E Management Prerogatives PDF

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.
LAST-MINUTE
NOTES ON THE 2012 BAR EXAMINATION IN LABOR LAW BASED ON THE
SUPREME COURT-PRESCRIBED SYLLABUS
Ch
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Prof. Joselito Guianan Chan
E. MANAGEMENT PREROGATIVES
[These 8-part Notes discuss all topics/sub-topics in the Supreme Court-prescribed Syllabus for Labor Law]
TOPICS UNDER THE SYLLABUS
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1. Discipline
2. Transfer of employees
3. Productivity standard
4. Grant of Bonus
5. Change of working hours
6. Marital discrimination
7. Post-employment ban
8. Limitations in its exercise
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1.MANAGEMENTRIGHTSANDPREROGATIVES.
a.Rightofemployertoregulateallaspectsofemployment.
Itisawellrecognizedprinciplethatemployershavetherightandprerogativetoregulateeveryaspectoftheir
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business,generallywithoutrestraintinaccordancewiththeirowndiscretionandjudgment. Thisprivilegeisinherentin
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therightofemployerstocontrolandmanagetheirenterpriseeffectively.
Employershavethefreedomandprerogative,accordingtotheirdiscretionandbestjudgment,toregulateand
control all aspects of employment in their business organizations. Such aspects of employment include hiring, work
assignments,workingmethods,time,placeandmannerofwork,toolstobeused,processestobefollowed,supervision
of workers, working regulations, transfer of employees, layoff of workers and the discipline, dismissal and recall of
workers.3
Ourlawsandjurisprudenceextendrecognitionandrespecttosuchexercisebytheemployersoftheirrights
andprerogatives.Forthisreason,courtsoftendeclinetointerfereinlegitimatebusinessdecisionsofemployers.Infact,
laborlawsdiscourageinterferenceinemployersjudgmentconcerningtheconductoftheirbusiness.4TheLaborCode
anditsimplementingrulesdonotvestintheLaborArbitersnorinthedifferentdivisionsoftheNLRC,norinthecourts,
managerial authority. Even as the law is solicitous of the welfare of employees, it must also protect the right of
employers to exercise what are clearly management prerogatives. The free will of management to conduct its own
businessaffairstoachieveitspurposecannotbedenied.5
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TOPIC UNDER THE SYLLABUS:
8. Limitations in its exercise
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1.LIMITATIONSINIITSEXERCISE.
a.Limitationsontheexerciseofmanagementprerogatives.
Theexerciseofmanagementprerogativeissubjecttothefollowing:
1. Limitationsimposedby:
a. law;
b. CBA;
Deles, Jr. v. NLRC, G.R. No. 121348, March 9, 2000; Castillo v. NLRC, G.R. No. 104319, June 17, 1999; Autubus Workers Union v. NLRC, G.R. No. 117453, June 26, 1998, 291 SCRA 219, 228.
Mendoza v. Rural Bank of Lucban, G.R. No. 155421, 07 July 2004.
Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000; OSS Security and Allied Services, Inc. v. NLRC, G.R. No. 112752, Feb. 9, 2000, 325 SCRA 157.
4 Coca-Cola Bottlers Philippines,Inc. v. Del Villar, G.R. No. 163091, Oct. 6, 2010; Philippine Industrial Security Agency Corporation v. Aguinaldo, G.R. No. 149974, June 15, 2005.
5 Valiao v. Hon. CA, G.R. No. 146621, July 30, 2004.
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LABOR LAW: E. MANAGEMENT PREROGATIVES

