I.

(A) Rocket Corporation is a domestic corporation registered with the SEC, with 30% of its authorized capital stock owned by foreigners and 70% of its authorized capital stock owned by Filipinos. Is Rocket Corporation allowed to engage in the recruitment and placement of workers, locally and overseas? Briefly state the basis for your answer. (2%)

(B) When does the recruitment of workers become an act of economic sabotage? (2%)

SUGGESTED ANSWER

(A) No. Article 27 of the Labor Code mandates that pertinently, for

a Corporation to validly engage in recruitment and placement of workers, locally and overseas, at least seventy-five percent (75%) of its authorized and voting capital stock must be owned and controlled by Filipino citizens. Since only 70% of its authorized capital stock is owned by Filipinos, it consequently cannot validly engage in recruitment and placement of workers, locally and overseas.

(B) Under Section 6(m) of RA 8042, illegal recruitment is considered economic sabotage if it is committed by a syndicate or is large scale in scope. It is syndicated illegal recruitment if the illegal recruitment is carried out by three (3) or more conspirators; and it is large scale in scope when it is committed against three (3) more persons, individually or as a group.

II.

LKG Garments Inc. makes baby clothes for export. As part of its measures to meet its orders, LKG requires its employees to work beyond eight (8) hours everyday, from Monday to Saturday. It pays its employees an additional 35% of their regular hourly wage for work rendered in excess of eight (8) hours per day. Because of additional orders, LKG now requires two (2) shifts of workers with both shifts working beyond eight (8) hours but only up to a maximum of four (4) hours. Carding is an employee who used to render up to six (6) hours of overtime work before the change in schedule. He complains that the change adversely affected him because now he can only earn up to a maximum of four (4) hours’ worth of overtime pay. Does Carding have a cause of action against the company? (4%)

SUGGESTED ANSWER

No. A change in work schedule is a management prerogative of LKG. Thus, Carding has no cause of action against LKG if, as a result of its change to two (2) shifts, he now can only expect a maximum of four (4) hours overtime work. Besides, Art. 97 of the Labor Code does not guarantee Carding a certain number of hours of overtime work. In Manila Jockey Employees’ Union v. Manila Jockey Club (G.R. No. 167760, March 7, 2007,517 SCRA 707), the Supreme Court held that the basis of overtime claim is an employee’s having been “permitted to work”. Otherwise, as in this case, such is not demandable.

III.

Benito is the owner of an eponymous clothing brand that is a top seller. He employs a number of male and female models who wear Benito’s clothes. in promotional shoots and videos. His deal with the models is that Benito will pay them with 3 sets of free clothes per week. Is this arrangement allowed? (2%)

SUGGESTED ANSWER

No. the arrangement is not allowed. The models are Benito’s employees. As such, their services require compensation in legal tender (Art. 102, Labor Code). The three sets of clothes, regardless of value, are in kind; hence, the former’s compensation is not in the form prescribed by law.

ANOTHER SUGGESTED ANSWER

Under Article 102 of the Labor Code, wages of an employee are to be paid only in legal tender, even when expressly requested by the employee. Hence, no lawful deal in this regard can be entered into by and between Benito and his models.

ALTERNATIVE ANSWER

The models are not employees. Therefore, Art. 102 of the Labor Code applies. The payment does not have to be in legal tender. But even if they are employees, the wage arrangement between Benito and the models is allowed by Art: 97(f) of the Labor Code which defines wage as the remuneration or earning paid to an employee, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered. It includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer. to the employee.

IV.

Far East Bank (FEB) is one of the leading banks in the country. Its compensation and bonus packages are top of the industry. For the last 6 years, FEB had been providing the following bonuses across-the-board to all its employees:

(a) 13th month pay; (b) 14th to 18th month pay; (c) Christmas basket worth P6,000; (d) Gift check worth P4,000; and (e) Productivity-based incentive ranging from a 20% to 40% increase in  gross monthly salary for all employees who would receive an evaluation of “Excellent” for 3 straight quarters in the same year.

Because of its poor performance over-all, FEB decided to cut back on the bonuses this year and limited itself to the following:

(a) 13th month pay; (b) 14th month pay; (c) Christmas basket worth P4,000; and (d) Gift check worth P2,000.

