1. THE APPLICABLE LAWS 2. BASIC PRINCIPLES
1. Tesoro et al., vs. Metro Manila Retreaders Inc., et al., GR No. 171482, March 12, 2014
FACTS:
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio Sharp used to work as salesmen for respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire and Rubber Corporation. These are sister companies collectively called “Bandag”. Bandag offered repair and retread services for used tires. In 1998, however, Bandag developed a franchising scheme that would enable others to operate tire and retreading businesses using its trade name and service system. Petitioners quit their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with Bandag for the operation of their respective franchises. Under this SFA, Bandag would provide funding with the petitioners subject to regular liquidation of revolving funds. The expenses of these funds will be deducted from their sale in order to determine their income. After some time, petitioners began to default on their obligations to submit periodic liquidations of their operational expenses in relation to the revolving funds Bandag provided them. Bandag terminated their SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal, non–payment of wages, incentive pay, 13th month pay and damages against Bandag with the National Labor Relations Commission (NLRC). Petitioners contend that despite the SFA, they remained employees of Bandag. For its part, Bandag pointed out that petitioners freely resigned from their employment and decided to avail themselves of the opportunity to be independent entrepreneurs under the franchise scheme that Bandag had. Thus, no employer–employee relationship existed between petitioners and Bandag.
ISSUE:
WON petitioners remained to be Bandag’s salesmen under the franchise scheme it entered into with them.
RULING:
No, petitioners were no longer employees of Bandag the moment they entered into the SFA. Franchising is a business method of expansion that allows an individual or group of individuals to market a product or a service and to use of the patent, trademark, trade name and the systems prescribed by the owner. The tests for determining employer–employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished. The last is called the “control test,” the most important element.
When petitioners agreed to operate Bandag’s franchise branches in different parts of the country, they knew that this substantially changed their former relationships. They were to cease working as Bandag’s salesmen, the positions they occupied before they ventured into running separate Bandag branches. They were to cease receiving salaries or commissions. Their incomes were to depend on the profits they made. Yet, petitioners did not then complain of constructive dismissal. They took their chances, ran their branches, Gregorio Sharp in La Union for several months and Ashmor Tesoro in Baguio and Pedro Ang in Pangasinan for over a year. Clearly, their belated claim of constructive dismissal is quite hollow.
It is pointed out that Bandag continued, like an employer, to exercise control over petitioners’ work. It points out that Bandag: (a) retained the right to adjust the price rates of products and services; (b) imposed minimum processed tire requirement (MPR); (c) reviewed and regulated credit applications; and (d) retained the power to suspend petitioners’ services for failure to meet service standards. But uniformity in prices, quality of services, and good business practices are the essence of all franchises. A franchisee will damage the franchisor’s business if he sells at different prices, renders different or inferior services, or engages in bad business practices. These business constraints are needed to maintain collective responsibility for faultless and reliable service to the same class of customers for the same prices.
This is not the “control” contemplated in employer–employee relationships. Control in such relationships addresses the details of day to day work like assigning the particular task that has to be done, monitoring the way tasks are done and their results, and determining the time during which the employee must report for work or accomplish his assigned task.
Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer–employee relationship with Bandag. These funds do not represent wages. They are more in the nature of capital advances for operations that Bandag conceptualized to attract prospective franchisees. Petitioners’
incomes depended on the profits they make, controlled by their individual abilities to increase sales and reduce operating costs.
2. Royale Homes Marketing Corp., vs. Alcantara, GR No. 195190, July 28, 2014
FACTS:
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara as its Marketing Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes’ real estate inventories on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of which covered the period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-Sales.
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal against Royale Homes and its corporate officers. He alleged that he is a regular employee of Royale Homes since he is performing tasks that are necessary and desirable to its business; that in 2003 the company gave him P1.2 million for the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale Homes told him that they were wondering why he still had the gall to come to office and sit at his table;10and that the acts of the executive officers of Royale Homes amounted to his dismissal from work
without any valid or just cause and in gross disregard of the proper procedure for dismissing employees. Thus, he also impleaded the corporate officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.
Alcantara prayed to be reinstated to his former position without loss of seniority rights and other privileges, as well as to be paid backwages, moral and exemplary damages, and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment paper of Alcantara is clear that it engaged his services as an independent sales contractor for a fixed term of one year only. He never received any other benefits from as he was paid purely on commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his tasks and responsibilities as he was free to solicit sales at any time and by any manner which he may deem appropriate and necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his wife had formed a brokerage company that directly competed with its business, and even recruited some of its sales agents. In a special management committee meeting on October 8,2003, however, Alcantara announced publicly and openly that he would leave the company by the end of October 2003 and that he would no longer finish the unexpired term of his contract. He has decided to join his wife and pursue their own brokerage business. Royale Homes accepted Alcantara’s decision. It then threw a despedida party in his honor and, subsequently, appointed a new independent contractor. Two months after he relinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter claiming that he was illegally dismissed.
On September 7, 2005,the Labor Arbiter rendered a Decision holding that Alcantara is an employee of Royale Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of his contract was against the law.
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter grievously erred in ruling that there exists an employer-employee relationship between the parties. It insisted that the contract between them expressly statesthat Alcantara is an independent contractor and not an ordinary employee. It had no control over the means and methods by which he performed his work. Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that he is not entitled to backwages, reinstatement, unpaid commissions, and damages.
On February 23, 2009, the NLRC rendered its Decision ruling that Alcantara is not an employee but a mere independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara to observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in the contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint is cognizable by the regular courts.
