G.R. No.
167648 January 28, 2008 group, until such time that TAPE shall have engaged the services of a professional
TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P.
TUVIERA, petitioners,
vs.
ROBERTO C. SERVAÑA, respondent.
DECISION
TINGA, J.:
This petition for review under Rule 45 assails the 21 December 2004 Decision1 and 8
April 2005 Resolution2 of the Court of Appeals declaring Roberto Servaña
(respondent) a regular employee of petitioner Television and Production
Exponents, Inc. (TAPE). The appellate court likewise ordered TAPE to pay nominal
damages for its failure to observe statutory due process in the termination of
respondent’s employment for authorized cause.
TAPE is a domestic corporation engaged in the production of television programs,
such as the long-running variety program, "Eat Bulaga!". Its president is Antonio P.
Tuviera (Tuviera). Respondent Roberto C. Servaña had served as a security guard
for TAPE from March 1987 until he was terminated on 3 March 2000.
Respondent filed a complaint for illegal dismissal and nonpayment of benefits
against TAPE. He alleged that he was first connected with Agro-Commercial
Security Agency but was later on absorbed by TAPE as a regular company guard.
He was detailed at Broadway Centrum in Quezon City where "Eat Bulaga!"
regularly staged its productions. On 2 March 2000, respondent received a
memorandum informing him of his impending dismissal on account of TAPE’s
decision to contract the services of a professional security agency. At the time of
his termination, respondent was receiving a monthly salary of P6,000.00. He
claimed that the holiday pay, unpaid vacation and sick leave benefits and other
monetary considerations were withheld from him. He further contended that his
dismissal was undertaken without due process and violative of existing labor laws,
aggravated by nonpayment of separation pay.3
In a motion to dismiss which was treated as its position paper, TAPE countered that
the labor arbiter had no jurisdiction over the case in the absence of an employer-
employee relationship between the parties. TAPE made the following assertions: (1)
that respondent was initially employed as a security guard for Radio Philippines
Network (RPN-9); (2) that he was tasked to assist TAPE during its live productions,
specifically, to control the crowd; (3) that when RPN-9 severed its relationship with
the security agency, TAPE engaged respondent’s services, as part of the support
group and thus a talent, to provide security service to production staff, stars and
guests of "Eat Bulaga!" as well as to control the audience during the one-and-a-
half hour noontime program; (4) that it was agreed that complainant would render
his services until such time that respondent company shall have engaged the
services of a professional security agency; (5) that in 1995, when his contract with
RPN-9 expired, respondent was retained as a talent and a member of the support
security agency; (6) that respondent was not prevented from seeking other
employment, whether or not related to security services, before or after attending
to his "Eat Bulaga!" functions; (7) that sometime in late 1999, TAPE started
negotiations for the engagement of a professional security agency, the Sun Shield
Security Agency; and (8) that on 2 March 2000, TAPE issued memoranda to all
talents, whose functions would be rendered redundant by the engagement of the
security agency, informing them of the management’s decision to terminate their
services.4
TAPE averred that respondent was an independent contractor falling under the
talent group category and was working under a special arrangement which is
recognized in the industry.5
Respondent for his part insisted that he was a regular employee having been
engaged to perform an activity that is necessary and desirable to TAPE’s business
for thirteen (13) years.6
On 29 June 2001, Labor Arbiter Daisy G. Cauton-Barcelona declared respondent
to be a regular employee of TAPE. The Labor Arbiter relied on the nature of the
work of respondent, which is securing and maintaining order in the studio, as
necessary and desirable in the usual business activity of TAPE. The Labor Arbiter
also ruled that the termination was valid on the ground of redundancy, and
ordered the payment of respondent’s separation pay equivalent to one (1)-month
pay for every year of service. The dispositive portion of the decision reads:
WHEREFORE, complainant’s position is hereby declared redundant.
Accordingly, respondents are hereby ordered to pay complainant his
separation pay computed at the rate of one (1) month pay for every year
of service or in the total amount of P78,000.00.7
On appeal, the National Labor Relations Commission (NLRC) in a Decision 8 dated
22 April 2002 reversed the Labor Arbiter and considered respondent a mere
program employee, thus:
We have scoured the records of this case and we find nothing to support
the Labor Arbiter’s conclusion that complainant was a regular employee.
xxxx
The primary standard to determine regularity of employment is the
reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. This
connection can be determined by considering the nature and work
performed and its relation to the scheme of the particular business or
trade in its entirety. x x x Respondent company is engaged in the business
of production of television shows. The records of this case also show that
complainant was employed by respondent company beginning 1995
after respondent company transferred from RPN-9 to GMA-7, a fact which
 complainant does not dispute. His last salary was P5,444.44 per month. In
such industry, security services may not be deemed necessary and
desirable in the usual business of the employer. Even without the
performance of such services on a regular basis, respondent’s company’s
business will not grind to a halt.
xxxx
Complainant was indubitably a program employee of respondent
company. Unlike [a] regular employee, he did not observe working hours
x x x. He worked for other companies, such as M-Zet TV Production, Inc. at
the same time that he was working for respondent company. The
foregoing indubitably shows that complainant-appellee was a program
employee. Otherwise, he would have two (2) employers at the same
time.9
Respondent filed a motion for reconsideration but it was denied in a
Resolution10 dated 28 June 2002.
Respondent filed a petition for certiorari with the Court of Appeals contending that
the NLRC acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it reversed the decision of the Labor Arbiter. Respondent asserted
that he was a regular employee considering the nature and length of service
rendered.11
Reversing the decision of the NLRC, the Court of Appeals found respondent to be
a regular employee. We quote the dispositive portion of the decision:
IN LIGHT OF THE FOREGOING, the petition is hereby GRANTED. The Decision
dated 22 April 2002 of the public respondent NLRC reversing the Decision
of the Labor Arbiter and its Resolution dated 28 June 2002 denying
petitioner’s motion for reconsideration are REVERSED and SET ASIDE. The
Decision dated 29 June 2001 of the Labor Arbiter
is REINSTATED with MODIFICATION in that private respondents are ordered
to pay jointly and severally petitioner the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process.
SO ORDERED.12
Finding TAPE’s motion for reconsideration without merit, the Court of Appeals
issued a Resolution13 dated 8 April 2005 denying said motion.
TAPE filed the instant petition for review raising substantially the same grounds as
those in its petition for certiorari before the Court of Appeals. These matters may be
summed up into one main issue: whether an employer-employee relationship exists
between TAPE and respondent.
On 27 September 2006, the Court gave due course to the petition and considered
the case submitted for decision.14
At the outset, it bears emphasis that the existence of employer-employee
relationship is ultimately a question of fact. Generally, only questions of law are
entertained in appeals by certiorari to the Supreme Court. This rule, however, is not
absolute. Among the several recognized exceptions is when the findings of the
Court of Appeals and Labor Arbiters, on one hand, and that of the NLRC, on the
other, are conflicting,15 as obtaining in the case at bar.
Jurisprudence is abound with cases that recite the factors to be considered in
determining the existence of employer-employee relationship, namely: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee with
respect to the means and method by which the work is to be accomplished.16 The
most important factor involves the control test. Under the control test, there is an
employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.17
In concluding that respondent was an employee of TAPE, the Court of Appeals
applied the "four-fold test" in this wise:
First. The selection and hiring of petitioner was done by private
respondents. In fact, private respondents themselves admitted having
engaged the services of petitioner only in 1995 after TAPE severed its
relations with RPN Channel 9.
By informing petitioner through the Memorandum dated 2 March 2000,
that his services will be terminated as soon as the services of the newly
hired security agency begins, private respondents in effect
acknowledged petitioner to be their employee. For the right to hire and
fire is another important element of the employer-employee relationship.
Second. Payment of wages is one of the four factors to be considered in
determining the existence of employer-employee relation. . . Payment as
admitted by private respondents was given by them on a monthly basis at
a rate of P5,444.44.
Third. Of the four elements of the employer-employee relationship, the
"control test" is the most important. x x x
The bundy cards representing the time petitioner had reported for work
are evident proofs of private respondents’ control over petitioner more
particularly with the time he is required to report for work during the
noontime program of "Eat Bulaga!" If it were not so, petitioner would be
free to report for work anytime even not during the noontime program of
"Eat Bulaga!" from 11:30 a.m. to 1:00 p.m. and still gets his compensation
for being a "talent." Precisely, he is being paid for being the security of "Eat
 Bulaga!" during the above-mentioned period. The daily time cards of
petitioner are not just for mere record purposes as claimed by private
respondents. It is a form of control by the management of private
respondent TAPE.18
TAPE asseverates that the Court of Appeals erred in applying the "four-fold test" in
determining the existence of employer-employee relationship between it and
respondent. With respect to the elements of selection, wages and dismissal, TAPE
proffers the following arguments: that it never hired respondent, instead it was the
latter who offered his services as a talent to TAPE; that the Memorandum dated 2
March 2000 served on respondent was for the discontinuance of the contract for
security services and not a termination letter; and that the talent fees given to
respondent were the pre-agreed consideration for the services rendered and
should not be construed as wages. Anent the element of control, TAPE insists that it
had no control over respondent in that he was free to employ means and
methods by which he is to control and manage the live audiences, as well as the
safety of TAPE’s stars and guests.19
The position of TAPE is untenable. Respondent was first connected with Agro-
Commercial Security Agency, which assigned him to assist TAPE in its live
productions. When the security agency’s contract with RPN-9 expired in 1995,
respondent was absorbed by TAPE or, in the latter’s language, "retained as
talent."20 Clearly, respondent was hired by TAPE. Respondent presented his
identification card21 to prove that he is indeed an employee of TAPE. It has been in
held that in a business establishment, an identification card is usually provided not
just as a security measure but to mainly identify the holder thereof as a bona
fide employee of the firm who issues it.22
Respondent claims to have been receiving P5,444.44 as his monthly salary while
TAPE prefers to designate such amount as talent fees. Wages, as defined in the
Labor Code, are remuneration or earnings, however designated, capable of
being expressed in terms of money, whether fixed or ascertained on a time, task,
piece or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be
rendered. It is beyond dispute that respondent received a fixed amount as
monthly compensation for the services he rendered to TAPE.
The Memorandum informing respondent of the discontinuance of his service
proves that TAPE had the power to dismiss respondent.
Control is manifested in the bundy cards submitted by respondent in evidence. He
was required to report daily and observe definite work hours. To negate the
element of control, TAPE presented a certification from M-Zet Productions to prove
that respondent also worked as a studio security guard for said company. Notably,
the said certificate categorically stated that respondent reported for work on
Thursdays from 1992 to 1995. It can be recalled that during said period, respondent
was still working for RPN-9. As admitted by TAPE, it absorbed respondent in late
1995.23
TAPE further denies exercising control over respondent and maintains that the
latter is an independent contractor.24Aside from possessing substantial capital or
investment, a legitimate job contractor or subcontractor carries on a distinct and
independent business and undertakes to perform the job, work or service on its
own account and under its own responsibility according to its own manner and
method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results
thereof.25 TAPE failed to establish that respondent is an independent contractor. As
found by the Court of Appeals:
We find the annexes submitted by the private respondents insufficient to
prove that herein petitioner is indeed an independent contractor. None
of the above conditions exist in the case at bar. Private respondents failed
to show that petitioner has substantial capital or investment to be
qualified as an independent contractor. They likewise failed to present a
written contract which specifies the performance of a specified piece of
work, the nature and extent of the work and the term and duration of the
relationship between herein petitioner and private respondent TAPE.26
TAPE relies on Policy Instruction No. 40, issued by the Department of Labor, in
classifying respondent as a program employee and equating him to be an
independent contractor.
Policy Instruction No. 40 defines program employees as—
x x x those whose skills, talents or services are engaged by the station for a
particular or specific program or undertaking and who are not required to
observe normal working hours such that on some days they work for less
than eight (8) hours and on other days beyond the normal work hours
observed by station employees and are allowed to enter into
employment contracts with other persons, stations, advertising agencies
or sponsoring companies. The engagement of program employees,
including those hired by advertising or sponsoring companies, shall be
under a written contract specifying, among other things, the nature of the
work to be performed, rates of pay and the programs in which they will
work. The contract shall be duly registered by the station with the
Broadcast Media Council within three (3) days from its consummation. 27
TAPE failed to adduce any evidence to prove that it complied with the
requirements laid down in the policy instruction. It did not even present its contract
with respondent. Neither did it comply with the contract-registration requirement.
Even granting arguendo that respondent is a program employee, stills, classifying
him as an independent contractor is misplaced. The Court of Appeals had this to
say:
We cannot subscribe to private respondents’ conflicting theories. The
theory of private respondents that petitioner is an independent contractor
runs counter to their very own allegation that petitioner is a talent or a
 program employee. An independent contractor is not an employee of
the employer, while a talent or program employee is an employee. The
only difference between a talent or program employee and a regular
employee is the fact that a regular employee is entitled to all the benefits
that are being prayed for. This is the reason why private respondents try to
seek refuge under the concept of an independent contractor theory. For
if petitioner were indeed an independent contractor, private respondents
will not be liable to pay the benefits prayed for in petitioner’s complaint.28
More importantly, respondent had been continuously under the employ of TAPE
from 1995 until his termination in March 2000, or for a span of 5 years. Regardless of
whether or not respondent had been performing work that is necessary or
desirable to the usual business of TAPE, respondent is still considered a regular
employee under Article 280 of the Labor Code which provides:
Art. 280. Regular and Casual Employment.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the
work or service to be performed is seasonal in nature and employment is
for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph. Provided, that, any employee who has rendered
at least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such
activity exists.
As a regular employee, respondent cannot be terminated except for just cause or
when authorized by law.29 It is clear from the tenor of the 2 March 2000
Memorandum that respondent’s termination was due to redundancy. Thus, the
Court of Appeals correctly disposed of this issue, viz:
Article 283 of the Labor Code provides that the employer may also
terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the provisions of this
Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving
devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least
one (1) month pay for every year or service, whichever is higher.
xxxx
We uphold the finding of the Labor Arbiter that "complainant [herein
petitioner] was terminated upon [the] management’s option to
professionalize the security services in its operations. x x x" However, [we]
find that although petitioner’s services [sic] was for an authorized cause,
i.e., redundancy, private respondents failed to prove that it complied with
service of written notice to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment. It bears
stressing that although notice was served upon petitioner through a
Memorandum dated 2 March 2000, the effectivity of his dismissal is fifteen
days from the start of the agency’s take over which was on 3 March 2000.
Petitioner’s services with private respondents were severed less than the
month requirement by the law.
Under prevailing jurisprudence the termination for an authorized cause
requires payment of separation pay. Procedurally, if the dismissal is based
on authorized causes under Articles 283 and 284, the employer must give
the employee and the Deparment of Labor and Employment written
notice 30 days prior to the effectivity of his separation. Where the dismissal
is for an authorized cause but due process was not observed, the dismissal
should be upheld. While the procedural infirmity cannot be cured, it
should not invalidate the dismissal. However, the employer should be
liable for non-compliance with procedural requirements of due process.
xxxx
Under recent jurisprudence, the Supreme Court fixed the amount
of P30,000.00 as nominal damages. The basis of the violation of
petitioners’ right to statutory due process by the private respondents
warrants the payment of indemnity in the form of nominal damages. The
amount of such damages is addressed to the sound discretion of the
court, taking into account the relevant circumstances. We believe this
form of damages would serve to deter employer from future violations of
the statutory due process rights of the employees. At the very least, it
provides a vindication or recognition of this fundamental right granted to
the latter under the Labor Code and its Implementing Rules. Considering
the circumstances in the case at bench, we deem it proper to fix it
at P10,000.00.30
In sum, we find no reversible error committed by the Court of Appeals in its assailed
decision.
However, with respect to the liability of petitioner Tuviera, president of TAPE, absent
any showing that he acted with malice or bad faith in terminating respondent, he
cannot be held solidarily liable with TAPE.31 Thus, the Court of Appeals ruling on this
point has to be modified.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are
AFFIRMED with MODIFICATION in that only petitioner Television and Production
Exponents, Inc. is liable to pay respondent the amount of P10,000.00 as nominal
damages for non-compliance with the statutory due process and petitioner
Antonio P. Tuviera is accordingly absolved from liability.

SO ORDERED.
 d) Facilitate, prepare and arrange airtime schedule for public service
G.R. No. 164156 September 26, 2006 announcement and complaints;

ABS-CBN BROADCASTING CORPORATION, petitioner, e) Assist, anchor program interview, etc; and
vs.
MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE f) Record, log clerical reports, man based control radio.4
LERASAN, respondents.
Their respective working hours were as follows:
DECISION
Name Time No. of Hours
CALLEJO, SR., J.:
1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 ½
Before us is a petition for review on certiorari of the Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for 8:00 A.M.-12:00 noon
reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB
Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 ½
of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon,
Jennifer Deiparine and Josephine Lerasan as regular employees. 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs.

The Antecedents 9:00 A.M.-6:00 P.M. (WF) 9 hrs.

Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the
broadcasting business and owns a network of television and radio stations, whose
operations revolve around the broadcast, transmission, and relay of
telecommunication signals. It sells and deals in or otherwise utilizes the airtime it
generates from its radio and television operations. It has a franchise as a
broadcasting company, and was likewise issued a license and authority to
operate by the National Telecommunications Commission.
Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as
production assistants (PAs) on different dates. They were assigned at the news and
public affairs, for various radio programs in the Cebu Broadcasting Station, with a
monthly compensation of P4,000. They were issued ABS-CBN employees’
identification cards and were required to work for a minimum of eight hours a day,
including Sundays and holidays. They were made to perform the following tasks
and duties:
a) Prepare, arrange airing of commercial broadcasting based on the daily
operations log and digicart of respondent ABS-CBN;
4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5
The PAs were under the control and supervision of Assistant Station Manager Dante
J. Luzon, and News Manager Leo Lastimosa.
On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees
executed a Collective Bargaining Agreement (CBA) to be effective during the
period from December 11, 1996 to December 11, 1999. However, since petitioner
refused to recognize PAs as part of the bargaining unit, respondents were not
included to the CBA.6
On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing
the PAs that effective August 1, 2000, they would be assigned to non-drama
programs, and that the DYAB studio operations would be handled by the studio
technician. Thus, their revised schedule and other assignments would be as follows:
Monday – Saturday

b) Coordinate, arrange personalities for air interviews; 4:30 A.M. – 8:00 A.M. – Marlene Nazareno.

c) Coordinate, prepare schedule of reporters for scheduled news reporting and Miss Nazareno will then be assigned at the Research Dept.
lead-in or incoming reports;
From 8:00 A.M. to 12:00
4:30 P.M. – 12:00 MN – Jennifer Deiparine II. Merlou Gerzon - ABS-CBN Employee’s Identification Card

Sunday Exhibit "C"

5:00 A.M. – 1:00 P.M. – Jennifer Deiparine Exhibit "D"

1:00 P.M. – 10:00 P.M. – Joy Sanchez Exhibit "D-1" &

Respondent Gerzon was assigned as the full-time PA of the TV News Department Exhibit "D-2" - ABS-CBN Salary Voucher from March
reporting directly to Leo Lastimosa.
1999 to January 2001 at P4,000.00
On October 12, 2000, respondents filed a Complaint for Recognition of Regular
Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Date employed: September 1, 1995
Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against
the petitioner before the NLRC. The Labor Arbiter directed the parties to submit
their respective position papers. Upon respondents’ failure to file their position Length of service: 5 years & 10 months
papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an
Order dated April 30, 2001, dismissing the complaint without prejudice for lack of III. Marlene Nazareno
interest to pursue the case. Respondents received a copy of the Order on May 16,
2001.7 Instead of re-filing their complaint with the NLRC within 10 days from May 16, Exhibit "E" - ABS-CBN Employee’s Identification Card
2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with
Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The
Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith Exhibit "E" - ABS-CBN Salary Voucher from Nov.
admitted the position paper of the complainants. Respondents made the
following allegations: Exhibit "E-1" & 1999 to December 2000

1. Complainants were engaged by respondent ABS-CBN as regular and full-time Exhibit :E-2"
employees for a continuous period of more than five (5) years with a monthly
salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of Date employed: April 17, 1996
this complaint on November 20, 2000.

Length of service: 5 years and one (1) month

Machine copies of complainants’ ABS-CBN Employee’s Identification Card and
salary vouchers are hereto attached as follows, thus:
IV. Joy Sanchez Lerasan
I. Jennifer Deiparine:
Exhibit "F" - ABS-CBN Employee’s Identification Card
Exhibit "A" - ABS-CBN Employee’s Identification Card
Exhibit "F-1" - ABS-CBN Salary Voucher from Aug.
Exhibit "B", - ABS-CBN Salary Voucher from Nov.
Exhibit "F-2" & 2000 to Jan. 2001
Exhibit "B-1" & 1999 to July 2000 at P4,000.00
Exhibit "F-3"
Exhibit "B-2"
Exhibit "F-4" - Certification dated July 6, 2000
Date employed: September 15, 1995
Acknowledging regular status of
Length of service: 5 years & nine (9) months
Complainant Joy Sanchez Lerasan
Signed by ABS-CBN Administrative
Officer May Kima Hife
Date employed: April 15, 1998
Length of service: 3 yrs. and one (1) month9
Respondents insisted that they belonged to a "work pool" from which petitioner
chose persons to be given specific assignments at its discretion, and were thus
under its direct supervision and control regardless of nomenclature. They prayed
that judgment be rendered in their favor, thus:
Complainants pray for such other reliefs as are just and equitable under the
premises.10
For its part, petitioner alleged in its position paper that the respondents were PAs
who basically assist in the conduct of a particular program ran by an anchor or
talent. Among their duties include monitoring and receiving incoming calls from
listeners and field reporters and calls of news sources; generally, they perform leg
work for the anchors during a program or a particular production. They are
considered in the industry as "program employees" in that, as distinguished from
regular or station employees, they are basically engaged by the station for a
particular or specific program broadcasted by the radio station. Petitioner asserted
that as PAs, the complainants were issued talent information sheets which are
updated from time to time, and are thus made the basis to determine the
programs to which they shall later be called on to assist. The program assignments
of complainants were as follows:

WHEREFORE, premises considered, this Honorable Arbiter is most respectfully a. Complainant Nazareno assists in the programs:
prayed, to issue an order compelling defendants to pay complainants the
following: 1) Nagbagang Balita (early morning edition)

1. One Hundred Thousand Pesos (P100,000.00) each 2) Infor Hayupan

and by way of moral damages; 3) Arangkada (morning edition)

2. Minimum wage differential; 4) Nagbagang Balita (mid-day edition)

3. Thirteenth month pay differential; b. Complainant Deiparine assists in the programs:

4. Unpaid service incentive leave benefits; 1) Unzanith

5. Sick leave; 2) Serbisyo de Arevalo

6. Holiday pay; 3) Arangkada (evening edition)

7. Premium pay; 4) Balitang K (local version)

8. Overtime pay; 5) Abante Subu

9. Night shift differential. 6) Pangutana Lang

Complainants further pray of this Arbiter to declare them regular and permanent c. Complainant Gerzon assists in the program:
employees of respondent ABS-CBN as a condition precedent for their admission
into the existing union and collective bargaining unit of respondent company 1) On Mondays and Tuesdays:
where they may as such acquire or otherwise perform their obligations thereto or
enjoy the benefits due therefrom.
(a) Unzanith
(b) Serbisyo de Arevalo petitioner claimed, as the payroll will show, respondents were paid all salaries and
benefits due them under the law.12
(c) Arangkada (evening edition)
Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA
(d) Balitang K (local version) and interpret the same, especially since respondents were not covered by the
bargaining unit.

(e) Abante Sugbu

On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents,
and declared that they were regular employees of petitioner; as such, they were
(f) Pangutana Lang awarded monetary benefits. The fallo of the decision reads:

2) On Thursdays WHEREFORE, the foregoing premises considered, judgment is hereby rendered

declaring the complainants regular employees of the respondent ABS-CBN
Nagbagang Balita Broadcasting Corporation and directing the same respondent to pay
complainants as follows:
3) On Saturdays
I - Merlou A. Gerzon P12,025.00
(a) Nagbagang Balita
II - Marlyn Nazareno 12,025.00
(b) Info Hayupan
III - Jennifer Deiparine 12,025.00
(c) Arangkada (morning edition)
IV - Josephine Sanchez Lerazan 12,025.00
(d) Nagbagang Balita (mid-day edition)
_________
4) On Sundays:
P48,100.00
(a) Siesta Serenata
plus ten (10%) percent Attorney’s Fees or a TOTAL aggregate amount of PESOS:
(b) Sunday Chismisan FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00).

(c) Timbangan sa Hustisya Respondent Veneranda C. Sy is absolved from any liability.

(d) Sayri ang Lungsod SO ORDERED.13

(e) Haranahan11
Petitioner maintained that PAs, reporters, anchors and talents occasionally
"sideline" for other programs they produce, such as drama talents in other
productions. As program employees, a PA’s engagement is coterminous with the
completion of the program, and may be extended/renewed provided that the
program is on-going; a PA may also be assigned to new programs upon the
cancellation of one program and the commencement of another. As such
program employees, their compensation is computed on a program basis, a fixed
amount for performance services irrespective of the time consumed. At any rate,
However, the Labor Arbiter did not award money benefits as provided in the CBA
on his belief that he had no jurisdiction to interpret and apply the agreement, as
the same was within the jurisdiction of the Voluntary Arbitrator as provided in
Article 261 of the Labor Code.
Respondents’ counsel received a copy of the decision on August 29, 2001.
Respondent Nazareno received her copy on August 27, 2001, while the other
respondents received theirs on September 8, 2001. Respondents signed and filed
their Appeal Memorandum on September 18, 2001.
For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter
denied and considered as an appeal, conformably with Section 5, Rule V, of the
NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC,
while respondents filed a partial appeal.
In its appeal, petitioner alleged the following:
1. That the Labor Arbiter erred in reviving or re-opening this case which had long
been dismissed without prejudice for more than thirty (30) calendar days;
2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right
to due process of law;
3. That the Labor Arbiter erred in denying respondent’s Motion for Reconsideration
on an interlocutory order on the ground that the same is a prohibited pleading;
4. That the Labor Arbiter erred when he ruled that the complainants are regular
employees of the respondent;
5. That the Labor Arbiter erred when he ruled that the complainants are entitled to
13th month pay, service incentive leave pay and salary differential; and
6. That the Labor Arbiter erred when he ruled that complainants are entitled to
attorney’s fees.14
On November 14, 2002, the NLRC rendered judgment modifying the decision of
the Labor Arbiter. The fallo of the decision reads:
WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez
dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING
respondent ABS-CBN Broadcasting Corporation, as follows:
1. To pay complainants of their wage differentials and other benefits arising from
the CBA as of 30 September 2002 in the aggregate amount of Two Million Five
Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100
(P2,561,948.22), broken down as follows:
a. Deiparine, Jennifer - P 716,113.49
b. Gerzon, Merlou - 716,113.49
c. Nazareno, Marlyn - 716,113.49
d. Lerazan, Josephine Sanchez - 413,607.75
Total - P 2,561,948.22
2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of
30 September 2002 representing their rice subsidy in the CBA, broken down as
follows:
a. Deiparine, Jennifer - 60 Sacks
b. Gerzon, Merlou - 60 Sacks
c. Nazareno, Marlyn - 60 Sacks
d. Lerazan, Josephine Sanchez - 53 Sacks
Total 233 Sacks; and
3. To grant to the complainants all the benefits of the CBA after 30 September
2002.
SO ORDERED.15
The NLRC declared that the Labor Arbiter acted conformably with the Labor Code
when it granted respondents’ motion to refile the complaint and admit their
position paper. Although respondents were not parties to the CBA between
petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless
granted and computed respondents’ monetary benefits based on the 1999 CBA,
which was effective until September 2002. The NLRC also ruled that the Labor
Arbiter had jurisdiction over the complaint of respondents because they acted in
their individual capacities and not as members of the union. Their claim for
monetary benefits was within the context of Article 217(6) of the Labor Code. The
validity of respondents’ claim does not depend upon the interpretation of the
CBA.
The NLRC ruled that respondents were entitled to the benefits under the CBA
because they were regular employees who contributed to the profits of petitioner
through their labor. The NLRC cited the ruling of this Court in New Pacific Timber &
Supply Company v. National Labor Relations Commission.16
Petitioner filed a motion for reconsideration, which the NLRC denied.
Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA, raising both procedural and substantive issues, as follows: (a)
whether the NLRC acted without jurisdiction in admitting the appeal of
respondents; (b) whether the NLRC committed palpable error in scrutinizing the
reopening and revival of the complaint of respondents with the Labor Arbiter upon
due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order
of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether
the NLRC acted without jurisdiction in entertaining and resolving the claim of the
respondents under the CBA instead of referring the same to the Voluntary
Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave
abuse of discretion when it awarded monetary benefits to respondents under the
CBA although they are not members of the appropriate bargaining unit.
On February 10, 2004, the CA rendered judgment dismissing the petition. It held
that the perfection of an appeal shall be upon the expiration of the last day to
appeal by all parties, should there be several parties to a case. Since respondents
received their copies of the decision on September 8, 2001 (except respondent
Nazareno who received her copy of the decision on August 27, 2001), they had
until September 18, 2001 within which to file their Appeal Memorandum. Moreover,
the CA declared that respondents’ failure to submit their position paper on time is
not a ground to strike out the paper from the records, much less dismiss a
complaint.
Anent the substantive issues, the appellate court stated that respondents are not
mere project employees, but regular employees who perform tasks necessary and
desirable in the usual trade and business of petitioner and not just its project
employees. Moreover, the CA added, the award of benefits accorded to rank-
and-file employees under the 1996-1999 CBA is a necessary consequence of the
NLRC ruling that respondents, as PAs, are regular employees.
Finding no merit in petitioner’s motion for reconsideration, the CA denied the same
in a Resolution17 dated June 16, 2004.
Petitioner thus filed the instant petition for review on certiorari and raises the
following assignments of error:
1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION
NOTWITHSTANDING THE PATENT NULLITY OF THE LATTER’S DECISION AND
RESOLUTION.
2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING
OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES.
3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING
OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18
Considering that the assignments of error are interrelated, the Court shall resolve
them simultaneously.
Petitioner asserts that the appellate court committed palpable and serious error of
law when it affirmed the rulings of the NLRC, and entertained respondents’ appeal
from the decision of the Labor Arbiter despite the admitted lapse of the
reglementary period within which to perfect the same. Petitioner likewise maintains
that the 10-day period to appeal must be reckoned from receipt of a party’s
counsel, not from the time the party learns of the decision, that is, notice to
counsel is notice to party and not the other way around. Finally, petitioner argues
that the reopening of a complaint which the Labor Arbiter has dismissed without
prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of
dismissal had already attained finality and can no longer be set aside.
Respondents, on the other hand, allege that their late appeal is a non-issue
because it was petitioner’s own timely appeal that empowered the NLRC to
reopen the case. They assert that although the appeal was filed 10 days late, it
may still be given due course in the interest of substantial justice as an exception to
the general rule that the negligence of a counsel binds the client. On the issue of
the late filing of their position paper, they maintain that this is not a ground to strike
it out from the records or dismiss the complaint.
We find no merit in the petition.
We agree with petitioner’s contention that the perfection of an appeal within the
statutory or reglementary period is not only mandatory, but also jurisdictional;
failure to do so renders the assailed decision final and executory and deprives the
appellate court or body of the legal authority to alter the final judgment, much less
entertain the appeal. However, this Court has time and again ruled that in
exceptional cases, a belated appeal may be given due course if greater injustice
may occur if an appeal is not given due course than if the reglementary period to
appeal were strictly followed.19 The Court resorted to this extraordinary measure
even at the expense of sacrificing order and efficiency if only to serve the greater
principles of substantial justice and equity.20
In the case at bar, the NLRC did not commit a grave abuse of its discretion in
giving Article 22321 of the Labor Code a liberal application to prevent the
miscarriage of justice. Technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties.22 We
have held in a catena of cases that technical rules are not binding in labor cases
and are not to be applied strictly if the result would be detrimental to the
workingman.23
Admittedly, respondents failed to perfect their appeal from the decision of the
Labor Arbiter within the reglementary period therefor. However, petitioner
perfected its appeal within the period, and since petitioner had filed a timely
appeal, the NLRC acquired jurisdiction over the case to give due course to its
appeal and render the decision of November 14, 2002. Case law is that the party
who failed to appeal from the decision of the Labor Arbiter to the NLRC can still
participate in a separate appeal timely filed by the adverse party as the situation is
considered to be of greater benefit to both parties.24
We find no merit in petitioner’s contention that the Labor Arbiter abused his
discretion when he admitted respondents’ position paper which had been
belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use
every reasonable means to ascertain the facts in each case speedily and
objectively, without technicalities of law or procedure, all in the interest of due
process.25 Indeed, as stressed by the appellate court, respondents’ failure to submit
a position paper on time is not a ground for striking out the paper from the records,
much less for dismissing a complaint.26 Likewise, there is simply no truth to
petitioner’s assertion that it was denied due process when the Labor Arbiter
admitted respondents’ position paper without requiring it to file a comment before
admitting said position paper. The essence of due process in administrative
proceedings is simply an opportunity to explain one’s side or an opportunity to
seek reconsideration of the action or ruling complained of. Obviously, there is
nothing in the records that would suggest that petitioner had absolute lack of
opportunity to be heard.27 Petitioner had the right to file a motion for
reconsideration of the Labor Arbiter’s admission of respondents’ position paper,
and even file a Reply thereto. In fact, petitioner filed its position paper on April 2,
2001. It must be stressed that Article 280 of the Labor Code was encoded in our
statute books to hinder the circumvention by unscrupulous employers of the
employees’ right to security of tenure by indiscriminately and absolutely ruling out
all written and oral agreements inharmonious with the concept of regular
employment defined therein.28
We quote with approval the following pronouncement of the NLRC:
The complainants, on the other hand, contend that respondents assailed the
Labor Arbiter’s order dated 18 June 2001 as violative of the NLRC Rules of
Procedure and as such is violative of their right to procedural due process. That
while suggesting that an Order be instead issued by the Labor Arbiter for
complainants to refile this case, respondents impliedly submit that there is not any
substantial damage or prejudice upon the refiling, even so, respondents’
suggestion acknowledges complainants right to prosecute this case, albeit with
the burden of repeating the same procedure, thus, entailing additional time,
efforts, litigation cost and precious time for the Arbiter to repeat the same process
twice. Respondent’s suggestion, betrays its notion of prolonging, rather than
promoting the early resolution of the case.
Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-
opened the dismissed case without prejudice beyond the ten (10) day
reglementary period had inadvertently failed to follow Section 16, Rule V, Rules
Procedure of the NLRC which states:
"A party may file a motion to revive or re-open a case dismissed without prejudice
within ten (10) calendar days from receipt of notice of the order dismissing the
same; otherwise, his only remedy shall be to re-file the case in the arbitration
branch of origin."
the same is not a serious flaw that had prejudiced the respondents’ right to due
process. The case can still be refiled because it has not yet prescribed. Anyway,
Article 221 of the Labor Code provides:
"In any proceedings before the Commission or any of the Labor Arbiters, the rules
of evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the
Labor Arbiters shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or
procedure, all in the interest of due process."
The admission by the Labor Arbiter of the complainants’ Position Paper and
Supplemental Manifestation which were belatedly filed just only shows that he
acted within his discretion as he is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process. Indeed, the
failure to submit a position paper on time is not a ground for striking out the paper
from the records, much less for dismissing a complaint in the case of the
complainant. (University of Immaculate Conception vs. UIC Teaching and Non-
Teaching Personnel Employees, G.R. No. 144702, July 31, 2001).
"In admitting the respondents’ position paper albeit late, the Labor Arbiter acted
within her discretion. In fact, she is enjoined by law to use every reasonable means
to ascertain the facts in each case speedily and objectively, without technicalities
of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA
53).
The respondents were given by the Labor Arbiter the opportunity to submit position
paper. In fact, the respondents had filed their position paper on 2 April 2001. What
is material in the compliance of due process is the fact that the parties are given
the opportunities to submit position papers.
"Due process requirements are satisfied where the parties are given the
opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737).
Thus, the respondent was not deprived of its Constitutional right to due process of
law.29
We reject, as barren of factual basis, petitioner’s contention that respondents are
considered as its talents, hence, not regular employees of the broadcasting
company. Petitioner’s claim that the functions performed by the respondents are
not at all necessary, desirable, or even vital to its trade or business is belied by the
evidence on record.
Case law is that this Court has always accorded respect and finality to the findings
of fact of the CA, particularly if they coincide with those of the Labor Arbiter and
the National Labor Relations Commission, when supported by substantial
evidence.30 The question of whether respondents are regular or project employees
or independent contractors is essentially factual in nature; nonetheless, the Court is
constrained to resolve it due to its tremendous effects to the legions of production
assistants working in the Philippine broadcasting industry.
We agree with respondents’ contention that where a person has rendered at least
one year of service, regardless of the nature of the activity performed, or where
the work is continuous or intermittent, the employment is considered regular as
long as the activity exists, the reason being that a customary appointment is not
indispensable before one may be formally declared as having attained regular
status. Article 280 of the Labor Code provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or desirable in
the usual business or trade of the employer except where the employment has
been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in
determining whether one is a regular employee:
The primary standard, 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. The connection can be determined by considering the nature of
work performed and its relation to the scheme of the particular business or trade in
its entirety. Also, if the employee has been performing the job for at least a year,
even if the performance is not continuous and merely intermittent, the law deems
repeated and continuing need for its performance as sufficient evidence of the
necessity if not indispensability of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity and while
such activity exists.32
As elaborated by this Court in Magsalin v. National Organization of Working Men:33
Even while the language of law might have been more definitive, the clarity of its
spirit and intent, i.e., to ensure a "regular" worker’s security of tenure, however, can
hardly be doubted. In determining whether an employment should be considered
regular or non-regular, the applicable test is the reasonable connection between
the particular activity performed by the employee in relation to the usual business
or trade of the employer. The standard, supplied by the law itself, is whether the
work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services
rendered and its relation to the general scheme under which the business or trade
is pursued in the usual course. It is distinguished from a specific undertaking that is
divorced from the normal activities required in carrying on the particular business
or trade. But, although the work to be performed is only for a specific project or
seasonal, where a person thus engaged has been performing the job for at least
one year, even if the performance is not continuous or is merely intermittent, the
law deems the repeated and continuing need for its performance as being
sufficient to indicate the necessity or desirability of that activity to the business or
trade of the employer. The employment of such person is also then deemed to be
regular with respect to such activity and while such activity exists.34
Not considered regular employees are "project employees," the completion or
termination of which is more or less determinable at the time of employment, such
as those employed in connection with a particular construction project, and
"seasonal employees" whose employment by its nature is only desirable for a
limited period of time. Even then, any employee who has rendered at least one
year of service, whether continuous or intermittent, is deemed regular with respect
to the activity performed and while such activity actually exists.
It is of no moment that petitioner hired respondents as "talents." The fact that
respondents received pre-agreed "talent fees" instead of salaries, that they did not
observe the required office hours, and that they were permitted to join other
productions during their free time are not conclusive of the nature of their
employment. Respondents cannot be considered "talents" because they are not
actors or actresses or radio specialists or mere clerks or utility employees. They are
regular employees who perform several different duties under the control and
direction of ABS-CBN executives and supervisors.
Thus, there are two kinds of regular employees under the law: (1) those engaged
to perform activities which are necessary or desirable in the usual business or trade
of the employer; and (2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to the activities in
which they are employed.35
The law overrides such conditions which are prejudicial to the interest of the worker
whose weak bargaining situation necessitates the succor of the State. What
determines whether a certain employment is regular or otherwise is not the will or
word of the employer, to which the worker oftentimes acquiesces, much less the
procedure of hiring the employee or the manner of paying the salary or the actual
time spent at work. It is the character of the activities performed in relation to the
particular trade or business taking into account all the circumstances, and in some
cases the length of time of its performance and its continued existence.36 It is
obvious that one year after they were employed by petitioner, respondents
became regular employees by operation of law.37
Additionally, respondents cannot be considered as project or program employees
because no evidence was presented to show that the duration and scope of the
project were determined or specified at the time of their engagement. Under
existing jurisprudence, project could refer to two distinguishable types of activities.
First, a project may refer to a particular job or undertaking that is within the regular
or usual business of the employer, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or
undertaking begins and ends at determined or determinable times. Second, the
term project may also refer to a particular job or undertaking that is not within the
regular business of the employer. Such a job or undertaking must also be
identifiably separate and distinct from the ordinary or regular business operations
of the employer. The job or undertaking also begins and ends at determined or
determinable times.38
The principal test 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.39
In this case, it is undisputed that respondents had continuously performed the
same activities for an average of five years. Their assigned tasks are necessary or
desirable in the usual business or trade of the petitioner. The persisting need for
their services is sufficient evidence of the necessity and indispensability of such
services to petitioner’s business or trade.40 While length of time may not be a sole
controlling test for project employment, it can be a strong factor to determine
whether the employee was hired for a specific undertaking or in fact tasked to
perform functions which are vital, necessary and indispensable to the usual trade
or business of the employer.41 We note further that petitioner did not report the
termination of respondents’ employment in the particular "project" to the
Department of Labor and Employment Regional Office having jurisdiction over the
workplace within 30 days following the date of their separation from work, using
the prescribed form on employees’ termination/ dismissals/suspensions.42
As gleaned from the records of this case, petitioner itself is not certain how to
categorize respondents. In its earlier pleadings, petitioner classified respondents as
program employees, and in later pleadings, independent contractors. Program
employees, or project employees, are different from independent contractors
because in the case of the latter, no employer-employee relationship exists.
Petitioner’s reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting
Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a
well-known television and radio personality, was an independent contractor and
not a regular employee:
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’S services to co-host its television and radio programs
because of SONZA’S peculiar skills, talent and celebrity status. SONZA contends
that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondent’s claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges "which he would not have enjoyed if he were truly the subject of a
valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBN’s employee, there would be no
need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th
month pay which the law automatically incorporates into every employer-
employee contract. Whatever benefits SONZA enjoyed arose from contract and
not because of an employer-employee relationship.
SONZA’s talent fees, amounting to P317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZA’S unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed
on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA,
to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.44
In the case at bar, however, the employer-employee relationship between
petitioner and respondents has been proven.
First. In the selection and engagement of respondents, no peculiar or unique skill,
talent or celebrity status was required from them because they were merely hired
through petitioner’s personnel department just like any ordinary employee.
Second. The so-called "talent fees" of respondents correspond to wages given as a
result of an employer-employee relationship. Respondents did not have the power
to bargain for huge talent fees, a circumstance negating independent
contractual relationship.
Third. Petitioner could always discharge respondents should it find their work
unsatisfactory, and respondents are highly dependent on the petitioner for
continued work.
Fourth. The degree of control and supervision exercised by petitioner over
respondents through its supervisors negates the allegation that respondents are
independent contractors.
The presumption is that when the work done is an integral part of the regular
business of the employer and when the worker, relative to the employer, does not
furnish an independent business or professional service, such work is a regular
employment of such employee and not an independent contractor.45 The Court
will peruse beyond any such agreement to examine the facts that typify the
parties’ actual relationship.46
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The
assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582
are AFFIRMED. Costs against petitioner.
SO ORDERED.

Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario,

It follows then that respondents are entitled to the benefits provided for in the J.J., concur.
existing CBA between petitioner and its rank-and-file employees. As regular
employees, respondents are entitled to the benefits granted to all other regular
employees of petitioner under the CBA.47 We quote with approval the ruling of the
appellate court, that the reason why production assistants were excluded from the
CBA is precisely because they were erroneously classified and treated as project
employees by petitioner:

x x x The award in favor of private respondents of the benefits accorded to rank-

and-file employees of ABS-CBN under the 1996-1999 CBA is a necessary
consequence of public respondent’s ruling that private respondents as production
assistants of petitioner are regular employees. The monetary award is not
considered as claims involving the interpretation or implementation of the
collective bargaining agreement. The reason why production assistants were
excluded from the said agreement is precisely because they were classified and
treated as project employees by petitioner.

As earlier stated, it is not the will or word of the employer which determines the
nature of employment of an employee but the nature of the activities performed
by such employee in relation to the particular business or trade of the employer.
Considering that We have clearly found that private respondents are regular
employees of petitioner, their exclusion from the said CBA on the misplaced belief
of the parties to the said agreement that they are project employees, is therefore
not proper. Finding said private respondents as regular employees and not as
mere project employees, they must be accorded the benefits due under the said
Collective Bargaining Agreement.

A collective bargaining agreement is a contract entered into by the union

representing the employees and the employer. However, even the non-member
employees are entitled to the benefits of the contract. To accord its benefits only
to members of the union without any valid reason would constitute undue
discrimination against non-members. A collective bargaining agreement is binding
on all employees of the company. Therefore, whatever benefits are given to the
other employees of ABS-CBN must likewise be accorded to private respondents
who were regular employees of petitioner.48

Besides, only talent-artists were excluded from the CBA and not production
assistants who are regular employees of the respondents. Moreover, under Article
1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer."

