person under written authority given by the worker for the purpose; or

Articles 102-105; 110-127; 303-304 of the Labor Code.

Corresponding IRR
Sections 56 and 133 of the Financial Rehabilitation and Insolvency Act of 2010
Labor Advisory No. 11 Series of 2014 (Non-Interference in the Disposal of Wages and
Allowable Deductions)
Explanatory Bulletin issued by DOLE Secretary Leonardo Quisumbing dated
November 25, 1996

Chapter III
PAYMENT OF WAGES
Art. 102. Forms of payment. No employer shall pay the wages of an employee by
means of promissory notes, vouchers, coupons, tokens, tickets, chits, or any object
other than legal tender, even when expressly requested by the employee.
Payment of wages by check or money order shall be allowed when such manner of
payment is customary on the date of effectivity of this Code, or is necessary
because of special circumstances as specified in appropriate regulations to be
issued by the Secretary of Labor and Employment or as stipulated in a collective
bargaining agreement.
Art. 103. Time of payment. Wages shall be paid at least once every two (2) weeks or
twice a month at intervals not exceeding sixteen (16) days. If on account of force
majeure or circumstances beyond the employers control, payment of wages on or
within the time herein provided cannot be made, the employer shall pay the wages
immediately after such force majeure or circumstances have ceased. No employer
shall make payment with less frequency than once a month.
The payment of wages of employees engaged to perform a task which cannot be
completed in two (2) weeks shall be subject to the following conditions, in the
absence of a collective bargaining agreement or arbitration award:
That payments are made at intervals not exceeding sixteen (16) days, in proportion
to the amount of work completed;
That final settlement is made upon completion of the work.
Art. 104. Place of payment. Payment of wages shall be made at or near the place of
undertaking, except as otherwise provided by such regulations as the Secretary of
Labor and Employment may prescribe under conditions to ensure greater protection
of wages.
Art. 105. Direct payment of wages. Wages shall be paid directly to the workers to
whom they are due, except:
In cases of force majeure rendering such payment impossible or under other special
circumstances to be determined by the Secretary of Labor and Employment in
appropriate regulations, in which case, the worker may be paid through another

Where the worker has died, in which case, the employer may pay the wages of the
deceased worker to the heirs of the latter without the necessity of intestate
proceedings. The claimants, if they are all of age, shall execute an affidavit attesting
to their relationship to the deceased and the fact that they are his heirs, to the
exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be
presented to the employer who shall make payment through the Secretary of Labor
and Employment or his representative. The representative of the Secretary of Labor
and Employment shall act as referee in dividing the amount paid among the heirs.
The payment of wages under this Article shall absolve the employer of any further
liability with respect to the amount paid.
Art. 110. Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employers business, his workers shall enjoy first preference as
regards their wages and other monetary claims, any provisions of law to the
contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in
full before claims of the government and other creditors may be paid. (As amended
by Section 1, Republic Act No. 6715, March 21, 1989)
Art. 111. Attorneys fees.
In cases of unlawful withholding of wages, the culpable party may be assessed
attorneys fees equivalent to ten percent of the amount of wages recovered.
It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of wages, attorneys fees which exceed
ten percent of the amount of wages recovered.
Chapter IV
PROHIBITIONS REGARDING WAGES
Art. 112. Non-interference in disposal of wages. No employer shall limit or otherwise
interfere with the freedom of any employee to dispose of his wages. He shall not in
any manner force, compel, or oblige his employees to purchase merchandise,
commodities or other property from any other person, or otherwise make use of any
store or services of such employer or any other person.
Art. 113. Wage deduction. No employer, in his own behalf or in behalf of any person,
shall make any deduction from the wages of his employees, except:
In cases where the worker is insured with his consent by the employer, and the
deduction is to recompense the employer for the amount paid by him as premium
on the insurance;
For union dues, in cases where the right of the worker or his union to check-off has
been recognized by the employer or authorized in writing by the individual worker
concerned; and
In cases where the employer is authorized by law or regulations issued by the
Secretary of Labor and Employment.

