Basic Labor Laws and Standards taken from the Labor Code of the Philippines

MINIMUM WAGE
Coverage
All covered employees are entitled to receive minimum wages regardless of the following:
a. their positions
b. designations
c. employment status; and
d. the method by which their wages are paid
Monthly-Paid Employees as isting!ished from aily-Paid Employees
M"N#$L%-PAI EMPL"%EE& refer to those who are paid every day of the month including unworked rest days, special days and regular
holidays. he !"uivalent #onthly $ate of monthly%paid workers should not be less than the Applicable &aily $ate ' '() days and divided
over *+ months.
AIL%-PAI EMPL"%EE& refer to those who are paid on the days they actually worked e,cept unworked regular holidays where they are
paid in their basic wage if they are present or on leave with pay on the working day before the regular holiday. !"uivalent #onthly $ate of
daily paid employees must not be less than the Applicable &aily $ate ' ()( days and divided over *+ months -for workers with * rest
day.week/ or the Applicable &aily $ate ' *+) days and divided over *+ months -for workers with + rest days/. ,as an effe-t .A /0/*
approved on 0uly +), +112/
Appli-able Minim!m Wage
The daily Cost of Living Allowances (COLA) of P18. 50 and P20. 00 provided for under Wage Orders RB III!! "
!# respectivel y was integrated into the $asic wage effecti ve August 03, 2007 %
This is pursuant to &ection ' of W%O% RB III!#( which states) * one (1) year after the effectivi t y of this new wage
order, the Cost of Living Allowances (COLA) under Wage Order Nos. R!!!"11 and 1# shall $e integrated into the
$asic wage of all covered wor%ers. & W%O% RB III!# too+ effect on August ,'( #,,-%
The applica$le .aily /ini0u0 Wage rates for the 1on agricul tural and Retail2&ervice sectors in August 03,
2007 shall $e as follows)
NON - AGRICULTURAL
P 278. 00 (for esta$lish0ents with total assets of 3',/ or 0ore)
P 270. 50 (for esta$lish0ents with total assets of less than 3',/)
RETAIL/SERVICE
P 267. 00 (for esta$lish0ents with !- or 0ore e0ployees)
P 253. 00 (for esta$lish0ents with less than !- e0ployees)
"n &eptember 102 *1132 a -ost of living allo4an-e ,C"LA5 of P/611 4as granted !nder W6"6 .7 III-)( 4hi-h too8 effe-t on
&eptember *32 *1136
Labor laws & standards compact as of 12.26.2007
LABOR LAW& A1. &TA1.AR.&
Thus( as of this date( applica$le .aily /ini 0u0 Wage rates for the 1on agricul tural and Retail2&ervice sectors
effecti ve S!t"#$ 27, 2007 shall $e as follows)
NON - AGRICULTURAL P%us COLA TOTAL
P 278. 00 (for esta$lish0ents with total assets of 3',/ or
0ore)
&.00 287. 00
P 270. 50 (for esta$lish0ents with total assets of less than
3',/)
&.00 27&. 50
RETAIL/SERVICE
P 267. 00 (for esta$lish0ents with !- or 0ore e0ployees) &.00 276. 00
P 253. 00 (for esta$lish0ents with less than !-
e0ployees)
&.00 263. 00
7asis for Minim!m Wage
he normal working hours which shall not be more than eight -3/ hours a day shall be the basis for the minimum wage rates prescribed by law.
Wor8ers Paid by .es!lt
All workers paid by results, including those who are paid on piecework, takay, pakyaw, or task basis, shall receive not less than the applicable
statutory minimum wage rates prescribed under the Act for normal working hours which shall not e,ceed eight -3/ hours a day, or a proportion
thereof for work of less than the normal working hours.
