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Part IIntroductory Materials

Section 1. LABOR LAW IN GENERAL

1.1 LABOR LAW DEFINED :

The law governing the rights and duties of the employer and employees(1) with respect to the terms and conditions of employment and(2) with respect to labor disputes arising from collective bargaining respecting such terms

and conditions

1. Labor Legislation Consists of statutes, regulations and jurisprudence governing therelations between capital and labor by:

a. providing for certain terms and conditions of employment or b. providing a legal framework within which these terms and conditions and the

employment relationships may be negotiated adjusted and administered.

2. Social Legislation Includes all laws that provide particular kinds of protection or benefits to society or segments thereof in furtherance of social justice. In that sense,labor laws are necessarily social legislation.

promote public welfare

1.2 LAW CLASSIFICATION

1. Labor Standards Law That which sets out the minimum terms, conditions and benefitsof employment that ERs must provide or comply with and to which EEs are entitled as amatter of legal right.Ex. 8-hour labor law

2. Labor Relations Law That which defines [S R D & IM] the status, rights and duties and the institutional mechanisms

that govern the individual and collective interaction of ERs and EEs or their representatives.Ex. Book V of Labor Code

3. Welfare Legislation designed to take care of contingencies which may affect workers,e.g. where there is loss of income for research beyond the workers control. BENEFITS* Social Security Law.

1.3 HISTORY AND ORIGIN

1.4 BASIS FOR ENACTMENT

1. Art. II, Sec.5, Const. : The maintenance of peace and order, the protection of life,liberty, and property, and the promotion of general welfare are essential for theenjoyment by all the people of the blessing of democracy.

2. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. Itshall protect the rights of workers and promote their welfare.

3. Art. XIII, Sec. I, Const. : The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reducesocial, economic and political inequalities, and remove cultural inequities by equitablydiffusing 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.


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LABOR LAW 1 (Labor Standards & Termination of Employment )

* Labor and social legislation are enacted pursuant to the police power of the State. Thisis its inherent power to enact wholesome and reasonable laws to promote order, safety,health, morals and general welfare of society. In its exercise the state may interfere withpersonal liberty, with property and with business and occupation. (Calalang vs.Williams).

* No longer may the due process clause and the freedom of contract be invoked tochallenge labor and social legislation. This has long been discarded since the 1937 caseof West Coast Hotel vs. Parish (US) and the 1924 case of Pp. vs. Pomar (RP ).

* Labor relation laws enable workers to obtain from their employers more than theminimum benefits set by labor standard laws

1.5 LAW AND WORKER

The SC reaffirms its concern for the lowly worker who, often at the mercy of his ER, mustlook up to the law for protection. Fittingly, the law regards him with tenderness and evenfavor and always with hope in his capacity to help in shaping the nations future. It is an error to take him for granted. (Cebu Royal Plant vs. Deputy Minister of Labor)

1.6 MANAGEMENT FUNCTION

Recognition

Deles v. NLRC (2000)

However, petitioner loses sight of the fact that the right of an employer to regulate allaspects of employment is well settled. This right, aptly called management prerogative, givesemployers the freedom to regulate, according to their discretion and best judgment, all aspectsof employment, including work assignment, working methods, processes to be followed, workingregulations, transfer of employees, work supervision, lay-off of workers and the discipline,dismissal and recall of workers. In general, management has the prerogative to discipline itsemployees and to impose appropriate penalties on erring workers, pursuant to company rulesand regulations.

Limitations

Great Pacific Employees Union v. Great Pacific Life Assurance

It bears emphasis that the employer is free to regulate all aspects of employmentaccording to his own discretion and judgment. This prerogative flowed from the established rulethat labor laws do not authorize substitution of judgment of the employer in the conduct of hisbusiness. Recall of workers clearly falls within the ambit of management prerogative. Theemployer can exercise this prerogative without fear of liability so long as it is done in good faithfor the advancement of his interest and not for the purpose of defeating or circumventing therights of the employees under special laws or valid agreements. It is valid as it is not performedin a malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite.

Pantranco North Express, Inc. v. NLRC

The State affords the constitutional blanket of rendering protection to labor, but it must alsoprotect the right of employers to exercise what are clearly management prerogatives, so long asthe exercise is without abuse of discretion.

Sigma Rho ( ) reviewersPersonal copy of Rene Callanta 82

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Bontia v. NLRC

The rule is well settled that labor laws discourage interference with an employer's judgment inthe conduct of his business. Even as the law is solicitous of the welfare of employees, it mustalso protect the right of an employer to exercise what are clearly management prerogatives Aslong as the company' s exercise of the same is in good faith in order to advance its interests andnot for the purpose of defeating or circumventing the rights of the employees under the law or valid agreements, such exercise will be upheld.

However, management prerogatives are not absolute but are subject to legal limits,collective bargaining agreements, or general principles of fair play and justice. And, while it is thespecial privilege of management to dismiss or lay off an employee, the exercise of thatprerogative must be made without abuse of discretion, for what is at stake is not only theemployee' s position but also his means of livelihood. Courts may, therefore, look into theemployer' s exercise of a management prerogative if the same is clearly shown to be tainted withgrave abuse of discretion, 15 ever mindful that, under the foregoing principles and the policy of the State, doubts should be resolved in favor of the disadvantaged employee.

1.7 COMPROMISE AND WAIVER

Article 227

Any compromise settlement, including those involving labor standards law, voluntarilyagreed upon by the parties with the assistance of the Bureau or the regional office of theDepartment of Labor, shall be FINAL and BINDING upon the parties. The National Labor relations Commission or any court shall not assume jurisdiction over issues involved thereinexcept in case of non-compliance thereof or if there is prima facie evidence that the settlementwas obtained through FRAUD, MISREPRESENTATION, OR COERCION.

Rules

Asian Alcohol Corp. v. NLRC

It is true that this Court has generally held that quitclaims and releases are contrary topublic policy and therefore, void. Nonetheless, voluntary agreements that represent areasonable settlement are binding on the parties and should not later be disowned. It is onlywhere there is clear proof that the waiver was wangled from an unsuspecting or gullible person,or the terms of the settlement are unconscionable, that the law will step in to bail out theemployee. While it is our duty to prevent the exploitation of employees, it also behooves us toprotect the sanctity of contracts that do not contravene our laws.

More Maritime Agencies, Inc. v. NLRC In American Home Assurance Co. v. NLRC, this Court held:

The law does not consider as valid any agreement to receive less compensation thatwhat a worker is entitled to recover nor prevent him from demanding benefits to which he isentitled. Quitclaims executed by the employees are thus commonly frowned upon as contrary topublic policy and ineffective to bar claims for the full measure of the workers legal rights,considering the economic disadvantage of the employee and the inevitable pressure upon himby financial necessity.

Thus, it is never enough to assert that the parties have voluntarily entered into such aquitclaim.

Golden Donuts, Inc. v. NLRC (2000)

"A compromise, once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery." Acompromise is basically a contract perfected by mere consent. "Consent is manifested by themeeting of the offer and the acceptance upon the thing and the cause which are to constitute thecontract." A compromise agreement is not valid when a party in the case has not signed thesame or when someone signs for and in behalf of such party without authority to do so.

1.8 SOURCES OF LAW


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1 Labor Code and Related Special Legislation2 Contract

Article 1305 Civil Code A contract is a meeting of the minds between two persons whereby one binds

himself, with respect to the other, to give something or to render some service.

Article 1306 Civil CodeThe contracting 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.

Collective Bargaining Agreement

Plastic Town Center Corp. v. NLRC

The subject for interpretation in this petition for review is not the Labor Code or itsimplementing rules and regulations but the provisions of the collective bargaining agreemententered into by management and the labor union. As a contract, it constitutes the law betweenthe parties (Fegurin v. National Labor Relations Commission) and in interpreting contracts, therules on contract must govern.

Contracts which are not ambiguous are to be interpreted according to their literalmeaning and should not be interpreted beyond their obvious intendment (Herrera v. Petrophil Corp.).

