Dear PAO,

I am employed as a goldsmith by RP Jewelry. Before I started working there, several incidents of theft were reportedly committed by employees of the said store. Therefore, the management decided to impose a policy requiring goldsmiths to post a deposit equivalent to 10 percent of our weekly salaries. RP Jewelry stated that these deposits will be used to cover any loss or damage caused by a goldsmith’s fault or negligence. I want to know if this arrangement is valid under the law.

Letty

Dear Letty,

As a general rule, Article 114 of the Labor Code of the Philippines clearly states that employers are prohibited in requiring their employee to make deposits intended to answer for any loss or damage of tools, materials, or equipment of the employer, subject to certain exceptions, to wit:

“Article 114. Deposits for loss or damage. – No employer shall require his worker to make deposits from which deductions shall be made for the reimbursement of loss of or damage to tools, materials, or equipment supplied by the employer, except when the employer is engaged in such trades, occupations or business where the practice of making deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor in appropriate rules and regulations.”

Thus, as exceptions to the general rule, the law provides that the employer may be allowed to require the posting of deposits if: (1) the employer is engaged in trades or business wherein the practice of deposits is recognized; or (2) it is necessary or desirable as determined by the Secretary of Labor.

The question now is whether these exceptions are applicable to your case. The answer is in the negative.

According to the case of Niña Jewelry Manufacturing of Metal Arts v. Madeline C. Montecillo and Liza M. Trinidad (GR 188169, Nov. 28, 2011), the Supreme Court, through Associate Justice Bienvenido Reyes, held that:

“While the petitioners are not absolutely precluded from imposing the new policy, they can only do so upon compliance with the requirements of the law. In other words, the petitioners should first establish that the making of deductions from the salaries is authorized by law, or regulations issued by the Secretary of Labor. Further, the posting of cash bonds should be proven as a recognized practice in the jewelry manufacturing business, or alternatively, the petitioners should seek for the determination by the Secretary of Labor through the issuance of appropriate rules and regulations that the policy the former seeks to implement is necessary or desirable in the conduct of business. The petitioners failed in this respect. It bears stressing that without proofs that requiring deposits and effecting deductions are recognized practices, or without securing the Secretary of Labor’s determination of the necessity or desirability of the same, the imposition of new policies relative to deductions and deposits can be made subject to abuse by the employers. This is not what the law intends.”

In your case, absence of any proof that requiring deposits is a recognized practice, or without securing the Secretary of Labor’s determination of the necessity or desirability of such deduction, the imposition of the said deduction by your employer may not be valid under the law.

We hope that we were able to answer your queries. This advice was based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

We appreciate your trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]