Labor standards 1st assignment 2002,[4] in NLRC-NCR Case No.

30-10-0-489-01, finding that private

FIRST DIVISION respondents were liable for constructive dismissal.

In 1995, petitioner was hired by Kasei Corporation during its incorporation

ANGELINA FRANCISCO, G.R. No. 170087 stage. She was designated as Accountant and Corporate Secretary and was
Petitioner, assigned to handle all the accounting needs of the company. She was also
Present: designated as Liaison Officer to the City of Makati to secure business
Panganiban, C.J. permits, construction permits and other licenses for the initial operation of
(Chairperson), the company.[5]
- versus - Ynares-Santiago,
Austria-Martinez, Although she was designated as Corporate Secretary, she was not
Callejo, Sr., entrusted with the corporate documents; neither did she attend any board
and meeting nor required to do so. She never prepared any legal document and
Chico- never represented the company as its Corporate Secretary. However, on
Nazario, JJ. some occasions, she was prevailed upon to sign documentation for the
NATIONAL LABOR RELATIONS company.[6]
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO In 1996, petitioner was designated Acting Manager. The
ACEDO, DELFIN LIZA, IRENE corporation also hired Gerry Nino as accountant in lieu of petitioner. As
BALLESTEROS, TRINIDAD LIZA Promulgated: Acting Manager, petitioner was assigned to handle recruitment of all
and RAMON ESCUETA, employees and perform management administration functions; represent the
Respondents. company in all dealings with government agencies, especially with the
August 31, 2006 Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the
x ---------------------------------------------------------------------------------------- city government of Makati; and to administer all other matters pertaining to
x the operation of Kasei Restaurant which is owned and operated by Kasei
Corporation.[7]
DECISION
For five years, petitioner performed the duties of Acting
Manager. As of December 31, 2000 her salary was P27,500.00 plus
YNARES-SANTIAGO, J.: P3,000.00 housing allowance and a 10% share in the profit of Kasei
Corporation.[8]

This petition for review on certiorari under Rule 45 of the Rules of Court
seeks to annul and set aside the Decision and Resolution of the Court of
Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in
CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal
filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission
(NLRC) dated April 15, 2003,[3] in NLRC NCR CA No. 032766-02 which
affirmed with modification the decision of the Labor Arbiter dated July 31,
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still be
connected with Kasei Corporation. Timoteo Acedo, the designated
Treasurer, convened a meeting of all employees of Kasei Corporation and
announced that nothing had changed and that petitioner was still connected
with Kasei Corporation as Technical Assistant to Seiji Kamura and in
charge of all BIR matters.[9]

1
 employees reported to the BIR, as well as a list of payees subject to
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a expanded withholding tax which included petitioner. SSS records were also
month beginning January up to September 2001 for a total reduction of submitted showing that petitioners latest employer was Seiji Corporation.[13]
P22,500.00 as of September 2001. Petitioner was not paid her mid-year
bonus allegedly because the company was not earning well. On October The Labor Arbiter found that petitioner was illegally dismissed,
2001, petitioner did not receive her salary from the company. She made thus:
repeated follow-ups with the company cashier but she was advised that the
company was not earning well.[10] WHEREFORE, premises considered, judgment is hereby
rendered as follows:
On October 15, 2001, petitioner asked for her salary from Acedo
and the rest of the officers but she was informed that she is no longer 1. finding complainant an employee of
connected with the company.[11] respondent corporation;
2. declaring complainants dismissal as illegal;
Since she was no longer paid her salary, petitioner did not report 3. ordering respondents to reinstate complainant
for work and filed an action for constructive dismissal before the labor to her former position without loss of seniority rights and
arbiter. jointly and severally pay complainant her money claims
in accordance with the following computation:
Private respondents averred that petitioner is not an employee of
Kasei Corporation. They alleged that petitioner was hired in 1995 as one of a. Backwages 10/2001 07/2002 275,000.00
its technical consultants on accounting matters and act concurrently as (27,500 x 10 mos.)
Corporate Secretary. As technical consultant, petitioner performed her work b. Salary Differentials (01/2001
at her own discretion without control and supervision of Kasei Corporation. 09/2001) 22,500.00
Petitioner had no daily time record and she came to the office any time she c. Housing Allowance (01/2001
wanted. The company never interfered with her work except that from time 07/2002) 57,000.00
to time, the management would ask her opinion on matters relating to her d. Midyear Bonus 2001 27,500.00
profession. Petitioner did not go through the usual procedure of selection of e. 13th Month Pay 27,500.00
employees, but her services were engaged through a Board Resolution f. 10% share in the profits of Kasei
designating her as technical consultant. The money received by petitioner Corp. from 1996-2001 361,175.00
from the corporation was her professional fee subject to the 10% expanded g. Moral and exemplary damages 100,000.00
withholding tax on professionals, and that she was not one of those reported h. 10% Attorneys fees 87,076.50
to the BIR or SSS as one of the companys employees.[12] P957,742.50

Petitioners designation as technical consultant depended solely If reinstatement is no longer feasible, respondents are
upon the will of management. As such, her consultancy may be terminated ordered to pay complainant separation pay with additional
any time considering that her services were only temporary in nature and backwages that would accrue up to actual payment of
dependent on the needs of the corporation. separation pay.

To prove that petitioner was not an employee of the corporation, SO ORDERED.[14]

private respondents submitted a list of employees for the years 1999 and
2000 duly received by the BIR showing that petitioner was not among the

2
 On April 15, 2003, the NLRC affirmed with modification the
Decision of the Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of
July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant
separation pay computed at one month per year of service
in addition to full backwages from October 2001 to July
31, 2002;
2) The awards representing moral and exemplary
damages and 10% share in profit in the respective
accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be
based on salary differential award only;
4) The awards representing salary differentials,
housing allowance, mid year bonus and 13th month pay
are AFFIRMED.
SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED.
The decision of the National Labor Relations
Commissions dated April 15, 2003 is hereby REVERSED
and SET ASIDE and a new one is hereby rendered
dismissing the complaint filed by private respondent
against Kasei Corporation, et al. for constructive
dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there
was an employer-employee relationship between petitioner and private
respondent Kasei Corporation; and if in the affirmative, (2) whether
petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the
National Labor Relations Commission on one hand, and the Court of
Appeals on the other, there is a need to reexamine the records to determine
which of the propositions espoused by the contending parties is supported
by substantial evidence.[17]
We held in Sevilla v. Court of Appeals[18] 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.
However, in certain cases the control test is not sufficient to give a
complete picture of the relationship between the parties, owing to the
complexity of such a relationship where several positions have been held by
the worker. There are instances when, aside from the employers power to
control the employee with respect to the means and methods by which the
work is to be accomplished, economic realities of the employment relations
help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer
or some other capacity.
The better approach would therefore be to adopt a two-tiered test
involving: (1) the putative employers 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.
This two-tiered test would provide us with a framework of
analysis, which would take into consideration the totality of circumstances
surrounding the true nature of the relationship between the parties. This is
especially appropriate in this case where there is no written agreement or
3
terms of reference to base the relationship on; and due to the complexity of
the relationship based on the various positions and responsibilities given to
the worker over the period of the latters employment.
The control test initially found application in the case of Viaa v. Al-
Lagadan and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where
we held that there is an employer-employee relationship when the person
for whom the services are performed reserves the right to control not only
the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,[21] we 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,
[22]
such as: (1) the extent to which the services performed are an integral
part of the employers business; (2) the extent of the workers investment in
equipment and facilities; (3) the nature and degree of control exercised by
the employer; (4) the workers 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.[23]
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.[24] In the United States, the touchstone of economic
reality in analyzing possible employment relationships for purposes of the
Federal Labor Standards Act is dependency.[25] By analogy, the benchmark
of economic reality in analyzing possible employment relationships for
purposes of the Labor Code ought to be the economic dependence of the
worker on his employer.
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 corporations Technical Consultant. She
reported for work regularly and served in various capacities as Accountant,
Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering
accounting and tax services to the company and performing functions
necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of
engagement.
Under the broader economic reality test, the petitioner can likewise
be said to be an employee of respondent corporation because she had served
the company for six years before her dismissal, receiving check vouchers
indicating her salaries/wages, benefits, 13 th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from
August 1, 1999 to December 18, 2000.[26] When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed
by Irene Ballesteros. Petitioners membership in the SSS as manifested by a
copy of the SSS specimen signature card which was signed by the President
of Kasei Corporation and the inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.[27]
It is therefore apparent that petitioner is economically dependent
on respondent corporation for her continued employment in the latters line
of business.
In Domasig v. National Labor Relations Commission,[28] we held
that in a business establishment, an identification card is provided not only
as a security measure but mainly to identify the holder thereof as a bona fide
employee of the firm that issues it. Together with the cash vouchers
covering petitioners salaries for the months stated therein, these matters
constitute substantial evidence adequate to support a conclusion that
petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who
registers its workers with the SSS is proof that the latter were the formers
employees. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001
has clearly established that petitioner never acted as Corporate Secretary
4
and that her designation as such was only for convenience. The actual
nature of petitioners job was as Kamuras direct assistant with the duty of
acting as Liaison Officer in representing the company to secure construction
permits, license to operate and other requirements imposed by government
agencies. Petitioner was never entrusted with corporate documents of the
company, nor required to attend the meeting of the corporation. She was
never privy to the preparation of any document for the corporation, although
once in a while she was required to sign prepared documentation for the
company.[30]
The second affidavit of Kamura dated March 7, 2002 which
repudiated the December 5, 2001 affidavit has been allegedly withdrawn by
Kamura himself from the records of the case. [31] Regardless of this fact, we
are convinced that the allegations in the first affidavit are sufficient to
establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the
first one, courts do not generally look with favor on any retraction or
recanted testimony, for it could have been secured by considerations other
than to tell the truth and would make solemn trials a mockery and place the
investigation of the truth at the mercy of unscrupulous witnesses. [32] A
recantation does not necessarily cancel an earlier declaration, but like any
other testimony the same is subject to the test of credibility and should be
received with caution.[33]
Based on the foregoing, 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.
The corporation constructively dismissed petitioner when it
reduced her salary by P2,500 a month from January to September
2001. This amounts to an illegal termination of employment, where the
petitioner is entitled to full backwages. Since the position of petitioner as
accountant is one of trust and confidence, and under the principle of
strained relations, petitioner is further entitled to separation pay, in lieu of
reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution in pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to an employee. [35] In Globe
Telecom, Inc. v. Florendo-Flores,[36] we ruled that where an employee ceases
to work due to a demotion of rank or a diminution of pay, an unreasonable
situation arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer. Hence,
her severance from the company was not of her own making and therefore
amounted to an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal
work opportunities regardless of sex, race or creed. Even as we, in every
case, attempt to carefully balance the fragile relationship between
employees and employers, we are mindful of the fact that the policy of the
law is to apply the Labor Code to a greater number of employees. This
would enable employees to avail of the benefits accorded to them by law, in
line with the constitutional mandate giving maximum aid and protection to
labor, promoting their welfare and reaffirming it as a primary social
economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals dated October 29, 2004 and October 7,
2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET
ASIDE. The Decision of the National Labor Relations Commission dated
April 15, 2003 in NLRC NCR CA No. 032766-02, is REINSTATED. The
case is REMANDED to the Labor Arbiter for the recomputation of
petitioner Angelina Franciscos full backwages from the time she was
illegally terminated until the date of finality of this decision, and separation
pay representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.
SO ORDERED.
5

FIRST DIVISION
[G.R. No. 138051. June 10, 2004]
JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING
CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari[1] assailing
the 26 March 1999 Decision[2] of the Court of Appeals in CA-G.R. SP
No. 49190 dismissing the petition filed by Jose Y. Sonza
(SONZA). The Court of Appeals affirmed the findings of the National
Labor Relations Commission (NLRC), which affirmed the Labor
Arbiters dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation
(ABS-CBN) signed an Agreement (Agreement) with the Mel and Jay
Management and Development Corporation (MJMDC). ABS-CBN
was represented by its corporate officers while MJMDC was
represented by SONZA, as President and General Manager, and
Carmela Tiangco (TIANGCO), as EVP and Treasurer. Referred to in
the Agreement as AGENT, MJMDC agreed to provide SONZAs
services exclusively to ABS-CBN as talent for radio and
television. The Agreement listed the services SONZA would render to
ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m.,
Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m.,
Sundays.[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent
fee of P310,000 for the first year and P317,000 for the second and
third year of the Agreement. ABS-CBN would pay the talent fees on
the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President,
Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994
entered into by your goodself on behalf of ABS-CBN with our company
relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent
events concerning his programs and career. We consider these acts of the
station violative of the Agreement and the station as in breach thereof. In
this connection, we hereby serve notice of rescission of said Agreement at
our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly
yours,
(Sgd.)
JO
SE Y. SONZA
President and Gen.
Manager[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN
before the Department of Labor and Employment, National Capital
Region in Quezon City. SONZA complained that ABS-CBN did not
pay his salaries, separation pay, service incentive leave pay,
13th month pay, signing bonus, travel allowance and amounts due
under the Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the
ground that no employer-employee relationship existed between the
parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly
talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new account
with the same bank where ABS-CBN deposited SONZAs talent fees
and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter [5] denied
the motion to dismiss and directed the parties to file their respective
position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an
employee of respondent company until April 15, 1996 and that he was not
paid certain claims, it is sufficient enough as to confer jurisdiction over the
6
instant case in this Office. And as to whether or not such claim would entitle
complainant to recover upon the causes of action asserted is a matter to be
resolved only after and as a result of a hearing. Thus, the respondents plea
of lack of employer-employee relationship may be pleaded only as a matter
of defense. It behooves upon it the duty to prove that there really is no
employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for
resolution. The parties submitted their position papers on 24
February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents
Position Paper with Motion to Expunge Respondents Annex 4 and
Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-
CBNs witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the
television and broadcast industry is to treat talents like SONZA as
independent contractors.
The Labor Arbiter rendered his Decision dated 8 July
1997 dismissing the complaint for lack of jurisdiction.[6] The pertinent
parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the
true nature of the contract of a talent, it stands to reason that a talent as
above-described cannot be considered as an employee by reason of the
peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason
of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform the
services he undertook to render in accordance with his own style. The
benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For
one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by
a specific contract. Likewise, he was not bound to render eight (8) hours of
work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was accorded some
benefits normally given to an employee is inconsequential. Whatever
benefits complainant enjoyed arose from specific agreement by the
parties and not by reason of employer-employee relationship. As
correctly put by the respondent, All these benefits are merely talent fees and
other contractual benefits and should not be deemed as salaries, wages
and/or other remuneration accorded to an employee, notwithstanding the
nomenclature appended to these benefits. Apropos to this is the rule that the
term or nomenclature given to a stipulated benefit is not controlling, but the
intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employer-
employee relationship. As held by the Supreme Court, The line should be
drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-
employee relationship unlike the second, which address both the result and
the means to achieve it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al.,
G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)[7]
SONZA appealed to the NLRC. On 24 February 1998, the
NLRC rendered a Decision affirming the Labor Arbiters
decision. SONZA filed a motion for reconsideration, which the NLRC
denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for
certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals
rendered a Decision dismissing the case.[8]
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no
employer-employee relationship existed between SONZA and ABS-
CBN. Adopting the NLRCs decision, the appellate court quoted the
following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into
the contract merely as an agent of complainant Sonza, the principal. By all
indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly
MJMDC is a management company devoted exclusively to managing the
careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
7
MJMDC. This is clear from the provisions of the May 1994 Agreement
which specifically referred to MJMDC as the AGENT. As a matter of fact,
when complainant herein unilaterally rescinded said May 1994 Agreement,
it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza,
who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the
fact that historically, the parties to the said agreements are ABS-CBN and
Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC
figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor
of ABS-CBN such that there exist[s] employer-employee relationship
between the latter and Mr. Sonza. On the contrary, We find it indubitable,
that MJMDC is an agent, not of ABS-CBN, but of the talent/contractor Mr.
Sonza, as expressly admitted by the latter and MJMDC in the May 1994
Agreement.
It may not be amiss to state that jurisdiction over the instant controversy
indeed belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of respondent-
appellee. As squarely apparent from complainant-appellants Position Paper,
his claims for compensation for services, 13th month pay, signing bonus and
travel allowance against respondent-appellee are not based on the Labor
Code but rather on the provisions of the May 1994 Agreement, while his
claims for proceeds under Stock Purchase Agreement are based on the
latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter
contractually bound itself to pay complainant a signing bonus consisting of
shares of stockswith FIVE HUNDRED THOUSAND PESOS
(P500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an
amount not lower than the amount he was receiving prior to effectivity of
(the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to
a commutable travel benefit amounting to at least One Hundred Fifty
Thousand Pesos (P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of
the fact that his contractual relations with ABS-CBN are founded on the
New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a
notice of rescission of Agreement with the station, per his letter dated April
1, 1996, which asserted that instead of referring to unpaid employee
benefits, he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement. (Annex 3 of the
respondent ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee
that complainant-appellant filed his complaint.Complainant-appellants
claims being anchored on the alleged breach of contract on the part of
respondent-appellee, the same can be resolved by reference to civil law and
not to labor law. Consequently, they are within the realm of civil law and,
thus, lie with the regular courts. As held in the case of Dai-Chi Electronics
Manufacturing vs. Villarama, 238 SCRA 267, 21 November 1994, an
action for breach of contractual obligation is intrinsically a civil
dispute.[9] (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-
employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve. [10] A
special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC.[11] Such action cannot cover an
inquiry into the correctness of the evaluation of the evidence which
served as basis of the NLRCs conclusion.[12] The Court of Appeals
added that it could not re-examine the parties evidence and
substitute the factual findings of the NLRC with its own. [13]
The Issue
In assailing the decision of the Court of Appeals, SONZA
contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
NLRCS DECISION AND REFUSING TO FIND THAT AN EMPLOYER-
EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-
CBN, DESPITE THE WEIGHT OF CONTROLLING LAW,
JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.
[14]
The Courts Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the
decision of the Court of Appeals affirming the NLRC ruling which
upheld the Labor Arbiters dismissal of the case for lack of jurisdiction.
8
 The present controversy is one of first impression. Although
Philippine labor laws and jurisprudence define clearly the elements of
an employer-employee relationship, this is the first time that the
Court will resolve the nature of the relationship between a television
and radio station and one of its talents. There is no case law stating
that a radio and television program host is an employee of the
broadcast station.
The instant case involves big names in the broadcast industry,
namely Jose Jay Sonza, a known television and radio personality,
and ABS-CBN, one of the biggest television and radio networks in
the country.
SONZA contends that the Labor Arbiter has jurisdiction over the
case because he was an employee of ABS-CBN. On the other hand,
ABS-CBN insists that the Labor Arbiter has no jurisdiction because
SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a
question of fact. Appellate courts accord the factual findings of the
Labor Arbiter and the NLRC not only respect but also finality when
supported by substantial evidence. [15] Substantial evidence means
such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion. [16] A party cannot prove the
absence of substantial evidence by simply pointing out that there is
contrary evidence on record, direct or circumstantial. The Court does
not substitute its own judgment for that of the tribunal in determining
where the weight of evidence lies or what evidence is credible. [17]
SONZA maintains that all essential elements of an employer-
employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee
relationship are: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the
employers power to control the employee on the means and
methods by which the work is accomplished.[18] The last element, the
so-called control test, is the most important element.[19]
A. Selection and Engagement of Employee
ABS-CBN engaged SONZAs services to co-host its television
and radio programs because of SONZAs peculiar skills, talent and
celebrity status. SONZA contends that the discretion used by
respondent in specifically selecting and hiring complainant over other
broadcasters of possibly similar experience and qualification as
complainant belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess
unique skills, expertise or talent to distinguish them from ordinary
employees. The specific selection and hiring of SONZA, because of
his unique skills, talent and celebrity status not possessed by
ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did
not possess such unique skills, talent and celebrity status, ABS-CBN
would not have entered into the Agreement with SONZA but would
have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA
does not conclusively determine his status. We must consider all the
circumstances of the relationship, with the control test being the most
important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no
part of his fees going to MJMDC. SONZA asserts that this mode of
fee payment shows that he was an employee of ABS-CBN. SONZA
also points out that ABS-CBN granted him benefits and privileges
which he would not have enjoyed if he were truly the subject of a
valid job contract.
All the talent fees and benefits paid to SONZA were the result of
negotiations that led to the Agreement. If SONZA were ABS-CBNs
employee, there would be no need for the parties to stipulate on
benefits such as SSS, Medicare, x x x and 13 th month pay[20] which
the law automatically incorporates into every employer-employee
contract.[21] Whatever benefits SONZA enjoyed arose from contract
and not because of an employer-employee relationship. [22]
SONZAs talent fees, amounting to P317,000 monthly in the
second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an
employer-employee relationship. ABS-CBN agreed to pay SONZA
such huge talent fees precisely because of SONZAs unique skills,
talent and celebrity status not possessed by ordinary employees.
Obviously, SONZA acting alone possessed enough bargaining power
to demand and receive such huge talent fees for his services. The
power to bargain talent fees way above the salary scales of ordinary
9
employees is a circumstance indicative, but not conclusive, of an
independent contractual relationship.
The payment of talent fees directly to SONZA and not to
MJMDC does not negate the status of SONZA as an independent
contractor. The parties expressly agreed on such mode of
payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under
the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party
may terminate their relationship. SONZA failed to show that ABS-
CBN could terminate his services on grounds other than breach of
contract, such as retrenchment to prevent losses as provided under
labor laws.[23]
During the life of the Agreement, ABS-CBN agreed to pay
SONZAs talent fees as long as AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement. [24] Even if it
suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs
talent fees during the life of the Agreement. This circumstance
indicates an independent contractual relationship between SONZA
and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting
his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-
CBN adhered to its undertaking in the Agreement to continue paying
SONZAs talent fees during the remaining life of the Agreement even
if ABS-CBN cancelled SONZAs programs through no fault of
SONZA.[25]
SONZA assails the Labor Arbiters interpretation of his rescission
of the Agreement as an admission that he is not an employee of
ABS-CBN. The Labor Arbiter stated that if it were true that
complainant was really an employee, he would merely resign,
instead. SONZA did actually resign from ABS-CBN but he also, as
president of MJMDC, rescinded the Agreement.SONZAs letter
clearly bears this out.[26] However, the manner by which SONZA
terminated his relationship with ABS-CBN is immaterial. Whether
SONZA rescinded the Agreement or resigned from work does not
determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and
television program host is an employee or an independent contractor,
we refer to foreign case law in analyzing the present case.
The United States Court of Appeals, First Circuit, recently held
in Alberty-Vlez v. Corporacin De Puerto Rico Para La Difusin
Pblica (WIPR)[27] that a television program host is an independent
contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First,
a television actress is a skilled position requiring talent and training not
available on-the-job. x x x In this regard, Alberty possesses a masters
degree in public communications and journalism; is trained in dance,
singing, and modeling; taught with the drama department at the University
of Puerto Rico; and acted in several theater and television productions prior
to her affiliation with Desde Mi Pueblo. Second, Alberty provided the
tools and instrumentalities necessary for her to perform. Specifically,
she provided, or obtained sponsors to provide, the costumes, jewelry, and
other image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors independent contractor
status because WIPR provided the equipment necessary to tape the
show. Albertys argument is misplaced. The equipment necessary for Alberty
to conduct her job as host of Desde Mi Pueblo related to her appearance on
the show.Others provided equipment for filming and producing the show,
but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent contractors
could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x
xx
Third, WIPR could not assign Alberty work in addition to filming
Desde Mi Pueblo. Albertys contracts with WIPR specifically provided that
WIPR hired her professional services as Hostess for the Program Desde Mi
Pueblo. There is no evidence that WIPR assigned Alberty tasks in addition
to work related to these tapings. x x x[28] (Emphasis supplied)
Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in
distinguishing an employee from an independent contractor. [29] This
test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises,
the more likely the worker is deemed an employee. The converse
10
holds true as well the less control the hirer exercises, the more likely
the worker is considered an independent contractor. [30]
First, SONZA contends that ABS-CBN exercised control over
the means and methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs
services specifically to co-host the Mel & Jay programs. ABS-CBN
did not assign any other work to SONZA. To perform his work,
SONZA only needed his skills and talent. How SONZA delivered his
lines, appeared on television, and sounded on radio were outside
ABS-CBNs control. SONZA did not have to render eight hours of
work per day. The Agreement required SONZA to attend only
rehearsals and tapings of the shows, as well as pre- and post-
production staff meetings.[31] ABS-CBN could not dictate the contents
of SONZAs script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests. [32] The clear
implication is that SONZA had a free hand on what to say or discuss
in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual
performance that produced the finished product of SONZAs work.
[33]
ABS-CBN did not instruct SONZA how to perform his job.ABS-
CBN merely reserved the right to modify the program format and
airtime schedule for more effective programming. [34] ABS-CBNs sole
concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means
and methods of performance of SONZAs work.
SONZA claims that ABS-CBNs power not to broadcast his
shows proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not
to broadcast SONZAs show, ABS-CBN was still obligated to pay
SONZAs talent fees. Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZAs performance of
his work, or even with the quality or product of his work, ABS-CBN
could not dismiss or even discipline SONZA. All that ABS-CBN could
do is not to broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show,
burdened as it was by the obligation to continue paying in full
SONZAs talent fees, did not amount to control over the means and
methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared
on television - did not meet ABS-CBNs approval. This proves that
ABS-CBNs control was limited only to the result of SONZAs work,
whether to broadcast the final product or not. In either case, ABS-
CBN must still pay SONZAs talent fees in full until the expiry of the
Agreement.
In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit
Court of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete
objectionable features in their shows. Since the management did not
have control over the manner of performance of the skills of the
artists, it could only control the result of the work by deleting
objectionable features.[37]
SONZA further contends that ABS-CBN exercised control over
his work by supplying all equipment and crew. No doubt, ABS-CBN
supplied the equipment, crew and airtime needed to broadcast the
Mel & Jay programs. However, the equipment, crew and airtime are
not the tools and instrumentalities SONZA needed to perform his job.
What SONZA principally needed were his talent or skills and the
costumes necessary for his appearance. [38] Even though ABS-CBN
provided SONZA with the place of work and the necessary
equipment, SONZA was still an independent contractor since ABS-
CBN did not supervise and control his work. ABS-CBNs sole concern
was for SONZA to display his talent during the airing of the
programs.[39]
A radio broadcast specialist who works under minimal
supervision is an independent contractor. [40] SONZAs work as
television and radio program host required special skills and talent,
which SONZA admittedly possesses. The records do not show that
ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBNs
employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-
CBNs control not only [over] his manner of work but also the quality
of his work.
The Agreement stipulates that SONZA shall abide with the rules
and standards of performance covering talents[41] of ABS-CBN. The
Agreement does not require SONZA to comply with the rules and
standards of performance prescribed for employees of ABS-
11
CBN. The code of conduct imposed on SONZA under the Agreement
refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the
COMPANY (ABS-CBN) as its Code of Ethics. [42] The KBP code
applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and
television stations. Clearly, the rules and standards of performance
referred to in the Agreement are those applicable to talents and not
to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the
hired party indicate that the latter is an employee of the former. [43] In
this case, SONZA failed to show that these rules controlled his
performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired
result, which are top-rating television and radio programs that comply
with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the
conduct of the other party in relation to the services being rendered may be
accorded the effect of establishing an employer-employee relationship. The
facts of this case fall squarely with the case of Insular Life Assurance Co.,
Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use
of such means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both the
result and the means used to achieve it.[44]
The Vaughan case also held that one could still be an
independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer,
however, must not deprive the one hired from performing his services
according to his own initiative.[45]
Lastly, SONZA insists that the exclusivity clause in the
Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by
itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to
the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted
practice in the entertainment industry. [46] This practice is not designed
to control the means and methods of work of the talent, but simply to
protect the investment of the broadcast station. The broadcast
station normally spends substantial amounts of money, time and
effort in building up its talents as well as the programs they appear in
and thus expects that said talents remain exclusive with the station
for a commensurate period of time.[47] Normally, a much higher fee is
paid to talents who agree to work exclusively for a particular radio or
television station. In short, the huge talent fees partially compensates
for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiters finding that he is a talent of
MJMDC, which contracted out his services to ABS-CBN. The Labor
Arbiter ruled that as a talent of MJMDC, SONZA is not an employee
of ABS-CBN. SONZA insists that MJMDC is a labor-only contractor
and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the
labor-only contractor; (2) the employee who is ostensibly under the
employ of the labor-only contractor; and (3) the principal who is
deemed the real employer. Under this scheme, the labor-only
contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as
if the principal itself directly hired or employed the employees.
[48]
These circumstances are not present in this case.
There are essentially only two parties involved under the
Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted
as SONZAs agent. The Agreement expressly states that MJMDC
acted as the AGENT of SONZA. The records do not show that
MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel
and Jay Management and Development Corporation, is a corporation
organized and owned by SONZA and TIANGCO. The President and
General Manager of MJMDC is SONZA himself. It is absurd to hold
that MJMDC, which is owned, controlled, headed and managed by
SONZA, acted as agent of ABS-CBN in entering into the Agreement
with SONZA, who himself is represented by MJMDC. That would
make MJMDC the agent of both ABS-CBN and SONZA.
12
 As SONZA admits, MJMDC is a management company
devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any other
business, not even job contracting. MJMDC does not have any other
function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry. [49]
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then
Minister of Labor Blas Ople on 8 January 1979 finally settled the
status of workers in the broadcast industry. Under this policy, the
types of employees in the broadcast industry are the station and
program employees.
Policy Instruction No. 40 is a mere executive issuance which
does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZAs
status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast
industry. The classification of workers in the broadcast industry into
only two groups under Policy Instruction No. 40 is not binding on this
Court, especially when the classification has no basis either in law or
in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits
of Socorro Vidanes and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses.SONZA brands these
witnesses as incompetent to attest on the prevailing practice in the
radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he
was never prevented from denying or refuting the allegations in the
affidavits. The Labor Arbiter has the discretion whether to conduct a
formal (trial-type) hearing after the submission of the position papers
of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of
action raised in the complaint excluding those that may have been amicably
settled, and shall be accompanied by all supporting documents including the
affidavits of their respective witnesses which shall take the place of the
latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the
submission of the parties of their position papers/memorandum, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit facts
or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.[50]
The Labor Arbiter can decide a case based solely on the
position papers and the supporting documents without a formal trial.
[51]
The holding of a formal hearing or trial is something that the
parties cannot demand as a matter of right. [52] If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot
be faulted for not conducting a formal trial, unless under the
particular circumstances of the case, the documents alone are
insufficient. The proceedings before a Labor Arbiter are non-litigious
in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do
not strictly apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the
broadcast and entertainment industries to treat talents like SONZA
as independent contractors. SONZA argues that if such practice
exists, it is void for violating the right of labor to security of tenure.
The right of labor to security of tenure as guaranteed in the
Constitution[53] arises only if there is an employer-employee
relationship under labor laws. Not every performance of services for
a fee creates an employer-employee relationship. To hold that every
person who renders services to another for a fee is an employee - to
give meaning to the security of tenure clause - will lead to absurd
results.
Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent contractors. The right
to life and livelihood guarantees this freedom to contract as
independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special
skills, expertise and talent, of his right to contract as an independent
contractor. An individual like an artist or talent has a right to render
his services without any one controlling the means and methods by
which he performs his art or craft. This Court will not interpret the
right of labor to security of tenure to compel artists and talents to
13
render their services only as employees. If radio and television
program hosts can render their services only as employees, the
station owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to freedom
of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC)[54] in relation to
Republic Act No. 7716,[55] as amended by Republic Act No. 8241,
[56]
treats talents, television and radio broadcasters differently. Under
the NIRC, these professionals are subject to the 10% value-added
tax (VAT) on services they render. Exempted from the VAT are those
under an employer-employee relationship. [57] This different tax
treatment accorded to talents and broadcasters bolters our
conclusion that they are independent contractors, provided all the
basic elements of a contractual relationship are present as in this
case.
Nature of SONZAs Claims
SONZA seeks the recovery of allegedly unpaid talent fees,
13th month pay, separation pay, service incentive leave, signing
bonus, travel allowance, and amounts due under the Employee
Stock Option Plan. We agree with the findings of the Labor Arbiter Republic of the Philippines
and the Court of Appeals that SONZAs claims are all based on the Supreme Court
May 1994 Agreement and stock option plan, and not on the Manila
Labor Code. Clearly, the present case does not call for an
application of the Labor Code provisions but an interpretation and THIRD DIVISION
implementation of the May 1994 Agreement. In effect, SONZAs
cause of action is for breach of contract which is intrinsically a civil
dispute cognizable by the regular courts.[58] BITOY JAVIER G.R. No. 192558
WHEREFORE, we DENY the petition. The assailed Decision of (DANILO P. JAVIER),
the Court of Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 Petitioner, Present:
is AFFIRMED. Costs against petitioner.
SO ORDERED. CARPIO,* J.,
Davide, Jr., C.J., (Chairman), Panganiban, Ynares- PERALTA,** Acting Chairperson,
Santiago, and Azcuna, JJ., concur. ABAD,
- versus - PEREZ,*** and
MENDOZA, JJ.

FLY ACE CORPORATION/ Promulgated:

14
 FLORDELYN CASTILLO,
Respondents. February 15, 2012
x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure
assailing the March 18, 2010 Decision[1] of the Court of Appeals (CA) and
its June 7, 2010 Resolution,[2]in CA-G.R. SP No. 109975, which reversed
the May 28, 2009 Decision[3] of the National Labor Relations
Commission (NLRC) in the case entitled Bitoy Javier v. Fly Ace/Flordelyn
Castillo,[4] holding that petitioner Bitoy Javier (Javier) was illegally
dismissed from employment and ordering Fly Ace Corporation (Fly Ace) to
pay backwages and separation pay in lieu of reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits. He alleged that
he was an employee of Fly Ace since September 2007, performing various
tasks at the respondents warehouse such as cleaning and arranging the
canned items before their delivery to certain locations, except in instances
when he would be ordered to accompany the companys delivery vehicles,
as pahinante; that he reported for work from Monday to Saturday from 7:00
oclock in the morning to 5:00 oclock in the afternoon; that during his
employment, he was not issued an identification card and payslips by the
company; that on May 6, 2008, he reported for work but he was no longer
allowed to enter the company premises by the security guard upon the
instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several
minutes of begging to the guard to allow him to enter, he saw Ong whom he
approached and asked why he was being barred from entering the premises;
that Ong replied by saying, Tanungin mo anak mo; [6] that he then went
home and discussed the matter with his family; that he discovered that Ong
had been courting his daughter Annalyn after the two met at a fiesta
celebration in Malabon City; that Annalyn tried to talk to Ong and convince
him to spare her father from trouble but he refused to accede; that thereafter,
Javier was terminated from his employment without notice; and that he was
neither given the opportunity to refute the cause/s of his dismissal from
work.
To support his allegations, Javier presented an affidavit of one
Bengie Valenzuela who alleged that Javier was a stevedore
or pahinante of Fly Ace from September 2007 to January 2008. The said
affidavit was subscribed before the Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the business of
importation and sales of groceries. Sometime in December 2007, Javier was
contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at
an agreed rate of ₱300.00 per trip, which was later increased to ₱325.00 in
January 2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a
month whenever the vehicle of its contracted hauler, Milmar Hauling
Services, was not available. On April 30, 2008, Fly Ace no longer needed
the services of Javier. Denying that he was their employee, Fly Ace insisted
that there was no illegal dismissal. [8] Fly Ace submitted a copy of its
agreement with Milmar Hauling Services and copies of acknowledgment
receipts evidencing payment to Javier for his contracted services bearing the
words, daily manpower (pakyaw/piece rate pay) and the latters
signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of
merit on the ground that Javier failed to present proof that he was a regular
employee of Fly Ace. He wrote:
Complainant has no employee ID showing
his employment with the Respondent nor any
document showing that he received the benefits
accorded to regular employees of the Respondents.
His contention that Respondent failed to give him
said ID and payslips implies that indeed he was not
a regular employee of Fly Ace considering that
complainant was a helper and that Respondent
15
 company has contracted a regular trucking for the any judgment in the delivery of company products. He was only engaged as
delivery of its products. a helper.
Respondent Fly Ace is not engaged in
trucking business but in the importation and sales Finding Javier to be a regular employee, the NLRC ruled that he
of groceries. Since there is a regular hauler to deliver was entitled to a security of tenure. For failing to present proof of a valid
its products, we give credence to Respondents claim cause for his termination, Fly Ace was found to be liable for illegal
that complainant was contracted on pakiao basis. dismissal of Javier who was likewise entitled to backwages and separation
As to the claim for underpayment of salaries, pay in lieu of reinstatement. The NLRC thus ordered:
the payroll presented by the Respondents showing WHEREFORE, premises considered,
salaries of workers on pakiao basis has evidentiary complainants appeal is partially GRANTED. The
weight because although the signature of the assailed Decision of the labor arbiter is VACATED
complainant appearing thereon are not uniform, and a new one is hereby entered holding respondent
they appeared to be his true signature. FLY ACE CORPORATION guilty of illegal dismissal
xxxx and non-payment of 13th month pay. Consequently,
Hence, as complainant received the rightful it is hereby ordered to pay complainant DANILO
salary as shown by the above described payrolls, Bitoy JAVIER the following:
Respondents are not liable for salary differentials. [9]
Ruling of the NLRC 1. Backwages -₱45,770.83
2. Separation pay, in lieu of
On appeal with the NLRC, Javier was favored. It ruled that the LA reinstatement - 8,450.00
skirted the argument of Javier and immediately concluded that he was not a 3. Unpaid 13th month pay
regular employee simply because he failed to present proof. It was of the (proportionate) - 5,633.33
view that a pakyaw-basis arrangement did not preclude the existence of TOTAL -₱59,854.16
employer-employee relationship. Payment by result x x x is a method of
compensation and does not define the essence of the relation. It is a mere All other claims are dismissed for lack of
method of computing compensation, not a basis for determining the merit.
existence or absence of an employer-employee relationship. [10] The NLRC
further averred that it did not follow that a worker was a job contractor and SO ORDERED.[11]
not an employee, just because the work he was doing was not directly
related to the employers trade or business or the work may be considered as
extra helper as in this case; and that the relationship of an employer and an Ruling of the Court of Appeals
employee was determined by law and the same would prevail whatever the
parties may call it. In this case, the NLRC held that substantial evidence On March 18, 2010, the CA annulled the NLRC findings that
was sufficient basis for judgment on the existence of the employer- Javier was indeed a former employee of Fly Ace and reinstated the
employee relationship. Javier was a regular employee of Fly Ace because dismissal of Javiers complaint as ordered by the LA. The CA exercised its
there was reasonable connection between the particular activity performed authority to make its own factual determination anent the issue of the
by the employee (as a pahinante) in relation to the usual business or trade existence of an employer-employee relationship between the
of the employer (importation, sales and delivery of groceries). He may not parties.According to the CA:
be considered as an independent contractor because he could not exercise
xxx

16
 In an illegal dismissal case the onus
probandi rests on the employer to prove that its
dismissal was for a valid cause. However, before a
case for illegal dismissal can prosper, an employer-
employee relationship must first be established. x x
x it is incumbent upon private respondent to prove
the employee-employer relationship by substantial
evidence.
xxx
It is incumbent upon private respondent to
prove, by substantial evidence, that he is an
employee of petitioners, but he failed to discharge
his burden. The non-issuance of a company-issued
identification card to private respondent supports
petitioners contention that private respondent was
not its employee.[12]
The CA likewise added that Javiers failure to present salary vouchers,
payslips, or other pieces of evidence to bolster his contention, pointed to
the inescapable conclusion that he was not an employee of Fly
Ace. Further, it found that Javiers work was not necessary and desirable to
the business or trade of the company, as it was only when there were
scheduled deliveries, which a regular hauling service could not deliver, that
Fly Ace would contract the services of Javier as an extra helper. Lastly, the
CA declared that the facts alleged by Javier did not pass the control test.
He contracted work outside the company premises; he was not required to
observe definite hours of work; he was not required to report daily; and he
was free to accept other work elsewhere as there was no exclusivity of his
contracted service to the company, the same being co-terminous with the
trip only.[13] Since no substantial evidence was presented to establish an
employer-employee relationship, the case for illegal dismissal could not
prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF
APPEALS ERRED IN HOLDING THAT THE
PETITIONER WAS NOT A REGULAR EMPLOYEE
OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF
APPEALS ERRED IN HOLDING THAT THE
PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and self-
serving affidavits of the other employees, Fly Ace has nothing to
substantiate its claim that Javier was engaged on a pakyaw basis. Assuming
that Javier was indeed hired on a pakyaw basis, it does not preclude his
regular employment with the company. Even the acknowledgment receipts
bearing his signature and the confirming receipt of his salaries will not show
the true nature of his employment as they do not reflect the necessary
details of the commissioned task. Besides, Javiers tasks as pahinante are
related, necessary and desirable to the line of business by Fly Ace which is
engaged in the importation and sale of grocery items. On days when there
were no scheduled deliveries, he worked in petitioners warehouse,
arranging and cleaning the stored cans for delivery to clients. [15] More
importantly, Javier was subject to the control and supervision of the
company, as he was made to report to the office from Monday to Saturday,
from 7:00 oclock in the morning until 5:00 oclock in the afternoon. The list
of deliverable goods, together with the corresponding clients and their
respective purchases and addresses, would necessarily have been prepared
by Fly Ace. Clearly, he was subjected to compliance with company rules
and regulations as regards working hours, delivery schedule and output, and
his other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the
Court ruled that payment to a worker on a per trip basis is not significant
because this is merely a method of computing compensation and not a basis
for determining the existence of employer-employee relationship. Javier
likewise invokes the rule that, in controversies between a laborer and his
master, x x x doubts reasonably arising from the evidence should be
17
resolved in the formers favour. The policy is reflected is no less than the
Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he
was illegally dismissed by the latters failure to observe substantive and
procedural due process. Since his dismissal was not based on any of the
causes recognized by law, and was implemented without notice, Javier is
entitled to separation pay and backwages.
In its Comment,[19] Fly Ace insists that there was no substantial
evidence to prove employer-employee relationship. Having a service
contract with Milmar Hauling Services for the purpose of transporting and
delivering company products to customers, Fly Ace contracted Javier as an
extra helper or pahinante on a mere per trip basis. Javier, who was actually
a loiterer in the area, only accompanied and assisted the company driver
when Milmar could not deliver or when the exigency of extra deliveries
arises for roughly five to six times a month. Before making a delivery, Fly
Ace would turn over to the driver and Javier the delivery vehicle with its
loaded company products. With the vehicle and products in their custody,
the driver and Javier would leave the company premises using their own
means, method, best judgment and discretion on how to deliver, time to
deliver, where and [when] to start, and manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless
assertions. Aside from his bare allegations, he presented nothing to
substantiate his status as an employee. It is a basic rule of evidence that
each party must prove his affirmative allegation. If he claims a right granted
by law, he must prove his claim by competent evidence, relying on the
strength of his own evidence and not upon the weakness of his opponent.
[21]
Invoking the case of Lopez v. Bodega City,[22] Fly Ace insists that in an
illegal dismissal case, the burden of proof is upon the complainant who
claims to be an employee. It is essential that an employer-employee
relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus
probandi rests on the employer to prove that its
dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can
prosper, an employer-employee relationship must
first be established.
Fly Ace points out that Javier merely offers factual assertions that
he was an employee of Fly Ace, which are unfortunately not supported by
proof, documentary or otherwise.[23] Javier simply assumed that he was an
employee of Fly Ace, absent any competent or relevant evidence to support
it. He performed his contracted work outside the premises of the respondent;
he was not even required to report to work at regular hours; he was not made
to register his time in and time out every time he was contracted to work; he
was not subjected to any disciplinary sanction imposed to other employees
for company violations; he was not issued a company I.D.; he was not
accorded the same benefits given to other employees; he was not registered
with the Social Security System (SSS) as petitioners employee; and, he was
free to leave, accept and engage in other means of livelihood as there is no
exclusivity of his contracted services with the petitioner, his services being
co-terminus with the trip only. All these lead to the conclusion that petitioner
is not an employee of the respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result,
means, manner and methods by which Javier would perform his work or by
which the same is to be accomplished. [25] In other words, Javier and the
company driver were given a free hand as to how they would perform their
contracted services and neither were they subjected to definite hours or
condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was
not directly related or necessary to its principal business of importation and
sales of groceries. Even without Javier, the business could operate its usual
course as it did not involve the business of inland transportation. Lastly, the
acknowledgment receipts bearing Javiers signature and words pakiao rate,
referring to his earned salaries on a per trip basis, have evidentiary weight
that the LA correctly considered in arriving at the conclusion that Javier was
not an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is
anchored on the existence of an employer-employee relationship between
him and Fly Ace. This is essentially a question of fact. Generally, the Court
18
does not review errors that raise factual questions. However, when there is
conflict among the factual findings of the antecedent deciding bodies like
the LA, the NLRC and the CA, it is proper, in the exercise of Our equity
jurisdiction, to review and re-evaluate the factual issues and to look into the
records of the case and re-examine the questioned findings. [26] In dealing
with factual issues in labor cases, substantial evidence that amount of
relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim of
employment with Fly Ace as wanting and deficient. The Court is
constrained to agree. Although Section 10, Rule VII of the New Rules of
Procedure of the NLRC[28] allows a relaxation of the rules of procedure and
evidence in labor cases, this rule of liberality does not mean a complete
dispensation of proof. Labor officials are enjoined to use reasonable means
to ascertain the facts speedily and objectively with little regard to
technicalities or formalities but nowhere in the rules are they provided a
license to completely discount evidence, or the lack of it. The quantum of
proof required, however, must still be satisfied. Hence, when confronted
with conflicting versions on factual matters, it is for them in the exercise of
discretion to determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their decision must
be supported by substantial evidence. [29] Accordingly, the petitioner needs to
show by substantial evidence that he was indeed an employee of the
company against which he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer
allegations as different as chalk and cheese. It is, therefore, incumbent upon
the Court to determine whether the party on whom the burden to prove lies
was able to hurdle the same. No particular form of evidence is required to
prove the existence of such employer-employee relationship. Any
competent and relevant evidence to prove the relationship may be
admitted. Hence, while no particular form of evidence is required, a finding
that such relationship exists must still rest on some substantial evidence.
Moreover, the substantiality of the evidence depends on its quantitative as
well as its qualitative aspects.[30]Although substantial evidence is not a
function of quantity but rather of quality, the x x x circumstances of the
instant case demand that something more should have been proffered. Had
there been other proofs of employment, such as x x x inclusion in
petitioners payroll, or a clear exercise of control, the Court would have
affirmed the finding of employer-employee relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on
petitioner to establish or substantiate such claim by the requisite quantum of
evidence.[32] Whoever claims entitlement to the benefits provided by law
should establish his or her right thereto x x x. [33] Sadly, Javier failed to
adduce substantial evidence as basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to
establish his employment with Fly Ace. By way of evidence on this point,
all that Javier presented were his self-serving statements purportedly
showing his activities as an employee of Fly Ace. Clearly, Javier failed to
pass the substantiality requirement to support his claim. Hence, the Court
sees no reason to depart from the findings of the CA.
While Javier remains firm in his position that as an employed
stevedore of Fly Ace, he was made to work in the company premises during
weekdays arranging and cleaning grocery items for delivery to clients, no
other proof was submitted to fortify his claim. The lone affidavit executed
by one Bengie Valenzuela was unsuccessful in strengthening Javiers cause.
In said document, all Valenzuela attested to was that he would frequently
see Javier at the workplace where the latter was also hired as stevedore.
[34]
Certainly, in gauging the evidence presented by Javier, the Court cannot
ignore the inescapable conclusion that his mere presence at the workplace
falls short in proving employment therein. The supporting affidavit could
have, to an extent, bolstered Javiers claim of being tasked to clean grocery
items when there were no scheduled delivery trips, but no information was
offered in this subject simply because the witness had no personal
knowledge of Javiers employment status in the company. Verily, the Court
cannot accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden
to pass the well-settled tests to determine the existence of an employer-
employee relationship, viz: (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. Of these elements, the most
important criterion is whether the employer controls or has reserved the
19
right to control the employee not only as to the result of the work but also as
to the means and methods by which the result is to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the
above elements exist in his case. He could not submit competent proof that
Fly Ace engaged his services as a regular employee; that Fly Ace paid his
wages as an employee, or that Fly Ace could dictate what his conduct
should be while at work. In other words, Javiers allegations did not establish
that his relationship with Fly Ace had the attributes of an employer-
employee relationship on the basis of the above-mentioned four-fold test.
Worse, Javier was not able to refute Fly Aces assertion that it had an
agreement with a hauling company to undertake the delivery of its goods. It
was also baffling to realize that Javier did not dispute Fly Aces denial of his
services exclusivity to the company. In short, all that Javier laid down were
bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on
a per trip rate as a stevedore, albeit on a pakyaw basis. The Court cannot fail
to note that Fly Ace presented documentary proof that Javier was indeed
paid on a pakyaw basis per the acknowledgment receipts admitted as
competent evidence by the LA. Unfortunately for Javier, his mere denial of
the signatures affixed therein cannot automatically sway us to ignore the
documents because forgery cannot be presumed and must be proved by
clear, positive and convincing evidence and the burden of proof lies on the
party alleging forgery.[36]
Considering the above findings, the Court does not see the
necessity to resolve the second issue presented.
One final note. The Courts decision does not contradict the settled
rule that payment by the piece is just a method of compensation and does
not define the essence of the relation. [37] Payment on a piece-rate basis does
not negate regular employment. The term wage is broadly defined in Article
97 of the Labor Code as remuneration or earnings, capable of being
expressed in terms of money whether fixed or ascertained on a time, task,
piece or commission basis. Payment by the piece is just a method of
compensation and does not define the essence of the relations. Nor does the
fact that the petitioner is not covered by the SSS affect the employer-
employee relationship. However, in determining whether the relationship is
that of employer and employee or one of an independent contractor, each
case must be determined on its own facts and all the features of the
relationship are to be considered. [38] Unfortunately for Javier, the attendant
facts and circumstances of the instant case do not provide the Court with
sufficient reason to uphold his claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social justice
and the protection of the working class, it should not be supposed that every
labor dispute will be automatically decided in favor of labor. Management
also has its rights which are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for the less privileged in life,
the Court has inclined, more often than not, toward the worker and upheld
his cause in his conflicts with the employer. Such favoritism, however, has
not blinded the Court to the rule that justice is in every case for the
deserving, to be dispensed in the light of the established facts and the
applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18,
2010 Decision of the Court of Appeals and its June 7, 2010 Resolution, in
CA-G.R. SP No. 109975, are hereby AFFIRMED.
SO ORDERED.
\
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO,
DANIEL S.L. BORBON II, HERMINIA REYES, MARCELA
PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING
JUDGE OF BRANCH 166, RTC, PASIG, and SAN MIGUEL
CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.
20

MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166,
is taken to task by petitioners in this special civil action for certiorari
and Prohibition for having issued the challenged Writ of Preliminary
Injunction on 29 March 1989 in Civil Case No. 57055 of his Court
entitled "San Miguel Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of
jurisdiction and with grave abuse of discretion, a labor dispute being
involved. Private respondent San Miguel Corporation (SanMig. for
short), for its part, defends the Writ on the ground of absence of any
employer-employee relationship between it and the contractual
workers employed by the companies Lipercon Services, Inc.
(Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact
that the Union is bereft of personality to represent said workers for
purposes of collective bargaining. The Solicitor General agrees with
the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for
merchandising services with Lipercon and D'Rite (Annexes K and I,
SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of Labor
and Employment (DOLE). SanMig entered into those contracts to
maintain its competitive position and in keeping with the imperatives
of efficiency, business expansion and diversity of its operation. In
said contracts, it was expressly understood and agreed that the
workers employed by the contractors were to be paid by the latter
and that none of them were to be deemed employees or agents of
SanMig. There was to be no employer-employee relation between
the contractors and/or its workers, on the one hand, and SanMig on
the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the
Union, for brevity) is the duly authorized representative of the
monthly paid rank-and-file employees of SanMig with whom the latter
executed a Collective Bargaining Agreement (CBA) effective 1 July
1986 to 30 June 1989 (Annex A, SanMig's Comment). Section 1 of
their CBA specifically provides that "temporary, probationary, or
contract employees and workers are excluded from the bargaining
unit and, therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union
advised SanMig that some Lipercon and D'Rite workers had signed
up for union membership and sought the regularization of their
employment with SMC. The Union alleged that this group of
employees, while appearing to be contractual workers supposedly
independent contractors, have been continuously working for SanMig
for a period ranging from six (6) months to fifteen (15) years and that
their work is neither casual nor seasonal as they are performing work
or activities necessary or desirable in the usual business or trade of
SanMig. Thus, it was contended that there exists a "labor-only"
contracting situation. It was then demanded that the employment
status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any
favorable response from SanMig, the Union filed a notice of strike for
unfair labor practice, CBA violations, and union busting (Annex D,
Petition).
On 30 January 1989, the Union again filed a second notice of strike
for unfair labor practice (Annex F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the
second notice. Subsequently, the two (2) notices of strike were
consolidated and several conciliation conferences were held to settle
the dispute before the National Conciliation and Mediation Board
(NCMB) of DOLE (Annex G, Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets
were staged by Lipercon and D'Rite workers in various SMC plants
and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and
Damages before respondent Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the
employees of LIPERCON and/or D'RITE for the
purposes of collective bargaining;
b. calling for and holding a strike vote, to compel
plaintiff to hire the employees or workers of
LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees
or workers of LIPERCON and D'RITE to
demonstrate and/or picket at the plants and offices
of plaintiff within the bargaining unit referred to in the
CBA,...;
21
 d. staging a strike to compel plaintiff to hire the
employees or workers of LIPERCON and D'RITE;
e. using the employees or workers of LIPERCON
AND D'RITE to man the strike area and/or picket
lines and/or barricades which the defendants may
set up at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or
molesting the other employees and/or contract
workers of plaintiff, as well as those persons lawfully
transacting business with plaintiff at the work places
within the bargaining unit referred to in the CBA, ...,
to compel plaintiff to hire the employees or workers
of LIPERCON and D'RITE;
g. blocking, preventing, prohibiting, obstructing
and/or impeding the free ingress to, and egress
from, the work places within the bargaining unit
referred to in the CBA .., to compel plaintiff to hire
the employees or workers of LIPERCON and
D'RITE;
h. preventing and/or disrupting the peaceful and
normal operation of plaintiff at the work places within
the bargaining unit referred to in the CBA, Annex 'C'
hereof, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE. (Annex H,
Petition)
Respondent Court found the Complaint sufficient in form and
substance and issued a Temporary Restraining Order for the
purpose of maintaining the status quo, and set the application for
Injunction for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to
Dismiss SanMig's Complaint on the ground of lack of jurisdiction over
the case/nature of the action, which motion was opposed by SanMig.
That Motion was denied by respondent Judge in an Order dated 11
April 1989.
After several hearings on SanMig's application for injunctive relief,
where the parties presented both testimonial and documentary
evidence on 25 March 1989, respondent Court issued the questioned
Order (Annex A, Petition) granting the application and enjoining the
Union from Committing the acts complained of, supra. Accordingly,
on 29 March 1989, respondent Court issued the corresponding Writ
of Preliminary Injunction after SanMig had posted the required bond
of P100,000.00 to answer for whatever damages petitioners may
sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship
negates the existence of labor dispute. Verily, this
court has jurisdiction to take cognizance of plaintiff's
grievance.
The evidence so far presented indicates that plaintiff
has contracts for services with Lipercon and D'Rite.
The application and contract for employment of the
defendants' witnesses are either with Lipercon or
D'Rite. What could be discerned is that there is no
employer-employee relationship between plaintiff
and the contractual workers employed by Lipercon
and D'Rite. This, however, does not mean that a final
determination regarding the question of the
existence of employer-employee relationship has
already been made. To finally resolve this dispute,
the court must extensively consider and delve into
the manner of selection and engagement of the
putative employee; the mode of payment of wages;
the presence or absence of a power of dismissal;
and the Presence or absence of a power to control
the putative employee's conduct. This necessitates a
full-blown trial. If the acts complained of are not
restrained, plaintiff would, undoubtedly, suffer
irreparable damages. Upon the other hand, a writ of
injunction does not necessarily expose defendants
to irreparable damages.
Evidently, plaintiff has established its right to the
relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us
seeking nullification of the challenged Writ. On 24 April 1989, we
issued a Temporary Restraining Order enjoining the implementation
of the Injunction issued by respondent Court. The Union construed
this to mean that "we can now strike," which it superimposed on the
Order and widely circulated to entice the Union membership to go on
strike. Upon being apprised thereof, in a Resolution of 24 May 1989,
22
we required the parties to "RESTORE the status quo
ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on
strike. Apparently, some of the contractual workers of Lipercon and
D'Rite had been laid off. The strike adversely affected thirteen (13) of
the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board
(NCMB) called the parties to conciliation. The Union stated that it
would lift the strike if the thirty (30) Lipercon and D'Rite employees
were recalled, and discussion on their other demands, such as wage
distortion and appointment of coordinators, were made. Effected
eventually was a Memorandum of Agreement between SanMig and
the Union that "without prejudice to the outcome of G.R. No. 87700
(this case) and Civil Case No. 57055 (the case below), the laid-off
individuals ... shall be recalled effective 8 May 1989 to their former
jobs or equivalent positions under the same terms and conditions
prior to "lay-off" (Annex 15, SanMig Comment). In turn, the Union
would immediately lift the pickets and return to work.
After an exchange of pleadings, this Court, on 12 October 1989,
gave due course to the Petition and required the parties to submit
their memoranda simultaneously, the last of which was filed on 9
January 1990.
The focal issue for determination is whether or not respondent Court
correctly assumed jurisdiction over the present controversy and
properly issued the Writ of Preliminary Injunction to the resolution of
that question, is the matter of whether, or not the case at bar
involves, or is in connection with, or relates to a labor dispute. An
affirmative answer would bring the case within the original and
exclusive jurisdiction of labor tribunals to the exclusion of the regular
Courts.
Petitioners take the position that 'it is beyond dispute that the
controversy in the court a quo involves or arose out of a labor dispute
and is directly connected or interwoven with the cases pending with
the NCMB-DOLE, and is thus beyond the ambit of the public
respondent's jurisdiction. That the acts complained of (i.e., the mass
concerted action of picketing and the reliefs prayed for by the private
respondent) are within the competence of labor tribunals, is beyond
question" (pp. 6-7, Petitioners' Memo).
On the other hand, SanMig denies the existence of any employer-
employee relationship and consequently of any labor dispute
between itself and the Union. SanMig submits, in particular, that
"respondent Court is vested with jurisdiction and judicial competence
to enjoin the specific type of strike staged by petitioner union and its
officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an
employer unit cannot strike to compel the employer
to hire and thereby create an employment
relationship with contractual workers, especially
were the contractual workers were recognized by the
union, under the governing collective bargaining
agreement, as excluded from, and therefore
strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted
the bargaining representative only in the event of a
deadlock in a labor dispute over 'wages, hours of
work and all other and of the employment' of the
employees in the unit. The union leaders cannot
instigate a strike to compel the employer, especially
on the eve of certification elections, to hire strangers
or workers outside the unit, in the hope the latter will
help re-elect them.
C. Civil courts have the jurisdiction to enjoin the
above because this specie of strike does not arise
out of a labor dispute, is an abuse of right, and
violates the employer's constitutional liberty to hire or
not to hire. (SanMig's Memorandum, pp. 475-476,
Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code
includes "any controversy or matter concerning terms and conditions
of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and
conditions of employment, regardless of whether the disputants
stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee
relationship exists between itself, on the one hand, and the
contractual workers of Lipercon and D'Rite on the other, a labor
dispute can nevertheless exist "regardless of whether the disputants
stand in the proximate relationship of employer and employee"
(Article 212 [1], Labor Code, supra) provided the controversy
23
concerns, among others, the terms and conditions of employment or
a "change" or "arrangement" thereof (ibid). Put differently, and as
defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate
relation of employer and employee.
That a labor dispute, as defined by the law, does exist herein is
evident. At bottom, what the Union seeks is to regularize the status of
the employees contracted by Lipercon and D'Rite in effect, that they
be absorbed into the working unit of SanMig. This matter definitely
dwells on the working relationship between said employees vis-a-vis
SanMig. Terms, tenure and conditions of their employment and the
arrangement of those terms are thus involved bringing the matter
within the purview of a labor dispute. Further, the Union also seeks to
represent those workers, who have signed up for Union membership,
for the purpose of collective bargaining. SanMig, for its part, resists
that Union demand on the ground that there is no employer-
employee relationship between it and those workers and because
the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the
conditions of employment are also involved. In fact, the injunction
sought by SanMig was precisely also to prevent such representation.
Again, the matter of representation falls within the scope of a labor
dispute. Neither can it be denied that the controversy below is
directly connected with the labor dispute already taken cognizance of
by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-
01-093-83).
Whether or not the Union demands are valid; whether or not
SanMig's contracts with Lipercon and D'Rite constitute "labor-only"
contracting and, therefore, a regular employer-employee relationship
may, in fact, be said to exist; whether or not the Union can lawfully
represent the workers of Lipercon and D'Rite in their demands
against SanMig in the light of the existing CBA; whether or not the
notice of strike was valid and the strike itself legal when it was
allegedly instigated to compel the employer to hire strangers outside
the working unit; — those are issues the resolution of which call for
the application of labor laws, and SanMig's cause's of action in the
Court below are inextricably linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April
1965, 13 SCRA 738) relied upon by SanMig is not controlling as in
that case there was no controversy over terms, tenure or conditions,
of employment or the representation of employees that called for the
application of labor laws. In that case, what the petitioning union
demanded was not a change in working terms and conditions, or the
representation of the employees, but that its members be hired as
stevedores in the place of the members of a rival union, which
petitioners wanted discharged notwithstanding the existing contract
of the arrastre company with the latter union. Hence, the ruling
therein, on the basis of those facts unique to that case, that such a
demand could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction
belongs to the labor tribunals. As explicitly provided for in Article 217
of the Labor Code, prior to its amendment by R.A. No. 6715 on 21
March 1989, since the suit below was instituted on 6 March 1989,
Labor Arbiters have original and exclusive jurisdiction to hear and
decide the following cases involving all workers including "1. unfair
labor practice cases; 2. those that workers may file involving wages,
hours of work and other terms and conditions of employment; ... and
5. cases arising from any violation of Article 265 of this Code,
including questions involving the legality of striker and lockouts. ..."
Article 217 lays down the plain command of the law.
The claim of SanMig that the action below is for damages under
Articles 19, 20 and 21 of the Civil Code would not suffice to keep the
case within the jurisdictional boundaries of regular Courts. That claim
for damages is interwoven with a labor dispute existing between the
parties and would have to be ventilated before the administrative
machinery established for the expeditious settlement of those
disputes. To allow the action filed below to prosper would bring about
"split jurisdiction" which is obnoxious to the orderly administration of
justice (Philippine Communications, Electronics and Electricity
Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24
SCRA 321).
We recognize the proprietary right of SanMig to exercise an inherent
management prerogative and its best business judgment to
determine whether it should contract out the performance of some of
its work to independent contractors. However, 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 (Section 3, Article XIII, 1987 Constitution)
equally call for recognition and protection. Those contending
interests must be placed in proper perspective and equilibrium.
24
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of
respondent Judge of 25 March 1989 and 29 March 1989 are SET
ASIDE. The Writ of Prohibition is GRANTED and respondent Judge
is enjoined from taking any further action in Civil Case No. 57055
except for the purpose of dismissing it. The status quo ante
declaration of strike ordered by the Court on 24 May 1989 shall be
observed pending the proceedings in the National Conciliation
Mediation Board-Department of Labor and Employment, docketed as
NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No
costs.
SO ORDERED.
Paras and Regalado, JJ., concur.
Padilla, Sarmiento, JJ., took no part.
Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------
x
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the
reversal of the May 6, 2008 Decision[1] and November 4, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97398,
entitled Philippine Long Distance Telephone Company v. National Labor
Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed
decision set aside the Resolutions of the National Labor Relations
Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in
turn affirmed the Decision dated February 13, 2004 of the Labor Arbiter.
The assailed resolution, on the other hand, denied petitioners motion for
reconsideration of the assailed decision.

