JOSE EMMANUEL P. GUILLERMO VS. CRISANTO P.
USON (G.R. NO. 198967, 07 MARCH 2016)
Facts:
1. The respondent was an accounting clerk and was
eventually promoted to accounting supervisor for Royal
Class Venture owned by the family of Petitioner from
1996 to 2000.
2. Allegedly, Uson was illegally dismissed which made
him file a complaint on March 2001 with a prayers for
reinstatement, backwages, salaries and 13th month
pay, moral and exemplary damages and attorney's
fees against the said company.
3. Despite receipt of summons, Royal Class Venture
did not make an appearance while Uson filed his
position paper. The Labor Arbiter then ruled in his
favour.
4. Royal Class Venture did not appeal. Consequently,
Uson filed for a Writ of Execution of this decision.
5. Thus, two Alias Writs of Execution were issued one
after the other but remained unsatisfied. This led to
Uson filing a Motion for Alias Writ of Execution and to
Hold Directors and Officers of Respondent Liable for
Satisfaction of the Decision.
A portion of the Sherrifs Return was used in
the Motion stating that the Petitioner tried to evade the
receipt of writ when his present business address
already operated under the name and style of JOEL
and SONS CORPORATION, of which he was the
general manager and that he used the nickname
Joey to receive the said writ, even saying that Jose
was his brother- contrary to the guard on-dutys
statement that they are one and the same person.
6. The complainants counsel also attempted to garnish
the Pertitioners BPI-Dagupan account but the bank
said that such account does not exist.
7. Subsequently, the Labor Arbiter granted this motion,
ruling that the officers of a corporation are jointly and
severally liable for the obligations of the corporation to
the employees and there is no denial of due process in
holding them so even if the said officers were not
parties to the case when the judgment in favor of the
employees was rendered. Thus, piercing the veil of
corporate fiction of Royal Class Venture, making Jose
Guillermo liable.
8. Petitioner then filed a Motion for Reconsideration but
was denied by the Labor Arbiter who even castigated
Guillermo for his unexplained absence in the prior
proceedings despite notice.
9. He filed another MR but was again denied.
10. On May 18, 2004, the Labor Arbiter issued an
Order granting Uson's Motion for the Issuance of an
Alias Writ of Execution and rejecting Guillermo's
arguments posed in his Comment and Opposition.
11. Guillermo elevated the matter to the NLRC which
ruled against him prompting him to elevate it further
to the CA which upheld all the findings of the NLRC.
However, the CA held that although the
judgment had become final and executory, it may be
modified or altered "as when its execution becomes
impossible or unjust." It also held the Guillermo as the
president of the corporation liable for the latter's
obligation to illegally dismissed employees. Finally, the
court dismissed Guillermo's allegation that the case is
an intra-corporate controversy, stating that jurisdiction
is determined by the allegations in the complaint and
the character of the relief sought.
12. In his petition before the SC, he asserted that he
was impleaded only more than a year after its Decision
had become final and executor and that he was being
discriminated in the application of the piercing the
veil doctrine when there were other directors in Royal
Class Venture and still maintained that the controversy
was intra-corporate in nature.
ISSUES:
1. Whether an officer of a corporation may be included
as judgment obligor in a labor case for the first time
only after the decision of the Labor Arbiter had become
final and executory.
2. Whether the twin doctrines of "piercing the veil of
corporate fiction" and personal liability of company
officers in labor cases apply.
3. Whether or not the matter is to be considered as an
intra-corporate controversy.
HELD:
1. YES. Liability is attached, especially to the
responsible officers, even after final judgment and
during execution, when there was a failure to collect
from the employer corporation the judgment debt
awarded to its workers.
In this case, Jose Guillermo is the
person responsible in the actual running of the
company and for the illegal dismissal of Uson.
Likewise, it was shown that he had a hand in dissolving
the original obligor-company in a obvious sceme to
avoid liability. In the earlier labor cases of Claparols v.
Court of Industrial Relations and A.C. Ransom Labor
Union-CCLU v. NLRC, persons who were not
originally impleaded in the case were, even
during execution, held to be solidarily liable with
the employer corporation for the latters unpaid
obligations to complainant-employees.
2. YES. The veil of corporate fiction can be pierced,
and responsible corporate directors and officers or
even a separate but related corporation, may be
impleaded and held answerable solidarily in a labor
case, even after final judgment and on execution, so
long as it is established that such persons have
deliberately used the corporate vehicle to unjustly
evade the judgment obligation, or have resorted to
fraud, bad faith or malice in doing so.
The key element is the presence of fraud,
malice or bad faith. Bad faith, in this instance, does
not connote bad judgment or negligence but imposed
is a dishonest purpose or some moral obliquity and
conscious doing of wrong; it means breach of a known
duty through some motive or interest or ill will; it
partakes of the nature of fraud.
Further, in Pantranco Employees AssoCiation
(PEA-PTGWO), et al. v. NLRC, et al. , the doctrine of
piercing the corporate veil is held to apply only in three
(3) basic areas, namely:
( 1) defeat of public convenience as when the
corporate fiction is used as a vehicle for the evasion of
an existing obligation;
(2) fraud cases or when the corporate entity is used
to justify a wrong, protect fraud, or defend a crime; or
(3) alter ego cases, where a corporation is merely a
farce since it is a mere alter ego or business conduit of
a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make
it merely an instrumentality, agency, conduit or adjunct
of another corporation. In the absence of malice, bad
faith, or a specific provision of law making a corporate
officer liable, such corporate officer cannot be made
personally liable for corporate liabilities.
Personal Liability only attaches only when, as
enumerated by section 31 of the Corporation Code,
there is a wilful and knowing assent to patently
unlawful acts of the corporation, there is gross
negligence or bad faith in directing the affairs of the
corporation or there is a conflict of interest resulting
damages to the corporation.
It was further held that the officers who should
be held liable will be the responsible officers i.e.
the person directly responsible for and who acted in
bad faith in the commission of the act violative of the
labor code. In a Close Corporation, it is the one who
actively engaged in the management of the
corporation.
Also, it was ruled that there is no hard and fast
rule on when corporate fiction may be disregard;
instead, each case must be evaluated according to its
peculiar circumstances.
In this case, the records of the present case
have shown that he had a hand in dissolving the
original obligor company in an obvious "scheme to
avoid liability".
It was also shown in the verified Position Paper
of complainant (herein respondent) Crisanto P. Uson,
where it was clearly alleged that Uson was "illegally
dismissed by the President/General Manager of
respondent corporation (herein petitioner) Jose
Emmanuel P. Guillermo when Uson exposed the
practice of the said President/General Manager of
dictating and undervaluing the shares of stock of the
corporation."-a proof that Guillermo was the
responsible officer in charge of running the company
as well as the one who dismissed Uson from
employment. This was never controverted by the
company nor Guillermo- such stands as a fact of the
case, and now functions as clear evidence of
Guillermo's bad faith in his dismissal of Uson from
employment, with the motive apparently being anger
at the latter's reporting of unlawful activities.
Also, without justifiable cause, Guillermo
refused to receive all notices and orders of the Labor
Arbiter that followed. This makes Guillermo responsible
for his and his company's failure to participate in the
entire proceedings before the said office. Guillermo's
knowledge of the case's filing and existence and his
unexplained refusal to participate in it as the
responsible official of his company, again is an indicia
of his bad faith and malicious intent to evade the
judgment of the labor tribunals.
Finally, the records likewise bear that Guillermo
dissolved Royal Class Venture and helped incorporate a
new firm, located in the same address as the former,
wherein he is again a stockholder as borne by the
Sheriffs Return. The foregoing clearly indicate a
pattern or scheme to avoid the obligations to Uson and
frustrate the execution of the judgment award.
3. As for Guillermo's assertion that the case is an intra-
corporate controversy, the Court sustains the finding of
the appellate court that the nature of an action and the
jurisdiction of a tribunal are determined by the
allegations of the complaint at the time of its filing,
irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted
therein.
 Although Uson is also a stockholder and
director of Royal Class Venture, it is settled in
jurisprudence that not all conflicts between a
stockholder and the corporation are intra-corporate;
an examination of the complaint must be made
on whether the complainant is involved in his
capacity as a stockholder or director, or as an
employee. If the latter is found and the dispute does
not meet the test of what qualifies as an intra-
corporate controversy, then the case is a labor case
cognizable by the NLRC and is not within the
jurisdiction of any other tribunal.
In the case at bar, Uson's allegation was that
he was maliciously and illegally dismissed as an
Accounting Supervisor by Guillermo, the Company
President and General Manager, an allegation that was
not even disputed by the latter nor by RoyalClass
Venture. It raised no intra-corporate relationship issues
between him and the corporation or Guillermo; neither
did it raise any issue regarding the regulation of the
corporation. As correctly found by the appellate court,
Uson's complaint and redress sought were centered
alone on his dismissal as an employee, and not upon
any other relationship he had with the company or
with Guillermo. Thus, the matter is clearly a labor
dispute cognizable by the labor tribunals.
Right to Self-Organization
Samahan ng Manggagawa Sa Hanjin Shipyard
(Samahan) v. Bureau of Labor Relations
G.R. 211145, October 14, 2015; October 14,
2015; Mendoza, J.
FACTS:
Samahan, through its President Alipio, filed
with the DOLE an application for registration of its
name Samahan ng Mga Manggagawa sa Hanjin
Shipyard attached with the names of the associations
120 officers and members, signatures of the attendees
of the February 7, 2010 meeting and the copies of
their Constitution and By-Laws. The DOLE Regional
Office No. 3 of San Fernando, Pampanga (DOLE-
Pampanga) issued the corresponding certificate of
registration in favor of Samahan.
However, Hanjin filed a petition with DOLE-
Pampanga praying for the cancellation of registration
of Samahans association on the ground that its
members did not fall under any of the types of workers
enumerated in the second sentence of Article 243 (now
Article 249). Specifically, Hanjin opined that only
ambulant, intermittent, itinerant, rural worker, self-
employed, and those without definite employers may
form a workers association. It further posited that 1/3
of the members of the association had definite
employers and the continued existence and
registration of the association would prejudice the
companys good will. All these allegations were
tantamount to misrepresentation which is a ground to
cancel Samahans registration.
The DOLE Regional Director ruled in favor of
Hanjin. It was admitted in Samahans Constitution and
By-Laws that Samahans members were employees of
Hanjin when not all of them were. This admission
bolstered Hanjins claim that Samahan committed
misrepresentation when it failed to prove that 63 of its
members were employees of Hanjin.
Aggrieved, Samahan filed an appeal before the
Bureau of Labor Relations arguing that Hanjin had no
right to petition for the cancellation of its registration
on the ground that the words Hanjin Shipyard, as
used in its application for registration, referred to a
workplace in Subic, Zambales, which became known as
Hanjin Shipyard. The BLR granted Samahans appeal
and reversed the ruling of the Regional Director
upholding the right of all workers to self-organization,
that industrial, commercial and self-employed workers
could form a workers association if they so desired
subject to the limitation of mutual aid and protection.
In Hanjins Motion for Reconsideration, the BLR
affirmed its earlier ruling but directed Samahan to
remove the words Hanjin Shipyard from its name.
Samahan filed a Petition for Certiorari under
Rule 65 before the Court of Appeals. The CA held that
Samahans registration as a legitimate workers
association was contrary to Article 243 of the Labor
Code. KAMI, ang mga Manggagawa sa Hanjin
Shipyard in Samahans preamble in its Constitution
and By-Laws created an impression that all its
members are employees of Hanjin Shipyard when only
57 of its 120 members were actually working with
Hanjin; therefore, misrepresentation was present
which warranted the cancellation of Samahans
registration. Also, Hanjins industry is not located in a
rural area, and the workers were neither ambulant,
intermittent or itinerant workers. At any rate, the CA
was in the view of dropping Hanjin Shipyard from the
association.
ISSUES:
A. Whether or not Samahan can choose to form a
workers association of employees of Hanjin,
not a labor union, thus upholding their
registration as such.
B. Whether or not Samahan should
remove/delete the word Hanjin in the name
of the union by reason of the companys
property right over the company name.
RULING:
A. Right to choose whether to form or join a
union of workers association belongs to
the workers themselves. Yes, Samahan can
form a workers association of employees of
Hanjin. The right to form a labor organization
necessarily includes the right to refrain or
 exercise such right. Inherent to the right of
self-organization is the right to choose to form
a union for purposes of collective bargaining or
a workers association for the purposes of
mutual aid and protection. The right to form a
workers association in Article 243 (now Article
249) is not exclusive to ambulant, intermittent
and itinerant workers. Further nothing in
Article 243, read together with Rule 2 of
Department Order No. 40-03, provides that
workers, with definite employers, cannot form
or join a workers association for mutual aid
and protection.
B. Removal of the word Hanjin Shipyard
from the associations name, however,
does not infringe on Samahans right to
self-organization. Yes, Samahan should
remove/delete the words Hanjin Shipyard
from the associations name because it gives
the wrong impression that all of its members
are employed by Hanjin. The policy under
Section 18 of the Corporation Code against the
registration of a corporate name which is
identical or deceptively or confusingly similar
to that of any existing corporation or which is
patently deceptive or patently confusing or wages; (3) the power of dismissal; and (4) the
contrary to existing laws, is the avoidance of
fraud upon the public which would have
occasion to deal with the entity concerned, the
evasion of legal obligations and duties, and the
reduction of difficulties of administration and
supervision over corporations. Further, Section
9, Rule IV of D.O. No. 40-03, Series of 2003
explicitly states that The change of name of a
labor organization shall not affect its legal
personality. All the rights and obligations of a
labor organization under its old name shall
continue to be exercised by the labor
organization under its new name.
tasked to solicit cable subscriptions for
respondent, as evidenced by Certifications
ANTONIO VALEROSO AND ALLAN LEGATONA vs.
SKYCABLE CORPORATION
G.R. No. 202015, July 13, 2016
Facts:
In 1998, Antonio Valeroso and Allan Legatona
alleged that they started working as accountant
executives for Skycable Corporation. They received
commissions ranging from P15,000.00 to 530,000.00
each upon reaching a specific quota every month and
an allowance of P6,500.00 to P7,000.00 per month. In
2007, they were transferred to Armada, Inc. In
February 2009, they were informed that their
commissions would be reduced due to the introduction
of prepaid cards sold to cable subscribers resulting in
lower monthly cable subscriptions. This prompted them
to file a labor case for Unfair Labor Practice on
February 2009. They claimed that they were directly
hired, paid and dismissed by respondent, in which
case, they were under the direct and control and
supervision of Skycable because they were being
monitored regularly, given trophies and awards, and
evaluated in their quota production.
Skycable Corporation countered that it did not
terminate the services of petitioners for there was
never an employer-employee relationship to begin
with. It further averred that it engaged petitioners as
independent contractors under a Sales Agency
Agreement. In 2007, Skycable decided to streamline
its operation and so, it engaged the services of an
independent contractor, Armada, Inc. As a
result, petitioners' contracts were terminated but they,
together with other sales account executives, were
referred for transfer to Armada. Petitioners then
became employees of Armada.
Issue: Were the Petitioners employees of
Skycable Corporation?
No. To prove the claim of an employer-employee
relationship, the following should be established by
competent evidence: (1) the selection and
engagement of the employee; (2) the payment of
employer's power to control the employee with respect
to the means and methods by which the work is to be
accomplished. Among the four, the most determinative
factor in ascertaining the existence of employer-
employee relationship is the "right of control test."
Under this control test, the person for whom the
services are performed reserves the right to control
not only the end to be achieved, but also the means by
which such end is reached.
Applying the test in this case, the evidence presented
by petitioners did not prove their claim that they were
employees of respondent. The Court found that
respondent's act of regularly updating petitioners of
new promos, new price listings, meetings and trainings
of new account executives; imposing quotas and
penalties; and giving commendations for meritorious
performance do not pertain to the means and
methods of how petitioners were to perform and
accomplish their task of soliciting cable
subscriptions. At most, these indicate that
respondent regularly monitors the result of
petitioners' work but in no way dictate upon
them the manner in which they should perform
their duties.
Applying also the totality of the economic
circumstances test, where the underlying economic
realities of the activity or relationship is determinative
of the relationship, this test applies only
in cases where there is no written agreement to base
the relationship on and where the various tasks
performed by the worker brings complexity to the
relationship with the employer. In the present case,
there is a written contract, i.e., the Sales Agency
Agreement, which served as the primary evidence of
the nature of the parties' relationship. In this duly
executed and signed agreement, petitioners and
respondent unequivocally agreed that petitioners'
services were to be engaged on an agency basis as
sales account executives and that no employer-
employee relationship is created but an independent
contractorship.
Jesus Reyes vs GLAUCOMA RESEARCH
FOUNDATION, INC.
