LABOR LAW:

(TOPIC III-
EMPLOYMENT
PROPER)
HNU- BA Political Science A.Y. 2024

PREPARED BY: ATTY. NINIA MARIE O. TAGAPIA

OUTLINE ON
TOPIC 3-EMPLOYMENT PROPER

COMMENCEMENT OF
MANAGEMENT
A. EMPLOYER-EMPLOYEE
RELATIONSHIP B. PREROGATIVE
A.
COMMENCEMENT OF
EMPLOYER-EMPLOYEE
RELATIONSHIP
1. Test to Determine Employer-Employee
Relationship
2. Principal-Agent Relationship (Article
1868, NCC)
3. Principal-Individual Independent
Contractor Relationship (Art. 1713 NCC)
1. TEST TO DETERMINE
ER-EE RELATIONSHIP
1.1. FOUR-FOLD TEST
a. Selection & engagement of employees
b. Payment of Wages
c. Power of Dismissal
d. Power of Control
1.2. TWO-TIERED TEST
• Applying Economic Dependence Test
1. TEST TO DETERMINE ER-EE RELATIONSHIP

1.1. FOUR-FOLD TEST

a. Selection & engagement of employees
b. Payment of Wages
c. Power of Dismissal
d. Power of Control/ “Means-and-Method
Control Test”
1. TEST TO DETERMINE ER-EE RELATIONSHIP

POWER OF CONTROL
• This is the most important element
• ISSUE: Whether the ER controls/has reserved the right to control
the EE not only as to the RESULT of the work to be done but
also as to the MEANS AND METHODS by which the same is to
be accomplished
• ABSENCE OF CONTROL: where a person who works for
another does do more or less at his own pleasure and is NOT
subject to definite hours or conditions of work and, in turn, is
compensated according to the result of his efforts and NOT as
to the amount thereof
1. TEST TO DETERMINE ER-EE RELATIONSHIP
POWER OF CONTROL
Guidelines indicative of labor law "control," should not merely relate to the mutually
desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to be employed in attaining the result, or of fixing the
methodology and of binding or restricting the party hired to the use of these means.

RULING:
Tested by this norm, Manulife’s instructions regarding the objectives and sales targets,
in connection with the training and engagement of other agents, are among the
directives that the principal may impose on the agent to achieve the assigned tasks.
They are targeted results that Manulife wishes to attain through its agents. Manulife’s codes of
conduct, likewise, do not necessarily intrude into the insurance agents’ means and manner of
conducting their sales. Codes of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be done. These codes, as well as insurance
industry rules and regulations, are not per se indicative of labor law control under our
jurisprudence. (Tongko v. Manufacturers Life Insurance (GR 167622, June 29, 2010 & January
25, 2011)
1. TEST TO DETERMINE ER-EE RELATIONSHIP

“It is NOT essential for the ER to

ACTUALLY supervise the performance
of duties of the EE; it is enough that the
former has a right to wield the power”
1. TEST TO DETERMINE ER-EE RELATIONSHIP

• Stipulation in a contract is NOT

CONTROLLING in determining the
existence of the relationship.
• The employment status of a person is
defined and prescribed by law and
NOT by what the parties say it should
be
1. TEST TO DETERMINE ER-EE RELATIONSHIP

Is there any employment relationship

wherein a formality required?
A: YES. Kasambahays are required to have a
written contract of employment under the
Kasambahay Law. Seafarers/OFWs are also
required to have a written contract (POEA-
SEC).
1. TEST TO DETERMINE ER-EE RELATIONSHIP

1.2. TWO-TIERED TEST

(1) The putative employer’s power to control the employee
with respect to the means and methods by which the work is
to be accomplished; and

(2) The underlying economic realities of the activity or

relationship or otherwise known as the economic
dependence of one against the other.
1. TEST TO DETERMINE ER-EE RELATIONSHIP

