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Right of First Preference of Unpaid Wages (Article 110 of The Labor Code)

1) The right of first preference for unpaid wages under Article 110 of the Labor Code does not create a lien on an insolvent debtor's property in favor of workers. 2) It establishes a preference in credit for workers to receive payment first from the proceeds of an insolvent employer's assets. 3) This right determines the order that credits will be paid out in the final distribution of an insolvent's assets, giving unpaid wages first preference for payment.

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Jin Yangyang
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107 views1 page

Right of First Preference of Unpaid Wages (Article 110 of The Labor Code)

1) The right of first preference for unpaid wages under Article 110 of the Labor Code does not create a lien on an insolvent debtor's property in favor of workers. 2) It establishes a preference in credit for workers to receive payment first from the proceeds of an insolvent employer's assets. 3) This right determines the order that credits will be paid out in the final distribution of an insolvent's assets, giving unpaid wages first preference for payment.

Uploaded by

Jin Yangyang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Right of first preference of unpaid wages (Article 110 of the Labor Code)

The right of first preference as regards unpaid wages recognized by Article 110 [of the Labor Code] does
not constitute a lien on the property of the insolvent debtor in favor or workers. It is but a preference of
credit in their favor, a preference in application. It is a method adopted to determine and specify the
order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is
a right to a first preference in the discharge of the funds of the judgment debtor. In the words of Republic
vs. Peralta:

'Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for
unpaid wages either upon all of the properties or upon any particular property owned by their employer.
Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims
established under Articles 2241 and 2242 of the Civil Code, except to the extent that such claims for
unpaid wages are already covered by Article 2241, number 6: 'claims for laborers' wages, on the goods
manufactured or the work done; or by Article 2242, number 3: 'claims of laborers and other workers
engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said
buildings, canals or other works.' To the extent that claims for unpaid wages fall outside the scope of
Article 2241, number 6 and Article 2242, number 3, they would come within the ambit of the category of
ordinary preferred credits under Article 2244.'

[Development Bank of the Philippines vs NLRC, G.R. No. 86932, June 27, 1990]

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