VI.

Administration and Enforcement and Job Contracting

A. Visitorial and Enforcement Power of DOLE
1. Article 128 Labor Code;
Art. 128. Visitorial and enforcement power.
a. The Secretary of Labor and Employment or his duly authorized representatives, including labor
regulation officers, shall have access to employer’s records and premises at any time of the day
or night whenever work is being undertaken therein, and the right to copy therefrom, to
question any employee and investigate any fact, condition or matter which may be necessary to
determine violations or which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations issued pursuant thereto.

b. Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of Labor and
Employment or his duly authorized representatives shall have the power to issue compliance
orders to give effect to the labor standards provisions of this Code and other labor legislation
based on the findings of labor employment and enforcement officers or industrial safety
engineers made in the course of inspection. The Secretary or his duly authorized representatives
shall issue writs of execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were not
considered in the course of inspection. (As amended by Republic Act No. 7730, June 2, 1994).

An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this Article may be appealed to the latter. In case said order involves a
monetary award, an appeal by the employer may be perfected only upon the posting of a cash
or surety bond issued by a reputable bonding company duly accredited by the Secretary of
Labor and Employment in the amount equivalent to the monetary award in the order appealed
from. (As amended by Republic Act No. 7730, June 2, 1994)

c. The Secretary of Labor and Employment may likewise order stoppage of work or suspension of
operations of any unit or department of an establishment when non-compliance with the law or
implementing rules and regulations poses grave and imminent danger to the health and safety
of workers in the workplace. Within twenty-four hours, a hearing shall be conducted to
determine whether an order for the stoppage of work or suspension of operations shall be lifted
or not. In case the violation is attributable to the fault of the employer, he shall pay the
employees concerned their salaries or wages during the period of such stoppage of work or
suspension of operation.

d. It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render
ineffective the orders of the Secretary of Labor and Employment or his duly authorized
representatives issued pursuant to the authority granted under this Article, and no inferior court
or entity shall issue temporary or permanent injunction or restraining order or otherwise
assume jurisdiction over any case involving the enforcement orders issued in accordance with
this Article.

e. Any government employee found guilty of violation of, or abuse of authority, under this Article
shall, after appropriate administrative investigation, be subject to summary dismissal from the

1
 service.

f. The Secretary of Labor and Employment may, by appropriate regulations, require employers to
keep and maintain such employment records as may be necessary in aid of his visitorial and
enforcement powers under this Code.
2. Department Order 183-17;
3. Quasi-judicial power of Regional Directors; Article 129
Art. 129. Recovery of wages, simple money claims and other benefits. Upon complaint of any
interested party, the Regional Director of the Department of Labor and Employment or any of the duly
authorized hearing officers of the Department is empowered, through summary proceeding and after
due notice, to hear and decide any matter involving the recovery of wages and other monetary claims
and benefits, including legal interest, owing to an employee or person employed in domestic or
household service or househelper under this Code, arising from employer-employee relations: Provided,
That such complaint does not include a claim for reinstatement: Provided further, That the aggregate
money claims of each employee or househelper does not exceed Five thousand pesos (P5,000.00). The
Regional Director or hearing officer shall decide or resolve the complaint within thirty (30) calendar days
from the date of the filing of the same. Any sum thus recovered on behalf of any employee or
househelper pursuant to this Article shall be held in a special deposit account by, and shall be paid on
order of, the Secretary of Labor and Employment or the Regional Director directly to the employee or
househelper concerned. Any such sum not paid to the employee or househelper because he cannot be
located after diligent and reasonable effort to locate him within a period of three (3) years, shall be held
as a special fund of the Department of Labor and Employment to be used exclusively for the
amelioration and benefit of workers.
4. Any decision or resolution of the Regional Director or hearing officer pursuant to this
provision may be appealed on the same grounds provided in Article 223 of this Code,
within five (5) calendar days from receipt of a copy of said decision or resolution, to the
National Labor Relations Commission which shall resolve the appeal within ten (10)
calendar days from the submission of the last pleading required or allowed under its
rules.
5. The Secretary of Labor and Employment or his duly authorized representative may
supervise the payment of unpaid wages and other monetary claims and benefits,
including legal interest, found owing to any employee or househelper under this
Code. (As amended by Section 2, Republic Act No. 6715, March 21, 1989)

