Presidential Decree

Presidential Decree No. 715

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PRESIDENTIAL DECREE No. 715 May 28, 1975

AMENDING COMMONWEALTH ACT NO. 108, AS AMENDED, OTHERWISE KNOWN AS “THE ANTI-DUMMY LAW”

WHEREAS, there have been conflicting interpretations as to whether Section 2-A of Commonwealth Act No. 108, as amended, otherwise known as the Anti-Dummy Law, allows aliens to become members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities;

WHEREAS, it is fair and equitable and in line with the constitutional policy expressed in Article XIV, Section 5 of the Constitution, that foreign investors be allowed limited representation in the governing board or body of corporations or associations in proportion to their allowable participation in the equity of the said entities;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:

Section 1. Section 2-A of Commonwealth Act No. 108, as amended, is hereby further amended to read as follows:

“Section 2-A. Any person, corporation, or association, which, having in its name or under its control, a right, franchise, privilege, property or business, the exercise or enjoyment of which is expressly reserved by the Constitution or the laws to citizens of the Philippines or of any other specific country, or to corporations or associations at least sixty per centum of the capital of which is owned by such citizens, permits or allows the use, exploitation or enjoyment thereof by a person, corporation or association not possessing the requisites prescribed by the Constitution or the laws of the Philippines; or leases, or in any other way, transfers or conveys said right, franchise, privilege, property or business to a person, corporation or association not otherwise qualified under the Constitution, or the provisions of the existing laws; or in any manner permits or allows any person, not possessing the qualifications required by the Constitution, or existing laws to acquire, use, exploit or enjoy a right, franchise, privilege, property or business, the exercise and enjoyment of which are expressly reserved by the Constitution or existing laws to citizens of the Philippines or of any other specific country, to intervene in the management, operation, administration or control thereof, whether as an officer, employee or laborer therein with or without remuneration except technical personnel whose employment may be specifically authorized by the Secretary of Justice, and any person who knowingly aids, assists, or abets in the planning, consummation or perpetration of any of the acts herein above enumerated shall be punished by imprisonment for not less than five nor more than fifteen years and by a fine of not less than the value of the right, franchise or privilege enjoyed or acquired in violation of the provisions hereof but in no case less than five thousand pesos: Provided, however, that the president, managers or persons in violating the provisions of this section shall be criminally liable in lieu thereof: Provided, further, That any person, corporation or association shall, in addition to the penalty imposed herein, forfeit such right, franchise, privilege and the property provisions of this Act; and Provided, finally, That the election of aliens as members of the board of directors or governing body of corporations or associations engaging in partially nationalized activities shall be allowed in proportion to their allowable participation or share in the capital of such entities.

Section 2. This Decree shall take effect immediately.

DONE in the City of Manila, this 28th day of May, in the year of Our Lord, nineteen hundred and seventy-five.

Presidential Decree No. 1534

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PRESIDENTIAL DECREE No. 1534

FURTHER AMENDING REPUBLIC ACT NO. 5527 AS AMENDED BY PRESIDENTIAL DECREE NO. 498 OTHERWISE KNOWN AS THE PHILIPPINE MEDICAL TECHNOLOGY ACT OF 1969

WHEREAS, Presidential Decree No. 498 amended certain sections of Republic Act No. 5527 otherwise known as the Philippine Medical Technology Act of 1969;

WHEREAS, in the implementation of said decree, certain sections thereof have been found to hamper or render ineffective certain functions and duties of the Department of Education and Culture and the Department of Health; and

WHEREAS, the aforesaid Decree contains provisions which prejudice the practice of anatomic and clinical pathology by qualified physicians thus negating one of the primary objectives of the original Medical Act of 1969;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:

Section 1. Section 3 of Republic Act No. 5527 as amended by Presidential Decree No. 498 is hereby amended to read as follows:

“Sec. 3. Council of Medical Technology Education; Its Composition. There is hereby established a Council of Medical Technology Education hereafter referred to as the Council, which shall be composed of the Director of Higher Education as Chairman; the Chairman of the Professional Regulation Commission as Vice-Chairman; and the Director of the Bureau of Research and Laboratories of the Department of Health, the Chairman and two (2) members of the Board of Medical Technology, a representative of the Deans of Schools of Medical Technology and Public Health, and the Presidents of the Philippine Society of Pathologists and the Philippine Association of Medical Technologies, as members.”

Section 2. Paragraph 3, Section 8 of Republic Act No. 5527 as amended is hereby amended to read as follows;

“Sec. 8. Qualification of Examiners. No person shall be appointed as a member of the Medical Technology Board unless he or she: . . . is a qualified Pathologists, or a duly registered Medical Technologist, of the Philippines with the degree of Bachelor of Science in Medical Technology/Bachelor of Science in Hygiene/Public Health; . . . .”

Section 3. Sub-paragraphs (g) and (i) of Section 11 of Republic Act No. 5527 as amended are hereby repealed.

Section 4. Section 13 of Republic Act No. 5527 as amended, is hereby further amended to read as follows:

“Sec. 13. Accreditation of Schools of Medical Technology and of Training Laboratories. The Department of Education and Culture shall approve schools of Medical Technology in accordance with the provisions of this Act, as amended, in conjunction with the Board of Medical Technology. The Department of Health through the Bureau of Research and Laboratories shall approve laboratories for accreditation as training laboratories for medical technology students or post-graduate trainees in conjunction with the Board of Medical Technology. The laboratories shall show satisfactory evidence that they possess qualified personnel and are properly equipped to carry out laboratory procedures commonly required in the following fields: Clinical Chemistry, Microbiology, Serology, Parasitology, Hematology, Blood Banking, Clinical Microscopy, and Histopathologic techniques, and that the scope of activities of said laboratories offer sufficient training in said laboratory procedures.”

Section 5. Section 12 of Presidential Decree No. 498 is hereby amended to read as follows:

“Sec. 12. Repealing Clause. All those Executive Order, Decrees, Rules and Regulations, or parts thereof inconsistent with the provisions of this Decree are hereby repealed, amended or modified accordingly: Provided, however, That nothing in this Decree shall be construed as repealing or amending any portion of the Medical Act of 1959 (Republic Act No. 2382, as amended by Republic Act No. 4224), and the Clinical Laboratory Act of 1966 (Republic Act No. 4688), and the Blood Banking Law of 1956 (Republic Act No. 1517), and the Rules and Regulations issued pursuant to these laws.”

Section 6. This Decree shall take effect immediately.

Done in the City of Manila, this 11th day of June, in the year of Our Lord, nineteen hundred and seventy-eight.

Presidential Decree No. 449

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PRESIDENTIAL DECREE No. 449 May 9, 1974

COCKFIGHTING LAW OF 1974

WHEREAS, cockfighting has been and still is a popular, traditional and customary form of recreation and entertainment among Filipinos during legal holidays, local fiestas, agricultural, commercial and industrial fairs, carnivals or expositions;

WHEREAS, by reason of the aforestated meaning and connotation of cockfighting in relation to filipino customs and traditions, it should neither be exploited as an object of commercialism or business enterprise, nor made a tool of uncontrolled gambling, but more as a vehicle for the preservation and perpetuation of native Filipino heritage and thereby enhance our national identity.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order to be part of the laws of the land, the following:

Sec 1. Title. This Decree shall be known as the “Cockfighting Law of 1974”.

Section 2. Scope. This law shall govern the establishment, operation, maintenance and ownership of cockpits.

Section 3. Declaration of Policy. It is hereby declared a policy of the government to insure within the framework of the New Society maximum development and promotion of wholesome recreation and amusement to bring about the following goals:

(a) To effectively control and regulate cockfighting towards its establishment as a national recreation, relaxation and source of entertainment;

(b) To provide additional revenue for our tourism program; and

(c) To remove and prevent excessive and unreasonable business operation and profit considerations in the management of cockpits and, instead preserve Philippine customs and traditions and thereby enhance our national identity.

Section 4. Definition of Terms. As used in this law, the following terms shall be understood, applied and construed as follows:

(a) Cockfighting shall embrace and mean the commonly known game or term “cockfighting derby, pintakasi or tupada”, or its equivalent terms in different Philippine localities.

(b) Zoning Law or Ordinance Either both national or local city or municipal legislation which logically arranges, prescribes, defines and apportions a given political subdivision into specific land uses as present and future projection of needs warrant.

(c) Bet Taker of Promoter A person who calls and takes care of bets from owners of both gamecocks and those of other bettors before he orders commencement of the cockfight and thereafter distributes won bets to the winners after deducting a certain commission.

(d) Gaffer (Taga Tari) A person knowledgeable in the art of arming fighting cocks with gaff or gaffs on either or both legs.

(e) Referee (Sentenciador) A person who watches and oversees the proper gaffing of fighting cocks, determines the physical condition of fighting cocks while cockfighting is in progress, the injuries sustained by the cocks and their capability to continue fighting and decides and make known his decision by work or gestures and result of the cockfight by announcing the winner or declaring a tie or no contest game.

(f) Bettor A person who participates in cockfights and with the use of money or other things of value, bets with other bettors or through the bet taker or promoter and wins or loses his bet depending upon the result of the cockfight as announced by the Referee or Sentenciador. He may be the owner of fighting cock.

Section 5. Cockpits and Cockfighting: In General:

(a) Ownership, Operation and Management of Cockpits. Only Filipino citizens not otherwise inhibited by existing laws shall be allowed to own, manage and operate cockpits. Cooperative capitalization is encouraged.

(b) Establishment of Cockpits. Only one cockpit shall be allowed in each city or municipality, except that in cities or municipalities with a population of over one hundred thousand, two cockpits may be established, maintained and operated.

(c) Cockpits Site and Construction. Cockpits shall be constructed and operated within the appropriate areas as prescribed in Zoning Law or Ordinance. In the absence of such law or ordinance, the local executives shall see to it that no cockpits are constructed within or near existing residential or commercial areas, hospitals, school buildings, churches or other public buildings. Owners, lessees, or operators of cockpits which are now in existence and do not conform to this requirement are given three years from the date of effectivity of this Decree to comply herewith. Approval or issuance of building permits for the construction of cockpits shall be made by the city or provincial engineer in accordance with their respective building codes, ordinances or engineering laws and practices.

(d) Holding of Cockfights. Except as provided in this Decree, cockfighting shall be allowed only in licensed cockpits during Sundays and legal holidays and during local fiestas for not more than three days. It may also be held during provincial, city or municipal, agricultural, commercial or industrial fair, carnival or exposition for a similar period of three days upon resolution of the province, city or municipality where such fair, carnival or exposition is to be held, subject to the approval of the Chief of Constabulary or his authorized representative: Provided, that, no cockfighting on the occasion of such fair, carnival or exposition shall be allowed within the month of a local fiesta or for more than two occasions a year in the same city or municipality: Provided, further, that no cockfighting shall be held on December 30 (Rizal Day), June 12 (Philippine Independence Day) November 30 (National Heroes Day), Holy Thursday, Good Friday, Election or Referendum Day and during Registration Days for such election or referendum.

(e) Cockfighting for Entertainment of Tourists or for Charitable Purposes. Subject to the preceding subsection hereof, the Chief Constabulary or his authorized representative may also allow the holding of cockfighting for the entertainment of foreign dignitaries or for tourists, or for returning Filipinos, commonly known as “Balikbayan”, or for the support of national fund-raising campaigns for charitable purposes as may be authorized by the Office of the President, upon resolution of a provincial board, city or municipal council, in licensed cockpits or in playgrounds or parks: Provided, that this privilege shall be extended for only one time, for a period not exceeding three days, within a year to a province, city, or municipality.

(f) Other games during cockfights prescribed. No gambling of any kind shall be permitted on the premises of the cockpit or place of cockfighting during cockfights. The owner, manager or lessee off such cockpit and the violators of this injunction shall be criminally liable under Section 8 hereof.

Section 6. Licensing of Cockpits. City and municipal mayors are authorized to issue licenses for the operation and maintenance of cockpits subject to the approval of the Chief of Constabulary or his authorized representatives. For this purpose, ordinances may be promulgated for the imposition and collection of taxes and fees not exceeding the rates fixed under Section 13, paragraphs (a) and (b); and 19; paragraph (g) 16 of Presidential Decree No. 231, dated June 28, 1973, otherwise known as the Local Tax Code, as amended.

Section 7. Cockfighting Officials. Gaffers, referees or bet takers or promoters shall not act as such in any cockfight herein authorized, without first securing a license renewable every year on their birth-month from the city or municipality where such cockfighting is held. Cities and municipalities may charge a tax of not more than twenty pesos. Only licensed gaffers, referees, bet takers or promoters shall officiate in all kinds of cockfighting authorized in this Decree.

Section 8. Penal Provisions. Any violation of the provisions of this Decree and of the rules and regulations promulgated by the Chief of Constabulary pursuant thereto shall be punished as follows:

a. By prison correctional in its maximum period and a fine of two thousand pesos, with subsidiary imprisonment in case of insolvency, when the offender is the financer, owner, manger or operator of cockpit, or the gaffer, referee or bet taker in cockfights; or the offender is guilty of allowing, promoting or participating in any other kind of gambling in the premises of cockfights during cockfights.

b. By prison correctional or a fine of not less than six hundred pesos nor more than two thousand pesos or both, such imprisonment and fine at the discretion of the court, with subsidiary imprisonment in case of insolvency, in case of any other offender.

Section 9. Repealing Clause. The provisions of Section 2285 and 2286 of the Revised Penal Code, Republic Act No. 946, all laws, decrees, rules and regulations, or orders which are inconsistent with this Decree are hereby repealed or modified accordingly.

Section 10. Date of Effectivity. This Decree shall take effect after fifteen (15) days following the completion of the publication in the Official Gazette.

Done in the City of Manila, this 9th day of May, in the year of Our Lord, nineteen hundred and seventy-four.

Presidential Decree No. 498

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PRESIDENTIAL DECREE No. 498 June 28, 1974

AMENDING SECTIONS TWO, THREE, FOUR, SEVEN, EIGHT, ELEVEN, THIRTEEN, SIXTEEN, SEVENTEEN, TWENTY-ONE AND TWENTY-NINE OF REPUBLIC ACT NO. 5527, ALSO KNOWN AS THE PHILIPPINE MEDICAL TECHNOLOGY ACT OF 1969

WHEREAS, Republic Act No. 5527, An Act Requiring the Registration of Medical Technologists, Defining Their Practice, And For Other Purpose took effect on June 21, 1969;

WHEREAS, in the implementation of said Act, some provisions were found to be prejudicial to the interests of some medical technology practitioners who would otherwise qualify for registration as medical technologist without examination; and

WHEREAS, it was likewise found that some provisions were inadequate to meet the primary objectives of maintaining the high standard of the medical technology profession, hence, there is an imperative need to correct these deficiencies of the said Act.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081 dated September 21, 1972, as amended, do hereby order and decree:

Section 1. Subsections (a) and (d) of Section 2 of Republic Act No. 5527 are hereby amended to read as follows:

“Sec. 2. Definition of Terms. As used in this Act, the following terms shall mean:

(a) Practice of Medical Technology. A person shall be deemed to be in the practice of medical technology within the meaning of this Act, who shall for a fee, salary or other compensation or reward paid or given directly or indirectly through another, renders any of the following professional services for the purpose of aiding the physician in the diagnosis, study and treatment of diseases and in the promotion of health in general:

1. Examination of tissues, secretions and excretions of the human body and body fluids by various electronic, chemical, miscroscopic, bacteriologic, hematologic, serologic, immunologic, nuclear, and other laboratory procedures and techniques either manual or automated:

2. Blood banking procedures and techniques;

3. Parasitologic, Mycologic and Microbiologic procedures and techniques;

4. Histopatholgic and Cytotechnology; provided that nothing in this paragraph shall inhibit a duly registered medical laboratory technician from performing histopathologic techniques and procedures.

5. Clinical research involving patients or human beings requiring the use of and/or application of medical technology knowledge and procedures;

6. Preparations and standardization of reagents, standards, stains and others, provided such reagents, standards, stains and others are exclusively for the use of their laboratory;

7. Clinical laboratory quality control;

8. Collection and preservation of specimens,

Provided, that any person who shall passed the corresponding Board examination for the practice of a profession already regulated by existing laws, shall not be subject to the provisions of at last four (4) preceding paragraphs if the performance of such acts or services is merely incidental to his profession.

(d) Medical Laboratory Technicians. A person certified and registered with the Board as qualified to assist a medical technologist and/or qualified pathologist in the practice of medical technology as defined in this Act.”

Section 2. Section 3 of the same Act is hereby amended and now to read as follows:

“Sec. 3. Council of Medical Technology Education, Its Composition. There is hereby established a Council of Medical Technology Education, hereafter referred to as Council, which shall be composed of the Commissioner of the Professional Regulation Commission as Chairman, the Chairman of the Board of Medical Technology as Vice-Chairman, and the two (2) members of the Board of Medical Technology, and the Director of Private Education or its duly authorized representative, the Director of the Bureau of Research and Laboratories of the Department of Health, and a representative of the deans or heads of the private schools of medical technology, as members.”

Section 3. Section of the same Act is hereby amended to read as follows:

“Sec. 4. Compensation and Traveling Expenses of Council Members. For every meeting actually attended, the Chairman shall be entitled to a fifty pesos (P50.00) per diem while the members shall be entitled to twenty-five pesos (P25.00) each regardless of whether or not they receive regular salaries from the government. In addition, the Chairman and members of the Council shall be entitled to traveling expenses in connection with their official duties.”

Section 4. Section 7 of the same Act is hereby amended to read as follows:

“Sec. 7. Medical Technology Board. There is hereby created a Medical Technology Board under the Professional Regulation Commission, which shall thereafter be referred to as the Board composed of a Chairman who is a pathologist, and two (2) members who are registered medical technologists who shall be appointed by the President of the Republic of the Philippines upon recommendation of the Professional Regulation Commission. The Chairman and members of the Board shall hold office for three (3) years after appointment or until their successors shall have been appointed and duly qualified: Provided, That the incumbent members will continue to serve until the expiration of their terms.

In case of death, disability, or removal of a member of the Board, his successor shall serve only the balance of his terms.”

Section 5. Paragraph 3 and 5 of Section 8 of the same Act are hereby amended to read as follows:

“Sec. 8. Qualification of Examiners. No person shall be appointed a member of the Medical Technology Board unless he or she:

1) . . .

2) . . .

3) is a duly registered medical technologist of the Philippines with the degree of Bachelor of Science in Medical Technology/Bachelor of Science in Hygiene/Public Health;

4) . . .

5) is not a member of the faculty of any medical technology school for at least two (2) years prior to appointment or having any pecuniary interest direct or indirect in such institution.”

Section 6. Subsection (c) of Section 11 of the same Act is hereby amended and subparagraphs (g), (h) and (l) are hereby added to read as follows:

“Sec. 11. . . .

(c) Issue, suspend and revoke certificates of registration for the practice of medical technology and medical laboratory technician;

(g) To determine the adequacy of the technical staff of all clinical laboratories and blood banks before they could be licensed with the Department of Health in accordance with R.A. No. 4655 and 1517;

(h) To prescribe the qualification and training of medical technologist as to special fields of the profession and supervise their specialty examination conducted by the professional organization of medical technologists accredited by the Professional Regulation Commission;

(i) To classify and prescribe the qualification and training of the technical staff of clinical laboratories as to: Chief Medical Technologist; Senior Medical Technologist; Medical Technologist and Medical Laboratory Technician.”

Section 7. Section 13 of the same Act is hereby amended to read as follows:

“Sec. 13. Accreditation of Schools of Medical Technology and of Training Laboratories. Upon the recommendation of the Medical Technology Board, the Department of Education and Culture shall approve schools of medical technology in accordance with the provisions of this Decree. The Professional Regulation Commission upon recommendation of the Medical Technology Board shall approve laboratories for accreditations as training laboratories for medical technology students or post graduate trainees upon satisfactory evidence that said laboratories possess qualified personnel and are properly equipped to carry out laboratory procedures commonly required in the following fields: bacteriology, serology, parasitology, hematology, biochemistry and blood banking, and that the scope of activities of said laboratory offer sufficient training in said laboratory procedure.”

Section 8. Subparagraph (b) of Section 16 is hereby amended to read as follows:

“Sec. 16. . . .

(b) Has completed a course of at least four (4) years leading to the degree of Bachelor of Science in Medical Technology or Bachelor of Science in Public Health conferred by a recognized school, college or university in accordance with this Decree or having graduated from some other profession and has been actually performing medical technology for the last five (5) years prior to the date of the examinations, if such performance began prior to June 21, 1969.”

Section 9. Section 17 of the same Act is hereby amended to read as follows:

“Sec. 17. Scope of examination. The examination questions shall cover the following subjects with their respective relative weights:

Clinical Chemistry    20%
Microbiology & Parasitology    20%
Hematology    20%
Blood Banking & Serology    20%
Clinical Microscopy (Urinalysis and other body fluids)    10%
Histopathologic Techniques, Cytotechnology, Medical Technology Laws, Related Laws and its implementing rules, and the Code of Ethics    10%

The Board shall prepare the schedule of subjects for examination and to submit the same to the Commissioner of the Professional Regulation Commission for publication at least thirty (30) days before the date of examination. The Board shall compute the general average of each examinee according to the above-mentioned relative weights of each subject. Provided, however, that the Board may change, add to or remove from the list of subjects or weights above as progress in the science of Medical Technology may require, subject to the prior approval of the Professional Regulation Commission, and publication of the change or amendment at least three (3) months prior to the date of examination in which the same is to take effect.”

Section 10. Section 21 of the same Act is hereby amended to read as follows:

“Sec. 21. Issuance of Certificate of Registration. Every applicant who has satisfactorily passed the required examination for medical technologist shall be issued a certificate of registration as such. Provided that no such certificate shall be issued to any successful applicant who has not attained the age of twenty-one (21) years. All certificate shall be signed by the members of the Board and by the Commissioner of the Professional Regulation Commission. The duly registered medical technologist shall be required to display his certificate of registration in the place where he works. Provided, that upon application filed and the payment of the required fee of one hundred and fifteen pesos (P115.00) the Board shall issue a certificate of registration as medical technologist without examination to persons who have been graduated with Bachelor of Science in Medical Technology/Bachelor of Science in Public Health in duly recognized schools of medical technology in the Philippines or in any foreign country, provided, that in case of the latter, the standard of medical technology education is substantially the same as ours, and in addition shall have been in the practice of medical technology for at least three (3) years prior to the filing of the application in laboratories in the Philippines duly accredited by the Bureau of Research and Laboratories, Department of Health, or in foreign countries if such performance began prior to June 21, 1969 and also to all other persons who having graduated from other professions have been actually performing medical technology practice for the last eight (8) years prior to filing of the application, Provided, that such performance began prior to June 21, 1969.

Provided, further, that the Board shall likewise issue a certificate of registration as medical laboratory technician without examination to any person who upon application and payment of the required fee of fifty pesos (P50.00) show evidence satisfactory to the Board that:

1. He or she passed the civil service examination for medical technician on March 21, 1964; or

2. Has finished a two-year college course and has at least one (1) year of experience as medical laboratory technician, provided, that for every year of deficiency in college attainment two (2) years of experience may be substituted; Provided, further, that an applicant who has at least ten (10) years experience as medical laboratory technician as of the date of approval of this Decree regardless of his academic attainment may qualify for registration without examination; or

3. Has failed to pass the board examination for medical technology but had obtained a general rating of at least 70%. Provided, finally, that a registered medical laboratory technician when employed in the government shall have the equivalent civil service eligibility not lower than second grade.”

Section 11. Section 29 subparagraph (j) of the same Act is hereby amended to read as follows:

“(j) Any person or corporate body who shall allow anyone in his employ who is not a registered medical technologist/medical laboratory technician to engage in the practice of medical technology or recommend for appointment anyone to the position of medical technologist/medical laboratory technician knowing that he is not registered as such.”

Section 12. Repealing Clause. All laws, executive orders, decrees, rules and regulations or parts thereof, inconsistent with the provisions of this Decree are hereby repealed, amended or modified accordingly.

Section 13. This Decree shall take effect immediately.

Done in the City of Manila, this 28th day of June, in the year of Our Lord, nineteen hundred and seventy-four.

Presidential Decree No. 1536

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PRESIDENTIAL DECREE No. 1536

REGULATING THE PRACTICE OF THE METALLURGICAL ENGINEERING PROFESSION IN THE PHILIPPINES AND PROVIDING FOR THE LICENSING AND REGISTRATION OF METALLURGICAL ENGINEERS

WHEREAS while other profession are protected from the influx of foreign practitioners, metallurgical engineers have been left to complete on their own ways with foreign metallurgical engineers and non-metallurgical engineers practicing tasks;

WHEREAS, there is a need to regulate the practice of the metallurgical engineering profession in the country and to protect the metal industry from unscrupulous practitioners; and

WHEREAS, in order to give justice to them men who have pioneered in this profession to enhance the development of our metal industry, it is now high time for the government which will be responsible for the promotion, development and implementation of the rules and regulations of the discipline in order to sustain the need of one of the fastest growing industries in the Philippines, today, the metal industry;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby order and Decree:

ARTICLE I

Section 1. Title of Decree This Decree shall be known as the “Metallurgical Engineering Law of the Philippines.”

Section 2. Creation and Composition of the Board Within thirty days and effectivity of this Decree, there shall be created a Board of Metallurgical Engineering, hereinafter referred to as the “Board”, to be composed of three members, all of whom shall be appointed by the President of the Philippines upon recommendation of the Professional Regulation Commission from among those organizations involved in minerals and metals processing or studies. One of the appointed members of the Board shall be designated as Chairman.

Section 3. Powers Vested in the Board The Board is hereby empowered to administer oaths; to issue, suspend and revoke certificates of registration for the practice of metallurgical engineering; to investigate violations of this Decree and for this purpose it may, under the hand of its chairman and seal of the Board, subpoena witnesses and compel their attendance; to inspect metallurgical plants; to look into the conditions affecting the teaching and practice of metallurgical engineering in the Philippines; to recommend the adoption of such rules and regulations and other measures as may be deemed proper for the enforcement of this Decree; and to discharge such other duties as the Board may deem necessary for the maintenance of ethical and technical standards of the metallurgical profession.

Section 4. Qualifications of Board Members Each members of the Board shall at the time of his appointment:

(1) Be a citizen of the Philippines;

(2) Be a holder of at least the degree of Bachelor of Science in Metallurgical Engineering of Metallurgy with at least five years experience in metallurgical practice as defined in Section 12 of this Decree after graduation, or a holder of the degree of Doctor of Science of Philosophy in Metallurgical or Mineral Engineering or Metallurgy with at least two years experience in metallurgical work;

(3) Be registered and legally qualified to practice metallurgical engineers in the Philippines, except for the members of the first Board who shall automatically be registered under the provisions of this Decree; and

(4) Not be a member of the faculty of any school, college or university, where degrees in metallurgy, metallurgical engineering or mining engineering are granted, nor has pecuniary interests in such institution at least two years before his appointment as members of the Board.

(5) Must be recommended by a bona fide professional mineral or metal organization of the Philippines.

Section 5. Term of Office The members of the Board shall hold office for a term of three years after their appointment or until their successors shall have been appointed and duly qualified. The members of the first Board appointed under this Decree shall hold office for the following: One member, (who shall be the Chairman of the Board) for one year, one member for two years and one member for three years. The Chairmanship of his last tenure year as member of the Board. In case of death, incapacity or removal for cause of any member, a new member shall be appointed by the President of the Philippines, and shall serve the unexpired portion of the term of his predecessor.

Section 6. Executive Office and Secretary of the Board The Professional Regulation Commission shall designate an executive officer of the Board who shall conduct the examination given by it. The Secretary of the Professional Regulation Commission shall also be the Secretary of the Board. All records and minutes of the deliberation of the Board, including examination papers, shall be kept by the Professional Regulation Commission under the direct custody of the Secretary.

Section 7. Removal of Board Members The President may remove any members of the Board for continued neglect of duty or incompetency, or for unethical or immoral conduct, after having given the member concerned an opportunity to defend himself in a proper administrative investigation.

Section 8. Compensation of the Board The members of the Board shall receive compensation at the current rate of the other Boards of Engineering. A member of the Board who is, at the same time, a government employee shall receive the compensation herein provided in addition to his salary. All fees shall be received by the Professional Regulation Commission which shall pay all authorized compensations and expenditures of the Board.

Section 9. Rules and Regulations The Board may, subject to the approval of the Professional Regulation Commission, adopt such rules and regulations as may be necessary to carry out the provisions of this Decree.

Section 10. Submission of Annual Report The Board shall submit an annual report to the President of the Philippines through the Commissioner of the Professional Regulation Commission after the close of each calendar year, giving a detailed account of its proceedings during the year and making such recommendation as it may deem proper.

ARTICLE II
REGISTRATION AND EXAMINATION

Section 11. Inhibition from practicing the Metallurgical Engineering Profession Unless exempt from registration, no person shall practice or offer to practice metallurgy or metallurgical engineering in the Philippines as defined in this Decree, without having previously obtained a certificate of registration as Metallurgical Engineering from the Board of Metallurgical Engineering created under this Decree; and in the case of foreigners, unless the country of which he is a citizen permits Filipino metallurgical engineers to practice their profession within their territorial limits.

Section 12. Definition of Terms (a) A person shall be deemed to be practicing metallurgical engineering within the meaning and intent of this Decree who shall, for a fee, salary or other reward or compensation, paid to him or through another person, or even without such reward or compensation, render or offer to render professional service in metallurgy or metallurgical engineering in the form of consultation, investigation, valuation, planning, designing or supervision of operation.

(b) The term metallurgy or metallurgical engineering as used in this Decree, shall mean the teaching and practice of the science and technology of preparing minerals and metals from ores by separating them from mechanical mixture and chemical combination and/or finally processing them for use. Metallurgy or metallurgical engineering embraces:

1. Mineral Processing and Extractive Metallurgy the scientific, engineering and economic aspects of the preparation, separation, extraction and purification of ores, metals and mineral products by physical and chemical processes such as roasting, and smelting, hydro-metallurgical processes such leaching, electro-metallurgical processes such as electric smelting and electrolysis other similar processes.

2. Physical Metallurgy processes specifically relating to the control of microstructure of metals and its alloys such as heat treatment and surface hardening; quality control in allowing operations to meet specification of metal allows; and metallographic studies. These apply to powder, mechanical, nuclear and vacuum metallurgy.

3. Fuel Technology fuel preparation processes such as washing, flotation, heavy media separation including carbonization, gasification and cooking operations.

Section 13. Exemption from Registration shall not be required of the following classes of persons upon proper application for exemption with the Board of Metallurgical Engineering:

(a) Foreign consultants, engineers and technicians called in by the Republic of the Philippines for consultation or for specific assignment or project.

(b) Foreign consultants, engineers and technicians employed by private firms for which the pertinent professional society certifies that no qualified Filipino is available, in which case the Board may, in its discretion, allow then to practice without registration: Provided, That the private firm shows justification for the need of said consultants, engineers and technicians to the satisfaction of the Board: Provided, further, That the period of employment shall be for one (1) year extendable for another year but not to exceed three (3) years for any one individual.

Employment of foreigners under paragraphs (a) and (b) of this section shall be subject to the following conditions:

1. That the applicant is of good reputation and moral character;

2. That the applicant’s curriculum vitae and detailed description of his assignment shall be submitted to the Board together with his application for exemption;

3. That the applicant will not engage in private practice on his own account;

4. That for every applicant one Filipino understudy who is registered under the provisions of this Decree shall be employed by the private firm utilizing the services of such applicants for at least the duration of the foreign expert’s tenure with said firm; and

5. That the applicant is legally qualified to practice his profession in his own state or country and that the country of which he is a citizen or subject permits Filipino metallurgical engineers and metallurgists to practice their profession within its territorial limits.

(c) Engineering students, apprentices and other persons employed or acting as subordinates of/or undergoing training under a person holding a valid certificate of registration under this Decree.

Section 14. Examination Required Except as otherwise specifically allowed under the provisions of this Decree, all applicants for registration for the practice of metallurgical engineering shall be required to undergo an examination as provided for in this Decree.

Section 15. Qualification for Examination In order to be admitted to the metallurgical engineering examination, an applicant shall establish to the satisfaction of the Board that:

(1) He is a citizen of the Philippines or if a foreigner, his country must accord reciprocity with the Philippines;

(2) He is at least twenty-one years of age;

(3) He is a good reputation and moral character; and

(4) He is graduated from school, college, university or institute recognized by the government with the least:

(a) Bachelor of Science in Metallurgical Engineering or Metallurgy or its equivalent, the course for which covers not less than the total number of credit units equivalent to the regular course in metallurgical engineering; or

(b) Bachelor in Science in Mining Engineering or Chemical Engineering and in addition has had at least five years experience in any or all of metallurgical engineering practice as defined in Section 12 of this Decree; or

(c) Bachelor of Science in any other engineering disciplines and in addition has had at least 10 years experience in any or all of the metallurgy or metallurgical engineering practice as defined in Section 12 of this Decree: Provided, That the said experience is certified by the applicant’s employer and approved by the Board: Provided, further, That said other engineering professions shall give the same privilege to graduate of metallurgy or metallurgical engineering.

Section 16. Exemption from Examination A person may be registered as metallurgical engineer and given a license to practice as metallurgical engineer without examination, who, on the date of approval of this Decree:

(a) Had graduated from a school, college or university recognized by the government with a degree of Bachelor of Science in Metallurgy or Metallurgical Engineering, and has had at least five (5) years experience in any or all of the metallurgical practice as defined in Section 12 of this Decree after graduation; or

(b) Had graduated with a degree of Master of Science in Metallurgy or Metallurgical Engineering or its equivalent and has had at least two (2) years experience in any or all of the metallurgical practice as defined in Section 12 of this Decree; or

(c) Had graduated with a degree of Doctor or Philosophy in Metallurgy, Metallurgical Engineering or Doctor of Science in Metallurgy, Metallurgical Engineering; or

(d) Had graduated from a school, college, universities or institute recognized by the government with a Bachelor of Science in Mining or Chemical Engineering; and has had at least ten (10) years experience in any metallurgical practice as defined in Section 12 of this Decree after his graduation; or

(e) Had graduated with a degree of Bachelor of Science in any other engineering discipline and in addition has had at least 15 years experience in any metallurgical practice as defined in Section 12 of this Decree after his graduation; or

(f) Are foreign metallurgists or metallurgical engineers, who had been in the actual and bonafide practice or metallurgy or metallurgical engineering for at least five consecutive years in the Philippines as approved by the Board; Provided, That no foreign metallurgical engineer or metallurgist shall be allowed to practice his profession in the Philippines unless the country of which he is citizen or subject permits Filipino metallurgical engineers or metallurgists to practice their profession within its territorial limits; and Provided, further, That the required experience mentioned above is certified by the applicant’s employer and approved by the Board.

All applicants for exemption from examination shall submit to the Board of Metallurgical Engineering the following:

1. Diploma or transcript of records of Board Registration Certificate Number.

2. A metallurgical engineering report which shall serve as a basis whether applicant, in the opinion of the Board, deserves exemption from examination.

All applications for registration without examination shall be filed within two (2) years from the date of effectivity of this Decree, except for those who graduated with a Doctorate degree who may apply at anytime.

Section 17. Qualification of Applicants for Metallurgical Plant Foreman Any person applying for a certificate of registration without examination as Metallurgical Plant Foreman, shall, prior to his admission for certification, establish to the satisfaction of the Board that:

1. He is a citizen of the Philippines;

2. He is of good reputation and moral character;

3. He has at least ten years experience in any metallurgical works as defined in Section 12 of this Decree and as certified applicant’s present employer.

The Board shall, subject to the approval of the Professional Regulation Commission, adopt such rules and regulations as may be necessary to classify metallurgical foremen to such metallurgical plants as concentrators, foundries, smelters, refineries and any other specific classifications as may be found necessary.

Section 18. Date and Scope of Examination Examinations for the practice of Metallurgical Engineering in the Philippines shall be given on the second Monday of February and August of each year. Unless modified by the Board and approved by the Commission, the examination shall cover questions relating to:

1. Mineral Processing, Physical Metallurgy, Assaying and Chemistry;

2. Extractive and Applied Metallurgy;

3. Fuel Technology, Foundry, and Refractory Science;

4. Engineering Management, Law and Ethics;

5. Applied Mathematics and Mechanics and any other pertinent subjects as the Board may deem necessary to test the applicant’s ability and knowledge to insure safety, economy and proficiency in the design, construction, installation maintenance, operation, organization and management of metallurgical plants: Provided, That the relative weight of 1 and 2 subjects shall not be less than thirty per cent each.

Section 19. Report of Rating The Board of Metallurgical Engineering shall, within ninety days after the examination, report and ratings obtained by each candidate to the Commissioner of the Professional Regulation Commission.

Section 20. Issuance of Certificate The Board of Metallurgical Engineers shall issue certificates of registration to:

a. Examinees who have successfully passed the board examinations for metallurgical engineers and have complied with the requirements of the rules and regulations prescribed by the Board;

b. Persons who have applied for registration without examination and who possess the qualifications listed in Section 16 of this Decree, and have complied with the requirements of the rules and regulations prescribed by the Board; and

c. Applicants for Metallurgical Plant Foreman as approved by the Board.

All certificates of registration shall state the full name of the registrant, shall have a serial number and shall be signed by all members of the Board, the Commissioner of PRC, and shall be attested to by the Official seal of the Board: Provided, That the issuance of certificate of registration by the Board to a registrant shall be evidence that the person named therein is entitled to all rights and privileges of a Registered Metallurgical Engineer or Metallurgical Plant Foreman while said certificate remains unrevoked or unsuspended.

Section 21. Fees for Examination and Registration Every applicant for the Metallurgical Engineer licensure examination shall pay one hundred and fifty pesos as examination fee; one hundred pesos as registration fee for every registrant after passing the examination; and ten pesos as annual registration fee.

Registrants without examination shall pay one hundred and fifty pesos plus the registration fees herein prescribed.

Section 22. Reprimand, Suspension and Revocation of Certificate The Board shall have the power to reprimand any registrant, or suspend or revoke his certificate of registration for any cause specified in this section, or for the use or perpetuation of any fraud or deceit in obtaining said certificate, or for gross negligence or incompetency, or for unprofessional, dishonorable or immoral conduct, after giving him proper notice and hearing.

It shall be sufficient for the revocation of a certificate issued under this Decree that he has:

1. Signed any metallurgical report, design, or work not prepared by him nor executed his direct and immediate supervision; or

2. Represented himself as having taken charge of, undertaken or supervised the metallurgical work in an area or of project without actually having done so.

Any person or persons, firm, associates or corporation may file charges in accordance with the provisions of this Section against registrant or the Board itself may motu proprio investigate the take cognizance of acts and practices constituting sufficient cause or suspension or revocation of the certificate of registration by proper order or resolution. Such charges shall be in writing and shall be sworn to by the person making them and filed with the Secretary of the Board.

Section 23. Reissue of Revoked Certificates and Replacement of Lost Certificates The Board may, after the expiration of one (1) year from the date of revocation of a certificate of registration for reasons it may be deem sufficient, entertain an application for a new certificate of registration from a person whose certificate has been revoked, in the same manner as application for an original certificate and in doing so it may, in its discretion, exempt the applicant from the necessity of undergoing another examination. Issuance of certificate of registration to replace any certificate lost, destroyed or mutilated shall be subject to the rules of the Board and a charge at current rate shall be made for such issuance.

ARTICLE III
SUNDRY PROVISIONS RELATIVE TO THEPRACTICE OF METALLURGICAL ENGINEERING

Section 24. Prohibited in the Practice of Metallurgical Engineering A person who shall practice metallurgical engineering in the Philippines as defined, without a certificate of registration issued in accordance with the provisions of this Decree, or without having been declared exempt, or any person presenting or using as his own a certificate or registration of another, or any person who shall give any false or forged evidence, or any person who shall give any false or forged evidence, or any person who shall impersonate any registrant of like or different name, or any person who shall use a revoked or suspended certificate of registration, or any person who shall assume, use or advertise any title or description tending to convey the impression that he is a metallurgist or metallurgical engineer or is engaged in metallurgical work without holding a valid certificate of registration from the Board, or any person who shall commit misdemeanor, shall upon conviction, be sentenced to a fine of not less than three thousand pesos nor more than five thousand pesos, or to suffer imprisonment for a period of not less than one month nor more than six months, or both, in the discretion of the court.

Section 25. Practice of Firms and Corporations A firm, co-partnership, company, corporation or association can practice metallurgical engineering in the Philippines provided that such practice is carried out by metallurgical engineers holding valid certificates of registration issued by the Board and in the regular employ of said firm, co-partnership, company, corporation or association.

