L. Prescription of actions

Frequency: ★★★★★

1. Money claims

a. 3-year prescription

Monetary claims have a 3-year prescription from accrual of cause of action. (Article 306, Labor Code)

1) The phrase “from accrual of cause of action”

Well-settled is the rule that since a cause of action requires, as essential elements, not only a legal right of the plaintiff and a correlative duty of the defendant but also “an act or omission of the defendant in violation of said legal right,” the cause of action does not accrue until the party obligated refuses, expressly or impliedly, to comply with its duty. (China Banking Corporation v. CA, G.R. No. 153267, 23 June 2005)

Otherwise stated, a cause of action has three elements, to wit:

1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created;

2) an obligation on the part of the named defendant to respect or not to violate such right; and

3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff. (Ibid.)

It bears stressing that it is only when the last element occurs that a cause of action arises. (Ibid.)

a) From the time when the employer refuses to pay

The day the action may be brought is the day a claim started as a legal possibility. (Rivera v. United Laboratories, Inc., G.R. No. 155639, 22 April 2009)

Otherwise stated, the employee’s cause of action for monetary claims commences when the employer refuses to pay after demand has been made, whether extrajudicially (e.g. demand letter) or judicially (e.g. labor complaint).

Judicial demand: The three (3)-year prescriptive period commences, not at the end of the year when the employee becomes entitled to the commutation of his service incentive leave, but from the time when the employer refuses to pay its monetary equivalent after demand of commutation or upon termination of the employee’s services, as the case may be. (Rodriguez v. Park N Ride Inc., G.R. No. 222980, 20 March 2017)

2) Exception: promissory estoppel

The principle of promissory estoppel is a recognized exception to the three-year prescriptive period enunciated in Article 291 of the Labor Code. (Accessories Specialist, Inc. v. Alabanza, G.R. No. 168985, 23 July 2008)

Promissory estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would virtually sanction the perpetration of fraud or would result in other injustice. Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its terms. (Ibid.)

In order to make out a claim of promissory estoppel, a party bears the burden of establishing the following elements: (1) a promise was reasonably expected to induce action or forbearance; (2) such promise did, in fact, induce such action or forbearance; and (3) the party suffered detriment as a result. (Ibid.)

b. Interruption or tolling is possible

Like other causes of action, the prescriptive period for money claims is subject to interruption, and in the absence of an equivalent Labor Code provision for determining whether the said period may be interrupted, Article 1155 of the Civil Code. (Philippine Long Distance Telephone Company v. Pingol, supra.)

Under Article 1155 of the Civil Code, the prescription of an action is interrupted by (a) the filing of an action, (b) a written extrajudicial demand by the creditor, and (c) a written acknowledgment of the debt by the debtor. (Ibid.)

1) No interruption for “follow-up”

Complainant never made any written extrajudicial demand. Neither did he make any written acknowledgment of its alleged obligation. Thus, the claimed “follow-ups” could not have validly tolled the running of the prescriptive period. (Ibid.)

c. Coverage of monetary claims

Article 306 [291] covers claims for overtime pay, holiday pay, service incentive leave pay, bonuses, salary differentials, and illegal deductions by an employer. It also covers money claims arising from seafarer contracts. (Arriola v. Pilipino Star Ngayon, Inc., 13 August 2014)

The provision, however, does not cover “money claims” consequent to an illegal dismissal such as backwages. It also does not cover claims for damages due to illegal dismissal. These claims are governed by Article 1146 of the Civil Code of the Philippines.

•••••

BAR EXAM QUESTION

(Question A.10[a], Part I, Labor Law, 2019 Bar Exam)

For purposes of prescription, within what periods from the time the cause of action accrued should the following cases be filed:

(a) Money claims arising from employer-employee relations (1%)

SUGGESTED ANSWER:

Monetary claims have a 3-year prescription from accrual of cause of action.

•••••

BAR EXAM QUESTION

(Question III, Labor Law, 2018 Bar Exam)

Due to his employer’s dire financial situation, Nicanor was prevailed upon by his employer to voluntarily resign. In exchange, he demanded payment of salary differentials, 13th month pay, and financial assistance, as promised by his employer. Management promised to pay him as soon as it is able to pay off all retrenched rank-and-file employees. Five years later, and before management was able to pay Nicanor the amount promised to him, Nicanor died of a heart attach. His widow, Norie, filed a money claim against the company before the National Labor Relations Commission (NLRC), including interest on the amount of the unpaid claim. She also claimed additional damages arguing that the supposed resignation letter was obtained from her spouse through undue pressure and influence. The employer filed a motion to dismiss on the ground that (A) the NLRC did not have jurisdiction over money claims, and (B) the action has prescribed.

(b) Assuming that the NLRC has jurisdiction, has the action prescribed? (2.5%)

SUGGGESTED ANSWER:

(b) No. Answer

Under labor law jurisprudence, the principle of promissory estoppel is a recognized exception to the three-year prescriptive period for monetary claims under the Labor Code. Promissory estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would virtually sanction the perpetration of fraud or would result in other injustice. Rule

In the case at bar, the employer through the Management promised to pay Nicanor his monetary claims as soon as the Company is able to pay off all retrenched rank-and-file employees. The employer is now estopped from denying such liability and such monetary claims is exempt from the coverage of the 3-year prescription. Apply

Thus, the action has not prescribed. Conclusion

•••••

2. Illegal dismissal

a. 4-year prescription

Illegal dismissal has a 4-year prescription from accrual of cause of action. (Arriola v. Pilipino Star Ngayon, Inc., supra.)

