JOSE SONZA VS ABSCBN BROADCASTING CORPORATION

FACTS:

Respondent ABSCBN signed an agreement with Mel and Jay Mngmt and Devt Corporation. ABSCBN was
represented by its corporate officers, while MJMDC was represented by Sonza, President and General Manager,
and Carmela Tiangco, EVP and Treasurer.

As referred to as agent, Sonza agreed to provide services to respondent as talent for radio and television. 1) as co-
host for Mel and Jay M-F, 8-10AM, and on Sundays 5:30-7PM

Respondent agreed to pay Sonza monthly talent fee of 310K for first year, 317K for second and third of the
agreement. respondent would pay the talent fees on the 10 th and 25th.

1996 – Sonza wrote a letter to respondent saying that he already resigned; that they considered these act in violation
of the agreement and the station; that Sonza is also revoking and renouncing recovery of the remaining amount
stipulated, but reserves the right to seek recovery of the benefits under said agreement.

Sonza then filed a complaint against respondent, before DOLE, on the ground that respondent did not pay his
salaries, separation pay, SIL pay, 13th month pay, signing bonus, travel allowance, anf amounts due under the
Employment stock option plan.

Meanwhile, respondent continued to remit talent fees to petitioner this its account in PCIBank and even opened a
new account and deposited Sonza’s talent fees and other payment due.

Labor Arbiter then considered the case submitted for resolution. Respondent contention: 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.

LA decision dated July 8, 1997: 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.

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.
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.

SONZA then appealed to the NLRC, affirmed the LA, filed MR, denied. SONZA filed certiorari to CA. then
petition to the SC.

CA affirmed the NLRC finding that there is no E-E relationship existed between SONZA and respondent.
- That the relationship merely exist between the principal Sonza and Agent MJMDC, not between ABSCBN
and MJMDC

ISSUE: WON THERE EXIT E-E RELATIONSHIP BETWEEN SONZA AND ABSCBN

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HELD:

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.

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.

Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.

***elements of an employeremployee 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.
FIRST REQUISITE: ABSCBN engaged SONZA's services to co-host its television and radio programs because of
SONZA's peculiar skills, talent and celebrity status.

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.

SECOND REQUISITE: 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, . . . 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.

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.

THIRD REQUISITE: 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.

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 ABSCBN. It even paid Sonza the talent fee even after the ABSCBN ceased his program since the
agreement is still subsisting.

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.

FOURTH REQUISITE: 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

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from an independent contractor. This test is based on the extent of control the hirer exercises over a worker. The
greater the supervision and control the hirer exercises, the more likely the worker is deemed an employee. The
converse holds true as well — the less control the hirer exercises, the more likely the worker is considered an
independent contractor.

First , SONZA contends that ABS-CBN exercised control over the means and methods. In the negative.

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 postproduction staff meeting.

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’s contention: the fact that respondent has the power to dismiss the program shows control) 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

(Sonza’s contention: respondent exercised control over his work by supplying all equipment and crew) 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.
.

A radio broadcast specialist who works under minimal supervision is an independent contractor.
(Sonza’s contention: he is obliged to follow set of rules and regulations = control) 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.

(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.

MJMDC as agent of SONZA

LA ruled that: as a talent of MJMDC, Sonza is not an employee of the ABSCBN. SONZA insists that MJMDC is a
labor-only contractor - The law makes the principal responsible to the employees of the "labor-only contractor" as if
the principal itself directly hired or employed the employees. These circumstances are not present in this case

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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 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. 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.

Policy Instruction no. 40

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.

Talents as Independent Contractor

The right of labor to security of tenure as guaranteed in the Constitution arises only if there is an employer-
employee relationship under labor laws. Not every performance of services for a fee creates an employer-employee
relationship.

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.

Tax treatment

- Talents, television and radio broadcasters are subject to the 10% VAT on services they rendered.

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.

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MAKATI HABERDASHERY VS NLRC

- While the private respondents are entitled of minimum wage, COLA and 13 th month pay, they are not
entitled to service incentive leave pay because as a piece-rate workers being paid at a fixed amount for
performing work irrespective of time consumed in the performance.

