Working With Labor Laws

Working
With Labor Laws
General
Principles of the Labor Code
The policy of the State to give maximum aid and protection to labor is embodied in Article 3 of the Labor Code as follows: Art. 3. Declaration of Basic Policy: The State shall afford protection to labor, promote full employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relations between workers and employers. The State shall assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work. While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every dispute will be automatically decided in favor of labor. The employer, or management, also has rights which are entitled to respect and enforcement in the interest of simple fair play. Although the Supreme Court has been more often inclined toward the employee and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Supreme Court to rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable lawand doctrine."
(b.eavier influence of the employer should be counter-balanced by the law which must accord sympathy and compassion to the underprivileged employee] As such, any doubt concerning the rights of labor should be resolved in favor of labor, pursuant to the social justice policy. 6
A. Liberal Interpretation Only in Case of Doubt
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The mandate of the law is that all doubts in the implementation and interpretation of the provisions of the Labor Code and its Implementing Rules and Regulations should be ~~.lp favor of labor," For example, although the New Rules of Procedure of the National Labor Relations Commission (NLRC) provides that the submission of position papers of the employer and the employee shall be simultaneous, the delay of the employee in the submission of his position paper is not a ground for the dismissal of his complaint. This stance is in accord with the policy of the Labor Code, which resolves all doubts in the interpretation of the law and its implementing rules and regulations in favor of labor. 8
B. Where the Law is Clear, the Law is to be Applied to the Facts of the Case
II. A LIBERAL INTERPRETATION OF THE LABOR CODE AND ITS IMPLEMENTING RULES
Under the policy of social justice, the law bends over backwards to accommodate the interests of the working class on the humane justification that those with less privileges in life should "'----have more privileges in ~ law." Thus, when conflicting interests of . labor and capital are weighed on the scales of social justice, the
The doctrine of liberal construction cannot be applied where the law invoked is clear, unequivocal and leaves no room for interpretation or construction. Where the law is clear, it should
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3 Cruz P. 11011. Mml/nn, 01 al., G.R. No. 73053, 15 September 1989. II Dttnn /I. "lIfII/lllilll' Ooorseas and Employment Administration et al., :.H. Nil. '/11'1/)0. :\ I)m;('mbcr 1990.
5 Philippine Telegraph and Telephone Corporation u. National Labor Relations Commission, 183 SCRA451 [1990]. 6 Marcopper Mining Corporation u. National Labor Relations Commission, et aI., G.R. No. 103525, 29 March 1996. 7 Article 4, Labor Code; Section 3, Preliminary Provisions, Omnibus Rules Implementing the Labor Code. 8 Fern's Elegance Lodging House, et al. u. Hon. Murillo, et al., G.R. Nos. 117442-43, 11 January 1995.
Working With labor laws
General Principles of the labor Code
be applied to the facts of the case. Otherwise, it will contravene the purpose for which the law was enacted, and will defeat the ends which it seeks to attain. 9 For example, where the law expressly excluded services rendered on a per diem basis in crediting the length of service for retirement purposes, the said services cannot be included in the computation of retirement benefits on the ground that laws should be construed in favor of employees.t? Furthermore, to disregard the employer's own rights and interests solely on the basis of concern and solicitude for labor is unjust and unacceptable.!' Justice is not fully served by sustaining the contention of the poor simply because he is poor. Justice is done by properly applying the law regardless of the station in life of the contending parties.P
III. PRINCIPLE OF NON-DIMINUTION OF BENEFITS
1. law; 2. an agreement between the employer and the employee; and 3. those which have ripened into company practice can no longer be unilaterally withdrawn, reduced, diminished, discontinued or eliminated by the employer.
A. Meaning of Supplements or Benefits
Supplements or benefits constitute extra remuneration. They are special privileges given to or received by the employees over and above their ordinary earnings or wages.!" Supplements or benefits include, but are not restricted to:lS 1. 2. 3. 4. 5. 6. 7. pay for vacation and special holidays not worked; paid sick leave; overtime rate in excess of what is required by law; profit-sharing; family allowances; Christmas and cost-of-living bonuses; or bonuses other than those paid as a reward for extra output or time spent on the job.
B. Indicators that Benefits have Ripened into Company Practice
In order to further protect the interest of employees and promote social justice, the principle of non-diminution of benefits is embodied in Article 100 of the Labor Code. The principle of non-diminution of benefits prohibits the elimination of supplements or other benefits already enjoyed by the employees under existing laws, decrees, executive orders, company policy or practice, or any agreement or contract between the employer and employees.P In other words, supplements or benefits enjoyed by employees by virtue of:
In order that benefits may be deemed to have ripened into company practice, the following indicators are considered.!" 1. the employer's knowledge that he is not required extend such benefit to his employees; to
9 Government Service Insurance System v. Civil Service Commission, et al., G.R. No. 98395, 28 October 1994. 10 Ibid. 11 Soriano v. Offshore Shipping and Manning Corporation, et aI., G.R. No. 78409, 14 September 1989. 12 Villavilla, et al. v. Court of Appeals, et al., G.R. No. 79664, 11 August 1992. 1:1 M( iele 100, Labor Code; American Express Philippines Local Employ111.'11 I\S.'1or;/ntion u. Leogardo, et a/., G.R. No. 75906, 18 May 1993.
14 States Marine Corporation and Royal Line Inc. v. Cebu Seamen's Association, G.R. No. L-12444, February 28, 1963. 15 Philippine National Bank v. Philippine National Bank Employees' Association, et al., G.R. No. L-30279, 30 July 1982. 16 Republic Planters Bank v. National Labor Relations Commission, G.R. No. 117460,6 January 1997; Manila Electric Company v. Secretary of .R. No. 12758,27 January] 999.
General Principles of the labor Code
2. the granting of the benefits is consistent and deliberate; and 3. the employer continues to grant his employees the benefit for several years. The considerable length of time that benefits have been granted by the employer to the employees indicates a ~_ '!~ voluntary act on its Rart, sufficient in itself to negate any claim of a mistake."? For example, where the employer, for a period of six years, freely, voluntarily and continuously included in.the computation of his employees' 13th-month pay, the payments for sick, vacation and maternity leaves, premiums for work done on rest days and special holidays, and pay for regular holidays, while the "13th-Month Pay Law" requires only a month's basic salary as 13th-month pay, the considerable length of time that the payment for leaves and premiums for rest days and holidays was included by the employer in the computation of the 13th-month pay indicates a unilateral and voluntary act on the part of the employer, sufficient in itself to negate any claim of mistake. As such, a company practice favorable to the employees has been established and has ripened into a benefit enjoyed by them. Under the principle of non-diminution of benefits, this benefit cannot be reduced, diminished, discontinued or eliminated by the employer.l"
management prerogatives. This is also known as the free will of the employer to conduct his own business affairs to achieve his purpose. 19 An employer is free.to regulate, according to his own discretion and judgment, all aspects of employment, includingr'" 1. hiring; 2. work assignments; 3. working methods; 4. time, place and manner of work; 5. tools to be used; 6. processes to be followed; 7. supervision of employees; 8. working regulations; 9. transfer of employees; 10. work supervision; 11. the lay-off of employees; arid 12. the discipline, dismissal and recall of work. Management prerogative is based on the established rule that the labor law does not authorize the substitution of the judgment of the employer in the conduct of his business. Every business enterprise endeavors to increase its profits. In the process, the employer may adopt or devise means designed toward that goal. Management prerogative may be availed of without fear of any liability so long as the following conditions are met.?'
IV. PREROGATIVE OF MANAGEMENT TO REGULATE All ASPECTS OF EMPLOYMENT AND THE CONDUCT OF ITS BUSINESS Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly
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1. It is exercised in good faith for the advancement of the -employer's interest and not for the purpose of defeating or circumventing the rights of employees under special laws or a valid agreement; and
19 Yap v. Hon. Inciong, et al., G.R. No. 51314,
21 June 1990.
17 Davao Fruits Corporation v. Associated Labor Unions No. 85073, 24 August 1993.
I n Ibid.
(ALU),
et al., G.R.
20 San Miguel Brewery Sales Force Union (PTGWO) v. Hon. Ople, et al., G.R. No. 53515, 8 February 1989. 21 Ibid; Wise and Co., Inc. v. Wise & Co., Inc. Employees Union-Natu, et al., G.R. No. 87672, 13 October 1989.
