COMPANY PRACTICE

1.

There is diminution of benefits when the following

requisites are present:

Honda Philippines, Inc. v. Samahan ng Malalaya sa

Honda (2005)

(1) the grant or benefit is founded on a policy or has

ripened into a practice over a long period of time;
(2) the practice is consistent and deliberate;
(3) the practice is not due to error in the construction or
application of a doubtful or difficult question of law;
and
(4) the diminution or discontinuance is done unilaterally
by the employer.

On Company Practice
The full month payment of the 13th month pay is the
established practice at Honda. As held by the VA, the
company explicitly accepted that it was the strike held
that prompted them to adopt a pro-rata computation,
aside from being in a state of rehabilitation due to
substantial losses in 1997-1999 the year 1999s loss
of 215M was caused by a 31-days strike. This is an
implicit acceptance that prior to the strike, a full month
basic pay computation was the present practice
intended to be maintained in the CBA.

The principle against diminution of benefits is applicable

only if the grant or benefit is founded on an express
policy or has ripened into a practice over a long period
of time which is consistent and deliberate; it
presupposes that a company practice, policy and
tradition favorable to the employees has been clearly
established; and that the payments made by the
company pursuant to it have ripened into benefits
enjoyed by them.

To allow the pro-ration of the 13th month pay in this case

is to undermine the wisdom behind the law and the
mandate that the workingmans welfare should be the
primordial and paramount consideration. To rule
otherwise results to dissuasion for workers from the free
exercise of their constitutional R2SO and to strike in
accordance with law.

3.

Benefits given to employees cannot be taken back or

reduced unilaterally by the employer because the benefit
has become a part of the employment contract, written
or unwritten. (Art. 100, Labor Code; Non-Diminution
Rule)

On 13th Month Pay

Excluded from the computation of basic salary are
payments for sick, vacation and maternity leaves, night
differentials, regular holiday pay and premiums for work
done on rest days and special holidays.

The rule against diminution of benefits applies if it is

shown that the grant of the benefit is based on an
express policy or has ripened into a practice over a long
period of time and that the practice is consistent and
deliberate. Nevertheless, the rule will not apply if the
practice is due to error in the construction or application
of a doubtful or difficult question of law. But even in
cases of error, it should be shown that the correction is
done soon after discovery of the error. (i) To substitute or
alter employment contracts approved and verified by the
Department of Labor from the time of actual signing
thereof by the parties up to and including the periods of
expiration of the same without the approval of the
Secretary of Labor[.]

Basic salary means 1/12 of their standard monthly

wage multiplied by their length of service within a given
calendar year, not the amount actually received by an
employee.
2.

Central Azucarera de Tarlac v. Central Azucarera

de Tarlac Labour Union-NLU (2010)

Vergara, Jr. v. Coca-Cola Bottlers Phils., Inc. (2013)

To be considered as a regular company practice, the

employee must prove by substantial evidence that the
giving of the benefit is done over a long period of time,
and that it has been made consistently and deliberately.
Jurisprudence has not laid down any hard-and-fast rule
as to the length of time that company practice should
have been exercised in order to constitute voluntary
employer practice. The common denominator in
previously decided cases appears to be characterized
by regularity, voluntary and deliberate intent of the
employer to grant the benefit over a considerable period
of time.
Any benefit and supplement being enjoyed by the
employees cannot be reduced, diminished, discontinued
or eliminated by the employer. The principle of nondiminution of benefits is actually founded on the
Constitutional mandate to protect the rights of workers,
to promote their welfare, and to afford them full
protection.

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SOCIAL JUSTICE
1.

Calalang v. Williams

2.

PLDT v. NLRC (1988)

4.

The language of Article 279 of the Labor Code is

pregnant with the implication that a legally dismissed
employee is not entitled to separation pay, to wit:

The policy of social justice is not intended to

countenance wrongdoing simply because it is
committed by the underprivileged. At best, it may
mitigate the penalty but it certainly will not condone it.
Social justice cannot be permitted to be a refuge of
scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social
justice may do so only if their hands are clean, and their
motives blameless, and not simply because they happen
to be poor.
3.

PAL v. NLRC (2010)

An employee who is unjustly dismissed from work shall

be entitled to reinstatement without loss of seniority
rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his
compensation was withheld from him up to the time of
his actual reinstatement.
However, in exceptional cases, this Court has granted
separation pay to a legally dismissed employee as an
act of social justice or based on equity. In both
instances, it is required that the dismissal (1) was not for
serious misconduct; and (2) does not reflect on the
moral character of the employee or would involve moral
turpitude. This equitable and humanitarian principle was
first discussed by the Court in the landmark case of
Philippine Long Distance Telephone Co. (PLDT) v.
National Labor Relations Commission, 164 SCRA 671
(1988).

Toyota Motors Phils., Corp. Workers Association v.

NLRC (2007)

What is the prevailing doctrine regarding grant of

financial assistance?
Toyota Doctrine:
Under this doctrine, all grounds in Article 282 of the
Labor Code, except analogous causes, would not merit
payment of financial assistance.

Serious misconduct as a valid cause for the dismissal of

an employee is defined simply as improper or wrong
conduct. It is a transgression of some established and
definite rule of action, a forbidden act, a dereliction of
duty, willful in character, and implies wrongful intent and
not mere error of judgment.

Exception to Toyota Doctrine:

When termination is based on analogous causes.
Toyota, however, makes a distinction when the grounds
cited are the analogous causes for termination under
Article 282(e), like inefficiency, incompetence, ineptitude,
poor performance and others. It declared that in these
cases, the NLRC or the courts may opt to grant
separation pay anchored on social justice in
consideration of the length of service of the employee,
the amount involved, whether the act is the first offense,
the performance of the employee and the like, using the
guideposts enunciated in PLDT on the propriety of the
award of separation pay.

To be serious within the meaning and intendment of the

law, the misconduct must be of such grave and
aggravated character and not merely trivial or
unimportant. However serious such misconduct, it must,
nevertheless, be in connection with the employees work
to constitute just cause for his separation. The act
complained of must be related to the performance of the
employees duties such as would show him to be unfit to
continue working for the employer.
On the other hand, moral turpitude has been defined as
everything which is done contrary to justice, modesty,
or good morals; an act of baseness, vileness or
depravity in the private and social duties which a man
owes his fellowmen, or to society in general, contrary to
justice, honesty, modesty, or good morals.

Illustrative case:
Yrasuegui v. Philippine Airlines, Inc., where the dismissal
of petitioner (an international flight attendant) due to his
obesity was held valid as an analogous cause under
Article 282(e) of the Labor Code. The Supreme Court,
however, as an act of social justice and for reason of
equity, awarded him separation pay equivalent to onehalf (1/2) months pay for every year of service, including
his regular allowances. The Court observed that his
dismissal occasioned by his failure to meet the weight
standards of his employer was not for serious
misconduct and does not reflect on his moral character.

In the case at bar, the transgressions imputed to private

respondent have never been firmly established as
deliberate and willful acts clearly directed at making
petitioner lose millions of pesos. At the very most, they
can only be characterized as unintentional, albeit major,
lapses in professional judgment. Likewise, the same
cannot be described as morally reprehensible actions.
Thus, private respondent may be granted separation pay
on the ground of equity which this Court had defined as
justice outside law, being ethical rather than jural and
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belonging to the sphere of morals than of law. It is

grounded on the precepts of conscience and not on any
sanction of positive law, for equity finds no room for
application where there is law.

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to his full back wages, inclusive of allowances and other

benefits or their monetary equivalent, computed from
the time his compensation was withheld from him up to
the time of his actual reinstatement.

