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Article II is divided into two (2) sections
namely, (a) Principles, and (b) State
Policies. All the seven (7) sections cited in
the Syllabus fall under State Policies, the
provisions of which are quoted below.


Section 9. The State shall promote a just and
dynamic social order that will ensure the
prosperity and independence of the nation and
free the people from poverty through policies that
provide adequate social services, promote full
employment, a rising standard of living, and an
improved quality of life for all.
Section 10. The State shall promote social
justice in all phases of national development.

Section 11. The State values the dignity of

every human person and guarantees full respect
for human rights.
Section 13. The State recognizes the vital
role of the youth in nation-building and shall
promote and protect their physical, moral,
spiritual, intellectual, and social well-being. It
shall inculcate in the youth patriotism and
nationalism, and encourage their involvement in
public and civic affairs.
Section 14. The State recognizes the role of
women in nation-building, and shall ensure the
fundamental equality before the law of women
and men.

Section 18. The State affirms labor as a

primary social economic force. It shall protect
the rights of workers and promote their welfare.
Section 20. The State recognizes the
indispensable role of the private sector,
encourages private enterprise, and provides
incentives to needed investments.


By its very title, Article II of the Constitution is a
declaration of principles and state policies. These
provisions are not intended to be self-executing tenets
ready for enforcement through the courts. They are
used by the judiciary as aids or as guides in the
exercise of its power of judicial review, and by the
legislature in its enactment of laws. The disregard of
these provisions cannot give rise to a cause of action in
the courts. They do not embody judicially enforceable
constitutional rights but guidelines for legislation. These
broad constitutional principles need legislative
enactments to implement them.

The reasons for denying a cause of action

based on alleged infringement of broad
constitutional principles are sourced from basic
considerations of due process and the lack of
judicial authority to wade into the uncharted
ocean of social and economic policy-making.

Since most of the provisions under this topic
are self-explanatory, only certain
will be discussed herein by reason of their
constitutional significance and relevance to
labor cases and situations.

a. Section 10 (Social Justice).

The case of Central Bank (now Bangko Sentral ng
Pilipinas) Employees Association, Inc. v. Bangko
Sentral ng Pilipinas, pronounces that equality is one
ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims equality as an
ideal precisely in protest against the crushing inequities in
Philippine society. The command to promote social justice
in Article II, Section 10, in all phases of national
development, further expounded in Article XIII, are clear
commands to the State to take affirmative action in the
direction of greater equality There is thus in the
Philippine Constitution no lack of doctrinal support for a
more vigorous state effort towards achieving a reasonable
measure of equality.

Our present Constitution has gone further in guaranteeing

vital social and economic rights to marginalized groups of
society, including labor. Under the policy of social justice,
the law bends over backward to accommodate the interests
of the working class on the humane justification that those
with less privilege in life should have more in law. And the
obligation to afford protection to labor is incumbent not only
on the legislative and executive branches but also on the
judiciary to translate this pledge into a living reality. Social
justice calls for the humanization of laws and the
equalization of social and economic forces by the State so
that justice, in its rational and objectively secular conception,
may at least be approximated.

b. Section 18 (Protection-to-Labor
Among the provisions afore-quoted it is
Section 18 which is often cited in labor cases.
Along with Section 3 of Article XIII, infra, it is
often referred to as the protection-to-labor
clause in the Constitution. It is invoked in
resolving doubts or ambiguities in the
interpretation of the law, employment contracts,
collective bargaining agreements and
appreciation of evidence. The constitutional
tenet embodied in this provision id the basis for
the following provision in the law:

(1) Article 1702 of the Civil Code which provides that all
labor legislation and labor contracts should be constructed
in favor of the safety and decent living for the laborer;
(2) Article 4 of the Labor Code which states that all
doubts should be resolved in favor of labor.
Thus, when conflicting interests of labor and capital are
to be weighed on the scales of social justice, the heavier
influence of the latter should be counter-balanced by
sympathy and compassion the law must accord the
unprivileged worker. In interpreting the protection to labor
and social justice provisions of the Constitution and the
labor laws or rules and regulations implementing the
constitutional mandates, the liberal approach which favors
the exercise of labor rights should always be adopted.

The same provision is the constitutional

touchstone for the States discharge of its
avowed duty of protecting and promoting the
exercise of all the rights granted to workers,
such as the right to full employment and
equality of employment opportunities, selforganization, collective bargaining and
negotiations, strike and other peaceful concerted
activities, security of tenure, humane conditions
of work, and a living wage, including the right to
participate in policy and decision-making
processes affecting their rights and benefits as
may be provided by law.

c. Section 18, not meant to

oppress employers.
The constitutional policy provide full protection to
labor is not meant to be a sword to oppress employers.
The commitment of the Court to the cause of labor does
not prevent it from sustaining the employer when it is in
the right. Certainly, an employer should not be
compelled to pay employees for work not actually
performed and in fact abandoned.
The employer should not be compelled to continue
employing a person who is admittedly guilty of
misfeasance or malfeasance and whose continued
employment is patently inimical to the employer. The
law protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer.


Out of the total of 22 Sections in Article III,
only seven (7) are mentioned in the Syllabus,

Section 1. No person shall be deprived of
life, liberty, or property without due process of
law, nor shall any person be denied the equal
protection of the laws.

Section 4. No law shall be passed abridging the

freedom of speech, of expression, or of the press, or the
right of the people peaceably to assemble and petition
the government for redress of grievances.
Section 7. The right of the people to information on
matters of public concern shall be recognized. Access to
official records, and to documents and papers pertaining
to official acts, transactions, or decisions, as well as to
government research data used as basis for policy
development, shall be afforded the citizen, subject to
such limitations as may provided by law.
Section 8. The right of the people, including those
employed in the public and private sectors, to form
unions, associations, or societies for purposes not
contrary to law shall not be abridged.

Section 10. No law impairing the obligation of

contracts shall be passed.
Section 16. All persons shall have the right to a
speedy disposition of their cases before all judicial,
quasi-judicial, or administrative bodies.
Section 18. xxx (2) No involuntary servitude in any
form shall exist except as a punishment for a crime
whereof the party shall have been duly convicted.
Except for Section 1, all the others have relevance and
applicability to labor law. Notably, Section 1 has been
declared not the proper basis for the invocation of due
process in plant-level termination of employment; nor is
the equal protection clause therein embodied applicable


Section 4 (Freedom of Speech, of Expression and of
the Press and Peaceably to Assemble and Petition
the Government for Redress of Grievances).
This position is the constitutional basis for the exercise of
the right to picket provided in the Labor Code, as
distinguished from its twin right to strike which finds its
constitutional mooring in another provision thereof,
particularly, Section 3 of Article XIII. Broadly speaking, the
right to picket is part of the right guaranteed under the law
"to engage in concerted activities for purposes of collective
bargaining for their mutual benefit and protection" but it is
principally guaranteed under the freedom of speech
principle in the Constitution.

To strike is to withhold or to stop work by the

concerted action of employees as a result of an
industrial or labor dispute. The work stoppage may
be accompanied by picketing by the striking
employees outside of the company compound.
While a strike focuses on stoppage of work,
picketing focuses on publicizing the labor dispute
and its incidents to inform the public of what is
happening in the company struck against. A picket
simply means the marching to and fro in front of
the employer's premises, usually accompanied by
the display of placards and other signs making
known the facts involved in a labor dispute. It is a
strike activity separate and different from the
actual stoppage of work.

According to the 2010 case of Phimco

Industries, Inc. v. Phimco Industries Labor
Association (PILA), while the right of
employees to publicize their dispute falls within
the protection of freedom of expression and the
right to peaceably assemble to air grievances,
these rights are by no means absolute. Protected
picketing does not extend to blocking ingress to
(entrance) and egress from (exit) the company
premises. That the picket was moving, was
peaceful and was not attended by actual violence
may not free it from taints of illegality if the
picket effectively blocked entry to and exit from
the company premises.

b. Section 8 (Right to Organize

This provision is the constitutional basis
for the exercise of the right to selforganization by workers in both public and
private sectors. To breathe life to this
constitutional tenet, the Labor Code:
(1)protects the right of workers to selforganization and to form, join, or assist
labor organizations of their own

(2) declares

as a policy of the State the fostering of

a free and voluntary organization of a strong and
united labor movement.
(3) declares that it shall be unlawful for any person
to restrain, coerce, discriminate against or unduly
interfere with employees and workers in their
exercise if the right to self-organization, which
includes the right to form, join, or assist labor
organizations for the purpose of collective
bargaining through representatives of their own
choosing and to engage in lawful concerted
activities for the same purpose or for their
mutual aid and protection.

c. Section 10 (Non-impairment of
Obligation of Contracts)
A law authorizing interference, when
appropriate, in the contractual relations between
or among parties is deemed read into the
contract and its implementation cannot
successfully be resisted by force of the nonimpairment guarantee. There is, in that
instance, no impingement of the nonimpairment clause.

The purpose of the non-impairment clause of the

Constitution is to safeguard the integrity of contracts
against unwarranted interference by the State. As a
rule, contracts should not be tampered with the
subsequent laws that would change or modify the rights
and obligations of the parties. Impairment is anything
that diminishes the efficacy of the contract. There is an
impairment if a subsequent law changes the terms of a
contract between the parties, imposes new conditions,
dispenses with those agreed upon or withdraws
remedies for the enforcement of the rights of the
parties. The non-impairment clause is limited in
application to laws that derogate from prior acts or
contracts by enlarging, abridging or in any manner
changing the intention of the parties. Necessarily, the
constitutional proscription would not apply to laws
already in effect at the time of contract execution.

Anucension v. National Labor Union. - R.A. No. 3350

exempts members of any religious sects, which prohibit
affiliation of their members in any labor organization,
from being covered by a union security clause. The union
contends that R.A. No. 3350 is unconstitutional for
impairing the obligation of its contract, specifically, the
"union security clause" embodied in its Collective
Bargaining Agreement (CBA) with the company, by virtue
of which "membership in the union was required as a
condition for employment for all permanent employees
and workers." This agreement was already in existence at
the time R.A. No. 3350 was enacted on June 18, 1961,
and it cannot, therefore, be deemed to have been
incorporated into the agreement.

But by reason of this amendment, Anucension

as well as others similarly situated, could no
longer be dismissed from his job even if he
should cease to be a member, or disaffiliate from
the union, and the company could continue
employing him notwithstanding his disaffiliation
from the union. The Act, therefore, introduced a
change into the express terms of union security
clause; the company was partly absolved by law
from the contractual obligation it had with the
union of employing only union members in
permanent position. It cannot be denied,
therefore, that there was indeed an impairment
of said union security clause.

But by reason of this amendment, Anucension as

well as others similarly situated, could no longer
be dismissed from his job even if he should
cease to be a member, or disaffiliate from the
union, and the company could continue
employing him notwithstanding his disaffiliation
from the union. The Act, therefore, introduced a
change into the express terms of union security
clause; the company was partly absolved by law
from the contractual obligation it had with the
union of employing only union members in
permanent position. It cannot be denied,
therefore, that there was indeed an impairment
of said union security clause.

It follows that not all legislations which have

the effect of impairing a contract are
obnoxious to the constitutional prohibition as
to impairment, and a statute passed in the
legitimate exercise of police power, although it
incidentally destroys existing contractual
rights, must be upheld by the courts. This has
special application to contracts regulating
relations between capital and labor which are
not merely ordinary but impressed with public
interest and therefore must yield to the
common good.

When then was the purpose sought to be

achieved by R.A. No. 3350? Its purpose was to
insure freedom of belief and religion, and to
promote the general welfare by preventing
discrimination against those members of religious
sects which prohibit their member from joining
labor unions, confirming thereby their natural,
statutory and constitutional right to work. It
cannot be gainsaid that said purpose is
legitimate. It may not be amiss to point out here
that the free exercise of religious profession or
belief is superior to contract rights. In case of
conflict, the latter must, therefore, yield to the

In another case where this issue was raised, Abella

v. NLRC, petitioner leased a farm land for a period of
ten (10) years, renewable, at her option, for another
ten (10) years. During the existence of the lease, she
employed herein private respondents. Upon the
expiration of her leasehold rights, petitioner dismissed
private respondents and turned over the hacienda to
its owners who continued the management, cultivation
and operation of the farm. In the illegal dismissal case
filed by the private respondents, petitioner claims that
she is not liable to pay separation pay because the
basis for the award thereof id Batas Pambansa Blg.
130 which was enacted only on August 21, 1981,
amending Article 283 of the Labor Code which grants
separation pay in case closure of business operations.

Petitioner contends that this amendatory law violates

the constitutional guarantee against impairment of
obligations and contracts because when she leased the
hacienda on June 27, 1960, neither she nor the lessor
contemplated the creation of the obligation to pay
separation pay to workers at the end of the lease. In
debunking this posture of petitioner, the Supreme Court
cited the above case of Anucension where this issue
has been laid to rest. The purpose of Article 283, as
amended, is obvious- the protection of the workers
whose employment is terminated because of the
closure of establishment and reduction of personnel.
Without said law, employees like private respondents in
the case at bar will lose the benefits to which they are
entitled- for the thirty-three years of service in the case
of Dionele and fourteen years in the case of Quitco.

Although they were absorbed by the new management

of the hacienda, in the absence of any showing that the
latter has assumed the responsibilities of the former
employer, they will be considered as new employees and
the years of service behind them would amount to
nothing. Moreover, to come under the constitutional
prohibition, the law must effect a change in the rights of
the parties with reference to each other and not with
reference to non-parties. As correctly observed by the
Solicitor General, Article 283 as amended refers to
employment benefits to farm hands who were not parties
to petitioners lease contract with the owner of the
hacienda. The contract cannot have the effect of
annulling subsequent legislation designed to protect the
interest of the working class.

As held in the 2009 en banc case of Serrano v.

Gallant Maritime Services, Inc.:
The prohibition [against impairment of the
obligation of contracts] is aligned with the general
principle that laws newly enacted have only a
prospective operation, and cannot affect acts or
contracts already perfected, however, as to laws
already in existence, their provisions are read into
contracts and deemed a part thereof. Thus, the nonimpairment clause under Section 10, Article III
[of the Constitution] is limited in application to
laws about to be enacted that would in any way
derogate from existing acts or contracts by
enlarging, abridging or in any manner changing
the intention of the parties thereto.

Thus, in this case, the enactment in 1995 of

R.A. No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995
preceded the execution of the employment
contract between petitioner and respondents in
1998. Hence, it cannot be argued that R.A. No.
8042, particularly the subject clause, impaired
the employment contract of the parties. Rather,
when the parties executed their 1998
employment contract, they were deemed to
have incorporated into it all the provisions of
R.A. No. 8042.

Police Power vs. Non-impairment Clause.

It must be borne in mind that police power is
superior to the non-impairment clause. The
constitutional guarantee of non-impairment of
contracts is limited by the exercise of the police
power of the State, in the interest of public
health, morals, and general welfare of the

Thus, in the same en banc case of Serrano, it was

further held that even of the Court were to disregard the
timeline when the law was enacted vis--vis the contract,
the subject clause may not be declared unconstitutional
on the ground that it impinges on the impairment clause,
for the law was enacted in the exercise of the police
power of the State to regulate a business, profession or
calling, particularly the recruitment and deployment of
OFWs, with the noble end in view of ensuring respect for
the dignity and well-being of OFWs wherever they may be
employed. Police power legislations adopted by the State
to promote the health, morals, peace, education, good
order, safety, and general welfare of the people are
generally applicable not only to future contracts but even
to those already in existence, for all private contracts
must yield to the superior and legitimate measures taken
by the State to promote public welfare.

The Conference of Maritime Manning Agencies,

Inc. v. POEA, illustrates this point. The POEA
issuances were assailed, inter alia, as being violative of
the non-impairment clause in the Constitution as they
were made applicable to any Filipino seafarer already
on-board any vessel. In upholding their validity, the
Supreme Court pronounced that the constitutional
prohibition against impairing contractual obligations is
not absolute and is not to be read with literal
exactness. It is restricted to contracts with respect to
property or some object of value and which confer
rights that may be asserted in a court of justice, it has
no application to statutes relating to public subjects
within the domain of the general legislative powers of
the State and involving the public rights and public
welfare of the entire community affected by it.

It does not prevent the proper exercise by the State of

its police power by enacting regulations reasonably
necessary to secure the health, safety, morals, comfort,
or general welfare of the community, even though
contracts may thereby be affected, for such matters
cannot be placed by contract beyond the power of the
State to regulate and control. Thus:
*Verily, the freedom to contract is not absolute; all
contracts and all rights are subject to the police power
of the State and not only may regulations which affect
them be established by the State, but all such
regulations must be subject to change from time to
time, as the general, well-being of the community may
require, or as the circumstances may change, or as
experience may demonstrate the necessity.

And under the Civil Code, contracts of labor are

explicitly subject to the police power of the
State because they are not ordinary contracts
but are impressed with public interest. The
challenged resolution and memorandum circular
being valid implementations of E.O. No. 797,
which was enacted under the police power of
the State, they cannot struck down on the
ground that they violate the contract clause. To
hold otherwise is to alter long-established
constitutional doctrine and to subordinate the
police power to the contract clause.

The stipulations in the contract must be valid.

While the contracting parties may establish such
stipulations, clauses, terms and conditions as they may
deem convenient, such stipulations should not be contrary
to the law, morals, good customs, public order and public
Maynilad Water Supervisors Association v.
Maynilad Water Services Inc. The Agreement or
contract between the parties is the formal expression of
the parties rights, duties and obligations. Thus, when the
terms of an agreement have been reduced in writing, it is
considered as containing all the terms agreed upon and
there can be no evidence of such terms other than the
contents of the written agreement between the parties and
their successors-in-interest.

Time and again, the rule has been stressed that

a contract is the law between the parties, and
courts have no choice but to enforce such
contract so long as it is not contrary to law,
morals, good customs or public policy.
Otherwise, courts would be interfering with the
freedom of contract of the parties. Simply
put, courts cannot stipulate for the parties or
amend the latters agreement, for to do so
would be to alter the real intention of the
contracting parties when the primary function of
courts is to give force and effect to the intention
of the parties.

d. Section 16 (Speedy Labor Justice).

Speedy disposition of cases or speedy labor
justice is a relative term and a flexible concept. It is
consistent with delays and depends upon the
circumstances of each case. What the Constitution
prohibits are unreasonable, arbitrary, and oppressive
delays which render rights nugatory.

Speech labor justice, in terms of period is provided

under Article 277(i) of the Labor Code, thus:

(i) To ensure speedy labor justice, the periods

provided in this Code within which decisions or
resolutions of labor relations cases or matters
should be rendered shall be mandatory. For this
purpose, a case or matter shall be deemed
submitted for decision or resolution upon the
filing of the last pleading or memorandum
required by the rules of the Commission or by
the Commission itself, or the Labor Arbiter, or
the Director of the Bureau of Labor Relations or
Med-Arbiter, or the Regional Director.

In the determination of whether or not the right

to a speedy trial has been violated, certain
factors may be considered and balanced against
each other. These are the length of delay,
reason for the delay, assertion of the right or
failure to assert it, and prejudice caused by the
delay. The same factors may also be considered
in answering the judicial inquiry as to whether
or not a person officially charge with the
administration of justice has violated the speedy
disposition of cases.

While the speedy disposition of labor cases may

be the policy of the law, it must be emphasized
that speed alone is not the chief objective of a
trial. It is the careful and deliberate
consideration for the administration of justice, a
genuine respect for the rights of all parties and
the requirements of procedural due process, and
an adherence to the principle that the disposition
of cases should always be predicated on the
consideration that more than the mere
convenience of the courts and of the parties in
the case, the ends of justice and fairness would
be served. These are more important than a
race to end the trial.

e. Section 18 (Involuntary Servitude).

Involuntary Servitude is every condition of
enforced or compulsory service of one to another, no
matter under what form such servitude may be
disguised. The 1987 Constitution categorically
prohibits involuntary servitude. It is on the basis of
this constitutional precept that employees are granted
the right to terminate their employment relationship
with their employers under Article 285 of the Labor
Code. This article recognized the equality of the
parties to an employment relationship. Thus, an
employee may resign from employment at any time
he wishes and with our without just cause, subject
only to certain minimum conditions imposed by law.

Bank of the Philippine Islands v. BPI Employees

Union-Davao Chapter-Federation of Unions in BPI
Unibank, involves the merger of BPI with FEBTC,
where the Voluntary Arbitrator ruled that, in
accordance with Section 80 of the Corporation Code,
the employees of FEBTC form part of the assets and
liabilities transferred to the surviving bank, petitioner
BPI, by virtue of the merger. The Supreme Court,
however, did not agree to this postulation. In legal
parlance, human beings are never embraced in the
term assets and liabilities. It is contrary to public
policy to declare the former FEBTC employees as
forming parts of the assets or liabilities of FEBTS that
were transferred and absorbed by BPI in the Articles of

Assets and liabilities, in this instance, should be deemed to

refer only to property rights and obligations of FEBTC and
do not include the employment contracts of its personnel.
A corporation cannot unilaterally transfer its employees to
another employer like chattel. Certainly, if BPI as an
employer had the right to choose who to retain among
FEBTCs employees, FEBTS employees had the concomitant
right to choose not to be absorbed by BPI. Even though
FEBTC employees had no choice whether or not they would
allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTCs employees from resigning or retiring
and seeking employment elsewhere instead of going along
with the proposed absorption. Employment is a personal
consensual contract and absorption by BPI of a former
FEBTC employee without the consent of the employee is in
violation of an individuals freedom to contract.

It would have been a different matter if there

was an express provision in the Articles of Merger
that as a condition for the merger, BPI was being
required to assume all the employment contracts
of all existing FEBTC employees with the
conformity of the employees. In the absence of
such a provision in the Articles of Merger, then
BPI clearly had the business management
decision as to whether or not to employ FEBTCs
employees. FEBTC employees likewise retained
the prerogative to allow themselves to be
absorbed or not; otherwise, that would be
tantamount to involuntary servitude.

Compulsory fulfillment of military or civic

Article 286 of the Labor Code which provides for
compulsory fulfillment of military or civic duty,
may well be considered as the exception to this
constitutional proscription. This is so because the
constitutional prohibition should be subordinated
to the right of the government to call upon its
citizens to protect their State as provided under
Section 4, Article II of the Constitution. The
survival of the State is the paramount
justification for such involuntary servitude.


Article XIII embodies 19 Sections but only five (5)
are included in the Syllabus, to wit:
Section 1. The Congress shall give highest priority
to the enactment of measures that protect and
enhance the right of all the people to human
dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by
equitably diffusing wealth and political power
for the common good.

To this end, the State shall regulate the

acquisition, ownership, use, and disposition
of property and its increments.
Section 2. The promotion of social justice shall
include the commitment to create economic
opportunities based on freedom of initiative and

Section 3. The State shall afford full protection to
labor, local and overseas, organized and
unorganized, and promote full employment and
equality of employment opportunities for all.
It shall guarantee the rights of all workers to selforganization, collective bargaining and negotiations, and
peaceful concerted activities, including the right to strike
in accordance with law. They shall be entitled to security
of tenure, humane conditions of work, and a living wage.
They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be
provided by law.

The State shall promote 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.
The State shall regulate the relations
between workers and employers,
recognizing the right of labor to its just
share in the fruits of production and the
right of enterprises to reasonable returns to
investments, and to expansion and growth.

Section 14. The State shall protect
working women by providing safe and
healthful working conditions, taking into
account their maternal functions, and
such facilities and opportunities that will
enhance their welfare and enable them to
realize their full potential in the service of
the nation.


On Article 3
Article 3 of the Labor Code states:

Article 3. Declaration of basic policy. The

State shall afford protection to labor, promote
full employment, ensure equal work
opportunities regardless of sex, race or creed
and regulate the relations between workers
and employers. The State shall assure the
rights of workers to self-organization,
collective bargaining, security of tenure, and
just and humane conditions of work.

In the 1987 Constitution, these principles

were amplified and enshrined in Sec. 3,
Article XIII thereof. This provision
crystallizes the fundamental laws policies
on labor, defines the parameters of the
rights granted to labor such as the right to
security of tenure, and prescribes the
standards for the enforcement of such
rights in concrete terms. While not
infallible, the measures provided therein
tend to ensure the achievement of the
constitutional aims.

On Article 166
Article 166 of the Labor Code states:
Article 166. Policy. The State shall
promote and develop a tax-exempt
employees compensation program
whereby employees and their dependants,
in the event of work-connected disability of
death, may promptly secure adequate
income benefit and medical related

a. The Employees Compensation Program

The ECP is designed to provide public and
private sector employees and their dependents
with income and other benefits in the event of
work-connected injury, sickness, disability or
death. It assures workers of total protection
through the provision of a comprehensive
benefit package encompassing preventive
occupation safety and health aspects, curative
or medical and compensatory grant, and
rehabilitation of occupationally disabled

b. Attributes of the ECP.

The ECP is characterized as follows:

It is not subject to tax;

2. It is designed to ensure promptitude in cases
of work-connected disability or death, in the
award to employees and their dependents of
adequate income benefits and medical or
related benefits.
3. It is funded by monthly contributions of all
covered employers.
4. It is compulsory on all employers and their
employees whose age us not over 60 years old.


It provides for benefits which are exclusive and in

place of all other liabilities of the employer to the
employee, his dependents or anyone otherwise entitled
to receive damages on behalf of the employee or his
dependents; and
6. It has its own adjudicatory machinery with original
and exclusive jurisdiction to settle any dispute with
respect to coverage, entitlement to benefits, collection
and payment of contributions and penalties thereon, or
any other matter related thereto, independent of other
tribunals, except the Supreme Court (and the Court of
Appeals per Revised Administrative Circular No. 1-95)

c. Compensable contingencies under the ECP.

