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I.
ARNOLD & Q BAR
(15pts)

Arnold works for Q Bar & Restaurant in Fort. He signed an employment contract on a contractual
basis for 5 months. When his 5 months expires, he is asked to sign a quitclaim indicating tahat his
contract has ended and his employment is severed due to “Endo”. A few weeks after, the
manager of Q Bar & Restaurant hires him again for another 5 months and assign him to their
branch at Quezon City. Same cycle of Endo and making him sign a quitclaim after 5 months. A
few weeks after he is rehired at Q Bar & Restaurant in Fort. After his last 5 months at Q Bar &
Restaurant in Fort, he was no longer rehired and he was terminated due to “Endo” or end of
contract. He is paid half month salary as separation pay and made to sign a quitclaim.

1.1 If you were counsel for Arnold and he comes to you for help, what will be your response
AND explanation to his following questions:
1.1.1 “Atty. am I a regular employee?” Why or Why not. (2 pts.);

a project or work pool employee has been: (1) continuously, as opposed to intermittently, re-
hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are
vital, necessary and indispensable to the usual business or trade of the employer, then the
employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code
and jurisprudence. To rule otherwise would allow circumvention of labor laws, allowing the
prevention of acquisition of tenurial security by project or work pool employees who have
already gained the status of regular employees by the employer's conduct.

Facts show that Arnold was continuously rehired by the Q Bar & Restaurant. Thus, it can be
gleaned that his work was vital, necessary and indispensable to the usual business or trade
of the Q Bar & Restaurant.

Under Article 281 of the Labor Code, "an employee who is allowed to work after a
probationary period shall be considered a regular employee." When an employer renews a
contract of employment after the lapse of the six-month probationary period, the employee
thereby becomes a regular employee. No employer is allowed to determine indefinitely the
fitness of its employees.14 While length of time is not the controlling test for project
employment, it is vital in determining if the employee was hired for a specific undertaking or
tasked to perform functions vital, necessary and indispensable to the usual business of trade
of the employer.

1.1.2 “Atty. I want to go back to work at Q Bar & Restaurant Quezon City? Do I
have the right to ask for my job in Q Bar & Restaurant in Quezon City back?”
(2pts)

Now that it has been established that Arnold was a regular employee, his termination is
considered illegal for lack of just or authorized causes. Under Article 279 of the Labor Code,
an employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages, inclusive of allowances,
and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.

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1.1.3 “If I go back, do I have to return my separation pay?” (2pts)

Payment of backwages is different from that of the award of separation pay. Separation pay
is granted where reinstatement is no longer advisable because of strained relations between
the employee and the employer. Backwages represent compensation that should have been
earned but were not collected because of the unjust dismissal. The basis for computing
separation pay is usually the length of the employee’s past service, while that for backwages
is the actual period when the employee was unlawfully prevented from working.

As to how both awards should be computed, Macasero v. Southern

Industrial Gases Philippines[14] instructs:

[T]he award of separation pay is inconsistent with a

finding that there was no illegal dismissal, for under Article 279
of the Labor Code and as held in a catena of cases, an employee
who is dismissed without just cause and without due process is
entitled to backwages and reinstatement or payment of separation
pay in lieu thereof:

Thus, an illegally dismissed employee is

entitled to two reliefs: backwages and
reinstatement. The two reliefs provided are
separate and distinct. In instances where
reinstatement is no longer feasible because of
strained relations between the employee and the
employer, separation pay is granted. In effect, an
illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages.

The normal consequences of respondents

illegal dismissal, then, are reinstatement without
loss of seniority rights, and payment of
backwages computed from the time compensation
was withheld up to the date of actual
reinstatement. Where reinstatement is no longer
viable as an option, separation pay equivalent to
one (1) month salary for every year of service
should be awarded as an alternative. The
payment of separation pay is in addition to
payment of backwages.

