Regional Director will be
Independently of any delegation, the BLR had power of its own to divested of his visitorial powers.
conduct the examination of accounts in this case as provided in Book
IV, Title VII, Chapter 4, sec. 16 of the Administrative Code of 1987. That is enforcement of the law. That is like contempt. In order for
The Labor Code, as amended by RA 6715, likewise authorizes the the court to continue its business, kinahanglan na pahilomun ka o ipagawas
BLR to decide intra-union disputes as provided under Article 226. This ka.
includes the examinations of accounts. Ang pulis mag-han-ay ug traffic. Ikaw nagapagubot. Mao pahawaon
ka, tagaan ka ug ticket, kuhaon ang imong lisensiya to enforce an order.
(Lab Rel ni na part) That is not yet adversarial. If you contest that, kita mo sa traffic (?) court.
The validity of the request for examination of union accounts So, you contest it in court. Mudaog ka kay dili man muadto ang pulis.
must be determined as of the time of its filing. Hence we hold that the Tua man gatrabaho. Hearing mo kausa, kaduha. Sa ikatulo, move to
request of the 200 union members (19.70% of its total membership) in dismiss on the ground on my right to speedy trial. 
this case was validly made and conferred jurisdiction on the DOLE-NCR This is the same. How can the Regional Director be divested of its
to conduct the examination of the books of accounts of the petitioners. visitorial power? The employer protests. Second, there is a need to
The requirement of 20% of the membership were inserted in Art. 274 examine evidentiary matters. Unsa man to? Matters that are documentary
by way of an amendment by R.A. 6715 which took effect on March 21, that have been presented by the employer and such matters are not
1989. On the other hand, the letter of the union members petitioning verifiable in the normal course of inspection.
You read the EX BATAAN VETERANS’ SECURITY vs. LAGUESMA!
19
EBVSAI did not contest the findings of the labor regulations officer
EX-BATAAN VETERANS SECURITY AGENCY vs. LAGUESMA during the hearing or after receipt of the notice of inspection results. It was
Nov. 20, 3007 only in its supplemental motion for reconsideration before the Regional
Director that EBVSAI questioned the findings of the labor regulations officer
FACTS: Ex-Bataan Veterans Security Agency, Inc. (EBVSAI) is in the and presented documentary evidence to controvert the claims of private
business of providing security services while private respondents are respondents. But even if this was the case, the Regional Director and the
EBVSA’s employees assigned to the National Power Corporation at Secretary of Labor still looked into and considered EBVSAI’s documentary
Ambuklao Hydro Electric Plant. evidence and found that such did not warrant the reversal of the Regional
Private respondents instituted a complaint for underpayment of Director’s order.
wages against EBVSAI. The pieces of evidence presented by EBVSAI were verifiable in the
The Regional Office conducted a complaint inspection at the normal course of inspection because all employment records of the
Ambuklao Plant where the following violations were noted: (1) non- employees should be kept and maintained in or about the premises of the
presentation of records; (2) non-payment of holiday pay; (3) non- workplace, which in this case is in Ambuklao Plant, the establishment where
payment of rest day premium; (4) underpayment of night shift private respondents were regularly assigned.
differential pay; (5) non-payment of service incentive leave; (6)
underpayment of 13th month pay; (7) no registration; (8) no annual AUGUST 6, 2008
medical report; (9) no annual work accidental report; (10) no safety This visitorial power is no longer limited by amount. For as long as it
committee; and (11) no trained first aider. is an exercise of visitorial powers, Article 129 is no longer limited in amount.
EBVSAI was ordered by the Regional Director to pay the What limits the exercise of visitorial power? The limitation comes in
deficiencies. only when the employer controverts the findings of the Labor Inspector and
EBVSAI filed a MFR and alleged that the Regional Director does produces documentary proofs for evidence not otherwise considered in the
not have jurisdiction over the subject matter of the case because the course of inspection.
money claim of each private respondent exceeded P5,000. EBVSAI In which case, according to EX BATAAN VETERANS’ SECURITY
pointed out that the Regional Director should have endorsed the case AGENCY vs. LAGUESMA, the case should be moved to the Labor Arbiter
to the Labor Arbiter. It was denied. for the latter’s adjudication because it has become adversarial in nature.
On appeal, CA dismissed the petition. The requirements as enunciated:
a. The employer contests the findings of the Labor Relations Officer
ISSUES: Whether the Secretary of Labor or his duly authorized b. Raises issues and in order to resolve such issues, there is a need
representatives acquired jurisdiction over EBVSAI to examine evidentiary matters
Whether the Secretary of Labor or his duly authorized c. That such evidentiary matters are not verifiable in the normal
representatives have jurisdiction over the money claims of private course of inspection.
respondents which exceed P5,000.
Aside from that, the Regional Director of Labor under Article 128 has
HELD: The Secretary of Labor has jurisdiction. quasi-judicial jurisdiction. This is adversarial. What are the requirements?
Notices and copies of orders shall be served on the parties or