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Coca-Cola Bottlers Philippines,Inc. v. Del Villar, G.R. No. 163091, Oct. 6, 2010; The Philippine American Life and General Insurance Co. v. Gramaje, G.R. No. 156963, Nov. 11, 2004.
Farrol v. CA, [G.R. No. 133259, February 10, 2000]; Associated Labor Unions-TUCP v. NLRC, G.R. No. 120450, Feb. 10, 1999.
Pantranco North Express, Inc. v. NLRC, G.R. No. 106516, Sept. 21, 1999.
9 Unicorn Safety Glass, Inc. v. Basarte, G.R. No. 154689, Nov. 25, 2004.
10 Philippine Airlines, Inc. v. Pascua, G.R. No. 143258, Aug. 15, 2003, 409 SCRA 195.
11 Deles, Jr. v. NLRC, G.R. No. 121348, March 9, 2000; Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000.
12 Shoemart, Inc. v. NLRC, G.R. No. 74229, Aug. 11, 1989.
13 St. Michaels Institute v. Santos, G.R. No. 145280, Dec. 4, 2001.
14 Reyes v. Minister of Labor, G.R. No. 48705, Feb. 9, 1989; Filipro, Inc. v. NLRC, G.R. No. 70546, Oct. 16, 1986.
15 Sime Darby Pilipinas, Inc. v. NLRC, G. R. No. 119205, April 15, 1998; PLDT v. Pingol, G.R. No. 182622, Sept. 8, 2010; Maribago Bluewater Beach Resort, Inc. v. Dual, G.R. No. 180660, July 20, 2010.
16 Soriano v. NLRC, G.R. No. 75510, Oct. 27, 1987.
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c. employmentcontract;
d. employerpolicy;
e. employerpractice;and
f. generalprinciplesoffairplayandjustice.6
2.Itissubjecttopolicepower.7
3. Itsexerciseshouldbewithoutabuseofdiscretion.8
2. Itshouldbedoneingoodfaithandwithdueregardtotherightoflabor.9
Ineluctably,theexerciseofmanagementprerogativesisnotabsolute.Theprerogativesaccordedmanagement
cannotdefeattheverypurposeforwhichlaborlawsexisttobalancetheconflictinginterestsoflaborandmanagement,
nottotiltthescaleinfavorofoneovertheother,buttoguaranteethatlaborandmanagementstandonequalfooting
whenbargainingingoodfaithwitheachother.10
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1. Discipline
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1.PREROGATIVETODISCIPLINE.
a.Components.
Therightorprerogativetodisciplinecoversthefollowing:
1.Righttodiscipline;
2.Righttodismiss;
3.Righttodeterminewhotopunish;
4.Righttopromulgaterulesandregulations;
5.Righttoimposepenalty;proportionalityrule;
6.Righttochoosewhichpenaltytoimpose;and
7.Righttoimposeheavierpenaltythanwhatthecompanyrulesprescribe.
2.RIGHTTODISCIPLINE.
The employers right to conduct the affairs of his business according to its own discretion and judgment
includestheprerogativetoinstilldisciplineamongitsemployeesandtoimposereasonablepenalties,includingdismissal,
uponerringemployees.Thisisamanagementprerogativewherethefreewillofmanagementtoconductitsownaffairs
toachieveitspurposetakesform.11
Theemployercannotbecompelledtomaintaininhisemploytheundeserving,ifnotundesirable,employees.12
Theonlycriteriontoguidetheexerciseofitsmanagementprerogativetodisciplineordismisserringemployeesisthat
thepolicies,rulesandregulationsonworkrelatedactivitiesoftheemployeesmustalwaysbefairandreasonableand
thecorrespondingpenalties,whenprescribed,shouldbecommensuratetotheoffenseinvolvedandtothedegreeof
theinfraction.13
3.RIGHTTODISMISS.
The right of the employer to dismiss its erring employees is a measure of selfprotection.14 The law, in
protecting the rights of the laborer, authorizes neither oppression nor selfdestruction of the employer. While the
constitutioniscommittedtothepolicyofsocialjusticeandtheprotectionoftheworkingclass,itshouldnotbesupposed
thateverylabordisputewillbeautomaticallydecidedinfavoroflabor.Managementalsohasitsownrightswhich,as
such,areentitledtorespectandenforcementintheinterestofsimplefairplay.Outofitsconcernforthosewithless
privilegesinlife,theSupremeCourthasinclinedmoreoftenthannottowardstheworkerandupheldhiscauseinhis
conflictswiththeemployer.Suchfavoritism,however,hasnotblindedtheCourttorulethatjusticeis,ineverycase,for
thedeserving,tobedispensedinthelightoftheestablishedfactsandapplicablelawanddoctrine.15
4.RIGHTTODETERMINEWHOTOPUNISH.
Theemployerhaswidelatitudetodeterminewhoamongitserringofficersoremployeesshouldbepunished,
towhatextentandwhatproperpenaltytoimpose.16
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Phimco Industries, Inc. v. NLRC, G.R. No. 118041, June 11, 1997.
Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000, 337 SCRA 286.
Farrol v. CA, G.R. No. 133259, Feb. 10, 2000; Manila Memorial Park Cemetery, Inc. v. Panado, G.R. No. 167118, June 15, 2006.
20 Felix v. NLRC, G.R. No. 148256, Nov. 17, 2004; Gutierrez v. Singer Sewing Machine Company, G.R. No. 140982, Sept. 23, 2003.
21 China Banking Corporation v. Borromeo, [G.R. No. 156515, October 19, 2004].
22 Stanford Microsystems, Inc. v. NLRC, [G.R. No. L-74187, January 28, 1988].
23 Coca-Cola Bottlers Philippines,Inc. v. Del Villar, G.R. No. 163091, Oct. 6, 2010.
24 Sentinel Security Agency, Inc. v. NLRC, G.R. No. 122468, Sept. 3, 1998; Blue Dairy Corporation v. NLRC, G.R. No. 129843, Sept. 14, 1999.
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5.RIGHTTOPRESCRIBECOMPANYRULESANDREGULATIONS.
The prerogative of an employer to prescribe reasonable rules and regulations necessary or proper for the
conductofitsbusinessandtoprovidecertaindisciplinarymeasuresinordertoimplementsaidrulesandtoassurethat
thesamewouldbecompliedwithhasbeenrecognizedinthisjurisdiction.17
6.RIGHTTOIMPOSEPENALTY;PROPORTIONALITYRULE.
Theemployermaylawfullyimposeappropriatepenaltiesonerringworkerspursuanttoitscompanyrulesand
regulations.18 However, the proportionality rule should be observed. This means that infractions committed by an
employee should merit only the corresponding sanction demanded by the circumstances. The penalty must be
commensuratewiththegravityoftheoffense,theact,conductoromissionimputedtotheemployeeandimposedin
connectionwiththeemployersdisciplinaryauthority.19Accordingly,indeterminingthevalidityofdismissalasaformof
penalty,thechargesforwhichanemployeeisbeingadministrativelycitedmustbeofsuchnaturethatwouldmeritthe
imposition of the said supreme penalty. Dismissal should not be imposed if it is unduly harsh and grossly
disproportionatetothecharges.20
7.RIGHTTOCHOOSEWHICHPENALTYTOIMPOSE.
Thematterofimposingtheappropriatepenaltydependsontheemployer.ItIscertainlywithinthepetitioners
prerogative to impose on the erring employee what it considered the appropriate penalty under the circumstances
pursuant to its company rules and regulations. Like all other business enterprises, its prerogative to discipline its
employeesandtoimposeappropriatepenaltiesonerringworkerspursuanttocompanyrulesandregulationsmustbe
respected.21
8.RIGHTTOIMPOSEHEAVIERPENALTYTHANWHATTHECOMPANYRULESPRESCRIBE.
The employer has the right to impose a heavier penalty than that prescribed in the company rules and
regulationsifcircumstanceswarranttheimpositionthereof.Thefactthattheoffensewascommittedforthefirsttimeor
hasnotresultedinanyprejudicetothecompanywasheldnottobeavalidexcuse.Noemployermayrationallybe
expectedtocontinueinemploymentapersonwhoselackofmorals,respectandloyaltytohisemployer,regardforhis
employers rules, and appreciation of the dignity and responsibility of his office, has so plainly and completely been
bared. Company rules and regulations cannot operate to altogether negate the employers prerogative and
responsibilitytodetermineanddeclarewhetherornotfactsnotexplicitlysetoutintherulesmayanddoconstitutesuch
serious misconduct as to justify the dismissal of the employee or the imposition of sanctions heavier than those
specificallyandexpresslyprescribedtherein.Thisisdictatedbylogic,otherwise,therules,literallyapplied,wouldresult
in absurdity; grave offenses, e.g., rape, would be penalized by mere suspension, this, despite the heavier penalty
providedthereforbytheLaborCodeorotherwisedictatedbycommonsense.22
In Cruz v. CocaCola Bottlers Phils.,Inc., [G.R. No. 165586, June 15, 2005], admittedly, the violation of the
companyrulescommittedbypetitionerispunishablewiththepenaltyofsuspensionforthefirstoffense.However,the
SupremeCourtaffirmedthevalidityofhisdismissalbecauserespondentcompanyhaspresentedevidenceshowingthat
petitionerhasarecordofotherviolationsfromasfarbackas1986.
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2. Transfer of employees
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1.PREROGATIVETOTRANSFEREMPLOYEES.
a.Concept.
Atransfermeansamovement:
1. Fromonepositiontoanotherofequivalentrank,levelorsalary,withoutabreakintheservice;23or
2. Fromoneofficetoanotherwithinthesamebusinessestablishment.24
b.Someprinciplesontransferofemployees.
1. The exercise of the prerogative to transfer or assign employees from one office or area of operation to
anotherisvalidprovidedthereisnodemotioninrankordiminutionofsalary,benefits,andotherprivileges,
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2.OTHERRELATEDPREROGATIVES.
Otherrightsandprerogativescloselyrelatedtotherighttotransferarethefollowing:
1.Prerogativetoreorganize;
Pharmacia and Upjohn, Inc. v. Albayda, Jr., G.R. No. 172724, Aug. 23, 2010.
Id.
Id.
28 Id.; See also Abbott Laboratories (Phils.), Inc. v. NLRC, [G.R. No. L-76959, October 12, 1987, 154 SCRA 713].
29 Floren Hotel v. NLRC, G.R. No. 155264, May 6, 2005; Mendoza v. Rural Bank of Lucban, G.R. No. 155421, July 7, 2004; Suldao v. Cimech System Construction, Inc., G.R. No. 171392, Oct. 30, 2006; Blue Dairy Corporation v. NLRC, G.R. No. 129843, Sept. 14, 1999, 314 SCRA 401.
30 Tinio v. CA, G.R. No. 171764, June 8, 2007; Mendoza v. Rural Bank of Lucban, G.R. No. 155421, July 7, 2004.
31 Bisig Manggagawa sa Tryco v. NLRC, [G.R. No. 151309, October 15, 2008].
32 (The Philippine American Life and General Insurance Co. v. Gramaje, G. R. No. 156963, Nov. 11, 2004; Suldao v. Cimech System Construction, Inc., G.R. No. 171392, Oct. 30, 2006.
33 OSS Security & Allied Services, Inc. v. NLRC, G.R. No. 112752, Feb. 9, 2000; See also Tan v. NLRC, G.R. No. 128290, Nov. 24, 1998, 299 SCRA 169, 180.
34 Yuco Chemical Industries, Inc. v. Ministry of Labor and Employment, [G.R. No. 75656, May 28, 1990].
35 Pharmacia and Upjohn, Inc. v. Albayda, Jr., G.R. No. 172724, Aug. 23, 2010; San Miguel Corp. v. Pontillas, G.R. No. 155178, May 7, 2008.
