Tag: Pakyaw Workers

Protecting Workers: Illegal Dismissal and the Rights of ‘Pakyaw’ Employees in the Philippines

This Supreme Court decision clarifies the rights of ‘pakyaw’ or piece-rate workers, emphasizing that regular employees, regardless of payment scheme, are entitled to security of tenure and due process. The Court affirmed that A. Nate Casket Maker illegally dismissed its employees when they refused to sign a new, less favorable employment contract. The ruling underscores that employers cannot circumvent labor laws by imposing unfair agreements and that ‘pakyaw’ workers are entitled to holiday pay, service incentive leave pay, and backwages upon illegal dismissal, though not 13th-month pay.

Beyond Piecework: When ‘Pakyaw’ Workers Deserve Regular Protection

The case of A. Nate Casket Maker vs. Elias V. Arango (G.R. No. 192282, October 5, 2016) revolves around a labor dispute concerning the alleged illegal dismissal of several employees. These employees, working as carpenters, mascilladors, and painters, were employed by A. Nate Casket Maker, a business engaged in the manufacture of caskets. The central issue is whether these workers, considered pakyaw or piece-rate employees, were illegally dismissed and if they are entitled to the same rights and benefits as regular employees.

The petitioners, Armando and Anely Nate, argued that the respondents were pakyaw workers paid per job order and not entitled to regular employee benefits. Conversely, the respondents claimed that they were regular employees, working long hours without proper compensation, and were ultimately dismissed for refusing to sign a contract that would diminish their rights. The Court of Appeals (CA) sided with the employees, reversing the National Labor Relations Commission (NLRC) decision and declaring that the employees were illegally dismissed.

At the heart of this case is the interpretation and application of Article 280 of the Labor Code, which defines regular employment. This article states that an employment is deemed regular if the employee performs activities that are usually necessary or desirable in the employer’s business, regardless of any written or oral agreement to the contrary. Here’s how Article 280 frames the concept:

Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer…

Building on this principle, the Supreme Court emphasized the importance of the “control test” in determining employment status. This test examines whether the employer has the power to control not only the result of the work but also the means and methods by which the work is accomplished. In this case, the Court found that A. Nate Casket Maker exercised control over the respondents, instructing them on the casket-making process and monitoring their work through signed notebooks, thereby establishing an employer-employee relationship.

A key element of the Court’s decision was the finding that the employees were illegally dismissed. The Court noted that the employer presented the employees with a new employment contract containing less favorable terms, and when the employees refused to sign, they were told to go home. This was viewed as a termination of employment without just cause or due process, violating the employees’ right to security of tenure guaranteed by Article XIII, Section 3 of the 1987 Constitution, which states:

They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law.

Furthermore, Article 279 of the Labor Code reinforces this right:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

The Court underscored that employers cannot use employment agreements to circumvent labor laws and deprive employees of their rights. Due to the length of time that had passed since the illegal dismissal, the Court upheld the CA’s decision to award separation pay in lieu of reinstatement. The separation pay was set at one month’s salary for every year of service.

Regarding monetary benefits, the Supreme Court addressed the respondents’ claims for holiday pay, 13th-month pay, service incentive leave pay, and overtime pay. Citing the case of David v. Macasio, the Court clarified that pakyaw workers are entitled to holiday pay and service incentive leave pay if they are not considered field personnel. In this case, the employees worked within the employer’s premises and were subject to supervision, thus they were not considered field personnel and were entitled to these benefits.

However, the Court ruled that the respondents were not entitled to 13th-month pay. Referring to Presidential Decree No. 851 and its implementing rules, the Court noted that employees paid on a task basis are specifically exempted from receiving 13th-month pay, irrespective of whether they are field personnel or not.

This decision offers important lessons for both employers and employees. It reinforces the principle that employers must adhere to labor laws and respect the rights of their employees, regardless of their payment scheme. Furthermore, it clarifies the rights of pakyaw workers, ensuring they receive fair treatment and protection under the law.