6. Labor Code; Rule XI Book 3 of the Labor Code;

7. Cases:
a. People Broadcasting (Radyo Bombo) vs Secretary
of Labor and Employment GR No. 179652, March 6,
2012.
To recapitulate, if a complaint is brought before the DOLE to give effect to the labor standards provisions
of the Labor Code or other labor legislation, and there is a finding by the DOLE that there is an existing
employer-employee relationship, the DOLE exercises jurisdiction to the exclusion of the NLRC. If the DOLE
finds that there is no employer-employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement, the jurisdiction is
properly with the Labor Arbiter, under Art. 217(3) of the Labor Code, which provides that the Labor Arbiter
has original and exclusive jurisdiction over those cases involving wages, rates of pay, hours of work, and
other terms and conditions of employment, if accompanied by a claim for reinstatement. If a complaint is
filed with the NLRC, and there is still an existing employer-employee relationship, the jurisdiction is

2
properly with the DOLE. The findings of the DOLE, however, may still be questioned through a petition for
certiorari under Rule 65 of the Rules of Court.

B. Job Contracting/Labor only Contracting

1. Articles 106 to 109 Labor Code

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person
for the performance of the former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with 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 employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as
well as differentiations within these types of contracting and determine who among the parties involved
shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.

There is “labor-only” contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

Art. 107. Indirect employer. The provisions of the immediately preceding article shall likewise apply to
any person, partnership, association or corporation which, not being an employer, contracts with an
independent contractor for the performance of any work, task, job or project.

Art. 108. Posting of bond. An employer or indirect employer may require the contractor or subcontractor
to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the
wages due the employees should the contractor or subcontractor, as the case may be, fail to pay the
same.

Art. 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability under
this Chapter, they shall be considered as direct employers.

2. Department Order 174

3. DOLE Dept Circular No. 1 Series of 2017
4. Cases:
i. PBCOM vs NLRC and Orpiada – GR L 66598

3
 (1986)
We are unable to agree with the bank and (CESI) on this score. The definition of "labor-only" contracting
in Rule VIII, Book III of the Implementing Rules must be read in conjunction with the definition of job
contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor of the bank was
not the performance of a specific — job for instance, the carriage and delivery of documents and parcels
to the addresses thereof. There appear to be many companies today which perform this discrete service,
companies with their own personnel who pick up documents and packages from the offices of a client or
customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the
addresses. In the present case, the undertaking of (CESI) was to provide its client-thebank-with a certain
number of persons able to carry out the work of messengers. Such undertaking of CESI was complied with
when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized
the premises and office equipment of the bank and not those of (CESI) Messengerial work-the delivery of
documents to designated persons whether within or without the bank premises — is of course directly
related to the day-to-day operations of the bank. Section 9(2) quoted above does not require for its
applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of
business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and
placement corporation placing bodies, as it were, in d ifferent client companies for longer or shorter
periods of time. It is this factor that, to our mind, distinguishes this case from American President v. Clave
et al, 114 SCRA 826 (1982) if indeed distinguishing way is needed.
ii. Sasan Sr et al vs NLRC GR 176240, October 17,
2008

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put
out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal.35 A person is considered
engaged in legitimate job contracting or subcontracting if 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.36

In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or

subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal.37 In labor-only contracting, the following elements are present:

4
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and

(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.38

In distinguishing between permissible job contracting and prohibited labor-only contracting,39 we

elucidated in Vinoya v. National Labor Relations Commission,40 that it is not enough to show substantial
capitalization or investment in the form of tools, equipment, etc. Other facts that may be considered
include the following: whether or not the contractor is carrying on an independent business; the nature
and extent of the work; the skill required; the term and duration of the relationship; the right to assign
the performance of specified pieces of work; the control and supervision of the work to another; the
employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control
of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode and
manner or terms of payment.41 Simply put, the totality of the facts and the surrounding circumstances
of the case are to be considered.42 Each case must be determined by its own facts and all the features of
the relationship are to be considered.43

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipments, implements, machineries and work premises, actually and directly used
by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.47 An independent contractor must have either substantial capital or investment in the
form of tools, equipment, machineries, work premises, among others. The law does not require both
substantial capital and investment in the form of tools, equipment, machineries, etc.48 It is enough that
it has substantial capital. In the case of HI, it has proven both.

VII. Post-Employment
A. Security of Tenure
1. Substantial due process
a. Just Causes for dismissal
i. Article 283 Labor Code

Art. 282. Termination by employer. An employer may terminate an employment for any of the following
causes:

a. Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;

b. Gross and habitual neglect by the employee of his duties;

c. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

d. Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

5
 e. Other causes analogous to the foregoing.
b. Authorized cause for dismissal
i. Article 284 Labor Code

Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is prohibited by
law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid
separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1)
whole year.

c. Application of Union security clause

Union security is a generic term which is applied to and comprehends closed shop, union shop,
maintenance of membership or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period for their
continued employment. There is maintenance of membership shop when employees, who are union
members as of the effective date of the agreement, or who thereafter become members, must maintain
union membership as a condition for continued employment until they are promoted or transferred out
of the bargaining unit or the agreement is terminated. A closed-shop, on the other hand, may be defined
as an enterprise in which, by agreement between the employer and his employees or their
representatives, no person may be employed in any or certain agreed departments of the enterprise
unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing
of a union entirely comprised of or of which the employees in interest are a part.
2. Procedural Due Process
a. Twin Notice requirement
b. Ample opportunity to be heard
The first notice, which may be considered as the proper charge, serves to apprise the employee of the
particular acts or omissions for which his dismissal is sought. The second notice on the other hand seeks
to inform the employee of the employers decision to dismiss him. This decision, however, must come only
after the employee is given a reasonable period from receipt of the first notice within which to answer
the charge and ample opportunity to be heard and defend himself with the assistance of a representative
if he so desires. This is in consonance with the express provision of the law on the protection to labor and
the broader dictates of procedural due process. Non-compliance therewith is fatal because these
requirements are conditions sine qua non before dismissal may be validly effected
3. Effect of sale of business/merger
Peñafrancia Travel and Tours vs. Sarmiento (2010)
On this ground, petitioner terminated the employment of respondents. However, what petitioner
apparently made was a transfer of ownership. It is true that, as invoked by petitioner, in Manlimos, et al.

6
v. NLRC, et al.,[20] we held that a change of ownership in a business concern is not proscribed by law. Lest
petitioner forget, however, we also held therein that the sale or disposition must be motivated by good
faith as a condition for exemption from liability.[21] Thus, where the charge of ownership is done in bad
faith, or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the
employees and is held liable for the transgressions of his or her predecessor.

“A change of ownership in a business concern is not proscribed by law.11 In Central Azucarera del
Danao vs. Court of Appeals,12 this Court-stated:

There can be no controversy for it is a principle well-recognized, that it is within the employer's
legitimate sphere of management control of the business to adopt economic policies or make some
changes or adjustments in their organization or operations that would insure profit to itself or protect
the investment of its stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets
and properties which may bring about the dismissal or termination of its employees in the process. Such
dismissal or termination should not however be interpreted in such a manner as to permit the employer
the very concept of social justice.

In a number of cases on this point, the rule has been laid down that the sale or disposition must be
motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of a
business establishment has no liability to the employees of the transfer or to continue employing them.
Nor is the transferee liable for past unfair labor practices of the previous owner, except, when the
liability therefor is assumed by the new employer under the contract of sale, or when liability arises
because of the new owner's participation in thwarting or defeating the rights of the employees.13

Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the
transferor employees as there is no law compelling such absorption. The most that the transferee may
do, for reasons of public policy and social justice, is to give preference to the qualified separated
employees in the filling of vacancies in the facilities of the purchaser.”

But, in this case, there is no successor-employer because there was no actual change of ownership. The
fact remains that the Cu family continues to operate petitioners business. Despite the alleged recent sale
to SCBC, represented by Willy Deterala, petitioner failed to refute the allegations of respondents that the
Cu family still continues to own and operate petitioner, or even to show that Willy Deterala is actually in
charge of petitioners business. Petitioner did not confront this issue head-on, and its failure to do so is
fatal to its cause. Petitioner having failed to discharge its burden of submitting sufficient and convincing
evidence required by law, we hold that respondents were illegally dismissed.

Corporate acquisitions
Asset Sales Stock Sales
Sale
In stock sales, the individual or corporate shareholders
Corporate entity sells all or substantially all of its
sell a controlling block of stock to new or existing
assets to another entity.
shareholders.
Obligation of Seller
A shift in the composition of its shareholders will
Seller in good faith is authorized to dismiss the not affect its existence and continuity. Notwithstanding
affected employees, but is liable for the payment the stock sale, the corporation continues to be the
of separation pay under the law. employer of its people and continues to be liable for
the payment of their just claims.
Obligation of Buyer

7
 The buyer in good faith, on the other hand, is not
The corporation or its new majority
obliged to absorb the employees affected by
shareholders are not entitled to lawfully
the sale, nor is it liable for the payment of their
dismiss corporate employees absent a just
claims. The most that it may do, for reasons of
or authorized cause. [SME Bank, Inc. v. De
public policy and social justice, is to give
Guzman, G.R. No. 184517,
preference to the qualified separated personnel
186641 (2013)]
of the selling firm.

EC. 80. Effects of merger or consolidation. — The merger or consolidation, as provided in the preceding
sections shall have the following effects:
5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in the same manner as if such surviving or consolidated
corporation had itself incurred such liabilities or obligations; and any claim, action or proceeding pending
by or against any of such constituent corporations may be prosecuted by or against the surviving or
consolidated corporation, as the case may be. Neither the rights of creditors nor any lien upon the
property of any of such constituent corporations shall be impaired by such merger or consolidation.
Although this provision does not explicitly state the merger's effect on the employees of the absorbed
corporation, Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-Federation of Unions in
BPI Unibank71 has ruled that the surviving corporation automatically assumes the employment contracts of
the absorbed corporation, such that the absorbed corporation's employees become part of the manpower
complement of the surviving corporation, thus: ChanRoblesVi rt ualawlib ra ry

Taking a second look on this point, we have come to agree with Justice Brion's view that it is more in keeping
with the dictates of social justice and the State policy of according full protection to labor to deem employment
contracts as automatically assumed by the surviving corporation in a merger, even in the absence of an
express stipulation in the articles of merger or the merger plan. In his dissenting opinion, Justice Brion
reasoned that: ChanRoblesVi rtua lawlib rary

To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared policies on
work, labor and employment, and the specific FEBTC-BPI situation — i.e., a merger with complete "body and
soul" transfer of all that FEBTC embodied and possessed and where both participating banks were willing
(albeit by deed, not by their written agreement) to provide for the affected human resources by recognizing
continuity of employment — should point this Court to a declaration that in a complete merger situation where
there is total takeover by one corporation over another and there is silence in the merger agreement on what
the fate of the human resource complement shall be, the latter should not be left in legal limbo and should be
properly provided for, by compelling the surviving entity to absorb these employees. This is what Section 80
of the Corporation Code commands, as the surviving corporation has the legal obligation to assume all the
obligations and liabilities of the merged constituent corporation.

Not to be forgotten is that the affected employees managed, operated and worked on the transferred assets
and properties as their means of livelihood; they constituted a basic component of their corporation during its
existence. In a merger and consolidation situation, they cannot be treated without consideration of the
applicable constitutional declarations and directives, or, worse, be simply disregarded. If they are so treated,
it is up to this Court to read and interpret the law so that they are treated in accordance with the legal
requirements of mergers and consolidation, read in light of the social justice, economic and social provisions
of our Constitution. Hence, there is a need for the surviving corporation to take responsibility for the affected
employees and to absorb them into its workforce where no appropriate provision for the merged corporation's
human resources component is made in the Merger Plan.

The merger of a corporation with another does not operate to dismiss the employees of the corporation
absorbed by the surviving corporation. This is in keeping with the nature and effects of a merger as
provided under law and the constitutional policy protecting the rights of labor. The employment of the
absorbed employees subsists. Necessarily, these absorbed employees are not entitled to separation pay
on account of such merger in the absence of any other ground for its award.
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION, Petitioner, v. UNOCAL PHILIPPINES, INC. (NOW
KNOWN AS CHEVRON GEOTHERMAL PHILIPPINES HOLDINGS, INC.) (2016)

8
 C. DO No. 147-15
D. Cases:
1. Aliviado et al vs Procter and Gamble Phil GR No.
160506 March 9, 2010
Misconduct has been defined as improper or wrong conduct; the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent
and not mere error of judgment. The misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant.46 To be a just cause for dismissal, such misconduct (a)
must be serious; (b) must relate to the performance of the employee’s duties; and (c) must show that the
employee has become unfit to continue working for the employer.47

Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the
employee concerned holds a position of responsibility or of trust and confidence. As such, he must be
invested with confidence on delicate matters, such as custody, handling or care and protection of the
property and assets of the employer. And, in order to constitute a just cause for dismissal, the act
complained of must be work-related and must show that the employee is unfit to continue to work for
the employer.50 In the instant case, the petitioners-employees of Promm-Gem have not been shown to
be occupying positions of responsibility or of trust and confidence. Neither is there any evidence to show
that they are unfit to continue to work as merchandisers for Promm-Gem.

B. Consequences of Dismissal
a. Full Backwages
b. Reinstatement
i. When is it immediately executory
ii. Exceptions (when reinstatement is not ordered)
c. Payroll Reinstatement
d. Separation Pay
i. When payable
ii. Basis for computation
e. Cases:
i. Bustamante et a vs NLRC GR 111651 Nov 28,
1996
We do not sustain public respondent's theory that private respondent should not be made to compensate
petitioners for backwages because its termination of their employment was not made in bad faith. The
act of hiring and re-hiring the petitioners over a period of time without considering them as regular
employees evidences bad faith on the part of private respondent. The public respondent made a finding
to this effect when it stated that the subsequent rehiring of petitioners on a probationary status "clearly
appears to be a convenient subterfuge on the part of management to prevent complainants (petitioners)
from becoming regular employees."5

Reliance by public respondent on the case of Manila Electric Company vs. NLRC6 is misplaced. In that case,
the Court ordered the reinstatement of an employee, without backwages because, although there was a
valid cause for dismissal, the penalty was too severe for an employee who had rendered service for an
uninterrupted period of twenty (20) years with two commendations for honesty. In the case at bar, there
is no valid cause for dismissal. The employees (petitioners) have not performed any act to warrant
termination of their employment. Consequently, petitioners are entitled to their full backwages and other
benefits from the time their compensation was withheld from them up to the time of their actual
reinstatement.

9
 ii. Paramount Vinyl Products Corp vs NLRC Gr No.
81200 October 17, 1990

But there is merit in the third point raised by respondents herein. The determination of the salary base
for the computation of backwages requires simply an application of judicial precedents defining the term
"backwages". Unfortunately, the Labor Arbiter erred in this regard. An unqualified award of backwages
means that the employee is paid at the wage rate at the time of his dismissal [Davao Free Worker Front
v. Court of Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments
Corporation v. Ople, G.R. No. 53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant &
Company v. NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the base
figure to be used in the computation of backwages due to the employee should include not just the basic
salary, but also the regular allowances that he had been receiving, such as the emergency living allowances
and the 13th month pay mandated under the law [See Pan-Philippine Life Insurance Corporation v. NLRC,
G.R. No. 53721, June 29, 1982, 144 SCRA 866; Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154
SCRA 166; Soriano v. NLRC, G.R. No. 75510, October 27, 1987, 155 SCRA 124; Insular Life Assurance Co.,
Ltd. v. NLRC, supra.] In his computation of the amount of backwages, the Labor Arbiter without legal basis
excluded the ECOLA. It is on this score alone that the Labor Arbiter's order dated November 27, 1985
should be set aside. The Court holds that notwithstanding the belated appeal by the UNION, the assailed
order should be modified with respect to the incorrect salary base used by the Labor Arbiter in his
computation of backwages. Where there is a patently improper application and interpretation of the law
on the part of administrative officers who are tasked to perform quasi-judicial functions, the Court will
not hesitate to disregard procedural rules so as to effect faithful adherence to that mandated under the
law.

