Labor Code of the Philippines

CONTRACTING / SUBCONTRACTING – an arrangement whereby a principal agrees to put out or farm out with a contractor 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

CONTRACTOR – any person or entity, including a cooperative, engaged in LEGITIMATE contracting/subcontracting arrangement either services, skilled workers, temporary workers, or a combination of services to a principal under a Service Agreement

PRINCIPAL - refers to any employer, whether a person or entity, including GOCC's, who/which puts out or farms out a job, service or work to a contractor

Contracting arrangement in Labor is Expressly allowed by Law. (Art. 106)

The court has taken judicial notice of the general practices adopted in several government and private institutions & industries of hiring independent contractors to perform special services. These services range from janitorial, security and even technical or other specific services. (Neri “radio operator” vs NLRC, FEBTC &Building Care Corp., 224 SCRA 217)

THE PRINCI

PAL

THE CONTRACT

OR

CONTRACTUAL EES

Conditions precedent The principal must have a written contract for a

specific job, work or service with the contractor Contractor must have a written contract with its

contractual employees Contractor must be registered/listed with the DOLE Contractor must have substantial capital or

investment which relates to the job, work or service to be performed

Refers to the capital stocks and subscribed capitalization (corporations)

Tools, equipment, implements, machineries and work premises, actually and directly used by the contractor in the performance of the job contracted out

Serious Misconduct - willful disobedience by the ee of the lawful orders of his er or representative in connection with his work

Misconduct is improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willfull in character, and implies wrongful intent and not mere error in judgment. The misconduct to be serious must be of such a grave and aggravated character and not merely trivial or unimportant

The Order of the ER must be Reasonable & lawful sufficiently known to the EE in connection with the duties which the EE has been engaged

to discharge

Gross and habitual neglect of the EE to his duty; Fraud/willful breach by the EE of the trust reposed in

him by his ER or his duly authorized representative Commission of a crime or offense by the EE against

his ER or any immediate member of his (ER) family or duly authorized representative (Art. 282)

Violation of the Anti-Sexual Harassment Law (Sec. 3, RA 7877)

Violation of Sec. 36, RA 9165 Dismissal due to demand of union to enforce a

closed-shop provision of the CBA Dismissal due to enforcement of union security

clause in the CBA

Dismissal or loss of employment status of union officers & members who knowingly participates in an illegal activity/strike by defying a Return-to-Work Order of the SOLE

Dismissal or loss of employment status of union officer who knowingly participates in an illegal strike

Dismissal or loss or employment status of any worker or union officer who knowingly participates in the commission of illegal acts during a strike

Installation of Labor Saving Devices Redundancy – services are in excess or what is

reasonably demanded by the actual requirements of the enterprise

Retrenchment to prevent losses Closure or cessation of operation

Transfer of workplace Sale of company Merger Bankruptcy insolvency

Disease In the absence of the required certification by a public

health physician, the ee’s dismissal due to disease is invalid.

For termination of employment based on just causes, procedural due process requires that the employee be given the benefit of the so-called twin-notice and hearing, as follows: First notice: Notice to Explain (NTE) or order to show cause. A

written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side.

Hearing or formal investigation. A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him.

Second notice: Notice of decision. A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. (See Art. 277[b] and Sec 2, Rule I, Book VI, IRR)

Service of Notices. personally served with notices (notice to show cause and

notice of termination). Ideally, this should be done by personally handing a copy of the notice to the employee concerned. However, if this is not possible, the notices may be served on the

employee’s last known address either by ordinary or registered mail (from legal viewpoint, registered mail is preferred).

The mere posting of the notice on the bulletin board is not sufficient compliance. (Shoppers Gain Supermart, 1996) If the employee refused to receive notice, the employer must serve

the same by registered mail at his last known address. (See Nueva Ecija Electric Coop case, 2005)

Opportunity to Respond. The very purpose of requiring the employer to

observe proper termination process is to give the employee ample opportunity to respond to the charges against him or to defend himself. What the law require is ample opportunity. Ample opportunity means every kind of assistance

that management must accord the employee to enable him to prepare adequately for his defense including legal representation.

