Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

1560

House Bill No.

Introduced by TUCP Party-List Representative
Hon. Raymond Democrito C. Mendoza

EXPLANATORY NOTE

The Philippine Constitution affirms “labor as primary social and economic force,” and
mandates the State to “protect the rights of workers and promote their welfare.”
Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines, declares as a State policy to “afford protection to labor”.

‘One such protection to labor is to satisfy their claims against the employer's
business. Republic Act No. 6715 provides in Article 110 of the Labor Code that
workers’ unpaid wages and benefits and/or money claims enjoy preference over all
other claims of creditors and the government.

Supreme Court decisions in interpreting Article 110 of the Labor Code vary. The
proposed amendment in this bill seeks to institutionalize jurisprudence upholding the
principle laid down in the said provision of the Labor Code. Workers should be given
first lien in case of bankruptcy to satisfy their money claims against the business.

Workers are at a disadvantage even more when employers start non-payment of
their wages, benefits and other entitlements. Such money claims and entitlements
should not require formal declaration of bankruptcy or insolvency to save workers
and their families from slipping into the quagmire of mere subsistence or poverty,

The proposed amendment will be consistent with the constitutional mandate of full
protection to labor.

REP. [RAYMOND DEMOCRITO C. MENDOZA
TUCP Party-List



Republic of the Philippines
HOUSE OF REPRESENTATIVES
: Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bill No. _1560_

Introduced by TUCP Party-List Representative
Hon. Raymond Democrito C, Mendoza

AN ACT
INSTITUTING WORKER’S CLAIM AS STATUTORY FIRST LIEN
ON THE ASSETS OF THE BANKRUPT EMPLOYER,
AMENDING FOR THIS PURPOSE ARTICLE 110
OF PRESIDENTIAL DECREE NO. 442, AS AMENDED,
OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

Section 1. Short title. -- This Act shall be known as the “Worker's First Lien in
Bankruptcy Act of 2010".

Section 2. First Lien in Bankruptcy. -- Article 110 of the Labor Code is hereby
amended to read as follows:

“ARTICLE 110. Worker [preference] FIRST LIEN in case of bankruptcy. - In
the event of bankruptcy or liquidation of an employer's business, his workers shall
enjoy first [preference] LIEN as regards their wages and other monetary claims,
any provisions of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full EVEN WITHOUT FORMAL DECLARATION OF
BANKRUPTCY OR INSOLVENCY before claims of the government and other
creditors may be paid. WHEN THE BUSINESS IS NO LONGER EXISTING
AND/OR UNABLE TO SATISFY THE MONETARY CLAIMS OF THE WORKER OR
WORKERS, THE OFFICERS SHALL BE HELD LIABLE FOR ACTING ON BEHALF
OF THE BUSINESS.”

Section 3. Repealing Clause. -- All laws, decrees, executive orders, rules and
regulations or parts thereof, which are inconsistent with this Act, are hereby
repealed, amended or modified accordingly.

Section 4. Effectivity. - This Act shall take effect fifteen (15) days after its
Publication in at least two newspapers of general circulation.

Approved,