Alcantara moved for reconsideration. In a Resolution dated May 29, 2009, however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari with the CA imputing grave abuse of discretion on the part of the NLRC in ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the issue of whether the pre-termination of the contract is valid.
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition and reversing the
NLRC’s Decision. Applying the four-fold and economic reality tests, it held that Alcantara is an employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since his job, is subject to company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover, the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the theory that he is an employee of said company.Considering, however, that the CA was not satisfied with the proof adduced to establish the amount of Alcantara’s annual salary, it remanded the case to the Labor Arbiter to determine the same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith or gross negligence. Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a
Resolution22 dated January 18, 2011, however, the CA denied said motions.
ISSUE:
WON Alcantara was an independent contractor or an employee of Royale Homes
RULING:
Alcantara is an independent contractor.
While the existence of employer-employee relationship is a matter of law, the characterization made by the parties in their contract as to the nature of their juridical relationship cannot be simply ignored, particularly in this case where the parties’ written contract unequivocally states their intention at the time they entered into it. In this case, the contract,27 duly signed and not disputed by the parties, conspicuously
provides that "no employer-employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not want to be bound by employer-employee relationship at the time of the signing of the contract.
In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold test. Among the four, the most determinative factor in ascertaining the existence of employer-employee relationship is the "right of control test. It is deemed to be such an important factor that the other requisites may even be disregarded. However, not every form of control is indicative of employer-employee relationship. A person who performs work for another and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee as long as the level of control does not interfere with the means and methods of accomplishing the assigned tasks.
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship. The continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights his satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of contract establish the existence of the labor law concept of control. Alcantara was not prohibited from engaging in any other business as long as he does not sell projects of Royale Homes’ competitors. He can engage in selling various other products or engage in unrelated businesses.
The element of payment of wages is also absent in this case. As provided in the contract, Alcantara’s remunerations consist only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support. There is no proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed salary withholding tax or that it registered him with the Social Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund.
This Court is, therefore, convinced that Alcantara is not an employee of Royale Homes, but a mere independent contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and that the same is cognizable by the regular courts.
3. Sameer Overseas Placement Agency vs. Cabiles, GR No. 170139, August 3, 2014, En Banc
FACTS:
Petitioner is a recruitment and placement agency. It accepted the respondent’s application for a quality control job in Taiwan and later asked respondent to sign a one-year employment contract as well as required payment of a placement fee amounting to Php 70,000.00.
Respondent was deployed to work for Taiwan Wacoal, Co. Ltd. (Wacoal) on June 26, 1997; however, in Taiwan, she was asked to work as a cutter.
Petitioner claims that on July 14, 1997, a certain Mr. Huwang from Wacoal informed respondent, without prior notice, that she was terminated. Respondent claims that she was told that she only earned a total of NT$9,000 and that Wacoal deducted NT$3,000 to cover her plane ticket to Manila.
On October 15, 1997, respondent filed a complaint with the National Labor Relations Commission (NLRC) against petitioner and Wacoal for illegal dismissal. In response to the complaint, petitioner alleged that the respondent’s termination was due to her inefficiency, negligence in her duties and her failure to comply with the work requirements of her foreign employer. Petitioner also denied the payment of placement fee. It further alleged that it was already substituted by Pacific Manpower & Management Services, Inc. (Pacific Manpower) since Wacoal’s accreditation with petitioner had already been transferred to Pacific Manpower on August 6, 1997 or before the filing of the complaint by respondent. Pacific Manpower, on the other hand, moved for the dismissal of the complaint since there was no employer-employee relationship between them.
On July 29, 1998, the Labor Arbiter ruled that the respondent’s complaint was based on mere allegations and dismissed the complaint. In a resolution dated March 31, 2004, the NLRC declared respondent to have been illegally dismissed since petitioner failed to prove that there were just causes for termination and procedural due process was not observed in terminating the respondent. It awarded respondent only three months’ worth of salary, the reimbursement of the amount withheld and attorney’s fees. However, the NLRC did not rule on the issue of the alleged transfer of obligations to Pacific Manpower.
The Commission subsequently denied petitioner’s motion for reconsideration.
The Court of Appeals (CA) affirmed the decision of the NLRC with respect to the finding of illegal dismissal but remanded the case to the NLRC to address the validity of petitioner’s allegations against Pacific Manpower.
ISSUES:
1. WON the CA erred in affirming the ruling of the NLRC in finding the respondent illegally dismissed.
2. WON petitioner is substituted by Pacific Manpower due to the transfer of Wacoal’s accreditation. RULING:
1. No, the CA did not err in affirming the NLRC ruling. Petitioner failed to show that there was cause for respondent’s dismissal. The employer, Wacoal, also failed to accord her due process of law. Petitioner’s allegation that respondent was inefficient in her work and negligent in her duties may constitute a just cause for termination under Article 282(b) of the Labor Code of the Philippines. The burden of proving that there is just cause for termination is on the employer. It must be affirmatively shown that: 1) the employer has set standards of conduct and workmanship against which the employee will be judged; 2) such standards have been communicated to the employee; and 3) the communication was made at a reasonable time prior to the employee's performance assessment.
In this case, there was no evidence to support petitioner’s allegations that respondent failed to comply with her foreign employer's work requirements. Petitioner did not even specify what requirements were not met, what efficiency standards were violated, or what particular acts of respondent constituted inefficiency.
There was also no showing that respondent was sufficiently informed of the standards against which her work efficiency and performance were judged. The parties' conflict as to the position held by respondent showed that even the matter as basic as the job title was not clear.
