Malao, Mike

SELECTED QUESTIONS in LABOR LAW

LABOR STANDARDS

1. Differentiate labor standards law from labor relations law. Are the two mutually exclusive?

Labor standards law is that labor law which prescribes terms and conditions of

employment like Book III, Book IV, Title I and Book VI of the Labor Code. These books of the

Labor Code deal with working conditions, wages, working conditions for women, minors, house helpers and home-workers, medical and dental services, occupational health and

safety, termination and retirement. On the other hand, labor relations law is that labor law which regulates the relations

between employers and workers like Book V of the Labor Code which deals with labor organizations, collective bargaining, unfair labor practices and strikes and lockouts.

Labor standards laws and labor relations laws are not mutually exclusive; they

complement to each other. Thus the law on strikes and lockouts which is and example of labor relations law includes some provisions on the security of tenure of workers who go on

strike or who are locked out. These provisions are clear examples of labor law relations.

2.What is the Constitutional basis of Articles 7-11 regarding emancipation of tenants? The State shall, by law, undertake an agrarian reform program founded on the right

of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case of other farmworkers, to receive a just share of the fruits

thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress

may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the rights of small landowners. The State shall further provide incentives for

voluntary land-sharing. (Article XIII, Section 4, 1987 Constitution)

3. Is a corporation, of which seventy percent (70%) of the authorized and voting capital is owned and controlled by Filipino citizens, allowed to engage in the

recruitment and placement of workers, locally or overseas? Explain briefly. NO. Art. 27 of the Labor Code explicitly requires that in order to qualify for

participation in the overseas employment program, the corporation must at least possess seventy-five percent (75%) of the authorized and voting capital stock of which is owned and

controlled by Filipino citizens.

4. Can a recruiter be convicted of violating a POEA Circular which was implemented without prior publication?

NO. The POEA MEMO Circular no. 2, series of 1983 was void. Where the administrative circular in question is one of those issuances which should be published for

its effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation. Considering that POEA Administrative Circular No. 2, Series of 1983 has

not as yet been published or filed with the National Administrative Register, the same is ineffective and ma not be enforced (Philsa International Placement and Services Corp. vs. Secretary of DOLE, G.R. No. 103144, April 4, 2001).

Malao, Mike

5. Is the absence of an employment a valid defense in a case of illegal recruitment? Explain.

NO. the law is clear on the matter. Private respondents further argue that they cannot

be held liable by petitioner because no employment contract between him and Step-Up Agency had been approved by the POEA. They also claim that the absence of a Special

Power of Attorney and an Affidavit of Responsibility, as required under Sections 1 and 2, Rule 1, Book III of the POEA Rules and Regulations only proves that they did not deploy

petitioner to Singapore. Their argument is far from persuasive. Surely, they cannot expect us to utilize their non-

compliance with the POEA Rules and Regulations as a basis in absolving them. To do so

would be tantamount to giving premium to acts done in violation of established rules. At most, private respondents act of deploying petitioner to Singapore without complying with the POEA requirements only made them susceptible to cancellation or suspension of license as provided by Section 2, Rule I, Book VI of POEA Rules and Regulations. (Hornales v.

NLRC, G.R. No. 118943, September 10, 2001). 6. Is there a requirement that a physician must be accredited by the POEA before he

can attend to a sick seaman?

This Court also finds no basis on (sic) the petitioners contention that the company-designated [physician] must also be accredited with the POEA before he can engage in the medical treatment of a sick seaman. There is nothing in the Standard Employment Contract

that provides this accreditation requirement, and even if there is, this would be absurd and contrary to public policy as its effect will deny and deprive the ailing seaman of his basic right to seek immediate medical attention from any competent physician. The lack of POEA

accreditation of a physician who actually treated the ailing seaman does not render the findings of such physician (declaring the seaman permanently disabled) less authoritative or

credible. To our mind, it is the competence of the attending physician, not the POEA accreditation, that determines the true health status of the patient-seaman, which in this

instant case, is [sic] the attending physicians from the Manila Doctors Hospital (German Marine Agencies, Inc. v. NLRC, G.R. No. 142049, January 30, 2001).

7. Martina is a clerk typist in Hospicio de San Jose, a charitable institution dependent

for its existence on contributions and donations from well wishers. She renders work eleven (11) hours a day but has not been given overtime pay since her place of work is

a charitable institution. Is Socorro entitled to overtime pay? Explain briefly.

YES. Martina is entitled to overtime compensation. She does not fall under any of the exceptions enumerated under Art. 82 of the Labor Code. Said provision equivocally states that Title I, Book III of the Labor Code dealing with hours of work, weekly rest periods, holidays, service incentive leaves and service charges, covers all employees in all establishments, whether for profit or not, except the following employees:

a. Government employees b. Managerial employees

c. Officers and members of the managerial staff d. Field personnel e. Members of the family of the employer who and dependent on him for support

f. Domestic helpers g. Persons in the personal service of another

h. Workers paid by results. A covered employee who works beyond eight (8) hours is entitled to overtime

compensation.

Malao, Mike

8. Krishna earns P7.00 for every manicure she does in the barbershop of a friend which has nineteen (19) employees. At times, she takes home P175.00 a day and at

other times she earns nothing. She now claims holiday pay. Is Krishna entitled to this benefit?

NO. Nemia is not entitled to holiday pay. Art. 82 of the Labor Code provide that

workers who are paid by results are, among others, not entitled to holiday pay. Nemia is a worker who is paid by results. She earns P7.00 for every manicure she does.

9. As a tireman in a gasoline station, which is open twenty four (24) hours a day with only five (5) employees, Joewa worked from 10:00 p.m. until 7:00 A.M. of the following

day. He claims to be entitled to night shift differential. Is he correct?

NO. In the Omnibus Rules Implementing the Labor Code (Book III, Rule II, dealing with night shift differential) it is provided that its provisions on night shift differential shall NOT apply to employees of retail and service establishments regularly employing not more that five (5) workers. Because of this provision, Joewa is not entitled to night shift differential because the gasoline station where he works (being a service establishment) has

only five employees.

10. A manufacturing firm with 500 employees schedules Sunday as the latters rest day. Fifty workers who were seventh-day adventists and 200 workers who belong to the Iglesia ni Kristo object and propose that their rest days be scheduled on Saturdays

and Thursdays, respectively. The company claims that the proposed schedule will seriously prejudice or obstruct its manufacturing operations and refuses to re-

schedule the rest day as requested.

a. Do the seventh day adventists and members of the Iglesia ni Kristo have any right to choose their own rest days?

YES. The employer, under the law, is required to respect the preference of the employee if the same is based on religious grounds. The employee shall make known his

preference to the employer in writing at least (7) days before the desired effectivity of the initial rest day preffered (Sec.4, Rule III, Book I, Implementing Rules and Regulations).

b. Assuming that the claim of the employer is well-founded, can it legally refuse to re-schedule the rest day of the employees involved?

YES. If the employer cannot resort to other remedial measures, it may schedule the

rest days of the employees involved on the days of their choice for at least 2 days in a month (Sec.4, Rule III, Book III, Implementing Rule and Regulations).

11. This year, National Heroes Day (August 25) falls on a Sunday. Sunday is the rest day of Bonifacio whose daily rate is P500.00.

a. If Bonifacio is required by his employer to work on that day for eight (8) hours, how

much should he be paid for his work? Explain.

For working on his scheduled rest day, according to Art. 93(a), Bonifacio should be paid P500.00 (his daily rate) plus P150.00 (30% of his daily rate = P650.00. This amount P650.00 should be multiplied by 2 = P1,300.00. this is the amount that Bonifacio as

employee working on his scheduled rest day which is also a regular holiday should receive.

Malao, Mike

Art. 94(c) of the Labor Code provides that an employee shall be paid a compensation equivalent to twice his regular rate for working on any regular holiday. The regular rate of Bonifacio on May 1,2002 with an additional thirty percent because the day is also his scheduled rest day.