EMPLOYER-EMPLOYEE RELATIONSHIP
I. Tests

Where reinstatement is no longer viable as an option,

back wages shall be computed from the time of the
illegal termination up to the finality of the decision.
Separation pay equivalent to one month salary for every
year of service should likewise be awarded as an
alternative in case reinstatement in not possible.

A. Four-fold Test
1.

South East Intl Rattan v. Coming (2014)

To ascertain the existence of an employer-employee

relationship jurisprudence has invariably adhered to the
four-fold test, to wit:

2.

Royale Homes Marketing Corp. v. Alcantara (2014)

the selection and engagement of the employee;

the payment of wages;
the power of dismissal; and
the power to control the employees conduct, or the
so-called control test.

Among the four, the most determinative factor in

ascertaining the existence of employer-employee
relationship is the right of control test. It is deemed to
be such an important factor that the other requisites may
even be disregarded.

In resolving the issue of whether such relationship exists

in a given case, substantial evidence that amount of
relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion is sufficient.
Although no particular form of evidence is required to
prove the existence of the relationship, and any
competent and relevant evidence to prove the
relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial
evidence.

This holds true where the issues to be resolved is

whether a person who performs work for another is the
latters employee or is an independent contractor, as in
this case. For where the person for whom the services
are performed reserves the right to control not only the
end to be achieved, but also the means by which such
end is reached, employer-employee relationship is
deemed to exist.

(1)
(2)
(3)
(4)

Not every form of control is indicative of employeremployee relationship. A person who performs work for
another and is subjected to its rules, regulations, and
code of ethics does not necessarily become an
employee.

In Tan v. Lagrama, 387 SCRA 393 (2002), the Court held

that the fact that a worker was not reported as an
employee to the SSS is not conclusive proof of the
absence of employer-employee relationship. Otherwise,
an employer would be rewarded for his failure or even
neglect to perform his obligation.

As long as the level of control does not interfere with the

means and methods of accomplishing the assigned
tasks, the rules imposed by the hiring party on the hired
party do not amount to the labor law concept of control
that is indicative of employer-employee relationship.

Nor does the fact that respondents name does not

appear in the payrolls and pay envelope records
submitted by petitioners negate the existence of
employer-employee relationship. For a payroll to be
utilized to disprove the employment of a person, it must
contain a true and complete list of the employee. In this
case, the exhibits offered by petitioners before the NLRC
consisting of copies of payrolls and pay earnings
records are only for the years 1999 and 2000; they do not
cover the entire 18-year period during which respondent
supposedly worked for SEIRI.

In Insular Life Assurance Co., Ltd. v. National Labor

Relations Commission, 179 SCRA 459 (1989), it was
pronounced that: Logically, the line should be drawn
between rules that merely serve as guidelines towards
the achievement of the mutually desired result without
dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the
second, which address both the result and the means
used to achieve it.

In any controversy between a laborer and his master,

doubts reasonably arising from the evidence are
resolved in favor of the laborer. As a regular employee,
respondent enjoys the right to security of tenure under
Article 279 of the Labor Code and may only be
dismissed for a just or authorized cause, otherwise the
dismissal becomes illegal.

Neither does the repeated hiring of Alcantara prove the

existence of employer-employee relationship. As
discussed above, the absence of control over the means
and methods disproves employer-employee relationship.
The continuous rehiring of Alcantara simply signifies the
renewal of his contract with Royale Homes, and
highlights his satisfactory services warranting the

Respondent, whose employment was terminated without

valid cause by petitioners, is entitled to reinstatement
without loss of seniority rights and other privileges and
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renewal of such contract. Nor does the exclusivity

clause of contract establish the existence of the labor
law concept of control. In Consulta v. Court of Appeals,
453 SCRA 732 (2005), it was held that exclusivity of
contract does not necessarily result in employeremployee relationship, viz.: x x x However, the fact that
the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana
exercised control over the means and methods of
Consultas work as the term control is understood in
labor jurisprudence. Neither did it make Consulta an
employee of Pamana. Pamana did not prohibit Consulta
from engaging in any other business, or from being
connected with any other company, for as long as the
business [of the] company did not compete with
Pamanas business. The same scenario obtains in this
case. Alcantara was not prohibited from engaging in any
other business as long as he does not sell projects of
Royale Homes competitors. He can engage in selling
various other products or engage in unrelated
businesses.

(1) The putative employers power to control the

employee with respect to the means and methods
by which the work is to be accomplished [control
test]; and
(2) The underlying economic realities of the activity or
relationship [broader economic reality test].
Employment relationship under the control test is
determined by asking whether 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 to be used in reaching such end.
The broader economic reality test calls for the
determination of the nature of the relationship based on
the circumstances of the whole economic activity,
namely:
(1) The extent to which the services performed are an
integral part of the employers business;
(2) The extent of the workers investment in equipment
and facilities;
(3) The nature and degree of control exercised by the
employer;
(4) The workers opportunity for profit and loss;
(5) The amount of initiative, skill, judgment or foresight
required for the success of the claimed independent
enterprise;
(6) The permanency and duration of the relationship
between the worker and the employer; and
(7) The degree of dependency of the worker upon the
employer for his continued employment in that line of
business.

The element of payment of wages is also absent in this

case. As provided in the contract, Alcantaras
remunerations consist only of commission override of
0.5%, budget allocation, sales incentive and other forms
of company support. There is no proof that he received
fixed monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes
deducted from his supposed salary withholding tax or
that it registered him with the Social Security System,
Philippine Health Insurance Corporation, or Pag-Ibig
Fund. In fact, his Complaint merely states a ballpark
figure of his alleged salary of P100,000.00, more or less.
All of these indicate an independent contractual
relationship.

Under the economic reality test, the proper standard of

economic dependence is whether the worker is
dependent on the alleged employer for his continued
employment in that line of business.

Besides, if Alcantara indeed considered himself an

employee of Royale Homes, then he, an experienced
and professional broker, would have complained that he
was being denied statutorily mandated benefits. But for
nine consecutive years, he kept mum about it, signifying
that he has agreed, consented, and accepted the fact
that he is not entitled to those employee benefits
because he is an independent contractor. This Court is,
therefore, convinced that Alcantara is not an employee
of Royale Homes, but a mere independent contractor.
The NLRC is, therefore, correct in concluding that the
Labor Arbiter has no jurisdiction over the case and that
the same is cognizable by the regular courts.

2.

Following the broader economic reality test, the

Supreme Court found petitioner in Orozco v. The Fifth
Division of the Honorable Court of Appeals, who is a
columnist in the Philippine Daily Inquirer (PDI), not an
employee of PDI but an independent contractor. Thus:
Petitioners main occupation is not as a columnist for
respondent but as a womens rights advocate working in
various womens organizations. Likewise, she herself
admits that she also contributes articles to other
publications. Thus, it cannot be said that petitioner was
dependent on respondent PDI for her continued
employment in respondents line of business.

B. Economic Reality/Dependence Test

II. What is the 2-tiered test of employment
relationship?
1.

Orozco v. CA (2008)

The inevitable conclusion is that petitioner was not

respondent PDIs employee but an independent
contractor, engaged to do independent work.

Francisco v. NLRC (2006)

The two-tiered test enunciated in Francisco v. NLRC, is

composed of:

One-Liner Doctrine: A newspaper columnist is not an

employee but an independent contractor of the
newspaper publishing the column.
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III. Who determines Er-Ee Relationship

1.

Indeed, like the NLRC, the DOLE has the authority to rule
on the existence of an er-ee relationship between the
parties, considering that the existence of an er-ee
relationship is a condition sine qua non for the exercise
of its visitorial power. Nevertheless, it must be
emphasized that without an er-ee relationship, or if one
has already been terminated, the Sec. of Labor is
without jurisdiction to determine if violations of labor
standards provision had in fact been committed, and to
direct employers to comply with their alleged violations
of labor standards.

