CHAPTER I: THE CONSTITUTION AND PROTECTION TO LABOR

Art II, Sec 9: the State shall a promote a just and dynamic social order -> that will ensure the prosperity and
independence of the nation + free the people from poverty through policies that provide 1) adequate social services; 2)
promote full employment; 3) a rising standard of living; 4) an improved quality life for all
Labor Code: Art 3. Declaration of Policy the state shall afford protection to labor, promote full employment, ensure
equal work opportunities and regulation the relations between the employer and the workers. The state shall assure the
rights of workers to self-organization, collective bargaining, security of tenure and just and human conditions of work.
Employment = not only contractual but also in the nature of a property right
Constitutional rights of workers:
1. Right to property and due process
2. Right to self-organization
3. Right to security of tenure, collective bargaining, strikes and concerted activities
4. Right to just and humane conditions of work
5. Right to a living wage
6. Right to participate in policy and decision-making
7. Right to just share in the fruits of production (profit)
Chap II General Labor Concepts
Interpretation of Labor Code Construction in favour of Labor:
In case of doubt in the interpretation & implementation of the provisions of the Labor Code, including its IRR, it
must be resolved in favour of labor.
Constitution: the State shall afford full protection to labor and promote full employment opportunities for all
Interpretation of Contracts Construction in favour labor (consti policy: utmost protection & justice to labor)
Employment Contracts
Contract of employment is in the nature of a contract of adhesion. As a rule, in case of ambiguity in a contract of
adhesion the same should be strictly interpreted against the person who prepared it. Thus, contract of
employment should be interpreted in favour of labor.
Contract of employment are impressed w public interest thus, provision of applicable statutes are deemed
written into the contract (eg employment status of a person)
CBA
Consti policy: utmost protection and justice to labor thus, construction MUST still be in favour of labor
Evidence
In case of doubt between the evidence presented by the employer & the employee, doubt shall be resolved in
favour of labor (Labor Code policy)
Employers Program
Employers program eg providing for separation benefits in case of doubt, construction must be in favour of
labor
Burden of Proof is always on the employer to show the validity of his exercise of management prerogatives eg wrt
termination of employment
Burden of proof: employer -> must show that dismissal was for a valid (legal) or authorized cause
o If not shown = illegal dismissal
o Quantum of proof: substantial evidence (that amount of evidence as a reasonable mind might accept as
adequate to support a conclusion)
NOTE: the employee must first prove the fact of dismissal by substantial evidence
NO WORK-NO PAY PRINCIPLE (fair days wage for a fair days labor)
- Basic factor in determining employees wages
- Exception: if the labourer was able, willing and ready to work BUT was illegally locked-out, suspended or
dismissed or illegally prevented from work
- Project workers or work pool employees who have gained regular status are still subject to no work-no pay
principle (those days without project (work) shall be deducted in computing backwages)
No work-no pay principle does not apply when the employee was forced out from work/constrained to take
mandatory leave (from the exception)
LAST IN, FIRST OUT (LIFO) RULE applies to termination of employment in the line of work
 - When 2 or more persons occupying the same position in the company affected by a retrenchment program ->
the last one employed shall be the first to go
- St a sound management prerogatives (therefore, employers can provide for a valid & equitable grounds as basis
for termination, separation etc)
o Exemption to the exception: the law so provides
ONE UNION-ONE COMPANY POLICY
GENERAL RULE: one union in one employer unit
Rationale: 1 unit -> to deal with the employer in equal power with 1 potent voice
Exception: when there are compelling reasons which would deny the right of a certain class of employees from their
right to self-organization
Proliferation of unions discouraged, why? Not of sound labor management relations to breakaway from their
fellow workers to form another bargaining unit
o Terms & conditions of employment are not substantial/significant in forming another union
The one union, one company policy must yield to the right of the employee:
1. To form unions/associations not contrary to law;
2. To self-organization;
3. To enter into collective bargaining negotiations, among others, which the Constitution guarantees
EQUAL PAY FOR EQUAL WORK PRINCIPLE - persons who work under similar qualifications, skill, effort and
requirement under similar conditions shall be paid similar salaries
Same position & rank = presumption -> equal work
NON-DIMINUTION OF BENEFITS - The Labor Code provides for the prohibition against the elimination and diminution of
benefits of employees
Requisites for voluntary employer practice st it cannot be unilaterally withdrawn:
1. It must have been a practice over a long period of time;
Jurisprudence has not provide for a minimum number of years
2. Shown to be consistent & deliberate
3. Act of liberality (not by a strict legal or contractual obligation)
CHAPTER IV: JOB CONTRACTTING AND LABOR-ONLY CONTRACTTING ARRANGEMENTS
Job contracting is valid -> management prerogative BUT it must comply with the limits & standards provided by the
Labor Code
On the part of the employer:
The reduction of employees through job contracting is valid: good faith & undertaken for a more economic &
efficient methods of production
o The company can determine in its best judgment whether to engage in job contracting (mgt prerog)
o Part of management prerogative to determine what activities must be contracted out, regardless of
whether such activity is peripheral or core in nature
Burden of proof that there is malice on the part of the employer is ON THE COMPLAINING EMPLOYEES; if not
proven, SC has no right to interfere
On the part of the independent contractor:
Proof of capitalization (capital, equipment)
Control over his employees
No bad faith and intent to circumvent the law
Where labor-only contracting exists -> the labor code establishes an employer-employee relationship between the
employer and the employees of the labor-only contractor. WHY? To prevent circumvention of labor laws. (with this
presumption) Labor-only contractor shall be considered as an agent of the employer and thus the employer, being the
principal, shall be considered responsible for the employees as if it is directly hired by the same.
VALID INDEPENDENT CONTRACTING OR SUB-CONTRACTING ARRANGEMENTS
Job-contracting arrangements: Tri-lateral relationships = three parties involved: employer; contractor or sub-
contractor; employees.
There is a contract for a specific job, work or service between the employer and the contractor/subcontractor &
a contract of employment between the contractor/subcontractor and employees.
Elements of valid job-contracting:
1. Contractor/sub-contractor carries on a distinct and independent business
 a. The contractor/subcontractor performs the job on his own account
b. Under his own responsibility
c. Using his own manner and method
d. Free from control of the principal as to the performance of the work except with the results thereof
2. Has his own capital or investment
a. In the form of tools, equipment, machineries, work premises
i. Permissible job contracting: when the job, work or services is performed within or outside the
premises of the principal (as long as there is a predetermined period)
3. Agreement that contractual employees are entitled to all rights and benefits
LABOR-ONLY CONTRACTING ARRANGEMENTS PROHIBITED BY LAW
Elements (either should exist):
1. The job contractor/subcontractor does not have substantial capital or investment AND the employees are
performing the job, work or services directly related to the main business of the principal; OR
a. directly related to the main business of the principal <- if the workers performed activities which are
direct and integral steps or aspects in the essential operations of the business.
i. If yes = labor-only
ii. If not = job contracting
2. The contractor/subcontractor does not have control over the conduct of the work to be performed by the
employees (control test, more decisive)
a. If contractor does not have control = labor-only
b. If contractor has control = job contracting
Effect Labor-Only Contracting & Job Contracting Agreements
Labor-only contracting Job Contracting
Illegal Legal
Employer is the DIRECT EMPLOYER thus, liable to Employer is the INDIRECT EMPLOYER; still
the employees OR the employer shall be solidary solidary liable with the job contractor to the
liable with the labor-only contractor with all employees BUT liability is for a more limited
money claims (wages, benefits, monetary claims) purpose (unpaid wages, no benefits)
The owner is jointly and severally liable
with the contractor in case of violations
with labor standard laws and unfair labor
practice
Labor-only contractor is deemed an agent
There is employer-employee relationship NO employer-employee relationship exists
between the employer and the employees hired between the owner and the employees of the job
by the labor-only contractor contractor

