Labor Law: Case Digests Recit Ver, Payment of Wages (Arts. 106 - 110)

Labor Law

Title II - Wages

Chapter III Payment of Wages (Arts. 106-110)

     1. Sonza v. ABS-CBN G.R. No. 138051, June 10, 2004 | Independent Contractor

• In May 1994, ABS-CBN signed an Agreement with MJMDC, making MJMDC as the "AGENT" for Jay Sonza's exclusive services to ABS-CBN for radio and television hosting.
• Jay Sonza's services included co-hosting for the Mel & Jay radio program and Mel & Jay television program.
• In 1996, Jay Sonza wrote to ABS-CBN's President, resigning due to recent events and claiming violation of the Agreement.
• Jay Sonza filed a complaint against ABS-CBN for unpaid salaries, separation pay, service incentive leave pay, 13th month pay, signing bonus, and travel allowance.
• ABS-CBN filed a motion to dismiss, claiming no employer-employee relationship.

WoN a "talent" is an employee and not and independent contractor.  NO.

Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees. The specific selection and hiring of Jay Sonza because of his unique skills, talent and celebrity status not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual relationship.

A legitimate contractor is not necessarily a firm; it may be an individual. Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees.

Applying the control test to the present case, we find that Jay Sonza is not an employee but an independent contractor. 

    2. San Miguel Corp. Employees Union v. Bersamira, G.R. No. 87700 June 13, 1990 | Proprietary Right

• San Miguel Corporation (SanMig) entered into contracts for merchandising services with independent contractors Lipercon and D'Rite. These contracts specified that the workers employed by the contractors were not SanMig's employees and no employer-employee relationship existed between them.
• San Miguel Corporation Employees Union-PTWGO (Union) alleged a "labor-only" contracting situation regarding some Lipercon and D'Rite workers who had been continuously working for SanMig for extended periods. The Union demanded regularization of these workers' employment statuses, leading to a notice of strike for unfair labor practices, CBA violations, and union busting.
• SanMig filed a Complaint for Injunction and Damages, seeking to prevent the Union from representing Lipercon and D'Rite workers, holding a strike vote, and staging strikes or demonstrations.

• RTC: Issued a Temporary Restraining Order and Writ of Preliminary Injunction stating that the absence of an employer-employee relationship negated the existence of a labor dispute.

WoN the respondent Court correctly assumed jurisdiction over the present controversy and properly issued the Writ of Preliminary Injunction.  NO.

We recognize the proprietary right of SanMig to exercise an inherent management prerogative and its best business judgment to determine whether it should contract out the performance of some of its work to independent contractors. However, 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 (Section 3, Article XIII, 1987 Constitution) equally call for recognition and protection. Those contending interests must be placed in proper perspective and equilibrium.

The Court ruled in favor of the petitioners, stating that the controversy constituted a labor dispute since it involved terms and conditions of employment, regularization of employees, and issues which requires application of existing labor laws. The Court emphasized that labor disputes are not limited to employer-employee relationships and that issues regarding employment terms and representation fall within the scope of labor disputes.

    3. MERALCO v. Quisumbing, G.R. No. 127598, February 22, 2000 | Management Prerogative 

• In 1999, the Supreme Court directed the parties to execute a Collective Bargaining Agreement (CBA) incorporating the terms and conditions from the Secretary of Labor's orders, along with modifications including changes in wages and retroactivity of the CBA, among others.
• The Secretary required consultation for contracting out services for six months or more.

WoN the added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more is valid.  NO.

The Court held that hiring of workers is within the employer's inherent freedom to regulate and is a valid exercise of its management prerogative subject only to special laws and agreements on the matter and the fair standards of justice.

The management cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be paid to what management decides. Contracting out of services is an exercise of business judgment or management prerogative. Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.

The law already sufficiently regulates this matter. Jurisprudence also provides adequate limitations, such that the employer must be motivated by good faith and the contracting out should not be resorted to circumvent the law or must not have been the result of malicious or arbitrary actions.

    4. Baguio, et.al v. NLRC, G.R. Nos. 79004-08, October 4, 1991 | Liability

• Feliciano Lupo, a building contractor, entered into a contract with General Milling Corporation (GMC) for construction work of an annex building inside the latter’s plant. 
• Lupo hired petitioners as carpenters, masons, or laborers for this project.
• After Lupo terminated petitioners' services, they filed complaints against Lupo and GMC for unpaid wages, COLA differentials, bonus, and overtime pay.