POWER OF CONTROL ECONOMIC REALITY TEST

Determined by asking whether “the person for Calls for the determination of the nature of the
whom the services are performed reserves the relationship based on the circumstances of the
right to control NOT only the END to be whole economic activity.
achieved but also the MANNER AND MEANS to
be used in reaching such end.”
ISSUE: Whether the worker is dependent on the
alleged employer for his continued employment in
that line of business
1. TEST TO DETERMINE ER-EE RELATIONSHIP
FRANCISCO vs. NLRC; (economic dependency test)
• Francisco was an EE of private Respondent Kasei Corporation,
where she simultaneously held several positions because she was
under the direct control and supervision of Seiji Kamura, the
Corporation’s Technical Consultant.
• She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager
and Corporate Secretary, with substantially the same job
functions, that is, rendering accounting and tax services to the
company and performing functions necessary and desirable for the
proper operation of the corporation, such as securing business
permits and other licenses over an indefinite period of engagement.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
FRANCISCO vs. NLRC
• Under the broader economic reality test, the petitioner can likewise be said to be
an employee of respondent corporation because she had served the company
for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses.
• She reported for work regularly and served in various capacities as
Accountant, Liaison Officer, Technical Consultant, Acting Manager and
Corporate Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions
necessary and desirable for the proper operation of the corporation, such
as securing business permits and other licenses over an indefinite period of
engagement and allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
FRANCISCO vs. NLRC
• When petitioner was designated General Manager,
respondent corporation made a report to the SSS.
Petitioner's membership in the SSS as manifested by a
copy of the SSS specimen signature card which was signed
by the President of Kasei Corporation and the inclusion of
her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship
between petitioner and respondent corporation.
1. TEST TO DETERMINE ER-EE RELATIONSHIP

HOW TO DETERMINE THAT A PERSON IS

ECONOMICALLY DEPENDENT?
1. Number of years in the company
2. Registered in the Payroll
3. Identification card
4. Company uniform
5. If the ER has reported the EE to SSS, it is a good
indicator that the ER is treating him as an employee.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
DETERMINE THE UNDERLYING ECONOMIC REALITIES OF
THE ACTIVITY OR RELATIONSHIPS.
1. The (broad) extent to which the services performed are an integral part of the
employer’s business.
2. The (limited) extent of the worker’s investment in the equipment and facilities
3. The nature (close supervision) and (high) degree of control exercised by the
employer
4. The workers (limited) opportunities for profit and loss
5. The (small) amount of initiative, skill, judgment or foresight required for the
success of the claimed independent enterprise
6. The (high degree of) permanency and duration of the relationship between the
worker and the employer
7. The degree of dependency of the worker upon the employer for his continued
employment in that line of business.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
ABSENCE OF NAME IN THE PAYROLL,
INCONSEQUENTIAL
“if only documentary evidence would be required to show
that relationship, no scheming employer would ever be
brought before the bar of justice, as no employer would
wish to come out with any trace of illegality he has authored
considering that it should take much weightier proof to
invalidate a written instrument.” (Azucena, 2016)
1. TEST TO DETERMINE ER-EE RELATIONSHIP

What property right is conferred upon an employee once there

is an employer-employee relationship?

• Once an employer-employee relationship is established, such

employment is treated, under our constitutional framework, as a
property right. When a person has no property, his job may
possibly be his only possession or means of livelihood and
those of his dependents.
• When a person loses his job, his dependents suffer as well. The
worker should, therefore, be protected and insulated against
any arbitrary deprivation of his job.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
IMPORTANCE OF DETERMING WHETHER THERE IS ER-EE RELATIONSHIP

1. EEs are entitled to hours of work, weekly rest periods, holidays, service
incentive leaves and service charges (next topic: Conditions of Employment)

2. The existence of ER-EE relationship is ESSENTIAL in that it comprises as the

jurisdictional basis for recovery under the law. (labor courts vs. regular courts)

3. Art. 295 Presupposes Employment Relationship

Art. 295 applies where the existence of Er-Ee relationship is not the issue of the
dispute. If the issue is whether or not the claimant is an employee, the tests of
employment relationship shall be resorted to.
 PRINCIPAL & AGENT vs.
PRINCIPAL & INDIVIDUAL INDEPENDENT
CONTRACTOR

Q: Why is it important to determine whether the

relationship between the parties is that of ER-EE, or
that of a principal-agent, or of a principal and
independent contractor?
PRINCIPAL & AGENT vs.
PRINCIPAL & INDIVIDUAL INDEPENDENT
CONTRACTOR
RELATIONSHIP GOVERNING LAWS TRIBUNAL

ER-EE Labor Laws Labor Tribunal

PRINCIPAL-AGENT Civil Code (Agency) Regular Courts

PRINCIPAL Civil Code (Obligations & Regular Courts

INDEPENDENT- Contracts)
CONTRACTOR
 2. Principal-Agent
Relationship (Article 1868,
New Civil Code (NCC))
ARTICLE 1868, NCC
By the contract of agency, a person binds himself
to render some service or to do something in
representation or on behalf of another, with the
consent or authority of the latter.
2. PRINCIPAL-AGENT RELATIONSHIP
Basic Characteristics:
1. The principal selects the agent
2. The agent is compensated under the contract of agency of services
rendered
3. The agent is disciplined by the principal as in the case of an employee
because the agent is under the authority of the principal.
4. The principal controls the means and methods of the work of an agent.
The principal substitutes his own judgment for that of the agent.
2. PRINCIPAL-AGENT RELATIONSHIP