Makati Haberdashery – petitioners

Pablo S. Bernardo – private respondents

FACTS:

 Private respondents have been working for petitioners Makati Haberdashery as tailors, seamstress, sewers,
basters and plantsadora. They are paid on a piece-rate basis except Maria Angeles and Leonila Serafina
who are paid on monthly basis.
 In addition to piece-rate, they are given a daily allowance of 3.00 provided they report for work before 9am
every day.
 Private respondents are required to work 9:30am to 7pm, Mon-Sat. and Sundays during peak periods and
holidays.
 July 20, 1984, Sandigan ng manggagawang Pilipino, labor organization of the private respondents filed a
complaint (NLRC CASE NO 7-2603-84) 1) non-payment of overtime work 2) underpayment of wages 3)
underpayment of living allowances 4) nonpayment of holiday pay 5) nonpayment of service incentive pay,
13th month pay,
 During pendency case, private respondent Dioscoro Pelobello left with Salvador Rivera an open package
which contained jusi barong tagalog.
 Pelobello replied that the same was ordered by respondent Casimiro Zapata for his customer.
 Zapata allegedly admitted that he copied the design of petitioner. But when asked in the afternoon, they
denied ownership of the same. Both of them were asked to explain why actions should not be taken
against them for accepting job order which is prejudicial and direct competition with the business of
the compay.
 Feb 4, 1985, both respondents did not submit their explanation and did not report for work and was
dismissed by the petitioner. They countered by filing a complaint for illegal dismissal NLRC CASE NO.
2-428-85.
 June 10, 1986, Labor Arbiter Coferina J Diosana rendered judgment, “(NLRC CASE NO 2-428-85)
finding respondents guilty of illegal dismissal and ordering them to reinstate Discoro Pelobello and
Casimiro Zapata. In NLRC CASE NO 7-26030-84, complainants claim for underpayment is hereby
dismissed for lack of merit.

 Petitioners appealed to the NLRC, affirmed said decision, entitled of the back wages equivalent to one year.
FILED AN INSTANT PETITION RAISING THE FF ISSUES:

- Whether or not employee-employer relationship exists bet. petitioner Haberdashery and

respondents workers
- Whether or not respondents are entitled to monetary claims despite the finding that they are not
entitled to minimum wage
- Whether or not respondents Zapata and Pelobello are illegally dismissed

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HELD

 FIRST ISSUE: Control is present. First issue is resolved in favor of the PR. When a customer enters to a
contract with haberdashery, the latter directs an employee who may be a tailor, pattern maker, sewer
to take customer’s measurements. Supervision is actively manifested – the manner and quality of
cutting, sewing, ironing.
 The presence of control is immediately manifested in this memorandum issued by Assistant Manager
Cecilio B. Inocencio Jr.
 It is evident that petitioner has reserved the right to control it employees not only as to the result but also
the means and methods by which the same are to be accomplished.
 PR are rreular employees, they have to report to work regularly rom 9:30am-6/7pm.
 PR did not exercise independence in their own methods, but on the contrary were subject to the control of
petitioners from the beginning of the task to their completion.
 Unlike independent contractors who generally rely on their own resources, the equipment, tools,
accessories, and paraphernalia used by private respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these aspects.

SECOND ISSUE: PR are entitled to the Minimum wage in LOI 829, PD 1614, states that “All employees paid
by the result shall receive not less than the applicable new minimum wage rates for eight (8) hours work a day,
except where a payment by result rate has been established by the Secretary of Labor.”

 The issue has been resolved in the decision of the Labor Arbiter. The record shows that PR did not appeal
the above ruling of the Labor Arbiter, nor did they file petition raising the issue in the SC. The judgment
may have attained finality.
 As to entitlement of 13th month pay: “except where the workers are paid on piece-rate basis in which case
the employer shall be covered by this issuance insofar as such workers are concerned."”
 Cont… While the private respondents are entitled of minimum wage, COLA and 13 th month pay, they are
not entitled to service incentive leave pay because as a piece-rate workers being paid at a fixed
amount for performing work irrespective of time consumed in the performance.

THIRD ISSUE: there is no illegal dismissal because it does show that a violation of the employer's rules has been
committed and the evidence of such transgression, the copied barong tagalog, was in the possession of Pelobello
who pointed to Zapata as the owner. When required by their employer to explain in a memorandum issued to each of
them, they not only failed to do so but instead went on AWOL (absence without official leave), waited for the period
to explain to expire and for petitioner to dismiss them.
 As to their contention that they did not abandoned their jobs, their blatant disregard of their employer’s
memorandum is undoubtedly an open defiance to the lawful orders of the latter, giving them justifiable
ground of termination of employment.
 Cont… a clear indication of guilt for the commission of acts inimical to the interests of the employer.
 The law is protecting the rights of the laborer authorizes neither oppression nor self-destruction of the
employer. 17 More importantly, 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 automatically be
decided in favor of labor.
 On the contrary, private respondents who vigorously insist on the existence of employer-employee
relationship, because of the supervision and control of their employer over them, were the very ones who
exhibited their lack of respect and regard for their employer's rules. Under the foregoing facts, it is
evident that petitioner Haberdashery had valid grounds to terminate the services of private
respondents.

