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Law F2021 #45 Fuji TV Network, Inc. v. Espiritu


LABOR LAW 1 Employment Relationship; Factors, Tests; Control Test 2014 Leonen, J. (2nd Division)

SUMMARY
• News producer Arlene’s employment contract with Fuji TV was terminated due to her illness (lung cancer).
• Arlene filed a complaint for illegal dismissal and monetary claims with the labor arbiter who ruled in favor or Fuji,
but whose ruling was reversed by NLRC. CA and SC upheld NLRC’s decision, with modifications.
• SC declared that Arlene, having an employer-employee relationship with Fuji, was a regular employee with a fixed-
term contract, and was illegally dismissed. SC ordered Arlene’s reinstatement and monetary awards in her favor.

FACTS
• In 2005, petitioner Fuji Television Network (Fuji) engaged respondent Arlene Espiritu (Arlene) as a news
correspondent/producer to report PH news to Fuji through its Manila Bureau field office.
• Arlene’s employment contract initially provided for a term of 1 year but was renewed on a yearly basis for more or
less 4 years, with salary adjustment upon every renewal, until its expiration on May 31, 2009.
• Sometime in January 2009, Arlene was diagnosed with lung cancer.
o Upon informing Fuji of her illness, the company’s chief of news agency informed her that the company will
have a problem renewing her contract since it would be difficult for her to perform her job.
o Arlene insisted that she was still fit to work as certified by her attending physician.
• On May 5, 2009, Arlene, under protest, signed with Fuji a non-renewal contract stipulating that (1) her contract
would no longer be renewed upon expiration on May 31, 2009, and (2) the parties release each other from
liabilities and responsibilities under the employment contract.
o Arlene acknowledged receipt of the amount of 18K US dollars representing her (1) salary for 3 months
until May 2009, (2) year-end and mid-year bonuses, and (3) separation pay.
o Arlene affixed her signature on the non-renewal contract with initials “U.P” for “under protest.”
• On May 6, 2009, Arlene filed a complaint for illegal dismissal and attorney’s fees with the NCR Arbitration Branch
of the NLRC, alleging that (1) she was forced to sign the non-renewal contract when Fuji came to know of her
illness and (2) Fuji withheld her salaries and other benefits for March and April 2009 when she refused to sign.
• The labor arbiter dismissed Arlene’s complaint, citing that, following Sonza v. ABS-CBN (2004) and applying the
four-fold test, Arlene was not Fuji’s employee but an independent contractor.
• On appeal, the NLRC reversed the labor arbiter’s decision, ruling that Arlene was a regular employee, ordering Fuji
to pay her backwages computed from the date of her illegal dismissal.
o Arlene and Fuji field separate motions for reconsideration, both of which NLRC denied for lack of merit.
• Arlene and Fuji then filed separate petitions for certiorari before the CA, which affirmed with modifications the
NLRC’s decision, ordering Fuji to immediately reinstate Arlene to her position without loss of seniority rights, pay
her backwages, 13-month pay, mid-year and year-end bonuses, sick leaves with pay until reinstatement, moral and
exemplary damages, attorney’s fees, and legal interest of 12 percent per annum of the total monetary awards.
o Fuji filed a motion for reconsideration, which the CA denied. Aggrieved, Fuji filed this petition for review
before the SC.

ISSUE & RATIO
#1: W/N an employer-employee relationship existed between Fuji and Arlene – YES
• Before the status of employment can be determined, the existence of an employer-employee relationship must be
established.
• The SC has often used the four-fold test to determine the existence of an employer-employee relationship.
o The elements of the four-fold test are the following:
1. Selection and engagement of the employee;
2. Payment of wages;
3. Power of dismissal; and
4. Power of control, which is the most important element.
• In Locsin, et al. v. PLDT (2009), the SC defined the power of control as “the right to control not only
the end to be achieved but also the means to be used in achieving such end.”
• In Corporal, Sr. v NLRC (2000), the SC stated that the power of control refers to the existence of
power and not necessarily to its actual exercise. 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.
• In Orozco v. CA, the SC differentiated between the following rules:
Rules that merely serve as guidelines towards the Rules that control or fix the methodology and
achievement of mutually desired results without dictating bind or restrict the party hired to use such means
the means or methods to be employed in attaining it
• Only aim to promote the result; and • Address both the result and the means
• Create no employer-employee relationship used to achieve it

