What’s Wrong With the Contractualization of Labor? (Part 1)

Absolutely nothing whatsoever, I dare say. There is nothing illegal or immoral per se about contractual or fixed-term employment, even according to the Supreme Court itself, in the landmark case of Brent School Inc., et. al. vs. Zamora, et. al. (181 SCRA 702 [1990]). If the Philippines has an outstanding policy of deploying overseas contract workers, and hailing them as the new heroes of Philippine society, then why can’t we allow the same fixed-term arrangements which greatly benefited our economy to become the norm here in our own country? Over the years, we have sent hundreds of thousands of nurses, seafarers, engineers, domestic helpers, construction, factory, and hospitality workers abroad to work for 2 to 3 years in a foreign country under a contract of employment with a fixed-term, and yet, in the Philippines, such fixed-term arrangements are considered as taboo.

The Labor Code provides that an employee who performs work which is necessary or desirable in the usual business or trade of the employer is considered to be a “regular employee” starting on the first day of his employment. If he is hired on a temporary, fixed-term, or probationary basis, he is presumed to be “regularized” after being employed for more than 6 months. If he is a project or seasonal employee and is allowed to work after the completion of the project or beyond the season, he is also deemed to be regularized. If he is a “casual employee”, or one whose nature of work is not necessary or desirable to the usual business or trade of the employer, then he is regularized after 1 year of continuous or broken employment. A regular employee enjoys “security of tenure” in his employment until he reaches the age of compulsory retirement, which is 65. With security of tenure, he cannot be terminated by his employer except for just or authorized causes sanctioned by law. Thus, he can look forward to his retirement pay, which is equivalent to at least one-half month salary for every year of service.    

A “fixed-term employee”, on the other hand, enjoys security of tenure only for the duration of his employment contract. Like a regular employee, he cannot be terminated by his employer except for just or authorized causes sanctioned by law. However, when his contract expires, his employment automatically ends. There is no assurance of contract renewal. Thus, he is not assured of a retirement pay at age 65. (Note that I deliberately did not use the term “contractual employee” because the Department of Labor and Employment (DOLE) reserved this definition for fixed-term employees who are employed by local manpower agencies but deployed to service the needs of client-business-owners. I will discuss “contractual employment” under DOLE Department Order 18-02 in Part 2 of this article.)

Most employers would rather employ fixed-term employees than regular employees primarily because the former are deemed to have higher productivity than the latter. The fear of non-renewal of their employment contracts would drive fixed-term workers to become high performers. It keeps them on their toes. Regular employees, on the other hand, have the general tendency to become complacent, and therefore mediocre in their performance. This notion came from the exemplary performance of our overseas Filipino workers (OFWs) in foreign host countries as compared to the below average productivity of our local workers arrayed against the productivity of workers of other nationalities. This belief is strengthened by the fact that, under our present labor laws, the incompetence or low productivity of an employee is not a valid ground for his termination.

The problem is that when business-owners try to engage our local workers in a 2 to 3 year employment contract, the authorities are unreasonably fast in generalizing that the arrangement is a circumvention of the security of tenure under the Labor Code, now enshrined in the Constitution. These supposed fixed-term workers were adjudged as regular employees who cannot be terminated for their incompetence or for their low productivity. Hence, business-owners were forced to hire workers on a shorter term of 5 months, renewable for another 5 months. These became known as the notorious 5-5-5 practice, which was eventually outlawed by the Supreme Court. The effect was that companies were forced to resort to 5 months fixed-term contracts, without any renewal. Instead of staying with just a single company, workers were forced to hop from one employer to another every 5 months. Ironically, what was originally a pro-labor policy in the beginning produced anti-labor consequences in the end.

But security of tenure should not be confused with regular employment. With due respect to the Supreme Court, these are two separate and distinct concepts. Note that fixed-term employees also enjoy security of tenure. It is just that they are protected from illegal termination only for the duration of their contract. Regular employees, on the other hand, are protected until their compulsory retirement age (65). I am not against security of tenure. I consider it as a constitutional right of every worker. I am also not advocating for the abolition of regular employment. I am simply voicing out the indispensable requirement of any business enterprise for highly competent and productive manpower complement. Why do you think our fixed-term OFWs are much sought after by foreign employers?

Actually, I believe that regular employment, as it now stands, oftentimes gives only false hope to Filipino workers. Statistics show that most startup companies do not last for more than 10 years, and that the great majority of our workforce is employed by micro, small and medium enterprises, which come and go, and not by large companies like Philippine Airlines. Retirement pay therefore becomes an illusion to the vast majority of our workers. It makes no sense when the goose that lays the golden egg is prone to sickness and has a short lifespan.  