iii. Santos vs NLRC GR No. 76721 September 21,

1987
The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights and,
secondly, the payment of backwages corresponding to the period from his legal dismissal up to actual
reinstatement. 2 The statutory intent on this matter is clearly discernible. Reinstatement restores the
employee who was unjustly dismissed to the position from which he was removed, that is, to his
status quo ante dismissal, while the grant of backwages allows the same employee to recover from the
employer that which he had lost by way of wages as a result of his dismissal. 3 These twin remedies —
reinstatement and payment of backwages — make the dismissed employee whole who can then look
forward to continued employment. Thus do these two remedies give meaning and substance to the
constitutional right of labor to security of tenure. 4 The two forms of relief are distinct and separate, one
from the other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-
availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the NLRC
found that her reinstatement was no longer feasible or appropriate. As the term suggests, separation pay
is the amount that an employee receives at the time of his severance from the service and, as correctly
noted by the Solicitor General in his Comment, is designed to provide the employee with "the wherewithal
during the period that he is looking for another employment." 5 In the instant case, the grant of separation
pay was a substitute for immediate and continued re-employment with the private respondent Bank. The
grant of separation pay did not redress the injury that is intended to be relieved by the second remedy of
backwages, that is, the loss of earnings that would have accrued to the dismissed employee during the

10
period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of
relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast,
is oriented towards the immediate future, the transitional period the dismissed employee must undergo
before locating a replacement job. It was grievous error amounting to grave abuse of discretion on the
part of the NLRC to have considered an award of separation pay as equivalent to the aggregate relief
constituted by reinstatement plus payment of backwages under Article 280 of the Labor Code. The grant
of separation pay was a proper substitute only for reinstatement; it could not be an adequate substitute
both for reinstatement and for backwages. In effect, the NLRC in its assailed decision failed to give to
petitioner the full relief to which she was entitled under the statute.

iv. Magana vs Medicard Philippines GR No. 174833

(2010)
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as
the reinstatement aspect is concerned, shall immediately be executory, even pending appeal The
employee shall either be admitted back to work under the same terms and conditions prevailing prior to
his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting
of a bond by the employer shall not stay the execution for reinstatement provided herein. (Emphasis
supplied)

Article 223 gives employers two options, namely, to (1) actually reinstate the dismissed employees or, (2)
constructively reinstate them in the payroll. Either way, this must be done immediately upon the filing of
their appeal, without need of any executory writ.

This unusual, mandatory order by law to execute reinstatement orders pending appeal, unheard of in
ordinary civil proceedings,[9] is a police power measure, grounded on the theory –

[t]hat the preservation of the lives of the citizens is a basic duty of the State, that is more vital than the
preservation of corporate profits. Then, by and pursuant to the same power, the State may authorize an
immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee
since that saving act is designed to stop, although temporarily since the appeal may be decided in favor
of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and its family.

Hence, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on
the part of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. On the other hand, if the employee has been reinstated during
the appeal period and such reinstatement order is reversed with finality, the employee is not required to
reimburse whatever salary he received for he is entitled to such, more so if he actually rendered services
during the period
v. Planters product vs NLRC GR No. 78524 (1989)
However, PPI erred in not integrating the allowances with the basic salary in the computation of the
separation pay. The salary base properly used in computing the separation pay should include not just
the basic salary but also the regular allowances that an employee has been receiving. (Insular Life
Assurance Co., Ltd. v. National Labor Relations Commission, 156 SCRA 740 [1987]; and Soriano v. National
Labor Relations Commission, 155 SCRA 124 [1987]).
The allowances of the remaining PPI employees were made part of their basic pay. This increased the
computation bases for their terminal benefits. (p. 51, Rollo- 78524). This should have been the case also

