Labor Law Notes

Constitutional Due Process vs Statutory Due Process

Constitutional Due Process protects an individual from the government and assures him of the rights in
criminal, civil or administrative proceedings.
Statutory Due Process protects employees from being unjustly terminated without just cause after due
notice and hearing (Agabon vs NLRC)
Violation of Notice Requirement is not a denial of Constitutional Due Process
1. Due process clause is a limitation on the power of the government. It does not apply to exercise of
private power.
2. Notice and hearing is required only before the power of organized society is brough to bear upon
an individual. The time of notice and hearing is at the trial stage not dismissal of employee.
3. The employer cannot be expected to be entirely impartial on his own cause
(Serrano vs NLRC)
Non-Impairment Contracts
- The prohibition is aligned on the general principle that laws newly enacted have only prospective
operation. Otherwise, it may derogate existing acts or contracts by abridging, enlarging, or in any
manner changing the intention of the parties (Serrano vs Gallant Maritime Service, Inc.)
Equal Protection Clause Elements:
1. Classification must be based on substantial distinction
2. Germane to the purpose of law
3. Must not be limited to existing conditions only
4. Must apply equally to all members of the same class
(Serrano vs Gallant Maritime Service, Inc.
– OFW illegally dismissed with less than a year unexpired contract vs. at least a year unexpired
contract/amount=unexpired term vs amount=3 mos. salary)
Procedural due process refers to the process used to try and convict defendants accused of crimes, while
substantive due process is a principle allowing courts to prevent government interference with
fundamental rights.
(Serrano vs Gallant Maritime Service, Inc.
- OFW illegally dismissed are left with claims that are less than what others in the same
situation would receive. Deprivation of property)
Social Justice (Calalang vs Williams – See Golden notes)
- When conflicting interest of labor and capital are to be weighed on the scale of social justice, the
heavier influence of the latter should be counterbalanced with the sympathy and compassion the
law accords the less privileged workingman. (Fuentes vs NLRC/Firestone Tire and Rubber
Company vs Firestone Tire and Rubber Company Employees Union)
 Protection to Labor Clause – Art. XIII, Sec. 3
1. Extent of Protection
2. Policy on Employment
3. Unionism
4. Concerted Activities
5. Working Condition
6. Codetermination
7. Shared Responsibility
8. Policy on Dispute Resolution
9. Right of Labor and Enterprise

Policy on Co-determination
- The workers shall participate in policy and decision making process that affects their rights and
benefits
- Consultation on matters pertaining to the interests of the worker and employer
- Voluntary modes of settling labor disputes and conciliation proceedings
- Collective Bargaining Agreement
Management Prerogative:Defined (SHS Perforated Materials Inc. vs Diaz)
- The right of an employer to regulate all aspects of employment, such as the freedom to prescribe
work assignments, working methods, processes to be followed, transfer of employees, supervision
of their work, lay off and discipline, and dismissal and recall of work.
Aspects of Management Prerogatives
1. Employee Selection
2. Right to Discipline
Security of Tenure
➢ The right of employee to security of tenure is correlative to the right of the employer to
reasonable returns on investment and does not give them vested rights to their position
to the extent of depriving the management of its prerogative to change their assignments
or to transfer them.
➢ Management has the prerogative to characterize an employee’s services as no longer
necessary or sustainable, and therefore properly terminable.
Dismissal of Employee
➢ The workers right to security of tenure is not an absolute right, for the law provides that
he may be dismissed for a cause (Molina vs Pacific Plans, Inc.)

3. Transfer of Employee
➢ The management has the prerogative to transfer or assign its employees from one office
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, made in bad faith, or
 effected as a form of punishment or demotion without sufficient cause. (Coca-Cola
Bottlers Phils. Inc. vs Del Pillar)
➢ Transfer – Movement from on position to another which is of equivalent rank, level or
salary, without break in service.
➢ Promotion – Advancement from one position to another with an increase in responsibility
as authorized by law, and usually accompanied by an increase in salary.
➢ Demotion – An employee is relegated to a subordinate or less important position
constituting a reduction to a lower grade or rank, with a corresponding decrease in duties
and responsibilities, and usually accompanied by a decrease in salary.
- Demotion is the consequence of the employee’s failure to comply with the
company productivity standards.
- While due process required by law is applied on dismissals, the same is also
applicable to demotion as demotions likewise affect the employment of a
worker whose right to continued employment, under the same terms and
conditions, is also protected by law. (Punitive) (Gaco vs NLRC)
Outsourcing of Business Activities
➢ It is the prerogative of management to farm out any of its activities, regardless of whether
such activity is peripheral or core in nature. (Alviado vs P&G)
➢ The service agreement does not violate the right of employee to security of tenure and
payment of benefits

4. Productivity Standards
➢ An employer is entitled to impose productivity standards for its workers and may impose
penalty.
➢ Failure to observe prescribed standards of work may constitute just cause for dismissal
➢ This management prerogative of requiring standards may be availed so long as they are
exercised in good faith for the advancement of the employer’s interest. (Buiser vs
Leogardo)