DIFFERENCE:
• The difference, thus, from ER-EE relationship is
that in a contract of agency, there is only one
party.
• The agent is merely an extension of the principal.
• Unlike that of an ER-EE relationship where there
are 2 parties involved, the ER & the EE,
respectively
3. Principal-Individual
Independent Contractor
Relationship (Article 1713
NCC)
ARTICLE 1713, NCC
By contract for a piece of work, the contractor binds
himself to execute a piece of work for the employer, in
consideration of a certain price or consideration. The
contractor may either employ only his labor, skill, or
also furnishes the materials.
An independent contractor is paid for the result of his labor, unlike
an employee who is paid for the labor he performs (1988 Dr. Sara)
[Link]-INDIVIDUAL INDEPENDENT
CONTRACTOR
Basic Characteristics
1. The principal selects the contractor.
2. The contractor is compensated for services rendered.
3. The contractor is not under the discipline of the principal.
4. The performed job, work, or services is according to his own
means and methods free from the control and direction of the
principal except as to the results thereof.
5. The contractor offers his services to the public, anybody could
be considered as his principal or his client.
[Link]-INDIVIDUAL INDEPENDENT
CONTRACTOR
DIFFERENCE:
• The difference, thus, from ER-EE relationship is that in
free artisanship, the results may be controlled or
directed by the principal but not the means, method,
or conduct of the service.
• A contractor may be an individual or a corporate
juridical entity.
• Examples of individual contractors include lawyers,
doctors, dentists, engineers, among others.
SURVEY OF CASES WHETHER THERE IS ER-EE RELATIONSHIP
EXAMPLE RELATIONSHIP
1. Caddy earns no fixed income but depends on the Independent-Contractor & not an EE of the golf club
number of players engaging his service. He is paid
by the golf player and not by the golf club
(1994 Manila Golf & Country Club)
2. Medical retainers hired by a hotel under Art. 157 Independent-Contractor & not an EE of the hotel (as
(2005 Phil. Global Communication) involving in the case involved)
emergency dental & medical services (2009
Escasinas)
3. “Medical consultants" in hospitals (2002 Ramos) Independent-Contractor & not an EE of the hospital

4. Working scholars in schools, college or university No ER-EE relationship by express provision of law
(Sec. 14, Rule X, IRR)
5. Resident physicians if there is a training No ER-EE relationship
agreement with the hospital and the training
program is accredited by the appropriate
government agency (Sec. 15, Rule X, IRR; DOLE
D.O. No. 192, S. 2017)
SURVEY OF CASES WHETHER THERE IS ER-EE RELATIONSHIP
EXAMPLE RELATIONSHIP

6. Non-training general practitioners (2008 Calamba There is ER-EE relationship

Medical Center)
7. Real Estate Broker, Appraiser or Consultant No ER-EE relationship between them and the
performing real estate services (Sec. 33, RA 9646 real estate developer
otherwise known as “Real Estate Service Act of the
Philippines)
8. Student Trainees (Dual Training System Act of 1994 No ER-EE relationship
(Sec. 8, RA 7686)
9. JobStart Trainee under JobStart Philippines Act (RA No ER-EE relationship
10869)
10. Independent Self- Employed Insurance Agent (2011 No ER-EE relationship between an agent and
Tongko, En Banc) the insurance company
11. The selection and employment of the jockey is made No ER-EE relationship between the jockey and
by the race horse owner whose horse the jockey will the race club
ride, not by the race club. (1969 Social Security
System/Manila Jockey Club case)
SURVEY OF CASES WHETHER THERE IS ER-EE RELATIONSHIP
EXAMPLE RELATIONSHIP
12. PBA basketball referee exercises his own independent No ER-EE relationship between the referee
judgment, based on the rules of the game, as to when and and sthe basketball association
how a call or decision is to be made. (2011 Bernate)
13. A “masiador” (bet-taker) and “sentenciador” Independent-Contractor
(referee) in a Sabong rely on their expertise. They can
interpret message conveyed by mere gestures. Their
compensation is based on arriba. (2011 Semblante)
14. Hotel Pianist There is ER-EE relationship
*The company has fixed the time of performance from
7:00 p.m. to 10:00 p.m., 3 to 6 times a week *No liberty to
choose the place of performance *Required to perform
only Tagalog songs or music or to wear barong Tagalog
*Subjected to rules on employee’s representation check
and chits (2012 Legend Hotel Manila)
1. TEST TO DETERMINE ER-EE RELATIONSHIP