• LA: Found both Lupo and GMC jointly and severally liable to petitioners under Article 109 of the Labor Code.
• NLRC First Division: Denied the appeal. 
• NLRC Third Division: Absolved GMC from any liability.
• Petitioners argue GMC's joint and several liability with Lupo based on Article 106 of the Labor Code, but the court rules that "labor-only" contracting doesn't apply to this situation.

WoN GMC is joint and several liability with Lupo based on Article 106 of the Labor Code. YES

There is "job contracting" where (1) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (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. 

In this case, the construction of an annex building in the plant has no relation to GMC's flour and feeds manufacturing business, so "labor-only" contracting doesn't apply, thus Article 106 is inapplicable.

Instead, "job contracting" exists. GMC, contracting Lupo for the annex building, is considered an "indirect employer" under Article 107, making GMC jointly and solidarily liable with Lupo for any Labor Code violations.

Article 108 mandates employers to require contractors to post a bond for unpaid wages. Since GMC didn't enforce this requirement with Lupo, GMC must pay Lupo's liabilities to the employees but can seek reimbursement from Lupo.

    5. Serrano v. NLRC & Isetann, G.R. No. 117040 January 27, 2000 | Good Faith

• Ruben Serrano was employed by Isetann Department Store as a security checker.
• As a cost-cutting measure, Isetann decided to phase out its entire security section and engage the services of an independent security agency. Petitioner received a termination notice.
• Petitioner filed a complaint alleging illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, nonpayment of salary, and overtime pay.

• LA: Ruled in favor of petitioner, finding his dismissal illegal.
• NLRC: Reversed the Labor Arbiter's decision, and considered Isetann's decision to phase out the security section and hire an independent security agency as a legitimate business decision, not subject to inquiry.

WoN the hiring of an independent security agency by Isetann to replace its current security section is a valid ground of dismissal. YES

The Court upheld the abolition of the regular positions and their being contracted out.

Citing past decisions, the Court reiterated that the employer has the right to "promote efficiency and attain economy" and to determine whether services "should be performed by its personnel or contracted to outside agencies."

Unless it is proved that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.

    6. Manila Water Co Inc v. Pena, G.R. No. 158255, July 8, 2004 | Independent Contractor

• The government-owned Metropolitan Waterworks and Sewerage System (MWSS) contracted the Manila Water Company (MWC) to manage the water distribution system in Metro Manila East Zone.
• he MWC absorbed some MWSS employees, but not the 121 collectors who were retained by MWC on contractual basis only. 
• These collectors formed the Association Collectors Group, Inc., (ACGI) with which MWC entered into a contract to collect water charges. The the contract was terminated after about 14 months. 
• The collectors filed a complaint of illegal dismissal against MWC, which, for its part, argued that the employer was ACGI not MWC. 

WoN ACGI a legitimate contractor? NO

It is a labor-only contractor applying the definition in D.O. No. 18-02 (now D.O. No. 18-A).

The court noted that:

1. ACGI does not have substantial capitalization or investment in the form of tools, equipment, etc., to qualify as an independent contractor.
2. The work of the private respondents was directly related to the principal business or operation of MWC.
3. ACGI did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, MWC.

MWC continued to issue memoranda on billing methods and distribution of books to the collectors; it required the workers to report daily; and MWC monitored strictly their attendance. Although ACGI would ultimately discipline the erring workers, MWC will dictate what penalty to impose.

Considering the facts, the court concluded that ACGI was not an independent contractor. The court rejected MWC's argument that the former employees had become independent contractors.

    7. Rosewood Processing Inc. v. NLRC, G.R. No. 116476-84, May 21 1998 | Liability

• The six complainants, employed as security guards filed a complaint for illegal dismissal, underpayment of wages, and nonpayment of various benefits against Veterans Philippine Scout Security Agency and/or Sergio Jamila IV.
• Rosewood Processing Inc. was impleaded as a third-party respondent by the security agency.

• LA: Ordered the respondents to pay complainants their monetary benefits holding petitioner Rosewood Processing Inc. jointly and severally liable with the security agency as the complainants' indirect employer under Articles 106, 107, and 109 of the Labor Code.
• NLRC: Dismissed petitioner's appeal.