their duly authorized representatives at their last known address or, if Requirements for the exercise of jurisdiction on the part of
they are represented by counsel, through the latter. The rules shall be Regional Director of Labor under Article 128:
liberally construed and only in the absence of any applicable provision
will the Rules of Court apply in a suppletory character. 1. Complainant is either a domestic, agricultural, industrial or
EBVSAI does not deny having received the notices of hearing. commercial worker
The Regional Director validly acquired jurisdiction over EBVSAI.
EBVSAI can no longer question the jurisdiction of the Regional Director 2. That his complaint that does not contain any prayer for
after receiving the notices of hearing and after appearing before the reinstatement. It means that he has not been severed or
Regional Director. terminated
In Allied Investigation Bureau, Inc. v. Sec. of Labor, we ruled
that: While it is true that under Articles 129 and 217 of the Labor 3. The aggregate individual monetary claim does not exceed
Code, the Labor Arbiter has jurisdiction to hear and decide cases P5,000. So, if it is only P5,000, it is still with the Regional
where the aggregate money claims of each employee exceeds Director’s jurisdiction. If it is above P5,000, it is no longer under the
P5,000.00, said provisions of law do not contemplate nor cover the jurisdiction of the Regional Director even if there is no prayer for
visitorial and enforcement powers of the Secretary of Labor or his duly reinstatement.
authorized representatives. Rather, said powers are defined and set The Regional Director of Labor has the power to rule on that
forth in Article 128 of the Labor Code (as amended by R.A. No. 7730). money claims dispute.
Article 128 explicitly excludes from its coverage Articles 129 and Q: What happens if there are several of them who files a
217 of the Labor Code by the phrase “Notwithstanding the provisions money claims complaint and all of them, except for one, has a
of Articles 129 and 217of this Code to the contrary x x x” thereby money claim less than P 5,000? And there is one who is in
retaining and further strengthening the power of the Secretary of excess of P5,000. What happens to the complaint of all the
Labor or his duly authorized representatives to issue compliance orders workers? Will the complaint of the employees consisting of less than
to give effect to the labor standards provisions of said Code and other P5,000 individual monetary claim remain with Regional Director and
labor legislation based on the findings of labor employment and the one in excess passed on to the Labor Arbiter?
enforcement officer or industrial safety engineer made in the course of The answer is all of them go together. And where is that? To
inspection. the Labor Arbiter. Why? To prevent conflict of rulings and decisions. The
This was further affirmed in our ruling in Cirineo Bowling Plaza, Labor Arbiter may rule that the employer must pay. But then, the Regional
Inc. v. Sensing, where we sustained the jurisdiction of the DOLE Director might say that the employer does not have pay. And the only
Regional Director and held that the visitorial and enforcement difference between these two is actually just the amount of the claim. And
powers of the DOLE Regional Director to order and enforce yet, they have the same factual conditions of employment. That is not
compliance with labor standard laws can be exercised even desirable in law. How will they be reconciled?
where the individual claim exceeds P5,000. So, if there is one whose money claim is in excess of P5,000, then, the
However, if the labor standards case is covered by the exception entire group of employees similarly situated will be moved to the Labor
clause in Article 128(b) of the Labor Code, then the Regional Director Arbiter.
will have to endorse the case to the appropriate Arbitration Branch of
the NLRC. In order to divest the Regional Director or his ATTORNEY’S FEES
representatives of jurisdiction, the following elements must be present:
(a) that the employer contests the findings of the labor regulations ARTICLE 111. Attorney's fees. — (a) In cases of unlawful
officer and raises issues thereon; withholding of wages the culpable party may be assessed attorney's fees
(b) that in order to resolve such issues, there is a need to examine equivalent to ten percent of the amount of wages recovered.
evidentiary matters; and (b) It shall be unlawful for any person to demand or accept, in any judicial
(c) that such matters are not verifiable in the normal course of or administrative proceedings for the recovery of the wages, attorney's
inspection. fees, which exceed ten percent of the amount of wages recovered.
The rules also provide that the employer shall raise such
objections during the hearing of the case or at any time after receipt of
Case: TRADER’S ROYAL BANK EMPLOYEES’ UNION vs. NLRC
the notice of inspection results.
269 SCRA 733 (1997)
In this case, the Regional Director validly assumed jurisdiction
The Trader’s Royal Bank Union entered into an agreement with a
over the money claims of private respondents even if the claims
lawyer. First, for a general retainer of a monthly compensation of P 1,000,
exceeded P5,000 because such jurisdiction was exercised in
he would give them legal advice and he will be notarizing all their legal
accordance with Article 128(b) of the Labor Code and the case does
documents.
not fall under the exception clause.