G.R. No. 189255 June 17, 2015
Facts:
Jesus Reyes was employed as an administrator in
Eye Referral Center (ERC) of the respondent in August
1, 2003. He worked as an administrator until April of
2005 wherein he alleged that he did not received his
salary from February and his 14 th month pay. He was
then refused entry and his office padlocked by the
Center. On the part of the Respondents, they engaged
his services as a consultant or adviser in the
formulation of an updated organizational set-up and
employees' manual which is compatible with their
present condition. Based on his claim that there is a
need for an administrator for the ERC, he later
designated himself as such on a trial basis. But later
on in his later on December of 2004, he stated therein
that he will be on leave and advised them that they
have the option of appointing his replacement during
his absence. With this, he severed his relationship with
the respondents. The respondents alleged that there is
no employer-employee relationship. Petitioner then
filed for a complaint for illegal dismissal.
LA dismissed the petitioners complaint for lack of
proof in establishing that there was indeed an
employer-employee relationship. Further, he was also
found undisputed to be consultant of Manila
International Airport Authority and other governmental
agencies. NLRC reversed the LAs decision contending
that it was necessary on the part of the respondent to
establish the fact of the dismissal. CA reinstated the
decision of LA ruling that under the control test and
the economic reality test, no employer-employee
relationship existed between respondents and
petitioner.
Hence, this petition.
Issue: Whether or not there was an employer-
employee relationship in the case.
Ruling:
The Court affirmed the decision of the CA in reinstating
the decision of LA. It held that in an illegal dismissal
case, the onus probandi rests on the employer to
prove that its dismissal of an employee was for a valid
cause. However, before a case for illegal dismissal can
prosper, an employer-employee relationship must first
be established. And in this case, the Court relied on
two tests to determine if there is an employer-
employee relationship; they are the Control Test and
the Economic Reality Test.
To establish the existence of employer-employee
relationship the four standards must exist, namely: (a)
the manner of selection and engagement of the
putative employee; (b) the mode of payment of
wages; (c) the presence or absence of power of
dismissal; and, (d) the presence or absence of control
of the putative employees conduct. Most determinative
among these factors is the so-called control test.
In the present case, the power to approve or reject the
organizational plans drawn by petitioner cannot be the
control contemplated in the "control test." It is but
logical that one who commissions another to do a
piece of work should have the right to accept or reject
the product. The important factor to consider in the
"control test" is still the element of control over how
the work itself is done, not just the end result thereof.
This was not established by the petitioner.
Under the economic reality test, which determines
whether an employer-employee relationship exists
between the parties the economic realities prevailing
within the activity or between the parties are
examined, taking into consideration the totality of
circumstances surrounding the true nature of the
relationship between the parties. This is especially
appropriate when, as in this case, there is no written
agreement or contract on which to base the
relationship. Economic dependence of the worker on
his employer is essential. Pay slips may not be treated
as competent evidence of petitioner's claim that he is
respondents' employee. In addition, the designation of
the payments to petitioner as salaries, is not
determinative of the existence of an employer-
employee relationship. Thus the petitioner failed to
establish that there is indeed an employer-employee
relationship in this case.
TENAZAS vs. R. VILLEGAS TAXI TRANSPORT; G.R.
No. 192998 April 2, 2014
FACTS
Bernard A. Tenazas (Tenazas), Jaime M. Francisco
(Francisco), and Isidro G. Endraca (Endraca) filed a
complaint for illegal dismissal against R. Villegas Taxi
Transport and/or Romualdo Villegas (Romualdo) and
Andy Villegas (Andy) (respondents).
Respondents admitted that Tenazas and Endraca were
employees of the company, the former being a regular
driver and the latter a spare driver. Respondents claim
that Isidro Endraca was only an extra driver who
stopped reporting to queue for available taxi units
which he could drive. Respondents offered Tenazas and
Edraco reinstatement but both refused. The
respondents, however, denied that Francisco was an
employee of the company or that he was able to drive
one of the companys units at any point in time.
The Labor Arbiter held that there could be no illegal
dismissal since there was no overt act of dismissal
committed by the respondents. There was no formal
investigations, no show cause memos, suspension
memos or termination memos were never issued.
Otherwise stated, there is no proof of overt act of
dismissal committed by herein respondents.
On appeal, the NLRC reversed the ruling of the LA and
ruled that the petitioners were all employees of the
company.
The Court of Appeals affirmed with modification the
decision of the NLRC, holding that there was indeed an
illegal dismissal on the part of Tenazas and Endraca
but not with respect to Francisco who failed to present
substantial evidence, proving that he was an employee
of the respondents. It also deleted the NLRCs award of
separation pay and instead ordered that Tenazas and
Endraca be reinstated.
ISSUES:
WON Tenazaz and Edraca are entitled to separation
pay. WON or not Francisco is an employee of
respondent.
RULING:
No, they are not entitled to separation pay. An
illegally dismissed employee is entitled to two reliefs:
back wages and reinstatement. In instances where
reinstatement is no longer feasible because of strained
relations between the employee and the employer,
separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement,
if viable, or separation pay if reinstatement is no
longer viable, and back wages. Clearly, it is only when
reinstatement is no longer feasible that the payment of
separation pay is ordered in lieu thereof. "It bears to
stress that reinstatement is the rule and, for the
exception of strained relations to apply, it should be
proved that it is likely that if reinstated, an atmosphere
of antipathy and antagonism would be generated as to
adversely affect the efficiency and productivity of the
employee concerned. Although litigation may also
engender a certain degree of hostility, the
understandable strain in the parties relation would not
necessarily rule out reinstatement which would,
otherwise, become the rule rather the exception in
illegal dismissal cases. Thus, it was a prudent call for
the CA to delete the award of separation pay and order
for reinstatement instead
There was no employer-employee relationship.
Francisco was claiming to be an employee of the
respondents, it is incumbent upon him to proffer
evidence to prove the existence of said relationship.
Any competent and relevant evidence to prove the
relationship may be admitted. Identification cards,
cash vouchers, social security registration,
appointment letters or employment contracts, payrolls,
organization charts, and personnel lists, serve as
evidence of employee status.In this case, however,
Francisco failed to present any proof substantial
enough to establish his relationship with the
respondents. Francisco simply relied on his allegation
that he was an employee of the company without any
other evidence supporting his claim. Unfortunately for
him, a mere allegation in the position paper is not
tantamount to evidence. Bereft of any evidence, the
CA correctly ruled that Francisco could not be
considered an employee of the respondents.
SOUTH EAST INTERNATIONAL RATTAN, INC. vs.
JESUS J. COMING
G.R. No. 186621 March 12, 2014 J.
FACTS
Petitioner South East International Rattan, Inc. (SEIRI)
is a domestic corporation engaged in the business of
manufacturing and exporting furniture to various
countries.
Coming was hired by petitioners as Sizing Machine
Operator sometime in 1984 and worked from 8 am to
5 pm with fixed compensation of P150.00 per day. In
1990, his employment was interrupted as he was told
by petitioners to resume work in two months. He did
not complain on the fear that petitioners might decide
not to call him back for work. He was however
dismissed in 2002 after having been told that the
company is not doing well financially and that he would
be called back to work only if they need his services
again. On 2003, Jesus J. Coming filed a complaint for
illegal dismissal.
SEIRI denied that Coming was their employee and that
he actually worked for SEIRIs furniture suppliers and
that Coming was alleging that he was employed in
1984 when in fact, it operated business only in 1987.
Further, Coming was not included in the list of
employees submitted to the SSS. Coming on the other
hand, submitted five affidavits of his former co-
workers stating that Coming was an employee of SEIRI
for almost 20 years.
The Labor Arbiter, pronounced that Coming was
SEIRIs employee and was terminated illegally which
was reversed by the NLRC which decision was further
set aside by the CA.
ISSUE
Whether or not there exists an employer-employee
relationship between SEIRI and Coming
HELD
There was employer-employee relationship and the
decision of the CA was upheld.
In ascertaining the existence of an employer-employee
relationship, the four-fold test is applied, i.e., (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." And in resolving the issue of
existence of em-em relationship, substantial evidence
is sufficient.
The fact that a worker was not reported as an
employee to the SSS is not conclusive proof of the
absence of employer-employee relationship. Nor does
the fact that respondents name does not appear in the
payrolls and pay envelope records submitted by
petitioners negate the existence of employer-employee
relationship. For a payroll to be utilized to disprove the
employment of a person, it must contain a true and
complete list of the employee. In this case, SEIRI list
did not cover the entire 18-year period during which
respondent supposedly worked for SEIRI. SEIRI
suggest that respondent was employed by SEIRIs
suppliers, Mayol and Apondar but no competent proof
was presented as to the latters status as independent
contractors. When SEIRI admitted that the five affiants
in behalf of Coming were its employees although
showing grudge feeling against the company is binding
to SEIRI and as pronounced by the CA, applying the
Control Test on SEIRI, (1) they required Coming to
work within the company premises; (2) they obliged
Coming to report every day of the week and tasked
him to usually perform the same job; (3) they
enforced the observance of definite hours of work from
8 oclock in the morning to 5 oclock in the afternoon;
(4) the mode of payment of Comings salary was under
their discretion, at first paying him on pakiao basis and
thereafter, on daily basis; (5) they implemented
company rules and regulations; (6) Agbay (Pres of
Company) directly paid Comings salaries and
controlled all aspects of his employment and (7)
Coming rendered work necessary and desirable in the
business of the respondent company.
Therefore, Coming, whose employment was
terminated without valid cause by petitioners, is
entitled to reinstatement without loss of seniority
rights and other privileges and to his full back wages,
inclusive of allowances and other benefits or their
monetary equivalent, computed from the time his
compensation was withheld from him up to the time of
his actual reinstatement. Where reinstatement is no
longer viable as an option, back wages shall be
computed from the time of the illegal termination up to
the finality of the decision. Separation pay equivalent
to one-month salary for every year of service should
likewise be awarded as an alternative in case
reinstatement in not possible.
ROYALE HOMES MARKETING CORPORATION VS.
ALCANTARA
G.R. NO. 195190, JULY 28, 2014
Topic: Existence of Employer-Employee Relationship;
Right of Control Test.
Case Doctrine: Not every form of control that a hiring
party imposes on the hired party is indicative of
employer-employee relationship. Rules and regulation
that merely serve as guidelines towards the
achievement of mutually desired result without
dictating the means and methods of accomplishing it,
do not establish employer-employee relationship.
Facts:
1. Royale Homes is a corporation engaged in
marketing Real Estates. In 1994, it engaged
the services of Alcantara and appointed him as
its Marketing Director for a period of one year,
which was subsequently extended to the latest
January 1 to December 2003;
2. In December 17, 2003, Alcantara filed an
Illegal Dismissal Case against Royale Homes
alleging that in November 2003, the Company
gave him Php 1.2 M for the services he
rendered to it, however, during the 1 st week of
November, the executive officers of Royale
Homes told him that they were wondering why
he still had to return at work, and that the acts
of the executive officers of Royale Homes
amounted to his dismissal from work without
any valid or just cause and in gross disregard
of the proper procedure for dismissing
employees;
3. For its part, Royale homes refuted the
allegation that Alcantara is its employee. It
argued that the appointment paper of
Alcantara is clear that it engaged his services
as an independent sales contractor for a fixed
term of one year only, as such, Alcantara never
received any salary, 13th month pay, overtime
pay or holiday pay from Royale Homes as he
was paid purely on commission basis. In
addition, it had no control on how Alcantara
would accomplish his tasks and responsibilities
as he was free to solicit sales at any time and
by any manner which he deems appropriate
and necessary, in fact, Alcantara was free to
recruit his own sales personnel to assist him in
pursuance of his sales target.
4. Moreover, Royale Homes averred that in its
Management Committee meeting held on
October 8, 2003, Alcantara announced openly
and publicly that he will leave the company by
the end of October 2003 on the ground that he
will join his wife to pursue their own brokerage
business.
Sole Issue:
Whether or not there exist an Employer-Employee
Relationship between Royale Homes and Alcantara.
Labor Arbiter: Alcantara is an employee of Royale
Homes having a fixed-term employment contract.
NLRC: Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its
ruling mainly on the contract which does not require
Alcantara to observe regular working hours. He was
also free to adopt the selling methods he deemed most
effective and can even recruit sales agents to assist
him in marketing the inventories of Royale Homes. The
NLRC also considered the fact that Alcantara was not
receiving monthly salary, but was being paid on
commission basis as stipulated in the contract.
Court of Appeals: It held that Alcantara is an
employee of Royal Homes. In applying the four-fold
and economic reality tests, it held that Royale Homes
exercised some degree of control over Alcantara since
his job, as observed by the CA, is subject to company
rules, regulations, and periodic evaluations. He was
also bound by the company code of ethics. Moreover,
the exclusivity clause of the contract has made
Alcantara economically dependent on Royale Homes,
supporting the theory that he is an employee of said
company.
Final Ruling of Supreme Court:
The Supreme Court ruled in the negative. First, it
explained that, based on the written contract of the
parties which is the primary evidence of their
relationship, there exist a provision thereto which
explicitly provided that both parties understood that
there will be no employer-employee relationship to
exist between them, and that Alcantara was engaged
by Royale Homes as an independent sales contractor to
be paid on commission basis.
Second, in applying the four-fold and economic reality
tests, to wit: (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; the fourth
element or right of control test is the most
determinative factor in determining the existence of
Employer-Employee relationship.
In the case, the Supreme Court disagrees with the
ratiocination of the Court of Appeals that since the
performance of Alcantaras tasks is subject to company
rules, regulations, code of ethics and periodic
evaluation, the element of control is present which
would make Alcantara an employee of Royal Homes.
The Supreme Court explained that, not every form of
control is indicative of employer-employee relationship
because a person who performs work for another and
is subjected to its rules, regulations, and code of ethics
does not necessarily become an employee for as long
as the level of control does not interfere with the
means and methods of accomplishing the assigned
tasks, the rules imposed by the hiring party on the
hired party do not amount to the labor law concept of
control that is indicative of employer-employee
relationship.
In this case, the Supreme Court agrees with Royal
Homes that the company rules, regulations, code of
ethics and periodic evaluation did not control the
means and methods by which Alcantara was to
perform his job, in fact, he had full control over the
means and methods of accomplishing his tasks as he
can solicit sales from prospective clients, at any time
and by any manner which he deems appropriate and
necessary. In essence, Alcantara performed his tasks
on his own account free from the control and direction
of Royale Homes in all matters connected therewith,
except to the following acts of the Company which is
not however indicative of control over Alcantaras
work, to wit: Fixing the price of Real Estate, imposing
requirements to the prospective buyers, laying down
terms and conditions of the sale including mode of
payment which an independent contractor must follow,
allocation of inventories among the independent
contractors, determination on who has the priority to
sell the real estate, grant of commission or allowance
based on predetermined criteria and regular monitor of
the results of the market and sales effort of the
independent contractors, the foregoing are valid acts
of the Company which is not indicative of control over
a hired party as to qualify him as an employee of the
Company.
AVELINO S. ALILIN vs. PETRON CORPORATION
G.R. No. 177592 June 9, 2014
FACTS:
Petron is a domestic corporation engaged in the oil
business. In 1968, Romualdo D. Gindang Contractor,
which was owned and operated by Romualdo D.
Gindang (Romualdo), started recruiting laborers for
fielding to Petrons Mandaue Bulk Plant.
On June 1, 2000, Petron and RDG entered into a
Contract for Services whereby RDG undertook to
provide Petron with janitorial, maintenance, tanker
receiving, packaging and other utility services in its
Mandaue Bulk Plant. This contract was extended and
upon expiration thereof, no further renewal of the
service contract was done.
Proceedings before the Labor Arbiter
Petitioners Alilin, Calesa, Hindang, Gindang, Sungahid,
Lee, Morato and Gabilan filed a Complaint for illegal
dismissal, underpayment of wages, damages and
attorneys fees against Petron and RDG. Petitioners did
not deny that RDG hired them and paid their salaries.
They, however, claimed that the latter is a labor-only
contractor, which merely acted as an agent of Petron,
their true employer. RDG corroborated petitioners
claim that they are regular employees of Petron. RDG
denied liability over petitioners claim of illegal
dismissal and further argued that Petron cannot
capitalize on the service contract to escape liability.
Petron, on the other hand, maintained that RDG is an
independent contractor and the real employer of the
petitioners. It was RDG which hired and selected
petitioners, paid their salaries and wages, and directly
supervised their work.
Labor Arbiter ruled that petitioners are regular
employees of Petron. It found that their jobs were
directly related to Petrons business operations; they
worked under the supervision of Petrons foreman and
supervisor; and they were using Petrons tools and
equipment in the performance of their works.
Proceedings before the NLRC
Petron continued to insist that there is no employer-
employee relationship between it and petitioners. NLRC
ruled that petitioners are Petrons regular employees
because they are performing job assignments which
are germane to its main business. Petrons MR denied.