Working With labor
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General
Principles
of the labor
Code
2. It is not exercised in a malicious, harsh" oppressive, vindictive or wanton manlier or out of malice or spite.
A. Management
Prerogative to Hire and Fire Personnel
The hiring and firing of personnel is a management~t _ However, it is not without limitation. The limitation is embodied in the constitutional requirement for the protection of labor and the promotion of social justice, which tilts the scales of justice, whenever there is doubt, in favor of the employee.P Moreover, with regard to the dismissal of employees, certain mandatory requirements laid down by the law must be complied with to ensure that this management prerogative is exercised without ~i-tFa-r-i-rress> abuse ofCOiscreticm Hence, or both the reason for dismissal and the manner of dismissing an employee must be appropriate. Otherwise, the termination itself is gravely defective and may be declared unlawful. This is because an employee's job is considered a property right and is therefore within the constitutional mantle of protection that eno person shall be deprived of life, liberty or property without due process of law; nor shall any person be denied the equal protection of the laws~'23
company. An employee's right to security of tenure does not } , give him such a vested right in his position as would deprive the employer of his prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, inconvenient, or prejudicial to him, and if it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that the transfer amounts to a constructive dismissal. 24 However, like all other rights, there are limits. The management prerogative to transfer personnel must be exercised without grave abuse of discretion, but by putting to mind the basic elements of justice and fair play. This is because having the right should not be confused with the manner in which that right must be exercised. Thus, the transfer of employees cannot be used as a subterfuge by the employer to rid himself of an undesirable employee or to penalize an employee for his union activities and thereby defeat his right to self-organization. 25
24 Cruz v. Ron. Medina, et al., G.R. No. 73053, 15 September 1989. 25 Philippine Telegraph and Telephone Corporation v. Laplana, et al., G.R. No. 76645,23 July 1991.
B. Management
Prerogative to Transfer Personnel
It is the employer's prerogative, based on his assessment of his employees' qualifications, aptitudes, and competence, to move the employees around in the various areas of his business operations so that they will function with maximum benefit to the
22 Employees Association of the Philippine American Life Insurance Company (EMAPALICO), et al. v. National Labor Relations Commission, et aI., G.R. No. 82976, 26 July 1991. 23 Brahm Industries, Inc. v. National Labor Relations Commission, et al., G.R. No. 118853, 16 October 1997.
Employment Relationship v. Independent Contractorship
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2
EMPLOYMENT RELATIONSHIP V. INDEPENDENT CONTRACTORSHIP
uI
performed reserves a right to control not only the end to be achieved, but also the means to be used in reaching such end: generally assumes primacy in the overall consideration of whether or not an employer-employee relationship exists between the parties." If the power to control the employee's conduct is absent, no employment relationshipmay b~nsidered as existing between the parties." The power to control the ~mployee'~ conduCt is deemed to be such an important factor that the other requisites (selection and engagement of employee, payment of wages and power of dismissal) may even be disregarded. 5 B.l. Sufficiency of the mere existence of the power to control The power of control refers to the existence of the power to control the employee's conduct and not necessarily to the actual exercise of that power. In other words, it is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power" in order that an employer-employee relationship may be considered as existing between the parties.
I. WHEN AN EMPLOYMENT RELATIONSHIP IS PRESENT An employee is defined as a person who performs services for an employer in which either or both mental and physical efforts are used and who receives compensation for such services, where there is an employer-employee relationship." A. The Fourfold Test To determine the existence of an employer-employee relationship, the following fourfold test is applied:" 1. 2. 3. 4. the selection and engagement of the employee; the payment of wages; the po;'er of dismissal; and the power to control the employee's conduct. B. The Right-of-Control Test The power to control the employee's conduct or the right-ofcontrol test [where the person for whom the services are
II. NO EMPLOYMENT RELATIONSHIP: INDEPENDENT CONTRACTORSHIP There may be cases when an independent contractors hip and not an employment relationship exists between the parties. An independent contractor is one who has contracted to do the work according to his own methods and without being
1 Villavilla, et al. v. Court of Appeals, et aI., G.R. No. 79664, 11 August

1992.
2 Escario v. National Labor Relations Commission, G.R. No. 124055, 8 June 2000. 10
3 Villuga, et al. v. National Labor Relations Commission, et al., G.R. No. 75038, 23 August 1993. 4 Sara, et al. v. Agarrado, et al., G.R. No. L-73199, 26 October 1988. 5 Sandigan Savings and Loan Bank, Inc., et a!. v. National Labor Relations Commission, G.R. No. 112877, 26 February 1996. 6 Equitable Banking Corporation v. National Labor Relations Commission,
273 SeRA 352.
13
ubjcct to the control of the employer except as to the result the work.?
A. Test of an Independent Contractorship
In determining whether the relationship is that of employer and employee or one of an independent contractor, each case must be determined on its own facts and all the features of the relationship considered." The significant factor in determining the relationship of the parties is the presence or absence of a supervisory_.Row~ control the method and_detail of performance of the seryice, and the degree to which the~erson for whom the services are performed may intervene to exercise such control. The presence of the power of control is indicative of an employment relationship and the absence of such power is indicative of independent contractorship.? In other words, where the person for whom the services are performed, or the principal, reserves the right to control both the end to be achieved and the manner and means to be used in reaching the end, an employer-employee relationship exists between the parties. Where the principal is interested only in the end to be achieved or the results of the work, an independent contractor relationship exists between the parties. A.l.
Not every form of control will establish an employment relationship.
every form of control that the principal reserves to himself 'over the conduct of the person whose services are engaged may be accorded the effect of establishing an employer-employee relationship between them. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. This is because realistically, it would be a rare contract of service that gives untrammeled freedom to the person whose services are engaged and eschews any intervention whatsoever in his performance of the work. 10
A.2. There is no control when guidelines do not dictate the methods to achieve the desired results.
The principal may establish guidelines to be followed by the person whose services are engaged. This will not necessarily create an employment relationship between them because not
The line should be drawn between rules that merely serve as guidelines toward the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address both the result and the means used to achieve it. 11 The distinction between rules that merely serve as guidelines toward the achievement of a mutually desired result and rules that the person hired is bound to follow acquires particular relevance in the case of an enterprise that affects public interest, such as the business of insurance, which is subject to regulation by the State with respect to the relations between the insurer and the insured, and the internal affairs of the insurance company. In the business of insurance, rules and regulations governing the conduct of the business are provided for in the Insurance Code and are enforced by the Insurance Commissioner. 12
7 Yiliuga, et al. v. National Labor Relations Commission, et aI., G.R. No. 75038, 23 August 1993. 8 Ibid. 9 AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission, G.R. No. 102199,28 January 1997.
10 Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, et aI., G.R. No. 84484, 15 November 1989. 11 Ibid. 12 Ibid.
Working With Labor Laws
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subject to the control of the employer except as to the result the work."
A. Test of an Independent
Contractorship
In determining whether the relationship is that of employer and employee or one of an independent contractor, each case must be determined on its own facts and all the features of the relationship considered." The significant factor in determining the relationship of the parties is the presence or absence of a sup~rvisory_.Ro~ co~trol the method _and detail of performance of the s~ryi~ and the degree to which the y-erson for whom the services are performed may intervene to exercise such control. The presence of the power of control is indicative of an employment relationship and the absence of such power is indicative of independent contractorship.? In other words, where the person for whom the services are performed, or the principal, reserves the right to control both the end to be achieved and the manner and means to be used in reaching the end, an employer-employee relationship exists between the parties. Where the principal is interested only in the end to be achieved or the results of the work, an independent contractor relationship exists between the parties. Not every form of control will establish an employment relationship. The principal may establish guidelines to be followed by the person whose services are engaged. This will not necessarily create an employment relationship between them because not A.l.
every form of control that the principal reserves to himself 'over the conduct of the person whose services are engaged may be accorded the effect of establishing an employer-employee relationship between them. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. This is because realistically, it would be a rare contract of service that gives untrammeled freedom to the person whose services are engaged and eschews any intervention whatsoever in his performance of the work. 10 There is no control when guidelines do not dictate the methods to achieve the desired results. The line should be drawn between rules that merely serve as guidelines toward the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employeremployee relationship unlike the second, which address both the result and the means used to achieve it.!' The distinction between rules that merely serve as guidelines toward the achievement of a mutually desired result and rules that the person hired is bound to follow acquires particular relevance in the case of an enterprise that affects public interest, such as the business of insurance, which is subject to regulation by the State with respect to the relations between the insurer and the insured, and the internal affairs of the insurance company. In the business of insurance, rules and regulations governing the conduct of the business are provided for in the Insurance Code and are enforced by the Insurance Commissioner. 12 A.2.