• The CA applied Sonza v. ABS-CBN and Dumpit-Murillo v. CA (2007), where the SC used the four-fold test, in
determining the existence of employer-employee relationship in between Fuji and Arlene. Both cases involved
newscasters and anchors. However, Sonza was declared and 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
ELEMENTS OF THE Sonza Case Dumpit-Murillo Case
FOUR-FOLD TEST Jay Sonza’s work with ABS-CBN Thelma Dumpit-Murillo was hired by
was for radio and TV programs. ABC as a newscaster and co-anchor.
Selection and engagement • Sonza was engaged by ABS-CBN in view of his unique •
of the employee skills, talent, and celebrity status not possessed by
ordinary employees.
Payment of wages • Sonza’s talent fee amounted to 317K pesos per month, • Dumpit-Murillo’s monthly salary was
which the SC found to be a substantial amount that 28K pesos.
indicated that he was an independent contractor rather
than a regular employee.
• ABS-CBN continued to pay his talent fee under their
agreement, even though his programs were no longer
broadcasted.
Power of dismissal • Sonza was unable to prove that ABS-CBN could terminate • Dumpit-Murillo was found to have been
his services apart from breach of contract. illegally dismissed by her employer
• There was no indication that he could be terminated when they did not renew her contract
based on just or authorized causes under the Labor Code. on her 4th year with ABC.
Power of control • ABS-CBN did not control how Sonza delivered his lines, • The duties and responsibilities
how he appeared on TV, or how he sounded on radio. All enumerated in Dumpit-Murillo’s
that company needed from Sonza was his talent. contract was a clear indication that ABC
• ABS-CBN could not terminate or discipline Sonza even if had control over her work.
the means and methods of performance of his work did • Dumpit-Murillo had to be in ABC to do
not meet the company’s approval. both on-air and off-air tasks.
• Sonza was not required to work for 8 hours

• Applying the four-fold test in the case of Arlene, the SC upheld the reliance of CA on the ruling in Dumpit-Murillo:
ELEMENTS OF THE ARLENE ESPIRITU’S CASE
FOUR-FOLD TEST Arlene works for Fuji TV as news correspondent/producer.
Selection and engagement • There was no showing that she was hired because of unique skills that would distinguish her from
of the employee ordinary employees.
• Fuji even alleged that the news reported by Arlene could easily be secured from other entities from
the Internet.
• Neither was there a showing that she had a celebrity status.
Payment of wages • While her monthly salary was 1,900 US dollars, roughly equivalent to 90,041 pesos1, appeared to be
a substantial sum especially if compared to her salary when she was still connected with GMA, the
SC said that wages should not be the conclusive factor in determining whether one is an employee or
an independent contractor.
Power of dismissal • Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment
contract.
Power of control • Fuji gave Arlene instructions on what to report.
• Arlene’s contract indicate that Fuji had control over her work because she was required to work for
8 hours from Monday to Friday although on flexible time.
• Arlene had no equipment and had to use the facilities of Fuji to accomplish her tasks.
• Even the mode of transportation in carrying out her functions was controlled by Fuji.

• Based on the four-fold test, SC established that an employer-employee relationship existed between Fuji and
Arlene.
#2: W/N Arlene was a regular employee or an independent contractor
– ARLENE WAS A REGULAR EMPLOYEE WITH A FIXED-TERM CONTRACT
! FIRST, here’s a discussion on the classification of employees under the law and jurisprudence:
• Article 280 of the Labor Code classifies employees into regular, project, seasonal, and casual. It further
classified 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 1 year of service, whether such service is continuous or
broken.
• In Brent School v. Zamora (1990), the SC discussed fixed-term employees, another classification of employees, in
whose employment contracts a fixed term is an essential and natural appurtenance, such as overseas employment
contracts and officers in educational institutions.
o Employees under fixed-term contracts cannot be independent contractors because in fixed-term contracts,