Requirements for First Notice (NTE). The first notice informing the employee of the charges

against him should set out clearly what he is being held liable for. It should neither be pro-forma nor vague. This is consistent with the requirement that the employee should be afforded ample opportunity to be heard and not mere opportunity.

Moreover, the dismissal, if necessary, must be based on the same grounds cited in the NTE. If the dismissal is based on grounds other than those specified in the notice, he is deemed to have been deprived of due process.

Effect of Refusal of Employee to Participate in Investigation.

By the refusal of employee to participate in the investigation, he is deemed to have waived his right to defend himself.

Effects or Consequences of Termination. If dismissal is for just cause and with prior notice

and hearing, the dismissal is valid. If the dismissal is for just cause but without prior

notice and hearing, the dismissal is valid but the employer may be required to pay nominal damages to the dismissed employee.

If there is no just cause for dismissal, whether or not there is prior notice and hearing, the dismissal is illegal. The employee is entitled to reinstatement, backwages and damages.

NTE NTE(with suspension) NOT

When the termination involves an EE who admits the guilt (Lagatic vs NLRC, GR No. 121004, 1/28/98

When the termination is due to AUTHORIZED CAUSES (Art. 283)

When the termination is due to DISEASE (Art. 284)

When the termination is at the initiative of the employee (Art. 285)

When the termination is done after 6 mos. of bonafied suspension of operation (Art. 286; Sebuguero vs NLRC, GR No. 115394, 9/27/95

When the termination is due to the completion of the project in cases of PROJECT EMPLOYMENT (Cioco vs CE Construction Corp, GR No. 90653, 11/12/90

When the termination is due to lapse of the season in cases of SEASONAL EMPLOYMENT (Art. 280)

When the termination is due EXPIRATION OF THE PERIOD OF PROBATIONARY EMPLOYMENT (AM Oreta & Co. Inc., vs NLRC GR No. 74004, 8/10/89

When the termination is due to the expiration of tenure that is coterminous with the lease (Hilado vs Leogardo, GR No. 65863, 6/11/86)

With JUST CAUSE and WITH DUE PROCESS Dismissal is legal EE has no relief However, in instances where the ee is validly dismissed for causes

other than serious misconduct or those reflecting of his moral character, separation pay is allowed as a measure of social justice (244 SCRA 125; 296 SCRA 184)

WITH JUST CAUSE BUT W/O DUE PROCESS Dismissal is legal ER may be liable to pay indemnity in the form of nominal damages Sanction should be tempered because the dismissal was initiated

by an act imputable to the EE Nominal damages: PHP 30,000.00 (Agabon vs NLRC, GR No.

158693, 11/17/2004)

WITHOUT JUST CAUSE BUT WITH OR W/O DUE PROCESS Illegal termination despite observance of

procedural due process

Consequences EE becomes entitled to reinstatement w/o loss of

seniority rights Payment of backwages corresponding to the

period from him dismissal up to his actual reinstatement

With Authorized Cause & With Due Process Dismissal is legal. However, the ER is requred to pay the

dismissed Ee of his usual separation pay EXCEPT when the ER suffered serious business losses or financial reverses

With Authorized Cause but without Due Process Dismissal is legal, but ER may be liable to pay indemnity in the

form of nominal damages at the discretion of the court in addition to the EE's usual separation pay.

Sanction is stiffer because the dismissal due process was initiated by the ER's exercise of management prerogative.

Nominal Damages: PHP 50,000.00 (Jaka Food Processing Corp. vs PAcot, GR No. 151378, 3/28/05)

Illegal despite observance of due process.

Normal Consequences: Reinstatement to former position without

loss of seniority rights and the payment of backwages corresponding to the period from his dismissal up to actual reinstatement