Katrina, an employee of FEB, who had gotten a rating of “Excellent” for the last 3 quarters was looking forward to the bonuses plus the productivity incentive bonus. After learning that FEB had modified the bonus scheme, she objected. Is Katrina’s objection justified? Explain. (3%)

SUGGESTED ANSWER

Katrina’s objection is justified. Having enjoyed the across-the-board bonuses, Katrina has earned a vested right. Hence, none of them can be withheld or reduced. In the problem, the company has not proven its alleged losses to be substantial. Permitting reduction of pay at the slightest indication of losses is contrary to the policy of the State to afford full protection to labor and promote full employment (Linton Commercial Co. v. Hellera, G.R. No. 163147, October 10, 2007,535 SCRA 434). As to the withheld productivity-based bonuses, Katrina is deemed to have earned them because of her excellent performance ratings for three quarters. On this basis, they cannot be withheld without violating the Principle of Non-Diminution of Benefits.

Moreover, it is evident from the facts of the case that what was withdrawn by FEB was a productivity bonus. Protected by RA No. 6791 which mandates that the monetary value of the productivity improvement be shared with the employees, the “productivity-based incentive” scheme of FEB cannot just be withdrawn without the consent of its affected employees.

V.

Soledad, a widowed school teacher, takes under her wing one of her students, Kiko, 13 years old, who was abandoned by his parents and has to do odd jobs in order to study. She allows Kiko to live in her house, provides him with clean clothes, food, and a daily allowance of 200 pesos. In exchange, Kiko does routine housework, consisting of cleaning the house and doing errands for Soledad. One day, a representative of the DOLE and the DSWD came to Soledad’s house and charged her with violating the law that prohibits work by minors. Soledad objects and offers as a defense that she was not requiring Kiko to work as the chores were not hazardous. Further, she did not give him chores regularly but only intermittently as the need may arise. Is Soledad’s defense meritorious? (4%)

SUGGESTED ANSWER

Soledad’s defense is meritorious. Sec. 4(d) of the Kasambahay Law (RA No. 10361) provides that the term “Domestic Worker” shall not include children who are under foster family arrangement, and are provided access to education and given an allowance incidental to education, i.e. “baon”, transportation, school projects and school activities.

VI.

Ador is a student working on his master’s degree in horticulture. To make ends meet, he takes on jobs to come up with flower arrangements for friends. His neighbor, Nico, is about to get married to Lucia and needs a floral arranger. Ador offers his services and Nico agrees. They shake hands on it, agreeing that Nico will pay Ador P20,000.00 for his services, but that Ador will take care of everything. As Ador sets about to decorate the venue, Nico changes all of Ador’s plans and ends up designing the arrangements himself with Ador simply executing Nico’s instructions.

(A) Is there an employer-employee relationship between Nico and

Ador? (4%)

(B) Will Nico need to register Ador with the Social Security System

(SSS)? (2%)

SUGGESTED ANSWER

(A) Yes. With Ador’s simply executing Nico’s instruction, Nico, who now has control over Ador’s work, has become the employer of Ador. In Royale Homes Marketing Corp. v. Fidel Alcantara (G.R. No. 195190, July 28, 2014), the Supreme Court held that control is the most important determinant of employer-employee relationship.

(B) Yes, as under Section 9 of the Social Security Law (Art. 1161 as

amended), coverage in the SSS shall be compulsory upon all employees not over sixty (60) years of age and their employers:

ANOTHER SUGGESTED ANSWER

(B) If Ador is a purely casual employee, then, no. Casual employees are not subject to the compulsory coverage of the SSS by express provision of law (Section 8(5) (3), RA No. 1161, as amended).

ALTERNATIVE ANSWER

(A) There is no employer-employee relationship. The case at hand

pertains to a civil law arrangement. There is no business undertaken by Lucia; what the parties have is a contract for a specific service.

VII.

Don Don is hired as a contractual employee of CALLHELP, a call center. His contract is expressly for a term of 4 months. Don Don is hired for 3 straight contracts of 4 months each but at 2-week intervals between contracts. After the third contract ended, Don Don is told that he will no longer be given another contract because of “poor performance.” Don Don files a suit for “regularization” and for illegal dismissal, claiming that he is a regular employee of CALLHELP and that he was dismissed without cause. You are the Labor Arbiter. How would you decide the case? (4%)

SUGGESTED ANSWER

As Labor Arbiter, I will decide the case in favor of Don Don. Given the nature of Don Don’s work, which consist of activities usually or desirable in the usual business of CALLHELP, Don Don should be considered a regular employee.

