UNIVERSITY OF SAN CARLOS

COLLEGE OF LAW

COMPENDIUM OF LABOR STANDARDS LAW

FINAL CASE DIGESTS 2014

_________________________________

IN PARTIAL FULFILLMENT

FOR THE REQUIREMENTS IN

LLB 242N (LABOR STANDARDS LAW)

_________________________________

SUBMITTED BY:

MIKKO GABRIEL L. VALENDEZ

JD – 2 (EH306)

SUBMITTED TO:

ATTY. JEFFERSON M. MARQUEZ

OCTOBER 16, 2014


LIST OF LABOR STANDARD CASES
JURISDICTION OF THE LABOR ARBITER
1. Tolosa vs. NLRC, G.R. No. 149578, April
10, 2003
2. Austria vs. NLRC, 312 SCRA 413
3. Eviota vs. Court of Appeals, 407 SCRA 394
4. Dynamic Signmaker Outdoor Advertising
Services vs. Potongan, G.R. No. 156589,
June 27, 2005
5. Metromedia Times Corp., vs. Pastorin, G.R.
No. 154295, July 29, 2005
6. Yusen Air & Sea Service Phils vs. Villamor,
G.R. No. 154942, August 16, 2005
7. Duty Free Phils., vs. Mojica, G.R. No.
166365, September 30, 2005
8. Easycall Communication Phils., vs. King,
G.R. No. 145901, December 15, 2005
9. San Miguel Foods Inc., vs. San Miguel Corp
Employees Union-PTGWO, G.R. No.
168569, October 5, 2007
10. Leyte IV Electric Cooperative Inc vs.
LEYECO IV Employees Union-ALU, G.R.
No. 1577745, October 19, 2007
11. Atty Garcia vs. Eastern Telecommunications
Phils., et al., GR No. 173115 & 173163-64,
April 16, 2009
12. Halaguena et al., vs. Phil Airlines GR No.
172013, Oct 2, 2009
13. Okol vs. Slimmer’s World International, et
al., G.R. No. 160146, December 11, 2009
14. Hugo et al., vs. Light Rail Transit Authority,
G.R. No. 181866, March 18, 2010
15. Matling Industrial and Commercial Corp et
al., vs. Coros, GR No. 157802, Oct. 13,
2010
16. Manila Electric Co. et al., vs. Lim, GR No.
184769, Oct. 5, 2010
17. Hongkong and Shanghai Banking Corp., vs.
Sps. Broqueza, GR No. 178610, Nov. 17,
2010
18. Real vs. Sangu Phils., Inc., et al., G.R. No.
168757, January 19, 2011
19. Portillo vs. Rudolf Lietz, Inc. et al., G.R.
No. 196539, October 10, 2012
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
20. Ace Navigation Co. Inc. et al., vs.
Fernandez, G.R. No. 197309, October 10,
2012
21. Cosare vs. Broadcom Asia, Inc. GR No.
201298, February 5, 2014, citing 2010
Matling Industrial and Commercial Corp et
al., vs. Coros, GR No. 157802 and 2011
Real vs. Sangu Phils., Inc., et al., G.R. No.
168757
2011 NLRC RULES OF PROCEDURE
22. T/SGP Larkins vs. NLRC, G.R. No. 92432,
February 23, 1995
23. UERM Memorial Medical Center vs.
NLRC, G.R. No. 110419, March 3, 1997
24. Phil Tranco Services vs. NLRC, G.R. No.
124100, April 1, 1998
25. St. Martin Funeral Homes vs. NLRC, G.R.
No. 130866, September 16, 1998
26. Ludo & Luym Corp., vs. Saornido, G.R. No.
140960, January 20, 2003
27. Hansin Engineering & Construction vs. CA,
G.R. No. 165910, April 10, 2006
28. Phil. Journalist Inc. vs. NLRC, G.R. No.
166421, Sept. 5, 2006
29. Balagtas Multi-purpose Coop. Vs. CA, G.R.
No. 159268, Oct. 27, 2006
30. St. Martin Funeral Homes vs. NLRC, G.R.
No. 142351, Nov. 22, 2006
31. DOLE Phils. Vs. Esteva, G.R. No. 161115,
Nov. 30, 2006
32. Intercontinental Broadcasting Corp., vs.
Panganiban, G.R. No. 151407, February 6,
2007
33. Far East Agricutural Supply vs. Lebatigue,
G.R. No. 162813, February 12, 2007
34. Letran Calamba Faculty & Employees
Association vs. NLRC, G.R. No. 156225,
January 29, 2008
35. Metro Transit Organization vs. Piglas
NFWU-KMU et al., G.R. No. 175460, April
14, 2008
2