Further, respondent's dismissal less than one year from hiring and her repatriation on the same day show that the employers did not comply with the due process requirement. Petitioner failed to comply with the twin notice and hearing requirements. The abruptness of the termination negated any finding that she was properly notified and given the opportunity to be heard. Her constitutional right to due process of law was violated.
2. No. Under Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, the foreign employer and the local employment agency are jointly and severally liable for money claims including claims arising out of an employer-employee relationship and/or damages.
The fundamental effect of joint and several liability is that each of the debtors is liable for the entire obligation. A final determination may, therefore, be achieved even if only one of the joint and several debtors are impleaded in an action. Hence, in the case of overseas employment, either the local agency or the foreign employer may be sued for all claims arising from the foreign employer's labor law violations. However, it must be emphasized that the local agency that is held to answer for the overseas worker's money claims is not left without remedy. The law does not preclude it from going after the foreign employer for reimbursement of whatever payment it has made to the employee to answer for the money claims against the foreign employer.
The Court held that with the present state of the pleadings, it is not possible to determine whether there was indeed a transfer of obligations from petitioner to Pacific. This should not be an obstacle for the respondent overseas worker to proceed with the enforcement of this judgment. Petitioner is possessed with the
resources to determine the proper legal remedies to enforce its rights against Pacific, if any.
3. Fuji Television Network vs. Espiritu, GR No. 204944-45, Dec. 3, 2014
FACTS:
Arlene S. Espiritu (Arlene) was engaged by Fuji Television Network, Inc. (Fuji) as a news correspondent/producer tasked to report Philippine news to Fuji through its Manila Bureau field office. The employment contract was initially for one year, but was successively renewed on a yearly basis with salary adjustments upon every renewal. In January 2009, Arlene was diagnosed with lung cancer. She informed Fuji about her condition, and the Chief of News Agency of Fuji, Yoshiki Aoki, informed the former that the company had a problem with renewing her contract considering her condition. Arlene insisted she was still fit to work as certified by her attending physician.
After a series of verbal and written communications, Arlene and Fuji signed a non-renewal contract. In consideration thereof, Arlene acknowledged the receipt of the total amount of her salary from March-May 2009, year-end bonus, mid-year bonus and separation pay. However, Arlene executed the non-renewal contract under protest. Arlene filed a complaint for illegal dismissal with the NCR Arbitration Branch of the NLRC, alleging that she was forced to sign the non-renewal contract after Fuji came to know of her illness. She also alleged that Fuji withheld her salaries and other benefits when she refused to sign, and that she was left with no other recourse but to sign the non-renewal contract to get her salaries.
Labor Arbiter dismissed the complaint and held that Arlene was not a regular employee but an independent contractor.
The NLRC reversed the Labor Arbiter’s decision and ruled that Arlene was a regular employee since she continuously rendered services that were necessary and desirable to Fuji’s business.
The Court of Appeals affirmed that NLRC ruling with modification that Fuji immediately reinstate Arlene to her position without loss of seniority rights and that she be paid her backwages and other emoluments withheld from her. The Court of Appeals agreed with the NLRC that Arlene was a regular employee, engaged to perform work that was necessary or desirable in the business of Fuji, and the successive renewals of her fixed-term contract resulted in regular employment. The case of Sonza does not apply in the case because Arlene was not contracted on account of a special talent or skill. Arlene was illegally dismissed because Fuji failed to comply with the requirements of substantive and procedural due process. Arlene, in fact, signed the non-renewal contract under protest as she was left without a choice.
Fuji filed a petition for review on certiorari under Rule 45 before the Supreme Court, alleging that Arlene was hired as an independent contractor; that Fuji had no control over her work; that the employment contracts were renewed upon Arlene’s insistence; that there was no illegal dismissal because she freely agreed not to renew her fixed-term contract as evidenced by her email correspondences.
Arlene filed a manifestation stating that the SC could not take jurisdiction over the case since Fuji failed to authorize Corazon Acerden, the assigned attorney-in-fact for Fuji, to sign the verification.
1. WON Arlene was an independent contractor 2. WON Arlene was a regular employee
3. Whether or not Arlene was illegally dismissed RULING:
Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exist.
Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause of when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just or authorized causes and only after compliance with procedural and substantive due process is conducted.
Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code.
Disease as a ground for dismissal. – Where the employee suffers from a disease and
his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health.
1. Arlene was not an independent contractor.
Fuji alleged that Arlene was an independent contractor citing the Sonzacase. She was hired because of her skills. Her salary was higher than the normal rate. She had the power to bargain with her employer. Her contract was for a fixed term. It also stated that
Arlene was not forced to sign the non-renewal agreement, considering that she sent an email with another version of her non-renewal agreement.
Arlene argued (1) that she was a regular employee because Fuji had control and supervision over her work; (2) that she based her work on instructions from Fuji; (3) that the successive renewal of her contracts for four years indicated that her work was necessary and desirable; (4) that the payment of separation pay indicated that she was a regular employee; (5) that the Sonzacase is not applicable because she was a plain reporter for Fuji; (6) that her illness was not a ground for her dismissal; (7) that she signed the non-renewal agreement because she was not in a position to reject the same.
Distinctions among fixed-term employees, independent contractors, and regular employees
Fixed Term Employment
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or 2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter. These indications, which must be read together, make the Brent doctrine applicable only in a few special cases wherein the employer and employee are on more or less in equal footing in entering into the contract. The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a position to make demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required for the protection of the employee.155 (Citations omitted)
For as long as the guidelines laid down in Brent are satisfied, this court will recognize the validity of the fixed-term contract. (GMA Network, Inc. vs. Pabriga)
Independent Contractor
One who carries on a distinct and independent business and undertakes to perform the job, work, or service on its own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof. No employer-employee relationship exists between the independent contractors and their principals.
