ARTICLE 95
291 is applicable to Bautistas
43. AUTO BUS
TRANSPORT SYSTEM
INC. V. BAUTISTA G.R.
No. 156367 May 16,
2005 CHICO-NAZARIO,
J.:
Doctrine:
The three (3)-year prescriptive period for SIL commences, not at the end of the year
when the employee becomes entitled to the commutation of his SIL, but from the time
when the employer refuses to pay its monetary equivalent after demand of
commutation or upon termination of the employees services, as the case may be.
FACTS:
Antonio Bautista has been employed by petitioner Auto Bus Transport Systems, Inc.
(Autobus), as driver-conductor and was paid on commission basis at the rate of 7% of
the total gross income per travel. Bautista, while driving petitioners bus along Sta.
Fe, Nueva Vizcaya, the bus he was driving accidentally bumped the rear portion of
another bus of petitioner, as the latter vehicle suddenly stopped at a sharp curve
without giving any warning.
After a month, Bautista was terminated for failing to pay 30% of the cost of the
repairs. Thus, Bautista instituted a complaint for Illegal dismissal with Money Claims
for nonpayment of 13th month pay and service incentive leave pay against Autobus.
Autobus, on the other hand, maintained that Bautistas employment was replete with
offenses involving reckless imprudence, gross negligence, and dishonesty. To support
its claim, petitioner presented copies of letters, memos, irregularity reports, and
warrants of arrest pertaining to several incidents wherein respondent was involved. It
likewise claimed to have afforded Bautista opportunity to explain his side.
LA RULING: The LA ruled that there was no illegal dismissal but ordered petitioner
to pay Bautista his 13th month pay and SIL.
NLRC RULING: The NLRC deleted the award of 13th month pay but retained the
award of SIL.
CA RULING: The CA affirmed in toto the decision of the NLRC.
ISSUES:
1. Whether Bautista is entitled to SIL.
2. Whether 3 year prescriptive period under Art.
SIL.
SC RULING:
1. Yes. As a rule, SIL shall not apply to employees classified as field personnel. The
phrase other employees whose performance is unsupervised by the employer must not
be understood as a separate classification of employees to which service incentive
leave shall not be granted. Rather, it serves as an amplification of the interpretation of
the definition of field personnel under the Labor Code as those whose actual hours of
work in the field cannot be determined with reasonable certainty.
The same is true with respect to the phrase those who are engaged on task or contract
basis, purely commission basis. Said phrase should be related with field personnel,
applying the rule on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow. Hence, employees engaged on
task or contract basis or paid on purely commission basis are not automatically
exempted from the grant of service incentive leave, unless, they fall under the
classification of field personnel.
Accordingly, the mere fact that Bautista is paid purely on a commission basis does
not deprive him entitlement to SIL.
Bautista cannot be considered as field personnel because the definition of field
personnel is not merely concerned with the location where the employee regularly
performs his duties but also with the fact that the employees performance is
unsupervised by the employer.
Along the routes that are plied by these bus companies, there are its inspectors
assigned at strategic places who board the bus and inspect the passengers, the
punched tickets, and the conductors reports. There is also the mandatory once-a-week
car barn or shop day, where the bus is regularly checked as to its mechanical,
electrical, and hydraulic aspects, whether or not there are problems thereon as
reported by the driver and/or conductor. They too, must be at specific place as
specified time, as they generally observe prompt departure and arrival from their point
of origin to their point of destination. In each and every depot, there is always the
Dispatcher whose function is precisely to see to it that the bus and its crew leave the
premises at specific times and arrive at the estimated proper time. Bautista, was
therefore under constant supervision while in the performance of this work.
2. Yes. As such, in the computation of the three-year prescriptive period, a
determination must be made as to the period when the act constituting a violation of
the workers right to the benefits being claimed was committed. In the case of service
incentive leave, the employee may choose to either use his leave credits or commute it
to its monetary equivalent if not exhausted at the end of the year. Furthermore, if the
employee entitled to service incentive leave does not use or commute the same, he is
entitled upon his resignation or separation from work to the commutation of his
accrued service incentive leave.
Thus, the three (3)-year prescriptive period commences, not at the end of the year
when the employee becomes entitled to the commutation of his service incentive
leave, but from the time when the employer refuses to pay its monetary equivalent
after demand of commutation or upon termination of the employees services, as the
case may be.
Bautista had not made use of his service incentive leave nor demanded for its
commutation until his employment was terminated by petitioner. Neither did he
compensate his accumulated service incentive leave pay at the time of his dismissal. It
was only upon his filing of a complaint for illegal dismissal, one month from the time
of his dismissal, that respondent demanded from his former employer commutation of
his accumulated leave credits. His cause of action to claim the payment of his
accumulated service incentive leave thus accrued from the time when his employer
dismissed him and failed to pay his accumulated leave credits. It cannot be denied that
his cause of action did not prescribe.
TICLE 97
44. SONGCO ET. AL V. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 50999-51000 March 23, 1990
MEDIALDEA J.:
Doctrines:
1. In computing the basis for paying separation pay, commissions and
allowances shall be added to the basic monthly salary.
2. The average commissions earned by a salesman during their last year of
employment should be used in computing the separation pay.
FACTS:
Petitioners are in the sales force of Zuellig. They received monthly salaries of at least
P400.00. In addition, they received commissions for every sale they made.
Zuellig filed with the DOLE an application seeking clearance to terminate the
services of petitioners allegedly on the ground of retrenchment due to financial losses.
Initially, petitioners opposed the dismissal on the ground that they are dismissed for
being part of the union. Later, they agreed that the sole issue to be resolved is the
basis of the separation pay due to them.
Petitioners maintain that their earned sales commissions and allowances should be
added together with their salary to arrive at the basis for computing separation pay,
citing Article 97(f) of the Labor Code. Zuellig on the other hand argues that in the
said article the term wage, commission is used only as one of the features or
designations attached to the word remuneration or earnings.
ISSUES:
1. Whether the allowances should be included in the monthly salary of petitioners
for the purpose of computation of their separation pay; and
2. Whether the sales commissions should be included in the monthly salary of
petitioners for the purpose of computation of their separation pay.
LA RULING: The basis of separation pay shall be equivalent to their one month
salary (exclusive of commissions, allowances, etc.) for every year in service that they
have worked in with the company.
The appeal to the NLRC was dismissed for lack of merit.
SC RULING:
1. Yes. In computing the basis for separation pay of a dismissed employee,
allowances should be included in the monthly salary. This has been settled in the case
of Santos v. NLRC, et al. (GR No. 76721. September 21, 1987) where the SC ruled
that in the computation of backwages and separation pay, account must be taken not
only of the basic salary but also of her transportation and emergency living
allowances.
2. Yes. Article 97(f) by itself is explicit that commission is included in the definition
of the term wage. The law speaks in clear and categorical language, there is no
room for interpretation or construction. Said Article provides:
(f) Wage paid to any employee shall mean the remuneration or
earnings, however designated, capable of being expressed in terms of
money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method calculating the same, which is
payable by an employer to an employee under a written or unwritten
contract of employment for wok done or to be done, or for services
rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee. Fair
and reasonable value shall not include any profit to the employer or to
any person affiliated with the employer.
Granting, in grantia argumenti, that the commissions were in the form of incentives or
encouragement, so that the petitioners would be inspired to put a little more industry
on the jobs particularly assigned to them, still these commissions are direct
remunerations for services rendered which contributed to the increase of income of
Zuellig. Commission is the recompense, compensation or reward of an agent,
salesman, executor, trustee, receiver, factor, broker or bailee, when the same is
calculated as a percentage on the amount of his transactions or on the profit to the
Principal. The nature of the work of a salesman and the reason for such tyoe of
remuneration for services rendered demonstrate clearly that commissions are part of
petitioners wage or salary.
In computation thereof, what should be taken into account is the average
commissions earned during their last year of employment.
45. MILLARES ET AL V. NLRC
GR No. 122827 March 29, 1999
BELLOSILLO, J.:
Doctrines:
1. In determining whether a privilege is a facility, the criterion is not so much its
kind but its purpose.
2. The Sec. of Labor may from time to time fix in appropriate issuances the fair
and reasonable value of board, lodging and other facilities customarily furnished
by an employer to his employees.
3. Separation pay when awarded to an illegally dismissed employee should be
computed based not only on the basic salary but also on the regular allowances
that the employee had been receiving.
FACTS:
Petitioners numbering 116 occupied positions of Technical Staff, Unit Manager,
Section Manager, Department Manager, Division Manager and Vice President in the
mill site of PICOP in Bislig, Surigao del Sur.
Their services were terminated when the company undertook a retrenchment
program. They received separation pay at the rate of one (1) month basic salary for
every year in service.
They lodged a complaint for separation pay differentials believing that the allowances
they allegedly regularly received on a monthly basis during their employment should
have been included in the computation of their separation pay.
The allowances pertained to the following:
1. Staff/Managers Allowance
a. PICOP provides free housing facilities to supervisory
and managerial employees assigned in Bislig. The
privilege includes free water and electric consumption.
b. Owing to the shortage of such facilities, PICOP was
constrained to grant Staff allowance instead to those who
live in rented houses outside but near the vicinity of the
mill site. The allowance ceases whenever a vacancy occurs
in the companys housing facilities.
2. Transportation Allowance Transportation allowance is granted to
key officers and Managers assigned in the mill site who use their own
vehicles in the performance of their duties. It is a conditional grant such
that when the conditions no longer obtain, the privilege is discontinued.
3. Bislig Allowance Given to Division Managers and corporate
officers assigned in Bislig on account of the hostile environment. But
once the recipient is transferred elsewhere outside Bislig, the allowance
ceases.
Petitioners maintain that the said allowances are included in the definition of
facilities in Art. 97, par. (f), of the Labor Code, being necessary and indispensable
for their existence and subsistence. Furthermore, they claim that their availment of
the monetary equivalent of those facilities on a monthly basis was characterized by
permanency, regularity and customariness.
ISSUES:
1. Whether the receipt of the above-mentioned allowances, on a monthly basis,
ipso facto characterize it as regular and forming part of salary; and
2. Whether the above-mentioned can be considered as facilitites and
therefore included in the computation of separation pay as wage.
LA RULING: Yes, the allowances are to be characterized as being received regularly
and forming part of salary. It is also to be considered as facilities under Art 97, par.
(f) of the Labor Code for purposes of computing separation pay. The LA cited Santos
v NLRC and Soriano v NLRC that in the computation of separation pay account
should be taken not just of the basic salary but also of the regular allowances that the
employee had been receiving.
NLRC RULING: No, the NLRC reversed the Labor Arbiter. The NLRC found that
petitioners allowances were contingency-based and thus not included in their
salaries.
SC RULING:
The decision of the NLRC is affirmed. The allowances are not to be included in the
computation of wage for purposes of paying separation pay
1. The receipt of an allowance on a monthly basis does not ipso facto
characterize it as regular and forming part of salary because the nature of the grant is
a factor worth considering. The subject allowances were temporarily, not regularly,
received by petitioners. Petitioners continuous enjoyment of the disputed allowances
was based on contingencies the occurrence of which wrote finis to such enjoyment.
For housing allowance, the same is discontinued once a vacancy occurs in
the company-provided housing accommodations.
Transportation allowance is given only to employees who have personal cars
in the form of advances for actual transportation expenses subject to liquidation.
Bislig allowance is- once the officer is transferred outside Bislig, the allowance stops.
2. The Staff/Managers allowance may fall under lodging but the transportation and
Bislig allowances are not embraced in facilitites on the main consideration that they
are granted as well as the Staff/Managers allowance for respondent PICOPs benefit
and convenience, i.e. to insure that petitioners render quality performance. In
determining whether a privilege is a facility, the criterion is not so much its kind but its
purpose.
46. SLL INTERNATIONAL CABLES
SPECIALIST AND SONNY LAGON V. NLRC GR
No. 172161. March 2, 2011
MENDOZA, J.:
Doctrines:
1. Before the value of facilities can be deducted from the employees wages, 3
requisites must concur: (1) proof must be shown that such facilities are
customarily furnished by the trade; (2) the provision of deductible facilities must
be voluntarily accepted in writing by the employee; and (3) facilities must be
charged at reasonable value.
2. Distinction between Facilities and Supplements. Supplements constitute 47. OUR HAUS REALTY DEVELOPMENT CORPORATION
extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages. Facilities are items
of expense necessary for the laborers and his familys existence and subsistence
so that they form part of the wage and when furnished by the employer are
deductible therefrom, since if they are not so furnished, the laborer would spend
and pay for them just the same.
FACTS:
Private respondents Lopez, Canete and Zuniga were hired by petitioner, initially as
trainee cable/lineman. They were paid the full minimum wage. After their training,
they were repeatedly hired by petitioner as project employees. They were not paid the
required minimum wage. In their last project with petitioner, respondents were not
allowed to render overtime work. This prompted respondents to return home and
leave their work.
They filed a complaint for illegal dismissal, non-payment of wages, holiday pay, 13th
month pay and damages.
In its answer, petitioner argued that respondents are not regular employees. It also
reasoned that the food allowance, allowance for lodging house, transportation.
Electricity, water and snacks should be added to their basic pay. With these,
petitioners claimed that private respondents received higher wage rate than that
prescribed in their areas of work.
ISSUE: Whether the said allowances are to be considered as facilities and are
therefore deductible from the wage of the respondent employees.
LA RULING: No. The free board and lodging, electricity, water and food enjoyed by
respondents could not be included in the computation of their wages because these
were given without their written consent.
NLRC RULING: No. decision of the Labor Arbiter affirmed.
CA RULING: No. decision of the Labor Arbiter affirmed.
SC RULING:
No. Before the value of facilities can be deducted from the employees wages, 3
requisites must concur: (1) proof must be shown that such facilities are customarily
furnished by the trade; (2) the provision of deductible facilities must be voluntarily
accepted in writing by the employee; and (3) facilities must be charged at reasonable
value. These requirements have not been met in this case.
vs.ALEXANDER PARIAN, JAY C. ERINCO, ALEXANDER CANLAS,
BERNARD TENEDERO and JERRY SABULAO
G.R. No. 204651 August 6, 2014
BRION J.:
Doctrines:
1. To be able to deduct facilities to the wage of an employee, three requisites
must concur:
a. proof must be shown that such facilities are customarily furnished
by the trade;
b. the provision of deductible facilities must be voluntarily accepted in
writing by the employee; and
c. The facilities must be charged at fair and reasonable value.
