Below is a comprehensive discussion of the employer’s liability for attorney’s fees in labor cases under the jurisdiction of the National Labor Relations Commission (NLRC) in the Philippines. This article surveys the legal basis, policy considerations, jurisprudential guidelines, and practical nuances involved. While the focus is on the employer’s liability, much of the doctrine revolves around general principles applicable to both employees and employers, grounded in the Labor Code and related laws.

I. Legal and Policy Framework

1. The Labor Code of the Philippines

Article 111 of the Labor Code (Attorney’s Fees):
The Labor Code expressly recognizes the possibility of awarding attorney’s fees to employees in cases involving unlawful withholding of wages and other monetary benefits. The text states that in cases where wages or indemnity for damages are awarded, the Labor Arbiter or the NLRC may, at its discretion, include an award for attorney’s fees equivalent to a maximum of ten percent (10%) of the total monetary award.
Public Policy Favoring Labor:
The Philippine Constitution and the Labor Code declare a strong policy in favor of protecting labor. That policy extends to making sure employees who are forced to litigate to protect their rights are not further burdened by legal expenses. Attorney’s fees, in appropriate cases, serve as a form of reimbursement or indemnification.

2. The Civil Code of the Philippines

Article 2208 of the Civil Code:
As a general rule, attorney’s fees cannot be recovered unless provided by law or stipulation. Article 2208, however, lists exceptions when attorney’s fees may be awarded. One notable provision is Article 2208(7), which covers actions for indemnity under employer’s liability laws—directly relevant to labor disputes.
Under this framework, employees forced to litigate due to an employer’s unlawful act may rightfully claim attorney’s fees.

3. NLRC Rules of Procedure

Awarding of Attorney’s Fees:
The Revised Rules of the NLRC (as amended) do not prescribe a new legal basis for attorney’s fees but reflect the existing principles in the Labor Code and jurisprudence. They confirm that Labor Arbiters and the NLRC have discretion to award attorney’s fees, typically capped at 10% of the total monetary judgment.

II. Grounds and Rationale for Awarding Attorney’s Fees Against the Employer

1. Unlawful Withholding of Wages or Benefits

The most straightforward ground for an award of attorney’s fees in labor cases is the unlawful withholding of wages or monetary benefits. If an employee has to file a case (e.g., for unpaid wages, illegal dismissal, 13th-month pay deficiencies, etc.) and prevails, the employer may be held liable for attorney’s fees. The key rationale is that the employer’s illegal act compelled the employee to litigate, thus incurring legal expenses.

2. Bad Faith or Malice

While the Labor Code’s language on attorney’s fees is protective of employees, the Supreme Court has clarified that bad faith or malice on the part of the employer strengthens the basis for awarding attorney’s fees. Even if the law provides for the possibility of attorney’s fees, courts typically look at the surrounding facts to determine whether the employer’s actions were oppressive, unreasonable, or in blatant disregard of the employee’s rights.

3. Forced Litigation

A recurring theme in labor law is the principle that attorney’s fees serve to indemnify an employee who has been forced to litigate—incurring counsel’s fees—to seek redress for a valid claim. The awarding of attorney’s fees is not meant to punish the employer per se but to make the employee whole. If there had been no unwarranted refusal to pay or act, the employee would not have incurred such expenses.

III. Amount and Limits: The 10% Threshold

1. Statutory Limit

As a rule of thumb, the maximum rate for attorney’s fees in labor cases is 10% of the total monetary award (which may include backwages, separation pay, retirement benefits, damages, or other monetary claims granted by the court). This cap is well-established in both statute (Article 111 of the Labor Code) and Supreme Court jurisprudence.

2. Discretion to Reduce

Although the maximum is 10%, Labor Arbiters and the NLRC have discretion to lower the rate. Courts may find that awarding a full 10% is excessive under the circumstances—especially if the amount awarded to the employee is large or if minimal legal work was performed. Conversely, if the case involved significant attorney involvement, complex litigation, or multiple appeals, the full 10% is often upheld.

3. Basis for Calculation

When awarded, attorney’s fees are typically computed based on the total monetary judgment at the time of finality. For instance, if an employee is awarded PHP 500,000 in total (covering backwages, separation pay, and other benefits), attorney’s fees (at 10%) would amount to PHP 50,000, subject to the final judgment of the Labor Arbiter or the NLRC.

IV. Key Jurisprudential Doctrines

Award Not Automatic:
The Supreme Court has repeatedly ruled that attorney’s fees in labor cases are not automatically awarded in every instance of a favorable judgment for the employee. The Labor Arbiter or Commission must find a factual and legal basis—most commonly, that the employee was compelled to litigate because of the employer’s act.
Proof of Legal Representation:
To recover attorney’s fees, the employee must generally be shown to have engaged a lawyer or otherwise incurred legal expenses. If the employee was represented by the Public Attorney’s Office (PAO), the Supreme Court has, in some instances, disallowed attorney’s fees. However, there is also jurisprudence allowing the labor tribunal to award attorney’s fees if it is established that the employee incurred costs or that the circumstances still justify indemnification.
No Duplication of Awards:
Attorney’s fees must be distinguished from other monetary awards (e.g., moral and exemplary damages). While both can be granted if warranted, they rest on different bases. Moral and exemplary damages arise from the employer’s wrongful act or bad faith, whereas attorney’s fees compensate the employee for litigation expenses.
Applicability to All Labor Claims:
Although attorney’s fees are most frequently discussed in illegal dismissal cases, they can be awarded in any labor dispute (e.g., money claims, wage differentials, violation of labor standards laws) as long as the criteria for forced litigation or unlawful withholding of wages are met.