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the
provisions of this Code.
XXX
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any
There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
Department Order No. 18-A, Series of 2011, Section 3
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting arrangements among the principal, contractor, and employees of the contractor. There is no employer-employee relationship between the contractor and principal who engages the contractor’s services, but there is an employer-employee relationship between the contractor and workers hired to
accomplish the work for the principal.
Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that set them apart from ordinary employees. There is no trilateral relationship in this case because the independent contractor himself or herself performs the work for the principal. In other words, the relationship is bilateral.
XXX
There are different kinds of independent contractors: those engaged in legitimate job contracting and those who have unique skills and talents that set them apart from
ordinary employees.
Since no employer-employee relationship exists between independent contractors and their principals, their contracts are governed by the Civil Code provisions on contracts and other applicable laws.
Regular Employees
Contracts of employment are different and have a higher level of regulation because they are impressed with public interest. Article 13, Section 3 of the 1987 Constitution provides full protection to labor.
Apart from the Constitutional guarantee, Article 1700 of the Civil Code states that :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.
In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory review by the labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special class that is constitutionally protected because of the inequality between capital and labor.176 This presupposes that
The level of protection to labor should vary from case to caese. When a prospective employee, on account of special skills or market forces, is in a position to make demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker.
The level of protection to labor must be determined on the basis of the nature of the work, qualifications of the employee, and other relevant circumstances such as but not limited to educational attainment and other special qualifications.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees under fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee relationship exists. The test in this kind of contract is not the necessity and desirability of the employee’s activities, “but the day certain agreed upon by the parties for the commencement and termination of the employment relationship.” For regular employees, the necessity and desirability of their work in the usual course of the employer’s business are the determining factors. On the other hand, independent contractors do not have employer-employee relationships with their principals.
To determine the status of employment, the existence of employer-employee relationship must first be settled with the use of the four-fold test, especially the qualifications for the power to control.
The distinction is in this guise:
Rules that merely serve as guidelines towards the achievement of a mutually desired result without dictating the means or methods to be employed creates no employer-employee relationship; whereas those that control or fix the methodology and bind or restrict the party hired to the use of such means creates the relationship.
In appliacation, Arlene was hired by Fuji as a news producer, but there was no evidence that she was hired for her unique skills that would distinguish her from ordinary employees. Her monthly salary appeared to be a substantial sum. Fuji had the power to dismiss Arlene, as provided for in her employment contract. The contract also indicated that Fuji had control over her work as she was rquired to report for 8 hours from Monday to Friday. Fuji gave her instructions on what to report and even her mode of transportation in carrying out her functions was controlled.
Therefore, Arlene could not be an independent contractor. 2. Arlene was a regular employee with a fixed-term contract.
In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade.
However, there may be a situation where an employee’s work is necessary but is not always desirable in the usual course of business of the employer. In this situation, there is no regular employment.
activities related to news gathering.
A news producer “plans and supervises newscast [and] works with reporters in the field planning and gathering information, including monitoring and getting news stories, rporting interviewing subjects in front of a video camera, submission of news and current events reports pertaining to the Philippines, and traveling to the regional office in Thailand.” She also had to report for work in Fuji’s office in Manila from Mondays to Fridays, eight per day. She had no equipment and had to use the facilities of Fuji to accomplish her tasks.
The successive renewals of her contract indicated the necessity and desirability of her work in the usual course of Fuji’s business. Because of this, Arlene had become a regular employee with the right to security of tenure.
Arlene’s contract indicating a fixed term did not automatically mean that she could never be a regular employee. For as long as it was the employee who requested, or bargained, that the contract have a “definite date of termination,” or that the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-term contract will be upheld.
3. Arlene was illegally dismissed.
As a regular employee, Arlene was entitled to security of tenure under Article 279 of the Labor Code and could be dismissed only for just or authorized causaes and after observance of due process.
The expiration of the contract does not negate the finding of illegal dismissal. The manner by which Fuji informed Arlene of non-renewal through email a month after she informed Fuji of her illness is tantamount to constructive dismissal. Further, Arlene was asked to sign a letter of resignation prepared by Fuji. The existence of a fixed-term contract should not mean that there can be no illegal dismissal. Due process must still be observed.
Moreoever, disease as a ground for termination under Article 284 of the Labor Code and Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code require two requirements to be complied with: (1) the employee’s disease cannot be cured within six months and his continued employment is prohibited by law or prejudicial to his health as well as to the health of his co-employees; and (2) certification issued by a competent public health authority that even with proper medical treatment, the disease cannot be cured within six months. The burden of proving compliance with these requisites is on the employer. Non-compliance leads to illegal dismissal.
Arlene was not accorded due process. After informing her employer of her lung cancer, she was not given the chance to present medical certificates. Fuji immediately concluded that Arlene could no longer perform her duties because of chemotherapy. Neither did it suggest for her to take a leave. It did not present any certificate from a competent public health authority.
Therefore, Arlene was illegally dismissed.