Peoples Broadcasting v. SOLE (2012)

On Jurisdiction to determine Er-Ee Relationship

In the exercise of the DOLEs visitorial and enforcement
power, the Labor Secretary or the latters authorized
representative shall have the power to determine the
existence of an employer-employee relationship to the
exclusion of the NLRC.
The determination of the existence of an employeremployee relationship by the DOLE must be respected.
The expanded visitorial and enforcement power of the
DOLE granted by RA 7730 would be rendered nugatory if
the alleged employer could, by the simple expedient of
disputing the employer-employee relationship, force the
referral of the matter to the NLRC.

IV. Drivers under Boundary System

1.

Court ruled that the relationship between jeepney

owners/operators on one hand and jeepney drivers on
the other under the boundary system is that of employeremployee and not of lessor-lessee.

The Court issued the declaration that at least a prima

facie showing of the absence of an employer-employee
relationship be made to oust the DOLE of jurisdiction.
But it is precisely the DOLE that will be faced with that
evidence, and it is the DOLE that will weigh it, to see if
the same does successfully refute the existence of an
employer-employee relationship.
2.

NLU v. Dinglasan (1996)

The only features that would make the relationship of

lessor and lessee between the respondent, owner of the
jeeps, and the drivers, members of the petitioner union,
are the fact that he does not pay them any fixed wage
but their compensation is the excess of the total amount
of fares earned or collected by them over and above the
amount of P7.50 which they agreed to pay to the
respondent, and the f act that the gasoline burned by the
jeeps is for the account of the drivers. These two
features are not, however, sufficient to withdraw the
relationship between them from that of employeremployee, because the estimated earnings for fares
must be over and above the amount they agreed to pay
to the respondent for a ten-hour shift or ten-hour a day
operation of the jeeps. Not having any interest in the
business because they did not invest anything in the
acquisition of the jeeps and did not participate in the
management thereof, their service as drivers of the jeeps
being their only contribution to the business, the
relationship of lessor and lessee cannot be sustained.

South Cotabato Comm. v. Hon. Sto. Tomas (2016)

Art. 128 of the Labor Code granted the Sec. of Labor, or

any of his/her authorized representatives, visitorial and
enforcement powers for the purpose of determining
violations of, and enforcing, the Labor Code and any
labor law, wage order, or rules and regulations issued
pursuant thereto. Indispensable to the DOLEs exercise
of such power is the existence of an actual employeremployee relationship between the parties.
The power of the DOLE to determine the existence of an
employer-employee relationship between petitioners and
private respondents in order to carry out its mandate
under Art. 128 has been established in Bombo Radyo
and its resolution of the reconsideration, to wit:

In the lease of chattels, the lessor loses complete control

over the chattel leased although the leassee cannot
make bad use thereof, for he would be responsible for
damages to the lessor should he do so. In this case
there is a supervision and a sort of control that the
owner of the jeeps exercises over the drivers.

xxx The law did not say that the DOLE would first
seek the NLRCs determination of the existence
of an er-ee relationship, or that should the
existence of the same be disputed, the DOLE
would refer the matter to the NLRC. The DOLE
must have the power to determine whether or not
an er-ee relationship exists, and from there to
decide whether or not to issue compliance orders
in accordance with Art. 128(b) of the Labor Code,
as amended by R.A. 7730.
The DOLE, in determining the existence of an eree relationship, follow the Four-Fold Test that
guide the courts. The use of this test is not solely
limited to the NLRC.

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MANAGEMENT PREROGATIVE

II. Transfer; Promotion; Demotion

I. Definition

1. Peckson v. Robinsons Supermarket (2013)

1. San Miguel Corporation v. NLRC (2008)

Valid exercise of MP

Valid exercise of MP

The reassignment of Jenny Peckson was a valid

exercise of MP so as not to constitute a demotion
amounting to her constructive dismissal.

Proof beyond reasonable doubt is not required as a

basis for judgment on the legality of an employers
dismissal of an employee, nor even preponderance of
evidence for that matter, substantial evidence being
sufficient. In the instant case, while there may be no
denying that respondents medical card had falsified
entries in it, SMC was unable to prove, by substantial
evidence, that it was respondent who made the
unauthorized entries. Besides, SMCs (Your) Guide on
Employee Conduct punishes the act of falsification of
company records or documents; it does not punish mere
possession of a falsified document.

This Court has consistently refused to interfere with

the exercise by management of its prerogative to
regulate the employees work assignments, the
working methods and the place and manner of work.
xxx Indeed, labor laws discourage interference with an
employers judgment in the conduct of his business.
Under the doctrine of management prerogative, every
employer has the inherent right to regulate, according
to his own discretion and judgment, all aspects of
employment, including hiring, work assignments,
working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-o of
workers, and discipline, dismissal, and recall of
employees. The only limitations to the exercise of this
prerogative are those imposed by labor laws and the
principles of equity and substantial justice.

Respondent cannot feign surprise nor ignorance of the

earlier AWOPs he had incurred. He was given a warning
for his 2, 4, and 11 January and 26, 28, and 29 April 1997
AWOPs. In the same warning, he was informed that he
already had six AWOPs for 1997. He admitted that he
was absent on 7 and 8 May 1997. He was also given
notices to explain his AWOPs for the period 26 May to 2
June 1997, which he received but refused to
acknowledge. It does not take a genius to figure out that
as early as June 1997, he had more than nine AWOPs.

It is the employers prerogative, based on its

assessment and perception of its employees
qualifications, aptitudes, and competence, to move
them around in the various areas of its business
operations in order to ascertain where they will
function with maximum benefit to the company. When
his transfer is not unreasonable, nor inconvenient, nor
prejudicial to him, and it does not involve a demotion in
rank or a diminution of his salaries, benefits, and other
privileges, the employee may not complain that it
amounts to a constructive dismissal.

In any case, when SMC imposed the penalty of dismissal

for the 12th and 13th AWOPs, it was acting well within its
rights as an employer. An employer has the prerogative
to prescribe reasonable rules and regulations necessary
for the proper conduct of its business, to provide certain
disciplinary measures in order to implement said rules
and to assure that the same would be complied with. An
employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on workrelated activities of the employees.

2. Julies Bakeshop v. Arnaiz (2012)

Demotion

It is axiomatic that appropriate disciplinary sanction is

within the purview of management imposition. Thus, in
the implementation of its rules and policies, the
employer has the choice to do so strictly or not, since
this is inherent in its right to control and manage its
business effectively. Consequently, management has the
prerogative to impose sanctions lighter than those
specifically prescribed by its rules, or to condone
completely the violations of its erring employees. Of
course, this prerogative must be exercised free of grave
abuse of discretion, bearing in mind the requirements of
justice and fair play.

Management is free to regulate, according to its

discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods,
time, place and manner of work, processes to be
followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of
workers, and discipline, dismissal and recall of workers.
3. Endico v. Quantum Foods (2009)
Transfer

All told, we find that SMC acted well within its rights
when it dismissed respondent for his numerous
absences. Respondent was afforded due process and
was validly dismissed for cause.

There was no constructive dismissal. Reassignments

made by management pending investigation of
violations of company policies and procedures allegedly
committed by an employee fall within the ambit of
management prerogative. The decision of Quantum
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Foods to transfer Endico pending investigation was a

valid exercise of management prerogative to discipline
its employees. The transfer, while incidental to the
charges against Endico, was not meant as a penalty, but
rather as a preventive measure to avoid further loss of
sales and the destruction of Quantum Foods image and
goodwill. It was not designed to be the culmination of
the then on-going administrative investigation against
Endico.

diminution of benefit which cannot be withdrawn without

employees consent?
UNIONS POSITION: The use of chairs by the operators
had been a company practice for 34 years, and cannot
be withdrawn without consent of affected employees.
Having chairs are favourable to the assembly line
operators who get tired and exhausted; the frequency of
the break period is not advantageous to the operators
because it cannot compensate for the time they are
made to stand throughout their working time.