36 Abbott Laboratories, Inc. v. NLRC, [G.R. No. 76959, October 12, 1987].
37 Allied Banking Corporation v. CA, G.R. No. 144412, Nov. 18, 2003; Homeowners Savings and Loan Association, Inc. v. NLRC, G.R. No. 97067, Sept. 26, 1996, 262 SCRA 406.
38 Allied Banking Corporation v. CA, [G.R. No. 144412, November 18, 2003]; Dosch v. NLRC, [G.R. No. L-51182, July 5, 1983, 208 Phil. 259; 123 SCRA 296].
39 Dosch v. NLRC, [supra].
40 Cinema, Stage and Radio Entertainment Free Workers v. CIR, G.R. No. L-19879, Dec. 17, 1966, 18 SCRA 1068.
41 Philippine Industrial Security Agency v. Dapiton, G.R. No. 127421, Dec. 8, 1999, 320 SCRA 124, 138.
42 Allied Banking Corporation v. CA, [G.R. No. 144412, November 18, 2003].
43 Castillo v. CIR, G.R. Nos. L-26124 and L-32725, May 29, 1971, 39 SCRA 75.
44 Duncan Association of Detailman-PTGWO v. Glaxo Welcome Philippines, Inc., [G.R. No. 162994, September 17, 2004].
45 Benguet Electric Cooperative v. Fianza, G.R. No. 158606, March 9, 2004; Equitable Banking Corporation v. NLRC, G.R. No. 102467, June 13, 1997, 339 Phil. 541.
46 Duldulao v. The CA and Baguio Colleges Foundation, [G.R. No. 164893, March 1, 2007]; Consolidated Food Corp. v. NLRC, G.R. No. 118647, Sept. 23, 1999, 315 SCRA 129; 373 Phil. 751, 762.
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andtheactionisnotmotivatedbydiscrimination,madeinbadfaith,oreffectedasaformofpunishmentor
demotionwithoutsufficientcause.25
2. TheCourtcannotlookintothewisdomofthetransferofanemployee.26
3. Commitment made by the employee in the employment contract to be reassigned anywhere in the
Philippinesisbindingonhim.27
4. Eveniftheemployeeisperformingwellinhispresentassignment,managementmayreassignhimtoanew
post.28
5. The transfer of an employee may constitute constructive dismissal when it amounts to an involuntary
resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely;
whenthereisademotioninrankand/oradiminutioninpay;orwhenacleardiscrimination,insensibilityor
disdainbyanemployerbecomesunbearabletotheemployeeleavinghimwithnooptionbuttoforegowith
hiscontinuedemployment.29Morespecifically,thefollowingthree(3)conditionsmustconcurinorderfor
thetransfertobeconsideredasconstructivedismissal:
a. Whenthetransferisunreasonable,inconvenientorprejudicialtotheemployee;
b. Whenthetransferinvolvesademotioninrankordiminutionofsalaries,benefitsandotherprivileges;
and
c. When the employer performs a clear act of discrimination, insensibility, or disdain towards the
employee,whichforeclosesanychoicebythelatterexcepttoforegohiscontinuedemployment.30
6. Transfermadeincompliancewithagovernmentorderdoesnotamounttoconstructivedismissal.31
7. Burdenofproofintransfercasesisontheemployer.32
8. Anemployeecannotclaimanyvestedrighttohisposition.Whileanemployeemayhavearighttosecurity
oftenure,thisdoesnotgivehersuchavestedrighttoherpositionaswoulddeprivetheemployerofits
prerogative to change her assignment or transfer her where her service will be most beneficial to the
employersinterest.33
9. Therefusalofanemployeetobetransferredmaybeheldjustifiedifthereisashowingthatthetransferwas
directedbytheemployerunderquestionablecircumstances.Forinstance,thetransferofemployeesduring
the height of their unions concerted activities in the company where they were active participants is
illegal.34
10. An employee who refuses to be transferred, when such transfer is valid, is guilty of insubordination or
willfuldisobedienceofalawfulorderofanemployerunderArticle282oftheLaborCode.35Forexample:
The dismissal of a medical representative who acceded in his employment application to be assigned
anywhereinthePhilippinesbutlaterrefusedtobetransferredfromManilatoaprovincialassignment,
washeldvalid.Thereasonisthatwhenheappliedandwasacceptedforthejob,heagreedtothepolicyof
thecompanyregardingassignmentanywhereinthePhilippinesasdemandedbyhisemployersbusiness
operation.36
11. Refusaltotransferduetoparentalobligations,additionalexpenses,inconvenience,hardshipandanguish,
heldnotvalid.Anemployeecouldnotvalidlyrefuselawfulorderstotransferbasedonthesegrounds.37
12. Refusaltotransfertooverseasassignmentisvalid.38
13. Refusaltotransferconsequenttopromotionisvalid.39
14. Transferpursuanttothecompanypolicyofpreventingconnivanceisvalid.40
15. Transferinaccordancewithpredeterminedandestablishedofficepolicyandpracticeisvalid.41
16.RotationamongemployeesofbanksasrequiredintheManualofRegulationsforBanksandOtherFinancial
IntermediariesissuedbytheBangkoSentralngPilipinasisvalid.42
17. Transferduetothestandardoperatingprocedureofrotatingemployeesfromthedayshifttothenight
shiftisvalid.43
18. Transfertoavoidconflictofinterestisvalid.44
19. Atransferfromonepositiontoanotheroccasionedbytheabolitionofthepositionisvalid.45
20. Reassignmentandtransferpendinginvestigationofirregularitiesisvalid.46
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2.Prerogativetopromote;and
3.Prerogativetodemote.
Theexerciseofthesethree(3)prerogativesobviouslyresultinthetransferofemployees.
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Hongkong and Shanghai Banking Corporation Employees Union v. NLRC, G.R. No. 125038, Nov. 6, 1997, 281 SCRA 509;See also Nagkahiusang Namumuo sa Dasuceco-National Federation of Labor (NAMADA-NFL) v. Davao Sugar Central Co., Inc., G.R. No. 145848, Aug. 0, 2006.
SCA Hygiene Products Corp. Employees Association-FFW v. SCA Hygiene Products Corp., [G.R. No. 182877, August 9, 2010].
Arrieta v. NLRC, G.R. No. 126230, Sept. 18, 1997, 279 SCRA 326.
Ibid..
51 Coca-Cola Bottlers Philippines,Inc. v. Del Villar, G.R. No. 163091, Oct. 6, 2010; Millares v. Subido, G.R. No. L-23281, Aug. 10, 1967, 20 SCRA 954, 127 Phil. 370, 378.
52 Millares v. Subido, G.R. No. L-23281, Aug. 10, 1967, 20 SCRA 954, 127 Phil. 370, 378.
53 Dosch v. NLRC, G.R. No. 51182, July 5, 1983; See also Erasmo v. Home Insurance & Guaranty Corporation, G.R. No. 139251, Aug. 29, 2002.
54 Philippine Telegraph & Telephone Corporation v. CA, G.R. No. 152057, Sept. 29, 2003.
55 Ibid..
56 Nagkahiusang Namumuo sa Dasudeco-National Federation of Labor [NAMADA-NFL] v. Davao Sugar Central Co., Inc., [G.R. No. 145848, August 9, 2006].
57 Coca-Cola Bottlers Philippines,Inc. v. Del Villar, G.R. No. 163091, Oct. 6, 2010; Tinio v. CA, G.R. No. 171764, June 8, 2007.
58 Philippine Wireless, Inc. [Pocketbell] v. NLRC, G.R. No. 112963, July 20, 1999; Brillantes v. Guevarra, G.R. No. L-22586, Feb. 27, 1969, 27 SCRA 138; Fernando v. Sto. Tomas, G.R. No. 112309, July 28, 1994, 234 SCRA 546; Coca-Cola Bottlers Philippines,Inc. v. Del Villar, [G.R.
No. 163091, October 6, 2010].
59 Blue Dairy Corporation v. NLRC, G.R. No. 129843, Sept. 14, 1999; Quisaba v. Sta. Ines-Melale Veneer and Plywood, Inc., No. L-38088, Aug. 30, 1974, 58 SCRA 771.
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2.1.RIGHTTOREORGANIZE.
Implementationofajobevaluationprogramorareorganizationisvalidforaslongasitisnotcontrarytolaw,
morals or public policy 47 and it is carried out in good faith.48 If the purpose of a reorganization is to be achieved,
changesinthepositionsandrankingsoftheemployeesshouldbeexpected.Toinsistononesoldpositionandranking
afterareorganizationwouldrendersuchendeavorineffectual.49Itishardtoaccepttheclaimthatanemployerwouldgo
throughalltheexpenditureandeffortincidentalandnecessarytoareorganizationjusttodismissasingleemployee
whomtheynolongerdeemeddesirable.50
Inthe2010caseof,itwaspronouncedthatajobevaluationprogramisvalidiftheemployerhasnotactedin
badfaithanditwasnotintendedtocircumventthelawanddeprivetheaffectedemployeesofthebenefitstheyare
supposedtoreceive.Thejobevaluationprogramwasundertakentostreamlinerespondentsoperationsandtoplaceits
employeesintheirproperpositionsorgroupings.AperusaloftheCBAsofthepartiesshowedthatitmerelyprovided
theprocedurefortheimplementationofthejobevaluationanddidnotguaranteeanyadjustmentinthesalariesofthe
employees.
2.2.PREROGATIVETOPROMOTE.
a.Promotion,defined.
Promotionistheadvancementfromonepositiontoanotherinvolvingincreaseindutiesandresponsibilitiesas
authorizedbylaw,andusuallyaccompaniedbyanincreaseincompensationandbenefits.51
b.Distinctionbetweentransferandpromotion.
Promotiondenotesascalarascentofanofficeroranemployeetoanotherposition,highereitherinrankor
salary.Transfer,ontheotherhand,involveslateralmovementfromonepositiontoanotherofequivalentlevel,rankor
salary.52
c.Someprinciplesonpromotion.
1. Anemployeehastherighttorefusepromotion.Thereisnolawwhichcompelsanemployeetoaccepta
promotion. Promotion is in the nature of a gift or reward. Any person may refuse to accept a gift or
reward.Suchrefusaltobepromotedisavalidexerciseofsuchrightandhecannotbepunishedtherefor.53
2. Anemployeecannotbepromotedwithouthisconsentevenifmerelyasaresultofatransfer.Atransfer
that results in promotion or demotion, advancement or reduction or a transfer that aims to lure the
employeeawayfromhispermanentpositioncannotbedonewithouthisconsent.54
3. An employee cannot be dismissed because of his refusal to be promoted. It cannot amount to
insubordinationorwillfuldisobedienceofalawfulorderoftheemployer.55
4. Employersdecisiononwhethertopromoteanemployeeornotisvalidforaslongasitdoesnotappearto
havebeenactuatedbybadfaith.56
2.3.PREROGATIVETODEMOTE.
a.Concept.
Demotion involves a situation where an employee is relegated to a subordinate or less important position
constitutingareductiontoalowergradeorrankwithacorrespondingdecreaseindutiesandresponsibilitiesandusually
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accompaniedbyadecreaseinsalary.
b.Someprinciplesondemotion.
1. Demotionmayresultfromtransferwhenthesameresultsinreductioninposition,rankorsalary.58
2. Transfer from a highly technical position to one requiring mechanical work virtually a transfer from a
positionofdignitytoaservileormenialjobisdemotion.59
3. Change in workplace may result in demotion. Hence, there is demotion in the case of transfer of an
employee from the laboratory the most expensive work area, on a per squaremeter basis in the
companyspremisestothevegetableprocessingsectionwhichinvolvesprocessingofvegetablesalone.
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Blue Dairy Corporation v. NLRC, [supra].