2. DOLE DO No. 56, series of 2005, which sets out the guidelines for the
implementation of DOLE DO No. 13, mandates that the cost of the
implementation of the requirements for the construction safety and health of
workers, shall be integrated to the overall project cost. The rationale behind
this is to ensure that the living accommodation of the workers is not
substandard and is strictly compliant with the DOLEs OSH criteria.
As part of the project cost that construction companies already charge to
their clients, the value of the housing of their workers cannot be charged
again to their employees salaries. Our Haus cannot pass the burden of the
OSH costs of its construction projects to its employees by deducting it as
facilities. This is Our Haus obligation under the law.
3. Lastly, even if a benefit is customarily provided by the trade, it must still
pass the purpose test set by jurisprudence. Under this test, if a benefit or
privilege granted to the employee is clearly for the employers convenience,
it will not be considered as a facility but a supplement. Here, careful
consideration is given to the nature of the employers business in relation to
the work performed by the employee. This test is used to address inequitable
situations wherein employers consider a benefit deductible from the wages
even if the factual circumstances show that it clearly redounds to the
employers greater advantage.
FACTS:
Respondents Alexander Parian, Jay Erinco, Alexander Canlas, Jerry Sabulao and
Bernardo Tenederowere all laborers working for petitioner Our Haus Realty
Development Corporation (Our Haus), a company engaged in the construction
business.
They claimed that they were not paid the required minimum wage. Petitioner argues
that aside from subsidizing their meals (3 times a day), it also gave them free lodging
near the construction project they were assigned to. In determining the total amount of
the respondents daily wages, the value of these benefits should be considered, in line
with Article 97(f) of the Labor Code.
The respondents pointed out that Our Haus never presented any proof that they agreed
in writing to the inclusion of their meals value in their wages. Also, Our Haus failed
to prove that the value of the facilities it furnished was fair and reasonable. Finally,
instead of deducting the maximum amount of 70% of the value of the meals, Our
Haus actually withheld its full value (which was Php290.00 per week for each
employee).
ISSUE: Whether the amounts for food subsidy and lodging should be considered as
part of the daily wages of a construction worker
LA RULING: Yes. The LA ruled in favor of Our Haus. He held that if the reasonable
values of the board and lodging would be taken into account, the respondents daily
wages would meet the minimum wage rate
NLRC RULING: No. The NLRC reversed the LA. Citing the case of Mayon Hotel
& Restaurant v. Adana, the NLRC noted that the respondents did not authorize Our
Haus in writing to charge the values of their board and lodging to their wages. Thus,
the samecannot be credited.
CA RULING: No. The CA dismissed Our Haus certiorari petition and affirmed the
NLRC rulings in toto.
SC RULING:
No. As the CA correctly ruled, the requirements for deducting the value of facilities
to the wages of an employee, as summarized in Mabeza, are the following:
a. proof must be shown that such facilities are customarily furnished by the
trade;
b. the provision of deductible facilities must be voluntarily accepted in
writing by the employee; and
c. The facilities must be charged at fair and reasonable value
None of these are proven to have existed by petitioner.
Our Haus could not really be expected to prove compliance with the first requirement
since the living accommodation of workers in the construction industry is not simply
a matter of business practice. Peculiar to the construction business are the
occupational safety and health (OSH) services which the law itself mandates
employers to provide to their workers. This isto ensure the humane working
conditions of construction employees despite their constant exposure to hazardous
working environments. Under Section 16 of DOLE Department Order (DO) No. 13,
series of 1998,43 employers engaged in the construction business are required to
providethe following welfare amenities:
16.1 Adequate supply of safe drinking water
16.2 Adequate sanitaryand washing facilities
16.3 Suitable living accommodation for workers, and as may be applicable,
for their families
16.4 Separate sanitary, washing and sleeping facilitiesfor men and women
workers.
Moreover, DOLE DO No. 56, series of 2005, which sets out the guidelines for the
implementation ofDOLE DO No. 13, mandates that the cost of the implementation of
the requirements for the construction safety and health of workers, shall be integrated
to the overall project cost.44 The rationale behind this isto ensure that the living
accommodation of the workers is not substandard and is strictly compliant with the
DOLEs OSH criteria.
As part of the project cost that construction companies already charge to their clients,
the value of the housing of their workers cannot be charged again to their employees
salaries. Our Haus cannot pass the burden of the OSH costs of its construction
projects to its employees by deducting it as facilities. This is Our Haus obligation
under the law.
As to the second requirement, Our Haus belatedly submitted five kasunduans,
supposedly executed by the respondents, containing their conformity to the inclusion
of the values of the meals and housing to their total wages. Oddly, Our Haus only
offered these documents when the NLRC had already ruled that respondents did not
accomplish any written authorization, to allow deduction from their wages. These five
kasunduans were also undated, making us wonder if they had reallybeen executed
when respondents first assumed their jobs.
Moreover, in the earlier sinumpaang salaysay by Our Haus four employees, it was
not mentioned that they also executed a kasunduanfor their board and lodging
benefits. Because of these surrounding circumstances and the suspicious timing when
the five kasunduanswere submitted as evidence, we agree withthe CA that the NLRC
committed no grave abuse of discretion in disregarding these documents for being
self serving.
As to the third requirement, Our Haus never explained how it came up with the values
it assigned for the benefits it provided; it merely listed its supposed expenses without
any supporting document. Since Our Haus is using these additional expenses (cooks
salary, water and LPG) to support its claim that it did not withhold the full amount of
the meals value, Our Haus is burdened to present evidence to corroborate its claim.
The records however, are bereft of any evidence to support Our Haus meal expense
computation. Even the value it assigned for the respondents living accommodations
was not supported by any documentary evidence. Without any corroborative evidence,
it cannot be said that Our Haus complied with this third requisite.
ARTICL
E 100
48. AMERICAN WIRE AND CABLE DAILY RATED EMPLOYEES UNION V.
AMERICAN WIRE AND CABLE
CO., INC.
GR No. 155059 April 29, 2005
CHICO-NAZARIO J.
Doctrines:
1. The granting of a bonus is a management prerogative, something given in
addition to what is ordinarily received by or strictly due the recipient. Thus, a
bonus is not a demandable and enforceable obligation, except when it is made
part of the wage, salary or compensation of the employee.
2. For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties, or it must have had a fixed amount and had
been a long ad regular practice on the part of the employer.
3. To be considered a regular practice, the giving of the bonus should have been
done over a long period of time, and must be shown to have been consistent and
deliberate.
FACTS:
The American Wire and Cable Co. Inc., has been giving its employees certain
benefits and entitlements. These include the following:
a. Service Award
b. 35% premium pay of an employees basic pay for work rendered
during Holy Monday, Holy Tuesday, Holy Wednesday, Dec. 23, 26,
27, 28 and 29
c. Christmas Party
d. Promotional Increase
All the said benefits are no part of the CBA and the grant thereof was based upon the
financial performance of the company. Moreover, the grant of the 35% premium pay
was only made for a period of two years with the express condition that it is based on
the financial situation of the company.
Over the years, there has been a downtrend in the giving of service awards and its
amount and holding of Christmas parties.
When the financial situation of the company worsened, the company unilaterally
stopped giving the said benefits.
The unions (petitioners), filed a complaint alleging that the company violated Article
100 of the Labor Code. It argues that the benefits and incentives can no longer be
withdrawn since it has ripened into a company practice.
The company answered by arguing that the said benefits are in the nature of bonuses
which it can withdraw unilaterally.
ISSUES:
1. Whether the said benefits are in the nature of bonuses which can be withdrawn
unilaterally by respondent company
2. If considered as bonuses, whether it can be considered as part of the wage or
salary or compensation making them enforceable obligations
LA RULING: Yes, therefore the company is not guilty of violating Art 100 of the
Labor Code.
CA RULING: Yes. The decision of the VA is affirmed and upheld.
SC RULING:
1. Yes. A bonus is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of the employers business and made
possible the realization of profits. The granting of a bonus is a management
prerogative, something given in addition to what is ordinarily received by or strictly
due the recipient. Thus, a bonus is not a demandable and enforceable obligation,
except when it is made part of the wage, salary or compensation of the employee.
All the said benefits are in excess of what the law requires each employer to give its
employees. Since they are above what is strictly due to the members of the union, the
granting of the same was a management prerogative, which, whenever management
sees necessary, may be withdrawn, unless they have been made a part of the wage or
salary or compensation of the employees.
2. No. For a bonus to be enforceable, it must have been promised by the employer and
expressly agreed upon by the parties, or it must have had a fixed amount and had been
a long and regular practice on the part of the employer.
The benefits in question were never subjects of any express agreement between the
parties. They were never incorporated in the CBA. The Christmas parties and its
incidental benefits and the giving of case incentive together with the service award
cannot be said to have fixed amounts, To be considered a regular practice, the givng
of the bonus should have been done over a long period of time, and must be shown to
have been consistent and deliberate. The downtrend in the grant of these two bonuses
over the years demonstrate that there is nothing consistent about it.
49. TSPIC
CORPORATION V.
TSPIC EMPLOYEES
UNION GR No. 163419
February 13, 2008
VELASCO, JR., J.
Doctrines:
1. Diminution of benefits is the unilateral withdrawal by the employer of benefits
already enjoyed by the employees. There is diminution of benefits when it is
shown that: (1) the grant or benefit is founded on a policy or has ripened into a
practice over a long period; (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
2. An erroneously granted benefit may be withdrawn without violating the
prohibition against non-diminution of benefits
FACTS:
Respondent Union is the registered bargaining agent of petitioner TSPIC. The two
entered into a CBA for the years 2000-2004. The CBA included a provision on yearly
salary increases starting January 2000 until January 2002. Under the CBA, different
rates of wage increases in the duration of the CBA, are given to different sets of
employees. The increases for the second year and third year of implementation of the
CBA are deemed to be inclusive of any Wage Increase ordered by the Wage Boards
and as correction of any wage distortion that may have been brought about by future
Wage Orders (crediting provision.)
When Wage Order No. 8 was implemented increasing the minimum wage of regular
employees, an error in the automated payroll system occurred and TSPIC claims that
24 employees were overpaid. They were notified that the overpayment would be
deducted from their salaries in a staggered basis. TSPIC explained that the correction
of the erroneous computation was based on the crediting provision of the CBA.
The Union asserted that there was no error and that the deduction constituted
diminution of pay. The Union insists that the crediting provision of the CBA finds
no application in the present case, since at the time the Wage Order was issued, the
probationary employees were not yet covered by the CBA, particularly by the
crediting provision.
ISSUE: Whether charging the overpayments made to the respondents through
staggered deductions constitute diminution of benefits.
LA RULING: Yes. The unilateral deduction made by TSPIC violated Art. 100 of the
Labor Code
CA RULING: Yes, the decision of the VA is affirmed in toto
SC RULING:
No. Diminution of benefits is the unilateral withdrawal by the employer of benefits
already enjoyed by the employees. There is diminution of benefits when it is shown
that: (1) the grant or benefit is founded on a policy or has ripened into a practice over
a long period; (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
As correctly pointed out by TSPIC, the overpayment of its employees was a
result of an error. This error was immediately rectified by TSPIC upon its discovery.
We have ruled before that an erroneously granted benefit may be withdrawn without
violating the prohibition against non-diminution of benefits.
50. LEPANTO CERAMICS, INC., V. LEPANTO
CERAMICS EMPLOYEES ASSOCIATION GR No.
180866 March 2, 2010
PEREZ, J.:
Doctrine:
A bonus that has been incorporated in the CBA becomes more than just an act of
generosity on the part of the employer but a contractual obligation it has undertaken.
FACTS:
In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of
the respondent Association. In September 1999, the two entered into a CBA which
provides for the grant of a Christmas gift package/bonus to the members of the
respondent Association. The Christmas bonus was one of the enumerated existing
benefit, practice of traditional rights which shall remain in full force and effect.
In 2002, the year-end cash benefit was only P600.00. The Association objected
arguing that such act was a violation of the CBA. After failure to settle, the
Association filed a Notice of Strike. The case was referred to the Voluntary Arbitrator.
The Association insisted that it has been the company practice grant members
Christmas bonuses in the amount of P3,000.00. Thus it argues that failure on the part
of the company to give said amount was in violation of the CBA.
Petitioner argues that the said amount is in the form of a bonus and is thus not
demandable. It argued that the giving of extra compensation was based on the
companys available resources for a given year and the workers are not entitled to a
bonus if the company does not make profits. Petitioner avers that it is debt ridden and
could not give out the bonus.
ISSUE: Whether the amount of P3,000 Christmas gift/bonus is demandable for being
included in the CBA
LA RULING: Yes. The CBA is a binding contract and constitutes the law between
the parties.
CA RULING: The decision of the VA is affirmed in toto
SC RULING:
Yes. Generally, a bonus is not a demandable and enforceable obligation. For a bonus to
be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties. Given that the bonus in this case is integrated in the CBA, the
same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has
become more than just an act of generosity on the part of the petitioner but a
contractual obligation it has undertaken.
51. EASTERN TELECOMMUNICATIONS PHIL. INC. V. EASTERN
TELECOMS EMPLOYEES UNION GR No. 185665. February 8, 2012
MENDOZA, J.:

Doctrines:
1. Whether or not a bonus forms part of wages depends upon the circumstances
and conditions for its payment. If it is additional compensation which the
employer promised and agreed to give without any conditions imposed for its
payment, such as success of business or greater production or output, then it is
part of the wage, But if its paid only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered part of wage. Where it is not
payable to all but only to some employees and only when their labor becomes
more efficient or more productive, it is only an inducement for efficiency, a
prize therefore, not a part of wage.
2. A bonus may be granted on equitable consideration when the giving of such
bonus has been the companys long and regular practice.
3. The principle of non-diminution of benefits is founded on the constitutional
mandate to protect the rights of workers and to promote their welfare and to
afford labor full protection.
FACTS:
Respondent Union is the exclusive bargaining agent in the establishment of Petitioner
Company. Since 1975, the company has been giving its employees 14 th , 15th and 16th
month bonuses. In 2001, the two signed a side agreement which provides that the
14th, 15th and 16th month bonuses are granted.
Due to continuing financial losses which started in 2000, the company, decided in
2003, to defer the payment of the said bonuses. The Union opposed the said plan. The
Union argues that the bonuses are now legally demandable for being included in the
CBA. Furthermore, the giving of the said bonuses has now ripened into company
practice and can no longer be withdrawn without violating Article 100 of the Labor
Code.
The company argues that the said bonuses are not legally demandable. It argues that
the giving of said bonuses are dependent on the financial capability of the company.
Since it has been sustaining losses since 2000, it no longer has the capacity to give
such bonuses.