Velasco v. National Labor Relations Commission emphasizes:

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The accepted doctrine is that separation pay may

avail in lieu of reinstatement if reinstatement is no longer
practical or in the best interest of the parties. Separation pay
in lieu of reinstatement may likewise be awarded if the employee
decides not to be reinstated. (emphasis in the original; italics
supplied)
1.1.4 “What am I entitled to after my Endo?” (2pts)

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.

1.1.5 “If we file with labor, what will the case be?” (2pts)

complaint for illegal dismissal, separation pay, money claims, moral and exemplary
damages, and attorney's fees

1.2 If you were lawyer for Q Bar & Restaurant and Arnold sues your client for illegal dismissal,
what will your defense be and what is your advise to your client? (5pts)

a project employee's work depends on the availability of projects, necessarily the duration of
his employment.23 It is not permanent but coterminous with the work to which he is
assigned.24 It would be extremely burdensome for Q Bar & Restaurant, who depends on the
availability of projects, to carry Arnold as a permanent employee and pay him wages even if
there are no projects for him to work on.25 The rationale behind this is that once the project is
completed it would be unjust to require the Q Bar & Restaurant to maintain its employees in
their payroll. To do so would make the employee a privileged retainer who collects payment
from his employer for work not done. This is extremely unfair to the employers and amounts
to labor coddling at the expense of management.26"

http://www.lawphil.net/judjuris/juri2014/feb2014/gr_204406_2014.html

II
SAMPLE FORMS
(5pts)

2.1 Draft a probationary employment contract?

PROBATIONARY EMPLOYMENT AGREEMENT

_______________
Date

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Dear _______:

We are pleased to confirm your employment with __________________________ (the

"Company") on a probationary status, with the designation of < position> . The conditions regarding
your employment with us are contained in this Probationary Employment Agreement (the
"Agreement"):

1. Your probationary employment shall be for a period of six (6) months commencing on
________ up to __________.
2. You will receive a salary of _______ a month.
3. During your probationary employment, you will be working on a trial basis, during which the
Company shall determine your fitness and suitability for regularization. Attainment of regular
employment shall be conditioned on your having successfully passed and complied with the
Company's established standards for regularization.
4. The Company reserves its right to terminate your probationary employment, at any time, even
prior to the expiration of the prescribed probationary period, for any of the just and authorized
causes provided by existing law or should you fail to satisfactorily meet and comply with the
performance standards and policies set by the Company.
5. Your probationary employment status, as a general rule, does not entitle you to the benefits
that is or may hereafter be granted only to regular and permanent employees, except those
which the Company as a matter of policy and upon its discretion, extends to all employees
regardless of status and to those provided by law.
6. You agree to comply with all existing policies, rules and regulations of the Company of
which you have been aware, as well as those which may hereafter be issued.
7. You agree to render a minimum of eight (8) hours of work a day for five (5) days per work
week, unless the Company requires you otherwise. You agree to work in accordance with a
work schedule determined by the Company and to render overtime/extra work on any day in
case there are urgent works to be done and/or immediate matters to be attended to.
8. You shall be solely responsible and accountable for any loss of, or damage to, any materials,
tools, equipment, etc., issued to you in the course of your employment. For this purpose, this
Agreement likewise serves as your authorization to the Company to deduct from your salary the
amount corresponding to any loss of, or damage to, any materials, tools, equipment, etc., issued to
you in the course of your employment.
9. You shall refrain from working for another employer, directly or indirectly, part-time or full-
time while still employed by the Company.
10. You are required to handle all official documents of the Company with utmost care and to
keep any information relating to the processes or operations of the Company, which you may
have acquired in the course of your employment, confidential at all times.
11. You may in the course of your employment with the Company, produce, develop, create, invent,
conceive or reduce to practice, Intellectual Property related to the business of the Company. You
agree that all such Intellectual Property is and shall be exclusive property of the Company may use
or pursue such Intellectual Property without restriction or additional compensation. You further
agree to assign and transfer to the Company all of your rights, title and interest in and to such
Intellectual Property in the name of the Company.
12. In case you intend to resign from the Company prior to the expiration of your Contract, you
are required to submit a thirty (30)-day written notice prior to the effectivity of such
resignation; otherwise, failure on your part to do so will render you liable for damages.