The Facts
THIRD DIVISION
On November 1, 1990, respondent Philippine Long Distance Telephone
Company (PLDT) and the Security and Safety Corporation of the
RAUL G. LOCSIN and G.R. No. 185251 Philippines (SSCP) entered into a Security Services
EDDIE B. TOMAQUIN, Agreement[3] (Agreement) whereby SSCP would provide armed security
Petitioners, guards to PLDT to be assigned to its various offices.
Present:
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin,
YNARES-SANTIAGO, J., among other security guards, were posted at a PLDT office.
Chairperson,
- versus - CHICO-NAZARIO, On August 30, 2001, respondent issued a Letter dated August 30,
VELASCO, JR., 2001 terminating the Agreement effective October 1, 2001.[4]
NACHURA, and Despite the termination of the Agreement, however, petitioners continued to
PERALTA, JJ. secure the premises of their assigned office. They were allegedly directed to
PHILIPPINE LONG DISTANCE Promulgated: remain at their post by representatives of respondent. In support of their
TELEPHONE COMPANY,

25
contention, petitioners provided the Labor Arbiter with copies of petitioner
Locsins pay slips for the period of January to September 2002.[5]
Then, on September 30, 2002, petitioners services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal
dismissal and recovery of money claims such as overtime pay, holiday pay,
premium pay for holiday and rest day, service incentive leave pay,
Emergency Cost of Living Allowance, and moral and exemplary damages
against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal
dismissal. It was explained in the Decision that petitioners were found to be
employees of PLDT and not of SSCP. Such conclusion was arrived at with
the factual finding that petitioners continued to serve as guards of PLDTs
offices. As such employees, petitioners were entitled to substantive and
procedural due process before termination of employment. The Labor
Arbiter held that respondent failed to observe such due process
requirements. The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby
rendered ordering respondent Philippine Long Distance
and Telephone Company (PLDT) to pay complainants
Raul E. Locsin and Eddie Tomaquin their separation pay
and back wages computed as follows:
NAME SEPARATION PAY BACKWAGES
1. Raul E. Locsin P127,500.00 P240,954.67
2. Eddie B. Tomaquin P127,500.00 P240,954.67
P73
6,909.34
All other claims are DISMISSED for want of factual
basis.
Let the computation made by the Computation
and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a
Resolution affirming in toto the Arbiters Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution
which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for
the nullification of the Resolution issued by the NLRC as well as the Labor
Arbiters Decision. The CA rendered the assailed decision granting PLDTs
petition and dismissing petitioners complaint. The dispositive portion of the
CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is
GRANTED. The Resolutions dated October 28,
2005 and August 28, 2006 of the National Labor
Relations Commission are ANNULLED and SET ASIDE.
Private respondents complaint against Philippine Long
Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the
existence of an employer-employee relationship between the parties but did
not find such relationship. It determined that SSCP was not a labor-only
contractor and was an independent contractor having substantial capital to
operate and conduct its own business. The CA further bolstered its decision
by citing the Agreement whereby it was stipulated that there shall be no
employer-employee relationship between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA
noted that those were issued by SSCP and not PLDT; hence, SSCP
continued to pay the salaries of petitioners after the Agreement. This fact
allegedly proved that petitioners continued to be employees of
SSCP albeit performing their work at PLDTs premises.
From such assailed decision, petitioners filed a motion for
reconsideration which was denied in the assailed resolution.
Hence, we have this petition.
26
 The Issues
1. Whether or not; complainants extended services to
the respondent for one (1) year from October 1, 2001,
the effectivity of the termination of the contract of
complainants agency SSCP, up to September 30,
2002, without a renewed contract, constitutes an
employer-employee relationship between respondent
and the complainants.
2. Whether or not; in accordance to the provision of
the Article 280 of the Labor Code, complainants
extended services to the respondent for another one
(1) year without a contract be considered as
contractual employment.
3. Whether or not; in accordance to the provision of
the Article 280 of the Labor Code, does complainants
thirteen (13) years of service to the respondent with
manifestation to the respondent thirteen (13) years
renewal of its security contract with the complainant
agency SSCP, can be considered only as seasonal in
nature or fixed as [specific projects] or undertakings
and its completion or termination can be dictated as
[controlled] by the respondent anytime they wanted
to.
4. Whether or not; complainants from being an alleged
contractual employees of the respondent for thirteen
(13) years as they were then covered by a contract,
becomes regular employees of the respondent as the
one (1) year extended services of the complainants
were not covered by a contract, and can be
considered as direct employment pursuant to the
provision of the Article 280 of the Labor Code.
5. Whether or not; the Court of Appeals committed
grave abuse of discretion when it set aside and
[annulled] the labor [arbiters] decision and of the
NLRCs resolution declaring the dismissal of the
complainant as illegal.[6]
The Courts Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee
relationship between the parties from the time of petitioners first assignment
to respondent by SSCP in 1988 until the alleged termination of the
Agreement between respondent and SSCP. In fact, this was the conclusion
that was reached by this Court in Abella v. Philippine Long Distance
Telephone Company,[7] where we ruled that petitioners therein, including
herein petitioners, cannot be considered as employees of PLDT. It bears
pointing out that petitioners were among those declared to be employees of
their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became
employees of respondent after the Agreement between SSCP and
respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners
remained in the premises of their offices even after the Agreement was
terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of
respondent, found that: (1) petitioners failed to prove that SSCP was a
labor-only contractor; and (2) petitioners are employees of SSCP and not of
PLDT.
In arriving at such conclusions, the CA relied on the provisions of
the Agreement, wherein SSCP undertook to supply PLDT with the required
security guards, while furnishing PLDT with a performance bond in the
amount of PhP 707,000. Moreover, the CA gave weight to the provision in
the Agreement that SSCP warranted that it carry on an independent business
27
and has substantial capital or investment in the form of equipment, work
premises, and other materials which are necessary in the conduct of its
business.
Further, in determining that no employer-employee relationship
existed between the parties, the CA quoted the express provision of the
Agreement, stating that no employer-employee relationship existed between
the parties herein. The CA disregarded the pay slips of Locsin considering
that they were in fact issued by SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that
petitioners remained at their post after the termination of the Agreement.
Notably, in its Comment dated March 10, 2009,[8] respondent never denied
that petitioners remained at their post until September 30, 2002. While
respondent denies the alleged circumstances stated by petitioners, that they
were told to remain at their post by respondents Security Department and
that they were informed by SSCP Operations Officer Eduardo Juliano that
their salaries would be coursed through SSCP as per arrangement with
PLDT, it does not state why they were not made to vacate their posts.
Respondent said that it did not know why petitioners remained at their
posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions.The following
presumptions are satisfactory if uncontradicted, but may
be contradicted and overcome by other evidence:
xxxx
(y) That things have happened according to the
ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or
managers would not allow security guards of an agency with whom the
owners or managers have severed ties with to continue to stay within the
business premises. This is because upon the termination of the owners or
managers agreement with the security agency, the agencys undertaking of
liability for any damage that the security guard would cause has already
been terminated. Thus, in the event of an accident or otherwise damage
caused by such security guards, it would be the business owners and/or
managers who would be liable and not the agency. The business owners or
managers would, therefore, be opening themselves up to liability for acts of
security guards over whom the owners or managers allegedly have no
control.
At the very least, responsible business owners or managers would
inquire or learn why such security guards were remaining at their posts, and
would have a clear understanding of the circumstances of the guards stay. It
is but logical that responsible business owners or managers would be aware
of the situation in their premises.
We point out that with respondents hypothesis, it would seem that
SSCP was paying petitioners salaries while securing respondents premises
despite the termination of their Agreement. Obviously, it would only be
respondent that would benefit from such a situation. And it is seriously
doubtful that a security agency that was established for profit would allow
its security guards to secure respondents premises when the Agreement was
already terminated.
From the foregoing circumstances, reason dictates that we
conclude that petitioners remained at their post under the instructions of
respondent. We can further conclude that respondent dictated upon
petitioners that the latter perform their regular duties to secure the premises
during operating hours. This, to our mind and under the circumstances, is
sufficient to establish the existence of an employer-employee relationship.
Certainly, the facts as narrated by petitioners are more believable than the
irrational denials made by respondent. Thus, we ruled in Lee Eng Hong v.
Court of Appeals:[9]
Evidence, to be believed, must not only proceed from the
mouth of a credible witness, but it must be credible in
itself such as the common experience and observation of
mankind can approve as probable under the
circumstances. We have no test of the truth of human
testimony, except its conformity to our knowledge,
observation and experience. Whatever is repugnant to
these belongs to the miraculous and is outside judicial
cognizance (Castaares v. Court of Appeals, 92 SCRA 568
[1979]).
28
 To reiterate, while respondent and SSCP no longer had any legal
relationship with the termination of the Agreement, petitioners remained at
their post securing the premises of respondent while receiving their salaries,
allegedly from SSCP. Clearly, such a situation makes no sense, and the
denials proffered by respondent do not shed any light to the situation. It is
but reasonable to conclude that, with the behest and, presumably, directive
of respondent, petitioners continued with their services. Evidently, such
are indicia of control that respondent exercised over petitioners.
Such power of control has been explained as the right to control
not only the end to be achieved but also the means to be used in reaching
such end.[10] With the conclusion that respondent directed petitioners to
remain at their posts and continue with their duties, it is clear that
respondent exercised the power of control over them; thus, the existence of
an employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,
[11]
we reiterated the oft repeated rule that control is the most important
element in the determination of the existence of an employer-employee
relationship:
In the determination of whether an employer-
employee relationship exists between two parties, this
Court applies the four-fold test to determine the existence
of the elements of such relationship. In Pacific
Consultants International Asia, Inc. v. Schonfeld, the
Court set out the elements of an employer-employee
relationship, thus:
Jurisprudence is firmly settled that
whenever the existence of an employment
relationship is in dispute, four elements
constitute the reliable yardstick: (a) the selection
and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal;
and (d) the employers power to control the
employees conduct. It is the so-called control test
which constitutes the most important index of the
existence of the employer-employee relationship
that 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. Stated otherwise, 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 means to be used in
reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision
on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever
an employer enters into a contract with another person for
the performance of the formers work, the employees of
the contractor and of the latters subcontractor, if any, shall
be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor
fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such
employees to the extent of the work performed under the
contract, in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor and Employment
may, by appropriate regulations, restrict or prohibit
the contracting-out of labor to protect the rights of
workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions
between labor-only contracting and job contracting as
well as differentiations within these types of
contracting and determine who among the parties
involved shall be considered the employer for purposes
of this Code, to prevent any violation or circumvention
of any provision of this Code.
29
 There is labor-only contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others,
and the workers recruited and placed by such person are
performing activities which are directly related to the
principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him. (Emphasis supplied.)
Thus, the Secretary of Labor issued Department Order No. 18-
2002, Series of 2002, implementing Art. 106 as follows:
Section 5. Prohibition against labor-only
contracting.Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall
refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers
to perform a job, work or service for a principal, and any
of the following elements are present:
(i) The contractor or subcontractor does
not have substantial capital or investment which
relates to the job, work or service to be
performed and the employees recruited, supplied
or placed by such contractor or subcontractor are
performing activities which are directly related to
the main business of the principal; or
(ii) the contractor does not exercise
the right to control over the performance of
the work of the contractual employee.
The foregoing provisions shall be without
prejudice to the application of Article 248 (C) of the
Labor Code, as amended.
Substantial capital or investment refers to capital
stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries
and work premises, actually and directly used by the
contractor or subcontractor in the performance or
completion of the job, work or service contracted out.
The right to control shall refer to the right
reserved to the person for whom the services of the
contractual workers are performed, to determine not only
the end to be achieved, but also the manner and means to
be used in reaching that end.
On the other hand, Sec. 7 of the department order contains the
consequence of such labor-only contracting:
Section 7. Existence of an employer-employee
relationship.The contractor or subcontractor shall be
considered the employer of the contractual employee for
purposes of enforcing the provisions of the Labor Code
and other social legislation. The principal, however, shall
be solidarily liable with the contractor in the event of any
violation of any provision of the Labor Code, including
the failure to pay wages.
The principal shall be deemed the employer of
the contractual employee in any of the following cases as
declared by a competent authority:
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls
within the prohibitions provided in Section 6
(Prohibitions) hereof. (Emphasis supplied.)
Evidently, respondent having the power of control over petitioners
must be considered as petitioners employerfrom the termination of the
Agreement onwardsas this was the only time that any evidence of control
was exhibited by respondent over petitioners and in light of our ruling
in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled
30
to the rights and benefits of employees of respondent, including due process
requirements in the termination of their services.
PEOPLES BROADCASTING SERVICE G.R. No. 179652
Both the Labor Arbiter and NLRC found that respondent did not (BOMBO RADYO PHILS., INC.),
observe such due process requirements. Having failed to do so, respondent Petitioner, Present:
is guilty of illegal dismissal.
CORONA, C.J.,
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision CARPIO,
and November 4, 2008 Resolution in CA-G.R. SP No. 97398. We - versus - VELASCO, JR.,
hereby REINSTATE the Labor Arbiters Decision dated February 13, LEONARDO-DE CASTRO,
2004 and the NLRCs Resolutions dated October 28, 2005 and August 28, BRION,
2006. PERALTA,
THE SECRETARY OF THE DEPARTMENT BERSAMIN,
No costs. OF LABOR AND EMPLOYMENT, THE DEL CASTILLO,*
REGIONAL DIRECTOR, DOLE REGION ABAD,
SO ORDERED. VII, and JANDELEON JUEZAN, VILLARAMA, JR.,
Respondents. PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

Promulgated:
March 6, 2012
x-----------------------------------------------------------------------------------------
x

RE SOLUTION

VELASCO, JR., J.:

In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting

Service, Inc. (Bombo Radyo Phils., Inc.) questioned the Decision and
Resolution of the Court of Appeals (CA) dated October 26, 2006 and June
Republic of the Philippines 26, 2007, respectively, in C.A. G.R. CEB-SP No. 00855.
SUPREME COURT
Manila Private respondent Jandeleon Juezan filed a complaint against
petitioner with the Department of Labor and Employment (DOLE) Regional
EN BANC Office No. VII, Cebu City, for illegal deduction, nonpayment of service

31
incentive leave, 13th month pay, premium pay for holiday and rest day and
illegal diminution of benefits, delayed payment of wages and noncoverage
of SSS, PAG-IBIG and Philhealth.[1] After the conduct of summary
investigations, and after the parties submitted their position papers, the
DOLE Regional Director found that private respondent was an employee of
petitioner, and was entitled to his money claims. [2] Petitioner sought
reconsideration of the Directors Order, but failed. The Acting DOLE
Secretary dismissed petitioners appeal on the ground that petitioner
submitted a Deed of Assignment of Bank Deposit instead of posting a cash
or surety bond.When the matter was brought before the CA, where
petitioner claimed that it had been denied due process, it was held that
petitioner was accorded due process as it had been given the opportunity to
be heard, and that the DOLE Secretary had jurisdiction over the matter, as
the jurisdictional limitation imposed by Article 129 of the Labor Code on
the power of the DOLE Secretary under Art. 128(b) of the Code had been
repealed by Republic Act No. (RA) 7730.[3]
In the Decision of this Court, the CA Decision was reversed and set aside,
and the complaint against petitioner was dismissed. The dispositive portion
of the Decision reads as follows:
WHEREFORE, the petition
is GRANTED. The Decision dated 26 October 2006 and
the Resolution dated 26 June 2007 of the Court of
Appeals in C.A. G.R. CEB-SP No. 00855
are REVERSED and SET ASIDE. The Order of the then
Acting Secretary of the Department of Labor and
Employment dated 27 January 2005 denying petitioners
appeal, and the Orders of the Director, DOLE Regional
Office No. VII, dated 24 May 2004 and 27 February
2004, respectively, are ANNULLED. The complaint
against petitioner is DISMISSED.[4]
The Court found that there was no employer-employee relationship
between petitioner and private respondent. It was held that while the DOLE
may make a determination of the existence of an employer-employee
relationship, this function could not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the Labor Code, as amended
by RA 7730. The National Labor Relations Commission (NLRC) was held
to be the primary agency in determining the existence of an employer-
employee relationship. This was the interpretation of the Court of the clause
in cases where the relationship of employer-employee still exists in Art.
128(b).[5]
From this Decision, the Public Attorneys Office (PAO) filed a
Motion for Clarification of Decision (with Leave of Court). The PAO
sought to clarify as to when the visitorial and enforcement power of the
DOLE be not considered as co-extensive with the power to determine the
existence of an employer-employee relationship.[6] In its Comment,[7] the
DOLE sought clarification as well, as to the extent of its visitorial and
enforcement power under the Labor Code, as amended.
The Court treated the Motion for Clarification as a second motion
for reconsideration, granting said motion and reinstating the petition. [8] It is
apparent that there is a need to delineate the jurisdiction of the DOLE
Secretary vis--vis that of the NLRC.
Under Art. 129 of the Labor Code, the power of the DOLE and its
duly authorized hearing officers to hear and decide any matter involving the
recovery of wages and other monetary claims and benefits was qualified by
the proviso that the complaint not include a claim for reinstatement, or that
the aggregate money claims not exceed PhP 5,000. RA 7730, or an Act
Further Strengthening the Visitorial and Enforcement Powers of the
Secretary of Labor, did away with the PhP 5,000 limitation, allowing the
DOLE Secretary to exercise its visitorial and enforcement power for claims
beyond PhP 5,000. The only qualification to this expanded power of the
DOLE was only that there still be an existing employer-employee
relationship.
It is conceded that if there is no employer-employee relationship,
whether it has been terminated or it has not existed from the start, the
DOLE has no jurisdiction. Under Art. 128(b) of the Labor Code, as
amended by RA 7730, the first sentence reads, Notwithstanding the
provisions of Articles 129 and 217 of this Code to the contrary, and in cases
where the relationship of employer-employee still exists, the Secretary of
Labor and Employment or his duly authorized representatives shall have the
power to issue compliance orders to give effect to the labor standards
provisions of this Code and other labor legislation based on the findings of
labor employment and enforcement officers or industrial safety engineers
made in the course of inspection. It is clear and beyond debate that an
employer-employee relationship must exist for the exercise of the visitorial
32
and enforcement power of the DOLE. The question now arises, may the
DOLE make a determination of whether or not an employer-employee
relationship exists, and if so, to what extent?
The first portion of the question must be answered in the
affirmative.
The prior decision of this Court in the present case accepts such
answer, but places a limitation upon the power of the DOLE, that is, the
determination of the existence of an employer-employee relationship cannot
be co-extensive with the visitorial and enforcement power of the
DOLE. But even in conceding the power of the DOLE to determine the
existence of an employer-employee relationship, the Court held that the
determination of the existence of an employer-employee relationship is still
primarily within the power of the NLRC, that any finding by the DOLE is
merely preliminary.
This conclusion must be revisited.
No limitation in the law was placed upon the power of the DOLE
to determine the existence of an employer-employee relationship. No
procedure was laid down where the DOLE would only make a preliminary
finding, that the power was primarily held by the NLRC. The law did not
say that the DOLE would first seek the NLRCs determination of the
existence of an employer-employee relationship, or that should the
existence of the employer-employee relationship be disputed, the DOLE
would refer the matter to the NLRC. The DOLE must have the power to
determine whether or not an employer-employee relationship exists, and
from there to decide whether or not to issue compliance orders in
accordance with Art. 128(b) of the Labor Code, as amended by RA 7730.
The DOLE, in determining the existence of an employer-employee
relationship, has a ready set of guidelines to follow, the same guide the
courts themselves use. The elements to determine the existence of an
employment relationship are: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; (4) the
employers power to control the employees conduct.[9] The use of this test is
not solely limited to the NLRC. The DOLE Secretary, or his or her
representatives, can utilize the same test, even in the course of inspection,
making use of the same evidence that would have been presented before the
NLRC.
The determination of the existence of an employer-employee
relationship by the DOLE must be respected. The expanded visitorial and
enforcement power of the DOLE granted by RA 7730 would be rendered
nugatory if the alleged employer could, by the simple expedient of disputing
the employer-employee relationship, force the referral of the matter to the
NLRC. The Court issued the declaration that at least a prima facie showing
of the absence of an employer-employee relationship be made to oust the
DOLE of jurisdiction. But it is precisely the DOLE that will be faced with
that evidence, and it is the DOLE that will weigh it, to see if the same does
successfully refute the existence of an employer-employee relationship.
If the DOLE makes a finding that there is an existing employer-
employee relationship, it takes cognizance of the matter, to the exclusion of
the NLRC. The DOLE would have no jurisdiction only if the employer-
employee relationship has already been terminated, or it appears, upon
review, that no employer-employee relationship existed in the first place.
The Court, in limiting the power of the DOLE, gave the rationale
that such limitation would eliminate the prospect of competing conclusions
between the DOLE and the NLRC. The prospect of competing conclusions
could just as well have been eliminated by according respect to the DOLE
findings, to the exclusion of the NLRC, and this We believe is the more
prudent course of action to take.
This is not to say that the determination by the DOLE is beyond
question or review. Suffice it to say, there are judicial remedies such as a
petition for certiorari under Rule 65 that may be availed of, should a party
wish to dispute the findings of the DOLE.
It must also be remembered that the power of the DOLE to
determine the existence of an employer-employee relationship need not
necessarily result in an affirmative finding. The DOLE may well make the
determination that no employer-employee relationship exists, thus divesting
itself of jurisdiction over the case. It must not be precluded from being able
to reach its own conclusions, not by the parties, and certainly not by this
Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the
DOLE is fully empowered to make a determination as to the existence of an
33
employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.
There is a view that despite Art. 128(b) of the Labor Code, as
amended by RA 7730, there is still a threshold amount set by Arts. 129 and
217 of the Labor Code when money claims are involved, i.e., that if it is for
PhP 5,000 and below, the jurisdiction is with the regional director of the
DOLE, under Art. 129, and if the amount involved exceeds PhP 5,000, the
jurisdiction is with the labor arbiter, under Art. 217. The view states that
despite the wording of Art. 128(b), this would only apply in the course of
regular inspections undertaken by the DOLE, as differentiated from cases
under Arts. 129 and 217, which originate from complaints. There are several
cases, however, where the Court has ruled that Art. 128(b) has been
amended to expand the powers of the DOLE Secretary and his duly
authorized representatives by RA 7730. In these cases, the Court resolved
that the DOLE had the jurisdiction, despite the amount of the money claims
involved. Furthermore, in these cases, the inspection held by the DOLE
regional director was prompted specifically by a complaint. Therefore, the
initiation of a case through a complaint does not divest the DOLE Secretary
or his duly authorized representative of jurisdiction under Art. 128(b).
by this Court, with the finding being that there was no employer-employee
relationship between petitioner and private respondent, based on the
evidence presented. Private respondent presented self-serving allegations as
well as self-defeating evidence. [10] The findings of the Regional Director
were not based on substantial evidence, and private respondent failed to
prove the existence of an employer-employee relationship. The DOLE had
no jurisdiction over the case, as there was no employer-employee
relationship present. Thus, the dismissal of the complaint against petitioner
is proper.
WHEREFORE, the Decision of this Court in G.R. No. 179652 is
hereby AFFIRMED, with the MODIFICATION that in the exercise of the
DOLEs visitorial and enforcement power, the Labor Secretary or the latters
authorized representative shall have the power to determine the existence of
an employer-employee relationship, to the exclusion of the NLRC.
SO ORDERED.

To recapitulate, if a complaint is brought before the DOLE to give

effect to the labor standards provisions of the Labor Code or other labor
legislation, and there is a finding by the DOLE that there is an existing
employer-employee relationship, the DOLE exercises jurisdiction to the
exclusion of the NLRC. If the DOLE finds that there is no employer-
employee relationship, the jurisdiction is properly with the NLRC. If a
complaint is filed with the DOLE, and it is accompanied by a claim for
reinstatement, the jurisdiction is properly with the Labor Arbiter, under Art.
217(3) of the Labor Code, which provides that the Labor Arbiter has
original and exclusive jurisdiction over those cases involving wages, rates
of pay, hours of work, and other terms and conditions of employment, if
accompanied by a claim for reinstatement. If a complaint is filed with the
NLRC, and there is still an existing employer-employee relationship, the
jurisdiction is properly with the DOLE. The findings of the DOLE,
however, may still be questioned through a petition for certiorari under Rule
65 of the Rules of Court.

In the present case, the finding of the DOLE Regional Director that
there was an employer-employee relationship has been subjected to review

34
 On January 1, 1996, the ABS-CBN Head Office in Manila issued Policy No.
FIRST DIVISION HR-ER-016 or the Policy on Employees Seeking Public Office. The
pertinent portions read:
ERNESTO G. YMBONG, G.R. No. 184885 1. Any employee who intends to run for any public
Petitioner, office position, must file his/her letter of
resignation, at least thirty (30) days prior to the
Present: official filing of the certificate of candidacy
either for national or local election.
CORONA, C.J., xxxx
Chairperson, 3. Further, any employee who intends to join a political
- versus - LEONARDO-DE CASTRO, group/party or even with no political
BERSAMIN, affiliation but who intends to openly and
VILLARAMA, JR., and aggressively campaign for a candidate or
PERLAS-BERNABE, group of candidates (e.g. publicly
speaking/endorsing candidate, recruiting
ABS-CBN BROADCASTING CORPORATION, Promulgated: campaign workers, etc.) must file a request for
VENERANDA SY AND DANTE LUZON, leave of absence subject to managements
Respondents. March 7, 2012 approval. For this particular reason, the
employee should file the leave request at least
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x thirty (30) days prior to the start of the planned
leave period.
x x x x[3] [Emphasis and underscoring supplied.]
DECISION Because of the impending May 1998 elections and based on his immediate
recollection of the policy at that time, Dante Luzon, Assistant Station
VILLARAMA, JR., J.: Manager of DYAB issued the following memorandum:
Before us is a Rule 45 Petition seeking to set aside the August 22, 2007 TO : ALL CONCERNED
Decision[1] and September 18, 2008 Resolution[2] of the Court of Appeals FROM : DANTE LUZON
(CA) in CA-G.R. SP No. 86206 declaring petitioner to have resigned from DATE : MARCH 25, 1998
work and not illegally dismissed. SUBJECT : AS STATED
The antecedent facts follow: Please be informed that per company policy, any
Petitioner Ernesto G. Ymbong started working for ABS-CBN Broadcasting employee/talent who wants to run for any position in
Corporation (ABS-CBN) in 1993 at its regional station in Cebu as a the coming election will have to file a leave of
television talent, co-anchoringHoy Gising and TV Patrol Cebu. His stint in absence the moment he/she files his/her certificate of
ABS-CBN later extended to radio when ABS-CBN Cebu launched its AM candidacy.
station DYAB in 1995 where he worked as drama and voice talent, spinner, The services rendered by the concerned employee/talent
scriptwriter and public affairs program anchor. to this company will then be temporarily suspended for
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu. the entire campaign/election period.
Starting 1995, he worked as talent, director and scriptwriter for various For strict compliance. [4] [Emphasis and underscoring
radio programs aired over DYAB. supplied.]

35
Luzon, however, admitted that upon double-checking of the exact text of the
policy and subsequent confirmation with the ABS-CBN Head Office, he
saw that the policy actually required suspension for those who intend to
campaign for a political party or candidate and resignation for those who
will actually run in the elections.[5]
After the issuance of the March 25, 1998 Memorandum, Ymbong got in
touch with Luzon. Luzon claims that Ymbong approached him and told him
that he would leave radio for a couple of months because he will campaign
for the administration ticket. It was only after the elections that they found
out that Ymbong actually ran for public office himself at the eleventh
hour. Ymbong, on the other hand, claims that in accordance with the March
25, 1998 Memorandum, he informed Luzon through a letter that he would
take a few months leave of absence from March 8, 1998 to May 18, 1998
since he was running for councilor of Lapu-Lapu City.
As regards Patalinghug, Patalinghug approached Luzon and advised him
that he will run as councilor for Naga, Cebu. According to Luzon, he
clarified to Patalinghug that he will be considered resigned and not just on
leave once he files a certificate of candidacy. Thus, Patalinghug
wrote Luzon the following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your
Drama Production Chief and Talent due to your companys
policy that every person connected to ABS-CBN that
should seek an elected position in the government will be
forced to resigned (sic) from his position. So herewith Im
submitting my resignation with a hard heart. But Im still
hoping to be connected again with your prestigious
company after the election[s] should you feel that Im still
an asset to your drama production department. Im looking
forward to that day and Im very happy and proud that I
have served for two and a half years the most stable and
the most prestigious Radio and TV Network in
the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.
Very Truly Yours,
(Sgd.)
Leandro Boy Patalinghug[6]
Unfortunately, both Ymbong and Patalinghug lost in the May 1998
elections.
Later, Ymbong and Patalinghug both tried to come back to ABS-CBN Cebu.
According to Luzon, he informed them that they cannot work there anymore
because of company policy. This was stressed even in subsequent meetings
and they were told that the company was not allowing any
exceptions. ABS-CBN, however, agreed out of pure liberality to give them a
chance to wind up their participation in the radio drama, Nagbabagang
Langit, since it was rating well and to avoid an abrupt ending. The agreed
winding-up, however, dragged on for so long prompting Luzon to issue to
Ymbong the following memorandum dated September 14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998
Please be reminded that your services as drama talent had
already been automatically terminated when you ran for a
local government position last election.
The Management however gave you more than enough
time to end your drama participation and other
involvement with the drama department.
It has been decided therefore that all your drama
participation shall be terminated effective immediately.
However, your involvement as drama spinner/narrator of
the drama NAGBA[BA]GANG LANGIT continues until
its writer/director Mr. Leandro Patalinghug wraps it up
one week upon receipt of a separate memo issued to him.
[7]
Ymbong in contrast contended that after the expiration of his leave of
absence, he reported back to work as a regular talent and in fact continued
to receive his salary. On September 14, 1998, he received a memorandum
stating that his services are being terminated immediately, much to his
surprise. Thus, he filed an illegal dismissal complaint[8]against ABS-
CBN, Luzon and DYAB Station Manager Veneranda Sy. He argued that the
ground cited by ABS-CBN for his dismissal was not among those
enumerated in the Labor Code, as amended. And even granting without
admitting the existence of the company policy supposed to have been
violated, Ymbong averred that it was necessary that the company policy
meet certain requirements before willful disobedience of the policy may
36
constitute a just cause for termination. Ymbong further argued that the
company policy violates his constitutional right to suffrage.[9]
Patalinghug likewise filed an illegal dismissal complaint [10] against ABS-
CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that there is
no employer-employee relationship between the company and Ymbong and
Patalinghug. ABS-CBN contended that they are not employees but talents as
evidenced by their talent contracts. However, notwithstanding their status,
ABS-CBN has a standing policy on persons connected with the company
whenever they will run for public office.[11]
On July 14, 1999, the Labor Arbiter rendered a decision[12] finding the
dismissal of Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is
rendered finding the dismissal of the two complainants
illegal. An order is issued directing respondent
ABS[-]CBN to immediately reinstate complainants to
their former positions without loss of seniority rights plus
the payment of backwages in the amount of P200,000.00
to each complainant.
All other claims are dismissed.
SO ORDERED.[13]
The Labor Arbiter found that there exists an employer-employee
relationship between ABS-CBN and Ymbong and Patalinghug considering
the stipulations in their appointment letters/talent contracts. The Labor
Arbiter noted particularly that the appointment letters/talent contracts
imposed conditions in the performance of their work, specifically on
attendance and punctuality, which effectively placed them under the control
of ABS-CBN. The Labor Arbiter likewise ruled that although the subject
company policy is reasonable and not contrary to law, the same was not
made known to Ymbong and Patalinghug and in fact was superseded by
another one embodied in the March 25, 1998 Memorandum issued by
Luzon. Thus, there is no valid or authorized cause in terminating Ymbong
and Patalinghug from their employment.
In its memorandum of appeal [14] before the National Labor Relations
Commission (NLRC), ABS-CBN contended that the Labor Arbiter has no
jurisdiction over the case because there is no employer-employee
relationship between the company and Ymbong and Patalinghug, and that
Sy and Luzon mistakenly assumed that Ymbong and Patalinghug could just
file a leave of absence since they are only talents and not employees. In its
Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and Patalinghug
were engaged as radio talents for DYAB dramas and personality programs
and their contract is one between a self-employed contractor and the hiring
party which is a standard practice in the broadcasting industry. It also
argued that the Labor Arbiter should not have made much of the provisions
on Ymbongs attendance and punctuality since such requirement is a dictate
of the programming of the station, the slating of shows at regular time slots,
and availability of recording studios not an attempt to exercise control over
the manner of his performance of the contracted anchor work within his
scheduled spot on air. As for the pronouncement that the company policy
has already been superseded by the March 25, 1998 Memorandum issued
by Luzon, the latter already clarified that it was the very policy he sought to
enforce. This matter was relayed by Luzon to Patalinghug when the latter
disclosed his plans to join the 1998 elections while Ymbong only informed
the company that he was campaigning for the administration ticket and the
company had no inkling that he will actually run until the issue was already
moot and academic. ABS-CBN further contended that Ymbong and
Patalinghugs reinstatement is legally and physically impossible as the talent
positions they vacated no longer exist. Neither is there basis for the award
of back wages since they were not earning a monthly salary but paid talent
fees on a per production/per script basis. Attached to the Supplemental
Appeal is a Sworn Statement[16] of Luzon.
On March 8, 2004, the NLRC rendered a decision [17] modifying the labor
arbiters decision. The fallo of the NLRC decision reads:
WHEREFORE, premises considered, the
decision of Labor Arbiter Nicasio C. Aninon dated 14 July
1999 is MODIFIED, to wit:
Ordering respondent ABS-CBN to reinstate
complainant Ernesto G. Ymbong and to pay his full
backwages computed from 15 September 1998 up to the
time of his actual reinstatement.
SO ORDERED.[18]
The NLRC dismissed ABS-CBNs Supplemental Appeal for being
filed out of time. The NLRC ruled that to entertain the same would be to
allow the parties to submit their appeal on piecemeal basis, which is
contrary to the agencys duty to facilitate speedy disposition of cases. The
NLRC also held that ABS-CBN wielded the power of control over Ymbong
and Patalinghug, thereby proving the existence of an employer-employee
relationship between them.
As to the issue of whether they were illegally dismissed, the NLRC
treated their cases differently. In the case of Patalinghug, it found that he
37
voluntarily resigned from employment on April 21, 1998 when he
submitted his resignation letter. The NLRC noted that although the tenor of
the resignation letter is somewhat involuntary, he knew that it is the policy
of the company that every person connected therewith should resign from
his employment if he seeks an elected position in the government. As to
Ymbong, however, the NLRC ruled otherwise. It ruled that the March 25,
1998 Memorandum merely states that an employee who seeks any elected
position in the government will only merit the temporary suspension of his
services. It held that under the principle of social justice, the March 25,
1998 Memorandum shall prevail and ABS-CBN is estopped from enforcing
the September 14, 1998 memorandum issued to Ymbong stating that his
services had been automatically terminated when he ran for an elective
position.
ABS-CBN moved to reconsider the NLRC decision, but the same was
denied in a Resolution dated June 21, 2004.[19]
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a petition
for certiorari[20] before the CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE
ABUSE OF DISCRETION AND SERIOUSLY
MISAPPRECIATED THE FACTS IN NOT HOLDING
THAT RESPONDENT YMBONG IS A FREELANCE
RADIO TALENT AND MEDIA PRACTITIONERNOT A
REGULAR EMPLOYEE OF PETITIONERTO WHOM
CERTAIN PRODUCTION WORK HAD BEEN
OUTSOURCED BY ABS-CBN CEBU UNDER AN
INDEPENDENT CONTRACTORSHIP SITUATION,
THUS RENDERING THE LABOR COURTS
WITHOUT JURISDICTION OVER THE CASE IN THE
ABSENCE OF EMPLOYMENT RELATIONS
BETWEEN THE PARTIES.
II.
RESPONDENT NLRC COMMITTED A GRAVE
ABUSE OF DISCRETION IN DECLARING
RESPONDENT YMBONG TO BE A REGULAR
EMPLOYEE OF PETITIONER AS TO CREATE A
CONTRACTUAL EMPLOYMENT RELATION
BETWEEN THEM WHEN NONE EXISTS OR HAD
BEEN AGREED UPON OR OTHERWISE INTENDED
BY THE PARTIES.
III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT
RELATION TO EXIST FOR THE SAKE OF
ARGUMENT, RESPONDENT NLRC IN ANY CASE
COMMITTED A GRAVE ABUSE OF DISCRETION IN
NOT SIMILARLY UPHOLDING AND APPLYING
COMPANY POLICY NO. HR-ER-016 IN THE CASE
OF RESPONDENT YMBONG AND DEEMING HIM
AS RESIGNED AND DISQUALIFIED FROM
FURTHER ENGAGEMENT AS A RADIO TALENT IN
ABS-CBN CEBU AS A CONSEQUENCE OF HIS
CANDIDACY IN THE 1998 ELECTIONS, AS
RESPONDENT NLRC HAD DONE IN THE CASE OF
PATALINGHUG.
IV.
RESPONDENT NLRC COMMITTED A GRAVE
ABUSE OF DISCRETION AND DENIED DUE
PROCESS TO PETITIONER IN REFUSING TO
CONSIDER ITS SUPPLEMENTAL APPEAL, DATED
OCTOBER 18, 1999, FOR BEING FILED OUT OF
TIME CONSIDERING THAT THE FILING OF SUCH A
PLEADING IS NOT IN ANY CASE PROSCRIBED
AND RESPONDENT NLRC IS AUTHORIZED TO
CONSIDER ADDITIONAL EVIDENCE ON APPEAL;
MOREOVER, TECHNICAL RULES OF EVIDENCE
DO NOT APPLY IN LABOR CASES.
V.
RESPONDENT NLRC COMMITTED A GRAVE
ABUSE OF DISCRETION IN GRANTING THE
RELIEF OF REINSTATEMENT AND BACKWAGES
TO RESPONDENT YMBONG SINCE HE NEVER
OCCUPIED ANY REGULAR POSITION IN
PETITIONER FROM WHICH HE COULD HAVE
BEEN ILLEGALLY DISMISSED, NOR ARE ANY OF
THE RADIO PRODUCTIONS IN WHICH HE HAD
38
 DONE TALENT WORK FOR PETITIONER STILL
EXISTING. INDEED, THERE IS NO BASIS
WHATSOEVER FOR THE AWARD OF BACKWAGES
TO RESPONDENT YMBONG IN THE AMOUNT OF
P200,000.00 CONSIDERING THAT, AS SHOWN BY
THE UNCONTROVERTED EVIDENCE, HE WAS NOT
EARNING A MONTHLY SALARY OF P20,000.00, AS
HE FALSELY CLAIMS, BUT WAS PAID TALENT
FEES ON A PER PRODUCTION/PER SCRIPT BASIS
WHICH AVERAGED LESS THAN P10,000.00 PER
MONTH IN TALENT FEES ALL IN ALL.[21]
On August 22, 2007, the CA rendered the assailed decision reversing and
setting aside the March 8, 2004 Decision and June 21, 2004 Resolution of
the NLRC. The CA declared Ymbong resigned from employment and not to
have been illegally dismissed. The award of full back wages in his favor
was deleted accordingly.
The CA ruled that ABS-CBN is estopped from claiming that Ymbong was
not its employee after applying the provisions of Policy No. HR-ER-016 to
him. It noted that said policy is entitled Policy on Employees Seeking
Public Office and the guidelines contained therein specifically pertain to
employees and did not even mention talents or independent contractors. It
held that it is a complete turnaround on ABS-CBNs part to later argue that
Ymbong is only a radio talent or independent contractor and not its
employee. By applying the subject company policy on Ymbong, ABS-CBN
had explicitly recognized him to be an employee and not merely an
independent contractor.
The CA likewise held that the subject company policy is the controlling
guideline and therefore, Ymbong should be considered resigned from ABS-
CBN. While Luzon has policy-making power as assistant radio manager, he
had no authority to issue a memorandum that had the effect of repealing or
superseding a subsisting policy. Contrary to the findings of the Labor
Arbiter, the subject company policy was effective at that time and continues
to be valid and subsisting up to the present. The CA cited Patalinghugs
resignation letter to buttress this conclusion, noting that Patalinghug openly
admitted in his letter that his resignation was in line with the said company
policy. Since ABS-CBN applied Policy No. HR-ER-016 to Patalinghug,
there is no reason not to apply the same regulation to Ymbong who was on a
similar situation as the former. Thus, the CA found that the NLRC
overstepped its area of discretion to a point of grave abuse in declaring
Ymbong to have been illegally terminated. The CA concluded that there is
no illegal dismissal to speak of in the instant case as Ymbong is considered
resigned when he ran for an elective post pursuant to the subject company
policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy No. HR-
ER-016; (2) in upholding the validity of the termination of Ymbongs
services; and (3) when it reversed the decision of the NLRC 4 th Division of
Cebu City which affirmed the decision of Labor Arbiter Nicasio C. Anion.
[22]
Ymbong argues that the subject company policy is a clear interference and a
gross violation of an employees right to suffrage. He is surprised why it was
easy for the CA to rule that Luzons memorandum ran counter to an existing
policy while on the other end, it did not see that it was in conflict with the
constitutional right to suffrage. He also points out that the issuance of the
March 25, 1998 Memorandum was precisely an exercise of the management
power to which an employee like him must respect; otherwise, he will be
sanctioned for disobedience or worse, even terminated. He was not in a
position to know which between the two issuances was correct and as far as
he is concerned, the March 25, 1998 Memorandum superseded the subject
company policy. Moreover, ABS-CBN cannot disown acts of its officers
most especially since it prejudiced his property rights.[23]
As to the validity of his dismissal, Ymbong contends that the ground relied
upon by ABS-CBN is not among the just and authorized causes provided in
the Labor Code, as amended. And even assuming the subject company
policy passes the test of validity under the pretext of the right of the
management to discipline and terminate its employees, the exercise of such
right is not without bounds. Ymbong avers that his automatic termination
was a blatant disregard of his right to due process. He was never asked to
explain why he did not tender his resignation before he ran for public office
as mandated by the subject company policy.[24]
Ymbong likewise asseverates that both the Labor Arbiter and the NLRC
were consistent in their findings that he was illegally dismissed. It is settled
that factual findings of labor administrative officials, if supported by
substantial evidence, are accorded not only great respect but even finality.[25]
ABS-CBN, for its part, counters that the validity of policies such as Policy
No. HR-ER-016 has long been upheld by this Court which has ruled that a
media company has a right to impose a policy providing that employees
who file their certificates of candidacy in any election shall be considered
resigned.[26] Moreover, case law has upheld the validity of the exercise of
management prerogatives even if they appear to limit the rights of
39
employees as long as there is no showing that management prerogatives This is not the first time that this Court has dealt with a policy similar to
were exercised in a manner contrary to law. [27] ABS-CBN contends that Policy No. HR-ER-016. In the case of Manila Broadcasting Company v.
being the largest media and entertainment company in the country, its NLRC,[32] this Court ruled:
reputation stems not only from its ability to deliver quality entertainment
programs but also because of neutrality and impartiality in delivering news. What is involved in this case is an unwritten
[28]
company policy considering any employee who files a
ABS-CBN further argues that nothing in the company policy prohibits its certificate of candidacy for any elective or local office as
employees from either accepting a public appointive position or from resigned from the company. Although 11(b) of R.A. No.
running for public office. Thus, it cannot be considered as violative of the 6646 does not require mass media commentators and
constitutional right of suffrage. Moreover, the Supreme Court has announcers such as private respondent to resign from their
recognized the employers right to enforce occupational qualifications as radio or TV stations but only to go on leave for the
long as the employer is able to show the existence of a reasonable business duration of the campaign period, we think that the
necessity in imposing the questioned policy. Here, Policy No. HR-ER-016 company may nevertheless validly require them to resign
itself states that it was issued to protect the company from any public as a matter of policy. In this case, the policy is justified on
misconceptions and [t]o preserve its objectivity, neutrality and the following grounds:
credibility. Thus, it cannot be denied that it is reasonable under the Working for the government and the
circumstances.[29] company at the same time is clearly
ABS-CBN likewise opposes Ymbongs claim that he was terminated. ABS- disadvantageous and prejudicial to the
CBN argues that on the contrary, Ymbongs unilateral act of filing his rights and interest not only of the
certificate of candidacy is an overt act tantamount to voluntary resignation company but the public as well. In the
on his part by virtue of the clear mandate found in Policy No. HR-ER-016. event an employee wins in an election,
Ymbong, however, failed to file his resignation and in fact misled his he cannot fully serve, as he is expected
superiors by making them believe that he was going on leave to campaign to do, the interest of his employer. The
for the administration candidates but in fact, he actually ran for councilor. employee has to serve two (2)
He also claims to have fully apprised Luzon through a letter of his intention employers, obviously detrimental to the
to run for public office, but he failed to adduce a copy of the same.[30] interest of both the government and the
As to Ymbongs argument that the CA should not have reversed the findings private employer.
of the Labor Arbiter and the NLRC, ABS-CBN asseverates that the CA is In the event the employee loses
not precluded from making its own findings most especially if upon its own in the election, the impartiality and cold
review of the case, it has been revealed that the NLRC, in affirming the neutrality of an employee as broadcast
findings of the Labor Arbiter, committed grave abuse of discretion personality is suspect, thus readily
amounting to lack or excess of jurisdiction when it failed to apply the eroding and adversely affecting the
subject company policy in Ymbongs case when it readily applied the same confidence and trust of the listening
to Patalinghug.[31] public to employers station.[33]
Essentially, the issues to be resolved in the instant petition are: (1) whether
Policy No. HR-ER-016 is valid; (2) whether the March 25, 1998
Memorandum issued by Luzonsuperseded Policy No. HR-ER-016; and (3) ABS-CBN, like Manila Broadcasting Company, also had a valid
whether Ymbong, by seeking an elective post, is deemed to have resigned justification for Policy No. HR-ER-016. Its rationale is embodied in the
and not dismissed by ABS-CBN. policy itself, to wit:
Policy No. HR-ER-016 is valid. Rationale:

40
 ABS-CBN BROADCASTING
CORPORATION strongly believes that it is to the best
interest of the company to continuously remain
apolitical. While it encourages and supports its
employees to have greater political awareness and for
them to exercise their right to suffrage, the company,
however, prefers to remain politically independent and
unattached to any political individual or entity.
Therefore, employees who [intend] to run for public
office or accept political appointment should resign
from their positions, in order to protect the company
from any public misconceptions. To preserve its
objectivity, neutrality and credibility, the company
reiterates the following policy guidelines for strict
implementation.
x x x x[34] [Emphasis supplied.]
We have consistently held that so long as a companys management
prerogatives are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the
rights of the employees under special laws or under valid agreements, this
Court will uphold them.[35] In the instant case, ABS-CBN validly justified
the implementation of Policy No. HR-ER-016. It is well within its rights to
ensure that it maintains its objectivity and credibility and freeing itself from
any appearance of impartiality so that the confidence of the viewing and
listening public in it will not be in any way eroded. Even as the law is
solicitous of the welfare of the employees, it must also protect the right of
an employer to exercise what are clearly management prerogatives. The free
will of management to conduct its own business affairs to achieve its
purpose cannot be denied.[36]
It is worth noting that such exercise of management prerogative has earned
a stamp of approval from no less than our Congress itself when on February
12, 2001, it enacted Republic Act No. 9006, otherwise known as the Fair
Election Act. Section 6.6 thereof reads:
6.6. Any mass media columnist, commentator,
announcer, reporter, on-air correspondent or
personality who is a candidate for any elective public
office or is a campaign volunteer for or employed or
retained in any capacity by any candidate or political
party shall be deemed resigned, if so required by their
employer, or shall take a leave of absence from his/her
work as such during the campaign period: Provided, That
any media practitioner who is an official of a political
party or a member of the campaign staff of a candidate or
political party shall not use his/her time or space to favor
any candidate or political party. [Emphasis and
underscoring supplied.]
Policy No. HR-
ER-016 was not
superseded by
the March 25,
1998
Memorandum
The CA correctly ruled that though Luzon, as Assistant Station Manager for
Radio of ABS-CBN, has policy-making powers in relation to his principal
task of administering the networks radio station in the Cebu region, the
exercise of such power should be in accord with the general rules and
regulations imposed by the ABS-CBN Head Office to its employees.
Clearly, the March 25, 1998 Memorandum issued by Luzon which only
requires employees to go on leave if they intend to run for any elective
position is in absolute contradiction with Policy No. HR-ER-016 issued by
the ABS-CBN Head Office in Manila which requires the resignation, not
only the filing of a leave of absence, of any employee who intends to run for
public office. Having been issued beyond the scope of his authority, the
March 25, 1998 Memorandum is therefore void and did not supersede
Policy No. HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement admitted
the inaccuracy of his recollection of the company policy when he issued the
March 25, 1998 Memorandum and stated therein that upon double-checking
of the exact text of the policy statement and subsequent confirmation with
the ABS-CBN Head Office in Manila, he learned that the policy required
resignation for those who will actually run in elections because the
company wanted to maintain its independence. Since the officer who
himself issued the subject memorandum acknowledged that it is not in
harmony with the Policy issued by the upper management, there is no
reason for it to be a source of right for Ymbong.
Ymbong is
deemed resigned
when he ran for
councilor.
41
As Policy No. HR-ER-016 is the subsisting company policy and not Luzons
March 25, 1998 Memorandum, Ymbong is deemed resigned when he ran
for councilor.
We find no merit in Ymbongs argument that [his] automatic termination x x
x was a blatant [disregard] of [his] right to due process as he was never
asked to explain why he did not tender his resignation before he ran for
public office as mandated by [the subject company policy]. [37] Ymbongs
overt act of running for councilor of Lapu-Lapu City is tantamount to
resignation on his part. He was separated from ABS-CBN not because he
was dismissed but because he resigned. Since there was no termination to
speak of, the requirement of due process in dismissal cases cannot be
applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to
explain why he did not tender his resignation before he ran for public office
as mandated by the subject company policy.
In addition, we do not subscribe to Ymbongs claim that he was not in a
position to know which of the two issuances was correct. Ymbong most
likely than not, is fully aware that the subsisting policy is Policy No. HR-
ER-016 and not the March 25, 1998 Memorandum and it was for this reason
that, as stated by Luzon in his Sworn Statement, he only told the latter that
he will only campaign for the administration ticket and not actually run for
an elective post. Ymbong claims he had fully apprised Luzon by letter of his
plan to run and even filed a leave of absence but records are bereft of any
proof of said claim. Ymbong claims that the letter stating his intention to go Republic of the Philippines
on leave to run in the election is attached to his Position Paper as Annex A, SUPREME COURT
a perusal of said pleading attached to his petition before this Court, Manila
however, show that Annex A was not his letter to Luzon but the September
14, 1998 Memorandum informing Ymbong that his services had been FIRST DIVISION
automatically terminated when he ran for a local government position.
Moreover, as pointed out by ABS-CBN, had Ymbong been truthful to his
superiors, they would have been able to clarify to him the prevailing G.R. No. 186621 March 12, 2014
company policy and inform him of the consequences of his decision in case
he decides to run, as Luzon did in Patalinghugs case. SOUTH EAST INTERNATIONAL RATTAN, INC. and/or
WHEREFORE, the petition for review on certiorari ESTANISLAO1 AGBAY, Petitioners,
is DENIED for lack of merit. vs.
With costs against petitioner. JESUS J. COMING, Respondent.

SO ORDERED. DECISION

VILLARAMA, JR., J.:

42
Before the Court is a petition for review on certiorari under Rule 45 to
reverse and set aside the Decision2 dated February 21, 2008 and
Resolution3 dated February 9, 2009 of the Court of Appeals (CA) in
CA-GR. CEB-SP No. 02113.
Petitioner South East International Rattan, Inc. (SEIRI) is a domestic
corporation engaged in the business of manufacturing and exporting
furniture to various countries with principal place of business at
Paknaan, Mandaue City, while petitioner Estanislao Agbay, as per
records, is the President and General Manager of SEIRI. 4
On November 3, 2003, respondent Jesus J. Coming filed a
complaint5 for illegal dismissal, underpayment of wages, non-
payment of holiday pay, 13th month pay and service incentive leave
pay, with prayer for reinstatement, back wages, damages and
attorney’s fees.
Respondent alleged that he was hired by petitioners as Sizing
Machine Operator on March 17, 1984. His work schedule is from
8:00 a.m. to 5:00 p.m. Initially, his compensation was on "pakiao"
basis but sometime in June 1984, it was fixed at ₱150.00 per day
which was paid weekly. In 1990, without any apparent reason, his
employment was interrupted as he was told by petitioners to resume
work in two months time. Being an uneducated person, respondent
was persuaded by the management as well as his brother not to
complain, as otherwise petitioners might decide not to call him back
for work. Fearing such consequence, respondent accepted his fate.
Nonetheless, after two months he reported back to work upon order
of management.6
Despite being an employee for many years with his work
performance never questioned by petitioners, respondent was
dismissed on January 1, 2002 without lawful cause. He was told that
he will be terminated because the company is not doing well
financially and that he would be called back to work only if they need
his services again. Respondent waited for almost a year but
petitioners did not call him back to work. When he finally filed the
complaint before the regional arbitration branch, his brother Vicente
was used by management to persuade him to withdraw the case. 7
On their part, petitioners denied having hired respondent asserting
that SEIRI was incorporated only in 1986, and that respondent
actually worked for SEIRI’s furniture suppliers because when the
company started in 1987 it was engaged purely in buying and
exporting furniture and its business operations were suspended from
the last quarter of 1989 to August 1992. They stressed that
respondent was not included in the list of employees submitted to the
Social Security System (SSS). Moreover, respondent’s brother,
Vicente Coming, executed an affidavit8 in support of petitioners’
position while Allan Mayol and Faustino Apondar issued notarized
certifications9 that respondent worked for them instead.10
With the denial of petitioners that respondent was their employee,
the latter submitted an affidavit11 signed by five former co-workers
stating that respondent was one of the pioneer employees who
worked in SEIRI for almost twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F.
Carreon ruled that respondent is a regular employee of SEIRI and
that the termination of his employment was illegal. The dispositive
portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered
ordering the respondent South East (Int’l.) Rattan, Inc. to pay
complainant Jesus J. Coming the following:
1. Separation pay ₱114,400.00
2. Backwages P 30,400.00
3. Wage differential P 15,015.00
4. 13th month pay P 5,958.00
5. Holiday pay P 4,000.00
6. Service incentive leave pay P 2,000.00
Total award ₱171,773.00
43
The other claims and the case against respondent Estanislao Agbay
are dismissed for lack of merit.
SO ORDERED.13
Petitioners appealed to the National Labor Relations Commission
(NLRC)-Cebu City where they submitted the following additional
evidence: (1) copies of SEIRI’s payrolls and individual pay records of
employees;14 (2) affidavit15of SEIRI’s Treasurer, Angelina Agbay; and
(3) second affidavit16 of Vicente Coming.
On July 28, 2005, the NLRC’s Fourth Division rendered its
Decision,17 the dispositive portion of which states:
WHEREFORE, premises considered, the decision of the Labor
Arbiter is hereby SET ASIDE and VACATED and a new one entered
DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondent’s motion for reconsideration. 19
Respondent elevated the case to the CA via a petition for certiorari
under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC
and ruled that there existed an employer-employee relationship
between petitioners and respondent who was dismissed without just
and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby
GRANTED. The assailed Decision dated July 28, 2005 issued by the
National Labor Relations Commission (NLRC), Fourth Division, Cebu
City in NLRC Case No. V-000625-2004 is REVERSED and SET
ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is
REINSTATED with MODIFICATION on the computation of
backwages which should be computed from the time of illegal
termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment
in the computation of the award of separation pay as well as the
monetary awards of wage differential, 13th month pay, holiday pay
and service incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for reconsideration but the CA denied it
under Resolution dated February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD,
THE FINDING OF THE HONORABLE COURT OF APPEALS THAT
THERE EXISTS EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PETITIONERS AND RESPONDENT IS IN ACCORD
WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE
COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY
APPRECIATED IN ACCORDANCE WITH APPLICABLE LAW AND
JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH
PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED,
THE FINDING OF THE HONORABLE COURT OF APPEALS THAT
PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF
RESPONDENT IS IN ACCORD WITH APPLICABLE LAW AND
JURISPRUDENCE.
44
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF
THE HONORABLE COURT OF APPEALS THAT THE BACKWAGES
DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE
TIME OF ILLEGAL TERMINATION UNTIL THE FINALITY OF THE
DECISION IS SUPPORTED BY PREVAILING JURISPRUDENCE.21
Resolution of the first issue is paramount in view of petitioners’ denial
of the existence of employer-employee relationship.
The issue of whether or not an employer-employee relationship
exists in a given case is essentially a question of fact. As a rule, this
Court is not a trier of facts and this applies with greater force in labor
cases.22 Only errors of law are generally reviewed by this
Court.23 This rule is not absolute, however, and admits of exceptions.
For one, the Court may look into factual issues in labor cases when
the factual findings of the Labor Arbiter, the NLRC, and the CA are
conflicting.24 Here, the findings of the NLRC differed from those of
the Labor Arbiter and the CA, which compels the Court’s exercise of
its authority to review and pass upon the evidence presented and to
draw its own conclusions therefrom.25
To ascertain the existence of an employer-employee relationship
jurisprudence has invariably adhered to the four-fold test, to wit: (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
employee’s conduct, or the so-called "control test." 26 In resolving the
issue of whether such relationship exists in a given case, substantial
evidence – that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion – is sufficient.
Although no particular form of evidence is required to prove the
existence of the relationship, and any competent and relevant
evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence. 27
In support of their claim that respondent was not their employee,
petitioners presented Employment Reports to the SSS from 1987 to
2002, the Certifications issued by Mayol and Apondar, two affidavits
of Vicente Coming, payroll sheets (1999-2000), individual pay
envelopes and employee earnings records (1999-2000) and affidavit
of Angelina Agbay (Treasurer and Human Resources Officer). The
payroll and pay records did not include the name of respondent. The
affidavit of Ms. Agbay stated that after SEIRI started its business in
1986 purely on export trading, it ceased operations in 1989 as
evidenced by Certification dated January 18, 1994 from the
Securities and Exchange Commission (SEC); that when business
resumed in 1992, SEIRI undertook only a little of manufacturing; that
the company never hired any workers for varnishing and pole sizing
because it bought the same from various suppliers, including
Faustino Apondar; respondent was never hired by SEIRI; and while it
is true that Mr. Estanislao Agbay is the company President, he never
dispensed the salaries of workers.28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to
1986, he was working with Ben Mayol as round core
maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito
Montececillo. This is a rattan trader with business address
near Cebu Rattan Factory on a "Pakiao" basis.
8. However, Jesus and I did not stay long at Okay Okay Yard
and instead we joined Eleuterio Agbay in Labogon, Cebu in
1989. In 1991, we went back to Okay Okay located near the
residence of Atty. Vicente de la Serna in Mandaue City. We
were on a "pakiao" basis. We stayed put until 1993 when we
resigned and joined Dodoy Luna in Labogon, Mandaue City
as classifier until 1995. In 1996[,] Jesus rested. It was only in
1997 that he worked back. He replaced me, as a classifier in
Rattan Traders owned by Allan Mayol. But then, towards the
end of the year, he left the factory and relaxed in our place of
birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken
back by Allan Mayol as sizing machine operator. However,
45
 the work was off and on basis. Not regular in nature, he was
harping a side line job with me knowing that I am now
working with Faustino Apondar that supplies rattan furniture’s
[sic] to South East (Int’l) Rattan, Inc. As a brother, I allowed
Jesus to work with me and collect the proceeds of his
services as part of my collectibles from Faustino Apondar
since I was on a "pakiao" basis. He was working at his
pleasure. Which means, he works if he likes to? That will be
until 10:00 o’clock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of
Vicente Coming. Jesus is a rattan factory worker and he was working
with me as rattan pole sizing/classifier of my business from 1997 up
to part of 1998 when he left my factory at will. I took him back
towards the end of 1999, this time as a sizing machine operator. In
all these years, his services are not regular. He works only if he likes
to.30
Faustino Apondar likewise issued a Certification which states:
This is to certify that I am a maker/supplier of finished Rattan
Furniture. As such, I have several rattan furniture workers under me,
one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of
his brother, Jesus who was already connected with Allan Mayol.
Having vouched for the integrity of his brother and knowing that the
job is temporary in character, I allowed Jesus to work with his brother
Vicente. However, the proceeds will be collected together with his
brother Vicente since it was the latter who was working with me. He
renders services to his brother work only after the regular working
hours but off and on basis.31
On the other hand, respondent submitted the affidavit executed by
Eleoterio Brigoli, Pedro Brigoli, Napoleon Coming, Efren Coming and
Gil Coming who all attested that respondent was their co-worker at
SEIRI.
Their affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of
Cebu, after having been duly sworn to in accordance with law,
depose and say:
That we are former employees of SOUTH EAST RATTAN which is
owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we
worked together in one company SOUTH EAST RATTANT [sic];
That we together with JESUS COMING are all under the employ of
ESTAN ESLAO AGBAY considering that the latter is the one directly
paying us and holds the absolute control of all aspects of our
employment;
That it is not true that JESUS COMING is under the employ of one
person other than ESTAN ESLAO AGBAY OF SOUTH EAST
RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH
EAST RATTAN and had been employed therein for almost twenty
years;
That we executed this affidavit to attest to the truth of the foregoing
facts and to deny any contrary allegation made by the company
against his employment with SOUTH EAST RATTAN.32
In his decision, Labor Arbiter Carreon found that respondent’s work
as sizing machine operator is usually necessary and desirable to the
rattan furniture business of petitioners and their failure to include
respondent in the employment report to SSS is not conclusive proof
that respondent is not their employee. As to the affidavit of Vicente
Coming, Labor Arbiter Carreon did not give weight to his statement
46
that respondent is not petitioners’ employee but that of one Faustino
Apondar. Labor Arbiter Carreon was not convinced that Faustino
Apondar is an independent contractor who has a contractual
relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March
17, 1984 up to January 21, 2002.1âwphi1 Records reveal however
that South East (Int’l.) Rattan, Inc. was incorporated only last July 18,
1986 (p. 55 records)[.] Moreover, when they started to actually
operate in 1987, the company was engaged purely on "buying and
exporting rattan furniture" hence no manufacturing employees were
hired. Furthermore, from the last quarter of 1989 up to August of
1992, the company suspended operations due to economic reverses
as per Certification issued by the Securities and Exchange
Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee,
complainant failed to present a single payslip, voucher or a copy of a
company payroll showing that he rendered service during the period
indicated therein. x x x
From the above established facts we are inclined to give weight and
credence to the Certifications of Allan Mayol and Faustino Apondar,
both suppliers of finished Rattan Furniture (pp. 442-43, records). It
appears that complainant first worked with Allan Mayol and later with
Faustino Apondar upon the proddings of his brother Vicente.
Vicente’s affidavit as to complainant’s employment history was more
detailed and forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support
our findings that complainant was not an employee of respondents.
Thus:
1. Complainant’s name does not appear in the list of
employees reported to the SSS.
2. His name does not also appear in the sample payrolls of
respondents’ employees.
3. The certification of Allan Mayol and Fasutino Apondar[,]
supplier of finished rattan products[,] that complainant had at
one time or another worked with them.
4. The Affidavit of Vicente Coming, complainant’s full
brother[,] attesting that complainant had never been an
employee of respondent. The only connection was that their
employer Faustino Apondar supplies finished rattan products
to respondents.33
On the other hand, the CA gave more credence to the declarations of
the five former employees of petitioners that respondent was their
co-worker in SEIRI. One of said affiants is Vicente Coming’s own
son, Gil Coming. Vicente averred in his second affidavit that when he
confronted his son, the latter explained that he was merely told by
their Pastor to sign the affidavit as it will put an end to the
controversy. Vicente insisted that his son did not know the contents
and implications of the document he signed. As to the absence of
respondent’s name in the payroll and SSS employment report, the
CA observed that the payrolls submitted were only from January 1,
1999 to December 29, 2000 and not the entire period of eighteen
years when respondent claimed he worked for SEIRI. It further noted
that the names of the five affiants, whom petitioners admitted to be
their former employees, likewise do not appear in the aforesaid
documents. According to the CA, it is apparent that petitioners
maintained a separate payroll for certain employees or willfully
retained a portion of the payroll.
x x x As to the "control test", the following facts indubitably reveal that
respondents wielded control over the work performance of petitioner,
to wit: (1) they required him to work within the company premises; (2)
they obliged petitioner to report every day of the week and tasked
him to usually perform the same job; (3) they enforced the
observance of definite hours of work from 8 o’clock in the morning to
5 o’clock in the afternoon; (4) the mode of payment of petitioner’s
salary was under their discretion, at first paying him on pakiao basis
47
and thereafter, on daily basis; (5) they implemented company rules
and regulations; (6) [Estanislao] Agbay directly paid petitioner’s
salaries and controlled all aspects of his employment and (7)
petitioner rendered work necessary and desirable in the business of
the respondent company.34
We affirm the CA.
In Tan v. Lagrama,35 the Court held that the fact that a worker was
not reported as an employee to the SSS is not conclusive proof of
the absence of employer-employee relationship. Otherwise, an
employer would be rewarded for his failure or even neglect to
perform his obligation.36
Nor does the fact that respondent’s name does not appear in the
payrolls and pay envelope records submitted by petitioners negate
the existence of employer-employee relationship. For a payroll to be
utilized to disprove the employment of a person, it must contain a
true and complete list of the employee.37 In this case, the exhibits
offered by petitioners before the NLRC consisting of copies of
payrolls and pay earnings records are only for the years 1999 and
2000; they do not cover the entire 18-year period during which
respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA,
petitioners emphasized that in the certifications issued by Mayol and
Apondar, it was shown that respondent was employed and working
for them in those years he claimed to be working for SEIRI. However,
a reading of the certification by Mayol would show that while the
latter claims to have respondent under his employ in 1997, 1998 and
1999, respondent’s services were not regular and that he works only
if he wants to. Apondar’s certification likewise stated that respondent
worked for him since 1999 through his brother Vicente as "sideline"
but only after regular working hours and "off and on" basis. Even
assuming the truth of the foregoing statements, these do not
foreclose respondent’s regular or full-time employment with SEIRI. In
effect, petitioners suggest that respondent was employed by SEIRI’s
suppliers, Mayol and Apondar but no competent proof was presented
as to the latter’s status as independent contractors.
In the same comment, petitioners further admitted that the five
affiants who attested to respondent’s employment with SEIRI are its
former workers whom they describe as "disgruntled workers of
SEIRI" with an axe to grind against petitioners, and that their
execution of affidavit in support of respondent’s claim is "their very
way of hitting back the management of SEIRI after disciplinary
measures were meted against them."38 This allegation though was
not substantiated by petitioners. Instead, after the CA rendered its
decision reversing the NLRC’s ruling, petitioners subsequently
changed their theory by denying the employment relationship with
the five affiants in their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased
premises of the private respondent, they were called workers of
SEIRI (private respondent). Such admission however, does not
connote employment. For the truth of the matter, all of the five
employees of the supplier assigned at the leased premises of the
private respondent. Because of the recommendation of the private
respondent with regards to the disciplinary measures meted on the
five workers, they wanted to hit back against the private respondent.
Their motive to implicate private respondent was to vindicate.
Definitely, they have an axe to grind against the private respondent.
Mention has to be made that despite the dismissal of these five (5)
witnesses from their service, none of them ever went to the National
Labor [Relations] Commission and invoked their rights, if any, against
their employer or at the very least against the respondent. The
reason is obvious, since they knew pretty well that they were not
employees of SEIRI but rather under the employ of Allan Mayol and
Faustino Apondar, working on a leased premise of respondent. x x
x39
Petitioners’ admission that the five affiants were their former
employees is binding upon them. While they claim that respondent
was the employee of their suppliers Mayol and Apondar, they did not
submit proof that the latter were indeed independent contractors;
clearly, petitioners failed to discharge their burden of proving their
own affirmative allegation.40 There is thus no showing that the five
former employees of SEIRI were motivated by malice, bad faith or
any ill-motive in executing their affidavit supporting the claims of
respondent.
48
In any controversy between a laborer and his master, doubts
reasonably arising from the evidence are resolved in favor of the
laborer.41

As a regular employee, respondent enjoys the right to security of

tenure under Article 27942 of the Labor Code and may only be
dismissed for a just43 or authorized44 cause, otherwise the dismissal Republic of the Philippines
becomes illegal. SUPREME COURT
Baguio City
Respondent, whose employment was terminated without valid cause
by petitioners, is entitled to reinstatement without loss of seniority FIRST DIVISION
rights and other privileges and to his full back wages, inclusive of
allowances and other benefits or their monetary equivalent,
computed from the time his compensation was withheld from him up G.R. No. 192998 April 2, 2014
to the time of his actual reinstatement. Where reinstatement is no
longer viable as an option, back wages shall be computed from the BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G.
time of the illegal termination up to the finality of the decision. ENDRACA, Petitioners,
Separation pay equivalent to one month salary for every year of vs.
service should likewise be awarded as an alternative in case R. VILLEGAS TAXI TRANSPORT and ROMUALDO
reinstatement in not possible.45 VILLEGAS, Respondents.

