THE APPLICABLE LAWS
money claims, provided there still exists an employer-
1. MATERNITY CHILDREN’S HOSPITAL
VS. SECRETARY OF LABOR
Facts:
Petitioner is a semi-government hospital, managed by the
Board of Directors of the Cagayan de Oro Women's Club
and Puericulture Center, headed by Mrs. Antera Dorado,
as holdover President. The hospital derives its finances
from the club itself as well as from paying patients,
averaging 130 per month. It is also partly subsidized by
the Philippine Charity Sweepstakes Office and the
Cagayan De Oro City government. Petitioner has forty-
one (41) employees. Aside from salary and living
allowances, the employees are given food, but the amount
spent therefor is deducted from their respective salaries.
On May 23, 1986, ten (10) employees of the petitioner
employed in different capacities/positions filed a
complaint with the Office of the Regional Director of
Labor and Employment, Region X, for underpayment of
their salaries and ECOLAS, which was docketed as ROX
Case No. CW-71-86.On June 16, 1986, the Regional
Director directed two of his Labor Standard and Welfare
Officers to inspect the records of the petitioner to
ascertain the truth of the allegations in the complaints.
Based on their inspection report and recommendation, the
Regional Director issued an Order dated August 4, 1986,
directing the payment of P723,888.58, representing
underpayment of wages and ECOLAs to all the
petitioner's employees. Petitioner appealed from this
Order to the Minister of Labor and Employment, Hon.
Augusto S. Sanchez, who rendered a Decision on
September 24, 1986, modifying the said Order in that
deficiency wages and ECOLAs should be computed only
from May 23, 1983 to May 23, 1986,On October 24,
1986, the petitioner filed a motion for reconsideration
which was denied by the Secretary of Labor in his Order
dated May 13, 1987, for lack of merit.
Issue:
Whether or not the Regional Director had jurisdiction
over the case and if so, the extent of coverage of any
award that should be forthcoming, arising from his
visitorial and enforcement powers under Article 128 of
the Labor Code
Held:
This is a labor standards case, and is governed by Art.
128-b of the Labor Code, as amendedvby E.O. No. 111.
Under the present rules, a Regional Director exercises
both visitorial and enforcement power over labor
standards cases, and is therefore empowered to adjudicate
employee relationship, and the findings of the regional
office is not contested by the employer concerned.
Labor standards refer to the minimum requirements
prescribed by existing laws, rules, and regulations relating
to wages, hours of work, cost of living allowance and
other monetary and welfare benefits, including
occupational, safety, and health standards (Section 7,
Rule I, Rules on the Disposition of Labor Standards Cases
in the Regional Office, dated September 16,1987).
Decision:
ACCORDINGLY, this petition should be dismissed, as it
is hereby DISMISSED, as regards all persons still
employed in the Hospital at the time of the filing of the
complaint, but GRANTED as regards those employees no
longer employed at that time. SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin, Cortes,Griño-
Aquino and Regalado, JJ., concur
2. P.I. MANUFACTURING VS. P.I.
MANUFACTURING UNION
FACTS:
Petitioner P.I. Manufacturing, Incorporated is a
domestic corporation engaged in the manufacture and sale
of household appliances. Respondent P.I. Manufacturing
Supervisors and Foremen Association (PIMASUFA) is an
organization of petitioner’s supervisors and foremen,
joined in this case by its federation, the National Labor
Union (NLU).
December 10, 1987, R.A. No. 6640 was
passed providing an increase in the statutory minimum
wage and salary rates of employees and workers in the
private sector, to which it is increased by P10.00 per day,
except non-agricultural workers and employees outside
Metro Manila who shall receive an increase of P11.00 per
day: Provided, That those already receiving above the
minimum wage up to P100.00 shall receive an increase
of P10.00 per day. Excepted from the provisions of this
Act are domestic helpers and persons employed in the
personal service of another.
December 18, 1987, petitioner and respondent
PIMASUFA entered into a new CBA (1987 CBA)
whereby the supervisors were granted an increase of
P625.00 per month and the foremen, P475.00 per month.
The increases were made retroactive to May 12, 1987, or
prior to the passage of R.A. No. 6640, and every year
thereafter until July 26, 1989.
January 26, 1989, respondents PIMASUFA and
NLU filed a complaint with NLRC charging petitioner
with violation of R.A. No. 6640. Respondents attached to
their complaint a numerical illustration of wage distortion
resulting from the implementation of R.A. No. 6640.
LA favored respondents ordering Petitioner to give
members of respondent PIMASUFA wage increases
equivalent to 13.5% of their basic pay they were
receiving prior to December 14, 1987. On appeal by
petitioner, the NLRC affirmed LA’s judgment. Petitioner
filed a petition for certiorari with SCourt. However, SC
referred the petition to CA. CA affirmed the Decision of
the NLRC with modification by raising the 13.5% wage
increase to 18.5%. M.R. was denied. Petitioner went to
SC but it favored respondents. Hence this MR.
ISSUES:
1. Whether the implementation of R.A. No. 6640
resulted in a wage distortion
2. Whether such distortion was cured or remedied
by the 1987 CBA.
RULING:
1. Yes. R.A. No. 6727, otherwise known as
the Wage Rationalization Act, explicitly
defines“wage distortion”as: “a situation where
an increase in prescribed wage rates results in
the elimination or severe contraction of
intentional quantitative differences in wage or
salary rates between and among employee
groups in an establishment as to effectively
obliterate the distinctions embodied in such wage
structure based on skills, length of service, or
other logical bases of differentiation.”
Otherwise stated, wage distortion means
the disappearance or virtual disappearance of pay
differentials between lower and higher positions in an
enterprise because of compliance with a wage order. The
increase in the wage rates by virtue of R.A. No. 6640
resulted in wage distortion or the elimination of
the intentional quantitative differences in the wage
rates of the supervisor employees of petitioner.
II. Yes. Wage distortions were cured or remedied when
respondent PIMASUFA entered into the 1987 CBA with
petitioner after the effectivity of R.A. No. 6640. The 1987
CBA increased the monthly salaries of the supervisors
by P625.00 and the foremen, by P475.00, effective May
12, 1987. These increases re-
established and broadened the gap, not only between
the supervisors and the foremen, but also between them
and the rank-and-file employees. Significantly, the 1987
CBA wage increases almost doubled that of the P10.00
increase under R.A. No. 6640.
The P625.00/month means P24.03 increase per day for
the supervisors, while
the P475.00/month means P18.26 increase per day for
the foremen. Such gap as re-established by virtue of the
CBA is more than a substantial compliance with R.A. No.
6640. CA erred in not taking into account the provisions
of the CBA. The provisions of the CBA should be read in
harmony with the wage orders, whose benefits should be
given only to those employees covered thereby.
To require petitioner to pay all the members of respondent
PIMASUFA a wage increase of 18.5%, over and above
the negotiated wage increases provided under the 1987
CBA, is highly unfair and oppressive to the former. It was
not the intention of R.A. No. 6640 to grant an across-the-
board increase in pay to all the employees of petitioner.
Only those receiving wages P100.00 and below are
entitled to the P10.00 wage increase. The apparent
intention of the law is only to upgrade the salaries or
wages of the employees specified therein. Almost all of
the members of respondent PIMASUFA have been
receiving wage rates above P100.00 and, therefore, not
entitled to the P10.00 increase. Only 3 of them are
receiving wage rates below P100.00, thus, entitled to such
increase.
TO compel employers simply to add on legislative
increases in salaries or allowances without regard to what
is already being paid, would be to penalize employers
who grant their workers more than the statutory
prescribed minimum rates of increases. Clearly, this
would be counter-productive so far as securing the
interests of labor is concerned.
It must be stressed that a CBA constitutes the law between
the parties when freely and voluntarily entered into. Iit
has not been shown that respondent PIMASUFA
was coerced or forced by petitioner to sign the 1987
CBA. All of its 13 officers signed the CBA with the
assistance of respondent NLU. They signed it fully aware
of the passage of R.A. No. 6640. The duty to bargain
requires that the parties deal with each other with open
and fair minds. Respondents cannot invoke the beneficial
provisions of the 1987 CBA but disregard the concessions
it voluntary extended to petitioner. The goal of collective
bargaining is the making of agreements that will stabilize
business conditions and fix fair standards of working
conditions. Respondents’ posture contravenes this goal.
WHEREFORE, we GRANT petitioner’s MR.
3. PHILIPPINE ASSOCIATION OF SERVICE
EXPORTERS VS. DRILON
Facts:
Petitioner, Phil association of Service Exporters, Inc., is
engaged principally in the recruitment of Filipino
workers, male and female of overseas employment. It
challenges the constitutional validity of Dept. Order No.