Should you accept the foregoing terms and conditions of employment please indicate your acceptance
by signing on the space provided for this purpose.

__________________________
By:
<name of responsible officer>
<position of officer>

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CONFORME

I hereby certify that I have read this Agreement; that it has been thoroughly explained to me; and
that I have freely accept the terms and conditions of my Probationary Employment.

<Print name of employee, then signature above>

Date:_____________

III.
LEMUEL
(10pts)

Lemuel is a team leader at ABC Call Center. He earns a basic salary of P1,000.00 for an ordinary
work day. Under Lem, he supervises a team of 7 agents. He takes care of these agents and
effectively recommends for their promotion for time to time, and sometimes imposed
disciplinary sanction. One Christmas a virus struck the office and everyone got sick except
Lemuel. Because of this Lemuel took over work for 18 hours, and only ate the whole day for 12
minutes and a half. It was unfortunate for lem because that Christmas day happens to also be
his birthday. Lem worked from 09:30 pm of 24 December 2014 until 18 hours later of 25
December 2014. By the way the President also declared December 24, 2014 a holiday. Lemuel’s
scheduled rest day falls on every Thursday. Lemuel is also a registered Person with Disability.
Compute the following:

3.1 Lemuel’s Basic Pay;

3.2 Lemuel’s Overtime pay for the period covered by the problem;
3.3 Lemuels’ total Night Shift Differential pay for the period covered by the problem;
3.4 Lemuel’s holiday pay for Dec. 24;
3.5 Lemuel’s total salary plus all the applicable premium on the for the period
covered by the problem;

2 points each.

3.1 Lemuel’s receives a daily income; basic pay is P1,000 a day.

3.2 Lemuel is not entitled to an overtime pay because he falls under the coverage of being
a managerial employee given that he supervises a team of 7 agents, effectively
recommends for their promotion for time to time, and sometimes imposed disciplinary
sanction. According to Article 82, the provisions regarding overtime pay does not apply to
managerial employees, and others.
3.3 Lemuel is not entitled to Night Shift Differential pay according to Article 82 of the Labor
Code.
3.4 Lemuel is not entitled to holiday pay as well according to Article 82 of the Labor Code.
3.5 Lemuel will still get only P1,000 for the day’s work.
[20]
Art. 87. Overtime work. - Work may be performed beyond eight (8) hours a day provided that the
employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus at
least twenty-five (25%) per cent thereof. Work performed beyond eight hours on a holiday or rest day shall
be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day
plus at least thirty percent thereof."
[21]
Art. 93. Compensation for rest day, Sunday or holiday work. - (a) Where an employee is made or
permitted to work on his scheduled rest day, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage. An employee shall be entitled to such additional compensation for work
performed on Sunday only when it is his established rest day.

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(b) When the nature of the work of the employee is such that he has no regular workdays and no regular
rest days can be scheduled, he shall be paid an additional compensation of at least thirty percent (30%) of
his regular wage for work performed on Sundays and holidays.
(c) Work performed on any special holiday shall be paid an additional compensation of at least thirty
percent (30%) of the regular wage of the employee. Where such holiday work falls on the employees
scheduled rest day, he shall be entitled to an additional compensation of at least fifty percent (50%) of his
regular wage.
(d) Where the collective bargaining agreement or other applicable employment contract stipulates the
payment of a higher premium pay than that prescribed under this Article, the employer shall pay such
higher rate.
[22]
Art. 95. Right to Service Incentive Leave. (a) Every employee who has rendered at least one year of
service shall be entitled to a yearly service incentive leave of five days with pay. x x x.

IV.
NIGHT WORKERS
(5pts)

4.1 Who are “night workers”?

Article 154 of Republic Act No. 10151 provides that 'Night worker' means any employed
person whose work requires performance of a substantial number of hours of night work
which exceeds a specified limit. This limit shall be fixed by the Secretary of Labor after
consulting the workers' representatives/labor organizations and employers.