Past Practices

Davao Fruits Corporation v. Associated Labor Union

From 1975 to 1981, petitioner had freely, voluntarily and continuously included in thecomputation of its employees' thirteenth month pay, the payments for sick, vacation andmaternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays. The considerable length of time the questioned items had been included by petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim of mistake.

A company practice favorable to the employees had indeed been established and thepayments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit andsupplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and Regulations ImplementingP.D. No. 851, and Article 100 of the Labor Code of the Philippines, which prohibit the diminutionor elimination by the employer of the employees' existing benefits (Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).

Section 2. LABOR AND THE CONSTITUTION 2.1 CONSTITUTIONAL PROVISIONS

1. Art. II, Sec. 9, Const. : The State shall promote a just and dynamic social order that willensure the prosperity and independence of the nation and free the people from povertythrough policies that provide adequate social services, promote full employment, a risingstandard of living, and an improved quality of life for all.

2. Art. II, Sec. 10, Const. : The State shall promote social justice in all phases of nationaldevelopment.

3. Art. II, Sec. 13, Const. : The State recognized the role of the youth in nation-buildingand shall promote and protect their physical, moral, spiritual, intellectual, and social well-being. . .


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4. Art. II, Sec. 14, Const. : The State recognizes the role of women in nation-building, andshall ensure their fundamental equality before the law of women and men.

5. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. Itshall protect the rights of workers and promote their welfare.

6. Art. XIII, Sec. 1, Const. : The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reducesocial, economic, and political inequalities, and remove cultural inequities by equitablydiffusing 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.

7. Art. XIII, Sec. 3 (1 st par), Const. : 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 . . .

8. Art. XIII, Sec. 4, Const. : The State shall, by law, undertake an agrarian reform programfounded on the right of farmers and regular farmworkers, who are landless, to wincollectively or collectively the lands they till or, in the case of other farmworkers, toreceive a just share of the fruits thereof . . .

9. Art. XIII, Sec. 11, Const. : The State shall adopt an integrated and comprehensiveapproach to health development which shall endeavor to make essential goods, healthand other social services available to all the people at affordable cost . . .

10. The present Constitution has gone further than the 1973 Constitution in guaranteeingvital social and economic rights to marginalized groups of society, including labor. Theframers of the Constitution intended to give primacy to the rights of labor and afford thesector full protection regardless of the geographical location of the workers and whether they are organized or not (Globe Mackay vs. NLRC).

2.2 PROTECTION TO LABOR

1. Art. XIII, Sec. 3, Const. : The State shall afford full protection to labor, local andoverseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to 1) self organization, 2) collectivebargaining and negotiations, and 3) peaceful and concerted activities including the right tostrike in accordance with law.

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 andERs and the preferential use of voluntary modes in settling disputes, including conciliation,and shall enforce mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and ERs, recognizing theright of labor to its just share in the fruits of production and the right of enterprises toreasonable returns in investment, expansion and growth.

1935 Const . : The State shall afford protection to labor, especially to workingwomen and minors, and shall regulate the relation between landowner and tenant,and between labor and capital in industry and in agriculture. The State may providefor compulsory arbitration.

7 Cardinal Rights of Workers

S CP TH L

right to self-organization collective bargaining and negotiations peacefulconcerted activities including the right to strike in accordance with lawsecurity of tenure humane conditions of work living wage participate in


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P policy and decision-making processes affecting their rights and benefits asmay be provided by law.

Phil. Airlines, Inc. v. Santos

It is a fact that the sympathy of the Court is on the side of the laboring classes, notonly because the Constitution imposes such sympathy, but because of the one-sided relation

between labor and capital. The purpose is to place the workingman on an equal plane withmanagement - with all its power and influence - in negotiating for the advancement of hisinterests and the defense of his rights. Under the policy of social justice, the law bends over backward to accommodate the interests of the working class on the humane justification thatthose with less privileges in life should have more privileges in law.

Phil. Geothermal, Inc. v. NLRC

The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. There may be cases where the circumstances warrantfavoring labor over the interests of management but never should the scale be so tilted if theresult is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied tonone).

Three aggregates of power against which the individual employee needs protection1. collective labor - Union2. collective capital - management3. collective bargaining relationship

* The law, while protecting the rights of laborers, does not authorize the oppression or destruction of the employer

LAISSEZ FAIRE

1. Laissez faire or the principle of free enterprise never found full acceptance in this jurisdiction . . . (ACCFA vs. CUGCO)

Employees Confederation of the Philippines v. NWPC (91) Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meantto "get the Government out of the industry" and leave labor and management alone indeciding wages. The Court does not think that the law intended to deregulate the relationbetween labor and capital for several reasons: (1) The Constitution calls upon the State toprotect the rights of workers and promote their welfare; (2) the Constitution also makes it aduty of the State "to intervene when the common goal so demands" in regulating propertyand property relations; (3) the Charter urges Congress to give priority to the enactment of measures, among other things, to diffuse the wealth of the nation and to regulate the use of property; (4) the Charter recognizes the "just share of labor in the fruits of production;" (5)under the Labor Code, the State shall regulate the relations between labor and management;(6) under Republic Act No. 6727 itself, the State is interested in seeing that workers receivefair and equitable wages; and (7) the Constitution is primarily a document of social justice,and although it has recognized the importance of the private sector, it has not embracedfully the concept of laissez faire or otherwise, relied on pure market forces to govern theeconomy; We can not give to the Act a meaning or intent that will conflict with these basicprinciples.

2.3 LABOR SECTOR

1. Art. II, Sec. 18, Const. : The State affirms labor as a primary social economic force. It shallprotect the rights of workers and promote their welfare.

2.4 POLICY CONSIDERATIONS SOCIAL JUSTICE

1. Art. II, Sec. 10, Const. : The State shall promote social justice in all phases of nationaldevelopment.


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Article XIII Section 1The Congress shall give highest priority to the enactment of measures that protect and enhancethe 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 commongood.

Article XIII, Section 2The promotion of social justice shall include the commitment to create economic opportunitiesbased on freedom of initiative and self-reliance.

2. What does social justice envision? It envisions [E, R, C]a. equitable diffusion of wealth and political power for the common good;

b. regulation of the acquisition, ownership, use and disposition of property and itsincrements;

c. and creation of economic opportunities based on freedom of initiative and self-reliance. (Art. XIII, Sec. 1 & 2, Constitution; Alcantara)

Definition [H, E, P, A]

1. Social justice is neither communism nor despotism, nor atornism, nor anarchy, but thehumanization of laws and the equalization of social and economic forces so that justicein its rational and objectively secular conception may at least be approximated. It meansthe promotion of the welfare of the people , the adoption of measures by thegovernment to ensure economic stability of all the competent elements of society,through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex . (Calalang vs. Williams)

2. What does social justice guarantee?Social justice does not champion division of property of economic status; what itguarantees are equality of opportunity, equality of political rights, equality before the law,equality between values given and received, and equitable sharing of the social andmaterial goods on the basis of efforts exerted in their production. (Guido vs. RPA)

Those who have less in life should have more in law Equal pay for equal wok

LIMITS OF USE

* The policy of social justice is not intended to countenance wrongdoing simply because it iscommitted by the underprivileged. At best it may mitigate the penalty but it certainly will notcondone the offense. Those who invoke social justice may do so only if their hands are cleanand their motives blameless and not simply because they happen to be poor. (PLDT vs. NLRC)

Garcia v. NLRC

The constitutional policy of providing full protection to labor is not intended to oppress or destroy management. The employer cannot be compelled to retain employees it no longer needs, to be paid for work unreasonably refused and not actually performed. NASECO bent over backward and exerted every effort to help the petitioners look for other work, postponed theeffective date of their separation, and offered them a generous termination pay package. Theunflagging commitment of this Court to the cause of labor will not prevent us from sustaining theemployer when it is in the right, as in this case.