WoN Rosewood Processing Inc. is jointly and severally liable as an Indirect Employer. YES

The court clarified that the liability of the petitioner as an indirect employer is limited to the extent of work performed under the contract between the petitioner and the agency, holding the petitioner liable for wage differentials during the period when the complainants were actually under its employ.

The court exempted the petitioner from the payment of back wages and separation pay, as these liabilities have a punitive character and require evidence of the petitioner's involvement in the illegal dismissal. The security agency was found entirely liable, as it did not appeal from the decisions of the labor arbiter and the Respondent Commission.

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractor's employees. 

This liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor. 

Under the Labor Code, an employer is solidarily liable for legal wages due security guards for the period of time they were assigned to it by its contracted security agency. However, in the absence of proof that the employer itself committed the acts constitutive of illegal dismissal or conspired with the security agency in the performance of such acts, the employer shall not be liable for back wages and/or separation pay arising as a consequence of such unlawful termination.

    8. San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005 | Labor-only Contractor and Cooperative

• In 1993, San Miguel Corporation (SMC) and Sunflower Multi-Purpose Cooperative (Sunflower) entered into a one-year Contract of Services to provide messengerial/janitorial, shrimp harvesting and cold storage services for SMC. The contract specified no employer-employee relationship between SMC and Sunflower or its members.
• In 1995, workers filed a complaint seeking regular employment status and benefits. SMC closed its Bacolod Shrimp Processing Plant in September 1995.

• LA: Ruled in favor of SMC, stating Sunflower was an independent contractor.
• NLRC: Reversed NLRC decision, considering Sunflower as an agent of SMC, facilitating its manpower requirements.

WoN respondents are employees of SMC. YES

The language of a contract is not, however, determinative of the parties’ relationship; rather it is the totality of the facts and surrounding circumstances of the case.

The court ruled that Sunflower did not have substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials to qualify as an independent contractor. The court noted that all the necessary equipment, facilities, and tools used by the workers were owned and provided by SMC, the principal employer. 

Moreover, Sunflower did not have an independent business and catered exclusively to SMC.

Private respondents were performing tasks directly related to SMC's business and should be considered regular employees entitled to benefits and rights accorded to regular employment.

     9. DOLE Philippine v. Esteva, G.R. No. 161115, November 30, 2006 | Labor-only Contractor and Cooperative

• In 1993, Dole Philippines, Inc. and Cannery Multi-Purpose Cooperative (CAMPCO), entered into a Service Contract, where CAMPCO members provided services to Dole. Although the contract was initially for six months, it was extended or renewed without a written agreement.
• DOLE's Regional Office found CAMPCO engaged in labor-only contracting, leading to a cease and desist order affirmed by DOLE Undersecretary Trajano. Despite the order, CAMPCO and others continued operations, leading DOLE to issue a Writ of Execution in 1999.
• Respondents, who started working for Dole through CAMPCO in 1993-1994, filed a Complaint in 1996 alleging illegal dismissal and claiming regular employment status and wage differentials.

• LA: Ruled in favor of Dole, stating CAMPCO was not engaged in labor-only contracting and respondents were not regular employees.
• NLRC: Affirmed the decision. CAMPCO's substantial capital was cited as evidence of legitimate job contracting.
• CA: Ruled CAMPCO did not qualify as an independent job contractor, emphasizing the need for independent business conduct, not just substantial capital investment. CAMPCO's lack of independence and Dole's control indicated labor-only contracting.

WoN CAPCO is engaged in the prohibited act of labor-only contracting. YES

The finding by the DOLE Secretary's authorized representatives that CAMPCO was a labor-only contractor is conclusive and cannot be deviated from. While some factors suggest an independent contractor relationship between petitioner and CAMPCO (e.g., CAMPCO selecting members to work, payment arrangements), other factors indicate a labor-only contracting arrangement such as the lack of substantial capital, sole reliance on petitioner, and petitioner's control over CAMPCO members' work and assignments.

Although petitioner touts the multi-million pesos assets of CAMPCO, it does well to remember that such were amassed in the years following its establishment. In 1993, when CAMPCO was established and the Service Contract between petitioner and CAMPCO was entered into, CAMPCO only had ₱6,600.00 paid-up capital, which could hardly be considered substantial. It only managed to increase its capitalization and assets in the succeeding years by continually and defiantly engaging in what had been declared by authorized DOLE officials as labor-only contracting.