4.2 Can workers demand a free health assessment before undergoing night work?

Article 155 of Republic Act No. 10151 provides that at their request, workers shall have
the right to undergo a health assessment without charge and to receive advice on how to
reduce or avoid health problems associated with their work:

(a) Before taking up an assignment as a night worker;

(b) At regular intervals during such an assignment; and

(c) If they experience health problems during such, an assignment which are not
caused by factors other than the performance of night work.

With the exception of a finding of unfitness for night work, the findings of such assessments
shall not be transmitted to others without the workers' consent and shall not be used to their
detriment.

4.3 What are the mandatory facilities available for workers performing night work?

Article 156 of Republic Act No. 10151 provides that suitable first·aid facilities shall be
made available for workers performing night work, including arrangements where such
workers, where necessary, can be taken immediately to a place for appropriate treatment.
The employers are likewise required to provide safe and healthful working conditions and
adequate or reasonable facilities such as sleeping or resting quarters in the establishment
and transportation from the work premises to the nearest point of their residence subject to
exceptions and guidelines to be provided by the DOLE.

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4.4 What happens to employees who are unfit for night work?

Article 157 of Republic Act No. 10151 provides that Night workers who are certified as
unfit for night work, due to health reasons, shall be transferred, whenever practicable, to a
similar job for which they are fit to work.

If such transfer to a similar job is not practicable, these workers shall be granted the same
benefits as other workers who are unable to work, or to secure employment during such
period.

A night worker certified as temporarily unfit for night work shall be given the same protection
against dismissal or notice of dismissal as other workers who are prevented from working for
reasons of health.

4.5 Can pregnant women be employed as night workers?

Article 158 of Republic Act No. 10151 provides that with regard to women night workers, the
law grants that those pregnant women or those nursing
their children for a period of at least 16 weeks before or after childbirth are allowed
alternative to night work, such as:

(a) transfer to day work when possible;

(b) the provision of social security benefits; or
(c) an extension of maternity leave.

V.

BEN AND MARGIE

(10 pts)

Ben and Margie have been living together for 8 years without the benefit of the
marriage. Ben and Margie have been working at a call center for over 5 years now.
Margie got pregnant and gave birth to twins by way of natural delivery. Ben is the
father. If you were employers of Ben and Margie. What benefits under the law are they
entitled to? How many leaves under the law does Ben have for the year? How many
leaves does Margie have under the law for the year?

SECTION 2 of Republic Act No. 8187 expressly provides that only married male
employee in the private and public sectors shall be entitled to a paternity leave of seven
(7) days with full pay for the first four (4) deliveries of the legitimate spouse with whom
he is cohabiting. Thus, Ben cannot be given this benefit because he is not married to
Margie.

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According to RA 7322, Unlike
paternity leave which requires a valid marriage
for it to be availed, the existence of a valid marriage is not required to
avail of maternity leave benefits.
Thus, Margie is entitled to the following basic conditions of the Maternity Leave:

o She will be granted 2 weeks leave before the expected date of

delivery.
o She will be granted 4 weeks leave after normal delivery or
abortion.
Maternity leave may be extended on account of illness arising out of the
pregnancy, delivery, abortion or miscarriage, which renders the woman
unfit for work. Extended maternity leave is without pay, but may be
charged against any unused leave credits.

VI.

JOEY
(10pts)

Joey’s annual salary is computed at P450.00 x 365 days in a year or a total of Php164,250.
He is a rank-and-file employee.

6.1 Is he a daily paid employee? Why?

Daily-Paid Employees

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6.2 Is he a monthly paid employee? Why?

For Monthly-Paid Employees

6.3 Is he entitled to holiday pay? Why?

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Only if he works during holiday will he be entitled to holiday pay. This is because
holiday is already accounted for in the computation of his Estimated Equivalent
Monthly Rate.

6.4 Is he underpaid? Why?

6.5 Is there a violation of the Labor Code? What?

VII

ALBERT AND INDAY

(5 pts)

Albert, a 40-year old employer, asked his domestic helper, Inday, to give him a private massage.
When Inday refused, Albert showed her Article 141 of the Labor Code, which says that one of the
duties of a domestic helper is to minister to the employer’s personal comfort and convenience.