CALLHELP’s termination of Don Don’s service in the guise of “poor performance” is not valid. Whether for a probationary or regular employee, the requisites of dismissal on that ground do not appear to have been complied with by the employer here.

VIII

Star Crafts is a lantern maker based in Pampanga. It supplies Christmas lanterns to stores in Luzon, Metro Manila, and parts of Visayas, for the months of August to November being the busiest months. Its factory employs a workforce of 2,000 workers who make different lanterns daily for the whole year. Because of increased demand, Star Crafts entered into a contractual arrangement with People Plus, a service contractor, to supply the former with 100 workers for only 4 months, August to November, at a rate different from what they pay their regular employees. The contract with People Plus stipulates that all equipment and raw materials will be supplied by Star Crafts with the express condition that the workers cannot take any of the designs home and must complete their tasks within the premises of Star Crafts.

Is there an employer-employee relationship between Star Crafts and the 100 workers from People Plus? Explain. (4%)

Yes. People Plus is a labor-only-contractor because it is not substantially capitalized. Neither does it carry on an independent business in which it uses its own investment in the form of tools, equipment, machineries or work premises. Hence, it is just an agent or recruiter of workers who perform work directly related to the trade of Star Crafts. Since both the essential element and the conforming element of labor-only contracting are present, Star Crafts becomes the employer of the supplied worker.. As principal; Star Crafts will always be an employer in relation to the workers supplied by its contractor. Its status as employer is either direct or indirect depending on whether the contractor is legitimate or not. Thus even if People Plus were a legitimate job contractor, still Star Crafts will be treated as a statutory employer for purposes of paying the workers’ unpaid wages and benefits.

IX

Din Din is a single mother with one child. She is employed as a sales executive at a prominent supermarket. She and her child live in Quezon City and her residence and workplace are a 15-minute drive apart. One day, Din Din is informed by her boss that she is being promoted to a managerial position but she is now being transferred to the Visayas. Din Din does not want to uproot her family and refuses the offer. Her boss is so humiliated by Din Din’s refusal of the offer that she gives Din Din successive unsatisfactory evaluations that result in Din Din being removed from the supermarket.

Din Din approaches you, as counsel, for legal advice. What would you advise her? (4 %)

SUGGESTED ANSWER

I will advise Din Din to sue her boss and the supermarket for illegal dismissal. Din Din cannot be compelled to accept the promotion. Her unsatisfactory evaluations as well as her boss’ insistence that she should agree to the intended transfer to Visayas are badges of an abuse of management prerogative. In Pfizer Inc. v. Velasco (G.R. No. 177467, March 9, 2011, 645 SCRA 135), the Supreme Court held that the managerial prerogative to transfer personnel must be exercised without abuse of discretion, bearing in mind the basic elements of justice and fair play. Hence, Din Din’s dismissal is illegal.

X

Karina Santos is a famous news anchor appearing nightly in the country’s most watched newscast. She is surprised, after one newscast, to receive a notice of hearing before the station’s Vice-President for Human Resources and calls the VP immediately to ask what was wrong. Karina is told over the phone that one of her crew filed a complaint against her for verbal abuse and that the management is duty bound to investigate and give her a chance to air her side. Karina objects and denies that she had ever verbally assaulted her crew. The VP then informed her that pending the investigation, she will be placed on a 30-day preventive suspension without pay, and that she will not be allowed to appear in the newscast during this time.

Is the preventive suspension of Karina valid? Discuss the reasons for your answer. (4%)

SUGGESTED ANSWER

No. The preventive suspension of Karina is not valid. The employer may place an employee under preventive suspension if his/ her continued employment would pose a serious and imminent threat to the life or property of the employer or of his/her co-employees. These requirements are not present here.