[Atty. Pol is the Senior Partner of The Law Firm of Parungao, Malimas, Sangalang & Gapasin, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com]

Employers Are Presumed Guilty

In criminal cases, the accused is presumed innocent until the prosecution has proven him guilty beyond reasonable doubt. In civil cases, the plaintiff must, by preponderance of evidence, prove his claims against the defendants. In both civil and criminal cases, the principle is the same, the party making an accusation or allegation against another has the burden of proving it by the required quantum of evidence. Mere accusation or allegation is not evidence and will not be sufficient to get a conviction or an award.

In labor cases, however, particularly in termination disputes, it is the reverse. The burden of proving that the dismissal of the employee is not illegal rests squarely on the employer. By analogy, this is like saying that the accused employer is presumed guilty until he can prove by substantial evidence his innocence. The worker who claims before the labor arbiter that he has been illegally dismissed need not submit evidence or proof other than his written allegations under oath. On the other hand, the employer who terminated him must show convincing proof that there are valid grounds for such management decision, and that administrative due process has been strictly complied with.

The Supreme Court has often ruled that “in termination cases, the employer bears the burden of proving that the dismissal of the employee is for a just or an authorized cause. Failure to dispose of the burden would imply that the dismissal is not lawful, and that the employee is entitled to reinstatement, backwages and accruing benefits. Moreover, dismissed employees are not required to prove their innocence of the employer’s accusations against them.” (San Miguel Corporation vs. NLRC et. al., GR No. 153983, May 26, 2009). Furthermore, it declared that “the case of the employer must stand or fall on its own merits and not on the weakness of the employee’s defense. The alleged weakness of defense of the employee cannot operate to relieve nor discharge the employer of its burden in termination cases. This principle is designed to give flesh and blood to the guaranty of security of tenure granted by the Constitution to employees under the Labor Code.” (Dela Cruz vs. NLRC, 268 SCRA 458).

Given such a skewed state of affairs, does it mean that an employer cannot terminate his employees? Does it mean that the employer always loses in labor cases? Of course not. It only means that employers must take extra care when they terminate or discipline their employees and that they should not take labor law or labor cases for granted. Business-owners and managers ought to know the rules of the game if they want to survive and prosper.

Labor arbiters and officials are not psychics. They do not have ESP and they cannot read minds or tell who between the management or the worker is the one telling the truth. They were not present when the incidents in question happened. Labor arbiters and officials are however mandated to decide and rule in favor of labor if they find even a shadow of a doubt. Article 4 of the Labor Code provides: “All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.” Article 1702 of the Civil Code states: “In case of doubt, all labor legislations and all labor contracts shall be construed in favor of the safety and decent living for the laborer.”

Business-owners and managers cannot and should not expect that, because of their higher educational attainment, or lofty economic and social status, and coat & tie-wearing lawyers, labor officials would simply take their word for it. They should not belittle the situation of the lowly worker, who does not even have a copy of his employment contract or pay slips, and who is represented by a non-lawyer in old denims and slippers, because his bare allegation carries more weight than the bare allegation of management. The social justice principle of “those who have less in life, should have more in law” works to the great advantage of the labor sector, which thrives on the stereotyped oppressive capitalist–oppressed laborer paradigm. Thus, accepting the reality that employers are presumed guilty until they have proven themselves innocent is the first step towards effective management-labor relations.

      

[Atty. Pol is the Managing Partner of The Firm of Parungao, Malimas, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com]

Do We Have Management Prerogative In The Philippines?

Last night, at a sumptuous dinner hosted by a Singaporean client and friend of mine, I had the opportunity to discuss the state and nature of management-labor relations in the Philippines with one of the guests, an American businessman who, after learning that I practice labor law, recalled that he received a very biased decision from a Labor Arbiter in a case filed against his local company by fifteen of its terminated workers. He was very frustrated because he cannot understand why the Labor Arbiter ruled in favor of the workers, whom he alleged were hopelessly incompetent and considered to be great liabilities to his business. Feeling very much aggrieved by the decision (which gave a generous award to the workers and granted them reinstatement), he lamented that our pro-labor policy is one of the reasons why foreign investors are apprehensive about doing business in our country. He talked about management prerogative in the United States, and the absolute right of the employer to fire employees; then, he asked me if there is such a law or concept in the Philippines.

            At this point, several guests, mostly foreigners, joined and listened to the discussion. Put on the spot, I explained that we actually have management prerogative in the Philippines, and that there might be other reasons why the case was lost. Factors like compliance with due process, sufficiency of evidence, and skill of the handling lawyer should be considered. I even ventured that our economic system, which is capitalism, is essentially and inherently pro-management, although admittedly, we have a lot of laws and policies that protect labor.

