Labrel Cases 1

1.
Constitutional basis for labor relations policyy

2. Civil Code provisions - Articles 19, 224, 1700 to 1712.
3. Definitions of:
Labor relations
Labor relations laws
Labor standards
Labor organization
Legitimate labor organization
Labor union
Labor dispute
Company union
Bargaining representative
4. Declaration of Policy {formerly 2011}
5. Factors considered in the determination of employer - employee relations
(1.) [G.R. No. 199166. April 20, 2015.]
NELSON V. BEGINO, GENER DEL VALLE, MONINA AVILA-LLORIN AND MA. CRISTINA
SUMAYAO, petitioners, vs. ABS-CBN CORPORATION (FORMERLY, ABS-CBN
BROADCASTING CORPORATION) AND AMALIA VILLAFUERTE, respondents.
(2.) [G.R. No. 205300. March 18, 2015.]
FONTERRA BRANDS PHILS., INC., petitioner, vs. LEONARDO 1 LARGADO and TEOTIMO
ESTRELLADO, respondents.
(3.) Francisco v. NLRC August 21, 2006
(4.) Tenazas et. al. v. R. Villegas Taxi Transport, April 2, 2014.
(5.) South East International Rattan Inc. v. Coming, March 12, 2014
(6.) Ymbong v. ABS-CBN, March 7, 2012
(7.) Peoples Broadcasting Service v. Sec of Labor, March 6, 2012
(8.) Javier v. Flyace Corp. Feb 15, 2012
(9.) Locsin et. al. v. PLDT, October 2, 2009
(10.) Professional Services v. CA, February 11, 2008
(12.) Sonza v. ABS CBN, June 10, 2004
(13.) SMCEU v. Judge Bersamira , June 13, 1990
(14.) Brotherhood Labor Unity v. Zamora, January 7, 1987
++ including other landmark cases
6. {Art. 212} Definition of Labor Dispute
(1.) Citibank v. CA, November 27, 1998
(2.) PAL v. NLRC, March 20, 1998
7. Managerial Employee
(1.) Penaranda v. Bagang Plywood Corp, May 3, 2006

(2.) SMCC v. Charter Chemical and Coating Corp., March 16, 2011
(3.) Jumuad v. Hi-Flyer Food Inc., September 7, 2011
THIRD DIVISION
G.R. No. 205300, March 18, 2015
FONTERRA BRANDS PHILS., INC., Petitioner, v. LEONARDO1 LARGADO AND TEOTIMO
ESTRELLADO, Respondents.
DECISION
VELASCO JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and
setting aside of the Decision of the Court of Appeals (CA) dated September 6, 2012, as well as its January
11, 2013 Resolution denying reconsideration thereof, in CA-G.R. SP No. 114227, entitledLeonardo Largado
and Teotimo P. Estrellado v. National Labor Relations Commission (NLRC), Fonterra Brands Phils., Inc./Carlo
Mendoza, Zytron Marketing & Promotions Corp./Francisco Valencia, A.C. Sicat Marketing & Promotional
Services/Arturo Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of Zytron Marketing and Promotions
Corp. (Zytron) for the marketing and promotion of its milk and dairy products. Pursuant to the contract,
Zytron provided Fonterra with trade merchandising representatives (TMRs), including respondents Leonardo
Largado (Largado) and Teotimo Estrellado (Estrellado). The engagement of their services began on
September 15, 2003 and May 27, 2002, respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006.
Fonterra then entered into an agreement for manpower supply with A.C. Sicat Marketing and Promotional
Services (A.C. Sicat). Desirous of continuing their work as TMRs, respondents submitted their job
applications with A.C. Sicat, which hired them for a term of five (5) months, beginning June 7, 2006 up to
November 6, 2006.
When respondents 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal
thereof, but wereallegedly refused. This prompted respondents to file complaints for illegal dismissal,
regularization, non-payment of service incentive leave and 13 th month pay, and actual and moral damages,
against petitioner, Zytron, and A.C. Sicat.
The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not illegally dismissed. As a
matter of fact, they were the ones who refused to renew their contract and that they voluntarily complied
with the requirements for them to claim their corresponding monetary benefits in relation thereto; and (2)
they were consecutively employed by Zytron and A.C. Sicat, not by Fonterra. The dispositive portion of the
Decision2 reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the instant case for utter
lack of merit.
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SO ORDERED.
The NLRC affirmed the Labor Arbiter, finding that respondents separation from Zytron was brought about by
the execution of the contract between Fonterra and A.C. Sicat where the parties agreed to absorb Zytrons
personnel, including respondents. Too, respondents failed to present any evidence that they protested this
set-up. Furthermore, respondents failed to refute the allegation that they voluntarily refused to renew their
contract with A.C. Sicat. Also, respondents did not assert any claim against Zytron and A.C. Sicat. The NLRC
disposed of the case in this wise:
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WHEREFORE, premises considered, the appeals are hereby ordered DISMISSED and the Decision of the
Labor Arbiter is AFFIRMED [in]toto.
SO ORDERED.3
The NLRC decision was assailed in a petition under Rule 65 before the CA.
Ruling on the petition, the CA, in the questioned Decision, 4 found that A.C. Sicat satisfies the requirements
of legitimate job contracting, but Zytron does not. According to the CA: (1) Zytrons paid-in capital of
P250,000 cannot be considered as substantial capital; (2) its Certificate of Registration was issued by the
DOLE months after respondents supposed employment ended; and (3) its claim that it has the necessary
tools and equipment for its business is unsubstantiated. Therefore, according to the CA, respondents were
Fonterras employees.
Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that
their dismissal is lawful. However, the illegal dismissal should be reckoned from the termination of their
supposed employment with Zytron on June 6, 2006. Furthermore, respondents transfer to A.C. Sicat is
tantamount to a completely new engagement by another employer. Lastly, the termination of their contract
with A.C. Sicat arose from the expiration of their respective contracts with the latter. The CA, thus, ruled
that Fonterra is liable to respondents and ordered the reinstatement of respondents without loss of seniority
rights, with full backwages, and other benefits from the time of their illegal dismissal up to the time of their
actual reinstatement. The fallo of the Decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed Decision dated 20
November 2009 and Resolution dated 5 March 2010 of the National Labor Relations Commission (NLRC),
Seventh Division, are hereby ANULLED and SET ASIDE. Private respondent Fonterra Brand, Inc. is hereby
ordered to REINSTATE [respondents] without loss of seniority rights. Private respondents Fonterra Brand,
Inc. and Zytron Marketing and Promotional Corp. are hereby further ORDERED to jointly and severally pay
petitioners their full backwages and other benefits from the time of their illegal dismissal up to the time of
their actual reinstatement; and attorneys fees.
SO ORDERED.
Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.
The Issues
Petitioner presents the following issues for Our resolution:
I.
The CA erred in ruling that Zytron was a mere labor-only contractor to petitioner Fonterra, in
that:
a.
As held by the Court, there is no absolute figure that constitutes substantial capital for an
independent contractor, and the same should instead be measured against the type of work
it is obligated to do for the principal. It is most respectfully submitted that, here, the
merchandising work undertaken by Zytrons paid-in capital of P250,000 was as of 1990, the
year it was incorporated;
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b.
As shown in its Articles of Incorporation, Zytron had been in business since 1990, or more
than a decade before it signed a merchandising agreement with petitioner Fonterra;
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c.
II.
Very importantly, petitioner Fonterra never exercised the right to control respondents and
other employees of Zytron. Indeed, respondents neither alleged that petitioner exercised
control over them nor presented proof in support thereof in any of their previous pleadings.
Respondents never claimed nor adduced evidence that they were dismissed from employment by
Zytron. In fact, Zytron denies terminating them from work. The CA, thus, erred in finding that
respondents were illegally dismissed.
Succinctly, the issues in the case at bar are: (1) whether or not Zytron and A.C. Sicat are labor-only
contractors, making Fonterra the employer of herein respondents; and (2) whether or not respondents were
illegally dismissed.
Our Ruling
We find merit in the petition.
As regards the CAs conclusion that Zytron is not a legitimate job contractor, We are of the view that such is
immaterial to the resolution of the illegal dismissal issue for one reason: We find that respondents
voluntarily terminated their employment with Zytron, contrary to their allegation that their employment with
Zytron was illegally terminated.
We do not agree with the CA that respondents employment with Zytron was illegally terminated.
As correctly held by the Labor Arbiter and the NLRC, the termination of respondents employment with
Zytron was brought about by the cessation of their contracts with the latter. We give credence to the Labor
Arbiters conclusion that respondents were the ones who refused to renew their contracts with Zytron, and
the NLRCs finding that they themselves acquiesced to their transfer to A.C. Sicat.
By refusing to renew their contracts with Zytron, respondents effectively resigned from the latter.
Resignation is the voluntary act of employees who are compelled by personal reasons to dissociate
themselves from their employment, done with the intention of relinquishing an office, accompanied by the
act of abandonment.5
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Here, it is obvious that respondents were no longer interested in continuing their employment with Zytron.
Their voluntary refusal to renew their contracts was brought about by their desire to continue their
assignment in Fonterra which could not happen in view of the conclusion of Zytrons contract with Fonterra.
Hence, to be able to continue with their assignment, they applied for work with A.C. Sicat with the hope that
they will be able to continue rendering services as TMRs at Fonterra since A.C. Sicat is Fonterras new
manpower supplier. This fact is even acknowledged by the CA in the assailed Decision where it recognized
the reason why respondents applied for work at A.C. Sicat. The CA stated that [t]o continuously work as
merchandisers of Fonterra products, [respondents] submitted their job applications to A.C. Sicat xxx.6 This
is further bolstered by the fact that respondents voluntarily complied with the requirements for them to
claim their corresponding monetary benefits in relation to the cessation of their employment contract with
Zytron.
In short, respondents voluntarily terminated their employment with Zytron by refusing to renew their
employment contracts with the latter, applying with A.C. Sicat, and working as the latters employees,
thereby abandoning their previous employment with Zytron. Too, it is well to mention that for obvious
reasons, resignation is inconsistent with illegal dismissal. This being the case, Zytron cannot be said to have
illegally dismissed respondents, contrary to the findings of the CA.
As regards respondents employment with A.C. Sicat and its termination via non-renewal of their contracts,
considering that in labor-only contracting, the law creates an employer-employee relationship between the
principal and the labor-only contractors employee as if such employees are directly employed by the
principal employer, and considers the contractor as merely the agent of the principal, 7 it is proper to dispose
of the issue on A.C. Sicats status as a job contractor first before resolving the issue on the legality of the
cessation of respondents employment.
In this regard, We defer to the findings of the CA anent A.C. Sicats status as a legitimate job contractor,
seeing that it is consistent with the rules on job contracting and is sufficiently supported by the evidence on
record.
A person is considered engaged in legitimate job contracting or subcontracting if the following conditions
concur:
1.
The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its
own manner and method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;
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2.
The contractor or subcontractor has substantial capital or investment; and
3.
The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of
the right to self-organization, security of tenure, and social and welfare benefits. 8
On the other hand, contracting is prohibited when the contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service for a principal and if any of the following elements are
present, thus:
1.
The contractor or subcontractor does not have substantial capital or investment which relates to the
job, work or service to be performed and the employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or
2.
The contractor does not exercise the right to control over the performance of the work of the
contractual employee.9
The CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C. Sicat
was able to prove its status as a legitimate job contractor for having presented the following evidence, to
wit:
1.
Certificate of Business Registration;
2.
Certificate of Registration with the Bureau of Internal Revenue;
3.
Mayors Permit;
4.
Certificate of Membership with the Social Security System;
5.
Certificate of Registration with the Department of Labor and Employment;
6.
Company Profile; and
7.
Certifications issued by its clients.10
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Furthermore, A.C. Sicat has substantial capital, having assets totaling P5,926,155.76 as of December 31,
2006. Too, its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and
salaries of its employees or workers, including benefits, premiums, and protection due them, as well as
remittance to the proper government entities of all withholding taxes, Social Security Service, and Medicare
premiums, in accordance with relevant laws.
The appellate court further correctly held that Fonterras issuance of Merchandising Guidelines, stock
monitoring and inventory forms, and promo mechanics, for compliance and use of A.C. Sicats employees
assigned to them, does not establish that Fonterra exercises control over A.C. Sicat. We agree with the CAs
conclusion that these were imposed only to ensure the effectiveness of the promotion services to be
rendered by the merchandisers as it would be risky, if not imprudent, for any company to completely entrust
the performance of the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its merchandising and promotions business, independent
of Fonterras business. Thus, having settled that A.C. Sicat is a legitimate job contractor, We now determine
whether the termination of respondents employment with the former is valid.
We agree with the findings of the CA that the termination of respondents employment with the latter was
simply brought about by the expiration of their employment contracts.
Foremost, respondents were fixed-term employees. As previously held by this Court, fixed-term employment
contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for
specific projects with predetermined dates of completion; they also include those to which the parties by
free choice have assigned a specific date of termination. 11 The determining factor of such contracts is not the
duty of the employee but the day certain agreed upon by the parties for the commencement and
termination of the employment relationship.12
In the case at bar, it is clear that respondents were employed by A.C. Sicat as project employees. In their
employment contract with the latter, it is clearly stated that [A.C. Sicat is] temporarily employing
[respondents] as TMR[s] effective June 6[, 2006] under the following terms and conditions: The need for
your service being only for a specific project, your temporary employment will be for the duration only of
said project of our client, namely to promote FONTERRA BRANDS products xxx which is expected to be
finished on or before Nov. 06, 2006.13
Respondents, by accepting the conditions of the contract with A.C. Sicat, were well aware of and even
acceded to the condition that their employment thereat will end on said pre-determined date of termination.
They cannot now argue that they were illegally dismissed by the latter when it refused to renew their
contracts after its expiration. This is so since the non-renewal of their contracts by A.C. Sicat is a
management prerogative, and failure of respondents to prove that such was done in bad faith militates
against their contention that they were illegally dismissed. The expiration of their contract with A.C. Sicat
simply caused the natural cessation of their fixed-term employment there at. We, thus, see no reason to
disturb the ruling of the CA in this respect.
With these, We need not belabor the other assigned errors.
IN VIEW OF THE FOREGOING, the instant Petition for Review is GRANTED. The assailed Decision of the
Court of Appeals dated September 6, 2012 and its January 11, 2013 Resolution denying reconsideration
thereof, in CA-G.R. SP No. 114227, are hereby REVERSED and SET ASIDE. The Decision of the National
Labor Relations Commission dated November 20, 2009 and its Resolution dated March 5, 2010 in NLRC Case
No. RAB IV 12-23927-06-Q are hereby REINSTATED.
SO ORDERED.
Peralta, Villarama, Jr., Reyes, and Jardeleza, JJ., concur.
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FIRST DIVISION
ANGELINA FRANCISCO, G.R. No. 170087
Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated
October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner
Angelina Francisco. The appellate court reversed and set aside the Decision of the
National Labor Relations Commission (NLRC) dated April 15, 2003, [3] in NLRC
NCR CA No. 032766-02 which affirmed with modification the decision of the
Labor Arbiter dated July 31, 2002,[4] in NLRC-NCR Case No. 30-10-0-489-01,
finding that private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the company.[5]
Although she was designated as Corporate Secretary, she was not entrusted
with the corporate documents; neither did she attend any board meeting nor
required to do so.She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the company.[6]
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner
was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation.[7]
For five years, petitioner performed the duties of Acting Manager. As of
December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance
and a 10% share in the profit of Kasei Corporation.[8]
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a prepared resolution for
her replacement but she was assured that she would still be connected with Kasei
Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all
employees of Kasei Corporation and announced that nothing had changed and that
petitioner was still connected with Kasei Corporation as Technical Assistant to
Seiji Kamura and in charge of all BIR matters.[9]
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month
beginning January up to September 2001 for a total reduction of P22,500.00 as of
September 2001.Petitioner was not paid her mid-year bonus allegedly because the
company was not earning well. On October 2001, petitioner did not receive her
salary from the company. She made repeated follow-ups with the company cashier
but she was advised that the company was not earning well.[10]
On October 15, 2001, petitioner asked for her salary from Acedo and the rest
of the officers but she was informed that she is no longer connected with the
company.[11]
Since she was no longer paid her salary, petitioner did not report for work
and filed an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary. As
technical consultant, petitioner performed her work at her own discretion without
control and supervision of Kasei Corporation. Petitioner had no daily time record
and she came to the office any time she wanted. The company never interfered
with her work except that from time to time, the management would ask her
opinion on matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were engaged through
a Board Resolution designating her as technical consultant. The money received by
petitioner from the corporation was her professional fee subject to the 10%
expanded withholding tax on professionals, and that she was not one of those
reported to the BIR or SSS as one of the companys employees.[12]
Petitioners designation as technical consultant depended solely upon the will
of management. As such, her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of the
corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees reported
to the BIR, as well as a list of payees subject to expanded withholding tax which
included petitioner. SSS records were also submitted showing that petitioners latest
employer was Seiji Corporation.[13]
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former
position without loss of seniority rights and jointly and severally pay
complainant her money claims in accordance with the following
computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00

f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay
complainant separation pay with additional backwages that would accrue
up to actual payment of separation pay.
SO ORDERED.[14]
On April 15, 2003, the NLRC affirmed with modification the Decision of the
Labor Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is
hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay
computed at one month per year of service in addition to full backwages
from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and
10% share in profit in the respective accounts of P100,000.00 and
P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary
differential award only;
4) The awards representing salary differentials, housing
allowance, mid year bonus and 13th month pay are AFFIRMED.
SO ORDERED.[15]
On appeal, the Court of Appeals reversed the NLRC decision, thus:

WHEREFORE, the instant petition is hereby GRANTED. The decision
of the National Labor Relations Commissions dated April 15, 2003 is
hereby REVERSED and SET ASIDE and a new one is hereby rendered
dismissing the complaint filed by private respondent against Kasei

Corporation, et al. for constructive dismissal.
SO ORDERED.[16]
The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an
employer-employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally
dismissed.
Considering the conflicting findings by the Labor Arbiter and the National
Labor Relations Commission on one hand, and the Court of Appeals on the other,
there is a need to reexamine the records to determine which of the propositions
espoused by the contending parties is supported by substantial evidence.[17]
We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has
been no uniform test to determine the existence of an employer-employee
relation. Generally, courts have relied on the so-called right of control test where
the person for whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such end. In
addition to the standard of right-of-control, the existing economic conditions
prevailing between the parties, like the inclusion of the employee in the payrolls,
can help in determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are
instances when, aside from the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving:

(1) the putative employers power to control the employee with respect to the means
and methods by which the work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which
would take into consideration the totality of circumstances surrounding the true
nature of the relationship between the parties. This is especially appropriate in this
case where there is no written agreement or terms of reference to base the
relationship on; and due to the complexity of the relationship based on the various
positions and responsibilities given to the worker over the period of the latters
employment.
The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held that there
is an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.
In Sevilla v. Court of Appeals,[21] we observed the need to consider the
existing economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the payrolls, to
give a clearer picture in determining the existence of an employer-employee
relationship based on an analysis of the totality of economic circumstances of the
worker.
Thus, the determination of the relationship between employer and employee
depends upon the circumstances of the whole economic activity,[22] such as: (1) the
extent to which the services performed are an integral part of the employers
business; (2) the extent of the workers investment in equipment and facilities; (3)
the nature and degree of control exercised by the employer; (4) the workers
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer;
and (7) the degree of dependency of the worker upon the employer for his
continued employment in that line of business.[23]
The proper standard of economic dependence is whether the worker is

dependent on the alleged employer for his continued employment in that line of
business.[24] In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards Act
is dependency.[25] By analogy, the benchmark of economic reality in analyzing
possible employment relationships for purposes of the Labor Code ought to be the
economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee
of Kasei Corporation because she was under the direct control and supervision of
Seiji Kamura, the corporations Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with substantially the same
job functions, that is, rendering accounting and tax services to the company and
performing functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an indefinite
period of engagement.
Under the broader economic reality test, the petitioner can likewise be said
to be an employee of respondent corporation because she had served the company
for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999 to December 18,
2000.[26] When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioners membership in
the SSS as manifested by a copy of the SSS specimen signature card which was
signed by the President of Kasei Corporation and the inclusion of her name in the
on-line inquiry system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation.[27]
It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latters line of
business.
In Domasig v. National Labor Relations Commission,[28] we held that in a
business establishment, an identification card is provided not only as a security
measure but mainly to identify the holder thereof as a bona fide employee of the
firm that issues it. Together with the cash vouchers covering petitioners salaries for
the months stated therein, these matters constitute substantial evidence adequate to
support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its
workers with the SSS is proof that the latter were the formers employees. The
coverage of Social Security Law is predicated on the existence of an employeremployee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has
clearly established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioners job
was as Kamuras direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any
document for the corporation, although once in a while she was required to sign
prepared documentation for the company.[30]
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from
the records of the case.[31] Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted testimony, for
it could have been secured by considerations other than to tell the truth and would
make solemn trials a mockery and place the investigation of the truth at the mercy
of unscrupulous witnesses.[32] A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test of
credibility and should be received with caution.[33]
Based on the foregoing, there can be no other conclusion that petitioner is an

employee of respondent Kasei Corporation. She was selected and engaged by the
company for compensation, and is economically dependent upon respondent for
her continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis
over an indefinite period of engagement. Respondent corporation hired and
engaged petitioner for compensation, with the power to dismiss her for cause.
More importantly, respondent corporation had the power to control petitioner with
the means and methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her
salary by P2,500 a month from January to September 2001. This amounts to an
illegal termination of employment, where the petitioner is entitled to full
backwages. Since the position of petitioner as accountant is one of trust and
confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement.[34]
A diminution of pay is prejudicial to the employee and amounts to
constructive dismissal. Constructive dismissal is an involuntary resignation
resulting in cessation of work resorted to when continued employment becomes
impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution in pay; or when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to an employee.[35] In Globe Telecom, Inc. v.
Florendo-Flores,[36] we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation arises which
creates an adverse working environment rendering it impossible for such employee
to continue working for her employer. Hence, her severance from the company was
not of her own making and therefore amounted to an illegal termination of
employment.
In affording full protection to labor, this Court must ensure equal work
opportunities regardless of sex, race or creed. Even as we, in every case, attempt to
carefully balance the fragile relationship between employees and employers, we
are mindful of the fact that the policy of the law is to apply the Labor Code to a
greater number of employees. This would enable employees to avail of the benefits
accorded to them by law, in line with the constitutional mandate giving maximum
aid and protection to labor, promoting their welfare and reaffirming it as a primary
social economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution
of the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the
National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA
No. 032766-02, isREINSTATED. The case is REMANDED to the Labor Arbiter
for the recomputation of petitioner Angelina Franciscos full backwages from the
time she was illegally terminated until the date of finality of this decision, and
separation pay representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
Francisco v. NLRC August 31, 2006 G.R NO. 170087 500

SCRA 690
Facts:
Petitioner was hired by Kasei Corporation during its incorporation stage. She was designated
as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the
company, however she was not entrusted with the corporate documents; neither did she attend any board
meeting nor required to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary, but she was prevailed upon to sign documentation for the company.
She was also designated as Liason Officer to secure business permits, construction permits and other
licenses for the initial operation of the company.
In 1996, petitioner was designated Acting Manager, she was assigned to handle recruitment of
all employees and perform management administration functions. For 5 years, petitioner performed the
duties of Acting Manager.
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager and the petitioner was
assured that she would still be connected with Kasei Corporation as Technical Assistant to Seiji Kamura
and in charge of all BIR matters. Petitioner did not receive her salary from the company and was informed
that she is no longer connected with the company. Petitioner filed an ction for constructive dismissal
before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They
alleged that as technical consultant, petitioner performed her work at her own discretion without control
and supervision of Kasei Corporation. She had no daily time record and she came to the office any time
she wanted. The company never interfered with her work except that from time to time, the management
would ask her opinion on matters relating to her profession. The petitioner did not go through the usual
procedure of selection of employees and her designation as technical consuktant depended solely upon
the will of management. As such, her consultancy may be terminated any time considering that her
services were only temporary in nature and dependent on the needs of the corporation.
Issue: Won there was an employer-employee relationship between the parties.
Ruling:
In certain cases the control test is not sufficient to give a complete picture of the relationship
between the parties, owing to the complexity of such a relationship where several positions have been
held by the worker. There are instances when, aside from the employers power to control the employee
with respect to the means and methods by which the work is to be accomplished, economic realities of
the employment relations help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: 1) putative
employers power to control the employee with respect to the means and methods by which the work is to
be accomplished; and 2) the underlying economic realities of the activity or relationship. This two-tiered
test would provide us with a framework of analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between the parties. This is especially
appropriate in this case where there is no written agreement or terms of reference to base the relationship
on; and due to the complexity of the relationship based on the various positions and responsibilities given
to the worker over the period of the latters employment.
The determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: 1) the extent to which the services performed are
an integral part of the employers business; 2) the extent of the workers investment in equipment and
facilities; 3) the nature and degree of control exercised by the employer; 4) the workers opportunity for
profit or loss; 5) the amount of initiative, skill, judgment or foresight required for the success of the claimed
independent enterprise; 6) the permanency and duration of the relationship between the worker and the
employer; and 7) the degree of dependency of the worker upon the employer of his continued
employment in that line of business.
The proper standard of economic dependence is whether the worker is dependent on the
alleged employer for his continued employment in that line of business. Based on the foregoing, there can
be no other conclusion that petitioner is an employee of respondent Kasei Corporations. She was
selected and engaged by the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job function involved
accounting and tax services rendered to respondent corporation on a regular basis over an indefinite
period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, respondent corporation had the power to control
petitioner with the means and methods by which the work is to be accomplished.
Republic of the Philippines

SUPREME COURT
Baguio City
FIRST DIVISION
G.R. No. 192998
April 2, 2014
BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,

vs.
R. VILLEGAS TAXI TRANSPORT and ROMUALDO VILLEGAS, Respondents.
DECISION
REYES, J.:
This is a petition for review on certiorari filed under Rule 45 of the Rules of Court, assailing the
Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals (CA) in
CA-G.R. SP No. 111150, which affirmed with modification the Decision dated June 23, 2009 of the
National Labor Relations Commission (NLRC) in NLRC LAC Case No. 07-002648-08.
1
The Antecedent Facts

On July 4, 2007, Bernard A. Tenazas (Tenazas) and Jaime M. Francisco (Francisco) filed a
complaint for illegal dismissal against R. Villegas Taxi Transport and/or Romualdo Villegas
(Romualdo) and Andy Villegas (Andy) (respondents). At that time, a similar case had already been
filed by Isidro G. Endraca (Endraca) against the same respondents. The two (2) cases were
subsequently consolidated.
5
In their position paper, Tenazas, Francisco and Endraca (petitioners) alleged that they were hired
and dismissed by the respondents on the following dates:
6
Name
Date of Hiring
Date of Dismissal
Salary
Bernard A. Tenazas
10/1997
07/03/07
Boundary System
Jaime M. Francisco
04/10/04
06/04/07
Boundary System
Isidro G. Endraca
04/2000
03/06/06
Boundary System
Relaying the circumstances of his dismissal, Tenazas alleged that on July 1, 2007, the taxi unit
assigned to him was sideswiped by another vehicle, causing a dent on the left fender near the driver
seat. The cost of repair for the damage was estimated at P500.00. Upon reporting the incident to the
company, he was scolded by respondents Romualdo and Andy and was told to leave the garage for
he is already fired. He was even threatened with physical harm should he ever be seen in the
companys premises again. Despite the warning, Tenazas reported for work on the following day but
was told that he can no longer drive any of the companys units as he is already fired.
8
Francisco, on the other hand, averred that his dismissal was brought about by the companys
unfounded suspicion that he was organizing a labor union. He was instantaneously terminated,
without the benefit of procedural due process, on June 4, 2007.
9
Endraca, for his part, alleged that his dismissal was instigated by an occasion when he fell short of
the required boundary for his taxi unit. He related that before he was dismissed, he brought his taxi
unit to an auto shop for an urgent repair. He was charged the amount of P700.00 for the repair
services and the replacement parts. As a result, he was not able to meet his boundary for the day.
Upon returning to the company garage and informing the management of the incident, his drivers
license was confiscated and was told to settle the deficiency in his boundary first before his license
will be returned to him. He was no longer allowed to drive a taxi unit despite his persistent pleas.
10
For their part, the respondents admitted that Tenazas and Endraca were employees of the company,
the former being a regular driver and the latter a spare driver. The respondents, however, denied
that Francisco was an employee of the company or that he was able to drive one of the companys
units at any point in time.
11
The respondents further alleged that Tenazas was never terminated by the company. They claimed
that on July 3, 2007, Tenazas went to the company garage to get his taxi unit but was informed that
it is due for overhaul because of some mechanical defects reported by the other driver who takes
turns with him in using the same. He was thus advised to wait for further notice from the company if
his unit has already been fixed. On July 8, 2007, however, upon being informed that his unit is ready
for release, Tenazas failed to report back to work for no apparent reason.
12
As regards Endraca, the respondents alleged that they hired him as a spare driver in February 2001.
They allow him to drive a taxi unit whenever their regular driver will not be able to report for work. In
July 2003, however, Endraca stopped reporting for work without informing the company of his
reason. Subsequently, the respondents learned that a complaint for illegal dismissal was filed by
Endraca against them. They strongly maintained, however, that they could never have terminated
Endraca in March 2006 since he already stopped reporting for work as early as July 2003. Even
then, they expressed willingness to accommodate Endraca should he wish to work as a spare driver
for the company again since he was never really dismissed from employment anyway.
13
On May 29, 2008, the petitioners, by registered mail, filed a Motion to Admit Additional
Evidence. They alleged that after diligent efforts, they were able to discover new pieces of evidence
that will substantiate the allegations in their position paper. Attached with the motion are the
following: (a) Joint Affidavit of the petitioners; (2) Affidavit of Good Faith of Aloney Rivera, a codriver; (3) pictures of the petitioners wearing company shirts; and (4) Tenazas Certification/Record
of Social Security System (SSS) contributions.
14
15
16
17
18
The Ruling of the Labor Arbiter

On May 30, 2008, the Labor Arbiter (LA) rendered a Decision, which pertinently states, thus:
19
In the case of complainant Jaime Francisco, respondents categorically denied the existence of an
employer-employee relationship. In this situation, the burden of proof shifts to the complainant to
prove the existence of a regular employment. Complainant Francisco failed to present evidence of
regular employment available to all regular employees, such as an employment contract, company
ID, SSS, withholding tax certificates, SSS membership and the like.
In the case of complainant Isidro Endraca, respondents claim that he was only an extra driver who
stopped reporting to queue for available taxi units which he could drive. In fact, respondents offered
him in their Position Paper on record, immediate reinstatement as extra taxi driver which offer he
refused.
In case of Bernard Tenazas, he was told to wait while his taxi was under repair but he did not report
for work after the taxi was repaired. Respondents[,] in their Position Paper, on record likewise,
offered him immediate reinstatement, which offer he refused.
We must bear in mind that the complaint herein is one of actual dismissal. But there was no formal
investigations, no show cause memos, suspension memos or termination memos were never
issued. Otherwise stated, there is no proof of overt act of dismissal committed by herein
respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar.
The situations contemplated by law for entitlement to separation pay does [sic] not apply.
WHEREFORE, premises considered, instant consolidated complaints are hereby dismissed for lack
of merit.
SO ORDERED.
20
The Ruling of the NLRC

Unyielding, the petitioners appealed the decision of the LA to the NLRC. Subsequently, on June 23,
2009, the NLRC rendered a Decision, reversing the appealed decision of the LA, holding that the
additional pieces of evidence belatedly submitted by the petitioners sufficed to establish the
existence of employer-employee relationship and their illegal dismissal. It held, thus:
21
In the challenged decision, the Labor Arbiter found that it cannot be said that the complainants were
illegally dismissed, there being no showing, in the first place, that the respondent [sic] terminated
their services. A portion thereof reads:
"We must bear in mind that the complaint herein is one of actual dismissal. But there were no formal
investigations, no show cause memos, suspension memos or termination memos were never
issued. Otherwise stated, there is no proof of overt act of dismissal committed by herein
respondents.
We are therefore constrained to rule that there was no illegal dismissal in the case at bar."
Issue: [W]hether or not the complainants were illegally dismissed from employment.
It is possible that the complainants Motion to Admit Additional Evidence did not reach the Labor
Arbiters attention because he had drafted the challenged decision even before they submitted it,
and thereafter, his staff attended only to clerical matters, and failed to bring the motion in question to
his attention. It is now up to this Commission to consider the complainants additional evidence.
Anyway, if this Commission must consider evidence submitted for the first time on appeal (Andaya
vs. NLRC, G.R. No. 157371, July 15, 2005), much more so must it consider evidence that was
simply overlooked by the Labor Arbiter.
Among the additional pieces of evidence submitted by the complainants are the following: (1) joint
affidavit (records, p. 51-52) of the three (3) complainants; (2) affidavit (records, p. 53) of Aloney
Rivera y Aldo; and (3) three (3) pictures (records, p. 54) referred to by the complainant in their joint
affidavit showing them wearing t-shirts bearing the name and logo of the respondents company.
xxxx
WHEREFORE, the decision appealed from is hereby REVERSED. Respondent Rom[u]aldo Villegas
doing business under the name and style Villegas Taxi Transport is hereby ordered to pay the
complainants the following (1) full backwages from the date of their dismissal (July 3, 2007 for
Tena[z]as, June 4, 2004 for Francisco, and March 6, 2006 for Endraca[)] up to the date of the finality
of this decision[;] (2) separation pay equivalent to one month for every year of service; and (3)
attorneys fees equivalent to ten percent (10%) of the total judgment awards.
SO ORDERED.
22
On July 24, 2009, the respondents filed a motion for reconsideration but the NLRC denied the same
in its Resolution dated September 23, 2009.
23
The Ruling of the CA

Unperturbed, the respondents filed a petition for certiorari with the CA. On March 11, 2010, the CA
rendered a Decision, affirming with modification the Decision dated June 23, 2009 of the NLRC.
The CA agreed with the NLRCs finding that Tenazas and Endraca were employees of the company,
but ruled otherwise in the case of Francisco for failing to establish his relationship with the company.
It also deleted the award of separation pay and ordered for reinstatement of Tenazas and Endraca.
The pertinent portions of the decision read as follows:
24
At the outset, We declare that respondent Francisco failed to prove that an employer-employee
relationship exists between him and R. Transport. If there is no employer-employee relationship in
the first place, the duty of R. Transport to adhere to the labor standards provisions of the Labor Code
with respect to Francisco is questionable.
xxxx
Although substantial evidence is not a function of quantity but rather of quality, the peculiar
environmental circumstances of the instant case demand that something more should have been
proffered. Had there been other proofs of employment, such as Franciscos inclusion in R.R.
Transports payroll, this Court would have affirmed the finding of employer-employee
relationship. The NLRC, therefore, committed grievous error in ordering R. Transport to answer for
Franciscos claims.
1wphi1
We now tackle R. Transports petition with respect to Tenazas and Endraca, who are both admitted
to be R. Transports employees. In its petition, R. Transport puts forth the theory that it did not
terminate the services of respondents but that the latter deliberately abandoned their work. We
cannot subscribe to this theory.
xxxx
Considering that the complaints for illegal dismissal were filed soon after the alleged dates of
dismissal, it cannot be inferred that respondents Tenazas and Endraca intended to abandon their
employment. The complainants for dismissal are, in themselves, pleas for the continuance of
employment. They are incompatible with the allegation of abandonment. x x x.
For R. Transports failure to discharge the burden of proving that the dismissal of respondents
Tenazas and Endraca was for a just cause, We are constrained to uphold the NLRCs conclusion
that their dismissal was not justified and that they are entitled to back wages. Because they were
illegally dismissed, private respondents Tenazas and Endraca are entitled to reinstatement and back
wages x x x.
xxxx
However, R. Transport is correct in its contention that separation pay should not be awarded
because reinstatement is still possible and has been offered. It is well[-]settled that separation pay is
granted only in instances where reinstatement is no longer feasible or appropriate, which is not the
case here.
xxxx
WHEREFORE, the Decision of the National Labor Relations Commission dated 23 June 2009, in
NLRC LAC Case No. 07-002648-08, and its Resolution dated 23 September 2009 denying
reconsideration thereof are AFFIRMED with MODIFICATION in that the award of Jaime Franciscos
claims is DELETED. The separation pay granted in favor of Bernard Tenazas and Isidro Endraca is,
likewise, DELETED and their reinstatement is ordered instead.
SO ORDERED. (Citations omitted)
25
On March 19, 2010, the petitioners filed a motion for reconsideration but the same was denied by
the CA in its Resolution dated June 28, 2010.
26
Undeterred, the petitioners filed the instant petition for review on certiorari before this Court on July
15, 2010.
The Ruling of this Court
The petition lacks merit.
Pivotal to the resolution of the instant case is the determination of the existence of employeremployee relationship and whether there was an illegal dismissal. Remarkably, the LA, NLRC and
the CA had varying assessment on the matters at hand. The LA believed that, with the admission of
the respondents, there is no longer any question regarding the status of both Tenazas and Endraca
being employees of the company. However, he ruled that the same conclusion does not hold with
respect to Francisco whom the respondents denied to have ever employed or known. With the
respondents denial, the burden of proof shifts to Francisco to establish his regular employment.
Unfortunately, the LA found that Francisco failed to present sufficient evidence to prove regular
employment such as company ID, SSS membership, withholding tax certificates or similar articles.
Thus, he was not considered an employee of the company. Even then, the LA held that Tenazas and
Endraca could not have been illegally dismissed since there was no overt act of dismissal committed
by the respondents.
27
On appeal, the NLRC reversed the ruling of the LA and ruled that the petitioners were all employees
of the company. The NLRC premised its conclusion on the additional pieces of evidence belatedly
submitted by the petitioners, which it supposed, have been overlooked by the LA owing to the time
when it was received by the said office. It opined that the said pieces of evidence are sufficient to
establish the circumstances of their illegal termination. In particular, it noted that in the affidavit of the
petitioners, there were allegations about the companys practice of not issuing employment records
and this was not rebutted by the respondents. It underscored that in a situation where doubt exists
between evidence presented by the employer and the employee, the scales of justice must be tilted
in favor of the employee. It awarded the petitioners with: (1) full backwages from the date of their
dismissal up to the finality of the decision; (2) separation pay equivalent to one month of salary for
every year of service; and (3) attorneys fees.
On petition for certiorari, the CA affirmed with modification the decision of the NLRC, holding that
there was indeed an illegal dismissal on the part of Tenazas and Endraca but not with respect to
Francisco who failed to present substantial evidence, proving that he was an employee of the
respondents. The CA likewise dismissed the respondents claim that Tenazas and Endraca
abandoned their work, asseverating that immediate filing of a complaint for illegal dismissal and
persistent pleas for continuance of employment are incompatible with abandonment. It also deleted
the NLRCs award of separation pay and instead ordered that Tenazas and Endraca be reinstated.
28
"Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of support from the evidence on record, or the
assailed judgment is based on a gross misapprehension of facts." The Court finds that none of the
mentioned circumstances is present in this case.
29
In reviewing the decision of the NLRC, the CA found that no substantial evidence was presented to
support the conclusion that Francisco was an employee of the respondents and accordingly modified
the NLRC decision. It stressed that with the respondents denial of employer-employee relationship,
it behooved Francisco to present substantial evidence to prove that he is an employee before any
question on the legality of his supposed dismissal becomes appropriate for discussion. Francisco,
however, did not offer evidence to substantiate his claim of employment with the respondents. Short
of the required quantum of proof, the CA correctly ruled that the NLRCs finding of illegal dismissal
and the monetary awards which necessarily follow such ruling lacked factual and legal basis and
must therefore be deleted.
The action of the CA finds support in Anonas Construction and Industrial Supply Corp., et al. v.
NLRC, et al., where the Court reiterated:
30
[J]udicial review of decisions of the NLRC via petition for certiorari under Rule 65, as a general rule,
is confined only to issues of lack or excess of jurisdiction and grave abuse of discretion on the part of
the NLRC. The CA does not assess and weigh the sufficiency of evidence upon which the LA and
the NLRC based their conclusions. The issue is limited to the determination of whether or not the
NLRC acted without or in excess of its jurisdiction, or with grave abuse of discretion in rendering the
resolution, except if the findings of the NLRC are not supported by substantial evidence. (Citation
omitted and emphasis ours)
31
It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial

proceedings, "the quantum of proof necessary is substantial evidence, or such amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion." "[T]he burden
of proof rests upon the party who asserts the affirmative of an issue." Corollarily, as Francisco was
claiming to be an employee of the respondents, it is incumbent upon him to proffer evidence to prove
the existence of said relationship.
32
33
"[I]n determining the presence or absence of an employer-employee relationship, the Court has
consistently looked for the following incidents, to wit: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
control the employee on the means and methods by which the work is accomplished. The last
element, the so-called control test, is the most important element."
34
There is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status.
35
In this case, however, Francisco failed to present any proof substantial enough to establish his
relationship with the respondents. He failed to present documentary evidence like attendance
logbook, payroll, SSS record or any personnel file that could somehow depict his status as an
employee. Anent his claim that he was not issued with employment records, he could have, at least,
produced his social security records which state his contributions, name and address of his
employer, as his co-petitioner Tenazas did. He could have also presented testimonial evidence
showing the respondents exercise of control over the means and methods by which he undertakes
his work. This is imperative in light of the respondents denial of his employment and the claim of
another taxi operator, Emmanuel Villegas (Emmanuel), that he was his employer. Specifically, in his
Affidavit, Emmanuel alleged that Francisco was employed as a spare driver in his taxi garage from
January 2006 to December 2006, a fact that the latter failed to deny or question in any of the
pleadings attached to the records of this case. The utter lack of evidence is fatal to Franciscos case
especially in cases like his present predicament when the law has been very lenient in not requiring
any particular form of evidence or manner of proving the presence of employer-employee
relationship.
36
In Opulencia Ice Plant and Storage v. NLRC, this Court emphasized, thus:
37
No particular form of evidence is required to prove the existence of an employer-employee

relationship. Any competent and relevant evidence to prove the relationship may be admitted. For, if
only documentary evidence would be required to show that relationship, no scheming employer
would ever be brought before the bar of justice, as no employer would wish to come out with any
trace of the illegality he has authored considering that it should take much weightier proof to
invalidate a written instrument.
38
Here, Francisco simply relied on his allegation that he was an employee of the company without any
other evidence supporting his claim. Unfortunately for him, a mere allegation in the position paper is
not tantamount to evidence. Bereft of any evidence, the CA correctly ruled that Francisco could not
be considered an employee of the respondents.
39
The CAs order of reinstatement of Tenazas and Endraca, instead of the payment of separation pay,
is also well in accordance with prevailing jurisprudence. In Macasero v. Southern Industrial Gases
Philippines, the Court reiterated, thus:
40
[A]n illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay
if reinstatement is no longer viable, and backwages.
1wphi1
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. (Emphasis

supplied)
41
Clearly, it is only when reinstatement is no longer feasible that the payment of separation pay is
ordered in lieu thereof. For instance, if reinstatement would only exacerbate the tension and strained
relations between the parties, or where the relationship between the employer and the employee has
been unduly strained by reason of their irreconcilable differences, it would be more prudent to order
payment of separation pay instead of reinstatement.
42
This doctrine of strained relations, however, should not be used recklessly or applied loosely nor be
based on impression alone. "It bears to stress that reinstatement is the rule and, for the exception of
strained relations to apply, it should be proved that it is likely that if reinstated, an atmosphere of
antipathy and antagonism would be generated as to adversely affect the efficiency and productivity
of the employee concerned."
43
44
Moreover, the existence of strained relations, it must be emphasized, is a question of fact. In Golden
Ace Builders v. Talde, the Court underscored:
45
Strained relations must be demonstrated as a fact, however, to be adequately supported by

evidencesubstantial evidence to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial controversy. (Citations
omitted and emphasis ours)
46
After a perusal of the NLRC decision, this Court failed to find the factual basis of the award of
separation pay to the petitioners. The NLRC decision did not state the facts which demonstrate that
reinstatement is no longer a feasible option that could have justified the alternative relief of granting
separation pay instead.
The petitioners themselves likewise overlooked to allege circumstances which may have rendered
their reinstatement unlikely or unwise and even prayed for reinstatement alongside the payment of
separation pay in their position paper. A bare claim of strained relations by reason of termination is
insufficient to warrant the granting of separation pay. Likewise, the filing of the complaint by the
petitioners does not necessarily translate to strained relations between the parties. As a rule, no
strained relations should arise from a valid and legal act asserting ones right. Although litigation
may also engender a certain degree of hostility, the understandable strain in the parties relation
would not necessarily rule out reinstatement which would, otherwise, become the rule rather the
exception in illegal dismissal cases. Thus, it was a prudent call for the CA to delete the award of
separation pay and order for reinstatement instead, in accordance with the general rule stated in
Article 279 of the Labor Code.
47
48
49
50
Finally, the Court finds the computation of the petitioners' backwages at the rate of P800.00 daily
reasonable and just under the circumstances. The said rate is consistent with the ruling of this Court
in Hyatt Taxi Services, Inc. v. Catinoy, which dealt with the same matter.
51
WHEREFORE, in view of the foregoing disquisition, the petition for review on certiorari is DENIED.
The Decision dated March 11, 2010 and Resolution dated June 28, 2010 of the Court of Appeals in
CA-G.R. SP No. 111150 are AFFIRMED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
WE CONCUR:
FIRST DIVISION
G.R. No. 186621, March 12, 2014
SOUTH EAST INTERNATIONAL RATTAN, INC. AND/OR ESTANISLAO 1 AGBAY, Petitioners, v.JESUS J.
COMING, Respondent.
DECISION
VILLARAMA, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 to reverse and set aside the
Decision2 dated February 21, 2008 and Resolution3 dated February 9, 2009 of the Court of Appeals (CA) in
CAG.R. CEBSP No. 02113.
Petitioner South East International Rattan, Inc. (SEIRI) is a domestic corporation engaged in the business of
manufacturing and exporting furniture to various countries with principal place of business at Paknaan,
Mandaue City, while petitioner Estanislao Agbay, as per records, is the President and General Manager of
SEIRI.4
On November 3, 2003, respondent Jesus J. Coming filed a complaint 5 for illegal dismissal, underpayment of
wages, nonpayment of holiday pay, 13th month pay and service incentive leave pay, with prayer for
reinstatement, back wages, damages and attorneys fees.
Respondent alleged that he was hired by petitioners as Sizing Machine Operator on March 17, 1984. His
work schedule is from 8:00 a.m. to 5:00 p.m. Initially, his compensation was on pakiao basis but
sometime in June 1984, it was fixed at P150.00 per day which was paid weekly. In 1990, without any
apparent reason, his employment was interrupted as he was told by petitioners to resume work in two
months time. Being an uneducated person, respondent was persuaded by the management as well as his
brother not to complain, as otherwise petitioners might decide not to call him back for work. Fearing such
consequence, respondent accepted his fate. Nonetheless, after two months he reported back to work upon
order of management.6
Despite being an employee for many years with his work performance never questioned by petitioners,
respondent was dismissed on January 1, 2002 without lawful cause. He was told that he will be terminated
because the company is not doing well financially and that he would be called back to work only if they need
his services again. Respondent waited for almost a year but petitioners did not call him back to work. When
he finally filed the complaint before the regional arbitration branch, his brother Vicente was used by
management to persuade him to withdraw the case.7
On their part, petitioners denied having hired respondent asserting that SEIRI was incorporated only in
1986, and that respondent actually worked for SEIRIs furniture suppliers because when the company
started in 1987 it was engaged purely in buying and exporting furniture and its business operations were
suspended from the last quarter of 1989 to August 1992. They stressed that respondent was not included in
the list of employees submitted to the Social Security System (SSS). Moreover, respondents brother,
Vicente Coming, executed an affidavit8 in support of petitioners position while Allan Mayol and Faustino
Apondar issued notarized certifications9 that respondent worked for them instead.10
With the denial of petitioners that respondent was their employee, the latter submitted an affidavit 11signed
by five former coworkers stating that respondent was one of the pioneer employees who worked in SEIRI
for almost twenty years.
In his Decision12 dated April 30, 2004, Labor Arbiter Ernesto F. Carreon ruled that respondent is a regular
employee of SEIRI and that the termination of his employment was illegal. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent South East (Intl.)
Rattan, Inc. to pay complainant Jesus J. Coming the following:
1.
2.
3.
4.
5.
6.
Separation pay
Backwages
Wage differential
13th month pay
Holiday pay
Service incentive leave pay
Total award
P114,400.00
P 30,400.00
P 15,015.00
P 5,958.00
P 4,000.00
P 2,000.00
P171,773.00
The other claims and the case against respondent Estanislao Agbay are dismissed for lack of merit.
SO ORDERED.13
Petitioners appealed to the National Labor Relations Commission (NLRC)Cebu City where they submitted
the following additional evidence: (1) copies of SEIRIs payrolls and individual pay records of
employees;14 (2) affidavit15 of SEIRIs Treasurer, Angelina Agbay; and (3) second affidavit 16 of Vicente
Coming.
On July 28, 2005, the NLRCs Fourth Division rendered its Decision, 17 the dispositive portion of which
states:
WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and
a new one entered DISMISSING the complaint.
SO ORDERED.18
The NLRC likewise denied respondents motion for reconsideration. 19
Respondent elevated the case to the CA via a petition for certiorari under Rule 65.
By Decision dated February 21, 2008, the CA reversed the NLRC and ruled that there existed an employer
employee relationship between petitioners and respondent who was dismissed without just and valid cause.
The CA thus decreed:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed Decision dated July 28,
2005 issued by the National Labor Relations Commission (NLRC), Fourth Division, Cebu City in NLRC Case
No. V0006252004 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated April 30, 2004 is
REINSTATED with MODIFICATION on the computation of backwages which should be computed from the
time of illegal termination until the finality of this decision.
Further, the Labor Arbiter is directed to make the proper adjustment in the computation of the award of
separation pay as well as the monetary awards of wage differential, 13 th month pay, holiday pay and service
incentive leave pay.
SO ORDERED.20
Petitioners filed a motion for reconsideration but the CA denied it under Resolution dated February 9, 2009.
Hence, this petition raising the following issues:
6.1
WHETHER UNDER THE FACTS AND EVIDENCE ON RECORD, THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT THERE EXISTS EMPLOYEREMPLOYEE RELATIONSHIP BETWEEN PETITIONERS AND
RESPONDENT IS IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THIS HONORABLE COURT.
6.2
WHETHER THE HONORABLE COURT OF APPEALS CORRECTLY APPRECIATED IN ACCORDANCE WITH
APPLICABLE LAW AND JURISPRUDENCE THE EVIDENCE PRESENTED BY BOTH PARTIES.
6.3
WHETHER UNDER THE FACTS AND EVIDENCE PRESENTED, THE FINDING OF THE HONORABLE COURT OF
APPEALS THAT PETITIONERS ARE LIABLE FOR ILLEGAL DISMISSAL OF RESPONDENT IS IN ACCORD WITH
APPLICABLE LAW AND JURISPRUDENCE.
6.4
WHETHER UNDER THE FACTS PRESENTED, THE RULING OF THE HONORABLE COURT OF APPEALS THAT THE
BACKWAGES DUE THE RESPONDENT SHOULD BE COMPUTED FROM THE TIME OF ILLEGAL TERMINATION
UNTIL THE FINALITY OF THE DECISION IS SUPPORTED BY PREVAILING JURISPRUDENCE. 21
Resolution of the first issue is paramount in view of petitioners denial of the existence of employer
employee relationship.
The issue of whether or not an employeremployee relationship exists in a given case is essentially a
question of fact. As a rule, this Court is not a trier of facts and this applies with greater force in labor
cases.22 Only errors of law are generally reviewed by this Court. 23 This rule is not absolute, however, and
admits of exceptions. For one, the Court may look into factual issues in labor cases when the factual
findings of the Labor Arbiter, the NLRC, and the CA are conflicting. 24 Here, the findings of the NLRC differed
from those of the Labor Arbiter and the CA, which compels the Courts exercise of its authority to review and
pass upon the evidence presented and to draw its own conclusions therefrom. 25
To ascertain the existence of an employeremployee relationship jurisprudence has invariably adhered to the
fourfold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct, or the socalled control test.26
In resolving the issue of whether such relationship exists in a given case, substantial evidence that amount
of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion is
sufficient. Although no particular form of evidence is required to prove the existence of the relationship, and
any competent and relevant evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence. 27
In support of their claim that respondent was not their employee, petitioners presented Employment
Reports to the SSS from 1987 to 2002, the Certifications issued by Mayol and Apondar, two affidavits of
Vicente Coming, payroll sheets (19992000), individual pay envelopes and employee earnings records
(19992000) and affidavit of Angelina Agbay (Treasurer and Human Resources Officer). The payroll and pay
records did not include the name of respondent. The affidavit of Ms. Agbay stated that after SEIRI started
its business in 1986 purely on export trading, it ceased operations in 1989 as evidenced by Certification
dated January 18, 1994 from the Securities and Exchange Commission (SEC); that when business resumed
in 1992, SEIRI undertook only a little of manufacturing; that the company never hired any workers for
varnishing and pole sizing because it bought the same from various suppliers, including Faustino Apondar;
respondent was never hired by SEIRI; and while it is true that Mr. Estanislao Agbay is the company
President, he never dispensed the salaries of workers.28
In his first affidavit, Vicente Coming averred that:
6. [Jesus Coming] is a furniture factory worker. In 1982 to 1986, he was working with Ben Mayol as round
core maker/splitter.
7. Thereafter, we joined Okay Okay Yard owned by Amelito Montececillo. This is a rattan trader with
business address near Cebu Rattan Factory on a Pakiao basis.
8. However, Jesus and I did not stay long at Okay Okay Yard and instead we joined Eleuterio Agbay in
Labogon, Cebu in 1989. In 1991, we went back to Okay Okay located near the residence of Atty. Vicente de
la Serna in Mandaue City. We were on a pakiao basis. We stayed put until 1993 when we resigned and
joined Dodoy Luna in Labogon, Mandaue City as classifier until 1995. In 1996[,] Jesus rested. It was only
in 1997 that he worked back. He replaced me, as a classifier in Rattan Traders owned by Allan Mayol. But
then, towards the end of the year, he left the factory and relaxed in our place of birth, in Sogod, Cebu.
9. It was only towards the end of 1999 that Jesus was taken back by Allan Mayol as sizing machine
operator. However, the work was off and on basis. Not regular in nature, he was harping a side line job
with me knowing that I am now working with Faustino Apondar that supplies rattan furnitures [sic] to South
East (Intl) Rattan, Inc. As a brother, I allowed Jesus to work with me and collect the proceeds of his
services as part of my collectibles from Faustino Apondar since I was on a pakiao basis. He was working
at his pleasure. Which means, he works if he likes to? That will be until 10:00 oclock in the evening.
x x x x29
The Certification dated January 20, 2004 of Allan Mayol reads:
This is to certify that I personally know Jesus Coming, the brother of Vicente Coming. Jesus is a rattan
factory worker and he was working with me as rattan pole sizing/classifier of my business from 1997 up to
part of 1998 when he left my factory at will. I took him back towards the end of 1999, this time as a sizing
machine operator. In all these years, his services are not regular. He works only if he likes to.30
Faustino Apondar likewise issued a Certification which states:
This is to certify that I am a maker/supplier of finished Rattan Furniture. As such, I have several rattan
furniture workers under me, one of whom is Vicente Coming, the brother of Jesus Coming.
That sometime in 1999, Vicente pleaded to me for a side line job of his brother, Jesus who was already
connected with Allan Mayol. Having vouched for the integrity of his brother and knowing that the job is
temporary in character, I allowed Jesus to work with his brother Vicente. However, the proceeds will be
collected together with his brother Vicente since it was the latter who was working with me. He renders
services to his brother work only after the regular working hours but off and on basis. 31
On the other hand, respondent submitted the affidavit executed by Eleoterio Brigoli, Pedro Brigoli, Napoleon
Coming, Efren Coming and Gil Coming who all attested that respondent was their coworker at SEIRI. Their
affidavit reads:
We, the undersigned, all of legal ages, Filipino, and resident[s] of Cebu, after having been duly sworn to in
accordance with law, depose and say:
That we are former employees of SOUTH EAST RATTAN which is owned by Estan Eslao Agbay;
That we personally know JESUS COMING considering that we worked together in one company SOUTH EAST
RATTANT [sic];
That we together with JESUS COMING are all under the employ of ESTAN ESLAO AGBAY considering that the
latter is the one directly paying us and holds the absolute control of all aspects of our employment;
That it is not true that JESUS COMING is under the employ of one person other than ESTAN ESLAO AGBAY
OF SOUTH EAST RATTAN;
That Jesus Coming is one of the pioneer employees of SOUTH EAST RATTAN and had been employed therein
for almost twenty years;
That we executed this affidavit to attest to the truth of the foregoing facts and to deny any contrary
allegation made by the company against his employment with SOUTH EAST RATTAN. 32
In his decision, Labor Arbiter Carreon found that respondents work as sizing machine operator is usually
necessary and desirable to the rattan furniture business of petitioners and their failure to include respondent
in the employment report to SSS is not conclusive proof that respondent is not their employee. As to the
affidavit of Vicente Coming, Labor Arbiter Carreon did not give weight to his statement that respondent is
not petitioners employee but that of one Faustino Apondar. Labor Arbiter Carreon was not convinced that
Faustino Apondar is an independent contractor who has a contractual relationship with petitioners.
In reversing the Labor Arbiter, the NLRC reasoned as follows:
First complainant alleged that he worked continuously from March 17, 1984 up to January 21, 2002.
Records reveal however that South East (Intl.) Rattan, Inc. was incorporated only last July 18, 1986 (p. 55
records)[.] Moreover, when they started to actually operate in 1987, the company was engaged purely on
buying and exporting rattan furniture hence no manufacturing employees were hired. Furthermore, from
the last quarter of 1989 up to August of 1992, the company suspended operations due to economic reverses
as per Certification issued by the Securities and Exchange Commission (p. 56 records)[.]
Second, for all his insistence that he was a regular employee, complainant failed to present a single payslip,
voucher or a copy of a company payroll showing that he rendered service during the period indicated
therein. x x x
From the above established facts we are inclined to give weight and credence to the Certifications of Allan
Mayol and Faustino Apondar, both suppliers of finished Rattan Furniture (pp. 44243, records). It appears
that complainant first worked with Allan Mayol and later with Faustino Apondar upon the proddings of his
brother Vicente. Vicentes affidavit as to complainants employment history was more detailed and
forthright. x x x
xxxx
In the case at bar, there is likewise substantial evidence to support our findings that complainant was not an
employee of respondents. Thus:
1.
Complainants name does not appear in the list of employees reported to the SSS.
2.
is name does not also appear in the sample payrolls of respondents employees.
3.
The certification of Allan Mayol and Fasutino Apondar[,] supplier of finished rattan products[,] that
complainant had at one time or another worked with them.
4.
The Affidavit of Vicente Coming, complainants full brother[,] attesting that complainant had never
been an employee of respondent. The only connection was that their employer Faustino Apondar
supplies finished rattan products to respondents.33
On the other hand, the CA gave more credence to the declarations of the five former employees of
petitioners that respondent was their coworker in SEIRI. One of said affiants is Vicente Comings own son,
Gil Coming. Vicente averred in his second affidavit that when he confronted his son, the latter explained
that he was merely told by their Pastor to sign the affidavit as it will put an end to the controversy. Vicente
insisted that his son did not know the contents and implications of the document he signed. As to the
absence of respondents name in the payroll and SSS employment report, the CA observed that the payrolls
submitted were only from January 1, 1999 to December 29, 2000 and not the entire period of eighteen
years when respondent claimed he worked for SEIRI. It further noted that the names of the five affiants,
whom petitioners admitted to be their former employees, likewise do not appear in the aforesaid
documents. According to the CA, it is apparent that petitioners maintained a separate payroll for certain
employees or willfully retained a portion of the payroll.
x x x As to the control test, the following facts indubitably reveal that respondents wielded control over the
work performance of petitioner, to wit: (1) they required him to work within the company premises; (2) they
obliged petitioner to report every day of the week and tasked him to usually perform the same job; (3) they
enforced the observance of definite hours of work from 8 oclock in the morning to 5 oclock in the
afternoon; (4) the mode of payment of petitioners salary was under their discretion, at first paying him on
pakiao basis and thereafter, on daily basis; (5) they implemented company rules and regulations; (6)
[Estanislao] Agbay directly paid petitioners salaries and controlled all aspects of his employment and (7)
petitioner rendered work necessary and desirable in the business of the respondent company.34
We affirm the CA.

In Tan v. Lagrama,35 the Court held that the fact that a worker was not reported as an employee to the SSS
is not conclusive proof of the absence of employeremployee relationship. Otherwise, an employer would be
rewarded for his failure or even neglect to perform his obligation. 36
Nor does the fact that respondents name does not appear in the payrolls and pay envelope records
submitted by petitioners negate the existence of employeremployee relationship. For a payroll to be
utilized to disprove the employment of a person, it must contain a true and complete list of the employee. 37
In this case, the exhibits offered by petitioners before the NLRC consisting of copies of payrolls and pay
earnings records are only for the years 1999 and 2000; they do not cover the entire 18year period during
which respondent supposedly worked for SEIRI.
In their comment to the petition filed by respondent in the CA, petitioners emphasized that in the
certifications issued by Mayol and Apondar, it was shown that respondent was employed and working for
them in those years he claimed to be working for SEIRI. However, a reading of the certification by Mayol
would show that while the latter claims to have respondent under his employ in 1997, 1998 and 1999,
respondents services were not regular and that he works only if he wants to. Apondars certification
likewise stated that respondent worked for him since 1999 through his brother Vicente as sideline but only
after regular working hours and off and on basis. Even assuming the truth of the foregoing statements,
these do not foreclose respondents regular or fulltime employment with SEIRI. In effect, petitioners
suggest that respondent was employed by SEIRIs suppliers, Mayol and Apondar but no competent proof was
presented as to the latters status as independent contractors.
In the same comment, petitioners further admitted that the five affiants who attested to respondents
employment with SEIRI are its former workers whom they describe as disgruntled workers of SEIRI with
an axe to grind against petitioners, and that their execution of affidavit in support of respondents claim is
their very way of hitting back the management of SEIRI after disciplinary measures were meted against
them.38 This allegation though was not substantiated by petitioners. Instead, after the CA rendered its
decision reversing the NLRCs ruling, petitioners subsequently changed their theory by denying the
employment relationship with the five affiants in their motion for reconsideration, thus:
x x x Since the five workers were occupying and working on a leased premises of the private respondent,
they were called workers of SEIRI (private respondent). Such admission however, does not connote
employment. For the truth of the matter, all of the five employees of the supplier assigned at the leased
premises of the private respondent. Because of the recommendation of the private respondent with regards
to the disciplinary measures meted on the five workers, they wanted to hit back against the private
respondent. Their motive to implicate private respondent was to vindicate. Definitely, they have an axe to
grind against the private respondent. Mention has to be made that despite the dismissal of these five (5)
witnesses from their service, none of them ever went to the National Labor [Relations] Commission and
invoked their rights, if any, against their employer or at the very least against the respondent. The reason is
obvious, since they knew pretty well that they were not employees of SEIRI but rather under the employ of
Allan Mayol and Faustino Apondar, working on a leased premise of respondent. x x x 39
Petitioners admission that the five affiants were their former employees is binding upon them. While they
claim that respondent was the employee of their suppliers Mayol and Apondar, they did not submit proof that
the latter were indeed independent contractors; clearly, petitioners failed to discharge their burden of
proving their own affirmative allegation.40 There is thus no showing that the five former employees of SEIRI
were motivated by malice, bad faith or any illmotive in executing their affidavit supporting the claims of
respondent.
In any controversy between a laborer and his master, doubts reasonably arising from the evidence are
resolved in favor of the laborer.41
As a regular employee, respondent enjoys the right to security of tenure under Article 279 42 of the Labor
Code and may only be dismissed for a just 43 or authorized44 cause, otherwise the dismissal becomes illegal.
Respondent, whose employment was terminated without valid cause by petitioners, is entitled to
reinstatement without loss of seniority rights and other privileges and to his full back wages, inclusive of
allowances and other benefits or their monetary equivalent, computed from the time his compensation was
withheld from him up to the time of his actual reinstatement. Where reinstatement is no longer viable as an
option, back wages shall be computed from the time of the illegal termination up to the finality of the
decision. Separation pay equivalent to one month salary for every year of service should likewise be
awarded as an alternative in case reinstatement in not possible. 45
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated February 21, 2008 and
Resolution dated February 9, 2009 of the Court of Appeals in CAG.R. No. CEBSP No. 02113 are
hereby AFFIRMED and UPHELD.
Petitioners to pay the costs of suit.
SO ORDERED.
Sereno, C.J., (Chairperson), LeonardoDe Castro, Bersamin, and Reyes, JJ., concur.
FIRST DIVISION
ERNESTO G. YMBONG,
G.R. No. 184885
Petitioner,
Present:
CORONA, C.J.,
Chairperson,
- versus -
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
PERLAS-BERNABE, JJ.
ABS-CBN
BROADCASTING
CORPORATION, VENERANDA
SY AND DANTE LUZON,
Respondents.
Promulgated:
March 7, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before us is a Rule 45 Petition seeking to set aside the August 22,
2007 Decision[1] and September 18, 2008 Resolution [2] of the
Court of Appeals (CA) in CA-G.R. SP No. 86206 declaring petitioner
to have resigned from work and not illegally dismissed.
The antecedent facts follow:
Petitioner Ernesto G. Ymbong started working for ABS-CBN
Broadcasting Corporation (ABS-CBN) in 1993 at its regional station
in Cebu as a television talent, co-anchoringHoy Gising and TV
Patrol Cebu. His stint in ABS-CBN later extended to radio when
ABS-CBN Cebu launched its AM station DYAB in 1995 where he
worked as drama and voice talent, spinner, scriptwriter and public
affairs program anchor.
Like Ymbong, Leandro Patalinghug also worked for ABS-CBN Cebu.
Starting 1995, he worked as talent, director and scriptwriter for
various radio programs aired over DYAB.
On January 1, 1996, the ABS-CBN Head Office in Manila issued
Policy No. HR-ER-016 or the Policy on Employees Seeking Public
Office. The pertinent portions read:
1.
Any employee who intends to run for any public

office position, must file his/her letter of
resignation, at least thirty (30) days prior to the
official filing of the certificate of candidacy either for
national or local election.
xxxx
3. Further, any employee who intends to join a
political group/party or even with no political
affiliation but who intends to openly and
aggressively campaign for a candidate or
group
of
candidates (e.g.
publicly
speaking/endorsing candidate, recruiting campaign
workers, etc.) must file a request for leave of
absence subject to managements approval. For
this particular reason, the employee should file the
leave request at least thirty (30) days prior to the
start of the planned leave period.
x x x x[3] [Emphasis and underscoring supplied.]
Because of the impending May 1998 elections and based on his

immediate recollection of the policy at that time, Dante Luzon,
Assistant Station Manager of DYAB issued the following
memorandum:
TO : ALL CONCERNED
FROM : DANTE LUZON
DATE : MARCH 25, 1998
SUBJECT : AS STATED
Please be informed that per company policy, any
employee/talent who wants to run for any position
in the coming election will have to file a leave of
absence the moment he/she files his/her certificate
of candidacy.
The services rendered by the concerned employee/talent
to this company will then be temporarily suspended for
the entire campaign/election period.
For strict
supplied.]
compliance.[4] [Emphasis
and
underscoring
Luzon, however, admitted that upon double-checking of the exact

text of the policy and subsequent confirmation with the ABS-CBN
Head Office, he saw that the policy actually required suspension
for those who intend to campaign for a political party or candidate
and resignation for those who will actually run in the elections. [5]
After the issuance of the March 25, 1998 Memorandum, Ymbong
got in touch with Luzon. Luzon claims that Ymbong approached
him and told him that he would leave radio for a couple of months
because he will campaign for the administration ticket. It was only
after the elections that they found out that Ymbong actually ran
for public office himself at the eleventh hour. Ymbong, on the
other hand, claims that in accordance with the March 25, 1998
Memorandum, he informed Luzon through a letter that he would
take a few months leave of absence from March 8, 1998 to May
18, 1998 since he was running for councilor of Lapu-Lapu City.
As regards Patalinghug, Patalinghug approached Luzon and
advised
him
that
he
will
run
as
councilor
for
Naga, Cebu. According to Luzon, he clarified to Patalinghug that
he will be considered resigned and not just on leave once he files
a certificate of candidacy. Thus, Patalinghug wrote Luzon the
following letter on April 13, 1998:
Dear Mr. Luzon,
Im submitting to you my letter of resignation as your
Drama Production Chief and Talent due to your companys
policy that every person connected to ABS-CBN that
should seek an elected position in the government will be
forced to resigned (sic) from his position. So herewith Im
submitting my resignation with a hard heart. But Im still
hoping to be connected again with your prestigious
company after the election[s] should you feel that Im still

an asset to your drama production department. Im
looking forward to that day and Im very happy and proud
that I have served for two and a half years the most
stable and the most prestigious Radio and TV Network in
the Philippines.
As a friend[,] wish me luck and Pray for me. Thank you.
Very Truly Yours,
(Sgd.)
Leandro Boy Patalinghug[6]
Unfortunately, both Ymbong and Patalinghug lost in the May 1998

elections.
Later, Ymbong and Patalinghug both tried to come back to ABSCBN Cebu. According to Luzon, he informed them that they
cannot work there anymore because of company policy. This was
stressed even in subsequent meetings and they were told that the
company was not allowing any exceptions. ABS-CBN, however,
agreed out of pure liberality to give them a chance to wind up
their participation in the radio drama, Nagbabagang Langit, since
it was rating well and to avoid an abrupt ending. The agreed
winding-up, however, dragged on for so long prompting Luzon to
issue to Ymbong the following memorandum dated September
14, 1998:
TO : NESTOR YMBONG
FROM : DANTE LUZON
SUBJECT : AS STATED
DATE : 14 SEPT. 1998

Please be reminded that your services as drama talent
had already been automatically terminated when you ran
for a local government position last election.
The Management however gave you more than enough
time to end your drama participation and other
involvement with the drama department.
It has been decided therefore that all your drama
participation shall be terminated effective immediately.
However, your involvement as drama spinner/narrator of
the drama NAGBA[BA]GANG LANGIT continues until its
writer/director Mr. Leandro Patalinghug wraps it up one
week upon receipt of a separate memo issued to him.[7]
Ymbong in contrast contended that after the expiration of his

leave of absence, he reported back to work as a regular talent
and in fact continued to receive his salary. OnSeptember 14,
1998, he received a memorandum stating that his services are
being terminated immediately, much to his surprise. Thus, he
filed an illegal dismissal complaint[8]against ABS-CBN, Luzon and
DYAB Station Manager Veneranda Sy. He argued that the ground
cited by ABS-CBN for his dismissal was not among those
enumerated in theLabor Code, as amended. And even granting
without admitting the existence of the company policy supposed
to have been violated, Ymbong averred that it was necessary that
the company policy meet certain requirements before willful
disobedience of the policy may constitute a just cause for
termination. Ymbong further argued that the company policy
violates his constitutional right to suffrage. [9]
Patalinghug likewise filed an illegal dismissal complaint [10] against
ABS-CBN.
ABS-CBN prayed for the dismissal of the complaints arguing that

there is no employer-employee relationship between the company
and Ymbong and Patalinghug. ABS-CBN contended that they are
not employees but talents as evidenced by their talent
contracts. However, notwithstanding their status, ABS-CBN has a
standing policy on persons connected with the company
whenever they will run for public office. [11]
On July 14, 1999, the Labor Arbiter rendered a decision [12] finding
the dismissal of Ymbong and Patalinghug illegal, thus:
WHEREFORE, in the light of the foregoing, judgment is
rendered finding the dismissal of the two complainants
illegal. An order is issued directing respondent ABS[-]CBN
to immediately reinstate complainants to their former
positions without loss of seniority rights plus the payment
of backwages in the amount of P200,000.00 to each
complainant.
All other claims are dismissed.
SO ORDERED.[13]
The Labor Arbiter found that there exists an employer-employee

relationship between ABS-CBN and Ymbong and Patalinghug
considering the stipulations in their appointment letters/talent
contracts. The Labor Arbiter noted particularly that the
appointment letters/talent contracts imposed conditions in the
performance of their work, specifically on attendance and
punctuality, which effectively placed them under the control of
ABS-CBN. The Labor Arbiter likewise ruled that although the
subject company policy is reasonable and not contrary to law, the
same was not made known to Ymbong and Patalinghug and in
fact was superseded by another one embodied in the March 25,
1998 Memorandum issued by Luzon. Thus, there is no valid or
authorized cause in terminating Ymbong and Patalinghug from

their employment.
In its memorandum of appeal[14] before the National Labor
Relations Commission (NLRC), ABS-CBN contended that the Labor
Arbiter has no jurisdiction over the case because there is no
employer-employee
relationship
between
the
company
and Ymbong and Patalinghug, and that Sy and Luzon mistakenly
assumed that Ymbong and Patalinghug could just file a leave of
absence since they are only talents and not employees. In its
Supplemental Appeal,[15] ABS-CBN insisted that Ymbong and
Patalinghug were engaged as radio talents for DYAB dramas and
personality programs and their contract is one between a selfemployed contractor and the hiring party which is a standard
practice in the broadcasting industry. It also argued that the Labor
Arbiter should not have made much of the provisions on Ymbongs
attendance and punctuality since such requirement is a dictate of
the programming of the station, the slating of shows at regular
time slots, and availability of recording studios not an attempt to
exercise control over the manner of his performance of the
contracted anchor work within his scheduled spot on air. As for
the pronouncement that the company policy has already been
superseded by the March 25, 1998 Memorandum issued by Luzon,
the latter already clarified that it was the very policy he sought to
enforce. This matter was relayed by Luzon to Patalinghug when
the latter disclosed his plans to join the 1998 elections while
Ymbong only informed the company that he was campaigning for
the administration ticket and the company had no inkling that he
will actually run until the issue was already moot and
academic. ABS-CBN further contended that Ymbong and
Patalinghugs reinstatement is legally and physically impossible as
the talent positions they vacated no longer exist. Neither is there
basis for the award of back wages since they were not earning a
monthly salary but paid talent fees on a per production/per script
basis. Attached to the Supplemental Appeal is a Sworn
Statement[16] of Luzon.
On March 8, 2004, the NLRC rendered a decision [17] modifying the

labor arbiters decision. The fallo of the NLRC decision reads:
WHEREFORE, premises considered, the decision of
Labor Arbiter Nicasio C. Aninon dated 14 July 1999 is
MODIFIED, to wit:
Ordering
respondent
ABS-CBN
to
reinstate
complainant Ernesto G. Ymbong and to pay his full
backwages computed from 15 September 1998 up to the
time of his actual reinstatement.
SO ORDERED.[18]
The NLRC dismissed ABS-CBNs Supplemental Appeal for

being filed out of time. The NLRC ruled that to entertain the same
would be to allow the parties to submit their appeal on piecemeal
basis, which is contrary to the agencys duty to facilitate speedy
disposition of cases. The NLRC also held that ABS-CBN wielded the
power of control over Ymbong and Patalinghug, thereby proving
the existence of an employer-employee relationship between
them.
As to the issue of whether they were illegally dismissed, the
NLRC treated their cases differently. In the case of Patalinghug, it
found that he voluntarily resigned from employment on April 21,
1998 when he submitted his resignation letter. The NLRC noted
that although the tenor of the resignation letter is somewhat
involuntary, he knew that it is the policy of the company that
every person connected therewith should resign from his
employment if he seeks an elected position in the government. As
to Ymbong, however, the NLRC ruled otherwise. It ruled that the
March 25, 1998 Memorandum merely states that an employee
who seeks any elected position in the government will only merit
the temporary suspension of his services. It held that under the
principle of social justice, the March 25, 1998 Memorandum shall
prevail and ABS-CBN is estopped from enforcing the September

14, 1998 memorandum issued to Ymbong stating that his services
had been automatically terminated when he ran for an elective
position.
ABS-CBN moved to reconsider the NLRC decision, but the same
was denied in a Resolution dated June 21, 2004.[19]
Imputing grave abuse of discretion on the NLRC, ABS-CBN filed a
petition for certiorari[20] before the CA alleging that:
I.
RESPONDENT NLRC COMMITTED A GRAVE ABUSE OF
DISCRETION AND SERIOUSLY MISAPPRECIATED THE FACTS
IN NOT HOLDING THAT RESPONDENT YMBONG IS A
FREELANCE RADIO TALENT AND MEDIA PRACTITIONERNOT
A REGULAR EMPLOYEE OF PETITIONERTO WHOM CERTAIN
PRODUCTION WORK HAD BEEN OUTSOURCED BY ABSCBN CEBU UNDER AN INDEPENDENT CONTRACTORSHIP
SITUATION, THUS RENDERING THE LABOR COURTS
WITHOUT JURISDICTION OVER THE CASE IN THE ABSENCE
OF EMPLOYMENT RELATIONS BETWEEN THE PARTIES.
II.
DISCRETION IN DECLARING RESPONDENT YMBONG TO BE
A REGULAR EMPLOYEE OF PETITIONER AS TO CREATE A
CONTRACTUAL EMPLOYMENT RELATION BETWEEN THEM
WHEN NONE EXISTS OR HAD BEEN AGREED UPON OR
OTHERWISE INTENDED BY THE PARTIES.
III.
EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION

TO EXIST FOR THE SAKE OF ARGUMENT, RESPONDENT
NLRC IN ANY CASE COMMITTED A GRAVE ABUSE OF
DISCRETION IN NOT SIMILARLY UPHOLDING AND APPLYING
COMPANY POLICY NO. HR-ER-016 IN THE CASE OF
RESPONDENT YMBONG AND DEEMING HIM AS RESIGNED
AND DISQUALIFIED FROM FURTHER ENGAGEMENT AS A
RADIO TALENT IN ABS-CBN CEBU AS A CONSEQUENCE OF
HIS CANDIDACY IN THE 1998 ELECTIONS, AS
RESPONDENT NLRC HAD DONE IN THE CASE OF
PATALINGHUG.
IV.
DISCRETION AND DENIED DUE PROCESS TO PETITIONER
IN REFUSING TO CONSIDER ITS SUPPLEMENTAL APPEAL,
DATED OCTOBER 18, 1999, FOR BEING FILED OUT OF
TIME CONSIDERING THAT THE FILING OF SUCH A
PLEADING IS NOT IN ANY CASE PROSCRIBED AND
RESPONDENT NLRC IS AUTHORIZED TO CONSIDER
ADDITIONAL
EVIDENCE
ON
APPEAL;
MOREOVER,
TECHNICAL RULES OF EVIDENCE DO NOT APPLY IN LABOR
CASES.
V.
DISCRETION
IN
GRANTING
THE
RELIEF
OF
REINSTATEMENT AND BACKWAGES TO RESPONDENT
YMBONG SINCE HE NEVER OCCUPIED ANY REGULAR
POSITION IN PETITIONER FROM WHICH HE COULD HAVE
BEEN ILLEGALLY DISMISSED, NOR ARE ANY OF THE RADIO
PRODUCTIONS IN WHICH HE HAD DONE TALENT WORK
FOR PETITIONER STILL EXISTING. INDEED, THERE IS NO

BASIS WHATSOEVER FOR THE AWARD OF BACKWAGES TO
RESPONDENT YMBONG IN THE AMOUNT OF P200,000.00
CONSIDERING
THAT,
AS
SHOWN
BY
THE
UNCONTROVERTED EVIDENCE, HE WAS NOT EARNING A
MONTHLY SALARY OF P20,000.00, AS HE FALSELY CLAIMS,
BUT WAS PAID TALENT FEES ON A PER PRODUCTION/PER
SCRIPT BASIS WHICH AVERAGED LESS THAN P10,000.00
PER MONTH IN TALENT FEES ALL IN ALL.[21]
On August 22, 2007, the CA rendered the assailed decision

reversing and setting aside the March 8, 2004 Decision and June
21, 2004 Resolution of the NLRC. The CA declared Ymbong
resigned from employment and not to have been illegally
dismissed. The award of full back wages in his favor was deleted
accordingly.
The CA ruled that ABS-CBN is estopped from claiming that
Ymbong was not its employee after applying the provisions of
Policy No. HR-ER-016 to him. It noted that said policy is entitled
Policy on Employees Seeking Public Office and the guidelines
contained therein specifically pertain to employees and did not
even mention talents or independent contractors. It held that it is
a complete turnaround on ABS-CBNs part to later argue that
Ymbong is only a radio talent or independent contractor and not
its employee. By applying the subject company policy on Ymbong,
ABS-CBN had explicitly recognized him to be an employee and not
merely an independent contractor.
The CA likewise held that the subject company policy is the
controlling guideline and therefore, Ymbong should be considered
resigned from ABS-CBN. While Luzon has policy-making power as
assistant radio manager, he had no authority to issue a
memorandum that had the effect of repealing or superseding a
subsisting policy. Contrary to the findings of the Labor Arbiter, the
subject company policy was effective at that time and continues
to be valid and subsisting up to the present. The CA cited

Patalinghugs resignation letter to buttress this conclusion, noting
that Patalinghug openly admitted in his letter that his resignation
was in line with the said company policy. Since ABS-CBN applied
Policy No. HR-ER-016 to Patalinghug, there is no reason not to
apply the same regulation to Ymbong who was on a similar
situation as the former. Thus, the CA found that the NLRC
overstepped its area of discretion to a point of grave abuse in
declaring Ymbong to have been illegally terminated. The CA
concluded that there is no illegal dismissal to speak of in the
instant case as Ymbong is considered resigned when he ran for an
elective post pursuant to the subject company policy.
Hence, this petition.
Petitioner argues that the CA gravely erred: (1) in upholding Policy
No. HR-ER-016; (2) in upholding the validity of the termination of
Ymbongs services; and (3) when it reversed the decision of the
NLRC 4th Division of Cebu City which affirmed the decision of
Labor Arbiter Nicasio C. Anion.[22]
Ymbong argues that the subject company policy is a clear
interference and a gross violation of an employees right to
suffrage. He is surprised why it was easy for the CA to rule
that Luzons memorandum ran counter to an existing policy while
on the other end, it did not see that it was in conflict with the
constitutional right to suffrage. He also points out that the
issuance of the March 25, 1998 Memorandum was precisely an
exercise of the management power to which an employee like him
must respect; otherwise, he will be sanctioned for disobedience or
worse, even terminated. He was not in a position to know which
between the two issuances was correct and as far as he is
concerned, the March 25, 1998 Memorandum superseded the
subject company policy. Moreover, ABS-CBN cannot disown acts of
its officers most especially since it prejudiced his property rights.
[23]
As to the validity of his dismissal, Ymbong contends that the

ground relied upon by ABS-CBN is not among the just and
authorized causes provided in the Labor Code, as amended. And
even assuming the subject company policy passes the test of
validity under the pretext of the right of the management to
discipline and terminate its employees, the exercise of such right
is not without bounds. Ymbong avers that his automatic
termination was a blatant disregard of his right to due process. He
was never asked to explain why he did not tender his resignation
before he ran for public office as mandated by the subject
company policy.[24]
Ymbong likewise asseverates that both the Labor Arbiter and the
NLRC were consistent in their findings that he was illegally
dismissed. It is settled that factual findings of labor administrative
officials, if supported by substantial evidence, are accorded not
only great respect but even finality.[25]
ABS-CBN, for its part, counters that the validity of policies such as
Policy No. HR-ER-016 has long been upheld by this Court which
has ruled that a media company has a right to impose a policy
providing that employees who file their certificates of candidacy
in any election shall be considered resigned. [26] Moreover, case
law has upheld the validity of the exercise of management
prerogatives even if they appear to limit the rights of employees
as long as there is no showing that management prerogatives
were exercised in a manner contrary to law. [27] ABS-CBN contends
that being the largest media and entertainment company in the
country, its reputation stems not only from its ability to deliver
quality entertainment programs but also because of neutrality
and impartiality in delivering news. [28]
ABS-CBN further argues that nothing in the company policy
prohibits its employees from either accepting a public appointive
position or from running for public office. Thus, it cannot be
considered as violative of the constitutional right of suffrage.
Moreover, the Supreme Court has recognized the employers right

to enforce occupational qualifications as long as the employer is
able to show the existence of a reasonable business necessity in
imposing the questioned policy. Here, Policy No. HR-ER-016 itself
states that it was issued to protect the company from any public
misconceptions and [t]o preserve its objectivity, neutrality and
credibility. Thus, it cannot be denied that it is reasonable under
the circumstances.[29]
ABS-CBN likewise opposes Ymbongs claim that he was
terminated. ABS-CBN argues that on the contrary, Ymbongs
unilateral act of filing his certificate of candidacy is an overt act
tantamount to voluntary resignation on his part by virtue of the
clear mandate found in Policy No. HR-ER-016. Ymbong, however,
failed to file his resignation and in fact misled his superiors by
making them believe that he was going on leave to campaign for
the administration candidates but in fact, he actually ran for
councilor. He also claims to have fully apprised Luzon through a
letter of his intention to run for public office, but he failed to
adduce a copy of the same.[30]
As to Ymbongs argument that the CA should not have reversed
the findings of the Labor Arbiter and the NLRC, ABS-CBN
asseverates that the CA is not precluded from making its own
findings most especially if upon its own review of the case, it has
been revealed that the NLRC, in affirming the findings of the
Labor Arbiter, committed grave abuse of discretion amounting to
lack or excess of jurisdiction when it failed to apply the subject
company policy in Ymbongs case when it readily applied the same
to Patalinghug.[31]
Essentially, the issues to be resolved in the instant petition are:
(1) whether Policy No. HR-ER-016 is valid; (2) whether the March
25, 1998 Memorandum issued by Luzonsuperseded Policy No. HRER-016; and (3) whether Ymbong, by seeking an elective post, is
deemed to have resigned and not dismissed by ABS-CBN.
Policy No. HR-ER-016 is valid.

This is not the first time that this Court has dealt with a policy
similar to Policy No. HR-ER-016. In the case of Manila
Broadcasting Company v. NLRC,[32] this Court ruled:
What is involved in this case is an unwritten company policy
considering any employee who files a certificate of candidacy for any
elective or local office as resigned from the company.Although 11(b) of
R.A. No. 6646 does not require mass media commentators and
announcers such as private respondent to resign from their radio or TV
stations but only to go on leave for the duration of the campaign period,
we think that the company may nevertheless validly require them to
resign as a matter of policy. In this case, the policy is justified on the
following grounds:
Working for the government and the company at the same
time is clearly disadvantageous and prejudicial to the rights
and interest not only of the company but the public as well.
In the event an employee wins in an election, he cannot
fully serve, as he is expected to do, the interest of his
employer. The employee has to serve two (2) employers,
obviously detrimental to the interest of both the
government and the private employer.
In the event the employee loses in the election, the
impartiality and cold neutrality of an employee as broadcast
personality is suspect, thus readily eroding and adversely
affecting the confidence and trust of the listening public to
employers station.[33]
ABS-CBN, like Manila Broadcasting Company, also had a valid

justification for Policy No. HR-ER-016. Its rationale is embodied in
the policy itself, to wit:
Rationale:
ABS-CBN BROADCASTING CORPORATION strongly

believes that it is to the best interest of the company to
continuously remain apolitical. While it encourages
and supports its employees to have greater
political awareness and for them to exercise their
right to suffrage, the company, however, prefers to
remain politically independent and unattached to
any political individual or entity.
Therefore, employees who [intend] to run for public
office or accept political appointment should resign
from their positions, in order to protect the
company from any public misconceptions. To
preserve its objectivity, neutrality and credibility,
the company reiterates the following policy guidelines for
strict implementation.
x x x x[34] [Emphasis supplied.]
We have consistently held that so long as a companys

management prerogatives are exercised in good faith for the
advancement of the employers interest and not for the purpose of
defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold
them.[35] In the instant case, ABS-CBN validly justified the
implementation of Policy No. HR-ER-016. It is well within its rights
to ensure that it maintains its objectivity and credibility and
freeing itself from any appearance of impartiality so that the
confidence of the viewing and listening public in it will not be in
any way eroded. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to
exercise what are clearly management prerogatives. The free will
of management to conduct its own business affairs to achieve its
purpose cannot be denied.[36]
It is worth noting that such exercise of management prerogative

has earned a stamp of approval from no less than our Congress
itself when on February 12, 2001, it enacted Republic Act No.
9006, otherwise known as the Fair Election Act. Section 6.6
thereof reads:
6.6. Any mass media columnist, commentator,
announcer, reporter, on-air correspondent or
personality who is a candidate for any elective
public office or is a campaign volunteer for or
employed or retained in any capacity by any
candidate or political party shall be deemed
resigned, if so required by their employer, or shall
take a leave of absence from his/her work as such during
the
campaign
period: Provided, That
any
media
practitioner who is an official of a political party or a
member of the campaign staff of a candidate or political
party shall not use his/her time or space to favor any
candidate or political party. [Emphasis and underscoring
supplied.]
Policy No. HR-ER-016 was

not superseded by the March
25, 1998 Memorandum
The CA correctly ruled that though Luzon, as Assistant Station
Manager for Radio of ABS-CBN, has policy-making powers in
relation to his principal task of administering the networks radio
station in the Cebu region, the exercise of such power should be
in accord with the general rules and regulations imposed by the
ABS-CBN Head Office to its employees. Clearly, the March 25,
1998 Memorandum
issued
by Luzon which
only
requires
employees to go on leave if they intend to run for any elective
position is in absolute contradiction with Policy No. HR-ER-016
issued by the ABS-CBN Head Office in Manila which requires the
resignation, not only the filing of a leave of absence, of any

employee who intends to run for public office. Having been issued
beyond the scope of his authority, the March 25, 1998
Memorandum is therefore void and did not supersede Policy No.
HR-ER-016.
Also worth noting is that Luzon in his Sworn Statement
admitted the inaccuracy of his recollection of the company policy
when he issued the March 25, 1998 Memorandum and stated
therein that upon double-checking of the exact text of the policy
statement and subsequent confirmation with the ABS-CBN Head
Office in Manila, he learned that the policy required resignation for
those who will actually run in elections because the company
wanted to maintain its independence. Since the officer who
himself issued the subject memorandum acknowledged that it is
not in harmony with the Policy issued by the upper management,
there is no reason for it to be a source of right for Ymbong.
Ymbong is deemed resigned
when he ran for councilor.
As Policy No. HR-ER-016 is the subsisting company policy and
not Luzons March 25, 1998 Memorandum, Ymbong is deemed
resigned when he ran for councilor.
We find no merit in Ymbongs argument that [his] automatic
termination x x x was a blatant [disregard] of [his] right to due
process as he was never asked to explain why he did not tender
his resignation before he ran for public office as mandated by [the
subject company policy].[37] Ymbongs overt act of running for
councilor of Lapu-Lapu City is tantamount to resignation on his
part. He was separated from ABS-CBN not because he was
dismissed but because he resigned. Since there was no
termination to speak of, the requirement of due process in
dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is
not duty-bound to ask him to explain why he did not tender his
resignation before he ran for public office as mandated by the
subject company policy.
In addition, we do not subscribe to Ymbongs claim that he was
not in a position to know which of the two issuances was
correct. Ymbong most likely than not, is fully aware that the
subsisting policy is Policy No. HR-ER-016 and not the March 25,
1998 Memorandum and it was for this reason that, as stated by
Luzon in his Sworn Statement, he only told the latter that he will
only campaign for the administration ticket and not actually run
for
an
elective
post. Ymbong
claims
he
had
fully
apprised Luzon by letter of his plan to run and even filed a leave
of absence but records are bereft of any proof of said
claim. Ymbong claims that the letter stating his intention to go on
leave to run in the election is attached to his Position Paper as
Annex A, a perusal of said pleading attached to his petition before
this Court, however, show that Annex A was not his letter to
Luzon but the September 14, 1998 Memorandum informing
Ymbong that his services had been automatically terminated
when he ran for a local government position.
Moreover, as pointed out by ABS-CBN, had Ymbong been truthful
to his superiors, they would have been able to clarify to him the
prevailing company policy and inform him of the consequences of
his decision in case he decides to run, as Luzon did in
Patalinghugs case.
WHEREFORE, the petition
is DENIED for lack of merit.
With costs against petitioner.
SO ORDERED.
for
review
on
certiorari
MARTIN S. VILLARAMA, JR.

Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson
TERESITA J. LEONARDO-DE
CASTRO
LUCAS P. BERSAMIN
Associate Justice
Associate Justice
ESTELA M. PERLAS-BERNABE
Associate Justice
SUPREME COURT
Manila
EN BANC
PEOPLES BROADCASTING
SERVICE (BOMBO RADYO
PHILS., INC.),
Petitioner,
- versus -
THE SECRETARY OF THE

DEPARTMENT OF LABOR
AND EMPLOYMENT, THE
REGIONAL DIRECTOR,
DOLE REGION VII, and
JANDELEON JUEZAN,
Respondents.
G.R. No. 179652

Present:
CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,*
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.
Promulgated:
March 6, 2012
x-----------------------------------------------------------------------------------------x
R E S O LUTIO N
VELASCO, JR., J.:
In a Petition for Certiorari under Rule 65, petitioner Peoples Broadcasting Service,
Inc. (Bombo Radyo Phils., Inc.) questioned the Decision and Resolution of the
Court of Appeals (CA) dated October 26, 2006 and June 26, 2007, respectively, in
C.A. G.R. CEB-SP No. 00855.
Private respondent Jandeleon Juezan filed a complaint against petitioner

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

Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice
See: Concurring Opinion (In the Result)
ARTURO D. BRION DIOSDADO M. PERALTA
(On official leave)

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO
Supreme Court
Manila
THIRD DIVISION
BITOY JAVIER
(DANILO P. JAVIER),
Petitioner,
- versus -
G.R. No. 192558

Present:
CARPIO, J.,
PERALTA, Acting Chairperson,
ABAD,
PEREZ,*** and
MENDOZA, JJ.
FLY ACE CORPORATION/

FLORDELYN CASTILLO,
Respondents.
Promulgated:
February 15, 2012
x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
This is a petition under Rule 45 of the Rules of Civil Procedure assailing the
March 18, 2010 Decision[1] of the Court of Appeals (CA) and its June 7, 2010
Resolution,[2]in CA-G.R. SP No. 109975, which reversed the May 28, 2009
Decision[3] of the National Labor Relations Commission (NLRC) in the case
entitled Bitoy Javier v. Fly Ace/Flordelyn Castillo,[4] holding that petitioner Bitoy
Javier (Javier) was illegally dismissed from employment and ordering Fly Ace
Corporation (Fly Ace) to pay backwages and separation pay in lieu of
reinstatement.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the NLRC for
underpayment of salaries and other labor standard benefits. He alleged that he was
an employee of Fly Ace since September 2007, performing various tasks at the
respondents warehouse such as cleaning and arranging the canned items before
their delivery to certain locations, except in instances when he would be ordered to

accompany the companys delivery vehicles, as pahinante; that he reported for
work from Monday to Saturday from 7:00 oclock in the morning to 5:00 oclock in
the afternoon; that during his employment, he was not issued an identification card
and payslips by the company; that on May 6, 2008, he reported for work but he
was no longer allowed to enter the company premises by the security guard upon
the instruction of Ruben Ong (Mr. Ong), his superior;[5] that after several minutes
of begging to the guard to allow him to enter, he saw Ong whom he approached
and asked why he was being barred from entering the premises; that Ong replied
by saying,Tanungin mo anak mo; [6] that he then went home and discussed the
matter with his family; that he discovered that Ong had been courting his daughter
Annalyn after the two met at a fiesta celebration in Malabon City; that Annalyn
tried to talk to Ong and convince him to spare her father from trouble but he
refused to accede; that thereafter, Javier was terminated from his employment
without notice; and that he was neither given the opportunity to refute the cause/s
of his dismissal from work.
To support his allegations, Javier presented an affidavit of one Bengie
Valenzuela who alleged that Javier was a stevedore or pahinante of Fly Ace from
September 2007 to January 2008. The said affidavit was subscribed before the
Labor Arbiter (LA).[7]
For its part, Fly Ace averred that it was engaged in the business of
importation and sales of groceries. Sometime in December 2007, Javier was
contracted by its employee, Mr. Ong, as extra helper on a pakyaw basis at an
agreed rate of 300.00 per trip, which was later increased to 325.00 in January
2008. Mr. Ong contracted Javier roughly 5 to 6 times only in a month whenever the
vehicle of its contracted hauler, Milmar Hauling Services, was not
available. On April 30, 2008, Fly Ace no longer needed the services of
Javier. Denying that he was their employee, Fly Ace insisted that there was no
illegal dismissal.[8] Fly Ace submitted a copy of its agreement with Milmar Hauling
Services and copies of acknowledgment receipts evidencing payment to Javier for
his contracted services bearing the words, daily manpower (pakyaw/piece rate
pay) and the latters signatures/initials.
Ruling of the Labor Arbiter
On November 28, 2008, the LA dismissed the complaint for lack of merit on
the ground that Javier failed to present proof that he was a regular employee of Fly
Ace. He wrote:
Complainant has no employee ID showing his employment with the

Respondent nor any document showing that he received the benefits
accorded to regular employees of the Respondents. His contention that
Respondent failed to give him said ID and payslips implies that indeed he
was not a regular employee of Fly Ace considering that complainant was a
helper and that Respondent company has contracted a regular trucking
for the delivery of its products.
Respondent Fly Ace is not engaged in trucking business but in the
importation and sales of groceries. Since there is a regular hauler to
deliver its products, we give credence to Respondents claim that
complainant was contracted on pakiao basis.
As to the claim for underpayment of salaries, the payroll presented
by the Respondents showing salaries of workers on pakiao basis has
evidentiary weight because although the signature of the complainant
appearing thereon are not uniform, they appeared to be his true signature.
xxxx
Hence, as complainant received the rightful salary as shown by the
above described payrolls, Respondents are not liable for salary
differentials. [9]
Ruling of the NLRC
On appeal with the NLRC, Javier was favored. It ruled that the LA skirted
the argument of Javier and immediately concluded that he was not a regular
employee simply because he failed to present proof. It was of the view that
a pakyaw-basis arrangement did not preclude the existence of employer-employee
relationship. Payment by result x x xis a method of compensation and does not
define the essence of the relation. It is a mere method of computing compensation,
not a basis for determining the existence or absence of an employer-employee
relationship.[10] The NLRC further averred that it did not follow that a worker was a
job contractor and not an employee, just because the work he was doing was not
directly related to the employers trade or business or the work may be considered
as extra helper as in this case; and that the relationship of an employer and an
employee was determined by law and the same would prevail whatever the parties
may call it. In this case, the NLRC held that substantial evidence was sufficient
basis for judgment on the existence of the employer-employee relationship. Javier
was a regular employee of Fly Ace because there was reasonable connection
between the particular activity performed by the employee (as a pahinante) in
relation to the usual business or trade of the employer (importation, sales and
delivery of groceries). He may not be considered as an independent contractor
because he could not exercise any judgment in the delivery of company
products. He was only engaged as a helper.
Finding Javier to be a regular employee, the NLRC ruled that he was entitled
to a security of tenure. For failing to present proof of a valid cause for his
termination, Fly Ace was found to be liable for illegal dismissal of Javier who was
likewise entitled to backwages and separation pay in lieu of reinstatement. The
NLRC thus ordered:
WHEREFORE, premises considered, complainants appeal is
partially GRANTED. The assailed Decision of the labor arbiter is
VACATED and a new one is hereby entered holding respondent FLY ACE
CORPORATION guilty of illegal dismissal and non-payment of 13 th month
pay. Consequently, it is hereby ordered to pay complainant DANILO Bitoy
JAVIER the following:
1. Backwages -45,770.83
2. Separation pay, in lieu of reinstatement - 8,450.00
3. Unpaid 13th month pay (proportionate) - 5,633.33
TOTAL -59,854.16
All other claims are dismissed for lack of merit.
SO ORDERED.[11]
Ruling of the Court of Appeals

On March 18, 2010, the CA annulled the NLRC findings that Javier was
indeed a former employee of Fly Ace and reinstated the dismissal of Javiers
complaint as ordered by the LA. The CA exercised its authority to make its own
factual determination anent the issue of the existence of an employer-employee
relationship between the parties.According to the CA:
xxx
In an illegal dismissal case the onus probandi rests on the employer
to prove that its dismissal was for a valid cause. However, before a case for
illegal dismissal can prosper, an employer-employee relationship must
first be established. x x x it is incumbent upon private respondent to prove
the employee-employer relationship by substantial evidence.
xxx
It is incumbent upon private respondent to prove, by substantial
evidence, that he is an employee of petitioners, but he failed to discharge
his burden. The non-issuance of a company-issued identification card to
private respondent supports petitioners contention that private
respondent was not its employee.[12]
The CA likewise added that Javiers failure to present salary vouchers, payslips, or
other pieces of evidence to bolster his contention, pointed to the inescapable
conclusion that he was not an employee of Fly Ace. Further, it found that Javiers
work was not necessary and desirable to the business or trade of the company, as it
was only when there were scheduled deliveries, which a regular hauling service
could not deliver, that Fly Ace would contract the services of Javier as an extra
helper. Lastly, the CA declared that the facts alleged by Javier did not pass the
control test.
He contracted work outside the company premises; he was not required to observe
definite hours of work; he was not required to report daily; and he was free to
accept other work elsewhere as there was no exclusivity of his contracted service
to the company, the same being co-terminous with the trip only.[13] Since no
substantial evidence was presented to establish an employer-employee
relationship, the case for illegal dismissal could not prosper.
The petitioners moved for reconsideration, but to no avail.
Hence, this appeal anchored on the following grounds:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER WAS NOT A REGULAR
EMPLOYEE OF FLY ACE.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PETITIONER IS NOT ENTITLED TO HIS
MONETARY CLAIMS.[14]
The petitioner contends that other than its bare allegations and self-serving
affidavits of the other employees, Fly Ace has nothing to substantiate its claim that
Javier was engaged on a pakyaw basis. Assuming that Javier was indeed hired on
a pakyaw basis, it does not preclude his regular employment with the company.
Even the acknowledgment receipts bearing his signature and the confirming receipt
of his salaries will not show the true nature of his employment as they do not
reflect the necessary details of the commissioned task. Besides, Javiers tasks
as pahinante are related, necessary and desirable to the line of business by Fly Ace
which is engaged in the importation and sale of grocery items. On days when there
were no scheduled deliveries, he worked in petitioners warehouse, arranging and
cleaning the stored cans for delivery to clients. [15] More importantly, Javier was
subject to the control and supervision of the company, as he was made to report to
the office from Monday to Saturday, from 7:00 oclock in the morning until 5:00
oclock in the afternoon. The list of deliverable goods, together with the
corresponding clients and their respective purchases and addresses, would
necessarily have been prepared by Fly Ace. Clearly, he was subjected to
compliance with company rules and regulations as regards working hours, delivery
schedule and output, and his other duties in the warehouse.[16]
The petitioner chiefly relied on Chavez v. NLRC,[17] where the Court ruled
that payment to a worker on a per trip basis is not significant because this is merely
a method of computing compensation and not a basis for determining the existence
of employer-employee relationship. Javier likewise invokes the rule that, in
controversies between a laborer and his master, x x x doubts reasonably arising
from the evidence should be resolved in the formers favour. The policy is reflected
is no less than the Constitution, Labor Code and Civil Code.[18]
Claiming to be an employee of Fly Ace, petitioner asserts that he was
illegally dismissed by the latters failure to observe substantive and procedural due
process. Since his dismissal was not based on any of the causes recognized by law,
and was implemented without notice, Javier is entitled to separation pay and
backwages.
In its Comment,[19] Fly Ace insists that there was no substantial evidence to
prove employer-employee relationship. Having a service contract with Milmar
Hauling Services for the purpose of transporting and delivering company products
to customers, Fly Ace contracted Javier as an extra helper or pahinante on a mere
per trip basis. Javier, who was actually a loiterer in the area, only accompanied and
assisted the company driver when Milmar could not deliver or when the exigency
of extra deliveries arises for roughly five to six times a month. Before making a
delivery, Fly Ace would turn over to the driver and Javier the delivery vehicle with
its loaded company products. With the vehicle and products in their custody, the
driver and Javier would leave the company premises using their own means,
method, best judgment and discretion on how to deliver, time to deliver, where and
[when] to start, and manner of delivering the products.[20]
Fly Ace dismisses Javiers claims of employment as baseless assertions.
Aside from his bare allegations, he presented nothing to substantiate his status as
an employee. It is a basic rule of evidence that each party must prove his
affirmative allegation. If he claims a right granted by law, he must prove his claim
by competent evidence, relying on the strength of his own evidence and not upon
the weakness of his opponent.[21] Invoking the case of Lopez v. Bodega City,[22] Fly
Ace insists that in an illegal dismissal case, the burden of proof is upon the
complainant who claims to be an employee. It is essential that an employeremployee relationship be proved by substantial evidence. Thus, it cites:
In an illegal dismissal case, the onus probandi rests on the

employer to prove that its dismissal of an employee was for a valid cause.
However, before a case for illegal dismissal can prosper, an employeremployee relationship must first be established.
Fly Ace points out that Javier merely offers factual assertions that he was an
employee of Fly Ace, which are unfortunately not supported by proof, documentary
or otherwise.[23] Javier simply assumed that he was an employee of Fly Ace, absent
any competent or relevant evidence to support it. He performed his contracted work
outside the premises of the respondent; he was not even required to report to work
at regular hours; he was not made to register his time in and time out every time he
was contracted to work; he was not subjected to any disciplinary sanction imposed
to other employees for company violations; he was not issued a company I.D.; he
was not accorded the same benefits given to other employees; he was not registered
with the Social Security System (SSS) as petitioners employee; and, he was free to
leave, accept and engage in other means of livelihood as there is no exclusivity of
his contracted services with the petitioner, his services being co-terminus with the
trip only. All these lead to the conclusion that petitioner is not an employee of the
respondents.[24]
Moreover, Fly Ace claims that it had no right to control the result, means,
manner and methods by which Javier would perform his work or by which the
same is to be accomplished.[25] In other words, Javier and the company driver were
given a free hand as to how they would perform their contracted services and
neither were they subjected to definite hours or condition of work.
Fly Ace likewise claims that Javiers function as a pahinante was not directly
related or necessary to its principal business of importation and sales of groceries.
Even without Javier, the business could operate its usual course as it did not involve
the business of inland transportation. Lastly, the acknowledgment receipts bearing
Javiers signature and words pakiao rate, referring to his earned salaries on a per trip
basis, have evidentiary weight that the LA correctly considered in arriving at the
conclusion that Javier was not an employee of the company.
The Court affirms the assailed CA decision.
It must be noted that the issue of Javiers alleged illegal dismissal is anchored
on the existence of an employer-employee relationship between him and Fly Ace.
This is essentially a question of fact. Generally, the Court does not review errors
that raise factual questions. However, when there is conflict among the factual
findings of the antecedent deciding bodies like the LA, the NLRC and the CA, it is
proper, in the exercise of Our equity jurisdiction, to review and re-evaluate the
factual issues and to look into the records of the case and re-examine the
questioned findings.[26] In dealing with factual issues in labor cases, substantial
evidence that amount of relevant evidence which a reasonable mind might accept
as adequate to justify a conclusion is sufficient.[27]
As the records bear out, the LA and the CA found Javiers claim of
employment with Fly Ace as wanting and deficient. The Court is constrained to
agree. Although Section 10, Rule VII of the New Rules of Procedure of the
NLRC[28] allows a relaxation of the rules of procedure and evidence in labor cases,
this rule of liberality does not mean a complete dispensation of proof. Labor
officials are enjoined to use reasonable means to ascertain the facts speedily and
objectively with little regard to technicalities or formalities but nowhere in the
rules are they provided a license to completely discount evidence, or the lack of it.
The quantum of proof required, however, must still be satisfied. Hence, when
confronted with conflicting versions on factual matters, it is for them in the
exercise of discretion to determine which party deserves credence on the basis of
evidence received, subject only to the requirement that their decision must be
supported by substantial evidence.[29] Accordingly, the petitioner needs to show by
substantial evidence that he was indeed an employee of the company against which
he claims illegal dismissal.
Expectedly, opposing parties would stand poles apart and proffer allegations
as different as chalk and cheese. It is, therefore, incumbent upon the Court to
determine whether the party on whom the burden to prove lies was able to hurdle
the same. No particular form of evidence is required to prove the existence of such
employer-employee relationship. Any competent and relevant evidence to prove
the relationship may be admitted. Hence, while no particular form of evidence is
required, a finding that such relationship exists must still rest on some substantial
evidence. Moreover, the substantiality of the evidence depends on its quantitative

as well as its qualitative aspects.[30]Although substantial evidence is not a function
of quantity but rather of quality, the x x x circumstances of the instant case demand
that something more should have been proffered. Had there been other proofs of
employment, such as x x x inclusion in petitioners payroll, or a clear exercise of
control, the Court would have affirmed the finding of employer-employee
relationship.[31]
In sum, the rule of thumb remains: the onus probandi falls on petitioner to
establish or substantiate such claim by the requisite quantum of evidence.
[32]
Whoever claims entitlement to the benefits provided by law should establish his
or her right thereto x x x.[33] Sadly, Javier failed to adduce substantial evidence as
basis for the grant of relief.
In this case, the LA and the CA both concluded that Javier failed to establish
his employment with Fly Ace. By way of evidence on this point, all that Javier
presented were his self-serving statements purportedly showing his activities as an
employee of Fly Ace. Clearly, Javier failed to pass the substantiality requirement to
support his claim. Hence, the Court sees no reason to depart from the findings of
the CA.
While Javier remains firm in his position that as an employed stevedore of
Fly Ace, he was made to work in the company premises during weekdays
arranging and cleaning grocery items for delivery to clients, no other proof was
submitted to fortify his claim. The lone affidavit executed by one Bengie
Valenzuela was unsuccessful in strengthening Javiers cause. In said document, all
Valenzuela attested to was that he would frequently see Javier at the workplace
where the latter was also hired as stevedore.[34]Certainly, in gauging the evidence
presented by Javier, the Court cannot ignore the inescapable conclusion that his
mere presence at the workplace falls short in proving employment therein. The
supporting affidavit could have, to an extent, bolstered Javiers claim of being
tasked to clean grocery items when there were no scheduled delivery trips, but no
information was offered in this subject simply because the witness had no personal
knowledge of Javiers employment status in the company. Verily, the Court cannot
accept Javiers statements, hook, line and sinker.
The Court is of the considerable view that on Javier lies the burden to pass
the well-settled tests to determine the existence of an employer-employee
relationship, viz: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct. Of these elements, the most important criterion is whether the
employer controls or has reserved the right to control the employee not only as to
the result of the work but also as to the means and methods by which the result is
to be accomplished.[35]
In this case, Javier was not able to persuade the Court that the above
elements exist in his case. He could not submit competent proof that Fly Ace
engaged his services as a regular employee; that Fly Ace paid his wages as an
employee, or that Fly Ace could dictate what his conduct should be while at work.
In other words, Javiers allegations did not establish that his relationship with Fly
Ace had the attributes of an employer-employee relationship on the basis of the
above-mentioned four-fold test. Worse, Javier was not able to refute Fly Aces
assertion that it had an agreement with a hauling company to undertake the
delivery of its goods. It was also baffling to realize that Javier did not dispute Fly
Aces denial of his services exclusivity to the company. In short, all that Javier laid
down were bare allegations without corroborative proof.
Fly Ace does not dispute having contracted Javier and paid him on a per trip
rate as a stevedore, albeit on a pakyaw basis. The Court cannot fail to note that Fly
Ace presented documentary proof that Javier was indeed paid on a pakyaw basis
per the acknowledgment receipts admitted as competent evidence by the
LA. Unfortunately for Javier, his mere denial of the signatures affixed therein
cannot automatically sway us to ignore the documents because forgery cannot be
presumed and must be proved by clear, positive and convincing evidence and the
burden of proof lies on the party alleging forgery.[36]
Considering the above findings, the Court does not see the necessity to
resolve the second issue presented.
One final note. The Courts decision does not contradict the settled rule that
payment by the piece is just a method of compensation and does not define the
essence of the relation.[37] Payment on a piece-rate basis does not negate regular
employment. The term wage is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether
fixed or ascertained on a time, task, piece or commission basis. Payment by the
piece is just a method of compensation and does not define the essence of the
relations. Nor does the fact that the petitioner is not covered by the SSS affect the
employer-employee relationship. However, in determining whether the relationship
is that of employer and employee or one of an independent contractor, each case
must be determined on its own facts and all the features of the relationship are to
be considered.[38] Unfortunately for Javier, the attendant facts and circumstances of
the instant case do not provide the Court with sufficient reason to uphold his
claimed status as employee of Fly Ace.
While the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor dispute
will be automatically decided in favor of labor. Management also has its rights
which are entitled to respect and enforcement in the interest of simple fair play.
Out of its concern for the less privileged in life, the Court has inclined, more often
than not, toward the worker and upheld his cause in his conflicts with the
employer. Such favoritism, however, has not blinded the Court to the rule that
justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.[39]
WHEREFORE, the petition is DENIED. The March 18, 2010 Decision of
the Court of Appeals and its June 7, 2010 Resolution, in CA-G.R. SP No. 109975,
are herebyAFFIRMED.
SO ORDERED.
JOSE CATRAL MENDOZA

Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
DIOSDADO M. PERALTA ROBERTO A. ABAD

Acting Chairperson
THIRD DIVISION
[G.R. NO. 185251 : October 2, 2009]
RAUL G. LOCSIN and EDDIE B. TOMAQUIN, Petitioners, v. PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, Respondent.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision 1and
November 4, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine
Long Distance Telephone Company v. National Labor Relations Commission, Raul G. Locsin and Eddie B.
Tomaquin. The assailed decision set aside the Resolutions of the National Labor Relations Commission
(NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision dated February 13,
2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners' motion for
reconsideration of the assailed decision.
The Facts
On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security
and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement 3 (Agreement)
whereby SSCP would provide armed security guards to PLDT to be assigned to its various offices.
Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards,
were posted at a PLDT office.
On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective
October 1, 2001.4
Despite the termination of the Agreement, however, petitioners continued to secure the premises of their
assigned office. They were allegedly directed to remain at their post by representatives of respondent. In
support of their contention, petitioners provided the Labor Arbiter with copies of petitioner Locsin's pay slips
for the period of January to September 2002.5
Then, on September 30, 2002, petitioners' services were terminated.
Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims
such as overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay,
Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.
The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the
Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was arrived
at with the factual finding that petitioners continued to serve as guards of PLDT's offices. As such
employees, petitioners were entitled to substantive and procedural due process before termination of
employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The
dispositive portion of the Labor Arbiter's Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long
Distance and Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their
separation pay and back wages computed as follows:
NAME
SEPARATION PAY
BACKWAGES
1. Raul E. Locsin
P127,500.00
P240,954.67
2. Eddie B. Tomaquin
P127,500.00
P240,954.67
P736,909.34
All other claims are DISMISSED for want of factual basis.

Let the computation made by the Computation and Examination Unit form part of this decision.
SO ORDERED.
PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiter's
Decision.
Thus, PDLT filed a Motion for Reconsideration of the NLRC's Resolution which was also denied.
Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution
issued by the NLRC as well as the Labor Arbiter's Decision. The CA rendered the assailed decision granting
PLDT's petition and dismissing petitioners' complaint. The dispositive portion of the CA Decision provides:
WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and
August 28, 2006 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private
respondents' complaint against Philippine Long Distance Telephone Company is DISMISSED.
SO ORDERED.
The CA applied the four-fold test in order to determine the existence of an employer-employee relationship
between the parties but did not find such relationship. It determined that SSCP was not a labor-only
contractor and was an independent contractor having substantial capital to operate and conduct its own
business. The CA further bolstered its decision by citing the Agreement whereby it was stipulated that there
shall be no employer-employee relationship between the security guards and PLDT.
Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and
not PLDT; hence, SSCP continued to pay the salaries of petitioners after the Agreement. This fact allegedly
proved that petitioners continued to be employees of SSCP albeit performing their work at PLDT's premises.
From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed
resolution.
Hence, we have this petition.
The Issues
1. Whether or not; complainants extended services to the respondent for one (1) year from October 1,
2001, the effectivity of the termination of the contract of complainants agency SSCP, up to September 30,
2002, without a renewed contract, constitutes an employer-employee relationship between respondent and
the complainants.
2. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants
extended services to the respondent for another one (1) year without a contract be considered as
contractual employment.
3. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants
thirteen (13) years of service to the respondent with manifestation to the respondent thirteen (13) years
renewal of its security contract with the complainant agency SSCP, can be considered only as "seasonal in
nature" or fixed as [specific projects] or undertakings and its completion or termination can be dictated as
[controlled] by the respondent anytime they wanted to.
4. Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen
(13) years as they were then covered by a contract, becomes regular employees of the respondent as the
one (1) year extended services of the complainants were not covered by a contract, and can be considered
as direct employment pursuant to the provision of the Article 280 of the Labor Code.
5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and
[annulled] the labor [arbiter's] decision and of the NLRC's resolution declaring the dismissal of the
complainant as illegal.6
The Court's Ruling
This petition is hereby granted.
An Employer-Employee
Relationship Existed Between the Parties
It is beyond cavil that there was no employer-employee relationship between the parties from the time of
petitioners' first assignment to respondent by SSCP in 1988 until the alleged termination of the Agreement
between respondent and SSCP. In fact, this was the conclusion that was reached by this Court in Abella v.
Philippine Long Distance Telephone Company,7 where we ruled that petitioners therein, including herein
petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners were among
those declared to be employees of their respective security agencies and not of PLDT.
The only issue in this case is whether petitioners became employees of respondent after the Agreement
between SSCP and respondent was terminated.
This must be answered in the affirmative.
Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even
after the Agreement was terminated. And it is this fact that must be explained.
To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to
prove that SSCP was a labor-only contractor; and (2) petitioners are employees of SSCP and not of PLDT.
In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook
to supply PLDT with the required security guards, while furnishing PLDT with a performance bond in the
amount of PhP 707,000. Moreover, the CA gave weight to the provision in the Agreement that SSCP
warranted that it "carry on an independent business and has substantial capital or investment in the form of
equipment, work premises, and other materials which are necessary in the conduct of its business."
Further, in determining that no employer-employee relationship existed between the parties, the CA quoted
the express provision of the Agreement, stating that no employer-employee relationship existed between
the parties herein. The CA disregarded the pay slips of Locsin considering that they were in fact issued by
SSCP and not by PLDT.
From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the
termination of the Agreement. Notably, in its Comment dated March 10, 2009, 8 respondent never denied
that petitioners remained at their post until September 30, 2002. While respondent denies the alleged
circumstances stated by petitioners, that they were told to remain at their post by respondent's Security
Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their salaries
would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to
vacate their posts. Respondent said that it did not know why petitioners remained at their posts.
Rule 131, Section 3(y) of the Rules of Court provides:
SEC. 3. Disputable presumptions. The following presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:
xxx
(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.
In the ordinary course of things, responsible business owners or managers would not allow security guards
of an agency with whom the owners or managers have severed ties with to continue to stay within the
business' premises. This is because upon the termination of the owners' or managers' agreement with the
security agency, the agency's undertaking of liability for any damage that the security guard would cause
has already been terminated. Thus, in the event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or managers who would be liable and not the agency.
The business owners or managers would, therefore, be opening themselves up to liability for acts of security
guards over whom the owners or managers allegedly have no control.
At the very least, responsible business owners or managers would inquire or learn why such security guards
were remaining at their posts, and would have a clear understanding of the circumstances of the guards'
stay. It is but logical that responsible business owners or managers would be aware of the situation in their
premises.
We point out that with respondent's hypothesis, it would seem that SSCP was paying petitioners' salaries
while securing respondent's premises despite the termination of their Agreement. Obviously, it would only be
respondent that would benefit from such a situation. And it is seriously doubtful that a security agency that
was established for profit would allow its security guards to secure respondent's premises when the
Agreement was already terminated.
From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post
under the instructions of respondent. We can further conclude that respondent dictated upon petitioners that
the latter perform their regular duties to secure the premises during operating hours. This, to our mind and
under the circumstances, is sufficient to establish the existence of an employer-employee relationship.
Certainly, the facts as narrated by petitioners are more believable than the irrational denials made by
respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals: 9
Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be
credible in itself - such as the common experience and observation of mankind can approve as probable
under the circumstances. We have no test of the truth of human testimony, except its conformity to our
knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is
outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).
To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the
Agreement, petitioners remained at their post securing the premises of respondent while receiving their
salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by
respondent do not shed any light to the situation. It is but reasonable to conclude that, with the behest and,
presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia of
control that respondent exercised over petitioners.
Such power of control has been explained as the "right to control not only the end to be achieved but also
the means to be used in reaching such end."10 With the conclusion that respondent directed petitioners to
remain at their posts and continue with their duties, it is clear that respondent exercised the power of
control over them; thus, the existence of an employer-employee relationship.
In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc.,11 we reiterated the oft repeated rule that
control is the most important element in the determination of the existence of an employer-employee
relationship:
In the determination of whether an employer-employee relationship exists between two parties, this Court
applies the four-fold test to determine the existence of the elements of such relationship. InPacific
Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee
relationship, thus:
Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four
elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's
conduct. It is the so-called "control test" which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or has reserved the right to control
the employee not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where
the person for whom the services are performed reserves the right to control not only the end to be
achieved but also the means to be used in reaching such end.
Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the 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.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contractingout of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
???r?bl?
FIRST DIVISION
PROFESSIONAL SERVICES,
INC.,
G.R. No. 126297
Petitioner,
- versus -
THE COURT OF APPEALS and

NATIVIDAD
and
ENRIQUE AGANA,
Respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - ---x
NATIVIDAD (Substituted by her
children MARCELINO AGANA
III,
ENRIQUE
AGANA,
JR.,
EMMA AGANA ANDAYA, JESUS
AGANA,
and
RAYMUND
AGANA) and ENRIQUE AGANA,
Petitioners,
- versus -
G.R. No. 126467

JUANFUENTES,
Respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - ---x
G.R. No. 127590
MIGUEL AMPIL,
Petitioner,
Present:
PUNO, C.J.,
- versus -
SANDOVAL-GUTIERREZ,
CORONA,
AZCUNA, and

NATIVIDAD AGANA and
ENRIQUEAGANA,
Respondents.
LEONARDO-DE CASTRO, JJ.
Promulgated:
February 11, 2008

x--------------------------------------------------------x
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
As the hospital industry changes, so must the laws and

jurisprudence governing hospital liability. The immunity from
medical malpractice traditionally accorded to hospitals has to be
eroded if we are to balance the interest of the patients and
hospitals under the present setting.
Before this Court is a motion for reconsideration filed by
Professional Services, Inc. (PSI), petitioner in G.R. No. 126297,
assailing the Courts First Division Decision datedJanuary 31, 2007,
finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590,
jointly and severally liable for medical negligence.
A brief revisit of the antecedent facts is imperative.
On April 4, 1984, Natividad Agana was admitted at
the Medical City General Hospital (Medical City)
because
of
difficulty of bowel movement and bloody anal discharge. Dr. Ampil
diagnosed her to be suffering from cancer of the sigmoid. Thus,
on April 11, 1984, Dr. Ampil, assisted by the medical
staff[1] of Medical City, performed an anterior resection surgery
upon her. During the surgery, he found that the malignancy in her
sigmoid area had spread to her left ovary, necessitating the
removal of certain portions of it.Thus, Dr. Ampil obtained the
consent of Atty. Enrique Agana, Natividads husband, to permit Dr.
Juan Fuentes, respondent in G.R. No. 126467, to perform

hysterectomy upon Natividad.
Dr.
Fuentes
performed
and
completed
the
hysterectomy. Afterwards, Dr. Ampil took over, completed the
operation and closed the incision. However, the operation
appeared to be flawed. In the corresponding Record of Operation
dated April 11, 1984, the attending nurses entered these remarks:
sponge count lacking 2
announced to surgeon searched done (sic) but to no
avail continue for closure.
After a couple of days, Natividad complained of excruciating pain

in her anal region. She consulted both Dr. Ampil and Dr. Fuentes
about it. They told her that the pain was the natural consequence
of the surgical operation performed upon her. Dr. Ampil
recommended that Natividad consult an oncologist to treat the
cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to
the United States to seek further treatment. After four (4) months
of consultations and laboratory examinations, Natividad was told
that she was free of cancer. Hence, she was advised to return to
the Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still
suffering from pains. Two (2) weeks thereafter, her daughter
found a piece of gauze protruding from her vagina.Dr. Ampil was
immediately informed. He proceeded to Natividads house where
he managed to extract by hand a piece of gauze measuring 1.5
inches in width. Dr. Ampil then assured Natividad that the pains
would soon vanish.
Despite Dr. Ampils assurance, the pains intensified, prompting
Natividad
to
seek
treatment
at
the Polymedic
General Hospital. While confined thereat, Dr. Ramon Gutierrez
detected the presence of a foreign object in her vagina -- a foulsmelling gauze measuring 1.5 inches in width. The gauze had
badly infected her vaginal vault. A recto-vaginal fistula had
formed in her reproductive organ which forced stool to excrete
through the vagina. Another surgical operation was needed to
remedy the situation. Thus, in October 1984, Natividad underwent
another surgery.
On November 12, 1984, Natividad and her husband filed with the
Regional Trial Court, Branch 96, Quezon City a complaint for
damages against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes.
On February 16, 1986, pending the outcome of the above
case, Natividad died. She was duly substituted by her abovenamed children (the Aganas).
On March 17, 1993, the trial court rendered judgment in
favor of spouses Agana finding PSI, Dr. Ampil and Dr. Fuentes
jointly and severally liable. On appeal, the Court of Appeals, in its
Decision dated September 6, 1996, affirmed the assailed
judgment with modification in the sense that the complaint
against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate
petitions for review on certiorari. On January 31, 2007, the Court,
through its First Division, rendered a Decision holding that PSI is

jointly and severally liable with Dr. Ampil for the following
reasons: first, there is an employer-employee relationship
between Medical City and Dr. Ampil.The Court relied on Ramos v.
Court of Appeals,[2] holding that for the purpose of apportioning
responsibility in medical negligence cases, an employer-employee
relationship in effect exists between hospitals and their
attending and visiting physicians; second, PSIs act of publicly
displaying in the lobby of the Medical City the names and
specializations of its accredited physicians, including Dr. Ampil,
estopped it from denying the existence of an employer-employee
relationship between them under the doctrine of ostensible
agency or agency by estoppel; and third, PSIs failure to
supervise Dr. Ampil and its resident physicians and nurses and to
take an active step in order to remedy their negligence rendered
it directly liable under the doctrine of corporate negligence.
In its motion for reconsideration, PSI contends that the Court
erred in finding it liable under Article 2180 of the Civil Code, there
being no employer-employee relationship between it and its
consultant, Dr. Ampil. PSI stressed that the Courts Decision
in Ramos holding that an employer-employee relationship in
effect exists between hospitals and their attending and visiting
physicians for the purpose of apportioning responsibility had been
reversed in a subsequent Resolution. [3] Further, PSI argues that
the doctrine
of
ostensible
agency
or
agency
by
estoppel cannot apply because spouses Agana failed to establish
one requisite of the doctrine, i.e., that Natividad relied on the
representation of the hospital in engaging the services of Dr.
Ampil. And lastly, PSI maintains that the doctrine of corporate
negligence is misplaced because the proximate cause of
Natividads injury was Dr. Ampils negligence.
The motion lacks merit.
As earlier mentioned, the First Division, in its assailed

Decision, ruled that an employer-employee relationship in
effect exists
between
the Medical City and
Dr.
Ampil.Consequently, both are jointly and severally liable to the
Aganas. This ruling proceeds from the following ratiocination
in Ramos:
We now discuss the responsibility of the hospital in
this particular incident. The unique practice (among
private hospitals) of filling up specialist staff with
attending and visiting consultants, who are allegedly not
hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice
cases. However, the difficulty is only more apparent
than real.
In the first place, hospitals exercise significant
control in the hiring and firing of consultants and
in the conduct of their work within the hospital
premises. Doctors who apply for consultant slots,
visiting or attending, are required to submit proof of
completion of residency, their educational qualifications;
generally, evidence of accreditation by the appropriate
board (diplomate), evidence of fellowship in most cases,
and references. These requirements are carefully
scrutinized by members of the hospital administration or
by a review committee set up by the hospital who either
accept or reject the application. This is particularly true
with respondent hospital.
After a physician is accepted, either as a
visiting or attending consultant, he is normally
required
to
attend
clinico-pathological
conferences, conduct bedside rounds for clerks,
interns and residents, moderate grand rounds and
patient audits and perform other tasks and

responsibilities, for the privilege of being able to
maintain a clinic in the hospital, and/or for the
privilege of admitting patients into the hospital. In
addition to these, the physicians performance as a
specialist is generally evaluated by a peer review
committee on the basis of mortality and morbidity
statistics, and feedback from patients, nurses,
interns and residents. A consultant remiss in his
duties, or a consultant who regularly falls short of
the minimum standards acceptable to the hospital
or its peer review committee, is normally politely
terminated.
In other words, private hospitals hire, fire and
exercise real control over their attending and visiting
consultant
staff. While
consultants
are
not,
technically employees, a point which respondent
hospital asserts in denying all responsibility for
the patients condition, the control exercised, the
hiring, and the right to terminate consultants all
fulfill the important hallmarks of an employeremployee relationship, with the exception of the
payment of wages. In assessing whether such a
relationship in fact exists, the control test is
determining.Accordingly, on the basis of the
foregoing, we rule that for the purpose of
allocating responsibility in medical negligence
cases, an employer-employee relationship in effect
exists between hospitals and their attending and
visiting physicians. This being the case, the question
now arises as to whether or not respondent hospital is
solidarily liable with respondent doctors for petitioners
condition.
The basis for holding an employer solidarily

responsible for the negligence of its employee is found in
Article 2180 of the Civil Code which considers a person
accountable not only for his own acts but also for those
of others based on the formers responsibility under a
relationship of partia ptetas.
Clearly, in Ramos, the Court considered the peculiar

relationship between a hospital and its consultants on the bases
of certain factors. One such factor is the control test wherein the
hospital exercises control in the hiring and firing of consultants,
like Dr. Ampil, and in the conduct of their work.
Actually, contrary to PSIs contention, the Court did not
reverse its ruling in Ramos. What it clarified was that the De Los
Santos Medical Clinic did not exercise control over its consultant,
hence, there is no employer-employee relationship between
them. Thus, despite the granting of the said hospitals motion for
reconsideration, the doctrine inRamos stays, i.e., for the purpose
of allocating responsibility in medical negligence cases, an
employer-employee relationship exists between hospitals and
their consultants.
In the instant cases, PSI merely offered a general denial of
responsibility, maintaining that consultants, like Dr. Ampil, are
independent contractors, not employees of the hospital. Even
assuming that Dr. Ampil is not an employee of Medical City, but
an independent contractor, still the said hospital is liable to the
Aganas.
In Nograles, et al. v. Capitol Medical Center, et al.,[4] through
Mr. Justice Antonio T. Carpio, the Court held:
The question now is whether CMC is automatically

exempt from liability considering that Dr. Estrada is an
independent contractor-physician.
In general, a hospital is not liable for the negligence
of an independent contractor-physician. There is,
however, an exception to this principle. The hospital may
be liable if the physician is the ostensible agent of the
hospital. (Jones v. Philpott, 702 F. Supp. 1210 [1988]) This
exception is also known as the doctrine of apparent
authority. (Sometimes referred to as the apparent or
ostensible agency theory. [King v. Mitchell, 31 A.D.3rd 958,
819 N.Y. S.2d 169 (2006)].
xxx
The doctrine of apparent authority essentially
involves two factors to determine the liability of an
independent contractor-physician.
The first factor focuses on the hospitals
manifestations and is sometimes described as an inquiry
whether the hospital acted in a manner which would lead
a reasonable person to conclude that the individual who
was alleged to be negligent was an employee or agent of
the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851
(2006) citing Hylton v. Koontz, 138 N.C. App. 629
(2000). In this regard, the hospital need not make
express representations to the patient that the
treating physician is an employee of the hospital;
rather a representation may be general and
implied. (Id.)
The doctrine of apparent authority is a specie of the
doctrine of estoppel. Article 1431 of the Civil Code
provides that [t]hrough estoppel, an admission or
representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against
the person relying thereon. Estoppel rests on this rule:
Whether a party has, by his own declaration, act, or

omission, intentionally and deliberately led another to
believe a particular thing true, and to act upon such
belief, he cannot, in any litigation arising out of such
declaration, act or omission, be permitted to falsify it. (De
Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3, par.
A, Rule 131 of the Rules of Court. See also King v.
Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).
xxx
The second factor focuses on the patients
reliance. It is sometimes characterized as an inquiry on
whether the plaintiff acted in reliance upon the conduct of
the hospital or its agent, consistent with ordinary care
and prudence. (Diggs v. Novant Health, Inc.)
PSI
argues
that
the doctrine
of
apparent
authority cannot
apply
to
these
cases
because
spouses Agana failed to establish proof of their reliance on the
representation ofMedical City that Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified that one of the reasons
why he chose Dr. Ampil was that he knew him to be a staff
member of Medical City, a prominent and known hospital.
Q Will you tell us what transpired in your visit to Dr.
Ampil?
A Well, I saw Dr. Ampil at the Medical City, I know him

to be a staff member there, and I told him about
the case of my wife and he asked me to bring my
wife over so she could be examined. Prior to that, I
have known Dr. Ampil, first, he was staying in front
of our house, he was a neighbor, second, my
daughter was his student in the University of the
East School of Medicine at Ramon Magsaysay; and
when my daughter opted to establish a hospital or
a clinic, Dr. Ampil was one of our consultants on
how to establish that hospital. And from there, I
have known that he was a specialist when it comes
to that illness.
Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your

reason for choosing to contact Dr. Ampil in
connection with your wifes illness?
A First, before that, I have known him to be a specialist

on that part of the body as a surgeon; second, I
have known him to be a staff member of
the Medical City which is a prominent and
known hospital. And third, because he is a
neighbor, I expect more than the usual medical
service to be given to us, than his ordinary patients.
[5]
Clearly, PSI is estopped from passing the blame solely to Dr.

Ampil. Its act of displaying his name and those of the other
physicians in the public directory at the lobby of the hospital
amounts to holding out to the public that it offers quality medical
service through the listed physicians. This justifies Atty. Aganas
belief that Dr. Ampil was a member of the hospitals staff. It must
be stressed that under the doctrine of apparent authority,
the question in every case is whether the principal has by
his voluntary act placed the agent in such a situation that
a person of ordinary prudence, conversant with business
usages and the nature of the particular business, is
justified in presuming that such agent has authority to
perform the particular act in question.[6] In these cases, the
circumstances yield a positive answer to the question.
The challenged Decision also anchors its ruling on
the doctrine of corporate responsibility.[7] The duty of
providing quality medical service is no longer the sole prerogative
and responsibility of the physician. This is because the modern
hospital now tends to organize a highly-professional medical
staff whose competence and performance need also to be
monitored by the hospital commensurate with its inherent
responsibility
to
provide
quality
medical
care. [8] Such
responsibility includes the proper supervision of the
members of its medical staff. Accordingly, the hospital has
the duty to make a reasonable effort to monitor and
oversee the treatment prescribed and administered by the
physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not
conduct an immediate investigation on the reported missing
gauzes to the great prejudice and agony of its patient. Dr. Jocson,
a member of PSIs medical staff, who testified on whether the
hospital conducted an investigation, was evasive, thus:
Q We go back to the operative technique, this was

signed by Dr. Puruganan, was this submitted
to the hospital?
A Yes, sir, this was submitted to the hospital with
the record of the patient.
Q Was the hospital immediately informed about

the missing sponges?
A That is the duty of the surgeon, sir.
Q As a witness to an untoward incident in the

operating room, was it not your obligation,
Dr., to also report to the hospital because you
are under the control and direction of the
hospital?
A The hospital already had the record of the two
OS missing, sir.
Q If you place yourself in the position of the

hospital, how will you recover.
A You do not answer my question with another
question.
Q Did the hospital do anything about the missing

gauzes?
A The hospital left it up to the surgeon who was
doing the operation, sir.
Q Did the hospital investigate the surgeon who did

the operation?
A I am not in the position to answer that, sir.
Q You never did hear the hospital investigating the

doctors involved in this case of those missing
sponges, or did you hear something?
xxxxxx
A I think we already made a report by just saying

that two sponges were missing, it is up to the
hospital to make the move.
Atty. Agana
Precisely, I am asking you if the hospital did a

move, if the hospital did a move.
A I cannot answer that.
Court
By that answer, would you mean to tell the Court
that you were aware if there was such a move
done by the hospital?
A I cannot answer that, your honor, because I did

not have any more follow-up of the case that
happened until now.[9]
The above testimony obviously shows Dr. Jocsons lack of

concern for the patients. Such conduct is reflective of the
hospitals manner of supervision. Not only did PSI breach
its duty to oversee or supervise all persons who practice
medicine within its walls, it also failed to take an active
step in fixing the negligence committed.This renders PSI, not
only vicariously liable for the negligence of Dr. Ampil under Article
2180 of the Civil Code, but also directly liable for its own
negligence under Article 2176.
Moreover, there is merit in the trial courts finding that the
failure of PSI to conduct an investigation established PSIs part
in the dark conspiracy of silence and concealment about
the gauzes. The following testimony of Atty. Agana supports
such findings, thus:
Q You said you relied on the promise of Dr. Ampil and
despite the promise you were not able to obtain the
said record. Did you go back to the record
custodian?
A I did not because I was talking to Dr. Ampil. He
promised me.
Q After your talk to Dr. Ampil, you went to the
record custodian?
A I went to the record custodian to get the clinical

record of my wife, and I was given a portion
of the records consisting of the findings,
among them, the entries of the dates, but not
the operating procedure and operative
report.[10]
In sum, we find no merit in the motion for reconsideration.

WHEREFORE, we DENY PSIs
reconsideration with finality.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
motion
for
RENATO C. CORONA
ADOLFO S. AZCUNA
Associate Justice
Associate Justice
TERESITA J. LEONARDO-DE CASTRO

Associate Justice
FIRST DIVISION
[G.R. No. 138051. June 10, 2004]
JOSE
Y.
SONZA, petitioner, vs.
CORPORATION, respondent.
ABS-CBN
BROADCASTING
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari assailing the 26 March
1999 Decision of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition
filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the
National Labor Relations Commission (NLRC), which affirmed the Labor Arbiters
dismissal of the case for lack of jurisdiction.
[1]
[2]
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN) signed
an Agreement (Agreement) with the Mel and Jay Management and Development
Corporation (MJMDC). ABS-CBN was represented by its corporate officers while
MJMDC was represented by SONZA, as President and General Manager, and Carmela
Tiangco (TIANGCO), as EVP and Treasurer. Referred to in the Agreement as AGENT,
MJMDC agreed to provide SONZAs services exclusively to ABS-CBN as talent for radio
and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.
[3]
ABS-CBN agreed to pay for SONZAs services a monthly talent fee of P310,000 for
the first year and P317,000 for the second and third year of the Agreement. ABS-CBN
would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,

We would like to call your attention to the Agreement dated May 1994 entered into by
your goodself on behalf of ABS-CBN with our company relative to our talent JOSE Y.
SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events
concerning his programs and career. We consider these acts of the station violative of
the Agreement and the station as in breach thereof. In this connection, we hereby
serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to seek
recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager
[4]
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the

Department of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service incentive
leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the
Employees Stock Option Plan (ESOP).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZAs monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
[5]
In this instant case, complainant for having invoked a claim that he was an employee
of respondent company until April 15, 1996 and that he was not paid certain claims, it
is sufficient enough as to confer jurisdiction over the instant case in this Office. And
as to whether or not such claim would entitle complainant to recover upon the causes
of action asserted is a matter to be resolved only after and as a result of a
hearing. Thus, the respondents plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to prove that there
really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with
Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4
and 5 are affidavits of ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz.
These witnesses stated in their affidavits that the prevailing practice in the television
and broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint
for lack of jurisdiction. The pertinent parts of the decision read as follows:
[6]
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the true nature
of the contract of a talent, it stands to reason that a talent as above-described cannot be
considered as an employee by reason of the peculiar circumstances surrounding the
engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his
peculiar skills and talent as a TV host and a radio broadcaster. Unlike an
ordinary employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the May
1994 Agreement are certainly very much higher than those generally given to
employees. For one, complainant Sonzas monthly talent fees amount to a
staggering P317,000. Moreover, his engagement as a talent was covered by a specific
contract. Likewise, he was not bound to render eight (8) hours of work per day as he
worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits
normally given to an employee is inconsequential. Whatever benefits complainant
enjoyed arose from specific agreement by the parties and not by reason of
employer-employee relationship. As correctly put by the respondent, All these
benefits are merely talent fees and other contractual benefits and should not be
deemed as salaries, wages and/or other remuneration accorded to an employee,
notwithstanding the nomenclature appended to these benefits. Apropos to this is the
rule that the term or nomenclature given to a stipulated benefit is not controlling, but
the intent of the parties to the Agreement conferring such benefit.
The fact that complainant was made subject to respondents Rules and
Regulations, likewise, does not detract from the absence of employer-employee
relationship. As held by the Supreme Court, The line should be drawn between rules
that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that
control or fix the methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means to achieve
it. (Insular Life Assurance Co., Ltd. vs. NLRC, et al., G.R. No. 84484, November 15,
1989).
x x x (Emphasis supplied)
[7]
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a

Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court
of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999, the
Court of Appeals rendered a Decision dismissing the case.
[8]
Hence, this petition.

The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRCs finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRCs decision, the
appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the
contract merely as an agent of complainant Sonza, the principal. By all indication and
as the law puts it, the act of the agent is the act of the principal itself. This fact is made
particularly true in this case, as admittedly MJMDC is a management company
devoted exclusively to managing the careers of Mr. Sonza and his broadcast partner,
Mrs. Carmela C. Tiangco. (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza
and MJMDC, and not between ABS-CBN and MJMDC. This is clear from the
provisions of the May 1994 Agreement which specifically referred to MJMDC as the
AGENT. As a matter of fact, when complainant herein unilaterally rescinded said
May 1994 Agreement, it was MJMDC which issued the notice of rescission in behalf
of Mr. Sonza, who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that
historically, the parties to the said agreements are ABS-CBN and Mr. Sonza. And it is
only in the May 1994 Agreement, which is the latest Agreement executed between
ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of
Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABSCBN such that there exist[s] employer-employee relationship between the latter and
Mr. Sonza. On the contrary, We find it indubitable, that MJMDC is an agent, not of
ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter
and MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed
belongs to the regular courts, the same being in the nature of an action for alleged
breach of contractual obligation on the part of respondent-appellee. As squarely
apparent from complainant-appellants Position Paper, his claims for compensation for
services, 13th month pay, signing bonus and travel allowance against respondentappellee are not based on the Labor Code but rather on the provisions of the May
1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are
based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:
Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually
bound itself to pay complainant a signing bonus consisting of shares of stockswith
FIVE HUNDRED THOUSAND PESOS (P500,000.00).
Similarly, complainant is also entitled to be paid 13 th month pay based on an amount
not lower than the amount he was receiving prior to effectivity of (the) Agreement.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a
commutable travel benefit amounting to at least One Hundred Fifty Thousand Pesos
(P150,000.00) per year.
Thus, it is precisely because of complainant-appellants own recognition of the fact
that his contractual relations with ABS-CBN are founded on the New Civil Code,
rather than the Labor Code, that instead of merely resigning from ABS-CBN,
complainant-appellant served upon the latter a notice of rescission of Agreement with
the station, per his letter dated April 1, 1996, which asserted that instead of referring
to unpaid employee benefits, he is waiving and renouncing recovery of the remaining
amount stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement. (Annex 3 of the respondent
ABS-CBNs Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-appellee that
complainant-appellant filed his complaint.Complainant-appellants claims being
anchored on the alleged breach of contract on the part of respondent-appellee, the

same can be resolved by reference to civil law and not to labor law. Consequently,
they are within the realm of civil law and, thus, lie with the regular courts. As held in
the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21
November 1994, an action for breach of contractual obligation is intrinsically a
civil dispute. (Emphasis supplied)
[9]
The Court of Appeals ruled that the existence of an employer-employee relationship

between SONZA and ABS-CBN is a factual question that is within the jurisdiction of the
NLRC to resolve. A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC. Such action cannot cover an inquiry into the
correctness of the evaluation of the evidence which served as basis of the NLRCs
conclusion. The Court of Appeals added that it could not re-examine the parties
evidence and substitute the factual findings of the NLRC with its own.
[10]
[11]
[12]
[13]
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS

DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE
WEIGHT OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO
SUPPORT SUCH A FINDING.
[14]
The Courts Ruling

We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiters dismissal of the case
for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws
and jurisprudence define clearly the elements of an employer-employee relationship,
this is the first time that the Court will resolve the nature of the relationship between a
television and radio station and one of its talents. There is no case law stating that a
radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose Jay
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate
courts accord the factual findings of the Labor Arbiter and the NLRC not only respect
but also finality when supported by substantial evidence. Substantial evidence means
such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion. A party cannot prove the absence of substantial evidence by simply
pointing out that there is contrary evidence on record, direct or circumstantial. The Court
does not substitute its own judgment for that of the tribunal in determining where the
weight of evidence lies or what evidence is credible.
[15]
[16]
[17]
SONZA maintains that all essential elements of an employer-employee relationship

are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers
power to control the employee on the means and methods by which the work is
accomplished. The last element, the so-called control test, is the most important
element.
[18]
[19]
A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs
because of SONZAs peculiar skills, talent and celebrity status. SONZA contends that
the discretion used by respondent in specifically selecting and hiring complainant over
other broadcasters of possibly similar experience and qualification as complainant
belies respondents claim of independent contractorship.
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific selection
and hiring of SONZA,because of his unique skills, talent and celebrity status not
possessed by ordinary employees, is a circumstance indicative, but not conclusive,
of an independent contractual relationship. If SONZA did not possess such unique skills,
talent and celebrity status, ABS-CBN would not have entered into the Agreement with
SONZA but would have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship, with
the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and
privileges which he would not have enjoyed if he were truly the subject of a valid job
contract.
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBNs employee, there would be no need for
the parties to stipulate on benefits such as SSS, Medicare, x x x and 13 th month
pay which the law automatically incorporates into every employer-employee contract.
Whatever benefits SONZA enjoyed arose from contract and not because of an
employer-employee relationship.
[20]
[21]
[22]
SONZAs talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent contractual
relationship rather than an employer-employee relationship. ABS-CBN agreed to pay
SONZA such huge talent fees precisely because of SONZAs unique skills, talent and
celebrity status not possessed by ordinary employees. Obviously, SONZA acting alone
possessed enough bargaining power to demand and receive such huge talent fees for
his services. The power to bargain talent fees way above the salary scales of ordinary
employees is a circumstance indicative, but not conclusive, of an independent
contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed on
such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA, to
whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as

provided under labor laws.
[23]
During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as
long as AGENT and Jay Sonza shall faithfully and completely perform each condition of
this Agreement. Even if it suffered severe business losses, ABS-CBN could not
retrench SONZA because ABS-CBN remained obligated to pay SONZAs talent fees
during the life of the Agreement. This circumstance indicates an independent
contractual relationship between SONZA and ABS-CBN.
[24]
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABSCBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZAs talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.
[25]
SONZA assails the Labor Arbiters interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated that
if it were true that complainant was really an employee, he would merely resign, instead.
SONZA did actually resign from ABS-CBN but he also, as president of MJMDC,
rescinded the Agreement.SONZAs letter clearly bears this out. However, the manner
by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether
SONZA rescinded the Agreement or resigned from work does not determine his status
as employee or independent contractor.
[26]
D. Power of Control
Since there is no local precedent on whether a radio and television program host is
an employee or an independent contractor, we refer to foreign case law in analyzing the
present case. The United States Court of Appeals, First Circuit, recently held in AlbertyVlez v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) that a television
program host is an independent contractor. We quote the following findings of
the U.S. court:
[27]
Several factors favor classifying Alberty as an independent contractor. First, a

television actress is a skilled position requiring talent and training not available
on-the-job. x x x In this regard, Alberty possesses a masters degree in public
communications and journalism; is trained in dance, singing, and modeling; taught
with the drama department at the University of Puerto Rico; and acted in several
theater and television productions prior to her affiliation with Desde Mi
Pueblo. Second, Alberty provided the tools and instrumentalities necessary for
her to perform. Specifically, she provided, or obtained sponsors to provide, the

costumes, jewelry, and other image-related supplies and services necessary for her
appearance. Alberty disputes that this factor favors independent contractor status
because WIPR provided the equipment necessary to tape the show. Albertys argument
is misplaced. The equipment necessary for Alberty to conduct her job as host of
Desde Mi Pueblo related to her appearance on the show. Others provided equipment
for filming and producing the show, but these were not the primary tools that Alberty
used to perform her particular function. If we accepted this argument, independent
contractors could never work on collaborative projects because other individuals often
provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming Desde Mi
Pueblo. Albertys contracts with WIPR specifically provided that WIPR hired her
professional services as Hostess for the Program Desde Mi Pueblo. There is no
evidence that WIPR assigned Alberty tasks in addition to work related to these
tapings. x x x (Emphasis supplied)
[28]
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most important test
our courts apply in distinguishing an employee from an independent contractor. This
test is based on the extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is deemed an
employee. The converse holds true as well the less control the hirer exercises, the more
likely the worker is considered an independent contractor.
[29]
[30]
First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically
to co-host the Mel & Jay programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside ABSCBNs control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as well
as pre- and post-production staff meetings. ABS-CBN could not dictate the contents of
SONZAs script. However, the Agreement prohibited SONZA from criticizing in his shows
ABS-CBN or its interests. The clear implication is that SONZA had a free hand on what
to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
[31]
[32]
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZAs work. ABS-CBN did not instruct SONZA how to
perform his job.ABS-CBN merely reserved the right to modify the program format and
airtime schedule for more effective programming. ABS-CBNs sole concern was the
quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise
control over the means and methods of performance of SONZAs work.
[33]
[34]
SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs
power over the means and methods of the performance of his work. Although ABS-CBN
did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay
SONZAs talent fees. Thus, even if ABS-CBN was completely dissatisfied with the
means and methods of SONZAs performance of his work, or even with the quality or
product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that
ABS-CBN could do is not to broadcast SONZAs show but ABS-CBN must still pay his
talent fees in full.
[35]
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the
obligation to continue paying in full SONZAs talent fees, did not amount to control over
the means and methods of the performance of SONZAs work. ABS-CBN could not
terminate or discipline SONZA even if the means and methods of performance of his
work - how he delivered his lines and appeared on television - did not meet ABS-CBNs
approval. This proves that ABS-CBNs control was limited only to the result of SONZAs
work, whether to broadcast the final product or not. In either case, ABS-CBN must still
pay SONZAs talent fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows. Since
the management did not have control over the manner of performance of the skills of
the artists, it could only control the result of the work by deleting objectionable features.
[36]
[37]
SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew
and airtime needed to broadcast the Mel & Jay programs. However, the equipment,
crew and airtime are not the tools and instrumentalities SONZA needed to perform his
job. What SONZA principally needed were his talent or skills and the costumes
necessary for his appearance. Even though ABS-CBN provided SONZA with the place
of work and the necessary equipment, SONZA was still an independent contractor since
ABS-CBN did not supervise and control his work. ABS-CBNs sole concern was for
SONZA to display his talent during the airing of the programs.
[38]
[39]
A radio broadcast specialist who works under minimal supervision is an

independent contractor. SONZAs work as television and radio program host required
special skills and talent, which SONZA admittedly possesses. The records do not show
that ABS-CBN exercised any supervision and control over how SONZA utilized his skills
and talent in his shows.
[40]
Second, SONZA urges us to rule that he was ABS-CBNs employee because ABSCBN subjected him to its rules and standards of performance. SONZA claims that this
indicates ABS-CBNs control not only [over] his manner of work but also the quality of his
work.
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance covering talents of ABS-CBN. The Agreement does not require SONZA
to comply with the rules and standards of performance prescribed for employees of
ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the
Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP),
which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics. The
KBP code applies to broadcasters, not to employees of radio and television
stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement
are those applicable to talents and not to employees of ABS-CBN.
[41]
[42]
In any event, not all rules imposed by the hiring party on the hired party indicate that
the latter is an employee of the former. In this case, SONZA failed to show that these
rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are
top-rating television and radio programs that comply with standards of the industry. We
have ruled that:
[43]
Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship. The facts of this case fall squarely
with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology
and bind or restrict the party hired to the use of such means. The first, which aim only
to promote the result, create no employer-employee relationship unlike the second,
which address both the result and the means used to achieve it.
[44]
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the desired
result. The hirer, however, must not deprive the one hired from performing his services
according to his own initiative.
[45]
Lastly, SONZA insists that the exclusivity clause in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that
SONZA is an employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast industry, exclusivity
is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry. This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and
effort in building up its talents as well as the programs they appear in and thus expects
that said talents remain exclusive with the station for a commensurate period of time.
Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates
for exclusivity, as in the present case.
[46]
[47]
MJMDC as Agent of SONZA

SONZA protests the Labor Arbiters finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
labor-only contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the labor-only
contractor; (2) the employee who is ostensibly under the employ of the labor-only
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the labor-only contractor is the agent of the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal
itself directly hired or employed the employees. These circumstances are not present
in this case.
[48]
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement
expressly states that MJMDC acted as the AGENT of SONZA. The records do not show
that MJMDC acted as ABS-CBNs agent. MJMDC, which stands for Mel and Jay
Management and Development Corporation, is a corporation organized and owned by
SONZA and TIANGCO. The President and General Manager of MJMDC is SONZA
himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and
managed by SONZA, acted as agent of ABS-CBN in entering into the Agreement with
SONZA, who himself is represented by MJMDC. That would make MJMDC the agent of
both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is not
engaged in any other business, not even job contracting. MJMDC does not have any
other function apart from acting as agent of SONZA or TIANGCO to promote their
careers in the broadcast and television industry.
[49]
Policy Instruction No. 40

SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZAs status. A mere executive issuance cannot exclude independent
contractors from the class of service providers to the broadcast industry. The
classification of workers in the broadcast industry into only two groups under Policy
Instruction No. 40 is not binding on this Court, especially when the classification has no
basis either in law or in fact.
Affidavits of ABS-CBNs Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the opportunity to cross-examine these
witnesses.SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these
witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBNs witnesses, he was never
prevented from denying or refuting the allegations in the affidavits. The Labor Arbiter
has the discretion whether to conduct a formal (trial-type) hearing after the submission
of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum

xxx
These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and shall
be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. x x x
Section 4. Determination of Necessity of Hearing. Immediately after the submission
of the parties of their position papers/memorandum, the Labor Arbiter shall motu
propio determine whether there is need for a formal trial or hearing. At this stage, he
may, at his discretion and for the purpose of making such determination, ask
clarificatory questions to further elicit facts or information, including but not limited
to the subpoena of relevant documentary evidence, if any from any party or witness.
[50]
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial. The holding of a formal hearing or trial is
something that the parties cannot demand as a matter of right. If the Labor Arbiter is
confident that he can rely on the documents before him, he cannot be faulted for not
conducting a formal trial, unless under the particular circumstances of the case, the
documents alone are insufficient. The proceedings before a Labor Arbiter are nonlitigious in nature. Subject to the requirements of due process, the technicalities of law
and the rules obtaining in the courts of law do not strictly apply in proceedings before a
Labor Arbiter.
[51]
[52]
Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To hold
that every person who renders services to another for a fee is an employee - to give
meaning to the security of tenure clause - will lead to absurd results.
[53]
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of tenure
cannot operate to deprive an individual, possessed with special skills, expertise and
talent, of his right to contract as an independent contractor. An individual like an artist or
talent has a right to render his services without any one controlling the means and
methods by which he performs his art or craft. This Court will not interpret the right of
labor to security of tenure to compel artists and talents to render their services only as
employees. If radio and television program hosts can render their services only as
employees, the station owners and managers can dictate to the radio and television
hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code (NIRC) in relation to Republic Act No. 7716,
as amended by Republic Act No. 8241, treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax (VAT) on services they render. Exempted from the VAT are those under
an employer-employee relationship. This different tax treatment accorded to talents
and broadcasters bolters our conclusion that they are independent contractors, provided
all the basic elements of a contractual relationship are present as in this case.
[54]
[55]
[56]
[57]
Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13 th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and amounts
due under the Employee Stock Option Plan. We agree with the findings of the Labor
Arbiter and the Court of Appeals that SONZAs claims are all based on the May 1994
Agreement and stock option plan, and not on the Labor Code. Clearly, the present
case does not call for an application of the Labor Code provisions but an interpretation
and implementation of the May 1994 Agreement. In effect, SONZAs cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular
courts.
[58]
WHEREFORE, we DENY the petition. The assailed Decision of the Court of

Appeals dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Davide,
JJ., concur.
Jr.,
C.J.,
(Chairman),
Panganiban,
Ynares-Santiago, and Azcuna,

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 87700 June 13, 1990
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, DANIEL S.L. BORBON II,
HERMINIA REYES, MARCELA PURIFICACION, ET AL., petitioners,
vs.
HON. JESUS G. BERSAMIRA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 166,
RTC, PASIG, and SAN MIGUEL CORPORATION, respondents.
Romeo C. Lagman for petitioners.
Jardeleza, Sobrevinas, Diaz, Mayudini & Bodegon for respondents.
MELENCIO-HERRERA, J.:
Respondent Judge of the Regional Trial Court of Pasig, Branch 166, is taken to task by petitioners in
this special civil action for certiorari and Prohibition for having issued the challenged Writ of
Preliminary Injunction on 29 March 1989 in Civil Case No. 57055 of his Court entitled "San Miguel
Corporation vs. SMCEU-PTGWO, et als."
Petitioners' plea is that said Writ was issued without or in excess of jurisdiction and with grave abuse
of discretion, a labor dispute being involved. Private respondent San Miguel Corporation (SanMig.
for short), for its part, defends the Writ on the ground of absence of any employer-employee
relationship between it and the contractual workers employed by the companies Lipercon Services,
Inc. (Lipercon) and D'Rite Service Enterprises (D'Rite), besides the fact that the Union is bereft of
personality to represent said workers for purposes of collective bargaining. The Solicitor General
agrees with the position of SanMig.
The antecedents of the controversy reveal that:
Sometime in 1983 and 1984, SanMig entered into contracts for merchandising services with
Lipercon and D'Rite (Annexes K and I, SanMig's Comment, respectively). These companies are
independent contractors duly licensed by the Department of Labor and Employment (DOLE).
SanMig entered into those contracts to maintain its competitive position and in keeping with the
imperatives of efficiency, business expansion and diversity of its operation. In said contracts, it was
expressly understood and agreed that the workers employed by the contractors were to be paid by
the latter and that none of them were to be deemed employees or agents of SanMig. There was to
be no employer-employee relation between the contractors and/or its workers, on the one hand, and
SanMig on the other.
Petitioner San Miguel Corporation Employees Union-PTWGO (the Union, for brevity) is the duly
authorized representative of the monthly paid rank-and-file employees of SanMig with whom the
latter executed a Collective Bargaining Agreement (CBA) effective 1 July 1986 to 30 June 1989
(Annex A, SanMig's Comment). Section 1 of their CBA specifically provides that "temporary,
probationary, or contract employees and workers are excluded from the bargaining unit and,
therefore, outside the scope of this Agreement."
In a letter, dated 20 November 1988 (Annex C, Petition), the Union advised SanMig that some
Lipercon and D'Rite workers had signed up for union membership and sought the regularization of
their employment with SMC. The Union alleged that this group of employees, while appearing to be
contractual workers supposedly independent contractors, have been continuously working for
SanMig for a period ranging from six (6) months to fifteen (15) years and that their work is neither
casual nor seasonal as they are performing work or activities necessary or desirable in the usual
business or trade of SanMig. Thus, it was contended that there exists a "labor-only" contracting
situation. It was then demanded that the employment status of these workers be regularized.
On 12 January 1989 on the ground that it had failed to receive any favorable response from SanMig,
the Union filed a notice of strike for unfair labor practice, CBA violations, and union busting (Annex
D, Petition).
On 30 January 1989, the Union again filed a second notice of strike for unfair labor practice (Annex
F, Petition).
As in the first notice of strike. Conciliatory meetings were held on the second notice. Subsequently,
the two (2) notices of strike were consolidated and several conciliation conferences were held to
settle the dispute before the National Conciliation and Mediation Board (NCMB) of DOLE (Annex G,
Petition).
Beginning 14 February 1989 until 2 March 1989, series of pickets were staged by Lipercon and
D'Rite workers in various SMC plants and offices.
On 6 March 1989, SMC filed a verified Complaint for Injunction and Damages before respondent
Court to enjoin the Union from:
a. representing and/or acting for and in behalf of the employees of LIPERCON and/or
D'RITE for the purposes of collective bargaining;
b. calling for and holding a strike vote, to compel plaintiff to hire the employees or
workers of LIPERCON and D'RITE;
c. inciting, instigating and/or inducing the employees or workers of LIPERCON and

D'RITE to demonstrate and/or picket at the plants and offices of plaintiff within the
bargaining unit referred to in the CBA,...;
d. staging a strike to compel plaintiff to hire the employees or workers of LIPERCON
and D'RITE;
e. using the employees or workers of LIPERCON AND D'RITE to man the strike area
and/or picket lines and/or barricades which the defendants may set up at the plants
and offices of plaintiff within the bargaining unit referred to in the CBA ...;
f. intimidating, threatening with bodily harm and/or molesting the other employees
and/or contract workers of plaintiff, as well as those persons lawfully transacting
business with plaintiff at the work places within the bargaining unit referred to in the
CBA, ..., to compel plaintiff to hire the employees or workers of LIPERCON and
D'RITE;
g. blocking, preventing, prohibiting, obstructing and/or impeding the free ingress to,
and egress from, the work places within the bargaining unit referred to in the CBA ..,
to compel plaintiff to hire the employees or workers of LIPERCON and D'RITE;
h. preventing and/or disrupting the peaceful and normal operation of plaintiff at the
work places within the bargaining unit referred to in the CBA, Annex 'C' hereof, to
compel plaintiff to hire the employees or workers of LIPERCON and D'RITE. (Annex
H, Petition)
Respondent Court found the Complaint sufficient in form and substance and issued a Temporary
Restraining Order for the purpose of maintaining the status quo, and set the application for Injunction
for hearing.
In the meantime, on 13 March 1989, the Union filed a Motion to Dismiss SanMig's Complaint on the
ground of lack of jurisdiction over the case/nature of the action, which motion was opposed by
SanMig. That Motion was denied by respondent Judge in an Order dated 11 April 1989.
After several hearings on SanMig's application for injunctive relief, where the parties presented both
testimonial and documentary evidence on 25 March 1989, respondent Court issued the questioned
Order (Annex A, Petition) granting the application and enjoining the Union from Committing the acts
complained of, supra. Accordingly, on 29 March 1989, respondent Court issued the corresponding
Writ of Preliminary Injunction after SanMig had posted the required bond of P100,000.00 to answer
for whatever damages petitioners may sustain by reason thereof.
In issuing the Injunction, respondent Court rationalized:
The absence of employer-employee relationship negates the existence of labor
dispute. Verily, this court has jurisdiction to take cognizance of plaintiff's grievance.
The evidence so far presented indicates that plaintiff has contracts for services with
Lipercon and D'Rite. The application and contract for employment of the defendants'
witnesses are either with Lipercon or D'Rite. What could be discerned is that there is
no employer-employee relationship between plaintiff and the contractual workers
employed by Lipercon and D'Rite. This, however, does not mean that a final
determination regarding the question of the existence of employer-employee
relationship has already been made. To finally resolve this dispute, the court must
extensively consider and delve into the manner of selection and engagement of the
putative employee; the mode of payment of wages; the presence or absence of a
power of dismissal; and the Presence or absence of a power to control the putative
employee's conduct. This necessitates a full-blown trial. If the acts complained of are
not restrained, plaintiff would, undoubtedly, suffer irreparable damages. Upon the
other hand, a writ of injunction does not necessarily expose defendants to irreparable
damages.
Evidently, plaintiff has established its right to the relief demanded. (p. 21, Rollo)
Anchored on grave abuse of discretion, petitioners are now before us seeking nullification of the
challenged Writ. On 24 April 1989, we issued a Temporary Restraining Order enjoining the
implementation of the Injunction issued by respondent Court. The Union construed this to mean that
"we can now strike," which it superimposed on the Order and widely circulated to entice the Union
membership to go on strike. Upon being apprised thereof, in a Resolution of 24 May 1989, we
required the parties to "RESTORE the status quo ante declaration of strike" (p. 2,62 Rollo).
In the meantime, however, or on 2 May 1989, the Union went on strike. Apparently, some of the
contractual workers of Lipercon and D'Rite had been laid off. The strike adversely affected thirteen
(13) of the latter's plants and offices.
On 3 May 1989, the National Conciliation and Mediation Board (NCMB) called the parties to
conciliation. The Union stated that it would lift the strike if the thirty (30) Lipercon and D'Rite
employees were recalled, and discussion on their other demands, such as wage distortion and
appointment of coordinators, were made. Effected eventually was a Memorandum of Agreement
between SanMig and the Union that "without prejudice to the outcome of G.R. No. 87700 (this case)
and Civil Case No. 57055 (the case below), the laid-off individuals ... shall be recalled effective 8
May 1989 to their former jobs or equivalent positions under the same terms and conditions prior to
"lay-off" (Annex 15, SanMig Comment). In turn, the Union would immediately lift the pickets and
return to work.
After an exchange of pleadings, this Court, on 12 October 1989, gave due course to the Petition and
required the parties to submit their memoranda simultaneously, the last of which was filed on 9
January 1990.
The focal issue for determination is whether or not respondent Court correctly assumed jurisdiction
over the present controversy and properly issued the Writ of Preliminary Injunction to the resolution
of that question, is the matter of whether, or not the case at bar involves, or is in connection with, or
relates to a labor dispute. An affirmative answer would bring the case within the original and
exclusive jurisdiction of labor tribunals to the exclusion of the regular Courts.
Petitioners take the position that 'it is beyond dispute that the controversy in the court a quo involves
or arose out of a labor dispute and is directly connected or interwoven with the cases pending with
the NCMB-DOLE, and is thus beyond the ambit of the public respondent's jurisdiction. That the acts
complained of (i.e., the mass concerted action of picketing and the reliefs prayed for by the private
respondent) are within the competence of labor tribunals, is beyond question" (pp. 6-7, Petitioners'
Memo).
On the other hand, SanMig denies the existence of any employer-employee relationship and
consequently of any labor dispute between itself and the Union. SanMig submits, in particular, that
"respondent Court is vested with jurisdiction and judicial competence to enjoin the specific type of
strike staged by petitioner union and its officers herein complained of," for the reasons that:
A. The exclusive bargaining representative of an employer unit cannot strike to
compel the employer to hire and thereby create an employment relationship with
contractual workers, especially were the contractual workers were recognized by the
union, under the governing collective bargaining agreement, as excluded from, and
therefore strangers to, the bargaining unit.
B. A strike is a coercive economic weapon granted the bargaining representative only
in the event of a deadlock in a labor dispute over 'wages, hours of work and all other
and of the employment' of the employees in the unit. The union leaders cannot
instigate a strike to compel the employer, especially on the eve of certification
elections, to hire strangers or workers outside the unit, in the hope the latter will help
re-elect them.
C. Civil courts have the jurisdiction to enjoin the above because this specie of strike
does not arise out of a labor dispute, is an abuse of right, and violates the employer's
constitutional liberty to hire or not to hire. (SanMig's Memorandum, pp. 475-476,
Rollo).
We find the Petition of a meritorious character.
A "labor dispute" as defined in Article 212 (1) of the Labor Code includes "any controversy or matter
concerning terms and conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and conditions of employment,
regardless of whether the disputants stand in the proximate relation of employer and employee."
While it is SanMig's submission that no employer-employee relationship exists between itself, on the
one hand, and the contractual workers of Lipercon and D'Rite on the other, a labor dispute can
nevertheless exist "regardless of whether the disputants stand in the proximate relationship of
employer and employee" (Article 212 [1], Labor Code, supra) provided the controversy concerns,
among others, the terms and conditions of employment or a "change" or "arrangement" thereof
(ibid). Put differently, and as defined by law, the existence of a labor dispute is not negative by the
fact that the plaintiffs and defendants do not stand in the proximate relation of employer and
employee.
That a labor dispute, as defined by the law, does exist herein is evident. At bottom, what the Union
seeks is to regularize the status of the employees contracted by Lipercon and D'Rite in effect, that
they be absorbed into the working unit of SanMig. This matter definitely dwells on the working
relationship between said employees vis-a-vis SanMig. Terms, tenure and conditions of their
employment and the arrangement of those terms are thus involved bringing the matter within the
purview of a labor dispute. Further, the Union also seeks to represent those workers, who have
signed up for Union membership, for the purpose of collective bargaining. SanMig, for its part,
resists that Union demand on the ground that there is no employer-employee relationship between it
and those workers and because the demand violates the terms of their CBA. Obvious then is that
representation and association, for the purpose of negotiating the conditions of employment are also
involved. In fact, the injunction sought by SanMig was precisely also to prevent such representation.
Again, the matter of representation falls within the scope of a labor dispute. Neither can it be denied
that the controversy below is directly connected with the labor dispute already taken cognizance of
by the NCMB-DOLE (NCMB-NCR- NS-01- 021-89; NCMB NCR NS-01-093-83).
Whether or not the Union demands are valid; whether or not SanMig's contracts with Lipercon and
D'Rite constitute "labor-only" contracting and, therefore, a regular employer-employee relationship
may, in fact, be said to exist; whether or not the Union can lawfully represent the workers of Lipercon
and D'Rite in their demands against SanMig in the light of the existing CBA; whether or not the
notice of strike was valid and the strike itself legal when it was allegedly instigated to compel the
employer to hire strangers outside the working unit; those are issues the resolution of which call
for the application of labor laws, and SanMig's cause's of action in the Court below are inextricably
linked with those issues.
The precedent in Layno vs. de la Cruz (G.R. No. L-29636, 30 April 1965, 13 SCRA 738) relied upon
by SanMig is not controlling as in that case there was no controversy over terms, tenure or
conditions, of employment or the representation of employees that called for the application of labor
laws. In that case, what the petitioning union demanded was not a change in working terms and
conditions, or the representation of the employees, but that its members be hired as stevedores in
the place of the members of a rival union, which petitioners wanted discharged notwithstanding the
existing contract of the arrastre company with the latter union. Hence, the ruling therein, on the basis
of those facts unique to that case, that such a demand could hardly be considered a labor dispute.
As the case is indisputably linked with a labor dispute, jurisdiction belongs to the labor tribunals. As
explicitly provided for in Article 217 of the Labor Code, prior to its amendment by R.A. No. 6715 on
21 March 1989, since the suit below was instituted on 6 March 1989, Labor Arbiters have original
and exclusive jurisdiction to hear and decide the following cases involving all workers including "1.
unfair labor practice cases; 2. those that workers may file involving wages, hours of work and other
terms and conditions of employment; ... and 5. cases arising from any violation of Article 265 of this
Code, including questions involving the legality of striker and lockouts. ..." Article 217 lays down the
plain command of the law.
The claim of SanMig that the action below is for damages under Articles 19, 20 and 21 of the Civil
Code would not suffice to keep the case within the jurisdictional boundaries of regular Courts. That
claim for damages is interwoven with a labor dispute existing between the parties and would have to
be ventilated before the administrative machinery established for the expeditious settlement of those
disputes. To allow the action filed below to prosper would bring about "split jurisdiction" which is
obnoxious to the orderly administration of justice (Philippine Communications, Electronics and
Electricity Workers Federation vs. Hon. Nolasco, L-24984, 29 July 1968, 24 SCRA 321).
We recognize the proprietary right of SanMig to exercise an inherent management prerogative and
its best business judgment to determine whether it should contract out the performance of some of
its work to independent contractors. However, the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law (Section 3, Article XIII, 1987 Constitution) equally call for recognition and
protection. Those contending interests must be placed in proper perspective and equilibrium.
WHEREFORE, the Writ of certiorari is GRANTED and the Orders of respondent Judge of 25 March
1989 and 29 March 1989 are SET ASIDE. The Writ of Prohibition is GRANTED and respondent
Judge is enjoined from taking any further action in Civil Case No. 57055 except for the purpose of
dismissing it. The status quo ante declaration of strike ordered by the Court on 24 May 1989 shall be
observed pending the proceedings in the National Conciliation Mediation Board-Department of Labor
and Employment, docketed as NCMB-NCR-NS-01-02189 and NCMB-NCR-NS-01-093-83. No costs.
SO ORDERED.
Paras and Regalado, JJ., concur.
Padilla, Sarmiento, JJ., took no part.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-48645 January 7, 1987
"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO
CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO
B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG, JUANITO
NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA, CARLOS
SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET
AL., petitioners,
vs.
HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF
THE PRESIDENT, HON. AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL
CORPORATION, GENARO OLIVES, ENRIQUE CAMAHORT, FEDERICO OATE, ERNESTO

VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO, respondents.
Armando V. Ampil for petitioners.
Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.
GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists
between petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM)
and respondent San Miguel Corporation, is the main issue in this petition. The disputed decision of
public respondent Ronaldo Zamora, Presidential Assistant for legal Affairs, contains a brief summary
of the facts involved:
1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now
defunct Court of Industrial Relations, charging San Miguel Corporation, and the
following officers: Enrique Camahort, Federico Ofiate Feliciano Arceo, Melencio
Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and Godofredo Cueto of unfair
labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
No. 875 and of Legal dismissal. It was alleged that respondents ordered the
individual complainants to disaffiliate from the complainant union; and that
management dismissed the individual complainants when they insisted on their union
membership.
On their part, respondents moved for the dismissal of the complaint on the grounds
that the complainants are not and have never been employees of respondent
company but employees of the independent contractor; that respondent company
has never had control over the means and methods followed by the independent
contractor who enjoyed full authority to hire and control said employees; and that the
individual complainants are barred by estoppel from asserting that they are
employees of respondent company.
While pending with the Court of Industrial Relations CIR pleadings and testimonial
and documentary evidences were duly presented, although the actual hearing was
delayed by several postponements. The dispute was taken over by the National
Labor Relations Commission (NLRC) with the decreed abolition of the CIR and the
hearing of the case intransferably commenced on September 8, 1975.
On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was
concurred in by the NLRC in a decision dated June 28, 1976. The amount of
backwages awarded, however, was reduced by NLRC to the equivalent of one (1)
year salary.
On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC
ruling, stressing the absence of an employer-mployee relationship as borne out by
the records of the case. ...
The petitioners strongly argue that there exists an employer-employee relationship between them
and the respondent company and that they were dismissed for unionism, an act constituting unfair
labor practice "for which respondents must be made to answer."
Unrebutted evidence and testimony on record establish that the petitioners are workers who have
been employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years
of service at the time of their termination. They worked as "cargadores" or "pahinante" at the SMC
Plant loading, unloading, piling or palleting empty bottles and woosen shells to and from company
trucks and warehouses. At times, they accompanied the company trucks on their delivery routes.
The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate
passes signed by Camahort and were provided by the respondent company with the tools,
equipment and paraphernalia used in the loading, unloading, piling and hauling operation.
Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-incharge. In turn, the assistant informs the warehousemen and checkers regarding the same. The
latter, thereafter, relays said orders to the capatazes or group leaders who then give orders to the
workers as to where, when and what to load, unload, pile, pallet or clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the volume of
bottles manufactured to be loaded and unloaded, as well as the business activity of the company.
Work did not necessarily mean a full eight (8) hour day for the petitioners. However, work,at times,
exceeded the eight (8) hour day and necessitated work on Sundays and holidays. For this, they
were neither paid overtime nor compensation for work on Sundays and holidays.
Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of
cartons and wooden shells they were able to load, unload, or pile. The group leader notes down the
number or volume of work that each individual worker has accomplished. This is then made the
basis of a report or statement which is compared with the notes of the checker and warehousemen
as to whether or not they tally. Final approval of report is by officer-in-charge Camahort. The pay
check is given to the group leaders for encashment, distribution, and payment to the petitioners in
accordance with payrolls prepared by said leaders. From the total earnings of the group, the group
leader gets a participation or share of ten (10%) percent plus an additional amount from the earnings
of each individual.
The petitioners worked exclusive at the SMC plant, never having been assigned to other companies
or departments of SMC plant, even when the volume of work was at its minimum. When any of the
glass furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was
temporarily suspended. Thereafter, the petitioners would return to work at the glass plant.
Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union activities.
Believing themselves entitled to overtime and holiday pay, the petitioners pressed management,
airing other grievances such as being paid below the minimum wage law, inhuman treatment, being
forced to borrow at usurious rates of interest and to buy raffle tickets, coerced by withholding their
salaries, and salary deductions made without their consent. However, their gripes and grievances
were not heeded by the respondents.
On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations
in connection with the dismissal of some of its members who were allegedly castigated for their
union membership and warned that should they persist in continuing with their union activities they
would be dismissed from their jobs. Several conciliation conferences were scheduled in order to
thresh out their differences, On February 12, 1969, union member Rogelio Dipad was dismissed
from work. At the scheduled conference on February 19, 1969, the complainant union through its
officers headed by National President Artemio Portugal Sr., presented a letter to the respondent
company containing proposals and/or labor demands together with a request for recognition and
collective bargaining.
San Miguel refused to bargain with the petitioner union alleging that the workers are not their
employees.
On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied
entrance to respondent company's glass factory despite their regularly reporting for work. A
complaint for illegal dismissal and unfair labor practice was filed by the petitioners.
The case reaches us now with the same issues to be resolved as when it had begun.
The question of whether an employer-employee relationship exists in a certain situation continues to
bedevil the courts. Some businessmen try to avoid the bringing about of an employer-employee
relationship in their enterprises because that judicial relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay, and unionism.
(Mafinco Trading Corporation v. Ople, 70 SCRA 139).
In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished. It. is the called "control test"
that is the most important element (Investment Planning Corp. of the Phils. v. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra,and Rosario Brothers, Inc. v. Ople, 131
SCRA 72).
Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent
asserts that the petitioners are employees of the Guaranteed Labor Contractor, an independent
labor contracting firm.
The facts and evidence on record negate respondent SMC's claim.
The existence of an independent contractor relationship is generally established by the following

criteria: "whether or not the contractor is carrying on an independent 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 a specified piece of work; the control and supervision of the work to another; the
employer's power with respect to the hiring, firing and payment of the contractor's workers; the
control of the premises; the duty to supply the premises tools, appliances, materials and labor; and
the mode, manner and terms of payment" (56 CJS Master and Servant, Sec. 3(2), 46; See also 27
AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR 7260727)
None of the above criteria exists in the case at bar.
Highly unusual and suspect is the absence of a written contract to specify the performance of a
specified piece of work, the nature and extent of the work and the term and duration of the
relationship. The records fail to show that a large commercial outfit, such as the San Miguel
Corporation, entered into mere oral agreements of employment or labor contracting where the same
would involve considerable expenses and dealings with a large number of workers over a long
period of time. Despite respondent company's allegations not an iota of evidence was offered to
prove the same or its particulars. Such failure makes respondent SMC's stand subject to serious
doubts.
Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked
continuously and exclusively for the respondent company's shipping and warehousing department.
Considering the length of time that the petitioners have worked with the respondent company, there
is justification to conclude that they were engaged to perform activities necessary or desirable in the
usual business or trade of the respondent, and the petitioners are, therefore regular employees (Phil.
Fishing Boat Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL
Martinez Fishing Corporation v. National Labor Relations Commission, 127 SCRA 454).
As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission
(supra):
... [T]he employer-employee relationship between the parties herein is not
coterminous with each loading and unloading job. As earlier shown, respondents are
engaged in the business of fishing. For this purpose, they have a fleet of fishing
vessels. Under this situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities
performed by herein complainants, i.e. unloading the catch of tuna fish from
respondents' vessels and then loading the same to refrigerated vans, are necessary
or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on
any specific project or seasonable activity. (NLRC Decision, p. 94, Rollo).
lwphl@it
so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for
repairs, the petitioners, thereafter, promptly returned to their jobs, never having been replaced, or
assigned elsewhere until the present controversy arose. The term of the petitioners' employment
appears indefinite. The continuity and habituality of petitioners' work bolsters their claim of employee
status vis-a-vis respondent company,
Even under the assumption that a contract of employment had indeed been executed between
respondent SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.
Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:
Job contracting. There is job contracting permissible under the Code if the
following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof;
and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in
the conduct of his business.
We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools, equipment
and paraphernalia used by the petitioners in their jobs are admittedly all supplied by respondent
company. It is only the manpower or labor force which the alleged contractors supply, suggesting the
existence of a "labor only" contracting scheme prohibited by law (Article 106, 109 of the Labor Code;
Section 9(b), Rule VIII, Book III, Implementing Rules and Regulations of the Labor Code). In fact,
even the alleged contractor's office, which consists of a space at respondent company's warehouse,
table, chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that the
alleged contractors have no capital outlay involved in the conduct of its business, in the maintenance
thereof or in the payment of its workers' salaries.
The payment of the workers' wages is a critical factor in determining the actuality of an employeremployee relationship whether between respondent company and petitioners or between the alleged
independent contractor and petitioners. It is important to emphasize that in a truly independent
contractor-contractee relationship, the fees are paid directly to the manpower agency in lump sum
without indicating or implying that the basis of such lump sum is the salary per worker multiplied by
the number of workers assigned to the company. This is the rule in Social Security System v. Court
of Appeals (39 SCRA 629, 635).
The alleged independent contractors in the case at bar were paid a lump sum representing only the
salaries the workers were entitled to, arrived at by adding the salaries of each worker which depend
on the volume of work they. had accomplished individually. These are based on payrolls, reports or
statements prepared by the workers' group leader, warehousemen and checkers, where they note
down the number of cartons, wooden shells and bottles each worker was able to load, unload, pile or
pallet and see whether they tally. The amount paid by respondent company to the alleged
independent contractor considers no business expenses or capital outlay of the latter. Nor is the
profit or gain of the alleged contractor in the conduct of its business provided for as an amount over
and above the workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of the earnings
of each individual worker, which, perhaps, accounts for the petitioners' charge of unauthorized
deductions from their salaries by the respondents.
Anent the argument that the petitioners are not employees as they worked on piece basis, we
merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the
Philippines (90 SCRA 161), as follows:
"[C]ircumstances 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."
Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:
... 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.
Firmly establishing respondent SMC's role as employer is the control exercised by it over the
petitioners that is, control in the means and methods/manner by which petitioners are to go about
their work, as well as in disciplinary measures imposed by it.
Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the
means and manner of performing the same is practically nil. For, how many ways are there to load
and unload bottles and wooden shells? The mere concern of both respondent SMC and the alleged
contractor is that the job of having the bottles and wooden shells brought to and from the warehouse
be done. More evident and pronounced is respondent company's right to control in the discipline of
petitioners. Documentary evidence presented by the petitioners establish respondent SMC's right to
impose disciplinary measures for violations or infractions of its rules and regulations as well as its
right to recommend transfers and dismissals of the piece workers. The inter-office memoranda
submitted in evidence prove the company's control over the petitioners. That respondent SMC has
the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who
is alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication of
respondent company's right of control over the petitioners as direct employer. There is no evidence
to show that the alleged labor contractor had such right of control or much less had been there to
supervise or deal with the petitioners.
The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant.
Respondent company would have us believe that this was a case of retrenchment due to the closure
or cessation of operations of the establishment or undertaking. But such is not the case here. The
respondent's shutdown was merely temporary, one of its furnaces needing repair. Operations
continued after such repairs, but the petitioners had already been refused entry to the premises and
dismissed from respondent's service. New workers manned their positions. It is apparent that the
closure of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then
agitating the respondent company for benefits, reforms and collective bargaining as a union. There
is no showing that petitioners had been remiss in their obligations and inefficient in their jobs to
warrant their separation.
As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is
clear that the respondent company had an existing collective bargaining agreement with the IBM
union which is the recognized collective bargaining representative at the respondent's glass plant.
There being a recognized bargaining representative of all employees at the company's glass plant,
the petitioners cannot merely form a union and demand bargaining. The Labor Code provides the
proper procedure for the recognition of unions as sole bargaining representatives. This must be
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages. However,
where reinstatement is no longer possible, the respondent SMC is ordered to pay the petitioners
separation pay equivalent to one (1) month pay for every year of service.
SO ORDERED.
Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.
THIRD DIVISION
[G.R. No. 108961. November 27, 1998]
CITIBANK, N. A., petitioners, vs. COURT OF APPEALS (Third Division),

AND CITIBANK INTEGRATED GUARDS LABOR ALLIANCE
(CIGLA)
SEGATUPAS/FSM
LOCAL
CHAPTER
No.
1394, respondents.
DECISION
PARDO, J.:
The Case
The case before the Court is a petition for review on certiorari seeking to reverse and set
aside the decision of the Court of Appeals and its resolution denying reconsideration ,
[1]
[2]
ruling that
it
is
the
labor
tribunal, not the regional trial court, that has jurisdiction over the complaint for injunction and
damages filed by petitioner with the regional trial court.
The Facts
In 1983, Citibank and El Toro Security Agency, Inc. (hereafter El Toro) entered into a
contract for the latter to provide security and protective services to safeguard and protect the
bank's premises, situated at 8741 Paseo de Roxas, Makati, Metro Manila. Under the contract, El
Toro obligated itself to provide the services of security guards to safeguard and protect the
premises and property of Citibank against theft, robbery or any other unlawful acts committed by
any person or persons, and assumed responsibility for losses and/or damages that may be
incurred by Citibank due to or as a result of the negligence of El Toro or any of its assigned
personnel.3
Citibank renewed the security contract with El Toro yearly until 1990. On April 22, 1990,
the contract between Citibank and El Toro expired.
On June 7, 1990, respondent Citibank Integrated Guards Labor Alliance-SEGATUPAS/FSM (hereafter CIGLA) filed with the National Conciliation and Mediation Board
(NCMB) a request for preventive mediation citing Citibank as respondent therein giving as
issues for preventive mediation the following:
a) Unfair labor practice;

b) Dismissal of union officers/members; and
c) Union busting.
On June 10, 1990, petitioner Citibank served on El Toro a written notice that the bank would
not renew anymore the service agreement with the latter. Simultaneously, Citibank hired another
security agency, the Golden Pyramid Security Agency, to render security services at Citibank's
premises.
On the same date, June 10, 1990, respondent CIGLA filed a manifestation with the NCMB
that it was converting its request for preventive mediation into a notice of strike for failure of the
parties to reach a mutually acceptable settlement of the issues, which it followed with a
supplemental notice of strike alleging as supplemental issue the mass dismissal of all union
officers and members.
On June 11, 1990, security guards of El Toro who were replaced by guards of the Golden
Pyramid Security Agency considered the non-renewal of El Toro's service agreement with
Citibank as constituting a lockout and/or a mass dismissal. They threatened to go on strike
against Citibank and picket its premises.
In fact, security guards formerly assigned to Citibank under the expired agreement loitered
around and near the Citibank premises in large groups of from twenty (20) and at times fifty (50)
persons.
On June 14, 1990, respondent CIGLA filed a notice of strike directed at the premises of the
Citibank main office.
Faced with the prospect of disruption of its business operations, on June 5, 1990, petitioner
Citibank filed with the Regional Trial Court, Makati, a complaint for injunction and
damages.4 The complaint sought to enjoin CIGLA and any person claiming membership therein
from striking or otherwise disrupting the operations of the bank.
On June 18, 1990, respondent CIGLA filed with the trial court a motion to dismiss the
complaint. The motion alleged that:
a) The Court had no jurisdiction, this being labor dispute.

b) The guards were employees of the bank.
c) There were pending cases/labor disputes between the guards and the
bank at the different agencies of the Department of Labor and
Employment (DOLE).
d) The bank was guilty of forum shopping in filing the complaint with the
Regional Trial Court after submitting itself voluntarily to the
jurisdiction of the different agencies of the DOLE.
By order dated August 19, 1990, the trial court denied respondent CIGLA's motion to
dismiss. The relevant portion of the order reads as follows:
"Plaintiff in its Opposition alleged that jurisdiction of the court is determined

by the allegations of the complaints. In the plaintiff's complaint there are
allegations, which negate any employer-employee relationship between it and
the CIGLA members; however the Court could not dismiss the case and lift
the restraining order without first threshing out the same at the trial of the
case.
The Court finding the grounds alleged in the defendant's motion well taken,
the motion is hereby denied.
SO ORDERED."
In due time, respondent CIGLA filed with the trial court a motion for reconsideration of the
above-mentioned order. On October 1, 1990, the trial court denied the motion.
Subsequently, respondent CIGLA filed with the trial court its answer to the complaint, and
averred as special and affirmative defense lack of jurisdiction of the court over the subject matter
of the case.Treating the averment as motion to dismiss, on April 27, 1991, the lower court issued
an order denying the motion. The lower court stated:
"The Court noted in defendant's Memorandum of Authorities that they made

no mention who among the parties - the plaintiff bank or the defendants union
- paid their wages or salaries and who has the power to dismiss them.
Defendants also alleged that the complaint states no valid cause of action as
plaintiff's allegations are purely anchored on conjectures and conclusions and
not based on ultimate facts.
Plaintiff in its Opposition alleged that it is a well-settled rule, that in a motion
to dismiss based on the ground that the complaint fails to state a cause of
action, the question submitted to the court for determination is the sufficiency
of the allegation in the complaint itself. Plaintiff also alleged that the
defendants disputed the jurisdiction of the court, the parties having employeremployee relationship; this mere allegation did not serve to automatically
deprive the court of its jurisdiction duly conferred by the allegations of the
complaint; in the opinion of the defendants, a labor dispute exists, the court is
duty bound to find out if such circumstances really exist.
The Court weighing the evidence and jurisprudence in support of the
respective contention of the parties, and finding that in the case at bar,
plaintiff seeks to recover pecuniary damages, the Court gives more credence
to the decisions cited by the plaintiff, hence the special and affirmative
defenses alleged in the answer treated as a 'Motion to Dismiss' is hereby

denied."
On May 24, 1991, respondent CIGLA filed with the Court of Appeals a petition for certiorari
with preliminary injunction5 assailing the validity of the proceedings had before the regional trial
court.
After due proceedings, on March 31, 1992, the Court of Appeals promulgated its decision in
CIGLA's favor, the dispositive portion of which states:
"WHEREFORE, the Writ of Certiorari is GRANTED, and the proceedings

before respondent Judge more particularly the challenged orders are declared
null and void and respondent Judge is enjoined from taking any further action
in Civil Case No. 90-1612 except for the purpose of dismissing it. Following,
however, the disposition in San Miguel Corporation Employees Union vs.
Bersamira, the status quo ante declaration of strike shall be observed pending
the proceedings in the National Conciliation and Mediation Board,
Department of Labor and Employment, National Capital Region (Annex A of
Petition). No Costs.
SO ORDERED."
On April 29, 1992, petitioner Citibank filed a motion for reconsideration of the decision. On
February 12, 1993, the Court of Appeals denied the motion, finding that the arguments in the
motion forreconsideration are but a rehash, if not a repetition, of the arguments in its comments,
which had been considered by the Court in its decision.
Hence, the petitioner's recourse to this Court.
The Issue
The basic issue involved is whether it is the labor tribunal or the regional trial court that has
jurisdiction over the subject matter of the complaint filed by Citibank with the trial court.
Petitioner's Submission
Petitioner Citibank contends that there is no employer-employee relationship between

Citibank and the security guards represented by respondent CIGLA and that there is no "labor
dispute" in the subject controversy. The security guards were employees of El Toro security
agency, not of Citibank. Its service contract with Citibank had expired and not renewed.
The Court's Ruling
We sustain the petitioner's contention. This Court has held in many cases that "in
determining the existence of an employer-employee relationship, the following elements are
generally considered: 1) the selection and engagement of the employee; 2) the payment of
wages; 3) the power of dismissal; and 4) the employer's power to control the employee
with respect to the means and methods by which the workis to be accomplished".6 It has been
decided also that the Labor Arbiter has no jurisdiction over a claim filed where no employeremployee relationship existed between a company and the security guards assigned to it by a
security service contractor.7 In this case, it was the security agency El Toro that recruited, hired
and assigned the watchmen to their place of work. It was the security agency that was
answerable to Citibank for the conduct of its guards.
The question arises. Is there a labor dispute between Citibank and the security guards,
members of respondent CIGLA, regardless of whether they stand in the relation of employer and
employees? Article 212, paragraph l of the Labor Code provides the definition of a "labor
dispute". It "includes any controversy or matter concerning terms or conditions of employment
or the association or representation of persons in negotiating, fixing, maintaining, changing or
arranging the terms and conditions of employment, regardless of whether the disputants stand in
the proximate relation of employer and employee."
If at all, the dispute between Citibank and El Toro security agency is one regarding the
termination or non-renewal of the contract of services. This is a civil dispute8. El Toro was an
independent contractor. Thus, no employer-employee relationship existed between Citibank and
the security guard members of the union in the security agency who were assigned to secure the
bank's premises and property. Hence, there was no labor dispute and no right to strike against the
bank.
It is a basic rule of procedure that "jurisdiction of the court over the subject matter of the
action is determined by the allegations of the complaint, irrespective of whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein. The jurisdiction of
the court can not be made to depend upon the defenses set up in the answer or upon the motion to
dismiss, for otherwise, the question of jurisdiction would almost entirely depend upon the
defendant."9 "What determines the jurisdiction of the court is the nature of the action pleaded as
appearing from the allegations in the complaint. The averments therein and the character of the
relief sought are the ones to be consulted."10
In the complaint filed with the trial court, petitioner alleged that in 1983, it entered into a
contract with El Toro, a security agency, for security and protection service. The parties renewed
the contract yearly until April 22, 1990. Petitioner further alleged that from June 11, 1990, until
the filing of the complaint, El Toro security guards formerly assigned to guard Citibank premises
loitered around the bank's premises in large groups and threatened to stage a strike, which would
hamper its operations and the normal conduct of its business and that the bank would suffer
damages should a strike push through.
On the basis of the allegations of the complaint, it is safe to conclude that the dispute
involved is a civil one, not a labor dispute. 11 Consequently, we rule that jurisdiction over the
subject matter of the complaint lies with the regional trial court.
Relief
WHEREFORE, the Court hereby GRANTS the petition for review on certiorari. We
REVERSE and SET ASIDE the decision of the Court of Appeals and its resolution denying
reconsideration in CA-G. R. SP No. 25584, and REMAND the records of the case to the
Regional Trial Court, Makati, for further proceedings in line with the ruling herein
that jurisdiction over the subject matter of the complaint in Civil Case No. 90-1612, is vested
therein.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Romero, and Purisima, JJ., concur.
Kapunan, J., no part. He was a signatory of its CA decision appealed from.
SECOND DIVISION
[G.R. No. 120567. March 20, 1998]
PHILIPPINE AIRLINES, INC., petitioner, vs., NATIONAL LABOR

RELATIONS
COMMISSION,
FERDINAND
PINEDA
and
GODOFREDO CABLING,respondents.
DECISION
MARTINEZ, J.:
Can the National Labor Relations Commission (NLRC), even without a complaint for
illegal dismissal filed before the labor arbiter, entertain an action for injunction and issue
such writ enjoining petitioner Philippine Airlines, Inc. from enforcing its Orders of
dismissal against private respondents, and ordering petitioner to reinstate the private
respondents to their previous positions?
This is the pivotal issue presented before us in this petition for certiorari under Rule
65 of the Revised Rules of Court which seeks the nullification of the injunctive writ dated
April 3,1995 issued by the NLRC and the Order denying petitioner's motion for
reconsideration on the ground that the said Orders were issued in excess of jurisdiction.
Private respondents are flight stewards of the petitioner. Both were dismissed from
the service for their alleged involvement in the April 3, 1993 currency smuggling in Hong
Kong.
Aggrieved by said dismissal, private respondents filed with the NLRC a petition [1] for
injunction praying that:
"I. Upon filing of this Petition, a temporary restraining order be issued,

prohibiting respondents (petitioner herein) from effecting or enforcing the
Decision dated Feb. 22, 1995, or to reinstate petitioners temporarily while a
hearing on the propriety of the issuance of a writ of preliminary injunction is
being undertaken;
"II. After hearing, a writ of preliminary mandatory injunction be issued ordering
respondent to reinstate petitioners to their former positions pending the
hearing of this case, or, prohibiting respondent from enforcing its Decision
dated February 22,1995 while this case is pending adjudication;
"III. After hearing, that the writ of preliminary injunction as to the reliefs sought
for be made permanent, that petitioners be awarded full backwages, moral
damages of PHP 500,000.00 each and exemplary damages of PHP
500,000.00 each, attorneys fees equivalent to ten percent of whatever amount
is awarded, and the costs of suit."
On April 3, 1995, the NLRC issued a temporary mandatory injunction [2] enjoining
petitioner to cease and desist from enforcing its February 22, 1995 Memorandum of
dismissal. In granting the writ, the NLRC considered the following facts, to wit:
x x x that almost two (2) years ago, i.e. on April 15, 1993, the petitioners were
instructed to attend an investigation by respondents Security and Fraud
Prevention Sub-Department regarding an April 3, 1993 incident in Hongkong
at which Joseph Abaca, respondents Avionics Mechanic in Hongkong was
intercepted by the Hongkong Airport Police at Gate 05 xxx the ramp area of
the Kai Tak International Airport while xxx about to exit said gate carrying a
xxx bag said to contain some 2.5 million pesos in Philippine Currencies. That
at the Police Station, Mr. Abaca claimed that he just found said plastic bag at
the Skybed Section of the arrival flight PR300/03 April 93, where petitioners
served as flight stewards of said flight PR300; x x the petitioners sought a

more detailed account of what this HKG incident is all about; but instead, the
petitioners were administratively charged, a hearing on which did not push
through until almost two (2) years after, i.e. on January 20, 1995 xxx where a
confrontation between Mr. Abaca and petitioners herein was compulsorily
arranged by the respondents disciplinary board at which hearing, Abaca was
made to identify petitioners as co-conspirators; that despite the fact that the
procedure of identification adopted by respondents Disciplinary Board was
anomalous as there was no one else in the line-up (which could not be called
one) but petitioners xxx Joseph Abaca still had difficulty in identifying
petitioner Pineda as his co-conspirator, and as to petitioner Cabling, he was
implicated and pointed by Abaca only after respondents Atty. Cabatuando
pressed the former to identify petitioner Cabling as co-conspirator; that with
the hearing reset to January 25, 1995, Mr. Joseph Abaca finally gave
exculpating statements to the board in that he cleared petitioners from any
participation or from being the owners of the currencies, and at which hearing
Mr. Joseph Abaca volunteered the information that the real owner of said
money was one who frequented his headquarters in Hongkong to which
information, the Disciplinary Board Chairman, Mr. Ismael Khan, opined for the
need for another hearing to go to the bottom of the incident; that from said
statement, it appeared that Mr. Joseph Abaca was the courier, and had
another mechanic in Manila who hid the currency at the planes skybed for
Abaca to retrieve in Hongkong, which findings of how the money was found
was previously confirmed by Mr. Joseph Abaca himself when he was first
investigated by the Hongkong authorities; that just as petitioners thought that
they were already fully cleared of the charges, as they no longer received any
summons/notices on the intended additional hearings mandated by the
Disciplinary Board, they were surprised to receive on February 23, 1995 xxx a
Memorandum dated February 22, 1995 terminating their services for alleged
violation of respondents Code of Discipline effective immediately; that
sometime xxx first week of March, 1995, petitioner Pineda received another
Memorandum from respondent Mr. Juan Paraiso, advising him of his
termination effective February 3, 1995, likewise for violation of respondents
Code of Discipline; x x x"
In support of the issuance of the writ of temporary injunction, the NLRC adopted the
view that: (1) private respondents cannot be validly dismissed on the strength of
petitioner's Code of Discipline which was declared illegal by this Court in the case of
PAL, Inc. vs. NLRC, (G.R. No. 85985), promulgated August 13, 1993, for the reason
that it was formulated by the petitioner without the participation of its employees as
required in R.A. 6715, amending Article 211 of the Labor Code; (2) the whimsical,
baseless and premature dismissals of private respondents which "caused them grave
and irreparable injury" is enjoinable as private respondents are left "with no speedy and
adequate remedy at law'"except the issuance of a temporary mandatory injunction; (3)
the NLRC is empowered under Article 218 (e) of the Labor Code not only to restrain any
actual or threatened commission of any or all prohibited or unlawful acts but also to
require the performance of a particular act in any labor dispute, which, if not restrained
or performed forthwith, may cause grave or irreparable damage to any party; and (4) the
temporary mandatory power of the NLRC was recognized by this Court in the case of
Chemo-Technicshe Mfg., Inc. Employees Union,DFA, et.al. vs. Chemo-Technische Mfg.,
Inc. [G.R. No. 107031, January 25,1993].
On May 4,1995, petitioner moved for reconsideration [3] arguing that the NLRC erred:
1. in granting a temporary injunction order when it has no jurisdiction to

issue an injunction or restraining order since this may be issued only
under Article 218 of the Labor Code if the case involves or arises from
labor disputes;
2. in granting a temporary injunction order when the termination of private
respondents have long been carried out;
3. ..in ordering the reinstatement of private respondents on the basis of their
mere allegations, in violation of PAL's right to due process;
4. ..in arrogating unto itself management prerogative to discipline its
employees and divesting the labor arbiter of its original and
exclusive jurisdiction over illegal dismissal cases;
5. ..in suspending the effects of termination when such action is exclusively
within the jurisdiction of the Secretary of Labor;
6. ..in issuing the temporary injunction in the absence of any irreparable
or substantial injury to both private respondents.
On May 31,1995, the NLRC denied petitioner's motion for reconsideration, ruling:
The respondent (now petitioner), for one, cannot validly claim that we
cannot exercise our injunctive power under Article 218 (e) of the Labor
Code on the pretext that what we have here is not a labor dispute as
long as it concedes that as defined by law, a(l) Labor Dispute includes
any controversy or matter concerning terms or conditions of
employment. . If security of tenure, which has been breached by respondent
and which, precisely, is sought to be protected by our temporary mandatory
injunction (the core of controversy in this case) is not a term or condition of
employment, what then is?
xxxxxxxxx
Anent respondents second argument x x x, Article 218 (e) of the Labor
Code x x x empowered the Commission not only to issue a prohibitory
injunction, but a mandatory (to require the performance) one as well.
Besides, as earlier discussed, we already exercised (on August 23,1991)
this temporary mandatory injunctive power in the case of ChemoTechnische Mfg., Inc. Employees Union-DFA et.al. vs. Chemo-Technishe
Mfg., Inc., et. al. (supra) and effectively enjoined one (1) month old
dismissals by Chemo-Technische and that our aforesaid mandatory
exercise of injunctive power, when questioned through a petition for
certiorari, was sustained by the Third Division of the Supreme court per
its Resolution dated January 25,1993.
xxxxxxxxx
Respondents fourth argument that petitioner's remedy for their
dismissals is 'to file an illegal dismissal case against PAL which cases
are within the original and exclusive jurisdiction of the Labor Arbiter' is
ignorant. In requiring as a condition for the issuance of a 'temporary or
permanent injunction'- '(4) That complainant has no adequate remedy at law;'
Article 218 (e) of the Labor Code clearly envisioned adequacy , and not
plain availability of a remedy at law as an alternative bar to the issuance
of an injunction. An illegal dismissal suit (which takes, on its expeditious
side, three (3) years before it can be disposed of) while available as a
remedy under Article 217 (a) of the Labor Code, is certainly not an
'adequate; remedy at law. Ergo, it cannot, as an alternative remedy, bar
our exercise of that injunctive power given us by Article 218 (e) of the
Code.
xxx xxx xxx
Thus, Article 218 (e), as earlier discussed [which empowers this Commission
'to require the performance of a particular act' (such as our requiring
respondent 'to cease and desist from enforcing' its whimsical memoranda of
dismissals and 'instead to reinstate petitioners to their respective position held
prior to their subject dismissals') in 'any labor dispute which, if not xxx
performed forthwith, may cause grave and irreparable damage to any party']
stands as the sole 'adequate remedy at law' for petitioners here.
Finally, the respondent, in its sixth argument claims that even if its acts of
dismissing petitioners 'may be great, still the same is capable of
compensation', and that consequently, 'injunction need not be issued where

adequate compensation at law could be obtained'. Actually, what respondent
PAL argues here is that we need not interfere in its whimsical dismissals of
petitioners as, after all, it can pay the latter its backwages. x x x
But just the same, we have to stress that Article 279 does not speak alone of
backwages as an obtainable relief for illegal dismissal; that reinstatement as well is the
concern of said law, enforceable when necessary, through Article 218 (e) of the Labor
Code (without need of an illegal dismissal suit under Article 217 (a) of the Code) if such
whimsical and capricious act of illegal dismissal will 'cause grave or irreparable injury to
a party'. x x x " [4]
Hence, the present recourse.
Generally, injunction is a preservative remedy for the protection of one's substantive
rights or interest. It is not a cause of action in itself but merely a provisional remedy,
an adjunct to a main suit. It is resorted to only when there is a pressing necessity to
avoid injurious consequences which cannot be remedied under any standard of
compensation. The application of the injunctive writ rests upon the existence of an
emergency or of a special reason before the main case be regularly heard. The
essential conditions for granting such temporary injunctive relief are that the complaint
alleges facts which appear to be sufficient to constitute a proper basis for injunction and
that on the entire showing from the contending parties, the injunction is reasonably
necessary to protect the legal rights of the plaintiff pending the litigation. [5] Injunction is
also a special equitable relief granted only in cases where there is no plain, adequate
and complete remedy at law.[6]
In labor cases, Article 218 of the Labor Code empowers the NLRC-
"(e) To enjoin or restrain any actual or threatened commission of any or all

prohibited or unlawful acts or to require the performance of a particular act in
any labor dispute which, if not restrained or performed forthwith, may cause
grave or irreparable damage to any party or render ineffectual any
decision in favor of such party; x x x." (Emphasis Ours)
Complementing the above-quoted provision, Sec. 1, Rule XI of the New Rules of
Procedure of the NLRC, pertinently provides as follows:
"Section 1. Injunction in Ordinary Labor Dispute.-A preliminary injunction or a

restraining order may be granted by the Commission through its divisions
pursuant to the provisions of paragraph (e) of Article 218 of the Labor Code,
as amended, when it is established on the bases of the sworn allegations in the
petition that the acts complained of, involving or arising from any labor dispute
before the Commission, which, if not restrained or performed forthwith, may cause
grave or irreparable damage to any party or render ineffectual any decision in favor of
such party.
xxx xxx xxx

The foregoing ancillary power may be exercised by the Labor Arbiters only as an
incident to the cases pending before them in order to preserve the rights of the parties
during the pendency of the case, but excluding labor disputes involving strikes or
lockout. [7] (Emphasis Ours)
From the foregoing provisions of law, the power of the NLRC to issue an injunctive
writ originates from "any labor dispute" upon application by a party thereof, which
application if not granted "may cause grave or irreparable damage to any party or
render ineffectual any decision in favor of such party."
The term "labor dispute" is defined as "any controversy or matter concerning terms
and conditions of employment or the association or representation of persons in
negotiating, fixing, maintaining, changing, or arranging the terms and conditions of
employment regardless of whether or not the disputants stand in the proximate relation
of employers and employees."[8]
The term "controversy" is likewise defined as "a litigated question; adversary
proceeding in a court of law; a civil action or suit, either at law or in equity; a
justiciable dispute."[9]
A "justiciable controversy" is "one involving an active antagonistic assertion of a
legal right on one side and a denial thereof on the other concerning a real, and not a
mere theoretical question or issue."[10]
Taking into account the foregoing definitions, it is an essential requirement that
there must first be a labor dispute between the contending parties before the labor
arbiter. In the present case, there is no labor dispute between the petitioner and private
respondents as there has yet been no complaint for illegal dismissal filed with the labor
arbiter by the private respondents against the petitioner.
The petition for injunction directly filed before the NLRC is in reality
an action for illegal dismissal. This is clear from the allegations in the petition which
prays for: reinstatement of private respondents; award of full backwages, moral and
exemplary damages; and attorney's fees. As such, the petition should have been filed
with the labor arbiter who has the original and exclusive jurisdiction to hear and decide
the following cases involving all workers, whether agricultural or non-agricultural:
(1) Unfair labor practice;

(2) Termination disputes;
(3) 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;
(4) Claims for actual, moral, exemplary and other forms of damages
arising from the employer-employee relations;
(5) Cases arising from any violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
(6) 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 (P 5,000.00), whether or not accompanied with a claim for reinstatement. [11]
The jurisdiction conferred by the foregoing legal provision to the labor arbiter is
both original and exclusive, meaning, no other officer or tribunal can take cognizance
of, hear and decide any of the cases therein enumerated. The only
exceptions are where the Secretary of Labor and Employment or the NLRC exercises
the power of compulsory arbitration, or the parties agree to submit the matter to
voluntary arbitration pursuant to Article 263 (g) of the Labor Code, the pertinent portions
of which reads:
"(g) When, in his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national interest,
the Secretary of Labor and Employment may assume jurisdiction over the
dispute and decide it or certify the same to the Commission for compulsory
arbitration. Such assumption or certification shall have the effect of
automatically enjoining the intended or impending strike or lockout as
specified in the assumption or certification order. If one has already taken
place at the time of assumption or certification, all striking or locked out
employees shall immediately resume operations and readmit all workers
under the same terms and conditions prevailing before the strike or lockout.
The Secretary of Labor and Employment or the Commission may seek the
assistance of law enforcement agencies to ensure compliance with this
provision as well as with such orders as he may issue to enforce the same.
xxxxxxxxx"
On the other hand, the NLRC shall have exclusive appellate jurisdiction over all
cases decided by labor arbiters as provided in Article 217(b) of the Labor Code. In short,
the jurisdiction of the NLRC in illegal dismissal cases is appellate in nature and,
therefore, it cannot entertain the private respondents' petition for injunction which
challenges the dismissal orders of petitioner. Article 218(e) of the Labor Code does not
provide blanket authority to the NLRC or any of its divisions to issue writs of injunction,
considering that Section 1 of Rule XI of the New Rules of Procedure of the NLRC
makes injunction only an ancillary remedy in ordinary labor disputes" [12]
Thus, the NLRC exceeded its jurisdiction when it issued the assailed Order granting
private respondents' petition for injunction and ordering the petitioner to reinstate private
respondents.
The argument of the NLRC in its assailed Order that to file an illegal dismissal suit
with the labor arbiter is not an "adequate" remedy since it takes three (3) years before it
can be disposed of, is patently erroneous. An "adequate" remedy at law has been
defined as one "that affords relief with reference to the matter in controversy, and which
is appropriate to the particular circumstances of the case." [13] It is a remedy which is
equally beneficial, speedy and sufficient which will promptly relieve the petitioner from
the injurious effects of the acts complained of.[14]
Under the Labor Code, the ordinary and proper recourse of an illegally dismissed
employee is to file a complaint for illegal dismissal with the labor arbiter. [15] In the case at
bar, private respondents disregarded this rule and directly went to the
NLRC through a petition for injunction praying that petitioner be enjoined from enforcing
its dismissal orders. In Lamb vs. Phipps,[16] we ruled that if the remedy is specifically
provided by law, it is presumed to be adequate. Moreover, the preliminary mandatory
injunction prayed for by the private respondents in their petition before the NLRC can
also be entertained by the labor arbiter who, as shown earlier, has the ancillary power to
issue preliminary injunctions or restraining orders as an incident in the cases pending
before him in order to preserve the rights of the parties during the pendency of the case.
[17]
Furthermore, an examination of private respondents' petition for injunction reveals

that it has no basis since there is no showing of any urgency or irreparable injury
which the private respondents might suffer. An injury is considered irreparable if it is of
such constant and frequent recurrence that no fair and reasonable redress can be had
therefor in a court of law,[18] or where there is no standard by which their amount can be
measured with reasonable accuracy, that is, it is not susceptible of mathematical
computation. It is considered irreparable injury when it cannot be adequately
compensated in damages due to the nature of the injury itself or the nature of the right
or property injured or when there exists no certain pecuniary standard for the
measurement of damages.[19]
In the case at bar, the alleged injury which private respondents stand to suffer by
reason of their alleged illegal dismissal can be adequately compensated and therefore,
there exists no "irreparable injury," as defined above which would necessitate the
issuance of the injunction sought for. Article 279 of the Labor Code provides that an
employee who is unjustly dismissed from employment shall be entitled to reinstatement,
without loss of seniority rights and other privileges, and to the payment of full
backwages, inclusive of allowances, and to other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his
actual reinstatement.
The ruling of the NLRC that the Supreme Court upheld its power to issue temporary
mandatory injunction orders in the case of Chemo-Technische Mfg., Inc. Employees
Union-DFA, et.al. vs. Chemo-Technische Mfg., Inc. et.al., docketed as G.R. No. 107031,
is misleading. As correctly argued by the petitioner, no such pronouncement was made
by this Court in said case. On January 25,1993, we issued a Minute Resolution in the
subject case stating as follows:
"Considering the allegations contained, the issues raised and the arguments
adduced in the petition for certiorari , as well as the comments of both public
and private respondents thereon, and the reply of the petitioners to private
respondent's motion to dismiss the petition, the Court Resolved to DENY the
same for being premature."
It is clear from the above resolution that we did not in anyway sustain the action of
the NLRC in issuing such temporary mandatory injunction but rather we dismissed the
petition as the NLRC had yet to rule upon the motion for reconsideration filed by
peitioner. Thus, the minute resolution denying the petition for being prematurely filed.
Finally, an injunction, as an extraordinary remedy, is not favored in labor law
considering that it generally has not proved to be an effective means of settling labor
disputes.[20] It has been the policy of the State to encourage the parties to use the nonjudicial process of negotiation and compromise, mediation and arbitration. [21] Thus,
injunctions may be issued only in cases of extreme necessity based on legal grounds
clearly established, after due consultations or hearing and when all efforts at conciliation
are exhausted which factors, however, are clearly absent in the present case.
WHEREFORE, the petition is hereby GRANTED. The assailed Orders dated April
3,1995 and May 31,1995, issued by the National Labor Relations Commission (First
Division), in NLRC NCR IC No. 000563-95, are hereby REVERSED and SET ASIDE.
SO ORDERED.
Regalado (Chairman), Melo, Puno, and Mendoza, JJ., concur.
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 159577
May 3, 2006
CHARLITO PEARANDA, Petitioner,

vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.
DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted from the provisions of the
Labor Code on labor standards. Since petitioner belongs to this class of employees, he is not
entitled to overtime pay and premium pay for working on rest days.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27,
20032 and July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358. The
earlier Resolution disposed as follows:
"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC) challenged in
the CA disposed as follows:
"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding overtime pay
and premium pay for rest day to complainant is hereby REVERSED and SET ASIDE, and the
complaint in the above-entitled case dismissed for lack of merit.5
The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga
Plywood Corporation (BPC) to take charge of the operations and maintenance of its steam plant
boiler.6 In May 2001, Pearanda filed a Complaint for illegal dismissal with money claims against
BPC and its general manager, Hudson Chua, before the NLRC.7
After the parties failed to settle amicably, the labor arbiter 8 directed the parties to file their position
papers and submit supporting documents.9 Their respective allegations are summarized by the labor
arbiter as follows:
"[Pearanda] through counsel in his position paper alleges that he was employed by respondent
[Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as Foreman/Boiler Head/Shift
Engineer until he was illegally terminated on December 19, 2000. Further, [he] alleges that his
services [were] terminated without the benefit of due process and valid grounds in accordance with
law. Furthermore, he was not paid his overtime pay, premium pay for working during holidays/rest
days, night shift differentials and finally claims for payment of damages and attorneys fees having
been forced to litigate the present complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and existing under
Philippine laws and is represented herein by its General Manager HUDSON CHUA, [the] individual
respondent. Respondents thru counsel allege that complainants separation from service was done
pursuant to Art. 283 of the Labor Code. The respondent [BPC] was on temporary closure due to
repair and general maintenance and it applied for clearance with the Department of Labor and
Employment, Regional Office No. XI to shut down and to dismiss employees (par. 2 position paper).
And due to the insistence of herein complainant he was paid his separation benefits (Annexes C and
D, ibid). Consequently, when respondent [BPC] partially reopened in January 2001, [Pearanda]
failed to reapply. Hence, he was not terminated from employment much less illegally. He opted to
severe employment when he insisted payment of his separation benefits. Furthermore, being a
managerial employee he is not entitled to overtime pay and if ever he rendered services beyond the
normal hours of work, [there] was no office order/or authorization for him to do so. Finally,
respondents allege that the claim for damages has no legal and factual basis and that the instant
complaint must necessarily fail for lack of merit."10
The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint was
premature because he was still employed by BPC.11 The temporary closure of BPCs plant did not
terminate his employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioners money claims for illegal dismissal was also weakened by
his quitclaim and admission during the clarificatory conference that he accepted separation benefits,
sick and vacation leave conversions and thirteenth month pay.12
Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for working on
rest days, and attorneys fees in the total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and premium
pay for working on rest days. According to the Commission, petitioner was not entitled to these
awards because he was a managerial employee.14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for Certiorari. The
appellate court held that he failed to: 1) attach copies of the pleadings submitted before the labor
arbiter and NLRC; and 2) explain why the filing and service of the Petition was not done by personal
service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that petitioner
still failed to submit the pleadings filed before the NLRC.16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:
"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction when it
entertained the APPEAL of the respondent[s] despite the lapse of the mandatory period of TEN
DAYS.
1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of jurisdiction
when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16, 2002
REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor arbiter] with
respect to the following:
"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common employee entitled
to monetary benefits under Art. 82 [of the Labor Code].
"II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and OTHER
MONETARY BENEFITS."18
The Courts Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearandas Petition on purely technical grounds, particularly with regard to the
failure to submit supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents accompanying
the petition before the CA sufficiently supported the allegations therein. Citing this case, PiglasKamao v. NLRC20 stayed the dismissal of an appeal in the exercise of its equity jurisdiction to order
the adjudication on the merits.
The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to
challenge the finding that he was a managerial employee.21 In his Motion for Reconsideration,
petitioner also submitted the pleadings before the labor arbiter in an attempt to comply with the CA
rules.22 Evidently, the CA could have ruled on the Petition on the basis of these attachments.
Petitioner should be deemed in substantial compliance with the procedural requirements.
Under these extenuating circumstances, the Court does not hesitate to grant liberality in favor of
petitioner and to tackle his substantive arguments in the present case. Rules of procedure must be
adopted to help promote, not frustrate, substantial justice.23 The Court frowns upon the practice of
dismissing cases purely on procedural grounds.24 Considering that there was substantial
compliance,25 a liberal interpretation of procedural rules in this labor case is more in keeping with the
constitutional mandate to secure social justice.26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter should
be filed within 10 days from receipt thereof.27
Petitioners claim that respondents filed their appeal beyond the required period is not substantiated.
In the pleadings before us, petitioner fails to indicate when respondents received the Decision of the
labor arbiter. Neither did the petitioner attach a copy of the challenged appeal. Thus, this Court has
no means to determine from the records when the 10-day period commenced and terminated. Since
petitioner utterly failed to support his claim that respondents appeal was filed out of time, we need
not belabor that point. The parties alleging have the burden of substantiating their allegations. 28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the award
granted by the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the coverage of labor standards.
Labor standards provide the working conditions of employees, including entitlement to overtime pay
and premium pay for working on rest days.29 Under this provision, managerial employees are "those
whose primary duty consists of the management of the establishment in which they are employed or
of a department or subdivision."30
The Implementing Rules of the Labor Code state that managerial employees are those who meet
the following conditions:
"(1) Their primary duty consists of the management of the establishment in which they are
employed or of a department or subdivision thereof;
"(2) They customarily and regularly direct the work of two or more employees therein;
"(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion or any
other change of status of other employees are given particular weight." 31
The Court disagrees with the NLRCs finding that petitioner was a managerial employee. However,
petitioner was a member of the managerial staff, which also takes him out of the coverage of labor
standards. Like managerial employees, officers and members of the managerial staff are not entitled
to the provisions of law on labor standards.32 The Implementing Rules of the Labor Code define
members of a managerial staff as those with the following duties and responsibilities:
"(1) The primary duty consists of the performance of work directly related to management
policies of the employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose primary
duty consists of the management of the establishment in which he is employed or
subdivision thereof; or (ii) execute under general supervision work along specialized or
technical lines requiring special training, experience, or knowledge; or (iii) execute under
general supervision special assignments and tasks; and
"(4) who do not devote more than 20 percent of their hours worked in a workweek to
activities which are not directly and closely related to the performance of the work described
in paragraphs (1), (2), and (3) above."33
As shift engineer, petitioners duties and responsibilities were as follows:
"1. To supply the required and continuous steam to all consuming units at minimum cost.
"2. To supervise, check and monitor manpower workmanship as well as operation of boiler
and accessories.
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.
"6. Recommend parts and supplies purchases.
"7. To recommend personnel actions such as: promotion, or disciplinary action.
"8. To check water from the boiler, feedwater and softener, regenerate softener if beyond
hardness limit.
"9. Implement Chemical Dosing.
"10. Perform other task as required by the superior from time to time."34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a
member of the managerial staff. His duties and responsibilities conform to the definition of a member
of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved overseeing
the operation of the machines and the performance of the workers in the engineering section. This
work necessarily required the use of discretion and independent judgment to ensure the proper
functioning of the steam plant boiler. As supervisor, petitioner is deemed a member of the
managerial staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he stated that
he was the foreman responsible for the operation of the boiler.36 The term foreman implies that he
was the representative of management over the workers and the operation of the
department.37 Petitioners evidence also showed that he was the supervisor of the steam plant. 38 His
classification as supervisor is further evident from the manner his salary was paid. He belonged to
the 10% of respondents 354 employees who were paid on a monthly basis; the others were paid
only on a daily basis.39
On the basis of the foregoing, the Court finds no justification to award overtime pay and premium
pay for rest days to petitioner.
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.
ARTEMIO V. PANGANIBAN
Chief Justice
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 169717
March 16, 2011
SAMAHANG MANGGAGAWA SA CHARTER CHEMICAL SOLIDARITY OF UNIONS IN THE

PHILIPPINES FOR EMPOWERMENT AND REFORMS (SMCC-SUPER), ZACARRIAS JERRY
VICTORIO-Union President,Petitioner,
vs.
CHARTER CHEMICAL and COATING CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
The right to file a petition for certification election is accorded to a labor organization provided that it
complies with the requirements of law for proper registration. The inclusion of supervisory
employees in a labor organization seeking to represent the bargaining unit of rank-and-file
employees does not divest it of its status as a legitimate labor organization. We apply these
principles to this case.
This Petition for Review on Certiorari seeks to reverse and set aside the Court of Appeals March 15,
2005 Decision1 in CA-G.R. SP No. 58203, which annulled and set aside the January 13, 2000
Decision2 of the Department of Labor and Employment (DOLE) in OS-A-6-53-99 (NCR-OD-M-9902019) and the September 16, 2005 Resolution3 denying petitioner unions motion for reconsideration.
Factual Antecedents
On February 19, 1999, Samahang Manggagawa sa Charter Chemical Solidarity of Unions in the
Philippines for Empowerment and Reforms (petitioner union) filed a petition for certification election
among the regular rank-and-file employees of Charter Chemical and Coating Corporation
(respondent company) with the Mediation Arbitration Unit of the DOLE, National Capital Region.
On April 14, 1999, respondent company filed an Answer with Motion to Dismiss 4 on the ground that
petitioner union is not a legitimate labor organization because of (1) failure to comply with the
documentation requirements set by law, and (2) the inclusion of supervisory employees within
petitioner union.5
Med-Arbiters Ruling
On April 30, 1999, Med-Arbiter Tomas F. Falconitin issued a Decision6 dismissing the petition for
certification election. The Med-Arbiter ruled that petitioner union is not a legitimate labor organization
because the Charter Certificate, "Sama-samang Pahayag ng Pagsapi at Authorization," and
"Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas" were not executed under oath and certified by the union secretary and attested to
by the union president as required by Section 235 of the Labor Code 7 in relation to Section 1, Rule
VI of Department Order (D.O.) No. 9, series of 1997. The union registration was, thus, fatally
defective.
The Med-Arbiter further held that the list of membership of petitioner union consisted of 12
batchman, mill operator and leadman who performed supervisory functions. Under Article 245 of the
Labor Code, said supervisory employees are prohibited from joining petitioner union which seeks to
represent the rank-and-file employees of respondent company.
As a result, not being a legitimate labor organization, petitioner union has no right to file a petition for
certification election for the purpose of collective bargaining.
Department of Labor and Employments Ruling
On July 16, 1999, the DOLE initially issued a Decision8 in favor of respondent company dismissing
petitioner unions appeal on the ground that the latters petition for certification election was filed out
of time. Although the DOLE ruled, contrary to the findings of the Med-Arbiter, that the charter
certificate need not be verified and that there was no independent evidence presented to establish
respondent companys claim that some members of petitioner union were holding supervisory
positions, the DOLE sustained the dismissal of the petition for certification after it took judicial notice
that another union, i.e., Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating
Corporation, previously filed a petition for certification election on January 16, 1998. The Decision
granting the said petition became final and executory on September 16, 1998 and was remanded for
immediate implementation. Under Section 7, Rule XI of D.O. No. 9, series of 1997, a motion for
intervention involving a certification election in an unorganized establishment should be filed prior to
the finality of the decision calling for a certification election. Considering that petitioner union filed its
petition only on February 14, 1999, the same was filed out of time.
On motion for reconsideration, however, the DOLE reversed its earlier ruling. In its January 13, 2000
Decision, the DOLE found that a review of the records indicates that no certification election was
previously conducted in respondent company. On the contrary, the prior certification election filed by
Pinag-isang Lakas Manggagawa sa Charter Chemical and Coating Corporation was, likewise,
denied by the Med-Arbiter and, on appeal, was dismissed by the DOLE for being filed out of time.
Hence, there was no obstacle to the grant of petitioner unions petition for certification election, viz:
WHEREFORE, the motion for reconsideration is hereby GRANTED and the decision of this Office
dated 16 July 1999 is MODIFIED to allow the certification election among the regular rank-and-file
employees of Charter Chemical and Coating Corporation with the following choices:
1. Samahang Manggagawa sa Charter Chemical-Solidarity of Unions in the Philippines for
Empowerment and Reform (SMCC-SUPER); and
2. No Union.
Let the records of this case be remanded to the Regional Office of origin for the immediate conduct
of a certification election, subject to the usual pre-election conference.
SO DECIDED.9
Court of Appeals Ruling
On March 15, 2005, the CA promulgated the assailed Decision, viz:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution dated
January 13, 2000 and February 17, 2000 are hereby [ANNULLED] and SET ASIDE.
SO ORDERED.10
In nullifying the decision of the DOLE, the appellate court gave credence to the findings of the MedArbiter that petitioner union failed to comply with the documentation requirements under the Labor
Code. It, likewise, upheld the Med-Arbiters finding that petitioner union consisted of both rank-andfile and supervisory employees. Moreover, the CA held that the issues as to the legitimacy of
petitioner union may be attacked collaterally in a petition for certification election and the infirmity in
the membership of petitioner union cannot be remedied through the exclusion-inclusion proceedings
in a pre-election conference pursuant to the ruling in Toyota Motor Philippines v. Toyota Motor
Philippines Corporation Labor Union.11 Thus, considering that petitioner union is not a legitimate
labor organization, it has no legal right to file a petition for certification election.
Issues
I
Whether x x x the Honorable Court of Appeals committed grave abuse of discretion tantamount to
lack of jurisdiction in granting the respondent [companys] petition for certiorari (CA G.R. No. SP No.
58203) in spite of the fact that the issues subject of the respondent company[s] petition was already
settled with finality and barred from being re-litigated.
II
lack of jurisdiction in holding that the alleged mixture of rank-and-file and supervisory employee[s] of
petitioner [unions] membership is [a] ground for the cancellation of petitioner [unions] legal
personality and dismissal of [the] petition for certification election.
III
lack of jurisdiction in holding that the alleged failure to certify under oath the local charter certificate
issued by its mother federation and list of the union membership attending the organizational
meeting [is a ground] for the cancellation of petitioner [unions] legal personality as a labor
organization and for the dismissal of the petition for certification election. 12
Petitioner Unions Arguments
Petitioner union claims that the litigation of the issue as to its legal personality to file the subject
petition for certification election is barred by the July 16, 1999 Decision of the DOLE. In this decision,
the DOLE ruled that petitioner union complied with all the documentation requirements and that
there was no independent evidence presented to prove an illegal mixture of supervisory and rankand-file employees in petitioner union. After the promulgation of this Decision, respondent company
did not move for reconsideration, thus, this issue must be deemed settled.
Petitioner union further argues that the lack of verification of its charter certificate and the alleged
illegal composition of its membership are not grounds for the dismissal of a petition for certification
election under Section 11, Rule XI of D.O. No. 9, series of 1997, as amended, nor are they grounds
for the cancellation of a unions registration under Section 3, Rule VIII of said issuance. It contends
that what is required to be certified under oath by the local unions secretary or treasurer and
attested to by the local unions president are limited to the unions constitution and by-laws,
statement of the set of officers, and the books of accounts.
Finally, the legal personality of petitioner union cannot be collaterally attacked but may be
questioned only in an independent petition for cancellation pursuant to Section 5, Rule V, Book IV of
the Rules to Implement the Labor Code and the doctrine enunciated in Tagaytay Highlands
International Golf Club Incoprorated v. Tagaytay Highlands Empoyees Union-PTGWO.13
Respondent Companys Arguments
Respondent company asserts that it cannot be precluded from challenging the July 16, 1999
Decision of the DOLE. The said decision did not attain finality because the DOLE subsequently
reversed its earlier ruling and, from this decision, respondent company timely filed its motion for
reconsideration.
On the issue of lack of verification of the charter certificate, respondent company notes that Article
235 of the Labor Code and Section 1, Rule VI of the Implementing Rules of Book V, as amended by
D.O. No. 9, series of 1997, expressly requires that the charter certificate be certified under oath.
It also contends that petitioner union is not a legitimate labor organization because its composition is
a mixture of supervisory and rank-and-file employees in violation of Article 245 of the Labor Code.
Respondent company maintains that the ruling in Toyota Motor Philippines vs. Toyota Motor
Philippines Labor Union14 continues to be good case law. Thus, the illegal composition of petitioner
union nullifies its legal personality to file the subject petition for certification election and its legal
personality may be collaterally attacked in the proceedings for a petition for certification election as
was done here.
Our Ruling
The petition is meritorious.
The issue as to the legal personality of petitioner union is not barred by the July 16, 1999 Decision
of the DOLE.
A review of the records indicates that the issue as to petitioner unions legal personality has been
timely and consistently raised by respondent company before the Med-Arbiter, DOLE, CA and now
this Court. In its July 16, 1999 Decision, the DOLE found that petitioner union complied with the
documentation requirements of the Labor Code and that the evidence was insufficient to establish
that there was an illegal mixture of supervisory and rank-and-file employees in its membership.
Nonetheless, the petition for certification election was dismissed on the ground that another union
had previously filed a petition for certification election seeking to represent the same bargaining unit
in respondent company.
Upon motion for reconsideration by petitioner union on January 13, 2000, the DOLE reversed its
previous ruling. It upheld the right of petitioner union to file the subject petition for certification
election because its previous decision was based on a mistaken appreciation of facts. 15 From this
adverse decision, respondent company timely moved for reconsideration by reiterating its previous
arguments before the Med-Arbiter that petitioner union has no legal personality to file the subject
petition for certification election.
The July 16, 1999 Decision of the DOLE, therefore, never attained finality because the parties timely
moved for reconsideration. The issue then as to the legal personality of petitioner union to file the
certification election was properly raised before the DOLE, the appellate court and now this Court.
The charter certificate need not be certified under oath by the local unions secretary or treasurer
and attested to by its president.
Preliminarily, we must note that Congress enacted Republic Act (R.A.) No. 9481 16 which took effect
on June 14, 2007.17 This law introduced substantial amendments to the Labor Code. However, since
the operative facts in this case occurred in 1999, we shall decide the issues under the pertinent legal
provisions then in force (i.e., R.A. No. 6715,18 amending Book V of the Labor Code, and the rules
and regulations19 implementing R.A. No. 6715, as amended by D.O. No. 9,20
series of 1997) pursuant to our ruling in Republic v. Kawashima Textile Mfg., Philippines, Inc.21
In the main, the CA ruled that petitioner union failed to comply with the requisite documents for
registration under Article 235 of the Labor Code and its implementing rules. It agreed with the MedArbiter that the Charter Certificate, Sama-samang Pahayag ng Pagsapi at Authorization, and
Listahan ng mga Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa
Saligang Batas were not executed under oath. Thus, petitioner union cannot be accorded the status
of a legitimate labor organization.
We disagree.
The then prevailing Section 1, Rule VI of the Implementing Rules of Book V, as amended by D.O.
No. 9, series of 1997, provides:
Section 1. Chartering and creation of a local chapter A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following:
(a) A charter certificate issued by the federation or national union indicating the creation or
establishment of the local/chapter;
(b) The names of the local/chapters officers, their addresses, and the principal office of the
local/chapter; and
(c) The local/chapters constitution and by-laws provided that where the local/chapters
constitution and by-laws [are] the same as [those] of the federation or national union, this
fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the
Treasurer of the local/chapter and attested to by its President.
As readily seen, the Sama-samang Pahayag ng Pagsapi at Authorization and Listahan ng mga
Dumalo sa Pangkalahatang Pulong at mga Sumang-ayon at Nagratipika sa Saligang Batas are not
among the documents that need to be submitted to the Regional Office or Bureau of Labor Relations
in order to register a labor organization. As to the charter certificate, the above-quoted rule indicates
that it should be executed under oath. Petitioner union concedes and the records confirm that its
charter certificate was not executed under oath. However, in San Miguel Corporation (Mandaue
Packaging Products Plants) v. Mandaue Packing Products Plants-San Miguel Corporation Monthlies
Rank-and-File Union-FFW (MPPP-SMPP-SMAMRFU-FFW),22 which was decided under the
auspices of D.O. No. 9, Series of 1997, we ruled
In San Miguel Foods-Cebu B-Meg Feed Plant v. Hon. Laguesma, 331 Phil. 356 (1996), the Court
ruled that it wasnot necessary for the charter certificate to be certified and attested by the
local/chapter officers. Id. While this ruling was based on the interpretation of the previous
Implementing Rules provisions which were supplanted by the 1997 amendments, we believe
that the same doctrine obtains in this case. Considering that the charter certificate is prepared
and issued by the national union and not the local/chapter, it does not make sense to have the
local/chapters officers x x x certify or attest to a document which they had no hand in the
preparation of.23 (Emphasis supplied)
In accordance with this ruling, petitioner unions charter certificate need not be executed under oath.
Consequently, it validly acquired the status of a legitimate labor organization upon submission of (1)
its charter certificate,24 (2) the names of its officers, their addresses, and its principal office, 25 and (3)
its constitution and by-laws26 the last two requirements having been executed under oath by the
proper union officials as borne out by the records.
The mixture of rank-and-file and supervisory employees in petitioner union does not nullify its legal
personality as a legitimate labor organization.
The CA found that petitioner union has for its membership both rank-and-file and supervisory
employees. However, petitioner union sought to represent the bargaining unit consisting of rank-andfile employees. Under Article 24527 of the Labor Code, supervisory employees are not eligible for
membership in a labor organization of rank-and-file employees. Thus, the appellate court ruled that
petitioner union cannot be considered a legitimate labor organization pursuant to Toyota Motor
Philippines v. Toyota Motor Philippines Corporation Labor Union28(hereinafter Toyota).
Preliminarily, we note that petitioner union questions the factual findings of the Med-Arbiter, as
upheld by the appellate court, that 12 of its members, consisting of batchman, mill operator and
leadman, are supervisory employees. However, petitioner union failed to present any rebuttal
evidence in the proceedings below after respondent company submitted in evidence the job
descriptions29 of the aforesaid employees. The job descriptions indicate that the aforesaid employees
exercise recommendatory managerial actions which are not merely routinary but require the use of
independent judgment, hence, falling within the definition of supervisory employees under Article
212(m)30 of the Labor Code. For this reason, we are constrained to agree with the Med-Arbiter, as
upheld by the appellate court, that petitioner union consisted of both rank-and-file and supervisory
employees.
Nonetheless, the inclusion of the aforesaid supervisory employees in petitioner union does not divest
it of its status as a legitimate labor organization. The appellate courts reliance on Toyota is
misplaced in view of this Courts subsequent ruling in Republic v. Kawashima Textile Mfg.,
Philippines, Inc.31 (hereinafter Kawashima). InKawashima, we explained at length how and why
the Toyota doctrine no longer holds sway under the altered state of the law and rules applicable to
this case, viz:
R.A. No. 6715 omitted specifying the exact effect any violation of the prohibition [on the comingling of supervisory and rank-and-file employees] would bring about on the legitimacy of
a labor organization.
It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended Omnibus Rules)
which supplied the deficiency by introducing the following amendment to Rule II (Registration of
Unions):
"Sec. 1. Who may join unions. - x x x Supervisory employees and security guards shall not be
eligible for membership in a labor organization of the rank-and-file employees but may join,
assist or form separate labor organizations of their own; Provided, that those supervisory
employees who are included in an existing rank-and-file bargaining unit, upon the effectivity of
Republic Act No. 6715, shall remain in that unit x x x. (Emphasis supplied) and Rule V
(Representation Cases and Internal-Union Conflicts) of the Omnibus Rules, viz:
"Sec. 1. Where to file. - A petition for certification election may be filed with the Regional Office which
has jurisdiction over the principal office of the employer. The petition shall be in writing and under
oath.
Sec. 2. Who may file. - Any legitimate labor organization or the employer, when requested to bargain
collectively, may file the petition.
The petition, when filed by a legitimate labor organization, shall contain, among others:
xxxx
(c) description of the bargaining unit which shall be the employer unit unless circumstances
otherwise require; and provided further, that the appropriate bargaining unit of the rank-andfile employees shall not include supervisory employees and/or security guards. (Emphasis
supplied)
By that provision, any questioned mingling will prevent an otherwise legitimate and duly registered
labor organization from exercising its right to file a petition for certification election.
Thus, when the issue of the effect of mingling was brought to the fore in Toyota, the Court, citing
Article 245 of the Labor Code, as amended by R.A. No. 6715, held:
"Clearly, based on this provision, a labor organization composed of both rank-and-file and
supervisory employees is no labor organization at all. It cannot, for any guise or purpose, be a
legitimate labor organization. Not being one, an organization which carries a mixture of rankand-file and supervisory employees cannot possess any of the rights of a legitimate labor
organization, including the right to file a petition for certification election for the purpose of
collective bargaining. It becomes necessary, therefore, anterior to the granting of an order
allowing a certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article 245 of the
Labor Code.
xxxx
In the case at bar, as respondent union's membership list contains the names of at least twentyseven (27) supervisory employees in Level Five positions, the union could not, prior to purging itself
of its supervisory employee members, attain the status of a legitimate labor organization. Not being
one, it cannot possess the requisite personality to file a petition for certification election." (Emphasis
supplied)
In Dunlop, in which the labor organization that filed a petition for certification election was one for
supervisory employees, but in which the membership included rank-and-file employees, the Court
reiterated that such labor organization had no legal right to file a certification election to represent a
bargaining unit composed of supervisors for as long as it counted rank-and-file employees among its
members.
It should be emphasized that the petitions for certification election involved
in Toyota and Dunlop were filed on November 26, 1992 and September 15, 1995, respectively;
hence, the 1989 Rules was applied in both cases.
But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further amended by
Department Order No. 9, series of 1997 (1997 Amended Omnibus Rules). Specifically, the
requirement under Sec. 2(c) of the 1989 Amended Omnibus Rules that the petition for certification
election indicate that the bargaining unit of rank-and-file employees has not been mingled with
supervisory employees was removed. Instead, what the 1997 Amended Omnibus Rules requires is
a plain description of the bargaining unit, thus:
Rule XI
Certification Elections
xxxx
Sec. 4. Forms and contents of petition. - The petition shall be in writing and under oath and shall
contain, among others, the following: x x x (c) The description of the bargaining unit.
In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity of the 1997
Amended Omnibus Rules, although the specific provision involved therein was only Sec. 1, Rule VI,
to wit:
"Section. 1. Chartering and creation of a local/chapter.- A duly registered federation or national union
may directly create a local/chapter by submitting to the Regional Office or to the Bureau two (2)
copies of the following: a) a charter certificate issued by the federation or national union indicating
the creation or establishment of the local/chapter; (b) the names of the local/chapter's officers, their
addresses, and the principal office of the local/chapter; and (c) the local/ chapter's constitution and
by-laws; provided that where the local/chapter's constitution and by-laws is the same as that of the
federation or national union, this fact shall be indicated accordingly.
All the foregoing supporting requirements shall be certified under oath by the Secretary or the
Treasurer of the local/chapter and attested to by its President."
which does not require that, for its creation and registration, a local or chapter submit a list of its
members.
Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands Employees UnionPGTWO in which the core issue was whether mingling affects the legitimacy of a labor organization
and its right to file a petition for certification election. This time, given the altered legal milieu, the
Court abandoned the view in Toyota and Dunlopand reverted to its pronouncement in Lopez that
while there is a prohibition against the mingling of supervisory and rank-and-file employees in one
labor organization, the Labor Code does not provide for the effects thereof. Thus, the Court held that
after a labor organization has been registered, it may exercise all the rights and privileges of a
legitimate labor organization. Any mingling between supervisory and rank-and-file employees in its
membership cannot affect its legitimacy for that is not among the grounds for cancellation of its
registration, unless such mingling was brought about by misrepresentation, false statement or fraud
under Article 239 of the Labor Code.
In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing Products PlantsSan Miguel Packaging Products-San Miguel Corp. Monthlies Rank-and-File Union-FFW, the Court
explained that since the 1997 Amended Omnibus Rules does not require a local or chapter to
provide a list of its members, it would be improper for the DOLE to deny recognition to said local or
chapter on account of any question pertaining to its individual members.
More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which involved a
petition for cancellation of union registration filed by the employer in 1999 against a rank-and-file
labor organization on the ground of mixed membership: the Court therein reiterated its ruling
in Tagaytay Highlands that the inclusion in a union of disqualified employees is not among the
grounds for cancellation, unless such inclusion is due to misrepresentation, false statement or fraud
under the circumstances enumerated in Sections (a) and (c) of Article 239 of the Labor Code.
All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus Rules, as
interpreted by the Court in Tagaytay Highlands, San Miguel and Air Philippines, had already set the
tone for it. Toyota and Dunlopno longer hold sway in the present altered state of the law and the
rules.32 [Underline supplied]
The applicable law and rules in the instant case are the same as those in Kawashima because the
present petition for certification election was filed in 1999 when D.O. No. 9, series of 1997, was still
in effect. Hence,Kawashima applies with equal force here. As a result, petitioner union was not
divested of its status as a legitimate labor organization even if some of its members were
supervisory employees; it had the right to file the subject petition for certification election.
The legal personality of petitioner union cannot be collaterally attacked by respondent company in
the certification election proceedings.
Petitioner union correctly argues that its legal personality cannot be collaterally attacked in the
certification election proceedings. As we explained in Kawashima:
Except when it is requested to bargain collectively, an employer is a mere bystander to any petition
for certification election; such proceeding is non-adversarial and merely investigative, for the
purpose thereof is to determine which organization will represent the employees in their collective
bargaining with the employer. The choice of their representative is the exclusive concern of the
employees; the employer cannot have any partisan interest therein; it cannot interfere with, much
less oppose, the process by filing a motion to dismiss or an appeal from it; not even a mere
allegation that some employees participating in a petition for certification election are actually
managerial employees will lend an employer legal personality to block the certification election. The
employer's only right in the proceeding is to be notified or informed thereof.
The amendments to the Labor Code and its implementing rules have buttressed that policy even
more.33
WHEREFORE, the petition is GRANTED. The March 15, 2005 Decision and September 16, 2005
Resolution of the Court of Appeals in CA-G.R. SP No. 58203 are REVERSED and SET ASIDE. The
January 13, 2000 Decision of the Department of Labor and Employment in OS-A-6-53-99 (NCR-ODM-9902-019) is REINSTATED.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:
RENATO C. CORONA
Supreme Court
Manila
THIRD DIVISION
PAMELA FLORENTINA
P. JUMUAD,
Petitioner,
G.R. No. 187887

Present:
VELASCO, JR, J., Chairperson,
PERALTA,
ABAD,
VILLARAMA, JR.,* and

MENDOZA, JJ.
- versus -
HI-FLYER FOOD, INC. and/or

JESUS R. MONTEMAYOR,
Respondents.
Promulgated:
September 7, 2011
x ----------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
This is a petition for review on certiorari assailing the April 20, 2009 Decision[1] of
the Court of Appeals (CA) in CA-G.R. SP No. 03346, which reversed the August
10, 2006 Decision[2] and the November 29, 2007 Resolution[3] of the National
Labor Relations Commission, 4th Division (NLRC), in NLRC Case No. V-00081306. The NLRC Decision and Resolution affirmed in toto the Decision[4] of the
Labor Arbiter Julie C. Ronduque (LA) in RAB Case No. VII-10-2269-05 favoring
the petitioner.
The Facts:
On May 22, 1995, petitioner Pamela Florentina P. Jumuad (Jumuad) began her
employment with respondent Hi-Flyer Food, Inc. (Hi-Flyer), as management
trainee. Hi-Flyer is a corporation licensed to operate Kentucky Fried
Chicken (KFC) restaurants in the Philippines. Based on her performance through
the years, Jumuad received several promotions until she became the area manager
for the entire Visayas-Mindanao 1 region, comprising the provinces
of Cebu, Bacolod, Iloilo and Bohol.[5]
Aside from being responsible in monitoring her subordinates, Jumuad was tasked
to: 1) be highly visible in the restaurants under her jurisdiction; 2) monitor and
support day-to-day operations; and 3) ensure that all the facilities and equipment at
the restaurant were properly maintained and serviced. [6] Among the branches under
her supervision were the KFC branches in Gaisano Mall, Cebu City (KFCGaisano); in Cocomall, Cebu City (KFC-Cocomall); and in Island City
Mall, Bohol (KFC-Bohol).
As area manager, Jumuad was allowed to avail of Hi-Flyers car loan program,
[7]
wherein forty (40%) percent of the total loanable amount would be subsidized by
Hi-Flyer and the remaining sixty (60%) percent would be deducted from her salary.
It was also agreed that in the event that she would resign or would be terminated
prior to the payment in full of the said car loan, she could opt to surrender the car
to Hi-Flyer or to pay the full balance of the loan.[8]
In just her first year as Area Manager, Jumuad gained distinction and was
awarded the 3rd top area manager nationwide. She was rewarded with a trip
to Singapore for her excellent performance.[9]
On October 4, 2004, Hi Flyer conducted a food safety, service and sanitation
audit at KFC-Gaisano. The audit, denominated as CHAMPS Excellence
Review (CER),revealed several sanitation violations, such as the presence of
rodents and the use of a defective chiller for the storage of food. [10] When asked to
explain, Jumuad first pointed out that she had already taken steps to prevent the
further infestation of the branch. As to why the branch became infested with
rodents, Jumuad faulted managements decision to terminate the services of the
branchs pest control program and to rely solely on the pest control program of the
mall. As for the defective chiller, she explained that it was under repair at the time
of the CER.[11] Soon thereafter, Hi-Flyer ordered the KFC-Gaisano branch closed.
Then, sometime in June of 2005, Hi-Flyer audited the accounts of KFC-Bohol
amid reports that certain employees were covering up cash shortages. As a result,
the following irregularities were discovered: 1) cash shortage amounting to
62,290.85; 2) delay in the deposits of cash sales by an average of three days; 3)
the presence of two sealed cash-for-deposit envelopes containing paper cut-outs
instead of cash; 4) falsified entries in the deposit logbook; 5) lapses in inventory
control; and 6) material product spoilage. [12] In her report regarding the incident,
Jumuad disclaimed any fault in the incident by pointing out that she was the one
responsible for the discovery of this irregularity.[13]
On August 7, 2005, Hi-Flyer conducted another CER, this time at its KFCCocomall branch. Grout and leaks at the branchs kitchen wall, dried up spills from
the marinator, as well as a live rat under postmix, and signs of rodent
gnawing/infestation were found.[14] This time, Jumuad explained to management
that she had been busy conducting management team meetings at the other KFC
branches and that, at the date the CER was conducted, she had no scheduled visit at
the KFC-Cocomall branch.[15]
Seeking to hold Jumuad accountable for the irregularities uncovered in the
branches under her supervision, Hi-Flyer sent Jumuad an Irregularities
Report[16] and Notice of Charges[17] which she received on September 5, 2005.
On September 7, 2005 Jumuad submitted her written explanation.[18] On September
28, 2005, Hi-Flyer held an administrative hearing where Jumuad appeared with
counsel. Apparently not satisfied with her explanations, Hi-Flyer served her a
Notice of Dismissal[19] dated October 14, 2005, effecting her termination
on October 17, 2005.
This prompted Jumuad to file a complaint against Hi-Flyer and/or Jesus R.
Montemayor (Montemayor) for illegal dismissal before the NLRC on October 17,
2005, praying for reinstatement and payment of separation pay, 13 th month pay,
service incentive leave, moral and exemplary damages, and attorneys fees. Jumuad
also sought the reimbursement of the amount equivalent to her forty percent (40%)
contribution to Hi-Flyers subsidized car loan program.
While the LA found that Jumuad was not completely blameless for the
anomalies discovered, she was of the view that the employers prerogative to
dismiss or layoff an employee must be exercised without abuse of discretion and
should be tempered with compassion and understanding.[20] Thus, the dismissal was
too harsh considering the circumstances. After finding that no serious cause for
termination existed, the LA ruled that Jumuad was illegally dismissed. The LA
disposed:
WHEREFORE, VIEWED FROM THE FOREGOING PREMISES,
judgment is hereby rendered declaring complainants dismissal as
ILLEGAL. Consequently, reinstatement not being feasible,
respondents HI-FLYER FOOD, INC. AND OR JESUS R.
MONTEMAYOR are hereby ordered to pay, jointly and severally,
complainant PAMELA FLORENTINA P. JUMUAD, the total

amount of THREE HUNDRED THIRTY-SIX THOUSAND FOUR
HUNDRED PESOS (336,400.00), Philippine currency,
representing Separation Pay, within ten (10) days from receipt
hereof, through the Cashier of this Arbitration Branch.
Further, same respondents are ordered to reimburse
complainant an amount equivalent to 40% of the value of her car
loaned pursuant to the car loan entitlement memorandum.
Other claims are DISMISSED for lack of merit.[21]
Both Jumuad and Hi-Flyer appealed to the NLRC. Jumuad faulted the LA for not
awarding backwages and damages despite its finding that she was illegally
dismissed. Hi-Flyer and Montemayor, on the other hand, assailed the finding that
Jumuad was illegally dismissed and that they were solidarily liable therefor. They
also questioned the orders of the LA that they pay separation pay and reimburse the
forty percent (40%) of the loan Jumuad paid pursuant to Hi-Flyers car entitlement
program.
Echoing the finding of the LA that the dismissal of Jumuad was too harsh, the
NLRC affirmed in toto the LA decision dated August 10, 2006. In addition, the
NLRC noted that even before the Irregularities Report and Notice of Charges were
given to Jumuad on September 5, 2005, two (2) electronic mails (e-mails) between
Montemayor and officers of Hi-Flyer showed that Hi-Flyer was already determined
to terminate Jumuad. The first e-mail[22] read:
From: Jess R. Montemayor
Sent: Tuesday, August 16, 2005 5:59 PM
To: bebe chaves; Maria Judith N. Marcelo; Jennifer Coloma
Ravela; Bernard Joseph A. Velasco
Cc: Odjie Belarmino; Jesse D. Cruz
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality
Violation
I agree if the sanctions are light we should change them. In the
case of Pamela however, the fact that Cebu Colon store had these
violations is not the first time this incident has happened in her
area. The Bohol case was also in her area and maybe these two
incidents is enough grounds already for her to be terminated or

maybe asked to resign instead of being terminated.
I know if any Ops person serves expired product this is ground for
termination. I think serving off specs products such as this lumpy
gravy in the case of Coco Mall should be grounds for termination.
How many customers have we lost due to this lumpy clearly out of
specs gravy? 20 customers maybe.
Jess.
The second e-mail,[23] sent by one Bebe Chaves of Hi-Flyer to Montemayor and
other officers of Hi-Flyer, reads:
From: bebe chaves
Sent: Sat 9/3/2005 3:45 AM
To: Maria Judith N. Marcelo
CC: Jennifer Coloma Ravela; Goodwin Belarmino; Jess R.
Montemayor
Subject: RE: 049 KFC Cocomall Food Safety Risk/Product Quality
Violation
Jojo,
Just an update of our meeting yesterday with Jennifer. After
having reviewed the case and all existing documents, we have
decided that there is enough ground to terminate her services.
IR/Jennifer are working hand in hand to service due notice and
close the case.
According to the NLRC, these e-mails were proof that Jumuad was denied due
process considering that no matter how she would refute the charges hurled against
her, the decision of Hi-Flyer to terminate her would not change.[24]
Sustaining the order of the LA to reimburse Jumuad the amount equivalent to 40%
of the value of the car loan, the NLRC explained that Jumuad enjoyed this benefit
during her period of employment as Area Manager and could have still enjoyed the
same if not for her illegal dismissal.[25]
Finally, the NLRC held that the active participation of Montemayor in the
illegal dismissal of Jumuad justified his solidary liability with Hi-Flyer.
Both Jumuad and Hi-Flyer sought reconsideration of the NLRC Decision but their
respective motions were denied on November 29, 2007.[26]
Alleging grave abuse of discretion on the part of the NLRC, Hi-Flyer appealed the
case before the CA in Cebu City.
On April 20, 2009, the CA rendered the subject decision reversing the decision of
the labor tribunal. The appellate court disposed:
WHEREFORE, in view of the foregoing, the Petition is
GRANTED. The Decision of the National Labor Relations
Commission (4th Division) dated 28 September 2007 in NLRC
Case No. V-000813-06 (RAB Case No. VII-10-2269-05, as well as
the Decision dated 10 August 2006 of the Honorable Labor
Arbiter Julie C. Ronduque, and the 29 November 2006 Resolution
of the NLRC denying petitioners Motion for Reconsideration
dated 08 November 2007, are hereby REVERSED and SET
ASIDE.
SO ORDERED.[27]
Contrary to the findings of the LA and the NLRC, the CA was of the opinion that
the requirements of substantive and procedural due process were complied with
affording Jumuad an opportunity to be heard first, when she submitted her written
explanation and then, when she was informed of the decision and the basis of her
termination.[28] As for the e-mail exchanges between Montemayor and the officers
of Hi-Flyer, the CA opined that they did not equate to a predetermination of
Jumuads termination. It was of the view that the e-mail exchanges were mere
discussions between Montemayor and other officers of Hi-Flyer on whether
grounds for disciplinary action or termination existed. To the mind of the CA, the
e-mails just showed that Hi-Flyer extensively deliberated the nature and cause of
the charges against Jumuad.[29]
On the issue of loss of trust and confidence, the CA considered the deplorable
sanitary conditions and the cash shortages uncovered at three of the seven KFC
branches supervised by Jumuad as enough bases for Hi-Flyer to lose its trust and
confidence in her.[30]
With regard to the reimbursement of the 40% of the car loan as awarded by the
labor tribunal, the CA opined that the terms of the car loan program did not provide
for reimbursement in case an employee was terminated for just cause and they, in
fact, required that the employee should stay with the company for at least three (3)
years from the date of the loan to obtain the full 40% subsidy. The CA further
stated that the rights and obligations of the parties should be litigated in a separate
civil action before the regular courts.[31]
The CA also exculpated Montemayor from any liability since it considered
Jumuads dismissal with a just cause and it found no evidence that he acted with
malice and bad faith.[32]
Hence, this petition on the following
GROUNDS:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN UPHOLD[ING] AS VALID THE TERMINATION
OF PETITIONERS SERVICES BY RESPONDENTS.
ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL
LABOR
RELATIONS
COMMISSION
4TH DIVISION OF CEBU CITY WHICH AFFIRMED THE

DECISION OF LABOR ARBITER JULUE RENDOQUE.
ERRED WHEN IT REVERSED THE DECISION OF THE
NATIONAL
LABOR
RELATIONS
COMMISSION
TH
4 DIVISION OF CEBU CITY WHEN IT RULED THAT
PETITIONER IS NOT ENTITLED TO REIMBURSEMENT
OF FORTY PERCENT (40%) OF THE CAR VALUE
BENEFITS.
It is a hornbook rule that factual findings of administrative or quasi-judicial

bodies, which are deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect but even finality,
and bind the Court when supported by substantial evidence.[33] While this rule is
strictly adhered to in labor cases, the same rule, however, admits exceptions. These
include: (1) when there is grave abuse of discretion; (2) when the findings are
grounded on speculation; (3) when the inference made is manifestly mistaken; (4)
when the judgment of the Court of Appeals is based on a misapprehension of facts;
(5) when the factual findings are conflicting; (6) when the Court of Appeals went
beyond the issues of the case and its findings are contrary to the admissions of the
parties; (7) when the Court of Appeals overlooked undisputed facts which, if
properly considered, would justify a different conclusion; (8) when the facts set
forth by the petitioner are not disputed by the respondent; and (9) when the
findings of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.[34]
In the case at bench, the factual findings of the CA differ from that of the LA
and the NLRC. This divergence of positions between the CA and the labor tribunal
below constrains the Court to review and evaluate assiduously the evidence on
record.
The petition is without merit.
On whether Jumuad was illegally dismissed, Article 282 of the Labor Code
provides:
Art. 282. Termination by Employer. An employer may

terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee
of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed
in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the
person of his employer or any immediate member of his family or
his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Jumuad was terminated for neglect of duty and breach of trust and
confidence. Gross negligence connotes want or absence of or failure to exercise
slight care or diligence, or the entire absence of care. It evinces a thoughtless
disregard of consequences without exerting any effort to avoid them. Fraud and
willful neglect of duties imply bad faith of the employee in failing to perform his
job, to the detriment of the employer and the latters business. Habitual neglect, on
the other hand, implies repeated failure to perform one's duties for a period of time,
depending upon the circumstances. It has been said that a single or an isolated act
of negligence cannot constitute as a just cause for the dismissal of an employee.
[35]
To be a ground for removal, the neglect of duty must be both gross and habitual.
[36]
On the other hand, breach of trust and confidence, as a just cause for termination of
employment, is premised on the fact that the employee concerned holds a position
of trust and confidence, where greater trust is placed by management and from
whom greater fidelity to duty is correspondingly expected. The betrayal of this
trust is the essence of the offense for which an employee is penalized.[37]
It should be noted, however, that the finding of guilt or innocence in a charge
of gross and habitual neglect of duty does not preclude the finding of guilty or
innocence in a charge of breach of trust and confidence. Each of the charges must
be treated separately, as the law itself has treated them separately. To repeat, to
warrant removal from service for gross and habitual neglect of duty, it must be
shown that the negligence should not merely be gross, but also habitual. In breach
of trust and confidence, so long as it is shown there is some basis for management
to lose its trust and confidence and that the dismissal was not used as an occasion
for abuse, as a subterfuge for causes which are illegal, improper, and unjustified
and is genuine, that is, not a mere afterthought intended to justify an earlier action
taken in bad faith, the free will of management to conduct its own business affairs
to achieve its purpose cannot be denied.
After an assiduous review of the facts as contained in the records, the Court is
convinced that Jumuad cannot be dismissed on the ground of gross and habitual
neglect of duty. The Court notes the apparent neglect of Jumuad of her duty in
ensuring that her subordinates were properly monitored and that she had dutifully
done all that was expected of her to ensure the safety of the consuming public who
continue to patronize the KFC branches under her jursidiction. Had Jumuad
discharged her duties to be highly visible in the restaurants under her jurisdiction,
monitor and support the day to day operations of the branches and ensure that all
the facilities and equipment at the restaurant were properly maintained and
serviced, the deplorable conditions and irregularities at the various KFC branches
under her jurisdiction would have been prevented.
Considering, however, that over a year had lapsed between the incidences at KFCGaisano and KFC-Bohol, and that the nature of the anomalies uncovered were each
of a different nature, the Court finds that her acts or lack of action in the
performance of her duties is not born of habit.
Despite saying this, it cannot be denied that Jumuad willfully breached her duties
as to be unworthy of the trust and confidence of Hi-Flyer. First, there is no
denying that Jumuad was a managerial employee. As correctly noted by the
appellate court, Jumuad executed management policies and had the power to
discipline the employees of KFC branches in her area. She recommended
actions on employees to the head office. Pertinent is Article 212 (m) of the Labor
Code defining a managerial employee as one who is vested with powers or
prerogatives to lay down and execute management policies and/or hire, transfer,
suspend, lay off, recall, discharge, assign or discipline employees.
Based on established facts, the mere existence of the grounds for the loss of
trust and confidence justifies petitioners dismissal. Pursuant to the Courts ruling
in Lima Land, Inc. v. Cuevas,[38] as long as there is some basis for such loss of
confidence, such as when the employer has reasonable ground to believe that the
employee concerned is responsible for the purported misconduct, and the nature of
his participation therein renders him unworthy of the trust and confidence
demanded of his position, a managerial employee may be dismissed.
In the present case, the CERs reports of Hi-Flyer show that there were anomalies
committed in the branches managed by Jumuad. On the principle
of respondeat superior or command responsibility alone, Jumuad may be held
liable for negligence in the performance of her managerial duties. She may not
have been directly involved in causing the cash shortages in KFC-Bohol, but her
involvement in not performing her duty monitoring and supporting the day to day
operations of the branches and ensure that all the facilities and equipment at the
restaurant were properly maintained and serviced, could have truly prevented the
whole debacle from ever occurring.
Moreover, it is observed that rather than taking proactive steps to prevent the
anomalies at her branches, Jumuad merely effected remedial measures. In the
restaurant business where the health and well-being of the consuming public is at
stake, this does not suffice. Thus, there is reasonable basis for Hi-Flyer to withdraw
its trust in her and dismissing her from its service.
The disquisition of the appellate court on the matter is also worth mentioning:
In this case, there is ample evidence that private respondent
indeed committed acts justifying loss of trust and confidence of
Hi-Flyer, and eventually, which resulted to her dismissal from
service. Private respondents mismanagement and negligence in
supervising the effective operation of KFC branches in the span of
less than a year, resulting in the closure of KFC-Gaisano due to
deplorable sanitary conditions, cash shortages in KFC-Bohol, in
which the said branch, at the time of discovery, was only several
months into operation, and the poor sanitation at KFC-Cocomall.
The glaring fact that three (3) out of the seven (7) branches under
her area were neglected cannot be glossed over by private
respondents explanation that there was no negligence on her part
as the sanitation problem was structural, that she had been

usually busy conducting management team meetings in several
branches of KFC in her area or that she had no participation
whatsoever in the alleged cash shortages.
xxx
It bears stressing that both the Labor Arbiter and the NLRC found
that private respondent was indeed lax in her duties. Thus, said
the NLRC: xxx [i]t is Our considered view that xxx complainant
cannot totally claim that she was not remiss in her duties xxx. [39]
As the employer, Hi-Flyer has the right to regulate, according to its

discretion and best judgment, all aspects of employment, including work
assignment, working methods, processes to be followed, working regulations,
transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Management has the prerogative to discipline its
employees and to impose appropriate penalties on erring workers pursuant to
company rules and regulations.[40]
So long as they are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or circumventing the rights
of the employees under special laws or under valid agreements, the employers
exercise of its management prerogative must be upheld.[41]
In this case, Hi-Flyer exercised in good faith its management prerogative as
there is no dispute that it has lost trust and confidence in her and her managerial
abilities, to its damage and prejudice. Her dismissal, was therefore, justified.
As for Jumuads claim for the reimbursement of the 40% of the value of the
car loan subsidized by Hi-Flyer under its car loan policy, the same must also be
denied. The rights and obligations of the parties to a car loan agreement is not a
proper issue in a labor dispute but in a civil one. [42] It involves the relationship of
debtor and creditor rather than employee-employer relations. [43] Jurisdiction,
therefore, lies with the regular courts in a separate civil action.[44]
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice and
hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct and loyalty. The
employer may not be compelled to continue to employ such persons whose
continuance in the service will patently be inimical to its interests.[45]
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA

Associate Justice
WE CONCUR:
PRESBITERO J. VELASCO, JR.

Associate Justice
Chairperson

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1.

Constitutional basis for labor relations policyy

(1.) Penaranda v. Bagang Plywood Corp, May 3, 2006

The contractor or subcontractor has substantial capital or investment; and

Certificate of Business Registration;

Certificate of Registration with the Bureau of Internal Revenue;

Certificate of Membership with the Social Security System;

Certificate of Registration with the Department of Labor and Employment;

Company Profile; and

Certifications issued by its clients.10

e. 13th Month Pay 27,500.00

On appeal, the Court of Appeals reversed the NLRC decision, thus:

dismissing the complaint filed by private respondent against Kasei

The better approach would therefore be to adopt a two-tiered test involving:

The proper standard of economic dependence is whether the worker is

Based on the foregoing, there can be no other conclusion that petitioner is an

Francisco v. NLRC August 31, 2006 G.R NO. 170087 500

Republic of the Philippines

BERNARD A. TENAZAS, JAIME M. FRANCISCO and ISIDRO G. ENDRACA, Petitioners,

The Antecedent Facts

The Ruling of the Labor Arbiter

The Ruling of the NLRC

The Ruling of the CA

It is an oft-repeated rule that in labor cases, as in other administrative and quasi-judicial

No particular form of evidence is required to prove the existence of an employer-employee

alternative. The payment of separation pay is in addition to payment of backwages. (Emphasis

Strained relations must be demonstrated as a fact, however, to be adequately supported by

We affirm the CA.

G.R. No. 184885

Any employee who intends to run for any public

Because of the impending May 1998 elections and based on his

Luzon, however, admitted that upon double-checking of the exact

company after the election[s] should you feel that Im still

Very Truly Yours,

Unfortunately, both Ymbong and Patalinghug lost in the May 1998

DATE : 14 SEPT. 1998

Ymbong in contrast contended that after the expiration of his

ABS-CBN prayed for the dismissal of the complaints arguing that

The Labor Arbiter found that there exists an employer-employee

authorized cause in terminating Ymbong and Patalinghug from

On March 8, 2004, the NLRC rendered a decision [17] modifying the

The NLRC dismissed ABS-CBNs Supplemental Appeal for

prevail and ABS-CBN is estopped from enforcing the September

EVEN ASSUMING THE ALLEGED EMPLOYMENT RELATION

FOR PETITIONER STILL EXISTING. INDEED, THERE IS NO

On August 22, 2007, the CA rendered the assailed decision

to be valid and subsisting up to the present. The CA cited

As to the validity of his dismissal, Ymbong contends that the

Moreover, the Supreme Court has recognized the employers right

Policy No. HR-ER-016 is valid.

ABS-CBN, like Manila Broadcasting Company, also had a valid

ABS-CBN BROADCASTING CORPORATION strongly

We have consistently held that so long as a companys

It is worth noting that such exercise of management prerogative

Policy No. HR-ER-016 was

resignation, not only the filing of a leave of absence, of any

MARTIN S. VILLARAMA, JR.

THE SECRETARY OF THE

G.R. No. 179652

Private respondent Jandeleon Juezan filed a complaint against petitioner

PRESBITERO J. VELASCO, JR.

ANTONIO T. CARPIO TERESITA J. LEONARDO-DE CASTRO

(On official leave)

Republic of the Philippines