XI

Rico has a temper and, in his work as Division Manager of Matatag Insurance, frequently loses his temper with his staff. One day, he physically assaults his staff member by slapping him. The staff member sues him for physical injuries. Matatag Insurance decides to terminate Rico, after notice and hearing, on the ground of loss of trust and confidence. Rico claims that he is entitled to the presumption of innocence because he has not yet been convicted. Comment on Matatag’s action in relation to Rico’s argument. (4%)

SUGGESTED ANSWER:

Matatag Insurance does not have to await the result of the criminal case before exercising its prerogative to dismiss. Dismissal is not affected by a criminal case. Under the Three-fold Liability Rule, a single act may result in three liabilities, two of which are criminal and administrative. To establish them, the evidence of the crime must amount to proof beyond reasonable doubt; whereas, the evidence of the ground for dismissal is substantial evidence only. In this regard, the company has some basis already for withholding the trust it has reposed on its manager. Hence, Rico’s convic tion need not precede the employee’s dismissal.

XII

Blank Garments, Inc. (BLANK), a clothing manufacturer, employs more than 200 employees in its manufacturing business. Because of its high overhead, BLANK decided to sell its manufacturing business to Bleach Garments, Inc. (BLEACH) lock, stock and barrel which included goodwill, equipment, and personnel. After taking on BLANK’s business, BLEACH reduces the workforce by not hiring half the workers specifically the ones with séniority, BLANK and BLEACH are still discerned to be sister companies with identical incorporators. The laid-off employees sue both BLANK and BLEACH for unlawful termination.

(A). How would you decide this case? (4%)

(B) What is the “successor employer” doctrine? (2%)

SUGGESTED ANSWER

(A) In transfer of ownership, the buyer corporation, as a general rule, is not duty-bound to absorb the employees of the selling corporation. The buyer corporation becomes liable to the displaced employees only if the change of ownership is done in bad faith or is used to defeat the rights of labor. In such a case, the successor employer is duty-bound to absorb the displaced employees (Peñafrancia Tours and Travel Transport, Inc., v. Sarmiento, G.R. No. 178397, October 20, 2011, 634 SCRA 279).

Since the facts of the case do not show any bad faith in BLEACH’S sale to BLANK, BLEACH, consequently, is not obliged to absorb the displaced employees of BLANK.

The case at hand involves sales of assets as differentiated from sales of stocks. The ruling in SME Bank v. De Guzman (G.R. No. 184517, October 8, 2013), which reversed Manlimos v. NLRC (G.R, No. 113337, March 2, 1995, 312 Phil. 178), pointed out that in asset sales, the rule is that the seller. in good faith is authorized to dismiss the affected employees, but is liable for the payment of separation pay under the law. The buyer in good faith, on the other hand, is not obliged to absorb the employees affected by the sale, nor is it liable for the payment of their claims. In contrast with asset sales, in which the assets of the selling corporation are transferred to another entity, the transaction in stock sales takes place at the shareholder level. Because the corporation possesses a personality separate and distinct from that of its shareholders, a shift in the composition of its shareholders will not affect its existence and continuity. Hence the corporation continues to be the employer and continues to be liable for the payment of their just claims. Absent a just or authorized cause, the corporation or its new majority shareholders are not entitled to lawfully dismiss corporate employees.

SUGGESTED ANSWERS

(B) The “successor employer” doctrine refers to a sale or transfer in

ownership of an entity that has been done in bad faith or to defeat the rights of labor. In such a case, it is as if there have been no changes in employer-employee relationship between the seller and its employees. The buyer becomes a “successor employer” and is obliged to absorb the displaced employees.

XIII

Luisa is an unwed mother with three (3) children from different fathers. in 2004, she became a member of the Social Security System (SSS). That same year, she suffered a miscarriage of a baby out of wedlock from the father of her third child. She wants to claim maternity benefits under the SSS Act. Is she entitled to claim? (3%)

SUGGESTED ANSWER

Yes, provided Luisa has reported to her employer her pregnancy and date of expected delivery, and paid at least three monthly contributions during the 12-month period immediately preceding her miscarriage, then she is entitled to maternity benefits up to four deliveries. As to the fact that she got pregnant outside wedlock, as in her past three pregnancies, this will not bar her claim because the SSS is non-discriminatory.

