Course Code CBM 382

Course Description Strategic Management

Module No. and Title Module 5: Labor Code of the Philippines
- Part III (Labor relations & Employee
Discipline)

Labor Relations is a branch of labor law that governs the collective relationship
between employers and employees, particularly when employees act together to
protect and promote their interests. It focuses on the rights, duties, and
interactions of management, workers, and labor organizations in relation to
employment conditions.

In a comprehensive sense, labor relations refers to:

● The legal and institutional framework governing union formation and recognition
● The process of collective bargaining and negotiation of employment terms
● The administration and enforcement of collective agreements
● The mechanisms for preventing and resolving labor disputes

Labor relations recognizes that individual employees often have weaker

bargaining power compared to employers. Thus, the law allows workers to
organize and bargain collectively to achieve fairness, equity, and dignity at
work.

Labor relations is both legal and social in nature. It combines statutory rules,
workplace practices, economic interests, and human behavior. Effective labor
relations promote productivity, mutual trust, and long-term organizational
stability.

Example: In a large supermarket chain, employees form a union to negotiate

higher wages, clearer promotion policies, and improved work schedules. The
negotiation process and resulting agreement fall under labor relations.

Parties in Labor Relations

Labor relations involve three primary parties, each with defined roles and
responsibilities under the Labor Code.
1. Employer
An employer is any individual, partnership, corporation, or entity that:
● Engages the services of employees
● Pays wages or salaries
● Exercises control over the means and methods of work
Control is the most important element. It includes the power to hire,
supervise, discipline, and dismiss employees.
Example: A construction company that assigns tasks, evaluates performance,
and enforces safety and disciplinary rules.

2. Employee
An employee is any person who performs work or services for an employer
in exchange for compensation and who is subject to the employer’s
control.
Employees covered by labor relations law are typically rank-and-file
employees, as managerial employees are generally excluded from
joining unions due to conflict of interest.
Example: Factory workers who follow production schedules and company rules
set by management.

3. Labor Organization (Labor Union)

A labor organization or labor union is any association of employees
organized for the purpose of:
● Collective bargaining
● Mutual aid and protection
● Improvement of wages, benefits, and working conditions
A union becomes a legitimate labor organization once it is properly registered with the
Department of Labor and Employment (DOLE).
Example: A registered union representing call center agents negotiating night
shift differentials and mental health benefits.

Right to Self-Organization
The right to self-organization allows employees to:
● Form, join, or assist labor organizations
● Engage in lawful union activities
● Bargain collectively with employers
This right is constitutionally guaranteed and protected by the Labor Code.
Important principle: Employees may exercise this right without interference,
restraint, or coercion from employers.
Example: Employees in a logistics company form a union despite management’s
preference for individual contracts. Preventing them from doing so would be
unlawful.

Unfair Labor Practices (ULPs) are acts by employers or labor organizations that
violate the right to self-organization and collective bargaining.

1. ULPs by
Employers
Examples
include:
● Interfering with union formation
 ● Discriminating against union members
● Refusing to bargain collectively
● Dismissing employees due to union activities
Example: An employee is demoted after being elected as a union officer–this
constitutes an unfair labor practice.

2. ULPs by Labor
Organizations Examples
include:
● Coercing employees to join a union
● Causing discrimination against non-members
● Refusing to bargain in bad faith
Example: A union threatens employees who refuse to join the organization.

Collective bargaining is the process by which a legitimate labor union and an employer
negotiate in good faith to determine:
● Wages
● Hours of work
● Benefits
● Working conditions
● Other employment terms
The outcome is a Collective Bargaining Agreement (CBA).

Collective Bargaining Agreement (CBA) is a written contract between employer and

union outlining agreed employment conditions.
Typical contents:
● Economic provisions (wages, benefits)
● Non-economic provisions (grievance procedures, discipline rules)
Example: A five-year CBA in a food processing company guarantees annual salary
increases and outlines disciplinary procedures.

Labor Disputes and Settlement

A labor dispute refers to any controversy concerning employment terms or labor relations.

Common methods of settlement:

● Grievance machinery
● Conciliation and mediation
● Voluntary arbitration
● Compulsory arbitration (NLRC)
Example: A dispute over unpaid overtime is resolved through mediation facilitated by
the Department of Labor and Employment (DOLE).
Employee discipline refers to the employer’s authority and responsibility to
regulate employee conduct, enforce workplace rules, and impose corrective
measures to ensure order, efficiency, productivity, and respect within the
organization.