CAMPCO did not operate independently from petitioner but was established solely to provide services to petitioner during peak seasons, with petitioner as its only client. CAMPCO did not perform specific or special jobs but supplied manpower as needed by petitioner, indicating labor-only contracting activities.  

    10. Republic v. Asiapro Cooperative, G.R. No. 172101, November 23, 2007  | Labor-only Contractor and Cooperative

• Asiapro Cooperative entered service contracts with Stanfilco, providing services, and generating income from these contracts. Asiapro's owners-members sought Social Security System (SSS) coverage as self-employed individuals due to their cooperative status.
• SSS, however, claimed Asiapro was an employer supplying workers to Stanfilco, demanding Asiapro to register as an employer and cover its owners-members under SSS.
• Asiapro asserted no employer-employee relationship existed. It claimed that the rights and obligations of its owners-members are derived from their Membership Agreements, By-Laws, and Cooperative Code, not from an employment relationship.

WoN employer-employee relationship existed between Asiapro and its owners-members. YES

The Supreme Court applying the four-fold test declared that employer-employee relationship exists between the cooperative and its shareholder members. 

The cooperative had exclusive discretion in selecting and engaging its owners-members and team leaders for assignments at Stanfilco. The stipends or shares in the service surplus given to owners-members were considered wages. These payments constituted compensation for services rendered to Stanfilco, making them equivalent to wages. The cooperative held the authority to investigate, discipline, and remove owners-members and their team leaders working at Stanfilco. The cooperative exercised sole control over the manner and methods of performing services under the Service Contracts with Stanfilco. Furthermore, it bore complete responsibility for its owners-members, team leaders, and other representatives at Stanfilco.

The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. In other words, the cooperative can be a contractor, and, where it qualifies as a legitimate contractor, it can be the employer of the workers, hence, can be compelled to register with the SSS. 

    11. South Cotabato Communications Corp. v. Hon. P. Sto. Tomas et al., June 15, 2016 | Visitorial and Enforcement Power

• The Department of Labor and Employment (DOLE) conducted an inspection at DXCP Radio Station, owned by South Cotabato Communications Corporation, and found violations of labor standards provisions, including underpayment of wages and non-remittance of SSS contributions.
• The DOLE issued a Notice of Inspection Result, directing the corporation to correct the violations but petitioners failed to comply. A Summary Investigation was scheduled, but petitioners did not appear. Another hearing was set, but their counsel's secretary requested a reset, which was denied.
• The DOLE Regional Director ordered petitioners to pay the total amount of P759,752 to the affected employees.
• Petitioners appealed to the Secretary of Labor, claiming denial of due process and lack of evidence of an employer-employee relationship.

• Secretary of Labor: Affirmed the DOLE Regional Director's findings and dismissed the appeal.
• CA: Upheld the Secretary of Labor's decision, stating that petitioners' failure to present evidence was due to negligence.

WoN the CA erred in affirming the Secretary of Labor's decision despite the absence of evidence proving the employer-employee relationship. YES

The Regional Director merely noted the discovery of violations of labor standards provisions in the course of inspection of the DXCP premises. No such categorical determination was made on the existence of an employer-employee relationship utilizing any of the guidelines set forth. In a word, the Regional Director had presumed, not demonstrated, the existence of the relationship. Of particular note is the DOLE'S failure to show that petitioners, thus, exercised control over private respondents' conduct in the workplace.

The existence of employer-employee relationship must be proved by adequate evidence and determined through examination of facts. The relationship must be demonstrated, not presumed, and its existence should be declared categorically before the powers under Article 128 may be exercised.

    12. Development Bank of the Philippines v. Secretary of Labor, G.R. No. 79351, November 28, 1989 | Labor Preference, Lien

• Private respondents filed a complaint for illegal dismissal, unfair labor practices, illegal salary deductions, and violation of minimum wage laws against Riverside Mills Corporation (RMC).
• RMC was ordered to pay backwages and separation benefits to private respondents. A writ of execution was issued but returned unserved and unsatisfied, as RMC's premises had been padlocked and foreclosed by Development Bank of the Philippines (DBP) due to RMC's loan default.
• Private respondents filed a motion requesting the delivery of RMC's properties in DBP's possession for proper disposition, citing Article 110 of the Labor Code. The motion was granted stating that Article 110 supported their preferential lien.
• DBP filed a motion for reconsideration, arguing that Article 110 did not apply because the properties had been foreclosed, sold, and delivered to third parties, and there were no bankruptcy or insolvency proceedings against RMC.