Article 166 of the Labor Code makes reference to
the promotion and development of a tax-exempt
ECP whereby employees and their dependents, in
the event of work-connected disability or death,
may promptly secure adequate income benefit
and medical related benefits. The following
contingencies are compensable under the ECP:
1. Work-connected injury or accident;
2. Work-connected sickness; and
3. Any disability or death resulting from any workconnected injury or accident or work-connected

4. On Article 211.
The provision of Article 211 of the Labor Code states:
Article 211. Declaration of Policy. A. It is the policy
of the State:



To promote and emphasize the primacy of free

collective bargaining and negotiations, including
voluntary arbitration, mediation and conciliation,
as modes of setting labor or industrial disputes;
To promote free trade unionism as an instrument
for the enhancement of democracy and the
promotion of social justice and development;
To foster the free and voluntary organization of a
strong and united labor movement;




To promote the enlightenment of workers

concerning their rights and obligations as
union members and as employees;
To provide an adequate administrative
machinery for the expeditious settlement
of labor or industrial disputes;
To ensure a stable but dynamic and just
industrial peace; and
To ensure the participation of workers in
decision and policy-making processes
affecting their rights, duties and welfare.

A. State Policy
Article 211 is the first article of the Book V of the Labor Code
on Labor Relations. Both Article 211 and Article 3 are the
letters that giveth life to the protection-to-labor policies in all
the modern constitutions in the Philippine.
Noteworthy is the primordial policy of the State to promote
collective bargaining, the settlement of labor disputes
through conciliation, mediation and arbitration, free trade
unionism, establishment of strong and united labor
movement, education of workers on their rights and
obligations and participation of workers in decision and
policy-making processes affecting their rights, duties and
welfare, to ensure a stable but dynamic and just industrial

It is not only industrial peace that the State is

connected about. Article 211 actually is an
amplification of the principles laid down in
Article 3 of the Labor Code which mandates
that it is a basic policy of the State to protect
labor, promote full employment, ensure equal
work opportunities regardless of sex, race or
creed, and regulate the relations between
workers and employers. The State is further
mandated to assure the rights of workers to
self-organization, collective bargaining,
security of tenure and just and humane
conditions of work.

B. Labor Relations
The term labor relations refers to that part
of labor law which regulates the relations
between employers and workers. Examples
are the provisions of the Book V of the labor
Code which deal with labor organizations,
collective bargaining, grievance machinery,
voluntary arbitration, conciliation and
mediation, unfair labor practices, strikes,
picketing and lockout and those found in
Book VI on termination of employment.

Broadly, labor relations, as understood within the

ambit of Books V and VI of the Labor Code, dwell on
the broad and dynamic relationship between the
employer and the employee, its ramifications and
implications insofar as their respective rights and
interests are concerned as well as the modes of
settling and adjusting their differences and disputed
and ultimately, the grounds and manner by which such
relationship will be terminated. Just like any
relationship founded on mutual interest, the employer
cannot exist without the employee and vice versa. It is
in this light that laws are enacted to delineate and
govern their relationship with the end in view of
promoting industrial peace and harmony in the

C. Labor Relations vs. Labor Standards.

Labor relations may be distinguished from
Labor standards in that the latter is that part
of labor law which prescribes the minimum
terms and conditions of employment which the
employer is required to grant to its employees.
Examples of labor standards are the provisions
embodied in the following Books of the Labor
1. Book One on recruitment and placement of
workers and employment of non-resident aliens;

2. Book Two on national manpower

development program and training and
employment of special workers;
3. Book Three on working conditions and rest
periods, wages and working conditions for
special groups of employees; and
4. Book Four on medical, dental and
occupational safety, employees compensation
and state insurance fund, medicare (now
PhilHealth) and adult education.

Labor relations and labor standards laws

are not mutually exclusive. They are
complementary to, and closely interlinked
with, each other. For instance, the laws on
collective bargaining, strikes and lockouts
which are covered by labor relations law
necessarily relate to the laws on working
conditions found in Book III.

On Article 212
Article 212 of the Labor Code simply
enumerates and defines the various
important terms and phrases used in the

On Article 255

Article 255 of the Labor Code contains the following provisions:

Article 255. Exclusive bargaining representation

and workers participation in policy and decisionmaking. The labor organization designated or
selected by the majority of the employees in an
appropriate collective bargaining unit shall be the
exclusive representative of the employees in such
unit for the purpose of collective bargaining.
However, an individual employee or group of
employees shall have the right at any time to
present grievances to their employer.

Any provision of law to the contrary

notwithstanding, workers shall have the right,
subject to such rules and regulations as the
Secretary of Labor and Employment may
promulgate, to participate in policy and decisionmaking processes of the establishment where
they are employed insofar as said processes will
directly affect their rights, benefits and welfare.
For this purpose, the workers and employers may
from labor-management councils: Provided, That
the representatives of the workers in such labormanagement councils shall be elected by at least
the majority of all employees is said

a. Article 255 provides for 2 separate concepts.

Article 255 is composed of 2 paragraphs embodying
different legal concepts, namely;
1. The 1st paragraph enunciates the concepts of exclusive
bargaining representation; and
2. The 2nd paragraph enunciates the concept of codetermination.

b. Different constitutional bases of the two

The constitutional basis of the first is different
from the second. The first paragraph is
anchored on the constitutional precept that the
State shall guarantee the rights of all workers
to self-organization [and] collective bargaining
and negotiations. The second paragraph is
based on the constitutional grant to workers of
the right to participate in policy and decisionmaking processes affecting their rights and
benefits as may be provided by law.
These concepts are discussed herein seriatim.


a. Exclusive bargaining representative; meaning

Exclusive bargaining representative or exclusive

bargaining agent refers to a legitimate labor
organizing duly recognized or certified as the sole and
exclusive bargaining representative or agent of all the
employees in a bargaining unit.
Once so recognized or certified, it shall remain as
such during the existence of the CBA, to the exclusion
of other labor organizations, and no petition
questioning its majority status shall be entertained
nor shall certification election be conducted outside of
the 60-day freedom period immediately before the
expiry date of the 5 year term of the CBA.

What is represented by the bargaining

agent are not only its members but also
its non-members who are included in the
bargaining unit.
The terms bargaining union and
bargaining agent may be used
interchangeably to refer to the union
designated as the sole and exclusive
bargaining representative not only of its
members but all the members of the
bargaining unit where it operated and
which it represents.

b. Individual employee or group of employees cannot

bring grievable issues for voluntary arbitration without
the participation of the bargaining union.
The designation of a bargaining agent, however,
does not deprive an individual employees to
exercise their right at any time to present
grievances to their employer, with or without the
intervention of the bargaining agent.
Article 255 explicitly provides that an individual
employee or group of employees may validly bring
grievances directly to the employer even if there is
an existing exclusive bargaining representative.

Tabigue v. International Copra Export

The Supreme Court, however, clarified in this case that an
individual employee or group of employees cannot be allowed
to submit or refer unsettled grievances for voluntary arbitration
without the participation of the bargaining union. The
petitioners in this case are members of INTERCO
Employees/Laborers Union (the union), the bargaining agent in
respondent company. Without the participation of the union,
petitioners filed a Notice of Preventive Mediation with the NCMB
against respondent for violation of Collective Bargaining
Agreement (CBA) and failure to sit on the grievance
conference/meeting. As the parties failed to reach a settlement
before the NCMB, petitioners requested to elevate the case to
voluntary arbitration. However, the president of the union of
which petitioners are members wrote a letter stating that
petitioners are not duly authorized by [the] board or the
officers to represent the union, [hence] .

All actions, representations or agreements

made by these people with the
management will not be honored or
recognized by the union. The Supreme
Court ruled that the right a=of any
employee or group of employees to, at any
time, present grievances to the employer
does not imply the right to submit the
same to voluntary arbitration. In this case,
petitioners have not been duly authorized
to represent the bargaining union, hence,
they cannot present their unsettled
grievances for voluntary arbitration.

Insular Hotel Employees Union-NFL v.

Waterfront Insular Hotel Davao, reiterated the
said ruling in Tabigue. In this case, the Davao
Insular Hotel Free Employees Union- National
Federation of Labor (DIHFEU-NFL), the recognized
labor organization in respondent hotel, entered into
a Memorandum of Agreement (MOA) with the
respondent which superseded the affected
provisions of the existing CBA. The MOA was
executed to effect the re-opening of the hotel which
earlier suspended its operation due to extreme
business losses. Individual members of another
union, the Insular Hotel Employees claimed to be
affiliated also with the same federation, questioned
the validity of the MOA by filling a Notice of
Preventive Mediation with the NCMB.

On the issue of the identity of the duly recognized

union, the rspondent hotel contended that it is
DIHFEU-NFL, which is recognized bargaining unit in
the establishment, the other union named IHEU-NFL
being a non-entry since, as certified by the DOLE, it is
not a registered labor organization. It was held,
however, that respondent is already stopped from
questioning the same as it did not raise the said issue
in the proceedings before the NCMB and the Voluntary
Arbitrator. A perusal of the records revealed that the
main theory posed by respondent was whether or not
the individual employees had the authority to file the
complaint notwithstanding the apparent nonparticipation of the union. Respondent never put in
issue the fact that DIHFEU-NFL was not the same as
IHEU-NFL. Consequently, it was declared already too
late in the day to assert the same.

Resolving the issue raised by respondent of

whether the individual members of IHEU-NFL have
the requisite standing to question the MOA before
the NCMB and the Voluntary Arbitrator, the
Supreme Court, invoking its 2009 ruling in Tabigue
and Section 3, Rule IV of the NCMB Manual of
Procedure which provides that only a certified or
duly recognized bargaining representative has the
right to file a notice or request for preventive
mediation, declared that the individual members
of the union have no authority to file the case.
Clearly, therefore, the NCMB and the Voluntary
Arbitrator had no jurisdiction to entertain the
Notice of Preventive Mediation and the voluntary
arbitration case, respectively.

c. In order to have legal standing, the individual members

should be shown to have been duly authorized to represent
the bargaining union.

In the same case of Insular Hotel, it was

held that in order to acquire legal standing
to initiate the complaint (Notice of
Preventive Mediation), the individual
employees should be shown to have been
duly authorized to represent the
bargaining union. Petitioners have not,
however, been duly authorized to
represent the union.


a. Principle of co-determination
This constitutional and legal right is the basis of
the principle of co-determination where the
employees are given the right to co-determine
or share the responsibility of formulating
certain policies that affect their rights, benefits
and welfare.

Philippine Airlines, Inc. (PAL) v. NLRC and Philippine

Airlines Employees Association (PALEA),
Best illustrates this principle. The principal issue submitted for
resolution in this case is whether or not the formulation of a
Code of Discipline among employees. If in the affirmative,
whether management may be compelled to share with the union
or its employees its prerogative of formulating said Code. On
March 15, 1985, petitioner PAL completely revised its 1966 Code
of Discipline. The Code was circulated among the employees and
was immediately implemented, and some employees were
forthwith subjected to the disciplinary measures embodied
therein. This led private respondent PALEA to file a complaint
before the NLRC on August 20, 1985, for unfair labor practice
with the following remarks: ULP with arbitrary implementation
of PALs Code of Discipline without notice and prior discussion
with Union by Management. It thus prayed that the
implementation of the Code be held in abeyance; that PAL
should be discuss the substance of the Code with PALEA;

that employees dismissed under the Code

be reinstated and their cases subjected to
further hearing; and that PAL be declared
guilty of unfair labor practice and be
ordered to pay damages.
In affirming the decision of the NLRC
which ordered that the New Code of
Discipline should be reviewed and
discussed with the union, particularly the
disputed provisions and that copies
thereof be furnished each employee, the
Supreme Court ratiocinated as follows:

A close scrutiny of the objectionable provisions of the

Code reveals that they are not purely businessoriented nor do they concern the management aspect
of the business of the company as in the San Miguel
Case. The provisions of the Code clearly have
repercussions on the employees right to security of
tenure. The implementation of the provisions may
result in the deprivation of an employees means of
livelihood which, as correctly pointed out by the
NLRC, is a property right. In view of these aspects of
the case which border on infringement of
constitutional rights, we must uphold the
constitutional requirements for the protection of labor
and the promotion of social justice, for these factors,
according to Justice Isagani Cruz, tilt the scales of
justice when there is doubt, in favor of the worker.

Verify, a line must be drawn between

management prerogatives regarding
business operations per se and those
which affect the rights of the employees.
In treating the latter, management should
see to it that its employees are at least
properly informed of its decisions or
modes of action. PAL asserts that all its
employees have been furnished copies of
the Code. Public respondents found to the
contrary, which finding to say the least is
entitled to great respect.

Indeed, industrial peace cannot be

achieved if the employees are denied their
just participation in the discussion of
matters affecting their rights. Thus, even
before Article 211 of the Labor Code (P.D.
442) was amended by R.. No. 6715, it was
already declared a policy of the State:(d)
To promote the enlightenment of workers
concerning their rights and obligations .
As employees. This was, of course,
amplified by R>A No. 6715 when it decreed
the participation of workers in decision and
policy making processes affecting their
rights, duties and welfare.

PALs position that it cannot be saddled with

the obligation of sharing management
prerogatives as during the formulation of the
Code, R.A. No. 6715 had not yet been enacted
(Petitioners Memorandum, p.44; Rollo,
p.212), cannot thus be sustained. While such
obligation was not yet founded in law when
the Code was formulated, the attainment of a
harmonious labor-management relationship
and the then already existing state policy of
enlighten workers concerning their rights as
employees demand no less than the
observance of transparency in managerial
moves affecting employees rights.

b. Limitation: Grant of the right of participation does not mean

co-management of business nor intrusion into management
prerogatives; This principle does not mean that workers
should approve management policies or decisions.
Although the law sets the standard that the participation
or the workers in the policy and decision-making
processes of the employer is limited to policies and
decisions which affect their rights, benefits and welfare,
there exists a question on the extent of such participation
that may be afforded to the workers in the said processes.
The discussion of the 1986 Constitutional and designated
as Sec. 3, par. 2, Article XIII, [Social Justice and Human
Rights] of the 1987 Constitution, indicates that it is only in
the area of grievance procedures and voluntary modes of
settling disputes, and not in the area of corporate
planning, charting or corporate business, modes and
procedures of corporate management and acquisition of
property, where workers may participate.

Manila Electric Company v. Quisumbing.

instructs that the grant of this right is not an
intrusion into the employers management
prerogative. The mandate of the Constitution and
the law is complied with when, for instance, the
union is allowed to have representatives in the
employers Safety Committee, Uniform Committee
and other committees of similar nature. Certainly,
such participation by the union in the said
committees is not in the nature of a comanagement control of the business of the
employer. What is granted therein is participation
and representation. Thus, there is no impairment of
management prerogatives

On Article 277.
Article 277 of the Labor Code states:
Article 277. Miscellaneous Provisions-



syllabus speaks of recruitment of:

Local workers; and

Migrant or overseas Filipino Workers
Notably, the rules are different for the 2
situations mentioned above. Hence,
discussion herein shall be divided in
accordance with these two classifications.


The following definitions are relevant to the
rules governing local employment:
1. Private Recruitment and Placement
Agency (PRPA) or Agency refers to
any individual, partnership, corporation
or entity engaged in the recruitment and
placement of persons for local



PRPA Branch refers to any extension office of

a licensed PRPA.
Representative refers to a person acting as
an agent of a licensed PRPA registered with the
Regional Office and granted Authority in the
recruitment of persons for local employment.
Recruitment and Placement refers to any
act of canvassing, enlisting, contracting,
transporting, utilizing, hiring or procuring
workers, and includes referrals, contract service,
promising or advertising for local employment,
whether for profit or not; provided, that any
person or entity which in any manner, offers or
promises employment for a fee, for 2 or more
persons shall be deemed engaged in recruitment
and placement.




Recruit refers to any individual

promise, contracted, or enlisted for
employment for a fee.
License refers to the certificate issued
by the DOLE authorizing an individual,
partnership, corporation, or entity to
operate a private recruitment and
placement agency.
Authority to Operate Branch Office
refers to the document granted by the
DOLE authorizing the licensed PRPA to
established and operate a branch office.

Authority to Recruit refers to the

document granted by the DOLE Regional
Office authorizing a person to conduct
recruitment activities in the region.
9. Licensee refers to any person or entity
duly licensed and authorized by the DOLE
to operate a private recruitment and
placement agency.
10. Recruitment Contract refers to the
agreement entered into between a licensed
PRPA or its authorized representative and a
recruit stating clearly the terms and
conditions of the recruitment in a language
known and understood by the recruit.


Contract refers to the

agreement entered into between the
employer and a recruit stating clearly
the terms and conditions of the
employment in a language known and
understood by the recruit.
12.Placement Fee refers to the amount
charged by a PRPA from a recruit as
payment for placement services.
13.Service Fee refers to the amount
charged by a PRPA from an employer as
payment for employment services.

An applicant for a license to operate a
private recruitment and placement
agency must possess the following:
1. Must be a Filipino citizen, if single
proprietorship. In case of a partnership
or a corporation, at least 75% of the
authorized capital stock must be owned
and controlled by Filipino citizens;

2. Must have a minimum net worth of

P200,000.00 in the case of single
proprietorship and partnership or a
minimum paid-up capital of P5000,000.00
in the case of a corporation.
3. The owner, partners or the officers of the
corporation must be of good moral
character and not otherwise disqualified
by law;
4. Must have an office space with a
minimum floor area of 50 sq. meters



Place to file application.

Application for license shall be filed with
the Regional Office having jurisdiction
over the place where the applicant
wishes to establish its main office.
Requirements for application.
The applicant for a license shall submit a
duly accomplished application form, and
in support thereof, the following
A filing fee of P1,000.00; if single
proprietor; and P3,000.00 of corporation
or partnership.

Certified copy of the Certificate of

Registration of firm or business name from
the Department of Trade and Industry
(DTI), in case the single proprietorship; or
a certified copy of the Articles of
Partnership or Incorporation duly registered
with the Securities and exchange
Commission (SEC), in the case of a
partnership or a corporation;

A sworn statement of assets and

liabilities and/or a duly audited financial
statement, as the case may be;

Owners certificate/title of office

location or contract of lease of office
space for at least 2 years;

NBI clearance of the applicant, or the

partners in the case of a partnership or all
the officers and members of the Boart of
Directors, in the case of a corporation;

Income Tax Returns for the last 2


A verified undertaking that the

applicant shall:
not engage in the recruitment of children below
15 years of age or place children below 18 years
old in hazardous occupation in accordance with
R.A No. 7610, as amended by R>A No. 7658, and
other related laws; and
Assume full responsibility for all claims and
liabilities which may arise in connection with the
use of the license;

Organizational structure and list of all

officers and personnel with their
respective bio-data, 2 passport size ID
pictures and a detailed description of their
duties and responsibilities; and

Specific address and location map of

the office/proposed office;
List of all authorized representatives,
if any, who must be at least high school
graduate, with their corresponding biodata, 2 passport size ID pictures, high
school diploma or other proof of
educational attainment duly
authenticated, NBI clearance and Special
Power of Attorney (SPA).
No application shall be accepted, unless all
the requirements have been compiled with.


Action on the application.

1. Upon receipt of the application, the
Regional Director of his duly authorized
representative shall evaluate the documents
submitted and conduct an ocular inspection
of the applicants office;
2. Within 15 working days after the ocular
inspection, the Regional Director shall act on
the application, and immediately notify the
applicant of the action taken; and
3. Applications which do not meet the
requirements set forth in the rules shall be



Publication The Agency shall publish

once in a newspaper of general circulation
the license number of the agency, names
and pictures or authorized representatives
within 15 days from the issuance of the
license and shall submit a copy of said
publication to the DOLE.
Validity of the license. The license
shall be valid all over the Philippines for 2
years from the date of issuance, upon
submission of proof of publication, unless
sooner suspended, cancelled or evoked by
the DOLE Regional Director.

Non-transferability. No license shall be

transferred, conveyed or assigned to any
other person or entity.
i) Display of license. The original license or
a copy shall be displayed conspicuously at all
times in the office premises of the PRPA.
j) Renewal of license. An application for
renewal of license shall be filed not later than
30 days before expiration of the same. No
agency shall be allowed to renew its license if
it has been convicted by the regular courts
for violation of the Labor Code, as amended,
and its implementing Rules, or if its license
has been previously revokes.

Requirement for renewal. The agency

shall submit its existing license together with
the requirement specified in the Rules.
l) Change of Ownership. Any agency which
desires to transfer ownership shall surrender
its license to the issuing Regional Office.
m) Change of business address. An agency
which desires to transfer to a new business
address shall notify the Regional Office which
issued the license at least 30 working days
prior to the intended date of transfer, It shall
likewise notify the Regional Office which has
Jurisdiction over the new business address and
submit a sketch of the new office and a copy
of the contract of lease, if any.



Authority to recruit. A licensed Agency

or its authorized representative shall
secure an authority to recruit from the
DOLE Regional Office having jurisdiction
over the place where recruitment activities
will be undertaken. Such authority shall be
co-terminus with the license unless sooner
revoked/cancelled by the issuing DOLE
Regional Office or terminated by the



Documents required. The following documents

shall be submitted by the applicant/agency for the
issuance/renewal of an Authority to Recruit:
Letter request by the Agency;
Copy of current license;
Certification under oath of license of the proposed
recruitment activities of the representative;
NBI clearance and bio-data of the representative
with 2 ID pictures; Clearance from previous
agency, if applicable; and
Precious Authority to Recruit, in case of renewal.

No application shall be accepted unless all the

requirements have been complied with.




Establishment of Branch Office. The

application to establish a branch office shall be
filed with the Regional Office having
jurisdiction over the place where the branch
office is to be established.
Validity of the Authority. The authority to
operate a branch office shall be co-terminus
with the validity of the license of the agency,
subject to renewal upon submission of the
original authority and requirements provided
for under Sec. 25 of the Rules (supra.), as well
as the original authority.




Placement fee.- A licensed PRPA may

charge workers a placement fee which
shall not exceed 20% of the workers first
months basic salary; in no case shall such
fee be charged prior to the actual
commencement of employment.
Service fee. A licensed PRPA may
charge employers a service fee which shall
not exceed 20% of the annual basic salary
of the worker. In no case shall the service
fee be deducted from the workers salary.



Transportation. Transportation
expenses of the worker from the place
of origin to the place of work shall be
charged against the employer, and shall
in no case be deducted from the
workers salary.
Issuance of official receipt. All
payments made or fees collected by a
licensed Agency shall be covered by an
official receipt indicating the amount
paid and the purpose of such payment.

Grounds for suspension of a license.
Any of the following shall constitute a ground for suspension
of a license:
1. Violation of any of the provisions of the Rules;
2. Violation of Department Order No. 21, Series of 1994,
regarding publication of job vacancies;
3. Non-issuance of official receipt for every fee collected;
4. Non-submission of monthly report as provided in the Rules;
5. Charging or accepting directly or indirectly, any amount in
excess of what is prescribed by the rules.
6. Disregard of lawful orders and notices issued by the DOLE
Secretary of his duly authorized representative, or
7. Non-observance of the procedures or recruitment as stated
in the Rules.

b. Grounds for cancellation/revocation

of a license. Any of the following
shall constitute a ground for the
cancellation/ revocation of license:
1. Violation/s of the conditions of license;
2. Engaging in act or acts of
misinterpretation for the purpose of
securing a license or renewal thereof;
3. Continuous operation despite due notice
that the license has expired;
4. Incurring 2 suspensions by a PRPA
based on final and executory orders;




Engaging in labor-only contracting as defined

in Art. 106 of the Labor Code, as amended;
Recruitment and placement of workers in
violation of R.A. No. 7610, as amended by R.A.
No. 7658;
Transferring, conveying or assigning of
license/authority to any person or entity other
than the one in whose favor it was issued.
Violation of any of the provisions, particularly,
Art. 34 of the Labor Code, as amended, and its
Implementing Rules and Regulations.

c. Table of penalties and fines. The

commission of any of the aforecited
grounds for suspension,
cancellation/revocation shall merit
composition of fine and penalties provided
in the Table of Penalties and Fines
provided in the Rules.



Notice of closure of the Agency of its

Branch.- The Agency or its branch office
which ceases to operate prior to the
expiration of its license or its authority to
operate shall notify the Regional Office
concerned, stating the justification for
such closure, accompanied by the
original receipt of cash bond and the
license, or the authority to operate, as
the case may be.


Refund of cash bond. An agency

which voluntarily surrenders its license
shall be entitled to the refund of its
deposited cash bond only after posting a
surety bond of similar amount from a
bonding company accredited by the
Insurance Commission. The surety bond
is valid for 3 years from expiration of the




The Labor Code
Migrant Workers and Overseas Filipinos
Act of 1995 [R.A. No. 8042], as
amended by R.A. No. 10022 (March 8,



Overseas Filipinos refer to migrant workers,
other Filipino nationals and their dependents
Overseas Filipino Worker or Migrant
Worker refers to a person who is to be
engaged, is engaged, or has been engaged in a
remunerated activity in a state of which he or she
is not a citizen or on board a vessel navigation the
foreign seas other than a government ship used
for military or non-commercial purposes, or on an
installation located offshore or on the high seas. A
person to be engaged in a remunerated
activity refers to an applicant worker who has
been promised or assured employment overseas.



Regular/Documented Filipino
Migrant Workers refer to the
Those who possess valid passports and
appropriate visas or permits to stay and
work in the receiving country; and
Those whose contracts of employment
have been processed by the POEA, or
subsequently verified and registered onsite by the Philippine Overseas Labor
Office (POLO), if required by law or

Seafarer refers to any person who is

employed or engaged in overseas employment
in any capacity on board a ship other than a
government ship used for military or noncommercial purposes. The definition shall
include fishermen, cruise ship personnel and
those serving on mobile offshore and drilling
units in the high seas.
Skilled Filipino Workers refer to those
who have obtained an academic degree,
qualification, or experience, or those who are
in possession of an appropriate level of
competence, training and certification, for the
job they are applying, as may be determined
by the appropriate government agency.

Underage Migrant Workers refer to those

who are below 18 years or below the
minimum age requirement for overseas
employment as determined by the DOLE
Overseas Filipino in Distress refers to an
overseas Filipino who has a medical, psychosocial or legal assistance problem requiring
treatment, hospitalization, counseling, legal
representation as specified in the Rules or any
other kind of intervention with the authorities
in the country where he or she is found.
Rehires refer to land-based workers who
renewed their employment contracts with the
same principal.