7 Villuga, et al. v. National Labor Relations Commission, et al., G.R. No. 75038, 23 August 1993. 8 Ibid. 9 AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission, C.R. No. 102199,28 January 1997.
10 Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, et al., G.R. No. 84484, 15 November 1989. 11 Ibid. 12 Ibid.
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Working
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Employment
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Contractorship15
Hence, it is usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies so that they will not violate the law. The following are considered as guidelines to achieve the desired results: '\ 1. rules which prescribe the qualifications of persons who may be insured; 2. subjecting insurance applications to processing and approval by the company; and 3. reserving to the company the determination of the premiums to be paid and the schedules of payment. No control is present in the above-enumerated guidelines for as long as the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience is not invaded.P A.3. The dealer is an independent contractor. Similarly, a person engaged to sell soft drinks for the principal, using a truck supplied by the principal, but with the right to employ his own workers, to sell according to his own methods, subject only to prearranged routes, observing no working hours fixed by the principal and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the principal for at least 250 cases of soft drinks sold daily, is not an employee but an independent contractor."
A.4. An express provision in the contract that an employee is an independent contractor cannot negate an employment relationship.
reality one of employment. This is because the employment status of a person is defined and prescribed by law and not by what the parties say it is. In determining the status of a contract, the fourfold test of employment, specifically the right-of-control test, has to be applied.:"
BJ Job Contracting Independent contractors may engage in permissible tracting if the following conditions are met.!" job con-
1. The contractor carries on an independent business and undertakes the contract work on his own account, under his own responsibility, and according to his own manner and method, free from the control and direction of his principal in all matters connected with the performance of the work, except as to the results of the work; 2. The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business; and 3. The employees recruited and placed by the contractor are not performing activities which are directly related to the principal business of the principal. Department Order No. 10-97, which was issued on 30 May 1997, superseded the Omnibus Rules Implementing the Labor Code provisions on permissible job contracting and labor-only contracting, or Articles 106 to 109.
The existence of an employer-employee relationship cannot be negated by expressly repudiating it in the contract and stipulating that the employee is an independent contractor when the terms of the contract clearly indicate that the relationship is in
13 Ibid.
1'1 Ibid.
15 Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, G.R.No. 119930, 12 March 1998; LVN Pictures, Inc. v. Philippine Musicians Guild (FFW), G.R. Nos. L-12582 and L-12598, 28 January 1961. 16 Pilipinas Shell Petroleum Corporation v. the Honorable Court of Appeals, G.R. No. 104658, 7 April 1993; Neri, et al. v. National Labor Relalions Commission, ot (II., C.R. Nos. 97008-09, 23 July 1
16
17
On 8 May 2001, Department Order No. 03-01, "Revoking Department Order No. 10, Series of 1997, and Continuing to. Prohibit Labor-Only Contracting," was issued. On 21 February 2002, Department Order No. 18-02, "Rules Implementing Articles 106 to. 109 of the Labar Code, as Amended" was issued. ~ The trilateral relationship in contracting agreements ,",Cantracting arrangements are expressly allawed by law but are subject to. regulation in order to. promote employment and to. observe the rights of employees to. just and humane conditions of work, security of tenure, self-organization and collective bargaining. Labor-only contracting is prohibited.l" In legitimate contracting, there exists a trilateral relationship under which there is a contract far a specific jab, work or service between the principal and the contractor; and a contract of employment between the contractor and its employees. Hence, there are three parties involved in legitimate contracting arJ.ill1gements:18 ---1. The principal, which decides to. farm aut a jab, work or service to. the contractor; 2. The cantractor, which has the capacity to. independently undertake the performance of the jab, work or service; and 3. The contractual employees engaged by the can tractor to. ~plIsh the jab-:-work or service.
performance or completion of a specific jab, work or service within a .definite or predetermined period, regardless of whether such jab, work or service is to. be performed or completed within or outside the premises of the principal. ii, Principal refers to. any employer who. puts aut or farms aut i!....jab, service or work to. a contractor, --iii. Contractor refers to. any person or entity engaged in a ~itimate cantractillg_ arrangement, iv. A contractual employee includes one employed by a con. tractor pursuant to. an arrangement between the contractor and the principal.
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B.2. Terms and conditions of a contract between a contractor and a contractual employee The can tract between a contractor and a contractual employee should be in writing. The contract should include the following terms and conditions, notwithstanding oral or written stipulations to. the contraryr? 1. A specific description of the jab, work or service to. be performed by the contractual employee; 2. The place of work and terms and conditions of employment, including a statement of the wage rate applicable to. the individual contractual employee; and 3. The term or duration of employment, which shall be coextensive with the can tract of the principal and the contractor; or with the specific phase far which the cantractual employee is engaged, as the case may be. The contractor shall inform the contractual employee of the above terms and conditions, an or before the first day of his employment.
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B.t.a.Definitions
of contracting.
principal, contractor
and
contractual i.
employee"
Contracting refers to. an rarra!!~~whereby the principal agrees to. put out or Ka~~--?ut to. a contractor the
17 Section 1, Department Order No. 18-02. 18 Section 3, Ibid. 19 Section 4, Ibid.
20 Section 9, Ibid.
18
19
(B.3.) Rights of contractual employees Tn{ contractual employee shall be entitled to all the rights and privileges due a regular employee as provided for in the Labor Code, including the following.'" 1.' safe and healthful working conditions; 2. labor standards such as service incentive leave, rest days, overtime pay, holiday pay, 13th month pay and separation pay; 3. social security and welfare benefits; 4. self-organization, collective bargaining and peaceful concerted action; and 5. security of tenure.
B.4. Duty to produce a copy of the contract between the principal and the contractor
2. The employees recruited, supplied or placed by the contractor are performing activities which are directly related to the main business of the principal; or 3. The contractor does not exercise the right of control over the performance of the work of the contractual employee. Substantial capital or investment refers to capital, stocks and su~cr~d capitalization in the case of corporations, and to the tools, equipment, implements, machinery and work premises actually and directly used by the contractor in the performance or completion of the job, work or service contracted out.>"
D. Distinction Between a Job Contractor and a Labor-only Contractor
The principal or the contractor has the obligation to produce a copy of the contract between them in the ordinary course of an inspection conducted by the Regional Director. Moreover, the contractor has the obligation to produce a copy of the contract of employment of the contractual employees when directed to do so by the Regional Director or his authorized representative. 22
@ Labor-only Contracting
Labor-only fers to an supplies or ~ principal, contracting is prohibited. Labor-only contracting rearrangement where the contracj:or l!lerel)LLe.CIJJ.!!?, places.workers.tc.pertorm.a.jcb, work or service for and if any of the following elements are present.>"
1. The contractor does not have substantial capital or investment which relates to the job, work or-se~ice to be performed;
The main distinction between a job contractor and a labor-only contractor is that the legitimate job contractor yrovides services, while the labor-only contractor, which is essentially prohibited by law as mentioned earlier, provides manpower 0Eb'. The legitimate job contractor undertakes to perform a specific job for the principal, while the labor-only contractor merely provides the personnel who will work for the principal. A legitimate job contractor validly provides services as it carries on an independent business and has substantial capital or investment. Also, the personnel recruited and placed by the contractor with the principal do not perform activities directly related to the main business of the principal. On the other hand, the labor-only contractor only provides manpower since it does not have substantial capital or investment. Moreover, the personnel supplied by the latter contractor perform activities directly related to the main business of the principal.
