Labor Law: Preliminary Title - Chapter I (September 5, 2023)

 Chapter 1 - General Provisions

Art. 1. Name of Decree. This Decree shall be known as the “Labor Code of the Philippines”.

• This Labor Code is the principal labor law of the country. 
• It contains most of our labor laws, such as those on illegal recruitment, wages of workers, rights of union members, collective bargaining, and employment termination.
• It also deals with the rights of employers, such as the right to make and enforce reasonable regulations, to reorganize and economize, and to lay off lazy and undisciplined employees. 
• The Labor Code is both substantive and procedural law. It speaks of rights and obligations of the parties and the methods by which those rights and obligations may be exercised and protected. 
• The Labor Code is not meant to protect only the rights of hired hands but also of those that hire them. The law is not one-sided; otherwise, it would be unconstitutional, hence invalid as it would violate the first provision in the Bill of Rights: "No 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. 

Social Legislation 

• It is a broad category of laws that protect or promote the welfare of society or segments of it in furtherance of social justice. 
• It is conceptually broader than labor laws.
• Some examples of social legislation are the:
• social security law 
• agrarian reform law, and
• law on migrant workers

Division of Labor Laws

• Labor standards
• Sets out the minimum terms, conditions and benefits of employment that employers must provide or comply with and to which employees are entitled as a matter of legal right. 
• Examples:
• laws on wages
• work hours
• safety and health of employees
• employment benefits such as paid leaves
• medical services for work-connected injuries 
• Labor relations
• defines the status, rights and duties, as well as the institutional mechanisms, that govern the individual and collective interactions between employers, employees and their representatives. 
• Examples:
• unionization
• negotiation
• dispute settlements

Art. 2. Date of effectivity. This Code shall take effect six (6) months after its promulgation.

May 1, 1974

• A draft labor code was signed into law by the martial law President as his P.D. No. 442. 
• But because further revisions were desired, the effectivity date was deferred to November 1, 1974. 

November 1, 1974

• Ferdinand E. Marcos, the dictatorial President, issued his Decree No. 570-A to change numerous significant provisions of the Code. 
• The decree was signed, dated and issued on that day. 
• The changes it made also took effect on that same day.

March 21, 1989

• President Corazon C. Aquino did not repeal the Code but made necessary changes through R.A. No. 6715.

• But amendments have not stopped. The Labor Code has been expressly amended by presidential decrees, executive orders, batas pambansa, and republic acts. 
• Proposals to amend the Code still await at the legislative mill but they are not milled so easily as before. While labor laws cannot be static, neither should they always be in a state of flux. The "rules of the game," especially as viewed by investors, must somehow settle down. Stability is a necessity.

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.

Seven basic rights of workers specifically guaranteed by the Constitution: 

• the right to organize; 
• the right to conduct collective bargaining or negotiation with management; 
• the right to engage in peaceful concerted activities, including strike in accordance with law; 
• the right to enjoy security of tenure; 
• the right to work under humane conditions; 
• the right to receive a living wage;
• the right to participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

Shared Responsibility

• Sec. 3, Art. XII, 1987 Constitution: 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 investments, and to expansion and growth. 
• Art. 1700, New Civil Code: 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. 

Equal Opportunities; Nondiscrimination

• Basic labor policy requires the State to ensure equal work opportunities regardless of:
• Sex 
• An enterprise cannot discriminate in favor of or against a male or female applicant solely on account of his or her sex;
• Art. 135, Labor Code: Present laws prohibit discrimination against any woman employee. 
• Race
• Neither may an employer hire or promote someone just because that person is a chinoy or has a Chinese-sounding name;
• Giving a foreign-hire a salary higher than that for a local hire is discriminatory, if they have the same jobs. 
• Creed
• Neither may an employer prefer to hire a Christian over a non-Christian, or vice versa, solely on account of the creed.
• This policy prohibits discrimination in hiring or employment terms based solely on any of those three factors. 
• RA. No. 7277, Section 5: No disabled person shall be denied access to opportunities for suitable employment, and that the terms and conditions of employment of a qualified disabled employee must be the same as those of a qualified able-bodied person. 
• RA. No. 10911: Prohibits "arbitrary age limitations in employment." 
• Also, it promotes: 
• employment of individuals on the basis of abilities and qualifications,
• the right of employees, regardless of age, to be treated equally in terms of compensation, benefits, promotion and other employment opportunities. 