ISSUE: Whether the said bonuses are legally demandable
NLRC RULING: No. the payment of these bonuses are management prerogative,
being an act of generosity and munificence on the part of the company and contingent
upon the realization of profits. The company may not be obliged to pay extra
compensation in view of the substantial decline in its financial condition.
CA RULING: Yes, the Side Agreement in the CBA granting the bonuses are
contractual obligations on the company without qualification or condition. Also, the
grant of the said bonuses has already ripened into a company practice and their denial
would amount to diminution of the employees benefits.
SC RULING:
Yes. A bonus becomes a demandable or enforceable obligation when it is made part of
the wage or salary or compensation of the employee. It is indubitable that the
company and the union agreed on the inclusion of a provision for the grant of the
bonuses in the Side Agreement. There were no conditions specified in the CBA Side
Agreement for the grant of the benefits. By its inclusion in the CBA Side Agreements,
the bonuses has become more than just an act of generosity on the part of the
company but a contractual obligation it has undertaken.
Granting arguendo that the CBA Side Agreement does not contractually bid the
company, its act of granting the same has become an established company practice
such that it has virtually become part of the employees salary or wage. A bonus may
be granted on equitable consideration when the giving of such bonus has been the
companys long and regular practice.
In this case, the company has been giving the said bonuses since 1975 whether it
earned profits or not.
ARTICLE 106
52. GSIS vs. NLRC
G.R. No. 180045
November 17, 2010
NACHURA, J.:
JOINT AND SOLIDARY LIABILITY OF THE PRINCIPAL
FACTS:
Respondents were employed as security guards by DNL Security Agency. By virtue
of the service contract entered into by DNL Security and GSIS, respondents were
assigned to GSIS Tacloban City office.
However, DNL Security informed respondents that its service contract with GSIS was
terminated. Notwithstanding, DNL Security instructed respondents to continue
reporting for work to GSIS. Respondents worked as instructed but without receiving
their wages; after which, they were terminated from employment. Hence, respondents
filed with the LA a complaint against DNL Security and GSIS.

ISSUE: Is GSIS liable for payment of the respondents unpaid salary and other
monetary benefits?
LA RULING: LA rendered a decision against DNL Security and GSIS ordering both
as jointly and solidarily liable to respondent for the unpaid salary.
NLRC RULING: NLRC treated DNL Securitys motion for reconsideration as an
appeal, but dismissed the same, as it was not legally perfected. GSIS filed a petition
for certiorari before the CA.
CA RULING: CA affirmed the NLRC ruling. GSIS averred that it has no actual and
direct employer-employee relationship between it and the respondents.
SC RULING:
GSIS is jointly and severally liable with DNS Security with respect to respondents
claims. When GSIS contracted DNL Securitys services, it became an indirect
employer of respondents, pursuant to Article 107 of LC. After DNL Security failed to
pay respondents the correct wages and other monetary benefits, GSIS, as principal,
became jointly and severally liable, as provided in Articles 106 and 109 of LC.
While it is true that respondents continued working for GSIS after the expiration of
their contract, based on the instruction of DNL Security, GSIS did not object to such
assignment and allowed respondents to render service. Thus, GSIS impliedly
approved the extension of respondents services. Accordingly, GSIS is bound by the
provisions of the LC on indirect employment. So long as the work, task, job, or
project has been performed for its benefit or on its behalf, the liability accrues for
such services. However, the solidary liability of GSIS does not preclude the
application of Article 1217 of the Civil Code on the right of reimbursement from its
co-debtor, DNS Security.
GSIS liability, however, cannot extend to the payment of separation pay. An order to
pay separation pay is invested with a punitive character, such that an indirect employer
should not be made liable without a finding that it had conspired in the illegal
dismissal of the employees.
53. ALIVIADO,
et.al. vs.
PROCTOR AND
GAMBLE G.R.
No. 160506 June 6,
2011
DEL CASTILLO, J.:
CONTROL TEST IS MERELY ONE OF THE ELEMENTS TO DETERMINE
EXISTENCE OF LABOR-ONLY
CONTRACTING
FACTS:
(The full text of the case does not include the facts since it only resolved the 2nd MR
filed by P&G to SC.) On March 9, 2010, the SC rendered a Decision holding that
Promm-Gem is a legitimate independent contractor; that Sales and Promotions
Services (SAPS) is a labor-only contractor consequently its employees are considered
employees of Procter & Gamble Phils., Inc. (P&G); that Promm-Gem is guilty of
illegal dismissal; that SAPS/P&G is likewise guilty of illegal dismissal; that
petitioners are entitled to reinstatement; and that the dismissed employees of
SAPS/P&G are entitled to moral damages and attorneys fees there being bad faith in
their dismissal.
P&G filed a Motion for Reconsideration but was denied by the SC. P&G filed a
second MR. P&G claimed that the SC erred in not applying the four -fold test,
particularly the control test in determining whether SAPS is a legitimate independent
contractor or a labor-only contractor.
ISSUE: Whether SAPS is a labor-only contractor?
SC RULING:
The SC correctly determined SAPS as a labor-only contractor. As discussed in the
March 9, 2010 SC Decision, the applicable rules are Article 106 of the LC and Rule
VIII-A, Book III of the Omnibus Rules Implementing the LC, as amended by D.O.
No. 18 -06. The said DO provides that labor- only contracting exists when any of the
two elements is present: (1) the contractor or subcontractor does not have substantial
capital or investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal;
OR (2) the contractor does not exercise the right to control over the performance of
the work of the contractual employee.
Therefore, the control test is merely one of the factors to consider. It was already
established that SAPS has no substantial capitalization and it was performing
merchandising and promotional activities which are directly related to P&G's business.
Since SAPS met one of the requirements, it was enough basis for SC to hold that it is a
labor -only contractor. Consequently, its principal, P&G, is considered the employer of
its employees. This is pursuant to the ruling in Aklan v. San Miguel Corporation[27]
where it was held that [a] finding that a contractor is a labor-only contractor, as
opposed to permissible job contracting, is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the
supposed contractor, and the labor-only contractor is considered as a mere agent of the
principal, the real employer.
54. MANDAUE GALLEON
TRADE INC. vs.
ANDALES et.al. G.R. No.
159668 March 7, 2008
AUSTRIA-MARTINEZ, J.:
FACTS:
Respondent Vicente Andales filed a complaint with the Labor Arbiter (LA) against
petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc.
(GTI) for illegal dismissal and non-payment of 13th month pay and service incentive
leave pay. Respondents alleged that MGTI hired them on various dates as weavers,
grinders, sanders and finishers but they were dismissed without notice and just cause.
Respondents further alleged that they are regular employees of MGTI because: (a)
they performed their work inside the company premises; (b) they were issued
uniforms by MGTI and were told to strictly follow company rules and regulations; (c)
they were under the supervision of MGTI's foremen, quality control personnel and
checkers; (d) MGTI supplied the materials, designs, tools and equipment in the
production of furniture; (e) MGTI conducts orientations on how the work was to be
done and the safe and efficient use of tools and equipment; (f) MGTI issues
memoranda regarding absences and waste of materials; and (g) MGTI exercises the
power to discipline them.
On the other hand, MGTI denied the existence of employer-employee relationship
with complainants, claiming that they are workers of independent contractors whose
services were engaged temporarily and seasonally when the demands for its products
are high and could not be met by its regular workforce; the independent contractors
recruited and hired the complainants, prepared the payroll and paid their wages,
supervised and directed their work, and had authority to dismiss them.
LA RULING: LA held that the respondents are regular piece-rate employees of
MGTI since they were made to perform functions which are necessary to MGTI's
rattan furniture manufacturing business. The independent contractors were not
properly identified. The absence of proof that the independent contractors have work
premises of their own, substantial capital or investment in the form of tools,
equipment and machineries make them only labor contractors.
NLRC RULING: It affirmed the decision of LA. It held that labor-only contracting
and not job -contracting was present since the alleged contractors did not have
substantial capital in the form of equipment, machineries and work premises.
CA RULING: MGTI is liable to the respondents because the alleged contractors are
not independent contractors but labor-only contractors.
ISSUE: Whether or not MGIT is a labor-only contractor?
SC RULING:
MGIT is a labor-only contractor. Based on Article 106 of the Labor Code and
Sections 5 and 7 of the Implementing Rules, labor-only contracting exists when the
following criteria are present: (1) where the contractor or subcontractor supplying
workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among other things; and the workers
recruited and placed by the contractor or subcontractor are performing activities
which are directly related to the principal business of such employer; or (2) where the
contractor does not exercise the right to control the performance of the work of the
contractual employee.
First, respondents work as weavers, grinders, sanders and finishers is directly related
to MGTI's principal business of rattan furniture manufacturing. Where the employees
are tasked to undertake activities usually desirable or necessary in the usual business
of the employer, the contractor is considered as a labor-only contractor and such
employees are considered as regular employees of the employer.
Second, MGTI was unable to present any proof that its contractors had substantial
capital. There was no evidence pertaining to the contractors' capitalization; nor to
their investment in tools, equipment or implements actually used in the performance
or completion of the job, work, or service that they were contracted to render.
Thus, the contractors are labor-only contractors since they do not have substantial
capital or investment which relates to the service performed and respondents
performed activities which were directly related to MGTI's
main business. MGTI, the principal employer, is solidarily liable with the labor-only
contractors, for the rightful claims of the employees. Under this set-up, labor -only
contractors are deemed agents of the principal, MGTI, and the law makes the principal
responsible to the employees of the labor-only contractor as if the principal itself
directly hired or employed the employees.

55. SPIC N SPAN
SERVICES CORPORATION
vs. PAJE et.al. G.R. No.
174084 August 25, 2010
BRION, J.:
REQUIREMENTS OF LEGITIMATE CONTRACTING/SUBCONTRACTING
FACTS:
Swift Foods, Inc. (Swift) manufactures and processes meat products and other food
products. Petitioner SNSs business is to supply manpower services to its clients for a
fee. Swift and SNS have a contract to promote Swift products. Respondents worked
as Deli/Promo Girls of Swift products in supermarkets. They were all dismissed from
their employment on February 28, 1998. They filed two complaints for illegal
dismissal against SNS and Swift before NLRC. Swift moved to dismiss the
complaints on the ground that it entered into an independent labor contract with SNS
for the promotion of its products. It alleged that the respondents were the employees
of SNS, not of Swift.
RULING OF LA: LA found SNS to be the agent of Swift. First, the agreement
between SNS and Swift shows that the latter exercised control over the promo girls
and/or merchandisers through the services of coordinators. Second, it cannot be said
that SNS has substantial capital. Third, the duties of the petitioners were directly
related, necessary and vital to the day-to -day operations of Swift. Lastly, the uniform
and identification cards used by the petitioners were subject to the approval of Swift.
RULING OF NLRC: NLRC ruled that SNS is an independent contractor. First, there
is no evidence that Swift exercised the power of control over the petitioners. Rather, it
is SNS who exercised direct control and supervision over the nature and performance
of the works of herein petitioners. Second, by law, Swift and SNS have distinct and
separate juridical personality from each other.
RULING OF CA: CA dismissed the appeal. It concluded that SNS was merely an
agent of Swift; thus, the latter should not be exempt from liability.
ISSUE: Whether SNS is merely an agent of Swift?
SC RULING:
SNS is considered merely an agent of Swift which does not exempt the latter from
liability. To be legitimate, contracting or subcontracting must satisfy the following
requirements: 1) 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; 2) the contractor or subcontractor has substantial capital
or investment; and 3) the agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all labor and
occupational safety and health standards, free exercise of right to self-organization,
security of tenure, and social and welfare benefit.
Nowhere in the decisions of both the LA and the NLRC show that SNS had full
control of the means and methods of the performance of their work. Moreover, as
found by the LA, there was no evidence that SNS has substantial capital or investment.
Lastly, there was no finding by the LA nor the NLRC that the agreement between the
principal (Swift) and contractor (SNS) assures the contractual employees entitlement
to all labor and occupational safety and health standards, free exercise of right to self-
organization, security of tenure, and social and welfare benefit.
56. VIGILLA et.al. vs. PCCI
G.R. No. 200094 June 10, 2013
MENDOZA, JR:
A QUITCLAIM EXECUTED IN FAVOR OF THE LABOR-ONLY
CONTRACTOR WILL REDOUND TO THE
BENEFIT OF THE PRINCIPAL EMPLOYER; A LABOR-ONLY
CONTRACTOR IS SOLIDARILY LIABLE
WITH THE EMPLOYER
FACTS:
PCCI is a non-stock educational institution, while the petitioners were janitors,
janitresses and supervisor in the Maintenance Department of PCCI under the
supervision and control of Atty. Seril, PCCIs Senior Vice President for
Administration. The petitioners, however, were made to understand, upon application
with PCCI, that they were under Metropolitan Building Services, Inc. (MBMSI), a
corporation engaged in providing janitorial services to clients. Atty. Seril is also the
President and General Manager of MBMSI.
PCCI, citing the revocation of MBMSI Articles of Incorporation, terminated its
relationship with MBMSI, resulting in the dismissal of the petitioners.
In their complainants before LA, petitioners alleged that it was the school, not
MBMSI, which was their real employer because PCCI had direct control over
MBMSIs operations and the selection and hiring of employees were undertaken by
PCCI.
On the other hand, PCCI contended that it could not have illegally dismissed the
complainants because it was not their direct employer; (b) MBMSI was the one who
had complete and direct control over the complainants; and (c) PCCI had a
contractual agreement with MBMSI, thus, making the latter their direct employer.
Also, PCCI submitted before LA the releases, waivers and quitclaims in favor of
MBMSI executed by the respondents to prove that they were employees of MBMSI
and not PCCI.
LA RULING: LA found that PCCI was the real principal employer of the
complainants and that MBMSI was a mere adjunct or alter ego/labor-only contractor.
LA explained that PCCI was actually the one which exercised control over the means
and methods of the work of the petitioners, thru Atty. Seril, who was acting,
throughout the time in his capacity as Senior Vice President for Administration of
PCCI, not in any way or time as the supposed employer/general manager or president
of MBMSI. However, LA did not touch on the validity and effect of the quitclaims.
NLRC RULING: NLRC affirmed the LAs findings. Nevertheless, the respondents
were excused from their liability by virtue of the releases, waivers and quitclaims
executed by the petitioners. Hence, petitioners filed an appeal before CA.
CA RULING: CA affirmed the NLRC decision. Petitioners argue that there is no
solidary liability to speak of in case of an existence of a labor-only contractor.
Petitioners contend that under Article 106 of the LC, a labor-only contractors liability
is not solidary as it is the employer who should be directly responsible to the supplied
worker. Hence, the said releases, waivers and quitclaims which they purportedly
issued in favor of MBMSI and Atty. Seril do not automatically release respondents
from their liability.
