LABOR LAW 1

(SUMMARY OF CASES)

REVIEWER

FINALS

CASES TOPIC RULING

1. Sonza v. ABS-CBN Legitimate Contracting: Independent contractors often present themselves to possess unique
Independent Contractor / skills, expertise or talent to distinguish them from ordinary employees.
Job Contracting The specific selection and hiring of 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. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered into the
Agreement with SONZA but would have hired him through its
personnel department just like any other employee. In any event, the
method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the
relationship, with the control test being the most important element.

All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBN’s
employee, there would be no need for the parties to stipulate on benefits
such as “SSS, Medicare, x x x and 13th month pay” which the law
automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because
of an employer-employee relationship.

SONZA’s talent fees, amounting to P317,000 monthly in the second and

third year, are so huge and out of the ordinary that they indicate more
an independent contractual relationship rather than an employer-
employee relationship. ABS-CBN agreed to pay SONZA such huge
talent fees precisely because of SONZA’s unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and
receive such huge talent fees for his services. The power to bargain
talent fees way above the salary scales of ordinary employees is a
circumstance indicative, but not conclusive, of an independent
contractual relationship.
 Applying the control test to the present case, we find that SONZA is not
an employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an
independent contractor. This test is based on the extent of control the
hirer exercises over a worker. The greater the supervision and control
the hirer exercises, the more likely the worker is deemed an employee.
The converse holds true as well—the less control the hirer exercises, the
more likely the worker is considered an independent contractor.

We find that ABS-CBN was not involved in the actual performance that
produced the finished product of SONZA’s work. ABS-CBN did not
instruct SONZA how to perform his job. ABS-CBN merely reserved the
right to modify the program format and airtime schedule “for more
effective programming.” ABS-CBN’s sole concern was the quality of the
shows and their standing in the ratings. Clearly, ABS-CBN did not
exercise control over the means and methods of performance of SONZA’s
work.

A radio broadcast specialist who works under minimal supervision is an

independent contractor. SONZA’s work as television and radio program
host required special skills and talent, which SONZA admittedly
possesses. The records do not show that ABS-CBN exercised any
supervision and control over how SONZA utilized his skills and talent
in his shows.
2. Escaria et., al. v. NLRC A Manpower Company may There is labor-only contracting when the contractor or subcontractor
be a Labor-Only Contractor merely recruits, supplies or places workers to perform a job, work or
in one case, and an service for a principal. In labor-only contracting, the following elements
Independent Contractor in are present:
another case
(a) 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
(b) The workers recruited and placed by such person are performing
activities which are directly related to the principal business of the
employer.

There is permissible job contracting when a principal agrees to put out

or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or
predetermined period, regardless of whether such job or work or service
 is to be performed or completed within or outside the premises of the
principal. In this arrangement, the following conditions must concur:
(a) The contractor carries on a distinct and independent business and
undertakes the contract work on his 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 his work except as to the results
thereof; and

(b) The contractor has substantial capital or investment in the form of

tools, equipment, machineries (sic), work premises, and other materials
which are necessary in the conduct of his business.

In the recent case of Alexander Vinoya vs. NLRC, et al., this Court ruled
that in order to be considered an independent contractor it is not enough
to show substantial capitalization or investment in the form of tools,
equipment, machinery and work premises. In addition, the following
factors need be considered:
(a) whether the contractor is carrying on an independent business;
(b) the nature and extent of the work;
(c) the skill required;
(d) the term and duration of the relationship; (e) the right to assign the
performance of specified pieces of work;
(f) the control and supervision of the workers; (g) the power of the
employer with respect to the hiring, firing and payment of workers of
the contractor;
(h) the control of the premises;
(i) the duty to supply premises, tools, appliances, materials, and labor;
and
(j) the mode, manner and terms of payment.

3. Jaguar Security and Investigation Extent of Principal’s Liability There is no question as regards the respective liabilities of petitioner
Agency v. Sales et., al. in Legitimate Contracting and Delta Milling. Under Articles 106, 107 and 109 of the Labor Code,
the joint and several liability of the contractor and the principal is
mandated to assure compliance of the provisions therein including the
statutory minimum wage. The contractor, petitioner in this case, is
made liable by virtue of his status as direct employer. On the other
hand, Delta Milling, as principal, is made the indirect employer of the
contractor’s employees for purposes of paying the employees their wages
should the contractor be unable to pay them. This joint and several
 liability facilitates, if not guarantees, payment of the workers’
performance of any work, task, job or project, thus giving the workers
ample protection as mandated by the 1987 Constitution.