1) Applies to action for reinstatement

An action for reinstatement by reason of illegal dismissal is one based on an injury which may be brought within four (4) years from the time of dismissal pursuant to Art. 1146 of the Civil Code. (Protective Maximum Security Agency, Inc. v. Fuentes, G.R. No. 169303, 11 February 2015)

2) Applies to backwages

This 4-year prescriptive period applies to claims for backwages, not the 3-year prescriptive period under Article 305 [291] of the Labor Code. A claim for backwages, according to this court, may be a money claim “by reason of its practical effect.” Legally, however, an award of backwages “is merely one of the reliefs which an illegally dismissed employee prays the labor arbiter and the NLRC to render in his favor as a consequence of the unlawful act committed by the employer.” Though it results “in the enrichment of the individual [illegally dismissed], the award of backwages is not in redress of a private right, but, rather, is in the nature of a command upon the employer to make public reparation for his violation of the Labor Code.” (Arriola v. Pilipino Star Ngayon, Inc., supra.)

Actions for damages due to illegal dismissal are likewise actions “upon an injury to the rights of the plaintiff.” Article 1146 of the Civil Code of the Philippines, therefore, governs these actions. (Ibid.)

b. Civil Code as basis

Illegal dismissal claims are governed by Article 1146 (1) of the Civil Code of the Philippines, which provides: Art. 1146. The following actions must be instituted within four years:… (1) Upon injury to the rights of the plaintiff. (Ibid.)

c. Injury to the rights of the plaintiff

Although illegal dismissal is a violation of the Labor Code, it is not the “offense” contemplated in Article 305 [290] which refers to illegal acts penalized under the Labor Code, including committing any of the prohibited activities during strikes or lockouts, unfair labor practices, and illegal recruitment activities. The three-year prescriptive period under Article 290, therefore, does not apply to complaints for illegal dismissal. (Ibid.)

Instead, “by way of supplement,” Article 1146 of the Civil Code of the Philippines governs complaints for illegal dismissal. Under Article 1146, an action based upon an injury to the rights of a plaintiff must be filed within four years. This court explained: … when one is arbitrarily and unjustly deprived of his job or means of livelihood, the action instituted to contest the legality of one’s dismissal from employment constitutes, in essence, an action predicated “upon an injury to the rights of the plaintiff,” as contemplated under Art. 1146 of the New Civil Code, which must be brought within four (4) years. (Ibid.)

d. When accrual of cause of action starts

In an illegal dismissal, the cause of action starts when employees are not allowed to perform their usual and regular job. (Philippine Long Distance Telephone Company v. Pingol, supra.)

•••••

BAR EXAM QUESTION

(Question A.10[b], Part I, Labor Law, 2019 Bar Exam)

For purposes of prescription, within what periods from the time the cause of action accrued should the following cases be filed:

(b) Illegal dismissal (1%)

SUGGESTED ANSWER:

Illegal dismissal has a 4-year prescription from accrual of cause of action.

•••••

3. Unfair labor practice

a. 1-year prescription

Unfair labor practice cases have a 1-year prescription from accrual of cause of action. (Paragraph 2, Article 305, Labor Code)

b. Action barred after prescription

USTFU filed its complaint under the theory of unfair labor practice. Thus, USTFU had one year from UST’s alleged failure to contribute, or “slide in,” the correct amount to the fund to file its complaint. USTFU had one year for every alleged breach by UST: school year (SY) 1997-1998, SY 1998-1999, SY 1999-2000, SY 2000-2001, SY 2001-2002, and SY 2002-2003. USTFU did not file any complaint within the respective one-year prescriptive periods. USTFU decided to file its complaint only in 2007, several years after the accrual of its several possible causes of action. (University of Santo Tomas Faculty Union v. University of Sto. Tomas, G.R. No. 203957, 30 July 2014)

4. Offenses under the Labor Code

a. 3-year prescription

Other offenses under the Labor Code have a 3-year prescription from accrual of cause of action.  (Paragraph 1, Article 305, Labor Code)

•••••

BAR EXAM QUESTION

(Question A.10[d], Part I, Labor Law, 2019 Bar Exam)

For purposes of prescription, within what periods from the time the cause of action accrued should the following cases be filed:

(d) Offenses under the Labor Code (1%)

SUGGESTED ANSWER:

Other offenses under the Labor Code have a 3-year prescription from accrual of cause of action.

•••••

5. Illegal recruitment

a. 3-year prescription

Illegal recruitment has a 3-year prescription from accrual of cause of action. (Section 12, R.A. 8042, as amended)

b. 20-year prescription

Illegal recruitment involving economic sabotage has a 20-year prescription from accrual of cause of action. (Ibid.)

c. Offenders

Illegal recruitment may be undertaken by either non-license or license holders. Non-license holders are liable by the simple act of engaging in recruitment and placement activities, while license holders may also be held liable for committing the acts prohibited under Section 6 of RA 8042. (People v. Sison, G.R. No. 187160, 09 August 2017)

d. Economic sabotage

1) By a syndicate; or

2) By large scale. (Paragraph 1 [m], Section 6, R.A. 8042, as amended)

e. Syndicate v. Large Scale

1) By a syndicate

Illegal recruitment is deemed committed by a syndicate carried out by a group of three (3) or more persons conspiring or confederating with one another. (Paragraph 2, Section 6, R.A. 8042, as amended)

2) By a large scale

Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group. (Ibid.)

•••••

BAR EXAM QUESTION

(Question A.10[e], Part I, Labor Law, 2019 Bar Exam)

For purposes of prescription, within what periods from the time the cause of action accrued should the following cases be filed:

Illegal recruitment (1%)

SUGGESTED ANSWER:

Illegal recruitment has a 3-year prescription from accrual of cause of action.

•••••

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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