ISSUES: Whether the quitclaims executed in favour of MBMSI redounded to the
benefit of PCCI?
SC RULING:
The NLRC and the CA correctly ruled that the releases, waivers and quitclaims
executed by petitioners in favor of MBMSI redounded to the benefit of PCCI pursuant
to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily liable
with the respondents for the valid claims of petitioners pursuant to Article 109 of the
Labor Code.
The issue of whether there is solidary liability between the labor-only contractor and
the employer is crucial in this case. If a labor -only contractor is solidarily liable with
the employer, then the releases, waivers and quitclaims in favor of MBMSI will
redound to the benefit of PCCI. On the other hand, if a labor- only contractor is not
solidarily liable with the employer, the latter being directly liable, then the releases,
waivers and quitclaims in favor of MBMSI will not extinguish the liability of PCCI.
There is solidary liability between the principal and labor-only contractor. In labor-
only contracting, the statute creates an employer -employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to
the employees of the labor -only contractor as if such employees had been directly
employed by the principal employer. The principal employer therefore becomes
solidarily liable with the labor-only contractor for all the rightful claims of the
employees.
57. BABAS, ET AL.
V. LORENZO
SHIPPING CORP.
GR. No. 186091
December 15, 2010
NACHURA, J.:
Doctrine:
In labor-only contracting, a prohibited act, the following elements are present: (a) the
contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work, or service under its own account and responsibility; and (b) the
employees recruited, supplied, or placed by such contractor or subcontractor perform
activities which are directly related to the main business of the principal.
On the other hand, permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with the contractor or
subcontractor the performance or completion of a specific job, work, or service within
a definite or predetermined period, regardless of whether such job, work, or service is
to be performed or completed within or outside the premises of the principal.
FACTS:
Respondent LSC entered into a General Equipment Maintenance Repair and
Management Services Agreement (Agreement) with Best Manpower Services, Inc.
(BMSI). Under the Agreement, BMSI undertook to provide maintenance and repair
services to LSCs container vans, heavy equipment, trailer chassis, and generator sets.
BMSI further undertook to provide checkers to inspect all containers received for
loading to and/or unloading from its vessels.
Simultaneous with the execution of the Agreement, LSC leased its equipment, tools,
and tractors to BMSI. The period of lease was coterminous with the Agreement.
BMSI then hired petitioners on various dates to work at LSC as checkers, welders,
utility men, clerks, forklift operators, motor pool and machine shop workers,
technicians, trailer drivers, and mechanics. Six years later, LSC entered into another
contract with BMSI, this time, a service contract.
In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for
regularization against LSC and BMSI. On October 1, 2003, LSC terminated the
Agreement. Consequently, petitioners lost their employment.
BMSI asserted that it is an independent contractor. It averred that it was willing to
regularize petitioners; however, some of them lacked the requisite qualifications for
the job. BMSI was willing to reassign petitioners who were willing to accept
reassignment.
LSC, on the other hand, averred that petitioners were employees of BMSI and were
assigned to LSC by virtue of the Agreement. The Agreement between LSC and BMSI
constituted legitimate job contracting. Thus, petitioners were employees of BMSI and
not of LSC.
LA RULING: LA found that petitioners were employees of BMSI.
NLRC RULING: Reversing the LA, the NLRC held: BMSI is not engaged in
legitimate job contracting. BMSI has no equipment, no office premises, no capital and
no investments as shown in the Agreement itself. BMSI has no independent business
or activity or job to perform in respondent LSC free from the control of respondent
LSC except as to the results thereof. LSC [petitioners] performed work that was
necessary and desirable to the main business of respondent LSC. BMSI has no other
client but respondent LSC.
Consequently, respondent Lorenzo Shipping Corp. is ordered to reinstate
[petitioners] to their former positions as regular employees and pay their
wage differentials and benefits. If reinstatement is not feasible, both
respondents Lorenzo Shipping Corp. and Best Manpower Services are
adjudged jointly and solidarily to pay [petitioners] separation pay.
CA RULING: CA rendered the now challenged Decision, reversing the
NLRC. According to the CA, the fact that BMSI entered into a contract of
lease with LSC did not ipso facto make BMSI a labor-only contractor; on the
contrary, it proved that BMSI had substantial capital. The CA was of the
view that the law only required substantial capital or investment.
ISSUE: Whether or not LSC the employer of the petitioners as BSMI is not an
independent contractor.
SC RULING:
YES. In distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case are
to be considered.
In labor-only contracting, a prohibited act, the following elements are present: (a) the
contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work, or service under its own account and responsibility; and (b) the
employees recruited, supplied, or placed by such contractor or subcontractor perform
activities which are directly related to the main business of the principal.
A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
(a) The contractor carries on a distinct and independent business and undertakes
the contract work on his account under his own responsibility according to
his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of his
work except as to the results thereof;
(b) The contractor has substantial capital or investment; and
(c) The agreement between the principal and the contractor or subcontractor
assures the contractual employees' entitlement to all labor and occupational
safety and health standards, free exercise of the right to self-organization,
security of tenure, and social welfare benefits.
The Court sustains the petitioners contention that BMSI is engaged in labor-only
contracting.
First, petitioners worked at LSCs premises, and nowhere else. There was no showing
that it was BMSI which established petitioners working procedure and methods,
which supervised petitioners in their work, or which evaluated the same. There was
absolute lack of evidence that BMSI exercised control over them or their work.
Second, LSC was unable to present proof that BMSI had substantial capital. What is
clear was that the equipment used by BMSI were owned by, and merely rented from,
LSC.
Third, petitioners performed activities which were directly related to the main
business of LSC.
Lastly, BMSI had no other client except for LSC. A Certificate of Registration issued
by the Department of Labor and Employment is not conclusive evidence of status of
independent contractor. The fact of registration simply prevents the legal presumption
of being a mere labor-only contractor from arising.
Consequently, the workers that BMSI supplied to LSC became regular employees of
the latter. Having gained regular status, petitioners were entitled to security of tenure
and could only be dismissed for just or authorized causes and after they had been
accorded due process.
58. FIRST PHILIPPINE INDUSTRIAL CORPORATION v. RAQUEL M.
CALIMBAS AND LUISA P. MAHILOM
G.R. No. 179256 July 10, 2013
PERALTA, J.:
Doctrine:
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
FACTS:
(FPIC) is a domestic corporation primarily engaged in the transportation of petroleum
products by pipeline. [DGMS] is engaged in the business of supplying manpower to
render general clerical, building and grounds maintenance, and janitorial and utility
services.
FPIC, entered into a Contract of Special Services with DGMS, wherein the latter
agreed to undertake some aspects of building and grounds maintenance at FPICs
premises, offices and facilities, as well as to provide clerical and other utility services
as may be required from time to time by FPIC.
Pursuant to the said Contract, petitioner Raquel Calimbas and Luisa Mahilom were
engaged by the DGMS to render services to FPIC. Thereat, petitioner Calimbas was
assigned as a department secretary at the Technical Services Department while
petitioner Mahilom served as a clerk at the Money Movement Section of the Finance
Division.
FPIC, through its Human Resources Manager, Lorna Young, informed the petitioners
that their services to the company would no longer be needed as a result of the Pace-
Setting Study conducted by an outside consultant. Accordingly, Treasurer of DGMS,
formally notified both the petitioners that their respective work assignments in FPIC
were no longer available to them citing the termination of the Project Contract with
FPIC as the main reason thereof. Calimbas and Mahilom signed quitclaims, releasing
and discharging DGMS from whatever claims that they might have against it by
virtue of their past employment.
Petitioners still filed a Complaint against FPIC for illegal dismissal and for the
collection of monetary benefits, alleging that they were regular employees of FPIC
after serving almost five (5) years, rendering services which were usually necessary
or desirable in the usual business or trade of FPIC and that they were dismissed
without cause.
In their Position Paper, petitioners maintained that their real employer was FPIC, and
that DGMS was merely its agent for having been engaged in prohibited labor-only
contracting. The petitioners averred that DGMS did not have substantial capital.
FPIC insisted that the Labor Arbiter had no jurisdiction over the case because there
was absolutely no employer-employee relationship between it and the petitioners; and
that they executed quitclaims in favor of
DGMS
LA RULING: Labor Arbiter rendered a Decision 4 holding that respondents were
regular employees of FPIC, and that they were illegally dismissed.
NLRC RULING: NLRC the Labor Arbiters decision. However, in a Resolution
after MR by FPIC, the NLRC reversed its decision. The CA finds no legal basis to
deem DGMS a labor-only contracting entity as maintained by complainants. The
fact that DGMS had only a capitalization of P75,000.00, without an investment in
tools, equipment, etc., does not necessarily constitute the latter as labor-only
contractor. Labor Arbiter is hereby REINSTATED.
ISSUE: Whether or not respondents are employees of FPIC.
SC RULING:
YES. Article 106 of the Labor Code and Sections 8 and 9 of DOLE Department
Order No. 10, Series of 1997 are the standards to apply.
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by him.
Respondents are petitioners employees and that DGMS is engaged in labor-only
contracting.
First, in Vinoya v. National Labor Relations Commission, 12 this Court categorically
stated that the actual paid-in capital of P75,000.00 could not be considered as
substantial capital. Thus, DGMSs actual paid-in capital in the amount of P75,000.00
does not constitute substantial capital essential to carry out its business as an
independent job contractor. DGMS has no substantial equipment in the form of tools,
equipment and machinery. As a matter of fact, respondents were using office
equipment and materials owned by petitioner while they were rendering their services
at its offices.
Second, FPIC exercised the power of control and supervision over the respondents.
The fact that DGMS did not assign representatives to supervise over respondents
work in petitioners company tends to disprove the independence of DGMS.
Respondents were subjected to the control and supervision of petitioner while they
were performing their jobs.
Third, also worth stressing are the points highlighted by respondents: Respondents
worked only at petitioners offices for an uninterrupted period of five years,
occupying the same position at the same department under the supervision of
company officials; FPICs HR Manager Lorna Young notified respondents, in a
closed-door meeting, that their services to the company would be terminated; The
direct superiors of respondents were managerial employees of petitioner, and had
direct control over all the work-related activities of the latter.
All told, an employer-employee relationship exists between petitioner and
respondents. And having served for almost five years at petitioners company,
respondents had already attained the status of regular employees.
In the present case, petitioners failed to show any valid or just cause under the Labor
Code on which it may justify the termination of services of respondents. Also, apart
from notifying that their services had already been terminated, petitioner failed to
comply with the rudimentary requirement of notifying respondents regarding the acts
or omissions which led to the termination of their services as well as giving them an
ample opportunity to contest the legality of their dismissal. Having failed to establish
compliance with the requirements of termination of employment under the Labor
Code, respondents dismissal is tainted with illegality.
59. AVELINO S. ALILIN, ET.
AL. vs. PETRON
CORPORATION G.R. No.
177592 June 9, 2014
DEL CASTILLO, J.
Doctrine:
A contractor is presumed to be a labor-only contractor, unless it proves that it has the
substantial capital, investment, tools and the like. However, where the principal is the
one claiming that the contractor is a legitimate contractor, the burden of proving the
supposed status of the contractor rests on the principal.
FACTS:
Romualdo D. Gindang Contractor, started recruiting laborers for fielding to Petrons
Mandaue Bulk Plant. When Romualdo died, his son Romeo D. Gindang through
Romeo D. Gindang Services(RDG), took over the business and continued to provide
manpower services to Petron. Petitioners were among those recruited by Romualdo
D. Gindang Contractor and RDG to work in the premises of the said bulk plant.
Petron and RDG entered into a Contract for Services 9 for the period from June 1,
2000 to May 31, 2002, whereby RDG undertook to provide Petron with janitorial,
maintenance, tanker receiving, packaging and other utility services in its Mandaue
Bulk Plant. This contract was extended on July 31, 2002 and further extended until
September 30, 2002. Upon expiration thereof, no further renewal of the service
contract was done.
Alleging that they were barred from continuing their services on October 16, 2002,
petitioners filed a Complaint for illegal dismissal, underpayment of wages, damages
and attorneys fees against Petron and RDG.
Petitioners did not deny that RDG hired them and paid their salaries. They, however,
claimed that the latter is a labor -only contractor, which merely acted as an agent of
Petron, their true employer. They asseverated that their jobs, which are directly related
to Petrons business, entailed them to work inside the premises of Petron using the
required equipment and tools furnished by it and that they were subject to Petrons
supervision.
RDG corroborated petitioners claim that they are regular employees of Petron.
Petron, on the other hand, maintained that RDG is an independent contractor and the
real employer of the petitioners. It was RDG which hired and selected petitioners,
paid their salaries and wages, and directly supervised their work. And not being the
employer, Petron cannot be held liable for petitioners claim of illegal dismissal.
LA RULING: Labor Arbiter ruled that petitioners are regular employees of Petron;
also found that Petron merely utilized RDG in its attempt to hide the existence of
employee-employer relationship between it and petitioners and avoid liability under
labor laws. The Labor Arbiter declared them to have been illegally dismissed. Petron
was thus held solidarily liable with Romeo for the payment of petitioners separation
pa.
NLRC RULING: NLRC affirmed the ruling of the LA.
CA RULING: The CA found no employer-employee relationship between the
parties. The CA also found RDG to be an independent labor contractor with sufficient
capitalization and investment as shown by its financial statement for year-end 2000.
ISSUE: Whether RDG is a labor-only contractor (prohibited) as such, petitioners are
regular employees of Petron.
SC RULING: YES. The prevailing rule on labor-only contracting at the time Petron
and RDG entered into the Contract for Services in June 2000 is DOLE Department
Order No. 10, series of 1997.
"Permissible job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out with a
contractor or subcontractor the performance of a specific job, work,
or service within a definite or predetermined period, regardless of
whether such job, work or, service is to be performed or completed
within or outside the premises of the principal.
Labor-only contracting, on the other hand, is a prohibited act, defined as "supplying
workers to an employer who does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer." 45 "[I]n
distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case
shall be considered."46 Generally, the contractor is presumed to be a labor-only
contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. However, where the principal is the
one claiming that the contractor is a legitimate contractor, as in the present case, said
principal has the burden of proving that supposed status. 47 It is thus incumbent upon
Petron, and not upon petitioners as Petron insists,48 to prove that RDG is an
independent contractor.
Petron failed to discharge the burden of proving that RDG is a legitimate contractor.
Hence, the presumption that RDG is a labor-only contractor stands.
Here, the audited financial statements and other financial documents of RDG for the
years 1999 to 2001 establish that it does have sufficient working capital to meet the
requirements of its service contract. The evidence adduced merely proves that RDG
was financially qualified as a legitimate contractor but only with respect to its last
service contract with Petron in the year 2000.
