GROUP 9

Bajada, Christiane Marie - P.D. 851, E.O. 203/E.O. 292/ R.A. 9177
Canada, Jillyn - D.O. 18-A/D.O. 18-02/ D.O. 174, RA 9262
Camino, Dylza Fia - Arts. 1705-1709 of the Civil Code, RA 6727
 PRESIDENTIAL
DECREE NO. 851, AS
AMENDED
Bajada, Christiane Marie L.
What is 13 Month Pay?th

◦ It is a form of monetary benefit equivalent to the monthly basic

compensation received by an employee, computed pro-rata according to
the number of months within a year that the employee has rendered
service to the employer.
◦ It is based on wage but is not part of wage. (Central Azucarera de Tarlac
vs. Central Azucarera de Tarlac Labor Union-NLU, G.R. No. 188949, July
26, 2010) This is because it is in the nature of additional income granted to
employees who are not receiving the same. (Agabon v. NLRC [2004])
◦ It covers all rank-and-file employees as well as all employers.
◦ Under P.D. 851, the employers were required to pay a 13th month pay to
all their employees receiving a basic salary of not more than P1000 a
month, regardless of the nature of their employment. This has now
been revised in Memorandum Order No. 28 by removing the salary
ceiling of P1000.
◦ With the removal of the salary ceiling of P1,000.00, all rank and file
employees are now entitled to a 13th month pay regardless of the
amount of basic salary that they receive in a month if their employers
are not otherwise exempted from the application of P.D. No. 851. Such
employees are entitled to the benefit regardless of their designation or
employment status, and irrespective of the method by which their
wages are paid, provided that they have worked for at least one (1)
month during a calendar year.
◦ Minimum amount of 13th month pay
◦ Under the Implementing Rules and Regulations of PD 851, the minimum amount
required should not be less than one-twelfth (1/12) of the total basic salary earned by
an employee within a calendar year.
◦ Minimum period of service required
◦ To be entitled to the benefit, it is required that the employee should have worked for at
least one (1) month during a calendar year.
◦ Time of payment
◦ The required 13th month pay shall be paid not later than December 24 of each year.
◦ An employer, however, may give to his employees one half (½) of the required 13th
month pay before the opening of the regular school year and the other half on before
the 24th of December of every year. The frequency of payment of this monetary
benefit may be the subject of agreement between the employer and the
recognized/collective bargaining agent of the employees.
 Basic salary
◦ The basic salary of an employee for purposes of computing the 13 th month pay should
include all remunerations or earnings paid by an employer to an employee for
services rendered but may not include cost-of-living allowances granted pursuant to
Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing
payments, and all allowances and monetary benefits which are not considered or
integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975. (Implemeting Rules and
Regulations)
◦ For purposes of computing the 13th month pay, “basic salary” should be interpreted to
mean not the amount actually received by an employee, but 1/12 of their standard
monthly wage multiplied by their length of service within a given calendar year
(Honda Phils., Inc. v Samahan ng Malayang Manggagawa sa Honda, G.R. No.
 Commissions vis-à-vis 13th month pay
◦ Earnings and remuneration which are closely akin to fringe benefits, overtime
pay or proft-sharing payments are excluded in computing for the 13th month pay.
However, sales commissions which are effectively an integral portion of the
basic salary structure of an employee shall be included in determining his 13th
month pay.
◦ In the case of Philippine Duplicators, Inc. v. NLRC (G.R. No. 110068, Feb. 15,
1995), the Supreme Court held that “the sales commission earned by the
salesmen who make or close a sale constitute part of the compensation or
remuneration paid to salesmen for serving as salesmen, and hence as part of the
“wage” or salary of petitioner’s salesmen. The sale commissions were an
integral part of the basic salary structure used as the base amount for the
computation of 13th month pay.”
Who are covered by P.D. 851?
◦ All rank-and-file employees
◦ Domestic workers/kasambahays
◦ Part time employees
◦ Seasonal employees
◦ Casual employees
◦ Workers paid on piece-rate basis
13th month pay of certain types of employees