1 (1998) of DOLE entitled “Guidelines Governing the
Temporary Suspension of Deployment of Filipino
Domestic and Household Workers.” It claims that such
order is a discrimination against males and females. The
Order does not apply to all Filipino workers but only to
domestic helpers and females with similar skills, and that
it is in violation of the right to travel, it also being an
invalid exercise of the lawmaking power. Further, PASEI
invokes Sec 3 of Art 13 of the Constitution, providing for
worker participation in policy and decision-making
processes affecting their rights and benefits as may be
provided by law. Thereafter the Solicitor General on
behalf of DOLE submitting to the validity of the
challenged guidelines involving the police power of the
State and informed the court that the respondent have
lifted the deployment ban in some states where there
exists bilateral agreement with the Philippines and
existing mechanism providing for sufficient safeguards to
ensure the welfare and protection of the Filipino workers.
Issue: Whether or not there has been a valid classification
in the challenged Department Order No. 1.
Held: SC in dismissing the petition ruled that there has
been valid classification, the Filipino female domestics
working abroad were in a class by themselves, because of
the special risk to which their class was exposed. There is
no question that Order No.1 applies only to female
contract workers but it does not thereby make an undue
discrimination between sexes. It is well settled hat
equality before the law under the constitution does not
import a perfect identity of rights among all men and
women. It admits of classification, provided that:
1. Such classification rests on substantial distinctions
2. That they are germane to the purpose of the law
3. They are not confined to existing conditions
4. They apply equally to al members of the same class
In the case at bar, the classifications made, rest on
substantial distinctions.
Dept. Order No. 1 does not impair the right to travel. The
consequence of the deployment ban has on the right to
travel does not impair the right, as the right to travel is
subjects among other things, to the requirements of
“public safety” as may be provided by law. Deployment
ban of female domestic helper is a valid exercise of police
power. Police power as been defined as the state authority
to enact legislation that may interfere with personal
liberty or property in order to promote general welfare.
Neither is there merit in the contention that Department
Order No. 1 constitutes an invalid exercise of legislative
power as the labor code vest the DOLE with rule making
powers.
4. SOSITO VS. AGUINALDO
DEVELOPMENT CORPORATION
FACTS:
Petitioner Manuel Sosito was employed in 1964 by
private respondent, being in charge of logging
importation. On Jan. 16,
1976, petitioner went on indefinite leave with consent of
the employer. On July 20, 1976, private respondent
through its president announced a retrenchment program
and offered separation pay to employees in the active
service as of June 30, 1976 who would tender their
resignations not later than July 31, 1976 due to financial
losses suffered by the company in the past two years.
Petitioner decided to accept this offer and filed a
resignation letter on July 29, 1976 but the same was not
acted upon and he did not receive the separation pay.
Petitioner complained to the Department of Labor who
ordered the company to pay petitioner his salary for 6 and
a half months. On appeal with the NLRC, decision was
reversed and held petitioner was not covered by the
retrenchment program.
ISSUE: Is petitioner covered by the retrenchment
program?
RULING:
No, it is clear from the Memorandum private respondent
released on July 20, 1976 that only those who are in active
service as of June30, 1976 are eligible for the
retrenchment program, and petitioner, being on indefinite
leave since Jan. 16, 1976, is thereby not qualified to avail
of the same. It is noteworthy that although Art. 272 (a) of
the Labor Code, then inforce, did not grant separation pay
if a company reduces its labor force due to financial
reverses, herein respondent did in fact offer a separation
pay. However, being that petitioner was on indefinite
leave, and could therefore choose to come back or not, at
his discretion, is lopsided in favor of petitioner in that he
could choose the best of both worlds, seek another
employment and yet avail of the benefits given by herein
respondent. To grant petitioner’s request would not be in
the interest of fair play and would in fact violate the rights
of the employer.
5. MENDOZA VS. RURAL BANK OF
LUCBAN
Facts:
On April 25, 1999, the Board of Directors of the Rural
Bank of Lucban, Inc., issued Board Resolution Nos. 99-
52 and 99-53, “that in line with the policy of the bank to
familiarize bank employees with the various phases of
bank operations and further strengthen the existing
internal control system[,] all officers and employees are
subject to reshuffle of assignments. Moreover, this
resolution does not preclude the transfer of assignment of
bank officers and employees from the branch office to the
head office and vice-versa."
Petitioner filed a Complaint before Arbitration Branch
No. IV of the National Labor Relations Commission
(NLRC). The Complaint -- for illegal dismissal,
underpayment, separation pay and damages. Petitioner
argues that he was compelled to file an action for
constructive dismissal, because he had been demoted
from appraiser to clerk and not given any work to do,
while his table had been placed near the toilet and
eventually removed.
He adds that the reshuffling of employees was done in bad
faith, because it was designed primarily to force him to
resign.
After the NLRC denied his Motion for Reconsideration,
petitioner brought before the CA a Petition for Certiorari
assailing the foregoing Resolution. The Court of appeals
Find that no grave abuse of discretion could be attributed
to the NLRC.
Hence, this Petition.
Issue:
Whether the petitioner was constructively dismissed from
his employment?
Held:
The Petition has no merit.
Constructive dismissal is defined as an involuntary
resignation resorted to when continued employment is
rendered impossible, unreasonable or unlikely; when
there is a demotion in rank or a diminution of pay; or
when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.
Jurisprudence recognizes the exercise of management
prerogatives. For this reason, courts often decline to
interfere in legitimate business decisions of employers.
Indeed, labor laws discourage interference in employers'
judgments concerning the conduct of their business. The
law must protect not only the welfare of employees, but
also the right of employers.
In the pursuit of its legitimate business interest,
management has the prerogative to transfer or assign
employees from one office or area of operation to another
-- provided there is no demotion in rank or diminution of
salary, benefits, and other privileges; and the action is not
motivated by discrimination, made in bad faith, or
effected as a form of punishment or demotion without
sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprise
effectively. The right of employees to security of tenure
does not give them vested rights to their positions to the
extent of depriving management of its prerogative to
change their assignments or to transfer them.
The law protects both the welfare of employees and the
prerogatives of management. Courts will not interfere
with business judgments of employers, provided they do
not violate the law, collective bargaining agreements, and
general principles of fair play and justice. The transfer of
personnel from one area of operation to another is
inherently a managerial prerogative that shall be upheld if
exercised in good faith -- for the purpose of advancing
business interests, not of defeating or circumventing the
rights of employees.
"The reshuffling of its employees was done in good faith
and cannot be made the basis of a finding of constructive
dismissal.
WHEREFORE, this Petition is DENIED, and the June 14,
2002 Decision and the September 25, 2002 Resolution of
the Court of Appeals are AFFIRMED. Costs against
petitioner.
 6. CHINA BANKING CORPORATION VS.
BORROMEO
Facts:
Respondent Mariano Borromeo was Assistant Vice-
President of the Branch Banking Group of China Banking
Corporation for the Mindanao Area.
Without authority from the Executive Committee or
Board of Directors of the bank, he approved several
DAUD/BP (Drawn Against Uncollected Deposits/Bills
Purhcased) accommodations amounting to P2,441,375 in
favour of Joel Maniwan. Such checks, which are not
sufficiently funded by cash, are generally not honoured by
banks. This came to the knowledge of the bank
authorities. A memorandum was issued to the Mariano
seeking clarification relative to the matter. The
respondent accepted full responsibility for committing an
error in judgment and abuse of discretion.
Mariano resigned from the Bank and apologized “for all
the trouble I have caused because of the Maniwan case.”
The respondent, however, vehemently denied benefitting
therefrom.
His acts having constituted violation of the Bank’s Code
of Ethics, the respondent was directed to restitute the
amount of P1,507,736.79 representing 90% of the total
loss of P1,675,263.10 incurred by the Bank. However, in
view of his resignation and considering the years of
service in the Bank, the management earmarked only
P836,637.08 from the respondent’s total separation
benefits or pay. The said amount would be released upon
recovery of the sums demanded from Maniwan in a civil
case filed against him by the bank with the RTC in
Cagayan de Oro City.
The respondent made a demand on the bank for the
payment of his separation pay and other benefits, but the
bank maintained its position to withhold the sum of
P836,637.08. Thus, Mariano filed with the NLRC a
complaint for payment of separation pay, mid-year bonus,
profit share and damages against the bank.
The Labor Arbiter ruled in favour of the bank.
Respondent appealed to the NLRC but it affirmed in toto
the findings of the Labor Arbiter. The CA, however,
alleging that respondent was denied his right to due
process, set aside the NLRC decision and ordered that the
records of the case be remanded to the Labor Arbiter for
further hearings on the factual issues involved.
The bank filed a motion for reconsidered but denied the
same. Hence, this petition.
Issue:
Whether or not the bank has the prerogative/right to
impose on the respondent what it considered the
appropriate penalty under the circumstances pursuant to
its company rules and regulations.
Held:
The petition is meritorious.
The bank was left with no other course but to impose the
ancillary penalty of restitution. It was certainly within the
bank’s prerogative to impose on the respondent what it
considered the appropriate penalty under the
circumstances pursuant to its company rules and
regulations.