A private Fee-charging Employment
Agency or Private
Recruitment/Employment Agency
refers to any person, partnership or
corporation duly licensed by the DOLE
Secretary to engage in the recruitment
and placement of workers for overseas
employment for a fee which is charged,
directly or indirectly, from the workers or
employers or both or from the workers
who renewed their employment contracts
with the same principal.



A private recruitment entity refers
to any person or association engaged in
the recruitment and placement of workers
without charging, directly or indirectly,
any fee from the workers or employers.
An example is a Filipino Service
Contactor licensed as such to recruit
workers for its accredited projects or
contracts overseas. This being so, it will
recruit and place workers without
charging any fee.



A PEA technically may be distinguished
from a PRE as follows:
A PEA has a right duly recognized in law
to charge a fee, directly or indirectly,
from the workers or the employers or
from both; while a PRE does not charge
any fee either directly or indirectly from
the workers or employers to which they
would be deployed;

The performer is authorized to recruit

only for overseas placement or
deployment; while the latter is allowed to
recruit for both local and overseas
The former derives its authority to
recruit and place workers from a
document denominated as a license:,
while the latter sources its authority from
a document called authority.




The following are authorized to engage in
recruitment and placement of workers:
Public employment offices;
Philippine Overseas Employment Administration
Private recruitment entities;
Private employment agencies;
Shipping or manning agents or representatives;
Such other persons or entities as may be
authorized by the DOLE Secretary; and
Construction contractors.



Filipino Service Contractor refers
to any person, partnership or corporation
duly licensed as a private recruitment
agency by the DOLE Secretary to recruit
workers for its accredited projects or
contracts overseas.
Manning Agency refers to any
person, partnership or corporation duly
licensed by the DOLE Secretary to engage
in the recruitment and placement of
seafarers for ships plying international
waters and for related maritime activities.

Non-licensee refers to any person,

partnership or corporation with no valid
license to engage in recruitment and
placement of overseas Filipino workers or
whose license is revoked, cancelled,
terminated, expired or otherwise delisted
from the roll of licensed
recruitment/manning agencies registered
with the POEA.

Placement Fees refer to any and all

amounts charged by a private
recruitment agency from a worker for its
recruitment and placement services as
prescribed by the DOLE Secretary.



In cases involving employment of OFWs, the
rights and obligations among and between
the OFWs, the local recruiter/agent, and the
foreign employer/principal are governed by
the employment contract. A contract freely
entered into is considered the law between
the parties and, therefore, should be
respected. In formulating the contract, the
parties may establish such stipulations,
clauses, terms and conditions as they may
deem convenient, provided they are not
contrary to law, morals, good customs, public
order, or public policy.


The rules on overseas employment are divided into
two, namely:


POEA Rules and Regulations Governing the Recruitment and

Employment of Land-Based overseas Workers; and
POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers

The obvious intent for the 2 separate issuances is

to distinguish between the rules applicable to
land-based overseas workers and those
applicable to seafarers (formerly termed as
seamen). This is as it should be because of
the unique and peculiar distinguishing features
of maritime employment.


Only those who possess the following
qualifications may be permitted to engage
in the business of recruitment and
placement of overseas Filipino workers:

citizens, partnerships or
corporations at least 75% of the
authorized capital stock of which is owned
and controlled by Filipino citizens;

minimum capitalization of P2,000,000.00

in case of a single proprietorship or
partnership and a minimum paid-up capital
P2,000,000.00 in case of a corporation;
Provided, that those with existing licenses
shall, within 4 years from effectivity hereof,
increase their capitalization or paid up
capital, as the case may be, the
P2,000,000.00 at the rate of P250,000.00
every year; and
Those not otherwise disqualified by law or
other government regulations to engage in
the recruitment and placement of workers
for overseas employment.

The following are not qualified to engage in the
business of recruitment and placement of Filipino
workers overseas:
a. Travel agencies and sale agencies of airline
b. Officers or members of the Board of any
corporation or members in a partnership engaged
in the business of a travel agency.
c. Corporations and partners, when any of its
officers, members of the board or partners, is
also an officer, member of the board or partner of
a corporation or partnership engaged in the
business of a travel agency;





Persons, partnerships or corporations

which have derogatory records, such as,
but not limited to, the following:
Those certified to have derogatory record
or information by the NBI or by the Antiillegal Recruitment Branch of the POEA;
Those against whom probable cause or
prima facie finding of guilt for illegal
recruitment or other related cases exists;
Those convicted for illegal recruitment or
other related cases and/or crimes
involving moral turpitude; and


Those agencies whose license s have

been previously revoked or cancelled by
the POEA for violation of R>A. No. 8042,
the Labor Code (PD 442, as amended),
and their implementing rules and
All applicants for issuance/renewal of
license shall be required to submit
clearances from the NBI and Anti-illegal
Recruitment Branch of the POEA,
including clearances for their respective
officers and employees.



Any official or employee of the DOLE,

POEA, Overseas Workers Welfare
Administration (OWWA), Department of
Foreign Affairs (DFA) and other
government agencies directly involved in
the implementation of R.A. No. 8042
and/or any of his/her relatives within the
4th civil degree of consanguinity or
affinity; and
Persons or partners, officers and
directors of corporations whose licenses
have been previously cancelled or
evoked for violation of recruitment laws.


Except in case of a provisional license,
every license shall be valid for 4 years
from the date of issuance unless sooner
cancelled, revoked or suspended for
violation of applicable Philippine law, the
Rules and other pertinent issuances. Such
license shall be valid only at the place/s
stated therein and when used by the
licensed person, partnership or

No license shall be transferred, conveyed or assigned
to any person, partnership or corporation. It shall not
be used directly or indirectly by any person,
partnership or corporation other than the one in
whose favor it was issued.
In case of death of the sole proprietor and to prevent
disruption of operation to the prejudice of the interest
of legitimate heirs, the license may be extended upon
request of the heirs, to continue only for the purpose
of winding up the business operations.

Transfer or change of ownership of a single
proprietorship licensed to engage in overseas
employment shall cause the automatic
revocation of the license.
A change in the relationship of the partners in a
partnership duly licensed to engage in overseas
employment which materially interrupts the
course of the business or results in the actual
dissolution of the partnership shall likewise
cause the automatic revocation of the license .


Any transfer of business address shall be
effected only with prior authority or approval of
the POEA. The approval shall be issued only
upon formal notice of the intention to transfer
with the following attachments:
a. In the case of a corporation, a Board Resolution
duly registered with the SEC authorizing the
transfer of business address; and
b. Copy of the contract of lease or proof of
building ownership.

The new office shall be subject to the

regular ocular inspection procedures by duly
authorized representatives of the POEA.
A notice to the public of the new address
shall be published in a newspaper of general

Additional/extension offices may be
established subject to the prior approval of
the POEA>.


No licensed agency shall conduct any
provincial recruitment, jobs fair or
recruitment activities of any form outside of
the address stated in the license or
approved additional office(s) without first
securing prior authority from the POEA.


An agency shall submit an application for the

renewal of its license on or before its expiration.
Such application shall be supported by the following
a) Renew or revalidated surety bond amounting to
b) Renewed escrow agreement in the amount or
P1,000,000.00 with a commercial bank to primarily
answer for valid and legal claims or recruited
workers as a result of recruitment violations or
money claims;




Audited financial statements for the past 2 years with

verified corporate or individual tax returns. In case the
equity of the agency is below the minimum
capitalization requirement, it shall be given 30 days
from release of the renewed license to submit proof(s)
of capital infusion, such as SEC certification of such
infusion or bank certification corresponding to the
amount infused and treasurers affidavit duly received
by the SEC. Otherwise, the license shall be suspended
until it has complied with the said requirement;
Clearances from the NBI and the POEA Anti-illegal
Recruitment Branch for the Board of Directors and
responsible officers; and
Other requirements as may be imposed by the POEA.

Where the license holder has made timely
and sufficient application for renewal, the
existing license shall not expire until the
application shall have been finally
determined by the POEA. For this purpose,
an application shall be considered sufficient
if the applicant has substantially complied
with the requirements for renewal.


(Section 5, R.A. No. 10022)


The term illegal recruitment is defined as
any recruitment activities, including the
prohibited practices enumerated under Article
34 of the Labor Code, to be undertaken by
non-licenses or non-holders of authority.
Based on paragraph [a] of Article 38, illegal
recruitment as defined therein, in relation to
Articles 13 [b] and 34 and penalized under
Article 39 of the Labor Code, may be
committed only by non-licensees or nonholders of authority.

R.A. No. 8042, otherwise known as the

Migrant Workers and Overseas Filipinos Act
of 1995, as amended, and its Implementing
Rules, have broadened this concept of illegal
recruitment as far as overseas placement
and recruitment activities are concerned.
Consequently, the acts described in the
following provision of this law that may be
committed by any person, constitute illegal
recruitment, regardless of whether such
person is non-licensee, non-holder, licensee
or holder of authority:

SECTION 6. Definition -

For purposes of this Act, illegal recruitment shall mean any

act of canvassing, enlisting, contracting, transporting,
utilizing, hiring or procuring workers and includes
referring, contract services, promising or advertising for
employment abroad, whether for profit or not, when
undertaken by non-licensee or non-holder of authority
contemplated under Article 13(f) of Presidential Decree No.
442, as amended, otherwise known as the Labor Code of the
Philippines: Provided, That any such non-licensee or nonholder who, in any manner, offers or promises for a fee
employment abroad to 2 or more persons shall be deemed
so engaged. It shall likewise include the following acts,
whether committed by any person, whether a nonlicensee, non-holder, licensee or holder of authority.



License refers to the document issued by

the DOLE Secretary authorizing a person,
partnership or corporation to operate a
private recruitment/manning agency.
Authority refers to the document issued by
the DOLE Secretary authorizing the officers,
personnel, agents or representatives of a
licensed recruitment/manning agency to
conduct recruitment and placement activities
in a place stated in the license or in a
specified place.



The essential elements of illegal

recruitment vary in accordance with the
following classifications:
1) Simple illegal recruitment;
2) When committed by a syndicate; or
3) When committed in large scale.
When illegal recruitment is committed
under either Nos. 2 or 3 above or both, it
is considered an offense involving
economic sabotage.




According to the 2011 case of Delia D. Romero

vs. People, the 2 elements of the crime of
simple illegal recruitment are:
1) The offender has no valid license or authority
required by law to enable one to lawfully engage
in recruitment and placement of workers; and
2) He undertakes wither any activity within the
meaning of recruitment and placement defined
under Article 13(b), or any prohibited practices
enumerated under Article 34 of the Labor Code.


Under the first element, a non-licensee or nonholder of authority is any person, corporation or
entity which has not been issued a valid license or
authority to engage in recruitment and placement
by the DOLE Secretary, or whose license or
authority has been suspended, revoked or cancelled
by the POEA or the DOLE Secretary.
The acts mentioned in Article 13(b) of the Labor
Code can lawfully be undertaken only by licenses or
holders of authority to engage in the recruitment
and placement of workers.

As far as agents or representatives appointed

by the licenses or holders of authority are
concerned, they shall be considered as falling
within the ambit of the term non-licensee or
non-holder of authority if their appointments
were not previously authorized by the POEA.
Consequently, their activities shall be
considered illegal recruitment.
Non-possession of a license to recruit is, under
the law, an essential ingredient of the crime of
illegal recruitment penalized under the Labor

A person who promised a job placement

abroad to another, for a consideration,
when he is not duly licensed now authorized
to engage in recruitment, is criminally liable
for illegal recruitment.
) Any person, whether a non-licensee, non-

holder, licensee or holder of authority, may be

held liable for illegal recruitment. Under R.A.
No. 8042, as amended by R.A. No. 10022,
license or authority of the illegal recruiter is

Under R.A. No. 8042, the crime of illegal

recruitment may be committed by any
person, whether a non-licensee, nonholder, licensee or holder of authority. Even
with a license or authority, illegal
recruitment could still be committed under
Section 6[supra] of said law,. It is clear that
under this law, in order to prove illegal
recruitment, there is no need to establish
whether the accused is a licensee or holder
of authority or not because it is no longer
an element of the crime.

) Recruiter may be a natural or juridicial person.

Accused-appellant in People vs. Saulo, contends

that he could not have committed the crime of
illegal recruitment in large scale since Nancy
Avelino, a labor and employment officer at the
POEA, testified that licenses for recruitment and
placement are issued only to corporation and not
to natural persons. Holding that this argument is
specious and illogical, the Supreme Court
ratiocinated that any person, whether natural or
juridical, that engages in recruitment activities
without the necessary license or authority shall
be penalized under Article 39 of the Labor Code.


The phrase recruitment and placement
refers to the acts described in paragraph [b]
of Article 13 of the Labor Code, viz:
[b] Recruitment and placement refers to any act of canvassing,
enlisting, contracting, transporting, utilizing, hiring or procuring
workers, and includes referrals, contract services, promising or
advertising for employment, locally or abroad, whether for profit or
not: Provided, That any person or entity which, in any manner, offers
or promises for a fee, employment to 2 or more persons shall be
deemed engaged in recruitment and placement.


Mere impression that a person could deploy
workers overseas is sufficient to constitute
illegal recruitment. But of no such
impression is given, the accused should not
be convicted for illegal recruitment.
Mere promise or offer of employment
abroad amounts to recruitment.
There is no need to show that accused
represented himself as a licensed recruiter.

Referrals may constitute illegal

It is illegal recruitment to induce
applicants to part with their money
upon false misrepresentations and
promises in assuring them that after
they paid the placement fee, jobs
abroad were waiting for them and that
they would be deployed soon.
Recruitment whether done for profit
or not is immaterial.

The act of receiving money far exceeding

the amount as required by law is not
considered as recruitment and
placement as this phrase is
contemplated under the law.
Actual receipt of fee is not an element of
the crime of illegal recruitment.
Conduct of interviews amounts to illegal
Absence of receipt is not essential to
hold a person guilty of illegal recruitment.

Conviction of interviews amounts to

illegal recruitment.
Absence of receipt is not essential to
hold a person guilty of illegal recruitment.
Conviction for illegal recruitment may be
made on the strength of the testimonies
of the complainants.
Absence of documents evidencing the
recruitment activities strengthens, not
weakens, the case for illegal recruitment.

Only one person recruited is sufficient to convict one

for illegal recruitment.
Non prosecution of another suspect is immaterial.
Execution of affidavit of desistance affects only the
civil liability but has no effect on the criminal liability
for illegal recruitment.
Defense of denial cannot prevail over positive
identification. Positive identification where
categorical and consistent and not attended by any
showing of ill motive on the part of the eyewitnesses
on the matter prevails over alibi and denial. Between
the categorical statements of the prosecution
witnesses, on the one hand, and bare denials of the
accused, on the other hand, the former must prevail.

Conspiracy in illegal recruitment cases, how

Conspiracy to defraud aspiring OFWs is evident
from the acts of the malefactors whose conduct
before, during and after the commission of the
crime clearly indicated that they were one in
purpose and united in its execution. Direct proof
of previous agreement to commit a crime is not
necessary as it may be deducted from the mode
and manner in which the offense was
perpetrated, or inferred from the acts of the
accused pointing to a joint purpose and design,
concerted action and community of interest.

As such, all the accused are equally

guilty of the crime of illegal
recruitment since in a conspiracy, the
act of one is the act of all. To
reiterate, in establishing conspiracy, it
is not essential that there be actual
proof that all the conspirators took a
direct part in every act. It is sufficient
that they acted in concert pursuant to
the same objective.


These two topics shall be discussed jointly in view of their close interrelation.




Illegal recruitment is considered a

crime involving economic sabotage
when the commission thereof is
attended by the following qualifying
When committed by a syndicate; or
2. When committed in large scale



Illegal recruitment is deemed

committed by a syndicate if it is
carried out by a group of three or
more persons conspiring or
confederating with one another.


The essential elements of the crime of illegal
recruitment committed by a syndicate are as
1. There are at least 3 persons who, conspiring
and/or confederating with one another, carried
out any unlawful or illegal recruitment and
placement activities as defined under Article
13(b) or committed any prohibited activities
under Article 34 of the Labor Code; and
2. Said persons are not licensed or authorized to
do so, either locally or overseas.

The law, it must be noted, does not

require that the syndicate should
recruit more than 1 person in order to
constitute the crime of illegal
recruitment by a syndicate.
Recruitment of 1 person would suffice
to qualify the illegal recruitment act as
having been committed by a


Illegal recruitment is deemed
committed in large scale if committed
against 3 or more persons
individually or as a group.


The elements of illegal recruitment in large
scale, as distinguished from simple illegal
recruitment, are as follows:
1. The accused engages in the recruitment
and placement of workers as defined under
Article 13(b) or committed any prohibited
activities under Article 34 of the Labor
Code; and
2. The accused commits the same against 3 or
more persons, individually or as a group.



As distinguished from illegal

recruitment committed by a syndicate,
illegal recruitment in large scale may
be committed by only 1 person. What
is important as qualifying element is
that there should be at least 3 victims
of such illegal recruitment, individually
or as a group.


The number of persons victimized is
determinative of the crime. A conviction for
large scale illegal recruitment must be based
on a finding in each case of illegal
recruitment of 3 or more persons having
been recruited, whether individually as a
Failure to prove at least 3 persons recruited
makes the crime a case of simple illegal

There is no illegal recruitment in large

scale based on several information's
filed by only one complainant.
The number of offenders is not
material in illegal recruitment in large
Recruitment in large scale or by a
syndicate is malum prohibitum and not
malum in se.





The crime of estafa is defined under
paragraph 2(a) of Article 315 of the Revised
Penal Code, viz:
Article 315. Swinding (estafa). Any person who
shall defraud another by any means mentioned

2. By means of any of the following false pretenses

or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
(a) By using fictitious name, or falsely pretending to
possess power, influence, qualifications, property,
credit, agency, business or imaginary transactions;
or by means of other similar deceits.

The elements of estafa in general

1. That the accused defrauded another
a. by abuse of confidence
b. by means of deceit
2. That damage or prejudice capable of
pecuniary estimation is caused to the
offended party or third person.

Deceit is the false representation of a

matter of fact, whether by words or
conduct, by false or misleading
allegations, or by concealment of that
which should have been disclosed; and
which deceives or is intended to
deceive another so that he shall act
upon it, to his legal injury.

The 2010 case of People v. Gallo, best

illustrates the case where the accused-appellant
was convicted not only for illegal recruitment
but also for estafa because all the elements of
estafa are present: the accused-appellant,
together with the other accused at large,
deceived the complainants into believing that
the agency had the power and capability to send
them abroad for employment; that there were
available jobs for them in Korea as factory
workers; that by reason or on the strength of
such assurance, the complainants parted with
their money in payment of the placement fees;

That after receiving the money,

accused-appellant and his co-accused
went into hiding by changing their
office locations without informing
complainants; and that complainants
were never deployed abroad.



In cases where some other crimes or

felonies like estafa are committed in
the process of illegal recruitment,
conviction under the Labor Code does
not preclude punishment under other
statutes. Illegal recruitment is
penalized under the Labor Code, which
is a special law, and not under the
Revised Penal Code.

It bears emphasis, however, that not

all acts which constitute the felony of
estafa under the Revised Penal Code
necessarily establish the crime of
illegal recruitment under the Labor
Code. Estafa is wider in scope and
covers deceits whether related or not
related to recruitment activities.



Same evidence to prove illegal

recruitment may be used to prove
Conviction for both illegal recruitment
and estafa, not double jeopardy.



a. Theory of Imputed Knowledge




Joint and several liability is the nature
of the liability of the principal/employer and
the recruitment/manning agency, for any
and all claims arising out of the
implementation of the employment contract
involving Filipino workers for overseas
deployment. This liability is required to be
incorporated in the contract for overseas
employment and is a condition precedent
for its approval.

If the recruitment/manning agency is a

juridical being, the corporate officers and
directors or partners, as the case may be,
shall themselves be jointly and severally
liable with the corporation or partnership for
the aforesaid claims and damages.
Such liabilities shall continue during the
entire period or duration of the employment
contract and shall not be affected by any
substitution, amendment and modification
made locally or in a foreign country of the
said contract.

Jurisprudence has already affirmed the validity of said
provision on joint and solidary liability.
The 2004 case of Phil. Employ Services and
Resources, Inc. v. Paramio ruled that under the law,
the agency which deployed the employees whose
employment contracts were adjudged illegally terminated,
is jointly and solidarily liable with the principal for the
money claims awarded to the aforesaid employees which
consist of the payment of the salaries due to the OFWs
corresponding to the unexpired portion of their contract
as well as the reimbursement of their placement fees.

However, in order to hold the officers of the

agency solidarily liable, it is required that there
must be proof of their culpability therefor. Thus,
in the 2012 case of Hon. Sto. Tomas v. Salac,
while the Supreme Court has affirmed the
constitutionally of the last sentence of the 2 nd
paragraph of Section 10, R.A. 8042, which states:
if the recruitment/placement agency is a
juridical being, the corporate officers and
directors and partners as the case may be,
shall themselves be jointly and solidarily
liable with the corporation or partnership for
the aforesaid claims and damages, it rules in
this wise:

But the court has already held, pending

adjudication of this case, that the liability of
corporate directors and officers is not automatic.
To make them jointly and solidarily liable with
their company, there must be a finding that they
were conduct of illegal activities. In the case of
Becmen and White Falcon, while there is evidence
that these companies were at fault in not
investigating the cause of Jasmins death, there is
no mention of any evidence in the case against
them that intervenors Gumabay, et. al., Becmens
corporate officers and directors, were personally
involved in their companys particular actions or
omissions in Jasmins case.

As a final note, R.A. 8042 is a police power

measure intended to regulate the recruitment
and deployment of OFWs. It aims to cub, if
not eliminate, the injustices and abuses
suffered by numerous OFWs seeking to work
abroad. The rule is settled that every statute
has in its favor the presumption of
constitutionality. The court cannot require into
the wisdom or expediency of the laws enacted
by the Legislative Department . Hence, in the
absence of a clear and unmistakable case that
the statute is unconstitutional, the court must
uphold its validity.

The above ruling was reiterated in the 2013 case

of Gagui v. Dejero, where the Court of Appeals
affirmed the finding of the NLRC that petitioner
Elizabeth M. Gagui, although not impleaded in
the original complaints filed by respondents, is
solidarily liable with the placement agency, PRO
Agency Manila, Inc., to pay respondents all the
money claims awarded by virtue their illegal
dismissal. The CA cited Section 10 of R.A. 8042
in stating that there was no need for petitioner
to be impleaded xxx because by express
provision of the law, she is made solidarily liable
with PRO Agency Manila, Inc., for any and all
money claims filed by private respondents.

The Supreme Court upheld petitioners

contention based o its earlier ruling in
Hon. Sto. Tomas v. Salac, that while it is
true that R.A 8042 and the Corporation
Code provide for solidary liability, this
liability must be so stated in the
decision sought to be implemented.
Absent this express statement, a
corporate officer may not be impleaded
and made to personally answer for the
liability of the corporation.



Solidary liability exists even if the

foreign principal is a foreign
government instrumentality; immunity
from suit cannot be invoked to defeat
the solidary nature of the liability.
Extension of term of employment of
OFW without knowledge of local agent
does not bind the latter.

Effect on liability of severance of relations

between local agent and foreign principal.
Even if the recruitment agency and the foreign
principal had already severed their agency
agreement at the time the worker was injured,
the recruitment agency may still be sued for
violation of the employment contract of no notice
of the termination of the agencys agreement with
its foreign principal was given to the OFW,
pursuant to Article 1921 of the Civil Code which
states that if the agency has been entrusted for
the purpose of contracting with specified persons,
its revocation shall not prejudice the latter if they
were not given notice thereof.

Previous owner remains liable to its

employees even if there is an
undertaking to assume
responsibility by the new owner. The
liability of the former owner of the
recruitment agency is not extinguished
by an undertaking made by the new
owner thereof assuming responsibility
therefor. Such undertaking does not bind
the employees as would release the
former from its liabilities to the latter.


The person criminally liable for illegal recruitment
1) In case of natural persons
(a) Principals;
(b) Accomplices; and
(c) Accessories.
2) In case of juridical persons.
(a) Officers having ownership, control,
management or direction of their business who
are responsible for the commission of the offense.
(b) Responsible employees/agents thereof.




Employees of a licensed recruitment

agency may be held liable for illegal
recruitment as principal by direct
participation, together with his employer, it
is shown that he actively and consciously
participated in illegal recruitment.
Good faith and merely following orders of
superiors are not valid defenses of an


A manager of a
recruitment/manning agency is not a
mere employee. As such, he receives
job applications, interviews
applicants and informs them of the
agencys requirement of payment of
performance or cash bond prior to
the applicants deployment. As the
crewing manager, he was at the
forefront of the companys
recruitment activities.



The institution of the criminal action

is without prejudice to any
administrative action against the
licensee or holder of authority
cognizable by the POEA which could
proceed independently of the criminal


The theory of imputed knowledge is a rule
that any information material to the
transaction, either possessed by the agent
at the time of the transaction or acquired
by him before its completion, is deemed to
be the knowledge of the principal, at least
insofar as the transaction is concerned,
even though the knowledge, in fact, is not
communicated to the principal at all.

Imputed Knowledge means the

knowledge attributed to a party
because of his position, or his
relationship with or responsibility for
another party. Such knowledge is
attributed for the reason that the facts
in issue were open to discovery and it
was that persons duty to apprise him
of such facts.

