Legal Trends &

Updates on Labor Law

Management Prerogatives, Employee
Classification & Termination of Employment

 OUTLINE:
Management Prerogatives
Classification of Employees
Termination of Employment

Management
Prerogatives

ELEMENTS: Valid
exercise of
management
prerogatives
(Capitol Medical
Center v. Meriz; San

Miguel Brewery and Union Carbide cases)

The free will of the management to conduct
its own affairs to achieve its purpose cannot
be denied, PROVIDED THAT THE SAME IS
EXERCISED:
1. In good faith
2. For the advancement of the employers interest
3. Not to circumvent the rights of the employees

Prohibition against
Elective Office
Ymbong v. ABS-CBN, 07 March 2012

Can the company require its

employees who wish to run for
public office to file their letter of
resignation 30 days in advance?

 ABS-CBN was justified in implementing

its policy on employees who wish to run
for any public office or intends to join a
political group/party must file their
letter of resignation or leave of absence,
respectively, 30 days in advance.

Management may search office

computer to check on
misconduct; non-infringement
of right to privacy

Briccio Ricky A. Pollo vs. Chairperson

Karina Constantino-David, et al., G.R.

No. 181881. 18 October 2011
Q: May the search conducted on employees
office computer and copying of personal
files without his knowledge and consent, be
considered an infringement of the
employees constitution right to privacy?

Management may search office

computer to check on
misconduct; non-infringement
of right to privacy
A: No, It is not an infringement of the right to
privacy. The CSC had implemented a policy that puts
its employees on notice that they have no
expectation of privacy in anything they create, store,
send or receive on the office computers. Under this
policy, the CSC may monitor the use of the compute
resources using both automated or human means.
This implies that on-the-spot inspections may be
done to ensure that computer resources were used
only for legitimate business purposes.

Management may search office

computer to check on
misconduct; non-infringement
of right to privacy
Q: May the search on the employees
computer be considered as reasonable?

Management may search office

computer to check on
misconduct; non-infringement
of right to privacy
A: Yes. A search by a government employer
of an employees office is justified at
inception when there are reasonable grounds
for suspecting that it will turn up evidence
that the employee is guilty of work-related
misconduct. Under the facts obtaining, the
search conducted on petitioners computer
was justified at its inception and scope.

Stipulation against
Marriage
Duncan Association of DetailmanPTGWO and Pedro Tecson v. Glaxo
Wellcome Philippines Inc., G.R. No.
162994, 17 September 2004; 438
SCRA 434
Is management correct in having a
policy which prohibits its employees to
get married with employees of
competitor-firms?

Non-compete Clauses
Non-compete agreements are increasingly
being used by employers to protect
themselves by prohibiting or limiting their
employees and/or former employees from
working for a competitor, or from
misappropriating or divulging trade secrets
or other proprietary data, or unfairly solicit
former customers to their own benefit, to
the prejudice of the employer.

Imposition of weight
requirement
Armando G. Yrasuegui vs Philippines
Airlines, G.R. No. 168081, 17 October
2008. This case portrays the peculiar story
of an international flight steward who was
dismissed because of his failure to adhere to
the weight standards of the airline company.

Is PAL correct in requiring its employees to

maintain weight standards of the company?

 The Supreme Court ruled that the business of

PAL is air transportation. As such, it has
committed itself to safely transport its passenger.
In order to achieve this, it must necessarily rely on
its employees, most particularly the cabin flight
deck crew who are on board the aircraft. The
weight standards of PAL should be viewed as
imposing strict norms of discipline upon its
employees. In other words, the primary objective
of PAL in the imposition of the weight standards
for cabin crew is flight safety.

Reduction of Working
Days/ Hours
Linton Commercial vs. Hellera, 535
SCRA 434 (2007).
Can an employer reduce the number of
working days without proving that he
incurred substantial losses?

 No. It can only do so when:

a) There is an existing economic recession and
the employer has shown severe business
losses;
b) The reduction of working hours is temporary
in nature;
c) The employees had been notified and
consulted;
d) The reduction scheme is a more humane
alternative than retrenchment or
redundancy program.

 Manila Pavillion vs. Henry Delada,

G.R. 189947, 25 January 2012 May
an employee refuse to comply with
transfer order of Management by
raising
a grievance
RULESthis
ON as
TRANSFER:
It issue?
is the
prerogative of management to transfer an
employee where he can be most useful to
the company; Insubordination if not
followed.

 SC: No. The refusal to obey a valid

transfer order constitutes willful
disobedience of a lawful order of an
employer.

Grant of a bonus is a
management prerogative
Producers Bank of the Philippines vs. NLRC. 2001
An employer cannot be forced to distribute bonuses
when it can no longer afford to pay.

Lepanto Ceramics, Inc. vs. Lepanto Ceramics

Employees Association 02 March 2010 A bonus is
not a demandable and enforceable obligation, except
when it is made part of the wage, salary or
compensation of the employee. Thus, if the bonus is
integrated in the CBA, the same partakes the nature of
a demandable right. It becomes a contractual
obligation.

Contracting out of
services.
General rule: Management may contract out
services in the exercise of its management
prerogatives.

Doctrinal case: Asian Alcohol Corporation vs.

NLRC Jan 2000 The Supreme Court has held in
a number of cases that an employers good faith in
implementing a redundancy program is NOT
necessarily destroyed by the availment of the
services of an independent contractor, to replace
the services of the terminated employees.

Valid Job Contracting vs.

Labor-only Contracting
I. General Rule: Employees of an independent contractor are
not employees of the principal

II. Elements: Article 106, Labor Code; Impl Rules and Reg,
S8R8B3
There is a job-contracting permissible by law where the
contractor/agency carries on an INDEPENDENT business and
undertakes the contract work on his ACCOUNT, under his own
RESPONSIBILITY, using his own MANNER AND METHODS, FREE from
the control of the principal in all matters connected with the
performance of work excepting the results thereof.

He has his own CAPITAL in the form of TOOLS, EQUIPMENT,

MACHINERY, WORK PREMISES, and that the agreement between the
contractor and principal assures the formers employees of ALL RIGHTS
AND BENEFITS under the law.

Valid Job Contracting vs.

Labor-only Contracting
Effects:
If labor only contracting: illegal. The employer is
deemed the DIRECT employer and is made liable
to the employees of the contractor for a more
comprehensive purpose. The labor-only contractor
is deemed merely an agent.
If job-contracting: legal. The employer is
considered an INDIRECT EMPLOYER, and is made
liable to the employees of the contractor for a
more limited purposes, : payment of unpaid wages
and other monetary claims.

CLASSIFICATI
ON OF
EMPLOYEES

REGULAR EMPLOYEES
Those who are hired for activities which are necessary or
desirable in the usual trade or business of the employer.

Masonic Contractor and Melvin Balais vs. Magdalena

Madjos 25 November 2009 In determining the
existence of an employer-employee relationship, the
elements that are generally considered are the following:
a) The selection and engagement of the employee;
b) The payment of wages;
c) Power of dismissal; and
d) The employers power to control the employee with respect to the
means and methods by which the work is to be accomplished. It is
the so-called control test that is the most important element.

REGULAR EMPLOYEES
ABS-CBN CASES:
Jose Sonza vs ABS-CBN 10 June
2004 What is the relationship of a big
name talent (Jay Sonza) and a televisionradio broadcasting company?

 It is one of an independent contracting

arrangement.

REGULAR EMPLOYEES
ABS-CBN CASES:
ABS-CBN vs Nazareno et al 26
September 2006 . They are regular
employees who perform several
different duties under the control and
direction of ABS-CBN executives and
supervisors.

Probationary Employees
Those who are hired generally for regular
position .
Placed on a probationary status for a period of
6 months (as a general rule.)
May become regular once he has qualified as
such in accordance with reasonable standards
made known to him at the time of hiring.
They are considered regular if they are allowed
to work beyond the probationary period.

Probationary Employees
Woodbridge School vs. Pe Benito
2008 A probationary employee enjoy
security of tenure.

Probationary Employees
Canadian Opportunities Unlimited,
Inc. vs. Bart Q. Dalangin. Jr., 06
February 2012, where Supreme Court
found that probationary employee was
validly dismissed

Term Employees
Those who are hired for a specific period, the arrival of
the date specified in the contract of which automatically
terminates the employer-employee relationship.

A contract of employment for a definite period terminates

by its own terms at the end of such period

The decisive determinant in term employment should not

be the activities that the employee is called upon to
perform, but the day certain agreed upon by the parties
for the commencement and the termination of their
employment relation.

Project Employees
The principal test for determining
whether particular employees are
properly characterized as project
employees as distinguished from
regular employees is whether or not
the project employees were assigned to
carry out a specific project or
undertaking, the duration and scope of
which were specified at the time the
employees were engaged for that
project.

Project Employees
Wilfredo Aro, Ronilo Tirol, et al. vs
NLRC Fourth Division, et al. 07
March 2012 The length of service or
the re-hiring of construction workers on
a project-to-project bases does not
confer upon them regular employment
status, since heir re-hiring is only natural
consequence of the fact that experienced
construction workers are preferred.

Project Employees
Hanjin Heavy Industries vs Ibanez
et., June 2008 Indicators of Project
Employment is found in Section2.2(e)
and (f) of DOLE Department Order No.
19, Series of 1993, entitled Guidelines
Governing the Employment of Workers
in the Construction Industry, to wit:

Project Employees
2.2 Indicators of project employment
Either one or more of the following
circumstances, among others, may be
considered as indicators that an employee
is a project employee.

Project Employees
a) The duration of the specific/identified
undertaking for which the worker is
engaged is reasonably determinable

Project Employees
b) Such duration, as well as the specific
work/service to be performed, is defined
in an employment agreement and is made
clear to the employee at the time of
hiring.

Project Employees
c) The work/service performed by the
employee is in connection with the
particular project/undertaking for which
he engaged.

Project Employees
d) The employee, while not employed and
awaiting engagement, is free to offer his
services to any other employer.

Project Employees
e) The termination of his employment in
the particular project/undertaking is
reported to the Department of Labor and
Employment (DOLE) Regional Office
having jurisdiction over the workplace
within 30 days following the date of his
separation from work, using the
prescribed form on employees
termination/dismissal/suspensions.

Project Employees
f) An undertaking in the employment
contract by the employer to pay
completion bonus to the project employee
as practiced by most construction
companies.

Grounds for
Termination

Just Causes for

Termination
I. Serious Misconduct

For misconduct or improper behavior to

be a just cause for dismissal, the same
must be related to the performance of
the employees duties and must show
that he has become unfit to continue
working for the employer.

Just Causes for

Termination
a) Interpretation of phrase must be in relation to the
performance of the employees duties
Punzal vs. ETSI Technologies March 2007
Halloween invitation sent out by employee for office trickor-treating without clearance from higher management.
When higher management refused to give clearance,
employee sent out a disparaging email against the Senior
Vice-President. Email remarks deemed just cause for
misconduct because her assailed conduct was related to
her work. It reflects an unwillingness to comply with
reasonable management directives.

Just Causes for

Termination
b) Drug abuse as serious misconduct
Bughaw Jr. vs Treasure Island 2008

Just Causes for

Termination
c) Theft of company property vs. personal
property of co-employees
General rule: If company property, valid
termination on the ground of serious
misconduct.
Caltex (Phils.) Inc. vs. Agad 23 April 2010:
Theft of Company Property (scrap metal).

Just Causes for

Termination
Exception: If not company property but personal property of coemployee, Supreme Court has made divergent rulings.
c.1) Villamor Golf Club vs Phid 04 October 2005
Malversation of a Paluwagan or voluntary contribution to a
common fund by the employees which was not known by the
employer, is not serious misconduct.
c.2) Cosmos Bottling vs Wilson Fermin 20 June 2012
Theft committed against a co-employee is considered as a case
analogous to serious misconduct, for which the penalty of
dismissal from service may be meted out to the erring employee

Just Causes for

Termination
II. Gross Insubordination
Elements:

a) Employees assailed conduct must be willful or intentional;

b) Willfulness characterized by wrongful or perverse attitude;
c) The order violated must be reasonable, lawful and made
known to the employee; and
d) The order must pertain to the duties which the employee
has been engaged to discharge.

Just Causes for

Termination
ePacific Global Contact Center vs. Cabansay Nov.
2007; when manager contravenes VPs directive
Although a managerial employee is clothed with
discretion to determine what was in the best of the
company, said managerial discretion is not without
limits. Its parameters were contained the moment the
discretion was exercised, and then opposed by the
immediate superior/officer for being against the
policies and welfare of the company. Hence, any action
in pursuit of the discretion thus opposed had ceased to
be discretionary and could be considered as willful
disobedience.

Just Causes for

Termination
III. Gross and Habitual Neglect of Duties

a) Gross negligence: connotes want of care in the

performance of ones duties, or absence of even
slight care or diligence as to amount to a reckless
disregards of the safety of the person or property.
b) Habitual Neglect: implies repeated failure to
perform ones duties over a period of time
c) Willful Neglect of Duties: Imply bad faith on the
part of the employee in failing to perform his job, to
the detriment of the employer and latters business

Just Causes for

Termination
St. Lukess Medical Center, Inc. and
Robert Kuan vs. Estrelito Nazario October
2010 Under Article 282 (b) of the Labor
Code, an employer may terminate an
employee of gross and habitual neglect of
duties. Gross negligence connotes want of
care in the performance on ones duties.
Habitual neglect implies repeated failure to
perform ones duties for a period of time,
depending upon the circumstances.

Just Causes for

Termination
IV. Fraud or Willful Breach of Trust
Fraud: the deliberate and false
representation of fact, despite knowledge
of its falsehood, in order to induce
another who relied upon it and benefit
therefrom.

Just Causes for

Termination
Elements of willful breach of trust leading to
loss of trust and confidence:

a) The breach must be willful and not ordinary

breach [hence, done knowingly and intentionally];
b) Employee holds a position of trust and confidence;
c) Must be in relation to the work performed;
d) There must exist substantial evidence, and should
not be based on mere surmises, speculations and
conjectures.

Just Causes for

Termination
Abelardo Abel vs. Philex Mining Corporation
31 July 2009 The first requisite for dismissal
on the ground of loss of trust and confidence is
that the employee concerned must be holding a
position of trust and confidence. The second
requisite is that there must be an act that would
justify the loss of trust and confidence. Loss of
trust and confidence, to be valid cause for
dismissal, must be based on a willful breach of
trust and founded on clearly established facts.

Just Causes for

Termination
V. Commision of Crime by Employee
Against Employer XXX
Torreda vs. Toshiba Info Equipment
Phils Feb 2007 This will also include
false accusation by the employee of his
immediate superior of a crime such as
robbery, as such is tantamount to serious
misconduct.

Just Causes for

Termination
VI. Other Analogous Causes

Incompetence EDI Staff Builders vs NLRC Oct

2007 An allegation of incompetence should have a
factual foundation and may be shown by weighing it
against a standard, benchmark or criterion.

Immorality This has been defined as such conduct

which conflicts with generally or traditionally held moral
principles. It is akin to the phrase moral turpitude, the
term implying something immoral in itself, regardless of
whether it is punishable by law or not.

AUTHORIZED
CAUSE FOR
TERMINATION

DISEASE
Separation pay of month pay for every year of service
Employee must be suffering from a disease, and
continued employment is prohibited by law and/or is
prejudicial to his health and/or that of his co-employees.
Disease cannot be cured within a period of 6 months, and
said fact is certified by a competent public health
authority.
If curable, then employer cannot terminate but may ask
employee to take a leave; immediately upon restoration
of normal health, employer must reinstate employee to
former position.

INSTALLATION OF
LABOR SAVING DEVICES
Separation pay of 1 month per year of
service
Example: computerization of accounting
and payroll system; mechanization of
assembly line, etc., thereby requiring
less employees.
Presumption is that the employer does
not have any serious business losses, as
to afford the purchase of labor-saving
devices.

REDUNDANCY
Separation pay of 1 month per year of service
Akin to retrenchment and is another authorized cause for
the termination of employees through no fault of the latter.
Redundancy exists where the services of an employee are
in excess of what is reasonably demanded by the actual
requirement of the business operations.
Caltex v. NLRC, 15 Oct 2007; Requirements for
redundancy program 1) 30-day notice to both affected
employees and DOLE, 2) separation pay of 1 month for
every year of service, 3) good faith in abolishing the
redundant position, and 4) fair and reasonable criteria in
ascertaining which positions are to be declared redundant.

RETRENCHMENT
Separation pay of month pay for every year of
service
It is the termination of employment by the
employer through no fault of the employees and is
usually resorted to by the employer primarily to
avoid or minimize economic or business reverses
during periods of business recession, industrial
depression, seasonal fluctuations, re-organization
or automation of the company operations.
Employer bears the burden to prove his allegation
of business losses.

RETRENCHMENT
Elements of Valid Retrenchment:
1) The losses expected should be substantial and not
merely de minimis in extent

2) The substantial losses apprehended must be

reasonably imminent

3) The retrenchment must be reasonable necessary

and likely to effectively prevent the expected losses

4) The alleged losses, if already incurred and the

expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing
evidence.

RETRENCHMENT
Anabe v. AsiaKonstruct, 23
December 2009; financial
statements as proof of serious
business losses Company
inexplicably submitted financial
statements 2 years after the case was
filed and pending, and only after it
received the adverse decision of the
Labor Arbiter. The delay in the
submission of the evidence should be
clearly explained and should adequately

CESSATION or CLOSURE
OF EMPLOYERS BUSINESS
Separation pay of month pay for
every year of service
Angeles v. Polytex Design, Oct 2007
an employer is not prevented from
exercising its prerogatives to close shop
so long as it is done in good faith to
advance its interests, and not for the
purpose of defeating or circumventing
the rights of the employees.

PROCEDURE FOR
TERMINATION

General Rule
The twin requirements of NOTICE and HEARING are
the essential elements of DUE PROCESS in
termination cases, which cannot be dispensed with
without violating the constitutional right to due
process.
King of Kings Transport v. Mamac, 29 June 2007 in order to intelligently prepare the employees for
their explanation and defenses, the notice should
contain a detailed narration of the facts and
circumstances that will serve as the basis for the
charge against the employee a general description of
the charge will not suffice.

ON NOTICE AND
HEARING
TWO NOTICES REQUIRED:
1ST NOTICE: NOTICE OF APPRAISAL
Which is a written notice served on the employee
specifying the ground/s of termination, and giving the
employee reasonable opportunity within which to
explain his side.
Q: is the employer required to inform the employee in
the appraisal/charge sheet that he may be terminated
for the infraction?

ON NOTICE AND
HEARING
A: Esguerra v. Valle Verde Country Club, 13
June 2012
NO, the law does not require that an intention to
terminate ones employment should be included
in the first notice. It is enough that employees are
properly apprised of the charges brought against
them so they can properly prepare their defenses.
IT IS ONLY DURING THE SECOND NOTICE
THAT THE INTENTION TO TERMINATE ONES
EMPLOYMENT SHOULD BE EXPLICITLY
STATED.

ON NOTICE AND
HEARING
REASONABLE OPPORTUNITY
King of Kings Transport, Ibid.
This means every kind of assistance that management
must accord to the employees to enable them to
prepare adequately for their defenses. This should
be construed as a period of FIVE (5) CALENDAR
DAYS from receipt of notice to give the employees
an opportunity to study the accusation against
them, consult a union official or lawyer, gather data
and evidence, and decide on the defenses they will
raise against the complainant.

ON NOTICE AND
HEARING
TWO NOTICE REQUIREMENT
2ND Notice: NOTICE OF TERMINATION
Which is a written notice of termination
served upon the employee, indicating
that upon due consideration of all the
circumstances, grounds have been
established to justify his termination.

ON NOTICE AND
HEARING
The new doctrine of due process in termination
cases: HEARING OR CONFERENCE NOT
NECESSARY
Perez v. Phil. Telegraph & Telephone Co. (2009)
SC ruled that there is no need for a hearing or
conference, provided that an employer affords the
employee ample opportunity to be heard and to
defend himself with the assistance of his
representatives if he so desires.

ON NOTICE AND
HEARING
Right to counsel on the part of the employee is
this mandatory and indispensable as part of due
process?
Lopez v. Alturas Group, 11 April 2011 No, the
right to counsel and the assistance of one in
investigations involving termination cases is
neither indispensable nor mandatory, except when
the employee himself requests for one or that he
manifests that he wants a formal hearing on the
charges against him

ILLEGALITY OF THE ACT OF

DISMISSAL Discharge w/o Just
Cause

Remedies under the Labor Code:

1) Reinstatement to his former position without
loss of seniority rights.
2) Payment of FULL backwages corresponding
to the period from his illegal dismissal up to
actual reinstatement.

ILLEGALITY IN THE MANNER OF

DISMISSAL Dismissal w/o Due
Process
In any event, no reinstatement. However, as penalty
for non-compliance with due process requirements,
employer shall be sanctioned with penalty of
P30,000.00 in accordance with Agabon v. NLRC
case.

Wenphil v. NLRC ruling (for terminations occurring

prior to 2000) because of failure to comply with the
Constitutional right to due process, the employer
may be penalized a fine (of P3,000.00 to P10,000.00,
depending upon the discretion of the SC)

ILLEGALITY IN THE MANNER OF

DISMISSAL Dismissal w/o Due
Process

Serrano v. NLRC decision

promulgated in 27 Jan 2000 (for
terminations occurring after 2000 but
before November 2004) increased
penalty to a fine in an amount
equivalent to backwages computed from
date of termination until finality of
judgment finding that there was just
cause but no due process.

ILLEGALITY IN THE MANNER OF

DISMISSAL Dismissal w/o Due
Process
Agabon v. NLRC ruling, 17 November 2004
(for terminations occurring after 17 Nov 2004)
SC abandoned Serrano ruling and reverted to
Wenphil ruling, insofar as it ruled that in cases
where there was substantial evidence proving
just cause BUT that due process was not
followed, the termination will be UPHELD
(considered valid and effective) but the employer
will be penalized the amount of P30,000.00; if
based on authorized cause- P50,000.00

BURDEN OF PROOF RESTS

UPON THE EMPLOYER
The employer must show that the
dismissal of the employee is for just
cause. Failure to do so means that the
dismissal is not justified and the
employee is entitled to reinstatement.

ON REINSTATEMENT
Where the former position is no longer
available, the employee must be
reinstated to an equivalent position.
Where the reinstatement is no longer
viable in view of the strained relations
between the employer and employee, or
if the employee decides not to be
reinstated, the employer shall pay him
separation pay in lieu of reinstatement

ON REINSTATEMENT
NATURE OF ORDER OF LABOR ARBITER ON
REINSTATEMENT
Garcia v. PAL, 20 January 2009
- immediately executory even pending appeal
- otherwise, employer will be held liable for backwages
from the date of notice of the order, up to the date of
employees actual or payroll reinstatement.
- if reversed on appeal, it is still 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 with finality; employee not
required to reimburse the employer