Formula:

(a) To get rest day pay Step 1: Get hourly wage rate

e.g. (P500 / 8 hrs) x 130% = P81.25 (rest day wage rate)

Step 2: Compute wage between 8:00pm 5:00 pm using rest day wage rate

e.g. 8hrs x P81.25 = P650

(b) To get regular holiday pay

e.g. P650 x 200% = P1300

b. If he works for ten (10) hours on that day, how much should he receive for his work? Explain.

P1,300.00 which is the amount that Bonifacio is to receive for working on May 1, 2002 should be divided by 8 to determine his hourly rate of P162.5. This hourly rate should be

multiplied by 2 (the number of hours he worked overtime). Thus, the amount that Bonifacio is entitled to receive for his overtime work per hour on May 1, 2002 is P325.00.

Holiday wage rate + 30% of holiday rate (200%)

Step 1: Get hourly wage rate

e.g. (P1300 / 8 hrs.) x 200% = P325

Step 2: Compute OT Premium Pay between 5:00 pm 10pm

e.g. (30 % x P325) + P325 = P422.50

no. of OT hours (5pm 10pm) = 2hrs ------------

Daily Basic Wage X special holiday wage rate

Number of hours worked

Number of hours worked X special holiday wage rate

Rest day Wage rate X Regular holiday

Daily Basic Wage X special holiday wage rate

Number of hours worked

[(30% X Wage Per Hour) + Wage Per Hour] No. of OT Hours = OT Premium Pay

Malao, Mike

P845.00 Step 3: COMPUTATION

8am-5pm 8hrs x P200.00 P1300

2 hours 2hrs x P260.00 845 ------------

Total Take Home Pay P2,145 12. Sia, the employer, admits that Damascos work starts at 8:30 in the morning and ends up at 6:30 in the evening daily, except holidays and Sundays. However, Sia claims that Damascos basic salary of P140.00 a day is more than enough to cover the one hour excess work which is the compensation they allegedly agreed upon. What other evidences are required to warrant the award of overtime pay?

Judicial admissions made by parties in the pleadings, or in the course of the trial or other proceedings in the same case are conclusive, no further evidence being required to

prove the same, and cannot be contradicted unless previously shown to have been made through palpable mistake or that no such admission was made. In view of Sias formal admission that Damasco worked beyond eight hours daily, the latter is entitled to overtime compensation. No further proof is required. Sia already admitted she worked an extra hour

daily. Thus, public respondent gravely erred in deleting the award of overtime pay to Damasco on the pretext that the claim has no factual basis.

Still, even assuming that Damasco received a wage which is higher than the minimum provided by law, it does not follow that any additional compensation due her can be offset by

her pay in excess of the minimum, in the absence of an express agreement to that effect. Moreover, such arrangement, if there be any, must appear in the manner required by law on

how overtime compensation must be determined. For it is necessary to have a clear and definite delineation between an employees regular and overtime compensation to thwart violation of the labor standards provision of the Labor Code (Damasco vs. NLRC, G.R. No.

115755, December 4, 2000).

13. May a Company adopt working hours beyond 8 hours a day? If the workers do not question such an arrangement, would that scheme be considered valid?

YES. In Interphil Laboratories Employees Union FFW v. Interphil (G.R. No. 142824, December 19, 2001) it was held by the Court that:

Section 1. Regular Working Hours A normal workday shall consist of not more than eight (8) hours. The regular working hours for the Company shall be from 7:30

A.M. to 4:30 P.M. The schedule of shift work shall be maintained; however the company may change the prevailing work time at its discretion, should such change

be necessary in the operations of the Company. All employees shall observe such rules as have been laid down by the company for the purpose of effecting control over working hours.

It is evident from the foregoing provision that the working hours may be changed, at

the discretion of the company, should such change be necessary for its operations, and that the employees shall observe such rules as have been laid down by the company. In the case

before us, Labor Arbiter Caday found that respondent company had to adopt a continuous 24-hour work daily schedule by reason of the nature of its business and the demands of its clients. It was established that the employees adhered to the said work schedule since 1988.

The employees are deemed to have waived the eight-hour schedule since they followed,

Malao, Mike

without any question or complaint, the two-shift schedule while their CBA was still in force and even prior thereto. The two-shift schedule effectively changed the working hours

stipulated in the CBA. As the employees assented by practice to this arrangement, they cannot now be heard to claim that the overtime boycott is justified because they were not

obliged to work beyond eight hours.

14. Explain the principle of A FAIRS DAY WAGE FOR A FAIRS DAYS LABOR The age-old rule governing the relation between labor and capital, or management and

employee of a "fair day's wage for a fair day's labor" remains as the basic factor in determining employees' wages. If there is no work performed by the employee there can be

no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed, or otherwise illegally prevented from working

(Caltex Refinery Employees Association (CREA) vs. Brillantes, 279 SCRA 218), a situation which we find is not present in the instant case. It would neither be fair nor just to allow private respondents to recover something they have not earned and could not have

earned because they did not render services at the Kalibo office during the stated period (Aklan Electric Cooperative Incorporated v. NLRC, G.R. No. 121439, January 25,

2000).

15. A Co., a tobacco manufacturing firm, is owned by Mr. X who also owned B Security Agency (BSA). When the employees of B formed a union, As management preterminated the security contract between A and B firms. When the guards filed a

case of illegal dismissal and ULP against both A and B, the counsel of A filed a Motion to Dismiss, alleging that that there was no employer-employee relationship between A

and the guards.

a. Should the MOTION be granted? Explain.

NO. The Motion should not be granted. The facts indicate a concerted effort on the

part of respondents to remove petitioners from the company and thus abate the growth of the union and block its actions to enforce their demands in accordance with the Labor

Standards laws. The Court held in Insular Life Assurance Co., Ltd., Employees Association-NATU vs. Insular Life Assurance Co., Ltd.,37 SCRA 244 (1971), that the test of whether an employer has interfered with and coerced employees within the meaning of section (a) (1) is whether the employer has engaged in conduct which it may reasonably be said tends to interfere with the free exercise of employees' rights under section 3 of the Act,

and it is not necessary that there be direct evidence that any employee was in fact intimidated or coerced by statements of threats of the employer if there is a reasonable

inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective bargaining. b. Is the doctrine of piercing the veil of corporate fiction applicable hereto?

It is a fundamental principle in corporation law that a corporation is an entity separate and distinct from its stockholders and from other corporations to which it is

connected. However, when the concept of separate legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation

as an association of persons, or in case of two corporations, merge them into one. The separate juridical personality of a corporation may also be disregarded when such corporation is a mere alter ego or business conduit of another person.

Malao, Mike

In the case at bar, it was shown that BSA was a mere adjunct of A Company. BSA, by virtue of a contract for security services, provided A Co. with security guards to safeguard its

premises. However, records show that BSA and A Co. have the same owners and business address, and BSA provided security services only to A Co. and other companies belonging to

its owners. The purported sale of the shares of the former stockholders to a new set of stockholders who changed the name of the corporation appears to be part of a scheme to

terminate the services of BSAs security guards posted at the premises of A Co. and bust their newly-organized union which was then beginning to become active in demanding the company's compliance with Labor Standards laws. Under these circumstances, the Court

cannot allow A Co. to use its separate corporate personality to shield itself from liability for illegal acts committed against its employees. (De Leon vs. NLRC, G.R. No. 112661, May

30, 2001)

16. Discuss the doctrine on the economic reality of the relations of parties test with respect to the existence of employer-employee relationship.

The relationship of employer-employee, which determines the liability for employment taxes under the Social Security Act was not to be determined solely by the idea of control

which an alleged employer may or could exercise over the details of the service tendered to his business by the worker or workers. Control is characteristically associated with the

employer -employee relationship, but in the application of social legislation, employees are those who as a matter of economic reality are dependent upon the business to which they render service, taking into account permanency of the relations, the skills required and the

investments in the facilities for work and opportunities for profit or loss from activities. It is the total situation that controls. (Investment Planning Corp. vs. SSS, 21 SCRA 924).