21 Section 8, Ibid. 22 Section 14, Ibid. 23 Section 5, par. 1, Ibid.
24 Section 5, par. 3, Ibid.
20
21
E. Extent of Liability of Principals of Job Contractors and labor-only Contractors In legitimate job contracting, the principal is considered only as an indirect employer of the contractual employees. The contractor is the direct employer of the contractual employees. In labor-only contracting, the principal is considered the direct employer of the contractual employees. The contractor is considered as a mere agent of the principal. E.1. The principal of the job contractor is an indirect employer. In legitimate job contracting, no employer-employee relationship exists between the contractual employees and the principal. However, when the job contractor fails to pay the wages of his contractual employees in accordance with the Labor Code, the principal becomes solidarily liable with his contractor to the contractual employees to the extent of the work performed under the contract, as though the contractual employees were directly employed by the principal. 25. ~ ( Solidary liability means "joint and several liability~" A solidary liability is one in which each debtor is liable for the entire obligation. Hence, with solidary liability, the liability of the principal and the contractor for unpaid wages may be enforced against them both by a joint action; or against any of them by an individual action.s" In other words, if the wages of the contractual employee are not paid, both the principal and the job contractor may be held liable for the full amount. In sum, the law itself establishes an employer-employee relationship between the principal and the contractual employees for a limited purpose: to ensure that the contractual employees
are paid the wages due them.F For as long as the work, task, job or project has been performed for the principal's benefit, the liability accrues for such period even if, later on, the contractual employees are eventually transferred or reassigned elsewhere by the contractor. The principal's liability to the contractual employees extends only to the period during which the contractual employees work for the principal. The fact that they are reassigned to another principal necessarily ends such responsibility. 28
E.l.a. Rationale for the solidary liability of a job contractor and_a_pri..ncipal

The solidary liability of the job contractor and the principal was enacted to ensure compliance with the provisions of the Labor Code, principally those on statutory minimum wage. The job contractor is made liable by virtue of his status as a direct employer. On the other hand, the principal is liable as the indirect employer of the contractual employees. This solidary liability facilitates, or if not, guarantees, payment of the employees' compensation. The 1987 Constitution mandates that employees be given ample protection.P? The imposition of solidary liability is not unduly burdensome to the principal. The principal is made liable to the contractual employees because he can protect himself from irresponsible job contractors by withholding such sums and paying them directly to the contractual employees, or by requiring a bond from the job contractor for this purpose.P?
25 Article 106, par. 2, Labor Code. 26 Industrial Management International Development Corp. (INlMACO) v. National Labor Relations Commission, et aI., G.R. No. 101723, 11 May 2000.
27 Philippine Bank of Communications v. National Labor Relations Commission, G.R. No. L-66598, 19 December 1986; Section 7, Department Order No. 18-02. 28 Rosewood Processing, Inc. v. National Labor Relations Commission, et al., G_R.Nos. 116476-84, 21 May 1998. 29 Ibid. 30 Ibid; Article 108, Labor Cod".
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Employment
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E.J.b. Right of reimbursement from the job contractor While the principal and the job contractor are solidarily liable for the payment of wages of the contractual employees, the principal has the right of reimbursement from the job contractor in case he pays the obligation to the contractual employees."
The Supreme Court has observed that businessmen, with the aid of lawyers, have tried to avoid bringing about an employeremployee relationship in some of their enterprises because that juridical relationship spawns obligations connected with workmen's compensation, social security, Medicare, minimum wage, termination pay and unionism.v'
The principal of the labor-only contractor is a direct employer. In labor-only contracting, an employer-employee relationship is created by law between the principal and the contractual employees. The principal is responsible to the contractual employees, as though such employees were directly employed by him. In this case, the labor-only contractor is considered merely an agent of the principal. 32 In labor-only contracting, the principal becomes solidarily liable with the labor-only contractor for all the rightful claims of the contractual employees.P This should be distinguished from the liability of the principal of a job contractor, whose liability is limited to the wages of the contractual employees for work done for the benefit of the principal. E.2.a. Rationale of the liability of principals of labor-only contractors Where labor-only contracting exists, the law establishes an employer-employee relationship between the principal and the contractual employees for a comprehensive purpose-to prevent any violation or circumvention of any provision of the Labor Code and to safeguard the employees' rights under the Labor Code.
31 Philippine Fisheries Development Authority v. National Labor Relations Commission, G.R. No. 94825, 4 September 1992. 32 Article 106, par. 4, Labor Code. 33 PCI Automation Center, Inc. v. National Labor Relations Commission, G.R. No. 115920,29 January 1996; Articles 106, par. 4 and Article 107, Labor Code.
E.2.
@Prohibited
Acts
Even if a contractor met all the requirements for legitimate job contracting, the following acts are prohibited for being contrary to law or public policy.:" 1. Contracting out of a job, work or service when not done in good faith/ and not justified by the exigencies of the business, and the contracting results in the termination of regular employees and the reduction of work hours or the reduction or splitting of the bargaining unit; 2. Contracting out of work with a "cabo,"/or a person, group of persons or to a labor group which, in the guise of a labor organization, supplies workers to an employer, with or without monetary or other consideration, whether in the capacity of an agent of the employer or as an ostensibly independent contractor; 3. Taking undue advantage of the economic situation or lack of bargaining strength of the contractual employe1 or undermining his security of tenure or basic rights, or circumventing the provisions of regular employment, in any of the following instances: a. in addition to his assigned functions, requiring the contractual employee to perform functions which are
34 Crisologo, et al., v. National Labor Relations Commission, G.R. Nos. 92777-78, et al., 13 March 199135 Section 6, Department Order No. 10-02.
24
Employment Relationship v, Independent Contractorship
25
currently being performed by the regular employees of the principal .or of the contractor; b. requiring him to sign, as a precondition to employment or continued employment, any of the following documents: i. an antedated resignation letter; ii. a blank payroll; iii.a waiver of labor standards including minimum wages and social welfare benefits; or iv. a quitclaim releasing the principal or contractor from any liability as to payment of future claims; and c. requiring him to sign a contract fixing the period of employment to a term shorter than the term of the contract between the principal and the contractor, unless the latter contract is divisible into phases for which substantially different skills are required, and this is made known to the employee at the time of engagement. 4. Contracting out a job, work or service through an inhouse agency,fwhich refers to a contractor engaged in the supply of labor which is owned, managed or controlled by the principal, and operates solely for the principal; 5. Contracting out a job, work or service directly related to the business or operation of the principal by reason of a strike or lockout, whether actual or imminent; and 6. Contracting out of a job, work or service being Q..erformed by union members .when such will interfere with, restrain or coerce employees in the exercise of their, rights to self-organization.
for effective labor market information and monitoring. Failure of a contractor to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.:" A contractor shall be listed in the registry of contractors upon completion of an application form to be provided by the DOLE. The application shall be verified and shall include an undertaking that the contractor shall abide by all applicable labor laws and regulations.P? The application and its supporting documents shall be filed with the Regional Offices of the DOLE where the applicant principally operates.i" All registered contractors or subcontractors may apply for the renewal of registration every three years.:"
H. Annual Reporting of Registered Contractors
Using a prescribed form, the contractor shall submit its annual report to the Regional Office not later than the 15th of January of the following year. The report shall include/Indicate:"? 1. a list of contracts entered with the principal during the subject reporting period; 2. the number of employees covered by each contract with the principal; and 3. a sworn undertaking that the benefits from the Social Security System (555), the Home Development Mutual Fund (HDMF), PhilHealth, Employees Compensation Commission (ECC), and remittances to the Bureau of Internal Revenue (BIR) due the contractual employees have been made during the subject reporting period.
G. Registration of Contractors
A registration system to govern contracting arrangements and the registration of contractors is established by the DOLE
36 37 38 39
Section Section Section Section Section
11, 12, 13, 17, ] 5,
Ibid. Ibid. Ibid. Ibid. Ibid.
26
I. Delisting of Contractors Subject to due process, the Regional Director shall cancel the registration of contractors based on any of the following grounds.:" 1. non-submission of contracts between the principal and the contractor when required to do so; 2. non-submission of annual report; 3. findings through arbitration that the contractor has engaged in labor-only contracting and prohibited acts; and 4. non-compliance with labor standards and working conditions.
3
WORKING CONDITIONS AND REST PERIODS
I. NORMAL HOURS OF WORK
CD
Solidary liability
The normal hours of work of employees shall not exceed eight ~in a day.'