Proceedings before the CA
CA found no employer-employee relationship between
the parties. According to it, the records of the case do
not show that petitioners were directly hired, selected
or employed by Petron; that their wages and other
wage related benefits were paid by the said company;
and that Petron controlled the manner by which they
carried out their tasks. The CA also found RDG to be
an independent labor contractor with sufficient
capitalization and investment as shown by its financial
statement for year-end 2000. In addition, the works
for which RDG was contracted to provide were menial
which were neither directly related nor sensitive and
critical to Petrons principal business.Petitioners filed an
MR. Motion denied.
ISSUE:
Whether RDG is a legitimate job contractor. Upon such
finding hinges the determination of whether an
employer-employee relationship exists between the
parties as to make Petron liable for petitioners
dismissal.
RULING: Labor-only contracting, distinguished from
permissible job contracting.
The prevailing rule on labor-only contracting at the
time Petron and RDG entered into the Contract for
Services in June 2000 is DOLE Department Order No.
10, series of 1997.
"Permissible job contracting or subcontracting
refers to an arrangement whereby a principal agrees to
farm out with a contractor or subcontractor the
performance of a specific job, work, or service within a
definite or predetermined period, regardless of
whether such job, work or, service is to be performed
or completed within or outside the premises of the
principal. Under this arrangement, the following
conditions must be met: (a) the contractor carries on a
distinct and independent business and undertakes the
contract work on his 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 his work except as to the results
thereof; (b) the contractor has substantial capital or
investment; and (c) the agreement between the
principal and contractor or subcontractor assures the
contractual employees entitlement to all labor and
occupational safety and health standards, free exercise
of the right to self-organization, security of tenure, and
social welfare benefits." Labor-only contracting, on
the other hand, is a prohibited act, defined as
"supplying workers to an employer who 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."
Generally, the contractor is presumed to be a labor-
only contractor, unless such contractor overcomes the
burden of proving that it has the substantial capital,
investment, tools and the like. However, where the
principal is the one claiming that the contractor is a
legitimate contractor, as in the present case, said
principal has the burden of proving that supposed
status. It is thus incumbent upon Petron, and not upon
petitioners as Petron insists, to prove that RDG is an
independent contractor.
Petron failed to discharge the burden of proving that
RDG is a legitimate contractor. Hence, the presumption
that RDG is a labor-only contractor stands.
Here, the audited financial statements and other
financial documents of RDG for the years 1999 to 2001
establish that it does have sufficient working capital to
meet the requirements of its service contract. In fact,
the financial evaluation conducted by Petron of RDGs
financial statements for years 1998-2000 showed RDG
to have a maximum financial capability of Php4.807
Million as of December 1998,49 and Php1.611 Million
as of December 2000.50 Petron was able to establish
RDGs sufficient capitalization when it entered into the
service contract in 2000. The Court stresses though
that this determination of RDGs status as an
independent contractor is only with respect to its
financial capability for the period covered by the
financial and other documents presented. In other
words, the evidence adduced merely proves that RDG
was financially qualified as a legitimate contractor but
only with respect to its last service contract with
Petron in the year 2000.
Sections 8 and 9,Rule VIII, Book III of the
implementing rules of the Labor Code, in force since
1976 and prior to DOLE Department Order No. 10,
series of 1997 provide that for job contracting to be
permissible, one of the conditions that has to be met is
that the contractor must have substantial capital or
investment. Petron having failed to show that this
condition was met by RDG, it can be concluded, on this
score alone, that RDG is a mere labor-only contractor.
The Court also finds, as will be discussed below, that
the works performed by petitioners were directly
related to Petrons business, another factor which
negates Petrons claim that RDG is an independent
contractor.
Petron therefore, being the principal employer and
RDG, being the labor-only contractor, are solidarily
liable for petitioners' illegal dismissal and monetary
claims.
Labor Contracting
MARITES R. CUSAP vs. ADIDAS G.R. No. 201494
July 29, 2015
Facts: On January 21, 2003, Marites Cusap and 27
other employees filed a complaint for Illegal Dismissal
against Adidas, Prime and JCA. They alleged that they
were regular employees of Adidas, as promo girls and
stockman at the companys various rented outlets for
years.
Adidas is engaged in the manufacture and marketing
of different lines of shoes and other sporting goods and
apparel in the Philippines.
It contracted JCA to be its exclusive distributor
nationwide for 1 year (January 1, 2002 December
31, 2002. JCA entered into a promotional contract with
PRIME to meet the promotional requirements in the
distribution of Adidas products.
December 9, 2002: Complainants were dismissed from
employment when he service contract between PRIME
and JCA was terminated.
Arguments of Complainants:
1. Adidas was their real employer; PRIME, merely a
recruitment agency supplying Adidas with manpower;
it is used to conceal actual employment relationship
between them and Adidas.
2. JCA, mere alter ego of Adidas: JCA and Adidas
occupied same office and that JCA was merely a
distributor of Adidas products.
3. The products they were selling remained the
property and under the control of Adidas; it was Adidas
that provided the warehouse where the products were
stored, that leased the outlets from department stores,
and that provided regular training to them. Also, the
proceeds of the sales were directly deposited to the
bank account of Adidas. Moreover, their salaries and
other monetary benefits supposedly paid by PRIME
were charged to the account of Adidas, as indicated in
their payslips.
4. JCA and PRIME were only intermediaries of Adidas;
Prime being not registered corporation, labor recruiter,
or agency when it supposedly entered into a contract
with JCA; neither with the Securities and Exchange
Commission15 nor with the Department of Trade and
Industry. It was registered as a "job
contractor/subcontractor" only on May 20, 2002. They
thus maintained that PRIME was just a labor-only
contractor at the time it claimed it had employed them
for its supposed undertaking with JCA.
Adidas and JCA contends that it PRIME who was the
employer of the complainants. That PRIME exercised
control and supervision over their work. That it
exercised the power to select, engage and dismiss the
complainants.
PRIME contends that it hired complainants for its
project with JCA to promote Adidas products. Their
employment was terminated when its contract with
JCA expired and was not renewed. Hence,
complainants were not illegally dismissed.
Rulings on Compulsory Arbitration: Labor Arbiter
Salinas dismissed the complaint. Prime was the
employer of the complainants and that it paid their 13 th
month pay and service incentive leave pay.
NLRC: Denied the appeal
CA: Affirmed the denial of the NLRC establishing
PRIME to be a legitimate contractor applying the 4
fold employer-employee Test that it was PRIME which
(1) hired the complainants; (2) paid their wages; (3)
dismissed them upon the expiration of the contract for
which they were hired; and (4) exercised control over
them with respect to the conduct of the work to be
performed.
Petitioner points out that JCA and PRIME did not carry
on an independent business or undertook the
performance of their service contracts according to
their own manner and methods, free from the control
and supervision of the principal Adidas. The two
entities, she insists, were mere labor-only contractors.
Issue: Whether PRIME is a labor only contractor.
Ruling: Yes. PRIME is a labor-only contractor;
Article 106 of the Labor Code provides that "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 the employer. In such cases, the
person or intermediary shall be considered merely an
agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter
were directly employed by him.
Sec. 5, Department Order No. 18-02, s. of 2002,
implementing Articles 106 to 109 of the Labor
Code, prohibits labor-only contracting and defines it as
"an arrangement where the contractor or sub-
contractor merely recruits, supplies or places workers
to perform a job, work or service for a principal, and
any of the following is present: (i) The contractor or
subcontractor does not have substantial capital or
investment which relates to the job, work or service to
be performed and the workers recruited, supplied or
placed by such contractor or sub-contractor are
performing activities which are directly related to the
principal business of the employer; or (ii) the
contractor does not exercise the right to control over
the performance of the work of the contractual
employee. x x x '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."
Aside from PRIME's remittances of employee
contributions to Philhealth, SSS, and Pag-ibig and the
payment for the complainants' and the petitioner's
wages, we find no indication, except mostly general
statements from Adidas, PRIME and JCA, that PRIME
possessed substantial capital or investment to operate
as a legitimate job contractor or subcontractor.
According to Adidas, not only did PRIME have
substantial capital or investment to run its own
business operations independent of its clients, it also
has sufficient capability to control and supervise its
employees. Yet it offered no proof to substantiate its
claim,40 other than its recognition of PRIME' s capability
to fulfill its obligations towards its employees.
The same thing is true with PRIME. It likewise offered
no proof of how or in what manner its purported
substantial capital financed its "promotional and inter-
marketing business" with JCA, except to say that in the
pursuit of its business operations, "it has complied with
all the requirements of law anent the rights, privileges
and benefits of its employees."42
For its part, JCA relied principally on its promotional
contract with PRIME to avoid liability, saying that the
terms of their service agreement demonstrate the
earmarks of an employer under the four-fold
employer-employee relationship test.43 It also
presented no proof of how or in what manner PRIME
carried out its undertaking under the contract;
although like Adidas, it acknowledged PRIME's
payment of the petitioners' and the complainants'
wages, and remittances to Philhealth, SSS, and Pag-
ibig.
While the payment of wages and workers' benefits is
one of the determinants of an employer-employee
relationship, we do not find it a reliable basis in this
case. In fact, a closer look at the payslips of PRIME's
supposed employees reveals that the complainants'
salaries and benefits were under the account of
Adidas,45giving credence to their claim that their
compensation was charged to Adidas.
Under these circumstances, we have reason to believe
that PRIME, the supposed JCA subcontractor, just
assumed the act of paying the complainants' wages
and benefits on behalf of Adidas, indicating thereby
that it was a mere agent of Adidas or a labor-only
contractor. In the light of the complete absence of
proof that PRIME applied its "substantial capital or
investment" in performing the promotional job it
contracted with JCA, we find credence in the
petitioner's submission that the products she was
selling remained to be the property and under the
control of Adidas; that it was Adidas who owned the
warehouse where they were stored; that leased the
sales outlets from department stores; and that
provided regular training to her and to the other
complainants.
Petron Corp. v. Caberte
G.R. No. 182255, June 15, 2015
Facts:
Petron is a domestic corporation engaged in
the manufacture and distribution of petroleum
products. Pursuant to the nature of its business, it
maintains and operates several bulk tanks all over the
country. One of which is located in Bacolod where the
respondents were hired as utility, maintenance and
LPG assistance workers in various dates from 1979 to
1998.
In 1996, Petron engaged the service of ABC
Contracting Services as a contractor to provide utility
and maintenance services to its Bacolod bulk tanks. In
1999, the contract between Petron and ABC was
terminated which led to the dismissal of the
respondents. Thus, they filed a complaint for illegal
dismissal contending that ABC was a mere labor-only
contractor which had no substantial capital and
investment, and had no control over the manner and
method on how they accomplished their work. Thus,
Petron is their true employer. Petron countered their
contention saying that ABC was an independent
contractor which supplied the needed manpower for
the maintenance and utility of its bulk plant.
The Labor Arbiter and the NLRC both decided
in favour of Petron stating that ABC was a legitimate
independent contractor and thus, the employer of the
respondents. The CA reversed the judgment of the
NLRC and ordered the reinstatement of the
respondents.
Issue:
Whether or not ABC Contracting Services was a
labor-only contractor of Petron.
Ruling:
The law presumes a contractor to be a labor-
only contractor and the employees are not expected to
prove the negative fact that the contractor is a labor-
only contractor. Thus, to overcome this presumption,
Petron has the burden of proving and must establish
that ABC is not a labor-only contractor but a legitimate
independent contractor.
Under the law and jurisprudence, a contractor
is deemed to be a labor-only contractor if the following
elements are present: (i) the contractor does not have
substantial capital or investment to actually perform
the job, work or service under its own account and
responsibility; and (ii) the employees recruited,
supplied or placed by such contractor are performing
activities which are directly related to the main
business of the principal.
In this case, Petron failed to show that ABC
had substantial capital or investment and that
respondents were performing activities which were not
directly related to Petrons principal business. The
documentary evidence presented by Petron were not
conclusive evidence of ABCs financial capacity to
operate and perform their business independently,
including the performance bond posted by ABC. It was
also shown that ABC does not own basic tools,
equipment and machineries, and work premises
needed to carry out their workers job. Moreover, the
Court found that the work rendered by the
respondents were directly related or necessary and
desirable to the main business of Petron for they are
vital as they are in the manufacture and distribution of
petroleum products. Petrons power of control over the
work of the respondents was also found by the Court
through its supervision over their work in handling LPG
products.
Therefore, considering Petrons failure to
overcome the presumption, the Court declared ABC as
a mere labor-only contractor and in finding that a
contractor is a labor-only contractor, it is equivalent
that there is an employer-employee relationship
between the principal and the employees of the
supposed contractor, and the labor-only contractor is
considered as a mere agent of the principal, the real
employer. Accordingly in this case, Petron is declared
to be the true employer of respondents who are
considered regular employees in view of the fact that
they have been regularly performing activities which
are necessary and desirable to the usual business of
Petron for a number of years.
Macarthur Malicdem & Flores v. Marulas
Industrial Corp. & Mancilla
G.R. No. 204406, February 26, 2014
FACTS:
Petitioners Malicdem and Flores were hired by
respondent corporation as extruder operators in 2006
They were responsible for the bagging of filament
yarn, the quality of pp yarn package and the
cleanliness of the work place area. Their employment
contracts were for a period of one (1) year. Every year
thereafter, they would sign a Resignation/Quitclaim in
favor of Marulas a day after their contracts ended, and
then sign another contract for one (1) year until such
time that they were told not to report to work
anymore. They were asked to sign a paper
acknowledging the completion of their contractual
status. Claiming that they were illegally dismissed, the
corporation countered that their contracts showed that
they were fixedterm employees for a specific
undertaking which was to work on a particular order of
a customer for a specific period. Their severance from
employment then was due to the expiration of their
contracts.
ISSUE: Whether or not petitioners were illegally
dismissed
HELD: Yes. CA affirming NLRC decision annulled
and set aside
Labor Law: Effect of continuous re-hiring of a
project employee for the same tasks that are
vital, necessary and indispensable to the usual
trade or business of the employer
Once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, rehired by
the same employer for the same tasks or nature of
tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the
employer, then the employee must be deemed a
regular employee, pursuant to Article 280 of the Labor
Code and jurisprudence. To rule otherwise would allow
circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No.
20/Department Order No. 19, hence allowing the
prevention of acquisition of tenurial security by project
or work pool employees who have already gained the
status of regular employees by the employers conduct.
The test to determine whether employment is regular
or not is the reasonable connection between the
particular activity performed by the employee in
relation to the usual business or trade of the employer.
If the employee has been performing the job for at
least one year, even if the performance is not
continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as
sufficient evidence of the necessity, if not
indispensability of that activity to the business.
It is clear then that there was deliberate intent on the
part of the employer to prevent the regularization of
petitioners. To begin with, there is no actual project.
The only stipulations in the contracts were the dates of
their effectivity, the duties and responsibilities of the
petitioners as extruder operators, the rights and
obligations of the parties, and the petitioners
compensation and allowances. As there was no specific
project or undertaking to speak of, the respondents
cannot invoke the exception in Article 280 of the Labor
Code.This is a clear attempt to frustrate the
regularization of the petitioners and to circumvent the
law.
Even granting that petitioners were project employees,
they can still be considered as regular as they were
continuously hired by the same employer for the same
position as extruder operators. Being responsible for
the operation of machines that produced sacks, their
work was vital and indispensable the business of the
employer.
The respondents cannot use the alleged expiration of
the employment contracts of the petitioners as a shield
of their illegal acts. The project employment contracts
that the petitioners were made to sign every year since
the start of their employment were only a stratagem to
violate their security of tenure in the company.
The respondents invocation ofWilliam Uy Construction
Corp. v. Trinidad22is misplaced because it is applicable
only in cases involving the tenure of project employees
in the construction industry. It is widely known that in
the construction industry, a project employees work
depends on the availability of projects, necessarily the
duration of his employment. It is not permanent but
coterminous with the work to which he is assigned.It
would be extremely burdensome for the employer, who
depends on the availability of projects, to carry him as
a permanent employee and pay him wages even if
there are no projects for him to work on.The rationale
behind this is that once the project is completed it
would be unjust to require the employer to maintain
these employees in their payroll.
Under Article 279 of the Labor Code, 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
equivalent computed from the time his compensation
was withheld from him up to the time of his actual
reinstatement.
PROJECT EMPLOYEES, WHEN CONSIDERED
REGULAR
While length of time is not the controlling test for
project employment, it is vital in determining if the
employee was hired for a specific undertaking or
tasked to perform functions vital, necessary and
indispensable to the usual business of trade of the
employer.Thus, in the earlier case of Maraguinot, Jr. v.