The concept of independent contractor is interminably linked with the economic

reality test when we consider the fact that such person is one who carries on a distinct and independent business and undertakes to perform the job to do a piece of work on his own account and under his own responsibility, according to his own manner and methods and

free from the control and direction of his principal, except as to the result of the work. Among the factors to be considered are whether the contractor is carrying on an

independent business; whether the work is part of the employer's general business; the nature and extent of the work; the skill required; the term and duration of the relationship;

the right to assign the performance of the work to another; the power to terminate the relationship; the existence of a contract for the performance of a specified piece of work; the control and supervision of the work; the employer's powers and duties with respect to the

hiring, firing, and payment of the contractor's servants-, the control of the premises; the duty to supply the premises, tools, appliances, material and labor; and the mode, manner,

and terms of payment. (MAFINCO Corporation v. Ople, 70 SCRA 139)

17. Pandoy was an electrician who worked within the premises of Ushio's car accessory shop, in Banawe Street, Quezon City. He filed a complaint for illegal dismissal, non-payment of overtime pay, holiday pay, and other benefits against

Ushio, which moved to dismiss the complaint claiming that Pandoy was not an employee but a free lance operator who waited on the shop's customers should the

latter require his services. Ushio argues that in fine, the shop owner and the free lance operator, as an independent contractor, were partners in trade, "both benefiting from

the proceeds of their joint efforts. It further claimed that it was a recognized and accepted trade practice peculiar to the auto spare parts shop industry operating along the stretch of Banawe Street that shop owners would collect the service fees from its

customers and disburse the same to the independent contractor at the end of a week.

Malao, Mike

Moreover, Pandoy was free to position himself near other car accessory shops to offer his services to customers of said shops. On the other hand, Pandoy insists that he is

entitled to the benefits because he was loyal to Ushio, as he did not perform work for anyone else. Is he correct?

NO. In stark contrast to the Companys regular employees, there are independent,

freelance operators who are permitted by the Company to position themselves proximate to the company premises. These independent operators are allowed by the Company to wait on Company customers who would be requiring their services. In exchange for the privileges of

favorable recommendation by the Company and immediate access to the customers in need of their services, these independent operators allow the Company to collect their service fee

from the customer and this fee is given back to the independent operator at the end of the week. In effect, they do not earn fixed wages from the Company as they earn their variable

fees from the customers of the Company. The Company has no control over and does not restrict the methodology or the means and manner by which these operators perform their work. These operators are not supervised by any employee of the Company since the results

of their work is controlled by the customers who hire them. Likewise, the Company has no control as an employer over these operators. They are not subject to regular hours and days

of work and may come and go as they wish. They are not subject to any disciplinary measures from the Company, save merely for the inherent rules of general behavior and

good conduct [Ushio Marketing v. NLRC, 294 SCRA 673 (1998)]. 18. In the employment of workers, is there a difference between an ordinary

employer-employee relationship and independent job contracting/ subcontracting?

YES. In an ordinary employer-employee relationship, there are only two parties involved - the employer and the employee. This relationship is established through a four-

fold test, under which the employer: a. Directly exercises control and supervision over the employee not only as to the

results of the work but also as to the means employed to attain this result; b. Has the power to select and hire the employee; c. Has the obligation to pay the employees his or her wages and other benefits.

d. Has the power to transfer and dismiss or discharge employees.

The power of control is the most important factor in determining the existence of an employer-employee relationship. The employer need not actually exercise this power. It is

enough that the employer retains the right to exercise this power, as it may deem necessary or appropriate.

In job contracting / subcontracting, there are three parties involved: a. The principal who decides to farm out a job or service to a subcontractor;

b. The job contractor or subcontractor which has the capacity to independently undertake the performance of the job or service; and

c. The employees engaged by the job contractor or subcontractor to accomplish the job or service.

In job contracting or subcontracting, the four-fold test of employer-employee relationship should be satisfied by the contractor or subcontractor in relation to the

employee it engages to accomplish the contracted or subcontracted job or service. In such cases, the contractor or subcontractor is also referred to as an independent contractor.

Malao, Mike

If the four-fold test is satisfied not by the job contractor or subcontractor but by the principal, the principal then becomes the employer of the employees engaged to accomplish

the job or service. What exists is not job contracting or subcontracting but a direct employer-employee relationship between the principal and the employees and the job

contractor becomes merely the agent of the principal or the subcontractor, the agent of his contractor, as the case may be.

19. Is there a difference between a job contractor or subcontractor and a private recruitment and placement agency (PRPA)?

YES. A job contractor or subcontractor directly undertakes a specific job or service for

a principal, and for this purpose employs its own workers. A PRPA cannot be a subcontractor. It simply recruits workers for the purpose of placing them with another

employer so that the workers recruited will not become the PRPA's employees. A job contractor or subcontractor is governed primarily by Articles 106-109 of the

Labor Code. A private recruitment and placement agency is governed by Articles 25 to 39 of the Labor Code and the rules implementing these articles.

A job contractor or subcontractor does not need authority from the Department of

Labor and Employment (DOLE) to undertake a subcontracted job or service. A PRPA needs an authority or license from DOLE to legally undertake recruitment and placement activities.

20. What law or rules govern job contracting or subcontracting?

The basic law governing job contracting or subcontracting is the Labor Code,

particularly Articles 106 to 109 thereof. These provisions prescribe the conditions for the regulation of job contracting or subcontracting and the rights and obligations of parties to this arrangement. Department Order No. 3, which took effect on 29 May 2001 was the latest

set of rules released by the DOLE implementing Articles 106 to 109.

The following laws and rules also apply in addition to Articles 106 to 109 of the Labor Code:

a. Article 248 (c) of the Labor Code, which disallows contracting out of services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their right to self-organization;

b. Article 280, Labor Code, which classifies employees into regular, project or seasonal employees;

c. Article 2180 of the Civil Code, under which the principal, in a civil suit for damages instituted by an injured person, can be held liable for any negligent acts of the employees of

a labor-only contractor; d. Republic Act No. 5487, which regulates the operation of security agencies, and its

implementing rules;

e. Jurisprudence interpreting the foregoing laws; f. D.O. No. 19, Series of 1993, for subcontracting arrangements in the construction

industry; and h. Contractual stipulations provided these are not in conflict with Labor Code provisions,

jurisprudence, and D.O. Nos. 3 and 19.

Malao, Mike

21. What are the important features of D.O. No. 3?

The following are the important features of D.O. No. 3: a. It revoked Department Order No. 10, Series of 1997, which was then the implementing

rules on Articles 106 to 109; b. It prohibits labor-only contracting;

c. It recognizes the continuing validity of contracts entered into when D.O. No. 10 was still in force;

d. It is a temporary measure;

e. It sets the process and mechanism, which is through consultations through the Tripartite Industrial Peace Council, by which a new set of rules shall be formulated.

22. Is job contracting or subcontracting illegal?

NO, provided the requirements for legitimate job contracting or subcontracting are

satisfied and the prohibition against labor-only contracting or subcontracting is observed. In

two recent cases decided by the Supreme Court, Vinoy v. NLRC, G.R. No. 126586, February 02,2000, and Lim v. NLRC, G.R. No. 124630, February 19, 1999, the

definition of legitimate subcontracting is as follows:

Contracting or subcontracting shall be legitimate if the following conditions concur: a. The contractor or subcontractor carries on a distinct and independent business and

undertakes to perform the job, work or service on its own account and under its own

responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except

as to the results thereof; b. The contractor or subcontractor has substantial capital or investment;

c. The agreement between the principal and the contractor or subcontractor assures the contractual employees entitlement to all occupational safety and health standards, free exercise of the right to self organization, security of tenure, and social and welfare benefits.

23. What is substantial capital? Is substantial capital sufficient to establish legitimate

subcontracting?

