Baguio City – Danika works for clothing brand in a popular Department Store in Baguio City.  She was hired last July 1, 2018.  Her first pay was given on July 15, 2018 and every cut off from July 30, 2018 to present is a deduction in her pay slip specifying a “Cash Bond” amounting to five hundred pesos (P 500.00) which was not explained to her and as far as she can remember was not stated on the provisions of her contract.

Article 97 of the Labor Code of the Philippines defines wage as 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. Being the compensation of an employee for a hard day’s work, it should not be subjected to deductions other than those authorized by law.

As a guiding principle, the country’s labor laws prescribe that “no employer shall limit or interfere with the freedom of the employee to dispose of his/her wages.”

Our law prohibits employers, on their own behalf or in behalf of any person, to make deductions from the wages of their employees except in the following instances: 1) where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance; 2) for union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and 3) the employer is authorized by law or regulations issued by the Secretary of Labor and Employment (Article 113, Labor Code of the Philippines).

The making of deductions for cash bonds or deposits is one of the allowable deductions from the employee’s wages (Article 114, Labor Code of the Philippines). However, the employers cannot just unilaterally declare and impose upon their employees the giving of bonds and/or deposits. Before the employers may make deductions from wages for cash bonds, they must first establish that the same is authorized by law, or regulations issued by the Secretary of Labor. They should also prove that posting of cash bonds is a recognized practice in their business or if there be none, the employers should seek for the determination by the Secretary of Labor through the issuance of appropriate rules and regulations that the policy that they wish to implement is necessary or desirable in the conduct of their business. The failure of the employers to comply with the foregoing will render the deductions baseless and illegal.

Employers cannot make any deductions from the wages of the employee, except in the following cases when the deductions are authorized by law, including deductions for insurance premiums advanced by the employer in behalf of the employee, as well as union dues where the right to check-off has been recognized by the employer or authorized in writing by the individual employee himself/herself; or when the deductions are with written authorization of the employees for payment to a third person and the employer agrees to do so, provided that the latter does not receive any pecuniary benefit, directly or indirectly, from the transaction.

On top of the general rule, DOLE Advisory No. 11, Series of 2014 states that “No employer shall make any deduction from employees wages unless indicated on the exemptions in the law.”  The advisory provides that as to “cash deposit to answer for loss or damage of tools, materials, or equipment supplied by the employers… it is only in private security agency where the practice is only recognized and allowed.” In requiring such a cash bond, however, a private security agency must first strictly observe rules and standards to ensure its validity and with due regard to social protection and welfare of an employee.

To this end, the employer should first ensure that any or all of the following attendant conditions have been observed: (a) The employee concerned is clearly shown to be responsible for the loss or damage; (b) The employee is given reasonable opportunity to show cause why deductions should not be made; (c) The amount of such deduction is fair and reasonable and shall not exceed the actual loss of damage; and (d) The deduction from the wages of the employee does not exceed 20 percent of the employee’s wages in a week.

The advisory emphasized that “in the event that a private security agency requires a cash deposit from its employees, the maximum amount shall not exceed the employee’s one month basic salary.”

It states that “the full amount of cash deposit deducted shall be returned to the employee within 10 days from his/her separation from the service.”

Furthermore, no other deductions from the wages of the employees or cash deposit/bond shall be required by the employer without express authorization from the Secretary of Labor and Employment through an advisory or guidelines.

Finally, Labor Advisory No. 11 provides that deductions made from the employees’ wages, for company uniforms, cash deposits for loss or damage, personal protective equipment (PPE), capital share or capital build up in service cooperatives, training fees, and other deductions not included in the enumeration above, are unauthorized.

Nonetheless, it must be refunded to the employees within 30 days from its issuance, or as may be agreed upon by the employer or employees through the Single Entry Approach (SEnA), otherwise failure to refund shall render the deduction illegal.

END/Patrick T Rillorta