Phil. Geothermal Inc. v. NLRC

While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, itshould not be overlooked that the benefits accorded to labor do not include compelling anemployer to retain the services of an employee who has been shown to be a gross liability to the


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employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of

justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on relativelyequal positions. There may be cases where the circumstances warrant favoring labor over theinterests of management but never should the scale be so tilted if the result is an injustice to theemployer. Justitia nemini neganda est (Justice is to be denied to none).

EMPLOYER PROTECTION

Asian Alcohol Corp. v. NLRC

Out of its concern for those with less privilege in life, this Court has inclined towards theworker and upheld his cause in his conflicts with the employer. This favored treatment isdirected by the social justice policy of the Constitution. But while titling the scales of justice infavor of workers, the fundamental law also guarantees the right of the employer to reasonablereturns from his investment. Corollarily, the law allows an employer to downsize his business tomeet clear and continuing economic threats. Thus, this Court has upheld reductions in the workforce to forestall business losses or stop the hemorrhaging of capital.

The right of management to dismiss workers during periods of business recessionand to install labor saving devices to prevent losses is governed by Art. 283 of theLabor Code.

Balbalec v. NLRC (95)

The law recognizes the right of every business entity to reduce its workforce if the same ismade necessary by compelling economic factors which would endanger its existence or stability.In spite of overwhelming support granted by the social justice provisions of our Constitution infavor of labor, the fundamental law itself guarantees, even during the process of tilting the scalesof social justice towards workers and employees, "the right of enterprises to reasonable returnsof investment and to expansion and growth." To hold otherwise would not only be oppressiveand inhuman, but also counterproductive and ultimately subversive of the nation's thrust towardsa resurgence in our economy which would ultimately benefit the majority of our people. Whereappropriate and where conditions are in accord with law and jurisprudence, the Court hasauthorized valid reductions in the workforce to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in the volume of business which has renderedcertain employees redundant.

2.5 SPECIFIC LABOR RIGHTS

* Art. XIII, Sec. 3, Const. : [In the relation between workers and ERs the following rights shallbe assured by the State:

a. Rights to self-organizationb. Right to collective bargainingc. Right to collective negotiationsd. Right to peaceful and concerted Activities including the right to strikee. Right to security of Tenuref. Right to just and humane Conditions of workg. Right to a living Wageh. Right to participate in policy and Decision-making processes (WACT BOND)

* Only to those that affect the rights of employees and have repercussions on their right tosecurity of tenure.

PROTECTION TO LABOR

The law must protect labor, at least to the extent of raising him to equal footing in bargainingrelations with capital and to shield him from abuses brought about by the necessity for survival. It is safe to presume, therefore, that an EE or laborer who waives in advance anybenefit granted him by law does so, certainly not in his interest or through generosity butunder the forceful intimidation of urgent need; and hence, he could not have so acted, freelyand voluntarily. (Sanchez vs. Harry Lyons)


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2.6 OTHER RIGHTS

1. Art. II, Sec. 10, Const. : No law impairing the obligation of contracts shall be passed.

*** COMPASSIONATE JUSTICE- disregarding rigid rules and giving due weight to all the equities of the case- years of service without derogatory record taken into account- harshness of penalty also taken into account

2. Art. III, Sec. 16, Const. : All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial or administrative bodies.

3. Art. III, Sec. 18 (2), Const. : No involuntary servitude in any form shall exist except as apunishment for a crime whereof the party shall have been duly convicted.

LABOR AS PROPERTY

Phil. Movie Workers Assn. v. Premiere Productions, Inc.

The right to labor is a constitutional as well as a statutory right. Every man has a naturalright to the fruits of his own industry. A man who has been employed to undertake certain labor and has put into it his time and effort is entitled to be protected. The right of a person to his labor is deemed to be property within the meaning of constitutional guarantees. That is his means of livelihood. He cannot be deprived of his labor or work without due process of law (11 Am. Jur.,333, pp. 1151-1153; 11 Am. Jur., section 344, pp. 1168- 1171).

Sibal v. Notre Dame of Greater Manila

Thus, in the case of Callanta v. Carnation Philippines, Inc. (145 SCRA 268) , this Courtheld that one's employment, profession, trade or calling is a "property right", and the wrongfulinterference therewith is an actionable wrong. The right is considered to be property within theprotection of a constitutional guaranty of due process of law.

DUE PROCESS REQUIREMENTS

* The twin requirements of notice and hearing constitutes essential elements of due process incases of EE dismissal: the requirement of notice is intended to inform the EE of the ERs intentto dismiss and the reason for the proposed dismissal; upon the other hand, the requirement of hearing affords the EE an opportunity to answer his ERs charges against him and accordingly todefend himself therefrom before dismissal is effected. Neither of these 2 requirements can bedispensed with without running afoul of the Constitution. (Century Textile vs. NLRC)

Maneja v. NLRC

The requisites of a valid dismissal are (1) the dismissal must be for any of the causesexpressed in Article 282 of the Labor Code, and (2) the employee must be given an opportunityto be heard and to defend himself. The substantive and procedural laws must be strictlycomplied with before a worker can be dismissed from his employment because what is at stakeis not only the employees position but his livelihood.

XXX Well-settled is the dictum that the twin requirements of notice and hearing constitutethe essential elements of due process in the dismissal of employees. It is a cardinal rule in our

jurisdiction that the employer must furnish the employees with two written notices before thetermination of employment can be effected: (a) the first apprises the employee of employersdecision to dismiss him. The requirement of a hearing, on the other hand, is complied with aslong as there was an opportunity to be heard, and not necessarily that an actual hearing wasconducted.

XXX It bears stressing that a workers employment is property in the constitutional sense.He cannot be deprived of his work without due process of law. Substantive due processmandates that an employee can only be dismissed based on just or authorized causes.Procedural due process requires further that he can only be dismissed after he has been given


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an opportunity to be heard. The import of due process necessitates the compliance of these twoaspects.

LIBERTY OF CONTRACT AND STATE INTERFERENCE

* Legislation appropriate to safeguard to peoples vital interests may modify or abrogatecontracts already in effect. Reservation of essential attributes of sovereign power is read intocontracts as a postulate of the legal order. All contracts made with reference to any matter that issubject to regulation under the police power must be understood as made in reference to thepossible exercise of that power. (Abella/Had. Danao vs. NLRC) such was the case when Art.283 of the Labor Code granted severance pay to workers who at the time of their employmentwere not entitled under the law to receive such pay. (Id.)

Leyte Land Transportation Co. v. Leyte Farmers and Workers Union

In answer to the contention of the petitioner that the doctrine laid down in the appealeddecision in effect "has deprived the company of its rights to enter into contract of employment asit and the employee may agree," it is sufficient to quote the following pronouncements of theUnited States Supreme Court: "The fact that both parties are of full age and competent tocontract does not necessarily deprive the State of the power to interfere where the parties do notstand upon an equality, or where the public health demands that one party to the contract shallbe protected against himself. The State still retains an interest in his welfare, however recklesshe may be. The whole is no greater than the sum of all the parts, and where the individualhealth, safety and welfare are sacrificed or neglected, the State must suffer." (West Coast HotelCompany vs. Parrish, quoting Holden vs. Hardy. The former, by the way, expressly overrules thecase of Adkins vs. Children's Hospital)

Victoriano vs. Elizalde Rope Workers Union

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. In spite of the constitutional prohibition, the Statecontinues to possess authority to safeguard the vital interests of its people. Legislationappropriate to safeguarding said interests may modify or abrogate contracts already in effect.For not only are existing laws read into contracts in order to fix the obligations as between theparties, but the reservation of essential attributes of sovereign power is also read into contractsas a postulate of the legal order. xxx This has special application to contracts regulating relationsbetween capital and labor which are not merely contractual, and said labor contracts, for beingimpressed with public interest, must yield to the common good.