Substantial capital refers to such investment, whether it is in the form of money, facilities, tools, equipment, machineries, work premises, or subscribed capital stock that would indicate the subcontractor's capacity to undertake the contracted or subcontracted

work or service independently. For example, a contractor or subcontractor with a capital stock of P1 Million which is fully subscribed and paid for has been deemed by the Supreme

Court to be a highly capitalized venture which satisfies the requirement of substantial capital.

Where a job contractor or subcontractor is highly capitalized, the Supreme Court has

held that it need not show evidence that it has investment in the form of tools, equipment,

machineries, work premises, among others, to be considered legitimate. However, it is still necessary for it to show that it has the capacity to be an independent contractor. That is, it

can undertake the performance of the contract according to its own manner and method, free from the supervision of the principal in all matters except as to the results of the work.

Malao, Mike

24. What is the basis of the State in prohibiting labor-only contracting? What is the objective and the prohibition?

The basis of the State in prohibiting labor-only contracting are:

a. The Constitution, which provides that the State shall protect labor and promote its welfare, and shall guarantee basic labor rights including just and humane terms and

conditions of employment and the right to self-organization. b. Article 106 of the Labor Code, which allows the Secretary of Labor to distinguish

between labor-only contracting and job contracting to prevent any violation or

circumvention of the Labor Code.

The objective of the State in prohibiting labor-only contracting is to ensure that labor laws are followed and to prevent the exploitation of workers. A labor-only contractor is one

who presents itself as an employer even if it does not have capital to run a business or capacity to ensure that its workers are paid their wages and other benefits as prescribed by law. As such, it cannot independently undertake to perform a contracted or subcontracted

job or service. To allow a labor-only contractor to operate is to give it an opportunity to circumvent the law and to exploit workers.

25. If you are the counsel of an agency which is being charged of LABOR-ONLY

CONTRACTING, what evidence will you present to refute the charge? Explain.

I would present the same documents shown in the case of Escario vs. NLRC, G.R.

No. 124055, June 8, 2000, to wit: D.L. Admark is a legitimate independent contractor. Among the circumstances which

tend to establish the status of D.L. Admark as a legitimate job contractor are: a. The SEC registration certificate of D.L. Admark states that it is a firm engaged in

promotional, advertising, marketing and merchandising activities. b. The service contract between CMC and D.L. Admark clearly provides that the

agreement is for the supply of sales promoting merchandising services rather than one of

manpower placement. c. D.L. Admark was actually engaged in several activities such as advertising,

publication, promotions, marketing and merchandising. It had several merchandising contracts with companies like Purefoods, Corona supply, Nabisco Biscuits and Licron. It

was likewise engaged in the publication business, as evidenced by its magazine, the Phenomenon.

d. It had its own capital assets to carry out its promotion business. It then had current

assets amounting to P6 million and is therefore a highly capitalized venture. It had an authorized capital stocks of P500,000. It owned several motor vehicles and other tools,

materials and equipment to service its clients. It paid rentals of P30,020 for the office space it occupied.

26. What are the effects of a labor-only contracting arrangement?

The following are the effects: a. The contractor or subcontractor will be treated as the agent of the principal. Since the

act of an agent is the act of the principal, representations made by the contractor or subcontractor to the employees will bind the principal.

Malao, Mike

b. The principal will become the employer as if it directly employed the workers engaged to undertake the contracted or subcontracted job or service. It will be responsible to them

for all their entitlements and benefits under the labor laws. c. The principal and the contractor or subcontractor will be solidarily treated as the

employer. d. The employees will become employees of the principal, subject to the classifications of

employees under Article 28 of the Labor Code.

If the labor-only contracting activity is undertaken by a legitimate labor organization,

a petition for cancellation of union registration may be filed against it, pursuant to Article 239 (e).

27. If a legitimate independent job contractor or subcontractor cannot pay the wages

of the employees it engages to perform the job or service, will the principal automatically become the employer of such employees?

NO. Under Article 106, a principal has two types of liability in relation to the employees of the contractor or subcontractor. The first type of liability is limited, and is

governed by the first two paragraphs of Article 106. Thus, mere inability of the contractor or subcontractor to pay wages will not automatically make the principal the direct employer. It

will only make the principal jointly and severally liable with the contractor or subcontractor for payment of the employees' wages to the extent of the work performed under the contract.

The second type of liability, which arises from the third and fourth paragraphs of

Article 106, is absolute and direct. This liability arises when there is labor-only contracting

as defined in D.O. No. 3. In such cases, the principal shall be held responsible to the workers in the same manner and extent as if it directly employed these workers.

28. Which employer should be held liable for the wages of security guards, the

PRINCIPAL EMPLOYER or the AGENCY? Explain.

There existed a contractual agreement between PTSI and EAGLE, wherein the former

availed of the security services provided by the latter. In return, the security agency collects from its client payment for its security services. This payment covers the wages for the

security guards and also expenses for their supervision and training, the guards bonds, firearms with ammunitions, uniforms and other equipments [sic], accessories, tools,

materials and supplies necessary for the maintenance of a security force.

Premises considered, the security guards immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage

Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned.

What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractors payment of the increase mandated. In the end therefore, the ultimate liability for the payment of the increases rests with the principal

(Security and Credit Investigation Inc. v. NLRC, G.R. No. 114316, January 26, 2001).

Malao, Mike

29. When is an insurance agent deemed an independent contractor of an insurance company?

As held in Insular Life Insurance Company, Ltd. vs. NLRC, G.R. No. 84484, Nov.

15, 1989, There is no employer-employee relationship between a commission agent and an investment company. The former is an independent contractor where said agent and others

similarly placed are: a. paid compensation in the form of commissions based on percentages of their sales,

any balance of commissions earned being payable to their legal representatives in the event

of death or resignation; b. required to put up performance bond;

c. subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of the services for certain causes;

d. not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who finally shouldered their own selling and transportation expenses.

Logically, the line should be drawn between rules that merely serve as guidelines

toward 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 aims only to promote the result, create no employer-employee relationship unlike the second, which addresses both the result and the means used to achieve it. The distinction acquires

particular relevance in the case of an enterprise affected with public interest, as in the business of insurance, which on that account, is subject to regulations by the State with

respect, not only to the relations between insurer and insured, but also to the internal affairs of the insurance company.

30. When are salesmen considered independent contractors rather than regular employees of a business establishment?

In, MAFINCO Trading Corporation v. Ople, GR No. L-37790, March 25, 1976, it

was held where, as in the case at bar, a peddler formally entered into a peddling contract with petitioner for the purchase and sale of Cosmos softdrinks, indicating the manner of

selling the goods, whereby the petitioner provides the peddler with delivery truck and bears the cost of gasoline and maintenance of' the truck; while on the other hand the peddler employs the driver and helpers and take care of the latter's compensation and social

security contributions, the peddlers are independent contractors and not employees of petitioner.

31. Is the joint and several liability of the principal and the job contractor under

Articles 107 and 109, in relation to Article 106 of the Labor Code, dependent upon the insolvency or unwillingness to pay on the part of the contractor or direct employees?

NO. Nothing in Article 106 indicates that insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several liability of the

principal or indirect employer. This joint and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution (Development Bank of the Philippines vs. NLRC, June 17, 1994).

Malao, Mike

32. A taxicab company required its taxi drivers to make deposits to defray any deficiency which the latter may incur in the remittance of their boundary and to cover car wash payments. Is this requirement authorized under Article 114 of the Labor Code? Explain.

The requirement for deposit to defray any deficiency in the remittance of drivers

boundary is not lawful. Article 114, which provides the rule on deposits for loss or damage to tools, materials or equipment supplied by the employer, does not apply to or permit such kind of deposit.

But the requirement for deposit for car wash payments is lawful. There is no dispute

that as a matter of practice in the taxi industry, after a tour of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean condition when he took it out.

Furthermore, the amounts doled out were paid directly to the persons who washed the units. Finally, it will be noted that there was nothing to prevent the drivers from cleaning the taxi units themselves, if they wanted their car wash payments (Five J Taxi vs. NLRC,

August 22, 1994).