FAQs

What was the key issue in this case?	The main issue was whether the employees of A. Nate Casket Maker, who were paid on a piece-rate basis (pakyaw), were illegally dismissed and entitled to the same rights as regular employees.
What is a ‘pakyaw’ worker?	A ‘pakyaw’ worker is an employee who is paid per piece or task completed, rather than on a fixed salary or hourly basis. Despite this payment method, they may still be considered regular employees under the law.
What is the “control test”?	The “control test” is used to determine employment status. It examines whether the employer has the power to control not only the result of the work but also the means and methods by which the work is accomplished.
What benefits are ‘pakyaw’ workers entitled to?	‘Pakyaw’ workers who are considered regular employees are entitled to security of tenure, holiday pay, and service incentive leave pay. However, they are not entitled to 13th-month pay.
What is illegal dismissal?	Illegal dismissal occurs when an employee is terminated without just cause or without following due process. It violates the employee’s right to security of tenure.
What are the remedies for illegal dismissal?	Remedies for illegal dismissal include reinstatement to the former position without loss of seniority, payment of backwages, and other benefits. If reinstatement is not feasible, separation pay may be awarded instead.
What is security of tenure?	Security of tenure is the right of an employee to continue working for an employer unless there is a just cause for termination and due process is followed. It is protected by the Constitution and the Labor Code.
Are employers allowed to change employment contracts to reduce employee benefits?	No, employers cannot unilaterally change employment contracts to reduce employee benefits if it violates labor laws and deprives employees of their rights. The law prioritizes the protection of labor.

This case serves as a reminder of the importance of upholding labor rights in the Philippines. By protecting vulnerable workers from unfair labor practices, the Supreme Court reinforces the constitutional mandate to provide full protection to labor. This ruling underscores the necessity for employers to respect the law and ensure that all employees, regardless of their payment scheme, receive the rights and benefits they are entitled to.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: A. Nate Casket Maker vs. Elias V. Arango, G.R. No. 192282, October 5, 2016

October 5, 2016

Upholding Workers’ Rights: Illegal Dismissal and Entitlement to Benefits for ‘Pakyaw’ Workers

This Supreme Court decision clarifies the rights of workers paid on a piece-rate basis (‘pakyaw’ workers) who are illegally dismissed. The Court ruled that these workers, if considered regular employees due to the employer’s control over their work, are entitled to reinstatement with backwages, or separation pay if reinstatement is not feasible. Additionally, the decision confirms their entitlement to holiday pay and service incentive leave, while clarifying the ineligibility for 13th-month pay due to existing regulations. This ensures that ‘pakyaw’ workers are afforded the same labor protections as other regular employees, safeguarding their security of tenure and basic labor rights.

Casket Makers’ Contract: Regular Employment vs. Unfair Dismissal?

The case of A. Nate Casket Maker vs. Elias V. Arango (G.R. No. 192282, October 5, 2016) revolves around a labor dispute between several employees and A. Nate Casket Maker, a business engaged in casket manufacturing. The central issue is whether the employees, who were paid on a piece-rate basis (‘pakyaw’ workers), were illegally dismissed and, if so, what benefits they are entitled to. This dispute highlights the complexities of employment relationships and the protection afforded to workers under Philippine labor laws.

The factual backdrop reveals that the employees, working as carpenters, painters, and ‘mascilladors’, had been employed by A. Nate Casket Maker for several years. A conflict arose when the employer presented them with an employment contract that sought to change their status to contractual, with a fixed term of five months and a waiver of certain benefits typically granted to regular employees. The employees refused to sign the contract, leading to their alleged termination. They filed a complaint for illegal dismissal, underpayment of wages, and non-payment of other benefits.

The Labor Arbiter (LA) initially dismissed the complaint, a decision affirmed by the National Labor Relations Commission (NLRC). The NLRC reasoned that there was insufficient evidence of dismissal and that ‘pakyaw’ workers are not typically entitled to the claimed benefits. However, the Court of Appeals (CA) reversed these decisions, finding that the employees were indeed illegally dismissed and were entitled to certain monetary benefits. The Supreme Court then took up the case to determine the correctness of the CA’s decision.

At the heart of the legal analysis is the determination of the employees’ employment status. Article 280 of the Labor Code defines regular employment, stating that an employee is deemed regular if they perform activities that are usually necessary or desirable in the usual business or trade of the employer. The Supreme Court emphasized that the tasks performed by the employees were integral to the casket-making business. Moreover, the Court applied the ‘control test’, noting that the employer exercised control over the employees’ work by instructing them on the casket-making process and checking their completed work.

Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer…

Having established that the employees were regular, the Court addressed the issue of illegal dismissal. The burden of proving a just and valid cause for dismissal lies with the employer. The Court found that the employer failed to present sufficient evidence of a valid cause for termination, such as misconduct or poor performance. The employer’s attempt to change the terms of employment through a disadvantageous contract, coupled with the subsequent termination when the employees refused to sign, indicated an act of illegal dismissal. It is critical to note that employers cannot circumvent labor laws by using contracts that deprive employees of their security of tenure.

Regarding the monetary claims, the Court differentiated between the types of benefits. It affirmed the CA’s ruling that the employees were entitled to holiday pay and service incentive leave (SIL). Citing the case of David v. Macasio, the Court clarified that ‘pakyaw’ workers are entitled to these benefits unless they fall under the definition of ‘field personnel’. Since the employees worked at the employer’s premises and their work hours could be reasonably determined, they were not considered field personnel and were therefore entitled to holiday pay and SIL.

However, the Court ruled differently regarding the 13th-month pay. Presidential Decree No. 851 and its implementing rules exempt employers of those paid on a ‘task basis’ from providing 13th-month pay. The Court emphasized that this exemption applies regardless of whether the task worker is also considered a field personnel. Thus, the employees were deemed ineligible for 13th-month pay.

The decision highlights the importance of security of tenure, a right guaranteed to all workers under the Constitution and the Labor Code. This right protects employees from arbitrary dismissal and ensures that they can only be terminated for just or authorized causes, following due process. The Court underscored that employers must comply with both substantive and procedural due process when terminating an employee. This includes providing a written notice of termination stating the grounds for dismissal and giving the employee an opportunity to be heard.

In cases of illegal dismissal, employees are entitled to reinstatement and backwages. Reinstatement restores the employee to their former position, while backwages compensate for the wages lost due to the illegal dismissal. The Court acknowledged that reinstatement may not always be practical, especially if the employment relationship has been strained. In such cases, separation pay may be awarded in lieu of reinstatement. The Supreme Court in this case deferred to the CA’s finding that separation pay was warranted because nine years had passed, making reinstatement impractical.

The determination of backwages for piece-rate workers requires a careful assessment of their varying degrees of production and days worked. The Court directed the NLRC to conduct further proceedings to determine the appropriate amount of backwages due to each employee, ensuring a fair and accurate calculation based on their actual work performance. The court emphasized that this should not impede the award of separation pay as earlier determined.

FAQs

What was the key issue in this case?	The central issue was whether the ‘pakyaw’ workers were illegally dismissed and, if so, what benefits they were entitled to, considering their employment status and mode of payment.
What is a ‘pakyaw’ worker?	A ‘pakyaw’ worker is someone paid on a piece-rate or task basis, where compensation is based on the number of items produced or tasks completed rather than a fixed salary or hourly wage.
How did the court determine the employment status of the workers?	The court applied the ‘control test’, examining whether the employer had the right to control not only the result of the work but also the means and methods by which it was accomplished.
What is the ‘control test’?	The ‘control test’ is a legal standard used to determine whether an employer-employee relationship exists. It focuses on the employer’s power to control the manner and details of the employee’s work performance.
What is security of tenure?	Security of tenure is the right of an employee to remain in their job unless there is a just or authorized cause for termination, ensuring protection against arbitrary dismissal.
What benefits are illegally dismissed employees entitled to?	Illegally dismissed employees are generally entitled to reinstatement, full backwages, and other benefits, or separation pay if reinstatement is no longer feasible.
Are ‘pakyaw’ workers entitled to holiday pay and service incentive leave (SIL)?	Yes, ‘pakyaw’ workers are entitled to holiday pay and SIL unless they are classified as ‘field personnel’, meaning they regularly perform their duties away from the employer’s premises and their hours cannot be reasonably determined.
Are ‘pakyaw’ workers entitled to 13th-month pay?	No, ‘pakyaw’ workers are generally not entitled to 13th-month pay, as they fall under the exemption provided in the rules and regulations implementing Presidential Decree No. 851.
What is the significance of this ruling?	The ruling reinforces the protection of workers’ rights, clarifying that ‘pakyaw’ workers who are considered regular employees are entitled to the same labor protections as other regular employees.

This case serves as a reminder of the importance of upholding workers’ rights and ensuring fair labor practices. It emphasizes that employers must not exploit vulnerable workers through unfair contracts or arbitrary dismissals. The decision reinforces the principle that the law protects employees and will not tolerate attempts to circumvent its intent. This ruling is vital for both employers and employees to understand their respective rights and obligations under Philippine labor law.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

October 5, 2016