CHRISDEN CABRERA DITIANGKIN, HENDRIX MASAMAYOR MOLINES, HARVEY

MOSQUITO JUANIO, JOSELITO CASTRO VERDE, and BRIAN ANTHONY CUBACUB
NABONG, petitioners,
vs. LAZADA E-SERVICES PHILIPPINES, INC., ALLAN ANCHETA, RICHARD DELANTAR,
and JADE ANDRADE, respondents
[G.R. No. 246892. September 21, 2022.]
1. TEST TO DETERMINE ER-EE RELATIONSHIP
RULING:
1. Petitioners (RIDERS) do NOT fall under any of the categories of independent
contractors
• First, petitioners are not hired by a contractor or subcontractor. Petitioners merely
refer to RGSERVE, Inc. as their former employer, but it is clear in the parties’
submission that petitioners were directly hired by respondents. Each petitioner
signed an individual contract with respondent Lazada who paid them directly.
• Second, petitioners cannot be considered independent contractors in a bilateral
relationship. The work performed by petitioners do not require a special talent or
skill. Picking up and delivering goods from warehouse to buyers do not call for a
specific expertise.

2. Petitioners SATISFY both the four-fold test and economic dependence test:
 1. TEST TO DETERMINE ER-EE RELATIONSHIP
2. Petitioners SATISFY both the four-fold test and economic dependence test:
Four-Fold Test:
• First, petitioners are directly employed by respondent Lazada as evidenced by the contracts they signed.
Petitioner’s former employer, RGSERVE, Inc., is not a party to the contract with respondent Lazada.
• Second, as indicated in the contract, petitioners receive their salaries from respondent Lazada. (P1, 200
salary)
• Third, respondent Lazada has the power to dismiss petitioners. In their contract, respondents can
immediately terminate the agreement if there is a breach of material provisions of the contract.
• Lastly, respondent Lazada has control over the means and methods of the performance of petitioners’
work.
➢ Respondent Lazada requires the accomplishment of a route sheet which keeps track of the arrival,
departure, and unloading time of the items.
➢ Petitioners were also required to submit trip tickets and incident reports to respondent. The circumstances
of the whole economic activity between petitioners and respondents confirm the existence of an employer-
employee relationship. The delivery of items is clearly integrated in the services offered by respondents.
➢ In carrying out their business, they are not merely a platform where parties can transact; they also offer the
delivery of the items from the sellers to the buyers.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
2. Petitioners SATISFY both the four-fold test and economic dependence
test:
RIDERS HAD NO CONTROL:
• Further, petitioners have invested in equipment to be engaged by
respondents. Particularly, petitioners are required by respondents to use their
own motor vehicles and other equipment and supplies in the delivery of the
items.
• Moreover, petitioners had no control over their own profit or loss because
they were paid a set daily wage. Petitioners also had no control over their own
time and they cannot offer their service to other companies as respondents
can demand their presence from time to time.
1. TEST TO DETERMINE ER-EE RELATIONSHIP
2. Petitioners SATISFY both the four-fold test and economic dependence
test:
ECONOMIC DEPENDENCE TEST:
• More importantly, petitioners are dependent on respondents for their
continued employment in this line of business. As the facts reveal, petitioners
have been previously engaged by a third-party contractor to provide services
for respondents. This time, petitioners were directly hired by respondents.
This demonstrates that petitioners have been economically dependent on
respondents for their livelihood.
Sonza vs ABS-CBN G.R. No. 13805 July 10, 2004
There was no employer-employee relationship that existed, but that of an independent
contractor.

1. The selection and engagement of the employee - ABS-CBN engaged SONZA’s services to co-host its
television and radio programs because of SONZA’s peculiar skills, talent and celebrity status. 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.

2. The payment of wages - ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees
going to MJMDC. 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.

3. The power of dismissal - For violation of any provision of the Agreement, either party may terminate
their relationship. During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long
as "AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement." Even if
it suffered severe business losses, ABS-CBN could not retrench SONZA because ABS-CBN remained
obligated to pay SONZA’s talent fees during the life of the Agreement.
Sonza vs ABS-CBN G.R. No. 13805 July 10, 2004
4. The employer’s power to control the employee on the means and methods by which
the work is accomplished - The control test is the most important test. 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.

First, ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only
needed his skills and talent. How SONZA delivered his lines, appeared on television,
and sounded on radio were outside ABS-CBN’s control. SONZA did not have to render
eight hours of work per day. The Agreement required SONZA to attend only rehearsals and
tapings of the shows, as well as pre- and post-production staff meetings. ABS-CBN could not
dictate the contents of SONZA’s script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests. The clear implication is that SONZA had a
free hand on what to say or discuss in his shows provided he did not attack ABS-CBN
or its interests.
Sonza vs ABS-CBN G.R. No. 13805 July 10, 2004
Second, The Agreement stipulates that SONZA shall abide with the rules and standards of
performance "covering talents" of ABS-CBN. The Agreement does not require SONZA to comply with
the rules and standards of performance prescribed for employees of ABS-CBN. The code of conduct
imposed on SONZA under the Agreement refers to the "Television and Radio Code of the
Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY
(ABS-CBN) as its Code of Ethics." The KBP code applies to broadcasters, not to employees of
radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those
applicable to talents and not to employees of ABS-CBN.

Lastly, being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN.
Even an independent contractor can validly provide his services exclusively to the hiring party. In the
broadcast industry, exclusivity is not necessarily the same as control. The hiring of exclusive
talents is a widespread and accepted practice in the entertainment industry. This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment
of the broadcast station. The broadcast station normally spends substantial amounts of money, time
and effort "in building up its talents as well as the programs they appear in and thus expects that said
talents remain exclusive with the station for a commensurate period of time." Normally, a much
higher fee is paid to talents who agree to work exclusively for a particular radio or television station.
In short, the huge talent fees partially compensates for exclusivity.
ABS-CBN vs. Nazareno G.R. No. 164156 September 26, 2006
The employer-employee relationship between petitioner and respondents has been proven by the ff:

First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity
status was required from them because they were merely hired through petitioner’s personnel
department just like any ordinary employee.

Second. The so-called “talent fees” of respondents correspond to wages given as a result of an
employer-employee relationship. Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship.

Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and
respondents are highly dependent on the petitioner for continued work.

Fourth. The degree of control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent contractors.

The presumption is that when the work done is an integral part of the regular business of the
employer and when the worker, relative to the employer, does not furnish an independent business or
professional service, such work is a regular employment of such employee and not an independent
contractor.
Calamba Medical Center vs. NLRC G.R. No. 176484 November 25, 2008

Under the "control test," an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which
the physician is to accomplish his task. As priorly stated, private respondents maintained
specific work-schedules, as determined by petitioner through its medical director, which
consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be
observed under pain of administrative sanctions.

• That petitioner exercised control over respondents gains light from the undisputed fact that
in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and
orderlies.
• Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power.
Calamba Medical Center vs. NLRC G.R. No. 176484 November 25, 2008

Respondents were in fact made subject to petitioner-hospital's Code of Ethics, the

provisions of which cover administrative and disciplinary measures on negligence of duties,
personnel conduct and behavior, and offenses against persons, property and the hospital's
interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status of
respondents, namely, the identification cards it issued them, the payslips and BIR W-2
(now 2316) Forms which reflect their status as employees, and the classification as
"salary" of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare
(Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS
Law34 is premised on the existence of an employer-employee relationship, except in cases of
compulsory coverage of the self-employed. It would be preposterous for an employer to report
certain persons as employees and pay their SSS premiums as well as their wages if they are
not its employees.
 B.
MANAGEMENT
PREROGATIVE
1. Discipline
2. Transfer of Employees
3. Productivity Standard
4. Bonus
5. Change of Working Hours
6. Bona Fide Occupational Qualifications
7. Marriage Between Employees of Competitor-
Employers
8. Post-Employment Restrictions
MANAGEMENT PREROGATIVE

It is well-recognized principle that ERs

have the right and prerogative to regulate
every aspect of their business, generally
without restraint in accordance with their
own discretion and judgment.
MANAGEMENT PREROGATIVE
GR: Management prerogative is the right of the employer to regulate all
aspects of employment, such as:

1. Freedom to prescribe work assignments;

2. Working methods;
3. Processes to be followed;
4. Regulation regarding transfer of Ees;
5. Supervision of their work, lay-off and discipline; and
6. Dismissal and recall of work. (Goya, Inc. v. Goya, Inc. Ees Union-FFW, G.R.
No. 170054, 21 Jan. 2013).

EXC: Otherwise limited by law, contract, and principles of fair play and
justice.
An employer is free to regulate, according to his
best discretion and best business judgement, all
aspects of employment, from hiring to firing, except
in cases of unlawful discrimination or those
which may be provided by law. (Philippine
Telegraph and Telephone Company v. NLRC, G.R.
No. 118978, 23 May 1997)
Q: Is withholding an Ee’s salary a
valid exercise of management
prerogative?
A: NO. Any withholding of an Ee’s wages by an Er may only
be allowed in the form of wage deductions under the
circumstances provided in Art. 113 of the LC:
1) The worker is insured;
2) For union dues;
3) In cases authorized by law or regulation issued by the
SOLE.

