JYCHAN:

LABOR LAW I REVIEWER

Social Justice
Phil. Const. Art. II, §10:
The State shall promote social justice in all phases of national development.

Phil. Const. Art. XIII, §1:

The Congress shall give highest priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequalities by equitably diffusing wealth and political power for
the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of
property and its increments.

Phil. Const. Art. XIII, §2:

The promotion of social justice shall include the commitment to create economic
opportunities based on freedom of initiative and self-reliance.

Phil. Const. Art. XIII, §3:

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation,
and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right
of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth
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A. Definition/Balancing of Interests:
Calalang v. Williams
FACTS:
The National Traffic Commission, in its resolution of July 17, 1940, resolved to
recommend to the Director of Public Works and the Secretary of the Public Works and
Communications that animal-drawn vehicles be prohibited from passing along Rosario Street
extending from Plaza Calderon de la Barca to Dasmariñas Street, from 7:30am to 12:30pm and
1:30pm to 5:40pm; and along Rizal Avenue extending from the railroad crossing at Antipolo Street
to Echague Street from 7am to 11pm, from a period of one year from the opening of the Colgante
Bridge to traffic. The said resolution was recommended by the Chairman of the NTC to the
Director of Public Works in pursuance of the provisions of Commonwealth Act No. 548, which
authorized the Director of the Public Works, with the approval of SPWC to promulgate rules and
regulations to regulate and control the use of and traffic on national roads. The Director of NTC
modified the resolution before indorsing it to the SPWC, placing down that the closing of Rizal
Avenue to animal-drawn vehicles be limited to the portion thereof extending from the railroad
crossing at Antipolo Streeet to Azcarraga Street. The SWPH approved of the resolution, which
was then adopted by the Mayor of Manila and the Acting Chief of Police of Manila, which caused
detriment to owners of animal-drawn vehicles and to the riding public, as well.
Calalang filed a writ of prohibition against the respondents. Following this writ, he
contended that Commonwealth Act No. 548 is unconstitutional as it constitutes an undue
delegation of legislative power. However, this contention is untenable, as the authority conferred
upon them is not to determine what public policy demands, but merely to carry out the legislative
policy laid down by the National Legislative in the said Act, which is “to promote safe transit upon
and avoid obstructions on, roads and streets designated as national roads by the acts of the
National Assembly, or by executive powers of the President.”

ISSUE:
1. Whether the rules and regulations complained of infringe upon the constitutional precept
regarding the promotion of social justice to insure the well-being and economic security
of all the people?
HOLDING:
1. NO. The promotion of social justice is to be achieved not through a mistaken sympathy
towards any given group. It is “neither communism, nor despotism, nor atomism, nor
anarchy”, but the humanization of laws and the equalization of social and economic forces
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by the State so that justice in its rational and objectively secular conception may at least be
approximated. It means the promotion of the welfare of all the people, the adoption by
the Government of measures calculated to insure economic stability of all the competent
elements of society, through the maintenance of a proper economic and social equilibrium
in the interrelations of the members of the community, constitutionally, through the
adoption of measures legally justifiable, or extra-constitutionally, through the exercise of
powers underlying the existence of all governments on the time-honored principles of salus
populi est suprema lex.
Social justice must be founded on the recognition of the necessity of interdependence
among divers and diverse units of a society and of the protection that should be equally
and evenly extended to all groups as a combined force in our social and economic life,
consistent with the fundamental and paramount objective of the state of promoting the
health, comfort, and quiet of all persons, and of bringing about “the greatest good to the
greatest number.”

Manila Electric Company v. Quisimbing

FACTS:
The Supreme Court ruled in favor of the MEWA (Meralco Employees and Workers
Association), holding that labor laws are silent as to when an arbitral award in a labor dispute
where the SOLE had assumed jurisdiction by virtue of Art. 263g of the Labor Code shall retroact.
Generally, CBAs negotiated within six months after the expiration of the existing CBA retroacts
to the day immediately following such date, and if agreed upon, the effectivity depends on the
agreement of the of the parties. However, the law is silent as to the retroactivity of a CBA arbitral
award or that granted not by virtue of the mutual agreement of parties, but by the intervention of
the government. Despite the silence of such law, the Court ruled that CBA arbitral awards granted
after 6 months from the expiration of the last CBA shall retroact to such time agreed upon by
both parties. However, absent such agreement, it shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA. And if there is no CBA, the SOLE may
determine the date of the retroactivity as part of his discretionary powers.
However, petitioner assails the resolution on the following bases: first, the Labor Code
always presupposes the existence of a prior or subsisting CBA and thus, the exercise of the SOLE
of his discretionary powers by virtue of Art. 253-A of the Labor Code will never come to pass;
second, the Resolution contravenes with the jurisprudential rule laid down in the cases of Union
of Filipro Employees v. NLRC, Pier 8Arrastre and Stevedoring Services Inc. v. Rolda-Confesor,
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and St. Luke’s Medical Center v. Torres; third, the Court erred in holding that the effectivity o
CBA provisions are automatically retroactive as the Court ruled previously that in the absence of
an agreement between parties, an arbitrated CBA takes on the nature of any judicial or quasi-
judicial award, and that it only operates and maybe executed prospectively unless there are legal
justifications for its retroactive application; fourth, the Court erred when it interpreted certain acts
of petitioner as consent to the retroactive application of the arbitral award; and fifth, the
Resolution is internally flawed as the award shall retroact to the first day after the six-month period,
which should have been June 1, 1996 and not December 1, 1995.
ISSUE:
- W/N SC’s decision ruling on the retroactivity issue fails to account for previous rulings of
the Court on the same issue?
HOLDING:
- NO. The Decision rendered in the case ordered that the CBA should be effective for a
term of two years counting from Dec. 28, 1996 (the date of the SOLE’s disputed Order
on the parties’ MR up to Dec. 27, 1998. That is to say, the arbitral award was given
prospective effect. Upon reconsideration of the Decision, the Court issued a Resolution
which ruled that where an arbitral award is granted beyond 6 months after the expiration
of the existing CBA, and there is no agreement between the parties as to the date of
effectivity, the arbitral award shall retroact to the first day after the six-month period
following the expiration of the last day of the CBA.
o In resolving the MR of this case, the Court took into account that the petitioner
belongs to an industry imbued with public interest. Thus, the Court cannot ignore
the enormous consequence of the full retroaction of the arbitral award to the date
of expiry of the CBA, and the inevitable effect that it would have on the national
economy. However, under the policy of social justice, the law bends over backward
to accommodate the interests of the working class on the humane justification that
those with less privilege in life should have more in law.
o Balancing these two contrasting interests, this Court turns to the dictates of
fairness and equitable justice, and thus, arrived at a formula that would address the
concerns of both sides. Thus, the Court held that the arbitral award be made to
retroact to the first day after the six-month period, following the expiration of the
last day of the CBA, from June 1, 1996 to May 31, 1998.
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Foundation: Police Power and State Protection