Salient Features of DOLE DO No. 18-02, Series of 2002

1. Mandatory registration of independent contractors for monitoring
Failure to register = presumption: LABOR ONLY CONTRACTOR
2. Requirements for registration + obligations of independent contractors
Effect of noncompliance = delisted
Job-contracting Negative List
1. Not done in good faith; not justified by the exigencies of the business; results in the termination of regular
employees; reduction of the bargaining unit
2. Contracting out with a cabo. Cabo is a person or group of persons in the guise of a labor organization that
supplies workers to employers with or without consideration whether in the capacity as an agent or an
ostensible job contractor
3. Violations of law:
a. Requiring the contractual employees to perform work already performed by regular employees
b. Antedated resignation letters; blank payroll; waiver of labor standards; quitclaim
c. Sign contract with shorter period of employment unless divisible siya
 4. Contracting job from in-house agency <- owned and managed by the employer (principal) and solely work for
the principal
5. Contracting out of a job, work, services directly related to the main business or operation of the principal by
reason of strike, lockout (actual, imminent).
6. Contract out job performed by union members when such will interfere w their rights to self-organization
A108 Labor Code: the owner of the project must answer for whatever liabilities the contractor may have incurred
without prejudice on the part of the project owner to seek reimbursement from the contractor.
CHAPTER V: MANAGEMENT PREROGATIVES
MANAGEMENT PREROGATIVES CANNOT BE DENIED (eg employment)
Management prerogative = freedom to conduct its own affairs so as to enhance the chances of making a profit
Elements:
1. Good faith (for the advancement of employers interest)
2. Not for the purpose of circumventing the rights of the employees as provided by law and valid agreements
If management prerogative = valid -> the SC will not substitute its judgement w that of the employer
Samples:
1. contract of perpetual employment -> employer has the right to terminate employees for just and authorized
cause
2. Terms and conditions upon hiring Ban on spouses in same company
Reasonableness must be clearly established
Bona fide Occupational Qualification: factors
1. The employment qualification is reasonably necessary for the essential operation of the job
involved;
2. Factual basis that substantially all persons who meet the qualification would be unable to perform
the job
Bona fide occupational qualification - on stipulations against marriage to employee of competitor company
valid (reasonable: to protect the interest of the company against possibility that competitor company may gain
access to their trade secrets and procedures)
2 theories on employment discrimination:
1. Disparate treatment employment policy is discriminatory on its face
2. Disparate impact employment policy is facially neutral but it has disproportionate effect
Rationale: not to make employment policies which are violative of the employees right to security of tenure
Bona fide occupational qualification employers weight requirement (international flight stewardess; from the
nature of the business & by reason of public policy; extraordinary diligence; )
Limitations:
1. Law
2. Valid agreements (CBA)
3. General principles of fair play and justice
Azucena pg 364: wage distortion the effect of increasing the pay of an employee to such an amount that equals,
almost equals, or overtakes that of another employee which is not similarly increased; the gaps or differences between
salary grades are not maintained; it arises because compliance.
No wage distortion if different regions.
Solution: voluntary negotiation or arbitration
Wage distortion is NON-STRIKEABLE