V. Practical Considerations for Employers

1. Preventive Measures

Compliance with Labor Standards:
The simplest way to avoid liability for attorney’s fees is consistent compliance with mandatory labor standards. Prompt and correct payment of wages, holiday pay, overtime, 13th-month pay, and other benefits reduces exposure to money claims and avoids forcing employees into litigation.
Good Faith in Settlements:
Employers should consider early settlement or amicable resolution of disputes, especially when the underlying claim has merit. Engaging in negotiations before matters escalate to formal litigation can save both parties from protracted disputes and additional costs—particularly attorney’s fees that may be later awarded to the employee.
Documentation:
Keeping proper payroll, timekeeping, and employment records is crucial. In many labor disputes, incomplete or inaccurate records disadvantage the employer and can lead to an adverse finding by the Labor Arbiter—paving the way for further liability, including attorney’s fees.

2. Defense Strategies

Contesting Bad Faith Allegations:
One crucial line of defense is showing the lack of bad faith in the employer’s actions—e.g., that there was a genuine, albeit mistaken, belief that the employee was not entitled to certain benefits, or there was an honest error in computation. Demonstrating good faith can mitigate or bar an award of attorney’s fees, even if the employee ultimately prevails on the monetary claim.
Minimizing the Rate:
If liability is unavoidable, employers can still argue for a reduced attorney’s fees percentage when the services rendered by counsel were minimal or the case was straightforward. Evidence showing minimal counsel involvement, prompt admission of liability, or short trial duration can serve to lower the award from 10% to a smaller percentage.

3. Appeals and Finality

Appeals to the NLRC and Higher Courts:
If the Labor Arbiter’s decision includes attorney’s fees, the employer may appeal to the NLRC. Employers should specifically challenge the factual and legal bases for attorney’s fees in the appeal memorandum. If the NLRC upholds the award, the employer may seek further review before the Court of Appeals (and ultimately the Supreme Court), but only on questions of law or jurisdictional issues (factual findings of the NLRC are generally accorded great respect).
Execution of Judgment:
Once the NLRC decision becomes final and executory—either because no further appeal is taken or the Supreme Court denies the petition—an entry of judgment will issue. The sheriff or a duly authorized officer will implement the award, including attorney’s fees. Employers must pay the full monetary judgment or risk compulsory enforcement measures (e.g., garnishment, levy on property).

VI. Illustrative Supreme Court Cases

Gaco v. NLRC (1994) – Reiterated the principle that attorney’s fees in labor cases may be awarded when an employee is forced to litigate due to the employer’s unlawful refusal to satisfy a valid claim.
Serrano v. NLRC (2000) – Emphasized that while 10% is the statutory cap, courts must consider the peculiar circumstances of each case to determine if the maximum is justifiable or if a reduced percentage is more equitable.
Lim v. NLRC (2014) – Clarified that the recovery of attorney’s fees is not automatic in every labor dispute; factual basis of litigation expenses and bad faith must be clearly shown.
Session Delights Ice Cream v. Court of Appeals (2017) – Confirmed that an award of attorney’s fees must rest on compelling reasons, with the Court repeatedly upholding 10% as the upper limit except in instances deemed excessive.

VII. Frequently Asked Questions

1. Is 10% always awarded for attorney’s fees in labor cases?
No. While 10% is the widely recognized maximum, the actual rate is subject to the discretion of the Labor Arbiter or the NLRC, based on factors such as complexity of the case, time spent, and the employer’s good or bad faith.

2. Can employers also claim attorney’s fees in NLRC cases?
In practice, it is rare. The law and jurisprudence heavily favor the employee in awarding attorney’s fees. Employers seeking attorney’s fees must show that the employee filed a clearly frivolous or malicious suit, an argument seldom upheld by labor tribunals.

3. What if the employee was represented by a union lawyer or the Public Attorney’s Office?
The rule on awarding attorney’s fees remains the same: if the circumstances justify reimbursement (e.g., forced litigation), the labor tribunal may still award fees. However, there are instances when the Supreme Court disallows attorney’s fees if no actual expense by the employee is proven. Each case is decided on its merits.

4. Can the award of attorney’s fees exceed 10% of the monetary award if the actual attorney’s agreement is higher?
No. The Labor Code caps the recoverable attorney’s fees at 10% for labor disputes. The private fee arrangement between the employee and counsel is a separate matter, but the recoverable amount that the employer can be ordered to pay is limited by law.

VIII. Conclusion

In the Philippine labor law context, employer liability for attorney’s fees in NLRC cases springs from a policy of social justice and protection for employees. If the employer’s unlawful act forces an employee to litigate, the law allows the employee to recoup the expenses incurred in hiring counsel, subject to a 10% cap of the total monetary award. While this framework is protective of labor, it is not an automatic penalty against the employer. Factual proof of forced litigation and, in many cases, bad faith or unreasonable withholding of wages is required.

For employers, the key preventive strategies are legal compliance, good faith dealings with employees, and a willingness to settle bona fide claims early. When attorney’s fees are eventually awarded, employers should know that—though the statutory limit is 10%—courts do retain discretion to reduce this figure. Conversely, employees must establish the factual basis for fees, remembering that not every successful labor claim automatically guarantees an additional 10% award.

Overall, the doctrine on employer liability for attorney’s fees in NLRC cases reflects a balanced approach in Philippine labor law: it compensates employees who are unjustly compelled to litigate, while allowing employers to contest unjust or excessive claims for fees.