CIT Group/Equipment Financing, Inc. v. Roberts,

observed that knowledge of one person is generally
only imputed to another where there exists a special
legal relationship between the two, such as where the
knowledge of an agent may be imputed to his client, or
the knowledge of one partner in a partnership is
imputed to all the partners. Even in those relationships,
though, imputation of knowledge may be only found
under certain circumstances. The theory known as
theory of imputed knowledge simply is that
knowledge from an agent to its principal is only when
the agent acts within the scope of the agency
relationship. The presumption upon which imputation
rests is that the agent will perform his duty and
communicate to his principal the facts that the agent
acquires while acting within the scope of the agency

The local manning agency vis a vis with the foreign

principal is that agent-principal, the former being
the agent and the latter, the principal.
Consequently, the theory of imputed knowledge
ascribes the knowledge of the agent to the
principal, but not the other way around.
Thus, the violation of the terms and
conditions of an extension contract of which
the local recruiter did not know and did not
consent to, shall not make said local recruiter
solidary liable for the reason that knowledge
by his foreign principal of said contract
cannot be imputed to him.

Sunace International Management

Services vs. NLRCFacts: Divina, an OFW domestic
helper in Taiwan has extended his
12 month contract after the
expiration of the original 2 years
original term. The extension was
without the knowledge of the
local recruitment agency.

The decision of the NLRC was affirmed

by the CA, that the agent cannot profess
ignorance of such extension, as obviously
the act of the principal extending the
contract necessarily, the agent is bound
by it. The knowledge of the principal
foreign employer cannot be imputed to
its local agent, there being no substantial
proof that the local agent knew and
consented to such extension. The foreign
principal directly negotiated with Divina
and entered into a new separate
employment contract while in Taiwan.


Various Forms of Pre-termination of
employment contract:
1. The OFW has requested for an early
termination of employment
2. The OFW and his employer mutually
agreed on an early termination of
3. The OFW has been discharged for just
cause or disciplinary reasons or authorized
4. The OFW has suffered injury or illness
5. The death of the OFW


They are contractual employees.
Cases decided by the Supreme Court:
Brent School Inc. vs. Zamora-OFWs are not covered under
the coverage of regular employees under the Labor Code
Coyoca vs. NLRC- the employment of Filipino seamen is
governed by the rules and regulations of the POEA which
state that the contract of seafarers shall be for a fixed period
no longer than 12 months.
Millares vs. NLRC- OFW contract is governed by the contract
they signed everytime they are re-hired and their
employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time.

What is the effect of Seafarer for overseas

employment but is assigned in local vessel.
OSM Shipping Philippines vs. NLRC- OSM hired
Guerrero as master mariner under an OFW contract.
He was not however been deployed overseas, and
thus, OSM contends that his contract is ineffective
because its object was allegedly absent. OSM argues
that the contract was novated. The SC said that the
non-deployment of the vessel to overseas deployment
did not affect the validity of the perfected
employment contract. After all the decision to use the
vessel for local shipping was made by OSM did not
bear the written conformity of Guerrero. A contract
cannot be novated by the will only of one party.

What is the effect of a Seafarer who was hired for overseas

deployment but later on assigning him to domestic operations
after the expiration of his overseas contract?
Case of Delos Santos vs. jebsen Martime Inc. De los
Santos was hired as 3rd Engineer for a period of 1
month. It was deployed for Japan. When it returned to
the Philippines, the contract expired, but Jebsen, opted
to retain his services on board the vessel which
underwent repairs in Cebu and eventually registered
and renamed as Super Roro 100 plying the route
Manila-Zamboanga-General Santos route after being
issued authority by the MARINA. De los Santos was
now being paid in Philppine pesos. Later on he got sick
and filed a complaint for disability benefits, sick wage
allowance and reimbursement of hospital and medical
expenses pursuant to the POEA approve contract.

The SC ruled that the POEA approved

contract should no longer apply after the
expiration of the one month contract. After
the lapse of the said period, his employment
under the POEA approved contract may be
deemed functus oficio and his employment
considered automatically terminated, there
being no mutually agreed renewal or
extension of the expired contract. After the
said original period, De los Santos ceased to
be an OFW as his employment on board an
inter-island vessel should already be
considered as domestic employment.



The same is akinto voluntary

resignation. However, if the employer
fails to present evidence of
voluntariness, the employee is
deemed illegally

Case: Skippers United Phils. Vs. Doza- There

was no writeen notice that was furnished the
seafarers about the cause of their dismissal. The
contention of the foreign employer is that it has
sent a telex to the local manning agency, that
the seafarers were repatriated because they
voluntarily per-terminated their contracts. The
Labor and NLRC gave credence to the telex. On
appeal, the CA said that the telex message was
biased and self serving document that did not
satisfy the requirement of substantial evidence.
If indeed the seafarers voluntarily preterminated their contracts, they should have
submitted a written resignation.



PROCESSUAL PRESUMPTION. This is an international
law doctrine which dictates that where a foreign law is
not pleaded or even if pleaded is not proved, the
presumption is that foreign law is the same as that of
Philippine laws. Thus, under this situation, Philippine
labor laws should apply in determining the issues
presented in a case. Philippine law does not take judicial
notice of foreign laws, hence, they must not only be
alleged, they must be proven. To prove a foreign law,
they must comply with the Revised Rules of Court.

Case: ATCI Overseas Corporation vs. EchinThe employer contends that Philippine labor
laws on probationary employment are not
applicable, since it was expressly provided in
the contract, that the terms of her
engagement must be governed by the Kawaiti
Civil Service laws, rules and regulations. The
Kuwaiti law probationary period is one (1)
year. After 8 months of service, she was
terminated, gave her a copy of termination
letter stating that she did not pass the
probation terms, without however specifying
the ground therefor. What was submitted was
only the termination letter and the translation

Ruling of the Supreme Court- the documents

presented whether taken singly or as a whole
do not sufficiently prove that the OFW was
validly terminated as a probationary employee
under the Kuwaiti Civil Service laws. Instead of
submitting the Kuwaiti labor laws duly
authenticated and translated by Embassy
Officials as required under the rules, what
petitioners submitted were merely certification
attesting only to the correctness of the
translations of the MOA and the termination
letter which does not prove at all that Kuwaiti
Civil Service laws differed from Philippine laws
and that under such Kuaiti laws, the employee
was validly terminated.

DUE PROCESS- In the absence of proof

applicable foreign law, OFWs are entitled
to due process in accordance with
Philippine laws.
Case: EDI-Staff Builders International Inc.
vs. NLRC- where no proof of the Saudi laws
was presented, in such absence, the
Philippine law shall govern the
relationship between the OFW and his

In Philemploy Services and Resources, Inc.

v. Rodriguez, the respondent employee was
hired as a domestic helper in Taiwan under a oneyear contract, with 40 days probationary period
before she would become a regular domestic
helper. Terminated after 10 days of work, she filed
an illegal dismissal case. The Supreme Court
affirmed the validity of her termination within the
probationary period but noted that the twin
requirements of notice and hearing were not
observed. Respondent is therefore entitled to be
award of P30,000.00 as nominal damages for
failure to observe due process.

Due process in case of termination of

employment of Seafarers.
PCL Shipping Philippines, Inc. v. NLRC. Contrary
to petitioners contention that the twin requirements of
notice and hearing apply strictly only when the
employment is within the Philippines and that the same
need to be strictly observed in cases of international
maritime or overseas employment, the provisions of the
Constitution as well as the Labor Code which afford
protection to labor apply to Filipino employees whether
working within the Philippines or abroad. Moreover, the
principle of lex loci contractus (the law of the place
where the contract is made) governs in this jurisdiction.

Centennial Transmarine, Inc. v. Dela Cruz,

However, is more Categorical in declaring
that for officers and crew who are working in
foreign vessels involved in overseas shipping,
there must be compliance with the applicable
laws on overseas employment as well as with
the regulations issued by the POEA, such as
those embodied in the Standard Contract for
Seafarers Employed Abroad (Standard

Skippers Pacific, Inc. v. Mira,

Instructs that under the said Standard Contract, the
two-notice rule is indicated. An erring seafarer is given
a written notice of the charge against him and is afforded
an opportunity to explain or defend himself. Should
sanctions be imposed, then a written notice of penalty
and the reasons for it should be furnished the erring
seafarer. It is only in the exceptional case of clear and
existing danger to the safety of a crew or vessel that the
required notices are dispensed with; but just the same, a
complete report should be sent to the manning agency,
duly supported by substantial evidence of the findings.



The Agabon doctrine of awarding indemnity

in the form of nominal damages in cases of
valid termination for just or authorized cause
but without procedural due process also
applies to termination of OFWs. The amount of
indemnity of P30,000.00 was awarded in DMA
Shipping Philippines, Inc. v. Cabillar, and
P10,000.00 in the case of PCL Shipping
Philippines, Inc. v. NLRC.

Most relevant to cite as example on this point is the

2011 case of Dela Rosa v. Michaelmar Philippines,
Inc.m which applied Agabon since petitioner was not
accorded procedural due process prior to his termination.
There was no showing here that respondents complied
with the required procedural due process. The only
notice allegedly given to Dela Rosa was a letter warning
dated March 16, 2003. Such letter, however, did not cite
the particular acts constituting Dela Rosas alleged poor
performance. Likewise, there was no formal investigation
of the charges. Certainly, respondents failed to observe
the necessary procedural safeguards. Consequently,
petitioner was awarded P30,000.00 as indemnity in the
form of nominal damages in accordance with the ruling
in Agabon because his dismissal was for just cause but
without due process.

Burden of proof devolves on both
recruitment agency and its foreign
In this termination cases, where the
employer-employee relationship has been
established, the onus probandi (burden of
proof) that the dismissal od an employee is for
a just cause, lies with the employer. Failure to
do so would necessarily mean that the dismissal
is not justifies.

Because of the joint and solidary nature if

the liability of the foreign-based employer
and the local recruitment agency, the burden
of proof to show that the dismissal of the
OFW is legal and valid devolves upon the
both of them.

Quantum of evidence required.

A fact is deemed established in cases filed
before administrative or quasi-judicial bodies
like the NLRC or POEA, if it is supported by
substantial evidence. They are not bound by
the technical rules of procedure and evidence
and the rules obtaining in the courts of law.
Their proceedings are non-litigious in nature.


Any and all money claims arising from the
employment of OFWs, including those for death,
disability or illness benefits, are not rooted in the
Labor Code. It is R.A. No. 8042, otherwise known
as the Migrant Workers and Overseas Filipino Act
of 1995, and not Article 279 of the Labor Code,
which is the appropriate legal basis for such claims.


An OFW who is dismissed from
employment for a valid cause is not entitled
to any salary for the unexpired portion of his
employment contract. However, if he is
dismissed without observance of procedural
due process, he is entitled to an indemnity on
the form of nominal damages.


Prior to the Serrano doctrine which was
enunciated in the en banc ruling in the 2009 case
of Antonio M. Serrano v. Gallant Maritime
Services, Inc., the following provision of the 5th
paragraph of Section 10 of R.A. No. 8042 which
is again quoted below for ready reference, viz:

in case of termination of overseas

employment without just, valid or authorized
cause as defined by law or contract, or any
unauthorized deductions from the migrant
workers salary, the worker shall be entitled
to the full reimbursement of his placement
fee and the deductions made with interest at
12% per annum, plus his slaries for the
unexpired portion of his employment
contract or for 3 months for every year
of the unexpired term, whichever is

The foregoing rule has been rendered

nugatory by the Serrano ruling which
declared the afore-quoted qualification or
for three months for every year of the
unexpired term, whichever is less n
paragraph 5, Section 10 of R.A. No. 8042 null
and unconstitutional for being discriminatory
and violative of the equal protection of the
law clause, among other significant reasons
cited therein, thusly:

Consequent to the Seranno ruling, an

illegally dismissed OFW is now entitled to all
the salaries for the entire unexpired portion
of their employment contracts, irrespective of
the stipulated term or duration thereof.
Resultantly, all past decisions subjecting the
monetary award to the afore-mentioned
qualifying clause no longer apply.


The Serrano doctrine was given retroactive
effect in the 2011 case of Yup v.
Thenamaris Ships Management, which
was pending before the Supreme Court when
the Serrano ruling was promulgated.

All statutes are to be construed as having only a

given them prospective application, unless the
purpose and intention of the legislature to give
then a retrospective effect are expressly declared
or are necessarily implied from the language used.
There is thus no reason to nullify the application of
the Serrano ruling in the present case. Said the
Supreme Court: Whether or not R.A. 10022 is
constitutional is not for us to rule upon in the
present case as this is an issue that is not
squarely before us. In other words, this is an issue
that awaits its proper day in court; in the
meanwhile, we make no pronouncement on it.



award to OFW is not in the nature of

separation pay or back wages but a from of
Only salaries are to be included in the
computation of the amount due for the
unexpired portion of the contract. Overtime,
holiday and leave pay and allowances are not
included. However, this rule on exclusion of
allowance does not apply in case it is
encapsulated in the basic salary clause.

Entitlement to overtime pay of OFWs.

A far as entitlement to overtime pay is
concerned, the correct criterion in
determining whether or not sailors are
entitled to overtime pay is not whether they
were on board and cannot leave ship
beyond the regular 8 working hours a day,
but an OFW is not entitled to overtime pay,
even if guaranteed, if he failed to present
any evidence to prove that he rendered
service in excess of the regular 8 working
hours a day.


case of unauthorized deductions from

OFWs salary, he shall be entitled to the
full reimbursement of the deductions made
with interest at 12% per annum. This is in
addition to the full reimbursement of his
placement fee with the same interest of
12% per annum plus his salaries for the
unexpired portion of his employment
contract if he is terminated without just,
valid or authorized cause defined by law or


of repatriation and transport of

personal belongings should be included in
the monetary award to an illegally dismissed
Right of the employer to recover cost of
repatriation from OFWs wages hinges on
whether the latter was legally or illegally
dismissed. If validity discharged, employer
has the right to recover therefrom;
otherwise, he cannot so recover.


substitution or alteration of POEAapproved employment contract from the time of

actual signing thereof by the parties up to and
including the period of their expiration without
the approval of the POEA is prohibited.
Effect of a final and executory judgment
against a foreign employer/principal. it
shall be automatically disqualified, without
further proceedings, from participating in the
Philippine Overseas Employment Program and
from recruiting and hiring Filipino workers until
and unless it fully satisfies the judgment award.


OFWs are not entitled to backwages
reinstatement or separation pay in lieu
thereof since these reliefs provided under
Article 279 of the Labor Code, as earlier
pointed out, are not available to them. Their
employment being purely fixed term in
character, they are entitled only to ALL the
salaries for the unexpired portion of their
employment contract per Serrano doctrine.


In the following cases, the OFWs were awarded actual or
compensatory damages because of the failure of the
recruitment agency to deploy them abroad, after signing a
POEA-approved employment contract, an act constitutive
of breach of contract:
1. Siantago v. CF Sharp Crew Management, Inc.,
where respondent recruitment agency was held liable to
pay petitioner actual and compensatory damages of
US$4,635.00 in the form of the loss of 9 months worth
of salary as provided in the contract.
2. Bright Maritime Corporation v. Fantonial, where
petitioner company was held liable for actual damages
for the loss of respondent's one-year salary as provided
in the contract.


Because of the attendant bad faith and
breach of contract, an illegally dismissed
OFW is entitled to moral and exemplary
damages and attorneys fees. Additionally,
because the OFW was compelled to litigate
and thus incur expenses to protect his rights
and interests, he is entitled to attorneys fees
equivalent to 10% of the total award.

Thus, in the same case of Bright Maritime,

respondent, in addition to the actual and
compensatory damages, was awarded moral
damages in the amount of P30,000.00,
exemplary damages of P50,000.00 and 10% of
all recoverable amounts as attorneys fees.
Similarly, based on the same grounds of
breach of contract and bad faith, the respondent
in Athenna Intrnational Manpower
Services, Inc. v. Villanos, was awarded
P50,000.00 as moral damages and P50,000.00
as exemplary damages, in addition to attorneys
fees of 10% of the aggregate monetary awards.


Repatriation as a remedy
Whatever ground is cited for the pretermination of employment, the OFW has the
right to insist that he be repatriated to the
Philippines. The only exception is when he is
charged for certain crimes or cases in foreign
courts and thus may not be allowed to go
home until the case is terminated in his favor.

Repatriation when an OFW requests for early

A seafarer who requests for early termination of his
contract shall be liable for his repatriation cost as well as
the transportation cost of his replacement.
c. Compulsory insurance policy covers repatriation
due to illegal termination or death of OFW.
The compulsory insurance policy coverage for an
agency-hired OFW includes the payment of repatriation
cost od the worker when his employment is terminated
by the employer without any valid cause or by the
employee with just cause, including the transport of his
personal belongings.
In case of death, the insurance provider shall arrange
and pay for the repatriation or return of the workers

Proportionate return of premium for

compulsory insurance.
When the worker decides to voluntarily
pre-terminate his employment contract
abroad and returns to the Philippines out of
his own volition and free will, there shall be a
proportionate amount of the
recruitment/manning agency corresponding
to the unexpired term if the insurance


a. Labor Arbiters have jurisdiction over
claims for disability, death and other
benefits of OFWs.
Being a money claim by their very nature
which may have arisen out of an employeremployee relationship or by virtue of a law or
contract, the Labor Arbiters of the NLRC have
jurisdiction to hear and decide claims for
disability, death and other benefits.

Labor Arbiter has jurisdiction even if the

case is filed by the heirs of the deceased
Medline Management, Inc. v. Roslinda,
Contrary to the claim of petitioner, the Labor Arbiter
has jurisdiction to hear even if there is no employeremployee relationship between the parties because
herein respondents who filed the complaint, are the
wife and son of Juliano Roslinda, the deceased OFW.
As heirs of Juliano Roslinda, they have the
personality to file the claim for death compensation,
reimbursement of medical expenses, damages and
attorneys fees before the Labor Arbiter of the NLRC.

Disability, not similar to illness or
Disability is generally defined as the
loss or impairment of a physical or mental
function resulting from injury or sickness.
Clearly, Disability is not synonymous with
sickness or illness, the former being a
potential effect of the latter.

Claims of OFWs for disability, death

and burial benefits, distinguished from
similar claims under the Labor Code
The claims for disability, death and burial
benefits involving seafarers of OFWs over
which the Labor Arbiters of the NLRC have
jurisdiction, are not the same as the claims
against the State Insurance Fund under Title
II, Book IV of the Labor Code for the same
benefits, over which the Employees
Compensation Commission (ECC) has

The Labor Codes concept of permanent total

disability applies to claims of OFWs.
But as far as the permanent total disability of OFWs
is concerned, the concept of this kind of disability under
Article 192 of the Labor Code is applicable to them.
The 2013 case of Kestrel Shipping Co., Inc. v.
Munar, declared that it is now well-settled that the
provisions of the Labor Code and Amended Rules on
Employee Compensation (AREC) implementing Title II,
Book IV of the Labor Code on disabilities are applicable
to the case of seafarers such that the POEA Standard
Employment Contract (POEA-SEC) is not the sole
issuance that governs their rights in the event of workrelated death, injury or illness.

Compensation and benefits for injury

or illness.
The latest POEA-SEC issued in 2010
prescribes the following compensation and
benefits for injury or illness.


The liabilities of the employer when the
seafarer his wages during the time he is on
board the ship;
1. The employer shall continue to pay the
seafarer his wages during the time he is on
board the ship.


If the injury or illness requires medical

and/or dental treatment in a foreign
port, the employer shall be liable for the full
cost of such medical, serious dental, surgical
and hospital treatment as well as board and
lodging until the seafarer is declared fit to
work or to be repatriated. However, if after
repatriation, the seafarer still requires medical
attention arising from said injury or illness, he
shall be so provided at cost to the employer
until such time he is declared fit or the degree
of his disability has been established by the
company-designated physician.


In addition to the above obligation of the

employer to provide medical attention, the
seafarer shall also receive sickness allowance
from his employer in an amount equivalent to
his basic wage computed from the time he
signed off until he is declared fit to work or
the degree of disability has been assessed
by the company-designated physician. The
period within which the seafarer shall be entitled
to his sickness allowance shall not exceed 120
days. Payment of the sickness allowance shall
be made on a regular basis, but not less than
once a month.

The seafarer shall be entitled to

reimbursement of the cost of medicines
prescribes by the company-designated
physician. In case treatment of the seafarer
is on an out-patient basis as determined by
the company-designated physician, the
company shall approve the appropriate mode
of transportation and accommodation. The
reasonable cost of actual traveling
expenses and/or accommodation shall be
paid subject to liquidation and submission of
official receipts and/or proof of expenses.

For this purpose, the seafarer shall submit himself to

a post-employment medical examination by a
company-designated physician within three
working days upon his return except when he is
physically incapacitated to do so, in which case, a
written notice to the agency within the same
period is deemed as compliance. In the course of
the treatment, the seafarer shall also report regularly
to the company-designated physician specifically on the
dates as prescribed by the company-designated
physician and agreed to by the seafarer. Failure of the
seafarer to comply with the mandatory reporting
requirement shall result in his forfeiture of the
right to claim the above benefits.

If the doctor appointed by the seafarer

disagrees with the assessment, a third doctor may
be agreed jointly between the employer and the
seafarer. The third doctors decision shall be
final and binding on both parties.
4. Those illnesses not listed in Section 32 of this
Contract are disputably presumed as work-related.
5. In case a seafarer is disembarked from the ship
for medical reasons, the employer shall bear the
full cost of repatriation in the event the seafarer is
declared (1) fit for repatriation; or (2) fir to work
but the employer is unable to find employment for
the seafarer on board his former ship or another
ship of the employer.


In case of permanent total or partial disability

of the seafarer caused by either injury or illness
the seafarer shall be compensated in accordance
with the schedule of benefits enumerated in
Section 32 of his Contract. Computation of his
benefits arising from an illness or disease shall be
governed by the rates and the rules of
compensation applicable at the time the illness or
disease was contracted.

The disability shall be based solely on the

disability grading's provided under Section 32 of this
Contract, and shall not be measured or determined
by the number of days a seafarer is under treatment
or the number of days in which sickness allowance is


It is understood and agreed that, the

benefits mentioned above shall be
separate and distinct from, and will be
in addition to whatever benefits which
the seafarer is entitled to under
Philippine laws such as from the Social
Security System, Overseas Workers
Welfare Administration, Employees
Compensation Commission, Philippine
Health Insurance Corporation and
Home Development Mutual Fund (PagIBIG Fund)

Requisites for compensability of injury or

Based on the above provision, an injury or illness is
compensable when, first, it is work-related and,
second, the injury or illness existed during the term
of the seafarers employment contract.
f. Requisites for occupational diseases.
An occupational disease and the resulting disability to
be compensable, the following need to be satisfied: (1)
the seafarers work must involve the risks described; (2)
the disease was contracted as a result of the seafarers
exposure to the described risks; (3) the disease was
contracted within a period of exposure and under such
other factors necessary to contract it; and (4) there was
no notorious negligence on the part of the seafarer.

The unqualified phrase during the term of

employment covers all injury or illness
occurring during the lifetime of the contract.
The injury or illness need not be shown to be
work-related. The important factor to consider
is that there must be a showing that the
injury or illness and the ensuing disability
occurred during the effectivity of the
employment contract.


Some principles on disability claims.

The POEA-SEC is the law between the parties.
Injury is not the one compensated but the
incapacity to work resulting in the impairment of
the ones earning capacity. Disability should be
understood not more on its medical significance,
but on the loss of earning capacity.
Disability arising from pre-existing illness is not
Self-inflicted injury is not compensable.
Strict rules of evidence are not applicable to
compensation and disability claims cases of OFWs.
Misrepresentation on disability claims on the part
of the claimant would defeat the claim for total
permanent disability.

When the benefit under the law of registry of the

vessel is higher than the Philippine law, it is correct to
resolve the award based on the law of registry of the
vessel providing greater benefit.
Failure to submit for post-employment medical
examination by company-designated physician within
3 working days from repatriation which is a condition
sine qua non, bars the filing of a claim for disability
The company-designated physician should make a
definite assessment of the seafarers fitness to work
or permanent disability within the period of 120 or
240 days. If the company-designated physician fails
to arrive at a definite assessment of the seafarers
fitness to work or permanent disability within the
period of 120-240 days, the latter shall be deemed
totally and permanently

disabled. On the other hand, an employees

disability becomes permanent and total even
before the lapse of the statutory 240-day
treatment period, when it becomes evident
that the employees disability continues and
he is unable to engage in gainful employment
during such period because, for instance, he
underwent surgery and it evidently appears
that he could not recover therefrom within
the statutory period.

Accreditation with the POEA of the companydesignated physician is not necessary.

Findings of company-designated physician are not
OFW has the right to present controverting
OFW has the right to seek a second opinion
from physicians other than company-designated
The procedure in jointly engaging a third doctor
whose decision is final and binding on both parties
should be complied with.
In case of conflict of opinions, that which is
favorable to the OFW should be adopted.

When opinion from an independent third

physician is not secured by the parties, the NLRC
has authority to evaluate the credibility of the
findings of their respective doctors on the basis of
their inherent merits.
Moral and exemplary damages may be awarded
in disability claims cases filed by OFWs for their
physical suffering and mental anguish.
Attorneys fees may be granted if OFW is
compelled to litigate or to incur expenses to
protect his interest or in any other case where the
court deems it just and equitable to grant.

a. Basis of the computation for death benefits of
The latest POEA-Standard Employment Contract
(POEA-SEC) issued in 2010 prescribes the following
compensation and benefits for death:
1. In case of work-related death of the seafarer,
during the term of his contract, the employer shall
pay his beneficiaries the Philippine currency
equivalent to the amount of US$50,000 and an
additional amount of US$7,000 to each child under
the age of 21 but not exceeding 4 children, at the
exchange rate prevailing during the time of



Where death is caused by warlike activity while

sailing a declared war zone or war risk area, the
compensation payable shall be doubled. The
employer shall undertake appropriate war zone
insurance coverage for this purpose.
It is understood and agreed that the benefits
mentioned above shall be separate and distinct
from, and will be in addition to whatever
benefits which the seafarer is entitled to under
Philippine laws from the Social Security System,
Overseas Workers Welfare Administration,
Employees Compensation Commission,
Philippine Health Insurance Corporation and
Home Development Mutual Fund (pag-IBIG




The other liabilities of the employer when the seafarer

dies as a result of work-related injury or illness during
the term of employment are as follows:
The employer shall pay the deceaseds beneficiary all
outstanding obligations due the seafarer under this
The employer shall transport the remains and
personal affects of the seafarer to the Philippines
at employers expense except of the death
occurred in a port where local government laws or
regulations do not permit the transport of such
remains. In case od death occurs at sea, the
disposition of the remains shall be handled or dealt with
in accordance with the masters best judgment. In all
cases, the employer/master shall communicate with the
manning agency to advise for disposition of seafarers


The employer shall pay the beneficiaries

of the seafarer the Philippine currency
equivalent to the amount of US$1,000 for
burial expenses at the exchange rate
prevailing during the time of payment.

