Recent Jurisprudence


A Simple Guide to Law Students and Labor Law Practitioners


I. Proof of Employment as distinguished from Proof of Partnership

Pedro D. Dusol and Maricel M. Dusol v. Emmarck A. Lazo, as owner of Ralco Beach, G.R. No. 200555, January 20, 2021

On one hand, there is a partnership if two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. A particular partnership may have for its object a particular undertaking. The existence of a partnership is established when it is shown that: (1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and (2) they intend to divide the profits among themselves. Generally, it is not required that the agreement be in writing or in a public instrument. However, when immovable properties or real rights are contributed to the partnership, it is required that an inventory of the real properties or rights contributed be prepared and signed by the parties, and attached to the public instrument, otherwise, the agreement is void.

Undoubtedly, the best evidence to prove the existence of a partnership is the contract or articles of partnership. Nevertheless, in its absence, its existence can be established by circumstantial evidence. Under Article 1769 of the Civil Code, “the receipt by a  person of a  share of the profits of a business is a prima facie evidence that he is a partner in the business, [but] no such inference shall be drawn if such profits were received in payment as wages of an employee [or rent to a landlord].” In addition, “the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.”

II. Substantial Capitalization does not Result to Becoming an Independent Job Contractor

Ernesto C. Luces, et al. v. Coca-Cola Bottlers Phils. Inc., Interserve Management Manpower Resources, Incorporated, and Hotwired Marketing Systems Inc., G.R. No. 213816. December 2, 2020

Labor-only contracting refers to the arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job or work for a principal. Under Sec. 5 of the DOLE) Department Order (DO) No. 174, series of 2017, there is labor-only contracting when: (a) the contractor or subcontractor does not have substantial capital or does not have investment in tools, equipment, machineries, supervision and work premises and the employees are performing activities which are directly related to the main business of the principal; or (b) the contractor or subcontractor does not exercise the right of control over the work of the employees except as to the result thereto.

Accordingly, there are two instances when a contractor or subcontractor is deemed to be engaged in labor-only contracting. In the first instance, there are two indicators: (1) the contractor or subcontractor does not have substantial capitalization or it does not have investment in tools, equipment, machineries, supervision and work premises and (2) its employees are performing activities or jobs which are directly related and indispensable to the main business of the principal. In the second instance, the principal, not the contractor or subcontractor, exercises the power of control over the manner and method of the employees’ work.

[However], jurisprudence has established that the Court does not set an absolute figure for what it considers substantial capital for an independent job contractor, but it measures the same against the type of work which the contractor is obligated to perform for the principal.

[Thus], a finding that a company has substantial capitalization does not automatically result to a finding that it is an independent job contractor. In the case of San Miguel Corp. v. MAERC Integrated Services Inc., the investment of MAERC, the contractor therein, in the form of buildings, tools, and equipment of more than P4,000,000.00 did not impress this Court, which still declared MAERC to be a  labor-only contractor.

The applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course.

III. Gross Inefficiency is Analogous to Gross and Habitual Neglect of Duty

Telephilippines, Inc., v. Ferrando H. Jacolbe, G.R. No. 233999, February 18, 2019

Jurisprudence instructs that gross inefficiency is analogous to gross and habitual neglect of duty under Article 297 (e) in relation to Article 297 (b) of the Labor Code, as amended, for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business, and constituting, therefore, just cause to dismiss an employee, thus:

In Buiser v. Leogardo, Jr., the Court explained that such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory results. Further, in San Miguel Corporation v. NLRC, the Court held that an employer is entitled to prescribe reasonable work standards, rules, and regulations necessary for the conduct of its business, to provide certain disciplinary measures in order to implement them, and to assure that the same would be complied with. This management prerogative of requiring standards may be availed of so long as they are exercised in good faith for the advancement of the employer’s interest.

IV. Security of Tenure of OFWs and Application of Lex Loci Contractus

Princess Talent Center Production, Inc., and/or Luchi Singh Moldes v. Desiree T. Masagca, G.R. No. 191310, April 11, 2018

Employees are not stripped of their security of tenure when they move to work in a different jurisdiction. With respect to the rights of overseas Filipino workers, we follow the principle of lex loci contractus (the law of the place where the contract is made).

This public policy should be borne in mind in this case because to allow foreign employers to determine for and by themselves whether an overseas contract worker may be dismissed on the ground of illness would encourage illegal or arbitrary pre-termination of employment contracts.

In the present case, it is not disputed that the Contract of Employment entered into by and between petitioners and private respondent was executed here in the Philippines with the approval of the Philippine Overseas Employment Administration (POEA). Hence, the Labor Code together with its implementing rules and regulations and other laws affecting labor apply in this case.

Alfredo F. Lay A, JR., v. C.A., NLRC, Philippine Veterans Bank and Ricardo A. Balbido, JR., G.R. No. 205813, January 10, 2018

The retirement of employees in the private sector is governed by Article 287 of the Labor Code:

x x x x Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, that an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided therein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay x x x x.

Under the provision, the employers and employees may agree to fix the retirement age for the latter, and to embody their agreement in either their collective bargaining agreements (CBAs) or their employment contracts. Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure, provided that the retirement benefits are not lower than those prescribed by law.