CMS Estate, Inc. v. SSS
FACTS:
CMS Estate is a domestic corporation engaged in the real estate business. On Dec. 1, 1952,
it started doing business with only six employees. Its Articles of Incorporation was amended in
1956 in order to engage in the logging business. The SEC issued the certificate of filing of said
amended articles. Petitioner also obtained an ordinary license from the Bureau of Forestry to
operate a forest concession of 13,000 hectares in Davao.
In 1957, it entered into a contract with a Eufracio D. Rojas for the operation and
exploitation of the forest concession. The logging operation started on Apri 1, 1957 with four
monthly salaried salaries. As of Sept. 1, it had 89 employees and laborers. On Dec. 26, 1957, CMS
revoked its contract of management with Mr. Rojas.
On Aug. 1, 1958, petitioner became a member of the SSS with respect to its real estate
business. On Sept. 16, CMS remitted to SSS the sum of Php203.13, representing the initial
premium on the monthly salaries of its employees in the logging business. However, on Oct. 19,
they demanded the refund, claiming that it is not yet subject to compulsory coverage. This was
however, denied by SSS, on the ground that the logging business was a mere expansion of the
petitioner’s activities and thus, petitioner should be considered a member of SSS when it
commenced its real estate business.
On Nov. 10, they filed a petition with the Social Security Commission, praying for the
determination of the effectivity date of the compulsory coverage of petitioner’s logging business.
The Commission denied the petition. An MR was also denied.
ISSUE:
- If the Court erred in holding that the contributions required of employers and employees
under our Social Security Act of 1954 are not in the nature of excise taxes, because the said
Act was allegedly enacted by Congress in the exercise of its police power, and not of its
taxing power?
HOLDING:
- NO. The Social Security Law’s emphasis is more on the promotion of the general welfare. It is
not part of our Internal Revenue Code nor are the contributions and premiums therein dealt with
and provided for, collected by the BIR. The funds contributed to the System belong to the
members who will receive benefits whenever the hazards provided by the law occur. Because of
its nature, all doubts in construing the Act shall favor coverage rather than exemption. The
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intention of the law is to cover as many persons as possible so as to promote the constitutional
objective of social justice. It is axiomatic that a later law prevails over a statute, and moreover the
legislative intent must be given effect.

Limits of Use
PLDT v. NLRC
FACTS:
Abucay, a traffic operator of PLDT, was accused by two complainants of having
demanded and received from them the total amount of Php3,800 in consideration of her promise
to facilitate approval of their applications for telephone installation. Investigated and heard, she
was found guilty as charged and accordingly separated from the service. She went to the Ministry
of Labor and Employment, claiming she had been illegally removed. After consideration of
evidence and arguments between the parties involved, the complaint was dismissed. However, she
was granted financial assistance in the form of one month pay for every year of service. Both the
petitioner and private respondent appealed to the NLRB, which upheld the said decision. They
held that the said award was in consideration for Abucay’s contribution to the company and for
her long years of service to the company.
ISSUE: Is the award of financial assistance to an employee who had been dismissed for cause
legal?
HOLDING:
NO. The rule embodied in the Labor Code is that a person dismissed for cause is not
entitled to separation pay. The cases that were cited constitute the exception based upon the
considerations of equity. Equity has been defined as justice outside law, being ethical rather than
jural and belonging to the sphere of morals than of law. In the above-mentioned jurisprudence
that were cited by respondent, there is something distinct from the circumstances of the current
case.
Where the cause of separation is more serious than mere inefficiency, the generosity of the
law must be more discerning. This is no longer mere incompetence, but clear dishonest. Separation
pay shall be allowed as a measure of social justice only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. This kind of misplaced compassion is not going to do labor in general any good as it
will encourage the infiltration of its ranks by those who do not deserve the protection and concern
of the Constitution. The policy of social justice is not intended to countenance wrongdoing simply
because it is committed by the underprivilege. Compassion for the poor is an imperative of every
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humane society but only when the recipient is not a rascal claiming an undeserved privilege. Social
justice cannot be permitted to be refuge of scoundrels any more than can equity be an impediment
to the punishment of the guilty. Those who invoke social justice may do so only if their hands are
clean and their motives blameless and not simply because they happen to be poor.
Applying the above considerations, we hold that the grant of separation pay in the case at
bar is unjustified. The private respondent has been dismissed for dishonesty, as found by the labor
arbiter and affirmed by the NLRC and as she herself has impliedly admitted. The fact that she has
worked with the PLDT for more than a decade, if it is to be considered at all, should be taken
against her as it reflects a regrettable lack of loyalty that she should have strengthened instead of
betraying during all of her 10 years of service with the company. If regarded as a justification for
moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the
meaning of social justice and undermining the efforts of labor to cleanse its ranks of all
undesirables.