G.R. No. 183810 January 21, 2010
FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD,
MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE and
ALAN C. ALMENDRAS, Petitioners,
vs.
ABS-CBN BROADCASTING CORPORATION, Respondent.
DECISION
BRION, J.:
The petition for review on certiorari1 now before us seeks to set aside the
decision2 and resolution3 of the Court of Appeals, Nineteenth Division (CA)
promulgated on March 25, 2008 and July 8, 2008, respectively, in CA- G.R. SP No.
01838.4
The Antecedents
The Regularization Case.
In June 2001, petitioners Farley Fulache, Manolo Jabonero, David Castillo, Jeffrey
Lagunzad, Magdalena Malig-on Bigno, Francisco Cabas, Jr., Harvey Ponce and
Alan C. Almendras (petitioners) and Cresente Atinen (Atinen) filed two separate
complaints for regularization, unfair labor practice and several money claims
(regularization case) against ABS-CBN Broadcasting Corporation-Cebu (ABS-CBN).
Fulache and Castillo were drivers/cameramen; Atinen, Lagunzad and Jabonero
were drivers; Ponce and Almendras were cameramen/editors; Bigno was a
PA/Teleprompter Operator-Editing, and Cabas was a VTR man/editor. The
complaints (RAB VII Case Nos. 06-1100-01 and 06-1176-01) were consolidated and
were assigned to Labor Arbiter Julie C. Rendoque.
The petitioners alleged that on December 17, 1999, ABS-CBN and the ABS-CBN
Rank-and-File Employees Union (Union) executed a collective bargaining
agreement (CBA) effective December 11, 1999 to December 10, 2002; they only
became aware of the CBA when they obtained copies of the agreement; they
learned that they had been excluded from its coverage as ABS-CBN considered
them temporary and not regular employees, in violation of the Labor Code. They
claimed they had already rendered more than a year of service in the company
and, therefore, should have been recognized as regular employees entitled to
security of tenure and to the privileges and benefits enjoyed by regular
employees. They asked that they be paid overtime, night shift differential, holiday,
rest day and service incentive leave pay. They also prayed for an award of moral
damages and attorney’s fees.
ABS-CBN explained the nature of the petitioners’ employment within the
framework of its operations. It claimed that: it operates in several divisions, one of
which is the Regional Network Group (RNG). The RNG exercises control and
supervision over all the ABS-CBN local stations to ensure that ABS-CBN programs
are extended to the provinces. A local station, like the Cebu station, can resort to
cost-effective and cost-saving measures to remain viable; local stations produced
shows and programs that were constantly changing because of the competitive
nature of the industry, the changing public demand or preference, and the
seasonal nature of media broadcasting programs. ABS-CBN claimed, too, that the
production of programs per se is not necessary or desirable in its business because
it could generate profits by selling airtime to block-timers or through advertising.
ABS-CBN further claimed that to cope with fluctuating business conditions, it
contracts on a case-to-case basis the services of persons who possess the
necessary talent, skills, training, expertise or qualifications to meet the requirements
of its programs and productions. These contracted persons are called "talents" and
are considered independent contractors who offer their services to broadcasting
companies.
Instead of salaries, ABS-CBN pointed out that talents are paid a pre-arranged
consideration called "talent fee" taken from the budget of a particular program
and subject to a ten percent (10%) withholding tax. Talents do not undergo
probation. Their services are engaged for a specific program or production, or a
segment thereof. Their contracts are terminated once the program, production or
segment is completed.
ABS-CBN alleged that the petitioners’ services were contracted on various dates
by its Cebu station as independent contractors/off camera talents, and they were
not entitled to regularization in these capacities.
On January 17, 2002, Labor Arbiter Rendoque rendered his decision5 holding that
the petitioners were regular employees of ABS-CBN, not independent contractors,
and are entitled to the benefits and privileges of regular employees.
ABS-CBN appealed the ruling to the National Labor Relations Commission (NLRC)
Fourth Division, mainly contending that the petitioners were independent
contractors, not regular employees.6
The Illegal Dismissal Case.
While the appeal of the regularization case was pending, ABS-CBN dismissed
Fulache, Jabonero, Castillo, Lagunzad and Atinen (all drivers) for their refusal to
sign up contracts of employment with service contractor Able Services. The four
drivers and Atinen responded by filing a complaint for illegal dismissal (illegal
dismissal case). The case (RAB VII Case No. 07-1300-2002) was likewise handled by
Labor Arbiter Rendoque.
In defense, ABS-CBN alleged that even before the labor arbiter rendered his
decision of January 17, 2002 in the regularization case, it had already undertaken
a comprehensive review of its existing organizational structure to address its
operational requirements. It then decided to course through legitimate service
contractors all driving, messengerial, janitorial, utility, make-up, wardrobe and
security services for both the Metro Manila and provincial stations, to improve its
operations and to make them more economically viable. Fulache, Jabonero,
Castillo, Lagunzad and Atinen were not singled out for dismissal; as drivers, they
were dismissed because they belonged to a job category that had already been
contracted out. It argued that even if the petitioners had been found to have
been illegally dismissed, their reinstatement had become a physical impossibility
because their employer-employee relationships had been strained and that Atinen
had executed a quitclaim and release.
In her April 21, 2003 decision in the illegal dismissal case,7 Labor Arbiter Rendoque
upheld the validity of ABS-CBN's contracting out of certain work or services in its
operations. The labor arbiter found that petitioners Fulache, Jabonero, Castillo,
Lagunzad and Atinen had been dismissed due to redundancy, an authorized
cause under the law.8 He awarded them separation pay of one (1) month’s salary
for every year of service.
Again, ABS-CBN appealed to the NLRC which rendered on December 15, 2004 a
joint decision on the regularization and illegal dismissal cases. 9 The NLRC ruled that
there was an employer-employee relationship between the petitioners and ABS-
CBN as the company exercised control over the petitioners in the performance of
their work; the petitioners were regular employees because they were engaged to
perform activities usually necessary or desirable in ABS-CBN's trade or business; they
cannot be considered contractual employees since they were not paid for the
result of their work, but on a monthly basis and were required to do their work in
accordance with the company’s schedule. The NLRC thus affirmed with
modification the labor arbiter's regularization decision of January 17, 2002,
additionally granting the petitioners CBA benefits and privileges.
The NLRC reversed the labor arbiter’s ruling in the illegal dismissal case; it found
that petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had been
illegally dismissed and awarded them backwages and separation pay in lieu of
reinstatement. Under both cases, the petitioners were awarded CBA benefits and
privileges from the time they became regular employees up to the time of their
dismissal.
The petitioners moved for reconsideration, contending that Fulache, Jabonero,
Castillo and Lagunzad are entitled to reinstatement and full backwages, salary
increases and other CBA benefits as well as 13th month pay, cash conversion of
sick and vacation leaves, medical and dental allowances, educational benefits
and service awards. Atinen appeared to have been excluded from the motion
and there was no showing that he sought reconsideration on his own.
ABS-CBN likewise moved for the reconsideration of the decision, reiterating that
Fulache, Jabonero, Castillo and Lagunzad were independent contractors, whose
services had been terminated due to redundancy; thus, no backwages should
have been awarded. It further argued that the petitioners were not entitled to the
CBA benefits because they never claimed these benefits in their position paper
before the labor arbiter while the NLRC failed to make a clear and positive finding
that that they were part of the bargaining unit; neither was there evidence to
support this finding.
The NLRC resolved the motions for reconsideration on March 24, 200610 by
reinstating the two separate decisions of the labor arbiter dated January 17,
2002,11 and April 21, 2003,12 respectively. Thus, on the regularization issue, the NLRC
stood by the ruling that the petitioners were regular employees entitled to the
benefits and privileges of regular employees. On the illegal dismissal case, the
petitioners, while recognized as regular employees, were declared dismissed due
to redundancy. The NLRC denied the petitioners’ second motion for
reconsideration in its order of May 31, 2006 for being a prohibited pleading. 13
The CA Petition and Decision
The petitioners went to the CA through a petition for certiorari under Rule 65 of the
Rules of Court.14 They charged the NLRC with grave abuse of discretion in: (1)
denying them the benefits under the CBA; (2) finding no evidence that they are
part of the company’s bargaining unit; (3) not reinstating and awarding
backwages to Fulache, Jabonero, Castillo and Lagunzad; and (4) ruling that they
are not entitled to damages and attorney’s fees.
ABS-CBN, on the other hand, questioned the propriety of the petitioners’ use of
a certiorari petition. It argued that the proper remedy for the petitioners was an
appeal from the reinstated decisions of the labor arbiter.
In its decision of March 25, 2008,15 the appellate court brushed aside ABS-CBN’s
procedural question, holding that the petition was justified because there is no
plain, speedy or adequate remedy from a final decision, order or resolution of the
NLRC; the reinstatement of the labor arbiter’s decisions did not mean that the
proceedings reverted back to the level of the arbiter. It likewise affirmed the NLRC
ruling that the petitioners’ second motion for reconsideration is a prohibited
pleading under the NLRC rules.16
On the merits of the case, the CA ruled that the petitioners failed to prove their
claim to CBA benefits since they never raised the issue in the compulsory
arbitration proceedings, and did not appeal the labor arbiter’s decision which was
silent on their entitlement to CBA benefits. The CA found that the petitioners failed
to show with specificity how Section 1 (Appropriate Bargaining Unit) and the other
provisions of the CBA applied to them.
On the illegal dismissal issue, the CA upheld the NLRC decision reinstating the labor
arbiter’s April 21, 2003 ruling.17 Thus, the drivers – Fulache, Jabonero, Castillo and
Lagunzad – were not illegally dismissed as their separation from the service was
due to redundancy; they had not presented any evidence that ABS-CBN abused
its prerogative in contracting out the services of drivers. Except for separation pay,
the CA denied the petitioners’ claim for backwages, moral and exemplary
damages, and attorney’s fees.
The petitioners moved for reconsideration, but the CA denied the motion in a
resolution promulgated on July 8, 2008.18 Hence, the present petition.
The Petition
The petitioners challenge the CA ruling on both procedural and substantive
grounds. As procedural questions, they submit that the CA erred in: (1) affirming
the NLRC resolution which reversed its own decision; (2) sustaining the NLRC ruling
that their second motion for reconsideration is a prohibited pleading; (3) not ruling
that ABS-CBN admitted in its position paper before the labor arbiter that they were
members of the bargaining unit as the matter was not raised in its appeal to the
NLRC; and, (4) not ruling that notwithstanding their failure to appeal from the first
decision of the Labor Arbiter, they can still participate in the appeal filed by ABS-
CBN regarding their employment status.
On the substantive aspect, the petitioners contend that the CA gravely erred in:
(1) not considering the evidence submitted to the NLRC on appeal to bolster their
claim that they were members of the bargaining unit and therefore entitled to the
CBA benefits; (2) not ordering ABS-CBN to pay the petitioners’ salaries, allowances
and CBA benefits after the NLRC has declared that they were regular employees
of ABS-CBN; (3) not ruling that under existing jurisprudence, the position of driver
cannot be declared redundant, and that the petitioners-drivers were illegally
dismissed; and, (4) not ruling that the petitioners were entitled to damages and
attorney’s fees.
The petitioners argue that the NLRC resolution of March 24, 200619 which set aside
its joint decision of December 15, 200420 and reinstated the twin decisions of the
labor arbiter,21 had the effect of promulgating a new decision based on issues that
were not raised in ABS-CBN’s partial appeal to the NLRC. They submit that the
NLRC should have allowed their second motion for reconsideration so that it may
be able to equitably evaluate the parties’ "conflicting versions of the facts" instead
of denying the motion on a mere technicality.
On the question of their CBA coverage, the petitioners contend that the CA erred
in not considering that ABS-CBN admitted their membership in the bargaining unit,
for nowhere in its partial appeal from the labor arbiter’s decision in the
regularization case did it allege that the petitioners failed to prove that they are
members of the bargaining unit; instead, the company stood by its position that
the petitioners were not entitled to the CBA benefits since they were independent
contractors/program employees.
The petitioners submit that while they did not appeal the labor arbiter’s decision in
the regularization case, ABS-CBN raised the employment status issue in its own
appeal to the NLRC; this appeal laid this issue open for review. They argue that
they could still participate in the appeal proceedings at the NLRC; pursue their
position on the issue; and introduce evidence as they did in their reply to the
company’s appeal.22 They bewail the appellate court’s failure to consider the
evidence they presented to the NLRC (consisting of documents and sworn
statements enumerating the activities they are performing) clearly indicating that
they are part of the rank-and-file bargaining unit at ABS-CBN.
The petitioners then proceeded to describe the work they render for the company.
Collectively, they claim that they work as assistants in the production of the
Cebuano news program broadcast daily over ABS-CBN Channel 3, as follows:
Fulache, Jabonero, Castillo and Lagunzad as production assistants to drive the
news team; Ponce and Almendras, to shoot scenes and events with the use of
cameras owned by ABS-CBN; Malig-on Bigno, as studio production assistant and
assistant editor/teleprompter operator; and Cabas, Jr., as production assistant for
video editing and operating the VTR machine recorder. As production assistants,
the petitioners submit that they are rank-and-file employees (citing in support of
their position the Court’s ruling in ABS-CBN Broadcasting Corp. v. Nazareno23) who
are entitled to salary increases and other benefits under the CBA. Relying on the
Court’s ruling in New Pacific Timber and Supply Company, Inc. v. NLRC,24 they posit
that to exclude them from the CBA "would constitute undue discrimination and
would deprive them of monetary benefits they would otherwise be entitled to."
As their final point, the petitioners argue that even if they were not able to prove
that they were members of the bargaining unit, the CA should not have dismissed
their petition. When the CA affirmed the rulings of both the labor arbiter and the
NLRC that they are regular employees, the CA should have ordered ABS-CBN to
recognize their regular employee status and to give them the salaries, allowances
and other benefits and privileges under the CBA.1avvphi1
On the dismissal of Fulache, Jabonero, Castillo and Lagunzad, the petitioners
impute bad faith on ABS-CBN when it abolished the positions of drivers claiming
that the company failed to comply with the requisites of a valid redundancy
action. They maintain that ABS-CBN did not present any evidence on the new
staffing pattern as approved by the management of the company, and did not
even bother to show why it considered the positions of drivers superfluous and
unnecessary; it is not true that the positions of drivers no longer existed because
these positions were contracted out to an agency that, in turn, recruited four
drivers to take the place of Fulache, Jabonero, Castillo and Lagunzad. As further
indication that the redundancy action against the four drivers was done in bad
faith, the petitioners call attention to ABS-CBN’s abolition of the position of drivers
after the labor arbiter rendered her decision declaring Fulache, Jabonero, Castillo
and Lagunzad regular company employees. The petitioners object to the dismissal
of the four drivers when they refused to sign resignation letters and join Able
Services, a contracting agency, contending that the four had no reason to resign
after the labor arbiter declared them regular company employees.
Since their dismissal was illegal and attended by bad faith, the petitioners insist that
they should be reinstated with backwages, and should likewise be awarded moral
and exemplary damages, and attorney's fees.
The Case for ABS-CBN
In its Comment filed on January 28, 2009,25 ABS-CBN presents several grounds
which may be synthesized as follows:
1. The petition raises questions of fact and not of law.
2. The CA committed no error in affirming the resolution of the NLRC
reinstating the decisions of the labor arbiter.
ABS-CBN submits that the petition should be dismissed for having raised questions
of fact and not of law in violation of Rule 45 of the Rules of Court. It argues that the
question of whether the petitioners were covered by the CBA (and therefore
entitled to the CBA benefits) and whether the petitioners were illegally dismissed
because of redundancy, are factual questions that cannot be reviewed
on certiorari because the Court is not a trier of facts.
ABS-CBN dismisses the petitioners’ issues and arguments as mere rehash of what
they raised in their pleadings with the CA and as grounds that do not warrant
further consideration. It further contends that because the petitioners did not
appeal the labor arbiter decisions, these decisions had lapsed to finality and could
no longer be the subject of a petition for certiorari; the petitioners cannot obtain
from the appellate court affirmative relief other than those granted in the
appealed decision. It also argues that the NLRC did not commit any grave abuse
of discretion in reinstating the twin decisions of the labor arbiter, thereby affirming
that no CBA benefits can be awarded to the petitioners; in the absence of any
illegal dismissal, the petitioners were not entitled to reinstatement, backwages,
damages, and attorney's fees.
The Court's Ruling
We first resolve the parties’ procedural questions.
ABS-CBN wants the petition to be dismissed outright for its alleged failure to comply
with the requirement of Rule 45 of the Rules of Court that the petition raises only
questions of law.26
We find no impropriety in the petition from the standpoint of Rule 45. The
petitioners do not question the findings of facts of the assailed decisions. They
question the misapplication of the law and jurisprudence on the facts recognized
by the decisions. For example, they question as contrary to law their exclusion from
the CBA after they were recognized as regular rank-and-file employees of ABS-
CBN. They also question the basis in law of the dismissal of the four drivers and the
legal propriety of the redundancy action taken against. To reiterate the
established distinctions between questions of law and questions of fact, we quote
hereunder our ruling in New Rural Bank of Guimba (N.E.) Inc. v. Fermina S. Abad
and Rafael Susan:27
We reiterate the distinction between a question of law and a question of fact. A
question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue does
not call for an examination of the probative value of the evidence presented, the
truth or falsehood of the facts being admitted. A question of fact exists when a
doubt or difference arises as to the truth or falsehood of facts or when the query
invites calibration of the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances, as
well as their relation to each other and to the whole, and the probability of the
situation.
We also find no error in the CA’s affirmation of the denial of the petitioners’ second
motion for reconsideration of the March 24, 2006 resolution of the NLRC reinstating
the labor arbiter’s twin decisions. The petitioners’ second motion for
reconsideration was a prohibited pleading under the NLRC rules of procedure.28
The parties’ other procedural questions directly bear on the merits of their positions
and are discussed and resolved below, together with the core substantive issues
of: (1) whether the petitioners, as regular employees, are members of the
bargaining unit entitled to CBA benefits; and (2) whether petitioners Fulache,
Jabonero, Castillo and Lagunzad were illegally dismissed.
The Claim for CBA Benefits
We find merit in the petitioners’ positions.
As regular employees, the petitioners fall within the coverage of the bargaining
unit and are therefore entitled to CBA benefits as a matter of law and contract. In
the root decision (the labor arbiter’s decision of January 17, 2002) that the NLRC
and CA affirmed, the labor arbiter declared:
WHEREFORE, IN THE LIGHT OF THE FOREGOING, taking into account the factual
scenario and the evidence adduced by both parties, it is declared that
complainants in these cases are REGULAR EMPLOYEES of respondent ABS-CBN and
not INDEPENDENT CONTRACTORS and thus henceforth they are entitled to the
benefits and privileges attached to regular status of their employment.
This declaration unequivocally settled the petitioners’ employment status: they are
ABS-CBN’s regular employees entitled to the benefits and privileges of regular
employees. These benefits and privileges arise from entitlements under the law
(specifically, the Labor Code and its related laws), and from their employment
contract as regular ABS-CBN employees, part of which is the CBA if they fall within
the coverage of this agreement. Thus, what only needs to be resolved as an issue
for purposes of implementation of the decision is whether the petitioners fall within
CBA coverage.
The parties’ 1999-2002 CBA provided in its Article I (Scope of the Agreement) that:29
Section 1. APPROPRIATE BARGAINING UNIT. – The parties agree that the
appropriate bargaining unit shall be regular rank-and-file employees of ABS-CBN
BROADCASTING CORPORATION but shall not include:
a) Personnel classified as Supervisor and Confidential employees;
b) Personnel who are on "casual" or "probationary" status as defined in
Section 2 hereof;
c) Personnel who are on "contract" status or who are paid for specified
units of work such as writer-producers, talent-artists, and singers.
The inclusion or exclusion of new job classifications into the bargaining unit shall be
subject of discussion between the COMPANY and the UNION. [emphasis supplied]
Under these terms, the petitioners are members of the appropriate bargaining unit
because they are regular rank-and-file employees and do not belong to any of
the excluded categories. Specifically, nothing in the records shows that they are
supervisory or confidential employees; neither are they casual nor probationary
employees. Most importantly, the labor arbiter’s decision of January 17, 2002 –
affirmed all the way up to the CA level – ruled against ABS-CBN’s submission that
they are independent contractors. Thus, as regular rank-and-file employees, they
fall within CBA coverage under the CBA’s express terms and are entitled to its
benefits.
We see no merit in ABS-CBN’s arguments that the petitioners are not entitled to
CBA benefits because: (1) they did not claim these benefits in their position paper;
(2) the NLRC did not categorically rule that the petitioners were members of the
bargaining unit; and (3) there was no evidence of this membership. To further
clarify what we stated above, CBA coverage is not only a question of fact, but of
law and contract. The factual issue is whether the petitioners are regular rank-and-
file employees of ABS-CBN. The tribunals below uniformly answered this question in
the affirmative. From this factual finding flows legal effects touching on the terms
and conditions of the petitioners’ regular employment. This was what the labor
arbiter meant when he stated in his decision that "henceforth they are entitled to
the benefits and privileges attached to regular status of their employment."
Significantly, ABS-CBN itself posited before this Court that "the Court of Appeals did
not gravely err nor gravely abuse its discretion when it affirmed the resolution of the
NLRC dated March 24, 2006 reinstating and adopting in toto the decision of the
Labor Arbiter dated January 17, 2002 x x x."30 This representation alone fully resolves
all the objections – procedural or otherwise – ABS-CBN raised on the regularization
issue.
The Dismissal of Fulache, Jabonero,
Castillo and Lagunzad
The termination of employment of the four drivers occurred under highly
questionable circumstances and with plain and unadulterated bad faith.
The records show that the regularization case was in fact the root of the resulting
bad faith as this case gave rise and led to the dismissal case. First, the
regularization case was filed leading to the labor arbiter’s decision31declaring the
petitioners, including Fulache, Jabonero, Castillo and Lagunzad, to be regular
employees. ABS-CBN appealed the decision and maintained its position that the
petitioners were independent contractors.
In the course of this appeal, ABS-CBN took matters into its own hands and
terminated the petitioners’ services, clearly disregarding its own appeal then
pending with the NLRC. Notably, this appeal posited that the petitioners were not
employees (whose services therefore could be terminated through dismissal under
the Labor Code); they were independent contractors whose services could be
terminated at will, subject only to the terms of their contracts. To justify the
termination of service, the company cited redundancy as its authorized cause but
offered no justificatory supporting evidence. It merely claimed that it was
contracting out the petitioners’ activities in the exercise of its management
prerogative.
ABS-CBN’s intent, of course, based on the records, was to transfer the petitioners
and their activities to a service contractor without paying any attention to the
requirements of our labor laws; hence, ABS-CBN dismissed the petitioners when
they refused to sign up with the service contractor.32 In this manner, ABS-CBN fell
into a downward spiral of irreconcilable legal positions, all undertaken in the hope
of saving itself from the decision declaring its "talents" to be regular employees.
By doing all these, ABS-CBN forgot labor law and its realities.
It forgot that by claiming redundancy as authorized cause for dismissal, it impliedly
admitted that the petitioners were regular employees whose services, by law, can
only be terminated for the just and authorized causes defined under the Labor
Code.
Likewise ABS-CBN forgot that it had an existing CBA with a union, which agreement
must be respected in any move affecting the security of tenure of affected
employees; otherwise, it ran the risk of committing unfair labor practice – both a
criminal and an administrative offense.33 It similarly forgot that an exercise of
management prerogative can be valid only if it is undertaken in good faith and
with no intent to defeat or circumvent the rights of its employees under the laws or
under valid agreements.34
Lastly, it forgot that there was a standing labor arbiter’s decision that, while not yet
final because of its own pending appeal, cannot simply be disregarded. By
implementing the dismissal action at the time the labor arbiter’s ruling was under
review, the company unilaterally negated the effects of the labor arbiter’s ruling
while at the same time appealling the same ruling to the NLRC. This unilateral
move is a direct affront to the NLRC’s authority and an abuse of the appeal
process.
All these go to show that ABS-CBN acted with patent bad faith. A close parallel we
can draw to characterize this bad faith is the prohibition against forum-shopping
under the Rules of Court. In forum-shopping, the Rules characterize as bad faith
the act of filing similar and repetitive actions for the same cause with the intent of
somehow finding a favorable ruling in one of the actions filed. 35 ABS-CBN’s actions
in the two cases, as described above, are of the same character, since its obvious
intent was to defeat and render useless, in a roundabout way and other than
through the appeal it had taken, the labor arbiter’s decision in the regularization
case. Forum-shopping is penalized by the dismissal of the actions involved. The
penalty against ABS-CBN for its bad faith in the present case should be no less.
The errors and omissions do not belong to ABS-CBN alone. The labor arbiter himself
who handled both cases did not see the totality of the company’s actions for what
they were. He appeared to have blindly allowed what he granted the petitioners
with his left hand, to be taken away with his right hand, unmindful that the
company already exhibited a badge of bad faith in seeking to terminate the
services of the petitioners whose regular status had just been recognized. He
should have recognized the bad faith from the timing alone of ABS-CBN’s
conscious and purposeful moves to secure the ultimate aim of avoiding the
regularization of its so-called "talents."
The NLRC, for its part, initially recognized the presence of bad faith when it
originally ruled that:
While notice has been made to the employees whose positions were declared
redundant, the element of good faith in abolishing the positions of the
complainants appear to be wanting. In fact, it remains undisputed that herein
complainants were terminated when they refused to sign an employment
contract with Able Services which would make them appear as employees of the
agency and not of ABS-CBN. Such act by itself clearly demonstrates bad faith on
the part of the respondent in carrying out the company’s redundancy program x x
x.36
On motion for reconsideration by both parties, the NLRC reiterated its
"pronouncement that complainants were illegally terminated as extensively
discussed in our Joint Decision dated December 15, 2004." 37 Yet, in an inexplicable
turnaround, it reconsidered its joint decision and reinstated not only the labor
arbiter’s decision of January 17, 2002 in the regularization case, but also his illegal
dismissal decision of April 21, 2003.38 Thus, the NLRC joined the labor arbiter in his
error that we cannot but characterize as grave abuse of discretion.
The Court cannot leave unchecked the labor tribunals’ patent grave abuse of
discretion that resulted, without doubt, in a grave injustice to the petitioners who
were claiming regular employment status and were unceremoniously deprived of
their employment soon after their regular status was recognized. Unfortunately, the
CA failed to detect the labor tribunals’ gross errors in the disposition of the dismissal
issue. Thus, the CA itself joined the same errors the labor tribunals committed.
The injustice committed on the petitioners/drivers requires rectification. Their
dismissal was not only unjust and in bad faith as the above discussions abundantly
show. The bad faith in ABS-CBN’s move toward its illegitimate goal was not even
hidden; it dismissed the petitioners – already recognized as regular employees – for
refusing to sign up with its service contractor. Thus, from every perspective, the
petitioners were illegally dismissed.
By law,39 illegally dismissed employees are entitled to reinstatement without loss of
seniority rights and other privileges and to full backwages, inclusive of allowances,
and to other benefits or their monetary equivalent from the time their
compensation was withheld from them up to the time of their actual
reinstatement. The four dismissed drivers deserve no less.
Moreover, they are also entitled to moral damages since their dismissal was
attended by bad faith.40 For having been compelled to litigate and to incur
expenses to protect their rights and interest, the petitioners are likewise entitled to
attorney’s fees.41
WHEREFORE, premises considered, we hereby GRANT the petition. The decision
dated March 25, 2008 and the resolution dated July 8, 2008 of the Court of
Appeals in CA-G.R. SP No. 01838 are hereby REVERSED and SET ASIDE. Accordingly,
judgment is hereby rendered as follows:
1. Confirming that petitioners FARLEY FULACHE, MANOLO JABONERO,
DAVID CASTILLO, JEFFREY LAGUNZAD, MAGDALENA MALIG-ON BIGNO,
FRANCISCO CABAS, JR., HARVEY PONCE and ALAN C. ALMENDRAS are
regular employees of ABS-CBN BROADCASTING CORPORATION, and
declaring them entitled to all the rights, benefits and privileges, including
CBA benefits, from the time they became regular employees in
accordance with existing company practice and the Labor Code;
2. Declaring illegal the dismissal of Fulache, Jabonero, Castillo and
Lagunzad, and ordering ABS-CBN to immediately reinstate them to their
former positions without loss of seniority rights with full backwages and all
other monetary benefits, from the time they were dismissed up to the date
of their actual reinstatement;
3. Awarding moral damages of ₱100,000.00 each to Fulache, Jabonero,
Castillo and Lagunzad; and,
4. Awarding attorney’s fees of 10% of the total monetary award decreed
in this Decision.
Costs against the respondent.
SO ORDERED.
G.R. No. 164652 June 8, 2007
THELMA DUMPIT-MURILLO, petitioner,
vs.
COURT OF APPEALS, ASSOCIATED BROADCASTING COMPANY, JOSE JAVIER AND
EDWARD TAN,respondents.
DECISION
QUISUMBING, J.:
This petition seeks to reverse and set aside both the Decision1 dated January 30,
2004 of the Court of Appeals in CA-G.R. SP No. 63125 and its Resolution2 dated
June 23, 2004 denying the motion for reconsideration. The Court of Appeals had
overturned the Resolution3 dated August 30, 2000 of the National Labor Relations
Commission (NLRC) ruling that petitioner was illegally dismissed.
The facts of the case are as follows:
On October 2, 1995, under Talent Contract No. NT95-1805,4 private respondent
Associated Broadcasting Company (ABC) hired petitioner Thelma Dumpit-Murillo
as a newscaster and co-anchor for Balitang-Balita, an early evening news
program. The contract was for a period of three months. It was renewed under
Talent Contracts Nos. NT95-1915, NT96-3002, NT98-4984 and NT99-5649.5 In addition,
petitioner’s services were engaged for the program "Live on Five." On September
30, 1999, after four years of repeated renewals, petitioner’s talent contract expired.
Two weeks after the expiration of the last contract, petitioner sent a letter to Mr.
Jose Javier, Vice President for News and Public Affairs of ABC, informing the latter
that she was still interested in renewing her contract subject to a salary increase.
Thereafter, petitioner stopped reporting for work. On November 5, 1999, she wrote
Mr. Javier another letter,6 which we quote verbatim:
xxxx
Dear Mr. Javier:
On October 20, 1999, I wrote you a letter in answer to your query by way of a
marginal note "what terms and conditions" in response to my first letter dated
October 13, 1999. To date, or for more than fifteen (15) days since then, I have not
received any formal written reply. xxx
In view hereof, should I not receive any formal response from you until Monday,
November 8, 1999, I will deem it as a constructive dismissal of my services.
xxxx
A month later, petitioner sent a demand letter7 to ABC, demanding: (a)
reinstatement to her former position; (b) payment of unpaid wages for services
rendered from September 1 to October 20, 1999 and full backwages; (c) payment
of 13th month pay, vacation/sick/service incentive leaves and other monetary
benefits due to a regular employee starting March 31, 1996. ABC replied that a
check covering petitioner’s talent fees for September 16 to October 20, 1999 had
been processed and prepared, but that the other claims of petitioner had no basis
in fact or in law.
On December 20, 1999, petitioner filed a complaint8 against ABC, Mr. Javier and
Mr. Edward Tan, for illegal constructive dismissal, nonpayment of salaries, overtime
pay, premium pay, separation pay, holiday pay, service incentive leave pay,
vacation/sick leaves and 13th month pay in NLRC-NCR Case No. 30-12-00985-99.
She likewise demanded payment for moral, exemplary and actual damages, as
well as for attorney’s fees.
The parties agreed to submit the case for resolution after settlement failed during
the mandatory conference/conciliation. On March 29, 2000, the Labor Arbiter
dismissed the complaint.9
On appeal, the NLRC reversed the Labor Arbiter in a Resolution dated August 30,
2000. The NLRC held that an employer-employee relationship existed between
petitioner and ABC; that the subject talent contract was void; that the petitioner
was a regular employee illegally dismissed; and that she was entitled to
reinstatement and backwages or separation pay, aside from 13th month pay and
service incentive leave pay, moral and exemplary damages and attorney’s fees. It
held as follows:
WHEREFORE, the Decision of the Arbiter dated 29 March 2000 is
hereby REVERSED/SET ASIDE and a NEW ONE promulgated:
1) declaring respondents to have illegally dismissed complainant from her regular
work therein and thus, ordering them to reinstate her in her former position without
loss of seniority right[s] and other privileges and to pay her full backwages, inclusive
of allowances and other benefits, including 13th month pay based on her said
latest rate of ₱28,000.00/mo. from the date of her illegal dismissal on 21 October
1999 up to finality hereof, or at complainant’s option, to pay her separation pay of
one (1) month pay per year of service based on said latest monthly rate, reckoned
from date of hire on 30 September 1995 until finality hereof;
2) to pay complainant’s accrued SILP [Service Incentive Leave Pay] of 5 days pay
per year and 13th month pay for the years 1999, 1998 and 1997 of ₱19,236.00 and
₱84,000.00, respectively and her accrued salary from 16 September 1999 to 20
October 1999 of ₱32,760.00 plus legal interest at 12% from date of judicial demand
on 20 December 1999 until finality hereof;
3) to pay complainant moral damages of ₱500,000.00, exemplary damages of
₱350,000.00 and 10% of the total of the adjudged monetary awards as attorney’s
fees.
Other monetary claims of complainant are dismissed for lack of merit.
SO ORDERED.10
After its motion for reconsideration was denied, ABC elevated the case to the
Court of Appeals in a petition for certiorari under Rule 65. The petition was first
dismissed for failure to attach particular documents,11 but was reinstated on
grounds of the higher interest of justice.12
Thereafter, the appellate court ruled that the NLRC committed grave abuse of
discretion, and reversed the decision of the NLRC.13 The appellate court reasoned
that petitioner should not be allowed to renege from the stipulations she had
voluntarily and knowingly executed by invoking the security of tenure under the
Labor Code. According to the appellate court, petitioner was a fixed-term
employee and not a regular employee within the ambit of Article 28014 of the
Labor Code because her job, as anticipated and agreed upon, was only for a
specified time.15
Aggrieved, petitioner now comes to this Court on a petition for review, raising
issues as follows:
I.
THIS HONORABLE COURT CAN REVIEW THE FINDINGS OF THE HONORABLE COURT OF
APPEALS, THE DECISION OF WHICH IS NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT[;]
II.
THE PRO-FORMA TALENT CONTRACTS, AS CORRECTLY FOUND BY THE NLRC – FIRST
DIVISION, ARE "ANTI-REGULARIZATION DEVICES" WHICH MUST BE STRUCK DOWN FOR
REASONS OF PUBLIC POLICY[;]
III.
BY REASON OF THE CONTINUOUS AND SUCCESSIVE RENEWALS OF THE THREE-
MONTH TALENT CONTRACTS, AN EMPLOYER-EMPLOYEE RELATIONSHIP WAS
CREATED AS PROVIDED FOR UNDER ARTICLE 280 OF THE LABOR CODE[;]
IV.
BY THE CONSTRUCTIVE DISMISSAL OF HEREIN PETITIONER, AS A REGULAR EMPLOYEE,
THERE WAS A DENIAL OF PETITIONER’S RIGHT TO DUE PROCESS THUS ENTITLING HER
TO THE MONEY CLAIMS AS STATED IN THE COMPLAINT[.] 16
The issues for our disposition are: (1) whether or not this Court can review the
findings of the Court of Appeals; and (2) whether or not under Rule 45 of the Rules
of Court the Court of Appeals committed a reversible error in its Decision.
On the first issue, private respondents contend that the issues raised in the instant
petition are mainly factual and that there is no showing that the said issues have
been resolved arbitrarily and without basis. They add that the findings of the Court
of Appeals are supported by overwhelming wealth of evidence on record as well
as prevailing jurisprudence on the matter.17
Petitioner however contends that this Court can review the findings of the Court of
Appeals, since the appellate court erred in deciding a question of substance in a
way which is not in accord with law or with applicable decisions of this Court.18
We agree with petitioner. Decisions, final orders or resolutions of the Court of
Appeals in any case — regardless of the nature of the action or proceeding
involved — may be appealed to this Court through a petition for review. This
remedy is a continuation of the appellate process over the original case,19 and
considering there is no congruence in the findings of the NLRC and the Court of
Appeals regarding the status of employment of petitioner, an exception to the
general rule that this Court is bound by the findings of facts of the appellate
court,20 we can review such findings.
On the second issue, private respondents contend that the Court of Appeals did
not err when it upheld the validity of the talent contracts voluntarily entered into by
petitioner. It further stated that prevailing jurisprudence has recognized and
sustained the absence of employer-employee relationship between a talent and
the media entity which engaged the talent’s services on a per talent contract
basis, citing the case of Sonza v. ABS-CBN Broadcasting Corporation.21
Petitioner avers however that an employer-employee relationship was created
when the private respondents started to merely renew the contracts repeatedly
fifteen times or for four consecutive years.22
Again, we agree with petitioner. The Court of Appeals committed reversible error
when it held that petitioner was a fixed-term employee. Petitioner was a regular
employee under contemplation of law. The practice of having fixed-term
contracts in the industry does not automatically make all talent contracts valid
and compliant with labor law. The assertion that a talent contract exists does not
necessarily prevent a regular employment status.23
Further, the Sonza case is not applicable. In Sonza, the television station did not
instruct Sonza how to perform his job. How Sonza delivered his lines, appeared on
television, and sounded on radio were outside the television station’s control.
Sonza had a free hand on what to say or discuss in his shows provided he did not
attack the television station or its interests. Clearly, the television station did not
exercise control over the means and methods of the performance of Sonza’s
work.24 In the case at bar, ABC had control over the performance of petitioner’s
work. Noteworthy too, is the comparatively low ₱28,000 monthly pay of
petitioner25 vis the ₱300,000 a month salary of Sonza,26 that all the more bolsters the
conclusion that petitioner was not in the same situation as Sonza.
The contract of employment of petitioner with ABC had the following stipulations:
xxxx
1. SCOPE OF SERVICES – TALENT agrees to devote his/her talent, time, attention
and best efforts in the performance of his/her duties and responsibilities as
Anchor/Program Host/Newscaster of the Program, in accordance with the
direction of ABC and/or its authorized representatives.
1.1. DUTIES AND RESPONSIBILITIES – TALENT shall:
a. Render his/her services as a newscaster on the Program;
b. Be involved in news-gathering operations by conducting interviews on- and off-
the-air;
c. Participate in live remote coverages when called upon;
d. Be available for any other news assignment, such as writing, research or camera
work;
e. Attend production meetings;
f. On assigned days, be at the studios at least one (1) hour before the live
telecasts;
g. Be present promptly at the studios and/or other place of assignment at the time
designated by ABC;
h. Keep abreast of the news;
i. Give his/her full cooperation to ABC and its duly authorized representatives in the
production and promotion of the Program; and
j. Perform such other functions as may be assigned to him/her from time to time.
xxxx
1.3 COMPLIANCE WITH STANDARDS, INSTRUCTIONS AND OTHER RULES AND
REGULATIONS – TALENT agrees that he/she will promptly and faithfully comply with
the requests and instructions, as well as the program standards, policies, rules and
regulations of ABC, the KBP and the government or any of its agencies and
instrumentalities.27
xxxx
In Manila Water Company, Inc. v. Pena,28 we said that the elements to determine
the existence of an employment relationship are: (a) the selection and
engagement of the employee, (b) the payment of wages, (c) the power of
dismissal, and (d) the employer’s power to control. The most important element is
the employer’s control of the employee’s conduct, not only as to the result of the
work to be done, but also as to the means and methods to accomplish it.29
The duties of petitioner as enumerated in her employment contract indicate that
ABC had control over the work of petitioner. Aside from control, ABC also dictated
the work assignments and payment of petitioner’s wages. ABC also had power to
dismiss her. All these being present, clearly, there existed an employment
relationship between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of employees,
namely: (1) those who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; and (2) those
who have rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed.30 In other words, regular
status arises from either the nature of work of the employee or the duration of his
employment.31 In Benares v. Pancho,32 we very succinctly said:
…[T]he primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee vis-à-
vis the usual trade or business of the employer. This connection can be determined
by considering the nature of the work performed and its relation to the scheme of
the particular business or trade in its entirety. If the employee has been performing
the job for at least a year, even if the performance is not continuous and merely
intermittent, the law deems repeated and continuing need for its performance as
sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is considered regular, but only with respect to
such activity and while such activity exists.33
In our view, the requisites for regularity of employment have been met in the
instant case. Gleaned from the description of the scope of services
aforementioned, petitioner’s work was necessary or desirable in the usual business
or trade of the employer which includes, as a pre-condition for its
enfranchisement, its participation in the government’s news and public information
dissemination. In addition, her work was continuous for a period of four years. This
repeated engagement under contract of hire is indicative of the necessity and
desirability of the petitioner’s work in private respondent ABC’s business. 34
The contention of the appellate court that the contract was characterized by a
valid fixed-period employment is untenable. For such contract to be valid, it should
be shown that the fixed period was knowingly and voluntarily agreed upon by the
parties. There should have been no force, duress or improper pressure brought to
bear upon the employee; neither should there be any other circumstance that
vitiates the employee’s consent.35 It should satisfactorily appear that the employer
and the employee dealt with each other on more or less equal terms with no moral
dominance being exercised by the employer over the employee.36 Moreover,
fixed-term employment will not be considered valid where, from the
circumstances, it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee.37

In the case at bar, it does not appear that the employer and employee dealt with
each other on equal terms. Understandably, the petitioner could not object to the
terms of her employment contract because she did not want to lose the job that
she loved and the workplace that she had grown accustomed to,38 which is
exactly what happened when she finally manifested her intention to negotiate.
Being one of the numerous newscasters/broadcasters of ABC and desiring to keep
her job as a broadcasting practitioner, petitioner was left with no choice but to
affix her signature of conformity on each renewal of her contract as already
prepared by private respondents; otherwise, private respondents would have
simply refused to renew her contract. Patently, the petitioner occupied a position
of weakness vis-à-vis the employer. Moreover, private respondents’ practice of
repeatedly extending petitioner’s 3-month contract for four years is a
circumvention of the acquisition of regular status. Hence, there was no valid fixed-
term employment between petitioner and private respondents.

While this Court has recognized the validity of fixed-term employment contracts in
a number of cases, it has consistently emphasized that when the circumstances of
a case show that the periods were imposed to block the acquisition of security of
tenure, they should be struck down for being contrary to law, morals, good
customs, public order or public policy.39

As a regular employee, petitioner is entitled to security of tenure and can be

dismissed only for just cause and after due compliance with procedural due
process. Since private respondents did not observe due process in constructively
dismissing the petitioner, we hold that there was an illegal dismissal.

WHEREFORE, the challenged Decision dated January 30, 2004 and Resolution
dated June 23, 2004 of the Court of Appeals in CA-G.R. SP No. 63125, which held
that the petitioner was a fixed-term employee, are REVERSED and SET ASIDE. The
NLRC decision is AFFIRMED.

Costs against private respondents.

SO ORDERED.
G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is
an independent contractor rather than a regular employee with or without a fixed
term. That a person has a disease does not per se entitle the employer to
terminate his or her services. Termination is the last resort. At the very least, a
competent public health authority must certify that the disease cannot be cured
within six ( 6) months, even with appropriate treatment.
We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc.,
seeking the reversal of the Court of Appeals’ Decision2 dated June 25, 2012,
affirming with modification the decision3 of the National Labor Relations
Commission.
In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer4 "tasked to report Philippine news to Fuji
through its Manila Bureau field office."5 Arlene’s employment contract initially
provided for a term of one (1) year but was successively renewed on a yearly basis
with salary adjustment upon every renewal.6 Sometime in January 2009, Arlenewas
diagnosed with lung cancer.7She informed Fuji about her condition. In turn, the
Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will
have a problem renewing her contract"8 since it would be difficult for her to
perform her job.9 She "insisted that she was still fit to work as certified by her
attending physician."10
After several verbal and written communications,11 Arlene and Fuji signed a non-
renewal contract on May 5, 2009 where it was stipulated that her contract would
no longer be renewed after its expiration on May 31, 2009. The contract also
provided that the parties release each other from liabilities and responsibilities
under the employment contract.12
In consideration of the non-renewal contract, Arlene "acknowledged receipt of
the total amount of US$18,050.00 representing her monthly salary from March 2009
to May 2009, year-end bonus, mid-year bonus, and separation pay."13 However,
Arlene affixed her signature on the nonrenewal contract with the initials "U.P." for
"under protest."14
On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
Arbitration Branch of the National Labor Relations Commission. She alleged that
she was forced to sign the nonrenewal contract when Fuji came to know of her
illness and that Fuji withheld her salaries and other benefits for March and April
2009 when she refused to sign.15
Arlene claimed that she was left with no other recourse but to sign the non-
renewal contract, and it was only upon signing that she was given her salaries and
bonuses, in addition to separation pay equivalent to four (4) years. 16
In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla
dismissed Arlene’s complaint.18Citing Sonza v. ABS-CBN19 and applying the four-
fold test, the Labor Arbiter held that Arlene was not Fuji’s employee but an
independent contractor.20
Arlene appealed before the National Labor Relations Commission. In its decision
dated March 5, 2010, the National Labor Relations Commission reversed the Labor
Arbiter’s decision.21 It held that Arlene was a regular employee with respect to the
activities for which she was employed since she continuously rendered services
that were deemednecessary and desirable to Fuji’s business.22 The National Labor
Relations Commission ordered Fuji to pay Arlene backwages, computed from the
date of her illegal dismissal.23 The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered GRANTING the
instant appeal. The Decision of the Labor Arbiter dated 19 September 2009 is
hereby REVERSED and SET ASIDE, and a new one is issued ordering respondents-
appellees to pay complainant-appellant backwages computed from the date of
her illegal dismissal until finality of this Decision.
SO ORDERED.24
Arlene and Fuji filed separat emotions for reconsideration. 25 Both motions were
denied by the National Labor Relations Commission for lack of merit in the
resolution dated April 26, 2010.26 From the decision of the National Labor Relations
Commission, both parties filed separate petitions for certiorari 27 before the Court of
Appeals. The Court of Appeals consolidated the petitions and considered the
following issues for resolution:
1) Whether or not Espirituis a regular employee or a fixed-term contractual
employee;
2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorney’s fees.28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate
Arlene to her position as News Producer without loss of seniority rights, and
pay her backwages, 13th-month pay, mid-year and year-end bonuses,
sick leave and vacation leave with pay until reinstated, moral damages,
 exemplary damages, attorney’sfees, and legal interest of 12% per annum
of the total monetary awards.29 The Court of Appeals ruled that:
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki
Aoki is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the
Decision dated March 5, 2010 of the National Labor Relations Commission, 6th
Division in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated
April 26, 2010 are hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to
her position as News Producer without loss of seniority rights and privileges and to
pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5,
2009 (the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of
dismissal, until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per
year from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per
year from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum
from date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein
stated; and
10. Legal interest of twelve percent (12%) per annum of the total
monetary awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the
above monetary awards consistent with the above directives.
SO ORDERED.30
In arriving at the decision, the Court of Appeals held that Arlene was a regular
employee because she was engaged to perform work that was necessary or
desirable in the business of Fuji,31 and the successive renewals of her fixed-term
contract resulted in regular employment.32
According to the Court of Appeals, Sonzadoes not apply in order to establish that
Arlene was an independent contractor because she was not contracted on
account of any peculiar ability, special talent, or skill.33 The fact that everything
used by Arlene in her work was owned by Fuji negated the idea of job
contracting.34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji
failed to comply with the requirements of substantive and procedural due process
necessary for her dismissal since she was a regular employee.35
The Court of Appeals found that Arlene did not sign the non-renewal contract
voluntarily and that the contract was a mere subterfuge by Fuji to secure its
position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment.36
Fuji filed a motion for reconsideration that was denied in the resolution37 dated
December 7, 2012 for failure to raise new matters.38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals
erred in affirming with modification the National Labor Relations Commission’s
decision, holding that Arlene was a regular employee and that she was illegally
dismissed. Fuji also questioned the award of monetary claims, benefits, and
damages.39
Fuji points out that Arlene was hired as a stringer, and it informed her that she
would remain one.40 She was hired as an independent contractor as defined in
Sonza.41 Fuji had no control over her work.42 The employment contracts were
executed and renewed annually upon Arlene’s insistence to which Fuji relented
because she had skills that distinguished her from ordinary employees. 43 Arlene
and Fuji dealt on equal terms when they negotiated and entered into the
employment contracts.44 There was no illegal dismissal because she freely agreed
not to renew her fixed-term contract as evidenced by her e-mail correspondences
with Yoshiki Aoki.45 In fact, the signing of the non-renewal contract was not
necessary to terminate her employment since "such employment terminated upon
expiration of her contract."46 Finally, Fuji had dealt with Arlene in good faith, thus,
she should not have been awarded damages.47
Fuji alleges that it did not need a permanent reporter since the news reported by
Arlene could easily be secured from other entities or from the internet.48 Fuji "never
controlled the manner by which she performed her functions."49It was Arlene who
insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for
annual increases in her pay.50
Fuji points out that Arlene reported for work for only five (5) days in February 2009,
three (3) days in March 2009, and one (1) day in April 2009. 51 Despite the provision
in her employment contract that sick leaves in excess of 30 days shall not be paid,
Fuji paid Arlene her entire salary for the months of March, April, and May; four(4)
months of separation pay; and a bonus for two and a half months for a total of
US$18,050.00.52 Despite having received the amount of US$18,050.00, Arlene still
filed a case for illegal dismissal.53
Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by
the parties as indicated in Arlene’s e-mail54 dated March 11, 2009 where she
consented to the non-renewal of her contract but refused to sign anything.55 Aoki
informed Arlene in an e-mail56 dated March 12, 2009 that she did not need to sign
a resignation letter and that Fuji would pay Arlene’s salary and bonus until May
2009 as well as separation pay.57
Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.58 This attached version contained a
provision that Fuji shall re-hire her if she was still interested to work for Fuji.59 For Fuji,
Arlene’s e-mail showed that she had the power to bargain.60
Fuji then posits that the Court of Appeals erred when it held that the elements of
an employer-employee relationship are present, particularly that of control;61 that
Arlene’s separation from employment upon the expiration of her contract
constitutes illegal dismissal;62 that Arlene is entitled to reinstatement;63 and that Fuji
is liable to Arlene for damages and attorney’s fees.64
This petition for review on certiorari under Rule 45 was filed on February 8,
2013.65 On February 27, 2013, Arlene filed a manifestation66 stating that this court
may not take jurisdiction over the case since Fuji failed to authorize Corazon E.
Acerden to sign the verification.67 Fuji filed a comment on the manifestation68 on
March 9, 2013.
Based on the arguments of the parties, there are procedural and substantive issues
for resolution:
I. Whether the petition for review should be dismissed as Corazon E.
Acerden, the signatory of the verification and certification of non forum
shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave
abuse of discretion was committed by the National Labor Relations
Commission when it ruled that Arlene was a regular employee, not an
independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor
Relations Commission’s decision by awarding reinstatement, damages,
and attorney’s fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized
to sign the verification and certification of non-forum shopping because Mr. Shuji
Yano was empowered under the secretary’s certificate to delegate his authority to
sign the necessary pleadings, including the verification and certification against
forum shopping.69
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and
Mr. Jin Eto in the secretary’s certificate is only for the petition for certiorari before
the Court of Appeals.70 Fuji did not attach any board resolution authorizing
Corazon orany other person tofile a petition for review on certiorari with this
court.71 Shuji Yano and Jin Eto could not re-delegate the power thatwas
delegated to them.72 In addition, the special power of attorney executed by Shuji
Yano in favor of Corazon indicated that she was empowered to sign on behalf of
Shuji Yano, and not on behalf of Fuji.73
The Rules of Court requires the
submission of verification and
certification against forum shopping
Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
verification, while Section 5 of the same rule provides the requirement of
certification against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and
that the allegations therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on
"information and belief," or upon "knowledge, information and belief," or lacks a
proper verification, shall be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall
certify under oath in the complaint orother initiatory pleading asserting a claim for
relief or in a sworn certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any claim involving
the same issues in any court, tribunal or quasi-judicial agency and, to the best of
his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to
the court wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion
and after hearing. The submission of a false certification or non-compliance with
any of the undertakings therein shall constitute indirect contempt ofcourt, without
prejudice to the corresponding administrative and criminalactions. If the acts of
the party or his counsel clearly constitute willful and deliberate forum shopping, the
same shall be ground for summary dismissal with prejudice and shall constitute
direct contempt, as well as a cause for administrative sanctions.
Section 4(e) of Rule 4574 requires that petitions for review should "contain a sworn
certification against forum shopping as provided in the last paragraph of section 2,
Rule 42." Section 5 of the same rule provides that failure to comply with any
requirement in Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank75 discussed the effect of non-compliance with regard to
verification and stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional.
Such requirement is simply a condition affecting the form of pleading, the non-
compliance of which does not necessarily render the pleading fatally defective.
Verification is simply intended to secure an assurance that the allegations in the
pleading are true and correct and not the product of the imagination or a matter
of speculation, and that the pleading is filed in good faith. The court may order the
correction of the pleading if the verification is lacking or act on the pleading
although it is not verified, if the attending circumstances are such that strict
compliance with the rules may be dispensed with inorder that the ends of justice
may thereby be served.76 (Citations omitted)
Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and
differentiated its effect from non-compliance with the requirement of certification
against forum shopping:
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45
of the 1997 Rules of Civil Procedure provides that the failure of the petitioner
tosubmit the required documents that should accompany the petition, including
the certification against forum shopping, shall be sufficient ground for the dismissal
thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said
signatory is authorized to file a petition on behalf of the corporation.78 (Emphasis
supplied) Effects of substantial compliance with the requirement of verification and
certification against forum shopping
Although the general rule is that failure to attach a verification and certification
against forum shopping isa ground for dismissal, there are cases where this court
allowed substantial compliance.
In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required
certification one day after filing his electoral protest.80 This court considered the
subsequent filing as substantial compliance since the purpose of filing the
certification is to curtail forum shopping.81
In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification
and certification against forum shopping but failed to attach the board resolution
indicating her authority to sign.83 In a motion for reconsideration, LDP Marketing
attached the secretary’s certificate quoting the board resolution that authorized
Dela Peña.84 Citing Shipside, this court deemed the belated submission as
substantial compliance since LDP Marketing complied with the requirement; what
it failed to do was to attach proof of Dela Peña’s authority to sign. 85 Havtor
Management Phils., Inc. v. National Labor Relations Commission86 and General
Milling Corporation v. National Labor Relations Commission87 involved petitions that
were dismissed for failure to attach any document showing that the signatory on
the verification and certification against forum-shopping was authorized.88 In both
cases, the secretary’s certificate was attached to the motion for
reconsideration.89 This court considered the subsequent submission of proof
indicating authority to sign as substantial compliance.90 Altres v.
Empleo91 summarized the rules on verification and certification against forum
shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the
requirement on, or submission of defective, verification and certification against
forum shopping:
1) A distinction must be made between non-compliance with the
requirement on or submission of defective verification, and
noncompliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does
not necessarily render the pleading fatally defective. The court may order
its submission or correction or act on the pleading if the attending
circumstances are such that strict compliance with the Rule may be
dispensed with in order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the complaint
or petition signs the verification, and when matters alleged in the petition
have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith
or a defect therein, unlike in verification, is generally not curable by its
 subsequent submission or correction thereof, unless there is a need to
relax the Rule on the ground of "substantial compliance" or presence of
"special circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign will be
dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share a
common interest and invoke a common cause of action or defense, the
signature of only one of them inthe certification against forum shopping
substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by
the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must execute a
Special Power of Attorney designating his counsel of record to sign on his
behalf.92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board
of directors or duly authorized officers and agents. Thus, the physical act of signing
the verification and certification against forum shopping can only be done by
natural persons duly authorized either by the corporate by-laws or a board
resolution.93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,94 authorizing Shuji Yano and Jin Eto to represent and sign for and on
behalf of Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan. Likewise attached to the
petition is the special power of attorney executed by Shuji Yano, authorizing
Corazon to sign on his behalf.97 The verification and certification against forum
shopping was signed by Corazon.98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for
review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was
empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of
Appeals, against Philippines’ National Labor Relations Commission
("NLRC") and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-
002697-09, RAB No. 05-06811-00 and entitled "Arlene S. Espiritu v. Fuji
Television Network, Inc./Yoshiki Aoki", and participate in any other
subsequent proceeding that may necessarily arise therefrom, including
but not limited to the filing of appeals in the appropriate venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to verify and execute the certification against nonforum
shopping which may be necessary or required to be attached to any
pleading to [sic] submitted to the Court of Appeals; and the authority to
so verify and certify for the Corporation in favor of the said persons shall
subsist and remain effective until the termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby
authorized, to represent and appear on behalf the [sic] Corporation in all
stages of the [sic] this case and in any other proceeding that may
necessarily arise thereform [sic], and to act in the Corporation’s name,
place and stead to determine, propose, agree, decide, do, and perform
any and all of the following:
1. The possibility of amicable settlement or of submission to
alternative mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.99 (Emphasis in the original; Italics omitted)
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E.
Acerden and Mr. Moises A. Rollera as his attorneys-in-fact.100 The special power of
attorney states:
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8
Daiba, Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV,
INc., [sic] (evidenced by the attached Secretary’s Certificate) one of the
respondents in NLRC-NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji
Television Network, Inc./Yoshiki Aoki", and subsequently docketed before the Court
of Appeals asC.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889) do
hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises
A. Rolleraas my true and lawful attorneys-infact for me and my name, place and
stead to act and represent me in the above-mentioned case, with special power
to make admission/s and stipulations and/or to make and submit as well as to
accept and approve compromise proposals upon such terms and conditions and
under such covenants as my attorney-in-fact may deem fit, and to engage the
services of Villa Judan and Cruz Law Officesas the legal counsel to represent the
Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute
and deliver such papers ordocuments as may be necessary in furtherance of the
power thus granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be filed.101 (Emphasis in the original)
In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could
further delegate his authority because the board resolution empowered him to
"act in the Corporation’s name, place and stead to determine, propose, agree,
decided [sic], do and perform any and all of the following: . . . such other matters
as may aid in the prompt disposition of the action."103 To clarify, Fuji attached a
verification and certification against forum shopping, but Arlene questions
Corazon’s authority to sign. Arlene argues that the secretary’s certificate
empowered Shuji Yano to file a petition for certiorari before the Court of Appeals,
and not a petition for review before this court, and that since Shuji Yano’s authority
was delegated to him, he could not further delegate such power. Moreover,
Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that
Fuji shall "file a Petition for Certiorari with the Court of Appeals"104 and "participate
in any other subsequent proceeding that may necessarily arise therefrom,
including but not limited to the filing of appeals in the appropriate venue," 105 and
that Shuji Yano and Jin Eto are authorized to represent Fuji "in any other
proceeding that may necessarily arise thereform [sic]."106 As pointed out by Fuji,
Shuji Yano and Jin Eto were also authorized to "act in the Corporation’s name,
place and stead to determine, propose, agree, decide, do, and perform anyand
all of the following: . . . 5. Such other matters as may aid in the prompt disposition
of the action."107
Considering that the subsequent proceeding that may arise from the petition for
certiorari with the Court of Appeals is the filing of a petition for review with this
court, Fuji substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon,
Article 1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person,
and the person appointed was notoriously incompetent or insolvent. All
acts of the substitute appointed against the prohibition of the principal
shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from
appointing a substitute. In fact, heis empowered to do acts that will aid in the
resolution of this case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping
without a board resolution. In Cagayan Valley Drug Corporation v. CIR,108 it was
held that:
In sum, we have held that the following officials or employees of the company can
sign the verification and certification without need of a board resolution: (1) the
Chairperson of the Board of Directors, (2) the President of a corporation, (3) the
General Manager or Acting General Manager, (4) Personnel Officer, and (5) an
Employment Specialist in a labor case.
While the above cases109 do not provide a complete listing of authorized
signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case basis.
The rationale applied in the foregoing cases is to justify the authority of corporate
officers or representatives of the corporation to sign the verification or certificate
against forum shopping, being ‘in a position to verify the truthfulness and
correctness of the allegations in the petition.’110
Corazon’s affidavit111 states that she is the "office manager and resident interpreter
of the Manila Bureau of Fuji Television Network, Inc."112 and that she has "held the
position for the last twenty-three years."113
As the office manager for 23 years,Corazon can be considered as having
knowledge of all matters in Fuji’s Manila Bureau Office and is in a position to verify
"the truthfulness and the correctness of the allegations in the Petition."114
Thus, Fuji substantially complied with the requirements of verification and
certification against forum shopping.
Before resolving the substantive issues in this case, this court will discuss the
procedural parameters of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code115 does not provide any mode of appeal for
decisions of the National Labor Relations Commission. It merely states that "[t]he
decision of the Commission shall be final and executory after ten (10) calendar
days from receipt thereof by the parties." Being final, it is no longer appealable.
However, the finality of the National Labor Relations Commission’s decisions does
not mean that there is no more recourse for the parties.
In St. Martin Funeral Home v. National Labor Relations Commission,116 this court
cited several cases117 and rejected the notion that this court had no jurisdiction to
review decisions of the National Labor Relations Commission. It stated that this
court had the power to review the acts of the National Labor Relations
Commission to see if it kept within its jurisdiction in deciding cases and alsoas a
form of check and balance.118 This court then clarified that judicial review of
National Labor Relations Commission decisions shall be by way of a petition for
certiorari under Rule 65. Citing the doctrine of hierarchy of courts, it further ruled
that such petitions shall be filed before the Court of Appeals. From the Court of
Appeals, an aggrieved party may file a petition for review on certiorari under Rule
45.
A petition for certiorari under Rule 65 is an original action where the issue is limited
to grave abuse of discretion. As an original action, it cannot be considered as a
continuation of the proceedings of the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of
appeal where the issue is limited to questions of law. In labor cases, a Rule 45
petition is limited toreviewing whether the Court of Appeals correctly determined
the presence or absence of grave abuse of discretion and deciding other
jurisdictional errors of the National Labor Relations Commission. 119
In Odango v. National Labor Relations Commission,120 this court explained that a
petition for certiorari is an extraordinary remedy that is "available only and
restrictively in truly exceptional cases"121 and that its sole office "is the correction of
errors of jurisdiction including commission of grave abuse of discretion amounting
to lack or excess of jurisdiction."122 A petition for certiorari does not include a review
of findings of fact since the findings of the National Labor Relations Commission are
accorded finality.123 In cases where the aggrieved party assails the National Labor
Relations Commission’s findings, he or she must be able to show that the
Commission "acted capriciously and whimsically or in total disregard of evidence
material to the controversy."124
When a decision of the Court of Appeals under a Rule 65 petition is brought to this
court by way of a petition for review under Rule 45, only questions of law may be
decided upon. As held in Meralco Industrial v. National Labor Relations
Commission:125
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this
Court ina petition for review on certiorari under Rule 45 of the Revised Rules of
Court is limited to reviewing only errors of law, not of fact, unless the factual
findings complained of are completely devoid of support from the evidence on
record, or the assailed judgment is based on a gross misapprehension of facts.
Besides, factual findings of quasi-judicial agencies like the NLRC, when affirmed by
the Court of Appeals, are conclusive upon the parties and binding on this Court. 126
Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the
parameters of judicial review under Rule 45:
As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65
decision on a labor case, as follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in
contrast with the review for jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of law raised against the
assailed CA decision. In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it
correctly determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision on the
merits of the case was correct. In other words, we have to be keenly aware that
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.129 (Emphasis in the original)
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
Aicaraz130 discussed that in petitions for review under Rule 45, "the Court simply
determines whether the legal correctness of the CA’s finding that the NLRC ruling .
. . had basis in fact and in Iaw."131 In this kind of petition, the proper question to be
raised is, "Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and
jurisprudence, then no grave abuse of discretion exists and the CA should so
declare and, accordingly, dismiss the petition. If grave abuse of discretion exists,
then the CA must grant the petition and nullify the NLRC ruling, entering at the
same time the ruling that isjustified under the evidence and the governing law,
rules and jurisprudence. In our Rule 45 review, this Court must denythe petition if it
finds that the CA correctly acted.133 (Emphasis in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji
alleges that Arlene was an independent contractor, while Arlene alleges that she
was a regular employee. To resolve this issue, we ascertain whether an employer-
employee relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an
employer-employee relationship. Under the four-fold test, the "control test" is the
most important.134 As to how the elements in the four-fold test are proven, this court
has discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters
or employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status.135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e.,
whether she was a regular employee. Relative to this, we shall analyze Arlene’s
fixed-term contract and determine whether it supports her argument that she was
a regular employee, or the argument of Fuji that she was an independent
contractor. We shall scrutinize whether the nature of Arlene’s work was necessary
and desirable to Fuji’s business or whether Fuji only needed the output of her work.
If the circumstances show that Arlene’s work was necessary and desirable to Fuji,
then she is presumed to be a regular employee. The burden of proving that she
was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial
evidence.136 "Substantial evidence" has been defined as "such amount of relevant
evidence which a reasonable mind might accept as adequate to justify a
conclusion."137
If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the employee
to prove the fact of dismissal.138 Once the employee establishes the fact of
dismissal, supported by substantial evidence, the burden of proof shifts tothe
employer to show that there was a just or authorized cause for the dismissal and
that due process was observed.139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN
and relying on the following facts: (1) she was hired because of her skills; (2) her
salary was US$1,900.00, which is higher than the normal rate; (3) she had the power
to bargain with her employer; and (4) her contract was for a fixed term. According
to Fuji, the Court of Appeals erred when it ruled that Arlene was forcedto sign the
non-renewal agreement, considering that she sent an email with another version
of the non-renewal agreement.140 Further, she is not entitled tomoral damages and
attorney’s fees because she acted in bad faith when she filed a labor complaint
against Fuji after receiving US$18,050.00 representing her salary and other
benefits.141 Arlene argues that she was a regular employee because Fuji had
control and supervision over her work. The news events that she covered were all
based on the instructions of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary and
desirable.143 In addition, Fuji’s payment of separation pay equivalent to one (1)
month’s pay per year of service indicates that she was a regular employee.144 To
further support her argument that she was not an independent contractor, she
states that Fuji owns the laptop computer and mini-camera that she used for
work.145 Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who
enjoyed a celebrity status.146 On her illness, Arlene points outthat it was not a
ground for her dismissal because her attending physician certified that she was fit
to work.147
Arlene admits that she signed the non-renewal agreement with quitclaim, not
because she agreed to itsterms, but because she was not in a position to reject
the non-renewal agreement. Further, she badly needed the salary withheld for her
sustenance and medication.148 She posits that her acceptance of separation pay
does not bar filing of a complaint for illegal dismissal.149
Article 280 of the Labor Code 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 services to be performed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph; Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which heis employed and his employment
shall continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It
further classifies regular employees into two kinds: (1) those "engaged to perform
activities which are usually necessary or desirable in the usual business or trade of
the employer"; and (2) casual employees who have "rendered at least one year of
service, whether such service is continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was
recognized in Brent School, Inc. v. Zamora150 where this court discussed that:
Logically, the decisive determinant in the term employment should not be the
activities that the employee is called upon to perform, but the day certain agreed
upon by the parties for the commencement and termination of their employment
relationship, a day certainbeing understood to be "that which must necessarily
come, although it may not be known when."151 (Emphasis in the original)
This court further discussed that there are employment contracts where "a fixed
term is an essential and natural appurtenance"152 such as overseas employment
contracts and officers in educational institutions.153
Distinctions among fixed-term
employees, independent contractors,
and regular employees
GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed term contracts
laid down in Brentin the following manner:
Cognizant of the possibility of abuse in the utilization of fixed term employment
contracts, we emphasized in Brentthat where from the circumstances it is apparent
that the periods have been imposed to preclude acquisition of tenurial security by
the employee, they should be struck down as contrary to public policy or morals.
We thus laid down indications or criteria under which "term employment" cannot
be said to be in circumvention of the law on security of tenure, namely:
1) 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; or
2) 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.
These indications, which must be read together, make the Brent doctrine
applicable only in a few special cases wherein the employer and employee are
on more or less in equal footing in entering into the contract. The reason for this is
evident: whena prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser
limitations on the parties’ freedom of contract are thus required for the protection
of the employee.155(Citations omitted)
For as long as the guidelines laid down in Brentare satisfied, this court will recognize
the validity of the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixedterm employment
of petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as
mixers, packers and machine operators was necessary and desirable in the usual
business ofrespondent company, they were employed temporarily only, during
periods when there was heightened demand for production. Consequently, there
could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination
because they knew exactly when their contracts would end. Contracts of
employment for a fixed period terminate on their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is
objectionable is the practice of some scrupulous employers who try to circumvent
the law protecting workers from the capricious termination of
employment.157 (Citation omitted)
Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of
employment. Caparoso and Quindipan were hired as delivery men for three (3)
months. At the end of the third month, they were hired on a monthly basis. In total,
they were hired for five (5) months. They filed a complaint for illegal dismissal. 159 This
court ruled that there was no evidence indicating that they were pressured into
signing the fixed-term contracts. There was likewise no proof that their employer
was engaged in hiring workers for five (5) months onlyto prevent regularization. In
the absence of these facts, the fixed-term contracts were upheld as valid.160 On
the other hand, an independent contractor is defined as:
. . . one who carries on a distinct and independent business and undertakes to
perform the job, work, or service on its own account and under one’s own
responsibility according to one’s own manner and method, free from the control
and direction of the principal in all matters connected with the performance of
the work except as to the results thereof.161
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor
Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a
contract with another person for the performance of the former’s work, the
employees of the contractor and of the latter’s subcontractor, if any, shall be paid
in accordance with the provisions of this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict
or prohibit the contracting-out of labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the
parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and the workers recruited
and placed by such person are performing activities which are directly related to
the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible
to the workers in the same manner and extent as if the latterwere directly
employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a
contractor the performance or completion of a specific job, work or service within
a definite or predetermined period, regardless of whether such job, work or service
is to be performed or completed within oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate
job contracting and subcontracting arrangements among the principal,
contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractor’s
services, but there is an employer-employee relationship between the contractor
and workers hired to accomplish the work for the principal.162
Jurisprudence has recognized another kind of independent contractor: individuals
with unique skills and talents that set them apart from ordinary employees. There is
no trilateral relationship in this case because the independent contractor himself or
herself performs the work for the principal. In other words, the relationship is
bilateral.
In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the
Philippine Daily Inquirer. This court ruled that she was an independent contractor
because of her "talent, skill, experience, and her unique viewpoint as a feminist
advocate."164 In addition, the Philippine Daily Inquirer did not have the power of
control over Orozco, and she worked at her own pleasure.165
Semblante v. Court of Appeals166 involved a masiador167 and a
sentenciador.168 This court ruled that "petitioners performed their functions as
masiadorand sentenciador free from the direction and control of
respondents"169 and that the masiador and sentenciador "relied mainly on their
‘expertise that is characteristic of the cockfight gambling.’"170 Hence, no employer-
employee relationship existed.
Bernarte v. Philippine Basketball Association171 involved a basketball referee. This
court ruled that "a referee is an independent contractor, whose special skills and
independent judgment are required specifically for such position and cannot
possibly be controlled by the hiring party."172
In these cases, the workers were found to be independent contractors because of
their unique skills and talents and the lack of control over the means and methods
in the performance of their work.
In other words, there are different kinds of independent contractors: those
engaged in legitimate job contracting and those who have unique skills and
talents that set them apart from ordinary employees.
Since no employer-employee relationship exists between independent contractors
and their principals, their contracts are governed by the Civil Code provisions on
contracts and other applicable laws.173
A contract is defined as "a meeting of minds between two persons whereby one
binds himself, with respect to the other, to give something or to render some
service."174 Parties are free to stipulate on terms and conditions in contracts as long
as these "are not contrary to law, morals, good customs, public order, or public
policy."175 This presupposes that the parties to a contract are on equal footing.
Theycan bargain on terms and conditions until they are able to reach an
agreement.
On the other hand, contracts of employment are different and have a higher level
of regulation because they are impressed with public interest. Article XIII, Section 3
of the 1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. 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.
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided
by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing
the right of labor to its just share in the fruits of production and the right of
enterprises to reasonable returns on investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the
Civil Code states:
ART. 1700. The relations between capital and labor are not merely contractual.
They are so impressed with public interest that labor contracts must yield to the
common good. Therefore, such contracts are subject to the special laws on labor
unions, collective bargaining, strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on equal
footing. Thus, it is subject to regulatory review by the labor tribunals and courts of
law. The law serves to equalize the unequal. The labor force is a special class that is
constitutionally protected because of the inequality between capital and
labor.176 This presupposes that the labor force is weak. However, the level of
protection to labor should vary from case to case; otherwise, the state might
appear to be too paternalistic in affording protection to labor. As stated in GMA
Network, Inc. v. Pabriga, the ruling in Brent applies in cases where it appears that
the employer and employee are on equal footing.177 This recognizes the fact that
not all workers are weak. To reiterate the discussion in GMA Network v. Pabriga:
The reason for this is evident: when a prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective
employer, such prospective employee needs less protection than the ordinary
worker. Lesser limitations on the parties’ freedom of contract are thus required for
the protection of the employee.178
The level of protection to labor mustbe determined on the basis of the nature of
the work, qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to
be on equal footing witha grocery bagger with a high school diploma. Employees
who qualify for jobs requiring special qualifications such as "[having] a Master’s
degree" or "[having] passed the licensure exam" are different from employees who
qualify for jobs that require "[being a] high school graduate; withpleasing
personality." In these situations, it is clear that those with special qualifications can
bargain with the employer on equal footing. Thus, the level of protection afforded
to these employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term
contract is contradictory. Employees under fixed-term contracts cannot be
independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity and
desirability of the employee’s activities, "but the day certain agreed upon by the
parties for the commencement and termination of the employment
relationship."179 For regular employees, the necessity and desirability of their work in
the usual course of the employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-employee
relationships with their principals. Hence, before the status of employment can be
determined, the existence of an employer-employee relationship must be
established.
The four-fold test180 can be used in determining whether an employeremployee
relationship exists. The elements of the four-fold test are the following: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power of control, which is the most important
element.181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission:182
The power to control refers to the existence of the power and not necessarily to
the actual exercise thereof, nor is it essential for the employer to actually supervise
the performance of duties of the employee. It is enough that the employer has the
right to wield that power.183 (Citation omitted)
Orozco v. Court of Appeals further elucidated the meaning of "power of control"
and stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.
. . .184 (Citation omitted)
In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the "power of
control" was defined as "[the] right to control not only the end to be achieved but
also the means to be used in reaching such end."186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court
of Appeals187 in determining whether Arlene was an independent contractor or a
regular employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an
independent contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity
status not possessed by ordinary employees."188 His work was for radio and
television programs.189 On the other hand, Dumpit-Murillo was hired by ABC as a
newscaster and co-anchor.190 Sonza’s talent fee amounted to ₱317,000.00 per
month, which this court found to be a substantial amount that indicatedhe was an
independent contractor rather than a regular employee.191Meanwhile, Dumpit-
Murillo’s monthly salary was ₱28,000.00, a very low amount compared to what
Sonza received.192
Sonza was unable to prove that ABS-CBN could terminate his services apart from
breach of contract. There was no indication that he could be terminated based
on just or authorized causes under the Labor Code. In addition, ABS-CBN
continued to pay his talent fee under their agreement, even though his programs
were no longer broadcasted.193 Dumpit-Murillo was found to have beenillegally
dismissed by her employer when they did not renew her contract on her fourth
year with ABC.194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his
lines, how he appeared on television, or how he sounded on radio.195 All that
Sonza needed was his talent.196 Further, "ABS-CBN could not terminate or discipline
SONZA even if the means and methods of performance of his work . . . did not
meet ABS-CBN’s approval."197 In Dumpit-Murillo, the duties and responsibilities
enumerated in her contract was a clear indication that ABC had control over her
work.198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene
was a regular employee. Arlene was hired by Fuji as a news producer, but there
was no showing that she was hired because of unique skills that would distinguish
her from ordinary employees. Neither was there any showing that she had a
celebrity status. Her monthly salary amounting to US$1,900.00 appears tobe a
substantial sum, especially if compared to her salary whenshe was still connected
with GMA.199 Indeed, wages may indicate whether oneis an independent
contractor. Wages may also indicate that an employee is able to bargain with the
employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.
Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.200 Her contract also indicated that Fuji had
control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time.201 Sonza was not required to work for
eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-air
tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.202 Even the mode of transportation in carrying out her functions was
controlled by Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of
place of work, the train, bus, or public transport shall be used for the trip. If the
Employee uses the private car during the work and there is an accident the
Employer shall not be responsible for the damage, which may be caused to the
Employee.203
Thus, the Court of Appeals did not err when it upheld the findings of the National
Labor Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji
and Arlene, the next questions for resolution are the following: Did the Court of
Appeals correctly affirm the National Labor Relations Commission that Arlene had
become a regular employee? Was the nature of Arlene’s work necessary and
desirable for Fuji’s usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable
connection between the employee’s activities and the usual business of the
employer. Article 280 provides that the nature of work must be "necessary or
desirable in the usual business or trade of the employer" as the test for determining
regular employment. As stated in ABS-CBN Broadcasting Corporation v.
Nazareno:204
In determining whether an employment should be considered regular or non-
regular, the applicable test is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the
employer. The standard, supplied by the law itself, is whether the work undertaken
is necessary or desirable in the usual business or trade of the employer, a fact that
can be assessed by looking into the nature of the services rendered and its relation
to the general scheme under which the business or trade is pursued in the usual
course. It is distinguished from a specific undertaking that is divorced from the
normal activities required incarrying on the particular business or trade.205
However, there may be a situation where an employee’s work is necessary but is
not always desirable inthe usual course of business of the employer. In this situation,
there is no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de
Guzman was hired to repair furnaces at San Miguel Corporation’s Manila glass
plant. He had a separate contract for every furnace that he repaired. He filed a
complaint for illegal dismissal three (3) years after the end of his last contract.207 In
ruling that de Guzman did not attain the status of a regular employee, this court
explained:
Note that the plant where private respondent was employed for only seven
months is engaged in the manufacture of glass, an integral component of the
packaging and manufacturing business of petitioner. The process of
manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces
repaired since said activity is not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after being used continuously for
a varying period of five (5) to ten (10) years. In 1990, one of the furnaces of
petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose,
petitioner must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the
regular business of the corporation. For petitioner is not engaged in the business of
repairing furnaces. Although the activity was necessary to enable petitioner to
continue manufacturing glass, the necessity therefor arose only when a particular
furnace reached the end of its life or operating cycle. Or, as in the second
undertaking, when a particular furnace required an emergency repair. In other
words, the undertakings where private respondent was hired primarily as
helper/bricklayer have specified goals and purposes which are fulfilled once the
designated work was completed. Moreover, such undertakings were also
identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the
duration and scope of which had been determined and made known to private
respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee.208
Fuji is engaged in the business of broadcasting,209 including news
programming.210 It is based in Japan211 and has overseas offices to cover
international news.212
Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has a few
employees.214 As such, Arlene had to do all activities related to news gathering.
Although Fuji insists that Arlene was a stringer, it alleges that her designation was
"News Talent/Reporter/Producer."215
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in
the field planning and gathering information. . . ."216 Arlene’s tasks included
"[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front
of a video camera,"217 "the timely submission of news and current events reports
pertaining to the Philippines[,] and traveling [sic] to [Fuji’s] regional office in
Thailand."218 She also had to report for work in Fuji’s office in Manila from Mondays
to Fridays, eight (8) hours per day.219 She had no equipment and had to use the
facilities of Fuji to accomplish her tasks.
The Court of Appeals affirmed the finding of the National Labor Relations
Commission that the successive renewals of Arlene’s contract indicated the
necessity and desirability of her work in the usual course of Fuji’s business. Because
of this, Arlene had become a regular employee with the right to security of
tenure.220 The Court of Appeals ruled that:
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila
Bureau. She was hired for the primary purpose of news gathering and reporting to
the television network’s 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. Parenthetically, ifit were true that Espiritu is an
independent contractor, as claimed by Fuji, the factthat everything that she uses
to perform her job is owned by the company including the laptop computer and
mini camera discounts the idea of job contracting.221
Moreover, the Court of Appeals explained that Fuji’s argument that no employer-
employee relationship existed in view of the fixed-term contract does not
persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned by Fuji,
showing that she was a regular employee and not an independent contractor.223
The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term
contracts that were successively renewed for four (4) years.224 This court held that
"[t]his repeated engagement under contract of hire is indicative of the necessity
and desirability of the petitioner’s work in private respondent ABC’s business."225
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the
Court of Appeals cited Philips Semiconductors, Inc. v. Fadriquela226 and held that
where an employee’s contract "had been continuously extended or renewed to
the same position, with the same duties and remained in the employ without any
interruption,"227 then such employee is a regular employee. The continuous renewal
is a scheme to prevent regularization. On this basis, the Court of Appeals ruled in
favor of Arlene.
As stated in Price, et al. v. Innodata Corp., et al.:228
The employment status of a person is defined and prescribed by law and not by
what the parties say it should be. Equally important to consider is that a contract of
employment is impressed with public interest such that labor contracts must yield
to the common good. Thus, provisions of applicable statutes are deemed written
into the contract, and the parties are not at liberty to insulate themselves and their
relationships from the impact of labor laws and regulations by simply contracting
with each other.229 (Citations omitted)
Arlene’s contract indicating a fixed term did not automatically mean that she
could never be a regular employee. This is precisely what Article 280 seeks to
avoid. The ruling in Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The
law does not preclude the possibility that a regular employee may opt to have a
fixed-term contract for valid reasons. This was recognized in Brent: For as long as it
was the employee who requested, or bargained, that the contract have a
"definite date of termination," or that the fixed-term contract be freely entered into
by the employer and the employee, then the validity of the fixed-term contract will
be upheld.230
V Art. 279. Security of tenure.In cases of regular employment, the employer shall not
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
dismissed, in view of the non-renewal contract voluntarily executed by the parties.
Fuji also argues that Arlene’s contract merely expired; hence, she was not illegally
dismissed.231
Arlene alleges that she had no choice but to sign the non-renewal contract
because Fuji withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and
that she voluntarily agreed not to renew the same. Even a cursory perusal of the
subject Non-Renewal Contract readily shows that the same was signed by Espiritu
under protest. What is apparent is that the Non-Renewal Contract was crafted
merely as a subterfuge to secure Fuji’s position that it was Espiritu’s choice not to
renew her contract.232
As a regular employee, Arlene was entitled to security of tenure and could be
dismissed only for just or authorized causes and after the observance of due
process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining
and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane
conditions of work, and a living wage. They shall also participate in policy and
decision-making processes affecting their rights and benefits as may be provided
by law.
Article 279 of the Labor Code also provides for the right to security of tenure and
states the following:
terminate the services of an employee except for a just cause of when authorized
by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there
are just orauthorized causes and only after compliance with procedural and
substantive due process is conducted.
Even probationary employees are entitled to the right to security of tenure. This
was explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:233
Within the limited legal six-month probationary period, probationary employees
are still entitled to security of tenure. It is expressly provided in the afore-quoted
Article 281 that a probationary employee may be terminated only on two grounds:
(a) for just cause, or (b) 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.234 (Citation omitted)
The expiration of Arlene’s 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.235 The existence of
a fixed-term contract should not mean that there can be no illegal dismissal. Due
process must still be observed in the pre-termination of fixed-term contracts of
employment.
In addition, the Court of Appeals and the National Labor Relations Commission
found that Arlene was dismissed because of her health condition. In the non-
renewal agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her
from continuing to effectively perform her functions under the said Contract such
as the timely submission of news and current events reports pertaining to the
Philippines and travelling [sic] to the FIRST PARTY’s regional office in
Thailand.236 (Emphasis supplied)
Disease as a ground for termination is recognized under Article 284 of the Labor
Code:
Art. 284. Disease as ground for termination. An employer may terminate the
services of an employee who has been found to be suffering from any disease and
whose continued employment is prohibited by law or is prejudicial to his health as
well as to the health of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month salary for
every year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code
provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a
disease and his continued employment is prohibited by law or prejudicial to his
healthor to the health of his coemployees, the employer shall not terminate his
employment unless there is a certification by a competent public health authority
that the disease is of such nature or at such a stage that it cannot be cured within
a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the
employee but shall ask the employee to take a leave. The employer shall reinstate
such employee to his former position immediately upon the restoration of his
normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with:
(1) the employee’s disease cannot be cured within six (6) months and his
"continued employment is prohibited by law or prejudicial to his health as well as to
the health of his co-employees"; and (2) certification issued by a competent public
health authority that even with proper medical treatment, the disease cannot be
cured within six (6) months.237 The burden of proving compliance with these
requisites is on the employer.238 Noncompliance leads to the conclusion that the
dismissal was illegal.239
There is no evidence showing that Arlene was accorded due process. 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. What Fuji did was to inform
her thather contract would no longer be renewed, and when she did not agree,
her salary was withheld. Thus, the Court of Appeals correctly upheld the finding of
the National Labor Relations Commission that for failure of Fuji to comply with due
process, Arlene was illegally dismissed.240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of
reinstatement, on the ground that the filing of the complaint for illegal dismissal
may have seriously strained relations between the parties. Backwages were also
awarded, to be computed from date of dismissal until the finality of the National
Labor Relations Commission’s decision. However, only backwages were included
in the dispositive portion because the National Labor Relations Commission
recognized that Arlene had received separation pay in the amount of US$7,600.00.
The Court of Appeals affirmed the National Labor Relations Commission’s decision
but modified it by awarding moral and exemplary damages and attorney’s fees,
and all other benefits Arlene was entitled to under her contract with Fuji. The Court
of Appeals also ordered reinstatement, reasoning that the grounds when
separation pay was awarded in lieu of reinstatement were not proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized
by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement. (Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s
decision was proper because the law itself provides that illegally dismissed
employees are entitled to reinstatement, backwages including allowances, and all
other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit
may have seriously abraded the relationship of the parties so as to render
reinstatement impractical."242 The Court of Appeals reversed this and ordered
reinstatement on the ground that separation pay in lieu of reinstatement is allowed
only in several instances such as (1) when the employer has ceased operations; (2)
when the employee’s position is no longer available; (3) strained relations; and (4)
a substantial period has lapsed from date of filing to date of finality.243
On this matter, Quijano v. Mercury Drug Corp.244 is instructive:
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed
employee of his right to reinstatement. Every labor dispute almost always results in
"strained relations" and the phrase cannot be given an overarching interpretation,
otherwise, an unjustly dismissed employee can never be reinstated.245 (Citations
omitted)
The Court of Appeals reasoned that strained relations are a question of fact that
must be supported by evidence.246No evidence was presented by Fuji to prove
that reinstatement was no longer feasible. Fuji did not allege that it ceased
operations or that Arlene’s position was no longer available. Nothing in the records
shows that Arlene’s reinstatement would cause an atmosphere of antagonism in
the workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a
substantial period247 to bar reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of
damages and attorney’s fees because the non-renewal agreement contained a
quitclaim, which Arlene signed. Quitclaims in labor cases do not bar illegally
dismissed employees from filing labor complaints and money claim. As explained
by Arlene, she signed the non-renewal agreement out of necessity. In Land and
Housing Development Corporation v. Esquillo,248 this court explained: We have
heretofore explained that the reason why quitclaims are commonly frowned upon
as contrary to public policy, and why they are held to be ineffective to bar claims
for the full measure of the workers’ legal rights, is the fact that the employer and
the employee obviously do not stand on the same footing. The employer drove
the employee to the wall. The latter must have to get holdof money. Because, out
of a job, he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not of
choice.249
With regard to the Court of Appeals’ award of moral and exemplary damages
and attorney’s fees, this court has recognized in several cases that moral damages
are awarded "when the dismissal is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good morals, good
customs or public policy."250 On the other hand, exemplary damages may be
awarded when the dismissal was effected "in a wanton, oppressive or malevolent
manner."251
the Labor Code states that "[i]n cases of unlawful withholding of wages, the
culpable party may be assessed attorney’s fees equivalent to ten percent of the
amount of wages recovered." Likewise, this court has recognized that "in actions
for recovery of wages or where an employee was forced to litigate and, thus, incur
expenses to protect his rights and interest, the award of attorney’s fees is
legallyand morally justifiable."255 Due to her illegal dismissal, Arlene was forced to
litigate.
In the dispositive portion of its decision, the Court of Appeals awarded legal
interest at the rate of 12% per annum.256 In view of this court’s ruling in Nacar v.
Gallery Frames,257 the legal interest shall be reducd to a rate of 6% per annum from
July 1, 2013 until full satisfaction.
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated
June 25, 2012 is AFFIRMED with the modification that backwages shall be
computed from June 2009. Legal interest shall be computed at the rate of 6% per
annum of the total monetary award from date of finality of this decision until full
satisfaction.
SO ORDERED.
MARVIC M.V.F LEONEN
Associate Justice