The principal shall be deemed as the direct employer of the contractual employees and is therefore solidarily liable with the contractor for whatever monetary claims the contractual employees may have against the contractor in case of violations in the following instances.v' 1. 2. 3. 4. 5. labor-only contracting; prohibited acts; rights of contractual employees; delisting; and pretermination of the contract between the principal and contractor for reasons not attributable to a fault of the contractor.
A. Coverage All employees are covered by the eight-hour work day except the following employees." 1. 2. 3. 4. 5. 6. government employees; managerial employees; officers and members of the managerial staff; field personnel; employer's family members; domestic helpers and persons in the personal service of another; and 7. workers paid by result: pakyaw and piece-rate workers.
41 Section 16, Ibid. 42 Section 19, Ibid.
1 Article 83, par. 1, Labor Code. 2 Article 82, par. 1, Ibid.; Section 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code.
II
Working Conditions
and Rest Periods
29
A. I. Definition of government employees, managerial employees,

officers and members of the managerial staff, field personnel, employer's family members, domestic helpers and workers paid by result Govemme.n.Lfillll2k!JLee!c refer to those employed by the National Government or any of its political subdivisions, including those employed in government-owned and/or controlled corporations. 3 b. Managerial employe.!!. refer to those whose primary duty consists of the management of the establishment, or a department or subdivision of the establishment in which they are employed, including other officers or members of the managerial staff. 4 Employees shall be considered as managerial employees, if they meet all of the following conditions:" i. Their primary duty consists of the management of the establishment in which they are employed, or of a department or subdivision of the establishment; ii. They customarily and regularly direct the work of two or more employees in the establishment, or a department or subdivision of the establishment; and iii. They have the authority to hire or fire employees of lower rank; or their suggestions and recommendations as to hiring and firing, or the promotion or any other change of status of other employees, is given particular weight. Employees shall be considered as officers or members of the managerial staff if they perform the following duties and responsibilities:"
3 Section 2(a), Rule I, Book III, Omnibus Rules Implementing the Labor Code. 4 Article 82, par. 2, Labor Code. 5 Section 2(b), Rule I, Book III, Omnibus Rules Implementing the Labor Code. 6 Section 2(c), Ibid.
a.
i. Their primary duty consists of the performance of work directly related to the management policies of their employer; ii. They customarily and regularly exercise discretion and independent judgment; iii. They either: (a) regularly and directly assist a proprietor or a managerial employee; (b)execute under general supervision work along spe-. cialized or technical lines requiring special training, experience, or knowledge; or (c) execute, under general supervision, special assignments and tasks. iv. They do not devote more than 20 percent of their hours worked in a workweek to activities which are not directly and closely related to the performance of the work described in paragraphs (a), (b) and (c) above. c. Field personnel refer to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer, and whose actual hours of work in the field cannot be determined with reasonable certainty. 7 d. The term "~ily. members" refers to the members of the family of the employer who are dependent on the employer for support. 8 e. The terms "domestic hel.Qers" and "persons in the personal service of another" refer to those who perform services in the employer's home which are usually necessary or desirable for the maintenance and enjoyment of the home, or who minister to the personal comfort,
7 Article 82, par. 3, Labor Code; Section 2(f), Rule I, Book III, Omnibus Rules Implementing the Labor Code. 8 Article 82, par. 1, Labor Code.
30
Working Conditions
and Rest Periods
31
convenience, or safety of the employer as well as the members of his household." f. The term "workers paid by result" refers to those who -= are paid on piece-work, takau, pakyaw or task basis, and other non-timed work. 10
C. Principles in Determining
Hours Worked
The following general principles shall govern the determination of whether the time spent by an employee is considered "hours worked": 1. All hours are hours worked which the employee is required to give his employer, regardless of whether or not such hours are spent in productive labor, or involve physical or mental exertion.P 2. An employee need not leave the premises of the workplace in order that his rest period will not be counted as hours worked. It is enough that he stop working, may rest completely and may leave his workplace to go elsewhere, whether within or outside the premises of his workplace.P However, rest periods of short duration, running from 5 to 20 minutes during working hours, shall be considered as hours worked.I" 3. If the work performed was necessary, if it benefited the employer, or if the employee could not abandon his work at the end of his normal working hours because he had no replacement, then all the time he spent for such work shall be considered as hours worked, if the work was with the knowledge of his employer or immediate supervisor. 15 4. The time during which an employee is inactive by reason of interruptions in his work beyond his control shall be considered working time if the imminence of the resumption of work requires the employee's
B. What Hours Worked Includes Hours worked shall include:

11
1. all the time during which an employee is required to be on duty or to be at a prescribed workplace; and 2. all the time during which an employee is suffered or permitted to work. For example, if an unscheduled brownout occurs for one hour in the establishment of the employer and the employees are required to remain in their posts while waiting for power to resume, the one-hour period is considered working time because the employees are required to be at the prescribed workplace. B.l. Broken shifts The employer and employee may agree on the schedule of the working hours of the employee. If the established working hours of an employee run from 8 a.m. to 12 noon and then from 4 p.m. to 8 p.m., the employee may only be compensated for the actual hours worked. The period from 12 noon to 4 p.m. is not considered as working time as he is not required to be at the prescribed workplace during this four-hour period.
12 Section 4(a), Rule I, Book III, Omnibus Rules Implementing the Labor 9 Section 2(d), Rule I, Book III, Omnibus Rules Implementing the Labor Code. 10 Section 2(e), Ibid. 11 Article 84, par. 1, Labor Code; Section 3, Rule I, Book III, Omnibus Rules Implementing the Labor Code. Code. 13 Section 4(b), Ibid. 14 Article 84, par. 2, Labor Code; Section 7, par. 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code. 15 Section 4(c), Rule I, Book III, Omnibus Rules Implementing the Labor Code.
32
Working Conditions
and Rest Periods
33
presence at the place of work, or if the interval is too brief to be utilized effectively and gainfully for the employee's own interest;"
D. When Waiting Time is Working Time
However, an employee is not working while on call when he is not required to leave word at his home or with company officials as to where he may be reached.i"
F. When Attendance at Lectures, Meetings or Training Programs is not Working Time
Waiting time spent by an employee shall be considered as working time in the following instances.!? 1. when waiting is an integral part of his work; or 2. the employee is required or engaged by the employer to wait. For example, a company driver who brings the manager to a meeting, waits for the manager, and after the m.eeting, drives the manager back to the establishment of the employer, is considered to be working while waiting.
E. When Being On Call is Working Time
Attendance at lectures, meetings, training programs, and other similar activities shall not be counted as working time if all of the following conditions are metr" 1. attendance is outside of the employee's regular working hours; 2 . attendance is in fact voluntary; and 3. the employee does not perform any productive work during such attendance. For example, meetings conducted by employees to organize themselves to form a union is not working time. Similarly, attendance at a company outing is not working time unless attendance is compulsory.
II. MEAL PERIOD
An employee required to remain on call in the employer's premises or so close to the premises that he cannot use the time effectively and gainfully for his own purpose shall be considered as working while on call. 18 For example, an X-ray technician who is required to remain in the premises of the hospital at night so that should there be any X-ray case or surgical operation during his "on call" duty hours does not actually stop working. Although the small number of X-ray and operation cases during the night shift may enable him to take a rest, this is not complete rest because anytime, he can be jolted into the reality of work by a call for an X-ray or an operation.P
A meal period or a meal break is a period consisting of 60 rr:inutes or one hour of time-off given by employers to employees for their re~ meals.P The one-hour meal break is not considered working time.P Hence, it is not compensable .
.---=-----
16 Section 4(d), Ibid. 17 Section 5(a), Ibid. 18 Section 5(b), Ibid. 1 9 San Pedro Hospital Employees Union-FFW v. San Pedro Hospital, Inc., Case No. CA-218-RBXI-06-02-90, 1 October 1990.
20 Section 5(b), Rule I, Book III, Omnibus Rules Implementing the Code. 21 Section 6, Rule I, Book III, Omnibus Rules Implementing the Code. 22 Article 85, Labor Code; Section 7, Rule I, Book III, Omnibus Implementing the Labor Code. 23 Philippine Airlines, Inc. v. National Labor Relations Commission, G.R. No. 132805, 2 February 1999.
