In the Philippine legal landscape, the relationship between an employer and an employee is not merely contractual; it is impressed with public interest. While the Employment Contract serves as the primary law between the parties, it is always subject to the overarching protections of the Labor Code of the Philippines and the 1987 Constitution.
When an employer fails to honor the terms of the contract—specifically regarding salary payments—employees have distinct legal avenues to seek redress.
1. Understanding Breach of Employment Contract
A breach occurs when either party fails to fulfill a material obligation stipulated in the signed agreement without a valid legal excuse. Common breaches by employers include:
- Non-payment of wages: Failure to pay the agreed-upon salary on time.
- Salary Discrepancies: Paying an amount lower than what was stipulated or mandated by law (underpayment).
- Unilateral change in benefits: Removing bonuses or allowances that have ripened into a "company practice."
- Illegal Deductions: Subtracting amounts from the salary without the employee's written consent or legal basis (e.g., "company bond" or "tool charges").
2. Legal Grounds and Protections
Under Philippine law, several principles protect the employee's right to their wages:
- Non-Diminution of Benefits: Article 100 of the Labor Code prohibits employers from reducing or eliminating benefits that have been consistently granted to employees.
- Management Prerogative vs. Contractual Rights: While employers have the right to manage their business, this cannot override specific salary provisions in a contract.
- The "Equal Pay for Equal Work" Principle: While not explicitly a single statute, Philippine jurisprudence (e.g., International School Alliance of Educators vs. Quisumbing) mandates that employees doing similar work under similar conditions should receive similar compensation.
3. Remedies for Salary Discrepancies and Underpayment
If an employee discovers a discrepancy between their contract and their actual take-home pay, the following steps are typically taken:
A. Internal Grievance Mechanism
Before litigation, most contracts or Employee Handbooks require the employee to raise the issue with Human Resources (HR) or through a formal grievance procedure. This is often a prerequisite in companies with Collective Bargaining Agreements (CBAs).
B. Single Entry Approach (SEnA)
Under the Department of Labor and Employment (DOLE), SEnA is a mandatory 30-day conciliation-mediation process. Its goal is to provide a speedy, impartial, and inexpensive settlement of labor issues to prevent them from escalating into formal court cases.
C. Formal Labor Complaint
If SEnA fails, the employee can file a formal position paper with the National Labor Relations Commission (NLRC). The case will be assigned to a Labor Arbiter.
Claims can include:
- Backwages: Unpaid salary from the time it was due.
- Differentials: The difference between the paid amount and the contracted/minimum wage.
- Legal Interest: Usually 6% per annum on the withheld amount.
- Attorney's Fees: Often capped at 10% of the total monetary award if the employee was forced to litigate to protect their rights.
4. Constructive Dismissal
If the breach of contract is so severe—such as a massive, unjustified reduction in pay—that it makes continued employment impossible or unbearable, the employee may resign and file a case for Constructive Dismissal.
In the eyes of the law, the employee did not "quit"; they were forced out by the employer's actions. If proven, the employer may be liable for separation pay and full backwages.
5. Vital Evidence for Claims
To succeed in a money claim or a breach of contract case, the employee must present:
- The Employment Contract: To prove the agreed-upon rate and benefits.
- Payslips: To demonstrate the actual amount received and any unauthorized deductions.
- Notice of Salary Adjustment: (If any) to show when the discrepancy began.
- Timecards/DTRs: To prove hours worked, especially for overtime and holiday pay claims.
6. Table: Common Monetary Claims in the Philippines
| Claim Type | Legal Basis | Description |
|---|---|---|
| Minimum Wage Reform | Wage Orders | Difference between actual pay and the regional minimum wage. |
| 13th Month Pay | P.D. No. 851 | Mandatory payment equivalent to 1/12 of the basic salary earned within a year. |
| Service Incentive Leave (SIL) | Art. 95, Labor Code | 5 days of paid leave for every year of service, commutable to cash if unused. |
| Holiday Pay | Art. 94, Labor Code | Payment of regular daily wage even if no work is performed on regular holidays. |
7. Prescription Periods
It is crucial to act quickly. Under Article 306 (now 291) of the Labor Code, all money claims arising from employer-employee relations must be filed within three (3) years from the time the cause of action accrued; otherwise, they shall be forever barred.
However, for cases involving "Illegal Dismissal," the prescriptive period is four (4) years under the Civil Code.