◦ Employees paid by results – entitled to 13th month pay

◦ Those with multiple employers – entitled to 13th month pay regardless of
their total earnings from each or all their employers
◦ Private school teachers – entitled regardless of the number of months they
teach or are paid within a year, if they have rendered service for at least 1
month within a year
◦ Employees who are paid a fixed or guaranteed wage plus commission –
entitled to 13th month pay based on their earnings during the calendar year
 13th Month Pay of a Resigned or
Separated Employee
◦ An employee who has resigned or whose services were terminated at any time before
the time for payment of the 13th month pay is entitled to this monetary benefit in
proportion to the length of time he worked during the year, reckoned from the time he
started working during the calendar year up to the time of his resignation or
termination from the service. Thus, if he worked only from January up to September
his proportionate 13th month pay should be equivalent of 1/12 his total basic salary
he earned during that period.
◦ The payment of the 13th month pay may be demanded by the employee upon the
cessation of employer-employee relationship. This is consistent with the principle of
equity that as the employer can require the employee to clear himself of all liabilities
and property accountability, so can the employee demand the payment of all benefits
due him upon the termination of the relationship.
Employees not covered by P.D. 851
1. Government employees
2. Employees paid purely on commission basis
3. Employees already receiving 13th month pay
4. Managers (except if such has been a company
practice)
5. Seafarers
 Petroleum Shipping Limited and Trans-Global Maritime
Agency, Inc. vs. NLRC and Florello Tanchico (G.R. No. 148130,
June 16, 2006)
◦ On 6 March 1978, Esso International Shipping (Bahamas) Co., Ltd., ("Esso") through Trans-Global
Maritime Agency, Inc. ("Trans-Global") hired Florello W. Tanchico ("Tanchico") as First Assistant
Engineer. On 13 October 1992, Tanchico returned to the Philippines for a two-month vacation after
completing his eight-month deployment.
◦ After undergoing the required standard medical examination, it was revealed that Tanchico was suffering
from heart diseases and diabetes. Tanchico took medications for two months and a subsequent stress test
showed a negative result. However, Esso no longer deployed Tanchico. Instead, Esso offered to pay him
benefits under the Career Employment Incentive Plan. Tanchico accepted the offer.
◦ On 26 April 1993, Tanchico filed a complaint before the Philippine Overseas Employment Administration
(POEA) for illegal dismissal with claims for backwages, separation pay, disability and medical benefits
and 13th month pay. The NLRC ruled that the agency should pay Tanchico his 13 th month pay, the former
not falling under the enumerated exempted employers under P.D. 851 and in the absence of any proof that
respondent is already paying its employees a 13th month pay. The Court of Appeals affirmed the NLRC.
 Petroleum Shipping Limited and Trans-Global Maritime
Agency, Inc. vs. NLRC and Florello Tanchico (G.R. No. 148130,
June 16, 2006)
◦ The Supreme Court did not agree with the ruling of the Court of Appeals in
granting the 13th month pay. It held that PD 851 does not apply to seafarers and
contemplates the situation of land-based workers, and not of seafarers who
generally earn more than domestic land-based workers. Seafarers are considered
contractual workers governed by the POEA and that as a Filipino seaman,
petitioner is governed by the Rules and Regulations Governing Overseas
Employment and the said Rules do not provide for separation or termination
pay. The Contract of Employment,  which is the standard employment contract
of the POEA, likewise does not provide for the payment of 13th month pay.
Hence, in the absence of any provision in his Contract governing the payment of
13th month pay, Tanchico is not entitled to the benefit.
 Employers not covered by P.D. 851
1. The Government and any of its political subdivisions
2. Employers already paying their employees 13th month pay or more in a calendar year in
its equivalent at the time of the issuance of the Revised Guidelines
3. Employers of those who are paid on purely basis of:
a. Commission
b. Boundary; or
c. Task; and
d. Fixed amount for performing a specific work irrespective of the time consumed in the performance
thereof
4. Distressed employers
a. Currently incurring substantial losses; or
b. In the case of non-profit institutions & organizations, where their income, whether from donations,
contributions, grants and other earnings from any source, has consistently declined by more than 40% of
their normal income for the last 2 years
 Exemptions of distressed employers
◦ Distressed employers shall qualify for exemption from the requirement of
the Decree upon prior authorization by the Secretary of Labor.
◦ Under Administrative Order No. 2, series of 1976, the petition for exemption shall
contain a sworn statement on the inability to implement the Decree and the reasons,
therefore, and shall be accompanied by the following documents and statements:
◦ (a) A certified true copy of the income tax returns for the last two (2) years;

(b) A certified copy of the financial reports for the last two (2) years filed with the
Government entities, such as the Securities and Exchange Commission, Department
of Trade, Department of Industries and Board of Investments;

(c) A detailed sworn statement of the actual monthly losses not covered by the report
required under paragraph (b) above and such other proofs or documents as may be
required by the Chairman, Wage Commission to establish such exemption.
 Report of Compliance
◦ Pursuant to the Implementing Rules and Regulations of PD 851, every covered
employer shall make a report of his compliance with the Decree to the nearest
regional labor office not later than January 15 of each year.
◦ Non-payment of the thirteenth-month pay provided by the Decree and these rules shall
be treated as money claims cases and shall be processed in accordance with the Rules
Implementing the Labor Code of the Philippines and the Rules of the National Labor
Relations Commission.
◦ Under A.O. No. 2, all complaints for non-payment of the 13th-month pay shall be
filed with the Field Services Division of the Regional Office concerned. The Regional
Director shall direct the said Division to conduct an inspection and investigation in
connection with the complaint filed.
13 Month Pay during COVID-19
th