WHEREFORE, the petition for review on certiorari is DENIED. The DECISION

Decision dated February 21, 2008 and Resolution dated February 9,
2009 of the Court of Appeals in CA-G.R. No. CEB-SP No. 02113 are
hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.
REYES, J.:
This is a petition for review on certiorari1 filed under Rule 45 of the
Rules of Court, assailing the Decision2 dated March 11, 2010 and
Resolution3 dated June 28, 2010 of the Court of Appeals (CA) in CA-
G.R. SP No. 111150, which affirmed with modification the
Decision4 dated June 23, 2009 of the National Labor Relations
Commission (NLRC) in NLRC LAC Case No. 07-002648-08.

The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M.

Francisco (Francisco) filed a complaint for illegal dismissal against R.
Villegas Taxi Transport and/or Romualdo Villegas (Romualdo) and
Andy Villegas (Andy) (respondents). At that time, a similar case had

49
already been filed by Isidro G. Endraca (Endraca) against the same
respondents. The two (2) cases were subsequently consolidated. 5
In their position paper,6 Tenazas, Francisco and Endraca (petitioners)
alleged that they were hired and dismissed by the respondents on
the following dates:
₱700.00 for the repair services and the replacement parts. As a
result, he was not able to meet his boundary for the day. Upon
returning to the company garage and informing the management of
the incident, his driver’s license was confiscated and was told to
settle the deficiency in his boundary first before his license will be
returned to him. He was no longer allowed to drive a taxi unit despite
his persistent pleas.10

Date of Date of
Name Salary For their part, the respondents admitted that Tenazas and Endraca
Hiring Dismissal
were employees of the company, the former being a regular driver
Bernard A. Boundary and the latter a spare driver. The respondents, however, denied that
10/1997 07/03/07 Francisco was an employee of the company or that he was able to
Tenazas System
drive one of the company’s units at any point in time. 11
Jaime M. Boundary
04/10/04 06/04/07
Francisco System The respondents further alleged that Tenazas was never terminated
Isidro G. Boundary by the company. They claimed that on July 3, 2007, Tenazas went to
04/2000 03/06/06 the company garage to get his taxi unit but was informed that it is
Endraca System7
due for overhaul because of some mechanical defects reported by
the other driver who takes turns with him in using the same. He was
Relaying the circumstances of his dismissal, Tenazas alleged that on thus advised to wait for further notice from the company if his unit
July 1, 2007, the taxi unit assigned to him was sideswiped by another has already been fixed. On July 8, 2007, however, upon being
vehicle, causing a dent on the left fender near the driver seat. The informed that his unit is ready for release, Tenazas failed to report
cost of repair for the damage was estimated at ₱500.00. Upon back to work for no apparent reason.12
reporting the incident to the company, he was scolded by
respondents Romualdo and Andy and was told to leave the garage As regards Endraca, the respondents alleged that they hired him as
for he is already fired. He was even threatened with physical harm a spare driver in February 2001. They allow him to drive a taxi unit
should he ever be seen in the company’s premises again. Despite whenever their regular driver will not be able to report for work. In
the warning, Tenazas reported for work on the following day but was July 2003, however, Endraca stopped reporting for work without
told that he can no longer drive any of the company’s units as he is informing the company of his reason. Subsequently, the respondents
already fired.8 learned that a complaint for illegal dismissal was filed by Endraca
against them. They strongly maintained, however, that they could
Francisco, on the other hand, averred that his dismissal was brought never have terminated Endraca in March 2006 since he already
about by the company’s unfounded suspicion that he was organizing stopped reporting for work as early as July 2003. Even then, they
a labor union. He was instantaneously terminated, without the benefit expressed willingness to accommodate Endraca should he wish to
of procedural due process, on June 4, 2007.9 work as a spare driver for the company again since he was never
really dismissed from employment anyway. 13
Endraca, for his part, alleged that his dismissal was instigated by an
occasion when he fell short of the required boundary for his taxi unit. On May 29, 2008, the petitioners, by registered mail, filed a Motion to
He related that before he was dismissed, he brought his taxi unit to Admit Additional Evidence.14 They alleged that after diligent efforts,
an auto shop for an urgent repair. He was charged the amount of

50
they were able to discover new pieces of evidence that will
substantiate the allegations in their position paper. Attached with the
motion are the following: (a) Joint Affidavit of the petitioners; 15 (2)
Affidavit of Good Faith of Aloney Rivera, a co-driver; 16 (3) pictures of
the petitioners wearing company shirts;17 and (4) Tenazas’
Certification/Record of Social Security System (SSS) contributions. 18
The Ruling of the Labor Arbiter
On May 30, 2008, the Labor Arbiter (LA) rendered a
Decision,19 which pertinently states, thus:
In the case of complainant Jaime Francisco, respondents
categorically denied the existence of an employer-employee
relationship. In this situation, the burden of proof shifts to the
complainant to prove the existence of a regular employment.
Complainant Francisco failed to present evidence of regular
employment available to all regular employees, such as an
employment contract, company ID, SSS, withholding tax certificates,
SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim that he
was only an extra driver who stopped reporting to queue for available
taxi units which he could drive. In fact, respondents offered him in
their Position Paper on record, immediate reinstatement as extra taxi
driver which offer he refused.
In case of Bernard Tenazas, he was told to wait while his taxi was
under repair but he did not report for work after the taxi was repaired.
Respondents[,] in their Position Paper, on record likewise, offered
him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual
dismissal. But there was no formal investigations, no show cause
memos, suspension memos or termination memos were never
issued. Otherwise stated, there is no proof of overt act of dismissal
committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay
does [sic] not apply.
WHEREFORE, premises considered, instant consolidated
complaints are hereby dismissed for lack of merit.
SO ORDERED.20
The Ruling of the NLRC
Unyielding, the petitioners appealed the decision of the LA to the
NLRC. Subsequently, on June 23, 2009, the NLRC rendered a
Decision,21 reversing the appealed decision of the LA, holding that
the additional pieces of evidence belatedly submitted by the
petitioners sufficed to establish the existence of employer-employee
relationship and their illegal dismissal. It held, thus:
In the challenged decision, the Labor Arbiter found that it cannot be
said that the complainants were illegally dismissed, there being no
showing, in the first place, that the respondent [sic] terminated their
services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual
dismissal. But there were no formal investigations, no show cause
memos, suspension memos or termination memos were never
issued. Otherwise stated, there is no proof of overt act of dismissal
committed by herein respondents.
We are therefore constrained to rule that there was no illegal
dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally dismissed
from employment.
51
It is possible that the complainants’ Motion to Admit Additional
Evidence did not reach the Labor Arbiter’s attention because he had
drafted the challenged decision even before they submitted it, and
thereafter, his staff attended only to clerical matters, and failed to
bring the motion in question to his attention. It is now up to this
Commission to consider the complainants’ additional evidence.
Anyway, if this Commission must consider evidence submitted for the
first time on appeal (Andaya vs. NLRC, G.R. No. 157371, July 15,
2005), much more so must it consider evidence that was simply
overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the
complainants are the following: (1) joint affidavit (records, p. 51-52)
of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney
Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to
by the complainant in their joint affidavit showing them wearing t-
shirts bearing the name and logo of the respondent’s company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED.
Respondent Rom[u]aldo Villegas doing business under the name
and style Villegas Taxi Transport is hereby ordered to pay the
complainants the following (1) full backwages from the date of their
dismissal (July 3, 2007 for Tena[z]as, June 4, 2004 for Francisco,
and March 6, 2006 for Endraca[)] up to the date of the finality of this
decision[;] (2) separation pay equivalent to one month for every year
of service; and (3) attorney’s fees equivalent to ten percent (10%) of
the total judgment awards.
SO ORDERED.22
On July 24, 2009, the respondents filed a motion for reconsideration
but the NLRC denied the same in its Resolution 23 dated September
23, 2009.
The Ruling of the CA
Unperturbed, the respondents filed a petition for certiorari with the
CA. On March 11, 2010, the CA rendered a Decision,24 affirming with
modification the Decision dated June 23, 2009 of the NLRC. The CA
agreed with the NLRC’s finding that Tenazas and Endraca were
employees of the company, but ruled otherwise in the case of
Francisco for failing to establish his relationship with the company. It
also deleted the award of separation pay and ordered for
reinstatement of Tenazas and Endraca. The pertinent portions of the
decision read as follows:
At the outset, We declare that respondent Francisco failed to prove
that an employer-employee relationship exists between him and R.
Transport. If there is no employer-employee relationship in the first
place, the duty of R. Transport to adhere to the labor standards
provisions of the Labor Code with respect to Francisco is
questionable.
xxxx
Although substantial evidence is not a function of quantity but rather
of quality, the peculiar environmental circumstances of the instant
case demand that something more should have been proffered. Had
there been other proofs of employment, such as Francisco’s
inclusion in R.R.
Transport’s payroll, this Court would have affirmed the finding of
employer-employee relationship.1âwphi1 The NLRC, therefore,
committed grievous error in ordering R. Transport to answer for
Francisco’s claims.
We now tackle R. Transport’s petition with respect to Tenazas and
Endraca, who are both admitted to be R. Transport’s employees. In
its petition, R. Transport puts forth the theory that it did not terminate
the services of respondents but that the latter deliberately
abandoned their work. We cannot subscribe to this theory.
xxxx
52
Considering that the complaints for illegal dismissal were filed soon
after the alleged dates of dismissal, it cannot be inferred that
respondents Tenazas and Endraca intended to abandon their
employment. The complainants for dismissal are, in themselves,
pleas for the continuance of employment. They are incompatible with
the allegation of abandonment. x x x.
For R. Transport’s failure to discharge the burden of proving that the
dismissal of respondents Tenazas and Endraca was for a just cause,
We are constrained to uphold the NLRC’s conclusion that their
dismissal was not justified and that they are entitled to back wages.
Because they were illegally dismissed, private respondents Tenazas
and Endraca are entitled to reinstatement and back wages x x x.
xxxx
However, R. Transport is correct in its contention that separation pay
should not be awarded because reinstatement is still possible and
has been offered. It is well[-]settled that separation pay is granted
only in instances where reinstatement is no longer feasible or
appropriate, which is not the case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations
Commission dated 23 June 2009, in NLRC LAC Case No. 07-
002648-08, and its Resolution dated 23 September 2009 denying
reconsideration thereof are AFFIRMED with MODIFICATION in that
the award of Jaime Francisco’s claims is DELETED. The separation
pay granted in favor of Bernard Tenazas and Isidro Endraca is,
likewise, DELETED and their reinstatement is ordered instead.
SO ORDERED.25 (Citations omitted)
On March 19, 2010, the petitioners filed a motion for reconsideration
but the same was denied by the CA in its Resolution26 dated June 28,
2010.
Undeterred, the petitioners filed the instant petition for review on
certiorari before this Court on July 15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the
existence of employer-employee relationship and whether there was
an illegal dismissal. Remarkably, the LA, NLRC and the CA had
varying assessment on the matters at hand. The LA believed that,
with the admission of the respondents, there is no longer any
question regarding the status of both Tenazas and Endraca being
employees of the company. However, he ruled that the same
conclusion does not hold with respect to Francisco whom the
respondents denied to have ever employed or known. With the
respondents’ denial, the burden of proof shifts to Francisco to
establish his regular employment. Unfortunately, the LA found that
Francisco failed to present sufficient evidence to prove regular
employment such as company ID, SSS membership, withholding tax
certificates or similar articles. Thus, he was not considered an
employee of the company. Even then, the LA held that Tenazas and
Endraca could not have been illegally dismissed since there was no
overt act of dismissal committed by the respondents.27
On appeal, the NLRC reversed the ruling of the LA and ruled that the
petitioners were all employees of the company. The NLRC premised
its conclusion on the additional pieces of evidence belatedly
submitted by the petitioners, which it supposed, have been
overlooked by the LA owing to the time when it was received by the
said office. It opined that the said pieces of evidence are sufficient to
establish the circumstances of their illegal termination. In particular, it
noted that in the affidavit of the petitioners, there were allegations
about the company’s practice of not issuing employment records and
this was not rebutted by the respondents. It underscored that in a
situation where doubt exists between evidence presented by the
employer and the employee, the scales of justice must be tilted in
favor of the employee. It awarded the petitioners with: (1) full
backwages from the date of their dismissal up to the finality of the
53
decision; (2) separation pay equivalent to one month of salary for
every year of service; and (3) attorney’s fees.
On petition for certiorari, the CA affirmed with modification the
decision of the NLRC, holding that there was indeed an illegal
dismissal on the part of Tenazas and Endraca but not with respect to
Francisco who failed to present substantial evidence, proving that he
was an employee of the respondents. The CA likewise dismissed the
respondents’ claim that Tenazas and Endraca abandoned their work,
asseverating that immediate filing of a complaint for illegal dismissal
and persistent pleas for continuance of employment are incompatible
with abandonment. It also deleted the NLRC’s award of separation
pay and instead ordered that Tenazas and Endraca be reinstated. 28
"Well-settled is the rule that the jurisdiction of this Court in a petition
for review on certiorari under Rule 45 of the Revised Rules of Court
is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are completely devoid of support from the
evidence on record, or the assailed judgment is based on a gross
misapprehension of facts."29 The Court finds that none of the
mentioned circumstances is present in this case.
In reviewing the decision of the NLRC, the CA found that no
substantial evidence was presented to support the conclusion that
Francisco was an employee of the respondents and accordingly
modified the NLRC decision. It stressed that with the respondents’
denial of employer-employee relationship, it behooved Francisco to
present substantial evidence to prove that he is an employee before
any question on the legality of his supposed dismissal becomes
appropriate for discussion. Francisco, however, did not offer
evidence to substantiate his claim of employment with the
respondents. Short of the required quantum of proof, the CA correctly
ruled that the NLRC’s finding of illegal dismissal and the monetary
awards which necessarily follow such ruling lacked factual and legal
basis and must therefore be deleted.
The action of the CA finds support in Anonas Construction and
Industrial Supply Corp., et al. v. NLRC, et al.,30where the Court
reiterated:
[J]udicial review of decisions of the NLRC via petition for certiorari
under Rule 65, as a general rule, is confined only to issues of lack or
excess of jurisdiction and grave abuse of discretion on the part of the
NLRC. The CA does not assess and weigh the sufficiency of
evidence upon which the LA and the NLRC based their conclusions.
The issue is limited to the determination of whether or not the NLRC
acted without or in excess of its jurisdiction, or with grave abuse of
discretion in rendering the resolution, except if the findings of the
NLRC are not supported by substantial evidence.31 (Citation omitted
and emphasis ours)
It is an oft-repeated rule that in labor cases, as in other administrative
and quasi-judicial proceedings, "the quantum of proof necessary is
substantial evidence, or such amount of relevant evidence which a
reasonable mind might accept as adequate to justify a
conclusion."32 "[T]he burden of proof rests upon the party who
asserts the affirmative of an issue."33 Corollarily, as Francisco was
claiming to be an employee of the respondents, it is incumbent upon
him to proffer evidence to prove the existence of said relationship.
"[I]n determining the presence or absence of an employer-employee
relationship, the Court has consistently looked for the following
incidents, to wit: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee on the means and
methods by which the work is accomplished. The last element, the
so-called control test, is the most important element." 34
There is no hard and fast rule designed to establish the aforesaid
elements. Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment
contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.35
In this case, however, Francisco failed to present any proof
substantial enough to establish his relationship with the respondents.
He failed to present documentary evidence like attendance logbook,
payroll, SSS record or any personnel file that could somehow depict
54
his status as an employee. Anent his claim that he was not issued
with employment records, he could have, at least, produced his
social security records which state his contributions, name and
address of his employer, as his co-petitioner Tenazas did. He could
have also presented testimonial evidence showing the respondents’
exercise of control over the means and methods by which he
undertakes his work. This is imperative in light of the respondents’
denial of his employment and the claim of another taxi operator,
Emmanuel Villegas (Emmanuel), that he was his employer.
Specifically, in his Affidavit,36 Emmanuel alleged that Francisco was
employed as a spare driver in his taxi garage from January 2006 to
December 2006, a fact that the latter failed to deny or question in any
of the pleadings attached to the records of this case. The utter lack of
evidence is fatal to Francisco’s case especially in cases like his
present predicament when the law has been very lenient in not
requiring any particular form of evidence or manner of proving the
presence of employer-employee relationship.
In Opulencia Ice Plant and Storage v. NLRC,37 this Court
emphasized, thus:
No particular form of evidence is required to prove the existence of
an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. For, if only
documentary evidence would be required to show that relationship,
no scheming employer would ever be brought before the bar of
justice, as no employer would wish to come out with any trace of the
illegality he has authored considering that it should take much
weightier proof to invalidate a written instrument. 38
Here, Francisco simply relied on his allegation that he was an
employee of the company without any other evidence supporting his
claim. Unfortunately for him, a mere allegation in the position paper
is not tantamount to evidence.39Bereft of any evidence, the CA
correctly ruled that Francisco could not be considered an employee
of the respondents.
The CA’s order of reinstatement of Tenazas and Endraca, instead of
the payment of separation pay, is also well in accordance with
prevailing jurisprudence. In Macasero v. Southern Industrial Gases
Philippines,40 the Court reiterated, thus:
[A]n illegally dismissed employee is entitled to two reliefs: backwages
and reinstatement.1âwphi1 The two reliefs provided are separate
and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the
employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation
pay if reinstatement is no longer viable, and backwages.
The normal consequences of respondents’ illegal dismissal, then, are
reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer
viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative.
The payment of separation pay is in addition to payment of
backwages.41 (Emphasis supplied)
Clearly, it is only when reinstatement is no longer feasible that the
payment of separation pay is ordered in lieu thereof. For instance, if
reinstatement would only exacerbate the tension and strained
relations between the parties, or where the relationship between the
employer and the employee has been unduly strained by reason of
their irreconcilable differences, it would be more prudent to order
payment of separation pay instead of reinstatement. 42
This doctrine of strained relations, however, should not be used
recklessly or applied loosely43 nor be based on impression alone. "It
bears to stress that reinstatement is the rule and, for the exception of
strained relations to apply, it should be proved that it is likely that if
reinstated, an atmosphere of antipathy and antagonism would be
generated as to adversely affect the efficiency and productivity of the
employee concerned."44
Moreover, the existence of strained relations, it must be emphasized,
is a question of fact. In Golden Ace Builders v. Talde, 45 the Court
underscored:
55
Strained relations must be demonstrated as a fact, however, to be SO ORDERED.
adequately supported by evidence—substantial evidence to show
that the relationship between the employer and the employee is BIENVENIDO L. REYES
indeed strained as a necessary consequence of the judicial
controversy.46 (Citations omitted and emphasis ours)

After a perusal of the NLRC decision, this Court failed to find the Republic of the Philippines
factual basis of the award of separation pay to the petitioners. The SUPREME COURT
NLRC decision did not state the facts which demonstrate that Manila
reinstatement is no longer a feasible option that could have justified
the alternative relief of granting separation pay instead.
EN BANC
The petitioners themselves likewise overlooked to allege
circumstances which may have rendered their reinstatement unlikely G.R. No. 167622 June 29, 2010
or unwise and even prayed for reinstatement alongside the payment
of separation pay in their position paper.47 A bare claim of strained GREGORIO V. TONGKO, Petitioner,
relations by reason of termination is insufficient to warrant the vs.
granting of separation pay. Likewise, the filing of the complaint by the THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC.
petitioners does not necessarily translate to strained relations and RENATO A. VERGEL DE DIOS,Respondents.
between the parties. As a rule, no strained relations should arise
from a valid and legal act asserting one’s right.48 Although litigation RESOLUTION
may also engender a certain degree of hostility, the understandable
strain in the parties’ relation would not necessarily rule out BRION, J.:
reinstatement which would, otherwise, become the rule rather the
exception in illegal dismissal cases.49 Thus, it was a prudent call for
This resolves the Motion for Reconsideration1 dated December 3,
the CA to delete the award of separation pay and order for
2008 filed by respondent The Manufacturers Life Insurance Co.
reinstatement instead, in accordance with the general rule stated in
(Phils.), Inc. (Manulife) to set aside our Decision of November 7,
Article 27950 of the Labor Code.
2008. In the assailed decision, we found that an employer-employee
relationship existed between Manulife and petitioner Gregorio
Finally, the Court finds the computation of the petitioners' backwages Tongko and ordered Manulife to pay Tongko backwages and
at the rate of ₱800.00 daily reasonable and just under the separation pay for illegal dismissal.
circumstances. The said rate is consistent with the ruling of this
Court in Hyatt Taxi Services, Inc. v. Catinoy,51 which dealt with the
The following facts have been stated in our Decision of November 7,
same matter.
2008, now under reconsideration, but are repeated, simply for
purposes of clarity.
WHEREFORE, in view of the foregoing disquisition, the petition for
review on certiorari is DENIED. The Decision dated March 11, 2010
The contractual relationship between Tongko and Manulife had two
and Resolution dated June 28, 2010 of the Court of Appeals in CA-
basic phases. The first or initial phase began on July 1, 1977, under
G.R. SP No. 111150 are AFFIRMED.
a Career Agent’s Agreement (Agreement) that provided:

56
It is understood and agreed that the Agent is an independent
contractor and nothing contained herein shall be construed or
interpreted as creating an employer-employee relationship between
the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance,
Annuities, Group policies and other products offered by the
Company, and collect, in exchange for provisional receipts issued by
the Agent, money due to or become due to the Company in respect
of applications or policies obtained by or through the Agent or from
policyholders allotted by the Company to the Agent for servicing,
subject to subsequent confirmation of receipt of payment by the
Company as evidenced by an Official Receipt issued by the
Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or
violation of any of the provisions hereof by the Agent by giving written
notice to the Agent within fifteen (15) days from the time of the
discovery of the breach. No waiver, extinguishment, abandonment,
withdrawal or cancellation of the right to terminate this Agreement by
the Company shall be construed for any previous failure to exercise
its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at
any time without cause, by giving to the other party fifteen (15) days
notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and
requirements of Manulife, and (2) to maintain a standard of
knowledge and competency in the sale of Manulife’s products,
satisfactory to Manulife and sufficient to meet the volume of the new
business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit
Manager in Manulife’s Sales Agency Organization. In 1990, he
became a Branch Manager. Six years later (or in 1996), Tongko
became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency
income, and management overrides. Since the beginning, Tongko
consistently declared himself self-employed in his income tax
returns. Thus, under oath, he declared his gross business income
and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax on
Tongko’s earnings.5
In 2001, Manulife instituted manpower development programs at the
regional sales management level. Respondent Renato Vergel de
Dios wrote Tongko a letter dated November 6, 2001 on concerns that
were brought up during the October 18, 2001 Metro North Sales
Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has
been very clear – to increase the number of agents to at least 1,000
strong for a start. This may seem diametrically opposed to the way
Manulife was run when you first joined the organization. Since then,
however, substantial changes have taken place in the organization,
as these have been influenced by developments both from within
and without the company.
xxxx
The issues around agent recruiting are central to the intended
objectives hence the need for a Senior Managers’ meeting earlier
last month when Kevin O’Connor, SVP-Agency, took to the floor to
determine from our senior agency leaders what more could be done
to bolster manpower development. At earlier meetings, Kevin had
presented information where evidently, your Region was the lowest
performer (on a per Manager basis) in terms of recruiting in 2000
and, as of today, continues to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain
comments from your end which were perceived to be uncalled for, it
became clear that a one-on-one meeting with you was necessary to
57
ensure that you and management, were on the same plane. As
gleaned from some of your previous comments in prior meetings
(both in group and one-on-one), it was not clear that we were
proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one
of which I joined briefly. In those subsequent meetings you reiterated
certain views, the validity of which we challenged and subsequently
found as having no basis.
With such views coming from you, I was a bit concerned that the rest
of the Metro North Managers may be a bit confused as to the
directions the company was taking. For this reason, I sought a
meeting with everyone in your management team, including you, to
clear the air, so to speak.
This note is intended to confirm the items that were discussed at the
said Metro North Region’s Sales Managers meeting held at the 7/F
Conference room last 18 October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and
would want to revert to the position of agents."
This is an often repeated issue you have raised with me and with
Kevin. For this reason, I placed the issue on the table before the rest
of your Region’s Sales Managers to verify its validity. As you must
have noted, no Sales Manager came forward on their own to confirm
your statement and it took you to name Malou Samson as a source
of the same, an allegation that Malou herself denied at our meeting
and in your very presence.
This only confirms, Greg, that those prior comments have no solid
basis at all. I now believe what I had thought all along, that these
allegations were simply meant to muddle the issues surrounding the
inability of your Region to meet its agency development objectives!
Issue # 3: "Sales Managers are doing what the company asks them
to do but, in the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked
and we found that you made a lot more money in the Year 2000
versus 1999. In addition, you also volunteered the information to
Kevin when you said that you probably will make more money in the
Year 2001 compared to Year 2000. Obviously, your above statement
about making "less money" did not refer to you but the way you
argued this point had us almost believing that you were spouting the
gospel of truth when you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your
ability to lead this group towards the new direction that we have been
discussing these past few weeks, i.e., Manulife’s goal to become a
major agency-led distribution company in the Philippines. While as
you claim, you have not stopped anyone from recruiting, I have never
heard you proactively push for greater agency recruiting. You have
not been proactive all these years when it comes to agency growth.
xxxx
I cannot afford to see a major region fail to deliver on its
developmental goals next year and so, we are making the following
changes in the interim:
1. You will hire at your expense a competent assistant who can
unload you of much of the routine tasks which can be easily
delegated. This assistant should be so chosen as to complement
your skills and help you in the areas where you feel "may not be your
cup of tea."
58
You have stated, if not implied, that your work as Regional Manager
may be too taxing for you and for your health. The above could solve
this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations
will deal with the North Star Branch (NSB) in autonomous fashion. x
xx
I have decided to make this change so as to reduce your span of
control and allow you to concentrate more fully on overseeing the
remaining groups under Metro North, your Central Unit and the rest
of the Sales Managers in Metro North. I will hold you solely
responsible for meeting the objectives of these remaining groups.
xxxx
The above changes can end at this point and they need not go any
further. This, however, is entirely dependent upon you. But you have
to understand that meeting corporate objectives by everyone is
primary and will not be compromised. We are meeting tough
challenges next year, and I would want everybody on board. Any
resistance or holding back by anyone will be dealt with accordingly. 6
Subsequently, de Dios wrote Tongko another letter, dated December
18, 2001, terminating Tongko’s services:
It would appear, however, that despite the series of meetings and
communications, both one-on-one meetings between yourself and
SVP Kevin O’Connor, some of them with me, as well as group
meetings with your Sales Managers, all these efforts have failed in
helping you align your directions with Management’s avowed agency
growth policy.
xxxx
On account thereof, Management is exercising its prerogative under
Section 14 of your Agents Contract as we are now issuing this notice
of termination of your Agency Agreement with us effective fifteen
days from the date of this letter. 7
Tongko responded by filing an illegal dismissal complaint with the
National Labor Relations Commission (NLRC) Arbitration Branch. He
essentially alleged – despite the clear terms of the letter terminating
his Agency Agreement – that he was Manulife’s employee before he
was illegally dismissed.8
Thus, the threshold issue is the existence of an employment
relationship. A finding that none exists renders the question of illegal
dismissal moot; a finding that an employment relationship exists, on
the other hand, necessarily leads to the need to determine the
validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-
rider not exceeding ₱50,000.00, regardless of production levels
attained and exclusive of commissions and bonuses. He also
claimed that as Regional Sales Manager, he was given a travel and
entertainment allowance of ₱36,000.00 per year in addition to his
overriding commissions; he was tasked with numerous administrative
functions and supervisory authority over Manulife’s employees, aside
from merely selling policies and recruiting agents for Manulife; and
he recommended and recruited insurance agents subject to vetting
and approval by Manulife. He further alleges that he was assigned a
definite place in the Manulife offices when he was not in the field – at
the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo Sts.,
Salcedo Village, Makati City – for which he never paid any rental.
Manulife provided the office equipment he used, including tables,
chairs, computers and printers (and even office stationery), and paid
for the electricity, water and telephone bills. As Regional Sales
Manager, Tongko additionally asserts that he was required to follow
at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
59
Manulife argues that Tongko had no fixed wage or salary. Under the
Agreement, Tongko was paid commissions of varying amounts,
computed based on the premium paid in full and actually received by
Manulife on policies obtained through an agent. As sales manager,
Tongko was paid overriding sales commission derived from sales
made by agents under his unit/structure/branch/region. Manulife also
points out that it deducted and withheld a 10% tax from all
commissions Tongko received; Tongko even declared himself to be
self-employed and consistently paid taxes as such—i.e., he availed
of tax deductions such as ordinary and necessary trade, business
and professional expenses to which a business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over
Tongko’s claim as he was not its employee as characterized in the
four-fold test and our ruling in Carungcong v. National Labor
Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship
existed between the parties. However, the NLRC reversed the labor
arbiter’s decision on appeal; it found the existence of an employer-
employee relationship and concluded that Tongko had been illegally
dismissed. In the petition for certiorari with the Court of Appeals (CA),
the appellate court found that the NLRC gravely abused its discretion
in its ruling and reverted to the labor arbiter’s decision that no
employer-employee relationship existed between Tongko and
Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and
found that an employment relationship existed between Tongko and
Manulife. We concluded that Tongko is Manulife’s employee for the
following reasons:
1. Our ruling in the first Insular11 case did not foreclose the
possibility of an insurance agent becoming an employee of
an insurance company; if evidence exists showing that the
company promulgated rules or regulations that effectively
controlled or restricted an insurance agent’s choice of
methods or the methods themselves in selling insurance, an
employer-employee relationship would be present. The
determination of the existence of an employer-employee
relationship is thus on a case-to-case basis depending on
the evidence on record.
2. Manulife had the power of control over Tongko, sufficient
to characterize him as an employee, as shown by the
following indicators:
2.1 Tongko undertook to comply with Manulife’s
rules, regulations and other requirements, i.e., the
different codes of conduct such as the Agent Code of
Conduct, the Manulife Financial Code of Conduct,
and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance
agents and managers, who occupied similar
positions as Tongko, showed that they performed
administrative duties that established employment
with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in
addition to his other administrative functions. De
Dios’ letter harped on the direction Manulife intended
to take, viz., greater agency recruitment as the
primary means to sell more policies; Tongko’s
alleged failure to follow this directive led to the
termination of his employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for
reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right
to due process by: (a) confining the review only to the issue
60
of "control" and utterly disregarding all the other issues that
had been joined in this case; (b) mischaracterizing the
divergence of conclusions between the CA and the NLRC
decisions as confined only to that on "control"; (c) grossly
failing to consider the findings and conclusions of the CA on
the majority of the material evidence, especially [Tongko’s]
declaration in his income tax returns that he was a "business
person" or "self-employed"; and (d) allowing [Tongko] to
repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled
rules in contract law and agency, distorts not only the legal
relationships of agencies to sell but also distributorship and
franchising, and ignores the constitutional and policy context
of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of
the CA on the three elements of the four-fold test other than
the "control" test, reverses well-settled doctrines of law on
employer-employee relationships, and grossly misapplies the
"control test," by selecting, without basis, a few items of
evidence to the exclusion of more material evidence to
support its conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation,
beyond the scope authorized by Articles 8 and 9 of the Civil
Code, beyond the powers granted to this Court under Article
VIII, Section 1 of the Constitution and contravenes through
judicial legislation, the constitutional prohibition against
impairment of contracts under Article III, Section 10 of the
Constitution.
5. For all the above reasons, the November 7[, 2008]
Decision made unsustainable and reversible errors, which
should be corrected, in concluding that Respondent Manulife
and Petitioner had an employer-employee relationship, that
Respondent Manulife illegally dismissed Petitioner, and for
consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and
attorney’s fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law
perspective, oblivious that the factual antecedents were set in the
insurance industry so that the Insurance Code primarily governs.
Chapter IV, Title 1 of this Code is wholly devoted to "Insurance
Agents and Brokers" and specifically defines the agents and brokers
relationship with the insurance company and how they are governed
by the Code and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the
"agency" that it speaks of, as agency is a civil law matter governed
by the Civil Code. Thus, at the very least, three sets of laws –
namely, the Insurance Code, the Labor Code and the Civil Code –
have to be considered in looking at the present case. Not to be
forgotten, too, is the Agreement (partly reproduced on page 2 of this
Dissent and which no one disputes) that the parties adopted to
govern their relationship for purposes of selling the insurance the
company offers. To forget these other laws is to take a myopic view
of the present case and to add to the uncertainties that now exist in
considering the legal relationship between the insurance company
and its "agents."
The main issue of whether an agency or an employment relationship
exists depends on the incidents of the relationship. The Labor Code
concept of "control" has to be compared and distinguished with the
"control" that must necessarily exist in a principal-agent relationship.
The principal cannot but also have his or her say in directing the
course of the principal-agent relationship, especially in cases where
the company-representative relationship in the insurance industry is
an agency.
61
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in
the country, in terms particularly of who can be in the insurance
business, who can act for and in behalf of an insurer, and how these
parties shall conduct themselves in the insurance business. Section
186 of the Insurance Code provides that "No person, partnership, or
association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to
do the business of insurance in the Philippines." Sections 299 and
300 of the Insurance Code on Insurance Agents and Brokers, among
other provisions, provide:
Section 299. No insurance company doing business in the
Philippines, nor any agent thereof, shall pay any commission or other
compensation to any person for services in obtaining insurance,
unless such person shall have first procured from the Commissioner
a license to act as an insurance agent of such company or as an
insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker
in the solicitation or procurement of applications for insurance, or
receive for services in obtaining insurance, any commission or other
compensation from any insurance company doing business in the
Philippines or any agent thereof, without first procuring a license so
to act from the Commissioner x x x The Commissioner shall satisfy
himself as to the competence and trustworthiness of the applicant
and shall have the right to refuse to issue or renew and to suspend
or revoke any such license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains
insurance on behalf of any insurance company or transmits for a
person other than himself an application for a policy or contract of
insurance to or from such company or offers or assumes to act in the
negotiating of such insurance shall be an insurance agent within the
intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is
subject.
The application for an insurance agent’s license requires a written
examination, and the applicant must be of good moral character and
must not have been convicted of a crime involving moral
turpitude.14 The insurance agent who collects premiums from an
insured person for remittance to the insurance company does so in a
fiduciary capacity, and an insurance company which delivers an
insurance policy or contract to an authorized agent is deemed to
have authorized the agent to receive payment on the company’s
behalf.15 Section 361 further prohibits the offer, negotiation, or
collection of any amount other than that specified in the policy and
this covers any rebate from the premium or any special favor or
advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of
qualification, be licensed and must also act within the parameters of
the authority granted under the license and under the contract with
the principal. Other than the need for a license, the agent is limited in
the way he offers and negotiates for the sale of the company’s
insurance products, in his collection activities, and in the delivery of
the insurance contract or policy. Rules regarding the desired results
(e.g., the required volume to continue to qualify as a company agent,
rules to check on the parameters on the authority given to the agent,
and rules to ensure that industry, legal and ethical rules are followed)
are built-in elements of control specific to an insurance agency and
should not and cannot be read as elements of control that attend an
employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person
[who] binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority
of the latter."16 While this is a very broad definition that on its face
may even encompass an employment relationship, the distinctions
between agency and employment are sufficiently established by law
and jurisprudence.
Generally, the determinative element is the control exercised over
the one rendering service. The employer controls the employee both
in the results and in the means and manner of achieving this result.
The principal in an agency relationship, on the other hand, also has
the prerogative to exercise control over the agent in undertaking the
62
assigned task based on the parameters outlined in the pertinent
laws.
Under the general law on agency as applied to insurance, an agency
must be express in light of the need for a license and for the
designation by the insurance company. In the present case, the
Agreement fully serves as grant of authority to Tongko as Manulife’s
insurance agent.17 This agreement is supplemented by the
company’s agency practices and usages, duly accepted by the agent
in carrying out the agency.18 By authority of the Insurance Code, an
insurance agency is for compensation,19 a matter the Civil Code
Rules on Agency presumes in the absence of proof to the
contrary.20 Other than the compensation, the principal is bound to
advance to, or to reimburse, the agent the agreed sums necessary
for the execution of the agency.21 By implication at least under Article
1994 of the Civil Code, the principal can appoint two or more agents
to carry out the same assigned tasks,22 based necessarily on the
specific instructions and directives given to them.
With particular relevance to the present case is the provision that "In
the execution of the agency, the agent shall act in accordance with
the instructions of the principal."23 This provision is pertinent for
purposes of the necessary control that the principal exercises over
the agent in undertaking the assigned task, and is an area where the
instructions can intrude into the labor law concept of control so that
minute consideration of the facts is necessary. A related article is
Article 1891 of the Civil Code which binds the agent to render an
account of his transactions to the principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and
Grepalife cases to establish that the company rules and regulations
that an agent has to comply with are indicative of an employer-
employee relationship.24 The Dissenting Opinions of Justice
Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite
Insular Life Assurance Co. v. National Labor Relations Commission
(second Insular case)25 to support the view that Tongko is Manulife’s
employee. On the other hand, Manulife cites the Carungcong case
and AFP Mutual Benefit Association, Inc. v. National Labor Relations
Commission (AFPMBAI case)26 to support its allegation that Tongko
was not its employee.
A caveat has been given above with respect to the use of the rulings
in the cited cases because none of them is on all fours with the
present case; the uniqueness of the factual situation of the present
case prevents it from being directly and readily cast in the mold of
the cited cases. These cited cases are themselves different from one
another; this difference underscores the need to read and quote
them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the
Carungcong, the Grepalife, and the second Insular Life cases. A
critical difference, however, exists as these cited cases dealt with the
proper legal characterization of a subsequent management contract
that superseded the original agency contract between the insurance
company and its agent. Carungcong dealt with a subsequent
Agreement making Carungcong a New Business Manager that
clearly superseded the Agreement designating Carungcong as an
agent empowered to solicit applications for insurance. The Grepalife
case, on the other hand, dealt with the proper legal characterization
of the appointment of the Ruiz brothers to positions higher than their
original position as insurance agents. Thus, after analyzing the duties
and functions of the Ruiz brothers, as these were enumerated in their
contracts, we concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out their jobs.
Finally, the second Insular Life case dealt with the implications of de
los Reyes’ appointment as acting unit manager which, like the
subsequent contracts in the Carungcong and the Grepalife cases,
was clearly defined under a subsequent contract. In all these cited
cases, a determination of the presence of the Labor Code element of
control was made on the basis of the stipulations of the subsequent
contracts.
In stark contrast with the Carungcong, the Grepalife, and the second
Insular Life cases, the only contract or document extant and
submitted as evidence in the present case is the Agreement – a pure
agency agreement in the Civil Code context similar to the original
contract in the first Insular Life case and the contract in the AFPMBAI
63
case. And while Tongko was later on designated unit manager in
1983, Branch Manager in 1990, and Regional Sales Manager in
1996, no formal contract regarding these undertakings appears in the
records of the case. Any such contract or agreement, had there been
any, could have at the very least provided the bases for properly
ascertaining the juridical relationship established between the
parties.
These critical differences, particularly between the present case and
the Grepalife and the second Insular Life cases, should therefore
immediately drive us to be more prudent and cautious in applying the
rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977
Agreement that governed and defined the parties’ relations until the
Agreement’s termination in 2001. This Agreement stood for more
than two decades and, based on the records of the case, was never
modified or novated. It assumes primacy because it directly dealt
with the nature of the parties’ relationship up to the very end;
moreover, both parties never disputed its authenticity or the accuracy
of its terms.
By the Agreement’s express terms, Tongko served as an "insurance
agent" for Manulife, not as an employee. To be sure, the Agreement’s
legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; as the dissent clearly stated,
the characterization of the juridical relationship the Agreement
embodied is a matter of law that is for the courts to determine. At the
same time, though, the characterization the parties gave to their
relationship in the Agreement cannot simply be brushed aside
because it embodies their intent at the time they entered the
Agreement, and they were governed by this understanding
throughout their relationship. At the very least, the provision on the
absence of employer-employee relationship between the parties can
be an aid in considering the Agreement and its implementation, and
in appreciating the other evidence on record.
The parties’ legal characterization of their intent, although not
conclusive, is critical in this case because this intent is not illegal or
outside the contemplation of law, particularly of the Insurance and
the Civil Codes. From this perspective, the provisions of the
Insurance Code cannot be disregarded as this Code (as heretofore
already noted) expressly envisions a principal-agent relationship
between the insurance company and the insurance agent in the sale
of insurance to the public.1awph!1 For this reason, we can take
judicial notice that as a matter of Insurance Code-based business
practice, an agency relationship prevails in the insurance industry for
the purpose of selling insurance. The Agreement, by its express
terms, is in accordance with the Insurance Code model when it
provided for a principal-agent relationship, and thus cannot lightly be
set aside nor simply be considered as an agreement that does not
reflect the parties’ true intent. This intent, incidentally, is reinforced by
the system of compensation the Agreement provides, which likewise
is in accordance with the production-based sales commissions the
Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance
agent never changed during his relationship with Manulife. If
changes occurred at all, the changes did not appear to be in the
nature of their core relationship. Tongko essentially remained an
agent, but moved up in this role through Manulife’s recognition that
he could use other agents approved by Manulife, but operating under
his guidance and in whose commissions he had a share. For want of
a better term, Tongko perhaps could be labeled as a "lead agent"
who guided under his wing other Manulife agents similarly tasked
with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated
under their own agency agreements. Thus, if Tongko’s compensation
scheme changed at all during his relationship with Manulife, the
change was solely for purposes of crediting him with his share in the
commissions the agents under his wing generated. As an agent who
was recruiting and guiding other insurance agents, Tongko likewise
moved up in terms of the reimbursement of expenses he incurred in
64
the course of his lead agency, a prerogative he enjoyed pursuant to
Article 1912 of the Civil Code. Thus, Tongko received greater
reimbursements for his expenses and was even allowed to use
Manulife facilities in his interactions with the agents, all of whom
were, in the strict sense, Manulife agents approved and certified as
such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly
remained an agent is the inevitable conclusion that results from the
reading of the Agreement (the only agreement on record in this case)
and his continuing role thereunder as sales agent, from the
perspective of the Insurance and the Civil Codes and in light of what
Tongko himself attested to as his role as Regional Sales Manager. To
be sure, this interpretation could have been contradicted if other
agreements had been submitted as evidence of the relationship
between Manulife and Tongko on the latter’s expanded undertakings.
In the absence of any such evidence, however, this reading – based
on the available evidence and the applicable insurance and civil law
provisions – must stand, subject only to objective and evidentiary
Labor Code tests on the existence of an employer-employee
relationship.
In applying such Labor Code tests, however, the enforcement of the
Agreement during the course of the parties’ relationship should be
noted. From 1977 until the termination of the Agreement, Tongko’s
occupation was to sell Manulife’s insurance policies and products.
Both parties acquiesced with the terms and conditions of the
Agreement. Tongko, for his part, accepted all the benefits flowing
from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he
was an independent agent selling Manulife insurance products since
he invariably declared himself a business or self-employed person in
his income tax returns. This consistency with, and action made
pursuant to the Agreement were pieces of evidence that were
never mentioned nor considered in our Decision of November 7,
2008. Had they been considered, they could, at the very least, serve
as Tongko’s admissions against his interest. Strictly speaking,
Tongko’s tax returns cannot but be legally significant because he
certified under oath the amount he earned as gross business
income, claimed business deductions, leading to his net taxable
income. This should be evidence of the first order that cannot be
brushed aside by a mere denial. Even on a layman’s view that is
devoid of legal considerations, the extent of his annual income alone
renders his claimed employment status doubtful.27
Hand in hand with the concept of admission against interest in
considering the tax returns, the concept of estoppel – a legal and
equitable concept28 – necessarily must come into play. Tongko’s
previous admissions in several years of tax returns as an
independent agent, as against his belated claim that he was all along
an employee, are too diametrically opposed to be simply dismissed
or ignored. Interestingly, Justice Velasco’s dissenting opinion states
that Tongko was forced to declare himself a business or self-
employed person by Manulife’s persistent refusal to recognize him as
its employee.29 Regrettably, the dissent has shown no basis for
this conclusion, an understandable omission since no evidence
in fact exists on this point in the records of the case. In fact,
what the evidence shows is Tongko’s full conformity with, and action
as, an independent agent until his relationship with Manulife took a
bad turn.
Another interesting point the dissent raised with respect to the
Agreement is its conclusion that the Agreement negated any
employment relationship between Tongko and Manulife so that the
commissions he earned as a sales agent should not be considered in
the determination of the backwages and separation pay that should
be given to him. This part of the dissent is correct although it went on
to twist this conclusion by asserting that Tongko had dual roles in his
relationship with Manulife; he was an agent, not an employee, in so
far as he sold insurance for Manulife, but was an employee in his
capacity as a manager. Thus, the dissent concluded that Tongko’s
backwages should only be with respect to his role as Manulife’s
manager.
The conclusion with respect to Tongko’s employment as a manager
is, of course, unacceptable for the legal, factual and practical
reasons discussed in this Resolution. In brief, the factual reason is
grounded on the lack of evidentiary support of the conclusion that
Manulife exercised control over Tongko in the sense understood in
65
the Labor Code. The legal reason, partly based on the lack of
factual basis, is the erroneous legal conclusion that Manulife
controlled Tongko and was thus its employee. The practical reason,
on the other hand, is the havoc that the dissent’s unwarranted
conclusion would cause the insurance industry that, by the law’s own
design, operated along the lines of principal-agent relationship in the
sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of
evidence on record showing that Manulife ever exercised means-
and-manner control, even to a limited extent, over Tongko during his
ascent in Manulife’s sales ladder. In 1983, Tongko was appointed
unit manager. Inexplicably, Tongko never bothered to present any
evidence at all on what this designation meant. This also holds true
for Tongko’s appointment as branch manager in 1990, and as
Regional Sales Manager in 1996. The best evidence of control – the
agreement or directive relating to Tongko’s duties and responsibilities
– was never introduced as part of the records of the case. The reality
is, prior to de Dios’ letter, Manulife had practically left Tongko alone
not only in doing the business of selling insurance, but also in guiding
the agents under his wing. As discussed below, the alleged directives
covered by de Dios’ letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and
the other sales groups to realign with in their own selling activities.
This is the reality that the parties’ presented evidence consistently
tells us.
What, to Tongko, serve as evidence of labor law control are the
codes of conduct that Manulife imposes on its agents in the sale of
insurance. The mere presentation of codes or of rules and
regulations, however, is not per se indicative of labor law control as
the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations
on both the insurance company and its agents in the performance of
their respective obligations under the Code, particularly on licenses
and their renewals, on the representations to be made to potential
customers, the collection of premiums, on the delivery of insurance
policies, on the matter of compensation, and on measures to ensure
ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the
principal an element of control over the agent in a manner consistent
with an agency relationship. In this sense, these control measures
cannot be read as indicative of labor law control. Foremost among
these are the directives that the principal may impose on the agent to
achieve the assigned tasks, to the extent that they do not involve the
means and manner of undertaking these tasks. The law likewise
obligates the agent to render an account; in this sense, the principal
may impose on the agent specific instructions on how an account
shall be made, particularly on the matter of expenses and
reimbursements. To these extents, control can be imposed through
rules and regulations without intruding into the labor law concept of
control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life
case teaches us is that a commitment to abide by the rules and
regulations of an insurance company does not ipso facto make the
insurance agent an employee. Neither do guidelines somehow
restrictive of the insurance agent’s conduct necessarily indicate
"control" as this term is defined in jurisprudence. Guidelines
indicative of labor law "control," as the first Insular Life case
tells us, should not merely relate to the mutually desirable result
intended by the contractual relationship; they must have the
nature of dictating the means or methods to be employed in
attaining the result, or of fixing the methodology and of binding or
restricting the party hired to the use of these means. In fact, results-
wise, the principal can impose production quotas and can determine
how many agents, with specific territories, ought to be employed to
achieve the company’s objectives. These are management policy
decisions that the labor law element of control cannot reach. Our
ruling in these respects in the first Insular Life case was practically
reiterated in Carungcong. Thus, as will be shown more fully below,
Manulife’s codes of conduct,30 all of which do not intrude into the
insurance agents’ means and manner of conducting their sales and
only control them as to the desired results and Insurance Code
66
norms, cannot be used as basis for a finding that the labor law To the dissent, Tongko’s administrative functions as recruiter, trainer,
concept of control existed between Manulife and Tongko. or supervisor of other sales agents constituted a substantive
alteration of Manulife’s authority over Tongko and the performance of
The dissent considers the imposition of administrative and his end of the relationship with Manulife. We could not deny though
managerial functions on Tongko as indicative of labor law control; that Tongko remained, first and foremost, an insurance agent, and
thus, Tongko as manager, but not as insurance agent, became that his additional role as Branch Manager did not lessen his main
Manulife’s employee. It drew this conclusion from what the other and dominant role as insurance agent; this role continued to
Manulife managers disclosed in their affidavits (i.e., their enumerated dominate the relations between Tongko and Manulife even after
administrative and managerial functions) and after comparing these Tongko assumed his leadership role among agents. This conclusion
statements with the managers in Grepalife. The dissent compared cannot be denied because it proceeds from the undisputed fact that
the control exercised by Manulife over its managers in the present Tongko and Manulife never altered their July 1, 1977 Agreement, a
case with the control the managers in the Grepalife case exercised distinction the present case has with the contractual changes made
over their employees by presenting the following matrix: 31 in the second Insular Life case. Tongko’s results-based commissions,
too, attest to the primacy he gave to his role as insurance sales
agent.
Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors
- to render or recommend prospective agents - train understudies The dissent
for the apparently
position did not also properly analyze and appreciate
of district
to be licensed, trained and contracted to sell manager the great qualitative difference that exists between:
Manulife products and who will be part of my
Unit  the Manulife managers’ role is to coordinate activities of the
agents under the managers’ Unit in the agents’ daily, weekly,
- to coordinate activities of the agents under - properly account, record and
anddocument the activities, making sure that their
monthly selling
[the managers’] Unit in [the agents’] daily, company’s funds, spot-check respective saleswork
and audit the of are met.
targets
weekly and monthly selling activities, making the zone supervisors, x x x follow up the
 the District Manager’s duty in Grepalife is to properly
sure that their respective sales targets are met; submission of weekly remittance reports of the
account, record, and document the company's funds, spot-
debit agents and zone supervisors
check and audit the work of the zone supervisors, conserve
- to conduct periodic training sessions for [the] the company's
- direct and supervise the sales activities ofbusiness
the in the district through
agents to further enhance their sales skill; and "reinstatements," follow up the submission of weekly
debit agents under him, x x x undertake and
remittance reports
discharge the functions of absentee debit agents, of the debit agents and zone supervisors,
- to assist [the] agents with their sales activities spot-check the record of debit
preserve
agents,company
and insureproperty in good condition, train
by way of joint fieldwork, consultations and understudies
proper documentation of sales for theofposition of district managers, and
and collections
one-on-one evaluation and analysis of debit agents. maintain his quota of sales (the failure of which is a ground
particular accounts for termination).

 the Zone Supervisor’s (also in Grepalife) has the duty to

Aside from these affidavits however, no other evidence exists direct and supervise the sales activities of the debit agents
regarding the effects of Tongko’s additional roles in Manulife’s sales under him, conserve company property through
operations on the contractual relationship between them. "reinstatements," undertake and discharge the functions of
absentee debit agents, spot-check the records of debit

67
 agents, and insure proper documentation of sales and
collections by the debit agents.
These job contents are worlds apart in terms of "control." In
Grepalife, the details of how to do the job are specified and pre-
determined; in the present case, the operative words are the "sales
target," the methodology being left undefined except to the extent of
being "coordinative." To be sure, a "coordinative" standard for a
manager cannot be indicative of control; the standard only essentially
describes what a Branch Manager is – the person in the lead who
orchestrates activities within the group. To "coordinate," and thereby
to lead and to orchestrate, is not so much a matter of control by
Manulife; it is simply a statement of a branch manager’s role in
relation with his agents from the point of view of Manulife whose
business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and
Tongko’s alleged administrative functions, is the selective citation of
the portions supportive of an employment relationship and the
consequent omission of portions leading to the contrary conclusion.
For example, the following portions of the affidavit of Regional Sales
Manager John Chua, with counterparts in the other affidavits, were
not brought out in the Decision of November 7, 2008, while the other
portions suggesting labor law control were highlighted. Specifically,
the following portions of the affidavits were not brought out: 32
1.a. I have no fixed wages or salary since my services are
compensated by way of commissions based on the
computed premiums paid in full on the policies obtained
thereat;
1.b. I have no fixed working hours and employ my own
method in soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my
daily work load;
1.d. I use my own facilities, tools, materials and supplies in
carrying out my business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations
of my office;
7. My staff are my own employees and received salaries
from me;
xxxx
9. My commission and incentives are all reported to the
Bureau of Internal Revenue (BIR) as income by a self-
employed individual or professional with a ten (10) percent
creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the
Manulife and the Grepalife cases, would have readily yielded the
conclusion that no employer-employee relationship existed between
Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the
least amount of intrusion into Tongko’s exercise of his role as
manager in guiding the sales agents. Strictly viewed, de Dios’
directives are merely operational guidelines on how Tongko could
align his operations with Manulife’s re-directed goal of being a "big
league player." The method is to expand coverage through the use of
more agents. This requirement for the recruitment of more agents is
not a means-and-method control as it relates, more than anything
else, and is directly relevant, to Manulife’s objective of expanded
business operations through the use of a bigger sales force whose
members are all on a principal-agent relationship. An important point
to note here is that Tongko was not supervising regular full-time
employees of Manulife engaged in the running of the insurance
business; Tongko was effectively guiding his corps of sales agents,
who are bound to Manulife through the same Agreement that he had
with Manulife, all the while sharing in these agents’ commissions
through his overrides. This is the lead agent concept mentioned
above for want of a more appropriate term, since the title of Branch
68
Manager used by the parties is really a misnomer given that what is
involved is not a specific regular branch of the company but a corps
of non-employed agents, defined in terms of covered territory,
through which the company sells insurance. Still another point to
consider is that Tongko was not even setting policies in the way a
regular company manager does; company aims and objectives were
simply relayed to him with suggestions on how these objectives can
be reached through the expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which
Manulife demonstrated, in Tongko’s case, to be unaffected by the
new goal and direction the company had set. Income in insurance
agency, of course, is dependent on results, not on the means and
manner of selling – a matter for Tongko and his agents to determine
and an area into which Manulife had not waded. Undeniably, de Dios’
letter contained a directive to secure a competent assistant at
Tongko’s own expense. While couched in terms of a directive, it
cannot strictly be understood as an intrusion into Tongko’s method of
operating and supervising the group of agents within his delineated
territory. More than anything else, the "directive" was a signal to
Tongko that his results were unsatisfactory, and was a suggestion on
how Tongko’s perceived weakness in delivering results could be
remedied. It was a solution, with an eye on results, for a consistently
underperforming group; its obvious intent was to save Tongko from
the result that he then failed to grasp – that he could lose even his
own status as an agent, as he in fact eventually did.
The present case must be distinguished from the second Insular Life
case that showed the hallmarks of an employer-employee
relationship in the management system established. These were:
exclusivity of service, control of assignments and removal of agents
under the private respondent’s unit, and furnishing of company
facilities and materials as well as capital described as Unit
Development Fund. All these are obviously absent in the present
case. If there is a commonality in these cases, it is in the collection of
premiums which is a basic authority that can be delegated to agents
under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case
was the grant of an expanded sales agency role that recognized him
as leader amongst agents in an area that Manulife defined. Whether
this consequently resulted in the establishment of an
employment relationship can be answered by concrete evidence
that corresponds to the following questions:
 as lead agent, what were Tongko’s specific functions and the
terms of his additional engagement;
 was he paid additional compensation as a so-called Area
Sales Manager, apart from the commissions he received
from the insurance sales he generated;
 what can be Manulife’s basis to terminate his status as lead
agent;
 can Manulife terminate his role as lead agent separately
from his agency contract; and
 to what extent does Manulife control the means and methods
of Tongko’s role as lead agent?
The answers to these questions may, to some extent, be deduced
from the evidence at hand, as partly discussed above. But strictly
speaking, the questions cannot definitively and concretely be
answered through the evidence on record. The concrete evidence
required to settle these questions is simply not there, since only the
Agreement and the anecdotal affidavits have been marked and
submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite
confluence of the factors determinative of the existence of employer-
employee relationship, the Court cannot conclusively find that the
relationship exists in the present case, even if such relationship only
refers to Tongko’s additional functions. While a rough deduction can
be made, the answer will not be fully supported by the substantial
evidence needed.
Under this legal situation, the only conclusion that can be made is
that the absence of evidence showing Manulife’s control over
Tongko’s contractual duties points to the absence of any employer-
employee relationship between Tongko and Manulife. In the context
69
of the established evidence, Tongko remained an agent all along;
although his subsequent duties made him a lead agent with
leadership role, he was nevertheless only an agent whose basic
contract yields no evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the
question of whether an agent may simultaneously assume conflicting
dual personalities. But to set the record straight, the concept of a
single person having the dual role of agent and employee while
doing the same task is a novel one in our jurisprudence, which must
be viewed with caution especially when it is devoid of any
jurisprudential support or precedent. The quoted portions in Justice
Carpio-Morales’ dissent,33 borrowed from both the Grepalife and the
second Insular Life cases, to support the duality approach of the
Decision of November 7, 2008, are regrettably far removed from their
context – i.e., the cases’ factual situations, the issues they decided
and the totality of the rulings in these cases – and cannot yield the
conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz
brothers’ appointment as zone supervisor and district manager made
them employees of Grepalife. Indeed, because of the presence of
the element of control in their contract of engagements, they were
considered Grepalife’s employees. This did not mean, however, that
they were simultaneously considered agents as well as employees
of Grepalife; the Court’s ruling never implied that this situation
existed insofar as the Ruiz brothers were concerned. The Court’s
statement – the Insurance Code may govern the licensing
requirements and other particular duties of insurance agents, but it
does not bar the application of the Labor Code with regard to labor
standards and labor relations – simply means that when an
insurance company has exercised control over its agents so as to
make them their employees, the relationship between the parties,
which was otherwise one for agency governed by the Civil Code and
the Insurance Code, will now be governed by the Labor Code. The
reason for this is simple – the contract of agency has been
transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue
of whether the labor bodies have jurisdiction over an illegal
termination dispute involving parties who had two contracts – first, an
original contract (agency contract), which was undoubtedly one for
agency, and another subsequent contract that in turn designated the
agent acting unit manager (a management contract). Both the Insular
Life and the labor arbiter were one in the position that both were
agency contracts. The Court disagreed with this conclusion and held
that insofar as the management contract is concerned, the labor
arbiter has jurisdiction. It is in this light that we remanded the case to
the labor arbiter for further proceedings. We never said in this case
though that the insurance agent had effectively assumed dual
personalities for the simple reason that the agency contract has been
effectively superseded by the management contract. The
management contract provided that if the appointment was
terminated for any reason other than for cause, the acting unit
manager would be reverted to agent status and assigned to any unit.
The dissent pointed out, as an argument to support its employment
relationship conclusion, that any doubt in the existence of an
employer-employee relationship should be resolved in favor of the
existence of the relationship.34This observation, apparently drawn
from Article 4 of the Labor Code, is misplaced, as Article 4 applies
only when a doubt exists in the "implementation and application" of
the Labor Code and its implementing rules; it does not apply where
no doubt exists as in a situation where the claimant clearly failed to
substantiate his claim of employment relationship by the quantum of
evidence the Labor Code requires. On the dissent’s last point
regarding the lack of jurisprudential value of our November 7, 2008
Decision, suffice it to state that, as discussed above, the Decision
was not supported by the evidence adduced and was not in
accordance with controlling jurisprudence. It should, therefore, be
reconsidered and abandoned, but not in the manner the dissent
suggests as the dissenting opinions are as factually and as legally
erroneous as the Decision under reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to
comply with the guidelines of de Dios’ letter, as a ground for
termination of Tongko’s agency, is a matter that the labor tribunals
cannot rule upon in the absence of an employer-employee
relationship. Jurisdiction over the matter belongs to the courts
applying the laws of insurance, agency and contracts.
70
WHEREFORE, considering the foregoing discussion, we REVERSE
our Decision of November 7, 2008, GRANTManulife’s motion for
reconsideration and, accordingly, DISMISS Tongko’s petition. No
costs.
TAPE is a domestic corporation engaged in the production of
television programs, such as the long-running variety program, Eat Bulaga!.
Its president is Antonio P. Tuviera (Tuviera). Respondent Roberto C. Servaa
had served as a security guard for TAPE from March 1987 until he was
terminated on 3 March 2000.