The question that now arises is whether petitioner may claim

reimbursement from Delta Milling through a cross-claim filed with the
labor court. This question has already been decisively resolved
in Lapanday Agricultural Development Corporation v. Court of Appeals,
324 SCRA 39 (2000) to wit: We resolve first the issue of jurisdiction. We
agree with the respondent that the RTC has jurisdiction over the subject
matter of the present case. It is well-settled in law and jurisprudence
that where no employer-employee relationship exists between the
parties and no issue is involved which may be resolved by reference to
the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction. In its
complaint, private respondent is not seeking any relief under the Labor
Code but seeks payment of a sum of money and damages on account of
petitioner’s alleged breach of its obligation under their Guard Service
Contract. The action is within the realm of civil law hence jurisdiction
over the case belongs to the regular courts. While the resolution of the
issue involves the application of labor laws, reference to the labor code
was only for the determination of the solidary liability of the petitioner
to the respondent where no employer-employee relation exists.
4. Kaisahan ng Kapatiran ng mga Article 111. Attorney’s Fees There are two commonly accepted concepts of attorney’s fees—the
Manggagawa, etc. v. Manila ordinary and extraordinary. In its ordinary concept, an attorney’s fee
Water is the reasonable compensation paid to a lawyer by his client for the
legal services the former renders; compensation is paid for the cost
and/or results of legal services per agreement or as may be assessed. In
its extraordinary concept, attorney’s fees are deemed indemnity
for damages ordered by the court to be paid by the losing party
to the winning party.

Article 111 of the Labor Code, as amended, contemplates

the extraordinary concept of attorney’s fees and that Article 111 is
an exception to the declared policy of strict construction in the
award of attorney’s fees. Although an express finding of facts
and law is still necessary to prove the merit of the award, there
need not be any showing that the employer acted maliciously or
in bad faith when it withheld the wages.
5. Nina Jewelry Manufacturing of Chapter IV. Prohibitions Constructive dismissal occurs when there is cessation of work because
Metal Arts, Inc. v. Montecillo Regarding Wages continued employment is rendered impossible, unreasonable or
Article 114. Deposits for unlikely; when there is a demotion in rank or diminution in pay or both;
Loss or Damage or when a clear discrimination, insensibility, or disdain by an employer
Article 115. Limitations
becomes unbearable to the employee.

Article 113 of the Labor Code is clear that there are only three
exceptions to the general rule that no deductions from the employees’
salaries can be made. The exception which finds application in the
instant petition is in cases where the employer is authorized by law or
regulations issued by the Secretary of Labor to effect the deductions. On
the other hand, Article 114 states that generally, deposits for loss or
damages are not allowed except in cases where the employer is engaged
in such trades, occupations or business where the practice of making
deposits is a recognized one, or is necessary or desirable as determined
by the Secretary of Labor in appropriate rules or regulations.

6. Bluer Than Blue Joint Ventures v. Loss of trust and confidence is premised on the fact that the employee
Esteban concerned holds a position of responsibility, trust and confidence. The
employee must be invested with confidence on delicate matters, such as
the custody, handling, care and protection of the employer’s property
and funds. “[W]ith respect to rank-and-file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of involvement
in the alleged events in question, and that mere uncorroborated
assertions and accusations by the employer will not be sufficient.”

Loss of trust and confidence to be a valid cause for dismissal must be

work related such as would show the employee concerned to be
unfit to continue working for the employer and it must be based
on a wilful breach of trust and founded on clearly established
facts. Such breach is wilful if it is done intentionally, knowingly, and
purposely, without justifiable excuse as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. The loss of trust
and confidence must spring from the voluntary or wilful act of the
employee, or by reason of some blameworthy act or omission on the part
of the employee.