Tinio v. CA, G.R. No. 171764, June 8, 2007; See also Rural Bank of Cantilan, Inc. v. Julve, [G.R. No. 169750, February 27, 2007].
Petrophil Corporation v. NLRC, G.R. No. L-64048, Aug. 29, 1986; International Harvester Macleod, Inc. v. IAC, G.R. No. 73287, May 18, 1987.
63 Leonardo v. NLRC, [G.R. No. 125303, June 16, 2000] and Fuerte v. Aquino, [G.R. No. 126937, June 16, 2000].
64 Leonardo v. NLRC, supra; Blue Dairy Corporation v. NLRC, supra; Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, G.R. No. 118045, Jan. 2, 1997, 266 SCRA 97.
65 Floren Hotel v. NLRC, G.R. No. 155264, May 6, 2005; Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, supra.
66 Fuerte v. Aquino, [G.R. No. 126937, June 16, 2000].
67 Section 5 [a], Rule VII-A, Book III, Rules to Implement the Labor Code, as amended by Memorandum Circular No. 3, Nov. 4, 1992.
68 Section 7, Department Order No. 5 [Rule XIV, Book III, Rules to Implement the Labor Code.
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3. Productivity standards
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1.PRODUCTIVITYSTANDARDSORQUOTA.
a.Concept.
The employer has the prerogative to prescribe the standards of productivity which the employees should
comply.Theproductivitystandardsmaybeusedbytheemployeras:
1.anincentivescheme;and/or
2.adisciplinaryscheme.
As an incentive scheme, employees who surpass the productivity standards or quota are usually given
additional benefits. As a disciplinary scheme, employees may be sanctioned for failure to meet the productivity
standardsorquota.
Leonardov.NLRC,[G.R.No.125303,June16,2000]66
The employer claims that the employee was demoted pursuant to a company policy intended to foster
competitionamongitsemployees.Underthisscheme,itsemployeesarerequiredtocomplywithamonthlysalesquota.
ShouldasupervisorlikeFuertefailtomeethisquotaforacertainnumberofconsecutivemonths,hewillbedemoted,
whereuponhissupervisorsallowancewillbewithdrawnandbegiventotheindividualwhotakeshisplace.Whenthe
employeeconcernedsucceedsinmeetingthequotaagain,heisreappointedsupervisorandhisallowanceisrestored.
TheSupremeCourtsaidthatthisarrangementappearstobeanallowableexerciseofcompanyrights.Anemployeris
entitled to imposeproductivity standardsfor its workersand in fact,noncompliancemay be visited witha penalty
evenmoreseverethandemotion.
b.DOLEtoestablishstandardoutputrates.
In appropriate cases, the DOLE intervenes, motu proprio or upon the initiative of any interested party, to
establishproductivitystandards.
For instance, in the case of workers paid by results who are considered nontime workers as their
compensationisbasednotonthebasisofthetimespentontheirworkbutaccordingtothequantity,qualityorkindof
job and the consequent results thereof, it is subject to more regulations in order to ensure the payment of fair and
reasonablewagerates.Thus,onpetitionofanyinterestedpartyoruponitsowninitiative,theDepartmentofLaborand
Employment shall use all available measures, including the use of time and motion studies and individual/collective
bargainingagreementbetweentheemployeranditsworkersasapprovedbytheDOLESecretaryandconsultationwith
representatives of employers and workers organizations, to determine whether the employees in any industry or
enterprisearebeingcompensatedinaccordancewiththeminimumwagerequirementsoftheruleonwages.67
Inthecaseofhomeworkers,attheinitiativeoftheDOLEoruponpetitionofanyinterestedparty,theDOLE
Secretaryorhisauthorizedrepresentativeismandatedtoestablishthestandardoutputrateorstandardminimumrate
inappropriateordersfortheparticularworkorprocessingtobeperformedbythehomeworkers.68
c.Standardoutputratesorpiecerates;howdetermined.
Thestandardoutputratesorpieceratesshallbedeterminedthroughanyofthefollowingprocedures:
a.Timeandmotionstudies;
b.An individual/collective agreement between the employer and its workers as approved by the DOLE
Secretaryorhisauthorizedrepresentative;or
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Definitely,thisisatransferfromaworkplacewhereonlyhighlytrustedauthorizedpersonnelareallowedto
accesstoaworkplacethatisnotascritical.60
4. Meretitleorpositionheldbyanemployeeinacompanydoesnotdeterminewhetheratransferconstitutes
ademotion.Rather,itisthetotalityofthefollowingcircumstances,towit:economicsignificanceofthe
work, the duties and responsibilities conferred, as well as the rank and salary of the employee, among
others,thatestablisheswhetheratransferisademotion.61
5. Theemployerhastherighttodemoteandtransferanemployeewhohasfailedtoobserveproperdiligence
inhisworkandincurredhabitualtardinessandabsencesandindolenceinhisassignedwork.62
6. Demotionmaybevalidlyimposedduetofailuretocomplywithproductivitystandards.63
7. Dueprocessprincipleinterminationcasesappliestodemotions.64Simplyput,eventheemployersrightto
demoteanemployeerequirestheobservanceofthetwinnoticerequirement.65
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c. Consultationwithrepresentativesofemployersandworkersorganizationsinatripartiteconferencecalled
bytheDOLESecretary.
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d.Timeandmotionstudies.
Thetime andmotion study is the morescientificandpreferred method.Thebasisfortheestablishmentof