In the absence of the following circumstances, withholding

thereof is thus unlawful. (SHS Perforated Materials, Inc. v.
Diaz, G.R. 185814, 13 Oct. 2010)
1. RIGHT TO DISCIPLINE

The employer has the prerogative to

instill discipline in his employees and to
impose reasonable penalties, including
dismissal, on erring employees pursuant
to company rules and regulations.
1. RIGHT TO DISCIPLINE
The Right or Prerogative to discipline covers the
following:
1. Right to discipline;
2. Right to dismiss;
3. Right to determine who to punish;
4. Right to promulgate rules and regulations;
5. Right to impose penalty; proportionality rule;
6. Right to choose which penalty to impose; and
7. Right to impose heavier penalty than what the
company rules prescribe
1. RIGHT TO DISCIPLINE
The Right or Prerogative to discipline covers the
following:
1. Right to discipline;
2. Right to dismiss;
3. Right to determine who to punish;
4. Right to promulgate rules and regulations;
5. Right to impose penalty; proportionality rule;
6. Right to choose which penalty to impose; and
7. Right to impose heavier penalty than what the
company rules prescribe
1. RIGHT TO DISCIPLINE
Limitation On The Employer’s Power To Discipline
While management has the prerogative to discipline its Ees
and to impose appropriate penalties on erring workers,
pursuant to company rules and regulations, however, such
management prerogative must be exercised in good faith
for the advancement of the Er’s interest and not for the
purpose of defeating or circumventing the rights of the Ees
under special laws and valid agreements.
(PLDT v. Teves, G.R. No. 143511, 15 Nov. 2010)
2. RIGHT TO TRANSFER OF EMPLOYEES
Transfer
1. Is the lateral movement from one position to another of
equivalent rank, level, or salary without break of service; or
2. From one office to another within the SAME business
establishment

CONDITIONS FOR A VALID EXERCISE BY THE EMPLOYER OF

ITS RIGHT TO TRANSFER EMPLOYEES
A: The transfer should:
1. Not be unreasonable, inconvenient, or prejudicial to the
employee; and
2. Not involve a demotion in rank, diminution in salaries, benefits
and other privileges concerning the transfer.
2. RIGHT TO TRANSFER OF EMPLOYEES
Employer’s Right to Transfer and Reassign Employees
In the pursuit of its legitimate business interests, especially during
adverse business conditions, management has the prerogative to
transfer or assign Ees from one office or area of operation to another
provided there is no demotion in rank or diminution of salary, benefits
and other privileges and the action is not motivated by discrimination,
bad faith, or effected as a form of punishment or demotion without
sufficient cause. This privilege is inherent in the right of Ers to control
and manage their enterprises effectively.
2. RIGHT TO TRANSFER OF EMPLOYEES
Constructive Dismissal
The transfer of an EE may constitute constructive dismissal when it
amounts to an involuntary resignation resorted to when continued
employment is rendered impossible, unreasonable or unlikely; when
there is a demotion in rank and/or a diminution in pay; or when a clear
discrimination, insensibility or disdain by the ER becomes unbearable
to the EE leaving him with NO option but to forego with his continued
employment
2. RIGHT TO TRANSFER OF EMPLOYEES
Gross Insubordination or Willful Disobedience
An EE who refuses to be transferred when such transfer is valid, is
guilty of insubordination or willful disobedience of a lawful order.

Example: The dismissal of a medical representative who acceded in

his employment application to be assigned anywhere in the Philippines,
but later refused to be transferred from Manila to a provincial
assignment, was held valid.
2. RIGHT TO TRANSFER OF EMPLOYEES

Q: May the Er exercise his right to transfer

an Ee and compel the latter to accept the
same if said transfer is coupled with or is in
the nature of promotion?
2. RIGHT TO TRANSFER OF EMPLOYEES
ANSWER:
NO. There is no law that compels an Ee to accept promotion.
Promotion is in the nature of a gift or a reward which a person has a
right to refuse. When an Ee refused to accept his promotion, he
was exercising his right and cannot be punished for it.