NLRC,it was ruled that a project or work pool
employee,who has been: (1) continuously, as opposed
to intermittently, rehired by the same employer for the
same tasks or nature of tasks; and (2) those tasks are
vital, necessary and indispensable to the usual
business or trade of the employer, must be deemed a
regular employee.
ROMEO BASAN vs. COCA-COLA BOTTLERS PH
G.R. Nos. 174365-66 February 4, 2015 PERALTA,
FACTS:
1. Petitioners Romeo Basan, Danilo Dizon, Jaime L.
Tumabiao, Jr., Roberto Dela Rama,Jr., Ricky S. Nicolas,
Crispulo D. Donor, Galo Falguera were engaged as
temporary route helpers by Coca-cola. As route
helpers, they engaged in the service of loading and
unloading softdrink products of respondent company to
its various delivery points. Each was tasked to work for
months, ranging from one to eight months,
intermittently for a couple of years.
2. On February 18, 1997, filed a complaint for illegal
dismissal with money claims against respondent Coca-
Cola Bottlers Philippines, alleging that respondent
dismissed them without just cause and prior written
notice required by law. They alleged that they were
performing activities necessary and desirable to the
usual business of petitioner for more than the period
for regularization, hence are considered as regular
employees.
3. Respondent countered that it hired petitioners as
temporary route helpers to act as substitutes for its
absent regular route helpers merely for a fixed period
in anticipation of the high volume of work in its plants
or sales offices. They also knew that their assignment
as route helpers was temporary in duration. Also, its
usual business or trade is softdrink manufacturing and
that the work assigned to respondent workers as sales
route helpers so involves merely "postproduction
activities," one which is not indispensable in the
manufacture of its products. Petitioners merely
rendered their services for periods of less than a year
so they could not have attained regular employment
status. Nevertheless, respondent asserted that where
a fixed period of employment was agreed upon
knowingly and voluntarily by the petitioners, the
duration of which was made known to them at the time
of their engagement, petitioners cannot claim
otherwise.
AS
4. LA ruled in favor of petitioners and found that since
they were performing activities necessary and
desirable to the usual business of petitioner for more
than the period for regularization, petitioners are
considered as regular employees, and thus, their
dismissal was done contrary to law in the absence of
just cause and prior written notice.
5. The NLRC affirmed the Labor Arbiters decision and
rejected respondents contention that petitioners were
merely employed for a specific project or undertaking
the completion or termination of which has been
determined at the time of their engagement. It
stressed that nowhere in the records of the case was it
shown that petitioners were hired as project or
seasonal employees, respondent having failed to
submit any contract of project or other similar proof
thereof.
6. The CA ruled in favor of respondents. Petitioners
must be considered as fixed term employees whose
"seasonal employment" or employment for a "period"
have been "set down. The respondents repeated hiring
for various periods (ranging from more than six
months for private respondent Basan to eight years in
the case of private respondent Dizon) would not
automatically categorize them as REGULAR
EMPLOYEES.
ISSUES:
1. WON petitioners are regular employees
2. WON the guidelines for a valid fixed term
employment were complied with
HELD:
1. Pursuant to Article 280 of the Labor Code, regular
employees are classified into:
i. Regular employees by nature of work or those who
are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of
the employer;
ii. Regular employees by years of service or those who
have rendered at least one year of service, whether
continuous or broken, with respect to the activities in
which they are employed
Petitioners, in this case, fall under the first kind of
regular employee. As route helpers who are engaged
in the service of loading and unloading softdrink
products of respondent company to its various delivery
points, which is necessary or desirable in its usual
business or trade, petitioners are considered as regular
employees.
 If, as so argued by petitioner company, only those
whose work are directly involved in the production of
softdrinks may be held performing functions necessary
and desirable in its usual business or trade, there
would have then been no need for it to even maintain
regular truck sales route helpers.
The repeated rehiring of respondent workers and the
continuing need for their services clearly attest to the
necessity or desirability of their services in the regular
conduct of the business or trade of petitioner company.
That they merely rendered services for periods of less
than a year is of no moment since for as long as they
were performing activities necessary to the business of
respondent, they are deemed as regular employees
under the Labor Code, irrespective of the length of
their service.
In Pacquing, et. al. v. Coca-Cola Philippines, Inc. and
also in the Magsalin case, the Court applied the ruling
cited above under the principle of stare decisis et non
quieta movere (follow past precedents and do not
disturb what has been settled). It was held therein that
route helpers were performing functions as the
necessary and desirable in the usual business or trade
of Coca Cola Philippines, Inc., they are considered as
regular employees entitled to security of tenure.
Consequently, for lack of any clear, valid, and just or
authorized cause in terminating petitioners'
employment, the Court found respondent guilty of
illegal dismissal.
2. No. The Court, in a litany of cases, recognized a
fixed-term type of employment embodied in a contract
specifying that the services of the employee shall be
engaged only for a definite period, the termination of
which occurs upon the expiration of said period
irrespective of the existence of just cause and
regardless of the activity the employee is called upon
to perform.
To avoid the possibility of abuse by employers in the
utilization of fixed-term employment contracts, the
Court laid down the following criteria to prevent the
circumvention of the employees security of tenure:
i. The fixed period of employment was knowingly and
voluntarily agreed upon by the parties without any
force, duress, or improper pressure being brought to
bear upon the employee and absent any other
circumstances vitiating his consent (NO VICE OF
CONSENT)
ii. It satisfactorily appears that the employer and the
employee dealt with each other on more or less equal
terms with no moral dominance exercised by the
former or the latter. (NO DOMINANCE OF EMPLOYER)
Unfortunately, however, the records of this case are
bereft of any proof which will show that petitioners
freely entered into agreements with respondent to
perform services for a specified length of time. In fact,
there is nothing in the records to show that there was
any agreement at all, the contracts of employment not
having been presented.
ZENAIDA PAZ vs. NORTHERN TOBACCO
REDRYING CO., INC., AND/OR ANGELO ANG
Facts: Northern Tobacco Redrying Co., Inc. (NTRCI), a
flue-curing and redrying of tobacco leaves business,
hired Zenaida Paz, sometime in 1974 as a seasonal
sorter, paid P185.00 daily. NTRCI regularly re-hired her
every tobacco season since then. On May 18, 2003,
Paz was 63 years old when NTRCI informed her that
she was considered retired under company policy. Paz
filed a complaint Illegal Dismissal which she later
amended to a Complaint for payment of retirement
benefits, damages, and attorneys fees. NTRCI
countered that no Collective Bargaining Agreement
(CBA) existed between NTRCI and its workers. NTRCI
raised the requirement of at least six months of service
a year for that year to be considered in the retirement
pay computation. It claimed that Paz only worked for
at least six months in 1995, 1999, and 2000 out of the
29 years she rendered service.
Issues:
1. Is Zenaida Paz considered a regular
employee?
Article 280 of the Labor Code and jurisprudence
identified three types of employees, namely:
(1) regular employees or those who have been
engaged to perform activities which are usually
necessary or desirable in the usual business or trade of
the employer;
(2) project employees or those whose employment
has been fixed for a specific project or undertaking,
the completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or service to be
performed is seasonal in nature and the employment is
for the duration of the season; and
(3) casual employees or those who are neither
regular nor project employees.
The primary test therefore, of determining regular
employment is the reasonable connection between the
particular activity performed by the employee in
relation to the usual trade or business of the
employer. The test is whether the former is usually
necessary or desirable in the usual business or
trade of the employer.
In this case, the services petitioner Paz performed as a
sorter were necessary and indispensable to respondent
NTRCIs business of flue-curing and re-drying tobacco
leaves. She was also regularly rehired as a sorter
during the tobacco seasons for 29 years since 1974.
These considerations taken together allowed the
conclusion that petitioner Paz was a regular seasonal
employee, entitled to rights under Article 279 53 of the
Labor Code on Security of Tenure.
 2. What are the benefits that should be Labor Arbiter dismissed Arlenes complaint and held
awarded? that Arlene was only an independent contractor. The
a. Full Back wages of P22,200.00- Since the exact NLRC reversed the Labor Arbiters decision and held
number of days petitioner Paz would have that Arlene was instead a regular employee because
worked between May 18, 2003 until she would she continuously rendered services that were deemed
turn 65 in 2005 could not be determined with necessary and desirable to Fujis business. On petition
specificity, this court thus awards full back for certiorari with the CA, Arlenes status of
employment as a regular employee and that she was
wages in the amount of P22,200.00 computed
illegally dismissed, were upheld.
by multiplying P185.00 by 20 days, then by
three months, then by two years.
ISSUES:
b. Retirement Pay of P12,487.50 based on the
three years she worked for at least six months 1. Is there an employer-employee relationship?
in 1995, 1999, and 2000.- In the absence of a 2. Is Arlene a regular employee?
retirement plan or agreement providing for 3. Was Arlene illegally dismissed?
retirement benefits of employees in the
establishment, an employee upon reaching the RULING:
age of sixty (60) years or more, but not 1. Applying the four-fold test, there is indeed an
beyond sixty-five (65) years which is hereby employer-employee relationship between
declared the compulsory retirement age, who Arlene and Fuji.
has served at least five (5) years in the said
establishment, may retire and shall be entitled Elements of the Four-Fold Test
to retirement pay equivalent to at least one- 1. Selection and engagement of the Arlene
half (1/2) month salary for every year of employee although
service, a fraction of at least six (6) 2. Payment of wages Her mon
months being considered as one whole be a su
year. be the
c. Financial Assistance of P60,356.25- The court whether
applied the following formula: one-half-month indepen
pay98 multiplied by 29 years in service and 3. Power of dismissal Fuji had
then divided by 2. This is pursuant to the paragra
principle of social and compassionate 4. Power of control Her con
justice where in special circumstances, the control
Court awards financial assistance considering required
the old age and infirmity of Paz, and the fact although
that she delivered 29 long dedicated years to instructi
her employer giving away her prime of her life mode o
to the company. function
she hav
her func
FUJI TELEVISION NETWORK, INC. vs. ARLENE S.
ESPIRITU
G.R. No. 204944-45; December 3, 2014

FACTS: In 2005, Arlene S. Espiritu was engaged by
Fuji Television Network, Inc. as a news
correspondent/producer tasked to report Philippine
news to Fuji through its Manila Bureau field office. The
employment contract initially provided for a term of 1
year but was successively renewed on a yearly basis,
until May 5, 2009 where both parties signed a non-
renewal contract. This non-renewal was predicated
by the fact that Arlene was diagnosed of lung cancer
sometime in January 2009 and after she informed Fuji
of the same. The contract stipulated further, that they
release each other from liabilities and responsibilities
under the employment contract. Arlene received
US$18,050 in consideration of the non-renewal
contract which represents her salary from March to
May 2009, bonuses, and separation pay. She signed
the contract under protest.
Arlene then initiated a complaint for illegal
dismissal a day after she signed the contract. The
2. Arlene is a regular employee of Fuji and not an
independent contractor. Particularly, she is a
regular employee with a fixed-term
contract.
The test for determining regular employment is
whether there is a reasonable connection between
the employees activities and the usual business of
the employer (i.e., the nature of the work must be
necessary or desirable in the usual business or
trade of the employer). Fuji is engaged in the
business of broadcasting, including news
programming. Arlene was hired for the primary
purpose of news gathering and reporting to the
television networks headquarters. Espiritu was not
contracted on account of any peculiar ability or
special talent and skill that she may possess which
the network desires to make use of (hence, the
ABS-CBN vs. Sonza ruling does not apply). As
correctly ruled by the NLRC and affirmed by the
 CA, the successive renewals of Arlenes contract
indicated the necessity and desirability of her work
in the usual course of Fujis business.
Arlenes contract indicating a fixed term did not
automatically mean that she could never be a
regular employee. The law does not preclude the
possibility that a regular employee may opt to
have a fixed-term contract for valid reasons. Fujis
argument that Arlene was an independent
contractor under a fixed-term contract is
contradictory, because there is an employer-
employee relationship in fixed-term contracts.
3. Arlene was illegally dismissed.
The expiration of Arlenes contract does not
negate the finding of illegal dismissal by Fuji. The
manner by which Fuji informed Arlene that her
contract would no longer be renewed is
tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of
resignation prepared by Fuji. Due process must
still be observed in the pre-termination of fixed-
term contracts of employment.
After informing her employer of her lung
cancer, she was not given the chance to present
medical certificates. Fuji immediately concluded
that Arlene could no longer perform her duties
because of chemotherapy. It did not ask her how
her condition would affect her work. Neither did it
suggest for her to take a leave, even though she
was entitled to sick leaves. Worse, it did not
present any certificate from a competent public
health authority that the disease could not be
cured within 6 months, even with appropriate
treatment. That a person has a disease does not
per se entitle the employer to terminate his or her
services. (See Art. 284 of the Labor Code and
Book VI, Rule 1, Section 8 of the Omnibus Rules
Implementing the Labor Code). Termination is the
last resort.
NELSON V. BEGINO vs. ABS-CBN CORPORATION
G.R. No. 199166 20 April 2015
SUMMARY:
Petitioners were hired as cameramen/editors
and reporters for TV Patrol Bicol. They have been
rehired continuously over the years and subject
to policies of ABS-CBN but they are supposedly
covered by Talent Contracts. They filed complaints as
regular workers but ABS-CBN averred that they are
talents and not regular employees. Supreme Court
used the four-fold test and concluded that they are
indeed regular workers regardless of the nomenclature
of their contract.
DOCTRINE:
Regardless of what the contract is called,
applying the four-fold test would determine the nature
of the employment. The control test is the most
indicative and determinative.
FACTS:
Petitioners Nelson Begino and Gener del Valle
were hired as cameramen/editors for TV Broadcasting,
while petitioners Ma. Cristina Sumayao and Monina
Avila-Llorin were hired as reporters. They were hired
through manager Amalia Villafuerte of Regional
Network Group in Naga City.
Their services were engaged through Talent
Contracts which provided terms ranging three months
to one year (renewed regularly over the years).
They were given Project Assignment Forms
which detailed, among other matters, the duration of a
particular project as well as the budget and the daily
technical requirements thereof.
Despite the fact that it specifically provided
that nothing therein shall be construed to establish an
employer-employee relationship, there were provisions
that showed rules on the how their work will be done.
Their remuneration was also called Talent fees.
Their first complaint was for claims for
regularization, underpayment of overtime pay, holiday
pay, 13th month pay, service incentive leave pay,
damages and attorney's fees. They assumed they were
regular employees by stating that they performed
necessary and desirable functions in ABS-CBN and
also, they were mandated to wear company IDs and
were provided all the equipment they needed. They
also worked under the direct supervision of Villafuerte
and they were tasked to take the route for the news
they needed to cover the next day. They were also
bound by respondents rule on attendance and
punctuality. They were also subjected to annual
competency assessments as a condition for continued
employment just like other ABS-CBN employees. But
respondents choose to characterize them differently
from the regular employees in order NOT to pay them
regular salaries by asserting their Talent Contract
and/or Project Assessment Forms.
Respondents aver that petitioners were hired
as talents, to act as reporters and/or cameramen for
TV Patrol Bicol for designated periods and rates. Fully
aware that they were not considered or to consider
themselves as employees of a particular production or
film outfit, petitioners were supposedly engaged on the
basis of the skills, knowledge or expertise the already
possessed and, for said reason, required no further
training from ABS-CBN. Although they were subject to
general guidelines, they were meant to guide them to
uphold the standards of the company and the
strictures of the industry.
During the pendency of the case, petitioners
were terminated. They filed a second complaint for
regularization, payment of labor standard benefits,
illegal dismissal and unfair labor practice. The second
complaint was dismissed for violation of the rules
against forum shopping.
Labor Arbiter Jesus Orlando Quinones ruled in
favor of petitioners on the basis of the finding that
petitioners performed functions necessary and
essential to ABS-CBNs business and the exclusivity
clause and prohibitions under their Talent
Contracts/Project Assessment Forms and ordered ABS-
CBN to pay them 2, 440,908.00 pesos +
reinstatement.
Respondents elevated case on an appeal to the
NLRC. The NLRC affirmed LAs ruling on the same
grounds. The petitioners filed a third complaint for
illegal dismissal, regularization, non-payment of
salaries and 13th month pay, unfair labor practice,
damages and attorneys fees. This was raffled again
to LA Quinones but he inhibited and also denied
respondents motion to dismiss.
Respondents filed a Rule 65 petition for
certiorari with the CA. CA reversed LA and NLRCs
ruling saying that there existed no employer-employee
relationship between them. Petitioners MR was also
denied.
ISSUE:
1. Whether or not petitioners are regular
employees of ABS-CBN Corporation.
2. What provision of the Labor Code governs
the NATURE OF EMPLOYMENT? In relation
to such, what are the kinds of employees
as contemplated under said provision?
3. Does the existence of a Talent Contract
necessarily prevent a regular employment
status?
4. Is Sonza vs. ABS-CBN Broadcasting
Corporation applicable in this case?