Section 26. Posting of Certificates Registered metallurgical engineers shall post or cause to be posted in a conspicuous place within his office or place of business his certificate of registration as metallurgical engineer; he shall present the same upon demand of members of the Board, or law-enforcing officers of the national, provincial, city, or municipal governments.

Section 27. Roster of Metallurgical Engineers A roster showing the names and places of business of all registered metallurgical engineers shall be prepared by the Secretary of the Board annually, commencing one year from the date this Decree becomes effective. Copies of this roster may be released to any government agency or to the public upon request.

ARTICLE IV
FINAL PROVISIONS

Section 28. Appropriation The sum of ten thousand pesos, not otherwise appropriated, is hereby authorized to be appropriated to be disbursed by the Professional Regulation Commission in accordance with the provisions of this Decree. All sums collected in accordance with this Decree shall be paid into the National Treasury as part of the general funds thereof: Provided, That during the first twelve months from effectivity of this Decree any portion of this sum collected may be used for purposes of this Decree to cover disbursements in excess of the amount appropriated herein.

Section 29. Separability Clause If any section or sections of this Decree are declared unconstitutional or invalid, this shall not invalidate any other section hereof.

Section 30. Repealing Clause All laws, decrees, orders, rules and regulations or parts thereof which are in conflict with the provisions of this Decree including parts of Act Numbered Twenty-Nine Hundred and eighty-five, as amended, as pertain to the practice of metallurgy, are hereby repealed or modified accordingly.

Section 31. Effectivity Clause This Decree shall take effect immediately.

Done in the City of Manila, this 11th day of June, in the year of Our Lord, nineteen hundred and seventy-eight.

Presidential Decree No. 129

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 129 February 15, 1973

GOVERNING THE ESTABLISHMENT, OPERATION AND REGULATION OF INVESTMENT HOUSES

WHEREAS, there were pending before Congress, prior to the promulgation of Proclamation No. 1081, dated September 21, 1972, urgent measures proposing the regulation of the so-called investment banks;

WHEREAS, an extensive survey and study of the Philippine financial system had been undertaken in order to determine its adequacy in Philippine economic development, and an integrated set of recommendations were submitted;

WHEREAS, the recommendations, as endorsed with modifications by the monetary authorities and made the basis of this Decree, advocated the enactment of the statutory framework within which the underwriting of securities may be governed and, to the extent that these entities perform quasi-banking functions, to harmonize their operations with national monetary goals.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution as Commander-in-Chief of all the Armed Forces of the Philippines, and pursuant to Proclamation No. 1081, dated September 21, 1972, and General Order No. 1, dated September 22, 1972, as amended, and in order to effect the desired changes and reforms in the social, economic, and political structure of our society, do hereby order and decree and make part of the law of the land the following:

Section 1. Title. This Decree shall be known as “The Investment Houses Law”.

Section 2. Scope. Any enterprise which engages in the underwriting of securities of other corporations shall be considered an “Investment House” and shall be subject to the provisions of this Decree and of other pertinent laws.

Nothing in this Decree shall be understood to preclude other enterprises from engaging in the mere buying and selling of short-term securities of other persons or enterprises.

Section 3. Definitions. For the purpose of this Decree, unless the context otherwise indicates, the following definition of terms are hereby adopted:

(a) “Underwriting” is the act or process of guaranteeing the distribution and sale of securities of any kind issued by another corporation.

(b) “Securities” are written evidences of ownership, interest, or participation, in an enterprise, or written evidences of indebtedness of a person or enterprise. It includes, but is not limited to the instruments enumerated in Section 2 of the Securities Act (Commonwealth Act No. 83, as amended).

Section 4. Organization and registration. Investment Houses shall be organized in the form of stock corporations.

The Securities and Exchange Commission shall not register the articles of incorporation of any Investment House, or any amendment thereto, unless it is satisfied from the evidence submitted to it:

(a) That all the requirements of this Decree and of existing laws or regulations to engage in the business have been complied with;

(b) That the proposed enterprise will not be in conflict with public interest and economic growth;

(c) That the amount of capital, the proposed organization, direction and administration, as well as the integrity, experience and expertise of the organizers and the proposed managerial staff, provide reasonable assurance that the enterprise will be conducted with financial prudence.

In determining compliance with the provisions of subsections (b) and (c) above, the Securities and Exchange Commission shall consult the Monetary Board of the Central Bank of the Philippines.

All applications for registration of the articles of incorporation of Investment Houses shall be accompanied by:

1. At least three copies of the proposed articles of incorporation;

2. A statement under oath of the educational background and experience of the organizers, directors, and the proposed managerial staff, as well as in information on any position concurrently held by them in other financial or banking institutions, if any;

3. A projected statement of assets and liabilities of the proposed Investment House;

4. A tentative program of operation for one year, including its investment direction and volume; and

5. Such other information as the Securities and Exchange Commission may require in support of the application and to enable the Commission to determine the justifiability of establishing the proposed enterprise.

Any enterprise already in operation and exercising the powers of an Investment House prior to the effectivity of this Decree shall, within six months therefrom, file an information sheet with the Securities and Exchange Commission in such form and containing such data as the Securities and Exchange Commission may, at its discretion, require, to enable the Commission to determine, in consultation with the Monetary Board, whether the enterprise meets the requirements of this Decree.

Section 5. Citizenship requirements. The majority of the voting stock of any Investment House shall be owned by citizens of the Philippines. In determining the percentage of foreign-owned voting stocks in Investment Houses, the basis for the computation shall be the citizenship of each stockholder, and, with respect to corporate owners of voting stock, the citizenship of the individual owners of voting stock in the corporation holding shares in that Investment House.

The majority of the members of the Board shall be citizens of the Philippines.

Section 6. Prohibitions. Except as may be authorized by the Monetary Board, no director or officer of an Investment House shall concurrently be a director or officer of a bank, as defined in Section 2 of the Republic Act No. 337, as amended: Provided, however, That in no event can a person be authorized to be concurrently an officer of an Investment House and of a bank.

No Investment House shall engage in banking operations as defined in Section 2 of Republic Act No. 337, as amended.

Section 7. Powers. In addition to the powers granted to corporations in general, an Investment House is authorized to do the following:

1. Arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

2. Participate in a syndicate undertaking to purchase and sell, distribute or arrange to distribute on a guaranteed basis securities of other corporations and of the Government or its instrumentalities;

3. Arrange to distribute or participate in a syndicate undertaking to purchase and sell on a best-efforts basis securities of other corporations and of the Government or its instrumentalities;

4. Participate as soliciting dealer or selling group member in tender offers, block sales, or exchange offering or securities; deal in options, rights or warrants relating to securities and such other powers which a dealer may exercise under the Securities Act (Act No. 83, as amended);

5. Promote, sponsor, or otherwise assist and implement ventures, projects and programs that contribute to the economy’s development;

6. Act as financial consultant, investment adviser, or broker;

7. Act as porfolio manager, and/or financial agent, but not as trustee of a trust fund or trust property as provided for in Chapter VII of Republic Act No. 337, as amended;

8. Encourage companies to go public, and initiate and/or promote, whenever warranted, the formation, merger, consolidation, reorganization, or recapitalization of productive enterprises, by providing assistance or participation in the form of debt or equity financing or through the extension of financial or technical advice or service;

9. Undertake or contract for researches, studies and surveys on such matters as business and economic conditions of various countries, the structure of financial markets, the institutional arrangements for mobilizing investments;

10. Acquire, own, hold, lease or obtain an interest in real and/or personal property as may be necessary or appropriate to carry on its objectives and purposes;

11. Design pension, profit-sharing and other employee benefits plans; and

12. Such other activities or business ventures as are directly or indirectly related to the dealing in securities and other commercial papers, unless otherwise governed or prohibited by special laws, in which case the special law shall apply.

Nothing in this section shall preclude other enterprises not covered by this Decree from engaging in the activities listed under subsections (3) to (11) of this section, except as may otherwise be governed by special laws.

Section 8. Capital. The minimum initial paid-in-capital of any Investment House shall be twenty million (P20,000,000) pesos.

Section 9. Credit policies. Investment Houses shall coordinate their credit policies with the general credit policies of the Monetary Board of the Central Bank.

Section 10. Reports. Investment Houses shall submit to the Securities and Exchange Commission and to the Central Bank a semi-annual report of operations and financial condition, signed under oath by its chief accountant and verified by its president.

The Securities and Exchange Commission may, at its discretion, require Investment Houses to include their underwriting commitments as contingent accounts in their financial statements.

Section 11. Regulations. Within six months after the approval of this Decree, the Securities and Exchange Commission, in coordination with the Central Bank, shall promulgate the necessary rules and regulations implementing the provisions of this Decree.

Section 12. Central Bank regulatory powers. Investment Houses shall be subject to such regulations of the Central Bank or non-bank financial intermediaries as may be promulgated pursuant to Section 2-B of Republic Act No. 337, as amended. The regulations which may include, but need not be limited to (a) minimum size of fund acceptance or receipt, (b) methods of marketing and distribution, (c) terms of placement and maturities, and (d) uses of funds may be modified by the Monetary Board insofar as they apply to Investment Houses.

The Monetary Board may, at its discretion, determine whether Investment Houses may be permitted to perform quasi- banking functions as defined in Section 2-D, subsection (b) of Republic Act No. 337, as amended. The Monetary Board is hereby authorized, at its discretion, to require any enterprise which is engaged or proposes to engage in quasi-banking functions to incorporate as an Investment House. If the Monetary Board decides to permit Investment Houses to engage in quasi-banking functions, the Board may require as a condition precedent the obtaining of a certificate of authority for the purpose from the Monetary Board.

Whenever the Monetary Board authorizes an Investment House to engage in quasi-banking functions, in accordance with the provisions of this section, the Board may subject Investment Houses to further regulations, pursuant to Republic Act 337, as amended, which may include but need not necessarily be limited to (a) liquidity reserve requirements; (b) capital-to-risk assets ratios; (c) interest rate ceilings; and (d) such other constraints as the Board may deem necessary.

In the exercise of its authority in this section, the Monetary Board may, whenever, it determines that the circumstances so warrant subject an Investment House to special examination.

Whenever on the basis of the reports submitted by, or upon examination of the books and records of, an Investment House, the Central Bank finds that the Investment House is not complying with the provisions of this section, with the pertinent provisions of this Decree, of other laws, or of orders, instructions, rules or regulations issued by the Monetary Board pertaining non-bank financial intermediaries and quasi-banking activities, said Board shall forthwith issue a cease-and-desist order upon the Investment House concerned. Failure on the part of an Investment House to comply with the cease-and-desist order shall subject said Investment House to a fine not exceeding two hundred (P200) pesos for every day the order is violated, to be imposed by the Monetary Board, without prejudice to the penalties provided in Section 16 of this Decree.

Section 13. Applicability of Securities Act. An Investment House may engage in the business of a dealer or a broker under the Securities Act without obtaining a separate license for the purpose as required in Section 14 of the Securities Act (C.A. No. 83, as amended).

Section 14. Applicability of Corporation Law. The provisions of the Corporation Law (Act No. 1459, as amended) insofar as they are not in conflict or inconsistent with the provisions of this Decree shall apply to Investment Houses.

Section 15. Transitory provisions. Existing enterprises which are operating as Investment Houses shall, within one year following the approval of this Decree, comply with the requirements hereof, except with respect to the filing of an information sheet which shall be complied with within six months as provided in the last paragraph of Section 4 of this Decree.

Section 16. Penalties for violation. Upon proof that an Investment House is violating or not complying with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, the Securities and Exchange Commission shall impose upon the Investment House and collect a fine not exceeding two hundred (P200) pesos per day for every day during which such violation or non-compliance continues, and/or suspend its certificate of registration. The officer or director of the Investment House who ordered or authorized the violation or non-compliance shall be solidarily liable. The fine so imposed shall be paid to the Government of the Philippines through the Securities and Exchange Commission.

Without prejudice to the provisions of the preceding paragraph any person, or any director or officer of an Investment House who violates or does not comply with the provisions of this Decree, of other pertinent laws, of the terms or conditions of its certificate of registration or charter, or of orders, decisions, rulings or regulations issued by the Securities and Exchange Commission or by the Central Bank of the Philippines, shall be punished by a fine of not more than twenty thousand (P20,000) pesos, or an imprisonment of not more than five years or both, at the discretion of the Court.

Section 17. Separability clause. The provisions of this Decree are hereby declared separable, and if any clause, sentence, provision or section hereof, or its application to any person or circumstance should be declared invalid, such invalidity shall not affect the other provisions of this Decree which can be given force and effect without the provisions which have been declared invalid.

Section 18. Repeal. All Acts and existing laws inconsistent with this Decree are hereby repealed.

Section 19. Effectivity. This Decree shall take effect immediately.

Done in the City of Manila, this 15th day of February, in the year of Our Lord, nineteen hundred and seventy-three.

Presidential Decree No. 1814

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 1814

AMENDING CERTAIN SECTIONS OF PRESIDENTIAL DECREE NO. 1460, OTHERWISE KNOWN AS THE INSURANCE CODE

WHEREAS, Presidential Decree No. 1460, otherwise known as the Insurance Code, was promulgated primarily to promote and develop a strong national insurance industry and to provide the necessary operating conditions for its integration in the economic and social development of the Philippines;

WHEREAS, the prevailing economic conditions necessitate the amendment of said Decree to ensure the due execution and performance of insurance contracts in the interests of the sound development of the national economy;

WHEREAS, there is a need to amend the said Decree to further assure reasonable insurance services for the protection of the interests of the policy holders and the public;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby decree and order the amendment of Presidential Decree No. 1460 otherwise known as the Insurance Code, as follows:

Section 1. Section 305, Title I, Chapter IV, of Presidential Decree No. 1460 otherwise known as the Insurance Code is hereby amended to read as follows:

“Sec. 305. An application for the issuance or renewal of a license to act as an insurance agent or insurance broker may be refused, or such license, if already issued or renewed, shall be suspended or revoked if the Commissioner finds that the application for, or holder of, such license:

(a) has willfully violated any provision of this Code; or

(b) has intentionally made a material misstatement in the application to qualify for such license; or

(c) has obtained or attempted to obtain a license by fraud or misrepresentation; or

(d) has been guilty of fraudulent or dishonest practices; or

(e) has misappropriated or converted to his own use or illegally withheld moneys required to be held in a fiduciary capacity;

(f) has not demonstrated trustworthiness and competence to transact business as an insurance agent or insurance broker in such manner as to safeguard the public; or

(g) has materially misrepresented the terms and conditions of policies or contracts of insurance which he seeks to sell or has sold; or

(h) has failed to pass the written examination prescribed, if not otherwise exempt from taking the same.

In addition to the foregoing causes, no license to act as insurance agent or insurance broker shall be renewed if the holder thereof has not been actively engaged as such agent or broker in accordance with such rules as the commissioner may prescribe.

Section 2. Paragraph (c) of Section 373, Chapter VI, of Presidential Decree No. 1460, otherwise known as the Insurance Code is hereby amended to read as follows:

“(c) `Third Party’ is any person other than a passenger as defined in this section and shall also exclude a member of the household, or a member of the family within the second degree of consanguinity or affinity, of a motor vehicle owner or land transportation operator, as likewise defined herein, or his employee in respect of death or bodily injury, arising out of and in the course of employment;”

Section 3. Paragraph (f) of Section 373 of the same Decree is hereby amended to read as follows:

“(f) `Insurance Policy’ or `Policy’ refers to a contract of insurance against passenger and third-party liability for death of bodily injuries arising from motor vehicle accidents.”

Section 4. Section 374 of the same Decree is hereby amended to read as follows:

“Sec. 374. It shall be unlawful for any land transportation operator or owner of a motor vehicle to operate the same in the public highways unless there is in force in relation thereto a policy of insurance or guaranty in cash or surety bond issued in accordance with the provisions of this chapter to indemnify the death or bodily injury of a third party or passenger, as the case may be, arising from the use thereof.”

Section 5. Section 377 of the same Decree is hereby amended to read as follows:

“Sec. 377. Every land transportation operator and every owner of a motor vehicle shall, before applying for the registration or renewal of registration of any motor vehicle, at his option, either secure an insurance policy or surety bond issued by an insurance company authorized by the Commissioner or make a cash deposit in such amount as herein required as limit of liability for purposes specified in section three hundred seventy-four.

“(1) In the case of a land transportation operator the insurance or guaranty in cash or surety bond shall cover liability for death or bodily injuries of third parties and/or passengers arising out of the use of such vehicle in the amount not less than twelve thousand pesos per passenger or third-party and an amount for each of such categories, in any one accident, of not less than that set forth in the following scale:

(a) Motor vehicles with an authorized capacity of twenty-six or more passengers: fifty thousand pesos;

(b) Motor vehicles with an authorized capacity of from twelve to twenty-five passengers: forty thousand pesos;

(c) Motor vehicles with an authorized capacity of from six to eleven passengers: thirty thousand pesos;

(d) Motor vehicles with an authorized capacity of five or less passengers: five thousand pesos multiplied by the authorized capacity.

“Provided, however, That such cash deposit made to, or surety bond posted with, the Commissioner shall be resorted to by him in cases of accidents the indemnities for which to third-parties and/or passengers are not settled accordingly by the land transportation operator and, in that event, the said cash deposit shall be replenished or such surety bond shall be restored within sixty days after impairment or expiry as the case may be, by such land transportation operator, otherwise, he shall secure the insurance policy required by this chapter. The aforesaid cash deposit may be invested by the Commissioner in readily marketable government bonds and/or securities.

“(2) In the case of an owner of a motor vehicle, the insurance or guaranty in cash or surety bond shall cover liability for death or injury to third-parties in an amount not less than that set forth in the following scale in any one accident:

I. Private Cars

(a) Bantam: Twenty Thousand Pesos;

(b) Light: Twenty Thousand Pesos;

(c) Heavy: Thirty Thousand Pesos;

II. Other Private Vehicles

(a) Tricycles, motorcycles, and scooters: twelve thousand pesos;

(b) Vehicles with an unladen weight of 2,600 kilos or less: twenty thousand pesos;

(c) Vehicles with an unladen weight of between 2,601 kilos and 3,930 kilos: thirty thousand pesos;

(d) Vehicles with an unladen weight over 3,930 kilos: fifty thousand pesos.

“The Commissioner may, if warranted, set forth schedule of indemnities for the payment of claims for death or bodily injuries with the coverages set forth herein.”

Section 6. Section 379 of the same Decree is hereby amended to read as follows:

“Sec. 379. No land transportation operator or owner of motor vehicle shall be unreasonably denied the policy of insurance or surety bond required by this chapter the insurance companies authorized to issue the same, otherwise, the Land Transportation Commission shall require from said land transportation operator or owner of the vehicle, in lieu of a policy of insurance or surety bond, a certificate that a cash deposit has been made with the Commissioner in such amount required as limits of indemnity in section three hundred seventy-seven to answer for the passenger and/or third-party liability of such land transportation operator or owner of the vehicle.

“No insurance company may issue the policy of insurance or surety bond required under this chapter unless so authorized under existing laws.

“The authority to engage in the casualty and/or surety lines of business of an insurance company that refuses to issue or renew, without just cause, the insurance policy or surety bond therein required shall be withdrawn immediately.”

Section 7. Section 348 of the same Decree is hereby amended to read as follows:

“Sec. 384. Any person having any claim upon the policy issued pursuant to this chapter shall, without any unnecessary delay, present to the insurance company concerned a written notice of claim setting forth the nature, extent and duration of the injuries sustained as certified by a duly licensed physician. Notice of claim must be filed within six months from date of the accident, otherwise, the claim shall be deemed waived. Action or suit for recovery of damage due to injury must be brought with the Commissioner or the Courts within one year from date of accident, otherwise, the claimant’s right of action shall prescribe.

Section 8. All laws, decrees, rules and regulations which are inconsistent herewith are hereby repealed or modified accordingly.

Section 9. This Decree shall take effect immediately.

Done in the City of Manila, this 16th day of January, in the year of Our Lord, nineteen hundred and eighty-one.

Presidential Decree No. 1308

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 1308 March 2, 1978

REGULATING THE PRACTICE OF THE PROFESSION OF ENVIRONMENTAL PLANNING IN THE PHILIPPINES

WHEREAS, the New Society is pursuing an integrated program of social, economic and political reforms so that it may be able to establish a secure national community and improve the quality of life of the people;

WHEREAS, in achieving these ends, the government has utilized the concept of environmental planning as one of its principal instruments, operationalized through the creation of the Human Settlements Commission and the National Coordinating Council for Town Planning. Housing and Zoning;

WHEREAS, a comprehensive system of environmental planning which seeks to conserve, rehabilitative and develop the physical environment and natural resources of the nation has already been established together with a National Framework Plan that translates into physical and spatial considerations policies on land capability, urbanization, agricultural development and natural resources development;

WHEREAS, the Institute of Environmental Planning in the University of the Philippines has been established for the precise purpose of providing assistance in the implementation of this comprehensive system and of developing a pool of capable Environmental Planners;

WHEREAS, this group of experts has contributed significantly to the national development efforts of the country and has consequently attracted other men and women to seek similar expertise;

WHEREAS, in recognition of the significant role and substantial contribution that the science of environmental planning has made to the country, there appears a need to professionalize and regulate practice in the Philippines.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines by virtue of the powers vested in me by the Constitution, do hereby order and decree, as follows:

TITLE I
Title of Decree and Scope of Practice

Section 1. Title. This Decree shall be known as the “Law Regulating the Environmental Planning Profession in the Philippines.”

Section 2. Definition of Terms.

(a) Environmental planning refers to activities concerned with the management and development of land, as well as the preservation, conservation, and rehabilitation of the human environment.

(b) The Term “environmental planner”, as used in this Decree, refers to a person engaged in the practice of environmental planning and duly registered with the Board of Environmental Planning in the Manner herein provided.

Section 3. Scope of Practice. the practice of environmental planning, within the meaning and intent of this Decree shall embrace, inter alia, professional services in the form of technical consultation, plan preparation, and/or implementation involving the following:

(a) Development of a community, town, city, or region;

(b) Development of a site for a particular need such as housing, centers for activities concerned with research, education, culture, recreation, or government, industrial estates, agriculture, and water resources, including creating a spatial arrangements of buildings, utilities and communication routes;

(c) Land use and zoning plans for the management and development preservation, conservation, rehabilitation, and control of the environment; and

(d) Pre-investment, pre-feasibility, and feasibility studies.

TITLE II
Board of Environmental Planning

Section 4. Creation of a Board of Environmental Planning. Within thirty (30) days after the approval of this Decree, there shall be created a Board of Environmental Planning, hereinafter referred to as the Board, which shall be composed of a chairman and (2) members. They shall be appointed by the President of the Philippines from among those recommended by the Philippine Institute of Environmental Planners (PIEP).

Section 5. Tenure of the Board Members. The members of the Board shall hold office for a term of three (3) years after their appointment until their successors shall have been appointed and shall have duly qualified: Provided, however, That the members of the Board first appointed under this Decree shall hold office for the following terms: one member for one (1) year; one member for two (2) years; and one member for three (3) years. Each member of the Board shall qualify by taking the proper oath of office before assumption of his duties.

Section 6. Qualification of Board Members. Each member of the Board shall, at the time of his appointment, possess the following qualifications:

(a) A citizen and resident of the Philippines;

(b) At least thirty (30) years of age and of good moral character;

(c) a holder of an environmental planning degree or its equivalent form a recognized and legally constituted institution of higher learning and with at least three (3) years of practical experience in environmental planning, prior to his appointment; or a degree holder in architecture, civil engineering, economics, public administration, or sociology, and with at least five (5) years of practical experience in environmental planning, prior to his appointment; and

(d) A registered environmental planner duly qualified to practice environmental planning in the Philippines. The members of the first Board shall be deemed automatically registered as environmental planners upon assumption of their duties as members of the Board.

Section 7. Causes for Removal from Office. Any member of the Board may be removed from office for neglect of duty, incompetence, malpractice, unprofessional, unethical, immoral, or dishonorable conduct after having been given the opportunity to defend himself in a proper administrative investigation; Provided, That during the process of investigation, the President of the Philippines shall suspend such member under investigation and shall appoint a temporary member in his place. Vacancies in the Board shall be filled for the unexpired term only.

Section 8. Powers and Functions of the Board. The Board shall have the following powers and functions:

(a) Issue certificates of registration for the practice of environmental planning and suspend or revoke the same for cause provided herein;

(b) Issue certificates of recognition to environmental planners already registered under this Decree for specialized training undertaken in physical planning, social planning, economic planning, administrative planning or planning law, or in any other branch of environmental planning, subject to the approval of the professional Regulation Commission, hereinafter referred to as Commission.

(c) Approve registration without examination and the issuance of the corresponding certificates of registration, in accordance with Section 12 of Title III of this Decree.

(d) Determine and prepare the contents of licensure examinations; score and rate the examination papers and submit the results thereof to the Commission within one hundred twenty (120) days after the last examination day.

(e) Adopt a Code of Ethics in the practice of environmental planning.

(f) Adopt and official seal to authenticate its official documents.

(g) Inspect, in coordination with the Department of Education and Culture, at least once a year, educational institutions offering courses in environmental planning in the Philippines to ensure that these institutions maintain a high standard of planning education.

(h) Look from time to time, into the conditions affecting the practice of environmental planning profession and adopt measures necessary for the enhancement of the environmental planning profession.

(i) Investigate violations of this Decree and the rules and regulations thereunder as may come to its knowledge and, for this purpose, issue subpoena and subpoena duces tecum to secure the appearance of witness and exhibition of the performance of its functions.

(j) Delegate the conduct of hearing or investigation of administrative cases filed before the Board.

(k) Promulgate decisions on such administrative cases subject to the review by the Commission.

(l) Issue, with the approval of the Commission, such rules and regulations as may be deemed necessary to carry out the provisions of this Decree; and

(m) Discharge such other powers and duties as may affect professional, ethical and technological standards of the environmental planning profession in the Philippines.

Section 9. Fees and Compensation of the Board.

(a) The Board shall charge for each application the sum of one hundred pesos (P100.00) upon filing of said application, and for registration purposes, the amount of fifty pesos (P50.00) payable the collecting and disbursing officer of the Commission.

(b) Each member of the Board, whether a government employee or not, shall receive a compensation of twenty-five pesos (P25.00) for each applicant examined or registered without examination, and a per diem not exceeding fifty pesos (P50.00) for each day of attendance in administrative investigations and ocular inspection lasting for more than one (1) hour at a time: Provided, That the total annual compensation of each member shall not exceed thirty-six thousand pesos (P36,000.00).

(c) All authorized expenses of the Board, including the compensation provided for herein, shall be paid by the collecting and disbursing officer of the Commission out of such appropriation as may be made for the purpose.

Section 10. Annual Report. The Board shall, at the end of each calendar year, submit to the Commission a detailed report of its activities and proceedings during the year embodying also such recommendations as it may deem proper to promote the policies and objectives of this Decree.

TITLE III
Examination and Registration

Section 11. Registration Required. Upon the effectivity of this Decree, no person shall practice or offer to practice environmental planning in the Philippines without having obtained the proper certificate of registration from the Board.

Section 12. Examination Requirements. Except as otherwise permitted under Section 12 of this Title, all applicants for registration for the practice of environmental planning shall be required to pass the required professional examination as herein provided.

Section 13. Registration without Examination. A certificate of registration for environmental planners shall be issued to any applicant by the Board first constituted, without requiring the passing of the examination herein prescribed: Provided, That he registers within one (1) year after the constitution of the said Board that he possesses the following qualifications:

(a) He must be at least twenty-one (21) years of age;

(b) He must be a Filipino citizen;

(c) He must be currently involved in the practice of environmental planning; and

(d) He must have any of the following academic and/or training background or experience:

1. Masteral degree in environmental planning, city and regional planning or town and country planning or its equivalent from a school recognized by the government, plus one (1) year of environmental planning experience;

2. Masteral degree in a field of discipline related to planning such as architecture, civil engineering, geography, economics, public administration, or sociology, plus two (2) years of environmental planning experience by the Board;

3. Masteral degree in a field of discipline related to planning, other than those listed in paragraph (2) above, plus two (2) years of environmental planning experience, and either of the following additional qualifications:

3.1 Completion of at least eighteen (18) units of graduate course work in environmental planning; or

3.2 Completion of a training program or program the total number of hours of which is equivalent to the number of graduate course work in environmental planning.

4. Bachelor’s degree in environmental planning, city and regional planning, or town and country planning from a school or institution recognized by the Government, plus three (3) years of environmental planning experience acceptable by the Board:

5. Bachelor’s degree in a field of discipline related to planning such as architecture, civil engineering, geography, economics, public administration or sociology, plus four (4) years of environmental planning experience acceptable by the Board;

6. Bachelor’s degree in a field of discipline related to planning, other than those listed in paragraph (5) above, plus eighteen (18) graduate units in planning and three (3) years of environmental planning experience acceptable by the Board; or

7. Civil service eligibility in planning or city planning, plus five (5) years of environmental planning experience.

Section 14. Holding of Examination. Examination for candidates desiring to practice environmental planning in the Philippines shall be given once a year in Metro Manila at such dates to be determined by the Commission.

Section 15. Subjects of Examination. Applicants for certificates of registration as environmental planners shall be examined on comprehensive plan preparation including the following subjects:

(a) Physical planning, such as zoning, land use and water resources studies; analysis of micro-climate, vegetation, topography, soil conditions, ecological and geological conditions; site planning; design and planning of infrastructure and transportation systems, communications and utilities systems, housing and community facilities analysis of space standards and interrelationships of building layouts and building envelopes; detailed planning design, etc.;

(b) Social planning, such as the sociological, anthropological and demographic aspects and requirements of planning;

(c) Economic planning, such as economic resource analysis, assessment of economic facilities, industrial sitting, determination of labor and transport requirements of industries, analysis of statistical information and economic linkages among different economic activities, etc.;

(d) Planning law and administration, such as organization and administration of a planning agency, preparation of cases in planning and zoning litigations, public policy instruments, professional practice, laws and ethics, and standard rules and regulations, etc.; and

(e) Special planning studies, project planning, pre-investment and reasibility studies, etc.

Subject groupings with corresponding percentage ratings shall be determined by the Board and approved by the Commission. Subjects not enumerated herein shall not be construed as excluded in this subject listing if, in the opinion of the Board, such inclusion is necessary.

Section 16. Qualifications for Examination. Any person applying for admission to the environmental planning examination as herein provided shall, prior to the dates of the examination, establish to the satisfaction of the Board that he has the following qualifications:

(a) A citizen of the Philippines;

(b) At least twenty-one (21) years of age; and

(c) A holder of any of the following:

1. Masteral degree in environmental planning, city and regional planning, or town and country planning, or its equivalent acceptable to the Board;

2. Bachelor’s degree in environmental planning, city and regional planning, or town and country planning, or its equivalent, and with two (2) years of environmental planning experience certified by a registered environmental planner;

3. Masteral degree in either architecture, civil engineering, economics, public administration or sociology, and with one (1) year of environmental planning experience certified by a registered environmental planner; or

4. Bachelor’s degree in either architecture, civil engineering, economics, public administration, or sociology, and with two (2) years of environmental planning experience certified by a registered environmental planner.

Section 17. Refusal to Issue Certificate. The Board shall not issue a certificate of registration to any person who suffers from any of the following disqualifications:

(a) Conviction by a court of competent jurisdiction of any criminal offense involving moral turpitude;

(b) Conviction in an administrative case of any offense involving immorality or notoriously undesirable conduct; and

(c) Has unsound mind.

In case of refusal to issue a certificate, the Board shall issue to the application a written statement setting forth the reason for such action.

Section 18. Oath of Environmental Planners. All successful candidate in the examinations shall take the prescribed professional oath before any other government official authorized to administer such oath prior to entering the practice of the profession.

Section 19. Planning Service by a Registered Environmental Planner.

(a) It shall be unlawful for any person to render planning services as defined in Section 3, Title I hereof, unless the plans, designs and programs have been prepared under, and signed and sealed be a registered environmental planner.

(b) It shall be unlawful for any environmental planner to sign his name, affix his seal, or use any other method of signature on plans, specifications or other documents prepared by another environmental planner or made under the supervision of another environmental planner. It shall likewise be unlawful for any person, except the environmental planner in charge, to sign for any branch of the work, or any function on environmental planning practice, not actually performed by him. The environmental planner in charge shall be fully responsible for all plans, specifications and other documents issued under his seal or authorized signature.

(c) It shall be unlawful for any person, without the written consent of the environmental planner or author of said documents, to amend, revise, duplicate or make copies of said documents for use in the repetition of and for other projects whether executed partly or in whole.

Section 20. Consulting firms and Corporations Engaged in Environmental Planning Practice. A consulting firm, partnership, company corporation, or association may engage in the practice of environmental planning in the Philippines: Provided, That it complies with the following requirements:

(a) The consulting firm, partnership, company, corporation, or association is registered as such with the Board and approved by the Commission to engage in the practice of environmental planning in the Philippines: Provided, That at least seventy-five (75) percent of the entire membership of the Board of the corporation, partnership, firm or association shall be registered environmental planners and at least seventy-five (75) percent of the total capitalization of the said entity is owned by them; and

(b) The practice of the consulting firm, partnership, company, corporation, or association in environmental planning shall be carried out by duly registered environmental planners.

Section 21. Roster of Environmental Planners. A roster showing the names and places of business of all registered environmental planners or of those holding Certificates of Recognition along special branches of environmental planning, shall be prepared and kept by the Secretary of the Commission. Copies of this roster shall be furnished to all building officials and government agencies involved in planning and/or approval of environmental plans, and shall be made available to the public upon request.

Section 22. Suspension and Revocation of Certificates. Subject to the approval of the Commission, the Board shall have the power, after due notice and hearing, to suspend or revoke the certificate of registration for any cause mentioned in Section 16 of this Title.

Section 23. Re-Issuance and Replacement of Certificate. The Board may, after the expiration of one (1) year from the date a certificate of registration is revoked and for valid reasons, entertain an application for the issuance of a new certificate of registration.

Section 24. Use of Seal. All registered environmental planners shall obtain a seal of such design as the Board shall authorize and direct: Provided, however, That the serial number of the certificate issued by the Board shall be included in the design of the seal. Plans, designs and programs prepared by, or under the direct supervision of a registered environmental planner shall be stamped with the said seal during the life of the registrant’s certificate, and it shall be unlawful for any one to stamp or seal any document with the said seal after the certificate of the registrant named thereon has expired or has been revoked, unless said certificate shall have been renewed or re-issued.

TITLE IV
Enforcement of Decree and Penal Provisions

Section 25. Enforcement by Government Officials and Officers of the Law. It shall be the duty of all government officials and duly constituted law officers of the national, provincial, city and municipal governments, to assist the Board and the Commission in enforcing the provisions of this Decree and to prosecute any person violating the same. In this connection, heads of government offices, departments, bureaus, government-owned or controlled corporation, provincial governors, and city and municipal mayors shall appoint only qualified and/or registered environmental planners to positions requiring the knowledge, skill, and competence of environmental planners.

Section 26. Penal Provision. Any person committing any of the following acts shall, upon conviction, be sentenced by imprisonment of not less than six (6) months, nor more than five (5) years, or a fine not less than two thousand pesos (P2,000.00) nor more than five thousand pesos (P5,000.00) or both, in the discretion of the Court:

(a) Engaging in the practice of environmental planning in the Philippines without having been registered or without having conformed to the provisions of this Decree;

(b) Presenting or attempting to use as his own the certificate of registration of a registered environmental planner;

(c) Giving any false or forged evidence of any kind to the Board, or impersonating any registered environmental planner;

(d) Attempting to use a revoked or suspended certificate of registration;

(e) Using in connection with his name or otherwise assuming, using or advertising any title or description tending to convey the impression that he is an environmental planner without holding a valid certificate of registration; or

(f) Violating any of the provisions of this Decree.

In case the offender is a corporation, partnership or juridical person, the penalty of imprisonment shall be imposed on the officer or offices responsible for permitting or causing the violation.

Section 27. Repealing Clause. All laws, parts of laws, decrees, orders, letters of instructions and ordinances, or regulations in conflict with the provisions hereof, are hereby repealed or modified accordingly.

Section 28. Separability Clause. If any part or section of this Decree shall be declared unconstitutional, such declaration shall not invalidate the other provisions hereof.

Section 29. Effectivity. This Decree shall take effect six months after the constitution of the Board.

DONE in the City of Manila, this 2nd day of March, in the year of Our Lord, nineteen hundred and seventy-eight.

Presidential Decree No. 442

Republic of the Philippines
MALACAÑANG
M a n i l a

Presidential Decree No. 442 : May 1, 1974

As Amended By
Presidential Decrees Nos. 570-A, 626, 643, 823, 819, 856-A, 891, 1367, 1368, 1391, 1412, 1641, 1691, 1692, 1693, 1920, 1921
Mga Batas Pambansa Blg. 32, 70, 130 and 227
Executive Orders Nos. 47, 111, 126, 179, 180, 203, 247, 251, 252, 307 and
Republic Acts Nos. 6640, 6657, 6715, 6725, 6727 and 8558

*OMNIBUS RULES IMPLEMENTING THE LABOR CODE
**RULES ON EMPLOYEES COMPENSATION

A DECREE INSTITUTING A LABOR CODE, THEREBY REVISING AND CONSOLIDATING LABOR AND SOCIAL LAWS TO AFFORD PROTECTION TO LABOR, PROMOTE EMPLOYMENT AND HUMAN RESOURCES DEVELOPMENT AND ENSURE INDUSTRIAL PEACE BASED ON SOCIAL JUSTICE

Preliminary Title

Chapter 1
EMANCIPATION OF TENANTS

Article 7. Statement of objectives. Inasmuch as the old concept of land ownership by a few has spawned valid and legitimate grievances that gave rise to violent conflict and social tension and the redress of such legitimate grievances being one of the fundamental objectives of the New Society, it has become imperative to start reformation with the emancipation of the tiller of the soil from his bondage.

Article 8. Transfer of lands to tenant workers. Being a vital part of the labor force, tenant-farmers on private agricultural lands primarily devoted to rice and corn under a system of share crop or lease tenancy whether classified as landed estate or not shall be deemed owner of a portion constituting a family size farm of five hectares if not irrigated and three hectares if irrigated.

In all cases, the landowner may retain an area of not more than seven hectares if such landowner is cultivating such area or will now cultivate it.

Article 9. Determination of land value. For the purpose of determining the cost of the land to be transferred to the m tenant-farmer, the value of the land shall be equivalent to two and one-half times the average harvest of three normal crop years immediately preceding the promulgation of Presidential Decree No. 27 on October 21, 1972.

The total cost of the land, including interest at the rate of six percent per annum, shall be paid by the tenant in fifteen years of fifteen equal annual amortizations.

In case of default, the amortizations due shall be paid by the farmer’s cooperative of which the defaulting tenant-farmer is a member, with the cooperative having a right of recourse against him.

The government shall guarantee such amortizations with shares of stock in government-owned and government-controlled corporations.

Article 10. Conditions of ownership. No title to the land acquired by the tenant-farmer under Presidential Decree No. 27 shall be actually issued to him unless and until he has become a full-fledged member of a duly recognized farmers’ cooperative.

Title to the land acquired pursuant to Presidential Decree No. 27 or the Land Reform Program of the Government shall not be transferable except by hereditary succession or to the Government in accordance with the provisions of Presidential Decree No. 27, the Code of Agrarian Reforms and other existing laws and regulations.

Article 11. Implementing agency. The Department of Agrarian Reform shall promulgate the necessary rules and regulations to implement the provisions of this chapter.

Book One
PRE-EMPLOYMENT

Article 12. Statement of objectives. It is the policy of the State:

(a) To promote and maintain a state of full employment through improved manpower training, allocation and utilization;

(b) To protect every citizen desiring to work locally or overseas by securing for him the best possible terms and conditions of employment;

(c) To facilitate a free choice of available employment by persons seeking work in conformity with the national interest;

(d) To facilitate and regulate the movement of workers in conformity with the national interest;

(e) To regulate the employment of aliens, including the establishment of a registration and/or work permit system;

(f) To strengthen the network of public employment offices and rationalize the participation of the private sector in the recruitment and placement of workers, locally and overseas, to serve national development objectives.

(g) To insure careful selection of Filipino workers for overseas employment in order to protect the good name of the Philippines abroad.

Title I
Recruitment and Placement of Workers

Chapter 1
GENERAL PROVISIONS

Article 13. Definitions. (a) “Workers” means any member of the labor force, whether employed or unemployed.

(b) “Recruitment and placement” refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or promises for a free employment to two or more persons shall be deemed engaged in recruitment and placement.