20
And in the contract of retainership, there was this second part. award for holiday pay differential computed. The Labor Arbiter granted
The second part says that there is a litigation and the services of the such motion. NLRC affirmed such decision.
lawyer will needed (?), that would be under a separate agreement or Petitioner union contends that the award for attorney’s fees should
billing, which will be paid on case to case basis. have been incorporated in the main case and not after the Supreme Court
There was a dispute as whether or not Trader’s Royal Bank was had already reviewed and passed upon the decision of the NLRC. Since the
under obligation to pay several amounts in 13 th month pay, overtime claim for attorney’s fees by private respondent was neither taken up nor
and premium pay. approved by the Supreme Court, no attorney’s fees should have been
They went (?) into grievance adjustment. There was no allowed by the NLRC.
movement or agreement. Finally, it was submitted to voluntary
arbitration. ISSUE: Whether or not attorney’s fees should not have been allowed by
So, they called upon their lawyer to submit position papers and to the NLRC.
attend the hearings called by the voluntary arbitrator.
The lawyer was able to win on the voluntary arbitrator. He won HELD: Private respondent is entitled to attorney’s fees.
the award for 13th month, overtime and premium pay. The present controversy stems from petitioner’s apparent
Trader’s Royal Bank appealed to the CA. The CA reversed the misperception that the NLRC has jurisdiction over claims for attorney’s fees
voluntary arbitrator and just awarded the 13 th month pay. The rest, only before its judgment is reviewed and ruled upon by the Supreme Court,
they forgot. and that thereafter the former may no longer entertain claims for attorney’s
The union got another lawyer. fees. It would obviously have been impossible, if not improper, for the
Sure enough, the Supreme Court affirmed the 13 th month award NLRC in the first instance and for the Supreme Court thereafter to make an
and the non-award of overtime and premium pay and other benefits. award for attorney’s fees when no claim therefor was pending before them.
So, the same ruling as the CA. Private respondent’s present claim for attorney’s fees may be filed
Judgment of the Supreme Court became final and executory. It before the NLRC even though or, better stated, especially after its earlier
is remanded to the Labor Arbiter for execution. Once the case is filed decision had been reviewed and partially affirmed. It is well settled that a
with the Labor Arbiter for execution, here comes the motion of the claim for attorney’s fees may be asserted either in the very action in which
lawyer that has been dismissed, the motion for attorney’s fees. the services of a lawyer had been rendered or in a separate action.
The union said no way are we going to pay attorney’s fees. Why Private respondent was well within his rights when he made his claim
did you not raise it in the Supreme Court before it became final and and waited for the finality of the judgment for holiday pay differential,
executory? Why are you just raising it now? instead of filing it ahead of the award’s complete resolution.
The Labor Arbiter said that I have the power to grant it. The A general retainer, or retaining fee, is the fee paid to a lawyer to
Labor Arbiter granted what the dismissed lawyer was asking. He was secure his future services as general counsel for any ordinary legal problem
just asking 10% of the awarded amount. that may arise in the routinary business of the client and referred to him for
So, the union went back to the Supreme Court for certiorari. So, legal action. The fees are paid whether or not there are cases referred to
ikaduha na ning balik sa Supreme Court. So, the issue before the the lawyer.
Supreme Court is kanus-a man ka mufile ug motion sa imong A special retainer is a fee for a specific case handled or special service
attorney’s fees? Can you file even after the judgment has become rendered by the lawyer for a client.
final and executory? Evidently, the P3,000.00 monthly fee provided in the retainer
Is what is being asked by the dismissed lawyer 10% of the award agreement between the union and the law firm refers to a general retainer,
should be granted? What is the correct amount? The union was or a retaining fee, as said monthly fee covers only the law firm’s pledge, or
saying dili na. We have been paying you P1,000 a month for 5 years as expressly stated therein, its “commitment to render the legal services
during the CBA effectivity. Sometimes, you did not have any papers to enumerated.” The fee is not payment for private respondent’s execution or
notarize. Unya gabayad gihapon mi niya. performance of the services listed in the contract, subject to some particular
How did the Supreme Court ruled? qualifications or permutations stated there. Hence, the retainer agreement
First, as to the timeliness of the motion, this is not Labor Law. cannot control the measure of remuneration for private respondent’s
The Supreme Court says there are two ways to recover attorney’s fees services.
before an ungrateful client. Either: Private respondent is entitled to an additional remuneration for
1. You will file an independent action – a separate action to pursuing legal action in the interest of petitioner before the labor arbiter
recover attorney’s fees and the NLRC, on top of the P3,000.00 retainer fee he received monthly
2. Or by a mere motion, file it within the same case from petitioner.
The question is when. Can you file it after the judgment has However, the value of private respondent’s legal services should not
become final and executory? be established on the basis of Article 111 of the Labor Code alone.
The Supreme Court said YES, you can still file for as long as the In the first place, the fees mentioned here are the extraordinary
monetary award has not been executed. attorney’s fees recoverable as indemnity for damages sustained by and
So, you are not yet late. Even when it is remanded to the court payable to the prevailing part. In the second place, the ten percent (10%)
for execution, for as long as it is not yet executed yet, your motion is attorney’s fees provided for in Article 111 of the Labor Code and Section
not too late. 11, Rule VIII, Book III of the Implementing Rules is the maximum of the
Should 10% be awarded? This is where the Supreme Court takes award that may thus be granted. Article 111 thus fixes only the limit on the
back what it has granted to the lawyer. amount of attorney’s fees the victorious party may recover in any judicial or
The 10% mentioned in Article 111 in the Labor Code is an upper administrative proceedings and it does not even prevent the NLRC from
limit. It is the maximum that can be granted as attorney’s fees in a fixing an amount lower than the ten percent (10%) ceiling prescribed by
labor dispute involving monetary claims. It means that the Court can the article when circumstances warrant it.
reduce the amount of attorney’s fees. The measure of compensation for private respondent’s services as
And that is where the Supreme Court said in this case, we against his client should properly be addressed by the rule of quantum
deemed it proper and reasonable that P 10,000 be granted to the meruit long adopted in this jurisdiction. Quantum meruit, meaning “as
lawyer. much as he deserves,” is used as the basis for determining the lawyer’s
professional fees in the absence of a contract, but recoverable by him from
TRADERS ROYAL BANK vs. NLRC (March 14, 1997) his client. The doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a person to
FACTS: Traders Royal Bank Employees Union and private respondent retain benefit without paying for it.
Atty. Emmanuel Noel A. Cruz entered into a retainer agreement
whereby the former obligated itself to pay the latter a monthly retainer
fee of P3,000.00 in consideration of the law firm’s undertaking to You have to read that case because there is a very good discussion
render the services enumerated in their contract. about general retainer and special retainer. General retainer is a monthly
During the existence of that agreement, petitioner union referred sum that you pay a lawyer to secure his services in the future. Not only for
to private respondent the claims of its members for holiday, mid-year services he rendered to you, but also compensate him for the cases he can
and year-end bonuses against their employer, Traders Royal Bank no longer attend to because he is defending you. From there on, once you
(TRB). After the appropriate complaint was filed by private are his client, he can no longer be a lawyer to any and all of your
respondent, the case was certified by the Secretary of Labor to the opponents because that would be contrary to legal ethics. That would be
NLRC. NLRC awarded those differentials to the employees. The SC contradicting.
modified the decision of the NLRC by deleting the award of mid-year A special retainer is in relation to a case. When the minds agree upon
and year-end bonus differentials while affirming the award of holiday a special retainer may still be revised. For instance, a lawyer in a contract
pay differential. of special retainer, without fully realizing the amount of work that he would
After private respondent received the above decision of the have to do in the case, then, the agreed amount should be revised.
Supreme Court, he notified the petitioner union, the TRB management What is the measuring stick now? That is what is called in legal ethics
and the NLRC of his right to exercise and enforce his attorney’s lien as quantum meruit – as much as the reasonable value of the services.
over the award of holiday pay differential. He filed a motion for the
determination of his attorney’s fees, praying that 10% of the total

