The document discusses contracting and subcontracting arrangements under Philippine labor law. It defines key terms like principal, contractor, and contractual employees. It outlines conditions for legitimate contracting, including written contracts and contractor registration. It also discusses grounds for termination, requirements for due process, and the consequences of legal and illegal termination.

2.  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

3.  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

4.  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

5.  Contracting arrangement in Labor is
Expressly allowed by Law. (Ar t. 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)

6. THE
PRINCIP
AL
THE CONTRACTUAL
CONTRACTO EES
R

7.  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
ser vice to be per formed
 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

9.  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

10.  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

11.  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

12.  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.

13.  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)

14. • prior to initiating disciplinary action
(suspension, non-punitive disciplinary letter,
temporary reduction in step, demotion, or
dismissal), the employee must be provided due
process.
• The only requirement in order to substantially
comply with Due Process is that the employee
is given “ample opportunity to be heard”

15. • prior to initiating disciplinary action
(suspension, non-punitive disciplinary letter,
temporary reduction in step, demotion, or
dismissal), the employee must be provided due
process.
• The only requirement in order to substantially
comply with Due Process is that the employee
is given “ample opportunity to be heard”

16. • The law requires that the due process afforded to employees must
include:
• 1. Notice of the proposed action
• 2. The reasons for the proposed action (Company Code/Rules &
Regulations + Art. 282 / 283 of the Labor Code
• 3. A copy of the charges and materials upon which the action is
based (material relied on)
• 4. The right to respond, either orally or in writing, to the authority
imposing discipline.

18. • procedural due process requires that the employee be given the benefit of the so-called
twin-notice and hearing, as follows:
• First notice: Intent Letter/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.
• Writen/Oral Reply+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)

19. • Ser vice of Notices.
• personally served with notices (notice to show cause and notice of decision)
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)

20.  Oppor tunity 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.

21. • 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.

22.  Ef fect of Refusal of Employee to
Par ticipate in Investigation.
 By the refusal of employee to participate in the
investigation, he is deemed to have waived his
right to defend himself.

23. • Ef fects 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.

24.  NTE
 NTE(with suspension)
 NOT

25.  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

26.  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)

28.  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)

29.  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

30.  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)

31.  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