SECOND DIVISION Respondent filed a complaint for illegal dismissal and nonpayment of
TELEVISION AND PRODUCTION G.R. No. 167648 benefits against TAPE. He alleged that he was first connected with Agro-
EXPONENTS, INC. and/or ANTONIO Commercial Security Agency but was later on absorbed by TAPE as a
P. TUVIERA, Present: regular company guard. He was detailed at Broadway Centrum in Quezon
Petitioners, City where Eat Bulaga! regularly staged its productions. On 2 March 2000,
QUISUMBING, J., respondent received a memorandum informing him of his impending
Chairperson, dismissal on account of TAPEs decision to contract the services of a
CARPIO, professional security agency. At the time of his termination, respondent
- versus - CARPIO MORALES, was receiving a monthly salary of P6,000.00. He claimed that the holiday
TINGA, and pay, unpaid vacation and sick leave benefits and other monetary
VELASCO, JR., JJ. considerations were withheld from him. He further contended that his
ROBERTO C. SERVAA, dismissal was undertaken without due process and violative of existing
Respondent. Promulgated: labor laws, aggravated by nonpayment of separation pay. [3]
January 28, 2008
In a motion to dismiss which was treated as its position paper, TAPE
x----------------------------------------------------------------------------x countered that the labor arbiter had no jurisdiction over the case in the
absence of an employer-employee relationship between the parties. TAPE
made the following assertions: (1) that respondent was initially employed
as a security guard for Radio Philippines Network (RPN-9); (2) that he was
DECISION
tasked to assist TAPE during its live productions, specifically, to control the
crowd; (3) that when RPN-9 severed its relationship with the security
TINGA, J.:
agency, TAPE engaged respondents services, as part of the support group
and thus a talent, to provide security service to production staff, stars and
guests of Eat Bulaga! as well as to control the audience during the one-and-
This petition for review under Rule 45 assails the 21 December
a-half hour noontime program; (4) that it was agreed that complainant
2004 Decision[1] and 8 April 2005 Resolution[2] of the Court of Appeals
would render his services until such time that respondent company shall
declaring Roberto Servaa (respondent) a regular employee of petitioner
have engaged the services of a professional security agency; (5) that in
Television and Production Exponents, Inc. (TAPE). The appellate court
1995, when his contract with RPN-9 expired, respondent was retained as a
likewise ordered TAPE to pay nominal damages for its failure to observe
talent and a member of the support group, until such time that TAPE shall
statutory due process in the termination of respondents employment for
have engaged the services of a professional security agency; (6) that
authorized cause.
respondent was not prevented from seeking other employment, whether
or not related to security services, before or after attending to his Eat

71
Bulaga! functions; (7) that sometime in late 1999, TAPE started
negotiations for the engagement of a professional security agency, the Sun
Shield Security Agency; and (8) that on 2 March 2000, TAPE issued
memoranda to all talents, whose functions would be rendered redundant
by the engagement of the security agency, informing them of the
managements decision to terminate their services. [4]
TAPE averred that respondent was an independent contractor
falling under the talent group category and was working under a special
arrangement which is recognized in the industry. [5]
Respondent for his part insisted that he was a regular employee having
been engaged to perform an activity that is necessary and desirable to
TAPEs business for thirteen (13) years.[6]
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared
respondent to be a regular employee of TAPE. The Labor Arbiter relied on
the nature of the work of respondent, which is securing and maintaining
order in the studio, as necessary and desirable in the usual business activity
of TAPE. The Labor Arbiter also ruled that the termination was valid on the
ground of redundancy, and ordered the payment of respondents
separation pay equivalent to one (1)-month pay for every year of
service. The dispositive portion of the decision reads:
WHEREFORE, complainants position is hereby declared
redundant. Accordingly, respondents are hereby ordered
to pay complainant his separation pay computed at the
rate of one (1) month pay for every year of service or in
the total amount of P78,000.00.[7]
On appeal, the National Labor Relations Commission (NLRC) in a
Decision[8] dated 22 April 2002 reversed the Labor Arbiter and considered
respondent a mere program employee, thus:
We have scoured the records of this case and we find
nothing to support the Labor Arbiters conclusion that
complainant was a regular employee.
xxxx
The primary standard to determine regularity of
employment is the reasonable connection between the
particular activity performed by the employee in relation
to the usual business or trade of the employer. This
connection can be determined by considering the nature
and work performed and its relation to the scheme of the
particular business or trade in its entirety. x x x
Respondent company is engaged in the business of
production of television shows. The records of this case
also show that complainant was employed by respondent
company beginning 1995 after respondent company
transferred from RPN-9 to GMA-7, a fact which
complainant does not dispute. His last salary
was P5,444.44 per month. In such industry, security
services may not be deemed necessary and desirable in
the usual business of the employer. Even without the
performance of such services on a regular basis,
respondents companys business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of
respondent company. Unlike [a] regular employee, he did
not observe working hours x x x. He worked for other
companies, such as M-Zet TV Production, Inc. at the
same time that he was working for respondent
company. The foregoing indubitably shows that
complainant-appellee was a program
employee. Otherwise, he would have two (2) employers
at the same time.[9]
72

Respondent filed a motion for reconsideration but it was denied in a
Resolution[10] dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals
contending that the NLRC acted with grave abuse of discretion amounting
to lack or excess of jurisdiction when it reversed the decision of the Labor
Arbiter. Respondent asserted that he was a regular employee considering
the nature and length of service rendered. [11]
Reversing the decision of the NLRC, the Court of Appeals found respondent
to be a regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is
hereby GRANTED. The Decision dated 22 April 2002 of
the public respondent NLRC reversing the Decision of the
Labor Arbiter and its Resolution dated 28 June 2002
denying petitioners motion for reconsideration
are REVERSED and SET ASIDE. The Decision dated 29
June 2001 of the Labor Arbiter
is REINSTATED with MODIFICATION in that private
respondents are ordered to pay jointly and severally
petitioner the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due
process.
SO ORDERED.[12]
Finding TAPEs motion for reconsideration without merit, the Court of
Appeals issued a Resolution[13] dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same
grounds as those in its petition for certiorari before the Court of Appeals.
These matters may be summed up into one main issue: whether an
employer-employee relationship exists between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition
and considered the case submitted for decision. [14]
At the outset, it bears emphasis that the existence of employer-employee
relationship is ultimately a question of fact. Generally, only questions of law
are entertained in appeals by certiorari to the Supreme Court. This rule,
however, is not absolute. Among the several recognized exceptions is when
the findings of the Court of Appeals and Labor Arbiters, on one hand, and
that of the NLRC, on the other, are conflicting,[15] as obtaining in the case at
bar.
Jurisprudence is abound with cases that recite the factors to be considered
in determining the existence of employer-employee relationship, namely:
(a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control
the employee with respect to the means and method by which the work is
to be accomplished.[16] The most important factor involves the control test.
Under the control test, there is an employer-employee relationship when
the person for whom the services are performed reserves the right to
control not only the end achieved but also the manner and means used to
achieve that end.[17]
In concluding that respondent was an employee of TAPE, the
Court of Appeals applied the four-fold test in this wise:
First. The selection and hiring of petitioner was
done by private respondents. In fact, private respondents
themselves admitted having engaged the services of
petitioner only in 1995 after TAPE severed its relations
with RPN Channel 9.
By informing petitioner through the
Memorandum dated 2 March 2000, that his services will
be terminated as soon as the services of the newly hired
security agency begins, private respondents in effect
73
 acknowledged petitioner to be their employee. For the
right to hire and fire is another important element of the
employer-employee relationship.
Second. Payment of wages is one of the four
factors to be considered in determining the existence of
employer-employee relation. . . Payment as admitted by
private respondents was given by them on a monthly
basis at a rate of P5,444.44.
Third. Of the four elements of the employer-
employee relationship, the control test is the most
important. x x x
The bundy cards representing the time petitioner
had reported for work are evident proofs of private
respondents control over petitioner more particularly
with the time he is required to report for work during the
noontime program of Eat Bulaga! If it were not so,
petitioner would be free to report for work anytime even
not during the noontime program of Eat Bulaga!
from 11:30 a.m. to 1:00 p.m. and still gets his
compensation for being a talent. Precisely, he is being
paid for being the security of Eat Bulaga! during the
above-mentioned period. The daily time cards of
petitioner are not just for mere record purposes as
claimed by private respondents. It is a form of control by
the management of private respondent TAPE.[18]
TAPE asseverates that the Court of Appeals erred in applying the four-fold
test in determining the existence of employer-employee relationship
between it and respondent. With respect to the elements of selection,
wages and dismissal, TAPE proffers the following arguments: that it never
hired respondent, instead it was the latter who offered his services as a
talent to TAPE; that the Memorandum dated 2 March 2000 served on
respondent was for the discontinuance of the contract for security services
and not a termination letter; and that the talent fees given to respondent
were the pre-agreed consideration for the services rendered and should
not be construed as wages. Anent the element of control, TAPE insists that
it had no control over respondent in that he was free to employ means and
methods by which he is to control and manage the live audiences, as well
as the safety of TAPEs stars and guests.[19]
The position of TAPE is untenable. Respondent was first connected with
Agro-Commercial Security Agency, which assigned him to assist TAPE in its
live productions. When the security agencys contract with RPN-9 expired in
1995, respondent was absorbed by TAPE or, in the latters language,
retained as talent.[20] Clearly, respondent was hired by TAPE. Respondent
presented his identification card [21] to prove that he is indeed an employee
of TAPE. It has been in held that in a business establishment, an
identification card is usually provided not just as a security measure but to
mainly identify the holder thereof as a bona fide employee of the firm who
issues it.[22]
Respondent claims to have been receiving P5,444.44 as his monthly salary
while TAPE prefers to designate such amount as talent fees. Wages, as
defined in the Labor Code, are remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed
or ascertained on a time, task, piece or commission basis, or other method
of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to
be done, or for service rendered or to be rendered. It is beyond dispute
that respondent received a fixed amount as monthly compensation for the
services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his
service proves that TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in
evidence. He was required to report daily and observe definite work
74
hours. To negate the element of control, TAPE presented a certification
from M-Zet Productions to prove that respondent also worked as a studio
security guard for said company. Notably, the said certificate categorically
stated that respondent reported for work on Thursdays from 1992 to
1995. It can be recalled that during said period, respondent was still
working for RPN-9. As admitted by TAPE, it absorbed respondent in late
1995.[23]
TAPE further denies exercising control over respondent and
maintains that the latter is an independent contractor. [24] Aside from
possessing substantial capital or investment, a legitimate job contractor or
subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and
under its own responsibility according to its own manner and method, and
free from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof. [25] TAPE
failed to establish that respondent is an independent contractor. As found
by the Court of Appeals:
We find the annexes submitted by the private
respondents insufficient to prove that herein petitioner is
indeed an independent contractor. None of the above
conditions exist in the case at bar. Private respondents
failed to show that petitioner has substantial capital or
investment to be qualified as an independent
contractor. They likewise failed to present a written
contract which specifies the performance of a specified
piece of work, the nature and extent of the work and the
term and duration of the relationship between herein
petitioner and private respondent TAPE.[26]
TAPE relies on Policy Instruction No. 40, issued by the Department
of Labor, in classifying respondent as a program employee and equating
him to be an independent contractor.
Policy Instruction No. 40 defines program employees as
x x x those whose skills, talents or services are
engaged by the station for a particular or specific
program or undertaking and who are not required to
observe normal working hours such that on some days
they work for less than eight (8) hours and on other days
beyond the normal work hours observed by station
employees and are allowed to enter into employment
contracts with other persons, stations, advertising
agencies or sponsoring companies. The engagement of
program employees, including those hired by advertising
or sponsoring companies, shall be under a written
contract specifying, among other things, the nature of
the work to be performed, rates of pay and the programs
in which they will work. The contract shall be duly
registered by the station with the Broadcast Media
Council within three (3) days from its consummation.[27]
TAPE failed to adduce any evidence to prove that it complied with
the requirements laid down in the policy instruction. It did not even
present its contract with respondent.Neither did it comply with the
contract-registration requirement.
Even granting arguendo that respondent is a program employee,
stills, classifying him as an independent contractor is misplaced. The Court
of Appeals had this to say:
We cannot subscribe to private respondents
conflicting theories. The theory of private respondents
that petitioner is an independent contractor runs counter
to their very own allegation that petitioner is a talent or a
program employee. An independent contractor is not an
employee of the employer, while a talent or program
employee is an employee. The only difference between a
talent or program employee and a regular employee is
the fact that a regular employee is entitled to all the
benefits that are being prayed for. This is the reason why
private respondents try to seek refuge under the concept
of an independent contractor theory. For if petitioner
were indeed an independent contractor, private
75
 respondents will not be liable to pay the benefits prayed
for in petitioners complaint.[28]
More importantly, respondent had been continuously under the
employ of TAPE from 1995 until his termination in March 2000, or for a
span of 5 years. Regardless of whether or not respondent had been
performing work that is necessary or desirable to the usual business of
TAPE, respondent is still considered a regular employee under Article 280
of the Labor Code which provides:
Art. 280. Regular and Casual Employment.The
provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of
the parties, an employment shall be deemed to be
regular where the employee has been engaged to
perform activities which are usually necessary or
desirable in the usual business or trade of the employer,
except where the employment has been fixed for a
specific project or undertaking the completion or
termination of which has been determined at the time of
engagement of the employee or where the work or
service to be performed is seasonal in nature and
employment is for the duration of the season.
An employment shall be deemed to be casual if
it is not covered by the preceding paragraph. Provided,
that, any employee who has rendered at least one year
of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to
the activity in which he is employed and his employment
shall continue while such activity exists.
As a regular employee, respondent cannot be terminated except
for just cause or when authorized by law. [29] It is clear from the tenor of
the 2 March 2000 Memorandum that respondents termination was due to
redundancy. Thus, the Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the
employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a
written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the
intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a separation
pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year or service,
whichever is higher.
xxxx
We uphold the finding of the Labor Arbiter that
complainant [herein petitioner] was terminated upon
[the] managements option to professionalize the security
services in its operations. x x x However, [we] find that
although petitioners services [sic] was for an authorized
cause, i.e., redundancy, private respondents failed to
prove that it complied with service of written notice to
the Department of Labor and Employment at least one
month prior to the intended date of retrenchment. It
bears stressing that although notice was served upon
petitioner through a Memorandum dated 2 March 2000,
the effectivity of his dismissal is fifteen days from the
start of the agencys take over which was on 3 March
2000. Petitioners services with private respondents were
severed less than the month requirement by the law.
Under prevailing jurisprudence the termination
for an authorized cause requires payment of separation
pay. Procedurally, if the dismissal is based on authorized
causes under Articles 283 and 284, the employer must
76
 give the employee and the Deparment of Labor and Television and Production Exponents, Inc. is liable to pay respondent the
Employment written notice 30 days prior to the amount of P10,000.00 as nominal damages for non-compliance with the
effectivity of his separation. Where the dismissal is for an statutory due process and petitioner Antonio P. Tuviera is accordingly
authorized cause but due process was not observed, the absolved from liability.
dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the SO ORDERED.
dismissal. However, the employer should be liable for
non-compliance with procedural requirements of due
process.

xxxx
SECOND DIVISION
Under recent jurisprudence, the Supreme Court
fixed the amount of P30,000.00 as nominal damages. The
basis of the violation of petitioners right to statutory due
[G.R. No. 87098. November 4, 1996]
process by the private respondents warrants the
payment of indemnity in the form of nominal
damages. The amount of such damages is addressed to
the sound discretion of the court, taking into account the ENCYCLOPAEDIA BRITANNICA (PHILIPPINES), INC., petitioner,
relevant circumstances. We believe this form of damages vs. NATIONAL LABOR RELATIONS COMMISSION, HON.
would serve to deter employer from future violations of LABOR ARBITER TEODORICO L. DOGELIO and
the statutory due process rights of the employees. At the BENJAMIN LIMJOCO, respondents.
very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor DECISION
Code and its Implementing Rules. Considering the
circumstances in the case at bench, we deem it proper to TORRES, JR., J.:
fix it at P10,000.00.[30]
Encyclopaedia Britannica (Philippines), Inc. filed this petition
In sum, we find no reversible error committed by the Court of for certiorari to annul and set aside the resolution of the National
Appeals in its assailed decision. Labor Relations Commission, Third Division, in NLRC Case No. RB
IV-5158-76, dated December 28, 1988, the dispositive portion of
However, with respect to the liability of petitioner Tuviera, which reads:
president of TAPE, absent any showing that he acted with malice or bad
faith in terminating respondent, he cannot be held solidarily liable with WHEREFORE, in view of all the foregoing, the decision dated December 7,
TAPE.[31] Thus, the Court of Appeals ruling on this point has to be modified. 1982 of then Labor Arbiter Teodorico L. Dogelio is hereby AFFIRMED,
and the instant appeal is hereby DISMISSED for lack of merit.
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals are AFFIRMED with MODIFICATION in that only petitioner SO ORDERED.[1]

77
 Private respondent Benjamin Limjoco was a Sales Division
Manager of petitioner Encyclopaedia Britannica and was in charge of
selling petitioners products through some sales representatives. As
compensation, private respondent received commissions from the
products sold by his agents. He was also allowed to use petitioners
name, goodwill and logo. It was, however, agreed upon that office
expenses would be deducted from private respondents
commissions. Petitioner would also be informed about appointments,
promotions, and transfers of employees in private respondents
district.
On June 14, 1974, private respondent Limjoco resigned from
office to pursue his private business. Then on October 30, 1975, he
filed a complaint against petitioner Encyclopaedia Britannica with the
Department of Labor and Employment, claiming for non-payment of
separation pay and other benefits, and also illegal deduction from his
sales commissions.
Petitioner Encyclopaedia Britannica alleged that complainant
Benjamin Limjoco (Limjoco, for brevity) was not its employee but an
independent dealer authorized to promote and sell its products and
in return, received commissions therefrom. Limjoco did not have any
salary and his income from the petitioner company was dependent
on the volume of sales accomplished.He also had his own separate
office, financed the business expenses, and maintained his own
workforce. The salaries of his secretary, utility man, and sales
representatives were chargeable to his commissions. 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 latter did not even report to the office of the
petitioner and did not observe fixed office hours. Consequently, there
was no employer-employee relationship.
Limjoco maintained otherwise. He alleged that he was hired by
the petitioner in July 1970, was assigned in the sales department,
and was earning an average of P4,000.00 monthly as his sales
commission. He was under the supervision of the petitioners officials
who issued to him and his other personnel, memoranda, guidelines
on company policies, instructions and other orders. He was,
however, dismissed by the petitioner when the Laurel-Langley
Agreement expired. As a result thereof, Limjoco asserts that in
accordance with the established company practice and the
provisions of the collective bargaining agreement, he was entitled to
termination pay equivalent to one month salary, the unpaid benefits
(Christmas bonus, midyear bonus, clothing allowance, vacation
leave, and sick leave), and the amounts illegally deducted from his
commissions which were then used for the payments of office
supplies, office space, and overhead expenses.
On December 7, 1982, Labor Arbiter Teodorico Dogelio, in a
decision ruled that Limjoco was an employee of the petitioner
company. Petitioner had control over Limjoco since the latter was
required to make periodic reports of his sales activities to the
company. All transactions were subject to the final approval of the
petitioner, an evidence that petitioner company had active control on
the sales activities. There was therefore, an employer-employee
relationship and necessarily, Limjoco was entitled to his claims. The
decision also ordered petitioner company to pay the following:
1. To pay complainant his separation pay in the total amount of P16,000.00;
2. To pay complainant his unpaid Christmas bonus for three years or the
amount of P12,000.00;
3. To pay complainant his unpaid mid-year bonus equivalent to one-half
month pay or the total amount of P6,000.00;
4. To pay complainant his accrued vacation leave equivalent to 15 days per
year of service, or the total amount of P6,000.00;
5. To pay complainant his unpaid clothing allowance in the total amount
of P600.00; and
6. To pay complainant his accrued sick leave equivalent to 15 days per year
of service or the total amount of P6,000.00.[2]
On appeal, the Third Division of the National Labor Relations
Commission affirmed the assailed decision. The Commission opined
that there was no evidence supporting the allegation that Limjoco
was an independent contractor or dealer. The petitioner still
78
exercised control over Limjoco through its memoranda and
guidelines and even prohibitions on the sale of products other than
those authorized by it. In short, the petitioner company dictated how
and where to sell its products. Aside from that fact, Limjoco passed
the costs to the petitioner chargeable against his future
commissions. Such practice proved that he was not an independent
dealer or contractor for it is required by law that an independent
contractor should have substantial capital or investment.
Dissatisfied with the outcome of the case, petitioner
Encyclopaedia Britannica now comes to us in this petition
for certiorari and injunction with prayer for preliminary injunction. On
April 3, 1989, this Court issued a temporary restraining order
enjoining the enforcement of the decision dated December 7, 1982.
The following are the arguments raised by the petitioner:
I products. These independent agents hired their own sales
The respondent NLRC gravely abused its discretion in holding that
appellants contention that appellee was an independent contractor is not
supported by evidence on record.
II
Respondent NLRC committed grave abuse of discretion in not passing upon
the validity of the pronouncement of the respondent Labor Arbiter granting
private respondents claim for payment of Christmas bonus, Mid-year bonus,
clothing allowance and the money equivalent of accrued and unused
vacation and sick leave.
The NLRC ruled that there existed an employer-employee
relationship and petitioner failed to disprove this finding. We do not
agree.
In determining the existence of an employer-employee
relationship the following elements must be present: 1) selection and
engagement of the employee; 2) payment of wages; 3) power of
dismissal; and 4) the power to control the employees conduct. Of the
above, control of employees conduct is commonly regarded as the
most crucial and determinative indicator of the presence or absence
of an employer-employee relationship. [3] Under the control test, 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.[4]
The fact that petitioner issued memoranda to private
respondents 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. It should be
noted that in petitioners business of selling encyclopedias and books,
the marketing of these products was done through dealership
agreements. The sales operations were primarily conducted by
independent authorized agents who did not receive regular
compensations but only commissions based on the sales of the
representatives, financed their own office expenses, and maintained
their own staff. Thus, there was a need for the petitioner to issue
memoranda to private respondent so that the latter would be
apprised of the company policies and procedures. Nevertheless,
private respondent Limjoco and the other agents were free to
conduct and promote their sales operations. The periodic reports to
the petitioner by the agents were but necessary to update the
company of the latters performance and business income.
Private respondent was not an employee of the petitioner
company. While it was true that the petitioner had fixed the prices of
the products for reason of uniformity and private respondent could
not alter them, the latter, nevertheless, had free rein in the means
and methods for conducting the marketing operations. He selected
his own personnel and the only reason why he had to notify the
petitioner about such appointments was for purpose of deducting the
employees salaries from his commissions. This he admitted in his
testimonies, thus:
Q. Yes, in other words you were on what is known as P&L
basis or profit and loss basis?
A. That is right.
79
Q. If for an instance, just example your sales
representative in any period did not produce any
sales, you would not get any money from Britannica,
would you?
A. No, sir.
Q. In fact, Britannica by doing the accounting for you as
division manager was merely making it easy for you to
concentrate all your effort in selling and you dont
worry about accounting, isnt that so?
A. Yes, sir.
Q. In fact whenever you hire a secretary or trainer you
merely hire that person and notify Britannica so that
Encyclopaedia Britannica will give the salaries and
deduct it from your earnings, isnt that so?
A. In certain cases I just hired people previously employed
by Encyclopaedia Britannica.
xxx
Q. In this Exhibit 2 you were informing Encyclopaedia
Britannica that you have hired a certain person and
you were telling Britannica how her salary was going
to be taken cared of, is it not?
A. Yes, sir.
Q. You said here, please be informed that we have
appointed Miss Luz Villan as division trainer effective
May 1, 1971 at P550.00 per month her salary will be
chargeable to the Katipunan and Bayanihan Districts,
signed by yourself. What is the Katipunan and
Bayanihan District?
A. Those were districts under my division.
Q. In effect you were telling Britannica that you have hired
this person and you should charge her salary to me, is
that right?
A. Yes, sir.[5]
Private respondent was merely an agent or an independent
dealer of the petitioner. He was free to conduct his work and he was
free to engage in other means of livelihood. At the time he was
connected with the petitioner company, private respondent was also
a director and later the president of the Farmers Rural Bank. Had he
been an employee of the company, he could not be employed
elsewhere and he would be required to devote full time for petitioner.
If private respondent was indeed an employee, it was rather unusual
for him to wait for more than a year from his separation from work
before he decided to file his claims. Significantly, when Limjoco
tendered his resignation to petitioner on June 14, 1974, he stated,
thus:
"Re: Resignation
I am resigning as manager of the EB Capitol Division effective 16 June
1974.This decision was brought about by conflict with other interests which
lately have increasingly required my personal attention. I feel that in
fairness to the company and to the people under my supervision I should
relinquish the position to someone who can devote full-time to the Division.
I wish to thank you for all the encouragement and assistance you have
extended to me and to my group during my long association with
Britannica.
Evidently, Limjoco was aware of conflict with other interests
which xxx have increasingly required my personal attention (p. 118,
Records). At the very least, it would indicate that petitioner has no
effective control over the personal activities of Limjoco, who as
admitted by the latter had other conflict of interest requiring his
personal attention.
In ascertaining whether the relationship is that of employer-
employee or one of independent contractor, each case must be
determined by its own facts and all features of the relationship are to
be considered.[6] The records of the case at bar showed that there
was no such employer-employee relationship.
As stated earlier, the element of control is absent; where a
person who works for another does so more or less at his own
80
pleasure and is not subject to definite hours or conditions of work,
and in turn is compensated according to the result of his efforts and
not the amount thereof, we should not find that the relationship of
employer and employee exists.[7] In fine, there is nothing in the
records to show or would indicate that complainant was under the
control of the petitioner in respect of the means and methods [8] in the
performance of complainants work.
Consequently, private respondent is not entitled to the benefits
prayed for.
In view of the foregoing premises, the petition is hereby
GRANTED, and the decision of the NLRC is hereby REVERSED
AND SET ASIDE.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 88883 January 18, 1991
ATOK-BIG WEDGE MINING COMPANY, INC., petitioner,
vs.
COURT OF APPEALS, and LIWAN CONSI, respondents.
Mario C.V. Jalandoni for petitioner.
Joy B. Labiaga for private respondent.
PARAS, J.:
This is a petition for review on certiorari which seeks to annul and set
aside; (a) the decision* of the Court of Appeals dated March 13, 1989
in CA-G.R. No. SP No. 13528 entitled "Liwan Consi vs. Hon. Judge
Ruben C. Ayson, et al." declaring that both the petitioner and private
respondent hold possessory titles to the land in question, and (b) the
resolution denying the motion for reconsideration.
The facts of the case are as follows:
Fredia Mineral claim of about nine (9) hectares situated in Tuding,
Itogon, Benguet, was located sometime between December 25, 1930
and December 31, 1930, a period of six (6) days, by A.I. Reynolds in
accordance with the provisions of the Act of Congress of July 1,
1902, better known as the Philippine Bill of 1902, in a so-called
Declaration of Location. The said Declaration of Location of mineral
claim was duly recorded in the Office of the Mining Recorder
sometime on January 2, 1931. Fredia mineral claim, together with
other mineral claims, was sold by A.I. Reynolds to Big Wedge Mining
Company, the earlier corporate name of Atok Big Wedge Mining
Company, Inc. (Atok for short; herein petitioner) in a Deed of Sale
executed on November 2, 1931. Since then petitioner Atok has been
in continuous and exclusive ownership and possession of said claim
up to the present (Rollo, Annex "B", p. 21).
Atok has paid the realty taxes and occupation fees for the Fredia
mineral claim. The Fredia mineral claim together with other mineral
claims owned by Atok has been declared under Tax Declaration No.
9535 and that in view of Presidential Decree No. 1214 an application
for lease was filed by Atok covering the Fredia mineral claim
(Rollo, Ibid., p. 22).
On the other hand, private respondent Liwan Consi has a lot below
the land of a certain Mr. Acay at Tuding Slide, Itogon, Benguet. He
constructed a house thereon sometime in 1964. The lot is covered by
Tax Declaration No. 9462. When he first constructed his house below
the lot of Mr. Acay he was told that it was not necessary for him to
obtain a building permit as it was only a nipa hut. And no one
prohibited him from entering the land so he was constructing a house
thereon. It was only in January 1984 when private respondent Consi
repaired the said house that people came to take pictures and told
him that the lot belongs to Atok. Private respondent Consi has been
paying taxes on said land which his father before him had occupied
(Rollo, Ibid., p. 22).
81
On January 1984, the security guards of Atok informed Feliciano
Reyes, Security Officer of Atok, that a construction was being
undertaken at the area of the Fredia mineral claim by private
respondent Liwan Consi. Feliciano Reyes instructed the cashier to
go and take pictures of the construction. Feliciano Reyes himself and
other security guards went to the place of the construction to verify
and then to the police to report the matter (Rollo, Ibid.).
On March 1, 1984, Atok filed a complaint for forcible entry and
detainer against Liwan Consi (Rollo, Annex "C", p. 32).
On January 29, 1987, after due hearing, the Municipal Trial Court of
Itogon, presided over by Judge Irving rendered a decision, the
dispositive portion of which reads:
WHEREFORE, this case against Liwan Consi is hereby
ordered dismissed. (Rollo, Annex "A", p. 20).
Petitioner ATOK appealed the decision to the Regional Trial Court
(RTC) of Baguio and Benguet, Branch VI, presided over by Judge
Ruben Ayson (Rollo, Petition, p. 3). On December 5, 1987, the RTC
rendered its decision, the dispositive portion of which reads:
WHEREFORE, in view of all the foregoing the decision of the
Municipal Trial Court of Itogon dated January 29, 1987
appealed from is hereby reversed and set aside and a new
one entered in its place ordering the defendant Liwan Consi
and all those claiming under him to vacate the premises of
the Fredia Mineral claim at Tuding, Itogon, Benguet
immediately, and to restore possession thereof to the plaintiff
Atok Big Wedge Mining Company.
The defendant, Liwan Consi, is further ordered to remove
and demolish his house constructed in the premises of the
land of Fredia mineral claim at Tuding, Benguet, and to pay
the costs.
SO ORDERED. (Rollo, p. 30).
From said decision, Liwan Consi filed with the Court of Appeals a
petition for review (Rollo, Petition, p. 4). On March 13, 1989, the
Court of Appeals rendered its decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered dismissing the
subject forcible entry action. Costs against private
respondent.
SO ORDERED. (Rollo, Annex "C" p. 48).
The Court of Appeals further ruled in part to wit:
The determination of whether the subject lot is mineral land
or agricultural awaits the decision of the Secretary of Natural
Resources in a proceeding called for that purpose. Thus,
there is a chance that the subject property may be classified
as alienable agricultural land. At any rate, the mining
company may not so readily describe Liwan Consi as a
"squatter" he also has possessory rights over the property.
Such rights may mature into ownership on the basis of long-
term possession under the Public Land Law,
Thus it is Our holding, that both Consi and ATOK are of
equal legal footing with regards the subject lot. Both hold
possessory titles to the land in question — the petitioner
through his long term occupancy of the same; the
respondent mining firm by virtue of its being the claim locator
and applicant for a lease on the mineral claim within which
the subject lot is found. But it was established that the
petitioner has been in actual and beneficial possession of the
subject lot since before the Second World War in the concept
of owner and in good faith. (Rollo, Annex "C", pp. 47-48).
On June 16, 1989, the Court of Appeals denied the motion for
reconsideration filed by petitioner ATOK (Rollo, Annex "D", p. 50).
Hence, the petition.
82
The main issue in this case is whether or not an individual's long a mining claim is perfected it has the effect of a grant by the
term occupation of land of the public domain vests him with such United States of the right of present and exclusive
rights over the same as to defeat the rights of the owner of that possession, with the right to the exclusive enjoyment of all
claim. the surface ground as well as of all the minerals within the
lines of the claim, except as limited by the extralateral right of
The petition is impressed with merit. adjoining locators; and this is the locator's right before as
well as after the issuance of the patent. While a lode locator
acquires a vested right by virtue of his location made in
It is of no importance whether Benguet and Atok had secured a
compliance with the mining laws, the fee remains in the
patent for as held in the Gold Creek Mining Corporation case, for all
government until patent issues. (St. Louis Mining & Mineral
physical purposes of ownership, the owner is not required to secure
Co. v. Montana Mining Co., 171 U.S. 605, 655; 43 Law ed.,
a patent as long as he complies with the provisions of the mining
320, 322)
laws; his possessory right, for all practical purposes of ownership, is
as good as though secured by patent (Republic v. Court of Appeals,
160 SCRA 228 [1988]). It is, therefore, evident that Benguet and Atok have exclusive rights
to the property in question by virtue of their respective mining claims
which they validly acquired before the Constitution of 1935 prohibited
In the case at bar, the evidence on record pointed that the petitioner
the alienation of all lands of the public domain except agricultural
Atok has faithfully complied with all the requirements of the law
lands, subject to vested rights existing at the time of its adoption. The
regarding the maintenance of the said Fredia Mineral Claim.
land was not and could not have been transferred to the private
respondents by virtue of acquisitive prescription, nor could its use be
The perfection of the mining claim converted the property to mineral shared simultaneously by them and the mining companies for
land and under the laws then in force removed it from the public agricultural and mineral purposes (Ibid).
domain. By such act, the locators acquired exclusive rights over the
land, against even the government, without need of any further act
On the matter of possession, private respondent contends that his
such as the purchase of the land or the obtention of a patent over it.
predecessor-in-interest has been in possession of said lot even
As the land had become the private property of the locators, they had
before the war and has in fact cultivated the same.
the right to transfer the same, as they did, to Benguet and Atok
(Ibid.).
In the case of Republic v. Court of Appeals, 160 SCRA 288 1988, this
Court held:
As in the instant petition, the record shows that the lot in question
was acquired through a Deed of Sale executed between Atok and
Fredia Mineral Claim. . . . even if it be assumed that the predecessor-in-interest of
the de la Rosas had already been in possession of the
subject property, their possession was not in the concept of
The legal effect of a valid location of a mining claim is not
owner of the mining claim but of the property as agricultural
only to segregate the area from the public domain, but to
land, which it was not. The property was mineral land, and
grant to the locator the beneficial ownership of the claim and
they are claiming it as agricultural land. They were not
the right to a patent therefor upon compliance with the terms
disputing the rights of the mining locators nor where they
and conditions prescribed by law. Where there is a valid
seeking to oust them as such and to replace them in the
location of mining claim, the area becomes segregated from
mining of the land. . . .
the public and the property of the locator. When a location of

83
Since the subject lot is mineral land, private respondent's possession
of the subject lot no matter how long did not confer upon him
possessory rights over the same.

Furthermore, Article 538 of the New Civil Code provides:

Art. 538. Possession as a fact cannot be recognized at the

same time in two different personalities except in the cases
of co-possession. Should a question arise regarding the fact SECOND DIVISION
of possession, the present possessor shall be preferred; if THELMA DUMPIT- G.R. No. 164652
there are two possessors, the one longer in possession; if
MURILLO,
the dates of the possession are the same, the one who
Petitioner, Present:
presents a title; and if all these conditions are equal, the
thing shall be placed in judicial deposit pending
QUISUMBING, J.,* Chairperson,
determination of its possession or ownership through proper
CARPIO,
proceedings.
- versus - CARPIO MORALES,
TINGA, and
Since 1931 up to the present, petitioner ATOK has been in VELASCO, JR., JJ.
continuous and exclusive possession of the Frediamineral claim
while private respondent's possession started only sometime in 1964 COURT OF APPEALS, Promulgated:
when he constructed a house thereon. Clearly, ATOK has superior ASSOCIATED
possessory rights than private respondent, Liwan Consi, the former BROADCASTING
being "the one longer in possession." COMPANY, JOSE JAVIER June 8, 2007
AND EDWARD TAN,
It is therefore clear that from the legal viewpoint it was really Respondents.
petitioner who was in actual physical possession of the property. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
Having been deprived of this possession by the private respondent, DECISION
petitioner has every right to sue for ejFectment. QUISUMBING, J.:
This petition seeks to reverse and set aside both the
With this ruling enunciated by the Court, it can further be declared Decision[1] dated January 30, 2004 of the Court of Appeals in CA-G.R. SP
and held that petitioner Atok has the exclusive right to the property in No. 63125 and its Resolution[2] dated June 23, 2004 denying the motion for
question. reconsideration. The Court of Appeals had overturned the
Resolution[3] dated August 30, 2000 of the National Labor Relations
PREMISES CONSIDERED, the petition is GRANTED and the Commission (NLRC) ruling that petitioner was illegally dismissed.
questioned decision of the Court of Appeals dated March 13, 1989 is The facts of the case are as follows:
REVERSED and SET ASIDE and the decision of the Regional Trial On October 2, 1995, under Talent Contract No. NT95-1805,
[4]
Court of Baguio and Benguet dated June 16, 1989 is REINSTATED. private respondent Associated Broadcasting Company (ABC) hired
petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor
for Balitang-Balita, an early evening news program. The contract was for a
SO ORDERED.

84
period of three months. It was renewed under Talent Contracts Nos. NT95-
1915, NT96-3002, NT98-4984 and NT99-5649.[5] In addition, petitioners
services were engaged for the program Live on Five. On September 30,
1999, after four years of repeated renewals, petitioners talent contract
expired. Two weeks after the expiration of the last contract, petitioner sent a
letter to Mr. Jose Javier, Vice President for News and Public Affairs of
ABC, informing the latter that she was still interested in renewing her
contract subject to a salary increase. Thereafter, petitioner stopped reporting
for work. On November 5, 1999, she wrote Mr. Javier another letter,
[6]
which we quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to
your query by way of a marginal note what terms and
conditions in response to my first letter dated October 13,
1999. To date, or for more than fifteen (15) days since
then, I have not received any formal written reply. xxx
In view hereof, should I not receive any formal response
from you until Monday, November 8, 1999, I will deem it
as a constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter [7] to ABC,
demanding: (a) reinstatement to her former position; (b) payment of unpaid
wages for services rendered from September 1 to October 20, 1999 and full
backwages; (c) payment of 13th month pay, vacation/sick/service incentive
leaves and other monetary benefits due to a regular employee starting
March 31, 1996. ABC replied that a check covering petitioners talent fees
for September 16 to October 20, 1999 had been processed and prepared, but
that the other claims of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint [8] against ABC,
Mr. Javier and Mr. Edward Tan, for illegal constructive dismissal,
nonpayment of salaries, overtime pay, premium pay, separation pay, holiday
pay, service incentive leave pay, vacation/sick leaves and 13 th month pay in
NLRC-NCR Case No. 30-12-00985-99. She likewise demanded payment for
moral, exemplary and actual damages, as well as for attorneys fees.
The parties agreed to submit the case for resolution after settlement
failed during the mandatory conference/conciliation. On March 29, 2000,
the Labor Arbiter dismissed the complaint.[9]
On appeal, the NLRC reversed the Labor Arbiter in a Resolution
dated August 30, 2000. The NLRC held that an employer-employee
relationship existed between petitioner and ABC; that the subject talent contract
was void; that the petitioner was a regular employee illegally dismissed; and
that she was entitled to reinstatement and backwages or separation pay, aside
from 13th month pay and service incentive leave pay, moral and exemplary
damages and attorneys fees. It held as follows:
WHEREFORE, the Decision of the Arbiter
dated 29 March 2000 is hereby REVERSED/SET
ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally
dismissed complainant from her regular work therein and
thus, ordering them to reinstate her in her former position
without loss of seniority right[s] and other privileges and
to pay her full backwages, inclusive of allowances and
other benefits, including 13th month pay based on her said
latest rate of P28,000.00/mo. from the date of her illegal
dismissal on 21 October 1999 up to finality hereof, or at
complainants option, to pay her separation pay of one (1)
month pay per year of service based on said latest
monthly rate, reckoned from date of hire on 30 September
1995 until finality hereof;
2) to pay complainants accrued SILP [Service
Incentive Leave Pay] of 5 days pay per year and
13th month pay for the years 1999, 1998 and 1997
of P19,236.00 and P84,000.00, respectively and her
accrued salary from 16 September 1999 to 20 October
1999 of P32,760.00 plus legal interest at 12% from date
of judicial demand on 20 December 1999 until finality
hereof;
3) to pay complainant moral damages
of P500,000.00, exemplary damages of P350,000.00 and
10% of the total of the adjudged monetary awards as
attorneys fees.
Other monetary claims of complainant are dismissed for lack
of merit.
SO ORDERED.[10]
After its motion for reconsideration was denied, ABC elevated the
case to the Court of Appeals in a petition for certiorari under Rule 65. The
petition was first dismissed for failure to attach particular documents, [11] but
was reinstated on grounds of the higher interest of justice.[12]
85
 Thereafter, the appellate court ruled that the NLRC committed
grave abuse of discretion, and reversed the decision of the NLRC. [13] The
appellate court reasoned that petitioner should not be allowed to renege
from the stipulations she had voluntarily and knowingly executed by
invoking the security of tenure under the Labor Code. According to the
appellate court, petitioner was a fixed-term employee and not a regular
employee within the ambit of Article 280[14] of the Labor Code because her
job, as anticipated and agreed upon, was only for a specified time.[15]
Aggrieved, petitioner now comes to this Court on a petition for
review, raising issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE
FINDINGS OF THE HONORABLE COURT OF
APPEALS, THE DECISION OF WHICH IS NOT IN
ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS
CORRECTLY FOUND BY THE NLRC FIRST
DIVISION, ARE ANTI-REGULARIZATION
DEVICES WHICH MUST BE STRUCK DOWN FOR
REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND
SUCCESSIVE RENEWALS OF THE THREE-MONTH
TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE
RELATIONSHIP WAS CREATED AS PROVIDED FOR
UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN
PETITIONER, AS A REGULAR EMPLOYEE, THERE
WAS A DENIAL OF PETITIONERS RIGHT TO DUE
PROCESS THUS ENTITLING HER TO THE MONEY
CLAIMS AS STATED IN THE COMPLAINT[.][16]
The issues for our disposition are: (1) whether or not this Court can
review the findings of the Court of Appeals; and (2) whether or not under
Rule 45 of the Rules of Court the Court of Appeals committed a reversible
error in its Decision.
On the first issue, private respondents contend that the issues raised
in the instant petition are mainly factual and that there is no showing that
the said issues have been resolved arbitrarily and without basis. They add
that the findings of the Court of Appeals are supported by overwhelming
wealth of evidence on record as well as prevailing jurisprudence on the
matter.[17]
Petitioner however contends that this Court can review the findings
of the Court of Appeals, since the appellate court erred in deciding a
question of substance in a way which is not in accord with law or with
applicable decisions of this Court.[18]
We agree with petitioner. Decisions, final orders or resolutions of
the Court of Appeals in any case regardless of the nature of the action or
proceeding involved may be appealed to this Court through a petition for
review. This remedy is a continuation of the appellate process over the
original case,[19] and considering there is no congruence in the findings of
the NLRC and the Court of Appeals regarding the status of employment of
petitioner, an exception to the general rule that this Court is bound by the
findings of facts of the appellate court,[20] we can review such findings.
On the second issue, private respondents contend that the Court of
Appeals did not err when it upheld the validity of the talent contracts
voluntarily entered into by petitioner. It further stated that prevailing
jurisprudence has recognized and sustained the absence of employer-
employee relationship between a talent and the media entity which engaged
the talents services on a per talent contract basis, citing the case of Sonza v.
ABS-CBN Broadcasting Corporation.[21]
Petitioner avers however that an employer-employee relationship
was created when the private respondents started to merely renew the
contracts repeatedly fifteen times or for four consecutive years.[22]
Again, we agree with petitioner. The Court of Appeals committed
reversible error when it held that petitioner was a fixed-term employee.
Petitioner was a regular employee under contemplation of law. The practice of
having fixed-term contracts in the industry does not automatically make all
talent contracts valid and compliant with labor law. The assertion that a talent
contract exists does not necessarily prevent a regular employment status.[23]
Further, the Sonza case is not applicable. In Sonza, the television
station did not instruct Sonza how to perform his job. How Sonza delivered
his lines, appeared on television, and sounded on radio were outside the
television stations control. Sonza had a free hand on what to say or discuss
in his shows provided he did not attack the television station or its interests.
Clearly, the television station did not exercise control over the means and
86
methods of the performance of Sonzas work. [24] In the case at bar, ABC had
control over the performance of petitioners work. Noteworthy too, is the
comparatively low P28,000 monthly pay of petitioner [25] vis the P300,000 a
month salary of Sonza,[26]that all the more bolsters the conclusion that
petitioner was not in the same situation as Sonza.
The contract of employment of petitioner with ABC had the
following stipulations:
xxxx
1. SCOPE OF SERVICES TALENT agrees to
devote his/her talent, time, attention and best efforts in the
performance of his/her duties and responsibilities as
Anchor/Program Host/Newscaster of the Program, in
accordance with the direction of ABC and/or its authorized
representatives.
1.1. DUTIES AND
RESPONSIBILITIES TALENT shall:
a. Render his/her services as a newscaster on
the Program;
b. Be involved in news-gathering operations
by conducting interviews on- and off-the-air;
c. Participate in live remote coverages when
called upon;
d. Be available for any other news
assignment, such as writing, research or
camera work;
e. Attend production meetings;
f. On assigned days, be at the studios at least
one (1) hour before the live telecasts;
g. Be present promptly at the studios and/or
other place of assignment at the time
designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and
its duly authorized representatives in the
production and promotion of the Program;
and
j. Perform such other functions as may be
assigned to him/her from time to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS,
INSTRUCTIONS AND OTHER RULES AND
REGULATIONS TALENT agrees that he/she
will promptly and faithfully comply with the
requests and instructions, as well as the program
standards, policies, rules and regulations of ABC,
the KBP and the government or any of its
agencies and instrumentalities.[27]
xxxx
In Manila Water Company, Inc. v. Pena,[28] we said that the elements to
determine the existence of an employment relationship are: (a) the selection and
engagement of the employee, (b) the payment of wages, (c) the power of
dismissal, and (d) the employers power to control. The most important element
is the employers control of the employees conduct, not only as to the result of
the work to be done, but also as to the means and methods to accomplish it.[29]
The duties of petitioner as enumerated in her employment contract
indicate that ABC had control over the work of petitioner. Aside from
control, ABC also dictated the work assignments and payment of petitioners
wages. ABC also had power to dismiss her. All these being present, clearly,
there existed an employment relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of
employees, namely: (1) those who are engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are
employed.[30] In other words, regular status arises from either the nature of
work of the employee or the duration of his employment. [31] In Benares v.
Pancho,[32] we very succinctly said:
[T]he primary standard for determining regular
employment is the reasonable connection between the
particular activity performed by the employee vis--vis the
usual trade or business of the employer. This connection
can be determined by considering the nature of the work
performed and its relation to the scheme of the particular
business or trade in its entirety. If the employee has been
performing the job for at least a year, even if the
performance is not continuous and merely intermittent,
the law deems repeated and continuing need for its
performance as sufficient evidence of the necessity if not
87
 indispensability of that activity to the business. Hence, the to block the acquisition of security of tenure, they should be struck down for
employment is considered regular, but only with respect being contrary to law, morals, good customs, public order or public policy.
to such activity and while such activity exists.[33] [39]

In our view, the requisites for regularity of employment have been As a regular employee, petitioner is entitled to security of tenure and can
met in the instant case. Gleaned from the description of the scope of be dismissed only for just cause and after due compliance with procedural due
services aforementioned, petitioners work was necessary or desirable in the process. Since private respondents did not observe due process in constructively
usual business or trade of the employer which includes, as a pre-condition dismissing the petitioner, we hold that there was an illegal dismissal.
for its enfranchisement, its participation in the governments news and WHEREFORE, the challenged Decision dated January 30,
public information dissemination. In addition, her work was continuous for 2004 and Resolution dated June 23, 2004 of the Court of Appeals in CA-
a period of four years. This repeated engagement under contract of hire is G.R. SP No. 63125, which held that the petitioner was a fixed-term
indicative of the necessity and desirability of the petitioners work in private employee, are REVERSED and SET ASIDE. The NLRC decision
respondent ABCs business.[34] is AFFIRMED.
The contention of the appellate court that the contract was
characterized by a valid fixed-period employment is untenable. For such SECOND DIVISION
contract to be valid, it should be shown that the fixed period was knowingly and
voluntarily agreed upon by the parties. There should have been no force, duress
or improper pressure brought to bear upon the employee; neither should there JOSE MEL BERNARTE, G.R. No. 192084
be any other circumstance that vitiates the employees consent. [35] It should Petitioner,
satisfactorily appear that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance being exercised by the Pres
employer over the employee.[36] Moreover, fixed-term employment will not be ent:
considered valid where, from the circumstances, it is apparent that periods have
been imposed to preclude acquisition of tenurial security by the employee.[37] - versus - CARPIO, J., Chairperson,
In the case at bar, it does not appear that the employer and employee BRION,
dealt with each other on equal terms. Understandably, the petitioner could not DEL CASTILLO,*
object to the terms of her employment contract because she did not want to lose PEREZ, and
the job that she loved and the workplace that she had grown accustomed to, SERENO, JJ.
[38]
which is exactly what happened when she finally manifested her intention to PHILIPPINE BASKETBALL
negotiate. Being one of the numerous newscasters/broadcasters of ABC and ASSOCIATION (PBA), JOSE
desiring to keep her job as a broadcasting practitioner, petitioner was left with no EMMANUEL M. EALA, and Promulgated:
choice but to affix her signature of conformity on each renewal of her contract as PERRY MARTINEZ,
already prepared by private respondents; otherwise, private respondents would Respondents. September 14, 2011
have simply refused to renew her contract. Patently, the petitioner occupied a x-----------------------------------------------------------------------------------------
position of weakness vis--vis the employer. Moreover, private respondents x
practice of repeatedly extending petitioners 3-month contract for four years is a
circumvention of the acquisition of regular status. Hence, there was no valid
fixed-term employment between petitioner and private respondents. DECISION
While this Court has recognized the validity of fixed-term
employment contracts in a number of cases, it has consistently emphasized
that when the circumstances of a case show that the periods were imposed CARPIO, J.:

88

The Case
This is a petition for review1 of the 17 December 2009 Decision2 and 5 April
2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The
Court of Appeals set aside the decision of the National Labor Relations
Commission (NLRC), which affirmed the decision of the Labor Arbiter, and
held that petitioner Jose Mel Bernarte is an independent contractor, and not
an employee of respondents Philippine Basketball Association (PBA), Jose
Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the
motion for reconsideration.
The Facts
The facts, as summarized by the NLRC and quoted by the Court of Appeals,
are as follows:
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that
they were invited to join the PBA as referees. During the
leadership of Commissioner Emilio Bernardino, they were made to
sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms of
their employment.
Complainant Bernarte, for instance, was not made to sign a
contract during the first conference of the All-Filipino Cup which
was from February 23, 2003 to June 2003. It was only during the
second conference when he was made to sign a one and a half
month contract for the period July 1 to August 5, 2003.
On January 15, 2004, Bernarte received a letter from the Office of
the Commissioner advising him that his contract would not be
renewed citing his unsatisfactory performance on and off the court.
It was a total shock for Bernarte who was awarded Referee of the
year in 2003. He felt that the dismissal was caused by his refusal to
fix a game upon order of Ernie De Leon.
On the other hand, complainant Guevarra alleges that he was
invited to join the PBA pool of referees in February 2001. On
March 1, 2001, he signed a contract as trainee. Beginning 2002, he
signed a yearly contract as Regular Class C referee. On May 6,
2003, respondent Martinez issued a memorandum
to Guevarra expressing dissatisfaction over his questioning on the
assignment of referees officiating out-of-town games. Beginning
February 2004, he was no longer made to sign a contract.
Respondents aver, on the other hand, that complainants entered
into two contracts of retainer with the PBA in the year 2003. The
first contract was for the period January 1, 2003 to July 15, 2003;
and the second was for September 1 to December 2003. After the
lapse of the latter period, PBA decided not to renew their contracts.
Complainants were not illegally dismissed because they were not
employees of the PBA. Their respective contracts of retainer were
simply not renewed. PBA had the prerogative of whether or not to
renew their contracts, which they knew were fixed.4
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an
employee whose dismissal by respondents was illegal. Accordingly, the
Labor Arbiter ordered the reinstatement of petitioner and the payment
of backwages, moral and exemplary damages and attorneys fees, to wit:
WHEREFORE, premises considered all respondents who are here
found to have illegally dismissed complainants are hereby ordered
to (a) reinstate complainants within thirty (30) days from the date
of receipt of this decision and to solidarily pay complainants:
89
 JOSE MEL RENATO GUEVARRA
WHEREFORE, the petition is hereby GRANTED. The
BERNARTE assailed Decision dated January 28, 2008 and Resolution dated
August 26, 2008 of the National Labor Relations Commission
1. backwages from January 1, 2004 are ANNULLED and SET ASIDE. Private respondents complaint
up to the finality of this Decision, before the Labor Arbiter is DISMISSED.
which to date is P536,250.00
100,000.00 SO ORDERED.10
2. moral damages
50,000.00

3. exemplary damages The Court of Appeals Ruling

4. 10% attorneys fees 68,625.00 36,125.00
The Court of Appeals found petitioner an independent contractor since
respondents did not exercise any form of control over the means and
TOTAL methods by which petitioner performed his work as a basketball referee.
P754,875.00P397,375.00The Court of Appeals held:

or a total of P1,152,250.00
The rest of the claims are hereby dismissed for lack of merit or basis.
SO ORDERED.7
In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters
judgment. The dispositive portion of the NLRCs decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision
of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005
is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter. The dispositive
portion of the Court of Appeals decision reads:
While the NLRC agreed that the PBA has no control over the
referees acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts refer
to the means and methods employed by the referees in officiating
basketball games for the illogical reason that said acts refer only to
the referees skills. How could a skilled referee perform his job
without blowing a whistle and making calls? Worse, how can the
PBA control the performance of work of a referee without
controlling his acts of blowing the whistle and making calls?
Moreover, this Court disagrees with the Labor Arbiters finding (as
affirmed by the NLRC) that the Contracts of Retainer show that
petitioners have control over private respondents.
xxxx
Neither do We agree with the NLRCs affirmance of the Labor
Arbiters conclusion that private respondents repeated hiring made
them regular employees by operation of law.11
The Issues