(c) “Private employment agency” means any person or entity engaged in the recruitment and placement of workers for a fee which is charged, directly or indirectly, from the workers or employers or both.

(d) “License” means a document issued by the Department of Labor authorizing a person or entity to operate a private employment agency.

(e) “Private recruitment entity” means any person or association engaged in the recruitment and placement of workers, locally or overseas, without charging, directly or indirectly, any fee from the workers or employers.

(f) “Authority” means a document issued by the Department of Labor authorizing a person or association to engage in recruitment and placement activities as a private recruitment entity.

(g) “Seaman” means any person employed in a vessel engaged in maritime navigation.

(h) “Overseas employment” means employment of a worker outside the Philippines.

(i) “Emigrant” means any person, worker or otherwise, who emigrates to a foreign country by virtue of an immigrant visa or resident permit or its equivalent in the country of destination.

Article 14. Employment promotion. The Secretary of Labor and Employment shall have the power and authority to:

(a) Organize and establish new employment offices in addition to the existing employment offices under the Department of Labor as the need arises;

(b) Organize and establish a nationwide job clearance and information system to inform applicants registering with a particular employment office of job opportunities in other parts of the country as well as job opportunities abroad;

(c) Develop and organize programs that will facilitate occupational, industrial and geographical mobility of labor and provide assistance in the relocation of workers from one area to another; and

(d) Require any person, establishment, organization or institution to submit such employment information as may be prescribed by the Department of Labor and Employment.

Article 15. Bureau of Employment Services. (a) The Bureau of Employment Services shall be primarily responsible for developing and monitoring a comprehensive employment program. It shall have the power and duty:

1. To formulate and develop plans and programs to implement the employment promotion objectives of this Title;

2. To establish and maintain a registration and/or licensing system to regulate private sector participation in the recruitment and placement of workers, locally and overseas, and to secure the best possible terms and conditions of employment for Filipino contract workers and compliance therewith under such rules and regulations as may be issued by the Department of Labor and Employment.

3. To formulate and develop employment programs designed to benefit disadvantaged groups and communities;

4. To establish and maintain a registration and/or work permit system to regulate the employment of aliens;

5. To develop a labor market information system in aid of proper manpower and development planning;

6. To develop a responsive vocational guidance and testing system in aid of proper human resources allocation; and

7. To maintain a central registry of skill, except seamen.

(b) The regional offices of the Department of Labor shall have the original and exclusive jurisdiction over all matters or cases involving employer-employee relations including money claims, arising out of or by virtue of any law or contracts involving Filipino workers for overseas employment except seamen: Provided, That the Bureau of Employment Service may, in the cases of the National Capital Region, exercise such power, whenever the Department of Labor and Employment deems it appropriate. The decisions of the regional offices or the Bureau of Employment Services if so authorized by the Secretary of Labor and Employment as provided in this Article, shall be appealable to the National Labor Relations Commission upon the same grounds provided in Article 223 hereof. The decisions of the National Labor Relations Commission shall be final and inappealable.

(c) The Department of Labor and Employment shall have the power to impose and collect fees, based on rate recommended by the Bureau of Employment Services. Such fees shall be deposited in the National Treasury as a special account of the General Fund, for the promotion of the objectives of the Bureau of Employment Services, subject to the provisions of Section 40 of Presidential Decree No. 1177.

Article 16. Private recruitment. Except as provided in Chapter II of this Title, no person or entity, other than the public employment offices and the OEDB for overseas employment, shall engage in the recruitment and placement of workers.

Article 17. Overseas Employment Development Board. An Overseas Employment Development Board is hereby created to undertake, in cooperation with relevant entities and agencies, a systematic program for overseas employment of Filipino workers in excess of domestic needs and to protect their rights to fair and equitable employment practices. It shall have the power and duty:

1. To promote and overseas employment of Filipino workers through a comprehensive market promotion and development program;

2. To secure the best possible terms and conditions of employment of Filipino contract workers on a government-to-government basis and to ensure compliance therewith;

3. To recruit and place workers for overseas employment on a government arrangement and in such other sectors as policy may dictate; and

4. To act as secretariat for the Board of Trustees of the Welfare and Training Fund for Overseas Workers.

Article 18. Ban on direct hiring. No employer may hire a Filipino worker for overseas employment except through the Boards and entities authorized by the Department of Labor and Employment. Direct hiring by members of the diplomatic service, officials and employees of international organizations and such other employers as may be allowed by the Department and Labor and Employment is exempt from this provision.

Article 19. Office of Emigrant Affairs. (a) Pursuant to the national policy to maintain close ties with Filipino migrant communities and promote their welfare as well as establish a data bank in aid of national manpower policy information, an Office of Emigrant Affairs is hereby created in the Department of Labor and Employment. The Office shall be a unit at the Office of the Secretary and shall initially be manned and operated by such personnel and through such fundings as are available within the Department and its attached agencies. Thereafter, its appropriation shall be made part of the regular General Appropriation Decree.

(b) The Office shall, among others, promote the well-being of emigrants and maintain their close link to the homeland by:

1. Serving as a liaison with migrant communities;

2. Providing welfare and cultural services;

3. Promoting and facilitating re-integration of migrants into the national mainstream;

4. Promoting economic, political and cultural ties with the communities; and

5. Undertaking such activities as may be appropriate to enhance such cooperative links.

Article 20. National Seamen Board. (a) A National Seamen Board is hereby created which shall develop and maintain a comprehensive program for Filipino seamen employed overseas. It shall have the power and duty:

1. To provide free placement services for seamen;

2. To regulate and supervise the activities of agents or representatives of shipping companies in the hiring of seamen for overseas employment; and secure the best possible terms of employment for contract seamen workers and secure compliance therewith; and

3. To maintain a complete registry of all Filipino seamen.

(b) The Board shall have original and exclusive jurisdiction over all matters or cases including money claims, involving employer-employee relations, arising out of or by virtue of any law or contracts involving Filipino seamen for overseas employment. The decision of the Board shall be appealable to the National Labor Relations Commission upon the same grounds provided in Article 223 hereof. The decision of the National Labor Relations Commission shall be final and inappealable.

Article 21. Foreign service role and participation. To provide ample protection to Filipino workers abroad, the labor attaches, the labor reporting officers duly designated by the Department of Labor and Employment and the Philippine diplomatic or consular officials concerned, shall, even without prior instruction or advice from the home office, exercise the power and duty:

(a) To provide all Filipino workers within their jurisdiction assistance on all matters arising out of employment;

(b) To ensure that Filipino workers are not exploited or discriminated against;

(c) To verify and certify as requisite to authentication that the terms and conditions of employment in contracts involving Filipino workers are in accordance with the Labor Code and rules and regulations of the Overseas Employment Development Board and the National Seamen Board;

(d) To make continuing studies or research and recommendations on the various aspects of the employment market within their jurisdiction:

(e) To gather and analyze information on the employment situation and its probable trends, and to make such information available to the Department of Labor and Employment and the Department of Foreign Affairs; and

(f) To perform such other duties as may be required of them from time to time.

Article 22. Mandatory remittance of foreign exchange earnings. It shall be mandatory for all Filipino workers abroad to remit a portion of their foreign exchange earnings to their families, dependents, and/or beneficiaries in the country in accordance with rules and regulations prescribed by the Secretary of Labor and Employment.

Article 23. Composition of the Boards. (a) The OEDB shall be composed of the Secretary of Labor and Employment as Chairman, the Undersecretary of Labor as Vice-Chairman, and a representative each of the Department of Foreign Affairs, the Department of National Defense, the Central Bank, the Department of Education, Culture and Sports, the National Manpower and Youth Council, the Bureau of Employment Services, a workers’ organization and an employers’ organization and the Executive Director of the OEDB as members.

(b) The National Seamen Board shall be composed of the Secretary of Labor and Employment as Chairman, the Undersecretary of Labor as Vice-Chairman, the Commandant of the Philippine Coast Guard, and a representative each of the Department of Foreign Affairs, the Department of Education, Culture and Sports, the Central Bank, the Maritime Industry Authority, the Bureau of Employment Services, a national shipping association and the Executive Director of the NSB as members.

The members of the Boards shall receive allowances to be determined by the Board which shall not be more than P2,000 per month.

(c) The Boards shall be attached to the Department of Labor for policy and program coordination. They shall each be assisted by a Secretariat headed by an Executive Director who shall be a Filipino citizen with sufficient experience in manpower administration, including overseas employment activities. The Executive Director shall be appointed by the President of the Philippines upon the recommendation of the Secretary of Labor and shall receive an annual salary as fixed by law. The Secretary of Labor shall appoint the other members of the Secretariat.

(d) The Auditor General shall appoint his representative to the Boards to audit their respective accounts in accordance, with auditing laws and pertinent rules and regulations.

Article 24. Boards to issue rules and collect fees. The Boards shall issue appropriate rules and regulations to carry out their functions. They shall have the power to impose and collect fees from employers concerned, which shall be deposited to the respective accounts of said Boards and be used by them exclusively to promote their objectives.

Chapter 2
REGULATION OF RECRUITMENT AND PLACEMENT ACTIVITIES

Article 25. Private sector participation in the recruitment and placement of workers. Pursuant to national development objectives and in order to harness and maximize the use of private sector resources and initiative in the development and implementation of a comprehensive employment program, the private employment sector shall participate in the recruitment and placement of workers, locally and overseas, under such guidelines, rules and regulations, as may be issued by the Secretary of Labor and Employment.

Article 26. Travel agencies prohibited to recruit. Travel agencies and sales agencies of airline companies are prohibited from engaging in the business of recruitment and placement of workers for overseas employment whether for profit or not.

Article 27. Citizenship requirement. Only Filipino citizens or corporations, partnerships or entities at least 75 percent of the authorized and voting capital stock of which is owned and controlled by Filipino citizens shall be permitted to participate in the recruitment and placement of workers, locally or overseas.

Article 28. Capitalization. All applicants for authority to hire or renewal of license to recruit are required to have such substantial capitalization as determined by the Secretary of Labor and Employment.

Article 29. Non-transferability of license or authority. No license or authority shall be used directly or indirectly by any person other than the one in whose favor it was issued at any place other than that stated in the license or authority, nor may such license or authority be transferred, conveyed or assigned to any other person or entity. Any transfer of business address, appointment or designation of any agent or representative including the establishment of additional offices anywhere shall be subject to the prior approval of the Department of Labor and Employment.

Article 30. Registration fees. The Secretary of Labor and Employment shall promulgate a schedule of fees for the registration of all applicants for license or authority.

Article 31. Bonds. All applicants for license or authority shall post such cash and surety bonds as determined by the Secretary of Labor and Employment to guarantee compliance with prescribed recruitment procedures, rules and regulations, and terms and conditions of employment as appropriate.

Article 32. Fees to be paid by workers. Any person applying with a private fee charging employment agency for employment assistance shall not be charged any fee until he has obtained employment through his efforts or has actually commenced employment. Such fee must be always covered with approved receipt clearly showing the amount paid. The Secretary of Labor and Employment shall promulgate a schedule of allowable fees.

Article 33. Reports on employment status. Whenever the public interest so requires, the Secretary of Labor and Employment may direct all persons or entities within the coverage of this Title to submit a report on the status of employment, including job vacancies; details of job requisitions, separation from jobs, wages, other terms and conditions, and other employment data.

Article 34. Prohibited practices. It shall be unlawful for any individual, entity, licensee or holder of authority:

(a) To charge or accept directly or indirectly any amount greater than that specified in the schedule of allowable fees prescribed by the Secretary of Labor and Employment, or to make a worker pay any amount greater than that actually received by him as a loan or advance;

(b) To furnish or publish any false notice or information or document in relation to recruitment or employment;

(c) To give any false notice, testimony, information or document or commit any act or misrepresentation for the purpose of securing a license or authority under this Code;

(d) To induce or attempt to induce a worker already employed to quit his employment in order to offer him another unless the transfer is designed to liberate a worker from oppressive terms and conditions of employment;

(e) To influence or attempt to influence any person or entity not to employ any worker who has not applied for employment through his agency;

(f) To engage in the recruitment or placement of workers in jobs harmful to public health or morality or to the dignity of the Republic of the Philippines;

(g) To obstruct or attempt to obstruct inspection by the Secretary of Labor and Employment or by his duly authorized representatives;

(h) To fail to file reports on the status of employment, placement vacancies, remittance of foreign exchange earnings, separation from jobs, departures and such other matters or information as may be required by the Secretary of Labor and Employment;

(i) To substitute or alter employment contracts approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the Department of Labor and Employment.

(j) To become officer or member of the Board of any corporation engaged in travel agency or to be engaged directly or indirectly in the management of a travel agency;

(k) To withhold or deny travel documents from applicant workers before departure for monetary or financial considerations other than those authorized under this Code and its implementing rules and regulations.

Article 35. Suspension and/or cancellation of license or authority. The Secretary of Labor and Employment shall have the power to suspend or cancel any license or authority to recruit employees for overseas employment for violation of rules and regulations issued by the Secretary of Labor and Employment, the Overseas Employment Development Board, and the National Seamen Board, or for violations of the provisions of this and other applicable laws, General Orders and Letters of Instructions.

Article 36. Regulatory power. The Secretary of Labor and Employment shall have the power to restrict and regulate the recruitment and placement activities of all agencies within the coverage of this Title and is hereby authorized to issue orders and promulgate rules and regulations to carry out the objectives and implement the provisions of this Title.

Chapter 3
MISCELLANEOUS PROVISIONS

Article 37. Visitorial power. The Secretary of Labor and Employment or his duly authorized representatives may at any time inspect the premises, books of accounts and records of any person or entity covered by this Title, require it to submit reports regularly on prescribed forms, and act on violations of any provision of this Title.

Article 38. Illegal Recruitment. (a) The following recruitment activities are deemed illegal and punishable as provided herein:

1. Those undertaken in any form or manner by non-licensees or non-holders of authority;

2. Participation in the exaction of money, goods and/or services in consideration of employment in an amount exceeding that authorized by law or appropriate regulations; and

3. Participation in the recruitment , placement or deployment of any worker under false pretense or false documentation.

(b) Illegal recruitment shall be considered as a crime of economic sabotage and shall be penalized as such in accordance with existing laws.

(c) The Secretary of Labor or his duly authorized representative shall have the power to recommend the arrest and detention of any person engaged in illegal recruitment.

(d) The Department of Labor shall set up a secretariat on illegal recruitment to serve as the focal point for all inter-agency efforts against illegal recruitment and related activities. The Secretariat shall initially be manned and operated by such personnel and through such funding as are available in the Department of Labor. Thereafter its appropriation shall be made part of the regular appropriation act.

Article 39. Penalties. (a) Any license or holder of authority found violating or causing another to violate any provision of this Title or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than two years nor more than five years or a fine of not less than P10,000 nor more than P50,000 or both such imprisonment and fine, at the discretion of the court;

(b) Any person who is neither a license nor a holder of authority under this Title found violating any provision thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than four years nor more than eight years or a fine of not less than P20,000 nor more than P100,000 or both such imprisonment and fine, at the discretion of the court;

(c) If the offender is a corporation, partnership, association or entity, the penalty shall be imposed upon the officer or officers of the corporation, partnership, association or entity responsible for violation; and if such officer is an alien, he shall, in addition to the penalties herein prescribed, be deported without further proceedings;

(d) In every case, conviction shall cause and carry the automatic revocation of the license or authority and all the permits and privileges granted to such person or entity under this Title, and the forfeiture of the cash and surety bonds in favor of the Overseas Employment Development Board or the National Seamen Board, as the case may be, both of which are authorized to use the same exclusively to promote their objectives.

Title II
Employment of Non-Resident Aliens

Article 40. Employment permit for non-resident aliens. Any alien seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage an alien for employment in the Philippines shall obtain an employment permit from the Department of Labor and Employment.

The employment permit may be issued to a non-resident alien or to the applicant employer after a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired.

For an enterprise registered in preferred areas of investment, said employment permit may be issued upon recommendation of the government agency charged with the supervision of said registered enterprise.

Article 41. Prohibition and penal sanctions. (a) After the issuance of employment permit, the alien shall not transfer to another job or change his employer without prior approval of Secretary of Labor and Employment.

(b) Any non-resident alien who shall take up employment in violation of the provision of this Title and its implementing rules and regulations shall be punished in accordance with the provisions of Articles 289 and 290 of the Labor Code.

In addition, the alien worker shall be subject to deportation after service of his sentence.

Article 42. Submission of list. Any employer employing non-resident foreign nationals on the effective date of this Code shall submit a list of such nationals to the Secretary of Labor and Employment within 30 days after such date indicating their names, citizenship, foreign and local addresses, nature of employment and status of stay in the country. The Secretary of Labor and Employment shall then determine if they are entitled to an employment permit.

Book Two
HUMAN RESOURCES DEVELOPMENT

Title I
National Manpower Development Program

Chapter 1
NATIONAL POLICIES AND ADMINISTRATIVE MACHINERY FOR THEIR IMPLEMENTATION

Article 43. Statement of objective. It is the objective of this Title to develop human resources, establish training institutions and formulate such plans and programs that will ensure efficient allocation, development and utilization of the nation’s manpower and thereby promote employment and accelerate economic and social growth.

Article 44. Definitions. As used in this Title: (a) “Manpower” shall mean that portion of the nation’s population which has actual or potential capability to contribute directly to the production of goods and services.

(b) “Entrepreneurship” shall mean training for self-employment or assisting individual or small industries within the purview of this Title.

Article 45. National Manpower and Youth Council Composition. To carry out the objectives of this Title, the National Manpower and Youth Council, which is attached to the Department of Labor and Employment for policy and program coordination and hereinafter referred to as the Council, shall be composed of the Secretary of Labor and Employment as ex-officio chairman, the Secretary of Education, Culture and Sports as ex-officio vice-chairman, and as ex-officio members: the Director-General of the National Economic and Development Authority; the Secretary of Agriculture; the Secretary of Natural Resources; the Chairman of the Civil Service Commission; the Secretary of Social Welfare; the Secretary of Local Government and Community Development, the Chairman of the National Science Development Board; the Secretary of Trade and Industry and the Director-General of the Council. The Director-General of the Council shall have no vote.

In addition, the President shall appoint the following members from the private sector; two representatives of national organizations of employers; two representatives of national workers organizations; and two from national family and youth organizations, each for a term of three years.

Article 46. National Manpower Plan. The Council shall formulate a long-term national manpower plan for the optimum allocation, development and utilization of manpower for employment, entrepreneurship and economic and social growth. This manpower plan shall, after adoption by the Council, be updated annually and submitted to the President for his approval. Thereafter, it shall be the controlling plan for the development of manpower resources for the entire country in accordance with the national development plan. The Council shall call upon any agency of government or the private sector to assist in this effort.

Article 47. National Manpower Skills Center. The Council shall establish a National Manpower Skills Center and regional and local training centers for the purpose of promoting the development of skills. The centers shall be administered and operated under such rules and regulations as may be established by the Council.

Article 48. Establishment and formulation of skills standards. There shall be national skills standards for industry trades to be established by the Council in consultation with employers and workers organizations and appropriate government authorities. The Council shall thereafter administer the national skills standards.

Article 49. Administration of training programs. The Council shall provide through the Secretariat instructor training, entrepreneurship development, training in vocations, trades and other fields of employment, and assist any employer or organization in training schemes designed to attain its objectives under rules and regulations which the Council shall establish for this purpose.

The Council shall exercise, through the Secretariat, authority and jurisdiction over, and administer, on-going technical assistance programs and/or grants-in-aid for manpower youth development including those which may be entered into between the Government of the Philippines and international and foreign organizations and nations, as well as persons and organizations in the Philippines.

In order to integrate the national manpower development effort, all manpower training schemes as provided for in this Code shall be coordinated with the Council particularly those having to do with the setting of skills standards. For this purpose, existing manpower training programs in government and in the private sector shall be reported to the Council which may regulate such programs to make them conform with national development programs.

This Article shall not include apprentices, learners and handicapped workers as governed by appropriate provisions of this Code.

Article 50. Industry boards. The Council shall establish industry boards to assist in the establishment of manpower development schemes, trades and skills standards and such other functions as will provide direct participation of employers and workers in the fulfillment of the Council’s objectives, in accordance with guidelines to be established by the Council and in consultation with the National Economic and Development Authority.

The maintenance and operations of the Industry Boards shall be financed through a funding scheme under such rates or fees and manners of collection and disbursements as may be determined by the Council.

Article 51. Employment service training functions. The Council shall utilize the employment service of the Department of Labor and Employment for the placement of its graduates. The Bureau of Employment Services shall render assistance to the Council in the measurement of unemployment and under-employment, conduct of local manpower resource surveys and occupational studies including an inventory of the labor force, establishment and maintenance without charge of a national register of technicians who have successfully completed a training program under this Act and skilled manpower including its periodic publication, and maintenance of an adequate and up-to-date system of employment information.

Article 52. Incentive scheme. An additional deduction from taxable income of one-half of the value of labor training expenses incurred for development programs shall be granted to the person or enterprise concerned provided that such development programs, other than apprenticeship, are approved by the Council and the deduction does not exceed ten percent of direct labor wage.

There shall be a review of the said scheme two years after its implementation.

Article 53. Council Secretariat. The Council shall have a Secretariat headed by a Director-General who shall be assisted by a Deputy Director-General, both of whom shall be career administrators appointed by the President of the Philippines on recommendation of the Secretary of Labor and Employment. The Secretariat shall be under the administrative supervision of the Secretary of Labor and Employment and shall have an Office of Manpower Planning and Development, an Office of Vocational Preparation, a National Manpower Skills Center, regional manpower development offices and such other offices as may be necessary.

The Director-General shall have the rank and emoluments of an undersecretary and shall serve for a term of ten years. The Executive-Directors of the Office of Manpower Planning and Development, the Office of Vocational Preparation and the National Manpower Skills Center shall have the rank and emoluments of a bureau director and shall be subject to Civil Service Law, rules and regulations. The Director-General, Deputy Director-General and Executive Directors shall be natural-born citizens, between thirty and fifty years of age at the time of appointment, with a master’s degree, or its equivalent, and experience in national planning and development of human resources. The Executive Director of the National Manpower Skills Center shall, in addition to the foregoing qualifications, have undergone training in center management. Executive Directors shall be appointed by the President on the recommendations of the Secretary of Labor and Employment.

The Director-General shall appoint such personnel necessary to carry out the objectives, policies and functions of the Council subject to Civil Service rules. The regular professional and technical personnel shall be exempt from WAPCO rules and regulations.

The Secretariat shall have the following functions and responsibilities:

(a) To prepare and recommend the manpower plan for approval by the Council;

(b) To recommend allocation of resources for the implementation of the manpower plan as approved by the Council;

(c) To carry out the manpower plan as the implementing arm of the Council;

(d) To effect the efficient performance of the functions of the Council and the achievement of the objectives of this Title;

(e) To determine specific allocation of resources for projects to be undertaken pursuant to approved manpower plans;

(f) To submit to the Council periodic reports on the progress and accomplishment of work programs;

(g) To prepare for approval by the Council an annual report to the President on plans, programs and projects on manpower and out-of-school youth development;

(h) To enter into agreements to implement approved plans and programs and perform any and all such acts as will fulfill the objectives of this Code as well as ensure the efficient performance of the functions of the Council; and

(i) To perform such other functions as may be authorized by the Council.

Article 54. Regional manpower development offices. The Council shall create regional manpower development offices which shall determine the manpower needs of the industry, agriculture and other sectors of the economy within their respective jurisdictions; provide the Council’s central planners with the data for updating the national manpower plan; recommend programs for the regional level agencies engaged in manpower and youth development within the policies formulated by the Council; administer and supervise Secretariat training programs within the region and perform such other functions as may be authorized by the Council.

Article 55. Consultants and technical assistance, publication and research. In pursuing its objectives, the Council is authorized to set aside a portion of its appropriation for the hiring of services of qualified consultants, and/or private organizations for research work and publication. It shall avail itself of the services of other agencies of the Government as may be required.

Article 56. Rules and regulations. The Council shall define its broad functions and issue appropriate rules and regulations necessary to implement the provisions of this Code.

Title II
Training and Employment of Special Workers

Chapter 1
APPRENTICESHIP

Article 57. Statement of objective. This Title aims:

(1) To help meet the demand of the economy for trained manpower;

(2) To establish a national apprenticeship program through the participation of employers, workers, and government and non-government agencies; and

(3) To establish apprenticeship standards for the protection of apprentices.

Article 58. Definition of terms. As used in this Title:

(a) “Apprenticeship” means practical training on the job supplemented by related theoretical instruction.

(b) An “apprentice” is a worker who is covered by a written apprenticeship agreement with an individual employer or any of the entities recognized under this Chapter.

(c) An “apprenticeable occupation” means any trade, form of employment or occupation which requires more than three months of practical training on the job supplemented by related theoretical instruction.

(d) “Apprenticeship agreement” is an employment contract wherein the employer binds himself to train the apprentice and the apprentice in turn accepts the terms of training.

Article 59. Qualifications of apprentice. To qualify as an apprentice, a person shall:

(a) Be at least fourteen year of age;

(b) Possess vocational aptitude and capacity for apprenticeship as established through appropriate tests; and

(c) Possess the ability to comprehend and follow oral and written instructions.

Trade and industry associations may recommend to the Secretary of Labor and Employment appropriate educational requirements for different occupations.

Article 60. Employment of Apprentices. Only employers in the highly technical industries may employ apprentices and only in apprenticeable occupation approved by the Secretary of Labor and Employment.

Article 61. Contents of apprenticeship agreements. Apprenticeship agreements, including wage rates of apprentices, shall conform to the rules issued by the Secretary of Labor and Employment. The period of apprenticeship shall not exceed six months. Apprenticeship agreements providing for wage rates below the legal minimum wage, which in no case shall start below 75 per cent of the applicable minimum wage, may be entered into only in accordance with apprenticeship programs duly approved by the Secretary of Labor and Employment. The Department shall develop standard model programs of apprenticeship.

Article 62. Signing of apprenticeship agreement. Every apprenticeship agreement shall be signed by the employer or his agent, or by an authorized representative of any of the recognized organizations, associations or groups and by the apprentice.

An apprenticeship agreement with a minor shall be signed in his behalf by his parent or guardian or, if the latter is not available, by an authorized representative of the Department of Labor and Employment, and the same shall be binding during its lifetime.

Every apprenticeship agreement entered into under this Title shall be ratified by the appropriate apprenticeship committees, if any, and a copy thereof shall be furnished both the employer and the apprentice.

Article 63. Venue of apprenticeship program. Any firm, employer group or association, industry organization or civic group wishing to organize an apprenticeship program may choose from any of the following apprenticeship schemes as the training venue for apprentices:

(a) Apprenticeship conducted entirely by and within the sponsoring firm, establishment or entity;

(b) Apprenticeship entirely within a Department of Labor and Employment training center or other public training institution; or

(c) Initial training in trade fundamentals in a training center or other institution with subsequent actual work participation within the sponsoring firm or entity during the final stage of training.

Article 64. Sponsoring of apprenticeship program. Any of the apprenticeship schemes recognized herein may be undertaken or sponsored by a single employer or firm or by a group or association thereof, or by a civic organization. Actual training of apprentices may be undertaken:

(a) In the premises of the sponsoring employer in the case of individual apprenticeship programs;

(b) In the premises of one or several designated firms in the case of programs sponsored by a group or association of employers or by a civic organization; or

(c) In a Department of Labor and Employment training center or other public training institution.

Article 65. Investigation of violation of apprenticeship agreement. Upon complaint of any interested person or upon its own initiative, the appropriate agency of the Department of Labor and Employment or its authorized representative shall investigate any violation of any apprenticeship agreement pursuant to such rules and regulations as may be prescribed by the Department of Labor and Employment.

Article 66. Appeal to the Secretary of Labor and Employment. The decision of the authorized agency of the Department of Labor and Employment may be appealed by any aggrieved person to the Secretary of Labor and Employment within five days from receipt of the decision. The decision of the Secretary of Labor and Employment shall be final and executory.

Article 67. Exhaustion of administrative remedies. No person shall institute any action for the enforcement of any apprenticeship agreement, or damages for breach of any such agreement, unless he has exhausted all available administrative remedies.

Article 68. Aptitude testing of applicants. Consonant with the minimum qualifications of apprentice-applicants required under this Chapter, employers of entities with duly recognized apprenticeship programs shall have primary responsibility for providing appropriate aptitude tests in the selection of apprentices. If they do not have adequate facilities for the purpose, the Department of Labor and Employment may perform the service free of charge.

Article 69. Responsibility for theoretical instruction. Supplementary theoretical instruction to apprentices in cases where the program is undertaken in the plant may be done by the employer. If the latter is not prepared to assume the responsibility, the same may be delegated to an appropriate government agency.

Article 70. Voluntary organization of apprenticeship program; exemptions. (a) The organization of apprenticeship programs shall be primarily a voluntary undertaking by employers.

(b) When national security or particular requirements of economic development so demand, the President of the Philippines may require compulsory training of apprentices in certain trades, occupations, jobs or employment levels where shortage of trained manpower is deemed critical as determined by the Secretary of Labor and Employment. Appropriate rules in this connection shall be promulgated by the Secretary of Labor and Employment as the need arises.

(c) Where services of foreign technicians are utilized by private companies in apprenticeable trades, said companies are required to set up appropriate apprenticeship programs.

Article 71. Deductibility of training costs. An additional deduction from taxable income of one-half of the value of labor training expenses incurred for developing the productivity and efficiency of apprentices shall be granted to the person or enterprise organizing an apprenticeship program provided such program is duly recognized by the Department of Labor and Employment; provided further that such deduction shall not exceed 10 percent of direct labor wage; and provided finally that the person or enterprise who wish to avail of this incentive should pay his apprentices the minimum wages.

Article 72. Apprentices without compensation. The Secretary of Labor and Employment may authorize the hiring of apprentices without compensation whose training on the job is required by the school or training program curriculum or as a requisite for graduation or board examination.

Chapter 2
LEARNERS

Article 73. Learners defined. Learners are persons hired as trainees in semi-skilled and other industrial occupations which are non-apprenticeable and which may be learned through practical training on the job in a relatively short period of time which shall not exceed three months.

Article 74. When Learners may be hired. Learners may be employed when no experienced workers are available, the employment of learners is necessary to prevent curtailment of employment opportunities, and the employment does not create unfair competition in terms of labor costs or impair or lower working standards.

Article 75. Learnership agreement. Any employer desiring to employ learners shall enter into a learnership agreement with them, which agreement shall include:

(a) The names and addresses of the learners;

(b) The duration of the learnership period, which shall not exceed three months;

(c) The wages or salary rates of the learners which shall begin at not less than 75 percent of the applicable minimum wage; and

(d) A commitment to employ the learners, if they so desire, as regular employees upon completion of the learnership. All learners who have been allowed or suffered to work during the first two months shall be deemed regular employees if training is terminated by the employer before the end of the stipulated period through no fault of the learner.

The learnership agreement shall be subject to inspection by the Secretary of Labor and Employment or his duly authorized representatives.

Article 76. Learners in piece work. Learners employed in piece or incentive rate jobs during the training period shall be paid in full for the work done.

Article 77. Penalty clause. Any violation of this Chapter or its implementing rules and regulations shall be subject to the general penalty clause provided for in this Code.

Chapter 3
HANDICAPPED WORKERS

Article 78. Definition. Handicapped workers are those whose earning capacity is impaired by age or physical or mental deficiency or injury.

Article 79. When employable. Handicapped workers may be employed when their employment is necessary to prevent curtailment of employment opportunities and when it does not create unfair competition in labor costs or impair or lower working standards.

Article 80. Employment agreement. Any employer who employs handicapped workers shall enter into an employment agreement with them, which agreement shall include:

(a) The names and addresses of the handicapped workers to be employed.

(b) The rate to be paid the handicapped workers which shall be not less than 75 percent of the applicable legal minimum wage;

(c) The duration of employment period; and

(d) The work to be performed by the handicapped workers.

The employment agreement shall be subject to inspection by the Secretary of Labor and Employment or his duly authorized representatives.

Article 81. Eligibility for apprenticeship. Subject to the appropriate provisions of this Code, handicapped workers may be hired as apprentices or learners if their handicap is not such as to effectively impede the performance of job operations in the particular occupations for which they are hired.

Book Three
CONDITIONS OF EMPLOYMENT

Title I
Working Conditions and Rest Periods

Chapter 1
HOURS OF WORK

Article 82. Coverage. The provision of this Title shall apply to employees in all establishments and undertakings, whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another and workers who are paid by results as determined by the Secretary of Labor and Employment in appropriate regulations.

As used herein, “managerial employees” refers to those whose primary duty consists of the management of the establishment in which they are employed or of a department or subdivision thereof, and to other officers or members of the managerial staff.

“Field personnel” refers to non-agricultural employees who regularly perform their duties away from the principal place of business or branch office of the employer and whose actual hours of work in the field cannot be determined with reasonable certainty.

Article 83. Normal hours of work. The normal hours of work of any employee shall not exceed eight in a day.

Health personnel in cities or municipalities with a population of at least one million or in hospitals or clinics with a bed capacity of at least one hundred shall hold regular office hours for eight hours a day, for five days a week, or a total of forty hours a week, exclusive of time for meals, except where the exigencies of the service require that such personnel work for six days, forty-eight hours, in which case they shall be entitled to an additional compensation of at least 30 percent of their regular wage for work on the sixth day. For purposes of this Article, “health personnel” shall include: resident physicians, nurses, nutritionists, dieticians, pharmacists, social workers, laboratory technicians, paramedical technicians, psychologists, midwives, attendants and all other hospital or clinic personnel.

Article 84. Hours worked. Hours worked shall include (a) all time during which an employee is required to be on duty or to be at a prescribed workplace, and (b) all time during which an employee is suffered or permitted to work.

Rest periods of short duration during working hours shall be counted as hours worked.

Article 85. Meal periods. Subject to such regulations as the Secretary of Labor and Employment may prescribe, it shall be the duty of every employer to give his employees not less than sixty minutes time-off for their regular meals.

Article 86. Night shift differential. Every employee shall be paid a night shift differential of not less than ten percent of his regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in the morning.

Article 87. Overtime work. Work may be performed beyond eight hours a day provided that the employee is paid for the overtime work an additional compensation equivalent to his regular wage plus at least twenty-five percent thereof. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate for the first eight hours on a holiday or rest day plus at least 30 percent thereof.

Article 88. Undertime not offset be overtime. Undertime work on any particular day shall not be offset by overtime work on any other day. Permission given to the employee to go on leave on some other day of the week shall not exempt the employer from paying the additional compensation required in this Chapter.

Article 89. Emergency overtime work. Any employee may be required by the employer to perform overtime work in any of the following cases:

(a) When the country is at war or when any other national or local emergency has been declared by Congress or the Chief Executive;

(b) When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity;

(c) When there is urgent work to be performed on machines, installation or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature;

(d) When the work is necessary to prevent loss or damage to perishable goods;

(e) Where the completion or continuation of the work started before the 8th hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer.

Any employee required to render overtime work under this Article shall be paid the additional compensation required in this Chapter.

Article 90. Computation of additional compensation. For purposes of computing overtime and other additional remuneration as required by this Chapter, the “regular wage” of an employee shall include the cash wage only, without deduction on account of facilities provided by the employer.

Chapter 2
WEEKLY REST PERIODS

Article 91. Right to weekly rest day. (a) It shall be the duty of every employer, whether operating for profit or not, to provide each of his employees a rest period of not less than twenty-four consecutive hours after every six consecutive normal work days.

(b) The employer shall determine and schedule the weekly rest day of his employees, subject to collective agreement and to such rules and regulations as the Secretary of Labor and Employment may provide. However, the employer shall respect the preference of employees as to their weekly rest day when such preference is based on religious grounds.

Article 92. When employer may require work on a rest day. The employer may require his employees to work on any day:

(a) In case of actual or impending emergencies caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life and property or imminent danger to public safety;

(b) In case of urgent work to be performed on the machinery, equipment or installation to avoid serious loss which the employer would otherwise suffer;

(c) In the event of abnormal pressure of work due to special circumstances, where the employer cannot ordinarily be expected to resort to other measures;

(d) To prevent loss or damage to perishable goods;

(e) Where the nature of the work requires continuous operations and the stoppage of work may result in irreparable injury or loss to the employer; and

(f) Under other circumstances analogous or similar to the foregoing as determined by the Secretary of Labor and Employment.

Article 93. Compensation for rest day, Sunday or holiday work. (a) Where an employee is made or permitted to work on his scheduled rest day, he shall be paid an additional compensation of at least 30 percent of his regular wage. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is his established rest day.

(b) When the nature of the work of the employee is such that he has no regular workdays and no regular rest days can be scheduled, he shall be paid an additional compensation of at least 30 percent of his regular wage for work performed on Sundays and holidays.

(c) Work performed on any special holiday shall be paid an additional compensation of at least 30 percent of the regular wage of the employee. Where such holiday work falls on the employee’s scheduled rest day, he shall be entitled to an additional compensation of at least 50 percent of his regular wage.

(d) Where the collective bargaining agreement or other applicable employment contract stipulates the payment of a higher premium pay than that prescribed under this Article, the employer shall pay such higher rate.

Chapter 3
HOLIDAYS, SERVICE INCENTIVE LEAVES AND SERVICE CHARGES

Article 94. Right to holiday pay. (a) Every worker shall be paid his regular daily wage during regular holidays, except in retail and service establishment regularly employing less than ten workers;

(b) The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate; and

(c) As used in this Article, “holiday” includes: New Year’s Day, Maundy Thursday, Good Friday, the ninth of April, the first of May, the twelfth of June, last Sunday of August, first of November, the thirtieth of November, the twenty-fifth and the thirtieth of December, thirty-first of December, and the day designated by law for holding a general election.

Article 95. Right to service incentive leave. (a) Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay at least five days and those employed in establishments regularly employing less than ten employees or in establishments exempted from granting this benefit by the Secretary of Labor after considering the viability or financial condition of such establishment.

(c) The grant of benefit in excess of that provided herein shall not be made a subject of arbitration or any court or administrative action.

Article 96. Service charges. All service charges collected by hotels, restaurants and similar establishments shall be distributed at the rate of 85 percent for all covered employees and 15 percent for management. The share of the employees shall be equally distributed among them. In case the service charge is abolished, the share of the covered employees shall be integrated into their wages.

Title II
Wages

Chapter 1
PRELIMINARY MATTERS/P>

Article 97. Definitions. As used in this Title: (a) “Person” means an individual, partnership, association, corporation, business trust, legal representative or any organized group of person.

(b) “Employer” includes any person acting directly or indirectly in the interest of an employer in relation to an employee and shall include the Government and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporations and institutions, as well as non-profit private institutions or organizations.

(c) “Employee” includes any individual employed by an employer.

(d) “Agriculture” includes farming in all its branches and among other things includes the cultivation and tillage of soil, dairying, the production, cultivation, growing and harvesting of any agricultural and horticultural commodities, the raising of livestock or poultry, and any practices performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, but does not include the manufacturing or processing of sugar, coconuts, abaca, tobacco, pineapples or other farm products.

(e) “Employ” means to suffer or permit to work.

(f) “Wage” paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging or other facilities customarily furnished by the employer to the employee. “Fair and reasonable value” shall not include any profit to the employer or to any person affiliated with the employer.

Article 98. Application of Title. This Title shall not apply to farm tenancy or leasehold, domestic service and persons working in their respective homes in needlework or in any cottage industry duly registered in accordance with law.

Chapter 2
MINIMUM WAGE RATES

Article 99. Regional Minimum Wages. The minimum wage rates for agricultural and non-agricultural employees and workers in each and every region of the country shall be determined by the Commission, which shall be attached to the Department of Labor and Employment (DOLE) for policy and program coordination.

Article 100. Prohibition against elimination or diminution of benefits. Nothing in this Book shall be construed to eliminate or in any way diminish supplements or other employee benefits being enjoyed at the time of the promulgation of this Code.

Article 101. Payment by results. The Secretary of Labor and Employment shall regulate the payment of wages by results, including pakyao, piecework and other non-time work, in order to ensure the payment of fair and reasonable wage rates, preferably through time and motion studies or in consultation with representatives of workers’ and employers’ organizations.

Chapter 3
PAYMENT OF WAGES

Article 102. Forms of payment. No employer shall pay the wages of an employee by means of promisorry 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 is stipulated in a collective bargaining agreement.

Article 103. Time of payment. Wages shall be paid at least once every two weeks or twice a month at intervals not exceeding sixteen days. If on account of force majeure or circumstances beyond the employer’s 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.