Art. 114. Deposits for loss or damage. No employer shall require his worker to make
deposits from which deductions shall be made for the reimbursement of loss of or
damage to tools, materials, or equipment supplied by the employer, except when
the employer is engaged in such trades, occupations or business where the practice
of making deductions or requiring deposits is a recognized one, or is necessary or
desirable as determined by the Secretary of Labor and Employment in appropriate
rules and regulations.
Art. 115. Limitations. No deduction from the deposits of an employee for the actual
amount of the loss or damage shall be made unless the employee has been heard
thereon, and his responsibility has been clearly shown.
Art. 116. Withholding of wages and kickbacks prohibited. It shall be unlawful for any
person, directly or indirectly, to withhold any amount from the wages of a worker or
induce him to give up any part of his wages by force, stealth, intimidation, threat or
by any other means whatsoever without the workers consent.
Art. 117. Deduction to ensure employment. It shall be unlawful to make any
deduction from the wages of any employee for the benefit of the employer or his
representative or intermediary as consideration of a promise of employment or
retention in employment.
Art. 118. Retaliatory measures. It shall be unlawful for an employer to refuse to pay
or reduce the wages and benefits, discharge or in any manner discriminate against
any employee who has filed any complaint or instituted any proceeding under this
Title or has testified or is about to testify in such proceedings.
Art. 119. False reporting. It shall be unlawful for any person to make any statement,
report, or record filed or kept pursuant to the provisions of this Code knowing such
statement, report or record to be false in any material respect.
Chapter V
WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION
Art. 120. Creation of National Wages and Productivity Commission. There is hereby
created a National Wages and Productivity Commission, hereinafter referred to as
the Commission, which shall be attached to the Department of Labor and
Employment (DOLE) for policy and program coordination. (As amended by Republic
Act No. 6727, June 9, 1989).
Art. 121. Powers and functions of the Commission. The Commission shall have the
following powers and functions:
To act as the national consultative and advisory body to the President of the
Philippines and Congress on matters relating to wages, incomes and productivity;
To formulate policies and guidelines on wages, incomes and productivity
improvement at the enterprise, industry and national levels;
To prescribe rules and guidelines for the determination of appropriate minimum
wage and productivity measures at the regional, provincial, or industry levels;

To review regional wage levels set by the Regional Tripartite Wages and Productivity
Boards to determine if these are in accordance with prescribed guidelines and
national development plans;
To undertake studies, researches and surveys necessary for the attainment of its
functions and objectives, and to collect and compile data and periodically
disseminate information on wages and productivity and other related information,
including, but not limited to, employment, cost-of-living, labor costs, investments
and returns;
To review plans and programs of the Regional Tripartite Wages and Productivity
Boards to determine whether these are consistent with national development plans;
To exercise technical and administrative supervision over the Regional Tripartite
Wages and Productivity Boards;
To call, from time to time, a national tripartite conference of representatives of
government, workers and employers for the consideration of measures to promote
wage rationalization and productivity; and
To exercise such powers and functions as may be necessary to implement this Act.
The Commission shall be composed of the Secretary of Labor and Employment as
ex-officio chairman, the Director-General of the National Economic and Development
Authority (NEDA) as ex-officio vice-chairman, and two (2) members each from
workers and employers sectors who shall be appointed by the President of the
Philippines upon recommendation of the Secretary of Labor and Employment to be
made on the basis of the list of nominees submitted by the workers and employers
sectors, respectively, and who shall serve for a term of five (5) years. The Executive
Director of the Commission shall also be a member of the Commission.
The Commission shall be assisted by a Secretariat to be headed by an Executive
Director and two (2) Deputy Directors, who shall be appointed by the President of
the Philippines, upon the recommendation of the Secretary of Labor and
Employment.
The Executive Director shall have the same rank, salary, benefits and other
emoluments as that of a Department Assistant Secretary, while the Deputy Directors
shall have the same rank, salary, benefits and other emoluments as that of a Bureau
Director. The members of the Commission representing labor and management shall
have the same rank, emoluments, allowances and other benefits as those prescribed
by law for labor and management representatives in the Employees Compensation
Commission. (As amended by Republic Act No. 6727, June 9, 1989)
Art. 122. Creation of Regional Tripartite Wages and Productivity Boards. There is
hereby created Regional Tripartite Wages and Productivity Boards, hereinafter
referred to as Regional Boards, in all regions, including autonomous regions as may
be established by law. The Commission shall determine the offices/headquarters of
the respective Regional Boards.

The Regional Boards shall have the following powers and functions in their
respective territorial jurisdictions:

such order. It shall be mandatory for the Commission to decide such appeal within
sixty (60) calendar days from the filing thereof.

