3-year Prescriptive Period for Monetary Claims by the Employee

21 October 2016

Benefits
Employees have 3 years to recover their monetary claims arising out of employment.
The employee is only allowed to recover any and all monetary claims within a period of three years from the date the
cause of action accrues. This so provided in the Labor Code, viz:
Article 305. MONEY CLAIMS
All money claims arising from employer-employee relations accruing during the effectivity of this [Labor] Code shall
be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred
Thus, any monetary claim beyond the 3-year period will no longer be enforceable. Beyond the 3-year period, the
employee cannot anymore recover as they are forever barred.
Being a special law on labor, the 3-year prescriptive period in the Labor Code will be followed for employment
contracts and not the 10-year prescriptive period for all other contracts in the Civil Code.[1]

What are monetary claims?

Monetary claims are any and all employment-related amounts, including but not limited to, salaries, holiday pay,
overtime pay, premium pay, night shift differential pay, service charges, 13 th month pay, separation pay, retirement
pay, monetary equivalents of leaves and benefits provided for by the employer.
The Labor Code provision is categorical on the matter. It states all monetary claims. As no exception is provided, it
refers to any and all claims by an employee against the employer arising out of the employment relations. It even
includes those incremental proceeds arising from tuition fee increases in private schools.[2]
If the employee does not make a claim within 3 years, it is possible that he/she will lose his monetary claims even
retirement pay and separation pay. Thus:
All money claims arising from an employer-employee relation are covered by the three-year prescriptive period
mandated by Article 291 [now: Article 305] of the Labor Code, and not by Article 1144 of the Civil Code which
provides for a ten-year prescriptive period for written agreements. Thus, Article 291 [now: Article 305] of the Labor
Code applies to [the employees] money claim, which is based on a provision of the Collective Bargaining Agreement
(CBA) on retirement and separation benefits and is a consequence of employer-employee relation.[3]
For employers, it is good to know of the time up to when the employee may only make a monetary claim. This will
spare the employers from shelling out payments when such monetary claims have already expired.

When do you start counting?

The Labor Code does not provide for a provision on when the counting will start. It simply states that money claims
become due from the time the cause of action accrued. A cause of action accrues only when the party obligated
refuses, expressly or impliedly, to comply with its duty.[4]
A cause of action consists of three elements.
a cause of action has three elements, to wit: (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting
a breach of the obligation of the defendant to the plaintiff.
It bears stressing that it is only when the last element occurs that a cause of action arises[5]
Thus, the counting will vary depending on when the employer denied the employees monetary claim. Consequently,
even if the monetary claim is beyond 3 years from the formal demand but there is no denial thereof within that time,
the employee may still recover the monetary claims within the prescriptive period after the employer finally makes a
denial.
[the employee] repeatedly demanded payment from respondent Maersk [on different dates earlier than the
October 1993 letter], respondent Maersk warded off these demands by saying that it would look into the matter until
years passed by. In October 1993, Serrano finally demanded in writing payment of the unsent money orders. Then
and only then was the claim categorically denied by respondent A.P. Moller in its letter dated November 22, 1993.
[the employees] cause of action accrued only upon respondent A.P. Mollers definite denial of his claim in November
1993. Having filed his action five (5) months thereafter or in April 1994, we hold that it was filed within the three-year
(3) prescriptive period provided in Article 291 of the Labor Code.[6]
In Ludo & Luym Corporation v. Ludo Employees Union,[7] the employees made a formal demand in writing of their
employment benefits. The demand letter was served in January 1995. The employment benefits sought to be
recovered were for the years 1977 through 1987. Prior to the demand letter, the employers did not deny or approve of
these said claims instead made promises to review the records to determine the validity of the claims. In the case,
the employer raised as defense the 3-year prescription. However, it was held that the employees are not yet barred
and hence still entitled to their monetary claims. The case went on to state that it will be the height of injustice if we
will brush aside the employees claims on a mere technicality, especially when it is [the employers] own action that
prevented them from interposing the claims within the prescribed period.