Labor Labor Rules et al.,
34
Working
Conditions
and Rest Periods
35
A. Coverage
All employees, except for the following, are entitled to a meal period or meal break.>" government employees; managerial employees; officers and members of the managerial staff; field personnel; the employer's family members; domestic helpers and persons in the personal service of another; and 7. workers paid by result: pakyaw and piece-rate workers.
A.1. Non-diminution of benefits
Employees are not prohibited from leaving the premises as long as they return to their posts on time'.25
1. 2. 3. 4. 5. 6.
C. Exception to the 60-minute Meal Period:

The 20-minute Meal Period
In the following cases, a meal period of at least 20 minutes may be given by the employer. However, this much shorter meal period is credited as compensable hours worked by the employee in the following situationsr" 1. Where the nature of the work is non-manual or does not involve strenuous physical exertion; 2. Where the establishment regularly operates at least 16 hours a day; 3. In cases of actual or impending emergencies or if there is urgent work to be done on machinery, equipment or installations to avoid serious loss which the employer would otherwise suffer; and 4. Where the work is necessary to prevent serious loss of perishable goods.
If the exempted employees are already enjoying a meal period either by agreement between the employer and the employees, or because of an established company practice, this benefit may not be eliminated or reduced because of the principle of nondiminution of benefits. Also, applying the principle of non-diminution of benefits, if the covered employees are enjoying a meal period longer than the 60 minutes prescribed by law, the meal period cannot be shortened to 60 minutes. If the meal period is compensable, it cannot become non-compensable.
III.
REST PERIODS
B. Meals May Be Taken Outside the Premises of the Employer
Rest periods or coffee breaks are periods of short duration, running from 5 to 20, minutes during working hours.F' Rest periods or coffee breaks are counted as hours worked. Hence, they are considered as compensable working time.P"
Meals need not be taken within the premises of the company. Even if an employee is obliged to stay in the company premises for eight hours, there is nothing in the law which states that employees must take their meals within the company premises.
24 Article 82, par. 1, Labor Code; Section 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code.
25 Philippine Airlines, Inc. v. National Labor Relations Commission, et al. , G.R. No. 132805, 2 February 1999. 26 Section 7, par. 1, Rule I, Book III, Omnibus Rules Implementing the Labor Code. 2 7 Section 7, par. 2, Ibid. 28 Article 84, par. 2, Labor Code; Section 7, par. 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code.
36
Working With Labor Laws A. Coverage
Working Conditions and Rest Periods
37
All employees, except for the following, are entitled to rest periods or coffee breaks.>? government employees; managerial employees; officers and members of the managerial staff; field personnel; the employer's family members; domestic helpers and persons in the personal service of another; and 7. workers paid by result: pakyaw and piece-rate workers.
1. 2. 3. 4. 5. 6.
work inconveniences and disadvantages such as the disarrangement of his social life, the loss of recreation or activities for leisure, and the ordinary associ~tion of normal family relations, the work time's adverse effect upon efficiency and output, and its remotely injurious effect on his health, consonant with the common saying among wage-earning people that the night was made for rest and sleep, and not for work. 31
A. Coverage
All employees, except for the following, are entitled to a nightshift differentialr'" 1. 2. 3. 4. 5. 6. government employees; managerial employees; officers and members of the managerial staff; field personnel; the employer's family members; domestic helpers and persons in the personal service of another; 7. workers paid by result: pakyaw and piece-rate workers; and 8. employees of retail and service establishments with only five employees or less.
Definition of retail and service establishments
If the exempted employees already enjoy rest periods or coffee breaks either by agreement between the employer and the employees, or because of its being an established company practice, this benefit may not be eliminated or reduced because of the principle of non-diminution of benefits. Also, applying the principle of non-diminution of benefits, if the covered employees enjoy compensable rest periods or coffee breaks longer than the 5- to 20-minute periods prescribed by law, these rest periods or coffee breaks cannot be reduced.
A.1. IV. NIGHT-SHIFT DIFFERENTIAL
Night-shift differential is the additional compensation paid to employees for each hour of work performed between 10 p.J~:
a~30
A night-shift differential is paid for work done during the "graveyard shift" because an employee must contend with night
a. A retail establishment is one principally engaged in the sale of goods to end-users for personal or household use.P" b. A service establishment is one primarily engaged in the sale of service to individuals for their own use or for household use.?"
31 San Pedro Hospital Employees Union-FFW v. San Pedro Hospital, Inc., Case No. CA-218-RBXI-06-02-90, 1 October 1990. 32 Article 82, par. 1, Labor Code; Section 1, Rule II, Book III, Omnibus Rules Implementing the Labor Code. 33 Section(f), Definition of terms, Rules Implementing R.A. 6727. 34 Section(g), Ibid.
-"..
29 Article 82, par. 1, Labor Code; Section 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code. 30 Article 86, Labor Code; Section 2, Rule II, Book III, Omnibus Rules Implementing the Labor Code.
1/1
Work",!; With labor
laws
Working Conditions
and Rest Periods
39
A.'J.. Non-diminution of benefits II the exempted employees are being paid a night-shift differential for work performed between 10 p.m. to 6 a.m. either by agreement between the employer and employees, or because of an established company practice, this benefit may not be eliminated because of the principle of non-diminution of benefits. Also, applying the principle of non-diminution of benefits, if the night-shift differential rate of covered employees is higher than that prescribed by law, it cannot be reduced.
B. The Night-shift Differential Rate
312.50
+ P 0.00 + P 125.00 + P 68.75

P 506.25
(P62.50 x 5) (2 p.m. to 7 p.m. [5 hours]) (7 p.m. to 8 p.m. [not compensable]) (P62.50 x 2) (8 p.m. to 10 p.m. [2 hours]) (10 p.m. to 11 p.m. [regular rate per hour + night-shift differential])
V. OVERTIME PAY Overtime pay is the additional compensation given to employees for each hour of work performed in excess of the normal worki~g hours of eight hours a day. 36 An employee who works beyond the regular working hours is entitled to overtime pay because he is made to work longer than the agreed upon working hours. When an employee spends additional time on his work, the effect on him is multi-faceted: he puts in more physical and/or mental effort; he experiences a delay in going home to his family to enjoy the comforts of his home; he might have no time for relaxation, amusement or sports; he might miss important pre-arranged engagements. It is the additional work, labor or service employed and the adverse effects of his longer stay in his place of work that justify overtime pay."?
A. Coverage
-----
on a Regular Working Day
Night-shift differential per hour of work rendered from 10 p.m. to 6 a.m. is equivalent to at least 10 percent of the regular wage of the employee. 35 Hence, NIGHT-SHIFT IFFERENTIAL ADDITIONALAYMENT F D = P O ATLEAST PERCENT THERATE 10 OF PERHOUR Illustration: If an employee's rate per day is P500.00, how much should the employee be paid on a regular working day from 2 p.m. to 11 p.m., with a meal break from 7 p.m. to 8 p.m.? Solution: 2 p.m. to 11 p.m. is 9 hours less 1 hour of noncompensable meal break = 8 hours. The employee's rate per hour on a regular day is P62.50 (P500.00 divided by 8 hours). For work done from 10 p.m. to 11p.m., the employee is entitled to: P
All employees, time payr" 1. 2. 3. 4.
except for the following, are entitled
to over-
+ P
P
62.50 6.25 68.75
(rate per hour on a regular day) (10% of P62.50)
government employees; managerial employees; officers and members of the managerial staff; field personnel;
Hence, for work done from 2 p.m. to 11 p.m., the employee is entitled to:
36 Article 87, Labor Code; Section 8, Rule I, Book III, Omnibus Rules Implementingthe Labor Code.
37 Philippine National Bank v. Philippine National Bank Employees Association, et al., G.R. No. L-30279, 30 July 1982.
35 Article 86, Labor Code; Section2, Rule II, BookIII, Omnibus Rules Implementingthe Labor Code.
38 Article 82, par. 1, Labor Code; Section 2, Rule I, BookIII, Omnibus RulesImplementingthe LaborCode.
III
Will hhm Willi Labor Laws
41
[I Ihe employer's family members; f,), domestic helpers and persons in the personal service of another; and workers paid by result: pakyaw and piece-rate workers,
If the exempted employees receive overtime pay for work performed in excess of eight hours a day either per an agreement between the employer and the employees, or because of an established company practice, this benefit may not be eliminated because of the principle of non-diminution of benefits, Also, applying the principle of non-diminution of benefits, even if the overtime rate of covered employees is higher than that prescribed by law, it cannot be reduced.