While Petron was able to establish that RDG was financially capable as a legitimate
contractor at the time of the execution of the service contract in 2000, it nevertheless
failed to establish the financial capability of RDG at the time when petitioners
actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.
Petrons power of control over petitioners exists in this case.
The facts that petitioners were hired by Romeo or his father and that their salaries
were paid by them do not detract from the conclusion that there exists an employer-
employee relationship between the parties due to Petrons power of control over the
petitioners. One manifestation of the power of control is the power to transfer
employees from one work assignment to another.55 Here, Petron could order
petitioners to do work outside of their regular "maintenance/utility" job. Also,
petitioners were required to report for work everyday at the bulk plant, observe an
8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being implemented within
the bulk plant. All these imply control.
Petitioners already attained regular status as employees of Petron.
Petitioners were given various work assignments. While the jobs performed by
petitioners may be menial and mechanical, they are nevertheless necessary and related
to Petrons business operations. If not for these tasks, Petrons products will not reach
the consumers in their proper state. Indeed, petitioners roles were vital inasmuch as
they involve the preparation of the products that Petron will distribute to its
consumers.
In view of these, and considering further that petitioners length of service entitles
them to become regular employees under the Labor Code, petitioners are deemed by
law to have already attained the status as Petrons regular employees. As such, Petron
could not terminate their services on the pretext that the service contract it entered
with RDG has already lapsed.
Petron therefore, being the principal employer and RDG, being the labor-only
contractor, are solidarily liable for petitioners' illegal dismissal and monetary claims.
60. FONTERRA BRANDS PHILS., INC. v. LEONARDO1 LARGADO AND
TEOTIMO ESTRELLADO
G.R. No. 205300 March 18, 2015
VELASCO JR., J.
Doctrine:
A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
1. 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;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety
and health standards, free exercise of the right to self-organization, security
of tenure, and social and welfare benefits.
FACTS:
Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing
and Promotions Corp. (Zytron) for the marketing and promotion of its milk and dairy
products. Zytron provided Fonterra with trade merchandising representatives
(TMRs), including respondents Leonardo Largado (Largado) and Teotimo Estrellado
(Estrellado). The engagement of their services began on September 15, 2003 and May
27, 2002, respectively.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract.
Fonterra then entered into an agreement for manpower supply with A.C. Sicat
Marketing and Promotional Services (A.C. Sicat). Desirous of continuing their work
as TMRs, respondents submitted their job applications with A.C. Sicat, which hired
them for a term of five (5) months.
When respondents 5-month contracts with A.C. Sicat were about to expire, they
allegedly sought renewal thereof, but were allegedly refused. This prompted
respondents to file complaints for illegal dismissal, regularization.
LA RULING: Labor Arbiter dismissed the complaint and ruled that: (1) respondents
were not illegally dismissed and (2) they were consecutively employed by Zytron and
A.C. Sicat, not by Fonterra.
NLRC RULING: NLRC affirmed the Labor Arbiter.
CA RULING: The CA, found that A.C. Sicat satisfies the requirements of legitimate
job contracting, but Zytron does not. According to the CA: Zytrons paid-in capital of
P250,000 cannot be considered as substantial capital; its claim that it has the
necessary tools and equipment for its business is unsubstantiated. Therefore,
according to the CA, respondents were Fonterras employees.
Additionally, the CA held that respondents were illegally dismissed since Fonterra
itself failed to prove that their dismissal is lawful. However, the illegal dismissal
should be reckoned from the termination of their supposed employment with Zytron
on June 6, 2006.
ISSUE: Whether or not Zytron and A.C. Sicat are labor-only contractors, making
Fonterra the employer of herein respondents.
SC RULING:
NO. Fonterra is not the employer and respondents were not illegally dismissed. As
correctly held by the Labor Arbiter and the NLRC, the termination of respondents
employment with Zytron was brought about by the cessation of their contracts with
the latter. By refusing to renew their contracts with Zytron, respondents effectively
resigned from the latter.
Respondents voluntarily terminated their employment with Zytron by refusing to
renew their employment contracts with the latter, applying with A.C. Sicat, and
working as the latters employees, thereby abandoning their previous employment
with Zytron. Too, it is well to mention that for obvious reasons, resignation is
inconsistent with illegal dismissal. This being the case, Zytron cannot be said to have
illegally dismissed respondents.
A.C. Sicat is as a legitimate job contractor, seeing that it is consistent with the rules
on job contracting and is sufficiently supported by the evidence on record.
A person is considered engaged in legitimate job contracting or subcontracting if the
following conditions concur:
1. 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;
2. The contractor or subcontractor has substantial capital or investment; and
3. The agreement between the principal and contractor or subcontractor assures
the contractual employees entitlement to all labor and occupational safety
 and health standards, free exercise of the right to self-organization, security
of tenure, and social and welfare benefits.
A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of
December 31, 2006. Too, its Agreement with Fonterra clearly sets forth that A.C.
Sicat shall be liable for the wages and salaries of its employees or workers, including
benefits, premiums, and protection due them.
We agree with the findings of the CA that the termination of respondents
employment with the latter was simply brought about by the expiration of their
employment contracts.
Foremost, respondents were fixed-term employees. It is clear that respondents were
employed by A.C. Sicat as project employees. In their employment contract with the
latter, it is clearly stated that [A.C. Sicat is] temporarily employing [respondents] as
TMRs.
Respondents, by accepting the conditions of the contract with A.C. Sicat, were well
aware of and even acceded to the condition that their employment thereat will end on
said pre- determined date of termination. They cannot now argue that they were
illegally dismissed by the latter when it refused to renew their contracts after its
expiration.
ARTICLE 110
61. DEVELOPMENT BANK
OF THE PHILIPPINES vs.
NLRC G.R. No. 108031
March 1, 1995
BELLOSILLO, J.
Doctrine:
A declaration of bankruptcy or a judicial liquidation must be present before the
worker's preference may be enforced.
FACTS:
Leonor Ang was an employee of Tropical Philippines Wood Industries, Inc. (TPWII).
DBP, as mortgagee of TPWII, foreclosed its plant facilities and equipment. It took
possession of the foreclosed properties. From then on the company ceased its
operations. As a consequence private respondent was verbally terminated from the
service. Private respondent Ang filed with Labor Arbiter a complaint for separation
pay, 13th month pay, vacation and sick leave pay, salaries and allowances against
TPWII, its General Manager, and petitioner. LA awarded Angs separation pay and
vacation and sick leave pay and held DBP subsidiarily liable in the even the company
failed to satisfy the judgment. The Labor Arbiter rationalized that the right of an
employee to be paid benefits due him from the properties of his employer is superior
to the right of the latter's mortgage. NLRC affirmed the ruling of LA.
ISSUE: Whether or not the declaration of bankruptcy or judicial liquidation required
before the worker's preference may be invoked under Art. 110 of the Labor Code.
SC RULING:
Yes, a declaration of bankruptcy or a judicial liquidation must be present before the
worker's preference may be enforced. In the event of insolvency, a principal objective
should be to effect an equitable distribution of the insolvents property among his
creditors. To accomplish this there must first be some proceeding where notice to all
of the insolvent's creditors may be given and where the claims of preferred creditors
may be bindingly adjudicated. A preference applies only to claims which do not attach
to specific properties. A lien creates a charge on a particular property. The right of first
preference as regards unpaid wages recognized by Article 110 does not constitute a
lien on the property of the insolvent debtor in favor of workers.
It is but a preference of credit in their favor, a preference in application. It is a method
adopted to determine and specify the order in which credits should be paid in the final
distribution of the proceeds of the insolvent's assets. It is a right to a first preference in
the discharge of the funds of the judgment debtor. Article 110 of the Labor Code does
not purport to create a lien in favor of workers or employees for unpaid wages either
upon all of the properties or upon any particular property owned by their employer.
Claims for unpaid wages do not therefore fall at all within the category of specially
preferred claims established under Articles 2241 and 2242 of the Civil Code, except to
the extent that such claims for unpaid wages are already covered by Article 2241,
number 6: "claims for laborers: wages, on the goods manufactured or the work done;"
or by Article 2242, number 3, "claims of laborers and other workers engaged in the
construction reconstruction or repair of buildings, canals and other works, upon said
buildings, canals and other works . . . . To the extent that claims for unpaid wages fall
outside the scope of Article 2241, number 6, and 22421 number 3, they would come
within the ambit of the category of ordinary preferred credits under Article 2244.
3
62. SHS
PERFORATED
MATERIALS, INC.
vs. DIAZ G.R. No.
185814 October 13,
2010
Doctrine:

Absent a showing that the withholding of complainants wages falls under the
exceptions provided in Article 113, the withholding thereof is thus unlawful.
FACTS:
Manuel Diaz was hired by petitioner SHS as Manager for Business Development on
probationary status. During his employment in the said company, Mr.
Hartmannshenn, the companys president, was often abroad and sent instructions to
respondent either by electronic mail or through telephone or mobile phone. During
meetings with respondent, Hartmannshen expressed his dissatisfaction over
respondents poor performance. When Hartmannshenn arrived in the Philippines, he
notified respondent of his arrival through electronic mail messages, which the
respondent claimed he never received, but the respondent refused to respond and to
meet with him. Hartmannshenn instructed not to release respondents salary. Later
that afternoon, respondent called and inquired about his salary but he was informed
that it was being withheld and that he had to immediately communicate with
Hartmannshen. The next day, respondent served a demand letter and a resignation
letter. In the evening of the same day, respondent met with Hartmannshenn in
Alabang. The latter told him that he was extremely disappointed for the following
reasons: his poor work performance; his unauthorized leave and malingering from
November 16 to November 30, 2005; and failure to immediately meet
Hartmannshenn upon his arrival from Germany. Respondent, on the other hand,
claimed that the meeting with Hartmannshenn took place in the evening of December
1, 2005, at which meeting the latter insulted him and rudely demanded that he accept
P25,000.00 instead of his accrued wage and stop working for SHS, which demands he
refused. Later that same night, he sent Hartmannshenn and Schumacher an electronic
mail message appealing for the release of his salary. Respondent filed a Complaint
against the petitioners for illegal dismissal; non-payment of salaries/wages and 13 th
month pay with prayer for reinstatement and full backwages; exemplary damages, and
attorneys fees, costs of suit, and legal interest.
LA RULING: The Labor Arbiter rendered a decision declaring complainant as
having been illegally dismissed and further ordering his immediate reinstatement
without loss of seniority rights and benefits. The LA found that respondent was
constructively dismissed because the withholding of his salary was contrary to Article
116 of the Labor Code as it was not one of the exceptions for allowable wage
deduction by the employer under Article 113 of the Labor Code. He had no other
alternative but to resign because he could not be expected to continue working for an
employer who withheld wages without valid cause
NLRC RULING: On appeal, NLRC reversed the decision of LA. The NLRC
explained that the withholding of respondents salary was a valid exercise of
management prerogative. The act was deemed justified as it was reasonable to
demand an explanation for failure to report to work and to account for his work
accomplishments. The NLRC held that the respondent voluntarily resigned as
evidenced by the language used in his resignation letter and demand letters. CA
reversed NLRC resolution and held that withholding respondents salary was not a
valid exercise of management prerogative as there is no such thing as a management
prerogative to withhold wages temporarily.
ISSUE: Whether or not the temporary withholding of salary of employee by
employer is a valid exercise of management prerogative
SC RULING: No. Management prerogative refers to the right of an employer to
regulate all aspects of employment, such as the freedom to prescribe work
assignments, working methods, processes to be followed, regulation regarding
transfer of employees, supervision of their work, lay-off and discipline, and dismissal
and recall of work. Although management prerogative refers to the right to regulate
all aspects of employment, it cannot be understood to include the right to temporarily
withhold salary/wages without the consent of the employee. Any withholding of an
employees wages by an employer may only be allowed in the form of wage
deductions under the circumstances provided in Article 113 of the Labor Code. As
correctly pointed out by the LA, absent a showing that the withholding of
complainants wages falls under the exceptions provided in Article 113, the
withholding thereof is thus unlawful.
What made it impossible, unreasonable or unlikely for respondent to continue working
for SHS was the unlawful withholding of his salary. For said reason, he was forced to
resign. It is of no moment that he served his resignation letter on November 30, 2005,
the last day of the payroll period and a non-working holiday, since his salary was
already due him on November 29, 2005, being the last working day of said period. In
fact, he was then informed that the wages of all the other SHS employees were already
released, and only his was being withheld. What is significant is that the respondent
prepared and served his resignation letter right after he was informed that his salary
was being withheld. It would be absurd to require respondent to tolerate the unlawful
withholding of his salary for a longer period before his employment can be considered
as so impossible, unreasonable or unlikely as to constitute constructive dismissal. Even
granting that the withholding of respondents salary on November 30, 2005, would not
constitute an unlawful act, the continued refusal to release his salary after the payroll
period was clearly unlawful. The petitioners claim that they prepared the check ready
for pick-up cannot undo the unlawful withholding.
ARTICLE 124
Standards/Criteria for
Minimum Wage Fixing
63. P.I. MANUFACTURING, INC. v. P.I. MANUFACTURING SUPERVISORS
AND FOREMAN ASSOCIATION and the NATIONAL LABORUNION
G.R. No. 167217 February 4, 2008
SANDOVAL-GUTIERREZ
DOCTRINE:
The Court adopts the policy that requires recognition and validation of wage
increases given by employers either unilaterally or as a result of collective bargaining
negotiations in an effort to correct wage distortions.
FACTS:
P.I. Manufacturing, Inc. is a domestic corporation engaged in the manufacture and
sale of household appliances. P.I. Manufacturing Supervisors and Foremen
Association (PIMASUFA) is an organization of supervisors and foremen, joined in
this case by its federation, the National Labor Union (NLU). In 1987, the President
signed into law RA 6640 providing, among others, an increase in the statutory
minimum wage and salary rates of employees and workers in the private sector.
Section 2 provides: The statutory minimum wage rates of workers and employees in
the private sector, whether agricultural or non-agricultural, shall be increased by ten
pesos (P 10.00) per day, except non-agricultural workers and employees outside
Metro Manila who shall receive an increase of eleven pesos (P11.00) per day:
Provided, That those already receiving above the minimum wage up to one hundred
pesos (P100.00) shall receive an increase of ten pesos (P10.00) per day. Excepted
from the provisions of this Act are domestic helpers and persons employed in the
personal service of another.
P.I. and PIMASUFA entered into a new Collective Bargaining Agreement (1987
CBA) whereby the supervisors were granted an increase of P625.00 per month and
the foremen, P475.00 per month. The increases were made retroactive prior to the
passage of R.A. No. 6640, and every year thereafter until July 26, 1989.