 Bona Fide Occupational Qualification (BFOQ)

• The law and the implementing rules do not absolutely prohibit consideration of the applicant's or employee's age in employment policy or decisions. 
• One broad exception recognizes "BFOQ," that is, if "age is a bona fide occupational qualification reasonably necessary in the normal operation of the particular business or where the differentiation is based on reasonable factors other than age." 
• To invoke any of the exceptions, however, the employer is required, prior to the implementation, to submit a report to the DOLE Regional Office which has jurisdiction over the workplace. 
• Failure to submit such report shall give rise to the presumption that the employer is not allowed to set age limitation. 

International Labor Law

• The Philippines has been an International Labor Organization member since 1948.
• As a member of the International Labor Organization and of the UN, the country subscribes to the fundamental principles of the ILO:
• labor is not a commodity; 
• freedom of expression and of association are essential to sustained progress; 
• that poverty anywhere constitutes a danger to prosperity everywhere;
• the war against want requires to, be carried on with unrelenting vigor within each nation, and by continuous and concerted international effort in which the representatives of workers and employers, enjoying equal status with those of governments, join with them in free discussion and democratic decision with a view to the promotion of the common welfare.
• As of the end of 2000, the Philippines has ratified 30 ILO Conventions, including the "core" conventions on:
• freedom of association,
• abolition of forced labor, 
• abolition of child labor
• non-discrimination

Art. 4. Construction in favor of labor. All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.

• The policy is to apply the Code to a greater number of employees so they may avail themselves of the benefits under the law, in line with the State's desire to give maximum aid and protection to labor.
• Abella v. National Labor Relations Commission:
• Rosalina Perez Abella leased Hacienda Danao-Ramona, for ten years, renewable for another ten years. She extended the lease contract for another ten years.
• During the lease, she employed private respondents Ricardo Dionele, Sr. and Romeo Quitco. 
• When her leasehold rights expired, Abella dismissed the private respondents and returned the hacienda to its owners.
• Private respondents filed a complaint against Abella for overtime pay, illegal dismissal, and reinstatement with back wages.

• WoN the respondents are entitled to separation pay. YES.

• The purpose of Article 284 as amended is the protection of the workers whose employment is terminated because of the closure of establishment and reduction of personnel.
• It is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the working man's welfare should be the primordial and paramount consideration.
• Court decisions adopt a liberal approach that favors the exercise of labor rights. 
• But it is not correct to think that the aim of the law is always to favor labor. 
• The mandate under Article 4 is simply to resolve doubt, if any, in favor of labor. 
• If there is no doubt in implementing and interpreting the law, labor will enjoy no built-in advantage and the law will have to be applied as it is.

Management Rights

• It should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. 
• Sosito v. Aguinaldo Development Corporation (1987):
• Manuel Sosito filed for an indefinite leave from the company on January 16, 1976. 
• Months later, the company underwent a retrenchment program but offered separation pay to those who had been in the active service as of June 30, 1976 and had tendered their resignation not later than July 31, 1976. 
• Petitioner, to avail of the benefits, submitted his resignation. The company denied him the benefits.
• WoN petitioner was entitled to the benefits. NO.
• The Court held that the petitioner was not qualified to avail of the benefits because at the time he submitted his resignation, he was not in the active service, having been on voluntary indefinite leave. The petitioner cannot just do as he please to the detriment of the company.
• The Court expressed that labor disputes aren’t necessarily immediately tipped in favor of labor. The Management also has its own rights, which must also be afforded the same protection as that of labor. The Court held “that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.”