RULING:
1. YES. Petitioners are regular employees of ABS-
CBN Corporation.
Of the criteria to determine whether
there is an employer-employee relationship,
the so-called "control test" is generally
regarded as the most crucial and determinative
indicator of the said relationship.
Under this test, an employer-employee
relationship is said to exist where the person
for whom the services are performed reserves
the right to control not only the end result but
also the manner and means utilized to achieve
the same.
Notwithstanding the nomenclature of
their Talent Contracts and/or Project
Assignment Forms and the terms and condition
embodied therein, petitioners are regular
employees of ABS-CBN.
As cameramen, editors and reporters,
it appears that Petitioners were subject to the
control and supervision of Respondents which
provided them with the equipment essential for
the discharge of their functions. The exclusivity
clause and prohibitions in their Talent Contract
were likewise indicative of Respondents' control
over them, however indirectly worded.
Also, the presumption is that when
the work done is an integral part of the
regular business of the employer and
when the worker does not furnish an
independent business or professional
service, such work is a regular
employment of such employee and not an
independent contractor.
2. As to the nature of ones employment is
concerned, Article 280 of the Labor Code of the
Philippines provides that:
ART. 280. Regular and Casual Employment.
The provisions of written agreement to the
contrary notwithstanding and regardless of the
oral agreement of the parties, an employment
shall be deemed to be regular where the
employee has been engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has
been fixed for a specific project or undertaking
the completion or termination of which has
been determined at the time of the
engagement of the employee or where the
work or service to be performed is seasonal in
nature and the employment is for the duration
of the season.
An employment shall be deemed to be
casual if it is not covered by the preceding
paragraph, provided that any employee who
has rendered at least one year of service,
 whether such service is continuous or broken,
shall be considered a regular employee with
respect to the activity in which he is employed
and his employment shall continue while such
actually exists.
With that, it has been ruled that the
foregoing provision contemplates four kinds of
employees, namely: (a) regular employees
or those who have been engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of the
employer; (b) project employees or those
whose employment has been fixed for a
specific project or undertaking, the completion
or termination of which has been determined
at the time of the engagement of the
employee; (c) seasonal employees or those
who work or perform services which are
seasonal in nature, and the employment is for
the duration of the season; and (d) casual
employees or those who are not regular,
project, or seasonal employees. To the
foregoing classification of employee,
jurisprudence has added that of contractual
or fixed term employee which, if not for the
fixed term, would fall under the category of
regular employment in view of the nature of
the employees engagement, which is to
perform activity usually necessary or desirable
in the employers business.
In the case, petitioners are classified
as regular employees of ABS-CBN as explained
in the ruling of the SC on the first issue.
3. NO. The nature of the employment depends,
after all, on the nature of the activities to be
performed by the employee, considering the
nature of the employers business, the duration
and scope to be done, and, in some cases,
even the length of time of the performance and
its continued existence. In the same manner
that the practice of having fixed-term contracts
in the industry does not automatically make all
talent contracts valid and compliant with labor
law, it has, consequently, been ruled that the
assertion that a talent contract exists does not
necessarily prevent a regular employment
status.
4. NO. As correctly pointed out by petitioners,
parallels cannot be expediently drawn between
this case and that of Sonza case which
involved a well-known television and radio
personality who was legitimately considered a
talent and amply compensated as such. While
possessed of skills for which they were
modestly recompensed by respondents,
petitioners lay no claim to fame and/or unique
talents for which talents like actors and
personalities are hired and generally
compensated in the broadcast industry.
The following are the distinctions
between employees like petitioners in this case
and television or radio personalities like Sonza,
to wit: [In other words, the Sonza case will not
apply because of the following differences]
Firstly, in the selection and
engagement of respondents, no peculiar or
unique skill, talent or celebrity status was
required from them because they were merely
hired through petitioners personnel
department just like any ordinary employee.
Secondly, the so-called "talent fees" of
respondents correspond to wages given as a
result of an employer-employee relationship.
Respondents did not have the power to bargain
for huge talent fees, a circumstance negating
independent contractual relationship.
Thirdly, petitioner could always
discharge respondents should it find their work
unsatisfactory, and respondents are highly
dependent on the petitioner for continued
work.
And lastly, the degree of control and
supervision exercised by petitioner over
respondents through its supervisors negates
the allegation that respondents are
independent contractors.
contractual
ARIEL L. DAVID vs. JOHN G. MACASIO
FACTS: Macasio filed before the LA a
complaint against petitioner Ariel L. David, for
non-payment of overtime pay, holiday pay and
13th month pay.
He also claimed payment for moral and
exemplary damages and attorneys fees.
Macasio also claimed payment for service
incentive leave (SIL).
Macasio alleged that he had been working as a
butcher for David since January 6, 1995. Macasio
claimed that David exercised effective control and
supervision over his work by:
(1) setting the work day, reporting time and hogs to be
chopped, as well as the manner by which he was to
perform his work;
(2) daily paid his salary of P700.00,
(3) approved and disapproved his leaves.
In his defense, David alleged that he hired Macasio as
a butcher or chopper on "pakyaw" or task basis who is
not entitled to overtime pay, holiday pay and 13th
month pay pursuant to the provisions of the IRR of
the Labor Code. David pointed out that Macasio:
(1) usually starts his work at 10:00 p.m. and ends at
2:00 a.m. of the following day or earlier, depending on
the volume of the delivered hogs;
(2) received the fixed amount of P700.00 per
engagement, regardless of the actual number of hours
that he spent chopping the delivered hogs; and
(3) was not engaged to report for work and,
accordingly, did not receive any fee when no hogs were
delivered.
Macasio disputed Davids allegations. He argued that
he reported for work every day which the payroll or
time record could have easily proved had David
submitted them in evidence.
Refuting Macasios submissions, David claims that
Macasio was not his employee as he hired the latter on
"pakyaw" or task basis.
The LAs Ruling The LA dismissed Macasios
complaint for lack of merit. The LA gave credence to
Davids claim that he engaged Macasio on "pakyaw" or
task basis. The LA noted the following facts to support
this finding:
(1) Macasio received the fixed amount of P700.00 for
every work done, regardless of the number of hours
that he spent in completing the task and of the volume
or number of hogs that he had to chop per
engagement;
(2) Macasio usually worked for only four hours,
beginning from 10:00 p.m. up to 2:00 a.m. of the
following day; and
(3) the P700.00 fixed wage far exceeds the then
prevailing daily minimum wage of P382.00.
The LA added that the nature of Davids business as
hog dealer supports this "pakyaw" or task basis
arrangement.
The LA concluded that as Macasio was engaged on
"pakyaw" or task basis, he is not entitled to overtime,
holiday, SIL and 13th month pay.
The NLRCs Ruling The NLRC affirmed the LA
ruling. The NLRC observed that David did not require
Macasio to observe an eight hour work schedule to
earn the fixed P700.00 wage; and that Macasio had
been performing a non-time work, pointing out that
Macasio was paid a fixed amount for the completion of
the assigned task, irrespective of the time consumed in
its performance. Since Macasio was paid by result and
not in terms of the time that he spent in the
workplace, Macasio is not covered by the Labor
Standards laws on overtime, SIL and holiday pay, and
13th month pay under the Rules and Regulations
Implementing the 13th month pay law
The CAs Ruling The CA partly granted Macasios
certiorari petition and reversed the NLRCs ruling for
having been rendered with grave abuse of discretion.
While the CA agreed with the LA and the NLRC that
Macasio was a task basis employee, it nevertheless
found Macasio entitled to his monetary claims. The CA
explained that as a task basis employee, Macasio is
excluded from the coverage of holiday, SIL and 13th
month pay only if he is likewise a "field personnel who
performs the work away from the office or place of
work and whose regular work hours cannot be
determined with reasonable certainty.
In Macasios case, the elements that characterize a
"field personnel" are evidently lacking as he had been
working as a butcher at Davids "Yiels Hog Dealer"
business in Sta. Mesa, Manila under Davids
supervision and control, and for a fixed working
schedule that starts at 10:00 p.m.
Accordingly, the CA awarded Macasios claim for
holiday, SIL and 13th month pay for three years, with
10% attorneys fees on the total monetary award. It
however, denied Macasios claim for moral and
exemplary damages for lack of basis.
David filed the present petition after the CA denied his
motion for reconsideration.
ISSUE:
Whether Macasio is NOT entitled to holiday, SIL
and 13th month pay simply because he was paid
on a pakyaw basis.
RULING:
NO. Engagement on "pakyaw" does not determine the
parties relationship as it is simply a method of pay
computation. Macasio is Davids employee, albeit
engaged on "pakyaw" or task basis.
The payment of an employee on task or pakyaw
basis alone is insufficient to exclude one from the
coverage of SIL and holiday pay. They are exempted
from the coverage only if they qualify as "field
personnel or those "whose actual hours of work in
the field cannot be determined with reasonable
certainty." Applying the rule on ejusdem generis
"employees engaged on task or contract basis are not
automatically exempted from the grant of service
incentive leave, unless, they fall under the
classification of field personnel."
Provisions governing SIL and holiday pay
Under Article 94 of the Labor Code, every worker shall Since Macasio cannot be considered a "field
be paid his regular daily wage during regular holidays. personnel," then he is not exempted from the grant of
The rule shall apply to all employees except Field holiday and SIL pay even as he was engaged on
personnel and other employees whose time and "pakyaw" or task basis.
performance is unsupervised by the employer including
those who are engaged on task or contract basis, MACASIO is not entitled to 13th month pay
purely commission basis, or those who are paid a fixed
amount for performing work irrespective of the time
With respect to the payment of 13th month pay, the
consumed in the performance thereof.
CA legally erred in finding that the NLRC gravely
abused its discretion in denying this benefit to Macasio.
On the other hand, Article 95 of the Labor Code
provides that every employee who has rendered at
As with holiday and SIL pay, 13th month pay benefits
least one year of service shall be entitled to a yearly
generally cover all employees; an employee must be
service incentive leave of five days with pay. This rule
one of those expressly enumerated to be exempted.
shall apply to all employees except, among others,
Section 3(e) of the Rules and Regulations
field personnel and other employees whose
Implementing P.D. No. 851 enumerates the
performance is unsupervised by the employer including
exemptions from the coverage of 13th month pay
those who are engaged on task or contract basis,
benefits. Under Section 3(e), "employers of those who
purely commission basis, or those who are paid a fixed
are paid on xxx task basis, and those who are paid a
amount for performing work irrespective of the time
fixed amount for performing a specific work,
consumed in the performance thereof.
irrespective of the time consumed in the performance
thereof" are exempted.
Under these provisions, the general rule is that
holiday and SIL pay provisions cover all
Note that unlike the IRR of the Labor Code on
employees. To be excluded from their coverage, an
holiday and SIL pay, Section 3(e) of the Rules
employee must be one of those that these provisions
and Regulations Implementing PD No. 851
expressly exempt, strictly in accordance with the
exempts employees "paid on task basis" without
exemption.
any reference to "field personnel." This could only
mean that insofar as payment of the 13th month pay is
By dismissing Macasios complaint without considering concerned, the law did not intend to qualify the
whether Macasio was a "field personnel" or not, the exemption from its coverage with the requirement that
NLRC proceeded based on a significantly incomplete the task worker be a "field personnel" at the same
consideration of the case. This action clearly smacks of time.
grave abuse of discretion.
ALILING v FELICIANO
Macasio is entitled to holiday and SIL pay
GR No. 185829 April 25, 2012

In determining whether workers engaged on "pakyaw"

Facts:
or task basis" is entitled to holiday and SIL pay, the
Respondent Wide Wide World Express
presence (or absence) of employer supervision as
regards the workers time and performance is the key: Corporation (WWWEC) offered to employ
if the worker is simply engaged on pakyaw or task petitioner Aliling as Account Executive
basis, then the general rule is that he is entitled to a (Seafreight Sales.
holiday pay and SIL pay unless exempted from the The offer came with a 6-month probation
exceptions specifically provided under Article 94 period condition with this express caveat:
(holiday pay) and Article95 (SIL pay) of the Labor
Performance during probationary period shall
Code. However, if the worker engaged on pakyaw or
task basis also falls within the meaning of "field be made as basis for confirmation to Regular
personnel" under the law, then he is not entitled to or Permanent Status.
these monetary benefits. Training then started. However, instead of a
Seafreight Sale assignment, WWWEC asked
Based on the definition of field personnel under Article Aliling to handle Ground Express (GX), a new
82 Macasio does not fall under the definition of "field company product involving domestic cargo
personnel." The CAs finding in this regard is supported forwarding service for Luzon.
by the established facts of this case: Barely a month after, Manuel F. San Mateo III,
WWWEC Sales and Marketing Director, emailed
first, Macasio regularly performed his duties at Aliling to express dissatisfaction with the
Davids principal place of business; latters performance
second, his actual hours of work could be Thereafter, Joseph R. Lariosa, Human
determined with reasonable certainty;
Resources Manager of WWWEC, asked Aliling
and, third, David supervised his time and
to report to the Human Resources Department
performance of duties.
 to explain his absence taken without leave
from September 20, 2004.
Aliling responded two days later. He denied
being absent on the days in question, attaching
to his reply-letter a copy of his timesheet
which showed that he worked from September
20 to 24, 2004.
In a separate letter, Aliling tendered his
resignation before San Mateo. While WWWEC
took no action on his tender, Aliling
nonetheless demanded reinstatement and a
written apology, claiming in a subsequent letter
to management that San Mateo had forced him
to resign.
Lariosas response-letter informed Aliling that
his case was still in the process of being
evaluated. Subsequently Lariosa again wrote,
this time to advise Aliling of the termination of
his services effective as of that date owing to
his non-satisfactory performance during his
probationary period. Records show that Aliling
was paid his outstanding salary.
Earlier, however, Aliling filed a Complaint for
illegal dismissal due to forced resignation,
nonpayment of salaries as well as damages
with the NLRC against WWWEC.
The LA declared Alilings termiantion as
unjustified. The LA gave credence to Alilings
allegation about not receiving and, therefore,
not bound by, San Mateos purported memo
which supposedly apprised Aliling of the sales
quota he was, but failed, to meet.
The NLRC affirmed the LAs decision in toto.
Both the LA and NLRC considered Aliling a
probationary employee.
The CA partly granted the petition and
mentioned that San Mateo and Lariosa are
jointly and severally liable with the company
for the payment of Alilings claims. The CA also
ruled that petitioner was a regular employee.
Issues:
1. Whether the petitioner can be considered a regular
employee of the company
2. Whether the petitioner was illegally dismissed
3. Whether the officers of WWWEC can be held jointly
and severally liable with the company
Ruling:
1. Petitioner Aliling is considered a regular employee.
The letter-offer itself states that the regularization
standards or the performance norms to be used are
still to be agreed upon by Aliling and his supervisor.
WWWEC has failed to prove that an agreement as
regards thereto has been reached. Clearly then, there
were actually no performance standards to speak of.
In the final analysis, one common thread runs through
the holding of the labor arbiter, the NLRC and the CA,
i.e., petitioner Aliling, albeit hired from managements
standpoint as a probationary employee, was deemed a
regular employee by force of the following self-
explanatory provisions:
Article 281 of the Labor Code
Probationary employment. - Probationary
employment shall not exceed six (6) months
from the date the employee started working,
unless it is covered by an apprenticeship
agreement stipulating a longer period. The
services of an employee who has been
engaged on a probationary basis may be
terminated for a just cause or when he
fails to qualify as a regular employee in
accordance with reasonable standards
made known by the employer to the
employee at the time of his engagement.
An employee who is allowed to work after a
probationary period shall be considered a
regular employee.
Section 6(d) of the Implementing Rules of
Book VI, Rule VIII-A of the Labor Code
Sec. 6. Probationary employment. There is
probationary employment where the employee,
upon his engagement, is made to undergo a
trial period where the employee determines his
fitness to qualify for regular employment,
based on reasonable standards made known to
him at the time of engagement.
Probationary employment shall be governed by
the following rules:
xxxx
(d) In all cases of probationary employment,
the employer shall make known to the
employee the standards under which he will
qualify as a regular employee at the time of his
engagement. Where no standards are made
known to the employee at that time, he
shall be deemed a regular employee.
Thus, pursuant to the explicit provision of Article 281
of the Labor Code, Section 6(d) of the Implementing
Rules of Book VI, Rule VIII-A of the Labor Code and
settled jurisprudence, petitioner Aliling is deemed a
regular employee as of June 11, 2004, the date of
his employment contract.
2. Petitioner was illegally dismissed.
To justify fully the dismissal of an employee, the
employer must, as a rule, prove that the dismissal was
for a just cause and that the employee was afforded
due process prior to dismissal. As a complementary
principle, the employer has the onus of proving with
clear, accurate, consistent, and convincing evidence
the validity of the dismissal.