IV

Luis, a PNP officer, was off duty and resting at home when he heard a scuffle outside his house. He saw two of his neighbors fighting and he rushed out to pacify them. One of the neighbors shot Luis by mistake, which resulted in Luis’ death. Marian, Luis’ widow, filed a claim with the GSIS seeking death benefits. The GSIS denied the claim on the ground that the death of Luis was not service related as he was off duty when the incident happened. Is the GSIS correct? (3 %)

SUGGESTED ANSWER

No. The GSIS is not correct: Luis, a policeman, just like a soldier, is covered by the 24-Hour, Duty Rule. He is deemed on round-the-clock duty unless on official leave, in which case his death outside performance of official peace-keeping mission will bar death claim. In this case, Luis was not on official leave and he died in the performance of a peace-keeping mission. Therefore, his death is compensable.

XV

Victor was hired by a local manning agency as a seafarer cook on board a luxury vessel for an eight-month cruise. While on board, Victor complained of chronic coughing, intermittent fever, and joint pains. He was advised by the ship’s doctor to take complete bed rest but was not given any other medication. His condition persisted but the degree varied from day to day. At the end of the cruise, Victor went home to Iloilo and there had himself examined. The examination revealed that he had tuberculosis.

(A) Victor sued for medical reimbursement, damages and attorney’s fees, claiming that tuberculosis was a compensable illness. Do you agree with Victor? Why or why not? (2%)

(B) Due to his prolonged illness, Victor was unable to work for more than 120 days. Will this entitle him to claim total permanent disability benefits? (2%)

SUGGESTED ANSWER

(A) TB is listed under Sec. 32-A of the POEA-SEC as a work-related disease. It was also either contracted or aggravated during the effectivity of Victor’s contract. Having shown its manifestations on board, Victor should have been medically repatriated for further examination and treatment in the Philippines. This obligation was entirely omitted in bad faith by the company when it waited for his contract to expire on him before signing him off. On this basis, Victor is entitled to medical reimbursement, damages and attorney’s fees.

(B) No. Victor’s TB is work-related and it developed on board, thereby satisfying the twin requisites of compensability. However, despite , his knowledge of his medical condition, he failed to report to his manning agent within three days from his arrival as required by Sec. 20-B(3) of the POEA-SEC. Since he already felt the manifestations of TB before his sign-off, he should have submitted to post-employment medical examination (Jebsens Maritime Inc. v. Enrique Undag, G.R. No. 191491, December 14, 2011, 662 SCRA 670). The effect of his omis sion is forfeiture by him of disability benefits (Coastal Safeway Marine Services, Inc. v. Elmer T. Esguerra, G.R. No. 185352, August 10, 2011, 655 SCRA 300). In effect, the 120-day rule has no application at all.

XVI

The Alliance of independent Labor Unions (AILU) is a legitimate labor federation which represents a majority of the appropriate bargaining unit at the Lumens Brewery (LB). While negotiations were ongoing for a renewal of the collective bargaining agreement (CBA), LB handed down a decision in a disciplinary case that was pending which resulted in the termination of the AILU’s treasurer and two other members for cause. AILU protested the decision, claiming that LB acted in bad faith and asked that LB reconsider. LB refused to reconsider. AILU then walked out of the negotiation and declared a strike without a notice of strike or a vote.AILU members locked in the LB management panel by barricading the doors and possible exits (including windows and fire escapes). LB requested the DOLE to assume jurisdiction over the dispute and to certify it for compulsory arbitration. The Secretary of Labor declined to assume jurisdiction, finding that the dispute was not one that involved national interest. LB then proceeds to terminate all of the members of the bargaining agent on the ground that it was unlawful to: (1) barricade the management panel in the building, and (2) participate in an illegal strike.

(A) Was AILU justified in declaring a strike without a strike vote and a notice of strike? Why or why not? (3%)

(B) Was the Secretary of Labor correct in declining to assume jurisdiction over the dispute? (2%)

(C) Was LB justified in terminating all those who were members of AILU on the two grounds cited? (3%)

SUGGESTED ANSWER

(A) No. Firstly, a Notice of Strike is always required by Art. 263(c) of

the Labor Code before a strike may be staged-be it grounded on bargaining deadlock or unfair Labor Practice. Secondiy, the Supreme Court already held in Sukothai that while AILU may not exhaust the 15-day cooling-off period in case of dismissal from employment of its officers who were duly elected in accordance with the Union constitution and by-laws and the dismissal constitutes union busting and a threat to AILU’s existence, still, Art. 263 (f) requires that a strike vote be undertaken through a secret ballot and approved by a majority of the total union membership in the bargaining unit. Devoid of a notice of strike and a strike vote, AILU’s strike is therefore illegal.