21
That is what the Supreme Court said in TRADER’S ROYAL You can choose to avail of that and have the rest of the night or the
BANK EMPLOYEES’ UNION vs. NLRC. morning in the temporary accommodation.
They are required to have that. The call center business must have
Technically speaking, in contracting and subcontracting cases, the those types of accommodation. That is in view of the safety of women
only way the indirect employer or principal can defend himself against because the night work condition for women is for the sake of the safety of
unwanted obligations as an employer in case the contractor fails to pay women.
or underpays his employees, the only protection (?) is to require Other progressive groups of women are saying that in this day and
contractor to put up a bond. age, where there is already electricity, light and communication, we should
Why does, in Philippine setting, this contractor or subcontractor not condone or justify the continued existence of unsafe place for women
very seldom put up a bond? Because you just raise the cost to be paid but preventing them from working at night. They say abolish the law and
by requiring him to put up a bond. He will have to spend for the make all places safe for women. That is what those progressive groups are
premium of the bond. Samot musaka ang iyang presyo. saying.
This makes the government to make all places safe for women at any
SPECIAL GROUPS OF EMPLOYEES : TITLE III time of the day or night. If the government is doing its job, there should be
no place unsafe for women.
1. Minors So, by continuing to institute this law, you are perpetuating unsafe
2. Domestics places. Remove this and the government will be forced to make all places
3. Women safe for women. That is their basis.
4. Homeworkers Whatever your position is, be sure you know what the meaning (?) of
that position is. You know what argument to use whichever your stand is.
They are called Special Groups of Employees.
ARTICLE 132. Facilities for women. — The Secretary of Labor shall
ARTICLE 130. Nightwork prohibition. — No woman establish standards that will insure the safety and health of women
regardless of age, shall be employed or permitted or suffered to work employees. In appropriate cases, he shall, by regulations, require any
with or without compensation: employer to:
(a) In any industrial undertaking or branch thereof between ten (a) Provide seats proper for women and permit them to use such seats
o'clock at night and six o'clock in the morning of the following day; or when they are free from work and during working hours, provided they can
(b) In any commercial or non-industrial undertaking or branch perform their duties in this position without detriment to efficiency;
thereof, other than agricultural, between midnight and six o'clock in (b) To establish separate toilet rooms and lavatories for men and women
the morning of the following day; or and provide at least a dressing room for women;
(c) In any agricultural undertaking at nighttime unless she is given a (c) To establish a nursery in a workplace for the benefit of the women
period of rest of not less than nine (9) consecutive hours. employees therein; and
(d) To determine appropriate minimum age and other standards for
WOMEN retirement or termination in special occupations such as those of flight
attendants and the like.
There is a general rule here of nightwork prohibition of women.
If and when this shows up in the bar examinations, I do not think it Separate facilities for women – you know that already.
will be in a way that describes the rules on women. They will ask you
whether or not this provision is discriminatory to women. Maternity Leave Benefits for women – this is social legislation. This is
Whether or not prohibition against nightwork that is applied to not labor legislation. This is placed here to make sure that the employer
women is discriminatory to women. In other words, if it is unjustifying complies with the obligation to enroll its workers with SSS.
(?) to women the opportunities to earn money because they are Take note that the way the maternity benefits are given is the
prohibited at least 10 hours from earning money. employer advances the benefits. Then, the employee signs a waiver after
Is it discriminatory? granting the power of attorney to management to collect her maternity
When you are asked, you must give an answer. benefits.
There are exceptions to the rule. Are the exceptions sufficient to Actually, by advancing the maternity benefits, the employer shells out
cover most of the opportunities open to women? more than what it actually receives because the maternity benefits is
slightly lower than the monthly wage of the woman employee.
ARTICLE 131. Exceptions. — The prohibitions prescribed by the Why is it lower? Wala pa na napangutana sa examination. Precisely
preceding Article shall not apply in any of the following cases: because it is a system of insurance. In insurance, you never get the full
(a) In cases of actual or impending emergencies caused by serious cost of the amount or the value of the damage which was insured against.