WWWEC had failed to discharge its twin burden in the
instant case.
3. The officers of WWWEC cannot be held jointly and
severally liable with the company.
A review of the facts of the case does not reveal ample
and satisfactory proof that respondent officers of
WWEC acted in bad faith or with malice in effecting the
termination of petitioner Aliling. Even assuming
arguendo that the actions of WWWEC are ill-conceived
and erroneous, respondent officers cannot be held
jointly and solidarily with it. Hence, the ruling on the
joint and solidary liability of individual respondents
must be recalled.
CHERYLL SANTOS LEUS vs. ST. SCHOLASTICA'S
COLLEGE WESTGROVE
FACTS:Cheryll Santos Leus (petitioner) was hired by
St. Scholastica's College Westgrove (SSCW), a Catholic
educational institution, as a non-teaching personnel,
engaged in pre-marital sexual relations, got pregnant
out of wedlock, married the father of her child, and
was dismissed by SSCW.
SSCW is a catholic and sectarian educational
institution in Silang, Cavite. In May 2001, SSCW hired
the petitioner as an Assistant to SSCWs Director of the
Lay Apostolate and Community Outreach Directorate.
Sometime in 2003, the petitioner and her
boyfriend conceived a child out of wedlock. When
SSCW learned of the petitioners pregnancy, Sr. Edna
Quiambao (Sr. Quiambao), SSCWs Directress, advised
her to file a resignation letter effective June 1, 2003.
In response, the petitioner informed Sr. Quiambao that
she would not resign from her employment just
because she got pregnant without the benefit of
marriage.
On May 28, 2003, Sr. Quiambao formally
directed the petitioner to explain in writing why she
should not be dismissed for engaging in pre-marital
sexual relations and getting pregnant as a result
thereof, which amounts to serious misconduct and
conduct unbecoming of an employee of a Catholic
school.
On June 4, 2003, the petitioner, through counsel, sent
Sr. Quiambao a letter, which, in part, reads:
To us, pre-marital sex between two consenting adults
without legal impediment to marry each other who
later on married each other does not fall within the
contemplation of "disgraceful or immoral conduct" and
"serious misconduct" of the Manual of Regulations for
Private Schools and the Labor Code of the Philippines.
Issue: Whether or not the dismissal is a valid exercise
of management prerogative on the ground of serious
misconduct
Rulings:
Ruling of the labor arbiter: The LA found that there
was a valid ground for the petitioners dismissal; that
her pregnancy out of wedlock is considered as a
"disgraceful and immoral conduct." The LA pointed out
that, as an employee of a Catholic educational
institution, the petitioner is expected to live up to the
Catholic values taught by SSCW to its students.
Ruling of the NLRC: The NLRC affirmed the decision
of the LA; pointing that the termination of the
employment of the personnel of private schools is
governed by the 1992 MRPS; that Section 94(e)
thereof cites "disgraceful or immoral conduct" as a just
cause for dismissal, in addition to the grounds for
termination of employment provided for under Article
282 of the Labor Code. The NLRC held that the
petitioners pregnancy out of wedlock is a "disgraceful
or immoral conduct" within the contemplation of
Section 94(e) of the 1992 MRPS and, thus, SSCW had
a valid reason to terminate her employment.
The Ruling of the CA: The CA affirmed the decision
of the NLRC, which denied the petition for certiorari
filed by the petitioner. The CA held that it is the
provisions of the 1992 MRPS and not the Labor Code
which governs the termination of employment of
teaching and non-teaching personnel of private
schools, explaining that: It is a principle of statutory
construction that where there are two statutes that
apply to a particular case, that which was specially
intended for the said case must prevail. Petitioner was
employed by respondent private Catholic institution
which undeniably follows the precepts or norms of
conduct set forth by the Catholic Church. Accordingly,
the Manual of Regulations for Private Schools followed
by it must prevail over the Labor Code, a general
statute.
The CA affirmed the decision of the NLRC, the
CA further held that the petitioners dismissal was a
valid exercise of SSCWs management prerogative to
discipline and impose penalties on erring employees
pursuant toits policies, rules and regulations. The CA
upheld the NLRCs conclusion that the petitioners
pregnancy out of wedlock is considered as a
"disgraceful and immoral conduct" and, thus, a ground
for dismissal under Section 94(e) of the 1992 MRPS.
The CA likewise opined that the petitioners pregnancy
out of wedlock is scandalous per segiven the work
environment and social milieu that she was in.
Ruling of the Supreme Court:
The SC reverse the ruling of the CA pointing
that the petitioners dismissal is not a valid exercise of
SSCWs management prerogative.
The Court has held that "management is free
to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring,
work assignments, working methods, time, place and
manner of work, processes to be followed, supervision
of workers, working regulations, transfer of employees,
work supervision, lay off of workers and discipline,
dismissal and recall of workers. The exercise of
management prerogative, however, is not absolute as
it must beexercised in good faith and with due regard
to the rights of labor." Management cannot exercise its
prerogative in a cruel, repressive, or despotic
manner.53
SSCW, as employer, undeniably has the right to
discipline its employees and, if need be, dismiss themif
there is a valid cause to do so. However, as already
explained, there is no cause to dismiss the petitioner.
Her conduct is not considered by law as disgraceful or
immoral. Further, the respondents themselves have
admitted that SSCW, at the time of the controversy,
does not have any policy or rule against an employee
who engages in pre-marital sexual relations and
conceives a child as a result thereof. There being no
valid basis in law or even in SSCWs policy and rules,
SSCWs dismissal of the petitioner is despotic and
arbitrary and, thus, not a valid exercise of
management prerogative.
In sum, the Court finds that the petitioner was
illegally dismissed as there was no just cause for the
termination of her employment. SSCW failed to adduce
substantial evidence to establish that the petitioners
conduct, i.e., engaging in pre-marital sexual relations
and conceiving a child out of wedlock, assessed in light
of the prevailing norms of conduct, is considered
disgraceful or immoral. The labor tribunals gravely
abused their discretion in upholding the validity of the
petitioners dismissal as the charge against the
petitioner lay not on substantial evidence, but on the
bare allegations of SSCW. In turn, the CA committed
reversible error in upholding the validity of the
petitioners dismissal, failing torecognize that the labor
tribunals gravely abused their discretion in ruling for
the respondents.
Under these tests, two things may be
concluded from the fact that an unmarried woman
gives birth out of wedlock:(1) if the father of the child
is himself unmarried, the woman is not ordinarily
administratively liable for disgraceful and immoral
conduct.It may be a not-so-ideal situation and may
cause complications for both mother and child but it
does not give cause for administrative sanction. There
is no law which penalizes an unmarried mother under
those circumstances by reason of her sexual conduct
or proscribes the consensual sexual activity between
two unmarried persons. Neither does the situation
contravene any fundamental state policy as expressed
in the Constitution, a document that accommodates
various belief systems irrespective of dogmatic origins.
(2) if the father of the child born out of
wedlock is himself married to a woman other thanthe
mother, then there is a cause for administrative
sanction against either the father or the mother. In
sucha case, the "disgraceful and immoral conduct"
consists of having extramarital relations with a married
person. The sanctity of marriage is constitutionally
recognized and likewise affirmed by our statutes as a
special contract of permanent union. Accordingly,
judicial employees have been sanctioned for their
dalliances with married persons or for their own
betrayals of the marital vow of fidelity.
In this case, it was not disputed that, like
respondent, the father of her child was unmarried.
Therefore, respondent cannot be held liable for
disgraceful and immoral conduct simply because she
gave birth to the child Christian Jeon out of wedlock.
CHRISTINE JOY CAPIN-CADIZ vs. BRENT
HOSPITAL AND COLLEGES, INC.
FACTS:
Christine Joy Cadiz was the Human Resource
Officer of respondent Brent Hospital and Colleges, Inc.
(Brent) at the time of her indefinite suspension from
employment in 2006. The cause of suspension was
Cadiz's Unprofessionalism and Unethical Behavior
Resulting to Unwed Pregnancy. It appears that Cadiz
became pregnant out of wedlock, and Brent imposed
the suspension until such time that she marries her
boyfriend in accordance with law.
Cadiz then filed with the Labor Arbiter (LA) a
complaint for Unfair Labor Practice, Constructive
Dismissal, Non-Payment of Wages and Damages with
prayer for Reinstatement. The LA found that Cadiz's
indefinite suspension amounted to a constructive
dismissal; nevertheless, the LA ruled that Cadiz was
not illegally dismissed as there was just cause for her
dismissal, that is, she engaged in premarital sexual
relations with her boyfriend resulting in a pregnancy
out of wedlock. The LA deemed said act to be immoral,
which was punishable by dismissal under Brent's rules
and which likewise constituted serious misconduct
under Article 282(a) of the Labor Code.
Cadiz appealed to the National Labor Relations
Commission (NLRC), which affirmed the LA decision in
its Resolution dated December 10, 2007. Her motion
for reconsideration having been denied by the NLRC.

She elevated the case to the Court of Appeals.
The CA, however, dismissed her petition outright due
to technical defects in the petition: (1) incomplete
statement of material dates; (2) failure to attach
registry receipts; and (3) failure to indicate the place
of issue of counsel's PTR and IBP official receipts. Cadiz
sought reconsideration but it was denied. (However,
when it comes to these technical defects, the Supreme
Court ruled that despite these defects, the Court finds
that the ends of substantial justice would be better
served by relaxing the application of technical rules of
procedure. These are mere tools to expedite the
decision or resolution of cases and if their strict and
rigid application would frustrate rather than promote
substantial justice, then it must be avoided).
Hence, the present petition before the
Supreme Court.
ISSUES:
1. Whether or not Christine Joy Cadiz premarital
relations with her boyfriend and the resulting
pregnancy out of wedlock constitute
immorality, hence a valid ground for dismissal?
2. Whether or not the stipulation that marriage as
a condition for reinstatement is valid?
RULING:
1.
No. To resolve this, the Court makes reference
to the recently promulgated case of Cheryll Santos
Leus v. St. Scholastica's College Westgrove and/or Sr.
Edna Quiambao, OSB. The Court ruled in Leus that the
determination of whether a conduct is disgraceful or
immoral involves a two-step process: first, a
consideration of the totality of the circumstances
surrounding the conduct; and second, an assessment
of the said circumstances vis-a-vis the prevailing
norms of conduct, i.e., what the society generally
considers moral and respectable.
In the present case, the surrounding facts
leading to Cadiz's dismissal are straightforward - she
was employed as a human resources officer in an
educational and medical institution of the Episcopal
Church of the Philippines; she and her boyfriend at
that time were both single; they engaged in premarital
sexual relations, which resulted into pregnancy. The
labor tribunals characterized these as constituting
disgraceful or immoral conduct. They also sweepingly
concluded that as Human Resource Officer, Cadiz
should have been the epitome of proper conduct and
her indiscretion "surely scandalized the Brent
community."
The foregoing circumstances, however, do not
readily equate to disgraceful and immoral conduct.
Brents Policy Manual and Employees Manual of
Policies do not define what constitutes immorality; it
simply stated immorality as a ground for disciplinary
action. Instead, Brent erroneously relied on the
standard dictionary definition of fornication as a form
of illicit relation and proceeded to conclude that Cadiz
acts fell under such classification, thus constituting
immorality.
Jurisprudence has already set the standard of
morality with which an act should be gauged - it is
public and secular, not religious. Whether a conduct is
considered disgraceful or immoral should be made in
accordance with the prevailing norms of conduct,
which, as stated in Leus, refer to those conducts which
are proscribed because they are detrimental to
conditions upon which depend the existence and
progress of human society. The fact that a particular
act does not conform to the traditional moral views of
a certain sectarian institution is not sufficient reason to
qualify such act as immoral unless it, likewise, does
not conform to public and secular standards. More
importantly, there must be substantial evidence to
establish that premarital sexual relations and
pregnancy out of wedlock is considered disgraceful or
immoral. The labor tribunals' respective conclusion that
Cadiz's "indiscretion" "scandalized the Brent
community" is speculative, at most, and there is no
proof adduced by Brent to support such sweeping
conclusion.
Hence, "premarital sexual relations between
two consenting adults who have no impediment to
marry each other, and, consequently, conceiving a
child out of wedlock, gauged from a purely public and
secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of
the 1992 MRPS." (Cheryll Santos Lens v. St.
Scholasticas College Westgrove and/or Sr. Edna
Quiambao, OSB).
2.
No. The doctrine of management prerogative
gives an employer the right to "regulate, according to
his own discretion and judgment, all aspects of
employment, including hiring, work assignments,
working methods, the time, place and manner of work,
work supervision, transfer of employees, lay-off of
workers, and discipline, dismissal, and recall of
employees."
However, Statutory law is replete with
legislation protecting labor and promoting equal
opportunity in employment. No less than the 1987
Constitution mandates that the "State shall afford full
protection to labor, local and overseas, organized and
unorganized, and promote full employment and
equality of employment opportunities for all." The
Labor Code of the Philippines, meanwhile, provides:
Art. 136. Stipulation against marriage.
It shall be unlawful for an employer to require
as a condition of employment or continuation
of employment that a woman employee shall
not get married, or to stipulate expressly or
tacitly that upon getting married, a woman
employee shall be deemed resigned or
separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.
 Also, Republic Act No. 9710 or the Magna
Carta of Women protects women against discrimination
in all matters relating to marriage and family relations,
including the right to choose freely a spouse and to
enter into marriage only with their free and full
consent.
Therefore, Brent's condition is coercive,
oppressive and discriminatory. There is no rhyme or
reason for it. It forces Cadiz to marry for economic
reasons and deprives her of the freedom to choose her
status, which is a privilege that inheres in her as an
intangible and inalienable right. While a marriage or
no-marriage qualification may be justified as a "bona
fide occupational qualification," Brent must prove two
factors necessitating its imposition, viz:
(1) that the employment qualification
is reasonably related to
essential operation of the job
involved; and
(2) that there is a factual basis for
believing that all or substantially all
persons meeting the qualification
would be unable to properly
perform the duties of the job.
Brent Hospital and Colleges, Inc. has not
shown the presence of these factors. Perforce, the
Court cannot uphold the validity of said condition.
EASTERN TELECOM PHILIPPINES, INC.
EASTERN TELECOM EMPLOYEES UNION
Topic: GRANT OF BONUSES
Facts Ganern:
1. Eastern Telecom Philippines, Inc. (ETPI) planned to
defer payment of the 2003 14th, 15th and 16th month
bonuses sometime in April 2004 due to alleged
continuing deterioration of company's financial position
which started in the year 2000. However, ETPI said
that while postponing payment of bonuses sometime in
April 2004, such payment would also be subject to
availability of funds.
2. The union vehemently opposed the deferment in
payment of the bonuses by filing a preventive
mediation complaint with the NCMB on July 3, 2003, to
determine the date when the bonus should be paid. In
the NCMB conference, ETPI reiterated its stand that
payment of the bonuses would only be made in April
2004 to which date of payment, the union agreed.
3. Subsequently, the company, thru a letter from Mr.
Sonny Javier, Vice-President for Human Resources and
Administration, made a sudden turnaround in its
position by declaring that the deferred release of
bonuses had been superseded and voided due to the
unions filing of the issue to the NCMB and that they
will no longer pay the bonuses until the issue is
resolved through compulsory arbitration.
4. Thus, on April 26, 2004, the union filed a Notice of
Strike on the ground of unfair labor practice for failure
of ETPI to pay the bonuses in gross violation of the
economic provision of the existing CBA.
5. On May 19, 2004, the Secretary of Labor and
Employment, finding that the company is engaged in
an industry considered vital to the economy and any
work disruption thereat will adversely affect not only
its operation but also that of the other business relying
on its services, certified the labor dispute for
compulsory arbitration. Acting on the certified labor
dispute, a hearing was called on July 16, 2004 wherein
the the parties have submitted that the issues for
resolution. Thereafter, they were directed to submit
their respective position papers and evidence in
support thereof after which submission, they agreed to
have the case considered submitted for decision.
6. On April 28, 2005, the NLRC issued its Resolution
dismissing ETEU's complaint and held that ETPI could
not be forced to pay the union members the bonuses
for the year 2003 and the 14th month bonus for the
year 2004 inasmuch as the payment of these
additional benefits was basically a management
prerogative, being an act of generosity and
VS
munificence on the part of the company and
contingent upon the realization of profits.
7. The CA, however, declared that the Side
Agreements of the 1998 and 2001 CBA created a
contractual obligation on ETPI to confer the subject
bonuses to its employees without qualification or
condition. It also found that the grant of said bonuses
has already ripened into a company practice and their
denial would amount to diminution of the employees'
benefits.
Issue: Whether or not ETPI is liable to pay 14th, 15th
and 16th month bonuses for the year 2003 and 14th
month bonus for the year 2004 to the members of
respondent union.
