Republic of the Philippines

Bulacan State University

Sarmiento Campus
City of San Jose del Monte, Bulacan

BULACAN STATE UNIVERSITY – SARMIENTO CAMPUS

LAZADA’S LABOR CONTROVERSY

A Case Study Analysis

Presented to the Faculty of Business and Management Department
Bulacan State University - Sarmiento Campus
City of San Jose Del Monte, Bulacan

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Science in Business Administration

By:
Bautista, John Paul C.
Calpatura, Stefanie C.
Caramol, Jovelyn L.
Cruz, Eunice Grace M.
Garcia, Ushley Eve S.
Lapidez, Maureen D.
Molina, Joshsua Adrian D.
Recto, Pionah Aliah M.
Tutana, Trisha Joy M.
Zamora, Akira P.

Instructor’s Name: Doc. Maricel C. Galang

Table of Contents
 BULACAN STATE UNIVERSITY – SARMIENTO CAMPUS

Summary………………………………………………………………….1

Background of the Study…………………………………………………2

Problem…………………………………………………………………...3

Solution…………………………………………………………………...5

Result……………………………………………………………………...6

Recommendation……………………………………………….................7

Conclusion…………………………………………………………...........8

References…………………………………………………………...........9
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SUMMARY
This study examines the legal controversy between Lazada E-Services Philippines,
Inc. and five former employees who were illegally dismissed and denied their rightful
benefits. Lazada was accused of unjustly terminating five employees and failing to
provide their due salaries, overtime pay, holiday pay, service incentive leave pay,
thirteenth-month pay, and separation pay. Lazada company argued that these workers
were independent contractors, but the Court ruled they were regular employees entitled
to protections under Philippine labor laws. The Supreme Court ruled in favor of the
employees, mandating their reinstatement and the payment of all outstanding benefits.
This case emphasizes the critical need for adherence to labor laws, including proper
employee classification and fair compensation practices. Additionally,
recommendations regarding the worker's condition and rights, employee
representations, and competitive wages. The case establishes a precedent for the
importance of legal compliance in employment practices and emphasizes the judiciary's
role in protecting workers' rights.

1
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BACKGROUND OF THE STUDY

Leading e-commerce company Lazada E-Services Philippines, Inc. was facing

legal issues related to the wrongful termination of five workers and the non-payment of
different benefits. Article 282 of the Philippine Labor Code mandates that employers
give due process and legitimate reasons for termination. The corporation was accused
of terminating these employees without following the correct processes. There were
severe doubts regarding the company's adherence to labor rules safeguarding workers'
rights when the employees were fired without cause or an opportunity to present their
case.

Lazada was found to have withheld a number of benefits from the employees,
including salary, overtime compensation, holiday pay, service incentive leave pay,
thirteenth month pay, and separation money, in addition to the unjust dismissal. This
was blatantly against the Labor Code's regulations for equitable compensation and
employee treatment, which require businesses to uphold their duties to employees by
providing all benefits and wages that are due. The business attempted to argue that the
workers were independent contractors rather than normal employees, saying that their
only responsibility was to arrange transactions rather than hire the delivery staff
directly.

Nonetheless, the Court determined that since Lazada had personally hired the
workers, they were entitled to the same protections under the Labor Code as normal
workers, particularly Article 294 which calls for the reinstatement of workers who have
been wrongfully fired along with back pay (Jurisprudence, 2022). In the end, the Court
of Appeals mandated that Lazada pay the workers' lost earnings and benefits and return
them to their previous positions. This case shows how important it is for businesses to
follow labor laws and treat employees fairly.
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2
PROBLEM

The Illegal dismissal of 5 employees of Lazada E-Services Philippines and non-

payment of salary, overtime pay, holiday pay, service incentive leave pay, thirteenth
month pay, and separation pay.

Lazada E-Services Philippines argued that the riders are not regular employees but
independent contractors. It argued that it is not a common carrier but rather a business
that helps facilitate the sale of goods between sellers and buyers. When a buyer
purchases an item through Lazada, the company simply arranges for the delivery of the
product using an independent transportation service.

It is said that the employees are not hired by a contractor or subcontractor.

Employees merely refer to RGSERVE, Inc. as their former employer, but it is clear in
the parties' submissions that employees were directly hired by Lazada E-Services
Philippines. Each employee signed an individual Contract with Lazada who paid them
directly. Thus, there is no relationship wherein a contractor or subcontractor is required
to possess substantial capital or investment. Additionally, employees cannot be
considered independent contractors in a bilateral relationship. The work performed by
the employees does not require a special skill or talent. Picking up and delivering goods
from the warehouse to buyers does not call for a specific expertise. It is also not shown
that employees were hired due to their unique ability or competency.

Therefore, Lazada E-Services violated the Labor code, particularly Article 294
which states, “In case of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and to his backwages computed from the time his
compensation was withheld from
 BULACAN STATE UNIVERSITY – SARMIENTO CAMPUS

him up to time of his reinstatement". Additionally, the illegal dismissal of 5 employees

of Lazada E-Services by bad faith is contrary to Article 282 of the Labor Code.

Article 282 of the Labor Code provides:

Article 282. Termination by employer. An employer may terminate an employment for

any of the following just causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;

(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative;
and

(e) Other causes analogous to the foregoing.

The Supreme Court ordered Lazada E-Services Philippines to reinstate the

employees to their former position and pay their full backwages, overtime pay,
thirteenth month pay, cash bond deposit, and other benefits and privileges from January
16, 2017, when they were dismissed, until the time of their actual reinstatement.
 BULACAN STATE UNIVERSITY – SARMIENTO CAMPUS

SOLUTION

Addressing the misclassification of the riders as independent contractors, Lazada

must review their employment status. Given that the riders typically conduct tasks that
are necessary for the company's operations, such as picking up and delivering items,
they should be regarded as employees rather than independent contractors. By
classifying them as workers, Lazada would be required to provide the complete range
of employment benefits and protections mandated by the Labor Code, such as health
insurance and retirement benefits, therefore considerably improving their job security.