he ad4usted minimum wage rates for workers paid by results shall be computed in accordance with the following steps:
a/ 5 increase 6 Amount of 7ncrease in Applicable #inimum 8age
9revious Applicable #inimum 8age ' *11
b/ 7ncrease in 9iece $ate 6 !,isting $ate per 9iece ' 5 7ncrease
c/ Ad4usted $ate 9er 9iece 6 !,isting $ate per 9iece 9 7ncrease in $ate 9er 9iece
Effe-t of Wage istortion
8age distortion is :a situation where an increase in prescribed wage rates results in the elimination of severe contraction of intentional
"uantitative differences in wage or salary rates between and among employee groups in an establishment;<
8age distortion may be corrected with the use of the following recommended formula:
#inimum 8age under 8.=. $B%777 >o. *' ? Amount of @=LA in 6 Amount of @=LA
9resent Salary 8.=. $B%777 >o. *' due to distortion
Effe-t of the .ed!-tion of Wor8days on Wages
7n situations where the reduction in the number of regular working days is resorted to by the employer to prevent serious losses due to causes
beyond his control such as when there is a substantial slump in the demand for his goods or services or when there is lack of raw materials,
the employer may ded!-t the 4ages -orresponding to the days ta8en off from the 4or84ee82 -onsistent 4ith the prin-iple of :no
4or82 no pay6; his is, of course, without pre4udice to an agreement or policy which provides otherwise.
P.EMIUM PA%
9remium pay refers to the additional compensation re"uired by law for work performed within eight -3/ hours on non%working days such as rest
days and special days.
Premi!m Pay .ates
he minimum statutory premium pay rates are as follows
Pl!s (1< of the daily rate of *115 or a total of *'15 for work performed on rest days or on special days
Pl!s =1< of the daily rate of *115 or a total of *)15 for work performed on a rest day which is also a special day
Pl!s )11< of the daily rate of *115 or a total of +115 pl!s (1< thereof or a total of +(15 for work performed on a regular holiday which is
also the employees rest day
">E.#IME PA%
Labor laws & standards compact as of 12.26.2007
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LABOR LAW& A1. &TA1.AR.&
=vertime pay refers to additional compensation for work performed beyond eight -3/ hours a day.
"vertime Pay .ates
he minimum overtime pay rates vary according to the day the overtime work is performed. he computation is as follows:
Aor overtime work during an ordinary day, an additional compensation e"uivalent to the employeeBs regular wage pl!s at least *=< thereof.
Aor overtime work during a rest day, special holiday or regular holiday, an additional compensation e"uivalent to the rate of the first eight
hours pl!s at least (1< thereof.
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LABOR LAW& A1. &TA1.AR.&
&tip!lated "vertime .ates
Cenerally, the premium pay for work performed on the employeeBs rest days or on special days or regular holidays are included as part of the
regular rate of the employee in the computation of overtime pay for any overtime work rendered on said days especially if the employer pays
only the minimum overtime rates prescribed by law. he employees and employer, however, may stipulate in their collective agreement the
payment of overtime rates higher than those provided by law and e,clude the premium rates in the computation of overtime pay. Such
agreement may be considered valid only if the stipulated overtime pay rates will yield to the employees not less than the minimum prescribed
by law.
NIG$# &$I?# PA%
!very employee is entitled to a minimum night shift pay of not less than ten -*1/ percent of their regular wage for each hour of work performed
between *1 oBclock in the evening and ( oBclock in the morning.
7f overtime work -or work in e,cess of 3 hours fall within the aforesaid period, premiums for overtime work should first be integrated into the regular
hourly rate of the employees before computing night shift pay.
Comp!tation of Night &hift Pay
*. 8here >ight Shift -*1 9# % ( A#/ 8ork is $egular 8ork
a. 9lus )1< or a total of **15 of the basic hourly rate on an ordinary day
b. 9lus )1< or a total of **15 of the regular hourly rate on an rest day, special day, or regular holiday
+. 8here >ight Shift -*1 9# % ( A#/ 8ork is =vertime 8ork
a. 9lus )1< or a total of **15 of the overtime hourly rate on an ordinary day
b. 9lus )1< of the overtime hourly rate on an rest day, special day, or regular holiday
$"LIA% PA%
he Doliday 9ay $ule stipulates that an employee is entitled to at least *115 of his basic wage even if he did not report for work, provided he.she
is present or is on leave of absence with pay on the work day immediately preceding the holiday. #oreover, when the holiday falls on the
scheduled workday of the employee, work performed on that said day merits an additional '15 of the employeeBs regular holiday rate of +115 or a
total of +(15.