[a] Is Inday’s refusal tenable? Explain. (3%)

[b] Distinguish briefly, but clearly, a "househelper" from a "homeworker." (2%)

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Presidential Decree No. 442, AS AMENDED

Article 141. "Domestic or household service" shall mean service in the employer’s home
which is usually necessary or desirable for the maintenance and enjoyment thereof and
includes ministering to the personal comfort and convenience of the members of the
employer’s household, including services of family drivers.

Chapter IV
EMPLOYMENT OF HOMEWORKERS

Article 153. Regulation of industrial homeworkers. The employment of industrial

homeworkers and field personnel shall be regulated by the government through the
appropriate regulations issued by the Secretary of Labor and Employment to ensure the
general welfare and protection of homeworkers and field personnel and the industries
employing them.

Article 154. Regulations of Secretary of Labor. The regulations or orders to be issued

pursuant to this Chapter shall be designed to assure the minimum terms and conditions of
employment applicable to the industrial homeworkers or field personnel involved.

Article 155. Distribution of homework. For purposes of this Chapter, the "employer" of
homeworkers includes any person, natural or artificial who, for his account or benefit, or on
behalf of any person residing outside the country, directly or indirectly, or through an
employee, agent contractor, sub-contractor or any other person:

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Delivers, or causes to be delivered, any goods, articles or materials to be processed or
fabricated in or about a home and thereafter to be returned or to be disposed of or distributed
in accordance with his directions; or

Sells any goods, articles or materials to be processed or fabricated in or about a home and
then rebuys them after such processing or fabrication, either by himself or through some
other person.

VIII

CONTRACTUALIZATION

(5 pts)

In her State of the Nation Address, the President stressed the need to provide an investor-friendly
business environment so that the country can compete in the global economy that now suffers
from a crisis bordering on recession. Responding to the call, Congress passed two innovative
legislative measures, namely: (1) a law abolishing the security of tenure clause in the Labor Code;
and (2) a law allowing contractualization in all areas needed in the employer’s business
operations. However, to soften the impact of these new measures, the law requires that all
employers shall obtain mandatory unemployment insurance coverage for all their employees.

The constitutionality of the two (2) laws is challenged in court. As judge, how will you rule? (5%)

I-a. Policies enshrined in Section 3, Article XIII of the Philippine Constitution not covered by Article 3 of the
Labor Code
 Guarantee of the right of all workers to peaceful concerted activities, including the right to strike in
accordance with law.
 Entitlement of the employee to a living wage.
 Employee participation in policy and decision-making processes affecting their rights and benefits
as may be provided by law.
 Promotion of the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

I-b. NLRC is correct. The Labor Arbiter’s citing of Article 4 of the Labor Code in the present case is
misplaced. The provision explicitly provides that ONLY when there is a doubt on the implementation and
interpretation of the Labor Code provisions will it be resolved in favor of labor; otherwise, it should be ruled
in accordance with the law.
The Labor Code provides that one of the just causes for an employment to be terminated is the “commission
of a crime or offense by the employee against the person of his employer…” likewise serious misconduct is
a ground for termination. It is clear from the text of the provision that the serious misconduct committed by
Clarito can be a ground for dismissal. As to whether the crime has been proven or if necessary due course
was given, is beyond the ambit of the Labor Code. Thus, Article 4 cannot be relied upon in the present case
on whether there was a legal or an illegal dismissal.
In this instance, interpretation is not necessary because the law is clear and it clearly applies to the instant
set of facts such that because Clarito committed serious misconduct he may be legally dismissed subject to
compliance with due process requirements of the Labor Code.

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IX

JOLLI-MAC

(5 pts)

Jolli-Mac Restaurant Company (Jolli-Mac) owns and operates the largest food chain in the
country. It engaged Matiyaga Manpower Services, Inc. (MMSI), a job contractor registered with
the Department of Labor and Employment, to provide its restaurants the necessary personnel,
consisting of cashiers, motorcycle delivery boys and food servers, in its operations. The Service
Agreement warrants, among others, that MMSI has a paid- up capital of P2,000,000.00; that it
would train and determine the qualification and fitness of all personnel to be assigned to Jolli-
Mac; that it would provide these personnel with proper Jolli-Mac uniforms; and that it is
exclusively responsible to these personnel for their respective salaries and all other mandatory
statutory benefits.