◦ DOLE came out with Labor Advisory No. 28 on Oct. 16, 2020, which
makes it mandatory for employers to pay 13th month pay. 
◦ Labor Advisory No. 28 provides that the request or application for the
exemption or deferment in the payment of the 13th month pay are not
allowed. This means despite incurring substantial losses, employers are
required to pay their rank-and-file employees a 13th month pay.
◦ Under Labor Advisory No. 28, the DOLE has also required employers to
make a report of their compliance to the nearest Regional Office not later
than 15 January of the following year i.e 15 January 2021.
E.O. 203 / E.O. 292 /
R.A. 9177
Bajada, Christiane Marie L.
Executive
Order No.
203, 1987
It was signed on June 30,
1987.
It provides a list of regular
holidays and special days
to be observed throughout
the Philippines and for
other purposes.
 Executive
Order No. 292
• Chapter 7 of Book 1
focuses on Regular
Holidays and Nationwide
Special Holidays which is
just a reiteration of EO 203.
• It provides the 10 official
regular holidays as
mandated from several acts
and previous laws
providing for the same as
well as 2 special days that
are to be celebrated
nationwide.
• Section 27 also provides
that “The President may
proclaim any local special
day for a particular date,
group or place.”
 Republic Act
9177
It declared Eidul Fitr as a regular
holiday that is to be celebrated
nationwide as opposed to only
Muslim areas as well as
declaring Eidul Adha as a
regional holiday in the
Autonomous Region of Muslim
Mindanao.
Eidl Fitr is the first day following
the thirty-day fasting period of
Ramadan whereas Eidl Adha is a
tenth day in the month of Hajj or
Islamic Pilgrimage to Mecca
when Muslims pay homage to
Abraham’s supreme sacrifice.
Both Eidl Fitr and Eidl Adha
follow the Islamic calendar and
their respective dates are to be
announced by presidential
proclamations.
Republic Act
9492
It is an act rationalizing
the celebration of
national holidays and
further amends EO 292
on Holidays.
Republic Act
9849
It was signed on
February 19, 2010.
It promoted Eidl
Adha from a regional
holiday into a
national regular
holiday.
San Miguel Corporation vs. CA (G.R.
No. 146775 Jan. 30, 2002)
◦ On 17 October 1992, the DOLE conducted a routine inspection in the premises
of San Miguel Corporation (SMC). In the course of the inspection, it was
discovered that there was underpayment by SMC of regular Muslim holiday
pay to its employees.
◦ Hence, Alan M. Macaraya, Director IV of DOLE Iligan District Office issued a
compliance order, dated 17 December 1993, directing SMC to consider
Muslim holidays as regular holidays and to pay both its Muslim and non-
Muslim employees holiday pay within thirty (30) days from the receipt of the
order.
 San Miguel Corporation vs. CA (G.R.
No. 146775 Jan. 30, 2002)
◦ Petitioner asserts that Article 3(3) of Presidential Decree No. 1083 provides that" (t)he
provisions of this Code shall be applicable only to Muslims . . . However, there should be
no distinction between Muslims and non-Muslims as regards payment of benefits for
Muslim holidays. The Court of Appeals did not err in sustaining Undersecretary Español
who stated:
◦ Assuming arguendo that the respondent’s position is correct, then by the same token, Muslims
throughout the Philippines are also not entitled to holiday pays on Christian holidays declared
by law as regular holidays. We must remind the respondent-appellant that wages and other
emoluments granted by law to the working man are determined on the basis of the criteria laid
down by laws and certainly not on the basis of the worker’s faith or religion.
◦ At any rate, Article 3(3) of Presidential Decree No. 1083 also declares that." . . nothing
herein shall be construed to operate to the prejudice of a non-Muslim."
 San Miguel Corporation vs. CA (G.R.
No. 146775 Jan. 30, 2002)
◦ In addition, the 1999 Handbook on Workers’ Statutory Benefits,
approved by then DOLE Secretary Bienvenido E. Laguesma on 14
December 1999 categorically stated:
◦ Considering that all private corporations, offices, agencies, and entities or
establishments operating within the designated Muslim provinces and
cities are required to observe Muslim holidays, both Muslim and
Christians working within the Muslim areas may not report for work on
the days designated by law as Muslim holidays.
Holiday Pay during COVID-19
(2020)
◦ DOLE released Labor Advisory No. 13-A, s. of 2020 which allowed the deferment
of payment of holiday pay for the April 2020 holidays in view of the existence of a
national emergency arising from COVID19. Employers were allowed to defer
payment until such time that the emergency situation had been abated. This
deferment was still allowed in succeeding labor advisories up until the month of
November.
◦ Labor Advisory No. 31, s. of 2020 was then released which stated that employers
who were allowed to defer payment of the holiday pay to their employees in Labor
Advisory Nos. 13-A, 15, 20, 22, 25, 27 and 29 were now required to pay all covered
employees of the deferred holiday pay equivalent to 100% of their daily wage.
Holiday Pay during COVID-19
(2021)
◦ Proc. 1107, s. of 2021 was released on Feb. 26, 2021, amending
Proc. 986, which revised the list of holidays for 2021.
◦ Under the amended proclamation, Nov. 2 (All Souls’ Day), Dec. 24
(Christmas Eve) and Dec. 31 (Last Day of the Year), which were
originally classified as Special (Non-Working) Days, were now
deemed as Special (Working) Days.
◦ Because of this reclassification, there will be no special pay rules
that will take effect if there is work to be done on these three days.
D.O. 18-A/D.O. 18-
02/D.O. 174
Canada, Jillyn
Definition of Terms

(a)Contracting” or “subcontracting” refers to an arrangement whereby a principal agrees to put out or

farm out with a contractor or subcontractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal.

(b) “Contractor or subcontractor” refers to any person or entity engaged in a legitimate contracting or
subcontracting arrangement.

(c) “Contractual employee” includes one employed by a contractor or subcontractor to perform or

complete a job, work or service pursuant to an arrangement between the latter and a principal.

(d) “Principal” refers to any employer who puts out or farms out a job, service or work to a contractor or
subcontractor.