Also Implementing a Proper Compensation Structure. Lazada ought to update their

compensation plan to incorporate all legally mandated benefits. The riders are currently
paid a daily service fee, which does not cover other benefits like overtime, holidays,
and thirteenth month pay. Employee loyalty, work satisfaction, and performance would
probably all rise as a result of this adjustment since the riders would feel appreciated
and fairly compensated for their contributions.

According to HRM Legal requirements this Mandatory Benefits Compliance

ensuring that all employees receive mandatory benefits is essential for compliance with
labor laws and for fostering a supportive work environment. This includes providing
service incentive leave, separation pay, and other statutory benefits. By adhering to
these legal requirements, Lazada can avoid potential penalties and litigation related to
non-compliance. Furthermore, offering these benefits enhances employee morale and
loyalty, as it demonstrates the company’s investment in their well-being and job
security.
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RESULT

 The decision by the Supreme Court resulted in favoring the riders, such as
declaring them as regular employees of Lazada E-Services Philippines, Inc., SC
ordered Lazada to reinstate the riders to their former posts and pay the
compensation for their lost wages and benefits despite the Independent Contractor
Agreement they signed. It demonstrates the judicial system’s role in upholding
workers’ rights.

 It also emphasizes the importance of fair employment practices and the company's
legal responsibilities to their employees. This event can be a guide to other
companies facing similar issues by showing them and making them realize the
importance of adhering to proper termination procedures to avoid leading in the
court case, which can be their downfall, such as having a bad reputation and other
negative effects.

 In order for other companies to avoid making the same mistake, they should
promote giving fair treatment to employees. This event can also motivate
employees to stand and speak up for their rights, especially if they feel that their
company is giving them unfair treatment, such as illegal dismissal, non-payment
of salary and benefits, etc.
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RECOMMENDATION

 Lazada should be sure that the terms of their agreements with their employees are
detailed out in clear information. This should include particulars regarding the
worker's authority over their job, the instruments and apparatus they employ, and
the terms of payment. These contracts need to be precise and straightforward;
broad terms and generalizations should be avoided. They should specify exactly
how much power the employer has over the employee's job, including monitoring,
task assignment, and working hours. That supplies the tools and equipment needed
for the job should also be included in the contract. The hourly rate or fixed fee,
deductions, and payment schedule should all be explicitly stated in the payment
structure

 Lazada should acknowledge and promote employee representation through

collective bargaining agreements or unions. This gives employees an opportunity
in choices that impact their working environment.

 Lazada should improve their workers’ rights by supporting and encouraging them
to speak their voices, as they also have their rights to file a complaint and that they
are safe to report problems or issues without worrying about consequences.

 Lazada needs to assess and adjust the wages of their workers to ensure that they
stay within or above industry standards and to provide livable income to their
employees.
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CONCLUSION

Lazada E-Services Philippines, a major e-commerce company, faced legal issues due to
the illegal dismissal of five employees and non-payment of their rightful benefits.
According to the complaint, Lazada terminated the employees without proper
procedure and without valid reasons, which is against the Labor Code of the Philippines
(Article 282). Additionally, Lazada did not pay the employees their salaries, overtime
pay, holiday pay, service incentive leave pay, 13th-month pay, and separation pay,
which also violates the Labor Code's provisions on fair compensation and proper
treatment of employees.

Lazada's defense was that the employees were independent contractors and not regular
employees, arguing that Lazada is a business that only facilitates the sale of products
between sellers and buyers. However, the Court confirmed that they were direct
employees of Lazada and entitled to protections under the Labor Code (Article 294).

The Court of Appeals ordered Lazada to reinstate the employees to their positions and
pay all the benefits they were deprived of from their dismissal on January 16, 2017,
until their reinstatement.
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REFERENCES:

Admin. (2023, February 7). Lazada riders as employees under the Four-Fold Test. iLead -
Institute of Leadership Entrepreneurship and Development.

https://i-leadacademy.org/2023/02/ditiangkin-vs-lazada/

Chrisden Cabrera Ditiangkin, Hendrix Masamayor Molines, Harvey Mosquito

Juanio, Joselito Castro Verde, & Brian Anthony Cubacub Nabong v. Lazada E Services

Philippines, Inc., Allan Ancheta, Richard Delantar, & Jade Andrade, G.R. No. 246892.

(September 21, 2022)

https://lawphil.net/judjuris/juri2022/sep2022/gr_246892_2022.html

Constitution of the Republic of the Philippines. (1987). Article XIII: Labor.

https://lawphil.net/consti/cons1987.html

Labor Code of the Philippines. (2022). Article 282: Termination by employer.

https://chanrobles.com/legal4labor6.htm#:~:text=ART.%20282.%20Termination%20by

%20employer.%20%20An%20employer,habitual%20neglect%20by%20the

%20employee%20of%20his%20duties%3B

Labor Code of the Philippines. (2022). Fair compensation and employee treatment.

chromeextension://kdpelmjpfafjppnhbloffcjpeomlnpah/https://library.laborlaw.ph/w

p-content/uploads/2023/10/2022.Labor_.Code_.DOLE-edition.pdf
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Labor Code of the Philippines.(2022). Article 294: Reinstatement and backwages.

https://lawphil.net/statutes/presdecs/pd1974/pd_442_1974a.html