Promissory Estoppel: Recovery After 3 Years Allowed

An employer who made promises to pay the money claims of the employee who relied therein may still be held liable
even after the lapse of the 3-year period. This is a recognized exception to the 3-year prescriptive for monetary
claims.
[The employers] aver that the action of the respondents [heirs of the employee who died] for the recovery of unpaid
wages, separation pay and 13th month pay has already prescribed since the action was filed almost five years from
the time Jones severed his employment from ASI. Jones filed his resignation on October 31, 1997, while the
complaint before the LA was instituted on September 29, 2002. [The employers] contend that the three-year
prescriptive period under Article 291 of the Labor Code had already set-in, thereby barring all of respondents money
claims arising from their employer-employee relations.
Based on the findings of facts of the LA, it was [the employer] which was responsible for the delay in the institution of
the complaint. When Jones filed his resignation, he immediately asked for the payment of his money claims.
However, the management of ASI promised him that he would be paid immediately after the claims of the rank-and-
file employees had been paid. Jones relied on this representation. Unfortunately, the promise was never fulfilled even
until the time of Jones death.
In light of these circumstances, we can apply the principle of promissory estoppel, which is a recognized exception to
the three-year prescriptive period enunciated in Article 291 of the Labor Code.
Promissory estoppel may arise from the making of a promise, even though without consideration, if it was intended
that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would virtually
sanction the perpetration of fraud or would result in other injustice. Promissory estoppel presupposes the existence of
a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and
sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its
terms.
In order to make out a claim of promissory estoppel, a party bears the burden of establishing the following elements:
(1) a promise was reasonably expected to induce action or forbearance; (2) such promise did, in fact, induce such
action or forbearance; and (3) the party suffered detriment as a result.
All the requisites of promissory estoppel are present in this case. Jones relied on the promise of ASI that he would be
paid as soon as the claims of all the rank-and-file employees had been paid. If not for this promise that he had held
on to until the time of his death, we see no reason why he would delay filing the complaint before the LA. Thus, we
find ample justification not to follow the prescriptive period imposed under Article 291 of the Labor Code. Great
injustice will be committed if we will brush aside the employees claims on a mere technicality, especially when it was
petitioners own action that prevented respondent from interposing the claims within the required period.[8]

Full backwages includes monetary benefits even after 3

years
If an employee is illegally dismissed, the Labor Code requires payment of full backwages. This will necessarily
include monetary equivalent of benefits such as the service incentive leave. Since a service incentive leave is clearly
demandable after one year of service whether continuous or broken or its equivalent period, and it is one of the
benefits which would have accrued if an employee was not otherwise illegally dismissed, it is fair and legal that its
computation should be up to the date of reinstatement as provided in the Labor Code.[9]
Likewise, 13th month pay and underpaid wages may also be recovered as a consequence of illegal dismissal.
[The Supreme Court stated the extent of recovery in full backwages:] The thirteenth month pay awarded should be
computed for each year of service from the time each employee was hired up to the date of his actual reinstatement.
The same computation applies to the award of the service incentive leave and underpaid wages. Each employee is to
be paid the remaining underpaid wages from the date of his or her hiring in accordance with the then prevailing wage
legislations. Likewise, a refund of P12 shall be computed for each day of service of each employee, to be reckoned
from the date such employee was hired. The damages awarded should be sustained because the employer acted in
bad faith. Back wages are to be computed from the date of dismissal up to the date of actual reinstatement without
any deductions or conditions.[10]
Thus, the 3-year prescriptive period will NOT apply to monetary claims that are covered by the full backwages as a
consequence of illegal dismissal.

Seafarers monetary claims subject to 3-year

period
For seafarers monetary claims, the 3-year prescriptive period in the Labor Code will be followed and not Section 28
of the Standard Employment Contract for Seafarers (SEC).[11]

Labor Code will be followed versus foreign

law
Should an employment contract cite a foreign law with a prescriptive period shorter than 3 years, the same will not be
valid as courts of the forum will not enforce a foreign claim obnoxious to the forums policy.[12] The 1987
Constitution expressly provides for policies providing for full protection to labor, among others.[13] Hence, an
employment contract citing a foreign law allowing 1 year only for an employee to claim is void for being contrary to
public policy. In that case, the 3-year prescriptive period in the Labor Code will then be followed.

Best legal practice

As a matter of best legal practice, the employer should take note of the 3-year prescriptive period. If monetary claims
are made within that period, the employer will be required to pay them provided they are due. Conversely, the
employer will not be required to pay monetary claims beyond the 3-year expiration.

With regard to the prescriptive period for money claims, Article 291 of the
Labor Code states:

Article 291. Money Claims. All money claims arising from

employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause
of action accrued; otherwise they shall be barred forever.

The pivotal question in resolving the issues is the date when the cause of
action of respondent Pingol accrued.