(e)Substantial capital or investment” refers to capital stocks and subscribed capitalization in the case of
corporations,
tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.
◦ In-house agency – the definition of an in-house agency was expanded to
refer to a contractor which is owned, managed, or controlled directly or
indirectly by the principal or one where the principal owns/represents any
share of stock, and which operates solely or mainly for the principal. It is
prohibited to engage the services of an in-house agency
◦ Capitalization/financial capacity of contractors – the concept of “Net
Financial Contracting Capacity (NFCC)” was introduced, which refers to the
formula to determine the financial capacity of the contractor. NFCC is the
current assets minus current liabilities multiplied by K, which stands for
contract duration equivalent to: 10 for one year or less, 15 for more than one
year up to two years, and 20 for more than two years, minus the value of all
outstanding or ongoing projects including the contracts to be started.
Department of Labor and Employment (DOLE)
Department Order No. 18-A: The Rules and
Regulations on Contracting
◦ A salient feature of DO 18-A is the mandatory registration of all
contractors with the DOLE. A Certificate of Registration is good for
3 years. Failure to register shall give rise to the presumption that the
contractor is engaged in labor-only contracting, which is prohibited.
◦ Hence, it is strongly advised that contractors register with DOLE, not
only in compliance with DO 18-A but also as a preventive measure to
avoid problems in the future concerning labor claims and cases filed
by employees.
Labor-only contracting
◦ It refers to an arrangement where:
◦ the contractor does not have substantial capital or investments in the form of tools,
equipment, machineries, work premises, among others, and the employees recruited and
placed are performing activities which are usually necessary or desirable to the operation
of the company, or directly related to the main business of the principal within a definite
or predetermined period, regardless of whether such job, work or service is to be
performed or completed within or outside the premises of the principal; or
◦ The contractor does not exercise the right to control over the performance of the work of
the employee.
◦ This is prohibited.
Department Order No. 18-A, Series of 2011 (“DO 18-A”). Section 4 of
DO 18-A states that contracting or subcontracting shall be legitimate if
all the following circumstances concur:
(a) The contractor is registered with DOLE and carries a distinct and
independent business and undertakes to perform the job, work or
service on its own responsibility, according to its own manner and
method, and free from control and direction of the principal in all
matters connected with the performance of the work except as to the
results thereof;
(b) The contractor has substantial capital and/or investment; and
(c) The Service Agreement ensures compliance with all the rights and 
benefits under Labor Laws.
It is required that the Employment Contract between the Contractor
and Employee include the following terms and conditions:
(a). The specific description of the job, work or service to be
performed by the employee;
(b). The place of work and terms and conditions of employment,
including a statement of the wage rate applicable to the individual
employee; and
(c). The term or duration of employment that must be co-extensive
with the Service Agreement or with the specific phase of work for
which the employee is engaged.
 DEPARTMENT ORDER NO. 18 – 02 (SERIES OF
2002) RULES IMPLEMENTING ARTICLES 106 TO
109 OF THE LABOR CODE, AS AMENDED

By virtue of the power vested in the Secretary of Labor and Employment under
Articles 5 (Rule-making) and 106 (Contractor or Subcontractor) of the Labor Code of
the Philippines, as amended, the following regulations governing contracting and
subcontracting arrangements are hereby issued
Guiding principles. - 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 as defined herein shall be
prohibited.
Coverage. - These Rules shall apply to all parties of
contracting and subcontracting arrangements where
employer-employee relationship exists. Placement
activities through private recruitment and placement
agencies as governed by Articles 25 to 39 of the Labor
Code are not covered by these Rules.
Duty to produce copy of contract between the principal
and the contractor or subcontractor.
The principal or the contractor or subcontractor shall be under an
obligation to produce a copy of the contract between the principal and
the contractor in the ordinary course of inspection. The contractor shall
likewise be under an obligation to produce a copy of the contract of
employment of the contractual worker when directed to do so by the
Regional Director or his authorized representative. A copy of the
contract between the contractual employee and the contractor or
subcontractor shall be furnished the certified bargaining agent, if there
is any.
MARVIN O. DAGUINOD, V. SOUTHGATE FOODS
INC., AND GENERATION ONE RESOURCE
SERVICE AND MULTIPURPOSE COOPERATIVE