Phil. National Construction Corp. v. NLRC

The mandate of the law for a liberal interpretation of labor contracts in favor of the workingman was applied in the case of Ditan vs. POEA Administrator 8 where We made the followingpronouncement:

"A strict interpretation of the cold facts before us might support the position taken by therespondents. However, we are dealing here not with an ordinary transaction but with a labor contract which deserves special treatment and a liberal interpretation in favor of the worker . . .the Constitution mandates the protection of labor and the sympathetic concern of the State for the working class conformably to the social justice policy . . .

xxx xxx xxxUnder 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 privileges in lifeshould have more privileges in law . . "

** Employees have a vested and demandable right over existing benefits voluntarily granted tothem by their employer.

MGT. Rights [C P S T]1. Right to conduct business2. Right to prescribe rules3. Right to select employees4. Right to transfer and discharge employees

MANAGEMENT AND THE CONSTITUTIONSigma Rho ( ) reviewers

Personal copy of Rene Callanta 82

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National Sugar Refineries Corp. v. NLRC (93)While the Constitution is committed to the policy of social justice and the protection of the

working class, it should not be supposed that every labor dispute will be automatically decided infavor of labor. Management also has its own rights which, as such, are entitled to respect andenforcement in the interest of simple fair play. Out of its concern for those with less privileges inlife, this Court has inclined more often than not toward the worker and upheld his cause in hisconflicts with the employer. Such favoritism, however, has not blinded us to the rule that justiceis in every case for the deserving, to be dispensed in the light of the established facts and theapplicable law and doctrine.

WAIVER AND COMPROMISE

* Not all waivers and quitclaims are invalid as against public policy

* It is only when there is clear proof that the waiver was wangled an unsuspecting person, or the terms of settlement are unconscionable on its face, that the law will step in to annul thequestionable transaction.

But where it is shown that the person making the waiver did so voluntarily, with fullunderstanding of what he was doing, and the consideration for the quitclaim is credible andreasonable, the transaction must be recognized as a valid and binding undertaking.(Sicangco vs. NLRC)

Should a party fail or refuse to comply with the terms of a valid compromise or amicablesettlement, the other party could either enforce the compromise by a writ of execution, or regard it as rescinded and to insist upon his original demand. (Morales vs. NLRC)

- Voluntary consideration not unconscionable- Waiver of future benefits is not valid and binding- The law does not consider as valid any agreement

a. to receive less compensation on what a worker is entitled to recover b. to prevent him from demanding benefits to which he is entitled

* Instances when quitclaim, waiver or compromise is valid:

1. C, a national promoter salesman, with high educational attainment, tendered hisresignation after a spot audit found out that he had a tentative shortage of Php49,005.59.It is unbelievable that C, occupying a responsible position, and with high educationattainment, can be rattled and confused into signing a resignation letter, on account of amere spot audit. (Callanta vs. NLRC)

2. Bank and EEs association, entered into a CBA providing for the withdrawal of thepending case of the association against the bank for non-payment of Php60.00 ECOLA.There is nothing in the compromise which contravenes the law, morals, good customs,

public order, or public policy . (Monte de Piedad vs. MOLE)

3. During pendency of appeal before the NLRC, workers executed a voluntary affidavitbefore the Labor Arbiter declaring intention to withdraw appeal in lieu of payment of severance pay. The affidavits executed voluntarily and knowingly in the presence of theLabor Arbiter has the effect and authority of res judicata . (Olaybar vs. NLRC)

4. A number of EEs made quitclaims in exchange for the dropping of charges of embezzlement of P25 million which the EEs allegedly embezzled. The consideration for the waiver is adequate . (PBC vs. Echiveri)

Instances when quitclaim, waiver or compromise invalid:

1. A worker hospitalized for several times for work-related accidents was told by animmediate supervisor and a personnel officer to retire and execute a quitclaim or elsewould be dismissed and got nothing. The retirement and quitclaim was made under threat of dismissal. (Alcantara)

2. A messenger with 5 years employment resigned and executed a quitclaim after being toldby his manager to resign or else charges will be filed against him. The threat was unjust


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since the messenger did not commit any unlawful act. There was intimidation, whichvitiated consent. (Guatson Tours vs. NLRC)

3. A quitclaim of future benefits made by an EE at the time of employment (Alcantara)

4. After the CIR rendered a decision ordering the ER to pay wage differentials, the EEsexecuted a quitclaim waiving their rights under the decision. The quitclaim contravenes

public policy since after a civil action is filed in court, the cause of action may not besubject of compromise unless the same is with leave of court. ( Pampanga Sugar Devt.Vs. Sugar Workers Assn.)

5. A quitclaim executed by an OFW repatriated to the Philippines because of an illnessrequiring surgical treatment in consideration of the return travel fund. There was noconsideration since the EE regularly contributed to the fund. Besides, the quitclaim isnegotiable and in congruous to the declared policy of the State to afford protection tolabor and to assure the right of workers to security of tenure . (Cuales vs. NLRC)

6. ER appealed the decision of the POEA awarding $3,800.00 disability benefits to worker.During pendency of appeal, the worker executed a quitclaim in exchange for Php18,000.00 since at the time the worker needed money for medical treatment. The law does not consider valid any agreement to receive less compensation than what theworkers should receive. It was clear that the worker was forced to accept the payment out of necessity .(PISC vs. NLRC)

7. After the finality of judgment awarding them severance pay, the workers executed aquitclaim before labor arbiter who had no participation in the case. Such settlementsmust be approved by the labor arbiter before whom the case is being heard . (St.Gothard Pub vs. NLRC)

* Quitclaims are ineffective to bar recovery of the full measure of the workers rights

* Dire Necessity is not an acceptable ground to annul releases unless there isshowing that

a. workers were forced to execute themb. the considerations for the quitclaims where unconscionably low

MANAGEMENT PREROGATIVES1. Right to select and discharge employees with valid cause2. promulgate reasonable employment rules and regulation3. designation of work to employees4. transfer and promote employees5. control company operations6. install money-saving devices7. re-clarify or abolish positions8. sell or close business

MANAGEMENT RIGHTS. Except as limited by special laws, an employer is free to regulate,according to his own discretion and judgments, all aspects of employment, including:

1. Hiring2. Work assignments3. Working methods4. Time, place and manner of work5. Tools to be used and processes to be followed6. Supervision of workers7. Working regulations8. Transfer of Employees9. Work Supervision10. Lay-off of workers11. Discipline, dismissal and recall of workers

Courts may look into the employers exercise of a management prerogative if it is clearlyshown to be tainted with grave abuse of discretion.


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respected as the law between the contracting parties, and they may establish such stipulations,clauses, terms and conditions as they may see fit; and for as long as such agreements are notcontrary to law, morals, good customs, public policy or public order, they shall have the force of law between them. However, while it is the inherent an inalienable right of every man tohave the utmost liberty of contracting, and agreements voluntarily and fairly made will be heldvalid and enforced in the courts, the general right to contract is subject to the limitation that theagreement must not be in violation of the Constitution, the statute or some rule of law. Andunder the Civil Code, contracts of labor are explicitly subject to the police power of the Statebecause they are not ordinary contracts but are impressed with public interest. Inasmuch as inthis particular instance the contract in question would have been deemed in violation of pertinentlabor laws, the provisions of said laws would prevail over the terms of the contract, and privaterespondent would still be entitled to overtime pay.

Philippine Telephone and Telegraph Co., v. NLRC

Petitioners policy is not only in derogation of the provisions of Article 136 of the Labor Code on the right of a woman to be free from any kind of stipulation against marriage inconnection with her employment, but it likewise assaults good morals and public policy, tendingas it does to deprive a woman of the freedom to choose her status, a privilege that by allaccounts inheres in the individual as an intangible and inalienable right. Hence, while it is truethat the parties to a contract may establish any agreements, terms, and conditions that they maydeem convenient, the same should not be contrary to law, orals, good customs, public order, or public policy. Carried to its logical consequences, it may even be said that petitioners policyagainst legitimate marital bonds would encourage illicit or common-law relations and subvert thesacrament of marriage.

