People’s Broadcasting v. Sec.
of Labor CA Decision was reversed and set aside, and
GR 179652; March 6, 2012
DOCTRINE:
If a complaint is brought before the DOLE to give
effect to the labor standards provisions of the Labor
Code or other labor legislation, and there is a
finding by the DOLE that there is an existing
employer-employee relationship, the DOLE
exercises jurisdiction to the exclusion of the NLRC.
If a complaint is filed with the DOLE, and it is
accompanied by a claim for reinstatement, the
jurisdiction is properly with the Labor Arbiter,
under Art. 217(3) of the Labor Code. If a complaint
is filed with the NLRC, and there is still an existing
employer-employee relationship, the jurisdiction is
properly with the DOLE. The findings of the DOLE,
however, may still be questioned through a petition
for certiorari under Rule 65 of the Rules of Court.
RA 7730 did away with the P5,000 limitation,
allowing the DOLE to exercise its visitorial and
enforcement power for claims beyond P5,000.
FACTS:
Private respondent Jandeleon Juezan filed a
complaint against petitioner DOLE Regional Office
VII, Cebu City, for illegal deduction, nonpayment
of service incentive leave, 13th month pay,
premium pay for holiday and rest day and illegal
diminution of benefits, delayed payment of wages
and noncoverage of SSS, PAG-IBIG and Philhealth.
DOLE Regional Director found that private
respondent was an employee of petitioner, and was
entitled to his money claims. Petitioner sought
reconsideration of the Director’s Order, but failed.
The Acting DOLE Secretary dismissed petitioner’s
appeal on the ground that petitioner submitted a
Deed of Assignment of Bank Deposit instead of
posting a cash or surety bond.
When the matter was brought before the CA, where
petitioner claimed that it had been denied due
process, it was held that petitioner was accorded
due process as it had been given the opportunity to
be heard, and that the DOLE Secretary had
jurisdiction over the matter, as the jurisdictional
limitation imposed by Article 129 of the Labor
Code on the power of the DOLE Secretary under
Art. 128(b) of the Code had been repealed by
Republic Act No. (RA) 7730.
complaint was dismissed.
The Court found that there was no employer-
employee relationship between petitioner and
private respondent. It was held that while the DOLE
may make a determination of the existence of an
employer-employee relationship, this function could
not be co-extensive with the visitorial and
enforcement power provided in Art. 128(b) of the
Labor Code, as amended by RA 7730. The National
Labor Relations Commission (NLRC) was held to
be the primary agency in determining the existence
of an employer-employee relationship. This was the
interpretation of the Court of the clause "in cases
where the relationship of employer-employee still
exists" in Art. 128(b).
Public Attorney’s Office (PAO) filed a Motion for
Clarification of Decision (with Leave of Court to
clarify as to when the visitorial and enforcement
power of the DOLE be not considered as co-
extensive with the power to determine the existence
of an employer-employee relationship. DOLE
sought clarification as well. Such was granted.
ISSUE:
May the DOLE make a determination of whether or
not an employer-employee relationship exists, and
if so, to what extent?
HELD:
DOLE Jurisdiction to determine ER-EE
Relationship. YES. No limitation in the law was
placed upon the power of the DOLE to determine
the existence of an employer-employee relationship.
No procedure was laid down where the DOLE
would only make a preliminary finding, that the
power was primarily held by the NLRC. The law
did not say that the DOLE would first seek the
NLRC’s determination of the existence of an
employer-employee relationship, or that should the
existence of the employer-employee relationship be
disputed, the DOLE would refer the matter to the
NLRC.
The DOLE, in determining the existence of an
employer-employee relationship, has a ready set of
guidelines to follow, the same guide the courts
themselves use. The elements to determine the
existence of an employment relationship are: (1) the
selection and engagement of the employee; (2) the no employer-employee relationship between
payment of wages; (3) the power of dismissal; (4) petitioner and private respondent, based on the
the employer’s power to control the employee’s evidence presented. The DOLE had no jurisdiction
conduct. The use of this test is not solely limited to over the case, as there was no employer-employee
the NLRC. The DOLE Secretary, or his or her relationship present. Thus, the dismissal of the
representatives, can utilize the same test, even in the complaint against petitioner is proper.
course of inspection, making use of the same DOLE Visitorial and Enforcement Powers. There
evidence that would have been presented before the is a view that despite Art. 128(b) of the Labor Code,
NLRC. as amended by RA 7730, there is still a threshold
The expanded visitorial and enforcement power of amount set by Arts. 129 and 217 of the Labor Code
the DOLE granted by RA 7730 would be rendered when money claims are involved, i.e., that if it is for
nugatory if the alleged employer could, by the PhP 5,000 and below, the jurisdiction is with the
simple expedient of disputing the employer- regional director of the DOLE, under Art. 129, and
employee relationship, force the referral of the if the amount involved exceeds PhP 5,000, the
matter to the NLRC. jurisdiction is with the labor arbiter, under Art. 217.