The Court of Appeals and National Labor Relations Commission found that after
Arlene had informed Fuji of her cancer, she was informed that there would be
problems in renewing her contract on account of her condition. This information
caused Arlene mental anguish, serious anxiety, and wounded feelings that can be
gleaned from the tenor of her email dated March 11, 2009. A portion of her email
reads:

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very
weak, you suddenly came to deliver to me the NEWS that you will no longer renew
my contract.1awp++i1 I knew this will come but I never thought that you will be so
‘heartless’ and insensitive to deliver that news just a month after I informed you
that I am sick. I was asking for patience and understanding and your response was
not to RENEW my contract.252

Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an
oppressive approach withher salary and other benefits being withheld until May 5,
2009, when she had no other choice but to sign the non-renewal contract. Thus,
there was legal basis for the Court of Appeals to modify the National Labor
Relations Commission’s decision.

However, Arlene receivedher salary for May 2009.253 Considering that the date of
her illegal dismissal was May 5, 2009,254 this amount may be subtracted from the
total monetary award. With regard to the award of attorney’s fees, Article 111 of
FIRST DIVISION
G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari 1 assailing the 26 March 1999
Decision2 of the Court of Appeals in CA-G.R. SP No. 49190 dismissing the petition
filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings of the
National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s
dismissal of the case for lack of jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed
an Agreement ("Agreement") with the Mel and Jay Management and
Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate
officers while MJMDC was represented by SONZA, as President and General
Manager, and Carmela Tiangco ("TIANGCO"), as EVP and Treasurer. Referred to in
the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services
exclusively to ABS-CBN as talent for radio and television. The Agreement listed the
services SONZA would render to ABS-CBN, as follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to
Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for
the first year and ₱317,000 for the second and third year of the Agreement. ABS-
CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III,
which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May
1994 entered into by your goodself on behalf of ABS-CBN with our
company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of
recent events concerning his programs and career. We consider
these acts of the station violative of the Agreement and the
station as in breach thereof. In this connection, we hereby serve
notice of rescission of said Agreement at our instance effective
as of date.
Mr. Sonza informed us that he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the
other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department
of Labor and Employment, National Capital Region in Quezon City. SONZA
complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and
amounts due under the Employees Stock Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no
employer-employee relationship existed between the parties. SONZA filed an
Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his
account at PCIBank, Quezon Avenue Branch, Quezon City. In July 1996, ABS-CBN
opened a new account with the same bank where ABS-CBN deposited SONZA’s
talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to
dismiss and directed the parties to file their respective position papers. The Labor
Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was
an employee of respondent company until April 15, 1996 and that he was
not paid certain claims, it is sufficient enough as to confer jurisdiction over
the instant case in this Office. And as to whether or not such claim would
entitle complainant to recover upon the causes of action asserted is a
 matter to be resolved only after and as a result of a hearing. Thus, the
respondent’s plea of lack of employer-employee relationship may be
pleaded only as a matter of defense. It behooves upon it the duty to
prove that there really is no employer-employee relationship between it
and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties
submitted their position papers on 24 February 1997.
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion
to Expunge Respondent’s Annex 4 and Annex 5 from the Records. Annexes 4 and 5
are affidavits of ABS-CBN’s witnesses Soccoro Vidanes and Rolando V. Cruz. These
witnesses stated in their affidavits that the prevailing practice in the television and
broadcast industry is to treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint
for lack of jurisdiction.6 The pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the
"true nature of the contract of a talent," it stands to reason that a "talent"
as above-described cannot be considered as an employee by reason of
the peculiar circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by
reason of his peculiar skills and talent as a TV host and a radio
broadcaster. Unlike an ordinary employee, he was free to perform the
services he undertook to render in accordance with his own style. The
benefits conferred to complainant under the May 1994 Agreement are
certainly very much higher than those generally given to employees. For
one, complainant Sonza’s monthly talent fees amount to a staggering
₱317,000. Moreover, his engagement as a talent was covered by a
specific contract. Likewise, he was not bound to render eight (8) hours of
work per day as he worked only for such number of hours as may be
necessary.
The fact that per the May 1994 Agreement complainant was accorded
some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from
specific agreement by the parties and not by reason of employer-
employee relationship. As correctly put by the respondent, "All these
benefits are merely talent fees and other contractual benefits and should
not be deemed as ‘salaries, wages and/or other remuneration’ accorded
to an employee, notwithstanding the nomenclature appended to these
benefits. Apropos to this is the rule that the term or nomenclature given to
a stipulated benefit is not controlling, but the intent of the parties to the
Agreement conferring such benefit."
The fact that complainant was made subject to respondent’s Rules and
Regulations, likewise, does not detract from the absence of employer-
employee relationship. As held by the Supreme Court, "The line should be
drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such
means. The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address both
the result and the means to achieve it." (Insular Life Assurance Co., Ltd. vs.
NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision
affirming the Labor Arbiter’s decision. SONZA filed a motion for reconsideration,
which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court
of Appeals assailing the decision and resolution of the NLRC. On 26 March 1999,
the Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC’s finding that no employer-employee
relationship existed between SONZA and ABS-CBN. Adopting the NLRC’s decision,
the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into
the contract merely as an agent of complainant Sonza, the principal. By
all indication and as the law puts it, the act of the agent is the act of the
principal itself. This fact is made particularly true in this case, as admittedly
MJMDC ‘is a management company devoted exclusively to managing
the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C.
Tiangco.’ (Opposition to Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between
complainant Sonza and MJMDC, and not between ABS-CBN and
MJMDC. This is clear from the provisions of the May 1994 Agreement which
specifically referred to MJMDC as the ‘AGENT’. As a matter of fact, when
complainant herein unilaterally rescinded said May 1994 Agreement, it
was MJMDC which issued the notice of rescission in behalf of Mr. Sonza,
who himself signed the same in his capacity as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the
fact that historically, the parties to the said agreements are ABS-CBN and
Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest
Agreement executed between ABS-CBN and Mr. Sonza, that MJMDC
figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‘labor-only’
contractor of ABS-CBN such that there exist[s] employer-employee
relationship between the latter and Mr. Sonza. On the contrary, We find it
indubitable, that MJMDC is an agent, not of ABS-CBN, but of the
talent/contractor Mr. Sonza, as expressly admitted by the latter and
MJMDC in the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy
indeed belongs to the regular courts, the same being in the nature of an
action for alleged breach of contractual obligation on the part of
respondent-appellee. As squarely apparent from complainant-
appellant’s Position Paper, his claims for compensation for services, ‘13th
month pay’, signing bonus and travel allowance against respondent-
appellee are not based on the Labor Code but rather on the provisions of
the May 1994 Agreement, while his claims for proceeds under Stock
Purchase Agreement are based on the latter. A portion of the Position
Paper of complainant-appellant bears perusal:
‘Under [the May 1994 Agreement] with respondent ABS-CBN, the
latter contractually bound itself to pay complainant a signing
bonus consisting of shares of stocks…with FIVE HUNDRED
THOUSAND PESOS (₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay
based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is
entitled to a commutable travel benefit amounting to at least
One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition
of the fact that his contractual relations with ABS-CBN are founded on the
New Civil Code, rather than the Labor Code, that instead of merely
resigning from ABS-CBN, complainant-appellant served upon the latter a
‘notice of rescission’ of Agreement with the station, per his letter dated
April 1, 1996, which asserted that instead of referring to unpaid employee
benefits, ‘he is waiving and renouncing recovery of the remaining amount
stipulated in paragraph 7 of the Agreement but reserves the right to such
recovery of the other benefits under said Agreement.’ (Annex 3 of the
respondent ABS-CBN’s Motion to Dismiss dated July 10, 1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994
Agreement and/or the Stock Purchase Agreement by respondent-
appellee that complainant-appellant filed his complaint. Complainant-
appellant’s claims being anchored on the alleged breach of contract on
the part of respondent-appellee, the same can be resolved by reference
to civil law and not to labor law. Consequently, they are within the realm
of civil law and, thus, lie with the regular courts. As held in the case of Dai-
Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a civil
dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee
relationship between SONZA and ABS-CBN is a factual question that is within the
jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only
to issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover
an inquiry into the correctness of the evaluation of the evidence which served as
basis of the NLRC’s conclusion.12 The Court of Appeals added that it could not re-
examine the parties’ evidence and substitute the factual findings of the NLRC with
its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S
DECISION AND REFUSING TO FIND THAT AN EMPLOYER-EMPLOYEE
RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT
OF CONTROLLING LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT
SUCH A FINDING.14
The Court’s Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of
Appeals affirming the NLRC ruling which upheld the Labor Arbiter’s dismissal of the
case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship,
this is the first time that the Court will resolve the nature of the relationship between
a television and radio station and one of its "talents." There is no case law stating
that a radio and television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay"
Sonza, a known television and radio personality, and ABS-CBN, one of the biggest
television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he
was an employee of ABS-CBN. On the other hand, ABS-CBN insists that the Labor
Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact.
Appellate courts accord the factual findings of the Labor Arbiter and the NLRC not
only respect but also finality when supported by substantial evidence.15 Substantial
evidence means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.16 A party cannot prove the absence of
substantial evidence by simply pointing out that there is contrary evidence on
record, direct or circumstantial. The Court does not substitute its own judgment for
that of the tribunal in determining where the weight of evidence lies or what
evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship
are present in this case. Case law has consistently held that the elements of an
employer-employee relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee on the means and methods by which
the work is accomplished.18 The last element, the so-called "control test", is the most
important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’s services to co-host its television and radio programs
because of SONZA’s peculiar skills, talent and celebrity status. SONZA contends
that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and
qualification as complainant belies respondent’s claim of independent
contractorship."
Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. The specific
selection and hiring of SONZA, because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a circumstance indicative, but not
conclusive, of an independent contractual relationship. If SONZA did not possess
such unique skills, talent and celebrity status, ABS-CBN would not have entered into
the Agreement with SONZA but would have hired him through its personnel
department just like any other employee.
In any event, the method of selecting and engaging SONZA does not conclusively
determine his status. We must consider all the circumstances of the relationship,
with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going
to MJMDC. SONZA asserts that this mode of fee payment shows that he was an
employee of ABS-CBN. SONZA also points out that ABS-CBN granted him benefits
and privileges "which he would not have enjoyed if he were truly the subject of a
valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that
led to the Agreement. If SONZA were ABS-CBN’s employee, there would be no
need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th
month pay"20 which the law automatically incorporates into every employer-
employee contract.21Whatever benefits SONZA enjoyed arose from contract and
not because of an employer-employee relationship.22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year,
are so huge and out of the ordinary that they indicate more an independent
contractual relationship rather than an employer-employee relationship. ABS-CBN
agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique
skills, talent and celebrity status not possessed by ordinary employees. Obviously,
SONZA acting alone possessed enough bargaining power to demand and receive
such huge talent fees for his services. The power to bargain talent fees way above
the salary scales of ordinary employees is a circumstance indicative, but not
conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate
the status of SONZA as an independent contractor. The parties expressly agreed
on such mode of payment. Under the Agreement, MJMDC is the AGENT of SONZA,
to whom MJMDC would have to turn over any talent fee accruing under the
Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their
relationship. SONZA failed to show that ABS-CBN could terminate his services on
grounds other than breach of contract, such as retrenchment to prevent losses as
provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as
long as "AGENT and Jay Sonza shall faithfully and completely perform each
condition of this Agreement."24 Even if it suffered severe business losses, ABS-CBN
could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s
talent fees during the life of the Agreement. This circumstance indicates an
independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-
CBN still paid him his talent fees. Plainly, ABS-CBN adhered to its undertaking in the
Agreement to continue paying SONZA’s talent fees during the remaining life of the
Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of
SONZA.25
SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement
as an admission that he is not an employee of ABS-CBN. The Labor Arbiter stated
that "if it were true that complainant was really an employee, he would merely
resign, instead." SONZA did actually resign from ABS-CBN but he also, as president
of MJMDC, rescinded the Agreement. SONZA’s letter clearly bears this
out.26 However, the manner by which SONZA terminated his relationship with ABS-
CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work
does not determine his status as employee or independent contractor.
D. Power of Control
Since there is no local precedent on whether a radio and television program host is
an employee or an independent contractor, we refer to foreign case law in
analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión
Pública ("WIPR")27 that a television program host is an independent contractor. We
quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent
contractor. First, a television actress is a skilled position requiring talent
and training not available on-the-job. x x x In this regard, Alberty possesses
a master’s degree in public communications and journalism; is trained in
dance, singing, and modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater and television
productions prior to her affiliation with "Desde Mi Pueblo." Second, Alberty
provided the "tools and instrumentalities" necessary for her to
perform. Specifically, she provided, or obtained sponsors to provide, the
costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors
independent contractor status because WIPR provided the "equipment
necessary to tape the show." Alberty’s argument is misplaced. The
equipment necessary for Alberty to conduct her job as host of "Desde Mi
Pueblo" related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the
primary tools that Alberty used to perform her particular function. If we
accepted this argument, independent contractors could never work on
collaborative projects because other individuals often provide the
equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi
Pueblo." Alberty’s contracts with WIPR specifically provided that WIPR
hired her "professional services as Hostess for the Program Desde Mi
Pueblo." There is no evidence that WIPR assigned Alberty tasks in addition
to work related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an
employee but an independent contractor. The control test is the most
important test our courts apply in distinguishing an employee from an independent
contractor.29 This test is based on the extent of control the hirer exercises over a
worker. The greater the supervision and control the hirer exercises, the more likely
the worker is deemed an employee. The converse holds true as well – the less
control the hirer exercises, the more likely the worker is considered an independent
contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and
methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically
to co-host the "Mel & Jay" programs. ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA
delivered his lines, appeared on television, and sounded on radio were outside
ABS-CBN’s control. SONZA did not have to render eight hours of work per day. The
Agreement required SONZA to attend only rehearsals and tapings of the shows, as
well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the
contents of SONZA’s script. However, the Agreement prohibited SONZA from
criticizing in his shows ABS-CBN or its interests.32 The clear implication is that SONZA
had a free hand on what to say or discuss in his shows provided he did not attack
ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced
the finished product of SONZA’s work.33 ABS-CBN did not instruct SONZA how to
perform his job. ABS-CBN merely reserved the right to modify the program format
and airtime schedule "for more effective programming."34 ABS-CBN’s sole concern
was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did
not exercise control over the means and methods of performance of SONZA’s
work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s
power over the means and methods of the performance of his work. Although
ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still
obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely
dissatisfied with the means and methods of SONZA’s performance of his work, or
even with the quality or product of his work, ABS-CBN could not dismiss or even
discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but
ABS-CBN must still pay his talent fees in full.35
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the
obligation to continue paying in full SONZA’s talent fees, did not amount to control
over the means and methods of the performance of SONZA’s work. ABS-CBN
could not terminate or discipline SONZA even if the means and methods of
performance of his work - how he delivered his lines and appeared on television -
did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited
only to the result of SONZA’s work, whether to broadcast the final product or not. In
either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the
Agreement.
In Vaughan, et al. v. Warner, et al.,36 the United States Circuit Court of Appeals
ruled that vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in their shows.
Since the management did not have control over the manner of performance of
the skills of the artists, it could only control the result of the work by deleting
objectionable features.37
SONZA further contends that ABS-CBN exercised control over his work by supplying
all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and
airtime needed to broadcast the "Mel & Jay" programs. However, the equipment,
crew and airtime are not the "tools and instrumentalities" SONZA needed to
perform his job. What SONZA principally needed were his talent or skills and the
costumes necessary for his appearance.38Even though ABS-CBN provided SONZA
with the place of work and the necessary equipment, SONZA was still an
independent contractor since ABS-CBN did not supervise and control his work.
ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the
programs.39
A radio broadcast specialist who works under minimal supervision is an
independent contractor.40 SONZA’s work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The records
do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-
CBN subjected him to its rules and standards of performance. SONZA claims that
this indicates ABS-CBN’s control "not only [over] his manner of work but also the
quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of
performance "covering talents"41 of ABS-CBN. The Agreement does not require
SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the
Agreement refers to the "Television and Radio Code of the Kapisanan ng mga
Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-
CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to
employees of radio and television stations. Broadcasters are not necessarily
employees of radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents and not
to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate
that the latter is an employee of the former.43 In this case, SONZA failed to show
that these rules controlled his performance. We find that these general rules are
merely guidelines towards the achievement of the mutually desired result, which
are top-rating television and radio programs that comply with standards of the
industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it.44
The Vaughan case also held that one could still be an independent contractor
although the hirer reserved certain supervision to insure the attainment of the
desired result. The hirer, however, must not deprive the one hired from performing
his services according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most
extreme form of control which ABS-CBN exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA
is an employee of ABS-CBN. Even an independent contractor can validly provide
his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the
entertainment industry.46 This practice is not designed to control the means and
methods of work of the talent, but simply to protect the investment of the
broadcast station. The broadcast station normally spends substantial amounts of
money, time and effort "in building up its talents as well as the programs they
appear in and thus expects that said talents remain exclusive with the station for a
commensurate period of time."47 Normally, a much higher fee is paid to talents
who agree to work exclusively for a particular radio or television station. In short,
the huge talent fees partially compensates for exclusivity, as in the present case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which
contracted out his services to ABS-CBN. The Labor Arbiter ruled that as a talent of
MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is a
"labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only"
contractor; (2) the employee who is ostensibly under the employ of the "labor-only"
contractor; and (3) the principal who is deemed the real employer. Under this
scheme, the "labor-only" contractor is the agent of the principal. The law makes
the principal responsible to the employees of the "labor-only contractor" as if the
principal itself directly hired or employed the employees.48 These circumstances
are not present in this case.
There are essentially only two parties involved under the Agreement, namely,
SONZA and ABS-CBN. MJMDC merely acted as SONZA’s agent. The Agreement
expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not
show that MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and
Jay Management and Development Corporation, is a corporation organized and
owned by SONZA and TIANGCO. The President and General Manager of MJMDC is
SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled,
headed and managed by SONZA, acted as agent of ABS-CBN in entering into the
Agreement with SONZA, who himself is represented by MJMDC. That would make
MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to
managing the careers of SONZA and his broadcast partner, TIANGCO. MJMDC is
not engaged in any other business, not even job contracting. MJMDC does not
have any other function apart from acting as agent of SONZA or TIANGCO to
promote their careers in the broadcast and television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas
Ople on 8 January 1979 finally settled the status of workers in the broadcast
industry. Under this policy, the types of employees in the broadcast industry are the
station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the
force and effect of law. There is no legal presumption that Policy Instruction No. 40
determines SONZA’s status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast
industry. The classification of workers in the broadcast industry into only two groups
under Policy Instruction No. 40 is not binding on this Court, especially when the
classification has no basis either in law or in fact.
Affidavits of ABS-CBN’s Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes
and Rolando Cruz without giving his counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as
incompetent to attest on the prevailing practice in the radio and television
industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented
from denying or refuting the allegations in the affidavits. The Labor Arbiter has the
discretion whether to conduct a formal (trial-type) hearing after the submission of
the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of
action raised in the complaint excluding those that may have been
amicably settled, and shall be accompanied by all supporting
documents including the affidavits of their respective witnesses which shall
take the place of the latter’s direct testimony. x x x
Section 4. Determination of Necessity of Hearing. – Immediately after the
submission of the parties of their position papers/memorandum, the Labor
Arbiter shall motu propio determine whether there is need for a formal trial
or hearing. At this stage, he may, at his discretion and for the purpose of
making such determination, ask clarificatory questions to further elicit
facts or information, including but not limited to the subpoena of relevant
documentary evidence, if any from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the
supporting documents without a formal trial.51 The holding of a formal hearing or
trial is something that the parties cannot demand as a matter of right.52 If the Labor
Arbiter is confident that he can rely on the documents before him, he cannot be
faulted for not conducting a formal trial, unless under the particular circumstances
of the case, the documents alone are insufficient. The proceedings before a Labor
Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly
apply in proceedings before a Labor Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like SONZA as independent contractors.
SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises
only if there is an employer-employee relationship under labor laws. Not every
performance of services for a fee creates an employer-employee relationship. To
hold that every person who renders services to another for a fee is an employee -
to give meaning to the security of tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their
services as independent contractors. The right to life and livelihood guarantees this
freedom to contract as independent contractors. The right of labor to security of
tenure cannot operate to deprive an individual, possessed with special skills,
expertise and talent, of his right to contract as an independent contractor. An
individual like an artist or talent has a right to render his services without any one
controlling the means and methods by which he performs his art or craft. This Court
will not interpret the right of labor to security of tenure to compel artists and talents
to render their services only as employees. If radio and television program hosts
can render their services only as employees, the station owners and managers can
dictate to the radio and television hosts what they say in their shows. This is not
conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No.
7716,55 as amended by Republic Act No. 8241,56 treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the 10%
value-added tax ("VAT") on services they render. Exempted from the VAT are those
under an employer-employee relationship.57 This different tax treatment accorded
to talents and broadcasters bolters our conclusion that they are independent
contractors, provided all the basic elements of a contractual relationship are
present as in this case.

Nature of SONZA’s Claims

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

WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals
dated 26 March 1999 in CA-G.R. SP No. 49190 is AFFIRMED. Costs against petitioner.

SO ORDERED.

Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.

G.R. No. 192084 September 14, 2011 dissatisfaction over his questioning on the assignment of referees officiating out-of-
town games. Beginning February 2004, he was no longer made to sign a contract.
JOSE MEL BERNARTE, Petitioner,
vs. Respondents aver, on the other hand, that complainants entered into two
PHILIPPINE BASKETBALL ASSOCIATION (PBA), JOSE EMMANUEL M. EALA, and PERRY contracts of retainer with the PBA in the year 2003. The first contract was for the
MARTINEZ,Respondents. period January 1, 2003 to July 15, 2003; and the second was for September 1 to
December 2003. After the lapse of the latter period, PBA decided not to renew
DECISION their contracts.

CARPIO, J.: Complainants were not illegally dismissed because they were not employees of
the PBA. Their respective contracts of retainer were simply not renewed. PBA had
the prerogative of whether or not to renew their contracts, which they knew were
The Case fixed.4

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010
Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals
set aside the decision of the National Labor Relations Commission (NLRC), which
affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel
Bernarte is an independent contractor, and not an employee of respondents
Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry
Martinez. The Court of Appeals denied the motion for reconsideration.
The Facts
In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an
employee whose dismissal by respondents was illegal. Accordingly, the Labor
Arbiter ordered the reinstatement of petitioner and the payment of backwages,
moral and exemplary damages and attorney’s fees, to wit:
WHEREFORE, premises considered all respondents who are here found to have
illegally dismissed complainants are hereby ordered to (a) reinstate complainants
within thirty (30) days from the date of receipt of this decision and to solidarily pay
complainants:

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as
follows: JOSE MEL RENATO
BERNARTE GUEVARRA
Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were
invited to join the PBA as referees. During the leadership of Commissioner Emilio 1. backwages from January 1, 2004 up to the ₱536,250.00 ₱211,250.00
Bernardino, they were made to sign contracts on a year-to-year basis. During the finality of this Decision, which to date is
term of Commissioner Eala, however, changes were made on the terms of their
employment. 2. moral damages 100,000.00 50,000.00

3. exemplary damages 100,000.00 50,000.00

Complainant Bernarte, for instance, was not made to sign a contract during the
first conference of the All-Filipino Cup which was from February 23, 2003 to June
2003. It was only during the second conference when he was made to sign a one 4. 10% attorney's fees 68,625.00 36,125.00
and a half month contract for the period July 1 to August 5, 2003.
TOTAL ₱754,875.00 ₱397,375.00
On January 15, 2004, Bernarte received a letter from the Office of the
Commissioner advising him that his contract would not be renewed citing his or a total of ₱1,152,250.00
unsatisfactory performance on and off the court. It was a total shock for Bernarte
who was awarded Referee of the year in 2003. He felt that the dismissal was
caused by his refusal to fix a game upon order of Ernie De Leon. The rest of the claims are hereby dismissed for lack of merit or basis.