(B) The refusal of the Secretary to assume jurisdiction is valid. Par. (g) of Art. 263 (old) of the Labor Code leaves it to his sound discretion to determine if national interest is involved. Assumption power is full and complete. It is also plenary and discretionary (Philtranco Service Enterprises, Inc. v. Philtranco Workers Union-AGLO, G.R. No. 180962, February 26, 2014). Thus, if in his opinion national interest is not involved, then the company cannot insist that he assume jurisdiction.

(C) If dismissal is based on illegal strike:

The company has to file a complaint for illegal strike first. Once the strike is declared by final judgment to be illegal, it can dismiss the union officers. As to members, their dismissal must be based on their having committed illegalities on the occasion of their illegal strike. Since the company prematurely and indiscriminately dismissed the AILU members then their dismissal is illegal.

If dismissal is based on the unlawful acts of barricading to lock the AILU members: Yes. Article 264 (a) of the Labor Code authorizes the employer to declare the loss of employment status of “ANY WORKER” or union officer who knowingly participates in the commission of illegal acts during a strike.

XVII

The Collective Bargaining Agreement (CBA) between Libra Films and its union, Libra Films Employees’ Union (LFEU), contains the following standard clauses:

1. Maintenance of membership;

2. Check off for union dues and agency fees; and

3. No strike, no lock-out.

While Libra Films and LFEU are in re-negotiations for an extension of the CBA, LFEU discovers that some of its members have resigned from the union, citing their constitutional right to organize (which includes the right NOT to organize). LFEU demands that Libra Films institute administrative proceedings to terminate those union members who resigned in violation of the CBA’s maintenance of membership clause. Libra Films refuses, citing its obligation to remain a neutral party. As a result, LFEU declare’s a strike and after filing a notice of strike and taking a strike vote, goes on  strike. The union claims that Libra Films grossly violated the terms of the – CBA and engaged in unfair labor practice.

(A)  Are LFEU’s claims correct? Explain. (4%)

(B) Distinguish between a “closed shop” clause and a “maintenance of membership” clause. (2%).

(C)  Distinguish between “union dues” and “agency fees.” (2%)

SUGGESTED ANSWERS

(A) LFEU’s claim that Libra Films committed ULP based on its violation of the CBA is not correct. For violation of a CBA to constitute ULP, the violation must be violation of its economic provisions. Moreover, said violation must be gross and flagrant. Based on the allegation of the union, what was violated was the maintenance of membership clause which was a political or representational provision; hence, no ULP was committed (BPI Employees Union-Davao City v. BPI, G.R. No. 164301, August 10, 2010, 702 SCRA 42).

(B) In a “closed shop” clause, all employees are required to be members of the union at the time of hiring. They too must remain members of good standing during the period of employment as a condition of continued employment. Maintenance of membership clause, on the other hand, requires all employees who are union members at the time of the execution of the CBA to maintain their membership of good standing, as a condition of continued employment.

(C) Union dues are union funds paid by union members, normally through check-off by the employer on the basis of an individual written autho rization duly signed by the employees pursuant to Art. 241. (o) of the Labor Code. Agency fee, on the other hand, is a reasonable fee equi valent to the dues and other fees paid by members of the recognized collective bargaining agent. Art. 248(e) of the Labor Code mandates that only non-union members who accept the benefits under the CBĄ may be assessed agency fees. Their check-off authorization is not required.

XVIII

George is an American who is working as a consultant for a local IT company. The company has a union and George wants to support the union. How far can George go in terms of his support for the union? (3%)

SUGGESTED ANSWER

George, as a general rule, is prohibited by Art. 270 (a) of the Labor Code from giving any donation, grant or other form of assistance, in cash or in kind, directly or indirectly to the Union. He can give a support only upon prior permission from the Secretary of Labor relative to “Trade Union activities” as defined in said law.

George, in addition to his alien employment permit, must first prove that the country whereof he is a national recognizes the right of Filipinos working therein to organize. Under these conditions, he is allowed to support the existing union by joining it as to increase its membership.