NOTES:
- Separation pay is only justified when the employee is dismissed due to inefficiency.
Agabon v. NLRC
FACTS:
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling
and installing ornamental and construction materials. It employed Virgilio Agabon and Jenny
Agabon as gypsum board and cornice installers on Jan. 2, 1992 until Feb. 23, 1999 when they were
dismissed for abandonment of work. Petitioners filed a complaint for illegal dismissal and payment
of money claims, which was granted by the Labor Arbiter. On appeal, NLRC, however, reversed
the decision of the Labor Arbiter, ruling that petitioners had abandoned their work, and were not
entitled to backwages and separation pay The money claims were also denied for lack of evidence.
CA ruled that the dismissal was not illegal because they had abandoned their employment
but ordered the payment of money claims.
Petitioners claim that they were dismissed as private respondent refused to give them work
as they refused to agree to work on a “pakyaw” basis. They did not agree as this would mean that
they would lose their benefits as SSS members. However, private respondent maintained that they
were not dismissed, but in fact, they had abandoned their work. In fact, two letters were sent to
their last known address, advising them that they report to work. Furthermore, they were able to
talk to Virgilio over the phone, informing him of his new assignment at the Pacific Plaza Towers.
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However, they did not report for work as they had subcontracted to perform installation work for
another company, and at the same time, they had demanded for an increase in their daily wage.
ISSUE: Were the petitioners illegally dismissed?
HOLDING:
NO. To dismiss an employee, the law requires not only the existence of a just and valid
cause, but also enjoins the employer to give the employee the opportunity to be heard and to
defend himself. Abandonment is the deliberate and unjustified refusal of an employee to resume
his employment. It is a form of neglect of duty, and thus, is a just cause for termination of
employment. In finding abandonment, there must be: 1) the failure to work to report for work or
absence without valid or justifiable reason; and 2) a clear intention to sever employee-employer
relationship. The intent must be shown by clear proof that it was deliberate and unjustified.
This intention is clear from petitioners being frequently absent for having subcontracted
an installation work for another company. Thus, the terminations done against them were for a
just and valid cause.
Book VI, Rule I, Sec. 2d of the Omnibus Rules Implementing the Labor Code provide the
procedure for terminating an employee: (1) a written notice served on the employee, specifying
the ground or grounds for termination, and giving said employee a reasonable opportunity to
explain; 2) a hearing or conference during with the employee, with the assistance of a counsel if
said employee wishes so, is given the opportunity to respond, present evidence or rebut the
evidence presented against him/her; and 3) a written notice of termination indicating that grounds
have been established to justify his termination. Foregoing notices shall be sent to their last known
address. If dismissal is based on a just cause, then there must be two written notices and a hearing
before termination. If based on an authorized cause, the employer must give the employee and the
DOLE written notices 30 days prior to the effectivity of the separation.
However, in the current situation, where there is a just situation, but due process was not
observed, the employer should be held liable for non-compliance. Private respondent did not
follow the notice requirements and argued that sending notices to their last known address would
have been useless as they did not reside there anymore. Still, this is not a valid excuse as the law
mandates the twin notice requirements to the employee’s last known address.
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not
given any notice. However, Wenphil Corp. v. NLRC reversed this, and held that the dismissed
employee, although not given any notice and hearing, was not entitled to reinstatement and
backwages as the dismissal was for grave misconduct and insubordination. The rule evolved to:
where the employer had a valid reason to dismiss an employee, but did not follow the due process
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requirement, the dismissal may be upheld, but the employer will be penalized to pay an indemnity
to the employee. This became known as the Wenphil or Belated Due Process Rule.
In 2000, in Serrano, the rule on the extent of the sanction was changed. The Court held
that the violation by the employer of the notice requirement in termination for just and authorized
causes was not a denial of due process that will nullify the termination. However, the dismissal is
ineffectual and the employer must pay full backwages from the time of termination until it is
judicially declared that the dismissal was for a just or authorized cause. The Court, now, believes
though that Serrano did not consider the full meaning of Art. 279 of the Labor Code. This means
that the termination is illegal only if it is not for any of the justified or authorized causes provided
by law. Payment of backwages and other benefits, including reinstatement, is justified only if the
employee was unjustly dismissed.
The Due Process Clause in Art. III, Sec. 1 of the 1987 Constitution embodies a system of
rights based on moral principles. Due process is that which comports with the deepest notions of
what is fair and right and just. It is a constitutional restraint on the legislative, executive, and judicial
powers of the government.
Due Process under the Labor Code has two aspects: substantive and procedural.
Procedural due process requirements for dismissal are found in the Implementing Rules of PD
442. Breaches of these due process requirements violate the Labor Code. Therefore, statutory due
process should be differentiated from failure to comply with constitutional due process.
Constitutional due process protects the individual from the government and assures him
of his rights in criminal, civil, or administrative proceedings; while statutory due process found in
the Labor Code and Implementing Rules protects employees from being unjustly terminated
without just cause after notice and hearing.
In Sebueguero v. NLRC, the dismissal was for a just and valid cause, but the employee was
not accorded due process. The dismissal was upheld by the Supreme Court, but the employer was
sanctioned. The sanction must be in the nature of indemnification or penalty, depending on the
facts and the gravity of the omission by the employer.
However, in viewing the circumstances, the Court ruled that it is better to abandon the
Serrano doctrine, and to follow Wenphil, by holding that the dismissal was for a just cause, but
there must be sanctions to be imposed on the employer. The said sanctions must be stiffer,
however, to achieve a fair result by dispensing justice to both sides.
The constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of labor does not prevent the
Court from sustaining the employer when it is in the right, such as in this case. An employee who
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is clearly guilty of conduct violative of Art. 282 should not be protected by the Social Justice
Clause of the Constitution. Social justice should be used only to correct an injustice. Social
justice is not based on rigid formulas set in stone. It has to allow for changing times and
circumstances. Justice Isagani Cruz emphasized the need to apply a balanced approach to labor-
management relations and dispense justice with an even hand in every case. Justice in every case
should only be for the deserving party. Where the dismissal is for a just cause, the lack of statutory
due process should not nullify the dismissal or render it illegal or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights as ruled in Reta
v. NLRC.
NOTES:
- Agabon is deemed as the middle ground between the cases of Wenphil and Serrano. In
Wenphil, dismissal despite not following procedural process is still valid, as long as you
pay a minimum fee. In Serrano, such dismissals are considered invalid. However, in
Agabon, dismissal still holds, but the Court imposes stricter penalties.