Parenthetically, the Civil Code provisions on the contract of labor state that the relationsbetween the parties, that is, of capital and labor, are not merely contractual, impressed as theyare with so much public interest that the same should yield to the common good. It goes on tointone that neither capital nor labor should visit acts of oppression against the other, nor impair the interest or convenience of the public. In the final reckoning, the danger of just such a policyagainst marriage followed by petitioner PT&T is that it strikes at the very essence, ideals andpurpose of marriage as an inviolable social institution and, ultimately, of the family as thefoundation of the nation. That it must be effectively interdicted here in all its indirect, disguised or dissembled forms as discriminatory conduct derogatory of the laws of the lands is not only inorder but imperatively required.

3.2 ER-EE STANDARD OF CONDUCT

* Art. 1701 : Neither capital nor labor shall act oppressively against the other, or impair theconvenience of the public.

FAIR TREATMENT

* The NCC states that every person must in the exercise of his rights, and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. (AHS Phils. vs. NLRC)

General Bank and Trust Co., v. Court of Appeals

Basically, the right of an employer to dismiss an employee differs from and should not beconfused with the manner in which such right is exercised. It must not be oppressive andabusive since it affects one's person and property. (Remerco Garments Manufacturing v. MOLE)

MUTUAL OBLIGATION

Firestone Tire and Rubber Co. v. LariosaThe employer's obligation to give him workers just compensation and treatment carries

with it the corollary right to expect from the workers adequate work, diligence and good conduct.


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LAW COMPLIANCE

* The return-to-work order in this case not so much confers a right as it imposes a duty and whileas a right it may be waived, it must be discharged as a duty even against a workerswill. Thus, it does not constitute a violation of the right against involuntary servitude.(Sarmiento vs. Tuico) This is differentiated from the instance where there is a merebreach of contractual stipulation. While the EE may be held liable for damages by virtueof the breach of contract, he may not be compelled to work against his will because thiswill be involuntary servitude. (Alcantara)

EE OBEDIENCE AND COMPLIANCE ER ORDERS

* It is a recognized principle that company policies and regulations are, unless shown to begrossly oppressive or contrary to law, generally binding and valid on the parties andmust be complied with until finally revised or amended unilaterally or preferable throughnegotiation or by a competent authority. (SMC vs. Ubaldo) Deliberate disregard or disobedience of rules, defiance of management authority by the EEs cannot becountenance. Until and unless the rules or orders imposed by the ER are declared to beillegal or improper by competent authority, the EEs ignore or disobey them at their ownperil. (GTE Directories vs. Sanchez)

PCIB v. Jacinto

Any employee who is entrusted with responsibility by his employer should perform thetask assigned to him with care and dedication. The lack of a written or formal designation shouldnot be an excuse to disclaim any responsibility for any damage suffered by the employer due tohis negligence. The measure of the responsibility of an employee is that if he performed hisassigned task efficiently and according to the usual standards, then he may not be heldpersonally liable for any damage arising therefrom. Failing in this, the employee must suffer theconsequences of his negligence if not lack of due care in the performance of his duties.

ER OBLIGATION

* An EE must not be treated as a disdained subordinate but with respect and fairness, if notaffection and gratitude due to an equal partner. (Lagniton vs. NLRC)

Maneja v. NLRC

An employer can terminate the services of an employee only for valid and just causeswhich must be supported by clear and convincing evidence. The employer has the burden of proving that the dismissal was indeed for a valid and just cause. Failure to do so results in afinding that the dismissal was unjustified.

Section 4. THE LABOR CODE OF THE PHILIPPINES

4.1 DECREE TITLE * Art. 1 : Labor Code of the Philippines

4.2 EFFECTIVITY * Art. 2 : 6 months after its promulgation.

4. 3 APPLICABILITY

1. Art. 6 : All rights and benefits granted under this Code shall, except as many otherwisebe provided, apply alike to all workers, whether agricultural, or non-agricultural.

2. Art . 276 : The terms and conditions of employment of all government of all governmentEEs, including EEs of GOCCs shall be governed by the Civil Service Law.

3. Art. IX-B, Sec. 2(1), Const. : The Civil Service embraces all branches of Government,including GOCCs with original charters.

TEST-GOCC


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* The rule now is that only the GOCCs with original charters come under the Civil ServiceLaw. (Cabrera vs. NLRC)

PNOC Energy Development Corp. v. NLRC

Thus, under the present state of the law, the test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law are the manner of itscreation, such that government corporations created by special charter are subject to itsprovisions while those incorporated under the General Corporation Law are not within itscoverage.

INTERNATIONAL AGENCIES

Ebro III v. NLRC

The grant of immunity is by virtue of the Convention on the Privileges and Immunities of Specialized Agencies of the U.N. adopted by the Senate on May 17, 1949. This has becomepart of the law of the land under the Constitution on generally accepted principles of internationallaw.

SCHOOL TEACHERS

National Mines and Allied Workers Union v NLRC

On the issue of whether the individual petitioners were permanent employees, it is theManual of Regulations for Private Schools, and not the Labor Code, which is applicable.

RELIGIOUS CORPORATIONS

Austria v. NLRC

An ecclesiastical affair is one that concerns doctrine, creed or form of worship of thechurch, or the adoption and enforcement within a religious association of needful laws andregulations for the government of the membership, and the power of excluding from suchassociations those deemed unworthy of membership. Based on this definition, an ecclesiasticalaffair involves the relationship between the church and its members and relate to matters of faith,religious doctrines, worship and governance of the congregation.

XXX Under the Labor Code, the provision which governs the dismissal of employees,is comprehensive enough to include religious corporations, such as the SDA, in its coverage.

Article 278 of the Labor Code on post-employment states that the provisions of this Title shallapply to all establishments or undertakings, whether for profit or not. Obviously, the cited articledoes not make any exception in favor of a religious corporation. This is made more evident bythe fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI onthe Termination of Employment and Retirement, categorically includes religious institutions in thecoverage of the law, to wit:

SECTION 1. Coverage. - This Rule shall apply to all establishments and undertakings, whether operated to profit or not, including educational, medical, charitable and religious institutions andorganizations, in cases of regular employment with the exception of Government and its politicalsubdivisions including government-owned or controlled corporations.

With this clear mandate, the SDA cannot hide behind the mantle of protection of thedoctrine of separation of church and state to avoid its responsibilities as an employer under theLabor Code.

4.4 IMPLEMENTING RULES

Art. 5: Implementing rules and regulations of the DOLE and other government agencies of the Code shall become effective* 15 days after announcement of their adoption in newspapers of general circulation.

LIMITATION RULE MAKING POWER


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It is basic and irrefragable rule that in carrying out and interpreting the provisions of theLabor Code and its implementing regulations, the workingmans welfare should be the primordialand paramount consideration. The interpretation herein made gives meaning and substance tothe liberal and compassionate spirit of the law enunciated in Article 4 of the Labor Code that alldoubts in the implementation and interpretation of the provisions of the Labor Code including itsimplementing rules and regulations shall be resolved in favor of labor.

DOUBT

* When these are 2 or more possible explanations regarding an issue affecting workers rights,that which favors the worker must be chosen. (Clemente vs. GSIS)

NO DOUBT

* The provision in case of doubt does not apply where the pertinent provisions of the Labor Codeleave no room for doubt either in their interpretation or application. (Bonifacio vs. GSIS)

SWEEPING INTERPRETATION

* The Supreme Court cannot also adopt a sweeping interpretation of the law, lest it engagesitself in judicial legislation. (Bravo vs. EEC)

FACTUAL CONSIDERATION AND RATIONALITY

* The care and solitude in the protection and vindication of the right of workingmen cannot justifydisregard of relevant facts or schewal of rationality in the construction of the text of applicablerules in order to arrive at disposition in favor of an EE. (PAL vs. NLRC)

EQUITY AND MORAL CONSIDERATION

* Considerations of equity and social justice cannot prevail against the expressed provisions of labor laws. (Manning vs. NLRC)

FAIRNESS

Reliance Surety and Insurance Co. Inc v NLRC

As a general rule, the sympathy of the Court is on the side of the laboring classes, notonly because the Constitution imposes sympathy but because of the one-sided relation betweenlabor and capital. The Court must take care, however, that in the contest between labor andcapital, the results achieved are fair and in conformity with the rules.

