Law 20033: Regulatory Framework & Legal Issues in Business

Labor Code of the Philippines

• The Labor Code of the Philippines is a comprehensive law that safeguards the welfare of workingmen and defines the responsibilities of every employee to better serve the capital.
• The law covers the employer-employee relationship, working conditions, and rest periods.

Employer-Employee Relationship

• The four-fold test is used to determine if an employer-employee relationship exists:
  • The power to hire
  • The payment of wages
  • The power to dismiss
  • The power to control the employees' conduct (the "control test")
• The power of control is the most important element in determining the existence of an employer-employee relationship.

Working Conditions and Rest Periods

• Normal hours of work: 8 hours a day, 6 days a week, or 48 hours a week
• Hours worked: all time during which an employee is required to be on duty, at the employer's premises, or at a prescribed work place
• Principles in determining hours worked:
  • All hours are hours worked if the employee is required to give them to the employer
  • Hours worked include time spent on productive labor, physical or mental exertion

Illustrative Cases

• DEALCO Farms vs. NLRC (2009): respondents were hired as escorts or "comboys" for the transit of live cattle; the Supreme Court held that an employer-employee relationship existed between the parties.
• Jose Sonza vs. ABS-CBN (2004): the Supreme Court held that there was no employer-employee relationship between the parties, as Sonza was a talent with a unique skill and celebrity status, and the agreement was the result of negotiations.

Social Security System (SSS) Law

• The SSS law provides for the compulsory coverage of all employers, which gives ample benefits to employees when they are no longer able to work due to disability, sickness, separation, or retirement.

Ease of Doing Business in the Philippines

• The law aims to expedite business transactions with the government and obviate corruption.
• Essential features of the law:
  • Zero-Contact Policy
  • Bigger accountability for receiving officers
  • Shorter processing times
  • Limiting the number of signatories to three people
  • Single unified business application form
  • Environmental and agricultural clearances, sanitary permits, and other local permits will be issued along with the business permit, which is valid for one year

Electronic and E-Commerce Act

• The law recognizes the legal effect of electronic data messages and electronic documents.
• Definitions:
  • "Electronic Data Message" refers to information generated, sent, received, or stored by electronic means
  • "Electronic Document" refers to information or data that is in a form usable for subsequent reference
  • "Electronic Signature" refers to any distinctive mark, characteristic, or sound attached to or logically associated with an electronic data message or electronic document

Philippine Deposit Insurance Corporation (PDIC) Law

• The PDIC is a government-owned and -controlled corporation that provides deposit insurance coverage to depositors.
• Deposit insurance coverage: up to ₱500,000 per depositor per bank
• Deposits covered by PDIC deposit insurance:
  • Demand deposits
  • Savings deposits
  • Time deposits
  • Certificates of deposit

Truth in Lending Act

• The law requires lenders to disclose the true interest rate and other terms of the loan to the borrower.
• Information required to be furnished to the borrower:
  • The rate of interest or finance charge
  • The total amount of the loan
  • The total amount of the interest or finance charge
  • The total amount of the payments

Bank Secrecy Law

• The law prohibits the disclosure of or inquiry into deposits with any banking institution.
• Exceptions to the bank secrecy law:
  • Deposits of public officials
  • Deposits relating to a crime
  • Deposits of a person who has given written permission to disclose the deposit

Anti-Money Laundering Act

• The law prohibits the laundering of money or other properties derived from unlawful activities.
• Covered transactions:
  • Cash transactions involving ₱5 million or more
  • Transactions involving the sale of real property or goods worth ₱5 million or more
  • Transactions involving the transfer of ₱5 million or more

Intellectual Property Code of the Philippines

• The law governs the rights and obligations of creators and owners of intellectual property.
• Types of intellectual property:
  • Copyright and related rights
  • Trademarks and service marks
  • Industrial designs and layout designs of integrated circuits
  • Patents

Data Privacy Act

• The law regulates the processing of personal data and ensures that the rights of data subjects are protected.
• Types of information:
  • Personal information
  • Sensitive personal information
  • Privileged information
• Principles in the processing of data:
  • Transparency
  • Legitimate purpose
  • Proportionality
• Rights of data subjects:
  • Right to be informed
  • Right to object
  • Right to access
  • Right to correct
  • Right to erase### Rest Periods and Overtime
• An employee's rest period shall not be counted if they stop working, rest completely, and leave their workplace, whether within or outside the premises.
• If the work performed was necessary, benefited the employer, or the employee could not abandon their work at the end of their normal working hours, all time spent for such work shall be considered as hours worked.
• Time spent inactive due to interruptions in work beyond the employee's control shall be considered working time if:
  • The employee's presence is required at the workplace.
  • The interval is too brief to be utilized effectively and gainfully in the employee's own interest.