90

The main issue in this case is whether petitioner is an employee of
respondents, which in turn determines whether petitioner was illegally
dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiters decision
has become final and executory for failure of respondents to appeal with the
NLRC within the reglementaryperiod.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiters Decision of 31 March 2005
became final and executory for failure of respondents to appeal with the
NLRC within the prescribed period. Petitioner claims that the Labor
Arbiters decision was constructively served on respondents as early as
August 2005 while respondents appealed the Arbiters decision only on 31
March 2006, way beyond the reglementary period to appeal. Petitioner
points out that service of an unclaimed registered mail is deemed complete
five days from the date of first notice of the post master. In this case three
notices were issued by the post office, the last being on 1 August 2005. The
unclaimed registered mail was consequently returned to sender. Petitioner
presents the Postmasters Certification to prove constructive service of the
Labor Arbiters decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in
charge, Vicente Asis, Jr., immediately issued the first registry
notice to claim on July 12, 2005 by the addressee. The second and
third notices were issued on July 21 and August 1, 2005,
respectively.
That the subject registered letter was returned to the sender (RTS)
because the addressee failed to claim it after our one month
retention period elapsed. Said registered letter was dispatched from
this office to Manila CPO (RTS) under bill #6, line 7, page1,
column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. Personal service is complete upon actual
delivery. Service by ordinary mail is complete upon the expiration of ten
(10) days after mailing, unless the court otherwise provides. Service by
registered mail is complete upon actual receipt by the addressee, or after
five (5) days from the date he received the first notice of the postmaster,
whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1)
actual service the completeness of which is determined upon receipt by the
addressee of the registered mail; and (2) constructive service the
completeness of which is determined upon expiration of five days from the
date the addressee received the first notice of the postmaster. 13
Insofar as constructive service is concerned, there must be conclusive proof
that a first notice was duly sent by the postmaster to the addressee. 14 Not
only is it required that notice of the registered mail be issued but that it
should also be delivered to and received by the addressee.15 Notably, the
presumption that official duty has been regularly performed is not
applicable in this situation. It is incumbent upon a party who relies on
constructive service to prove that the notice was sent to, and received by, the
addressee.16
The best evidence to prove that notice was sent would be a certification
from the postmaster, who should certify not only that the notice was issued
or sent but also as to how, when and to whom the delivery and receipt was
made. The mailman may also testify that the notice was actually delivered. 17
In this case, petitioner failed to present any concrete proof as to how, when
and to whom the delivery and receipt of the three notices issued by the post
office was made. There is no conclusive evidence showing that the post
office notices were actually received by respondents, negating petitioners
claim of constructive service of the Labor Arbiters decision on respondents.
The Postmasters Certification does not sufficiently prove that the three
notices were delivered to and received by respondents; it only indicates that
91
the post office issued the three notices. Simply put, the issuance of the
notices by the post office is not equivalent to delivery to and receipt by the
addressee of the registered mail. Thus, there is no proof of completed
constructive service of the Labor Arbiters decision on respondents.
At any rate, the NLRC declared the issue on the finality of the Labor
Arbiters decision moot as respondents appeal was considered in the interest
of substantial justice. We agree with the NLRC. The ends of justice will be
better served if we resolve the instant case on the merits rather than
allowing the substantial issue of whether petitioner is an independent
contractor or an employee linger and remain unsettled due to procedural
technicalities.
The existence of an employer-employee relationship is ultimately a question
of fact. As a general rule, factual issues are beyond the province of this
Court. However, this rule admits of exceptions, one of which is where there
are conflicting findings of fact between the Court of Appeals, on one hand,
and the NLRC and Labor Arbiter, on the other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law
has consistently applied the four-fold test, to wit: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employers power to control the employee on the
means and methods by which the work is accomplished. The so-
called control test is the most important indicator of the presence or
absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioners services, as shown
in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per
diem or allowances, as stipulated in the retainer contract. PBA can terminate
the retainer contract for petitioners violation of its terms and conditions.
However, respondents argue that the all-important element of control is
lacking in this case, making petitioner an independent contractor and not an
employee of respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of
respondents since the latter exercise control over the performance of his
work. Petitioner cites the following stipulations in the retainer contract
which evidence control: (1) respondents classify or rate a referee; (2)
respondents require referees to attend all basketball games organized or
authorized by the PBA, at least one hour before the start of the first game of
each day; (3) respondents assign petitioner to officiate ballgames, or to act
as alternate referee or substitute; (4) referee agrees to observe and comply
with all the requirements of the PBA governing the conduct of the referees
whether on or off the court; (5) referee agrees (a) to keep himself in good
physical, mental, and emotional condition during the life of the contract; (b)
to give always his best effort and service, and loyalty to the PBA, and not to
officiate as referee in any basketball game outside of the PBA, without
written prior consent of the Commissioner; (c) always to conduct himself on
and off the court according to the highest standards of honesty or morality;
and (6) imposition of various sanctions for violation of the terms and
conditions of the contract.
The foregoing stipulations hardly demonstrate control over the means and
methods by which petitioner performs his work as a referee officiating a
PBA basketball game. The contractual stipulations do not pertain to, much
less dictate, how and when petitioner will blow the whistle and make calls.
On the contrary, they merely serve as rules of conduct or guidelines in order
to maintain the integrity of the professional basketball league. As correctly
observed by the Court of Appeals, how could a skilled referee perform his
job without blowing a whistle and making calls? x x x [H]ow can the PBA
control the performance of work of a referee without controlling his acts of
blowing the whistle and making calls?20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the
relationship between a television and radio station and one of its talents, the
Court held that not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. The Court held:
We find that these general rules are merely guidelines towards the
achievement of the mutually desired result, which are top-rating
television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself
over the conduct of the other party in relation to the services being
rendered may be accorded the effect of establishing an employer-
employee relationship. The facts of this case fall squarely with the
92
 case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve
as guidelines towards the achievement of the mutually desired
result without dictating the means or methods to be employed in
attaining it, and those that control or fix the methodology and bind
or restrict the party hired to the use of such means. The first, which
aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and
the means used to achieve it.22
We agree with respondents that once in the playing court, the referees
exercise their own independent judgment, based on the rules of the game, as
to when and how a call or decision is to be made. The referees decide
whether an infraction was committed, and the PBA cannot overrule them
once the decision is made on the playing court. The referees are the only,
absolute, and final authority on the playing court. Respondents or any of the
PBA officers cannot and do not determine which calls to make or not to
make and cannot control the referee when he blows the whistle because
such authority exclusively belongs to the referees. The very nature of
petitioners job of officiating a professional basketball game undoubtedly
calls for freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an
independent contractor: (1) the referees are required to report for work only
when PBA games are scheduled, which is three times a week spread over an
average of only 105 playing days a year, and they officiate games at an
average of two hours per game; and (2) the only deductions from the fees
received by the referees are withholding taxes.
In other words, unlike regular employees who ordinarily report for work
eight hours per day for five days a week, petitioner is required to report for
work only when PBA games are scheduled or three times a week at two
hours per game. In addition, there are no deductions for contributions to the
Social Security System, Philhealth or Pag-Ibig, which are the usual
deductions from employees salaries. These undisputed circumstances
buttress the fact that petitioner is an independent contractor, and not an
employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an
independent contractor, whose special skills and independent judgment
are required specifically for such position and cannot possibly be controlled
by the hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States
District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the
statutory body that governs soccer in the United States. As such, plaintiff
was not entitled to protection by the Age Discrimination in Employment
Act. The U.S. District Court ruled:
Generally, if an employer has the right to control and direct the
work of an individual, not only as to the result to be achieved, but
also as to details by which the result is achieved, an
employer/employee relationship is likely to exist. The Court must
be careful to distinguish between control[ling] the conduct of
another party contracting party by setting out in detail his
obligations consistent with the freedom of contract, on the one
hand, and the discretionary control an employer daily exercises
over its employees conduct on the other.
Yonan asserts that the Federation closely supervised his
performance at each soccer game he officiated by giving him an
assessor, discussing his performance, and controlling what clothes
he wore while on the field and traveling. Putting aside that the
Federation did not, for the most part, control what clothes he wore,
the Federation did not supervise Yonan, but rather evaluated his
performance after matches. That the Federation evaluated Yonan as
a referee does not mean that he was an employee. There is no
question that parties retaining independent contractors may judge
the performance of those contractors to determine if the contractual
relationship should continue. x x x
It is undisputed that the Federation did not control the
way Yonan refereed his games. He had full discretion and
authority, under the Laws of the Game, to call the game as he saw
fit. x x x In a similar vein, subjecting Yonan to qualification
standards and procedures like the Federations registration and
93
 training requirements does not create an employer/employee
relationship. x x x
A position that requires special skills and independent judgment
weights in favor of independent contractor status. x x x Unskilled
work, on the other hand, suggests an employment relationship.
x x xHere, it is undisputed that soccer refereeing, especially at the
professional and international level, requires a great deal of skill
and natural ability. Yonan asserts that it was the Federations
training that made him a top referee, and that suggests he was an
employee. Though substantial training supports an employment
inference, that inference is dulled significantly or negated when the
putative employers activity is the result of a statutory requirement,
not the employers choice. x x x
In McInturff v. Battle Ground Academy of Franklin,24 it was held that
the umpire was not an agent of the Tennessee Secondary
School Athletic Association (TSSAA), so the players vicarious
liability claim against the association should be dismissed. In
finding that the umpire is an independent contractor, the
Court of Appeals of Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform
rules for all baseball games played between TSSAA member
schools. The TSSAA does not supervise regular season games. It
does not tell an official how to conduct the game beyond the
framework established by the rules. The TSSAA does not, in the
vernacular of the case law, control the means and method by which
the umpires work.
In addition, the fact that PBA repeatedly hired petitioner does not by itself
prove that petitioner is an employee of the former. For a hired party to be
considered an employee, the hiring party must have control over the means
and methods by which the hired party is to perform his work, which is
absent in this case. The continuous rehiring by PBA of petitioner simply
signifies the renewal of the contract between PBA and petitioner, and
highlights the satisfactory services rendered by petitioner warranting such
contract renewal. Conversely, if PBA decides to discontinue petitioners
services at the end of the term fixed in the contract, whether for
unsatisfactory services, or violation of the terms and conditions of the
contract, or for whatever other reason, the same merely results in the non-
renewal of the contract, as in the present case. The non-renewal of the
contract between the parties does not constitute illegal dismissal of
petitioner by respondents.
WHEREFORE, we DENY the petition and AFFIRM the assailed decision
of the Court of Appeals.
SO ORDERED.
SECOND DIVISION
[G.R. No. 119268. February 23, 2000]
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS,
ROSENDO MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA
and AMADO CENTENO, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (NLRC) and GOODMAN TAXI
(PHILJAMA INTERNATIONAL, INC.), respondents.
DECISION
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision[1] of
public respondent promulgated on October 28, 1994, in NLRC NCR
CA No. 003883-92, and its resolution[2] dated December 13, 1994
which denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International
Inc., a domestic corporation engaged in the operation of "Goodman
94
Taxi." Petitioners used to drive private respondents taxicabs every
other day on a 24-hour work schedule under the boundary system.
Under this arrangement, the petitioners earned an average of
P400.00 daily. Nevertheless, private respondent admittedly regularly
deducts from petitioners daily earnings the amount of P30.00
supposedly for the washing of the taxi units. Believing that the
deduction is illegal, petitioners decided to form a labor union to
protect their rights and interests.
Upon learning about the plan of petitioners, private respondent
refused to let petitioners drive their taxicabs when they reported for
work on August 6, 1991, and on succeeding days. Petitioners
suspected that they were singled out because they were the leaders
and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against private respondent for
unfair labor practice, illegal dismissal and illegal deduction of
washing fees. In a decision[3] dated August 31, 1992, the labor arbiter
dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated
April 28, 1994, reversed and set aside the judgment of the labor
arbiter. The labor tribunal declared that petitioners are employees of
private respondent, and, as such, their dismissal must be for just
cause and after due process. It disposed of the case as follows:
"WHEREFORE, in view of all the foregoing
considerations, the decision of the Labor Arbiter
appealed from is hereby SET ASIDE and another
one entered:
1. Declaring the respondent company guilty of illegal
dismissal and accordingly it is directed to reinstate
the complainants, namely, Alberto A. Gonzales, Joel
T. Morato, Gavino Panahon, Demetrio L. Calagos,
Sonny M. Lustado, Romeo Q. Clariza, Luis de los
Angeles, Amado Centino, Angel Jardin, Rosendo
Marcos, Urbano Marcos, Jr., and Joel Ordeniza, to
their former positions without loss of seniority and
other privileges appertaining thereto; to pay the
complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the
amount paid as washing charges; and
2. Dismissing the charge of unfair [labor] practice for
insufficiency of evidence.
SO ORDERED."[4]
Private respondents first motion for reconsideration was denied.
Remaining hopeful, private respondent filed another motion for
reconsideration. This time, public respondent, in its decision [5] dated
October 28, 1994, granted aforesaid second motion for
reconsideration. It ruled that it lacks jurisdiction over the case as
petitioners and private respondent have no employer-employee
relationship. It held that the relationship of the parties is leasehold
which is covered by the Civil Code rather than the Labor Code, and
disposed of the case as follows:
"VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion
under reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of
April 28, 1994 are hereby SET ASIDE. The Decision of the Labor
Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE
ENTERED dismissing the complaint for lack of jurisdiction.
No costs.
SO ORDERED."[6]
Expectedly, petitioners sought reconsideration of the labor tribunals
latest decision which was denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted
without or in excess of jurisdiction, or with grave abuse of discretion
in rendering the assailed decision, arguing that:
95
 "I
THE NLRC HAS NO JURISDICTION TO
ENTERTAIN RESPONDENTS SECOND MOTION
FOR RECONSIDERATION WHICH IS ADMITTEDLY
A PLEADING PROHIBITED UNDER THE NLRC
RULES, AND TO GRANT THE SAME ON
GROUNDS NOT EVEN INVOKED THEREIN.
II
THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PARTIES IS
ALREADY A SETTLED ISSUE
CONSTITUTING RES JUDICATA, WHICH THE
NLRC HAS NO MORE JURISDICTION TO
REVERSE, ALTER OR MODIFY.
III
IN ANY CASE, EXISTING JURISPRUDENCE ON
THE MATTER SUPPORTS THE VIEW THAT
PETITIONERS-TAXI DRIVERS ARE EMPLOYEES
OF RESPONDENT TAXI COMPANY."[7]
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess
of jurisdiction" has settled meaning in the jurisprudence of procedure.
It means such capricious and whimsical exercise of judgment by the
tribunal exercising judicial or quasi-judicial power as to amount to
lack of power.[8] In labor cases, this Court has declared in several
instances that disregarding rules it is bound to observe constitutes
grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,[9] private respondent therein, after receiving a
copy of the labor arbiters decision, wrote the labor arbiter who
rendered the decision and expressed dismay over the judgment.
Neither notice of appeal was filed nor cash or surety bond was
posted by private respondent. Nevertheless, the labor tribunal took
cognizance of the letter from private respondent and treated said
letter as private respondents appeal. In a certiorari action before this
Court, we ruled that the labor tribunal acted with grave abuse of
discretion in treating a mere letter from private respondent as private
respondents appeal in clear violation of the rules on appeal
prescribed under Section 3(a), Rule VI of the New Rules of
Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,[10] we held that the labor arbiter
committed grave abuse of discretion when he failed to resolve
immediately by written order a motion to dismiss on the ground of
lack of jurisdiction and the supplemental motion to dismiss as
mandated by Section 15 of Rule V of the New Rules of Procedure of
the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,[11] we held that the
NLRC gravely abused its discretion by allowing and deciding an
appeal without an appeal bond having been filed as required under
Article 223 of the Labor Code.
In Maebo vs. NLRC,[12] we declared that the labor arbiter gravely
abused its discretion in disregarding the rule governing position
papers. In this case, the parties have already filed their position
papers and even agreed to consider the case submitted for decision,
yet the labor arbiter still admitted a supplemental position paper and
memorandum, and by taking into consideration, as basis for his
decision, the alleged facts adduced therein and the documents
attached thereto.
In Gesulgon vs. NLRC,[13] we held that public respondent gravely
abused its discretion in treating the motion to set aside judgment and
writ of execution as a petition for relief of judgment. In doing so,
public respondent had, without sufficient basis, extended the
reglementary period for filing petition for relief from judgment contrary
to prevailing rule and case law.
96
In this case before us, private respondent exhausted administrative
remedy available to it by seeking reconsideration of public
respondents decision dated April 28, 1994, which public respondent
denied. With this motion for reconsideration, the labor tribunal had
ample opportunity to rectify errors or mistakes it may have committed
before resort to courts of justice can be had.[14] Thus, when private
respondent filed a second motion for reconsideration, public
respondent should have forthwith denied it in accordance with Rule
7, Section 14 of its New Rules of Procedure which allows only one
motion for reconsideration from the same party, thus:
"SEC. 14. Motions for Reconsideration. --- Motions
for reconsideration of any order, resolution or
decision of the Commission shall not be entertained
except when based on palpable or patent errors,
provided that the motion is under oath and filed
within ten (10) calendar days from receipt of the
order, resolution or decision with proof of service that
a copy of the same has been furnished within the
reglementary period the adverse party and provided
further, that only one such motion from the same
party shall be entertained." [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from
the same party is to assist the parties in obtaining an expeditious and
inexpensive settlement of labor cases. For obvious reasons, delays
cannot be countenanced in the resolution of labor disputes. The
dispute may involve no less than the livelihood of an employee and
that of his loved ones who are dependent upon him for food, shelter,
clothing, medicine, and education. It may as well involve the survival
of a business or an industry.[15]
As correctly pointed out by petitioner, the second motion for
reconsideration filed by private respondent is indubitably a prohibited
pleading[16] which should have not been entertained at all. Public
respondent cannot just disregard its own rules on the pretext of
"satisfying the ends of justice",[17] especially when its disposition of a
legal controversy ran afoul with a clear and long standing
jurisprudence in this jurisdiction as elucidated in the subsequent
discussion. Clearly, disregarding a settled legal doctrine enunciated
by this Court is not a way of rectifying an error or mistake. In our
view, public respondent gravely abused its discretion in taking
cognizance and granting private respondents second motion for
reconsideration as it wrecks the orderly procedure in seeking reliefs
in labor cases.
But, there is another compelling reason why we cannot leave
untouched the flip-flopping decisions of the public respondent. As
mentioned earlier, its October 28, 1994 judgment is not in accord
with the applicable decisions of this Court. The labor tribunal
reasoned out as follows:
"On the issue of whether or not employer-employee relationship
exists, admitted is the fact that complainants are taxi drivers purely
on the boundary system. Under this system the driver takes out his
unit and pays the owner/operator a fee commonly called boundary
for the use of the unit. Now, in the determination the existence of
employer-employee relationship, the Supreme Court in the case of
Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988)
has applied the following four-fold test: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power of control the employees
conduct.
Among the four (4) requisites, the Supreme Court stresses that
control is deemed the most important that the other requisites may
even be disregarded. Under the control test, an employer-employee
relationship exists if the employer has reserved the right to control
the employee not only as to the result of the work done but also as to
the means and methods by which the same is to be accomplished.
Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is
clear that the respondent does not pay the drivers, the complainants
herein, their wages. Instead, the drivers pay a certain fee for the use
of the vehicle. On the matter of control, the drivers, once they are out
plying their trade, are free to choose whatever manner they conduct
their trade and are beyond the physical control of the owner/operator;
they themselves determine the amount of revenue they would want
97
to earn in a days driving; and, more significantly aside from the fact hearing is set-out in Article 277 (b) of the said Code. Hence,
that they pay for the gasoline they consume, they likewise shoulder petitioners, being employees of private respondent, can be
the cost of repairs on damages sustained by the vehicles they are dismissed only for just and authorized cause, and after affording
driving. them notice and hearing prior to termination. In the instant case,
private respondent had no valid cause to terminate the employment
Verily, all the foregoing attributes signify that the relationship of the of petitioners. Neither were there two (2) written notices sent by
parties is more of a leasehold or one that is covered by a charter private respondent informing each of the petitioners that they had
agreement under the Civil Code rather than the Labor Code." [18] been dismissed from work. These lack of valid cause and failure on
the part of private respondent to comply with the twin-notice
requirement underscored the illegality surrounding petitioners
The foregoing ratiocination goes against prevailing jurisprudence.
dismissal.
In a number of cases decided by this Court,[19] we ruled that the
Under the law, an employee who is unjustly dismissed from work
relationship between jeepney owners/operators on one hand and
shall be entitled to reinstatement without loss of seniority rights and
jeepney drivers on the other under the boundary system is that of
other privileges and to his full backwages, inclusive of allowances,
employer-employee and not of lessor-lessee. We explained that in
and to his other benefits or their monetary equivalent computed from
the lease of chattels, the lessor loses complete control over the
the time his compensation was withheld from him up to the time of
chattel leased although the lessee cannot be reckless in the use
his actual reinstatement.[23] It must be emphasized, though, that
thereof, otherwise he would be responsible for the damages to the
recent judicial pronouncements[24] distinguish between employees
lessor. In the case of jeepney owners/operators and jeepney drivers,
illegally dismissed prior to the effectivity of Republic Act No. 6715 on
the former exercise supervision and control over the latter. The
March 21, 1989, and those whose illegal dismissals were effected
management of the business is in the owners hands. The owner as
after such date. Thus, employees illegally dismissed prior to March
holder of the certificate of public convenience must see to it that the
21, 1989, are entitled to backwages up to three (3) years without
driver follows the route prescribed by the franchising authority and
deduction or qualification, while those illegally dismissed after that
the rules promulgated as regards its operation. Now, the fact that the
date are granted full backwages inclusive of allowances and other
drivers do not receive fixed wages but get only that in excess of the
benefits or their monetary equivalent from the time their actual
so-called "boundary" they pay to the owner/operator is not sufficient
compensation was withheld from them up to the time of their actual
to withdraw the relationship between them from that of employer and
reinstatement. The legislative policy behind Republic Act No. 6715
employee. We have applied by analogy the abovestated doctrine to
points to "full backwages" as meaning exactly that, i.e., without
the relationships between bus owner/operator and bus conductor,
[20] deducting from backwages the earnings derived elsewhere by the
auto-calesa owner/operator and driver,[21] and recently between
concerned employee during the period of his illegal dismissal.
taxi owners/operators and taxi drivers.[22] Hence, petitioners are
Considering that petitioners were terminated from work on August 1,
undoubtedly employees of private respondent because as taxi
1991, they are entitled to full backwages on the basis of their last
drivers they perform activities which are usually necessary or
daily earnings.
desirable in the usual business or trade of their employer.

With regard to the amount deducted daily by private respondent from

As consistently held by this Court, termination of employment must
petitioners for washing of the taxi units, we view the same as not
be effected in accordance with law. The just and authorized causes
illegal in the context of the law. We note that after a tour of duty, it is
for termination of employment are enumerated under Articles 282,
incumbent upon the driver to restore the unit he has driven to the
283 and 284 of the Labor Code. The requirement of notice and
same clean condition when he took it out. Car washing after a tour of

98
duty is indeed a practice in the taxi industry and is in fact dictated by DEL CASTILLO,
fair play.[25] Hence, the drivers are not entitled to reimbursement of ABAD,
washing charges. VILLARAMA, JR.,
PEREZ and
WHEREFORE, the instant petition is GRANTED. The assailed MENDOZA, JJ.**
DECISION of public respondent dated October 28, 1994, is hereby THE COURT OF
SET ASIDE. The DECISION of public respondent dated April 28, APPEALS
1994, and its RESOLUTION dated December 13, 1994, are hereby and NATIVIDAD and
REINSTATED subject to MODIFICATION. Private respondent is ENRIQUE
directed to reinstate petitioners to their positions held at the time of AGANA,
the complained dismissal. Private respondent is likewise ordered to
Respondents.
pay petitioners their full backwages, to be computed from the date of
dismissal until their actual reinstatement. However, the order of
public respondent that petitioners be reimbursed the amount paid as x-------------------x
washing charges is deleted. Costs against private respondents. NATIVIDAD [substituted by her G.R. No. 126467
children Marcelino Agana III,
Enrique Agana, Jr.,
SO ORDERED.
Emma Agana-Andaya,
Jesus Agana and Raymund
Agana] and ENRIQUE AGANA,
Petitioners,

- versus-

PROFESSIONAL SERVICES, G.R. No. 126297 THE COURT OF

INC., APPEALS and JUAN
Petitioner, Present: FUENTES,
PUNO, C.J., Respondents.
CARPIO,
CORONA, x-------------------x
CARPIO MORALES, MIGUEL AMPIL, G.R. No. 127590
VELASCO, JR., Petitioner,
NACHURA,
- v e r s u s - LEONARDO-DE CASTRO,
BRION, -versus-
PERALTA,
BERSAMIN,*
NATIVIDAD and ENRIQUE

99
AGANA,
Respondents.
Promulgated
: the hospital.
February 2, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
RESOLUTION
CORONA, J.:
With prior leave of court,[1] petitioner Professional Services, Inc.
(PSI) filed a second motion for reconsideration[2] urging referral thereof to
the Court en banc and seeking modification of the decision dated January
31, 2007 and resolution dated February 11, 2008 which affirmed its
vicarious and direct liability for damages to respondents Enrique Agana and
the heirs of Natividad Agana (Aganas).
Manila Medical Services, Inc. (MMSI), [3] Asian Hospital, Inc. (AHI),[4] and
Private Hospital Association of the Philippines (PHAP) [5] all sought to
intervene in these casesinvoking the common ground that, unless
modified, the assailed decision and resolution will jeopardize the financial
viability of private hospitals and jack up the cost of health care.
The Special First Division of the Court granted the motions for
intervention of MMSI, AHI and PHAP (hereafter intervenors), [6] and
referred en consulta to the Court en banc the motion for prior leave of
court and the second motion for reconsideration of PSI.[7]
Due to paramount public interest, the Court en banc accepted the
referral[8] and heard the parties on oral arguments on one particular issue:
whether a hospital may be held liable for the negligence of physicians-
consultants allowed to practice in its premises.[9]
To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr.
Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique Agana
and Natividad Agana (later substituted by her heirs), in a complaint [10] for
damages filed in the Regional Trial Court (RTC) of Quezon City, Branch
96, for the injuries suffered by Natividad when Dr. Ampil and Dr. Fuentes
neglected to remove from her body two gauzes[11] which were used in the
surgery they performed on her on April 11, 1984 at the Medical City
General Hospital. PSI was impleaded as owner, operator and manager of
In a decision[12] dated March 17, 1993, the RTC held PSI solidarily liable with
Dr. Ampil and Dr. Fuentes for damages.[13] On appeal, the Court of Appeals
(CA), absolved Dr. Fuentes but affirmed the liability of Dr. Ampil and PSI,
subject to the right of PSI to claim reimbursement from Dr. Ampil. [14]
On petition for review, this Court, in its January 31, 2007 decision, affirmed
the CA decision.[15] PSI filed a motion for reconsideration [16] but the Court
denied it in a resolution dated February 11, 2008.[17]
The Court premised the direct liability of PSI to the Aganas on the
following facts and law:
First, there existed between PSI and Dr. Ampil an employer-employee
relationship as contemplated in the December 29, 1999 decision in Ramos v.
Court of Appeals[18] that for purposes of allocating responsibility in medical
negligence cases, an employer-employee relationship exists between
hospitals and their consultants.[19] Although the Court in Ramos later issued
a Resolution dated April 11, 2002 [20] reversing its earlier finding on the
existence of an employment relationship between hospital and doctor, a
similar reversal was not warranted in the present case because the defense
raised by PSI consisted of a mere general denial of control or responsibility
over the actions of Dr. Ampil.[21]
Second, by accrediting Dr. Ampil and advertising his
qualifications, PSI created the public impression that he was its agent.
[22]
Enrique testified that it was on account of Dr. Ampil's accreditation with
PSI that he conferred with said doctor about his wife's (Natividad's)
condition.[23] After his meeting with Dr. Ampil, Enrique asked Natividad to
personally consult Dr. Ampil.[24] In effect, when Enrigue and Natividad
engaged the services of Dr. Ampil, at the back of their minds was that the
latter was a staff member of a prestigious hospital. Thus, under the doctrine
of apparent authority applied in Nogales, et al. v. Capitol Medical Center, et
al.,[25] PSI was liable for the negligence of Dr. Ampil.
100
 Finally, as owner and operator of Medical City General Hospital,
PSI was bound by its duty to provide comprehensive medical services to
Natividad Agana, to exercise reasonable care to protect her from harm, [26] to
oversee or supervise all persons who practiced medicine within its walls,
and to take active steps in fixing any form of negligence committed within
its premises.[27] PSI committed a serious breach of its corporate duty when it
failed to conduct an immediate investigation into the reported missing
gauzes.[28]
PSI is now asking this Court to reconsider the foregoing rulings for
these reasons:
I In their respective memoranda, intervenors raise parallel
The declaration in the 31 January 2007 Decision vis-a-vis
the 11 February 2009 Resolution that the ruling in Ramos
vs. Court of Appeals (G.R. No. 134354, December 29, 1999)
that an employer-employee relations exists between
hospital and their consultants stays should be set aside for
being inconsistent with or contrary to the import of the
resolution granting the hospital's motion for
reconsideration in Ramos vs. Court of Appeals (G.R. No.
134354, April 11, 2002), which is applicable to PSI since
the Aganas failed to prove an employer-employee
relationship between PSI and Dr. Ampil and PSI proved that
it has no control over Dr. Ampil. In fact, the trial court has
found that there is no employer-employee relationship in
this case and that the doctor's are independent
contractors.
II
Respondents Aganas engaged Dr. Miguel Ampil as their
doctor and did not primarily and specifically look to the
Medical City Hospital (PSI) for medical care and support;
otherwise stated, respondents Aganas did not select
Medical City Hospital (PSI) to provide medical care because
of any apparent authority of Dr. Miguel Ampil as its agent
since the latter was chosen primarily and specifically based
on his qualifications and being friend and neighbor.
III
PSI cannot be liable under doctrine of corporate
negligence since the proximate cause of Mrs. Agana's
injury was the negligence of Dr. Ampil, which is an element
of the principle of corporate negligence. [29]
arguments that the Court's ruling on the existence of an employer-employee
relationship between private hospitals and consultants will force a drastic
and complex alteration in the long-established and currently prevailing
relationships among patient, physician and hospital, with burdensome
operational and financial consequences and adverse effects on all three
parties.[30]
The Aganas comment that the arguments of PSI need no longer be
entertained for they have all been traversed in the assailed decision and
resolution.[31]
After gathering its thoughts on the issues, this Court holds that PSI is liable
to the Aganas, not under the principle of respondeat superior for lack of
evidence of an employment relationship with Dr. Ampil but under the
principle of ostensible agency for the negligence of Dr. Ampil and, pro hac
vice, under the principle of corporate negligence for its failure to perform
its duties as a hospital.
While in theory a hospital as a juridical entity cannot practice
medicine,[32] in reality it utilizes doctors, surgeons and medical practitioners
in the conduct of its business of facilitating medical and surgical treatment.
[33]
Within that reality, three legal relationships crisscross: (1) between the
hospital and the doctor practicing within its premises; (2) between the
hospital and the patient being treated or examined within its premises and
(3) between the patient and the doctor. The exact nature of each
relationship determines the basis and extent of the liability of the hospital
for the negligence of the doctor.
101
 Where an employment relationship exists, the hospital may be held
vicariously liable under Article 2176[34] in relation to Article 2180[35] of the
Civil Code or the principle of respondeat superior. Even when no
employment relationship exists but it is shown that the hospital holds out to
the patient that the doctor is its agent, the hospital may still be vicariously
liable under Article 2176 in relation to Article 1431[36] and Article 1869[37] of
the Civil Code or the principle of apparent authority. [38] Moreover,
regardless of its relationship with the doctor, the hospital may be
held directly liable to the patient for its own negligence or failure to follow
established standard of conduct to which it should conform as a corporation.
[39]
This Court still employs the control test to determine the existence
of an employer-employee relationship between hospital and doctor.
In Calamba Medical Center, Inc. v. National Labor Relations Commission, et
al.[40] it held:
Under the "control test", an employment relationship
exists between a physician and a hospital if the hospital
controls both the means and the details of the process by
which the physician is to accomplish his task.
xx xx xx
As priorly stated, private respondents maintained specific
work-schedules, as determined by petitioner through its
medical director, which consisted of 24-hour shifts totaling
forty-eight hours each week and which were strictly to be
observed under pain of administrative sanctions.
That petitioner exercised control over
respondents gains light from the undisputed fact that in
the emergency room, the operating room, or any
department or ward for that matter, respondents' work is
monitored through its nursing supervisors, charge nurses
and orderlies. Without the approval or consent of
petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is
not essential for the employer to actually supervise the
performance of duties of the employee, it being enough
that it has the right to wield the power. (emphasis
supplied)
Even in its December 29, 1999 decision[41] and April 11,
2002 resolution[42] in Ramos, the Court found the control test decisive.
In the present case, it appears to have escaped the Court's
attention that both the RTC and the CA found no employment relationship
between PSI and Dr. Ampil, and thatthe Aganas did not question such
finding. In its March 17, 1993 decision, the RTC found that defendant
doctors were not employees of PSI in its hospital, they being merely
consultants without any employer-employee relationship and in the
capacity of independent contractors.[43] The Aganas never questioned such
finding.
PSI, Dr. Ampil and Dr. Fuentes appealed [44] from the RTC decision
but only on the issues of negligence, agency and corporate liability. In
its September 6, 1996 decision, the CA mistakenly referred to PSI and Dr.
Ampil as employer-employee, but it was clear in its discussion on the
matter that it viewed their relationship as one of mere apparent agency. [45]
The Aganas appealed from the CA decision, but only to question the
exoneration of Dr. Fuentes.[46] PSI also appealed from the CA decision, and it
was then that the issue of employment, though long settled, was
unwittingly resurrected.
In fine, as there was no dispute over the RTC finding that PSI and
Dr. Ampil had no employer-employee relationship, such finding became
final and conclusive even to this Court.[47] There was no reason for PSI to
have raised it as an issue in its petition. Thus, whatever discussion on the
matter that may have ensued was purely academic.
Nonetheless, to allay the anxiety of the intervenors, the Court holds that,
in this particular instance, the concurrent finding of the RTC and the CA
that PSI was not the employer of Dr. Ampil is correct. Control as a
determinative factor in testing the employer-employee relationship
102
between doctor and hospital under which the hospital could be held
vicariously liable to a patient in medical negligence cases is a requisite fact
to be established by preponderance of evidence. Here, there was
insufficient evidence that PSI exercised the power of control or wielded
such power over the means and the details of the specific process by which
Dr. Ampil applied his skills in the treatment of Natividad.Consequently, PSI
cannot be held vicariously liable for the negligence of Dr. Ampil under the
principle of respondeat superior.
There is, however, ample evidence that the hospital (PSI) held out
to the patient (Natividad)[48] that the doctor (Dr. Ampil) was its agent.
Present are the two factors that determine apparent authority: first, the
hospital's implied manifestation to the patient which led the latter to
conclude that the doctor was the hospital's agent; and second, the patients
reliance upon the conduct of the hospital and the doctor, consistent with
ordinary care and prudence.[49]
Enrique testified that on April 2, 1984, he consulted Dr. Ampil
regarding the condition of his wife; that after the meeting and as advised
by Dr. Ampil, he asked [his] wife to go to Medical City to be examined by
[Dr. Ampil]; and that the next day, April 3, he told his daughter to take her
mother to Dr. Ampil.[50] This timeline indicates that it was Enrique who
actually made the decision on whom Natividad should consult and where,
and that the latter merely acceded to it. It explains the testimony of
Natividad that she consulted Dr. Ampil at the instigation of her daughter. [51]
Moreover, when asked what impelled him to choose Dr. Ampil, Enrique
testified:
Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your
reason for choosing Dr. Ampil to contact with in
connection with your wife's illness?
A. First, before that, I have known him to be a specialist on
that part of the body as a surgeon, second, I have known
him to be a staff member of the Medical City which is
a prominent and known hospital. And third, because he is
a neighbor, I expect more than the usual medical service to
be given to us, than his ordinary patients.[52] (emphasis
supplied)
Clearly, the decision made by Enrique for Natividad to consult Dr.
Ampil was significantly influenced by the impression that Dr. Ampil was a
staff member of MedicalCity General Hospital, and that said hospital was
well known and prominent. Enrique looked upon Dr. Ampil not as
independent of but as integrally related to Medical City.
PSI's acts tended to confirm and reinforce, rather than negate, Enrique's
view. It is of record that PSI required a consent for hospital care [53] to be
signed preparatory to the surgery of Natividad. The form reads:
Permission is hereby given to the medical, nursing and
laboratory staff of the Medical City General Hospital to
perform such diagnostic procedures and to administer
such medications and treatments as may be deemed
necessary or advisable by the physicians of this
hospital for and during the confinement of xxx. (emphasis
supplied)
By such statement, PSI virtually reinforced the public impression that Dr.
Ampil was a physician of its hospital, rather than one independently
practicing in it; that the medications and treatments he prescribed were
necessary and desirable; and that the hospital staff was prepared to carry
them out.
PSI pointed out in its memorandum that Dr. Ampil's hospital
affiliation was not the exclusive basis of the Aganas decision to have
Natividad treated in Medical CityGeneral Hospital, meaning that, had Dr.
Ampil been affiliated with another hospital, he would still have been
chosen by the Aganas as Natividad's surgeon.[54]
The Court cannot speculate on what could have been behind the Aganas
decision but would rather adhere strictly to the fact that, under the
circumstances at that time, Enriquedecided to consult Dr. Ampil for he
believed him to be a staff member of a prominent and known hospital.
After his meeting with Dr. Ampil, Enrique advised his wife Natividad to go
103
to the Medical City General Hospital to be examined by said doctor, and the
hospital acted in a way that fortified Enrique's belief.
This Court must therefore maintain the ruling that PSI is
vicariously liable for the negligence of Dr. Ampil as its ostensible agent.
Moving on to the next issue, the Court notes that PSI made the following
admission in its Motion for Reconsideration:
51. Clearly, not being an agent or employee of petitioner
PSI, PSI [sic] is not liable for Dr. Ampil's acts during the
operation. Considering further that Dr. Ampil was
personally engaged as a doctor by Mrs. Agana, it is
incumbent upon Dr. Ampil, as Captain of the Ship, and as
the Agana's doctor to advise her on what to do with her
situation vis-a-vis the two missing gauzes. In addition to
noting the missing gauzes, regular check-ups were made
and no signs of complications were exhibited during her
stay at the hospital, which could have alerted petitioner
PSI's hospital to render and provide post-operation
services to and tread on Dr. Ampil's role as the doctor of
Mrs. Agana. The absence of negligence of PSI from the
patient's admission up to her discharge is borne by the
finding of facts in this case. Likewise evident therefrom is
the absence of any complaint from Mrs. Agana after her
discharge from the hospital which had she brought to the
hospital's attention, could have alerted petitioner PSI to
act accordingly and bring the matter to Dr. Ampil's
attention. But this was not the case. Ms. Agana
complained ONLY to Drs. Ampil and Fuentes, not the
hospital. How then could PSI possibly do something to fix
the negligence committed by Dr. Ampil when it was not
informed about it at all.[55] (emphasis supplied)
PSI reiterated its admission when it stated that had Natividad
Agana informed the hospital of her discomfort and pain, the hospital would
have been obliged to act on it.[56]
The significance of the foregoing statements is critical.
First, they constitute judicial admission by PSI that while it had no
power to control the means or method by which Dr. Ampil conducted the
surgery on Natividad Agana, it had the power to review or cause the
review of what may have irregularly transpired within its walls strictly for
the purpose of determining whether some form of negligence may have
attended any procedure done inside its premises, with the ultimate end of
protecting its patients.
Second, it is a judicial admission that, by virtue of the nature of its
business as well as its prominence[57] in the hospital industry, it assumed a
duty to tread on the captain of the ship role of any doctor rendering
services within its premises for the purpose of ensuring the safety of the
patients availing themselves of its services and facilities.
Third, by such admission, PSI defined the standards of its
corporate conduct under the circumstances of this case, specifically: (a)
that it had a corporate duty to Natividad even after her operation to ensure
her safety as a patient; (b) that its corporate duty was not limited to having
its nursing staff note or record the two missing gauzes and (c) that its
corporate duty extended to determining Dr. Ampil's role in it, bringing the
matter to his attention, and correcting his negligence.
And finally, by such admission, PSI barred itself from arguing in its
second motion for reconsideration that the concept of corporate
responsibility was not yet in existence at the time Natividad underwent
treatment;[58] and that if it had any corporate responsibility, the same was
limited to reporting the missing gauzes and did not include taking an active
step in fixing the negligence committed. [59] An admission made in the
pleading cannot be controverted by the party making such admission and is
conclusive as to him, and all proofs submitted by him contrary thereto or
inconsistent therewith should be ignored, whether or not objection is
interposed by a party.[60]
Given the standard of conduct that PSI defined for itself, the next
relevant inquiry is whether the hospital measured up to it.
104
PSI excuses itself from fulfilling its corporate duty on the ground that Dr.
Ampil assumed the personal responsibility of informing Natividad about the
two missing gauzes.[61]Dr. Ricardo Jocson, who was part of the group of
doctors that attended to Natividad, testified that toward the end of the
surgery, their group talked about the missing gauzes but Dr. Ampil assured
them that he would personally notify the patient about it. [62] Furthermore,
PSI claimed that there was no reason for it to act on the report on the two
missing gauzes because Natividad Agana showed no signs of complications.
She did not even inform the hospital about her discomfort. [63]
The excuses proffered by PSI are totally unacceptable.
To begin with, PSI could not simply wave off the problem and
nonchalantly delegate to Dr. Ampil the duty to review what transpired
during the operation. The purpose of such review would have been to
pinpoint when, how and by whom two surgical gauzes were mislaid so that
necessary remedial measures could be taken to avert any jeopardy to
Natividads recovery. Certainly, PSI could not have expected that purpose to
be achieved by merely hoping that the person likely to have mislaid the
gauzes might be able to retrace his own steps. By its own standard of
corporate conduct, PSI's duty to initiate the review was non-delegable.
While Dr. Ampil may have had the primary responsibility of notifying
Natividad about the missing gauzes, PSI imposed upon itself the separate
and independent responsibility of initiating the inquiry into the missing
gauzes. The purpose of the first would have been to apprise Natividad of
what transpired during her surgery, while the purpose of the second would
have been to pinpoint any lapse in procedure that led to the gauze count
discrepancy, so as to prevent a recurrence thereof and to determine
corrective measures that would ensure the safety of Natividad. That Dr.
Ampil negligently failed to notify Natividad did not release PSI from its self-
imposed separate responsibility.
Corollary to its non-delegable undertaking to review potential
incidents of negligence committed within its premises, PSI had the duty to
take notice of medical records prepared by its own staff and submitted to
its custody, especially when these bear earmarks of a surgery gone awry.
Thus, the record taken during the operation of Natividad which reported a
gauze count discrepancy should have given PSI sufficient reason to initiate a
review. It should not have waited for Natividad to complain.
As it happened, PSI took no heed of the record of operation and
consequently did not initiate a review of what transpired during Natividads
operation. Rather, it shirked its responsibility and passed it on to others to
Dr. Ampil whom it expected to inform Natividad, and to Natividad herself to
complain before it took any meaningful step. By its inaction, therefore, PSI
failed its own standard of hospital care. It committed corporate negligence.
It should be borne in mind that the corporate negligence ascribed
to PSI is different from the medical negligence attributed to Dr. Ampil. The
duties of the hospital are distinct from those of the doctor-consultant
practicing within its premises in relation to the patient; hence, the failure of
PSI to fulfill its duties as a hospital corporation gave rise to a direct
liability to the Aganas distinct from that of Dr. Ampil.
All this notwithstanding, we make it clear that PSIs hospital
liability based on ostensible agency and corporate negligence applies only
to this case, pro hac vice. It is not intended to set a precedent and should
not serve as a basis to hold hospitals liable for every form of negligence of
their doctors-consultants under any and all circumstances. The ruling is
unique to this case, for the liability of PSI arose from an implied agency
with Dr. Ampil and an admitted corporate duty to Natividad. [64]
Other circumstances peculiar to this case warrant this ruling,
[65]
not the least of which being that the agony wrought upon the Aganas
has gone on for 26 long years, with Natividad coming to the end of her days
racked in pain and agony. Such wretchedness could have been avoided had
PSI simply done what was logical: heed the report of a guaze count
discrepancy, initiate a review of what went wrong and take corrective
measures to ensure the safety of Nativad. Rather, for 26 years, PSI hemmed
and hawed at every turn, disowning any such responsibility to its
patient. Meanwhile, the options left to the Aganas have all but dwindled,
for the status of Dr. Ampil can no longer be ascertained. [66]
Therefore, taking all the equities of this case into consideration,
this Court believes P15 million would be a fair and reasonable liability of
105
PSI, subject to 12% p.a. interest from the finality of this resolution to full
satisfaction.
WHEREFORE, the second motion for reconsideration is DENIED and the
motions for intervention are NOTED.
Professional Services, Inc. is ORDERED pro hac vice to pay Natividad
(substituted by her children Marcelino Agana III, Enrique Agana, Jr., Emma
Agana-Andaya, Jesus Agana and Raymund Agana) and Enrique Agana the
total amount of P15 million, subject to 12% p.a. interest from the finality of
this resolution to full satisfaction.
No further pleadings by any party shall be entertained in this case.
Let the long-delayed entry of judgment be made in this case upon receipt
by all concerned parties of this resolution.
SO ORDERED.
SECOND DIVISION
[G.R. No. 146530. January 17, 2005]
PEDRO CHAVEZ, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, SUPREME PACKAGING, INC. and ALVIN
LEE, Plant Manager, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the
Resolution[1] dated December 15, 2000 of the Court of Appeals (CA)
reversing its Decision dated April 28, 2000 in CA-G.R. SP No. 52485.
The assailed resolution reinstated the Decision dated July 10, 1998
of the National Labor Relations Commission (NLRC), dismissing the
complaint for illegal dismissal filed by herein petitioner Pedro
Chavez. The said NLRC decision similarly reversed its earlier
Decision dated January 27, 1998 which, affirming that of the Labor
Arbiter, ruled that the petitioner had been illegally dismissed by
respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the
business of manufacturing cartons and other packaging materials for
export and distribution. It engaged the services of the petitioner,
Pedro Chavez, as truck driver on October 25, 1984. As such, the
petitioner was tasked to deliver the respondent companys products
from its factory in Mariveles, Bataan, to its various customers, mostly
in Metro Manila. The respondent company furnished the petitioner
with a truck. Most of the petitioners delivery trips were made at
nighttime, commencing at 6:00 p.m. from Mariveles, and returning
thereto in the afternoon two or three days after. The deliveries were
made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially,
the petitioner was paid the sum of P350.00 per trip. This was later
adjusted to P480.00 per trip and, at the time of his alleged dismissal,
the petitioner was receiving P900.00 per trip.
Sometime in 1992, the petitioner expressed to respondent Alvin
Lee, respondent companys plant manager, his (the petitioners)
desire to avail himself of the benefits that the regular employees
were receiving such as overtime pay, nightshift differential pay, and
13th month pay, among others. Although he promised to extend
these benefits to the petitioner, respondent Lee failed to actually do
so.
On February 20, 1995, the petitioner filed a complaint for
regularization with the Regional Arbitration Branch No. III of the
106
NLRC in San Fernando, Pampanga. Before the case could be heard,
respondent company terminated the services of the petitioner.
Consequently, on May 25, 1995, the petitioner filed an amended
complaint against the respondents for illegal dismissal, unfair labor
practice and non-payment of overtime pay, nightshift differential pay,
13th month pay, among others. The case was docketed as NLRC
Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an
employer-employee relationship between the respondent company
and the petitioner. They averred that the petitioner was an
independent contractor as evidenced by the contract of service which
he and the respondent company entered into. The said contract
provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents,
agrees to hire and the Contractor [referring to Pedro Chavez], by nature of
their specialized line or service jobs, accepts the services to be rendered to
the Principal, under the following terms and covenants heretofore
mentioned:
1. That the inland transport delivery/hauling activities to be
performed by the contractor to the principal, shall only
cover travel route from Mariveles to Metro Manila.
Otherwise, any change to this travel route shall be
subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any
hauling or delivery transport services fully rendered by
the Contractor shall be on a per trip basis depending on
the size or classification of the truck being used in the
transport service, to wit:
a) If the hauling or delivery service shall require a truck of six
wheeler, the payment on a per trip basis from Mariveles to
Metro Manila shall be THREE HUNDRED PESOS
(P300.00) and EFFECTIVE December 15, 1984.
b) If the hauling or delivery service require a truck of ten
wheeler, the payment on a per trip basis, following the
same route mentioned, shall be THREE HUNDRED
FIFTY (P350.00) Pesos and Effective December 15,
1984.
3. That for the amount involved, the Contractor will be to
[sic] provide for [sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be
responsible to the Principal for the cost of any damage
to, loss of any goods, cargoes, finished products or the
like, while the same are in transit, or due to reckless
[sic] of its men utilized for the purpose above
mentioned;
5. That the Contractor shall have absolute control and
disciplinary power over its men working for him subject
to this agreement, and that the Contractor shall hold the
Principal free and harmless from any liability or claim
that may arise by virtue of the Contractors non-
compliance to the existing provisions of the Minimum
Wage Law, the Employees Compensation Act, the
Social Security System Act, or any other such law or
decree that may hereafter be enacted, it being clearly
understood that any truck drivers, helpers or men
working with and for the Contractor, are not employees
who will be indemnified by the Principal for any such
claim, including damages incurred in connection
therewith;
6. This contract shall take effect immediately upon the
signing by the parties, subject to renewal on a year-to-
year basis.[2]
This contract of service was dated December 12, 1984. It was
subsequently renewed twice, on July 10, 1989 and September 28,
1992. Except for the rates to be paid to the petitioner, the terms of
the contracts were substantially the same. The relationship of the
respondent company and the petitioner was allegedly governed by
this contract of service.
The respondents insisted that the petitioner had the sole control
over the means and methods by which his work was accomplished.
107
He paid the wages of his helpers and exercised control over them.
As such, the petitioner was not entitled to regularization because he
was not an employee of the respondent company. The respondents,
likewise, maintained that they did not dismiss the petitioner. Rather,
the severance of his contractual relation with the respondent
company was due to his violation of the terms and conditions of their
contract. The petitioner allegedly failed to observe the minimum
degree of diligence in the proper maintenance of the truck he was
using, thereby exposing respondent company to unnecessary
significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor
Arbiter rendered the Decision dated February 3, 1997, finding the
respondents guilty of illegal dismissal. The Labor Arbiter declared
that the petitioner was a regular employee of the respondent
company as he was performing a service that was necessary and
desirable to the latters business. Moreover, it was noted that the
petitioner had discharged his duties as truck driver for the
respondent company for a continuous and uninterrupted period of
more than ten years.
The contract of service invoked by the respondents was
declared null and void as it constituted a circumvention of the
constitutional provision affording full protection to labor and security
of tenure. The Labor Arbiter found that the petitioners dismissal was
anchored on his insistent demand to be regularized. Hence, for lack
of a valid and just cause therefor and for their failure to observe the
due process requirements, the respondents were found guilty of
illegal dismissal. The dispositive portion of the Labor Arbiters
decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered
declaring respondent SUPREME PACKAGING, INC. and/or MR. ALVIN
LEE, Plant Manager, with business address at BEPZ, Mariveles, Bataan
guilty of illegal dismissal, ordering said respondent to pay complainant his
separation pay equivalent to one (1) month pay per year of service based on
the average monthly pay of P10,800.00 in lieu of reinstatement as his
reinstatement back to work will not do any good between the parties as the
employment relationship has already become strained and full backwages
from the time his compensation was withheld on February 23, 1995 up to
January 31, 1997 (cut-off date) until compliance, otherwise, his backwages
shall continue to run. Also to pay complainant his 13th month pay, night
shift differential pay and service incentive leave pay hereunder computed as
follows:
a) Backwages .. P248,400.00
b) Separation Pay .... P140,400.00
c) 13th month pay .P 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL P401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the
complainant as attorneys fees. SO ORDERED.[3]
The respondents seasonably interposed an appeal with the
NLRC. However, the appeal was dismissed by the NLRC in its
Decision[4] dated January 27, 1998, as it affirmed in toto the decision
of the Labor Arbiter. In the said decision, the NLRC characterized the
contract of service between the respondent company and the
petitioner as a scheme that was resorted to by the respondents who,
taking advantage of the petitioners unfamiliarity with the English
language and/or legal niceties, wanted to evade the effects and
implications of his becoming a regularized employee.[5]
The respondents sought reconsideration of the January 27,
1998 Decision of the NLRC. Acting thereon, the NLRC rendered
another Decision[6] dated July 10, 1998, reversing its earlier decision
and, this time, holding that no employer-employee relationship
existed between the respondent company and the petitioner. In
reconsidering its earlier decision, the NLRC stated that the
respondents did not exercise control over the means and methods by
which the petitioner accomplished his delivery services. It upheld the
validity of the contract of service as it pointed out that said contract
was silent as to the time by which the petitioner was to make the
deliveries and that the petitioner could hire his own helpers whose
wages would be paid from his own account. These factors indicated
that the petitioner was an independent contractor, not an employee
of the respondent company.
The NLRC ruled that the contract of service was not intended to
circumvent Article 280 of the Labor Code on the regularization of
employees. Said contract, including the fixed period of employment
contained therein, having been knowingly and voluntarily entered into
108
by the parties thereto was declared valid citing Brent School, Inc. v.
Zamora.[7] The NLRC, thus, dismissed the petitioners complaint for
illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998
Decision but it was denied by the NLRC in its Resolution dated
September 7, 1998. He then filed with this Court a petition for
certiorari, which was referred to the CA following the ruling in St.
Martin Funeral Home v. NLRC.[8]
The appellate court rendered the Decision dated April 28, 2000,
reversing the July 10, 1998 Decision of the NLRC and reinstating the
decision of the Labor Arbiter. In the said decision, the CA ruled that
the petitioner was a regular employee of the respondent company
because as its truck driver, he performed a service that was
indispensable to the latters business. Further, he had been the
respondent companys truck driver for ten continuous years. The CA
also reasoned that the petitioner could not be considered an
independent contractor since he had no substantial capital in the
form of tools and machinery. In fact, the truck that he drove belonged
to the respondent company. The CA also observed that the routing
slips that the respondent company issued to the petitioner showed
that it exercised control over the latter. The routing slips indicated the
chronological order and priority of delivery, the urgency of certain
deliveries and the time when the goods were to be delivered to the
customers.
The CA, likewise, disbelieved the respondents claim that the
petitioner abandoned his job noting that he just filed a complaint for
regularization. This actuation of the petitioner negated the
respondents allegation that he abandoned his job. The CA held that
the respondents failed to discharge their burden to show that the
petitioners dismissal was for a valid and just cause. Accordingly, the
respondents were declared guilty of illegal dismissal and the decision
of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of
service between the respondent company and the petitioner in this
wise:
In summation, we rule that with the proliferation of contracts seeking to
prevent workers from attaining the status of regular employment, it is but
necessary for the courts to scrutinize with extreme caution their legality and
justness. Where from the circumstances it is apparent that a contract has
been entered into to preclude acquisition of tenurial security by the
employee, they should be struck down and disregarded as contrary to public
policy and morals. In this case, the contract of service is just another
attempt to exploit the unwitting employee and deprive him of the protection
of the Labor Code by making it appear that the stipulations of the parties
were governed by the Civil Code as in ordinary transactions.[9]
However, on motion for reconsideration by the respondents, the
CA made a complete turn around as it rendered the assailed
Resolution dated December 15, 2000 upholding the contract of
service between the petitioner and the respondent company. In
reconsidering its decision, the CA explained that the extent of control
exercised by the respondents over the petitioner was only with
respect to the result but not to the means and methods used by him.
The CA cited the following circumstances: (1) the respondents had
no say on how the goods were to be delivered to the customers; (2)
the petitioner had the right to employ workers who would be under
his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent
company for more than ten years was, according to the CA, of no
moment because his status was determined not by the length of
service but by the contract of service. This contract, not being
contrary to morals, good customs, public order or public policy,
should be given the force and effect of law as between the
respondent company and the petitioner. Consequently, the CA
reinstated the July 10, 1998 Decision of the NLRC dismissing the
petitioners complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails
the December 15, 2000 Resolution of the appellate court alleging
that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION
109
 IN GIVING MORE CONSIDERATION TO THE CONTRACT OF
SERVICE ENTERED INTO BY PETITIONER AND PRIVATE
RESPONDENT THAN ARTICLE 280 OF THE LABOR CODE
OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A
REGULAR EMPLOYMENT NOTWITHSTANDING ANY
WRITTEN AGREEMENT TO THE CONTRARY AND
REGARDLESS OF THE ORAL AGREEMENT OF THE
PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OF JURISDICTION
IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A
REGULAR EMPLOYEE AND IN HOLDING THAT THERE
EXISTED NO EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS
MUCH AS THE CONTROL TEST WHICH IS CONSIDERED
THE MOST ESSENTIAL CRITERION IN DETERMINING THE
EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT. [10]
The threshold issue that needs to be resolved is whether there
existed an employer-employee relationship between the respondent
company and the petitioner. We rule in the affirmative.
The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the
employers power to control the employees conduct. [11] The most
important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish it. [12] All the four elements
are present in this case.
First. Undeniably, it was the respondents who engaged the
services of the petitioner without the intervention of a third party.
Second. Wages are defined as remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or commission
basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or
to be rendered.[13] That the petitioner was paid on a per trip basis is
not significant. This is merely a method of computing compensation
and not a basis for determining the existence or absence of
employer-employee relationship. One may be paid on the basis of
results or time expended on the work, and may or may not acquire
an employment status, depending on whether the elements of an
employer-employee relationship are present or not. [14] In this case, it
cannot be gainsaid that the petitioner received compensation from
the respondent company for the services that he rendered to the
latter.
Moreover, under the Rules Implementing the Labor Code, every
employer is required to pay his employees by means of payroll.
[15]
The payroll should show, among other things, the employees rate
of pay, deductions made, and the amount actually paid to the
employee. Interestingly, the respondents did not present the payroll
to support their claim that the petitioner was not their employee,
raising speculations whether this omission proves that its
presentation would be adverse to their case.[16]
Third. The respondents power to dismiss the petitioner was
inherent in the fact that they engaged the services of the petitioner as
truck driver. They exercised this power by terminating the petitioners
services albeit in the guise of severance of contractual relation due
allegedly to the latters breach of his contractual obligation.
Fourth. As earlier opined, of the four elements of the employer-
employee relationship, the control test is the most important.
Compared to an employee, an independent contractor is one who
carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under its
own responsibility according to its own manner and method, free
from the control and direction of the principal in all matters connected
with the performance of the work except as to the results thereof.
[17]
Hence, while an independent contractor enjoys independence and
freedom from the control and supervision of his principal, an
employee is subject to the employers power to control the means
and methods by which the employees work is to be performed and
accomplished.[18]
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 Although the respondents denied that they exercised control
over the manner and methods by which the petitioner accomplished
his work, a careful review of the records shows that the latter
performed his work as truck driver under the respondents
supervision and control. Their right of control was manifested by the
following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck shall
be used exclusively to deliver respondent companys goods; [19]
3. Respondents directed the petitioner, after completion of each delivery, to
park the truck in either of two specific places only, to wit: at its office in
Metro Manila at 2320 Osmea Street, Makati City or at BEPZ, Mariveles,
Bataan;[20] and
4. Respondents determined how, where and when the petitioner would
perform his task by issuing to him gate passes and routing slips. [21]
a. The routing slips indicated on the column REMARKS, the chronological
order and priority of delivery such as 1st drop, 2nd drop, 3rd drop, etc. This
meant that the petitioner had to deliver the same according to the order of
priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to be
delivered urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the goods were
to be delivered to the customers as, for example, the words tomorrow
morning was written on slip no. 2776.
These circumstances, to the Courts mind, prove that the
respondents exercised control over the means and methods by
which the petitioner accomplished his work as truck driver of the
respondent company. On the other hand, the Court is hard put to
believe the respondents allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling
services when he did not even own the truck used for such services.
Evidently, he did not possess substantial capitalization or investment
in the form of tools, machinery and work premises. Moreover, the
petitioner performed the delivery services exclusively for the
respondent company for a continuous and uninterrupted period of
ten years.
The contract of service to the contrary notwithstanding, the
factual circumstances earlier discussed indubitably establish the
existence of an employer-employee relationship between the
respondent company and the petitioner. It bears stressing that the
existence of an employer-employee relationship cannot be negated
by expressly repudiating it in a contract and providing therein that the
employee is an independent contractor when, as in this case, the
facts clearly show otherwise. Indeed, the employment status of a
person is defined and prescribed by law and not by what the parties
say it should be.[22]
Having established that there existed an employer-employee
relationship between the respondent company and the petitioner, the
Court shall now determine whether the respondents validly
dismissed the petitioner.
As a rule, the employer bears the burden to prove that the
dismissal was for a valid and just cause. [23] In this case, the
respondents failed to prove any such cause for the petitioners
dismissal. They insinuated that the petitioner abandoned his job. To
constitute abandonment, these two factors must concur: (1) the
failure to report for work or absence without valid or justifiable
reason; and (2) a clear intention to sever employer-employee
relationship.[24] Obviously, the petitioner did not intend to sever his
relationship with the respondent company for at the time that he
allegedly abandoned his job, the petitioner just filed a complaint for
regularization, which was forthwith amended to one for illegal
dismissal. A charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal, more so when it
includes a prayer for reinstatement.[25]
Neither can the respondents claim that the petitioner was guilty
of gross negligence in the proper maintenance of the truck constitute
a valid and just cause for his dismissal. Gross negligence implies a
want or absence of or failure to exercise slight care or diligence, or
111
the entire absence of care. It evinces a thoughtless disregard of the respondents guilty of illegally terminating the employment of petitioner Pedro
Chavez, is REINSTATED.
consequences without exerting any effort to avoid them. [26] The
negligence, to warrant removal from service, should not merely
be gross but also habitual.[27] The single and isolated act of the Republic of the Philippines
petitioners negligence in the proper maintenance of the truck alleged SUPREME COURT
by the respondents does not amount to gross and habitual neglect Manila
warranting his dismissal.
FIRST DIVISION
The Court agrees with the following findings and conclusion of
the Labor Arbiter:
G.R. No. 146881 February 5, 2007
As against the gratuitous allegation of the respondent that complainant was
not dismissed from the service but due to complainants breach of their COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA,
contractual relation, i.e., his violation of the terms and conditions of the Manager, Petitioners,
contract, we are very much inclined to believe complainants story that his vs.
dismissal from the service was anchored on his insistent demand that he be DR. DEAN N. CLIMACO, Respondent.
considered a regular employee. Because complainant in his right senses will
not just abandon for that reason alone his work especially so that it is only DECISION
his job where he depends chiefly his existence and support for his family if
he was not aggrieved by the respondent when he was told that his services AZCUNA, J.:
as driver will be terminated on February 23, 1995.[28]
This is a petition for review on certiorari of the Decision of the Court
Thus, the lack of a valid and just cause in terminating the of Appeals1 promulgated on July 7, 2000, and its Resolution
services of the petitioner renders his dismissal illegal. Under Article promulgated on January 30, 2001, denying petitioner’s motion for
279 of the Labor Code, an employee who is unjustly dismissed is reconsideration. The Court of Appeals ruled that an employer-
entitled to reinstatement, without loss of seniority rights and other employee relationship exists between respondent Dr. Dean N.
privileges, and to the payment of full backwages, inclusive of Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola),
allowances, and other benefits or their monetary equivalent, and that respondent was illegally dismissed.
computed from the time his compensation was withheld from him up
to the time of his actual reinstatement. [29] However, as found by the Respondent Dr. Dean N. Climaco is a medical doctor who was hired
Labor Arbiter, the circumstances obtaining in this case do not warrant by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer
the petitioners reinstatement. A more equitable disposition, as held Agreement that stated:
by the Labor Arbiter, would be an award of separation pay equivalent
to one month for every year of service from the time of his illegal
WHEREAS, the COMPANY desires to engage on a retainer basis
dismissal up to the finality of this judgment in addition to his full
the services of a physician and the said DOCTOR is accepting such
backwages, allowances and other benefits.
engagement upon terms and conditions hereinafter set forth;
WHEREFORE, the instant petition is GRANTED. The Resolution dated
December 15, 2000 of the Court of Appeals reversing its Decision dated April 28, 2000
in CA-G.R. SP No. 52485 is REVERSED and SET ASIDE. The Decision dated
February 3, 1997 of the Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding

112
NOW, THEREFORE, in consideration of the premises and the
mutual agreement hereinafter contained, the parties agree as
follows:
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The
said term notwithstanding, either party may terminate the
contract upon giving a thirty (30)-day written notice to the
other.
2. The compensation to be paid by the company for the
services of the DOCTOR is hereby fixed at PESOS: Three
Thousand Eight Hundred (₱3,800.00) per month. The
DOCTOR may charge professional fee for hospital services
rendered in line with his specialization. All payments in
connection with the Retainer Agreement shall be subject to a
withholding tax of ten percent (10%) to be withheld by the
COMPANY under the Expanded Withholding Tax System. In
the event the withholding tax rate shall be increased or
decreased by appropriate laws, then the rate herein
stipulated shall accordingly be increased or decreased
pursuant to such laws.
3. That in consideration of the above mentioned retainer’s
fee, the DOCTOR agrees to perform the duties and
obligations enumerated in the COMPREHENSIVE MEDICAL
PLAN, hereto attached as Annex "A" and made an integral
part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety
and Health Standards, Ministry of Labor and Employment
shall be followed.
5. That the DOCTOR shall be directly responsible to the
employee concerned and their dependents for any injury
inflicted on, harm done against or damage caused upon the
employee of the COMPANY or their dependents during the
course of his examination, treatment or consultation, if such
injury, harm or damage was committed through professional
negligence or incompetence or due to the other valid causes
for action.
6. That the DOCTOR shall observe clinic hours at the
COMPANY’S premises from Monday to Saturday of a
minimum of two (2) hours each day or a maximum
of TWO (2) hours each day or treatment from 7:30 a.m.
to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless
such schedule is otherwise changed by the COMPANY as
[the] situation so warrants, subject to the Labor Code
provisions on Occupational Safety and Health Standards as
the COMPANY may determine. It is understood that the
DOCTOR shall stay at least two (2) hours a day in the
COMPANY clinic and that such two (2) hours be devoted to
the workshift with the most number of employees. It is further
understood that the DOCTOR shall be on call at all times
during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist
between the COMPANY and the DOCTOR whilst this
contract is in effect, and in case of its termination, the
DOCTOR shall be entitled only to such retainer fee as may
be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and
responsibilities of respondent, adverted to in the Retainer
Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the]
employees’ and dependents’ health:
1. Prompt and adequate treatment of occupational and non-
occupational injuries and diseases.
2. To protect employees from any occupational health hazard
by evaluating health factors related to working conditions.
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 3. To encourage employees [to] maintain good personal
health by setting up employee orientation and education on
health, hygiene and sanitation, nutrition, physical fitness, first
aid training, accident prevention and personnel safety.
4. To evaluate other matters relating to health such as
absenteeism, leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this
program.
2. The health program shall cover pre-employment and
annual p.e., hygiene and sanitation, immunizations, family
planning, physical fitness and athletic programs and other
activities such as group health education program, safety
and first aid classes, organization of health and safety
committees.
3. Periodically, this program will be reviewed and adjusted
based on employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational
and non-occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present
education materials.
6. Coordinate with Safety Committee in developing specific
studies and program to minimize environmental health
hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical
fitness and athletic programs.
9. Visiting and follow-up treatment of Company employees
and their dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was
renewed annually. The last one expired on December 31, 1993.
Despite the non-renewal of the Retainer Agreement, respondent
continued to perform his functions as company doctor to Coca-Cola
until he received a letter4 dated March 9, 1995 from petitioner
company concluding their retainership agreement effective 30 days
from receipt thereof.
It is noted that as early as September 1992, petitioner was already
making inquiries regarding his status with petitioner company. First,
he wrote a letter addressed to Dr. Willie Sy, the Acting President and
Chairperson of the Committee on Membership, Philippine College of
Occupational Medicine. In response, Dr. Sy wrote a letter 5 to the
Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating
that respondent should be considered as a regular part-time
physician, having served the company continuously for four (4)
years. He likewise stated that respondent must receive all the
benefits and privileges of an employee under Article 157 (b)6 of the
Labor Code.
Petitioner company, however, did not take any action. Hence,
respondent made another inquiry directed to the Assistant Regional
Director, Bacolod City District Office of the Department of Labor and
Employment (DOLE), who referred the inquiry to the Legal Service of
the DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis
P. Ancheta, Legal Service, DOLE, stated that he believed that an
employer-employee relationship existed between petitioner and
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respondent based on the Retainer Agreement and the
Comprehensive Medical Plan, and the application of the "four-fold"
test. However, Director Ancheta emphasized that the existence of
employer-employee relationship is a question of fact. Hence,
termination disputes or money claims arising from employer-
employee relations exceeding ₱5,000 may be filed with the National
Labor Relations Commission (NLRC). He stated that their opinion is
strictly advisory.
An inquiry was likewise addressed to the Social Security System
(SSS). Thereafter, Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod
City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers
Phils., Inc. informing the latter that the legal staff of his office was of
the opinion that the services of respondent partake of the nature of
work of a regular company doctor and that he was, therefore, subject
to social security coverage.
Respondent inquired from the management of petitioner company
whether it was agreeable to recognizing him as a regular employee.
The management refused to do so.
On February 24, 1994, respondent filed a Complaint 9 before the
NLRC, Bacolod City, seeking recognition as a regular employee of
petitioner company and prayed for the payment of all benefits of a
regular employee, including 13th Month Pay, Cost of Living
Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas
Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter,
respondent received a letter dated March 9, 1995 from petitioner
company concluding their retainership agreement effective thirty (30)
days from receipt thereof. This prompted respondent to file a
complaint for illegal dismissal against petitioner company with the
NLRC, Bacolod City. The case was docketed as RAB Case No. 06-
04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N.
Rodriguez, Jr. found that petitioner company lacked the power of
control over respondent’s performance of his duties, and recognized
as valid the Retainer Agreement between the parties. Thus, the
Labor Arbiter dismissed respondent’s complaint in the first case, RAB
Case No. 06-02-10138-94. The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the instant complaint seeking recognition as a regular
employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin
Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-
04-10177-95) in view of the previous finding of Labor Arbiter Jesus
N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant
therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers
Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division,
Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC
dismissed the appeal in both cases for lack of merit. It declared that
no employer-employee relationship existed between petitioner
company and respondent based on the provisions of the Retainer
Agreement which contract governed respondent’s employment.
Respondent’s motion for reconsideration was denied by the NLRC in
a Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals
ruled that an employer-employee relationship existed between
petitioner company and respondent after applying the four-fold test:
(1) the power to hire the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer’s power to control the
115
employee with respect to the means and methods by which the work
is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when
read together with the Comprehensive Medical Plan which was made
an integral part of the retainer agreements, coupled with the actual
services rendered by the petitioner, would show that all the elements
of the above test are present.
First, the agreements provide that "the COMPANY desires to engage
on a retainer basis the services of a physician and the said DOCTOR
is accepting such engagement x x x" (Rollo, page 25). This clearly
shows that Coca-Cola exercised its power to hire the services of
petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner
would be entitled to a final compensation of Three Thousand Eight
Hundred Pesos per month, which amount was later raised to Seven
Thousand Five Hundred on the latest contract. This would represent
the element of payment of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the
same shall be valid for a period of one year. "The said term
notwithstanding, either party may terminate the contract upon giving
a thirty (30) day written notice to the other." (Rollo, page 25). This
would show that Coca-Cola had the power of dismissing the
petitioner, as it later on did, and this could be done for no particular
reason, the sole requirement being the former’s compliance with the
30-day notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-
Cola exercised the most important element of all, that is, control,
over the conduct of petitioner in the latter’s performance of his duties
as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the
duties and obligations enumerated in the Comprehensive Medical
Plan referred to above. In paragraph (6), the fixed and definite hours
during which the petitioner must render service to the company is
laid down.
We say that there exists Coca-Cola’s power to control petitioner
because the particular objectives and activities to be observed and
accomplished by the latter are fixed and set under the
Comprehensive Medical Plan which was made an integral part of the
retainer agreement. Moreover, the times for accomplishing these
objectives and activities are likewise controlled and determined by
the company. Petitioner is subject to definite hours of work, and due
to this, he performs his duties to Coca-Cola not at his own pleasure
but according to the schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member
of its Bacolod Plant’s Safety Committee. The minutes of the meeting
of the said committee dated February 16, 1994 included the name of
petitioner, as plant physician, as among those comprising the
committee.
It was averred by Coca-Cola in its comment that they exercised no
control over petitioner for the reason that the latter was not directed
as to the procedure and manner of performing his assigned tasks. It
went as far as saying that "petitioner was not told how to immunize,
inject, treat or diagnose the employees of the respondent (Rollo,
page 228). We believe that if the "control test" would be interpreted
this strictly, it would result in an absurd and ridiculous situation
wherein we could declare that an entity exercises control over
another’s activities only in instances where the latter is directed by
the former on each and every stage of performance of the particular
activity. Anything less than that would be tantamount to no control at
all.
To our minds, it is sufficient if the task or activity, as well as the
means of accomplishing it, is dictated, as in this case where the
objectives and activities were laid out, and the specific time for
performing them was fixed by the controlling party.15
116
Moreover, the Court of Appeals declared that respondent should be
classified as a regular employee having rendered six years of service
as plant physician by virtue of several renewed retainer agreements.
It underscored the provision in Article 28016 of the Labor Code stating
that "any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed,
and his employment shall continue while such activity exists."
Further, it held that the termination of respondent’s services without
any just or authorized cause constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal
was an act oppressive to labor and was effected in a wanton,
oppressive or malevolent manner which entitled respondent to moral
and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National
Labor Relations Commission dated November 28, 1997 and its
Resolution dated August 7, 1998 are found to have been issued with
grave abuse of discretion in applying the law to the established facts,
and are hereby REVERSED and SET ASIDE, and private
respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of
seniority rights from the time his compensation was withheld
up to the time he is actually reinstated; however, if
reinstatement is no longer possible, to pay the petitioner
separation pay equivalent to one (1) month’s salary for every
year of service rendered, computed at the rate of his salary
at the time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of
₱50,000.00.
3. Pay petitioner exemplary damages in the amount of
₱50,000.00.
4. Give to petitioner all other benefits to which a regular
employee of Coca-Cola is entitled from the time petitioner
became a regular employee (one year from effectivity date of
employment) until the time of actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision
of the Court of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of
Appeals stated that petitioner company noted that its Decision failed
to mention whether respondent was a full-time or part-time regular
employee. It also questioned how the benefits under their Collective
Bargaining Agreement which the Court awarded to respondent could
be given to him considering that such benefits were given only to
regular employees who render a full day’s work of not less that eight
hours. It was admitted that respondent is only required to work for
two hours per day.
The Court of Appeals clarified that respondent was a "regular part-
time employee and should be accorded all the proportionate benefits
due to this category of employees of [petitioner] Corporation under
the CBA." It sustained its decision on all other matters sought to be
reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION,
CONTRARY TO THE DECISIONS OF THE HONORABLE
SUPREME COURT ON THE MATTER.
117
2. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS
NECESSARY AND DESIRABLE TO THE BUSINESS OF
SOFTDRINKS MANUFACTURING, CONTRARY TO THE
RULINGS OF THE SUPREME COURT IN ANALOGOUS
CASES.
3. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
HOLDING INSTEAD THAT THE PETITIONERS
EXERCISED CONTROL OVER THE WORK OF THE
RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THERE IS EMPLOYER-EMPLOYEE
RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE
LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THERE EXISTED ILLEGAL DISMISSAL
WHEN THE EMPLOYENT OF THE RESPONDENT WAS
TERMINATED WITHOUT JUST CAUSE.
6. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THE RESPONDENT IS A REGULAR PART
TIME EMPLOYEE WHO IS ENTITLED TO
PROPORTIONATE BENEFITS AS A REGULAR PART TIME
EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS
COMMITTED REVERSIBLE ERROR, BASED ON A
SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE
NATIONAL LABOR RELATIONS COMMISSION, AND
FINDING THAT THE RESPONDENT IS ENTITLED TO
MORAL AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an
employer-employee relationship between the parties. The resolution
of the main issue will determine whether the termination of
respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee
relationship, has invariably adhered to the four-fold test: (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
employee’s conduct, or the so-called "control test," considered to be
the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC
that the circumstances of this case show that no employer-employee
relationship exists between the parties. The Labor Arbiter and the
NLRC correctly found that petitioner company lacked the power of
control over the performance by respondent of his duties. The Labor
Arbiter reasoned that the Comprehensive Medical Plan, which
contains the respondent’s objectives, duties and obligations, does
not tell respondent "how to conduct his physical examination, how to
immunize, or how to diagnose and treat his patients, employees of
118
[petitioner] company, in each case." He likened this case to that
of Neri v. National Labor Relations Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job
description which detailed her functions as a radio/telex operator.
However, a cursory reading of the job description shows that what
was sought to be controlled by FEBTC was actually the end result of
the task, e.g., that the daily incoming and outgoing telegraphic
transfer of funds received and relayed by her, respectively, tallies
with that of the register. The guidelines were laid down merely to
ensure that the desired end result was achieved. It did not, however,
tell Neri how the radio/telex machine should be operated.
In effect, the Labor Arbiter held that petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure
that the end result was achieved, but did not control the means and
methods by which respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it
is precisely because the company lacks the power of control that the
contract provides that respondent shall be directly responsible to the
employee concerned and their dependents for any injury, harm or
damage caused through professional negligence, incompetence or
other valid causes of action.
The Labor Arbiter also correctly found that the provision in the
Retainer Agreement that respondent was on call during emergency
cases did not make him a regular employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at
anytime of the day and night makes him a regular employee is off-
tangent. Complainant does not dispute the fact that outside of the
two (2) hours that he is required to be at respondent company’s
premises, he is not at all further required to just sit around in the
premises and wait for an emergency to occur so as to enable him
from using such hours for his own benefit and advantage. In fact,
complainant maintains his own private clinic attending to his private
practice in the city, where he services his patients, bills them
accordingly -- and if it is an employee of respondent company who is
attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an
employee is required to stay in the employer’s workplace or
proximately close thereto that he cannot utilize his time effectively
and gainfully for his own purpose. Such is not the prevailing situation
here.1awphi1.net
In addition, the Court finds that the schedule of work and the
requirement to be on call for emergency cases do not amount to
such control, but are necessary incidents to the Retainership
Agreement.
The Court also notes that the Retainership Agreement granted to
both parties the power to terminate their relationship upon giving a
30-day notice. Hence, petitioner company did not wield the sole
power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is
nothing wrong with the employment of respondent as a retained
physician of petitioner company and upholds the validity of the
Retainership Agreement which clearly stated that no employer-
employee relationship existed between the parties. The Agreement
also stated that it was only for a period of 1 year beginning January
1, 1988 to December 31, 1998, but it was renewed on a yearly basis.
Considering that there is no employer-employee relationship
between the parties, the termination of the Retainership Agreement,
which is in accordance with the provisions of the Agreement, does
not constitute illegal dismissal of respondent. Consequently, there is
no basis for the moral and exemplary damages granted by the Court
of Appeals to respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and
Resolution of the Court of Appeals are REVERSED and SET ASIDE.
The Decision and Resolution dated November 28, 1997 and August
7, 1998, respectively, of the National Labor Relations Commission
are REINSTATED.
119
 Petitioner, represented by his surviving spouse, Flordeliza V.
FIRST DIVISION Gabriel, was the owner-operator of a public transport business,
Gabriel Jeepney, with a fleet of 54 jeepneysplying the Baclaran-Divisoria-
MELENCIO GABRIEL, G.R. No. 146989 Tondo route. Petitioner had a pool of drivers, which included respondents,
represented by surviving spouse, operating under a boundary system of P400 per day.
FLORDELIZA V. GABRIEL,
Petitioner, Present: The facts[3] are as follows:

PUNO, C.J., Chairperson, On November 15, 1995, respondents filed their separate complaints for
- versus - SANDOVAL-GUTIERREZ, illegal dismissal, illegal deductions, and separation pay against petitioner
CORONA, with the National Labor Relations Commission (NLRC). These were
AZCUNA, and consolidated and docketed as NLRC-NCR Case No. 00-11-07420-95.[4]
GARCIA, JJ.
NELSON BILON, ANGEL BRAZIL On December 15, 1995, the complaint was amended, impleading as party
AND ERNESTO PAGAYGAY, respondent the Bacoor Transport Service Cooperative, Inc., as both parties
Respondents. Promulgated: are members of the cooperative.
February 7, 2007
Respondents alleged the following:
x 1) That they were regular drivers of
---------------------------------------------------------------------------------------- x Gabriel Jeepney, driving their respective units bearing
Plate Nos. PHW 553, NXU 155, and NWW 557, under a
DECISION boundary system of P400 per day,
plying Baclaran to Divisoria via Tondo, and vice versa,
since December 1990, November 1984 and November
AZCUNA, J.: 1991, respectively, up to April 30, 1995,[5] driving five

This is a petition for review on certiorari [1] assailing the Decision days a week, with average daily earnings of P400;
and Resolution of the Court of Appeals, respectively dated August 4,
2000 and February 7, 2001, in CA-G.R. SP No. 52001 entitled 2) That they were required/forced to pay
Nelson Bilon, et al. v. National Labor Relations Commission, et al. additional P55.00 per day for the following: a) P20.00
police protection; b) P20.00 washing; c) P10.00 deposit;
The challenged decision reversed and set aside the decision [2] of the and [d)] P5.00 garage fees;
National Labor Relations Commission (NLRC) dismissing respondents
complaint for illegal dismissal and illegal deductions, and reinstating the 3) That there is no law providing the operator to
decision of the Labor Arbiter finding petitioner guilty of illegal dismissal require the drivers to pay police protection, deposit,
but not of illegal deductions subject to the modification that respondents be washing, and garage fees.
immediately reinstated to their former positions without loss of seniority
rights and privileges instead of being paid separation pay. 4) That on April 30, 1995, petitioner told them
not to drive anymore, and when they went to the garage to

120
 report for work the next day, they were not given a unit to
drive; and
5) That the boundary drivers of
passenger jeepneys are considered regular employees of
the jeepney operators. Being such, they are entitled to
security of tenure. Petitioner, however, dismissed them
without factual and legal basis, and without due process.
On his part, petitioner contended that:
1) He does not remember if the respondents were
ever under his employ as drivers of his
passenger jeepneys. Certain, however, is the fact that
neither the respondents nor other drivers who worked for
him were ever dismissed by him. As a matter of fact,
some of his former drivers just stopped reporting for
work, either because they found some other employment
or drove for other operators, and like the respondents, the
next time he heard from them was when they started
fabricating unfounded complaints against him;
2) He made sure that none of the jeepneys would
stay idle even for a day so he could collect his earnings;
hence, it had been his practice to establish a pool of
drivers. Had respondents manifested their desire to drive
his units, it would have been immaterial whether they
were his former drivers or not. As long as they obtained
the necessary licenses and references, they would have
been accommodated and placed on schedule;
3) While he was penalized or made to pay a
certain amount in connection with similar complaints by
other drivers in a previous case before this, it was not
because his culpability was established, but due to
technicalities involving oversight and negligence on his
part by not participating in any stage of the investigation
thereof; and
4) Respondents claim that certain
amounts, as enumerated in the complaint, were deducted
from their days earnings is preposterous. Indeed, there
were times when deductions were made from the days
earnings of some drivers, but such were installment
payments for the amount previously advanced to
them. Most drivers, when they got involved in accidents
or violations of traffic regulations, managed to settle
them, and in the process they had to spend some money,
but most of the time they did not have the needed amount
so they secured cash advances
from him, with the understanding that the same should be
paid back by installments through deductions from their
daily earnings or boundary.
On the other hand, Bacoor Transport Service Cooperative, Inc.
(BTSCI) declared that it should not be made a party to the case because: 1)
[I]t has nothing to do with the employment of its member-drivers. The
matter is between the member-operator and their respective member-
drivers. The member-drivers tenure of employment, compensation, work
conditions, and other aspects of employment are matters of arrangement
between them and the member-operators concerned, and the BTSCI has
nothing to do with it, as can be inferred from the Management Agreement
between BTSCI and the member-operators; and 2) [T]he amount allegedly
deducted from respondents and the purpose for which they were applied
were matters that the cooperative was not aware of, and much less imposed
on them.
On September 17, 1996, respondents filed a motion to re-raffle the case for
the reason that the Labor Arbiter (Hon. Roberto I. Santos) failed to render
his decision within thirty (30) calendar days, without extension, after the
submission of the case for decision.
On September 18, 1996, said Labor Arbiter inhibited himself from further
handling the case due to personal reasons.
On November 8, 1996, Labor Arbiter Ricardo C. Nora, to whom
the case was re-raffled, ordered the parties to file their respective
121
memoranda within ten days, after which the case was deemed submitted for Incidentally, on April 4, 1997, petitioner passed away. On April 18, 1997, a
resolution. copy of the above decision was delivered personally to petitioners house.
On March 17, 1997, the Labor Arbiter (Hon. Ricardo C. Nora) According to respondents, petitioners surviving spouse, Flordeliza Gabriel,
handed down his decision, the dispositive portion of which is worded as and their daughter, after reading the contents of the decision and after they
follows: had spoken to their counsel, refused to receive the same. Nevertheless,
Bailiff Alfredo V. Estonactoc left a copy of the decision with petitioners
WHEREFORE, premises considered, judgment is hereby wife and her daughter but they both refused to sign and acknowledge receipt
rendered declaring the illegality of [respondents] of the decision.[7]
dismissal and ordering [petitioner] Melencio Gabriel to The labor arbiters decision was subsequently served by registered
pay the [respondents] the total amount of ONE MILLION mail at petitioners residence and the same was received on May 28, 1997.
THIRTY FOUR THOUSAND PESOS [P1,034,000,] On May 16, 1997, counsel for petitioner filed an entry of appearance with
representing [respondents] backwages and separation pay motion to dismiss the case for the reason that petitioner passed away last
as follows: April 4, 1997.
On June 5, 1997, petitioner appealed the labor arbiters decision to
1. Nelson Bilon the National Labor Relations Commission, First Division, contending that
the labor arbiter erred:
Backwages P 284,800
Separation Pay 26,400 P 321,200 1. In holding that [petitioner] Gabriel dismissed the
complainants, Arb. Nora committed a serious
2. Angel Brazil error in the findings of fact which, if not
corrected, would cause grave or irreparable
Backwages P 294,800 damage or injury to [petitioner] Gabriel;
Separation Pay 96,800 391,600
2. In holding that strained relations already exist between
3. Ernesto Pagaygay the parties, justifying an award of separation pay
in lieu of reinstatement, Arb. Nora not only
Backwages P 294,800 committed a serious error in the findings of fact,
Separation Pay 26,400 321,200 but he also abused his discretion;
P 1,034,000
3. In computing the amount of backwages allegedly due
[Petitioner] Melencio Gabriel is likewise ordered to pay [respondents] from 30 April 1995 to 15 March
attorneys fees equivalent to five percent (5%) of the 1997, Arb. Nora abused his discretion,
judgment award or the amount of P51,700 within ten (10) considering that the case had been submitted for
days from receipt of this Decision. decision as early as 1 March 1996 and that the
same should have been decided as early as 31
All other issues are dismissed for lack of merit. March 1996;
SO ORDERED.[6]
4. In using P400.00 and 22 days as factors in computing
the amount of backwages allegedly due
[respondents], Arb. Nora abused his discretion

122
 and committed a serious error in the findings of
fact, considering that there was no factual or
evidentiary basis therefor;
5. In using 33.5 months as factor in the computation of the
amount of backwages allegedly due
[respondents], Arb. Nora committed a serious
error in the findings of fact[,] because even if it
is assumed that backwages are due from 30 April
1995 to 15 March 1997, the period between the
two dates is only 22 months, and not 33 months
as stated in the appealed decision; and
6. In not dismissing the case[,] despite notice of
the death of [petitioner] Gabriel before final
judgment, Arb. Nora abused his discretion and
committed a serious error of law.[8]
On July 3, 1997, respondents filed a motion to dismiss petitioners appeal on
the ground that the surety bond is defective and the appeal was filed out of
time, which move was opposed by petitioner.
Subsequently, on April 28, 1998, the NLRC promulgated its first decision,
the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed
decision is hereby reversed and set aside. The above-
entitled case is hereby dismissed for lack of employer-
employee relationship.
SO ORDERED.[9]
Respondents filed a motion for reconsideration. They claimed that the
decision did not discuss the issue of the timeliness of the appeal. The lack of
employer-employee relationship was mentioned in the dispositive portion,
which issue was not raised before the labor arbiter or discussed in the body
of the questioned decision. In view of the issues raised by respondents in
their motion, the NLRC rendered its second decision on October 29, 1998.
The pertinent portions are hereby quoted thus:
In the case at bar, [petitioner] Melencio Gabriel was not
represented by counsel during the pendency of the case. A
decision was rendered by the Labor Arbiter a
quo on March 17, 1997 while Mr. Gabriel passed away
on April 4, 1997 without having received a copy thereof
during his lifetime. The decision was only served on April
18, 1997 when he was no longer around to receive the
same. His surviving spouse and daughter cannot
automatically substitute themselves as party respondents.
Thus, when the bailiff tendered a copy of the decision to
them, they were not in a position to receive them. The
requirement of leaving a copy at the partys residence is
not applicable in the instant case because this presupposes
that the party is still living and is just not available to
receive the decision.
The preceding considered, the decision of the labor arbiter
has not become final because there was no proper service
of copy thereof to [petitioner] .
Undoubtedly, this case is for recovery of money which
does not survive, and considering that the decision has not
become final, the case should have been dismissed and
the appeal no longer entertained.
WHEREFORE, in view of the foregoing, the Decision
of April 28, 1998 is set aside and vacated. Furthermore,
the instant case is dismissed and complainants are
directed to pursue their claim against the proceedings for
the settlement of the estate of the
deceased Melencio Gabriel.
SO ORDERED.[10]
Aggrieved by the decision of the NLRC, respondents elevated the case to
the Court of Appeals (CA) by way of a petition for certiorari. On August 4,
2000, the CA reversed the decisions of the NLRC:
123
 Article 223 of the Labor Code categorically
mandates that an appeal by the employer may be SECTION 3. Execution in
perfected only upon the posting of a cash bond or surety Case of Death of Party. Where a party
bond x x x. It is beyond peradventure then that the non- dies after the finality of the
compliance with the above conditio sine qua non, plus the decision/entry of judgment of order,
fact that the appeal was filed beyond execution thereon may issue or one
the reglementary period, should have been enough already issued may be enforced in the
reasons to dismiss the appeal. following cases:

In any event, even conceding ex gratia that such a) x x x ;

procedural infirmity [were] inexistent, this petition would b) In case of death of the
still be tenable based on substantive aspects. losing party, against his
successor-in-interest, executor
The public respondents decision, dated April 28, 1998, is or administrator;
egregiously wrong insofar as it was anchored on the c) In case of death of the
absence of an employer-employee relationship. Well- losing party after execution is
settled is the rule that the boundary system used actually levied upon any of his
in jeepney and (taxi) operations presupposes an employer- property, the same may be sold
employee relationship (National Labor Union for the satisfaction thereof, and
v. Dinglasan, 98 Phil. 649) . the sheriff making the sale
shall account to his successor-
The NLRC ostensibly tried to redeem itself by vacating in-interest, executor or
the decision April 28, 1998. By so doing, however, it did administrator for any surplus in
not actually resolve the matter definitively. It merely his hands.
relieved itself of such burden by suggesting that the
petitioners pursue their claim against the proceedings for Notwithstanding the foregoing disquisition
the settlement of the estate of the though, We are not entirely in accord with the labor
deceased Melencio Gabriel. arbiters decision awarding separation pay in favor of the
petitioners. In this regard, it [is] worth mentioning that
In the instant case, the decision (dated March 17, 1997) of in Kiamco v. NLRC,[11] citing Globe-Mackay Cable and
the Labor Arbiter became final and executory on account Radio Corp. v. NLRC,[12] the Supreme Court qualified the
of the failure of the private respondent to perfect his application of the strained relations principle when it held
appeal on time. --

Thus, we disagree with the ratiocination of the NLRC that
the death of the private respondent on April 4, 1997 ipso
facto negates recovery of the money claim against the
successors-in-interest . Rather, this situation comes within
the aegis of Section 3, Rule III of the NLRC Manual on
Execution of Judgment, which provides:
If in the wisdom of the Court,
there may be a ground or grounds for
the non-application of the above-cited
provision (Art. 279, Labor Code) this
should be by way of exception, such as
when the reinstatement may be

124
 inadmissible due to ensuing strained
relations between the employer and
employee.
In such cases, it should be
proved that the employee concerned
occupies a position where he enjoys the
trust and confidence of his employer,
and that it is likely that if reinstated, an
atmosphere of antipathy and antagonism
may be generated as to adversely affect
the efficiency and productivity of the
employee concerned x x x Obviously,
the principle of strained relations cannot
be applied indiscriminately. Otherwise,
reinstatement can never be possible
simply because some hostility is
invariably engendered between the
parties as a result of litigation. That is
human nature.
Besides, no strained relations
should arise from a valid legal act of
asserting ones right; otherwise[,] an
employee who shall assert his right
could be easily separated from the
service by merely paying his separation
pay on the pretext that his relationship
with his employer had already become
strained.
Anent the award of backwages, the Labor Arbiter erred in
computing the same from the date the petitioners were
illegally dismissed (i.e. April 30, 1995) up to March 15,
1997, that is two (2) days prior to the rendition of his
decision (i.e. March 17, 1997).
WHEREFORE, premises considered, the petition is
GRANTED, hereby REVERSING and SETTING ASIDE
the assailed decisions of the National Labor Relations
Commission, dated April 28, 1998 ans October 29, 1998.
Consequently, the decision of the Labor Arbiter,
dated March 17, 1997, is hereby REINSTATED, subject
to the MODIFICATION that the private respondent is
ORDERED to immediately REINSTATE petitioners
Nelson Bilon, Angel Brazil and Ernesto Pagaygay to their
former position without loss of seniority rights and
privileges, with full backwages from the date of their
dismissal until their actual reinstatement. Costs against
private respondent.
SO ORDERED.[13]
Petitioner filed a motion for reconsideration but the same was denied by the
CA in a resolution dated February 7, 2001.
Hence, this petition raising the following issues:[14]
I
THE COURT OF APPEALS ERRED IN FINDING
THAT PETITIONERS APPEAL TO THE NATIONAL
LABOR RELATIONS COMMISSION WAS FILED
OUT OF TIME.
II
THE COURT OF APPEALS ERRED IN HOLDING
THAT THE ALLEGED DEFECTS IN PETITIONERS
APPEAL BOND WERE OF SUCH GRAVITY AS TO
PREVENT THE APPEAL FROM BEING PERFECTED.
III
THE COURT OF APPEALS ERRED IN GRANTING
RESPONDENTS PETITION FOR CERTIORARI
DESPITE THE FACT THAT THE SAME ASSAILED A
DECISION WHICH HAD BEEN VACATED IN FAVOR
OF A NEW ONE WHICH, IN TURN, HAS SOLID
LEGAL BASIS.
IV
125
 THE COURT OF APPEALS ERRED IN APPLYING
SECTION 3, RULE III, OF THE MANUAL ON
EXECUTION OF JUDGMENT OF THE NATIONAL
LABOR RELATIONS COMMISSION WHICH, BY ITS
OWN EXPRESS TERMS, IS NOT APPLICABLE.
A resolution of the case requires a brief discussion of two issues
which touch upon the procedural and substantial aspects of the case thus: a)
whether petitioners appeal was filed out of time; and b) whether the claim
survives.
As regards the first issue, the Court considers the service of copy
of the decision of the labor arbiter to have been validly made on May 28,
1997 when it was received through registered mail. As correctly pointed out
by petitioners wife, service of a copy of the decision could not have been
validly effected on April 18, 1997 because petitioner passed away on April
4, 1997.
Section 4, Rule III of the New Rules of Procedure of the NLRC
provides:
SEC. 4. Service of Notices and Resolutions. (a)
Notices or summons and copies of orders, resolutions or
decisions shall be served on the parties to the case
personally by the bailiff or authorized public officer
within three (3) days from receipt thereof or by registered
mail; Provided, That where a party is represented by
counsel or authorized representative, service shall be
made on such counsel or authorized representative;
Provided further, That in cases of decision and final
awards, copies thereof shall be served on both parties and
their counsel .
For the purpose of computing the period of
appeal, the same shall be counted from receipt of such
decisions, awards or orders by the counsel of record.
(b) The bailiff or officer personally serving the
notice, order, resolution or decision shall submit his return
within two (2) days from date of service thereof, stating
legibly in his return, his name, the names of the persons
served and the date of receipt which return shall be
immediately attached and shall form part of the records of
the case. If no service was effected, the serving officer
shall state the reason therefore in the return.
Section 6, Rule 13 of the Rules of Court which is suppletory to the NLRC
Rules of Procedure states that: [s]ervice of the papers may be made by
delivering personally a copy to the party or his counsel, or by leaving it in
his office with his clerk or with a person having charge thereof. If no person
is found in his office, or his office is not known, or he has no office, then by
leaving the copy, between the hours of eight in the morning and six in the
evening, at the partys or counsels residence, if known, with a person of
sufficient age and discretion then residing therein.
The foregoing provisions contemplate a situation wherein the party to the
action is alive upon the delivery of a copy of the tribunals decision. In the
present case, however, petitioner died before a copy of the labor arbiters
decision was served upon him. Hence, the above provisions do not apply. As
aptly stated by the NLRC:
In the case at bar, respondent Melencio Gabriel was not
represented by counsel during the pendency of the case. A
decision was rendered by the Labor Arbiter a
quo on March 17, 1997 while Mr. Gabriel passed away
on April 4, 1997, without having received a copy thereof
during his lifetime. The decision was only served on April
18, 1997 when he was no longer around to receive the
same. His surviving spouse and daughter cannot
automatically substitute themselves as party respondents.
Thus, when the bailiff tendered a copy of the decision to
them, they were not in a position to receive them. The
requirement of leaving a copy at the partys residence is
not applicable in the instant case because this presupposes
that the party is still living and is not just available to
receive the decision.
126
 The preceding considered, the decision of the
Labor Arbiter has not become final because there was no
proper service of copy thereof to party respondent.[15]
Thus, the appeal filed on behalf of petitioner on June 5, 1997 after receipt of
a copy of the decision via registered mail on May 28, 1997 was within the
ten-day reglementaryperiod prescribed under Section 223 of the Labor
Code.
On the question whether petitioners surety bond was defective,
Section 6, Rule VI of the New Rules of Procedure of the NLRC provides:
SEC. 6. Bond. In case the decision of a Labor
Arbiter involves monetary award, an appeal by the
employer shall be perfected only upon the posting of a
cash or surety bond issued by a reputable bonding
company duly accredited by the Commission or the
Supreme Court in an amount equivalent to the monetary
award, exclusive of moral and exemplary damages and
attorneys fees.
The employer as well as counsel shall submit a
joint declaration under oath attesting that the surety bond
posted is genuine and that it shall be in effect until final
disposition of the case.
The Commission may, in meritorious cases and
upon Motion of the Appellant, reduce the amount of the
bond. (As amended on Nov. 5, 1993).
The Court believes that petitioner was able to comply substantially with the
requirements of the above Rule. As correctly pointed out by the NLRC:
While we agree with complainants-appellees that the
posting of the surety bond is jurisdictional, We do not
believe that the defects imputed to the surety bond posted
for and in behalf of respondent-appellant Gabriel are of
such character as to affect the jurisdiction of this
Commission to entertain the instant appeal.
It matters not that, by the terms of the bond posted, the
Liability of the surety herein shall expire on June 5,
1998 and this bond shall be automatically cancelled ten
(10) days after the expiration. After all, the bond is
accompanied by the joint declaration under oath of
respondent-appellants surviving spouse and counsel
attesting that the surety bond is genuine and shall be in
effect until the final disposition of the case.
Anent complainants-appellees contention that the surety
bond posted is defective for being in the name of BTSCI
which did not appeal and for having been entered into by
Mrs. Gabriel without BTSCIs authority, the same has
been rendered moot and academic by the certification
issued by Gil CJ. San Juan, Vice-President of the bonding
company to the effect that Eastern Assurance and Surety
Corporation Bond No. 2749 was posted for and on behalf
appellant Melencio Gabriel and/or his heirs and that (T)he
name Bacoor Transport Service Cooperative, Inc. was
indicated in said bond due merely in (sic) advertence.
At any rate, the Supreme Court has time and again ruled
that while Article 223 of the Labor Code, as amended
requiring a cash or surety bond in the amount equivalent
to the monetary award in the judgment appealed from for
the appeal to be perfected, may be considered a
jurisdictional requirement, nevertheless, adhering to the
principle that substantial justice is better served by
allowing the appeal on the merits threshed out by this
Honorable Commission, the foregoing requirement of the
law should be given a liberal interpretation
(Pantranco North Express, Inc. v. Sison, 149 SCRA 238;
C.W. Tan Mfg. v. NLRC, 170 SCRA 240; YBL v. NLRC,
190 SCRA 160; Rada v. NLRC, 205 SCRA 69; Star Angel
Handicraft v. NLRC, 236 SCRA 580).[16]
On the other hand, with regard to the substantive aspect of the case, the
Court agrees with the CA that an employer-employee relationship existed
127
between petitioner and respondents. In Martinez v. National Labor
Relations Commission,[17] citing National Labor Union v. Dinglasan,[18] the
Court ruled that:
[T]he relationship
between jeepney owners/operators and jeepney drivers
under the boundary system is that of employer-employee
and not of lessor-lessee because in the lease of chattels
the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof,
otherwise he would be responsible for the damages to
the lessor. In the case of jeepney owners/operators
and jeepney drivers, the former exercises supervision and
control over the latter. The fact that the drivers do not
receive fixed wages but get only that in excess of the so-
called boundary [that] they pay to the owner/operator is
not sufficient to withdraw the relationship between them
from that of employer and employee. Thus, private
respondents were employees because they had been
engaged to perform activities which were usually
necessary or desirable in the usual business or trade of the
employer.[19]
The same principle was reiterated in the case of Paguio Transport
Corporation v. NLRC.[20]
The Court also agrees with the labor arbiter and the CA that respondents
were illegally dismissed by petitioner. Respondents were not accorded due
process.[21] Moreover, petitioner failed to show that the cause
for termination falls under any of the grounds enumerated in Article 282
(then Article 283)[22] of the Labor Code.[23] Consequently, respondents are
entitled to reinstatement without loss of seniority rights and other privileges
and to their full backwages computed from the date of dismissal up to the
time of their actual reinstatement in accordance with Article 279 of the
Labor Code.
Reinstatement is obtainable in this case because it has not been shown that
there is an ensuing strained relations between petitioner and respondents.
This is pursuant to the principle laid down in Globe-Mackay Cable and
Radio Corporation v. NLRC[24] as quoted earlier in the CA decision.
With regard to respondents monetary claim, the same shall be governed by
Section 20 (then Section 21), Rule 3 of the Rules of Court which provides:
SEC. 20. Action on contractual money claims. When the
action is for recovery of money arising from contract,
express or implied, and the defendant dies before entry of
final judgment in the court in which the action was
pending at the time of such death, it shall not be dismissed
but shall instead be allowed to continue until entry of final
judgment. A favorable judgment obtained by the plaintiff
therein shall be enforced in the manner provided in these
Rules for prosecuting claims against the estate of a
deceased person. (21a)
In relation to this, Section 5, Rule 86 of the Rules of Court states:
SEC. 5. Claims which must be filed under the notice. If
not filed, barred ; exceptions. All claims for money
against the decedent arising from contract, express or
implied, whether the same be due, not due, or
contingent, ... and judgment for money against the
decedent, must be filed within the time limited in the
notice; otherwise they are barred forever, except that they
may be setforth as counterclaims in any action that the
executor or administrator may bring against the claimants.
Thus, in accordance with the above Rules, the money claims of respondents
must be filed against the estate of petitioner Melencio Gabriel.[25]
WHEREFORE, the petition is DENIED. The Decision and Resolution of
the Court of Appeals dated August 4, 2000 and February 7, 2001,
respectively, in CA-G.R. SP No. 52001 are AFFIRMED but with
the MODIFICATION that the money claims of respondents should be filed
against the estate of Melencio Gabriel, within such reasonable time from the
finality of this Decision as the estate court may fix.
128
 Since 24 May 1995, respondent Antonio Bautista has been
No costs. employed by petitioner Auto Bus Transport Systems, Inc. (Autobus),
as driver-conductor with travel routes Manila-Tuguegarao via Baguio,
Baguio- Tuguegarao via Manila and Manila-Tabuk via Baguio.
SO ORDERED. Respondent was paid on commission basis, seven percent (7%) of
the total gross income per travel, on a twice a month basis.
On 03 January 2000, while respondent was driving Autobus No.
114 along Sta. Fe, Nueva Vizcaya, the bus he was driving
accidentally bumped the rear portion of Autobus No. 124, as the
latter vehicle suddenly stopped at a sharp curve without giving any
warning.
SECOND DIVISION Respondent averred that the accident happened because he
was compelled by the management to go back to Roxas, Isabela,
although he had not slept for almost twenty-four (24) hours, as he
had just arrived in Manila from Roxas, Isabela. Respondent further
[G.R. No. 156367. May 16, 2005] alleged that he was not allowed to work until he fully paid the amount
of P75,551.50, representing thirty percent (30%) of the cost of repair
of the damaged buses and that despite respondents pleas for
reconsideration, the same was ignored by management. After a
AUTO BUS TRANSPORT SYSTEMS, INC., petitioner, month, management sent him a letter of termination.
vs. ANTONIO BAUTISTA, respondent.
Thus, on 02 February 2000, respondent instituted a Complaint
for Illegal Dismissal with Money Claims for nonpayment of 13 th month
DECISION pay and service incentive leave pay against Autobus.
CHICO-NAZARIO, J.: Petitioner, on the other hand, maintained that respondents
employment was replete with offenses involving reckless
Before Us is a Petition for Review on Certiorari assailing the imprudence, gross negligence, and dishonesty. To support its claim,
Decision[1] and Resolution[2] of the Court of Appeals affirming the petitioner presented copies of letters, memos, irregularity reports,
Decision[3] of the National Labor Relations Commission (NLRC). The and warrants of arrest pertaining to several incidents wherein
NLRC ruling modified the Decision of the Labor Arbiter (finding respondent was involved.
respondent entitled to the award of 13th month pay and service
incentive leave pay) by deleting the award of 13 th month pay to Furthermore, petitioner avers that in the exercise of its
respondent. management prerogative, respondents employment was terminated
only after the latter was provided with an opportunity to explain his
side regarding the accident on 03 January 2000.
THE FACTS On 29 September 2000, based on the pleadings and supporting
evidence presented by the parties, Labor Arbiter Monroe C. Tabingan
promulgated a Decision,[4] the dispositive portion of which reads:

129
WHEREFORE, all premises considered, it is hereby found that the
complaint for Illegal Dismissal has no leg to stand on. It is hereby ordered
DISMISSED, as it is hereby DISMISSED.
However, still based on the above-discussed premises, the respondent must
pay to the complainant the following:
a. his 13th month pay from the date of his hiring to the date
of his dismissal, presently computed at P78,117.87;
b. his service incentive leave pay for all the years he had
been in service with the respondent, presently
computed at P13,788.05.
All other claims of both complainant and respondent are hereby dismissed
for lack of merit.[5]
Not satisfied with the decision of the Labor Arbiter, petitioner
appealed the decision to the NLRC which rendered its decision on 28
September 2001, the decretal portion of which reads:
[T]he Rules and Regulations Implementing Presidential Decree No. 851,
particularly Sec. 3 provides:
Section 3. Employers covered. The Decree shall apply to all employers
except to:
xxx xxx xxx
e) employers of those who are paid on purely commission, boundary, or task
basis, performing a specific work, irrespective of the time consumed in the
performance thereof. xxx.
Records show that complainant, in his position paper, admitted that he was
paid on a commission basis.
In view of the foregoing, we deem it just and equitable to modify the
assailed Decision by deleting the award of 13th month pay to the
complainant.
WHEREFORE, the Decision dated 29 September 2000 is MODIFIED by
deleting the award of 13th month pay. The other findings are AFFIRMED.[6]
In other words, the award of service incentive leave pay was
maintained. Petitioner thus sought a reconsideration of this aspect,
which was subsequently denied in a Resolution by the NLRC dated
31 October 2001.
Displeased with only the partial grant of its appeal to the NLRC,
petitioner sought the review of said decision with the Court of
Appeals which was subsequently denied by the appellate court in a
Decision dated 06 May 2002, the dispositive portion of which reads:
WHEREFORE, premises considered, the Petition is DISMISSED for lack
of merit; and the assailed Decision of respondent Commission in NLRC
NCR CA No. 026584-2000 is hereby AFFIRMED in toto. No costs.[7]
Hence, the instant petition.
ISSUES
1. Whether or not respondent is entitled to service incentive
leave;
2. Whether or not the three (3)-year prescriptive period provided
under Article 291 of the Labor Code, as amended, is
applicable to respondents claim of service incentive leave
pay.
RULING OF THE COURT
130
 The disposition of the first issue revolves around the proper
interpretation of Article 95 of the Labor Code vis--vis Section 1(D),
Rule V, Book III of the Implementing Rules and Regulations of the
Labor Code which provides:
Art. 95. RIGHT TO SERVICE INCENTIVE LEAVE
(a) Every employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five
days with pay.
Book III, Rule V: 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 in a fixed amount for performing
work irrespective of the time consumed in the performance
thereof; . . .
A careful perusal of said provisions of law will result in the
conclusion that the grant of service incentive leave has been
delimited by the Implementing Rules and Regulations of the Labor
Code to apply only to those employees not explicitly excluded by
Section 1 of Rule V. According to the Implementing Rules, Service
Incentive Leave shall not apply to employees classified as field
personnel. The phrase other employees whose performance is
unsupervised by the employer must not be understood as a separate
classification of employees to which service incentive leave shall not
be granted. Rather, it serves as an amplification of the interpretation
of the definition of field personnel under the Labor Code as those
whose actual hours of work in the field cannot be determined with
reasonable certainty.[8]
The same is true with respect to the phrase those who are
engaged on task or contract basis, purely commission basis. Said
phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained
and limited by the particular terms that they follow. [9] Hence,
employees engaged on task or contract basis or paid on purely
commission basis are not automatically exempted from the grant of
service incentive leave, unless, they fall under the classification of
field personnel.
Therefore, petitioners contention that respondent is not entitled
to the grant of service incentive leave just because he was paid on
purely commission basis is misplaced. What must be ascertained in
order to resolve the issue of propriety of the grant of service incentive
leave to respondent is whether or not he is a field personnel.
According to Article 82 of the Labor Code, field personnel shall
refer to non-agricultural employees who regularly perform their duties
away from the principal place of business or branch office of the
employer and whose actual hours of work in the field cannot be
determined with reasonable certainty. This definition is further
elaborated in the Bureau of Working Conditions (BWC), Advisory
Opinion to Philippine Technical-Clerical Commercial Employees
Association[10] which states that:
As a general rule, [field personnel] are those whose performance of their
job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days
of work cannot be determined with reasonable certainty; hence, they are
paid specific amount for rendering specific service or performing specific
work. If required to be at specific places at specific times, employees
including drivers cannot be said to be field personnel despite the fact that
they are performing work away from the principal office of the
employee. [Emphasis ours]
To this discussion by the BWC, the petitioner differs and
postulates that under said advisory opinion, no employee would ever
be considered a field personnel because every employer, in one way
or another, exercises control over his employees. Petitioner further
argues that the only criterion that should be considered is the nature
of work of the employee in that, if the employees job requires that he
works away from the principal office like that of a messenger or a bus
driver, then he is inevitably a field personnel.
131
 We are not persuaded. At this point, it is necessary to stress
that the definition of a field personnel is not merely concerned with
the location where the employee regularly performs his duties but
also with the fact that the employees performance is unsupervised by
the employer. As discussed above, field personnel are those who
regularly perform their duties away from the principal place of
business of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. Thus, in order to
conclude whether an employee is a field employee, it is also
necessary to ascertain if actual hours of work in the field can be
determined with reasonable certainty by the employer. In so doing,
an inquiry must be made as to whether or not the employees time
and performance are constantly supervised by the employer.
As observed by the Labor Arbiter and concurred in by the Court
of Appeals:
It is of judicial notice that along the routes that are plied by these bus
companies, there are its inspectors assigned at strategic places who board
the bus and inspect the passengers, the punched tickets, and the conductors
reports. There is also the mandatory once-a-week car barn or shop day,
where the bus is regularly checked as to its mechanical, electrical, and
hydraulic aspects, whether or not there are problems thereon as reported by
the driver and/or conductor. They too, must be at specific place as [sic]
specified time, as they generally observe prompt departure and arrival from
their point of origin to their point of destination. In each and every depot,
there is always the Dispatcher whose function is precisely to see to it that
the bus and its crew leave the premises at specific times and arrive at the
estimated proper time. These, are present in the case at bar. The driver, the
complainant herein, was therefore under constant supervision while in the
performance of this work. He cannot be considered a field personnel.[11]
We agree in the above disquisition. Therefore, as correctly
concluded by the appellate court, respondent is not a field personnel
but a regular employee who performs tasks usually necessary and
desirable to the usual trade of petitioners business. Accordingly,
respondent is entitled to the grant of service incentive leave.
The question now that must be addressed is up to what amount
of service incentive leave pay respondent is entitled to.
The response to this query inevitably leads us to the correlative
issue of whether or not the three (3)-year prescriptive period under
Article 291 of the Labor Code is applicable to respondents claim of
service incentive leave pay.
Article 291 of the Labor Code states that all money claims
arising from employer-employee relationship shall be filed within
three (3) years from the time the cause of action accrued; otherwise,
they shall be forever barred.
In the application of this section of the Labor Code, the pivotal
question to be answered is when does the cause of action for money
claims accrue in order to determine the reckoning date of the three-
year prescriptive period.
It is settled jurisprudence that a cause of action has three
elements, to wit, (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such
right; and (3) an act or omission on the part of such defendant
violative of the right of the plaintiff or constituting a breach of the
obligation of the defendant to the plaintiff. [12]
To properly construe Article 291 of the Labor Code, it is
essential to ascertain the time when the third element of a cause of
action transpired. Stated differently, in the computation of the three-
year prescriptive period, a determination must be made as to the
period when the act constituting a violation of the workers right to the
benefits being claimed was committed. For if the cause of action
accrued more than three (3) years before the filing of the money
claim, said cause of action has already prescribed in accordance
with Article 291.[13]
Consequently, in cases of nonpayment of allowances and other
monetary benefits, if it is established that the benefits being claimed
have been withheld from the employee for a period longer than three
(3) years, the amount pertaining to the period beyond the three-year
prescriptive period is therefore barred by prescription. The amount
that can only be demanded by the aggrieved employee shall be
limited to the amount of the benefits withheld within three (3) years
before the filing of the complaint.[14]
132
 It is essential at this point, however, to recognize that the
service incentive leave is a curious animal in relation to other
benefits granted by the law to every employee. In the case of service
incentive leave, the employee may choose to either use his leave
credits or commute it to its monetary equivalent if not exhausted at
the end of the year.[15] Furthermore, if the employee entitled to
service incentive leave does not use or commute the same, he is
entitled upon his resignation or separation from work to the
commutation of his accrued service incentive leave. As enunciated
by the Court in Fernandez v. NLRC:[16]
The clear policy of the Labor Code is to grant service incentive leave pay to
workers in all establishments, subject to a few exceptions. Section 2, Rule
V, Book III of the Implementing Rules and Regulations provides that
[e]very employee who has rendered at least one year of service shall be
entitled to a yearly service incentive leave of five days with pay. Service
incentive leave is a right which accrues to every employee who has served
within 12 months, whether continuous or broken reckoned from the date the
employee started working, including authorized absences and paid regular
holidays unless the working days in the establishment as a matter of practice
or policy, or that provided in the employment contracts, is less than 12
months, in which case said period shall be considered as one year. It is
also commutable to its money equivalent if not used or exhausted at the end
of the year. In other words, an employee who has served for one year is
entitled to it. He may use it as leave days or he may collect its monetary
value. To limit the award to three years, as the solicitor general
recommends, is to unduly restrict such right.[17] [Italics supplied]
Correspondingly, it can be conscientiously deduced that the
cause of action of an entitled employee to claim his service incentive
leave pay accrues from the moment the employer refuses to
remunerate its monetary equivalent if the employee did not make use
of said leave credits but instead chose to avail of its commutation.
Accordingly, if the employee wishes to accumulate his leave credits
and opts for its commutation upon his resignation or separation from
employment, his cause of action to claim the whole amount of his
accumulated service incentive leave shall arise when the employer
fails to pay such amount at the time of his resignation or separation
from employment.
Applying Article 291 of the Labor Code in light of this peculiarity
of the service incentive leave, we can conclude that the three (3)-
year prescriptive period commences, not at the end of the year when
the employee becomes entitled to the commutation of his service
incentive leave, but from the time when the employer refuses to pay
its monetary equivalent after demand of commutation or upon
termination of the employees services, as the case may be.
The above construal of Art. 291, vis--vis the rules on service
incentive leave, is in keeping with the rudimentary principle that in
the implementation and interpretation of the provisions of the Labor
Code and its implementing regulations, the workingmans welfare
should be the primordial and paramount consideration. [18] The policy
is to extend the applicability of the decree to a greater number of
employees who can avail of the benefits under the law, which is in
consonance with the avowed policy of the State to give maximum aid
and protection to labor.[19]
In the case at bar, respondent had not made use of his service
incentive leave nor demanded for its commutation until his
employment was terminated by petitioner. Neither did petitioner
compensate his accumulated service incentive leave pay at the time
of his dismissal. It was only upon his filing of a complaint for illegal
dismissal, one month from the time of his dismissal, that respondent
demanded from his former employer commutation of his
accumulated leave credits. His cause of action to claim the payment
of his accumulated service incentive leave thus accrued from the
time when his employer dismissed him and failed to pay his
accumulated leave credits.
Therefore, the prescriptive period with respect to his claim for
service incentive leave pay only commenced from the time the
employer failed to compensate his accumulated service incentive
leave pay at the time of his dismissal. Since respondent had filed his
money claim after only one month from the time of his dismissal,
necessarily, his money claim was filed within the prescriptive period
provided for by Article 291 of the Labor Code.
WHEREFORE, premises considered, the instant petition is
hereby DENIED. The assailed Decision of the Court of Appeals in
CA-G.R. SP. No. 68395 is hereby AFFIRMED. No Costs.
133
 SO ORDERED. The CA decision annulled and set aside the May 26, 2010
decision4 of the National Labor Relations Commission
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., (NLRC)5 which, in turn, affirmed the April 30, 2009 Decision 6 of the
concur. Labor Arbiter (LA). The LA's decision dismissed respondent John G.
Macasio's monetary claims.

The Factual Antecedents

In January 2009, Macasio filed before the LA a complaint 7 against

petitioner Ariel L. David, doing business under the name and style
"Yiels Hog Dealer," for non-payment of overtime pay, holiday pay and
13th month pay. He also claimed payment for moral and exemplary
damages and attorney’s fees. Macasio also claimed payment for
service incentive leave (SIL).8

Macasio alleged9 before the LA that he had been working as a

butcher for David since January 6, 1995. Macasio claimed that David
exercised effective control and supervision over his work, pointing
Republic of the Philippines out that David: (1) set the work day, reporting time and hogs to be
SUPREME COURT chopped, as well as the manner by which he was to perform his
Manila work; (2) daily paid his salary of ₱700.00, which was increased from
₱600.00 in 2007, ₱500.00 in 2006 and ₱400.00 in 2005; and (3)
SECOND DIVISION approved and disapproved his leaves. Macasio added that David
owned the hogs delivered for chopping, as well as the work tools and
implements; the latter also rented the workplace. Macasio further
G.R. No. 195466 July 2, 2014 claimed that David employs about twenty-five (25) butchers and
delivery drivers.
ARIEL L. DAVID, doing business under the name and style
"YIELS HOG DEALER," Petitioner, In his defense,10 David claimed that he started his hog dealer
vs. business in 2005 and that he only has ten employees. He alleged
JOHN G. MACASIO, Respondent. that he hired Macasio as a butcher or chopper on "pakyaw" or task
basis who is, therefore, not entitled to overtime pay, holiday pay and
DECISION 13th month pay pursuant to the provisions of the Implementing Rules
and Regulations (IRR) of the Labor Code. David pointed out that
BRION, J.: Macasio: (1) usually starts his work at 10:00 p.m. and ends at 2:00
a.m. of the following day or earlier, depending on the volume of the
We resolve in this petition for review on certiorari1 the challenge to delivered hogs; (2) received the fixed amount of ₱700.00 per
the November 22, 2010 decision2 and the January 31, 2011 engagement, regardless of the actual number of hours that he spent
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 116003. chopping the delivered hogs; and (3) was not engaged to report for

134
work and, accordingly, did not receive any fee when no hogs were
delivered.
Macasio disputed David’s allegations.11 He argued that, first, David
did not start his business only in 2005. He pointed to the Certificate
of Employment12 that David issued in his favor which placed the date
of his employment, albeit erroneously, in January 2000. Second, he
reported for work every day which the payroll or time record could
have easily proved had David submitted them in evidence.
Refuting Macasio’s submissions,13 David claims that Macasio was
not his employee as he hired the latter on "pakyaw" or task basis. He
also claimed that he issued the Certificate of Employment, upon
Macasio’s request, only for overseas employment purposes. He
pointed to the "Pinagsamang Sinumpaang Salaysay," 14 executed by
Presbitero Solano and Christopher (Antonio Macasio’s co-butchers),
to corroborate his claims.
In the April 30, 2009 decision,15 the LA dismissed Macasio’s
complaint for lack of merit. The LA gave credence to David’s claim
that he engaged Macasio on "pakyaw" or task basis. The LA noted
the following facts to support this finding: (1) Macasio received the
fixed amount of ₱700.00 for every work done, regardless of the
number of hours that he spent in completing the task and of the
volume or number of hogs that he had to chop per engagement; (2)
Macasio usually worked for only four hours, beginning from 10:00
p.m. up to 2:00 a.m. of the following day; and (3) the ₱700.00 fixed
wage far exceeds the then prevailing daily minimum wage of
₱382.00. The LA added that the nature of David’s business as hog
dealer supports this "pakyaw" or task basis arrangement.
The LA concluded that as Macasio was engaged on "pakyaw" or task
basis, he is not entitled to overtime, holiday, SIL and 13th month pay.
The NLRC’s Ruling
In its May 26, 2010 decision,16 the NLRC affirmed the LA ruling.17 The
NLRC observed that David did not require Macasio to observe an
eight hour work schedule to earn the fixed ₱700.00 wage; and that
Macasio had been performing a non-time work, pointing out that
Macasio was paid a fixed amount for the completion of the assigned
task, irrespective of the time consumed in its performance. Since
Macasio was paid by result and not in terms of the time that he spent
in the workplace, Macasio is not covered by the Labor Standards
laws on overtime, SIL and holiday pay, and 13th month pay under the
Rules and Regulations Implementing the 13th month pay law. 18
Macasio moved for reconsideration19 but the NLRC denied his
motion in its August 11, 2010 resolution,20 prompting Macasio to
elevate his case to the CA via a petition for certiorari. 21
The CA’s Ruling
In its November 22, 2010 decision,22 the CA partly granted Macasio’s
certiorari petition and reversed the NLRC’s ruling for having been
rendered with grave abuse of discretion.
While the CA agreed with the LAand the NLRC that Macasio was a
task basis employee, it nevertheless found Macasio entitled to his
monetary claims following the doctrine laid down in Serrano v.
Severino Santos Transit.23 The CA explained that as a task basis
employee, Macasio is excluded from the coverage of holiday, SIL
and 13th month pay only if he is likewise a "field personnel." As
defined by the Labor Code, a "field personnel" is one who performs
the work away from the office or place of work and whose regular
work hours cannot be determined with reasonable certainty. In
Macasio’s case, the elements that characterize a "field personnel"
are evidently lacking as he had been working as a butcher at David’s
"Yiels Hog Dealer" business in Sta. Mesa, Manila under David’s
supervision and control, and for a fixed working schedule that starts
at 10:00 p.m.
Accordingly, the CA awarded Macasio’s claim for holiday, SIL and
13th month pay for three years, with 10% attorney’s fees on the total
monetary award. The CA, however, denied Macasio’s claim for moral
and exemplary damages for lack of basis.
135
David filed the present petition after the CA denied his motion for wage method of payment and affirms his regular employment status.
reconsideration24 in the CA’s January 31, 2011 resolution.25 He points out that David did not allege or present any evidence as
regards the quota or number of hogs that he had to chop as basis for
The Petition the "pakyaw" or task basis payment; neither did David present the
time record or payroll to prove that he worked for less than eight
hours each day. Moreover, David did not present any contract to
In this petition,26 David maintains that Macasio’s engagement was on
prove that his employment was on task basis. As David failed to
a "pakyaw" or task basis. Hence, the latter is excluded from the
prove the alleged task basis or "pakyawan" agreement, Macasio
coverage of holiday, SIL and 13th month pay. David reiterates his
concludes that he was David’s employee. Procedurally, Macasio
submissions before the lower tribunals27 and adds that he never had
points out that David’s submissions in the present petition raise
any control over the manner by which Macasio performed his work
purely factual issues that are not proper for a petition for review on
and he simply looked on to the "end-result." He also contends that he
certiorari. These issues – whether he (Macasio) was paid by result or
never compelled Macasio to report for work and that under their
on "pakyaw" basis; whether he was a "field personnel"; whether an
arrangement, Macasio was at liberty to choose whether to report for
employer-employee relationship existed between him and David; and
work or not as other butchers could carry out his tasks. He points out
whether David exercised control and supervision over his work – are
that Solano and Antonio had, in fact, attested to their (David and
all factual in nature and are, therefore, proscribed in a Rule 45
Macasio’s) established "pakyawan" arrangement that rendered a
petition. He argues that the CA’s factual findings bind this Court,
written contract unnecessary. In as much as Macasio is a task basis
absent a showing that such findings are not supported by the
employee – who is paid the fixed amount of ₱700.00 per
evidence or the CA’s judgment was based on a misapprehension of
engagement regardless of the time consumed in the performance –
facts. He adds that the issue of whether an employer-employee
David argues that Macasio is not entitled to the benefits he claims.
relationship existed between him and David had already been settled
Also, he posits that because he engaged Macasio on "pakyaw" or
by the LA29 and the NLRC30 (as well as by the CA per Macasio’s
task basis then no employer-employee relationship exists between
manifestation before this Court dated November 15, 2012), 31 in his
them.
favor, in the separate illegal case that he filed against David.
Finally, David argues that factual findings of the LA, when affirmed by
The Issue
the NLRC, attain finality especially when, as in this case, they are
supported by substantial evidence. Hence, David posits that the CA
erred in reversing the labor tribunals’ findings and granting the The issue revolves around the proper application and interpretation
prayed monetary claims. of the labor law provisions on holiday, SIL and 13th month pay to a
worker engaged on "pakyaw" or task basis. In the context of the Rule
65 petition before the CA, the issue is whether the CA correctly found
The Case for the Respondent
the NLRC in grave abuse of discretion in ruling that Macasio is
entitled to these labor standards benefits.
Macasio counters that he was not a task basis employee or a "field
personnel" as David would have this Court believe.28 He reiterates
The Court’s Ruling
his arguments before the lower tribunals and adds that, contrary to
David’s position, the ₱700.00 fee that he was paid for each day that
he reported for work does not indicate a "pakyaw" or task basis We partially grant the petition.
employment as this amount was paid daily, regardless of the number
or pieces of hogs that he had to chop. Rather, it indicates a daily-