BALANCING CONFLICTING CLAIMS

* The basic policy of the law is to balance or to coordinate the rights and interests of bothworkers and ERs. It should not be deduced that the basic policy is to favor labor to prejudicecapital. (Azucena)

Phil. Airlines, Inc. v. NLRC (1992)

That there should be care and solicitude in the protection and vindication of the rights of workingmen cannot be gainsaid; but that care and solicitude can not justify disregard of relevantfacts or eschewal of rationality in the construction of the text of applicable rules in order to arriveat a disposition in favor of an employee who is perceived as otherwise deserving of sympathyand commiseration.

4.7 ENFORCEMENT AND SANCTIONS

1. Art. 217 (a) (2), (3), (4), (6) : Jurisdiction of Labor Arbiters and the Commission

The Labor Arbiters shall have exclusive and original jurisdiction, except as otherwise provided, the following cases involving all workers: (unfair labor practice )


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1. Termination disputes (qualified by Art. 261 which grant voluntary arbitrators original andexclusive jurisdiction over all unresolved grievances arising from CBAs and companypersonnel policies);

2. Cases involving terms and conditions of employment , if accompanied with a claimfor reinstatement (including claims of OFWs arising out of an ER-EE relationship,including claims for actual, moral and exemplary damages, as provided in Sec. 10,Migrant Workers Act );

3. Claims for actual, moral, exemplary and other damages arising from the ER-EE relations;

4. Except claims for EEs Compensation, Social Security, Medicare and maternity benefits,all other claims, arising from the ER-EE relations; including

- those of persons in domestic or household service, involving an amountexceeding Php5,000 , regardless of whether of whether accompanied with aclaim for reinstatement.

5. Disputes arising from Art. 264 including legality of strikes and lockouts

2. Art. 128 : Visitorial and Enforcement Power of the Secretary of Labor or his duly authorized representative.

1. Accesss to ERs records and premises at anytime of the day or night whenever work isbeing undertaken therein and copy thereform;

2. Question any EE; and3. Investigate any fact, condition or matter which may be necessary to determine violations

of this Code of any labor law, wage order or rules and regulations issued pursuantthereto.

* In cases where the relationship of ER-EE still exists, the power to issue Compliance Orders togive effect to the labor standard provisions of this Code and other social legislation.

Writs of execution to the appropriate authority shall be issued for the enforcementof the said orders, except in cases:

a. where the ER contests the findings of the labor employment andenforcement officer; and

b. raises issues supported by documentary profits which were notconsidered in the course of inspection.

* Order Stoppage of work or suspension of operations of any unit or department of anestablishment when non-compliance poses grave and imminent danger to the health and safetyof workers in the workplace.

Within 24 hours, a hearing shall be conducted to determine whether an order for the stoppage of work and suspension of operations shall be lifted or not.In case the violation is attributable to the fault of the ER, he shall pay EEs their EEs their salaries or wages during said period.

* It shall be unlawful for any person to Obstruct, impede, delay or otherwise render ineffective theorder of the Secretary of Labor.

* No inferior court shall issue a temporary or permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders in accordancewith this Article.

* Any government EE found guilty of violation, after appropriate administrative investigation, besubject to Summary dismissal from the service.

* The Secretary of Labor may require ERs to keep and maintain Employment records as may benecessary. (AS CONES)

3. Art. 129. Recovery of wages, simple money and other benefits.

* The Regional Director of the DOLE or any of the duly authorized hearing officers of theDepartment is empowered, through summary proceedings and after due notice, to hear and


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decide any matter involving the recovery of wages and other monetary claims and benefits,including legal interest owing to a person employed in domestic or household service: Provided

such complain does not include claim for reinstatementaggregate money claims of each househelper does not exceed P5,000.00

* The complaint shall be resolved within 30 days from the date of the filing of the same.

4. Art. 288 : Penalties and Jurisdiction - a. Except, as otherwise provided in the Code, or unless the acts complained of

hinges in a question or interpretation or implementation of ambiguous provisionsof an existing CBA, any violation of this Code declared to be unlawful or penal innature shall be punished with:a fine not less than P1,000.00 nor more than P10,000.00.or imprisonment of not less than 3 months nor more than 3 years.Or both such fine and imprisonment at the discretion of the court.In addition to such penalty any alien found guilty shall besummarily deported upon completion of service of service.

b. Any criminal offense punished under this Code shall be under the concurrent jurisdiction of the MTC and the RTC.

5. Art. 289 : The penalty (of the offenses listed in the Labor Code) shall be imposed upon theguilty officer of officers of a corporation, trust, firm, partnership, association pr entity whichcommitted said offenses.

6. Art. 290. Prescription of Offensses -

* Offenses penalized under this Code and the IRRs 3 years.

* Unfair labor practice 1 year from accrual of such unfair labor practice.

7. Art. 291 : Prescription of Money Claims- All money claims arising from ER-EE relationsaccruing during the effectivity of this Code 3 years from the time the cause of action is accrued.

8. Art. 292 : Money claims specified in Art. 291 shall be filed before the appropriate entityindependently of the criminal action that may be instituted in the proper courts.

Pending the final determination of the merit of money claims filed with the appropriate entity, nocivil action shall be filed with any court.

This provision shall not apply to EEs compensation cases which shall beprocessed and determined strictly in accordance with the pertinent provisions of this Code.

Section 5. WORK RELATIONSHIP

5. 1 WORK RELATIONSHIP

ER and EE

1. Art. 97 (a) and (b) : Person means individual, partnership, association, corporation,business trust, legal representative, or any organized group of persons.(b) ER includes any person acting directly or indirectly in the interest of the ER inrelation to an EE and shall include the Government and all its branches, subdivisions andinstrumentalities, all GOCCs and institutions, as well as non-profit private institutions, or organizations.

2. Art. 167 (f) and (g) : (f) ER means any person, natural or juridical, employing theservices of the EE.

(g) EE means any person compulsory covered by the GSIS . . ., including membersof the AFP, and any person employed as casual, emergency, temporary, substitute or contractual, or any person compulsory covered by the SSS. . .


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although the latter (d) is the most important element. (Rosario Brothers vs. Ople) No particular form of evidence is required to prove the existence of an ER-EE relationship. Any competent andrelevant evidence to prove the relationship may be admitted (Opulencia vs. NLRC)

2. Is there an ER-EE relationship? Workers under a pakiao agreement arranged by G whom PRC considered as an

independent contractor. ER gives orders to G, on where to store the copra, when to bring out,how much to load and where, and what class of copra to handle. The equipment used is ownedby PRC. Yes . PRC has direct control over the handling of the copra. The control test issatisfactorily met.

* Piece workers subject to specifications. Yes . The fact that the making of the basket is subject to Dys specifications indicates the existence of control. (Dy Koh Beng vs. ILMU)

* Tailors, pressers, stitchers and similar workers employed by COD on a piece-work basis. TheEEs are governed by the companys regulations i.e. 8-hour workday, recording of attendanceetc Furthermore, a master cutter distributes job orders equally, supervises the work and seesto it that they were finished as soon as possible. Yes . The workers conduct in the performanceof their work was controlled by the company (Rosario vs. Ople)

* Cargadores and pahinantes recruited by SMC through a labor contractor who are governed bythe regulations of the SMC whose work consisted of loading, unloading, pilling or palleting emptybottles and wooden shells from company trucks and warehouses. Yes. The evidence firmly establishes the control exercised by the SMC. (BLUM vs. Zamora)

* Shoe shiners who had their own customers but shared proceeds with company. No . Thecompany does not exercise any degree of control or supervision over his work. The shoe shiner is a partner in trade. (Besa vs. Trajano)

* Vendees of cigarettes who are governed by the regulations of the vendor company i.e. definitesales territory, requirement to submit daily, weekly and monthly reports, etc. Yes . Vendor company had control over the vendee. (SSS vs. CA)