XIX

What is the rule on the “equity of the incumbent”? (2%)

SUGGESTED ANSWER

The Equity of the Incumbent rule has it that all existing federations or national unions, possessing all qualifications of an LLO and none of the grounds for CR cancellation, shall continue to maintain their existing affiliates regardless of their location or industry to which they belong. In case of dissociation, affiliates are not required to observe the one union-one industry rule.

XX

(A) XYZ Company and Mr. AB, a terminated employee who also happens to be the President of XYZ Employees Union, agree in writing to submit Mr. AB’s illegal dismissal case to voluntary arbitration. Is this agreement a valid one? (3%)

(B) XYZ Company and XYZ Employees Union (XYZEU) reach a deadlock in their negotiation for a new collective bargaining agreement (CBA).

XYZEU files a notice of strike; XYZ Company proposes to XYZEU that the deadlock be submitted instead to voluntary arbitration. If you are counsel for XYZEU, what advice would you give the union as to the: (1) propriety of the request of XYZ Company, and (2) the

relative advantages/disadvantages between voluntary arbitration ‘ and compulsory arbitration? (4%)

SUGGESTED ANSWER

(A) The agreement is valid because the preferred mode of settling labor disputes is through voluntary modes, like voluntary arbitration. The agreement is consistent with Sec. 3, Art. XIII of the Constitution. Moreover, Art. 262 of the Labor Code authorizes a voluntary arbitrator to hear and decide by agreement of the parties, all other labor disputes.

(B) (1) As counsel, I will advise the union to accede to the request of

the company. Besides being the constitutionally preferred mode of dispute settlement, voluntary arbitration is less adversarial and more expeditious.

(B) (2) The advantages of voluntary arbitration are:

(a) the parties’ dispute is heard and resolved by a person whom both parties have chosen as their judge; hence, likely to be impartial,

(b) if both parties are willing to submit their dispute, the decision is final and binding on them in general by reason of their submission agreement; and

(c) in the event of a challenge, the decision is elevated to the CA and then to the SC, i.e., less one layer of appeal because the NLRC is out of the way.

The disadvantages of voluntary arbitration are:

(a) in case of appeal by the employer to the CA, the monetary award will not be secured with an appeal bond which Rule 43 of the Rules of Court does not require; and

(b) in case of enforcement of judgment, the Voluntary Arbitrator has no sheriff to enforce it.

The advantages of compulsory arbitration are:

(a) subject to pre-litigation mediation, a case can be initiated through the filing of a verified complaint by a union member, unlike in voluntary arbitration where the Voluntary Arbitrator acquires jurisdiction primarily through a submission agreement. In a case where the company is unwilling, the EBR (and only the EBR) may serve a notice to arbitrate; hence, a union member may be left out in the process if the EBR does not serve that notice; (b) a monetary award is secured with the employer’s appeal bond; and (c) there is a system of restitution in compulsory arbitration.

The disadvantages of compulsory arbitration are: (a). State interference with the affairs of labor and management is maxi

mized, disregarding the inter-party nature of the relationship; and (b) the system of appeals entails a longer process.

XXI

Philippine News Network (PNN) engages the services of Anya, a prominent news anchor from a rival station, National News Network (NNN). NNN objects to the transfer of Anya claiming that she is barred from working in a competing company for a period of three years from the expiration of her contract. Anya proceeds to sign with PNN which then asks her to anchor their nightly newscast. NNN sues Anya and PNN before the National Labor Relations Commission (NLRC), asking for a labor injunction. Anya and PNN object claiming that it is a matter cognizable by a regular court and not the NLRC.

(A) Is NNN’s remedy correct? Why or why not? (3%).