136
Preliminary considerations: the Montoya ruling and the factual-issue-
bar rule
In this Rule 45 petition for review on certiorari of the CA’s decision
rendered under a Rule 65 proceeding, this Court’s power of review is
limited to resolving matters pertaining to any perceived legal errors
that the CA may have committed in issuing the assailed decision.
This is in contrast with the review for jurisdictional errors, which we
undertake in an original certiorari action. In reviewing the legal
correctness of the CA decision, we examine the CA decision based
on how it determined the presence or absence of grave abuse of
discretion in the NLRC decision before it and not on the basis of
whether the NLRC decision on the merits of the case was
correct.32 In other words, we have to be keenly aware that the CA
undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.33
Moreover, the Court’s power in a Rule 45 petition limits us to a
review of questions of law raised against the assailed CA decision. 34
In this petition, David essentially asks the question – whether
Macasio is entitled to holiday, SIL and 13th month pay. This one is a
question of law. The determination of this question of law however is
intertwined with the largely factual issue of whether Macasio falls
within the rule on entitlement to these claims or within the exception.
In either case, the resolution of this factual issue presupposes
another factual matter, that is, the presence of an employer-
employee relationship between David and Macasio.
In insisting before this Court that Macasio was not his employee,
David argues that he engaged the latter on "pakyaw" or task basis.
Very noticeably, David confuses engagement on "pakyaw" or task
basis with the lack of employment relationship. Impliedly, David
asserts that their "pakyawan" or task basis arrangement negates the
existence of employment relationship.
At the outset, we reject this assertion of the petitioner. Engagement
on "pakyaw" or task basis does not characterize the relationship that
may exist between the parties, i.e., whether one of employment or
independent contractorship. Article 97(6) of the Labor Code defines
wages as "xxx the remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for
work done or to be done, or for services rendered or to be
rendered[.]"35 In relation to Article 97(6), Article 10136 of the Labor
Code speaks of workers paid by results or those whose pay is
calculated in terms of the quantity or quality of their work output
which includes "pakyaw" work and other non-time work.
More importantly, by implicitly arguing that his engagement of
Macasio on "pakyaw" or task basis negates employer-employee
relationship, David would want the Court to engage on a factual
appellate review of the entire case to determine the presence or
existence of that relationship. This approach however is not
authorized under a Rule 45 petition for review of the CA decision
rendered under a Rule 65 proceeding.
First, the LA and the NLRC denied Macasio’s claim not because of
the absence of an employer-employee but because of its finding that
since Macasio is paid on pakyaw or task basis, then he is not entitled
to SIL, holiday and 13th month pay. Second, we consider it crucial,
that in the separate illegal dismissal case Macasio filed with the LA,
the LA, the NLRC and the CA uniformly found the existence of an
employer-employee relationship.37
In other words, aside from being factual in nature, the existence of an
employer-employee relationship is in fact a non-issue in this case. To
reiterate, in deciding a Rule 45 petition for review of a labor decision
rendered by the CA under 65, the narrow scope of inquiry is whether
the CA correctly determined the presence or absence of grave abuse
of discretion on the part of the NLRC. In concrete question form, "did
the NLRC gravely abuse its discretion in denying Macasio’s claims
simply because he is paid on a non-time basis?"
At any rate, even if we indulge the petitioner, we find his claim that no
employer-employee relationship exists baseless. Employing the
137
control test,38 we find that such a relationship exist in the present
case.
Even a factual review shows that Macasio is David’s employee
To determine the existence of an employer-employee relationship,
four elements generally need to be 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
employee’s conduct. These elements or indicators comprise the so-
called "four-fold" test of employment relationship. Macasio’s
relationship with David satisfies this test.
First, David engaged the services of Macasio, thus satisfying the
element of "selection and engagement of the employee." David
categorically confirmed this fact when, in his "Sinumpaang
Salaysay," he stated that "nag apply po siya sa akin at kinuha ko siya
na chopper[.]"39 Also, Solano and Antonio stated in their
"Pinagsamang Sinumpaang Salaysay"40 that "[k]ami po ay
nagtratrabaho sa Yiels xxx na pag-aari ni Ariel David bilang butcher"
and "kilalanamin si xxx Macasio na isa ring butcher xxx ni xxx David
at kasama namin siya sa aming trabaho."
Second, David paid Macasio’s wages.Both David and Macasio
categorically stated in their respective pleadings before the lower
tribunals and even before this Court that the former had been paying
the latter ₱700.00 each day after the latter had finished the day’s
task. Solano and Antonio also confirmed this fact of wage payment in
their "Pinagsamang Sinumpaang Salaysay."41 This satisfies the
element of "payment of wages."
Third, David had been setting the day and time when Macasio should
report for work. This power to determine the work schedule obviously
implies power of control. By having the power to control Macasio’s
work schedule, David could regulate Macasio’s work and could even
refuse to give him any assignment, thereby effectively dismissing
him.
And fourth, David had the right and power to control and supervise
Macasio’s work as to the means and methods of performing it. In
addition to setting the day and time when Macasio should report for
work, the established facts show that David rents the place where
Macasio had been performing his tasks. Moreover, Macasio would
leave the workplace only after he had finished chopping all of the hog
meats given to him for the day’s task. Also, David would still engage
Macasio’s services and have him report for work even during the
days when only few hogs were delivered for butchering.
Under this overall setup, all those working for David, including
Macasio, could naturally be expected to observe certain rules and
requirements and David would necessarily exercise some degree of
control as the chopping of the hog meats would be subject to his
specifications. Also, since Macasio performed his tasks at David’s
workplace, David could easily exercise control and supervision over
the former. Accordingly, whether or not David actually exercised this
right or power to control is beside the point as the law simply requires
the existence of this power to control 4243 or, as in this case, the
existence of the right and opportunity to control and supervise
Macasio.44
In sum, the totality of the surrounding circumstances of the present
case sufficiently points to an employer-employee relationship existing
between David and Macasio.
Macasio is engaged on "pakyaw" or task basis
At this point, we note that all three tribunals – the LA, the NLRC and
the CA – found that Macasio was engaged or paid on "pakyaw" or
task basis. This factual finding binds the Court under the rule that
factual findings of labor tribunals when supported by the established
facts and in accord with the laws, especially when affirmed by the
CA, is binding on this Court.
A distinguishing characteristic of "pakyaw" or task basis engagement,
as opposed to straight-hour wage payment, is the non-consideration
of the time spent in working. In a task-basis work, the emphasis is on
the task itself, in the sense that payment is reckoned in terms of
138
completion of the work, not in terms of the number of time spent in
the completion of work.45 Once the work or task is completed, the
worker receives a fixed amount as wage, without regard to the
standard measurements of time generally used in pay computation.
In Macasio’s case, the established facts show that he would usually
start his work at 10:00 p.m. Thereafter, regardless of the total hours
that he spent at the workplace or of the total number of the hogs
assigned to him for chopping, Macasio would receive the fixed
amount of ₱700.00 once he had completed his task. Clearly, these
circumstances show a "pakyaw" or task basis engagement that all
three tribunals uniformly found.
In sum, the existence of employment relationship between the
parties is determined by applying the "four-fold" test; engagement on
"pakyaw" or task basis does not determine the parties’ relationship
as it is simply a method of pay computation. Accordingly, Macasio is
David’s employee, albeit engaged on "pakyaw" or task basis.
As an employee of David paid on pakyaw or task basis, we now go
to the core issue of whether Macasio is entitled to holiday, 13th
month, and SIL pay.
On the issue of Macasio’s entitlement to holiday, SIL and 13th month
pay
The LA dismissed Macasio’s claims pursuant to Article 94 of the
Labor Code in relation to Section 1, Rule IV of the IRR of the Labor
Code, and Article 95 of the Labor Code, as well as Presidential
Decree (PD) No. 851. The NLRC, on the other hand, relied on Article
82 of the Labor Code and the Rules and Regulations Implementing
PD No. 851. Uniformly, these provisions exempt workers paid on
"pakyaw" or task basis from the coverage of holiday, SIL and 13th
month pay.
In reversing the labor tribunals’ rulings, the CA similarly relied on
these provisions, as well as on Section 1, Rule V of the IRR of the
Labor Code and the Court’s ruling in Serrano v. Severino Santos
Transit.46 These labor law provisions, when read together with the
Serrano ruling, exempt those engaged on "pakyaw" or task basis
only if they qualify as "field personnel."
In other words, what we have before us is largely a question of law
regarding the correct interpretation of these labor code provisions
and the implementing rules; although, to conclude that the worker is
exempted or covered depends on the facts and in this sense, is a
question of fact: first, whether Macasio is a "field personnel"; and
second, whether those engaged on "pakyaw" or task basis, but who
are not "field personnel," are exempted from the coverage of holiday,
SIL and 13th month pay.
To put our discussion within the perspective of a Rule 45 petition for
review of a CA decision rendered under Rule 65 and framed in
question form, the legal question is whether the CA correctly ruled
that it was grave abuse of discretion on the part of the NLRC to deny
Macasio’s monetary claims simply because he is paid on a non-time
basis without determining whether he is a field personnel or not.
To resolve these issues, we need tore-visit the provisions involved.
Provisions governing SIL and holiday pay
Article 82 of the Labor Code provides the exclusions from the
coverage of Title I, Book III of the Labor Code - provisions governing
working conditions and rest periods.
Art. 82. Coverage.— The provisions of [Title I] shall apply to
employees in all establishments and undertakings whether for profit
or not, but not to government employees, managerial employees,
field personnel, members of the family of the employer who are
dependent on him for support, domestic helpers, persons in the
personal service of another, and workers who are paid by results as
determined by the Secretary of Labor in appropriate regulations.
xxxx
139
"Field personnel" shall refer to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
[emphases and underscores ours]
Among the Title I provisions are the provisions on holiday pay (under
Article 94 of the Labor Code) and SIL pay (under Article 95 of the
Labor Code). Under Article 82,"field personnel" on one hand and
"workers who are paid by results" on the other hand, are not covered
by the Title I provisions. The wordings of Article82 of the Labor Code
additionally categorize workers "paid by results" and "field personnel"
as separate and distinct types of employees who are exempted from
the Title I provisions of the Labor Code.
The pertinent portion of Article 94 of the Labor Code and its
corresponding provision in the IRR47 reads:
Art. 94. Right to holiday pay. (a) Every worker shall be paid his
regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than (10) workers[.]
[emphasis ours]
xxxx
SECTION 1. Coverage. – This Rule shall apply to all employees
except:
xxxx
(e)Field personnel and other employees whose time and
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. [emphases ours]
On the other hand, Article 95 of the Labor Code and its
corresponding provision in the IRR48 pertinently provides:
Art. 95. Right to service incentive. (a) Every employee who has
rendered at least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying
the benefit herein provided, those enjoying vacation leave with pay of
at least five days and those employed in establishments regularly
employing less than ten employees or in establishments exempted
from granting this benefit by the Secretary of Labor and Employment
after considering the viability or financial condition of such
establishment. [emphases ours]
xxxx
Section 1. Coverage. – This rule shall apply to all employees except:
xxxx
(e) 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. [emphasis ours]
Under these provisions, the general rule is that holiday and SIL pay
provisions cover all employees. To be excluded from their coverage,
an employee must be one of those that these provisions expressly
exempt, strictly in accordance with the exemption. Under the IRR,
exemption from the coverage of holiday and SIL pay refer to "field
personnel and other employees whose time and performance is
unsupervised by the employer including those who are engaged on
task or contract basis[.]" Note that unlike Article 82 of the Labor
Code, the IRR on holiday and SIL pay do not exclude employees
"engaged on task basis" as a separate and distinct category from
employees classified as "field personnel." Rather, these employees
are altogether merged into one classification of exempted
employees.
140
Because of this difference, it may be argued that the Labor Code
may be interpreted to mean that those who are engaged on task
basis, per se, are excluded from the SIL and holiday payment since
this is what the Labor Code provisions, in contrast with the IRR,
strongly suggest. The arguable interpretation of this rule may be
conceded to be within the discretion granted to the LA and NLRC as
the quasi-judicial bodies with expertise on labor matters.
However, as early as 1987 in the case of Cebu Institute of
Technology v. Ople49 the phrase "those who are engaged on task or
contract basis" in the rule has already been interpreted to mean as
follows:
[the phrase] should however, be related with "field personnel"
applying the rule on ejusdem generis that general and unlimited
terms are restrained and limited by the particular terms that they
follow xxx Clearly, petitioner's teaching personnel cannot be deemed
field personnel which refers "to non-agricultural employees who
regularly perform their duties away from the principal place of
business or branch office of the employer and whose actual hours of
work in the field cannot be determined with reasonable certainty.
[Par. 3, Article 82, Labor Code of the Philippines]. Petitioner's claim
that private respondents are not entitled to the service incentive
leave benefit cannot therefore be sustained.
In short, the payment of an employee on task or pakyaw basis alone
is insufficient to exclude one from the coverage of SIL and holiday
pay. They are exempted from the coverage of Title I (including the
holiday and SIL pay) only if they qualify as "field personnel." The IRR
therefore validly qualifies and limits the general exclusion of "workers
paid by results" found in Article 82 from the coverage of holiday and
SIL pay. This is the only reasonable interpretation since the
determination of excluded workers who are paid by results from the
coverage of Title I is "determined by the Secretary of Labor in
appropriate regulations."
The Cebu Institute Technology ruling was reiterated in 2005 in Auto
Bus Transport Systems, Inc., v. Bautista:
A careful perusal of said provisions of law will result in the conclusion
that the grant of service incentive leave has been delimited by the
Implementing Rules and Regulations of the Labor Code to apply only
to those employees not explicitly excluded by Section 1 of Rule V.
According to the Implementing Rules, Service Incentive Leave shall
not apply to employees classified as "field personnel." The phrase
"other employees whose performance is unsupervised by the
employer" must not be understood as a separate classification of
employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the
definition of field personnel under the Labor Code as those "whose
actual hours of work in the field cannot be determined with
reasonable certainty."
The same is true with respect to the phrase "those who are engaged
on task or contract basis, purely commission basis." Said phrase
should be related with "field personnel," applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited
by the particular terms that they follow.
The Autobus ruling was in turn the basis of Serrano v. Santos Transit
which the CA cited in support of granting Macasio’s petition.
In Serrano, the Court, applying the rule on ejusdem
generis50 declared that "employees engaged on task or contract
basis xxx are not automatically exempted from the grant of service
incentive leave, unless, they fall under the classification of field
personnel."51 The Court explained that the phrase "including those
who are engaged on task or contract basis, purely commission
basis" found in Section 1(d), Rule V of Book III of the IRR should not
be understood as a separate classification of employees to which SIL
shall not be granted. Rather, as with its preceding phrase - "other
employees whose performance is unsupervised by the employer" -
the phrase "including those who are engaged on task or contract
basis" serves to amplify the interpretation of the Labor Code
definition of "field personnel" as those "whose actual hours of work in
the field cannot be determined with reasonable certainty."
141
In contrast and in clear departure from settled case law, the LA and
the NLRC still interpreted the Labor Code provisions and the IRR as
exempting an employee from the coverage of Title I of the Labor
Code based simply and solely on the mode of payment of an
employee. The NLRC’s utter disregard of this consistent
jurisprudential ruling is a clear act of grave abuse of discretion. 52 In
other words, by dismissing Macasio’s complaint without considering
whether Macasio was a "field personnel" or not, the NLRC
proceeded based on a significantly incomplete consideration of the
case. This action clearly smacks of grave abuse of discretion.
Entitlement to holiday pay
Evidently, the Serrano ruling speaks only of SIL pay. However, if the
LA and the NLRC had only taken counsel from Serrano and earlier
cases, they would have correctly reached a similar conclusion
regarding the payment of holiday pay since the rule exempting "field
personnel" from the grant of holiday pay is identically worded with
the rule exempting "field personnel" from the grant of SIL pay. To be
clear, the phrase "employees engaged on task or contract basis
"found in the IRR on both SIL pay and holiday pay should be read
together with the exemption of "field personnel."
In short, in determining whether workers engaged on "pakyaw" or
task basis" is entitled to holiday and SIL pay, the presence (or
absence) of employer supervision as regards the worker’s time and
performance is the key: if the worker is simply engaged on pakyaw or
task basis, then the general rule is that he is entitled to a holiday pay
and SIL pay unless exempted from the exceptions specifically
provided under Article 94 (holiday pay) and Article95 (SIL pay) of the
Labor Code. However, if the worker engaged on pakyaw or task
basis also falls within the meaning of "field personnel" under the law,
then he is not entitled to these monetary benefits.
Macasio does not fall under the classification of "field personnel"
Based on the definition of field personnel under Article 82, we agree
with the CA that Macasio does not fall under the definition of "field
personnel." The CA’s finding in this regard is supported by the
established facts of this case: first, Macasio regularly performed his
duties at David’s principal place of business; second, his actual
hours of work could be determined with reasonable certainty; and,
third, David supervised his time and performance of duties. Since
Macasio cannot be considered a "field personnel," then he is not
exempted from the grant of holiday, SIL pay even as he was
engaged on "pakyaw" or task basis.
Not being a "field personnel," we find the CA to be legally correct
when it reversed the NLRC’s ruling dismissing Macasio’s complaint
for holiday and SIL pay for having been rendered with grave abuse of
discretion.
Entitlement to 13th month pay
With respect to the payment of 13th month pay however, we find that
the CA legally erred in finding that the NLRC gravely abused its
discretion in denying this benefit to Macasio.1âwphi1
The governing law on 13th month pay is PD No. 851.53
As with holiday and SIL pay, 13th month pay benefits generally cover
all employees; an employee must be one of those expressly
enumerated to be exempted. Section 3 of the Rules and Regulations
Implementing P.D. No. 85154enumerates the exemptions from the
coverage of 13th month pay benefits. Under Section 3(e),
"employers of those who are paid on xxx task basis, and those who
are paid a fixed amount for performing a specific work, irrespective of
the time consumed in the performance thereof" 55 are exempted.
Note that unlike the IRR of the Labor Code on holiday and SIL pay,
Section 3(e) of the Rules and Regulations Implementing PD No. 851
exempts employees "paid on task basis" without any reference to
"field personnel." This could only mean that insofar as payment of
the 13th month pay is concerned, the law did not intend to qualify the
exemption from its coverage with the requirement that the task
worker be a "field personnel" at the same time.
142
WHEREFORE, in light of these considerations, we hereby
PARTIALLY GRANT the petition insofar as the payment of 13th
month pay to respondent is concerned. In all other aspects, we
AFFIRM the decision dated November 22, 2010 and the resolution
dated January 31, 2011 of the Court of Appeals in CA-G.R. SP No.
116003.
SO ORDERED.
DIVISION
[ GR No. 199166, Apr 20, 2015 ]
NELSON V. BEGINO v. ABS-CBN CORPORATION +
DECISION
PEREZ, J.:
The existence of an employer-employee relationship is at the heart of this
Petition for Review on Certiorari filed pursuant to Rule 45 of the Rules of
Court, primarily assailing the 29 June 2011 Decision[1] rendered by the
Fourth Division of the Court of Appeals (CA) in CA-G.R. SP No. 116928
which ruled out said relationship between the parties.
The Facts
Respondent ABS-CBN Corporation (formerly ABS-CBN Broadcasting
Corporation) is a television and radio broadcasting corporation which, for
its Regional Network Group in Naga City, employed respondent Amalia
Villafuerte (Villafuerte) as Manager. There is no dispute regarding the fact
that, thru Villafuerte, ABS-CBN engaged the services of petitioners Nelson
Begino (Begino) and Gener Del Valle (Del Valle) sometime in 1996 as
Cameramen/Editors for TV Broadcasting. Petitioners Ma. Cristina Sumayao
(Sumayao) and Monina Avila-Llorin (Llorin) were likewise similarly
engaged as reporters sometime in 1996 and 2002, respectively. With their
services engaged by respondents thru Talent Contracts which, though
regularly renewed over the years, provided terms ranging from three (3)
months to one (1) year, petitioners were given Project Assignment Forms
which detailed, among other matters, the duration of a particular project as
well as the budget and the daily technical requirements thereof. In the
aforesaid capacities, petitioners were tasked with coverage of news items
for subsequent daily airings in respondents’ TV Patrol Bicol Program.[2]
While specifically providing that nothing therein shall be deemed or
construed to establish an employer-employee relationship between the
parties, the aforesaid Talent Contracts included, among other matters,
provisions on the following matters: (a) the Talent’s creation and
performance of work in accordance with the ABS-CBN’s professional
standards and compliance with its policies and guidelines covering
intellectual property creators, industry codes as well as the rules and
regulations of the Kapisanan ng mga Broadcasters sa Pilipinas (KBP) and
other regulatory agencies; (b) the Talent’s non-engagement in similar work
for a person or entity directly or indirectly in competition with or adverse to
the interests of ABS-CBN and non-promotion of any product or service
without prior written consent; and (c) the results-oriented nature of the
talent’s work which did not require them to observe normal or fixed
working hours.[3] Subjected to contractor’s tax, petitioners’ remunerations
were denominated as Talent Fees which, as of last renewal, were admitted to
be pegged per airing day at P273.35 for Begino, P302.92 for Del Valle,
143
P323.08 for Sumayao and P315.39 for Llorin.[4]
Claiming that they were regular employees of ABS-CBN, petitioners filed
against respondents the complaint[5] docketed as Sub-RAB 05-04-00041-07
before the National Labor Relations Commission’s (NLRC) Sub- Regional
Arbitration Branch No. 5, Naga City. In support of their claims for
regularization, underpayment of overtime pay, holiday pay, 13th month pay,
service incentive leave pay, damages and attorney's fees, petitioners alleged
that they performed functions necessary and desirable in ABS-CBN's
business. Mandated to wear company IDs and provided all the equipment
they needed, petitioners averred that they worked under the direct control
and supervision of Villafuerte and, at the end of each day, were informed
about the news to be covered the following day, the routes they were to take
and, whenever the subject of their news coverage is quite distant, even the
start of their workday. Due to the importance of the news items they
covered and the necessity of their completion for the success of the
program, petitioners claimed that, under pain of immediate termination,
they were bound by the company’s policy on, among others, attendance and
punctuality.[6]
Aside from the constant evaluation of their actions, petitioners were
reportedly subjected to an annual competency assessment alongside other
ABS-CBN employees, as condition for their continued employment.
Although their work involved dealing with emergency situations at any time
of the day or night, petitioners claimed that they were not paid the labor
standard benefits the law extends to regular employees. To avoid paying
what is due them, however, respondents purportedly resorted to the simple
expedient of using said Talent Contracts and/or Project Assignment Forms
which denominated petitioners as talents, despite the fact that they are not
actors or TV hosts of special skills. As a result of this iniquitous situation,
petitioners asseverated that they merely earned an average of P7,000.00 to
P8,000.00 per month, or decidedly lower than the P21,773.00 monthly
salary ABS-CBN paid its regular rank-and-file employees. Considering
their repeated re-hiring by respondents for ostensible fixed periods, this
situation had gone on for years since TV Patrol Bicol has continuously aired
from 1996 onwards.[7]
In refutation of the foregoing assertions, on the other hand, respondents
argued that, although it occasionally engages in production and generates
programs thru various means, ABS-CBN is primarily engaged in the
business of broadcasting television and radio content. Not having the full
manpower complement to produce its own program, the company had
allegedly resorted to engaging independent contractors like actors, directors,
artists, anchormen, reporters, scriptwriters and various production and
technical staff, who offered their services in relation to a particular program.
Known in the industry as talents, such independent contractors inform ABS-
CBN of their availability and were required to accomplish Talent
Information Forms to facilitate their engagement for and appearance on
designated project days. Given the unpredictability of viewer preferences,
respondents argued that the company cannot afford to provide regular work
for talents with whom it negotiates specific or determinable professional
fees on a per project, weekly or daily basis, usually depending on the budget
allocation for a project.[8]
Respondents insisted that, pursuant to their Talent Contracts and/or Project
Assignment Forms, petitioners were hired as talents, to act as reporters
and/or cameramen for TV Patrol Bicol for designated periods and rates.
Fully aware that they were not considered or to consider themselves as
employees of a particular production or film outfit, petitioners were
supposedly engaged on the basis of the skills, knowledge or expertise they
already possessed and, for said reason, required no further training from
ABS-CBN. Although petitioners were inevitably subjected to some degree
of control, the same was allegedly limited to the imposition of general
guidelines on conduct and performance, simply for the purpose of
upholding the standards of the company and the strictures of the industry.
Never subjected to any control or restrictions over the means and methods
by which they performed or discharged the tasks for which their services
were engaged, petitioners were, at most, briefed whenever necessary
regarding the general requirements of the project to be executed. [9]
Having been terminated during the pendency of the case, Petitioners filed
on 10 July 2007 a second complaint against respondents, for regularization,
payment of labor standard benefits, illegal dismissal and unfair labor
practice, which was docketed as Sub-RAB 05-08-00107-07. Upon
respondents’ motion, this complaint was dismissed for violation of the rules
against forum shopping in view of the fact that the determination of the
issues in the second case hinged on the resolution of those raised in the first.
[10]
On 19 December 2007, however, Labor Arbiter Jesus Orlando Quiñones
(Labor Arbiter Quiñones) resolved Sub-RAB 05-04-00041-07 in favor of
petitioners who, having rendered services necessary and related to ABS-
144
CBN’s business for more than a year, were determined to be its regular
employees. With said conclusion found to be buttressed by, among others,
the exclusivity clause and prohibitions under petitioners’ Talent Contracts
and/or Project Assignment Forms which evinced respondents’ control over
them,[11] Labor Arbiter Quiñones disposed of the case in the following wise:
WHEREFORE, finding merit in the causes of action set forth by the
complainants, judgment is hereby rendered declaring complainants
MONINA AVILA-LLORIN, GENER L. DEL VALLE, NELSON V.
BEGINO and MA. CRISTINA V. SUMAYAO, as regular employees of
respondent company, ABS-CBN BROADCASTING CORPORATION.
Accordingly, respondent ABS-CBN Broadcasting Corporation is hereby
ORDERED to pay complainants, subject to the prescriptive period provided
under Article 291 of the Labor Code, however applicable, the total amount
of Php2,440,908.36, representing salaries/wage differentials, holiday pay,
service incentive leave pay and 13th month pay, to include 10% of the
judgment award as attorney’s fees of the judgment award (computation of
the monetary awards are attached hereto as integral part of this
decision).
Moreover, respondents are directed to admit back complainants to work
under the same terms and conditions prevailing prior to their separation or,
at respondents' option, merely reinstated in the payroll.
Other than the above, all other claims and charges are ordered DISMISSED
for lack of merit.[12]
Aggrieved by the foregoing decision, respondents elevated the case on
appeal before the NLRC, during the pendency of which petitioners filed a
third complaint against the former, for illegal dismissal, regularization, non-
payment of salaries and 13th month pay, unfair labor practice, damages and
attorney’s fees. In turn docketed as NLRC Case No. Sub-RAB-V-05-03-
00039-08, the complaint was raffled to Labor Arbiter Quiñones who issued
an Order dated 30 April 2008, inhibiting himself from the case and denying
respondents’ motion to dismiss on the grounds of res judicata and forum
shopping.[13] Finding that respondents’ control over petitioners was indeed
manifest from the exclusivity clause and prohibitions in the Talent Contracts
and/or Project Assignment Forms, on the other hand, the NLRC rendered a
Decision dated 31 March 2010, affirming said Labor Arbiter’s appealed
decision.[14] Undeterred by the NLRC’s 31 August 2010 denial of their
motion for reconsideration,[15] respondents filed the Rule 65 petition
for certiorari docketed before the CA as CA-G.R. SP No. 116928 which, in
addition to taking exceptions to the findings of the assailed decision, faulted
petitioners for violating the rule against forum shopping.[16]
On 29 June 2011, the CA rendered the herein assailed decision, reversing
the findings of the Labor Arbiter and the NLRC. Ruling out the existence of
forum shopping on the ground that petitioners' second and third complaints
were primarily anchored on their termination from employment after the
filing of their first complaint, the CA nevertheless discounted the existence
of an employer-employee relation between the parties upon the following
findings and conclusions: (a) petitioners, were engaged by respondents as
talents for periods, work and the program specified in the Talent Contracts
and/or Project Assignment Forms concluded between them; (b) instead of
fixed salaries, petitioners were paid talent fees depending on the budget
allocated for the program to which they were assigned; (c) being mainly
concerned with the result, respondents did not exercise control over the
manner and method by which petitioner accomplished their work and, at
most, ensured that they complied with the standards of the company, the
KBP and the industry; and, (d) the existence of an employer-employee
relationship is not necessarily established by the exclusivity clause and
prohibitions which are but terms and conditions on which the parties are
allowed to freely stipulate.[17]
Petitioners’ motion for reconsideration of the foregoing decision was denied
in the CA's 3 October 2011 Resolution,[18] hence, this petition.
The Issues
Petitioners seek the reversal of the CA’s assailed Decision and
Resolution on the affirmative of the following issues:
1. Whether or not the CA seriously and reversibly erred in not dismissing
respondents’ petition for certiorari in view of the fact that they did file a
Notice of Appeal at the NLRC level and did not, by themselves or through
their duly authorized representative, verify and certify the Memorandum of
Appeal they filed thereat, in accordance with the NLRC Rules of Procedure;
145
and
2. Whether or not the CA seriously and reversibly erred in brushing aside
the determination made by both the Labor Arbiter and the NLRC of the
existence of an employer-employee relationship between the parties, despite
established jurisprudence supporting the same.
The Court's Ruling
The Court finds the petition impressed with merit.
Petitioners preliminarily fault the CA for not dismissing respondents’ Rule
65 petition for certiorari in view of the fact that the latter failed to file a
Notice of Appeal from the Labor Arbiter’s decision and to verify and certify
the Memorandum of Appeal they filed before the NLRC. While concededly
required under the NLRC Rules of Procedure, however, these matters
should have been properly raised during and addressed at the appellate stage
before the NLRC. Instead, the record shows that the NLRC took cognizance
of respondents’ appeal and proceeded to resolve the same in favor of
petitioners by affirming the Labor Arbiter’s decision. Not having filed their
own petition for certiorari to take exception to the liberal attitude the NLRC
appears to have adopted towards its own rules of procedure, petitioners
were hardly in the proper position to raise the same before the CA or, for
that matter, before this Court at this late stage. Aside from the settled rule
that a party who has not appealed is not entitled to affirmative relief other
than the ones granted in the decision[19] rendered, liberal interpretation of
procedural rules on appeal had, on occasion, been favored in the interest of
substantive justice.[20]
Although the existence of an employer-employee relationship is, on the
other hand, a question of fact[21] which is ordinarily not the proper subject of
a Rule 45 petition for review on certiorari like the one at bar, the conflicting
findings between the labor tribunals and the CA justify a further
consideration of the matter.[22] To determine the existence of said relation,
case law has consistently applied the four-fold test, to wit: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer's power to control the employee on the
means and methods by which the work is accomplished.[23] Of these criteria,
the so-called “control test” is generally regarded as the most crucial and
determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to
exist where the person for whom the services are performed reserves the
right to control not only the end result but also the manner and means
utilized to achieve the same.[24]
In discounting the existence of said relationship between the parties, the CA
ruled that Petitioners' services were, first and foremost, engaged thru their
Talent Contracts and/or Project Assignment Forms which specified the work
to be performed by them, the project to which they were assigned, the
duration thereof and their rates of pay according to the budget therefor
allocated. Because they are imbued with public interest, it cannot be
gainsaid, however, that labor contracts are subject to the police power of the
state and are placed on a higher plane than ordinary contracts. The
recognized supremacy of the law over the nomenclature of the contract and
the stipulations contained therein is aimed at bringing life to the policy
enshrined in the Constitution to afford protection to labor.[25] Insofar as the
nature of one’s employment is concerned, Article 280 of the Labor Code of
the Philippines also provides as follows:
ART. 280. Regular and Casual Employment. — The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer,
except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or service to
be performed is seasonal in nature and the employment is for the duration of
the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists.
It has been ruled that the foregoing provision contemplates four kinds of
employees, namely: (a) regular employees or those who have been engaged
to perform activities which are usually necessary or desirable in the usual
146
business or trade of the employer; (b) project employees or those whose
employment has been fixed for a specific project or undertaking, the
completion or termination of which has been determined at the time of the
engagement of the employee; (c) seasonal employees or those who work or
perform services which are seasonal in nature, and the employment is for
the duration of the season; and (d) casual employees or those who are not
regular, project, or seasonal employees.[26] To the foregoing classification of
employee, jurisprudence has added that of contractual or fixed term
employee which, if not for the fixed term, would fall under the category of
regular employment in view of the nature of the employee’s engagement,
which is to perform activity usually necessary or desirable in the employer’s
business.[27]
The Court finds that, notwithstanding the nomenclature of their Talent
Contracts and/or Project Assignment Forms and the terms and condition
embodied therein, petitioners are regular employees of ABS-CBN. Time
and again, it has been ruled that the test to determine whether employment
is regular or not is the reasonable connection between the activity
performed by the employee in relation to the business or trade of the
employer.[28] As cameramen/editors and reporters, petitioners were
undoubtedly performing functions necessary and essential to ABS-CBN’s
business of broadcasting television and radio content. It matters little that
petitioners’ services were engaged for specified periods for TV Patrol Bicol
and that they were paid according to the budget allocated therefor. Aside
from the fact that said program is a regular weekday fare of the ABS-CBN’s
Regional Network Group in Naga City, the record shows that, from their
initial engagement in the aforesaid capacities, petitioners were continuously
re-hired by respondents over the years. To the mind of the Court,
respondents’ repeated hiring of petitioners for its long-running news
program positively indicates that the latter were ABS-CBN’s regular
employees.
If the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the
repeated or continuing performance as sufficient evidence of the necessity,
if not indispensability of that activity in the business.[29] Indeed, an
employment stops being co-terminous with specific projects where the
employee is continuously re-hired due to the demands of the employer’s
business.[30] When circumstances show, moreover, that contractually
stipulated periods of employment have been imposed to preclude the
acquisition of tenurial security by the employee, this Court has not hesitated
in striking down such arrangements as contrary to public policy, morals,
good customs or public order.[31] The nature of the employment depends,
after all, on the nature of the activities to be performed by the employee,
considering the nature of the employer’s business, the duration and scope to
be done, and, in some cases, even the length of time of the performance and
its continued existence.[32] In the same manner that the practice of having
fixed-term contracts in the industry does not automatically make all talent
contracts valid and compliant with labor law, it has, consequently, been
ruled that the assertion that a talent contract exists does not necessarily
prevent a regular employment status.[33]
As cameramen/editors and reporters, it also appears that petitioners were
subject to the control and supervision of respondents which, first and
foremost, provided them with the equipments essential for the discharge of
their functions. Prepared at the instance of respondents, petitioners’ Talent
Contracts tellingly provided that ABS-CBN retained “all creative,
administrative, financial and legal control” of the program to which they
were assigned. Aside from having the right to require petitioners “to attend
and participate in all promotional or merchandising campaigns, activities or
events for the Program,” ABS-CBN required the former to perform their
functions “at such locations and Performance/Exhibition Schedules” it
provided or, subject to prior notice, as it chose determine, modify or change.
Even if they were unable to comply with said schedule, petitioners were
required to give advance notice, subject to respondents’ approval.
[34]
However obliquely worded, the Court finds the foregoing terms and
conditions demonstrative of the control respondents exercised not only over
the results of petitioners’ work but also the means employed to achieve the
same.
In finding that petitioners were regular employees, the NLRC further ruled
that the exclusivity clause and prohibitions in their Talent Contracts and/or
Project Assignment Forms were likewise indicative of respondents’ control
over them. Brushing aside said finding, however, the CA applied the ruling
in Sonza v. ABS-CBN Broadcasting Corporation[35] where similar
restrictions were considered not necessarily determinative of the existence
of an employer-employee relationship. Recognizing that independent
contractors can validly provide his exclusive services to the hiring party,
said case enunciated that guidelines for the achievement of mutually desired
results are not tantamount to control. As correctly pointed out by petitioners,
147
however, parallels cannot be expediently drawn between this case and that
of Sonza case which involved a well-known television and radio personality
who was legitimately considered a talent and amply compensated as such.
While possessed of skills for which they were modestly recompensed by
respondents, petitioners lay no claim to fame and/or unique talents for
which talents like actors and personalities are hired and generally
compensated in the broadcast industry.
Later echoed in Dumpit-Murillo v. Court of Appeals,[36] this Court has
rejected the application of the ruling in the Sonza case to employees
similarly situated as petitioners in ABS-CBN Broadcasting Corporation v.
Nazareno.[37] The following distinctions were significantly observed
between employees like petitioners and television or radio personalities
like Sonza, to wit:
First. In the selection and engagement of respondents, no peculiar or unique
skill, talent or celebrity status was required from them because they were
merely hired through petitioner’s personnel department just like any
ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages
given as a result of an employer-employee relationship. Respondents did not
have the power to bargain for huge talent fees, a circumstance negating
independent contractual relationship.
Third. Petitioner could always discharge respondents should it find their
work unsatisfactory, and respondents are highly dependent on the petitioner
for continued work.
Fourth. The degree of control and supervision exercised by petitioner over
respondents through its supervisors negates the allegation that respondents
are independent contractors.
The presumption is that when the work done is an integral part of the
regular business of the employer and when the worker, relative to the
employer, does not furnish an independent business or professional service,
such work is a regular employment of such employee and not an
independent contractor. The Court will peruse beyond any such agreement
to examine the facts that typify the parties’ actual relationship.[38] (Emphasis
omitted)
Rather than the project and/or independent contractors respondents claim
them to be, it is evident from the foregoing disquisition that petitioners are
regular employees of ABS-CBN. This conclusion is borne out by the
ineluctable showing that petitioners perform functions necessary and
essential to the business of ABS-CBN which repeatedly employed them for
a long-running news program of its Regional Network Group in Naga City.
In the course of said employment, petitioners were provided the equipments
they needed, were required to comply with the Company's policies which
entailed prior approval and evaluation of their performance. Viewed from
the prism of these considerations, we find and so hold that the CA reversibly
erred when it overturned the NLRC's affirmance of the Labor Arbiter's
finding that an employer-employee relationship existed between the parties.
Given the fact, however, that Sub-RAB-V-05-03-00039-08 had not been
consolidated with this case and appears, for all intents and purposes, to be
pending still, the Court finds that the reinstatement of petitioners ordered by
said labor officer and tribunal should, as a relief provided in case of illegal
dismissal, be left for determination in said case.
WHEREFORE, the Court of Appeals' assailed Decision dated 29 June
2011 and Resolution dated 3 October 2011 in CA-G.R. SP No. 116928
are REVERSED and SET ASIDE. Except for the reinstatement of Nelson
V. Begino, Gener Del Valle, Monina Avila-Llorin and Ma. Cristina
Sumayao, the National Labor and Relations· Commission's 31 March 2010
Decision is, accordingly, REINSTATED.
[ GR No. 186114, Oct 07, 2015 ]
CHEVRON v. VITALIANO C GALIT +
PERALTA J.:*
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court seeking the reversal and setting aside of the
Decision[1] and Resolution[2] of the Court of Appeals (CA), dated
December 8, 2008 and January 20, 2009, respectively, in CA-G.R.
SP No. 104713. The assailed CA Decision reversed and set aside the
Decision dated January 31, 2008 and the Resolution dated May 27,
148
2008 of the National Labor Relations Commission (NLRC), Second
Division in NLRC NCR (Case No.) 00-03-02399-06 (CA No. 051468-
07), while the questioned CA Resolution denied petitioner's Motion
for Reconsideration.
The factual and procedural antecedents of the case are as follows:
On March 20, 2006, herein respondent (Galit) filed against Caltex
Philippines, Inc., now Chevron (Phils.), Inc., SJS and Sons
Construction Corporation (SJS), and its president, Reynaldo
Salomon (Salomon),[3] a Complaint[4] for illegal dismissal,
underpayment/non-payment of 13th month pay, separation pay and
emergency cost of living allowance. The Complaint was filed with the
NLRC National Capital Region, North Sector Branch in Quezon City.
In his Position Paper,[5] Galit alleged that: he is a regular and
permanent employee of Chevron since 1982, having been assigned at
the company's Pandacan depot; he is an "all-around employee"
whose job consists of cleaning the premises of the depot, changing
malfunctioning oil gaskets, transferring oil from containers and other
tasks that management would assign to him; in the performance of
his duties, he was directly under the control and supervision of
Chevron supervisors; on January 15, 2005, he was verbally informed
that his employment is terminated but was promised that he will be
reinstated soon; for several months, he followed up his reinstatement
but was not given back his job.
In its Position Paper,[6] SJS claimed that: it is a company which was
established in 1993 and was engaged in the business of providing
manpower to its clients on a "per project/contract" basis; Galit was
hired by SJS in 1993 as a project employee and was assigned to
Chevron, as a janitor, based on a contract between the two
companies; contrary to Galit's allegation, he started working for SJS
only in 1993; the manpower contract between SJS and Chevron
eventually ended on November 30, 2004 which resulted in the
severance of Galit's employment; SJS finally closed its business
operations in December 2004; it retired from doing business in
Manila on January 21, 2005; Galit was paid separation pay of
P11,000.00.
On the other hand, petitioner contended in its Position Paper with
Motion to Dismiss[7] that: it entered into two (2) contracts for-
janitorial services with SJS from May 1, 2001 to April 30, 2003 and
from June 1, 2003 to June 1, 2004; under these contracts, SJS
undertook to "assign such number of its employees, upon prior
.agreement with [petitioner], as would be sufficient to fully and
effectively render the work and services undertaken" and to "supply
the equipment, tools and materials, which shall, by all means, be
effective and efficient, at its own expense, necessary for the
performance" of janitorial services; Galit, who was employed by SJS,
was assigned to petitioner's Pandacan depot as a janitor; his wages
and all employment benefits were paid by SJS; he was subject to the
supervision, discipline and control of SJS; on November 30, 2004,
the extended contract between petitioner and SJS expired;
subsequently, a new contract for janitorial services was awarded by
petitioner to another independent contractor; petitioner was
surprised that Galit filed an action impleading it; despite several
conferences, the parties were not able to arrive at an amicable
settlement.
On October 31, 2006, the Labor Arbiter (LA) assigned to the case
rendered a Decision,[8] the dispositive portion of which reads as
follows:
WHEREFORE, judgment is hereby rendered DISMISSING the
Complaint against respondent Chevron for lack of jurisdiction, and
against respondents SJS and Reynaldo Salomon for lack of merit. For
equity and compassionate consideration, however, respondent SJS is
hereby ordered to pay the complainant a separation pay at the rate of
a half-month salary for every year of service that the complainant
had with respondent SJS.
SO ORDERED.[9]
The LA found that SJS is a legitimate contractor and that it was
Galit's employer, not petitioner. The LA dismissed Galit's complaint
for illegal dismissal against petitioner for lack of jurisdiction on the
ground that there was no employer-employee relationship between
petitioner and Galit. The LA likewise dismissed the complaint against
SJS and Salomon for lack of merit on the basis of his finding that
149
Galit's employment with SJS simply expired as a result of the
completion of the project for which he was engaged.
Aggrieved, herein respondent filed an appeal[10] with the NLRC.
On January 31, 2008, the NLRC rendered its Decision[11] and
disposed as follows:
WHEREFORE, premises considered, the decision under review is
hereby, MODIFIED.
Respondent SJS and Sons Construction Corporation is ordered to
pay the complainant, severance compensation, at the rate of one (1)
month salary for every year of service. In all other respects, the
appealed decision so stands as AFFIRMED.
SO ORDERED.[12]
The NLRC affirmed the findings of the LA that SJS was a legitimate
job contractor and that it was Galit's employer. However,"the NLRC
found that Gal it was a regular, and not a project employee, of SJS,
whose employment was effectively terminated when SJS ceased to
operate.
Herein respondent tiled a Motion for Reconsideration, [13] but the
NLRC denied it in its Resolution[14] dated May 27, 2008.
Respondent then filed a petition for certiorari with the CA assailing
the above NLRC Decision and Resolution.
On December 8, 2008, the CA promulgated its assailed Decision, the
dispositive portion of which reads, thus:
WHEREFORE, premises considered, the petition is GRANTED.
The Decision dated January 31, 2008 and the Resolution dated May
27, 2008 of the NLRC, Second Division in NLRC NCR [Cast No.] 00-
03-02399-06 (CA No. 051468-07) are REVERSED and SET
ASIDE. Judgment is rendered declaring private respondent
Chevron Phils, guilty of illegal dismissal and ordering petitioner
Galit's reinstatement without loss of seniority rights and other
privileges and payment of his full backwages, inclusive of allowances
and to other benefits or their monetary equivalents computed from
the time compensation was withheld up to the time of actual
reinstatement. Private respondent Chevron Phils, is also hereby
ordered to pay 10% of the amount due petitioner Galit as attorney's
fees.
SO ORDERED.[15]
Contrary to the- findings of the LA and the NLRC, the CA held that
SJS was a labor-only contractor, that petitioner is Galit's actual
employer and that the latter was unjustly dismissed from his
employment.
Herein petitioner filed a motion for reconsideration, but the CA
denied it in its Resolution dated January 20, 2009.
Hence, the present petition for review on certiorari based on the
following grounds:
I.
WITH ALL DUE RESPECT, THE HONORABLE COURT OF
APPEALS SERIOUSLY ERRED IN DECLARING THAT THE
DISMISSAL OF RESPONDENT WAS ILLEGAL CONSIDERING
THAT:
A. THE FINDINGS OF FACT OF TFIE LABOR ARBITER A QUO
AND THE NATIONAL LABOR RELATIONS COMMISSION ARE
ALREADY BINDING UPON THE HONORABLE COURT OF
APPEALS.
B. THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN THE COMPANY AND RESPONDENT HEREIN.
C. PETITIONER SJS IS A. LEGITIMATE INDEPENDENT
CONTRACTOR.
150

II.
CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE COMPANY AND RESPONDENT
HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF
REINSTATEMENT, BACKWAGES, AND ATTORNEY'S FEES
AGAINST THE COMPANY HAS NO LEGAL BASIS.[16]
On September 19, 2012, this Court issued a Resolution[17] directing
petitioner to implead SJS as party-respondent on the ground that it
is an indispensable party without whom no final determination can
be had of this case.
In a Motion[18] dated November 21, 2012, petitioner manifested its
compliance with this Court's September 19, 2012 Resolution. In
addition, it prayed that Salomon be also impleaded as party-
respondent
Acting on petitioner's above Motion, this Court issued another
Resolution[19] on June 19, 2013, stating that SJS and Salomon are
impleaded as parties-respondents and are required to comment on
the petition for review on certiorari.
However, despite due notice sent to SJS and Salomon at their last
known addresses, copies of the above Resolution were returned
unserved. Hence, on October 20, 2014, the Court, acting on Galit's
plea for early resolution of the case, promulgated a
Resolution[20]resolving to dispense with the filing by SJS and
Salomon of their respective comments.
The Court will, thus, proceed to resolve the instant petition.
At the outset, the Court notes that the first ground raised by
petitioner consists of factual issues. It is settled that this Court is not
a trier of facts, and this applies with greater force in labor cases.
[21]
Corollary thereto, this Court has held in a number of cases that
factual findings of administrative or quasi-judicial bodies, which are
deemed to have acquired expertise in matters within their respective
jurisdictions, are generally accorded not only respect but even
finality, and bind the Court when supported by substantial evidence.
[22]
However, it is equally settled that the.foregoing principles admit
of certain exceptions, to wit: (1) the findings are grounded entirely on
speculation, surmises or conjectures; (2) the inference made is
manifestly mistaken, absurd or impossible; (3) there is grave abuse of
discretion; (4) the judgment is based on a misapprehension of facts;
(5) the findings of fact are conflicting; (6) in making its findings, the
Court of Appeals went beyond the issues of the case, or its findings
are contrary to the admissions of both appellant and appellee; (7) the
findings are contrary to those of the trial court; (8) the findings are
conclusions without citation of specific evidence on which they are
based; (9) the facts set forth in the petition, as well as in petitioners
main and reply briefs, are not disputed by respondent; (10) the
findings of fact are premised on the supposed absence of evidence
and contradicted by the evidence on record; and (11) the Court of
Appeals manifestly overlooked certain relevant facts not disputed by
the parties, which, if properly considered, would justify a different
conclusion.[23] In the instant case, the Court gives due course to the
instant petition considering that the findings of fact and conclusions
of law of the LA and the NLRC differ from those of the CA.
Thus, the primordial question that confronts the Court is whether
there existed an employer-employee relationship between petitioner
and Galit, and whether the former is liable to the latter for the
termination of his employment. Corollary to this, is the issue of
whether or not SJS is an independent contractor or a labor only
contractor.
To ascertain the existence of an employer-employee relationship,
jurisprudence has invariably adhered to the four-fold test, to wit: (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
employee's conduct, or the so-called "control test."[24] Of these four,
the last one is the most important.[25] The so-called "control test" is
commonly regarded as the most crucial and determinative indicator
of the presence or absence of an employer-employee relationship.
[26]
Under the control test, an employer-employee relationship exists
where the person for whom the services are performed reserves the
right to control not only the end achieved, but also the manner and
means to be used in reaching that end.[27]
151

In the instant case, the true nature of Galit's employment is evident
from the Job Contract between petitioner and SJS, pertinent
portions of which are reproduced hereunder:
xxxx
1.1 The CONTRACTOR [SJS] shall provide the following specific
services to the COMPANY [petitioner]:
xxxx
1. Scooping of slop of oil water separator
2. Cleaning of truck parking area/drum storage area and pier
xxxx
4.1 In the fulfillment of its obligations to the COMPANY, the
CONTRACTOR shall select and hire its workers. The CONTRACTOR
alone shall be responsible for the payment of their wages and other
employment benefits and likewise for the safeguarding of their health
and safety in accordance with existing laws- and regulations.
Likewise, the CONTRACTOR shall be responsible for the discipline
and/or dismissal of these workers.
4.2 The CONTRACTOR shall retain the right to control the manner
and the means of performing the work, with the COMPANY having
the control or direction only as to the results to be accomplished.
xxxx
4.4 It is understood that, for the above reasons, these workers shall
be considered as the employees of the CONTRACTOR. Under no
circumstances, shall these workers be deemed directly or indirectly
as the employees of the COMPANY.
xxxx
5.1 The CONTRACTOR shall maintain efficient and effective
discipline over any and all employees it may utilize in performing its
obligations under this CONTRACT, x x x
5.2 The COMPANY shall in no manner be answerable or accountable
for any incident or injury which may occur to any worker or
personnel of .the CONTRACTOR during the time and consequent
upon the performance of the work and services under this
Agreement, nor for any injury, loss or damage arising from fault,
negligence or carelessness of the CONTRACTOR or anyone of its
workers to any person or persons or to his or their property; and the
CONTRACTOR covenants and agrees to assume, as it does hereby
assume, all liabilities for any such injury, loss or damage and to make
the COMPANY free and blameless therefrom, x x x
5.3. The CONTRACTOR shall be responsible for any loss or damage
that may be incurred upon the products, properties and installations
of the COMPANY during the effectivity of this Contract which are due
to the unreasonable or negligent act of the CONTRACTOR, its agents
or its workers.
xxxx
6.1 The CONTRACTOR shall at its own expense maintain with a
reputable insurance company, acceptable to the CQMPANY, a
comprehensive liability insurance in the amount required by the
COMPANY to cover claims for bodily injury, death or property
damage caused to any person or persons by an act or omission of the
CONTRACTOR or any of its employees, agents or representatives.
xxxx
x x x [T]he CONTRACTOR agrees and undertakes:
xxxx
b. To submit satisfactory proof to the COMPANY that it has
registered its personnel/workers assigned to perform the work and
services herein required with the Social Security System, Medicare
and other appropriate agencies for purposes of the Labor Code as
well as other laws, decrees, rules and regulations.
c. To pay the wages or salaries of its personnel/workers as well as
152
benefits, premia and protection in accordance with the provisions of
the Labor Code and other applicable laws, decrees, rules and
regulations promulgated by competent authority, xxx
d. To assign such number of its employees, upon prior agreement
with the COMPANY, as would be sufficient to fully and effectively
render the work and services herein undertaken, xxx
e. To supply the equipment, tools and materials, which shall, by all
means, be effective and efficient, at its own expense, necessary for
the performance of the services under this Contract. [28]
The foregoing provisions of the Job Contract between petitioner and
SJS demonstrate that the latter possessed the following earmarks of
an employer, to wit: (1) the power of selection and engagement of
employees, under.Sections 4.1 and 6.1(d); (2) the payment of wages,
under Sections 4.1 and 6.1(c); (3) the power to discipline and dismiss,
under Section 4.1; and, (4) the power to control the employee's
conduct, under Sections 4.1, 4.2, and 5.1.
As to SJS' power of selection and engagement, Galit himself admitted
in his own affidavit that it was SJS which assigned him to work at
Chevron's Pandacan depot.[29] As such, there is no question that it
was SJS which selected and engaged Galit as its employee.
With respect to the payment of wages, the Court finds no error in the
findings of the LA that Galit admitted that it was SJS which paid his
wages. While Galit claims that petitioner was the one which actually
paid his wages and that SJS was merely used as a conduit, Galit failed
to present evidence to this effect. Galit, likewise, failed to present
sufficient proof to back up his claim that it was petitioner, and not
SJS, which actually paid his SSS, Philhealth and Pag-IBIG premiums.
On the contrary, it is .unlikely that SJS would report Galit as its
worker, pay his SSS, Philhealth and Pag-IBIG premiums, as well as
his wages, if it were not true that he was indeed its employee. [30] In
the same manner, the Quitclaim and Release, [31] which was
undisputedly signed by Galit, acknowledging receipt of his separation
pay from SJS, is an indirect admission or recognition of the fact that
the latter was indeed his employer. Again, it would be unlikely for
SJS to pay Galit his separation pay if it is not the latter's employer.
Galit also did not dispute the fact that he was dismissed from
employment by reason of the termination of the service contract
between SJS and petitioner. In other words, it was not petitioner
which ended his employment. He was dismissed therefrom because
petitioner no longer renewed its contract with SJS and that the latter
subsequently ceased to operate.
Anent the power of control, the Court again finds no cogent reason to
depart from the findings of the NLRC that in case of matters that
needed to be addressed with respect to employee performance,
petitioner dealt directly with SJS and not with the employee
concerned. In any event, it is settled that such power merely calls for
the existence of the right to control and not necessarily the exercise
thereof. In the' present case, the Job Contract between petitioner and
SJS clearly provided that SJS "shall retain the right to control the
manner and the means of performing the work, with [petitioner]
having the control or direction only as to the results to be
accomplished."[32]
In addition, it would bear to point out that contrary to the ruling of
the CA, the work performed by Galit, which is the "scooping of slop of
oil water separator,"[33] has no direct relation to petitioner's business,
which is the importation, refining and manufacture of petroleum
products. The Court defers to the findings of both the LA and the
NLRC that the job performed by Galit, which essentially consists of
janitorial services, may be incidental or desirable to petitioner's main
activity but it is not necessary and directly related to it.
As to whether or not SJS is an independent contractor, jurisprudence
has invariably ruled that an independent contractor carries on an
independent business and undertakes the contract work on his own
account, under his own responsibility, according to his own manner
and method, and free from the control and direction of his employer
or principal in all matters connected with the performance of the
work except as to the results thereof.[34] This embodies what has long
been jurisprudentially recognized as the control test, as discussed
above. In the instant case, SJS presented evidence to show that it had
an independent business by paying business taxes and fees and that
it was registered as an employer with the Social Security System.
Moreover, there was no evidence to show that SJS and its employees
153
were ever subject to the control of petitioner. On the contrary, as
shown above, SJS possessed the right to control its employees'
manner and means of performing their work , including herein
respondent Galit.
As to its capital, there is no dispute that SJS generated an income of
P1,523,575.81 for the year 2004.[35] In Neri v. National Labor
Relations Commission,[36] this Court held that a business venture
which had a capitalization of P1,000,000.00 was considered as
highly capitalized and cannot be deemed engaged in labor-only
contracting. In the present case, while SJS' income of more than
P1,500,000.00 was not shown to be equivalent to its authorized
capital stock, such income is an indication of how much capital was
put into its business to generate such amount of revenue. Thus, the
Court finds no sufficient reason to disturb the findings of the LA and
the NLRC that SJS had substantial capital.
WHEREFORE, the instant petition is GRANTED. The assailed
Decision and Resolution of the Court of Appeals, dated December 8,
2008 and January 20, 2009, respectively, are REVERSED and SET
ASIDE. The Decision of the National Labor Relations Commission,
dated January 31, 2008 in NLRC NCR' [Case No.] 00-03-02399-06
(CA No. 051468-07) is REINSTATED.
SO ORDERED.
SECOND DIVISION
G.R. No. 208451, February 03, 2016
MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D.
LLUZ, NORMAN CORRAL, ERWIN FUGABAN, VALDIMAR BALISI,
EMILIO FABON, JOHN MARK APLICADOR, MICHAEL CURIOSO,
JUNLIN ESPARES, GAVINO FARINAS, AND WARD TRADING AND
SERVICES, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 assailing the Decision2 dated 21
January 2013 and the Resolution3 dated 17 July 2013 of the Court of
Appeals (CA) in CA-G.R. SP No. 119237.chanRoblesvirtualLawlibrary
The Facts
On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc.
(Manila Memorial) entered into a Contract of Services with respondent
Ward Trading and Services (Ward Trading). The Contract of Services
provided that Ward Trading, as an independent contractor, will render
interment and exhumation services and other related work to Manila
Memorial in order to supplement operations at Manila Memorial Park,
Paranaque City.
Among those assigned by Ward Trading to perform services at the Manila
Memorial Park were respondents Ezard Lluz, Norman Corral, Erwm
Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael
Curioso, Junlin Espares, and Gavino Farinas (respondents). They worked
six days a week for eight hours daily and were paid P250 per day.
On 26 June 2007, respondents filed a Complaint4 for regularization and
Collective Bargaining Agreement benefits against Manila Memorial; Enrique
B. Lagdameo, Manila Memorial's Executive Vice-President and Director in
Charge for Overall Operations, and Ward Trading. On 6 August 2007,
respondents filed an amended complaint to include illegal dismissal,
underpayment of 13th month pay, and payment of attorney's fees.
Respondents alleged that they asked Manila Memorial to consider them as
regular workers within the appropriate bargaining unit established in the
collective bargaining agreement by Manila Memorial and its union, the
Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial
refused the request since respondents were employed by Ward Trading, an
independent labor contractor. Thereafter, respondents joined the MMP
Union. The MMP Union, on behalf of respondents, sought their
regularization which Manila Memorial again declined. Respondents then
filed the complaint. Subsequently, respondents were dismissed by Manila
Memorial. Thus, respondents amended the complaint to include the prayer
154
for their reinstatement and payment of back wages.
Meanwhile, Manila Memorial sought the dismissal of the complaint for lack
of jurisdiction since there was no employer-employee relationship. Manila
Memorial argued that respondents were the employees of Ward Trading.
In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the
complaint for failing to prove the existence of an employer-employee
relationship. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered
dismissing the above-entitled case for complainants' lack of employer-
employee relationship with respondent Manila Memorial Park Cemetery,
Inc.
SO ORDERED.6chanroblesvirtuallawlibrary
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September
2010, the NLRC reversed the Labor Arbiter's findings. The NLRC ruled that
Ward Trading was a labor-only contractor and an agent of Manila Memorial.
The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, complainants' appeal is GRANTED. The
assailed Decision of Labor Arbiter Geobel A. Bartolabac dated March 29,
2010 is MODIFIED. It is hereby declared that complainants were regular
employees of respondent Manila Memorial Park Cemetery, Inc. and entitled
to the benefits provided for under the CBA between the latter and the
Manila Memorial Park Free Workers Union.
Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage
differentials to complainants as follows:ChanRoblesVirtualawlibrary
1. Ezard D.
P43,982.79
Lluz -
2. Norman
P29,765.67
Corral -
3. Erwin
P28,634.67
Fugaban -
4. Valdimar
P20,310.33
Balisi -
5. Emilio
P43,982.79
Fabon -
6. John Mark
P43,982.79
Aplicador -
7. Michael
P43,982.79
Curioso -
8. Ju[n]lin
P43,982.79
Espares -
9. Gavino
P43,982.79
Farinas -
SO ORDERED.9chanroblesvirtuallawlibrary
Manila Memorial filed a Motion for Reconsideration which was denied in a
Resolution10 dated 31 January 2011.
Thereafter, Manila Memorial filed an appeal with the CA. In a Decision
dated 21 January 2013, the CA affirmed the ruling of the NLRC. The CA
found the existence of an employer-employee relationship between Manila
Memorial and respondents. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is
DENIED. The Decision, dated September 30, 2010 and the Resolution,
dated January 31, 2011, rendered by the National Labor Relations
Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.
SO ORDERED.11chanroblesvirtuallawlibrary
Manila Memorial then filed a Motion for Reconsideration which was denied
by the CA in a Resolution dated 17 July 2013.
Hence, the instant petition.chanRoblesvirtualLawlibrary
The Issue
The main issue for our resolution is whether or not an employer-employee
relationship exists between Manila Memorial and respondents for the latter
to be entitled to their claim for wages and other
benefits.chanRoblesvirtualLawlibrary
The Court's Ruling
The petition lacks merit.
Manila Memorial contends that Ward Trading has total assets in excess of
P1.4 million, according to Ward Trading's financial statements for the year
2006, proving that it has sufficient capitalization to qualify as a legitimate
independent contractor. Manila Memorial insists that nowhere is it provided
in the Contract of Services that Manila Memorial controls the manner and
means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the
155
latter's employees to abide by company rules and regulations. the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the
Respondents, on the other hand, assert that they are regular employees of employer who shall be responsible to the workers in the same
Manila Memorial since Ward Trading cannot qualify as an independent manner and extent as if the latter were directly employed by
contractor but should be treated as a mere labor-only contractor. him. (Emphasis supplied)
Respondents state that (1) there is enough proof that Ward Trading does
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between
not have substantial capital, investment, tools and the like; (2) the workers
legitimate and labor-only contracting and assume the existence of an
recruited and placed by the alleged contractors performed activities that
employer-employee relationship if found to be engaged in labor-only
were related to Manila Memorial's business; and (3) Ward Trading does not
contracting. The provisions state:ChanRoblesVirtualawlibrary
exercise the right to control the performance of the work of the contractual
xxxx
employees.
Section 3. Trilateral Relationship in Contracting Arrangements.
As a general rule, factual findings of the CA are binding upon this Court.
In legitimate contracting, there exists a trilateral relationship under
One exception to this rule is when the factual findings of the former are
which there is a contract for a specific job, work or service between the
contrary to those of the trial court, or the lower administrative body, as the
principal and the contractor or subcontractor, and a contract of
case may be. This Court is obliged to resolve an issue of fact due to the
employment between the contractor or subcontractor and its workers.
conflicting findings of the Labor Arbiter on one hand, and the NLRC and the
Hence, there are three parties involved in these arrangements, the
CA on the other.
principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity to
In order to determine whether there exists an employer-employee
independently undertake the performance of the job, work or service, and
relationship between Manila Memorial and respondents, relevant provisions
the contractual workers engaged by the contractor or subcontractor to
of the labor law and rules must first be reviewed. Article 106 of the Labor
accomplish the job, work or service.
Code states:ChanRoblesVirtualawlibrary
Art. 106. Contractor or subcontractor. Whenever an employer enters into a
xxxx
contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall
Section 5. Prohibition against labor-only contracting. Labor-only
be paid in accordance with the provisions of this Code.
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
In the event that the contractor or subcontractor fails to pay the wages of
subcontractor merely recruits, supplies or places workers to perform a job,
his employees in accordance with this Code, the employer shall be jointly
work or service for a principal, and any of the following elements are
and severally liable with his contractor or subcontractor to such employees
present:
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and
The Secretary of Labor and Employment may, by appropriate regulations,
the employees recruited, supplied or placed by such contractor or
restrict or prohibit the contracting-out of labor to protect the rights of
subcontractor are performing activities which are directly related to the
workers established under this Code. In so prohibiting or restricting, he
main business of the principal; or
may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
ii) The contractor does not exercise the right to control over the
determine who among the parties involved shall be considered the
performance of the work of the contractual employee.
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
The foregoing provisions shall be without prejudice to the application of
Article 248 (c) of the Labor Code, as amended.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
"Substantial capital or investment" refers to capital stocks and subscribed
investment in the form of tools, equipment, machineries, work
capitalization in the case of corporations, tools, equipment, implements,
premises, among others, and the workers recruited and placed by
machineries and work premises, actually and directly used by the
such person are performing activities which are directly related to