accident, fire, flood, typhoon, earthquake, epidemic or other disasters There is always a share on the part of the insured.
or calamity, to prevent loss of life or property, or in cases of force That is the coefficient of insurance. Why is that? So, you will not be
majeure or imminent danger to public safety; tempted to take advantage of the insurance.
(b) In case of urgent work to be performed on machineries That is the same system as health insurance.
equipment or installation, to avoid serious loss which the employer By the way, the more expensive the insurance, the higher the co-
would otherwise suffer; insurance is.
(c) Where the work is necessary to prevent serious loss of perishable To discourage them from doing that, there is a system of co-insurance.
goods; xxx
You get more if it is caesarian.
Those are all the exceptions that make up the grounds for
overtime. But the last 4 are particular to women:
ARTICLE 133. Maternity leave benefits. — (a) Every employer
(d) Where the woman employee holds a responsible position of shall grant to any pregnant woman employee, who has rendered an
managerial or technical nature, or where the woman employee has aggregate service of at least six (6) months for the last twelve (12) months,
been engaged to provide health and welfare service;2 maternity leave of at least two (2) weeks prior to the expected date of
(e) Where the nature of the work requires the manual skill and delivery and another four (4) weeks after normal delivery or abortion with
dexterity of women workers and the same cannot be performed with full pay based on her regular or average weekly wages. The employer may
equal efficiency by male workers; require from any woman employee applying for maternity leave the
(f) Where the women employees are immediate members of the production of a medical certificate stating that delivery will probably take
family operating the establishment or undertaking; and place within two weeks.
(g) Under other analogous cases exempted by the Secretary of Labor
and Employment in appropriate regulations. So, 6 weeks.
Remember, you do not have to be married. Why? Because the law
What are those exempted by the Secretary of Labor? That is call says “any pregnant woman employee”. All you have to be is a woman,
center. Dili man na manual dexterity. Vocal dexterity man na. from birth ha. Not because of any intervention.
That is covered by the Special Memorandum by the Secretary.
You know of course that call centers are now required to have (b) The maternity leave shall be extended without pay on account of
temporary rest accommodation according to gender. So, if you say illness medically certified to arise out of the pregnancy, delivery, abortion,
your time off is 2:00 in the morning and there is no transportation or miscarriage, which renders the woman unfit for work, unless she has
provided to you by the company or if there is, it would entail that you earned unused leave credits from which such extended leave may be
will walk where there are hostile people before you reach your home. charged.
(c) The maternity leave provided in this Article shall be paid by the
employer only for the first four (4) deliveries by a woman employee after
the effectivity of this Code.
2
So, nurses and managerial employees who are women
22
Stipulation against marriage – we have taken that up.
Paternity leave – How many days is paternity leave? 7.
Please take note that paternity leave is not a labor legislation. So Another special law which we have to take up is the Anti-Sexual
that, any doubts arising from paternity leave is not interpreted in favor Harassment Act of 1995. That is RA 7877. This became effective on
of labor because it applies both to public and private employment. It February 14, 1995.
is not labor legislation.
The requirement is you must be a husband. What are the acts prohibited?
If your spouse gives birth up to 4 times, and the spouse is the 1. Sexual harassment in the educational institution or training
one you are cohabiting with, should you be separated from your related or in the workplace
spouse, you can no longer claim paternity benefits. So, you must be We are more interested in the workplace.
living with your spouse. What are the acts in the workplace that constitute sexual
harassment?
Stipulation against marriage. You all know that is discriminatory. (1) The sexual favor is made as a condition in the hiring or in
the employment, re-employment or continued employment of
ARTICLE 136. Stipulation against marriage. — It shall be said individual, or in granting said individual favorable
unlawful for an employer to require as a condition of employment or compensation, terms, conditions, promotions, or privileges;
continuation of employment that a woman employee shall not get
married, or to stipulate expressly or tacitly that upon getting married a Sexual favor is made a condition for the granting of any
woman employee shall be deemed resigned or separated, or to employment benefit or consideration.
actually dismiss, discharge, discriminate or otherwise prejudice a I am not granted overtime work unless I yield to the sexual
woman employee merely by reason of her marriage. demands. That is using sexual favor as a condition.

