Labor Law: Title II Wages; Chapter IV Prohibition Regarding Wages; Arts. 112 - 119

  Title II

WAGES

Chapter IV

PROHIBITIONS REGARDING WAGES

Arts. 112 - 119

Q: What deductions can I make from my employees' wages? 

Q: May an employee be required to pay the cost of a company property that he damaged while working?

Art. 112. Non-interference in disposal of wages.
No employer shall limit or otherwise interfere

with the freedom of any employee to dispose of his wages.

He shall not in any manner

force, compel, or oblige his employees

to purchase merchandise, commodities or other property from any other person,

or otherwise make use of any store or services of such employer or any other person.

Notes:

• This provision does not allow an employer to control, directly or indirectly, the employee's use of his money. 
• He earned it by working and, having earned it, he has the freedom to spend it the way he wants, or not to spend it at all.

Implementing Rules of Labor Code Book III, Rule VIII.

SEC. 9. Noninterference in disposal of wages. — 

No employer shall limit or otherwise interfere with the freedom of any employee to dispose of his wages and no employer shall in any manner oblige any of his employees to patronize any store or avail of the services offered by any person.

Art. 113. Wage deduction. 

No employer, in his own behalf or in behalf of any person, 

shall make any deduction from the wages of his employees, except:

1. In cases where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;
2. For union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and
3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment.

Notes:

• Having worked for his wages, the employee should get them in full, every centavo of it. What the employee has worked for, the employer must pay. The employer cannot, by any unauthorized deduction, diminish the employee's earnings.
• There are allowable deductions:
1. Premium on insurance
2. Union dues
3. Authorized by law or regulations
• The following deductions are authorized by existing laws:
1. In cases where the employee is indebted to the employer, where such indebtedness has become due and demandable (Civil Code, Art. 1706);
• Art. 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
2. In court awards, wages may be subject of execution or attachment, but only for debts incurred for food, shelter, clothing, and medical attendance. (Civil Code, Art. 1703)
1. Art. 1703. No contract which practically amounts to involuntary servitude, under any guise whatsoever, shall be valid.
3. Withholding tax (Tax Code);
4. Salary deductions of a member of a legally established cooperative (R.A. No. 9520, Art. 58);
5. Deductions for payment to third persons, upon written authorization of the employee (Implementing Rules of Labor Code Book III, Rule VIII, Sec. 13);
6. Union dues (Arts. 250 and 292);
7. Agency fee (Art. 259[e]);
8. Deductions for value of meal and other facilities (Implementing Rules of Labor Code Book III, Rule VII-A, Sec. 7);
9. Deductions for loss or damage under Art. 114;
10. SSS, PhilHealth, Pag-IBIG premiums
• Under the rules implementing the Code, an employee's payment of obligation to a third person (including a spouse) is deductible from the employee's wages only if the deduction is authorized in writing by the employee. 
• The employer may agree to make the deduction but is not obliged to do so.
• He must not receive any pecuniary benefit, directly or indirectly, from the transaction.

Implementing Rules of Labor Code Book III, Rule VIII.

SEC. 13. Wage deduction. – 

Deductions from the wages of the employees may be made by the employer in any of the following cases:

1. When the deductions are authorized by law, including deductions for the insurance premiums advanced by the employer in behalf of the employee as well as union dues where the right to check-off has been recognized by the employer or authorized in writing by the individual employee himself;
2. When the deductions are with the written authorization of the employees for payment to a third person and the employer agrees to do so. provided that the latter does not receive any pecuniary benefit, directly or indirectly from the transaction

Art. 114. Deposits for loss or damage. 

No employer shall require his worker 

to make deposits from which deductions shall be made 

for the reimbursement of loss of or damage 

to tools, materials, or equipment supplied by the employer, 

except when the employer is engaged 

in such trades, occupations or business 

where the practice of making deductions or requiring deposits is a recognized one, 

or is necessary or desirable as determined 

by the Secretary of Labor and Employment in appropriate rules and regulations.

Art. 115. Limitations. 

No deduction from the deposits of an employee 

for the actual amount of the loss or damage 

shall be made unless the employee has been heard thereon, 

and his responsibility has been clearly shown.

Notes:

Damage to Company Property

• Under the Implementing Rules (Book Ill, Rule VIII) payments or for lost or damaged equipment is deductible from employee's salary if four conditions are met, namely:
1. That the employee concerned is clearly shown to be responsible for the loss of damage;
2. That the employee is given reasonable opportunity to show cause why deduction should not be made;
3. That the amount of such deductions is fair and reasonable and shall not exceed the actual loss or damage; and
4. That the deduction from the wages of the employee does not exceed 20% of the employee’s wages in a week.
• As provision for such potential liability, the employer may require an employee to post a bond or deposit. 
1. But the employer should fist establish that the posting of deposit and making deductions therefrom are authorized by law or regulations issued by DOLE.
2. Moreover, it should be proven that the posting of bond or deposit is a recognized practice in the industry. 
3. In any event, it should be proved that the policy is necessary or desirable in the conduct of the business.

Art. 116. Withholding of wages and kickbacks prohibited. 

It shall be unlawful for any person, 

directly or indirectly, 

to withhold any amount from the wages of a worker

or induce him to give up any part of his wages 

by force, stealth, intimidation, threat 

or by any other means whatsoever without the worker’s consent.

Notes:

• The earned wages must be paid on time and in full. The employer cannot refuse to pay the wages because the employee has not yet submitted a required report or has violated certain company rules. 
• The inefficiency or the violation can be acted upon in some lawful way but not by withholding the wages.

Q: If an employee continues to fail to submit some employment requirements (e.g., health certificate, police/NBI/Barangay clearance), may the employer withhold his pay till he complies? 

This is an example of management details that are not squarely answered by law or government regulations. The gap may be supplied through company rules and regulations duly formulated and communicated for their guidance and compliance.

Art. 117. Deduction to ensure employment. 

It shall be unlawful to make any deduction from the wages of any employee 

for the benefit of the employer or his representative or intermediary 

as consideration of a promise of employment or retention in employment.

Art. 118. Retaliatory measures. 

It shall be unlawful for an employer

to refuse to pay or reduce the wages and benefits, 

discharge or in any manner discriminate against any employee 

who has filed any complaint or instituted any proceeding 

under this Title or has testified or is about to testify in such proceedings.

Art. 119. False reporting.

It shall be unlawful for any person 

to make any statement, report, or record filed or kept 

pursuant to the provisions of this Code 

knowing such statement, report or record to be false in any material respect.