The payment of wages of employees engaged to perform a task which cannot be completed in two weeks shall be subject to the following conditions in the absence of a collective bargaining agreement or arbitration award:

(1) That payments are made at intervals not exceeding sixteen days, in proportion to the amount of work completed; and

(2) That final settlement is made upon completion of the work.

No employer shall make payment with less frequency than once a month.

Article 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.

Article 105. Direct payment of wages. Wages shall be paid directly to the workers to whom they are due, except:

(a) In cases of force majeure rendering such payments impossible or under other special circumstances to be determined by the Secretary of Labor and Employment in appropriate regulations, in which cases the worker may be paid through another person under written authority given by the worker for the purpose; or

(b) 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 claimant, 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.

Article 106. Contractor or sub-contractor. Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s sub-contractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or sub-contractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting as well as differentiations within these types of contracting, and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is “labor-only” contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Article 107. Indirect employer. The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

Article 108. Posting of bond. An employer or indirect employer may require the contractor or sub-contractor to furnish a bond equal to the cost of labor under contract, on condition that the bond will answer for the wages due the employees should the contractor or sub-contractor, as the case may be, fail to pay the same.

Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy or liquidation of an employer’s 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. (As amended by R. A. 6715)

Article 111. Attorney’s fees. (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in judicial or administrative proceedings for the recovery of the wages, attorney’s fees which exceed ten percent of the amount of wages recovered.

Chapter 4
PROHIBITIONS REGARDING WAGES

Article 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 the employer or from any other person or otherwise make use of any store or services of such employer or any other person.

Article 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:

(a) 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;

(b) 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

(c) In cases where the employer is authorized by law or regulations issued by the Secretary of Labor and Employment.

Article 114. Deposits for loss or damage. No employer shall require his worker to make deposits from which deduction 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 businesses 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.

Article 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.

Article 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 dismissal or by any other means whatsoever without the worker’s consent.

Article 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.

Article 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.

Article 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 5
WAGE STUDIES, WAGE AGREEMENTS AND WAGE DETERMINATION

Article 120. Creation of the 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 RA 6727)

Article 121. Powers and Functions of the Commission. The Commission shall have the following powers and functions:

(a) 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;

(b) To formulate policies and guidelines on wages, incomes and productivity improvement at the enterprise, industry and national levels;

(c) To prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels;

(d) 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;

(e) 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;

(f) To review plans and programs of the regional Tripartite Wages and Productivity Boards to determine whether these are consistent with national development plans;

(g) To exercise technical and administrative supervision over the Regional Tripartite Wages and Productivity Boards;

(h) 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

(i) 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 Secretariat 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 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 RA 6727)

Article 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 jurisdiction:

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

(b) To determine and fix minimum wage rates applicable in their respective regions, provinces or industries therein and to issue the corresponding wage orders, subject to guidelines issued by the Commission;

(c) 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;

(d) To coordinate with the other Regional Boards as may be necessary to attain the policy and intention of this Code;

(e) To receive, process and act on applications for exemption from prescribed wage rates as may be provided by law or any Wage Order; and

(f) 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 Department of Trade and Industry as 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.

Each Regional Board to be headed by its chairman shall be assisted by a Secretariat. (As amended by RA 6727)

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

The filing of the appeal does not operate to 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 RA 6727)

Article 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:

(a) The demand for living wages;

(b) Wage adjustment vis-a-vis the consumer price index;

(c) The cost of living and changes or increases therein;

(d) The needs of workers and their families;

(e) The need to induce industries to invest in the countryside;

(f) Improvements in standards of living;

(g) The prevailing wage levels;

(h) Fair return of the capital invested and capacity to pay of employers;

(i) Effects in employment generation and family income; and

(j) 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 arbitrator or panel 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.

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.

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.

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 RA 6727)

Article 125. Freedom to bargain. No wage order shall be construed to prevent workers in particular firms or enterprises of industries from bargaining for higher wages with their respective employers.

Article 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 RA 6727)

Article 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 RA 6727)

Chapter 6
ADMINISTRATION AND ENFORCEMENT

Article 128. Visitorial and enforcement powers. (a) The Secretary of Labor and Employment or his duly authorized representatives, including labor regulations officers, shall have access to employer’s records and premises at any time of the day or night whenever work is being undertaken therein, and the right to copy therefrom, to question any employee and to investigate any fact, condition or matter which may be necessary to determine violations or which may aid in the enforcement of this Code and of any labor law, wage order or rules and regulations issued pursuant thereto.

(b) The provisions of Article 217 of this Code to the contrary notwithstanding and in cases where the relationship of employer-employee still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to order and administer, after due notice and hearing, compliance with the labor standards provisions of this Code and other labor legislation based on the findings of labor regulation officers or industrial safety engineers made in the course of inspection, and to issue writs of execution to the appropriate authority for the enforcement of their order, except in cases where the employer contests the findings of the labor regulation officer and raises issues which cannot be resolved without considering evidentiary matters that are not verifiable in the normal course of inspection.

(c) The Secretary of Labor and Employment may likewise order stoppage of work or suspension of operations of any unit or department of an establishment when non-compliance with the law or implementing rules and regulations poses grave and imminent danger to the health and safety of workers in the workplace. Within twenty-four hours, a hearing shall be conducted to determine whether an order for the stoppage of work or suspension of operations shall be lifted or not. In case the violation is attributable to the fault of the employer, he shall pay the employees concerned their salaries or wages during the period of such stoppage of work or suspension of operation.

(d) It shall be unlawful for any person or entity to obstruct, impede, delay or otherwise render ineffective the order of the Secretary of Labor and Employment or his duly authorized representatives issued pursuant to the authority granted under this Article, and no inferior court or entity shall issue temporary or permanent injunction or restraining order or otherwise assume jurisdiction over any case involving the enforcement orders issued in accordance with this Article.

(e) Any government employee found guilty of violation of, or abuse of authority under this Article shall, after appropriate administrative investigation, be subject to summary dismissal from the service.

(f) The Secretary of Labor and Employment may by appropriate regulations require employers to keep and maintain such employment records as may be necessary in aid of his visitorial and enforcement powers under this Code.

Article 129. Recovery of wages, simple money claims and other benefits. Upon complaint of any interested party, the Regional Director of the Department of Labor and Employment or any of the duly authorized hearing officers of the Department is empowered, through summary proceeding and after due notice, to hear and decide any matter involving the recovery of wages and other monetary claims and benefits, including legal interest, owing to an employee or person employed in domestic or household service or househelper under this Code, arising from employer-employee relations: Provided, That such complaint does not include a claim for reinstatement: Provided, further, That the aggregate money claims of each employee or househelper do not exceed five thousand pesos (P5,000). The Regional Director or hearing officer shall decide or resolve the complaint within thirty (30) calendar days from the date of the filing of the same. Any sum thus recovered on behalf of any employee or househelper pursuant to this Article shall be held in a special deposit account, and shall be paid, on order of the Secretary of Labor and Employment or the Regional Director directly to the employee or househelper concerned. Any such sum not paid to the employee or househelper, because he cannot be located after diligent and reasonable effort to locate him within a period of three (3) years, shall be held as a special fund of the Department of Labor and Employment to be used exclusively for the amelioration and benefit of workers.

Any decision or resolution of the Regional Director or hearing officer pursuant to this provision may be appealed on the same grounds provided in Article 223 of this Code, within five (5) calendar days from receipt of a copy of said decision or resolution, to the National Labor Relations Commission which shall resolve the appeal within ten (10) calendar days from the submission of the last pleading required or allowed under its rules.

The Secretary of Labor and Employment or his duly authorized representative may supervise the payment of unpaid wages and other monetary claims and benefits, including legal interest, found owing to any employee or househelper under this Code. (As amended by RA 6715)

Title III
Working Conditions for Special Groups of Employees

Chapter 1
EMPLOYMENT OF WOMEN

Article 130. Night work prohibition. No woman, regardless of age, shall be employed or permitted or suffered to work, with or without compensation:

(a) In any industrial undertaking or branch thereof between ten o’clock at night and six o’clock in the morning of the following day;

(b) In any commercial or non-industrial undertaking or branch thereof, other than agricultural, between midnight and six o’clock in the morning of the following day; or

(c) In any agricultural undertaking at night time unless she is given a period of rest of not less than nine consecutive hours.

Article 131. Exceptions. The prohibition prescribed by the preceding Article shall not apply in any of the following cases:

(a) In cases of actual or impending emergencies caused by serious accident, fire, flood, typhoon, earthquake, epidemic or other disasters or calamity, to prevent loss of life or property or in cases of force majeure or imminent danger to public safety;

(b) In case of urgent work to be performed on machineries, equipment or installation, to avoid serious loss which the employer would otherwise suffer;

(c) Where the work is necessary to prevent serious loss of perishable goods;

(d) Where the woman employee holds a responsible position of managerial or technical nature, or where the woman employee has been engaged to provide health and welfare services;

(e) Where the nature of the work requires the manual skill and dexterity of woman worker and the same cannot be performed with equal efficiency by male worker;

(f) Where the women employees are immediate members of the family operating the establishment or undertaking; and

(g) Under other analogous cases exempted by the Secretary of Labor and Employment in appropriate regulations.

Article 132. Facilities for women. The Secretary of Labor and Employment shall establish standards that will ensure the safety and health of women employees. In appropriate cases, he shall by regulations require any employer to:

(a) Provide seats proper for women and permit them to use such seats when they are free from work and during working hours, provided they can perform their duties in this position without detriment to efficiency;

(b) Establish separate toilet rooms and lavatories for men and women and provide at least a dressing room for women;

(c) Establish a nursery in a workplace for the benefit of the woman employees therein; and

(d) Determine appropriate minimum age and other standards for retirement or termination in special occupations such as those of flight attendants and the like.

Article 133. Maternity leave benefits. (a) Every employer shall grant to any pregnant woman employees who has rendered an aggregate service of at least six months for the last twelve months, maternity leave of at least two weeks prior to the expected date of delivery and another four weeks after normal delivery or abortion, with full pay based on her regular or average weekly wages. The employer may require from any woman employee applying for maternity leave the presentation of a medical certificate stating that delivery will probably take place within two weeks.

(b) The maternity leave shall be extended without pay on account of illness medically certified to arise out of the pregnancy, delivery, abortion or miscarriage, which renders the woman unfit for work, unless she has earned unused leave credits from which such extended leave may be charged.

(c) The maternity leave provided in this Article shall be paid by the employer only for the first four deliveries by a woman employee after the effectivity of this Code.

Article 134. Family planning services; incentives for family planning. (a) Establishments which are required by law to maintain a clinic or infirmary shall provide free family planning services to their employees which shall include, but not limited to, the application or use of contraceptive pills and intra-uterine devices.

(b) In coordination with other agencies of the government engaged in the promotion of family planning, the Department of Labor and Employment shall develop and prescribe incentive bonus schemes to encourage family planning among female workers in any establishment or enterprise.

Article 135. Discrimination prohibited. It shall be unlawful for any employer to discriminate against any woman employee with respect to terms and conditions of employment solely on account of her sex.

The following are acts of discrimination:

(a) Payment of a lesser compensation, including wage, salary or other form of remuneration and fringe benefits, to a female employee as against a male employee, for work of equal value; and

(b) Favoring a male employee over a female employee with respect to promotion, training opportunities, study and scholarship grant solely on account of their sexes.

Criminal liability for the willful commission of any unlawful act as provided in this article or any violation of the rules and regulations issued pursuant to Section 2 hereof shall be penalized as provided in Articles 288 and 289 of this Code: Provided, That the institution of any criminal action under this provision shall not bar the aggrieved employee from filing an entirely separate and distinct action for money claims, which may include claims for damages and other affirmative reliefs. The actions hereby authorized shall proceed independently of each other.

Article 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.

Article 137. Prohibited acts. (a) It shall be unlawful for any employer:

(1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code;

(2) To discharge such woman on account of her pregnancy, while on leave or in confinement due to her pregnancy; or

(3) To discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant.

Article 138. Classification of certain women workers. Any woman who is permitted or suffered to work with or without compensation in any night club, cocktail lounge, massage clinic, bar or similar establishment, under the effective control or supervision of the employer for a substantial period of time as determined by the Secretary of Labor and Employment, shall be considered as an employee of such establishments for purposes of labor and social legislation.

Chapter 2
EMPLOYMENT OF MINORS

Article 139. Minimum employable age. (a) No child below 15 years of age shall be employed, except when he works directly under the sole responsibility of his parents or guardian and his employment does not in any way interfere with his schooling.

(b) A person between 15 and 18 years of age may be employed for such number of hours and such periods of the day as determined by the Secretary of Labor and Employment in appropriate regulations.

(c) The foregoing provisions shall in no case allow the employment of a person below 18 years of age in an undertaking which is hazardous or deleterious in nature as determined by the Secretary of Labor and Employment.

Article 140. Prohibition against child discrimination. No employer shall discriminate against any person in respect to terms and conditions of employment on account of his age.

Chapter 3
EMPLOYMENT OF HOUSEHELPERS

Article 141. Coverage. The Chapter shall apply to all persons rendering services in households for compensation.

“Domestic or household services” shall mean service in the employer’s home which is usually necessary or desirable for the maintenance and enjoyment thereof and includes ministering to the personal comfort and convenience of the members of the employer’s household, including services of family drivers.

Article 142. Contract of domestic service. The original contract of domestic service shall not last for more than two years but it may be renewed for such periods as may be agreed upon by the parties.

Article 143. Minimum wage. (a) Househelpers shall be paid the following minimum wage rates:

(1) Sixty pesos (P60.00) a month for housekeepers in Manila, Quezon, Pasay and Caloocan cities and the municipalities of Makati, San Juan, Mandaluyong, Muntinlupa, Navotas, Malabon, Parañaque, Las Piñas, Pasig and Marikina in Rizal province.

(2) Forty-five pesos (P45.00) a month for those in other chartered cities and first class municipalities.

(3) Thirty pesos (P30.00) a month for those in other municipalities.

Article 144. Minimum cash wage. The minimum wage rates prescribed under this Chapter shall be the basic cash wages which shall be paid to the househelper in addition to lodging, food and medical attendance.

Article 145. Assignment to non-household work. No househelper shall be assigned to work in a commercial, industrial or agricultural enterprise at a wage or salary rate lower than that provided for agricultural or non-agricultural worker as prescribed herein.

Article 146. Opportunity for education. If the househelper is under the age of eighteen years, the employer shall give him or her an opportunity for at least elementary education. The cost of such education shall be part of the househelper’s compensation, unless there is a stipulation to the contrary.

Article 147. Treatment of househelpers. The employer shall treat the househelper in a just and humane manner. In no case shall physical violence be used upon the househelper.

Article 148. Board, lodging and medical attendance. The employer shall furnish the househelper free of charge suitable and sanitary living quarters as well as adequate food and medical attendance.

Article 149. Indemnity for unjust termination of services. If the period of household service is fixed, neither the employer nor the househelper may terminate the contract before the expiration of the term, except for a just cause. If the househelper is unjustly dismissed, he or she shall be paid the compensation already earned plus that of 15 days by way of indemnity.

If the househelper leaves without justifiable reason, he or she shall forfeit any unpaid salary due him or her not exceeding 15 days.

Article 150. Service of termination notice. If the duration of the household service is not determined either by stipulation or by the nature of the service, the employer or the househelper may give notice to put an end to the relationship five days before the intended termination of the service.

Article 151. Employment certification. Upon the severance of the household service relation, the employer shall give the househelper a written statement of the nature and duration of the service and his or her efficiency and conduct as househelper.

Article 152. Employment records. The employer may keep such records as he may deem necessary to reflect the actual terms and conditions of employment of his househelper which the latter shall authenticate by signature or thumbmark upon request of the employer.

Chapter 4
EMPLOYMENT OF HOMEWORKERS

Article 153. Regulations of industrial homework. The employment of industrial homeworkers and field personnel shall be regulated by the Government through appropriate regulations issued by the Secretary of Labor and Employment to ensure the general welfare and protection of homeworkers and field personnel and the industries employing them.

Article 154. Regulations of Secretary of Labor and Employment. The regulations or orders to be issued pursuant to this Chapter shall be designed to assure the average employee of an undertaking the minimum terms and conditions of employment applicable to the industrial homeworkers or field personnel involved.

Article 155. Distribution of homework. For purposes of this Chapter, the “employer” of homeworkers includes any person, natural or artificial, who for his account or benefit or on behalf of any person residing outside the country, directly or indirectly, or through any employee, agent, contractor, sub-contractor or any other person:

(1) Delivers, or causes to be delivered, any goods, articles or materials to be processed or fabricated in or about a home and thereafter to be returned or to be disposed of or distributed in accordance with his directions; or

(2) Sells any goods, articles or materials for the purpose of having the same processed or fabricated in or about a home and then rebuys them after such processing or fabrication, either himself or through some other person.

Book Four
HEALTH, SAFETY AND SOCIAL WELFARE BENEFITS

Title I
Medical, Dental and Occupational Safety

Chapter 1
MEDICAL AND DENTAL SERVICES

Article 156. First-aid treatment. Every employer shall keep in his establishment such first-aid medicines and equipment as the nature and conditions of work may require, in accordance with such regulations as the Department of Labor and Employment shall prescribe.

The employer shall take steps for the training of a sufficient number of employees in first-aid treatment.

Article 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees exceeds 50 but not more than 200 except when the employer does not maintain hazardous work places, in which case the services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor and Employment shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed 50 and shall determine by appropriate order hazardous work places for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds 200 but not more than 300 and;

(c) The services of a full-time physician, dentist and a full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with one bed capacity for every 100 employees, when the number of employees exceeds 300.

In cases of hazardous work places, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment for at least two hours, in the case of those engaged on part-time basis, and not less than eight hours in the case of those employed on full-time basis. Where the undertaking is non-hazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor and Employment may prescribe to ensure immediate availability of medical and dental treatment and attendance in case of emergency.

Article 158. When emergency hospital not required. The requirement for an emergency hospital or dental clinic shall not be applicable in case there is a hospital or dental clinic which is accessible from the employer’s establishment and he makes arrangements for the reservation therein of the necessary beds and dental facilities for the use of his employees.

Article 159. Health program. The physician engaged by an employer shall, in addition to his duties under this Chapter, develop and implement a comprehensive occupational health program for the benefit of the employees of his employer.

Article 160. Qualifications of health personnel. The physicians, dentists and nurses employed by employers pursuant to this Chapter shall have the necessary training in industrial medicine and occupational safety and health. The Secretary of Labor and Employment, in consultation with industrial medical and occupational safety and health associations, shall establish the qualifications, criteria and conditions of employment of such health personnel.

Article 161. Assistance of employer. It shall be the duty of any employer to provide all the necessary assistance to ensure the adequate and immediate medical and dental attendance and treatment to an injured or sick employee in case of emergency.

Chapter 2
OCCUPATIONAL HEALTH AND SAFETY

Article 162. Safety and health standards. The Secretary of Labor and Employment shall by appropriate orders set and enforce mandatory occupational safety and health standards to eliminate or reduce occupational safety and health hazards in all work places and institute new and update existing programs to ensure safe and healthful working conditions in all places of employment.

Article 163. Research. It shall be the responsibility of the Department of Labor and Employment to conduct continuing studies and researches to develop innovative methods, techniques and approaches for dealing with occupational safety and health problems; to discover latent diseases by establishing causal connections between diseases and work in environmental conditions; and to develop medical criteria which will assure insofar as practicable that no employee will suffer impairment or diminution in health, functional capacity or life expectancy as a result of his work and working conditions.

Article 164. Training programs. The Department of Labor and Employment shall develop and implement training programs to increase the number and competence of personnel in the field of occupational safety and industrial health.

Article 165. Administration of safety and health laws. (a) The Department of Labor and Employment shall be solely responsible for the administration and enforcement of occupational safety and health laws, regulations and standards in all establishments and workplaces wherever they may be located; however, chartered cities may be allowed to conduct industrial safety inspections of establishments within their respective jurisdiction where they have adequate facilities and competent personnel for the purpose as determined by the Department of Labor and Employment and subject to national standards established by the latter.

(b) The Secretary of Labor and Employment may, through appropriate regulations, collect reasonable fees for the inspection of steam boilers, pressure vessels and piping and electrical installations, the test and approval for safe use of materials, equipment and other safety devices, and the approval of plans for such materials, equipment and devices. The fees so collected shall be deposited in the national treasury to the credit of the occupational safety and health fund and shall be expended exclusively for the administration and enforcement of safety and other labor laws administered by the Department of Labor and Employment.

Title II
Employees’ Compensation and State Insurance Fund

Chapter 1
POLICY AND DEFINITIONS

Article 166. Policy. The State shall promote and develop a tax-exempt employees’ compensation program whereby employees and their dependents, in the event of work-connected disability or death, may promptly secure adequate income benefit, and medical or related benefits.

Article 167. Definition of terms. As used in this Title, unless the context indicates otherwise:

(a) “Code” means the Labor Code of the Philippines instituted under Presidential Decree numbered four hundred forty-two, as amended.

(b) “Commission” means the Employees’ Compensation Commission created under this Title.

(c) “SSS” means the Social Security System created under Republic Act numbered eleven hundred sixty-one, as amended.

(d) “GSIS” means the Government Service Insurance System created under Commonwealth Act Numbered one hundred eighty-six, as amended.

(e) “System” means the SSS or GSIS, as the case may be.

(f) “Employer” means any person, natural or juridical, employing the services of the employee.

(g) “Employee” means any person compulsorily covered by the GSIS under Commonwealth Act numbered one hundred eighty-six, as amended, including members of the Armed Forces of the Philippines, and any person employed as casual, emergency, temporary, substitute or contractual; or any person compulsorily covered by the SSS under Republic Act numbered eleven hundred sixty-one, as amended.

(h) “Person” means any individual, partnership, firm, association, trust, corporation or legal representative thereof.

(i) “Dependents” means the legitimate, legitimated, legally adopted or acknowledged natural child who is unmarried, not gainfully employed, and not over 21 years of age or over 21 years of age provided he is incapable of self-support due to a physical or mental defect which is congenital or acquired during minority; the legitimate spouse living with the employee; and the parents of said employee wholly dependent upon him for regular support.

(j) “Beneficiaries” means the dependent spouse until he remarries and dependent children, who are the primary beneficiaries. In their absence, the dependent parents and, subject to the restrictions imposed on dependent children, the illegitimate children and legitimate descendants, who are the secondary beneficiaries: Provided, that the dependent acknowledged natural child shall be considered as a primary beneficiary when there are no other dependent children who are qualified and eligible for monthly income benefit.

(k) “Injury” means any harmful change in the human organism from any accident arising out of and in the course of employment.

(l) “Sickness” means illness definitely accepted as an occupational disease listed by the Commission, or any illness caused by employment, subject to proof that the risk of contracting the same is increased by working conditions. For this purpose, the Commission is empowered to determine and approve occupational diseases and work-related illnesses that may be considered compensable based on peculiar hazards of employment.

(m) “Death” means loss of life resulting from injury or sickness.

(n) “Disability” means loss or impairment of a physical or mental function resulting from injury or sickness.

(o) “Compensation” means all payments made under this Title for income benefits and medical or related benefits.

(p) “Income benefit” means all payments made under this Title to the employee or his dependents.

(q) “Medical benefit” means all payments made under this Title to the providers of medical care, rehabilitation services and hospital care.

(r) “Related benefit” means all payments made under this Title for appliances and supplies.

(s) “Appliances” means crutches, artificial aids and other similar devices.

(t) “Supplies” means medicine and other medical, dental or surgical items.

(u) “Hospital” means any medical facility, government or private, authorized by law, an active member of good standing of the Philippine Hospital Association and accredited by the Commission.

(v) “Physician” means any doctor of medicine duly licensed to practice in the Philippines, an active member of good standing of the Philippine Medical Association and accredited by the Commission.

(w) “Wages” or “salary” means all actual remuneration for employment received during the month, except that part in excess of three thousand pesos.

(x) “Monthly salary credit” means the wage or salary base for contributions as provided in Republic Act numbered eleven hundred sixty-one, as amended, or the wages or salary.

(y) “Average monthly salary credit” in the case of the SSS means the result obtained by dividing the sum of the monthly salary credit in the sixty-month period immediately preceding the semester of death or permanent disability by sixty, except where the month of death or permanent disability fails within eighteen calendar months from the month of coverage, in which case it is the result obtained by dividing the sum of all monthly salary credits paid prior to the amount of the contingency by the total number of calendar months of coverage in the same period.

(z) “Average daily salary credit” in the case of the SSS means the result obtained by dividing the sum of the six highest monthly salary credits in the twelve-month period immediately preceding the semester of sickness or injury by one hundred eighty, except where the month of injury falls within twelve calendar months from the first month of coverage, in which case it is the result obtained by dividing the sum of all monthly salary credits by thirty times the number of calendar months of coverage in the same period.

In the case of the GSIS, the average daily salary credit shall be the actual daily salary or wage or the monthly salary or wage divided by the actual number of working days in the month of contingency.

(aa) “Quarter” means a period of three consecutive months ending on the last day of March, June, September and December.

(bb) “Semester” means a period of two consecutive quarters ending in the quarter of death, permanent disability, injury or sickness.

(cc) “Replacement ratio.” The sum of twenty percent and the quotient obtained by dividing three hundred by the sum of three hundred forty and the average monthly salary credit.

(dd) “Credited years of service”. For a member covered prior to January 1975, nineteen hundred seventy five minus the calendar year of coverage, plus the number of calendar years in which six or more contributions have been paid from January 1975 up to the calendar year containing the semester prior to the contingency. For a member covered in or after January 1975, the number of calendar years in which six or more contributions have been paid from the year of coverage up to the calendar year containing the semester prior to the contingency.

(ee) “Monthly income benefit.” Means the amount equivalent to one hundred fifteen percent of the sum of:

The average monthly salary credit multiplied by the replacement ratio; and

One and a half percent of the average monthly salary credit for each credited year of service in excess of ten years: Provided, That the monthly income benefit shall in no case be less than two hundred fifty pesos.

Chapter 2
COVERAGE AND LIABILITY

Article 168. Compulsory coverage. Coverage in the State Insurance Fund shall be compulsory upon all employers and their employees not over sixty years of age: Provided, That an employee who is over sixty years of age and paying contributions to qualify for the retirement or life insurance benefit administered by the System shall be subject to compulsory coverage.

Article 169. Foreign employment. The Commission shall ensure adequate coverage of Filipino employees employed abroad, subject to regulations as it may prescribe.

Article 170. Effective date of coverage. Compulsory coverage of the employer during the effectivity of this Title shall take effect on the first day of his operation, and that of the employee on the date of his employment.

Article 171. Registration . Each employer and his employees shall register with the System in accordance with its regulations.

Article 172. Limitation of liability. The State Insurance Fund shall be liable for compensation to the employee or his dependents, except when the disability or death was occasioned by the employee’s intoxication, willful intention to injure or kill himself or another, notorious negligence, or otherwise provided under this Title.

Article 173. Extent of liability. Unless otherwise provided, the liability of the State Insurance Fund under this Title shall be exclusive and in place of all other liabilities of the employer to the employee, his dependents or anyone otherwise entitled to receive damages on behalf of the employee or his dependents. The payment of compensation under this Title shall not bar the recovery of benefits as provided for in Section 699 of the Revised Administrative Code, Republic Act numbered eleven hundred sixty-one, as amended, Commonwealth Act numbered one hundred eighty-six, as amended, Republic Act numbered sixty-hundred eleven, as amended, Republic Act numbered six hundred ten, as amended, Republic Act numbered forty-eight hundred sixty-four, as amended and other laws whose benefits are administered by the System or by other agencies of the government.

Article 174. Liability of third parties. (a) When the disability or death is caused by circumstances creating a legal liability against a third party, the disabled employee or the dependent in case of his death shall be paid by the System under this Title. In case benefit is paid under this Title, the System shall be subrogated to the rights of the disabled employee or the dependents in case of his death, in accordance with the general law.

(b) Where the System recovers from such third party damages in excess of those paid or allowed under this Title, such excess shall be delivered to the disabled employee or other persons entitled thereto, after deducting the cost of proceedings and expenses of the System.

Article 175. Deprivation of benefits. Except as otherwise provided under this Title, no contract, regulation or device whatsoever shall operate to deprive the employee or his dependents of any part of the income benefits and medical or related services granted under this Title. Existing medical services being provided by the employer shall be maintained and continued to be enjoyed by their employees.

Chapter 3
ADMINISTRATION

Article 176. Employees Compensation Commission. (a) To initiate, rationalize and coordinate the policies of the employees’ compensation program, the Employees’ Compensation Commission is hereby created to be composed of five (5) ex-officio members: the Secretary of Labor and Employment as Chairman, the Executive Director of the ECC, the GSIS General Manager, the SSS Administrator, the Chairman of the Philippine Medical Care Commission and two appointive members, one of whom shall represent the employees and other employers, to be appointed by the President of the Philippines for a term of six years. The appointive member shall have at least five years experience in workmen’s compensation or social security program. All vacancies shall be filled for the unexpired term only.

(b) The Vice-Chairman of the Commission shall be alternated each year between the GSIS General Manager and the SSS administrator. The presence of four members shall constitute a quorum. Each member shall receive a per diem of two hundred pesos for every meeting that is actually attended by him, exclusive of actual, ordinary and necessary travel and representation expenses. In his absence, any member may designate an official of the institution he serves on full-time basis as his representative to act in his behalf.

(c) The general conduct of the operations and management functions of the GSIS or SSS under this Title shall be vested in its respective chief executive officer, who shall be immediately responsible for carrying out the policies of the Commission.

(d) The Commission shall have the status and category of a government corporation, and it is hereby deemed attached to the Department of Labor and Employment for policy coordination and guidance.

Article 177. Powers and duties. The Commission shall have the following powers and duties:

(a) To assess and fix a rate of contribution from all employers;

(b) To determine the rate of contribution payable by an employer whose records show a high frequency of work accidents or occupational diseases due to failure by the said employer to observe adequate safety measures;

(c) To approve rules and regulations governing the processing of claims and the settlement of disputes arising therefrom as prescribed by the System;

(d) To initiate policies and programs toward adequate occupational health and safety and accident prevention in the working environment, rehabilitation other than those provided for under Art. 190 hereof, and other related programs and activities, and to appropriate funds therefor;

(e) To make the necessary actuarial studies and calculations concerning the grant of constant help and income benefits for permanent disability or death, and the rationalization of the benefits for permanent disability and death under the Title with benefits payable by the System for similar contingencies: Provided, That the Commission may upgrade benefits and add new ones, subject to approval of the President; and Provided, further, That the actuarial stability of the State Insurance Fund shall be guaranteed: Provided, finally, that such increases in benefits shall not require any increases in contribution, except as provided for in paragraph (b) hereof.

(f) To appoint the personnel of its staff, subject to civil service law and rules, but exempt from WAPCO law and regulations;

(g) To adopt annually a budget of expenditures of the Commission and its staff chargeable against the State Insurance Funds: Provided, That the SSS and GSIS shall advance on a quarterly basis the remittances of allotment of the loading fund for this Commissioner’s operational expenses based on its annual budget as duly approved by the Department of the Budget and Management.

(h) To have the power to administer oath and affirmation, and to issue subpoena and subpoena duces tecum in connection with any question or issue arising from appealed cases under this Title;

(i) To sue and be sued in court;

(j) To acquire property, real or personal, which may be necessary or expedient for the attainment of the purposes of this Title;

(k) To enter into agreements or contracts for such service and aid as may be needed for the proper, efficient and stable administration of the program; and

(l) To perform such other acts as it may deem appropriate for the attainment of the purposes of the Commission and proper enforcement of the provisions of this Title.

Article 178. Management of funds. All revenues collected by the System under this Title shall be deposited, invested, administered and disbursed in the same manner and under the same conditions, requirements and safeguards as provided by Republic Act numbered eleven hundred sixty-one, as amended, and Commonwealth Act numbered one hundred eighty-six, as amended, with regard to such other funds as are thereunder being paid to or collected by the SSS and GSIS, respectively: Provided, That the Commission, SSS and GSIS may disburse each year not more than 12 per cent of the contributions and investment earnings collected for operational expenses, including occupational health and safety programs, incidental to the carrying out of this Title.

Article 179. Investment of funds. Provisions of existing laws to the contrary notwithstanding, all revenues as are not needed to meet current operational expenses under this Title shall be accumulated in a fund to be known as the State Insurance Fund, which shall be used exclusively for payment of the benefits under this Title, and no amount thereof shall be used for any other purpose. All amounts accruing to the State Insurance Fund, which is hereby established in the SSS and the GSIS, respectively, shall be deposited with any authorized depository bank approved by the Commission, or invested with due and prudent regard for the liquidity needs of the System.

Article 180. Settlement of claims. The System shall have original and exclusive jurisdiction to settle any dispute arising from this Title with respect to coverage, entitlement to benefits, collection and payment of contributions and penalties thereon, or any other matter related thereto, subject to appeal to the Commission, which shall decide appealed cases within 20 working days from the submission of the evidence.

Article 181. Review. Decisions, orders or resolutions of the Commission may be reviewed on certiorari by the Supreme Court only on questions of law upon petition of an aggrieved party within 10 days from notice thereof.

Article 182. Enforcement of decisions. (a) Any decision, order or resolution of the Commission shall become final and executory if no appeal is taken therefrom within 10 days from notice thereof. All awards granted by the Commission in cases appealed from decisions of the System shall be effected within 15 days from receipt of notice.

(b) In all other cases, decisions, orders and resolutions of the Commission which have become final and executory shall be enforced and executed in the same manner as decisions of the Regional Trial Court, and the Commission shall have the power to issue to the city or provincial sheriff or to the sheriff whom it may appoint such writs of execution as may be necessary for the enforcement of such decisions, orders or resolutions, and any person who shall fail or refuse to comply therewith shall, upon application by the Commission, be punished by the proper court for contempt.

Chapter 4
CONTRIBUTIONS

Article 183. Employer’s contributions. (a) Under such regulations as the System may prescribe, beginning as of the last day of the month when an employee’s compulsory coverage takes effect and every month thereafter during his employment his employer shall prepare to remit to the System a contribution equivalent to one percent of his monthly salary credit.

(b) The rate of contribution shall be reviewed periodically and, subject to the limitations herein provided, may be revised as the experience in risk, cost of administration, and actual or anticipated as well as unexpected losses, may require.

(c) Contributions under this Title shall be paid in their entirety by the employer and any contract or devise for the deduction of any portion thereof from the wages or salaries of the employees shall be null and void.

(d) When a covered employee dies, becomes disabled or is separated from employment, his obligation to pay the monthly contribution arising from the employment shall cease at the end of the month of contingency and during such months that he is not receiving wages or salary.

Article 184. Government guarantee. The Republic of the Philippines guarantees the benefits prescribed under this Title, and accepts general responsibility for the solvency of the State Insurance Fund. In case of any deficiency, the same shall be covered by supplemental appropriations from the national government.

Chapter 5
MEDICAL BENEFITS

Article 185. Medical services. Immediately after an employee contracts sickness or sustains an injury, he shall be provided by the System during the subsequent period of his disability with such medical services and appliances as the nature of his sickness or injury and progress of his recovery may require, subject to the expense limitation prescribed by the Commission.

Article 186. Liability. The System shall have the authority to choose or order a change of physician, hospital or rehabilitation facility for the employee, and shall not be liable for compensation for any aggravation of the employee’s injury or sickness resulting from unauthorized changes by the employee of medical services, appliances, supplies, hospitals, rehabilitation facilities or physicians.

Article 187. Attending physician. Any physician attending an injured or sick employee shall comply with all the regulations of the System and submit reports in prescribed forms at such time as may be required concerning his condition or treatment. All medical information relevant to the particular injury or sickness shall on demand be made available to the employee or the System. No information developed in connection with treatment or examination for which compensation sought shall be considered as privileged communication.

Article 188. Refusal of examination or treatment. If the employee unreasonably refuses to submit to medical examination or treatment the System shall stop the payment of further compensation during such time as such refusal continues. What constitutes an unreasonable refusal shall be determined by the System which, may on its own initiative determine the necessity, character, and sufficiency of any medical services furnished or to be furnished.

Article 189. Fees and other charges. All fees and other charges for hospital services, medical care and appliances, excluding professional fees, shall not be higher than those prevailing in wards of hospitals for similar services to injured or sick persons in general, and shall be subject to the regulations of the Commission. Professional fees shall only be appreciably higher than those prescribed under Republic Act number sixty-one hundred eleven, as amended, otherwise known as the Philippine Medical Care Act of 1969.

Article 190. Rehabilitation services. (a) The System shall, as soon as practicable, establish a continuing program for the rehabilitation of injured and handicapped employees, who shall be entitled to rehabilitation services, which shall consist of medical, surgical or hospital treatment, including appliances if he has been handicapped by the injury, to help him become physically independent.

(b) As soon as practicable, the System shall establish centers equipped and staffed to provide a balanced program of remedial treatment, vocational assessment and preparation designed to meet the individual needs of each handicapped employee to restore him to suitable employment, including assistance as may be within its resources to help each rehabilitee to develop his mental, vocational or social potential.

Chapter 6
DISABILITY BENEFITS

Article 191. Temporary total disability. (a) Under such regulations as the Commission may approve, any employee under this Title who sustains an injury or contracts sickness resulting in temporary total disability shall for each day of such a disability or fraction thereof be paid by the System an income benefit equivalent to 90 percent of his average daily salary credit, subject to the following conditions; the daily income benefit shall not be less than four pesos, nor more than twenty five pesos, nor paid for a continuous period longer than one hundred twenty days, and the System shall not be notified of the injury or sickness.

(b) The payment of such income benefit shall be in accordance with the regulations of the Commission.

Article 192. Permanent total disability. (a) Under such regulations as the Commission may approve, any employee under this Title who contracts sickness or sustains an injury resulting in his permanent total disability shall, for each month until his death, be paid by the System during such a disability, an amount equivalent to the monthly income benefit, plus ten percent thereof for each dependent child, but not exceeding five, beginning with the youngest and without substitution: Provided, That the monthly income benefit shall be the new amount of the monthly benefit for all covered pensioners, effective upon approval of this Decree.

(b) The monthly income benefit shall be guaranteed for five years, and shall be suspended if the employee is gainfully employed or recovers from his permanent total disability or fails to present himself for examination at least once a year upon notice by the System, except as otherwise provided for in other laws, decrees, orders or Letters of Instructions.

(c) The following disabilities shall be deemed total and permanent:

(1) Temporary total disability lasting continuously for more than one hundred twenty days except as otherwise provided for in the Rules;

(2) Complete loss of sight of both eyes;

(3) Loss of two limbs at or above the ankle or wrist;

(4) Permanent complete paralysis of two limbs;

(5) Brain injury resulting in incurable imbecility or insanity; and

(6) Such cases as determined by the Medical Director of the System and approve by the Commission.

(d) The number of months of paid coverage shall be defined and approximated by a formula to be approved by the Commission.

Article 193. Permanent partial disability. (a) Under such regulations as the Commission may approve, any employee under this Title who contracts sickness or sustains an injury resulting in permanent partial disability shall for each month not exceeding the period designated herein, be paid by the System during such disability an income benefit equivalent to the income benefit for permanent total disability.

(b) The benefit shall be paid for not more than the period designated in the following schedule:

One index finger8
One thumb10
One middle finger6
One ring finger5
One little finger3
One big toe6
Any toe3
One arm50
One hand39
One foot31
One leg46
One ear10
Both ears20
Hearing of one ear10
Hearing of both ears50
Sight of one eye25

(c) A loss of a wrist shall be considered as a loss of the hand, and a loss of an elbow shall be considered as a loss of the arm. A loss of an ankle shall be considered as a loss of the foot, and a loss of a knee shall be considered as a loss of the leg. A loss of more than one joint shall be considered as a loss of the whole finger or toe, and a loss of only the first joint shall be considered as a loss of one-half of the whole finger or toe: Provided, that such a loss shall be either the functional loss of the use or physical loss of the member.

(d) In cases of permanent partial disability less than the total loss of the member specified in the preceding paragraph, the same monthly income benefit shall be paid for a portion of the period established for the total loss of the member in accordance with the proportion that the partial loss bears to the total loss. If the result is a decimal fraction, the same shall be rounded off to the next higher integer.

(e) In cases of simultaneous loss of more than one member or a part thereof as specified in this Article, the same monthly income benefit shall be paid for a period equivalent to the sum of the periods established for the loss of the member or a part thereof. If the result is a decimal fraction, the same shall be rounded off to the next higher integer.

(f) In cases of injuries or illnesses resulting in a permanent partial disability not listed in the preceding schedule, the benefit shall be an income benefit equivalent to the percentage of the permanent loss of the capacity for work.