(B) What are the grounds for a labor injunction to issue? (2%)

(C) Distinguish the jurisdiction of a Labor Arbiter from that of the NLRC. (3%)

SUGGESTED ANSWER

(A) The NLRC has no jurisdiction. As to PNN, there is no employer-employee relationship between itself and NNN; hence, the NLRC cannot hear and resolve their dispute (Reasonable Causal Connection Rule). *As to Anya, the injunctive power of the NLRC is ancillary in nature; hence, it requires a principal case, which is absent. Besides, the dispute between her and PNN is not resolvable solely through the application of the Labor Code, other labor statutes; CBA or employment contract. (Reference to Labor Law Rule)

(B) The NLRC may issue an injunctive writ to enjoin an illegal activity. under Art.264 (old) of the Labor Code; as an ancillary remedy to avoid irreparable injury to the rights of a party in an ordinary labor dispute pursuant to Rule X; 2011 NLRC Rules of Procedure, as amended; and to correct the Labor Arbiter’s grave abuse of discretion pursuant to Rule XII of the 2011 NLRC Rules of Procedure, as amended.

Moreover, for labor injunction to issue, it must be proven under Art. 218 (e), Labor Code:

i. that the prohibited or unlawful acts have been threatened and will be committed and will be continued unless restrained;

ii. that substantial and irreparable injury to the complainant’s property will follow;

iii. that greater injury, will be inflicted upon complainant by the denial of relief than will be inflicted upon defendants by the granting of relief;

iv. that complainant has no adequate remedy at law; and

v. that public officers charged with the duty to protect complainant’s property are unable or unwilling to furnish adequate protection.

(C) As to jurisdiction, the LA can hear and resolve cases under Art. 217 (old) of the Labor Code, money claims under Sec. 7 of RA No. 10022; and referred wage distortion disputes in unorganized establishments, as well as the enforcement of compromise agreements pursuant to the 2011 NLRC Rules of Procedure, as amended. ‘On the other hand, the NLRC reviews decisions rendered by the LA; decisions or orders rendered by the RD under Art. 129 of the Labor Code; and conducts compulsory arbitration in certified cases.

As to the power to issue a labor injunction, the NLRC can issue an injunctive writ. On the other hand, the Labor Arbiter cannot issue an injunctive writ.

XXII

Mario comes from a family of coffee bean growers. Deciding to incorporate his fledgling coffee venture, he invites his best friend, Carlo, to join him. Carlo is hesitant because he does not have money to invest but Mario suggests a scheme where Carlo can be the Chief Marketing Agent of the company, earning a salary and commissions. Carlo agrees and the venture is formed. After one year, the business is so successful that they were able to declare dividends. Mario is so happy with Carlo’s work that he assigns 100 shares of stock to Carlo as part of the latter’s bonus. Much later on, it is discovered that Carlo had engaged in unethical conduct which caused embarrassment to the company. Mario is forced to terminate Carlo but he does so without giving Carlo the opportunity to explain. Carlo filed a case against Mario and the company for illegal dismissal. Mario objected on the ground that the Labor Arbiter had no jurisdiction over the case as it would properly be considered as an intra-corporate controversy cognizable by the RTC. Further, Mario claimed that because Carlo’s dismissal was a corporate act, he cannot be held personally liable.

(A) As the Labor Arbiter assigned to this case, how would you resolve the jurisdiction question. (3%)

(B) What is the rule on personal liability of corporate officers for a corporate act declared to be unlawful? (2%)

SUGGESTED ANSWER

(A) The Labor Arbiter has jurisdiction over Carlo’s illegal dismissal

complaint as he was hired by Mario on a “salary and commission”. basis. In Grepalife v. Judico (G.R. No. 73887, December 21. 1989, 180 SCRA 445) it was held that a worker who is paid on a salary plus commission basis is an employee. While regular courts have jurisdiction over Mario’s corporate act of severing ties with Carlo, the Labor Arbiter, pursuant to Art. 217 A-(2) of the Labor Code, has jurisdiction over Carlo’s illegal dismissal complaint.

(B) Corporate officers are not, as a general rule; personally liable for the corporate acts they performed in behalf of the corporation they represent. They are, however, personally liable for their corporate acts if they acted with malice or bad faith (Girly Ico V. Systems Technology Institute, Inc., G.R. No. 185100, July 9, 2014).

ALTERNATIVE ANSWER

(A) Carlo is party to a joint-venture. Hence, he is not related to Mario as an employee. As a business organization, the affairs of that joint-venture are not governed by Labor Law, except in relation to its employees. Any issue arising from that affair, therefore, must be brought to the RTC. Thus, the NLRC has no jurisdiction because the matter did not arise from employer-employee relationship and the issue between the disputants is not resolvable solely through the application of Labor Law.