Preventive suspension is a measure allowed by law and afforded to the

employer if an employee’s continued employment poses a serious and
imminent threat to the employer’s life or property or of his co-workers.
 It may be legally imposed against an employee whose alleged violation
is the subject of an investigation. In this case, the petitioner was acting
well within its rights when it imposed a 10-day preventive suspension
on Esteban. While it may be that the acts complained of were committed
by Esteban almost a year before the investigation was conducted, still,
it should be pointed out that Esteban was performing functions that
involve handling of the petitioner’s property and funds, and the
petitioner had every right to protect its assets and operations pending
Esteban’s investigation.

Article 113 of the Labor Code provides that no employer, in his own
behalf or in behalf of any person, shall make any deduction from the
wages of his employees, except in cases where the employer is
authorized by law or regulations issued by the Secretary of Labor and
Employment, among others. The Omnibus Rules Implementing the
Labor Code, meanwhile, provides: SECTION 14. Deduction for loss or
damage.—Where the employer is engaged in a trade, occupation or
business where the practice of making deductions or requiring deposits
is recognized to answer for the reimbursement of loss or damage to tools,
materials, or equipment supplied by the employer to the employee, the
employer may make wage deductions or require the employees to make
deposits from which deductions shall be made, subject to the following
conditions:
(a) That the employee concerned is clearly shown to be responsible for
the loss or damage;
(b) That the employee is given reasonable opportunity to show cause
why deduction should not be made;
(c) That the amount of such deduction is fair and reasonable and shall
not exceed the actual loss or damage; and
(d) That the deduction from the wages of the employee does not exceed
20 percent of the employee’s wages in a week.
7. Special Steel Products, Inc. v. Article 116. Withholding of What an employee has worked for, his employer must pay. Thus, an
Villareal Wages and Kickbacks employer cannot simply refuse to pay the wages or benefits of its
Prohibited employee because he has either defaulted in paying a loan guaranteed
by his employer; or violated their memorandum of agreement; or failed
to render an accounting of his employer’s property.

For legal compensation to take place, the requirements set forth in

Articles 1278 and 1279 of the Civil Code, quoted below, must be present.
“ARTICLE 1278. Compensation shall take place when two persons, in
 their own right, are creditors and debtors of each other. “ARTICLE
1279. In order that compensation may be proper, it is necessary: (1) That
each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if
the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable; (5) That over neither of
them there be any retention or controversy, commenced by third persons
and communicated in due time to the debtor.”
8. SHS Perforated Material, Inc. v. Management prerogative refers “to the right of an employer to regulate
Diaz all aspects of employment, such as the freedom to prescribe work
assignments, working methods, processes to be followed, regulation
regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of work.” Although management
prerogative refers to “the right to regulate all aspects of employment,”
it cannot be understood to include the right to temporarily withhold
salary/wages without the consent of the employee. To sanction such an
interpretation would be contrary to Article 116 of the Labor Code, x x x
Any withholding of an employee’s wages by an employer may only be
allowed in the form of wage deductions under the circumstances
provided in Article 113 of the Labor Code.

The Court, however, agrees with the LA and the CA that respondent
was forced to resign and was, thus, constructively dismissed.
In Duldulao v. Court of Appeals, 517 SCRA 191 (2007), it was written:
There is constructive dismissal if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the
part of the employee that it would foreclose any choice by him except to
forego his continued employment. It exists where there is cessation of
work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and
a diminution in pay.

In this case, the withholding of respondent’s salary does not fall under
any of the circumstances provided under Article 113. Neither was it
established with certainty that respondent did not work from November
16 to November 30, 2005. Hence, the Court agrees with the LA and the
 CA that the unlawful withholding of respondent’s salary amounts to
constructive dismissal.

This Court has held that probationary employees who are unjustly
dismissed during the probationary period are entitled to reinstatement
and payment of full backwages and other benefits and privileges from
the time they were dismissed up to their actual reinstatement.
Respondent is, thus, entitled to reinstatement without loss of seniority
rights and other privileges as well as to full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed
from the time his compensation was withheld up to the time of actual
reinstatement.