5. Grant of Bonus
➢ Bonus – Gratuity act of liberality of the giver which the recipient has no right to demand
as a matter of right.
➢ The grant of bonus is a management prerogative which cannot be forced upon an
employer who may not be obliged to assume onerous burden of granting bonuses or other
benefits aside from the employee’s basic salary or wages. (Traders Royal Bank vs NLRC)
➢ Bonus becomes demandable when it is made part of the wage or salary or compensation
of the employee (Phil. National Construction Corp. vs NLRC) – When promised to be
given without condition, such as for success of business or greater output, it is part of the
wage.
➢ An employer cannot be forced to distribute bonuses which he can no longer afford to pay.
Bonus should be dependent on the profits. (Traders Royal Bank vs NLRC)

6. Change of Working Hours

➢ When exigencies of the service so requires
➢ Exercised in good faith and not for the purpose of defeating or circumventing the rights
of the employees
 7. Post- employment Ban/Non-Involvement Clause
➢ A post retirement competitive employment restriction is designed to protect the employer
against competition by former employees who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment. (Van Felt vs.
Berefco)
➢ Restraint of Trade – The Non-involvement clause is subject to limitations of time, trade,
and place

8. Policy on Marital Discrimination

➢ Validity of policy prohibiting relationship with competitor’s employee
➢ The employer has the right to guard its trade secrets, manufacturing formulation,
marketing strategies, and other confidential programs and information from
competitors.
➢ Employer has the right to protect its economic interests. No less than the Constitution
recognizes the right of the enterprises to adopt and enforce such a policy to protect its
right to reasonable return on investments and to expansion of growth. (Sec. 3, Art. XIII,
Constitution)
➢ Test on validity of the policy of marital discrimination
1. Disparate Treatment Analysis – Policy must be proven to be discriminatory on its
face. (Ex. Prohibiting employer to hire the wives of male employees but hiring the
husband of female employees.)
2. Disparate Impact Analysis – A facially neutral policy has a disproportionate effect on
a particular class
➢ There must be a compelling business necessity for the validity of marital discrimination
Criterion in the Exercise of Mgmt. Prerogatives
- The employer has a wide latitude of discretion to regulate all aspects of employment. But the
policies, rules and regulation on work-related activities must be fair and reasonable. (Gemina, Jr.
v. Bankwise, Inc.)
Management Prerogatives and those which affects the rights of the employees
- The exercise of management prerogatives was never considered boundless. (Cruz vs Medina)
- The management prerogatives must be without abuse of discretion
- So long as company’s management prerogatives are exercised in good faith for the advancement
of the employer’s interest and not for defeating the rights of the employees, the court will uphold
them. (San Miguel Brewery Sales Force Union vs Ople)
- Must be fair and Reasonable
Art. XIII, Section 3, not Self-Executing
- The espousal of such view presents the dangerous tendency of being overbroad and
exaggerated. The broadest interpretation suggests a blanket shield in favor of labor against
any form of removal regardless of the circumstance. Subsequent legislation is still need to
define the parameters of these guaranteed rights to ensure the protection and promotion, not
only the rights of the labor sector, but of the employers as well. (Agabon vs NLRC)\
Construction in Favor of Labor/Labor Legislation/Contracts
 - Section 4 (Labor Code) – All doubts resolved in favor of labor
- Article 1703 (Civ. Code) – All doubts resolved in favor of safety and decent living of laborer
- The employee’s welfare should be the primary and paramount consideration (PCL Ship.
Phils. Vs NLRC)
Jurisprudential Doctrines when Art. 4 of the Labor Code is not applicable
- Marcopper Mining Corp. vs NLRC
➢ Provisions of CBA - The CBA being a contract, the rules embodied in the Civil Code on
interpretation of contracts should govern. The intent of the parties should be ascertained
by considering relevant provisions of the CBA.
Rule Making Power of DOLE
- For an administrative order to be valid, it must be (i) issued on the authority of law and (ii) it must
not be contrary to the law and Constitution
Applicability of the Labor Code
- It shall apply alike to all workers, whether agricultural or non-agricultural
- Exception:
1. Those employed in the Civil Service
2. Those employed in GOCC with special charter
3. Intra-corporate controversy
4. Employer immuned from suit
Coverage of Civil Service
- All branch, subdivisions, instrumentalities, and agencies of the government, including GOCC’s
with original charters
Test whether a GOCC is covered by Civil Service
- Created under special charter
- Those incorporated under the Corporation law shall not be covered
Corporations governed by the Labor Code – Created under the Corporation Code
1. CDC
2. Philippine Tubercolosis Society, Inc.
3. Red Cross
4. NHA (Organized under the former corporation law and has no original charter)
5. Bliss Devt. Corp. (Same as NHA)
6. PNOC-EDC
7. FTI
Corporations covered by the Civil Service Law – Has original or special charter
1. Phil. Casino Operators Corp. (PCOC)
2. Phil. Special Services Corp. (PSSC)
3. Duty Free Phils.
4. LWD – PD198
Employers with Immunity from Suit
1. International Organizations
2. Asia Devt. Bank
3. Internation Rice Research Institute
4. Specialized Agencies of UN
5. Southeast Asian Fisheries Devt. Center
When Immunity from suit is not applicable
1. When it has entered into a contract in its private or proprietary capacity