• Constitutional guarantees:
• Sec. 20, Art. II: encourage private enterprise 
• Sec. 20, Art. II: private sector plays an indispensable role in nation-building
• Sec. 3, Art. XIII: private enterprise enjoys the right to reasonable return of investments and the right to expansion and growth.
• San Miguel Brewery Sales Force Union v. Hon. Blas Ople (1987):
• San Miguel Corporation implemented its “Complementary Distribution System” (CDS) whereby wholesalers can directly get beer products from any SMC office. 
• The scheme was approved by then Secretary of Labor Blas Ople. 
• The San Miguel Brewery Sales Force Union (SMBSFU) assailed this program because it violates the Collective Bargaining Agreement particularly the established scheme whereby route salesmen have been given specific territories to sell beer products. 
• The CDS scheme would then lower the take home pay of the route salesmen and in effect an attack to union members. SMBSFU filed a petition for review on the order of Sec. Ople approving the scheme.
• WoN the CDS is a violation of the CBA. NO.
• The SC ruled that the CDS is an exercise of management prerogative whereby the management can implement schemes to optimize their profit. 
• Further, the CDS provides for a compensation clause as well for salesmen. San Miguel Corporation’s offer to compensate the members of its sales force who will be adversely affected by the implementation of the CDS by paying them a so-called “back adjustment commission” to make up for the commissions they might lose as a result of the CDS proves the company’s good faith and lack of intention to bust their union.
• Prerogative connotes power or privilege enjoyed exclusively, so exclusive that it excludes sharing and scrutiny. The right to manage is never absolute. It is limited by special laws and by contract as well as the basic principles of equity and fair play.
• Dole Philippines, Inc. v. Pawis ng Makabayang Obrero (2003):
• A five-year Collective Bargaining Agreement (CBA) was signed between Dole Philippines, Inc. and Pawis Ng Makabayang Obrero-NFL.
• A disputed section in the CBA pertained to meal allowances. Some departments at Dole began providing free meals after exactly three hours of overtime work, while others continued the practice of offering free meals only after more than three hours of overtime.
• PAMAO-NFL filed a complaint with the National Conciliation and Mediation Board, claiming that Dole was not complying with the CBA by granting free meals to those who worked exactly three hours of overtime.
• Dole argued that the phrase "after three hours of actual overtime work" should be interpreted as meaning "after more than three hours of actual overtime work," citing its 13-year practice.
• PAMAO-NFL and the arbitrator contended that "after three hours of actual overtime work" simply meant "after rendering exactly, or no less than, three hours of actual overtime work."
• WoN the interpretation of DOLE is in accordance to the principle of management prerogrative. NO.
• No amount of legal semantics can convince the Court that after more than means the same as after. 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.
• 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 petitioner and private respondent and compliance therewith is mandated by the express policy of the law. 
• The Philippine Constitution nowhere uses the word "prerogative" since its exclusive character contradicts the principle of "shared responsibility" of employers and workers.
• Courts may look into the employers exercise of management prerogative if it is clearly shown to be tainted with grave abuse of discretion.
• Master Iron Labor Union v. NLRC (1993)
• The Master Iron Works Construction Corporation (Corporation) and the Master Iron Labor Union (MILU) entered into a collective bargaining agreement (CBA). The CBA contained provisions prohibiting strikes and lockouts during its term and addressing service allowances for workers assigned outside the company plant.
• The Corporation subcontracted outside workers, causing regular workers to have reduced workdays and be scheduled on a rotation basis.
• Despite the intervention of Department of Labor and Employment (DOLE), the Corporation continued hiring outside workers despite the agreement, leading to further disputes and requests for conciliation conferences.
• MILU staged a strike leading to arrests of picketers by CAPCOM soldiers.
• Labor Arbiter declared the strike illegal, ordered the cancellation of MILU's registration permit, and terminated the employment of certain employees.
• WoN the Corporation hiring outside workers is within the management prerogative. NO.
• While it is true that an employer's exercise of management prerogatives, with or without reason, does not per se constitute unjust discrimination, such exercise, if clearly shown to be in grave abuse of discretion, may be looked into by the courts. Indeed, the hiring, firing, transfer, demotion, and promotion of employees are traditionally identified as management prerogatives. 
• However, they are not absolute prerogatives. They are subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and justice. The Corporation's assertion that it was exercising a management prerogative in hiring outside workers being contrary to the contract of employment which, of necessity, states the expected wages of the workers, as well as the CBA, is therefore untenable.

Art. 5. Rules and regulations. The Department of Labor and other government agencies charged with the administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and regulations. Such rules and regulations shall become effective fifteen (15) days after announcement of their adoption in newspapers of general circulation.