• Undersecretary of Labor and Employment: Denied DBP's motion for reconsideration.

WoN by virtue of Article 110 of the Labor Code, an "automatic first lien" was created in favor of private respondents on RMC properties. NO

It is clear from the wording of the law that the preferential right accorded to employees and workers under Article 110 may be invoked only during bankruptcy or judicial liquidation proceedings against the employer. The law is unequivocal and admits of no other construction. Article 110 of the Labor Code may not be invoked by employees or workers in the absence of a formal declaration of bankruptcy or a judicial liquidation order of RMC.

What Article 110 of the Labor Code establishes is not a lien, but a preference of credit in favor of employees.  This simply means that during bankruptcy, insolvency or liquidation proceedings involving the existing properties of the employer, the employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be proved therein.

Unlike a lien, a preference of credit does not create in favor of the preferred creditor a charge or proprietary interest upon any particular property of the debtor. Neither does it vest as a matter of course upon the mere accrual of a money claim against the debtor. 

    13. Republic v. Peralta, G.R. No. L-56568 May 20, 1987 | Separation Pay

• In the voluntary insolvency proceedings of Quality Tobacco Corporation, various creditors filed claims, including the USTC Association of Employees and Workers Union-PTGWO USTC and the Federacion de la Industria Tabaquera y Otros Trabajadores de Filipinas ("FOITAF") for separation pay awarded by the National Labor Relations Commission.

• CFI-Manila: Ruled in favor of the Unions' claims for separation pay, giving preference to these claims over the claims of the Bureau of Internal Revenue for tobacco inspection fees and the Bureau of Customs for customs duties and taxes. The trial court based its decision on Article 110 of the Labor Code, which prioritizes workers' claims for wages in cases of bankruptcy or liquidation of an employer's business.
• Solicitor General: Contested this ruling, arguing that separation pay is not included within the definition of "wages" but a form of "penalty of damage" against the employer and should not enjoy priority over tax claims.

WoN the term "wages," in the Article 110 of the Labor Code, include the separation pay.  YES 

In the case of Philippine Commercial and Industrial Bank (PCIB) vs. National Mines and Allied Workers Union, separation pay was considered part of "wages" under Article 110 of the Labor Code.

The court held that for the specific purposes of Article 110, separation pay is reasonably regarded as forming part of the remuneration or other money benefits accruing to employees or workers by reason of their having previously rendered services to their employer. 

The court categorizes credits in insolvency into three general categories: special preferred credits, ordinary preferred credits, and common credits.

• Special preferred credits, listed in Articles 2241 and 2242 of the Civil Code, include taxes, duties, and fees due to the State or any subdivision thereof, and enjoy the highest priority.
• Ordinary preferred credits, listed in Article 2244, include claims for unpaid wages not covered by special preferred credits. These claims are subordinate to taxes and other special preferred credits.

The court clarifies that claims for unpaid wages, including separation pay, do not constitute liens on the employer's property but are considered ordinary preferred credits under Article 2244.

Article 110 of the Labor Code modified the order of preference established in Article 2244 (2). Specifically, it removed the one-year limitation on claims for unpaid wages and giving first priority to claims for unpaid wages of laborers or workers of the insolvent employer.

The court directs the trial court to determine whether the insolvent has inventories of processed or manufactured tobacco products. If so, these inventories must first satisfy the claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees, and the remaining value will be subject to the claims of the Unions for separation pay. If no inventories exist, the Unions' claims will be paid out of the insolvent's "free property" as modified by Article 110 of the Labor Code.

    14. Development Bank of the Philippines v. NLRC and Ang, G.R. No. 108031 March 1, 1995 | Declaration of Bankruptcy, Judicial Liquidation

• Leonor A. Ang worked for Tropical Philippines Wood Industries, Inc. (TPWII) from 1977 to 1986.
• In 1983, TPWII faced financial issues, leading to the foreclosure of its properties by petitioner Development Bank of the Philippines. In 1986, TPWII ceased operations and Ang was verbally terminated.
• Ang filed a complaint seeking separation pay, 13th-month pay, vacation and sick leave pay, salaries, and allowances from TPWII and Development Bank of the Philippines.
• LA: Found TPWII primarily liable for separation pay and vacation and sick leave pay. Development Bank of the Philippines was held subsidiarily liable if TPWII failed to pay.
• NLRC: Affirmed the LA.