here are now eleven -**/ regular holidays as provided under != +1' -incorporated in != +E+/ as amended by .6A6 /0/* approved on 0uly +),
+112, :An A-t .ationali@ing the Celebration of national $olidays amending for the p!rpose &e-tion *+2 Chapter 32 7oo8 ) of EAe-!tive
"rder No6*/*2 as amended2 other4ise 8no4n as the Administrative Code of )/B36;
Ne4 %earCs ay 0anuary *
Ma!ndy #h!rsday #ovable &ate
Good ?riday #ovable &ate
Ara4 ng Dagitingan #onday nearest April E
Labor ay #onday nearest #ay *
Independen-e ay #onday nearest 0une *+
National $eroes ay Last #onday of August
7onifa-io ay #onday nearest >ovember '1
Eid!l ?itr #ovable &ate
Christmas ay &ecember +)
.i@al ay #onday nearest &ecember '1
&pe-ial ays
he principle of :no 4or82 no pay< applies in case of Special >on%8orking Dolidays provided hereunder as well as on other special days
proclaimed as such by the 9resident.

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LABOR LAW& A1. &TA1.AR.&
Nation4ide &pe-ial $olidays
Ninoy AE!ino ay #onday nearest August +*
All &aintsC ay >ovember *
Last ay of the %ear &ecember '*
7n addition to these three national special days, two special days were also declared for the province%%% Fose Abad &antos ay every 2th day
of #ay and Pampanga ay every **th day of &ecember.
8ork performed on these days merits an additional compensation of not less than '15 on top of the basic pay for a total of *'15. An
additional )15 over and above of the basic pay or a total of *)15 if the worker is permitted or suffered to work on that day which falls on
his.her scheduled rest day.
Dowever, workers who do not report for work or were not re"uired or permitted to work on those days are not by law entitled to any
compensation. his however, is without pre4udice to any voluntary practice or stipulation in the @BA providing for the payment of wages and
other benefits for days declared as special days even if unworked.
)(th M"N#$ PA%
he *'th month pay re"uired by 9residential &ecree 3)* is additional income based on wage but not part of the wage. 7t is *.*+ of the total basic
salary earned by an employee within calendar year. All rank%and%file employees regardless of their designation or employment status and
irrespective of the method by which their wages are paid, are entitled to this benefit, provided that hey have worked for at least one month during
the calendar year. 7f the employee worked for only a portion of the year, the *'th month pay is computed pro rata.
he :basic salary< of an employee for the purpose of computing the *'th month pay shall include all remuneration or earnings paid by the employer
for services rendered. Dowever, this does not include allowances and monetary benefits which are considered or integrated as part of the regular
or basic salary, such as cash e"uivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost%
of%living allowances. Dowever, those salary%related benefits may be included as part of the basic salary in the computation of the *'th month pay if
by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of an employee.
#ime of Payment
#he reE!ired )(th month pay shall be paid not later than e-ember )0 of ea-h year6 An employer, however, may give to his employees
one half -F/ of the re"uired *'th pay before the opening of the regular school year and the other half on or before the +Gth of &ecember of
every year. he fre"uency of payment of this monetary benefit may be the sub4ect of agreement between the employer and the
recogniHed.collective bargaining agent of the employees.
)(th Month Pay for Employees Paid by .es!lts
!mployees who are paid on piece work basis are by law entitled to the *'th month pay. !mployees who are paid a fi,ed or guaranteed wage
plus commissions are also entitled to the mandated *'th month pay, based on their total earnings during the calendar year, i.e. both their fi,ed
or guaranteed wage and commission.
)(th Month Pay for .esigned or &eparated Employee
An employee who resigned or whose services are terminated at any time before the time of payment of the *'th month pay is entitled to this
monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar
year up to the time of his resignation or termination from the service. hus, if he worked only from 0anuary up to September, his proportionate
*'th month pay should be e"uivalent of *.*+ of his total basic salary he earned during the period.
#he payment of the )(th month pay may be demanded by the employee !pon the -essation of employer-employee relationship . his
is consistent with the principle of e"uity that as the employer can re"uire the employee to clear himself of all liabilities and property
accountability, so can the employee demand payment of all benefits due him upon termination of the relationship.
Non-in-l!sion in the .eg!lar Wage
#he mandated )(th month pay need not be -redited a part of reg!lar 4age of employees for purposes of determining overtime and
premium pays, fringe benefits as well as contributions to the state insurance fund, Social Security, #edicare and companyBs retirement plans.