Neither was there any demotion in rank or any

diminution of Endicos salary, privileges and other
benefits. Endico was being transferred to the head office
as area sales manager, the same positionEndico held in
Cebu. There was also no proof that the transfer involved
a diminution of Endicos salary, privileges and other
benefits.

MANAGEMENT POSITION: The directive to take out the

chairs is in line with the I Operate, I Maintain, I Clean
program of petitioner for bottling operators, wherein
every bottling operator is given the responsibility to keep
the machinery and equipment assigned to him clean and
safe, and to constantly move about in the performance
of their duties and responsibilities. The removal of the
chairs was implemented so that the bottling operators
will avoid sleeping, and thus, prevent injuries to their
persons.

On the alleged inconvenience on Endico and his family

because of the transfer from Cebu to the head office in
Paraaque, the Court rules that the transfer is valid,
there being no showing that there was bad faith on the
part of Quantum Foods. Moreover, the Court finds that
Quantum Foods, considering the declining sales and the
loss of a major account in Cebu, was acting in the
legitimate pursuit of what it considered its best interest
in deciding to transfer Endico to the head office.

ANSWER: For Management. Valid exercise of

management prerogatives. The decision to remove the
chairs was done with good intentions as Company
wanted to avoid instances of operators sleeping on the
job while in the performance of their duties and
responsibilities and because of the fact that the chairs
were not necessary considering that the operators
constantly move about while working.

Jurisprudence recognizes the exercise of management

prerogatives. Labor laws also discourage interference
with an employers judgment in the conduct of its
business. For this reason, the Court often declines to
interfere in legitimate business decisions of employers.
The law must protect not only the welfare of employees,
but also the right of employers.

In short, the removal of the chairs was designed to

increase work efficiency. Hence, companys exercise of
its management prerogative was made in good faith
without doing any harm to the workers rights.

In the pursuit of its legitimate business interests,

especially during adverse business conditions,
management has the prerogative to transfer or assign
employees from one office or area of operation to
another provided there is no demotion in rank or
diminution of salary, benefits and other privileges and
the action is not motivated by discrimination, bad faith,
or effected as a form of punishment or demotion without
sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprises
effectively. The right of employees to security of tenure
does not give them vested rights to their positions to the
extent of depriving management of its prerogative to
change their assignments or to transfer them.

The rights of the Union under any labor law were not
violated. There is no law that requires employers to
provide chairs for bottling operators. The CA correctly
ruled that the Labor Code, specifically Article 132
thereof, only requires employers to provide seats for
women. No similar requirement is mandated for men or
male workers. It must be stressed that all concerned
bottling operators in this case are men.
The Union should also not complain too much about
standing and moving about for one and one-half (1 12)
hours because studies show that sitting in workplaces
for a long time is hazardous to ones health. The report
of VicHealth, Australia,12 disclosed that prolonged
workplace sitting is an emerging public health and
occupational health issue with serious implications for
the health of our working population. Importantly,
prolonged sitting is a risk factor for poor health and early
death, even among those who meet, or exceed, national
activity guidelines.

III. Good Faith

1. Royal Plant Workers Union v. Coca-Cola Bottlers
Phils., Inc. - Cebu Plant (2013)
QUESTION: Is the decision of Coca-Cola Bottlers to take
out the chairs of employees in an assembly line in
exchange for additional periods of rest/breaks, a valid
exercise of management prerogatives, or is it a

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EMPLOYMENT RESTRICTION
I.

(c) whether the covenant is injurious to the public

welfare;
(d) whether the time and territorial limitations
contained in the covenant are reasonable; and
(e) whether the restraint is reasonable from the
standpoint of public policy.

Competitive Employment

1. Rivera v. Solidbank Corporation (2006)

A post-retirement competitive employment ban is
unreasonable where it has no geographical limits. The
matter of whether the restriction is reasonable or
unreasonable cannot be ascertained with finality solely
from the terms and conditions of the Undertaking, or
even in tandem with the Release, Waiver and
Quitclaim.

II. Employment of Relatives

1. United Kimberly-Clark Employees Union v.
Kimberly-Clark Philippines (2006)
The Court has recognized in numerous instances the
undoubted right of the employer to regulate, according
to his own discretion and best judgment, all aspects of
employment, including but not limited to, work
assignments and supervision, working methods and
regulations, time, place and manner of work, processes
to be followed, and hiring, supervision, transfer,
discipline, lay off, dismissal and recall of workers.
Encompassing though it could be, the exercise of this
right is not absolute. Management prerogative must be
exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating
or circumventing the rights of the employees under
special laws, valid agreements such as the individual
contract of employment and the collective bargaining
agreement, and general principles of justice and fair
play.

Estoppel cannot give validity to an act that is

prohibited by law or one that is against public policy.
Petitioner is not proscribed, by waiver or estoppel,
from assailing the post-retirement competitive
employment ban since under Article 1409 of the New
Civil Code, those contracts whose cause, object or
purpose is contrary to law, morals, good customs,
public order or public policy are inexistent or void from
the beginning.
An employer is burdened to establish that a restrictive
covenant barring an employee from accepting a
competitive employment after retirement or resignation
is not an unreasonable or oppressive, or in undue or
unreasonable restraint of trade, thus, unenforceable for
being repugnant to public policy. There are two
principal grounds on which the doctrine is founded
that a contract in restraint of trade is void as against
public policy:

III. Marriage
What are the relevant pieces of jurisprudence on
marriage?

1. the injury to the public by being deprived of the

restricted partys industry; and
2. the other is, the injury to the party himself by being
precluded from pursuing his occupation, and thus
being prevented from supporting himself and his
family.

1. Duncan Association of Detailment-PTGWO v. Glaxo

Wellcome (2004)
In this case, the prohibition against marriage embodied
in the following stipulation in the employment contract
was held as valid:

In cases where an employee assails a contract

containing a provision prohibiting him from accepting
competitive employment as against public policy, the
employer has to adduce evidence to prove that the
restriction is reasonable and not greater than
necessary to protect the employers legitimate
business interests. While freedom to contract must not
be unreasonably abridged, neither must the right to
protect by reasonable restrictions that which a man by
industry, skill and good judgment has built up, be
denied.

10. You agree to disclose to management any

existing or future relationship you may have,
either by consanguinity or affinity with coemployees or employees of competing drug
companies. Should it pose a possible conflict of
interest in management discretion, you agree to
resign voluntarily from the Company as a matter
of Company policy.
The Supreme Court ruled that the dismissal based on
this stipulation in the employment contract is a valid
exercise of management prerogative.

In determining whether the contract is reasonable or

not, the trial court should consider the following
factors:

The prohibition against personal or marital relationships

with employees of competitor companies upon its
employees was held reasonable under the
circumstances because relationships of that nature
might compromise the interests of the company. In
laying down the assailed company policy, the employer

(a) whether the covenant protects a legitimate

business interest of the employer;
(b) whether the covenant creates an undue burden
on the employee;
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only aims to protect its interests against the possibility

that a competitor company will gain access to its secrets
and procedures.
2. Capin-Cadiz v. Brent Hospital and College, inc.
(2016)
The doctrine of management prerogative gives an
employer the right to "regulate, according to his own
discretion and judgment, all aspects of employment,
including hiring, work assignments, working methods,
the time, place and manner of work, work supervision,
transfer of employees lay-off of workers, and discipline,
dismissal, and recall of employees.
In this case, Brent imposed on Cadiz the condition that
she subsequently contract marriage with her then
boyfriend for her to be reinstated. According to Brent,
this is "in consonance with the policy against
encouraging illicit or common-law relations that would
subvert the sacrament of marriage.
Statutory law is replete with legislation protecting labor
and promoting equal opportunity in employment. No less
than the 1987 Constitution mandates that 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. The Labor Code of the Philippines, meanwhile,
provides:
Art. 136. Stipulation against marriage. - It shall be
unlawful for an employer to require as a condition
of employment or continuation of employment
that a woman employee shall not get married, or
to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed
resigned or separated, or to actually dismiss,
discharge, discriminate or otherwise prejudice a
woman employee merely by reason of her
marriage.
With particular regard to women, Republic Act No. 9710
or the Magna Carta of Women protects women against
discrimination in all matters relating to marriage and
family relations, including the right to choose freely a
spouse and to enter into marriage only with their free
and full consent.