The view states that despite the wording of Art.
If the DOLE makes a finding that there is an
128(b), this would only apply in the course of
existing employer-employee relationship, it takes
regular inspections undertaken by the DOLE, as
cognizance of the matter, to the exclusion of the
differentiated from cases under Arts. 129 and 217,
NLRC. The DOLE would have no jurisdiction only
which originate from complaints. There are several
if the employer-employee relationship has already
cases, however, where the Court has ruled that Art.
been terminated, or it appears, upon review, that no
128(b) has been amended to expand the powers of
employer-employee relationship existed in the first
the DOLE Secretary and his duly authorized
place.
representatives by RA 7730. In these cases, the
The Court, in limiting the power of the DOLE, gave Court resolved that the DOLE had the jurisdiction,
the rationale that such limitation would eliminate despite the amount of the money claims involved.
the prospect of competing conclusions between the
DOLE and the NLRC.
This is not to say that the determination by the
DOLE is beyond question or review. Suffice it to
say, there are judicial remedies such as a petition for
certiorari under Rule 65 that may be availed of,
should a party wish to dispute the findings of the
DOLE.
The power of the DOLE to determine the existence
of an employer-employee relationship need not
necessarily result in an affirmative finding. The
DOLE may well make the determination that no
employer-employee relationship exists, thus
divesting itself of jurisdiction over the case.
Under Art. 128(b) of the Labor Code, as amended
by RA 7730, the DOLE is fully empowered to make
a determination as to the existence of an employer-
employee relationship in the exercise of its visitorial
and enforcement power, subject to judicial review,
not review by the NLRC.
In the present case, the finding of the DOLE
Regional Director that there was an employer-
employee relationship has been subjected to review
by this Court, with the finding being that there was

Lapanday Agricultural Dev. Corp. v. CA
GR 112139; January 31, 2000
Doctrine:
Where no employer-employee relationship exists, it
is the Regional Trial Court that has jurisdiction. The
principal and the contractor are jointly and severally
liable to the employees for their wages. The right of
the contractor to recover from the principal arises
only if he has paid the amounts for which both of
them are solidarily liable in line with Article 1217
of the Civil Code.
Facts:
In June 1986, plaintiff Commando Security Service
Agency, Inc., and defendant Lapanday Agricultural
Development Corporation entered into a Guard
Service Contract. Plaintiff provided security guards
in defendant's banana plantation. The contract
called for the payment to a guard of P754.28 on a
daily 8-hour basis and an additional P565.72 for a
four hour overtime while the shift-in-charge was to
be paid P811.40 on a daily 8-hour basis and
P808.60 for the 4-hour overtime.
Wage Orders increasing the minimum wage in 1983
were complied with by the defendant. On June 16,
1984, Wage Order No. 5 was promulgated directing
an increase of P3.00 per day on the minimum wage
of workers in the private sector and a P5.00 increase
on the ECOLA. On November 1, 1984, Wage Order
No. 6 further increased said minimum wage by
P3.00 on the ECOLA. Both Wage Orders contain
the following provision:
"In the case of contract for construction projects and
for security, janitorial and similar services, the
increase in the minimum wage and allowances rates
of the workers shall be borne by the principal or
client of the construction/service contractor and the
contracts shall be deemed amended accordingly,
subject to the provisions of Sec. 3 (b) of this order"
Plaintiff demanded that its contract with defendant
be upgraded in compliance with Wage Order Nos. 5
and 6. Defendant refused. Their Contract expired on
June 6, 1986 without the rate adjustment. By the
time of the filing of plaintiff's Complaint, the rate
adjustment payable by defendant amounted to
P462,346.25. Defendant opposed the Complaint by
raising that: (1) the rate adjustment is the obligation
of the plaintiff as employer of the security guards;
(2) assuming its liability, the sum it should pay is
less in amount; and (3) the Wage Orders violate the
impairment clause of the Constitution.