4. Cabaobas vs. Pepsicola GR No. 176908, March 25, 2015
FACTS:
Respondent Pepsi-Cola Products Philippines, Inc. (PCPPI) is a domestic corporation engaged in the manufacturing, bottling and distribution of soft drink products, which operates plants all over the country, one of which is the Tanauan Plant in Tanauan,
Leyte. PCPPI’s Tanauan Plant allegedly incurred business losses in the total amount of Twenty-Nine Million One Hundred Sixty-Seven Thousand and Three Hundred Ninety (P29,167,390.00) Pesos. To avert further losses, PCPPI implemented a company-wide retrenchment program denominated as Corporate-wide Rightsizing Program (CRP) from 1999 to 2000, and retrenched forty-seven (47) employees of its Tanauan Plant. Twenty-seven (27) of said employees, led by Anecito Molon, filed complaints for illegal dismissal before the NLRC Regional Arbitration Branch (LA). Other employees in Tanauan plant, who are permanent and regular employees of the Tanauan Plant, received their respective letters, informing them of the cessation of their employment pursuant to PCPPI's CRP. They then filed their respective complaints for illegal dismissal before the National Labor Relations Commission Regional Arbitration Branch. Petitioners alleged that PCPPI was not facing serious financial losses because after their termination, it regularized four (4) employees and hired replacements for the forty-seven (47) previously dismissed employees. They also alleged that PCPPI's CRP was just designed to prevent their union, Leyte Pepsi-Cola Employees Union-Associated Labor Union (LEPCEU-ALU), from becoming the certified bargaining agent of PCPPI's rank-and-file employees.
PCPPI countered that petitioners were dismissed pursuant to its CRP to save the company from total bankruptcy and collapse; thus, it sent notices of termination to them and to the Department of Labor and Employment. In support of its argument that its CRP is a valid exercise of management prerogative, PCPPI submitted audited financial statements showing that it suffered financial reverses in 1998 in the total amount of SEVEN HUNDRED MILLION (P700,000,000.00) PESOS, TWENTYSEVEN MILLION (P27,000,000.00) PESOS of which was allegedly incurred in the Tanauan Plant in 1999. ISSUE:
WON the dismissal of the employees was valid pursuant to a retrenchment program adopted by the employer
RULING:
The Court sustains PCPPI.
Essentially, the prerogative of an employer to retrench its employees must be exercised only as a last resort, considering that it will lead to the loss of the employees' livelihood. It is justified only when all other less drastic means have been tried and found insufficient or inadequate. Corollary thereto, the employer must prove the requirements for a valid retrenchment by clear and convincing evidence; otherwise, said ground for termination would be susceptible to abuse by scheming employers who might be merely feigning losses or reverses in their business ventures in order to ease out employees. These requirements are:
1. That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;
2. That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;
3. That the employer pays the retrenched employees separation pay equivalent to one 1 month pay or at least one-half (½) month pay for every year of service, whichever is higher;
4. That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and
5. That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. In due regard of these requisites, the Court observes that Pepsi had validly implemented its retrenchment program.
In due regard of these requisites, the Court observes that Pepsi had validly implemented its retrenchment program. Records disclose that both the CA and the NLRC had already determined that Pepsi complied with the requirements of substantial loss and due notice to both the DOLE and the workers to be retrenched. PEPSICOLA’s financial statements are substantial evidence which carry great credibility and reliability viewed in light of the financial crisis that hit the country which saw multinational corporations closing shops and walking away, or adapting their own corporate rightsizing program.
The notice requirement was also complied with by PEPSI-COLA when it served notice of the corporate rightsizing program to the DOLE and to the fourteen (14) employees who will be affected thereby at least one (1) month prior to the date of retrenchment. Pepsi’s Corporate Rightsizing Program was a company-wide program which had already been implemented in its other plants in Bacolod, Iloilo, Davao, General Santos and Zamboanga. Consequently, given the GENERAL APPLICABILITY of its retrenchment program, Pepsi could not have intended to decimate LEPCEU-ALU’s membership, much less impinge upon its right to selforganization, when it employed the same.
On the issue of the alleged replacement of the affected workers
The idea of rightsizing is to reduce the number of workers and related functions and trim down, streamline, or simplify the structure of the organization to the level of utmost efficiency and productivity in order to realize profit and survive. After the CRP shall have been implemented, the desired size of the corporation is attained. Engaging the services of service contractors does not expand the size of the corporate structure. In this sense, the retrenched workers were not replaced.
3. RIGHT TO HIRE
4. WAGES & WAGE RATIONALIZATION ACT
1. Vergara, Jr. vs. Coca-Cola Bottlers Phils Inc. G.R. No. 176985, April 1, 2013
FACTS:
Petitioner Ricardo E. Vergara, Jr. was an employee of respondent Coca-Cola Bottlers Philippines, Inc. from May 1968 until he retired on January 31, 2002 as a District Sales Supervisor (DSS) for Las Piñas City, Metro Manila.
As stipulated in respondent's existing Retirement Plan Rules and Regulations at the time, the Annual Performance Incentive Pay of RSMs, DSSs, and SSSs shall be considered in the computation of retirement benefits, as follows: Basic Monthly Salary + Monthly Average Performance Incentive (which is the total performance incentive earned during the year immediately preceding 12 months) No. of Years in Service.
Claiming his entitlement to an additional PhP474,600.00 as Sales Management Incentives (SMI) and to the amount of PhP496,016.67 which respondent allegedly deducted illegally, representing the unpaid accounts of two dealers within his jurisdiction, petitioner filed a complaint before the NLRC on June 11, 2002 for the payment of his "Full Retirement Benefits, Merit Increase, Commission/Incentives, Length of Service, Actual, Moral and Exemplary Damages, and Attorney's Fees."