(1) that the employment qualification is reasonably

related to the essential operation of the job involved;
and
(2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification
would be unable to properly perform the duties of the
job.
Brent has not shown the presence of neither of these
factors. Perforce, the Court cannot uphold the validity of
said condition.
3. Star Paper-Corporation v. Simbol (2006)
The following policies were struck down as invalid for
violating the standard of reasonableness which is being
followed in our jurisdiction, otherwise called the
Reasonable Business Necessity Rule :
1. New applicants will not be allowed to be hired if in
case he/she has a relative, up to the 3rd degree of
relationship, already employed by the company.
2. In case of two of our employees (both single, one
male and another female) developed a friendly
relationship during the course of their employment
and then decided to get married, one of them should
resign to preserve the policy stated above.
3. PILTEL v. NLRC (1997)
The record discloses clearly that de Guzmans ties with
PT&T were dissolved principally because of the
companys policy that married women are not qualified
for employment in the company, and not merely because
of her supposed acts of dishonesty.
It was declared here that the company policy of not
accepting or considering as disqualified from work any
woman worker who contracts marriage runs afoul of the
test of, and the right against, discrimination afforded all
women workers by our labor laws and by no less than
the Constitution.
This finds support in Section 9 of the New Constitution,
which provides:

Weighed against these safeguards, it becomes apparent

that Brent's condition is coercive, oppressive and
discriminatory. There is no rhyme or reason for it. It
forces Cadiz to marry for economic reasons and
deprives her of the freedom to choose her status, which
is a privilege that inheres in her as an intangible and
inalienable right.

Sec. 9. The State shall afford protection to labor,

promote full employment and equality in
employment, ensure equal work opportunities
regardless of sex, race, or creed, and regulate the
relations between workers and employees. The
State shall assure the rights of workers to selforganization, collective bargaining, security of
tenure, and just and humane conditions of work x
x x.

While a marriage or no-marriage qualification may be

justified as a "bona fide occupational qualification,"
Brent must prove two factors necessitating its
imposition, viz: :

Also, Article 136 of the Labor Code, one of the protective

laws for women, explicitly prohibits discrimination
merely by reason of marriage of a female employee. It is
recognized that company is free to regulate manpower

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and employment from hiring to firing, according to their

discretion and best business judgment, except in those
cases of unlawful discrimination or those provided by
law.
The government abhors any stipulation or policy in the
nature adopted by PT&T. As stated in the labor code:
Art. 136. Stipulation against marriage. It shall
be unlawful for an employer to require as a
condition of employment or continuation of
employment that a woman shall not get married,
or to stipulate expressly or tacitly that upon
getting married, a woman employee shall be
deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of
marriage.
The policy of PT&T is in derogation of the provisions
stated in Art.136 of the Labor Code on the right of a
woman to be free from any kind of stipulation against
marriage in connection with her employment and it
likewise is contrary to good morals and public policy,
depriving a woman of her freedom to choose her status,
a privilege that is inherent in an individual as an
intangible and inalienable right. The kind of policy
followed by PT&T strikes at the very essence, ideals and
purpose of marriage as an inviolable social institution
and ultimately, family as the foundation of the nation.
Such policy must be prohibited in all its indirect,
disguised or dissembled forms as discriminatory
conduct derogatory of the laws of the land not only for
order but also imperatively required.

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QUITCLAIMS AND COMPROMISE AGREEMENTS

I.

Not all quitclaims are per se invalid or against public

policy. A quitclaim is invalid or contrary to public policy
only:

Contents of a valid quitclaim/waiver

1. EDI-Stabuilders v. NLRC (2007)

Courts must undertake a meticulous and rigorous review
of quitclaims or waivers, more particularly those
executed by employeesthey should be carefully
examined, in regard not only to the words and terms
used, but also the factual circumstances under which
they have been executed.
In order to prevent disputes on the validity and
enforceability of quitclaims and waivers of employees
under Philippine laws, said agreements should contain
the following:
1. A fixed amount as full and final compromise
settlement;
2. The benefits of the employees if possible with the
corresponding amounts, which the employees are
giving up in consideration of the fixed compromise
amount;
3. A statement that the employer has clearly explained
to the employee in English, Filipino, or in the dialect
known to the employees - that by signing the waiver
or quitclaim, they are forfeiting or relinquishing their
right to receive the benefits which are due them
under the law; and
4. A statement that the employees signed and executed
the document voluntarily, and had fully understood
the contents of the document and that their consent
was freely given without any threat, violence, duress,
intimidation, or undue influence exerted on their
person.
It is advisable that the stipulations be made in English
and Tagalog or in the dialect known to the employee.
There should be two (2) witnesses to the execution of
the quitclaim who must also sign the quitclaim. The
document should be subscribed and sworn to under
oath preferably before any administering official of the
Department of Labor and Employment or its regional
office, the Bureau of Labor Relations, the NLRC or a
labor attach in a foreign country.
The foregoing rules on quitclaim or waiver shall apply
only to labor contracts of Overseas Filipino Workers
(OFWs) in the absence of proof of the laws of the foreign
country agreed upon to govern said contracts.
II. Valid and binding agreement
1. Radio Mindanao Network v. Amurao III (2014)
Worth noting is that Michael signed the quitclaim to
release RMN from any and all claims that could be due
to him by reason of his employment after he receiving
the agreed settlement pay of P311,922.00.

(1) where there is clear proof that the waiver was

wrangled from an unsuspecting or gullible person; or
(2) where the terms of settlement are unconscionable on
their face. In instances of invalid quitclaims, the law
steps in to annul the questionable waiver.
Indeed, there are legitimate waivers that represent the
voluntary and reasonable settlements of laborers claims
that should be respected by the Court as the law
between the parties.
Where the party has voluntarily made the waiver, with a
full understanding of its terms as well as its
consequences, and the consideration for the quitclaim is
credible and reasonable, the transaction must be
recognized as a valid and binding undertaking, and may
not later be disowned simply because of a change of
mind. A waiver is essentially contractual.
In our view, the requisites for the validity of Michaels
quitclaim were satisfied. We explain.
Firstly, Michael acknowledged in his quitclaim that he
had read and thoroughly understood the terms of his
quitclaim and signed it of his own volition. Being a radio
broadcaster and production manager, he occupied a
highly responsible position in the company. It would be
implausible to hold, therefore, that he could be easily
duped into simply signing away his rights. Besides, the
language and content of the quitclaim were clear and
uncomplicated such that he could not claim that he did
not understand what he was signing.
Secondly, the settlement pay of P311,922.00 was
credible and reasonable considering that Michael did not
even assail such amount as unconscionably low, or even
state that he was entitled to a higher amount.
Thirdly, that he was required to sign the quitclaim as a
condition to the release of the settlement pay did not
prove that its execution was coerced. Having agreed to
part with a substantial amount of money, RMN took
steps to protect its interest and obtain its release from all
obligations once it paid Michael his settlement pay,
which it did in this case.
And, lastly, that he signed the quitclaim out of fear of not
being able to provide for the needs of his family and for
the schooling of his children did not immediately
indicate that he had been forced to sign the same. Dire
necessity should not necessarily be an acceptable
ground for annulling the quitclaim, especially because it
was not at all shown that he had been forced to execute
it. Nor was it even proven that the consideration for the
quitclaim was unconscionably low, and that he had been
tricked into accepting the consideration.