On the other hand, complainant Guevarra alleges that he was invited to join the SO ORDERED.7
PBA pool of referees in February 2001. On March 1, 2001, he signed a contract as
trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiter’s judgment.
May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing The dispositive portion of the NLRC’s decision reads:
WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita
D. Castillon-Lora dated March 31, 2005 is AFFIRMED.
SO ORDERED.9
Respondents filed a petition for certiorari with the Court of Appeals, which
overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of
the Court of Appeals’ decision reads:
WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January
28, 2008 and Resolutiondated August 26, 2008 of the National Labor Relations
Commission are ANNULLED and SET ASIDE. Private respondents’ complaint before
the Labor Arbiter is DISMISSED.
SO ORDERED.10
The Court of Appeals’ Ruling
The Court of Appeals found petitioner an independent contractor since
respondents did not exercise any form of control over the means and methods by
which petitioner performed his work as a basketball referee. The Court of Appeals
held:
While the NLRC agreed that the PBA has no control over the referees’ acts of
blowing the whistle and making calls during basketball games, it, nevertheless,
theorized that the said acts refer to the means and methods employed by the
referees in officiating basketball games for the illogical reason that said acts refer
only to the referees’ skills. How could a skilled referee perform his job without
blowing a whistle and making calls? Worse, how can the PBA control the
performance of work of a referee without controlling his acts of blowing the whistle
and making calls?
Moreover, this Court disagrees with the Labor Arbiter’s finding (as affirmed by the
NLRC) that the Contracts of Retainer show that petitioners have control over
private respondents.
xxxx
Neither do We agree with the NLRC’s affirmance of the Labor Arbiter’s conclusion
that private respondents’ repeated hiring made them regular employees by
operation of law.11
The Issues
The main issue in this case is whether petitioner is an employee of respondents,
which in turn determines whether petitioner was illegally dismissed.
Petitioner raises the procedural issue of whether the Labor Arbiter’s decision has
become final and executory for failure of respondents to appeal with the NLRC
within the reglementary period.
The Ruling of the Court
The petition is bereft of merit.
The Court shall first resolve the procedural issue posed by petitioner.
Petitioner contends that the Labor Arbiter’s Decision of 31 March 2005 became
final and executory for failure of respondents to appeal with the NLRC within the
prescribed period. Petitioner claims that the Labor Arbiter’s decision was
constructively served on respondents as early as August 2005 while respondents
appealed the Arbiter’s decision only on 31 March 2006, way beyond the
reglementary period to appeal. Petitioner points out that service of an unclaimed
registered mail is deemed complete five days from the date of first notice of the
post master. In this case three notices were issued by the post office, the last being
on 1 August 2005. The unclaimed registered mail was consequently returned to
sender. Petitioner presents the Postmaster’s Certification to prove constructive
service of the Labor Arbiter’s decision on respondents. The Postmaster certified:
xxx
That upon receipt of said registered mail matter, our registry in charge, Vicente
Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005 by the
addressee. The second and third notices were issued on July 21 and August 1,
2005, respectively.
That the subject registered letter was returned to the sender (RTS) because the
addressee failed to claim it after our one month retention period elapsed. Said
registered letter was dispatched from this office to Manila CPO (RTS) under bill #6,
line 7, page1, column 1, on September 8, 2005.12
Section 10, Rule 13 of the Rules of Court provides:
SEC. 10. Completeness of service. – Personal service is complete upon actual
delivery. Service by ordinary mail is complete upon the expiration of ten (10) days
after mailing, unless the court otherwise provides. Service by registered mail is
complete upon actual receipt by the addressee, or after five (5) days from the
date he received the first notice of the postmaster, whichever date is earlier.
The rule on service by registered mail contemplates two situations: (1) actual
service the completeness of which is determined upon receipt by the addressee of
the registered mail; and (2) constructive service the completeness of which is
determined upon expiration of five days from the date the addressee received the
first notice of the postmaster.13
Insofar as constructive service is concerned, there must be conclusive proof that a
first notice was duly sent by the postmaster to the addressee.14 Not only is it
required that notice of the registered mail be issued but that it should also be
delivered to and received by the addressee.15 Notably, the presumption that
official duty has been regularly performed is not applicable in this situation. It is
incumbent upon a party who relies on constructive service to prove that the
notice was sent to, and received by, the addressee.16
The best evidence to prove that notice was sent would be a certification from the
postmaster, who should certify not only that the notice was issued or sent but also
as to how, when and to whom the delivery and receipt was made. The mailman
may also testify that the notice was actually delivered.17
In this case, petitioner failed to present any concrete proof as to how, when and to
whom the delivery and receipt of the three notices issued by the post office was
made. There is no conclusive evidence showing that the post office notices were
actually received by respondents, negating petitioner’s claim of constructive
service of the Labor Arbiter’s decision on respondents. The Postmaster’s
Certification does not sufficiently prove that the three notices were delivered to
and received by respondents; it only indicates that the post office issued the three
notices. Simply put, the issuance of the notices by the post office is not equivalent
to delivery to and receipt by the addressee of the registered mail. Thus, there is no
proof of completed constructive service of the Labor Arbiter’s decision on
respondents.
At any rate, the NLRC declared the issue on the finality of the Labor Arbiter’s
decision moot as respondents’ appeal was considered in the interest of substantial
justice. We agree with the NLRC. The ends of justice will be better served if we
resolve the instant case on the merits rather than allowing the substantial issue of
whether petitioner is an independent contractor or an employee linger and
remain unsettled due to procedural technicalities.
The existence of an employer-employee relationship is ultimately a question of
fact. As a general rule, factual issues are beyond the province of this Court.
However, this rule admits of exceptions, one of which is where there are conflicting
findings of fact between the Court of Appeals, on one hand, and the NLRC and
Labor Arbiter, on the other, such as in the present case.18
To determine the existence of an employer-employee relationship, case law has
consistently applied the four-fold test, to wit: (a) the selection and engagement of
the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
employer’s power to control the employee on the means and methods by which
the work is accomplished. The so-called "control test" is the most important
indicator of the presence or absence of an employer-employee relationship.19
In this case, PBA admits repeatedly engaging petitioner’s services, as shown in the
retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or
allowances, as stipulated in the retainer contract. PBA can terminate the retainer
contract for petitioner’s violation of its terms and conditions.
However, respondents argue that the all-important element of control is lacking in
this case, making petitioner an independent contractor and not an employee of
respondents.
Petitioner contends otherwise. Petitioner asserts that he is an employee of
respondents since the latter exercise control over the performance of his work.
Petitioner cites the following stipulations in the retainer contract which evidence
control: (1) respondents classify or rate a referee; (2) respondents require referees
to attend all basketball games organized or authorized by the PBA, at least one
hour before the start of the first game of each day; (3) respondents assign
petitioner to officiate ballgames, or to act as alternate referee or substitute; (4)
referee agrees to observe and comply with all the requirements of the PBA
governing the conduct of the referees whether on or off the court; (5) referee
agrees (a) to keep himself in good physical, mental, and emotional condition
during the life of the contract; (b) to give always his best effort and service, and
loyalty to the PBA, and not to officiate as referee in any basketball game outside
of the PBA, without written prior consent of the Commissioner; (c) always to
conduct himself on and off the court according to the highest standards of
honesty or morality; and (6) imposition of various sanctions for violation of the terms
and conditions of the contract.
The foregoing stipulations hardly demonstrate control over the means and
methods by which petitioner performs his work as a referee officiating a PBA
basketball game. The contractual stipulations do not pertain to, much less dictate,
how and when petitioner will blow the whistle and make calls. On the contrary,
they merely serve as rules of conduct or guidelines in order to maintain the integrity
of the professional basketball league. As correctly observed by the Court of
Appeals, "how could a skilled referee perform his job without blowing a whistle and
making calls? x x x [H]ow can the PBA control the performance of work of a
referee without controlling his acts of blowing the whistle and making calls?"20
In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the
relationship between a television and radio station and one of its talents, the Court
held that not all rules imposed by the hiring party on the hired party indicate that
the latter is an employee of the former. The Court held:
We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct
of the other party in relation to the services being rendered may be accorded the
effect of establishing an employer-employee relationship. The facts of this case fall
squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we
held that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve
it.22
We agree with respondents that once in the playing court, the referees exercise
their own independent judgment, based on the rules of the game, as to when and
how a call or decision is to be made. The referees decide whether an infraction
was committed, and the PBA cannot overrule them once the decision is made on
the playing court. The referees are the only, absolute, and final authority on the
playing court. Respondents or any of the PBA officers cannot and do not
determine which calls to make or not to make and cannot control the referee
when he blows the whistle because such authority exclusively belongs to the
referees. The very nature of petitioner’s job of officiating a professional basketball
game undoubtedly calls for freedom of control by respondents.
Moreover, the following circumstances indicate that petitioner is an independent
contractor: (1) the referees are required to report for work only when PBA games
are scheduled, which is three times a week spread over an average of only 105
playing days a year, and they officiate games at an average of two hours per
game; and (2) the only deductions from the fees received by the referees are
withholding taxes.
In other words, unlike regular employees who ordinarily report for work eight hours
per day for five days a week, petitioner is required to report for work only when PBA
games are scheduled or three times a week at two hours per game. In addition,
there are no deductions for contributions to the Social Security System, Philhealth
or Pag-Ibig, which are the usual deductions from employees’ salaries. These
undisputed circumstances buttress the fact that petitioner is an independent
contractor, and not an employee of respondents.
Furthermore, the applicable foreign case law declares that a referee is an
independent contractor, whose special skills and independent judgment are
required specifically for such position and cannot possibly be controlled by the
hiring party.
In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court
of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not
an employee of defendant which is the statutory body that governs soccer in the
United States. As such, plaintiff was not entitled to protection by the Age
Discrimination in Employment Act. The U.S. District Court ruled:
Generally, "if an employer has the right to control and direct the work of an
individual, not only as to the result to be achieved, but also as to details by which
the result is achieved, an employer/employee relationship is likely to exist." The
Court must be careful to distinguish between "control[ling] the conduct of another
party contracting party by setting out in detail his obligations" consistent with the
freedom of contract, on the one hand, and "the discretionary control an employer
daily exercises over its employee’s conduct" on the other.
Yonan asserts that the Federation "closely supervised" his performance at each
soccer game he officiated by giving him an assessor, discussing his performance,
and controlling what clothes he wore while on the field and traveling. Putting aside
that the Federation did not, for the most part, control what clothes he wore, the
Federation did not supervise Yonan, but rather evaluated his performance after
matches. That the Federation evaluated Yonan as a referee does not mean that
he was an employee. There is no question that parties retaining independent
contractors may judge the performance of those contractors to determine if the
contractual relationship should continue. x x x
It is undisputed that the Federation did not control the way Yonan refereed his
games.1âwphi1 He had full discretion and authority, under the Laws of the Game,
to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to
qualification standards and procedures like the Federation’s registration and
training requirements does not create an employer/employee relationship. x x x
A position that requires special skills and independent judgment weights in favor of
independent contractor status. x x x Unskilled work, on the other hand, suggests an
employment relationship. x x x Here, it is undisputed that soccer refereeing,
especially at the professional and international level, requires "a great deal of skill
and natural ability." Yonan asserts that it was the Federation’s training that made
him a top referee, and that suggests he was an employee. Though substantial
training supports an employment inference, that inference is dulled significantly or
negated when the putative employer’s activity is the result of a statutory
requirement, not the employer’s choice. x x x
In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was
not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so
the player’s vicarious liability claim against the association should be dismissed. In
finding that the umpire is an independent contractor, the Court of Appeals of
Tennesse ruled:
The TSSAA deals with umpires to achieve a result-uniform rules for all baseball
games played between TSSAA member schools. The TSSAA does not supervise
regular season games. It does not tell an official how to conduct the game
beyond the framework established by the rules. The TSSAA does not, in the
vernacular of the case law, control the means and method by which the umpires
work.
In addition, the fact that PBA repeatedly hired petitioner does not by itself prove
that petitioner is an employee of the former. For a hired party to be considered an
employee, the hiring party must have control over the means and methods by
which the hired party is to perform his work, which is absent in this case. The
continuous rehiring by PBA of petitioner simply signifies the renewal of the contract
between PBA and petitioner, and highlights the satisfactory services rendered by
petitioner warranting such contract renewal. Conversely, if PBA decides to
discontinue petitioner’s services at the end of the term fixed in the contract,
whether for unsatisfactory services, or violation of the terms and conditions of the
contract, or for whatever other reason, the same merely results in the non-renewal
of the contract, as in the present case. The non-renewal of the contract between
the parties does not constitute illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of
Appeals.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice
G.R. No. 159469 June 8, 2005
ZALDY G. ABELLA and the Members of the PLDT SECURITY PERSONNEL unioN LISTED
IN ANNEX "D" OF THIS PETITION, Petitioners,
vs.
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT CO.) and PEOPLE'S
SECURITY INC. (PSI),Respondents.
RESOLUTI ON
CHICO-NAZARIO, J.:
This case stemmed from a complaint for regularization filed by petitioners1 against
respondents before the Arbitration Branch of the National Labor Relations
Commission (NLRC). The petition for review at bar assails the decision 2 of the Court
of Appeals, affirming the decision3 of the NLRC, sustaining the earlier decision4 of
the Labor Arbiter dismissing petitioners’ complaint against the Philippine Long
Distance Telephone Company (PLDT) and herein respondent People’s Security
Incorporated (PSI).
The dispute arose from the following factual milieu:
Respondent PSI entered into an agreement with the PLDT to provide the latter with
such number of qualified uniformed and properly armed security guards for the
purpose of guarding and protecting PLDT’s installations and properties from theft,
pilferage, intentional damage, trespass or other unlawful acts. Under the
agreement, it was expressly provided that there shall be no employer-employee
relationship between the PLDT and the security guards, which may be supplied to it
by PSI, and that the latter shall have the entire charge, control and supervision
over the work and services of the supplied security guards. It was likewise stipulated
therein that PSI shall also have the exclusive authority to select, engage, and
discharge its security guards, with full control over their wages, salaries or
compensation.lawphil.net
Consequently, respondent PSI deployed security guards to the PLDT. PLDT’s
Security Division interviewed these security guards and asked them to fill out
personal data sheets. Those who did not meet the height requirements were sent
back by PLDT to PSI.
On 05 June 1995, sixty-five (65) security guards supplied by respondent PSI filed a
Complaint5 for regularization against the PLDT with the Labor Arbiter. The
Complaint alleged inter alia that petitioner security guards have been employed
by the company through the years commencing from 1982 and that all of them
served PLDT directly for more than 1 year. It was further alleged that PSI or other
agencies supply security to PLDT, which entity controls and supervises the
complainants’ work through its Security Department. Petitioners likewise alleged
that PSI acted as the middleman in the payment of the minimum pay to the
security guards, but no premium for work rendered beyond eight hours was paid to
them nor were they paid their 13th month pay. In sum, the Complaint states that
inasmuch as the complainants are under the direct control and supervision of
PLDT, they should be considered as regular employees by the latter with
compensation and benefits equivalent to ordinary rank-and-file employees of the
same job grade.
Forthwith, after filing the complaint, the security guards formed the PLDT Company
Security Personnel Union with petitioner Zaldy Abella as union president. A month
later, PLDT allegedly ordered PSI to terminate about 25 members of said union who
participated in a protest picket in front of the PLDT Office at the Ramon
Cojuangco Building in Makati City.1avvphi1
The Labor Arbiter dismissed the complaint for lack of merit. On appeal, the NLRC
affirmed in toto the Labor Arbiter’s decision.
The Court of Appeals, in turn, affirmed the NLRC’s disquisition.6 According to the
Court of Appeals, evidence demonstrates that it is respondent PSI which is
petitioners’ employer, not the PLDT inasmuch as the power of selection over the
guards lies with the former. The Court of Appeals also took cognizance of the fact
that petitioners have collected their wages from PSI.7
On 29 September 2003, this Court denied the petition for review filed by petitioners
assailing the Court of Appeals’ Decision for lack of verified statement of material
date of receipt of the assailed judgment. On 16 March 2005, the Court resolved to
deny the motion for reconsideration for lack of merit and sufficient showing that
the Court of Appeals had committed any reversible error in the questioned
judgment to warrant the exercise by this Court of its discretionary appellate
jurisdiction.
Undaunted, petitioners moved for reconsideration of our Resolution dated 16
March 2005. Petitioners now urge this Court to ignore technicalities and brush aside
the procedural requirements so this case may be decided "on the merits."
On the postulate that dismissal of appeals based on mere technicalities is frowned
upon, we take another look at this petition for review to quell all doubts that the
Court is impervious to petitioners’ cause. Cautious as we are against rendering a
decision that may well be a "blow on the breadbasket of our lowly
employees,"8 we are hence rendering a complete adjudication of this case at bar.
Crucial to the resolution of this case is a determination whether or not an
employer-employee relationship exists between petitioners and respondent PLDT.
Philippine Airlines, Inc. v. National Labor Relations Commission 9 provides the legal
yardstick in addressing this issue. In that case, Unicorn Security Services, Inc. (USSI)
and Philippine Airlines, Inc. (PAL) executed a security service agreement where
USSI was designated therein as the contractor. In determining which between PAL
and USSI is the employer of the security guards, we considered the following
factors in considering the existence of an employer-employee relationship: (1) the
selection and engagement of the employee; (2) the payment of wages; (3) the
power to dismiss; and (4) the power to control the employee’s conduct.
Considering these elements, we held in the said case that the security guards of
PAL were the employees of the security agency, not PAL. We explained why-
In the instant case, the security service agreement between PAL and USSI provides
the key to such consideration. A careful perusal thereof, especially the terms and
conditions embodied in paragraphs 4, 6, 7, 8, 9, 10, 13 and 20 quoted earlier in
this ponencia, demonstrates beyond doubt that USSI - and not PAL – was the
employer of the security guards. It was USSI which (a) selected, engaged or hired
and discharged the security guards; (b) assigned them to PAL according to the
number agreed upon; (c) provided, at its own expense, the security guards with
firearms and ammunitions; (d) disciplined and supervised them or controlled their
conduct; (e) determined their wages, salaries, and compensation; and (f) paid
them salaries or wages. Even if we disregard the explicit covenant in said
agreement that "there exists no employer-employee relationship between
CONTRACTOR and/or his guards on the one hand, and PAL on the other" all other
considerations confirm the fact that PAL was not the security guards’
employer. (Emphasis supplied)
On the first factor, applying PAL v. NLRC as our guidepost in the case before us, the
Labor Arbiter, the NLRC and the Court of Appeals rendered a consistent finding
based on the evidence adduced that it was the PSI, the security provider of the
PLDT, which selected, engaged or hired and discharged the security guards. The
Labor Arbiter was no less emphatic –
It is not disputed that complainants applied for work with PSI, submitted the
necessary employment documentary requirement with PSI and executed
employment contracts with PSI. Complainants, however, contend that their referral
by the PSI to PLDT for further interview and evaluation falls under the context of
"selection and engagement" thereby making them employees of PLDT.
We are not convinced.
Testimonies during the trial reveal that interviews and evaluation were conducted
by PLDT to ensure that the standards it set are met by the security guards. In fact,
PLDT rarely failed to accept security guards referred to by PSI but on account of
height deficiency. The referral is nothing but for possible assignment in a
designated client which has the inherent prerogative to accept and reject the
assignee for justifiable grounds or even arbitrarily. We are thus convinced that the
employer-employee relationship is deemed perfected even before the posting of
the complainants with the PLDT, as assignment only comes after employment.10
We hasten to add on this score that the Labor Arbiter as well as the NLRC and the
Court of Appeals found that PSI is a legitimate job contractor pursuant to Section
8, Rule VII, Book II of the Omnibus Rules Implementing the Labor Code. It is a
registered corporation duly licensed by the Philippine National Police to engage in
security business. It has substantial capital and investment in the form of guns,
ammunitions, communication equipments, vehicles, office equipments like
computer, typewriters, photocopying machines, etc., and above all, it is servicing
clients other than PLDT like PCIBank, Crown Triumph, and Philippine Cable, among
others.11 Here, the security guards which PSI had assigned to PLDT are already the
former’s employees prior to assignment and if the assigned guards to PLDT are
rejected by PLDT for reasons germane to the security agreement, then the
rejected or terminated guard may still be assigned to other clients of PSI as in the
case of Jonathan Daguno who was posted at PLDT on 21 February 1996 but was
subsequently relieved therefrom and assigned at PCIBank Makati Square effective
10 May 1996.12 Therefore, the evidence as it stands is at odds with petitioners’
assertion that PSI is an "in-house" agency of PLDT so as to call for a piercing of veil
of corporate identity as what the Court has done in De leon, et al. vs. NLRC and
Fortune Tobacco Corporation, et al.13
On the second factor, the Labor Arbiter as well as the NLRC and the Court of
Appeals are all in agreement that it is PSI that determined and paid the petitioners’
wages, salaries, and compensation. As elucidated by the Labor Arbiter,
petitioners’ witness testified that his wages were collected and withdrawn at the
office of PSI and PLDT pays PSI for the security services on a lump-sum basis and
that the wages of complainants are only a portion of the total sum. The signature
of the PLDT supervisor in the Daily Time Records does not ipso facto make PLDT the
employer of complainants inasmuch as the Labor Arbiter had found that the
record is replete with evidence showing that some of the Daily Time Records do
not bear the signature of a PLDT supervisor yet no complaint was lodged for
nonpayment of the guard’s wages evidencing that the signature of the PLDT’s
supervisor is not a condition precedent for the payment of wages of the guards.
Notably, it was not disputed that complainants enjoy the benefits and incentives of
employees of PSI and that they are reported as employees of PSI with the SSS.14
Anent the third and fourth factors, petitioners capitalize on the delinquency reports
prepared by PLDT personnel against some of the security guards as well as
certificates of participation in civil disturbance course, certificates of attendance
in first aid training, certificate of completion in fire brigade training seminar and
certificate of completion on restricted land mobile radio telephone operation to
show that the petitioners are under the direct control and supervision of PLDT and
that the latter has, in fact, the power to dismiss them.
The Labor Arbiter found from the evidence that the delinquency reports were
nothing but reminders of the infractions committed by the petitioners while on duty
which serve as basis for PLDT to recommend the termination of the concerned
security guard from PLDT. As already adverted to earlier, termination of services
from PLDT did not ipso facto mean dismissal from PSI inasmuch as some of those
pulled out from PLDT were merely detailed at the other clients of PSI as in the case
of Jonathan Daguno, who was merely transferred to PCIBank Makati.
We are likewise in agreement with the Labor Arbiter’s reasoning that said
delinquency reports merely served as justifiable, not arbitrary, basis for PLDT to
demand replacement of guards found to have committed infractions while on
their tours of duty at PLDT’s premises. In Citytrust Banking Corporation v. NLRC,15 we
upheld the validity of the contract between ADAMS and ESSI to provide security
guards to Citytrust and held that the security guards were the employees of the
security agencies, not Citytrust. Specifically we held as valid and controlling the
stipulation that the bank has the option to ask for replacement of the guards or
personnel assigned to the bank who, in its judgment, are unsatisfactory, wanting in
the performance of their duties or for any reason at the discretion of the bank.
Thus-
In substantially identical language, the contracts between CITYTRUST, on the one
hand, and ADAMS and ESSI, on the other, unequivocally declare that any person
that may be assigned by the "CARRIER" (agency) to carry out its obligation under
the Agreement should in no sense be considered an employee of the bank and
shall always remain an employee of the CARRIER. The contracts moreover require
the CARRIER to give the bank a list of personnel assigned to render security services
to the bank, and make clear that:
1) the CARRIER shall maintain efficient and effective discipline, control
and supervision over any and all guards or personnel it may utilize in
performing its obligations under the Agreement;
2) the BANK has the option to ask for the replacement of the CARRIER’s
guards or personnel assigned to the BANK who, in its judgment, are
unsatisfactory, wanting in the performance of their duties or for any
reason at the discretion of the Bank;. . . .[16] (Emphasis supplied)
As regards the seminars, we defer to the findings of the Labor Arbiter as affirmed
by the NLRC and the Court of Appeals that while said seminars were conducted at
the premises of PLDT, it also remains uncontroverted that complainants’
participation was done with the approval and at the expense of PSI.17 To be sure, it
is not uncommon, specially for big aggressive corporations like PLDT, to align or
integrate their corporate visions and policies externally or with that of other entities
they deal with such as their suppliers, consultants, or contractors, for that matter. As
a case in point, manufacturing companies usually hold suppliers’ conferences to
integrate their suppliers’ corporate goals and visions with their own so that the
manufacturing companies are ensured of the quality and timing of their supplies of
materials or services, as the case may be. It is therefore not surprising that PLDT
would demand that security guards assigned to its premises undergo seminars and
trainings on certain areas of concern which are unique to PLDT.
In the same way, it is in the ordinary course of things for big companies such as
PLDT to assign their own security personnel and supervisors to monitor the
performance of the security guards as part of the company’s internal check,
monitoring and control system in order to rate whether the security agency it hired
is performing at par with PLDT’s set standards.
Furthermore, petitioners’ logic that the certificates of appreciation and/or
commendations for good performance issued by PLDT to select security guards
are proof that the latter are under the control and supervision of PLDT is
indeed non sequitur. As the Labor Arbiter has found, similar certificates are also
issued as a matter of practice to non-PLDT personnel like members of the Philippine
National Police (PNP) and military officers who have rendered exemplary support
and assistance to PLDT.18
The Labor Arbiter likewise rendered the distinct finding as regards petitioner Zaldy
Abella that documentary evidence belies his claim that PLDT directs and
supervises him. These documents include his application for employment with PSI,
employment contract with PSI, Special Orders of assignment at the different
detachments of PLDT issued by a certain Joreim Aguilar of PSI, his request to PSI for
sick leaves and/or vacation leaves, authority to deduct from his salary death
contributions pursuant to the policy of PSI and Order of Relief from PLDT Marikina
for AWOL issued by said Joreim Aguilar of PSI per Special Order dated 12 June
1995.19 Similarly, as found by the Labor Arbiter in the case of petitioner Roberto
Basilides, his 201 file reflects PSI Orders on his assignment to PLDT installations and
subsequent reassignment to another PCIB client.20
All told, there being no showing that neither the Labor Arbiter nor the NLRC nor the
Court of Appeals gravely abused its discretion or otherwise acted without
jurisdiction or in excess of the same,21 this Court is bound by their findings of facts.
Indeed, the records reveal that the questioned decision is duly supported by
evidence.22
In fine, while the Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that every labor dispute
will be automatically decided in favor of labor. The partiality for labor has not in
any way diminished our belief that justice is in every case for the deserving, to be
dispensed in the light of the established facts and the applicable law and
doctrine.23
WHEREFORE, petitioners’ motion for reconsideration of our Resolution dated 16
March 2005 is hereby DENIEDwith Finality no compelling reason having been
adduced by petitioners to warrant the reversal thereof. Accordingly, the Decision
dated 31 January 2003 and the
Resolution dated 06 August 2003 of the Court of Appeals are hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 145443. March 18, 2005
RAQUEL P. CONSULTA, Petitioner,
vs.
COURT OF APPEALS, PAMANA PHILIPPINES, INC., RAZUL Z. REQUESTO, and ALETA
TOLENTINO,Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for
review1
assailing the Decision of 28 April 2000 and Resolution of
9 October 2000 promulgated by the Court of Appeals ("appellate court")2 in CA-
G.R. SP No. 50462. The appellate court reversed the Resolution of the National
Labor Relations Commission ("NLRC") which in turn affirmed the Labor Arbiter’s
Decision.
The Antecedent Facts
Pamana Philippines, Inc. ("Pamana") is engaged in health care business. Raquel P.
Consulta ("Consulta") was a Managing Associate of Pamana. Consulta’s
appointment dated 1 December 1987 states:
We are pleased to formally confirm your appointment and confer upon you the
authority as MANAGING ASSOCIATE (MA) effective on December 1, 1987 up to
January 2, 1988. Your area of operation shall be within Metro Manila.
In this capacity, your principal responsibility is to organize, develop, manage, and
maintain a sales division and a full complement of agencies and Health
Consultants (HealthCons) and to submit such number of enrollments and revenue
attainments as may be required of your position in accordance with pertinent
Company policies and guidelines. In pursuit of this objective, you are hereby
tasked with the responsibilities of recruiting, training and directing your Supervising
Associates (SAs) and the Health Consultants under their respective agencies, for
the purpose of promoting our corporate Love Mission.
In the performance of such duties, you are expected to uphold and promote the
Company’s interests and good image and to abide by its principles and
established norms of conduct necessary and appropriate in the discharge of your
functions. The authority as MA likewise vests upon you command responsibility for
the actions of your SAs and HealthCons; the Company therefore reserves the right
to debit your account for any accountabilities/financial obligations arising
therefrom.
By your acceptance of this appointment, it is understood that you must represent
the Company on an exclusive basis, and must not engage directly or indirectly in
activities, nor become affiliated in official or unofficial capacity with companies or
organizations which compete or have the same business as Pamana. It is further
understood that his [sic] self-inhibition shall be effective for a period of one year
from date of official termination with the Company arising from any cause
whatsoever.
In consideration of your undertaking the assignment and the accompanying
duties and responsibilities, you shall be entitled to compensation computed as
follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participate in sales contests and such other incentives
that may be implemented by the Company.
This appointment is on a non-employer-employee relationship basis, and shall be in
accordance with the Company Guidelines on Appointment, Reclassification and
Transfer of Sales Associates.3
Sometime in 1987, Consulta negotiated with the Federation of Filipino Civilian
Employees Association ("FFCEA") working at the United States Subic Naval Base for
a Health Care Plan for the FFCEA members. Pamana issued Consulta a
Certification4 dated 23 November 1987, as follows:
This certifies that the Emerald Group under Ms. Raquel P. Consulta, as Managing
Consultant, is duly authorized to negotiate for and in behalf of PAMANA with the
Federation of Filipino Civilian Employees Association covering all U.S. facilities in the
Philippines, the coverage of FFCEA members under the Pamana Golden Care
Health Plans.
Upon such negotiation and eventual execution of the contract agreements,
entitlements of all benefits due the Emerald Group in it’s [sic] entirely including it’s
[sic] Supervising Consultants and Health Consultants, by of commissions, over-rides
and other package of benefits is hereby affirmed, obligated and confirmed as
long as the contracts negotiated and executed are in full force and effect,
including any and all renewals made. And provided further that the herein
authorized consultants remain in active status with the Pamana Golden Care sales
group.5
On 4 March 1988, Pamana and the U.S. Naval Supply Depot signed the FFCEA
account. Consulta, claiming that Pamana did not pay her commission for the
FFCEA account, filed a complaint for unpaid wages or commission against
Pamana, its President Razul Z. Requesto ("Requesto"), and its Executive Vice-
President Aleta Tolentino ("Tolentino").
The Rulings of the Labor Arbiter and the NLRC
In a Decision promulgated on 23 June 1993, Labor Arbiter Alex Arcadio Lopez
ruled, as follows:
ACCORDINGLY, respondent is hereby ordered to pay complainant her unpaid
commission to be computed as against actual transactions between respondent
PAMANA and the contracting Department of U.S. Naval Supply Depot upon
presentation of pertinent document.
Respondent is further ordered to pay ten (10%) percent attorney’s fees.
SO ORDERED.6
Pamana, Requesto and Tolentino ("Pamana et al.") appealed the Decision of the
Labor Arbiter.
In a Resolution7 promulgated on 22 July 1994, the NLRC dismissed the appeal and
affirmed the Decision of the Labor Arbiter. In its Order promulgated on 3 October
1994, the NLRC denied the motion for reconsideration of Pamana et al.
Pamana et al. filed a petition for certiorari before this Court. In compliance with this
Court’s resolution dated 6 February 1995, the Office of the Solicitor General
submitted a Manifestation in Lieu of Comment praying to grant the petition on the
ground that Consulta was not an employee of Pamana. On 23 November 1998,
this Court referred the case to the appellate court pursuant to St. Martin Funeral
Home v. NLRC.8
The Decision of the Appellate Court
In its Decision promulgated on 28 April 2000, the appellate court reversed the NLRC
Decision. The appellate court ruled that Consulta was a commission agent, not an
employee of Pamana. The appellate court also ruled that Consulta should have
litigated her claim for unpaid commission in an ordinary civil action.
Hence, Consulta’s recourse to this Court.
The Issues
The issues are:
1. Whether Consulta was an employee of Pamana.
2. Whether the Labor Arbiter had jurisdiction over Consulta’s claim for unpaid
commission.
The Ruling of the Court
We affirm the Decision of the appellate court. Consulta was an independent
agent and not an employee of Pamana.
The Four-Fold Test
In Viaña v. Al-Lagadan,9 the Court first laid down the four-fold test to determine the
existence of an employer-employee relationship. The four elements of an
employer-employee relationship, which have since been adopted in subsequent
jurisprudence,10 are (1) the power to hire; (2) the payment of wages; (3) the power
to dismiss; and (4) the power to control. The power to control is the most important
of the four elements.
In Insular Life Assurance Co., Ltd. v. NLRC,11 the Court explained the scope of the
power to control, thus:
x x x It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-
employee relationship between them in the legal or technical sense of the term. A
line must be drawn somewhere, if the recognized distinction between an
employee and an individual contractor is not to vanish altogether. Realistically, it
would be a rare contract of service that gives untrammelled freedom to the party
hired and eschews any intervention whatsoever in his performance of the
engagement.
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.
In the present case, the power to control is missing. Pamana tasked Consulta to
organize, develop, manage, and maintain a sales division, submit a number of
enrollments and revenue attainments in accordance with company policies and
guidelines, and to recruit, train and direct her Supervising Associates and Health
Consultants.12However, the manner in which Consulta was to pursue these
activities was not subject to the control of Pamana. Consulta failed to show that
she had to report for work at definite hours. The amount of time she devoted to
soliciting clients was left entirely to her discretion. The means and methods of
recruiting and training her sales associates, as well as the development,
management and maintenance of her sales division, were left to her sound
judgment.
Consulta claims that the documents she submitted show that Pamana had control
on the conduct of her work and the means and methods to accomplish the work.
However, the documents only prove the absence of the power to control. The
Minutes of the meeting on 31 May 1988 of the Managing Associates with Fely
Whitfield, Vice-President for Sales of Pamana, reflect the following:
At this point Mrs. Whitfield gave some pointers on recruitment and selling
techniques and reminded the group that the success of an agency is still people.
The more recruits you have the better is your chance to achieve your quota.
She also announced June be made a recruitment month, and told the MAs to
remind their associates that if you cannot sell to a prospect then recruit him or her.
She also discussed extensively the survey method of selling and recruitment and
that the sales associates should be more aggressive in their day to day sales
activity. She reminded the MAs to fill up their recruitment requirements to be able
to participate in the monthly and quarterly contest.
xxx
4. Recruitment Campaign
In connection with the Recruitment Campaign for June, Mr. R. Canon13 requested
for Management support. He suggested that a recruitment Advertisement be
placed in a leading Metropolitan daily Newspaper. The cost of which was
unanimously suggested by MAs that Management should share at least 50%.
5. MAs agreed to pay in advance their share for the salary of the MAs
Secretary.14 (Emphasis supplied)
The Minutes of the 7 June 1988 meeting reflect the following:
III. PRODUCTION & RECRUITMENT INCENTIVES
To help the MAs in their recruitment drive Mrs. Whitfield suggested some incentives
to be undertaken by the MAs like (1) cash incentives for associates that bring in a
recruit, (2) cash incentives based on production brought in by these new recruits.
She said that MAs, as businessm[e]n should invest time, effort & money to their
work, because it will redown [sic] to their own good anyway, that the success of
their agency should not depend solely on what management could give as
incentives but also on incentives of MAs within their agencies. It should be a
concerted effort.
After a thorough discussion on the pros & cons of the suggestions it was agreed
that a ₱10.00 per recruit be given to the associate that will recruit and an
additional cash prize based on production of these new recruits.15
Clearly, the Managing Associates only received suggestions from Pamana on how
to go about their recruitment and sales activities. They could adopt the
suggestions but the suggestions were not binding on them. They could adopt other
methods that they deemed more effective.
Further, the Managing Associates had to ask the Management of Pamana to
shoulder half of the advertisement cost for their recruitment campaign. They
shelled out their own resources to bolster their recruitment. They shared in the
payment of the salaries of their secretaries. They gave cash incentives to their sales
associates from their own pocket. These circumstances show that the Managing
Associates were independent contractors, not employees, of Pamana.
Finally, Pamana paid Consulta not for labor she performed but only for the results
of her labor.16 Without results, Consulta’s labor was her own burden and loss. Her
right to compensation, or to commission, depended on the tangible results of her
work17 - whether she brought in paying recruits. Consulta’s appointment paper
provides:
In consideration of your undertaking the assignment and the accompanying
duties and responsibilities, you shall be entitled to compensation computed as
follows:
On Initial Membership Fee Entrance Fee 5%
Medical Fee 6%
On Subsequent Membership Fee 6%
You are likewise entitled to participation in sales contests and such other incentives
that may be implemented by the Company.18
The Guidelines on Appointment of Associates show that a Managing Associate
received the following commissions and bonuses:
3. Compensation Package of Regular MAs
Regular MAs shall be entitled to the following compensation and benefits:
3.1 Compensation
a) Personal Production
Individual/Family Institutional Acct.
commission 30% 30%
bonus 40% -
b) Group Production
overriding commission 6% 6%
bonus 5% -
3.2 Benefits
Participation in all sales contests corresponding to the MA position plus any such
other benefits as may be provided for the MA on regular status.19
Aside from commissions, bonuses and other benefits that depended solely on
actual sales, Pamana did not pay Consulta any compensation for managing her
sales division, or for recruiting and training her sales consultants. As a Managing
Associate, she was only entitled to commissions, bonuses and other benefits, which
depended solely on her sales and on the sales of her group.
The Exclusivity Provision
Consulta’s appointment had an exclusivity provision. The appointment provided
that Consulta must represent Pamana on an exclusive basis. She must not engage
directly or indirectly in activities of other companies that compete with the business
of Pamana. However, the fact that the appointment required Consulta to solicit
business exclusively for Pamana did not mean that Pamana exercised control over
the means and methods of Consulta’s work as the term control is understood in
labor jurisprudence.20 Neither did it make Consulta an employee of Pamana.
Pamana did not prohibit Consulta from engaging in any other business, or from
being connected with any other company, for as long as the business or company
did not compete with Pamana’s business.
The prohibition applied for one year after the termination of the contract with
Pamana. In one of their meetings, one of the Managing Associates reported that
he was transferring his sales force and account from another company to
Pamana.21 The exclusivity provision was a reasonable restriction designed to
prevent similar acts prejudicial to Pamana’s business interest. Article 1306 of the
Civil Code provides that "[t]he contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are
not contrary to law, morals, good customs, public order, or public policy."
Jurisdiction over Claim for Unpaid Commission
There being no employer-employee relationship between Pamana and Consulta,
the Labor Arbiter and the NLRC had no jurisdiction to entertain and rule on
Consulta’s money claim.
Article 217 of the Labor Code provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as
otherwise provided under this Code the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied
with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same
to the grievance machinery and voluntary arbitration as may be provided in said
agreements.
Consulta filed her action under Article 217(a)(6) of the Labor Code. However, since
there was no employer-employee relationship between Pamana and Consulta,
the Labor Arbiter should have dismissed Consulta’s claim for unpaid commission.
Consulta’s remedy is to file an ordinary civil action to litigate her claim.
WHEREFORE, the petition is DISMISSED and the Decision of the Court of Appeals in
CA-G.R. SP No. 50462 is AFFIRMED in toto.
SO ORDERED.
G.R. No. 165881 April 19, 2006
OSCAR VILLAMARIA, JR. Petitioner,
vs.
COURT OF APPEALS and JERRY V. BUSTAMANTE, Respondents
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of
Court assailing the Decision1and Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 78720 which set aside the Resolution3 of the National Labor Relations
Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision4 of
the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole
proprietorship engaged in assembling passenger jeepneys with a public utility
franchise to operate along the Baclaran-Sucat route. By 1995, Villamaria stopped
assembling jeepneys and retained only nine, four of which he operated by
employing drivers on a "boundary basis." One of those drivers was respondent
Bustamante who drove the jeepney with Plate No. PVU-660. Bustamante remitted
P450.00 a day to Villamaria as boundary and kept the residue of his daily earnings
as compensation for driving the vehicle. In August 1997, Villamaria verbally agreed
to sell the jeepney to Bustamante under the "boundary-hulog scheme," where
Bustamante would remit to Villarama P550.00 a day for a period of four years;
Bustamante would then become the owner of the vehicle and continue to drive
the same under Villamaria’s franchise. It was also agreed that Bustamante would
make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled "Kasunduan ng Bilihan
ng Sasakyan sa Pamamagitan ng Boundary-Hulog"5 over the passenger jeepney
with Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The
parties agreed that if Bustamante failed to pay the boundary-hulog for three days,
Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day; in case Bustamante failed to remit the daily
boundary-hulog for a period of one week, the Kasunduan would cease to have
legal effect and Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without
prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate
the vehicle to transport passengers only and not for other purposes. He was also
required to display an identification card in front of the windshield of the vehicle; in
case of failure to do so, any fine that may be imposed by government authorities
would be charged against his account. Bustamante further obliged himself to pay
for the cost of replacing any parts of the vehicle that would be lost or damaged
due to his negligence. In case the vehicle sustained serious damage, Bustamante
was obliged to notify Villamaria Motors before commencing repairs. Bustamante
was not allowed to wear slippers, short pants or undershirts while driving. He was
required to be polite and respectful towards the passengers. He was also obliged
to notify Villamaria Motors in case the vehicle was leased for two or more days and
was required to attend any meetings which may be called from time to time.
Aside from the boundary-hulog, Bustamante was also obliged to pay for the
annual registration fees of the vehicle and the premium for the vehicle’s
comprehensive insurance. Bustamante promised to strictly comply with the rules
and regulations imposed by Villamaria for the upkeep and maintenance of the
jeepney.
Bustamante continued driving the jeepney under the supervision and control of
Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of
the purchase price of the vehicle. Bustamante failed to pay for the annual
registration fees of the vehicle, but Villamaria allowed him to continue driving the
jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with
Villamaria Motors failed to pay their respective boundary-hulog. This prompted
Villamaria to serve a "Paalala,"6 reminding them that under the Kasunduan, failure
to pay the daily boundary-hulog for one week, would mean their respective
jeepneys would be returned to him without any complaints. He warned the drivers
that the Kasunduan would henceforth be strictly enforced and urged them to
comply with their obligation to avoid litigation.
On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and
barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint7 for Illegal Dismissal against
Villamaria and his wife Teresita. In his Position Paper,8 Bustamante alleged that he
was employed by Villamaria in July 1996 under the boundary system, where he
was required to remit P450.00 a day. After one year of continuously working for
them, the spouses Villamaria presented the Kasunduan for his signature, with the
assurance that he (Bustamante) would own the jeepney by March 2001 after
paying P550.00 in daily installments and that he would thereafter continue driving
the vehicle along the same route under the same franchise. He further narrated
that in July 2000, he informed the Villamaria spouses that the surplus engine of the
jeepney needed to be replaced, and was assured that it would be done.
However, he was later arrested and his driver’s license was confiscated because
apparently, the replacement engine that was installed was taken from a stolen
vehicle. Due to negotiations with the apprehending authorities, the jeepney was
not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000,
and he was no longer allowed to drive the vehicle since then unless he paid them
P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:
WHEREFORE, in the light of the foregoing, it is most respectfully prayed that
judgment be rendered ordering the respondents, jointly and severally, the
following:
 1. Reinstate complainant to his former position without loss of seniority
rights and execute a Deed of Sale in favor of the complainant relative to
the PUJ with Plate No. PVU-660;
2. Ordering the respondents to pay backwages in the amount of P400.00
a day and other benefits computed from July 24, 2000 up to the time of
his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and
P180,000.00 for the expenses incurred by the complainant in the repair
and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred
(P100.00) Pesos per day counted from August 7, 1997 up to June 2000 or a
total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorney’s fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for. 9
In their Position Paper,10 the spouses Villamaria admitted the existence of the
Kasunduan, but alleged that Bustamante failed to pay the P10,000.00
downpayment and the vehicle’s annual registration fees. They further alleged that
Bustamante eventually failed to remit the requisite boundary-hulog of P550.00 a
day, which prompted them to issue the Paalaala. Instead of complying with his
obligations, Bustamante stopped making his remittances despite his daily trips and
even brought the jeepney to the province without permission. Worse, the jeepney
figured in an accident and its license plate was confiscated; Bustamante even
abandoned the vehicle in a gasoline station in Sucat, Parañaque City for two
weeks. When the security guard at the gasoline station requested that the vehicle
be retrieved and Teresita Villamaria asked Bustamante for the keys, Bustamante
told her: "Di kunin ninyo." When the vehicle was finally retrieved, the tires were
worn, the alternator was gone, and the battery was no longer working.
Citing the cases of Cathedral School of Technology v. NLRC11 and Canlubang
Security Agency Corporation v. NLRC,12 the spouses Villamaria argued that
Bustamante was not illegally dismissed since the Kasunduan executed on August 7,
1997 transformed the employer-employee relationship into that of vendor-vendee.
Hence, the spouses concluded, there was no legal basis to hold them liable for
illegal dismissal. They prayed that the case be dismissed for lack of jurisdiction and
patent lack of merit.
In his Reply,13 Bustamante claimed that Villamaria exercised control and
supervision over the conduct of his employment. He maintained that the rulings of
the Court in National Labor Union v. Dinglasan,14 Magboo v. Bernardo,15 and
Citizen's League of Free Workers v. Abbas16 are germane to the issue as they
define the nature of the owner/operator-driver relationship under the boundary
system. He further reiterated that it was the Villamaria spouses who presented the
Kasunduan to him and that he conformed thereto only upon their representation
that he would own the vehicle after four years. Moreover, it appeared that the
Paalala was duly received by him, as he, together with other drivers, was made to
affix his signature on a blank piece of paper purporting to be an "attendance
sheet."
On March 15, 2002, the Labor Arbiter rendered judgment17 in favor of the spouses
Villamaria and ordered the complaint dismissed on the following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA,
to prove their claim that complainant violated the terms of their contract and
afterwards abandoned the vehicle assigned to him. As against the foregoing, [the]
complaint’s (sic) mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and
attorney's fees.18
Bustamante appealed the decision to the NLRC,19 insisting that the Kasunduan did
not extinguish the employer-employee relationship between him and Villamaria.
While he did not receive fixed wages, he kept only the excess of the boundary-
hulog which he was required to remit daily to Villamaria under the agreement.
Bustamante maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to Villamaria’s
trade or business.
The NLRC rendered judgment20 dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED for
reasons not stated in the Labor Arbiter's decision but mainly on a jurisdictional issue,
there being none over the subject matter of the controversy.21
The NLRC ruled that under the Kasunduan, the juridical relationship between
Bustamante and Villamaria was that of vendor and vendee, hence, the Labor
Arbiter had no jurisdiction over the complaint. Bustamante filed a Motion for
Reconsideration, which the NLRC resolved to deny on May 30, 2003.22
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that
the NLRC erred
I
IN DISMISSING PETITIONER’S APPEAL "FOR REASON NOT STATED IN THE LABOR
ARBITER’S DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;"
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT DECLARED
THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN PETITIONER AND THE
PRIVATE RESPONDENT WAS DEFINITELY A MATTER WHICH IS BEYOND THE PROTECTIVE
MANTLE OF OUR LABOR LAWS.23
Bustamante insisted that despite the Kasunduan, the relationship between him and
Villamaria continued to be that of employer-employee and as such, the Labor
Arbiter had jurisdiction over his complaint. He further alleged that it is common
knowledge that operators of passenger jeepneys (including taxis) pay their drivers
not on a regular monthly basis but on commission or boundary basis, or even the
boundary-hulog system. Bustamante asserted that he was dismissed from
employment without any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of their
employer-employee relationship. He further pointed out that the Dinglasan case
pertains to the boundary system and not the boundary-hulog system, hence
inapplicable in the instant case. He argued that upon the execution of the
Kasunduan, the juridical tie between him and Bustamante was transformed into a
vendor-vendee relationship. Noting that he was engaged in the manufacture and
sale of jeepneys and not in the business of transporting passengers for
consideration, Villamaria contended that the daily fees which Bustmante paid
were actually periodic installments for the the vehicle and were not the same fees
as understood in the boundary system. He added that the boundary-hulog plan
was basically a scheme to help the driver-buyer earn money and eventually pay
for the unit in full, and for the owner to profit not from the daily earnings of the
driver-buyer but from the purchase price of the unit sold. Villamaria further asserted
that the apparently restrictive conditions in the Kasunduan did not mean that the
means and method of driver-buyer’s conduct was controlled, but were mere ways
to preserve the vehicle for the benefit of both parties: Villamaria would be able to
collect the agreed purchase price, while Bustamante would be assured that the
vehicle would still be in good running condition even after four years. Moreover,
the right of vendor to impose certain conditions on the buyer should be respected
until full ownership of the property is vested on the latter. Villamaria insisted that the
parallel circumstances obtaining in Singer Sewing Machine Company v.
Drilon24 has analogous application to the instant issue.
In its Decision25 dated August 30, 2004, the CA reversed and set aside the NLRC
decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned resolutions of the NLRC
must be, as they are hereby are, REVERSED AND SET ASIDE, and judgment entered
in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay petitioner
Jerry Bustamante separation pay computed from the time of his
employment up to the time of termination based on the prevailing
minimum wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay petitioner
Jerry Bustamante back wages computed from the time of his dismissal up
to March 2001 based on the prevailing minimum wage at the time of his
dismissal.
Without Costs.
SO ORDERED.26
The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamante’s
complaint. Under the Kasunduan, the relationship between him and Villamaria was
dual: that of vendor-vendee and employer-employee. The CA ratiocinated that
Villamaria’s exercise of control over Bustamante’s conduct in operating the
jeepney is inconsistent with the former’s claim that he was not engaged in the
transportation business. There was no evidence that petitioner was allowed to let
some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in the
Kasunduan, it did not mean that Villamaria could not exercise it. It explained that
the existence of an employment relationship did not depend on how the worker
was paid but on the presence or absence of control over the means and method
of the employee’s work. In this case, Villamaria’s directives (to drive carefully, wear
an identification card, don decent attire, park the vehicle in his garage, and to
inform him about provincial trips, etc.) was a means to control the way in which
Bustamante was to go about his work. In view of Villamaria’s supervision and
control as employer, the fact that the "boundary" represented installment
payments of the purchase price on the jeepney did not remove the parties’
employer-employee relationship.
While the appellate court recognized that a week’s default in paying the
boundary-hulog constituted an additional cause for terminating Bustamante’s
employment, it held that the latter was illegally dismissed. According to the CA,
assuming that Bustamante failed to make the required payments as claimed by
Villamaria, the latter nevertheless failed to take steps to recover the unit and
waited for Bustamante to abandon it. It also pointed out that Villamaria neither
submitted any police report to support his claim that the vehicle figured in a
mishap nor presented the affidavit of the gas station guard to substantiate the
claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and filed, on
September 17, 2004, a motion for reconsideration thereof. The CA denied the
motion in a Resolution27 dated November 2, 2004, and Villamaria received a copy
thereof on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review on
certiorari under Rule 65 of the Rules of Court, alleging that the CA committed
grave abuse of its discretion amounting to excess or lack of jurisdiction in reversing
the decision of the Labor Arbiter and the NLRC. He claims that the CA erred in
ruling that the juridical relationship between him and respondent under the
Kasunduan was a combination of employer-employee and vendor-vendee
relationships. The terms and conditions of the Kasunduan clearly state that he and
respondent Bustamante had entered into a conditional deed of sale over the
jeepney; as such, their employer-employee relationship had been transformed into
that of vendor-vendee. Petitioner insists that he had the right to reserve his title on
the jeepney until after the purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate remedy of
petitioner was an appeal via a petition for review on certiorari under Rule 45 of the
Rules of Court and not a special civil action of certiorari under Rule 65. He argues
that petitioner failed to establish that the CA committed grave abuse of its
discretion amounting to excess or lack of jurisdiction in its decision, as the said
ruling is in accord with law and the evidence on record.
Respondent further asserts that the Kasunduan presented to him by petitioner
which provides for a boundary-hulog scheme was a devious circumvention of the
Labor Code of the Philippines. Respondent insists that his juridical relationship with
petitioner is that of employer-employee because he was engaged to perform
activities which were necessary or desirable in the usual business of petitioner, his
employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally
construed in his favor; hence, it behooves the Court to resolve the merits of his
petition.
We agree with respondent’s contention that the remedy of petitioner from the CA
decision was to file a petition for review on certiorari under Rule 45 of the Rules of
Court and not the independent action of certiorari under Rule 65. Petitioner had 15
days from receipt of the CA resolution denying his motion for the reconsideration
within which to file the petition under Rule 45.28 But instead of doing so, he filed a
petition for certiorari under Rule 65 on November 22, 2004, which did not, however,
suspend the running of the 15-day reglementary period; consequently, the CA
decision became final and executory upon the lapse of the reglementary period
for appeal. Thus, on this procedural lapse, the instant petition stands to be
dismissed.29
It must be stressed that the recourse to a special civil action under Rule 65 of the
Rules of Court is proscribed by the remedy of appeal under Rule 45. As the Court
elaborated in Tomas Claudio Memorial College, Inc. v. Court of Appeals:30
We agree that the remedy of the aggrieved party from a decision or final
resolution of the CA is to file a petition for review on certiorari under Rule 45 of the
Rules of Court, as amended, on questions of facts or issues of law within fifteen
days from notice of the said resolution. Otherwise, the decision of the CA shall
become final and executory. The remedy under Rule 45 of the Rules of Court is a
mode of appeal to this Court from the decision of the CA. It is a continuation of the
appellate process over the original case. A review is not a matter of right but is a
matter of judicial discretion. The aggrieved party may, however, assail the decision
of the CA via a petition for certiorari under Rule 65 of the Rules of Court within sixty
days from notice of the decision of the CA or its resolution denying the motion for
reconsideration of the same. This is based on the premise that in issuing the
assailed decision and resolution, the CA acted with grave abuse of discretion,
amounting to excess or lack of jurisdiction and there is no plain, speedy and
adequate remedy in the ordinary course of law. A remedy is considered plain,
speedy and adequate if it will promptly relieve the petitioner from the injurious
effect of the judgment and the acts of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal is
available, for the remedies of appeal and certiorari are mutually exclusive and not
alternative or successive. The aggrieved party is, likewise, barred from filing a
petition for certiorari if the remedy of appeal is lost through his negligence. A
petition for certiorari is an original action and does not interrupt the course of the
principal case unless a temporary restraining order or a writ of preliminary
injunction has been issued against the public respondent from further proceeding.
A petition for certiorari must be based on jurisdictional grounds because, as long as
the respondent court acted within its jurisdiction, any error committed by it will
amount to nothing more than an error of judgment which may be corrected or
reviewed only by appeal.31
However, we have also ruled that a petition for certiorari under Rule 65 may be
considered as filed under Rule 45, conformably with the principle that rules of
procedure are to be construed liberally, provided that the petition is filed within the
reglementary period under Section 2, Rule 45 of the Rules of Court, and where
valid and compelling circumstances warrant that the petition be resolved on its
merits.32 In this case, the petition was filed within the reglementary period and
petitioner has raised an issue of substance: whether the existence of a boundary-
hulog agreement negates the employer-employee relationship between the
vendor and vendee, and, as a corollary, whether the Labor Arbiter has jurisdiction
over a complaint for illegal dismissal in such case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof, as well as,
which court or agency of the government has jurisdiction over the same, are
determined by the material allegations of the complaint in relation to the law
involved and the character of the reliefs prayed for, whether or not the
complainant/plaintiff is entitled to any or all of such reliefs. 33 A prayer or demand
for relief is not part of the petition of the cause of action; nor does it enlarge the
cause of action stated or change the legal effect of what is alleged. 34 In
determining which body has jurisdiction over a case, the better policy is to
consider not only the status or relationship of the parties but also the nature of the
action that is the subject of their controversy.35
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive
original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30)
calendar days after the submission of the case by the parties for decision without
extension, even in the absence of stenographic notes, the following cases
involving all workers, whether agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work, and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of damages arising
from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code, including
questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security, Medicare
and maternity benefits, all other claims, arising from employer-employee
relationship, including those of persons in domestic or household service,
involving an amount exceeding five thousand pesos (P5,000.00)
regardless of whether accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction
over all cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of
collective bargaining agreements, and those arising from the
interpretation or enforcement of company personnel policies
shall be disposed of by the Labor Arbiter by referring the same to
the grievance machinery and voluntary arbitration as may be
provided in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable
jurisdictional requisite.36 The jurisdiction of Labor Arbiters and the NLRC under Article
217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other
labor statutes or their collective bargaining agreement.37 Not every dispute
between an employer and employee involves matters that only the Labor Arbiter
and the NLRC can resolve in the exercise of their adjudicatory or quasi-judicial
powers. Actions between employers and employees where the employer-
employee relationship is merely incidental is within the exclusive original jurisdiction
of the regular courts.38 When the principal relief is to be granted under labor
legislation or a collective bargaining agreement, the case falls within the exclusive
jurisdiction of the Labor Arbiter and the NLRC even though a claim for damages
might be asserted as an incident to such claim.39
We agree with the ruling of the CA that, under the boundary-hulog scheme
incorporated in the Kasunduan, a dual juridical relationship was created between
petitioner and respondent: that of employer-employee and vendor-vendee. The
Kasunduan did not extinguish the employer-employee relationship of the parties
extant before the execution of said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan40 that the
jeepney owner/operator-driver relationship under the boundary system is that of
employer-employee and not lessor-lessee. This doctrine was affirmed, under similar
factual settings, in Magboo v. Bernardo41 and Lantaco, Sr. v. Llamas,42 and was
analogously applied to govern the relationships between auto-calesa
owner/operator and driver,43 bus owner/operator and conductor,44 and taxi
owner/operator and driver.45
The boundary system is a scheme by an owner/operator engaged in transporting
passengers as a common carrier to primarily govern the compensation of the
driver, that is, the latter’s daily earnings are remitted to the owner/operator less the
excess of the boundary which represents the driver’s compensation. Under this
system, the owner/operator exercises control and supervision over the driver. It is
unlike in lease of chattels where the lessor loses complete control over the chattel
leased but the lessee is still ultimately responsible for the consequences of its use.
The management of the business is still in the hands of the owner/operator, who,
being the holder of the certificate of public convenience, must see to it that the
driver follows the route prescribed by the franchising and regulatory authority, and
the rules promulgated with regard to the business operations. The fact that the
driver does not receive fixed wages but only the excess of the "boundary" given to
the owner/operator is not sufficient to change the relationship between them.
Indubitably, the driver performs activities which are usually necessary or desirable
in the usual business or trade of the owner/operator.46
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner,
an amount which represented the boundary of petitioner as well as respondent’s
partial payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage.
Thus, the daily remittances also had a dual purpose: that of petitioner’s boundary
and respondent’s partial payment (hulog) for the vehicle. This dual purpose was
expressly stated in the Kasunduan. The well-settled rule is that an obligation is not
novated by an instrument that expressly recognizes the old one, changes only the
terms of payment, and adds other obligations not incompatible with the old
provisions or where the new contract merely supplements the previous one. 47 The
two obligations of the respondent to remit to petitioner the boundary-hulog can
stand together.
In resolving an issue based on contract, this Court must first examine the contract
itself, keeping in mind that when the terms of the agreement are clear and leave
no doubt as to the intention of the contracting parties, the literal meaning of its
stipulations shall prevail.48 The intention of the contracting parties should be
ascertained by looking at the words used to project their intention, that is, all the
words, not just a particular word or two or more words standing alone. The various
stipulations of a contract shall be interpreted together, attributing to the doubtful
ones that sense which may result from all of them taken jointly.49 The parts and
clauses must be interpreted in relation to one another to give effect to the whole.
The legal effect of a contract is to be determined from the whole read together.50
Under the Kasunduan, petitioner retained supervision and control over the
conduct of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary
hulog ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG
ang sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG
IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o
pangangalakal sa malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG
IKALAWANG PANIG sa mga bagay na makapagdudulot ng kahihiyan,
kasiraan o pananagutan sa TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG
PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay
ng ID Card sa harap ng windshield upang sa pamamagitan nito ay
madaliang malaman kung ang nagmamaneho ay awtorisado ng
VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng]
multa kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID
card sa wastong lugar o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o
piyesa na papalitan ng nasira o nawala ito dahil sa kanyang
kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang
hinuhulugan pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing
sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang
ipinagkaloob ng TAUHAN NG UNANG PANIG, ang TAUHAN NG
IKALAWANG PANIG ay obligadong itawag ito muna sa VILLAMARIA
MOTORS bago ipagawa sa alin mang Motor Shop na awtorisado ng
VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa
panahon ng pamamasada na ang nagmamaneho ay naka-tsinelas,
naka short pants at nakasando lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan upang igalang ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang
driver ay magpapakita ng magandang asal sa mga pasaheros at hindi
dapat magsasalita ng masama kung sakali man may pasaherong
pilosopo upang maiwasan ang anumang kaguluhan na maaaring
kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang
TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang
opisina ng VILLAMARIA MOTORS ang may karapatang mangasiwa ng
nasabing sasakyan hanggang matugunan ang lahat ng responsibilidad.
Ang halagang dapat bayaran sa opisina ay may karagdagang multa ng
P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA
MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay
ng BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na
ang kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan sa TAUHAN NG UNANG
PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro,
comprehensive insurance taon-taon at kahit anong uri ng aksidente
habang ito ay hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa
pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing
tatawag ang mga tagapangasiwa nito upang maipaabot ang anumang
mungkahi sa ikasusulong ng samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga
patakaran na magkakaroon ng pagbabago o karagdagan sa mga
darating na panahon at hindi magiging hadlang sa lahat ng mga balakin
ng VILLAMARIA MOTORS sa lalo pang ipagtatagumpay at ikakatibay ng
Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa
pasahero upang hindi kainisan ng kapwa driver at maiwasan ang
pagkakasangkot sa anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan
lalo na sa umaga bago pumasada, at sa hapon o gabi naman ay
sisikapin mapanatili ang kalinisan nito.
 19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng
dalawa o higit pang araw sa lalawigan ay dapat lamang na ipagbigay
alam muna ito sa VILLAMARIA MOTORS upang maiwasan ang mga
anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang pakikipag-
unahan sa kaninumang sasakyan upang maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin
sa VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa
kinauukulan at iwasan na iparating ito kung [kani-kanino] lamang upang
maiwasan ang anumang usapin. Magsadya agad sa opisina ng
VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong
sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG
IKALAWANG PANIG ang nasabing sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba pa.51
The parties expressly agreed that petitioner, as vendor, and respondent, as
vendee, entered into a contract to sell the jeepney on a daily installment basis of
P550.00 payable in four years and that petitioner would thereafter become its
owner. A contract is one of conditional sale, oftentimes referred to as contract to
sell, if the ownership or title over the
property sold is retained by the vendor, and is not passed to the vendee unless
and until there is full payment of the purchase price and/or upon faithful
compliance with the other terms and conditions that may lawfully be
stipulated.52Such payment or satisfaction of other preconditions, as the case may
be, is a positive suspensive condition, the failure of which is not a breach of
contract, casual or serious, but simply an event that would prevent the obligation
of the vendor to convey title from acquiring binding force.53 Stated differently, the
efficacy or obligatory force of the vendor's obligation to transfer title is
subordinated to the happening of a future and uncertain event so that if the
suspensive condition does not take place, the parties would stand as if the
conditional obligation had never existed.54 The vendor may extrajudicially
terminate the operation of the contract, refuse conveyance, and retain the sums
or installments already received, where such rights are expressly provided for. 55
Under the boundary-hulog scheme, petitioner retained ownership of the jeepney
although its material possession was vested in respondent as its driver. In case
respondent failed to make his P550.00 daily installment payment for a week, the
agreement would be of no force and effect and respondent would have to return
the jeepney to petitioner; the employer-employee relationship would likewise be
terminated unless petitioner would allow respondent to continue driving the
jeepney on a boundary basis of P550.00 daily despite the termination of their
vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner and
respondent was not negated by the foregoing stipulation in the Kasunduan,
considering that petitioner retained control of respondent’s conduct as driver of
the vehicle. As correctly ruled by the CA:
The exercise of control by private respondent over petitioner’s conduct in
operating the jeepney he was driving is inconsistent with private respondent’s
claim that he is, or was, not engaged in the transportation business; that, even if
petitioner was allowed to let some other person drive the unit, it was not shown
that he did so; that the existence of an employment relation is not dependent on
how the worker is paid but on the presence or absence of control over the means
and method of the work; that the amount earned in excess of the "boundary
hulog" is equivalent to wages; and that the fact that the power of dismissal was not
mentioned in the Kasunduan did not mean that private respondent never
exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an
identification card, or to don a decent attire, or to park the vehicle in Villamaria
Motors garage, or to inform Villamaria Motors about the fact that the unit would
be going out to the province for two days of more, or to drive the unit carefully,
etc. necessarily related to control over the means by which the petitioner was to
go about his work; that the ruling applicable here is not Singer Sewing Machine but
National Labor Union since the latter case involved jeepney owners/operators and
jeepney drivers, and that the fact that the "boundary" here represented installment
payment of the purchase price on the jeepney did not withdraw the relationship
from that of employer-employee, in view of the overt presence of supervision and
control by the employer.56
Neither is such juridical relationship negated by petitioner’s claim that the terms
and conditions in the Kasunduan relative to respondent’s behavior and
deportment as driver was for his and respondent’s benefit: to insure that
respondent would be able to pay the requisite daily installment of P550.00, and
that the vehicle would still be in good condition despite the lapse of four years.
What is primordial is that petitioner retained control over the conduct of the
respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is
entitled to exercise supervision and control over the respondent, by seeing to it
that the route provided in his franchise, and the rules and regulations of the Land
Transportation Regulatory Board are duly complied with. Moreover, in a business
establishment, an identification card is usually provided not just as a security
measure but to mainly identify the holder thereof as a bona fide employee of the
firm who issues it.57
As respondent’s employer, it was the burden of petitioner to prove that
respondent’s termination from employment was for a lawful or just cause, or, at the
very least, that respondent failed to make his daily remittances of P550.00 as
boundary. However, petitioner failed to do so. As correctly ruled by the appellate
court:
It is basic of course that termination of employment must be effected in
accordance with law. The just and authorized causes for termination of
employment are enumerated under Articles 282, 283 and 284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here, the default
in the remittance of the boundary hulog for one week or longer may be
considered an additional cause for termination of employment. The reason is
because the Kasunduan would be of no force and effect in the event that the
purchaser failed to remit the boundary hulog for one week. The Kasunduan in this
case pertinently stipulates:
"Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo
makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na
hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat
ang hindi ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng
kaso.
"Sumasainyo
"Attendance: 8/27/99

"(The Signatures appearing herein

13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng
BOUNDARY HULOG sa loob ng isang linggo ay NANGANGAHULUGAN na ang
kasunduang ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG include (sic) that of petitioner’s) (Sgd.)
PANIG ang nasabing sasakyan sa TAUHAN NG UNANG PANIG na wala ng
paghahabol pa. OSCAR VILLAMARIA, JR."

Moreover, well-settled is the rule that, the employer has the burden of proving that
the dismissal of an employee is for a just cause. The failure of the employer to
discharge this burden means that the dismissal is not justified and that the
employee is entitled to reinstatement and back wages.
In the case at bench, private respondent in his position paper before the Labor
Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00
and the yearly registration of the unit; that petitioner also stopped remitting the
"boundary hulog," prompting him (private respondent) to issue a "Paalala," which
petitioner however ignored; that petitioner even brought the unit to his
(petitioner’s) province without informing him (private respondent) about it; and
that petitioner eventually abandoned the vehicle at a gasoline station after
figuring in an accident. But private respondent failed to substantiate these
allegations with solid, sufficient proof. Notably, private respondent’s allegation viz,
that he retrieved the vehicle from the gas station, where petitioner abandoned it,
contradicted his statement in the Paalala that he would enforce the provision (in
the Kasunduan) to the effect that default in the remittance of the boundary hulog
for one week would result in the forfeiture of the unit. The Paalala reads as follows:
If it were true that petitioner did not remit the boundary hulog for one week or
more, why did private respondent not forthwith take steps to recover the unit, and
why did he have to wait for petitioner to abandon it?1avvphil.net
On another point, private respondent did not submit any police report to support
his claim that petitioner really figured in a vehicular mishap. Neither did he present
the affidavit of the guard from the gas station to substantiate his claim that
petitioner abandoned the unit there.58
Petitioner’s claim that he opted not to terminate the employment of respondent
because of magnanimity is negated by his (petitioner’s) own evidence that he
took the jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court
of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against petitioner.
SO ORDERED.

"Sa lahat ng mga kumukuha ng sasakyan ROMEO J. CALLEJO, SR.

Associate Justice
"Sa pamamagitan ng ‘BOUNDARY HULOG’

"Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na

ang paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary
Hulog sa loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na
inyong hinuhulugan ng wala ng paghahabol pa.

"Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong

ipatutupad ang nasabing Kasunduan kaya’t aking pinaaalala sa inyong lahat na
tuparin natin ang nakalagay sa kasunduan upang maiwasan natin ito.
G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION
and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and
Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006
and 20 March 2006, respectively, which annulled and set aside the Orders of the
Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February
20043 and 16 September 2004,4respectively, thereby dismissing the petition-
complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS)
against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-
judicial body authorized by law to resolve disputes arising under Republic Act No.
1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other
hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose
cooperative created pursuant to Republic Act No. 69386 and duly registered with
the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its
by-laws, owners-members are of two categories, to wit: (1) regular member, who is
entitled to all the rights and privileges of membership; and (2) associate member,
who has no right to vote and be voted upon and shall be entitled only to such
rights and privileges provided in its by-laws.8 Its primary objectives are to provide
savings and credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts9 with Stanfilco - a division of
DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do
not receive compensation or wages from the respondent cooperative. Instead,
they receive a share in the service surplus10 which the respondent cooperative
earns from different areas of trade it engages in, such as the income derived from
the said Service Contracts with Stanfilco. The owners-members get their income
from the service surplus generated by the quality and amount of services they
rendered, which is determined by the Board of Directors of the respondent
cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-
members of the respondent cooperative, who were assigned to Stanfilco
requested the services of the latter to register them with petitioner SSS as self-
employed and to remit their contributions as such. Also, to comply with Section 19-
A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS
contributions of the said owners-members were equal to the share of both the
employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for
Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent
cooperative, addressed to its Chief Executive Officer (CEO) and General Manager
Leo G. Parma, informing the latter that based on the Service Contracts it executed
with Stanfilco, respondent cooperative is actually a manpower contractor
supplying employees to Stanfilco and for that reason, it is an employer of its
owners-members working with Stanfilco. Thus, respondent cooperative should
register itself with petitioner SSS as an employer and make the corresponding
report and remittance of premium contributions in accordance with the Social
Security Law of 1997. On 9 October 2002,12 respondent cooperative, through its
counsel, sent a reply to petitioner SSS’s letter asserting that it is not an employer
because its owners-members are the cooperative itself; hence, it cannot be its
own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to
respondent cooperative ordering the latter to register as an employer and report
its owners-members as employees for compulsory coverage with the petitioner SSS.
Respondent cooperative continuously ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC
against the respondent cooperative and Stanfilco praying that the respondent
cooperative or, in the alternative, Stanfilco be directed to register as an employer
and to report respondent cooperative’s owners-members as covered employees
under the compulsory coverage of SSS and to remit the necessary contributions in
accordance with the Social Security Law of 1997. The same was docketed as SSC
Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to
Dismiss alleging that no employer-employee relationship exists between it and its
owners-members, thus, petitioner SSC has no jurisdiction over the respondent
cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against
the respondent cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss
filed by the respondent cooperative. The respondent cooperative moved for the
reconsideration of the said Order, but it was likewise denied in another Order
issued by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for
Extension of Time to File a Petition for Review before the Court of Appeals.
Subsequently, respondent cooperative filed a Manifestation stating that it was no
longer filing a Petition for Review. In its place, respondent cooperative filed a
Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No.
87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner]
SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess
of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has
jurisdiction over the petition a quo, considering that it failed to
first resolve the issue of the existence of an employer-employee
relationship between [respondent] cooperative and its owners-
members.
B. While indeed, the [petitioner] SSC has jurisdiction over all
disputes arising under the SSS Law with respect to coverage,
benefits, contributions, and related matters, it is respectfully
submitted that [petitioner] SSC may only assume jurisdiction in
cases where there is no dispute as to the existence of an
employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue
of employer-employee relationship raised in [respondent’s]
Motion to Dismiss can be preliminarily resolved through summary
hearings prior to the hearing on the merits. However, any inquiry
beyond a preliminary determination, as what [petitioner SSC]
wants to accomplish, would be to encroach on the jurisdiction of
the National Labor Relations Commission [NLRC], which is the
more competent body clothed with power to resolve issues
relating to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the
petition a quo.
A. [Respondent] is not an employer within the contemplation of
the Labor Law but is a multi-purpose cooperative created
pursuant to Republic Act No. 6938 and composed of owners-
members, not employees.
B. The rights and obligations of the owners-members of
[respondent] cooperative are derived from their Membership
Agreements, the Cooperatives By-Laws, and Republic Act No.
6938, and not from any contract of employment or from the
Labor Laws. Moreover, said owners-members enjoy rights that are
not consistent with being mere employees of a company, such
as the right to participate and vote in decision-making for the
cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-
members of [respondent] cooperative are not paid any
compensation income.15 (Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition
filed by the respondent cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004]
and [16 September 2004], are ANNULLED and SET ASIDE and a new one is entered
DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner]
Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration,
but it was denied by the appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of
Appeals erred in not finding that the SSC has jurisdiction over the subject matter
and it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed
before it by the [petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction
of petitioner SSC after invoking its jurisdiction by filing an [A]nswer with
[M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in
denying respondent [cooperative’s] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of
fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent
cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS as it involved an issue of whether or not a worker is entitled to
compulsory coverage under the SSS Law. Petitioners avow that Section 5 of
Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers
upon petitioner SSC the power to settle disputes on compulsory coverage,
benefits, contributions and penalties thereon or any other matter related thereto.
Likewise, Section 9 of the same law clearly provides that SSS coverage is
compulsory upon all employees. Thus, when petitioner SSS filed a petition-
complaint against the respondent cooperative and Stanfilco before the petitioner
SSC for the compulsory coverage of respondent cooperative’s owners-members
as well as for collection of unpaid SSS contributions, it was very obvious that the
subject matter of the aforesaid petition-complaint was within the expertise and
jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to
determine the existence of an employer-employee relationship between the
respondent cooperative and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-complaint.
Considering that the principal relief sought in the said petition-complaint has to be
resolved by reference to the Social Security Law and not to the Labor Code or
other labor relations statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to
Dismiss grounded on the alleged lack of employer-employee relationship does not
constitute grave abuse of discretion on the part of petitioner SSC because the
latter has the authority and power to deny the same. Moreover, the existence of
an employer-employee relationship is a question of fact where presentation of
evidence is necessary. Petitioners also maintain that the respondent cooperative is
already estopped from assailing the jurisdiction of the petitioner SSC because it has
already filed its Answer before it, thus, respondent cooperative has already
submitted itself to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship
between the respondent cooperative and its owners-members. The respondent
cooperative is the employer of its owners-members considering that it undertook to
provide services to Stanfilco, the performance of which is under the full and sole
control of the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own
the cooperative, thus, no employer-employee relationship can arise between
them. The persons of the employer and the employee are merged in the owners-
members themselves. Likewise, respondent cooperative’s owners-members even
requested the respondent cooperative to register them with the petitioner SSS as
self-employed individuals. Hence, petitioner SSC has no jurisdiction over the
petition-complaint filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled
that petitioner SSC acted with grave abuse of discretion when it assumed
jurisdiction over the petition-complaint without determining first if there was an
employer-employee relationship between the respondent cooperative and its
owners-members. Respondent cooperative claims that the question of whether an
employer-employee relationship exists between it and its owners-members is a
legal and not a factual issue as the facts are undisputed and need only to be
interpreted by the applicable law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from
assailing the jurisdiction of petitioner SSC simply because it filed an Answer with
Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first
instance and where the only relief being sought is the dismissal of the petition-
complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint
filed before it by petitioner SSS against the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the
jurisdiction of petitioner SSC since it had already filed an Answer with
Motion to Dismiss before the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as
well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect
to coverage, benefits, contributions and penalties thereon or any other matter
related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with
respect to coverage, entitlement of benefits, collection and settlement of
contributions and penalties thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its President, Manager or
Officer-in-charge of the Department/Branch/Representative Office concerned
had first taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the
compulsory coverage of the SSS is well within the exclusive domain of the
petitioner SSC. It is important to note, though, that the mandatory coverage under
the SSS Law is premised on the existence of an employer-employee
relationship17 except in cases of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the
Answer or in the Motion to Dismiss, determine which court has jurisdiction over an
action; otherwise, the question of jurisdiction would depend almost entirely upon
the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the
court, it remains with it until the full termination of the case.19 The said principle may
be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner
SSC against the respondent cooperative and Stanfilco alleges that the owners-
members of the respondent cooperative are subject to the compulsory coverage
of the SSS because they are employees of the respondent cooperative.
Consequently, the respondent cooperative being the employer of its owners-
members must register as employer and report its owners-members as covered
members of the SSS and remit the necessary premium contributions in accordance
with the Social Security Law of 1997. Accordingly, based on the aforesaid
allegations in the petition-complaint filed before the petitioner SSC, the case
clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by
the respondent cooperative challenged the jurisdiction of the petitioner SSC on
the alleged lack of employer-employee relationship between itself and its owners-
members, the same is not enough to deprive the petitioner SSC of its jurisdiction
over the petition-complaint filed before it. Thus, the petitioner SSC cannot be
faulted for initially assuming jurisdiction over the petition-complaint of the petitioner
SSS.
Nonetheless, since the existence of an employer-employee relationship between
the respondent cooperative and its owners-members was put in issue and
considering that the compulsory coverage of the SSS Law is predicated on the
existence of such relationship, it behooves the petitioner SSC to determine if there
is really an employer-employee relationship that exists between the respondent
cooperative and its owners-members.
The question on the existence of an employer-employee relationship is not within
the exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article
217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the
NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied
with a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for Social Security, it
would necessarily include issues on the coverage thereof, because claims are
undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining
the coverage of the Social Security System is explicitly excluded from the
jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily
charged with the duty of settling disputes arising under the Social Security Law of
1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS
involved the issue of compulsory coverage of the owners-members of the
respondent cooperative, this Court agrees with the petitioner SSC when it
declared in its Order dated 17 February 2004 that as an incident to the issue of
compulsory coverage, it may inquire into the presence or absence of an
employer-employee relationship without need of waiting for a prior
pronouncement or submitting the issue to the NLRC for prior determination. Since
both the petitioner SSC and the NLRC are independent bodies and their jurisdiction
are well-defined by the separate statutes creating them, petitioner SSC has the
authority to inquire into the relationship existing between the worker and the
person or entity to whom he renders service to determine if the employment,
indeed, is one that is excepted by the Social Security Law of 1997 from compulsory
coverage.21
Even before the petitioner SSC could make a determination of the existence of an
employer-employee relationship, however, the respondent cooperative already
elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court
of Appeals by filing a Petition for Certiorari. As a consequence thereof, the
petitioner SSC became a party to the said Petition for Certiorari pursuant to Section
5(b)22 of Republic Act No. 8282. The appellate court ruled in favor of the
respondent cooperative by declaring that the petitioner SSC has no jurisdiction
over the petition-complaint filed before it because there was no employer-
employee relationship between the respondent cooperative and its owners-
members. Resultantly, the petitioners SSS and SSC, representing the Republic of the
Philippines, filed a Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Court’s power of review, the
Court is not a trier of facts and the findings of fact of the Court of Appeals are
conclusive and binding on the Court,23 said rule is not without exceptions. There
are several recognized exceptions24 in which factual issues may be resolved by this
Court. One of these exceptions finds application in this present case which is, when
the findings of fact are conflicting. There are, indeed, conflicting findings espoused
by the petitioner SSC and the appellate court relative to the existence of
employer-employee relationship between the respondent cooperative and its
owners-members, which necessitates a departure from the oft-repeated rule that
factual issues may not be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the workers; (2) the
payment of wages by whatever means; (3) the power of dismissal; and (4) the
power to control the worker’s conduct, with the latter assuming primacy in the
overall consideration.25The most important element is the employer’s control of the
employee’s conduct, not only as to the result of the work to be done, but also as
to the means and methods to accomplish.26 The power of control refers to the
existence of the power and not necessarily to the actual exercise thereof. It is not
essential for the employer to actually supervise the performance of duties of the
employee; it is enough that the employer has the right to wield that power.27 All
the aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent
cooperative which has the exclusive discretion in the selection and engagement
of the owners-members as well as its team leaders who will be assigned at
Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered."29 In this case, the weekly stipends or the so-
called shares in the service surplus given by the respondent cooperative to its
owners-members were in reality wages, as the same were equivalent to an
amount not lower than that prescribed by existing labor laws, rules and regulations,
including the wage order applicable to the area and industry; or the same shall
not be lower than the prevailing rates of wages.30 It cannot be doubted then that
those stipends or shares in the service surplus are indeed wages, because these
are given to the owners-members as compensation in rendering services to
respondent cooperative’s client, Stanfilco. Third. It is also stated in the above-
mentioned Service Contracts that it is the respondent cooperative which has the
power to investigate, discipline and remove the owners-members and its team
leaders who were rendering services at Stanfilco.31 Fourth. As earlier opined, of the
four elements of the employer-employee relationship, the "control test" is the most
important. In the case at bar, it is the respondent cooperative which has the sole
control over the manner and means of performing the services under the Service
Contracts with Stanfilco as well as the means and methods of work.32 Also, the
respondent cooperative is solely and entirely responsible for its owners-members,
team leaders and other representatives at Stanfilco. 33 All these clearly prove that,
indeed, there is an employer-employee relationship between the respondent
cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent
cooperative and Stanfilco expressly provide that there shall be no employer-
employee relationship between the respondent cooperative and its owners-
members.34 This Court, however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship
actually exists between the respondent cooperative and its owners-members. The
four elements in the four-fold test for the existence of an employment relationship
have been complied with. The respondent cooperative must not be allowed to
deny its employment relationship with its owners-members by invoking the
questionable Service Contracts provision, when in actuality, it does exist. The
existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding circumstances show
otherwise. The employment status of a person is defined and prescribed by law
and not by what the parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses,
terms and conditions as they want, and their agreement would have the force of
law between them. However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public order.36 The Service
Contract provision in question must be struck down for being contrary to law and
public policy since it is apparently being used by the respondent cooperative
merely to circumvent the compulsory coverage of its employees, who are also its
owners-members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural
Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business
concern, being run either by persons, partnerships, or corporations. Its owners
and/or members are the ones who run and operate the business while the others
are its employees x x x.
An employee therefore of such a cooperative who is a member and co-owner
thereof cannot invoke the right to collective bargaining for certainly an owner
cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of
the Solicitor General he correctly opined that employees of cooperatives who are
themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners
of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not
members or co-owners thereof, certainly such employees are entitled to exercise
the rights of all workers to organization, collective bargaining, negotiations and
others as are enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The
declaration made by the Court in the aforesaid case was made in the context of
whether an employee who is also an owner-member of a cooperative can
exercise the right to bargain collectively with the employer who is the cooperative
wherein he is an owner-member. Obviously, an owner-member cannot bargain
collectively with the cooperative of which he is also the owner because an owner
cannot bargain with himself. In the instant case, there is no issue regarding an
owner-member’s right to bargain collectively with the cooperative. The question
involved here is whether an employer-employee relationship can exist between
the cooperative and an owner-member. In fact, a closer look at Cooperative
Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-
member of a cooperative can be its own employee.
It bears stressing, too, that a cooperative acquires juridical personality upon its
registration with the Cooperative Development Authority.38 It has its Board of
Directors, which directs and supervises its business; meaning, its Board of Directors is
the one in charge in the conduct and management of its affairs.39 With that, a
cooperative can be likened to a corporation with a personality separate and
distinct from its owners-members. Consequently, an owner-member of a
cooperative can be an employee of the latter and an employer-employee
relationship can exist between them.
In the present case, it is not disputed that the respondent cooperative had
registered itself with the Cooperative Development Authority, as evidenced by its
Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of Directors
directs, controls, and supervises the business and manages the property of the
respondent cooperative. Clearly then, the management of the affairs of the
respondent cooperative is vested in its Board of Directors and not in its owners-
members as a whole. Therefore, it is completely logical that the respondent
cooperative, as a juridical person represented by its Board of Directors, can enter
into an employment with its owners-members.
In sum, having declared that there is an employer-employee relationship between
the respondent cooperative and its owners-member, we conclude that the
petitioner SSC has jurisdiction over the petition-complaint filed before it by the
petitioner SSS. This being our conclusion, it is no longer necessary to discuss the
issue of whether the respondent cooperative was estopped from assailing the
jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The

Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236,
dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and
SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16
September 2004 are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to
continue hearing the petition-complaint filed before it by the petitioner SSS as
regards the compulsory coverage of the respondent cooperative and its owners-
members. No costs.

SO ORDERED.
G.R. No. 157214 June 7, 2005
PHILIPPINE GLOBAL COMMUNICATIONS, INC., petitioner,
vs.
RICARDO DE VERA, respondent.
DECISION
GARCIA, J.:
Before us is this appeal by way of a petition for review on certiorari from the 12
September 2002 Decision1 and the 13 February 2003 Resolution2 of the Court of
Appeals in CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the
National Labor Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation
engaged in the business of communication services and allied activities, while
respondent Ricardo De Vera is a physician by profession whom petitioner enlisted
to attend to the medical needs of its employees. At the crux of the controversy is
Dr. De Vera’s status vis a vis petitioner when the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981,3 offered
his services to the petitioner, therein proposing his plan of works required of a
practitioner in industrial medicine, to include the following:
1. Application of preventive medicine including periodic check-up of
employees;
2. Holding of clinic hours in the morning and afternoon for a total of five
(5) hours daily for consultation services to employees;
3. Management and treatment of employees that may necessitate
hospitalization including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees
with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative function such as
accomplishing medical forms, evaluating conditions of employees
applying for sick leave of absence and subsequently issuing proper
certification, and all matters referred which are medical in nature.
The parties agreed and formalized respondent’s proposal in a document
denominated as RETAINERSHIP CONTRACT4 which will be for a period of one year
subject to renewal, it being made clear therein that respondent will cover "the
retainership the Company previously had with Dr. K. Eulau" and that respondent’s
"retainer fee" will be at P4,000.00 a month. Said contract was renewed yearly.5 The
retainership arrangement went on from 1981 to 1994 with changes in the retainer’s
fee. However, for the years 1995 and 1996, renewal of the contract was only made
verbally.
The turning point in the parties’ relationship surfaced in December 1996 when
Philcom, thru a letter6 bearing on the subject boldly written as "TERMINATION –
RETAINERSHIP CONTRACT", informed De Vera of its decision to discontinue the
latter’s "retainer’s contract with the Company effective at the close of business
hours of December 31, 1996" because management has decided that it would be
more practical to provide medical services to its employees through accredited
hospitals near the company premises.
On 22 January 1997, De Vera filed a complaint for illegal dismissal before the
National Labor Relations Commission (NLRC), alleging that that he had been
actually employed by Philcom as its company physician since 1981 and was
dismissed without due process. He averred that he was designated as a "company
physician on retainer basis" for reasons allegedly known only to Philcom. He likewise
professed that since he was not conversant with labor laws, he did not give much
attention to the designation as anyway he worked on a full-time basis and was
paid a basic monthly salary plus fringe benefits, like any other regular employees of
Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
decision7 dismissing De Vera’s complaint for lack of merit, on the rationale that as
a "retained physician" under a valid contract mutually agreed upon by the parties,
De Vera was an "independent contractor" and that he "was not dismissed but
rather his contract with [PHILCOM] ended when said contract was not renewed
after December 31, 1996".
On De Vera’s appeal to the NLRC, the latter, in a decision8 dated 23 October 2000,
reversed (the word used is "modified") that of the Labor Arbiter, on a finding that
De Vera is Philcom’s "regular employee" and accordingly directed the company
to reinstate him to his former position without loss of seniority rights and privileges
and with full backwages from the date of his dismissal until actual reinstatement.
We quote the dispositive portion of the decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to
reinstate complainant to his former position without loss of seniority rights and
privileges with full backwages from the date of his dismissal until his actual
reinstatement computed as follows:
Backwages:

a) Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos. P1,750,185.00
13th Month Pay:
b) 145,848.75
1/12 of P1,750,185.00
Travelling allowance:
c) 39,330.00
P1,000.00 x 39.33 mos.
GRAND TOTAL P1,935,363.75
The decision stands in other aspects.
SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of
27 February 2001,9 Philcom then went to the Court of Appeals on a petition
for certiorari, thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC when
it reversed the findings of the labor arbiter and awarded thirteenth month pay and
traveling allowance to De Vera even as such award had no basis in fact and in
law.
On 12 September 2002, the Court of Appeals rendered a decision,10 modifying that
of the NLRC by deleting the award of traveling allowance, and ordering payment
of separation pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent,
dated 23 October 2000, is MODIFIED. The award of traveling allowance is deleted
as the same is hereby DELETED. Instead of reinstatement, private respondent shall
be paid separation pay computed at one (1) month salary for every year of
service computed from the time private respondent commenced his employment
in 1981 up to the actual payment of the backwages and separation pay. The
awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the
appellate court in its resolution of 13 February 2003.11
Hence, Philcom’s present recourse on its main submission that -
THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL
LABOR RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND
RESOLUTION IN A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE
LAWS AND JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING
AGREEMENTS FROM THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this
Court in decisions rendered by the Court of Appeals. There are instances, however,
where the Court departs from this rule and reviews findings of fact so that
substantial justice may be served. The exceptional instances are where:
"xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise
and conjecture; (2) the inference made is manifestly mistaken; (3) there is grave
abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5)
the findings of fact are conflicting; (6) the Court of Appeals went beyond the issues
of the case and its findings are contrary to the admissions of both appellant and
appellees; (7) the findings of fact of the Court of Appeals are contrary to those of
the trial court; (8) said findings of facts are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the petition as well as
in the petitioner’s main and reply briefs are not disputed by the respondents; and
(10) the findings of fact of the Court of Appeals are premised on the supposed
absence of evidence and contradicted by the evidence on record."12
As we see it, the parties’ respective submissions revolve on the primordial issue of
whether an employer-employee relationship exists between petitioner and
respondent, the existence of which is, in itself, a question of fact 13 well within the
province of the NLRC. Nonetheless, given the reality that the NLRC’s findings are at
odds with those of the labor arbiter, the Court, consistent with its ruling in Jimenez
vs. National Labor Relations Commission,14 is constrained to look deeper into the
attendant circumstances obtaining in this case, as appearing on record.
In a long line of decisions,15 the Court, in determining the existence of an
employer-employee relationship, has invariably adhered to the four-fold test, to
wit: [1] the selection and engagement of the employee; [2] the payment of
wages; [3] the power of dismissal; and [4] the power to control the employee’s
conduct, or the so-called "control test", considered to be the most important
element.
Applying the four-fold test to this case, we initially find that it was respondent
himself who sets the parameters of what his duties would be in offering his services
to petitioner. This is borne by no less than his 15 May 1981 letter16which, in full, reads:
"May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your
corporation if you deemed it necessary. I have the necessary qualifications,
training and experience required by such position and I am confident that I can
serve the best interests of your employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of
a practitioner in industrial medicine which includes the following:
1. Application of preventive medicine including periodic check-
up of employees;
2. Holding of clinic hours in the morning and afternoon for a total
of five (5) hours daily for consultation services to employees;
3. Management and treatment of employees that may
necessitate hospitalization including emergency cases and
accidents;
4. Conduct pre-employment physical check-up of prospective
employees with no additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as
accomplishing medical forms, evaluating conditions of
employees applying for sick leave of absence and subsequently
issuing proper certification, and all matters referred which are
medical in nature.
On the subject of compensation for the services that I propose to render to the
corporation, you may state an offer based on your belief that I can very well
qualify for the job having worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter
and hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D."
Significantly, the foregoing letter was substantially the basis of the labor arbiter’s
finding that there existed no employer-employee relationship between petitioner
and respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized
by the complainant himself in a signed letter to the respondent dated April 21,
1982 attached as Annex G to the respondent’s Reply and Rejoinder. Quoting the
pertinent portion of said letter:
‘To carry out your memo effectively and to provide a systematic and workable
time schedule which will serve the best interests of both the present and absent
employee, may I propose an extended two-hour service (1:00-3:00 P.M.) during
which period I can devote ample time to both groups depending upon the
urgency of the situation. I shall readjust my private schedule to be available for the
herein proposed extended hours, should you consider this proposal.
As regards compensation for the additional time and services that I shall render to
the employees, it is dependent on your evaluation of the merit of my proposal and
your confidence on my ability to carry out efficiently said proposal.’
The tenor of this letter indicates that the complainant was proposing to extend his
time with the respondent and seeking additional compensation for said extension.
This shows that the respondent PHILCOM did not have control over the schedule of
the complainant as it [is] the complainant who is proposing his own schedule and
asking to be paid for the same. This is proof that the complainant understood that
his relationship with the respondent PHILCOM was a retained physician and not as
an employee. If he were an employee he could not negotiate as to his hours of
work.
The complainant is a Doctor of Medicine, and presumably, a well-educated
person. Yet, the complainant, in his position paper, is claiming that he is not
conversant with the law and did not give much attention to his job title- on a
‘retainer basis’. But the same complainant admits in his affidavit that his service for
the respondent was covered by a retainership contract [which] was renewed
every year from 1982 to 1994. Upon reading the contract dated September 6,
1982, signed by the complainant himself (Annex ‘C’ of Respondent’s Position
Paper), it clearly states that is a retainership contract. The retainer fee is indicated
thereon and the duration of the contract for one year is also clearly indicated in
paragraph 5 of the Retainership Contract. The complainant cannot claim that he
was unaware that the ‘contract’ was good only for one year, as he signed the
same without any objections. The complainant also accepted its renewal every
year thereafter until 1994. As a literate person and educated person, the
complainant cannot claim that he does not know what contract he signed and
that it was renewed on a year to year basis.17
The labor arbiter added the indicia, not disputed by respondent, that from the
time he started to work with petitioner, he never was included in its payroll; was
never deducted any contribution for remittance to the Social Security System (SSS);
and was in fact subjected by petitioner to the ten (10%) percent withholding tax
for his professional fee, in accordance with the National Internal Revenue Code,
matters which are simply inconsistent with an employer-employee relationship. In
the precise words of the labor arbiter:
"xxx xxx xxx After more than ten years of services to PHILCOM, the complainant
would have noticed that no SSS deductions were made on his remuneration or
that the respondent was deducting the 10% tax for his fees and he surely would
have complained about them if he had considered himself an employee of
PHILCOM. But he never raised those issues. An ordinary employee would consider
the SSS payments important and thus make sure they would be paid. The
complainant never bothered to ask the respondent to remit his SSS contributions.
This clearly shows that the complainant never considered himself an employee of
PHILCOM and thus, respondent need not remit anything to the SSS in favor of the
complainant."18
Clearly, the elements of an employer-employee relationship are wanting in this
case. We may add that the records are replete with evidence showing that
respondent had to bill petitioner for his monthly professional fees.19 It simply runs
against the grain of common experience to imagine that an ordinary employee
has yet to bill his employer to receive his salary.
We note, too, that the power to terminate the parties’ relationship was mutually
vested on both. Either may terminate the arrangement at will, with or without
cause.20
Finally, remarkably absent from the parties’ arrangement is the element of control,
whereby the employer has reserved the right to control the employee not only as
to the result of the work done but also as to the means and methods by which the
same is to be accomplished.21
Here, petitioner had no control over the means and methods by which respondent
went about performing his work at the company premises. He could even embark
in the private practice of his profession, not to mention the fact that respondent’s
work hours and the additional compensation therefor were negotiated upon by
the parties.22 In fine, the parties themselves practically agreed on every terms and
conditions of respondent’s engagement, which thereby negates the element of
control in their relationship. For sure, respondent has never cited even a single
instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and
the Court of Appeals ruled that respondent is petitioner’s regular employee at the
time of his separation.
Partly says the appellate court in its assailed decision:
Be that as it may, it is admitted that private respondent’s written ‘retainer contract’
was renewed annually from 1981 to 1994 and the alleged ‘renewal’ for 1995 and
1996, when it was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
‘The provisions of written agreement to the contrary notwithstanding and
regardless of the oral agreements of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform in the usual
business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for
the duration of the season.’
‘An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at least
one (1) year of service, whether such is continuous or broken, shall be considered
a regular with respect to the activity in which he is employed and his employment
shall continue while such activity exists.’
Parenthetically, the position of company physician, in the case of petitioner, is
usually necessary and desirable because the need for medical attention of
employees cannot be foreseen, hence, it is necessary to have a physician at
hand. In fact, the importance and desirability of a physician in a company
premises is recognized by Art. 157 of the Labor Code, which requires the presence
of a physician depending on the number of employees and in the case at bench,
in petitioner’s case, as found by public respondent, petitioner employs more than
500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the
provisions of a written agreement to the contrary notwithstanding or the existence
of a mere oral agreement, if the employee is engaged in the usual business or
trade of the employer, more so, that he rendered service for at least one year,
such employee shall be considered as a regular employee. Private respondent
herein has been with petitioner since 1981 and his employment was not for a
specific project or undertaking, the period of which was pre-determined and
neither the work or service of private respondent seasonal. (Emphasis by the CA
itself).
We disagree to the foregoing ratiocination.
The appellate court’s premise that regular employees are those who perform
activities which are desirable and necessary for the business of the employer is not
determinative in this case. For, we take it that any agreement may provide that
one party shall render services for and in behalf of another, no matter how
necessary for the latter’s business, even without being hired as an employee. This
set-up is precisely true in the case of an independent contractorship as well as in
an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the
appellate court, is not the yardstick for determining the existence of an
employment relationship. As it is, the provision merely distinguishes between two (2)
kinds of employees, i.e., regular and casual. It does not apply where, as here, the
very existence of an employment relationship is in dispute.23
Buttressing his contention that he is a regular employee of petitioner, respondent
invokes Article 157 of the Labor Code, and argues that he satisfies all the
requirements thereunder. The provision relied upon reads:
ART. 157. Emergency medical and dental services. – It shall be the duty of every
employer to furnish his employees in any locality with free medical and dental
attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of
employees exceeds fifty (50) but not more than two hundred (200) except
when the employer does not maintain hazardous workplaces, in which
case the services of a graduate first-aider shall be provided for the
protection of the workers, where no registered nurse is available. The
Secretary of Labor shall provide by appropriate regulations the services
that shall be required where the number of employees does not exceed
fifty (50) and shall determine by appropriate order hazardous workplaces
for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and
dentist, and an emergency clinic, when the number of employees
exceeds two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered
nurse as well as a dental clinic, and an infirmary or emergency hospital
with one bed capacity for every one hundred (100) employees when the
number of employees exceeds three hundred (300).
In cases of hazardous workplaces, no employer shall engage the services of a
physician or dentist who cannot stay in the premises of the establishment for at
least two (2) hours, in the case of those engaged on part-time basis, and not less
than eight (8) hours in the case of those employed on full-time basis. Where the
undertaking is nonhazardous in nature, the physician and dentist may be engaged
on retained basis, subject to such regulations as the Secretary of Labor may
prescribe to insure immediate availability of medical and dental treatment and
attendance in case of emergency.
Had only respondent read carefully the very statutory provision invoked by him, he
would have noticed that in non-hazardous workplaces, the employer may engage
the services of a physician "on retained basis." As correctly observed by the
petitioner, while it is true that the provision requires employers to engage the
services of medical practitioners in certain establishments depending on the
number of their employees, nothing is there in the law which says that medical
practitioners so engaged be actually hired as employees,24 adding that the law,
as written, only requires the employer "to retain", not employ, a part-time physician
who needed to stay in the premises of the non-hazardous workplace for two (2)
hours.25
Respondent takes no issue on the fact that petitioner’s business of
telecommunications is not hazardous in nature. As such, what applies here is the
last paragraph of Article 157 which, to stress, provides that the employer may
engage the services of a physician and dentist "on retained basis", subject to such
regulations as the Secretary of Labor may prescribe. The successive "retainership"
agreements of the parties definitely hue to the very statutory provision relied upon
by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a
statute that is free from doubt. Where the law is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice but to see to it that
the mandate is obeyed.26 As it is, Article 157 of the Labor Code clearly and
unequivocally allows employers in non-hazardous establishments to engage "on
retained basis" the service of a dentist or physician. Nowhere does the law provide
that the physician or dentist so engaged thereby becomes a regular employee.
The very phrase that they may be engaged "on retained basis", revolts against the
idea that this engagement gives rise to an employer-employee relationship.
With the recognition of the fact that petitioner consistently engaged the services
of respondent on a retainer basis, as shown by their various "retainership contracts",
so can petitioner put an end, with or without cause, to their retainership
agreement as therein provided.27
We note, however, that even as the contracts entered into by the parties
invariably provide for a 60-day notice requirement prior to termination, the same
was not complied with by petitioner when it terminated on 17 December 1996 the
verbally-renewed retainership agreement, effective at the close of business hours
of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties,28 that
execution of the NLRC decision had already been made at the NLRC despite the
pendency of the present recourse. For sure, accounts of petitioner had already
been garnished and released to respondent despite the previous Status Quo
Order29 issued by this Court. To all intents and purposes, therefore, the 60-day
notice requirement has become moot and academic if not waived by the
respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of
Appeals REVERSED and SET ASIDE. The 21 December 1998 decision of the labor
arbiter is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on official leave.
G.R. No. 146881 February 5, 2007
COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs.
DR. DEAN N. CLIMACO, Respondent.
DECISION
AZCUNA, J.:
This is a petition for review on certiorari of the Decision of the Court of
Appeals1 promulgated on July 7, 2000, and its Resolution promulgated on January
30, 2001, denying petitioner’s motion for reconsideration. The Court of Appeals
ruled that an employer-employee relationship exists between respondent Dr. Dean
N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that
respondent was illegally dismissed.
Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner
Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated:
WHEREAS, the COMPANY desires to engage on a retainer basis the services of a
physician and the said DOCTOR is accepting such engagement upon terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual agreement
hereinafter contained, the parties agree as follows:
1. This Agreement shall only be for a period of one (1) year
beginning January 1, 1988 up to December 31, 1988. The said term
notwithstanding, either party may terminate the contract upon giving a
thirty (30)-day written notice to the other.
2. The compensation to be paid by the company for the services of the
DOCTOR is hereby fixed at PESOS: Three Thousand Eight Hundred
(₱3,800.00) per month. The DOCTOR may charge professional fee for
hospital services rendered in line with his specialization. All payments in
connection with the Retainer Agreement shall be subject to a withholding
tax of ten percent (10%) to be withheld by the COMPANY under the
Expanded Withholding Tax System. In the event the withholding tax rate
shall be increased or decreased by appropriate laws, then the rate herein
stipulated shall accordingly be increased or decreased pursuant to such
laws.
3. That in consideration of the above mentioned retainer’s fee, the
DOCTOR agrees to perform the duties and obligations enumerated in the
COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and
made an integral part of this Retainer Agreement.
4. That the applicable provisions in the Occupational Safety and Health
Standards, Ministry of Labor and Employment shall be followed.
5. That the DOCTOR shall be directly responsible to the employee
concerned and their dependents for any injury inflicted on, harm done
against or damage caused upon the employee of the COMPANY or their
dependents during the course of his examination, treatment or
consultation, if such injury, harm or damage was committed through
professional negligence or incompetence or due to the other valid
causes for action.
6. That the DOCTOR shall observe clinic hours at the COMPANY’S premises
from Monday to Saturday of a minimum of two (2) hours each day or a
maximum of TWO (2) hours each day or treatment from 7:30 a.m.
to 8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule
is otherwise changed by the COMPANY as [the] situation so warrants,
subject to the Labor Code provisions on Occupational Safety and Health
Standards as the COMPANY may determine. It is understood that the
DOCTOR shall stay at least two (2) hours a day in the COMPANY clinic and
that such two (2) hours be devoted to the workshift with the most number
of employees. It is further understood that the DOCTOR shall be on call at
all times during the other workshifts to attend to emergency case[s];
7. That no employee-employer relationship shall exist between the
COMPANY and the DOCTOR whilst this contract is in effect, and in case of
its termination, the DOCTOR shall be entitled only to such retainer fee as
may be due him at the time of termination.2
The Comprehensive Medical Plan,3 which contains the duties and responsibilities of
respondent, adverted to in the Retainer Agreement, provided:
A. OBJECTIVE
These objectives have been set to give full consideration to [the] employees’ and
dependents’ health:
1. Prompt and adequate treatment of occupational and non-
occupational injuries and diseases.
2. To protect employees from any occupational health hazard by
evaluating health factors related to working conditions.
3. To encourage employees [to] maintain good personal health by setting
up employee orientation and education on health, hygiene and
sanitation, nutrition, physical fitness, first aid training, accident prevention
and personnel safety.
 4. To evaluate other matters relating to health such as absenteeism,
leaves and termination.
5. To give family planning motivations.
B. COVERAGE
1. All employees and their dependents are embraced by this program.
2. The health program shall cover pre-employment and annual p.e.,
hygiene and sanitation, immunizations, family planning, physical fitness
and athletic programs and other activities such as group health
education program, safety and first aid classes, organization of health
and safety committees.
3. Periodically, this program will be reviewed and adjusted based on
employees’ needs.
C. ACTIVITIES
1. Annual Physical Examination.
2. Consultations, diagnosis and treatment of occupational and non-
occupational illnesses and injuries.
3. Immunizations necessary for job conditions.
4. Periodic inspections for food services and rest rooms.
5. Conduct health education programs and present education materials.
6. Coordinate with Safety Committee in developing specific studies and
program to minimize environmental health hazards.
7. Give family planning motivations.
8. Coordinate with Personnel Department regarding physical fitness and
athletic programs.
9. Visiting and follow-up treatment of Company employees and their
dependents confined in the hospital.
The Retainer Agreement, which began on January 1, 1988, was renewed annually.
The last one expired on December 31, 1993. Despite the non-renewal of the
Retainer Agreement, respondent continued to perform his functions as company
doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from
petitioner company concluding their retainership agreement effective 30 days
from receipt thereof.
It is noted that as early as September 1992, petitioner was already making inquiries
regarding his status with petitioner company. First, he wrote a letter addressed to
Dr. Willie Sy, the Acting President and Chairperson of the Committee on
Membership, Philippine College of Occupational Medicine. In response, Dr. Sy
wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City,
stating that respondent should be considered as a regular part-time physician,
having served the company continuously for four (4) years. He likewise stated that
respondent must receive all the benefits and privileges of an employee under
Article 157 (b)6 of the Labor Code.
Petitioner company, however, did not take any action. Hence, respondent made
another inquiry directed to the Assistant Regional Director, Bacolod City District
Office of the Department of Labor and Employment (DOLE), who referred the
inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993,
Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an
employer-employee relationship existed between petitioner and respondent
based on the Retainer Agreement and the Comprehensive Medical Plan, and the
application of the "four-fold" test. However, Director Ancheta emphasized that the
existence of employer-employee relationship is a question of fact. Hence,
termination disputes or money claims arising from employer-employee relations
exceeding ₱5,000 may be filed with the National Labor Relations Commission
(NLRC). He stated that their opinion is strictly advisory.
An inquiry was likewise addressed to the Social Security System (SSS). Thereafter,
Mr. Romeo R. Tupas, OIC-FID of SSS-Bacolod City, wrote a letter8 to the Personnel
Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his
office was of the opinion that the services of respondent partake of the nature of
work of a regular company doctor and that he was, therefore, subject to social
security coverage.
Respondent inquired from the management of petitioner company whether it was
agreeable to recognizing him as a regular employee. The management refused to
do so.
On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod
City, seeking recognition as a regular employee of petitioner company and
prayed for the payment of all benefits of a regular employee, including 13th
Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay,
and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94.
While the complaint was pending before the Labor Arbiter, respondent received a
letter dated March 9, 1995 from petitioner company concluding their retainership
agreement effective thirty (30) days from receipt thereof. This prompted
respondent to file a complaint for illegal dismissal against petitioner company with
the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95.
In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr.
found that petitioner company lacked the power of control over respondent’s
performance of his duties, and recognized as valid the Retainer Agreement
between the parties. Thus, the Labor Arbiter dismissed respondent’s complaint in
the first case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing the
instant complaint seeking recognition as a regular employee.
SO ORDERED.11
In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed
the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous
finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that
complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers
Phils., Inc.
Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City.
In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the
appeal in both cases for lack of merit. It declared that no employer-employee
relationship existed between petitioner company and respondent based on the
provisions of the Retainer Agreement which contract governed respondent’s
employment.
Respondent’s motion for reconsideration was denied by the NLRC in a
Resolution14 promulgated on August 7, 1998.
Respondent filed a petition for review with the Court of Appeals.
In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an
employer-employee relationship existed between petitioner company and
respondent after applying the four-fold test: (1) the power to hire the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the employer’s
power to control the employee with respect to the means and methods by which
the work is to be accomplished.
The Court of Appeals held:
The Retainer Agreement executed by and between the parties, when read
together with the Comprehensive Medical Plan which was made an integral part
of the retainer agreements, coupled with the actual services rendered by the
petitioner, would show that all the elements of the above test are present.
First, the agreements provide that "the COMPANY desires to engage on a retainer
basis the services of a physician and the said DOCTOR is accepting such
engagement x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its
power to hire the services of petitioner.
Secondly, paragraph (2) of the agreements showed that petitioner would be
entitled to a final compensation of Three Thousand Eight Hundred Pesos per
month, which amount was later raised to Seven Thousand Five Hundred on the
latest contract. This would represent the element of payment of wages.
Thirdly, it was provided in paragraph (1) of the agreements that the same shall be
valid for a period of one year. "The said term notwithstanding, either party may
terminate the contract upon giving a thirty (30) day written notice to the
other." (Rollo, page 25). This would show that Coca-Cola had the power of
dismissing the petitioner, as it later on did, and this could be done for no particular
reason, the sole requirement being the former’s compliance with the 30-day
notice requirement.
Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised
the most important element of all, that is, control, over the conduct of petitioner in
the latter’s performance of his duties as a doctor for the company.
It was stated in paragraph (3) that the doctor agrees to perform the duties and
obligations enumerated in the Comprehensive Medical Plan referred to above. In
paragraph (6), the fixed and definite hours during which the petitioner must render
service to the company is laid down.
We say that there exists Coca-Cola’s power to control petitioner because the
particular objectives and activities to be observed and accomplished by the latter
are fixed and set under the Comprehensive Medical Plan which was made an
integral part of the retainer agreement. Moreover, the times for accomplishing
these objectives and activities are likewise controlled and determined by the
company. Petitioner is subject to definite hours of work, and due to this, he
performs his duties to Coca-Cola not at his own pleasure but according to the
schedule dictated by the company.
In addition, petitioner was designated by Coca-Cola to be a member of its
Bacolod Plant’s Safety Committee. The minutes of the meeting of the said
committee dated February 16, 1994 included the name of petitioner, as plant
physician, as among those comprising the committee.
It was averred by Coca-Cola in its comment that they exercised no control over
petitioner for the reason that the latter was not directed as to the procedure and
manner of performing his assigned tasks. It went as far as saying that "petitioner
was not told how to immunize, inject, treat or diagnose the employees of the
respondent (Rollo, page 228). We believe that if the "control test" would be
interpreted this strictly, it would result in an absurd and ridiculous situation wherein
we could declare that an entity exercises control over another’s activities only in
instances where the latter is directed by the former on each and every stage of
performance of the particular activity. Anything less than that would be
tantamount to no control at all.
To our minds, it is sufficient if the task or activity, as well as the means of
accomplishing it, is dictated, as in this case where the objectives and activities
were laid out, and the specific time for performing them was fixed by the
controlling party.15
Moreover, the Court of Appeals declared that respondent should be classified as a
regular employee having rendered six years of service as plant physician by virtue
of several renewed retainer agreements. It underscored the provision in Article
28016 of the Labor Code stating that "any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall be considered a
regular employee with respect to the activity in which he is employed, and his
employment shall continue while such activity exists." Further, it held that the
termination of respondent’s services without any just or authorized cause
constituted illegal dismissal.
In addition, the Court of Appeals found that respondent’s dismissal was an act
oppressive to labor and was effected in a wanton, oppressive or malevolent
manner which entitled respondent to moral and exemplary damages.
The dispositive portion of the Decision reads:
WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations
Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are
found to have been issued with grave abuse of discretion in applying the law to
the established facts, and are hereby REVERSED and SET ASIDE, and private
respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to:
1. Reinstate the petitioner with full backwages without loss of seniority
rights from the time his compensation was withheld up to the time he is
actually reinstated; however, if reinstatement is no longer possible, to pay
the petitioner separation pay equivalent to one (1) month’s salary for
every year of service rendered, computed at the rate of his salary at the
time he was dismissed, plus backwages.
2. Pay petitioner moral damages in the amount of ₱50,000.00.
3. Pay petitioner exemplary damages in the amount of ₱50,000.00.
4. Give to petitioner all other benefits to which a regular employee of
Coca-Cola is entitled from the time petitioner became a regular
employee (one year from effectivity date of employment) until the time of
actual payment.
SO ORDERED.17
Petitioner company filed a motion for reconsideration of the Decision of the Court
of Appeals.
In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that
petitioner company noted that its Decision failed to mention whether respondent
was a full-time or part-time regular employee. It also questioned how the benefits
under their Collective Bargaining Agreement which the Court awarded to
respondent could be given to him considering that such benefits were given only
to regular employees who render a full day’s work of not less that eight hours. It
was admitted that respondent is only required to work for two hours per day.
The Court of Appeals clarified that respondent was a "regular part-time employee
and should be accorded all the proportionate benefits due to this category of
employees of [petitioner] Corporation under the CBA." It sustained its decision on
all other matters sought to be reconsidered.
Hence, this petition filed by Coca-Cola Bottlers Phils., Inc.
The issues are:
1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME
COURT ON THE MATTER.
2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS
NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS
MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME COURT IN
ANALOGOUS CASES.
3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED
CONTROL OVER THE WORK OF THE RESPONDENT.
4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE
RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE.
5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN
THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST
CAUSE.
 6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART
TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A
REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS’ CBA.
7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE
FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS
COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL
AND EXEMPLARY DAMAGES.
The main issue in this case is whether or not there exists an employer-employee
relationship between the parties. The resolution of the main issue will determine
whether the termination of respondent’s employment is illegal.
The Court, in determining the existence of an employer-employee relationship, has
invariably adhered to the four-fold test: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power
to control the employee’s conduct, or the so-called "control test," considered to
be the most important element.18
The Court agrees with the finding of the Labor Arbiter and the NLRC that the
circumstances of this case show that no employer-employee relationship exists
between the parties. The Labor Arbiter and the NLRC correctly found that
petitioner company lacked the power of control over the performance by
respondent of his duties. The Labor Arbiter reasoned that the Comprehensive
Medical Plan, which contains the respondent’s objectives, duties and obligations,
does not tell respondent "how to conduct his physical examination, how to
immunize, or how to diagnose and treat his patients, employees of [petitioner]
company, in each case." He likened this case to that of Neri v. National Labor
Relations Commission,19 which held:
In the case of petitioner Neri, it is admitted that FEBTC issued a job description
which detailed her functions as a radio/telex operator. However, a cursory reading
of the job description shows that what was sought to be controlled by FEBTC was
actually the end result of the task, e.g., that the daily incoming and outgoing
telegraphic transfer of funds received and relayed by her, respectively, tallies with
that of the register. The guidelines were laid down merely to ensure that the
desired end result was achieved. It did not, however, tell Neri how the radio/telex
machine should be operated.
In effect, the Labor Arbiter held that petitioner company, through the
Comprehensive Medical Plan, provided guidelines merely to ensure that the end
result was achieved, but did not control the means and methods by which
respondent performed his assigned tasks.
The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely
because the company lacks the power of control that the contract provides that
respondent shall be directly responsible to the employee concerned and their
dependents for any injury, harm or damage caused through professional
negligence, incompetence or other valid causes of action.
The Labor Arbiter also correctly found that the provision in the Retainer Agreement
that respondent was on call during emergency cases did not make him a regular
employee. He explained, thus:
Likewise, the allegation of complainant that since he is on call at anytime of the
day and night makes him a regular employee is off-tangent. Complainant does
not dispute the fact that outside of the two (2) hours that he is required to be at
respondent company’s premises, he is not at all further required to just sit around in
the premises and wait for an emergency to occur so as to enable him from using
such hours for his own benefit and advantage. In fact, complainant maintains his
own private clinic attending to his private practice in the city, where he services his
patients, bills them accordingly -- and if it is an employee of respondent company
who is attended to by him for special treatment that needs hospitalization or
operation, this is subject to a special billing. More often than not, an employee is
required to stay in the employer’s workplace or proximately close thereto that he
cannot utilize his time effectively and gainfully for his own purpose. Such is not the
prevailing situation here.1awphi1.net
In addition, the Court finds that the schedule of work and the requirement to be on
call for emergency cases do not amount to such control, but are necessary
incidents to the Retainership Agreement.
The Court also notes that the Retainership Agreement granted to both parties the
power to terminate their relationship upon giving a 30-day notice. Hence,
petitioner company did not wield the sole power of dismissal or termination.
The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong
with the employment of respondent as a retained physician of petitioner company
and upholds the validity of the Retainership Agreement which clearly stated that
no employer-employee relationship existed between the parties. The Agreement
also stated that it was only for a period of 1 year beginning January 1, 1988 to
December 31, 1998, but it was renewed on a yearly basis.
Considering that there is no employer-employee relationship between the parties,
the termination of the Retainership Agreement, which is in accordance with the
provisions of the Agreement, does not constitute illegal dismissal of respondent.
Consequently, there is no basis for the moral and exemplary damages granted by
the Court of Appeals to respondent due to his alleged illegal dismissal.
WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court
of Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated
November 28, 1997 and August 7, 1998, respectively, of the National Labor
Relations Commission are REINSTATED.
G.R. No. 146530 January 17, 2005
PEDRO CHAVEZ, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SUPREME PACKAGING, INC. and ALVIN
LEE, Plant Manager,respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari of the Resolution1 dated
December 15, 2000 of the Court of Appeals (CA) reversing its Decision dated April
28, 2000 in CA-G.R. SP No. 52485. The assailed resolution reinstated the Decision
dated July 10, 1998 of the National Labor Relations Commission (NLRC), dismissing
the complaint for illegal dismissal filed by herein petitioner Pedro Chavez. The said
NLRC decision similarly reversed its earlier Decision dated January 27, 1998 which,
affirming that of the Labor Arbiter, ruled that the petitioner had been illegally
dismissed by respondents Supreme Packaging, Inc. and Mr. Alvin Lee.
The case stemmed from the following facts:
The respondent company, Supreme Packaging, Inc., is in the business of
manufacturing cartons and other packaging materials for export and distribution.
It engaged the services of the petitioner, Pedro Chavez, as truck driver on October
25, 1984. As such, the petitioner was tasked to deliver the respondent company’s
products from its factory in Mariveles, Bataan, to its various customers, mostly in
Metro Manila. The respondent company furnished the petitioner with a truck. Most
of the petitioner’s delivery trips were made at nighttime, commencing at 6:00 p.m.
from Mariveles, and returning thereto in the afternoon two or three days after. The
deliveries were made in accordance with the routing slips issued by respondent
company indicating the order, time and urgency of delivery. Initially, the petitioner
was paid the sum of ₱350.00 per trip. This was later adjusted to ₱480.00 per trip
and, at the time of his alleged dismissal, the petitioner was receiving ₱900.00 per
trip.
Sometime in 1992, the petitioner expressed to respondent Alvin Lee, respondent
company’s plant manager, his (the petitioner’s) desire to avail himself of the
benefits that the regular employees were receiving such as overtime pay, nightshift
differential pay, and 13th month pay, among others. Although he promised to
extend these benefits to the petitioner, respondent Lee failed to actually do so.
On February 20, 1995, the petitioner filed a complaint for regularization with the
Regional Arbitration Branch No. III of the NLRC in San Fernando, Pampanga. Before
the case could be heard, respondent company terminated the services of the
petitioner. Consequently, on May 25, 1995, the petitioner filed an amended
complaint against the respondents for illegal dismissal, unfair labor practice and
non-payment of overtime pay, nightshift differential pay, 13th month pay, among
others. The case was docketed as NLRC Case No. RAB-III-02-6181-95.
The respondents, for their part, denied the existence of an employer-employee
relationship between the respondent company and the petitioner. They averred
that the petitioner was an independent contractor as evidenced by the contract
of service which he and the respondent company entered into. The said contract
provided as follows:
That the Principal [referring to Supreme Packaging, Inc.], by these presents, agrees
to hire and the Contractor [referring to Pedro Chavez], by nature of their
specialized line or service jobs, accepts the services to be rendered to the
Principal, under the following terms and covenants heretofore mentioned:
1. That the inland transport delivery/hauling activities to be performed by
the contractor to the principal, shall only cover travel route from Mariveles
to Metro Manila. Otherwise, any change to this travel route shall be
subject to further agreement by the parties concerned.
2. That the payment to be made by the Principal for any hauling or
delivery transport services fully rendered by the Contractor shall be on a
per trip basis depending on the size or classification of the truck being
used in the transport service, to wit:
a) If the hauling or delivery service shall require a truck of six
wheeler, the payment on a per trip basis from Mariveles to Metro
Manila shall be THREE HUNDRED PESOS (₱300.00) and EFFECTIVE
December 15, 1984.
b) If the hauling or delivery service require a truck of ten wheeler,
the payment on a per trip basis, following the same route
mentioned, shall be THREE HUNDRED FIFTY (₱350.00) Pesos and
Effective December 15, 1984.
3. That for the amount involved, the Contractor will be to [sic] provide for
[sic] at least two (2) helpers;
4. The Contractor shall exercise direct control and shall be responsible to
the Principal for the cost of any damage to, loss of any goods, cargoes,
finished products or the like, while the same are in transit, or due to
reckless [sic] of its men utilized for the purpose above mentioned;
5. That the Contractor shall have absolute control and disciplinary power
over its men working for him subject to this agreement, and that the
Contractor shall hold the Principal free and harmless from any liability or
claim that may arise by virtue of the Contractor’s non-compliance to the
existing provisions of the Minimum Wage Law, the Employees
Compensation Act, the Social Security System Act, or any other such law
or decree that may hereafter be enacted, it being clearly understood
that any truck drivers, helpers or men working with and for the Contractor,
are not employees who will be indemnified by the Principal for any such
claim, including damages incurred in connection therewith;
 6. This contract shall take effect immediately upon the signing by the
parties, subject to renewal on a year-to-year basis.2
This contract of service was dated December 12, 1984. It was subsequently
renewed twice, on July 10, 1989 and September 28, 1992. Except for the rates to
be paid to the petitioner, the terms of the contracts were substantially the same.
The relationship of the respondent company and the petitioner was allegedly
governed by this contract of service.
The respondents insisted that the petitioner had the sole control over the means
and methods by which his work was accomplished. He paid the wages of his
helpers and exercised control over them. As such, the petitioner was not entitled to
regularization because he was not an employee of the respondent company. The
respondents, likewise, maintained that they did not dismiss the petitioner. Rather,
the severance of his contractual relation with the respondent company was due
to his violation of the terms and conditions of their contract. The petitioner
allegedly failed to observe the minimum degree of diligence in the proper
maintenance of the truck he was using, thereby exposing respondent company to
unnecessary significant expenses of overhauling the said truck.
After the parties had filed their respective pleadings, the Labor Arbiter rendered
the Decision dated February 3, 1997, finding the respondents guilty of illegal
dismissal. The Labor Arbiter declared that the petitioner was a regular employee of
the respondent company as he was performing a service that was necessary and
desirable to the latter’s business. Moreover, it was noted that the petitioner had
discharged his duties as truck driver for the respondent company for a continuous
and uninterrupted period of more than ten years.
The contract of service invoked by the respondents was declared null and void as
it constituted a circumvention of the constitutional provision affording full
protection to labor and security of tenure. The Labor Arbiter found that the
petitioner’s dismissal was anchored on his insistent demand to be regularized.
Hence, for lack of a valid and just cause therefor and for their failure to observe
the due process requirements, the respondents were found guilty of illegal
dismissal. The dispositive portion of the Labor Arbiter’s decision states:
WHEREFORE, in the light of the foregoing, judgment is hereby rendered declaring
respondent SUPREME PACKAGING, INC. and/or MR. ALVIN LEE, Plant Manager,
with business address at BEPZ, Mariveles, Bataan guilty of illegal dismissal, ordering
said respondent to pay complainant his separation pay equivalent to one (1)
month pay per year of service based on the average monthly pay of ₱10,800.00 in
lieu of reinstatement as his reinstatement back to work will not do any good
between the parties as the employment relationship has already become strained
and full backwages from the time his compensation was withheld on February 23,
1995 up to January 31, 1997 (cut-off date) until compliance, otherwise, his
backwages shall continue to run. Also to pay complainant his 13th month pay,
night shift differential pay and service incentive leave pay hereunder computed as
follows:
a) Backwages ………………….. ₱248,400.00
b) Separation Pay ………….…... ₱140,400.00
c) 13th month pay ………….……₱ 10,800.00
d) Service Incentive Leave Pay .. 2,040.00
TOTAL ₱401,640.00
Respondent is also ordered to pay ten (10%) of the amount due the complainant
as attorney’s fees.
SO ORDERED.3
The respondents seasonably interposed an appeal with the NLRC. However, the
appeal was dismissed by the NLRC in its Decision4 dated January 27, 1998, as it
affirmed in toto the decision of the Labor Arbiter. In the said decision, the NLRC
characterized the contract of service between the respondent company and the
petitioner as a "scheme" that was resorted to by the respondents who, taking
advantage of the petitioner’s unfamiliarity with the English language and/or legal
niceties, wanted to evade the effects and implications of his becoming a
regularized employee.5
The respondents sought reconsideration of the January 27, 1998 Decision of the
NLRC. Acting thereon, the NLRC rendered another Decision6 dated July 10, 1998,
reversing its earlier decision and, this time, holding that no employer-employee
relationship existed between the respondent company and the petitioner. In
reconsidering its earlier decision, the NLRC stated that the respondents did not
exercise control over the means and methods by which the petitioner
accomplished his delivery services. It upheld the validity of the contract of service
as it pointed out that said contract was silent as to the time by which the petitioner
was to make the deliveries and that the petitioner could hire his own helpers
whose wages would be paid from his own account. These factors indicated that
the petitioner was an independent contractor, not an employee of the
respondent company.
The NLRC ruled that the contract of service was not intended to circumvent Article
280 of the Labor Code on the regularization of employees. Said contract, including
the fixed period of employment contained therein, having been knowingly and
voluntarily entered into by the parties thereto was declared valid citing Brent
School, Inc. v. Zamora.7The NLRC, thus, dismissed the petitioner’s complaint for
illegal dismissal.
The petitioner sought reconsideration of the July 10, 1998 Decision but it was
denied by the NLRC in its Resolution dated September 7, 1998. He then filed with
this Court a petition for certiorari, which was referred to the CA following the ruling
in St. Martin Funeral Home v. NLRC .8
The appellate court rendered the Decision dated April 28, 2000, reversing the July
10, 1998 Decision of the NLRC and reinstating the decision of the Labor Arbiter. In
the said decision, the CA ruled that the petitioner was a regular employee of the
respondent company because as its truck driver, he performed a service that was
indispensable to the latter’s business. Further, he had been the respondent
company’s truck driver for ten continuous years. The CA also reasoned that the
petitioner could not be considered an independent contractor since he had no
substantial capital in the form of tools and machinery. In fact, the truck that he
drove belonged to the respondent company. The CA also observed that the
routing slips that the respondent company issued to the petitioner showed that it
exercised control over the latter. The routing slips indicated the chronological order
and priority of delivery, the urgency of certain deliveries and the time when the
goods were to be delivered to the customers.
The CA, likewise, disbelieved the respondents’ claim that the petitioner
abandoned his job noting that he just filed a complaint for regularization. This
actuation of the petitioner negated the respondents’ allegation that he
abandoned his job. The CA held that the respondents failed to discharge their
burden to show that the petitioner’s dismissal was for a valid and just cause.
Accordingly, the respondents were declared guilty of illegal dismissal and the
decision of the Labor Arbiter was reinstated.
In its April 28, 2000 Decision, the CA denounced the contract of service between
the respondent company and the petitioner in this wise:
In summation, we rule that with the proliferation of contracts seeking to prevent
workers from attaining the status of regular employment, it is but necessary for the
courts to scrutinize with extreme caution their legality and justness. Where from the
circumstances it is apparent that a contract has been entered into to preclude
acquisition of tenurial security by the employee, they should be struck down and
disregarded as contrary to public policy and morals. In this case, the "contract of
service" is just another attempt to exploit the unwitting employee and deprive him
of the protection of the Labor Code by making it appear that the stipulations of
the parties were governed by the Civil Code as in ordinary transactions.9
However, on motion for reconsideration by the respondents, the CA made a
complete turn around as it rendered the assailed Resolution dated December 15,
2000 upholding the contract of service between the petitioner and the respondent
company. In reconsidering its decision, the CA explained that the extent of control
exercised by the respondents over the petitioner was only with respect to the result
but not to the means and methods used by him. The CA cited the following
circumstances: (1) the respondents had no say on how the goods were to be
delivered to the customers; (2) the petitioner had the right to employ workers who
would be under his direct control; and (3) the petitioner had no working time.
The fact that the petitioner had been with the respondent company for more than
ten years was, according to the CA, of no moment because his status was
determined not by the length of service but by the contract of service. This
contract, not being contrary to morals, good customs, public order or public
policy, should be given the force and effect of law as between the respondent
company and the petitioner. Consequently, the CA reinstated the July 10, 1998
Decision of the NLRC dismissing the petitioner’s complaint for illegal dismissal.
Hence, the recourse to this Court by the petitioner. He assails the December 15,
2000 Resolution of the appellate court alleging that:
(A)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING
TO EXCESS OF JURISDICTION IN GIVING MORE CONSIDERATION TO THE "CONTRACT
OF SERVICE" ENTERED INTO BY PETITIONER AND PRIVATE RESPONDENT THAN ARTICLE
280 OF THE LABOR CODE OF THE PHILIPPINES WHICH CATEGORICALLY DEFINES A
REGULAR EMPLOYMENT NOTWITHSTANDING ANY WRITTEN AGREEMENT TO THE
CONTRARY AND REGARDLESS OF THE ORAL AGREEMENT OF THE PARTIES;
(B)
THE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION AMOUNTING
TO EXCESS OF JURISDICTION IN REVERSING ITS OWN FINDINGS THAT PETITIONER IS A
REGULAR EMPLOYEE AND IN HOLDING THAT THERE EXISTED NO EMPLOYER-
EMPLOYEE RELATIONSHIP BETWEEN PRIVATE RESPONDENT AND PETITIONER IN AS
MUCH AS THE "CONTROL TEST" WHICH IS CONSIDERED THE MOST ESSENTIAL
CRITERION IN DETERMINING THE EXISTENCE OF SAID RELATIONSHIP IS NOT PRESENT. 10
The threshold issue that needs to be resolved is whether there existed an employer-
employee relationship between the respondent company and the petitioner. We
rule in the affirmative.
The elements to determine the existence of an employment relationship are: (1)
the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the employer’s power to control the employee’s
conduct.11 The most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done, but also as to the means
and methods to accomplish it.12 All the four elements are present in this case.
First. Undeniably, it was the respondents who engaged the services of the
petitioner without the intervention of a third party.
Second. Wages are defined as "remuneration or earnings, however designated,
capable of being expressed in terms of money, whether fixed or ascertained on a
time, task, piece or commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for service rendered or to
be rendered."13 That the petitioner was paid on a per trip basis is not significant. This
is merely a method of computing compensation and not a basis for determining
the existence or absence of employer-employee relationship. One may be paid
on the basis of results or time expended on the work, and may or may not acquire
an employment status, depending on whether the elements of an employer-
employee relationship are present or not.14 In this case, it cannot be gainsaid that
the petitioner received compensation from the respondent company for the
services that he rendered to the latter.
Moreover, under the Rules Implementing the Labor Code, every employer is
required to pay his employees by means of payroll.15 The payroll should show,
among other things, the employee’s rate of pay, deductions made, and the
amount actually paid to the employee. Interestingly, the respondents did not
present the payroll to support their claim that the petitioner was not their
employee, raising speculations whether this omission proves that its presentation
would be adverse to their case.16
Third. The respondents’ power to dismiss the petitioner was inherent in the fact that
they engaged the services of the petitioner as truck driver. They exercised this
power by terminating the petitioner’s services albeit in the guise of "severance of
contractual relation" due allegedly to the latter’s breach of his contractual
obligation.
Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. Compared to an employee, an
independent contractor is one who carries on a distinct and independent business
and undertakes to perform the job, work, or service on its own account and under
its own responsibility according to its own manner and method, free from the
control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.17 Hence, while an
independent contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the employer’s power to
control the means and methods by which the employee’s work is to be performed
and accomplished.18
Although the respondents denied that they exercised control over the manner and
methods by which the petitioner accomplished his work, a careful review of the
records shows that the latter performed his work as truck driver under the
respondents’ supervision and control. Their right of control was manifested by the
following attendant circumstances:
1. The truck driven by the petitioner belonged to respondent company;
2. There was an express instruction from the respondents that the truck
shall be used exclusively to deliver respondent company’s goods; 19
3. Respondents directed the petitioner, after completion of each delivery,
to park the truck in either of two specific places only, to wit: at its office in
Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles,
Bataan;20 and
4. Respondents determined how, where and when the petitioner would
perform his task by issuing to him gate passes and routing slips. 21
a. The routing slips indicated on the column REMARKS, the
chronological order and priority of delivery such as 1st drop, 2nd
drop, 3rd drop, etc. This meant that the petitioner had to deliver
the same according to the order of priority indicated therein.
b. The routing slips, likewise, showed whether the goods were to
be delivered urgently or not by the word RUSH printed thereon.
c. The routing slips also indicated the exact time as to when the
goods were to be delivered to the customers as, for example, the
words "tomorrow morning" was written on slip no. 2776.
These circumstances, to the Court’s mind, prove that the respondents exercised
control over the means and methods by which the petitioner accomplished his
work as truck driver of the respondent company. On the other hand, the Court is
hard put to believe the respondents’ allegation that the petitioner was an
independent contractor engaged in providing delivery or hauling services when
he did not even own the truck used for such services. Evidently, he did not possess
substantial capitalization or investment in the form of tools, machinery and work
premises. Moreover, the petitioner performed the delivery services exclusively for
the respondent company for a continuous and uninterrupted period of ten years.
The contract of service to the contrary notwithstanding, the factual circumstances
earlier discussed indubitably establish the existence of an employer-employee
relationship between the respondent company and the petitioner. It bears
stressing that the existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract and providing therein that the
employee is an independent contractor when, as in this case, the facts clearly
show otherwise. Indeed, the employment status of a person is defined and
prescribed by law and not by what the parties say it should be.22
Having established that there existed an employer-employee relationship between
the respondent company and the petitioner, the Court shall now determine
whether the respondents validly dismissed the petitioner.
As a rule, the employer bears the burden to prove that the dismissal was for a valid
and just cause.23 In this case, the respondents failed to prove any such cause for
the petitioner’s dismissal. They insinuated that the petitioner abandoned his job. To
constitute abandonment, these two factors must concur: (1) the failure to report
for work or absence without valid or justifiable reason; and (2) a clear intention to
sever employer-employee relationship.24Obviously, the petitioner did not intend to
sever his relationship with the respondent company for at the time that he
allegedly abandoned his job, the petitioner just filed a complaint for regularization,
which was forthwith amended to one for illegal dismissal. A charge of
abandonment is totally inconsistent with the immediate filing of a complaint for
illegal dismissal, more so when it includes a prayer for reinstatement.25
Neither can the respondents’ claim that the petitioner was guilty of gross
negligence in the proper maintenance of the truck constitute a valid and just
cause for his dismissal. Gross negligence implies a want or absence of or failure to
exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid
them.26 The negligence, to warrant removal from service, should not merely
be gross but also habitual.27 The single and isolated act of the petitioner’s
negligence in the proper maintenance of the truck alleged by the respondents
does not amount to "gross and habitual neglect" warranting his dismissal.

The Court agrees with the following findings and conclusion of the Labor Arbiter:

… As against the gratuitous allegation of the respondent that complainant was not
dismissed from the service but due to complainant’s breach of their contractual
relation, i.e., his violation of the terms and conditions of the contract, we are very
much inclined to believe complainant’s story that his dismissal from the service was
anchored on his insistent demand that he be considered a regular employee.
Because complainant in his right senses will not just abandon for that reason alone
his work especially so that it is only his job where he depends chiefly his existence
and support for his family if he was not aggrieved by the respondent when he was
told that his services as driver will be terminated on February 23, 1995. 28

Thus, the lack of a valid and just cause in terminating the services of the petitioner
renders his dismissal illegal. Under Article 279 of the Labor Code, an employee who
is unjustly dismissed is entitled to reinstatement, without loss of seniority rights and
other privileges, and to the payment of full backwages, 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.29 However, as found by the Labor Arbiter, the circumstances
obtaining in this case do not warrant the petitioner’s reinstatement. A more
equitable disposition, as held by the Labor Arbiter, would be an award of
separation pay equivalent to one month for every year of service from the time of
his illegal dismissal up to the finality of this judgment in addition to his full
backwages, allowances and other benefits.

WHEREFORE, the instant petition is GRANTED. The Resolution dated December 15,
2000 of the Court of Appeals reversing its Decision dated April 28, 2000 in CA-G.R.
SP No. 52485 is REVERSED and SET ASIDE. The Decision dated February 3, 1997 of the
Labor Arbiter in NLRC Case No. RAB-III-02-6181-5, finding the respondents guilty of
illegally terminating the employment of petitioner Pedro Chavez, is REINSTATED.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.