*I. S, a prominent social figure, had an agreement with TWS to act as branch manager; Theagreement provided that she would be entitled to a part of the commission on sale of tickets; andthat she would share in the expenses of maintaining the office. She was also a signatory to alease agreement covering the branchs premises, holding herself solidarily liable for the promptpayment of rentals. No . I. S was not subject to the control by TWS. The services rendered by I.Smust have been done by her pursuant to a contract of agency. (Sevilla vs. CA)

* A plant manager hired by a marble company which was about to close in a few months timedue to business losses. The company had no control over the former, either as to hours of workor method of accomplishing the work. The former was entitled to a percentage of the net profitsof the company for that period. No . Manager was merely a party to a joint venture. (CMC vs.NLRC)

* Fishermen-crew of a trawl fishing vessel subject to control and supervision of the owner of thevessel i.e. conduct of fishing operations; time to report to fishing port, etc Yes . (Ruga vs.NLRC)

* Tailors, seamstresses and other workers of a haberdashery who were paid on a piece-ratebasis. They were directed by the proprietor of the establishment as specified by the customers.They were required to finish jobs orders in one day before due date. Yes . They did not exerciseindependence in their own methods, but on the contrary were subject to the control of theestablishment from the beginning of their task to their completion. They also had to rely on thetools and equipment supplied by the haberdashery. (Makati Haberdashery vs. NLRC)

* The power of control refers merely to the existence of the power and not the actual exercisethereof.

* Caddies who are not under the control and supervision of the golf club as to working hours,manner of carrying out their services, etc. No . The club did not have the measure of control over the incidents of the caddys work and compensation that the ER would possess. (Manila vs.IAC)


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* College teachers. Yes . The Court takes judicial notice that a university controls the work of themembers of its faculty; that it prescribes the courses or subjects that they teach and the time and

place for teaching. (Feati vs. Bautista)

* Jeepney drivers working under the boundary system. Yes . The driver does not have any interest in the business because he did not invest anything in the acquisition of jeeps and did not

participate in the management thereof. (Citizens League of Free Workers vs. Abbas)

C. CONTROL TEST

There is an ER-EE relationship where the ER controls or has reserved the right to controlthe EE not only as the result of the work but also as to the means by which said work is to beaccomplished (Paradise vs. Ng) . The test merely calls for the existence of the right to controlthe manner of doing the work not the actual exercise of the right. (Ruga vs. NLRC) The lineshould be drawn between rules that merely serve as guidelines towards the achievement of themutually desired results without dictating the means or methods employed in attaining it, andthose that control or fix the methodology and bind or restrict the party hired to the use of suchmeans. The first , which aim only to promote the result, create no ER-EE relationship unlike thesecond, which addresses both the result and the means to achieve it. (Insular Life vs. NLRC)The control test calls merely for the existence of the right to control and manner of doing work,not the actual exercise of the right. (Dy Keh Beng)

POWER OF CONTROL- Refers to the existence of the power and NOT necessarily the actual exercise thereof, not

is it essential for the ER to actually supervise the performance of the EE- It is enough that the employer has the right to wield the power

Religious of the Virgin Mary v. NLRC

The argument has no merit. AS this Court has consistently ruled, the power of control isthe most decisive factor in determining the existence of an employer - employee relationship. InEncyclopedia Britannica (Phils.), Inc. v. NLRC, we held:

In determining the existence of an employer-employee relationship the following elements must be present: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) the power to control the employees conduct. Of the above, control of employees conduct is commonly regarded as the most crucial and determinative indicator of the

presence or absence of an employer-employee relationship. Under the control test, anemployer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means tobe used in reaching that end.

In this case, CDSPB reserved the right to control and supervise the operations of theGirls Department. Although CDSPB actually exercised minimal supervision over petitioner,[it]could exercise substantial supervision and control as it did when [it] preterminated the

Agreement. There was, therefore, no basis in finding that petitioner had a greater degree of autonomy ad independence in running the affairs of the school. The presence of the schooldirector, whose vast powers have already been noted, negates any suggestions or semblance of autonomy.

Nor is there any merit in the claim that actual and effective control was exercised bypetitioner since the designation of the parish priest as director was a mere formality, as he didperform functions which are purely ministerial and figurative in nature. Time and again we haveheld that the control test only requires the existence of the right to control the manner of doingthe work not necessarily the actual exercise of the power by him, which he can delegate.Indeed, although the letters of appointment were signed by the principal/representative of petitioner, they bore the name/letterhead of CDSPB and clearly indicated therein that theemployees were hired as teachers/personnel by CDSPB, and not by RVM. Moreover, CDSPBitself admits that its name - not petitioners - appears in the employees payroll ledger cards.

D. ECONOMIC TEST


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With respect to the second requirement, the service provided by janitors, firemen,mechanics, hired helpers and similar workers are considered directly related to the operations of a company since this is necessary to the proper maintenance of the premises and machineriesas well as the protection of the company premises against fires. (Guarin vs. NLRC)

In such cases, the person intermediary shall be considered merely as an agent of the ERwho shall be responsible to the workers in the same manner and extent as if the latter weredirectly employed by him.

1. Sec. 9, Rule VIII, Book III, IRRs : (a) Any person who undertakes to supply workers toan ER shall be deemed to be engaged in labor-only contracting where such person :

* Does not havesubstantial capital[substantial] investment in the form of tools, equipment, machineries, workpremises and other materials; and

* The workers recruited and placed by such person are performing activities which are directlyrelated to the principal business or operations of the ER in which the workers are habituallyemployed.

Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the ER who shall be responsible to theworkers in the same manner and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of Labor shall determine throughwhether or not the contracting out is permissible in the light of the circumstances of each caseand after considering the operating needs of the ER and the rights of the workers involved.

2. Art. 107 : Indirect ER The provisions of the immediately preceding Article shall likewiseapply in any person, partnership, association or corporation which, not being an ER,contracts with an independent contractor for the performance of any work, job or project.

3. Art. 109 : Every ER or indirect ER shall be held responsible with his contractor or subcontractor for any violation of the provisions of this Code. For purposes of determiningthe extent of their civil liability under this Chapter, they shall be considered direct ERs.

4. Sec. 8, Rule VIII, Book III, IRRs : Job Contracting There is job contracting permissibleunder the Code if the following conditions are met: (INDEPENDENT CONTRACTOR)

1. The contractor carries on an independent business and undertakes the contract work[A R M - F]a. on his own accountb. under his own responsibilityc. according to his own manner and methodd. free from the control and direction of his ER or principal in all matters connected

with the performance of the work except as to the results thereof; and2. The contractor has

a. substantial capital or b. [substantial] investment in the form of tools, machineries, work premises, and

other materials which are necessary in the conduct of his business.

Where the ER-EE relationship has become ascertained, the ER becomes bound bystatutory requirements pertaining, though not limited, to terms and conditions of employment, labor relations and post employment. (Phone-Poulenc vs. NLRC)Nonetheless, when a contractor fails to pay the wages of his EEs, the ER whocontracted out the job to the contractor becomes jointly and severally liable with hiscontractor to the EEs of the latter to the extent of the work performed under thecontract as if such ER were the ER of the contractors EEs. The law itself,establishes an ER-EE relationship between the ER and the job contractors EEs for alimited purpose i.e. in order to ensure that the latter get paid the wages due them. Asimilar situation obtains where there is a labor-only contracting. This time, however,for a comprehensive purpose: ER for purposes of this Code, to prevent any violationor circumvention of any provision of this Code. The law in effect holds both the ER


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and the labor only contractor responsible to the latters EEs for more effectivesafeguarding of the EEs rights under the Labor Code. (PBC vs. NLRC)

INDEPENDENT CONTRACTOR

National Power Corp. v. Court of Appeals (98)

Job (independent) contracting is present if the following conditions are met: (a) thecontractor carries on an independent business and undertakes the contract work on his ownaccount under his own responsibility according to his own manner and method, free from thecontrol and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and (b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materialswhich are necessary in the conduct of his business. Absent these requisites, what exists is alabor only contract under which the person acting as contractor is considered merely as anagent or intermediary of the principal who is responsible to the workers in the same manner andto the same extent as if they had been directly employed by him.