(Apparently, Petitioner argued that the granting of SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened into company practice. The only two pieces of evidence that he stubbornly presented throughout the entirety of this case are the sworn statements of Renato C. Hidalgo (Hidalgo) and Ramon V. Velazquez (Velasquez), former DSSs of respondent who retired in 2000 and 1998, respectively. They claimed that the SMI was included in their retirement package even if they did not meet the sales and collection qualifiers. Therefore, the failure of employer to grant him his SMI is a violation on the principle of non-diminution of benefits.)
ISSUE:
WON the granting of SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened into company practice
RULING:
Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is actually founded on the Constitutional mandate to protect the rights of workers, to promote their welfare, and to afford them full protection. In turn, said mandate is the basis of Article 4 of the Labor Code which states that "all doubts in the implementation and interpretation of this Code, including its implementing rules and regulations, shall be rendered in favor of labor."
There is diminution of benefits when the following requisites are present:
1. the grant or benefit is founded on a policy or has ripened into a practice over a long period of time; 2. the practice is consistent and deliberate;
3. the practice is not due to error in the construction or application of a doubtful or difficult question of law; and
4. The diminution or discontinuance is done unilaterally by the employer.
To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time.
Upon review of the entire case records, We find no substantial evidence to prove that the grant of SMI to all retired DSSs regardless of whether or not they qualify to the same had ripened into company practice.
The granting of the SMI in the retirement package of Velazquez was an isolated incident and could hardly be classified as a company practice that may be considered an enforceable obligation. To repeat, the principle against diminution of benefits is applicable only if the grant or benefit is founded on an express policy or has ripened into a practice over a long period of time which is consistent and deliberate; it presupposes that a company practice, policy and tradition favorable to the employees has been clearly established; and that the payments made by the company pursuant to it have ripened into benefits enjoyed by them. Certainly, a practice or custom is, as a general rule, not a source of a legally demandable or enforceable right. Company practice, just like any other fact, habits, customs, usage or patterns of conduct, must be proven by the offering party who must allege and establish specific, repetitive conduct that might constitute evidence of habit or company practice.
2. Royal Plant Workers Union vs. Coca-Cola Bottlers Phils Inc. -Cebu Plant, G.R. No. 198783, April 15, 2013
FACTS:
Under the employ of each bottling plant of Coca-Cola are bottling operators. In the case of the plant in Cebu City, there are 20 bottling operators who work for its Bottling Line 1 while there are 12-14 bottling operators who man its Bottling Line 2. All of them are male and they are members of herein respondent Royal Plant Workers Union (ROPWU).
In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request was likewise granted. Sometime in September 2008, the chairs provided for the operators were removed pursuant to a national directive of petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of petitioner for bottling operators, wherein every bottling operator is given the responsibility to keep the machinery and equipment assigned to him clean and safe. The program reinforces the task of bottling operators to constantly move about in the performance of their duties and responsibilities.
With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling operator does not need a chair anymore, hence, petitioner’s directive to remove them. Furthermore, CCBPI rationalized that the removal of the chairs is implemented so that the bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling operators are working with machines which consist of moving parts, it is imperative that they should not fall asleep as to do so would expose them to hazards and injuries. In addition, sleeping will hamper the efficient flow of operations as the bottling operators would be unable to perform their duties competently.
ISSUE:
WON the removal of the bottling operators’ chairs was a valid exercise of management prerogative.
RULING:
Yes. According to the Union, such removal constitutes a violation of the 1) Occupational Health and Safety Standards which provide that every worker is entitled to be provided by the employer with
appropriate seats, among others; 2) policy of the State to assure the right of workers to a just and humane condition of work as provided for in Article 3 of the Labor Code;8 3) Global Workplace Rights Policy of CCBPI which provides for a safe and healthy workplace by maintaining a productive workplace and by minimizing the risk of accident, injury and exposure to health risks; and 4) diminution of benefits provided in Article 100 of the Labor Code.
The Court has held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place, and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor.10
In the present controversy, it cannot be denied that CCBPI removed the operators’ chairs pursuant to a national directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to perform their duties and responsibilities more efficiently. The chairs were not removed indiscriminately. They were carefully studied with due regard to the welfare of the members of the Union. The removal of the chairs was compensated by: a) a reduction of the operating hours of the bottling operators from a two-and-one-half (2 ½)-hour rotation period to a one-and-a-half (1 ½) hour rotation period; and b) an increase of the break period from 15 to 30 minutes between rotations.
Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid instances of operators sleeping on the job while in the performance of their duties and responsibilities and because of the fact that the chairs were not necessary considering that the operators constantly move about while working. In short, the removal of the chairs was designed to increase work efficiency. Hence, CCBPI’s exercise of its management prerogative was made in good faith without doing any harm to the workers’ rights.
The rights of the Union under any labor law were not violated. There is no law that requires employers to provide chairs for bottling operators. There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV of the Labor Code of the Philippines. As shown in the foregoing, the removal of the chairs was compensated by the reduction of the working hours and increase in the rest period. The directive did not expose the bottling operators to safety and health hazards.
The Union should not complain too much about standing and moving about for one and one-half (1 ½) hours because studies show that sitting in workplaces for a long time is hazardous to one’s health. The CBA between the Union and CCBPI contains no provision whatsoever requiring the management to provide chairs for the operators in the production/manufacturing line while performing their duties and responsibilities.