In 1989, PIMASUFA and NLU filed a complaint with the Arbitration Branch of the
NLRC, charging P.I. with violation of R.A. No. 6640.
Theyhttp://sc.judiciary.gov.ph/jurisprudence/2008/feb2008/167217.htm - _ftn3
attached to their complaint a numerical illustration of wage distortion resulting from
the implementation of R.A. No. 6640.
LABOR ARBITER RULING: in favor of PIMASUFA.
NLRC RULING: affirmed the Labor Arbiters judgment.
CA RULING: affirmed the Decision of the NLRC with modification by raising the
13.5% wage increase to 18.5%.
ISSUE: Whether the increase resulting from any wage distortion caused by the
implementation of Republic Act 6640 is waivable.
SC RULING:
YES. R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly
defines wage distortion as: a situation where an increase in prescribed wage rates
results in the elimination or severe contraction of intentional quantitative differences
in wage or salary rates between and among employee groups in an establishment as to
effectively obliterate the distinctions embodied in such wage structure based on skills,
length of service, or other logical bases of differentiation.
In this case, the Court of Appeals correctly ruled that a wage distortion occurred due
to the implementation of R.A. No. 6640. Significantly, the 1987 CBA wage increases
almost doubled that of the P10.00 increase under R.A. No. 6640. Clearly, the gap
between the wage rates of the supervisors and those of the foremen was inevitably re-
established. It continued to broaden through the years.
Interestingly, such gap as re-established by virtue of the CBA is more than a
substantial compliance with R.A. No. 6640. The CA erred in not taking into account
the provisions of the CBA viz-a-viz the wage increase under
the said law. To direct petitioner to grant an across- the-board increase to all of them,
regardless of the amount of wages they are already receiving, would be harsh and
unfair to the former.
To compel employers simply to add on legislative increases in salaries or allowances
without regard to what is already being paid, would be to penalize employers who
grant their workers more than the statutory prescribed minimum rates of increases.
Clearly, this would be counter-productive so far as securing the interests of labor is
concerned.
At this juncture, it must be stressed that a CBA constitutes the law between the parties
when freely and voluntarily entered
into.http://sc.judiciary.gov.ph/jurisprudence/2008/feb2008/167217.htm - _ftn13 Here,
it has not been shown that respondent PIMASUFA was coerced or forced to sign the
1987 CBA. All of its 13 officers signed the CBA with the assistance of respondent
NLU.
64. BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE
UNIONS v. NATIONAL LABOR RELATIONS COMMISSION and
BANKARD, INC.
G.R. No. 140689 February 17, 2004
CARPIO MORALES, J.:
ARTICLE 124
DOCTRINE:
The four elements of wage distortion are: (1.) An existing hierarchy of positions with
corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one; (3) The elimination of the distinction
between the two levels; and (4) The existence of the distortion in the same region of
the country.
FACTS:
Bankard, Inc. classifies its employees by levels, to wit: Level I to V. In 1993, its
Board of Directors approved a New Salary Scale for the purpose of making its hiring
rate competitive in the industrys labor market. The New Salary Scale increased the
hiring rates of new employees, to wit: Levels I and V by P1,000, and Levels II, III
and IV by P900. Accordingly, the salaries of employees who fell below the new
minimum rates were also adjusted to reach such rates under their levels.
Bankards move drew the Bankard Employees Union -WATU, the duly certified
exclusive bargaining agent of the regular rank and file employees of Bankard, to press
for the increase in the salary of its old, regular employees. Bankard took the position,
however, that there was no obligation on the part of the management to grant to all its
employees the same increase in an across-the-board manner.
As the continued request remained unheeded, it filed a Notice of Strike on the ground
of discrimination and other acts of Unfair Labor Practice.
NLRC RULING: finding no wage distortion, dismissed the case for lack of merit.
CA RULING: denied the same for lack of merit. Hence, the present petition.
ISSUE: Whether the unilateral adoption by an employer of an upgraded salary scale
that increased the hiring rates of new employees without increasing the salary rates of
old employees resulted in wage distortion within the contemplation of Article 124 of
the Labor Code.
SC RULING:
NO. Upon the enactment of R.A. No. 6727 (WAGE RATIONALIZATION ACT,
amending, among others, Article 124 of the Labor Code) on June 9, 1989, the term
wage distortion was explicitly defined as:
... a situation where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment as to effectively obliterate
the distinctions embodied in such wage structure based on skills, length of service, or
other logical bases of differentiation.
The four elements of wage distortion are: (1.) An existing hierarchy of positions with
corresponding salary rates;
(2) A significant change in the salary rate of a lower pay class without a concomitant
increase in the salary rate of a higher one; (3) The elimination of the distinction
between the two levels; and (4) The existence of the distortion in the same region of
the country.
Involved in the classification of employees are various factors such as the degrees of
responsibility, the skills and knowledge required, the complexity of the job, or other
logical basis of differentiation. The differing wage rate for each of the existing classes
of employees reflects this classification.
Petitioner maintains that for purposes of wage distortion, the classification is not one
based on levels or ranks but on two groups of employees, the newly hired and the old,
in each and every level, and not between and among the different levels or ranks in
the salary structure.
The employees of Bankard have been historically classified into levels, i.e. I to V, and
not on the basis of their length of service. The Union cannot make a contrary
classification of Bankards employees without encroaching upon recognized
management prerogative of formulating a wage structure, in this case, one based on
level. It is thus clear that there is no hierarchy of positions between the newly hired
and regular employees of Bankard, hence, the first element of wage distortion is
wanting. For purposes of determining the existence of wage distortion, employees
cannot create their own independent classification and use it as a basis to demand an
across-the-board increase in salary.
Even assuming that there is a decrease in the wage gap between the pay of the old
employees and the newly hired employees, said gap is not significant as to obliterate
or result in severe contraction of the intentional quantitative differences in the salary
rates between the employee group. The classification under the wage structure is based
on the rank of an employee, not on seniority. For this reason, wage distortion does not
appear to exist.
13th MONTH PAY

65. CENTRAL AZUCARERA DE TARLAC v. CENTRAL AZUCARERA DE
TARLAC LABOR UNION-NLU
G.R. No. 188949 July 26, 2010
NACHURA, J.:
DOCTRINE:
The term basic salary of an employee for the purpose of computing the 13th-month
pay was interpreted to include all remuneration or earnings paid by the employer for
services rendered, but does not include allowances and monetary benefits which are
not integrated as part of the regular or basic salary, such as the cash equivalent of
unused vacation and sick leave credits, overtime, premium, night differential and
holiday pay, and cost -of-living allowances. However, these salary-related benefits
should be included as part of the basic salary in the computation of the 13th- month
pay if, by individual or collective agreement, company practice or policy, the same
are treated as part of the basic salary of the employees.
FACTS:
Central Azucarera de Tarlac is a domestic corporation engaged in the business of
sugar manufacturing, while Central Azucarera de Tarlac Labor Union-NLU is a
legitimate labor organization which serves as the exclusive bargaining representative
of the Central's rank-and-file employees. The controversy stems from the
interpretation of the term basic pay, essential in the computation of the 13th-month
pay.
In compliance with P.D. No. 851, the Central granted its employees the mandatory
13th month pay since 1975. The formula used was: Total Basic Annual Salary divided
by 12. Included in the computation of the Total Basic Annual Salary were the
following: basic monthly salary; first 8 hours overtime pay on Sunday and
legal/special holiday; night premium pay; and vacation and sick leaves for each year.
Throughout the years, the Central used this computation until 2006.
After a strike staged by the Union, the Central gave the employees their 13th-month
pay based on the employees total earnings during the year divided by 12. The latter
objected to this computation. The Union filed a complaint against for money claims
based on the alleged diminution of benefits/erroneous computation of 13th-month pay
before the Regional Arbitration Branch of the NLRC.
LA RULING : dismissed the complaint and declared that the Central had the right to
rectify the error in the computation of the 13th-month pay of its employees.
NLRC RULING: reversed the Labor Arbiter.
CA RULING: affirmed the decision and resolution of the NLRC. Hence, the petition.
ISSUE: Whether there was an error in the computation of the employees' 13th month
pay.
SC RULING:
YES. The 13th-month pay mandated by P.D. No. 851 represents an additional income
based on wage but not part of the wage. It is equivalent to one-twelfth (1/12) of the
total basic salary earned by an employee within a calendar year. All rank-and-file
employees, regardless of their designation or employment status and irrespective of
the method by which their wages are paid, are entitled to this benefit, provided that
they have worked for at least one month during the calendar year. If the employee
worked for only a portion of the year, the 13th-month pay is computed pro rata.
It is clear that there could have no erroneous interpretation or application of what is
included in the term basic salary for purposes of computing the 13th-month pay of
employees. From the inception of P.D. No. 851 on December 16, 1975, clear-cut
administrative guidelines have been issued to insure uniformity in the interpretation,
application, and enforcement of the provisions of P.D. No. 851 and its implementing
regulations.
As correctly ruled by the CA, the practice of the Central in giving 13th-month pay
based on the employees gross annual earnings which included the basic monthly
salary, premium pay for work on rest days and special holidays, night shift differential
pay and holiday pay continued for almost thirty (30) years and has ripened into a
company policy or practice which cannot be unilaterally withdrawn.
The argument of the Central that the grant of the benefit was not voluntary and was
due to error in the interpretation of what is included in the basic salary deserves scant
consideration. No doubtful or difficult question of law is involved in this case. The
voluntariness of the grant of the benefit was manifested by the number of years the
employer had paid the benefit to its employees. The Central only changed the formula
in the computation of the 13th-month pay after almost 30 years and only after the
dispute between the management and employees erupted. This act of changing the
formula at this time cannot be sanctioned, as it indicates a badge of bad faith.
ARTICLE 128
Visitorial and
Enforcement
Power
66. PEOPLES BROADCASTING SERVICE (BOMBO RADYO PHILS., INC.)
vs. THE SECRETARY OF THE DEPARTMENT OF LABOR AND
EMPLOYMENT, THE REGIONAL DIRECTOR, DOLE REGION VII, and
JANDELEON JUEZAN
G.R. No. 179652 March 6, 2012
VELASCO, JR., J.:
DOCTRINE:
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully
empowered to make a determination as to the existence of an employer-employee
relationship in the exercise of its visitorial and enforcement power, subject to judicial
review, not review by the NLRC.
FACTS:
Jandeleon Juezan filed a complaint against Peoples Broadcasting Service (Bombo)
with the DOLE Regional Office No. VII, Cebu City, for illegal deduction,
nonpayment of service incentive leave, 13th month pay, among others. After the
conduct of summary investigations, and after the parties submitted their position
papers, the DOLE Regional Director found that Juezan was an employee of Bombo,
and was entitled to his money claims. Bombo sought reconsideration of the Directors
Order, but failed.
The Acting DOLE Secretary dismissed Bombos appeal. When the matter was
brought before the CA, where Bombo claimed that it had been denied due process, it
was held that Bombo was accorded due process as it had been given the opportunity
to be heard, and that the DOLE Secretary had jurisdiction over the matter, as the
jurisdictional limitation imposed by Article 129 of the Labor Code on the power of
the DOLE Secretary under Art. 128(b) of the Code had been repealed by Republic
Act No. (RA) 7730.
SC reversed the CA Decision and the complaint against Bombo was dismissed. The
Court found that there was no employer-employee relationship between Bombo and
Juezan. It was held that while the DOLE may make a determination of the existence
of an employer-employee relationship, this function could not be co-extensive with
the visitorial and enforcement power provided in Art. 128(b) of the Labor Code, as
amended by RA 7730. The NLRC was held to be the primary agency in determining
the existence of an employer-employee relationship. From this Decision, the Public
Attorneys Office (PAO) filed a Motion for Clarification of Decision (with Leave of
Court). The PAO sought to clarify as to when the visitorial and enforcement power of
the DOLE be not considered as co-extensive with the power to determine the
existence of an employer-employee relationship. The SC revisits its former
conclusion.
ISSUE: Whether DOLE can make a determination of the existence of employer-
employee relationship.
SC RULING:
YES. No limitation in the law was placed upon the power of the DOLE to determine
the existence of an employer-employee relationship. No procedure was laid down
where the DOLE would only make a preliminary finding, that the power was
primarily held by the NLRC. The law did not say that the DOLE would first seek the
NLRCs determination of the existence of an employer-employee relationship, or that
should the existence of the employer -employee relationship be disputed, the DOLE
would refer the matter to the NLRC. The DOLE must have the power to determine
whether or not an employer -employee 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 RA 7730.
The determination of the existence of an employer-employee 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. If the DOLE makes a finding that there
is an existing employer- employee relationship, it takes cognizance of the matter, to
the exclusion of the NLRC. The DOLE would have no jurisdiction only if the
employer-employee relationship has already been terminated, or it appears, upon
review, that no employer-employee relationship existed in the first place.
If a complaint is brought before the DOLE to give effect to the labor standards
provisions of the Labor Code or other labor legislation, and there is a finding by the
DOLE that there is an existing employer-employee relationship, the DOLE exercises
jurisdiction to the exclusion of the NLRC. If the DOLE finds that there is no
employer-employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for reinstatement,
the jurisdiction is properly with the Labor Arbiter, under Art. 217(3) of the Labor
Code. If a complaint is filed with the NLRC, and there is still an existing employer-
employee relationship, the jurisdiction is properly with the DOLE. The findings of the
DOLE, however, may still be questioned through a petition for certiorari under Rule
65 of the Rules of Court.
67. MRS. ALBERTA YANSON v. SECRETARY
OF LABOR AND EMPLOYMENT G.R. No.
159026 February 11, 2008
AUSTRIA-MARTINEZ, J.:

ARTICLE 128
DOCTRINE:
The posting of the proper amount of the appeal bond under Article 128 (b) is
mandatory for the perfection of an appeal from a monetary award in labor standard
cases.
FACTS:
In 1998, Mardy Cabigo and 40 other workers filed with DOLE Bacolod a request for
payroll inspection of Hacienda Valentin Balabag owned by Alberta Yanson. DOLE
Bacolod conducted an inspection of the establishment and issued a Notice of
Inspection Report, finding Yanson liable for the following violations of labor standard
laws:
1. Underpayment of salaries and wages (workers being paid a daily rate of
P90.00 since 1997 and P75.00 prior to such year);
2. Non-payment of 13th month pay for two (2) years;
3. Non-payment of Social Amelioration Bonus (SAB) for two (2) years;
4. Non-payment of employers 1/3 carabao share.
In addition, DOLE Bacolod scheduled a summary investigation. Yanson did not
appear in any of the scheduled hearings, or present any pleading or document. In a
Compliance Order, DOLE Bacolod directed Yanson to pay a total of P372,444 and to
correct existing violations of occupational safety and health standards. It then issued a
Writ of Execution. Yanson filed with public respondent a Verified Appeal and posted a
bond.