• The Department of Labor and Employment is the lead agency in enforcing 
• labor laws and it possesses rule-making power in the enforcement of the Code. 
• But a rule or regulation that exceeds the department's rule-making authority is void. 
• The rule making power is exceeded when the implementing rule changes, wittingly or unwittingly, the content or meaning of the law which the rule aims to implement. 
• The implementing rule must be subordinate to the law itself. 
• For instance, in the Rules and Regulations implementing Article 94 of the Labor Code, and Policy Instructions No. 9, the Labor Secretary excluded monthly-paid employees from entitlement to holiday pay, although the law gives it to "every worker." 
• The Court ruled that those rules and regulations as well as the policy instructions are null and void. They were promulgated by the Labor Secretary in excess of his rule-making authority or ultra vires (beyond one's power). An implementing rule cannot change the law
• CBTC Employees Union v. Hon. Jacobo Clave and Commercial Bank and Trust Co. of the Philippines (1986):  
• The Commercial Bank and Trust Company Employees' Union filed a complaint against the bank for non-payment of holiday pay benefits provided for under Art 95 of the Labor Code. 
• The Arbitrator ruled that monthly-paid employees were entitled to holiday pay retroactive from November 1, 1974.
• The Department of Labor released Policy Instructions No. 9, clarifying that only those whose monthly salary did not yet include payment for the ten (10) paid legal holidays are entitled to the benefit.
• WoN permanent monthly-paid employees were entitled to holiday pay. YES.
• The aforementioned section and interpretative bulletin are null and void, having been promulgated by the then Secretary of Labor in excess of his rule-making authority. It was pointed out, inter alia, that in the guise of clarifying the provisions on holiday pay, said rule and policy instructions in effect amended the law by enlarging the scope of the exclusions. 
• We further stated that the then Secretary of Labor went as far as to categorically state that the benefit is principally intended for daily paid employees whereas the law clearly states that every worker shall be paid their regular holiday pay which is incompatible with the mandatory directive, in Article 4 of the Labor Code, that "all doubts in the implementation and interpretation of the provisions of Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor." Thus, there was no basis at all to deprive the union members of their right to holiday pay.

 

Art. 6. Applicability. All rights and benefits granted to workers under this Code shall, except as may otherwise be provided herein, apply alike to all workers, whether agricultural or non-agricultural. 

General Rule: Rights and benefits granted to workers under this Code shall apply alike to all workers.

Exception: Except as may otherwise be provided herein.

• A right or benefit granted under one article is denied under another article.
• ART. 83. Normal hours of work. - The normal hours of work of any employee shall not exceed eight (8) hours a day.
• ART. 87. Overtime work. - Work may be performed beyond eight (8) hours a day provided that the employee is paid for the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%) thereof.
• ART. 101. Payment by results. - (a) The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework, and other non-time work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers’ and employers’ organizations.
• Therefore, questions of entitlement to labor benefits should be correlated with other Labor Code articles and even other laws outside the Labor Code.

Employment Relationship

• Foundationally significant in labor law. 
• Most Labor Code rights and benefits pertain only to "employees," not to all workers. 
• This Article 6 is loosely worded in saying that the Labor Code nghts and benefits apply to "all workers." 
• Not all workers are employees.
• Being an employee is almost always an essential requisite for a worker to claim a certain labor right or benefit under this Code. 
• Relationship between "employer" and "employee" has traditionally been at the heart of labor law.
• Certain conditions must be present before a worker may be considered an "employee" and a hirer of workers an "employer." (Articles 82, 106, and 295)

Applicability to Government Corporations

• Sec 2, Art. IX-B, 1987 Constitution: The civil service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters.
• Corporations with original charters means the government corporations not organized under our general incorporation statute, the Corporation Code.
•  GOCCs created under special laws.
• Art. 276, Labor Code: The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations, shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the New Constitution. However, there shall be no reduction of existing wages, benefits and other terms and conditions of employment being enjoyed by them at the time of the adoption of this Code.
• When the employees of a government agency, such the SSS, declare a strike, the employer may invoke the jurisdiction of a regular court (instead of the of the National Labor Relations Commission) to secure an order to stop the strike.
• When a government agency enters into contract with a private entity, the money claims against the agency must be pursued or enforced through the Commission on Audit instead of the NLRC.
• Title II, Book IV of this Code does apply to government employees compulsorily covered by the GSIS.

Q: Labor Code applies to non-government organizations? Why?

    Does the Labor Code applies to Contract of Service Workers of the government?