In its most comprehensive sense, employee discipline is:

● A management function essential to business operations
● A legal process governed by labor laws and jurisprudence
● A corrective mechanism, not merely a form of punishment
Discipline must always be exercised within the limits of the law and guided by the
principles of:
● Substantive due process (there must be a valid cause)
● Procedural due process (proper steps must be followed)
● Fairness and proportionality (penalty must fit the offense)

Discipline is meant to correct behavior and protect workplace standards, not to

oppress or humiliate employees.

Example: An employee who violates the company’s code of conduct by using

offensive language is required to attend counseling and is issued a written
warning instead of immediate dismissal.

Management prerogative refers to the inherent right of employers to regulate all

aspects of employment in order to efficiently run the business.

This includes the right to:

● Hire and select employees
● Assign work and determine work methods
● Set company policies and standards
● Evaluate performance
● Impose disciplinary actions
However, management prerogative is not absolute. It must be exercised:
● In good faith
● Without abuse of discretion
● In compliance with labor laws, CBAs, and principles of fairness
Example: A company implements a new attendance monitoring system. This is
a valid exercise of management prerogative as long as it is applied fairly and
consistently.

Just Causes for Disciplinary Action

Under the Labor Code, just causes
include:
● Serious misconduct
 ● Willful disobedience
● Gross and habitual neglect of duties
● Fraud or breach of trust
● Commission of a crime against the employer or co-workers
Example: An employee falsifies company records–this is a just cause for dismissal.

Due process in employee discipline is the legally mandated procedure that

employers must follow before imposing disciplinary sanctions, especially
dismissal. It ensures that employees are not arbitrarily punished and are given a
fair opportunity to defend themselves.

Due process is required under the Constitution, the Labor Code, and Supreme
Court jurisprudence. Failure to observe due process may result in employer
liability even if the dismissal is based on a valid cause.

Two Aspects of Due Process

a. Substantive Due Process refers to the existence of a valid and lawful
cause for disciplinary action. The cause must be:
● Recognized by law (just or authorized cause)
● Supported by substantial evidence
● Related to the employee’s duties or conduct
Example: Dismissal due to serious misconduct such as theft or falsification satisfies
substantive due process.

b. Procedural Due Process refers to the proper steps and procedures that must
be followed before imposing discipline.
Even if the cause is valid, failure to follow procedure results in a violation of
procedural due process.

The Two-Notice Rule is the procedural due process requirement established by

the Supreme Court that employers must comply with before dismissing or
seriously disciplining an employee for just causes.
The Two-Notice Rule is a mandatory procedural safeguard that requires the employer
to give the employee two separate written notices–(1) a Notice to Explain and (2) a Notice of
Decision–ensuring that the employee is informed of the charges, given a genuine opportunity
to be heard, and formally notified of the employer’s decision.

The rule exists to protect the employee’s right to security of tenure while allowing
employers to exercise legitimate management prerogative.
Decision Trees: What Penalty is Proper?
Decision trees help employers apply progressive discipline and ensure penalties are fair,
proportional, and legally defensible.

Decision Tree 1: Determining the Proper Penalty

Step 1: Identify the Nature of the Offense

What type of misconduct occurred?
● Minor Offense
Examples: tardiness, minor policy violations, first-time negligence
● Serious Offense
Examples: insubordination, repeated violations, dishonesty
● Gross Misconduct
Examples: theft, fraud, serious insubordination,
violence Step 2: Check Company Rules and Code of Conduct
Is the offense clearly defined in company policy?
Is there a corresponding penalty stated?
Step 3: Review Employee Record
First offense?
With prior warnings?
Habitual offender?
Step 4: Consider Aggravating or Mitigating Circumstances
Aggravating:
● Intentional act
● Damage to company property
● Repetitio
n Mitigating:
● Long years of service
● First offense
● Admission of fault
Step 5: Impose the Appropriate Penalty
Offense Level Possible Penalties
Minor Verbal warning→ Written warning

Repeated Minor Written warning→ Suspension

Serious Suspension→ Final warning

Gross Misconduct Termination (after due process)

Golden rule: The penalty must be proportionate to the offense.
Decision Tree 2: Is Termination Justified?
Is the act a Just Cause under Article 297 (Labor Code)?
● Serious misconduct
● Willful disobedience
● Gross and habitual neglect
● Fraud or breach of trust
● Commission of a crime against
employer If YES, proceed to due process
If NO, termination is not valid

Was Due Process Observed?

● Notice to Explain issued?
● Opportunity to be heard given?
● Notice of Decision
released? If YES, termination
may be valid
If NO, employer may be liable for illegal dismissal or nominal damages