Requisites for entitlement.

Clearly, to be entitled for death compensation
benefits from the employer, the death of the seafarer
(1) must be work-related; and (2) must happen
during the term of the employment contract.
Under the Amended POEA Contract, work-relation is
now an important requirement. The qualification that
death must be work-related has made it necessary
to show a causal connection between a seafarers
work and his death to be compensable. Therefore, if
the seafarer dies after the termination of his contract
of employment, his beneficiaries are not entitled to
the death benefits.

But even if the seafarer was merely on shore

leave when he died, his death is not
In the 2013 case of Sy v. Philippine
Transmarine Carriersm Inc., petitioners
husband, Alfonso N. Sy, was hired as an Able
Seaman (AB) on board M/V Chekiang on June 23,
2005 and was found dead on October 2, 2005,
with drowning as the cause of death while he as
on shore leave while the vessel was at the Port
of Jakarta, Indonesia. In denying petitioners
claim for death benefits, the High Court ruled:

Notably, at the time of the accident, AB Sy was on

shore leave and there was no showing that he was doing
an act in relation to his duty as a seaman or engaged in
the performance of any act incidental thereto, It was not
also established that, at the time of the accident, he was
doing work which was ordered by his superior ship
officers to be done for the advancement of his
employers interest. On the contrary, it was established
that he was on shore leave when he drowned and
because of the 20% alcohol found in his urine upon
autopsy of his body, it can be safely presumed that he
just came a personal social function which was not
related at all to his job as seaman. Consequently, his
death could not be considered work-related to be

Some principle on death benefits.

Death, to be compensable, should be
shown to have been caused by an illness
acquired during the term of his
employment. Indeed, the death of a seaman
several months after his repatriation for illness
does not necessarily mean that: (a) the
seaman died of the same illness; (b) his
working conditions increased the risk of
contracting the illness which caused his death;
and (c) the death is compensable, unless there
is some reasonable basis to support otherwise



death is caused by the OFW himself, it is not

Even in case of death of a seafarer, the grant
of benefits on favor of the heirs of the
deceased is not automatic. Without a postmedical examination or its equivalent to show that
the disease for which the seaman died was
contracted during his employment or that his
working conditions increased the risk of contracting
the ailment, the employer cannot be made liable
for death compensation. In fact, the death of a
seaman even during the term of employment
does not automatically give rise to

Direct Hiring refers to the process of directly
hiring workers by employers for overseas employment
as authorized by the DOLE Secretary and processed by
the POEA, including:
1. Those hired by international organizations;
2. Those hired by members of the diplomatic corps;
3. Name hires or workers who are able to secure
overseas employment opportunity with an employer
without the assistance or participation of any


For migrant workers classified as rehires,
name hires or direct hires, they may opt to be
covered by this insurance coverage by
requesting their foreign employers to pay for
the cost of the insurance coverage or they
may pay for the premium themselves. To
protect the rights of these workers, the DOLE
and POEA shall provide them adequate legal
assistance, including conciliation and
mediation services, whether at home or

AUTHORITY (Article 35, Labor Code)


This provision states:
Article 35. Suspension and/or Cancellation of
License of Authority.- The Minister of Labor shall
have the power to suspend or cancel any license
or authority to recruit employees for overseas
employment for violation of rules and regulations
issued by the Ministry of Labor., the Overseas
Employment Development Board, or for violation
of the provisions of this and other applicable
laws, General Orders and Letters of Instructions.


A. Jurisdiction of the POEA over recruitment
violations and related cases.
The POEA has original and exclusive jurisdiction to hear
and decide:
(a) All cases which are administrative in character,
involving or arising out of violation of rules and
regulations relating to licensing and registration of
recruitment and employment agencies or entitles,
including refund of fees collected from workers and
violation of the conditions for the issuance of license to
recruit workers.

(b) Disciplinary action cases and other special

cases which are administrative in character ,
involving employers, principals, contracting
partners and Filipino migrant workers.
It must be emphasized that even without a
written complaint from an aggrieved party, the
POEA can initiate proceedings against an erring
private placement agency and, if the result of
its investigation so warrants, impose the
corresponding administrative sanction thereon.

B. Cases not falling within the jurisdiction of the

1) Money claims cases of OFWs. The POEA had
ceased to have any jurisdiction over claims arising
out of an employer-employee relationship or by
virtue of any law or contract involving Filipino
workers for overseas deployment including claims
for actual, moral, exemplary and other forms of
damages. The jurisdiction over these claims was
transferred to the Labor Arbiters of the NLRC by
virtue of Section 10 of R.A. No. 8042, as amended.

2) Quasi-delict or tort cases-The

POEA has no jurisdiction over tort cases
where the complaint alleges claims under
the Civil Code and not under the Labor Code
as when the matters demanded are not
labor benefits such as wages, overtime or
separation pay.


labor Arbiters and the NLRC have no

jurisdiction over quasidelict or tort cases per
Article 2176 of the Civil Code that have no
reasonable causal connection to any of the
claims provided in the Labor Code, other
labor statues, or collective bargaining
agreements . These cases are cognizable by
the regular courts.


Enforcement of foreign judgement. The

POEA , being an administrative body
performing adjudicatory or quasi-judicial
functions, has no jurisdiction to hear and
decide a claim for enforcement of a foreign
judgement .Such claim must be brought
before the regular courts.


Local Employment
The POEA has no
jurisdiction where the cause of action rests
upon the local employment contract and not
the overseas contract . The jurisdiction
thereover lies with the labor Arbiters of the


Nature of POEA proceeding,administrative

not criminal.

The administrative determination of facts

and the consequent imposition of the
suspension or revocation of authority or
license does not make the proceedings
criminal . It remains administrative in


Closure order.

The DOLE Secretary or the POEA

Administrator or the DOLE Regional Director
of the appropriate regional office outside the
National Capital Region, or their duly
authorized representatives, may conduct an
ex-parte preliminary examination to
determine whether the activities of a nonlicense constitute a danger to national
security and public order or will lead to
further exploitation of job seekers.


upon such preliminary examination or

surveillance, the DOLE Secretary, the POEA
Administrator or DOLE Regional Director is
satisfied that such danger or exploitation
exists, a written order may be issued for the
closure of the establishment being used for
illegal recruitment activity.

E. Power to issue arrest and search

and seizure orders, unconstitutional.
It was declared in Salazar v. Achacoso,
That the exercise by the DOLE Secretary of
his twin powers to issue arrest and search
and seizure orders provided under Article
38(c) of the Labor Code is unconditional. This
declaration of nullity and unconstitutionality,
however,should not affect the exercise of the
other distinct power to close violatorcompanies.establishments or entities.


Money claims in addition to

administrative penalties

Money claims arising from recruitment

violations may be awarded in addition to the
administrative penalties imposed.

Imposition of fines

In addition or in lieu of the penalty of

suspension of license, the Administration (POEA)
may impose the penalty of fine which shall be
computed at P10,000.00 for every month of


Mitigating, aggravating or alternative

In the determination of the penalties to be
imposed, the following,mitigating,aggravating
and alternative circumtaces attendant to the
commission of the offense shall be considered:
A. First Offender;


Admission of guilt and voluntary

restitution, where applicable;
C. Good faith;
D. Exemplary Performance;
E. Recidivism;
F. Prejudice to the worker;
G. Gross negligence;
H. Other analogous circumtances.


Cancellation of license, proper

penalty for cases involving five(5) or
more complainants.
A respondents recruitment agency found
guilty of committing an offense, regardless
of the number or nature of charges, against
five(5) or more complainants in a single case
shall be imposed the penalty of cancellation
of license.




Grounds for disciplinary action against

foreign principals or employers.

The following are the grounds for

disciplinary action against foreign principals or

a. Default on its contractual obligations to

the migrant worker (or seafarer)and/or its
Philippine agent;

b. Gross violation of laws, rules and

regulations on overseas employment;


Gross negligence leading to serious injury

or illness or death of the worker (or
D. Grave misconduct;
E. Conviction of an offense involving moral
F. Any other case analogous to the


Temporary disqualification of foreign

principal or employer.

A foreign employer or principal against

whom a complaint for disciplinary action has
been filed shall be temporarily disqualified
from participatingin the overseas
employment program for land-based
overseas workers (or maritime employment
program in case of seafarers) until the
respondent submits to the jurisdiction of the
Administration (POEA).


Preventive suspension.

A principal or employer may be

suspended from participating in the overseas
employment program pending investigation
of the disciplinary action case when the
evidence of guilt is strong and there is
reasonable ground to believe that the
continued deployment to the principal or
employer will result to further violation or
exploitation of migrant workers.

The Overseas Employment Adjudicator (OEA)

shall, within sixty (60) calendar days from the
filing of the case, submit his findings and
recommendations in the form of a draft order.

D. Disqualification of foreign principals

or employers.

Foreign principals or employers against

whom the penalty of suspension or
disqualification had been imposed through an
order, decision or resolution shall be disqualified
from participating in the overseas employment


for land-based overseas workers

(or maritime employment program in case of
seafarers) unless cleared by the
Administration (POEA) or the penalty
imposed is lifted.




As far as recruitment and placement of
workers for local and overseas employment are
concerned, the Labor Code contains two (2)
separate provisions on the regulatory and
visitorial powers of the DOLE Secretary,
1. Article 36 Regulatory Power; and
2. Article 37 - Visitorial Power.


Article 36, Labor Code.

The regulatory power is embodied in Article 36,
to wit:

Article 36. Regulatory Power. The Secretary

of Labor shall have power to restrict and regulate
the recruitment and placement activities of all
agencies within the coverage of this Title and is
hereby authorized to issue orders and promulgate
rules and regulations to carry out the objectives
and implement the provisions of this Title.


Nature of regulatory power.

The power to regulate and restrict the

recruitment and placement activities of all
agencies conferred by Article 36 to the DOLE
Secretary is a valid grant of police power.

Being regulatory, the DOLE Secretary may

validly issue rules and regulations restricting
or otherwise regulating the recruitment and
placement activities of persons and entities
engaged in the recruitment and placement of
workers locally, or overseas.


Exercise of the Regulatory Power.

Pursuant to Article 36 and in accordance with

other pertinent and related provisions of the
Labor Code, the DOLE Secretary has issued
several implementing rules,circulars, guidelines
and regulations.


A. Article 37, Labor Code.

The visitorial power is found in Article 37,viz:

Article 37. Visitorial Power. The Secretary

of Labor or his duly authorized representative


at any time, inspect the

premises,books of accounts and records of
any person or entity covered by this Title,
require it to submit reports regularly on
prescribed forms, and act on violation of any
provisions of this Title.


Distinctions of the visitorial powers

of the DOLE Secretary under Articles
274 and 128 of the Labor Code.

The visitorial power of the DOLE Secretary

or his duly authorized representatives described
in Article 37 of the Labor Code should be
distinguished from the other visitorial powers
granted to him by the other provisions of the
Labor Code such as the ones provided for under
Article 128 and Article 274 thereof.

Here, the visitorial power pertains to the

inspection of the premises, books of accounts


records of local employers to determine

violations of the Labor Code and any labor
laws, wage orders or rules and regulations
issued pursuant thereto.
Article 274 dwells on the visitorial power
of the DOLE Secretary to inquire into the
financial activities of legitimate labor


Effect of obstruction of exercise of

visitorial power.

The act of any person, whether a nonlicense, non-holder,licensee or holder of

authority, in obstructing or attempting to
obstruct inspection by the DOLE Secretary or
by his duly authorized representative under
Article 37 of the Labor Code is one of the
prohibited practices and unlawful acts which
constitutes illegal recruitment.





It shall be mandatory for all Filipino workers

abroad to remit a portion of their foreign
exchange earnings to their families,
dependents, and or beneficiaries in the country
in accordance with rules and regulations
prescribed by the DOLE Secretary. It should be
made through the Philippine banking system.


obligation to remit is required to be

stipulated in the following documents:

(1) Contract of employment and/or

service between a foreign-based employer
and a worker;

(2) Affidavit of undertaking whereby a

worker obligates himself to remit a portion of
his earnings to his beneficiaries;

(3) Application for a license or authority

to recruit workers;


Recruitment agreement and/or service

contract between a licensed agency or
authority holder and its foreign employer or
principal; and
5. Application for accreditation of a principal
or project.



Remittance to the Philippines of foreign

exchange earnings of Filipino workers abroad
is necessary to protect the welfare of their
families, dependents and beneficiaries and to
ensure that their foreign exchange earnings
are remitted through authorized financial
institutions of the Philippine government in
line with the countrys economic development


with the laws and regulations

on remittance of foreign exchange earnings
and recourse to the use of unauthorized and
unofficial financing institutions had led to the
detriment of the countrys balance of
payments and economic development
program. Consequently, it is imperative that
the mandatory remittance requirement be fully
complied with by all concerned through the
institution of appropriate remittance facilities
and the imposition of effective sanctions.



This mandatory requirement applies to

every OFW recruited and placed in overseas
employment. It also applies to licensed
agencies and authority holders.



The percentage of foreign remittances

shall be as follows:


Seamen and mariners: Eighty percent

(80%) of the basic salary;

2. Workers of Filipino contractors and

construction companies: Seventy percent
(70%) of the basic salary;
3. Doctors, engineers, teachers, nurses and
other professional workers whose employment
contracts provide for free board and lodging
facilities: Seventy percent (70%) of the
basic salary;


All other professionals whose employment

contracts do not provide free board and
lodging facilities: Fifty percent (50%) of
the basic salary; the


Domestic and other service workers:

Fifty percent (50%) of basic salary;


All other workers not falling under the

afore-mentioned categories: Fifty percent
(50% of the basic salary.


Performing artists overseas are required to

remit at least fifty percent (50%) of their
monthly salary to the Philippines.



Remittance of foreign exchange may be

done individually by a worker or collectively
through an employer under a payroll
deduction scheme, to be approved by the



(a) The OFW, prior to departure, is

required to open a deposit account for his
mandatory remittance in favor of his
beneficiary in any Philippine bank. A foreign
currency account may also be opened by the
worker to be funded by savings in excess of
the mandatory remittance. The applicant
should inform the POEA of his deposit
account number.


In the case of seaman/seafarer, construction

workers and other organized work crews
involving at least twenty five (25) workers, the
foreign currency/peso account should be opened
by the employee with any Philippine bank upon
the signing of the employment contract. The
account shall be accompanied by a covering
letter of nomination of beneficiaries and the date
of payment of the allotment to the beneficiaries
as may be stipulated by the employee and the
licensed agency, manning agency or
construction contractor.


At the end of every period as may be

stipulated in the notice as payment, the licensed
agency, construction contractor or manning
agent shall prepare a payroll sheet indicating
the names of the workers covered by the
scheme, their beneficiaries, their individual bank
account numbers, the number of foreign
currency remitted and the peso equivalent
thereof. This payroll sheet, together with the
peso check representing the remittance, shall be
forwarded to the bank concerned with
instructions to credit the account of the worker


beneficiares. A copy of the payroll sheet

shall be furnished the POEA on a monthly basis.


No local agent or representative shall pay

directly the beneficiaries of the worker. The
agent or representative shall submit to the
POEA copies of the reports which the bank may
require him to submit and payroll sheets on or
before the end of the succeeding month of the
payroll sheets on or before the end of the


month of the payroll period together with the

bank credit advice evidencing remittance of foreign




A licensed agency, authority holder, or manning

agent or a worker who wilfully fails or refuses to remit
the assigned portion of his foreign exchange earnings or
is found to have engaged or is engaging in the illegal
traffic or blackmarket of foreign exchange, shall be liable



the Labor Code and existing Central Bank


The employer or his representative shall undertake
the proper implementation of the law, by providing
facilities to effect the remittance and monitoring of
foreign exchange earnings. Failure to do so shall be
subject to appropriate sanctions specified in the
Labor Code and regulations issued by the Central

of the Philippines (now Bangko Sentral ng

Agencies shall submit periodic reports to the
Bangko Sentral ng Pilipinas on their foreign
exchange earnings, copies of which shall be
furnished the POEA.




Under the law, it is declared that no passport

shall be issued renewed or extended by the
Department of Foreign Affairs (DFA) unless proof of
applicants substantial compliance with the
mandatory remittance


in the percentages provided under the

law is submitted.

Passports issued to Filipino contract workers

shall have an initial period of validity of one (1) year.
The DFA may, however, adjust, as circumstances
may require, the initial passport validity period.

The passport shall be renewable every year

upon submission of usual requirements and
presentation of documentary proof of compliance to
the remittance requirement.



The Inter-Agency Committee created to

implement the law, clarified the foregoing effect of
non-compliance with the mandatory remittance
requirement on the issuance, renewal and extension
of passport. Said Committee declared that in
accordance with the normal duration of contracts of
employment and taking into account the


of some issuances mandating the

DFA to adjust, as circumstances may require,
the initial validity period, passport issued to
OFWs shall be valid for two (2) years,
renewable for another two (2) years, subject to
compliance with the mandatory remittance

An OFW shall be deemed to have

substantially complied with the mandatory
requirement if, at the time he applies for


of passport or renewal of his

employment contract during the period cited
above, he can show proof that he has remitted
and sold for pesos at least one-half(1/2) of the
amount of foreign exchange corresponding to
the mandatory remittance required of him.

The requirement to remit on a monthly

basis need not be strictly applied during the
initial period of implementation provided


the amount remitted and sold for pesos

through authorized financing institutions shall
at least be equal to one-half of the amount
corresponding to the mandatory percentage
requirement defined under the Executive

The Substantial compliance rule as

defined, applies to contract workers remitting
on an individual basis. It does not apply to
OFWs already remitting or who will be
remitting under the payroll system, or on a
monthly basis.




a. On accreditation of employer, issuance

of license or authority and approval/renewal of
contracts of employment.

No accreditation shall be issued to an employer,

and no license or authority shall be granted to an
agency or entity by the DOLE unless they submit
proof that they have


facilities to effect the remittance of foreign

exchange earnings of Filipino workers under their

No contracts of employment and/or service

agreement shall be approved or renewed by the DOLE
unless proof of compliance with the mandatory
remittance requirement is submitted.

b. On the OFW.

An OFW who fails to comply with the


remittance requirement shall be suspended

excluded from the list of eligible workers for overseas
employment and in case of subsequent violations, he
shall be repatriated at his own expense or at the
expense of his employer, as the case may be.

c. On foreign employers.

Foreign employers and/or their representatives

who fail to comply with the law shall be excluded from
the overseas employment program.


On private employment agencies.

In the case of local private employment

agencies and other similar entities their
failure to comply with the mandatory
remittance requirement shall be a ground for
cancellation of their authority to recruit
workers for overseas employment without
prejudice to their liabilities under existing
laws and regulations.



Should there be a conflict in complying with

the mandatory remittance requirement in view
of the host countrys regulations on the matter,
the percentages of remittance shall be, within
allowable limits, set down by local laws.




An OFW whose immediate family members,

dependents or beneficiaries are residing with him
abroad, is not compelled to comply with the
mandatory remittance requirements except if the
dependents themselves are contract workers, subject
to verification of his family status by the DFA and/or
DOLE. He should be encouraged,
nevertheless, to remit a portion of his foreign
Earnings to the Philippines.




Executive Order No. 1021 (On Encouraging the

Inward Remittances of Contract Workers Earnings
Through Official Channels) issued on May 1, 1985 by
President Ferdinand E. Marcos, repealed the punitive
provisions of Executive Order No. 857.


The role of the Embassy is only


in the absence of banking facilities in the

jobsite and pending the establishment of appropriate
arrangements by the Bangko Sentral ng Pilipinas. In
exercising this function, the Embassy shall abide by
customary local laws and regulations of the host




The obligations of OFWs to remit portions

of their foreign exchange earnings under the

law are separate and distinct from the personal

deductions defined under gross income taxation laws.
Besides illegal recruitment, the law additionaly
Provides that it shall also be unlawful for any
person or entity to commit the following
Prohibited acts:

(1) Grant

a loan to an overseas Filipino worker with

interest exceeding eight percent (8%) per annum,
which will be used for payment of legal and allowable
placement fees and make the migrant worker issue,
either personally or through a guarantor or
accommodation party, post-dated checks in relation to
the said loan;


Impose a compulsory and exclusive arrangement

whereby an overseas Filipino worker is
required to avail of a loan only from
specifically designated institutions,


or persons;


Refuse to condone or renegotiate a loan incurred by

an overseas Filipino worker after the latters
employment contract has been prematurely terminated
through no fault of his or her own;


Impose a compulsory and exclusive arrangement

whereby an overseas Filipino worker is required
to undergo health examinations only from
specifically designated medical clinics,
institutions, entities or persons, except in


case of a seafarer whose medical examination cost

is shouldered by the principal/shipowner;


Impose a compulsory and exclusive arrangement

whereby an overseas Filipino worker is required to
undergo training, seminar, instruction or schooling of
any kind only from specifically designated institutions,
entities or persons,except for recommendatory
trainings mandated by principals/shipowners
The latter shoulder the cost of such things.

For a suspended recruitment/manning

agency to engage in any kind of recruitment activity

including the processing of pending workers
7. For a recruitment/manning agency or a foreign
principal/employer to pass on the overseas Filipino
worker or deduct from his or her salary the payment of
the cost of insurance fees, premium or other insurance
related charges, as provided under the compulsory
workers insurance coverage.

82, Labor Code


The provisions on working conditions in the Labor Code are as follows.


Normal hours of work;

Hours worked;
Meal periods;
Night shift differential;
Overtime work;
Undertime not offset by
Article 89- Emergency overtime work;
Article 90- Computation of additional

Article 91- Right to weekly rest period;

Article 92- When employer may require work on a rest
Article 93- Compensation for rest day, Sunday or
holiday work;
Article 94- Right to holiday pay;
Article 95- Right to service incentive leave; and
Article 96- Service charges.

Employees in all establishment, whether operated for
profit or not, are covered by the law on labor
The following are excluded from the coverage of the
law on labor standards:
a. Government employees;
b. Managerial employees;
c. Other officers or members of a

managerial staff;
d. Domestic servants and persons in the personal
service of another;
e. Workers paid by results;
f. Non-agricultural field personnel; and
g. Members of the family of the employer.

The total number of working hours shall not
exceed eight (8) hours daily. This eight (8) hour period
is called the normal hours of work. Any work in
excess of eight (8) hours is considered
overtime work.

a. Reduction of 8-hour working day by employer.
The employer, in the lawful exercise of its prerogative, is not
prohibited from reducing the eight hour normal working time per
day provided that no
corresponding reduction is made on the
employees wage or salary equivalent to an
eight-hour work day. In instances where the
number of hours required by the nature of work
is less than eight hours, such number of hours
should be regarded as the employees full

working day.
b. Broken hours.
The normal eight (8) working hours mandated by law
do not always mean continuous and uninterrupted eight
(8) hours of work. As may be required by peculiar
circumstances of employment, it may mean broken
hours of say, four hours
in the morning and four hours in the evening
or a variation thereof, provided that the total
eight (8) hours is accomplished within one

work day as this term is understood in law. Hence, even if the

4-hour work is done in the evening as in the example above, it
should not be considered overtime work since the eight-hour
period has not yet been exceeded.
c. Staggered working time.
Staggered working time is a valid scheme which may be
resorted to by employers. As a matter of precedence,
Memorandum Circular No. 81 was issued by the
Office of the President on December 14, 2004
which implemented the Staggered Working Time in
the Executive Department in relation to the

other branches of government and the private sector in Metro

Manila during the Christmas Season from December 15, 2004
to January 6,2005. According to this issuance, the Staggered
Working Time is meant to improve the delivery of goods and
d. Work in different shifts.
In establishments where work is in
different shifts, work done by the employee
beyond his eight-hour shift is considered
overtime work which should be compensated

accordingly. For example, if there are three (3) eight

hour shifts in a work day, say, the first shift is from
6:00 a.m. to 2:00 p.m.; second shift is from 2:00 p.m.
to 10:00 p.m.; and third shift from 10:00 p.m. to 6:00
a.m. of the following day, the employee whose regular
eight-hour work is in the first shift (6:00 a.m. to 2:00
p.m.), once required to work in the second or third
shift, should be given additional compensation
for such work done beyond his regular working
hours which legally is considered overtime

e. Reduction of workdays on account of losses.

Workdays may be reduced in situations where the
reduction in the number of regular working days is
resorted to by the employer to prevent serious losses
due to causes beyond his control, such as when there is
a substantial slump in the demand for his goods or
services or when there is lack of raw materials.

f. Flexible work schedule under R.A. No. 8972.

Under R.A. No. 8972, otherwise known as The Solo
Parents Welfare Act of 2000, solo parents are allowed
to work on a flexible schedule, thus:
The phrase flexible work schedule is defined in the
same law as the right granted to a solo parent employee
to vary his/her arrival and departure time without
affecting the core work hours as defined by the

g. Work interruptions due to brownouts.

The following are the effects of work interruption due
to brownouts.
1. Brown-outs of short duration but not exceeding
twenty (20) minutes shall be treated as worked or
compensable hours whether used productively by the
Employees or not.
2. Brown-outs running for more than

twenty (20) minutes may not be treated as hours

worked provided any of the following conditions are
a. The employees can leave their workplace or go
elsewhere whether within or without the work premises;
b. The employees can use the time effectively for
their own interest.
3. In each case, the employer may extend
the working hours of his employees outside

the regular schedules to compensate for the loss of

productive man-hours without being liable for overtime
4. Industrial enterprises with one or two workshifts may
adopt any of the workshifts prescribed for enterprises
with three (3) workshifts to prevent serious loss or
damage to materials, machineries or equipment that
may result in case of power interruptions.