&E.>ICE INCEN#I>E LEA>E
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LABOR LAW& A1. &TA1.AR.&
!very employee who has rendered at least one -*/ year of service is entitled to a yearly service incentive leave of five -)/ days with pay. he
service incentive leave may be used for sick and vacation leave purposes.
Meaning of :one year of service.;
he phrase :one year of service of the employee means service within *+ months, whether continuous or broken, reckoned from the date the
employee started working. he period includes authoriHed absences, unworked weekly rest days, and paid regular holidays.
Comm!tation to Cash
he unused service incentive leave is commutable to its money e"uivalent at the end of the year. 7n computing, the basis shall be the salary
rate at the date of commutation.
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LABOR LAW& A1. &TA1.AR.&
PA#E.NI#% LEA>E
9aternity Leave refers to leave credits granted to all married male employees to allow him to earn compensation for seven -2/ working days without
reporting for work, provided that his spouse has delivered a child or had a miscarriage or an abortion for the purpose of lending support to his wife
during her period of recovery and.or the nursing of the newly born child.
Coverage
!very married male employee cohabiting or residing with his wife shall be entitled to 9aternity Leave benefits of seven -2/ working days with
full pay only for the first four -G/ deliveries by his lawful spouse.
Availment
he benefit may be en4oyed before, during or after the delivery by his wife; that the total number of days shall not e,ceed seven -2/ working
days for each delivery; that the benefit shall be availed of not later than si,ty -(1/ days after the date of said delivery.
Non--onversion of benefits
7n the event that the paternity leave benefit is not availed of, said leave shall not be convertible to cash.
MA#E.NI#% 7ENE?I#&
*. !very pregnant woman in the private sector, whether married or unmarried is entitled to the daily maternity benefit of *115 of the average daily
salary credit for a compensable for the following periods:
&iAty ,+15 days in case of normal delivery, abortion or miscarriage;
&eventy-eight ,3B5 days in case of cesarean delivery
+. o be entitled to the maternity benefit, the employee:
must be an SSS member employed at the time of delivery, miscarriage or abortion;
must have given the re"uired notification to the SSS thru her employers; and
her employers must have paid at least three -'/ months of maternity contributions within the twelve%month period immediately before the
date of contingency.
PAG-I7IG ?UN or $"U&ING E>EL"PMEN# MU#UAL ?UN
he coverage of the 9ag%7B7C Aund or Dousing &evelopment #utual Aund -D&#A/ shall be mandatory upon all employees covered by the Social
Security System -SSS/ and.or the Covernment Service 7nsurance System -CS7S/, and their respective employers. Dowever, the coverage of the
employees whose monthly compensation is less than four thousand pesos -9G,111/ shall be vol!ntary.
Ipon membership, employers and employees shall contribute an amount according to the following percentages but not e,ceeding one hundred
pesos -9*11/:
a. !mployees earning not more than one thousand five hundred pesos -9*,)11/ per month shall contribute one percent -*5/
b. !mployees earning more than one thousand five hundred pesos -9*,)11/ per month shall contribute two percent -+5/
c. All employers %%% two percent -+5/ of the monthly compensation of the covered employees.
&E.>ICE C$A.GE&
&haring
!mployees of employers collecting service charges are entitled to B=< of the total of such charges, e,cept managerial employees. he
remaining *)5 of the charges may be retained by management to answer for losses and breakages and for distribution to managerial
employees -at the discretion of management in the latter case/. Service charges are collected by most hotels and some restaurants, night
clubs, cocktail lounges, among others.
Payments
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LABOR LAW& A1. &TA1.AR.&
he shares of the employees in the service charges have to be distributed to them not less often than once every two -+/ weeks or twice a
month at intervals not e,ceeding si,teen -*(/ days.
8here the company stopped collecting service charges, the average share previo!sly enGoyed by the employees shall be integrated into
their basi- 4ages.
#E.MINA#I"N PA%
he amount of separation pay an employee is by law entitled to receive depends on the reason and grounds for the termination of his services.