Stated otherwise: whether the subject bonuses are
demandable or not i.e. can these bonuses be
considered part of the wage, salary or compensation
making them enforceable obligations?
Ruling: YES.
A bonus is a gratuity or act of liberality of the giver
which the recipient cannot demand as a matter of
right. The grant of a bonus is basically a
management prerogative which cannot be forced
upon the employer who may not be obliged to
assume the onerous burden of granting bonuses.
However, a bonus becomes a demandable or
enforceable obligation if the additional
compensation is granted without any conditions
imposed for its payment. In such case, the bonus
is treated as part of the wage, salary or
compensation of the employee.
In the case at bench, it is indubitable that ETPI and
ETEU agreed on the inclusion of a provision for the
grant of 14th, 15th and 16th month bonuses in the
1998-2001 CBA Side Agreement, as well as in the
2001-2004 CBA Side Agreement, which was signed on
September 3, 2001.
Such statement in the CBA was never qualified. Thus,
there is no room for interpreting it. Terse and clear, the
said provision does not state that the subject bonuses
shall be made to depend on the ETPIs financial
standing or that their payment was contingent upon
the realization of profits. Neither does it state that if
the company derives no profits, no bonuses are to be
given to the employees. In fine, the payment of these
bonuses was not related to the profitability of business
operations.
Verily, by virtue of its incorporation in the CBA
Side Agreements, the grant of 14th, 15th and
16th month bonuses has become more than just
an act of generosity on the part of ETPI but a
contractual obligation it has undertaken.
Moreover, the continuous conferment of bonuses by
ETPI to the union members from 1998 to 2002 by
virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a
management prerogative. It is manifestly clear that
although it incurred business losses of
149,068,063.00 in the year 2000, it continued to
distribute 14th, 15th and 16th month bonuses for said
year.
The Court finds that its act of granting the same has
become an established company practice such that it
has virtually become part of the employees salary or
wage. A bonus may be granted on equitable
consideration when the giving of such bonus has been
the companys long and regular practice. In Philippine
Appliance Corporation v. Court of Appeals, it was
pronounced:
To be considered a regular practice,
however, the giving of the bonus should have
been done over a long period of time, and must
be shown to have been consistent and deliberate.
The test or rationale of this rule on long practice
requires an indubitable showing that the
employer agreed to continue giving the benefits
knowing fully well that said employees are not
covered by the law requiring payment thereof.
The records show that ETPI, aside from
complying with the regular 13th month bonus, has
been further giving its employees 14th month bonus
every April as well as 15th and 16th month bonuses
every December of the year, without fail, from 1975 to
2002 or for 27 years whether it earned profits or not.
The considerable length of time ETPI has been giving
the special grants to its employees indicates a
unilateral and voluntary act on its part to continue
giving said benefits knowing that such act was not
required by law.
The rule is settled that any benefit and
supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the
employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to
protect the rights of workers and to promote their
welfare and to afford labor full protection.
CRISPIN B. LOPEZ vs. IRVINE CONSTRUCTION
CORP and TOMAS SY SANTOS
FACTS:
Irvine Construction Corp. (Irvine) is a construction firm
who initially hired Lopez as laborer in November 1994
and, thereafter, designated him as a guard at its
warehouse in Dasmarinas, Cavite in the year 2000. On
December 18, 2005, Lopez was purportedly terminated
from his employment, whereupon he was told "Ikaw ay
lay-off muna." Thus, on January 10, 2006, he filed a
complaint for illegal dismissal with prayer for the
payment of separation benefits against Irvine.
For its part, Irvine denied Lopez's claims, alleging that
he was employed only as a laborer who, however,
sometimes doubled as a guard. As laborer, Lopez's
duty was to bring construction materials from the
suppliers' vehicles to the company warehouse when
there is a construction project in Cavite. As evidenced
by an Establishment Termination Report which Irvine
previously submitted before the Department of Labor
and Employment (DOLE), Lopez was, however,
temporarily laid-off on December 27, 2005 after the
Cavite project was finished. Eventually, Lopez was
asked to return to work through a letter (return to
work order), allegedly sent to him within the six (6)
month period under Article 286 of the Labor Code. As
such, Irvine argued that Lopez's filing of the complaint
for illegal dismissal was premature.
ISSUES:
1. What makes an employee a project or regular
employee?
2. Whether the temporary lay-off of Crispin Lopez
is valid.
HELD:
1. Case law states that the principal test for
determining whether particular employees are
properly characterized as "project employees"
as distinguished from "regular employees," is
whether or not the "project employees" were
assigned to carry out a "specific project or
undertaking," the duration and scope of which
were specified at the time the employees were
engaged for that project. The project could
either be (1) a particular job or undertaking
that is within the regular or usual business of
the employer company, but which is distinct
and separate, and identifiable as such, from
the other undertakings of the company; or (2)
a particular job or undertaking that is not
within the regular business of the corporation.
In order to safeguard the rights of workers
against the arbitrary use of the word "project"
to prevent employees from attaining the status
of regular employees, employers claiming that
their workers are project employees should not
only prove that the duration and scope of the
employment was specified at the time they
were engaged, but also that there was indeed
a project.
In this case, there was no substantial evidence
presented by Irvine to show that Lopez had
been assigned to carry out a "specific project
or undertaking," with its duration and scope
specified at the time of engagement. In view of
the weight accorded by the courts to factual
findings of labor tribunals such as the NLRC,
the Court, absent any cogent reason to hold
otherwise, concurs with its ruling that Lopez
was not a project but a regular employee. This
conclusion is bolstered by the undisputed fact
that Lopez had been employed by Irvine since
November 1994, which is more than 10 years
from the time he was laid off on December 27,
2005.
2. In this case as no evidence was submitted by
Irvine to show any dire exigency which
rendered it incapable of assigning Lopez to any
of its projects. Add to this the fact that Irvine
did not proffer any sufficient justification for
singling out Lopez for lay-off among its other
three hundred employees, thereby casting a
cloud of doubt on Irvine's good faith in
pursuing this course of action. Verily, Irvine
cannot conveniently suspend the work of any
of its employees in the guise of a temporary
lay-off when it has not shown compliance with
the legal parameters under Article 286 of the
Labor Code. With Irvine failing to prove such
compliance, the resulting legal conclusion is
that Lopez had been constructively dismissed
TOPIC: Management prerogative in relation to
termination based on redundancy
EUGENE S. ARABIT et. al. vs. JARDINE PACIFIC
FINANCE, INC.
G.R. No. 181719 April 21, 2014
FACTS:
Petitioners were former regular employees of
respondent Jardine Pacific Finance, Inc. (Jardine) and
were also officers and members of MB Finance
Employees Association-FFW Chapter (the Union), a
legitimate labor union and the sole exclusive
bargaining agent of the employees of Jardine.
On the claim of financial losses, Jardine
decided to reorganize and implement a redundancy
program among its employees. The petitioners were
among those affected by the redundancy program.
Jardine thereafter hired contractual employees to
undertake the functions these employees used to
perform.
The Union filed a notice of strike with the
National Conciliation and Mediation Board (NCMB),
questioning the termination of employment of the
petitioners alleging unfair labor practice on the part of
Jardine, as well as discrimination in the dismissal of its
officers and members.
Negotiations ensued between the Union and
Jardine under the auspices of the NCMB, and both
parties eventually reached an amicable settlement. On
June 1, 1999, the petitioners and the Union filed a
complaint against Jardine with the NLRC for illegal
dismissal and unfair labor practice.
ISSUE:
Whether or not the termination of the
employees based on redundancy was a valid exercise
of management prerogative?
HELD:
NO. Redundancy exists where the services of
an employee are in excess of what is reasonably
demanded by the actual requirements of the
enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
over hiring of workers, decreased volume of business,
or dropping of a particular product line or service
activity previously manufactured or undertaken by the
enterprise.
Retrenchment, on the other hand, is the
termination of employment initiated by the employer
through no fault of the employees and without
prejudice to the latter, resorted to by management
during periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls
occasioned by lack of orders, shortage of materials,
conversion of the plant for a new production program
or the introduction of new methods or more efficient
machinery, or of automation.
 From this, it is illogical for Jardine to terminate
the petitioners employment and replace them with
contractual employees. The replacement effectively
belies Jardines claim that the petitioners positions
were abolished due to superfluity. Redundancy could
have been justified if the functions of the petitioners
were transferred to other existing employees of the
company. To dismiss the petitioners and hire new
contractual employees as replacements necessarily
give rise to the sound conclusion that the petitioners
services have not really become in excess of what
Jardines business requires. To replace the petitioners
who were all regular employees with contractual ones
would amount to a violation of their right to security of
tenure.
Management has the prerogative to
characterize an employees services as no longer
necessary or sustainable, and therefore properly
terminable. The exercise of management prerogative,
however, is subject to the limitation that it should not
performed in violation of any law and that it is not
tainted by any arbitrary or malicious motive on the
part of the employer.
The employer must use fair and reasonable
criteria in the selection of employees who will be
dismissed from employment due to redundancy such
as but are not limited to: (a) less preferred status (e.g.
temporary employee); (b) efficiency; and (c) seniority.
The presence of these criteria used by the employer
shows good faith on its part and is evidence that the
implementation of redundancy was painstakingly done
by the employer in order to properly justify the
termination from the service of its employees.
For the implementation of a redundancy
program to be valid, the employer must comply with
the following requisites: (1) written notice served on
both the employees and the Department of Labor and
Employment at least one month prior to the intended
date of retrenchment; (2) payment of separation pay
equivalent to at least one month pay or at least one
month pay for every year of service, whichever is
higher; (3) good faith in abolishing the redundant
positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared
redundant and accordingly abolished.
SPI Technologies v. Victoria Mapua
G.R. No. 191154 April 7, 2014
Facts:
Mapua was hired as Corporate Developments
Research/Business Intelligence Unit Head and Manager.
Elizabeth Nolan was hired, by Vice Pres. Maqueram, as
Mapuas supervisor.
One day, the hard drive of Mapuas laptop
crashed, causing her to lose files and data. Such lost
caused her failure to meet a deadline. Hence, she was
realigned to be a subordinate of co-manager Raina.
She noticed that she was avoided because Nolan and
Raina gave majority of her duties to the rank-and-file
staff. She asked the Human Resource Director
Villanueva for transfer of department within SPI but it
did not materialized. Mapua saw the new table of
organization which showed that Mapua was
downgraded because a new manager would be hired
between her position and Rainas
On March 21, 20017, Raina informed Mapua
over the phone that her position was considered
redundant and that she is terminated from
employment effective immediately. Villanueva
notified Mapua that she should cease reporting for
work the next day. Her laptop computer and company
mobile phone were taken right away and her office
phone ceased to function. This prompted Mapua to call
her lawyer (which told SPI that it violated the 30-day
notice) and file a complaint for illegal dismissal.
Afterwards, she was given a second termination letter
in a meeting with SPI. A third termination letter was
received by her through mail which changed the
termination date to April 21, 2007 with a notation
inscribed, "refused to sign and acknowledge" with
unintelligible signatures of witnesses.
A recruitment advertisement of SPI was
published to the Inquirer including the previous
position of Mapua. SPI demanded Mapua to pay the
remaining car value of her car due to the SPIs car plan
policy.
Mapua alleges that Prime Manpower advertised
on Jobstreet for SPIs Corporate Development Manager.
Mapua even applied under the alias Jeanne Tesoro to
confirm it and affirmed by Prime Manpowers
consultant Dimatulac. Hence, she was convinced that
her position is not redundant. Because of this, she
incurred medical expenses and psychiatric counseling
due to being jobless.
While SPI alleges that the termination was
valid because it underwent reorganization of its
structure with the objective of streamlining its
operation. Also, on March 21, 2007, Mapua refused to
receive the notice thus the notation was made and it
made report to DOLE of Mapuas termination. It denied
Dimatulacs revelation as it is hearsay because she did
not execute and affidavit but it affirmed the Inquirer
advertisement.
Labor Arbiter: termination is illegal because of want
of factual basis. Award P2.9M and car assigned to her.
NLRC: reverse LAs decision. The determination of
whether a position is redundant does not lie to Mapua.
It lies within the sound business management.
CA: initially dismissed Mapuas petition due to
technicalities but upon MR, CA granted.
Issue:
Whether or not Mapua was validly dismissed on the
ground of redundancy
Ruling:
No. Requisites for valid implementation of
redundancy:
1. Written notice served on both the
employee and the DOLE at least one
month prior to the intended date of
termination;
Not Complied. The 2 termination letters
provided that the termination was effective
immediately (March 21, 2007). After realizing it, it
 was only upon the third termination where the
effectivity was changed to April 21, 2007.
2. Payment of separation pay equivalent to
at least one month pay or at least one
month pay for every year of service,
whichever is higher;
Complied. SPI offered Mapua separation pay.
3. Good faith in abolishing the redundant
position; and
Not complied. It is insignificant that the
amount offered to Mapua is higher than what the
law requires because the Court has previously
noted that a job is more than the salary that it
carries. There is a psychological effect or a stigma
in immediately finding ones self laid off from work.
4. Fair and reasonable criteria in
ascertaining what positions are to be
declared redundant.
Not complied. The companys memorandum
did not mention that the position of the Corporate
Development Manager or any other position would
be abolished or deemed redundant. The Court held
that the presentation of the new table of the
organization and the certification of the Human
Resources Supervisor that the positions occupied
by the retrenched employees are redundant are
inadequate as evidence to support the colleges
redundancy program. It is grossly inadequate and
self-serving. More compelling evidence would have
been a comparison of the old and new staffing
patterns, a description of the abolished and newly
created positions, and proof of the set business
targets and failure to attain the same which
necessitated the reorganization or streamlining.
Regarding Prime Manpowers recruitment
advertisement, failure of Mapua to present a sworn
statement of Dimatulac renders the formers
statements hearsay. Yet, SPI admitted that it
caused the Inquirer advertisement for a Marketing
Communications Manager position.
The primordial consideration is not the
nomenclature or title given to the employee,
but the nature of his functions. It is not the
job title but the actual work that the
employee performs. Also, change in the job
title is not synonymous to a change in the
functions. A position cannot be abolished by a
mere change of job title.
Vehicle under the car plan is not within the
jurisdiction of LA but with the regular courts. Moral
damages and exemplary damages were awarded
the employee had been harassed and arbitrarily
terminated by the employer. Moral damages may
be awarded to compensate one for diverse injuries
such as mental anguish, besmirched reputation,
wounded feelings, and social humiliation
occasioned by the employers unreasonable
dismissal of the employee. Attorneys fees were
also awarded.
GIRLY G. ICO, Petitioner,
vs.
SYSTEMS TECHNOLOGY INSTITUTE
July 9, 2014
Facts:
-STI is an educational institution duly incorporated and
organize and existing under the Philippine laws, while
Jacob and Fernandez are officers of STI the former
being the President and Chief Executive Officer (CEO)
and the latter Senior Vice-President.
-Girly G. Ico on one hand degree holder with doctorate
units earned was hired as Faculty Member by STI
College Makati a wholly-owned subsidiary of STI. She
was later promoted as Dean and later COO of STI-
Makati.
-Sometime in July 2003 during the stint of Ico as COO
of STI-Makati a plan of merger was executed between
STI and STI-Makati, whereby the latter will be
absorbed to STI, which was later approved by SEC. As
a result STI College Makati ceased to exist, and STI-
Makati was placed under STIs Education Management
Division.
-In a 2004 Memorandum. Petitioner was re-appointed
as COO of STI-Makati, and reporting directly to the
Head thereof, herein respondent Fernandez.
-2 months after, another memorandum from STI HR
Department was issued wherein the COO position of
the petitioner was to be abolished, and Ico was
appointed as Compliance Manager According to STI,
the "organizational re-structuring" was undertaken "in
order to streamline operations. In the process, the
positions of Chief Executive Officer and Chief Operating
Officer of STI Makati were abolished.
-Thereafter, Fernandez summons Ico accusing her of
disobedience. An investigation then was made and she
was place under Preventive Suspension. Afterwards the
investigating committee found out that Ico committed
grave abuse of authority, falsification, gross
dishonesty, maligning and causing intrigues,
commission of acts tending to cast negativity upon
Fernandez person , and other charges, which resulted
to her dismissal.
-Petitioner then file a case for Constructive illegal
dismissal to Labor Arbiter She contends that her
transfer was illegal for it constituted a demotion
because there was no prior notice of her transfer,
which places her in an embarrassing situation.
Secondly, the basis of her dismissal is without basis
and that it was not proven by adequate evidence.
-On one hand respondent contend that the transfer of
position is a result of the merger which requires the
abolition of Icos position as COO in order to streamline
its operation thus they are in good faith. It further
argued that there was no demotion because the
position of COO and compliance manager is of the
same rank.