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MARAGUINOT JR VS NLRC

DOCTRINES:

- Job contracting is permissible if the following conditions are met: (1) The contractor carries on an
independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except as to the results thereof; and (2) The
contractor has substantial capital or investment in the form of tools, equipments machineries work
premises, and other materials which are necessary in the conduct of his business.
- Assuming that the associate producers are job contractors, they must then be engaged in the business of
making motion pictures. As such, and to be a job contractor under the preceding description, associate
producers must have tools, equipment, machinery, work premises, and other materials necessary to make
motion pictures. However, the associate producers here have none of these. Private respondents'
evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA.
- There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital of investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such persons are performing activities which are directly
related to the principal business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.
- E-E relationship is present specifically the control test. There is "labor-only" contracting where the
person supplying workers to an employer does not have substantial capital of investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed by him.
All the circumstances indicate an employment relationship between petitioners and VIVA alone,
thus the inevitable conclusion is that petitioners are employees only of VIVA.

FACTS
 PETITIONER Alejandro MAraguinot Jr maintains that he was employed by PR on Jul18 1989 as part
of the filming crew w/ a salary of 375 a week.
 four months later, he was designated as Asst. electrician with a salary of 400 a week and increased to 450
on May 1990.
 Jun 1991, he was promoted to the rank of electrician with a salary of 475, to 598 in Sept 1991.
 Petitioner Paulino Enero claims that PR employed him in June 1990 as a member of the shooting crew w/
a weekly salary of 375, 425 in May 1991, 475 21 Dec 1991.
 Petitioners’ tasks consisted of loading, unloading and arranging movie equipment in the shooting area as
instructed by cameraman, returning equipment to VIVA FILMS warehouse, assisting in the fixing of the
lighting system, performing tasks that cameraman would assign.
 May 1992, petitioners sought the assistance of supervisor Ms Alejandria Cesario to adjust their salary in
accordance with the minimum wage law.
 Mrs. Cesario informed petitioners that Mr Vic Del Rosario would agree to increase their salary only if they
signed a blank employment contract.
 Petitioners refused to sign. PR forced Enero to go on leave in June 1992, then refused to take him back
when he reported for work on Jul20 1992.
 Meanwhile, Maraguinot was dropped from company payroll from 8-21 June92, but was returned on June
22 92 and was asked again to sign, and refused again.

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  PR terminated his services on 20Jul92. Petitioners sued PR for illegal dismissal.
 PRIVATE RESPONDENT CONTENTION: VIVA films is a trade name of VIVA Prod. And that it is
primarily engaged in the distribution and exhibition of movies, but not in the business of making
movies. Vic Del Rosario serves as a financier who invests certain amount of money for the production of
movie. They contract person called producers to produce or make movies for the PR. Contends that
petitioners are project employees of the producers who act as an independent contractors. No employee-
employer relationship.
 Cont… it was associate producers of the film “mahirap maging pogi” who hired petitioner Maraguinot.
Shooting was Jul2-22 1992 It was then that petitioner was released upon payment of his last salary , as his
service was no longer needed.
 Cont.. Enero, hired for the movie “Sigaw ng Puso” – “Narito ang Puso”, he went on leave Jun 8 92, by the
time he reported on Jul20 92, the shooting has already been completed.
 Labor Arbiter decision: petitioners are employees of PR. The producers cannot be considered as an
independent contractor but should be considered only as labor-only contractor, and as such acts as a mere
agent of the real employer.
 Cont… it is an admitted fact that complainants received their salaries from the respondents.
 Cont…. complainants are doing activities which are necessary to the business. Maraguinot as electrician,
Enero as Crew member
 PR appealed to the NLRC and latter found the ff circumstances
 1) Complainants were hired for specific movie projects and their employment was co-terminus
 2) work of shooting units are not continuous in nature but depends on the availability of movie projects
 3) total working hours logged by complainants in a month show extreme variations
 4) irregular work schedule of complainants on a daily basis, and explains the lump sum payment for
complainant’ services for each movie project. “no work no pay” is strictly prohibited
 5) complainants were no prohibited from working with such movie prods. And this was not rebutted
 NLRC reversed their decision, that petitioners are project employees
 Petitioners filed an instant petition after their motion for reconsideration was denied, grounds: 1) grave
abuse of discretion amounting for lack of excess of jurisdiction in finding that petitioners are project
employees, were not illegally dismissed, reversing the decision of Labor Arbiter.
 PETITIONERS CONTENTION: their performance of activities were necessary in the usual trade of
business of private respondents and added their work was continuous; they are part of a work pool, after
one project, they were assigned to another project.
 PR CONTENTION: that the petitioners are project employees. Point to petitioner’s irregular work load
and work schedule, and petitioners are not prohibited from working with other movie companies
 OSG CONTENTION: petitioner is improper to question facts, finding that those facts are supported by
substantial evidence
 Cont… rejects the contention that since they were hired for multiple projects they are regular employees.
In Mamansag vs NLRC, there was a time frame for each movie project made known to petitioners and that
made the petitioners regular employees.