While it may be true that the right to transfer or reassign an Ee is an

Er’s exclusive right and the prerogative of management, such right is
not absolute. (Dosch v. NLRC and Northwest Airlines, G.R.
No. 51182, 5 July 1983)
2. RIGHT TO TRANSFER OF EMPLOYEES

TRANSFER PROMOTION
Lateral movement from Denotes a scalar ascent
one position to another of of an officer or an
equivalent level, rank or employee to another
salary. position
2. RIGHT TO TRANSFER OF EMPLOYEES
PRINCIPLES ABOUT PROMOTION:
1. An employee has the right to REFUSE promotion.
2. An employee CANNOT be promoted without his consent even if
merely as a result of transfer
3. An EE CANNOT be dismissed because of his refusal to be
promoted.
2. RIGHT TO TRANSFER OF EMPLOYEES
DEMOTION: OPPOSITE OF PROMOTION

DEMOTION involves a situation where an EE is relegated to a

subordinate or less important position consisting of a reduction to a
lower grade or rank with corresponding decrease in duties and
responsibilities and usually accompanied by a decrease in salary

2 FORMS OF DEMOTION
(1) Disciplinary Sanction; or
(2) Constructive Dismissal
2. RIGHT TO TRANSFER OF EMPLOYEES
Burden of Proving that the Transfer was Reasonable

The Er must be able to show that the transfer is not unreasonable,

inconvenient, or prejudicial to the Ee; nor does it involve a demotion
in rank or a diminution of his salaries, privileges and other benefits.

Should the Er fail to overcome this burden of proof, the Ee’s transfer
shall be tantamount to constructive dismissal. (Blue Dairy
Corporation v. NLRC, G.R. No. 129843, 4 Sept. 1999)
3. PRODUCTIVITY
STANDARDS
3. PRODUCTIVITY STANDARDS

Q: May an Er impose productivity

standards for its workers?
3. PRODUCTIVITY STANDARDS
ANSWER:
A: YES. An ER is entitled to impose
productivity standards for its workers. In fact,
non-compliance may be visited with a penalty
even more severe than demotion.
3. PRODUCTIVITY STANDARDS
EXAMPLES OF PRODUCTIVITY STANDARDS:
The practice of a company in laying off workers because they failed to make the
work quota has been recognized in this jurisdiction. Failure to meet the sales
quota assigned to each of them constitute a just cause for their dismissal,
regardless of the permanent or probationary status of their employment.

Likewise, failure to observe prescribed standards of work or to fulfill

reasonable work assignments due to inefficiency may constitute just cause for
dismissal. Such inefficiency is understood to mean failure to attain work goals or
work quotas, either by failing to complete the same within the allotted reasonable
period, or by producing unsatisfactory results.
4. BONUS

It is an amount granted and paid to an Ee

for his industry and loyalty which
contributed to the success of the Er’s
business and made possible the
realization of profits.
4. BONUS

Q: Can bonus be
demanded?
4. BONUS
A: Generally, NO. Bonus is not demandable as a matter of right. It is a management
prerogative given in addition to what is ordinarily received by or strictly due to recipient.
(Producers Bank of the Phil. v. NLRC, G.R. No. 100701, 28 March 2001)

XPNs: Given for a long period of time, provided that:

1. Consistent and deliberate – ER continued giving benefit without any condition
imposed for its payment;
2. Er knew he was not required to give benefit;
3. Nature of benefit is not dependent on profit;
4. Made part of the wage or compensation agreed and stated in the employment
contract;
5. It was promised to be given without any conditions imposed for its payment in which
case it is deemed part of the wage; and
6. It has ripened into practice. (Marcos v. NLRC, G.R. No. 111744, 8 Sept. 1995)
4. BONUS

Elimination or diminution of benefits may

constitute constructive dismissal or indicate
demotion.
Constructive dismissal is an involuntary resignation resorted to when
continued employment is rendered impossible, unreasonable or unlikely;
when there is a demotion in rank and/or a diminution in pay; or when a
clear discrimination, insensibility or disdain by an employer becomes
unbearable to the employee
5. CHANGE OF WORKING HOURS
The working hours may be changed, at the
discretion of the company, should such
change be necessary for its operations,
and that employees shall observe such
rules as have been laid down by the
company. (Interphil Laboratories Union-
FFW v. Interphil Laboratories, Inc., G.R.
No. 142824, 19 Dec. 2001)
6. BONA FIDE OCCUPATIONAL
QUALIFICATIONS

Where the job itself necessarily requires

a particular question qualification,
then the job applicant or worker who
does not possess it may be disqualified
on that basis. This will not be unlawful
discrimination. (Azucena, 2016)
6. BONA FIDE OCCUPATIONAL QUALIFICATIONS (BFOQ)
TO JUSTIFY A BFOQ, THE ER MUST PROVE TWO
FACTORS:
1. That the employment qualification is reasonably related to the
essential operation of the job involved; and
2. That there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable
to properly perform the duties of the job. (Star Paper v. Simbol,
G.R. No. 164774, 12 April 2006)