Meal and Rest Periods

• Meal periods: at least 60 minutes of time-off
• Night shift differential: 10% (between 10pm to 6:00am)

Overtime Work

• Overtime work: 25% of regular wage
• Overtime work on a holiday or rest day: 30% of regular wage

Weekly Rest Periods

• Right to weekly rest day: 24 consecutive hours after every 6 consecutive normal workdays
• When an employer may require work on a rest day: in case of actual or impending emergencies or in the event of abnormal pressure of work due to special circumstances, such as force majeure or unforeseen events.

Holidays

• Right to holiday pay: 100% of daily wage
• Service incentive leave (SIL): 5 days if 1 year of service

Service Charges

• Service charges: 85% to employees, 15% to management

Leaves

• Leaves are days when employees may still be paid despite their absence from work
• Types of leaves:
  • Service Incentive Leave (SIL)
  • Solo Parents' Leave
  • Maternity Leave (R.A. 11210)
  • Paternity Leave (R.A. 8187)
  • Leaves under RA 9262 and RA 9710

Post-Employment and Termination of Employment

• Security of tenure: regular and casual employment
• Probationary employment: not to exceed 6 months
• Termination by employer:
  • Just causes: serious misconduct, willful disobedience, gross and habitual neglect, fraud, or commission of a crime
  • Authorized causes: closure of establishment, reduction of personnel, disease, or other causes analogous to the foregoing
• Termination by employee:
  • Without just cause: written notice to the employer at least 1 month in advance
  • With just cause: no notice required

Social Security Act of 2018 (R.A. 11199)

• Coverage:
  • Compulsory for all employees, including kasambahays or domestic workers, and their employers
  • Compulsory for self-employed persons, including professionals, partners, and single proprietors of businesses
  • Compulsory for overseas Filipino workers (OFWs)
• Effective date of coverage: first day of employment or operation
• Effect of separation from employment: continued coverage on a voluntary basis### Social Security Act of 2018
• Compulsory coverage:
  • Employer's contribution and obligation to pay contributions cease at the end of the month of separation.
  • Employee is credited with all contributions paid on their behalf and entitled to benefits.
  • Employee may continue to pay total contributions to maintain right to full benefit.

Benefits Available

• Monthly Pension:
  • Calculated based on the highest of three options:
    • ₱300.00 + 20% of average monthly salary credit + 2% of average monthly salary credit for each credited year of service in excess of 10 years.
    • 40% of average monthly salary credit.
    • ₱1,000.00.
  • Minimum pension: ₱1,200.00 for members with at least 10 credited years of service and ₱2,400.00 for those with at least 20 credited years of service.

Death Benefits

• Upon death of a member, primary beneficiaries shall be entitled to:
  • Monthly pension if the member has paid at least 36 monthly contributions prior to the semester of death.
  • Lump sum benefit equivalent to 36 times the monthly pension if the member has not paid the required 36 monthly contributions.

Permanent Disability Benefits

• Upon permanent total disability, a member shall be entitled to:
  • Monthly pension if the member has paid at least 36 monthly contributions prior to the semester of disability.
  • Lump sum benefit equivalent to the monthly pension times the number of monthly contributions paid to the SSS or 12 times the monthly pension, whichever is higher.

Funeral Benefit

• A funeral grant of ₱12,000.00 shall be paid to help defray funeral expenses upon the death of a member.

Sickness Benefit

• A member who has paid at least 3 monthly contributions in the 12-month period immediately preceding the semester of sickness or injury shall be entitled to:
  • Daily sickness benefit equivalent to 90% of average daily salary credit.
  • Payment of daily sickness benefit shall not be paid longer than 120 days in one calendar year.

Unemployment Insurance or Involuntary Separation Benefits

• A member who is not over 60 years of age and has paid at least 36 months of contributions, 12 months of which should be in the 18-month period immediately preceding the involuntary unemployment or separation, shall be entitled to:
  • Monthly cash payments equivalent to 50% of the average monthly salary credit for a maximum of 2 months.

Non-Transferability of Benefits

• Benefits are not transferable, and no power of attorney or other document executed by those entitled thereto shall be recognized.

Republic Act No. 11032 (The Ease of Doing Business and Efficient Government Service Delivery Act of 2018)

• Coverage: All government offices and agencies, including local government units, government-owned or controlled corporations, and other government instrumentalities, whether located in the Philippines or abroad.
• Key Features:
  • Streamline procedure for issuance of local business permits, licenses, or clearances.
  • Citizen's charter, coverage of the law, automatic approval or extension of permits and licenses.
  • Accountability of heads of offices and agencies, including those located abroad.
  • Zero-Contact Policy to prevent "under-the-table" transactions.
  • Bigger accountability for receiving officers, who will be required to inform applicants of any deficiencies in requirements, assign a unique identification number, and provide a reference number for the transaction.

This instructional material covers labor laws, SSS Law, Ease of Doing Business, and other legal issues in the Philippines. It is compiled by Atty. Ritche I. Eponilla for the College of Accountancy and Finance. The material provides an overview of the regulatory framework and legal issues in business.