ISSUE:

 WHETHER THERE IS EMPLOYEE-EMPLOYER RELATIONSHIP

 IF YES, PETITIONERS COULD HAVE BEEN UNJUSTLY DISMISSED
 WHETHER PR ARE ENGAGED IN THE BUSINESS OF MAKING MOTION PICTURES.

HELD: Yes, VIVA is engaged in the business of making movies.

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  Private respondents insists that petitioners are project employees of associate producers who in turn
independent contractors.
 Contracting out of labor is allowed only in case of job contracting. 1) contractor carries an independent
business 2) contractor has substantial capital or investment
 BUT private respondent’s evidence reveals that the movie-making equipment are supplied to the producers
and owned by VIVA. These include generators, cables wooden platforms, camera and shooting
equipment. Trucks that are used to transport equipment. Viva owns the trucks used to transport
equipment. Assoc producer merely leases the equipment ffrom Viva.
 On the contention that these independent contractors rent/lease equipment from VIVA: petitioner
narrated that VIVA’s generators broke down during petitioner’s last movie project, which forced the
associated producer concerned to rent generators. This shows that associate producers did not have
substantial capital nor investment in the form of tools equipment. So the PR admitted that producers are not
engaged in permissible job contracting, but labor-only contractors.
 Labor only contractors are prohibited, the law considers the person enagaged as a mere agent or
intermediary of the direct employer. But producers cannot be considered as labor-only contractors as they
did not supply nor recruit nor hire the workers.
 Cont… it was Juanita Cesario shooting unit supervisor who recruited crew members.
 AGENCY – relationship between VIVA and its producers, latter makes movies in behalf of viva, whose
business is to make movies.
 CONTROL IS EVIDENT – in its mandate that the end result must be a quality film acceptable to the
company. Movies must be finished within schedule w/o exceeding the budget. Supervising, the eyes and
ears of viva and del Rosario intervenes in the movie making process by assisting in solving problems.
 by commanding the crew members to observe rules and regulations promulgated by VIVA, the
appointment slips only emphasizes VIVA’s control over petitioners.
 Selection and engagement is likewise present. Aside from control, the element of selection and
engagement is likewise present in the instant case and exercised by VIVA. A sample appointment Slip
offered by private respondents "to prove that members of the shooting crew except the driver are project
employees of the Independent Producers".
 It is the VIVA’s corporate name which appears on the heading o the appointment slip. It can be seen in the
heading of appointment slip the name VIVA PRODUCTIONS INC, likewise it paid the petitioner’s salaries
as evidenced by vouchers.
 SECOND ISSUE: Illegal Dismissal. it may not be ignored that PR expressly admitted that petitioners
were part of a work pool and while petitioner were initially hired possibly as project employees, they had
attained the status of regular employees. 1) there is a continuous rehiring of project employee even
after cessation of project. 2) tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer (UNDER Art 280 of the Labor Code).
 In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2)
years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some
three (3) years and worked on at least twenty-three (23) projects. 35 35a Moreover, as petitioners' tasks
involved, among other chores, the loading, unloading and arranging of movie equipment in the
shooting area as instructed by the cameramen, returning the equipment to the Viva Films'
warehouse, and assisting in the "fixing" of the lighting system, it may not be gainsaid that these tasks
were vital, necessary and indispensable to the usual business or trade of the employer.
 In closing then, as petitioners had already gained the status of regular employees, their dismissal was
unwarranted, for the cause invoked by private respondents for petitioners' dismissal, viz., completion of
project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such,