(g) Under such regulations as the Commission may approve, the income benefit payable in case of permanent partial disability may be paid in monthly pension or in lump sum if the period covered does not exceed one year.

Chapter 7
DEATH BENEFITS

Article 194. Death. (a) Under such regulations as the Commission may approve, the System shall pay to the primary beneficiaries upon the death of the covered employee under this Title an amount equivalent to his monthly income benefit, plus 10 percent thereof for each dependent child, but not exceeding five, beginning with the youngest and without substitution except as provided for in paragraph (i) on Article 167 hereof: Provided, however, That the monthly income benefit shall be guaranteed for five years: Provided, further, That if he has no primary beneficiary, the System shall pay to his secondary beneficiaries the monthly income benefit but not to exceed 60 months: Provided, finally, That the minimum death benefit shall not be less than fifteen thousand pesos.

(b) Under such regulations as the Commission may approve, the System shall pay to the primary beneficiaries upon the death of a covered employee who is under permanent total disability under this Title, eighty percent of the monthly income benefit and his dependents to the dependent’s pension: Provided, That the marriage must have been validly subsisting at the time of disability: Provided, further, That if he has no primary beneficiary, the System shall pay to his secondary beneficiaries the monthly pension excluding the dependent pension, of the remaining balance of the five-year guaranteed period: Provided, finally, That the minimum death benefit shall not be less than fifteen thousand pesos.

(c) The monthly income benefit provided herein shall be the new amount of the monthly income benefit for the surviving beneficiaries upon the approval of this decree.

(d) Funeral benefit. A funeral benefit of one thousand five hundred pesos be paid upon the death of a covered employee or permanently totally disabled pensioner.

Chapter 8
PROVISIONS COMMON TO INCOME BENEFITS

Article 195. Relationship and dependency. All questions of relationship and dependency shall be determined as of the time of death.

Article 196. Delinquent contributions. (a) An employer who is delinquent in his contributions shall be liable to the System for the benefits which may have been paid by the System to his employees or their dependents and any benefit and expenses to which such employer is liable shall constitute a lien on all his property, real or personal, which is hereby declared to be preferred to any credit except taxes. The payment by the employer of the lump sum equivalent of such liability shall absolve him from the payment of the delinquent contributions and penalty thereon with respect to the employee concerned.

(b) Failure or refusal of the employer to pay or remit the contributions herein prescribed shall not prejudice the right of the employee or his dependents to the benefits under this Title. If the sickness, injury, disability or death occurs before the System receives any report of the name of his employee, the employer shall be liable to the System for the lump sum equivalent of the benefits to which such employee or his dependents may be entitled.

Article 197. Second injuries. If any employee under permanent partial disability suffers another injury which results in a compensable disability greater than the previous injury, the State Insurance Fund shall be liable for the income benefit of the new disability: Provided, That if the new disability is related to the previous disability, the System shall be liable only for the difference in income benefits.

Article 198. Assignment of benefits. No claim for compensation under this Title is transferable, or liable to tax, attachment, garnishment, levy or seizure by or under any legal process whatsoever, either before or after receipt by the person or persons entitled thereto, except to pay any debt of the employee to the System.

Article 199. Earned benefits. Income benefits shall, with respect to any period of disability, be payable in accordance with this Title to an employee who is entitled to receive wages, salaries or allowances for holidays, vacation or sick leaves, and any award or benefit under a collective bargaining or other agreement.

Article 200. Safety devices. In case the employee’s injury or death was due to the failure of the employer to comply with any law, or to install and maintain safety devices, or take other precautions for the prevention of injury, said employer shall pay to the State Insurance Fund a penalty of 25 per cent of the lump sum equivalent of the income benefit payable by the System to the employee. All employers, especially those who should have been paying a rate of contribution higher than that required of them under this Title, are enjoined to undertake and strengthen measures for the occupational health and safety of their employees.

Article 201. Prescriptive period. No claim for compensation shall be given due course unless said claim is filed with the System within three years from the time the cause of action accrued.

Article 202. Erroneous payment. (a) If the System in good faith pay income benefit to a dependent who is inferior in right to another dependent or with whom another dependent is entitled to share, such payment shall discharge the System from liability, unless and until such other dependent notifies the System of his claim prior to the payment.

(b) In case of doubt as to the respective rights of rival claimants, the System is hereby empowered to determine as to whom payment should be made in accordance with such regulations as the Commission may approve. If the money is payable to a minor or incompetent, payment shall be made by the System to such person or persons as it may consider to be best qualified to take care and dispose of the minor’s or incompetent’s property for his benefit.

Article 203. Prohibition. No agent, attorney or other person pursuing or in charge of the preparation or filing of any claim for benefit under this Title shall demand or charge for his services any fee, and any stipulation to the contrary shall be null and void. The retention or deduction of any amount from any benefit granted under this Title for the payment of fees of such services is prohibited. Violation of any provision of this Article shall be punished by a fine of not less than five hundred pesos nor more than five thousand pesos, or imprisonment for not less than six months nor more than one year, or both, at the discretion of the court.

Article 204. Exemption from levy, tax, etc. All laws to the contrary notwithstanding, the State Insurance Fund and all its assets shall be exempt from any tax, fee, charge, levy or customs or import duty, and no law hereafter enacted shall apply to the State Insurance Fund unless it is provided therein that the same is applicable by expressly stating its name.

Chapter 9
RECORDS, REPORTS AND PENAL PROVISIONS

Article 205. Records of death or disability. (a) All employers shall keep a logbook to record chronologically the sickness, injury or death of their employees, setting forth therein their names, dates and places of the contingency, nature of the contingency and absences. Entries in the logbook shall be made within five days from notice or knowledge of the occurrence of the contingency. Within five days after the entry in the logbook, the employer shall report to the System only those contingencies it deems to be work connected.

(b) All entries in the employer’s logbook shall be made by the employer or any of his authorized official after verification of the contingencies or the employee’s absences for a period of a day or more. Upon request by the System, the employer shall furnish the necessary certificate regarding information about any contingency appearing in the logbook, citing the entry number, page number and date. Such logbook shall be made available for inspection to the duly authorized representative of the System.

(c) Should any employer fail to record in the logbook an actual sickness, injury or death of any of his employees within the period prescribed herein, give false information or withhold material information already in his possession, he shall be held liable for 50 per cent of the lump sum equivalent of the income benefit to which the employee may be found to be entitled, the payment of which shall accrue to the State Insurance Fund.

(d) In case of payment of benefits for any claim which is later determined to be fraudulent and the employer is found to be a party to the fraud, such employer shall reimburse the System the full amount of the compensation paid.

Article 206. Notice of sickness, injury or death. Notice of sickness, injury or death shall be given to the employer by the employee or by his dependents or anybody on his behalf within five days from the occurrence of the contingency. No notice to the employer shall be required if the contingency is known to the employer or his agents or representatives.

Article 207. Penal provisions. (a) The penal provisions of Republic Act numbered eleven hundred sixty-one, as amended, and Commonwealth Act numbered one hundred eighty-six, as amended, with regard to the funds as are thereunder being paid to, collected or disbursed by the System, shall be applicable to the collection, administration and disbursement of the funds under this Title.

(b) Any person, who for the purpose of securing entitlement to any benefit or payment under this Title or the issuance of any certificate or document for any purpose connected with this Title, whether for him or for some other person, commits fraud, collusion, falsification, misrepresentation of facts or any other kind of anomaly shall be punished with a fine of not less than five hundred pesos nor more than five thousand pesos and an imprisonment for not less than six months nor more than one year, at the discretion of the court.

(c) If the act penalized by this Article is committed by any person who has been or is employed by the Commission or System, or a recidivist, the imprisonment shall not be less than one year; if committed by a lawyer, physician or other professional, he shall in addition to the penalty prescribed herein be disqualified from the practice of his profession; and if committed by an official, employee or personnel of the Commission, System or any government agency, he shall in addition to the penalty prescribed herein be dismissed with prejudice to reemployment in the government service.

Article 208. Applicability. This Title shall apply only to injury, sickness, disability or death occurring on or after January 1, 1975.

Article 208-A. Repeal of Laws. All existing laws, Presidential Decrees and Letters of Instructions which are inconsistent with or contrary to this Decree, are hereby repealed: Provided, That in the case of the GSIS, conditions for entitlement to benefits shall be governed by the Labor Code, as amended: Provided, however, That the formulas for computation of benefits, as well as the contribution base, shall be those provided for under Commonwealth Act numbered one hundred eighty-six, as amended by Presidential Decree No. 1146, plus 20 per cent thereof.

Title III
Medicare

Article 209. Medical care. The Philippine Medical Care Plan shall be implemented as provided under Republic Act numbered sixty-one hundred eleven, as amended.

Title IV
Adult Education

Article 210. Adult education. Every employer shall render assistance in the establishment and operation of adult education programs for their workers and employees as prescribed by regulations jointly approved by the Department of Labor and Employment and the Department of Education, Culture and Sports.

Book Five
LABOR RELATIONS

Title I
Policy and Definitions

Chapter 1
POLICY

Article 211. Declaration of policy. A. It is the policy of the State:

(a) To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration, mediation and conciliation, as modes of setting labor or industrial disputes;

(b) To promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social justice and development;

(c) To foster the free and voluntary organization of a strong and united labor movement;

(d) To promote the enlightenment of workers concerning their rights and obligations as union members and as employees;

(e) To provide an adequate administrative machinery for the expeditious settlement of labor or industrial disputes;

(f) To ensure a stable but dynamic and just industrial peace; and

(g) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare.

B. To encourage a truly democratic method of regulating the relations between the employers and employees by means of agreements freely entered into through collective bargaining, no court or administrative agency or official shall have the power to set or fix wages, rates of pay, hours of work or other terms and conditions of employment, except as otherwise provided under this Code.

Chapter 2
DEFINITIONS

Article 212. Definitions. (a) “Commission” means the National Labor Relations Commission or any of its divisions, as the case may be, as provided under this Code.

(b) “Bureau” means the Bureau of Labor Relations and/or the Labor Relations Divisions in the regional offices established under Presidential Decree No. 1, in the Department of Labor.

(c) “Board” means the National Conciliation and Mediation Board established under Executive Order No. 126.

(d) “Council” means the Tripartite Voluntary Arbitration Advisory Council established under Executive Order No. 126, as amended.

(e) “Employer” includes any person acting in the interest of an employer, directly or indirectly. The term shall not include any labor organization or any of its officers or agents except when acting as employer.

(f) “Employee” includes any person in the employ of an employer. The term shall not be limited to the employees of a particular employer, unless this Code so explicitly states. It shall include any individual whose work has ceased as a result of or in connection with any current labor dispute or because of any unfair labor practice if he has not obtained any other substantially equivalent and regular employment.

(g) “Labor organization” means any union or association of employees which exists in whole or in part for the purpose of collective bargaining or of dealing with employers concerning terms and conditions of employment.

(h) “Legitimate labor organization” means any labor organization duly registered with the Department of Labor and Employment, and includes any branch or local thereof.

(i) “Company union” means any labor organization whose formation, function or administration has been assisted by any act defined as unfair labor practice by this Code.

(j) “Bargaining representative” means a legitimate labor organization or any officer or agent of such organization whether or not employed by the employer.

(k) “Unfair labor practice” means any unfair labor practice as expressly defined by this Code.

(l) “Labor dispute” includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee.

(m) “Managerial employee” is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees. Supervisory employees are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment. All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of this Book.

(n) “Voluntary Arbitrator” means any person accredited by the Board as such, or any person named or designated in the collective bargaining agreement by the parties to act as their voluntary arbitrator, or one chosen, with or without the assistance of the National Conciliation and Mediation Board, pursuant to a selection procedure agreed upon in the collective bargaining agreement, or any official that may be authorized by the Secretary of Labor and Employment to act as voluntary arbitrator upon the written request and agreement of the parties to a labor dispute.

(o) “Strike” means any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute.

(p) “Lockout” means the temporary refusal of an employer to furnish work as a result of an industrial or labor dispute.

(q) “Internal union dispute” includes all disputes or grievances arising from any violation of or disagreement over any provision of the constitution and by-laws of a union, including any violation of the rights and conditions of union membership provided for in this Code.

(r) “Strike breaker” means any person who obstructs, impedes, or interferes with by force, violence, coersion, threats or intimidation any peaceful picketing by employees during any labor controversy affecting wages, hours or conditions of work or in the exercise of the right of self-organization or collective bargaining.

(s) “Strike area” means the establishment, warehouses, depots, plants or offices, including the sites or premises used as run-away shops, of the employer struck against, as well as the immediate vicinity actually used by picketing strikers in moving to and for. before all points of entrance to and exit from said establishment. (As amended by RA 6715)

Title II
National Labor Relations Commission

Chapter 1
CREATION AND COMPOSITION

Article 213. National Labor Relations Commission. There shall be a National Labor Relations Commission which shall be attached to the Department of Labor and Employment for program and policy coordination only, composed of a Chairman and fourteen (14) members.

Five (5) members each shall be chosen from among the nominees of the workers and employers organizations, respectively. The Chairman and the four (4) remaining members shall come from the public sector, with the latter to be chosen from among the recommendees of the Secretary of Labor and Employment.

Upon assumption into office, the members nominated by the workers and employers organizations shall divest themselves of any affiliation with or interest in the federation or association to which they belong.

The Commission may sit en banc or in five (5) divisions, each composed of three (3) members. The Commission shall sit en banc only for purposes of promulgating rules and regulations governing the hearing and disposition of cases before any of its divisions and regional branches and formulating policies affecting its administration and operations. The Commission shall exercise its adjudicatory and all other powers, functions, and duties through its divisions. Of the five (5) divisions, the first and second divisions shall handle cases coming from the National Capital Region and the third, fourth and fifth divisions, cases from other parts of Luzon, from the Visayas and Mindanao, respectively. The divisions of the Commission shall have exclusive appellate jurisdiction over cases within their respective territorial jurisdiction.

The concurrence of two (2) Commissioners of a division shall be necessary for the pronouncement of a judgment or resolution. Whenever the required membership in a division is not complete and the concurrence of two (2) Commissioners to arrive at a judgment or resolution cannot be obtained, the Chairman shall designate such number of additional Commissioners from the other divisions as may be necessary.

The conclusions of a division on any case submitted to it for decision shall be reached in consultation before the case is assigned to a member for the writing of the opinion. It shall be mandatory for the division to meet for purposes of the consultation ordained therein. A certification to this effect signed by the Presiding Commissioner of the division shall be issued, and a copy thereof attached to the record of the case and served upon the parties.

The Chairman shall be the Presiding Commissioner of the first division, and the four (4) other members from the public sector shall be the Presiding Commissioners of the second, third, fourth and fifth divisions, respectively. In case of the effective absence or incapacity of the Chairman, the Presiding Commissioner of the second division shall be the Acting Chairman.

The Chairman, aided by the Executive Clerk of the Commission, shall have administrative supervision over the Commission and its regional branches and all its personnel, including the Executive Labor Arbiters and Labor Arbiters.

The Commission, when sitting en banc, shall be assisted by the same Executive Clerk, and, when acting thru its divisions, by said Executive Clerk for its first division and four (4) other Deputy Executive Clerks for the second, third, fourth and fifth divisions, respectively, in the performance of such similar or equivalent functions and duties as are discharged by the Clerk of Court and Deputy Clerks of Court of the Court of Appeals. (As amended by RA 6715)

Article 214. Headquarters, branches and provincial extension units. The Commission and its first, second, and third divisions shall have their main offices in Metropolitan Manila, and the fourth and fifth divisions in the cities of Cebu and Cagayan de Oro, respectively. The Commission shall establish as many regional branches as there are regional offices of the Department of Labor and Employment, sub-regional branches or provincial extension units. There shall be as many labor arbiters as may be necessary for the effective and efficient operation of the Commission. Each regional branch shall be headed by an Executive Labor Arbiter. (As amended by RA 6715)

Article 215. Appointment and qualifications. The Chairmans and other Commissioners shall be members of the Philippine Bar and must have been engaged in the practice of law in the Philippines for at least fifteen (15) years, with at least five (5) years experience or exposure in the field of labor-management relations, and shall preferably be residents of the region where they are to hold office. The Executive Labor Arbiters and Labor Arbiters shall likewise be members of the Philippine Bar and must have been engaged in the practice of law in the Philippines for at least seven (7) years, with at least three (3) years experience or exposure in the field of labor-management relations: Provided, however, that incumbent Executive Labor Arbiters and Labor Arbiters who have been engaged in the practice of law for at least five (5) years may be considered as already qualified for purposes of reappointment as such under this Act.

The Chairman and the other Commissioners, the Executive Labor Arbiters and Labor Arbiters shall hold office during good behavior until they reach the age of sixty-five (65) years, unless sooner removed for cause as provided by law or become incapacitated to discharge the duties of their office.

The Chairman, the Division Presiding Commissioners and other Commissioners shall all be appointed by the President, subject to confirmation by the Commission on Appointments. Appointment to any vacancy shall come from the nominees of the sector which nominated the predecessor. The Executive Labor Arbiters and Labor Arbiters shall also be appointed by the President, upon recommendation of the Secretary of Labor and Employment, and shall be subject to the Civil Service Law, rules and regulations.

The Secretary of Labor and Employment shall, in consultation with the Chairman of the Commission, appoint the staff and employees of the Commission, and its regional branches as the needs of the service may require, subject to the Civil Service Law, rules and regulations, and upgrade their current salaries, benefits and other emoluments in accordance with law. (As amended by RA 6715)

Article 216. Salaries, benefits and other emoluments. The Chairman and members of the Commission shall receive an annual salary at least equivalent to, and be entitled to the same allowances and benefits as, those of the Presiding Justice and Associate Justices of the Court of Appeals, respectively. The Executive Labor Arbiters shall receive an annual salary at least equivalent to that of an Assistance Regional Director of the Department of Labor and Employment and shall be entitled to the same allowances and benefits as that of a Regional Director of said department. The Labor Arbiters shall receive an annual salary at least equivalent to, and be entitled to the same allowances and benefits as, that of an Assistant Regional Director of the Department of Labor and Employment. In no case, however, shall be the provision of this Article result in the diminution of existing salaries, allowances and benefits of the aforementioned officials. (As amended by RA 6715)

Chapter 2
POWERS AND DUTIES

Article 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:

(1) Unfair labor practice cases;

(2) Termination disputes;

(3) If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rate of pay, hours of work and other terms and conditions of employment;

(4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations;

(5) Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and

(6) Except claims for employees compensation, social security, medicare and maternity benefits, all other claims arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00), whether or not accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

(c) Cases arising from the interpretation or implementation of collective bargaining agreements and those arising from the interpretation or enforcement of company personnel policies shall be disposed of by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said agreements. (As amended by RA 6715)

Article 218. Powers of the Commission. The Commission shall have the power and authority:

(a) To promulgate rules and regulations governing the hearing and disposition of cases before it and its regional branches, as well as those pertaining to its internal functions and such rules and regulations as may be necessary to carry out the purposes of this Code;

(b) To administer oaths, summon the parties to a controversy, issue subpoenas requiring the attendance and testimony of witnesses or the production of such books, papers, contracts, records, statements of accounts, agreements, and others as may be material to a just determination of the matter under investigation, and to testify in any investigation or hearing conducted in pursuance of this Code;

(c) To conduct investigation for the determination of a question, matter or controversy within its jurisdiction, proceed to hear and determine the disputes in the absence of any party thereto who has been summoned or served with notice to appear, adjourn its hearings to any time and place, refer technical matters or accounts to an expert and to accept his report as evidence after hearing of the parties upon due notice, direct parties to be joined in or excluded from the proceedings, correct, amend, or waive any error, defect or irregularity, whether in substance or in form, give all such directions as it may deem necessary or expedient in the determination of the dispute before it, and dismiss any matter or refrain from hearing further or from determining the dispute or part thereof, where it is trivial or where further proceedings by the Commission are not necessary or desirable;

(d) To hold any person in contempt direct or indirectly and impose appropriate penalties therefor in accordance with law.

A person guilty of misbehavior in the presence of or so near the Chairman or any member of the Commission or any Labor Arbiter as to obstruct or interrupt the proceedings before the same, including disrespect toward said officials, offensive personalities toward others, or refusal to be sworn or to answer as a witness, or to subscribe an affidavit or deposition when lawfully required to do so, may summarily adjudged in direct contempt by said officials and punished by fine not exceeding five hundred pesos (P500) or imprisonment not exceeding five (5) days, or both if it be the Commission or a member thereof, or by a fine not exceeding one hundred pesos (P100) or imprisonment not exceeding one (1) day, or both if it be a Labor Arbiter.

The person adjudged in direct contempt by a Labor Arbiter may appeal to the Commission and the execution of the judgment shall be suspended pending the resolution of the appeal upon the filing of subject person of a bond on condition that he will abide by and perform the judgment of the Commission should the appeal be decided against him. Judgment of the Commission on direct contempt is immediately executory and unappealable. Indirect contempt shall be dealt with by the Commission or Labor Arbiter in the manner prescribed under Rule 71 of the Revised Rules of Court; and

(e) To enjoin or restrain any actual or threatened commission of any or all prohibited or unlawful acts or to require the performance of a particular act in any labor dispute which, if not restrained or performed forthwith, may cause grave or irreparable damage to any party: Provided, That no temporary or permanent injunction in any case involving or growing out of a labor dispute as defined in this Code shall be issued except after hearing the testimony of witnesses, with opportunity for cross-examination, in support of the allegations of a complaint made under oath, and testimony in opposition thereto, if offered, and only after a finding of fact by the Commission, to the effect:

(1) That prohibited or unlawful acts have been threatened and will be committed unless restrained, or have been committed and will be continued unless restrained, but no injunction or temporary restraining order shall be issued on account of any threat, prohibited or unlawful act, except against the person or persons, association or organization making the threat or committing the prohibited or unlawful act or actually authorizing or ratifying the same after actual knowledge thereof;

(2) That substantial and irreparable injury to complainant’s property will follow;

(3) That, as to each item of relief to be granted, greater injury will be inflicted upon complainant by the denial of relief than will be inflicted upon defendants by the granting of relief;

(4) That complainant has no adequate remedy at law; and

(5) That the public officers charged with the duty to protect complainant’s property are unable or unwilling to furnish adequate protection.

Such hearing shall be held after due and personal notice thereof has been served, in such manner as the Commission shall direct, to all known persons against whom relief is sought, and also to the Chief Executive and other public officials of the province or city within which the unlawful acts have been threatened or committed charged with the duty to protect complainant’s property: Provided, however, That if a complainant shall also allege that, unless a temporary restraining order shall be issued without notice, a substantial and irreparable injury to complainant’s property will be unavoidable, such a temporary restraining order may be issued upon testimony under oath, sufficient, if sustained, to justify the Commission in issuing a temporary injunction upon hearing after notice. Such a temporary restraining order shall be effective for no longer than twenty (20) days and shall become void at the expiration of said twenty (20) days. No such temporary restraining order or temporary injunction shall be issued except on condition that complainant shall first file an undertaking with adequate security in an amount to be fixed by the Commission sufficient to recompense those enjoined for any loss, expense or damage caused by the improvident or erroneous issuance of such order or injunction, including all reasonable costs, together with a reasonable attorney’s fee, and expense of defense against the order or against the granting of any injunctive relief sought in the same proceeding and subsequently denied by the Commission.

The undertaking herein mentioned shall be understood to constitute an agreement entered into by the complainant and the surety upon which an order may be rendered in the same suit or proceeding against said complainant and surety, upon a hearing to assess damages, of which hearing complainant and surety shall have reasonable notice, the said complainant and surety submitting themselves to the jurisdiction of the Commission for that purpose. But nothing herein contained shall deprive any party having a claim or cause of action under or upon such undertaking from electing to pursue his ordinary remedy by suit at law or in equity: Provided, further, That the reception of evidence for the application of a writ of injunction may be delegated by the Commission to any of its Labor Arbiters who shall conduct such hearings in such places as he may determine to be accessible to the parties and their witnesses and shall submit thereafter his recommendation to the Commission. (As amended by RA 6715)

Article 219. Ocular inspection. The Chairman, any Commissioner, Labor Arbiter or their duly authorized representatives may at any time during working hours conduct an ocular inspection on any establishment, building, ship or vessel, place or premises, including any work, material, implement, machinery, appliance or any object therein, and ask any employee, laborer or any person as the case may be for any information or data concerning any matter or question relative to the object of the investigation.

Article 220. Compulsory Arbitrators. The Commission or any Labor Arbiter shall have the power to seek the assistance of other government officials and qualified private citizens to act as compulsory arbitrators on cases referred to them and to fix and assess the fees of such compulsory arbitrators, taking into account the nature of the case, the time consumed in hearing of the case, the professional standing of the arbitrators, the financial capacity of the parties, and the fees provided in the rules of court.

Article 221. Technical rules not binding and prior resort to amicable settlement. In any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling, and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. In any proceeding before the Commission or any Labor Arbiter, the parties may be represented by legal counsel but it shall be the duty of the Chairman, any Presiding Commissioner or Commissioner or any Labor Arbiter to exercise complete control of the proceedings at all stages.

Any provision of law to the contrary notwithstanding, the Labor Arbiter shall exert all efforts towards the amicable settlement of a labor dispute within his jurisdiction on or before the first hearing. The same rule shall apply to the Commission in the exercise of its original jurisdiction. (As amended by RA 6715)

Article 222. Appearances and fees. (a) Non-lawyers may appear before the Commissioner or any Labor Arbiter only:

1. If they represent themselves; or

2. If they represent their organization or members thereof.

(b) No attorney’s fees, negotiation fees or similar charges of any kind arising from any collective bargaining negotiations or conclusion of the collective agreement shall be imposed on any individual member of the contracting union: Provided, however, That attorney’s fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void.

Chapter 3
APPEAL

Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds:

(a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter;

(b) If the decision, order or award was secured through fraud or coercion, including graft and corruption;

(c) If made purely on questions of law; and

(d) If serious errors in the findings of facts are raised which would cause grave or irreparable damage or injury to the appellant.

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

To discourage frivolous or dilatory appeals, the Commission or the Labor Arbiter shall impose reasonable penalty, including fines or censures, upon the erring parties.

In all cases, the appellant shall furnish a copy of the memorandum of appeal to the other party who shall file an answer not later than ten (10) calendar days from receipt thereof.

The Commission shall decide all cases within twenty (20) calendar days from receipt of the answer of the appellee.

The decision of the Commission shall be final and executory after ten (10) calendar days from receipt thereof by the parties.

Any law enforcement agency may be deputized by the Secretary of Labor and Employment or the Commission in the enforcement of decisions, awards, or orders. (As amended by RA 6715)

Article 224. Execution of decisions, orders, or awards. (a) The Secretary of Labor and Employment or any Regional Director, the Commission or any Labor Arbiter or Med-Arbiter, or the voluntary arbitrator or panel of voluntary arbitrators may, motu proprio or on motion of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final and executory, requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards of the Secretary of Labor and Employment or Regional Director, the Commission, or the Labor Arbiter or Med-Arbiter, or voluntary arbitrator or panel of voluntary arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the counsel of record and the parties with copies of said decisions, orders or awards. Failure to comply with the duty prescribed herein shall subject such responsible officer to appropriate administrative sanctions.

(b) The Secretary of Labor and Employment, and the Chairman of the Commission may designate special sheriffs and take any measure under existing laws to ensure compliance with their decisions, orders or awards and those of Labor Arbiters and voluntary arbitrators or panel of voluntary arbitrators, including the imposition of administrative fines which shall not be less than five hundred pesos (P500.00) nor more than ten thousand pesos (P10,000.00).

Article 225. Contempt powers of the Secretary of Labor and Employment. In the exercise of his powers under this Code, the Secretary of Labor and Employment may hold any person in direct or indirect contempt and impose the appropriate penalties therefor.

Title III
Bureau of Labor Relations

Article 226. Bureau of Labor Relations. The Bureau of Labor Relations and the labor relations divisions in the regional offices of the Department of Labor and Employment shall have original and exclusive authority to act, at their own initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes, grievances or problems arising from or affecting labor-management relations in all workplaces whether agricultural or non-agricultural, except those arising from the implementation or interpretation of collective bargaining agreements which shall be the subject of grievance procedure and/or voluntary arbitration.

The Bureau shall have fifteen (15) calendar days to act on labor cases before it, subject to extension by agreement of the parties. (As amended by RA 6715)

Article 227. Compromise agreements. Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Secretary of Labor and Employment, shall be final and binding upon the parties. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion.

Article 228. Indorsement of case to Labor Arbiters. (a) Except as provided in paragraph (b) of this Article, the Labor Arbiter shall entertain only cases indorsed to them for compulsory arbitration by the Bureau or by the Regional Director of the Department of Labor and Employment. All parties to a case shall be furnished by the Bureau or by the Regional Director with a written notice of such indorsement or non-indorsement. The indorsement or non-indorsement of the Regional Director may be appealed to the Bureau within ten working days from receipt of the notice.

(b) The parties may, at any time, by mutual agreement, withdraw a case from the Conciliation Section and jointly submit it to a Labor Arbiter, except deadlocks in collective bargaining.

Article 229. Issuance of subpoenas. The Bureau shall have the power to require the appearance of any person or the production of any paper, document or matter relevant to a labor dispute under its jurisdiction either at the request of any interested party or at its own initiative.

Article 230. Appointment of bureau personnel. The Secretary of Labor and Employment may appoint, in addition to the present personnel of the Bureau and the Industrial Relations Divisions, such number of examiners and other assistants as may be necessary to carry out the purpose of this Code. (As amended by RA 6715)

Article 231. Registry of unions and file of collective agreements. The Bureau shall keep a registry of legitimate labor organizations.

The Bureau shall also maintain a file of all collective bargaining agreements and other related agreements and records of settlement of labor disputes, and copies of orders, and decisions of voluntary arbitrators or panel or voluntary arbitrators. The file shall be open and accessible to interested parties under conditions prescribed by the Secretary of Labor and Employment, provided that no specific information submitted in confidence shall be disclosed unless authorized by the Secretary, or when it is at issue in any judicial litigation or when public interest or national security so requires.

Within thirty (30) days from the execution of a collective bargaining agreement, the parties shall submit copies of the same directly to the Bureau or the Regional Offices of the Department of Labor and Employment for registration accompanied with verified proofs of its posting in two conspicuous places in the place of work and ratification by the majority of all the workers in the bargaining unit. The Bureau or Regional Offices shall act upon the application for registration of such collective bargaining agreement within five (5) calendar days from receipt thereof. The Regional Offices shall furnish the Bureau with a copy of the collective bargaining agreement within five (5) days from its submission.

The Bureau or Regional Office shall assess the employer for every collective bargaining agreement a registration fee of not less than one thousand pesos (P1,000.00) or in any other amount as may be deemed appropriate and necessary by the Secretary of Labor and Employment for the effective and efficient administration of the voluntary arbitration program. Any amount collected under this provision shall accrue to the Special Voluntary Arbitration Program.

The Bureau shall also maintain a file, and shall undertake or assist in the publication, of all final decisions, orders and awards of the Secretary of Labor and Employment, Regional Directors and the Commission. (As amended by RA 6715)

Article 232. Prohibition on certification election. The Bureau shall not entertain any petition for certification election or any other action which may disturb the administration of duly registered existing collective bargaining agreements affecting the parties except under Articles 253, 253-A and 256 of this Code. (As amended by RA 6715)

Article 233. Privileged communication. Information and statements made at conciliation proceedings shall be treated as privileged communication and shall not be used as evidence in the Commission. Conciliators and similar officials shall not testify in any court or body regarding any matters taken up at conciliation proceedings conducted by them.

Title IV
Labor Organizations

Chapter 1
REGISTRATION AND CANCELLATION

Article 234. Requirements of registration. Any applicant labor organization, association or group of unions or workers shall acquire legal personality and shall be entitled to the rights and privileges granted by law to legitimate labor organizations upon issuance of the certificate of registration based on the following requirements:

(a) Fifty-pesos (P50.00) registration fee;

(b) The names of its officers, their addresses, the principal address of the labor organization, the minutes of the organizational meetings and the list of the workers who participated in such meetings;

(c) The names of all its members comprising at least twenty 20% percent of all the employees in the bargaining unit where it seeks to operate.

(d) If the applicant has been in existence for one or more years, copies of its annual financial reports; and

(e) Four copies of the constitution and by-laws of the applicant union, the minutes of its adoption or ratification and the list of the members who participated in it.

Article 235. Action on application. The Bureau shall act on all applications for registration within thirty (30) days from filing.

All requisite documents and papers shall be certified under oath by the Secretary or the treasurer of the organization, as the case may be, and attested to by its president.

Article 236. Denial of registration; appeal. The decision of the Labor Relations Division in the regional office denying registration may be appealed by the applicant union to the Bureau within ten days from receipt of notice thereof.

Article 237. Additional requirements for federations or national unions. Subject to Article 238 if the applicant for registration is a federation or a national union, it shall, in addition to the requirements of the preceding Articles, submit the following:

(a) Proof of the affiliation of at least ten locals or chapters, each of which must be a duly recognized collective bargaining agent in the establishment or industry in which it operates, supporting the registration of such applicant federation or national union;

(b) The names and addresses of the companies where the locals or chapters operate and the list of all the members in each company involved.

Art. 238. Conditions for registration of federations or national unions. No federation or national union shall be registered to engage in any organizational activity in more than one industry in any area or region, and no federation or national union shall be registered to engage in any organizational activity in more than one industry all over the country.

The federation or national union which meets the requirements and conditions herein prescribed may organize the affiliate locals and chapters without registering such locals or chapters with the Bureau.

Locals or chapters shall have the same rights and privileges as if they were registered in the Bureau, provided that such federation or national union organizes such locals or chapters within its assigned organization field of activity as may be prescribed by the Secretary of Labor and Employment.

The Bureau shall see to it that federations and national unions shall only organize locals and chapters within a specific industry or region.]

Article 238. Cancellation of Registration, appeal. The certificate of registration of any legitimate labor organization, whether national or local, shall be cancelled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no longer meets one or more of the requirements herein prescribed.

[The Bureau upon approval of this Code shall immediately institute cancellation proceedings and take such other steps as may be necessary to restructure all existing registered labor organizations in accordance with the objective envisioned above.]

Article 239. Grounds for cancellation of union registration. The following shall constitute grounds for cancellation of union registration:

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of members who took part in the ratification;

(b) Failure to submit the documents mentioned in the preceding paragraph within thirty (30) days from adoption or ratification of the constitution and by-laws or amendments thereto;

(c) Misrepresentation, false statement or fraud in connection with the election of officers, minutes of the election of officers and the list of voters, or failure to submit these documents together with the list of the newly elected/appointed officers and their postal addresses within thirty (30) days from election;

(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report itself;

(e) Acting as a labor contractor or engaging in the “cabo” system, or otherwise engaging in any activity prohibited by law;

(f) Entering into collective bargaining agreements which provide terms and conditions of employment below minimum standard established by law;

(g) Asking for or accepting attorney’s fees or negotiation fees from employers;

(h) Other than for mandatory activities under this Code, checking off special assessments or any other fees without duly signed individual written authorizations of the members;

(i) Failure to submit a list of individual members to the Bureau once a year or whenever required by the Bureau; and

(j) Failure to comply with requirements under Articles 237 and 238.

Article 240. Equity of the incumbent. All existing federations and national unions which meet the qualifications of a legitimate labor organization and none of the grounds for cancellation shall continue to maintain their existing affiliates regardless of the nature of the industry and the location of the affiliates.

[Incumbent affiliates of existing federations or national unions may disaffiliate only for the purpose of joining a federation or national union in the industry or region in which it properly belongs or for the purpose of operating as an independent labor group.]

Chapter 2
RIGHTS AND CONDITIONS OF MEMBERSHIP

Article 241. Rights and conditions of membership in a labor organization. The following are the rights and conditions of membership in a labor organization:

(a) No arbitrary or excessive initiation fees shall be required of the members of a legitimate labor organization nor shall arbitrary, excessive or oppressive fine and forfeiture be imposed;

(b) The members shall be entitled to full and detailed reports from their officers and representatives of all financial transactions as provided for in the constitution and by-laws of the organization;

(c) The members shall directly elect their officers in the local union, as well as their national officers in the national union or federation to which they or their local union is affiliated, by secret ballot at intervals of five (5) years. No qualification requirement for candidacy to any position shall be imposed other than membership in good standing in subject labor organization. The secretary or any other responsible union officer shall furnish the Secretary of Labor and Employment with a list of the newly-elected officers, together with the appointive officers or agents who are entrusted with the handling of funds within thirty (30) calendar days after the election of officers or from the occurrence of any change in the list of officers of the labor organization. (As amended by RA 6715);

(d) The members shall determine by secret ballot, after due deliberation, any question of major policy affecting the entire membership of the organization, unless the nature of the organization or force majeure renders such secret balloting impractical, in which case the board of directors of the organization may make the decision in behalf of the general membership.

(e) No labor organization shall knowingly admit as member or continue in membership any individual who belongs to a subversive organization or who is engaged directly or indirectly in any subversive activity;

(f) No person who has been convicted of a crime involving moral turpitude shall be eligible for election as a union officer or for appointment to any position in the union;

(g) No officer, agent or member of a labor organization shall collect any fees, dues, or other contributions in its behalf or make any disbursement of its moneys or funds unless he is duly authorized pursuant to its constitution and by-laws;

(h) Every payment of fees, dues or other contributions by a member shall be evidenced by a receipt signed by the officer or agent making the collection and entered into the record of the organization to be kept and maintained for the purpose;

(i) The funds of the organization shall not be applied for any purpose or object other than those expressly provided by its constitution and by-laws or those expressly authorized by written resolution adopted by the majority of the members at a general meeting duly called for the purpose;

(j) Every income or revenue of the organization shall be evidenced by a record showing its source, and every expenditure of its funds shall be evidenced by a receipt from the person to whom the payment is made, which shall state the date, place and purpose of such payment. Such record or receipt shall form part of the financial records of the organization.

Any action involving the funds of the organization shall prescribe after three (3) 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: Provided, That this provision shall apply only to a legitimate labor organization which has submitted the financial report requirements under this Code: Provided, further, That failure of any labor organization to comply with the periodic financial reports required by law and such rules and regulations promulgated thereunder six (6) months after the effectivity of this Act shall automatically result in the cancellation of union registration of such labor organization. (As amended by RA 6715);

(k) The officers of any labor organization shall not be paid any compensation other than the salaries and expenses due to their positions as specifically provided for in its constitution and by-laws or in a written resolution duly authorized by a majority of all the members at a general membership meeting duly called for the purpose. The minutes of the meeting and the list of participants and ballots cast shall be subject to inspection by the Secretary of Labor and Employment or his duly authorized representatives. Any irregularities in the approval of the resolutions shall be a ground for impeachment or expulsion from the organization;

(l) The treasurer of any labor organization and every officer thereof who is responsible for the accounts of such organization or for the collection, management, disbursement, custody or control of the funds, moneys and other properties of the organization, shall render to the organization and to its members a true and correct account of all moneys received and paid by him since he assumed office or since the last date on which he rendered such account and of the balance remaining in his hands at the time of rendering such account, and of all bonds, securities and other properties of the organization entrusted to his custody or under his control. The rendering of such account shall be made.

(1) At least once a year within thirty (30) days after the close of its fiscal year;

(2) At such other times as may be required by a resolution of the majority of the members of the organization; and

(3) Upon vacating his office.

The account shall be duly audited and verified by affidavit and a copy thereof shall be furnished the Secretary of Labor and Employment;

(m) The books of accounts and other records of the financial activities of any labor organization shall be opened to inspection by any officer or member thereof during office hours;

(n) No special assessment or other extraordinary fees may be levied upon the members of a labor organization unless authorized by a written resolution of a majority of all the members at a general membership meeting duly called for the purpose. The secretary of the organization shall record the minutes of the meeting including the list of all members present, the votes cast, the purpose of the special assessment or fees and the recipient of such assessment or fees. The record shall be attested to by the president;

(o) Other than for mandatory activities under the Code, no special assessment, attorney’s fees, negotiation fees or any other extraordinary fees may be checked off from any amount due an employee without an individual written authorization duly signed by the employee. The authorization should specifically state the amount, purpose and beneficiary of the deduction; and

(p) It shall be the duty of any labor organization and its officers to inform its members on the provisions of its constitution and by-laws, collective bargaining agreement, the prevailing labor relations system and all their rights and obligations under existing labor laws.

For this purpose, registered labor organizations may assess reasonable dues to finance labor relations seminars and other labor education activities.