33. Do disparity in wages between employees holding similar positions but located in different regions of the country constitute wage distortion as contemplated by law?

Explain. NO. Varying in each region of the country are controlling facts, such as the cost of

living, supply and demand of basic goods, services and necessities; and the purchasing

power of the peso. The wages in different regions are not uniform. And the fact that a person is receiving more in one region does not necessarily mean that he or she is better off than a

person receiving less in another region.

Wage distortion presupposes an increase in the compensation of the lower ranks in an office hierarchy without a corresponding raise for higher-tiered employees in the same region of the country, resulting in the elimination or the severe dimunition of the distinction

between the two groups (Prudential Bank Association vs. Prudential Bank and Trust Co., January 25, 1999).

34. Does a wage increase granted pursuant to a collective bargaining agreement

constitute compliance with a subsequently issued wage order? NO. A collective bargaining agreement is a contractual obligation. It is distinct from an

obligation imposed by law. The terms and conditions of a collective bargaining contract constitute the law between the parties. Beneficiaries thereof are therefore, by right, entitled

to the fulfillment of the obligation prescribed therein. Moreover, compliance with a collective bargaining agreement is mandated by the expressed policy to give protection to labor. Unless

otherwise provided by law, said policy should be given paramount consideration.

Increments to the laborers' financial gratification, be they in the form of salary increases or

changes in the salary scale are aimed at one thing - improvement of the economic predicament of the laborers. As such, they should be viewed in the light of the State's

avowed policy to protect labor. Thus, having entered into an agreement with its employees, an employer may not be allowed to renege on its obligation under a collective bargaining

agreement should, at the same time, the law grant the employees the same or better terms and conditions of employment. Employee benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement

itself or by law. (Meycauayan College vs. Drilon, G.R. No. 81144, May 7, 1990).

Malao, Mike

35. Can a woman be employed in any kind of occupation or undertaking?

YES, she can be employed in any occupation or undertaking allowable by law,

provided it is not deleterious to her health and safety. She should not be discriminated against in employment by reason of her age, marital status and pregnancy.

36. What are considered as acts of discrimination against women?

The following are considered acts of discrimination: a. Payment of a lesser compensation, including wage, salary and fringe benefits, to a

female employee as against a male employee, for work of equal value; b. Favoring a male employee over a female employee with respect to promotion, training

opportunities, study and scholarship grants solely on account of their sexes. 37. How much maternity leave benefit will a pregnant woman receive? Who will pay

the maternity leave benefits?

The member shall receive a maternity benefit equivalent to 100% of her average daily salary credit multiplied by 60 days for normal delivery; or by 78 days in cases of caesarian

section delivery.

The employer advances the maternity leave benefit to the qualified employee in full or

in two equal installments, the first to be made upon receipt of maternity leave application and the second not later than 30-days after payment of the first installment. Upon receipt of

satisfactory proof of such payment, the SSS will reimburse the employer after the contingency for the amount of maternity benefit legally advanced to the employee.

38. Can a maternity leave benefit be extended beyond the allowable PERIOD?

YES, a maternity leave may be extended beyond 60 days upon request of the woman employee. Such request must be due to illness medically certified to arise out of her

pregnancy, delivery, complete abortion or miscarriage which renders her unfit to work. The extended leave benefit shall be a hindrance to recover sickness benefit for the same period of 60 days for the same childbirth, abortion or miscarriage.

39. What is the status of a woman permitted or suffered to work in any night club, bar,

or other similar establishment under the Labor Code?

Any woman who is permitted or suffered to work with or without compensation in any night club, cocktail lounge, massage clinic, bar, or similar establishment shall be considered as an employee of such establishment for purposes of labor and social legislation.

40. What other statutory benefits and services shall an employer provide the woman

employee?

The employer shall provide the following: a. Free family planning services to employees and their spouses, if the establishment

regularly employ more than 200 workers;

Malao, Mike

b. Holiday pay during the period that the woman employee is receiving maternity or disability benefits, equivalent to the same percentage as the benefit granted by SSS;

c. Flexible work schedule to any solo parent as defined in Republic Act No. 8972; d. Parental leave of not more than seven days every year to the solo parent who has

rendered at least one-year service. e. facilities for women such as seats, separate toilet rooms and nursery in the work

place. f. to determine the appropriate minimum age and other standards for retirement in special occupations for women.

41. Who are considered young workers and working children?

Young workers are in different categories, namely:

a. The working youth who are between 15 and 30 years of age (Republic Act No. 8044); b. Employed minors who are from 15 to below 18 years of age (Labor Code);

c. Working children who are below 15 years of age, subject to the exceptions specified by Republic Act No. 7658;

d. Those engaged in Child Labor, which is prohibited by law.

42. What is the minimum employable age for young workers?

The minimum employable age for young workers is 18 years old. However, any person

between 15 and 18 years of age may be employed in undertakings not hazardous or deleterious in nature.

43. What is a non-hazardous undertaking?

It refers to any kind of work or activity, in which the employee is not exposed to any

risk that constitutes an imminent danger to his or her life and limb, safety and health.

44. What are the hazardous work and activities to persons below 18 years of age?

Hazardous work and activities to persons below 18 years age include:

a. Work which exposes children to physical; psychological or sexual abuse; b. Work under ground, under water, at dangerous heights or at unguarded heights of

two meters and above, or in confined spaces; c. Work with hazardous machinery, equipment and tools, or which involves manual

handling or transport of heavy loads; d. Work in an unhealthy environment which may expose children to hazardous

processes, to temperatures, noise levels or vibrations damaging to their health, to toxic, corrosive, poisonous, noxious, explosive, flammable and combustible substances or composites, to harmful biological agents, or to other dangerous chemicals including

pharmaceuticals. e. Work under particularly difficult conditions such as work for long hours or during the

night, or work where the child is unreasonably confined to the premises of the employer.

45. Can a child below 15 years of age be employed or made to work?

A child below 15 years old is NOT permitted to work in any public or private

establishment EXCEPT in these two situations:

Malao, Mike

1. When the child works directly under the sole responsibility of his or her parents or

guardians or legal guardian and where only members of the employers family are employed, on the following conditions:

a. The employment does not endanger the childs life, safety and health and morals; b. The employment does not impair the childs moral development c. The employer parent or legal guardian provides the child with primary and / or

secondary education prescribed by the Department of Education, Culture and Sports (DECS).

2. Where the childs employment or participation in public entertainment or information

through cinema, theater, radio or television is essential, provided that: a. The employment does not involve advertisement or commercials promoting

alcoholic beverages, intoxicating drinks, tobacco and its by-products or exhibiting violence;

b. There is a written contract approved by the DOLE;

c. The employment does not endanger the childs life, safety, health and morals; d. The employment does not interfere with his or her schooling.

46. Once a firm validly employs a young person, is he or she entitled to the same

terms and conditions of employment accorded to an employee of legal age?

YES. An employer is prohibited by the Labor Code to discriminate against any young

person with respect to terms and conditions of employment on account of his or her being a minor.

47. Can a person between 15 and 18 years of age be allowed to engage in domestic

service?

A minor, whether male or female, may be employed as a domestic servant to render

service in and about the employers home, which services are usually necessary or desirable for the maintenance and enjoyment thereof, such as ministering to the personal comfort and

enjoyment of the employers family.

48. Can a young worker be a member of the Social Security System (SSS) and avail of the social security (SS) and Employees Compensation (EC) benefits?

YES. The Social Security Law provides that coverage in the SSS is compulsory upon all employees not over 60 years of age. This law defines an employee as any person who

performs services for an employer and who receives compensation for such services, where there is an employer-employee relationship. Self-employed young persons can also be SSS

members. 49. Who are considered child laborers?

Child laborers are persons aged below 15, or from 15 to below 18 years, performing work or service that is hazardous or deleterious in nature, or exploitative, or unsupervised

by the childs parent or guardian, or that interferes with normal development, or deprives that childs right to health and education.