Legal Basis
International Conventions
ISAE v. Quisimbing
FACTS:
The local-hires of private respondent school, International School - Manila, are receiving
salaries less than their counterparts hired abroad. Employees should be given equal pay for work
of equal work value.
Private respondent, IS - Manila, is a domestic educational institution established for
dependents of foreign diplomatic personnel and other temporary residents. To enable the school
to continue its educational program, Section 2c of PD 732 allows the school to employ its own
teaching and management personnel selected either locally or abroad, and they will be exempt
from otherwise applicable laws.
As thus, the School hires both foreign and local teachers: foreign-hires and local-hires.
There are four tests to determine whether the teacher is foreign-hired or locally-hired:
One’s domicile, one’s home economy, to which country does one owe economic allegiance, and
whether the individual was hired abroad specifically to work in the School and was the School
responsible for bringing that individual to the Philippines.
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Foreign-hires have certain benefits as compared to their local counterparts: housing,
transportation, shipping costs, taxes, and home leave travel allowances. They are paid a salary rate
25% more than local-hires. This is due to their dislocation factor and limited tenure
Negotiations for a new CBA were held on June 1995 between ISAE (a legitimate labor
union) and they contested the salary difference. At the same time, the issue and the question
whether foreign-hires should be included in the appropriate bargaining unit caused a deadlock
between the parties.
On September 7, 1995, a notice of strike was given. The failure of the National Conciliation
and Mediation Board to reach a compromise prompted DOLE to assume jurisdiction over the
dispute.
Acting Secretary of Labor and Employment upheld the classification, holding that the
international character of the school required the hiring of foreign personnel to deal with different
nationalities and different cultures, among the student population. Furthermore, he ruled that
foreign hires have limited contract of employment.
ISSUE: Whether the point-of-hire classification employed by the school is discriminatory to
Filipinos and that the grant of higher salaries to foreign-hires constitute racial discrimination?
HOLDING:
YES. Public policy abhors inequality and discrimination. Our Constitution and laws reflect
the policy against these evils.
The Constitution in the Article on Social Justice and Human Rights exhorts Congress to
“give highest priority to the enactment of measures that protect and enhance the right of all human
dignity, reduce social, economic, and political inequalities.
Article 19 of the Civil Code also requires every person to act with justice, give everyone
his due, and observe honesty and good faith.
At the same time, international law proscribes discrimination. The Philippines has
incorporated the general principle against discrimination as part of its national laws, as provided
by Art. II, Sec. 2 of the 1987 Constitution.
Furthermore, the Constitution specifically provides that labor is entitled to “human
conditions of work”, not only to physical workplace, but as well as the manner by which employees
treat their employees. The Constitution directs the State to promote equality of employment
opportunities for all. The Labor Code also provides that the State shall “ensure equal work
opportunities, regardless of sex, race, or creed.”
Discrimination, particularly, in terms of wages, is frowned upon by the Labor Code, such
as Art. 135 which prohibits and penalizes the payment of lesser compensation to a female
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employee compared to a male employee. Art. 248 also declares it an unfair labor practice for an
employee to discriminate in regard to wages in order to encourage or discourage membership in
any labor organization.
The International Covenant on Economic, Social, and Cultural Rights, supra, in Art. 7 also
institutionalize in this jurisdiction the long-honored legal truism of “equal pay for equal work.”
Thus, persons who work with substantially equal qualifications, skill, effort and responsibility,
under similar conditions, should be paid similar salaries. This rule applies to the School, its
“international character” notwithstanding.
The school contents that petitioner has not adduced evidence that local-hires perform
work equal to that of foreign-hires. The Court does not agree. If an employer accords employees
the same position and rank, the presumption is that these employees perform equal work.
However, the employer in this case failed to explain why the employee is treated unfairly.
They cannot invoke that need to entice foreign-hires to rationalize the distinction in salary rates,
without violating the principle of equal work for equal pay.
Salaries should not be used as an enticement to the prejudice of local-hires. They perform
the same services as foreign-hires and they ought to be paid the same salaries as the latter. The
dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain
benefits accorded to them, which are not enjoyed by local-hires. The Constitution enjoins the state
to protect the rights of workers and their welfare. Thus, the State has the right and duty to regulate
the relations between labor and capital.
The Court finds the point-of-hire classification employed by the School to justify the
distinction between foreign-hires and local hires to be an invalid classification. There is no
reasonable distinction between the services rendered of both.
However, the Court agrees that foreign-hires do not belong to the same bargaining unit as
local-hires. A “bargaining unit” is a group of employees of a given employer, comprised of all or
less than all of the entire body of employees, consistent with equity to the employer, indicate to
be the best suited to serve the reciprocal rights and duties of the parties under the collective
bargaining provisions of the law.
FACTORS AFFECTING:
 Will of the employees
 Affinity and unity of the employees’ interest
 Prior Collective bargaining history
 Similarity of employment status
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 W/N it is fundamentally the combination which will best assure to all employees
the exercise of their collective bargaining rights