-LABOR ARBITER: ruled that there was an illegally
constructively and in bad faith dismissal by
respondents in Petioles legally acquired status as
regular employee. It held that petitioners transfer
which STI claimed was the result of STIs restructuring
was irregular, because at the time of such transfer, the
reorganization and restructuring of STI-Makati had
already been affected, and the 2004 Memorandum that
was issued confirms petitioners appointment as COO.
Moreover, petitioner was appointed to the position of
Compliance Manager which did not actually exist for
under STI Corporate structure there are only two
compliance manager which are already occupied. As a
result Ico was appointed to Compliance officer who in
effect demoted her rank.
-NLRC: reversed Labor Arbiter Decision. It held that
that any action taken by STI after the merger can be
reasonably concluded as one of the valid consequences
thereof for the regulation of manpower is a
management prerogative enjoyed by STI, and it was
free to regulate according to its own discretion and
judgment all aspects of petitioners employment. In
this light, and since no concrete evidence was
presented by petitioner to show that respondents
acted with malice or bad faith, the NLRC held that it
may not be said that the abolition of the position of
STI-Makati COO was done to unduly ease her out of
STI.
-CA; Upheld decision of NLRC
Issue: Whether or not the transfer of petitioner is a
valid managerial prerogative and not it does not result
to a illegal constructive dismissal
Held:
The Supreme Court ruled in favor of the Petitioner due
to the following reasons:
First the position of STI-Makati COO was
actually never abolished. As a matter of fact, soon
after petitioner was removed from the position,
Fernandez was appointed to take her place as STI-
Makati COO; his appointment was even publicly
announced via an official communication disseminated
company-wide. Whatever the reason could be for
Fernandezs appointment as STI-Makati COO, the fact
still remains that such position continued to exist.
Second, petitioners appointment as
Compliance Manager appears to be contrived as well.
At the time of petitioners appointment, there are only
two Compliance Manager Positions within STIs
compliance department which were already filled up
The only positions within the department that were at
the time vacant were those of Compliance Officers,
which are of lower rank. In other words, petitioner
could not have been validly appointed as Compliance
Manager, a position within STI that was then very
much occupied; if ever, petitioner took the position of a
mere Compliance Officer, the only vacant position
within the department.
Constructive dismissal exists where there is
cessation of work because continued employment is
rendered impossible, unreasonable or unlikely, as an
offer involving a demotion in rank or a diminution in
pay and other benefits. Aptly called a dismissal in
disguise or an act amounting to dismissal but made to
appear as if it were not, constructive dismissal may,
likewise, exist if an act of clear discrimination,
insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it could
foreclose any choice by him except to forego his
continued employment.
In cases of a transfer of an employee, the rule
is settled that the employer is charged with the burden
of proving that its conduct and action are for valid and
legitimate grounds such as genuine business necessity
and that the transfer is not unreasonable, inconvenient
or prejudicial to the employee. If the employer cannot
overcome this burden of proof, the employees transfer
shall be tantamount to unlawful constructive
dismissal.59
Thus, because STI failed to show that the
transfer is unreasonable and it likewise failed to prove
that the transfer of petitioner for valid and legitimate
grounds, the transfer of petitioner can therefore be
concluded as constructive dismissal and that it is not
valid managerial prerogative.
G.J.T. REBUILDERS MACHINE SHOP vs. RICARDO
AMBOS et al
Topic: Closure of Business; Payment of Separation Pay;
Case Doctrine: To prove serious business losses,
employers must present in evidence financial
statements showing the net losses suffered by
the business within a sufficient period of time.
Generally, it cannot be based on a single financial
statement showing losses. Absent this proof,
employers closing their businesses must pay the
dismissed employees separation pay equivalent
to one-month pay or to at least one-half-month
pay for every year of service, whichever is
higher.
Facts:
1. Petitioner G.J.T. Rebuilders is a single
proprietorship owned by Spouses Trillana and
engaged in steel works and metal fabrication
employing respondents Ricardo Ambos, Russell
Ambos and Benjamin Putian;
2. Petitioner rented a space in Far East Asia Building
which served as the site of its machine shop,
however in 1996 , a fire partially destroyed the
building so the owner thereof notified their
tenants, including Petitioner to vacate their units
by the end of September to avoid any unforeseen
accidents;
3. Petitioner refused that it continued its business
until 1997 but the owner of the building later on
refused to accommodate them so petitioner left the
rented space and closed the machine shop. It then
filed an Affidavit of Closure before the DOLE and a
sworn application to retire its business operations
before the Mandaluyong City Treasurers Office;
4. Respondents then later on filed a complaint against
Petitioner for the payment of their allowance,
 Separation Pay and Attorneys fees. Petitioner on
the other hand countered that it is not liable for
the payment of the respondents money claim
because it suffered serious business losses and
financial reverses forcing it to close its machine
shop.
5. The Labor Arbiter ruled that Petitioner is liable
because G.J.T. Rebuilders failed to show convincing
proof that it suffered serious business losses, and
even if it suffered such losses, respondents are
entitled to Separation Pay based on Social Justice
and Equity;
6. NLRC on appeal ruled that petitioner suffered
business losses because of the fire in 1996 which is
the proximate cause of the business loss of
petitioner such that in the 1997 financial statement
of G.J.T, it was shown that it suffered a net loss of
P316, 210.00, as a result the NLRC ruled that
petitioner is not liable to pay separation pay of
respondents;
7. The Court of Appeals upon appeal reversed the
decision of NLRC and affirmed the decision of the
labor Arbiter that Petitioner failed to prove its
alleged serious business losses. Moreover, the CA
refused to admit the financial statement of
petitioner on the ground that it was not subscribed
under oath by the Certified Public Accountant who
prepared the same.
Issue:
Whether or not Petitioner sufficiently proved that it
suffered business losses, and whether or not petitioner
is not liable to pay separation pay of respondents.
Held:
The Supreme Court ruled in the negative. It explained
that while the closure of business is a management
prerogative that courts cannot interfere with,
employers must sufficiently prove that it really suffered
serious business losses to justify the closure of the
business and for it to be excused from the payment of
separation pay of its employees.
It is explained that the burden of proving serious
business losses is with the employer. It must show
losses on the basis of financial statements covering a
sufficient period of time. In the case, the financial
statement provided by the petitioner covering the
period of 1996 to 1997 showed that petitioner earned
a net income of 61,157.00 in 1996 and incurred a net
loss of 316,210.00 in 1997. On the basis thereof the
Court stated that the two year period covered by the
financial statement is insufficient for the petitioner to
have objectively perceived that the business would not
recover from the loss, hence as a conclusion petitioner
only closed its business not for serious business losses
but only to prevent losses.
Considering that the Court found that petitioner failed
to prove that it really suffered serious business losses,
it is therefore liable to pay the separation pay of the
respondents.
Moreover, the Court held that petitioner is liable to pay
nominal damages to the respondents for its failure to
comply with the procedural requirements for closing its
business, the court held that notice of the eventual
closure of establishment is a personal right of the
employee to be personally informed of his or her
proposed dismissal as well as the reasons therefore.
The reason for the said requirement is to give the
employee some time to prepare for the eventual loss
of his or her job, and failure of the employer to comply
with said requirement would make the employer liable
for nominal damages, as in this case.
RODOLFO LABORTE vs. PAGSANJAN TOURISM
CONSUMERS COOPERATIVE PELAGIO et al
FACTS:
1. Petitioner Philippine Tourism Authority (PTA) is
a government-owned and controlled corporation
that administers tourism zones.
2. Respondent Pagsanjan Tourism Consumers
Cooperative (PTCC) is a cooperative organized
since 1988 under Republic Act No. 6938, or the
"Cooperative Code of the Philippines." The other
individual respondents are PTCC employees,
consisting of restaurant staff and boatmen at the
PTA Complex.
3. In 1989, in order to help the PTCC as a
cooperative, the PTA allowed it to operate a
restaurant business located at the main building of
the PTA Complex and the boat ride services to
ferry guests and tourists to and from the
Pagsanjan Falls, paying a certain percentage of its
earnings to the PTA.
4. In 1993, the PTA implemented reorganization
and reshuffling in its top level management.
Herein petitioner Rodolfo Laborte (Laborte) was
designated as Area Manager. 5. On October 22,
1993, Laborte served a written notice upon the
respondents to cease the operations of the latters
restaurant business and boat ride services in view
of the rehabilitation, face lifting and upgrading
project of the PTA Complex.
6. Consequently, on November 9, 1993, the PTCC
filed with the RTC, Branch 28, Santa Cruz,
Laguna a Complaint for Prohibition, Injunction and
Damages with Temporary Restraining Order (TRO)
and Preliminary Injunction7 against Laborte,
docketed as Civil Case No. 3150.
7. The PTCC also sought from the court the
award of moral and exemplary damages,
attorneys fees and costs of suit. It also prayed for
the issuance of a TRO or writ of preliminary
injunction to prohibit Laborte from causing the
PTCC to cease the operations of the restaurant
and boat ride services and from evicting the PTCCs
restaurant from the main building of the PTA Complex.
8. The trial court issued the TRO prayed for,
prohibiting Laborte from (a) causing the PTCC to
cease operations; (b) doing the threatened act of
closing the operation of the PTCCs restaurant and
other activities; (c) evicting the PTCCs restaurant
from the main building of the PTA Complex; and
(d) demolishing the said building. In the same
Order, the trial court set the hearing on the Writ
of Preliminary Injunction on November 25, 1993.
9. Laborte averred that the PTCC does not own
the restaurant facility as it was only tolerated to
operate the same by the PTA as a matter of
lending support and assistance to the cooperative
in its formative years. It has neither been granted
any franchise nor concession to operate the
restaurant nor any exclusive franchise to handle
the boating operations in the complex. Since the
PTCC had no contract, concession, or exclusive
franchise to operate the restaurant business and
the boating services in the PTA Complex, no
existing right has been allegedly violated by the
petitioners. The respondents, therefore, had no
right for the injunctive relief prayed for.
10. On December 7, 1993, the PTCC filed with
the trial court a Petition for Contempt with Motion
for Early Resolution. It alleged that Laborte and
his lawyers defied the TRO and proceeded to
close the restaurant on December 2, 1993. The
PTCC also alleged that Laborte prohibited its own
boatmen from ferrying tourists and allowed another
association of boatmen to operate.
11. On December 13, 1993, Laborte filed his
Answer with Counter-Claim. It denied the PTCCs
allegations of harassment, threat and retaliation.
He claimed (a) that his actions were upon the
mandate of his superiors and the PTAs
rehabilitation programs in the area;13 (b) that the
PTA only tolerated the PTCCs operations;14 and
(c) that the issuance of a permanent injunction
will violate the PTAs constitutional freedom to
operate a legitimate business enterprise and the
legal requirement of a publicbidding for the
operation of revenue-generating projects of
government entities involving private third parties
12. On March 14, 1994, the individual
respondents, Fabricio et al., who are employees
and boatmen of the PTCC, filed a Complaint-in-
Intervention against Laborte as they were
rendered jobless and were deprived of their
livelihood because Laborte failed to heed the trial
courts TRO. Thus, they prayed that the trial court
order Laborte to pay their unearned salaries,
among others.
13. On April 4, 1994, the PTCC filed an
Amended Complaint to include petitioner PTA as
defendant and the additional prayer for payment of
Thirty Thousand Pesos (P30,000.00) a month,
representing the PTCCs unrealized profits from
November 1993 up to the actual resumption of
its restaurant and boat ride businesses.
14. PTA filed its Answer with Counterclaim,
alleging, among others, that (1) the PTCC has no
cause of action against it since the PTA owned
the restaurant and the boat ride facilities within
the Complex and that it never formally entered
into a contract with the PTCC to operate the
same; (2) the PTA did not violate the trial courts
TRO and Writ of Preliminary Injunction since the
PTA was not yet impleaded as defendant at that
time; (3) the physical rehabilitation of the PTA
Complex, including the restaurant and boat
facilities therein, was part of its new marketing
strategy; and (4) the action had become moot
and academic in view of the actual closure of the
PTCCs restaurant and boat service businesses.
15. On May 29, 2002, the RTC rendered a
decision in favour of plaintiffs. 16. On appeal the
CA promulgated its Decision, affirming the RTC
Decision dated May 29, 2002.
ISSUE: Whether the closure of PTCC's restaurant
and boat ride business was a valid and lawful
exercise of PTA's management prerogative?
RULING:
YES. The PTA is a government owned and
controlled corporation which was mandated to
administer tourism zones. Based on this mandate,
it was the PTAs obligation to adopt a
comprehensive program and project to rehabilitate
and upgrade the facilities of the PTA Complex as
shown in Annexes "H-2" to "H-4" of the petition.
The Court finds that there was indeed a
renovation of the Pagsanjan Administration
Complex which was sanctioned by the PTA main
office; and such renovation was done in good faith
in performance of its mandated duties as tourism
administrator. In the exercise of its management
prerogative to determine what is best for the said
agency, the PTA had the right to terminate at
any moment the PTCCs operations of the
restaurant and the boat ride services since the
PTCC has no contract, concession or franchise
from the PTA to operate the above-mentioned
businesses.
As shown by the records, the operation of
the restaurant and the boat ride services was
merely tolerated, in order to extend financial
assistance to its PTA employee-members who are
members of the then fledging PTCC. Except for
receipts for rents paid by the PTCC to the PTA,
the respondents failed to show any contract,
concession agreement or franchise to operate the
restaurant and boat ride services.
In fact, the PTCC initially did not implead
the PTA in its Complaint since it was well aware
that there was no contract executed between the
PTCC and the PTA. While the PTCC has been
operating the restaurant and boat ride services for
almost ten (10) years until its closure, the same
was by mere tolerance of the PTA.67 In the
consolidated case of Phil. Ports Authority v. Pier 8
Arrastre & Stevedoring Services, Inc.,68 the Court
upheld the authority of government agencies to
terminate at any time hold-over permits.69 Thus,
considering that the PTCCs operation of the
restaurant and the boat ride services was by
mere tolerance, the PTA can, at any time,
terminate such operation.
The CA ruled that "the closure of the
restaurant and boat ride business within the PTA
Complex was tainted with bad faith on the part of
[the] defendants-appellants."70 It referred to the
Sheriffs Report dated January 19, 1994, which
stated that no such repairs and rehabilitation were
actually undertaken. Further, the petitioners
engaged the services of a new restaurant operator
(the New Selecta Restaurant) after the closure of
therestaurant per official receipts showing that the
new operator of the restaurant paid PTA
commissions for its catering services from March
1994 to April 1994.
The Court disagrees. The records disclose
that sufficient notice was given by the PTA for
the respondents to vacate the area. The Sheriffs
Report dated January 19, 1994, alleging that
there were, in fact, no repairs and rehabilitation
undertaken in the area at the time of inspection
cannot be given weight. It must be noted that
the RTC had issued on November 11, 1993 a TRO
enjoining the petitioners from pursuing its actions.
Thus, the absence of any business activity in the
premises is even proof of the petitioners
compliance to the order of the trial court.
Furthermore, the Sheriffs Report was executed
only about a month after the announced
construction or development; thus, it cannot be
expected that the petitioners would immediately
go full-blast in the implementation of the repair
and renovation.
As to the alleged engagement of the
services of a new restaurant operator, the Court
agrees with the petitioners that the engagement of
New Selecta Restaurant was temporary and due
only to the requests of the guests who needed
catering services for the duration of their stay.
The evidence offered by the respondents which
were receipts issued to New Selecta Restaurant on
different dates even emphasize this point.72 From
the foregoing, the Court concludes that the
engagement of New Selecta Restaurant is not
continuous but on contingency basis only. With
respect to Laborte's liability in his official and
personal capacity, the Court finds that Laborte
was simply implementing the lawful order of the
PTA Management. As a general rule the officer
cannot be held personally liable with the
corporation, whether civilly or otherwise, for the
consequences of his acts, if acted for and in
behalf of the corporation, within the scope of his
authority and in good faith.73 Furthermore, the
Court also notes that the charges against
petitioners Laborte and the PTA for grave coercion
and for the violation of R.A. 671374 have all been
dismissed.75 Thus, the Court finds no basis to
hold petitioner Laborte liable. Likewise, the award
of damages to the respondents and respondents-
intervenors is without basis. Absent a contract
between the PTCC and the PTA, and considering
further that the respondents were adequately
notified to properly vacate the PTA Complex, the
Court finds no justifiable reason to award any
damages. Neither may the respondents-intervenors
claim damages since the act directed against the
PTCC was a lawful exercise of the PTA's
management prerogative. While it is true that the
exercise of management prerogative is a
recognized right of a corporate entity, it cannot
be gainsaid that the exercise of such right must
be tempered with justice, honesty, good faith76
and a careful regard of other party's rights. In the
instant case, there is ample evidence to show that
the petitioners were able to observe the same.