However, not all children who work are engaged in child labor. Work performed by any person below 15 years of age is not considered child labor if it falls under allowable

situations under Republic Act No. 7658. Light work that is occasional, legal and respects the childs right to health and education is not child labor.

Malao, Mike

50. You were asked by a paint manufacturing company about the possible employment

as a mixer of a person, aged seventeen (17), who shall be directly under the care of the section supervisor. What advice would you give? Explain briefly.

I will advise the paint manufacturing company that it cannot hire a person aged

seventeen (17). Art. 139 (c) of the Labor Code provides that a person below eighteen (18) years of age shall not be allowed to work in an undertaking which is hazardous or deleterious in nature as determined by the Secretary of Labor. The Secretary of Labor has

classified paint manufacturing as hazardous work.

51. What are the benefits provided by law to young and deserving students who want to work?

Republic Act No. 7323 provides for employment assistance to students who are at

least 15 but not more than 25 years of age enrolled or intending to be enrolled in any

secondary, tertiary, vocational or technological institutions. The qualified and deserving youth can be employed during the summer and /or Christmas vacation as aid to the pursuit

of their education.

As incentives for employers, they shall pay the students only 60% of the basic wage and the remaining 40% in the form of educational vouchers payable by the government. An employer, under this law, can be a national or local government office or a private

establishment or undertaking.

52. Are SSS benefits considered property earned by the member during his lifetime? Do they form part of his estate? Explain.

The benefits receivable under the SSS law are in the nature of a special privilege or an

arrangement secured by the law pursuant to the policy of the State to provide social security

to the workingman. Such benefits cannot be considered as property earned by the member during his lifetime. His contributions to the fund, it may be noted, constitute only an

insignificant portion thereof. Thus, the benefits are specifically declared not transferable and exempt from tax legal processes and liens. Furthermore, in the settlement of claims, the

procedure to be observed is governed not by the general provisions of law, but by rules and regulations promulgated by the Social Security Commission. And it is not the probate or regular court but the Commission that determines the persons to whom the benefits are

payable (Social Security System vs. Davac, G.R. No. L-21642, July 30, 1966).

53. Does the delay on the part of the victim of sexual harassment to complain said act impair his cause of action against his/her employer?

NO. The gravamen of the offense in sexual harassment is not the violation of the employees sexuality but the abuse of power by the employer. Any employee, male or female, may rightfully cry foul provided the claim is well substantiated. Strictly speaking there is not time period within which he or she is expected to complain through the proper channels.

The time to do so may vary depending upon the needs, circumstances, and more importantly, the emotional threshold of the employee (Philippine Aeolus Automotive

United Corp. vs. NLRC, G.R. No. 124617, April 28, 2000). 54. The owners of FALCON Factory, a company engaged in the assembling of

automotive components, decided to have their building renovated. Fifty (50) persons,

Malao, Mike

composed of engineers, architects and other construction workers, were hired by the company for this purpose. The work is estimated to be completed in three (3) years.

The employees contended that since the work would be completed after more than one (1) year, they should be subject to compulsory coverage under the Social Security

Law. Is their contention correct?

NO. Under Section 8 (j) of RA 1161, as amended, employment of purely casual employees, not for the purpose of the occupation or business of the employer are excepted from compulsory coverage.

An employment is purely casual if it is not for the purpose of occupation or business

of the employer.

In the problem given, Falcon Factory is a company engaged in the assembling of automotive components. The fifty (50) persons (engineers, architects and construction workers) were hired by Falcon Factory to renovate its building. The work to be performed by

these fifty (50) people is not in connection with the purpose of the business of the factory. Hence, the employment of these fifty (50) persons is purely casual. They are therefore

excepted from the compulsory coverage of the SSS law.

LABOR RELATIONS 55. PICOP's main thesis is that the positions Section Heads and Supervisors, who have

been designated as Section Managers and Unit Managers, as the case may be, were converted to managerial employees under the decentralization and reorganization

program it implemented in 1989. Being managerial employees, with alleged authority to hire and fire employees, they are ineligible for union membership under Article 245

of the Labor Code. Furthermore, PICOP contends that no malice should be imputed against it for implementing its decentralization program only after the petition for certification election was filed inasmuch as the same is a valid exercise of its

management prerogative, and that said program has long been in the drawing boards of the company, which was realized only in 1989 and fully implemented in 1991.

PICOP emphatically stresses that it could not have conceptualized the decentralization program only for the purpose of "thwarting the right of the concerned

employees to self-organization." Is PICOPs contention tenable? NO. The petition not being meritorious, must fail and the same should be as it is

hereby dismissed. In United Pepsi-Cola Supervisory Union (UPSU) v. Laguesma, we had occasion to elucidate on the term "managerial employees." Managerial employees are ranked

as Top Managers, Middle Managers and First Line Managers. Top and Middle Managers have the authority to devise, implement and control strategic and operational policies while

the task of First-Line Managers is simply to ensure that such policies are carried out by the rank-and- file employees of an organization. Under this distinction, "managerial employees" therefore fall in two (2) categories, namely, the "managers" per se composed of Top and

Middle Managers, and the "supervisors" composed of First-Line Managers. Thus, the mere fact that an employee is designated manager" does not ipso facto make him one. Designation

should be reconciled with the actual job description of the employee, for it is the job description that determines the nature of employment (PICOP vs. Laguesma, G.R. No.

101738, April 12, 2000).

Malao, Mike

56. Do labor arbiters have jurisdiction over illegal dismissal cases that may be filed against priests and ministers?

YES. The fact that a case involves the church and its religious minister does not ipso

facto give the case a religious significance. Simply stated, what is involved in an illegal dismissal case is the relationship of the church as an employer and the minister as an

employeea purely secular matter not related to the practice of faith, worship, or doctrines of the church (Austria vs. NLRC, G.R. No. 124382, August 16, 1999).

57. Do Labor Arbiters or the NLRC have jurisdiction over criminal cases involving violations of the penal provisions of labor laws? Explain.

Labor Arbiters or the NLRC are not invested with the judicial power; they merely

exercise quasi-judicial functions. In the hearing and disposition of cases brought before them, they do not adhere strictly to the technical rules of evidence. This is required in

criminal cases where the guilt of the accused must be established beyond reasonable doubt. The regular courts have jurisdiction over criminal cases involving violations of the labor laws.

58. Explain the doctrine of forum non-conveniens. May this doctrine be invoked

against the exercise of jurisdiction by the labor arbiter?

Under the rule of forum non conveniens, a Philippine court or agency MAY assume jurisdiction over the case if it chooses to do so, PROVIDED:

a. that the Philippine court is one to which the parties may conveniently resort to;

b. that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and

c. that the Philippine court has or is likely to have power to enforce its decision.

This doctrine may be invoked against the exercise of jurisdiction of the labor arbiters as held in the case of Manila Hotel Corporation and Manila Hotel International limited vs. NLRC and Marcelo Santos which ruled that the NLRC was a seriously inconvenient

forum on the following grounds:

a. The NLRC is an inconvenient forum given that all the incidents of the case- from the time of recruitment, to employment, and to dismissal occurred outside the Philippines. The

inconvenience is compounded by the fact that the proper defendants the Palace Hotel and MHICL are not nationals of the Philippines. Neither are they doing business in the Philippines. Likewise, the main witnesses are non-residents of the Philippines.

b. Neither can an intelligent decision be made as to the law governing the employment

contract as such was perfected in foreign soil. This calls for the application of the principle of lex loci contractus (the law of the place where the contract was made).

c. Even assuming that the proper decision could be reached by the NLRC, such would

not have any binding effect against the employer, the Palace Hotel. The Palace hotel is a corporation incorporated under the laws of China and was not even served with summons, hence jurisdictions over its person was not acquired.

Malao, Mike

59. Does the principle of Jurisdiction by Estoppel apply in labor cases?

YES, the principle of Jurisdiction by Estoppel applies to labor cases as was held by the Supreme Court in the case of Prudential Bank and Trust Company vs. Reyes, G.Rr

No. 141093, Feb. 20, 2001.