1 Exactly PHP 90,040.7416, computed based on the average dollar-peso exchange rate in May 2009, which was USD 1=PHP 47.389864
an employer-employee relationship exists.
• In Orozco v. CA’s Fifth Division (2008), 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.”
o In view of the "distinct and independent business" of independent contractors, no employer-employee
relationship exists between independent contractors and their principals.
• Jurisprudence has recognized another kind of independent contractor (aside from those engaged in
legitimate job contracting): those individuals with unique skills and talents that set them apart from ordinary
employees, and who himself/herself performs the work for the principal.
o Since no employer-employee relationship exists between independent contractors and their principals, the
Civil Code provisions on contracts and other applicable laws govern their contracts.
! NOW, back to answering the ISSUE #1:
• 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 – the necessity and desirability test.
o Article 280 of the Labor Code provides that the nature of work must be “necessary or desirable in the usual
business or trade of the employer,” which is the test for determining regular employment.
" In ABS-CBN Broadcasting Corporation v. Nazareno (2006), the test is made 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, which is distinguished from a specific
undertaking that is divorced from the normal activities required in carrying on the
particular business or trade.
" But the SC discussed that when work is necessary but not always desirable in the usual course of
business of the employer, there is no regular employment.
• Applying the test of necessity and desirability to Arlene’s employment:
o Japan-based Fuji is engaged in the business of broadcasting, including news programming, and has
overseas offices covering international news.
" Fuji’s Manila Bureau Office, located in Diamond Hotel Manila, is a small unit and has few
employees. As such, Arlene had to do all activities related to newsgathering.
• Arlene’s tasks included monitoring and timely submission of news and current events
stories and reports on the Philippines, reporting, video-interviewing subjects, and
travelling to Fuji’s regional office in Thailand.
• Arlene had to report in Fuji’s office in Manila from Mondays to Fridays, for 8 hours a day.
• Also, an employee can be a regular employee with a fixed-term contract.
o 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.
o Arlene’s contract indicating a fixed term did not automatically mean that she could never be a regular
employee. This is what Article 280 of the Labor Code seeks to avoid.
• Moreover, the pieces of equipment Arlene used were all owned by Fuji, showing that she was a regular employee
and not an independent contractor.
# 3: W/N Arlene was illegally dismissed – YES
• As 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 as provided for in the Constitution and Article 279 of the Labor
Code
• The expiration of Arlene’s contact does not negate the finding of illegal dismissal.
o Due process must still be observed in the pre-termination of fixed-term contracts of employment.
o The manner by which Fuji informed Arlene that her contract would no longer be renewed is tantamount to
constructive dismissal.
• Arlene was dismissed because of her health condition (she was undergoing chemotherapy for lung cancer).
o Disease as a ground for termination is recognized under Article 284 of the Labor Code.
o In consideration of Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code, in order
for a dismissal under Article 284 to be valid, 2 requirements must be complied with:
1. The employee's disease cannot be cured within 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. A certification issued by a competent public health authority that even with proper medical
treatment, the disease cannot be cured within 6 months.
• The burden of proving compliance with these requisites is on the employer.
• Noncompliance by Fuji leads to the conclusion that the dismissal was illegal.
• There is no evidence showing that Arlene was accorded due process.
o After informing her employer of her lung cancer, she was not given the chance to present medical
certificates.
o Fuji immediately concluded that Arlene could no longer perform her duties because of chemotherapy.
" Fuji did not ask her how her condition would affect her work.
" Fuji did not suggest for her to take a leave, even though she was entitled to sick leaves.
" Fuji did not present any certificate from a competent public health authority.
o What Fuji did was to inform her that her contract would no longer be renewed, and when she did not
agree, her salary was withheld.
#4: W/N Arlene is entitled to reinstatement, damages, and attorney’s fees - YES
• ON REINSTATEMENT
o Article 279 of the Labor Code provides in part that “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.”
o The NLRC 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."
" 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.
o The SC ruled that the doctrine of stained relations must strictly be construed so as not to deprive an
illegally dismissed employee of his right to reinstatement.
" No evidence was presented by Fuji to prove that reinstatement was no longer possible, that
Arlene’s reinstatement would cause an atmosphere of antagonism in the workplace.
" Only 5 years have elapsed since Arlene filed her complaint in 2009. In Association of Independent
Unions in the Philippines v. NLRC (1999), the SC considered “more than 8 years” as substantial,
awarding separation pay in lieu of reinstatement.
• ON DAMAGES
o That the non-renewal agreement contained a quitclaim does not bar Arlene, an illegally dismissed
employee, from filing labor complaints and money claims.
" Arlene signed the non-renewal agreement out of necessity.
" In Land and Housing Development Corporation v. Esquillo (2005), the SC explained that quitclaims
are commonly frowned upon as contrary to public policy because the employer and the employee
obviously do not stand on the same footing. Forced by economic circumstances, the employee is in
no position to resist the money proffered, construing the signing of a quitclaim as a case of
adherence, not of choice.
o 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.
o Exemplary damages may be awarded when the dismissal was effected in a wanton, oppressive or
malevolent manner.
" Arlene’s illegal dismissal was effected in an oppressive approach with her salary and other benefits
being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal
contract.
• ON ATTORNEY'S FEES
o Article 111 of the Labor Code states that in cases of unlawful withholding of wages, the culpable party may
be assessed attorney's fees equivalent to 10 percent of the amount of wages recovered.
" When Arlene refused to sign the non-renewal contract, Fuji withheld her salaries and other
benefits for March and April 2009.
o SC has also recognized in Aliling v. Feliciano (2012) 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 legally and morally justifiable."
" Arlene was forced to litigate due to her illegal dismissal.
• ON LEGAL INTEREST
o In view of SC’s ruling in Nacar v. Gallery Frames (2013), the legal interest awarded at the rate of 12% per
annum shall be reduced to 6 percent per annum.

FALLO
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.

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