Respondent’s reinstatement, however, is no longer feasible as

antagonism has caused a severe strain in their working relationship.
Under the doctrine of strained relations, the payment of separation pay
is considered an acceptable alternative to reinstatement when the latter
option is no longer desirable or viable. Payment liberates the employee
from what could be a highly oppressive work environment, and at the
same time releases the employer from the obligation of keeping in its
employ a worker it no longer trusts. Therefore, a more equitable
disposition would be an award of separation pay equivalent to at least
one month pay, in addition to his full backwages, allowances and other
benefits.
9. Norkis Free and Independent Chapter V. Wage Studies, We hold that the issue here is not about creditability, but the
Worker Union v. Norkis Trading Wage Agreements, and applicability of Wage Order No. ROVII-06 to respondent’s employees.
Co. Wage Determination The Wage Order was intended to fix a new minimum wage only, not to
Article 124. Standards grant across-the-board wage increases to all employees in Region VII.
Criteria for Minimum Wage
The intent of the Order is indicated in its title, “Establishing New
Fixing
“Floor Wage” Wage Order Minimum Wage Rates,” as well as in its preamble: the purpose, reason
does not require Across- or justification for its enactment was “to adjust the minimum wage of
the-Board Pay Increase workers to cushion the impact brought about by the latest economic
crisis not only in the Philippines but also in the Asian region.”

Notably, the RTWPB was interpreting only its own issuance, not a
statutory provision. The best authority to construe a rule or an issuance
is its very source, in this case the RTWPB. Without a doubt, the Board,
like any other executive agency, has the authority to interpret
its own rules and issuances; any phrase contained in its interpretation
becomes a part of those rules or issuances themselves. Therefore, it was
 proper for the CA to consider the letter dated June 13, 2000, written by
the RTWPB to explain the scope and import of the latter’s own Order,
as such interpretation is deemed a part of the Order itself.

In the resolution of labor cases, this Court has always been guided by
the State policy enshrined in the Constitution: social justice and the
protection of the working class. Social justice does not, however,
mandate that every dispute should be automatically decided in favor of
labor. In every case, justice is to be granted to the deserving and
dispensed in the light of the established facts and the applicable law
and doctrine.
10. National Federation of Labor v. Summation of Principles on We note that neither the Wage Orders noted above, nor the
NLRC Salary Distortion Implementing Rules promulgated by the Department of Labor and
Employment, set forth a clear and specific notion of “wage distortion.”
What the Wage Orders and the Implementing Rules did was simply to
recognize that implementation of the Wage Orders could result in a
“distortion of the wage structure” of an employer, and to direct the
employer and the union to negotiate with each other to correct the
distortion.

A statutory definition of “wage distortion” is now found in Article 124 of

the Labor Code as amended by Republic Act No. 6727 (dated 9 June
1989) which reads as follows: “Article 124. Standards/Criteria for
Minimum Wage Fixing.—x x x x x x x x x xxx As used herein, a wage
distortion shall mean a situation where an increase in prescribed wage
rates results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and among
employee groups in an establishment as to effectively obliterate the
distinctions embodied in such wage structure based on skills, length of
service, or other logical bases of differentiation.”

From the above quoted material, it will be seen that the concept of wage
distortion assumes an existing grouping or classification of
employees which establishes distinctions among such employees on
some relevant or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of employees. The
wage distortion anticipated in Wage Orders Nos. 3, 4, 5 and 6 was a
“distortion” (or “compression”) which ensued from the impact of those
Wage Orders upon the different wage rates of the several classes of
employees. Thus distortion ensued where the result of implementation
of one or another of the several Wage Orders was the total elimination
or the severe reduction of the differential or gap existing between the
wage rates of the differing classes of employees.

It is important to note that the remedy contemplated in the Wage

Orders, and now in Article 124 of the Labor Code, for a wage distortion
consisted of negotiations between employer and employees for the
rectification of the distortion by re-adjusting the wage rates of the
differing classes of employees. As a practical matter, this ordinarily
meant a wage increase for one or more of the affected classes of
employees so that some gap or differential would be re-established.
There was no legal requirement that the historical gap which existed
before the implementation of the Wage Orders be restored in precisely
the same form or amount.

We believe and so hold that the re-establishment of a significant gap or

differential between regular employees and casual employees by
operation of the CBA was more than substantial compliance with the
requirements of the several Wage Orders (and of Article 124 of the
Labor Code). That this re-establishment of a significant differential was
the result of collective bargaining negotiations, rather than of a special
grievance procedure, is not a legal basis for ignoring it. The NLRC En
Banc was in serious error when it disregarded the differential of P3.60
which had been restored by 1 July 1985 upon the ground that such
differential “represent[ed] negotiated wage increase[s] which should not
be considered covered and in compliance with the Wage Orders.”

