NELLY ACTA MARTINEZ vs.

NLRC
[G.R. No. 117495. May 29, 1997]
BELLOSILLO, J.:

RAUL MARTINEZ was operator of two (2) taxicab units under the business name PAMA TX and two (2) additional units under the name P. J. TIGER TX. Private respondents Dominador, Pastor, Celestino, Luis, Ereberto all surnamed Corro, Jaime Cruz, Wenceslao Delvo, Gregorio Delvo, Hermejias Colibao, Jose Ogana and Alonso Albao worked for him as drivers. On 18 March 1992 Raul Martinez died leaving behind his mother, petitioner Nelly Acta Martinez, as his sole heir. On 14 July 1992 private respondents lodged a complaint against Raul Martinez and petitioner Nelly Acta Martinez before the Labor Arbiter for violation of P. D. 851 and illegal dismissal.
[1]

They alleged that they have been regular drivers of Raul Martinez since 20 October 1989 earning no less than P400.00 per day driving twenty-four (24) hours every other day. For the duration of employment, not once did they receive a 13th month pay. After the death of Raul Martinez, petitioner took over the management and operation of the business. On or about 22 June 1992 she informed them that because of difficulty in maintaining the business, she was selling the units together with the corresponding franchises. However, petitioner did not proceed with her plan; instead, she assigned the units to other drivers.

Petitioner traversed the claim for 13th month pay by contending that it was personal and therefore did not survive the death of her son. Besides, private respondents were not entitled thereto as Sec. 3, par. (e), of the Rules and Regulations Implementing P. D. 851 is explicit that employers of those who are paid on purely boundary basis are not covered therein. The relationship between her son and private respondents was not that of employer-employee but of lessor-lessee. The operation of the business ceased upon the death of her son and that she did not continue the business because she did not know how to run it. On 30 August 1993 the Labor Arbiter dismissed the complaint on the following grounds:
(a) private respondents' claims being personal were extinguished upon the death of Raul Martinez; (b) petitioner was a mere housewife who did not possess the required competence to manage the business; and, (c) private respondents were not entitled to 13th month pay because the existence of employer-employee relationship was doubtful on account of the boundary system adopted by the parties.[2]

However, respondent National Labor Relations Commission viewed the case differently.
According to NLRC, (a) private respondents were regular drivers because payment of wages, which is one of the essential requisites for the existence of employment relation, may either be fixed, on commission, boundary, piece-rate or task basis; (b) the management of the business passed on to petitioner who even replaced private respondents with a new set of drivers; and, (c) the claims of private respondents survived the death of Raul Martinez considering that the business did not cease operation outright but continued presumably, in the absence of proof of sale, up to the moment. As regards the claim for 13th month pay, NLRC upheld the stand of petitioner based on the express provision of P. D. 851 as reiterated in the revised guidelines on the implementation thereof. On 28 January 1994 respondent NLRC thus set aside the appealed decision, and as alternative to reinstatement, ordered petitioner to grant respondents separation pay equivalent to one (1) month salary for every year of service a fraction of six (6) months being considered as one (1) whole year.[3] On 30 September 1994 the motion for reconsideration was denied. [4] Hence, this recourse of petitioner.

On 11 October 1995 the Court issued a temporary restraining order enjoining the execution of the assailed decision of respondent NLRC. Petitioner imputes grave abuse of discretion on

respondent NLRC in reversing the decision of the Labor Arbiter. Petitioner argues that respondent NLRC acted as a probate court when it assumed jurisdiction over the estate of a deceased person, pronounced her legally entitled to succeed the deceased and ordered her to pay the money claim of private respondents. Moreover, petitioner argues that the claims of private respondents were personal to her son and thus were abated by his death. Issues: 1. Can respondents file their claim against Nelly Acta? NO. The claim for 13th month pay pertains to the personal obligation of Raul Martinez which did not survive his death. The rule is settled that unless expressly assumed, labor contracts are not enforceable against the transferee of an enterprise. The reason for the rule is that labor contracts are in personam, and that claims for backwages earned from the former employer cannot be filed against the new owners of an enterprise. Nor is the new operator of a business liable for claims for retirement pay of employees. Thus the claim of private respondents should have been filed instead in the intestate proceedings involving the estate of Raul Martinez in accordance with Sec. 5, Rule 86, of the Rules of Court which provides in part [5] [6] [7]

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, all claims for funeral expenses and expenses for the last sickness of the decedent, 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 set forth as counterclaims in any action that the executor or administrator may bring against the claimants x x x x

2. Was there an E-E relationship? YES. Petitioner also insists on the absence of E-E relationship because there is no evidence that her son paid a single centavo by way of wages to private respondents; rather, they were governed by the boundary system; and because she did not continue the operation of the business which ceased upon the death of her son. As early as 3 March 1956, in National Labor Union v. Dinglasan, this Court ruled that the relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. Therein we explained that 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 exercise 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" they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and employee. The doctrine is applicable by analogy to the present case. Thus, private respondents were employees of Raul Martinez because they had been engaged to perform activities which were usually necessary or desirable in the usual business or trade of the employer. The records show that private respondents had been employed since 20 October 1989 except for Ogana, the Delvos, Albao and Colibao who were employed on later dates.
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Hence, these questions arise: Do private respondents, being then employees of Raul Martinez, necessarily continue to be employees of the petitioner as the new operator of the business? In the affirmative, were they illegally dismissed? The factual findings of quasi-judicial agencies such as respondent NLRC, which have acquired expertise in the matters entrusted to their jurisdiction, are accorded by this Court not only respect but also finality if they are supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. As respondent NLRC found [12]

The facts of the case will readily show that before respondent taxi owner Raul Martinez died, he became bedridden and the management of his taxi business passed on to his mother who was his only surviving heir. It will also be noted that despite the information given by the mother that she will sell the business and extend separation benefits to complainants, no such thing occurred. Instead, she replaced complainants with a new set of drivers (See Complainants' Position paper, p. 25, Record).
[13]

The above findings, however, were culled from mere allegations in private respondents' position paper. But mere allegation is not evidence. It is a basic rule in evidence that each party must prove his affirmative allegation. In Opulencia Ice Plant and Storage v. NLRC we ruled that no particular form of evidence is required to prove the existence of an employeremployee relationship. Any competent and relevant evidence to prove the relationship may be admitted. In that case, the relationship was sufficiently proved by testimonial evidence. In the present case, however, private respondents simply assumed the continuance of an employeremployee relationship between them and petitioner, when she took over the operation of the business after the death of her son Raul Martinez, without any supporting evidence. Consequently, we cannot sustain for lack of basis the factual finding of respondent NLRC on the existence of employer-employee relationship between petitioner and private respondents. Clearly, such finding emanates from grave abuse of discretion. With this conclusion, consideration of the issue on illegal dismissal becomes futile and irrelevant.
[14] [15] [16]

WHEREFORE, the petition is GRANTED. The Decision of respondent National Labor Relations Commission dated 28 January 1994 ordering petitioner Nelly Acta Martinez to grant respondents separation pay as well as its Order of 30 September 1994 denying reconsideration is SET ASIDE. The Decision of the Labor Arbiter dated 30 August 1993 dismissing the complaint is REINSTATED. The temporary restraining order issued on 11 October 1995 is made PERMANENT. SO ORDERED. Vitug, Kapunan, and Hermosisima, Jr., concur. Padilla, (Chairman), on leave

[1]

Requiring all employers to pay their employees a 13th month pay. Penned by Labor Arbiter Jesus N. Rodriguez Jr.; Rollo, p. 51.

[2]

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Penned by Commissioner Vicente S.E. Veloso with the concurrence of Presiding Commissioner Bartolome S. Carale and Commissioner Alberto R. Quimpo; Rollo, p. 60. Rollo, p. 79. Robledo v. NLRC, G.R. No. 110358, 9 November 1994, 238 SCRA 52. Sundowner Development Corporation v. Drilon, G.R. No. 82341, 6 December 1989, 180 SCRA 14. Filipinas Port Services, Inc. v. NLRC, G.R. No. 86026, 31 August 1989, 177 SCRA 203. See Note 5. 98 Phil. 648, reiterated in Magboo v. Bernardo, No. L-16790, 30 April 1963, 7 SCRA 952, and Lantaco Sr. v. Llamas, Adm. Matter No. 1037-CJ, 28 October 1981, 108 SCRA 502. Art. 280, The Labor Code of the Philippines, Zanotte Shoes v. NLRC, G.R. No. 100665, 13 February 1995, 241 SCRA 261. Records, p. 9. Falguera v. Linsangan, G.R. No. 114848, 14 December 1995, 251 SCRA 364. Rollo, p. 59. P.T. Cerna Corporation v. Court of Appeals, G.R. No. 91622, 6 April 1993, 221 SCRA 19. Jimenez v. NLRC, G.R. No. 116960, 2 April 1996, 256 SCRA 84. G.R. No. 98368, 15 December 1993, 228 SCRA 473.

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2. G.R. No. L-25984 October 30, 1970 ALHAMBRA INDUSTRIES, INC., vs. COURT OF INDUSTRIAL RELATIONS and ALHAMBRA EMPLOYEES ASSOCIATION (FTUP), TEEHANKEE, J.:.
Appeal by certiorari from respondent court's decision in an unfair labor practice case that the fifteen drivers and helpers not recognized by petitioners are in truth and in fact its employees, and not separate and independent employees of its salesmen and propagandists, and are therefore entitled retroactively to all the privileges, rights and benefits provided for all its other regular employees under its collective bargaining agreement with respondent union. The complaint for unfair labor practice1 for violation of section 4 (a) subsections (4) and (6) of the Industrial Peace Act, was filed by the acting prosecutor of respondent court against petitioner, upon the charges of respondent union that fifteen of the union members, employed as drivers and helpers of petitioner, were being discriminated against by petitioner's not affording the the benefits and privileges enjoyed by all the other employees for no justifiable reason other than their union membership; and that the union had asked petitioner to negotiate with respect to said fifteen drivers and helpers who were being excluded from the benefits of their subsisting collective bargaining agreement, but petitioner refused to do so. The union prayed for a desistance order and that petitioner be ordered to bargain collectively in good faith and to grant the drivers and helpers the same benefits and privileges extended to and

enjoyed by all its other employees. In answer, petitioner denied the unfair labor practice imputed to it and countered that the fifteen drivers and helpers were not its employees, but separate and independent employee's of its salesmen and propagandists who exercised discretion and control over their selection, employment, compensation, suspension and dismissal. It is admitted that respondent union is sole and exclusive collective bargaining representative for all the employees of petitioner and that collective bargaining agreements had been successively signed between the union and petitioner on March 14, 1962 and on February 18, 1964. Both the union and petitioner exhausted steps 1 to 3 of the grievance machinery provided in the collective bargaining agreement with regard to the union's claim that the benefits thereof should be extended to the fifteen drivers and helpers and the petitioner's contrary stand that they were not its "employees." Hence, as they could not resolve by conferences this dispute, the union invoked the final step in the grievance machinery, after written notice thereof, and elevated the issue of the true status of said drivers and helpers to respondent court through its complaint for unfair labor practice. Respondent court in its decision, affirmed by its resolution en banc of April 11, 1966, categorically held petitioners disclaimer of the employee status of drivers and 17 helpers to be baseless and untenable as follows: "In accordance with the "memorandum of instructions," Exhibit "24," which the respondent corporation issues to the salesman or propagandist, it is really from here that the latter is authorized by the former to engage the services of a driver or helper. So that even when the driver or helper does not apply directly to the respondent corporation for the job but to the salesman or propagandist, nevertheless, the authority of the saleman or propagandist to employ the driver or helper emanates from the respondent corporation. It is, therefore, apparent that in truth and in fact, the respondent corporation is the "employer" of the driver or helper and not the salesman or propagandist who is merely expressly authorized by the former to engage such services. "The salary of the driver or helper also comes from the respondent corporation in the form of 'driver allowance' which is appropriated for the purpose. This allowance is given to the salesman or propagandist who in turn pays the same to the driver or helper for salaries or wages. Of course, we realize that this mode of paying the salaries or wages of the driver or helper indirectly through the salesman or propagandist will save the respondent corporation the burden of record keeping and other similar indirect costs. Nevertheless, it could not be denied that it is the respondent corporation that pays the wages and salaries of the driver or helper." "The duties and obligations of the driver or helper do not come from the salesman or propagandist but are expressly stated by the respondent corporation in the "memorandum of instructions." He does not only accompany the salesman or propagandist in all the trips, but also drives or watches the truck which is the property of the respondent corporation. He assists the salesman in making deliveries, to different stores and in the preparation of inventories. These duties are the dictates of respondent corporation and not of the salesman or propagandist. It is therefore clear that the terms and conditions of employment of the driver or helper are those fixed and determined by the respondent corporation. From all the foregoing consideration we are convinced that the driver and helper is an "employee" of respondent corporation." It therefore rendered the following judgment against petitioner:. IN CONCLUSION, THEREFORE, we rule and so hold that all the fifteen (15) drivers and helpers whose names are listed in the "Partial Stipulation of Facts" are employees of the respondent Alhambra Industries, Inc., and as such they should be given and/or extended all the privileges, rights and benefits that are given to all other regular employees, including those fringe benefits provided for in the Collective Bargaining Agreement signed and concluded between the complainant union and the respondent corporation, retroactive as of the effectivity of the first agreement of March 14, 1962 up to the present. Petitioner in this appeal, does not dispute the respondent courts basic ruling that the fifteen drivers and helpers are in truth and in fact its employees and that its making use of its salesmen and propagandists, as the ostensible "employers" of the drivers and helpers was in effect but an elaborate artifice to deprive the drivers and helpers of their status as employees of petitioner, entitled to enjoy all the privileges, rights and benefits provided for all other employees under the collective bargaining agreements. The lone error assigned by petitioner in its brief is that respondent court "acted in excess of jurisdiction in entering judgment against petitioner in spite of its finding that the petitioner had not committed any act of unfair labor practice." 2 Petitioner uses as props for this lone assigned error respondent court's statements in the body of its decision that (S)ince the grant of benefits to the drivers will depend on a finding by the Court that they are employees' of the respondent corporation and not on account of their membership with the complainant union or activities therein,

then the charge of discrimination against the respondent corporation is without basis in fact and in law. Settled is the rule in this jurisdiction that in order to judge an employer of discrimination in accordance with the Act, it must he due to the union affiliation or activities of the employee concerned" and that "both parties tried their level best to decide the issue before the Court is the last step provided for in their grievance machinery, Step No. 4. ... Since the grant of benefits to the drivers and helpers hinges on the decision of the Court that they are "employees" of the respondent corporation, then the latter could not have been guilty of refusal to bargain in accordance with the Act." Petitioner, invoking section 5(c) of the Industrial Peace Act,3 thus contends that "it is mandatory upon the respondent court to order the dismissal of the complaint, once it finds out that no unfair labor practice has been committed" and it should have "left the parties alone to settle their differences through conciliation meditation and recourse to the ordinary courts." Petitioner's appeal must be dismissed. It is speciously grounded on mere form rather than the realities of the case. In form, respondent court gently treated petitioner's scheme to deprive the fifteen drivers and helpers of their rightful status as employees and did not denounce it as a betrayal of the salutary purpose and objective of the Industrial Peace Act,4 but instead remarked that since the grant of employees' benefits hinged on the court's decision on their status as such employees, petitioner "could not have been guilty of refusal to bargain in accordance with the Act." The reality, however, is that respondent court expressly found that "in truth and in fact, (petitioner) corporation is the "employer" of the driver or helper and not the salesman or propagandist who is merely expressly authorized by the former to engage such services." Petitioner's failure to comply with its duty under the collective bargaining agreement to extend the privileges, rights and benefits thereof to the drivers and helpers as its actual employees clearly amounted to the commission of an unfair labor practice. And consequently respondent court properly ordered in, its judgment that said drivers and helpers "should be given and/or extended all the privileges, rights and benefits that are given to all the other regular employees retroactive as of the effectivity of the first agreement of March 14, 1962 up to the present." In ordering, respondent court but discharging its function under section 5(c) of the Act, supra, to order the cessation of an unfair labor practice and "take such affirmative action as will effectuate the policies of this Act." Failure on petitioner's part to live up in good faith to the terms of its collective bargaining agreement by denying the privileges and benefits thereof to the fifteen drivers and helpers through its device of trying to pass them off as "employees" of its salesmen and propagandists was a serious violation of petitioner's duty to bargain collectively and constituted unfair labor practice in any language.5 As succinctly stated by Mr. Justice Castro on Republic Savings Bank vs. Court of Industrial Relations, 6 in unfair labor practice cases, "(T)he question is whether the (respondent) committed the act charged in the complaint. If it did, it is of no consequence either as a matter of procedure or of substantive law, what the act is denominated whether as a restraint, interference or coercion, as some members of the Court believe it to be, or as a discriminatory discharge as other members think it is, or as refusal to bargain as some other members view it, or even as a combination of any or all of these." ACCORDINGLY, the judgment appealed from is affirmed. The writ of preliminary injunction heretofore issued on May 17, 1966 is lifted and set aside. With costs against petitioner. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando and Barredo, JJ., concur. Villamor, J., took no part. Makasiar J., is on leave.

# Footnotes. 1 Case No. 3805-ULP, "Alhambra Employees Ass'n. (FTUP) vs. Alhambra Industries, Inc." 2 Petitioner's brief, p. 4. 3 "If, after investigation, the Court shall be of the opinion that any person named in the complaint has engaged in or is engaging in any unfair labor practice, then the Court shall state its findings of fact and shall issue and cause to be served on such person an order requiring such person to cease and desist from such unfair labor practice and take such affirmative action as will effectuate the policies of this Act, including (but not limited to) reinstatement of employees with or without backpay and including rights of the employees prior to dismissal including seniority. Such order may further require such person to post the Court's order and findings in a place available to all the employees and to make reports from time to time showing the extent to which the Court's order has been complied with. If after investigation the Court shall be of the opinion that no person named in

the complaint has engaged in or is engaging in any such unfair labor practice, then the Court shall state its findings of fact and shall issue an order dismissing the said complaint. If the complaining party withdraws its complaint, the Court shall dismiss the case." 4 See Social Security System vs. Court of Appeals, L-25406, Dec. 24, 1968 (26 SCRA 458). 5 See Security Bank Employees Union vs. Security Bank & Trust Co., L-28536, Apr. 30, 1968 and cases cited. 6 L-20303, Resolution, October 31, 1967, (21 SCRA, 661).

G.R. No. L-32245 May 25, 1979 DY KEH BENG vs. INTERNATIONAL LABOR and MARINE UNION OF THE PHILIPPINES, ET AL. DE CASTRO, J.: Petitioner Dy Keh Beng seeks a review by certiorari of the decision of the Court of Industrial Relations dated March 23, 1970 in Case No. 3019-ULP and the Court's Resolution en banc of June 10, 1970 affirming said decision. The Court of Industrial Relations in that case found Dy Keh Beng guilty of the unfair labor practice acts alleged and order him to

reinstate Carlos Solano and Ricardo Tudla to their former jobs with backwages from their respective dates of dismissal until fully reinstated without loss to their right of seniority and of such other rights already acquired by them and/or allowed by law.
1

Now, Dy Keh Beng assigns the following errors 2 as having been committed by the Court of Industrial Relations: I RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE EMPLOYEES OF PETITIONERS. II RESPONDENT COURT ERRED IN FINDING THAT RESPONDENTS SOLANO AND TUDLA WERE DISMISSED FROM THEIR EMPLOYMENT BY PETITIONER. III RESPONDENT COURT ERRED IN FINDING THAT THE TESTIMONIES ADDUCED BY COMPLAINANT ARE CONVINCING AND DISCLOSES (SIC) A PATTERN OF DISCRIMINATION BY THE PETITIONER HEREIN. IV RESPONDENT COURT ERRED IN DECLARING PETITIONER GUILTY OF UNFAIR LABOR PRACTICE ACTS AS ALLEGED AND DESCRIBED IN THE COMPLAINT. V RESPONDENT COURT ERRED IN PETITIONER TO REINSTATE RESPONDENTS TO THEIR FORMER JOBS WITH BACKWAGES FROM THEIR RESPECTIVE DATES OF DISMISSALS UNTIL FINALLY REINSTATED WITHOUT LOSS TO THEIR RIGHT OF SENIORITY AND OF SUCH OTHER RIGHTS ALREADY ACQUIRED BY THEM AND/OR ALLOWED BY LAW. The facts as found by the Hearing Examiner are as follows: A charge of unfair labor practice was filed against Dy Keh Beng, proprietor of a basket factory, for discriminatory acts within the

meaning of Section 4(a), sub-paragraph (1) and (4). Republic Act No. 875, 3 by dismissing on September 28 and 29, 1960, respectively, Carlos N. Solano and Ricardo Tudla for their union activities. After preliminary investigation was conducted, a case was filed in the Court of Industrial Relations for in behalf of the International Labor and Marine Union of the Philippines and two of its members, Solano and Tudla In his answer, Dy Keh Beng contended that he did not know Tudla and that Solano was not his employee because the latter came to the establishment only when there was work which he did on pakiaw basis, each piece of work being done under a separate contract. Moreover, Dy Keh Beng countered with a special defense of simple extortion committed by the head of the labor union, Bienvenido Onayan. After trial, the Hearing Examiner prepared a report which was subsequently adopted in toto by the Court of Industrial Relations. An employee-employer relationship was found to have existed between Dy Keh Beng and complainants Tudla and Solano, although Solano was admitted to have worked on piece basis. 4 The issue therefore centered on whether there existed an employee employer relation between petitioner Dy Keh Beng and the respondents Solano and Tudla . According to the Hearing Examiner, the evidence for the complainant Union tended to show that Solano and Tudla became employees of Dy Keh Beng from May 2, 1953 and July 15, 1955, 5 respectively, and that except in the event of illness, their work with the establishment was continuous although their services were compensated on piece basis. Evidence likewise showed that at times the establishment had eight (8) workers and never less than five (5); including the complainants, and that complainants used to receive ?5.00 a day. sometimes less. 6 According to Dy Keh Beng, however, Solano was not his employee for the following reasons: (1) Solano never stayed long enought at Dy's establishment; (2) Solano had to leave as soon as he was through with the (3) order given him by Dy; (4) When there were no orders needing his services there was nothing for him to do; (5) When orders came to the shop that his regular workers could not fill it was then that Dy went to his address in Caloocan and fetched him for these orders; and

(6) Solano's work with Dy's establishment was not continuous. ,

According to petitioner, these facts show that respondents Solano and Tudla are only piece workers, not employees under Republic Act 875, where an employee 8 is referred to as shall include any employee and shag not be limited to the employee of a particular employer unless the Act explicitly states otherwise and shall include any individual whose work has ceased as a consequence of, or in connection with any current labor dispute or because of any unfair labor practice and who has not obtained any other substantially equivalent and regular employment. while an employer 9 includes any person acting in the interest of an employer, directly or indirectly but shall not include any labor organization (otherwise than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization. Petitioner really anchors his contention of the non-existence of employee-employer relationship on the control test. He points to the case of Madrigal Shipping Co., Inc. v. Nieves Baens del Rosario, et al., L-13130, October 31, 1959, where the Court ruled that: The test ... of the existence of employee and employer relationship is whether there is an understanding between the parties that one is to render personal services to or for the benefit of the other and recognition by them of the right of one to order and control the other in the performance of the work and to direct the manner and method of its performance. Petitioner contends that the private respondents "did not meet the control test in the fight of the ... definition of the terms employer and employee, because there was no evidence to show that petitioner had the right to direct the manner and method of respondent's work. 10 Moreover, it is argued that petitioner's evidence showed that "Solano worked on a pakiaw basis" and that he stayed in the establishment only when there was work. While this Court upholds the control test 11 under which an employer-employee relationship exists "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, " it finds no merit with petitioner's arguments as stated above. It should be borne in mind that the control test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right.
12

Considering the finding by

the Hearing Examiner that the establishment of Dy Keh Beng is "engaged in the manufacture of baskets known as kaing, 13 it is natural to expect that those working under Dy would have to observe, among others, Dy's requirements of size and quality of

the kaing. Some control would necessarily be exercised by Dy as the making of the kaing would be subject to Dy's specifications. Parenthetically, since the work on the baskets is done at Dy's establishments, it can be inferred that the proprietor Dy could easily exercise control on the men he employed. As to the contention that Solano was not an employee because he worked on piece basis, this Court agrees with the Hearing Examiner that circumstances must be construed to determine indeed if payment by the piece is just a method of compensation and does not define the essence of the relation. Units of time ... and units of work are in establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied whenever agreed upon. We cannot construe payment by the piece where work is done in such an establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure. At this juncture, it is worthy to note that Justice Perfecto, concurring with Chief Justice Ricardo Paras who penned the decision in "Sunrise Coconut Products Co. v. Court of Industrial Relations" (83 Phil..518, 523), opined that judicial notice of the fact that the so-called "pakyaw" system mentioned in this case as generally practiced in our country, is, in fact, a labor contract -between employers and employees, between capitalists and laborers. Insofar as the other assignments of errors are concerned, there is no showing that the Court of Industrial Relations abused its discretion when it concluded that the findings of fact made by the Hearing Examiner were supported by evidence on the record. Section 6, Republic Act 875 provides that in unfair labor practice cases, the factual findings of the Court of Industrial Relations are conclusive on the Supreme Court, if supported by substantial evidence. This provision has been put into effect in a long line of decisions where the Supreme Court did not reverse the findings of fact of the Court of Industrial Relations when they were supported by substantial evidence. 14 Nevertheless, considering that about eighteen (18) years have already elapsed from the time the complainants were dismissed, 15 and that the decision being appealed ordered the payment of backwages to the employees from their respective dates of dismissal until finally reinstated, it is fitting to apply in this connection the formula for backwages worked out by Justice Claudio Teehankee in "cases not terminated sooner." 16 The formula cans for fixing the award of backwages without qualification and deduction to three years, "subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances. 17 Considering there are no such circumstances in this case, there is no reason why the Court should not apply the abovementioned formula in this instance. WHEREFORE; the award of backwages granted by the Court of Industrial Relations is herein modified to an award of backwages for three years without qualification and deduction at the respective rates of compensation the employees concerned were receiving at the time of dismissal. The execution of this award is entrusted to the National Labor Relations Commission. Costs against petitioner. SO ORDERED. Teehankee, Makasiar, Guerrero, and Melencio-Herrera, JJ., concur. Fernandez, J., took no part.

#Footnotes
1 Rollo, p. 48. 2 petitioner's Brief, pp. 1-2. 3 Republic Act 875, as amended, Section 4. Unfair Labor Practices. a) It will be unfair labor practice for an employer: (1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed in section three; xxx xxx xxx (4) To discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization; ... 4 Rollo, p. 32. 5 Id., p. 23.

6 Id. 7 Rollo, Annex A, p. 22. 8 Section 2(d), Republic Act 875, As Amended, otherwise known as the Industrial Peace Act. 9 Id., Section 2(c). 10 Petitioner's Brief, pp. 5-7. 11 LVN Pictures v. Philippine Musicians Guild, et. al., 110 Phil. 12 Feati University v. Bautista, et al., L-21500, December 27 1966, 18 SCRA 1966, 13 Rollo, p. 46. 14 Among them are: Philippine Newspapers' Guild v. Evening News, Inc., 86 Phil 303; GPTC Employees Union v. Court of Industrial Relations, et. all 102 Phil 538; Community Sawmill Company v. Court of Industrial Relations and Community Effort Labor Union, L-24347, March 27, 1979; Gonzalo, Puyat & Sorts, Inc. v. Labayo, 62 SCRA 488; De Leon, et al., v. Pampanga Development Co., Inc., L-26844, September 30, 1969, 29 SCRA 628; Castillo, et al., v. Court of Industrial Relations, L-26124, May 29, 1971, 39 SCRA 75. 15 Rollo, p. 36. 16 Mercury Drug Co., et al. v. Court of Industrial Relations, L-23357, April 30, 1974, 56 SCRA 694, 712. 17 Id.

4. G.R. No. L-12582

January 28, 1961

LVN PICTURES, INC., v. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS G.R. No. L-12598 January 28, 1961

SAMPAGUITA PICTURES, INC., vs. PHILIPPINE MUSICIANS Guild (FFW) and COURT OF INDUSTRIAL RELATIONS, CONCEPCION, J.:
Petitioners herein, LVN Pictures, Inc. and Sampaguita Pictures, Inc. seek a review by certiorari of an order of the Court of Industrial Relations in Case No. 306-MC thereof, certifying the Philippine Musicians Guild (FFW), petitioner therein and respondent herein, as the sole and exclusive bargaining agency of all musicians working with said companies, as well as with the Premiere Productions, Inc., which has not appealed. The appeal of LVN Pictures, Inc., has been docketed as G.R. No. L-12582, whereas G.R. No. L12598 is the appeal of Sampaguita Pictures, Inc. Involving as they do the same order, the two cases have been jointly heard in this Court, and will similarly be disposed of. In its petition in the lower court, the Philippine Musicians Guild (FFW), hereafter referred to as the Guild, averred that it is a duly registered legitimate labor organization; that LVN Pictures, Inc., Sampaguita Pictures, Inc., and Premiere Productions, Inc. are corporations, duly organized under the Philippine laws, engaged in the making of motion pictures and in the processing and distribution thereof; that said companies employ musicians for the purpose of making music recordings for title music, background music, musical numbers, finale music and other incidental music, without which a motion picture is incomplete; that ninety-five (95%) percent of all the musicians playing for the musical recordings of said companies are members of the Guild; and that the same has no knowledge of the existence of any other legitimate labor organization representing musicians in said companies. Premised upon these allegations, the Guild prayed that it be certified as the sole and exclusive bargaining agency for all musicians working in the aforementioned companies. In their respective answers, the latter denied that they have any musicians as employees, and alleged that the musical numbers in the filing of the companies are furnished by independent contractors. The lower court, however, rejected this pretense and sustained the theory of the Guild, with the result already adverted to. A reconsideration of the order complained of having been denied by the Court en banc, LVN Pictures, inc., and Sampaguita Pictures, Inc., filed these petitions for review for certiorari. Apart from impugning the conclusion of the lower court on the status of the Guild members as alleged employees of the film companies, the LVN Pictures, Inc., maintains that a petition for certification cannot be entertained when the existence of employer-

employee relationship between the parties is contested. However, this claim is neither borne out by any legal provision nor supported by any authority. So long as, after due hearing, the parties are found to bear said relationship, as in the case at bar, it is proper to pass upon the merits of the petition for certification. It is next urged that a certification is improper in the present case, because, "(a) the petition does not allege and no evidence was presented that the alleged musicians-employees of the respondents constitute a proper bargaining unit, and (b) said alleged musicians-employees represent a majority of the other numerous employees of the film companies constituting a proper bargaining unit under section 12 (a) of Republic Act No. 875." The absence of an express allegation that the members of the Guild constitute a proper bargaining unit is fatal proceeding, for the same is not a "litigation" in the sense in which this term is commonly understood, but a mere investigation of a non-adversary, fact finding character, in which the investigating agency plays the part of a disinterested investigator seeking merely to ascertain the desires of employees as to the matter of their representation. In connection therewith, the court enjoys a wide discretion in determining the procedure necessary to insure the fair and free choice of bargaining representatives by employees.1 Moreover, it is alleged in the petition that the Guild it a duly registered legitimate labor organization and that ninety-five (95%) percent of the musicians playing for all the musical recordings of the film companies involved in these cases are members of the Guild. Although, in its answer, the LVN Pictures, Inc. denied both allegations, it appears that, at the hearing in the lower court it was merely the status of the musicians as its employees that the film companies really contested. Besides, the substantial difference between the work performed by said musicians and that of other persons who participate in the production of a film, and the peculiar circumstances under which the services of that former are engaged and rendered, suffice to show that they constitute a proper bargaining unit. At this juncture, it should be noted that the action of the lower court in deciding upon an appropriate unit for collective bargaining purposes is discretionary (N.L.R.B. v. May Dept. Store Co., 66 Sup. Ct. 468. 90 L. ed. 145) and that its judgment in this respect is entitled to almost complete finality, unless its action is arbitrary or capricious (Marshall Field & Co. v. N.L.R.B. [C.C.A. 19431, 135 F. 2d. 891), which is far from being so in the cases at bar. Again, the Guild seeks to be, and was, certified as the sole and exclusive bargaining agency for the musicians working in the aforesaid film companies. It does not intend to represent the other employees therein. Hence, it was not necessary for the Guild to allege that its members constitute a majority of all the employees of said film companies, including those who are not musicians. The real issue in these cases, is whether or not the musicians in question are employees of the film companies. In this connection the lower court had the following to say: As a normal and usual course of procedure employed by the companies when a picture is to be made, the producer invariably chooses, from the musical directors, one who will furnish the musical background for a film. A price is agreed upon verbally between the producer and musical director for the cost of furnishing such musical background. Thus, the musical director may compose his own music specially written for or adapted to the picture. He engages his own men and pays the corresponding compensation of the musicians under him. When the music is ready for recording, the musicians are summoned through 'call slips' in the name of the film company (Exh 'D'), which show the name of the musician, his musical instrument, and the date, time and place where he will be picked up by the truck of the film company. The film company provides the studio for the use of the musicians for that particular recording. The musicians are also provided transportation to and from the studio by the company. Similarly, the company furnishes them meals at dinner time. During the recording sessions, the motion picture director, who is an employee of the company, supervises the recording of the musicians and tells what to do in every detail. He solely directs the performance of the musicians before the camera as director, he supervises the performance of all the action, including the musicians who appear in the scenes so that in the actual performance to be shown on the screen, the musical director's intervention has stopped. And even in the recording sessions and during the actual shooting of a scene, the technicians, soundmen and other employees of the company assist in the operation. Hence, the work of the musicians is an integral part of the entire motion picture since they not only furnish the music but are also called upon to appear in the finished picture. The question to be determined next is what legal relationship exits between the musicians and the company in the light of the foregoing facts. We are thus called upon to apply R.A. Act 875. which is substantially the same as and patterned after the Wagner Act substantially the same as a Act and the Taft-Hartley Law of the United States. Hence, reference to decisions of American Courts on these laws on the point-at-issue is called for. Statutes are to be construed in the light of purposes achieved and the evils sought to be remedied. (U.S. vs. American Tracking Association, 310 U.S. 534, 84 L. ed. 1345.) . In the case of National Labor Relations Board vs. Hearts Publication, 322 U.S. 111, the United States Supreme Court said the Wagner Act was designed to avert the 'substantial obstruction to the free flow of commerce which results from strikes and other forms of industrial unrest by eliminating the causes of the unrest. Strikes and industrial unrest result from the refusal of employers' to bargain collectively and the inability of workers to bargain successfully for improvement in their working conditions. Hence, the purposes of the Act are to encourage collective bargaining and to remedy the workers' inability to bargaining power, by protecting the exercise of full freedom of association and designation of representatives of their own choosing, for the purpose of negotiating the terms and conditions of their employment.'

The mischief at which the Act is aimed and the remedies it offers are not confined exclusively to 'employees' within the traditional legal distinctions, separating them from 'independent contractor'. Myriad forms of service relationship, with infinite and subtle variations in the term of employment, blanket the nation's economy. Some are within this Act, others beyond its coverage. Large numbers will fall clearly on one side or on the other, by whatever test may be applied. Inequality of bargaining power in controversies of their wages, hours and working conditions may characterize the status of one group as of the other. The former, when acting alone may be as helpless in dealing with the employer as dependent on his daily wage and as unable to resist arbitrary and unfair treatment as the latter.' To eliminate the causes of labor dispute and industrial strike, Congress thought it necessary to create a balance of forces in certain types of economic relationship. Congress recognized those economic relationships cannot be fitted neatly into the containers designated as 'employee' and 'employer'. Employers and employees not in proximate relationship may be drawn into common controversies by economic forces and that the very dispute sought to be avoided might involve 'employees' who are at times brought into an economic relationship with 'employers', who are not their 'employers'. In this light, the language of the Act's definition of 'employee' or 'employer' should be determined broadly in doubtful situations, by underlying economic facts rather than technically and exclusively established legal classifications. (NLRB vs. Blount, 131 F [2d] 585.) In other words, the scope of the term 'employee' must be understood with reference to the purposes of the Act and the facts involved in the economic relationship. Where all the conditions of relation require protection, protection ought to be given . By declaring a worker an employee of the person for whom he works and by recognizing and protecting his rights as such, we eliminate the cause of industrial unrest and consequently we promote industrial peace, because we enable him to negotiate an agreement which will settle disputes regarding conditions of employment, through the process of collective bargaining. The statutory definition of the word 'employee' is of wide scope. As used in the Act, the term embraces 'any employee' that is all employees in the conventional as well in the legal sense expect those excluded by express provision. (Connor Lumber Co., 11 NLRB 776.). It is the purpose of the policy of Republic Act 875; (a) To eliminate the causes of industrial unrest by protecting the exercise of their right to self-organization for the purpose of collective bargaining. (b) To promote sound stable industrial peace and the advancement of the general welfare, and the best interests of employers and employees by the settlement of issues respecting terms and conditions of employment through the process of collective bargaining between employers and representatives of their employees. The primary consideration is whether the declared policy and purpose of the Act can be effectuated by securing for the individual worker the rights and protection guaranteed by the Act. The matter is not conclusively determined by a contract which purports to establish the status of the worker, not as an employee. The work of the musical director and musicians is a functional and integral part of the enterprise performed at the same studio substantially under the direction and control of the company. In other words, to determine whether a person who performs work for another is the latter's employee or an independent contractor, the National Labor Relations relies on 'the right to control' test. Under this test an employer-employee relationship exist 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 the end. (United Insurance Company, 108, NLRB No. 115.). Thus, in said similar case of Connor Lumber Company, the Supreme Court said:. 'We find that the independent contractors and persons working under them are employees' within the meaning of Section 2 (3) of its Act. However, we are of the opinion that the independent contractors have sufficient authority over the persons working under their immediate supervision to warrant their exclusion from the unit. We shall include in the unit the employees working under the supervision of the independent contractors, but exclude the contractors.' 'Notwithstanding that the employees are called independent contractors', the Board will hold them to be employees under the Act where the extent of the employer's control over them indicates that the relationship is in reality one of employment. (John Hancock Insurance Co., 2375-D, 1940, Teller, Labor Dispute Collective Bargaining, Vol.). The right of control of the film company over the musicians is shown (1) by calling the musicians through 'call slips' in 'the name of the company; (2) by arranging schedules in its studio for recording sessions; (3) by furnishing transportation and meals to musicians; and (4) by supervising and directing in detail, through the motion picture director, the performance of the musicians before the camera, in order to suit the music they are playing to the picture which is being flashed on the screen. Thus, in the application of Philippine statutes and pertinent decisions of the United States Courts on the matter to the facts established in this case, we cannot but conclude that to effectuate the policies of the Act and by virtue of the 'right of

control' test, the members of the Philippine Musicians Guild are employees of the three film companies and, therefore, entitled to right of collective bargaining under Republic Act No. 875. In view of the fact that the three (3) film companies did not question the union's majority, the Philippine Musicians Guild is hereby declared as the sole collective bargaining representative for all the musicians employed by the film companies." We are fully in agreement with the foregoing conclusion and the reasons given in support thereof. Both are substantially in line with the spirit of our decision in Maligaya ShipWatchmen Agency vs. Associated Watchmen and Security Union, L-12214-17 (May 28, 1958). In fact, the contention of the employers in the Maligaya cases, to the effect that they had dealt with independent contractors, was stronger than that of the film companies in these cases. The third parties with whom the management and the workers contracted in the Maligaya cases were agencies registered with the Bureau of Commerce and duly licensed by the City of Manila to engage in the business of supplying watchmen to steamship companies, with permits to engage in said business issued by the City Mayor and the Collector of Customs. In the cases at bar, the musical directors with whom the film companies claim to have dealt with had nothing comparable to the business standing of said watchmen agencies. In this respect, the status of said musical directors is analogous to that of the alleged independent contractor in Caro vs. Rilloraza, L-9569 (September 30, 1957), with the particularity that the Caro case involved theenforcement of the liability of an employer under the Workmen's Compensation Act, whereas the cases before us are merely concerned with the right of the Guild to representthe musicians as a collective bargaining unit. Hence, there is less reason to be legalistic and technical in these cases, than in the Caro case. Herein, petitioners-appellants cite, in support of their appeal, the cases of Sunripe Coconut Product Co., Inc vs. CIR (46 Off. Gaz., 5506, 5509), Philippine Manufacturing Co. vs. Santos Vda. de Geronimo, L-6968 (November 29, 1954), Viana vs. Al-Lagadan, L8967 (May 31, 1956), and Josefa Vda. de Cruz vs. The Manila Hotel Co. (53 Off. Gaz., 8540). Instead of favoring the theory of said petitioners-appellants, the case of the Sunripe Coconut Product Co., Inc. is authority for herein respondents-appellees. It was held that, although engaged as piece-workers, under the "pakiao" system, the "parers" and "shellers" in the case were, not independent contractor, but employees of said company, because "the requirement imposed on the 'parers' to the effect that 'the nuts are pared whole or that there is not much meat wasted,' in effect limits or controls the means or details by which said workers are to accomplish their services" as in the cases before us. The nature of the relation between the parties was not settled in the Viana case, the same having been remanded to the Workmen's Compensation Commission for further evidence. The case of the Philippine Manufacturing Co. involved a contract between said company and Eliano Garcia, who undertook to paint a tank of the former. Garcia, in turn engaged the services of Arcadio Geronimo, a laborer, who fell while painting the tank and died in consequence of the injuries thus sustained by him. Inasmuch as the company was engaged in the manufacture of soap, vegetable lard, cooking oil and margarine, it was held that the connection between its business and the painting aforementioned was purelycasual; that Eliano Garcia was an independent contractor; that Geronimo was not an employee of the company; and that the latter was not bound, therefore, to pay the compensation provided in the Workmen's Compensation Act. Unlike the Philippine Manufacturing case, the relation between the business of herein petitioners-appellants and the work of the musicians is not casual. As held in the order appealed from which, in this respect, is not contested by herein petitioners-appellants "the work of the musicians is an integral part of the entire motion picture." Indeed, one can hardly find modern films without music therein. Hence, in the Caro case (supra), the owner and operator of buildings for rent was held bound to pay the indemnity prescribed in the Workmen's Compensation Act for the injury suffered by a carpenter while working as such in one of said buildings even though his services had been allegedly engaged by a third party who had directly contracted with said owner. In other words, the repair work had not merely a casual connection with the business of said owner. It was a necessary incident thereof, just as music is in the production of motion pictures. The case of Josefa Vda. de Cruz vs. The Manila Hotel Co., L-9110 (April 30, 1957) differs materially from the present cases. It involved the interpretation of Republic Act No. 660, which amends the law creating and establishing the Government Service Insurance System. No labor law was sought to be construed in that case. In act, the same was originally heard in the Court of First Instance of Manila, the decision of which was, on appeal, affirmed by the Supreme Court. The meaning or scope if the term "employee," as used in the Industrial Peace Act (Republic Act No. 875), was not touched therein. Moreover, the subject matter of said case was a contract between the management of the Manila Hotel, on the one hand, and Tirso Cruz, on the other, whereby the latter greed to furnish the former the services of his orchestra, consisting of 15 musicians, including Tirso Cruz, "from 7:30 p.m. to closing time daily." In the language of this court in that case, "what pieces the orchestra shall play, and how the music shall be arranged or directed, the intervals and other details such are left to the leader's discretion." This is not situation obtaining in the case at bar. The musical directors above referred to have no such control over the musicians involved in the present case. Said musical directors control neither the music to be played, nor the musicians playing it. The film companies summon the musicians to work, through the musical directors. The film companies, through the musical directors, fix the date, the time and the place of work. The film companies, not the musical directors, provide the transportation to and from the studio. The film companies furnish meal at dinner time. What is more in the language of the order appealed from "during the recording sessions, the motion picture director who is an employee of the company" not the musical director "supervises the recording of the musicians and tells them what to do in every detail". The motion picture director not the musical director "solely directs and performance of the musicians before the camera". The motion picture director "supervises the performance of all the actors, including the musicians who appear in the scenes, so that in the actual performance to be shown in the screen, the musical director's intervention has stopped." Or, as testified to in the lower court, "the movie director tells the musical director what to do; tells the music to be cut or tells additional music in this part or he eliminates the entire music he does not (want) or he may want more drums or move violin or piano, as the case may be".

The movie director "directly controls the activities of the musicians." He "says he wants more drums and the drummer plays more" or "if he wants more violin or he does not like that.". It is well settled that "an employer-employee relationship exists . . .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 . . . ." (Alabama Highway Express Co., Express Co., v. Local 612, 108S. 2d. 350.) The decisive nature of said control over the "means to be used", is illustrated in the case of Gilchrist Timber Co., et al., Local No. 2530 (73 NLRB No. 210, pp. 1197, 1199-1201), in which, by reason of said control, the employer-employee relationship was held to exist between the management and the workers, notwithstanding the intervention of an alleged independent contractor,who had, and exercise, the power to hire and fire said workers. The aforementioned control over the means to be used" in reading the desired end is possessed and exercised by the film companies over the musicians in the cases before us. WHEREFORE, the order appealed from is hereby affirmed, with costs against petitioners herein. It is so ordered. Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera, Paredes and Dizon, JJ., concur. Gutierrez David, J., took no part. Footnotes N.L.R.B. v. Botany Worsted Mils, 319 U.S. 751, 87 L. ed. 1705; Southern S.S. Co. v. N.L.R.B., 316 U.S. 31, 86 L. ed. 1246; N.L.R.B. v. A.J. Tower Co., 66 Sup. Ct. 1011; ". . . 'certification' and 'de-certification' proceedings under this section of the Act are a non-adversary nature. Such proceedings are not predicated upon an allegation of misconduct requiring relief, but, rather, are merely of an inquisitorial nature. The Board's functions are not judicial in nature, but merely of an investigative character. The object of the proceedings is not the decision of an alleged commission of wrongs nor asserted deprivation of rights but merely the determination of proper bargaining units and the ascertainment if the will and choice of the employees in respect of the election of a bargaining representative. The determination of the proceeding does not entail the entry of remedial orders to redress rights, but culminates solely in an official designation of bargaining units and an affirmation of the employees' expressed choice of bargaining agent." (Rothenberg on Labor Relations, p. 514.)
1

G.R. No. L-53590 July 31, 1984 ROSARIO BROTHERS INC. (MANILA COD DEPARTMENT STORE), petitioner, vs. HON. BLAS F. OPLE, THE NATIONAL LABOR RELATIONS COMMISSION, and LEONARDO LOVERIA, MARIETTA GALUT, LINDA TAPICERIA, JESUS S. OLIVER, CLARITA SANGLE, RICARDO ROXAS, ANTONIO MABUTOL, LUZ BAYNO, NESTOR SANCHEZ, TITO CASTALEDA, EDDIE RODRIGUEZ, MANUEL MEJES, FRANCISCA TAPICERIA, EDITHA BAYNO, ET AL., respondents. Bueno & Primicias Law Office for petitioner. The Solicitor General for respondents.

RELOVA, J.: The issue raised in this case is whether an employer-employee relationship exists between the petitioner and the private respondents. It is the submission of petitioner that no such relationship exists or has been created because the "series of memoranda" issued by petitioner to the private respondents from 1973 to 1977 would reveal that it had no control and/or supervision over the work of the private respondents. Private respondents are tailors, pressers, stitchers and similar workers hired by the petitioner in its tailoring department (Modes Suburbia). Some had worked there since 1969 until their separation on January 2, 1978. For their services, they were paid weekly wages on piece-work basis, minus the withholding tax per Bureau of Internal Revenue (BIR) rules. Further, they were registered with the Social Security System (SSS) as employees of petitioner and premiums were deducted from their wages; they were also members of the Avenida-Cubao Manila COD Department Store Labor Union which has a Collective Bargaining Agreement with the company and; they were required to report for work from Monday through Saturday and to stay in the tailoring shop for no less than eight (8) hours a day, unless no job order was given them after waiting for two to three hours, in which case, they may leave and may come back in the afternoon. Their attendance was recorded through a bundy clock just like the other

employees of petitioner. A master cutter distributes job orders equally, supervises the work and sees to it that they were finished as soon as possible. Quoting from the comment of the Solicitor General, petitioner, in its memorandum, said Once the job orders and the corresponding materials were distributed to them, private respondents were on their own. They were free to do their jobs either in the petitioner's shop or elsewhere at their option, without observing the regular working time of the company provided that they finished their work on time and in accordance with the specifications. As a matter of fact, they were allowed to contract other persons to do the job for them; and also to accept tailoring jobs from other establishments. (p. 202, Rollo) On September 7, 1977, the private respondents filed with the Regional Office of the Department (now Ministry) of Labor a complaint for violation of Presidential Decree 851 (13th month pay) and Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance) against herein petitioner. After petitioner had filed its answer, the case was certified for compulsory arbitration to the Labor Arbiter who, after due hearing, rendered a decision on December 29, 1977 dismissing "private respondents" claims for unpaid emergency living allowance and 13th month pay, for lack of merit, upon finding that the complainants (herein private respondents) are not employees of the respondent (herein petitioner) within the meaning of Article 267(b) of the Labor Code. As a consequence, the private respondents were dismissed on January 2, 1978 and this prompted them to file a complaint for illegal dismissal with the Ministry of Labor. Meanwhile, the National Labor Relations Commission (NLRC) affirmed the decision of the Labor Arbiter and dismissed private respondents' appeal for lack of merit. However, upon appeal to the Minister of Labor, the latter reversed the resolution of the NLRC in a decision, dated March 27, 1979, holding that The decision appealed from must be reversed. It is clearly erronious. Ccmplainants and respondent are correct (sic) in considering their relationship as one between employees and employer. The labor arbiter should not have made a different finding. Complainants were employed as tailors, pressers, stitchers and coatmakers in the tailoring department of the respondent. They are hired through a master cutter and the department head and upon the approval of the personnel department and the management. They report to the shop from Monday to Saturday and record their attendance with a bundy clock. They are required to stay in the shop premises "for no less than 8 hours a day" unless no job is given them "after waiting for two or three hours" in which case, they are "allowed to leave." The employees (tailors, pressers and stitchers) are paid by piece per week according to the rates established by the company. They are registered as employees with the Social Security System for which premiums are deducted from their wages. Taxes are also witheld from their wages pursuant to BIR rules. Moreover, they enjoy the benefits due to employees under their collective agreement with the company. The tailors are given deadlines on their assigned jobs. They are required to work on job orders as soon as these are given to them. The master cutter is ordered "to watch out for tailors who postponed their assigned job up to the last few days of the deadline" and to report violators "for proper action." Tailors are also required to follow the company code of discipline and the rules and regulations of the tailoring department. Outright dismissal is meted on anyone who brings out company patterns. Under these facts, the existence of the employment relations can not be disputed. The respondent itself, in its very first position papers, accepts this fact. The labor arbiter certainly erred in making a different finding. However, respondent contends that the employees are excluded from the coverage of

PD 525, 851 and 1123 because of the nature of their employment, there being 'no fixed number with regards to entry and exit and no fixed number of days of work, with respect to said employees. We have, however, examined carefully the decrees and find absolutely no indication therein that the employees are indeed excluded. Nor are the rules implementing the decrees supportive of the respondent's contention. On the contrary, the rules argue for the contrary view. Section 2 of the rules implementing PD 525 provides: "The Decree shall apply to all employees of covered employers, regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid, including temporary, casual, probationary, and seasonal employees and workers." And Section 3, of the rules implementing PD 851 provides that "all employees of covered employers shall be entitled to benefits provided under the Decree ... regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid." Section 2 of the same rules explicitly provides that the rules apply to "workers paid on piece-rate basis" or "those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same." WHEREFORE, respondent is hereby ordered to pay the emergency allowances under PD 525 and 1123 and the 13th month pay under PD 851 from the date of the effectivity of said decrees but not earlier than September 7, 1974 to the following complainants: Leonardo Loveria, Editha Bayno, Fe Bonita, Ricardo Roxas, Marietta Galut, Mercedes Oliver, Antonio Mabutol, Clarita Sangle and Jesus Oliver; and the emergency allowances and 13th month pay under said decrees from the date of the effectivity of said decrees but not earlier than the date of the date of the start of their employment, as indicated in the parenthesis after their names, to the following complainants: Linda Tapiceria (July 14, 1975), Luz Bayno, (September 22, 1975), Tito Castaeda (October 20, 1976), Francisco Tapiceria (February 14, 1977), Manuel Mejes (February 20, 1977), Eddie Rodriguez (July 4, 1977) and Nestor Sanchez (July 22, 1977). The Socio-Economic Analyst of the National Labor Relations Commission is hereby directed to compute the amount of the awards stated in this order and to submit a report thereon within 20 calendar days from receipt of this order. (pp. 37-40, Rollo) Thereafter, private respondents filed a motion for issuance of a writ of execution of the aforesaid decision of the Minister of Labor which was granted and, partially implemented. On February 28, 1980, the Labor Arbiter, issued an order directing the Chief of the Research and Information Department of the Commission to designate a Socio-Economic Analyst to compute the balance of private respondents' claims for the 13th month pay and emergency living allowance in accordance with respondent Minister's decision of March 27, 1979. Pursuant thereto, a report, dated March 4, 1980, was submitted computing the balance of private respondents' claims for emergency living allowance and 13th month pay up to February 29,1980 in the total amount of P71,131.14. A writ of execution was issued for the satisfaction of said amount. Hence, the filing of this petition for certiorari, praying, among others, to annul and set aside the decision of public respondent Minister of Labor and to dismiss the claims of private respondents. We cannot sustain the petition. It was filed on April 1, 1980 which was too late because the Labor Minister's decision of March 27, 1979, subject of this judicial review, had already become final. And, not only that. The questioned decision has already been partially implemented by the sheriff as shown by his return, dated July 17, 1979 (p. 96, Rollo). What is left for execution is the balance of private respondents' claim. Further, the petition is devoid of merit. As held in Mafinco Trading Corporation vs. Ople, 70 SCRA 139, the existence of employer-employee relationship is determined by the following elements, 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 employees' conduct although the latter is the most important element. On the other hand, an independent contractor is one who exercises independent employment and contracts to do a piece of work according to his own methods and without being subjected to control of his employer except as to the result of his work. 1. In the case at bar, as found by the public respondent, the selection and hiring of private respondents were done by the petitioner, through the master cutter of its tailoring department who was a regular employee. The procedure was modified when the employment of personnel in the tailoring department was made by the management itself after the applicants' qualifications had been passed upon by a committee of four. Later, further approval by the Personnel Department was required. 2. Private respondents received their weekly wages from petitioner on piece-work basis which is within the scope and meaning of the term "wage" as defined under Article 97(f) of the New Labor Code (PD 442), thus (f) "Wage" paid to any employee shag mean 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, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging or other facilities customarily furnished by the employer to the employee. ... 3. Petitioner had the power to dismiss private respondents, as shown by the various memoranda issued for strict compliance by private respondents, violations of which, in extreme cases, are grounds for outright dismissal. In fact, they were dismissed on January 2, 1978, although, the dismissal was declared illegal by the Labor Arbiter. The case is pending appeal with the National Labor Relations Commission. 4. Private respondents' conduct in the performance of their work was controlled by petitioner, such as: (1) they were required to work from Monday through Saturday; (2) they worked on job orders without waiting for the deadline; (3) they were to observe cleanliness in their place of work and were not allowed to bring out tailoring shop patterns; and (4) they were subject to quality control by petitioner. 5. Private respondents were allowed to register with the Social Security System (SSS) as employees of petitioner and premiums were deducted from their wages just like its other employees. And, withholding taxes were also deducted from their wages for transmittal to the Bureau of Internal Revenue (BIR). 6. Well-established is the principle that "findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases do not go so far as to evaluate the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their determinations but are limited to issues of jurisdiction or grave abuse of discretion (Special Events & Central Shipping Office Workers Union vs. San Miguel Corporation, 122 SCRA 557)." In the case at bar, the questioned decision and order of execution of public respondents are not tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction and, therefore, this Court finds no necessity to disturb, much less, reverse the same. WHEREFORE, premises considered, the petition is dismissed for lack of merit. SO ORDERED.

No E&E relationship G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. Tirol & Tirol for petitioner. Enojas, Defensor & Teodosio Cabado Law Offices for private respondent.

NARVASA, J.: On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which: 1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company; 2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and 3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract. The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.: RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe. ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner. TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ... Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust.

ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ... Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2 In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3 Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5 The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6 This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition. The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action. The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective. Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their

applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9 It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10 ... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ... has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. 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. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople, 13the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b)

required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses. More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee. The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods or the methods themselves of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance." The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company. The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits. WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. SO ORDERED. Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur.

Footnotes 1 Rollo, pp. 14-15. 2 Rollo, p. 16. 3 Rollo, p. 17. 4 Docketed as RAB Case No. VI-0010-83. 5 Rollo, p. 17. 6 Id., pp. 18-22. 7 Rollo, pp., 23-27.

8 which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, ... all money claims of workers, including those based on nonpayment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits." 9 Respondents Comments; Rollo, pp. 47-52, 60-69. 10 99 Phil. 408. 411-412. 11 Feati University vs. Bautista, 18 SCRA., 119: Dy Keh Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 163: Rosario Bros. vs. Ople, 131 SCRA 72; National Mines and Allied Workers Union (NAMAWU) vs. Valero, 132 SCRA 578. 12 43 Am. Jur. 2d, pp. 73-91. 13 70 SCRA 139. 14 21 SCRA 924 (1967). 15 G.R. No. 73199. October 26, 1988.

[G.R. No. 102199. January 28, 1997]

AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE,respondents. DECISION PANGANIBAN, J.: The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain and rule on money claims where no employer-employee relations is involved. Thus, any such award rendered without jurisdiction is a nullity. This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution[1] of the National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-0201196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private respondent.

The Antecedent Facts

The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided:[2] "B. Duties and Obligations:

1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and regulations which it may from time to time, revise, modify or cancel to serve its business interests. 2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation or residence of military personnel. He is free to solicit in the area for which he/she is licensed and as authorized, provided however, that AFPMBAI may from time to time, assign him a specific area of responsibility and a production quota on a case to case basis. xxx C. xxx xxx

Commission

1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the applicant's commission schedules hereto attached. xxx D. xxx xxx

General Provisions

1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby deemed an independent contractor." As compensation, he received commissions based on the following percentages of the premiums paid:[3] "30% of premium paid within the first year; 10% of premium paid with the second year; 5% of the premium paid during the third year; 3% of the premium paid during the fourth year; and 1% of the premium paid during the fifth year up-to the tenth year. On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another life insurance company in violation of said agreement. At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid to him. Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private respondent signed a quitclaim in favor of petitioner.

Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check, he discovered from a document (account summary) attached to said check that his total commissions for the 24 months actually amounted to P354,796.09. Said document stated:[4] "6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983 grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total expected commission would amount to P354,796.09. From that figure at a 15% compromise settlement this would mean P53,219.41 due him to settle his claim." Private respondent, however, was paid only the amount of P35,000.00. On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance Commissioner, advised private respondent that it was the Department of Labor and Employment that had jurisdiction over his complaint. On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2 years from termination of employment equivalent to 30% of premiums remitted during employment; (2) P354,796.00 as commission earned from renewals and old business generated since 1983; (3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages. After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the dispositive portion of which reads:[5] "WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the dismissal of the complainant as just and valid, and consequently, his claim for separation pay is denied. On his money claim, the respondent company is hereby ordered to pay complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60. All other claims of the complainant are dismissed for want of merit." The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area of responsibility and a production quota, and read it as signaling the existence of employer-employee relationship between petitioner and private respondent. On appeal, the Second Division[6] of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and ruled:[7] "WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and the decision appealed from affirmed. SO ORDERED." Hence, this petition.

The Issue

Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that

the labor arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an employer-employee relationship between petitioner and private respondent. Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employer-employee relationship between private respondent and itself. Hence, respondent commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over the case.

The Court's Ruling

The petition is meritorious.

First Issue: Not All That Glitters Is Control

Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be accorded not only respect but even finality when supported by substantial evidence. [8] The determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this Court. Respondent Commission concurred with the labor arbiter's findings that:[9] "x x x The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of the respondent company. Under the Sales Agents Agreement, the complainant was required to solicit exclusively for the respondent company, 'and he was bound by the company policies, memo circulars, rules and regulations which were issued from time to time. By such requirement to follow strictly management policies, orders, circulars, rules and regulations, it only shows that the respondent had control or reserved the right to control the complainant's work as solicitor. Complainant was not an independent contractor as he did not carry on an independent business other than that of the company's x x x." To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign private respondent a specific area of responsibility and a production quota. From there, it concluded that apparently there is that exercise of control by the employer which is the most important element in determining employer-employee relationship.[10] We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most important element.[11] The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81[12] and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect the public and to enable insurance companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance Commission, and not from an intention by

petitioner to establish control over the method and manner by which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties, nor does it necessarily imbue such relationship with the quality of control envisioned by the law. So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued from time to time is also not indicative of control. In its Reply to Complainant's Position Paper,[13] petitioner alleges that the policies, memo/circulars, and rules and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for sorties, circulars on incentives and awards to be given based on production, and other matters concerning the selling of insurance, in accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected or covered by the rules and regulations concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the same are deemed admitted, or at least proven, thereby leaving nothing to support the respondent Commission's conclusion that the foregoing elements signified an employment relationship between the parties. In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of control over an employee. First of all, the place of work in the business of soliciting insurance does not figure prominently in the equation. And more significantly, private respondent failed to rebut petitioner's allegation that it had never issued him any territorial assignment at all. Obviously, this Court cannot draw the same inference from this feature as did the respondent Commission. To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control. The presence of such power of control is indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer except only as to the result of the work.[14] Such is exactly the nature of the relationship between petitioner and private respondent. 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 employeremployee 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. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. xxxx None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employeremployee relationship between him and the company."[15] Private respondent's contention that he was petitioner's employee is belied by the fact that he was

free to sell insurance at any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result of his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means of persuading people to take out insurance. There is no prohibition, as contended by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. As petitioner explains: "(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered time to pursue his business. He did not have to punch in and punch out the bundy clock as he was not required to report to the (petitioner's) office regularly. He was not covered by any employee policies or regulations and not subject to the disciplinary action of management on the basis of the Employee Code of Conduct. He could go out and sell insurance at his own chosen time. He was entirely left to his own choices of areas or territories, with no definite, much less supervised, time schedule. (Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of Control and Supervision over his performance except as to the payment of commission the amount of which entirely depends on the sole efforts of (private respondent). He was free to engage in other occupation or practice other profession for as long as he did not commit any violation of the ethical standards prescribed in the Sales Agent's Agreement."[16] Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be disapproved was only the result of the work, and not the means by which it was accomplished. The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus, the Court is constrained to rule that no employment relationship had ever existed between the parties. Second Issue: Jurisdiction of Respondent Commission & Labor Arbiter

Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As an independent contractor, his claim for unpaid commission should have been litigated in an ordinary civil action.[17] The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code.[18] The unifying element running through paragraphs (1) - (6) of said provision is the consistent reference to cases or disputes arising out of or in connection with an employer-employee relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all other cases arising from employer-employee relation unless expressly excluded by this Code."[19] Without this critical element of employment relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof. Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action.[20] Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter [21] and respondent Commission.[22] It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without jurisdiction is a total nullity.[23] A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final. "x x x (I)t may be

said to be a lawless thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head."[24] The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be that as it may, this ruling is without prejudice to private respondent's right to file a suit for collection of unpaid commissions against petitioner with the proper forum and within the proper period. WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE. SO ORDERED. Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

[1]

Rollo, pp. 48-54. Rollo, p. 176. Rollo, p. 98. Rollo, p. 111. Rollo, pp. 48-49. Commissioners Rustico L. Diokno, ponente, with Presiding Commissioners Edna Bonto-Perez and Commissioner Domingo H. Zapanta. Rollo, p. 53. North Davao Mining Corporation vs. National Labor Relations Commission, 254 SCRA 721, 731, March 13, 1996; Great Pacific Life Assurance Corporation vs. National Labor Relations Commission, 187 SCRA 694, 699, July 23, 1990; Loadstar Shipping Co., Inc. vs. Gallo, 229 SCRA 654, 660, February 4, 1994; Inter-Orient Maritime Enterprises, Inc. vs. National Labor Relations Commission, 235 SCRA 268, 277, August 11, 1994. Rollo, pp. 49-50. Rollo, p. 51. Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459, 464, November 15, 1989; Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 255, January 19, 1993; and Villuga vs. NLRC, 225 SCRA 537, 546, August 23, 1993.

[2]

[3]

[4]

[5]

[6]

[7]

[8]

[9]

[10]

[11]

[12]

Memorandum Circular No. 2-81 on Licensing Of Insurance Agents, Variable Contract Agents, Insurance Brokers and Reinsurance Brokers provides: "x x x x x x xxx

2. LICENSING REQUIREMENTS, LIMITATIONS xxx xxx xxx

2.5. No person shall be licensed to act as an insurance agent or general agent of more than one life insurance company, and/ or as a general agent of more than one non-life insurance company, and/or as insurance agent of more than three other non-life insurance companies. x x x."
[13]

Rollo, p. 36. Investment Planning Corp. of the Phil. vs. Social Security System, 21 SCRA 924, 931, November 18, 1967. Supra., p. 465 Petitioner's Position Paper, Rollo, p. 32. Insular Life Assurance Co., Ltd. vs. NLRC, supra., p. 467; Manliguez vs. Court of Appeals, 232 SCRA 427, 431, May 20, 1994; and Hawaiian-Philippine Company vs. Gulmatico, 238 SCRA 181, 187, November 16, 1994.

[14]

[15]

[16]

[17]

[18]

ART. 217. Jurisdiction of Labor Arbiters and the Commission. -(a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, x x x, the following cases involving all workers, whether agricultural or non-agricultural: 1. 2. 3. 4. 5. 6. Unfair labor practice cases; Termination disputes; If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; Claims for actual, moral, exemplary and other forms of damages arising from the employeremployee relations; Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. xxx
[19]

xxx

xxx

San Miguel Corporation vs. National Labor Relations Commission, 161 SCRA 719, 724-725, May 31, 1988. Southeast Asian Fisheries Development Center-Agriculture Department vs. National Labor Relations Commission, 206 SCRA 283, 288, February 14, 1992; and Calimlim vs. Ramirez, 118 SCRA 399, 406, November 19, 1982. Petitioner's Position Paper, Rollo, pp. 29-33. Petitioner's Appeal Memorandum, Rollo, pp. 40-46. Philippine-Singapore Ports Corporation vs. National Labor Relations Commission, 218 SCRA 77, 83, January 29, 1993. Leonor vs. Court of Appeals, et al., G.R. No. 112597, April 2, 1996, pp. 17-18.

[20]

[21]

[22]

[23]

[24]

8. G.R. No. 91307 January 24, 1991 SINGER SEWING MACHINE COMPANY, petitioner vs. HON. FRANKLIN M. DRILON, MED-ARBITER FELIX B. CHAGUILE, JR., and SINGER MACHINE COLLECTORS UNION-BAGUIO (SIMACUB), respondents.c GUTIERREZ, JR., J.:p
This is a petition for certiorari assailing the order of Med-Arbiter Designate Felix B. Chaguile, Jr., the resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal and the order denying the motion for reconsideration in the case entitled "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB)" docketed as OS-MA-A-7-119-89 (IRD Case No. 02-89 MED). On February 15, 1989, the respondent union filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of the Singer Sewing Machine Company, Baguio City branch (hereinafter referred to as "the Company"). The Company opposed the petition mainly on the ground that the union members are actually not employees but are independent contractors as evidenced by the collection agency agreement which they signed. The respondent Med-Arbiter, finding that there exists an employer-employee relationship between the union members and the Company, granted the petition for certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. The motion for reconsideration of the Secretary's resolution was denied. Hence, this petition in which the Company alleges that public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion in that: a) the Department of Labor and Employment (DOLE) has no jurisdiction over the case since the existence of employer-employee relationship is at issue; b) the right of petitioner to due process was denied when the evidence of the union members' being commission agents was disregarded by the Labor Secretary; c) the public respondents patently erred in finding that there exists an employer-employee relationship; d) the public respondents whimsically disregarded the well-settled rule that commission agents are not employees but are independent contractors. The respondents, on the other hand, insist that the provisions of the Collection Agency Agreement belie the Company's position that the union members are independent contractors. To prove that union members are employees, it is asserted that they "perform the most desirable and necessary activities for the continuous and effective operations of the business of the petitioner Company" (citing Article 280 of the Labor Code). They add that the termination of the agreement by the petitioner pending the resolution of the case before the DOLE "only shows the weakness of petitioner's stand" and was "for the purpose of frustrating the constitutionally mandated rights of the members of private respondent union to selforganization and collective organization." They also contend that under Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code, which defines job-contracting, they cannot legally qualify as independent contractors who must be free from control of the alleged employer, who carry independent businesses and who have substantial capital or investment in the form of equipment, tools, and the like necessary in the conduct of the business. The present case mainly calls for the application of the control test, which if not satisfied, would lead us to conclude that no employer-employee relationship exists. Hence, if the union members are not employees,

no right to organize for purposes of bargaining, nor to be certified as such bargaining agent can ever be recognized. The following elements are generally considered in the determination of the employeremployee relationship; " (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 although the latter is the most important element" The Collection Agency Agreement defines the relationship between the Company and each of the union members who signed a contract. The petitioner relies on the following stipulations in the agreements: (a) a collector is designated as a collecting agent" who is to be considered at all times as an independent contractor and not employee of the Company; (b) collection of all payments on installment accounts are to be made monthly or oftener; (c) an agent is paid his compensation for service in the form of a commission of 6% of all collections made and turned over plus a bonus on said collections; (d) an agent is required to post a cash bond of three thousand pesos (P3,000.00) to assure the faithful performance and observance of the terms and conditions under the agreement; (e) he is subject to all the terms and conditions in the agreement; (f) the agreement is effective for one year from the date of its execution and renewable on a yearly basis; and (g) his services shall be terminated in case of failure to satisfy the minimum monthly collection performance required, failure to post a cash bond, or cancellation of the agreement at the instance of either party unless the agent has a pending obligation or indebtedness in favor of the Company. Meanwhile, the respondents rely on other features to strengthen their position that the collectors are employees. They quote paragraph 2 which states that an agent shall utilize only receipt forms authorized and issued by the Company. They also note paragraph 3 which states that an agent has to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company. Paragraph 4 on the monthly collection quota required by the Company is deemed by respondents as a control measure over the means by which an agent is to perform his services. The nature of the relationship between a company and its collecting agents depends on the circumstances of each particular relationship. Not all collecting agents are employees and neither are all collecting agents independent contractors. The collectors could fall under either category depending on the facts of each case. The Agreement confirms the status of the collecting agent in this case as an independent contractor not only because he is explicitly described as such but also because the provisions permit him to perform collection services for the company without being subject to the control of the latter except only as to the result of his work. After a careful analysis of the contents of the agreement, we rule in favor of the petitioner. The requirement that collection agents utilize only receipt forms and report forms issued by the Company and that reports shall be submitted at least once a week is not necessarily an indication of control over the means by which the job of collection is to be performed. The agreement itself specifically explains that receipt forms shall be used for the purpose of avoiding a co-mingling of personal funds of the agent with the money collected on behalf of the Company. Likewise, the use of standard report forms as well as the regular time within which to submit a report of collection are intended to facilitate order in office procedures. Even if the report requirements are to be called control measures, any control is only with respect to the end result of the collection since the requirements regulate the things to be done after the performance of the collection job or the rendition of the service. The monthly collection quota is a normal requirement found in similar contractual agreements and is so stipulated to encourage a collecting agent to report at least the minimum amount of proceeds. In fact,

paragraph 5, section b gives a bonus, aside from the regular commission every time the quota is reached. As a requirement for the fulfillment of the contract, it is subject to agreement by both parties. Hence, if the other contracting party does not accede to it, he can choose not to sign it. From the records, it is clear that the Company and each collecting agent intended that the former take control only over the amount of collection, which is a result of the job performed. The respondents' contention that the union members are employees of the Company is based on selected provisions of the Agreement but ignores the following circumstances which respondents never refuted either in the trial proceedings before the labor officials nor in its pleadings filed before this Court. 1. The collection agents are not required to observe office hours or report to Singer's office everyday except, naturally and necessarily, for the purpose of remitting their collections. 2. The collection agents do not have to devote their time exclusively for SINGER. There is no prohibition on the part of the collection agents from working elsewhere. Nor are these agents required to account for their time and submit a record of their activity. 3. The manner and method of effecting collections are left solely to the discretion of the collection agents without any interference on the part of Singer. 4. The collection agents shoulder their transportation expenses incurred in the collections of the accounts assigned to them. 5. The collection agents are paid strictly on commission basis. The amounts paid to them are based solely on the amounts of collection each of them make. They do not receive any commission if they do not effect any collection even if they put a lot of effort in collecting. They are paid commission on the basis of actual collections. 6. The commissions earned by the collection agents are directly deducted by them from the amount of collections they are able to effect. The net amount is what is then remitted to Singer." (Rollo, pp. 7-8) If indeed the union members are controlled as to the manner by which they are supposed to perform their collections, they should have explicitly said so in detail by specifically denying each of the facts asserted by the petitioner. As there seems to be no objections on the part of the respondents, the Court finds that they miserably failed to defend their position. A thorough examination of the facts of the case leads us to the conclusion that the existence of an employer-employee relationship between the Company and the collection agents cannot be sustained. The plain language of the agreement reveals that the designation as collection agent does not create an employment relationship and that the applicant is to be considered at all times as an independent contractor. This is consistent with the first rule of interpretation that the literal meaning of the stipulations in the contract controls (Article 1370, Civil Code; La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor, Relations, 123 SCRA 679 [1983]). No such words as "to hire and employ" are present. Moreover, the agreement did not fix an amount for wages nor the required working hours. Compensation is earned only on the basis of the tangible results produced,i.e., total collections made (Sarra v. Agarrado, 166 SCRA 625 [1988]). In Investment Planning Corp. of the Philippines v. Social Security System, 21 SCRA 924 [1967] which involved commission agents, this Court had the occasion to rule, thus: We are convinced from the facts that the work of petitioner's agents or registered representatives more nearly approximates that of an independent contractor than that of an employee. The latter is paid for the labor he performs, that is, for the acts of which such labor consists the former is paid for the result thereof . . . . xxx xxx xxx

Even if an agent of petitioner should devote all of his time and effort trying to sell its investment plans he would not necessarily be entitled to compensation therefor. His right to compensation depends upon and is measured by the tangible results he produces." Moreover, the collection agent does his work "more or less at his own pleasure" without a regular daily time frame imposed on him (Investment Planning Corporation of the Philippines v. Social Security System, supra; See alsoSocial Security System v. Court of Appeals, 30 SCRA 210 [1969]). The grounds specified in the contract for termination of the relationship do not support the view that control exists "for the causes of termination thus specified have no relation to the means and methods of work that are ordinarily required of or imposed upon employees." (Investment Planning Corp. of the Phil. v. Social Security System, supra) The last and most important element of the control test is not satisfied by the terms and conditions of the contracts. There is nothing in the agreement which implies control by the Company not only over the end to be achieved but also over the means and methods in achieving the end (LVN Pictures, Inc. v. Philippine Musicians Guild, 1 SCRA 132 [1961]). The Court finds the contention of the respondents that the union members are employees under Article 280 of the Labor Code to have no basis. The definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute. Even Section 8, Rule 8, Book III of the Omnibus Rules Implementing the Labor Code does not apply to this case. Respondents assert that the said provision on job contracting requires that for one to be considered an independent contractor, he must have "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." There is no showing that a collection agent needs tools and machineries. Moreover, the provision must be viewed in relation to Article 106 of the Labor Code which provides: Art. 106. Contractor or subcontractor. Whenever an employer enters into a 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 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. xxx xxx xxx 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 persons 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." (p. 20)

It can readily be seen that Section 8, Rule 8, Book Ill and Article 106 are relevant in determining whether the employer is solidarily liable to the employees of an alleged contractor and/or sub-contractor for unpaid wages in case it is proven that there is a job-contracting situation. The assumption of jurisdiction by the DOLE over the case is justified as the case was brought on appeal by the petitioner itself which prayed for the reversal of the Order of the Med-Arbiter on the ground that the union members are not its employees. Hence, the petitioner submitted itself as well as the issue of existence of an employment relationship to the jurisdiction of the DOLE which was faced with a dispute on an application for certification election. The Court finds that since private respondents are not employees of the Company, they are not entitled to the constitutional right to join or form a labor organization for purposes of collective bargaining. Accordingly, there is no constitutional and legal basis for their "union" to be granted their petition for direct certification. This Court made this pronouncement in La Suerte Cigar and Cigarette Factory v. Director of Bureau of Labor Relations, supra: . . . The question of whether employer-employee relationship exists is a primordial consideration before extending labor benefits under the workmen's compensation, social security, medicare, termination pay and labor relations law. It is important in the determination of who shall be included in a proposed bargaining unit because, it is the sine qua non, the fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein . . . . (At p. 689) WHEREFORE, the Order dated June 14,1989 of Med-Arbiter Designate Felix B. Chaguile, Jr., the Resolution and Order of Secretary Franklin M. Drilon dated November 2, 1989 and December 14, 1989, respectively are hereby REVERSED and SET ASIDE. The petition for certification election is ordered dismissed and the temporary restraining order issued by the Court on December 21, 1989 is made permanent. SO ORDERED. Fernan, C.J., Feliciano and Bidin, JJ., concur.

9. G.R. No. L-37790 March 25, 1976 MAFINCO TRADING CORPORATION, petitioner, vs. THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR RELATIONS COMMISSION RODRIGO REPOMANTA and REY MORALDE, respondents. Tanada, Sanchez, Tanada & Tanada for petitioner. Jose T. Maghari for private respondents. Solicitor General Estelito P. Mendoza for all other respondents.

AQUINO, J.:
Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of certiorari and prohibition

in order to annul the decision of the Secretary of Labor dated April 16, 1973. In that decision the Secretary reversed an order of the old National Labor Relations Commission (NLRC) and held that the NLRC had jurisdiction over the complaint lodged by the Federacion Obrera de la Industria Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against Mafinco for having dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The voluminous record reveals the following facts: Peddling contracts and their termination. On April 30, 1968 Cosmos Aerated Water Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal, appointed Mafinco as its sole distributor of Cosmos soft drinks in Manila. On May 31, 1972 Rodrigo Repomanta and Mafinco executed a peddling contract whereby Repomanta agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a similar contract. The contracts were to remain in force for one year unless sooner terminated by either party upon five days notice to the other. 1 The contract with Repomanta reads as follows: PEDDLING CONTRACT KNOW ALL MEN BY THESE PRESENTS: This CONTRACT, entered into by and between: The MAFINCO TRADING CORPORATION, a domestic corporation duly organized and existing under the laws of the Philippines, doing business at Rm. 715 Equitable Bank Bldg., Juan Luna St., Manila, under the style MAFINCO represented in this act by its General Manager, SALVADOR C. PICA, duly authorized for the purpose and hereinafter referred to as MAFINCO, and RODRIGO REPOMANTA, married/single, of legal age, and a resident of 70-D Bo. Potrero, MacArthur Highway, Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH: WHEREAS, MAFINCO has been appointed as the exclusive distributor of 'COSMOS' Soft Drink Products for and within the City of Manila; WHEREAS, the PEDDLER is desirous of buying and selling in Manila the 'COSMOS' Soft Drink Products handled by MAFINCO; NOW THEREFORE, for and in consideration of the foregoing premises and the covenants and conditions hereinafter set forth, the parties hereto has agreed as follows: 1. That in consideration of the competence of the PEDDLER and his ability to promote mutual benefits for the parties hereto, MAFINCO shall provide the PEDDLER with a delivery truck with which the latter shall exclusively peddle the soft drinks of the former, under the terms set forth herein; 2. The PEDDLER himself shall, carefully and in strict observance to traffic regulations, drive the truck furnished him by MAFINCO or should he employ a driver or helpers such driver or helpers shall be his employees under his direction and responsibility and not that of MAFINCO, and their compensation including salaries, wages, overtime pay, separation pay, bonus or other remuneration and privileges shall be for the PEDDLER'S own account; The PEDDLER shall likewise bind himself to comply with the provisions of the Social Security Act and all the applicable labor laws in relation to his employees; 3. The PEDDLER shall be responsible for any damage to property, death or injuries to persons or damage to the truck used by him caused by his own acts or omission or that of his driver and helpers; 4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips, bear the cost of maintenance and repairs of the said truck arising from ordinary wear and tear; 5. The PEDDLER shall secure at his own expense all necessary licenses and permits required by law or ordinance and shall bear any and all expenses which may be incurred by him in the sales of the soft drink products covered by the contract; 6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per case of 24 bottles, ex-

warehouse; PROVIDED, However, that if the PEDDLER purchases a total of not less than 250 cases a day, he shall be entitled further to a Peddler's Discount of P11.00; 7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the amount of P1,500.00 against which MAFINCO shall charge the PEDDLER with any unpaid account at the end of each day or with any damage to the truck of other account which is properly chargeable to the PEDDLER; within 30 days after the termination of this contract, the cash bond, after deducting proper charges, shall be returned to the PEDDLER; 8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized representative at the end of each day, and his failure to do so shall subject his cash bond at once to answer for any unliquidated accounts; 9. This contract shall be effective up to May 31, 1973 and supersedes any or all other previous contracts, if any, that may have been entered into between the parties; However, either of the parties may terminate the same upon five (5) days prior notice to the other; 10. Upon the. termination of this contract, unless the same is renewed, the delivery truck and such other equipment furnished by MAFINCO to the PEDDLER shall be returned by the latter in good order and workable condition, ordinary wear and tear excepted, und shall promptly settle his outstanding account if any, with MAFINCO; 11. To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the applicable labor laws and for damages suffered by third persons, PEDDLER shall furnish a performance bond of P1,000.00 in favor of MAFINCO from a SURETY COMPANY acceptable to MAFINCO. IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City of Manila, Philippines, this May 31, 1972. MAFINCO TRADING CORPORATION By: (Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA Peddler General Manager (Witnesses and notarial acknowledgment are omitted) On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the same. The notice to Repomanta reads as follows: Dear Mr. Repomanta: This has reference to the Peddling Contract you executed with the Mafinco Trading Corporation on May 31, 1972. Please be informed that in accordance with the provisions of paragraph 9 of the said peddling contract, we are hereby serving notice of termination thereof effective on December 12, 1972. Yours truly, (Sgd.) SALVADOR C. PICA General Manager Complaints of Repomanta and Moralde and NLRCs dismissal thereof. Four days later or on December 11, 1972 Repomanta and Moralde, through their union, the FOITAF, filed a complaint with the NLRC,

charging the general manager of Mafinco with having violated Presidential Decree No. 21, issued on October 14, 1972, which created the NLRC and which was intended "to promote industrial peace, maximize productivity and secure social justice for all". The brief complaint reads as follows: Hon. Amado Gat Inciong, Chairman National Labor Relations Commission Phoenix Bldg., Intramuros, Manila Sir: Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a complaint against SALVADOR C. PICA, General Manager of MAFINCO TRADING CORP. located at Room 715, Equitable Bank Bldg., Juan Luna, Manila, for terminating union officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde, which is a violation of the above mentioned decree. Notice of termination is herewith attach (sic). We anticipate your due attention and assistance. Respectfully yours, (Signed by National Secretary of FOITAF) Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no jurisdiction because Repomanta and Moralde were not its employees but were independent contractors. It stressed that there was termination of the contract, not a dismissal of an employee. In Repomanta's case, it pointed out that he was registered with the Social Security System as an employer who, as a peddler, paid premiums for his employees; that he secured the mayor's permit to do business and the corresponding peddler's license and paid the privilege tax and that he obtained workmen's compensation insurance for his own employees or helpers. It alleged that Moralde was in the same situation as Repomanta. Mafinco further alleged that the Bureau of Labor Relations denied the application of peedlers for registration as a labor union because they were not employees but employers in their own right of delivery helpers (Decision dated January 4, 1966 by the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter of Cosmos Supervisors Association-PTGWO); that the Court of Industrial Relations in Case No. 4399-ULP, Cosmos Supervisors' Association PTGWO vs. Manila Cosmos Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the peddlers were not employees of Cosmos, and that the Court of Appeals held in Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R, March 18, 1958 that the delivery helpers of the peddlers were not employees of Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung Kui, Resolution dated July 16, 1958). The complaint was referred to a factfinder who in a lengthy report dated January 22, 1973 found, after "exhaustively and impartially" considering the contentions of the parties, that the peddlers were employers or "independent businessmen', as held by the Court of Industrial Relations and the Court of Appeals, and that that holding has the force of res judicata. The factfinder recommended the dismissal of the complaint. The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O. Castro, adopted that recommendation in its order dated February 2, 1973. That order, which analyzes the peddling contract and reviews the court rulings on the matter, is quoted below: The question of whether peddling contracts of the kind entered into between the parties give rise to an employer-employee relationship is not new. Nor are the contracts

themselves of recent vintage. For at least twenty years respondent MAFINCO and its predecessor and/or principal, the Manila-Cosmos Aerated Water Factory, have entered into contracts with peddlers, under the terms of which the latter buy from the former at a special price, and sell in Manila, the former's soft drink products. The distributor provides the peddler with a delivery truck with the distributor answering for the cost of fuel and maintenance. If a peddler buys a certain number of cases or more a day, he is entitled to a fixed amount of peddler's discount. The peddler himself drives the truck but if he engages a driver or helpers, the latter are his employees and he assumes all the responsibilities of an employer in relation to them. He also obtains at his own expense all licenses and permits required by law of salesmen. The peddler clears his accounts with the distributor at the end of each day, and unpaid accounts are charged against the cash deposit or bond which he gives the distributor upon the execution of the peddling contract. He answers for damages caused by him or his employees to third persons. Ruling upon this type of contracts, and the practices and relationships that attended its implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did not create a relationship of employer and employee; that the peddlers under such contract were not employees of the manufacturer or distributor, and accordingly dismissed the complaints in the said case. (The peddler-complainants in that case were claiming overtime pay and damages, among others.) Elevated to the Supreme Court on review (G.R. Nos. L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in effect affirmed, for the petition for review was dismissed by the Supreme Court 'for being factual and for lack of merit! The Court of Industrial Relations is of the same persuasion. After inquiring extensively into substantially the same terms and conditions of peddling contracts and the practices and relationships that went into their implementation, the Court said in Case No. 4399ULP that the peddlers of the Manila-Cosmos Aerated Water Factory were not employees of the latter. These precedents apply squarely to the case at hand. The complainants here have not shown that their peddling contracts with the respondent differ in any substantial degree from those that were at issue in the Court of Industrial Relations, the Court of Appeals and the Supreme Court in the cases cited above. Indeed, a comparison between the contracts involved in those cases and those in the instant litigation do not show any difference that would warrant a different conclusion than that reached by those courts. If at all, the additional stipulations in the present contracts strengthen the position that the complainant peddlers are independent contractors or businessman, not employees of the respondent. Nor has there been shown any substantial change in the old practices of peddlers vis-avis the distributor or manufacturer. The points raised by the complainants in their pleadings regarding these practices were extensively discussed by the CIR in the ULP case above referred to. We are not prepared to depart from this rule of long standing. It is the law of the case. We therefore hold that the complainants in this case were not employees of MAFINCO and Presidential Decree No. 21 does not I apply to them. Complainants' appeal and the Labor Secretary's decision that they were employees of Mafinco. Complainants Repomanta and Moralde appealed to the Secretary of Labor. They argued that the NLRC erred (1) in holding that they were independent contractors and not employees; (2) in relying on the

peddler's contract to determine the existence of employer-employee relationship; (3) in anchoring its decisions on precedents which have only persuasive force and which did not rule squarely on the issue of employer-employee relationship, and (4) in dismissing their complaint. As stated at the outset, the Secretary in his decision reversed al the NLRC order. He ruled that Repomanta and Moralde were employees of Mafinco and that, consequently, the NLRC had jurisdiction over their complaint. The Secretary directed the NLRC to hear the case on the merits. The Secretary found that the complainants "were driver-salesmen of the company, driving the trucks and distributing the products of the company" and that they were not independent contractors because they had no capital of their own. That finding was based on the following considerations: (1) That the contracts are Identical; (2) that the complainants were originally plant drivers' of the company; (3) that the complainants had no capital of their own; (4) that their delivery trucks were provided by the company; (5) that the use of the trucks were 'exclusively' for peddling the products of the company; (6) that they were required to observe regulations; (7) that they were required to drive the trucks; (8) that the company furnished the gasoline and oil to run the said trucks in business trips; (9) that the company shouldered the cost of maintenance and repair of the said trucks arising from an ordinary wear and tear; (10) that the company required them to secure the necessary licenses and permits; (11) that the company prohibited them from selling the company's products higher than the fixed price of the company; and (12) that they and their helpers were paid on commission basis. The Secretary relied on this Court's ruling that a person who possesses no capital or money of his own to pay his obligations to his workers but relies-entirely upon the contract price to be paid by the company, falls short of the requisites or conditions necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil. 941). He observed that "behind the peddling cloak there was in fact employee-employer relationship". He said: While, generally, written employment contracts are held sufficient in determining the nature of employment, such contracts, however, cannot be always held conclusive where the actual circumstances of employment indicate otherwise. For example, some employers, in order to avoid or evade coverage of the Workmen's Compensation Act, enter into pseudo contracts with their employees who are named as 'employers' or 'independent contractors'. Such 'written contracts as distinguished from oral Agreements, purporting to make persons independent contractors, no matter how 'adroitly framed', can be carefully scanned and the real relationship ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe & Inton, Workmen's Compensation Act. p. 69). If the Peddling Contract were carefully scanned, the conclusion may be drawn that the contract is but a device and subterfuge to evade coverage under the labor laws. There is more than meets the eye in item 2 of the Peddling Contract which required the peddlers to do that which the law intends the employer to have done. In fact, such contracts, as the one in question, exempting or tending to exempt the employers from their legal obligations to their workers are null and void under Sec. 7 of the Workmen's Compensation Act, as amended, which states: Any contract, regulation or device of any sort intended to exempt the employer from all or part of the liability created by this Act shall be null and void. To rule otherwise would be to open the floodgate to employers in this territory to evade liabilities to their workers by simply letting contracts for the doing of their business. 'Such construction could not only narrow the provisions of the Act, but would defeat its intent and purposes in their entirety. (Andoyo vs. Manila Railroad Co., supra).

The motion for the reconsideration of the decision was denied by the Secretary in his order of July 16,1973. The Committee's report that the peddlers are independent contractors. On July 25, 1973 Mafinco moved for the clarification of the decision by inquiring whether the question of employee-employer relationship would be included in the hearing on the merits. Action on the said motion was deferred until the receipt of the report of the committee created to study the status of peddlers of Cosmos products. On September 3, 1973- the Secretary directed the committee composed of Ernesto Valencia, Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of the actual relationship existing between the Cosmos Bottling Co. and its peddlers. The committee in its report dated September 17, 1973 arrived at the conclusion that the relationship actually existing between Cosmos and Mafinco, on one hand, and the peddlers of Cosmos products, on the other, is not one of employer and employee and "that the peddlers are independent contractors". The committee after a perusal of the record of NLRC Case No. LR-086 interviewed twenty peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of the interviews it 44 observed judicious adherence to impartiality and openmindedness but with a modicum of friendliness and much of informality". The report reads in part as follows: (1) Implications of the 'Agreement To Peddler Soft Drinks'. Of vital importance to the mind of your committee is the fact that this Agreement entered into between Cosmos and the Peddlers has, as its prefatory statement but before the enumeration of its terms and conditions, the following: That the Peddler has agreed to buy and sell the products of the MANUFACTURER under the following conditions: Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers. contains peculiarly Identical wordings. viz: WHEREAS, the PEDDLER is desirious of buying and selling in Manila the 'COSMOS' Soft Drink Products handled by MAFINCO: It is immediately clear from the beginning that the relationship that the parties would want to establish between them is one of buyer and seller of the Cosmos Products. Moreover, this type of Agreement or Contract has its roots since some twenty (20) years earlier, with modifications only with respect to the factory price, the amount of over prices or what the peddlers refer to as commission, and the amount pertaining to the dealer's discount. which appear to vary depending upon the market demands. We are, however, tempted to argue, as did the Peddlers, that this Agreement or Contract might have been contrived as a device to evade responsibilities imposed upon Cosmos or Mafinco under our labor laws as well as under other national or municipal laws. Nevertheless, a close reading thereof will show a flaw in this line of insistence, when we consider that this type of Agreement or Contract has been substantially the same since the beginning of this relationship. More than this, it has withstood the test of time by pronouncements of the CIR in ULP Case No. 4399, Cosmos Supervisors Association vs. Manila Cosmos Aerated Water Factory, Inc.' July 17, 1967; by judicial review of the Court of Appeals in CA-G.R. Nos. 19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos Aerated Water Factory, Inc.', promulgated on March 18, 1958; and impliedly by resolution of the Supreme Court in G.R. Nos. L-14072 to L-14074 when the Court of Appeals cases were appealed to that Tribunal. But the more basic and indeed forceful ratiocination in favor of the validity of the

Agreement or Contract which covenants that the relationship between the Peddlers and Cosmos or Mafinco is one of buyer and seller of the Cosmos Products on the part of the Peddlers, and, therefore, one of an independent contractorship, finds substantive support in our Civil Code which provides: (here arts. 1370 and 1374 of the Civil Code regarding interpretation of contracts are quoted). For its adjective interpretation, our Rules of Court specifically provides: (Here parol evidence rule in see. 7, Rule 130, Rules of Court is quoted) It must b restated at this point for purposes of emphasis that the validity of the aforesaid Agreement or Contract has not been seriously assailed by the parties. In fact, their rallying cause was the Agreement or Contract itself. To strengthen these provisions of the Civil Code and the Rules of Court, stabilized jurisprudence have held that it is elementary rule of contract that the laws in force at the time the contract was made must govern its interpretation and application; that the terms of the contract, where unambiguous, are conclusive, in the absence of averment and proof of mistake, the question being, not what intention existed in the minds of the parties, but what intention is expressed by the language used; that interpretation of an agreement does not include its modifications or the creation of a new or different one; that Courts cannot make for the parties better agreements than they themselves have been satisfied to make, or rewrite contracts because they operate harshly or inequitably as to one of the parties; and that there is no right to interpret an agreement as meaning something different from what the parties intended as expressed by the language they saw fit to employ. xxx xxx xxx (1) The selection and engagement of the employees.-Nothing in the Agreement to Peddler Soft Drinks in the case of Cosmos and in the Peddling Contract in the case of Mafinco, will reveal and we cannot logically infer therefrom, that the Peddlers were engaged as employees of Cosmos or Mafinco. The selection of the Peddlers who will buy and sell Cosmos products is left entirely between the parties; it is not the sole prerogative of either one of the parties. There must be meeting of the minds in order to consummate the Agreement or Contract and no evidence of coercion or imposition of the will of one over the other is evident or apparent from the Peddlers' or Managements' interviews had by the members of your Committee. This test, therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the Agreement or Contract itself provides that the Peddlers can hire helpers and drivers under their direction and responsibility, and to whom they shall be liable for payment of 'salaries, wages, overtime pay, separation pay, bonus and other remuneration and privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M. Fong Kui, who are peddlers in their own right. This evidently shows the discretion granted the peddlers to hire employees of their own. (2) The payment of wages. On the basis of the clear terms of the Agreement or Contract, no mention is made of the wages of the Peddlers; neither can an inference be made that any salary or wage is given to Peddlers. In the interviews, however, with the Peddlers, they vehemently take the position that the 'dealer's discount' which was given to them at the rate of Pll.50 in excess of 200 cases of Cosmos products they sell a day, constitutes their 'wages'. The term 'wages' as defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as amended) is as follows: (g) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece, commission basis, or other method of calculating the same, which is payable by an employer to an under a written or unwritten contract of employement for work done or to be done or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. ... Section 10 (k) of the same law provides as follows:

(k) Notification of wage conditions. It shall be the duty of every employer to notify his employees at the time of hiring of the wage conditions under which they are employed, which shall include the following particulars: (1) The rate of wages payable; (2) The method of calculation of wages; (3) The periodicity of wage payment; the day, the hour and pIace of payment; and (4) Any change with respect to any of the foregoing items. To the Committee's mind, all these requirements have not been shown to exist in the relationship between the Peddlers and the Cosmos or Mafinco. If it were true that the Pedders' 'dealer's discount' is in the nature of wages, then they must be notifed fully of the wage conditions. Moreover, such 'wages' must be paid to them periodically at least once every two weeks or twice a month. (See Par. (h) of See. 10 of Act No. 602, as amended). The absence of such notification to the Peddlers and the lack of periodicity of such payment in the manner and procedure contemplated in the Minimum Wage Law destroy, quiet evidently, their allegation that the 'dealer's discount' was their 'wage'. Take note that the 'dealer's discount' was given only about a week after the end of the month, and from the evidence submitted by Cosmos, it appears clearly that the 'dealer's discount' varies from month to month. Thus, the earnings of Mr. Salvador Abonales, who is a Peddler, from January to August, 1973, amounted to P12,520.70, while that of Mr. Alberto S. Garcia, for the same period, amounted to P13,633.42, and 4 their earnings every month vary decisively. This factor defeats factually the insistence of the Peddlers that they are employees of Cosmos or Mafinco. Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers are taken from the overprice or what is ordinarily termed as 'commission' of ten centavos (P0.10) per case that they get-a factor which indicates that they are themselves employers of their helpers. In addition, the Peddlers are reported as Employers of these helpers with the Social Security System, and that they also purchase workmen's compensation policies in their names as Employers of their own helpers for purposes of workmen's compensation insurance of their liabilities, which are all in accordance with the terms and conditions of the Agreement or Contract and indicative of an attribute of one who is an independent merchant. (3) The power of dismissal. In the case of 'Rodrigo Repomanta and Rey Moralde vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one of our bases for this study, the complainants therein appear to have complained before the National Labor Relations Commission for being allegedly illegally dismissed or that their services were terminated without cause. A search of the alleged dismissal however shows that the Identical letters both dated December 7, 1972 addressed to the said complainants were not actually what complainants pictured them to be, but the termination of the peddling in accordance with paragraph 9 of said Contract. xxx xxx xxx Thus, complainants' services were not terminated, only their Peddling Contracts with Mafinco were. The power of dismissal is not lodged with either Mafinco or Cosmos, for based on the Agreement or Contract none whatsoever exists. Certainly, to attribute a power of dismissal to Cosmos or Mafinco where none exists is careless imprudence and a height of inaccuracy. This power of dismissal by Cosmos or Mafinco is not countenanced in the Agreement or Contract. There is, however, an allegation by the Peddlers that the hiring and firing of the helpers ultimately rest on Cosmos or Mafinco. This allegation nevertheless, is controverted by

Cosmos and Mafinco. Nonetheless, we checked the basic document the Agreement or Contract and we find that the hiring and, impliedly firing, we is a prerogative of the Peddlers and not of Cosmos or Mafinco. (4) The power to control the employee's conduct. From the interviews had by your Committee with both the Peddlers and the representatives of Cosmos and Mafinco, we gather that the following findings on the power of control are substantially correct: (a) That the delivery trucks assigned to the Peddlers are available to them early in the morning and are free to get them, which they usually do between 5:30 A.M. to 6:30 A.M. There was no compulsion on the part of the Peddlers to report for work at that time, as in fact, they did not sign any time record. The practice of getting the delivery trucks early in the morning is more beneficial to the Peddlers than to Cosmos or Mafinco since they can finish the peddling of Cosmos products much earlier and spend the rest of the day at their own pleasure. The signing of the 'logbooks' is both pertinent and necessary since the trucks used in the delivery of Cosmos products are owned by Cosmos or Mafinco and are simply utilized by Peddlers as a measure of convenience and for advertising purposes. But peddlers are not precluded from getting trucks of their own should they so desire. (b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in definite areas routes or zones, not so much of supervision over Peddlers, since their areas, routes or zones were already agreed upon or pre-arranged among them through the Cosmos Peddlers Association, Inc. of which all Peddlers are members, as principally for market analysis since soft drinks selling is a highly competitive business, and also to inquire or check on sales, and the result of which, report is made direct to the Office of Cosmos or Mafinco. (c) That the use of the uniform does not seem to be an imposition by management of Cosmos or Mafinco upon the Peddlers, but a voluntary arrangement among the Peddlers themselves. For, from the documents submitted to this Committee, it appears that the Cosmos Peddlers Association, in a meeting held on August 5, 1967, adopted a resolution to 'always wear their uniform while in the performance of their sales work,' and in their meeting on January 25, 1969, it adopted another resolution penalizing Peddlers who failed to wear their uniform in the amount of P2.00 per violation. Certainly, the resolutions of the Cosmos Peddlers Association, an independent association of Peddlers and duly registered with the Securities and Exchange Commission, and possessing an entirely distinct existence, cannot be taken as impositions from Cosmos or Mafinco. (d) That the matter of turning in of sales of collection which, if found short, is charged against the Peddler's cash bond, is to the mind of the Committee, giving effect to the valid terms and conditions of the Agreement or Contract, and also an ordinary business practice which necessarily requires liquidation of the day's accounts. We do not see any evidence of control on the part of Cosmos or Mafinco over the activities, including the sales, of the Cosmos products by the Peddlers themselves who are, apparently, left to their own choices of routes, areas or zones as pre-arranged, with no definite, much less supervised, time schedule. (e) That in the matter of reprimand or discipline which the peddlers attempt to project when they failed to report for work, your Committee found no substantial evidence on this point. The evidence shows that the peddlers are free to choose their time. Obviously, any absence that they may incur means so much reduction from their earnings. Thus, if their attention is incidentally called on this matter it is for the observance of their agreements which is present in any contractual relations. As to the aspect of employer-employee relation, therefore, between Cosmos or Mafinco and the Peddlers, your Committee does not have sufficient basis to reasonably sustain the stand of the Peddlers that there is such relationship.

(c) Attributes of an independent contractor. As a countercheck, as it were, to the issue of employer-employee relationship your committee has taken the task of testing such relationship against the attributes of an independent contractor which, from the interviews and documents submitted by the parties, appear to exists on the part of the Peddlers. The earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722, promulgated on March 28, 1932, furnishes us the definition of an 'independent contractor.' Our Supreme Court of pre-war composition, ruled: An independent contractor is 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 the resuIt of thework. A person who has no capital or money of his own to pay his laborers or to comply with his obligations to them, who files no bond to answer for the fulfillment of his contract with his employer, falls short of the requisites or conditions necessary to classify him as independent contractor. These requisites and conditions were reiterated in the postwar cases of Philippine Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November 29, 1954, and Koppel (Phil.), Inc. vs. Darlucio et, al., G.R. No. L-14903, promulgated on August. 29, 1960. Analyzing the definition of 'independent contractor', the following may be gathered from the relationship between the Peddlers, on the one hand, and Cosmos or Mafinco, on the other: (1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the latter furnishing the delivery truck, but the former sell Cosmos products according to their own methods, subject to the prearranged routes, areas and zones, and go back to the Company compound to return the delivery truck and to make accounting of the day's sales collection at any time in the morning or in the afternoon. Essentially, control, if at all, extends only as to observance of traffic regulations which is inherent in ownership of the delivery truck by Cosmos or Mafinco and the end result which is the liquidation of the sales collection. Control over the details of the Peddlers' sales activities seems to be farfetched in this case. (2) Capital or money of the Peddlers to pay their own helpers is evidently within their prerogative, although it appears that the wages of helpers are uniform at P6.00 per trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers constitute their capital? For big-time businessmen, this small amount may not be considered capital, but when it is taken as a 'deposit on consignment' since the same answers for any deficiencies that the Peddlers may incur during the day's sales collection, then it can be taken to mean 'capital' within its signification that it allocates to every day business dealing. The amount of capital, to us, is immaterial; it is the purpose for which the same is deposited that is most significant. (3) The Peddlers are required under the Agreement to Peddler Soft Drinks and Peddling Contract to put up not only the cash bond of P1,500.00, but also a performance bond of P1,000.00 as embodied in said Agreement to Peddler Soft Drinks as follows: (4) To assure performance by the PEDDLER of his obligation to his employees under the Social Security Act, the applicable labor laws, and for damages suffered by third persons PEDDLER shall furnish a performance bond of P1,000.00 in favor of the MANUFACTURER from a surety Company acceptable to the MANUFACTURER. And, in case Performance Bond within 30 days from the date of signing of this Contract, such failure shall be sufficient ground for the MANUFACTURER to suspend the business relationship with the Peddler until the Peddler complies with this provision. Again, to the mind of your Committee, the amount of the Performance Bond is not so relevant and material as to the purpose for which the same is executed- which is to assure performance of the Peddlers' obligations as employer of his helpers. This is an attribute of an independent contractor to which the Peddlers are bound under the Agreement or Contract. (4) Peddlers are doing business for themselves since they took out licenses in the City of

Manila, and have paid their corresponding professional or occupation tax to the Bureau of Internal Avenue. This fact strengthens the Committee findings that the peddlers are carrying on a business as independent merchants. The Secretary in his resolution of October 18, 1973 ignored the committee's conclusion. He clarified that the NLRC should determine whether the two complainants were illegally dismissed and that the jurisdictional issue should not be taken up anymore. The instant petition; the issue and the ruling thereon. Mafinco filed the instant actions on November 14, 1973. It prayed for a declaration that the Secretary of Labor and the NLRC had no jurisdiction to entertain the complaints of Repomanta and Moralde; that the Secretary's decision should be set aside, and that the NLRC and the Secretary be enjoined from further proceeding in NLRC Case No. LR-086. Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21 the Secretary's decision "is appealable" to the President of the Philippines (Nation Multi Service Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274). However, under section 22 of the old NLRC regulations, an appeal to the President should be made only "in national interest cases". On the other hand, judicial review of the decision of an administrative agency or official exercising quasijudicial functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case the administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56; Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General, L-21352, November 29, 1966, 18 SCRA 877, 891). After the parties had submitted their illuminating memoranda, Mafinco filed a motion in this Court for the dismissal of the complaint in the defunct NLRC on three grounds, to wit: (1) that the NLRC had no jurisdiction over the case because Repomanta and Moralde had not sought reinstatement or backwages; (2) that the employer's failure to secure written clearance from the Secretary of Labor before dismissing an employee might constitute a crime punishable under article 327 of the Labor Code and not mere contempt, as contemplated in section 10 of Presidential Decree No. 21, and (3) that the contempt provisions of that decree were abrogated by the Labor Code. Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was held that the regular court, not the NLRC, has jurisdiction over an employee's action for damages against his employer's act of demoting him. Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed out that, inasmuch as their complaint is pending in the new NLRC, this Court cannot dismiss it. They also observed that article 327 was eliminated from the Labor Code which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains only 292 articles. Article 327 was superseded by article 278 of the amended Code. The truth is that Mafinco's motion merely adduced additional grounds to support its stand that the Secretary of Labor had no jurisdiction over the complaint of Repomanta and Moralde. This case was not rendered moot by the Labor Code. Although the Code abolished the old NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases pending before the old NLRC should be transferred to, and processed by, the corresponding labor relations division or the new NLRC and should be decided in accordance with Presidential Decree No. 21 and the rules and regulations adopted thereunder (Art. 290. See Sec. 5, P.D. No. 626).

The issue is whether the dismissal of Repomanta and Moralde was within the jurisdiction of the old NLRC. If, as held by the old NLRC, it had no jurisdiction over their complaint because they were not employees of Mafinco but independent contractors, then the Secretary of Labor had no jurisdiction to remand the case to the

NLRC for a hearing on the merits of the complaint.

Hence, the crucial issue is whether Repomanta and Moralde were employees of Mafinco under the peddling contract already quoted. Is the contract an employment contract or a contract to sell or distribute Cosmos products? The question of whether an employer-employee relationship exists in a certain situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried to avoid the bringing about of an employeremployee relationship in some of their enterprises because that juridical relation spawns obligations connected with workmen's compensation, social security, medicare, minimum wage, termination pay and unionism. Presidential Decree No. 21 provides: SEC. 2. The Commission shall have original and exclusive jurisdiction over the following: 1) All matters involving employee-employer relations including all disputes and grievances which may otherwise lead to strikes and lockouts under Republic Act No. 875; xxx xxx xxx SEC. 10. The President of the Philippines, on recommendation of the Commission and the Secretary of Labor, may order the arrest and detention of any person held in contempt by the Commission for non-compliance and defiance of any subpoena, order or decision duly issued by the Commission in accordance with this Decree and its implementing rules and regulations and for any violation of the provisions of this Decree. SEC. 11. No employer may shut down his establishment or dismiss or terminate the services of regular employees with at least one year of service without the written clearance of the Secretary of , Labor. The Solicitor General, as counsel for the old NLRC and the Secretary of Labor, argues that the question of whether Repomanta and Morale are independent contractors or employees is factual in character and cannot be resolved by merely construing the peddling contracts; that other relevant facts aliunde or dehors the said contracts should be taken into account, and that the contracts were a part of an "intricate network of devices (of Mafinco and Cosmos) developed. and perfected through the years to conceal the true nature of their relationship to their sales agents". Repomanta and Moralde contend that their peddling contracts were terminated because of their activities in organizing a union among the peddlers. Annexed to their memorandum is a joint affidavit of sixty-three sales agents of Cosmos products who described therein the nature of their work, the organization of their union and the dismissal of Repomanta and Moralde. Annexed to their answer is Resolution No. 921 of the Social Security Commission dated November 16, 1972 in SSS Case No. 602 wherein it was held that peddlers and their helpers were employees of Cosmos. Like the Solicitor General, Repomanta and Moralde harp on the argument that the peddling contracts were a scheme to camouflage an employer-employee relationship and thus evade the coverage of labor laws. The parties in their pleadings and memoranda injected conflicting factual allegations to support their diametrically opposite contentions. From the factual angle, the case has become highly controversial. In a certiorari and prohibition case, like the instant case, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require that in the verified petition for certiorari, mandamus and prohibition the petitioner should allege "facts with certainty".

In this case the facts have become uncertain. Controversial evidentiary facts have been alleged. What is certain and indubitable is that a notarized peddling contract was executed. This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the parties' contradictory factual submissions. The record has become voluminous because of their efforts to persuade this Court to accept their discordant factual statements. Pro hac vice the issue of whether Repomanta and Moralde were employees of Mafinco or were independent contractors should be resolved mainly in the light of their peddling contracts. A different approach would lead this Court astray into the field of factual controversy where its legal pronouncements would not rest on solid grounds. A restatement of the provisions of the peddling contract is necessary in order to find out whether under that instrument Repomanta and Moralde were independent contractors or mere employees of Mafinco. Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver and helpers, he would be responsible for their compensation and social security contributions and he should comply with applicable labor laws "in relation to his employees" (Par. 2). The peddler would be responsible for any damage to persons or property or to the truck caused by his own acts or omissions or those of his driver and helpers (Par. 3). Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would secure at his own expense the necessary licenses and permits and bear the expenses to be incurred in the sale of Cosmos products (Par. 5). The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-warehouse. Should he purchase at least 250 cases a day, he would be entitled to a peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might terminate it upon five days' prior notice to the other (Par. 9). We hold that under their peddling contracts Repomanta and Moralde were not employees of Mafinco but were independent contractors as found by the NLRC and its fact-finder and by the committee appointed by the Secretary of Labor to look into the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with their own capital and employees. Ordinarily, an employee or a mere peddler does not execute a formal contract of employment. He is simply hired and he works under the direction and control of the employer. Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which indicate the manner in which they would sell Cosmos soft drinks. That Circumstance signifies that they were acting as independent businessmen. They were to sign or not to sign that contract. If they did not want to sell Cosmos products under the conditions defined in that contract; they were free to reject it. But having signed it, they were bound by its stipulations and the consequences thereof under existing labor laws. One such stipulation is the right of the parties to terminate the contract upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be resolved without submission of evidence. Using the contract itself as the sole criterion, the termination should perforce be characterized as simply the exercise of a right freely stipulated upon by the parties. "In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct-although the latter is the most important element" (Viana vs. Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445). On the other hand, an independent contractor is "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 the result of the work" (Mansal vs. P.P. Gocheco Lumber Co., supra). Among the factors to be considered are whether the contractor is carrying on an independent business; whether the work is part of the employer's general business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of the work to another; the power to terminate the relationship; the existence of a contract for the performance of a specified piece of work; the control and supervision of the work; the employer's powers and duties with respect to the hiring, firing, and payment of the contractor's servants; the control of the premises; the duty to supply the premises, tools, appliances, material and labor; and the mode, manner, and terms of payment. (56 C.J.S. 46). Those tests to determine the existence of an employer-employee relationship or whether the person doing a particular work for another is an independent contractor cannot be satisfactorily applied in the instant case. It should be obvious by now that the instant case is a penumbral, sui generis case lying on the shadowy borderline that separates an employee from an independent contractor. In determining whether the relationship is that of employer and employee or whether one is an independent contractor, "each case must be determined on its own facts and all the features of the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of the peddling contract, no employer-employee relationship was created. Hence, the old NLRC had no jurisdiction over the termination of the peddling contract. However, this ruling is without prejudice to the right of Repomanta and Moralde and the other peddlers to sue in the proper Court of First Instance and to ask for a reformation of the instrument evidencing the contract or for its annulment or to secure a declaration that, disregarding the peddling contract, the actual juridical relationship between them and Mafinco or Cosmos is that of employer and employee. In that action a fulldress trial may be held and the parties may introduce the evidence necessary to sustain their respective contentions. Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted oppressively towards their peddlers, as contemplated in article 1701 of the Civil Code, then they should file the proper action for damages in the regular courts. Where there is a right, there is a remedy (Ubi jus, ubi remedium). WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case No. LR-086 dated April 16, July 16 and October 18, 1973, respectively, are set aside and the order of the NLRC dated February 2, 1973, dismissing the case for lack of jurisdiction, is affirmed. No costs. SO ORDERED. Barredo, Antonio, Concepcion, Jr. and Martin, JJ., concur. Mr. Justice Fernando is on leave. Mr. Justice Martin was designated to sit in the Second Division.

Footnotes 1 For comparison, the provisions of the peddling contract involved in Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-8, March 18, 1958 are quoted below: 1. That in consideration of the competence of the PEDDLER and his ability to promote mutual benefits for parties hereto, the MANUFACTURER shall provide the PEDDLER with a delivery truck with which the latter shall peddle the soft drinks of the former, under the terms and conditions of this agreement;

2. That the MANUFACTURER shall furnish the gasoline and oil to run the said truck in business trips, bear the cost of maintenance and repairs of said truck arising from ordinary wear and tear, but damages to said vehicle caused by the negligence and carelessness of the PEDDLER or his driver shall be for the latter's own responsibility and account; 3. That the PEDDLER shall provide himself with, and pay on his own account, all the necessary licenses and permits required by law and ordinances, as well as bear any and all such expenses as may be incurred by him in connection with the business of selling, such contributions tips, etc. 4. That the PEDDLER shall assume the responsibility of driving the truck, or should he employ a driver and helpers, their compensation (salaries, wages, bonus or others) shall be paid by him at his own expense and not chargeable to the MANUFACTURER, and the former shall be liable to the latter for any injury or damage to the MANUFACTURER, caused by any act or acts of the driver or helpers so employed; 5. That any agreement or contract of employment entered into by the PEDDLER with others shall not bind in any manner the MANUFACTURER unless confirmed in writing by the latter; 6. That the PEDDLER shall maintain a cash deposit with the MANUFACTURER in sum of not less than Two HUNDRED PESOS (P200.00) against which MANUFACTURER may issue soft drinks to the PEDDLER at the price of P1.55 warehouse less four per cent (4%) discount per case of 24 bottles, for resale by PEDDLER; the the exthe

7 That the PEDDLER shall clear every day his account with the MANUFACTURER, and failure to do so shall subject the cash deposit, or so much thereof as may be necessary, to such set offs and payments as shall he proper against the account in question; 8 That this agreement shall remain in force for a period of ONE (1) year from the date hereof. The Court of Appeals, through Justice Makalintal and with the concurrence of Justices Fred Ruiz Castro and Dionisio de Leon, held that the truck or delivery helpers of peddlers, who acted as sales agents of Manila Cosmos Aerated Water Factory, were not employees of Cosmos and could not claim wage differentials from it. The helpers were employees of the peddlers. This Court in its resolution of July 14, 1958 in L-14072, Rapajon vs. Fong Kui, denied the petition for the review of the said ruling. The Lawphil Project - Arellano Law Foundation

10. G.R. No. 72409 December 29, 1986 MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES, petitioner, vs. THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPIL-KATIPUNAN), respondents. De Asis and Hernando Law Office for petitioner. Estebal M. Mendoza for private respondent.

PARAS, J.: This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-165-85, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1-044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17) shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the rights, privileges and benefits of an employee as provided in the Labor Code. Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division of the National Capital Region. Petitioner opposed it alleging that 1. There is no employer-employee relationship between Besa's and the petitionerssignatories to the petition; 2. The subject of the present petition had previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata; 3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and 4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition. Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an order declaring that there was an employer-employee relationship between the parties and directed that an election be conducted. Petitioner appealed the order to the Director of BLR citing among others the following reasons 1. That the subject of the present petition has previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783, 2751 and 2949 ULP December 21, 1965); 2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there was no employer-employee relationship between the shoeshiners and petitioner Besas (Order in NCR-LSED1-020-85); Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res judicata. xxx xxx xxx Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It declared that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the causes of action in the certification election case are different from the parties and causes of action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP

Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with petition for certiorari with Prohibition and simultaneously filed with the MedArbiter a motion to suspend the pre-election conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds: I THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE CONSIDERATION OF THIS HONORABLE COURT. II THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS, SURMISES AND CONJECTURES. III THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER. IV THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS IMPLEMENTING RULES. V THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINER-MEMBERS OF THE RESPONDENT UNION, VI THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS THEREFORE BABRED BY THE PRINCIPLE OF RES ADJUDICATA. The main thrust of the instant petition is the question of employer-employee relationship between petitioner BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are shoeshiners while 16 persons are non-shoeshiners. The question of employer-employee relationship became a primodial consideration in resolving whether or not the subject shoeshiners have the juridical personality and standing to present a petition for certification election as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of the employees must support the petition for certification election and that in order to be certified as the sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters.

In the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently nullified the result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec. 8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as the sole and exclusive bargaining agent of the workers of Besa's. The present petition merits Our consideration. The records of the case reveal that an employeremployee relationship does not exist between the 17 shoeshiners and petitioner. Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners against herein petitioner BESA declared in its Decision dated December 21, 1965 that: The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not, however, contribute anything to the capital of the employer other than his service. It is the employer of the piece worker who pays his wages, while the shoe shiner in this instance is paid directly by his customer. The piece worker is paid for work accomplished without regard or concern to the profit as derived by his employer, but in the case of the shoe shiners, the proceeds derived from the trade are always divided share and share alike with respondent BESA. The shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the piece worker supervises and controls his work, but in the case of the shoe shiner, respondent BESA does not exercise any degree of control or supervision over their person and their work. All these are not obtaining in the case of a piece worker as he is in fact an employee in contemplation of law, distinct from the shoe shiner in this instance who, in relation to respondent MAMERTO B. BESA, is a partner in the trade. Consequently, employer-employee relationship between members of the Petitioning union and respondent MAMERTO B. BESA being absent the latter could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6, Annex "B1 " of said Decision).<re|| an1w> Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an increase both in minimum wage and cost of living allowance, opined as follows: Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of employer-employee relationship which is determined by the concurrence of the following conditions: 1. right to hire 2. payment of wages 3. right to fire; and 4. control and supervision The most important condition to be considered is the exercise of control and supervision over the employees, per our conversation, the persons concerned under your query are the shoe shiners and based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but are partners instead. This is due to the fact that the owner/manager does not exercise control and supervision over the shoe shiners. That the shiners have their own customers from whom they charge the fee and divide the proceeds equally with the owner, which make the owner categorized them as on purely commission basis. The

attendant circumstances clearly show that there is no employer-employee relationship existing, and such the owner/manager is not by law, under obligation to extend to those on purely commission basis the benefit of Wage Order No. 2. However, the law does not preclude the employer in giving such benefit to all its employees including those which may not be covered by the mandate of the law. (Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition) The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employer-employee relationship exists. The Supreme Court in the Rosario Brothers case ruled that; A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit because it is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein. Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d] power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc, vs. Ople, 131 SCRA 72, 1984) WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8-165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED. SO ORDERED.