Any violation of the above rights and conditions of membership shall be a ground for cancellation of union registration or expulsion of an officer from office, whichever is appropriate. At least thirty (30%) per cent of all the members of a union or any member or members specifically concerned may report such violation to the Bureau. The Bureau shall have the power to hear and decide any reported violation and to mete appropriate penalty.

Criminal and civil liabilities arising from violations of above rights and conditions of membership shall continue to be under the jurisdiction of ordinary courts.

Chapter 3
RIGHTS OF LEGITIMATE LABOR ORGANIZATIONS

Article 242. Rights of legitimate labor organizations. A legitimate labor organization shall have the right:

(a) To act as the representative of its members for the purpose of collective bargaining;

(b) To be certified as the exclusive representative of all the employees in an appropriate collective bargaining unit for purposes of collective bargaining;

(c) To be furnished by the employer, upon written request, with his annual audited financial statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar days from the date of receipt of the request, after the union has been duly recognized by the employer or certified as the sole and exclusive bargaining representative of the employees in the bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective bargaining agreement, or during the collective bargaining negotiation.

(d) To own property, real or personal, for the use and benefit of the labor organization and its members;

(e) To sue and be sued in its registered name; and

(f) To undertake all other activities designed to benefit the organization and its members, including cooperative, housing welfare and other projects not contrary to law.

Notwithstanding any provision of a general or special law to the contrary, the income, and the properties of legitimate labor organizations, including grants, endowments, gifts, donations and contributions they may receive from fraternal and similar organizations, local or foreign, which are actually, directly and exclusively used for their lawful purposes, shall be free from taxes, duties, and other assessments. The exemptions provided herein may be withdrawn only by a special law expressly repealing this provision. (As amended by RA 6715)

Title V
Coverage

Article 243. Coverage and employees’ right to self-organization. All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join or assist labor organizations of their own choosing for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without any definite employers may form labor organizations for the purpose of enhancing and defending their interests and for their mutual aid and protection.

Article 244. Right of employees in the public service. Employees of government corporations established under the Corporation Code shall have the right to organize and to bargain collectively with their respective employers. All other employees in the civil service shall have the right to form associations for purposes not contrary to law.

Article 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees. Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor organizations of their own. (As amended by RA 6715)

Article 246. Non-abridgement of right to self-organization. It shall be unlawful for any person to restrain, coerce, discriminate against or unduly interfere with employees and workers in their exercise of the right to self-organization. Such right shall include the right to form, join, or assist labor organizations for the purpose of collective bargaining through representatives of their own choosing and to engage in lawful aid and protection, subject to the provisions of Article 246 of this Code.

Title VI
Unfair Labor Practices

Chapter 1
CONCEPT

Article 247. Concept of unfair labor practice and procedure for prosecution thereof. Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

Consequently, unfair labor practices are not only violations of the civil rights of both labor and management but are also criminal offenses against the State which shall be subject to prosecution and punishment as herein provided.

Subject to the exercise by the President or by the Secretary of Labor and Employment of the powers vested in them by Articles 263 and 264 of this Code, the civil aspects of all cases involving unfair labor practices, which may include claims for actual, moral, exemplary and other forms of damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of the Labor Arbiters. The Labor Arbiters shall give utmost priority to the hearing and resolution of all cases involving unfair labor practices. They shall resolve such cases within thirty (30) calendar days from the time they are submitted for decision. (As amended by RA 6715)

Recovery of civil liability in the administrative proceedings shall bar recovery under the Civil Code.

No criminal prosecution under this Title may be instituted without a final judgment, finding that an unfair labor practice was committed, having been first obtained in the administrative proceeding referred to in the preceding paragraph. During the pendency of such administrative proceeding, the running of the period of prescription of the criminal offense herein penalized shall be considered interrupted: Provided, however, That the final judgment in the administrative proceedings shall not be binding in the criminal case nor be considered as evidence of guilt but merely as proof of compliance with the requirements herein set forth.

Chapter 2
UNFAIR LABOR PRACTICES OF EMPLOYERS

Article 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit any of the following unfair labor practices:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(b) To require as a condition for employment that a person or an employee shall not join a labor organization or shall withdraw from one to which he belongs;

(c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor organization, including the giving of financial or other support to it or its organizers or officers;

(e) To discriminate in regard to hire or tenure of employment or any term or condition of employment in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other law shall prevent the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except of those employees who are already members of another union at the time of the signing of the collective bargaining agreement. Employees belonging to an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such non-union members accept the benefits under the collective agreement: Provided, That the individual authorization required under Article 242, paragraph (o), of this Code shall not apply to non-members of the recognized collective bargaining agent;

(f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give testimony under this Code;

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of any issue in collective bargaining or any other dispute; or

(i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of corporations, associations, or partnerships who have actually participated in, authorized or ratified unfair labor practices shall be held criminally liable.

Chapter 3
UNFAIR LABOR PRACTICES OF LABOR ORGANIZATIONS

Article 249. Unfair labor practices of labor organizations. It shall be unlawful for labor organization, its officers, agents, or representatives to commit any of the following unfair labor practices;

(a) To restrain or coerce employees in the exercise of their right to self-organization: Provided, That the labor organization shall have the right to prescribe its own rules with respect to the acquisition or retention of membership;

(b) To cause or attempt to cause an employer to discriminate against an employee, including discrimination against an employee with respect to whom membership in such organization has been denied or terminated on any ground other than the usual terms and conditions under which membership or continuation of membership is made available to other members;

(c) To violate the duty or refuse to bargain collectively with the employer, provided that it is the representative of the employees;

(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any money or other things of value, in the nature of an exaction, for services which are not performed or not to be performed, including the demand for a fee for union negotiations;

(e) To ask for or accept negotiation or attorney’s fees from employers as part of the settlement of any issue in collective bargaining or any other dispute; or

(f) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers, members of governing boards, representatives or agents or members of labor associations or organizations who have actually participated in, authorized or ratified unfair labor practices shall be held criminally liable.

Title VII
Collective Bargaining and Administration of Agreements

Article 250. Procedure in collective bargaining. The following procedures shall be observed in collective bargaining:

(a) When a party desires to negotiate an agreement, it shall serve a written notice upon the other party with a statement of its proposals. The other party shall make a reply thereto not later than ten (10) calendar days from receipt of such notice;

(b) Should differences arise on the basis of such notice and reply, either party may request for a conference which shall begin not later than ten (10) calendar days from the date of request;

(c) If the dispute is not settled, the Board shall intervene upon request of either or both parties or at its own initiative and immediately call the parties to conciliation meetings. The Board shall have the power to issue subpoenas requiring the attendance of the parties to such meetings. It shall be the duty of the parties to participate fully and promptly in the conciliation meetings the Board may call.

(d) During the conciliation proceedings in the Board, the parties are prohibited from doing any act which may disrupt or impede the early settlement of the disputes; and

(e) The Board shall exert all efforts to settle disputes amicably and encourage the parties to submit their case to a voluntary arbitrator.

Article 251. Duty to bargain collectively in the absence of collective bargaining agreements. In the absence of an agreement or other voluntary arrangement providing for a more expeditious manner of collective bargaining, it shall be the duty of the employer and the representatives of the employees to bargain collectively in accordance with the provisions of this Code.

Article 252. Meaning of duty to bargain collectively. The duty to bargain collectively means the performance of a mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to wages, hours of work and all other terms and any grievances or questions arising under such agreement and executing a contract incorporating such agreements if requested by either party, but such duty does not compel any party to agree to a proposal or to make any concession.

Article 253. Duty to bargain collectively when there exists a collective bargaining agreement. When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate or modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect the term and conditions of the existing agreement during the 60-day period and/or until a new agreement is reached by the parties.

Article 253-A. Terms of a collective bargaining agreement. Any collective bargaining agreement that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term of five (5) years. No petition questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the Department of Labor and Employment outside of the sixty-day period immediately before the date of expiry of such five year term of the collective bargaining agreement. All other provisions of the collective bargaining agreement shall be renegotiated not later than three (3) years after its execution. Any agreement on such other provisions of the collective bargaining agreement entered into within six (6) months from the date of expiry of the term of such other provisions as fixed in the collective bargaining agreement, shall retroact to the day immediately following such date. If any such agreement is entered into beyond six months, the parties shall agree on the duration of retroactivity thereof. In case of a deadlock in the renegotiation of the collective bargaining agreement, the parties may exercise their rights under this Code. (As amended by RA 6715)

Article 254. Injunction prohibited. No temporary or permanent injunction or restraining order in any case involving or growing out of labor disputes shall be issued by any court or other entity, except as otherwise provided in Articles 218 and 264 of this Code. (As amended by BP Blg. 227)

Article 255. Exclusive bargaining representation and workers’ participation in policy and decision-making. The labor organization designated or selected by the majority of the employees in an appropriate collective bargaining unit shall be the exclusive representative of the employee in such unit for the purpose of collective bargaining. However, an individual employee or group of employees shall have the right at any time to present grievances to their employer.

Any provision of law to the contrary notwithstanding, workers shall have the right, subject to such rules and regulations as the Secretary of Labor and Employment may promulgate, to participate in policy and decision-making processes of the establishment where they are employed insofar as said processes will directly affect their rights, benefits and welfare. For this purpose, workers and employers may form labor-management councils: Provided, That the representatives of the workers in such labor-management councils shall be elected by at least the majority of all employees in said establishment. (As amended by RA 6715)

Article 256. Representation issue in organized establishments. In organized establishments, when a verified petition questioning the majority status of the incumbent bargaining agent is filed before the Department of Labor and Employment within the sixty-day period before the expiration of a collective bargaining agreement, the Med-Arbiter shall automatically order an election by secret ballot when the verified petition is supported by the written consent of at least twenty-five percent (25%) of all the employees in the appropriate bargaining unit. To have a valid election, at least a majority of all eligible voters in the unit must have cast their votes. The labor union receiving the majority of the valid votes cast shall be certified as the exclusive bargaining agent of all the workers in the unit. When an election which provides for three or more choices results in no choice receiving a majority of the valid votes cast, a run-off election shall be conducted between the labor unions receiving the two highest number of votes: Provided, That the total number of votes for all contending unions is at least fifty percent (50%) of the number of votes cast.

At the expiration of the freedom period, the employer shall continue to recognize the majority status of the incumbent bargaining agent where no petition for certification is filed. (As amended by RA 6715)

Article 257. Petitions in unorganized establishments. In any establishment where there is no certified bargaining agent, a certification election shall automatically be conducted by the Med-Arbiter upon the filing of a petition by a legitimate labor organization. (As amended by RA 6715)

Article 258. When an employer may file petition. When requested to bargain collectively, an employer may petition the Bureau for an election. If there is no existing certified collective bargaining agreement in the unit, the Bureau shall, after hearing, order a certification election.

All certification cases shall be decided within 20 working days.

The Bureau shall conduct a certification election within 20 days in accordance with the rules and regulations prescribed by the Secretary of Labor and Employment.

Article 259. Appeal from certification election orders. Any party to an election may appeal the order or results of the election as determined by the Med-Arbiter directly to the Secretary of Labor and Employment on the ground that the rules and regulations or parts thereof established by the Secretary of Labor and Employment for the conduct of the election have been violated. Such appeal shall be decided within fifteen (15) calendar days. (As amended by RA 6715)

Title VII-A
Grievance Machinery and Voluntary Arbitration

Article 260. Grievance machinery and voluntary arbitration. The parties to a collective bargaining agreement shall include therein provisions that will ensure the mutual observance of its terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances arising from the interpretation or implementation of their collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies.

All grievances submitted to the grievance machinery which are not settled within seven (7) calendar days from the date of its submission shall automatically be referred to voluntary arbitration prescribed in the collective bargaining agreement.

For this purpose, parties to a collective bargaining agreement shall name and designate in advance a voluntary arbitrator or panel of voluntary arbitrators, or include in the agreement a procedure for the selection of such voluntary arbitrator or panel of voluntary arbitrators, preferably from the listing of qualified voluntary arbitrators duly accredited by the Board. In case the parties fail to select a voluntary arbitrator or panel of voluntary arbitrators, the Board shall designate the voluntary arbitrator or panel of voluntary arbitrators, as may be necessary, pursuant to the selection procedure agreed upon in the collective bargaining agreement, which shall act with the same force and effects as if the voluntary arbitrator or panel of voluntary arbitrators have been selected by the parties as described above. (As added by RA 6715)

Article 261. Jurisdiction of voluntary arbitrators and panel of voluntary arbitrators. The voluntary arbitrator or panel of voluntary arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the collective bargaining agreement and those arising from the interpretation or enforcement of company personnel policies referred to in the immediately preceding Article. Accordingly, violations of a collective bargaining agreement, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved as grievances under the collective bargaining agreement. For purposes of this Article, gross violations of a collective bargaining agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement.

The Commission, its Regional Offices and the Regional Directors of the Department of Labor and Employment shall not entertain disputes, grievances or matters under the exclusive and original jurisdiction of the voluntary arbitrator or panel of voluntary arbitrators and shall immediately dispose and refer the same to the grievance machinery or voluntary arbitration provided in the collective bargaining agreement. (As added by RA 6715)

Article 262. Jurisdiction over other labor disputes. The voluntary arbitrator or panel of voluntary arbitrators, upon agreement of the parties, shall also hear and decide all other labor disputes including unfair labor practices and bargaining deadlocks. (As added by RA 6715)

Article 262-A. Procedures. The voluntary arbitrator or panel of voluntary arbitrators shall have the power to hold hearings, receive evidences and take whatever action is necessary to resolve the issue or issues subject of the dispute, including efforts to effect a voluntary settlement between parties.

All parties to the dispute shall be entitled to attend the arbitration proceedings. The attendance of any third party or the exclusion of any witness from the proceedings shall be determined by the voluntary arbitrator or panel of voluntary arbitrators. Hearings may be adjourned for cause or upon agreement by the parties.

Unless the parties agree otherwise, it shall be mandatory for the voluntary arbitrator or panel of voluntary arbitrators to render an award or decision within twenty (20) calendar days from the date of submission of the dispute to voluntary arbitration.

The award or decision of the voluntary arbitrator or panel of voluntary arbitrators shall contain the facts and the law on which it is based. It shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties.

Upon motion of any interested party, the voluntary arbitrator or panel of voluntary arbitrators or the Labor Arbiter in the region where the movant resides, in case of the absence or incapacity of the voluntary arbitrator or panel of voluntary arbitrators for any reason, may issue a writ of execution requiring either the sheriff of the Commission or regular courts or any public official whom the parties may designate in the submission agreement to execute the final decision, order or award. (As added by RA 6715)

Article 262-B. Cost of voluntary arbitration and voluntary arbitrator’s fee. The parties to a collective bargaining agreement shall provide therein a proportionate sharing scheme on the cost of voluntary arbitration including the voluntary arbitrator’s fee. The fixing of fee of voluntary arbitrators or panel of voluntary arbitrators, whether shouldered wholly by the parties or subsidized by the Special Voluntary Arbitration Fund, shall take into account the following factors:

(a) Nature of the case;

(b) Time consumed in hearing the case;

(c) Professional standing of the voluntary arbitrator;

(d) Capacity to pay of the parties; and

(e) Fees provided for in the Revised Rules of Court. (As added by RA 6715)

Title VIII
Strikes and Lockouts and Foreign Involvement in Trade Union Activities

Chapter 1
STRIKES AND LOCKOUTS

Article 263. Strikes, picketing and lockouts. (a) It is the policy of the State to encourage free trade unionism and free collective bargaining.

(b) Workers shall have the right to engage in concerted activities for purposes of collective bargaining or for their mutual benefit and protection. The right of legitimate labor organizations to strike and picket and of employers to lockout, consistent with the national interest, shall continue to be recognized and respected. However, no labor union may strike and no employer may declare a lockout on grounds involving inter-union and intra-union disputes.

(c) In cases of bargaining deadlock, the duly certified or recognized bargaining agent may file a notice of strike or the employer may file a notice of lockout with the Department at least thirty (30) days before the intended date thereof. In cases of unfair labor practice, the period of notice shall be fifteen (15) days and in the absence of a duly certified or recognized bargaining agent, the notice of strike may be filed by any legitimate labor organization in behalf of its members. However, in case of dismissal from employment of union officers duly elected in accordance with the union constitution and by-laws, which may constitute union busting where the existence of the union is threatened, the 15-day cooling-off period shall not apply and the union may take action immediately.

(d) The notice must be in accordance with such implementing rules and regulations as the Secretary of Labor and Employment may promulgate.

(e) During the cooling-off period, it shall be the duty of the Department to exert all efforts at mediation and conciliation to effect a voluntary settlement. Should the dispute remain unsettled until the lapse of the requisite number of days from the mandatory filing of the notice, the labor union may strike or the employer may declare a lockout.

(f) A decision to declare a strike must be approved by a majority of the total union membership in the bargaining unit concerned, obtained by secret ballot in meetings or referenda called for that purpose. A decision to declare a lockout must be approved by majority of the board of directors of the corporation or association or of the partners in a partnership, obtained by secret ballot in a meeting called for that purpose. The decision shall be valid for the duration of the dispute based on substantially the same grounds considered when the strike or lockout vote was taken. The Department may, at its own initiative or upon the request of any affected party, supervise the conduct of the secret balloting. In every case, the union or the employer shall furnish the Department the results of the voting at least seven days before the intended strike or lockout, subject to the cooling-off period herein provided.

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same.

In line with the national concern for and the highest respect accorded to the right of patients to life and health, strikes and lockouts in hospitals, clinics and similar medical institutions shall, to every extent possible, be avoided, and all serious efforts, not only by labor and management but government as well, be exhausted to substantially minimize, if not prevent, their adverse effects on such life and health, through the exercise, however legitimate, by labor of its right to strike and by management to lockout. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce of medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as are necessary to insure the proper and adequate protection of the life and health of its patients, most especially emergency cases, for the duration of the strike or lockout. In such cases, therefore, the Secretary of Labor and Employment may immediately assume, within twenty four (24) hours from knowledge of the occurrence of such a strike or lockout, jurisdiction over the same or certify it to the Commission for compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders, prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under pain of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of them.

The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining the industries that, in his opinion, are indispensable to the national interest, and from intervening at any time and assuming jurisdiction over any labor dispute in such industries in order to settle or terminate the same.

(h) Before or at any stage of the compulsory arbitration process, the parties may opt to submit their dispute to voluntary arbitration.

(i) The Secretary of Labor and Employment, the Commission or the voluntary arbitrator or panel of voluntary arbitrators shall decide or resolve the dispute within thirty (30) calendar days from the date of the assumption of jurisdiction or the certification or submission of the dispute, as the case may be. The decision of the President, the Secretary of Labor and Employment, the Commission or the voluntary arbitrator or panel of voluntary arbitrators shall be final and executory ten (10) calendar days after receipt thereof by the parties. (As amended by RA 6715)

Article 264. Prohibited activities. (a) No labor organization or employer shall declare a strike or lockout without first having bargained collectively in accordance with Title VII of this Book or without first having filed the notice required in the preceding Article or without the necessary strike or lockout vote first having been obtained and reported to the Department.

No strike or lockout shall be declared after assumption of jurisdiction by the President or the Secretary or after certification or submission of the dispute to compulsory or voluntary arbitration or during the pendency of cases involving the same grounds for the strike or lockout.

Any worker whose employment has been terminated as a consequence of an unlawful lockout shall be entitled to reinstatement with full backwages. Any union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment right: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike.

(b) No person shall obstruct, impede or interfere with by force, violence, coercion, threats or intimidation any peaceful picketing by employees during any labor controversy or in the exercise of the right of self-organization or collective bargaining or shall aid or abet such obstruction or interference.

(c) No employer shall use or employ any strike-breaker nor shall any person be employed as a strike-breaker.

(d) No public official or employee, including officers and personnel of the New Armed Forces of the Philippines or the Integrated National Police, or armed persons, shall bring in, introduce or escort in any manner, any individual who seeks to replace strikers in entering or leaving the premises of a strike area, or work in place of the strikers. The police force shall keep out of the picket lines unless actual violence or other criminal acts occur therein: Provided, That nothing herein shall be interpreted to prevent any public officers from taking any measure necessary to maintain peace and order, protect life and property, and/or enforce the law and legal order.

(e) No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public thoroughfares.

Article 265. Improved offer balloting. In an effort to settle a strike, the Department of Labor and Employment shall conduct a referendum by secret balloting on the improved offer of the employer on or before the 30th day of the strike. When at least a majority of the union members vote to accept the improved offer, the striking workers shall immediately return to work and the employer shall thereupon readmit them upon the signing of the agreement.

In case of a lockout, the Department of Labor and Employment shall also conduct a referendum by secret balloting on the reduced offer of the union on or before the 30th day of the lockout. When at least a majority of the board of directors or trustees or the partners holding the controlling interest in the case of a partnership vote to accept the reduced offer, the workers shall immediately return to work and the employer shall thereupon readmit them upon the signing of the agreement. (As amended by RA 6715)

Article 266. Requirement for arrest and detention. Except on grounds of national security and public peace, no union members or union organizers may be arrested or detained for union activities without previous consultations with the Secretary of Labor and Employment.

Chapter 2
ASSISTANCE TO LABOR ORGANIZATIONS

Article 267. Assistance by the Department of Labor and Employment. The Department of Labor and Employment, at the initiative of the Secretary of Labor and Employment, shall extend special assistance to the organization for purposes of collective bargaining of the most underprivileged workers who, for reasons of occupation, organizational structure or insufficient incomes are not normally covered by major labor organizations or federations.

Article 268. Assistance by the Institute for Labor Studies. The Institute for Labor Studies shall render technical and other forms of assistance to labor educations and employer organizations in the field of labor education, especially pertaining to collective bargaining, arbitration, labor standards and the Labor Code of the Philippines in general.

Chapter 3
FOREIGN ACTIVITIES

Article 269. Prohibition against aliens; Exceptions. All alien, natural or juridical, as well as all foreign organizations are strictly prohibited from engaging directly or indirectly in all forms of trade union activities without prejudice to normal contacts between Philippine labor unions and recognized international labor centers: Provided, however, That aliens working in the country with valid permits issued by the Department of Labor and Employment may exercise the right to self-organization and join or assist labor organizations of their own choosing for purposes of collective bargaining: Provided, further, That said aliens are nationals of a country which grants the same or similar rights to Filipino workers. (As amended by RA 6715)

Article 270. Regulation of foreign assistance. No foreign individual, organization or entity may give any donations, grants or other forms of assistance, in cash or in kind, directly or indirectly, to any labor organization, group of workers or any auxiliary thereof, such as cooperatives, credit unions and institutions engaged in research, education or communication, in relation to trade union activities without prior permission by the Secretary of Labor and Employment.

This prohibition shall equally apply to foreign donations, grants or other forms of assistance, in cash or in kind, given directly or indirectly to any employer or employer’s organization to support any activity or activities affecting trade unions.

The Secretary of Labor and Employment shall promulgate rules and regulations to regulate and control the giving and receiving of such donations, grants, or other forms of assistance, including the mandatory reporting of amounts of donations or grants, the specific recipients thereof, the projects or activities proposed to be supported and their duration.

Article 270-A. “Trade union activities” shall mean:

(1) Organization, formation and administration of labor organizations.

(2) Negotiations and administration of collective bargaining agreements;

(3) All forms of concerted union action;

(4) Organizing, managing or assisting union conventions, meetings, rallies, referenda, teach-ins, seminars, conferences and institutes;

(5) Any form of participation or involvement in representing proceedings, representation elections, consent elections, union elections; and

(6) Other activities or actions analogous to the foregoing.

Article 271. Applicability to farm tenants and rural workers. The provisions of this Title pertaining to foreign organizations and activities shall be deemed applicable to all organizations of farm tenants, rural workers and the like, provided that in appropriate cases the Secretary of Agrarian Reform shall exercise the powers and responsibilities vested by this Decree in the Secretary of Labor and Employment.

Chapter 4
PENALTIES FOR VIOLATION

Article 272. Penalties. (a) Any person violating any of the provisions of Article 264 of this Code shall be punished by a fine of not less than one thousand pesos (P1,000.00) nor more than ten thousand pesos (P10,000.00) and/or imprisonment for not less than three (3) months nor more than three (3) years, or both such fine and imprisonment, at the discretion of the court. Prosecution under this provision shall preclude prosecution for the same act under the Revised Penal Code, and vice versa. (As amended by RA 6715)

(b) Upon the recommendation of the Secretary of Labor and Employment and the Secretary of National Defense, foreigners who violate the provisions of this Title shall be subject to immediate and summary deportation by the Commission on Immigration and Deportation and shall be permanently barred from re-entering the country without the special permission of the President of the Philippines.

Title IX
Special Provisions

Article 273. Study of labor-management relations. The Secretary of Labor and Employment shall have the power and it shall be his duty to inquire into:

(a) The existing relations between employers and employees in the Philippines;

(b) The growth of associations of employees and the effect of such associations upon employer-employee relations;

(c) The extent and results of the methods of collective bargaining in the determination of terms and conditions of employment;

(d) The methods which have been tried by employers and associations of employees for maintaining mutually satisfactory relations;

(e) Desirable industrial practices which have been developed through collective bargaining for settling differences;

(f) The possible ways of increasing the usefulness and efficiency of collective bargaining for settling differences;

(g) The possibilities for the adoption of practical and effective methods of labor-management cooperation;

(h) Any other aspects of employer-employee relations concerning the promotion of harmony and understanding between the parties; and

(i) The relevance of labor laws and labor relations to national development.

The Secretary of Labor and Employment shall also inquire into the causes of industrial unrest and take all the necessary steps within his powers as may be prescribed by law to alleviate the same, and shall from time to time recommend the enactment of such remedial legislation as in his judgment may be desirable for the maintenance and promotion of industrial peace.

Article 274. Visitorial power. The Secretary of Labor and Employment or his duly authorized representative is hereby empowered to inquire into the financial activities of legitimate labor organizations upon the filing of a complainant under oath and duly supported by the written consent of at least twenty percent (20%) of the total membership of the labor organization concerned and to examine their books of accounts and other records to determine compliance or non-compliance with the law and to prosecute any violations of the law and the union constitution and by-laws: Provided, That such inquiry or examination shall not be conducted during the sixty (60) day freedom period nor within thirty (30) days immediately preceding the date of election of union officials. (As amended by RA 6715)

Article 275. Tripartism and tripartite conferences. (a) Tripartism in labor relations is hereby declared a State policy. Towards this end, workers and employers shall, as far as practicable, be represented in decision and policy-making bodies of the government.

(b) The Secretary of Labor and Employment or his duly authorized representatives may from time to time call a national, regional, or industrial tripartite conference of representatives of government, workers and employers for the consideration and adoption of voluntary codes of principles designed to promote industrial peace based on social justice or to align labor movement relations with established priorities in economic and social development. In calling such conference, the Secretary of Labor and Employment may consult with accredited representatives of workers and employers. (As amended by RA 6715)

Article 276. Government employees. The terms and conditions of employment of all government employees, including employees of government-owned and controlled corporations, shall be governed by the Civil Service Law, rules and regulations. Their salaries shall be standardized by the National Assembly as provided for in the new constitution. However, there shall be no reduction of existing wages, benefits and other terms and conditions of employment being enjoyed by them at the time of the adoption of this Code.

Article 277. Miscellaneous provisions. (a) All u

Presidential Decree No. 612

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 612 December 18, 1974

ORDAINING AND INSTITUTING AN INSURANCE CODE OF THE PHILIPPINES

I, Ferdinand E. Marcos, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and order the following:

GENERAL PROVISIONS

Section 1. This Decree shall be known as “The Insurance Code”.

Section 2. Whenever used in this Code, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires:

(1) A “contract of insurance” is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event.

A contract of suretyship shall be deemed to be an insurance contract, within the meaning of this Code, only if made by a surety who or which, as such, is doing an insurance business as hereinafter provided.

(2) The term “doing an insurance business” or “transacting an insurance business”, within the meaning of this Code, shall include (a) making or proposing to make, as insurer, any insurance contract; (b) making or proposing to make, as surety, any contract of suretyship as a vocation and not as merely incidental to any other legitimate business or activity of the surety; (c) doing any kind of business, including a reinsurance business, specifically recognized as constituting the doing of an insurance business within the meaning of this Code; (d) doing or proposing to do any business in substance equivalent to any of the foregoing in a manner designed to evade the provisions of this Code.

In the application of the provisions of this Code the fact that no profit is derived from the making of insurance contracts, agreements or transactions or that no separate or direct consideration is received therefor, shall not be deemed conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business.

(3) As used in this code, the term “Commissioner” means the “Insurance Commissioner”.

Chapter 1
THE CONTRACT OF INSURANCE

Title 1
WHAT MAY BE INSURED

Section 3. Any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of this chapter.

The consent of the husband is not necessary for the validity of an insurance policy taken out by a married woman on her life or that of her children.

Any minor of the age of eighteen years or more, may, notwithstanding such minority, contract for life, health and accident insurance, with any insurance company duly authorized to do business in the Philippines, provided the insurance is taken on his own life and the beneficiary appointed is the minor’s estate or the minor’s father, mother, husband, wife, child, brother or sister.

The married woman or the minor herein allowed to take out an insurance policy may exercise all the rights and privileges of an owner under a policy.

All rights, title and interest in the policy of insurance taken out by an original owner on the life or health of a minor shall automatically vest in the minor upon the death of the original owner, unless otherwise provided for in the policy.

Section 4. The preceding section does not authorize an insurance for or against the drawing of any lottery, or for or against any chance or ticket in a lottery drawing a prize.

Section 5. All kinds of insurance are subject to the provisions of this chapter so far as the provisions can apply.

Title 2
PARTIES TO THE CONTRACT

Section 6. Every person, partnership, association, or corporation duly authorized to transact insurance business as elsewhere provided in this code, may be an insurer.

Section 7. Anyone except a public enemy may be insured.

Section 8. Unless the policy otherwise provides, where a mortgagor of property effects insurance in his own name providing that the loss shall be payable to the mortgagee, or assigns a policy of insurance to a mortgagee, the insurance is deemed to be upon the interest of the mortgagor, who does not cease to be a party to the original contract, and any act of his, prior to the loss, which would otherwise avoid the insurance, will have the same effect, although the property is in the hands of the mortgagee, but any act which, under the contract of insurance, is to be performed by the mortgagor, may be performed by the mortgagee therein named, with the same effect as if it had been performed by the mortgagor.

Section 9. If an insurer assents to the transfer of an insurance from a mortgagor to a mortgagee, and, at the time of his assent, imposes further obligation on the assignee, making a new contract with him, the act of the mortgagor cannot affect the rights of said assignee.

Title 3
INSURABLE INTEREST

Section 10. Every person has an insurable interest in the life and health:

(a) Of himself, of his spouse and of his children;

(b) Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;

(c) Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and

(d) Of any person upon whose life any estate or interest vested in him depends.

Section 11. The insured shall have the right to change the beneficiary he designated in the policy, unless he has expressly waived this right in said policy.

Section 12. The interest of a beneficiary in a life insurance policy shall be forfeited when the beneficiary is the principal, accomplice, or accessory in willfully bringing about the death of the insured; in which event, the nearest relative of the insured shall receive the proceeds of said insurance if not otherwise disqualified.

Section 13. Every interest in property, whether real or personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the insured, is an insurable interest.

Section 14. An insurable interest in property may consist in:

Section 15. A carrier or depository of any kind has an insurable interest in a thing held by him as such, to the extent of his liability but not to exceed the value thereof.

Section 16. A mere contingent or expectant interest in anything, not founded on an actual right to the thing, nor upon any valid contract for it, is not insurable.

Section 17. The measure of an insurable interest in property is the extent to which the insured might be damnified by loss or injury thereof.

Section 18. No contract or policy of insurance on property shall be enforceable except for the benefit of some person having an insurable interest in the property insured.

Section 19. An interest in property insured must exist when the insurance takes effect, and when the loss occurs, but not exist in the meantime; and interest in the life or health of a person insured must exist when the insurance takes effect, but need not exist thereafter or when the loss occurs.

Section 20. Except in the cases specified in the next four sections, and in the cases of life, accident, and health insurance, a change of interest in any part of a thing insured unaccompanied by a corresponding change in interest in the insurance, suspends the insurance to an equivalent extent, until the interest in the thing and the interest in the insurance are vested in the same person.

Section 21. A change in interest in a thing insured, after the occurrence of an injury which results in a loss, does not affect the right of the insured to indemnity for the loss.

Section 22. A change of interest in one or more several distinct things, separately insured by one policy, does not avoid the insurance as to the others.

Section 23. A change on interest, by will or succession, on the death of the insured, does not avoid an insurance; and his interest in the insurance passes to the person taking his interest in the thing insured.

Section 24. A transfer of interest by one of several partners, joint owners, or owners in common, who are jointly insured, to the others, does not avoid an insurance even though it has been agreed that the insurance shall cease upon an alienation of the thing insured.

Section 25. Every stipulation in a policy of insurance for the payment of loss whether the person insured has or has not any interest in the property insured, or that the policy shall be received as proof of such interest, and every policy executed by way of gaming or wagering, is void.

Title 4
CONCEALMENT

Section 26. A neglect to communicate that which a party knows and ought to communicate, is called a concealment.

Section 27. A concealment entitles the injured party to rescind a contract of insurance.

Section 28. Each party to a contract of insurance must communicated to the other, in good faith, all facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining.

Section 29. An intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind.

Section 30. Neither party to a contract of insurance is bound to communicate information of the matters following, except in answer to the inquiries of the other:

(a) Those which the other knows;

(b) Those which, in the exercise of ordinary care, the other ought to know, and of which the former has no reason to suppose him ignorant;

(c) Those of which the other waives communication;

(d) Those which prove or tend to prove the existence of a risk excluded by a warranty, and which are not otherwise material; and

(e) Those which relate to a risk excepted from the policy and which are not otherwise material.

Section 31. Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries.

Section 32. Each party to a contract of insurance is bound to know all the general causes which are open to his inquiry, equally with that of the other, and which may affect the political or material perils contemplated; and all general usages of trade.

Section 33. The right to information of material facts may be waived, either by the terms of the insurance or by neglect to make inquiry as to such facts, where they are distinctly implied in other facts of which information is communicated.

Section 34. Information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section fifty-one.

Section 35. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question.

Title 5
REPRESENTATION

Section 36. A representation may be oral or written.

Section 37. A representation may be made at the time of, or before, issuance of the policy.

Section 38. The language of a representation is to be interpreted by the same rules as the language of contracts in general.

Section 39. A representation as to the future is to be deemed a promise, unless it appears that it was merely a statement of belief or expectation.

Section 40. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty.

Section 41. A representation may be altered or withdrawn before the insurance is effected, but not afterwards.

Section 42. A representation must be presumed to refer to the date on which the contract goes into effect.

Section 43. When a person insured has no personal knowledge of a fact, he may nevertheless repeat information which he has upon the subject, and which he believes to be true, with the explanation that he does so on the information of others; or he may submit the information, in its whole extent, to the insurer; and in neither case is he responsible for its truth, unless it proceeds from an agent of the insured, whose duty it is to give the information.

Section 44. A representation is to be deemed false when the facts fail to correspond with its assertions or stipulations.

Section 45. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time when the representation becomes false.

Section 46. The materiality of a representation is determined by the same rules as the materiality of a concealment.

Section 47. The provisions of this chapter apply as well to a modification of a contract of insurance as to its original formation.

Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by any provision of this chapter, such right must be exercised previous to the commencement of an action on the contract.

After a policy of life insurance made payable on the death of the insured shall have been in force during the lifetime of the insured for a period of two years from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment or misrepresentation of the insured or his agent.

Title 6
THE POLICY

Section 49. The written instrument in which a contract of insurance is set forth, is called a policy of insurance.

Section 50. The policy shall be in printed form which may contain blank spaces; and any word, phrase, clause, mark, sign, symbol, signature, number, or word necessary to complete the contract of insurance shall be written on the blank spaces provided therein.

Any rider, clause, warranty or endorsement purporting to be part of the contract of insurance and which is pasted or attached to said policy is not binding on the insured, unless the descriptive title or name of the rider, clause, warranty or endorsement is also mentioned and written on the blank spaces provided in the policy.

Unless applied for by the insured or owner, any rider, clause, warranty or endorsement issued after the original policy shall be countersigned by the insured or owner, which countersignature shall be taken as his agreement to the contents of such rider, clause, warranty or endorsement.

Group insurance and group annuity policies, however, may be typewritten and need not be in printed form.

Section 51. A policy of insurance must specify:

(a) The parties between whom the contract is made;

(b) The amount to be insured except in the cases of open or running policies;

(c) The premium, or if the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined;

(d) The property or life insured;

(e) The interest of the insured in property insured, if he is not the absolute owner thereof;

(f) The risks insured against; and

(g) The period during which the insurance is to continue.

Section 52. Cover notes may be issued to bind insurance temporarily pending the issuance of the policy. Within sixty days after the issue of the cover note, a policy shall be issued in lieu thereof, including within its terms the identical insurance bound under the cover note and the premium therefor.

Cover notes may be extended or renewed beyond such sixty days with the written approval of the Commissioner if he determines that such extension is not contrary to and is not for the purpose of violating any provisions of this Code. The Commissioner may promulgate rules and regulations governing such extensions for the purpose of preventing such violations and may by such rules and regulations dispense with the requirement of written approval by him in the case of extension in compliance with such rules and regulations.

Section 53. The insurance proceeds shall be applied exclusively to the proper interest of the person in whose name or for whose benefit it is made unless otherwise specified in the policy.

Section 54. When an insurance contract is executed with an agent or trustee as the insured, the fact that his principal or beneficiary is the real party in interest may be indicated by describing the insured as agent or trustee, or by other general words in the policy.

Section 55. To render an insurance effected by one partner or part-owner, applicable to the interest of his co-partners or other part-owners, it is necessary that the terms of the policy should be such as are applicable to the joint or common interest.

Section 56. When the description of the insured in a policy is so general that it may comprehend any person or any class of persons, only he who can show that it was intended to include him can claim the benefit of the policy.

Section 57. A policy may be so framed that it will inure to the benefit of whomsoever, during the continuance of the risk, may become the owner of the interest insured.

Section 58. The mere transfer of a thing insured does not transfer the policy, but suspends it until the same person becomes the owner of both the policy and the thing insured.

Section 59. A policy is either open, valued or running.

Section 60. An open policy is one in which the value of the thing insured is not agreed upon, but is left to be ascertained in case of loss.

Section 61. A valued policy is one which expresses on its face an agreement that the thing insured shall be valued at a specific sum.

Section 62. A running policy is one which contemplates successive insurances, and which provides that the object of the policy may be from time to time defined, especially as to the subjects of insurance, by additional statements or indorsements.

Section 63. A condition, stipulation, or agreement in any policy of insurance, limiting the time for commencing an action thereunder to a period of less than one year from the time when the cause of action accrues, is void.

Section 64. No policy of insurance other than life shall be cancelled by the insurer except upon prior notice thereof to the insured, and no notice of cancellation shall be effective unless it is based on the occurrence, after the effective date of the policy, of one or more of the following:

(a) non-payment of premium;

(b) conviction of a crime arising out of acts increasing the hazard insured against;

(c) discovery of fraud or material misrepresentation;

(d) discovery of willful or reckless acts or omissions increasing the hazard insured against;

(e) physical changes in the property insured which result in the property becoming uninsurable; or

(f) a determination by the Commissioner that the continuation of the policy would violate or would place the insurer in violation of this Code.

Section 65. All notices of cancellation mentioned in the preceding section shall be in writing, mailed or delivered to the named insured at the address shown in the policy, and shall state (a) which of the grounds set forth in section sixty-four is relied upon and (b) that, upon written request of the named insured, the insurer will furnish the facts on which the cancellation is based.

Section 66. In case of insurance other than life, unless the insurer at least forty-five days in advance of the end of the policy period mails or delivers to the named insured at the address shown in the policy notice of its intention not to renew the policy or to condition its renewal upon reduction of limits or elimination of coverages, the named insured shall be entitled to renew the policy upon payment of the premium due on the effective date of the renewal. Any policy written for a term of less than one year shall be considered as if written for a term of one year. Any policy written for a term longer than one year or any policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year.

Title 7
WARRANTIES

Section 67. A warranty is either expressed or implied.

Section 68. A warranty may relate to the past, the present, the future, or to any or all of these.

Section 69. No particular form of words is necessary to create a warranty.

Section 70. Without prejudice to section fifty-one, every express warranty, made at or before the execution of a policy, must be contained in the policy itself, or in another instrument signed by the insured and referred to in the policy as making a part of it.

Section 71. A statement in a policy of matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof.

