2019 Labor Law and Social Legislation, Q13

Mr. A signed a one (1)-year contract with XYZ Recruitment Co. for deployment as welding supervisor for DEF, Inc. located in Dubai. The employment contract, which the Philippine Overseas Employment Administration (POEA) approved, stipulated a salary of US$600.00 a month.
Mr. A had only been in his job in Dubai for six (6) months when DEF, Inc. announced that it was suffering from severe financial losses and thus intended to retrench some of its workers, among them Mr. A. DEF, Inc. hinted, however, that employees who would accept a lower salary could be retained.
Together with some other Filipino workers, Mr. A agreed to a reduced salary of US$400.00 a month and thus, continued with his employment.
(a) Was the reduction of Mr. A’s salary valid? Explain. (2.5%)
(b) Assuming that the reduction was invalid, may Mr. A hold XYZ recruitment Co. liable for underpayment of wages? Explain. (2.5%)

Quick check

Under Section 6 of R.A. 8042, what is the legal status of an agreement signed abroad reducing an OFW's POEA-approved salary?

What is the statutory liability of a local recruitment agency for wage underpayment committed by its foreign principal?

Why is an OFW's consent to a salary reduction signed abroad to avoid retrenchment legally ineffective?

Which government agency must approve any modification or alteration of an overseas employment contract?

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Under Republic Act No. 8042, what purpose does the joint and solidary liability of local recruitment agencies serve?

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1. POEA Contract Substitution
Under Section 6 of Republic Act No. 8042, as amended, substituting or altering an employment contract approved and processed by the Philippine Overseas Employment Administration (POEA) to the prejudice of an overseas Filipino worker without prior DOLE or POEA approval is a prohibited practice. A POEA-approved contract establishes the minimum terms and conditions of overseas employment. Any subsequent agreement or compromise executed abroad reducing the worker's stipulated salary or benefits is void ab initio for violating public policy, and the original approved salary rate remains fully binding and enforceable.

2. Solidary Liability Rule
Under Section 10 of Republic Act No. 8042, a private recruitment or placement agency is jointly and solidarily liable with its foreign principal for any and all claims, wage underpayments, or monetary liabilities arising out of the implementation of an overseas employment contract. This statutory joint and solidary liability is mandatory and cannot be waived or contractually excluded. It ensures that aggrieved overseas Filipino workers have an accessible local remedy and effective recourse against the local recruitment agency in the Philippines without having to sue the foreign employer in a foreign jurisdiction.

3. Non-Waiver of Benefits
In Philippine labor jurisprudence, waivers, quitclaims, or agreements reducing statutory labor standards or approved contractual wages executed by workers under threat of termination or economic duress are invalid. An overseas worker who agrees to a salary reduction merely to avoid immediate retrenchment or deportation does not voluntarily waive the right to collect salary differentials. Acceptance of a reduced salary abroad does not constitute estoppel or novation of the POEA-approved contract, as labor contracts are impressed with public interest under the Civil Code and Constitution.

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The questions reproduced here are the official texts of the Philippine Bar Examinations, published by the Supreme Court. They are reproduced for study purposes.The suggested answers are the author’s own.

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Where a question comes from an earlier examination, the suggested answer applies the law as it now stands, which may differ from the law in force when the question was given, and may therefore differ from what would have been the correct answer at that time. Where the difference is material, the answer notes it.The practice scoring feature measures wording overlap with the suggested answer. It is not a grade, carries no official weight, and says nothing about whether your reasoning is sound.Errors are possible. If you find one, please tell me and I will correct it.Last reviewed: October 2026