The petitioner’s bank business is essentially imbued with
public interest and owes great fidelity to the public it deals
with. It is expected to exercise the highest degree of
diligence in the selection and supervision of their
employees. As a corollary, and like all other business
enterprises, its prerogative to discipline its employees and
to impose appropriate penalties on erring workers
pursuant to company rules and regulations must be
respected. The law, in protecting the rights of labor,
authorized neither oppression nor self-destruction of an
employer company which itself is possessed of rights that
must be entitled to recognition and respect.
Significantly, the respondent is not wholly deprived of his
separation benefits. As the Labor Arbiter stressed in his
decision, “the separation benefits due the complainant
were merely withheld. Even the petitioner bank itself
gives “the assurance that as soon as the bank has satisfied
a judgment in the civil case, the earmarked portion of his
benefits will be released without delay.
WHEREFORE, the petition is granted. The decision of
the CA is reversed and set aside. The Resolution of the
NLRC is reinstated.
7. SSS EMPLOYEES ASSOCIATION VS. CA
Facts:
On June 11, 1987, the SSS filed with the Regional Trial
Court of Quezon City a complaint for damages with a
prayer for a writ of preliminary injunction against
petitioners, alleging that on June 9, 1987, the officers and
members of SSSEA staged an illegal strike and baricaded including government-owned or controlled corporations
the entrances to the SSS Building, preventing non-striking with original charters" [Art. IX(B), Sec. .2(l) see also Sec.
employees from reporting for work and SSS members 1 of E.O. No. 180 where the employees in the civil service
from transacting business with the SSS; that the strike was are denominated as "government employees"] and that the
reported to the Public Sector Labor - Management SSS is one such government-controlled corporation with
Council, which ordered the strikers to return to work; that an original charter, having been created under R.A. No.
the strikers refused to return to work; and that the SSS 1161, its employees are part of the civil service
suffered damages as a result of the strike. The complaint [NASECO v. NLRC, G.R. Nos. 69870 & 70295,
prayed that a writ of preliminary injunction be issued to November 24,1988] and are covered by the Civil Service
enjoin the strike and that the strikers be ordered to return Commission's memorandum prohibiting strikes. This
to work; that the defendants (petitioners herein) be being the case, the strike staged by the employees of the
ordered to pay damages; and that the strike be declared SSS was illegal.
illegal.
It appears that the SSSEA went on strike after the SSS
failed to act on the union's demands, which included:
implementation of the provisions of the old SSS-SSSEA
collective bargaining agreement (CBA) on check-off of
union dues; payment of accrued overtime pay, night
differential pay and holiday pay; conversion of temporary
or contractual employees with six (6) months or more of
service into regular and permanent employees and their
entitlement to the same salaries, allowances and benefits
given to other regular employees of the SSS; and payment
of the children's allowance of P30.00, and after the SSS
deducted certain amounts from the salaries of the
employees and allegedly committed acts of
discrimination and unfair labor practices.
Issue:
Whether or not employees of the Social Security System
(SSS) have the right to strike.
Held
The 1987 Constitution, in the Article on Social Justice and
Human Rights, provides that the State "shall guarantee the
rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted
activities, including the right to strike in accordance with
law" [Art. XIII, Sec. 31].
Resort to the intent of the framers of the organic law
becomes helpful in understanding the meaning of these
provisions. A reading of the proceedings of the
Constitutional Commission that drafted the 1987
Constitution would show that in recognizing the right of
government employees to organize, the commissioners
intended to limit the right to the formation of unions or
associations only, without including the right to strike.
Considering that under the 1987 Constitution "the civil
service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
BASIC PRINCIPLES
8. BROTHERHOOD LABOR UNITY
MOVEMENT VS. ZAMORA
Facts:
The petitioners are workers who have been employed at
the San Miguel Parola Glass Factory as “pahinantes” or
“kargadors” for almost seven years. They worked
exclusively at the SMC plant, never having been assigned
to other companies or departments of San Miguel Corp,
even when the volume of work was at its minimum. Their
work was neither regular nor continuous, depending on
the volume of bottles to be loaded and unloaded, as well
as the business activity of the company. However, work
exceeded the eight-hour day and sometimes, necessitated
work on Sundays and holidays. -for this, they were neither
paid overtime nor compensation.
Sometime in 1969, the workers organized and affiliated
themselves with Brotherhood Labor Unity Movement
(BLUM). They wanted to be paid to overtime and holiday
pay. They pressed the SMC management to hear their
grievances. BLUM filed a notice of strike with the Bureau
of Labor Relations in connection with the dismissal of
some of its members. San Miguel refused to bargain with
the union alleging that the workers are not their
employees but the employees of an independent labor
contracting firm, Guaranteed Labor Contractor.
The workers were then dismissed from their jobs and
denied entrance to the glass factory despite their regularly
reporting for work. A complaint was filed for illegal
dismissal and unfair labor practices.
Issue:
Whether or not there was employer-employee (ER-
EE)relationship between the workers and San Miguel
Corp.
Held:
YES. In determining if there is an existence of the (ER-
EE) relationship, the four-fold test was used by the
Supreme Court. These are:
· The selection and engagement of the employee
· Payment of wages
· Power of dismissal
· Control Test- the employer’s power to control the
employee with respect to the means and methods by
which work is to be accomplished
In the case, the records fail to show that San Miguel
entered into mere oral agreements of employment with
the workers. Considering the length of time that the
petitioners have worked with the company, there is
justification to conclude that they were engaged to
perform activities necessary in the usual business or trade.
Despite past shutdowns of the glass plant, the workers
promptly returned to their jobs. The term of the
petitioner’s employment appears indefinite and the
continuity and habituality of the petitioner’s work bolsters
the claim of an employee status.
As for the payment of the workers’ wages, the contention
that the independent contractors were paid a lump sum
representing only the salaries the workers where entitled
to have no merit. The amount paid by San Miguel to the
contracting firm is no business expense or capital outlay
of the latter. What the contractor receives is a percentage
from the total earnings of all the workers plus an
additional amount from the earnings of each individual
worker.
The power of dismissal by the employer was evident
when the petitioners had already been refused entry to the
premises. It is apparent that the closure of the warehouse
was a ploy to get rid of the petitioners, who were then
agitating the company for reforms and benefits.
The inter-office memoranda submitted in evidence prove
the company’s control over the workers. That San Miguel
has the power to recommend penalties or dismissal is the
strongest indication of the company’s right of control over
the workers as direct employer
*SC ordered San Miguel to reinstate the petitioners with
3 years backwages.
9. TABAS VS. CMC
Facts:
Petitioners filed a petition in the NLRC for reinstatement
and payment of various benefits against California
Manufacturing Company. The respondent company then
denied the existence of an employer-employee
relationship between the company and the petitioners.
Pursuant to a manpower supply agreement, it appears that
the petitioners prior their involvement with California
Manufacturing Company were employees of Livi
Manpower service, an independent contractor, which
assigned them to work as “promotional merchandisers.”
The agreement provides that:
California “has no control or supervisions whatsoever
over [Livi’s] workers with respect to how they
accomplish their work or perform [Californias]
obligation” It was further expressly stipulated that the
assignment of workers to California shall be on a
“seasonal and contractual basis”; that “[c]ost of living
allowance and the 10 legal holidays will be charged
directly to [California] at cost “; and that “[p]ayroll for the
preceding [sic] week [shall] be delivered by [Livi] at
[California’s] premises.”
Issue: WON principal employer is liable.
Held:
Yes. The existence of an employer-employee relation
cannot be made the subject of an agreement.
Based on Article 106, “labor-only” contractor is
considered merely as an agent of the employer, and the
liability must be shouldered by either one or shared by
both.
There is no doubt that in the case at bar, Livi performs
“manpower services”, meaning to say, it contracts out
labor in favor of clients. We hold that it is one
notwithstanding its vehement claims to the contrary, and
notwithstanding the provision of the contract that it is “an
independent contractor.” The nature of one’s business is
not determined by self-serving appellations one attaches
thereto but by the tests provided by statute and prevailing
case law. The bare fact that Livi maintains a separate line
of business does not extinguish the equal fact that it has
provided California with workers to pursue the latter’s
own business. In this connection, we do not agree that the
petitioners had been made to perform activities ‘which are
not directly related to the general business of
manufacturing,” California’s purported “principal
operation activity.” Livi, as a placement agency, had
simply supplied California with the manpower necessary
to carry out its (California’s) merchandising activities,
using its (California’s) premises and equipment.
10. PHILIPPINE FUJI XEROX VS. NLRC
Facts:
This is a petition for certiorari to set aside the decision of
NLRC finding Fuji guilty of illegally dismissing privated
respondent Pedro Gerado and ordering him reinstated.
NLRC reversed the decision of Labor Arbiter finding
Gerado to be an employee of another firm (Skillpower).
May 1977, Fuji entered into an agreement under
Skillpower to operate copier machines of Fuji in its sales
offices where Gerado was assigned as key operator.