WoN the declaration of bankruptcy or judicial liquidation required before the worker's preference may be invoked under Art. 110 of the Labor Code.  YES 

A declaration of bankruptcy or a judicial liquidation must be present before the worker's preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a liquidation order

The 1989 amendment of Article 110 expanded the concept of "worker preference" to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate. Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have been notably eliminated, this Court did not alter its original position that the right to preference given to workers under Art. 110 cannot exist in any effective way prior to the time of its presentation in distribution proceedings. 

In the present case, there is as yet no declaration of bankruptcy nor judicial liquidation of TPWII. Hence, it would be premature to enforce the worker's preference.

    15. Barayoga v. Asset Privatization Trust, G.R. No. 160073, October 24, 2005 | Principle of Absorption

• Bisudeco-Philsucor Corfarm Workers Union is composed of workers of Bicolandia Sugar Development Corporation (BISUDECO).
• BISUDECO contracted the services of Philippine Sugar Corporation (Philsucor) to take over the management of the sugar plantation and milling operation.
• Asset Privatization Trust, a public trust created to take title to and manage non-performing assets of the Philippine government, acquired the mortgage credits of BISUDECO from Philippine National Bank.
• BISUDECO’s assets were eventually foreclosed and the properties were sold at a public auction to APT. APT later transferred the assets to Bicol-Agro-Industrial Cooperative (BAPCI), which took over the sugar milling operations.
• The Union filed a complaint for unfair labor practice, illegal dismissal, illegal deduction, and underpayment of wages and other labor standard benefits.

• LA: Ruled in favor of the workers, ordering APT to pay mandated employment benefits. 
• NLRC: Affirmed APT’s liability for the workers’ money claims but ruled that APT was not liable for unfair labor practice and illegal dismissal.
• CA: Ruled that APT was not liable for the workers’ claims as there was no employer-employee relationship between APT and the workers.

WoN the APT is liable for petitioners’ monetary claims, including back wages. NO

APT, as a mere transferee of mortgage credit and later as a purchaser in a public auction, cannot be held liable for the workers’ claims against BISUDECO. APT's liabilities were not automatically assumed from BISUDECO. 

Labor contracts like collective bargaining agreements are not enforceable against the transferee (APT) unless expressly assumed.  The principle of absorption does not obligate a bona fide buyer or transferee to absorb the selling company’s employees. The purchasing company may give preference to reemploy qualified separated employees for reasons of public policy and social justice.

APT’s lien on BISUDECO’s mortgaged assets is a special preferred lien that must be satisfied first before the claims of the workers. Worker’s preference under Article 110 of the Labor Code does not constitute a lien on the property in favor of workers.

The Court clarified that the ruling does not reverse or rule upon the workers’ entitlement to back wages and other unpaid benefits from their previous employer, BISUDECO. The decision only absolves APT from liability in this case.

    16. Rubberworld Inc v. NLRC, G.R. No. 126773 April 14, 1999 | Rehabilitation Proceedings

• Rubberworld Philippines, Inc., a domestic corporation engaged in manufacturing footwear, bags and garments, filed a petition for suspension of payments and prayed for the approval of the proposed rehabilitation plan with the Securities and Exchange Commission (SEC).
• The SEC ordered the creation of a management committee and the suspension of all actions for claims against Rubberworld. 
• Private respondents, claiming to be employees of Rubberworld, filed complaints for illegal dismissal, unfair labor practice, damages and payment of separation pay, among others.
• Rubberworld moved to suspend these labor cases based on the SEC order.

• LA: Denied the motion.
• NLRC: Sustained the rulings of the LA.

WoN NLRC erred in affirming the order of Labor Arbiter denying petitioners' motion to suspend proceedings despite the Order of the Securities and Exchange Commission.   YES 

The Court ruled in favor of Rubberworld, stating that the SEC's suspension order, under PD 902-A, automatically stays all actions for claims against a corporation upon the appointment of a management committee or rehabilitation receiver. This suspension applies without exceptions.