Section 72. A statement in a policy which imparts that it is intended to do or not to do a thing which materially affects the risk, is a warranty that such act or omission shall take place.

Section 73. When, before the time arrives for the performance of a warranty relating to the future, a loss insured against happens, or performance becomes unlawful at the place of the contract, or impossible, the omission to fulfill the warranty does not avoid the policy.

Section 74. The violation of a material warranty, or other material provision of a policy, on the part of either party thereto, entitles the other to rescind.

Section 75. A policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy.

Section 76. A breach of warranty without fraud merely exonerates an insurer from the time that it occurs, or where it is broken in its inception, prevents the policy from attaching to the risk.

Title 8
PREMIUM

Section 77. An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against. Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period provision applies.

Section 78. An acknowledgment in a policy or contract of insurance or the receipt of premium is conclusive evidence of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium is actually paid.

Section 79. A person insured is entitled to a return of premium, as follows:

(a) To the whole premium if no part of his interest in the thing insured be exposed to any of the perils insured against;

(b) Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium as corresponds with the unexpired time, at a pro rata rate, unless a short period rate has been agreed upon and appears on the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has previously accrued; Provided, That no holder of a life insurance policy may avail himself of the privileges of this paragraph without sufficient cause as otherwise provided by law.

Section 80. If a peril insured against has existed, and the insurer has been liable for any period, however short, the insured is not entitled to return of premiums, so far as that particular risk is concerned.

Section 81. A person insured is entitled to return of the premium when the contract is voidable, on account of fraud or misrepresentation of the insurer, or of his agent, or on account of facts, the existence of which the insured was ignorant without his fault; or when by any default of the insured other than actual fraud, the insurer never incurred any liability under the policy.

Section 82. In case of an over-insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.

Title 9
LOSS

Section 83. An agreement not to transfer the claim of the insured against the insurer after the loss has happened, is void if made before the loss except as otherwise provided in the case of life insurance.

Section 84. Unless otherwise provided by the policy, an insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss which the peril insured against was only a remote cause.

Section 85. An insurer is liable where the thing insured is rescued from a peril insured against that would otherwise have caused a loss, if, in the course of such rescue, the thing is exposed to a peril not insured against, which permanently deprives the insured of its possession, in whole or in part; or where a loss is caused by efforts to rescue the thing insured from a peril insured against.

Section 86. Where a peril is especially excepted in a contract of insurance, a loss, which would not have occurred but for such peril, is thereby excepted although the immediate cause of the loss was a peril which was not excepted.

Section 87. An insurer is not liable for a loss caused by the willful act or through the connivance of the insured; but he is not exonerated by the negligence of the insured, or of the insurance agents or others.

Title 10
NOTICE OF LOSS

Section 88. In case of loss upon an insurance against fire, an insurer is exonerated, if notice thereof be not given to him by an insured, or some person entitled to the benefit of the insurance, without unnecessary delay.

Section 89. When a preliminary proof of loss is required by a policy, the insured is not bound to give such proof as would be necessary in a court of justice; but it is sufficient for him to give the best evidence which he has in his power at the time.

Section 90. All defects in a notice of loss, or in preliminary proof thereof, which the insured might remedy, and which the insurer omits to specify to him, without unnecessary delay, as grounds of objection, are waived.

Section 91. Delay in the presentation to an insurer of notice or proof of loss is waived if caused by any act of him, or if he omits to take objection promptly and specifically upon that ground.

Section 92. If the policy requires, by way of preliminary proof of loss, the certificate or testimony of a person other than the insured, it is sufficient for the insured to use reasonable diligence to procure it, and in case of the refusal of such person to give it, then to furnish reasonable evidence to the insurer that such refusal was not induced by any just grounds of disbelief in the facts necessary to be certified or testified.

Title 11
DOUBLE INSURANCE

Section 93. A double insurance exists where the same person is insured by several insurers separately in respect to the same subject and interest.

Section 94. Where the insured is overinsured by double insurance:

(a) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts;

(b) Where the policy under which the insured claims is a valued policy, the insured must give credit as against the valuation for any sum received by him under any other policy without regard to the actual value of the subject matter insured;

(c) Where the policy under which the insured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any policy;

(d) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves;

(e) Each insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract.

Title 12
REINSURANCE

Section 95. A contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance.

Section 96. Where an insurer obtains reinsurance, except under automatic reinsurance treaties, he must communicate all the representations of the original insured, and also all the knowledge and information he possesses, whether previously or subsequently acquired, which are material to the risk.

Section 97. A reinsurance is presumed to be a contract of indemnity against liability, and not merely against damage.

Section 98. The original insured has no interest in a contract of reinsurance.

Chapter II
CLASSES OF INSURANCE

Title I
MARINE INSURANCE

Sub-Title 1-A
DEFINITION

Section 99. Marine Insurance includes:

(1) Insurance against loss of or damage to:

(a) Vessels, craft, aircraft, vehicles, goods, freights, cargoes, merchandise, effects, disbursements, profits, moneys, securities, choses in action, evidences of debts, valuable papers, bottomry, and respondentia interests and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage, transhipment, or reshipment incident thereto, including war risks, marine builder’s risks, and all personal property floater risks;

(b) Person or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of ownership, maintenance, or use of automobiles);

(c) Precious stones, jewels, jewelry, precious metals, whether in course of transportation or otherwise;

(d) Bridges, tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage); piers, wharves, docks and slips, and other aids to navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control of waterways.

(2) “Marine protection and indemnity insurance,” meaning insurance against, or against legal liability of the insured for loss, damage, or expense incident to ownership, operation, chartering, maintenance, use, repair, or construction of any vessel, craft or instrumentality in use of ocean or inland waterways, including liability of the insured for personal injury, illness or death or for loss of or damage to the property of another person.

Sub-Title 1-B
INSURABLE INTEREST

Section 100. The owner of a ship has in all cases an insurable interest in it, even when it has been chartered by one who covenants to pay him its value in case of loss: Provided, That in this case the insurer shall be liable for only that part of the loss which the insured cannot recover from the charterer.

Section 101. The insurable interest of the owner of the ship hypothecated by bottomry is only the excess of its value over the amount secured by bottomry.

Section 102. Freightage, in the sense of a policy of marine insurance, signifies all the benefits derived by the owner, either from the chartering of the ship or its employment for the carriage of his own goods or those of others.

Section 103. The owner of a ship has an insurable interest in expected freightage which according to the ordinary and probable course of things he would have earned but for the intervention of a peril insured against or other peril incident to the voyage.

Section 104. The interest mentioned in the last section exists, in case of a charter party, when the ship has broken ground on the chartered voyage. If a price is to be paid for the carriage of goods it exists when they are actually on board, or there is some contract for putting them on board, and both ship and goods are ready for the specified voyage.

Section 105. One who has an interest in the thing from which profits are expected to proceed has an insurable interest in the profits.

Section 106. The charterer of a ship has an insurable interest in it, to the extent that he is liable to be damnified by its loss.

Sub-Title 1-C
CONCEALMENT

Section 107. In marine insurance each party is bound to communicate, in addition to what is required by section twenty-eight, all the information which he possesses, material to the risk, except such as is mentioned in Section thirty, and to state the exact and whole truth in relation to all matters that he represents, or upon inquiry discloses or assumes to disclose.

Section 108. In marine insurance, information of the belief or expectation of a third person, in reference to a material fact, is material.

Section 109. A person insured by a contract of marine insurance is presumed to have knowledge, at the time of insuring, of a prior loss, if the information might possibly have reached him in the usual mode of transmission and at the usual rate of communication.

Section 110. A concealment in a marine insurance, in respect to any of the following matters, does not vitiate the entire contract, but merely exonerates the insurer from a loss resulting from the risk concealed:

(a) The national character of the insured;

(b) The liability of the thing insured to capture and detention;

(c) The liability to seizure from breach of foreign laws of trade;

(d) The want of necessary documents;

(e) The use of false and simulated papers.

Sub-Title 1-D
REPRESENTATION

Section 111. If a representation by a person insured by a contract of marine insurance, is intentionally false in any material respect, or in respect of any fact on which the character and nature of the risk depends, the insurer may rescind the entire contract.

Section 112. The eventual falsity of a representation as to expectation does not, in the absence of fraud, avoid a contract of marine insurance.

Sub-Title 1-E
IMPLIED WARRANTIES

Section 113. In every marine insurance upon a ship or freight, or freightage, or upon any thing which is the subject of marine insurance, a warranty is implied that the ship is seaworthy.

Section 114. A ship is seaworthy when reasonably fit to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties to the policy.

Section 115. An implied warranty of seaworthiness is complied with if the ship be seaworthy at the time of the of commencement of the risk, except in the following cases:

(a) When the insurance is made for a specified length of time, the implied warranty is not complied with unless the ship be seaworthy at the commencement of every voyage it undertakes during that time;

(b) When the insurance is upon the cargo which, by the terms of the policy, description of the voyage, or established custom of the trade, is to be transhipped at an intermediate port, the implied warranty is not complied with unless each vessel upon which the cargo is shipped, or transhipped, be seaworthy at the commencement of each particular voyage.

Section 116. A warranty of seaworthiness extends not only to the condition of the structure of the ship itself, but requires that it be properly laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment, such as ballasts, cables and anchors, cordage and sails, food, water, fuel and lights, and other necessary or proper stores and implements for the voyage.

Section 117. Where different portions of the voyage contemplated by a policy differ in respect to the things requisite to make the ship seaworthy therefor, a warranty of seaworthiness is complied with if, at the commencement of each portion, the ship is seaworthy with reference to that portion.

Section 118. When the ship becomes unseaworthy during the voyage to which an insurance relates, an unreasonable delay in repairing the defect exonerates the insurer on ship or shipowner’s interest from liability from any loss arising therefrom.

Section 119. A ship which is seaworthy for the purpose of an insurance upon the ship may, nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of the insurance upon the cargo.

Section 120. Where the nationality or neutrality of a ship or cargo is expressly warranted, it is implied that the ship will carry the requisite documents to show such nationality or neutrality and that it will not carry any documents which cast reasonable suspicion thereon.

Sub-Title 1-F
THE VOYAGE AND DEVIATION

Section 121. When the voyage contemplated by a marine insurance policy is described by the places of beginning and ending, the voyage insured in one which conforms to the course of sailing fixed by mercantile usage between those places.

Section 122. If the course of sailing is not fixed by mercantile usage, the voyage insured by a marine insurance policy is that way between the places specified, which to a master of ordinary skill and discretion, would mean the most natural, direct and advantageous.

Section 123. Deviation is a departure from the course of the voyage insured, mentioned in the last two sections, or an unreasonable delay in pursuing the voyage or the commencement of an entirely different voyage.

Section 124. A deviation is proper:

(a) When caused by circumstances over which neither the master nor the owner of the ship has any control;

(b) When necessary to comply with a warranty, or to avoid a peril, whether or not the peril is insured against;

(c) When made in good faith, and upon reasonable grounds of belief in its necessity to avoid a peril; or

(d) When made in good faith, for the purpose of saving human life or relieving another vessel in distress.

Section 125. Every deviation not specified in the last section is improper.

Section 126. An insurer is not liable for any loss happening to the thing insured subsequent to an improper deviation.

Sub-Title 1-G
LOSS

Section 127. A loss may be either total or partial.

Section 128. Every loss which is not total is partial.

Section 129. A total loss may be either actual or constructive.

Section 130. An actual total loss is cause by:

(a) A total destruction of the thing insured;

(b) The irretrievable loss of the thing by sinking, or by being broken up;

(c) Any damage to the thing which renders it valueless to the owner for the purpose for which he held it; or

(d) Any other event which effectively deprives the owner of the possession, at the port of destination, of the thing insured.

Section 131. A constructive total loss is one which gives to a person insured a right to abandon, under Section one hundred thirty-nine.

Section 132. An actual loss may be presumed from the continued absence of a ship without being heard of. The length of time which is sufficient to raise this presumption depends on the circumstances of the case.

Section 133. When a ship is prevented, at an intermediate port, from completing the voyage, by the perils insured against, the liability of a marine insurer on the cargo continues after they are thus reshipped.

Nothing in this section shall prevent an insurer from requiring an additional premium if the hazard be increased by this extension of liability.

Section 134. In addition to the liability mentioned in the last section, a marine insurer is bound for damages, expenses of discharging, storage, reshipment, extra freightage, and all other expenses incurred in saving cargo reshipped pursuant to the last section, up to the amount insured.

Nothing in this or in the preceding section shall render a marine insurer liable for any amount in excess of the insured value or, if there be none, of the insurable value.

Section 135. Upon an actual total loss, a person insured is entitled to payment without notice of abandonment.

Section 136. Where it has been agreed that an insurance upon a particular thing, or class of things, shall be free from particular average, a marine insurer is not liable for any particular average loss not depriving the insured of the possession, at the port of destination, of the whole of such thing, or class of things, even though it becomes entirely worthless; but such insurer is liable for his proportion of all general average loss assessed upon the thing insured.

Section 137. An insurance confined in terms to an actual loss does not cover a constructive total loss, but covers any loss, which necessarily results in depriving the insured of the possession, at the port of destination, of the entire thing insured.

Sub-Title 1-H
ABANDONMENT

Section 138. Abandonment, in marine insurance, is the act of the insured by which, after a constructive total loss, he declares the relinquishment to the insurer of his interest in the thing insured.

Section 139. A person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy, or otherwise separately insured, and recover for a total loss thereof, when the cause of the loss is a peril insured against:

(a) If more than three-fourths thereof in value is actually lost, or would have to be expended to recover it from the peril;

(b) If it is injured to such an extent as to reduce its value more than three-fourths;

(c) If the thing insured is a ship, and the contemplated voyage cannot be lawfully performed without incurring either an expense to the insured of more than three-fourths the value of the thing abandoned or a risk which a prudent man would not take under the circumstances; or

(d) If the thing insured, being cargo or freightage, and the voyage cannot be performed, nor another ship procured by the master, within a reasonable time and with reasonable diligence, to forward the cargo, without incurring the like expense or risk mentioned in the preceding sub-paragraph. But freightage cannot in any case be abandoned unless the ship is also abandoned.

Section 140. An abandonment must be neither partial nor conditional.

Section 141. An abandonment must be made within a reasonable time after receipt of reliable information of the loss, but where the information is of a doubtful character, the insured is entitled to a reasonable time to make inquiry.

Section 142. Where the information upon which an abandonment has been made proves incorrect, or the thing insured was so far restored when the abandonment was made that there was then in fact no total loss, the abandonment becomes ineffectual.

Section 143. Abandonment is made by giving notice thereof to the insurer, which may be done orally, or in writing; Provided, That if the notice be done orally, a written notice of such abandonment shall be submitted within seven days from such oral notice.

Section 144. A notice of abandonment must be explicit, and must specify the particular cause of the abandonment, but need state only enough to show that there is probable cause therefor, and need not be accompanied with proof of interest or of loss.

Section 145. An abandonment can be sustained only upon the cause specified in the notice thereof.

Section 146. An abandonment is equivalent to a transfer by the insured of his interest to the insurer, with all the chances of recovery and indemnity.

Section 147. If a marine insurer pays for a loss as if it were an actual total loss, he is entitled to whatever may remain of the thing insured, or its proceeds or salvage, as if there had been a formal abandonment.

Section 148. Upon an abandonment, acts done in good faith by those who were agents of the insured in respect to the thing insured, subsequent to the loss, are at the risk of the insurer and for his benefit.

Section 149. Where notice of abandonment is properly given, the rights of the insured are not prejudiced by the fact that the insurer refuses to accept the abandonment.

Section 150. The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer for an unreasonable length of time after notice shall be construed as an acceptance.

Section 151. The acceptance of an abandonment, whether express or implied, is conclusive upon the parties, and admits the loss and the sufficiency of the abandonment.

Section 152. An abandonment once made and accepted is irrevocable, unless the ground upon which it was made proves to be unfounded.

Section 153. On an accepted abandonment of a ship, freightage earned previous to the loss belongs to the insurer of said freightage; but freightage subsequently earned belongs to the insurer of the ship.

Section 154. If an insurer refuses to accept a valid abandonment, he is liable as upon actual total loss, deducting from the amount any proceeds of the thing insured which may have come to the hands of the insured.

Section 155. If a person insured omits to abandon, he may nevertheless recover his actual loss.

Sub-Title 1-I
MEASURE OF INDEMNITY

Section 156. A valuation in a policy of marine insurance in conclusive between the parties thereto in the adjustment of either a partial or total loss, if the insured has some interest at risk, and there is no fraud on his part; except that when a thing has been hypothecated by bottomry or respondentia, before its insurance, and without the knowledge of the person actually procuring the insurance, he may show the real value. But a valuation fraudulent in fact, entitles the insurer to rescind the contract.

Section 157. A marine insurer is liable upon a partial loss, only for such proportion of the amount insured by him as the loss bears to the value of the whole interest of the insured in the property insured.

Section 158. Where profits are separately insured in a contract of marine insurance, the insured is entitled to recover, in case of loss, a proportion of such profits equivalent to the proportion which the value of the property lost bears to the value of the whole.

Section 159. In case of a valued policy of marine insurance on freightage or cargo, if a part only of the subject is exposed to the risk, the evaluation applies only in proportion to such part.

Section 160. When profits are valued and insured by a contract of marine insurance, a loss of them is conclusively presumed from a loss of the property out of which they are expected to arise, and the valuation fixes their amount.

Section 161. In estimating a loss under an open policy of marine insurance the following rules are to be observed:

(a) The value of a ship is its value at the beginning of the risk, including all articles or charges which add to its permanent value or which are necessary to prepare it for the voyage insured;

(b) The value of the cargo is its actual cost to the insured, when laden on board, or where the cost cannot be ascertained, its market value at the time and place of lading, adding the charges incurred in purchasing and placing it on board, but without reference to any loss incurred in raising money for its purchase, or to any drawback on its exportation, or to the fluctuation of the market at the port of destination, or to expenses incurred on the way or on arrival;

(c) The value of freightage is the gross freightage, exclusive of primage, without reference to the cost of earning it; and

(d) The cost of insurance is in each case to be added to the value thus estimated.

Section 162. If cargo insured against partial loss arrives at the port of destination in a damaged condition, the loss of the insured is deemed to be the same proportion of the value which the market price at that port, of the thing so damaged, bears to the market price it would have brought if sound.

Section 163. A marine insurer is liable for all the expenses attendant upon a loss which forces the ship into port to be repaired; and where it is stipulated in the policy that the insured shall labor for the recovery of the property, the insurer is liable for the expense incurred thereby, such expense, in either case, being in addition to a total loss, if that afterwards occurs.

Section 164. A marine insurer is liable for a loss falling upon the insured, through a contribution in respect to the thing insured, required to be made by him towards a general average loss called for by a peril insured against; provided, that the liability of the insurer shall be limited to the proportion of contribution attaching to his policy value where this is less than the contributing value of the thing insured.

Section 165. When a person insured by a contract of marine insurance has a demand against others for contribution, he may claim the whole loss from the insurer, subrogating him to his own right to contribution. But no such claim can be made upon the insurer after the separation of the interests liable to the contribution, nor when the insured, having the right and opportunity to enforce the contribution from others, has neglected or waived the exercise of that right.

Section 166. In the case of a partial loss of ship or its equipment, the old materials are to be applied towards payment for the new. Unless otherwise stipulated in the policy, a marine insurer is liable for only two-thirds of the remaining cost of repairs after such deduction, except that anchors must be paid in full.

Title 2
FIRE INSURANCE

Section 167. As used in this Code, the term “fire insurance” shall include insurance against loss by fire, lightning, windstorm, tornado or earthquake and other allied risks, when such risks are covered by extension to fire insurance policies or under separate policies.

Section 168. An alteration in the use or condition of a thing insured from that to which it is limited by the policy made without the consent of the insurer, by means within the control of the insured, and increasing the risks, entitles an insurer to rescind a contract of fire insurance.

Section 169. An alteration in the use or condition of a thing insured from that to which it is limited by the policy, which does not increase the risk, does not affect a contract of fire insurance.

Section 170. A contract of fire insurance is not affected by any act of the insured subsequent to the execution of the policy, which does not violate its provisions, even though it increases the risk and is the cause of the loss.

Section 171. If there is no valuation in the policy, the measure of indemnity in an insurance against fire is the expense it would be to the insured at the time of the commencement of the fire to replace the thing lost or injured in the condition in which at the time of the injury; but if there is a valuation in a policy of fire insurance, the effect shall be the same as in a policy of marine insurance.

Section 172. Whenever the insured desires to have a valuation named in his policy, insuring any building or structure against fire, he may require such building or structure to be examined by an independent appraiser and the value of the insured’s interest therein may then be fixed as between the insurer and the insured. The cost of such examination shall be paid for by the insured. A clause shall be inserted in such policy stating substantially that the value of the insured’s interest in such building or structure has been thus fixed. In the absence of any change increasing the risk without the consent of the insurer or of fraud on the part of the insured, then in case of a total loss under such policy, the whole amount so insured upon the insured’s interest in such building or structure, as stated in the policy upon which the insurers have received a premium, shall be paid, and in case of a partial loss the full amount of the partial loss shall be so paid, and in case there are two or more policies covering the insured’s interest therein, each policy shall contribute pro rata to the payment of such whole or partial loss. But in no case shall the insurer be required to pay more than the amount thus stated in such policy. This section shall not prevent the parties from stipulating in such policies concerning the repairing, rebuilding or replacing of buildings or structures wholly or partially damaged or destroyed.

Section 173. No policy of fire insurance shall be pledged, hypothecated, or transferred to any person, firm or company who acts as agent for or otherwise represents the issuing company, and any such pledge, hypothecation, or transfer hereafter made shall be void and of no effect insofar as it may affect other creditors of the insured.

Title 3
CASUALTY INSURANCE

Section 174. Casualty insurance is insurance covering loss or liability arising from accident or mishap, excluding certain types of loss which by law or custom are considered as falling exclusively within the scope of other types of insurance such as fire or marine. It includes, but is not limited to, employer’s liability insurance, motor vehicle liability insurance, plate glassinsurance, burglary and theft insurance, personal accident and health insurance as written by non-life insurance companies, and other substantially similar kinds of insurance.

Title 4
SURETYSHIP

Section 175. A contract of suretyship is an agreement whereby a party called the surety guarantees the performance by another party called the principal or obligor of an obligation or undertaking in favor of a third party called the obligee. It includes official recognizances, stipulations, bonds or undertakings issued by any company by virtue of and under the provisions of Act No. 536, as amended by Act No. 2206.

Section 176. The liability of the surety or sureties shall be joint and several with the obligor and shall be limited to the amount of the bond. It is determined strictly by the terms of the contract of suretyship in relation to the principal contract between the obligor and the obligee. (As amended by Presidential Decree No. 1455)

Section 177. The surety is entitled to payment of the premium as soon as the contract of suretyship or bond is perfected and delivered to the obligor. No contract of suretyship or bonding shall be valid and binding unless and until the premium therefor has been paid, except where the obligee has accepted the bond, in which case the bond becomes valid and enforceable irrespective of whether or not the premium has been paid by the obligor to the surety; Provided, That if the contract of suretyship or bond is not accepted by, or filed with the obligee, the surety shall collect only reasonable amount, not exceeding fifty per centum of the premium due thereon as service fee plus the cost of stamps or other taxes imposed for the issuance of the contract or bond; Provided, however, That if the non-acceptance of the bond be due to the fault or negligence of the surety, no such service fee, stamps or taxes shall be collected.

In the case of a continuing bond, the obligor shall pay the subsequent annual premium as it falls due until the contract of suretyship is cancelled by the obligee or by the Commissioner or by a court of competent jurisdiction, as the case may be.

Section 178. Pertinent provisions of the Civil Code of the Philippines shall be applied in a suppletory character whenever necessary in interpreting the provisions of a contract of suretyship.

Title 5
LIFE INSURANCE

Section 179. Life insurance is insurance on human lives and insurance appertaining thereto or connected therewith.

Section 180. An insurance upon life may be made payable on the death of the person, or on his surviving a specified period, or otherwise contingently on the continuance or cessation of life.

Every contract or pledge for the payment of endowments or annuities shall be considered a life insurance contract for purpose of this Code

In the absence of a judicial guardian, the father, or in the latter’s absence or incapacity, the mother, or any minor, who is an insured or a beneficiary under a contract of life, health or accident insurance, may exercise, in behalf of said minor, any right under the policy, without necessity of court authority or the giving of a bond, where the interest of the minor in the particular act involved does not exceed twenty thousand pesos. Such right may include, but shall not be limited to, obtaining a policy loan, surrendering the policy, receiving the proceeds of the policy, and giving the minor’s consent to any transaction on the policy.

Section 181. A policy of insurance upon life or health may pass by transfer, will or succession to any person, whether he has an insurable interest or not, and such person may recover upon it whatever the insured might have recovered.

Section 182. Notice to an insurer of a transfer or bequest thereof is not necessary to preserve the validity of a policy of insurance upon life or health, unless thereby expressly required.

Section 183. Unless the interest of a person insured is susceptible of exact pecuniary measurement, the measure of indemnity under a policy of insurance upon life or health is the sum fixed in the policy.

Chapter III
THE BUSINESS OF INSURANCE

Title 1
INSURANCE COMPANIES: ORGANIZATION, CAPITALIZATION AND AUTHORIZATION

Section 184. For purposes of this Code, the term “insurer” or “insurance company” shall include all individuals, partnerships, associations, or corporations, including government-owned or controlled corporations or entities, engaged as principals in the insurance business, excepting mutual benefit associations. Unless the context otherwise requires, the terms shall also include professional reinsurers defined in section two hundred eighty. “Domestic company” shall include companies formed, organized or existing under the laws of the Philippines. “Foreign company” when used without limitation shall include companies formed, organized, or existing under any laws other than those of the Philippines.

Section 185. Corporations formed or organized to save any person or persons or other corporations harmless from loss, damage, or liability arising from any unknown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance with contractual obligations or the payment of debt of others shall be known as “insurance corporations”.

The provisions of the Corporation Law shall apply to all insurance corporations now or hereafter engaged in business in the Philippines insofar as they do not conflict with the provisions of this chapter.

Section 186. No person, partnership, or association of persons shall transact any insurance business in the Philippines except as agent of a person or corporation authorized to do the business of insurance in the Philippines, unless possessed of the capital and assets required of an insurance corporation doing the same kind of business in the Philippines and invested in the same manner; nor unless the Commissioner shall have granted to him or them a certificate to the effect that he or they have complied with all the provisions of law which an insurance corporation doing business in the Philippines is required to observe.

Every person, partnership, or association receiving any such certificate of authority shall be subject to the insurance laws of the Philippines and to the jurisdiction and supervision of the Commissioner in the same manner as if an insurance corporation authorized by the laws of the Philippines to engage in the business of insurance specified in the certificate.

Section 187. No insurance company shall transact any insurance business in the Philippines until after it shall have obtained a certificate of authority for that purpose from the Commissioner upon application therefor and payment by the company concerned of the fees hereinafter prescribed.

The Commissioner may refuse to issue a certificate of authority to any insurance company if, in his judgment, such refusal will best promote the interest of the people of this country. No such certificate of authority shall be granted to any such company until the Commissioner shall have satisfied himself by such examination as he may make and such evidence as he may require that such company is qualified by the laws of the Philippines to transact business therein, that the grant of such authority appears to be justified in the light of economic requirements, and that the direction and administration, as well as the integrity and responsibility of the organizers and administrators, the financial organization and the amount of capital, notwithstanding the provisions of section one hundred eighty-eight, reasonably assure the safety of the interests of the policyholders and the public.

In order to maintain the quality of the management of the insurance companies and afford better protection to policyholders and the public in general, any person of good moral character, unquestioned integrity and recognized competence may be elected or appointed director or officer of insurance companies. The Commissioner shall prescribe the qualifications of the executive officers and other key officials of insurance companies for purposes of this section.

No person shall concurrently be a director and/or officer of an insurance company and an adjustment company.

Incumbent directors and/or officers affected by the above provisions are hereby allowed to hold on to their positions until the end of their terms or two years from the effectivity of this decree, whichever is shorter.

Before issuing such certificate of authority, the Commissioner must be satisfied that the name of the company is not that of any other known company transacting a similar business in the Philippines, or a name so similar as to be calculated to mislead the public.

Such certificate of authority shall expire on the last day of June of each year and shall be renewed annually if the company is continuing to comply with the provisions of this Code or the circulars, instructions, rulings or decisions of the Commissioner. Every company receiving any such certificates of authority shall be subject to the provisions of this Code and other related laws and to the jurisdiction and supervision of the Commissioner.

No insurance company may be authorized to transact in the Philippines the business of life and non-life insurance concurrently unless specifically authorized to do so; Provided, That the terms “life” and “non-life” insurance shall be deemed to include health, accident and disability insurance.

No insurance company shall have equity in an adjustment company and neither shall an adjustment company have an equity in an insurance company.

Insurance companies and adjustment companies presently affected by the above provision shall have two years from the effectivity of this Decree within which to divest of their stockholdings. (As amended by Presidential Decree No. 1455).

Section 188. Except as provided in section two hundred eighty-one, no domestic insurance company shall, in a stock corporation, engage in business in the Philippines unless possessed of a paid-up capital stock equal to at least five million pesos; Provided, That a domestic insurance company already doing business in the Philippines with a paid-up capital stock which is less than five million pesos shall have a paid-up capital stock of at least three million pesos by December thirty-one, nineteen hundred seventy-eight, four million pesos by December thirty-one, nineteen hundred seventy-nine and five million pesos by December thirty-one, nineteen hundred eighty; Provided, further, that the Secretary of Finance may, upon recommendation of the Insurance Commissioner, increase such minimum paid-up capital stock requirement, under such terms and conditions as he may impose, to an amount which, in his opinion, would reasonably assure the safety of the interests of the policyholders and the public.

The Commissioner may, as a pre-licensing requirement of a new insurance company, in addition to the paid-up capital stock, require the stockholders to pay in cash to the company in proportion to their subscription interests a contributed surplus fund of not less than one million pesos, in the case of a life insurance company, or not less than five hundred thousand pesos, in the case of an insurance company other than life. He may also require such company to submit to him a business plan showing the company’s estimated receipts and disbursements, as well as the basis therefor, for the next succeeding three years.

If organized as a mutual company, in lieu of such capital stock, it must have available cash assets of at least five million pesos above all liabilities for losses reported, expenses, taxes, legal reserve, and reinsurance of all outstanding risks, and the contributed surplus fund equal to the amounts required of stock corporations. A stock insurance company doing business in the Philippines may, subject to the pertinent law and regulations which now are of hereafter may be in force, alter its organization and transform itself into a mutual insurance company. (As amended by Presidential Decree No. 1455).

Section 189. Every company must, before engaging in the business of insurance in the Philippines, file with the Commissioner the following:

(a) A certified copy of the last annual statement or a verified financial statement exhibiting the condition and affairs of such company;

(b) If incorporated under the laws of the Philippines, a copy of the articles of incorporation and by-laws, and any amendments to either, certified by the Securities and Exchange Commission to be a copy of that which is filed in its Office;

(c) If incorporated under any laws other than those of the Philippines, a certificate from the Securities and Exchange Commission showing that it is duly registered in the mercantile registry of that Commission in accordance with the Corporation Law. A copy of the articles of incorporation and by-laws, and any amendments to either, if organized or formed under any law requiring such to be filed, duly certified by the officer having the custody of same, or if not so organized, a copy of the law, charter or deed of settlement under which the deed of organization is made, duly certified by the proper custodian thereof, or proved by affidavit to be a copy; also, a certificate under the hand and seal of the proper officer of such state or country having supervision of insurance business therein, if any there be, that such corporation or company is organized under the laws of such state or country, with the amount of capital stock or assets and legal reserve required by this Code;

(d) If not incorporated and of foreign domicile, aside from the certificate mentioned in paragraph (c) of this section, a certificate setting forth the nature and character of the business, the location of the principal office, the name of the individual or names of the persons composing the partnership or association, the amount of actual capital employed or to be employed therein and the names of all officers and persons by whom the business is or may be managed.

The certificate must be verified by the affidavit of the chief officer, secretary, agent, or manager of the company; and if there are any written articles of agreement of the company, a copy thereof must be accompany such certificate.

Section 190. The Commissioner must require as a condition precedent to the transaction of insurance business in the Philippines by any foreign insurance company, that such company file in his office a written power of attorney designating some person who shall be a resident of the Philippines as its general agent, on whom any notice provided by law or by any insurance policy, proof of loss, summons and other legal processes may be served in all actions or other legal proceedings against such company, and consenting that service upon such general agent shall be admitted and held as valid as if served upon the foreign company at its home office. Any such foreign company shall, as further condition precedent to the transaction of insurance business in the Philippines, make and file with the Commissioner an agreement or stipulation, executed by the proper authorities of said company in form and substance as follows:

“The (name of company) does hereby stipulate and agree in consideration of the permission granted by the Insurance Commissioner to transact business in the Philippines, that if at any time said company shall leave the Philippines, or cease to transact business therein, or shall be without any agent in the Philippines on whom any notice, proof of loss, summons, or legal process may be served, then in any action or proceeding arising out any business or transaction which occurred in the Philippines, service of any notice provided by law, or insurance policy, proof of loss, summons, or other legal process may be made upon the Insurance Commissioner shall have the same force and effect as if made upon the company.”

Whenever such service of notice, proof of loss, summons, or other legal process shall be made upon the Commission, he must, within ten days thereafter, transmit by mail, postage paid, a copy of such notice, proof of loss, summons, or other legal process to the company at its home or principal office. The sending of such copy by the Commissioner shall be a necessary part of the service of the notice, proof of loss, or other legal process.

Section 191. No insurance company organized or existing under the government or laws other than those of the Philippines shall engage in business in the Philippines unless possessed of paid-up unimpaired capital or assets and reserve not less than that herein required of domestic insurance companies, nor until it shall have deposited with the Commissioner for the benefit and security of the policyholders and creditors of such company in the Philippines, securities satisfactory to the Commissioner consisting of good securities of the Philippines, including new issues of stock of “registered enterprises”, as this term is defined in Republic Act No. 5186, otherwise known as the Investment Incentives Act, as amended, to the actual market value of not less than the minimum paid-up capital required of domestic insurance companies: Provided, That at least fifty per centum of such securities shall consist of bonds or other evidences of debt of the Government of the Philippines, its political subdivisions and instrumentalists, or of government-owned or controlled corporations and entities, including the Central Bank. The total investment of a foreign insurance company in any registered enterprise shall not exceed twenty per centum of the net worth of said foreign insurance company nor twenty per centum of the capital of the registered enterprise, unless previously authorized in writing by the Commissioner.

For purposes of this Code, the net worth of a foreign insurance company shall refer only to its net worth in the Philippines.

Section 192. The Commissioner shall hold the securities, deposited as aforesaid, for the benefit and security of all the policyholders of the company depositing the same, but shall as long as the company is solvent, permit the company to collect the interest or dividends on the securities so deposited, and, from time to time, with his assent, to withdraw any of such securities, upon depositing with said Commissioner other like securities, the market value of which shall be equal to the market value of such as may be withdrawn. In the event of any company ceasing to do business in the Philippines the securities deposited as aforesaid shall be returned upon the company’s making application therefor and proving to the satisfaction of the Commissioner that it has no further liability under any of its policies in the Philippines.

Section 193. Every foreign company doing business in the Philippines shall set aside an amount corresponding to the legal reserves of the policies written in the Philippines and invest and keep the same therein in accordance with the provisions of this section. The legal reserve therein required to be set aside shall be invested only in the classes of the Philippine securities described in section two hundred; Provided, however, That no investment in stocks or bonds of any single entity shall, in the aggregate exceed twenty per centum of the net worth of the investing company or twenty per centum of the capital of the issuing company, whichever is the lesser unless otherwise approved in writing by the Commissioner. The securities purchased and kept in the Philippines under this section, shall not be sent out of the territorial jurisdiction of the Philippines without the written consent of the Commissioner.

Title 2
MARGIN OF INSOLVENCY

Section 194. An insurance company doing business in the Philippines shall at all times maintain a margin of solvency which shall be an excess of the value of its admitted assets exclusive of its paid-up capital, in the case of a domestic company, or an excess of the value of its admitted assets in the Philippines, exclusive of its security deposits, in the case of a foreign company, over the amount of its liabilities, unearned premium and reinsurance reserves in the Philippines of at least two per mille of the total amount of its insurance in force as of the preceding calendar year on all policies, except term insurance, in the case of a life insurance company, or of at least ten per centum of the total amount of its net premium written during the preceding calendar year, in the case of a company other than a life insurance company; Provided, That in either case, such margin shall in no event be less than five hundred thousand pesos; and Provided, further, That the term “paid-up capital” shall not include contributed surplus and capital paid in excess of par value. Such assets, liabilities and reserves shall exclude assets, liabilities and reserves included in separate accounts established in accordance with section two hundred thirty-seven. Whenever the aforementioned margin be found to be less than that herein required to be maintained, the Commissioner shall forthwith direct the company to make good any such deficiency by cash, to be contributed by all stockholders of record in proportion to their respective interest, and paid to the treasurer of the company, within fifteen days from receipt of the order; Provided, That the company in the interim shall not be permitted to take any new risk of any kind or character unless and until it make good any such deficiency; Provided, further, that a stockholder who aside from paying the contribution due from him, pays the contribution due from the another stockholder by reason of the failure or refusal of the latter to do so, shall have a lien on the certificates of stock of the insurance company concerned appearing in its books in the name of the defaulting stockholder on the date of default, as well as on any interests or dividends that have accrued or will accrue to the said certificates of stock, until the corresponding payment or reimbursement is made by the defaulting stockholder. (As amended by Presidential Decree No. 1455)

Section 195. No domestic insurance corporation shall declare or distribute any dividend on its outstanding stocks except from profits attested in a sworn statement to the Commissioner by the president or treasurer of the corporation to be remaining on hand after retaining unimpaired:

(a) The entire paid-up capital stock;

(b) The margin of solvency required by section one hundred ninety-four;

(c) In the case of life insurance corporation, the legal reserve fund required by section two hundred eleven;

(d) In the case of corporations other than life, the legal reserve fund required by section two hundred thirteen;

(e) A sum sufficient to pay all net losses reported, or in the course of settlement, and all liabilities for expenses and taxes.

Any dividend declared or distributed under the preceding paragraph shall be reported to the Commissioner within thirty days after such declaration or distribution.

If the Commissioner finds that any such corporation has declared or distributed any such dividend in violation of this section, he may order such corporation to cease and desist from doing business until the amount of such dividend or the portion thereof in excess of the amount allowed under this section has been restored to said corporation.

Title 3
ASSETS

Section 196. In any determination of the financial condition of any insurance company doing business in the Philippines, there shall be allowed and admitted as assets only such assets owned by the insurance company concerned and which consist of:

1. Cash in the possession of the insurance company or in transit under its control, and the true and duly verified balance of any deposit of such company in a financially sound commercial bank or trust company.

2. Investments in securities, including money market instruments, and in real property acquired or held in accordance with and subject to the applicable provisions of this Code and the income realized therefrom or accrued thereon.

3. Loans granted by the insurance company concerned to the extent of that portion thereof adequately secured by non-speculative assets with readily realizable values in accordance with and subject to the limitations imposed by applicable provisions of this Code.

4. Policy loans and other policy assets and liens on policies, contracts or certificates of a life insurance company, in an amount not exceeding legal reserves and other policy liabilities carried on each individual life insurance policy, contract or certificate.

5. The net amount of uncollected and deferred premiums and annuity considerations in the case of a life insurance company which carries the full mean tabular reserve liability.

6. Reinsurance recoverable by the ceding insurer: (a) from an insurer authorized to transact business in this country, the full amount thereof; or (b) from an insurer not authorized in this country, in an amount not exceeding the liabilities carried by the ceding insurer for amounts withheld under a reinsurance treaty with such unauthorized insurer as security for the payment of obligations thereunder if such funds are held subject to withdrawal by, and under the control of, the ceding insurer. The Commissioner may prescribe the conditions under which a ceding insurer may be allowed credit, as an asset or as a deduction from loss and unearned premium reserves, for reinsurance recoverable from an insurer not authorized in this country but which presents satisfactory evidence that it meets the applicable standards of solvency required in this country.

7. Funds withheld by a ceding insurer under a reinsurance treaty, provided reserves for unpaid losses and unearned premiums are adequately provided.

8. Deposits or amounts recoverable from underwriting associations, syndicates and reinsurance funds, or from any suspended banking institution, to the extent deemed by the Commissioner to be available for the payment of losses and claims and values to be determined by him.