February 1983, Gerado went on leave and his place was
taken by a substitute. He returned March and discovered
that there was a apoilage of over 600 copies. He tried to
talk to the service techinician of Fuji to stop the meter of
the machine but was refused. Fuji then knew about the
incident and reported to Skillpower. Skillpower wrote a
letter to Gerado asking for explaination and suspended
him from work. Gerado then filed for illegal dismissal.
Labor Arbiter found that Gerado applied for work to
Skillpower and was made to sign a contract. Although he
receives his salaries from Fuji, Skillpower exercises
control and supervision over his wrk. Labor arbiter then
held the decision that Gerado was an employee of
Skillpower
NLRC found Gerado to be an employee of Fuji and was
illegally dismissed. NLRC found that Skillpower acted on
behalf of Fuji in supervising his work, and that FUji paid
his salaries and Skillpower was just a paymaster-agent.
Here, Fuji petitions that Skillpower is an independent
contractor and Gerado is its employee: (1) Gerado was
recruited by Skillpower, (2) work done by Gerado was not
necessary to the conduct of business of Fuji, (3) Gerado's
salaries and benefits were paid directly by Skillpower, (4)
Gerado worked under the control of Skillpower and (5)
Skillpower is a highly-capitalized business venture.
Issue: (1) Whether Gerado is an employee of Fuji or of
Skillpower.
Ruling: Contentions are without merit. Gerado is en
employee of Fuji.
(1) Gerado was recruited by Skillpower to be assigned at
Fuji. With a contract between Gerado and Fuji as basis.
(2) The job of Gerado may not generate income directly
to Fuji but it is necessary in their products and promotion
of the company's public image.
(3) The letters of the legal and industrial relations officer
of Fuji and the union president played the dismissal of the
employee, the order of dismissal was issued as a mere
obedience to the decision of petitioner.
(4) The service being rendered by privated respondent
was not a specific or special skill that Skillpower was in
the business of providing. Skillpower is classified under
Article 106 of the Labor Code; where there is "labor only"
where the person supplying workers to an employer does
not have suubstantial capital or investment in the forms of
tools, equipment, etc. and workers recruited and placed
are performing activities directly related to the principal
employer. Skillpower merely supplied workers to Fuji.
(5) There is an agreement between Fuji and Skillpower
that Skillpower has no control over the workers they
supplied with Fuji.
11. MANILA GOLF AND COUNTRY CLUB VS.
IAC
Facts:
Three separate proceedings, all initiated by Llamar and
his fellow caddies gave rise to the present petition for
review which was originally filed with the Social Security
Commission (SSC) via petition of 17 persons who styled
themselves "Caddies of Manila Golf and Country Club-
PTCCEA" for coverage and availment of benefits under
the Social Security Act as amended, "PTCCEA" being the
acronym of a labor organization, the "Philippine
Technical, Clerical, Commercial Employees
Association," with which the petitioners claimed to be
affiliated. The petition alleged in essence that although the
petitioners were employees of the Manila Golf and
Country Club, a domestic corporation, the latter had not
registered them as such with the SSS. At about the same
time, two other proceedings bearing on the same question
were filed or were pending.
The respondent Club filed answer praying for the
dismissal of the petition, alleging in substance that the
petitioners, caddies by occupation, were allowed into the
Club premises to render services as such to the individual
members and guests playing the Club's golf course and
who themselves paid for such services; that as such
caddies, the petitioners were not subject to the direction
and control of the Club as regards the manner in which
they performed their work; and hence, they were not the
Club's employees.
Issue:
Whether or not persons rendering caddying services for
members of golf clubs and their guests in said clubs'
courses or premises are the employees of such clubs and
therefore within the compulsory coverage of the Social
Security System (SSS).
Ruling:
The private respondent Fermin Llamar, is not an
employee of petitioner Manila Golf and Country Club and
that petitioner is under no obligation to report him for
compulsory coverage to the Social Security System. No
pronouncement as to costs. The caddies were paid by the
players, not by the Club, and that they observed no
definite working hours and earned no fixed income.
The Court does not agree that the facts necessarily or
logically point to such an employer-employee
relationship, and to the exclusion of any form of
arrangements, other than of employment that would make
the Llamar’s services available to the members and guest
of the Manila Golf Club. In the very nature of things,
caddies must submit to some supervision of their conduct
while enjoying the privilege of pursuing their occupation
within the premises and grounds of whatever club they do
their work in. For all that is made to appear, they work for
the club to which they attach themselves on sufference
but, on the other hand, also without having to observe any
working hours, free to leave anytime they please, to stay
away for as long they like.
It is not pretended that if found remiss in the observance
of said rules, any discipline may be meted them beyond
barring them from the premises which, it may be
supposed, the Club may do in any case even absent any
breach of the rules, and without violating any right to
work on their part. All these considerations clash frontally
with the concept of employment. The IAC would point to
the fact that the Club suggests the rate of fees payable by
the players to the caddies as still another indication of the
latter's status as employees. It seems to the Court,
however, that the intendment of such fact is to the
contrary, showing that the Club has not the measure of
control over the incidents of the caddies' work and
compensation that an employer would possess. The Court
agrees with petitioner that the group rotation system so-
called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who
is absent when his turn number is called simply losing his
turn to serve and being assigned instead the last number
for the day.
12. SEVILLA VS. CA
FACTS:
A contract by and between Noguera and Tourist World
Service (TWS), represented by Canilao, wherein TWS
leased the premises belonging to Noguera as branch office
of TWS. When the branch office was opened, it was run
by appellant Sevilla payable to TWS by any airline for
any fare brought in on the efforts of Mrs. Sevilla, 4% was
togo to Sevilla and 3% was to be withheld by the TWS.
Later, TWS was informed that Sevilla was connected with
rival firm, and since the branch office was losing, TWS
considered closing down its office. On January 3, 1962,
the contract with appellee for the use of the branch office
premises was terminated and while the effectivity thereof
was January 31, 1962, the appellees no longer used it.
Because of this, Canilao, the secretary of TWS, went over
to the branch office, and finding the premises locked, he
padlocked the premises. When neither appellant Sevilla
nor any of his employees could enter, a complaint was
filed by the appellants against the appellees. TWS insisted
that Sevilla was a mere employee, being the “branch
manager” of its branch office and that she had no say on
the lease executed with the private respondent, Noguera.
ISSUE:
W/N ER-EE relationship exists between Sevilla and TWS
HELD:
The records show that petitioner, Sevilla, was not subject
to control by the private respondent TWS. In the first
place, under the contract of lease, she had bound herself
in solidum as and for rental payments, an arrangement
that would belie claims of a master-servant relationship.
That does not make her an employee of TWS, since a true
employee cannot be made to part with his own money in
pursuance of his employer’s business, or otherwise,
assume any liability thereof. In the second place, when the
branch office was opened, the same was run by the
appellant Sevilla payable to TWS by any airline for any
fare brought in on the effort of Sevilla. Thus, it cannot be
said that Sevilla was under the control of TWS. Sevilla in
pursuing the business, relied on her own capabilities. It is
further admitted that Sevilla was not in the company’s
payroll. For her efforts, she retained 4% in commissions
from airline bookings, the remaining 3% going to TWS.
Unlike an employee, who earns a fixed salary, she earned
compensation in fluctuating amount depending on her
booking successes. The fact that Sevilla had been
designated “branch manager” does not make her a TWS
employee. It appears that Sevilla is a bona fide travel
agent herself, and she acquired an interest in the business
entrusted to her. She also had assumed personal
obligation for the operation thereof, holding herself
solidary liable for the payment of rentals. Wherefore,
TWS and Canilao are jointly and severally liable to
indemnify the petitioner, Sevilla
13. ENCYCLOPEDIA BRITANNICA VS. NLRC
Facts:
Private respondent was a sales division manager of
private petitioner and was in charge of selling the latter’s
products through sales representatives. As compensation,
private respondent receive commissions from the
products sold by his agents. After resigning from office to
pursue his private business, he filed a complaint against
the petitioner, claiming for non-payment of separation
pay and other benefits.
Petitioner alleged that complainant was not its employee
but an independent dealer authorized to promote and sell
its products and in return, received commissions
therefrom. Petitioner did not have any salary and his
income from petitioner was dependent on the volume of
sales accomplished. He had his own office, financed the
business expense, and maintained his own workforce.
Thus petitioner argued that it had no control and
supervision over the complainant as to the manner and
means he conducted his business operations.
The Labor Arbiter ruled that complainant was an
employee of the petitioner company. Petioner had control
over the complainant since the latter was required to make
periodic reports of his sales activities to the company.
Issue: Whether or not there exists an employer-employee
relationship.
Held:
No. Control of employee’s conduct is commonly regarded
as the most crucial and determinative indicator of the
presence or absence of an employer-employee
relationship. Under this, an employer-employee
relationship exists where the person for whom the
services are performed reserves the right to control not
only the end to be achieved, but also the manner and
means to be used in reaching that end.
The fact that petitioner issued memoranda to private
respondent and to other division sales managers did not
prove that petitioner had actual control over them. The
different memoranda were merely guidelines on company
policies which the sales managers follow and impose on
their respective agents.