G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO
TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and
RAMON ESCUETA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to
annul and set aside the Decision and Resolution of the Court of Appeals dated
October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515
dismissing the complaint for constructive dismissal filed by herein petitioner
Angelina Francisco. The appellate court reversed and set aside the Decision of the
National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR
CA No. 032766-02 which affirmed with modification the decision of the Labor
Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that
private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.
She was designated as Accountant and Corporate Secretary and was assigned to
handle all the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits, construction permits
and other licenses for the initial operation of the company. 5
Although she was designated as Corporate Secretary, she was not entrusted with
the corporate documents; neither did she attend any board meeting nor required
to do so. She never prepared any legal document and never represented the
company as its Corporate Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the company. 6
In 1996, petitioner was designated Acting Manager. The corporation also hired
Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was
assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government
agencies, especially with the Bureau of Internal Revenue (BIR), Social Security
System (SSS) and in the city government of Makati; and to administer all other
matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation. 7
For five years, petitioner performed the duties of Acting Manager. As of December
31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10%
share in the profit of Kasei Corporation. 8
In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner
alleged that she was required to sign a prepared resolution for her replacement
but she was assured that she would still be connected with Kasei Corporation.
Timoteo Acedo, the designated Treasurer, convened a meeting of all employees
of Kasei Corporation and announced that nothing had changed and that
petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji
Kamura and in charge of all BIR matters. 9
Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning
January up to September 2001 for a total reduction of P22,500.00 as of September
2001. Petitioner was not paid her mid-year bonus allegedly because the company
was not earning well. On October 2001, petitioner did not receive her salary from
the company. She made repeated follow-ups with the company cashier but she
was advised that the company was not earning well. 10
On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the
officers but she was informed that she is no longer connected with the
company. 11
Since she was no longer paid her salary, petitioner did not report for work and filed
an action for constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its technical
consultants on accounting matters and act concurrently as Corporate Secretary.
As technical consultant, petitioner performed her work at her own discretion
without control and supervision of Kasei Corporation. Petitioner had no daily time
record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would ask
her opinion on matters relating to her profession. Petitioner did not go through the
usual procedure of selection of employees, but her services were engaged
through a Board Resolution designating her as technical consultant. The money
received by petitioner from the corporation was her professional fee subject to the
10% expanded withholding tax on professionals, and that she was not one of those
reported to the BIR or SSS as one of the company’s employees. 12
Petitioner’s designation as technical consultant depended solely upon the will of
management. As such, her consultancy may be terminated any time considering
that her services were only temporary in nature and dependent on the needs of
the corporation.
To prove that petitioner was not an employee of the corporation, private
respondents submitted a list of employees for the years 1999 and 2000 duly
received by the BIR showing that petitioner was not among the employees
reported to the BIR, as well as a list of payees subject to expanded withholding tax
which included petitioner. SSS records were also submitted showing that
petitioner’s latest employer was Seiji Corporation. 13
The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainant’s dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss
of seniority rights and jointly and severally pay complainant her money claims in
accordance with the following computation:
a. Backwages 10/2001 – 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 – 09/2001) 22,500.00
c. Housing Allowance (01/2001 – 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorney’s fees 87,076.50
P957,742.50
If reinstatement is no longer feasible, respondents are ordered to pay complainant
separation pay with additional backwages that would accrue up to actual
payment of separation pay.
SO ORDERED. 14
On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor
Arbiter, the dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at
one month per year of service in addition to full backwages from October 2001 to
July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit
in the respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorney’s fees shall be based on salary differential award
only;
4) The awards representing salary differentials, housing allowance, mid year bonus
and 13th month pay are AFFIRMED.
SO ORDERED. 15
On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National
Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET
ASIDE and a new one is hereby rendered dismissing the complaint filed by private
respondent against Kasei Corporation, et al. for constructive dismissal.
SO ORDERED. 16
The appellate court denied petitioner’s motion for reconsideration, hence, the
present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-
employee relationship between petitioner and private respondent Kasei
Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor
Relations Commission on one hand, and the Court of Appeals on the other, there is
a need to reexamine the records to determine which of the propositions espoused
by the contending parties is supported by substantial evidence. 17
We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no
uniform test to determine the existence of an employer-employee relation.
Generally, courts have relied on the so-called right of control test where the person
for whom the services are performed reserves a right to control not only the end to
be achieved but also the means to be used in reaching such end. In addition to
the standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, can help in
determining the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity of such a
relationship where several positions have been held by the worker. There are
instances when, aside from the employer’s power to control the employee with
respect to the means and methods by which the work is to be accomplished,
economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee,
independent contractor, corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1)
the putative employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished; and (2) the underlying
economic realities of the activity or relationship.
This two-tiered test would provide us with a framework of analysis, which would
take into consideration the totality of circumstances surrounding the true nature of
the relationship between the parties. This is especially appropriate in this case
where there is no written agreement or terms of reference to base the relationship
on; and due to the complexity of the relationship based on the various positions
and responsibilities given to the worker over the period of the latter’s employment.
The control test initially found application in the case of Viaña v. Al-Lagadan and
Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is
an employer-employee relationship when the person for whom the services are
performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.
In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing
economic conditions prevailing between the parties, in addition to the standard of
right-of-control like the inclusion of the employee in the payrolls, to give a clearer
picture in determining the existence of an employer-employee relationship based
on an analysis of the totality of economic circumstances of the worker.
Thus, the determination of the relationship between employer and employee
depends upon the circumstances of the whole economic activity, 22 such as: (1)
the extent to which the services performed are an integral part of the employer’s
business; (2) the extent of the worker’s investment in equipment and facilities; (3)
the nature and degree of control exercised by the employer; (4) the worker’s
opportunity for profit and loss; (5) the amount of initiative, skill, judgment or
foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the
employer; and (7) the degree of dependency of the worker upon the employer for
his continued employment in that line of business. 23
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of
business. 24 In the United States, the touchstone of economic reality in analyzing
possible employment relationships for purposes of the Federal Labor Standards Act
is dependency. 25 By analogy, the benchmark of economic reality in analyzing
possible employment relationships for purposes of the Labor Code ought to be the
economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of
Kasei Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporation’s Technical Consultant. She reported for work regularly
and served in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with substantially the same
job functions, that is, rendering accounting and tax services to the company and
performing functions necessary and desirable for the proper operation of the
corporation such as securing business permits and other licenses over an indefinite
period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be
an employee of respondent corporation because she had served the company
for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions from August 1, 1999 to December 18,
2000. 26 When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene Ballesteros. Petitioner’s
membership in the SSS as manifested by a copy of the SSS specimen signature
card which was signed by the President of Kasei Corporation and the inclusion of
her name in the on-line inquiry system of the SSS evinces the existence of an
employer-employee relationship between petitioner and respondent
corporation. 27
It is therefore apparent that petitioner is economically dependent on respondent
corporation for her continued employment in the latter’s line of business.
In Domasig v. National Labor Relations Commission, 28 we held that in a business
establishment, an identification card is provided not only as a security measure but
mainly to identify the holder thereof as a bona fide employee of the firm that issues
it. Together with the cash vouchers covering petitioner’s salaries for the months
stated therein, these matters constitute substantial evidence adequate to support
a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers
with the SSS is proof that the latter were the former’s employees. The coverage of
Social Security Law is predicated on the existence of an employer-employee
relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly
established that petitioner never acted as Corporate Secretary and that her
designation as such was only for convenience. The actual nature of petitioner’s job
was as Kamura’s direct assistant with the duty of acting as Liaison Officer in
representing the company to secure construction permits, license to operate and
other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the
meeting of the corporation. She was never privy to the preparation of any
document for the corporation, although once in a while she was required to sign
prepared documentation for the company. 30
The second affidavit of Kamura dated March 7, 2002 which repudiated the
December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from
the records of the case. 31 Regardless of this fact, we are convinced that the
allegations in the first affidavit are sufficient to establish that petitioner is an
employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one,
courts do not generally look with favor on any retraction or recanted testimony, for
it could have been secured by considerations other than to tell the truth and
would make solemn trials a mockery and place the investigation of the truth at the
mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an
earlier declaration, but like any other testimony the same is subject to the test of
credibility and should be received with caution. 33
maximum aid and protection to labor, promoting their welfare and reaffirming it as
a primary social economic force in furtherance of social justice and national
development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP
No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02,
is REINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of
petitioner Angelina Francisco’s full backwages from the time she was illegally
terminated until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a fraction of at
least six months shall be considered as one whole year.

Based on the foregoing, there can be no other conclusion that petitioner is an SO ORDERED.
employee of respondent Kasei Corporation. She was selected and engaged by
the company for compensation, and is economically dependent upon
respondent for her continued employment in that line of business. Her main job
function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement.
Respondent corporation hired and engaged petitioner for compensation, with the
power to dismiss her for cause. More importantly, respondent corporation had the
power to control petitioner with the means and methods by which the work is to
be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by

P2,500 a month from January to September 2001. This amounts to an illegal
termination of employment, where the petitioner is entitled to full backwages.
Since the position of petitioner as accountant is one of trust and confidence, and
under the principle of strained relations, petitioner is further entitled to separation
pay, in lieu of reinstatement. 34

A diminution of pay is prejudicial to the employee and amounts to constructive

dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of
work resorted to when continued employment becomes impossible, unreasonable
or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to an
employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an
employee ceases to work due to a demotion of rank or a diminution of pay, an
unreasonable situation arises which creates an adverse working environment
rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and
therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities
regardless of sex, race or creed. Even as we, in every case, attempt to carefully
balance the fragile relationship between employees and employers, we are
mindful of the fact that the policy of the law is to apply the Labor Code to a
greater number of employees. This would enable employees to avail of the
benefits accorded to them by law, in line with the constitutional mandate giving
G.R. No. 167622 June 29, 2010
GREGORIO V. TONGKO, Petitioner,
vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A. VERGEL DE
DIOS,Respondents.
RESOLUTI ON
BRION, J.:
This resolves the Motion for Reconsideration1 dated December 3, 2008 filed by
respondent The Manufacturers Life Insurance Co. (Phils.), Inc. (Manulife) to set
aside our Decision of November 7, 2008. In the assailed decision, we found that an
employer-employee relationship existed between Manulife and petitioner
Gregorio Tongko and ordered Manulife to pay Tongko backwages and separation
pay for illegal dismissal.
The following facts have been stated in our Decision of November 7, 2008, now
under reconsideration, but are repeated, simply for purposes of clarity.
The contractual relationship between Tongko and Manulife had two basic phases.
The first or initial phase began on July 1, 1977, under a Career Agent’s Agreement
(Agreement) that provided:
It is understood and agreed that the Agent is an independent contractor and
nothing contained herein shall be construed or interpreted as creating an
employer-employee relationship between the Company and the Agent.
xxxx
a) The Agent shall canvass for applications for Life Insurance, Annuities, Group
policies and other products offered by the Company, and collect, in exchange for
provisional receipts issued by the Agent, money due to or become due to the
Company in respect of applications or policies obtained by or through the Agent
or from policyholders allotted by the Company to the Agent for servicing, subject
to subsequent confirmation of receipt of payment by the Company as evidenced
by an Official Receipt issued by the Company directly to the policyholder.
xxxx
The Company may terminate this Agreement for any breach or violation of any of
the provisions hereof by the Agent by giving written notice to the Agent within
fifteen (15) days from the time of the discovery of the breach. No waiver,
extinguishment, abandonment, withdrawal or cancellation of the right to
terminate this Agreement by the Company shall be construed for any previous
failure to exercise its right under any provision of this Agreement.
Either of the parties hereto may likewise terminate his Agreement at any time
without cause, by giving to the other party fifteen (15) days notice in writing.2
Tongko additionally agreed (1) to comply with all regulations and requirements of
Manulife, and (2) to maintain a standard of knowledge and competency in the
sale of Manulife’s products, satisfactory to Manulife and sufficient to meet the
volume of the new business, required by his Production Club membership.3
The second phase started in 1983 when Tongko was named Unit Manager in
Manulife’s Sales Agency Organization. In 1990, he became a Branch Manager. Six
years later (or in 1996), Tongko became a Regional Sales Manager.4
Tongko’s gross earnings consisted of commissions, persistency income, and
management overrides. Since the beginning, Tongko consistently declared himself
self-employed in his income tax returns. Thus, under oath, he declared his gross
business income and deducted his business expenses to arrive at his taxable
business income. Manulife withheld the corresponding 10% tax on Tongko’s
earnings.5
In 2001, Manulife instituted manpower development programs at the regional sales
management level. Respondent Renato Vergel de Dios wrote Tongko a letter
dated November 6, 2001 on concerns that were brought up during the October
18, 2001 Metro North Sales Managers Meeting. De Dios wrote:
The first step to transforming Manulife into a big league player has been very clear
– to increase the number of agents to at least 1,000 strong for a start. This may
seem diametrically opposed to the way Manulife was run when you first joined the
organization. Since then, however, substantial changes have taken place in the
organization, as these have been influenced by developments both from within
and without the company.
xxxx
The issues around agent recruiting are central to the intended objectives hence
the need for a Senior Managers’ meeting earlier last month when Kevin O’Connor,
SVP-Agency, took to the floor to determine from our senior agency leaders what
more could be done to bolster manpower development. At earlier meetings, Kevin
had presented information where evidently, your Region was the lowest performer
(on a per Manager basis) in terms of recruiting in 2000 and, as of today, continues
to remain one of the laggards in this area.
While discussions, in general, were positive other than for certain comments from
your end which were perceived to be uncalled for, it became clear that a one-on-
one meeting with you was necessary to ensure that you and management, were
on the same plane. As gleaned from some of your previous comments in prior
meetings (both in group and one-on-one), it was not clear that we were
proceeding in the same direction.
Kevin held subsequent series of meetings with you as a result, one of which I joined
briefly. In those subsequent meetings you reiterated certain views, the validity of
which we challenged and subsequently found as having no basis.
With such views coming from you, I was a bit concerned that the rest of the Metro
North Managers may be a bit confused as to the directions the company was
taking. For this reason, I sought a meeting with everyone in your management
team, including you, to clear the air, so to speak.
This note is intended to confirm the items that were discussed at the said Metro
North Region’s Sales Managers meeting held at the 7/F Conference room last 18
October.
xxxx
Issue # 2: "Some Managers are unhappy with their earnings and would want to
revert to the position of agents."
This is an often repeated issue you have raised with me and with Kevin. For this
reason, I placed the issue on the table before the rest of your Region’s Sales
Managers to verify its validity. As you must have noted, no Sales Manager came
forward on their own to confirm your statement and it took you to name Malou
Samson as a source of the same, an allegation that Malou herself denied at our
meeting and in your very presence.
This only confirms, Greg, that those prior comments have no solid basis at all. I now
believe what I had thought all along, that these allegations were simply meant to
muddle the issues surrounding the inability of your Region to meet its agency
development objectives!
Issue # 3: "Sales Managers are doing what the company asks them to do but, in
the process, they earn less."
xxxx
All the above notwithstanding, we had your own records checked and we found
that you made a lot more money in the Year 2000 versus 1999. In addition, you also
volunteered the information to Kevin when you said that you probably will make
more money in the Year 2001 compared to Year 2000. Obviously, your above
statement about making "less money" did not refer to you but the way you argued
this point had us almost believing that you were spouting the gospel of truth when
you were not. x x x
xxxx
All of a sudden, Greg, I have become much more worried about your ability to
lead this group towards the new direction that we have been discussing these past
few weeks, i.e., Manulife’s goal to become a major agency-led distribution
company in the Philippines. While as you claim, you have not stopped anyone
from recruiting, I have never heard you proactively push for greater agency
recruiting. You have not been proactive all these years when it comes to agency
growth.
xxxx
I cannot afford to see a major region fail to deliver on its developmental goals next
year and so, we are making the following changes in the interim:
1. You will hire at your expense a competent assistant who can unload you of
much of the routine tasks which can be easily delegated. This assistant should be
so chosen as to complement your skills and help you in the areas where you feel
"may not be your cup of tea."
You have stated, if not implied, that your work as Regional Manager may be too
taxing for you and for your health. The above could solve this problem.
xxxx
2. Effective immediately, Kevin and the rest of the Agency Operations will deal with
the North Star Branch (NSB) in autonomous fashion. x x x
I have decided to make this change so as to reduce your span of control and
allow you to concentrate more fully on overseeing the remaining groups under
Metro North, your Central Unit and the rest of the Sales Managers in Metro North. I
will hold you solely responsible for meeting the objectives of these remaining
groups.
xxxx
The above changes can end at this point and they need not go any further. This,
however, is entirely dependent upon you. But you have to understand that
meeting corporate objectives by everyone is primary and will not be
compromised. We are meeting tough challenges next year, and I would want
everybody on board. Any resistance or holding back by anyone will be dealt with
accordingly.6
Subsequently, de Dios wrote Tongko another letter, dated December 18, 2001,
terminating Tongko’s services:
It would appear, however, that despite the series of meetings and
communications, both one-on-one meetings between yourself and SVP Kevin
O’Connor, some of them with me, as well as group meetings with your Sales
Managers, all these efforts have failed in helping you align your directions with
Management’s avowed agency growth policy.
xxxx
On account thereof, Management is exercising its prerogative under Section 14 of
your Agents Contract as we are now issuing this notice of termination of your
Agency Agreement with us effective fifteen days from the date of this letter.7
Tongko responded by filing an illegal dismissal complaint with the National Labor
Relations Commission (NLRC) Arbitration Branch. He essentially alleged – despite
the clear terms of the letter terminating his Agency Agreement – that he was
Manulife’s employee before he was illegally dismissed.8
Thus, the threshold issue is the existence of an employment relationship. A finding
that none exists renders the question of illegal dismissal moot; a finding that an
employment relationship exists, on the other hand, necessarily leads to the need to
determine the validity of the termination of the relationship.
A. Tongko’s Case for Employment Relationship
Tongko asserted that as Unit Manager, he was paid an annual over-rider not
exceeding ₱50,000.00, regardless of production levels attained and exclusive of
commissions and bonuses. He also claimed that as Regional Sales Manager, he
was given a travel and entertainment allowance of ₱36,000.00 per year in addition
to his overriding commissions; he was tasked with numerous administrative
functions and supervisory authority over Manulife’s employees, aside from merely
selling policies and recruiting agents for Manulife; and he recommended and
recruited insurance agents subject to vetting and approval by Manulife. He further
alleges that he was assigned a definite place in the Manulife offices when he was
not in the field – at the 3rd Floor, Manulife Center, 108 Tordesillas corner Gallardo
Sts., Salcedo Village, Makati City – for which he never paid any rental. Manulife
provided the office equipment he used, including tables, chairs, computers and
printers (and even office stationery), and paid for the electricity, water and
telephone bills. As Regional Sales Manager, Tongko additionally asserts that he was
required to follow at least three codes of conduct.9
B. Manulife’s Case – Agency Relationship with Tongko
Manulife argues that Tongko had no fixed wage or salary. Under the Agreement,
Tongko was paid commissions of varying amounts, computed based on the
premium paid in full and actually received by Manulife on policies obtained
through an agent. As sales manager, Tongko was paid overriding sales commission
derived from sales made by agents under his unit/structure/branch/region.
Manulife also points out that it deducted and withheld a 10% tax from all
commissions Tongko received; Tongko even declared himself to be self-employed
and consistently paid taxes as such—i.e., he availed of tax deductions such as
ordinary and necessary trade, business and professional expenses to which a
business is entitled.
Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s claim as
he was not its employee as characterized in the four-fold test and our ruling
in Carungcong v. National Labor Relations Commission.10
The Conflicting Rulings of the Lower Tribunals
The labor arbiter decreed that no employer-employee relationship existed
between the parties. However, the NLRC reversed the labor arbiter’s decision on
appeal; it found the existence of an employer-employee relationship and
concluded that Tongko had been illegally dismissed. In the petition for certiorari
with the Court of Appeals (CA), the appellate court found that the NLRC gravely
abused its discretion in its ruling and reverted to the labor arbiter’s decision that no
employer-employee relationship existed between Tongko and Manulife.
Our Decision of November 7, 2008
In our Decision of November 7, 2008, we reversed the CA ruling and found that an
employment relationship existed between Tongko and Manulife. We concluded
that Tongko is Manulife’s employee for the following reasons:
1. Our ruling in the first Insular11 case did not foreclose the possibility of an
insurance agent becoming an employee of an insurance company; if
evidence exists showing that the company promulgated rules or
regulations that effectively controlled or restricted an insurance agent’s
choice of methods or the methods themselves in selling insurance, an
employer-employee relationship would be present. The determination of
the existence of an employer-employee relationship is thus on a case-to-
case basis depending on the evidence on record.
2. Manulife had the power of control over Tongko, sufficient to
characterize him as an employee, as shown by the following indicators:
2.1 Tongko undertook to comply with Manulife’s rules, regulations
and other requirements, i.e., the different codes of conduct such
as the Agent Code of Conduct, the Manulife Financial Code of
Conduct, and the Financial Code of Conduct Agreement;
2.2 The various affidavits of Manulife’s insurance agents and
managers, who occupied similar positions as Tongko, showed
that they performed administrative duties that established
employment with Manulife;12 and
2.3 Tongko was tasked to recruit some agents in addition to his
other administrative functions. De Dios’ letter harped on the
direction Manulife intended to take, viz., greater agency
recruitment as the primary means to sell more policies; Tongko’s
alleged failure to follow this directive led to the termination of his
employment with Manulife.
The Motion for Reconsideration
Manulife disagreed with our Decision and filed the present motion for
reconsideration on the following GROUNDS:
1. The November 7[, 2008] Decision violates Manulife’s right to due process
by: (a) confining the review only to the issue of "control" and utterly
disregarding all the other issues that had been joined in this case; (b)
mischaracterizing the divergence of conclusions between the CA and the
NLRC decisions as confined only to that on "control"; (c) grossly failing to
consider the findings and conclusions of the CA on the majority of the
material evidence, especially [Tongko’s] declaration in his income tax
returns that he was a "business person" or "self-employed"; and (d)
allowing [Tongko] to repudiate his sworn statement in a public document.
2. The November 7[, 2008] Decision contravenes settled rules in contract
law and agency, distorts not only the legal relationships of agencies to sell
but also distributorship and franchising, and ignores the constitutional and
policy context of contract law vis-à-vis labor law.
3. The November 7[, 2008] Decision ignores the findings of the CA on the
three elements of the four-fold test other than the "control" test, reverses
well-settled doctrines of law on employer-employee relationships, and
grossly misapplies the "control test," by selecting, without basis, a few items
of evidence to the exclusion of more material evidence to support its
conclusion that there is "control."
4. The November 7[, 2008] Decision is judicial legislation, beyond the
scope authorized by Articles 8 and 9 of the Civil Code, beyond the
powers granted to this Court under Article VIII, Section 1 of the
Constitution and contravenes through judicial legislation, the
constitutional prohibition against impairment of contracts under Article III,
Section 10 of the Constitution.
5. For all the above reasons, the November 7[, 2008] Decision made
unsustainable and reversible errors, which should be corrected, in
concluding that Respondent Manulife and Petitioner had an employer-
employee relationship, that Respondent Manulife illegally dismissed
Petitioner, and for consequently ordering Respondent Manulife to pay
Petitioner backwages, separation pay, nominal damages and attorney’s
fees.13
THE COURT’S RULING
A. The Insurance and the Civil Codes;
the Parties’ Intent and Established
Industry Practices
We cannot consider the present case purely from a labor law perspective,
oblivious that the factual antecedents were set in the insurance industry so that the
Insurance Code primarily governs. Chapter IV, Title 1 of this Code is wholly devoted
to "Insurance Agents and Brokers" and specifically defines the agents and brokers
relationship with the insurance company and how they are governed by the Code
and regulated by the Insurance Commission.
The Insurance Code, of course, does not wholly regulate the "agency" that it
speaks of, as agency is a civil law matter governed by the Civil Code. Thus, at the
very least, three sets of laws – namely, the Insurance Code, the Labor Code and
the Civil Code – have to be considered in looking at the present case. Not to be
forgotten, too, is the Agreement (partly reproduced on page 2 of this Dissent and
which no one disputes) that the parties adopted to govern their relationship for
purposes of selling the insurance the company offers. To forget these other laws is
to take a myopic view of the present case and to add to the uncertainties that
now exist in considering the legal relationship between the insurance company
and its "agents."
The main issue of whether an agency or an employment relationship exists
depends on the incidents of the relationship. The Labor Code concept of "control"
has to be compared and distinguished with the "control" that must necessarily exist
in a principal-agent relationship. The principal cannot but also have his or her say
in directing the course of the principal-agent relationship, especially in cases
where the company-representative relationship in the insurance industry is an
agency.
a. The laws on insurance and agency
The business of insurance is a highly regulated commercial activity in the country,
in terms particularly of who can be in the insurance business, who can act for and
in behalf of an insurer, and how these parties shall conduct themselves in the
insurance business. Section 186 of the Insurance Code provides that "No person,
partnership, or association of persons shall transact any insurance business in the
Philippines except as agent of a person or corporation authorized to do the
business of insurance in the Philippines." Sections 299 and 300 of the Insurance
Code on Insurance Agents and Brokers, among other provisions, provide:
Section 299. No insurance company doing business in the Philippines, nor any
agent thereof, shall pay any commission or other compensation to any person for
services in obtaining insurance, unless such person shall have first procured from
the Commissioner a license to act as an insurance agent of such company or as
an insurance broker as hereinafter provided.
No person shall act as an insurance agent or as an insurance broker in the
solicitation or procurement of applications for insurance, or receive for services in
obtaining insurance, any commission or other compensation from any insurance
company doing business in the Philippines or any agent thereof, without first
procuring a license so to act from the Commissioner x x x The Commissioner shall
satisfy himself as to the competence and trustworthiness of the applicant and shall
have the right to refuse to issue or renew and to suspend or revoke any such
license in his discretion.1avvphi1.net
Section 300. Any person who for compensation solicits or obtains insurance on
behalf of any insurance company or transmits for a person other than himself an
application for a policy or contract of insurance to or from such company or offers
or assumes to act in the negotiating of such insurance shall be an insurance agent
within the intent of this section and shall thereby become liable to all the duties,
requirements, liabilities and penalties to which an insurance agent is subject.
The application for an insurance agent’s license requires a written examination,
and the applicant must be of good moral character and must not have been
convicted of a crime involving moral turpitude.14 The insurance agent who collects
premiums from an insured person for remittance to the insurance company does
so in a fiduciary capacity, and an insurance company which delivers an insurance
policy or contract to an authorized agent is deemed to have authorized the agent
to receive payment on the company’s behalf.15 Section 361 further prohibits the
offer, negotiation, or collection of any amount other than that specified in the
policy and this covers any rebate from the premium or any special favor or
advantage in the dividends or benefit accruing from the policy.
Thus, under the Insurance Code, the agent must, as a matter of qualification, be
licensed and must also act within the parameters of the authority granted under
the license and under the contract with the principal. Other than the need for a
license, the agent is limited in the way he offers and negotiates for the sale of the
company’s insurance products, in his collection activities, and in the delivery of the
insurance contract or policy. Rules regarding the desired results (e.g., the required
volume to continue to qualify as a company agent, rules to check on the
parameters on the authority given to the agent, and rules to ensure that industry,
legal and ethical rules are followed) are built-in elements of control specific to an
insurance agency and should not and cannot be read as elements of control that
attend an employment relationship governed by the Labor Code.
On the other hand, the Civil Code defines an agent as a "person [who] binds
himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter."16 While this is a very broad
definition that on its face may even encompass an employment relationship, the
distinctions between agency and employment are sufficiently established by law
and jurisprudence.
Generally, the determinative element is the control exercised over the one
rendering service. The employer controls the employee both in the results and in
the means and manner of achieving this result. The principal in an agency
relationship, on the other hand, also has the prerogative to exercise control over
the agent in undertaking the assigned task based on the parameters outlined in
the pertinent laws.
Under the general law on agency as applied to insurance, an agency must be
express in light of the need for a license and for the designation by the insurance
company. In the present case, the Agreement fully serves as grant of authority to
Tongko as Manulife’s insurance agent.17 This agreement is supplemented by the
company’s agency practices and usages, duly accepted by the agent in carrying
out the agency.18 By authority of the Insurance Code, an insurance agency is for
compensation,19 a matter the Civil Code Rules on Agency presumes in the
absence of proof to the contrary.20 Other than the compensation, the principal is
bound to advance to, or to reimburse, the agent the agreed sums necessary for
the execution of the agency.21 By implication at least under Article 1994 of the Civil
Code, the principal can appoint two or more agents to carry out the same
assigned tasks,22 based necessarily on the specific instructions and directives given
to them.
With particular relevance to the present case is the provision that "In the execution
of the agency, the agent shall act in accordance with the instructions of the
principal."23 This provision is pertinent for purposes of the necessary control that the
principal exercises over the agent in undertaking the assigned task, and is an area
where the instructions can intrude into the labor law concept of control so that
minute consideration of the facts is necessary. A related article is Article 1891 of the
Civil Code which binds the agent to render an account of his transactions to the
principal.
B. The Cited Case
The Decision of November 7, 2008 refers to the first Insular and Grepalife cases to
establish that the company rules and regulations that an agent has to comply with
are indicative of an employer-employee relationship.24 The Dissenting Opinions of
Justice Presbitero Velasco, Jr. and Justice Conchita Carpio Morales also cite Insular
Life Assurance Co. v. National Labor Relations Commission (second Insular
case)25 to support the view that Tongko is Manulife’s employee. On the other
hand, Manulife cites the Carungcong case and AFP Mutual Benefit Association,
Inc. v. National Labor Relations Commission (AFPMBAI case)26 to support its
allegation that Tongko was not its employee.
A caveat has been given above with respect to the use of the rulings in the cited
cases because none of them is on all fours with the present case; the uniqueness
of the factual situation of the present case prevents it from being directly and
readily cast in the mold of the cited cases. These cited cases are themselves
different from one another; this difference underscores the need to read and
quote them in the context of their own factual situations.
The present case at first glance appears aligned with the facts in the Carungcong,
the Grepalife, and the second Insular Life cases. A critical difference, however,
exists as these cited cases dealt with the proper legal characterization of a
subsequent management contract that superseded the original agency contract
between the insurance company and its agent. Carungcong dealt with a
subsequent Agreement making Carungcong a New Business Manager that clearly
superseded the Agreement designating Carungcong as an agent empowered to
solicit applications for insurance. The Grepalife case, on the other hand, dealt with
the proper legal characterization of the appointment of the Ruiz brothers to
positions higher than their original position as insurance agents. Thus, after
analyzing the duties and functions of the Ruiz brothers, as these were enumerated
in their contracts, we concluded that the company practically dictated the
manner by which the Ruiz brothers were to carry out their jobs. Finally, the second
Insular Life case dealt with the implications of de los Reyes’ appointment as acting
unit manager which, like the subsequent contracts in the Carungcong and the
Grepalife cases, was clearly defined under a subsequent contract. In all these
cited cases, a determination of the presence of the Labor Code element of
control was made on the basis of the stipulations of the subsequent contracts.
In stark contrast with the Carungcong, the Grepalife, and the second Insular Life
cases, the only contract or document extant and submitted as evidence in the
present case is the Agreement – a pure agency agreement in the Civil Code
context similar to the original contract in the first Insular Life case and the contract
in the AFPMBAI case. And while Tongko was later on designated unit manager in
1983, Branch Manager in 1990, and Regional Sales Manager in 1996, no formal
contract regarding these undertakings appears in the records of the case. Any
such contract or agreement, had there been any, could have at the very least
provided the bases for properly ascertaining the juridical relationship established
between the parties.
These critical differences, particularly between the present case and the Grepalife
and the second Insular Life cases, should therefore immediately drive us to be
more prudent and cautious in applying the rulings in these cases.
C. Analysis of the Evidence
c.1. The Agreement
The primary evidence in the present case is the July 1, 1977 Agreement that
governed and defined the parties’ relations until the Agreement’s termination in
2001. This Agreement stood for more than two decades and, based on the records
of the case, was never modified or novated. It assumes primacy because it directly
dealt with the nature of the parties’ relationship up to the very end; moreover,
both parties never disputed its authenticity or the accuracy of its terms.
By the Agreement’s express terms, Tongko served as an "insurance agent" for
Manulife, not as an employee. To be sure, the Agreement’s legal characterization
of the nature of the relationship cannot be conclusive and binding on the courts;
as the dissent clearly stated, the characterization of the juridical relationship the
Agreement embodied is a matter of law that is for the courts to determine. At the
same time, though, the characterization the parties gave to their relationship in the
Agreement cannot simply be brushed aside because it embodies their intent at
the time they entered the Agreement, and they were governed by this
understanding throughout their relationship. At the very least, the provision on the
absence of employer-employee relationship between the parties can be an aid in
considering the Agreement and its implementation, and in appreciating the other
evidence on record.
The parties’ legal characterization of their intent, although not conclusive, is critical
in this case because this intent is not illegal or outside the contemplation of law,
particularly of the Insurance and the Civil Codes. From this perspective, the
provisions of the Insurance Code cannot be disregarded as this Code (as
heretofore already noted) expressly envisions a principal-agent relationship
between the insurance company and the insurance agent in the sale of insurance
to the public.1awph!1 For this reason, we can take judicial notice that as a matter
of Insurance Code-based business practice, an agency relationship prevails in the
insurance industry for the purpose of selling insurance. The Agreement, by its
express terms, is in accordance with the Insurance Code model when it provided
for a principal-agent relationship, and thus cannot lightly be set aside nor simply be
considered as an agreement that does not reflect the parties’ true intent. This
intent, incidentally, is reinforced by the system of compensation the Agreement
provides, which likewise is in accordance with the production-based sales
commissions the Insurance Code provides.
Significantly, evidence shows that Tongko’s role as an insurance agent never
changed during his relationship with Manulife. If changes occurred at all, the
changes did not appear to be in the nature of their core relationship. Tongko
essentially remained an agent, but moved up in this role through Manulife’s
recognition that he could use other agents approved by Manulife, but operating
under his guidance and in whose commissions he had a share. For want of a better
term, Tongko perhaps could be labeled as a "lead agent" who guided under his
wing other Manulife agents similarly tasked with the selling of Manulife insurance.
Like Tongko, the evidence suggests that these other agents operated under their
own agency agreements. Thus, if Tongko’s compensation scheme changed at all
during his relationship with Manulife, the change was solely for purposes of
crediting him with his share in the commissions the agents under his wing
generated. As an agent who was recruiting and guiding other insurance agents,
Tongko likewise moved up in terms of the reimbursement of expenses he incurred
in the course of his lead agency, a prerogative he enjoyed pursuant to Article 1912
of the Civil Code. Thus, Tongko received greater reimbursements for his expenses
and was even allowed to use Manulife facilities in his interactions with the agents,
all of whom were, in the strict sense, Manulife agents approved and certified as
such by Manulife with the Insurance Commission.
That Tongko assumed a leadership role but nevertheless wholly remained an agent
is the inevitable conclusion that results from the reading of the Agreement (the
only agreement on record in this case) and his continuing role thereunder as sales
agent, from the perspective of the Insurance and the Civil Codes and in light of
what Tongko himself attested to as his role as Regional Sales Manager. To be sure,
this interpretation could have been contradicted if other agreements had been
submitted as evidence of the relationship between Manulife and Tongko on the
latter’s expanded undertakings. In the absence of any such evidence, however,
this reading – based on the available evidence and the applicable insurance and
civil law provisions – must stand, subject only to objective and evidentiary Labor
Code tests on the existence of an employer-employee relationship.
In applying such Labor Code tests, however, the enforcement of the Agreement
during the course of the parties’ relationship should be noted. From 1977 until the
termination of the Agreement, Tongko’s occupation was to sell Manulife’s
insurance policies and products. Both parties acquiesced with the terms and
conditions of the Agreement. Tongko, for his part, accepted all the benefits flowing
from the Agreement, particularly the generous commissions.
Evidence indicates that Tongko consistently clung to the view that he was an
independent agent selling Manulife insurance products since he invariably
declared himself a business or self-employed person in his income tax returns. This
consistency with, and action made pursuant to the Agreement were pieces of
evidence that were never mentioned nor considered in our Decision of November
7, 2008. Had they been considered, they could, at the very least, serve as Tongko’s
admissions against his interest. Strictly speaking, Tongko’s tax returns cannot but be
legally significant because he certified under oath the amount he earned as gross
business income, claimed business deductions, leading to his net taxable income.
This should be evidence of the first order that cannot be brushed aside by a mere
denial. Even on a layman’s view that is devoid of legal considerations, the extent
of his annual income alone renders his claimed employment status doubtful. 27
Hand in hand with the concept of admission against interest in considering the tax
returns, the concept of estoppel – a legal and equitable concept28 – necessarily
must come into play. Tongko’s previous admissions in several years of tax returns as
an independent agent, as against his belated claim that he was all along an
employee, are too diametrically opposed to be simply dismissed or ignored.
Interestingly, Justice Velasco’s dissenting opinion states that Tongko was forced to
declare himself a business or self-employed person by Manulife’s persistent refusal
to recognize him as its employee.29 Regrettably, the dissent has shown no basis for
this conclusion, an understandable omission since no evidence in fact exists on this
point in the records of the case. In fact, what the evidence shows is Tongko’s full
conformity with, and action as, an independent agent until his relationship with
Manulife took a bad turn.
Another interesting point the dissent raised with respect to the Agreement is its
conclusion that the Agreement negated any employment relationship between
Tongko and Manulife so that the commissions he earned as a sales agent should
not be considered in the determination of the backwages and separation pay
that should be given to him. This part of the dissent is correct although it went on to
twist this conclusion by asserting that Tongko had dual roles in his relationship with
Manulife; he was an agent, not an employee, in so far as he sold insurance for
Manulife, but was an employee in his capacity as a manager. Thus, the dissent
concluded that Tongko’s backwages should only be with respect to his role as
Manulife’s manager.
The conclusion with respect to Tongko’s employment as a manager is, of course,
unacceptable for the legal, factual and practical reasons discussed in this
Resolution. In brief, the factual reason is grounded on the lack of evidentiary
support of the conclusion that Manulife exercised control over Tongko in the sense
understood in the Labor Code. The legal reason, partly based on the lack of
factual basis, is the erroneous legal conclusion that Manulife controlled Tongko
and was thus its employee. The practical reason, on the other hand, is the havoc
that the dissent’s unwarranted conclusion would cause the insurance industry that,
by the law’s own design, operated along the lines of principal-agent relationship in
the sale of insurance.
c.2. Other Evidence of Alleged Control
A glaring evidentiary gap for Tongko in this case is the lack of evidence on record
showing that Manulife ever exercised means-and-manner control, even to a
limited extent, over Tongko during his ascent in Manulife’s sales ladder. In 1983,
Tongko was appointed unit manager. Inexplicably, Tongko never bothered to
present any evidence at all on what this designation meant. This also holds true for
Tongko’s appointment as branch manager in 1990, and as Regional Sales
Manager in 1996. The best evidence of control – the agreement or directive
relating to Tongko’s duties and responsibilities – was never introduced as part of
the records of the case. The reality is, prior to de Dios’ letter, Manulife had
practically left Tongko alone not only in doing the business of selling insurance, but
also in guiding the agents under his wing. As discussed below, the alleged
directives covered by de Dios’ letter, heretofore quoted in full, were policy
directions and targeted results that the company wanted Tongko and the other
sales groups to realign with in their own selling activities. This is the reality that the
parties’ presented evidence consistently tells us.
What, to Tongko, serve as evidence of labor law control are the codes of conduct
that Manulife imposes on its agents in the sale of insurance. The mere presentation
of codes or of rules and regulations, however, is not per se indicative of labor law
control as the law and jurisprudence teach us.
As already recited above, the Insurance Code imposes obligations on both the
insurance company and its agents in the performance of their respective
obligations under the Code, particularly on licenses and their renewals, on the
representations to be made to potential customers, the collection of premiums, on
the delivery of insurance policies, on the matter of compensation, and on
measures to ensure ethical business practice in the industry.
The general law on agency, on the other hand, expressly allows the principal an
element of control over the agent in a manner consistent with an agency
relationship. In this sense, these control measures cannot be read as indicative of
labor law control. Foremost among these are the directives that the principal may
impose on the agent to achieve the assigned tasks, to the extent that they do not
involve the means and manner of undertaking these tasks. The law likewise
obligates the agent to render an account; in this sense, the principal may impose
on the agent specific instructions on how an account shall be made, particularly
on the matter of expenses and reimbursements. To these extents, control can be
imposed through rules and regulations without intruding into the labor law concept
of control for purposes of employment.
From jurisprudence, an important lesson that the first Insular Life case teaches us is
that a commitment to abide by the rules and regulations of an insurance
company does not ipso facto make the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent’s conduct necessarily
indicate "control" as this term is defined in jurisprudence. Guidelines indicative of
labor law "control," as the first Insular Life case tells us, should not merely relate to
the mutually desirable result intended by the contractual relationship; they must
have the nature of dictating the means or methods to be employed in attaining
the result, or of fixing the methodology and of binding or restricting the party hired
to the use of these means. In fact, results-wise, the principal can impose
production quotas and can determine how many agents, with specific territories,
ought to be employed to achieve the company’s objectives. These are
management policy decisions that the labor law element of control cannot reach.
Our ruling in these respects in the first Insular Life case was practically reiterated in
Carungcong. Thus, as will be shown more fully below, Manulife’s codes of
conduct,30 all of which do not intrude into the insurance agents’ means and
manner of conducting their sales and only control them as to the desired results
and Insurance Code norms, cannot be used as basis for a finding that the labor
law concept of control existed between Manulife and Tongko.
Aside from these affidavits however, no other evidence exists regarding the effects
of Tongko’s additional roles in Manulife’s sales operations on the contractual
relationship between them.
To the dissent, Tongko’s administrative functions as recruiter, trainer, or supervisor of
other sales agents constituted a substantive alteration of Manulife’s authority over
Tongko and the performance of his end of the relationship with Manulife. We could
not deny though that Tongko remained, first and foremost, an insurance agent,
and that his additional role as Branch Manager did not lessen his main and
dominant role as insurance agent; this role continued to dominate the relations
between Tongko and Manulife even after Tongko assumed his leadership role
among agents. This conclusion cannot be denied because it proceeds from the
undisputed fact that Tongko and Manulife never altered their July 1, 1977
Agreement, a distinction the present case has with the contractual changes made
in the second Insular Life case. Tongko’s results-based commissions, too, attest to
the primacy he gave to his role as insurance sales agent.

The dissent apparently did not also properly analyze and appreciate the great
The dissent considers the imposition of administrative and managerial functions on qualitative difference that exists between:
Tongko as indicative of labor law control; thus, Tongko as manager, but not as
insurance agent, became Manulife’s employee. It drew this conclusion from what
the other Manulife managers disclosed in their affidavits (i.e., their enumerated  the Manulife managers’ role is to coordinate activities of the agents under
administrative and managerial functions) and after comparing these statements the managers’ Unit in the agents’ daily, weekly, and monthly selling
with the managers in Grepalife. The dissent compared the control exercised by activities, making sure that their respective sales targets are met.
Manulife over its managers in the present case with the control the managers in  the District Manager’s duty in Grepalife is to properly account, record,
the Grepalife case exercised over their employees by presenting the following and document the company's funds, spot-check and audit the work of
matrix:31 the zone supervisors, conserve the company's business in the district
through "reinstatements," follow up the submission of weekly remittance
reports of the debit agents and zone supervisors, preserve company
Duties of Manulife’s Manager Duties of Grepalife’s Managers/Supervisors property in good condition, train understudies for the position of district
managers, and maintain his quota of sales (the failure of which is a
- to render or recommend prospective agents to - train understudies for the position of district
groundmanager
for termination).
be licensed, trained and contracted to sell  the Zone Supervisor’s (also in Grepalife) has the duty to direct and
Manulife products and who will be part of my Unit supervise the sales activities of the debit agents under him, conserve
company property through "reinstatements," undertake and discharge
- to coordinate activities of the agents under [the - properly account, record and document the functions the
of absentee debit agents, spot-check the records of debit
managers’] Unit in [the agents’] daily, weekly and company’s funds, spot-check and audit the work of
agents, and insure proper documentation of sales and collections by the
monthly selling activities, making sure that their the zone supervisors, x x x follow up thedebitsubmission
agents.of
respective sales targets are met; weekly remittance reports of the debit agents and
zone supervisors
These job contents are worlds apart in terms of "control." In Grepalife, the details of
- to conduct periodic training sessions for [the] how to do the job are specified and pre-determined; in the present case, the
agents to further enhance their sales skill; and - direct and supervise the sales activities words
operative of the are
debit
the "sales target," the methodology being left undefined
agents under him, x x x undertakeexceptandtodischarge
the extenttheof being "coordinative." To be sure, a "coordinative" standard
- to assist [the] agents with their sales activities by functions of absentee debit agents, spot-check
for a manager the be indicative of control; the standard only essentially
cannot
way of joint fieldwork, consultations and one-on- record of debit agents, describes and insurewhat aproper
Branch Manager is – the person in the lead who orchestrates
one evaluation and analysis of particular documentation of sales andactivities collections of the
within debitgroup. To "coordinate," and thereby to lead and to
accounts agents. orchestrate, is not so much a matter of control by Manulife; it is simply a statement
of a branch manager’s role in relation with his agents from the point of view of
Manulife whose business Tongko’s sales group carries.
A disturbing note, with respect to the presented affidavits and Tongko’s alleged
administrative functions, is the selective citation of the portions supportive of an
employment relationship and the consequent omission of portions leading to the
contrary conclusion. For example, the following portions of the affidavit of Regional
Sales Manager John Chua, with counterparts in the other affidavits, were not
brought out in the Decision of November 7, 2008, while the other portions
suggesting labor law control were highlighted. Specifically, the following portions
of the affidavits were not brought out:32
1.a. I have no fixed wages or salary since my services are compensated
by way of commissions based on the computed premiums paid in full on
the policies obtained thereat;
1.b. I have no fixed working hours and employ my own method in
soliticing insurance at a time and place I see fit;
1.c. I have my own assistant and messenger who handle my daily work
load;
1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;
xxxx
6. I have my own staff that handles the day to day operations of my
office;
7. My staff are my own employees and received salaries from me;
xxxx
9. My commission and incentives are all reported to the Bureau of Internal
Revenue (BIR) as income by a self-employed individual or professional
with a ten (10) percent creditable withholding tax. I also remit monthly for
professionals.
These statements, read with the above comparative analysis of the Manulife and
the Grepalife cases, would have readily yielded the conclusion that no employer-
employee relationship existed between Manulife and Tongko.
Even de Dios’ letter is not determinative of control as it indicates the least amount
of intrusion into Tongko’s exercise of his role as manager in guiding the sales
agents. Strictly viewed, de Dios’ directives are merely operational guidelines on
how Tongko could align his operations with Manulife’s re-directed goal of being a
"big league player." The method is to expand coverage through the use of more
agents. This requirement for the recruitment of more agents is not a means-and-
method control as it relates, more than anything else, and is directly relevant, to
Manulife’s objective of expanded business operations through the use of a bigger
sales force whose members are all on a principal-agent relationship. An important
point to note here is that Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business; Tongko was effectively
guiding his corps of sales agents, who are bound to Manulife through the same
Agreement that he had with Manulife, all the while sharing in these agents’
commissions through his overrides. This is the lead agent concept mentioned
above for want of a more appropriate term, since the title of Branch Manager
used by the parties is really a misnomer given that what is involved is not a specific
regular branch of the company but a corps of non-employed agents, defined in
terms of covered territory, through which the company sells insurance. Still another
point to consider is that Tongko was not even setting policies in the way a regular
company manager does; company aims and objectives were simply relayed to
him with suggestions on how these objectives can be reached through the
expansion of a non-employee sales force.
Interestingly, a large part of de Dios’ letter focused on income, which Manulife
demonstrated, in Tongko’s case, to be unaffected by the new goal and direction
the company had set. Income in insurance agency, of course, is dependent on
results, not on the means and manner of selling – a matter for Tongko and his
agents to determine and an area into which Manulife had not waded.
Undeniably, de Dios’ letter contained a directive to secure a competent assistant
at Tongko’s own expense. While couched in terms of a directive, it cannot strictly
be understood as an intrusion into Tongko’s method of operating and supervising
the group of agents within his delineated territory. More than anything else, the
"directive" was a signal to Tongko that his results were unsatisfactory, and was a
suggestion on how Tongko’s perceived weakness in delivering results could be
remedied. It was a solution, with an eye on results, for a consistently
underperforming group; its obvious intent was to save Tongko from the result that
he then failed to grasp – that he could lose even his own status as an agent, as he
in fact eventually did.
The present case must be distinguished from the second Insular Life case that
showed the hallmarks of an employer-employee relationship in the management
system established. These were: exclusivity of service, control of assignments and
removal of agents under the private respondent’s unit, and furnishing of company
facilities and materials as well as capital described as Unit Development Fund. All
these are obviously absent in the present case. If there is a commonality in these
cases, it is in the collection of premiums which is a basic authority that can be
delegated to agents under the Insurance Code.
As previously discussed, what simply happened in Tongko’s case was the grant of
an expanded sales agency role that recognized him as leader amongst agents in
an area that Manulife defined. Whether this consequently resulted in the
establishment of an employment relationship can be answered by concrete
evidence that corresponds to the following questions:
 as lead agent, what were Tongko’s specific functions and the terms of his
additional engagement;
  was he paid additional compensation as a so-called Area Sales Manager,
apart from the commissions he received from the insurance sales he
generated;
 what can be Manulife’s basis to terminate his status as lead agent;
 can Manulife terminate his role as lead agent separately from his agency
contract; and
 to what extent does Manulife control the means and methods of Tongko’s
role as lead agent?
The answers to these questions may, to some extent, be deduced from the
evidence at hand, as partly discussed above. But strictly speaking, the questions
cannot definitively and concretely be answered through the evidence on record.
The concrete evidence required to settle these questions is simply not there, since
only the Agreement and the anecdotal affidavits have been marked and
submitted as evidence.
Given this anemic state of the evidence, particularly on the requisite confluence of
the factors determinative of the existence of employer-employee relationship, the
Court cannot conclusively find that the relationship exists in the present case, even
if such relationship only refers to Tongko’s additional functions. While a rough
deduction can be made, the answer will not be fully supported by the substantial
evidence needed.
Under this legal situation, the only conclusion that can be made is that the
absence of evidence showing Manulife’s control over Tongko’s contractual duties
points to the absence of any employer-employee relationship between Tongko
and Manulife. In the context of the established evidence, Tongko remained an
agent all along; although his subsequent duties made him a lead agent with
leadership role, he was nevertheless only an agent whose basic contract yields no
evidence of means-and-manner control.
This conclusion renders unnecessary any further discussion of the question of
whether an agent may simultaneously assume conflicting dual personalities. But to
set the record straight, the concept of a single person having the dual role of
agent and employee while doing the same task is a novel one in our
jurisprudence, which must be viewed with caution especially when it is devoid of
any jurisprudential support or precedent. The quoted portions in Justice Carpio-
Morales’ dissent,33 borrowed from both the Grepalife and the second Insular Life
cases, to support the duality approach of the Decision of November 7, 2008, are
regrettably far removed from their context – i.e., the cases’ factual situations, the
issues they decided and the totality of the rulings in these cases – and cannot yield
the conclusions that the dissenting opinions drew.
The Grepalife case dealt with the sole issue of whether the Ruiz brothers’
appointment as zone supervisor and district manager made them employees
of Grepalife. Indeed, because of the presence of the element of control in their
contract of engagements, they were considered Grepalife’s employees. This did
not mean, however, that they were simultaneously considered agents as well as
employees of Grepalife; the Court’s ruling never implied that this situation existed
insofar as the Ruiz brothers were concerned. The Court’s statement – the Insurance
Code may govern the licensing requirements and other particular duties of
insurance agents, but it does not bar the application of the Labor Code with
regard to labor standards and labor relations – simply means that when an
insurance company has exercised control over its agents so as to make them their
employees, the relationship between the parties, which was otherwise one for
agency governed by the Civil Code and the Insurance Code, will now be
governed by the Labor Code. The reason for this is simple – the contract of agency
has been transformed into an employer-employee relationship.
The second Insular Life case, on the other hand, involved the issue of whether the
labor bodies have jurisdiction over an illegal termination dispute involving parties
who had two contracts – first, an original contract (agency contract), which was
undoubtedly one for agency, and another subsequent contract that in turn
designated the agent acting unit manager (a management contract). Both the
Insular Life and the labor arbiter were one in the position that both were agency
contracts. The Court disagreed with this conclusion and held that insofar as the
management contract is concerned, the labor arbiter has jurisdiction. It is in this
light that we remanded the case to the labor arbiter for further proceedings. We
never said in this case though that the insurance agent had effectively assumed
dual personalities for the simple reason that the agency contract has been
effectively superseded by the management contract. The management contract
provided that if the appointment was terminated for any reason other than for
cause, the acting unit manager would be reverted to agent status and assigned
to any unit.
The dissent pointed out, as an argument to support its employment relationship
conclusion, that any doubt in the existence of an employer-employee relationship
should be resolved in favor of the existence of the relationship. 34This observation,
apparently drawn from Article 4 of the Labor Code, is misplaced, as Article 4
applies only when a doubt exists in the "implementation and application" of the
Labor Code and its implementing rules; it does not apply where no doubt exists as
in a situation where the claimant clearly failed to substantiate his claim of
employment relationship by the quantum of evidence the Labor Code requires.
On the dissent’s last point regarding the lack of jurisprudential value of our
November 7, 2008 Decision, suffice it to state that, as discussed above, the
Decision was not supported by the evidence adduced and was not in
accordance with controlling jurisprudence. It should, therefore, be reconsidered
and abandoned, but not in the manner the dissent suggests as the dissenting
opinions are as factually and as legally erroneous as the Decision under
reconsideration.
In light of these conclusions, the sufficiency of Tongko’s failure to comply with the
guidelines of de Dios’ letter, as a ground for termination of Tongko’s agency, is a
matter that the labor tribunals cannot rule upon in the absence of an employer-
employee relationship. Jurisdiction over the matter belongs to the courts applying
the laws of insurance, agency and contracts.
WHEREFORE, considering the foregoing discussion, we REVERSE our Decision of
November 7, 2008, GRANTManulife’s motion for reconsideration and,
accordingly, DISMISS Tongko’s petition. No costs.