rates for piece, output or contract work is the performance of an ordinary worker of minimum skill or ability.69 An
ordinary worker of minimum skill or ability is the average worker of the lowest producing group representing fifty
percent(50%)ofthetotalnumberofemployeesengagedinsimilaremploymentinaparticularestablishment,excluding
learners,apprenticesandhandicappedworkersemployedtherein.70
Inthecaseofhomeworkers,thetimeandmotionstudiesshouldbeundertakenbytheDOLERegionalOffice
having jurisdiction over the location of the premises used regularly by the homeworker/s. However, where the job
operationoractivityisbeinglikewiseperformedbyregularfactoryworkersatthefactoryorpremisesoftheemployer,
thetimeandmotionstudiesshouldbeconductedbytheDOLERegionalOfficehavingjurisdictionoverthelocationof
themainundertakingorbusinessoftheemployer.Pieceratesestablishedthroughtimeandmotionstudiesconducted
atthefactoryormainundertakingoftheemployershallbeapplicabletothehomeworkersperformingthesamejob
activity.ThestandardpiecerateshallbeissuedbytheDOLERegionalOfficewithinone(1)monthafterarequesthas
beenmadeatsaidoffice.UponrequestoftheDOLERegionalOffice,theBureauofWorkingConditions(BWC)shall
provideassistanceintheconductofsuchstudies.71
e.Allowedtime;meaning.
Inincentivewagesystem,thenumberofminutesallowedfortoolcare,personalneedsandfatigue,isaddedto
operatingtimeinestablishingjobstandardsortaskasabasisfordeterminingpieceratesorincentivebonus.
f.Baserate;meaning.
Inincentivewagesystem,theratefortheestablishedtaskorjobstandardproductioniscalledbaserate.The
baserateusuallyrepresentstheonehundredpercent(100%)basisformeasuringtheincentivebonus.Itisalsousedto
describetheregularratefortimeworkedwhichistheestablishedrateperhourfortheassignedjob,exclusiveofextras
resultingfrommeritorserviceincreaseorovertime,amongothers.
g.Outputratesinworkpaidbyresults;effectifdeterminedbyemployerorbyDOLE.
Theemployershallbasicallyprescribetheoutputratesinworkpaidbyresults.Hemayprescribeithimselfor
securefirstthepriorapprovaloftheDepartmentofLaborandEmployment(DOLE).
Iftheoutput ratesare prescribed solelybythe employer andthe samedonotconformwiththe standards

