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. These unpaid wages and monetary claims must be paid in full before the claims of the Government and other creditors can be paid.
Employee Representation and Consultation
Generally, employees are not entitled to management representation (such as on the board of directors). According to the Labor Code, 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 process of the establishments where they are employed insofar as said process will directly affect their rights, benefits and welfare." Employee participation is implemented through labor-management councils, which the law encourages both employers and workers to organize. Representatives to these councils are elected by at least a majority of all employees in the establishment.
The management is not any under any obligation to consult its employees regarding major transactions such as acquisitions or joint ventures, unless it is bound to do so under a valid contract, collective bargaining agreement.
Bought or Sold a Business?
In the absence of any express stipulation, when a business is transferred (for example, when a business is sold), the employees are not automatically transferred to the new owner of the business.
If the closure or cessation of operations involves a transfer of assets, the general rule is that an innocent transferee has no liability to the employees. The closure or cessation of operations must be bona fide, that is, its purpose must not be to defeat or circumvent the rights of the employees under the law or a valid agreement. If the closure or cessation of operation is not bona fide, the employer can be held liable for the illegal dismissal of employees under a transfer made to a new entity in bad faith.
Notes: Even if the new employer decided to hire some of the former employees, the contracts of all employees hired will be considered as a new employment contracts and the new employer is not obliged to incorporate any employment terms from their previous employment contracts.
Employer’s Liability on Employee’s Acts
Employers will be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks.
Whenever an employee's negligence causes damage or injury to another, an automatic presumption arises that the employer failed to exercise good diligence in the selection or supervision of its employees. To avoid liability for a negligent act committed by employees, an employer must overcome this presumption by presenting convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee.
Intellectual Property (IP)
For copyrights and patents, where work is created by an employee during and in the course of his/her employment, the copyright or patent will belong to:
● The employer, where the work created is the result of the employee performing his regular duties (unless there is an agreement to the contrary between the employer and the employee);
● The employee, where the work created is not the result of the employee performing his regular duties (even if the employee has used the employer's time, facilities and materials in creating the work).