SO ORDERED.
G.R. No. 157802 October 13, 2010
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. SPENCER,
CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners,
vs.
RICARDO R. COROS, Respondent.
DECISION
BERSAMIN, J.:
This case reprises the jurisdictional conundrum of whether a complaint for illegal
dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court (RTC).
The determination of whether the dismissed officer was a regular employee or a
corporate officer unravels the conundrum. In the case of the regular employee,
the LA has jurisdiction; otherwise, the RTC exercises the legal authority to
adjudicate.
In this appeal via petition for review on certiorari, the petitioners challenge the
decision dated September 13, 20021and the resolution dated April 2, 2003,2 both
promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial
Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission,
whereby by the Court of Appeals (CA) sustained the ruling of the National Labor
Relations Commission (NLRC) to the effect that the LA had jurisdiction because the
respondent was not a corporate officer of petitioner Matling Industrial and
Commercial Corporation (Matling).
Antecedents
After his dismissal by Matling as its Vice President for Finance and Administration,
the respondent filed on August 10, 2000 a complaint for illegal suspension and
illegal dismissal against Matling and some of its corporate officers (petitioners) in
the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3
The petitioners moved to dismiss the complaint,4 raising the ground, among others,
that the complaint pertained to the jurisdiction of the Securities and Exchange
Commission (SEC) due to the controversy being intra-corporate inasmuch as the
respondent was a member of Matling’s Board of Directors aside from being its
Vice-President for Finance and Administration prior to his termination.
The respondent opposed the petitioners’ motion to dismiss,5 insisting that his status
as a member of Matling’s Board of Directors was doubtful, considering that he had
not been formally elected as such; that he did not own a single share of stock in
Matling, considering that he had been made to sign in blank an undated
indorsement of the certificate of stock he had been given in 1992; that Matling
had taken back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been removed as the
Vice President for Finance and Administration, not as a Director, a fact that the
notice of his termination dated April 10, 2000 showed.
On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that
the respondent was a corporate officer because he was occupying the position of
Vice President for Finance and Administration and at the same time was a
Member of the Board of Directors of Matling; and that, consequently, his removal
was a corporate act of Matling and the controversy resulting from such removal
was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of
Presidential Decree No. 902.
Ruling of the NLRC
The respondent appealed to the NLRC,7 urging that:
I
THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION
GRANTING APPELLEE’S MOTION TO DISMISS WITHOUT GIVING THE APPELLANT AN
OPPORTUNITY TO FILE HIS OPPOSITION THERETO THEREBY VIOLATING THE BASIC
PRINCIPLE OF DUE PROCESS.
II
THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING THE CASE
FOR LACK OF JURISDICTION.
On March 13, 2001, the NLRC set aside the dismissal, concluding that the
respondent’s complaint for illegal dismissal was properly cognizable by the LA, not
by the SEC, because he was not a corporate officer by virtue of his position in
Matling, albeit high ranking and managerial, not being among the positions listed
in Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:
WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered declaring
and holding that the case at bench does not involve any intracorporate matter.
Hence, jurisdiction to hear and act on said case is vested with the Labor Arbiter,
not the SEC, considering that the position of Vice-President for Finance and
Administration being held by complainant-appellant is not listed as among
respondent's corporate officers.
Accordingly, let the records of this case be REMANDED to the Arbitration Branch of
origin in order that the Labor Arbiter below could act on the case at bench, hear
both parties, receive their respective evidence and position papers fully observing
the requirements of due process, and resolve the same with reasonable dispatch.
SO ORDERED.
The petitioners sought reconsideration,9 reiterating that the respondent, being a
member of the Board of Directors, was a corporate officer whose removal was not
within the LA’s jurisdiction.
The petitioners later submitted to the NLRC in support of the motion for
reconsideration the certified machine copies of Matling’s Amended Articles of
Incorporation and By Laws to prove that the President of Matling was thereby
granted "full power to create new offices and appoint the officers thereto, and the
minutes of special meeting held on June 7, 1999 by Matling’s Board of Directors to
prove that the respondent was, indeed, a Member of the Board of Directors.10
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for
reconsideration.11
Ruling of the CA
The petitioners elevated the issue to the CA by petition for certiorari, docketed as
C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in reversing the correct decision of the
LA.
In its assailed decision promulgated on September 13, 2002,12 the CA dismissed the
petition for certiorari, explaining:
For a position to be considered as a corporate office, or, for that matter, for one to
be considered as a corporate officer, the position must, if not listed in the by-laws,
have been created by the corporation's board of directors, and the occupant
thereof appointed or elected by the same board of directors or stockholders. This is
the implication of the ruling in Tabang v. National Labor Relations Commission,
which reads:
"The president, vice president, secretary and treasurer are commonly regarded as
the principal or executive officers of a corporation, and modern corporation
statutes usually designate them as the officers of the corporation. However, other
offices are sometimes created by the charter or by-laws of a corporation, or the
board of directors may be empowered under the by-laws of a corporation to
create additional offices as may be necessary.
It has been held that an 'office' is created by the charter of the corporation and
the officer is elected by the directors or stockholders. On the other hand, an
'employee' usually occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee."
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor
Relations Commission and De Rossi v. National Labor Relations Commission.
The position of vice-president for administration and finance, which Coros used to
hold in the corporation, was not created by the corporation’s board of directors
but only by its president or executive vice-president pursuant to the by-laws of the
corporation. Moreover, Coros’ appointment to said position was not made through
any act of the board of directors or stockholders of the corporation. Consequently,
the position to which Coros was appointed and later on removed from, is not a
corporate office despite its nomenclature, but an ordinary office in the
corporation.
Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the
labor arbiter.
WHEREFORE, the petition for certiorari is hereby DISMISSED.
SO ORDERED.
The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
Issue
Thus, the petitioners are now before the Court for a review on certiorari, positing
that the respondent was a stockholder/member of the Matling’s Board of Directors
as well as its Vice President for Finance and Administration; and that the CA
consequently erred in holding that the LA had jurisdiction.
The decisive issue is whether the respondent was a corporate officer of Matling or
not. The resolution of the issue determines whether the LA or the RTC had
jurisdiction over his complaint for illegal dismissal.
Ruling
The appeal fails.
I
The Law on Jurisdiction in Dismissal Cases
As a rule, the illegal dismissal of an officer or other employee of a private employer
is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor
Code, as amended, which provides as follows:
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as
otherwise provided under this Code, the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the
submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
 1. Unfair labor practice cases;
2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases
that workers may file involving wages, rates of pay, hours of work
and other terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from any violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts;
and
6. Except claims for Employees Compensation, Social Security,
Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
domestic or household service, involving an amount exceeding
five thousand pesos (₱5,000.00) regardless of whether
accompanied with a claim for reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective
bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
voluntary arbitration as may be provided in said agreements. (As
amended by Section 9, Republic Act No. 6715, March 21, 1989).
Where the complaint for illegal dismissal concerns a corporate officer, however,
the controversy falls under the jurisdiction of the Securities and Exchange
Commission (SEC), because the controversy arises out of intra-corporate or
partnership relations between and among stockholders, members, or associates,
or between any or all of them and the corporation, partnership, or association of
which they are stockholders, members, or associates, respectively; and between
such corporation, partnership, or association and the State insofar as the
controversy concerns their individual franchise or right to exist as such entity; or
because the controversy involves the election or appointment of a director,
trustee, officer, or manager of such corporation, partnership, or association.14 Such
controversy, among others, is known as an intra-corporate dispute.
Effective on August 8, 2000, upon the passage of Republic Act No.
8799,15 otherwise known as The Securities Regulation Code, the SEC’s jurisdiction
over all intra-corporate disputes was transferred to the RTC, pursuant to Section 5.2
of RA No. 8799, to wit:
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5
of Presidential Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall
retain jurisdiction over pending cases involving intra-corporate disputes submitted
for final resolution which should be resolved within one (1) year from the
enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally
disposed.
Considering that the respondent’s complaint for illegal dismissal was commenced
on August 10, 2000, it might come under the coverage of Section 5.2 of RA No.
8799, supra, should it turn out that the respondent was a corporate, not a regular,
officer of Matling.
II
Was the Respondent’s Position of Vice President
for Administration and Finance a Corporate Office?
We must first resolve whether or not the respondent’s position as Vice President for
Finance and Administration was a corporate office. If it was, his dismissal by the
Board of Directors rendered the matter an intra-corporate dispute cognizable by
the RTC pursuant to RA No. 8799.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matling’s President
pursuant to By-Law No. V, as amended,16 to wit:
BY LAW NO. V
Officers
The President shall be the executive head of the corporation; shall preside over the
meetings of the stockholders and directors; shall countersign all certificates,
contracts and other instruments of the corporation as authorized by the Board of
Directors; shall have full power to hire and discharge any or all employees of the
corporation; shall have full power to create new offices and to appoint the officers
thereto as he may deem proper and necessary in the operations of the
corporation and as the progress of the business and welfare of the corporation
may demand; shall make reports to the directors and stockholders and perform all
such other duties and functions as are incident to his office or are properly required
of him by the Board of Directors. In case of the absence or disability of the
President, the Executive Vice President shall have the power to exercise his
functions.
The petitioners argue that the power to create corporate offices and to appoint
the individuals to assume the offices was delegated by Matling’s Board of Directors
to its President through By-Law No. V, as amended; and that any office the
President created, like the position of the respondent, was as valid and effective a
creation as that made by the Board of Directors, making the office a corporate
office. In justification, they cite Tabang v. National Labor Relations
Commission,17 which held that "other offices are sometimes created by the charter
or by-laws of a corporation, or the board of directors may be empowered under
the by-laws of a corporation to create additional officers as may be necessary."
The respondent counters that Matling’s By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices; that
Matling’s By-Law No. III listed only four corporate officers, namely: President,
Executive Vice President, Secretary, and Treasurer; 18 that the corporate offices
contemplated in the phrase "and such other officers as may be provided for in the
by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt with
Directors & Officers while its By-Law No. V dealt with Officers proved that there was
a differentiation between the officers mentioned in the two provisions, with those
classified under By-Law No. V being ordinary or non-corporate officers; and that
the officer, to be considered as a corporate officer, must be elected by the Board
of Directors or the stockholders, for the President could only appoint an employee
to a position pursuant to By-Law No. V.
We agree with respondent.
Section 25 of the Corporation Code provides:
Section 25. Corporate officers, quorum.--Immediately after their election, the
directors of a corporation must formally organize by the election of a president,
who shall be a director, a treasurer who may or may not be a director, a secretary
who shall be a resident and citizen of the Philippines, and such other officers as
may be provided for in the by-laws. Any two (2) or more positions may be held
concurrently by the same person, except that no one shall act as president and
secretary or as president and treasurer at the same time.
The directors or trustees and officers to be elected shall perform the duties
enjoined on them by law and the by-laws of the corporation. Unless the articles of
incorporation or the by-laws provide for a greater majority, a majority of the
number of directors or trustees as fixed in the articles of incorporation shall
constitute a quorum for the transaction of corporate business, and every decision
of at least a majority of the directors or trustees present at a meeting at which
there is a quorum shall be valid as a corporate act, except for the election of
officers which shall require the vote of a majority of all the members of the board.
Directors or trustees cannot attend or vote by proxy at board meetings.
Conformably with Section 25, a position must be expressly mentioned in the By-
Laws in order to be considered as a corporate office. Thus, the creation of an
office pursuant to or under a By-Law enabling provision is not enough to make a
position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held
that the only officers of a corporation were those given that character either by
the Corporation Code or by the By-Laws; the rest of the corporate officers could
be considered only as employees or subordinate officials. Thus, it was held
in Easycall Communications Phils., Inc. v. King:20
An "office" is created by the charter of the corporation and the officer is elected
by the directors or stockholders. On the other hand, an employee occupies no
office and generally is employed not by the action of the directors or stockholders
but by the managing officer of the corporation who also determines the
compensation to be paid to such employee.
In this case, respondent was appointed vice president for nationwide expansion by
Malonzo, petitioner’'s general manager, not by the board of directors of petitioner.
It was also Malonzo who determined the compensation package of respondent.
Thus, respondent was an employee, not a "corporate officer." The CA was
therefore correct in ruling that jurisdiction over the case was properly with the
NLRC, not the SEC (now the RTC).
This interpretation is the correct application of Section 25 of the Corporation Code,
which plainly states that the corporate officers are the President, Secretary,
Treasurer and such other officers as may be provided for in the By-Laws.
Accordingly, the corporate officers in the context of PD No. 902-A are exclusively
those who are given that character either by the Corporation Code or by the
corporation’s By-Laws.
A different interpretation can easily leave the way open for the Board of Directors
to circumvent the constitutionally guaranteed security of tenure of the employee
by the expedient inclusion in the By-Laws of an enabling clause on the creation of
just any corporate officer position.
It is relevant to state in this connection that the SEC, the primary agency
administering the Corporation Code, adopted a similar interpretation of Section 25
of the Corporation Code in its Opinion dated November 25, 1993,21 to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code),
whoever are the corporate officers enumerated in the by-laws are the exclusive
Officers of the corporation and the Board has no power to create other Offices
without amending first the corporate By-laws. However, the Board may create
appointive positions other than the positions of corporate Officers, but the persons
occupying such positions are not considered as corporate officers within the
meaning of Section 25 of the Corporation Code and are not empowered to
exercise the functions of the corporate Officers, except those functions lawfully
delegated to them. Their functions and duties are to be determined by the Board
of Directors/Trustees.
Moreover, the Board of Directors of Matling could not validly delegate the power
to create a corporate office to the President, in light of Section 25 of the
Corporation Code requiring the Board of Directors itself to elect the corporate
officers. Verily, the power to elect the corporate officers was a discretionary power
that the law exclusively vested in the Board of Directors, and could not be
delegated to subordinate officers or agents.22 The office of Vice President for
Finance and Administration created by Matling’s President pursuant to By Law No.
V was an ordinary, not a corporate, office.
To emphasize, the power to create new offices and the power to appoint the
officers to occupy them vested by By-Law No. V merely allowed Matling’s
President to create non-corporate offices to be occupied by ordinary employees
of Matling. Such powers were incidental to the President’s duties as the executive
head of Matling to assist him in the daily operations of the business.
The petitioners’ reliance on Tabang, supra, is misplaced. The statement in Tabang,
to the effect that offices not expressly mentioned in the By-Laws but were created
pursuant to a By-Law enabling provision were also considered corporate offices,
was plainly obiter dictum due to the position subject of the controversy being
mentioned in the By-Laws. Thus, the Court held therein that the position was a
corporate office, and that the determination of the rights and liabilities arising from
the ouster from the position was an intra-corporate controversy within the SEC’s
jurisdiction.
In Nacpil v. Intercontinental Broadcasting Corporation, 23 which may be the more
appropriate ruling, the position subject of the controversy was not expressly
mentioned in the By-Laws, but was created pursuant to a By-Law enabling
provision authorizing the Board of Directors to create other offices that the Board
of Directors might see fit to create. The Court held there that the position was a
corporate office, relying on the obiter dictum in Tabang.
Considering that the observations earlier made herein show that the soundness of
their dicta is not unassailable, Tabang and Nacpil should no longer be controlling.
III
Did Respondent’s Status as Director and
Stockholder Automatically Convert his Dismissal
into an Intra-Corporate Dispute?
Yet, the petitioners insist that because the respondent was a Director/stockholder
of Matling, and relying on Paguio v. National Labor Relations
Commission24 and Ongkingko v. National Labor Relations Commission, 25 the NLRC
had no jurisdiction over his complaint, considering that any case for illegal dismissal
brought by a stockholder/officer against the corporation was an intra-corporate
matter that must fall under the jurisdiction of the SEC conformably with the context
of PD No. 902-A.
The petitioners’ insistence is bereft of basis.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings,
the complainants were undeniably corporate officers due to their positions being
expressly mentioned in the By-Laws, aside from the fact that both of them had
been duly elected by the respective Boards of Directors. But the herein
respondent’s position of Vice President for Finance and Administration was not
expressly mentioned in the By-Laws; neither was the position of Vice President for
Finance and Administration created by Matling’s Board of Directors. Lastly, the
President, not the Board of Directors, appointed him.
True it is that the Court pronounced in Tabang as follows:
Also, an intra-corporate controversy is one which arises between a stockholder
and the corporation. There is no distinction, qualification or any exemption
whatsoever. The provision is broad and covers all kinds of controversies between
stockholders and corporations.26
However, the Tabang pronouncement is not controlling because it is too sweeping
and does not accord with reason, justice, and fair play. In order to determine
whether a dispute constitutes an intra-corporate controversy or not, the Court
considers two elements instead, namely: (a) the status or relationship of the parties;
and (b) the nature of the question that is the subject of their controversy. This was
our thrust in Viray v. Court of Appeals:27
The establishment of any of the relationships mentioned above will not necessarily
always confer jurisdiction over the dispute on the SEC to the exclusion of regular
courts. The statement made in one case that the rule admits of no exceptions or
distinctions is not that absolute. The better policy in determining which body has
jurisdiction over a case would be to consider not only the status or relationship of
the parties but also the nature of the question that is the subject of their
controversy.
Not every conflict between a corporation and its stockholders involves corporate
matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-
judicial powers. If, for example, a person leases an apartment owned by a
corporation of which he is a stockholder, there should be no question that a
complaint for his ejectment for non-payment of rentals would still come under the
jurisdiction of the regular courts and not of the SEC. By the same token, if one
person injures another in a vehicular accident, the complaint for damages filed by
the victim will not come under the jurisdiction of the SEC simply because of the
happenstance that both parties are stockholders of the same corporation. A
contrary interpretation would dissipate the powers of the regular courts and distort
the meaning and intent of PD No. 902-A.
In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated
these determinants thuswise:
In order that the SEC (now the regular courts) can take cognizance of a case, the
controversy must pertain to any of the following relationships:
a) between the corporation, partnership or association and the public;
 b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
c) between the corporation, partnership or association and the State as
far as its franchise, permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves.
The fact that the parties involved in the controversy are all stockholders or that the
parties involved are the stockholders and the corporation does not necessarily
place the dispute within the ambit of the jurisdiction of SEC. The better policy to be
followed in determining jurisdiction over a case should be to consider concurrent
factors such as the status or relationship of the parties or the nature of the question
that is the subject of their controversy. In the absence of any one of these factors,
the SEC will not have jurisdiction. Furthermore, it does not necessarily follow that
every conflict between the corporation and its stockholders would involve such
corporate matters as only the SEC can resolve in the exercise of its adjudicatory or
quasi-judicial powers.29
The criteria for distinguishing between corporate officers who may be ousted from
office at will, on one hand, and ordinary corporate employees who may only be
terminated for just cause, on the other hand, do not depend on the nature of the
services performed, but on the manner of creation of the office. In the
respondent’s case, he was supposedly at once an employee, a stockholder, and
a Director of Matling. The circumstances surrounding his appointment to office
must be fully considered to determine whether the dismissal constituted an intra-
corporate controversy or a labor termination dispute. We must also consider
whether his status as Director and stockholder had any relation at all to his
appointment and subsequent dismissal as Vice President for Finance and
Administration.
Obviously enough, the respondent was not appointed as Vice President for
Finance and Administration because of his being a stockholder or Director of
Matling. He had started working for Matling on September 8, 1966, and had been
employed continuously for 33 years until his termination on April 17, 2000, first as a
bookkeeper, and his climb in 1987 to his last position as Vice President for Finance
and Administration had been gradual but steady, as the following sequence
indicates:
1966 – Bookkeeper
1968 – Senior Accountant
1969 – Chief Accountant
1972 – Office Supervisor
1973 – Assistant Treasurer
1978 – Special Assistant for Finance
1980 – Assistant Comptroller
1983 – Finance and Administrative Manager
1985 – Asst. Vice President for Finance and Administration
1987 to April 17, 2000 – Vice President for Finance and Administration
Even though he might have become a stockholder of Matling in 1992, his
promotion to the position of Vice President for Finance and Administration in 1987
was by virtue of the length of quality service he had rendered as an employee of
Matling. His subsequent acquisition of the status of Director/stockholder had no
relation to his promotion. Besides, his status of Director/stockholder was unaffected
by his dismissal from employment as Vice President for Finance and
Administration.1avvphi1
In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank
manager who had risen from the ranks but was dismissed, the Court held that her
complaint for illegal dismissal was correctly brought to the NLRC, because she was
deemed a regular employee of the bank. The Court observed thus:
It appears that private respondent was appointed Accounting Clerk by the Bank
on July 14, 1963. From that position she rose to become supervisor. Then in 1982,
she was appointed Assistant Vice-President which she occupied until her illegal
dismissal on July 19, 1991. The bank’s contention that she merely holds an elective
position and that in effect she is not a regular employee is belied by the nature of
her work and her length of service with the Bank. As earlier stated, she rose from
the ranks and has been employed with the Bank since 1963 until the termination of
her employment in 1991. As Assistant Vice President of the Foreign Department of
the Bank, she is tasked, among others, to collect checks drawn against overseas
banks payable in foreign currency and to ensure the collection of foreign bills or
checks purchased, including the signing of transmittal letters covering the same. It
has been stated that "the primary standard 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. Additionally,
"an employee is regular because of the nature of work and the length of service,
not because of the mode or even the reason for hiring them." As Assistant Vice-
President of the Foreign Department of the Bank she performs tasks integral to the
operations of the bank and her length of service with the bank totaling 28 years
speaks volumes of her status as a regular employee of the bank. In fine, as a
regular employee, she is entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause. This being in truth a case of illegal
dismissal, it is no wonder then that the Bank endeavored to the very end to
establish loss of trust and confidence and serious misconduct on the part of private
respondent but, as will be discussed later, to no avail.
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision
of the Court of Appeals.

Costs of suit to be paid by the petitioners.

SO ORDERED.
G.R. No. 201298 February 5, 2014
RAUL C. COSARE, Petitioner,
vs.
BROADCOM ASIA, INC. and DANTE AREVALO, Respondents.
DECISION
REYES, J.:
Before the Court is a petition for review on certiorari 1 under Rule 45 of the Rules of
Court, which assails the Decision2 dated November 24, 2011 and Resolution3 dated
March 26, 2012 of the Court of Appeals (CA) in CA-G.R. SP. No. 117356, wherein
the CA ruled that the Regional Trial Court (RTC), and not the Labor Arbiter (LA),
had the jurisdiction over petitioner Raul C. Cosare's (Cosare) complaint for illegal
dismissal against Broadcom Asia, Inc. (Broadcom) and Dante Arevalo (Arevalo),
the President of Broadcom (respondents).
The Antecedents
The case stems from a complaint4 for constructive dismissal, illegal suspension and
monetary claims filed with the National Capital Region Arbitration Branch of the
National Labor Relations Commission (NLRC) by Cosare against the respondents.
Cosare claimed that sometime in April 1993, he was employed as a salesman by
Arevalo, who was then in the business of selling broadcast equipment needed by
television networks and production houses. In December 2000, Arevalo set up the
company Broadcom, still to continue the business of trading communication and
broadcast equipment. Cosare was named an incorporator of Broadcom, having
been assigned 100 shares of stock with par value of ₱1.00 per share.5 In October
2001, Cosare was promoted to the position of Assistant Vice President for Sales
(AVP for Sales) and Head of the Technical Coordination, having a monthly basic
net salary and average commissions of ₱18,000.00 and ₱37,000.00, respectively.6
Sometime in 2003, Alex F. Abiog (Abiog) was appointed as Broadcom’s Vice
President for Sales and thus, became Cosare’s immediate superior. On March 23,
2009, Cosare sent a confidential memo7 to Arevalo to inform him of the following
anomalies which were allegedly being committed by Abiog against the company:
(a) he failed to report to work on time, and would immediately leave the office on
the pretext of client visits; (b) he advised the clients of Broadcom to purchase
camera units from its competitors, and received commissions therefor; (c) he
shared in the "under the-table dealings" or "confidential commissions" which
Broadcom extended to its clients’ personnel and engineers; and (d) he expressed
his complaints and disgust over Broadcom’s uncompetitive salaries and wages
and delay in the payment of other benefits, even in the presence of office staff.
Cosare ended his memo by clarifying that he was not interested in Abiog’s
position, but only wanted Arevalo to know of the irregularities for the corporation’s
sake.
Apparently, Arevalo failed to act on Cosare’s accusations. Cosare claimed that
he was instead called for a meeting by Arevalo on March 25, 2009, wherein he
was asked to tender his resignation in exchange for "financial assistance" in the
amount of ₱300,000.00.8 Cosare refused to comply with the directive, as signified in
a letter9dated March 26, 2009 which he sent to Arevalo.
On March 30, 2009, Cosare received from Roselyn Villareal (Villareal), Broadcom’s
Manager for Finance and Administration, a memo10 signed by Arevalo, charging
him of serious misconduct and willful breach of trust, and providing in part:
1. A confidential memo was received from the VP for Sales informing me
that you had directed, or at the very least tried to persuade, a customer
to purchase a camera from another supplier. Clearly, this action is a gross
and willful violation of the trust and confidence this company has given to
you being its AVP for Sales and is an attempt to deprive the company of
income from which you, along with the other employees of this company,
derive your salaries and other benefits. x x x.
2. A company vehicle assigned to you with plate no. UNV 402 was found
abandoned in another place outside of the office without proper turnover
from you to this office which had assigned said vehicle to you. The vehicle
was found to be inoperable and in very bad condition, which required
that the vehicle be towed to a nearby auto repair shop for extensive
repairs.
3. You have repeatedly failed to submit regular sales reports informing the
company of your activities within and outside of company premises
despite repeated reminders. However, it has been observed that you
have been both frequently absent and/or tardy without proper
information to this office or your direct supervisor, the VP for Sales Mr. Alex
Abiog, of your whereabouts.
4. You have been remiss in the performance of your duties as a Sales
officer as evidenced by the fact that you have not recorded any sales for
the past immediate twelve (12) months. This was inspite of the fact that
my office decided to relieve you of your duties as technical coordinator
between Engineering and Sales since June last year so that you could
focus and concentrate [on] your activities in sales.11
Cosare was given forty-eight (48) hours from the date of the memo within which to
present his explanation on the charges. He was also "suspended from having
access to any and all company files/records and use of company assets effective
immediately."12 Thus, Cosare claimed that he was precluded from reporting for
work on March 31, 2009, and was instead instructed to wait at the office’s
receiving section. Upon the specific instructions of Arevalo, he was also prevented
by Villareal from retrieving even his personal belongings from the office.
On April 1, 2009, Cosare was totally barred from entering the company premises,
and was told to merely wait outside the office building for further instructions. When
no such instructions were given by 8:00 p.m., Cosare was impelled to seek the
assistance of the officials of Barangay San Antonio, Pasig City, and had the
incident reported in the barangay blotter.13
On April 2, 2009, Cosare attempted to furnish the company with a Memo14 by
which he addressed and denied the accusations cited in Arevalo’s memo dated
March 30, 2009. The respondents refused to receive the memo on the ground of
late filing, prompting Cosare to serve a copy thereof by registered mail. The
following day, April 3, 2009, Cosare filed the subject labor complaint, claiming that
he was constructively dismissed from employment by the respondents. He further
argued that he was illegally suspended, as he placed no serious and imminent
threat to the life or property of his employer and co-employees.15
In refuting Cosare’s complaint, the respondents argued that Cosare was neither
illegally suspended nor dismissed from employment. They also contended that
Cosare committed the following acts inimical to the interests of Broadcom: (a) he
failed to sell any broadcast equipment since the year 2007; (b) he attempted to
sell a Panasonic HMC 150 Camera which was to be sourced from a competitor;
and (c) he made an unauthorized request in Broadcom’s name for its principal,
Panasonic USA, to issue an invitation for Cosare’s friend, one Alex Paredes, to
attend the National Association of Broadcasters’ Conference in Las Vegas,
USA.16 Furthermore, they contended that Cosare abandoned his job17 by
continually failing to report for work beginning April 1, 2009, prompting them to
issue on April 14, 2009 a memorandum18 accusing Cosare of absence without
leave beginning April 1, 2009.
The Ruling of the LA
On January 6, 2010, LA Napoleon M. Menese (LA Menese) rendered his
Decision19 dismissing the complaint on the ground of Cosare’s failure to establish
that he was dismissed, constructively or otherwise, from his employment. For the LA,
what transpired on March 30, 2009 was merely the respondents’ issuance to
Cosare of a show-cause memo, giving him a chance to present his side on the
charges against him. He explained:
It is obvious that [Cosare] DID NOT wait for respondents’ action regarding the
charges leveled against him in the show-cause memo. What he did was to pre-
empt that action by filing this complaint just a day after he submitted his written
explanation. Moreover, by specifically seeking payment of "Separation Pay"
instead of reinstatement, [Cosare’s] motive for filing this case becomes more
evident.20
It was also held that Cosare failed to substantiate by documentary evidence his
allegations of illegal suspension and non-payment of allowances and commissions.
Unyielding, Cosare appealed the LA decision to the NLRC.
The Ruling of the NLRC
On August 24, 2010, the NLRC rendered its Decision21 reversing the Decision of LA
Menese. The dispositive portion of the NLRC Decision reads:
WHEREFORE, premises considered, the DECISION is REVERSED and the Respondents
are found guilty of Illegal Constructive Dismissal. Respondents BROADCOM ASIA,
INC. and Dante Arevalo are ordered to pay [Cosare’s] backwages, and
separation pay, as well as damages, in the total amount of ₱1,915,458.33, per
attached Computation.
SO ORDERED.22
In ruling in favor of Cosare, the NLRC explained that "due weight and credence is
accorded to [Cosare’s] contention that he was constructively dismissed by
Respondent Arevalo when he was asked to resign from his employment."23The fact
that Cosare was suspended from using the assets of Broadcom was also
inconsistent with the respondents’ claim that Cosare opted to abandon his
employment.
Exemplary damages in the amount of ₱100,000.00 was awarded, given the NLRC’s
finding that the termination of Cosare’s employment was effected by the
respondents in bad faith and in a wanton, oppressive and malevolent manner. The
claim for unpaid commissions was denied on the ground of the failure to include it
in the prayer of pleadings filed with the LA and in the appeal.
The respondents’ motion for reconsideration was denied.24 Dissatisfied, they filed a
petition for certiorari with the CA founded on the following arguments: (1) the
respondents did not have to prove just cause for terminating the employment of
Cosare because the latter’s complaint was based on an alleged constructive
dismissal; (2) Cosare resigned and was thus not dismissed from employment; (3) the
respondents should not be declared liable for the payment of Cosare’s monetary
claims; and (4) Arevalo should not be held solidarily liable for the judgment award.
In a manifestation filed by the respondents during the pendency of the CA
appeal, they raised a new argument, i.e., the case involved an intra-corporate
controversy which was within the jurisdiction of the RTC, instead of the LA.25They
argued that the case involved a complaint against a corporation filed by a
stockholder, who, at the same time, was a corporate officer.
The Ruling of the CA
On November 24, 2011, the CA rendered the assailed Decision26 granting the
respondents’ petition. It agreed with the respondents’ contention that the case
involved an intra-corporate controversy which, pursuant to Presidential Decree No.
902-A, as amended, was within the exclusive jurisdiction of the RTC. It reasoned:
Record shows that [Cosare] was indeed a stockholder of [Broadcom], and that he
was listed as one of its directors. Moreover, he held the position of [AVP] for Sales
which is listed as a corporate office. Generally, the president, vice-president,
secretary or treasurer are commonly regarded as the principal or executive officers
of a corporation, and modern corporation statutes usually designate them as the
officers of the corporation. However, it bears mentioning that under Section 25 of
the Corporation Code, the Board of Directors of [Broadcom] is allowed to appoint
such other officers as it may deem necessary. Indeed, [Broadcom’s] By-Laws
provides:
Article IV
Officer
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board, may, from time to time, appoint such other officers as it may determine
to be necessary or proper. x x x
We hold that [the respondents] were able to present substantial evidence that
[Cosare] indeed held a corporate office, as evidenced by the General Information
Sheet which was submitted to the Securities and Exchange Commission (SEC) on
October 22, 2009.27 (Citations omitted and emphasis supplied)
Thus, the CA reversed the NLRC decision and resolution, and then entered a new
one dismissing the labor complaint on the ground of lack of jurisdiction, finding it
unnecessary to resolve the main issues that were raised in the petition. Cosare filed
a motion for reconsideration, but this was denied by the CA via the
Resolution28 dated March 26, 2012. Hence, this petition.
The Present Petition
The pivotal issues for the petition’s full resolution are as follows: (1) whether or not
the case instituted by Cosare was an intra-corporate dispute that was within the
original jurisdiction of the RTC, and not of the LAs; and (2) whether or not Cosare
was constructively and illegally dismissed from employment by the respondents.
The Court’s Ruling
The petition is impressed with merit.
Jurisdiction over the controversy
As regards the issue of jurisdiction, the Court has determined that contrary to the
ruling of the CA, it is the LA, and not the regular courts, which has the original
jurisdiction over the subject controversy. An intra-corporate controversy, which falls
within the jurisdiction of regular courts, has been regarded in its broad sense to
pertain to disputes that involve any of the following relationships: (1) between the
corporation, partnership or association and the public; (2) between the
corporation, partnership or association and the state in so far as its franchise,
permit or license to operate is concerned; (3) between the corporation,
partnership or association and its stockholders, partners, members or officers; and
(4) among the stockholders, partners or associates, themselves.29 Settled
jurisprudence, however, qualifies that when the dispute involves a charge of illegal
dismissal, the action may fall under the jurisdiction of the LAs upon whose
jurisdiction, as a rule, falls termination disputes and claims for damages arising from
employer-employee relations as provided in Article 217 of the Labor Code.
Consistent with this jurisprudence, the mere fact that Cosare was a stockholder
and an officer of Broadcom at the time the subject controversy developed failed
to necessarily make the case an intra-corporate dispute.
In Matling Industrial and Commercial Corporation v. Coros,30 the Court
distinguished between a "regular employee" and a "corporate officer" for purposes
of establishing the true nature of a dispute or complaint for illegal dismissal and
determining which body has jurisdiction over it. Succinctly, it was explained that
"[t]he determination of whether the dismissed officer was a regular employee or
corporate officer unravels the conundrum" of whether a complaint for illegal
dismissal is cognizable by the LA or by the RTC. "In case of the regular employee,
the LA has jurisdiction; otherwise, the RTC exercises the legal authority to
adjudicate.31
Applying the foregoing to the present case, the LA had the original jurisdiction over
the complaint for illegal dismissal because Cosare, although an officer of
Broadcom for being its AVP for Sales, was not a "corporate officer" as the term is
defined by law. We emphasized in Real v. Sangu Philippines, Inc.32 the definition of
corporate officers for the purpose of identifying an intra-corporate controversy.
Citing Garcia v. Eastern Telecommunications Philippines, Inc.,33 we held:
" ‘Corporate officers’ in the context of Presidential Decree No. 902-A are those
officers of the corporation who are given that character by the Corporation Code
or by the corporation’s by-laws. There are three specific officers whom a
corporation must have under Section 25 of the Corporation Code. These are the
president, secretary and the treasurer. The number of officers is not limited to these
three. A corporation may have such other officers as may be provided for by its
by-laws like, but not limited to, the vice-president, cashier, auditor or general
manager. The number of corporate officers is thus limited by law and by the
corporation’s by-laws."34 (Emphasis ours)
In Tabang v. NLRC,35 the Court also made the following pronouncement on the
nature of corporate offices:
It has been held that an "office" is created by the charter of the corporation and
the officer is elected by the directors and stockholders. On the other hand, an
"employee" usually occupies no office and generally is employed not by action of
the directors or stockholders but by the managing officer of the corporation who
also determines the compensation to be paid to such employee.36 (Citations
omitted)
As may be deduced from the foregoing, there are two circumstances which must
concur in order for an individual to be considered a corporate officer, as against
an ordinary employee or officer, namely: (1) the creation of the position is under
the corporation’s charter or by-laws; and (2) the election of the officer is by the
directors or stockholders. It is only when the officer claiming to have been illegally
dismissed is classified as such corporate officer that the issue is deemed an intra-
corporate dispute which falls within the jurisdiction of the trial courts.
To support their argument that Cosare was a corporate officer, the respondents
referred to Section 1, Article IV of Broadcom’s by-laws, which reads:
ARTICLE IV
OFFICER
Section 1. Election / Appointment – Immediately after their election, the Board of
Directors shall formally organize by electing the President, the Vice-President, the
Treasurer, and the Secretary at said meeting.
The Board may, from time to time, appoint such other officers as it may determine
to be necessary or proper. Any two (2) or more compatible positions may be held
concurrently by the same person, except that no one shall act as President and
Treasurer or Secretary at the same time.37 (Emphasis ours)
This was also the CA’s main basis in ruling that the matter was an intra-corporate
dispute that was within the trial courts’ jurisdiction.
The Court disagrees with the respondents and the CA. As may be gleaned from
the aforequoted provision, the only officers who are specifically listed, and thus
with offices that are created under Broadcom’s by-laws are the following: the
President, Vice-President, Treasurer and Secretary. Although a blanket authority
provides for the Board’s appointment of such other officers as it may deem
necessary and proper, the respondents failed to sufficiently establish that the
position of AVP for Sales was created by virtue of an act of Broadcom’s board,
and that Cosare was specifically elected or appointed to such position by the
directors. No board resolutions to establish such facts form part of the case
records. Further, it was held in Marc II Marketing, Inc. v. Joson38 that an enabling
clause in a corporation’s by-laws empowering its board of directors to create
additional officers, even with the subsequent passage of a board resolution to that
effect, cannot make such position a corporate office. The board of directors has
no power to create other corporate offices without first amending the corporate
by-laws so as to include therein the newly created corporate office.39 "To allow the
creation of a corporate officer position by a simple inclusion in the corporate by-
laws of an enabling clause empowering the board of directors to do so can result
in the circumvention of that constitutionally well-protected right [of every
employee to security of tenure]."40
The CA’s heavy reliance on the contents of the General Information Sheets 41,
which were submitted by the respondents during the appeal proceedings and
which plainly provided that Cosare was an "officer" of Broadcom, was clearly
misplaced. The said documents could neither govern nor establish the nature of
the office held by Cosare and his appointment thereto. Furthermore, although
Cosare could indeed be classified as an officer as provided in the General
Information Sheets, his position could only be deemed a regular office, and not a
corporate office as it is defined under the Corporation Code. Incidentally, the
Court noticed that although the Corporate Secretary of Broadcom, Atty. Efren L.
Cordero, declared under oath the truth of the matters set forth in the General
Information Sheets, the respondents failed to explain why the General Information
Sheet officially filed with the Securities and Exchange Commission in 2011 and
submitted to the CA by the respondents still indicated Cosare as an AVP for Sales,
when among their defenses in the charge of illegal dismissal, they asserted that
Cosare had severed his relationship with the corporation since the year 2009.
Finally, the mere fact that Cosare was a stockholder of Broadcom at the time of
the case’s filing did not necessarily make the action an intra- corporate
controversy. "Not all conflicts between the stockholders and the corporation are
classified as intra-corporate. There are other facts to consider in determining
whether the dispute involves corporate matters as to consider them as intra-
corporate controversies."42 Time and again, the Court has ruled that in determining
the existence of an intra-corporate dispute, the status or relationship of the parties
and the nature of the question that is the subject of the controversy must be taken
into account.43 Considering that the pending dispute particularly relates to
Cosare’s rights and obligations as a regular officer of Broadcom, instead of as a
stockholder of the corporation, the controversy cannot be deemed intra-
corporate. This is consistent with the "controversy test" explained by the Court in
Reyes v. Hon. RTC, Br. 142,44 to wit:
Under the nature of the controversy test, the incidents of that relationship must also
be considered for the purpose of ascertaining whether the controversy itself is
intra-corporate. The controversy must not only be rooted in the existence of an
intra-corporate relationship, but must as well pertain to the enforcement of the
parties’ correlative rights and obligations under the Corporation Code and the
internal and intra-corporate regulatory rules of the corporation. If the relationship
and its incidents are merely incidental to the controversy or if there will still be
conflict even if the relationship does not exist, then no intra-corporate controversy
exists.45 (Citation omitted)
It bears mentioning that even the CA’s finding46 that Cosare was a director of
Broadcom when the dispute commenced was unsupported by the case records,
as even the General Information Sheet of 2009 referred to in the CA decision to
support such finding failed to provide such detail.
All told, it is then evident that the CA erred in reversing the NLRC’s ruling that
favored Cosare solely on the ground that the dispute was an intra-corporate
controversy within the jurisdiction of the regular courts.
The charge of constructive dismissal
Towards a full resolution of the instant case, the Court finds it appropriate to rule on
the correctness of the NLRC’s ruling finding Cosare to have been illegally dismissed
from employment.
In filing his labor complaint, Cosare maintained that he was constructively
dismissed, citing among other circumstances the charges that were hurled and
the suspension that was imposed against him via Arevalo’s memo dated March 30,
2009. Even prior to such charge, he claimed to have been subjected to mental
torture, having been locked out of his files and records and disallowed use of his
office computer and access to personal belongings.47While Cosare attempted to
furnish the respondents with his reply to the charges, the latter refused to accept
the same on the ground that it was filed beyond the 48-hour period which they
provided in the memo.
Cosare further referred to the circumstances that allegedly transpired subsequent
to the service of the memo, particularly the continued refusal of the respondents
to allow Cosare’s entry into the company’s premises. These incidents were cited in
the CA decision as follows:
On March 31, 2009, [Cosare] reported back to work again. He asked Villareal if he
could retrieve his personal belongings, but the latter said that x x x Arevalo
directed her to deny his request, so [Cosare] again waited at the receiving section
of the office. On April 1, 2009, [Cosare] was not allowed to enter the office
premises. He was asked to just wait outside of the Tektite (PSE) Towers, where
[Broadcom] had its offices, for further instructions on how and when he could get
his personal belongings. [Cosare] waited until 8 p.m. for instructions but none were
given. Thus, [Cosare] sought the assistance of the officials of Barangay San
Antonio, Pasig who advised him to file a labor or replevin case to recover his
personal belongings. x x x.48 (Citation omitted)
It is also worth mentioning that a few days before the issuance of the memo dated
March 30, 2009, Cosare was allegedly summoned to Arevalo’s office and was
asked to tender his immediate resignation from the company, in exchange for a
financial assistance of ₱300,000.00.49 The directive was said to be founded on
Arevalo’s choice to retain Abiog’s employment with the company.50 The
respondents failed to refute these claims.
Given the circumstances, the Court agrees with Cosare’s claim of constructive
and illegal dismissal. "[C]onstructive dismissal occurs when there is cessation of
work because continued employment is rendered impossible, unreasonable, or
unlikely as when there is a demotion in rank or diminution in pay or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee leaving the latter with no other option but to quit."51 In Dimagan v.
Dacworks United, Incorporated,52 it was explained:
The test of constructive dismissal is whether a reasonable person in the employee’s
position would have felt compelled to give up his position under the
circumstances. It is an act amounting to dismissal but is made to appear as if it
were not. Constructive dismissal is therefore a dismissal in disguise. The law
recognizes and resolves this situation in favor of employees in order to protect their
rights and interests from the coercive acts of the employer.53(Citation omitted)
It is clear from the cited circumstances that the respondents already rejected
Cosare’s continued involvement with the company. Even their refusal to accept
the explanation which Cosare tried to tender on April 2, 2009 further evidenced
the resolve to deny Cosare of the opportunity to be heard prior to any decision on
the termination of his employment. The respondents allegedly refused acceptance
of the explanation as it was filed beyond the mere 48-hour period which they
granted to Cosare under the memo dated March 30, 2009. However, even this
limitation was a flaw in the memo or notice to explain which only further signified
the respondents’ discrimination, disdain and insensibility towards Cosare,
apparently resorted to by the respondents in order to deny their employee of the
opportunity to fully explain his defenses and ultimately, retain his employment. The
Court emphasized in King of Kings Transport, Inc. v. Mamac54 the standards to be
observed by employers in complying with the service of notices prior to
termination:
[T]he first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the
employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means
every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as
a period of at least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will
raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a
detailed narration of the facts and circumstances that will serve as basis for the
charge against the employees. A general description of the charge will not suffice.
Lastly, the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged against
the employees.55 (Citation omitted, underscoring ours, and emphasis supplied)
In sum, the respondents were already resolute on a severance of their working
relationship with Cosare, notwithstanding the facts which could have been
established by his explanations and the respondents’ full investigation on the
matter. In addition to this, the fact that no further investigation and final disposition
appeared to have been made by the respondents on Cosare’s case only
negated the claim that they actually intended to first look into the matter before
making a final determination as to the guilt or innocence of their employee. This
also manifested from the fact that even before Cosare was required to present his
side on the charges of serious misconduct and willful breach of trust, he was
summoned to Arevalo’s office and was asked to tender his immediate resignation
in exchange for financial assistance.
The clear intent of the respondents to find fault in Cosare was also manifested by
their persistent accusation that Cosare abandoned his post, allegedly signified by
his failure to report to work or file a leave of absence beginning April 1, 2009. This
was even the subject of a memo56 issued by Arevalo to Cosare on April 14, 2009,
asking him to explain his absence within 48 hours from the date of the memo. As
the records clearly indicated, however, Arevalo placed Cosare under suspension
beginning March 30, 2009. The suspension covered access to any and all
company files/records and the use of the assets of the company, with warning
that his failure to comply with the memo would be dealt with drastic management
action. The charge of abandonment was inconsistent with this imposed
suspension. "Abandonment is the deliberate and unjustified refusal of an employee
to resume his employment. To constitute abandonment of work, two elements
must concur: ‘(1) the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and (2) there must have been a
clear intention on the part of the employee to sever the employer- employee
relationship manifested by some overt act.’"57Cosare’s failure to report to work
beginning April 1, 2009 was neither voluntary nor indicative of an intention to sever
his employment with Broadcom. It was illogical to be requiring him to report for
work, and imputing fault when he failed to do so after he was specifically denied
access to all of the company’s assets. As correctly observed by the NLRC:

[T]he Respondent[s] had charged [Cosare] of abandoning his employment

beginning on April 1, 2009. However[,] the show-cause letter dated March 3[0],
2009 (Annex "F", ibid) suspended [Cosare] from using not only the equipment but
the "assets" of Respondent [Broadcom]. This insults rational thinking because the
Respondents tried to mislead us and make [it appear] that [Cosare] failed to
report for work when they had in fact had [sic] placed him on suspension. x x x.58

Following a finding of constructive dismissal, the Court finds no cogent reason to

modify the NLRC's monetary awards in Cosare's favor. In Robinsons
Galleria/Robinsons Supermarket Corporation v. Ranchez,59 the Court reiterated
that an illegally or constructively dismissed employee is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and
(2) backwages.60 The award of exemplary damages was also justified given the
NLRC's finding that the respondents acted in bad faith and in a wanton,
oppressive and malevolent manner when they dismissed Cosare. It is also by
reason of such bad faith that Arevalo was correctly declared solidarily liable for
the monetary awards.

WHEREFORE, the petition is GRANTED. The Decision dated November 24, 2011 and
Resolution dated March 26, 2012 of the Court of Appeals in CA-G.R. SP. No. 117356
are SET ASIDE. The Decision dated August 24, 2010 of the National Labor Relations
Commission in favor of petitioner Raul C. Cosare is AFFIRMED.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice
G.R. No. 187320 January 26, 2011
ATLANTA INDUSTRIES, INC. and/or ROBERT CHAN, Petitioners,
vs.
APRILITO R. SEBOLINO, KHIM V. COSTALES, ALVIN V. ALMOITE, and JOSEPH S.
SAGUN, Respondents.
DECISION
BRION, J.:
For resolution is the petition for review on certiorari1 assailing the decision2 and the
resolution3 of the Court of Appeals (CA) rendered on November 4, 2008 and
March 25, 2009, respectively, in CA-G.R. SP. No. 99340.4
The Antecedents
The facts are summarized below.
In the months of February and March 2005, complainants Aprilito R. Sebolino, Khim
V. Costales, Alvin V. Almoite, Joseph S. Sagun, Agosto D. Zaño, Domingo S. Alegria,
Jr., Ronie Ramos, Edgar Villagomez, Melvin Pedregoza, Teofanes B. Chiong, Jr.,
Leonardo L. dela Cruz, Arnold A. Magalang, and Saturnino M. Mabanag filed
several complaints for illegal dismissal, regularization, underpayment, nonpayment
of wages and other money claims, as well as claims for moral and exemplary
damages and attorney’s fees against the petitioners Atlanta Industries, Inc.
(Atlanta) and its President and Chief Operating Officer Robert Chan. Atlanta is a
domestic corporation engaged in the manufacture of steel pipes.
The complaints were consolidated and were raffled to Labor Arbiter Daniel Cajilig,
but were later transferred to Labor Arbiter Dominador B. Medroso, Jr.
The complainants alleged that they had attained regular status as they were
allowed to work with Atlanta for more than six (6) months from the start of a
purported apprenticeship agreement between them and the company. They
claimed that they were illegally dismissed when the apprenticeship agreement
expired.
In defense, Atlanta and Chan argued that the workers were not entitled to
regularization and to their money claims because they were engaged as
apprentices under a government-approved apprenticeship program. The
company offered to hire them as regular employees in the event vacancies for
regular positions occur in the section of the plant where they had trained. They
also claimed that their names did not appear in the list of employees (Master
List)5 prior to their engagement as apprentices.
On May 24, 2005, dela Cruz, Magalang, Zaño and Chiong executed a Pagtalikod
at Pagwawalang Saysay before Labor Arbiter Cajilig.
The Compulsory Arbitration Rulings
On April 24, 2006, Labor Arbiter Medroso dismissed the complaint with respect to
dela Cruz, Magalang, Zaño and Chiong, but found the termination of service of
the remaining nine to be illegal.6 Consequently, the arbiter awarded the dismissed
workers backwages, wage differentials, holiday pay and service incentive leave
pay amounting to ₱1,389,044.57 in the aggregate.
Atlanta appealed to the National Labor Relations Commission (NLRC). In the
meantime, or on October 10, 2006, Ramos, Alegria, Villagomez, Costales and
Almoite allegedly entered into a compromise agreement with Atlanta. 7The
agreement provided that except for Ramos, Atlanta agreed to pay the workers a
specified amount as settlement, and to acknowledge them at the same time as
regular employees.
On December 29, 2006,8 the NLRC rendered a decision, on appeal, modifying the
ruling of the labor arbiter, as follows: (1) withdrawing the illegal dismissal finding
with respect to Sagun, Mabanag, Sebolino and Pedregoza; (2) affirming the
dismissal of the complaints of dela Cruz, Zaño, Magalang and Chiong; (3)
approving the compromise agreement entered into by Costales, Ramos,
Villagomez, Almoite and Alegria, and (4) denying all other claims.
Sebolino, Costales, Almoite and Sagun moved for the reconsideration of the
decision, but the NLRC denied the motion in its March 30, 20079 resolution. The four
then sought relief from the CA through a petition for certiorari under Rule 65 of the
Rules of Court. They charged that the NLRC committed grave abuse of discretion
in: (1) failing to recognize their prior employment with Atlanta; (2) declaring the
second apprenticeship agreement valid; (3) holding that the dismissal of Sagun,
Mabanag, Sebolino and Melvin Pedregoza is legal; and (4) upholding the
compromise agreement involving Costales, Ramos, Villagomez, Almoite and
Alegria.
The CA Decision
The CA granted the petition based on the following findings:10
1. The respondents were already employees of the company before they
entered into the first and second apprenticeship agreements – Almoite
and Costales were employed as early as December 2003 and,
subsequently, entered into a first apprenticeship agreement from May 13,
2004 to October 12, 2004; before this first agreement expired, a second
apprenticeship agreement, from October 9, 2004 to March 8, 2005 was
executed. The same is true with Sebolino and Sagun, who were employed
by Atlanta as early as March 3, 2004. Sebolino entered into his first
apprenticeship agreement with the company from March 20, 2004 to
August 19, 2004, and his second apprenticeship agreement from August
20, 2004 to January 19, 2005. Sagun, on the other hand, entered into his
first agreement from May 28, 2004 to October 8, 2004, and the second
agreement from October 9, 2004 to March 8, 2005.
 2. The first and second apprenticeship agreements were defective as they
were executed in violation of the law and the rules.11 The agreements did
not indicate the trade or occupation in which the apprentice would be
trained; neither was the apprenticeship program approved by the
Technical Education and Skills Development Authority (TESDA).
3. The positions occupied by the respondents – machine operator,
extruder operator and scaleman – are usually necessary and desirable in
the manufacture of plastic building materials, the company’s main
business. Costales, Almoite, Sebolino and Sagun were, therefore, regular
employees whose dismissals were illegal for lack of a just or authorized
cause and notice.
4. The compromise agreement entered into by Costales and Almoite,
together with Ramos, Villagomez and Alegria, was not binding on
Costales and Almoite because they did not sign the agreement.
The petitioners themselves admitted that Costales and Almoite were initially
planned to be a part of the compromise agreement, but their employment has
been regularized as early as January 11, 2006; hence, the company did not pursue
their inclusion in the compromise agreement.12
The CA faulted the NLRC for failing to appreciate the evidence regarding the
respondents’ prior employment with Atlanta. The NLRC recognized the prior
employment of Costales and Almoite on Atlanta’s monthly report for December
2003 for the CPS Department/Section dated January 6, 2004.13 This record shows
that Costales and Almoite were assigned to the company’s first shift from 7:00 a.m.
to 3:00 p.m. The NLRC ignored Sebolino and Sagun’s prior employment under the
company’s Production and Work Schedule for March 7 to 12, 2005 dated March 3,
2004,14 as they had been Atlanta’s employees as early as March 3, 2004, with
Sebolino scheduled to work on March 7-12, 2005 at 7:00 a.m. to 7:00 p.m., while
Sagun was scheduled to work for the same period but from 7:00 p.m. to 7:00 a.m.
The CA noted that Atlanta failed to challenge the authenticity of the two
documents before it and the labor authorities.
Atlanta and Chan moved for reconsideration, but the CA denied the motion in a
resolution rendered on March 25, 2009.15 Hence, the present petition.
The Petition
Atlanta seeks a reversal of the CA decision, contending that the appellate court
erred in (1) concluding that Costales, Almoite, Sebolino and Sagun were
employed by Atlanta before they were engaged as apprentices; (2) ruling that a
second apprenticeship agreement is invalid; (3) declaring that the respondents
were illegally dismissed; and (4) disregarding the compromise agreement
executed by Costales and Almoite. It submits the following arguments:
First. The CA’s conclusion that the respondent workers were company employees
before they were engaged as apprentices was primarily based on the Monthly
Report16 and the Production and Work Schedule for March 7-12, 2005,17 in total
disregard of the Master List18 prepared by the company accountant, Emelita M.
Bernardo. The names of Costales, Almoite, Sebolino and Sagun do not appear as
employees in the Master List which "contained the names of all the persons who
were employed by and at petitioner."19
Atlanta faults the CA for relying on the Production and Work Schedule and the
Monthly Report which were not sworn to, and in disregarding the Master List whose
veracity was sworn to by Bernardo and by Alex Go who headed the company’s
accounting division. It maintains that the CA should have given more credence to
the Master List.
Second. In declaring invalid the apprenticeship agreements it entered into with
the respondent workers, the CA failed to recognize the rationale behind the law
on apprenticeship. It submits that under the law,20 apprenticeship agreements are
valid, provided they do not exceed six (6) months and the apprentices are paid
the appropriate wages of at least 75% of the applicable minimum wage.
The respondents initially executed a five-month apprenticeship program with
Atlanta, at the end of which, they "voluntarily and willingly entered into another
apprenticeship agreement with the petitioner for the training of a second skill"21 for
five months; thus, the petitioners committed no violation of the apprenticeship
period laid down by the law.
Further, the apprenticeship agreements, entered into by the parties, complied with
the requisites under Article 62 of the Labor Code; the company’s authorized
representative and the respondents signed the agreements and these were
ratified by the company’s apprenticeship committee. The apprenticeship program
itself was approved and certified by the TESDA.22 The CA, thus, erred in overturning
the NLRC’s finding that the apprenticeship agreements were valid.
Third. There was no illegal dismissal as the respondent workers’ tenure ended with
the expiration of the apprenticeship agreement they entered into. There was,
therefore, no regular employer-employee relationship between Atlanta and the
respondent workers.
The Case for Costales, Almoite, Sebolino and Sagun
In a Comment filed on August 6, 2009,23 Costales, Almoite, Sebolino and Sagun
pray for a denial of the petition for being procedurally defective and for lack of
merit.
The respondent workers contend that the petition failed to comply with Section 4,
Rule 45 of the Rules of Court which requires that the petition be accompanied by
supporting material portions of the records. The petitioners failed to attach to the
petition a copy of the Production and Work Schedule despite their submission that
the CA relied heavily on the document in finding the respondent workers’ prior
employment with Atlanta. They also did not attach a copy of the compromise
agreement purportedly executed by Costales and Almoite. For this reason, the
respondent workers submit that the petition should be dismissed.
The respondents posit that the CA committed no error in holding that they were
already Atlanta’s employees before they were engaged as apprentices, as
confirmed by the company’s Production and Work Schedule.24 They maintain that
the Production and Work Schedule meets the requirement of substantial evidence
as the petitioners failed to question its authenticity. They point out that the
schedule was prepared by Rose A. Quirit and approved by Adolfo R. Lope, head
of the company’s PE/Spiral Section. They argue that it was highly unlikely that the
head of a production section of the company would prepare and assign work to
the complainants if the latter had not been company employees.
The respondent workers reiterate their mistrust of the Master List25 as evidence that
they were not employees of the company at the time they became apprentices.
They label the Master List as "self-serving, dubious and even if considered as
authentic, its content contradicts a lot of petitioner’s claim and allegations," 26 thus
-
1. Aside from the fact that the Master List is not legible, it contains only the
names of inactive employees. Even those found by the NLRC to have
been employed in the company (such as Almoite, Costales and Sagun)
do not appear in the list. If Costales and Almoite had been employed with
Atlanta since January 11, 2006, as the company claimed,27 their names
would have been in the list, considering that the Master List accounts for
all employees "as of May 2006" – the notation carried on top of each
page of the document.
2. There were no entries of employees hired or resigned in the years 2005
and 2006 despite the "as of May 2006" notation; several pages making up
the Master List contain names of employees for the years 1999 - 2004.
3. The fact that Atlanta presented the purported Master List instead of the
payroll raised serious doubts on the authenticity of the list.
In sum, the respondent workers posit that the presentation of the Master List
revealed the "intention of the herein petitioner[s] to perpetually hide the fact of
[their] prior employment."28
On the supposed apprenticeship agreements they entered into, Costales, Almoite,
Sebolino and Sagun refuse to accept the agreements’ validity, contending that
the company’s apprenticeship program is merely a ploy "to continually deprive
[them] of their rightful wages and benefits which are due them as regular
employees."29 They submit the following "indubitable facts and ratiocinations:"30
1. The apprenticeship agreements were submitted to TESDA only in 2005
(with dates of receipt on "1/4/05" & "2/22/05"31 ), when the agreements
were supposed to have been executed in April or May 2004. Thus, the
submission was made long after the starting date of the workers’
apprenticeship or even beyond the agreement’s completion/termination
date, in violation of Section 23, Rule VI, Book II of the Labor Code.
2. The respondent workers were made to undergo apprenticeship for
occupations different from those allegedly approved by TESDA. TESDA
approved Atlanta’s apprenticeship program on "Plastic Molder"32 and not
for extrusion molding process, engineering, pelletizing process and mixing
process.
3. The respondents were already skilled workers prior to the apprenticeship
program as they had been employed and made to work in the different
job positions where they had undergone training. Sagun and Sebolino,
together with Mabanag, Pedregoza, dela Cruz, Chiong, Magalang and
Alegria were even given production assignments and work schedule at
the PE/Spiral Section from May 11, 2004 to March 23, 2005, and some of
them were even assigned to the 3:00 p.m. – 11:00 p.m. and graveyard
shifts (11:00 p.m. – 7:00 a.m.) during the period.33
4. The respondent workers were required to continue as apprentices
beyond six months. The TESDA certificate of completion indicates that the
workers’ apprenticeship had been completed after six months. Yet, they
were suffered to work as apprentices beyond that period.
Costales, Almoite, Sebolino and Sagun resolutely maintain that they were illegally
dismissed, as the reason for the termination of their employment – notice of the
completion of the second apprenticeship agreement – did not constitute either a
just or authorized cause under Articles 282 and 283 of the Labor Code.
Finally, Costales and Almoite refuse to be bound by the compromise
agreement34 that Atlanta presented to defeat the two workers’ cause of action.
They claim that the supposed agreement is invalid as against them, principally
because they did not sign it.
The Court’s Ruling
The procedural issue
The respondent workers ask that the petition be dismissed outright for the
petitioners’ failure to attach to the petition a copy of the Production and Work
Schedule and a copy of the compromise agreement Costales and Almoite
allegedly entered into — material portions of the record that should accompany
and support the petition, pursuant to Section 4, Rule 45 of the Rules of Court.
In Mariners Polytechnic Colleges Foundation, Inc. v. Arturo J. Garchitorena35 where
the Court addressed essentially the same issue arising from Section 2(d), Rule 42 of
the Rules of Court,36 we held that the phrase "of the pleadings and other material
portions of the record xxx as would support the allegation of the petition clearly
contemplates the exercise of discretion on the part of the petitioner in the
selection of documents that are deemed to be relevant to the petition. The crucial
issue to consider then is whether or not the documents accompanying the petition
sufficiently supported the allegations therein."37
As in Mariners, we find that the documents attached to the petition sufficiently
support the petitioners’ allegations. The accompanying CA decision38 and
resolution,39 as well as those of the labor arbiter40 and the NLRC,41 referred to the
parties’ position papers and even to their replies and rejoinders. Significantly, the
CA decision narrates the factual antecedents, defines the complainants’ cause of
action, and cites the arguments, including the evidence the parties adduced. If
any, the defect in the petition lies in the petitioners’ failure to provide legible
copies of some of the material documents mentioned, especially several pages in
the decisions of the labor arbiter and of the NLRC. This defect, however, is not fatal
as the challenged CA decision clearly summarized the labor tribunal’s rulings. We,
thus, find no procedural obstacle in resolving the petition on the merits.
The merits of the case
We find no merit in the petition. The CA committed no reversible error in nullifying
the NLRC decision42 and in affirming the labor arbiter’s ruling,43 as it applies to
Costales, Almoite, Sebolino and Sagun. Specifically, the CA correctly ruled that the
four were illegally dismissed because (1) they were already employees when they
were required to undergo apprenticeship and (2) apprenticeship agreements
were invalid.
The following considerations support the CA ruling.
First. Based on company operations at the time material to the case, Costales,
Almoite, Sebolino and Sagun were already rendering service to the company as
employees before they were made to undergo apprenticeship. The company itself
recognized the respondents’ status through relevant operational records – in the
case of Costales and Almoite, the CPS monthly report for December 200344 which
the NLRC relied upon and, for Sebolino and Sagun, the production and work
schedule for March 7 to 12, 200545 cited by the CA.
Under the CPS monthly report, Atlanta assigned Costales and Almoite to the first
shift (7:00 a.m. to 3:00 p.m.) of the Section’s work. The Production and Work
Schedules, in addition to the one noted by the CA, showed that Sebolino and
Sagun were scheduled on different shifts vis-à-vis the production and work of the
company’s PE/Spiral Section for the periods July 5-10, 2004;46 October 25-31,
2004;47 November 8-14, 2004;48 November 16-22, 2004;49January 3-9,
2005;50 January 10-15, 2005;51 March 7-12, 200552 and March 17-23, 2005.53
We stress that the CA correctly recognized the authenticity of the operational
documents, for the failure of Atlanta to raise a challenge against these documents
before the labor arbiter, the NLRC and the CA itself. The appellate court, thus,
found the said documents sufficient to establish the employment of the
respondents before their engagement as apprentices.
Second. The Master List54 (of employees) that the petitioners heavily rely upon as
proof of their position that the respondents were not Atlanta’s employees, at the
time they were engaged as apprentices, is unreliable and does not inspire belief.
The list, consisting of several pages, is hardly legible. It requires extreme effort to sort
out the names of the employees listed, as well as the other data contained in the
list. For this reason alone, the list deserves little or no consideration. As the
respondents also pointed out, the list itself contradicts a lot of Atlanta’s claims and
allegations, thus: it lists only the names of inactive employees; even the names of
those the NLRC found to have been employed by Atlanta, like Costales and
Almoite, and those who even Atlanta claims attained regular status on January 11,
2006,55 do not appear in the list when it was supposed to account for all
employees "as of May 6, 2006." Despite the "May 6, 2006" cut off date, the list
contains no entries of employees who were hired or who resigned in 2005 and
2006. We note that the list contains the names of employees from 1999 to 2004.
We cannot fault the CA for ignoring the Master List even if Bernardo, its head office
accountant, swore to its correctness and authenticity.56 Its substantive unreliability
gives it very minimal probative value. Atlanta would have been better served, in
terms of reliable evidence, if true copies of the payroll (on which the list was based,
among others, as Bernardo claimed in her affidavit) were presented
instead.1âwphi1
Third. The fact that Costales, Almoite, Sebolino and Sagun were already rendering
service to the company when they were made to undergo apprenticeship (as
established by the evidence) renders the apprenticeship agreements irrelevant as
far as the four are concerned. This reality is highlighted by the CA finding that the
respondents occupied positions such as machine operator, scaleman and
extruder operator - tasks that are usually necessary and desirable in Atlanta’s usual
business or trade as manufacturer of plastic building materials. 57 These tasks and
their nature characterized the four as regular employees under Article 280 of the
Labor Code. Thus, when they were dismissed without just or authorized cause,
without notice, and without the opportunity to be heard, their dismissal was illegal
under the law.58
Even if we recognize the company’s need to train its employees through
apprenticeship, we can only consider the first apprenticeship agreement for the
purpose. With the expiration of the first agreement and the retention of the
employees, Atlanta had, to all intents and purposes, recognized the completion of
their training and their acquisition of a regular employee status. To foist upon them
the second apprenticeship agreement for a second skill which was not even
mentioned in the agreement itself,59 is a violation of the Labor Code’s
implementing rules60 and is an act manifestly unfair to the employees, to say the
least. This we cannot allow.
Fourth. The compromise agreement61 allegedly entered into by Costales and
Almoite, together with Ramos, Villagomez and Alegria, purportedly in settlement of
the case before the NLRC, is not binding on Costales and Almoite because they
did not sign it. The company itself admitted62 that while Costales and Almoite were
initially intended to be a part of the agreement, it did not pursue their inclusion
"due to their regularization as early as January 11, 2006."63

WHEREFORE, premises considered, we hereby DENY the petition for lack of

merit.1âwphi1 The assailed decision and resolution of the Court of Appeals are
AFFIRMED. Costs against the petitioner Atlanta Industries, Inc.