G.R. No. 227795 | February 20, 2019

 FACTS
◦ Marvin Daguinod was assigned as counter crew/cashier of Jollibee Alphaland pursuant to a Service
Agreement that Generation One Resource Service and Multi-Purpose Cooperative will provide “specified
non-core functions and operational activities” for the franchise operator Southgate Foods, Inc’s Jollibee
Alphaland branch.
◦ Daguinod also executed a Service Contract with Generation One which stated that Generation One was
contracted by Southgate to perform “specified peripheral and support services.” In the Service Contract,
Daguinod was referred to as a service provider and member of Generation One cooperative. The specific
work responsibilities to be performed by Daguinod were left blank. The period of Daguinod’s services
was stated as “beginning Sept. 9, 2010 until the end of the project.”
◦ To become a member of Generation One, Daguinod was required to pay a membership fee of P250.00
and participate in “capital build-up and savings program” which obligated him to acquire 150 paid-up
share in Generation One, valued at P1,500.00. Prior to his employment/membership in Generation One
cooperative, Daguinod was employed directly bu Southgate as counter crew.
◦ On April 10, 2011, Daguinod was accused of theft and was then dismissed.
 ISSUE:
Whether or not Generation One
is a legitimate contractor
 RULING:
◦ Generation One is not a legitimate labor contractor, thus, Daguinod is a regular employee of
Southgate.
◦ Under Section 4(a) of DO 18-02, legitimate labor contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work, or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal. The “principal” refers to any employer who puts out or farms
out a job service or work to a contractor or subcontractor.
◦ On the other hand, there is labor-only contracting where: (a) the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and (b) the workers recruited and placed by such person
are performing activities which are directly related to the principal business of the employer.
◦ Based on this, one of the factors in determining whether there is a labor-only contracting is the
nature of the employee’s job; whether the work he performs is necessary and desirable to the
business
 RULING:
◦ In this particular case, Daguinod was assigned to perform cash control activities which entails
gathering of orders and assembling food on the tray for dine-in customers or for take-out. As
cashier, Daguinod was also tasked to receive payments and give change. These tasks are
undoubtedly necessary and desirable for a business like that of Jollibee. It is not merely a non-
core or peripheral activity as Generation One and Southgate claim. These circumstance lead to
no other conclusion than that Daguinod was a regular employee of Southgate and that
Generation One was a mere agent of Southgate.
◦ The ownership of substantial capital in the form of tools, equipment, machineries, work
premises, and other properties, by the contractor is another factor in establishing whether it is
legitimate. Generation One submitted only one Income Tax Return for the year  December 2010
but did not submit any Audited Financial Statements to show its assets, liabilities, and equity. It
only submitted notes to the AFS for the year ended 2010 which does not show a complete
picture of its financial standing. In fine, the documents submitted are insufficient to prove that
Generation One possesses substantial capital to be considered a legitimate labor contractor.
 RULING:
◦ Generation One cannot rely either on their Certificate of Registration as an
Independent Contractor issued by the DOLE. In San Miguel Corporation v. Semillano,
the Court ruled that it is not a conclusive evidence of being a legitimate labor
contractor. The fact of registration simply prevents the legal presumption of being a
mere labor-only contractor from arising. In distinguishing between permissible job
contracting and prohibited labor-only contracting, the totality of the facts and the
surrounding circumstances of the case are to be considered.
◦ A perusal of Daguinod’s Service Contract shows that the specific work responsibilities
were unspecified, leaving the “other requirements to perform the services to be part of
the orientation at the designated place of assignment,” thus, suggesting that the right
to determine not only the end to be achieved, but also the manner and means to
achieve that end, was reposed in Southgate. Consequently, Southgate shall be deemed
as the direct employer of Daguinod.
DOLE DEPARTMENT
ORDER NO. 174-17
which is the governing rule for labor contracting and subcontracting arrangements in
the Philippines.
DO 174 reiterates the absolute prohibition under the Philippine Labor Code and
jurisprudence against labor-only contracting.

Under DO 174, labor-only contracting refers to the following arrangements:

•the contractor or sub-contractor does not have substantial capital. DO 174-17

increased the amount of substantial capital, from at least PHP3 million to at least
PHP5 million in case of corporations, partnerships, and cooperatives. As for a single
proprietorship, the owner must have a net worth of at least PHP5 million.
•the contractor or subcontractor does not have investments in the form of tools,
equipment, machineries, supervision work premises, among others.
•the contractor’s or subcontractor’s employees recruited and placed are performing
activities which are directly related to the main business operation of the principal.
DO 147-17 also prohibits the following employment
arrangements for being contrary to law or public policy:
• When the principal farms out work to a CABO, which is a person or group of persons or a
labor group which under the guise of a labor organization, cooperative or any entity, supplies
workers to an employer, with or without any monetary or other consideration, whether in the
capacity of an agent of the employer or as an ostensible independent contractor;
• Contracting out of job or work through an in-house agency;
• Contracting out of job or work through an in-house cooperative which merely supplies workers
to the principal;
• Contracting out of a job or work by reason of a strike or lockout whether actual or imminent;
• Contracting out of a job or work being performed by union members and such will interfere
with, restrain or coerce employees in the exercise of their rights to self-organization;
• Requiring the contractor’s/subcontractor’s employees to perform functions which are currently
being performed by the regular employees of the principal;
Mandatory Service Agreement
◦ DO 174 requires a service agreement between the
principal and contractor or sub-contractor. It must
include provisions on the specific description of the
job or work being subcontracted, its duration as well
as the agreed amount of the contracted job or work.
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Coverage: no express inclusion of Coverage: expressly includes Coverage: apply to all parties of contracting and
cooperatives, but nonetheless cooperatives subcontracting arrangements where employer-
Notable Changes
prohibited
Deleted provision on trilateral Trilateral Relationship was
employee relationship exists.
Trilateral Relationship was emphasized.
relationship. emphasized. Principal   Contractor   Employees
Principal   Contractor  
Employees
Requirements: Permissible Requirements: Legitimate Job Requirements: completion of an application
Contracting Contracting form to be provided by the DOLE.
 DOLE-registered  DOLE-registered  DOLE-registered
 Distinct and independent  Distinct and independent  A certified copy of a certificate of
business business registration of firm or business name from
 Substantial capital  Substantial capital and/or the SEC, DTI, CDA
 Labor Law Compliant Service investment  Business Permit
Agreement  Labor Law Compliant Service  Registration of Contractors or
 Plus: Free from control by Agreement Subcontractors
Principal  Annual Reporting of Registered Contractors
 Labor Law Compliant Service Agreement
Substantial Capital: Substantial Capital: Php3,000,00.00 N/A
Php5,000,00.00
N/A Net Financial Contracting Capacity N/A
(NFCC)
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
No co-terminus employment Co-terminus employment allowed termination results from the expiration of
(for regular) the contract between the principal and the
The term or duration of employment that contractor or subcontractor, or from the
Mere expiration of Service must be co-extensive with the Service completion of the phase of the job, work
Agreement shall not be Agreement or with the specific phase of or service for which the contractual
deemed as a termination of work for which the employee is engaged. employee is engaged
employment of the contractor’
employees who are regular
employees of the latter.
Labor-Only Contract: Labor-Only Contract: Prohibited Labor-Only Contract: Prohibited
Absolutely Prohibited
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Labor-only Contracting: Version 1 Labor-only Contracting: Version 1 Labor-only Contracting: Version 1
The contractor does not have The contractor does not have substantial capital
substantial capital - or – The contractor or subcontractor does not
- or - The contractor does not have investments in
have substantial capital or investment
The contractor does not have the form of tools, equipment, machinery, work
investments in the form of tools, premises, among others,
equipment, machineries, The contractor or subcontractor does not
supervision, work premises among - and - investment which relates to the job, work
others, The employees recruited and placed are or service to be performed and the
performing activities which are usually employees recruited, supplied or placed
- and - necessary or desirable to the operation of the by such contractor or subcontractor are
The contractor’s or subcontractor’s company, or directly related to the main performing activities which are directly
employees recruited and placed business of the principal within a definite or related to the main business of the
are performing activities which are predetermined period, regardless of whether
directly related to the main such job, work or service is to be performed principal
business operation of the principal; within or outside the premises of the principal; - and -