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With the quitclaim having been freely and voluntarily

signed, RMN was released and absolved from any
liability in favor of Michael. Suffice it to say that the
quitclaim is ineffective in barring recovery of the full
measure of an employees rights only when the
transaction is shown to be questionable and the
consideration is scandalously low and inequitable. Such
is not true here.

It is only where there is clear proof that the

waiver was wangled from an unsuspecting or
gullible person, or the terms of settlement are
unconscionable on its face, that the law will step
in to annul the questionable transaction. But
where it is shown that the person making the
waiver did so voluntarily, with full understanding
of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and
binding undertaking.

III. Quitclaims generally frowned upon

1. Zuellig Pharma Corp. v. Sibal (2013)
The Release and Quitclaim executed by each of the
respondents remains valid.
It is true that quitclaims executed by employees are
often frowned upon as contrary to public policy. But that
is not to say that all waivers and quitclaims are invalid as
against public policy.
Quitclaims will be upheld as valid if the following
requisites are present:
(1) the employee executes a deed of quitclaim
voluntarily;
(2) there is no fraud or deceit on the part of any of the
parties;
(3) the consideration of the quitclaim is credible and
reasonable; and,
(4) the contract is not contrary to law, public order,
public policy, morals or good customs or prejudicial
to a third person with a right recognized by law.
In this case, there is no showing that Zuellig coerced or
forced respondents to sign the Release and Quitclaim. In
fact, there is no allegation that Zuellig employed fraud or
deceit in making respondents sign the Release and
Quitclaim. On the other hand, respondents declared that
they had received the separation pay in full settlement of
all claims arising from their employment with Zuellig. For
which reason, they have remised, released and
discharged Zuellig.
Notably, the Release and Quitclaim represents a
reasonable and fair settlement of respondents claims.
Under Article 283 of the Labor Code, the employers are
required to pay employees separated from employment
by reason of redundancy at least one (1) month pay or at
least one (1) month pay for every year of service,
whichever is higher.

2. Poseidon International v. Tamala (2013)

The waivers and quitclaims signed by the respondents
are valid and binding.
The waivers and quitclaims are reasonable and duly
executed, and also have superseded the May 25, 2005
agreement.
General Rule: The Court looks with disfavor at quitclaims
executed by employees for being contrary to public
policy.
Exception: Where the person making the waiver has
done so voluntarily, with full understanding of its terms
and with the payment of credible and reasonable
consideration, the transaction is valid and binding.
In this case, the requisites for the validity of the
respondents quitclaim are present:
First, respondents voluntarily signed the document after
receiving the agreed settlement pay.
Second, the settlement pay is reasonable under the
circumstances, especially when contrasted with the
amounts to which they are entitled pursuant to the
POEA-SEC (Sec. 23) and Labor Code (Art. 283.)

Thus, the respondents undeniably received more than

what they were entitled to receive under the law as a
result of the cessation of the fishing operations.

Here, respondents received 100% of their one (1) month

basic pay for every year of service, plus a premium
ranging from 20% to 85% of such basic pay for every
year of service (depending on the number of years in
service), as separation pay.

Third, the contents of the waiver and quitclaim are clear,

unequivocal and uncomplicated so that the respondents
could fully understand the import of what they were
signing and of its consequences.

In Goodrich Manufacturing Corporation v. Ativo, this

Court declared that:

Fourth, the respondents are mature and intelligent

individuals, with college degrees, and are far from the
naive and unlettered individuals they portrayed
themselves to be.

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Fifth, they were not in dire need for cash and that they
would not be paid anything if they would not sign, as
records show, respondents and their other fellow
seafarers, served as each others witnesses when they
agreed and signed their respective waivers and
quitclaims.
Sixth, the respondents voluntary and knowing
conformity to the settlement pay was proved by the
letters of acceptance and the vouchers evidencing
payment. With these documents on record, the burden
shifts to the respondents to prove coercion and undue
influence other than through their bare self-serving
claims. No such evidence appeared on record at any
stage of the proceedings.
In these lights and in the absence of any evidence
showing that fraud, deception or misrepresentation
attended the execution of the waiver and quitclaim, we
are sufficiently convinced that a valid transaction took
place.
LABOR CODE OF THE PHILIPPINES
(P.D. 442, as amended)
I.

Rule-Making Power

chapter of a national union or federation. As provided by

Article 241 (h) and (j), a labor organization must still
maintain books of account, but it need not submit the
same as a requirement for registration. Given the
foregoing disquisition, we find no cogent reason to
declare Department Order No. 9 null and void, as well as
to reverse the assailed resolution of the Secretary of
Labor.
2. Phil. Association of Service Exporters, Inc. v. Drilon
(1998)
II. Scope/Application
1. SEAFDEC v. NLRC (1992)
Independency of SEAFDEC as intergovernmental
organization from state.
Being an intergovernmental organization, SEAFDEC
including its Departments (AQD), enjoys functional
independence and freedom from control of the state in
whose territory its office is located. Estoppel does not
apply to confer jurisdiction to a tribunal that has none
over a cause of action. Jurisdiction is conferred by law.
Where there is none, no agreement of the parties can
provide one.

1. Pagpalain Hauler, Inc. v. Trajano (1999)

2. Postigo v. Phil. Tuberculosis Society, Inc. (2006)

For an administrative order to be valid, it must (i) be

issued on the authority of law and (ii) it must not be
contrary to the law and the Constitution.

Respondent is a government-owned and controlled

corporation created under the Corporation Code. Hence,
it is a private and not a governmental corporation.

Department Order No. 9 has been issued on authority of

law. Under the law, the Secretary is authorized to
promulgate rules and regulations to implement the Labor
Code. Specifically, Article 5 of the Labor Code provides
that the Department of Labor and other government
agencies charged with the administration and
enforcement of this Code or any of its parts shall
promulgate the necessary implementing rules and
regulations. Consonant with this article, the Secretary of
Labor and Employment promulgated the Omnibus Rules
Implementing the Labor Code. By virtue of this selfsame authority, the Secretary amended the abovementioned omnibus rules by issuing Department Order
No. 9, Series of 1997.

Extant on the records is the respondents admission that

although its employees are compulsory members of the
GSIS, said employees are governed by the Labor Code
and not by the Civil Service Law. From the foregoing, it is
cleae that the petitioners are employees in the private
sector entitled to the benefits of Rep. Act No. 7641.

Moreover, Pagpalain has failed to show that Department

Order No. 9 is contrary to the law or the Constitution. At
the risk of being repetitious, the Labor Code does not
require a local or chapter to submit books of account in
order for it to be registered as a legitimate labor
organization. There is, thus, no inconsistency between
the Labor Code and Department Order No. 9. Neither
has Pagpalain shown that said order contravenes any
provision of the Constitution.

3. Hidalgo v. Republic, for and in behalf of the Armed

Forces of the Philippines Commissary and
Exchange Services (AFPCES) (2010)

Department Order No. 9 only dispenses with books of

account as a requirement for registration of a local or

Hence, The accommodation under Rep. Act No. 1820

extending GSIS coverage to Philippine Tuberculosis
Society, Inc. (PTSI) employees did not take away from
petitioners the beneficial coverage afforded by Rep. Act
No. 7641. The retirement pay payable under Article 287
of the Labor Code as amended by Rep. Act No. 7641
should be considered apart from the retirement benefit
claimable by the petitioners under the GSIS law.