The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general principles of justice and fair play because the bottling operators’ working time was considerably reduced from two and a half (2 ½) hours to just one and a half (1 ½) hours and the break period, when they could sit down, was increased to 30 minutes between rotations. The bottling operators’ new work schedule is certainly advantageous to them because it greatly increases their rest period and significantly decreases their working time. A break time of thirty (30) minutes after working for only one and a half (1 ½) hours is a just and fair work schedule.
The operators’ chairs cannot be considered as one of the employee benefits covered in Article 10016 of the Labor Code. In the Court’s view, the term "benefits" mentioned in the non-diminution rule refers to monetary benefits or privileges given to the employee with monetary equivalents.
enforceable obligations.
This Court has already decided several cases regarding the non-diminution rule where the benefits or privileges involved in those cases mainly concern monetary considerations or privileges with monetary equivalents. Without a doubt, equating the provision of chairs to the bottling operators is something within the ambit of "benefits'' in the context of Article 100 of the Labor Code is unduly stretching the coverage of the law. The interpretations of Article 100 of the Labor Code do not show even with the slightest hint that such provision of chairs for the bottling operators may be sheltered under its mantle.
3. Maynilad Water Supervisors Asso. Vs. Maynilad Water Services, GR No.198935, Nov. 27, 2013
FACTS:
Maynilad Water Supervisors Association (MWSA) is an association composed of former supervisory employees of Metropolitan Waterworks and Sewerage System (MWSS). These employees claim that during their employment with MWSS, they were receiving a monthly cost of living allowance (COLA) equivalent to 40% of their basic pay. The payment of these allowances and other additional compensation, including the COLA were, however, discontinued without qualification effective when the Department of Budget and Management (DBM) issued Corporate Compensation Circular No. 10 (CCC No. 10). In 1997, MWSS was privatized and part of it, MWSS West, was acquired by Maynilad Water Services, Inc. (Maynilad). Some of the employees of MWSS, which included members of MWSA, were absorbed by Maynilad subject to the terms and conditions of a Concession Agreement, inter alia, to grant to all Concessionaire Employees employee benefits no less favorable than those granted to such employees by the MWSS at the time of their separation from MWSS, which however did not include the payment of COLA.
In 1998, the Supreme Court declared DBM CCC No.10 ineffective for failure to comply with the publication requirement. Consequently, MWSS partially released the COLA payments for its employees, including members of MWSA, covering the years 1989 to 1997, and up to year 1999 for its retained employees.
In 2002, MWSA filed a complaint before the Labor Arbiter praying for the payment of their COLA from the year 1997, the time its members were absorbed by Maynilad, up to the present. MWSA argued that since DBM CCC No. 10 was rendered ineffective, the COLA should be paid as part of the benefits enjoyed by their members at the time of their separation from MWSS, and which should form part of their salaries and benefits with Maynilad.
ISSUE:
WON Maynilad bound itself under the Concession Agreement to pay the COLA of the employees it absorbed from MWSS.
RULING:
No. It is clear that COLA is not among the benefits to be received by the absorbed employees. Contrary to the contention of MWSA, the declaration by the Court of the ineffectiveness of DBM CCC No. 10 due to its non-publication in the Official Gazette or in a newspaper of general circulation in the country, did not give rise to the employee's right to demand payment of the subject benefit from Maynilad.
incorporated in the standardized salary rates of government employees under the general rule of integration. In explaining its inclusion in the standardized salary rates, the Court cited its ruling in National Tobacco Administration v. COA, in that the enumerated fringe benefits in items (1) to (6) have one thing in common they belong to one category of privilege called allowances which are usually granted to officials and employees of the government to defray or reimburse the expenses incurred in the performance of their official functions. Consequently, if these allowances are consolidated with the standardized salary rates, then the government official or employee will be compelled to spend his personal funds in attending to his duties. On the other hand, item (7) is a "catch-all proviso" for benefits in the nature of allowances similar to those enumerated.
COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and employees of the government in the performance of their official functions. It is not payment in consideration of the fulfillment of official duty. As defined, cost of living refers to "the level of prices relating to a range of everyday items" or "the cost of purchasing those goods and services which are included in an accepted standard level of consumption." Based on this premise, COLA is a benefit intended to cover increases in the cost of living. Thus, it is and should be integrated into the standardized salary rates.
To grant COLA to herein petitioners now would create an absurd situation wherein they would be receiving an additional COLA in the amount equivalent to 40% of their basic salary even if the Court has already ruled that the COLA is already integrated in the employee's basic salary. Such conclusion would give the absorbed employees far greater rights than their former co-employees or other government employees from whom COLA was eventually disallowed.
Unless expressly assumed, labor contracts such as employment contracts and collective bargaining agreements are not enforceable against a transferee of an enterprise, labor contracts being in personam, thus binding only between the parties. In the instant case, the only commitment of Maynilad under the Concession Agreement it entered with MWSS was to provide the absorbed employees with a compensation package "no less favorable than those granted to [them] by the MWSS at the time of their separation from MWSS, particularly those set forth in Exhibit 'F' x x x." It is undisputed that Maynilad complied with such commitment. It cannot, however, be compelled to assume the payment of an allowance which was not agreed upon. Such would not only be unreasonable but also unfair for Maynilad. MWSS and Maynilad could not have presumed that the COLA was part of the agreement when it was no longer being received by the employees at the time of the execution of the contract, which is the reckoning point of their new employment.
4. The National Wages & Productivity Commission et al., vs. The Alliance of Progressive Labor et al., GR No. 150326, March 12, 2014
FACTS:
On June 9, 1989, Republic Act No. 6727 was enacted into law. In order to rationalize wages throughout the Philippines, Republic Act No. 6727 created the NWPC and the RTWPBs of the different regions.