156
contractor or subcontractor in the performance or completion of the job,
work or service contracted out.
The "right to control" shall refer to the right reserved to the person for
whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be
used in reaching that end.
xxxx
Section 7. Existence of an employer-employee relationship. - The
contractor or subcontractor shall be considered the employer of the
contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarity
liable with the contractor in the event of any violation of any provision of
the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in
any of the following cases as declared by a competent
authority:ChanRoblesVirtualawlibrary
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof. (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the
performance of specific jobs or services under the law and its implementing
rules are allowed. However, contracting must be made to a legitimate and
independent job contractor since labor rules expressly prohibit labor-only
contracting.
Labor-only contracting exists when the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
2) The contractor does not exercise the right to control the performance of
the work of the contractual employee.13
In the present case, Manila Memorial entered into a Contract of Services
with Ward Trading, a single proprietorship owned by Emmanuel Mayor
Ward with business address in Las Piñas City on 23 February 2006. In the
Contract of Services, it was provided that Ward Trading, as the contractor,
had adequate workers and substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials which
were necessary in the conduct of its business.
However, a closer look at the Contract of Services reveals that Ward
Trading does not have substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials since it is
Manila Memorial which owns the equipment used in the performance of
work needed for interment and exhumation services. The pertinent
provision in the Contract of Services which shows that Manila Memorial
owns the equipment states:ChanRoblesVirtualawlibrary
The COMPANY shall [sell] to the contractor the COMPANY owned equipment
in the amount of ONE MILLION FOUR HUNDRED THOUSAND PESOS ONLY
(Php 1,400,000.00) payable in two (2) years or a monthly payment of
FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php
58,335.00) to be deducted from the CONTRACTOR'S
billing.14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular
business transaction between two parties. However, Manila Memorial did
not present any evidence to show that the sale actually pushed through or
that payments were made by Ward Trading to prove an ordinary arms
length transaction. We agree with the NLRC in its
findings:ChanRoblesVirtualawlibrary
While the above-cited provision of the Contract of Service implies that
respondent MMPCI would sell subject equipment to Ward at some future
time, the former failed to present any contract of sale as proof that,
indeed, it actually sold said equipment to Ward. Likewise, respondent
MMPCI failed to present any "CONTRACTOR'S billing" wherein the
purported monthly installment of P58,335.00 had been deducted, to prove
that Ward truly paid the same as they fell due. In a contract to sell, title is
retained by the vendor until full payment of the price.
Moreover, the Contract of Service provides that:ChanRoblesVirtualawlibrary
"5. The COMPANY reserves the right to rent all or any of the
CONTRACTOR'S equipment in the event the COMPANY requires the use of
said equipment, x x x."
This provision is clear proof that Ward does not have an absolute right to
use or enjoy subject equipment, considering that its right to do so is
subject to respondent MMPCI's use thereof at any time the latter requires
it. Such provision is contrary to Article 428 of the Civil Code, which
provides that "The owner has the right to enjoy and dispose of a thing,
without other limitation than those established by law." It is plain to see
that Ward is not the owner of the equipment worth P1,400,000.00 that is
being actually and directly used in the performance of the services
contracted out.
Further, the Service Contract states that:ChanRoblesVirtualawlibrary
157
"For its part, the COMPANY agrees to provide the following:
a) Area to store CONTRACTOR'S equipment and materials
b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and
directly used by Ward in the performance of the services contracted out is
owned by respondent MMPCI.15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of
P1,400,000.00 can be glaringly seen in Ward Trading's financial statements
for the year 2006 when compared to its 2005 financial statements. It is
significant to note that these financial statements were submitted by
Manila Memorial without any certification that these financial statements
were actually audited by an independent certified public accountant. Ward
Trading's Balance Sheet16 as of 31 December 2005 showed that it had
assets in the amount of P441,178.50 and property and equipment with a
net book value of P86,026.50 totaling P534,705. A year later, Ward
Trading's Balance Sheet17 ending in 31 December 2006 showed that it had
assets in the amount of P57,084.70 and property and equipment with a net
book value of Pl,426,468 totaling P1,491,052.70. Ward Trading, in its
Income Statements18 for the years 2005 and 2006, only earned a net
income of P53,800 in the year ending 2005 and P68,141.50 in 2006.
Obviously, Ward Trading could not have raised a substantial capital of
P1,400,000.00 from its income alone without the inclusion of the
equipment owned and allegedly sold by Manila Memorial to Ward Trading
after they signed the Contract of Services on 23 February 2006.
Further, the records show that Manila Memorial and Enrique B. Lagdameo
admitted that respondents performed various interment services at its
Sucat, Paranaque branch which were directly related to Manila Memorial's
business of developing, selling and maintaining memorial parks and
interment functions. Manila Memorial even retained the right to control the
performance of the work of the employees concerned. As correctly
observed by the CA:ChanRoblesVirtualawlibrary
A perusal of the Service Contract would reveal that respondent Ward is still
subject to petitioner's control as it specifically provides that although Ward
shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of
petitioner Memorial Park, particularly:ChanRoblesVirtualawlibrary
"It is also agreed that:
a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave
sites/areas being dug to ensure compliance with the COMPANY'S interment
schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment
days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination
with the COMPANY'S schedule of interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s
and/or structure/s resulting from its operation, which must be restored to
its/their original condition without delay and at the expense of
CONTRACTOR."
The contract further provides that petitioner has the option to take over the
functions of Ward's personnel if it finds any part or aspect of the work or
service provided to be unsatisfactory, thus:ChanRoblesVirtualawlibrary
"6.1 It is hereby expressly agreed and understood that, at any time during
the effectivity of this CONTRACT and its sole determination, the COMPANY
may take over the performance of any of the functions mentioned in
Paragraph I above, in any of the following
cases:chanRoblesvirtualLawlibrary
c. If the COMPANY finds the performance of the CONTRACTOR in any part
or aspect of the grave digging works or other services provided by it to be
unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at
the mercy of petitioner Memorial Park as the contract states that the latter
may take over if it finds any part of the services to be below its
expectations, including the manner of its performance. x x
x.19chanroblesvirtuallawlibrary
The NLRC also found that Ward Trading's business documents fell short of
sound business practices. The relevant portion in the NLRC's Decision
states:ChanRoblesVirtualawlibrary
It is also worth noting that while Ward has a Certificate of Business Name
Registration issued by the Department of Trade and Industry on October
24, 2003 and valid up to October 24, 2008, the same expressly states that
it is not a license to engage in any kind of business, and that it is valid only
at the place indicated therein, which is Las Piñas City. Hence, the same is
not valid in Paranaque City, where Ward assigned complainants to perform
interment services it contracted with respondent MMPCI. It is also noted
that the Permit, which was issued to Ward by the Office of the Mayor of Las
Piñas City on October 28, 2003, was valid only up to December 31, 2003.
Likewise, the Sanitary Permit to Operate, which was issued to Ward by the
Office of the City Health Officer of the Las Piñas City Health Office on
October 28, 2003, expired on December 31, 2003. While respondents
MMPCI and Lagdameo were able to present copies of the above-mentioned
documents, they failed to present any proof that Ward is duly registered as
[a] contractor with the Department of Labor and
Employment.20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of
contractors or subcontractors with the DOLE,
states:ChanRoblesVirtualawlibrary
158
Section 11. Registration of Contractors or Subcontractors. - Consistent with
authority of the Secretary of Labor and Employment to restrict or prohibit
the contracting out of labor through appropriate regulations, a registration
system to govern contracting arrangements and to be implemented by the
Regional Office is hereby established.
The Registration of contractors and subcontractors shall be necessary for
purposes of establishing an effective labor market information and
monitoring.
Failure to register shall give rise to the presumption that the contractor is
engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is
engaged in labor-only contracting unless the contractor overcomes the
burden of proving that it has substantial capital, investment, tools and the
like.21chanroblesvirtuallawlibrary
In this case, however, Manila Memorial failed to adduce evidence to prove
that Ward Trading had any substantial capital, investment or assets to
perform the work contracted for. Thus, the presumption that Ward Trading
is a labor-only contractor stands. Consequently, Manila Memorial is deemed
the employer of respondents. As regular employees of Manila Memorial,
respondents are entitled to their claims for wages and other benefits as
awarded by the NLRC and affirmed by the CA.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21
January 2013 and the Resolution dated 17 July 2013 of the Court of
Appeals in CA-G.R. SP No. 119237.
THIRD DIVISION
G.R. Nos. 173254-55 & 173263, January 13, 2016
DIAMOND FARMS, INC., Petitioner, v. SOUTHERN PHILIPPINES
FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF
DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN
REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE
(DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICK)
CAPRECHO, REY DIMACALI, ELESIO EMANEL, VICTOR SINGSON,
NILDA DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER
MONTERO, JOSISIMO GOMEZ AND MANUEL
MOSQUERA, Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the Rules of Court,
the issue of who among Diamond Farms, Inc. ("DFI"), Diamond Farms
Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO")
and the individual contractors2 ("respondent-contractors") is the employer
of the 400 employees ("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006
Resolution4 of the Court Appeals, Special Twenty-Second Division, Cagayan
De Oro City for being contrary to law and jurisprudence. The Decision
dismissed DFI's Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and
61607 and granted DARBMUPCO's Petition for Certiorari in C.A.-G.R. SP
No. 59958. It declared DFI as the statutory employer of the respondent-
workers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal,
Carmen, Davao.5 Pursuant to Republic Act No. 6657 or the Comprehensive
Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject
to compulsory acquisition and distribution, 6 thus the original plantation was
covered by the law. However, the Department of Agrarian Reform ("DAR")
granted DFI a deferment privilege to continue agricultural operations until
1998.7 Due to adverse marketing problems and observance of the so-called
"lay-follow" or the resting of a parcel of land for a certain period of time
after exhaustive utilization, DFI closed some areas of operation in the
original plantation and laid off its employees.8 These employees petitioned
the DAR for the cancellation of DFI's deferment privilege alleging that DFI
already abandoned its area of operations.9 The DAR Regional Director
recalled DFI's deferment privilege resulting in the original plantation's
automatic compulsory acquisition and distribution under the CARL. 10 DFI
filed a motion for reconsideration which was denied. It then appealed to
the DAR Secretary.11
In the meantime, to minimize losses, DPI offered to give up its rights and
interest over the original plantation in favor of the government by way of a
Voluntary Offer to Sell.12 The DAR accepted DFI's offer to sell the original
159
plantation. However, out of the total 800 hectares, the DAR only approved
the disposition of 689.88 hectares. Hence, the original plantation was split
into two: 689.88 hectares were sold to the government ("awarded
plantation") and the remaining 200 hectares, more or less, were retained
by DPI ("managed area").13 The managed area is subject to the outcome of
the appeal on the cancellation of the deferment privilege before the DAR
Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified
agrarian reform beneficiaries ("ARBs") under the CARL. These ARBs are the
same farmers who were working in the original plantation. They
subsequently organized themselves into a multi-purpose cooperative
named "DARBMUPCO," which is one of the respondents in this case. 14
On March 27, 1996, DARBMUPCO entered into a Banana Production and
Purchase Agreement ("BPPA")15with DFI.16 Under the BPPA, DARBMUPCO
and its members as owners of the awarded plantation, agreed to grow and
cultivate only high grade quality exportable bananas to be sold exclusively
to DPI.17 The BPPA is effective for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to
Memorandum Agreement" ("SMA").19 The SMA stated that DFI shall take
care of the labor cost arising from the packaging operation, cable
maintenance, irrigation pump and irrigation maintenance that the workers
of DARBMUPCO shall conduct for DFI's account under the BPPA.20
From the start, DARBMUPCO was hampered by lack of manpower to
undertake the agricultural operation under the BPPA because some of its
members were not willing to work. 21 Hence, to assist DARBMUPCO in
meeting its production obligations under the BPPA, DFI engaged the
services of the respondent-contractors, who in turn recruited the
respondent-workers.22
The engagement of the respondent-workers, as will be seen below, started
a series of labor disputes among DARBMUPCO, DFI and the respondent-
contractors.
CA. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines Federation of
Labor ("SPFL")—a legitimate labor organization with a local chapter in the
awarded plantation—filed a petition for certification election in the Office of
the Med-Arbiter in Davao City.23 SPFL filed the petition on behalf of some
400 workers (the respondent-workers in this petition) "jointly employed by
DFI and DARBMUPCO" working in the awarded plantation.
DARBMUPCO and DFI dented that they are the employers of the
respondent-workers. They claimed, instead, that the respondent-workers
are the employees of the respondent-contractors. 24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for
certification election. It directed the conduct of certification election and
declared that DARBMUPCO was the employer of the respondent-workers.
The Order stated that "whether the said workers/employees were hired by
independent contractors is of no moment. What is material is that they
were hired purposely to work on the 689.88 hectares banana plantation
[the awarded plantation] now owned and operated by DARBMUPCO." 26
DARBMUPCO appealed to the Secretary of Labor and Employment
("SOLE"). In a Resolution dated February 18, 1999,27 the SOLE modified
the decision of the Med-Arbiter. The SOLE held that DFI, through its
manager and personnel, supervised and directed the performance of the
work of the respondent-contractors. The SOLE thus declared DFI as the
employer of the respondent-workers.28
DFI filed a motion for reconsideration which the SOLE denied in a
Resolution dated May 4, 1999.29
On June 11, 1999, DFI elevated the case to the Court of Appeals
("CA") via a Petition for Certiorari30under Rule 65 of the Rules of Court. The
case was raffled to the CA's former Twelfth Division and was docketed
as C.A.-G.R. SP No. 53806.
CA.-G.R. SP No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together
with more than 300 workers, filed a case for underpayment of wages, non-
payment of 13th month pay and service incentive leave pay and attorney's
fees against DFI, DARBMUPCO and the respondent-contractors before the
National Labor Relations Commission ("NLRC") in Davao City. DARBMUPCO
averred that it is not the employer of respondent-workers; neither is DFI.
It asserted that the money claims should be directed against the true
employer—the respondent-contractors.33
In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that
die respondent-contractors are "labor-only contractors." The LA gave
credence to the affidavits of the other contractors35 of DFI (who are not
party-respondents in this petition) asserting that DFI engaged their
services, and supervised and paid their laborers. The affidavits also stated
that the contractors had no dealings with DARBMUPCO, except that their
work is done in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer
of all the respondent-workers.37The LA dismissed the case against
DARBMUPCO and the respondent-contractors.38
160
DFI appealed to the NLRC. In a Resolution dated May 24, 1999, 39 the NLRC
Fifth Division modified the Decision of the LA and declared that
DARBMUPCO and DFI are the statutory employers of the workers rendering
services in the awarded plantation and the managed area, respectively. 40 It
adjudged DFI and DARBMUPCO as solidarity liable with the respondent-
contractors for the monetary claims of the workers, in proportion to their
net planted area.41
In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division
consolidated C.A.-G.R. SP No. 61607 with C.A.-G.R. SP. No. 59958 and
C.A. G.R. SP No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55

DARBMUPCO filed a motion for reconsideration which was denied. 42 It filed (1) "Whether DFI or DARBMUPCO is the statutory employer of the
a second motion for reconsideration in the NLRC, which was also denied for [respondent-workers] in these petitions; and
lack of merit and for being barred under the NLRC Rules of
Procedure.43 Hence, DARBMUPCO elevated the case to the CA by way of a
Petition for Certiorari.44 The case was docketed as CA.-G.R. SP. No. 59958. (2) Whether or not a certification election may be conducted pending
the resolution of the petition for certiorari filed before this Court,
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. the main issue of which is the identity of the employer of the
59958 and C.A.-G.R. SP No. 53806 in a Resolution dated January 27, [respondent-workers] in these petitions."
2001.45
On the first issue, the CA agreed with the ruling of the SOLE 56 that DFI is
the statutory employer of the respondent-workers. It noted that the DFI
C.A.-G.R. SPNo. 61607
hired the respondent-contractors, who in turn procured their own men to
work in the land owned by DARBMUPCO. Further, DFI admitted that the
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct
respondent-contractors worked under the direction and supervision of DFI's
of certification election, the Department of Labor and Employment
managers and personnel. DFI also paid for the respondent-contractors'
("DOLE") conducted a certification election on October 1, 1999. 46On even
services.57 The CA said that the fact that the respondent-workers worked in
date, DFI filed an election protest47 before the Med-Arbiter arguing that the
the land owned by DARBMUPCO is immaterial. "Ownership of the land is
certification election was premature due to the pendency of a petition
not one of the four (4) elements generally considered to establish
for certiorari before the CA assailing the February 18, 1999 and May 4,
employer-employee relationship."58
1999 Resolutions of the SOLE (previously discussed in C.A.-G.R. SP No.
53806).
The CA also ruled that DFI is the true employer of the respondent-workers
because the respondent-contractors are not independent contractors. 59 The
In an Order dated December 15, 1999,48 the Med-Arbiter denied DFI's
CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the
election protest, and certified SPFL- Workers Solidarity of
CA, DFI revealed that DARBMUPCO lacks manpower to fulfill the production
DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining
requirements under the BPPA. This impelled DFI to hire contractors to
representative of the respondent-workers. DPI filed a Motion for
supply labor enabling DARBMUPCO to meet its quota. The CA observed that
Reconsideration49 which the Med-Arbiter treated as an appeal, and which
while the various agencies involved in the consolidated petitions sometimes
the latter elevated to the SOLE.
differ as to who the statutory employer of the respondent-workers is, they
are uniform in finding that the respondent-contractors are labor-only
In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The
contractors.60
Resolution stated that the May 4, 1999 Resolution directing the conduct of
certification election is already final and executory on June 4, 1999. It
On the second issue, the CA reiterated the ruling of the SOLE 61 that absent
pointed out that the filing of the petition for certiorari before the CA
an injunction from the CA, the pendency of a petition for certiorari does not
assailing the February 18, 1999 and May 4, 1999 Resolutions does not stay
stay the holding of the certification election.62 The challenged Resolution of
the conduct of the certification election because the CA did not issue a
the SOLE is already final and executory as evidenced by an Entry of
restraining order.51 DFI filed a Motion for Reconsideration but the motion
Judgment dated July 14, 1999; hence, the merits of the case can no longer
was denied.52
be reviewed.63
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA,
The CA thus held in its Decision dated March 31, 2006:
docketed as C.A.-G.R. SP No. 61607.
WHEREFORE, premises considered, this Court hereby ORDERS:

161
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and
C.A.-G.R. SP No. 61607; and
(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the
SETTING ASIDE of the assailed resolutions of the NLRC dated 24
May 1999, 30 July 1999 and 26 June 2000, respectively.
SO ORDERED.64ChanRoblesVirtualawlibrary
DFI filed a Motion for Reconsideration of the CA Decision which was denied
in a Resolution dated May 30, 2006.65
DFI is now before us by way of Petition for Review on Certiorari praying
that DARBMUPCO be declared the true employer of the respondent-
workers.
DARBMUPCO filed a Comment66 maintaining that under the control test,
DFI is the true employer of the respondent-workers.
Respondent-contractors filed a Verified Explanation and
Memorandum67 asserting that they were labor-only contractors; hence,
they are merely agents of the true employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of the
respondent-workers.68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the
respondent-contractors is the employer of the respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement expressly allowed
by law. Contracting or subcontracting is an arrangement whereby a
principal (or employer) agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work or
service within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside
the premises of the principal.69 It involves a trilateral relationship among
the principal or employer, the contractor or subcontractor, and the workers
engaged by the contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the
relations which may arise between an employer, a contractor, and the
contractor's employees,72 thus:
ART. 106. Contractor or subcontracting. - Whenever an employer enters
into a contract with another person for the performance of the formers
work, the employees of the contractor and of the latter's subcontractor, if
any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and
determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code 73 distinguishes between
permissible job contracting (or independent contractorship) and labor-only
contracting. Job contracting is permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.74
162
In contrast, job contracting shall be deemed as labor-only contracting, an
arrangement prohibited by law, if a person who undertakes to supply
workers to an employer:
(1) Does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises and other materials;
and
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually
employed.75
As a general rule, a contractor is presumed to be a labor-only contractor,
unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. 76
Based on the conditions for permissible job contracting, we rule
that respondent-contractors are labor-only contractors.
There is no evidence showing that respondent-contractors are independent
contractors. The respondent-contractors, DFI, and DARBMUPCO did not
offer any proof that respondent-contractors were not engaged in labor-only
contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company
pretends to show through Venancio Nasol's own testimony that he was an
independent contractor who undertook to construct a railway line between
Maropadlusan and Mantalisay, but as far as the record shows, Nasol did
not testify that the defendant company had no control over him as to the
manner or methods he employed in pursuing his work. On the contrary, he
stated that he was not bonded, and that he only depended upon the Manila
Railroad for money to be paid to his laborers. As stated by counsel for the
plaintiffs, the word 'independent contractor' means 'one who exercises
independent employment and contracts to do a piece of work according to
his own methods and without being subject to control of his employer
except as to result of the work.' furthermore, if the employer claims that
the workmen is an independent contractor, for whose acts he is not
responsible, the burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has
presented piactically no evidence to determine whether Venancio
Nasol was in reality an independent contractor or not, we are
inclined to think that he is nothing but an intermediary between the
defendant and certain laborers. It is indeed difficult to find that
Nasol is an independent contractor; a person who possesses no
capital or money of his own to pay his obligations to them, who files no
bond to answer for any fulfillment of his contract with his employer
and specially subject to the control and supervision of his employer, falls
short of the requisites or conditions necessary for the common and
independent contractor."78 (Citations omitted; Emphasis supplied.)
To support its argument that respondent-contractors are the employers of
respondent-workers, and not merely labor-only contractors, DFI should
have presented proof showing that respondent-contractors carry on an
independent business and have sufficient capitalization. The record,
however, is bereft of showing of even an attempt on the part of DFI to
substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that
respondent-contractors are independent contractors. Nowhere in the NLRC
Resolution does it say that the respondent-contractors are independent
contractors. On the contrary, the NLRC declared that "it was not clearly
established on record that said [respondent-]contractors are independent,
xxx."79
Further, respondent-contractors admit, and even insist that they are
engaged in labor-only contracting. As will be seen below, respondent-
contractors made the admissions and declarations on two
occasions: firstwas in their Formal Appearance of Counsel and Motion for
Exclusion of Individual Party-Respondents filed before the LA;
and second was in their Verified Explanation and Memorandum filed before
this Court.
Before the LA, respondent-contractors categorically stated that they are
"labor-only" contractors who have been engaged by DFI and
DARBMUPCO.80 They admitted that they do not have substantial capital or
investment in the form of tools, equipment, machineries, work premises
and other materials, and they recruited workers to perform activities
directly related to the principal operations of their employer. 81
Before this Court, respondents-contractors again admitted that they are
labor-only contractors. They narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were
commissioned and contracted by petitioner,
Diamond Farms, Inc. (DFI) to recruit farm workers,
who are the complaining [respondent-workers] (as
represented by Southern Philippines Federation of
Labor (SPFL) in this appeal by certiorari), in order to
perform specific farm activities, such as pruning,
dcleafing, fertilizer application, bud inject, stem spray,
drainage, bagging, etc., on banana plantation lands
awarded to private respondent, Diamond Farms Agrarian
Reform Beneficiaries Multi-Purpose Cooperative
163
 (DARBMUPCO) and on banana planted lands owned and
managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to
performance of such farm activities were supplied by
petitioner DFI to respondents Voltaire Lopez, Jr., et. al.
as well as to respondents-SPFL, et. al. Herein
respondents Voltaire Lopez, Jr. et. al. had no
adequate capital to acquire or purchase such tools,
implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. as
well as rcspondents-SPFL, et. al. were being
directly supervised, controlled and managed by
petitioner DFI farm managers and supervisors,
specifically on work assignments and performance
targets. DFI managers and supervisors, at their sole
discretion and prerogative, could directly hire and
terminate any or all of the respondents-SPFL, et. al.,
including any or all of the herein respondents Voltaire
Lopez, Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al.
were being prepared by herein respondents Voltaire
Lopez, Jr., et. al., and correspondingly submitted to
petitioner DFI. Payment of wages to respondents-SPFL,
et. al. were being paid for by petitioner DFI thru herein
respondents Voltaire Lopez, [Jr.], et. al. The latter were
also receiving their wages/salaries from petitioner DFI for
monitoring/leading/recruiting the respondents- SPFL, et.
al.
5. No monies were being paid directly by private respondent
DARBMUPCO to respondents-SPFL, et al., nor to herein
respondents Voltaire Lopez, [Jr.], et. al. Nor did
respondent DARBMUPCO directly intervene much less
supervise any or all of [the] respondents- SPFL, et. al.
including herein respondents Voltaire Lopez, Jr.. et.
al.82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-
contractors.83 Judicial admissions made by parties in the pleadings, or in
the course of the trial or other proceedings in the same case are conclusive
and so does not require further evidence to prove them.84 Here, the
respondent-contractors voluntarily pleaded that they are labor-only
contractors; hence, these admissions bind them.
A finding that a contractor is a labor-only contractor is equivalent to a
declaration that there is an employer-employee relationship between the
principal, and the workers of the labor-only contractor; the labor-only
contractor is deemed only as the agent of the principal.85 Thus, in this case,
respondent-contractors are the labor-only contractors and either DFI or
DARBMUPCO is their principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer refers to the
person who enters into an agreement with a job contractor, either for the
performance of a specified work or for the supply of manpower.86 In this
regard, we quote with approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual
[respondent-contractors] who in turn hired their own men to work
in the 689.88 hectares land of DARBMUPCO as well as in the
managed area of the plantation. DFI admits [that] these [respondent-
contractors] worked under the direction and supervision of the DFI.
managers and personnel. DFI paid the [respondent-contractors] for the
services rendered in the plantation and the [respondent-contractors] in
turn pay their workers after they [respondent-contractors] received
payment from DFI xxx DARBMUPCO did not have anything to do with the
hiring, supervision and payment of the wages of the workers-respondents
thru the contractors-respondents. xxx87 (Emphasis supplied.)
DFI does not deny that it engaged the services of the respondent-
contractors. It does not dispute the claims of respondent-contractors that
they sent their billing to DFI for payment; and that DFI's managers and
personnel are in close consultation with the respondent-contractors. 88
DFI cannot argue that DARBMUPCO is the principal of the respondent-
contractors because it (DARBMUPCO) owns the awarded plantation where
respondent-contractors and respondent-workers were working;89 and
therefore DARBMUPCO is the ultimate beneficiary of the employment of the
respondent-workers.90
That DARBMUPCO owns the awarded plantation where the respondent-
contractors and respondent-workers were working is immaterial. This does
not change the situation of the parties. As correctly found by the CA, DFI,
as the principal, hired the respondent-contractors and the latter, in turn,
engaged the services of the respondent-workers. 91 This was also the
unanimous finding of the SOLE,92 the LA,93 and the NLRC.94 Factual findings
of the NLRC, when they coincide with the LA and affirmed by the CA are
accorded with great weight and respect and even finality by this Court. 95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled
that the presence of the power of control on the part of the principal over
164
the workers of the contractor, under the facts, prove the employer-
employee relationship between the former and the latter, thus:
[A] finding that a contractor is a 'labor-only' contractor is equivalent to
declaring that there is an employer-employee relationship between the
principal and the employees of the supposed contractor." In this case,
the employer-employee relationship between Pctron and
petitioners becomes all the more apparent due to the presence of
the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of
Appeals that:
This Court has constantly adhered to the "fourfold test" to determine
whether there exists an employer-employee relationship between the
parties. The four elements of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the power to control the employee's
conduct.
Of these four elements, it is the power to control which is the most
crucial and most determinative factor, so important, in fact, that,
the other elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and
that their salaries were paid by them do not detract from the conclusion
that there exists an employer-employee relationship between the parties
due to Pctron's power of control over the petitioners. One manifestation of
the power of control is the power to transfer employees from one work
assignment to another. Here, Petron could order petitioners to do work
outside of their regular "maintenance/utility" job. Also, petitioners were
required to report for work everyday at the bulk plant, observe an 8:00
a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety
helmets as prescribed by the safety and security measures being
implemented within the bulk plant. All these imply control. In an industry
where safety is of paramount concern, control and supervision over
sensitive operations, such as those performed by the petitioners, are
inevitable if not at all necessary. Indeed, Petron deals with commodities
that are highly volatile and flammable which, if mishandled or not properly
attended to, may cause serious injuries and damage to property and the
environment. Naturally, supervision by Petron is essential in every aspect
of its product handling in order not to compromise the integrity, quality and
safety of the products that it distributes to the consuming
public.97 (Citations omitted; Emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the
CA's finding that DFI exercises control over the respondent-workers. 98 DFI,
through its manager and supervisors provides for the work assignments
and performance targets of the respondent-workers. The managers and
supervisors also have the power to directly hire and terminate the
respondent-workers.99 Evidently, DFI wields control over the respondent-
workers.
Neither can DFI argue that it is only the purchaser of the bananas
produced in the awarded plantation under the BPPA,100 and that under the
terms of the BPPA, no employer-employee relationship exists between DFI
and the respondent-workers,101 to wit:
UNDERTAKING OF THE FIRST PARTY
xxx
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper
conduct, safety, benefits and general welfare of its members working in the
plantation and specifically render free and harmless the SECOND PARTY
[DPI] of any expense, liability or claims arising therefrom. It is clearly
recognized, by the FIRST PARTY that its members and other
personnel utilized in the performance of its function under this
agreement are not employees of the SECOND PARTY.102 (Emphasis
supplied)
In labor-only contracting, it is the law which creates an employer-employee
relationship between the principal and the workers of the labor-only
contractor.103
Inasmuch as it is the law that forms the employment ties, the stipulation in
the BPPA that respondent-workers are not employees of DFI is not
controlling, as the proven facts show otherwise. The law prevails over the
stipulations of the parties. Thus, in Tabas v. California Manufacturing Co.,
Inc.,104 we held that:
The existence of an employer-employees relation is a question of
law and being such, it cannot be made the subject of
agreement. Hence, the fact that the manpower supply agreement
between Livi and California had specifically designated the former as the
petitioners' employer and had absolved the latter from any liability as an
employer, will not erase either party's obligations as an employer, if an
employer-employee relation otherwise exists between the workers and
either firm. xxx105 (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-
contractors are only agents of DFI. Under Article 106 of the Labor Code,
DFI shall be solidarily liable with the respondent-contractors for the rightful
claims of the respondent-workers, to the same manner and extent, as if
the latter are directly employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The March 31,
2006 Decision and the May 30, 2006 Resolution of the Court of Appeals in
C.A.-G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.
165

SO ORDERED.chanroblesvirtuallawlibrary
THIRD DIVISION
G.R. No. 187691, January 13, 2016
OLYMPIA HOUSING, INC., Petitioner, v. ALLAN LAPASTORA AND
IRENE UBALUBAO, Respondents.
DECISION
REYES, J.:
This is a Petition for Review on Certiorari1 filed under Rule 45 of the Rules
of Court, assailing the Decision2dated April 28, 2009 of the Court of
Appeals (CA) in CA-G.R. SP No. 103699, which affirmed the Decision dated
December 28, 2007 and Resolution3 dated February 29, 2008 of the
National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-03-
00976-00.
The instant case stemmed from a complaint for illegal dismissal, payment
of backwages and other benefits, and regularization of employment filed by
Allan Lapastora (Lapastora) and Irene Ubalubao (Ubalubao) against
Olympic Housing, Inc. (OHI), the entity engaged in the management of the
Olympia Executive Residences (OER), a condominium hotel building
situated in Makati City, owned by a Philippine-registered corporation known
as the Olympia Condominium Corporation (OCC). The complaint, which was
docketed as NLRC NCR Case No. 30-03-00976-00 (NLRC NCR CA No.
032043-02), likewise impleaded as defendants the part owner of OHI, Felix
Limcaoco (Limcaoco), and Fast Manpower and Allied Services Company,
Inc. (Fast Manpower). Lapastora and Ubalubao alleged that they worked as
room attendants of OHI from March 1995 and June 1997, respectively,
until they were placed on floating status on February 24, 2000, through a
memorandum sent by Fast Manpower.4chanroblesvirtuallawlibrary
To establish employer-employee relationship with OHI, Lapastora and
Ubalubao alleged that they were directly hired by the company and
received salaries directly from its operations clerk, Myrna Jaylo (Jaylo).
They also claimed that OHI exercised control over them as they were
issued time cards, disciplinary action reports and checklists of room
assignments. It was also OHI which terminated their employment after
they petitioned for regularization. Prior to their dismissal, they were
subjected to investigations for their alleged involvement in the theft of
personal items and cash belonging to hotel guests and were summarily
dismissed by OHI despite lack of evidence. 5chanroblesvirtuallawlibrary
For their part, OHI and Limcaoco alleged that Lapastora and Ubalubao were
not employees of the company but of Fast Manpower, with which it had a
contract of services, particularly, for the provision of room attendants.
They claimed that Fast Manpower is an independent contractor as it (1)
renders janitorial services to various establishments in Metro Manila, with
500 janitors under its employ; (2) maintains an office where janitors
assemble before they are dispatched to their assignments; (3) exercises
the right to select, refuse or change personnel assigned to OHI; and (4)
supervises and pays the wages of its
employees.6chanroblesvirtuallawlibrary
Reinforcing OHI's claims, Fast Manpower reiterated that it is a legitimate
166
manpower agency and that it had a valid contract of services with OHI, The claim against [Limcaoco] is hereby dismissed for lack of merit.
pursuant to which Lapastora and Ubalubao were deployed as room
attendants. Lapastora and Ubalubao were, however, found to have violated SO ORDERED.10chanrobleslaw
house rules and regulations and were reprimanded accordingly. It denied
the employees' claim that they were dismissed and maintained they were
In ruling for the existence of employer-employee relationship, the LA held
only placed on floating status for lack of available work
that OHI exercised control and supervision over Lapastora and Ubalubao
assignments.7chanroblesvirtuallawlibrary
through its supervisor, Anamie Lat. The LA likewise noted that
documentary evidence consisting of time cards, medical cards and medical
Subsequently, on August 22, 2000, a memorandum of agreement was
examination reports all indicated OHI as employer of the said employees.
executed, stipulating the transfer of management of the OER from OHI to
Moreover, the affidavit of OHI's housekeeping coordinator, Jaylo, attested
HSAI-Raintree, Inc. (HSAI-Raintree). Thereafter, OHI informed the
to the fact that OHI is the one responsible for the selection of employees
Department of Labor and Employment (DOLE) of its cessation of operations
for its housekeeping department. OHI also paid the salaries of the
due to the said change of management and issued notices of termination to
housekeeping staff by depositing them to their respective ATM accounts.
all its employees. This occurrence prompted some union officers and
That there is a contract of services between OHI and Fast Manpower did
members to file a separate complaint for illegal dismissal and unfair labor
not rule out the existence of employer-employee relationship between the
practice against OHI, OCC and HSAI-Raintree, docketed as NLRC NCR CN
former and Lapastora and Ubalubao as it appears that the said contract
30-11-04400-00 (CA No. 032193-02), entitled Malonie D. Ocampo, et al. v.
was a mere ploy to circumvent the application of pertinent labor laws
Olympia Housing, Inc., et at. (Ocampo v. OHI). This complaint was,
particularly those relating to security of tenure. The LA pointed out that the
however, dismissed for lack of merit. The complainants therein appealed
business of OHI necessarily requires the services of housekeeping aides,
the said ruling to the NLRC.8chanroblesvirtuallawlibrary
room boys, chambermaids, janitors and gardeners in its daily operations,
which is precisely the line of work being rendered by Lapastora and
Meanwhile, on May 10, 2002, the Labor Arbiter (LA) rendered a Decision 9 in
Ubalubao.11chanroblesvirtuallawlibrary
the instant case, holding that Lapastora and Ubalubao were regular
employees of OHI and that they were illegally dismissed. The dispositive
Both parties appealed to the NLRC. OHI asseverated that the reinstatement
portion of the decision reads as follows:
of Lapastora and Ubalubao was no longer possible in view of the transfer of
the management of the OER to HSAI-Raintree.12chanroblesvirtuallawlibrary
WHEREFORE, finding complainants to have been illegally dismissed and as
regular employees of [OHI] the latter is ordered to reinstate complainants On December 28, 2007, the NLRC rendered a decision, dismissing the
to their former position or substantially equal position without loss of appeal for lack of merit, the dispositive portion of which reads as follows:
seniority rights and benefits. [OHI] is further ordered to pay complainants
backwages, service incentive leave pay and attorney's fees as follows:
WHEREFORE, premises considered, the appeals of both the respondents
and the complainants are DISMISSED, and the Decision of the [LA] is
1. Backwages: hereby AFFIRMED. All other claims are dismissed for lack of
merit.13chanrobleslaw
[Lapastora] - P171,616.60 and
[Ubalubao] - P170,573.44 from February 24, 2000 to
The NLRC held that OHI is the employer of Lapastora and Ubalubao since
date of decision which shall further be adjusted until their
Fast Manpower failed to establish the fact that it is an independent
actual reinstatement.
contractor. Further, it ruled that the memorandum of agreement between
OCC and HSAI-Raintree did not render the reinstatement of Lapastora and
2. P3,305.05 - ILP for Lapastora Ubalubao impossible since a change in the management does not
automatically result in a change of personnel especially when the
3. P3,426.04 - SILP for Ubalubao
memorandum itself did not include a provision on that
4. 10% of the money awards as attorney's fees. matter.14chanroblesvirtuallawlibrary

Unyielding, OHI filed its Motion for Reconsideration 15 but the NLRC denied
Other claims are dismissed for lack of merit. the same in a Resolution16dated February 29, 2008.

167

In the meantime, in Ocampo v. OHI, the NLRC rendered a Decision17 dated
November 22, 2002, upholding the validity of the cessation of OHI's
operations and the consequent termination of all its employees. It stressed
that the cessation of business springs from the management's prerogative
to do what is necessary for the protection of its investment,
notwithstanding adverse effect on the employees. The discharge of
employees for economic reasons does not amount to unfair labor
practice.18 The said ruling of the NLRC was elevated on petition
for certiorari to the CA, which dismissed the same in Resolutions dated
November 28, 200319 and June 23, 2004.20 The mentioned resolutions were
appealed to this Court and were docketed as G.R. No. 164160, which was,
however, denied in the Resolution21dated July 26, 2004 for failure to
comply with procedural rules and lack of reversible error on the part of the
CA.chanRoblesvirtualLawlibrary
Ruling of the CA
OHI, upon receipt of the adverse decision in NLRC NCR Case No. 30-03-
00976-00, filed a Petition for Certiorari22 with the CA, praying that the
Decision dated December 28, 2007 and Resolution dated February 29,
2008 of the NLRC be set aside. It pointed out that in the related case
of Ocampo v. OHI, the NLRC took into consideration the supervening
events which transpired after the supposed termination of Lapastora and
Ubalubao, particularly OHI's closure of business on October 1, 2000. The
NLRC then likewise upheld the validity of the closure of business and the
consequent termination of employees in favor of OHI, holding that the
measures taken by the company were proper exercises of management
prerogative. OHI argued that since the said disposition of the NLRC
in Ocampo v. OHI was affirmed by both the CA and the Supreme Court, the
principle of stare decisis becomes applicable and the issues that had
already been resolved in the said case may no longer be relitigated. 23 At
any rate, OHI argued that it could not be held liable for illegal dismissal
since Lapastora and Ubalubao were not its
employees.24chanroblesvirtuallawlibrary
On April 28, 2009, the CA rendered a Decision25 dismissing the petition, the
dispositive portion of which reads as follows:
WHEREFORE, the petition for certiorari is DISMISSED. The NLRC's
Decision dated December 28, 2007 and Resolution dated February 29,
2008 in NLRC NCR Case No. 30-03-00976-00 (NLRC NCR CANo. 032043-
02) are AFFIRMED.
SO ORDERED.26chanroblesvirtuallawlibrary
The CA ruled that OHI's cessation of operations on October 1, 2000 is not a
supervening event because it transpired long before the promulgation of
the LA's Decision dated May 10, 2002 in the instant case. In the same
manner, the ruling of the NLRC in Ocampo v. OHI does not constitute stare
decisis to the present petition because of the apparent dissimilarities in the
attendant circumstances. For instance, Ocampo v. OHI was founded on the
union members' allegation that OHI's claim of substantial financial losses to
support closure of business lacked evidence, while in the instant case,
Lapastora and Ubalubao claimed illegal dismissal on account of their being
placed on floating status after they were implicated in a theft case. The
differences in the facts and issues in the two cases rule out the invocation
of the doctrine. The CA added that the prevailing jurisprudence is that the
NLRC decision upholding the validity of the closure of business and
retrenchment of employees resulting therefrom will not preclude it from
decreeing the illegality of an employee's dismissal. Considering that OHI
failed to prove that the memorandum of agreement between OCC and
HSAI-Raintree had any effect on the employment of Lapastora and
Ubalubao or that there is any other valid or authorized cause for their
termination from employment, the CA concluded that they were unlawfully
dismissed.27chanroblesvirtuallawlibrary
Unyielding, OHI filed the instant petition, reiterating its arguments before
the CA. It added that, even assuming that the facts warrant a finding of
illegal dismissal, the cessation of operations of the company is a
supervening event that should limit the award of backwages to Lapastora
and Ubalubao until October 1, 2000 only and justify the deletion of the
order of reinstatement. After all, it complied with the notice requirements
of the DOLE for a valid closure of business.28chanroblesvirtuallawlibrary
On April 4, 2011, Ubalubao, on her own behalf, filed a Motion to
Dismiss/Withdraw Complaint and Waiver,29 stating that she has decided to
accept the financial assistance in the amount of P50,000.00 offered by
OHI, in lieu of all the monetary claims she has against the company, as full
and complete satisfaction of any judgment that may be subsequently
rendered in her favor. She likewise informed the Court that she had
willingly and knowingly executed a quitclaim and waiver agreement,
releasing OHI from any liability. She thus prayed for the dismissal of the
complaint she filed against OHI.
In a Resolution30 dated January 16, 2012, the Court granted Ubalubao's
motion and considered the case closed and terminated as to her part,
leaving Lapastora as the lone respondent in the present
petition.chanRoblesvirtualLawlibrary
Ruling of the Court
Lapastora was illegally dismissed
168
Indisputably, Lapastora was a regular employee of OHI. As found by the
LA, he has been under the continuous employ of OHI since March 3, 1995
until he was placed on floating status in February 2000. His uninterrupted
employment by OHI, lasting for more than a year, manifests the continuing
need and desirability of his services, which characterize regular
employment. Article 280 of the Labor Code provides as follows:
Art. 280. Regular and casual employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking, the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity
exists.
Based on records, OHI is engaged in the business of managing residential
and commercial condominium units at the OER. By the nature of its
business, it is imperative that it maintains a pool of housekeeping staff to
ensure that the premises remain an uncluttered place of comfort for the
occupants. It is no wonder why Lapastora, among several others, was
continuously employed by OHI precisely because of the indispensability of
their services to its business. The fact alone that Lapastora was allowed to
work for an unbroken period of almost five years is all the same a reason
to consider him a regular employee.
The attainment of a regular status of employment guarantees the
employee's security of tenure that he cannot be unceremoniously
terminated from employment. "To justify fully the dismissal of an
employee, the employer must, as a rule, prove that the dismissal was for a
just cause and that the employee was afforded due process prior to
dismissal. As a complementary principle, the employer has the onus of
proving with clear, accurate, consistent, and convincing evidence the
validity of the dismissal."31chanroblesvirtuallawlibrary
OHI miserably failed to discharge its burdens thus making Lapastora's
termination illegal.
On the substantive aspect, it appears that OHI failed to prove that
Lapastora's dismissal was grounded on a just or authorized cause. While it
claims that it had called Lapastora's attention several times for tardiness,
unexplained absences and loitering, it does not appear from the records
that the latter had been notified of the company's dissatisfaction over his
performance and that he was made to explain his supposed infractions. It
does not even show from the records that Lapastora was ever disciplined
because of his alleged tardiness. In the same manner, allegations
regarding Lapastora's involvement in the theft of personal items and cash
belonging to hotel guests remained unfounded suspicions as they were not
proven despite OHI's probe into the incidents.
On the procedural aspect, OHI admittedly failed to observe the twin notice
rule in termination cases. As a rule, the employer is required to furnish the
concerned employee two written notices: (1) a written notice served on the
employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side; and
(2) a written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been
established to justify his termination.32 In the present case, Lapastora was
not informed of the charges against him and was denied the opportunity to
disprove the same. He was summarily terminated from employment.
OHI argues that no formal notices of investigation, notice of charges or
termination was issued to Lapastora since he was not an employee of the
company but of Fast Manpower.
The issue of employer-employee relationship between OHI and Lapastora
had been deliberated and ruled upon by the LA and the NLRC in the
affirmative on the basis of the evidence presented by the parties. The LA
ruled that Lapastora was under the effective control and supervision of OHI
through the company supervisor. She gave credence to the pertinent
records of Lapastora's employment, i.e., timecards, medical records and
medical examinations, which all indicated OHI as his employer. She
likewise noted Fast Manpower's failure to establish its capacity as
independent contractor based on the standards provided by law.
That there is an existing contract of services between OHI and Fast
Manpower where both parties acknowledged the latter as the employer of
the housekeeping staff, including Lapastora, did not alter established facts
proving the contrary. The parties cannot evade the application of labor laws
by mere expedient of a contract considering that labor and employment
are matters imbued with public interest. It cannot be subjected to the
agreement of the parties but rather on existing laws designed specifically
for the protection of labor. Thus, it had been repeatedly stressed in a
number of jurisprudence that "[a] party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the character of its
business, i.e., whether as labor-only contractor or as job contractor, it
169
being crucial that its character be measured in terms of and determined by
the criteria set by statute."33chanroblesvirtuallawlibrary
The Court finds no compelling reason to deviate from the findings of the LA
and NLRC, especially in this case when the same was affirmed by the CA. It
is settled that findings of fact made by LAs, when affirmed by the NLRC,
are entitled not only to great respect but even finality and are binding on
this Court especially when they are supported by substantial
evidence.34chanroblesvirtuallawlibrary
The principle of stare decisis is not applicable
Still, OHI argues that the legality of the closure of its business had been
the subject of the separate case of Ocampo v. OHI, where the NLRC upheld
the validity of the termination of all the employees of OHI due to cessation
of operations. It asserts that since the ruling was affirmed by the CA and,
eventually by this Court, the principle of stare decisis becomes applicable.
Considering the closure of its business, Lapastora can no longer be
reinstated and should instead be awarded backwages up to the last day of
operations of the company only, specifically on October 1,
2000.35chanroblesvirtuallawlibrary
In Ting v. Velez-Ting,36 the Court elaborated on the principle of stare
decisis, thus:
The principle of stare decisis enjoins adherence by lower courts to doctrinal
rules established by this Court in its final decisions. It is based on the
principle that once a question of law has been examined and decided, it
should be deemed settled and closed to further argument. Basically, it is a
bar to any attempt to relitigate the same issues, necessary for two simple
reasons: economy and stability. In our jurisdiction, the principle is
entrenched in Article 8 of the Civil Code.37 (Citations omitted)
Verily, the import of the principle is that questions of law that have been
decided by this Court and applied in resolving earlier cases shall be deemed
the prevailing rule which shall be binding on future cases dealing on the
same intricacies. Apart from saving the precious time of the Court, the
application of this principle is essential to the consistency of the rulings of
the Court which is significant in its role as the final arbiter of judicial
controversies.
The CA correctly ruled that the principle of stare decisis finds no relevance
in the present case. To begin with, there is no doctrine of law that is
similarly applicable in both the present case and in Ocampo v. OHI. While
both are illegal dismissal cases, they are based on completely different sets
of facts and involved distinct issues. In the instant case, Lapastora cries
illegal dismissal after he was arbitrarily placed on a floating status on mere
suspicion that he was involved in theft incidents within the company
premises without being given the opportunity to explain his side or any
formal investigation of his participation. On the other hand, in Ocampo v.
OHI, the petitioners therein questioned the validity of OHI's closure of
business and the eventual termination of all the employees. Thus, the
NLRC ruled upon both cases differently.
Nonetheless, the Court finds the recognition of the validity of OHI's
cessation of business in the Decision dated November 22, 2002 of the
NLRC, which was affirmed by the CA and this Court, a supervening event
which inevitably alters the judgment award in favor of Lapastora. The NLRC
noted that OHI complied with all the statutory requirements, including the
filing of a notice of closure with the DOLE and furnishing written notices of
termination to all employees effective 30 days from receipt. 38 OHI likewise
presented financial statements substantiating its claim that it is operating
at a loss and that the closure of business is necessary to avert further
losses.39 The action of the OHI, the NLRC held, is a valid exercise of
management prerogative.
Thus, while the finding of illegal dismissal in favor of Lapastora subsists, his
reinstatement was rendered a legal impossibility with OHI's closure of
business. In Galindez v. Rural Bank of Llanera, Inc.,40 the Court noted:
Reinstatement presupposes that the previous position from which one had
been removed still exists or there is an unfilled position more or less of
similar nature as the one previously occupied by the employee. Admittedly,
no such position is available. Reinstatement therefore becomes a legal
impossibility. The law cannot exact compliance with what is
impossible.41chanrobleslaw
Considering the impossibility of Lapastora's reinstatement, the payment of
separation pay, in lieu thereof, is proper. The amount of separation pay to
be given to Lapastora must be computed from March 1995, the time he
commenced employment with OHI, until the time when the company
ceased operations in October 2000.42 As a twin relief, Lapastora is likewise
entitled to the payment of backwages, computed from the time he was
unjustly dismissed, or from February 24, 2000 until October 1, 2000 when
his reinstatement was rendered impossible without fault on his
part.43chanroblesvirtuallawlibrary
Finally, for OHI's failure to prove the fact of payment, the Court sustains
the award for the payment of service incentive leave pay and 13 th month
pay. The rule, as stated in Mantle Trading Services, Inc. and/or Del Rosario
v. NLRC, et al.,44 is that "the burden rests on the employer to prove
payment, rather than on the employee to prove nonpayment. The reason
for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents — which will show that overtime,
170
differentials, service incentive leave and other claims of workers have been
paid — are not in the possession of the employee but in the custody and
absolute control of the employer."45 Considering that OHI did not dispute
Lapastora's claim for nonpayment of the mentioned benefits and opted to
disclaim employer-employee relationship, the presumption is that the said
claims were not paid.
The award for attorney's fees of 10% of the monetary awards is likewise
sustained considering that Lapastora was forced to litigate and, thus,
incurred expenses to protect his rights and
interests.46chanroblesvirtuallawlibrary
WHEREFORE, the Decision dated April 28, 2009 of. the Court of Appeals in
CA-G.R. SP No. 103699 is AFFIRMED with MODIFICATION in that OHI
is hereby ORDERED to pay Allan Lapastora the following: (1) separation
pay, in lieu of reinstatement, computed from the time of his employment
until the time of its closure of business, or from March 1995 to October
2000; (2) backwages, computed from the time of illegal dismissal until
cessation of business, or from February 24, 2000 to October 1, 2000; (3)
service incentive leave pay and 13th month pay; and (4) attorney's fees.
SO ORDERED.cralawlawlibrary
FIRST DIVISION
G.R. No. 220978, July 05, 2016
CENTURY PROPERTIES, INC., Petitioner, v. EDWIN J. BABIANO AND
EMMA B. CONCEPCION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated
April 8, 2015 and the Resolution3dated October 12, 2015 of the Court of
Appeals (CA) in CA-G.R. SP No. 132953, which affirmed, with modification
the Decision4 dated June 25, 2013 and the Resolution5 dated October 16,
2013 of the National Labor Relations Commission (NLRC) in NLRC LAC No.
05-001615-12, and ordered petitioner Century Properties, Inc. (CPI) to pay
respondents Edwin J. Babiano (Babiano) and Emma B. Concepcion
(Concepcion; collectively, respondents) unpaid commissions in the
amounts of P889,932.42 and P591,953.05, respectively.
The Facts
On October 2, 2002, Babiano was hired by CPI as Director of Sales, and
was eventually6 appointed as Vice President for Sales effective September
1, 2007. As CPFs Vice President for Sales, Babiano was remunerated
with, inter alia, the following benefits: (a) monthly salary of P70,000.00;
(b) allowance of P50,000.00; and (c) 0.5% override commission for
completed sales. His employment contract 7 also contained a
"Confidentiality of Documents and Non-Compete Clause" 8 which, among
others, barred him from disclosing confidential information, and from
working in any business enterprise that is in direct competition with CPI
"while [he is] employed and for a period of one year from date of
resignation or termination from [CPI]." Should Babiano breach any of the
terms thereof, his "forms of compensation, including commissions and
incentives will be forfeited."9chanrobleslaw
During the same period, Concepcion was initially hired as Sales Agent by
CPI and was eventually10promoted as Project Director on September 1,
2007.11 As such, she signed an employment agreement, denominated as
"Contract of Agency for Project Director"12 which provided, among others,
that she would directly report to Babiano, and receive, a monthly subsidy
of P60,000.00, 0.5% commission, and cash incentives.13 On March 31,
2008, Concepcion executed a similar contract14 anew with CPI in which she
would receive a monthly subsidy of P50,000.00, 0.5% commission, and
cash incentives as per company policy. Notably, it was stipulated in both
contracts that no employer-employee relationship exists between
Concepcion and CPI.15chanrobleslaw
After receiving reports that Babiano provided a competitor with information
regarding CPFs marketing strategies, spread false information regarding
CPI and its projects, recruited CPI's personnel to join the competitor, and
for being absent without official leave (AWOL) for five (5) days, CPI,
through its Executive Vice President for Marketing and Development, Jose
Marco R. Antonio (Antonio), sent Babiano a Notice to Explain 16 on February
23, 2009 directing him to explain why he should not be charged with
disloyalty, conflict of interest, and breach of trust and confidence for his
actuations.17chanrobleslaw
On February 25, 2009, Babiano tendered18 his resignation and revealed
that he had been accepted as Vice President of First Global BYO
171
Development Corporation (First Global), a competitor of CPI.19 On March 3,
2009, Babiano was served a Notice of Termination20 for: (a) incurring
AWOL; (b) violating the "Confidentiality of Documents and Non-Compete
Clause" when he joined a competitor enterprise while still working for CPI
and provided such competitor enterprise information regarding CPFs
marketing strategies; and (c) recruiting CPI personnel to join a
competitor.21chanrobleslaw
On the other hand, Concepcion resigned as CPFs Project Director through a
letter22 dated February 23, 2009, effective immediately.
On August 8, 2011, respondents filed a complaint23 for non-payment of
commissions and damages against CPI and Antonio before the NLRC,
docketed as NLRC Case No. NCR-08-12029-11, claiming that their repeated
demands for the payment and release of their commissions remained
unheeded.24chanrobleslaw
For its part, CPI maintained25cralawred that Babiano is merely its agent
tasked with selling its projects. Nonetheless, he was afforded due process
in the termination of his employment which was based on just causes. 26 It
also claimed to have validly withheld Babiano's commissions, considering
that they were deemed forfeited for violating the "Confidentiality of
Documents and Non-Compete Clause."27 On Concepcion's money claims,
CPI asserted that the NLRC had no jurisdiction to hear the same because
there was no employer-employee relations between them, and thus, she
should have litigated the same in an ordinary civil action. 28chanrobleslaw
The LA Ruling
In a Decision29 dated March 19, 2012, the Labor Arbiter (LA) ruled in CPI's
favor and, accordingly, dismissed the complaint for lack of
merit.30chanrobleslaw
The LA found that: (a) Babiano's acts of providing information on CPI's
marketing strategies to the competitor and spreading false information
about CPI and its projects are blatant violations of the "Confidentiality of
Documents and Non-Compete Clause" of his employment contract, thus,
resulting in the forfeiture of his unpaid commissions in accordance with the
same clause;31 and (b) it had no jurisdiction over Concepcion's money
claim as she was not an employee but a mere agent of CPI, as clearly
stipulated in her engagement contract with the latter. 32chanrobleslaw
Aggrieved, respondents appealed33 to the NLRC.
The NLRC Ruling
In a Decision34 dated June 25, 2013, the NLRC reversed and set aside the
LA ruling, and entered a new one ordering CPI to pay Babiano and
Concepcion the amounts of P685,211.76 and P470,754.62, respectively,
representing their commissions from August 9, 2008 to August 8, 2011, as
well as 10% attorney's fees of the total monetary awards. 35chanrobleslaw
While the NLRC initially concurred with the LA that Babiano's acts
constituted just cause which would warrant the termination of his
employment from CPI, it, however, ruled that the forfeiture of all earned
commissions of Babiano under the "Confidentiality of Documents and Non-
Compete Clause" is confiscatory and unreasonable and hence, contrary to
law and public policy.36 In this light, the NLRC held that CPI could not
invoke such clause to avoid the payment of Babiano's commissions since
he had already earned those monetary benefits and, thus, should have
been released to him. However, the NLRC limited the grant of the money
claims in light of Article 291 (now Article 306)37 of the Labor Code which
provides for a prescriptive period of three (3) years. Consequently, the
NLRC awarded unpaid commissions only from August 9, 2008 to August 8,
2011 — i.e., which was the date when the complaint was
filed.38 Meanwhile, contrary to the LA's finding, the NLRC ruled that
Concepcion was CPI's employee, considering that CPI: (a) repeatedly hired
and promoted her since 2002; (b) paid her wages despite referring to it as
"subsidy"; and (c) exercised the power of dismissal and control over
her.39 Lastly, the NLRC granted respondents' claim for attorney's fees since
they were forced to litigate and incurred expenses for the protection of
their rights and interests.40chanrobleslaw
Respondents did not assail the NLRC findings. In contrast, only CPI moved
for reconsideration,41 which the NLRC denied in a Resolution42 dated
October 16, 2013. Aggrieved, CPI filed a petition for certiorari43before the
CA.
The CA Ruling
In a Decision44 dated April 8, 2015, the CA affirmed the NLRC ruling with
modification increasing the award of unpaid commissions to Babiano and
Concepcion in the amounts of P889,932.42 and P591.953.05, respectively,
and imposing interest of six percent (6%) per annum on all monetary
awards from the finality of its decision until fully paid.45chanrobleslaw
The CA held that Babiano properly instituted his claim for unpaid
commissions before the labor tribunals as it is a money claim arising from
an employer-employee relationship with CPI. In this relation, the CA opined
that CPI cannot withhold such unpaid commissions on the ground of
Babiano's alleged breach of the "Confidentiality of Documents and Non-
Compete Clause" integrated in the latter's employment contract,
considering that such clause referred to acts done after the cessation of the
employer-employee relationship or to the "post-employment" relations of
172
the parties. Thus, any such supposed breach thereof is a civil law dispute
that is best resolved by the regular courts and not by labor
tribunals.46chanrobleslaw
Similarly, the CA echoed the NLRC's finding that there exists an employer-
employee relationship between Concepcion and CPI, because the latter
exercised control over the performance of her duties as Project Director
which is indicative of an employer-employee relationship. Necessarily
therefore, CPI also exercised control over Concepcion's duties in recruiting,
training, and developing directors of sales because she was supervised by
Babiano in the performance of her functions. The CA likewise observed the
presence of critical factors which were indicative of an employer-employee
relationship with CPI, such as: (a) Concepcion's receipt of a monthly salary
from CPI; and (b) that she performed tasks besides selling CPI properties.
To add, the title of her contract which was referred to as "Contract of
Agency for Project Director" was not binding and conclusive, considering
that the characterization of the juridical relationship is essentially a matter
of law that is for the courts to determine, and not the parties thereof.
Moreover, the totality of evidence sustains a finding of employer-employee
relationship between CPI and Concepcion. 47chanrobleslaw
Further, the CA held that despite the NLRC's proper application of the three
(3)-year prescriptive period under Article 291 of the Labor Code, it
nonetheless failed to include all of respondents' earned commissions during
that time - i.e., August 9, 2008 to August 8, 2011 - thus, necessitating the
increase in award of unpaid commissions in respondents'
favor.48chanrobleslaw
Undaunted, CPI sought for reconsideration,49 which was, however, denied
in a Resolution50 dated October 12, 2015; hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA erred in
denying CPI's petition for certiorari, thereby holding it liable for the unpaid
commissions of respondents.
The Court's Ruling
The petition is partly meritorious.
I.
Article 1370 of the Civil Code provides that "[i]f the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control." 51 In Norton Resources and
Development Corporation v. All Asia Bank Corporation,52 the Court had the
opportunity to thoroughly discuss the said rule as
follows:ChanRoblesVirtualawlibrary
The rule is that where the language of a contract is plain and
unambiguous, its meaning should be determined without reference
to extrinsic facts or aids. The intention of the parties must be gathered
from that language, and from that language alone. Stated differently,
where the language of a written contract is clear and unambiguous,
the contract must be taken to mean that which, on its face, it
purports to mean, unless some good reason can be assigned to
show that the words should be understood in a different
sense. Courts cannot make for the parties better or more equitable
agreements than they themselves have been satisfied to make, or rewrite
contracts because they operate harshly or inequitably as to one of the
parties, or alter them for the benefit of one party and to the detriment of
the other, or by construction, relieve one of the parties from the terms
which he voluntarily consented to, or impose on him those which he did
not.53 (Emphases and underscoring supplied)
Thus, in the interpretation of contracts, the Court must first determine
whether a provision or stipulation therein is ambiguous. Absent any
ambiguity, the provision on its face will be read as it is written and treated
as the binding law of the parties to the contract.54chanrobleslaw
In the case at bar, CPI primarily invoked the "Confidentiality of Documents
and Non-Compete Clause" found in Babiano's employment contract 55 to
justify the forfeiture of his commissions, viz.:ChanRoblesVirtualawlibrary
Confidentiality of Documents and Non-Compete Clause
All records and documents of the company and all information pertaining to
its business or affairs or that of its affiliated companies are confidential and
no unauthorized disclosure or reproduction or the same will be made by
you any time during or after your employment.
And in order to ensure strict compliance herewith, you shall not
work for whatsoever capacity, either as an employee, agent or
consultant with any person whose business is in direct competition
with the company while you are employed and for a period of one
year from date of resignation or termination from the company.
In the event the undersigned breaches any term of this contract, the
undersigned agrees and acknowledges that damages may not be an
adequate remedy and that in addition to any other remedies available to
the Company at law or in equity, the Company is entitled to enforce its
rights hereunder by way of injunction, restraining order or other relief to
enjoin any breach or default of this contract.
The undersigned agrees to pay all costs, expenses and attorney's fees
incurred by the Company in connection with the enforcement of the
173
obligations of the undersigned. The undersigned also agrees to .pay the
Company all profits, revenues and income or benefits derived by or
accruing to the undersigned resulting from the undersigned's breach of the
obligations hereunder. This Agreement shall be binding upon the
undersigned, all employees, agents, officers, directors, shareholders,
partners and representatives of the undersigned and all heirs, successors
and assigns of the foregoing.
Finally, if undersigned breaches any terms of this contract, forms of
compensation including commissions and incentives will be
forfeited.56 (Emphases and underscoring supplied)
Verily, the foregoing clause is not only clear and unambiguous in stating
that Babiano is barred to "work for whatsoever capacity x x x with any
person whose business is in direct competition with [CPI] while [he is]
employed and for a period of one year from date of [his] resignation or
termination from the company," it also expressly provided in no uncertain
terms that should Babiano "[breach] any term of [the employment
contract], forms of compensation including commissions and incentives will
be forfeited." Here, the contracting parties - namely Babiano on one side,
and CPI as represented by its COO-Vertical, John Victor R. Antonio, and
Director for Planning and Controls, Jose Carlo R. Antonio, on the other
-indisputably wanted the said clause to be effective even during the
existence of the employer-employee relationship between Babiano and CPI,
thereby indicating their intention to be bound by such clause by affixing
their respective signatures to the employment contract. More significantly,
as CPFs Vice President for Sales, Babiano held a highly sensitive and
confidential managerial position as he "was tasked, among others, to
guarantee the achievement of agreed sales targets for a project and to
ensure that his team has a qualified and competent manpower resources
by conducting recruitment activities, training sessions, sales rallies,
motivational activities, and evaluation programs." 57 Hence, to allow
Babiano to freely move to direct competitors during and soon after his
employment with CPI would make the latter's trade secrets vulnerable to
exposure, especially in a highly competitive marketing environment. As
such, it is only reasonable that CPI and Babiano agree on such stipulation
in the latter's employment contract in order to afford a fair and reasonable
protection to CPI.58 Indubitably, obligations arising from contracts,
including employment contracts, have the force of law between the
contracting parties and should be complied with in good faith. 59 Corollary
thereto, parties are bound by the stipulations, clauses, terms, and
conditions they have agreed to, provided that these stipulations, clauses,
terms, and conditions are not contrary to law, morals, public order or
public policy,60 as in this case.
Therefore, the CA erred in limiting the "Confidentiality of Documents and
Non-Compete Clause" only to acts done after the cessation of the
employer-employee relationship or to the "post-employment" relations of
the parties. As clearly stipulated, the parties wanted to apply said clause
during the pendency of Babiano's employment, and CPI correctly invoked
the same before the labor tribunals to resist the former's claim for unpaid
commissions on account of his breach of the said clause while the
employer-employee relationship between them still subsisted. Hence, there
is now a need to determine whether or not Babiano breached said clause
while employed by CPI, which would then resolve the issue of his
entitlement to his unpaid commissions.
A judicious review of the records reveals that in his resignation
letter61 dated February 25, 2009, Babiano categorically admitted to CPI
Chairman Jose Antonio that on February 12, 2009, he sought employment
from First Global, and five (5) days later, was admitted thereto as vice
president. From the foregoing, it is evidently clear that when he sought and
eventually accepted the said position with First Global, he was still
employed by CPI as he has not formally resigned at that time. Irrefragably,
this is a glaring violation of the "Confidentiality of Documents and Non-
Compete Clause" in his employment contract with CPI, thus, justifying the
forfeiture of his unpaid commissions.
II.
Anent the nature of Concepcion's engagement, based on case law, the
presence of the following elements evince the existence of an employer-
employee relationship: (a) the power to hire, i.e., the selection and
engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the employer's power to control the employee's conduct,
or the so called "control test." The control test is commonly regarded as
the most important indicator of the presence or absence of an employer-
employee relationship.62 Under this test, an employer-employee
relationship exists where the person for whom the services are performed
reserves the right to control not only the end achieved, but also the
manner and means to be used in reaching that end.63chanrobleslaw
Guided by these parameters, the Court finds that Concepcion was an
employee of CPI considering that: (a) CPI continuously hired and promoted
Concepcion from October 2002 until her resignation on February 23,
2009,64 thus, showing that CPI exercised the power of selection and
engagement over her person and that she performed functions that were
necessary and desirable to the business of CPI; (b) the monthly "subsidy"
and cash incentives that Concepcion was receiving from CPI are actually
remuneration in the concept of wages as it was regularly given to her on a
monthly basis without any qualification, save for the "complete submission
of documents on what is a sale policy";65 (c) CPI had the power to
discipline or even dismiss Concepcion as her engagement contract with CPI
expressly conferred upon the latter "the right to discontinue [her] service
anytime during the period of engagement should [she] fail to meet the
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performance standards,"66 among others, and that CPI actually exercised any affirmative relief other than what was already granted under said
such power to dismiss when it accepted and approved Concepcion's judgment. However, when strict adherence to such technical rule
resignation letter; and most importantly, (d) as aptly pointed out by the will impair a substantive right, such as that of an illegally dismissed
CA, CPI possessed the power of control over Concepcion because in the employee to monetary compensation as provided by law, then
performance of her duties as Project Director - particularly in the conduct equity dictates that the Court set aside the rule to pave the way for
of recruitment activities, training sessions, and skills development of Sales a full and just adjudication of the case. 72 (Emphasis and underscoring
Directors - she did not exercise independent discretion thereon, but was supplied)
still subject to the direct supervision of CPI, acting through
Babiano.67chanrobleslaw
In the present case, the CA aptly pointed out that the NLRC failed to
account for all the unpaid commissions due to Concepcion for the period of
Besides, while the employment agreement of Concepcion was denominated
August 9, 2008 to August 8, 2011.73 Indeed, Concepcion's right to her
as a "Contract of Agency for Project Director," it should be stressed that
earned commissions is a substantive right which cannot be impaired by an
the existence of employer-employee relations could not be negated by the
erroneous computation of what she really is entitled to. Hence, following
mere expedient of repudiating it in a contract. In the case of Insular Life
the dictates of equity and in order to arrive at a complete and just
Assurance Co., Ltd. v. NLRC,68 it was ruled that one's employment status is
resolution of the case, and avoid a piecemeal dispensation of justice over
defined and prescribed by law, and not by what the parties say it should
the same, the CA correctly recomputed Concepcion's unpaid commissions,
be, viz.:ChanRoblesVirtualawlibrary
notwithstanding her failure to seek a review of the NLRC's computation of
It is axiomatic that the existence of an employer-employee relationship
the same.
cannot be negated by expressly repudiating it in the management contract
and providing therein that the "employee" is an independent contractor
In sum, the Court thus holds that the commissions of Babiano were
when the terms of the agreement clearly show otherwise. For, the
properly forfeited for violating the "Confidentiality of Documents and Non-
employment status of a person is defined and prescribed by law
Compete Clause." On.the other hand, CPI remains liable for the unpaid
and not by what the parties say it should be. In determining the
commissions of Concepcion in the sum of P591,953.05.
status of the management contract, the "four-fold test" on employment
earlier mentioned has to be applied.69 (Emphasis and underscoring
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated April
supplied)
8, 2015 and the Resolution dated October 12, 2015 of the Court of Appeals
Therefore, the CA correctly ruled that since there exists an employer- (CA) in CA-G.R. SP No. 132953 are hereby MODIFIED in that the
employee relationship between Concepcion and CPI, the labor tribunals commissions of respondent Edwin J. Babiano are deemed FORFEITED. The
correctly assumed jurisdiction over her money claims. rest of the CA Decision stands.

III. SO ORDERED.chanRoblesvirtualLawlibrary

Finally, CPI contends that Concepcion's failure to assail the NLRC ruling
awarding her the amount of P470,754.62 representing unpaid commissions
rendered the same final and binding upon her. As such, the CA erred in
increasing her monetary award to P591,953.05.70chanrobleslaw

The contention lacks merit.

As a general rule, a party who has not appealed cannot obtain any
affirmative relief other than the one granted in the appealed decision.
However, jurisprudence admits an exception to the said rule, such as when
strict adherence thereto shall result in the impairment of the substantive
rights of the parties concerned. In Global Resource for Outsourced
Workers, Inc. v. Velasco:71
Indeed, a party who has failed to appeal from a judgment is deemed to
have acquiesced to it and can no longer obtain from the appellate court

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