prescribed under the implementing rules, or with the rates prescribed by the DOLE in an appropriate order, the
employeesareentitledtothedifferencebetweentheamountwhichtheyareentitledtoreceiveundersuchprescribed
standardsorratesandthatactuallypaidtothembytheemployer.72
Moreover,ifbymultiplyingtherateperpieceasdeterminedbytheemployerwithouttheapprovaloftheDOLE
and the actual output of the worker paid by results, the amount arrived at conforms with or exceeds the statutory
minimumwage,thensuchworkershouldreceivesuchhigheramount.Butifaftersuchcomputation,theamountarrived
atislessthanthestatutoryminimumwage,then,theemployershouldpaythedifferenceinordertoassuretheworker
ofthestatutoryminimumwage.
InthecaseofFramanlisFarms,Inc.v.MinisterofLabor,[G.R.Nos.7261617,March8,1989,171SCRA87],
theHighCourtruledthatrespondentMinisterofLabordidnoterrinrequiringthepetitionerstopaywagedifferentials
totheirpakyawworkerswhoworkedforatleasteight(8)hoursdailyandearnedlessthanP8.00perday.
ThesamethingmaynotbesaidiftheoutputratesareprescribedbytheDOLE,inwhichcase,theemployeris
dutyboundtofollow it. Consequently, thewages of workerspaidby resultsunderthissituationaredeterminedby
simplymultiplyingthenumberofpiecesproducedbytheratefixedperpiece.Consequently,whetherornottheeight
hournormalworkinghoursisexceededorthatthetotaloutputisequivalentto,morethanorlessthanthestatutory
minimumwage,isimmaterial.Whatismaterialistheactualoutputorearningsforthatparticularday.
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4. Grant of Bonus
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1.BONUS.
a.Generalrule;notdemandableorenforceable.
Bonus,asageneralrule,isanamountgrantedandpaidexgratiatotheemployee.Itspaymentconstitutesan
actofenlightenedgenerosityandselfinterestonthepartoftheemployerratherthanasademandableorenforceable
Section 5 [b], Rule VII-A, Book III, Rules to Implement the Labor Code, as amended by Memorandum Circular No. 3, Nov. 4, 1992.
Section 5 [c], Rule VII-A, Book III, Ibid..
Section 7, Ibid.
72 Section 5 [d], Rule VII-A, Book III, Rules to Implement the Labor Code, as amended by Memorandum Circular No. 3, Nov. 4, 1992.
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Producers Bank of the Philippines v. NLRC, G.R. No. 100701, March 28, 2001, 355 SCRA 489; Philippine Duplicators, Inc. v. NLRC, G.R. No. 110068, Feb. 15, 1995.
UST Faculty Union v. NLRC, G.R. No. 90445, Oct. 2, 1990, 190 SCRA 215; Philippine Education Co., Inc. v. CIR, G.R. No. L-5103, Dec. 24, 1952, 92 Phil. 381, 385.
Protacio v. Laya Mananghaya & Co., G.R. No. 168654, March 25, 2009.
76 Aragon v. Cebu Portland Cement Co., 61 O. G. 4597.
77 Producers Bank of the Philippines v. NLRC, G.R. No. 100701, March 28, 2001, 355 SCRA 489, 496.
78 Kamaya Point Hotel v. NLRC, G.R. No. 75289, Aug. 31, 1989, 177 SCRA 160.
79 Luzon Stevedoring Corporation v. Court of Industrial Relations, G.R. No. L-17411, Dec. 31, 1965.
80 Marcos v. NLRC, G.R. No. 111744, Sept. 8, 1995; Manila Electric Company v. Secretary of Labor, G.R. No. 127598, Jan. 27, 1999; Davao Fruits Corporation v. Associated Labor Unions, G.R. No. 85073, Aug. 24, 1993, 225 SCRA 562.
81 Atok Big Wedge Mining Co., Inc. v. Atok Big Wedge Mutual Benefit Association, G.R. No. L-5276, March 3, 1953, 92 Phil. 754.
82 Protacio v. Laya Mananghaya & Co., G.R. No. 168654, March 25, 2009; See also The Manila Banking Corporation v. NLRC, G.R. No. 107487, Sept. 29, 1997; 345 Phil. 105, 106.
83 Philippine Airlines, Inc. v. NLRC, G.R. No. 115785, Aug. 4, 2000; OSS Security and Allied Services, Inc. v. NLRC, G.R. No. 112752, Feb. 9, 2000, 325 SCRA 157.
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obligation.73 It is an amount granted and paid to an employee for his industry and loyalty which contributed to the
successoftheemployersbusinessandmadepossibletherealizationofprofits.74Itissomethinggiveninadditionto
what is ordinarily received by or strictly due the recipient.75 It is a gratuity or act of liberality of the giver which the
recipienthasnorighttodemandasamatterofright.76Itsgrantisamanagementprerogative.77Itcannotbeforcedupon
theemployerwhomaynotbeobligedtoassumetheonerousburdenofgrantingbonusesorotherbenefitsasidefrom
theemployeesbasicsalariesorwages.Itissomethinggiveninadditiontowhatisordinarilyreceivedby,orstrictlydue
to,therecipient.78
Ifthereisnoprofit,thereshouldbenobonus.Ifprofitisreduced,bonusshouldlikewisebereduced,absent
anyagreementmakingsuchbonuspartofthecompensationoftheemployees.79
b.Bonus;whendemandableandenforceable.
Notwithstandingthefactthatabonusdoesnotformpartofthewageorsalaryoftheemployees,itbecomes
demandableandenforceableunderanyofthefollowingcircumstances:
1.WhenitisstipulatedinanemploymentcontractorCBA;
2. Whenthegrantofbonusisacompanypolicyorpractice;80
3. Whenitisgrantedasanadditionalcompensationwhichtheemployeragreedtogivewithoutanycondition
suchassuccessofbusinessormoreefficientormoreproductiveoperationand,thus,mustbedeemedpart
ofwageorsalary;hence,demandable.81
Itthusbecomesademandableandenforceableobligationonlywhenitismadepartofthewageorsalaryor
compensation.Whenconsideredaspartofthecompensationand,therefore,demandableandenforceable,theamount
isusuallyfixed.
Butiftheamountofbonusisdependentupontherealizationofprofits,thebonusisnotdemandableand
enforceable.82
c.Forfeitureofbonus.
It is valid for an employer to establish as policy that once an employee is found guilty of an administrative
charge,heshallforfeithisbonusinfavoroftheemployer.InthecaseofRepublicPlantersBank,nowknownasPNB
RepublicBankv.NLRC,[G.R.No.117460,January6,1997],theSupremeCourtrecognizedasvalidtheforfeitureofthe
1988 midyear and yearend bonus of an employee who was found guilty of an administrative charge in 1988, in
accordancewiththeexistingcompanypolicyoftheemployer.
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5. Change of working hours
=============================
1. PREROGATIVETOCHANGEWORKINGHOURS.
Employershavethefreedomandprerogative,accordingtotheirdiscretionandbestjudgment,toregulateand
controlthetimewhenworkersshouldreportforworkandperformtheirrespectivefunctions.83
SimeDarbyPilipinas,Inc.v.NLRC,[G.R.No.119205,April15,1998,289SCRA86].
Theexerciseofthisprerogativeisbestexemplifiedinthiscasewhereitwasheldthatmanagementretainsthe
prerogativetochangetheworkinghoursofitsemployeeswheneverexigenciesoftheservicesorequire.
ManilaJockeyClubEmployeesLaborUnionPTGWO,v.ManilaJockeyClub,Inc.,[G.R.No.167760,March7,
2007].
ThevalidityoftheexerciseofthesameprerogativetochangetheworkinghourswasaffirmedinthiscaseIn
thiscase.ItwasfoundthatwhileSection1,ArticleIVoftheCBAprovidesfora7hourworkschedulefrom9:00a.m.to
12:00noonandfrom1:00p.m.to5:00p.m.fromMondaystoSaturdays,Section2,ArticleXIthereof,however,expressly
reserves on respondent the prerogative to change existing methods or facilities and to change the schedules of
work.Consequently,thehoursofworkofregularmonthlypaidemployeeswaschangedfrom9:00a.m.to5:00p.m.to
1:00 p.m. to 8:00 p.m. when horse races are held, that is, every Tuesday and Thursday. The 9:00 a.m. to 5:00 p.m.
schedulefornonracedayswas,however,retained.Respondent,asemployer,citedthechangeintheprogramofhorse
racesasreasonfortheadjustmentoftheemployeesworkschedule.ItrationalizedthatwhentheCBAwassigned,the
horseracesstartedat10:00a.m.Whentheracesweremovedto2:00p.m.,therewasnootherchoiceformanagement
buttochangetheemployeesworkscheduleastherewasnoworktobedoneinthemorning.Evidently,theadjustment
intheworkscheduleoftheemployeesisjustified.
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6. Marital discrimination
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1.MARITALDISCRIMINATION.
a.Prerogativetoprescriberuleonmarriage.
The employer has the prerogative to establish a policy on marriage. Jurisprudence has ruled on the
validity/invalidityofcertainpoliciesonmarriage.
b.Ruleagainstmarriage,whenvalid.
In Duncan Association of DetailmanPTGWO v. Glaxo Welcome Philippines, Inc., [G.R. No. 162994,
September17,2004],thecontractofemploymentexpresslyprohibitedanemployeefromhavingarelationshipwithan
employeeofacompetitorcompany.Itprovides:
10.Youagreetodisclosetomanagementanyexistingorfuturerelationshipyoumayhave,
either by consanguinity or affinity with coemployees or employees of competing drug companies.
Shoulditposeapossibleconflictofinterestinmanagementdiscretion,youagreetoresignvoluntarily
fromtheCompanyasamatterofCompanypolicy.
TheSupremeCourtruledthatthisstipulationisavalidexerciseofmanagementprerogative.Theprohibition
against personal or marital relationships with employees of competitorcompanies upon its employees is reasonable
underthecircumstancesbecauserelationshipsofthatnaturemightcompromisetheinterestsofthecompany.Inlaying
down the assailed company policy, the employer only aims to protect its interests against the possibility that a
competitor company will gain access to its trade secrets, manufacturing formulas, marketing strategies and other
confidentialprogramsandinformation.
c.Ruleagainstmarriage,whennotvalid.
Article 136 of the Labor Code considers as an unlawful act of the employer to stipulate, as a condition of
employment or continuation of employment, that a woman employee shall not get married, or that upon getting
married,awomanemployeeshallbedeemedresignedorseparated.Itislikewiseanunlawfulactoftheemployer,to
actuallydismiss,discharge,discriminateorotherwiseprejudiceawomanemployeemerelybyreasonofhermarriage.84
InPT&Tv.NLRC,[G.R.No.118978,May23,1997,272SCRA596,605],itwasheldthatacompanypolicyof
notacceptingorconsideringasdisqualifiedfromworkanywomanworkerwhocontractsmarriagerunsafoulofthetest