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 petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other
benefits that may have accrued.
 Petitioners are entitled to receive full back wages from the date of their dismissal up to the time of their
reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal
dismissal, subject, however, to the above observations.
 PETITION IS GRANTED

FRANCISCO VS NLRC

- Control test, two tiered test

- Relationship between employee and employer depends upon the circumstances of the whole economic
activity
- This court must ensure equal work opportunities regardless of sex, race or creed. In every case, attempt to
carefully balance the fragile relationship between employees and employers

FACTS

 1995, petitioner Angelina Francisco was hired by Kasei Corp during its incorporation stage. She was
designated by Accountant and Corp Sec and was designed to handle all the accounting needs of the
company.
 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
 But she was not entrusted with the corporate documents, neither she attended board meeting
 Never prepared any legal document nor presented company as its Corp Sec.
 1996, petitioner was designated Acting Manager. she was assigned to handle recruitment of all employees
and perform mngmt admin. Functions, represent company in all dealings w/ govt agency
 For five years the petitioner performed the duties of Acting Mngr
 Dec 30 2000 her salary was 27, 500 + 3000 housing allowance and 10% share in Kasei Corp.
 Jan 2001, pet was replaced by Liza Fuentes as manager
 Petitioner alleged that she was required to sign a prepared resolution for her replacement but was told that
she would still be connected with Kasei Corp.
 Timoteo Acedo, announced that nothing changed and petitioner was still connected w/ Kasei Corp as
Technical Assistance to Seiji KAmura and in charge of all BIR matters.
 Kasei Corp reduced her salary to 2,500 a month from Jan-Sept 2001, total of 22, 500 reduction
 Petitioner was not paid mid-year bonus allegedly because company was not earning well. Oct 2001,
petitioner did not receive her salary from the company
 Oct 2001 – petitioner asked for her salary from Acedo and the rest of the officers but was informed that she
is no longer connected with the company, so she filed and action for constructive dismissal
 PR CONTENTION: said that petitioner is not an employee of Kasei Corp. As technical Consultant,
petitioner performed work at her own discretion w/o control and supervision of Kasei Corp. petitioner has
no daily time record and comes to the office anytime she wanted. Petitioner did not go through the usual
procedure of selection of employees. Money received by petitioner was he professional fees

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  Cont.. submitted a list of employees for the year 1999-2000 by BIR showing that petitioner was not among
the employees. List of payees subject to expanded withholding taxes include the petitioner. SSS records
show that her latest employer was Seiji Corp.
 LABOR ARBITER DECISION.. employees of the PR. back wages and reinstatement
 But court of appeals reversed the decision of NLRC

ISSUE:

 Employee-employer relationship
 Whether petitioner was illegally dismissed
 in certain cases the control test is not sufficient to give complete picture of e-e relationship.
 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 true classification of the individual.
 Better approach is the Two-tiered test: 1) the putative employer’s power to control the employee w/
respect the means and method by which work is to be accomplished, 2) 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 various positions and
responsibilities given to the worker.
 Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity,
(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

 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.
 BY APPLYING THE CONTROL TEST, there is no doubt that petitioner is an employee of Kasei Crop
because she was under direct control and supervision of Seiji Kamura, the corporation’s Technical
Consultant.
 Cont.. reported for work regularly and served in various capacities as Accountant Liaison Officer,
Technical Consultant, Acting Mngr, and Corp Sec, with the same job functions, that is rendering
accounting and tax services to the company and
 Under the broader economic reality. She had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries, wages, benefits, 13 th month pay, bonuses allowances, SSS
from Aug1 1999 to Dec 18 2000
 Cont. when designated as Gen Mngr, petitioner’s membership in the SSS as manifested by a copy of the
SSS specimen and was signed by the President of the Kasei Corp and inclusion of her name.
 Cont… petitioner is economically dependent on respondent corp for her continued employment in the
latter’s line of business.