SECRETARY OF LABOR RULING: dismissed the appeal.
CA RULING: Petition for Certiorari was denied due course and dismissed. Hence,
the present recourse.
ISSUE:
1. Whether the compliance order by DOLE Bacolod, in the exercise of its
visitorial and enforcement power, was proper. YES
2. Whether the appeal was perfected. NO.
SC RULING:
For its perfection, the appeal was subject to the requirements prescribed under Article
128 of the Labor Code, as amended by Republic Act No. 7730, viz.:
Art. 128. Visitorial and Enforcement Power. - x x x (b) Notwithstanding the
provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of
labor employment and enforcement officers or industrial safety engineers
made in the course of inspection. The Secretary or his duly authorized
representatives shall issue writs of execution to the appropriate authority for
the enforcement of their orders, except in cases where the employer contests
the findings of the labor employment and enforcement officer and raises
issues supported by documentary proofs which were not considered in the
course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the
monetary award in the order appealed from.
When Yanson filed her Verified Appeal and Supplement to the Verified Appeal,
Public respondent rejected said appeal for insufficiency of the appeal bond. The
posting of the proper amount of the appeal bond under Article 128 (b) is mandatory
for the perfection of an appeal from a monetary award in labor standard cases. Also
applying the Implementing Rules, there is one other reason for holding that Yanson
failed to perfect her appeal. It is of record that she received Compliance Order issued
by DOLE-Bacolod. She was put on actual notice not only of the existence of the
Compliance Order but also of the summary investigation of her establishment. It
behooves her to file a timely appeal to public respondent or object to the conduct of
the investigation. Yanson did neither, opting instead to sit idle and wait until the
following year to question the investigation and resultant order, in the guise of
opposing the writ of execution.
In fine, the CA was correct in holding that public respondent did not commit grave
abuse of discretion in rejecting the appeal due to the insufficiency of her appeal bond.
Even on its substance, her appeal would still not prosper. The determination made by
DOLE-Bacolod on this matter binds the Court, especially as it was not reversed by
public respondent and the CA.
68. BALLADARES ET. AL. v.
PEAK VENTURES
CORPORATION G.R. No. 161794
June 16, 2009
Nachura, J.:
ART. 128: VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE
REGIONAL DIRECTOR
DOCTRINE:
The visitorial and enforcement powers of the DOLE Regional Director to order and
enforce compliance with labor standard laws can be exercised even when the
individual claim exceeds P5,000. However, if the labor standards case is covered by
the exception clause in Article 128 (b) of the Labor Code, then the Regional Director
will have to endorse the case to the appropriate Arbitration Branch of the NLRC.
FACTS:
Petitioners Nestor J. Balladares et al., were employed by respondent Peak Ventures
Corp as security guards and were assigned at the premises of respondent YMOAA.
They filed a complaint for underpayment of wages against their employer, Peak
Ventures, with the DOLE. Acting on the complaint, DOLE conducted an inspection of
Peak Ventures and the following violations were noted: underpayment of the
minimum wage and other auxiliary benefits; pertinent employment records were not
available at the time of inspection.
A Notice of Inspection Result was issued to Peak Ventures instructing them to effect
restitution and/or file its objections within five working days from receipt thereof.
Respondent failed to correct the violations or contest the findings as required, hence,
the parties were summoned for hearing. Peak Ventures moved to implead its client
YMOAA, claiming that any underpayment of wages arose from the failure of
YMOAA to pay Peak Ventures the amount due petitioners as prescribed by various
wage orders.
After the hearing, DOLE Regional Director Maximo Lim rendered judgment in favor
of petitioners and ruled that the contractor was jointly and severally liable with the
principal. Lim averred that because Peak Ventures failed to controvert the complaint
and its repeated denial to give access to records, it is deemed to have waived its
constitutional right to due process. Petitioners were awarded P1,106,298. Peak
Ventures filed a motion for reconsideration, but the same was denied prompting them
to appeal to the CA.
CA RULING: The CA granted the petition, ruling that the Regional Director had no
jurisdiction to hear and decide the case, because the claims of each of the petitioners
exceeded P5,000.00, and the power to adjudicate such claims belonged to the Labor
Arbiter, pursuant to Servandos, Inc. v. Secretary of Labor. The appellate court
ratiocinated that this exclusive jurisdiction of the Labor Arbiters was confirmed by
Article 129 of the Labor Code, which excludes from the jurisdiction of the Regional
Directors or any hearing officer of the DOLE the power to hear and decide claims of
employees arising from employer-employee relations exceeding the amount of
P5,000.00 for each employee.
ISSUE: Does DOLE Regional Director has jurisdiction to even though the claims of
the complainants exceeded P5,000?
SC RULING:
YES. Yes. The Supreme Court ruled that the visitorial and enforcement powers of the
DOLE Regional Director to order and enforce compliance with labor standard laws
can be exercised even when the individual claim exceeds P5,000. However, if the
labor standards case is covered by the exception clause in Article 128 (b) of the Labor
Code, then the Regional Director will have to endorse the case to the appropriate
Arbitration Branch of the NLRC. In order to divest the Regional Director or his
representatives of jurisdiction, the following elements must be present: (a) that
the employer contests the findings of the labor regulations officer and raises issues
thereon; (b) that in order to resolve such issues, there is a need to examine evidentiary
matters; and (c) that such matters are not verifiable in the normal course of inspection.
The rules also provide that the employer shall raise such objections during the hearing
of the case or at any time after receipt of the notice of inspection results.
In the case at bar, Peak Ventures did not contest the findings of the labor regulations
officer during the hearing or after receipt of notice of the inspection results.
Accordingly, we find no sufficient reason to warrant the certification of the instant
case to the LA and divest the Regional Director of jurisdiction. Respondent did not
contest the findings of the labor regulations officer. Even during the hearing,
respondent never denied that petitioners were not paid correct wages and benefits.
69. ALLIED INVESTIGATION BUREAU,
INC., v. SECRETARY OF LABOR GR No.
122006 November 24, 1999
ART. 128 VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE
REGIONAL DIRECTOR
DOCTRINE:
While it is true that under Articles 129 and 217of the Labor Code, the Labor Arbiter
has jurisdiction to hear and decide cases where the aggregate money claims of each
employee exceedsP5,000.00, said provisions of law do not contemplate nor cover the
visitorial and enforcement powers of the Secretary of Labor or his duly authorized
representatives. Said powers are defined and set forth in Art. 128 of the Labor Code.
FACTS:
Petitioner Allied Investigation Bureau is a security agency which entered into a
security contract with Novelty Philippines Inc (NPI). Private respondents Melvin
Pelayo and Samuel Sucanel, two of the security guards assigned by petitioner to NPI,
filed a complaint with the Office of respondent Regional Director Romeo Young,
charging petitioner with non-compliance with a wage order increasing the minimum
daily pay of workers. Regional Director Young conducted inspection visits at
petitioners establishment and found that Petitioner failed to implement the wage
increase. Petitioner was required to effect restitution and/or correction of the
foregoing within five calendar days, or challenge the findings within five working
days. Thereafter, a series of conferences and hearings were scheduled by the Regional
Director to facilitate amicable settlement. However, despite due notice, petitioner
failed to appear in any of said hearings. As a result, the Regional Director ruled in
favor of private respondents and awarded them P807,570.
Petitioners appealed the Order to respondent Secretary of Labor, without posting a
cash or surety bond, as such the appeal was dismissed. Petitioner argues that the
power to adjudicate money claims belongs to the Labor Arbiter who has exclusive
jurisdiction over employees claims where the aggregate amount of the claims of each
employee exceeds P5,000.
ISSUE: Whether or not the DOLE Regional Director acted without jurisdiction in
adjudicating the private respondents claims which were in excess of P5,000.
RULING:
Yes. While it is true that under Articles 129 and 217of the Labor Code, the Labor
Arbiter has jurisdiction to hear and decide cases where the aggregate money claims of
each employee exceedsP5,000.00, said provisions of law do not contemplate nor
cover the visitorial and enforcement powers of the Secretary of Labor or his duly
authorized representatives. Said powers are defined and set forth in Art. 128 of the
Labor Code.
Art. 128. Visitorial and enforcement power.
(a) The Secretary of Labor or his duly authorized representatives, including labor
regulation officers, shall have access to employers records and premises at any
time of the day or night whenever work is being undertaken therein, and the right
to copy therefrom, to question any employee and investigate any fact, condition
or matter which may be necessary to determine violations or which may aid in
the enforcement of this Code and of any labor law, wage order or rules and
regulations issued pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee exists, the
Secretary of Labor and Employment or his duly authorized representatives shall
have the power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of labor
employment and enforcement officers or industrial safety engineers made in the
course of inspection. The Secretary or his duly authorized representatives shall
issue writs of execution to the appropriate authority for the enforcement of their
orders, except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by documentary
proofs which were not considered in the course of inspection.
An order issued by the duly authorized representatives of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to the
monetary award in the order appealed from.
In the case at bar, the Office of respondent Regional Director conducted inspection
visits at petitioners establishment on February 9 and 14, 1995 in accordance with the
above -mentioned provision of law. In the course of said inspection, several violations
of the labor standard provisions of the Labor Code were discovered and reported by
Senior Labor Enforcement Officer Eduvigis A. Acero in his Notice of Inspection
Results. It was on the bases of the aforesaid findings (which petitioner did not
contest), that respondent Regional Director issued the assailed Order for petitioner to
pay private respondents the respective wage differentials due them.
Clearly, as the duly authorized representative of respondent Secretary of Labor, and in
the lawful exercise of the Secretarys visitorial and enforcement powers under Article
128 of the Labor Code, respondent Regional Director had jurisdiction to issue his
impugned Order.
70. URBANES v. SECRETARY OF LABOR
GR No. 122791 February 19, 2003
ART. 128 VISITORIAL AND ENFORCEMENT POWERS OF THE DOLE
REGIONAL DIRECTOR
DOCTRINE:
It is well settled in law and jurisprudence that where no employer- employee
relationship exists between the parties and no issue is involved which may be resolved
by reference to the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks payment of a sum
of money and damages on account of petitioner's alleged breach of its obligation
under their Guard Service Contract. The action is within the realm of civil law hence
jurisdiction over the case belongs to the regular courts. While the resolution of the
issue involves the application of labor laws, reference to the labor code was only for
the determination of the solidary liability of the petitioner to the respondent where no
employer-employee relation exists.
FACTS:
Petitioner Placido O. Urbanes, Jr., doing business under the name and style of
Catalina Security Agency, entered into an agreement to provide security services to
respondent Social Security System (SSS). During the effectivity of the agreement,
petitioner, by letter of May 16, 1994, requested the SSS for the upward adjustment of
their contract rate in view of Wage Order No. NCR-03. As SSS refused to comply, On
June 29, 1994, petitioner filed a complaint with the DOLE-NCR against the SSS
seeking the implementation of Wage Order No. NCR-03. In its position paper, the
SSS prayed for the dismissal of the complaint on the ground that petitioner is not the
real party in interest and has no legal capacity to file the same. In any event, it argued
that if it had any obligation, it was to the security guards. On the other hand, petitioner
in his position paper, citing Eagle Security Agency, Inc. v. NLRC, contended that the
security guards assigned to the SSS do not have any legal basis to file a complaint
against it for lack of contractual privity.
Finding for petitioner, the Regional Director of the DOLE- NCR issued an Order for
SSS to pay petitioner P1.6 million. SSS appealed to the Secretary of Labor, claiming
that the Regional Director has no jurisdiction to issue the assailed order. The
Secretary set aside the order and remanded the case. Petitioner filed the present
petition for certiorari with the Supreme Court asserting that the Secretary of Labor
does not have jurisdiction to review appeals from decisions of the Regional Directors
in complaints filed under Art. 129 of the Labor Code. They claim that appeals from
orders of Regional directors should be made with the NLRC.
ISSUE: Whether or not the Secretary of Labor has jurisdiction to review appeals from
decisions of the Regional Directors in complaints filed under Art. 129.
SC RULING:
No. Neither the petitioners contention nor the SSSs is impressed with merit, rather, it
is the RTC that has jurisdiction over the subject matter of the present case. It is well
settled in law and jurisprudence that where no employer-employee relationship exists
between the parties and no issue is involved which may be resolved by
reference to the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private
respondent is not seeking any relief under the Labor Code but seeks payment of a sum
of money and damages on account of petitioner's alleged breach of its obligation
under their Guard Service Contract. The action is within the realm of civil law hence
jurisdiction over the case belongs to the regular courts. While the resolution of the
issue involves the application of labor laws, reference to the labor code was only for
the determination of the solidary liability of the petitioner to the respondent where no
employer-employee relation exists.
In the case at bar, even if petitioner filed the complaint on his and also on behalf of
the security guards, the relief sought has to do with the enforcement of the contract
between him and the SSS which was deemed amended by virtue of Wage Order No.
NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper
forum for the resolution of which is the civil courts.
Even if the petition was filed with the proper forum, it must still be dismissed for lack
of cause of action. Under Art. 106 of the Labor Code: In the event that the contractor
or subcontractor fails to pay the wage of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor
to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
It is only when [the] contractor pays the increases mandated that it can claim an
adjustment from the principal to cover the increases payable to the security guards.
The conclusion that the right of the contractor (as principal debtor) to recover
from the principal (as solidary co-debtor) arises only if he has paid the amounts
for which both of them are jointly and severally liable is in line with Article 1217
of the Civil Code.
In fine, the liability of the SSS to reimburse petitioner arises only if and when
petitioner pays his employee-security guards the increases mandated by Wage Order
No. NCR-03.
ARTICLE 136 (now Art. 134)
Stipulation Against
Marriage
71. ZIALCITA, ET AL. v. PAL RO4-3-398-76. February 20, 1977
FACTS:
Complainant Zialcita, an international flight stewardess of PAL, was discharged from
the service on account of her marriage. In separating Zialcita, PAL invoked its policy
which stated that flight attendants must be single, and shall be automatically separated
from employment in the event they subsequently get married. They claimed that this
policy was in accordance with Article 132 of the Labor Code. On the other hand,
Zialcita questioned her termination on account of her marriage, invoking Article 136
of the same law.
ISSUE: Was Zialcita validly terminated on account of her marriage?