1987 Constitution
Phil. Const. Art. II. §5.
The maintenance of peace and order, the protection of life, liberty, and property, and the
promotion of the general welfare are essential for the enjoyment by all the people of the blessings
of democracy.
Phil. Const. Art. II, §9.
The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living, and an improved
quality of life for all.
Phil. Const. Art. II, §10.
The State shall promote social justice in all phases of national development.
Phil. Const. Art. II, § 13.
The State recognizes the vital role of the youth in nation-building and shall promote and
protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the
youth patriotism and nationalism, and encourage their involvement in public and civil affairs.
Phil. Const. Art. II, § 14.
The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.
Phil. Const. Art. II, § 18
The State affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.
Phil. Const. Art. XIII, §1.
The Congress shall give highest priority to the enactment of measures that protect and
enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for
the common good.
To this end, the State shall regulate the acquisition, ownership, use, and disposition of
property and its increments.
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Phil. Const. Art. XIII, § 3.

The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting their rights and bene ts as
may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including conciliation,
and shall enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right
of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns on investments, and to expansion and growth.
Phil. Const. Art. XIII, § 14.
The State shall protect working women by providing safe and healthful working conditions,
taking into account their maternal functions, and such facilities and opportunities that will enhance
their welfare and enable them to realize their full potential in the service of the nation.
1935 Const. Art. XIV, §6.
The State shall afford protection to labor, especially to working women, and minors, and
shall regulate the relations between the landowner and tenant, and between labor and capital in
industry and in agriculture. The State may provide for compulsory arbitration.
1973 Const. Art. II, §9.
The State shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employers. The State shall assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work.
The State may provide for compulsory arbitration.

Labor Code and Omnibus Rules Implementing the Labor Code

New Civil Code
Art. 4
Laws shall have no retroactive effect, unless the contrary is provided.
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Art. 19
Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.
Art. 21
Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the damage.
Art. 1700
The relations between capital and labor are not merely contractual. They are so impressed with
public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop,
wages, working conditions, hours of labor and similar subjects.
Art. 1701
Neither capital nor labor shall act oppressively against the other, or impair the interest or
convenience of the public.

Sources of Law
A. Labor Code and Related Special Legislation
B. Contract
Art. 1305
A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service. (1254a)
Art. 1306
The contracting parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy. (1255a)

NOTES:
- If the contract has no consent on the part of the employee, then it is deemed as voluntary
service of servitude. If it is on the part of the employer, it is deemed as oppression.
- Principle of Party Autonomy: “xxx”
JYCHAN:

C. Collective Bargaining Agreement

DOLE v. Pawis ng Makabayang Obrero
FACTS:
On Feb. 22, 1996, a new five-year CBA for the period of Feb. 1996 to Feb. 2001, was
executed by DOLE and private respondent, PAMAO-NFL. Among the provisions of the CBA is
the disputed section on meal allowance under Sec. 3 of Art. XVIII on Bonuses and Allowances
which reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a
MEAL ALLOWANCE of TEN PESOS (P10.00) to all employees who
render at least TWO (2) hours or more of actual overtime work on a
workday, and FREE MEALS, as presently practiced, not exceeding
TWENTY FIVE PESOS (P25.00) after THREE (3) hours of actual
overtime work.