To develop plans, programs and projects relative to wages, incomes and productivity
improvement for their respective regions;

The filing of the appeal does not stay the order unless the person appealing such
order shall file with the Commission, an undertaking with a surety or sureties
satisfactory to the Commission for the payment to the employees affected by the
order of the corresponding increase, in the event such order is affirmed. (As
amended by Republic Act No. 6727, June 9, 1989)

To determine and fix minimum wage rates applicable in their regions, provinces or
industries therein and to issue the corresponding wage orders, subject to guidelines
issued by the Commission;
To undertake studies, researches, and surveys necessary for the attainment of their
functions, objectives and programs, and to collect and compile data on wages,
incomes, productivity and other related information and periodically disseminate the
same;
To coordinate with the other Regional Boards as may be necessary to attain the
policy and intention of this Code;
To receive, process and act on applications for exemption from prescribed wage
rates as may be provided by law or any Wage Order; and
To exercise such other powers and functions as may be necessary to carry out their
mandate under this Code.
Implementation of the plans, programs, and projects of the Regional Boards referred
to in the second paragraph, letter (a) of this Article, shall be through the respective
regional offices of the Department of Labor and Employment within their territorial
jurisdiction; Provided, however, That the Regional Boards shall have technical
supervision over the regional office of the Department of Labor and Employment
with respect to the implementation of said plans, programs and projects.
Each Regional Board shall be composed of the Regional Director of the Department
of Labor and Employment as chairman, the Regional Directors of the National
Economic and Development Authority and the Department of Trade and Industry as
vice-chairmen and two (2) members each from workers and employers sectors who
shall be appointed by the President of the Philippines, upon the recommendation of
the Secretary of Labor and Employment, to be made on the basis of the list of
nominees submitted by the workers and employers sectors, respectively, and who
shall serve for a term of five (5) years.
Each Regional Board to be headed by its chairman shall be assisted by a
Secretariat. (As amended by Republic Act No. 6727, June 9, 1989)
Art. 123. Wage Order. Whenever conditions in the region so warrant, the Regional
Board shall investigate and study all pertinent facts; and based on the standards
and criteria herein prescribed, shall proceed to determine whether a Wage Order
should be issued. Any such Wage Order shall take effect after fifteen (15) days from
its complete publication in at least one (1) newspaper of general circulation in the
region.
In the performance of its wage-determining functions, the Regional Board shall
conduct public hearings/consultations, giving notices to employees and employers
groups, provincial, city and municipal officials and other interested parties.
Any party aggrieved by the Wage Order issued by the Regional Board may appeal
such order to the Commission within ten (10) calendar days from the publication of

Art. 124. Standards/Criteria for minimum wage fixing. The regional minimum wages
to be established by the Regional Board shall be as nearly adequate as is
economically feasible to maintain the minimum standards of living necessary for the
health, efficiency and general well-being of the employees within the framework of
the national economic and social development program. In the determination of
such regional minimum wages, the Regional Board shall, among other relevant
factors, consider the following:
The demand for living wages;
Wage adjustment vis--vis the consumer price index;
The cost of living and changes or increases therein;
The needs of workers and their families;
The need to induce industries to invest in the countryside;
Improvements in standards of living;
The prevailing wage levels;
Fair return of the capital invested and capacity to pay of employers;
Effects on employment generation and family income; and
The equitable distribution of income and wealth along the imperatives of economic
and social development.
The wages prescribed in accordance with the provisions of this Title shall be the
standard prevailing minimum wages in every region. These wages shall include
wages varying with industries, provinces or localities if in the judgment of the
Regional Board, conditions make such local differentiation proper and necessary to
effectuate the purpose of this Title.
Any person, company, corporation, partnership or any other entity engaged in
business shall file and register annually with the appropriate Regional Board,
Commission and the National Statistics Office, an itemized listing of their labor