What happens if the employer, one of his criteria in hiring you is or the refusal to grant the sexual favor results in limiting,
that you must be married? He does not hire anybody who is single. segregating or classifying the employee which in any way
It is my submission that that is not discriminatory because there would discriminate, deprive or diminish employment
is no law that prohibits it. There must first be a law to make that opportunities or otherwise adversely affect said employee;
discriminatory.
Timex – As much as possible, they require you to be married. If When you refuse, there is a negative effect. Either you are not
you are married, especially if you have one child, you will want to work given what is due you as an employee or you are not given a promised
for the sake of your child. You do not want to absent yourself. That is privilege or promotion, etc.
their findings. That is why the requirement is you have to be married.
(2) The above acts would impair the employee's rights or
MINORS privileges under existing labor laws; or

(3) The above acts would result in an intimidating, hostile, or


ARTICLE 139. Minimum employable age. — (a) No child
offensive environment for the employee.
below fifteen (15) years of age shall be employed, except when he
works directly under the sole responsibility of his parents or guardian,
You are not necessarily deprive but it will result in a hostile,
and his employment does not in any way interfere with his schooling.
intimidating, offensive environment.
(b) Any person between fifteen (15) and eighteen (18) years of age
This last one, in the United States, it has been considered as a
may be employed for such number of hours and such periods of the
sexual harassment if the supervisor in his office has all these pictures
day as determined by the Secretary of Labor in appropriate
or photographs of naked women clustered all over his desk. That
regulations.
subjects to an intimidating or hostile environment.
(c) The foregoing provisions shall in no case allow the employment of
What exactly is intimidating or hostile environment? I guess it
a person below eighteen (18) years of age in an undertaking which is
will depend on the circumstances.
hazardous or deleterious in nature as determined by the Secretary of
Let us say you are the supervisor of the sales ladies of SM. So,
Labor.
all your subordinates are female and you are male. And in your office,
there are all these pictures of naked women. You are subjecting them
What is the youngest age? 15 to a hostile or intimidating environment.
Exceptions: if it is employment with parents or there is a contract But if you are a curator of a museum and in that particular
sanctioned by the Department of Labor and the education of the minor section of the museum, the theme (?) African feminine art. So, that is
is not sacrificed and you are not in danger physically and morally. not intimidating. That is the subject matter of your work.
You are not employed in dangerous workplaces like those So, it all depends.
involving explosives and chemicals. But the above acts would result in an intimidating, hostile and
And in case must you be employed, if you are employed in media offensive environment, that is prohibited by the Anti-Sexual
or entertainment, involving in the exhibition and promotion of tobacco Harassment Act of 1995.
and its derivatives or alcohol and its derivatives. So, you are not
allowed to endorse those substances. There are already cases where the Supreme Court said that offenses
Remember that there must be a written contract approved by the under the Anti-Sexual Harassment Act can be a ground for dismissal, even
Department of Labor. though it is not one of the grounds listed in the Labor Code. That has
already been passed by the Supreme Court. It can also be a ground for
AUGUST 7, 2008 suspension or a lesser form of disciplinary action on the part of the
management.
We have discussed women workers, especially maternity benefits
granted under RA 7322, now provided under Section 14-A of the Social What are the duties of the employer with respect to the Anti-Sexual
Security Law (RA 8282). This benefit is granted to all pregnant Harassment Act?
women, whether married or unmarried.
SECTION 4. Duty of the Employer or Head of Office in a
There is a requirement for entitlement of maternity benefits that
Work-related, Education or Trainings Environment. — It shall be the
you must report as early as possible your pregnancy. The employer is
duty of the employer or the head of the work-related, educational or
supposed to keep an SSS maternity benefits record book that records
training environment or institution, to prevent or deter the commission of
the time which the pregnancy is reported and states the estimated
acts of sexual harassment and to provide the procedures for the resolution,
time of the inception of the pregnancy.
settlement or prosecution of acts of sexual harassment. Towards this end,
What is the purpose of that report? It is to prevent simulated
the employer or head of office shall:
pregnancies. To prevent that, there is supposed to be this log book.
And that is required. That is why it is not an empty formality when the
(a) Promulgate appropriate rules and regulations in consultation
SSS Law requires that the pregnant employee shall have notified her
with and jointly approved by the employees or students or trainees, through
employer of her pregnancy and the probable date of her childbirth.
their duly designated representatives, prescribing the procedure for the
If you report the probable date, then, you have already computed
investigation of sexual harassment cases and the administrative sanctions
the time when the pregnancy began.
therefor.
Administrative sanctions shall not be a bar to prosecution in the proper
We discussed the Paternity Leave Act of 1996. This is not a labor
courts for unlawful acts of sexual harassment.
legislation law because it covers both public and private employment.
The said rules and regulations issued pursuant to this subsection (a)
That is RA 8187, which became effective March 13, 1997. 7 leave
shall include, among others, guidelines on proper decorum in the workplace
days with full pay to all married male employees for the first four
and educational or training institutions.
deliveries of the legitimate spouse with whom he is cohabiting.