the contractor does not exercise the right

to control over the performance of the
work of the contractual employee.
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Labor-only Contracting: Version 2 Labor-only Contracting: Version 2 Labor-only Contracting: Version 2
The contractor does not exercise The contractor does not exercise the The contractor does not exercise the
the right to control over the right to control the performance of the right to control the performance of the
performance of the work of the work of employee. work of employee.
employee.
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Other Illicit Forms of Employment Other Prohibitions Other Prohibitions
Arrangements (No good faith and legitimate business (No good faith and legitimate business
reason) reason)
 Cabo  Cabo  Cabo
 In-House Agency  In-House Agency  In-House Agency
 In-House Cooperative N/A N/A

 Strike/Lockout  Strike/Lockout  Strike/Lockout

 Union Members  Union Members  Union Members

 Performed by Regular Employees  Performed by Regular Employees  Performed by Regular Employees

 Ante-dated Resignation Letter;  Ante-dated Resignation Letter; Blank  Ante-dated Resignation Letter; Blank
Blank Payroll; Waiver of Labor Payroll; Waiver of Labor Standards; Payroll; Waiver of Labor Standards;
Standards; Quitclaim Releasing Quitclaim Releasing Quitclaim Releasing
Principal/Contractor; Requiring Principal/Contractor Principal/Contractor; Requiring
Membership to a Cooperative Membership to a Cooperative
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
 Repeated Short Term  Repeated Short Term Employment  Repeated Short Term Employment
Employment
 Employment Shorter than  Employment Shorter than Service  Employment Shorter than Service
Service Agreement Agreement Agreement
 Practices Circumventing N/A
Security of Tenure
N/A  Results in termination/reduction of
regulars and reduction of work
hours; or
 Results in termination/reduction of
regulars and reduction/splitting of
bargaining unit
N/A  Refusal to give copy of required
contracts to the sole exclusive
bargaining agent
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02

 Repeated Short Term  Repeated Short Term Employment  Repeated Short Term Employment
Employment

 Employment Shorter  Employment Shorter than Service  Employment Shorter than Service
than Service Agreement Agreement Agreement

 Practices Circumventing N/A N/A

Security of Tenure

N/A  Results in termination/reduction of  Results in termination/reduction of

regulars and reduction of work hours; or regulars and reduction of work hours; or
 Results in termination/reduction of  Results in termination/reduction of
regulars and reduction/splitting of regulars and reduction/splitting of
bargaining unit bargaining unit

N/A  Refusal to give copy of required contracts  Refusal to give copy of required contracts
to the sole exclusive bargaining agent to the sole exclusive bargaining agent

N/A  Engaging/maintaining in excess of CBA  Engaging/maintaining in excess of CBA

or set by Industry Tripartite Council or set by Industry Tripartite Council
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Principal deemed direct employer: N/A Principal deemed direct employer:
Engaged in: Engaged in:
1. Labor-only contracting 1. Labor-only contracting
2. Other illicit forms of employment 2. Other illicit forms of employment
arrangements arrangements
3. Violation of employee’s rights 3. Violation of employee’s rights
4. Violation of required contracts 4. Violation of required contracts
N/A Non-Impairment of Existing Non-Impairment of Existing Contracts
Contracts
 DOLE D.O. 174-17 DOLE D.O. 18-A-11 DO 18-02
Expiration of Service Expiration of Service Agreement: Expiration of Service Agreement:
Agreement: Completed Contract- No Separation Pay
Employee may opt for payment of
Employee may opt to wait for separation benefits as may be provided by without prejudice to his/her entitlement to
re-employment within 3 months law or the Service Agreement, without the completion [of] bonuses or other
to resign and transfer to another prejudice to his/her entitlement to the emoluments, including retirement benefits
employer. completion [of] bonuses or other whenever applicable.
emoluments, including retirement benefits
Failure to provide new whenever applicable.
employment, employee shall be
entitled to separation benefits as
may be provided by law or the
Service Agreement, whichever
is higher, without prejudice to
entitlement completion of
bonuses or other emoluments,
including retirement benefits
whenever applicable.