5. The days when work was not required and no work

could be done because of shutdown due to electrical
power interruptions, lack of raw materials and repair of
machines, are not deemed hours worked.

The Labor Code provides that the normal work hours per
day shall be eight (8) hours. Work may be performed
beyond eight hours a day provided the employee is paid
for the overtime work. On the other hand, the normal
number of workdays per week shall be six (6) days, or a
total of forty-eight (48) hours based on the normal
workday of eight (8) hours.
Compressed Workweek or CWW refers to a
situation where the normal workweek is reduced to
less than six (6) days but the normal number
of work-hours of 48 hours per week remains.

The normal workday is increased to more than eight (8)

hours but not to exceed twelve (12) hours, without
corresponding overtime premium. This concept can be
adjusted accordingly in cases where the normal
workweek of the firm is five (5) days.
CWW is a kind of flexible work arrangement
which is considered as better alternative to

the outright termination of the services of the employees

or the total closure of the establishments. Anchored on
voluntary basis and conditions mutually acceptable to
both the employer and the employees, it is recognized as
beneficial in terms of reduction of business costs and
helps in saving jobs while maintaining competitiveness
and productivity in industries.
Flexible work arrangements refer to alternative
arrangements or schedules other than the
traditional or standard work hours, workdays
and workweek. The effectivity and implementatio
of any of the flexible work arrangements

should be temporary in nature.

Other than the CWW, the following are flexible work
arrangements which may be considered, among others:
1. Reduction of Workdays refers to one
Where the normal workdays per week and
reduced but should not last for more than

six (6) months.

2. Rotation of Workers refers to one where the
employees are rotated or alternately provided work
within the workweek.
3. Forced Leave refers to one where the employees are
requires to go on leave for several days or weeks utilizing
their leave credits, if there are any.
4. Broken-time schedule refers to one

where the work schedule is not continuous but the workhours within the day or week remain.
5. Flexi-holidays schedule refers to one where the
employees agree to avail of the holidays at some other
days provided there is no diminution of existing benefits
as a result of such arrangement.
Under these flexible work arrangement ,
the employers and the employees are
encouraged to explore alternative schemes

under any agreement and company policy or practice in

order to cushion and mitigate the effect of the loss of
income of the employees.
DOLE shall recognize CWW schemes adopted
in accordance with the following:
1. The CWW scheme is
undertaken as a result of an express and

voluntary agreement of majority of the covered

employees or their duly authorized
representatives. This agreement may be expressed
through collective bargaining or other legitimate
workplace mechanisms of participation such as labormanagement councils, employee assemblies or
2. In firms using substances, chemicals,
and processes or operating under conditions
where the are airborne contaminants,

human carcinogens or noise prolonged exposure to which

may pose hazards to the employees health and safety,
there must be a certification from an accredited health
and safety organization or practitioner or from the firms
safety committee that work beyond eight (8) hours is
within the threshold limits or tolerable levels of
exposure, as set in the Occupational Safety and Health
Standards (OSHS).
3. The employer shall notify the
DOLE, through its Regional Office having

jurisdiction over the workplace, of the adoption of the

CWW scheme. The notice should be made in DOLE CWW
Report Form.
A CWW scheme which complies with the
foregoing conditions shall have the following effects:
1. Unless there is a more
favorable practice existing in the firm,

work beyond eight (8) hours will not be

compensable by overtime premium provided the
total number of hours worked per day shall not
exceed twelve (12) hours. In any case, any work
performed beyond twelve (12) hours a day or fortyeight (48) hours a week shall be subject to overtime pay.
2. Consistent with Article 85 of the Labor Code,
employees under a CWW scheme are entitled
to meal periods of not less than sixty (60)

minutes. Nothing, however, shall impair the right of

employees to rest days as well as to holiday pay, rest
day or leaves in accordance with law or applicable CBA
or company practice.
3. Adoption of CWW scheme shall in no case
result in diminution of existing benefits. Reversion
to the normal eight-hour workday shall not
constitute a diminution of benefits. The
reversion shall be considered a legitimate
exercise of management prerogative

provided that the employer shall give the employees

prior notice of such reversion within a reasonable period
of time.
A case in point is Bisig Manggagawa sa Tryco v.
NLRC, where private respondent Tryco and the
petitioners signed separate Memorand (a) of Agreement
(MOA), providing for a compressed workweek schedule
to be implemented in the company effective May
20,1996. The MOA was entered into pursuant to
DOLE Department Order (D.O) No. 21, Series
of 1990 enunciating the Guidelines on the

Implementation of Compressed Workweek.

As provide in the MOA, 8:00 a.m. to 6:12 p.m., from
Monday to Friday, shall be considered as the regular
working hours, and no overtime pay shall be due and
payable to the employee for work rendered during those
hours. The MOA specifically stated that the employee
waives the right to claim overtime pay for work rendered
after 5:00 p.m. until 6:12 p.m. from Monday to Friday
considering that the compressed workweek
is adopted in lieu of the regular workweek
schedule which also consists of forty-six (46)

hours. However, should an employee be permitted or

required to work beyond 6:12 p.m., such employee shall
be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions
(BWC) of the Department of Labor and Employment of
the Implementation of the said compressed work week in
the company.
In upholding the validity of the compressed
workweek, it was noted that Department Order No.
21 sanctions the waiver of overtime pay in
consideration of the benefits that the

employees will derive from the adoption of a compressed

workweek scheme,thus:
The compressed workweek scheme was
originally conceived for establishments wishing to save
on energy costs, promote greater work efficiency and
lower the rate of employee absenteeism, among others.
Workers favor the scheme considering that it would
mean savings on the increasing cost of transportation
fares for at least one (1) day a week; savings on
meal and snack expenses ; longer weekends
Or an additional 52 off-days a year, that can

be devoted to rest, leisure, family responsibilities,

studies and other personal matters, and that it will spare
them for at least another day in a week from certain
inconvenience that are the normal incidents of
employment, such as commuting to and from the
workplace, travel time spent , exposure to dust and
motor vehicle fumes, dressing up for work , etc. Thus,
under this scheme, the generally observed workweek of
six (6) days is shortened to five (5) days but
prolonging the working hours from Monday to
Friday without the employer being obliged for

pay overtime premium compensation for work performed in

excess of eight (8) hours on weekdays, in exchange for the
benefits above-cited that will accrue to the employee.
In declaring the compressed workweek arrangement in the
2007 case of Linton Commercial Co., Inc. v. Hellera as
unjustified and illegal and in holding the petitioners are guilty of
illegal reduction of work hours, the Supreme Court found
specious the
petitioners attempt to justify their action by

alleging that the company was suffering from financial

losses owing to the Asian currency crisis. Petitioners
claim of financial losses was not supported by evidence.
A close examination of petitioners financial reports for
1997-1998 shows that while the company suffered a loss
of P3,645,422.00 in 1997, it retained a considerable
Amount of earnings and operating income. Clearly then,
while Linton sufficiently sustain its operation. In
business, sustained operations in the black is the ideal
but being in the red is a cruel reality.
However, a year of financial losses would not

warrant the immolation of the welfare of the employees

which is this case was done through a reduced workweek
that resulted in an unsetting diminution of the periodic
pay for a protracted period. Permitting reduction of work
and pay at the slightest indication of losses would be
contrary to the States policy to afford protection to labor
and provide full employment. All taken into account, the
compressed workweek arrangement was unjustified and
illegal. Thus, petitioners committed illegal reduction
of work hours.

(Article 85, Labor Code)
As a general rule, every employer is required to
give his employees, regardless of sex, not less than
One (1) hour (or 60 minutes) time-off for
Regular meals.

Being time-off, it is not compensable hours worked. In

this case, the employee is free to do anything he wants,
except to work. If he is required, however, to work while
eating, he should be compensated therefor.
In the following cases, a meal period
of not less than twenty (20) minutes may be
given by the employer provided that such

shorter meal period is credited as compensable hours

worked of the employee.
a. Where the work is non-manual work in nature
or does not involve strenuous physical exertion;
b. Where the establishment regularly operates
for not less than sixteen (16) hours a day.
c. In cases of actual or impending
emergencies or when there is urgent work

to be performed on machineries, equipment or

installations to avoid serious losses which the
employer would otherwise suffer; and
d. Where the work is necessary to prevent serious
loss of perishable goods.
The law allows a situation where the

employees themselves request for the shortening of meal

period to not less than twenty (20) minutes (say, thirty
minutes, or from 12:00 to 12:30 p.m. instead of 12:00 to
1:00 p.m.) for the purpose of allowing them to leave
work earlier than the lapse of the eight (8) hours
required by law (say, 4:30 p.m. instead of 5:00 p.m.).
This shortened period, however, shall not be considered
compensable working time provided the following
conditions are complied with:
a. The employees voluntarily agree in writing

to a shortened meal period of thirty (30) minutes and are

willing to waive the overtime pay for such shortened
meal period;
b. There should be no diminution in the benefits
of the employees which they receive prior to the
effectivity of the shortened meal period;
c. The work of the employees does
not involve strenuous physical exertion
and they provided with adequate coffee

breaks in the morning and afternoon;

d. The value of the benefits derived by the
employees from the proposed work arrangement is
equal to or commensurate with the compensation due
them for the shortened meal period as well as the
overtime pay for 30 minutes as determined by the
employees concerned;
e. The overtime pay of the employees
Will become due and demandable if ever

they are permitted or made to work beyond 4:30 p.m.;

f. The effectivity of the proposed working time
arrangement shall be for a temporary duration as
determined by the DOLE Secretary.
The law does not allow that meal time
Be shortened to less than twenty (20) minutes.

If so reduced, the same shall no longer be considered as

meal time but merely as rest period or coffee break
and, therefore, becomes compensable working time.
The case of Sime Darby Pilipinas,
Inc. v. NLRC, is illustrative of this point. Prior
to the present controversy, all company

factory workers in Marikina including members of private

respondent union worked from 7:45 a.m. to 3:45 p.m.
with a 30-minute paid on call lunch break. Petitioner, by
way of a memorandum, changed the meal time schedule
from 30 minutes to one (1) hour without pay. Since
private respondent union felt affected adversely by the
change in the work schedule and discontinuance of the
30-minute paid on call lunch break, it filed on behalf of
its members a complaint with the Labor
Arbiter for unfair labor practice,discrimination
And evasion of liability. In declaring the
Change in the work schedule as valid, the

Supreme Court held : if necessary and were paid accordingly

for working. With the new work schedule, the employees are
now given a one-hour lunch break without any interruption
from their employer. For a full one-hour undisturbed lunch
break, the employees can freely and effectively use this hour
not only for eating but also for their rest and comfort which
are conducive to more efficiency and better performance in
their work. Since the employees are no longer required to
work during
this one-hour lunch break, there is no more
need for them to be compensated for this

period. We agree with the Labor Arbiter that the new

work schedule fully complies with the daily work period of
eight (8) hours without violating the Labor Code.
Besides, the new schedule applies to all employees in the
factory similarly situated whether they are union
members or not.
In a company where work is continuous
For several shifts, the mealtime breaks

should be counted as working time for purpose of overtime

compensation. Consequently, the workers who are required
to work in two (2) full successive shifts should be paid for
sixteen (16) hours and not fourteen (14), the two hours for
rest or meantime breaks being included as compensable
working time. The idle time that an employee may spend
for resting wherein he may leave the work area should not
be counted as working time only when the work is not

(Article 84, Labor Code)
The following shall be considered as compensable
hours worked:
a. All time during which an employee
is required to be on duty or to be at the

employers premises or to be at a prescribed workplace;

b. All time during which an employee is suffered or
permitted to work.
The following general principles shall

govern in determining whether the time spent by an

employee is considered hours worked:
a. All hours are hours worked which the employee is
required to give to his employer, regardless of whether or
not such hours are spent in productive labor or involve
physical or mental exertion;
b. An employee need not leave the premises of the
workplace in order that his rest period shall not be
counted, it being enough that he stops working, rests

Completely and leaves his workplace to go elsewhere,

whether within or outside the premises of his workplace;
c. If the work performed was necessary or it benefited
the employer or the employee could not abandon his
work at the end of his normal working hours because he
had no replacement, all time spent for such work shall be
considered as hours worked if the work was with the
knowledge of his employer or immediate supervisor;
d. The time during which an employee is
inactive by reason of interruptions in his

work beyond his control shall be considered working time

either if the imminence of the resumption of work
requires the employees presence at the place of work or
if the interval is too brief to be utilized effectively and
gainfully in the employees own interest.
It bears emphasizing that the employer retains the
management prerogative, whenever exigencies of the
service so require, to change the working hours
of its employees.

Moreover, the age-old rule which governs the relationship

between labor and capital or management and employee
of a fair days wage for a fair days labor, remains the
basic factor in determining the employees wages and
a. When waiting time is compensable.
Waiting time spent by an employee
shall be considered as working time if waiting

is an integral part of his work or the employee is required

or engaged by the employer to wait.
In Arica v. NLRC, it was ruled that the 30-minute
assembly time practiced by the employees of the
company cannot be considered waiting time and
should not therefore be compensable.
Although it is clear that employers must
compensate employees for time actually
spent working, questions arise as to whether

the minimum wage and overtime provisions also apply to

time spent waiting to perform productive work. Under
the regulations, whether waiting time is time worked
depends on the particular circumstances.
Time spent waiting for work is compensable if it is
spent primarily for the benefit of the employer and [its]
business. Conversely, if the time is spent primarily for
the benefit of the employee, the time is not
compensable. In determining whether waiting
time constitutes hours worked, the amount

of control the employer has over the employee during the

waiting time, and whether the employee can affectively use
that time for his own purpose is material.
b. On Duty.
Waiting time while on duty is included in compensable
time, especially when it is unpredictable, or is of such short
duration that the employee cannot use
the time effectively for their own purposes.
In those instances, the employees are to be
compensated whether their work is on or off

the employers premises, even if the employees spend

the time engaging in such amusements as playing cards,
watching television or reading. Examples in American
jurisprudence where employees were found to be
engaged in compensable waiting time include:
Assembly line workers who experienced idle time of 45
minutes or less due to delays in delivery and mechanical
A well pumper who resided on the employers
premises and who was required to be on

duty at least eight hours per day, seven days per week to
pump wells and repair machinery when needed;
Restaurants employees who were required by their
employer to report to work at a certain time even though
they could not punch in until enough customers were
present to make work available;
Truck washers who are idle while waiting for the
arrival of the next truck;
Truck drivers carrying the mail who had

periodic layovers lasting two hours or less due to loading

or unloading problems;
Oil well casing crews who had to wait for casings after
they set up their equipment;
Truck drivers and helpers who were required by their
employer to wait on premises for assignment; and
Employees who experienced occasional idle
time caused by machinery breakdowns.

C. Off Duty
Based on U.S. jurisprudence, periods during which an
employee is completely relieved from duty and which are
long enough to enable him to use the time effectively for
his own purposes are not hours worked. Whether the
time off is truly sufficient to enable employees to
effectively use the time for their own purposes is a
factual issue dependent upon the circumstances.
Circumstances considered by the courts
include the duration of the time off and any

other facts which may place restrictions on the employees.

Examples of cases where courts have found that
employers are justified in denying compensation for idle
time include:

A telephone dispatcher who only had to answer a small

number of telephone calls for non-emergency ambulance
care each night and who was allowed to pursue her own
personal, social and business activities during the
evening hours;

Employees who were required to live on the

on the employers premises during their off-shift hours,

but who were free during their off duty time to sleep, eat,
watch television, exercise, play ping pong or cards, read
and engage in other personal amusements; and

Truck drivers responsible for picking up and delivering the

mail who were free to attend to personal matters and
occupy their time as they desired during the waiting time
between scheduled runs.

A close variance of waiting time is idle time during
which an otherwise off-duty employee remains available
to be called to work may or may not be compensate,
depending upon the situation. As a general rule, the issue
of compensability depends on whether the time is spent
primarily for the employers benefit as opposed to the
employees. The answer usually turns upon the
extent to which employee is able to and does
use the time effectively for personal purposes.

An evaluation of all the relevant facts become necessary

to determine compensability. The following, among
others, should not be considered:
a. The employer requires the employee to remain on
the employers premises;
b. The employer requires the employee to wait
home for calls or messages or confines the
employee to a highly-restricted geographical


c. The employee receives numerous or frequent work

assignments during the on-call period;
d. The employee must respond within a short
timeframe under the circumstances (especially if the
employee must travel somewhere to do the work);
e. Requires the employee to be on-call frequently,
never relieves the employee from on-call
status, does not permit the employee to
exchange calls or call periods with another

another worker, or does not allow the employee to turn

down at least some calls; and
f. There is an agreement or understanding covering
the arrangement.
Some combination of the foregoing factors is
present when idle on call time is found to be
compensable work.


a. Travel from home to work.
An employee who travels from home before his
regular workday and returns to his home at the end of
the workday is engaged in ordinary home-to-work
travel which is a normal incident of employment and
therefore not considered as hours worked.
This is true whether he works at a fixed
location or at different jobsites.

But while normal travel from home to work is not

working time, if an employees receives an emergency
call outside of his regular working hours and is required
to travel to his regular place of business or some other
work site, all of the time spent in such travel is
considered working time.
b. Travel that is all in the days work.
Time spent by an employee in travel
as part of his principal activity, such as

travel from jobsite during the workday, must be counted as

hours worked. Where an employee is required to report at a
meeting place to receive instructions or to perform other work
there, or to pick up and carry tools, the travel from the
designated place to the workplace is part of the days work
and must be counted as hours worked regardless of contract,
custom or practice. If an employee normally finishes his work
on the premises at
5:00 p.m. and is sent to another job which he
finished at 8:00 p.m. and is required to
return to his employers premises arriving at
9:00 p.m., all of the time is working time.
However, if the employee goes home instead

of returning to his employers premises, the travel after

8:00 p.m. is work-to-home (home-to-work) travel and is
not hours worked.
c. Travel away from home.
Travel that keeps the employee away from home
overnight is travel away from home. Travel away from
home is clearly working time when it cuts across
the employees workday. The employee is
simply substituting travel for other duties.

The time is not only hours worked on regular working days

during normal working days but also during the
corresponding hours on non-working days. If an employee
regularly works from 9:00 a.m. to 5:00 p.m. from Monday
through Friday, the travel time during these hours is
working time. Regular meal period is not counted. As an
enforcement policy, the Department of Labor and
Employment does not consider as working time the time
spent in travel away from home
outside of regular working hours as a
passenger on an airplane, train, boat, bus or

Any work which an employee is required to perform while

travelling must be counted as hours worked. An
employee who drives a truck, bus, automobile, boat or
airplane or an employee who is required to ride therein
as an assistant or helper, is working while riding, except
during bona-fide meal periods or when he is permitted to
sleep in adequate facilities furnished by the

(Article 87, Labor Code)

a. Some principles on overtime work.
1.Work rendered after normal eight
(8) hours of work is called
overtime work.

2. In computing overtime work, regular wage or basic

salary means cash wage only without deduction for
facilities provided by the employer.
3. Premium pay means the additional compensation
required by law for work performed within eight (8) hours
on non-working days, such as regular holidays, special
holidays and rest days.
4. Overtime pay means the additional
compensation for work performed beyond

eight (8) hours.

5. Illustrations on how overtime is computed:
a. For overtime work performed on an ordinary day,
the overtime pay is plus 25% of the basic hourly rate.
b. For overtime work performed on a rest day or on
a special day, the overtime pay is plus 30%
of the basic hourly rate which includes 30%
additional compensation as provided in

Article 93 [a] of the Labor Code.

c. For overtime work performed on a rest day which
falls on a special day, the overtime pay is plus 30% of
the basic hourly rate which includes 50% additional
compensation as provided in Article 93 [c] of the Labor
d. For overtime work performed on a regular
holiday, the overtime pay is plus 30% of the
basic hourly rate which includes 100%

additional compensation as provided in Article 94 [b] of

the Labor Code.
e. For overtime work performed on a rest day which
falls on a regular holiday, the overtime pay is plus
30% of the basic hourly rate which includes 160%
additional compensation.
Premium pay refers to the additional

compensation required by law for work performed within

eight (8) hours on non-working days, such as rest days,
regular and special holidays.
Overtime pay refers to the additional compensable
for work performed beyond eight (8) hours a day. Every
employee who is entitled to premium pay is likewise
entitled to the benefit of overtime pay.


In case the employment contract stipulates that
the compensation includes built-in overtime pay and the
same is duly approved by the Director of the Bureau of
Employment Services (now Bureau of Local
Employment),the non-payment by the employer of any
overtime pay for overtime work is justified and valid.
In PAL Employees Savings and Loan
Association, Inc.[PESALA] v. NLRC,

where the period of normal working hours per day was

increased to twelve (12) hours, it was held that the
employer remains liable for whatever deficiency in the
amount for overtime work in excess of the first eight (8)
hours, after recomputation shows such deficiency.
Generally, the premium pay for work
performed on the employees rest days or

regular and special days is included as part of the regular

rate of the employee in the computation of overtime pay
for any overtime work rendered on said days, especially
if the employer pays only the minimum overtime rates
prescribed by law. The employees and employer,
however, may stipulate in their CBA the payment of
overtime rates higher than those provided by law. Such
agreement may be considered valid only if the stipulated
overtime pay rates will yield to the employees not
less than the minimum prescribed by law.


a. General rule.
The general rule remains that no employee may
be compelled to render overtime work against his will.
b. Exceptions when employee may be
compelled to render overtime work:

1. When the country is at war or when any other national or

local emergency has been declared by the National
Assembly or the Chief Executive;
2. When overtime work is necessary to prevent loss of life or
property or in case of imminent danger to public safety
due to actual or impending emergency in the locality
caused by serious accident, fire, floods, typhoons,
earthquake, epidemic or other disasters
or calamities;
3. When there is urgent work to be performed

on machines, installations or equipment, or in order to

avoid serious loss or damage to the employer or some
other causes of similar nature;
4. When the work is necessary to prevent loss or damage
to perishable goods;
5. When the completion or continuation of work started
before the 8th hour is necessary to prevent
serious obstruction or prejudice to the
business or operations of the employer; and

6. When overtime work is necessary to avail of favorable

weather or environmental conditions where performance
or quality of work is dependent thereon.
c. May an employee validly refuse to render
overtime work under any of the afore-said
No, an employee cannot validly refuse
to render overtime work if any of the aforementioned circumstances is present. When an

employee refuses to render emergency overtime work

under any of the foregoing conditions, he may be
dismissed on the ground of insubordination or willful
disobedience of the lawful order of the employer.
The following rules shall apply:
1. Undertime work on any particular

day shall not be offset by overtime on any other day.

2. Permission given to the employee to go on leave on
some other day of the week shall not exempt the
employer from paying the additional compensation
required by law such as overtime pay or night shift
differential pay.
The right to claim overtime pay is not

subject to a waiver. Such right is governed by law and not

merely by the agreement of the parties.
While rights may be waived, the same must not be
contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right
recognized by law.
But if the waiver is done in exchange for and in
consideration of certain valuable privileges, among them
that of being given tips when doing overtime work,

there being no proof that the value of said privileges

did not compensate for such work, such waiver may be
considered valid.
NIGHT WORK (R.A. NO. 10151).
1. R.A. NO. 10151 [June 21, 2011].

a. Significance of the law.

R.A. No. 10151 has repealed Article 130
[Nightwork Prohibition] and same articles. Additionally, it
has inserted a new Chapter V of Title III of Book III of
the Labor Code entitled Employment of Night Workers
which addresses the issue on nightwork of all employees,
including women workers. Chapter V covers newly
renumbered Articles 154 up to 161 of the Labor

b. Coverage of the law.

The law on nightwork applies not only to women but
to all persons, who shall be employed or permitted or
suffered to work at night, except those employed in
agriculture, stock raising, fishing, maritime transport and
inland navigation, during a period of not less than
seven (7) consecutive hours, including the interval
from midnight to five oclock in the morning,
to be determined by the DOLE Secretary,
after consulting the workers representative

/labor organizations and employers.

c. Night worker, meaning.
Night worker means any employed person
whose work covers the period from 10 oclock in the
evening to 6 oclock the following morning provided
that the worker performs no less than seven (7)
consecutive hours of work.

d. Health assessment.
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
(b) At regular intervals during such
an assignment; or

c. If they experience health problems during such

an assignment.
With the exception of a finding of unfitness for night
work, the findings of such assessment shall be
confidential and shall not be used to their detriment,
subject, however, to applicable company policies.
e. Mandatory facilities.
Mandatory facilities shall be made

Available for workers performing night work which include

the following:
(a) Suitable first-aid and emergency facilities as
provided for under Rule 1960 (Occupational Health
Services) of the Occupational Safety and Health
Standards (OSHS);
(b) Lactation station in required companies
pursuant to R.A. No. 10028 (The Expanded
Breastfeeding Promotion Act of 2009);

(c) Separate toilet facilities for men and women;

(d) Facility for eating with potable drinking water;
(e) Facilities for transportation and/or properly
ventilated temporary sleeping or resting quarters,
separate for male and female workers, shall be
provided except where any of the following circumstances
is present:


Where there is an existing company guideline, practice

or policy, CBA or any similar agreement between
management and workers providing for an equivalent
or superior benefit; or


Where the start or end of the night work does not fall
within 12 midnight to 5 oclock in the morning; or


Where the workplace is located in an area

that is accessible twenty-four (24) hours
to public transportation;

iv. Where the number of employees does not exceed a

specified number as may be provided for by the DOLE
Secretary in subsequent issuances.
f. Transfer due to unfitness of work for health
Night workers who are certified by competent
physician, as unfit to render night work, due to
health reasons, shall be transferred to a job
for which they are fit to work whenever

practicable. The transfer of the employee must be to

a similar or equivalent position and in good faith.
If such transfer is not practicable or the
workers are unable to render night work for a
continuous period of not less than six (6) months
upon the certification of a competent public health
authority, these workers shall be granted the same
company benefits as other
workers who are unable to work due to

A night worker certified as temporarily unfit for night work

for a period of less than six (6) months shall be given the
same protection against dismissal or notice of dismissal as
other workers who are prevented from working for health
g. Women night workers, alternative measures
to night work for pregnant and nursing employees.
Employees shall ensure that measures

shall be undertaken to provide an alternative to night

work for pregnant and nursing employees who would
otherwise be called upon to perform such work. Such
measures may include the transfer to day work, where
it is possible, as well as the provision of social security
benefits or an extension of maternity leave.
(a) Transfer to day work. As far as practicable,
pregnant or nursing employees shall be assigned
to day work, before and after childbirth for a
period of at least sixteen (16) weeks which

shall be divided between the time before and after

Medical certificate issued by competent physician
(i.e., Obstetrician/Gynecologists, Pediatrician, etc.) is
necessary for the grant of:
i. additional periods of assignment to day work
during pregnancy or after childbirth other than the
period mentioned in the foregoing paragraph,
provided that the length of additional period

as may be agreed upon by the employer and the

ii. extension of maternity leave; and
iii. clearance to render night work.
(b) Provisions of social security benefits.Social security benefit, such as paid maternity leave shall
be provided to women workers in accordance with
the provisions of R.A. 8282 (Social Security
Act of 1997) and other existing company

policy or CBA.
(c) Extension of maternity leave.- Where transfer
to day work is not possible, a woman employee may be
allowed to extend, as recommended by a competent
physician, her maternity leave without pay or using
earned leave credits of the worker, if any.
h. Non-diminution of maternity leave
benefits under existing laws.