 14. INSULAR ASSURANCE VS. NLRC
Facts:
Petitioner Insular Life entered into a contract with
respondent Basiao where the latter is authorized to solicit
for insurance policies. Sometime later, the parties entered
into another contract which caused Basiao to organize an
agency in order to fulfill its terms. The contract being
subsequently terminated by petitioner, Basiao sued the
latter which prompted also for the termination of their
engagement under the first contract. Basiao thus filed
before the Ministry of Labor seeking to recover alleged
unpaid commissions. Petitioner contends that Basiao is
not an employee but an independent contractor for which
they have no obligation to pay said commissions. The
Labor Arbiter found for Basiao ruling that there exists
employer-employee relationship between him and
petitioner. NLRC affirmed.
Issue:
Whether or not employer-employee relationship existed
between petitioner and Basiao.
Ruling: NO.
In determining the existence of employer-employee
relationship, the following elements are generally
considered, namely: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees’
conduct — although the latter is the most important
element. It should, however, be obvious that not every
form of control that the hiring party reserves to himself
over the conduct of the party hired in relation to the
services rendered may be accorded the effect of
establishing an employer-employee relationship between
them in the legal or technical sense of the term.
Rules and regulations governing the conduct of the
business are provided for in the Insurance Code and
enforced by the Insurance Commissioner. It is, therefore,
usual and expected for an insurance company to
promulgate a set of rules to guide its commission agents
in selling its policies that they may not run afoul of the
law and what it requires or prohibits. None of these really
invades the agent’s contractual prerogative to adopt his
own selling methods or to sell insurance at his own time
and convenience, hence cannot justifiably be said to
establish an employer-employee relationship between
him and the company.
The Court, therefore, rules that under the contract invoked
by him, Basiao was not an employee of the petitioner, but
a commission agent, an independent contractor whose
claim for unpaid commissions should have been litigated
in an ordinary civil action.
15. FRANCISCO VS. NLRC
Facts:
Petitoner was hired by Kasei Corporation during the
incorporation stage. She was designated as accountant
and corporate secretary and was assigned to handle all the
accounting needs of the company. She was also
designated as Liason Officer to the City of Manila to
secure permits for the operation of the company.
In 1996, Petitioner was designated as Acting Manager.
She was assigned to handle recruitment of all employees
and perform management administration functions. In
2001, she was replaced by Liza Fuentes as Manager.
Kasei Corporation reduced her salary to P2,500 per month
which was until September. She asked for her salary but
was informed that she was no longer connected to the
company. She did not anymore report to work since she
was not paid for her salary. She filed an action for
constructive dismissal with the Labor Arbiter.
The Labor Arbiter found that the petitioner was illegally
dismissed. NLRC affirmed the decision while CA
reversed it.
Issue: Whether or not there was an employer-employee
relationship.
Ruling: The court held that in this jurisdiction, there has
been no uniform test to determine the existence of an
employer-employee relation. Generally, courts have
relied on the so-called right of control test where the
person for whom the services are performed reserves a
right to control not only the end to be achieved but also
the means to be used in reaching such end. In addition to
the standard of right-of-control, the existing economic
conditions prevailing between the parties, like the
inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee
relationship.
The better approach would therefore be to adopt a two-
tiered test involving: (1) the putative employer’s power to
control the employee with respect to the means and
methods by which the work is to be accomplished; and (2)
the underlying economic realities of the activity or
relationship.
In Sevilla v. Court of Appeals, the court observed the need
to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-
of-control like the inclusion of the employee in the
payrolls, to give a clearer picture in determining the
existence of an employer-employee relationship based on
an analysis of the totality of economic circumstances of
the worker.
Thus, the determination of the relationship between
employer and employee depends upon the circumstances
of the whole economic activity, such as: (1) the extent to
which the services performed are an integral part of the
employer’s business; (2) the extent of the worker’s
investment in equipment and facilities; (3) the nature and
degree of control exercised by the employer; (4) the
worker’s opportunity for profit and loss; (5) the amount
of initiative, skill, judgment or foresight required for the
success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the
worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his
continued employment in that line of business. The proper
standard of economic dependence is whether the worker
is dependent on the alleged employer for his continued
employment in that line of business.
By applying the control test, there is no doubt that
petitioner is an employee of Kasei Corporation because
she was under the direct control and supervision of Seiji
Kamura, the corporation’s Technical Consultant. It is
therefore apparent that petitioner is economically
dependent on respondent corporation for her continued
employment in the latter’s line of business.
There can be no other conclusion that petitioner is an
employee of respondent Kasei Corporation. She was
selected and engaged by the company for compensation,
and is economically dependent upon respondent for her
continued employment in that line of business. Her main
job function involved accounting and tax services
rendered to Respondent Corporation on a regular basis
over an indefinite period of engagement. Respondent
Corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause.
More importantly, Respondent Corporation had the
power to control petitioner with the means and methods
by which the work is to be accomplished.
16. PAGUIO VS. NLRC
G.R. No. 147816 May 9, 2003 FIRST DIVISION
(VITUG, J.)
Facts:
• Metromedia Times Corporation entered, for the
fifth time, into an agreement with petitioner Efren P.
Paguio, appointing the latter to be an account executive of
the firm.
• Again, petitioner was to solicit advertisements
for "The Manila Times," a newspaper of general
circulation, published by respondent company.
• Petitioner, for his efforts, was to receive
compensation consisting of a 15% commission on direct
advertisements less withholding tax and a 10%
commission on agency advertisements based on gross
revenues less agency commission and the corresponding
withholding tax. The commissions, released every fifteen
days of each month, were to be given to petitioner only
after the clients would have paid for the advertisements.
Apart from commissions, petitioner was also entitled to a
monthly allowance of P2,000.00 as long as he met the
P30,000.00-monthly quota.
• Basically, the contentious points raised by the
parties had something to do with the following
stipulations of the agreement; viz:
"12. You are not an employee of the Metromedia Times
Corporation nor does the company have any obligations
towards anyone you may employ, nor any responsibility
for your operating expenses or for any liability you may
incur. The only rights and obligations between us are
those set forth in this agreement. This agreement cannot
be amended or modified in any way except with the duly
authorized consent in writing of both parties.
"13. Either party may terminate this agreement at any time
by giving written notice to the other, thirty (30) days prior
to effectivity of termination."
• Barely two months after the renewal of his
contract, petitioner received a notice from respondent
firm informing him of the termination of his services.
Apart from vague allegations of misconduct on which he
was not given the opportunity to defend himself, i.e.,
pirating clients from his co-executives and failing to
produce results, no definite cause for petitioner's
termination was given.
• Aggrieved, petitioner filed a case before the labor
arbiter. The labor arbiter found for petitioner and declared
his dismissal illegal. The arbiter ordered respondent
Metromedia Times Corporation and its officers to
reinstate petitioner to his former position, without loss of
seniority rights, and to pay him his commissions and other
remuneration accruing from the date of dismissal up until
his reinstatement.
• On appeal, NLRC reversed the ruling of the labor
arbiter and declared the contractual relationship between
the parties as being for a fixed-term employment.
• Court of Appeals upheld in toto the findings of
the commission.
Issue:
What is the nature of the contractual relationship between
petitioner and respondent company - was it or was it not
one of regular employment?
Held:
• A "regular employment," whether it is one or not,
is aptly gauged from the concurrence, or the non-
concurrence, of the following factors - a) the manner of
selection and engagement of the putative employee, b) the
mode of payment of wages, c) the presence or absence of
the power of dismissal; and d) the presence or absence of
the power to control the conduct of the putative employee
or the power to control the employee with respect to the
means or methods by which his work is to be
accomplished.
• An indicum of regular employment, rightly taken
into account by the labor arbiter, was the reservation by
respondent Metromedia Times Corporation not only of
the right to control the results to be achieved but likewise
the manner and the means used in reaching that end.
Metromedia Times Corporation exercised such control by
requiring petitioner, among other things, to submit a daily
sales activity report and also a monthly sales report as
well. Various solicitation letters would indeed show that
Robina Gokongwei, company president, Alda Iglesia, the
advertising manager, and Frederick Go, the advertising
director, directed and monitored the sales activities of
petitioner.
• Article 280 of the Labor code defined a regular
employee - is one who is engaged to perform activities
which are necessary and desirable in the usual business or
trade of the employer as against those which are
undertaken for a specific project or are seasonal. Even in
these latter cases, where such person has rendered at least
one year of service, regardless of the nature of the activity
performed or of whether it is continuous or intermittent,
the employment is considered regular as long as the
activity exists, it not being indispensable that he be first
issued a regular appointment or be formally declared as
such before acquiring a regular status.