            Our Supreme Court has consistently upheld the management prerogative of employers. In Hongkong and Shanghai Banking Corporation Employees Union v. National Labor Relations Commission (281 SCRA 509), it ruled that “the hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified as a management prerogative subject to limitations found in the law, collective bargaining agreement, or in general principles of fair play and justice. This is a function associated with the employer’s inherent right to control and manage effectively its enterprise.  Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives.  The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.”

            Management prerogative emanates from ownership of property. A business enterprise is the property of the employer or business-owner. Article 428 of the Civil Code provides that: “the owner has the right to enjoy and dispose of a thing, without other limitations other than those established by law.” The so-called “right to enjoy and dispose of property” is actually a bundle of rights which includes the right to possess and control; the right to use and abuse; the right to sell, transfer, and encumber; the right to appropriate the income, profit and other fruits; and the right to destroy (or close down) the property (read: business establishment).

            Management prerogative is inherent in the rationale of business enterprise. The Supreme Court eloquently calls it the elbow room or leeway of the businessman in his quest for profit. It is granted to the employer or business-owner because society wants him to succeed.       

            The Supreme Court, however, repeatedly cautioned employers because management prerogative is not absolute. While it is undisputed that the employer owns the business enterprise, he cannot treat his employees as if they are his properties. Although he is given all chances to make a profit, he cannot treat his workers unfairly or unjustly. Like the Bill of Rights, the Labor Code imposes checks and limitations on the exercise of management’s inherent and almost absolute powers.

            One of the guests intently listening to our discussion protested, “But Philippine labor law is a mine field!” I quickly replied, “Ah, that’s true, my friend! That’s why you need an expert minesweeper like me!” And everyone had a good laugh.

           

[Atty. Pol is the Managing Partner of The Firm of Parungao, Malimas, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com] 

www.linkedin.com/pub/apollo-x-c-s-sangalang-lawyer/1/431/1aa

Is Government Pro-Labor or Pro-Management?

When I was still connected with the National Labor Relations Commission (NLRC), I did a personal experiment. I conducted an informal survey among the businessmen and labor leaders that I had the chance to meet and talk with during official and social occasions. I asked them only one (1) question, and that is, whether they think the government, the NLRC and the Department of Labor and Employment (DOLE) in particular, is pro-labor or pro-management. I was only able to survey about 25 businessmen, 10 union officials, and at least 10 assertive workers.

Almost all the businessmen I surveyed strongly believed that the government is pro-labor. On the other hand, almost all the labor sector representatives I asked replied that the government is totally pro-management. Surprised?

I guess when the government tries to please everyone it ends up pleasing no one. And this is quite true in labor-management relations, especially when there is already a labor dispute. It’s a win-lose scenario for the triumphant and defeated litigants. Often times, it’s a lose-lose situation because of the substantial amount of money and other resources spent and the length of time that elapsed before finality or satisfaction of judgment, not to mention the terrible mental and emotional stress that accompany every case under litigation. Just imagine, your case is initially heard and decided by a labor arbiter, whose decision is appealable to the NLRC commission proper, whose decision, in turn, may still be challenged before the Court of Appeals, which however is subject to the final review powers of the Supreme Court. It’s a four (4)-tiered process, which can take years, sometimes more than ten (10) years.

Even when the parties enter into compromise, the hype is that it’s a win-win solution, but in reality, the aggrieved party, whether it’s the employer or the employee, believes that he was somehow denied justice. Why? Because the aggrieved employer thinks he actually owes nothing to his employee and yet he was still made to pay in order to buy peace; while the aggrieved employee believes that, under the law, he is entitled to much more than what he actually received under the compromise agreement. Thus, government policies encouraging, or even advocating, amicable settlement in labor disputes is viewed with suspicion by either side, more particularly by the party who firmly believes in the strength of his case and the justness of his cause.    

Some of the businessmen I interviewed were actually my friends, and so I felt that I had some explaining to do since I was then an NLRC official. I reasoned that the government tries very hard to be impartial and fair to both management and labor sectors. However, the laws and policies that we were tasked to implement and enforce are pro-labor. I would even venture that government is inherently pro-management. But our hands were tied because of the laws protecting labor. You don’t believe me?

Just look at the facts. We are not ruled by a communist party, nor do we consider ourselves as a socialist state. We have an economy patterned after the American capitalist model. Privately-owned enterprises (instead of state-owned) are our primary engines of growth and progress. Private ownership (instead of communal ownership) of capital, whether land, building, machinery, investment money, and other means of revenue or income generation or production, is totally allowed and fully protected. The Filipino’s dream and quest for profit, acquisition, accumulation, and expansion is encouraged in an environment of free competition and open market as a means to generate more and better employment opportunities, increase the supply and improve the quality and delivery of goods and services, promote new and better technologies, lower the prices, and in general, improve the quality of life for all.