The law and its rules shall be construed to authorized

diminution or reduction of the protection and benefits
connected with maternity leave under existing law.
i. Protection against dismissal and loss of
attached to employment status,
seniority and access to promotion.
Where no alternative work can be provided
to a woman employee who is not in a position
to render night work, she shall be allowed

to go on leave or on extended maternity leave, using her

earned leave credits.
A woman employee shall not be dismissed for
reasons of pregnancy, childbirth and childcare
responsibilities. She will not lose the benefits
regarding her employment status, seniority, and access
to promotion which may attach to her regular night work

j. Compensation.
The compensation for night workers in the form of
working time, pay or similar benefits shall recognize the
exceptional nature of work.
Consequently, such compensation shall include, but
not be limited to, working time, pay and benefits under
the Labor Code, as amended and under existing
laws, such as service incentive leave, rest
day, night differential pay, 13th month

pay, and other benefits as provided for by law,

company policy or CBA.
k. Social Services.
Appropriate social services shall be provided for
night workers and, where necessary, for workers
performing night work.

l. Night Work Schedules.

The employer shall its own initiative, consult the
recognized workers representative or union in the
establishment on the details of the night work schedules
and the forms of organization of night work that are best
adapted to the establishment and its personnel, as well
as on the occupational health measures and social
services which are required.
In establishments employing night

workers, consultation shall take place regularly and

appropriate changes of work schedule shall be agreed
upon before it is implemented.
a. How reckoned.
Night shift differential is equivalent to 10%
of employees regular wage for each hour of
work performed between 10:00 p.m. and

6:00 a.m. of the following day.

b. Night shift differential vs. overtime pay.
When the work of an employee falls at night time, the
receipt of overtime pay shall not preclude the right to
receive night differential pay. The reason is the payment
of the night differential pay is for the work done during
the night; while the payment of the overtime pay
is for work in excess of the regular eight (8)
working hours.

c. Computation of Night Shift Differential Pay:


Where night shift (10 p.m. to 6 a.m.) work is

regular work.
a. On an ordinary day: Plus 10% of the basic hourly
rate or a total of 110% of the basic hourly rate.
b. On a rest day, special day or regular
holiday : Plus 10% of the regular hourly
rate on a rest day, special day or regular

Holiday or a total of 110% of the regular hourly rate.

2. Where night shift (10 p.m. to 6 a.m.) work is
overtime work.
a. On an ordinary day: Plus 10% of the overtime
hourly rate on an ordinary day or a total of 110% of the
overtime hourly rate on an ordinary day.
b. On a rest day or special day or regular
holiday: Plus 10% of the overtime hourly

Rate on a rest day or special day or regular holiday.

3. For overtime work in the night shift. Since overtime
work is not usually eight (8) hours, the compensation for
overtime night shift work is also computed on the basis of
the hourly rate.
a. On an ordinary day. Plus 10% of 125% of basic
hourly rate or a total of 110% of 125% of basic
hourly rate .

b. On a rest day or special day or regular holiday.

Plus 10% of 130% of regular hourly rate on said days or
a total of 110% of 130% of the applicable regular hourly
The Labor Code does not define

part-time work. There is no universally accepted

definition of part-time work or employment. A definition
proposed by the International Labor Organization (ILO)
describes part-time work as a single, regular or
voluntary form of employment with hours of work
substantially shorter than those considered as normal in
the establishment. A part-time worker is an employed
person whose normal hours of work are less than those
of comparable full-time workers.

Full-time workers affected by partial unemployment,

that is by a collective and temporary reduction in their
normal hours of work for economic, technical or structural
reasons, are not considered to be part-time workers.
This definition excludes certain forms of employment
which although referred to as part-time work, are in
particular, irregular, temporary or
intermittent employment, or cases where
hours of work have been temporarily

reduced for economic, technical or structural reasons.

Part-time work may take different forms depending
on the agreed hours of work in a day, the days of work in
a week or other reference periods. In the Philippines,
however, the two most common and acceptable forms
are four (4) hours work per day and weekend work or
two (2) full days per week.

The same protection afforded to full-time
workers with respect to security of tenure should also be
extended to part-time workers. Thus, protection
provided under the Labor Code and its implementing
rules and regulations should likewise be applied to said
type of workers. If for example, a part-time employee
becomes regular, he cannot be dismissed
summarily without just or authorized cause
and without complying with the twin

requirements of notice and hearing. Otherwise, he shall

be considered illegally dismissed.
A part-time worker is considered a regular employee
under any of the following conditions.
1. The terms of his employment show that he
is engaged as regular or permanent

2. The terms of his employment indicate that he is

employed for an indefinite period;
3. He has been engaged for a probationary period and
has continued in his employment even after the
expiration of the probationary period; or
4. The employee performs activities which are usually
necessary or desirable in the usual business
or trade of the employer.

On the other hand, where the employment contract

is fixed or for a definite period only as contemplated by
law, part-time employees are likewise entitled to tenurial
rights during the entire period of their fixed employment.
In other words, they cannot be separated from work
without just or authorized cause.
Using the legal principles enunciated

in Article 281 of the Labor Code on probationary

employment vis-a-vis Article 13 of the Civil Code on the
proper reckoning of periods, a part-time employee shall
become regular in status after working for such number
of hours or days which equates to or completes a sixmonth probationary period in the same establishment
doing the same job under the employment contract.
Once a part-time employee becomes a regular employee,
he is entitled to security of tenure under the law
he can only be separated for a just or
authorized cause and after due process.


That an employee worked only on a part-time
basis cannot deprive him of his attaining regular
employment. Part-time work does not mean that one is
not a regular employee. Ones regularity of employment
is not determined by the number of hours one works but
by the nature and by the length of time one has
been in that particular job.

The above principle was used as the basis in

declaring respondent Benedicto Faburada as a regular
employee in the case of Perpetual Help Credit
Cooperative, Inc. v. Faburada. Respondent Faburada
was a regular part-time computer programmer/operator
in petitioner cooperative. He had worked with the
Cooperative since June 1, 1988 up to December 29,1989.
His work schedule was on Tuesdays and Thursday, from
1:00 p.m. to 5:30 p.m. and every Saturday from 8:00 to
11:30 a.m. and
1:00 to 4:00 p.m. and for at least three
(3) hours during Sundays.

His monthly salary was P1,000.00 from June to December

1988; P1,350.00- from January to June 1989; and P1,500.00
from July to December 1989. His duties, among others, were
to enter data into the computer, compute interests on savings
deposits, effect mortuary deductions and dividends on fixed
deposits, maintain the masterlist of the cooperative members,
perform various forms for mimeographing, and perform such
other duties as may be assigned to him from time to time.
The same principle was cited in
International Pharmaceuticals, Inc. v. NLRC
and Dr. Virginia Camacho Quintia, as basis

in ruling that private respondent Quintia was aregular

employee despite the fact THAT she was teaching fulltime at the Cebu Doctors College while working parttime with petitioner company. This fact does not negate
her regular status since it does not affect the nature of
Quintas work. Thus, whether ones employment is
regular is not determined by the number of hours one
works, but by the nature of the work and by the length
of time one has been in that particular job.


Workers who are hired initially as temporary parttimers may demand that their status be converted not to
regular part-timers but to regular full-timers if the
circumstances warrant such conversion.
In Philippine Airlines, Inc. v. Pascua,
which involves the issue of regularization of
part-time workers to full-time workers, the

Supreme Court ruled that although the respondentemployees were initially hired as part-time employees for
one (1) year, thereafter the over-all circumstances with
respect to the duties assigned to them, number of hours
they were permitted to work including overtime, and the
extension of their employment beyond two (2) years can
only lead to the conclusion that they should be declared
full-time regular employees. Evidently, there was a
continued and repeated necessity for their services
which puts to naught the contention that
respondents, beyond the one-year period,

still continued to be temporary part-time employees.

Article 280 of the Labor Code provides that any employee
who has rendered at least one year of service, whether
such service is continuous or broken, shall be considered
a regular employee with respect to the activity in which
he is employed, and his employment shall continue while
such activity actually exists.


In the same case of Philippine Airlines, petitioner
contented that the NLRC encroached upon its exclusive
sphere of managerial decision when it ruled that
respondents should be made regular full-time
employees instead of regular part-time
employee, and the appellate court thereby

erred in sustaining the NLRC. The Supreme Court ,

however, declared that this contention does not quite
ring true, much less persuade it. It must be borne in
mind that the exercise of management prerogative is not
absolute. While it may be concede that management is in
the best position to know its operational needs, the
exercise of management prerogative cannot be utilized
to circumvent the law and public policy on labor and
social justice. That prerogative accorded
management could not defeat the very
purpose for which our labor laws exist: to

balance the conflicting interest of labor and management,

not to tilt the scale in favor of one over the other, but to
guarantee that labor and management stand on equal
footing when bargaining in good faith with each other. By
its very nature, encompassing as it could be,
management prerogative must be exercised always with
the principle of fair play at heart and justice in mind.
Hence, having been borne out by the record and the
evidence presented that respondent-employees
status deserves to be converted from
part-time to regular full-time, the NLRCs
findings were affirmed by the High Court.

Thus, not without sufficient and substantial reasons, the

claim of management prerogative by petitioner ought to
be struck down for being contrary to law and policy, fair
play and good faith.
In an Advisory Opinion issued by
Bureau of Working Conditions of the
Department of Labor and Employment, it was

pronounced that part-time workers are entitled to the full

benefit of the yearly five (5) days service incentive leave
with pay. The reason is that the provision of Article 95 of
the Labor Code and its implementing rules, speak of the
number of months in a year for entitlement to said benefit.
Resultantly, part-time employees are also entitled to the full
service incentive leave benefit and not on a pro-rata basis.
In the case of Cebu Institute of
Technology v. Ople, the school contends
that the teachers it hired on contractual
basis are not entitled to service incentive

leave since the nature of their work is similar to those who

are engaged on task or contract basis under the Rules to
Implement the Labor Code. The High Court, in debunking this
claim, ruled that such quoted phrase should be related to the
term field personnel following
the rule of ejusdem generis that general and unlimited terms
are restrained and limited by the particular terms that they
follow. Clearly, the teachers cannot be deemed doing field
duties away from the principal place of
business or branch office of the employer
and whose actual hours of work in the field
cannot be determined with reasonable


a. Part-time teachers cannot acquire permanent
As held in University of Santo Tomas v. NLRC, and
Saint Marys University v. CA, a part-time member of
the faculty cannot acquire permanent employment status
under the Manual of Regulations for Private Schools,
in relation to the Labor Code. Only when one
has served as a full-time teacher can he
acquire permanent or regular status.

In said University of Sto.Tomas case,it was ruled that

for a private school teacher to acquire permanent status in
employment, the following requisites must concur:
(1) the teacher is a full-time teacher; (2) the teacher
must have rendered three (3) consecutive years of
service; and (3) such service must have been satisfactory.
b. Part-time employment cannot be credited
to acquire permanent tenure.
The petitioner in Lacuesta v. Ateneo de

de Manila University, was a part-time lecturer before

she was appointed as a full-time instructor on probation.
As a part-time lecturer, her employment as such had
ended when her contract expired. Thus, the three (3)
semester she served as part-time lecturer could not be
credited to her in computing the number of years she has
served to qualify her for permanent status. Petitioner
posits that after completing the three-year probation with
an above-average performance, she already
acquired permanent status. It was held,
however, that completing the probation
period does not automatically qualify her to

become a permanent employee of the university. Petitioner

could only qualify to become a permanent employee upon
fulfilling the reasonable standards for permanent
employment as faculty member. Consistent with academic
freedom and constitutional autonomy, an institution of
higher learning has the prerogative to provide standards
for its teachers and determine whether these standards
have been met. At the end of the probationary period, the
decision to rehire an
employee on probation belongs to the
university alone as the employer.

c. Part-time teachers enjoy security of tenure

only during the effectivity of the part-time
employment contract.
Part-time teachers enjoy security of tenure during
the effectivity of part-time employment. The school could
not lawfully terminate a part-time before the end of the
agreed period without just cause. But once the period,
semester, or term ends, there is no
obligation on the part of the school to renew
the contract of employment for the next
period, semester, or term.

The syllabus specifically refers to the provisions of the
Civil Code on Contract for Piece Work. The Civil
Code has a complete Section 3, Chapter 3
(Work and Labor), Title VIII (LEASE) devoted
to Contract for Piece of Work covering
Articles 1713 to 1731.


a. Nature.
By the contract for a piece of work, the contractor
binds himself to execute a piece of work for the
employer, in consideration of a certain price or
compensation. The contractor may either employ
only his labor or skill, or also furnish the

b. Pertinent provisions:
The following are the relevant Civil Code provisions:
Art.1714. If the contractor agrees to produce the
work from material furnished by him, he shall deliver the
thing produced to the employer and transfer dominion over
the thing. This contract shall be governed by the following
articles as well as by the pertinent
provisions on warranty of title and against
hidden defects and the payment of price in a
contract of sale.

Art. 1715. The contractor shall execute the work in such a

manner that it has the qualities agreed upon and has no
defects which destroy or lessen its value or fitness for its
ordinary or stipulated use. Should the work be not of such
quality, the employer may require that the contractor remove
the defect or execute another work. If the contractor fails or
refuses to comply with this obligation, the employer may have
the defect removed or another work executed, at the
contractors cost.
Art. 1716. An agreement waiving or limiting
the contractors liability for any defect in the
work is void if the contractor acted fraudulently.

Art.1717. If the contractor bound himself to furnish the

material, he shall suffer the loss if the work should be
destroyed before its delivery, save when there has been
delay in receiving it.
Art.1718. The contractor who has undertaken to put
only his work or skill, cannot claim any compensation if
the work should be destroyed before its delivery, unless
there has been delay in receiving it, or if the
destruction was caused by the poor quality of
the material, provided this fact was
communicated in due time to the owner.

If the material is lost through a fortuitous event, the

contract is extinguished.
Art. 1719. Acceptance of the work by the employer
relieves the contractor of liability for any defect in the
work, unless:
(1) The defect is hidden and the employer is
not, by his special knowledge, expected to recognize
the same; or
(2) The employer expressly
reserves his rights against the contractor

by the reason of the defect.

Art. 1720. The price or compensation shall be paid at the
time and place of delivery of the work, unless there is a
stipulation to the contrary. If the work is to be delivered
partially, the price or compensation for each part having
been fixed, the sum shall be paid at the time and place of
delivery, in the absence if stipulation.
Art. 1721. If, in the execution of the work,
an act, the contractor is entitled to a
reasonable compensation.

The amount of the compensation is computed, on the one

hand, by the duration of the delay and the amount of the
compensation stipulated, and on the other hand, by what
the contractor has saved in expenses by reason of the
delay or is able to earn by a different employment of his
time and industry.
Art.1722. If the work cannot be completed on account
of a defect in the material furnished by the
employer, or because of orders from the
employer, without any fault on the part of
contractor, the latter has a right to an

equitable part of the compensation proportionally to the

work done, and reimbursement for proper expense made.
Art.1723. The engineer or architect who drew up the
plans and specifications for a building is liable for damages
if within fifteen years from the completion of the structure,
the same should collapse by reason of a defect in those
plans and specifications, or due to the defects in the
ground. The contractor is likewise
responsible for the damages if the edifice
falls, within the same period, on account of
defects in the construction or the use of

materials of inferior quality furnished by him, or due to

any violation of the terms of the contract. If the
engineer or architect supervises the construction, he
shall be solidarily liable with the contractor.
Acceptance of the building, after completion, does not
imply waiver of any of the cause of action by reason of
any defect mentioned in the preceding paragraph.
The action must be brought within ten
years following the collapse of the building.

Art. 1724. The contractor who undertakes to build a structure

or any other work for a stipulated price, in conformity, with
plans and specifications agreed upon with the price on account
of the higher cost of labor or materials, save when there has
been a change in the plans and specifications provided:
(1) Such change has been authorized by the proprietor
writing; and
(2) The additional price to be paid to the
contractor has been determined in
writing by both parties.

Art. 1725. The owner may withdraw at will from the

construction of the work, although it may have been
commenced, indemnifying contractor for all the latters
expenses, work, and the usefulness which the owner may
obtain there from, and damages.
Art. 1726. When a piece of work has been entrusted to a
person by reason of his personal qualifications, the
contract is rescinded upon his death.
In this case the proprietor shall pay the
heirs of the contractor in proportion to the

price agreed upon, the value of the part of the work

done, and of the materials prepared, provided the latter
yield him some benefit.
The same rule shall apply if the contractor cannot finish
the work due to circumstances beyond his control.
Art. 1727. The contractor is responsible for the work
done by persons employed by him.
Art. 1728. The contractor is liable for all

the claims of laborers and others employed by him, and of

third persons for death or physical injuries during the
Art.1729. Those who put their labor upon or furnish
materials for a piece of work undertaken by the contractor
have an action against the owner up to the amount owing
from the latter to the contractor at the time the claim is
However, the following shall not prejudice
the laborers, employees and furnishes of

(1) Payments made by the owner to the contractor before

they are due;
(2) Renunciation by the contractor of any amount due
him from the owner.
This article is subject to the provisions of special

Art. 1730. If it is agreed that the work shall be

accomplished to the satisfaction of the proprietor, it is
understood that in case of disagreement the question shall
be subject to expert judgment.
If the work is subject to the approval of a third person, his
decision shall be final, except in case of fraud or manifest
Art. 1731. He who has executed work upon
a movable has a right to retain it by way of
pledge until he is paid.

In addition to the foregoing, there is this relevant Civil

Code provision found in the law on Sales:
Art. 1467. A contract for the delivery at a certain
price of an article which the vendor in the ordinary course
of his business manufactures or procures for the general
market, whether the same is on hand at the time or not,
is a contract of sale, but if the goods are to be
manufactured specially for the customer and upon
his special order, and not for the general
market, it is contract for a piece of work.



The term wage is used to characterized

the compensation paid for or manual skilled
or unskilled labor. Salary, on the other
hand, is used to described the compensation

for higher or superior level of employment.

In cases of execution, attachment or garnishment of
the compensation of an employee received from work
issued by the court to satisfy a judicially-determined
obligation, a distinction should be made whether
such compensation is considered wage or
salary. Under Article 1708 of the Civil Code,
if considered a wage, the employees

compensation shall not be subject to execution or

attachment or garnishment, except for debts incurred for
food, shelter, clothing and medical attendance. If deemed a
salary, such compensation is not exempt from execution
or attachment or garnishment. Thus, the salary,
commission and other remuneration received by a
managerial employee (as distinguished from an ordinary
worker or laborer) cannot be considered wages. Salary is
understood to relate to a position or office, or to
compensation given for official or other
service; while wage is the compensation of

2. A.
The term basic wage means all the
remuneration or earnings paid by an employee to a
worker for services rendered on normal working days and
hours but does not include cost-of-living
allowances, profit-sharing payments,
premium payments, 13th month pay or
other monetary benefits which are not

considered as part of or integrated into the regular salary

of the workers.
Further, as held in Honda Phils., Inc. v.
Samahan ng Malayang Manggagawa sa Honda, the
following should be excluded from the computation of
basic salary, to wit: payments for sick, vacation and
maternity leaves, night differentials, regular
holiday pay and premiums for work done on rest
days and
special holidays.

Wage paid to any employee has the following
1. It is the remuneration or earnings, however,
designated, for work done or to be done or for
services rendered or to be rendered;
2. It is capable of being expressed in
terms of money, whether fixed or

ascertained on a time, task, piece or commission basis, or

other method of calculating the same;
3. It is payable by an employer to an employee under a
written or unwritten contract of employment for work done
or to be done or for services rendered or to be rendered;
4. It includes the fair and reasonable value, as
determined by the DOLE Secretary, of board,
lodging, or other facilities customarily

furnished by the employer to the employee. Fair and

reasonable value shall not include any profit to the
employer or to any person affiliated with the employer.
The minimum wage rates prescribed by law shall
be the basic cash wages without deduction therefrom
of whatever benefits, supplements or allowances
which the employees enjoy free of charge
aside from the basic pay.


The term statutory minimum wage refers simply
to the lowest basic wage rate fixed by law that an
employer can pay his workers.
The term regional minimum wage rates
that an employer can pay his workers, as
fixed by the Regional Tripartite Wages

and Productivity Boards (RTWPBs), and which shall not

be lower than the applicable statutory minimum wage
The minimum wage rates for agricultural and nonagricultural employees and workers in each and every
region of the country shall be those prescribed by the
RTWPBs. These wage rates may include wages by
industry, province or locality as may be deemed
necessary by the RTWPBs.

The term wage rates includes cost-of-living allowances
as fixed by the RTWPB, but excludes other wage related
benefits such as overtime pay, bonuses, night shift differential
pay, holiday pay, premium pay, 13th month pay, premium pay,
leave benefits, among others.

The principal reason why a legislated

wage increase is considered valid is that it

prevents the exploitation of defenseless workers who are

situated in an unequal position vis--vis their employers in
terms of bargaining power. By setting the minimum below
which the law considers illegal, the workers are assured of
decent living subsistence without need for them to bargain
for the same.
The employer cannot hope to validate his noncompliance with the legislated minimum wage by
contending that he has liquidity problem or
is suffering from financial reverses or
business losses. Whatever problem he may

have in the operation of his business cannot certainly

affect his obligation to pay the minimum wage rate fixed
by law.
Thus, In Mayon Hotel & Restaurant v. Adana, the
Supreme Court ruled that petitioners repeated invocation
of serious business losses is not a defense to payment of
labor standard benefits. The employer cannot
exempt himself from liability to pay minimum
wages because of poor financial condition of
the company. The payment of minimum

wages is not dependent on the employers ability to

It must be noted that acceptance by the
employee of wage below the minimum set by law
does not preclude him from suing for the
deficiency. The principle of estoppel or laches does
not apply in this situation.


a. Meaning of cost-of-living allowance. (COLA)
Clearly, COLA is not in the nature of an allowance
intended to reimburse expenses incurred by employees in
the performance of their official functions. It is not
payment in consideration of the fulfillment of
official duty. As defined, cost of living
refers to the level of prices relating to a
range of everyday items or the cost of

purchasing the goods and services which are included in

an accepted standard level of consumption. Based on
this premise, COLA is a benefit intended to cover
increases in the cost of living.
b. Validity of integration.
The integration of monetary benefits into the basic
pay of workers is not a new method of increasing
the minimum wage.

by way of latest illustration, under Section 1 of Wage

Order No. NCR-17 which took effect on June 03, 2012, the
COLA of P22.00 per day under Wage Order No. NCR-16
was ordered integrated into the basic pay upon its
Under Section 1(c) of Wage Order No. NCR-18 which
took effect on October 4, 2013 also ordered the
integration of the P15.00 of the existing P30.00
COLA per day under said Wage Order No.
NCR-17 into the basic wage making the new
basic wage of covered workers. P451.00

(New Basic Wage of P436.00 plus P15.00 COLA integrated

as of January 1, 2014) and the new minimum wage rate of
covered workers, P466.00 (Basic Wage after integration
of P451.00 plus COLA of P15.00) effective January 1, 2014.
It must be emphasized that the age-old rule
governing the relation between labor and
capital, or management and employee of
no work, no pay or fair days wage for

fair days labor remains to be adhered to in our

jurisdiction as the basic factor in determining the wages
of employees. If the worker does not work, he is
generally not entitled to any wage or pay. The exception
is when it was the employer who unduly prevented him
from working despite his ableness , willingness, and
readiness to work; or in cases where he is illegally locked
out or illegally suspended or illegally dismissed or
otherwise illegally prevented from working in which
event, he should be entitled to his wage.

a. Wage order, defined.
The term Wage Order refers to the order promulgated
by the RTWPB pursuant to its
wage fixing authority.

b. Prescribed increases or adjustments, defined.