It is a settled jurisprudence that a cause of action has three (3) elements, to

wit: (1) a right in favor of the plaintiff by whatever means and under whatever law
it arises or is created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the part of such
defendant violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff.[17]

Respondent asserts that his complaint was filed within the prescriptive
period of four (4) years. He claims that his cause of action did not accrue
on January 1, 2000 because he was not categorically and formally dismissed or his
monetary claims categorically denied by petitioner PLDT on said date. Further,
respondent Pingol posits that the continuous follow-up of his claim with petitioner
PLDT from 2001 to 2003 should be considered in the reckoning of the prescriptive
period.

Petitioner PLDT, on the other hand, contends that respondent Pingol was
dismissed from the service on January 1, 2000 and such fact was even alleged in
the complaint he filed before the LA. He never contradicted his previous
admission that he was dismissed on January 1, 2000. Such admitted fact does not
require proof.

The Court agrees with petitioner PLDT. Judicial admissions made by parties in the
pleadings, or in the course of the trial or other proceedings in the same case are
conclusive and so does not require further evidence to prove them. These
admissions cannot be contradicted unless previously shown to have been made
through palpable mistake or that no such admission was made.[18] In Pepsi Cola
Bottling Company v. Guanzon,[19] it was written:

xxx that the dismissal of the private respondent's complaint

was still proper since it is apparent from its face that the action
has prescribed. Private respondent himself alleged in the
complaintthat he was unlawfully dismissed in 1979 while the
complaint was filed only on November 14, 1984. xxx (Emphasis
supplied. Citations omitted.)
 In the case at bench, Pingol himself alleged the date January 1, 2000 as the
date of his dismissal in his complaint[20] filed on March 29, 2004, exactly four (4)
years and three (3) months later.Respondent never denied making such admission
or raised palpable mistake as the reason therefor. Thus, the petitioner correctly
relied on such allegation in the complaint to move for the dismissal of the case on
the ground of prescription.

The Labor Code has no specific provision on when a claim for illegal dismissal or
a monetary claim accrues. Thus, the general law on prescription applies. Article
1150 of the Civil Code states:

Article 1150. The time for prescription for all kinds of actions,
when there is no special provision which ordains otherwise, shall
be counted from the day they may be brought. (Emphasis
supplied)

The day the action may be brought is the day a claim starts as a legal
possibility.[21] In the present case, January 1, 2000 was the date that respondent
Pingol was not allowed to perform his usual and regular job as a maintenance
technician. Respondent Pingol cited the same date of dismissal in his complaint
before the LA. As, thus, correctly ruled by the LA, the complaint filed had already
prescribed.

Respondent claims that between 2001 and 2003, he made follow-ups with PLDT
management regarding his benefits. This, to his mind, tolled the running of the
prescriptive period.

The rule in this regard is covered by Article 1155 of the Civil Code. Its
applicability in labor cases was upheld in the case of International Broadcasting
Corporation v. Panganiban[22] where it was written:

Like other causes of action, the prescriptive period for money

claims is subject to interruption, and in the absence of an
 equivalent Labor Code provision for determining whether the
said period may be interrupted, Article 1155 of the Civil Code may
be applied, to wit:

ART. 1155. The prescription of actions is interrupted when

they are filed before the Court, when there is a written
extrajudicial demand by the creditors, and when there is any
written acknowledgment of the debt by the debtor.

Thus, the prescription of an action is interrupted by (a) the

filing of an action, (b) a written extrajudicial demand by the
creditor, and (c) a written acknowledgment of the debt by the
debtor.

In this case, respondent Pingol never made any written extrajudicial

demand. Neither did petitioner make any written acknowledgment of its alleged
obligation. Thus, the claimed follow-ups could not have validly tolled the running
of the prescriptive period. It is worthy to note that respondent never presented any
proof to substantiate his allegation of follow-ups.

Unfortunately, respondent Pingol has no one but himself to blame for his
own predicament. By his own allegations in his complaint, he has barred his
remedy and extinguished his right of action. Although the Constitution is
committed to the policy of social justice and the protection of the working class, it
does not necessary follow that every labor dispute will be automatically decided in
favor of labor. The management also has its own rights. Out of Its concern for the
less privileged in life, this Court, has more often than not inclined, to uphold the
cause of the worker in his conflict with the employer. Such leaning, however,
does not blind the Court to the rule that justice is in every case for the deserving, to
be dispensed in the light of the established facts and applicable law and doctrine.