Under this principle, a party to a labor case is estopped from raising the issue of jurisdiction of the labor arbiter when he has participated in the proceedings from start to finish. In this case the petitioner bank actively participated in the proceedings before the

Labor Arbiter, NLRC and Court of Appeals. It was only when the Court of Appeals made an adverse decision did it raise the issue of jurisdiction. The Supreme Court held that it was

already too late to raise the issue of jurisdiction as the petitioner was already in estoppel. While it is true that jurisdiction over the subject matter of a case may be raised at any time

of the proceedings, this rule presupposes that laches or estoppel has not supervened. 60. Does the Labor Arbiter have jurisdiction over disputes involving the wages and

terms and conditions of employment of COOPERATIVE employees? Explain.

YES. In the case of Perpetual Help Credit Coop Inc. vs. Faburada, G.R. No. 121498, October 8, 2001 it was clarified that:

ART. 121. Settlement of Disputes. Disputes among members, officers,

directors, and committee members, and intra-cooperative disputes shall, as far as

practicable, be settled amicably in accordance with the conciliation or mediation mechanisms embodied in the by-laws of the cooperative, and in applicable laws.

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of competent jurisdiction."

Complementing this Article is Section 8 of R.A. No. 6939 (Cooperative Development Authority Law) which reads:

SEC. 8 Mediation and Conciliation. Upon request of either or both parties,

the Authority shall mediate and conciliate disputes within a cooperative or between cooperatives: Provided, That if no mediation or conciliation succeeds within three (3)

months from request thereof, a certificate of non-resolution shall be issued by the Commission prior to the filing of appropriate action before the proper courts.

The above provisions apply to members, officers and directors of the cooperative involved in disputes within a cooperative or between cooperatives.

There is no evidence that private respondents are members of petitioner PHCCI and even if they are, the dispute is about payment of wages, overtime pay, rest day and

termination of employment. Under Art. 217 of the Labor Code, these disputes are within the original and exclusive jurisdiction of the Labor Arbiter.

61. May an execution be stopped merely because of a third party claim? NO. The Labor Code grants the National Labor Relations Commission (NLRC)

sufficient authority and power to execute final judgments and awards. Thus, a third-party claim of ownership on a levied property should not necessarily prevent execution,

particularly where as in the present case the surrounding circumstances point to a fraudulent claim. In fact, the disputed contract of sale here is not merely rescissible; it is simulated or fictitious and, hence, void ab initio (Tanongon v. Samson, G.R. No. 140089,

May 9, 2002).

Malao, Mike

62. May a temporary restraining order in a labor dispute be issued ex parte?

YES. The issuance of an ex parte TRO in a labor dispute is not per se prohibited. Its

issuance, however should be characterized by care and caution for the law requires that it be clearly justified by considerations of extreme necessity, as when the commission of

unlawful acts is causing substantial irreparable injury to company properties and the company is, for the moment, bereft of an adequate remedy at law (Bisig ng Manggagawa sa Concrete Aggregates, Inc. vs. NLRC, September 16, 1993).

63. In cases involving monetary award, why does the law require an employer to post

a cash or surety bond as an indispensable condition for the perfection of an appeal?

An appeal stays the execution of an award. Such decision could be in the form of a monetary award in favor of an employee. Thus, an appeal will mean that a monetary award

will not be executed. To ensure that an appealed monetary award is affirmed and has become final and executory, Art. 223 requires that as an indispensable condition for the perfection of an appeal by an employer, he must post a cash or surety bond issued by a

reputable bonding company duly accredited by the NLRC in the amount equivalent to the monetary award in the judgment appealed from.

64. What is the remedy in case the Regional Office or BLR verbally denies or refuses to

act on an application for registration for a considerable amount of time?

Secure a notice of denial in order to avail of the remedy of appeal. After all, the

decision of the Regional Office or the Bureau denying the application for registration shall be in writing, stating in clear terms the reasons for such a denial. A copy of the notice of denial

should be furnished to the applicant union.

65. What is the effect of the filing/pendency of inter/intra union and other related labor disputes to the relationship of the party litigants?

The rights, relationships and obligations of the parties-litigants against each other and other parties-in-interest prior to the institution of the petition shall continue to remain

during the pendency of the petition and until the date of finality of the decision rendered therein. Thereafter, the rights, relationships and obligations of the parties-litigants against

each other and other parties-in-interest shall be governed by the decision so ordered. The filing or pendency of any inter/intra-union dispute and other related labor

relations dispute is not a prejudicial question to any petition for certification election and shall not be a ground for the dismissal of petition for certification election or suspension of

proceedings for certification election (Sections 3 and 4, RULE XI Book V, IRR 2003).

66. Can there be several unions in one enterprise?

YES. There can be several bargaining units in one employer unit, and at least one

legitimate labor organization per bargaining unit. Also, there can be several unions within one bargaining unit, since there is no law precluding such a situation. But there can only be

one bargaining agent [to the exclusion of others] which shall be designated either by certification or consent election, or by voluntary recognition as the case may be.

Malao, Mike

67. Can all rank and file employees join, assist, or form a labor union?

NO. Confidential employees who are ALSO rank and file employees cannot form, join, or assist unions if they assist in a confidential capacity or have access to the confidential

matters of persons who exercise managerial functions in the field of labor relations

By the very nature of their functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons who exercise managerial functions in the field of labor relations. As such, the rationale for the ineligibility of managerial employees to

form, assist or join a labor union equally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon. Augusta Sanchez,144 SCRA 628 [1986] the Court elaborated on the rationale for such inhibition in that, if the managerial

employees would belong to, or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of interests. The Union can also become company-dominated with the presence of managerial employees in Union membership."

This also holds true for confidential employees such as accounting personnel, radio

and telegraph operators, who having access to confidential information, may become the source of undue advantage. Said employee(s) may act as a spy (ies) of either party to a

collective bargaining agreement. This is especially true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file employees in the establishment. To allow confidential employees to join the existing Union of the rank-and file

would be in violation of the terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their functions/positions are expressly excluded. (Philips vs.

NLRC, G.R. No. 88957, June 25, 1992).

68. In what forms is company domination of a labor union made manifest?

a. Initiation of the company union idea, which may occur in three styles:

(1) Outright formation by the employer or his representative\ (2) Employee formation or outright demand or influence of the employer

(3) Managerially motivated formation by employees.

b. Financial support to the union An employer commits unfair labor practice if he defrays the union expenses or pays

the fees of the attorney who drafted the unions constitution and by-laws. c. Employer encouragement and assistance

Immediately granting the union exclusive recognition as a bargaining agent without determining whether the union represents the majority of employees is an illegal form of

assistance amounting to unfair labor practice. d. Supervisory assistance

This takes the form of soliciting membership, permitting union activities during working time or coercing employees to join the union by threats of dismissal or demotion

(Philippine American Cigar & Cigarette Factory Workers Union vs. Philippine American Cigar & Cigarette Mfg. Co. Inc., G.R. No. L-18364 February 28, 1963).

Malao, Mike

69. XYZ Co. was informed that a petition for certification election has been filed by ABC Union, a legitimate labor organization within XYZ Co beyond the 60-day freedom

period granted to the former. By virtue of said information. XYZ Co. unilaterally suspended the on-going negotiations for a new CBA with XYZ Co. Employees

Association (XYZEA) and refused to do any further negotiations and bargaining. Was there unfair labor practice on the part of XYZ Co.?

Yes. The duty to bargain collectively includes the mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an

agreement. In order to allow the employer to validly suspend the bargaining process, there must be a valid petition for Certification Election raising a legitimate representation issue.

When a petition is filed OUTSIDE the 60-day freedom period, there is no legitimate representation issue and the filing of said petition do not constitute a bar to an on-going

negotiation (Colegio de San Juan de Letran v. Association of Employees and Faculty of Letran, G.R. No. 14147, September 18, 2000).