After the contract was signed, it was revealed, based on research conducted, that MMSI had no
other clients except Jolli- Mac, and one of its major owners was a member of the Board of
Directors of Jolli-Mac.

[a] Is the Service Agreement between Jolli-Mac and MMSI legal and valid? Why or why not? (3%)

[b] If the cashiers, delivery boys and food servers are not paid their lawful salaries, including
overtime pay, holiday pay, 13th month pay, and service incentive leave pay, against whom may
these workers file their claims? Explain. (2%)

no, , it is not legal and valid because MMSI is engaged in labor only contracting. For one, the
workers sullpied by MMSI to Jolli-Mac are performing servies which are directly related to the
principal business of Jolli-Mac. This is so because the duties performed by the workers are
integrak steps in or aspects of the essential operations of the principal. For another, MMSI was
organized by Jolli-Mac itself to supply its personnel requirements.

[alt. answer]

-the service agreement is valid. The law, Art. 106 does not invalidate an independent contractors
agreement because an independent contractor is one of the major owners of the employing
establishment. MMSI, is an independent business, adequately capitalized and assumed all the
responsibilities of a legitimate independent contractor.

B - they may file their claims against Jolli-Mac. A finding that MMSI is a labor only
contractor is equivalent to declaring there is an employer-employee relationship
between Jolli-Mac and the workers of MMSI. The liability of Jolli-Mac visavis the
workers of MMSI if for a comprehensive purpose, ie, not only for the unpaid wages
but for all claims under the labor … his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the same
manner and extent, that he is liable to employee directly employed by him.

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PEDRO AND SUPER COMFY HOTEL

(5pts)

Super Comfort Hotel employed a regular pool of “extra waiters” who are called or asked to
report for duty when the Hotel’s volume of business is beyond the capacity of the regularly
employed waiters to undertake. Pedro has been an “extra waiter” for more than 10 years. He is
also called upon to work on weekends, on holidays and when there are big affairs at the hotel.

What is Pedros’ status as an employee under the Labor Code? Why? Explain your answer fully.
(5%)

Pedro is considered a regular employee from being a casual employee in the beginning.
The Labor Code defines a regular employee by specifying its two kinds:
1. those who are engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer; and
2. those casual employees who have rendered at least one year of service, whether continuous or
broken, with respect to the activity in which they are employed.
By the definition of the Labor Code, Pedro can be considered a regular employee since he has been a
worker for Super Comfort Hotel for over 10 years. Since the law didn’t qualify whether the year of service is
continuous or broken, it can be taken as applicable to Pedro’s case.

- Pedro is deemed to be a regular employee.

According to Article 295, a regular employee is one who is engaged to perform activities
which are necessary and desirable in the usual business or trade of the employer as against
those which are undertaken for a specific project or are seasonal. It is obvious that Pedro is
performing necessary and desirable activities in the usual business of the hotel. Without
him, there will be an overload of work that the regular waiters have to undertake, causing
inefficiency and undesirable reputation to the services of hotel.

But even if the contrary was true that Pedro’s services were not necessary, it is an
uncontested fact that he has been doing this for more than 10 years. The provision of Article
295 further provides that, he who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered as regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity
exists. Hence, under this second criterion, Pedro is still eligible to become a regular
employee.