• That petitioner performed activities which were
necessary and desirable to the business of the employer,
and that the same went on for more than a year, could
hardly be denied. Petitioner was an account executive in
soliciting advertisements, clearly necessary and desirable,
for the survival and continued operation of the business
of respondent corporation. Robina Gokongwei, its
President, herself admitted that the income generated
from paid advertisements was the lifeblood of the
newspaper's existence. Implicitly, respondent corporation
recognized petitioner's invaluable contribution to the
business when it renewed, not just once but five times, its
contract with petitioner.
• Respondent company cannot seek refuge under
the terms of the agreement it has entered into with
petitioner. The law, in defining their contractual
relationship, does so, not necessarily or exclusively upon
the terms of their written or oral contract, but also on the
basis of the nature of the work petitioner has been called
upon to perform. The law affords protection to an
employee, and it will not countenance any attempt to
subvert its spirit and intent. A stipulation in an agreement
can be ignored as and when it is utilized to deprive the
employee of his security of tenure. The sheer inequality
that characterizes employer-employee relations, where
the scales generally tip against the employee, often
scarcely provides him real and better options.
• A lawful dismissal must meet both substantive
and procedural requirements; in fine, the dismissal must
be for a just or authorized cause and must comply with the
rudimentary due process of notice and hearing. It is not
shown that respondent company has fully bothered itself
with either of these requirements in terminating the
services of petitioner. The notice of termination recites no
valid or just cause for the dismissal of petitioner nor does
it appear that he has been given an opportunity to be heard
in his defense.
WHEREFORE, the instant petition is GRANTED. The
decision of the Court of Appeals and that of National
Labor Relations Commission are hereby SET ASIDE and
that of the Labor Arbiter is REINSTATED
SO ORDERED.
17. GREAT PACIFIC LIFE VS. JUDICO
FACTS:
Petition for certiorari to review the decision NLRC dated
September 9, 1985
• Ordering petitioner Grepalife to recognize private
respondent HonoratoJudico, as its regular employee as
defined under Art. 281 of the Labor Code.
• Remanding the case to its origin for the
determination of private respondent Judico's money
claims.
HonoratoJudico filed a complaint for illegal dismissal
against Grepalife, a duly organized insurance firm.
Said complaint prayed for award of money claims
consisting of:
• Separation pay,
• Unpaid salary and 13th month pay,
• Refund of cash bond,
• Moral and exemplary damages and attorney's
fees.
Grepalife admits that Judico entered into an agreement of
agency with them to become a debit agent attached in
Cebu City.
Grepalife defines a debit agent as "an insurance agent
selling/servicing industrial life plans and policy holders.
As a debit agent, Judico had definite work assignments
including but not limited to collection of premiums from
policyholders and selling insurance to prospective clients.
Public respondent NLRC also found out that complainant
was initially paid P 200. 00 as allowance for thirteen (13)
weeks regardless of production and later a certain
percentage denominated as sales reserve of his total
collections but not lesser than P 200.00.
Judicowas promoted to the position of Zone Supervisor
and was given additional (supervisor's) allowance fixed at
P110.00 per week.
During the third week of November 1981, he was reverted
to his former position as debit agent but, for unknown
reasons, not paid so-called weekly sales reserve of at least
P 200.00.
Finally on June 28, 1982, complainant was dismissed by
way of termination of his agency contract.
Petitioner assails and argues that the respondent is not an
employee and that his compensation was not based on any
fixed number of hours he was required to devote to the
service of company but rather it was the production or
result of his efforts or his work that was being
compensated
That the so-called allowance for the first thirteen weeks
that Judico worked as debit agent, cannot be construed as
salary but as a subsidy or a way of assistance for
transportation and meal expenses of a new debit agent
during the initial period of his training which was fixed
for thirteen (13) weeks.
Said contentions of petitioner were strongly rejected by
respondent he maintains that he received a definite
amount as his wage known as "sales reserve" the failure
to maintain the same would bring him back to a beginner's
employment with a fixed weekly wage of P 200.00
regardless of production.
He was assigned a definite place in the office to work on
when he is not in the field and in addition to canvassing
and making regular reports.
He was burdened with the job of collection and to make
regular weekly report thereto for which an anemic
performance would mean dismissal.
He earned out of his faithful and productive service, a
promotion to Zone Supervisor with additional
supervisor's allowance, (a definite or fixed amount of
P110.00) that he was dismissed primarily because of
anemic performance and not because of the termination
of the contract of agency substantiate the fact that he was
indeed an employee of the petitioner and not an insurance
agent in the ordinary meaning of the term.
Both parties appealed to the NLRC and decision was
rendered by the Labor Arbiter dismissing the complaint
on the ground that:
• The employer-employee relations did not exist
between the parties.
• But ordered Grepalife to pay complainant the
sum of Pl,000.00 by reason of Christian Charity.
On appeal, decision was reversed by the NLRC ruling
that:
• Complainant is a regular employee as defined
under Art. 281 of the Labor Code.
• Declaring the appeal of Grepalife questioning the
legality of the payment of Pl,000.00 to complainant moot
and academic.
Petitioner company moved to reconsider, which was
denied, hence this petition.
ISSUE:
• Whether or not employer-employee relationship
existed between petitioner and private respondent.
HELD:
That Judico was an agent of the petitioner is
unquestionable.
As held in (Investment Planning Corp. vs. SSS, 21 SCRA
294), an insurance company may have two classes of
agents who sell its insurance policies:
Salaried employees who keep definite hours and work
under the control and supervision of the company.
Registered representatives who work on commission
basis.
The test therefore is whether the "employer" controls or
has reserved the right to control the "employee" not only
as to the result of the work to be done but also as to the
means and methods by which the same is to be
accomplished.
Applying the test to the case at bar, We can readily see
that the element of control by the petitioner on Judico was
very much present.
The record shows that:
Petitioner Judico received a definite minimum amount per
week as his wage known as "sales reserve".
He was assigned a definite place in the office to work on
when he is not in the field.
In addition to his canvassing work he was burdened with
the job of collection.
Both cases he was required to make regular report to the
company regarding these duties, and for which an anemic
performance would mean a dismissal.
Conversely faithful and productive service earned him a
promotion and additional supervisor's allowance, a
definite amount of P110.00 aside from the regular P
200.00 weekly "allowance".
His contract of services with petitioner is not for a piece
of work nor for a definite period.
In the instant case the facts show that:
• He was controlled by petitioner insurance
company not only as to the kind of work.
• The amount of results, the kind of performance
but also the power of dismissal.
Ratio:
Undoubtedly, private respondent, by nature of his
position and work, had been a regular employee of
petitioner and is therefore entitled to the protection of the
law and could not just be terminated without valid and
justifiable cause.
Premises considered, the appealed decision is hereby
AFFIRMED
18. VILLAMARIA VS. CA
FACTS:
- Oscar Villamaria, Jr. was the owner of Villamaria
Motors, a sole proprietorship engaged in assembling
passenger jeepneys with a public utility franchise to
operate along the Baclaran-Sucat route. By 1995,
Villamaria stopped assembling jeepneys and retained
only nine, four of which operated by employing drivers
on a “boundary basis.” One of those drivers was
respondent Bustamante.
- Bustamante remitted 450 a day to Villamaria as
boundary and kept the residue of his daily earnings as
compensation for driving the vehicle. In August 1997,
Villamaria verbally agreed to sell the jeepney to
Bustamante under a “boundary-hulog scheme”, where
Bustamante would remit to Villamaria P550 a day for a
period of 4 years; Bustamane would then become the
owner of the vehicle and continue to drive the same under
Villamaria’s franchise, but with Php 10,000
downpayment.
- August 7, 1997, Villamaria executed a contract entitled
“Kasunduan ng Bilihan ng Sasakyan sa Pamamagitan ng
Boundary Hulog”. The parties agreed that if Bustamante
failed to pay the boundary- hulog for 3 days, Villamaria
Motors would hold on to the vehicle until Bustamante
paid his arrears, including a penalty of 50 a day; in case
Bustamante failed to remit the daily boundary-hulog for a
period of one week, the Kasunduan would cease to have
the legal effect and Bustamante would have to return the
vehicle to Villamaria motors.
- In 1999, Bustamante and other drivers who also had the
same arrangement failed to pay their respective boundary-
hulog. The prompted Villamaria to serve a “Paalala”. On
July 24, 2000. Villamaria took back the jeepney driven by
Bustamante and barred the latter from driving the vehicle.
- Bustamante filed a complaint for Illegal Dismissal.
DECISION OF LOWER COURTS:
*Labor Arbiter: petition dismissed.
*NLRC: dismissed appeal.
*CA: reversed NLRC, awarded Bustamante separation
pay and backwages.
Hence, this petition for review on certiorari.
ISSUES:
(1) WON the existence of a boundary-hulog agreement
negates the employer-employee relationship between the
vendor and vendee
(2) WON the Labor Arbiter has jurisdiction over a
complaint for illegal dismissal in such a case.