Does the LA have jurisdiction against an adjunct

government agency engaged in proprietary function?
Should the complaint be lodged before the NLRC or
the CSC?
It is the Civil Service Commission that has jurisdiction.
AFPCES is an agency under the direct control and

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supervision of the AFP. By clear implication, all AFPCES

personnel should therefore be classified as government
employees and any appointment, promotion, discipline
and termination of its civilian staff should be governed
by appropriate civil service laws and procedures.
Such fact cannot be negated by the failure of
respondents to follow appropriate civil service rules in
the hiring, appointment, discipline and dismissal of
petitioners. Neither can it be denied by the fact that
respondents chose to enroll petitioners in the SSS
instead of the GSIS. Such considerations cannot be
used against the CSC to deprive it of its jurisdiction. It is
not the absence or presence of the required
appointment from the CSC, or the membership of an
employee in the SSS or in the GSIS that determine the
status of the position of an employee. We agree with the
opinion of the AFP Judge Advocate General that it is the
regulation or the law creating the Service that
determines the position of the employee.
Petitioners are government personnel since they are
employed by an agency attached to the AFP.
Consequently, as correctly observed by the Court of
Appeals, the Labor Arbiters decision on their complaint
for illegal dismissal cannot be made to stand since the
same was issued without jurisdiction. Any decision
issued without jurisdiction is a total nullity, and may be
struck down at any time.

5. PNOC v. Leogardo (1989)

PNOC-EDC is incorrect.
It is true that PNOC is a GOCC and that PNOC-EDC,
being a subsidiary of PNOC, is likewise a GOCC. It is
also true that under the 1973 Constitution, all GOCCs are
under the jurisdiction of the CSC. However, the 1987
Constitution change all this as it now provides:
The Civil Service embraces all branches, subdivisions,
instrumentalities and agencies of the Government,
including gover nment-owned or controlled
corporations with original charters. (Article IX-B,
Section 2 [1]) [emphasis supplied]
Hence, the above provision sets the rule that the mere
fact that a corporation is a GOCC does not automatically
place it under the CSC. Under this provision, the test in
determining whether a GOCC is subject to the Civil
Service Law is the manner of its creation such that
government corporations created by special charter are
subject to its provisions while those incorporated under
the general Corporation Law are not within its coverage.
In the case at bar, PNOC-EDC, even though it is a
GOCC, was incorporated under the general Corporation
Law it does not have its own charter, hence, it is under
the jurisdiction of the MOLE.

However, given petitioners peculiar situation, the Court

is constrained not to deny the petition entirely, but
instead to refer it to the CSC pro hac vice.
4. Juco v. NLRC (1997)
NHA is now within the jurisdiction of the Department of
Labor and Employment, it being a government-owned
and/or controlled corporation without an original charter.
NHA workers or employees undoubtedly have the right
to form unions or employees organization and that there
is no impediment to the holding of a certification election
among them as they are covered by the Labor Code.
Thus, the NLRC erred in dismissing petitioners
complaint for lack of jurisdiction.
Having been incorporated under the Corporation Law, its
relations with its personnel are governed by the Labor
Code and come under the jurisdiction of the National
Labor Relations Commission.
Civil Service Law/Civil Service Commission
employees of GOCCs with original charters
Labor Code/NLRC
employees of GOCCs without original charters/
GOCCs created under the Corporation Code

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RECRUITMENT & REPLACEMENT

power to send workers abroad for employment

purposes.

I. ILLEGAL RECRUITMENT
What was the extent of Inoveros civil liability?
1.

PERT/CPM Manpower Exponent Co. v. Vinuya

(2012)

Further, Article 38 of the Labor Code, as amended by

R.A. 8042, defined illegal recruitment to include the
following act:
Clearly, the agency and Modern Metal committed a
prohibited practice and engaged in illegal recruitment
under the law. Article 34 of the Labor Code provides:
Art. 34. Prohibited Practices. It shall be unlawful for
any individual, entity, licensee, or holder of authority: x
xx x

The nature of the obligation of the co-conspirators in the

commission of the crime requires solidarity, and each
debtor may be compelled to pay the entire obligation.
As a co-conspirator, then, Inoveros civil liability was
similar to that of a joint tortfeasor under the rules of the
civil law. Joint tortfeasors are those who command,
instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or
who approve of it after it is done, if done for their benefit.
II. POWERS OF THE SECRETARY OF LABOR
Salazar v. Achacoso

(i) To substitute or alter to the prejudice of the worker,

employment contracts approved and verified by the
Department of Labor and Employment from the time of
actual signing thereof by the parties up to and including
the period of the expiration of the same without the
approval of the Department of Labor and Employment[.]
2.
3.
4.

Sto. Tomas v. Salac

People v. Panis
People v. Hashim/People v. Pansacala (2012)

2.
3.
4.
5.
6.

Commencement of employer-employee relationship

1.

Abosta Ship Management v. Hilario (2014)

When is a contract deemed perfected?

To be convicted of the crime of illegal recruitment

committed by a syndicate, the following elements must
occur:
1.

III. MIGRANT WORKERS/OFW

The accused have no valid license or authority

required by law to enable them to lawfully engage in
the recruitment and placement of workers.
The accused engaged in this activity of recruitment
and placement by actually recruiting, deploying and
transporting.
Illegal recruitment was committed by three persons
conspiring and confederating with one another.

The contract was already perfected on the date of its

execution, which occurred when petitioner and
respondent agreed on the object and the cause, as well
as on the rest of the terms and conditions therein.
Naturally, contemporaneous with the perfection of the
employment contract was the birth of certain rights and
obligations, a breach of which may give rise to a cause
of action against the erring party.
Also, the POEA Standard Contract must be recognized
and respected. Thus, neither the manning agent nor the
employer can simply prevent a seafarer from being
deployed without a valid reason.
2.

People v. Gallo
People v. Chua
People v. Velasco/People v. Inovero (2014)

Santiago v. C.F. Sharp Crew Management (2007)

What is the eect of non-deployment of OFW to

overseas employment?

The essential elements of illegal recruitment committed

in large scale are: (1) that the accused engaged in acts
of recruitment and placement of workers as defined
under Article 13(b) of the Labor Code, or in any
prohibited activities under Article 34 of the same Code;
(2) that the accused had not complied with the
guidelines issued by the Secretary of Labor and
Employment with respect to the requirement to secure a
license or authority to recruit and deploy workers; and
(3) that the accused committed the unlawful acts against
3 or more persons. In simplest terms, illegal recruitment
is committed by persons who, without authority from
the government, give the impression that they have the

Petitioner-seafarer, in Santiago v. CF Sharp Crew

Management, Inc. was not deployed overseas despite
the signing of a POEA-approved employment contract.
One of his contentions is that such failure to deploy was
an act designed to prevent him from attaining the status
of a regular employee.
The Supreme Court, however, disagreed and ruled that
seafarers are considered contractual employees and
cannot be considered as regular employees under the
Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their
employment is terminated when the contract expires.

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The exigencies of their work necessitate that they be

employed on a contractual basis.
Money Claims
Important Doctrinal Cases: OFW & Lex loci contractus;
whichever is less in RA 10022 (as reinstated from RA
8042) is unconstitutional.
1.

Serrano v. Gallant Maritime Services (2009)

What are the reliefs to which OFWs are entitled?