SO ORDERED.

G.R. No. 200575 February 5, 2014
INTEL TECHNOLOGY PHILIPPINES, INC., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND JEREMIAS CABILES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by
petitioner Intel Technology Philippines, Inc. (Intel Phil.). It assails the October 28,
20111 and February 3, 20122 Resolutions of the Court of Appeals (CA) in CA-G.R. SP
No.118880, which dismissed the petition for certiorari filed by Intel Phil. thereby
affirming the September 2, 2010 Decision3 of the National Labor Relations
Commission (NLRC) and its February 9, 2011 Resolution. The NLRC decision
modified the March 18, 2010 Decision4 of the Labor Arbiter (LA), and held Intel Phil.
solely liable for the retirement benefits of respondent Jeremias Cabiles (Cabiles).
The Facts
This case concerns the eligibility of Cabiles to receive retirement benefits from Intel
Phil. granted to employees who had complied with the ten (10)-year service
period requirement of the company.
Cabiles was initially hired by Intel Phil. on April 16, 1997 as an Inventory Analyst. He
was subsequently promoted several times over the years and was also assigned at
Intel Arizona and Intel Chengdu. He later applied for a position at Intel
Semiconductor Limited Hong Kong (Intel HK).
In a letter,5 dated December 12, 2006, Cabiles was offered the position of Finance
Manager by Intel HK. Before accepting the offer, he inquired from Intel Phil.,
through an email, the consequences of accepting the newly presented
opportunity in Hong Kong, to wit:
Are there any clearance requirements I need to fulfil as I move as a local hire to
Hong Kong starting February 1?? I am still on my expat assignment in Chengdu till it
ends January 31. Then immediately I become a HK local employee so I don’t
technically repatriate and work back to my home site Philippines at all.
Nevertheless, I still need to close I think my employment there and so that all my ES
benefits and clearance will be closed like conversion of my vacation leaves to
cash, carry over of my service tenure in CV to HK etc. Please do let me know what
process I need to go through or would an email notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. I will
celebrate my 10th year of service with Intel on April 16, 2007. However, because I
will be moving to Hong Kong as a local hire starting February 1, would I still be
entitled to retirement benefits?? Do we roundup the years of service if its close
enough to 10 years?? If not, what other alternatives I have or do I just lose my years
of service at Intel Philippines? Any possibility that I keep my 9.5 years and start from
there when I work in the Philippines again in the future??6
On January 23, 2007, Intel Phil., through Penny Gabronino (Gabronino), replied as
follows:
Jerry – you are not eligible to receive your retirement benefit given that you have
not reached 10 years of service at the time you moved to Hong Kong. We do not
round up the years of service.
There will [be] no gap in your years of service. So in case that you move back to
the Philippines your total tenure of service will be computed less on the period that
you are out of Intel Philippines.7 [Emphasis supplied]
On January 31, 2007, Cabiles signed the job offer.8
On March 8, 2007, Intel Phil. issued Cabiles his "Intel Final Pay Separation Voucher"
indicating a net payout of ₱165,857.62. On March 26, 2007, Cabiles executed a
Release, Waiver and Quitclaim (Waiver)9 in favor of Intel Phil. acknowledging
receipt of ₱165,857.62 as full and complete settlement of all benefits due him by
reason of his separation from Intel Phil.
On September 8, 2007, after seven (7) months of employment, Cabiles resigned
from Intel HK.
About two years thereafter, or on August 18, 2009, Cabiles filed a complaint for
non-payment of retirement benefits and for moral and exemplary damages with
the NLRC Regional Arbitration Branch-IV. He insisted that he was employed by Intel
for 10 years and 5 months from April 1997 to September 2007 – a period which
included his seven (7) month stint with Intel HK. Thus, he believed he was qualified
to avail of the benefits under the company’s retirement policy allowing an
employee who served for 10 years or more to receive retirement benefits.
The Labor Arbiter’s Decision
On March 18, 2010, the LA ordered Intel Phil. together with Grace Ong, Nida delos
Santos, Gabronino, and Pia Viloria, to pay Cabiles the amount of HKD 419,868.77 or
its peso equivalent as retirement pay with legal interest and attorney’s fees. The LA
held that Cabiles did not sever his employment with Intel Phil. when he moved to
Intel HK, similar to the instances when he was assigned at Intel Arizona and Intel
Chengdu. Despite the clarification made by Intel Phil. regarding his ineligibility to
receive retirement benefits, the LA stated that Cabiles could not be faulted if he
was made to believe his non-entitlement to retirement benefits. Thus, it should not
prevent him from asserting his right to receive them. Finally, the Waiver executed
by Cabiles when he left Intel Phil., was treated by the LA as no bar for claiming his
retirement pay because it merely covered the last salary and commutation of sick
leaves and vacation leaves to the exclusion of retirement benefits. The dispositive
portion of the LA decision reads:
WHEREFORE, premises considered, Respondents are hereby ordered to pay
complainant the amount of Four Hundred Nineteen Thousand Eight Hundred Sixty-
Eight and 77/100 Hong Kong Dollars (HKD419,868.77) or its Peso equivalent as
retirement pay with legal interest until satisfied, and to pay attorney’s fees
equivalent to ten percent (10%) of the judgment award.
SO ORDERED.10
The NLRC Ruling
On appeal, the NLRC affirmed with modification the LA decision. In its September
2, 2010 Decision, the NLRC held Intel Phil. solely liable to pay Cabiles his retirement
benefits. It determined that his decision to move to Intel HK was not definitive proof
of permanent severance of his ties with Intel Phil. It treated his transfer to Hong
Kong as akin to his overseas assignments in Arizona and Chengdu. As to the email
exchange between Cabiles and Intel Phil., the NLRC considered the same as
insufficient to diminish his right over retirement benefits under the law. Meanwhile,
the NLRC disregarded the Waiver because at the time it was signed, the retirement
pay due him had not yet accrued. Hence:
WHEREFORE, the appealed Decision is MODIFIED. Respondent-appellant Intel
Technology Phil., Inc. is ordered to pay complainant-appellee Jeremias Cabiles
the sum [xx] of Four Hundred Nineteen Thousand Eight Hundred Sixty Eight and
77/100 Hong Kong Dollars (HKD419,868.77) or its equivalent in Philippine peso as
retirement pay together with legal interest thereon and attorney’s fees computed
at ten percent (10%) of the award.
The individual respondents-appellants Grace Ong, Nida delos Santos, Penny
Gabronino and Pia Viloria are RELIEVED from any personal liability resulting from the
foregoing.
SO ORDERED.11
Intel Phil. moved for reconsideration but its motion was denied in the NLRC
Resolution,12 dated February 9, 2011.
The CA Decision
Aggrieved, Intel Phil. elevated the case to the CA via a petition for certiorari with
application for a Temporary Restraining Order (TRO) on April 5, 2011. The
application for TRO was denied in a Resolution, dated July 5, 2011. A motion for
reconsideration, dated July 27, 2011, was filed, but it was denied in a Resolution,
dated October 28, 2011, which also dismissed the petition for certiorari.13
On December 1, 2011, Intel Phil. filed a motion for reconsideration.
Earlier, on September 19, 2011, pending disposition of the petition before the CA,
the NLRC issued a writ of execution14 against Intel Phil.:
NOW, THEREFORE, you are commanded to proceed to the premises of respondent
INTEL TECHNOLOGY PHILIPPINES, INCORPORATED located at Gateway Business
Park, Javalera, General Trias, Cavite or anywhere in the Philippines where it could
be located to collect the amount of Three Million Two Hundred One Thousand
Three Hundred Ninety Eight Pesos and Sixty Centavos (₱3,201,398.60) and turn over
the same to this Office for appropriate disposition.
You are likewise directed to collect from the respondents the amount of Thirty One
Thousand Five Hundred Ten Pesos (₱31,510.00) representing the execution fees
pursuant to the provisions of the NLRC Manual of Execution of Judgment.
In case you fail to collect the said amount in cash, you are directed to cause the
satisfaction of the same out of the respondents’ chattels or movable goods or in
the absence thereof, out of the immovable properties not exempt from execution
and return this Writ of Execution to the undersigned not more than five (5) years
from receipt hereof together with the report not later than thirty (30) days from
receipt and every thirty (30) days thereafter pursuant to Section 12, Rule XI of the
2001 NLRC Rules of Procedures.15
As ordered by the NLRC, Intel Phil. satisfied the judgment on December 13, 2011 by
paying the amount of ₱3,201,398.60 which included the applicable withholding
taxes due and paid to the Bureau of InternalRevenue. Cabiles received a net
amount of ₱2,485,337.35, covered by the Bank of the Philippine Islands Manager’s
Check No. 0000000806.16
By reason thereof, Intel Phil. filed on December 21, 2011 a Supplement to the
Petition for Certiorari17 praying, in addition to the reliefs sought in the main, that the
CA order the restitution of all the amounts paid by them pursuant to the NLRC’s
writ of execution, dated September 19, 2011.
In its February 3, 2012 Resolution,18 the CA noted without action the supplement to
the petition for certiorari of Intel Phil. and denied the December 21, 2011 motion for
reconsideration.
Hence, this petition.
ISSUES
I
The Court of Appeals committed serious error in dismissing the Petition for Certiorari
without expressing clearly and distinctly the facts and the law on which its decision
was based.
II
The Court of appeals committed serious and reversible error in not finding that
respondent NLRC gravely abused its discretion when it ruled that private
respondent was entitled to retire under Intel Philippines’ retirement plan.
III
The Court of Appeals committed serious and reversible error in not finding that
respondent NLRC gravely abused its discretion in annulling private respondent’s
quitclaim.
IV
The Court of Appeals committed serious and reversible error in not finding that
Cabiles has the legal obligation to return all the amounts paid by Intel pursuant to
the writ of execution.19
Intel Phil. insists as serious error the CA’s affirmation of the NLRC decision holding it
liable for the retirement benefits claimed by Cabiles. It contends that he is
disqualified to receive the benefits for his failure to complete the required minimum
ten (10) years of service as he resigned to assume new responsibilities with Intel HK
effective February 1, 2007.
Respondent’s Position
In his Comment,20 Cabiles submits (1) that the petition presents questions of fact
which cannot be reviewed via Rule 45; and (2) that the CA did not err when it
affirmed the NLRC ruling:
(a) for his entitlement to retirement pay as he was under the employ of
Intel Phil. for more than ten (10) years in accordance with the prevailing
retirement policy;
(b) for the nullity of the quitclaim as he was misled to believe that he was
disqualified to receive retirement benefits; and
(c) for his right to receive legal interest, damages and attorney’s fees.
Cabiles views his employment with Intel HK as a continuation of his service with
Intel Phil. alleging that it was but an assignment by his principal employer, similar to
his assignments to Intel Arizona and Intel Chengdu. Having rendered 9.5 years of
service with Intel Phil. and an additional seven months with Intel HK, he claims that
he had completed the required 10 year continuous service21 with Intel Phil., thus,
qualifying him for retirement benefits.
In its Reply, Intel Phil. reiterates the arguments contained in its petition.
The Court’s Ruling
Review of Factual Findings
As a general rule, this Court is not a trier of facts and a petition for review on
certiorari under Rule 45 of the Rules of Court must exclusively raise questions of
law.22 Nevertheless, this Court will not hesitate to deviate from what are clearly
procedural guidelines and disturb and strike down the findings of the CA and those
of the labor tribunals if there is a showing that they are unsupported by the
evidence on record or there was a patent misappreciation of facts. Indeed, that
the impugned decision of the CA is consistent with the findings of the labor
tribunals does not per se conclusively demonstrate its correctness. By way of
exception to the general rule, this Court will scrutinize the facts if only to rectify the
prejudice and injustice resulting from an incorrect assessment of the evidence
presented.23
It is in this wise that the Court agrees with Intel Phil. that the CA seriously erred in
affirming the findings of the NLRC on the face of substantial evidence showing
Cabiles’ disqualification to receive the retirement benefits. The Court, therefore,
reverses the ruling of the CA for the reasons hereinafter discussed.
Cabiles Resigned from Intel Philippines
Cabiles calls the attention of the Court to the lack of evidence proving his
resignation. On the contrary, he states that no severance of relationship was made
upon his transfer to Intel HK.
The Court is not convinced.
Resignation is the formal relinquishment of an office,24 the overt act of which is
coupled with an intent to renounce. This intent could be inferred from the acts of
the employee before and after the alleged resignation.25
In this case, Cabiles, while still on a temporary assignment in Intel Chengdu, was
offered by Intel HK the job of a Finance Manager.
In contemplating whether to accept the offer, Cabiles wrote Intel Phil. providing
details and asking as follows:
Are there any clearance requirements I need to fulfil as I move as a local hire to
Hong Kong starting February 1?? I am still on my expat assignment in Chengdu till it
ends January 31. Then immediately I become a HK local employee so I don’t
technically repatriate and work back to my home site Philippines at all.
Nevertheless, I still need to close I think my employment there and so that all my ES
benefits and clearance will be closed like conversion of my vacation leaves to
cash, carry over of my service tenure in CV to HK etc. Please do let me know what
process I need to go through or would an email notification be enough?
Another issue I would like to clarify is with regard to my retirement benefits. Will
celebrate my 10th year of service with Intel on April 16, 2007. However, because I
will be moving to Hong Kong as a local hire starting February 1, would I still be
entitled to retirement benefits?? Do we roundup the years of service if its close
enough to 10 years?? If not, what other alternatives I have or do I just lose my years
of service at Intel Philippines? Any possibility that I keep my 9.5 years and start it
from there when I work in the Philippines again in the future??26 [Emphases
supplied]
This communication manifested two of his main concerns: a) clearance
procedures; and b) the probability of getting his retirement pay despite the non-
completion of the required 10 years of employment service. Beyond these
concerns, however, was his acceptance of the fact that he would be ending his
relationship with Intel Phil. as his employer. The words he used - local hire, close,
clearance – denote nothing but his firm resolve to voluntarily disassociate himself
from Intel Phil. and take on new responsibilities with Intel HK.
Despite a non-favorable reply as to his retirement concerns, Cabiles still accepted
the offer of Intel HK.
His acceptance of the offer meant letting go of the retirement benefits he now
claims as he was informed through email correspondence that his 9.5 years of
service with Intel Phil. would not be rounded off in his favor. He, thus, placed
himself in this position, as he chose to be employed in a company that would pay
him more than what he could earn in Chengdu or in the Philippines.
The choice of staying with Intel Phil. vis-à-vis a very attractive opportunity with Intel
HK put him in a dilemma. If he would wait to complete ten (10) years of service
with Intel Phil. (in about 4 months) he would enjoy the fruits of his retirement but at
the same time it would mean forfeiture of Intel HK’s compensation offer in the
amount of HK $ 942,500.00, an amount a lot bigger than what he would receive
under the plan. He decided to forfeit and became Intel HK’s newest hire.
All these are indicative of the clearest intent of Cabiles to sever ties with Intel Phil.
He chose to forego his tenure with Intel Phil., with all its associated benefits, in favor
of a more lucrative job for him and his family with Intel HK.
The position of Cabiles that he was being merely assigned leads the Court to its
next point.
No Secondment Contract Exists
Cabiles views his employment in Hong Kong as an assignment or an extension of
his employment with Intel Phil. He cited as evidence the offer made to him as well
as the letter, dated January 8, 2007,27 both of which used the word "assignment" in
reference to his engagement in Hong Kong as a clear indication of the alleged
continuation of his ties with Intel Phil.
The foregoing arguments of Cabiles, in essence, speak of the "theory of
secondment."
The Court, however, is again not convinced.
The continuity, existence or termination of an employer-employee relationship in a
typical secondment contract or any employment contract for that matter is
measured by the following yardsticks:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and
4. the employer’s power to control the employee’s conduct.28
As applied, all of the above benchmarks ceased upon Cabiles’ assumption of
duties with Intel HK on February 1, 2007. Intel HK became the new employer. It
provided Cabiles his compensation. Cabiles then became subject to Hong Kong
labor laws, and necessarily, the rights appurtenant thereto, including the right of
Intel HK to fire him on available grounds. Lastly, Intel HK had control and supervision
over him as its new Finance Manager. Evidently, Intel Phil. no longer had any
control over him.
Although in various instances, his move to Hong Kong was referred to as an
"assignment," it bears stressing that it was categorized as a "permanent transfer." In
Sta. Maria v. Lopez,29 the Court held that "no permanent transfer can take place
unless the officer or employee is first removed from the position held, and then
appointed to another position." Undoubtedly, Cabiles’ decision to move to Hong
Kong required the abandonment of his permanent position with Intel Phil. in order
for him to assume a position in an entirely different company. Clearly, the "transfer"
was more than just an assignment. It constituted a severance of Cabiles’
relationship with Intel Phil., for the assumption of a position with a different
employer, rank, compensation and benefits.
Hence, Cabiles’ theory of secondment must fail.
The NLRC, however, was of the view that the transfer of Cabiles to Intel HK was
similar to his assignments in Intel Chengdu and Intel Arizona.
The Court finds this conclusion baseless.
What distinguishes Intel Chengdu and Intel Arizona from Intel HK is the lack of
intervention of Intel Phil. on the matter. In the two previous transfers, Intel Phil.
remained as the principal employer while Cabiles was on a temporary assignment.
By virtue of which, it still assumed responsibility for the payment of compensation
and benefits due him. The assignment to Intel HK, on the other hand, was a
permanent transfer and Intel Phil. never participated in any way in the process of
his employment there. It was Cabiles himself who took the opportunity and the risk.
If it were indeed similar to Intel Arizona and Intel Chengdu assignments, Intel
Philippines would have had a say in it.
Release, Waiver and Quitclaim Valid Terms Are Clear
Contrary to the conclusion affirmed by the CA, the Waiver executed by Cabiles
was valid.
In Goodrich Manufacturing Corporation, v. Ativo,30 the Court reiterated the
standards that must be observed in determining whether a waiver and quitclaim
had been validly executed:
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding
on the parties and may not later be disowned simply because of a change of
mind. It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable transaction. But where it
is shown that the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a valid and
binding undertaking.
In Callanta v. National Labor Relations Commission,31 this Court ruled that:
It is highly unlikely and incredible for a man of petitioner’s position and educational
attainment to so easily succumb to private respondent company’s alleged
pressures without even defending himself nor demanding a final audit report
before signing any resignation letter. Assuming that pressure was indeed exerted
against him, there was no urgency for petitioner to sign the resignation letter. He
knew the nature of the letter that he was signing, for as argued by respondent
company, petitioner being "a man of high educational attainment and
qualification, x x x he is expected to know the import of everything that he
executes, whether written or oral.32
Here, the NLRC concluded in its February 9, 2011 Resolution33 that the Waiver was
executed merely to allow Intel Phil. to escape its obligation to pay the retirement
benefits, thus, violative of law, morals, and public policy. The Court, however, sees
no clear evidence in the records showing that Cabiles was constrained into signing
the document. Also, it cannot be said that Cabiles did not fully understand the
consequences of signing the Waiver. Being a person well-versed in matters of
finance, it would have been impossible for him not to have comprehended the
consequences of signing a waiver. Failing to see any evidence to warrant the
disregard of the Waiver, the Court is unable to affirm the CA and, hence, declares
it as valid and binding between Cabiles and Intel Phil..
Assuming the Waiver was valid, the NLRC contended that it could not be
construed to cover the claims for the retirement pay because it had not yet
accrued at the time the document was signed by Cabiles.
The Court finds Itself unable to agree.
The terms of the Waiver are clear:
I, Jeremias P. Cabiles, Filipino, of legal age and a resident of xxx hereby
acknowledge receipt from Intel Technology Philippines, Inc. (the Company) the
amount of xxx, in full and complete settlement of all benefits due me by reason of
my lawful separation from the Company effective February 1, 2007.
In consideration of the foregoing:
1. I release, remise and forever discharge the Company, its successors-in-interest, its
stockholders, its officers, directors, agents or employees from any action, sum of
money, damages, claims and demands whatsoever, which in law or in equity I
ever had, now have, or which I, my heirs, successors and assigns hereafter may
have by reason of any matter, cause or thing whatsoever, up to the time of these
presents, the intention thereof being to completely and absolutely release the
Company, its successors-in-interest, xxx from all liabilities arising wholly, partially, or
directly from my employment with the Company.
xxx xxx xxx
5. I acknowledge that I have received all amounts that are now or in the future
may be due me from the Company. I also acknowledge that during the entire
period of my employment with the Company, I received or was paid all
compensation, benefits and privileges, to which I am entitled under all laws and
policies of the Company by reason of my past employment and/or engagement
therewith, and if I hereafter be found in any manner to be entitled to any amount,
the aforementioned monetary amount is a full and final satisfaction of any and all
such undisclosed claims. (Emphasis supplied)34
Suffice it to state that nothing is clearer than the words used in the Waiver duly
signed by Cabiles - that all claims, in the present and in the future, were waived in
consideration of his receipt of the amount of ₱165,857.62. Because the waiver
included all present and future claims, the non-accrual of benefits cannot be used
as a basis in awarding retirement benefits to him.
Lastly, even if the Court assumes that the Waiver was invalid, Cabiles nonetheless
remains disqualified as a recipient of retirement benefits because, as previously
discussed, the ten-year minimum requirement was not satisfied on account of his
early resignation.
Cabiles is not entitled to the Retirement Benefits
Having effectively resigned before completing his 10th year anniversary with Intel
Phil. and after having validly waived all the benefits due him, if any, Cabiles is
hereby declared ineligible to receive the retirement pay pursuant to the retirement
policy of Intel Phil.

For that reason, Cabiles must return all the amounts he received from Intel Phil.
pursuant to the Writ of Execution issued by the NLRC, dated September 19, 2011.

WHEREFORE, the petition is GRANTED. The assailed October 28, 2011 and February
3, 2012 Resolutions of the Court of Appeals are hereby REVERSED and SET ASIDE.

Respondent Jeremias P. Cabiles is ordered to make restitution to petitioner Intel

Technology Philippines Inc. for whatever amounts he received pursuant to the Writ
of Execution issued by the National Labor Relations Commission, dated September
19, 2011.

SO ORDERED.
G.R. No. 195190 July 28, 2014
ROYALE HOMES MARKETING CORPORATION, Petitioner,
vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative
of employee-employer relationship. Rules and regulations that merely serve as
guidelines towards the achievement of a mutually desired result without dictating
the means and methods of accomplishing it do not establish employer-employee
relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court
of Appeals (CA) in CA-G.R. SP No. 109998 which (i) reversed and set aside the
February 23, 2009 Decision4 of the National Labor Relations Commission (NLRC), (ii)
ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay
respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and
(iii) remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying
Royale Homes’ Motion for Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates,
appointed Alcantara asits Marketing Director for a fixed period of one year. His
work consisted mainly of marketing Royale Homes’ realestate inventories on an
exclusive basis. Royale Homes reappointed him for several consecutive years, the
last of which covered the period January 1 to December 31, 2003 where he held
the position of Division 5 Vice-President-Sales.8
Proceedings before the Labor Arbiter
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against
Royale Homes and its President Matilde Robles, Executive Vice-President for
Administration and Finance Ma. Melinda Bernardino, and Executive Vice- President
for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale
Homes since he is performing tasks that are necessary and desirable to its business;
that in 2003 the company gave him ₱1.2 million for the services he rendered to it;
that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to
office and sit at his table;10 and that the actsof 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. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his dismissal in
bad faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority
rights and other privileges, as well as to be paid backwages, moral and exemplary
damages, and attorney’s fees. He further sought that the ownership of the
Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its
employee. It argued that the appointment paper of Alcantara isclear that it
engaged his services as an independent sales contractorfor a fixed term of one
year only. He never received any salary, 13th month pay, overtime pay or holiday
pay from Royale Homes as hewas paid purely on commission basis. In addition,
Royale Homes 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 may deem appropriateand necessary. He is even free to recruit his own sales
personnel to assist him in pursuance of his sales target.
According to Royale Homes, Alcantara decided to leave the company after his
wife, who was once connectedwith it as a sales agent, had formed a brokerage
company that directly competed with its business, and even recruited some of its
sales agents. Although this was against the exclusivity clause of the contract,
Royale Homes still offered to accept Alcantara’s wife back so she could continue
to engage in real estate brokerage, albeit exclusively for Royale Homes. In a
special management committee meeting on October 8,2003, however, Alcantara
announced publicly and openly that he would leave the company by the end of
October 2003 and that he would no longer finish the unexpired term of his
contract. He has decided to join his wifeand pursue their own brokerage business.
Royale Homes accepted Alcantara’s decision. It then threw a despedidaparty in
his honor and, subsequently, appointed a new independent contractor. Two
months after herelinquished his post, however, Alcantara appeared in Royale
Homes and submitted a letter claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that
Alcantara is an employee of Royale Homes with a fixed-term employment period
from January 1 to December 31, 2003 and that the pre-termination of his contract
was against the law.Hence, Alcantara is entitled to an amount which he may
have earned on the average for the unexpired portion of the contract. With
regard to the impleaded corporate officers, the Labor Arbiter absolved them from
any liability.
The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the
respondent Royale Homes Marketing Corp. to pay the complainant the total
amount of TWO HUNDRED SEVENTY SEVEN THOUSAND PESOS (₱277,000.00)
representing his compensation/commission for the unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.12
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes
claimed that the Labor Arbiter grievously erred inruling that there exists an
employer-employee relationship between the parties. It insisted that the contract
between them expressly statesthat Alcantara is an independent contractor and
not an ordinary employee. Ithad no control over the means and methods by
which he performed his work. RoyaleHomes likewise assailed the award of
₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was
Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his
employment was for a fixed-term and that he is not entitled to backwages,
reinstatement, unpaid commissions, and damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision,13 ruling that 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. Being an independent contractor, the NLRC concluded
that Alcantara’s Complaint iscognizable by the regular courts.
The falloof the NLRC Decision reads:
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-
Beley dated September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE
rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009,
however, the NLRC denied his motion.
Alcantara thus filed a Petition for Certiorari 17 with the CA imputing grave abuse of
discretion on the partof the NLRC in ruling that he is not an employee of Royale
Homes and that it is the regular courts which have jurisdiction over the issue of
whether the pre-termination of the contract is valid.
Ruling of the Court of Appeals
On June 23, 2010, the CA promulgated its Decision18 granting Alcantara’s Petition
and reversing the NLRC’s Decision. Applying the four-fold and economic reality
tests, it held thatAlcantara is an employee of Royale Homes. 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 anemployee of said company.
The CA further held that Alcantara’s termination from employment was without
any valid or just cause, and it was carried out in violation of his right to procedural
due process. Thus, the CA ruled that he isentitled to backwages and separation
pay, in lieu of reinstatement. Considering,however, that the CA was not satisfied
with the proofadduced to establish the amount of Alcantara’s annual salary, it
remanded the caseto the Labor Arbiter to determine the same and the monetary
award he is entitled to. With regard to the corporate officers, the CA absolved
them from any liability for want of clear proof that they assented to the patently
unlawful acts or that they are guilty of bad faith orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed
decision of the National Labor Relations Commission in NLRC NCR CASE NO. 00-12-
14311-03 NLRC CA NO. 046104-05 dated February 23, 2009 as well as the Resolution
dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering the
respondent company to pay petitioner backwages which shall be computed from
the time of his illegal termination in October 2003 up to the finality of this decision,
plus separation pay equivalent to one month salary for every year of service. This
case is REMANDED to the Labor Arbiter for the proper determination and
computation of back wages, separation pay and other monetary benefits that
petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for
Reconsideration.21 In a Resolution22 dated January 18, 2011, however, the CA
denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following
issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT
 OF RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN
FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW
IN DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT IN THE
CASEOF TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE
RULINGS OF SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW
IN DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN
REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous
−it engaged his services as an independent contractor. This can be readily seen
from the contract stating that no employer-employee relationship exists between
the parties; that Alcantara was free to solicit sales at any time and by any manner
he may deem appropriate; that he may recruit sales personnel to assist him in
marketing Royale Homes’ inventories; and, thathis remunerations are dependent
on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised
control over Alcantara based on a shallow ground that his performance is subject
to company rules and regulations, code of ethics, periodic evaluation, and
exclusivity clause of contract. RoyaleHomes maintains that it is expected to
exercise some degree of control over its independent contractors,but that does
not automatically result in the existence ofemployer-employee relationship. For
control to be consideredas a proof tending to establish employer-employee
relationship, the same mustpertain to the means and method of performing the
work; not on the relationship of the independent contractors among themselves or
their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss
Alcantara. It was Alcantara who openly and publicly declared that he was pre-
terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an
independent contractor or anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an
employee or an independent contractor involves an evaluation of factual matters
which, ordinarily, is not within the province of this Court. In view of the conflicting
findings of the tribunals below, however, this Court is constrained to go over the
factual matters involved in this case.24
The juridical relationship of the parties based on their written contract
The primary evidence of the nature of the parties’ relationship in this case is the
written contract that they signed and executed in pursuanceof their mutual
agreement. While the existence of employer-employee relationship is a matter of
law, the characterization made by the parties in their contract as to the nature of
their juridical relationship cannot be simply ignored, particularly in this case where
the parties’ written contractunequivocally states their intention at the time they
entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it
was held that:
To be sure, the Agreement’s legal characterization of the nature of the relationship
cannot be conclusive and binding on the courts; x x x the characterization of the
juridical relationship the Agreement embodied is a matter of law that is for the
courts to determine. At the same time, though, the characterization the parties
gave to their relationship in the Agreement cannot simply be brushed aside
because it embodiestheir intent at the time they entered the Agreement, and they
were governed by this understanding throughout their relationship. At the very
least, the provision on the absence of employer- employee relationship between
the parties can be an aid in considering the Agreement and its implementation,
and in appreciating the other evidence on record.26
In this case, the contract,27 duly signed and not disputed by the parties,
conspicuously provides that "no employer-employee relationship exists between"
Royale Homes and Alcantara, as well as his sales agents. It is clear that they did
not want to be bound by employer-employee relationship atthe time ofthe signing
of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE
HOMES MARKETING CORPORATION effective January 1, 2003 to December 31,
2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE
BASIS under such price, terms and condition to be provided to you from time to
time.
As such, you can solicit sales at any time and by any manner which you deem
appropriate and necessary to market our real estate inventories subject to rules,
regulations and code of ethics promulgated by the company. Further, you are free
to recruit sales personnel/agents to assist you in marketing of our inventories
provided that your personnel/agents shall first attend the required seminars and
briefing to be conducted by us from time to time for the purpose of familiarizing
them of terms and conditionsof sale, the natureof property sold, etc., attendance
of which shall be a condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning
January 1, 2003 booked by your sales agents.
2. Budget allocation depending on your division’s sale
performance as per our budget guidelines.
3. Sales incentive and other forms of company support which
may be granted from time to time. It is understood, however, that
no employer-employee relationship exists between us, that of
your sales personnel/agents, and that you shall hold our
company x x x, its officers and directors, free and harmless from
any and all claims of liability and damages arising from and/or
incident to the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of
any company rules and regulations, policies and code of ethics upon notice for
justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which
shall be determined by the management.
If you are amenable to the foregoing terms and conditions, please indicate your
conformity by signing on the space provided below and return [to] us a duplicate
copy of this letter, duly accomplished, to constitute as our agreement on the
matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of itsstipulations should control."28 No
construction is even needed asthey already expressly state their intention. Also, this
Court adopts the observation of the NLRC that it is rather strange on the part of
Alcantara, an educated man and a veteran sales broker who claimed to be
receiving ₱1.2 million as his annual salary, not to have contested the portion of the
contract expressly indicating that he is not an employee of Royale Homes if their
true intention were otherwise.
The juridical relationship of the parties based on Control Test
In determining the existence of an employer-employee relationship, this Court has
generally relied on the four-fold test, to wit: (1) the selection and engagement of
the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the
employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished.29 Among the four, the most
determinative factor in ascertaining the existence of employeremployee
relationship is the "right of control test".30 "It is deemed to be such an important
factor that the other requisites may even be disregarded."31 This holds true where
the issues to be resolved iswhether a person who performs work for another is the
latter’s employee or is an independent contractor,32 as in this case. For where the
person for whom the services are performed reserves the right to control not only
the end to beachieved, but also the means by which such end is reached,
employer-employee relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated
that since the performance of his tasks is subject to company rules, regulations,
code of ethics, and periodic evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee
relationship.1âwphi1 A person who performs work for another and is subjected to
its rules, regulations, and code of ethics does not necessarily become an
employee.34 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 Insular Life Assurance Co., Ltd. v.
National Labor Relations Commission35 it was pronounced that:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the
means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employeremployee relationship
unlike the second, which address both the result and the means used to achieve it.
x x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code
of ethics, and periodic evaluation alluded to byAlcantara do not involve control
over the means and methods by which he was to performhis job. Understandably,
Royale Homes has to fix the price, impose requirements on prospective buyers,
and lay down the terms and conditionsof the sale, including the mode of
payment, which the independent contractors must follow. It is also necessary for
Royale Homes to allocateits inventories among its independent contractors,
determine who has priority in selling the same, grant commission or allowance
based on predetermined criteria, and regularly monitor the result of their marketing
and sales efforts. But tothe mind of this Court, these do not pertain to the means
and methods of how Alcantara was to perform and accomplish his task of
soliciting sales. They do not dictate upon him the details of how he would solicit
sales or the manner as to how he would transact business with prospective clients.
In Tongko, this Court held that guidelines or rules and regulations that do notpertain
to the means or methodsto be employed in attaining the result are not indicative
of control as understood inlabor law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is
that a commitment to abide by the rules and regulations of an insurance
company does not ipso factomake the insurance agent an employee. Neither do
guidelines somehow restrictive of the insurance agent’s conduct necessarily
indicate "control" as this term is defined in jurisprudence. Guidelines indicative of
labor law "control," as the first Insular Lifecase tells us, should not merely relate to
the mutually desirable result intended by the contractual relationship; they must
have the nature of dictating the means or methods to beemployed in attaining
the result, or of fixing the methodology and of binding or restricting the party hired
to the use of these means.In fact, results-wise, the principal can impose production
quotas and can determine how many agents, with specific territories, ought to be
employed to achieve the company’s objectives. These are management policy
decisions that the labor law element of control cannot reach. Our ruling in these
respects in the first Insular Lifecase was practically reiterated in Carungcong. Thus,
as will be shown more fully below, Manulife’s codes of conduct, all of which do not
intrude into the insurance agents’ means and manner of conducting their sales
and only control them as to the desired results and Insurance Code norms, cannot
be used as basis for a finding that the labor law concept of control existed
between Manulife and Tongko.37 (Emphases in the original)
As the party claiming the existence of employer-employee relationship, it behoved
upon Alcantara to prove the elements thereof, particularly Royale Homes’ power
of control over the means and methods of accomplishing the work.38 He, however,
failed to cite specificrules, regulations or codes of ethics that supposedly imposed
control on his means and methods of soliciting sales and dealing with prospective
clients. On the other hand, this case is replete with instances that negate the
element of control and the existence of employer-employee relationship. Notably,
Alcantara was not required to observe definite working hours. 39 Except for soliciting
sales, RoyaleHomes did not assign other tasks to him. He had full control over the
means and methods of accomplishing his tasks as he can "solicit sales at any time
and by any manner which [he may] deem appropriate and necessary." He
performed his tasks on his own account free from the control and direction of
Royale Homes in all matters connected therewith, except as to the results
thereof.40
Neither does the repeated hiring of Alcantara prove the existence of employer-
employee relationship.41 As discussed above, the absence of control over the
means and methodsdisproves employer-employee relationship. The continuous
rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes,
and highlights his satisfactory services warranting the renewal of such contract. Nor
does the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals,42 it was held that exclusivity of
contract does not necessarily result in employer-employee relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit business
exclusively for Pamana did not mean that Pamana exercised control over the
means and methods of Consulta’s work as the term control is understood in labor
jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did
not prohibit Consulta from engaging in any other business, or from being
connected with any other company, for aslong as the business [of the] company
did not compete with Pamana’s business.43
The same scenario obtains in this case. Alcantara was not prohibited from
engaging in any other business as long as he does not sell projects of Royale
Homes’ competitors. He can engage in selling various other products or engage in
unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the
contract, Alcantara’s remunerations consist only of commission override of 0.5%,
budget allocation, sales incentive and other forms of company support. There is no
proof that he received fixed monthly salary. No payslip or payroll was ever
presented and there is no proof that Royale Homes deducted from his supposed
salary withholding tax or that it registered him with the Social Security System,
Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint
merely states a ballpark figure of his alleged salary of ₱100,000.00, more or less. All
of these indicate an independent contractual relationship.44 Besides, if Alcantara
indeed consideredhimself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he was being
denied statutorily mandated benefits. But for nine consecutive years, he kept mum
about it, signifying that he has agreed, consented, and accepted the fact that he
is not entitled tothose employee benefits because he is an independent
contractor.
This Court is, therefore,convinced that Alcantara is not an employee of Royale
Homes, but a mere independent contractor. The NLRC is, therefore, correct in
concluding that the Labor Arbiter has no jurisdiction over the case and that the
same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of
the Court of Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The
February 23, 2009 Decision of the National Labor Relations Commission is
REINSTATED and AFFIRMED. SO ORDERED.
January 13, 2016
G.R. No.187691
OLYMPIA HOUSING, INC., Petitioner,
vs.
ALLAN LAPASTORA and IRENE UBALUBAO, Respondents.
DECISION
REYES, J.:
This is a Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court,
assailing the Decision2 dated April 28, 2009 of the Court of Appeals (CA) in CA-G.R.
SP No. 103699, which affirmed the Decision dated December 28, 2007 and
Resolution3 dated February 29, 2008 of the National Labor Relations Commission
(NLRC) in NLRC NCR Case No. 30-03-00976-00.
The instant case stemmed from a complaint for illegal dismissal, payment of
backwages and other benefits, and regularization of employment filed by Allan
Lapastora (Lapastora) and Irene Ubalubao (Ubalubao) against Olympic Housing,
Inc. (OHI), the entity engaged in the management of the Olympia Executive
Residences (OER), a condominium hotel building situated in Makati City, owned by
a Philippine-registered corporation known as the Olympia Condominium
Corporation (OCC). The complaint, which was docketed as NLRC NCR Case No.
30-03-00976-00 (NLRC NCR CA No. 032043-02), likewise impleaded as defendants
the part owner of OHI, Felix Limcaoco (Limcaoco), and Fast Manpower and Allied
Services Company, Inc. (Fast Manpower). Lapastora and Ubalubao alleged that
they worked as room attendants of OHI from March 1995 and June 1997,
respectively, until they were placed on floating status on February 24, 2000,
through a memorandum sent by Fast Manpower.4
To establish employer-employee relationship with OHI, Lapastora and Ubalubao
alleged that they were directly hired by the company and received salaries
directly from its operations clerk, Myrna Jaylo (Jaylo). They also claimed that OHI
exercised control over them as they were issued time cards, disciplinary action
reports and checklists of room assignments. It was also OHI which terminated their
employment after they petitioned for regularization. Prior to their dismissal, they
were subjected to investigations for their alleged involvement in the theft of
personal items and cash belonging to hotel guests and were summarily dismissed
by OHI despite lack of evidence.5
For their part, OHI and Limcaoco alleged that Lapastora and Ubalubao were not
employees of the company but of Fast Manpower, with which it had a contract of
services, particularly, for the provision of room attendants. They claimed that Fast
Manpower is an independent contractor as it (1) renders janitorial services to
various establishments in Metro Manila, with 500 janitors under its employ; (2)
maintains an office where janitors assemble before they are dispatched to their
assignments; (3) exercises the right to select, refuse or change personnel assigned
to OHI; and (4) supervises and pays the wages of its employees. 6
Reinforcing OHI’s claims, Fast Manpower reiterated that it is a legitimate
manpower agency and that it had a valid contract of services with OHI, pursuant
to which Lapastora and Ubalubao were deployed as room attendants. Lapastora
and Ubalubao were, however, found to have violated house rules and regulations
and were reprimanded accordingly. It denied the employees’ claim that they
were dismissed and maintained they were only placed on floating status for lack of
available work assignments.7
Subsequently, on August 22, 2000, a memorandum of agreement was executed,
stipulating the transfer of management of the OER from OHI to HSAI-Raintree, Inc.
(HSAI-Raintree). Thereafter, OHI informed the Department of Labor and
Employment (DOLE) of its cessation of operations due to the said change of
management and issued notices of termination to all its employees. This
occurrence prompted some union officers and members to file a separate
complaint for illegal dismissal and unfair labor practice against OHI, OCC and
HSAI-Raintree, docketed as NLRC NCR CN 30-11-04400-00 (CA No. 032193-02),
entitled Malonie D. Ocampo, et al. v. Olympia Housing, Inc., et al. (Ocampo v.
OHI). This complaint was, however, dismissed for lack of merit. The complainants
therein appealed the said ruling to the NLRC.8
Meanwhile, on May 10, 2002, the Labor Arbiter (LA) rendered a Decision9 in the
instant case, holding that Lapastora and Ubalubao were regular employees of OHI
and that they were illegally dismissed. The dispositive portion of the decision reads
as follows:
WHEREFORE, finding complainants to have been illegally dismissed and as regular
employees of [OHI] the latter is ordered to reinstate complainants to their former
position or substantially equal position without loss of seniority rights and benefits.
[OHI] is further ordered to pay complainants backwages, service incentive leave
pay and attorney’s fees as follows:
1. Backwages:
[Lapastora] - P171,616.60 and
[Ubalubao] - P170,573.44 from February 24, 2000 to date of
decision which shall further be adjusted until their actual
reinstatement.
2. P3,305.05 - ILP for Lapastora
3. P3,426.04 - SILP for Ubalubao
4. 10% of the money awards as attorney’s fees.
Other claims are dismissed for lack of merit.
The claim against [Limcaoco] is hereby dismissed for lack of merit.
SO ORDERED.10
In ruling for the existence of employer-employee relationship, the LA held that OHI
exercised control and supervision over Lapastora and Ubalubao through its
supervisor, Anamie Lat. The LA likewise noted that documentary evidence
consisting of time cards, medical cards and medical examination reports all
indicated OHI as employer of the said employees.
Moreover, the affidavit of OHI’s housekeeping coordinator, Jaylo, attested to the
fact that OHI is the one responsible for the selection of employees for its
housekeeping department. OHI also paid the salaries of the housekeeping staff by
depositing them to their respective ATM accounts. That there is a contract of
services between OHI and Fast Manpower did not rule out the existence of
employer-employee relationship between the former and Lapastora and
Ubalubao as it appears that the said contract was a mere ploy to circumvent the
application of pertinent labor laws particularly those relating to security of tenure.
The LA pointed out that the business of OHI necessarily requires the services of
housekeeping aides, room boys, chambermaids, janitors and gardeners in its daily
operations, which is precisely the line of work being rendered by Lapastora and
Ubalubao.11
Both parties appealed to the NLRC. OHI asseverated that the reinstatement of
Lapastora and Ubalubao was no longer possible in view of the transfer of the
management of the OER to HSAI-Raintree.12
On December 28, 2007, the NLRC rendered a decision, dismissing the appeal for
lack of merit, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, the appeals of both the respondents and the
complainants are DISMISSED, and the Decision of the [LA] is hereby AFFIRMED. All
other claims are dismissed for lack of merit.13
The NLRC held that OHI is the employer of Lapastora and Ubalubao since Fast
Manpower failed to establish the fact that it is an independent contractor. Further,
it ruled that the memorandum of agreement between OCC and HSAI-Raintree did
not render the reinstatement of Lapastora and Ubalubao impossible since a
change in the management does not automatically result in a change of
personnel especially when the memorandum itself did not include a provision on
that matter.14
Unyielding, OHI filed its Motion for Reconsideration15 but the NLRC denied the same
in a Resolution16 dated February 29, 2008.
In the meantime, in Ocampo v. OHI, the NLRC rendered a Decision17 dated
November 22, 2002, upholding the validity of the cessation of OHI’s operations and
the consequent termination of all its employees. It stressed that the cessation of
business springs from the management’s prerogative to do what is necessary for
the protection of its investment, notwithstanding adverse effect on the employees.
The discharge of employees for economic reasons does not amount to unfair labor
practice.18 The said ruling of the NLRC was elevated on petition for certiorari to the
CA, which dismissed the same in Resolutions dated November 28, 200319 and June
23, 2004.20 The mentioned resolutions were appealed to this Court and were
docketed as G.R. No. 164160, which was, however, denied in the
Resolution21 dated July 26, 2004 for failure to comply with procedural rules and lack
of reversible error on the part of the CA.
Ruling of the CA
OHI, upon receipt of the adverse decision in NLRC NCR Case No. 30-03-00976-00,
filed a Petition for Certiorari22with the CA, praying that the Decision dated
December 28, 2007 and Resolution dated February 29, 2008 of the NLRC be set
aside. It pointed out that in the related case of Ocampo v. OHI, the NLRC took into
consideration the supervening events which transpired after the supposed
termination of Lapastora and Ubalubao, particularly OHI’s closure of business on
October 1, 2000. The NLRC then likewise upheld the validity of the closure of
business and the consequent termination of employees in favor of OHI, holding
that the measures taken by the company were proper exercises of management
prerogative. OHI argued that since the said disposition of the NLRC in Ocampo v.
OHI was affirmed by both the CA and the Supreme Court, the principle of stare
decisis becomes applicable and the issues that had already been resolved in the
said case may no longer be relitigated.23 At any rate, OHI argued that it could not
be held liable for illegal dismissal since Lapastora and Ubalubao were not its
employees.24
On April 28, 2009, the CA rendered a Decision25 dismissing the petition, the
dispositive portion of which reads as follows:
WHEREFORE, the petition for certiorari is DISMISSED. The NLRC’s Decision dated
December 28, 2007 and Resolution dated February 29, 2008 in NLRC NCR Case No.
30-03-00976-00 (NLRC NCR CA No. 032043-02) are AFFIRMED.
SO ORDERED.26
The CA ruled that OHI’s cessation of operations on October 1, 2000 is not a
supervening event because it transpired long before the promulgation of the LA’s
Decision dated May 10, 2002 in the instant case. In the same manner, the ruling of
the NLRC in Ocampo v. OHI does not constitute stare decisis to the present petition
because of the apparent dissimilarities in the attendant circumstances. For
instance, Ocampo v. OHI was founded on the union members’ allegation that
OHI’s claim of substantial financial losses to support closure of business lacked
evidence, while in the instant case, Lapastora and Ubalubao claimed illegal
dismissal on account of their being placed on floating status after they were
implicated in a theft case. The differences in the facts and issues in the two cases
rule out the invocation of the doctrine. The CA added that the prevailing
jurisprudence is that the NLRC decision upholding the validity of the closure of
business and retrenchment of employees resulting therefrom will not preclude it
from decreeing the illegality of an employee’s dismissal. Considering that OHI
failed to prove that the memorandum of agreement between OCC and HSAI-
Raintree had any effect on the employment of Lapastora and Ubalubao or that
there is any other valid or authorized cause for their termination from employment,
the CA concluded that they were unlawfully dismissed.27
Unyielding, OHI filed the instant petition, reiterating its arguments before the CA. It
added that, even assuming that the facts warrant a finding of illegal dismissal, the
cessation of operations of the company is a supervening event that should limit the
award of backwages to Lapastora and Ubalubao until October 1, 2000 only and
justify the deletion of the order of reinstatement. After all, it complied with the
notice requirements of the DOLE for a valid closure of business.28
On April 4, 2011, Ubalubao, on her own behalf, filed a Motion to Dismiss/Withdraw
Complaint and Waiver,29 stating that she has decided to accept the financial
assistance in the amount of ₱50,000.00 offered by OHI, in lieu of all the monetary
claims she has against the company, as full and complete satisfaction of any
judgment that may be subsequently rendered in her favor. She likewise informed
the Court that she had willingly and knowingly executed a quitclaim and waiver
agreement, releasing OHI from any liability. She thus prayed for the dismissal of the
complaint she filed against OHI.
In a Resolution30 dated January 16, 2012, the Court granted Ubalubao’s motion
and considered the case closed and terminated as to her part, leaving Lapastora
as the lone respondent in the present petition.
Ruling of the Court
Lapastora was illegally dismissed
Indisputably, Lapastora was a regular employee of OHI. As found by the LA, he has
been under the continuous employ of OHI since March 3, 1995 until he was placed
on floating status in February 2000. His uninterrupted employment by OHI, lasting
for more than a year, manifests the continuing need and desirability of his services,
which characterize regular employment. Article 280 of the Labor Code provides as
follows:
Art. 280. Regular and casual employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties,
an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed
for a specific project or undertaking, the completion or termination of which has
been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for
the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.
Based on records, OHI is engaged in the business of managing residential and
commercial condominium units at the OER. By the nature of its business, it is
imperative that it maintains a pool of housekeeping staff to ensure that the
premises remain an uncluttered place of comfort for the occupants. It is no
wonder why Lapastora, among several others, was continuously employed by OHI
precisely because of the indispensability of their services to its business. The fact
alone that Lapastora was allowed to work for an unbroken period of almost five
years is all the same a reason to consider him a regular employee.
The attainment of a regular status of employment guarantees the employee’s
security of tenure that he cannot be unceremoniously terminated from
employment. "To justify fully the dismissal of an employee, the employer must, as a
rule, prove that the dismissal was for a just cause and that the employee was
afforded due process prior to dismissal. As a complementary principle, the
employer has the onus of proving with clear, accurate, consistent, and convincing
evidence the validity of the dismissal."31
OHI miserably failed to discharge its burdens thus making Lapastora’s termination
illegal.
On the substantive aspect, it appears that OHI failed to prove that Lapastora’s
dismissal was grounded on a just or authorized cause. While it claims that it had
called Lapastora’s attention several times for tardiness, unexplained absences and
loitering, it does not appear from the records that the latter had been notified of
the company’s dissatisfaction over his performance and that he was made to
explain his supposed infractions. It does not even show from the records that
Lapastora was ever disciplined because of his alleged tardiness. In the same
manner, allegations regarding Lapastora’s involvement in the theft of personal
items and cash belonging to hotel guests remained unfounded suspicions as they
were not proven despite OHI’s probe into the incidents.
On the procedural aspect, OHI admittedly failed to observe the twin notice rule in
termination cases. As a rule, the employer is required to furnish the concerned
employee two written notices: (1) a written notice served on the employee
specifying the ground or grounds for termination, and giving to said employee
reasonable opportunity within which to explain his side; and (2) a written notice of
termination served on the employee indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination.32 In the
present case, Lapastora was not informed of the charges against him and was
denied the opportunity to disprove the same. He was summarily terminated from
employment.
OHI argues that no formal notices of investigation, notice of charges or termination
was issued to Lapastora since he was not an employee of the company but of Fast
Manpower.
The issue of employer-employee relationship between OHI and Lapastora had
been deliberated and ruled upon by the LA and the NLRC in the affirmative on the
basis of the evidence presented by the parties. The LA ruled that Lapastora was
under the effective control and supervision of OHI through the company
supervisor. She gave credence to the pertinent records of Lapastora’s
employment, i.e., timecards, medical records and medical examinations, which all
indicated OHI as his employer. She likewise noted Fast Manpower’s failure to
establish its capacity as independent contractor based on the standards provided
by law.
That there is an existing contract of services between OHI and Fast Manpower
where both parties acknowledged the latter as the employer of the housekeeping
staff, including Lapastora, did not alter established facts proving the contrary. The
parties cannot evade the application of labor laws by mere expedient of a
contract considering that labor and employment are matters imbued with public
interest. It cannot be subjected to the agreement of the parties but rather on
existing laws designed specifically for the protection of labor. Thus, it had been
repeatedly stressed in a number of jurisprudence that "[a] party cannot dictate, by
the mere expedient of a unilateral declaration in a contract, the character of its
business, i.e., whether as labor-only contractor or as job contractor, it being crucial
that its character be measured in terms of and determined by the criteria set by
statute."33
The Court finds no compelling reason to deviate from the findings of the LA and
NLRC, especially in this case when the same was affirmed by the CA. It is settled
that findings of fact made by LAs, when affirmed by the NLRC, are entitled not only
to great respect but even finality and are binding on this Court especially when
they are supported by substantial evidence.34
The principle of stare decisis is not applicable
Still, OHI argues that the legality of the closure of its business had been the subject
of the separate case of Ocampo v. OHI, where the NLRC upheld the validity of the
termination of all the employees of OHI due to cessation of operations. It asserts
that since the ruling was affirmed by the CA and, eventually by this Court, the
principle of stare decisis becomes applicable. Considering the closure of its
business, Lapastora can no longer be reinstated and should instead be awarded
backwages up to the last day of operations of the company only, specifically on
October 1, 2000.35
In Ting v. Velez-Ting,36 the Court elaborated on the principle of stare decisis, thus:
The principle of stare decisis enjoins adherence by lower courts to doctrinal rules
established by this Court in its final decisions. It is based on the principle that once
a question of law has been examined and decided, it should be deemed settled
and closed to further argument. Basically, it is a bar to any attempt to relitigate the
same issues, necessary for two simple reasons: economy and stability. In our
jurisdiction, the principle is entrenched in Article 8 of the Civil Code.37 (Citations
omitted)
Verily, the import of the principle is that questions of law that have been decided
by this Court and applied in resolving earlier cases shall be deemed the prevailing
rule which shall be binding on future cases dealing on the same intricacies. Apart
from saving the precious time of the Court, the application of this principle is
essential to the consistency of the rulings of the Court which is significant in its role
as the final arbiter of judicial controversies.
The CA correctly ruled that the principle of stare decisis finds no relevance in the
present case. To begin with, there is no doctrine of law that is similarly applicable in
both the present case and in Ocampo v. OHI. While both are illegal dismissal
cases, they are based on completely different sets of facts and involved distinct
issues. In the instant case, Lapastora cries illegal dismissal after he was arbitrarily
placed on a floating status on mere suspicion that he was involved in theft
incidents within the company premises without being given the opportunity to
explain his side or any formal investigation of his participation. On the other hand,
in Ocampo v. OHI, the petitioners therein questioned the validity of OHI’s closure of
business and the eventual termination of all the employees. Thus, the NLRC ruled
upon both cases differently.
Nonetheless, the Court finds the recognition of the validity of OHI’s cessation of
business in the Decision dated November 22, 2002 of the NLRC, which was affirmed
by the CA and this Court, a supervening event which inevitably alters the
judgment award in favor of Lapastora. The NLRC noted that OHI complied with all
the statutory requirements, including the filing of a notice of closure with the DOLE
and furnishing written notices of termination to all employees effective 30 days
from receipt.38 OHI likewise presented financial statements substantiating its claim
that it is operating at a loss and that the closure of business is necessary to avert
further losses.39 The action of the OHI, the NLRC held, is a valid exercise of
management prerogative.
Thus, while the finding of illegal dismissal in favor of Lapastora subsists, his
reinstatement was rendered a legal impossibility with OHI’s closure of
business.1âwphi1 In Galindez v. Rural Bank of Llanera, Inc.,40 the Court noted:
Reinstatement presupposes that the previous position from which one had been
removed still exists or there is an unfilled position more or less of similar nature as the
one previously occupied by the employee. Admittedly, no such position is
available. Reinstatement therefore becomes a legal impossibility. The law cannot
exact compliance with what is impossible.41
Considering the impossibility of Lapastora’s reinstatement, the payment of
separation pay, in lieu thereof, is proper. The amount of separation pay to be
given to Lapastora must be computed from March 1995, the time he commenced
employment with OHI, until the time when the company ceased operations in
October 2000.42 As a twin relief, Lapastora is likewise entitled to the payment of
backwages, computed from the time he was unjustly dismissed, or from February
24, 2000 until October 1, 2000 when his reinstatement was rendered impossible
without fault on his part.43

Finally, for OHI’s failure to prove the fact of payment, the Court sustains the award
for the payment of service incentive leave pay and 13th month pay. The rule, as
stated in Mantle Trading Services, Inc. and/or Del Rosario v. NLRC, et al.,44 is that
"the burden rests on the employer to prove payment, rather than on the employee
to prove nonpayment. The reason for the rule is that the pertinent personnel files,
payrolls, records, remittances and other similar documents — which will show that
overtime, differentials, service incentive leave and other claims of workers have
been paid — are not in the possession of the employee but in the custody and
absolute control of the employer."45 Considering that OHI did not dispute
Lapastora’s claim for nonpayment of the mentioned benefits and opted to
disclaim employer-employee relationship, the presumption is that the said claims
were not paid.

The award for attorney’s fees of 10% of the monetary awards is likewise sustained
considering that Lapastora was forced to litigate and, thus, incurred expenses to
protect his rights and interests.46

WHEREFORE, the Decision dated April 28, 2009 of the Court of Appeals in CA-G.R.
SP No. 103699 is AFFIRMED with MODIFICATION in that OHI is hereby ORDERED to
pay Allan Lapastora the following: (1) separation pay, in lieu of reinstatement,
computed from the time of his employment until the time of its closure of business,
or from March 1995 to October 2000; (2) backwages, computed from the time of
illegal dismissal until cessation of business, or from February 24, 2000 to October 1,
2000; (3) service incentive leave pay and 13th month pay; and (4) attorney's fees.

SO ORDERED.

BIENVENIDO L. REYES
Associate Justice