Pursuant to the above provision, some departments of DOLE reverted to the previous
practice of granting free meals after exactly three hours of actual overtime work. However, other
departments continued the practice of granting free meals only after more than three hours of
overtime work. Thus, private respondent filed a complaint before the NCMB, alleging DOLE
refusing to comply with the provisions of the CBA. They submitted themselves to voluntary
arbitration, who ruled in favor of respondent, issuing an order directing DOLE to extend the “free
meal” benefit to those employees who actually did overtime work, even for exactly three hours
only.
MR was denied. CA upheld the order.
ISSUE:
How many hours of overtime work must a DOLE employee render to be entitled to the free meal
under their CBA?
HOLDING:
The meal allowance provision in the CBA is not new. It was in the previous CBAs. The
clear changes in each provision on meal allowance were in the amount of the meal allowance and
free meals, and the use of the words “after” and “after more than” to qualify the amount of
overtime work to be performed by an employee to entitle him to the free meal.
The CBA covering Sept. 21, 1985 to Sept. 20, 1988 provided: that meal allowance was to
granted to all employees who rendered at least two hours or more of actual overtime work, and
free meals after three hours. The CBA for Jan. 14, 1990 to Jan. 13, 1995 provided that meal
allowances would be granted to those who rendered at least two hours or more of actual overtime
work, and free meals, not exceeding sixteen pesos, after three hours of actual overtime work. The
JYCHAN:
said provision was amended when they negotiated the economic provisions of the CBA, pursuant
to Art. 253-A of the Labor Code. The provisions of the Jan. 14, 1993 to Jan. 13, 1995 Supplement
to the 1990-1995 CBA reads that a meal subsidy was to be given for all employees who rendered
at least two or more hours of actual overtime work on a workday, and free meals, after more than
three hours of actual overtime work.
The phrase “more than” was neither in the 1985-1988 nor in the original 1990-1995 CBA>
It was only in the 1993-1995 CBA Supplement. However, the said phrase is absent in the 1996-
2001 CBA. Petitioner maintains that “after three hours” does not mean after exactly three hours,
but after more than three hours, while respondent maintains that it does mean after exactly three
hours.
No amount of legal semantics can convince the Court that “after more than” means the
same as “after.” Clearly then, the reversion to the wording of previous CBAs can only mean that
the parties intended that free meals be given to employees after exactly, or no less than, three hours
of actual overtime work.
The disputed provision of the CBA is clear and unambiguous. The terms are explicit and
the language of the CBA is not susceptible to any other interpretation. Hence, the literal meaning
of “free meals after three (3) hours of overtime work” shall prevail, which is simply that an
employee shall be entitled to a free meal if he has rendered exactly, or no less than, three hours of
overtime work, not “after more than” or “in excess of” three hours overtime work.
Petitioner invokes the well-entrenched principle of management prerogative that “the
power to grant benefits over and beyond the minimum standards of law or the Labor Code belongs
to the employer.”
However, the exercise of management prerogative is not unlimited. It is subject to
the limitations found in law, a collective bargaining agreement or the general principles
of fair play and justice. This situation constitutes one of the limitations. The CBA is the norm
of conduct between the petitioner and the private respondent, and compliance therewith is
mandated by the express policy of the law.

Previous Practices
Davao Fruits Corporation v. Associated Labor Unions
FACTS:
On Dec. 28, 1982, Associated Labor Unions, in behalf of all the rank-and-file workers and
employees of petitioner, filed a complaint before the Ministry of Labor and Employment against
petitioner for “Payment of the Thirteenth-Month Pay Differentials.” They sought to recover from
petitioner the thirteenth month pay differential of its rank-and-file employees, equivalent to their
JYCHAN:
sick, vacation and maternity leaves, premium for work done on rest days and special holidays, and
pay for regular holidays which petitioner, allegedly in disregard of company practice since 1975,
excluded from the computation of the thirteenth month pay for 1982.
Petitioner claimed that it erroneously included said items upon a doubtful and difficult of
law. It only discovered its mistake in 1981 after the promulgation of San Miguel Corp. v. Inciong.
The Labor Arbiter ruled in favor of ALU. The NLRC also affirmed the said decision.
Petitioner elevated the matter to the SC under Rule 45, but this Court shall treat the
petition as a special civil action for certiorari under Rule 65.
ISSUE:
If in the computation of the thirteenth month pay given by employers to their employees
under PD 851, payments for sick, vacation and monthly leaves, premiums for work done on rest
days and special holidays, and pay for regular holidays may be excluded in the computation and
payment thereof, regardless of long-standing company practice?
HOLDING:
NO. PD 851 mandates that all employers must pay their employees a thirteenth month
pay. How this is computed is set forth in the Rules and Regulations Implementing PD 851. The
DOLE issued the “Supplementary Rules and Regulations Implementing PD 851”, which places
that overtime pay, earnings, and other remunerations which are not part of the basic salary shall
not be included in the computation. Any compensation or remuneration other than the daily wage
rate is excluded. Petitioner claims mistake in the interpretation due to the opinions, orders, and
rulings of Acting Labor Sec. Inciong.
However, whatever doubt arose in the interpretation of PD 851 was erased by the
Supplementary Rules and Regulations that was issued as early as Jan. 16, 1976. Yet, petitioner
continued its practice in Dec. 1981, after promulgation of the said decision on Feb. 24, 1981. The
considerable length of time the questioned items had been included by the petitioner
indicates a unilateral and voluntary act on its part, sufficient in itself to negate any claim
of mistake.
A company practice favorable had been indeed established and the payments made
pursuant thereto ripened into benefits enjoyed. And any benefit and supplement being enjoyed by
the employees cannot be reduced, diminished, discontinued or eliminated by the employer by
virtue of Sec. 10 of the Rules and Regulations Implementing PD 851, and Art. 100 of the Labor
Code. Solutio indebiti, which is a civil law concept, cannot be applicable to Labor Law. At the
same time, petitioner does not demand the return of what it has paid. Instead, it wants to rectify
its “mistake”.
JYCHAN:

SMTFM-UWP v. NLRC
FACTS:
Petitioner Samahang Manggagawa Top Form Manufacturing-United Workers of the
Philippines was the certified collective bargaining representative of all regular rank and file
employees of private respondent, Top Form Manufacturing Philippines, Inc. At the collective
bargaining negotiation, the parties agreed to discuss unresolved economic uses.
The following appeared in the Minutes:
Union proposed that any future wage increase given by the government should be
implemented by the company across-the-board or non-conditional.
In their joint affidavit, union members affirmed that at the subsequent collective
bargaining negotiations, the union insisted on the incorporation in the CBA of the union proposal
on “automatic across-the-board wage increase.” They added that they agreed to drop said proposal,
relying on the undertakings made by the officials of the company who negotiated with them.
On Oct. 15, 1990, the RTWPB-NCR issued Wage Order No. 01, granting an increase of
Php17.00 per day in the salary of workers. This was followed by Wage Order No. 02, providing
for a Php12.00 increase.
As expected, the union requested for the implementation of the said wage orders. However,
they demanded that the increase be on an across-the-board basis. However, private responded
refused to accede, and instead, implemented a scheme of increases purportedly to avoid wage
distortion. They implemented the Php17.00 increase to those receiving salary of Php125.00 and
below, while the Php12.00 increase to those Php140.00 and below. For those above Php125.00 or
Php140.00, they granted an increase from Php6.99 to Php.14.30 and Php6.00 to Php10.00.
The union wrote a letter to the private respondent demanding that it should fulfill its
pledge of sincerity to the union by granting an across-the-board wage increase to all employees
under the wage orders. They had agreed to the old provision of CBA on the strength of the private
respondent’s promise and assurance.
They filed a complaint with the NCR-NLR, alleging that private respondent’s at of
“reneging on its undertaking/promise clearly constitutes an act of unfair labor practice through
bargaining in bad faith.” Furthermore, they charged private respondent with “violation of Art. 100
of the Labor Code.”
The Labor Arbiter dismissed the complaint for lack of merit. It was the union itself which
decided for the deferment of such union proposal. Therefore, it is misleading for them to claim
that the management promised to implement wage increases in such terms. Furthermore, there is
JYCHAN:
no violation on the said provision of the Labor Code. No benefits or privileges previously enjoyed
by the employees were withdrawn as a result of the implementation of the subject orders.
They appealed to the NLRC, which dismissed the appeal for lack of merit.
ISSUES:
1. Whether an employer committed an unfair labor practice by bargaining in bad faith and
discriminating against its employees?
2. Whether there was a significant wage distortion of the wage structure?
HOLDING:
1. NO. If there was indeed a promise or undertaking, petitioner should have requested or
demanded that such be incorporated into the CBA. After all, petitioner has the means
under the law to compel private respondent to incorporate this specific economic proposal
in the CBA. It could have invoked Art. 252, defining duty to bargain. However, same
article states that the duty to bargain does not compel any part to agree. Thus, the petitioner
union may not validly claim that the proposal embodied in the Minutes form part of the
CBA. The Minutes may only reflect the proceedings and discussions, but nothing is
considered final until the parties have reached an agreement. If, indeed private respondent
has promised, such promise could only be demandable in law if incorporated in the CBA.
There is no violation in the provisions of Sec. 5, Art. VII, of the CBA, and Art.
100 of the Labor Code. Art. 100 provides that “nothing in the Code shall be construed to
eliminate or in any way diminish supplements, or other employee benefits.” No benefits
or privileges previously enjoyed by petitioner union and other employees were
withdrawn as a result of the manner by which private respondent implemented the
wage orders. Granted that private respondent had granted an across-the-board
increase pursuant to RA 6727, that single instance may not be considered as
established company practice.
2. NO. The issue on whether wage distortion exists is a question of fact that is within the
jurisdiction of the quasi-judicial tribunals. Factual findings of administrative agencies are
accorded respect and even finality in this Court, even if they are supported by substantial
evidence. The NLRC Decision unanimously rule that there was no wage distortion that
marred private respondent’s implementation of the wage orders.

American Wire and Cable Daily Rated Employees v. American Wire and
Cable Co.
FACTS:
JYCHAN:
American Wire and Cable Co., Inc. is a corporation engaged in the manufacture of wires
and cables. There are two unions in the company, the American Wire and Cable Monthly-Rated
Employees, and the Daily-Rated Employees.
On Feb. 16, 2001, an original action was filed by the two unions for voluntary arbitration.
They alleged that private respondent, without valid cause, suddenly and unilaterally withdrew and
denied certain benefits and entitlements which they have long enjoyed: Service Award; 35%
premium pay during Holy Monday, Tuesday, Wednesday, December 23, 26, 27, 28, and 29;
Christmas Party; and Promotional Increase.
A promotional increase was asked by petitioner for fifteen of its members who were given
or assigned new job classifications. The new job classifications were in the nature of a promotion,
thus necessitating the grant of an increase.
On June 21, a Submission Agreement was filed by the parties. On July 4, the parties filed
their respective position papers. On Sept. 25, a decision was rendered in favor of private
respondent, ruling that the Company is not guilty of violating Art. 100 of the Labor Code.
An MR was filed, but it was denied.
They filed an appeal under Rule 43 before the CA, asserting that the Voluntary Arbiter
erred when it adopted the company’s unaudited Revenues and Profitability Analysis for the years,
1996-2000 in justifying the latter’s withdrawal of the questioned benefits. It was dismissed for lack
of merit. MR was also denied.
ISSUE: Whether the private respondent is guilty of violating Art. 100 of the Labor Code?
HOLDING:
NO. The subject benefits/entitlements that are bonuses, are not demandable or
enforceable obligations. They are not considered as part of the wage or salary or compensation.
For a bonus to be enforceable, it must have been promised by the employer and expressly agreed
upon by the parties, or it must have had a fixed amount, and it had been a long and regular practice
on the part of the employer.
The said benefits/entitlements were never subjects of any express agreement, nor were
they incorporated in the CBAs. The Christmas parties and its incidental benefits, and the giving of
cash incentive cannot be said to have fixed amounts. What is clear from the records is that over
the years, there has been a downtrend in the amount given. To be considered as “regular practice”,
the giving of the bonus should have been done over a long period of time, and must be
shown to have been consistent and deliberate. The downtrend over the years demonstrates
that there is nothing consistent about it.
JYCHAN:
Furthermore, the additional 35% premium pay cannot be shown properly to have ripened
into a company practice as there is no evidence adduced that it has become one. It was merely
granted for two years and with express reservation from the owner that it cannot continue to grant
the same in view of the company’s current financial situation.