Mandatory Enrollment to DOLE N/A The contractor or subcontractor shall

Programs: Principal and submit in triplicate its annual report using a
Contractors/Subcontractors prescribed form to the appropriate
Regional Office not later than the 15th of
January of the following year.
R.A. 9262 (ANTI-VIOLENCE
AGAINST WOMEN AND
CHILDREN ACT)
Canada, Jillyn
R.A. 9262
◦ It was approved on March 8, 2004.
◦ It is the law penalizing acts of violence against women and
their children as a public crime. These acts include
physical violence, sexual violence, psychological violence,
and economic abuse.
◦ These acts are punishable even if committed outside of the
house.
Violence against women or children
◦ This refers to any act or a series of acts committed by any person against a
woman who is his wife, former wife, or against a woman with whom the
person has or had a sexual or dating relationship, or with whom he has a
common child, or against her child whether legitimate or illegitimate, within or
without the family abode, which results in or is likely to result in physical,
sexual, psychological harm or suffering, or economic abuse including threats
of such acts, battery, assault, coercion, harassment or arbitrary deprivation of
liberty.
◦ It includes, but is not limited to, the following acts: physical violence, sexual
violence, psychological violence, and economic abuse.
 Summary
◦ The VAWC leave benefits are given to female employees who have experienced
violence, including their children, from their romantic partners.
◦ The benefit is applicable to all female employees, whether employed in the private sector
or the public sector.
◦ The benefit consists of ten (10) working days of leave credits with full pay.
◦ The employee is required to submit a Certification of Pending Action.
◦ The benefit is non-convertible to cash.
◦ The benefit is non-cumulative.
◦ The administrative enforcement of this leave entitlement shall be considered within the
jurisdiction of the Regional Director of the DOLE under Art. 129 of the Labor Code for
the private sector and the Civil Service Commission, for government employees.
◦ CONCEPT
◦ Female employees who have been subjected to violence, including their children, by their
romantic partners, whether male or female, are extended leave credits with full pay to be used at
her own discretion.
◦ COMPUTATION
◦ The leave credit is equal to the basic salary, including mandatory and/or integrated allowances.
The pay shall not be less than the minimum wage.
◦ USAGE
◦ The benefit is designed to grant a female employee leave credits to be used at her own discretion.
◦ CONDITIONS FOR ENTITLEMENT
◦ The only condition for entitlement is that: the female employee presents a Certificate of Pending
Action as proof that an action is pending relative to the violence, issued by either the Barangay
Chairman/Councilor, Prosecutor, or Clerk of Court.
◦ For government employees, in addition to the certification, the employee must file an application
for leave citing RA 9262 as basis.
PROVISIONS OF THE CIVIL
CODE OF THE PHILIPPINES
ON LABOR
Camino, Dylza Fia
Article 1705. 