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  FURTHERMORE, the affidavit of Seiji Kamura established that petitioner never acted as Corp Sec and
that her designation was only for convenience. The actual nature of petitioner’s job was as kamura’s
direct asst w/ duty of Liaison Officer in representing the company to secure construction permits,
license to operate and other requirements imposed by govt agencies.
 Cont.. second affidavit withdrawn the first, but the court is convinced that the allegations in the first
affidavit are sufficient. A recantation does not necessarily cancel an earlier declaration,
 Based on the foregoing, she was an employee of the respondent. She was selected and engaged by the
company for compensation, dependent upon respondent for her continued employment.
 Respondent was constructively dismissed when it reduced salary by 2500 a month. Entitled to full back
wages
 This court must ensure equal work opportunities regardless of sex, race or creed. In every case, attempt to
carefully balance the fragile relationship between employees and employers, we are mindful of the fact that
the policy of law is to apply the Labor Code to a great number of employees. Enabling employees to avail
of the benefits, constitutional mandate giving maximum aid and protection to labor, promoting their
welfare and reaffirming it as a primary social economic force in furtherance of social justice and natl devp.
 PETITION IS GRANTED

SAN MIGUEL BREWERY SALES FORCE UNION VS OPLE

FACTS:

APRIL 17 1978 a collective bargaining agreement was entered into by petitioner San Miguel Corporation Sales
Force Union and the private respondent San Miguel Corporation. “Employees within the appropriate bargaining
unit shall be entitled to a basic monthly compensation plus commission based on their respective sales."
 Sept 1979, the company introduced a marketing scheme known as the Complementary Distribution System,
whereby its products were offered for sale directly to wholesalers through San Miguel’s sales offices.
 The petitioner Labor Union filed a complaint for unfair labor practice in the Ministry of Labor, with a
notice to strike on the ground that CDS was contrary to the existing marketing scheme whereby the Route
Salesmen were assigned specific territories within which to sell their stocks of beer, and wholesalers had to
buy beer from them, not from the company.
 It was alleged that the new marketing scheme violated Section 1 Article IV of the collective bargaining
agreement because the introduction of CDS would reduce take-home pay of the salesmen and their truck
helpers for the company would be unfairly competing with them.

ISSUE:

 Whether the CDS violates the collective bargaining agreement

 Whether it is an indirect way of busting the union.

HELD:

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  Minister of Labor ruled: they saw nothing in the record as to suggest that the new scheme was designed
to discourage union organization or diminish its influence, but it was part of its overall plan to improve
efficiency and economy and at the same time gain profit to the highest.
 Public respondent was correct in holding CDS as a valid exercise of management prerogatives, “except
as limited by special laws, an employer is free to regulate according to his own discretion and judgment, all
aspects of employment.”
 SC ruled: every business enterprise endeavors to increase its profits. In the process, it may adopt or devise
means designed towards the goal.
 In one of the cases, the SC ruled: the free will of mngmt to conduct its own business affairs to achieve its
purpose cannot be denied.
 Cont…. so long as the company’s mngmt prerogatives are exercised in good faith for the advancement of
the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this court will uphold them.
 San Miguel Corporation offer to compensate the members of its sales force who will be adversely affected
by the implementation of the CDS by paying them back adjustment commission to make up for the
commission they might lose as a result of the CDS, proves the company’s good faith and lack of intention
to bust their union.
 Petition dismissed.

SIME DARBY PILIPINAS VS NLRC (30 MINUTE ON-CALL LUNCH / 1 HR LUNCH BREAK)

FACTS:
Petitioner is engaged in the manufacture of automotive tires, tubes, and other rubber products. PR Sime Darby
Salaried Employees Assoc is an assoc of monthly salaried employees of petitioner at its Marikina factory. Before the
controversy, all factory workers in Marikina including members of PR union worked from 7:45am-3:45pm, with 30
minute on call lunch break.

Aug 14 1992 petitioner issued memorandum to all factorybased employees, except warehouse and Quality assurance
dept, a new work schedule of the factory office: 7:45am-4:45pm(M-F), 7:45am-11:45am (SAT)

Coffee break time will be ten minutes only anytime between:

9:30 A.M. — 10:30 A.M. and
2:30 P.M. — 3:30 P.M.

Lunch break will be between:

12:00 NN — 1:00 P.M. (Monday to Friday).

PR, affected of the new schedule, filed on behalf of its members for unfair labor practice, discrimination, and
evasion of liability pursuant to the resolution of this court.

However, the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise of management
prerogative and that the new work schedule, break time and one-hour lunch break did not have the effect of
diminishing the benefits granted to factory workers as the working time did not exceed eight (8) hours.

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The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid
during their lunch break even if they were no longer "on call" or required to work during the break; that the previous
case did not apply to the current since the prior issue is the non-payment of 30-minute on call break.