B. When the Meal Period is Considered Overtime
Where during the meal period the employees are required to stand by for emergency work, or where the one-hour meal period is not one of complete rest, the meal period is considered overtime. 39 A meal period is considered as overtime work in the following instances: 1. When an employee is required to stand by for emergency work and if he happened to be unavailable when called, he was reprimanded by the supervisor; or 2. When the employee is called from his meals or told to hurry eating to perform work during the meal period. C. Compulsory Overtime Work Subject to the giving of the additional compensation required for overtime work, any employee may be required by the employer to perform overtime work in any of the following cases."?
39 Pan American World Airways System (Philippines) v. Pan American Employees Association, G.R. No, L-16275, 23 February 1961. 40 Article 89, Labor Code; Section 10, Rule I, Book III, Omnibus Rules Implementing the Labor Code.
1, When the country is at war or when any other national or local emergency has been declared by Congress or by the President of the Philippines; 2, When it is necessary to prevent loss of life or property, or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fires, floods, typhoons, earthquakes, epidemics or other disasters or calamities; 3, When there is urgent work to be performed on machines, on an installation or equipment, in order to avoid serious loss or damage to the employer; or some other cause of a similar nature; 4. When the work is necessary to prevent loss or damage to perishable goods; 5. Where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer; and 6. When the overtime work is necessary to avail of favorable weather or environmental conditions where the performance or quality of work is dependent on the weather or environmental conditions. In cases not falling under any of the above enumeration, an employee may not be made to work beyond 8 hours eight day against his will."!
D. Overtime Pay On A Regular Working Day
Overtime pay on a regular working day is equivalent to at least th~ regular wage of the emplozee.p us at least 25 percent of the regular wage.42
41 Section 10, par. 2, Rule I, Book III, Omnibus Rules Implementing the Labor Code. 42 Article 87, Labor Code; Section 8, Rule I, Book III, Omnibus Rules
Implementing the Lnbor
42
43
lienee, OVERTIME PAY is computed thus:

HA.TEFOR REGULAR WORKING DAY
Hence,
TO 6 A.M.
OVERTIME
PAY FOR WORK RENDERED
BETWEEN 10 P.M.
+
125 PERCENT
is computed thus:
25 PERCENT OF REGULAR WAGE
Illustration: If an employee's rate per day is P500.00, how much should the employee be paid on a regular working day for work done from 8 a.m. to 7 p.m., with a meal break from 12 noon to 1 p.m.? Solution: 8 a.m. to 7 p.m. is 11 hours, less 1 hour of noncompensable meal break = 10 hours. The employee's rate per hour on a regular day is P62.50 (P500.00 divided by 8 hours). For the overtime work done from 5 p.m. to 7 p.m., the employee is entitled to: P P P 62.50 15.625 78.125 (rate per hour on a regular day) (25% of P62.50) (125% of rate per hour on a regular day [P62.50 x 125%])
OVERTIME RATE + 10 PERCENT OF OVERTIME RATE = 137.5 PERCENT
Illustration: If an employee's rate per day is P500.00, how much should the employee be paid on a regular working day from 1 p.m. to 12 midnight, with a meal break from 6 p.m. to 7 p.m.? Solution: 1 p.m. to 12 midnight is 11 hours, less 1 hour for a non-compensable meal break = 10 hours. The employee's rate per hour on a regular day is P62.50; overtime rate per hour on a regular day is P78.125. For overtime work done from 10 p.m. to 12 midnight, an employee is entitled to: P
+ P
P
78.125 (overtime rate per hour) 7.8125 (10% of P78.125) 85.9375(137.5% of rate per hour [P62.50 x 137.5%] )
Hence, for work done from 8 a.m. to 7 p.m., the employee is entitled to:
P P P
500.00 156.25 656.25
(8 a.m. to 5 p.m. [8 working hours]) (P78.125 [overtime pay per hour] x 2)
Hence, for work done from 1 p.m. to 12 midnight on a regular working day, an employee is entitled to:
P P P
500.00 171.875 671.875
(1 p.m. to 10 p.m. [8 working hours]) (10 p.m. to 12 mn. [(P85.9375 x 2])
E. Overtime Pay on a Regular Working Day When Overtime Work is Rendered from 10 P.M. to 6 A.M. F. Undertime Cannot be Offset by Overtime Work
Where an employee renders overtime work between 10 p.m. to 6 a.m. on a regular working day, he shall be entitled to his overtime rate and an additional amount of at least 10 percent of the overtime rate for each hour of work performed. 43
Undertime work on any particular day shal~t by overtime work on any other day. Permission given to the employee to go-on leave on some other day of the week shall not exempt the employer from paying the premium for overtime work. 44
43 Section 3, Rule II, Book III, Omnibus
Rules Implementing
Labor Code.
Article
88, Labor Cede.
44
Working Conditions
and Rest Periods
45
The legal prohibition to offset overtime against undertime Ipplles only to undertime incurred and overtime work rendered I~ different days, because the employee would be deprived of idditional pay for overtime work rendered. Hence, an employee who was late by 30 minutes on a regular working day lasting from 8 a.m. to 5 p.m. and rendered work until 7 p.m. on the same day is entitled to only 1 1/2 hours of overtime pay due to his 30-minute tardiness.
or because of an established company practice, this benefit may not be eliminated because of the principle of non-diminution of benefits. Also, applying the principle of non-diminution of benefits, if the covered employees enjoy a weekly rest period longer than the 24 hours prescribed by law, then the weekly rest period cannot be shortened to 24 hours. If the weekly rest period is compensable, it cannot become non-compensable.
VI. WEEKLY REST PERIOD
B. Business on Sundays and Holidays
A weekly rest period, or a rest day, is a rest period of not less than 24 consecutive hours or one day, after every six consecu. '-'" tive normal workdays.:"
,..----
A. Coverage
All establishments and enterprises may operate or open for business on Sundays and holidays, provided that the covered employees are given a weekly rest day. 47 An employee shall be entitled to additional compensation for work performed on a Sunday, only when Sunday is his established rest day. 48
All employees, except for the following, are entitled to a weekly rest dayr'" government employees; managerial employees; officers and members of the managerial staff; field personnel; the employer's family members; domestic helpers and persons in the personal service of another; and 7. workers paid by result: pakyaw and piece-rate workers.
C. Determination
of Weekly Rest Day
1. 2. 3. 4. 5. 6.
and Preference of Employee
The employer shall determine and schedule the weekly rest day of the employee, subject to the agreement entered into by the parties.:" However, the employer shall respect the preference of the employee as to his weekly rest day, when the preference is based on religious grounds.t? The employee shall make known his rest day preference to the employer in writing at least seven days before the desired effectivity of the initial rest day preferred.
If the exempted employees enjoy a weekly rest period either because of an agreement between the employer and employees,
45 Article 91, par. 1, Labor Code; Section 3, Rule III, Book III, Omnibus Rules Implementing the Labor Code. 46 Article 82, par. 1, Labor Code.
47 Section 3, Rule III, Book III, Omnibus Rules Implementing the Labor Code. 48 Article 93(a), Labor Code; Section 7(a), Rule III, Book III, Omnibus Rules Implementing the Labor Code. 49 Article 91, par. 2, Labor Code. 50 Ibid.
46
47
However, where the choice of the employee as to his rest day based on religious grounds will inevitably result in serious prejudice or obstruction to the operations of the establishment of the employer, and the employer cannot normally be expected to resort to other remedial measures, the employer may schedule the weekly rest day chosen by the employee for at least two days a month. 51 For example, an employee from the Iglesia ni Cristo sect may request for Thursday as his rest day. However, if having the employee take his rest day every Thursday of the month will prejudice the operations of the establishment of the employer, the employee may schedule the employee's rest day for two weeks on a Thursday. Meanwhile, for the other two weeks of the month, the employer's preference will be followed.