MANAGEMENT FUNCTION

Manila Electric Co. v. Quisumbing (99)

Additionally, We recognize that contracting out is not unlimited; rather, it is a prerogativethat management enjoys subject to well-defined legal limitations. As we have previously held, thecompany can determine in its best business judgment whether it should contract out theperformance of some of its work for as long as the employer is motivated by good faith, and thecontracting out must not have been resorted to circumvent the law or must not have been theresult of malicious or arbitrary action. The Labor Code and its implementing rules also containspecific rules governing contracting out (Department or Labor Order No. 10, May 30, 1997,Sections 1-25).

Factors to Determine existence of Independent Contractor Relationship:1. whether the contractor is carrying on an independent business;2. whether the work is part of the ERs general business;3. the nature and extent of the work;4. the skill required;5. the terms and duration of the relationship;6. the right to assign the performance of the work to another;7. the control and supervision of the work and the ERs powers with respect to the hiring,

firing and payment of salaries;8. the duty to supply premises, tools and appliances. (Mafinco vs. Ople)

REQUIREMENTS - INDEPENDENT CONTRACTOR

Lim v. NLRC (99)

Under DOLE Department Order No. 10 (1997), contracting shall be legitimate if thefollowing circumstances concur:

i) The contractor or subcontractor carries on a distinct and independent business andundertakes to perform the job, work or service on its own account and under its ownresponsibility, according to its own manner and method, and free from the control and directionof the principal in all matters connected with the performance of the work except as to the resultsthereof;

ii)The contractor or subcontractor has substantial capital or investment; and

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

Escario v. NLRC (2000)

In contrast, there is permissible job contracting when a principal agrees to put out or farmout with a contractor or a subcontractor the performance or completion of a specific job, work or


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service within a definite or predetermined period, regardless of whether such job or work or service is to be performed or completed within or outside the premises of the principal. In thisarrangement, the following conditions must concur:

(a) .... The contractor carries on a distinct and independent business and undertakes the contractwork on his account under his own responsibility according to his own manner and method, freefrom the control and direction of his employer or principal in all matters connected with theperformance of his work except as to the results thereof; and

(b).... The contractor has substantial capital or investment in the form of tools, equipment,machineries (sic), work premises, and other materials which are necessary in the conduct of hisbusiness. [RULES TO IMPLEMENT THE LABOR CODE, Book III, Rule VIII, Sec. 8.]

In the recent case of Alexander Vinoya vs. NLRC et al., this Court ruled that in order tobe considered an independent contractor it is not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises. In addition, thefollowing factors need be considered: (a) whether the contractor is carrying on an independentbusiness; (b) the nature and extent of the work; (c) the skill required; (d) the term and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the controland supervision of the workers; (g) the power of the employer with respect to the hiring, firingand payment of workers of the contractor; (h) the control of the premises; (i) the duty to supplypremises, tools, appliances, materials, and labor; and (j) the mode, manner and terms of payment.

DESIRABLE - UNNECESSARY

Coca-Cola Bottlers Phil., Inc. v. NLRC (99)

We perceive at the outset the disposition of the NLRC that janitorial services arenecessary and desirable to the trade or business of petitioner Coca-Cola. But this is inconsistentwith our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took

judicial notice of the practice adopted in several government and private institutions andindustries of hiring janitorial services on an independent contractor basis. In this respect,although janitorial services may be considered directly related to the principal business of anemployer, as with every business, we deemed them unnecessary in the conduct of theemployers principal business.

JUDICIAL NOTICE

Coca-Cola Bottlers Phil., Inc. v. NLRC (99)

We perceive at the outset the disposition of the NLRC that janitorial services arenecessary and desirable to the trade or business of petitioner Coca-Cola. But this is inconsistentwith our pronouncement in Kimberly Independent Labor Union v. Drilon where the Court took

judicial notice of the practice adopted in several government and private institutions andindustries of hiring janitorial services on an independent contractor basis. In this respect,although janitorial services may be considered directly related to the principal business of anemployer, as with every business, we deemed them unnecessary in the conduct of theemployers principal business.

This judicial notice, of course, rests on the assumption that the independent contractor isa legitimate job contractor so that there can be no doubt as to the existence of an employer-employee relationship between the contractor and the worker. In this situation, the only pertinentquestion that may arise will no longer deal with whether there exists an employment bond butwhether the employee may be considered regular or casual as to deserve the application of Art.280 of the Labor Code.

EMPLOYER - EMPLOYEE

Phil. Airlines, Inc. v. NLRC (98)

From the foregoing disquisition, it is evident that petitioner was engaged in permissible jobcontracting and that the individual private respondents, for the entire duration of their employ,were employees not of petitioner but of STELLAR. In legitimate job contracting, no employer-


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employee relation exists between the principal and the job contractor's employees. The principalis responsible to the job contractor's employees only for the proper payment of wages. But inlabor-only contracting, an employer-employee relation is created by law between the principaland the labor-only contractor's employees, such that the former is responsible to suchemployees, as if he or she had directly employed them. Besides, the Court has already taken

judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis.

** Examples of Independent Contractor:

* Commission agent : IPC Company entered into agreement with registered representativeswho worked on a commission basis. While the agents were subject to a set of rules andregulations governing the performance bond; the termination for certain causes, however, theagents were not required to report to work; to devote their time exclusively for the company; toaccount for their time nor submit a record of their activities; and that they were paid on acommission based on a certain percentage of sales. The fact that for a certain specified causes(failure to meet annual quota) the relationship may be terminated does not mean such control exists, for the causes of termination have no relation to the means and methods of work. (IPC vs. SSS)

* Dealership : A contract whereby one engages to purchase and sell soft drinks on truckssupplied by the manufacturer but providing that the other party (peddler) shall have the right toemploy his own workers, shall post a bond to protect the manufacturer against losses shall beresponsible for damages caused to third person, shall obtain the necessary licenses andpermits and bear the expenses incurred in the sale of the soft drinks. (Mafinco vs. NLRC)

Another dealership agreement wherein the dealer: handles the products in accordancewith existing laws and regulations; sends his orders to the factory plant; is supplied by the factorywith a delivery truck and all expenses for repairs are borne by the factory; receives nocommission but given a discount for all sales; is responsible alone for any violation of the law,sells the product at the price agreed upon between the parties; and posts a surety bond of notless than P10,000.00. (La Suerte vs. Director of Labor Relations)

* Security Agency : Shipping company entered into an agreement with a security agencywherein the security agency was responsible for the hiring and assignment of the guards, theguards were not known to the shipping company for it dealt directly with the agency, and apayment of a lump sum to the agency who in turn paid the compensation of the individualwatchmen. Under the circumstances, the guards cannot be considered EEs of the shipping company. It is the security agency that recruits, hires and assigns the work of the watchmen. It isthe wages to which the watchman is entitled. The powers to dismiss lies with the agency. Lastly,since the company has to deal with the agency, and not with the individual watchmen, onmatters, pertaining to the contracted task, it stands to reason that the company does not exercise any power or control over the watchmens conduct. (APL vs. Clave)

* Stevedoring Services : SHIPSIDE entered into a Contract for Services with La Unionproviding among others that the latter would furnish all labor needed for stevedoring work inpiers controlled by the former. The net balance of the stevedoring charges will be divided equallyamong the parties. The records do not show any participation on the part of SHIPSIDE withrespect to the selection and engagement of the individual stevedores. The terms and conditionsof their services are matters determined not by SHIPSIDE but by La Union. It is also sufficiently established that La Union exercised supervision and control over its labor force. WhileSHIPSIDE occasionally issued instructions to the stevedores, such instructions, in legal contemplation are mere requests since the privity of contract lies between the workers and LaUnion. (SHIPSIDE vs. NLRC)

* Collection Agency : Singer entered into a colle

labor law i

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