"ne ,)5 or "ne $alf ,)H*5 month Pay Per %ear of &ervi-e
An employee is entitled to receive as termination pay the e"uivalent of one -*/ or one%half -*.+/ month pay for every year of service, a fraction
of at least si, -(/ months being considered as one whole year, if his separation from service is due to any of the following causes:
a. $etrenchment to prevent losses -i.e. reduction of personnel affected by management to prevent losses/;
b. @losure or cessation of operation of an establishment not due to serious losses or financial reverses;
c. 8hen the employee is suffering from a disease not curable within a period of si, months and his continued employment is pre4udicial to
his health or to the health of his co%employees.
#he -omp!tation of termination pay sho!ld be based on either one ,)5 month or one-half ,)H*5 monthCs pay2 4hi-hever 4ill yield a
higher separation pay ta8ing into -onsideration his length of servi-e. 7t can be seen that if an employee has served for at least si, -(/
months, in no case will he.she get less than one -*/ month separation pay if the separation is due to above stated causes. hus, if an
employee has been in the service for at least si, -(/ months, he is entitled to one -*/ full monthBs pay as his termination pay if the separation is
due to the causes enumerated above. But if he has to his credit ten -*1/ years of service, he is entitled to five -)/ months pay, thus being
higher than one -*/ monthBs pay.
"ne ,)5 Month Pay Per %ear of &ervi-e
An employee is entitled to termination pay e"uivalent to his one -*/ monthBs pay for every year of service, a fraction of at least -(/ months
being considered as one -*/ whole year, if his separation from service is due to any of the following:
a. 7nstallation of labor%saving device such as the replacement of employees by machineries;
b. $edundancy, as when the position of the employee has been found to be unnecessary in the operation of the enterprise;
c. 7mpossible reinstatement of the employee to his former or to a substantially e"uivalent position for reasons not attributable to the fault of
the employer, as when the reinstatement ordered by a competent authority cannot be implemented due to closure or cessation of
operations of the establishment, or the position to which he is to be reinstated no longer e,ists and there is no substantially e"uivalent
position in the establishment to which he can be assigned.
Noti-e of #ermination
he employer may terminate the employment of any employee due to installation of labor%saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the law, by serving a written notice on the workers and the &epartment of Labor and !mployment through the regional offices
having 4urisdiction over the place of business at least one -*/ month before the intended date thereof.
7asis of #ermination Pay
he computation of the termination pay of an employee shall be based on his last salary rate, unless the same is reduced by the employer to
defeat the intention of the law, in which case the basis of computation shall be the rate before its reduction.
.E#I.EMEN# PA%
Coverage
All employees regardless of their position, designation or status and irrespective of the method by which their wages are paid are entitled to
retirement benefits provided under $epublic Act 2(G* upon compulsory retirement at the age of si,ty%five -()/ or upon optional retirement at
si,ty -(1/ or more but not ().
his benefit does not apply to the following:
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LABOR LAW& A1. &TA1.AR.&
a. Covernment !mployees
b. &omestic helpers and persons in the personal service of another
c. !mployees of retail, service and agricultural establishments or operations regularly employing not more than ten -*1/ employees
d. =ther benefits that may be agreed upon by employer and employee for inclusion
#o Ill!strateI
"ne $alf Month &alary 6 -*) , latest daily salary/ 9 -) , latest daily salary/ 9 *.*+ of *'th month pay
Minim!m .etirement Pay 6 >o. =f Jears in service , =ne Dalf #onth salary
Aor covered employees who are paid by result, the basis for computing their salary for fifteen days shall be their Average &aily Salary -A&S/.
he A&S may be derived by dividing the total salary or earnings for the last *+ months by the number of actual working days.
Comp!lsory
7n the absence of a retirement plan or applicable agreement in an establishment, an employee shall be retired upon reaching the age of si,ty
five -()/ an shall be entitled to the retirement pay illustrated above.
"ptional
An employee below si,ty five -()/ years of age may retire and shall be entitled to retirement pay under $A 2(G* if:
a. there is no retirement plan or applicable agreement on retirement benefits in an establishment
b. he has reached si,ty -(1/ years or more; and
c. if he has served for at least five -)/ years in the said establishment
.etirement !nder the -olle-tive bargaining agreementHappli-able -ontra-t
Any employee may retire or be retired by his employer upon reaching the age established in the @BA or other applicable agreement contract
and shall receive the benefits granted therein. Such benefits shall not be less than the amount re"uired by law. Any difference shall be paid
by the employer.