11
for the complainants/complainants-intervenors.
We adopt the Solicitor General's statement on the questioned death benefits that in any case, the death
benefits are payable only in the event of the death of the employee. Since petitioners and intervenors-
petitioners are still alive, they obviously are not entitled thereto. (p. 99, Rollo - 78739).
Finally, the complainants/complainants-intervenors are not entitled to share in the distribution of the
RPP. Under Section M, Part VII of the RPP, only existing employees of the Company have the right to
participate in the distribution of the assets of the fund.
vi. Islriz Trading vs Capada et al Gr 168501
January 31, 2011
We reiterate in this petition the settled view that employees are entitled to their accrued salaries during
the period between the Labor Arbiter's order of reinstatement pending appeal and the resolution of the
National Labor Relations Commission (NLRC) overturning that of the Labor Arbiter. Otherwise stated,
even if the order of reinstatement of the Labor Arbiter is reversed on appeal, the employer is still obliged
to reinstate and pay the wages of the employee during the period of appeal until reversal by a higher
court or tribunal. In this case, respondents are entitled to their accrued salaries from the time petitioner
received a copy of the Decision of the Labor Arbiter declaring respondents' termination illegal and
ordering their reinstatement up to the date of the NLRC resolution overturning that of the Labor Arbiter.
Can respondents collect their accrued salaries for the period between the Labor Arbiter's order of
reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter?
To come up with the answer to said question, we shall apply the two-fold test used in Garcia.
Was there an actual delay or was the order of reinstatement pending appeal executed prior to its
reversal? (Meron)
Now, the next question is: Was the delay not due to the employer's unjustified act or omission? (Hindi.
Kasalanan ng employer)
Failing to exercise the options in the alternative, petitioner must pay private respondents' salaries which
automatically accrued from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal
of the NLRC.
xxxx
x x x [S]ince private respondent's reinstatement pending appeal was effective only until its reversal by
the NLRC on April 28, 1999, they are no longer entitled to salaries from May 1, 1999 to March 15, 2001, as ordered by the Labor
Arbiter.

vii. Agabon vs NLRC Gr No. 158693, November 17,

2004
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under
Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under
Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due
process was observed; (3) the dismissal is without just or authorized cause and there was no due process;
and (4) the dismissal is for just or authorized cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee
is entitled to reinstatement without loss of seniority rights and other privileges and full backwages,
inclusive of allowances, and other benefits or their monetary equivalent computed from the time the
compensation was not paid up to the time of actual reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be held liable for non-compliance with
the procedural requirements of due process.

12
After carefully analyzing the consequences of the divergent doctrines in the law on employment
termination, we believe that in cases involving dismissals for cause but without observance of the twin
requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to
follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the
employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court
would be able to achieve a fair result by dispensing justice not just to employees, but to employers as
well.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
viii. Jaka Food vs Pakot et al GR No. 151378 March
28, 2005
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should
be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee;
and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply
with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by
the employer’s exercise of his management prerogative.
It is, therefore, established that there was ground for respondents’ dismissal, i.e., retrenchment, which is
one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established
that JAKA failed to comply with the notice requirement under the same Article. Considering the factual
circumstances in the instant case and the above ratiocination, we, therefore, deem it proper to fix the
indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
Corporation vs. NLRC,[11] we made the following declaration:
“The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the
employer, the affected employee is entitled to separation pay. This is consistent with the state policy of
treating labor as a primary social economic force, affording full protection to its rights as well as its
welfare. The exception is when the closure of business or cessation of operations is due to serious
business losses or financial reverses; duly proved, in which case, the right of affected employees to
separation pay is lost for obvious reasons
C. Preventive Suspension
D. Suspension of operations
a. Article 286
E. Resignations
a. Constructive Dismissal
b. Burden of proof

F. Retirement

a. Article 287 Labor Code

b. Amount and basis of retirement pay
c. Employee’s consent
i. Laya vs CA GR 205813 January 10, 2018
ii. Banco de Oro vs Sagaysay Gr. No. 214961
September 16, 2015
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five
(65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-

13
half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as
one whole year.

Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and
uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible
ages under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early
retirement plan. In other words, only the implementation and execution of the option may be unilateral,
but not the adoption and institution of the retirement plan containing such option. For the option to be
valid, the retirement plan containing it must be voluntarily assented to by the employees or at least by a
majority of them through a bargaining representative.

14