component, specifying the names of their workers and employees below the
managerial level, including learners, apprentices and disabled/handicapped workers
who were hired under the terms prescribed in the employment contracts, and their
corresponding salaries and wages.
Where the application of any prescribed wage increase by virtue of a law or wage
order issued by any Regional Board results in distortions of the wage structure within
an establishment, the employer and the union shall negotiate to correct the
distortions. Any dispute arising from wage distortions shall be resolved through the
grievance procedure under their collective bargaining agreement and, if it remains
unresolved, through voluntary arbitration. Unless otherwise agreed by the parties in
writing, such dispute shall be decided by the voluntary arbitrators within ten (10)
calendar days from the time said dispute was referred to voluntary arbitration.
In cases where there are no collective agreements or recognized labor unions, the
employers and workers shall endeavor to correct such distortions. Any dispute
arising therefrom shall be settled through the National Conciliation and Mediation
Board and, if it remains unresolved after ten (10) calendar days of conciliation, shall
be referred to the appropriate branch of the National Labor Relations Commission
(NLRC). It shall be mandatory for the NLRC to conduct continuous hearings and
decide the dispute within twenty (20) calendar days from the time said dispute is
submitted for compulsory arbitration.
The pendency of a dispute arising from a wage distortion shall not in any way delay
the applicability of any increase in prescribed wage rates pursuant to the provisions
of law or wage order.
As used herein, a wage distortion shall mean a situation where an increase in
prescribed wage rates results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and among employee
groups in an establishment as to effectively obliterate the distinctions embodied in
such wage structure based on skills, length of service, or other logical bases of
differentiation.
All workers paid by result, including those who are paid on piecework, takay, pakyaw
or task basis, shall receive not less than the prescribed wage rates per eight (8)
hours of work a day, or a proportion thereof for working less than eight (8) hours.
All recognized learnership and apprenticeship agreements shall be considered
automatically modified insofar as their wage clauses are concerned to reflect the
prescribed wage rates. (As amended by Republic Act No. 6727, June 9, 1989)
Art. 125. Freedom to bargain. No wage order shall be construed to prevent workers
in particular firms or enterprises or industries from bargaining for higher wages with
their respective employers. (As amended by Republic Act No. 6727, June 9, 1989)
Art. 126. Prohibition against injunction. No preliminary or permanent injunction or
temporary restraining order may be issued by any court, tribunal or other entity
against any proceedings before the Commission or the Regional Boards. (As
amended by Republic Act No. 6727, June 9, 1989)
Art. 127. Non-diminution of benefits. No wage order issued by any regional board
shall provide for wage rates lower than the statutory minimum wage rates
prescribed by Congress. (As amended by Republic Act No. 6727, June 9, 1989)

BOOK SEVEN
Prescriptions, Transitory and Final Provisions
RULE I
Venue of Actions
SECTION 1. Money claims. All money claims and benefits arising from employeremployee relations, except claims for social security benefits, medicare and
workmen's compensation, shall be filed with the Labor Relations Division of the
regional office nearest the place where the cause of action accrued.cralaw
SECTION 2. Unfair labor practices. All complaints for unfair labor practices shall be
filed with the Labor Relations Division of the regional office nearest the place where
the acts complained of were committed.cralaw

SECTION 3. Workmen's compensation claims. (a) Claims for workmen's

compensation accruing prior to January 1, 1975 shall be filed with the appropriate
regional offices of the Department of Labor and Employment in accordance with the
Rules of the Workmen's Compensation Commission;
(b) Claims for workmen's compensation arising or after January 1, 1975 shall be filed
with the Social Security System for employees in the private sector and with the
Government Service Insurance System for employees of the government, as the
case may be, in accordance with such rules and regulations as the case may be, as
may be laid down by the Employees' Compensation Commission.
RULE II
Prescription of Actions
SECTION 1. Money claims. All money claims and benefits arising from employer
relations shall be filed within three (3) years from the time the cause of action
accrued; otherwise, they shall be forever barred.cralaw
SECTION 2. Unfair labor practices. The complaints involving unfair labor practices
shall be filed within one (1) year from the time the acts complained of were
committed; otherwise, they shall be forever barred.cralaw
SECTION 3. Workmen's compensation claims. Subject to the exceptions provided
under the Code, all claim for workmen's compensation shall be filed within one (1)
year from the occurrence of injury or death; otherwise they shall be forever
barred.cralaw