XI

PIZCORP

(10 pts)

The Pizza Corporation (PizCorp) and Ready Supply Cooperative (RSC) entered into a “service
agreement” wherein RSC, in consideration of service fees to be paid by PizCorp, will exclusively

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supply PizCorp with a group of RSC motorcyle-owning cooperative members who will
henceforth perform PizCorp’s pizza delivery service. RSC assumes — under the agreement —
full obligation for the payment of the salaries and other statutory monetary benefits of its
members deployed to PizCorp. The parties also stipulated that there shall be no employer-
employee relationship between PizCorp and the RSC members. However, if PizCorp is
materially prejudiced by any act of the delivery crew that violates PizCorp’s directives and
orders, PizCorp can directly impose disciplinary actions on, including the power to dismiss, the
erring RSC member/s.

a) Is the contractual stipulation that there is no employer-employee relationship binding on labor

officials? Why? Explain fully. (3%)

b) Based on the test/s for employer-employee relationship, determine the issue of who is the
employer of the RSC members. (4%)

c) Assume that RSC has a paid-up capitalization of P1,000,000.00. Is RSC engaged in “labor only”
contracting, permissible job contracting or simply, recruitment? (3%)

IV-a. No, labor officials are not bound by the contract itself but by the totality of the facts and circumstances
surrounding the situation.
Whether there exists an employer-employee relationship is a question of fact. In determining the existence
of such, jurisprudence has adhered to the four-fold test, which are as follows:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employer's power to control the employee with respect to the means and method by which the work
is to be accomplished.

If the enumeration above are met, it is then without doubt that there exists an employer-employee
relationship. Jurisprudence also has it that even if only the last item, which is the power of control, is the only
item present, it can still be believed that there is an employer-employee relationship. The said power of
control is the most crucial and most determinative factor.

- No, the contractual stipulation is not binding because the courts have relied in the control test in
determining the existence of employer-employee relationship, coupled with analysis of the
circumstances of the whole economic activity. Contract itself does not bind the relationship
because it merely is an agreement, which may deviate from the actual activity of the worker
manifesting the real intention of the parties. Thus, the control test is the primordial consideration
in determining the presence of employer-employee relationship, not solely by the contract.

IV-b.
In the eyes of the law, PizCorp is the employer of the RSC members.

In the main, there is an express contracting agreement between RSC and PizCorp and all of the items in the
four-fold test are not present. There should have been no employer-employee relationship between PizCorp
and the RSC members. However, given the fact that RSC supplies human resources exclusively for PizCorp
and the members are a group of motorcycle-owning cooperative, it is apparent that RSC is a labor-only
contracting, which the law prohibits. According to Labor Advisory No. 10 of the Department of Labor and
Employment, the effect of the Prohibition Against Labor-Only Contracting is that the workers of labor-only
contractor/subcontractor are considered employees of the principal – in the case at bar, PizCorp is the
principal. Hence, RSC and Pizcorp engaging in a prohibited agreement of labor-only contracting, in effect
makes the former’s members/workers to be employees of the latter.

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- the employer of RSC is PizCorp.

the four-fold test in determining employer-employee r relationship is: (1) the selection and
engagement of the employees; (2) the payment of wages; (3) the power of dismissal; and (4) the
power of control the employee’s conduct.

Among this four, the power of control over the employees’ conduct is the most crucial and
determinative indicator of the presence or absence of an employer-employee relationship.
Applying the contril test, PizCorp is the employer of RSC members because “if PizCorp is
materially prejudiced by any act of the delivery crew that violated PizCorp’s directives and
orders, PizCorp can directly impose disciplinary sanctions on, including the power to dismiss,
the erring RSC members”. Clearly, PizCorp controls the RSC members’ conduct not only as to the
end to be achieved but also as to the means of achieving the ends.

-Generally, the independent contractor is the employer of the workers providing services for
another company as may be stipulated in the contract agreement between the company and the
independent contractor. However, where the workers are mandated to follow directives and
orders from the company, the company is now vested as the employer of the workers following
the control test. PizCorp is now vested as the employer of RSC members.

Despite the stipulation that there will be no employer-employee relationship between PizCorp
and the workers, the imposition of disciplinary actions by PizCorp whenever they will be
prejudiced by the workers’ violation of the directives and orders of the company, is in effect,
tantamount to subjecting themselves under the control of PizCorp. The RCS members are bound
to follow the directives of PizCorp, which, in applying the control test, is sufficient enough to
prove that there exist an employer-employee relationship between the workers and PizCorp.
Furthermore, PizCorp had the power to dismiss over the erring workers, which is one of the
economic conditions that will help determine the existence of an employer-employee
relationship.