Article 121 of the Labor Code, as amended by Section 3 of Republic Act No. 6727, empowered the NWPC to formulate policies and guidelines on wages, incomes and productivity improvement at the enterprise, industry and national levels; to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels; and to review
regional wage levels set by the RTWPBs to determine whether the levels were in accordance with the prescribed guidelines and national development plans, among others.
On the other hand, Article 122(b) of the Labor Code, also amended by Section 3 of Republic Act No. 6727, tasked the RTWPBs to determine and fix minimum wage rates applicable in their region, provinces or industries therein; and to issue the corresponding wage orders, subject to the guidelines issued by the NWPC.
Consequently, the RTWPB–NCR issued Wage Order No. NCR–07 on October 14, 1999 imposing an increase of P25.50/day on the wages of all private sector workers and employees in the NCR and pegging the minimum wage rate in the NCR at P223.50/day.6 However, Section 2 and Section 9 of Wage Order No. NCR–07
exempted certain sectors and industries from its coverage Section 2. The adjustment in this Order does not cover the following:
A. [W]orkers in the following sectors which were granted corresponding wage increases on January 1, 1999 as prescribed by Wage Order No. NCR–06:
a.1. Agriculture workers
–Plantation P12.00
–Non–plantation P18.50
a.2. Cottage/handicraft industry P16.00
a.3. Private hospitals with bed capacity of 100 or less P12.00
a.4. Retail/Service establishments
–Employing 11–15 workers P12.00
–Employing not more than 10 workers P19.00
B. Workers in small establishments employing less that ten (10) workers.
x x x x
Section 9. Upon application with and as determined by the Board, based on documentation and other requirements in accordance with applicable rules and regulations issued by the Commission, the following may be exempt from the applicability of this Order:
1. Distressed establishments as defined in the NPWC Guidelines No. 01, series of 1996;
2. Exporters including indirect exporters with at least 50% export sales and with forward contracts with their foreign buyers/principals entered into on or twelve (12) months before the date of publication of this Order may be exempt during the lifetime of said contract but not to exceed twelve (12) months from the effectivity of this Order.
Feeling aggrieved by their non–coverage by the wage adjustment, the Alliance of Progressive Labor (APL) and the Tunay na Nagkakaisang Manggagawa sa Royal (TNMR) filed an appeal with the NWPC assailing Section 2(A) and Section 9(2) of Wage Order No. NCR–07. They contended that neither the NWPC nor the RTWPB–NCR had the authority to expand the non–coverage and exemptible categories under the wage order; hence, the assailed sections of the wage order should be voided.
The NWPC upheld the validity of Section 2(A) and Section 9(2) of Wage Order No. NCR–07. It observed that the RTWPB’s power to determine exemptible categories was adjunct to its wage fixing function conferred by Article 122(e) of the Labor Code, as amended by Republic Act No. 6727; that such authority of the RTWPB was also
recognized in NWPC Guidelines No. 01, Series of 1996.
The APL and TNMR assailed the decisions of the NWPC on certiorari in the CA, contending that the power of the RTWPB–NCR to determine exemptible categories was not an adjunct to its wage fixing function. CA favored the respondents and granted the petition for certiorari.
Hence, this appeal by petition for review on certiorari by the NWPC and RTWPB–NCR. ISSUE:
WON the RTWPB–NCR had had the authority to provide additional exemptions from the minimum wage adjustments embodied in Wage Order No. NCR–07
RULING:
The RTWPB–NCR had the authority to provide additional exemptions from the minimum wage adjustments embodied in Wage Order No. NCR–07.
The NWPC promulgated NWPC Guidelines No. 001–95 (Revised Rules of Procedure
on Minimum Wage Fixing) to govern the proceedings in the NWPC and the RTWPBs in
the fixing of minimum wage rates by region, province and industry. Section 1 of Rule VIII of NWPC Guidelines No. 001–95 recognized the power of the RTWPBs to issue exemptions from the application of the wage orders subject to the guidelines issued by the NWPC
(this is the rationale behind exemption)
SECTION 2. CATEGORIES OF EXEMPTIBLE ESTABLISHMENTS
Exemption of establishments from compliance with the wage increases and cost of living allowances prescribed by the Boards may be granted in order to (1) assist establishments experiencing temporary difficulties due to losses maintain the financial viability of their businesses and continued employment of their workers; (2) encourage the establishment of new businesses and the creation of more jobs, particularly in areas outside the National Capital Region and Export Processing Zones, in line with the policy on industry dispersal; and (3) ease the burden of micro establishments, particularly in the retail and service sector, that have a limited capacity to pay.
The following categories of establishments may be exempted upon application with and as determined by the Board:
1. Distressed establishments 2. New business enterprises (NBEs)
3. Retail/Service establishments employing not more than ten (10) workers 4. Establishments adversely affected by natural calamities
Under the guidelines, the RTWPBs could issue exemptions from the application of the wage orders as long as the exemptions complied with the rules of the NWPC. In its rules, the NWPC enumerated four exemptible establishments, but the list was not exclusive. The RTWPBs had the authority to include in the wage orders establishments that belonged to, or to exclude from the four enumerated exemptible categories.
If the exemption was outside of the four exemptible categories, like here, the exemptible category should be: (1) in accord with the rationale for exemption; (2) reviewed/approved by the NWPC; and (3) upon review, the RTWPB issuing the wage order must submit a strong and justifiable reason or reasons for the inclusion of such category. It is the compliance with the second requisite that is at issue here.