(f) Act No. 3428, as amended, or the Workmen's Compensation Act.cralaw

(g) Act No. 3959, or the Contractor's Bond Act.cralaw
(h) Commonwealth Act No. 103, as amended, or the Court of Industrial Relations
Act.cralaw
(i) Commonwealth Act No. 104, as amended, or the Industrial Safety Act.cralaw
(j) Commonwealth Act No. 213.cralaw
(k) Commonwealth Act No. 303.cralaw
(l) Commonwealth Act No. 444, as amended, or the Eight Hour Labor Law.cralaw
(m) Republic Act No. 602, as amended, or the Minimum Wage Law, except Sections
3 and 7 thereof.cralaw
(n) Republic Act No. 679, as amended, or the Woman and Child Labor Law.cralaw
(o) Republic Act No. 761, as amended, or the National Employment Service
Law.cralaw
(p) Republic Act No. 875, as amended, or the Industrial Peace Act.cralaw
(q) Republic Act No. 946, as amended, or the Blue Sunday Law.cralaw
(r) Republic Act No. 1052, as amended, or the Termination Pay Law.cralaw

SECTION 4. Claims accruing prior to effectivity of the Code. (a) All money claims
and benefits arising from the employer-employee relations which accrued prior to
the effectivity of the Code shall be filed within one (1) year from the date of the
effectivity of the Code; otherwise, they shall be forever barred.cralaw

(s) Republic Act No. 1054 or the Emergency Medical and Dental Treatment
Law.cralaw

(b) All worker's compensation claims accruing prior to January 1, 1975 shall be filed
not later than March 31, 1975, otherwise, they shall be forever barred.cralaw

(u) Republic Act No. 2646.cralaw

SECTION 5. Prescription of action on union funds. Any action involving the funds
of the organization shall prescribe after three years from the date of submission of
the annual financial report to the Department of Labor and Employment or from the
date the same should have been submitted as required by law, whichever comes
earlier.
RULE III
Laws Repealed
SECTION 1. Laws repealed. Pursuant to the repealing clause of Article 303 of the
Code, the following labor laws are deemed repealed by the Code:
(a) Act No. 1874, or the Employer's Liability Act.
(b) Act No. 2473.cralaw
(c) Act No. 2486, as amended, or the Recruitment for Overseas Employment
Act.cralaw
(d) Act No. 2549.cralaw
(e) Act No. 3957, as amended, or the Private Employment Agency Act.cralaw

(t) Republic Act No. 1826, as amended, or the National Apprenticeship Act.cralaw

(v) Republic Act No. 2714.cralaw

(w) Republic Act No. 5462, or the Manpower and Out-of-School Youth Development
Act.cralaw
(x) Reorganization Plan No. 20-A.cralaw
All rules and regulations, policy instructions, orders and issuances implementing
Presidential Decree No. 442, as amended, contrary to or inconsistent with these
rules are hereby repealed or modified accordingly.cralaw
All other laws involving employer-employee relations, including the Sugar Act of
1952 (R.A. 809), are deemed not repealed.
RULE IV
Date of Effectivity
SECTION 1. Effectivity of these rules and regulations. (a) The provisions of these
rules and regulations which were promulgated on January 19, 1975, shall continue to
be in effect as of February 3, 1975, except the following:

1. Those relating to self-executing provisions of the Labor Code which become

effective on November 1, 1974; and

the sale of the thing together with other property for a lump sum, when the price
thereof can be determined proportionally;

2. Those implementing the pertinent provisions of Presidential Decree No. 850

further amending the Labor Code and incorporated as part of these rules and
regulations, which shall take effect on March 2, 1976, unless they pertain to selfexecuting provisions of Presidential Decree No. 850, which took effect on December
16, 1975.cralaw

(4) Credits guaranteed with a pledge so long as the things pledged are in the hands
of the creditor, or those guaranteed by a chattel mortgage, upon the things pledged
or mortgaged, up to the value thereof;

(b) Republic Act No. 6715 took effect on March 21, 1989, fifteen (15) days after the
completion of its publication in two (2) newspapers of general circulation. The Rules
implementing this Act shall take effect fifteen (15) days after the completion of their
publication in two (2) newspapers of general circulation, except those which pertain
to self-executing provisions of said Act.
Done in the City of Manila, this 27th day of May, 1989.

Article 288 of the Revised Penal Code.

Art. 288. Other similar coercions; (Compulsory purchase of merchandise and
payment of wages by means of tokens.) The penalty of arresto mayor or a fine
ranging from 200 to 500 pesos, or both, shall be imposed upon any person, agent or
officer, of any association or corporation who shall force or compel, directly or
indirectly, or shall knowingly permit any laborer or employee employed by him or by
such firm or corporation to be forced or compelled, to purchase merchandise or
commodities of any kind.chanrobles virtual law library
The same penalties shall be imposed upon any person who shall pay the wages due
a laborer or employee employed by him, by means of tokens or objects other than
the legal tender currency of the laborer or employee.

