H. Clearance procedures

Frequency: ★☆☆☆☆


Requiring clearance before the release of last payments to the employee is a standard procedure among employers, whether public or private. Clearance procedures are instituted to ensure that the properties, real or personal, belonging to the employer but are in the possession of the separated employee, are returned tothe employer before the employee’s departure. (Milan v. NLRC, Solid Mills, Inc., G.R. No. 202961, 04 February 2015)


General Rule: As a general rule, employers are prohibited from withholding wages from employees… and the elimination or diminution of benefits.
Exception: However, our law supports the employers’ institution of clearance procedures before the release of wages.
As an exception to the general rule that wages may not be withheld and benefits may not be diminished, the Labor Code provides:
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:
1. 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;
2. 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
3. In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment. (Emphasis supplied)
The Civil Code provides that the employer is authorized to withhold wages for debts due:
Article 1706. Withholding of the wages, except for a debt due, shall not be made by the employer.
“Debt” in this case refers to any obligation due from the employee to the employer. It includes any accountability that the employee may have to the employer. There is no reason to limit its scope to uniforms and equipment, as petitioners would argue. (Milan v. NLRC, Solid Mills, Inc., supra.)
Milan v. NLRC, Solid Mills, Inc. (February 2015)
… respondent Solid Mills and NAFLU, the union representing petitioners, agreed that the release of petitioners’ benefits shall be “less accountabilities.”
“Accountability,” in its ordinary sense, means obligation or debt. The ordinary meaning of the term “accountability” does not limit the definition of accountability to those incurred in the worksite. As long as the debt or obligation was incurred by virtue of the employer-employee relationship, generally, it shall be included in the employee’s accountabilities that are subject to clearance procedures.
It may be true that not all employees enjoyed the privilege of staying in respondent Solid Mills’ property. However, this alone does not imply that this privilege when enjoyed was not a result of the employer-employee relationship. Those who did avail of the privilege were employees of respondent Solid Mills. Petitioners’ possession should, therefore, be included in the term “accountability.”
Accountabilities of employees are personal. They need not be uniform among all employees in order to be included in accountabilities incurred by virtue of an employer-employee relationship. Petitioners do not categorically deny respondent Solid Mills’ ownership of the property, and they do not claim superior right to it. What can be gathered from the findings ofthe Labor Arbiter, National Labor Relations Commission, and the Court ofAppeals is that respondent Solid Mills allowed the use of its property for the benefit of petitioners as its employees. Petitioners were merely allowed to possess and use it out of respondent Solid Mills’ liberality. The employer may, therefore, demand the property at will.
The return of the property’s possession became an obligation or liability on the part of the employees when the employer-employee relationship ceased. Thus, respondent Solid Mills has the right to withhold petitioners’ wages and benefits because of this existing debt or liability x x x
x x x
For these reasons, we cannot hold that petitioners are entitled to interest of their withheld separation benefits. These benefits were properly withheld by respondent Solid Mills because of their refusal to return its property.
Solas v. Power and Telephone Supply Phils., Inc. (August 2008)
There was valid reason for respondents’ withholding of petitioner’s salary for the month of February 2000. Petitioner does not deny that he is indebted to his employer in the amount of around 95,000.00. Respondents explained that petitioner’s salary for the period of February 1-15, 2000 was applied as partial payment for his debt and for withholding taxes on his income; while for the period of February 15-28, 2000, petitioner was already on absence without leave, hence, was not entitled to any pay.
The law does not sanction a situation where employees who do not even assert any claim over the employer’s property are allowed to take all the benefits out of their employment while they simultaneously withhold possession of their employer’s property for no rightful reason. Withholding of payment by the employer does not mean that the employer may renege on its obligation to pay employees their wages, termination payments, and due benefits. The employees’ benefits are also not being reduced. It is only subjectedto the condition that the employees return properties properly belonging to the employer. This is only consistent with the equitable principle that “no one shall be unjustly enriched or benefited at the expense of another.”

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.


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Mock Bar Exam: Labor Law

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Frequency: ★★★☆☆ Concepts Wage – paid to any employee shall mean the remuneration or earnings, however designated, capable of being

K. Voluntary arbitrator

Frequency: ★★★★★ 1. JURISDICTION a. Exclusive and original jurisdiction 1) Those arising from the implementation or interpretation of the CBA;

A. Basic policy on labor

Frequency: ★★☆☆☆ 1. Security of tenure a. Entitlement to security of tenure Workers shall be entitled to security of tenure.


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