Prescribed increases or adjustments refer to the
amount of increases or adjustments in the wage rate of
workers fixed by the RTWPB (hereunder may be referred to
as Regional Board which the employer is mandated to
pay upon effectively of a Wage Order.
c. When proper to issue wage order.
Whenever conditions in the region so
warrant, the Regional Board shall investigate

and study all pertinent facts and based on the prescribed

standards and criteria, shall proceed to determine whether
a Wage Order should be issued. Any such Wage Order shall
take effect after fifteen (15) days from its complete
publication in at least one (1) newspaper of general
circulation in the region.
d. Public hearing / consultations.
In the performance of its wage-determining
functions, the Regional Board shall conduct
public hearings/consultations, giving notices

to employees and employers group, provincial, city and

municipal officials and other interested parties.
e. Appeal by aggrieved party.
Any party aggrieved by the Wage Order issued by
the Regional Board may appeal such order to the
National Wages and Productivity Commission (hereafter
NWPC or Commisssion within ten (10)
calendar days from the publication of such
order. It shall be mandatory for the

commission to decide such appeal within sixty (60)

calendar days from the filling thereof.
The filing of the appeal does not stay the order
unless the person appealing such order shall fine with the
Commission an undertaking with a surety or sureties
satisfactory to the Commission for the payment to the
employees affected by the order of the corresponding
increase, in the event such order is affirmed.


a. Relevant factors to consider in fixing
minimum wage.
The minimum wage rates to be established by the
Regional Board shall be as nearly adequate as is
economically feasible to maintain the
minimum standards of living necessary for
the health, efficiency and general well-being

of the workers within the framework of national

economic and social development goals. In the
determination of regional minimum wages, the Regional
Board shall, among other relevant factors, consider the
(1) Needs of workers and their families
1) Demand for living wages;
2) Wage adjustment vis--vis the
consumer price index;
3) Cost of living and changes

4) Needs of workers and their families;
5) Improvements in standards of living.
(2) Capacity to pay
1) Fair return on capital invested and capacity to
pay of employers;
2) Productivity.

(3) Comparable wages and incomes

1) Prevailing wage levels.
(4) Requirements of economic and social
1) Need to induce industries to invest
the countryside.
2) Effects on employment generation and family income;

3) Equitable distribution of income and wealth along

the imperatives of economic and social development.
b. Standard prevailing minimum wages in
every region.
The wages shall be the standard prevailing
minimum wages in every region. These wages shall
include wages varying with industries,
provinces or localities if in the judgment
of the Regional Board, conditions make such

local differentiation proper and necessary to effectuate the

purpose of the law.
a. Two (2) methods according to jurisprudence.
The Supreme Court has identified two (2)
methods of fixing the minimum wage, namely:
1. Floor Wage method which

involves the fixing of a determinate amount to be added to

the prevailing statutory minimum wage rates. This was
applied in earlier wage orders; and
2. Salary-Cap or Salary-Ceiling method where he
wage adjustment is to be applied to employees receiving a
certain denominated salary ceiling. On other words,
workers already being paid more than the existing
minimum wage (up to a certain amount stated in
the Wage Order) are also to be given a wage

The Salary-Cap or Salary-Ceiling method is the
preferred mode.
b. Distinction between the 2 methods.
The distinction between the two (2) methods is best
shown by way of an illustration. Under the Floor Wage
Method, it could be sufficient if the Wage Order
simply set P15.00 as the amount to be added
to the prevailing statutory minimum wage

rates; while in the Salary-Ceiling Method, it would be

sufficient if the Wage Order states a specific salary, such as
P250.00, and only those earning below it shall be entitled
to the wage increase.
c. Current policy discourages across-the-board
When neither of the 2 methods is used and
instead what was granted was an across-the
board (ATB) wage increase, the Regional

Board is deemed to have exceeded its authority (ultra

vires) by extending the coverage of the Wage Order to
wage earners receiving more than the prevailing
minimum wage rate without a denominated salary
While ATB Wage increases have been granted in
the past, current policy discourages the Regional Boards
from granting ATB adjustments as they create more
distortions in the labor market which in turn affect
adversely the income and standard of living
of workers and their families. Specifically:

ATB wage increases have greater impact on inflation;

ATB wage increase are disincentives to trade
ATB increases are not consistent with the minimum
wage fixing mandate of the Regional Boards.
a. On issuance of wage order.

Contents of Wage Order. - A Wage Order shall

specify the region, province, or industry to which the
minimum wage rates prescribed thereunder shall
apply and provide exemptions, if any, subject to
guidelines issued by the Commission.
Frequency of Wage Order. Any Wage Order
issued by the Regional Board may not be disturbed
for a period of twelve (12) months from its
effectivity, and no petition for wage increase

shall be entertained within the said period except when

there are supervening conditions, such as extraordinary
increase in prices of petroleum products and basic
goods/services, which demand a review of the minimum
wage rates as determined by the Regional Board and
confirmed by the Commission (NWPC), in which case, the
Regional Board shall proceed to exercise its wage fixing
function even before the expiration of the said period.

Review of Wage Order. The Commission shall review

the Wage Order issued by the Regional Board prior to
Effectivity of Wage Order; requirement of
publication. A wage Order shall be published only
after its review by the Commission and shall take
effect fifteen (15) days after its publication in at
least one (1) newspaper of general

circulation in the region.

b. On public hearing/consultations.
Hearings may be conducted by the Regional Board en
banc or by a duly authorized committee thereof
wherein each sector shall be represented .
No preliminary or permanent injunction or temporary
restraining order may be issued by any court,
tribunal or any other entity against any

proceeding before the Commission or Regional Board.

Failure to conduct public hearings/consultations and
to publish a wage order renders it invalid.
c. On applicability of wage order.
Wage increases mandated by wage orders apply only
to covered employees specified therein.
If none of the employees are receiving

salaries below the prescribed minimum wage, an employer

is not obliged to grant the wage increase to any of them.

Workers are not required to refund what they have

erroneously received consequent to the
implementation of a void provision of a wage order.

According to Article 124 of the Labor Code

All workers paid by results, including those who

are paid on piecework, takay, pakyaw or task basis, shall
receive not less than the prescribed wage rates per eight
(8) hours of work a day, or a proportion thereof for
working less than eight (8) hours.
The Labor Code contains, in its Article 101,
a provision directly dwelling on how payment
by results is to be made, thus:

Article 101. Payment by Results.- (a) The Secretary of

Labor and Employment shall regulate the payment of
wages by results, including pakyao, piecework, and other
non-time work, in order to ensure the payment of fair and
reasonable wage rates, preferably through time and
motion studies or in consultation with representatives of
workers and employers organization.
Article 101 of the Labor Code contemplates
non-time workers. They are so-called

because they are paid not on the basis of the time spent
on their work but according to the quantity, quality or
kind of job and the consequent results thereof.
Because of the unique manner by which the work
is compensated as distinguished from the compensation
calculated on the basis of time, it is subject to more
regulations in order to ensure the payment of fair and
reasonable wage rates, basically through two (2)
a. Time and motion study; or

b. As may be fixed through consultation with workers and

employers organization.
The time and motion study is the more scientific and
preferred method.
Workers paid by results may be classified
a. Supervised workers; and

b. Unsupervised workers.
As the term clearly connotes, supervised workers are
those who manner of work is under the control of the
employer; while unsupervised workers are those who
work is controlled more in the results than in the
manner or method of performing it.
The law does not make any categorical
differentiation among the workers paid by
results. Thus, the workers may be on

pakyao (sometimes spelled pakyaw), takay or piecerate or output basis. All of them are similar in character in
that they are all paid on the basis of the results of their
work. When the law does not distinguish, we should not
On petition of any interested party or upon
its own initiative, the DOLE shall use all
available measures, including the use of time
and motion studies and individual /collective

bargaining agreement between the employer and its

workers as approved by the DOLE Secretary and
consultation with representatives of employers and workers
organizations, to determine whether the employees in any
industry or enterprise are being compensated in accordance
with the minimum wage requirements of the rule on wages.
The basis for the establishment of rates
for piece, output or contract work is the
performance of an ordinary worker of

minimum skill or ability.

An ordinary worker of minimum skill or ability is the
average worker of the lower producing group representing fifty
percent (50%) of the total number of employees engaged in
similar employment in a particular establishment, excluding
learners, apprentices and persons with disability employed
In incentive wage system, the number
of minutes allowed for tool care, personal

needs and fatigue, is added to operating time in establishing

standards or task as a basis for determining piece rates
or incentive bonus.
In incentive wage system, the rate for the established
task or job standard production is called basic rate.
The base rate usually represents the one hundred
percent (100%) basis for measuring the
incentive bonus. It is also used to described
the regular rate for time worked which is the

established rate per hour for the assigned job, exclusive of

extras resulting from merit or service increase or
overtime, among others.
The employer shall basically prescribe the
output rate in work paid by results. He may
prescribe it himself or secure first the prior
approval of the DOLE.

If the output rates are prescribed solely by the

employer and the same do not conform with the standards
prescribed under the implementing rules, or with the rates
prescribed by the DOLE in an appropriate order, the employees
are entitled to the difference between the amount which they
are entitled to receive under such prescribed standards or
rates and that actually paid to them by the employer.
Moreover, if by multiplying the rate
per piece as determined by the employer
without the approval of the DOLE and the
actual output of the worker paid by results,

the amount arrived at conforms with or exceeds the

statutory minimum wage, then such worker should
receive such higher amount. But if after such
computation, the amount arrived at is less than the
statutory minimum wage, then, the employer should pay
the difference in order to assure the worker of the
statutory minimum wage.
In the case of Framanlis Farms, Inc.v.
Minister of Labor, the High Court ruled
that respondent Minister of Labor did not

err in requiring the petitioners to pay wage differentials to

their pakyaw workers who worked for at least eight (8) hours
daily and earned less than P8.00 per day.
The same thing may not be said if the output rates are
prescribed by the DOLE, in which case, the employer is dutybound to follow it. Consequently, the wages of workers paid by
results under this situation are determined by simply
multiplying the number of
pieces produced by the rate fixed per piece.
Consequently, whether or not the eight (8)
normal working hours are exceeded or that

the total output is equivalent to, more than or less than

the statutory minimum wage, is immaterial. What is
material is the actual output or earnings for that
particular day.


The wage rate of a learner or an apprentice is
set at seventy-five percent (75%) of the statutory
minimum wage.
The Labor Code, in its Article 124,
categorically mentions the effect of legallymandated wage increases ordered by

Wage Orders on
agreements, to wit:





All recognized learneship and apprenticeship agreements

shall be considered automatically modified insofar as their
wage clauses are concerned to reflect the prescribed wage
Consequently, all Wage Orders issued by the
Regional Boards contain a provision thereon.
For example, the latest Wage Order No.
NCR-18 (Effective 4 October 2013)
states in its Section 7:


WORKERS.- Wages of apprentices and learners shall
be no case be less than seventy-five percent (75%)
of the applicable minimum wage rates prescribed in
this Order.
All recognized learnership and apprenticeship
agreements entered into before the effectivity of this
Order shall be considered automatically modified
insofar as their wage clauses are concerned
to reflect the new minimum wage rates.

All qualified handicapped workers shall receive the

full amount of the minimum wage rate prescribed
herein pursuant to R.A. No. 7277, otherwise known as the
Magna Carta for Disabled Persons.
Under Article 80 of the Labor
Code, handicapped workers, now to be

properly called as Persons With Disability or PWD, are

entitled to not less than seventy-five percent (75%) of
the applicable adjusted minimum wage. In view,
however, of R.A. 7277, the wage rate of PWDs had been
increased to and fixed at 100% of the applicable
minimum wage.
Wage Orders issued by the Regional Boards normally
reflect this principle. For instance, as shown in
Section 7 of Wage Order No. NCR-18
quoted above, the full amount of the

minimum wage rate prescribed thereunder is granted to

a PWD.
Moreover, the employment agreements with
persons with disability are deemed automatically
modified insofar as their wage clauses are concerned to
reflect the said legally mandated increases.

Commission is the recompense, compensation
or reward of an employee, agent, salesman, executor,
trustee, receiver, factor, broker or bailee, when the
same is calculated as a percentage on
the amount of his transactions or on the
profit of the principal.


Commission earned may or may not be considered
part of the wage or salary depending on the peculiar
circumstances of a case and on the purpose for which
the determination is being made. For instance, the rule
on the inclusion of commissions for purposes of
computing the separation pay may essentially
differ from the inclusionary rule thereof for
purposes of computing the 13th month pay.






Accordin g to Lagatic v. NLRC, there is no law which

requires employers to pay commissions.
Once commission is granted, there is a
law which prescribes a method for

computing it. The determination of the amount of

commissions is the result of collective bargaining
negotiations, individual employment contracts or
established practice.
Consequently, as held in Lagatic, since the formula
for the computation of commissions was presented to
and accepted by the petitioner employee, such
prescribed formula is in order. As to the allegiation
that said formula diminishes the benefits
being received by petitioner whenever there

is a wage increase, it must be noted that his

commissions are not meant to be in a fixed amount. In
fact, there was no assurance that he would receive any
commission at all. Non-diminution of benefits, as applied
here, merely means that the company may not remove
the privilidge of sales personnel to earn a commission,
not that they are entitled to fixed amount thereof.

For purposes of determining the appropriate amount
of separation pay of salesman who were terminated due
to retrenchment, commissions earned from actual
transactions and received by them should be included in
the monthly salary. This holds true even if the
commissions were merely in the form of
incentives or encouragement so that the
salesman would be inspired to put a little
more industry on the jobs particularly

assigned to them. Still, these commissions are direct

remunerations for services rendered which contributed to
the increase of the income of the employer. For purpose
of the computation of the separation pay, what should be
taken into account is the average commission earned
during last year of employment.
Commissions, however, should not be included in
the computation of the base figure if the same
is dependent on the earnings of the
employee through actual marketing

transactions taken by him.




For purposes of computing the 13th month pay, the

salesmens commission comprising a pre-determined
percent of the selling price of the goods sold by
each salesmen should be properly included
in the term basic salary or wage .

These commissions are neither overtime payments nor

profit-sharing payments nor any other fringe benefit.
But if the commissions were received by medical
representatives as productivity bonuses
the same
should not be included in the term
basic salary.
Productivity bonuses are generally tied to the
productivity or capacity for revenue production of a
corporation. Such bonuses closely resemble
profit-sharing payments and have no clear,
direct or necessary relation to the amount

of work actually done by each individual employee.

More generally, a bonus is an amount granted and paid
ex gratia to the employee. Its payment constitutes an
act of enlightened generosity and self-interest on the
part of the employer rather than as a demandable or
enforceable obligation.

The general rule is that an employer, by himself or
through his representative, is prohibited from
making any deductions from the wages of his
employees. The employer is not allowed to
make unnecessary deductions without the
knowledge or authorization of the

a. Deductions allowed under Article 113.
Article 113 of the Labor Code allows only three (3)
kinds of deductions,

(a) In cases where the worker is insured with his consent

by the employer, and the deduction is to recompense the
employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the
worker or his union to check-off has been recognized by
the employer or authorized in writing by the individual
worker concerned; and

(c) In cases where the employer is authorized by law or

regulations issued by the DOLE Secretary.
b. Deductions allowed under other provisions of the
Labor Code and other laws.
Deductions from the wages of employees may be
made by the employer in any of the following cases:
1. Deductions for loss or damage
under Article 114 of the Labor Code;

2. Deductions made for agency fees from non-union

members who accept the benefits under the CBA
negotiated by the bargaining union. This form of
deduction does not require the written authorization of
the non-bargaining union member concerned;
3. Union service fees;
4. When the deductions are with the written
authorization of the employee for
payment to a third person and the

employer agrees to do so, provided that the latter does

not receive any pecuniary benefit, directly or indirectly,
from the transaction;
5. Deductions for value of meal and other facilities;

6. Deductions for premium for SSS, PhilHealth,

employees compensation and Pag-IBIG;
7. Withholding tax mandated under the
National Internal Revenue Code (NIRC);

8. Withholding of wages because of the employees debt

to the employer which is already due;
9. Deductions made pursuant to a court judgment
against the worker under circumstances where the
wages may be the subject of attachment or execution
but only for debts incurred for food, clothing, shelter
and medical attendance;
10. When deductions from wages are ordered
by the court;

11. Salary deductions of a member of a cooperative.

Deductions due to tardiness or absences.
Tardiness or absences may be lawfully deducted from the
wages of the workers. For purpose of computing the
proper amount of deduction for the same, the equivalent
daily rate (EDR) of the employee
concerned should be used as the basis thereof.

Deductions from 13th month pay. 13th month pay

is considered part of wages within the meaning and
contemplation of the Labor Code. No deduction therefore
can be made therefrom without the knowledge and
consent of the employee concerned. Example : In
Agabon v. NLRC, the Supreme Court disallowed for
being unauthorized the deduction of SSS loan and the
value of shoes from the 13th month pay of the employee.
Deductions due to losses on account
of illegal negligence. In the case of

Metropolitan Bank and Trust Company v. NLRC, the

Act of the bank in deducting P1,000.00 bi-monthly from
the salary of a bank teller supposedly to answer for the
loss of P96,370.00 on account of her negligence in
failing to ask the alleged representative of the depositor
to present identification papers and in failing to verify
the withdrawal of the client-depositor considering the
large amount involved as required by the Manual
Procedure of the bank, was held, under the
circumstances, constitutive of illegal
deduction since it was common knowledge

that the bank procedures have been relaxed especially to accommodate

special clients who are often allowed to go directly to the bank officials
to facilitate withdrawals. The teller here was more of a victim than a
SYSTEM. In TSPIC Corp. v. TSPIC Employees Union [FFW], the
deductions made to correct the erroneous overpayment of salaries
were held valid since no vested right could have accrued
in favor of the employees. Hence, any amount
given to the employees in excess of what
they were legally entitled to may be

deducted by the employees salaries.

a. The non-elimination and
non-diminution principle applies even to
Benefits granted after the promulgation/

effectivity of the Labor Code.

Albeit Article 100 is clear that the principle of nonelimination and non-diminution of benefits apply only to
the benefits being enjoyed at the time of the
promulgation of the Labor Code, the Supreme Court has
consistently cited Article 100 as being applicable even to
benefits granted after said promulgation. It has, in fact,
been treated as the legal anchor for the declaration
of the invalidity of so many acts of employer
deemed to have eliminated or diminished

the benefits of employees.

b. Proper basis of the non-elimination and non
diminution principle is not Article 100.
The language of Article 100 is clear as to its
Therefore, subsequent to the date of
promulgation of the Labor Code, the non-elimination and
non-diminution principle enunciated therein can no
longer be invoked as the same was explicitly
and clearly made applicable only to

supplements or other employee benefits enjoyed at the

time of promulgation of the Labor Code.
This view that Article 100 is not the proper basis for
the invocation of the non-diminution and non-elimination
of benefits principle was underscored in the separate
concurring opinion of Mr. Justice Arturo D. Brion in the
case of Arco Metal Products, Inc. v. Samahang ng mga
Manggagawa sa Arco Metal-NAFLU(SAMARM-NAFLU)
where he clarified that the basis for the
prohibition against diminution of establish

benefits is not really Article 100 of the Labor Code as the

respondents claimed and as the cases cited in the
ponencia mentioned. He emphasized therein that Article
100 refers solely to the non-diminution of benefits enjoyed
at the time of the promulgation of the Labor Code.
Indeed, the view is advanced that even without Article
100, the protection-to-labor clause in the
Constitution and the grounds of justice and
equity will not allow such diminution and/or
elimination of employee benefits.

Based on the ponencia and concurring opinion aforecited in the Arco Metal case, it may be safely concluded
that the proper legal bases for the invocation of the
principle that any benefit or supplement being enjoyed
by employees cannot be reduced, discontinued by the
employer are the following:
(1) Express terms of an employment agreement;
(2) Company practice which refers to
the implied terms of an employment

agreement which the employer has freely, voluntarily

and consistently extended to its employees and thus
cannot be withdrawn except by mutual consent or
agreement of the contracting parties;
(3) The Constitution (Section 18 of Article II and Section
3 of Article XIII thereof; and
(4) Article 4 of the Labor Code.

Indeed, the express terms of an employment

agreement which are not contrary to law, public policy or
public order are the touchstone of the employment
relationship. Said terms constitute the law between the
employer and the employee which cannot be breached.
The implied terms thereof, once granted by the
employer, may ripen into a company practice or even
into a policy which generally can lo longer be withdrawn
unilaterally by the employer except when the
affected employee agrees to such

And the protection-to-labor mandate enunciated in

Section 18 of Article II and Section 3 of Article XIII of the
Constitution as well as the rule on the proper
interpretation and construction of the provisions of the
Labor Code and its implementing rules enshrined in
Article 4 thereof are the main bedrock and shield against
any attempt at reducing, diminishing or eliminating
benefits that employers have granted and with the
employees have been enjoying.

c. Latest pronouncement on the application of

the non-diminution rule in Article 100.
The 2014 case of Wesleyan UniversityPhilippines v. Wesleyan University-Philippines
Faculty and Staff Association succinctly point out that
the Non-Diminution Rule found in Article 100 of the
Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received
by their employees. This rule, however,
applies only if the benefit is based on any

of the following:
(1) An express policy;
(2) A written contract; or
(3) A company practice.
a. When it constitute demotion.
The illegal and unjustified elimination




or certain benefits may result in illegal demotion if it results

in the lowering in position or rank or reduction in salary of
the employee.
b. When it constitutes constructive dismissal.
Elimination or diminution of certain benefits may result
in the constructive dismissal of an employee when it
amounts to an involuntary resignation resorted
to because continued employment is
rendered impossible, unreasonable or
unlikely; when there is a demotion in rank

and/or diminution in pay; or when a clear discrimination,

insensibility or disdain by an employer becomes unbearable
to the employee that it could foreclose any choice by him
except to forego his continued employment.
a. No hard and fast rule to establish
company practice.
Company practice is a custom or habit

shown by an employers repeated, habitual customary or

succession of acts of similar kind by reason of which, it
gains the status of a company policy that can no longer
be disturbed or withdrawn.
b. The grant of benefit should not be by reason
of legal or contractual obligation but by reason of
To ripen into a company practice that is
demandable as a matter of right, the giving

of the benefit should not be by reason of a strict legal or

contractual obligation but by reason of an act of liberality
on the part of the employer.
c. Criteria that may be used to determine existence
of company practice.
There is no hard and fast rule which may be used and
applied in determining whether a certain act of the
employer may be considered as having
ripened into a practice which, having been
elevated to such status, may thus be

accorded the same enforceability and binding effect

equivalent to a demandable policy or agreement.
According to the case of National Sugar
Refineries Corporation v. NLRC,
the test or
rationale of this rule on long practice requires an
indubitable showing that the employer agreed to
continue giving the benefits knowing fully well
that said employees are not covered
by the law requiring the payment thereof.

The following criteria may, however, be used to

determine whether an act has ripened into a company
(1) The act of the employer has been done for a
considerable period of time;
(2) The act should be done consistently and
intentionally; and
(3) The act should not be a product of
erroneous interpretation or

or construction of a doubtful or difficult question of law or

Provision in the CBA.
1. The act of the employer has been done for
considerable period of time.

If done only once as in the case of Philippine

Appliance Corporation (Philcor) v. CA, where the CBA
signing cannot be considered as having
ripened into a company practice. Similarly,
in the 2011 case of Supreme Steel
Corporation v. Nagkakaisang

Manggagawa ng Supreme Independent Union

(NMS-IND-APL), it was held that the implementation of
the COLA under Wage Order No. RBIII-10 on an acrossthe-board basis, which only lasted for less than a year,
cannot be considered as having been practiced over a
long period of time. While it is true that jurisprudence
has not laid down any rule requiring a specific minimum
number of years in order for a practice to be considered
as a voluntary act of the
employer, under existing jurisprudence on
this matter, an act carried out within less

than a year would certainly not quality as such. Hence,

the withdrawal of the COLA Wage Order No. RBIII-10
from the salaries of non-minimum wage earners did not
amount to a diminution of benefits under the law.
In the following cases, the act of the employer was
declared company practice because of the considerable
period of time it has been practiced:
(a) Davao Fruits Corporation v.
Associated Labor Unions. The act of

the company of freely and continuously including in the

computation of the 13th month pay, items that were
expressly excluded by law has lasted for six (6) years,
hence, was considered indicative of company practice.
(b) Sevilla Trading Company v. V.A. Semana
The act of including non-basic benefits such as paid
leaves for unused sick leave and vacation leave in the
computation of the employees 13th month pay for
at least two (2) years was considered a
company practice.

(c) The 2010 case of Central Azucarera de Tarlac v.

Central Azuc arera de Tarlac Labor Union-NLU, also
ruled as company practice the act of petitioner of granting
for thirty (30) years, its workers the mandatory
13th month pay computed in accordance with the following
formula: Total Basic Annual Salary divided by twelve
(12) and including in the computation of the Total Basic
Annual Salary the following: basic monthly salary; first eight
(8) hours overtime pay on
Sunday and legal/special holiday; night
premium pay; and vacation and sick leaves

for each year.

(d) Manila Electric Company v. Secretary of Labor,
where the act of the employer in granting, in addition to
the regular 13th month bonus, an additional Christmas
bonus at the tail-end of the year since 1988 was
considered company practice. The considerable length of
time MERALCO has been giving these special grants to
its employees indicates a unilateral and voluntary
act on its part to continue giving said
benefits knowing that such act was not

required by law.
e. Davao Integrated Port Stevedoring Services v.
Abarquez. The employer, for three (3) years and nine
(9) months, approved the commutation to cash of the
unenjoyed portion of the sick leave with pay benefit of its
intermittent workers. It was held that this act of the
employer has already ripened into a company practice
which can no longer be withdrawn.

Tiangco v. Leogardo, Jr., where the

employer carried on the practice of giving a fixed

monthly emergency allowance from November 1976 to
February 1980, or for a period of three (3) years and
four (4) months. It was ruled that this has already
ripened into a company practice which cannot be
peremptorily and unilaterally withdrawn by the employer.
(g)Metropolitan Bank and Trust Company v. NLRC,
where the act of Metrobank , for over a decade,
of consistently, deliberately and voluntarily
granting improved benefits to its officers,

after the signing of each CBA with its rank and file
employees, retroactive to January 1st of the same year
as the grant of improved benefits and without the
condition that the officers should remain employees as of
a certain date is a company practice. This undeniably
indicates a unilateral and voluntary act on Metrobanks
part, to give said benefits to its officers, knowing that
such act was not required by law or the company
retirement plan.