D. Exception to the 48-hour Workweek
0.2. The 40-hour workweek for health personnel Health personnel in cities or municipalities with a population of at least one million, or in hospitals or clinics with a bed capacity of at least one hundred, are required to hold regular office hours for eight hours a day, five days a week, exclusive of time for meals. However, health personnel may work for six days or 48 hours per week, when the exigencies of the service so require. For work done on the sixth day, health personnel shall be entitled to an additional compensation of at least 30 percent of their regular wage. 53 Health personnel include resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel. 54
D.2.a. Rationale for the 40-hour workweek for health personnel
As a normal work day lasts eight hours,. a normal workweek of an employee lasts 48 hours. However, an establishment may have a 40-hour workweek in the following cases: 1. when there is an agreement between the employer and employee; and 2. when health personnel are involved. 0.1. The 40-hour workweek by agreement Normally, Saturday is not a rest day or "day off." However, the employer and employee may agree on a regular workweek of only 40 hours, or eight hours a day for five days. Hence, when an employee is required to render work on a Saturday in excess of the 40 hours of a regular workweek, the employee may be considered as performing overtime work on that particular Saturday. 52
51 Section 4, Rule III, Book III, Omnibus Rules Implementing the Labor Code. 52 CaltexRegular Employees v. Caltex (Philippines, Inc.), G.R. No. 111359, 15 August 1995.
Compared to other employees, hospital and health clinic personnel are overworked despite the fact that their duties are more delicate in nature. The fact that hospitals and health clinic personnel perform duties which are directly concerned with the health and lives of people does not mean that they should work for longer periods than most employees. Making them work longer than is necessary may endanger, rather than protect, the health of their patients. 55
E. Compulsory Work on a Rest Day
The employer may require an employee to work on his rest day in any of the following casesr"
53 Article 83, par. 2, Labor Code; Rule I-A, Book III, Omnibus Rules Implementing the Labor Code. 54 Ibid. 55 San Juan de Dios Hospital Employees Association-AF'Tt\f,et a/. v. National Labor Relations Commission, et a/., G.R. No. 126383, 28 November 1997. 6 Article 92, Labor Code; Section 6, Rule III, Book III, Omnibus Rules Implementing the Labor Code.
48
Working
With Labor Laws
Working
Conditions
and Rest Periods
49
1. In case of actual or impending emergencies caused by serious accidents, fires, floods, typhoons, earthquakes, epidemics or other disasters or calamities, to prevent loss of life and property or imminent danger to public safety; 2. In cases of urgent work to be performed on machinery, equipment or an installation, to avoid serious loss which the employer would otherwise suffer; 3. In the event of abnormal pressure from work due to special circumstances, where the employer cannot ordinarily be expected to resort to other measures; 4. To prevent loss or damage to perishable goods; 5. Where the nature of the work requires continuous operations for seven days a week and the stoppage of work may result in irreparable injury or loss to the employer, as in the case of the crew members of a vessel to complete a voyage, and in other similar cases; and 6. When the work is necessary to avail of favorable weather or environmental conditions, where the performance or quality of the work is dependent on the weather or environmental conditions. An employee cannot be required to work against his will on his scheduled rest day, except under the above circumstances. When an employee volunteers to work on his rest day under other circumstances, he shall express such desire in writing, and shall be given additional compensation for work done on a rest day. 57
F. Rest Day Pay
Hence, the formula for REST DAY PAY is as follows: RATEFORREGULARDAY+ 30 PERCENTOF REGULAR WAGE == 130 PERCENT Illustration: If an employee's rate per day is P500.00, how much should the employee be paid for working 8 hours on a Sunday, assuming that Sunday were his scheduled rest day? Solution: For work done on a Sunday, the employee is entitled to:
P 500.00 P 150.00 P 650.00
(rate per day) (30% of P500.00) (130% of rate per day [P500 x 130%])
G. Overtime Work on a Rest Day
For overtime work on a rest day, an employee is entitled to an additional compensation of at least 30 percent of his wage on a rest day."? Hence, OVERTIMEPAYON A RESTDAYis computed thus: RATEFOR RESTDAY(130 PERCENT)+ 30 PERCENTOF WAGEFOR THE RESTDAY == 169 PERCENT Illustration: If an employee's rate per day is P500.00, how much should the employee be paid for working 10 hours on a Sunday, assuming that Sunday is his scheduled rest day? Solution: The employee's rate per hour on a Sunday is P81.25 (P650.00 divided by 8 hours). For work done in excess of 8 hours, the employee is entitled to:
to ;.:0
)::-
Rest day pay is equivalent to at least the regular wage of the employee plus at least 30 percent of the regular wage. 58
::0
-<
P P P
81.25 24.375 105.625
(rate per hour on a Sunday) (30% of P81.25) per hour (169% of rate per hour [P62.50 x 169%])
57 Section 6, par. 2, Ibid.

58 Article 93(a), Labor Code; Section 7 (a), Rule III, Book III, Omnibus
Rules Implementing the Labor Code.
Article 87, Labor Code; Section 9(a), Rule I, Book III, Omnibus Rules Implementing the Labor Code.
50
Wrkhl~\ Will. l ahor Laws

111~11I~t).
Working Conditions
and Rest Periods
51
I()J 10 hours of work on a Sunday, an employee is
III
II 1I11~d In:
Hence, for 10 hours of work on a Sunday, with overtime rendered from 10 p.m. to 6 a.m., an employee is entitled to:
P 650.00 P 211.25 P 861.25
(rate for 8 hours on a Sunday) (P105.625 x 2)
P 650.00 P 232.375 P 882.375
(rate on a Sunday) (Pl16.1875 x 2)
H. Overtime Work on a Rest Day Rendered from 10 P.M. to 6 A.M.
I. Compressed Workweek61
When an employee renders overtime work between 10 p.m. to 6 a.m. on a rest day, he shall be given compensation equivalent to his overtime rate on a rest day and an additional amount of not less than 10 percent of the overtime rate on a rest day, for each hour of work performed. 60 Hence, PAY FOR OVERTIME WORK ON A REST DAY RENDERED FROM 10 P.M. TO 6 A.M. is computed thus:
I
OVERTIME RATE ON A REST DAY + 10 PERCENT OF OVERTIME RATE ON A REST DAY = 185.9 PERCENT
Illustration: If an employee's rate per day is P500.00, how much should the employee be paid for 10 hours of work on a Sunday, assuming that Sunday is his scheduled rest day, if the 2 hours of overtime work were rendered between 10 p.m. and 6 a.m.? Solution: The employee's rate per hour on a Sunday is P81.25; overtime rate per hour on a Sunday is P105.625. For overtime work done from 10 p.m. to 6 a.m., an employee is entitled to:
P 105.625 P 10.5625 P 116.1875
(overtime rate per hour on a Sunday) (10% of P105.625) per hour (185.9% of rate per hour [P62.50 x 185.9%])
The compressed workweek scheme was originally conceived for establishments wishing to save on energy costs, to promote greater work efficiency and lower the rate of employee absenteeism, among others. Employees favor the scheme because it translates to savings on the increasing cost of transportation fare for at least one day a week, savings on meal and snack expenses; longer weekends, or an additional 52 off-days a year, that can be devoted to rest, leisure, family responsibilities, studies and other personal matters. It will also spare them for at least another day in a week from certain inconveniences that are the normal incidents of employment, such as commuting to and from the workplace, travel time spent, exposure to dust and motor vehicle fumes, and dressing up for work. Thus, under the compressed workweek scheme, the generally observed workweek of six days is shortened to five days, but the working hours from Monday to Friday are prolonged without the employer's being obliged to give overtime premium compensation for work performed in excess of eight hours on weekdays, in exchange for the benefits mentioned above that will accrue to the employees. Considering the acceptability of the compressed workweek scheme in several establishments, and considering further the present energy situation, the DOLE,after consultations with the representatives of management and labor, recommended the adoption of the compressed workweek scheme by an establishment on a voluntary basis.
61 Department Order No. 021-90, "Guidelines on the Implementation Compressed Workweek," 31 Auzust 1990. of
60 Section 4, Rule II, Book III, Omnibus Rules Implementing the Labor Code.

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Principles of the Labor Code

A. Liberal Interpretation Only in Case of Doubt

General Principles of the labor Code