SC RULING:
NO. When Presidential Decree No. 148, otherwise known as the Women and Child
Labor Law, was promulgated in 13 March 1973, PALs policy had met its doom.
However, since no one challenged its validity, the said policy was able to obtain a
momentary reprieve. Section 8 of PD148 is exactly the same provision reproduced
verbatim in Article 136 of the Labor Code, which was promulgated on 1 May 1974
and took effect six months later. Although Article 132 enjoins the Secretary of Labor
to establish standards that will ensure the safety and health of women employees and
in appropriate cases shall by regulation require employers to determine appropriate
minimum standards for termination in special occupations, such as those of flight
attendants, it is logical to presume that, in the absence of said standards or regulations
which are yet to be established, the policy of PAL against marriage is patently illegal.
Article 136 is not intended to apply only to women employed in ordinary occupations,
or it should have categorically expressed so. The sweepingintendment of the law, be it
on special or ordinary occupations, is reflected in the whole text and supported by
Article 135 that speaks of non-discrimination on the employment of women.
72. STAR PAPER CORPORATION v. SIMBOL GR No. 164774 April 12,
2006 Puno, J.
ART. 136 OF THE LABOR CODE AND DISCRIMINATION.
DOCTRINE:
The questioned policy may not facially violate Article 136 of the Labor Code but it
creates a disproportionate effect and under the disparate impact theory, the only way it
could pass judicial scrutiny is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a
legitimate business concern in imposing the questioned policy cannot prejudice the
employees right to be free from arbitrary discrimination based upon stereotypes of
married persons working together in one company.
FACTS: Petitioner Star Paper Corporation promulgated a company policy which
states:
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 singles [sic], 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.
Respondents Ronaldo Simbol, and Wilfreda Comia are employees of Star Paper who
claim that they were compelled to resign in view of an illegal company policy, after
they married fellow co-workers. They filed a complaint for unfair labor practice and
constructive dismissal against Star Paper Corp.
Respondents submit that their dismissal violates the above provision. Petitioners
allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but
it assumes a new meaning if read together with the first paragraph of the rule. The
rule does not require the woman employee to resign. The employee spouses have the
right to choose who between them should resign. Further, they are free to marry
persons other than co-employees. Hence, it is not the marital status of the employee,
per se, that is being discriminated. It is only intended to carry out its no-employment-
for-relatives-within-the-third-degree-policy which is within the ambit of the
prerogatives of management.
LA RULING: The LA dismissed the complaint ruling that the policy against
marriage between employees was a valid management prerogative. The ruling was
affirmed by the NLRC.
CA RULING: The CA reversed the above rulings and held that the dismissal of the
respondents was illegal and ordering their reinstatement.
ISSUE: Whether or not the policy of Star Paper requiring the resignation of either
spouse-employee is in violation of Art. 136 of the Labor Code.
SC RULING:
Yes. The Supreme Court ruled that Petitioners sole contention that "the company did
not just want to have two
(2) or more of its employees related between the third degree by affinity and/or
consanguinity is lame. That the second paragraph was meant to give teeth to the first
paragraph of the questioned rule is evidently not the valid reasonable business
necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were
found fit for the job, but were asked to resign when they married a co- employee.
Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine
Operator, to Alma Dayrit, then an employee of the Repacking Section, could be
detrimental to its business operations. Neither did petitioners explain how this
detriment will happen in the case of Wilfreda Comia, then a Production Helper in the
Selecting Department, who married Howard Comia, then a helper in the cutter-
machine. The policy is premised on the mere fear that employees married to each
other will be less efficient. If we uphold the questioned rule without valid
justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a co-
employee, but they are free to marry persons other than co-employees. The
questioned policy may not facially violate Article 136 of the Labor Code but it creates
a disproportionate effect and under the disparate impact theory, the only way it could
pass judicial scrutiny is a showing that it is reasonable despite the discriminatory,
albeit disproportionate, effect. The failure of petitioners to prove a legitimate business
concern in imposing the questioned policy cannot prejudice the employees right to be
free from arbitrary discrimination based upon stereotypes of married persons working
together in one company.
AL HARASSMENT
73. MA. LOURDES T.
DOMINGO v. ROGELIO
I. RAYALA G.R. No.
155831 February 18, 2008
NACHURA, J.:
DOCTRINES:
1. It is not necessary that the demand, request or requirement of a sexual
favor be articulated in a categorical oral or written statement to be
considered as sexual harassment.
2. The Chief Executive does not have unfettered discretion to impose a
penalty other than the penalty provided by law for sexual harassment.
FACTS:
Petitioner Ma. Lourdes T. Domingo, then Stenographic Reporter III at the NLRC,
filed a Compliant for sexual harassment against Respondent, NLRC Chairman
Rogelio I. Rayala before the Secretary of Labor and Employment. She claimed that
the respondent committed the following acts:
1. Holding and squeezing her shoulders;
2. Running his fingers across her neck and tickling her ear;
3. Having inappropriate conversations wither her;
4. Giving her money allegedly for school expenses with a promise of future
privileges; and
5. Making statements with unmistakable sexual overtones.
A committee was created to investigate the said allegations. The said committee found
the respondent guilty of the offense charged and recommended the imposition of the
minimum penalty provided under AO 250, which it erroneously stated as suspension
for 6 months. However, the Secretary of Labor and employment recommended that
the penalty should be suspension for 6 months and 1 day, in accordance with AO 250.
The Office of the President, through Executive Secretary Zamora, concurred with the
findings of the Committee but imposed the penalty of dismissal. The respondent
assailed the decision claiming his acts do not constitute sexual harassment.
CA RULING: The CA held that there was sufficient evidence on record to create
moral certainty that the Respondent committed the acts he was charged with.
ISSUE:
1. Whether or not the Respondent is guilty of sexual harassment?
2. Whether or not the Office of the President may impose the penalty of
dismissal?
SC RULING:
1. Yes. If we were to test Rayalas acts strictly by the standards set in Section 3,
RA 7877, he would still be administratively liable. It is true that this
provision calls for a "demand, request or requirement of a sexual favor." But
it is not necessary that the demand, request or requirement of a sexual favor
be articulated in a categorical oral or written statement. It may be discerned,
with equal certitude, from the acts of the offender. Holding and squeezing
Domingos shoulders, running his fingers across her neck and tickling her
ear, having inappropriate conversations with her, giving her money allegedly
for school expenses with a promise of future privileges, and making
statements with unmistakable sexual overtones all these acts of Rayala
resound with deafening clarity the unspoken request for a sexual favor.
Likewise, contrary to Rayalas claim, it is not essential that the demand,
request or requirement be made as a condition for continued employment or
for promotion to a higher position. It is enough that the respondents acts
result in creating an intimidating, hostile or offensive environment for the
employee.45 That the acts of Rayala generated an intimidating and hostile
environment for Domingo is clearly shown by the common factual finding of
the Investigating Committee, the OP and the CA that Domingo reported the
matter to an officemate and, after the last incident, filed for a leave of
absence and requested transfer to another unit.
2. No. Under AO 250, the penalty for the first offense is suspension for six (6)
months and one (1) day to one (1) year, while the penalty for the second
offense is dismissal.52 On the other hand, Section 22(o), Rule XVI of the
Omnibus Rules Implementing Book V of the Administrative Code of 198753
and Section

52 A(15) of the Revised Uniform Rules on Administrative Cases in the Civil
Service54 both provide that the first offense of disgraceful and immoral
conduct is punishable by suspension of six (6) months and one (1) day to
one (1) year. A second offense is punishable by dismissal.
Under the Labor Code, the Chairman of the NLRC shall hold office during
good behavior until he or she reaches the age of sixty -five, unless sooner
removed for cause as provided by law or becomes incapacitated to discharge
the duties of the office.55
In this case, it is the President of the Philippines, as the proper disciplining authority,
who would determine whether there is a valid cause for the removal of Rayala as
NLRC Chairman. This power, however, is qualified by the phrase "for cause as
provided by law." Thus, when the President found that Rayala was indeed guilty of
disgraceful and immoral conduct, the Chief Executive did not have unfettered
discretion to impose a penalty other than the penalty provided by law for such offense.
As cited above, the imposable penalty for the first offense of either the administrative
offense of sexual harassment or for disgraceful and immoral conduct is suspension of
six (6) months and one (1) day to one (1) year. Accordingly, it was error for the Office
of the President to impose upon Rayala the penalty of dismissal from the service, a
penalty, which can only be imposed upon commission of a second offense.
74. PHILIPPINE AEOLUS AUTOMOTIVE UNITED CORPORATION and/or
FRANCIS CHUA v. NATIONAL LABOR RELATIONS COMMISSION and
ROSALINDA C. CORTEZ, respondents.
G.R. No. 124617 April 28, 2000
BELLOSILLO, J.:
SEXUAL HARASSMENT
DOCTRINE:
The gravamen of the offense in sexual harassment is not the violation of the
employee's sexuality but the abuse of power by the employer.
FACTS:
Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a
corporation duly organized and existing under Philippine laws, petitioner, Francis
Chua is its President while private respondent Rosalinda C. Cortez was a company
nurse of Petitioner Corporation until her termination.
PAAUC dismissed Private Respondent from service on the ground of serious
misconduct, gross habitual neglect and fraud or willful breach of trust. Among the
acts she allegedly committed is throwing a stapler at Plant Manager William Chua,
her superior and uttering invectives against him. She filed with the Labor Arbiter a
complaint for illegal dismissal, non-payment of annual service incentive leave, 13 th
month pay and damages against PAAUC and its President Francis Chua. She claimed
as a defense for the offense charged against her that William Chua manifested a
special liking for her. She claimed that William Chua would oftentimes invite her for
a date, make sexual advances touching her hands, putting his arms around her
shoulders, running his finger on her arms and telling her she looked beautiful. The
special treatment and sexual advances continued during her employment for 4 years
but she never reciprocated his flirtations, until finally, she noticed that his attitude
toward her changed. He made her understand that if she would not give in to his
sexual advances he would cause her termination from the service; and he made good
his threat when he started harassing her.
LA RULING:
The Labor Arbiter rendered a decision holding the termination of Cortez as valid and
legal, at the same time dismissing her claim for damages for lack of merit.
NLRC RULING:
The NLRC disbelieved the explanation proffered by private respondent on the ground
she never filed a complaint against William Chua for more than 4 years.
ISSUE:
Whether or not William Chua committed acts of sexual harassment against Cortez?
SC RULING:
Yes. The gravamen of the offense in sexual harassment is not the violation of the
employee's 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 no 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.
Private respondent admittedly allowed four (4) years to pass before finally coming out
with her employer's sexual impositions. Not many women, especially in this country,
are made of the stuff that can endure the agony and trauma of a public, even
corporate, scandal. If petitioner corporation had not issued the third memorandum that
terminated the services of private respondent, we could only speculate how much
longer she would keep her silence. Moreover, few persons are privileged indeed to
transfer from one employer to another. The dearth of quality employment has become
a daily "monster" roaming the streets that one may not be expected to give up one's
employment easily but to hang on to it, so to speak, by all tolerable means. Perhaps,
to private respondent's mind, for as long as she could outwit her employer's ploys she
would continue on her job and consider them as mere occupational hazards. This
uneasiness in her place of work thrived in an atmosphere of tolerance for four (4)
years, and one could only imagine the prevailing anxiety and resentment, if not
bitterness, that beset her all that time. But William Chua faced reality soon enough.
Since he had no place in private respondent's heart, so must she have no place in his
office. So, he provoked her, harassed her, and finally dislodged her; and for finally
venting her pent-up anger for years, he "found" the perfect reason to terminate her.
ARTICLE 141 (now Art. 139) - Coverage
75. APEX MINING COMPANY, INC. v. NATIONAL LABOR RELATIONS
COMMISSION and SINCLITICA
CANDIDO
G.R. No. 94951 April 22, 1991
GANCAYCO, J.:
HOUSEHELPER OR DOMESTIC SERVANT
DOCTRINE:
The definition provided by the Labor Code of the terms househelper or domestic
servant cannot be interpreted to include househelp or laundrywomen working in
staffhouses of a company, like petitioner who attends to the needs of the company's
guest and other persons availing of said facilities
FACTS:
Private respondent Sinclita Candida was employed by petitioner Apex Mining
Company, Inc. to perform laundry services at its staff house. In the beginning, she was
paid on a piece rate basis. However, she was then paid on a monthly basis at Php
250.00 a month, which was ultimately increased, to Php 575.00 a month. On 18
December 1987, while she was attending to her assigned task and she was hanging
her laundry, she accidentally slipped and hit her back on a stone. As a result of which,
she was not able to continue her work. She was offered the amount of Php 2,000.00,
which was eventually increased to Php 5,000.00, to persuade her to quit her job, but
she refused. The petitioner subsequently disallowed her to return to work. She filed a
request for assistance with the DOLE.
LA RULING:
The Labor Arbiter ordered the petitioner to pay her the following: 1) salary; 2)
Emergency Living; 3) 13th Month Pay; and 4) Separation Pay. The petitioner appealed
the decision to the NLRC.
NLRC RULING:
The NLRC dismissed the appeal for lack of merit and affirmed the appealed decision.
A motion for reconsideration thereof was likewise denied.
ISSUE: Whether or not private responded should be treated as a mere househelper or
domestic servant and not as a regular employee entitled to the amounts granted by the
Labor Arbiter?
SC RULING:
No. Under Rule XIII, Section l(b), Book 3 of the Labor Code, as amended, the terms
"househelper" or "domestic servant" are defined as follows:
The term "househelper" as used herein is synonymous to the term "domestic
servant" and shall refer to any person, whether male or female, who renders
services in and about the employer's home and which services are usually
necessary or desirable for the maintenance and enjoyment thereof, and
ministers exclusively to the personal comfort and enjoyment of the
employer's family.
The definition cannot be interpreted to include househelp or laundrywomen working
in staffhouses of a company, like petitioner who attends to the needs of the company's
guest and other persons availing of said facilities. By the same token, it cannot be
considered to extend to then driver, houseboy, or gardener exclusively working in the
company, the staffhouses and its premises. They may not be considered as within the
meaning of a "househelper" or "domestic servant" as above-defined by law.
The criteria is the personal comfort and enjoyment of the family of the employer in
the home of said employer. While it may be true that the nature of the work of a
househelper, domestic servant or laundrywoman in a home or in a company
staffhouse may be similar in nature, the difference in their circumstances is that in the
former instance they are actually serving the family while in the latter case, whether it
is a corporation or a single proprietorship engaged in business or industry or any other
agricultural or similar pursuit, service is being rendered in the staffhouses or within
the premises of the business of the employer. In such instance, they are employees of
the company or employer in the business concerned entitled to the privileges of a
regular employee.