of, and the right against, discrimination afforded all women workers by our labor laws and by no less than the
Constitution.85
InacasedecidedbytheOfficeofthePresident,Zialcitav.PhilippineAirlines,Inc.,[CaseNo.RO4339876,
February20,1977],theprovisioninacontractbetweenanairlinecompanyandaflightattendantwhichstatesthat
flightattendantapplicantsmustbesingleandthattheyshallbeautomaticallyseparatedfromemploymentintheevent
theysubsequentlygetmarriedwasdeclaredanullandvoidprovision,hence,cannotbeenforcedforbeingcontraryto
Article136oftheLaborCodeandtheprotectiontolaborclauseintheConstitution.
d.Reasonablebusinessnecessityruleasappliedtotheprohibitionagainstmarriagepolicy.
Theemployeesinthe2006caseofStarPaperCorp.v.Simbol,ComiaandEstrella,[G.R.No.164774,April12,
2006],wereterminatedonvariousoccasions,onthebasisofthefollowingcompanypolicypromulgatedin1995,viz.:
1.Newapplicantswillnotbeallowedtobehiredifincasehe/shehas[a]relative,upto[the]3rd
degreeofrelationship,alreadyemployedbythecompany.
2.In case two of our employees (both singles [sic], one male and another female) developed a
friendlyrelationshipduringthecourseoftheiremploymentandthendecidedtogetmarried,one
ofthemshouldresigntopreservethepolicystatedabove.
Accordingtotheemployer,saidruleisonlyintendedtocarryoutitsnoemploymentforrelativeswithinthe
thirddegreepolicy which is within the ambit of the prerogatives of management. The Supreme Court, however,
disagreed.Itruledthatsaidpolicyfailedtocomplywiththestandardofreasonablenesswhichisbeingfollowedinour
jurisdiction. The casesof Duncan [supra]and PT&T [supra] instruct that the requirement of reasonablenessmustbe
clearlyestablishedtoupholdthequestionedemploymentpolicy.Theemployerhastheburdentoprovetheexistenceof
a reasonablebusiness necessity. Theburden was successfullydischargedin Duncan butnot in PT&T.TheHighCourt
similarlydidnotfindareasonablebusinessnecessityinthecaseatbar.Thus,itpronounced:
Petitionerssolecontentionthatthecompanydidnotjustwanttohavetwo(2)ormoreof
its employees related between the third degree by affinity and/or consanguinity is lame. That the
secondparagraphwasmeanttogiveteethtothefirstparagraphofthequestionedruleisevidently
notthevalidreasonablebusinessnecessityrequiredbythelaw.
Itissignificanttonotethatinthecaseatbar,respondentswerehiredaftertheywerefound
fitforthejob,butwereaskedtoresignwhentheymarriedacoemployee.Petitionersfailedtoshow
See also Section 13 [e], Rule XII, Book III, Rules to Implement the Labor Code; Gualberto v. Marinduque Mining Industrial Corporation, C. A.-G.R. No. 52753-R, June 28, 1978.
Gualberto v. Marinduque Mining & Industrial Corporation, [supra].
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Ferrassini v. Gsell, G.R. No. 10712, August 10, 1966, 34 Phil. 697, 713, citing Gibbs v. Consolidated Gas Co. of Baltimore, [130 U.S. 396].
G.R. No. 21127, February 9, 1924, 45 Phil. 679.
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7. Post-employment ban
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1.POSTEMPLOYMENTBAN.
The employer, in the exercise of its prerogative, may insist on an agreement with the employee for
certain prohibitions to take effect after the termination of their employeremployee relationship. The following
stipulationsinanemploymentcontractareillustrativeoftheprohibitionsnormallyagreeduponbytheemployer
andtheemployee:
1.NonCompetitionClause
2.ConfidentialityandNonDisclosureClause
3.InventionsAssignmentClause(IntellectualPropertyClause)
4.NonSolicitationClause
5.NonRecruitmentClause
2.NONCOMPETITIONCLAUSE.
a.Freedomtocontract.
According to Philippine jurisprudence, the employer and the employee are free to stipulate in an
employment contract prohibiting the employee within a certain number of years from the termination of his
employment, from working in a business firm or corporation that is engaged in a similar business or that might
competewiththeemployer.Contractswhichprohibitanemployeefromengaginginbusinessincompetitionwith
theemployerarenotnecessarilyvoidforbeinginrestraintoftrade.
InthelanguageofFerrassiniv.Gsell,86thequestioniswhether,undertheparticularcircumstancesofthe
caseandthenatureoftheparticularcontractinvolvedinit,thecontractis,orisnot,unreasonable.Astipulationin
an employment contract barring the employee from competing with the employer after termination of the
employment is enforceable if it is reasonable and supported by a valuable consideration. There is no inflexible
formula for deciding the ubiquitous question of reasonableness. Precedents are of little value because the
question of reasonableness must be decided on an ad hoc basis. The question whether the agreement will be
enforcedistobedeterminedinviewofthecircumstances.
b.Theremustbelimitationontheprohibitionastotimeandtrade.
Acontractembodyingsuchprohibitionthatislimitedastotimeandtradeisconsideredreasonableand,
therefore, valid and enforceable. In Del Castillo v. Richmond,87 the Supreme Court observed that the law
concerning contracts whichtend to restrain business and trade has gone througha long series of changes from
time to time with the changing conditions of trade and commerce. With trifling exceptions, said changes have
beenacontinuousdevelopmentofageneralrule.Theearlycasesshowplainlyadispositiontoavoidandannulall
contractswhichprohibitedorrestrainedanyonefromusingalawfultradeatanytimeoratanyplace,asbeing
against the benefit of the state. Later cases and the rule is now wellestablished that a contract in restraint of
tradeisvalidprovidedthereisalimitationuponeithertimeorplace.Acontract,therefore,whichrestrainsaman
fromenteringintoabusinessortradewithouteitheralimitationastotimeorplacewillbeheldinvalid.Onthe
otherhand,acontractmaybelimitedindurationbutnotastotrade,renderingitunenforceablejustthesamefor
being unreasonable. In this connection, the Supreme Court in Ferrassini, [supra] said that the contract under
consideration, tested by the law, rules and principles above set forth, is clearly one in undue or unreasonable
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howthemarriageofSimbol,thenaSheetingMachineOperator,toAlmaDayrit,thenanemployeeof
theRepackingSection,couldbedetrimentaltoitsbusinessoperations.Neitherdidpetitionersexplain
how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
SelectingDepartment,whomarriedHowardComia,thenahelperinthecuttermachine.Thepolicyis
premisedonthemerefearthatemployeesmarriedtoeachotherwillbelessefficient.Ifweuphold
thequestionedrulewithoutvalidjustification,theemployercancreatepoliciesbasedonanunproven
presumptionofaperceiveddangerattheexpenseofanemployeesrighttosecurityoftenure.
Petitioners contend that their policy will apply only when one employee marries a co
employee,buttheyarefreetomarrypersonsotherthancoemployees.Thequestionedpolicymay
notfaciallyviolateArticle136oftheLaborCodebutitcreatesadisproportionateeffectandunderthe
disparateimpacttheory,theonlywayitcouldpassjudicialscrutinyisashowingthatitisreasonable
despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a
legitimatebusinessconcerninimposingthequestionedpolicycannotprejudicetheemployeesright
tobefreefromarbitrarydiscriminationbaseduponstereotypesofmarriedpersonsworkingtogether
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The provisions provided in this Section shall be separate and severable, enforceable independently of
each other, and independent of any other provision of this Agreement.
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The provisions contained in this Section are considered reasonable by the Employee and the
Company but, in the event that any such provisions should be found to be void under applicable laws
but would be valid if some part thereof was deleted or the period or area of application reduced, such
provisions shall apply with such modification as may be necessary to make them valid and effective.
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This Section shall survive the termination of this Agreement for any reason.
3.CONFIDENTIALITYANDNONDISCLOSURECLAUSE.
The confidentiality and nondisclosure clause reflects the commitment of the Employee that he shall not,
eitherduringtheperiodofhisemploymentwiththeEmployeroratanytimethereafter,useordisclosetoany
person,firmorcorporationanyinformationconcerningthebusinessoraffairsofhisemployment,forhisown
benefit or to the detriment of the Employer. This clause may also cover Former Employer Information and
ThirdPartyInformation.Thismaybeillustratedbythefollowingprovisionsinanemploymentcontract:
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(a) Company Information. The Employee agrees at all times during the term of his
employment and thereafter, to hold in strictest confidence, and not to use or disclose, except for the
benefit of the Company, to any person, firm or corporation without written authorization of the Chief
Executive Officer of the Company, any Confidential Information of the Company. The Employee
understands that Confidential Information means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research, product plans, products,
services, customer lists and customers (including, but not limited to, customers of the Company on
whom he called or with whom he became acquainted during the term of his employment), markets,
software, developments, inventions, processes, formulas, technology, designs, drawings,
engineering data, hardware configuration information, marketing, financial or other business
information disclosed to him by the Company either directly or indirectly in writing, orally or by