The purpose of the automatic stay is to allow the management committee or rehabilitation receiver to effectively exercise its powers without interference, thereby facilitating the rehabilitation of the corporation.

The Court clarified that the preference given to workers under Article 110 of the Labor Code applies only in insolvency or judicial liquidation proceedings, not in rehabilitation cases like this one.

The purpose of rehabilitation proceedings is precisely to enable the company to gain a new lease on life and thereby allow creditors to be paid their claims from its earnings. In insolvency proceedings, on the other hand, the company stops operating, and the claims of creditors are satisfied from the assets of the insolvent corporation. The present case involves the rehabilitation, not the liquidation, of petitioner-corporation. Hence, the preference of credit granted to workers or employees under Article 110 of the Labor Code is not applicable.

    17. Sebuguero v. NLRC, G.R. No. 115394, September 27, 1995 | Attorney's Fees

• The petitioners, who were among the 38 regular employees of GTI Sportswear Corporation, were given "temporary lay-off" notices due to alleged lack of work and heavy losses. 
• The employees filed complaints for illegal dismissal, unfair labor practice, underpayment of wages, and non-payment of benefits.
• GTI denied the claim of illegal dismissal and asserted that it was its prerogative to lay-off its employees temporarily for a period not exceeding six months to prevent losses due to lack of work or job orders from abroad.

• LA: Found GTI liable for constructive dismissal and ordered GTI to pay backwages, separation pay, 13th-month pay, and attorney's fees.
• NLRC: Concurred with the findings of the Labor Arbiter that there was a valid lay-off of the petitioners due to lack of work but deleted the awards for backwages, 13th-month pay, and attorney's fees, and directed payment of separation pay to the employees.

WoN petitioners are entitled to an award for attorney's fees. YES

The petitioners are entitled to an award for attorney's fees pursuant to paragraph 7, Article 2208 of the Civil Code which must, however, be reasonable. The award of P120,618.87, which is equivalent to ten percent (10%) of the amounts recovered, as attorney's fees should be reduced to P 25,000.00, an amount we find to be reasonable. 

The ten percent (10%) attorney's fees provided for in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the maximum; hence, any amount less than that may be awarded as the circumstances of the case may warrant.

    18. Heirs of Aniban v. NLRC, G.R. No. 116354, December 4, 1997 | Attorney's Fees

• Reynaldo Aniban was employed as a radio operator on the vessel "Kassel" by Philippine Transmarine Carriers, Inc., acting on behalf of its foreign principal Norwegian Ship Management A/S. He died due to myocardial infarction during his employment period, leaving behind a pregnant wife and three minor children.
• The POEA's Standard Employment Contract stated that in case of a seaman's death during the contract term, the employer should pay beneficiaries US $13,000.00 for officers, including radio operators.
• An additional claim was made under the Collective Bargaining Agreement (CBA), which promised compensation for death caused by an occupational injury or disease. The CBA granted US $30,000.00 in additional death benefits, plus US $8,000.00 to each child under 18, up to a maximum of US $24,000.00.
  
  
• POEA: Ruled in favor of Aniban's heirs, considering myocardial infarction as an occupational disease due to the pressure and strain faced by a radio operator on board. 
• NLRC: Denied the claim, arguing that the Employees Compensation Commission (ECC) had jurisdiction over the case. NLRC also deleted the award of Attorney's fees on the ground that there was no unlawful withholding of wages.

WoN the NLRC erred in deleting the award of Attorney's fees on the ground that there was no unlawful withholding of wages. YES

Art. 111 of the Labor Code does not limit the award of attorney's fees to cases of unlawful withholding of wages only. What it explicitly prohibits is the award of attorney's fees which exceed 10% of the amount of wages recovered. 

Thus, under the circumstances, attorney's fees are recoverable for the services rendered by petitioner's counsel to compel Aniban's employer to pay its monetary obligations under the CBA. However the amount of P50,000.00 claimed as attorneys' fees in this case is the reasonable compensation based on the records and not the maximum 10% of the total award as granted by POEA. The reduction of unreasonable attorney's fees is within our regulatory powers.

Note: The Supreme Court affirmed the POEA's jurisdiction, stating that the ECC's jurisdiction applies only when the State Insurance Fund's liability is in question. As for myocardial infarction, the court upheld the POEA's decision, considering the nature of the job and the emotional strain faced by seamen.