Republic of the Philippines
HOUSE OF REPRESENTATIVES

‘Quezon City ff Receive \
JUL 07 ks )
NINETEENTH CONGRESS
First Regular Session
House Bill No. 1520

Introduced by TUCP Party-List
Rep. RAYMOND DEMOCRITO C. MENDOZA

EXPLANATORY NOTE

The Philippine Constitution affirms “labor as a 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 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.

However, Supreme Court decisions interpreting Article 110 of the Labor Code vary.
Hence, this bill seeks to institutionalize jurisprudence upholding the principle laid
down on workers’ money claims being given the first lien in case of business
bankruptcy,

Workers are disadvantaged even more when employers do not pay their earned
wages, benefits, and other entitlements. Therefore, such money claims and
entitlements should not require a 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
complete protection for labor.

ITO C. MENDOZA
Representative, TUCP Party-List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

NINETEENTH CONGRESS
irst Regular Session

House Bilt No. 1520

Introduced by TUCP PARTY-LIST
Rep. 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".

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 business, the employer's 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,