Articles 2241 to 2244 of the Civil Code.

CHAPTER 2

(5) Credits for the making, repair, safekeeping or preservation of personal property,
on the movable thus made, repaired, kept or possessed;
(6) Claims for laborers' wages, on the goods manufactured or the work done;
(7) For expenses of salvage, upon the goods salvaged;
(8) Credits between the landlord and the tenant, arising from the contract of tenancy
on shares, on the share of each in the fruits or harvest;
(9) Credits for transportation, upon the goods carried, for the price of the contract
and incidental expenses, until their delivery and for thirty days thereafter;
(10) Credits for lodging and supplies usually furnished to travellers by hotel keepers,
on the movables belonging to the guest as long as such movables are in the hotel,
but not for money loaned to the guests;
(11) Credits for seeds and expenses for cultivation and harvest advanced to the
debtor, upon the fruits harvested;
(12) Credits for rent for one year, upon the personal property of the lessee existing
on the immovable leased and on the fruits of the same, but not on money or
instruments of credit;
(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing
deposited, upon the price of the sale.
In the foregoing cases, if the movables to which the lien or preference attaches have
been wrongfully taken, the creditor may demand them from any possessor, within
thirty days from the unlawful seizure. (1922a)

CLASSIFICATION OF CREDITS

Art. 2242. With reference to specific immovable property and real rights of the
debtor, the following claims, mortgages and liens shall be preferred, and shall
constitute an encumbrance on the immovable or real right:

Art. 2241. With reference to specific movable property of the debtor, the following
claims or liens shall be preferred:

(1) Taxes due upon the land or building;

(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;
(2) Claims arising from misappropriation, breach of trust, or malfeasance by public
officials committed in the performance of their duties, on the movables, money or
securities obtained by them;
(3) Claims for the unpaid price of movables sold, on said movables, so long as they
are in the possession of the debtor, up to the value of the same; and if the movable
has been resold by the debtor and the price is still unpaid, the lien may be enforced
on the price; this right is not lost by the immobilization of the thing by destination,
provided it has not lost its form, substance and identity; neither is the right lost by

(2) For the unpaid price of real property sold, upon the immovable sold;
(3) Claims of laborers, masons, mechanics and other workmen, as well as of
architects, engineers and contractors, engaged in the construction, reconstruction or
repair of buildings, canals or other works, upon said buildings, canals or other works;
(4) Claims of furnishers of materials used in the construction, reconstruction, or
repair of buildings, canals or other works, upon said buildings, canals or other works;
(5) Mortgage credits recorded in the Registry of Property, upon the real estate
mortgaged;

(6) Expenses for the preservation or improvement of real property when the law
authorizes reimbursement, upon the immovable preserved or improved;
(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by
attachments or executions, upon the property affected, and only as to later credits;
(8) Claims of co-heirs for warranty in the partition of an immovable among them,
upon the real property thus divided;
(9) Claims of donors or real property for pecuniary charges or other conditions
imposed upon the donee, upon the immovable donated;

(13) Gifts due to public and private institutions of charity or beneficence;

(14) Credits which, without special privilege, appear in (a) a public instrument; or (b)
in a final judgment, if they have been the subject of litigation. These credits shall
have preference among themselves in the order of priority of the dates of the
instruments and of the judgments, respectively. (1924a)

Sections 56 and 133 of the Financial Rehabilitation and Insolvency Act of

2010

(10) Credits of insurers, upon the property insured, for the insurance premium for
two years. (1923a)
Art. 2243. The claims or credits enumerated in the two preceding articles shall be
considered as mortgages or pledges of real or personal property, or liens within the
purview of legal provisions governing insolvency. Taxes mentioned in No. 1, Article
2241, and No. 1, Article 2242, shall first be satisfied. (n)
Art. 2244. With reference to other property, real and personal, of the debtor, the
following claims or credits shall be preferred in the order named:
(1) Proper funeral expenses for the debtor, or children under his or her parental
authority who have no property of their own, when approved by the court;

Section 56.Treatment of Employees, Claims. Compensation of

employees required to carry on the business shall be considered an
administrative expense. Claims of separation pay for months worked
prior to the commencement date shall be considered a preommencement claim. Claims for salary and separation pay for work
performed after the commencement date shall be an administrative
expense.