The Wage Orders referred to above had provided for the crediting of
increases in wages or allowances granted or paid by employers within a
specified time against the statutorily prescribed increases in minimum
wages. A similar provision recognizing crediting of increases in daily
basic wage rates granted by employers pursuant to collective bargaining
agreements, is set out in Section 4 (d) of R.A. No. 6727, a statute which
sought to “rationalize wage policy determination by establishing the
mechanism and proper standards therefor.” We believe that the same
public policy requires recognition and validation, as it were, of wage
increases given by employers either unilaterally or as a result of
collective bargaining negotiations, in the effort to correct wage
distortions.
 We consider, still further, that the “regularization” of the casual or non-
regular employees on 21 June 1984 which was unilaterally effected by
the Company (albeit upon the request of petitioner NFL), in conjunction
with the coming into effect of the increases in daily wage stipulated in
the CBA, had the effect of rendering the whole problem of wage
distortion academic. The act of “regularization” eliminated the
classification scheme in respect of which the wage distortion had existed.

The basic point which needs to be stressed is that whether or not a new
or additional scheme of classification of employees for compensation
purposes should be established by the Company (and the legitimacy or
viability of the bases of distinction there embodied) is properly a matter
for management judgment and discretion, and ultimately, perhaps, a
subject matter for bargaining negotiations between employer and
employees. It is assuredly something that falls outside the concept of
“wage distortion.” The wage Orders and Article 124 as amended do not
require the establishment of new classifications or sub-classifications by
the employer. The NLRC is not authorized unilaterally to impose,
directly or indirectly, under the guise of rectifying a “wage distortion,”
upon an employer a new scheme of classification of employees where
none has been established either by management decision or by
collective bargaining.

11. People’s Broadcasting Service v. Article 128. Visitorial and The most important consideration for the allowance of the instant
Secretary of Labor Enforcement Power petition is the opportunity for the Court not only to set the demarcation
Who determines the between the NLRC’s jurisdiction and the DOLE’s prerogative but also
existence of Employer- the procedure when the case involves the fundamental challenge on the
Employee Relationship
DOLE’s prerogative based on lack of employer-employee relationship.
As exhaustively discussed here, the DOLE’s prerogative hinges on the
existence of employer-employee relationship, the issue is which is at the
very heart of this case. And the evidence clearly indicates private
respondent has never been petitioner’s employee. But the DOLE did not
address, while the Court of Appeals glossed over, the issue. The
peremptory dismissal of the instant petition on a technicality would
deprive the Court of the opportunity to resolve the novel controversy.
12. St. Joseph’s College v. St. Joseph’s Teachers’ Share in Tuition The judiciary merely applies what the law is, not what it should be.
College Worker’s Association Fee Increase Section 5(2) of Republic Act (RA) 6728 allows a tuition fee increase only
under the condition that at least 70 percent of the increase shall be
disbursed as salaries, wages, allowances and other benefits for teaching
and nonteaching personnel. The law imposes this requirement without
exceptions or qualifications.

The law plainly states that 70 percent of the tuition fee increase shall
be allotted for the teaching and the nonteaching personnel; and that the
payment of other costs of operation, together with the improvement of
the school’s infrastructure, shall be taken only from the remaining 30
percent. The law does not speak, directly or indirectly, of the contention
of petitioner that in the event that its total tuition income is lesser than
that in the previous year, then the whole amount of the increase in
tuition fee, and not merely up to 30 percent as provided by law, may be
used for the improvement and modernization of infrastructure and for
the payment of other costs of operation.

Apart from making theoretical calculations, petitioner has not provided

the Court with hard evidence on the actual loss it has incurred as a
result of the tuition fee increase. Note that a mere decrease in the gross
income of a corporation does not necessarily and automatically translate
into a negative bottom line. Decreased income may also mean decreased
expenses. Petitioner has failed to present evidence showing it actually
suffered bottom line losses as a direct and necessary consequence of the
tuition fee increase. As it is then, its averments are mere conjectures,
sorely insufficient to overturn the CA’s judgment.