70. What is the legal justification of a UNION SHOP provision in the CBA? Explain.

The Labor Code, as amended, recognizes the validity of a union shop agreement in Article 248 thereof, Section (e) provides, to wit:

to discriminate in regard to hire or tenure of employment or any term or condition of employment in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other law shall prevent the parties from requiring

membership in a recognized collective bargaining agent as a condition for employment, except of those employees who are already members of another union at the time of the

signing of the collective bargaining agreement.

We affirm the ruling of the voluntary arbitrator for the inclusion of a union shop provision in addition to the existing maintenance of membership clause in the collective

bargaining agreement. As the Solicitor General asserted in his consolidated Comment, the University's reliance on the case of Victoriano vs. Elizalde Rope Workers' Union is clearly misplaced. In that case, we ruled that "...the right to join a union includes the right to

abstain from joining any union. The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection

granted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of which the employer may

employ only members of the collective bargaining union, and the employees must continue to be members of the union for the duration of the contract in order to keep their jobs (DLSU vs. Laguesma, G.R.No. 109002, 12 April 2000).

71. Union X, a local/chapter of Y Federation moved to disaffiliate from the latter. The

move was supported by almost all of its members. During the pendency of the disaffiliation proceeding, the company entered into a collective bargaining agreement

with Union X. Y federation filed an action for ULP against the company. Decide. If the local unions move to disaffiliate is supported by almost all [majority] the members of said union, and such fact is not disputed by the federation [mother union], the companys act of entering into a CBA with the local union does not constitute ULP. As held in the case of Philippine Skylanders vs. NLRC, G.R. No. 127374, January

31, 2002, as PSEA has validly severed itself from PAFLU, there would be no restrictions

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which could validly hinder it from subsequently affiliating with NCW and entering into a CBA in behalf of its members.

Applying the principle of agency, the local union being the agent of the real principal

the union members; and the federation being merely the agent of the agent the local union, the former which has chosen to disaffiliate from the latter as willed by majority of its

members may validly enter into a CBA with the employer without holding the employer liable for ULP.

72. What is a sweetheart contract?

Article 249 considers it an unfair labor practice for a labor organization to ask for or accept negotiation of attorneys fees from the employer in settling a bargaining issue or a dispute. When it happens, the resulting Collective Bargaining Agreement (CBA) will most likely be a sweetheart contract, a CBA that does not substantially improve the employees wages and benefits. Under Article 239 (f), one of the grounds for cancellation of union registration is entering into collective bargaining agreements which provide terms and conditions of employment below minimum standards established by law.

73. May an electric cooperative be held liable to pay damages for the ULP it has

committed against its employees? How much?

YES, but the amount should be tempered. For this reason, we find it proper in this case to impose moral and exemplary damages on private respondent. However, the damages awarded by the labor arbiter, to our mind, are excessive. In determining the amount of

damages recoverable, the business, social and financial position of the offended parties and the business and financial position of the offender are taken into account. It is our view that

herein private respondents had not fully acted in good faith. However, we are cognizant that a cooperative promotes the welfare of its own members. The economic benefits filter to the

cooperative members. Either equally or proportionally, they are distributed among members in correlation with the resources of the association utilized. Cooperatives help promote economic democracy and support community development.

Under these circumstances, we deem it proper to reduce moral damages to only

P10,000.00 payable by private respondent NEECO I to each individual petitioner. We also deem it sufficient for private respondent NEECO I to pay each individual petitioner

P5,000.00 to answer for exemplary damages, based on the provisions of Articles 2229 and 2232 of the Civil Code (NEECO I v. NLRC, G.R. No. 116066, January 24, 2000).

74. What is [an] in-house agency?

An in-house agency is where a contractor or subcontractor is engaged in the supply of labor which is owned, managed, or controlled by the principal and operates solely for the

principal owning, managing, and controlling it. It is prohibited by law.

75. What is the so-called HOLDOVER PRINCIPLE in a CBA?

In the case of New Pacific Timber vs. NLRC, the court had the occasion to rule that

Article 253 and 253-A mandate the parties to keep the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period

prior to the expiration of the old CBHA and/or until a new agreement is reached by the parties. Consequently, the automatic renewal clause provided by the law, which is deemed

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incorporated in all CBAs provides the reason why the new CBA can only be given a prospective effect. Thus, employees hired after the stipulated term of a CBA are entitled to

the benefits provided thereunder. To exclude them would constitute undue discrimination and deprive them of monetary benefits they would otherwise be entitled to under a new

collective bargaining contract to which they would have been parties.

76. Which is the better barometer of the true financial standing of a company for purposes of resolving an economic deadlock in collective bargaining, a proposed budget or an audited financial statement. Explain.

As we ruled in the case of Caltex Refinery Employees Association (CREA) vs. Jose

S. Brillantes, (279 SCRA 218, 1997) [w]e believe that the standard proof of a company's financial standing is its financial statements duly audited by independent and credible

external auditors." Financial statements audited by independent external auditors constitute the normal method of proof of profit and loss performance of a company. The financial capability of a company cannot be based on its proposed budget because a

proposed budget does not reflect the true financial condition of a company, unlike audited financial statements, and more importantly, the use of a proposed budget as proof of a

company's financial condition would be susceptible to abuse by scheming employers who might be merely feigning dire financial condition in their business ventures in order to avoid

granting salary increases and fringe benefits to their employees.

77. What is the controlling doctrine on the issue of RETROACTIVITY of CBA benefits?

Explain. May the Secretary of Labor order the retroactivity of a CBA?

Labor laws are silent as to when an arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall

retroact. In general, a CBA negotiated within six months after the expiration of the existing CBA retroacts to the day immediately following such date and if agreed thereafter, the effectivity depends on the agreement of the parties. On the other hand, the law is silent as to

the retroactivity of a CBA arbitral award or that granted not by virtue of the mutual agreement of the parties but by intervention of the government. Despite the silence of the

law, the Court rules herein that CBA arbitral awards granted after six months from the expiration of the last CBA shall retroact to such time agreed upon by both employer and the

employees or their union. Absent such an agreement as to retroactivity, the award shall retroact to the first day after the six-month period following the expiration of the last day of the CBA should there be one. In the absence of a CBA, the Secretary's determination of the

date of retroactivity as part of his discretionary powers over arbitral awards shall control (MERALCO v. Quisumbing, G.R. No. 127598, February 22, 2000).

78. May the Labor Unions and the Company enter into a CBA that grants a

moratorium of ten years in collective bargaining? Is this not a novation of the unions right to collective bargaining? Explain.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void because it abrogated the right of workers to self-organization and their right to

collective bargaining. Petitioners claim that the agreement was not meant merely to suspend the existing PAL-PALEA CBA, which expires on September 30, 2000, but also to foreclose

any renegotiation or any possibility to forge a new CBA for a decade or up to 2008. It violates the protection to labor policy laid down by the Constitution.

Under Article 253-A of the Labor Code insofar as representation is concerned, a CBA

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has a term of five years, while the other provisions, except for representation, may be negotiated not later than three years after the execution. Petitioners submit that a 10-year

CBA suspension is inordinately long, way beyond the maximum statutory life of a CBA, provided for in Article 253-A. By agreeing to a 10-year suspension, PALEA, in effect,

abdicated the workers constitutional right to bargain for another CBA at the mandated time. We find the argument devoid of merit (Rivera v. Espiritu, G.R. No. 135547, January

23, 2002).

79. Is there a conflict between a CBA that grants a 10-year moratorium on CBA

bargaining on one hand, and Art. 253-A of the Labor Code, on the other? Explain.

The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the severe financial situation faced by the employer,

with the peculiar and unique intention of not merely promoting industrial peace at PAL, but preventing the latters closure. We find no conflict between said agreement and Article 253-A of the Labor Code. Article 253-A has a two-fold purpose. One is to promote industrial

stability and predictability. Inasmuch as the agreement sought to promote indus