With the 2 new commissioners, The public respondent declared that the new work schedule deprived the employees
of the honored benefits of a time-honored company practice of providing its employees a 30-minute paid lunch
break resulting in an unjust diminution of company privileges prohibited by Art. 100 of the Labor Code, as
amended.
ISSUE: WON THERE WAS A VALID EXERCISE OF MNGMT PREROGATIVE ON THE PART OF THE
PETITIONER

HELD:
We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on
their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient conduct
of its business operations and its improved production. 6 It rationalizes that while the old work schedule included a
30-minute paid lunch break, the employees could be called upon to do jobs during that period as they were "on call."
Even if denominated as lunch break, this period could very well be considered as working time because the factory
employees were required to work if necessary and were paid accordingly for working.

With the new work schedule, the employees are now given a one-hour lunch break without interruption from their
employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use this hour not
only for eating but also for their rest and comfort which are conducive to more efficiency and better performance in
their work. Since the employees are no longer required to work during this one-hour break, there is no more need for
them to be compensated for this period. We agree with the Labor Arbiter that the new work schedule fully complies
with the daily work period of eight (8) hours without violating the Labor Code. Besides, the new schedule applies to
all employees in the factory similarly situated whether they are union members or not.

Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby case 9 with
the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that case involved
the matter of granting lunch breaks to certain employees while depriving the other employees of such breaks. This
Court affirmed in that case the NLRC's finding that such act of management was discriminatory and constituted
unfair labor practice.

As shown by the records, the change effected by management with regard to working time is made to apply to all
factory employees engaged in the same line of work whether or not they are members of private respondent union.
Hence, it cannot be said that the new scheme adopted by management prejudices the right of private respondent to
self-organization.

Further, management retains the prerogative, whenever exigencies of the service so require, to change the
working hours of its employees. So long as such prerogative is exercised in good faith for the advancement of the
employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements, this Court will uphold such exercise.

MOISES DE LEON VS NLRC

FACTS:

Petitioner was employes by PR L Tondena in 1981 at the Maintenance Section of its Engineering Dept in Tondo
Manila. His work was mainly painting company building and equipment, other odd jobs relating to
maintenance. He was paid on a daily basis through petty cash vouchers.

After service of more than one year, petitioner requested from the PR if he can be included in the payroll of regular
workers. PR response was to dismiss the petitioner from employment.

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Having been refused reinstatement despite repeated demands, petitioner filed a complaint for illegal dismissal,
reinstatement and payment of backwages before the Office of the Labor Arbiter of the then Ministry now
Department of Labor and Employment; that weeks after his dismissal, he was re-hired by the respondent company
indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor agency of respondent company, and
was made to perform the tasks which he used to do.

PR claimed that petitioner is not a regular employee but only a casual worker hired only to paint a certain building
in the company premises, and terminated upon the completion of the painting job.

LA ruled in favor of petitioner and asking PR to include petitioner in the payroll.

ISSUE: WON PETITIONER IS A REGULAR WORKER

HELD:

Court finds merit in the petition as We sustain the position of the Solicitor General that the reversal of the decision
of the Labor Arbiter by the respondent Commission was erroneous.

Art 281: 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 actually exists."

******The primary standard, therefore, of determining a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade 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 the 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 one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to
the business.

Hence, the employment is also considered regular, but only with respect to such activity and while such
activity exists.

However, during petitioner's period of employment, the records reveal that the tasks assigned to him
included not only painting of company buildings, equipment and tools but also cleaning and oiling machines,
even operating a drilling machine, and other odd jobs assigned to him when he had no painting job. A regular
employee of respondent company, Emiliano Tanque, Jr., attested in his affidavit that petitioner worked with
him as a maintenance man when there was no painting job.

It misleadingly assumed that all the petitioner did during his more than one year of employment was to paint a
certain building of the respondent company, whereas it is admitted that he was given other assignments relating to
maintenance work besides painting company building and equipment.

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It is the nature of the activities performed in relation to the particular business or trade considering all circumstances,
and in some cases the length of time of its performance and its continued existence.

PH GEOTHERMAL INC VS NLRC

FACTS:

Petitioner is a US Corporation engaged in the exploration and devt of geothermal energy resources as an alternative
source of energy. It duly authorized to engage in the business in the PH is the prime contractor Natl Power
Corporation in Tiwi Albay and Makiling-banahas.

PR are employees of the petitioner occupying various positions from carpenter to Clerk II who had worked with
petitioner company under individual contracts from 15 days to 3 months, and subject for renewal at the time when
the individual PR rendered 3-5 months.

1984, petitioner started terminating employment by not renewing their individual contracts. Subsequently petitioner
entered into job contracting agreement with Dra. Generosa Gonzales who supplies it with skilled manpower.