They are entitled to the reliefs provided under Section 10
of R.A. No. 8042, as amended, to wit:
(1) All salaries for the unexpired portion of the contract;
(2) Full reimbursement of placement fees and
deductions made with interest at twelve percent
(12%) per annum now 6%1 per annum in
accordance with Circular No. 799, because R.A. 8042
does not provide for a specific interest rate
In other words, all the reliefs available to an illegally
dismissed OFW are always monetary in nature.
It must be noted that under the 2009 Serrano doctrine,
(Antonio M. Serrano v. Gallant Maritime Services, Inc.,),
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.
The underlined phrase in Section 10 below has been
declared unconstitutional in this case:
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 worker's salary, the worker shall be entitled to
the full reimbursement of his placement fee and the
deductions made with interest at twelve percent (12%)
per annum, plus his salaries for the unexpired portion of
his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
However, R.A. No. 10022 (March 8, 2010), which
amended R.A. No. 8042 (Migrant Workers and Overseas
Filipinos Act of 1995), has replicated and re-enacted the
same unconstitutional provision exactly as above
quoted.
The question is: was the unconstitutionality of the
above-underlined part of the provision cured by such
replication or re-enactment in the amendatory law?

The 2014 en banc case of Sameer Overseas Placement

Agency, Inc. v. Joy C. Cabiles, answered this in the
negative. The said provision was thus declared still
unconstitutional and null and void despite its replication
in R.A. No.
2.

Sameer Overseas Placement v. Cabiles (2014)

Employees are not stripped of their security of tenure

when they move to work in a different jurisdiction. With
respect to the rights of overseas Filipino workers, we
follow the principle of lex loci contractus. The principle
of lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. There is no
question that the contract of employment in this case
was perfected here in the Philippines. Therefore, the
Labor Code, its implementing rules and regulations, and
other laws affecting labor apply in this case. By our laws,
overseas Filipino workers (OFWs) may only be
terminated for a just or authorized cause and after
compliance with procedural due process requirements.
On Section 7, RA 10022 re the clause or for three (3)
months for every year of the unexpired term,
whichever is less. -- Having been illegally dismissed,
she is entitled to her salary for the unexpired portion of
the employment contract that was violated together with
attorneys fees and reimbursement of amounts withheld
from her salary.
In Serrano v. Gallant Maritime Services, Inc. and Marlow
Navigation Co., Inc., (601 Phil. 245 (2009) [Per J. AustriaMartinez, En Banc]), this Court ruled that the clause or
for three (3) months for every year of the unexpired term,
whichever is less is unconstitutional for violating the
equal protection clause and substantive due process.
The clause or for three (3) months for every year of the
unexpired term, whichever is less was reinstated in
Republic Act No. 8042 upon promulgation of Republic
Act No. 10022 in 2010. The law passed incorporates the
exact clause already declared as unconstitutional,
without any perceived substantial change in the
circumstances.
When a law or a provision of law is null because it is
inconsistent with the Constitution, the nullity cannot be
cured by reincorporation or reenactment of the same or
a similar law or provision. A law or provision of law that
was already declared unconstitutional remains as such
unless circumstances have so changed as to warrant a
reverse conclusion.

If judgment did not become final and executory before July 1, 2013 and there was no stipulation in the contract providing
for a dierent interest rate, other money claims under Section 10 of Republic Act No. 8042 shall be subject to the 6%
interest per annum in accordance with Circular No. 799. (Sameer Overseas Placement Agency, Inc. v. Cabiles (2014).

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Liability of Principal/Agent for Damages; Theory of

Imputed Knowledge
1.

Sealanes Marine Services v. Dela Torre (2015)

On Being Totally and Permanently Disabled

The law does not require that the illness should be
incurable. What is important is that he was unable to
perform his customary work for more than 120 days
which constitutes permanent total disability. An award of
a total and permanent disability benefit would be
germane to the purpose of the benefit, which is to help
the employee in making ends meet at the time when he
is unable to work.
On Liability of Principal/Agent for Damages; Theory of
Imputed Knowledge
The liability of the principal/employer and the
recruitment/placement agency for any and all claims
under this section shall be joint and several.
This provision shall be incorporated in the contract for
overseas employment and shall be a condition
precedent for its approval. The performance bond to [be]
filed by the recruitment/placement agency, as provided
by law, shall be answerable for all money claims or
damages that may be awarded to the workers.
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.
Such liabilities shall continue during the entire period or
duration of the employment contract and shall not be
affected by any substitution, amendment or modification
made locally or in a foreign country of the said contract.
On the Agencys Duty to Submit a Written Application
with a Verified Undertaking when applying for License to
Operate
Thus, every applicant for license to operate a seafarers
manning agency shall, in the case of a corporation or
partnership, submit a written application together with,
among others, a verified undertaking by officers,
directors and partners that they will be jointly and
severally liable with the company over claims arising
from employer-employee relationship.
Laws are deemed incorporated in employment contracts
and the contracting parties need not repeat them. They
do not even have to be referred to. Every contract, thus,
contains not only what has been explicitly stipulated, but
also the statutory provisions that have any bearing on
the matter.

2.

Becmen Service Exporte and Promotions, Inc. v.

Sps. Cuaresma (2009)

The foreign employer may not have been obligated by its

contract to provide a companion for a returning
employee, but it cannot deny that it was expressly
tasked by its agreement to assure the safe return of said
worker.
In a foreign land where OFWs are likely to encounter
uneven if not discriminatory treatment from the foreign
government, and certainly a delayed access to language
interpretation, legal aid, and the Philippine consulate, the
recruitment agencies should be the first to come to the
rescue of our distressed OFWs since they know the
employers and the addresses where they are deployed
or stationed. Upon them lies the primary obligation to
protect the rights and ensure the welfare of our OFWs,
whether distressed or not.
Private employment agencies are held jointly and
severally liable with the foreign-based employer for any
violation of the recruitment agreement or contract of
employment. This joint and solidary liability imposed by
law against recruitment agencies and foreign employers
is meant to assure the aggrieved worker of immediate
and sufficient payment of what is due him.
White Falcons assumption of Becmens liability does not
automatically result in Becmens freedom or release from
liability. This has been ruled in ABD Overseas Manpower
Corporation v. NLRC. Instead, both Becmen and White
Falcon should be held liable solidarily, without prejudice
to each having the right to be reimbursed under the
provision of the Civil Code that whoever pays for another
may demand from the debtor what he has paid.
3.

Sunace International Manpower Services v. NLRC

(2006)

The theory of imputed knowledge ascribes the

knowledge of the agent, Sunace, to the principal,
employer Xiong, not the other way around. The
knowledge of the principal-foreign employer cannot,
therefore, be imputed to its agent Sunace.
What is meant by this theory?
Knowledge of the agent is deemed knowledge of the
principal but not the other way around.
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.
In, Sunace International Management Services, Inc. v.
NLRC, the High Court here has the opportunity to

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discuss the application of the theory of imputed

knowledge. The OFW (Divina), a domestic helper in
Taiwan, has extended her 12-month contract, after its
expiration, for two (2) more years after which she
returned to the Philippines. It was established by
evidence that the extension was without the knowledge
of the local recruitment agency, petitioner Sunace. The
Court of Appeals, however, affirmed the Labor Arbiters
and NLRCs finding that Sunace knew of and impliedly
consented to the extension of Divinas 2-year contract.
It went on to state that It is undisputed that [Sunace]
was continually communicating with [Divinas] foreign
employer .
It thus concluded that as agent of the foreign principal,
petitioner cannot profess ignorance of such extension
as obviously, the act of the principal extending
complainants employment contract necessarily bound
it.
In finding that the application by the CA of this theory of
imputed knowledge was misplaced, the High Court ruled
that this theory ascribes the knowledge of the agent,
Sunace, to the principal, employer Xiong, not the other
way around. The knowledge of the principal-foreign
employer cannot, therefore, be imputed to its agent,
Sunace. There being no substantial proof that Sunace
knew of and consented to be bound under the 2-year
employment contract extension, it cannot be said to be
privy thereto. As such, Sunace and its owner cannot be
held solidarily li able for any of Divinas claims arising
from the 2-year employment extension. As the New Civil
Code provides: Contracts take effect only between the
parties, their assigns, and heirs, except in case where
the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by
provision of law.

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