The laborer's wages shall be

paid in legal currency.
Article 1706. 
Withholding of the wages,
except for a debt due, shall not be
made by the employer.
Article 1707. 
The laborer's wages shall be a
lien on the goods manufactured
or the work done.
Article 1708. 
The laborer's wages shall not be
subject to execution or attachment,
except for debts incurred for food,
shelter, clothing and medical
attendance.
Article 1709. 
The employer shall neither
seize nor retain any tool or other
articles belonging to the laborer.
 R.A. 6727 (WAGE
RATIONALIZATION
ACT)
Camino, Dylza Fia
SUMMARY:
◦ The law prescribes a minimum wage required to be observed
by the employers.
◦ The minimum wage varies per region as it is set by the
Regional Tripartite Wages and Productivity Board (RTWPB).
◦ Violations of minimum wage may result in double indemnity
and/or criminal liability.
◦ The RTWPB ma provide for exemptions, including those for
Barangay Micro Business Enterprises.
◦ Minimum wage earners are exempt from income tax.
In ECOP vs. NWPC (G.R. No. 96169, September 24, 1991),
the Court declared that precisely, Republic Act No. 6727 was
intended to rationalize wages, first, by providing for full-time
boards to police wages round-the-clock, and second, by giving
the boards enough powers to achieve this objective. The Court
is of the opinion that Congress meant the boards to be creative
in resolving the annual question of wages without labor and
management knocking on the legislature's door at every turn.
The fact of the matter is that the Act sought a "thinking" group
of men and women bound by statutory standards.
 CONCEPT:
◦ A minimum wage is a legal mandate for employers to pay
their employees a compensation which should not be less
than that prescribed by the Regional Tripartite Wages and
Productivity Board.
◦ Hence, every region will have its own minimum wage as
several factors are considered in determining the amount,
such as cost of living allowance, prices of goods and
commodities, and so on.
CONCEPT:
◦ Further, the same Board prescribes a different minimum wage
depending on the industry classification, i.e. non-agricultural,
agricultural, retail and service establishments, and manufacturing.
◦ The Board issues Wage Orders containing the prescribed
minimum wage at a given time, including the requirements and
procedures for exemption thereof. If granted, an establishments
may be exempted from complying with the minimum wage for a
period of one (1) year.
◦ It is recommended for an employer to inquire with the RTWPB
for the prevailing rates.
VIOLATIONS:
◦ The employer may be penalized with double
indemnity or be required to pay an amount
equivalent to double/twice the unpaid wage owing to
the employee.
◦ Notwithstanding payment, the employer may still be
held criminally liable for the violation.
Creation of Regional Tripartite Wages
and Productivity Boards
◦There is hereby created Regional Tripartite Wages
and Productivity Boards, hereinafter referred to as
Regional Boards, in all regions, including
autonomous regions as may be established by law.
The Commission shall determine the
offices/headquarters of the respective Regional
Boards. 
Use Of The “Floor Wage” Method Of
Adjusting Minimum Wage
◦ The “floor-wage” methodology in adjusting minimum wages
is the method generally being utilized by the different Boards.
As explained by the Court in the cases of Metropolitan Bank
and Trust Company, Inc. vs. NWPC (G.R. NO. 144322,
February 6, 2007) and ECOP vs. NWPC (G.R. No. 96169,
September 24, 1991) the "floor-wage" method of adjusting
minimum wage involves the fixing of a determinate amount
to be added to the prevailing statutory minimum wage rates.
Standards/Criteria for Minimum Wage
Fixing. 
A. For Workers in Private Establishments
1. The demand for living wages;
2. Wage adjustment vis-à-vis the consumer price index;
3. The cost of living and changes or increases therein;
4. The needs of workers and their families;
5. The need to induce industries to invest in the countryside;
6. Improvements in standards of living;
7. The prevailing wage levels;
8. Fair return of the capital invested and capacity to pay of employers;
9. Effects on employment generation and family income; and
10.The equitable distribution of income and wealth along the imperatives of economic and social
development.
Standards/Criteria for Minimum Wage
Fixing. 
B. For Domestic Workers
1. Needs of workers and their families;
2. Wage adjustments vis-à-vis the consumer price index;
3. Poverty threshold;
4. Household income; and
5. Average wage of domestic workers.
WAGE DISTORTION
(For Wage Order of workers in private establishments)

Wage distortion exists where the application of any

prescribed wage increase by virtue of a law or Wage
Order results in the elimination or severe contraction of
intentional quantitative differences in wage or salary rates
between and among employee groups in an establishment
as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or
other logical basis of differentiation.
Elements of Wage Distortion
◦ Existing hierarchy of positions with corresponding salary rates;
◦ A significant change in the salary rates of a lower pay class without
a
◦ concomitant increase in the salary rate of a higher one;
◦ The elimination of the distinction between the two (2) levels; and
◦ The existence of the distortion in the same region.
DAILY STATUTORY
MINIMUM WAGE
RATES
The Regional Boards shall have the following powers and
functions in their respective territorial jurisdiction:
a) To develop plans, programs and projects relative to wages, incomes and
productivity improvement for their respective regions; 
b) To determine and fix minimum wage rates applicable in their region,
provinces or industries therein and to issue the corresponding wage
orders, subject to guidelines issued by the Commission; 
c) To undertake studies, researches and surveys necessary for the
attainment of their functions, objectives and programs, and to collect
and compile data on wages, incomes, productivity and other related
information and periodically disseminate the same; 
d) To coordinate with the other Regional Boards as may be
necessary to attain the policy and intention of this Code; 
e)To receive, process and act on applications for exemption
from prescribed wage rates as may be provided by law or
any Wage Order; and 
f) To exercise such other powers and functions as may be
necessary to carry out their mandate under this Code.
BARANGAY MICRO BUSINESS
ENTERPRISES (BMBEs)
◦ Subject to Certification issued by the Department
of Trade and Industry (DTI) as to their status as
Barangay Micro Business Enterprises, these
establishments may be exempted from the coverage
of the minimum wage so long as they obtain the
necessary exemption from the RTWPB.
KASAMBAHAY’S MINIMUM
WAGE
◦The Kasambahay’s minimum wage is different as it
is regulated by the Kasambahay Law. It is
recommended for an employer to inquire with the
RTWPB for the prevailing rates. Currently, the
minimum wage for a kasambahay is P5,000 in NCR
and ranges from P2,000 to P5,000 in other regions.
WORKERS PAID BY RESULTS
◦The RTWPB Regional Orders
prescribe for the minimum wage of
workers paid by results, such as
homeworkers, piece-rate workers,
takay, pakyaw, or task basis.
PERSONS WITH DISABILITY
◦There should be no discrimination against
persons with disability. They should be
paid the same compensation and benefit as
with ordinary employees who are qualified
as able-bodied.
NO INCOME TAX DUE
◦Minimum wage earners (MWE) are
exempt from income tax in relation to their
minimum wage inclusive of cost of living
allowance, holiday pay, overtime pay,
night shift differential pay, and hazard pay.