Under the capitalist system, who is the economic (and therefore the political) elite? In Tagalog, sino ang bida? Of course, it’s the capitalists, the entrepreneurs, the business-owners, including the hacienderos and big land owners, and the managers (as well as the politicians) who represent them or their interests. Need I say more? Sometimes, it is not good to overstress the obvious.

But within this backdrop, we have many laws likes Article 4 of the Labor Code which provides: “All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.” We also have many Supreme Court decisions, among them are the cases that essentially rule that it is the defendant-employer who must prove by substantial evidence his defenses against the claims of the complainant-employee who, however, need not prove his bare allegations. 

Hence, my fearless conclusion: The government is inherently pro-management. It is just that we have too many laws and policies that are pro-labor…

[Atty. Pol is the Managing Partner of Parungao, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com]

Employers Are Presumed Guilty

Integrated Bar of the Philippines

In criminal cases, the accused is presumed innocent until the prosecution has proven him guilty beyond reasonable doubt. In civil cases, the plaintiff must, by preponderance of evidence, prove his claims against the defendants. In both civil and criminal cases, the principle is the same, the party making an accusation or allegation against another has the burden of proving it by the required quantum of evidence. Mere accusation or allegation is not evidence and will not be sufficient to get a conviction or an award.

In labor cases, however, particularly in termination disputes, it is the reverse. The burden of proving that the dismissal of the employee is not illegal rests squarely on the employer. By analogy, this is like saying that the accused employer is presumed guilty until he can prove by substantial evidence his innocence. The worker who claims before the labor arbiter that he has been illegally dismissed need not submit evidence or proof other than his written allegations under oath. On the other hand, the employer who terminated him must show convincing proof that there are valid grounds for such management decision, and that administrative due process has been strictly complied with.

The Supreme Court has often ruled that “in termination cases, the employer bears the burden of proving that the dismissal of the employee is for a just or an authorized cause. Failure to dispose of the burden would imply that the dismissal is not lawful, and that the employee is entitled to reinstatement, backwages and accruing benefits. Moreover, dismissed employees are not required to prove their innocence of the employer’s accusations against them.” (San Miguel Corporation vs. NLRC et. al., GR No. 153983, May 26, 2009). Furthermore, it declared that “the case of the employer must stand or fall on its own merits and not on the weakness of the employee’s defense. The alleged weakness of defense of the employee cannot operate to relieve nor discharge the employer of its burden in termination cases. This principle is designed to give flesh and blood to the guaranty of security of tenure granted by the Constitution to employees under the Labor Code.” (Dela Cruz vs. NLRC, 268 SCRA 458).

Given such a skewed state of affairs, does it mean that an employer cannot terminate his employees? Does it mean that the employer always loses in labor cases? Of course not. It only means that employers must take extra care when they terminate or discipline their employees and that they should not take labor law or labor cases for granted. Business-owners and managers ought to know the rules of the game if they want to survive and prosper.

Labor arbiters and officials are not psychics. They do not have ESP and they cannot read minds or tell who between the management or the worker is the one telling the truth. They were not present when the incidents in question happened. Labor arbiters and officials are however mandated to decide and rule in favor of labor if they find even a shadow of a doubt. Article 4 of the Labor Code provides: “All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.” Article 1702 of the Civil Code states: “In case of doubt, all labor legislations and all labor contracts shall be construed in favor of the safety and decent living for the laborer.”

Business-owners and managers cannot and should not expect that, because of their higher educational attainment, or lofty economic and social status, and coat & tie-wearing lawyers, labor officials would simply take their word for it. They should not belittle the situation of the lowly worker, who does not even have a copy of his employment contract or pay slips, and who is represented by a non-lawyer in old denims and slippers, because his bare allegation carries more weight than the bare allegation of management. The social justice principle of “those who have less in life, should have more in law” works to the great advantage of the labor sector, which thrives on the stereotyped oppressive capitalist–oppressed laborer paradigm. Thus, accepting the reality that employers are presumed guilty until they have proven themselves innocent is the first step towards effective management-labor relations.

[Atty. Pol is the Managing Partner of Parungao, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com]

It gives you less expensive labor case by consulting to the best EMPLOYMENT LEGAL ADVICE.  


http://laborlawmadeeasyforbusybusinessmen.blogspot.com/

[Atty. Pol is the Managing Partner of Parungao, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email: apollosangalang@lawyer.com]

Photo thanks to: Integrated Bar of the Philippines