8here both the employer and employee contribute to a retirement fund sub4ect of the applicable agreement, the employerBs total contributions
and the accrued interest thereof shall not be less than the total retirement benefits to which the employee would have been entitled had there
been no such retirement fund. 7f such total portion from the employer is less, the employer shall pay the deficiency.
EMPL"%MEN# &#A#U&
.eg!lar Employment
Article +31 of the Labor @ode on $egular and @asual !mployment specifies that the provisions of a written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer. An e,ception is
when the employment has been fi,ed for a specific pro4ect or undertaking the completion 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 is for the duration of
the season.
Cas!al Employment
An employment is deemed to be casual if it is not covered by the preceding paragraph: Provided, that, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such activity e,ists.
What determines reg!larity or -as!alness is not the employment -ontra-t2 4ritten or other4ise2 b!t the nat!re of the Gob.
Probationary Employment
Article +3* of the Labor @ode stipulates that probationary employment shall not e,ceed si, -(/ months from the date the employee started
working unless it is covered by an apprenticeship agreement stipulating a longer period. he services of an employee who has been engaged
on a probationary basis may be terminated for a 4ust cause or when he.she fails to "ualify as a regular employee in accordance with
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LABOR LAW& A1. &TA1.AR.&
reasonable standards made known by the employer to the employee at the time of his engagement. An employee 4ho is allo4ed to 4or8
after a probationary period shall be -onsidered a reg!lar employee.
#E.MINA#I"N
#ermination by Employer
Gro!nds for #ermination
An employer may terminate an employment for any of the following causes:
a. Serious misconduct or willful disobedience by employee of the lawful orders of his employer or representative in connection with his.her
work;
b. Cross and habitual neglect by the employee of his duties;
c. Araud or willful breach by the employee of the trust reposed in him by his employer or duly authoriHed representative;
d. @ommission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly
authoriHed representative; and
e. =ther causes analogous to the foregoing.
ismissal Pro-ed!re
7t is not enough for an employer who wishes to dismiss an employee to charge him.her with theft or some other wrongdoing. he validity of the
charge must be established in a manner consistent with due process. Accusation cannot take the place of proof. A suspicion or belief no
matter how sincerely felt cannot substitute for factual findings carefully established through an orderly procedure.
he law re"uires that the employer must furnish the worker sought to be dismissed with two written notices before termination of employment
can be legally effected:
*. notice which apprises the employee of the particular acts or omissions for which his.her dismissal is sought; and
+. the subse"uent notice which informs the employee of the employerBs decision to dismiss him.her.
Aailure to comply with the re"uirements taints the dismissal with illegality. his procedure is mandatory, in the absence of which, any
4udgment reached by management is void and ineAistent.
An employee is likewise deemed constructively dismissed where his status is changed from regular to casual.
Preventive &!spension
9reventive suspension is 4ustified where the employeeBs continued employment poses a serious and imminent threat to the life of property of
the employer or of his.her co%workers.
he suspension may last for thirty -'1/ days; beyond that, the suspension may continue but the employee be-omes entitled to his pay and
benefits.
Clos!re of the establishment and .ed!-tion of Personnel
he employer may also terminate the employment of any employee due to the following:
a. 7nstallation of labor saving devices;
b. $edundancy;
c. $etrenchment to prevent losses; or
d. the closing or cessation of operation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing
the above provisions.
he employer must serve a written notice on the worker and the &epartment of Labor and !mployment at least one -*/ month before the
intended date thereof. 7n case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay e"uivalent to at least one -*/ month pay or to at least one -*/ month pay for every year of service, whichever is
higher. 7n case of retrenchment to prevent losses and in case of closure or cessation of operations of establishment or undertaking not due to
serious losses or financial reverses, the separation pay shall be e"uivalent to one -*/ month pay or at least one%half -*.+/ month pay for every
year of service, whichever is higher. A fraction of at least si, -(/ months shall be considered as one -*/ whole year.
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LABOR LAW& A1. &TA1.AR.&
isease as Gro!nd for #ermination
An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is pre4udicial to his health as well as to the health of his co%employees: Provided, that he is paid a
separation pay e"uivalent to at least one -*/ month salary or to one%half -*.+/ month salary for every year of service, whichever is greater, a
fraction of at least si, -(/ months being considered as one -*/ whole year.
#ermination by Employee
#ermination 4ith a G!st -a!se
An employee may terminate the employer%employee relationship with 4ust cause by serving a written notice to the employer at least one
-*/ month in advance. #he employer !pon 4hom no s!-h noti-e 4as served may hold the employee liable for damages.
#ermination 4itho!t a G!st -a!se
An employee may put an end to the relationship without serving any notice on the employer for any of the following 4ust causes:
a. Serious insult by the employer or his representative on the honor and person of the employee;
b. 7nhuman and unbearable treatment accorded the employee by the employer or his representative;
c. @ommission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate
members of his family; and
d. =ther causes analogous to the foregoing.
When employment is not deemed terminated
he bona fide suspension of the operation of a business or undertaking for a period not e,ceeding si, -(/ months, or the fulfillment by the
employee of a military or civic duty shall not terminate employment. 7n all such cases, the employer shall reinstate the employee to his former
position without loss of seniority rights if he indicates his desire to resume his work not later than one -*/ month from the resumption of
operations of his employer or from his relief from the military or civic duty.
C"N#.AC#ING AN &U7-C"N#.AC#ING ,EPA.#MEN# ".E. )B-*11*5
@ontracting and subcontracting arrangements are e,pressly allowed by law, but may be sub4ect to regulations consistent with the promotion of
employment, protection of workersB welfare, and enhancement of industrial peace and the rights of the workers to self%organiHation and collective
bargaining.
@ontractors and subcontractors as well as other employees, are entitled to all the rights and privileges, and are sub4ect to all the duties and
responsibilities which the Labor @ode, as amended, attaches to every employee%employer relationship.
#erm or d!ration of -ontra-t!al employment
he term or duration of contractual employment shall be coe,tensive with the term or duration of the contract between the principal and
contractor or subcontractor. Dowever, where the contract is divisible into phases such that substantially different skills are re"uired for each
phase, the term or duration of the contractual employment may be made coe,tensive with each phase.
Aor purposes of this $ule, the phrase :substantially different skills< refer to those skills the ac"uisition of which re"uires specialiHed knowledge
or training .
Permissible -ontra-ting or s!b-ontra-ting
he principal may engage the services of a contractor or subcontractor for the performance of any of the following:
a. 8orks or services temporarily or occasionally needed to meet abnormal increase in the demand of product or services, provided that
normal production capacity or regular workforce of the principal cannot reasonably cope with such demand;
b. 8orks or services temporarily or occasionally needed by the principal for undertakings re"uiring e,pert or highly technical personnel to
improve the management or operations of the enterprise;
c. Services temporarily needed for the introduction or promotion of new products, only for the duration of the introductory or promotional
period;
d. 8orks or services not directly related or not integral to the main business or operation of the principal, including casual work, 4anitorial,
security, landscaping, and messengerial services, and work not related to manufacturing processes in manufacturing establishments;
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e. Services involving the public display of manufacturersB products which does not involve the act of selling or issuance of receipts or
invoices;
f. SpecialiHed works involving the use of some particular, unusual or peculiar skills, e,pertise, tools or e"uipment the performance of which
is beyond the competence of the regular workforce or production capacity of the principal; and
g. Inless a reliever system is placed among the regular workforce, substitute services for absent regular employees, provided that the
period of service shall be coe,tensive with the period of absence and the same is made clear to the substitute employee at the time of
engagement. he phrase :absent regular employees< includes those who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal, but e,cludes those on strike where all the formal re"uisites for the
legality of the strike have been prima facie complied with based on records filed with the >ational @onciliation K #ediation Board.
Prohibitions
he following are hereby declared prohibited for being contrary to law or public policy :
a. Labor%only contracting;
b. @ontracting out of a 4ob work or service when not done in good faith and 4ustified by the e,igencies of the business and the same results in
the termination of regular employees and reduction of work hours or splitting of the bargaining unit.
c. @ontracting out of work with :cabo< as defined in Section * -ii/, $ule *, Book L of these $ules;
d. aking undue advantage of the economic situation of lack of bargaining strength of the contractual employee, or undermining his security
of tenure or basic rights or circumventing the provisions of regular employment, in any of the following instances:
d.i In addition to his assigned functions, requiring the contractual employee to perform functions which are currently being performed
by the regular employees of the principal or of the contractor or subcontractor;
d.ii equiring him to sign, as a precondition to employment or continued employment , an antedated resignation letter, a blank payroll! a
waiver of labor standards including minimum wages and social welfare benefits; or a quitclaim releasing the principal, contractor or
subcontractor from any liability as to payment of future claims; and
d.iii equiring him to sign a contract fi"ing the period of employment to a term shorter than the term of the contract between the principal
and the contractor or subcontractor, unless the latter contract is divisible into phases for which substantially different skills are
required and this is made known to the employee at the time of engagement;
e. @ontracting out of a 4ob, work or service through an in%house agency as defined herein;
f. @ontracting out of a 4ob, work or service directly related to the business or operation of the principal by reason of strike or lockout whether
actual or imminent; and
g. @ontracting out of a 4ob, work or service being performed by union members when such will interfere with, restrain or coerce employees in
the e,ercise of their rights to self organiHation as provided in Art. +G3 -c/ of the Labor @ode as ammended.
Prohibitions against labor-only -ontra-tingI
Labor%only contracting is hereby declared prohibited. Aor this purpose, labor%only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a 4ob, work or service for a principal and any of the following elements are
present:
*. he contractor or subcontractor does not have substantial capital or investment to actually perform 4ob, work or service to be performed and
the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or
+. he contractor does not e,ercise the right to -ontrol over the performance of the work of the contractual employee.
Contra-t bet4een -ontra-tor or s!b-ontra-tor and -ontra-t!al employee
>otwithstanding oral or written stipulations to the contrary, the contract between the contractor or subcontractor and the contractual employee
shall include the following terms and conditions:
a. he specific description of the 4ob, work or service to be performed by the contractual employee;
b. he place of work and terms and conditions of employment , including a statement of the wage rate applicable to the individual
contractual employee; and
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LABOR LAW& A1. &TA1.AR.&
c. he term or duration of employment, which shall be coe,tensive with the contract between the principal and contractor or subcontractor, or
with the specific phase for which the contractual employee is engaged, as the case may be.
he contractor or subcontractor shall inform the contractual of the foregoing terms and conditions on or before the first day of his employment.
.egistration of Contra-tors or &!b-ontra-tors
he registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor market information and
monitoring.
Aailure to register shall give rise to the presumption that the contractor is engaged in labor%only contracting.
elisting of -ontra-tors or s!b-ontra-tors
Sub4ect to due process, the $egional &irector shall cancel the registration of contractors or subcontractors based on any of the following
grounds:
-a/ >on%submission of contracts between principal and the contractor or subcontractor when re"uired to do so;
-b/ >on%submission of Annual $eport
-c/ Ainding through arbitration that the contractor or subcontractor has engaged in labor%only contracting and the prohibited activities as
provided in Section ( of &.=. *3%+11+
-d/ >on%compliance with labor standards and working conditions
.ights of the -ontra-t!al employee
he contractual employee shall be entitled to all the rights and privileges due a regular employee, including but not limited to the right to
working conditions and standards, service incentive leave, rest days, overtimes and holidays, health, safety and social and welfare benefits,
self%organiHation and collective bargaining and security of tenure.
7n cases of termination of employment prior to the e,piration of the contract between the principal and the contractor or subcontractor, the right
of the contractual employee to separation pay or other related benefits shall be governed by the applicable law and 4urisprudence on
termination of employment. 8here the termination results from the e,piration of the contract between the principal and the contractor or
subcontractor, or from the completion of the phase of the 4ob, work or service for which the contractual employee is engaged, the latter shall
not be entitled to separation pay. Dowever, this shall be without pre4udice to completion bonuses or other emoluments, including retirement
pay as may be provided by law or in the contract between the principal and the contractor or subcontractor.
&olidary liability
he prin-ipal shall be deemed as the dire-t employer of the contractual employees and therefore, solidarily liable with the contractor or
subcontractor for whatever monetary claims the contractual employee may have against the former in the case of violations as provided for in
Section ) -Labor%only contracting/, ( -9rohibitions/ 3 -$ights of @ontractual !mployee/ and *( -&elisting/ of these rules.
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