Company Policies
China Banking Corp v. Borromeo
FACTS:
Mariano Borromeo joined the petitioner Bank on June 1, 1989 as Manager assigned in the
Regional Office in Cebu City. He, then had a rank of Manager Level I. He was then transferred to
CDO as Branch Manager. From 1989-1990, he received a “highly satisfactory” performance ratin
and received the corresponding profit sharing/performance bonus. Then, from 1991-1995, he
consistently received a “very good” performance rating for each of the said years and again,
received the corresponding profit sharing/performance bonus. In 1992, he was promoted to
Manager Level II. Then, Senior Manager Level I, Senior Manager Level II, then until he was
promoted to the position of Assistant Vice-President, Branch Banking Group for the Mindanao
Group effective Oct. 16, 1996. Each promotion had the corresponding increase in the
respondent’s salary and the benefits he received.
However, prior to his promotion, he approved several DAUP/BP (Drawn Agaunst
Uncollected Deposits/Bills Purchased) accommodations amounting to Php2,441,375 in favor of
Joel Maniwan, with Edmundo Ramos as surety. Such checks are not sufficiently funded by cash,
and are generally not accepted. But, it is a credit accommodation granted to few. As such, each of
the returned checks were stamped with the notation “Payment Stopped/Account Closed.”
On Oct. 8, 1996, the respondent wrote a Memorandum, requesting for a Php2.4M loan
grant to Maniwan. It was to regularize and liquidate DAUD availments. It was only then when
they came to know of the DAUP/BP accommodations. They further learned that these
accommodations exceeded the limit granted to clients.
Due to his error in judgment and lapses in control, Borromeo notified Chiong, the Bank’s
First Vice-President and Head-Visayas Mindanao Region, of his intention to resign and apologized
for all the trouble he caused. However, he denied benefiting from it. He formally tendered his
resignation on April 30, 1997, effective May 31, 1997.
Yang, informed the respondent that his approval without authority and approval of higher
management violated the petitioner Bank’s Code of Ethics. Thus, he was directed to restitute the
amount of 90% of the total loss incurred. In view of his resignation, they only earmarked
Php836,637.00 from his total separation benefits or pay. In another letter, they informed him that
JYCHAN:
the manager would withhold the said sum and will be released only upon recovery of the sums
demanded from Maniwan in Civil Case No. 97174.
Respondent made a demand on the petitioner for the payment of his separation pay and
other benefits. But, still petitioner maintained its petition. Thus, he filed a complaint before the
NLRC. Labor Arbiter ruled in favor of the Bank, holding that the respondent had committed a
serious infraction, when he approved of the accommodations in blatant violation of the bank’s
standard operating procedures and policies. In fact, he even offered to assign or convey a property
that he owned, as well, as proposing to withhold of the benefits due him to answer for the losses.
Even without his consent, the Labor arbiter held that the petitioner Bank’s act of withholding his
benefits was justified under its Code of Ethics.
Respondent appealed to the NLRC, which affirmed the findings and conclusions of the
Labor Arbiter. MR was denied.
In the CA, he appealed and denied that he offered to pledge his property to the bank or
proposed to withhold his separation pay and other benefits. He also argued that the Bank deprived
him of his right to due process because it unilaterally imposed the penalty of restitution on him.
CA found merit in his contention that he was deprived of his right to due process as no
administrative investigation was conducted by it prior to the act of withholding the respondent’
separation pay and other benefits. He was also not informed of any charge against him.
MR by petitioner was denied.
ISSUE:
1. Whether the factual findings of the labor arbiter as affirmed by the NLRC that are
supported by substantial evidence should have been accorded respect and finality by the
CA?
HOLDING:
1. YES. Factual findings of the NLRC, affirming those of the Labor Arbiter, when
sufficiently supported by evidence on record, are accorded respect, if not finality, and are
considered binding on this Court. As long as their decisions are devoid of any arbitrariness
in the process of their deduction from the evidence proffered by the parties, all that is left
is for the Court to stamp its affirmation.
a. The respondent was a responsible officer of the petitioner Bank, and by his own
admission, he granted the accommodations in ecess of the authority given to him
and in violation of the bank’s standard operating procedures. The petitioner Bank’s
Code of Ethics provides that the restitution/forfeiture of benefits may be imposed
on the employees for infraction of the bank’s standard operating procedures.
JYCHAN:
Furthermore, the respondent stated that he “accepts full responsibility for
committing an error in judgment, lapses in control, and abuse of discretion” and
that he was “ready to face the consequence of his action.”
b. It is well recognized that company policies and regulations are, unless shown to be
grossly oppressive or contrary to law, generally binding and valid on the parties
and must be complied with until finally revised or amended unilaterally or
preferably through negotiation or by competent authority. Moreover, management
has the prerogative to discipline its employees and to impose appropriate penalties
on erring workers pursuant to company rules and regulations. With more reason
should these truisms apply to the respondent, who, by reason of his position, was
required to act judiciously and to exercise his authority in harmony with company
policies.
c. Contrary to the respondent’s contention that the petitioner Bank could not
properly impose the accessory penalty of restitution on him without imposing the
principal penalty of “Written Reprimand/Suspension,” the latter’s Code of Ethics
expressly sanctions the imposition of restitution/forfeiture of benefits apart from
or independent of the other penalties. Obviously, in view of his voluntary
separation from the petitioner Bank, the imposition of the penalty of reprimand
or suspension would be futile. The petitioner Bank was left with no other recourse
but to impose the ancillary penalty of restitution. It was certainly within the
petitioner Bank’s prerogative to impose on the respondent what it considered the
appropriate penalty under the circumstances pursuant to its company rules and
regulations.