That the employee might be well aware of the existence of the retirement program at the time of his engagement does not suffice. His implied knowledge, regardless of duration, did not equate to the voluntary acceptance required by law in granting an early retirement age option to the employee. The law demanded more than a passive acquiescence on the part of the employee, considering that his early retirement age option involved conceding the constitutional right to security of tenure.

In Cercado v. Uniprom, Inc., we have underscored the character of the employee’s consent in agreeing to the early retirement policy of the employer, viz.:

Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible ages under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early retirement plan. In other words, only the implementation and execution of the option may be unilateral, but not the adoption and institution of the retirement plan containing such option. For the option to be valid, the retirement plan containing it must be voluntarily assented to by the employees or at least by a majority of them through a bargaining representative

VI. Substantial Evidence required of Employers in Dismissal of Employees

Maula v. Ximex Delivery Express, Inc., G.R. No. 207838, January 25, 2017

Dismissal from employment have two facets: first, the legality of the act of dismissal, which constitutes substantive due process; and, second, the legality of the manner of dismissal, which constitutes procedural due process. The burden of proof rests upon the employer to show that the disciplinary action was made for lawful cause or that the termination of employment was valid. In administrative and quasi-judicial proceedings, the quantum of evidence required is substantial evidence or “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Thus, unsubstantiated suspicions, accusations, and conclusions of the employer do not provide legal justification for dismissing the employee. When in doubt, the case should be resolved in favor of labor pursuant to the social justice policy of our labor laws and the 1987 Constitution.

VII. Instance where Onus Probandi in Dismissal is shifted to the Employee

Dee Jay’s Inn and Cafe and/or Melinda Ferraris v. Ma. Lorina, Rañeses, G.R. No. 191823, October 05, 2016

While the general rule in dismissal cases is that the employer has the burden to prove the dismissal was for just or authorized causes and after due process, said burden is necessarily shifted to the employee if the alleged dismissal is denied by the employer because the dismissal is supposedly a positive and unequivocal act by the employer.

Accordingly, it is the employee that bears the burden of proving that in fact he was dismissed. An unsubstantiated allegation on the part of the employee cannot stand as the same offends due process.

VIII. Temporary Retrenchment: Security Guards on Floating Status

Exocet Security and Allied Services Corp. and/or Ma. Teresa Marcelo v. Armando D. Serrano, G.R. No. 198538, September 29, 2014

The concept has been defined as that period of time when security guards are in between assignments or when they are made to wait after being relieved from a previous post until they are transferred to a new one. It takes place when the security agency’s clients decide not to renew their contracts with the agency, resulting in a situation where the available posts under its existing contracts are less than the number of guards in its roster. It also happens in instances where contracts for security services stipulate that the client may request the agency for the replacement of the guards assigned to it, even for want of cause, such that the replaced security guard may be placed on temporary “off-detail” if there are no available posts under the agency’s existing contracts.

As the circumstance is generally outside the control of the security agency or the employer, the Court has ruled that when a security guard is placed on a “floating status,” he or she does not receive any salary or financial benefit provided by law.

Due to the grim economic consequences to the employee, the employer should bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned.

It must be emphasized, however, that although placing a security guard on “floating status” or a temporary “off-detail” is considered a temporary retrenchment measure, there is similarly no provision in the Labor Code which treats of a temporary retrenchment or lay-off. Neither is there any provision which provides for its requisites or its duration. Nevertheless, since an employee cannot be laid-off indefinitely, the Court has applied Article 292 (previously Article 286) of the Labor Code by analogy to set the specific period of temporary lay-off to a maximum of six (6) months.

After six months, the employee should be recalled for work, or for a new assignment; otherwise, he is deemed terminated.

If after the period of 6 months, the security agency/employer cannot provide work or give assignment to the reserved security guard, the latter can be dismissed from service and shall be entitled to separation pay.

Security guards on reserved status who accept employment in other security agencies or employers before the end of the above six-month period may not be given separation pay

In cases involving security guards, a relief and transfer order in itself does not sever employment relationship between a security guard and his agency. An employee has the right to security of tenure, but this does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where his service, as security guard, will be most beneficial to the client.

IX. Requirement of Due Process in the Termination of Probationary Employment

Mylene Carvajal v. Luzon Development Bank and/or Oscar Z. Ramirez, G.R. No. 186169, August 1, 2012

The Supreme Court enumerated the grounds on the basis of which a probationary employee may be terminated:

“Unlike under the first ground for the valid termination of probationary employment which is for just cause, the second ground failure to qualify in accordance with the standards prescribed by employer does “not” require notice and hearing. Due process of law for this second group consists of making the reasonable standards expected of the employee during his probationary period known to him at the time of his probationary employment. By the very nature of a probationary employment, the employee knows from the very start that he will be under close observation and his performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It is in apprising him of the standards against which his performance shall be continuously assessed where due process regarding the second ground lies, and not in notice and hearing as in the case of the first ground.”


©2021 by PinoyEmployee. All Rights Reserved.
Statements and opinions of the authors are of their own and do not reflect any organization they may be connected or affiliated with. All information herein is for general information only. The content should not be considered as legal advice. Please consult a lawyer to address your specific concern.

%d bloggers like this: