FIRST DIVISION

[G.R. No. 138051. June 10, 2004]

JOSE Y. SONZA, petitioner, vs. ABS-CBN BROADCASTING CORPORATION, respondent.

DECISION

5 CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari[1] assailing the 26 March 1999 Decision[2] of the Court of Appeals in CA-G.R.
SP No. 49190 dismissing the petition filed by Jose Y. Sonza (SONZA). The Court of Appeals affirmed the findings of the National Labor
Relations Commission (NLRC), which affirmed the Labor Arbiters dismissal of the case for lack of jurisdiction.

10 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
15 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.

20 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
25 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.

30 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
35 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
40 Branch,Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited SONZAs talent
fees and other payments due him under the Agreement.

In his Order dated 2 December 1996, the Labor Arbiter[5] denied the motion to dismiss and directed the parties to file their
respective position papers. The Labor Arbiter ruled:

In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April 15, 1996 and
45 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
50 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.

55 The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.[6] The pertinent parts of
the decision read as follows:

xxx

While Philippine jurisprudence has not yet, with certainty, touched on the true nature of the contract of a talent, it stands to reason that
a talent as above-described cannot be considered as an employee by reason of the peculiar circumstances surrounding the
60 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
65 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
70 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
75 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]

80 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.

85 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
90 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
95 rescission in behalf of Mr. Sonza, who himself signed the same in his capacity as President.

Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said agreements are
ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement executed between ABS-CBN and Mr.
Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.

We find it erroneous to assert that MJMDC is a mere labor-only contractor of ABS-CBN such that there exist[s] employer-employee
100 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
105 against respondent-appellee are not based on the Labor Code but rather on the provisions of the May 1994 Agreement, while his claims
for proceeds under Stock Purchase Agreement are based on the latter. A portion of the Position Paper of complainant-appellant bears
perusal:

Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a signing bonus
consisting of shares of stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00).

110 Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was receiving prior to
effectivity of (the) Agreement.

Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to at least One
Hundred Fifty Thousand Pesos (P150,000.00) per year.

Thus, it is precisely because of complainant-appellants own recognition of the fact that his contractual relations with ABS-CBN are
115 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).
120 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
125 civil dispute.[9] (Emphasis supplied)

The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a factual
question that is within the jurisdiction of the NLRC to resolve. [10] A special civil action for certiorari extends only to issues of want or
excess of jurisdiction of the NLRC. [11] Such action cannot cover an inquiry into the correctness of the evaluation of the evidence which
served as basis of the NLRCs conclusion. [12] The Court of Appeals added that it could not re-examine the parties evidence and
130 substitute the factual findings of the NLRC with its own.[13]

The Issue

In assailing the decision of the Court of Appeals, SONZA contends that:

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRCS DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING
135 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.

140 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,
145 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
150 Arbiter and the NLRC not only respect but also finality when supported by substantial evidence. [15] Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion. [16] A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on record, direct or circumstantial. The Court does not
substitute its own judgment for that of the tribunal in determining where the weight of evidence lies or what evidence is credible. [17]

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

A. Selection and Engagement of Employee

ABS-CBN engaged SONZAs services to co-host its television and radio programs because of SONZAs peculiar skills, talent and
160 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
165 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

170 ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this mode of
fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits and privileges
which he would not have enjoyed if he were truly the subject of a valid job contract.

All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were ABS-CBNs
employee, there would be no need for the parties to stipulate on benefits such as SSS, Medicare, x x x and 13 th month pay[20] which the
175 law automatically incorporates into every employer-employee contract.[21] Whatever benefits SONZA enjoyed arose from contract and not
because of an employer-employee relationship.[22]

SONZAs talent fees, amounting to P317,000 monthly in the second and third year, are so huge and out of the ordinary that they
indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-CBN agreed to pay SONZA
such huge talent fees precisely because of SONZAs unique skills, talent and celebrity status not possessed by ordinary employees.
180 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
185 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]

190 During the life of the Agreement, ABS-CBN agreed to pay SONZAs talent fees as long as AGENT and Jay Sonza shall faithfully
and completely perform each condition of this Agreement. [24] Even if it suffered severe business losses, ABS-CBN could not retrench
SONZA because ABS-CBN remained obligated to pay SONZAs talent fees during the life of the Agreement. This circumstance indicates
an independent contractual relationship between SONZA and ABS-CBN.

SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly, ABS-
195 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
200 this out.[26]However, the manner by which SONZA terminated his relationship with ABS-CBN is immaterial. Whether SONZA rescinded
the Agreement or resigned from work does not determine his status as employee or independent contractor.

D. Power of Control

Since there is no local precedent on whether a radio and television program host is an employee or an independent contractor, we
refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit, recently held in Alberty-Vlez

5
205 v. Corporacin De Puerto Rico Para La Difusin Pblica (WIPR) [27] that a television program host is an independent contractor. We
quote the following findings of the U.S. court:

Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position requiring talent
and training not available on-the-job. x x x In this regard, Alberty possesses a masters degree in public communications and
journalism; is trained in dance, singing, and modeling; taught with the drama department at the University of Puerto Rico; and acted in
210 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
215 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
220 assigned Alberty tasks in addition to work related to these tapings. x x x[28] (Emphasis supplied)

Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The control
test is the most important test our courts apply in distinguishing an employee from an independent contractor. [29] This test is based on
the extent of control the hirer exercises over a worker. The greater the supervision and control the hirer exercises, the more likely the
worker is deemed an employee. The converse holds true as well the less control the hirer exercises, the more likely the worker is
225 considered an independent contractor.[30]

First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZAs argument is misplaced. ABS-CBN engaged SONZAs services specifically to co-host the Mel & Jay programs. ABS-
CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his
lines, appeared on television, and sounded on radio were outside ABS-CBNs control. SONZA did not have to render eight hours of work
230 per day. The Agreement required SONZA to attend only rehearsals and tapings of the shows, as well as pre- and post-production staff
meetings.[31] ABS-CBN could not dictate the contents of SONZAs script. However, the Agreement prohibited SONZA from criticizing in
his shows ABS-CBN or its interests.[32] The clear implication is that SONZA had a free hand on what to say or discuss in his shows
provided he did not attack ABS-CBN or its interests.

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work. [33] ABS-
235 CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime
schedule for more effective programming.[34] ABS-CBNs sole concern was the quality of the shows and their standing in the
ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZAs work.

SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the
performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay
240 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
245 or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television -
did not meet ABS-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al.,[36] the United States Circuit Court of Appeals ruled that vaudeville performers were independent
contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not
250 have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting
objectionable features.[37]
 SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN
supplied the equipment, crew and airtime needed to broadcast the Mel & Jay programs. However, the equipment, crew and airtime are
not the tools and instrumentalities SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the
255 costumes necessary for his appearance. [38] Even though ABS-CBN provided SONZA with the place of work and the necessary
equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBNs sole concern
was for SONZA to display his talent during the airing of the programs.[39]

A radio broadcast specialist who works under minimal supervision is an independent contractor. [40] SONZAs work as television and
radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
260 exercised any supervision and control over how SONZA utilized his skills and talent in his shows.

Second, SONZA urges us to rule that he was ABS-CBNs employee because ABS-CBN subjected him to its rules and standards of
performance. SONZA claims that this indicates ABS-CBNs control not only [over] his manner of work but also the quality of his work.

The Agreement stipulates that SONZA shall abide with the rules and standards of performance covering talents[41] of ABS-CBN.
The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for employees of ABS-
265 CBN. The code of conduct imposed on SONZA under the Agreement refers to the Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-CBN) as its Code of Ethics. [42] The KBP code applies
to broadcasters, not to employees of radio and television stations. Broadcasters are not necessarily employees of radio and television
stations. Clearly, the rules and standards of performance referred to in the Agreement are those applicable to talents and not to
employees of ABS-CBN.

270 In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. [43] In
this case, SONZA failed to show that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being
275 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
280 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
285 over him.

This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an
independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.

The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry. [46] This practice is not designed
290 to control the means and methods of work of the talent, but simply to protect the investment of the broadcast station. The broadcast
station normally spends substantial amounts of money, time and effort in building up its talents as well as the programs they appear in
and thus expects that said talents remain exclusive with the station for a commensurate period of time. [47] Normally, a much higher fee is
paid to talents who agree to work exclusively for a particular radio or television station. In short, the huge talent fees partially
compensates for exclusivity, as in the present case.

295 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
300 the employ of the labor-only contractor; and (3) the principal who is deemed the real employer. Under this scheme, the labor-only
contractor is the agent of the principal. The law makes the principal responsible to the employees of the labor-only contractor as if
the principal itself directly hired or employed the employees.[48] These circumstances are not present in this case.

There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as
SONZAs agent. The Agreement expressly states that MJMDC acted as the AGENT of SONZA. The records do not show that MJMDC
305 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
310 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
315 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
320 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.

325 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

330 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
335 may, at his discretion and for the purpose of making such determination, ask clarificatory questions to further elicit facts or information,
including but not limited to the subpoena of relevant documentary evidence, if any from any party or witness.[50]

The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal trial.
[51]
The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right. [52] If the Labor Arbiter is
 confident that he can rely on the documents before him, he cannot be faulted for not conducting a formal trial, unless under the particular
340 circumstances of the case, the documents alone are insufficient. The proceedings before a Labor Arbiter are non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and the rules obtaining in the courts of law do not strictly
apply in proceedings before a Labor Arbiter.

Talents as Independent Contractors

ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like SONZA as
345 independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to security of tenure.

The right of labor to security of tenure as guaranteed in the Constitution [53] arises only if there is an employer-employee relationship
under labor laws. Not every performance of services for a fee creates an employer-employee relationship. To hold that every person
who renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to absurd results.

Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors. The right to
350 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
355 managers can dictate to the radio and television hosts what they say in their shows. This is not conducive to freedom of the press.

Different Tax Treatment of Talents and Broadcasters

The National Internal Revenue Code (NIRC)[54] in relation to Republic Act No. 7716, [55] as amended by Republic Act No. 8241,
[56]
treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to the 10% value-added
tax (VAT) on services they render. Exempted from the VAT are those under an employer-employee relationship. [57] This different tax
360 treatment accorded to talents and broadcasters bolters our conclusion that they are independent contractors, provided all the basic
elements of a contractual relationship are present as in this case.

Nature of SONZAs Claims

SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave, signing bonus,
travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of the Labor Arbiter and the Court
365 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.
370 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

375

380

385
390

395

400

405

SECOND DIVISION

410
JOSE MEL BERNARTE, G.R. No. 192084
Petitioner,

Present:
415
- versus - CARPIO, J., Chairperson,
BRION,
DEL CASTILLO,*
PEREZ, and
420 SERENO, JJ.
PHILIPPINE BASKETBALL
ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and Promulgated:
PERRY MARTINEZ,
425 Respondents. September 14, 2011
x-----------------------------------------------------------------------------------------x

DECISION

430 CARPIO, J.:

The Case

435 This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No.
105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of
the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents
Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for
reconsideration.
440
The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

445 Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the
leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was
450 from February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half
month contract for the period July 1 to August 5, 2003.

10
 On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be
renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee
455 of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On
March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On
May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the
460 assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003.
The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003.
After the lapse of the latter period, PBA decided not to renew their contracts.
465
Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer
were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal.
470 Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages
and attorneys fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby
ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and to solidarily pay
475 complainants:

JOSE MEL RENATO GUEVARRA

BERNARTE
1. backwages from January 1, 2004
up to the finality of this Decision, P211,250.00
which to date is P536,250.00
100,000.00 100,000.00
2. moral damages 50,000.00
50,000.00
3. exemplary damages
4. 10% attorneys fees 68,625.00 36,125.00

TOTAL P754,875.00 P397,375.00

or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

480 SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the NLRCs decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31,
485 2005 is AFFIRMED.

SO ORDERED.9

490 Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The
dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August
26, 2008 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint before
495 the Labor Arbiter isDISMISSED.

SO ORDERED.10

The Court of Appeals Ruling

500

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means
and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:

505 While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and making calls during
basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in
 officiating basketball games for the illogical reason that said acts refer only to the referees skills. How could a skilled referee
perform his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and making calls?
510
Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the Contracts of Retainer show
that petitioners have control over private respondents.

xxxx
515 Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents repeated hiring
made them regular employees by operation of law.11

The Issues
520

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally
dismissed.

525 Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for failure of respondents to
appeal with the NLRC within the reglementary period.

The Ruling of the Court

530
The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

535 Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of respondents to appeal
with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiters decision was constructively served on respondents
as early as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way beyond thereglementary period
to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of
the post master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail
540 was consequently returned to sender. Petitioner presents the Postmasters Certification to prove constructive service of the Labor
Arbiters decision on respondents. The Postmaster certified:
xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry
545 notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005,
respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month
retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1,
550 column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

555
SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is complete
upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete
upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster,
whichever date is earlier.
560

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon
receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of
five days from the date the addressee received the first notice of the postmaster.13
565
Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the
addressee.14 Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the
addressee.15 Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent
upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.16
570
The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice
was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the
notice was actually delivered.17
575 In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices
issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by
respondents, negating petitioners claim of constructive service of the Labor Arbiters decision on respondents. The Postmasters
Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the
post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt
580 by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiters decision on
respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal was considered in
the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the
585 merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and remain
unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the
590 province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the
Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to
595 control the employee on the means and methods by which the work is accomplished. The so-called control test is the most important
indicator of the presence or absence of an employer-employee relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays petitioner a retainer fee,
exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioners
600 violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor
and not an employee of respondents.

605 Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the
performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents
classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least
one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate
referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the
610 referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the
life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball
game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according
to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and conditions of the
contract.
615
The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee
officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the
whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the
professional basketball league. As correctly observed by the Court of Appeals, how could a skilled referee perform his job without
620 blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of
blowing the whistle and making calls?20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of
its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
625 former. The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-
rating television and radio programs that comply with standards of the industry. We have ruled that:

630 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. v. NLRC. In said case, we held that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the
635 methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.22

We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of
the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA
640 cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the
playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot
 control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioners
job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents.

645 Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for
work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and
they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are
withholding taxes.

650 In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to
report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions
for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees salaries. These
undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.

655 Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent
judgment are required specifically for such position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an
independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such,
660 plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:

Generally, if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved,
but also as to details by which the result is achieved, an employer/employee relationship is likely to exist. The Court must be
careful to distinguish between control[ling] the conduct of another party contracting party by setting out in detail his obligations
665 consistent with the freedom of contract, on the one hand, and the discretionary control an employer daily exercises over its
employees conduct on the other.

Yonan asserts that the Federation closely supervised his performance at each soccer game he officiated by giving him an
assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that
670 the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather
evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an
employee. There is no question that parties retaining independent contractors may judge the performance of those contractors
to determine if the contractual relationship should continue. x x x

675 It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under
the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and
procedures like the Federations registration and training requirements does not create an employer/employee relationship.
xxx

680 A position that requires special skills and independent judgment weights in favor of independent contractor
status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer
refereeing, especially at the professional and international level, requires a great deal of skill and natural ability. Yonan asserts
that it was the Federations training that made him a top referee, and that suggests he was an employee. Though substantial
training supports an employment inference, that inference is dulled significantly or negated when the putative employers activity
685 is the result of a statutory requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary
School Athletic Association (TSSAA), so the players vicarious liability claim against the association should be dismissed. In
finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled:
690
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member
schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the
framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by
which the umpires work.
695

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired
party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to
perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract
700 between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal.
Conversely, if PBA decides to discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory
services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-
renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal
of petitioner by respondents.
705
WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.
710

715

720

725

730

Republic of the Philippines

SUPREME COURT
735 Manila

THIRD DIVISION

MARTICIO SEMBLANTE and DUBRICK G.R. No. 196426

PILAR,
Petitioners, Present:

CARPIO,* J.
- versus - VELASCO, JR., Chairperson,
BRION,**
PERALTA, and
COURT OF APPEALS, 19THDIVISION, now SPECIAL SERENO,*** JJ.
FORMER 19TH DIVISION, GALLERA DE MANDAUE /
SPOUSES VICENTE and MARIA LUISA
LOOT, Promulgated:
Respondents.
August 15, 2011
x-----------------------------------------------------------------------------------------x
740

DECISION

VELASCO, JR., J.:

745
Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to set aside the Decision [1] and
Resolution[2] dated May 29, 2009 and February 23, 2010, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA
affirmed the October 18, 2006 Resolution[3] of the National Labor Relations Commission (NLRC), Fourth Division (now Seventh Division),
in NLRC Case No. V-000673-2004.
750
Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they were hired by respondents-spouses
Vicente and Maria Luisa Loot, the owners of Gallera de Mandaue (the cockpit), as the official masiador and sentenciador, respectively, of
the cockpit sometime in 1993.

755 As the masiador, Semblante calls and takes the bets from the gamecock owners and other bettors and orders the start of the
cockfight. He also distributes the winnings after deducting the arriba, or the commission for the cockpit. Meanwhile, as thesentenciador,
Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks physical condition and capabilities to continue the
cockfight, and eventually declares the result of the cockfight.[4]

760 For their services as masiador and sentenciador, Semblante receives PhP 2,000 per week or a total of PhP 8,000 per month,
while Pilar gets PhP 3,500 a week or PhP 14,000 per month. They work every Tuesday, Wednesday, Saturday, and Sunday every week,
excluding monthly derbies and cockfights held on special holidays. Their working days start at 1:00 p.m. and last until 12:00 midnight, or
until the early hours of the morning depending on the needs of the cockpit. Petitioners had both been issued employees identification
15
 cards[5] that they wear every time they report for duty. They alleged never having incurred any infraction and/or violation of the cockpit
765 rules and regulations.

On November 14, 2003, however, petitioners were denied entry into the cockpit upon the instructions of respondents, and were
informed of the termination of their services effective that date. This prompted petitioners to file a complaint for illegal dismissal against
respondents.
770
In answer, respondents denied that petitioners were their employees and alleged that they were associates of respondents
independent contractor, Tomas Vega. Respondents claimed that petitioners have no regular working time or day and they are free to
decide for themselves whether to report for work or not on any cockfighting day. In times when there are few cockfights in Gallera de
Mandaue, petitioners go to other cockpits in the vicinity. Lastly, petitioners, so respondents assert, were only issued identification cards to
775 indicate that they were free from the normal entrance fee and to differentiate them from the general public. [6]

In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners to be regular employees of respondents
as they performed work that was necessary and indispensable to the usual trade or business of respondents for a number of years. The
Labor Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to pay petitioners their backwages and
780 separation pay.[7]

Respondents counsel received the Labor Arbiters Decision on September 14, 2004. And within the 10-day appeal period, he filed
the respondents appeal with the NLRC on September 24, 2004, but without posting a cash or surety bond equivalent to the monetary
award granted by the Labor Arbiter.[8]
785
It was only on October 11, 2004 that respondents filed an appeal bond dated October 6, 2004. Hence, in a Resolution [9] dated
August 25, 2005, the NLRC denied the appeal for its non-perfection.

Subsequently, however, the NLRC, acting on respondents Motion for Reconsideration, reversed its Resolution on the postulate
790 that their appeal was meritorious and the filing of an appeal bond, albeit belated, is a substantial compliance with the rules. The NLRC
held in its Resolution of October 18, 2006 that there was no employer-employee relationship between petitioners and respondents,
respondents having no part in the selection and engagement of petitioners, and that no separate individual contract with respondents
was ever executed by petitioners.[10]

795 Following the denial by the NLRC of their Motion for Reconsideration, per Resolution dated January 12, 2007, petitioners went
to the CA on a petition for certiorari. In support of their petition, petitioners argued that the NLRC gravely abused its discretion in
entertaining an appeal that was not perfected in the first place. On the other hand, respondents argued that the NLRC did not commit
grave abuse of discretion, since they eventually posted their appeal bond and that their appeal was so meritorious warranting the
relaxation of the rules in the interest of justice.[11]
800
In its Decision dated May 29, 2009, the appellate court found for respondents, noting that referees and bet-takers in a cockfight
need to have the kind of expertise that is characteristic of the game to interpret messages conveyed by mere gestures. Hence,
petitioners are akin to independent contractors who possess unique skills, expertise, and talent to distinguish them from ordinary
employees. Further, respondents did not supply petitioners with the tools and instrumentalities they needed to perform work. Petitioners
805 only needed their unique skills and talents to perform their job as masiador and sentenciador.[12] The CA held:

In some circumstances, the NLRC is allowed to be liberal in the interpretation of the rules in deciding labor
cases. In this case, the appeal bond was filed, although late. Moreover, an exceptional circumstance obtains in the
case at bench which warrants a relaxation of the bond requirement as a condition for perfecting the appeal.
810 This case is highly meritorious that propels this Court not to strictly apply the rules and thus prevent a grave injustice
from being done.

As elucidated by the NLRC, the circumstances obtaining in this case wherein no actual employer-
employee exists between the petitioners and the private respondents [constrain] the relaxation of the rules . In
815 this regard, we find no grave abuse attributable to the administrative body.

xxxx

Petitioners are duly licensed masiador and sentenciador in the cockpit owned by Lucia Loot. Cockfighting,
820 which is a part of our cultural heritage, has a peculiar set of rules. It is a game based on the fighting ability of the game
cocks in the cockpit. The referees and bet-takers need to have that kind of expertise that is characteristic of the
cockfight gambling who can interpret the message conveyed even by mere gestures. They ought to have the
talent and skill to get the bets from numerous cockfighting aficionados and decide which cockerel to put in the arena.
They are placed in that elite spot where they can control the game and the crowd. They are not given salaries by
825 cockpit owners as their compensation is based on the arriba. In fact, they can offer their services everywhere
because they are duly licensed by the GAB. They are free to choose which cockpit arena to enter and offer their
expertise. Private respondents cannot even control over the means and methods of the manner by which they
perform their work. In this light, they are akin to independent contractors who possess unique skills, expertise and
talent to distinguish them from ordinary employees.
830
 Furthermore, private respondents did not supply petitioners with the tools and instrumentalities they needed to
perform their work. Petitioners only needed their talent and skills to be a masiador and sentenciador. As such, they
had all the tools they needed to perform their work. (Emphasis supplied.)

835
The CA refused to reconsider its Decision. Hence, petitioners came to this Court, arguing in the main that the CA committed a
reversible error in entertaining an appeal, which was not perfected in the first place.

Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases involving monetary awards from the
840 Decision of the Labor Arbiter.[13] Article 223 of the Labor Code provides:

Article 223. Appeal. Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to
the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or
orders. Such appeal may be entertained only on any of the following grounds:
845
xxxx

In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the
850 amount equivalent to the monetary award in the judgment appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case, has relaxed this rule on, and excused the
late posting of, the appeal bond when there are strong and compelling reasons for the liberality,[14] such as the prevention of miscarriage
of justice extant in the case[15] or the special circumstances in the case combined with its legal merits or the amount and the issue
855 involved.[16] After all, technical rules cannot prevent courts from exercising their duties to determine and settle, equitably and completely,
the rights and obligations of the parties.[17] This is one case where the exception to the general rule lies.

While respondents had failed to post their bond within the 10-day period provided above, it is evident, on the other hand, that
petitioners are NOT employees of respondents, since their relationship fails to pass muster the four-fold test of employment We have
860 repeatedly mentioned in countless decisions: (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, which is the most important element.[18]

As found by both the NLRC and the CA, respondents had no part in petitioners selection and management; [19] petitioners
compensation was paid out of the arriba (which is a percentage deducted from the total bets), not by petitioners;[20] andpetitioners
865 performed their functions as masiador and sentenciador free from the direction and control of respondents.[21] In the conduct of
their work, petitioners relied mainly on their expertise that is characteristic of the cockfight gambling, [22] and were never given by
respondents any tool needed for the performance of their work.[23]

Respondents, not being petitioners employers, could never have dismissed, legally or illegally, petitioners, since respondents
870 were without power or prerogative to do so in the first place. The rule on the posting of an appeal bond cannot defeat the substantive
rights of respondents to be free from an unwarranted burden of answering for an illegal dismissal for which they were never responsible.

Strict implementation of the rules on appeals must give way to the factual and legal reality that is evident from the records of this
case.[24] After all, the primary objective of our laws is to dispense justice and equity, not the contrary.
875
WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and February 23, 2010 Resolution of the CA,
and the October 18, 2006 Resolution of the NLRC.

SO ORDERED.
880

885

890

895
900

905

910

915

920

Republic of the Philippines

Supreme Court
Manila
925
THIRD DIVISION

ATOK BIG WEDGE COMPANY, G.R. No. 169510

INC.,
Petitioner, Present:

- versus - CARPIO,* J.,

JESUS P. GISON, VELASCO, JR., J., Chairperson,
Respondent. BRION,**
PERALTA, and
SERENO,*** JJ.

Promulgated:

August 8, 2011

930 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

935
PERALTA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the Decision [1] dated May 31, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 87846, and the Resolution [2] dated August 23, 2005 denying petitioners motion for
940 reconsideration.

The procedural and factual antecedents are as follows:

945 Sometime in February 1992, respondent Jesus P. Gison was engaged as part-time consultant on retainer basis by petitioner
Atok Big Wedge Company, Inc. through its then Asst. Vice-President and Acting Resident Manager, Rutillo A. Torres. As a consultant on
retainer basis, respondent assisted petitioner's retained legal counsel with matters pertaining to the prosecution of cases against illegal
surface occupants within the area covered by the company's mineral claims. Respondent was likewise tasked to perform liaison work
with several government agencies, which he said was his expertise.
950
Petitioner did not require respondent to report to its office on a regular basis, except when occasionally requested by the
management to discuss matters needing his expertise as a consultant. As payment for his services, respondent received a retainer fee
 of P3,000.00 a month,[3] which was delivered to him either at his residence or in a local restaurant. The parties executed a retainer
agreement, but such agreement was misplaced and can no longer be found.
955
The said arrangement continued for the next eleven years.

Sometime thereafter, since respondent was getting old, he requested that petitioner cause his registration with the Social
Security System (SSS), but petitioner did not accede to his request. He later reiterated his request but it was ignored by respondent
960 considering that he was only a retainer/consultant. On February 4, 2003, respondent filed a Complaint [4] with the SSS against petitioner
for the latter's refusal to cause his registration with the SSS.

On the same date, Mario D. Cera, in his capacity as resident manager of petitioner, issued a Memorandum [5] advising
respondent that within 30 days from receipt thereof, petitioner is terminating his retainer contract with the company since his services are
965 no longer necessary.

On February 21, 2003, respondent filed a Complaint[6] for illegal dismissal, unfair labor practice, underpayment of wages, non-
payment of 13th month pay, vacation pay, and sick leave pay with the National Labor Relations Commission (NLRC), Regional Arbitration
Branch (RAB), Cordillera Administrative Region, against petitioner, Mario D. Cera, and Teofilo R. Asuncion, Jr. The case was docketed
970 as NLRC Case No. RAB-CAR-02-0098-03.

Respondent alleged that:

x x x [S]ometime in January 1992, Rutillo A. Torres, then the resident manager of respondent Atok Big Wedge Co., Inc.,
975 or Atok for brevity, approached him and asked him if he can help the companys problem involving the 700 million
pesos crop damage claims of the residents living at the minesite of Atok. He participated in a series of dialogues
conducted with the residents. Mr. Torres offered to pay himP3,000.00 per month plus representation expenses. It was
also agreed upon by him and Torres that his participation in resolving the problem was temporary and there will be no
employer-employee relationship between him and Atok. It was also agreed upon that his compensation, allowances
980 and other expenses will be paid through disbursement vouchers.

On February 1, 1992 he joined Atok. One week thereafter, the aggrieved crop damage claimants
barricaded the only passage to and from the minesite. In the early morning of February 1, 1992, a dialogue was made
by Atok and the crop damage claimants. Unfortunately, Atoks representatives, including him, were virtually held
985 hostage by the irate claimants who demanded on the spot payment of their claims. He was able to convince the
claimants to release the company representatives pending referral of the issue to higher management.

A case was filed in court for the lifting of the barricades and the court ordered the lifting of the
barricade. While Atok was prosecuting its case with the claimants, another case erupted involving its partner, Benguet
990 Corporation. After Atok parted ways with Benguet Corporation, some properties acquired by the partnership and some
receivables by Benguet Corporation was the problem. He was again entangled with documentation, conferences,
meetings, planning, execution and clerical works. After two years, the controversy was resolved and Atok received its
share of the properties of the partnership, which is about 5 million pesos worth of equipment and condonation of Atoks
accountabilities with Benguet Corporation in the amount of P900,000.00.
995
In the meantime, crop damage claimants lost interest in pursuing their claims against Atok and Atok
was relieved of the burden of paying 700 million pesos. In between attending the problems of the crop damage issue,
he was also assigned to do liaison works with the SEC, Bureau of Mines, municipal government of Itogon, Benguet,
the Courts and other government offices.
1000
After the crop damage claims and the controversy were resolved, he was permanently assigned by
Atok to take charge of some liaison matters and public relations in Baguio and Benguet Province, and to report
regularly to Atoks office in Manila to attend meetings and so he had to stay in Manila at least one week a month.

1005 Because of his length of service, he invited the attention of the top officers of the company that he is
already entitled to the benefits due an employee under the law, but management ignored his requests. However, he
continued to avail of his representation expenses and reimbursement of company-related expenses. He also enjoyed
the privilege of securing interest free salary loans payable in one year through salary deduction.

1010 In the succeeding years of his employment, he was designated as liaison officer, public relation officer
and legal assistant, and to assist in the ejection of illegal occupants in the mining claims of Atok.

Since he was getting older, being already 56 years old, he reiterated his request to the company to
cause his registration with the SSS. His request was again ignored and so he filed a complaint with the SSS. After
1015 filing his complaint with the SSS, respondents terminated his services.[7]

On September 26, 2003, after the parties have submitted their respective pleadings, Labor Arbiter Rolando D. Gambito
rendered a Decision[8] ruling in favor of the petitioner. Finding no employer-employee relationship between petitioner and respondent, the
1020 Labor Arbiter dismissed the complaint for lack of merit.
 Respondent then appealed the decision to the NLRC.
On July 30, 2004, the NLRC, Second Division, issued a Resolution [9] affirming the decision of the Labor Arbiter. Respondent
filed a Motion for Reconsideration, but it was denied in the Resolution[10] dated September 30, 2004.
1025
Aggrieved, respondent filed a petition for review under Rule 65 of the Rules of Court before the CA questioning the decision and
resolution of the NLRC, which was later docketed as CA-G.R. SP No. 87846. In support of his petition, respondent raised the following
issues:

1030 a) Whether or not the Decision of the Honorable Labor Arbiter and the subsequent Resolutions of the Honorable
Public Respondent affirming the same, are in harmony with the law and the facts of the case;

b) Whether or not the Honorable Labor Arbiter Committed a Grave Abuse of Discretion in Dismissing the Complaint of
Petitioner and whether or not the Honorable Public Respondent Committed a Grave Abuse of Discretion when it
1035 affirmed the said Decision.[11]

On May 31, 2005, the CA rendered the assailed Decision annulling and setting aside the decision of the NLRC, the decretal
portion of which reads:

1040 WHEREFORE, the petition is GRANTED. The assailed Resolution of the National Labor Relations
Commission dismissing petitioner's complaint for illegal dismissal is ANNULLED and SET ASIDE. Private respondent
Atok Big Wedge Company Incorporated is ORDERED to reinstate petitioner Jesus P. Gison to his former or equivalent
position without loss of seniority rights and to pay him full backwages, inclusive of allowances and other benefits or
their monetary equivalent computed from the time these were withheld from him up to the time of his actual and
1045 effective reinstatement. This case is ordered REMANDED to the Labor Arbiter for the proper computation of
backwages, allowances and other benefits due to petitioner. Costs against private respondent Atok Big Wedge
Company Incorporated.

SO ORDERED.[12]
1050

In ruling in favor of the respondent, the CA opined, among other things, that both the Labor Arbiter and the NLRC may have
overlooked Article 280 of the Labor Code, [13] or the provision which distinguishes between two kinds of employees, i.e., regular and
casual employees. Applying the provision to the respondent's case, he is deemed a regular employee of the petitioner after the lapse of
1055 one year from his employment. Considering also that respondent had been performing services for the petitioner for eleven years,
respondent is entitled to the rights and privileges of a regular employee.

The CA added that although there was an agreement between the parties that respondent's employment would only be
temporary, it clearly appears that petitioner disregarded the same by repeatedly giving petitioner several tasks to perform. Moreover,
1060 although respondent may have waived his right to attain a regular status of employment when he agreed to perform these tasks on a
temporary employment status, still, it was the law that recognized and considered him a regular employee after his first year of rendering
service to petitioner. As such, the waiver was ineffective.

Hence, the petition assigning the following errors:

1065
I. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT GAVE DUE COURSE TO THE
PETITION FOR CERTIORARI DESPITE THE FACT THAT THERE WAS NO SHOWING THAT THE NATIONAL
LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF DISCRETION.
1070

II. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO THE LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT BASED ITS FINDING THAT
RESPONDENT IS ENTITLED TO REGULAR EMPLOYMENT ON A PROVISION OF LAW THAT THIS HONORABLE
1075 COURT HAS DECLARED TO BE INAPPLICABLE IN CASE THE EXISTENCE OF AN EMPLOYER-EMPLOYEE
RELATIONSHIP IS IN DISPUTE OR IS THE FACT IN ISSUE.

III. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY
TO LAW AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY FOUND THAT
1080 RESPONDENT IS A REGULAR EMPLOYEE OF THE COMPANY.

IV. WHETHER OR NOT THE COURT OF APPEALS DECIDED QUESTIONS OF SUBSTANCE CONTRARY TO LAW
AND APPLICABLE RULINGS OF THIS HONORABLE COURT WHEN IT ERRONEOUSLY DIRECTED
RESPONDENT'S REINSTATEMENT DESPITE THE FACT THAT THE NATURE OF THE SERVICES HE PROVIDED
1085 TO THE COMPANY WAS SENSITIVE AND CONFIDENTIAL.[14]

20
 Petitioner argues that since the petition filed by the respondent before the CA was a petition for certiorari under Rule 65 of the
Rules of Court, the CA should have limited the issue on whether or not there was grave abuse of discretion on the part of the NLRC in
1090 rendering the resolution affirming the decision of the Labor Arbiter.

Petitioner also posits that the CA erred in applying Article 280 of the Labor Code in determining whether there was an employer-
employee relationship between the petitioner and the respondent. Petitioner contends that where the existence of an employer-
employee relationship is in dispute, Article 280 of the Labor Code is inapplicable. The said article only set the distinction between a
1095 casual employee from a regular employee for purposes of determining the rights of an employee to be entitled to certain benefits.

Petitioner insists that respondent is not a regular employee and not entitled to reinstatement.

On his part, respondent maintains that he is an employee of the petitioner and that the CA did not err in ruling in his favor.
1100
The petition is meritorious.

At the outset, respondent's recourse to the CA was the proper remedy to question the resolution of the NLRC. It bears stressing
that there is no appeal from the decision or resolution of the NLRC. As this Court enunciated in the case of St. Martin Funeral Home v.
1105 NLRC,[15] the special civil action of certiorari under Rule 65 of the Rules of Civil Procedure, which is filed before the CA, is the proper
vehicle for judicial review of decisions of the NLRC. The petition should be initially filed before the Court of Appeals in strict observance
of the doctrine on hierarchy of courts as the appropriate forum for the relief desired. [16] This Court not being a trier of facts, the resolution
of unclear or ambiguous factual findings should be left to the CA as it is procedurally equipped for that purpose. From the decision of the
Court of Appeals, an ordinary appeal under Rule 45 of the Rules of Civil Procedure before the Supreme Court may be resorted to by the
1110 parties. Hence, respondent's resort to the CA was appropriate under the circumstances.

Anent the primordial issue of whether or not an employer-employee relationship exists between petitioner and respondent.

Well-entrenched is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that
1115 the findings thereon by the Labor Arbiter and the NLRC shall be accorded not only respect but even finality when supported by
substantial evidence.[17] Being a question of fact, the determination whether such a relationship exists between petitioner and respondent
was well within the province of the Labor Arbiter and the NLRC. Being supported by substantial evidence, such determination should
have been accorded great weight by the CA in resolving the issue.

1120 To ascertain the existence of an employer-employee relationship jurisprudence has invariably adhered to the four-fold test, to
wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employee's conduct, or the so-called "control test." [18] Of these four, the last one is the most important. [19] The so-called
control test is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under the control test, an employer-employee relationship exists where the person for whom the services are performed
1125 reserves the right to control not only the end achieved, but also the manner and means to be used in reaching that end.[20]

Applying the aforementioned test, an employer-employee relationship is apparently absent in the case at bar. Among other
things, respondent was not required to report everyday during regular office hours of petitioner. Respondent's monthly retainer fees were
paid to him either at his residence or a local restaurant. More importantly, petitioner did not prescribe the manner in which respondent
1130 would accomplish any of the tasks in which his expertise as a liaison officer was needed; respondent was left alone and given the
freedom to accomplish the tasks using his own means and method. Respondent was assigned tasks to perform, but petitioner did not
control the manner and methods by which respondent performed these tasks. Verily, the absence of the element of control on the part of
the petitioner engenders a conclusion that he is not an employee of the petitioner.

1135 Moreover, the absence of the parties' retainership agreement notwithstanding, respondent clearly admitted that petitioner hired
him in a limited capacity only and that there will be no employer-employee relationship between them. As averred in respondent's
Position Paper:[21]

2. For the participation of complainant regarding this particular problem of Atok, Mr. Torres offered him a pay in the
1140 amount of Php3,000.00 per month plus representation expenses. It was also agreed by Mr. Torres and the
complainant that his participation on this particular problem of Atok will be temporary since the problem was then
contemplated to be limited in nature, hence, there will be no employer-employee relationship between him and
Atok. Complainant agreed on this arrangement. It was also agreed that complainant's compensations,
allowances, representation expenses and reimbursement of company- related expenses will be processed and
1145 paid through disbursement vouchers;[22]

Respondent was well aware of the agreement that he was hired merely as a liaison or consultant of the petitioner and he
agreed to perform tasks for the petitioner on a temporary employment status only. However, respondent anchors his claim that he
became a regular employee of the petitioner based on his contention that the temporary aspect of his job and its limited nature could
1150 not have lasted for eleven years unless some time during that period, he became a regular employee of the petitioner by continually
performing services for the company.

Contrary to the conclusion of the CA, respondent is not an employee, much more a regular employee of petitioner. The
appellate court's premise that regular employees are those who perform activities which are desirable and necessary for the business of
1155 the employer is not determinative in this case. In fact, any agreement may provide that one party shall render services for and in behalf
 of another, no matter how necessary for the latter's business, even without being hired as an employee.[23] Hence, respondent's length of
service and petitioner's repeated act of assigning respondent some tasks to be performed did not result to respondent's entitlement to
the rights and privileges of a regular employee.

1160 Furthermore, despite the fact that petitioner made use of the services of respondent for eleven years, he still cannot be
considered as a regular employee of petitioner. Article 280 of the Labor Code, in which the lower court used to buttress its findings that
respondent became a regular employee of the petitioner, is not applicable in the case at bar. Indeed, the Court has ruled that said
provision is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two
kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain
1165 benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in
dispute.[24] It is, therefore, erroneous on the part of the Court of Appeals to rely on Article 280 in determining whether an employer-
employee relationship exists between respondent and the petitioner

Considering that there is no employer-employee relationship between the parties, the termination of respondent's services by
1170 the petitioner after due notice did not constitute illegal dismissal warranting his reinstatement and the payment of full backwages,
allowances and other benefits.

WHEREFORE, premises considered, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in
CA-G.R. SP No. 87846, are REVERSED and SET ASIDE. The Resolutions dated July 30, 2004 and September 30, 2004 of the
1175 National Labor Relations Commission are REINSTATED.
SO ORDERED.

1180

FIRST DIVISION

[G.R. No. 112877. February 26, 1996]

SANDIGAN SAVINGS and LOAN BANK, INC., and SANDIGAN REALTY DEVELOPMENT CORPORATION,petitioners,
1185 vs. NATIONAL LABOR RELATIONS COMMISSION and ANITA M. JAVIER, respondents.

SYLLABUS

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; ELEMENTS OF EMPLOYER-EMPLOYEE

RELATIONSHIP. - 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
1190 employers power to control the employee with respect to the means and methods by which the work is to be accomplished.

2. ID.; ID.; ID.; RIGHT OF CONTROL TEST, CONSTRUED. - This Court has generally relied on the so-called right of control test in
making such a determination. 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 by which such end is reached, the relationship is deemed to exists. Stated differently, it is the
power of control which is the most determinative factor. It is deemed to be such an important factor that the other requisites may
1195 even be disregarded.

3. ID.; ID.; ID.; REALTY SALES AGENT NOT AN EMPLOYEE; NOT ENTITLED TO SECURITY OF TENURE; REASON. - As it
appears that Sandigan Realty had no control over the conduct of Javier as a realty sales agent since its only concern or interest
was in the result of her work and not in how it was achieved, there cannot now be any doubt that Javier was not an employee,
much less a regular employee of the Sandigan Realty. Hence, she cannot be entitled to the right to security of tenure nor to
1200 backwages and separation pay as consequence of her separation therefrom. Evidently, the legal relation of Javier to the Sandigan
Realty can be that of an independent contractor, where the control of the contracting party is only with respect to the result of the
work, as distinguished from an employment relationship where the person rendering service is under the control of the hirer with
respect to the details and manner of performance.
 4. ID.; ID.; ID.; MARKETING COLLECTOR, A REGULAR EMPLOYEE; ENTITLED TO SECURITY OF TENURE. - Private respondent
1205 Anita Javier as marketing collector of petitioner Bank, by virtue of her employment status, is, under the law entitled to security of
tenure, which means that she has the right to continue in employment until the same is terminated under contitions required by
Article 279 of the Labor Code, as amended.

5. ID.; ID.; ID.; ID.; ENTITLED TO REINSTATEMENT AND BACKWAGES IN CASE OF ILLEGAL DISMISSAL. - There being a finding
of illegal dismissal of private respondent Anita Javier, her reinstatemet should follow as a matter of course, unless it be shown that
1210 the same is no longer possible, in which case, payment of separation pay will be ordered, in lieu thereof. In this case, we do not
find any such showing or basis to preclude private respondents reinstatement. In effect, the petitioner bank is liable to private
respondent only for backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time
her compensation was withheld from her up to the time of her actual reinstatement, at the rate of her latest monthly salary and
allowance which was in the total amount of P2,350.00 as shown by Javiers latest Notice of Salary Adjustment.

1215 6. ID.; ID.; ID.; ID.; ID.; EARNINGS ELSEWHERE SHOULD BE DEDUCTED FROM BACKWAGES. - Earnings derived elsewhere by
Javier from the date of dismissal up to the date of reinstatement, if there be any, should be deducted from said backwages. In this
connection, it must be pointed out that the NLRC applied the old rule, otherwise known as the Mercury Drug Rule, and so, as to
the rate of P2,400.00, no evidence was presented as basis. The rule that should apply in this case is that provided in Article 279 of
the Labor Code, as amended by Section 34, Republic Act No. 6715, as aforequoted, which took effect on March 21, 1989,
1220 considering that the private respondents dismissal occurred thereafter, or on April 20, 1990.

PADILLA, J., concurring and dissenting opinion:

1. LABOR AND SOCIAL LEGISLATION; LABOR CODE; EMPLOYMENT; BASIS OF COMPUTATION OF BACKWAGES. - The
backwages to be awarded to the dismissed employee (Anita Javier) should be reckoned from the date of illegal dismissal to date of
actual reinstatement (thereby departing from the Mercury Drug Rule). Article 279 of the Labor Code as amended by Rep. Act No.
1225 6715 provides for such a period as the basis in the computation of backwages.

2. ID.; ID.; ID.; BACKWAGES; AMENDMENT BY REPUBLIC ACT NO. 6715 TO ARTICLE 279 OF THE CIVIL CODE, DOES NOT
ALLOW DEDUCTION OF INCOME OR SALARIES EARNED ELSEWHERE. - J. Padilla do not however agree to the deduction
from backwages of income or salaries earned by the employee from elsewhere during the period of his illegal dismissal. As J.
Padilla stated in his separate opinion in Pines City Educational Center v. NLRC, G.R. No. 96779, 10 November 1993, 227
1230 SCRA 655: x x x. The amendment to Art. 279 of the Labor Code introduced by Rep. Act No. 6715 inserted the qualification full to
the word backwages. The intent of the law seems to be clear. The plain words of the statute provide that an employee who is
unjustly dismissed is entitled toFULL backwages from the time of his dismissal to actual reinstatement. The law provides no
qualification nor does it state that income earned by the employee during the period between his unjust dismissal and reinstatement
should be deducted from such backwages. When the law does not provide, the Court should not improvise.

1235 3. ID.; ID.; ID.; ID.; PRINCIPLE OF UNJUST ENRICHMENT IF NO DEDUCTION IS ALLOWED, DOES NOT APPLY. - The principle
of unjust enrichment (if no deduction is allowed from backwages) does not apply in this case, for the following reasons: 1. The
applicable provision of law should be construed in favor of labor. 2. The Labor Code is special law which should prevail over the
Civil Code provisions on unjust enrichment. 3. The language employed by the statute and, therefore, its intent are clear. Where the
unjust dismissal occurs after Rep. Act No 6715 took effect, backwages must be awarded from the time the employee is unlawfully
1240 dismissed until the time he is actually reinstated. There is no provision authorizing deduction of any income earned by the
employee during that period. Besides and this we cannot over-stress-given the language of the law, the Court appears to have no
alternative but to award such full backwages without deduction or qualification. Any other interpretation opens the Court to the
charge of indulging in judicial legislation.

APPEARANCES OF COUNSEL

1245 Minerva C. Genovea for petitioner.

The Solicitor General for public respondent.

Vivar Lopez & Fuentes Law Offices for private respondent.

DECISION
 HERMOSISIMA, JR., J.:

1250 This Petition for Certiorari, with prayer for the issuance of a temporary restraining order, seeks to review, modify and/or set aside
the Resolution[1] dated 24 September 1993 and the Resolution [2] dated 19 November 1993 of public respondent National Labor Relations
Commission (NLRC) in NLRC CAS RAB-III-05-1560-90. The former affirmed, with modification, the Decision[3] of the Labor Arbiter of the
NLRC Regional Arbitration Branch No. III while the latter denied the motion to reconsider the former.

Private respondent Anita M. Javier (hereinafter referred to as Javier) worked as a realty sales agent of the petitioner Sandigan
1255 Realty Development Corporation (hereinafter called the Sandigan Realty) from November 2, 1982 (or November 9, 1982) [4] to November
30, 1986. Their agreement was that Javier would receive a 5% commission for every sale, or if no sale was made, she would receive a
monthly allowance of P500.00.

Subsequently, that is, on 1 December 1986, Javier was hired as a marketing collector of petitioner Sandigan Savings and Loan
Bank (hereinafter called the Sandigan Bank) by Angel Andan, the President of both the Sandigan Bank and Sandigan Realty. Javiers
1260 monthly salary and allowance were initially in the amount of P788.00 and P5 85.00, respectively.

These were adjusted thereafter (the latest adjustment having been made on 1 July 1989), to P1,840.00 per month as salary and to
P510.00 as monthly allowance, per Notice of Salary Adjustment.[5]

Meanwhile, respondent Javier continued to be a realty sales agent of Sandigan Realty on the side, and while she still received
the 5%commission on her sales, she no longer enjoyed the P5 00.00 monthly allowance.

1265 On 20 April 1990, Javier was advised by Angel Andan not to report for work anymore. This in effect was a notice of dismissal. The
manner by which her dismissal was effected has been correctly described by the Solicitor General, thus:

On April 20, 1990, around 8:30 in the morning, while performing her duties at the Bank, Javier saw and overheard petitioner Andan
summon the Banks personnel officer, Mrs. Liberata G. Fajardo, and instruct her to prepare her (Javier s) termination papers.
Immediately thereafter, Andan changed his mind and told Mrs. Fajardo to prepare instead a resignation letter for Javier, saying, Ayaw ko
1270 na siyang makita sa susunod. Turning to private respondent, he said, Huwag na ninyong itanong kung anong dahilan, basta t gusto ko,
ito ang desisyon ko. Naawa lang ako sa iyo noon kaya kita tinanggap. Ka Anita, huwag mong isipin na may kinalaman ang mga pan
gyayari kay Ditas, wala, wala, hindi iyon, basta t si Alice, iniskandalo na naman ako.

xxx xxx xxx

In the afternoon, after she received P50,000.00 from one Mr. Ben Santos as full payment for a lot sold in Sta. Rita Village, Guiguinto,
1275 Bulacan, Andan ordered Reynaldo Bordado, her co-employee, to withdraw her commission of P10,000.00 from the account of the
Realty, saying, Ibigay mo sa ka Anita yan para hindi na balikan dito. [6]

The advice of her termination notwithstanding, Javier reported for work at the bank on the next working day or on 23 April
1990. Though she signed the attendance sheet, she left when she could not find her table.

On 18 May 1990, Javier filed a complaint against petitioners and Angel Andan with the NLRC Regional Arbitration Branch No. III at
1280 San Fernando, Pampanga, for illegal dismissal, seeking reinstatement and payment of backwages and moral and exemplary damages.

On October 6, 1992, the labor arbiter rendered judgment in private respondents favor, the dispositive portion of which reads:

WHEREFORE, considering the foregoing considerations, and for having unjustly dismissed Anita Javier from employment, respondents
are hereby directed to reinstate her to her former position as marketing collector of Sandigan Savings and Loan Bank and sales agent of
Sandigan Realty Development Coiporation, pay her full backwages from the time of her dismissal, plus 10% attorneys fee and all her
1285 monetary award, until her actual reinstatement, and P60,000.00 moral and exemplary damages to compensate for her mental pain and
anguish, her social humiliation and besmirched reputation. Should reinstatement be rendered impossible by virtue of the abolition of her
position as marketing collector, grant her, in addition to backwages and other benefits, separation pay equivalent to one (1) month for
every year of service until after this decision shall have become final and executory.[7]

On appeal, the NLRC affirmed the decision of the Labor Arbiter in its Resolution, dated 24 September 1993, but, deleting the award
1290 of damages and attorneys fees, provided the following monetary award of backwages and separation pay:
 Backwages: Fr: April 20, 1990-

April 20, 1993 - 36 months

Realty: P500.00 (allowance) x 36 P18,000.00

Savings Bank: P2,400.00 x 36 P86,400.00

1295 TOTAL P104,400.00

Separation Pay:

Realty: Nov. 2, 1982-

April 20, 1993 -10 years

P500.00 (allowance) x10 P5,000.00

1300 Savings Bank: Dec. 1, 1986-

April 20, 1993 - 6 years

P2,400.00 x 6 P14,400.00

GRAND TOTAL P123,800.00

The petitioners Motion for Reconsideration of the said Resolution, and that of the private respondent, were denied by the NLRC in
1305 its Resolution, dated 19 November 1993, the dispositive portion of which reads:

It appearing that the issues raised by both parties in their Motions for Reconsideration were thoroughly discussed and duly passed upon
in the questioned Resolution promulgated on September 24, 1993, the same are hereby denied for lack of merit with finality.

No further motion for reconsideration shall be entertained.

The petitioners, thus, instituted this petition for certiorari, contending that the NLRC gravely and seriously abused its discretion in
1310 holding that:

1. Javier is a regular employee of both Sandigan Realty and Sandigan Bank and entitled to backwages and separation pay from
both;

2. Javier was receiving P2,400.00 a month from the bank and that she is entitled to separation pay for six years. [8]

The records disclose that petitioner Sandigan Bank no longer disputes the finding that Javier was dismissed by it and that she did
1315 not abandon her job thereat. In fact, it would have paid private respondent the monetary award representing backwages and separation
pay adjudged against it in the assailed NLRC resolution, if only it found the same to be in the correct amount.[9]

Consequently, the issues in this case are: (1) whether or not the respondent NLRC abused its discretion in finding that private
respondent was a regular employee of the petitioner Sandigan Realty, entitled to backwages and separation pay because of her alleged
illegal separation therefrom; and (2) whether the computation of the monetary award owing to the private respondent, as contained in the
1320 assailed NLRC resolution, was attended with serious errors as to its bases both in fact and in law.

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 employers power to
control the employee with respect to the means and methods by which the work is to be accomplished. [10] This Court has generally relied
on the so-called right of control test in making such a determination. Where the person for whom the services are performed reserves
1325 a right to control not only the end to be achieved but also the means by which such end is reached, [11] the relationship is deemed to
25
 exist. Stated differently, it is the power of control which is the most determinative factor.[12] It is deemed to be such an important factor
that the other requisites may even be disregarded. [13] Thus, in the case of Cosmopolitan Funeral Homes, Inc. v. Maalat, it was held that
to determine whether a person who performs work for another is the latters employee or is an independent contractor, the prevailing
test is the right of control test. In the said case, the petitioner therein failed to prove that the contract with private respondent was that of
1330 a mere agency, an indication that subject person is free to accomplish his work on his own terms and may engage in other means of
livelihood.[14]

Viewed in the light of the foregoing criteria, the features of the relationship between Javier and the Sandigan Realty, as may be
gleaned from the facts described herein below by the Office of the Solicitor General, readily negate the existence of an employer-
employee relationship between them, the element of control being noticeably absent.

1335 Javier was hired in 1982 to sell houses or lots owned by the Realty. She was paid 5% commission for every lot or house sold. From
1982 up to 1986 when she was hired as a marketing collector of petitioner bank, she received from the Realty P500.00 monthly
allowance if she was unable to make any sale. The P500.00 allowance ceased when she became a regular employee of the petitioner
bank.

Javier sold houses or lots according to the manner or means she chose to. The petitioner realty firm, while interested in the result of her
1340 work, had no control with respect to the details of how the sale of a house or lot was achieved. She was free to adopt her own selling
methods or free to sell at her own time (cf Insular Life Assurance Co., Ltd. v. NLRC, 179 SCRA 459 [1989]). Her obligation was merely
to turn over the proceeds of each sale to the Realty and, in turn, the Realty paid her by the job, i.e., her commission, not by the hour.

Moreover, selling houses and lots was merely her sideline or extra work for a sister company. [15]

As it appears that Sandigan Realty had no control over the conduct of Javier as a realty sales agent since its only concern or
1345 interest was in the result of her work and not in how it was achieved, there cannot now be any doubt that Javier was not an employee,
much less a regular employee of the Sandigan Realty. Hence, she cannot be entitled to the right to security of tenure nor to backwages
and separation pay as a consequence of her separation therefrom.

Evidently, the legal relation of Javier to the Sandigan Realty can be that of an independent contractor, where the control of the
contracting party is only with respect to the result of the work, as distinguished from an employment relationship where the person
1350 rendering service is under the control of the hirer with respect to the details and manner of performance.[16]

In the case of Sara v. Agarrado, private respondent who sold palay and rice for the petitioners under an arrangement or agreement
that the former would be paid P2.00 commission per sack of milled rice sold as well as a commission of 10% per kilo of palay purchased,
[17]
and that she would spend her own money for the undertaking, and where she was shown to have worked for petitioners at her own
pleasure, that she was not subject to definite hours or conditions of work, that she could even delegate the task of buying and selling to
1355 others, if she so desired, or simultaneously engaged in other means of livelihood while selling and purchasing rice or palay, was held to
be an independent contractor.[18]

By the same token, the private respondent in another case,[19] who earns on a per head/talent commission basis and who works as
she pleases, on her own schedule, terms and conditions was also held to be an independent contractor.

Private respondent Anita Javier is clearly similarly placed as the private respondents in the above-cited cases. Hence, she could
1360 not have been a regular employee but an independent contractor in relation to the petitioner Sandigan Realty.

As we hold that private respondent was not a regular employee of the Sandigan Realty and that she could not, therefore, be entitled
to backwages and separation pay, we will necessarily have to limit our treatment of the alleged errors committed by the NLRC in the
computation of the monetary award to that adjudged against the petitioner Sandigan Bank. But, first, we have to settle the question as to
whether reinstatement or payment of separation pay in its stead is the proper relief to be accorded the private respondent, it appearing
1365 that neither the labor arbiter nor the NLRC made a definitive ruling on the matter. This has become especially more significant since
private respondent, in her Comment [20] and Memorandum,[21] presses for an order of reinstatement to her former position, claiming that
there is no sufficient basis for a grant of separation pay in lieu thereof.

We agree with the private respondent in this respect.

 Private respondent Anita Javier, by virtue of her employment status, is, under the law entitled to security of tenure, which means
1370 that she has the right to continue in employment until the same is terminated under conditions required by law. Article 279 of the Labor
Code, as amended, clearly provides that:

Security of Tenure. - In cases of regular employment, the employer shall not terminate the services of an employee except for a just
cause or when authorized by the Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss
of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
1375 equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

There being a finding of illegal dismissal of private respondent Anita Javier, her reinstatement should follow as a matter of course,
unless it be shown that the same is no longer possible, in which case, payment of separation pay will be ordered, in lieu thereof. [22] In this
case, we do not find any such showing or basis to preclude private respondents reinstatement.

In effect, the petitioner bank is liable to private respondent only for backwages, inclusive of allowances, and other benefits or their
1380 monetary equivalent computed from the time her compensation was withheld from her up to the time of her actual reinstatement, at the
rate of her latest monthly salary and allowance which was in the total amount of P2,350.00 as shown by Javiers latest Notice of Salary
Adjustment. However, earnings derived elsewhere by Javier from the date of dismissal up to the date of reinstatement, if there be any,
should be deducted from said backwages.[23] In this connection, it must be pointed out that the NLRC applied the old rule, otherwise
known as the Mercury Drug Rule, and so, as to the rate of P2,400.00, no evidence was presented as basis. The rule that should apply
1385 in this case is that provided in Article 279 of the Labor Code, as amended by Section 34, Republic Act No. 6715, as aforequoted, which
took effect on March 21, 1989, considering that the private respondents dismissal occurred thereafter, or on April 20, 1990.

WHEREFORE, the petition is GRANTED. The assailed resolutions of the National Labor Relations Commission, dated 24
September 1993 and 19 November 1993, are hereby modified to conform both to our finding that private respondent was not a regular
employee of Sandigan Realty Development Corporation but of the Sandigan Savings and Loan Bank, Inc. and to our determination
1390 respecting the monetary award to which the private respondent is entitled. The petitioner Sandigan Savings and Loan Bank, Inc. is
hereby ordered to reinstate private respondent Anita Javier and to pay her backwages from April 20, 1990 up to the date of her actual
reinstatement, less earnings derived elsewhere, if any.

SO ORDERED.

1395

1400

1405
1410

1415

1420

1425

1430
1435

1440

1445

1450

Republic of the Philippines

SUPREME COURT
Manila

1455 THIRD DIVISION

G.R. No. 80750-51 July 23, 1990

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ERNESTO RUIZ and RODRIGO RUIZ, respondents.

1460 G.A. Fortun and Associates for petitioner.

Antonio P. Espinosa for private respondents.

CORTES, J.:
 Brothers Rodrigo and Ernesto Ruiz (private respondents herein) entered into individual agency agreements with petitioner Grepalife in
1465 1977, each starting out as trainee-agents and later promoted to higher positions. On July 6,1981, Ernesto was designated as district
manager under a three-year Agreement of Managership [Annex 'A', Rollo, p. 341. However, he was dismissed from service on November
30, 1983, before the lapse of the period fixed in the contract, when upon audit he was found to have delayed the remittance of premium
collections in his possession and to have appropriated for his own use the sum of Twelve Thousand Eight Hundred Eighteen Pesos and
Seventy-Three Centavos (P12,818.73) by remitting smaller amounts of premiums than that actually paid by policy holders. Grepalife then
1470 designated Rodrigo as officer-in charge to take over the functions of district manager in the Butuan district effective December 5, 1983, in
addition to his responsibilities then as zone supervisor. Unfortunately, Rodrigo proved to be made of the same stuff as his brother. After
his designation as officer-in-charge was recalled in January 1984, he instigated the other zone supervisors and debit agents of the
Butuan district not to submit their weekly reports of business and not to remit the premium collections. Rodrigo's insistent violation
despite warnings from the Vice-President for VisMin Sales prompted Grepalife to terminate his employment effective March 5, 1984 in a
1475 letter dated March 8, 1984. Although the ground for Rodrigo's dismissal was not given in said letter, petitioner maintained that it was for
substantially the same infractions committed by Ernesto.

In the consolidated illegal dismissal cases (NLRC RAB X Case Nos. 4-0210-84 and 2-0103-85) filed by the brothers, the labor arbiter
found that Rodrigo and Ernesto: (1) were employees of Grepalife; (2) committed acts inimical to Grepalife's business; and (3) were
dismissed without first being afforded due process by way of a notice in writing of the grounds for their dismissal.

1480 However, despite such findings, the labor arbiter ordered their reinstatement without backwages [Rollo, pp. 51-52].

Upon appeal, the National Labor Relations Commission (NLRC) affirmed the factual findings of the labor arbiter but reversed the order of
reinstatement on the ground that Grepalife cannot ' be compelled to retain an employee found guilty of acts inimical to its interest.
Nevertheless, 'separation pay" was awarded in favor of private respondents for petitioner's failure to observe due process prior to their
termination from employment. The dispositive portion of the decision reads:

1485 ... for failure of respondents [Grepalife and the branch manager] to give timely notice in writing to complainants of the
acts constituting the grounds for their dismissal pursuant to Section 2, Rule XIV, of Batas Pambansa Blg. 130,
respondent should be ordered to pay complainants Rodrigo Ruiz and Ernesto Ruiz separation pay, equivalent to one-
half month's salary for every year of service. [NLRC Resolution, p. 5; Rollo, p. 9; Emphasis supplied.]

Hence, the present petition.

1490 The Solicitor General filed its comment on behalf of public respondent. Petitioner filed a reply thereto. Subsequently, the Court resolved
to give the petition due course and to require the parties to submit their memoranda. Petitioner and public respondent complied and duly
submitted their respective memoranda. On the other hand, private respondents did not file their comment and memorandum.

The existence of valid grounds for private respondents' dismissal is not disputed herein, and therefore the finding that the Ruiz brothers
were dismissed for just cause is final. The only issues in this petition are (1) Whether or not there was grave abuse of discretion on the
1495 part of public respondent in holding that Ernesto and Rodrigo are employees of Grepalife; and (2) Whether or not there was grave abuse
of discretion on the part of public respondent in ordering the award of separation pay to private respondents as sanction for Grepalife's
failure to accord them due process even though there was finding of just cause for their dismissal.

With respect to the first issue, the Court finds no grave abuse of discretion.

Grepalife contends that Rodrigo and Ernesto are agents, not employees, of the company by alleging that they were hired under agency
1500 agreements, that they were not among the company's "organic personnel" who handled technical and administrative functions of the
company, that they were paid on the basis of production/output (by way of commissions and bonuses, and not salaries), and that they
were neither under any form of control whatsoever as to hours of work nor were they "on call" by the company. On the basis of the
foregoing, Grepalife concluded that the relationship was one of principal-agent and therefore, necessarily, it is the Civil Code and the
Insurance Code which properly govern the relationship, to the exclusion of the Labor Code.

1505 This contention is devoid of merit.

Article 280 of the Labor Code provides that "[the provisions of written agreement to the contrary notwithstanding and regardless of the
oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer. ..." Furthermore, in determining who is
considered an "employee', the Court has time and again applied the "four-fold" test,* with control being the most crucial and
1510 determinative indicator of an employer-employee relationship. The 'employer" must have control (or must have reserved the right to
30
 control) not only over the result of the "employee's" work but also the means and methods by which it is to be accomplished [Investment
Planning Corp. of the Philippines v. SSS, G.R. No. L-19124, November 18, 1967, 21 SCRA 924; Mafinco Trading Corp. v. Ople, G.R. No.
L-37790, March 25, 1976, 70 SCRA 139; Rosario Brothers, Inc. v. Ople, G.R. No. 53590, July 31, 1984, 131 SCRA 72; Brotherhood
Labor Unity Movement of the Philippines v. Zamora, G.R. No.
1515 L-48645, January 7, 1987,147 SCRA 49; Grepalife v. NLRC, G.R. No. 73887, December 21, 1989].

Applying the above, the Court finds that, as correctly held by public respondent, the relationships of the Ruiz brothers and Grepalife were
those of employer-employee.

First, their work at the time of their dismissal as zone supervisor and district manager are necessary and desirable to the usual business
of the insurance company. They were entrusted with supervisory, sales and other functions to guard Grepalife's business interests and to
1520 bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully
brought to the company.

Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of their efforts.
A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner
by which their jobs are to be carried out. For instance, the District Manager must properly account, record and document the company's
1525 funds spot-check and audit the work of the zone supervisors, conserve the company's business in the district through 'reinstatements',
follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good
condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for
termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve
company property through "reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of
1530 debit agents, and insure proper documentation of sales and collections by the debit agents.

True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code [Art. 300] some of the functions
performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not employees of
Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar
the application of the Labor Code with regard to labor standards and labor relations.

1535 Moreover, it is well-settled that the existence of an employer-employee relationship is ultimately a question of fact, and such findings of
fact of the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence [RJL
Martinez Fishing Corporation v. NLRC, G.R. Nos. 63550-51, January 31, 1984, 127 SCRA 454; Asim v. Castro, G.R. Nos. 75063-64,
June 30, 1988, 163 SCRA 344; Murillo v. Sun Valley Realty, Inc., G.R. No. 67272, June 30, 1988, 163 SCRA 271], as in this case.

With respect to the second issue, petitioner argues that private respondents are not entitled to separation pay since there was clear
1540 finding of just cause for dismissal, and furthermore "neither the law nor the rules implementing the same authorizes the award of
separation pay as 'penalty." [Petition, p. 8; Rollo, p. 25.]

Again, the contention is devoid of merit.

It must be emphasized that the monetary award fixed by public respondent, although erroneously termed as "separation pay', was in fact
a sanction for the employer's failure to observe the procedural requirements of due process provided under Rule XIV, Secs. 2, 5 and 6 of
1545 the rules implementing Batas Pambansa Blg. 130, and the parties' own covenant [Annex "A", Rollo, p. 38.] The imposition of such a
sanction is in consonance with the ruling in the case of Wenphil v. NLRC, [G.R. No. 80587, February 8,1989,170 SCRA 69). The Court
held therein that anindemnity, not "separation pay", must be imposed on the employer for failure to observe the procedural requirements
of notice and hearing prior to the dismissal of an employee for just cause. Considering the circumstances of the case at bar, petitioner
must indemnify private respondents in the amount of One Thousand Pesos (P1,000.00) each [See also Shoemart, Inc. v. NLRC, G.R.
1550 No. 74229, August 11, 1989].

IN VIEW OF THE FOREGOING, the decision of the NLRC is hereby MODIFIED insofar as the award of "separation pay" is concerned. In
lieu of "separation pay" petitioner Grepalife is hereby ordered to indemnifyprivate respondents Rodrigo Ruiz and Ernesto Ruiz the
amount of One Thousand Pesos (P1,000.00) each.

SO ORDERED.

1555
1560

1565

1570

1575

1580

1585

SECOND DIVISION

1590 SOUTH DAVAO DEVELOPMENT G.R. No. 171814

COMPANY, INC. (NOW SODACO
AGRICULTURAL CORPORATION)
AND/OR MALONE PACQUIAO Present:
AND VICTOR A. CONSUNJI,
1595 Petitioners,
CARPIO MORALES,* J.
- versus - Acting Chairperson,
TINGA,
VELASCO, JR.,
1600 SERGIO L. GAMO, ERNESTO LEONARDO DE CASTRO,**and
BELLEZA, FELIX TERONA, BRION, JJ.
CARLOS ROJAS, MAXIMO
MALINAO, VIRGILIO COSEP,
ELEONOR COSEP, MAXIMO Promulgated:
1605 TOLDA, NELSON BAGAAN,
and TRADE UNION OF THE
PHILIPPINES and ALLIED May 8, 2009
SERVICES (TUPAS),
Respondents.
1610 x---------------------------------------------------------------------------------------x
D E C I S I ON
TINGA, J.:

Before us is a Rule 45 petition[1] which seeks the reversal of the Court of Appeals decision[2] and resolution[3] in CA-G.R. SP No.
1615 68511. The Court of Appeals decision reinstated the NLRCs Resolution [4] dated 23 March 2001 which reversed the labor arbiters
decision.[5]

Petitioner South Davao Development Company (petitioner or petitioner corporation) is the operator of a coconut and mango
farm in San Isidro, Davao Oriental and Inawayan/Baracatan, Davao del Sur. On August 1963 petitioner hired respondent Sergio L. Gamo
1620 (Gamo) as a foreman. Sometime in 1987, petitioner appointed Gamo as a copra maker contractor. Respondents Ernesto Belleza,
Carlos Rojas, Maximo Malinao were all employees in petitioners coconut farm, while respondents Felix Terona, Virgilio Cosep, Maximo
Tolda, and Nelson Bagaan were assigned to petitioners mango farm. All of the abovenamed respondents (copra workers) were later
transferred by petitioner to Gamo as the latters copraceros. From 1987 to 1999, Gamo and petitioner entered into a profit-sharing
agreement wherein 70% of the net proceeds of the sale of copra went to petitioner and 30% to Gamo. The copra workers were paid by
1625 Gamo from his 30% share.
 Petitioner wanted to standardize payments to its contractors in its coconut farms. On 2 October 1999, petitioner proposed a
new payment scheme to Gamo. The new scheme provided a specific price for each copra making activity. Gamo submitted his counter
proposal.[6] Petitioner did not accept Gamos counter proposal since it was higher by at least fifty percent (50%) from its original offer.
1630 Without agreeing to the new payment scheme, Gamo and his copra workers started to do harvesting work. Petitioner told them to stop.
Eventually, petitioner and Gamo agreed that the latter may continue with the harvest provided that it would be his last contract with
petitioner. Gamo suggested to petitioner to look for a new contractor since he was not amenable to the new payment scheme.[7]

Gamo and petitioner failed to agree on a payment scheme, thus, petitioner did not renew the contract of Gamo. Gamo and the
1635 copra workers alleged that they were illegally dismissed.

On the other hand, respondent Eleonor Cosep (Eleonor) was employed as a mango classifier in the packing house of
petitioners mango farm in San Isidro, Davao Oriental. Sometime in October 1999, she did not report for work as she had wanted to raise
and sell pigs instead. Petitioner, through Malone Pacquiao, tried to convince Eleonor to report for work but to no avail.
1640
On 22 March 2000, respondents filed a complaint[8] for illegal dismissal against petitioner. They alleged that sometime in December
1999, petitioner verbally terminated them en masse.

The labor arbiter dismissed[9] the complaint. He ruled that there was no employee-employer relationship between petitioner and
1645 respondents. As to Eleonor, he ruled that she had voluntarily stopped working.

Respondents appealed to the National Labor Relations Commission (NLRC). The NLRCs Resolution [10] reversed the arbiters
decision and ruled that respondents were petitioners employees. Petitioner moved[11] for reconsideration. The NLRC granted[12] the
motion for reconsideration and ruled that the nature of the job of the respondents could not result in an employer-employee relationship.
1650 Respondents moved for reconsideration which was denied.[13]

Respondents filed a petition for certiorari[14] under Rule 65 with the Court of Appeals. The Court of Appeals ruled that there existed
an employer-employee relationship. It declared that respondents were regular seasonal employees who can be dismissed by the
petitioner at the end of the season provided due process is observed. [15] With regard to Eleonor, the Court of Appeals ruled that she did
1655 not abandon her work.

Hence this petition.

Petitioner raises the following issues: (1) whether the Court of Appeals failed to take judicial notice of the accepted practice of
1660 independent contractors in the coconut industry; (2) whether there is a valid job contracting between petitioner and Gamo; and (3)
whether Eleonor had effectively abandoned her work.

The labor arbiter took judicial notice of the alleged prevailing business practices in the coconut industry that copra making activities
are done quarterly; that the workers can contract with other farms; and that the workers are independent from the land owner on all work
1665 aspects. Petitioner wants this Court to take judicial notice of the current business practice in the coconut industry which allegedly
treats copraceros as independent contractors. In Expertravel & Tours, Inc. v. Court of Appeals, [16] we held, thus:

Generally speaking, matters of judicial notice have three material requisites: (1) the matter must be one of
common and general knowledge; (2) it must be well and authoritatively settled and not doubtful or uncertain; and (3) it
1670 must be known to be within the limits of the jurisdiction of the court. The principal guide in determining what facts may
be assumed to be judicially known is that of notoriety.[17]Hence, it can be said that judicial notice is limited to facts
evidenced by public records and facts of general notoriety. Moreover, a judicially noticed fact must be one not subject
to a reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court; or (2)
capable of accurate and ready determination by resorting to sources whose accuracy cannot reasonably be
1675 questionable.[18]
Things of common knowledge, of which courts take judicial matters coming to the knowledge of men
generally in the course of the ordinary experiences of life, or they may be matters which are generally accepted by
mankind as true and are capable of ready and unquestioned demonstration. Thus, facts which are universally known,
and which may be found in encyclopedias, dictionaries or other publications, are judicially noticed, provided, they are
1680 of such universal notoriety and so generally understood that they may be regarded as forming part of the common
knowledge of every person. As the common knowledge of man ranges far and wide, a wide variety of particular facts
have been judicially noticed as being matters of common knowledge. But a court cannot take judicial notice of any fact
which, in part, is dependent on the existence or non-existence of a fact of which the court has no constructive
knowledge.[19]
1685 An invocation that the Court take judicial notice of certain facts should satisfy the requisites set forth by case law. A mere prayer
for its application shall not suffice. Thus, in this case the Court cannot take judicial notice of the alleged business practices in the copra
industry since none of the material requisites of matters of judicial notice is present in the instant petition. The record is bereft of any
indication that the matter is of common knowledge to the public and that it has the characteristic of notoriety, except petitioners self-
serving claim.
1690
A related issue is whether Gamo is an independent contractor. In Escario v. NLRC,[20] we ruled that there is permissible job
contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of whether such job or work service is to be performed
 within or outside the premises of the principal.[21] To establish the existence of an independent contractor, we apply the following
1695 conditions: first, 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 to the result thereof; and second, the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his
business.[22]
1700
The Implementing Rules and Regulation of the Labor Code defines investmentas tools, equipment, implements, machineries
and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or
service contracted out.[23] The investment must be sufficient to carry out the job at hand.

1705 In the case at bar, Gamo and the copra workers did not exercise independent judgment in the performance of their tasks. The
tools used by Gamo and his copra workers like the karit, bolo, pangbunot, panglugit and pangtapok are not sufficient to enable them to
complete the job.[24] Reliance on these primitive tools is not enough. In fact, the accomplishment of their task required more expensive
machineries and equipment, like the trucks to haul the harvests and the drying facility, which petitioner corporation owns.

1710 In order to determine the existence of an employer-employee relationship, the Court has frequently applied the four-fold test: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees conduct, or the so called control test, which is considered the most important element. [25] From the time they were hired by
petitioner corporation up to the time that they were reassigned to work under Gamos supervision, their status as petitioner corporations
employees did not cease. Likewise, payment of their wages was merely coursed through Gamo. As to the most determinative testthe
1715 power of control, it is sufficient that the power to control the manner of doing the work exists, it does not require the actual exercise of
such power.[26] In this case, it was in the exercise of its power of control when petitioner corporation transferred the copra workers from
their previous assignments to work as copraceros. It was also in the exercise of the same power that petitioner corporation put Gamo in
charge of the copra workers although under a different payment scheme. Thus, it is clear that an employer-employee relationship has
existed between petitioner corporation and respondents since the beginning and such relationship did not cease despite their
1720 reassignments and the change of payment scheme.

As to the last issue, petitioner seeks our indulgence to declare that Eleonor has abandoned her work. Petitioner admitted that
Eleonor was its regular employee.[27] However, it claimed that she abandoned her work, preferring to sell and raise pigs instead.

1725 It is well settled that abandonment as a just and valid ground for dismissal requires the deliberate and unjustified refusal of the
employee to return for work. Two elements must be present, namely: (1) the failure to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever the employer-employee relationship. The second element is more determinative of
the intent and must be evinced by overt acts. Mere absence, not being sufficient, the burden of proof rests upon the employer to show
that the employee clearly and deliberately intended to discontinue her employment without any intention of returning. [28] In Samarca v.
1730 Arc-Men Industries, Inc, we held that abandonment is a matter of intention and cannot lightly be presumed from certain equivocal acts.

To constitute abandonment, there must be clear proof of deliberate and unjustified intent to sever the employer-employee
relationship. Clearly, the operative act is still the employees ultimate act of putting an end to his employment. [29] However, an employee
who takes steps to protest her layoff cannot be said to have abandoned her work because a charge of abandonment is totally
1735 inconsistent with the immediate filing of a complaint for illegal dismissal, more so when it includes a prayer for reinstatement. [30] When
Eleonor filed the illegal dismissal complaint, it totally negated petitioners theory of abandonment.

Also, to effectively dismiss an employee for abandonment, the employer must comply with the due process requirement of
sending notices to the employee. In Brahm Industries, Inc. v. NLRC,[31] we ruled that this requirement is not a mere formality that may be
1740 dispensed with at will. Its disregard is a matter of serious concern since it constitutes a safeguard of the highest order in response to
mans innate sense of justice.[32] Petitioner was not able to send the necessary notice requirement to Eleonor. Petitioners belated claim
that it was not able to send the notice of infraction prior to the filing of the illegal dismissal case cannot simply unacceptable. [33] Based on
the foregoing, Eleonor did not abandon her work.

1745 WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Cost against petitioner.

SO ORDERED.

1750

1755

1760
1765

1770

1775

1780

1785

1790

SECOND DIVISION

GLORIA V. GOMEZ, G.R. No. 174044

1795 Petitioner,

Present:

Carpio, J., Chairperson,

- versus - Leonardo-De Castro,

1800 Brion,
Del Castillo, and
Abad, JJ.
PNOC DEVELOPMENT AND
MANAGEMENT CORPORATION
1805 (PDMC) (formerly known as
FILOIL DEVELOPMENT AND
MANAGEMENT CORPORATION Promulgated:
[FDMC]),
Respondent. November 27, 2009
1810
x ---------------------------------------------------------------------------------------- x

DECISION

1815 ABAD, J.:

35
 This case is about what distinguishes a regular company manager performing important executive tasks from a corporate officer
whose election and functions are governed by the companys by-laws.
1820
The Facts and the Case

Petitioner Gloria V. Gomez used to work as Manager of the Legal Department of Petron Corporation, then a government-owned
corporation. With Petrons privatization, she availed of the companys early retirement program and left that organization on April 30,
1825 1994. On the following day, May 1, 1994, however, Filoil Refinery Corporation (Filoil), also a government-owned corporation, appointed
her its corporate secretary and legal counsel,[1] with the same managerial rank, compensation, and benefits that she used to enjoy at
Petron.

But Filoil was later on also identified for privatization. To facilitate its conversion, the Filoil board of directors created a five-
1830 member task force headed by petitioner Gomez who had been designated administrator. [2] While documenting Filoils assets, shefound
several properties which were not in the books of the corporation. Consequently, she advised the board to suspend the privatization until
all assets have been accounted for.

With the privatization temporarily shelved, Filoil underwent reorganization and was renamed Filoil Development Management
1835 Corporation (FDMC), which later became the respondent PNOC Development Management Corporation (PDMC). When this happened,
Gomezs task force was abolished and its members, including Gomez, were given termination notices on March 5, 1996. [3] The matter
was then reported to the Department of Labor and Employment on March 7, 1996.[4]

Meantime, petitioner Gomez continued to serve as corporate secretary of respondent PDMC. On September 23, 1996 its
1840 president re-hired her as administrator and legal counsel of the company.[5] In accordance with company guidelines, it credited her the
years she served with the Filoil task force. On May 24, 1998, the next president of PDMC extended her term as administrator beyond
her retirement age,[6] pursuant to his authority under the PDMC Approvals Manual.[7] She was supposed to serve beyond retirement from
August 11, 1998 to August 11, 2004. Meantime, a new board of directors for PDMC took over the company.

1845 On March 29, 1999 the new board of directors of respondent PDMC removed petitioner Gomez as corporate secretary. Further,
at the boards meeting on October 21, 1999 the board questioned her continued employment as administrator. In answer, she presented
the former presidents May 24, 1998 letter that extended her term. Dissatisfied with this, the board sought the advice of its legal
department, which expressed the view that Gomezs term extension was an ultra vires act of the former president. It reasoned that,
since her position was functionally that of a vice-president or general manager, her term could be extended under the companys by-laws
1850 only with the approval of the board. The legal department held that her de facto tenure could be legally put to an end.[8]

Sought for comment, the Office of the Government Corporate Counsel (OGCC) held the view that while respondent PDMCs
board did not approve the creation of the position of administrator that Gomez held, such action should be deemed ratified since the
board had been aware of it since 1994. But the OGCC ventured that the extension of her term beyond retirement age should have been
1855 made with the boards approval.[9]

Petitioner Gomez for her part conceded that as corporate secretary, she served only as a corporate officer. But, when they
named her administrator, she became a regular managerial employee. Consequently, the respondent PDMCs board did not have to
approve either her appointment as such or the extension of her term in 1998.
1860
Pending resolution of the issue, the respondent PDMCs board withheld petitioner Gomezs wages from November 16 to 30,
1999, prompting her to file a complaint for non-payment of wages, damages, and attorneys fees with the Labor Arbiter on December 8,
1999.[10] She later amended her complaint to include other money claims.[11]

1865 In a special meeting held on December 29, 1999 the respondent PDMCs board resolved to terminate petitioner Gomezs
services retroactive on August 11, 1998, her retirement date.[12] On January 5, 2000 the board informed petitioner of its decision.
[13]
Thus, she further amended her complaint to include illegal dismissal.[14]

Respondent PDMC moved to have petitioner Gomezs complaint dismissed on ground of lack of jurisdiction. The Labor Arbiter
1870 granted the motion[15] upon a finding that Gomez was a corporate officer and that her case involved an intra-corporate dispute that fell
under the jurisdiction of the Securities and Exchange Commission (SEC) pursuant to Presidential Decree (P.D.) 902-A. [16] On motion for
reconsideration, the National Labor Relations Commission (NLRC) Third Division set aside the Labor Arbiters order and remanded the
case to the arbitration branch for further proceedings.[17] The Third Division held that Gomez was a regular employee, not a corporate
officer; hence, her complaint came under the jurisdiction of the Labor Arbiter.
1875
Upon elevation of the matter to the Court of Appeals (CA) in CA-G.R. SP 88819, however, the latter rendered a decision on May
19, 2006,[18] reversing the NLRC decision. The CA held that since Gomezs appointment as administrator required the approval of the
board of directors, she was clearly a corporate officer. Thus, her complaint is within the jurisdiction of the Regional Trial Court (RTC)
under P.D. 902-A, as amended by Republic Act (R.A.) 8799.[19] With the denial of her motion for reconsideration,[20] Gomez filed this
1880 petition for review on certiorari under Rule 45.

The Issue Presented

 The key issue in this case is whether or not petitioner Gomez was, in her capacity as administrator of respondent PDMC, an
1885 ordinary employee whose complaint for illegal dismissal and non-payment of wages and benefits is within the jurisdiction of the NLRC.

The Courts Ruling

Ordinary company employees are generally employed not by action of the directors and stockholders but by that of the managing
1890 officer of the corporation who also determines the compensation to be paid such employees. [21] Corporate officers, on the other hand,
are elected or appointed[22] by the directors or stockholders, and are those who are given that character either by the Corporation Code or
by the corporations by-laws.[23]

Here, it was the PDMC president who appointed petitioner Gomez administrator, not its board of directors or the
1895 stockholders. The president alone also determined her compensation package. Moreover, the administrator was not among the
corporate officers mentioned in the PDMC by-laws. The corporate officers proper were the chairman, president, executive vice-
president, vice-president, general manager, treasurer, and secretary.[24]

Respondent PDMC claims, however, that since its board had under its by-laws the power to create additional corporate offices,
1900 it may be deemed to have simply ratified its presidents creation of the corporate position of administrator. [25] But creating an additional
corporate office was definitely not respondent PDMCs intent based on its several actions concerning the position of administrator.

Respondent PDMC never told Gomez that she was a corporate officer until the tail-end of her service after the board found legal
justification for getting rid of her by consulting its legal department and the OGCC which supplied an answer that the board obviously
1905 wanted. Indeed, the PDMC president first hired her as administrator in May 1994 and then as administrator/legal counsel in September
1996 without a board approval. The president even extended her term in May 1998 also without such approval. The companys mindset
from the beginning, therefore, was that she was not a corporate officer.

Respondent PDMC of course claims that as administrator petitioner Gomez performed functions that were similar to those of its
1910 vice-president or its general manager, corporate positions that were mentioned in the companys by-laws. It points out that Gomez was
third in the line of command, next only to the chairman and president,[26] and had been empowered to make major decisions and
manage the affairs of the company.

But the relationship of a person to a corporation, whether as officer or agent or employee, is not determined by the nature of the
1915 services he performs but by the incidents of his relationship with the corporation as they actually exist. [27] Here, respondent PDMC hired
petitioner Gomez as an ordinary employee without board approval as was proper for a corporate officer. When the company got her the
first time, it agreed to have her retain the managerial rank that she held with Petron. Her appointment paper said that she would be
entitled to all the rights, privileges, and benefits that regular PDMC employees enjoyed. [28] This is in sharp contrast to what the former
PDMC presidents appointment paper stated: he was elected to the position and his compensation depended on the will of the board of
1920 directors.[29]

What is more, respondent PDMC enrolled petitioner Gomez with the Social Security System, the Medicare, and the Pag-Ibig
Fund. It even issued certifications dated October 10, 2008, [30] stating that Gomez was a permanent employee and that the company had
remitted combined contributions during her tenure. The company also made her a member of the PDMCs savings and provident
1925 plan[31] and its retirement plan.[32] It grouped her with the managers covered by the companys group hospitalization insurance.
[33]
Likewise, she underwent regular employee performance appraisals,[34] purchased stocks through the employee stock option plan,
[35]
and was entitled to vacation and emergency leaves. [36] PDMC even withheld taxes on her salary and declared her as an employee in
the official Bureau of Internal Revenue forms. [37] These are all indicia of an employer-employee relationship which respondent PDMC
failed to refute.
1930
Estoppel, an equitable principle rooted on natural justice, prevents a person from rejecting his previous acts and representations
to the prejudice of others who have relied on them. [38] This principle of law applies to corporations as well. The PDMC in this case is
estopped from claiming that despite all the appearances of regular employment that it weaved around petitioner Gomezs position it must
have technically hired her only as a corporate officer. The board and its officers made her stay on and work with the company for years
1935 under the belief that she held a regular managerial position.

That petitioner Gomez served concurrently as corporate secretary for a time is immaterial. A corporation is not prohibited from
hiring a corporate officer to perform services under circumstances which will make him an employee. [39] Indeed, it is possible for one to
have a dual role of officer and employee. In Elleccion Vda. De Lecciones v. National Labor Relations Commission,[40] the Court upheld
1940 NLRC jurisdiction over a complaint filed by one who served both as corporate secretary and administrator, finding that the money claims
were made as an employee and not as a corporate officer.

WHEREFORE, the Court GRANTS the petition, REVERSES and SETS ASIDE the decision dated May 19, 2006 and the
resolution dated August 15, 2006 of the Court of Appeals in CA-G.R. SP 88819, and REINSTATES the resolution dated November 22,
1945 2002 of the National Labor Relations Commissions Third Division in NLRC NCR 30-12-00856-99. Let the records of this case
be REMANDED to the arbitration branch of origin for the conduct of further proceedings.

SO ORDERED.

1950
1955

1960

1965

1970

1975

1980

1985

1990

THIRD DIVISION

DEALCO FARMS, INC., G.R. No. 153192

Petitioner,

Present:

- versus - AUSTRIA-MARTINEZ, J.,

Acting Chairperson,
TINGA,*
CHICO-NAZARIO,
NATIONAL LABOR RELATIONS COMMISSION NACHURA, and
(5th DIVISION), CHIQUITO BASTIDA, and ALBERT CABAN, PERALTA, JJ.
Respondents.
Promulgated:

January 30, 2009

1995 x------------------------------------------------------------------------------------x

DECISION

2000 NACHURA, J.:

Under review are Resolutions[1] of the Court of Appeals (CA) in CA-G.R. SP No. 68972 denying due course to and dismissing
petitioner Dealco Farms, Inc.s petition for certiorari.
2005 Petitioner is a corporation engaged in the business of importation, production, fattening and distribution of live cattle for sale to
meat dealers, meat traders, meat processors, canned good manufacturers and other dealers in Mindanao and in Metro Manila. Petitioner
imports cattle by the boatload from Australia into the ports of General Santos City, Subic, Batangas, or Manila. In turn, these imported
cattle are transported to, and housed in, petitioners farms in Polomolok, South Cotabato, or in Magalang, Pampanga, for fattening until
the cattle individually reach the market weight of 430 to 450 kilograms.
2010
Respondents Albert Caban and Chiquito Bastida were hired by petitioner on June 25, 1993 and October 29, 1994, respectively, as
escorts or comboys for the transit of live cattle from General Santos City to Manila. Respondents work entailed tending to the cattle
during transportation. It included feeding and frequently showering the cattle to prevent dehydration and to develop heat resistance. On
the whole, respondents ensured that the cattle would be safe from harm or death caused by a cattle fight or any such similar incident.
2015
Upon arrival in Manila, the cattle are turned over to and received by the duly acknowledged buyers or customers of petitioner, at
which point, respondents work ceases. For every round trip travel which lasted an average of 12 days, respondents were each
paid P1,500.00. The 12-day period is occasionally extended when petitioners customers are delayed in receiving the cattle. In a month,
respondents usually made two trips.
2020
On October 15, 1999, respondents Bastida and Caban, together with Ramon Maquinsay and Roland Parrocha, filed a Complaint
for illegal dismissal with claims for separation pay with full backwages, salary differentials, service incentive leave pay, 13 th month pay,
damages, and attorneys fees against petitioner, Delfin Alcoriza[2] and Paciano Danilo Ramis[3] before the National Labor Relations
Commission (NLRC), Sub-Regional Arbitration Branch No. XI, General Santos City. Although the four complainants collectively filed a
2025 case against petitioner, Maquinsay and Parrocha never appeared in any of the conferences and/or hearings before the Labor Arbiter.
Neither did they sign the verification page of complainants position paper. Most importantly, Maquinsay and Parrocha executed affidavits
in favor of petitioner praying for the dismissal of the complaint insofar as they were concerned.

It appears that, on August 19, 1999, respondents were told by a Jimmy Valenzuela, a hepe de viaje, that he had been instructed by
2030 Ramis to immediately effect their replacement. Valenzuela proffered no reason for respondents replacement. Respondents repeated
attempts to see and meet with Ramis, as well as to write Alcoriza, proved futile, compelling them to file an illegal dismissal case against
petitioner and its officers.

In all, respondents alleged in their position paper that: (1) they were illegally dismissed, as they never violated any of petitioners
2035 company rules and policies; (2) their dismissal was not due to any just or authorized cause; and (3) petitioner did not observe due
process in effecting their dismissal, failing to give them written notice thereof. Thus, respondents prayed for money claims, i.e., salary
differentials, service incentive leave pay, cost of living allowance (COLA) and 13th month pay.

Petitioner, however, paints a different picture. Petitioner asserts that the finished cattle are sold to traders and middlemen who
2040 undertake transportation thereof to Manila for distribution to the wet markets. In fact, according to petitioner, the buyers and end-users of
their finished cattle actually purchase the cattle as soon as they are considered ready for the market. Petitioner claims that once the
finished cattle are bought by the buyers, these buyers act separately from, and independently of, petitioners business. In this regard, the
buyers themselves arrange, through local representatives, for the (a) hauling from petitioners farm to the port area; (b) shipment of the
finished cattle to Manila; and (c) escort or comboy services to feed and water the cattle during transit.
2045
In its position paper, petitioner relates only one instance when it engaged the services of respondents as comboys. Petitioner
maintains that their arrangement with respondents was only on a per-trip or per-contract basis to escort cattle to Manila which
contemplated the cessation of the engagement upon return of the ship to the port of origin the General Santos City port.

2050 Petitioner further narrates that sometime in 1998, and well into 1999, its import of cattle from Australia substantially decreased due
to the devalued dollar. Consequently, petitioner was forced to downsize, and the sale and shipments to Manila were drastically reduced.
Thus, petitioner and/or its buyers no longer retained escort or comboy services.

Ultimately, petitioner denies the existence of an employer-employee relationship with respondents. Petitioner posits that: (a)
2055 respondents are independent contractors who offer comboy services to various shippers and traders of cattle, not only to petitioner; (b)
in the performance of work on board the ship, respondents are free from the control and supervision of the cattle owner since the latter is
interested only in the result thereof; (c) in the alternative, respondents can only be considered as casual employees performing work not
necessary and desirable to the usual business or trade of petitioner, i.e., cattle fattening to market weight and production; and (d)
respondents likewise failed to complete the one-year service period, whether continuous or broken, set forth in Article 280 [4] of the Labor
2060 Code, as petitioners shipments were substantially reduced in 1998-1999, thereby limiting the escort or comboy activity for which
respondents were employed.

On June 30, 2000, the Labor Arbiter found that respondents were employees of petitioner, thus:

2065 [Petitioner] admits having engaged the services of [respondents] as caretakers or comboys (convoys) though
it qualifies that it was on a per trip or per contract basis. It also admits paying their remuneration of P1,500.00 per
trip. It tacitly admits having terminated [respondents] services when it said that [respondents] were among the group of
escorts who were no longer accommodated due to the decrease in volume of imports and shipments. [Petitioner] also
undoubtedly exercised control and supervision over [respondents] work as caretakers considering that the value of the
2070 cattle shipped runs into hundreds of thousands of pesos. The preparation of the cattle for shipment, manning and
feeding them prior to and during transit, and making a report upon return to General Santos City to tally the records of
 the cattle shipped out versus cattle that actually reached Manila are certainly all in accordance with [petitioners]
instructions.

2075 Thus, all the four elements in the determination of an employer-employee relationship being present, [x x x]
[respondents] were, therefore, employees of [petitioner].

x x x [Respondents] also performed activities which are usually necessary or desirable in the usual business or
trade of [petitioner] (Art. 280, Labor Code). [Petitioners] contention, to the contrary, is erroneous. Transporting the
2080 cattle to its main market in Manila is an essential and component aspect of [petitioners] operation. As held by [the
NLRCs] Fifth Division in one case:

Complainants task of escorting the livestock shipped to Manila, taking care of the livestock in
transit, is an activity which is necessary and desirable in the usual business or trade of respondent. It
2085 is of judicial notice that the bulk of the market for livestock of big livestock raisers such as
respondent is in Manila. Hogs do not swim, they are shipped. When in transit (usually two-and-one-
half days) they do not queue to the mess hall, they are fed. x x x The caretaker is a component of the
business, a part of the scheme of the operation. (NFL and Ricardo Garcia v. Bibiana Farms, Inc.,
NLRC CA No. XI-065089-99 (rab-xi-01-50026-98); prom. April 28, 2000).
2090
More, it also appears that [respondents] had rendered service for more than one year doing the same task
repeatedly, thus, even assuming they were casual employees they may be considered regular employees with respect
to the activity in which they were employed and their employment shall continue while such activity exists (last par. of
Art. 280). [Respondents], in fact, were hired on October 29, 1994 (Bastida) and June 25, 1993 (Caban), a fact which
2095 [petitioner] dismally failed to refute.

Given the foregoing, [petitioners] contention that [respondents] were independent contractors and free lancers
deserves little consideration. Its argument that its usual trade or business (importation/production and fattening) ends
in General Santos City, and does not include transporting the cattle, does not persuade us.
2100
[Petitioners] witnesses tried to corroborate [its] contention that [respondents] also offered their services to
various shippers and traders of cattle, not only to [petitioner]. Former complainants Maquinsay and Parrocha
mentioned the names of these traders/buyers or shippers as Lozano Farms, Bibiana Farms and other big cattle feedlot
farms in SOCSARGEN (Annexes A and E, [petitioners] position paper.) But not a modicum of evidence was
2105 adduced to prove payment of [respondents] services by any of these supposed traders or that [respondents] received
instructions from them. There is also no record that shows that the trader/s actually shipped livestock and engaged the
services of caretakers.[5]

2110 Accordingly, the Labor Arbiter granted respondents claim for separation pay, COLA and union service fees. The Labor Arbiter
awarded respondents: (a) separation pay of one month for every year of service; (b) COLA, as petitioner failed to prove payment thereof
or its exemption therefrom; and (c) union service fees fixed at 10% of the total monetary award. The Labor Arbiter computed
respondents total monetary awards as follows:

NAME SEPARATION PAY COLA SUB-TOTAL

Chiquito Bastida P15,000.00 P2,400.00 P17,400.00

Albert Caban 18,000.00 2,400.00 20,400.00
P37,800.00
Plus 10% Union Service Fees 3,780.00

TOTAL ------ P41,580.00[6]

2115

However, the Labor Arbiter denied respondents claim for backwages, 13th month pay, salary differential, service incentive leave
pay and damages, to wit:

2120 But we deny the claim for backwages which was merely inserted in the prayer portion of [respondents]
position paper. Reasons are abundant why we decline to grant the same. In their complaint, [respondents] prayed for
separation pay (not reinstatement with consequent backwages) thereby indicating right from the start that they do not
want to work with [petitioner] again. More importantly[,] during the conference held on January 6, 2000, [petitioner]
manifested its willingness to reinstate [respondents] to their former work as [comboys] under the same terms and
2125 conditions but [respondents] answered that they do not want to return to work and instead are asking for payment of
their separation pay. Finally[,] [respondents] do not dispute that [petitioners] downsizing of its escorts in 1999 was due
to a legitimate cause, i.e., dollar devaluation.

Also to go are [respondents] labor standard claims for 13 th month pay and service incentive leave pay as well
2130 as the claim for damages. We also deny the claim for salary differentials.

40
 [Respondents] are not entitled to their claims for 13th month pay and service incentive leave pay because they
were paid on task basis. The claim for damages is denied for lack of factual and legal basis as there is no showing that
respondent acted in bad faith in downsizing the number of its caretakers. It even appears that the same is due to a
2135 legitimate cause. The claim for salary differentials is denied on two grounds: (1) [these are] not prayed for in their
complaint; and (2) for lack of merit. It takes not more than 3 days for the Gen. Santos-Manila trip. Even if we include
counting the return trip that would be total of six (6) days to the maximum. [Respondents] were paid P1,500.00 per trip.
Or, since they made an average of 2 trips/month they were paid P3,000.00 for a twelve (12) days work (or the
equivalent of P250.00/day).[7]
2140

On appeal to the NLRC, the Fifth Division affirmed the Labor Arbiters ruling on the existence of an employer-employee
relationship between the parties and the total monetary award of P41,580.00 representing respondents separation pay, COLA and union
service fees. The NLRC declared:
2145
After a judicious review of the records of this case, we found no cogent reason to disturb the findings of the
branch.

The presence of the four (4) elements in the determination of an employer-employee relationship has been
2150 clearly established by the facts and evidence on record, starting with the admissions of [petitioner] who acknowledged
the engagement of [respondents] as escorts of their cattles shipped from General Santos to Manila, and the
compensation of the latter at a fee of P1,500.00 per trip. The dates claimed by [respondents] that they were engaged
remain not disputed by [petitioner] as observed by the branch.

2155 The element of control, jurisprudentially considered the most essential element of the four, has not been
demolished by any evidence to the contrary. The branch has noticed that the preparation of the shipment of cattle,
manning and feeding them while in transit, and making a report upon their return to General Santos that the cattle
shipped and which reached Manila actually tallied were all indicators of instructions, supervision and control by
[petitioner] on [respondents] performance of work as escorts for which they were hired. This we agree on all four[s].
2160 The livestock shipment would cost thousands of pesos and the certainty of it reaching its destination would be the only
thing any operator would consider at all [time] and under all circumstances. Nothing more, nothing less. It is illogical for
[petitioner] to argue that the shipment was not necessary [or] desirable to their business, as their business was mainly
livestock production, because they were undeniably the owners of the cattle escorted by [respondents]. Should losses
of a shipment occur due to [respondents] neglect these would still be [petitioners] loss, and nobody elses.
2165
At this point, we emphasize the fact that even on appeal [petitioner] declines to refute, by way of evidence, the
finding of the branch that they failed to prove the payment of [respondents] services by any of the supposed traders, or
that said traders actually shipped livestock. This is the point where the case of NFL v. Bibiana Farms cited by
[petitioner] differs from the instant case in that bills of lading issued to, thus, in the name of the hog shippers were
2170 submitted as proof that said shippers engaged, compensated and supervised the escorts or convoys in their work, and
not the hog raisers.[8]

Undaunted, petitioner filed a petition for certiorari before the CA. As previously adverted to, the CA denied due course and
2175 dismissed the petition for the following procedural flaws:

1) other material portions of the record referred to in the petition are not attached thereto such as the Complaint
for illegal dismissal and position papers of the parties, in violation of Sec. 3, Rule 46 of the 1997 Rules of Civil
Procedure; and
2180
2) there is no written explanation why personal service was not resorted to, as required under Sec. 11, Rule
13, Ibid.[9]

Petitioners motion for reconsideration was, likewise, denied by the appellate court.
2185
Hence, this appeal positing the following issues:

1. Whether the CA gravely abused its discretion when it dismissed the petition for certiorari based on technical rules of
procedure.
2190
2. Whether the NLRC gravely abused its discretion when it affirmed the Labor Arbiters ruling on the existence of an employer-
employee relationship between the parties.

3. Corollary thereto, whether the NLRC gravely erred when it affirmed the Labor Arbiters finding that respondents were illegally
2195 dismissed by petitioner and the consequent award of money claims to respondents.

At the outset, we observe that petitioner raises extraneous issues which were obviously not passed upon by appellate court when
the latter denied due course and dismissed outright the petition for certiorari. As such, the instant petition for review oncertiorari directly
 assails the NLRCs decision which mainly involves factual issues, such as whether respondents were employees of petitioner and if they
2200 are entitled to their money claims.

Petitioner is unconcerned with the CAs reasons for dismissing the petition and, in fact, declares that the dismissal was done with
grave abuse of discretion for sticking to the provisions of the Rules of Court a mere technicality as petitioner cavalierly puts it.
Petitioner asseverates that the CA dismissal defeat[s] substantial justice considering that [it] has a strong cause of action against
2205 [respondents]. In all, petitioner submits that it had faithfully complied with Section 11, Rule 13 of the Rules of Court by submitting an
explanation and a duly notarized affidavit of service of Maria Fe Sobrevega. Petitioner likewise points out that the Explanation for the
resort to service of the petition for certiorari via registered mail is found on page 30 thereof. Curiously, however, only the copy of the
same document submitted to the CA lacked an Explanation.

2210 We completely agree with the appellate courts forthright dismissal of the petition for certiorari.

Even if we are to overlook petitioners account on the curious case of the missing Explanation only in the CAs copy of the petition,
petitioners non-compliance with the requisites for the filing a petition for certiorari remains. We detect petitioners ploy to sidestep a more
fatal procedural error, i.e., the failure to attach copies of all pleadings and documents relevant and pertinent to the petition
2215 for certiorari set forth in paragraph 2, Section 1, Rule 65 of the Rules of Court which reads:

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject
thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-
forum shopping as provided in the third paragraph of Section 3, Rule 46.[10]
2220

Corollary thereto, the second paragraph of Section 6, Rule 65, the first paragraph of Section 2, Rule 56, and the last paragraph
of Section 3, Rule 46 respectively read:

2225 SEC. 6. Order to comment. x x x

In petitions for certiorari before the Supreme Court and the Court of Appeals, the provisions of Section 2, Rule
56, shall be observed. x x x

2230 SEC. 2. Rules applicable. The procedure in original cases for certiorari, prohibition, mandamus, quo
warranto and habeas corpus shall be in accordance with the applicable provisions of the Constitution, laws, and Rules
46, 48, 49, 51, 52 and this Rules[.] x x x

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. x x x

2235
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the
dismissal of the petition.

Quite apparent from the foregoing is that the CA did not err, much less commit grave abuse of discretion, in denying due course to
2240 and dismissing the petition for certiorari for its procedural defects. Petitioners failure to attach copies of all pleadings and documents
relevant and pertinent to its petition for certiorari warranted the outright dismissal thereof.

Petitioner, however, invokes the righteous ends of substantial justice as would exempt it from adherence to procedural rules.
Petitioner claims that the merits of its case necessitate a liberal interpretation of the Rules of Court leading to a reversal of the appellate
2245 courts outright dismissal of its petition.

Regrettably, upon an evaluation of the merits of the petition, we do not find cause to disturb the findings of the Labor Arbiter,
affirmed by the NLRC, which are supported by substantial evidence.

2250 The well-entrenched rule is 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.[11] Section 5, Rule 133 defines substantial evidence as that amount of relevant evidence which
a reasonable mind might accept as adequate to justify a conclusion.

2255 Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor cases. [12] We may
take cognizance of and resolve factual issues only when the findings of fact and conclusions of law of the Labor Arbiter are inconsistent
with those of the NLRC and the CA.[13]

In the case at bench, both the Labor Arbiter and the NLRC were one in their conclusion that respondents were not independent
2260 contractors, but employees of petitioner. In determining the existence of an employer-employee relationship between the parties, both
the Labor Arbiter and the NLRC examined and weighed the circumstances against the four-fold test which has the following elements: (1)
the power to hire, (2) the payment of wages, (3) the power to dismiss, and (4) the power to control the employees conduct, or the so-
called control test.[14] Of the four, the power of control is the most important element. More importantly, the control test merely calls for
the existence of the right to control, and not necessarily the exercise thereof.[15]
2265
 Naturally, both petitioners and respondents claims are on opposite poles. Respondents aver that they were regular employees of
petitioner, designated as escorts or comboys for the latters cattle. Petitioner, on the other hand, denies that claim, and simultaneously
asserts that respondents are free lance escorts who offer their services to the buyers, middlemen and traders of petitioner. Petitioner
further asserts that its business is only confined to the fattening of cattle and their sale once they reach the required market weight.
2270 According to petitioner, its business does not include the shipment of cattle, which is undertaken by the middlemen, traders and buyers,
who, as owners thereof, engage respondents services to care for the cattle while in transit. Thus, petitioner ultimately asserts that
respondents, at that juncture, were under the control and supervision of these middlemen, traders and buyers.

To support the foregoing contentions, petitioner simply presents the affidavits of Maquinsay and Parrocha, original complainants
2275 before the Labor Arbiter, praying for the withdrawal of the complaint for illegal dismissal insofar as they are concerned. Maquinsay and
Parrocha both allege that their engagement with petitioner is on a per-trip or per-contract basis, and that they and their fellow
comboys or escorts, herein respondents, did not offer their services to petitioner alone.

Paying no heed to petitioners narration of the contemplated arrangement with respondents, the Labor Arbiter pointed out the
2280 following:

[Maquinsay and Parrocha, petitioners] witnesses, tried to corroborate [petitioners] contention that
complainants also offered their services to various shippers and traders of cattle, not only to [petitioner]. Former
complainants Maquinsay and Parrocha mentioned the names of these traders/buyers or shippers as Lozano Farms,
2285 Bibiana Farms and other big cattle feedlot farms in SOCSARGEN (Annexes A and B, [petitioners] position
paper). But not a modicum of evidence was adduced to prove payment of [respondents] services by any of
these supposed traders or that [respondents] received instructions from them. There is also no record that the
trader/s actually shipped livestock and engaged the services of caretakers. [16]

2290
Echoing the same observation, the NLRC declared, thus:

At this point, we emphasize the fact that even on appeal [petitioner] decline to refute, by way of evidence, the
finding of the branch that they failed to prove the payment of [respondents] services by any of the supposed traders, or
2295 that said traders actually shipped livestock. This is the point where the case of NFL v. Bibiana Farms cited by
[petitioner] differ from the instant case in that bills of lading issued to, thus, in the name of the hog shippers were
submitted as proof that said shippers engaged, compensated and supervised the escorts or convoys in their work, and
not the hog raisers.[17]

2300
Yet, petitioner is adamant that its lack of documentary evidence should not be taken against it since Maquinsay and Parrocha, two
of the original complainants, attest to the nature of a comboys or escorts work.

Significantly, Maquinsays and Parrochas affidavits proffer no reason why, in the first place, they filed, along with herein
2305 respondents, the complaint for illegal dismissal against petitioner. Maquinsay and Parrocha made an absolute turnaround and retracted
their previous claim of regular employee status without proof to support their allegations as against the claim of the remaining
complainants, herein respondents.

Conveniently, for its purposes, petitioner claims that Maquinsays and Parrochas affidavits substantiate the claim of petitioner that
2310 indeed shipping arrangements and accommodation of escorts, which are informal in nature and, thus, unrecorded, are under the
responsibility, control and supervision of the buyers and traders. Essentially, petitioner insists that the affidavits of Maquinsay and
Parrocha should bear more weight than the claims of respondents in their complaint and position paper.

We reject petitioners self-serving contention. Having failed to substantiate its allegation on the relationship between the parties,
2315 we stick to the settled rule in controversies between a laborer and his master that doubts reasonably arising from the evidence should be
resolved in the formers favor.[18] The policy is reflected in no less than the Constitution,[19] Labor Code[20]and Civil Code.[21]

Moreover, petitioners other contention that the shipment and the escort of live cattle is not part of its business, thus, at most,
respondents may only be considered as casual employees, likewise fails to persuade.
2320
First. Petitioner failed to disprove respondents claim that they were hired by petitioner as comboys from 1993 and 1994,
respectively. In fact, petitioner admits that respondents were engaged, at one point, as comboys, on a per trip or per contract basis.
This assertion petitioner failed anew to substantiate. Noteworthy is the fact that Maquinsays and Parrochas affidavit merely contain a
statement that the offer of their services as comboys or escorts was not limited to petitioner alone. The affidavits simply aver that they,
2325 including herein respondents, were engaged by Dealco on a per trip basis, which commenced upon embarkation on a ship
for Manila and terminated upon their return to the port of origin. Maquinsay and Parrocha did not state that respondents engagement by
petitioner was on a one-time basis. As a result, petitioners claim remains an unsubstantiated and bare-faced allegation.

Second. Even assuming that respondents task is not part of petitioners regular course of business, this does not preclude their
2330 attainment of regular employee status.

Article 280 of the Labor Code explicitly provides:

 Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary
2335 notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the employee or where
the work or services to be performed is seasonal in nature and the employment is for the duration of the season.
2340
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That,
any employee who has rendered at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity exists.[22]
2345

Undoubtedly, respondents were regular employees of petitioner with respect to the escort or comboy activity for which they had been
engaged since 1993 and 1994, respectively, without regard to continuity or brokenness of the service.

2350 Lastly, considering that we have sustained the Labor Arbiters and the NLRCs finding of an employer-employee relationship
between the parties, we likewise sustain the administrative bodies finding of respondents illegal dismissal. Accordingly, we are not wont
to disturb the award of separation pay, claims for COLA and union service fees fixed at 10% of the total monetary award, as these were
based on the finding that respondents were dismissed without just or authorized cause.

2355 WHEREFORE, the petition is DENIED. The Resolution dated July 29, 2001 of the NLRC in NLRC CA No. M-005974-2000 (RAB-
11-10-50453-99) is hereby AFFIRMED. Costs against the petitioner.

SO ORDERED.

2360

2365

2370

2375
 FIRST DIVISION

2380 MARANAW HOTELS AND G.R. No. 149660

RESORT CORP.,
Petitioner,
Present:

2385 PUNO, C.J., Chairperson,

- versus - CARPIO,
CORONA,

AZCUNA, and
LEONARDO-DE CASTRO, JJ.
2390

COURT OF APPEALS, SHERYL

OABEL AND MANILA Promulgated:
RESOURCE DEVELOPMENT
CORP.,
2395 Respondents. January 20, 2009

x------------------------------------------------- x

DECISION

2400 PUNO, C.J.:

Before the Court is a petition for review on certiorari assailing a resolution issued by the Court of Appeals. The resolution denied
the petition for review filed by petitioner Maranaw Hotels and Resort Corp.

2405 The present proceedings emanate from a complaint for regularization, subsequently converted into one for illegal dismissal,
filed before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl Oabel.

It appears that private respondent Oabel was initially hired by petitioner as an extra beverage attendant on April 24, 1995.
This lasted until February 7, 1997.[1] Respondent worked in Century Park Hotel, an establishment owned by the petitioner.
2410
On September 16, 1996,[2] petitioner contracted with Manila Resource Development Corporation. [3] Subsequently, private
respondent Oabel was transferred to MANRED, with the latter deporting itself as her employer.[4] MANRED has intervened at all stages
of these proceedings and has consistently claimed to be the employer of private respondent Oabel. For the duration of her employment,
private respondent Oabel performed the following functions:
2415
Secretary, Public Relations Department: February 10, 1997 March 6, 1997
Gift Shop Attendant: April 7, 1997 April 21, 1997
Waitress: April 22, 1997 May 20, 1997
Shop Attendant: May 21, 1997 July 30, 1998[5]
2420
On July 20, 1998, private respondent filed before the Labor Arbiter a petition for regularization of employment against the
petitioner. On August 1, 1998, however, private respondent Oabel was dismissed from employment. [6] Respondent converted her
petition for regularization into a complaint for illegal dismissal.

2425 Labor Arbiter Madjayran H. Ajan rendered a decision on July 13, 1999, dismissing the complaint against the petitioner. The
decision held:
While complainant alleged that she has been working with the respondent hotel in different department (sic)
of the latter on (sic) various capacities (although not all departments are part and parcel of the hotels), complainant
never disputed the fact that her work with the same were on a per function basis or on a need basis co-terminus
2430 with the function she was hired for.Considering that complainant job (sic) with the respondent hotel was on a per
function basis or on a need basis, complainant could not even be considered as casual employee or provisional
employee. Respondent hotel consider (sic) complainant, at most, a project employee which does not ripened (sic) into
regular employee (sic).[7]

2435 Private respondent appealed before the National Labor Relations Commission (NLRC). The NLRC reversed the ruling of
the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and (2) private respondent was illegally dismissed.

Of the first holding, the NLRC observed that under the very terms of the service contract, MANRED shall provide the
petitioner not specific jobs or services but personnel and that MANRED had insufficient capitalization and was not sufficiently

45
2440 equipped to provide specific jobs.[8] The NLRC likewise observed that the activities performed by the private respondent were
directly related to and usually necessary or desirable in the business of the petitioner.[9]

With respect to the termination of private respondents employment, the NLRC held that it was not effected for a valid or
just cause and was therefore illegal. The dispositive portion of the ruling reads thus:
2445 WHEREFORE, the decision appealed from is hereby REVERSED. xxxx Respondents Century Park Hotel and
Manila Resource Development Corporation are hereby declared jointly and severally liable for the following awards in
favor of complainant: 1) her full backwages and benefits from August 1, 1998 up to the date of her actual
reinstatement; 2) her salary differentials, share in the service charges, service incentive leave pay and 13 th month pay
from July 20, 1995 to July 31, 1998.
2450
SO ORDERED.[10]

Petitioner subsequently appealed before the Court of Appeals. In a resolution, the appellate court dismissed the petition on
account of the failure of the petitioner to append the board resolution authorizing the counsel for petitioner to file the petition before
2455 the Court of Appeals. The Court of Appeals held:

After a careful perusal of the records of the case, We resolve to DISMISS the present petition on the ground
of non-compliance with the rule on certification against forum shopping taking into account that the aforesaid
certification was subscribed and verified by the Personnel Director of petitioner corporation without attaching thereto
2460 his authority to do so for and in behalf of petitioner corporation per board resolution or special power of attorney
executed by the latter.[11]

Petitioner duly filed its motion for reconsideration which was denied by the Court of Appeals in a resolution dated August 30,
2001.[12]

2465

In the present petition for review, the petitioner invokes substantial justice as justification for a reversal of the resolution of the
Court of Appeals.[13] Petitioner likewise contends that the filing of a motion for reconsideration with the certificate of non-forum shopping
attached constitutes substantial compliance with the requirement.[14]

2470 There is no merit to the petition.

Well-settled is the rule that the certificate of non-forum shopping is a mandatory requirement. Substantial compliance applies only
with respect to the contents of the certificate but not as to its presence in the pleading wherein it is required.

2475 Petitioners contention that the filing of a motion for reconsideration with an appended certificate of non forum-shopping suffices to
cure the defect in the pleading is absolutely specious. It negates the very purpose for which the certification against forum shopping is
required: to inform the Court of the pendency of any other case which may present similar issues and involve similar parties as the one
before it. The requirement applies to both natural and juridical persons.

2480 Petitioner relies upon this Courts ruling in Digital Microwave Corp. v. Court of Appeals[15] to show that its Personnel Director has
been duly authorized to sign pleadings for and in behalf of the petitioner. Petitioner, however, has taken the ruling inDigital
Microwave out of context. The portion of the ruling in Digital Microwave upon which petitioner relies was in response to the issue of
impossibility of compliance by juridical persons with the requirements of Circular 28-91. [16] The Courts identification of duly authorized
officers or directors as the proper signatories of a certificate of non forum-shopping was in response to that issue. The ruling does not,
2485 however, ipso facto clothe a corporate officer or director with authority to execute a certificate of non-forum shopping by virtue of the
formers position alone.
 Any doubt on the matter has been resolved by the Courts ruling in BPI Leasing Corp. v. Court of Appeals [17] where this Court
emphasized that the lawyer acting for the corporation must be specifically authorized to sign pleadings for the corporation. [18] Specific
2490 authorization, the Court held, could only come in the form of a board resolution issued by the Board of Directors that specifically
authorizes the counsel to institute the petition and execute the certification, to make his actions binding on his principal,i.e., the
corporation.[19]

This Court has not wavered in stressing the need for strict adherence to procedural requirements. The rules of procedure exist
2495 to ensure the orderly administration of justice. They are not to be trifled with lightly.

For this reason alone, the petition must already be dismissed. However, even if this grave procedural infirmity is set aside, the
petition must still fail. In the interest of averting further litigation arising from the present controversy, and in light of the respective
positions asserted by the parties in the pleadings and other memoranda filed before this Court, the Court now proceeds to resolve the
2500 case on the merits.

Petitioner posits that it has entered into a service agreement with intervenor MANRED. The latter, in turn, maintains that private
respondent Oabel is its employee and subsequently holds itself out as the employer and offers the reinstatement of private respondent.

2505 Notably, private respondents purported employment with MANRED commenced only in 1996, way after she was hired by the
petitioner as extra beverage attendant on April 24, 1995. There is thus much credence in the private respondents claim that the service
agreement executed between the petitioner and MANRED is a mere ploy to circumvent the law on employment, in particular that which
pertains on regularization.

2510 In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with the end of each
event or function and that there is an ever present need for individuals to perform certain tasks necessary in the petitioners business.
Thus, although the tasks themselves may vary, the need for sufficient manpower to carry them out does not. In any event, as borne out
by the findings of the NLRC, the petitioner determines the nature of the tasks to be performed by the private respondent, in the process
exercising control.

2515

This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only contractor.
[20]
Concordantly, the real employer of private respondent Oabel is the petitioner.

It appears further that private respondent has already rendered more than one year of service to the petitioner, for the period
2520 1995-1998, for which she must already be considered a regular employee, pursuant to Article 280 of the Labor Code:

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a specific project or undertaking
2525 the completion or termination of which has been determined at the time of the engagement of the employee or where
the work or service to be performed is seasonal in nature and the employment is for the duration of the season.
 An employment shall be deemed to be casual if it is not covered by the preceding paragraph:
Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he is
2530 employed and his employment shall continue while such activity exists. (Emphasis supplied)

IN VIEW WHEREOF, the present petition is DENIED. The resolution of the Court of Appeals dated June 15, 2001 is
affirmed.

2535 Costs against petitioner.

SO ORDERED.

2540

2545

2550

2555

2560

2565

2570

2575

2580
SECOND DIVISION

JEROMIE D. ESCASINAS and EVAN RIGOR G.R. No. 178827

SINGCO,
Petitioners, Present:

- versus - QUISUMBING, J., Chairperson,

CARPIO MORALES,
SHANGRI-LAS MACTAN ISLAND RESORT and NACHURA,*
DR. JESSICA J.R. PEPITO, BRION, and
Respondents. PERALTA,** JJ.
 Promulgated:

March 4, 2009

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

2585 DECISION

CARPIO MORALES, J.:

Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996, respectively, by
Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort (Shangri-la)
2590 inCebu of which she was a retained physician.

In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-
RAB No. VII) a complaint [1] for regularization, underpayment of wages, non-payment of holiday pay, night shift differential and 13 th month
pay differential against respondents, claiming that they are regular employees of Shangri-la. The case was docketed as RAB Case No.
2595 07-11-2089-02.

Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via
Memorandum of Agreement (MOA)[2] pursuant to Article 157 of the Labor Code, as amended.

2600 Respondent doctor for her part claimed that petitioners were already working for the previous retained physicians of Shangri-la
before she was retained by Shangri-la; and that she maintained petitioners services upon their request.

By Decision[3] of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of Shangri-la. The
Arbiter thus ordered Shangri-la to grant them the wages and benefits due them as regular employees from the time their services were
2605 engaged.

In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work which is necessary
and desirable to Shangri-las business; that they observe clinic hours and render services only to Shangri-las guests and employees;
that payment for their salaries were recommended to Shangri-las Human Resource Department (HRD); that respondent doctor was
2610 Shangri-las in-house physician, hence, also an employee; and that the MOA between Shangri-la and respondent doctor was an
insidious mechanism in order to circumvent [the doctors] tenurial security and that of the employees under her.

Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the non-award to them
of some of the benefits they were claiming.
2615 By Decision[4] dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors appeal and dismissed petitioners
complaint for lack of merit, it finding that no employer-employee relationship exists between petitioner and Shangri-la. In so deciding, the
NLRC held that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as what is required under Article
157 is that the employer should provide the services of medical personnel to its employees, but nowhere in said article is a provision that
nurses are required to be employed; that contrary to the finding of the Arbiter, even if Article 280 states that if a worker performs work
2620 usually necessary or desirable in the business of the employer, he cannot be automatically deemed a regular employee; and that the
MOA amply shows that respondent doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her own
nurses and other clinic personnel.

Brushing aside petitioners contention that since their application for employment was addressed to Shangri-la, it was really
2625 Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for employment were made by persons
who are not parties to the case and were not shown to have been actually hired by Shangri-la.

On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitioners wages were
recommended by Shangri-las HRD did not prove that it was Shangri-la which pays their wages. It thus credited respondent doctors
2630 explanation that the recommendations for payment were based on the billings she prepared for salaries of additional nurses during
Shangri-las peak months of operation, in accordance with the retainership agreement, the guests payments for medical services having
been paid directly to Shanrgi-la.

Petitioners thereupon brought the case to the Court of Appeals which, by Decision [5] of May 22, 2007, affirmed the NLRC
2635 Decision that no employer-employee relationship exists between Shangri-la and petitioners. The appellate court concluded that all
aspects of the employment of petitioners being under the supervision and control of respondent doctor and since Shangri-la is not
principally engaged in the business of providing medical or healthcare services, petitioners could not be regarded as regular employees
of Shangri-la.

2640 Petitioners motion for reconsideration having been denied by Resolution [6] of July 10, 2007, they interposed the present
recourse.

Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered nurse, apart from a
physician, hence, their engagement should be deemed as regular employment, the provisions of the MOA notwithstanding; and that the
2645 MOA is contrary to public policy as it circumvents tenurial security and, therefore, should be struck down as being voidab initio. At most,
they argue, the MOA is a mere job contract.

And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business permit and no
business name registration, which is contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and Regulations of
2650 the Labor Code on sub-contracting.

Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in substantial
capital, the clinic having been set-up and already operational when she took over as retained physician; that respondent doctor has no
control over how the clinic is being run, as shown by the different orders issued by officers of Shangri-la forbidding her from receiving
2655 cash payments and several purchase orders for medicines and supplies which were coursed thru Shangri-las Purchasing Manager,
circumstances indubitably showing that she is not an independent contractor but a mere agent of Shangri-la.

In its Comment,[7] Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for being
inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises factual issues, such as the validity of the
2660 MOA, which were never raised during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article 157 of
the Labor Code does not make it mandatory for a covered establishment to employ health personnel; that the services of nurses is not
germane nor indispensable to its operations; and that respondent doctor is a legitimate individual independent contractor who has the
power to hire, fire and supervise the work of the nurses under her.

2665 The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the provisions on
permissible job contracting of the Labor Code, as amended.

The Court holds that, contrary to petitioners postulation, Art. 157 does not require the engagement of full-time nurses as
regular employees of a company employing not less than 50 workers. Thus, the Article provides:
2670
ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:

(a) The services of a full-time registered nurse when the number of employees
2675 exceeds fifty (50) but not more than two hundred (200) except when the employer
does not maintain hazardous workplaces, in which case the services of a graduate first-
aider shall be provided for the protection of the workers, where no registered nurse is
available. The Secretary of Labor shall provide by appropriate regulations the services that
shall be required where the number of employees does not exceed fifty (50) and shall
2680 determine by appropriate order hazardous workplaces for purposes of this Article;

(b) The services of a full-time registered nurse, a part-time physician and dentist, and
an emergency clinic, when the number of employees exceeds two hundred (200) but
not more than three hundred (300); and
2685
(c) The services of a full-time physician, dentist and full-time registered nurse as well as a
dental clinic, and an infirmary or emergency hospital with one bed capacity for every one
hundred (100) employees when the number of employees exceeds three hundred (300).

2690 In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who
cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time
basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is
nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such
regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental
2695 treatment and attendance in case of emergency. (Emphasis and underscoring supplied)

Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to furnish its employees with
the services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means that it
2700 should provide or make available such medical and allied services to its employees, not necessarily to hire or employ a
service provider. As held in Philippine Global Communications vs. De Vera:[8]

x x x while it is true that the provision requires employers to engage the services of
medical practitioners in certain establishments depending on the number of their
2705 employees, nothing is there in the law which says that medical practitioners so engaged be
actually hired as employees, adding that the law, as written, only requires the employer to
retain, not employ, a part-time physician who needed to stay in the premises of the non-hazardous
workplace for two (2) hours. (Emphasis and underscoring supplied)

2710

50
 The term full-time in Art. 157 cannot be construed as referring to the type of employment of the person engaged to provide the
services, for Article 157 must not be read alongside Art. 280[9] in order to vest employer-employee relationship on the employer and the
person so engaged. So De Vera teaches:

2715 x x x For, we take it that any agreement may provide that one party shall render services for
and in behalf of another, no matter how necessary for the latters business, even without being
hired as an employee. This set-up is precisely true in the case of an independent contractorship as
well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate
court, is not the yardstick for determining the existence of an employment relationship . As it
2720 is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and
casual. x x x[10] (Emphasis and underscoring supplied)

The phrase services of a full-time registered nurse should thus be taken to refer to the kind of services that the nurse will render in the
companys premises and to its employees, not the manner of his engagement.
2725
As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections of DOLE
Department Order No. 10, series of 1997, illuminate:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are
2730 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

2735

(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.

2740 Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and

2745

(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be
2750 considered merely as an agent or intermediary 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.
 (c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after
2755 considering the operating needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the workers. (Emphasis supplied)

The existence of an independent and permissible contractor relationship is generally established by considering the following
determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the
2760 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.[11]

On the other hand, existence of an employer- employee relationship is established by the presence of the following
2765 determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever
means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration.[12]

Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily prove that
2770 respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of medical services to its
employees is required under Art. 157, which are not directly related to Shangri-las principal business operation of hotels and
restaurants.

As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and other
2775 benefits of the staff[13]; group life, group personal accident insurance and life/death insurance[14] for the staff with minimum benefit
payable at 12 times the employees last drawn salary, as well as value added taxes and withholding taxes, sourced from herP60,000.00
monthly retainer fee and 70% share of the service charges from Shangri-las guests who avail of the clinic services. It is unlikely that
respondent doctor would report petitioners as workers, pay their SSS premium as well as their wages if they were not indeed her
employees.[15]
2780
With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, Clinic Policies and
Employee Manual[16] claimed to have been prepared by respondent doctor exists, to which petitioners gave their conformity[17] and in
which they acknowledged their co-terminus employment status. It is thus presumed that said document, and not the employee manual
being followed by Shangri-las regular workers, governs how they perform their respective tasks and responsibilities.
2785
Contrary to petitioners contention, the various office directives issued by Shangri-las officers do not imply that it is Shangri-las
management and not respondent doctor who exercises control over them or that Shangri-la has control over how the doctor and the
nurses perform their work. The letter[18] addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving
instructions regarding the replenishment of emergency kits is, at most, administrative in nature, related as it is to safety matters; while the
2790 letter[19] dated May 17, 2004 from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from receiving cash
payments from the resorts guests is a matter of financial policy in order to ensure proper sharing of the proceeds, considering that
Shangri-la and respondent doctor share in the guests payments for medical services rendered. In fine, as Shangri-la does not control
how the work should be performed by petitioners, it is not petitioners employer.
WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and the Resolution
2795 dated July 10, 2007 are AFFIRMED.

SO ORDERED.

2800

2805

2810

2815
2820

2825

2830

2835

THIRD DIVISION

2840
RAUL G. LOCSIN and G.R. No. 185251
EDDIE B. TOMAQUIN,
Petitioners,
Present:
2845
YNARES-SANTIAGO, J.,
Chairperson,
- versus - CHICO-NAZARIO,
VELASCO, JR.,
2850 NACHURA, and
PERALTA, JJ.

PHILIPPINE LONG DISTANCE Promulgated:

TELEPHONE COMPANY,
2855 Respondent. October 2, 2009
x-----------------------------------------------------------------------------------------x

DECISION

2860 VELASCO, JR., J.:

The Case

2865 This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision [1] and November 4, 2008
Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No. 97398, entitled Philippine Long Distance Telephone Company v. National
Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin. The assailed decision set aside the Resolutions of the National
Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision dated February
13, 2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for reconsideration of the assailed
2870 decision.

The Facts

On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation
2875 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.
2880
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
2885 Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to September 2002.[5]

Then, on September 30, 2002, petitioners services were terminated.

 Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime
2890 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
2895 to serve as guards of PLDTs offices. As such employees, petitioners were entitled to substantive and procedural due process before
termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The dispositive
portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long
2900 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
2905 2. Eddie B. Tomaquin P127,500.00 P240,954.67
P736,909.34

All other claims are DISMISSED for want of factual basis.

2910 Let the computation made by the Computation and Examination Unit form part of this decision.

SO ORDERED.

PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.
2915
Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.

Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as
well as the Labor Arbiters Decision. The CA rendered the assailed decision granting PLDTs petition and dismissing petitioners
2920 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.
2925
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
2930 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
2935 employees of SSCP albeit performing their work at PLDTs premises.

From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.

Hence, we have this petition.

2940
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
2945 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.

2950 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.
2955
 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.
2960
5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the
labor [arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as illegal.[6]

2965 The Courts Ruling

This petition is hereby granted.

An Employer-Employee
2970 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
2975 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.
2980
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.
2985
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
2990 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
2995 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
untilSeptember 30, 2002. While respondent denies the alleged circumstances stated by petitioners, that they were told to remain at their
3000 post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their salaries
would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to vacate their posts.
Respondent said that it did not know why petitioners remained at their posts.

Rule 131, Section 3(y) of the Rules of Court provides:

3005
SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:

xxxx
3010
(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
3015 termination of the owners or managers agreement with the security agency, the agencys undertaking of liability for any damage that the
security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such
security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or
managers would, therefore, be opening themselves up to liability for acts of security guards over whom the owners or managers
allegedly have no control.
3020 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.

55
 We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing
3025 respondents premises despite the termination of their Agreement. Obviously, it would only be respondent that would benefit from such a
situation. And it is seriously doubtful that a security agency that was established for profit would allow its security guards to secure
respondents premises when the Agreement was already terminated.

From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the
3030 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]

3035 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]).
3040
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
3045 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.
3050
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
3055 applies the four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants
International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in

dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b)
3060 the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees
conduct. It is the so-called control test which constitutes the most important index of the existence of the
employer-employee relationship that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the person
3065 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:

3070 Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for
the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with
3075 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
3080 contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties involved shall be
considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision
of this Code.
3085
There is labor-only contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
3090 employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis supplied.)
 Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows:

3095 Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements
are present:

3100 (i) The contractor or subcontractor does not have substantial capital or investment which relates to
the job, work or service to be performed and the employees recruited, supplied or placed by such contractor
or subcontractor are performing activities which are directly related to the main business of the principal; or

(ii) the contractor does not exercise the right to control over the performance of the work of
3105 the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as
amended.

3110 Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted out.

The right to control shall refer to the right reserved to the person for whom the services of the contractual
3115 workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in
reaching that end.

On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting:

3120 Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be

considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and
other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation
of any provision of the Labor Code, including the failure to pay wages.

3125 The principal shall be deemed the employer of the contractual employee in any of the following cases as
declared by a competent authority:

(a) where there is labor-only contracting; or

3130 (b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions)
hereof. (Emphasis supplied.)

Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the
termination of the Agreement onwardsas this was the only time that any evidence of control was exhibited by respondent over
3135 petitioners and in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were entitled to the rights and benefits
of employees of respondent, including due process requirements in the termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do so,
respondent is guilty of illegal dismissal.
3140
WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398.
We hereby REINSTATE the Labor Arbiters Decision dated February 13, 2004 and the NLRCs Resolutions dated October 28,
2005 and August 28, 2006.

3145 No costs.

SO ORDERED.