Dear Attorney,

I am employed in a company, and my concern is whether my employer can hold my salary without giving me prior notice. Is there any law in the Philippines that addresses this issue, and what are my rights as an employee in such a situation? I would appreciate any guidance you can provide.

Sincerely,
A Concerned Employee

Insights

The Legality of Withholding Wages in the Philippines

In the Philippines, the withholding of an employee's salary without proper notice or lawful justification touches upon several important legal concepts under the country's labor laws. These include the rules governing wage payment, the rights of employees to due process, and the penalties for employers who unlawfully withhold wages. Let’s delve deeper into these principles.

1. Wages and Labor Standards Law

Under the Labor Code of the Philippines (Presidential Decree No. 442), specifically Title III on "Working Conditions and Rest Periods," it is mandated that employees receive their wages on time and without delay. Article 103 of the Labor Code states that wages shall be paid directly to the workers to whom they are due, unless otherwise stipulated by law. Employers are generally not allowed to withhold wages arbitrarily.

The term "wages" includes all remuneration or earnings capable of being expressed in monetary terms, whether fixed or ascertained on a time, task, or commission basis, including allowances provided for by law.

2. Legal Grounds for Withholding Wages

There are specific instances where employers are permitted to deduct or withhold wages, as provided by law. The following situations allow for legitimate withholding:

Authorized Deductions: According to Article 113 of the Labor Code, wages may be withheld for authorized deductions such as payment for insurance premiums, union dues (if an employee is a union member), or other deductions required by law, such as income tax, Social Security System (SSS) contributions, or Pag-IBIG Fund deductions.
Disciplinary Action (With Due Process): In cases where an employee commits an offense that warrants disciplinary action, such as suspension, an employer may withhold wages during the suspension period, provided that due process is followed. Under the "due process" requirement, an employee must be given notice and an opportunity to explain before any disciplinary action affecting their wages can be implemented.
Unpaid Debts to the Employer: An employer can withhold part of an employee's wages if there are debts owed to the employer, provided there is a clear agreement to that effect, and the withholding does not reduce the employee's wages below the minimum wage.
Court Orders: Employers may also be required to withhold wages in compliance with a lawful court order, such as garnishment for child support or other legal obligations.

3. Notice and Due Process

Employers are obligated to follow due process whenever an employee's wages are to be affected. This concept of "due process" is twofold:

Substantive Due Process: The reason for withholding wages must be lawful and valid. There should be a legitimate basis for the withholding, as discussed above.
Procedural Due Process: The employee must be informed of the withholding, and the reason must be explained to them. In most cases, this is done through a written notice. Failing to provide such notice could be a violation of the employee’s rights, and the employer could be held liable.

The Supreme Court of the Philippines, in various rulings, has emphasized the importance of due process in labor disputes. The most relevant is the requirement to provide both a notice to explain (the so-called "first notice") and, in case the withholding is related to disciplinary issues, a notice of decision (the "second notice").

4. Consequences of Unlawful Withholding

If an employer withholds wages without legal justification or without following due process, the employee may seek redress through the following means:

Filing a Complaint with the Department of Labor and Employment (DOLE): Employees can file a complaint for illegal withholding of wages at the nearest DOLE regional office. The DOLE is empowered to investigate complaints related to labor standards and wage issues.
Filing a Claim with the National Labor Relations Commission (NLRC): If the dispute escalates or if the employer does not address the wage complaint, an employee may file a case with the NLRC, which handles cases involving illegal dismissal, unpaid wages, and other labor disputes.

The employer could face penalties for violating labor laws, including fines and other administrative sanctions. Moreover, under the Wage Rationalization Act (Republic Act No. 6727), failure to pay the prescribed minimum wage is also punishable by law, and the employer may be ordered to pay back wages and additional compensation in the form of damages.

5. The Employee’s Right to Compensation Without Delay

Article 116 of the Labor Code also emphasizes the employee’s right to demand immediate payment of wages when they are due. Employers are prohibited from engaging in unfair labor practices such as:

Delaying wage payments.
Failing to provide timely notice when wages are being withheld.
Using wage withholding as a form of retaliation or harassment.

Wages must be paid at least twice a month, in intervals not exceeding 16 days. Employees should be informed of any wage adjustments or deductions clearly and in writing.

6. Additional Considerations

In some cases, disputes regarding wage withholding may arise because of ambiguities in employment contracts or unclear policies regarding salary deductions. Employers must ensure that their employment contracts explicitly state any conditions under which wage deductions or withholdings may occur. Employees, on the other hand, should be encouraged to review their contracts carefully and seek clarification on any unclear provisions.

Labor unions can also play a key role in protecting employees’ wage rights. Unionized workers may enjoy additional protections through collective bargaining agreements (CBAs), which often contain specific provisions related to wage payments, deductions, and dispute resolution procedures.

7. Conclusion: Protecting Employees' Wage Rights

Withholding an employee’s wages without proper notice or lawful justification is a violation of Philippine labor laws. Employees have a right to be compensated in a timely and full manner unless a lawful reason justifies otherwise, such as court orders, authorized deductions, or agreed-upon conditions in the employment contract. Furthermore, due process must always be observed, ensuring that employees are informed of any potential wage withholding and are given the opportunity to explain or contest the action.

For employees facing unlawful wage withholding, several legal avenues are available to address these grievances. Employers, on the other hand, must be diligent in ensuring compliance with labor standards to avoid legal complications.