9. Electronic data processing machines, as may be authorized by the Commissioner to be acquired by the insurance company concerned, the acquisition cost of which to be amortized in equal annual amounts within a period of five years from the date of acquisition thereof.

10. Other assets, not inconsistent with the provisions of paragraphs 1 to 9 hereof, which are deemed by the Commissioner to be readily realizable and available for the payment of losses and claims at values to be determined by him.

Section 197. In addition to such assets as the Commissioner may from time to time determine to be non-admitted assets of insurance companies doing business in the Philippines, the following assets shall in no case be allowed as admitted assets of an insurance company doing business in the Philippines, in any determination of its financial condition:

1. Goodwill, trade names, and other like intangible assets.

2. Prepaid or deferred charges for expenses and commissions paid by such insurance company.

3. Advances to officers (other than policy loans), which are not adequately secured and which are not previously authorized by the Commissioner, as well as advances to employees, agents, and other persons on mere personal security.

4. Shares of stock of such insurance company, owned by it, or any equity therein as well as loans secured thereby, or any proportionate interest in such shares of stock through the ownership by such insurance company of an interest in another corporation or business unit.

5. Furniture, furnishing, fixtures, safes, equipment, library, stationery, literature, and supplies.

6. Items of bank credits representing checks, drafts or notes returned unpaid after the date of statement.

7. The amount, if any, by which the aggregate value of investments as carried in the ledger assets of such insurance company exceeds the aggregate value thereof as determined in accordance with the provisions of this Code and/or the rules of the Commissioner.

All non-admitted assets and all other assets of doubtful value or character included as ledger or non-ledger assets in any statement submitted by an insurance company to the Commissioner, or in any insurance examiner’s report to him, shall also be reported, to the extent of the value disallowed as deductions from the gross assets of such insurance company, except where the Commissioner permits a reserve to be carried among the liabilities of such insurance company in lieu of any such deduction.

Title 4
INVESTMENTS

Section 198. No insurance company shall loan any of its money or deposits to any person, corporation or association, except upon first mortgage or deeds of trust of unencumbered, improved or unimproved real estate, including condominiums, in cities and centers of population of municipalities in the Philippines when the amount of such loan is not in excess of seventy per centum of the market value of such real estate; or upon the security of first mortgages or deeds of trust of actually cultivated, improved and unencumbered agricultural lands in the Philippines when the amount of such loan is not in excess of forty per centum of the market value of such land; or upon the purchase money mortgages or like securities received by it upon the sale or exchange of real property acquired pursuant to sections two hundred and two hundred two; or upon bonds or other evidences of debt of the Government of the Philippines or its political subdivisions authorized by law to issue bonds, or upon bonds or other evidences of debt of government-owned or controlled corporations and instrumentalities including the Central Bank or upon obligations issued or guaranteed by the International Bank for Reconstruction and Development; or upon stocks, bonds or other evidences of debt as are specified in section two hundred.

A life insurance company, however, may lend to any of its policyholders upon the security of the value of its policy such sum as may be determined pursuant to the provisions of the policy.

Loans granted upon the security of real estate for a period longer than five years shall be amortized in monthly, quarterly, semi-annual or annual installments; Provided, That no such loans shall have a maturity in excess of twenty years.

The phrase “improved real estate” used above is hereby defined to mean land with permanent building or buildings erected or being erected thereon. Except as otherwise approved by the Commissioner, in case the building or buildings on land do not belong to the owner of the latter, no loan shall be granted on the security of the real estate in question unless both the owner of the building or buildings and the owner of the land sign the deed of mortgage, and unless the owner of the land is the Government of the Philippines or one of its political subdivisions, in which event the owner is not required to sign the deed of mortgage.

Section 199. No loan by any insurance company on the security of real estate shall be made unless the title to such real estate shall have first been registered in accordance with the existing Land Registration Act, or shall be a titulo real duly registered, or have been previously registered under the provisions of the existing Mortgage Law.

Section 200. (1) An insurance company may purchase, hold, own and convey such property, real and personal, as may have been mortgaged, pledged, or conveyed to it in good faith in trust for its benefit by reason of money loaned by it in pursuance of the regular business of the company, and such real or personal property as may have been purchased by it at sales under pledges, mortgages or deeds of trust for its benefit on account of money loaned by it; and such real and personal property as may have been conveyed to it by borrowers in satisfaction and discharge of loans made by the company to them: Provided, however, That any real estate purchased by an insurance company in payment or by reason of any loan made by it shall be sold by the company within twenty years after the title thereto has been vested in it.

(2) An insurance company may purchase, hold, own and convey real and personal property as follows:

(a) The lot with building thereon in which the company conducts and carries on its business.

(b) Bonds or other evidences of debt of the Government of the Philippines or its political subdivisions authorized by law to issue bonds at the reasonable market value thereof.

(c) Bonds or other evidences of debt of the government-owned or controlled corporations and entities, including the Central Bank.

(d) Bonds, debentures or other evidences of indebtedness of any solvent corporations or institution created or existing under the laws of the Philippines; Provided, however, That the issuing, assuming or guaranteeing entity or its predecessors shall not have defaulted in the payment of interest on any of its securities and that during each of any three including the last two of the five fiscal years next preceding the date of acquisition by such insurance company of such bonds, debentures, or other evidences of indebtedness, the net earnings of the issuing, assuming or guaranteeing institution available for its fixed charges, as hereinafter defined, shall have been not less than one and one-quarter times the total of its fixed charges for such year; and provided, further, that no life insurance company shall invest in or loan upon the obligations of any one institution in the kinds permitted under this sub-section an amount in excess of twenty-five per centum of the total admitted assets of such insurer as of December thirty-first next preceding the date of such investment.

As used in this sub-section the term “net earnings available for fixed charges” shall mean net income after deducting operating and maintenance expenses, taxes other than income taxes, depreciation and depletion; but excluding extraordinary non-recurring items of income or expense appearing in the regular financial statement of the issuing, assuming or guaranteeing institution. The term “fixed charges” shall include interest on funded and unfunded debt, amortization of debt discount, and rentals for leased properties.

(e) Preferred or guaranteed stocks of any solvent corporation or institution created or existing under the laws of the Philippines; Provided, however, That the issuing, assuming or guaranteeing entity or its predecessors has paid regular dividends upon its preferred or guaranteed stocks for a period of at least three years next preceding the date of investment in such preferred or guaranteed stock; Provided, further, That if the stocks are guaranteed, the amount of stocks so guaranteed is not excess of fifty per centum of the amount of the preferred or common stocks, as the case may be, of the guaranteeing corporation; And provided, finally, That no life insurance company shall invest in or loan upon obligations of any one institution in the kinds permitted under this sub-section an amount in excess of ten per centum of the total admitted assets of such insurer as of December thirty-first next preceding the date of such investment.

(f) Common stocks of any solvent corporation or institution created or existing under the laws of the Philippines upon which regular dividends shall have been paid for the three years next preceding the purchase of such stock; Provided, however, That no life insurance company shall invest in or loan upon the obligations of any one corporation or institution in the kinds permitted under this sub-section an amount in excess of ten per centum of the total admitted assets of such insurer as of December thirty-first next preceding the date of such investment.

(g) Certificates, notes and other obligations issued by the trustees or receivers of any institution created or existing under the laws of the Philippines which, or the assets of which, are being administered under the direction of any court having jurisdiction; Provided, however, That such certificates, notes or other obligations are adequately secured as to principal and interests.

(h) Equipment trust obligations or certificates which are adequately secured or other adequately secured instruments evidencing an interest in equipment wholly or in part within the Philippines; Provided, however, That there is a right to receive determined portions of rental, purchase or other fixed obligatory payments for the use or purchase of such equipment.

(i) Any obligation of any corporation or institution created or existing under the laws of the Philippines which is, on the date of acquisition by the insurer, adequately secured and has qualities and characteristics wherein the speculative elements are not predominant.

(j) Such other securities as may be approved by the Commissioner.

(3) Any domestic insurer which has outstanding insurance, annuity or reinsurance contracts in currencies other than the national currency of the Philippines may invest in, or otherwise acquire or loan upon securities and investments in such currency which are substantially of the same kinds, classes and investment grades as those eligible for investment under the foregoing subdivisions of this section; but the aggregate amount of such investment and of such cash in such currency which is at anytime held by such insurer shall not exceed one and one-half times the amount of its reserves and other obligations under such contracts or the amount which such insurer is required by the law of any country or possession outside the Republic of the Philippines to be invest in such country or possession, whichever shall be greater.

Section 201. An insurance company may (1) invest in equities of other financial institutions, and (2) engage in the buying and selling of short-term debt instruments; Provided, That any or all of such investments shall be with the prior approval of the Commissioner.

Section 202. Any life insurance company may:

(a) Acquire or construct housing projects and, in connection with any such project, may acquire land or any interest therein by purchase, lease or otherwise, or use land acquired pursuant to any other provision of this Code. Such company may thereafter own, maintain, manage, collect or receive income from, or sell and convey, any land or interest therein so acquired and any improvements thereon. The aggregate book value of the investments of any such company in all such projects shall not exceed at the time of such investments twenty five per centum of the total admitted assets of such company on the thirty-first day of December next preceding;

(b) Acquire real property, other than property to be used primarily for providing housing and property for accommodation of its own business, as an investment for the production of income, or may acquire real property to be improved or developed for such investment purpose pursuant to a program therefor, subject to the condition that the cost of each parcel of real property so acquired under the authority of this paragraph (b), including the estimated cost to the company of the improvement or development thereof, when added to the book value of all other real property held by its pursuant to this paragraph (b), shall not exceed twenty-five per centum of its admitted assets as of the thirty-first day of December next preceding.

Section 203. Every domestic insurance company shall, to the extent of an amount equal in value to twenty-five per centum of the minimum paid-up capital required under section one hundred eighty-eight, invest its funds only in securities, satisfactory to the Commissioner, consisting of bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government-owned or controlled corporations and entities, including the Central Bank of the Philippines; Provided, That such investments shall at all times be maintained free from any lien or encumbrance; and Provided, further, That such securities shall be deposited with and held by the Commissioner for the faithful performance by the depositing insurer of all its obligations under its insurance contracts. The provisions of section one hundred ninety-two shall, so far as practicable, apply to the securities deposited under this section.

Except as otherwise provided in this Code, no judgment creditor or other claimant shall have the right to levy upon any of the securities of the insurer held on deposit under this section or held on deposit pursuant to the requirement of the Commissioner. (As amended by Presidential Decree No. 1455)

Section 204. After satisfying the requirements contained in the preceding section, any domestic non-life insurance company, shall invest, to an amount prescribed below, its funds in, or otherwise, acquire or loan upon, only the classes of investments described in section two hundred, including securities issued by any “registered enterprise”, as this term is defined in Republic Act No. 5186, otherwise known as the Investment Incentives Act, and such other classes of investments as may be authorized by the Commissioner for purposes of this section; Provided, That (a) no more than twenty per centum of the net worth of such company as shown by its latest financial statement approved by the Commissioner shall be invested in the lot and building in which the insurance company conducts its business and (b) the total investment of an insurance company in any registered enterprise shall not exceed twenty per centum of the net worth of said insurance company as shown by its aforesaid financial statement nor twenty per centum of the paid-up capital of the registered enterprise excluding the intended investment, unless previously authorized by the Commissioner; and, Provided, further, That such investments free from any lien or encumbrance, shall be at least equal in amount to the aggregate amount of (a) its legal reserve, as provided in section two hundred thirteen, and (b) its reserve fund held for reinsurance as provided for in the pertinent treaty provision in the case of reinsurance ceded to authorized insurers. (As amended by Presidential Decree No.1455)

Section 205. After satisfying the requirements contained in sections one hundred ninety-one, one hundred ninety-three, two hundred three and two hundred four, any non-life insurance company may invest any portion of its funds representing earned surplus in any of the investments described in sections one hundred ninety-eight, two hundred and two hundred one, or in any securities issued by a “registered enterprise” mentioned in the preceding sections; Provided, That no investment in stocks or bonds of any single entity shall in the aggregate, exceed twenty per centum of the net worth of the insurance company as shown in its latest financial statement approved by the Commissioner or twenty per centum of the paid-up capital of the issuing company, whichever is lesser, unless otherwise approved by the Commissioner.

Section 206. After satisfying the minimum capital investment required in section two hundred three, any life insurance company may invest its legal policy reserve, as provided in section two hundred eleven or in section two hundred twelve, in any of the classes of securities or types of investments described in sections one hundred ninety-eight, two hundred, two hundred one and two hundred two, subject to the limitations therein contained, and in any securities issued by any “registered enterprise” mentioned in section two hundred four, free from any lien or encumbrance, in such amounts as may be approved by the Commissioner. Such company may likewise invest any portion of its earned surplus in the aforesaid securities or investments subject to the aforesaid limitations.

Section 207. Any investment made in violation of the applicable provisions of this title shall be considered non-admitted assets.

Section 208. (1) All bonds or other evidences of indebtedness having a fixed term and rate of interest and held by any life insurance company authorized to do business in this country, if amply secured and if not in default as to principal or interest, shall be valued as follows: If purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made, or in the discretion of the Commissioner, on the basis of the method of calculation commonly known as the pro-rata method. In applying the foregoing rule the purchase price shall in no case be taken at a higher figure than the actual market value at the time of acquisition. The Commissioner shall have the power to determine the eligibility of any such investments for valuation on the basis of amortization, and may by regulation prescribe or limit the classes of securities so eligible for amortization. All bonds or other evidences of indebtedness which in the judgment of the Commissioner are not amply secured shall not be eligible for amortization and shall be valued in accordance with paragraph two. The Commissioner may, if he finds that the interest of policy holders so permit or require, by official regulation permit or require any class or classes of insurers, other than life insurance companies, authorized to do business in this country, to value their bonds or other evidences of indebtedness in accordance with the foregoing rule.

(2) The investments of all insurers authorized to do business in this country, except securities subject to amortization and except as otherwise provided in this chapter, shall be valued, in the discretion of the Commissioner, at their market value, or at their appraised value, or at prices determined by him as representing their fair market value. If the Commissioner finds that in view of the character of investments of any insurer authorized to do business in this country it would be prudent for such insurer to establish a special reserve for possible losses or fluctuations in the values of its investments, he may require such insurer to establish such reserve, reasonable in amount, and may require that such reserve be maintained and reported in any statement or report of the financial condition of such insurer. The Commissioner may, in connection with any examination or required financial statement of an authorized insurer, require such insurer to furnish him complete financial statements and audited report of the financial condition of any corporation of which the securities are owned wholly or partly by such insurer and may cause an examination to be made of any subsidiary or affiliate of such insurer.

(3) The stock of an insurance company shall be valued at the lesser of its market value or its book value as shown by its last approved annual statement or the last report on examination, whichever is more recent. The book value of a share of common stock of an insurance company shall be ascertained by dividing (a) the amount of its capital and surplus less the value of all of its preferred stock, if any, outstanding, by (b) the number of shares of its common stock issued and outstanding. Notwithstanding the foregoing provisions, an insurer may, at its option, value its holdings of stock in a subsidiary insurance company in an amount not less than acquisition cost if such acquisition cost is less than the value determined as hereinbefore provided.

(4) Real estate required by foreclosure or by deed in lieu thereof, in the absence of a recent appraisal deemed by the Commissioner to be reliable, shall not be valued at an amount greater than the unpaid principal of the defaulted loan at the date of such foreclosure or deed, together with any taxes and expenses paid or incurred by such insurer at such time in connection with such acquisition, and the cost of additions or improvements thereafter paid by such insurer and any amount or amounts thereafter paid by such insurer on any assessments levied for improvements in connection with the property.

(5) Purchase money mortgages received on dispositions of real property held pursuant to section one hundred ninety-eight shall be valued in an amount equivalent to ninety per centum of the value of such real property. Purchase money mortgages received on disposition of real property otherwise held shall be valued in an amount not exceeding ninety per centum of the value of such real property as determined by an appraisal made by an appraiser at or about the time of disposition of such real property.

(6) The stock of a subsidiary of an insurer shall be valued on the basis of the greater of (i) the value of only such subsidiary of the assets of such subsidiary as would constitute lawful investments for the insurer if acquired or held directly by the insurer or (ii) such other value determined pursuant to standards and cumulative limitations, contained in a regulation to be promulgated by the Commissioner.

(7) Notwithstanding any provision contained in this section or elsewhere in this chapter, if the Commissioner find that the interests of policyholders so permit or require, he may permit or require any class or classes of insurers authorized to do business in this country to value their investments or any class or classes thereof as of any date heretofore or hereafter in accordance with any applicable valuation or method.

Section 209. It shall be the duty of the officers of the insurance company to report within the first fifteen days of every month all such investments as may be made by them during the preceding month, and the Commissioner may, if such investments or any of them seem injudicious to him, require the sale or disposal of the same. The report shall also include a list of investments sold or disposed of by the company during the same period.

Title 5
RESERVES

Section 210. Every life insurance company, doing business in the Philippines, shall annually make a valuation of all policies, additions thereto, unpaid dividends, and all other obligations outstanding on the thirty-first day of December of the preceding year. All such valuations shall be made upon the net premiums basis, according to the standard adopted by the company, which standard shall be stated in its annual report.

Such standard of valuation whether of the net level premium, full preliminary term, any modified preliminary term, or select and ultimate reserve basis, shall be according to a standard table of mortality with interest at not more than six per centum compound interest. When the preliminary term basis is used, the term insurance shall be limited to the first policy year.

The results of such valuations shall be reported to the Commissioner on or before the thirtieth day of April of each year accompanied by a sworn statement of the company’s actuary certifying to the figures and stating upon what mortality table it is based, upon what rate of interest the valuation is made, and the methods used in arriving at the result obtained.

Section 211. The aggregate net value so ascertained of the policies of such company shall be deemed its reserve liability, to provide for which it shall hold funds in secure investments equal to such net value, above all its other liabilities; and it shall be the duty of the Commissioner, after having verified, to such an extent as he may deem necessary, the valuation of all policies in force, to satisfy himself that the company has such amount in safe legal securities after all other debts and claims against it have been provided for.

The reserve liability for variable contracts defined in section two hundred thirty-two shall be established in accordance with actuarial procedures that recognize the variable nature of the benefits provided, and shall be approved by the Commissioner.

Section 212. Every domestic life insurance company, conducted on the mutual plan or a plan in which policyholders are by the terms of their policies entitled to share in the profits or surplus shall, on all policies of life insurance heretofore or hereafter issued, under the conditions of which the distribution of surplus is deferred to a fixed or specified time and contingent upon the policy being in force and the insured living at that time, annually ascertain the amount of the surplus to which all such policies as separate class are entitled, and shall annually apportion to such policies as a class the amount of the surplus so ascertained, and carry the amount of such apportioned surplus, plus the actual interest earnings and accretions to such fund, as a distinct and separate liability to such class of policies on and for which the same was accumulated, and no company or any of its officers shall be permitted to use any part of such apportioned surplus fund for any purpose whatsoever other than for the express purpose for which the same was accumulated.

Section 213. Every insurance company, other than life, shall maintain a reserve for unearned premiums on its policies in force, which shall be charged as a liability in any determination of its financial condition. Such reserve shall be equal to forty per centum of the gross premiums, less returns and cancellations, received on policies or risks having not more than a year to run, and pro rata on all gross premiums received on policies or risks having more than a year to run; Provided, That for marine cargo risks the reserve shall be equal to forty per centum of the premiums written in the policies upon yearly risks, and the full amount of the premiums written during the last two months of the calendar year upon all other marine risks not terminated.

Section 214. In addition to its liabilities and reserves on contracts of insurance issued by it, every insurance company shall be charged with the estimated amount of all of its other liabilities, including taxes, expenses and other obligations due or accrued at the date of statement, and including any special reserves required by the Commissioner pursuant to the provisions of this Code.

Title 6
LIMIT OF SINGLE RISK

Section 215. No insurance company other than life, whether foreign or domestic, shall retain any risk on any one subject of insurance in an amount exceeding twenty per centum of its net worth. For purposes of this section, the term “subject of insurance” shall include all properties or risks insured by the same insurer that customarily are considered by non-life company underwriters to be subject to loss or damage from the same occurrence of any hazard insured against.

Reinsurance ceded as authorized under the succeeding title shall be deducted in determining the risk retained. As to surety risk, deduction shall also be made of the amount assumed by any other company authorized to transact surety business and the value of any security mortgage, pledged, or held subject to the surety’s control and for the surety’s protection.

Title 7
REINSURANCE TRANSACTIONS

Section 216. An insurance company doing business in the Philippines may accept reinsurances only of such risks, and retain risk thereon within such limits, as it is otherwise authorized to insure.

Section 217. No insurance company doing business in the Philippines shall cede all or part of any risks situated in the Philippines by way of reinsurance directly to any foreign insurer not authorized to do business in the Philippines unless such foreign insurer or, if the services of a non-resident broker are utilized, such non-resident broker is represented in the Philippines by a resident agent duly registered with the Commissioner as required in this Code.

The resident agent of such unauthorized foreign insurer or non- resident broker shall immediately upon registration furnish the Commissioner with the annual statement of such insurer, or of such company or companies where such broker may place Philippine business as of the year preceding such registration, and annually thereafter as soon as available.

Section 218. All insurance companies, both life and non-life, authorized to do business in the Philippines shall cede their excess risks to other companies similarly authorized to do business in the Philippines in such amounts and under such arrangements as would be consistent with sound underwriting practices before they enter into reinsurance arrangements with unauthorized foreign insurers.

Section 219. Any insurance company doing business in the Philippines desiring to cede their excess risks to foreign insurance or reinsurance companies not authorized to transact business in the Philippines may do so under the following conditions:

(1) Except in facultative reinsurance and excess of loss covers, the full amount of the reserve fund required by law shall be set up in the books of and held by the ceding company for so long as the risk concerned is in force; Provided, That in case of facultative insurance, the ceding company shall show to the satisfaction of the Commissioner that the Philippine market cannot provide the facilities sought abroad.

(2) The reserve fund withheld shall be invested in bonds or other evidences of debt of the Government of the Philippines or its political subdivisions or instrumentalities, or of government-owned or controlled corporations and entities, including the Central Bank, and/or other securities acceptable under section two hundred.

Should any reinsurance agreement be for any reason cancelled or terminated, the ceding company concerned shall inform the Commissioner in writing of such cancellation or termination within thirty days from the date of such cancellation or termination or from the date notice or information of such cancellation or termination is received by such company as the case may be.

Section 220. Every insurance company authorized to do business in the Philippines shall report to the Commissioner on forms prescribed by him the particulars of reinsurance treaties as of the first day of January of the year following the approval of this Code and shall thereafter similarly report to the Commissioner particulars of any new treaties or changes in existing treaties.

Section 221. No credit shall be allowed as an admitted asset or as a deduction from liability, to any ceding insurer for reinsurance made, ceded, renewed, or otherwise becoming effective after January first, nineteen hundred seventy-five, unless the reinsurance shall be payable by the assuming insurer on the basis of the liability of the ceding insurer under the contract or contracts reinsured without diminution because of the insolvency of the ceding insurer nor unless under the contract or contracts of reinsurance the liability for such reinsurance is assumed by the assuming insurer or insurers as of the same effective date; nor unless the reinsurance agreement provides that payments by the assuming insurer shall be made directly to the ceding insurer or to its liquidator, receiver, or statutory successor except (a) where the contract specifically provides another payee of such reinsurance in the event of the insolvency of the ceding insurer and (b) where the assuming insurer with the consent of the direct insured or insureds has assumed such policy obligations of the ceding insurer as direct obligations of the assuming insurer to the payees under such policies and in substitution for the obligations of the ceding insurer to such payees.

Section 222. No life insurance company doing business in the Philippines shall reinsure its whole risk on any individual life or joint lives, or substantially all of its insurance in force, without having first obtained the written permission of the Commissioner.

Title 8
ANNUAL STATEMENT

Section 223. Every insurance company doing business in the Philippines shall terminate its fiscal period on the thirty-first day of December every year, and shall annually on or before the thirtieth day of April of each year render to the Commissioner a statement signed and sworn to by the chief officer of such company showing, in such form and details as may be prescribed by the Commissioner, the exact condition of its affairs on the preceding thirty-first day of December.

Any entry in the statement which is found to be false shall constitute a misdemeanor and the officer signing such statement shall be subject to the penalty provided for under section four hundred nineteen.

Section 224. Every insurance company authorized under title ten of this chapter to issue, deliver or use variable contracts shall annually file with the Commissioner separate annual statement of its separate variable accounts. Such statement shall be on a form prescribed or approved by the Commissioner and shall include details as to all of the income, disbursements, assets and liability items of and associated with the said separate variable accounts. Said statement shall be under oath of two officers of the company and shall be filed simultaneously with the annual statement required by the preceding section.

Section 225. Within thirty days after receipt of the annual statement approved by the Commissioner, every insurance company doing business in the Philippines shall publish in two newspapers of general circulation in the City of Manila, one published in English and one in Pilipino, a full sypnosis of its annual financial statement showing fully the conditions of its business, and setting forth its resources and liabilities.

Title 9
POLICY FORMS

Section 226. No policy, certificate or contract of insurance shall be issued or delivered within the Philippines unless in the form previously approved by the Commissioner, and no application form shall be used with, and no rider, clause, warranty or endorsement shall be attached to, printed or stamped upon such policy, certificate or contract unless the form of such application, rider, clause, warranty or endorsement has been approved by the Commissioner.

Section 227. In the case of individual life or endowment insurance, the policy shall contain in substance the following conditions:

(a) A provision that the policyholder is entitled to a grace period either of thirty days or of one month within which the payment of any premium after the first may be made, subject at the option of the insurer to an interest charge not in excess of six per centum per annum for the number of days of grace elapsing before the payment of the premium, during which period of grace the policy shall continue in full force, but in case the policy becomes a claim during the said period of grace before the overdue premium is paid, the amount of such premium with interest may de deducted from the amount payable under the policy in settlement;

(b) A provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date of issue as shown in the policy, or date of approval of last reinstatement, except for non-payment of premium and except for violation of the conditions of the policy relating to military or naval service in time of war;

(c) A provision that the policy shall constitute the entire contract between the parties, but if the company desires to make the application a part of the contract it may do so provided a copy of such application shall be indorsed upon or attached to the policy when issued, and in such case the policy shall contain a provision that the policy and the application therefor shall constitute the entire contract between the parties;

(d) A provision that if the age of the insured is considered in determining the premium and the benefits accruing under the policy, and the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age;

(e) If the policy is participating, a provision that the company shall periodically ascertain and apportion any divisible surplus accruing on the policy under conditions specified therein;

(f) A provision specifying the options to which the policyholder is entitled to in the event of default in a premium payment after three full annual premiums shall have been paid. Such option shall consist of:

(1) A cash surrender value payable upon surrender of the policy which shall not be less than the reserve on the policy, the basis of which shall be indicated, for the then current policy year and any dividend additions thereto, reduced by a surrender charge which shall not be more than one-fifth of the entire reserve or two and one-half per centum of the amount insured and any dividend additions thereto;

(2) One or more paid-up benefits on a plan or plans specified in the policy of such value as may be purchased by the cash surrender value;

(g) A provision that at anytime after a cash surrender value is available under the policy and while the policy is in force, the company will advance, on proper assignment or pledge of the policy and on sole security thereof, a sum equal to, or at the option of the owner of the policy, less than the cash surrender value on the policy, at a specified rate of interest, not more than the maximum allowed by law, to be determined by the company from time to time, but not more often than once a year, subject to the approval of the Commissioner; and that the company will deduct from such loan value any existing indebtedness on the policy and any unpaid balance of the premium for the current policy year, and may collect interest in advance on the loan to the end of the current policy year, which provision may further provide that such loan may be deferred for not exceeding six months after the application therefor is made;

(h) A table showing in figures cash surrender values and paid-up options available under the policy each year upon default in premium payments, during at least twenty years of the policy beginning with the year in which the values and options first become available, together with a provision that in the event of the failure of the policyholder to elect one of the said options within the time specified in the policy, one of said options shall automatically take effect and no policyholder shall ever forfeit his right to same by reason of his failure to so elect;

(i) In case the proceeds of a policy are payable in installments or as an annuity, a table showing the minimum amounts of the installments or annuity payments;

(j) A provision that the policyholder shall be entitled to have the policy reinstated at any time within three years from the date of default of premium payment unless the cash surrender value has been duly paid, or the extension period has expired, upon production of evidence of insurability satisfactory to the company and upon payment of all overdue premiums and any indebtedness to the company upon said policy, with interest rate not exceeding that which would have been applicable to said premiums and indebtedness in the policy years prior to reinstatement.

Any of the foregoing provisions or portions thereof not applicable to single premium or term policies shall to that extent not be incorporated therein; and any such policy may be issued and delivered in the Philippines which in the opinion of the Commissioner contains provisions on any one or more of the foregoing requirements more favorable to the policyholder than hereinbefore required.

This section shall not apply to policies of group life or industrial life insurance.

Section 228. No policy of group life insurance shall be issued and delivered in the Philippines unless it contains in substance the following provisions, or provisions which in the opinion of the Commissioner are more favorable to the persons insured, or at least as favorable to the persons insured and more favorable to the policy-holders:

(a) A provision that the policyholder is entitled to a grace period of either thirty days or of one month for the payment of any premium due after the first, during which grace period the death benefit coverage shall continue in force, unless the policyholder shall have given the insurer written notice of discontinuance in advance of the date of discontinuance and in accordance with the terms of the policy. The policy may provide that the policyholder shall be liable for the payment of a pro rata premium for the time the policy is in force during such grace period;

(b) A provision that the validity of the policy shall not be contested, except for non-payment of premiums after it has been in force for two years from its date of issue; and that no statement made by any insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person’s lifetime nor unless contained in written instrument signed by him;

(c) A provision that a copy of the application, if any, of the policyholder shall be attached to the policy when issued, that all statements made by the policyholder or by persons insured shall be deemed representations and not warranties, and that no statement made by any insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person or to his beneficiary;

(d) A provision setting forth the conditions, if any, under which the insurer reserves the right to require a person eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of his coverage;

(e) A provision specifying an equitable adjustment of premiums or of benefits or of both to be made in the event that the age of a person insured has been misstated, such provision to contain a clear statement of the method of adjustment to be used;

(f) A provision that any sum becoming due by reason of death of the person insured shall be payable to the beneficiary designated by the insured, subject to the provisions of the policy in the event that there is no designated beneficiary, as to all or any part of such sum, living at the death of the insured, and subject to any right reserved by the insurer in the policy and set forth in the certificate to pay at its option a part of such sum not exceeding five hundred pesos to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred funeral or other expenses incident to the last illness or death of the person insured;

(g) A provision that the insurer will issue to the policyholder for delivery to each person insured an individual certificate setting forth a statement as to the insurance protection to which he is entitled, to whom the insurance benefits are payable, and the rights set forth in paragraphs (h), (i) and (j) following;

(h) A provision that if the insurance, or any portion of it, on a person covered under the policy ceases because of termination of employment or of membership in the class or classes eligible for coverage under the policy, such person shall be entitled to have issued to him by the insurer, without evidence of insurability, an individual policy of life insurance without disability or other supplementary benefits, provided application for the individual policy and payment of the first premium to the insurer shall be made within thirty days after such termination and provided further that:

(1) the individual policy shall be on any one of the forms, except term insurance, then customarily issued by the insurer at the age and for an amount not in excess of the coverage under the group policy; and

(2) the premium on the individual policy shall be at the insurer’s then customary rate applicable to the form and amount of the individual policy, to the class of risk to which such person then belongs, and to his age attained on the effective date of the individual policy.

(i) A provision that if the group policy terminates or is amended so as to terminate the insurance of any class of insured persons, every person insured thereunder at the date of such termination whose insurance terminates and who has been so insured for five years prior to such termination date shall be entitled to have issued to him by the insurer an individual policy of life insurance subject to the same limitations as set forth in paragraph (h), except that the group policy may provide that the amount of such individual policy shall not exceed the smaller of (a) the amount of the person’s life insurance protection ceasing less the amount of any life insurance for what he is or becomes eligible under any group policy issued or reinstated by the same or another reinsurer within thirty days after such termination, and (b) two thousand pesos;

(j) A provision that if a person insured under the group policy dies during the thirty-day period within which he would have been entitled to an individual policy issued to him in accordance with (h) and (i) above and before such individual policy shall have become effective, the amount of life insurance which he would have been entitled to have issued to him as an individual policy shall be payable as a claim under the group policy whether or not application for the individual policy or the payment of the first premium has been made;

(k) In the case of a policy issued to a creditor to insure debtors of such creditor, a provision that the insurer will furnish to the policyholder for delivery to each debtor insured under the policy a form which will contain a statement that the life of the debtor is insured under the policy and that any death benefit paid thereunder by reason of his death shall be applied to reduce or extinguish indebtedness.

The provisions of paragraphs (f) to (j) shall not apply to policies issued to a creditor to insure his debtors. If a group life policy is on a plan of insurance other than term, it shall contain a non-forfeiture provision or provisions which in the opinion of the Commissioner is or are equitable to the insured or the policyholder; Provided, That nothing herein contained shall be so construed as to require group life policies to contain the same non-forfeiture provisions as are required of individual life policies.

Section 229. The term “industrial life insurance” as used in this Code shall mean that form of life insurance under which the premiums are payable either monthly or oftener, if the face amount of insurance provided in any policy is not more than five hundred times that of the current statutory minimum daily wage in the City of Manila, and if the words “industrial policy” are printed upon the policy as part of the descriptive matter.

An industrial life policy shall not lapse for non-payment of premium if such non-payment was due to the failure of the company to send its representative or agent to the insured at the residence of the insured or at some other place indicated by him for the purpose of collecting such premium; Provided, That the provisions of this paragraph shall not apply when the premium on the policy remains unpaid for a period of three months or twelve weeks after the grace period has expired.

Section 230. In the case of industrial life insurance, the policy shall contain in substance the following provisions:

(a) A provision that the insured is entitled to a grace period of four weeks within which the payment of any premium after the first may be made, except that where premiums are payable monthly, the period of grace shall be either one month or thirty days; and that during the period of grace, the policy shall continue in full force, but if during such grace period the policy becomes a claim, then any overdue and unpaid premiums may be deducted from any amount payable under the policy in settlement;

(b) A provision that the policy shall be incontestable after it has been in force during the lifetime of the insured for a specified period, not more than two years from its date of issue, except for non-payment of premiums and except for violation of the conditions of the policy relating to naval or military service, or services auxiliary thereto, and except as to provisions relating to benefits in the event of disability as defined in the policy, and those granting additional insurance specifically against death by accident or by accidental means, or to additional insurance against loss of, or loss of use of, specific members of the body;

(c) A provision that the policy shall constitute the entire contract between the parties, or if a copy of the application is endorsed upon and attached to the policy when issued, a provision that the policy and the application therefor shall constitute the entire contract between the parties, and in the latter case, a provision that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties;

(d) A provision that if the age of the person insured, or the age of any person, considered in determining the premium, or the benefits accruing under the policy, has been misstated, any amount payable or benefit accruing under the policy shall be such as the premium paid would have purchased at the correct age;

(e) A provision that if the policy is a participating policy, the company shall periodically ascertain and apportion any divisible surplus accruing on the policy under the conditions specified therein;

(f) A provision that in the event of default in premium payments after three full years’ premiums have been paid, the policy shall be converted into a stipulated form of insurance, and that in the event of default in premium payments after five full years’ premiums have been paid, a specified cash surrender value shall be available, in lieu of the stipulated form of insurance, at the option of the policyholder. The net value of such stipulated form of insurance and the amount of such cash value shall not be less than the reserve on the policy and dividend additions thereto, if any, at the end of the last completed policy year for which premiums shall have been paid (the policy to specify the mortality table, rate of interest and method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits and accidental death benefits, less an amount not to exceed two and one-half per centum of the maximum amount insured by the policy and dividend additions thereto, if any, at the end of the last completed policy year for which premiums shall have been paid (the policy to specify the mortality table, rate of interest and method of valuation adopted to compute such reserve), exclusive of any reserve on disability benefits and accidental death benefits, less an amount not to exceed two and one-half per centum of the maximum amount insured by the policy and dividend additions thereto, if any, when the issue age is under ten years, and less an amount not to exceed two and one-half per centum of the current amount insured by the policy and dividend additions thereto, if any, if the issue age is ten years or older, and less any existing indebtedness to the company on or secured by the policy;

(g) A provision that the policy may be surrendered to the company at its home office within a period of not less than sixty days after the due date of a premium in default for the specified cash value, provided that the insurer may defer payment for not more than six months after the application therefor is made;

(h) A table that shows in figures the non-forfeiture benefits available under the policy every year upon default in payment of premiums during at least the first twenty years of the policy, such table to begin with the year in which such values become available, and a provision that the company will furnish upon request an extension of such table beyond the year shown in the policy;

(i) A provision that specifies which one of the stipulated forms of insurance provided for under the provision of paragraph (f) of this section shall take effect in the event of the insured’s failure, within sixty days from the due date of the premium in default, to notify the insurer in writing as to which one of such forms he has selected;

(j) A provision that the policy may be reinstated at any time within two years from the due date of the premium in default unless the cash surrender value has been paid or the period of extended term insurance expired, upon production of evidence of insurability satisfactory to the company and payment of arrears of premiums with interest at a rate not exceeding six per centum per annum payable annually;

(k) A provision that when a policy shall become a claim by death of the insured, settlement shall be made upon receipt of due proof of death, or not later than two months after receipt of such proof;

(l) A title on the face and on the back of the policy correctly describing its form;

(m) A space on the front or the back of the policy for the name of the beneficiary designated by the insured with a reservation of the insured’s right to designate or change the beneficiary after the issuance of the policy. The policy may also provide that no designation or change of beneficiary shall be binding on the insurer until endorsed on the policy by the insurer, and that the insurer may refuse to endorse the name of any proposed beneficiary who does not appear to the insurer to have an insurable interest in the life of the insured. Such policy may also contain a provision that if the beneficiary designated in the policy does not surrender the policy with due proof of death within the period stated in the policy, which shall not be less than thirty days after the death of the insured, or if the beneficiary is the estate of the insured, or is a minor, or dies before the insured, or is not legally competent to give valid release, then the insurer may make any payment thereunder to the executor or administrator of the insured, or to any of the insured’s relatives by blood or legal adoption or connections by marriage or to any person appearing to the insurer to be equitably entitled thereto by reason of having incurred expense for the maintenance, medical attention or burial of the insured; and

(n) A provision that when an industrial life insurance policy is issued providing for accidental or health benefits, or both, in addition to life insurance, the foregoing provisions shall apply only to the life insurance portion of the policy.

Any of the foregoing provisions or portions thereof not applicable to non-participating or term policies shall to that extent not be incorporated therein. The foregoing provisions shall not apply to policies issued or granted pursuant to the non-forfeiture provisions prescribed in provisions of paragraphs (f) and (i) of this section, nor shall provisions of paragraphs (f), (g), (h), and (i) hereof be required in term insurance of twenty years or less but such term policies shall specify the mortality table, rate of interest, and method of computing reserves.

Section 231. No policy of industrial life insurance shall be issued or delivered in the Philippines if it contains any of the following provisions:

(a) A provision that gives the insurer the right to declare the policy void because the insured has had any disease or ailment, whether specified or not, or because the insured has received institutional, hospital, medical or surgical treatment or attention, except a provision which gives the insurer the right to declare the policy void if the insured has, within two years prior to the issuance of the policy, received institutional hospital, medical or surgical treatment or attention and if the insured or the claimant under the policy fails to show that the condition occasioning such treatment or attention was not of a serious nature or was not material to the risk;

(b) A provision that gives the insurer the right to declare the policy void because the insured has been rejected for insurance, unless such right be conditioned upon a showing by the insurer that knowledge of such rejection would have led to a refusal by the insurer to make such contract;

(c) A provision that allows the company to pay the proceeds of the policy at the death of the insured to any person other than the named beneficiary, except in accordance with a standard provision as specified under the provisions of paragraph (m) of the preceding section;

(d) A provision that limits the time within which any action at law or in equity may be commenced to less than six years after the cause of action shall accrue; and

(e) A provision that specifies any mode of settlement at maturity of less value than the amount insured by the policy plus dividend additions, if any, less any indebtedness to the company on the policy and less any premium that may by the terms of the policy be deducted, payments to be made in accordance with the terms of the policy.

Nothing contained in this section nor in the provision of paragraph (b) of the preceding section, relating to incontestability, shall be construed as prohibiting the life insurance company from placing in its industrial life policies provisions limiting its liability with respect to: (1) death resulting from aviation other than as a fare-paying passenger on a regularly scheduled route between definitely established airports; and (2) military or naval