HELD:
(1) NO. Under the boundary-hulog scheme, a dual
juridical relationship is created; that of employer-
employee and vendor-vendee. The Kasanduan did not
extinguish the employer employee relationship of the
parties existing before the execution of said deed.
a. Under this system the owner/operator exercises control
and supervision over the driver. It is unlike in lease of
chattels where the lessor loses complete control over the
chattel leased but the lessee is still ultimately responsible
for the consequences of its use. The management of the
business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience,
must see to it that the driver follows the route prescribed
by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations.
b. The driver performs activities which are usually
necessary or desirable in the usual business or trade of the
owner/operator. Under the Kasunduan, respondent was
required to remit Php 550 daily to petitioner, an amount
which represented the boundary of petitioner as well as
respondent’s partial payment (hulog) of the purchase
price of the jeepney. Thus, the daily remittances also had
a dual purpose: that of petitioner’s boundary
and respondent’s partial payment (hulog) for the vehicle.
c. The obligation is not novated by an instrument that
expressly recognizes the old one, changes only the terms
of payment and adds other obligations not incompatible
with the old provisions or where the contract merely
supplements the previous one.
d. The existence of an employment relation is not
dependent on how the worker is paid but on the presence
or absence of control over the means and method of the
work. The amount earned in excess of the “boundary
hulog” is equivalent to wages and the fact that the power
of dismissal was not mentioned in the Kasunduan did not
mean that private respondent never exercised such power,
or could not exercise such power.
(2) YES. The Labor Arbiter and the NLRC has
jurisdiction under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee
relationship which can only be resolved by reference to
the Labor Code, other labor statues of their collective
bargaining agreement.
OTHER NOTES:
(1) The rule is that the nature of an action and subject
matter thereof, as well as, which court or agency of the
government has jurisdiction and the character of the
reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such
reliefs.
(2) Not every dispute between an employer and employee
involves matters that only the Labor Arbiter and the
NLRC can resolve in the exercise of their adjudicatory or
quasi-judicial powers. Actions between employers and
employees where the employer-employee relationship is
merely incidental is within the exclusive original
jurisdiction of the regular courts.
19. SY VS. CA
Facts:
Throughout all the changes in (corporate) names and for
36 years, private respondent Sahot continuously served
the trucking business of petitioners. When he turned 59
years old, he incurred absences as he was suffering from
various ailments and greatly affected the performance of
his task as a driver.
Sahot had filed a week-long leave in May and then
applied for extension of his leave for the whole month of
June. Petitioners allegedly threatened to terminate his
employment should he refuse to go back to work.
Petitioners carried out their threat and dismissed him from
work, effective June 30, 1994. He ended up sick, jobless
and penniless.
Sahot filed with the NLRC a complaint for illegal. He
prayed for the recovery of separation pay and attorney’s
fees against the petitioners.
Petitioners admitted having trucking business in the Ruling:
1950s but denied employing helpers and drivers; that
(1) YES. A computation of the age of Sahot shows that he
private respondent was not illegally dismissed as a driver
was only twenty-three (23) years when he started working
because he was in fact petitioner’s industrial partner; that
with respondent as truck helper. How can we entertain in
SBT Trucking Corporation was established only in 1994
our mind that a twenty-three (23) year old man, working
and only then did Sahot become an employee of the
as a truck helper, be considered an industrial partner.
company.
Hence we rule that Sahot was only an employee, not a
Petitioners further claimed that sometime prior to June, partner of respondents from the time Sahot started
Sahot went on leave and was not able to report for work working for respondent.
for almost seven days. Sahot asked permission to extend
Sahot denies that he was ever an industrial partner of
his leave of absence until end of June. It appeared that
petitioners. There was no written agreement, no proof that
from the expiration of his leave, private respondent never
he received a share in petitioners’ profits, nor was there
reported back to work nor did he file an extension of his
anything to show he had any participation with respect to
leave. Instead, he filed the complaint for illegal dismissal
the running of the business.
against the trucking company and its owners.
Records of the case show that Sahot actually engaged in
Petitioners add that due to Sahot’s refusal to work after
work as an employee. During the entire course of his
the expiration of his authorized leave of absence, he
employment he did not have the freedom to determine
should be deemed to have voluntarily resigned from his
where he would go, what he would do, and how he would
work. They contended that Sahot had all the time to
do it. He merely followed instructions of petitioners and
extend his leave or at least inform petitioners of his health
was content to do so, as long as he was paid his wages.
condition.
Indeed, said the CA, private respondent had worked as a
NLRC through Labor Arbiter Santos ruled that there was truck helper and driver of petitioners not for his own
no illegal dismissal; that Sahot had failed to report to pleasure but under the latter’s control.
work; that petitioners and Sahot were industrial partners
(2) NO. While it was very obvious that complainant did
before January 1994; and ordered petitioners to pay
not have any intention to report back to work due to his
"financial assistance" of P15,000 to Sahot for having
illness which incapacitated him to perform his job, such
served the company as a regular employee since January
intention cannot be construed to be abandonment. Instead,
1994 only.
the same should have been considered as one of those
On appeal, NLRC modified the judgment of the LA and falling under the just causes of terminating an
ruled that Sahot was an employee, not an industrial employment.
partner, since the start; that Sahot did not abandon his job
Article 277(b) of the Labor Code puts the burden of
but his employment was terminated on account of his
proving that the dismissal of an employee was for a valid
illness (Art. 284 of the Labor Code); and ordered
or authorized cause on the employer, without distinction
petitioners to pay private respondent separation pay in the
whether the employer admits or does not admit the
amount of P60,320.00, at the rate of P2,080.00 per year
dismissal. For an employee’s dismissal to be valid, (a) the
for 29 years of service.
dismissal must be for a valid cause and (b) the employee
Petitioners assailed the decision of the NLRC before the must be afforded due process.
Court of Appeals. The appellate court affirmed with
In order to validly terminate employment on the ground
modification the judgment of the NLRC. It held that
of disease, the Omnibus Implementing Rules of the Labor
private respondent was indeed an employee of petitioners
Code requires a certification by competent public health
since 1958. It also increased the amount of separation pay
authority that the disease is of such nature or at such a
awarded to private respondent to P74,880, computed at
stage that it cannot be cured within a period of six (6)
the rate of P2,080 per year for 36 years of service from
months even with proper medical treatment.
1958 to 1994.
Triple Eight Integrated Services, Inc. vs. NLRC, the
Issues: (1) Whether or not an employer-employee
requirement for a medical certificate under Article 284 of
relationship existed between petitioners and respondent
the Labor Code cannot be dispensed with; otherwise, it
Sahot; (2) Whether or not there was valid dismissal; and
would sanction the unilateral and arbitrary determination
(3) Whether or not respondent Sahot is entitled to
by the employer of the gravity or extent of the employee’s
separation pay.
illness and thus defeat the public policy in the protection
of labor.
In the case at bar, the employer clearly did not comply
with the medical certificate requirement before Sahot’s
dismissal was effected.
From the records, it clearly appears that procedural due
process was not observed in the separation of Sahot by the
management of the trucking company. The employer is
required to furnish an employee with two written notices
before the latter is dismissed: (1) the notice to apprise the
employee of the particular acts or omissions for which his
dismissal is sought, which is the equivalent of a charge;
and (2) the notice informing the employee of his
dismissal, to be issued after the employee has been given
reasonable opportunity to answer and to be heard on his
defense. These, the petitioners failed to do, even only for
record purposes.
(3) YES. The law is clear on the matter. An employee who
is terminated because of disease is entitled to "separation
pay equivalent to at least one month salary or to one-half
month salary for every year of service, whichever is
greater xxx." Following the formula set in Art. 284, his
separation pay was computed by the appellate court at
P2,080 times 36 years (1958 to 1994) or P74,880. We
agree with the computation, after noting that his last
monthly salary was P4,160.00 so that one-half thereof is
P2,080.00.
20. MAKATI HABERDACHERY VS. NLRC
G.R. No. 83380-81 – 15 November 1989
Penned by Justice Fernan
Nature: Petition for certiorari to review the decision of the
NLRC which affirmed the decision of the Labor Arbiter
who jointly heard and decided two cases filed by the
Union in behalf of the private respondents
MAIN FACTS:
• Individual complainants are working for Makati
Haberdashery Inc as tailors, seamstress, sewers, basters,
and “plantsadoras” and are paid on a piece-rate basis
(except two petitioners who are paid on a monthly basis)
• In addition, they are given a daily allowance of P 3.00
provided they report before 9:30 a.m. everyday.
•Work schedule: 9:30-6 or 7 p.m., Mondays to Saturdays
and even on Sundays and holidays during peak periods.
• The Sandigan ng Manggagawang Pilipino filed a
complaint for underpayment of the basic wages,
underpayment of living allowance, nonpayment of
overtime work, nonpayment of holiday pay, and other
money claims.
• The Labor Arbiter rendered judgment in favor of
complainants which the NLRC affirmed but limited back
wages to one year.
• Petitioner urged that the NLRC erred in concluding that
an employer-employee relationship existed between the
petitioner and the workers.
Issue:
1. WON employees paid on piece-rate basis are entitled
to service incentive pay?