TN:BFOQ and REASONABLE BUSINESS NECESSITY RULE

6. BONA FIDE OCCUPATIONAL QUALIFICATIONS (BFQQ)
YRASUEGUI VS. PAL, G.R. No. 168081, October 17, 2008
FACTS:
• THIS case portrays the peculiar story of an international flight steward who was
dismissed because of his failure to adhere to the weight standards of the airline
company.
• In 1984, the weight problem started, which prompted PAL to send him to an
extended vacation until November 1985. He was allowed to return to work once
he lost all the excess weight. But the problem recurred. He again went on leave
without pay from October 17, 1988 to February 1989.
• Despite the lapse of a ninety-day period given him to reach his ideal weight,
petitioner remained overweight.
ISSUE: Whether he was validly dismissed?
6. BONA FIDE OCCUPATIONAL QUALIFICATIONS (BFQQ)
YRASUEGUI VS. PAL, G.R. No. 168081, October 17, 2008
RULING: YES
The dismissal of petitioner can be predicated on the bona fide occupational qualification defense.
Employment in particular jobs may not be limited to persons of a particular sex, religion, or national origin
unless the employer can show that sex, religion, or national origin is an actual qualification for performing
the job. The qualification is called a bona fide occupational qualification (BFOQ). In short, the test of
reasonableness of the company policy is used because it is parallel to BFOQ. BFOQ is valid “provided it
reflects an inherent quality reasonably necessary for satisfactory job performance.”

The business of PAL is air transportation. As such, it has committed itself to safely transport its
passengers. In order to achieve this, it must necessarily rely on its employees, most particularly the cabin
flight deck crew who are on board the aircraft. The weight standards of PAL should be viewed as imposing
strict norms of discipline upon its employees.

The primary objective of PAL in the imposition of the weight standards for cabin crew is flight safety.
Separation pay, however, should be awarded in favor of the employee as an act of social justice or based
on equity. This is so because his dismissal is not for serious misconduct. Neither is it reflective of his moral
character.
7. MARRIAGE BETWEEN EMPLOYEES
OF COMPETITOR-EMPLOYERS
1. Article 134- Stipulation Against
Marriage
2. Zalcita vs. PAL (1977)- INVALID
3. Star Paper Corporation vs. Simbol
(2006)- INVALID
4. Duncan Association of Detailman-
PTGWO vs. Glaxo Wellcome
Philippines (2004)- VALID
8. POST-EMPLOYMENT RESTRICTIONS

Refer to limitations imposed on former

employees after exiting employment in
relation to their next work or business, as
well as what they can say about their
previous work which may be sensitive or
confidential
8. POST-EMPLOYMENT RESTRICTIONS
FREEDOM TO CONTRACT
The ER and EE are FREE to stipulate in an
employment contract prohibiting the EE within a
certain period from and after the termination of his
employment, from:
(1) Starting a similar business, profession, or trade; or
(2) Working in an entity that is engaged in a similar
business that might compete with the ER
8. POST-EMPLOYMENT RESTRICTIONS
1. NON-COMPETE CLAUSE
When the employee is prevented from directly competing or working for a
competitor of his former employer, or when the employee is prevented from setting
up a competing business.

2. NON-SOLICITATION CLAUSE
When a duty is imposed on the employee not to approach his former employer’s
customers or prospective customers, or when the employee is prevented from
taking customers/clients of his former employer.

3. NON-POACHING CLAUSE
When the employee is prevented from enticing his former employer’s staff away
from the business, the aim is to prevent the employee from taking key employees with
him to his new employment or business.
8. POST-EMPLOYMENT RESTRICTIONS
4. CONFIDENTIALITY AND NON-DISCLOSURE CLAUSE
Reflects the commitment of the EE that he shall NOT, either during the period
of his employment with the ER or at any time thereafter, use or disclose to any
person, firm or corporation any information concerning the business or affairs
of his employment, for his own benefit or to the deteriment of the ER.
8. POST-EMPLOYMENT RESTRICTIONS
FACTORS TO CONSIDER TO ENFORCE A RESTRICTIVE
COVENANT
1. Whether the covenant protects a legitimate business
interest of the employer;
2. Whether the covenant creates an undue burden on the
employee;
3. Whether the covenant is injurious to the public welfare;
4. Whether the time and territorial limitations contained in
the covenant are reasonable; and
5. Whether the restraint is reasonable from the standpoint of
public policy.