(2) Credits for services rendered the insolvent by employees, laborers, or household
helpers for one year preceding the commencement of the proceedings in insolvency;
(3) Expenses during the last illness of the debtor or of his or her spouse and children
under his or her parental authority, if they have no property of their own;
(4) Compensation due the laborers or their dependents under laws providing for
indemnity for damages in cases of labor accident, or illness resulting from the nature
of the employment;
(5) Credits and advancements made to the debtor for support of himself or herself,
and family, during the last year preceding the insolvency;
(6) Support during the insolvency proceedings, and for three months thereafter;

Section 133. Concurrence and Preference of Credits. - The Liquidation

Plan and its Implementation shall ensure that the concurrence and
preference of credits as enumerated in the Civil Code of the Philippines
and other relevant laws shall be observed, unless a preferred creditor
voluntarily waives his preferred right. For purposes of this chapter, credits
for services rendered by employees or laborers to the debtor shall enjoy
first preference under Article 2244 of the Civil Code, unless the claims
constitute legal liens under Article 2241 and 2242 thereof.

(7) Fines and civil indemnification arising from a criminal offense;

(8) Legal expenses, and expenses incurred in the administration of the insolvent's
estate for the common interest of the creditors, when properly authorized and
approved by the court;
(9) Taxes and assessments due the national government, other than those
mentioned in Articles 2241, No. 1, and 2242, No. 1;
(10) Taxes and assessments due any province, other than those referred to in
Articles 2241, No. 1, and 2242, No. 1;
(11) Taxes and assessments due any city or municipality, other than those indicated
in Articles 2241, No. 1, and 2242, No. 1;
(12) Damages for death or personal injuries caused by a quasi-delict;

Labor Advisory No. 11 Series of 2014 (Non-Interference in the Disposal of Wages and
Allowable Deductions)
Explanatory Bulletin issued by DOLE Secretary Leonardo Quisumbing dated
November 25, 1996

LIRAGs only remaining asset was mortgaged to DBP which on April 15,
1983 foreclosed the mortgage and acquired said property at public auction for
P31,346,462.90, in partial satisfaction of LIRAGs indebtedness to DBP. LIRAGs
workers through their union (LAND) thereupon sought to garnish on DBP the
proceeds of the foreclosure sale, to the extent of their adjudged unpaid wages.
ISSUE:
Whether or not the claim of LIRAGs workers for unpaid wages should be given first
preference in the liquidation proceedings.
RULING:
NO. LAND (representing LIRAGs workers) may not enforce its first preference in the
satisfaction of unpaid monetary claims of its members, over that of DBP, in the
absence of a formal declaration of bankruptcy or judicial liquidation of LIRAGs
business.
Under Article 110 of the Labor Code:
In the event of bankruptcy or liquidation of an employers business, his workers
shall enjoy first preference as regards their unpaid wages and other monetary
claims, any provision of law to the contrary notwithstanding. Such unpaid wages and
monetary claims, shall be paid in full before the claims of the Government and other
creditors may be paid
In the event of insolvency, a principal objective should be to effect an equitable
distribution of the insolvents property among his creditors. To accomplish this there
must first be some proceeding where notice to all of the insolvents creditors may be
given and where the claims of preferred creditors may be bindingly adjudicated.
Preferential right of credit attains significance only after the properties of the debtor
have been inventoried and liquidated, and the claims held by his various creditors
have been established.
DBP anchors its claim on a mortgage credit. A recorded mortgage credit is a special
preferred credit. The preference given by Article 110, is an ordinary preferred credit.

DEVELOPMENT BANK OF THE PHILIPPINES v. NATIONAL LABOR RELATIONS

COMMISSION
FACTS:
Lirag Textile Mills, Inc. (LIRAG) ceased operations by early 1982. Pursuant to
a final and executory judgment of the NLRC, LIRAG was adjudged liable to its
workers for unpaid wages and salaries which amounted to P 6,292,380

For and orderly settlement of a debtors assets, all creditors must be convened, their
claims ascertained and inventoried, and thereafter the preferences determined in
the course of judicial proceedings. Such adjudication made will be binding on all
parties-in-interest, since the proceedings are proceedings in rem.