23
These rules and regulations have something to do with the Children below 15 years of age cannot be employed except:
prescription of the proper attire, the rules on decorum in the
workplace. And the procedure that is to be followed or made known If the child works directly under the sole responsibility of his parents or
to the employees if they have complaints relating to sexual legal guardian, and where all the members of the employer’s family are
harassment. employed, provided, however, that his employment neither endangers his
So, the employees are supposed to be informed of the steps that life, safety, health or morals nor impairs his normal development. Provided,
they are going to take. That is part of the obligation of the employer – further, that the parent or legal guardian shall provide the said minor with
to promulgate rules and regulations in consultation and jointly the prescribed primary and/or secondary education.
approved by the employees as to the procedure to be followed in case Take a look at this circus. They pass it on for generations, from the
there are complaints. And these rules should include the guidelines on great grandfather all the way to the fourth generation. The high-wire
the proper decorum in the workplace. walking act. Astang mga gagmay na mga bata. Is that a violation? Basta
they are employed together with the parents and only members of the
(b) Create a committee on decorum and investigation of family. Most of them are members of the family there. And then, they are
cases on sexual harassment. The committee shall conduct given education, primary and secondary education. In between acts, they
meetings, as the case may be, with officers and employees, teachers, have their own system of literacy.
instructors, professors, coaches, trainors and students or trainees to And then, under the sole responsibility of his parents or guardians.
increase understanding and prevent incidents of sexual harassment. It
shall also conduct the investigation of alleged cases constituting sexual When the child’s employment involves participation in public
harassment. entertainment or information through cinema, theater, radio, or television,
In the case of a work-related environment, the committee shall then, there are these further requirements:
be composed of at least one(1) representative each from the
management, the union, if any, the employees from the supervisory 1. That there must be an employment contract which is concluded by the
rank, and from the rank and file employees. child’s parents or legal guardian with the express agreement of the child
In the case of the educational or training institution, the and the approval of the Department of Labor and Employment and the
committee shall be composed of at least one (1) representative from following conditions must be included in the written agreement:
the administration, the trainors, teachers, instructors, professors or (a) The employer shall ensure the protection, health, safety and
coaches and students or trainees, as the case may be. morals of the child;
The employer or head of office, educational or training institution (b) the employer shall institute measures to prevent the child's
shall disseminate or post a copy of this Act for the information of all exploitation or discrimination taking into account the system and
concerned. level of remuneration, and the duration and arrangement of
working time; and;
This committee must be well-represented, not just management (c) The employer shall formulate and implement, subject to the
but rank-and-file employees and supervisors must be represented in approval and supervision of competent authorities, a continuing
the committee. program for training and skill acquisition of the child.
The employer shall first secure, before engaging such child, a work
What is the consequence if the employer fails to comply permit from the Department of Labor and Employment which shall ensure
with these duties? observance of the above requirement.
And then, there is this prohibition on the employment of the child as
models or participants in commercials or advertisements promoting
SECTION 5. Liability of the Employer, Head of Office,
alcoholic beverages, intoxicating drinks, tobacco and its byproducts and
Educational or Training Institution. — The employer or head of
violence.
office, educational or training institution shall be solidarily liable for
That is with respect to minors.
damages arising from the acts of sexual harassment committed in the
employment, education or training environment if the employer or
With respect to domestics, we have already discussed this.
head of office, educational or training institution is informed of such
HOMEWORKERS
acts by the offended party and no immediate action is taken thereon.
Who are homeworkers?
Please take note that the employee does not have to complain in
writing. The employee does not have to complain verbally. If it is
ARTICLE 153. Regulation of industrial homeworkers. — The
proven that the employer knows but fails to do anything, then, he
employment of industrial homeworkers and field personnel shall be
becomes solidarily liable for damages arising from such act if he is
regulated by the Government through appropriate regulations issued by the
informed and there is no immediate action taken thereof.
Secretary of Labor to ensure the general welfare and protection of
homeworkers and field personnel and the industries employing them.
SECTION 6. Independent Action for Damages. — Nothing
in this Act shall preclude the victim of work, education or training-
Suppose you are asked to distinguish between a house helper (a
related sexual harassment from instituting a separate and independent
domestic) and a home worker. What is the distinction?
action for damages and other affirmative relief.
When you are asked to distinguish, first, you have to mention what is
So, if you have been the victim of sexual harassment, you can in common. Both workers work in a home. They both work in a home.
also file criminal cases like acts of lasciviousness or attempted rape or The domestics work in a home. The homeworkers work in a home.
whatever. That does not preclude you from filing such cases, together But the domestic works in the home of her employer, which is a
with or independent of cases filed on the basis of the anti-sexual natural household. And his work consists in ministering the personal
harassment law. comfort and safety of the members of the household.
But the homeworker works not in the home of an employer but in
What are the penalties? his or her own home. But here tasks are not domestic chores but normally,
handicraft manufacturing because they receive materials from their
SECTION 7. Penalties. — Any person who violates the employer and they are supposed to transform these material according to a
provisions of this Act shall, upon conviction, be penalized by particular pattern, a sample of which has been given them.
imprisonment of not less than one (1) month nor more than six (6) Further difference – a domestic is not an agricultural, industrial or
months, or a fine of not less than Ten thousand pesos (P10,000) nor commercial worker. A homeworker is not a domestic but an industrial
more than Twenty thousand pesos (P20,000), or both such fine and worker.
imprisonment at the discretion of the court.
Any action arising from the violation of the provisions of this Act One thing you have to keep in mind is that if a homeworker fails to
shall prescribe in three (3) years. come up with the standards as presented to him or her through a sample,
he or she can be made to undo her work according to the standard, at no
The right of action prescribed in 3 years from the time the right of extra cost or payment.
action accrues. Gitagaan siya ug buri (?) na kalo. Unya ang kalo na iyang gihimo,
kana mang sakayan-sakayan, dili lingin. Gipausab niya. Now, he or she
That is Anti-Sexual Harassment. cannot demand more payment because she is made to undo the work that
she has already done because she was given a sample.
We discussed employment of minors, especially this act
prohibiting the employment of minors below 15 years of age in public Now, they are normally paid on a piece-rate basis. The piece-rate
or private undertakings amending for this purpose Section 12, Article basis cannot be used in order to circumvent the minimum wage law. So,
VIII, Republic Act 7610. This act was approved November 9, 1993 these homeworkers can ask the Secretary of Labor or his duly authorized
and supersedes paragraph (a) of Article 139 of the Labor Code. representative to conduct time and motion studies to determine whether or
not the piece rate system is used by their employer to escape the burdens
of minimum wage because normally, they are piece-rate.