2. WON there is an Employer-Employee Relationship?
Held:
1. NO, fall under exceptions set forth in the implementing
rules (this will be reexamined under Article 101).
2. Yes, evident in a Memorandum issued by the Assistant
Manager.
Ratio:
1. As to the service incentive leave pay: as piece-rate
workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof,
they fall under the exceptions stated in Sec1(d), Rule V,
IRR, Book III, Labor Code
Service Incentive Leave
SECTION 1. Coverage. — This rule shall apply to all
employees except:
(d) Field personnel and other employees whose
performance is unsupervised by the employer including
those who are engaged on task or contract basis, purely
commission basis, or those who are paid a fixed amount
for performing work irrespective of the time consumed in
the performance thereof;
2. Employer-Employee Relationship
There is such relationship because in the application of
the four-fold test, it was found that petitioners had control
over the respondents not only as to the result but also as
to the means and method by which the same is to be
accomplished. Such control is proven by a memorandum
which enumerates procedures and instructions regarding
job orders, alterations, and their behavior inside the shop
issued by the Assistant Manager which reads in part:
"Effective immediately, new procedures shall be
followed:
a. To follow instruction and orders from the
undersigned…
b. Before accepting the job orders, tailors must
check the materials, job orders, due dates, and other things
to maximize efficiency…
c. Effective immediately all job orders, must be
finished one day before the due date. This can be done by
proper scheduling of job order and if you will cooperate
with your supervisors. xxxx
d. If there is any problem regarding supervisors or
co-tailor inside our shop, consult with me at once to settle
the problem. Fighting inside the shop is strictly
prohibited. Any tailor violating this memorandum will be
subject to disciplinary action.”
WHEREFORE, the decision of the National Labor
Relations Commission dated March 30, 1988 and that of
the Labor Arbiter dated June 10, 1986 are hereby
modified. The complaint filed by Pelobello and Zapata for
illegal dismissal docketed as NLRC NCR Case No. 2-
428-85 is dismissed for lack of factual and legal bases.
Award of service incentive leave pay to private
respondents is deleted. SO ORDERED.
_____________________________________________
________________________________
OTHER FACTS: (there are only two main issues, just in
case this is going to be asked)
•While the first case was pending decision, Pelobello left
an open package containing a jusi barong tagalong with
salesman Rivera. He was caught and confronted about
this and he explained that this was ordered by Zapata, also
a worker, for his (personal) customer. Zapata allegedly
admitted that he copied the design of the company but
later denied ownership of the same.
•They were made to explain why no action should be
taken against them for accepting a job order which is
prejudicial and in direct competition with the business.
However they did not submit and went on AWOL until
the period given for them to explain expired hence the
dismissal.
•Illegal dismissal complaint on the second case filed
before the Labor Arbiter Diosana (THIS IS THE 3rd
ISSUE IN THE FULL CASE).
•LA declared petitioners guilty of illegal dismissal and
ordered to reinstate Pelobello and Zapata and found
petitioners violating decrees of Cost-Of-Living
Allowance (COLA), service incentive and 13th month
pay. Commission analyst was directed to compute the
monetary awards which retroacts to three years prior to
filing of case.
_____________________________________________
________________________________
Other issues discussed:
•Minimum Wage
Held: No dispute that entitled to minimum wage but court
dismissed case for lack of sufficient evidence to support
claim that there was in fact underpayment which was
ruled by the LAand which the private respondents did not
appeal to in the NLRC nor in the SC. Well-settled is the
rule that “an appellee who has not himself appealed
cannot obtain from the appellate court any affirmative
relief other than the ones granted in the decision of the
court below”.
•COLA (Cost-Of-Living Allowance)
Held: Entitled. They are regular employees. IRR of Wage
No. 1, 2, and 5 provide that “all workers in the private
sector, regardless of their position, designation of status,
and irrespective of the method by which their wages are
paid” are entitled to such allowance.
•13th Month pay
Held: Entitled under Sec. 3(e) of the IRR of PD 851 which
is an exception to the exception of such provision which
states that employers whose workers are paid on piece-
rate basis in which are covered by such issuance in so far
as such workers are concerned.
•Illegal dismissal
Held: Dismissed for justifiable ground based on Article
283 (a)and (c). Inimical to the interest of the employer.
Not dismissed just because of union activities.
 21. MARAGUINOT VS. NLRC
FACTS:
Petitioner maintains that he was employed by respondents
as part of the filming crew. He was later promoted as an
electrician. Petitioners’ tasks contained of loading movie
equipment in the shoothing area. Petitioners sought the
assistance of their supervisor, Cesario, to facilitate their
request that respondents adjust their salary in accordance
with the minimum wage law. Mrs. Cesario informed
petitioners that del Rosario would agree to increase their
salary only if they signed a blank employment contract.
As petitioner refused to sign, respondents forced Enero
(the other petitioner who worked as a crew member) to go
on leave. However, when he reported to work, respondent
refused to take him back. Maraguinot was dropped from
the company payroll but when he returned, he was again
asked to sign a blank employment contract, and when he
still refused, respondent’s terminated his services.
Petitioners thus sued for illegal dismissal. Private
respondents assert that they contract persons called
producers to produce or make movies for private
respondents and contend that petitioners are project
employees of the associate producers, who act as
independent contractors. Thus, there is no ER-EE
relationship. However, petitioners cited that their
performance of activities is necessary in the usual trade or
business of respondents and their work in continuous.
ISSUE:
W/N ER-EE relationship exists
HELD:
Yes. With regards to VIVA’s contention that it does not
make movies but merely distributes motion pictures, there
is no sufficient proof to prove this contention. In respect
to respondents’ allegation that petitioners are project
employees, it is a settled rule that the contracting out of
labor is allowed only in case of job contracting. However,
assuming that the associate producers are job contactors,
they must then be engaged in the business of making
motion pictures. Associate producers must have tools
necessary to make motion pictures. However, the
associate producers in this case have none of these. The
movie-making equipment are supplied to the producers
and owned by VIVA. Thus, it is clear that the associate
producer merely leases the equipment from VIVA. In
addition, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply,
recruit nor hire the workers. It was Cesario, the Shooting
Supervisor of VIVA, who recruited crew members. Thus,
the relationship between VIVA and its producers or
associate producers seems to be that of agency. With
regards to the issue of illegal dismissal, petitioners assert
that they were regular employees who were illegally
dismissed. Petitioners in this case had already attained the
status of regular employees in view of VIVA’s conduct.
Thus, petitioners are entitled to back wages. A project
employee or a member of a work pool may acquire the
status of a regular employee when:
a. there is a continuous rehiring of project employees even
after a cessation of project
b. the tasks performed by the alleged project employee are
vital and necessary to the business of employer
The tasks of petitioners in loading movie equipment and
returning it to VIVA’s warehouse and fixing the lighting
system were vital, necessary and indispensable to the
usual business or trade of the employer. Wherefore,
petition is granted.
22. ORLANDO FARM VS. NLRC
FACTS:
Orlando Farms Growers Association is an association of
landowners engaged in the production of export quality
bananas established for the sole purpose of dealing
collectively on matters concerning technical services,
canal maintenance, irrigation and pest control, among
others. Respondents were hired as farm workers by
several member-landowners but; nonetheless, were made
to perform functions as packers and harvesters in the
plantation of petitioner association. Respondents were
dismissed on various dates. Petitioner alleged that
respondents were not its employees and but of the
individual landowners which fact can easily be deduced
from the payments made by the latter of respondent's SSS
contributions. Moreover, it could have never exercised
the power of control over them with regard to the manner
and method by which the work was to be accomplished,
which authority remain vested with the landowners
despite becoming members thereof.
ISSUE(S): (1) Whether or not an unregistered association
may be an employer independent of the respective
members it represents.(2) Whether or not EER exists.
HELD:
YES. An employer is any person acting in the interest of
an employer, directly or indirectly. The law does not
require an employer to be registered before he may come
within the purview of the Labor Code, consistent with the
established rule in statutory construction that when the
law does not distinguish, we should not distinguish. To do
otherwise would bring about a situation whereby
employees are denied, not only redress of their
grievances, but, more importantly, the protection and
benefits accorded to them by law if their employer
happens to be an unregistered association. The following
are generally considered in the determination of the
existence of an employer-employee relationship; (1) the
manner of selection and engagement; (2) the payment of
wages; (3) the presence or absence of the power of
dismissal; and (4) the presence or absence of the power of
control; of these four, the last one being the most
important. The following circumstances which support
the existence of employer-employee relations cannot be
denied. During the subsistence of the association, several
circulars and memoranda were issued concerning, among
other things, absences without formal request, loitering in
the work area and disciplinary measures with which every
worker is enjoined to comply. Furthermore, the
employees were issued identification cards. While the
original purpose of the formation of the association was
merely to provide the landowners a unified voice in
dealing with Stanfilco, petitioner however exceeded its
avowed intentions when its subsequent actions reenforced
only too clearly its admitted role of employer.