IV-c.
Assuming that RSC has a paid-up capitalization, it can be inferred that they are engaged in a permissible job
contracting.

It cannot be a labor-only contracting since the law provides that in labor-only contracting, the contractor does
not have substantial capital or investment related to the job, work or service to be performed by the
members/workers. It cannot also be recruitment because according to the facts of the case, the payment of
the salaries of the workers will be assumed by RSC and not from PizCorp, where work shall be rendered.

In a permissible job contracting, the law requires that the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its own
manner and method, and free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees
entitlement to all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social and welfare benefits.

Looking at the facts of the case, RSC can be identified as having an independent business because it has
contracted to do the work not subject to the control of the employer, PizCorp. PizCorp does not have control
of the performance of drivers and may only intervene when PizCorp is materially prejudiced by any act of
the delivery crew that violates PizCorp’s directives and orders. The workers are hired by RSC and paid by
RSC. True that they may be fired by PizCorp but only under specified circumstances.

On the second condition, RSC has a substantial capital.

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The last condition is met because, as mentioned in the case, the workers are a group of RSC motorcyle-
owning “cooperative members;” thus, already exercising the right to self-organization.

RSC has met all the conditions required to be a permissible or legitimate job contracting.

-no because the paid up capitalization of P1,000,000 is not sufficient. Pursuant to the DO 174
Series of 2017, the term “sufficient capital” means a paid-up capital or net worth of at least P5
million. Generally,

[suggested answer]

-RSC is engaged in labor only contracting.

Generally, the presumption is that the contractor is a labor-only contracting unless such
contractor overcomes the burden of proving that it has a substantial capital, investment, tools and
the like. It is very apparent that RSC has no sufficient capital of P5 million, pursuant to DO 174,
Series of 2017. Apart from the substantial capitalization or investment in the form of tools,
equipment, machinery and work premises, other factors are need to be considered like (a)
whether the contractor is carrying on an independent business; (b) the nature and extent of the
work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to assign
the performance of specific piece of work; (f) the control and supervision of the workers; (g) the
power of the employer with respect to the hiring, firing and payment of workers of the
contractor; (h) the control of the premises; (i) the duty to supply premises, tools, appliances,
materials, and labor; and (j) the mode, manner and terms of payment.

Also consider other circumstances like (1) the workers placed by RSC are performing activities
which are directly related to the principal business of PizCorp and (2) RSC is not free from the
control and direction of PizCorp in all matters connected with the performance of the work.

XII

CASE OF THE WAITERS

(10pts)

Complainants had worked five (5) years as waitresses in a cocktail lounge owned by the
respondent. They did not receive any salary directly from the respondent but shared in all service
charges collected for food and drinks to the extend of 75%. With respondent’s prior permission,
they could sit with and entertain guests inside the establishment and appropriate for themselves
the tips given by guests. After five (5) years, the complainants’ individual shares in the collected
service charges dipped to below minimum wage level as a consequence of the lounge’s marked
business decline. Thereupon, complainants asked respondent to increase their share in the
collected service charges to 85%, or the minimum wage level, whichever is higher.

Respondent terminated the services of the complainants who countered by filing a consolidated
complaint for unlawful dismissal, with prayer for 85% of the collected services or the minimum
wage for the appropriate periods, whichever is higher. Decide.

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- Article 138 of the Labor Code provides the classification of certain women workers.
They are any woman who is permitted or suffered to work, with or without
compensation, in any night club, cocktail lounge, massage clinic, bar or similar
establishment, under the effective control or supervision of the employer for a substantial
period of time as determined by the Secretary of Labor, shall be considered as an
employee of such establishment for purposes of labor and social legislation”. Since
complainants are under the effective control and supervision of respondent, they are
therefore considered as employees and entitled to full backwages based on the minimum
wage for the appropriate period plus 85% of the collected service charges.

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