PR filed a case for illegal lockout and unfair labor practice and instant consolidated case illegal dismissal,
reinstatement, backwages and service incentives.

LA ruled in favor of the respondents. Petitioners filed a petition.

Private respondents filed their memorandum on August 8, 1989 13 while public respondent filed its memorandum
on September 1, 1989. 14 Petitioner filed its memorandum on September 8, 1989.

The main issue in the case at bar is whether or not private respondents may be considered regular and
permanent employees due to their length of service in the company despite the fact that their employment is
on contractual basis.

HELD:

Petitioner contention: services of PR on a monthly basis to ensure that manpower would be available when and
where needed. PR were fully aware of the nature of their employment. It was simply an expiration of the tenure of
employment contracts and completion of phase of the project for which their services were hired.

In Kimberley Independent Labor Union vs Drilon: this Court classified the two kinds of regular employees, as: 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 (1) year of service, whether continuous or broken with
respect to the activity in which they are employed.

Assuming therefore, that an employee could properly be regarded as a casual (as distinguished from a regular
employee) he becomes entitled to be regarded as a regular employee of the employer as soon as he has completed
one year of service. Under the circumstances, employers may not terminate the service of a regular employee
except for a just cause or when authorized under the Labor Code.

It is the policy of the state to assure the right of workers to "security of tenure. The guarantee is an act of
social justice. When a person has no property, his job may possibly be his only possession or means of
livelihood. Therefore, he should be protected against any arbitrary deprivation of his job. Article 280 of the
Labor Code has construed 'security of tenure' as meaning that "the employer shall not terminate the services
of the employee except for a just cause or when authorized by the Code.

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MARIO CARTAGENAS VS ROMAGO ELECTRIC COMPANY

FACTS:

Respondent Romago is a general contractor engaged in contracting and sub contracting of specific building
construction projects or undertaking such as electrical, mechanical and civil engineering aspects in the repair of
buildings and from other kindred services.

Individual complainants are employed by the respondent in connection with particular construction projects.

July 12, 1986, individual complainants and Lawrence Deguit were temporarily laid-off by virtue of a
memorandum issued by the respondent. In said memorandum they were also informed that a meeting regarding
the resumption of operation will be held on July 16, 1986 and that they will be notified as to when they will
resume work.

On July 28, 1986, complainants filed the instant case for illegal dismissal but before the respondent could receive a
copy of the complaint and the notification and summons issued by the NLRC National Capital Region (actually
received only on August 22, 1986, page 4, records) individual complainants re-applied with the respondent and
were assigned to work with its project at Robinson — EDSA.

And in hiring the complainants, they are to fill up employment application form and subject to pre-hiring
examination. CONDITION: “Hired for above project only”.

Thereafter, hired employees is given by the respondent an assignment slip, which reads: “His employment will
terminate upon completion stoppage of the project or terminated earlier for cause.”

The NLRC held that the complainants were project employees because their appointments were "co-terminus with
the phase or item of work assigned to them in said project."

ISSUE in this case is whether the petitioners are project employees of the private respondent Romago
Electric Company, Inc., as found by the National Labor Relations Commission, or regular employees as
found by the Labor Arbiter.
***As an electrical contractor, the private respondent depends for its business on the contracts it is able to obtain
from real estate developers and builders of buildings. Since its work depends on the availability of such contracts or
"projects," necessarily the duration of the employment of its work force is not permanent but co-terminus with the
projects to which they are assigned and from whose payrolls they are paid.

It would be extremely burdensome for their employer who, like them, depends on the availability of projects, if it
would have to carry them as permanent employees and pay them wages even if there are no projects for them to
work on. We hold, therefore, that the NLRC did not abuse its discretion in finding, based on substantial
evidence in the records, that the petitioners are only project workers of the private respondent.

Petitioners' invocation of the resolution of this Court in Romago Electric Company, Inc. vs. Romago Electric United
Workers Union-Christian Labor Organization, (REWU-CLOP), et al., G.R. No. 79774, February 1, 1988, where this
Court dismissed the petition, is not well taken. As pointed out by the public respondent, the issue in that case was
whether the members of the union may properly participate in the holding of a certification election. Since the
petitioners in their complaint for illegal dismissal dated July 28, 1986 (Annex A of petition) averred that they do not
belong to any union, the ruling in Romago vs. REWU-CLOP may not apply to them. In their Reply to the public
respondents' Comment in this case, they disclosed that they are members and officers of a new union which they
organized on March 13, 1988 (pp. 62-63, Rollo).

That supervening fact, however, has no relevance to this case

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