drawings or observation of parts or equipment. The Employee further understands that Confidential
Information does not include any of the foregoing items which has become publicly known and made
generally available through no wrongful act of his or of others who were under confidentiality
obligations as to the item or items involved or improvements or new versions thereof.
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(b) Former Employer Information. The Employee agrees that he will not, during his
employment with the Company, improperly use or disclose any proprietary information or trade
secrets of any former or concurrent employer or other person or entity and that he will not bring onto
the premises of the Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such employer, person or entity.
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the Employee will not approach clients, customers or contacts of the Company or other persons
or entities introduced to the Employee in his/her capacity as a representative of the Company for
purposes of doing business with such persons or entities and will not interfere with the
business relationship between the Company and such persons and/or entities;
unless expressly consented to by the Company, the Employee will not assume employment with
or provide services as a director or otherwise for any competitor of the Company, or engage,
whether as principal, partner, licensor or otherwise, in any business which is in direct or indirect
competition with the business of the Company and its subsidiaries. The Company shall
compensate any Employee who, after termination of the employment, complies with the
requirements set forth herein, in the amount of 50% of the Employees annual salary; and
unless expressly consented to by the Company, the Employee will not seek directly or indirectly,
by the offer of alternative employment or other inducement whatsoever, to solicit the services of
any employee of the Company and its subsidiaries employed as at or after the date of such
termination, or in the year preceding such termination.
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restraintoftradeand,therefore,againstpublicpolicy.Itislimitedastotimeandplacebutnotastotrade.Itisnot
necessaryfortheprotectionofthedefendant,asthisisprovidedforinanotherpartoftheclause.Itwouldforce
theplaintifftoleavethePhilippinesinordertoobtainalivelihoodincasethedefendantdeclinedtogivehimthe
writtenpermissiontoworkelsewhereinthiscountry.
c.IllustrationofaNonCompetitionClause.
Followingthediscussionabove,thefollowingclausemaybeillustrativethereof:
In consideration of the salary paid to the Employee by the Company, the Employee agrees that during
the term of the Employment and for a period of one (1) year following the termination or expiration of
this Agreement (for whatever reason):
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(c) Third Party Information. The Employee recognizes that the Company has received and in the
future will receive from third parties their confidential or proprietary information subject to a duty on
the Companys part to maintain the confidentiality of such information and to use it only for certain
limited purposes. The Employee agrees to hold all such confidential or proprietary information in the
strictest confidence and not to disclose it to any person, firm or corporation or to use it except as
necessary in carrying out his work for the Company consistent with the Companys agreement with
such third party.
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From and after the Effective Date, the Employee shall disclose in confidence to the Company and its
subsidiaries all inventions, improvements, designs, original works of authorship, formulas, processes,
compositions of matter, computer software programs, databases, mask works and trade secrets,
whether or not patentable, copyrightable or protectible as trade secrets (collectively, the Inventions),
which the Employee may solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of his/her employment at the
Company. The Employee acknowledges that copyrightable works prepared by him/her within the scope
of and during the period of his/her employment with the Company are works for hire and that the
Company and its subsidiaries will be considered the author thereof. The Employee agrees and
acknowledges that all the Inventions are works made for hire and shall be the sole and exclusive
property of the Company and its subsidiaries, including any copyrights, patents, mask work rights,
trade secrets, or other intellectual property rights pertaining hereto. If it is determined that any such
works are not works made for hire, the Employee hereby assigns all his/her right, title and interest,
including rights of copyrights, patents, mark work rights, trade secrets, and other intellectual property
rights, to or in such Inventions to the Company and its subsidiaries or its successor in interest without
further consideration.
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The Employee agrees to assist the Company and its subsidiaries in every proper way to obtain for the
Company and its subsidiaries and enforce patents, copyrights, mark work rights, trade secret rights,
and other legal protection for the Inventions. The Employee will execute any documents that the
Company and its subsidiaries may reasonably request for use in obtaining or enforcing such patents,
copyrights, mask work rights, trade secrets and other legal protections. His/Her obligations under this
paragraph will continue beyond the termination of his/her employment with the Company, provided that
the Company will compensate the Employee at a reasonable rate after such termination for time or
expenses actually spent by the Employee at the Companys request on such assistance. The Employee
appoints the Secretary of the Company as his/her attorney-in-fact to execute documents on his/her
behalf for this purpose.
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This Section shall survive the termination of this Agreement for any reason.
5.NONSOLICITATIONCLAUSE.
To protect the legitimate business interests of the Employer, including its business relationships, the
Employeemay,directlyorindirectly,beprohibitedfrommakingsolicitationsunderaNonSolicitationClausebest
illustratedunderthefollowingprovision:
For a period of three (3) years after termination of employment, the Employee shall not identify,
solicit, approach, cause to be solicited or approached, assist any other person or entity in soliciting
or approaching, or accept any business from any person or entity who shall at any time within the
year preceding the termination have been (a) a client, talent, producer, designer, programmer,
distributor, merchandiser, or advertiser of the Company, (b) a party or prospective party to an
agreement with the Company, or (c) a representative or agent of any client, talent, producer,
designer, programmer, distributor, merchandiser, or advertiser of the Company for the purpose of
offering to that person or entity goods or services which are of the same type as or similar to any
goods or services supplied by the Company at termination.
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4.INVENTIONSASSIGNMENTCLAUSE(INTELLECTUALPROPERTYCLAUSE).
In industries engaged in research and development and related activities, the following Inventions
Assignment Clause deserves to be incorporated in the Employment Contract of employees involved in said
activities:
The Employee understands that the Company and its subsidiaries are engaged in research and
development and other activities in connection with its business and that, as an essential part of the
Employment, the Employee is expected to make new contributions to and create inventions of value for
the Company and its subsidiaries.
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6.NONRECRUITMENTCLAUSE.
ProhibitionmayalsopertaintotherecruitmentofpersonneloremployeesoftheEmployerunderaNon
RecruitmentClauseasfollows:
For a period of three (3) years after termination of employment, either on his own account or in
conjunction with or on behalf of any other person, solicit or entice or hire away or attempt to solicit
or entice or hire away from any member of the Company, offer employment to or offer to conclude
any contract of services with, any person who is at termination or who was at any time during the
period of six months immediately preceding said termination employed in a managerial, supervisory,
technical or sales capacity by, or engaged as a consultant to the Company and who remains so
employed or engaged in the six months prior to the relevant breach of this clause 2.2(iv) (whether or
not such person would commit a breach of contract by reason of leaving such employment or
engagement).
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END OF DISCUSSION ON
TOPIC E. MANAGEMENT PREROGATIVES
13

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ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

Prof. Joselito Guianan Chan

TOPICS UNDER THE SYLLABUS

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

Blue Dairy Corporation v. NLRC, [supra].

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

Thetime andmotion study is the morescientificandpreferred method.Thebasisfortheestablishmentof

Iftheoutput ratesare prescribed solelybythe employer andthe samedonotconformwiththe standards

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.

LABOR LAW: E. MANAGEMENT PREROGATIVES

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