LABOR LAWS AND LEGISLATION – NOTES 1

The Labor Code of the Philippines stands as the law governing employment practices and labor
relations in the Philippines. It prescribes the rules for hiring and termination of private
employees; the conditions of work including maximum work hours and overtime; employee
benefits such as holiday pay, thirteenth month pay and retirement pay; and the guidelines in the
organization and membership in labor unions as well as in collective bargaining.

The Labor Code contains several provisions which are beneficial to labor. It prohibits termination
from employment of Private employees except for just or authorized causes as prescribed in
Article 282 to 284 of the Code. The right to trade union is expressly recognized, as is the right of
a union to insist on a closed shop. Strikes are also authorized for as long as they comply with the
strict requirements under the Code, and workers who organize or participate in illegal strikes
may be subject to dismissal.

Moreover, Philippine jurisprudence has long applied a rule that any doubts in the interpretation
of law, especially the Labor Code, will be resolved in favor of labor and against management.

PRESIDENTIAL DECREE NO. 442, AS AMENDED A DECREE INSTITUTING A LABOR CODE

THEREBY REVISING AND CONSOLIDATING LABOR AND SOCIAL LAWS TO AFFORD
PROTECTION TO LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT
AND ENSURE INDUSTRIAL PEACE BASED ON SOCIAL JUSTICE.

LABOR

Labor refers to the exertion of human effort to acquire an income. Human effort includes physical
and mental exertion. In management, labor is one factor of the production with land, capital and
enterprise.

Labor is synonymous to human resource, one of the four resources of an organization, and the
other would-be financial resource, physical resource, and information resource.

Labor in the Philippines is managed by the Department of Labor and Employment (DOLE). Labor
supply is determined by the number of able people in the population and their willingness to
work. Labor demand, on the other hand, is determined by the health of the economy and firms.

CHARACTERISTICS OF LABOR

• Labor is perishable – this characteristic makes labor incapable of being stored. Labor is
wasted and is lost forever.
• Labor and the individual are inseparable – a man working for wages cannot separate his
physical self from his labor if he wants to enjoy the comforts of another room.
• Labor supply does not change quickly - The supply of labor increases steadily as
population grows. When there is a great demand for labor in a particular year, labor
cannot be made to increase abruptly.
Sometimes, even if the demand for labor is higher in some places, many people still prefer to
remain unemployed. Reasons would include they want to stay close with their families,
unfamiliar of the environment, lack of required skill, cost of moving to another place. Although,
many Filipinos, especially the millennials, would rather choose moving overseas to be employed
than to be relocated in other parts of the country.

MANAGEMENT PREROGATIVE

MANAGEMENT PREROGATIVE is an exclusive and special right, power or privilege granted to

business owners. Paragraph 4, Section 3, Article XIII of the 1987 Constitution of the Philippines
reads: ‘the State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to reasonable
returns to investments, and to expansion and growth’. It verbalizes business owner’s rights that
provides freedom on how they will conduct their business if these conducts or business practices
are in compliance with directly associated existing laws.

Article 428 of the Civil Code reads; ‘the owner has the right to enjoy and dispose of a thing,
without limitations than those established by law’. Thereby giving a free interpretation on the
prerogatives given to business owners.

COMMON MANAGEMENT PREROGATIVES

Right to Hire. Business organizations has been given an exclusive right to decide or hire people
whom they think is capable of helping the organization grow and prosper. Although of course, it
is still, as well it should be, in accordance to labor laws (Book 1 Pre-Employment).

Right to Dismiss/Terminate. A company has the right to dismiss employees in accordance with
the causes and procedures established by law. This particular right must be exercised with
caution and without abuse of discretion because termination affects the right of the worker to
Security of Tenure.

Right to Transfer. A company has the right to transfer an employee from one office to another
within the business establishment provided that there is no demotion in rank, salary, benefits
and other privileges.

Right to Promote and Demote. The company has the right to promote employees. Promotion is a
scalar ascent of an employee to another position higher in rank and in salary. The right to
promote carries with it the right to demote employees, as well.

Right to Lay Down Company Policies, Right to Establish Working Hours, Right to Organize and
Reorganize. In general terms, an employer is free to regulate, according to his own discretion and
judgment, all aspects of employment, including work assignments, working methods, time, and
the manner or work, tools to be used, processes to be followed, supervision of workers ad
working regulations.
Right to Reasonable Return on Investment and the Right to Expansion and Growth. Every business
enterprise endeavors to increase its profit, and, in the process, it may adopt, or devise means
designed to towards expansion and growth as espoused in Paragraph 4, Section 3, Article XIII of
the 1987 Constitution.

Right to contract out work. Contracting and subcontracting arrangements are expressly allowed
by law and are subject to regulation for the promotion of employment and the observance of the
rights of workers to just and humane conditions of work, security of tenure, self-organization,
and collective bargaining.
* Labor-only contracting shall be prohibited. Also, the company, though they can exercise this right, are
prohibited to do so if there are existing employees who can carry out a job; and contracting or subcontracting
cannot be used to terminate employees due to redundancy. *

LIMITATIONS OF MANAGEMENT PREROGATIVE

Management prerogative is not absolute. Limitations on the application and use of management
prerogative are first, it should be exercised in good faith, and it should protect employee rights.

“Managerial prerogatives, however, are subject to limitations provided by law, collective

bargaining agreements, and general principles of fair play and justice.” (Endico v. Quantum Foods
Distribution Center, G.R. No. 161615, 39 January 2009)

Good Faith

The decisions made by the employer that affected the employees shall be made without
deliberate motive of harming the employees or thumping their rights.

Employee Right

For instance, “[t]he managerial prerogative to transfer personnel must be exercised without
grave abuse of discretion. It must always bear in mind the basic elements of justice and fair play.
Having the right must not be confused with the manner that right is exercised.” (Globe Telecom,
Inc. v. Lazaro, G.R. No. 150092, 27 September 2002)

Involuntary Solitude

The Philippine Constitution states that no involuntary servitude in any form shall exist except as
punishment for a crime whereof the party shall have been duly convicted. In view of the
prohibition on involuntary servitude, an employee is given the right to resign under Article 285
of the Labor Code.
Article 285. Termination by Employee reads: a) An employee may terminate without just
cause, the employee/employer relationship by serving a written notice on the employer at
least one (1) month in advance. The employer upon who no such notice was served may
hold the employee liable for damages.
An employee can end the employee/employer relationship without serving any notice to the
employer if the following are present:

a. Serious insult by the employer or his representative on the honor and person of the
employee;

b. Inhuman and unbearable treatment accorded the employee by the employer or his
representative;

c. Commission of a crime or offense by the employer of his representative against the person
of the employee or any of the immediate members of his family; and

d. Other causes analogous to any of the foregoing.

EMPLOYEE/EMPLOYER RELATIONSHIP OR EER exist if all of the following elements are

present:

1. The employer selects and engages the employee.

2. The employer pays the wages or salaries of the employee.

3. The employer has the power to dismiss the employee.

4. The employer has the power to control how the employee conducts his work.