TC – in favor of plaintiff. It held: However, in order
for the security agency to pay the security guards,
the Wage Orders made specific provisions to amend
existing contracts for security services by allowing
the adjustment of the consideration paid by the
principal to the security agency concerned. As to
the issue of impairment of contract of the wage
orders, the court sustained the validity and
constitutionality of labor and social legislation.
Petitioner asserts that private respondent has no
factual and legal basis to collect the benefits under
subject wage orders intended for the security guards
without the authorization of the security guards
concerned. Inasmuch as the services of the 42
security guards were already terminated at the time
the complaint was filed, private respondent's
complaint partakes of the nature of an action for
recovery of what was supposedly due the guards.
Moreover, petitioner submits that it is the NLRC
and not the RTC (civil courts) that has jurisdiction
to resolve the issue involved in this case for it refers
to the enforcement of wage adjustment and other
benefits due.
Private respondent contends that the basis of its
action against petitioner-appellant is the
enforcement of the Guard Service Contract; the
increases/adjustments in wages and ECOLA are due
to private respondent and not to the security guards
who are not parties to the said contract. It is
therefore immaterial whether or not private
respondent paid its security guards their wages as
adjusted by said Wage Orders and that since the
forty-two (42) security guards are not parties to the
Guard Service Contract, there is no need for them to
authorize the filing of, or be joined in, this suit.
Furthermore, the enforcement of this written
contract does not fall under the jurisdiction of the
NLRC because the money claims involved therein
did not arise from employer-employee relations
between the parties and is intrinsically a civil
dispute. Thus, jurisdiction lies with the regular
courts.
Issue:
Whether the RTC has jurisdiction.
Whether or not petitioner is liable to the private
respondent for the wage adjustments provided under
Wage Order Nos. 5 and 6.
Held:
Jurisdiction. YES. It is well settled in law and
jurisprudence that where no employer-employee
relationship exists between the parties and no issue
is involved which may be resolved by reference to
the Labor Code, other labor statutes or any
collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction. In its complaint,
private respondent is not seeking any relief under
the Labor Code but seeks payment of a sum of
money and damages on account of petitioner's
alleged breach of its obligation under their Guard
Service Contract. The action is within the realm of
civil law hence jurisdiction over the case belongs to
the regular courts. While the resolution of the issue
involves the application of labor laws, reference to
the labor code was only for the determination of the
solidary liability of the petitioner to the respondent
where no employer-employee relation exists.
Article 217 of the Labor Code as amended vests
upon the labor arbiters exclusive original
jurisdiction only over the following:
1. Unfair labor practices; 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 form of damages arising
from employer-employee relations; 5. Cases arising
from any violation of Article 264 of this Code,
including questions involving 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
(P5,000.00) regardless of whether accompanied
with a claim for reinstatement.
Liability for Wage Adjustments. YES. Private
respondent admits that there is no employer-
employee relationship between it and the petitioner.
The private respondent is an independent/job
contractor who assigned security guards at the
petitioner's premises for a stipulated amount per
guard per month. The Contract of Security Services
expressly stipulated that the security guards are
employees of the Agency and not of the petitioner.
Art. 106. Contractor or sub contractor. — 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.
In the event that the contractor or subcontractor fails
to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor
to such employees to the extent of the work
performed under the contract, in the same manner
and extent that he is liable to employees directly
employed by him.
Art. 107. Indirect employer. — The provisions of
the immediately preceding Article shall likewise
apply to any person, partnership, association or
corporation which, not being an employer, contracts
with an independent contractor for the performance
of any work, task, job or project.
It will be seen from the above provisions that the
principal (petitioner) and the contractor (respondent)
are jointly and severally liable to the employees for
their wages.
It is only when contractor pays the increases
mandated that it can claim an adjustment from the
principal to cover the increases payable to the
security guards. The conclusion that the right of the
contractor (as principal debtor) to recover from the
principal as solidary co-debtor) arises only if he has
paid the amounts for which both of them are jointly
and severally liable, in line with Article 1217 of the
Civil Code.
The records show that the judgment holds both
petitioner and private respondent jointly and
solidarily liable to the security guards. However, it
is not disputed that the private respondent has not
actually paid the security guards the wage increases.
Accordingly, private respondent has no cause of
action against petitioner to recover the wage
increases. Needless to stress, the increases in wages
are intended for the benefit of the laborers and the
contractor may not assert a claim against the
principal for salary wage adjustments that it has not
actually paid. Otherwise, as correctly put by the
respondent, the contractor would be unduly
enriching itself.