24
13th
So, those are the special workers. month
pay, so as
ITEMS OF PAY to be
excluded
We have already dealt with the computation of pay. How do you
compute if you are given the daily rate? If you are given the daily ECOLA – In Region XII, the aggregate number is P265 na karon. The
rate, how do you know that this is the monthly gross pay of someone daily ECOLA now is P 30. The regular wage is P235. But by September,
who is paid the correct minimum daily wage rate? the regular wage will be P250 because P15 of the old ECOLA will now be
integrated into regular age, by September 1. What would be left is P250
Applicable Actual # of Working Applicable regular wage and P15 of ECOLA to make it P265.
Daily Rate x Days in a Year = Monthly Rate
---------------------------------------------- More or less, those are all the necessary figures (?) to remember.
12
Take note 13th month pay – If you are dismissed or terminated in the
The big variable is the actual number of working days. middle of the year, you are entitle to proportionate 13 th month pay at the
time of severance, even at the time of resignation.
365 calendar days in a year How is the 13th month pay computed? Gross regular pay of the year
- 52 weeks (rest days minimum for a calendar year 3) divided by 12. If you only served 6 months, your regular wage for that 6
----------- months divided by 12, that is your 13 th month pay. At the time you are
313 dismissed from the 6th month or at the time you are terminated because of
- 11 regular holidays retrenchment, that is what you are entitled.
-----------
302 Normal Actual # of Working Days We are thru with Labor Standards 

If you have somebody who works everyday of the year, mausab na - End -
sad ang computation ana, like a security guard who works everyday of
the year. Ang mahitabo ana:

365 calendar days in a year


+ 22 regular holidays (200%)
+ 67.60 (52 x 1.30)
---------------
454.60 Actual # of Working Days if you are a security guard

If you are given a monthly pay, and you are asked, is he


receiving a minimum wage? So, you have to arrive at the applicable
daily rate.

Applicable Applicable
Monthly Rate x 12 = Daily Rate
-------------------------------------
Total # of Working Days

What are the elements/items of compensation?

Whether or not it is included

Comp Comp Comp for More


Elements/Items of for for 13th Income than 1
Compensation Overtime Month Tax Employer

1. Regular Wage   4 

2. ECOLA x x x 
 if
higher
than
3. 13th Month Pay x  P20,000 

4. Premium Pay x5 x  

5. Overtime Pay  x  
6. Bonus x x  x
if
Christmas
bonus, it
should
not be
higher
than
P20,000,
including

3
Remember that the right to rest day comes after every 6 consecutive
working days.
4
This is included, although there is new legislation that if you just receive
minimum wage, you are exempt. But precisely, you have determine whether
you are minimum wage by the use of regular wage. So, it is included. It is
the basis for the computation of income tax.
5
As a general rule, NO, unless it is overtime during the day that premium
pay is paid. Patrabahuon ka sa Domingo, rest day nimo. Nisobra ka 8 hours
na trabaho. So, ang premium pay ana apil sa pagcompute sa imont overtime
kanang adlawa. Pero patrabahuon ka ordinary working day, wala man nay
premium because premium pay is additional compensation for work done on
days when work is not required.
25

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