36. J.K. Mercado & Sons Agricultural
Enterprises, Inc., vs Sto. Tomas, G.R.No.
158084, August 29, 2008
37. J. Phil. Marine Inc., vs. NLRC, G.R. No.
1753661, August 11, 2008; but see Ilagan
vs. Court of Appeals, G.R. No. 162089, July
9, 2008
38. Sy vs. ALC Industries, G.R. No. 168339,
October 10, 2008
39. PCI Travel Corp., vs. NLRC, G.R. No.
154379, October 31, 2008
40. Lopez vs. Q. C. Sports Club, G.R. No.
164032, January 19, 2009
41. Lockheed Detective & Watchman Agency,
G.R. No. 185918, April 18, 2012
42. Portillo vs. Rudolf Lietz, Inc. et al., G.R.
No. 196539, October 10, 2012
43. Building Care Corp. vs. Macaraeg, G.R. No.
198357, December 10, 2012
OTHER IMPORTANT LABOR PROVISIONS
A.CONTRACTING ARRANGEMENT
44. PBCom vs. NLRC, 146 SCRA 347 [1986]
45. Neri vs. NLRC, 224 SCRA 717 [1993]
46. Filipinas Synthetic Fiber Corp., vs. NLRC,
257 SCRA 336 [1996]
47. Maraquinot vs. NLRC, 284 SCRA 539
[1998]
48. Urbanes Jr. vs. Sec. Of Labor, G.R. No.
122791, Feb. 19, 2003
49. San Miguel vs. Maerc Integrated Services,
G.R. No. 144672, July 10, 2003
50. Mariveles Shipyard vs. CA, G.R. No.
144134, Nov. 11, 2003
51. New Golden City Builders vs. CA, G.R. No.
154715, Dec. 11, 2003
52. National Food Authority vs. Maceda
SecurIty Agency, G.R. No. 163448, March
8, 2005
53. Abella vs. PLDT, G.R. No. 159469, June 8,
2005
54. San Miguel vs. Aballa, G.R. No. 149011,
June 28, 2005
55. Manila Electric Co., vs. Benamira, G.R. No.
145271, July 14, 2005
56. Granspan Development Corp., vs. Bernardo,
G.R. No. 141464, Sept. 21, 2005
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
57. Acevedo vs. Advanstar Co., G.R. No.
157656, Nov. 11, 2005
58. Big AA Manufacturer vs. Antonio, G.R. No.
1608504, March 3, 2006
59. DOLE Phils. Vs. Esteva, G.R. No. 161115,
Nov. 30, 2006
60. San Miguel Vs. NLRC, G.R. No. 147566,
Dec. 6, 2006 citing Maerc Integrated
Services case
61. Eparwa Security & Janitorial Services vs.
Liceo De Cagayan Univ. G.R. No. 150402,
Nov. 28, 2006, citing Eagle Security case
62. Lapanday Agri Development Corp., vs.
Court of Appeals, 324 SCRA 39
63. Escario vs. NLRC, 333 SCRA 257 [2000]
64. Aboitiz Haulers vs. Dimapatoi, G.R. No.
148619, Sept. 19, 2006
65. GSIS vs. NLRC, G.R. No. 157647, October
15, 2007, citing Rosewood Processing vs.
NLRC, 290 SCRA 408
66. Republic of the Phils/SSC/SSS vs. Asiapro
Cooperative, G.R. No. 172101, November
23, 2007
67. Almeda et al., vs. Asahi Glass, G.R. No.
177785, Sept 3, 2008
68. Sasan, Sr et al., vs. NLRC and EPCIB, G.R.
No. 176240, October 17, 2008
69. Purefoods Corp., vs. NLRC et al., G.R. No.
172241, November 20, 2008
70. Maranaw Hotels and Resort vs. Court of
Appeals, et al., G.R. No. 149660, Jan. 20,
2009
71. CCBPI vs. Agito et al., G.R. No. 179546,
Feb. 13, 2009
72. South Davao Development Company et al.,
vs. Gamo et al., GR No. 171814, May 8,
2009
73. Traveno et al., vs. Bobongon Banana
Growers Multi-purpose Cooperative et al.,
GR No. 164205, Sept. 3, 2009
74. Locsin et al., vs. PLDT, GR No. 185251,
Oct 2, 2009
75. Aliviado et al vs. Procter & Gamble Phils
GR No. 160506, March 9, 2010
76. San Miguel Corp. vs. Semillano et al., GR
No. 164257, July 5, 201
77. Manila Water Co. vs. Dalumpines, GR No.
175501, Oct. 4, 2010
78. Teng vs. Pahagac, GR No. 169704,
November 17, 2010
3

79. GSIS vs. NLRC et al., GR No. 180045, Nov.
17, 2010
80. Sy et al., vs. Fairland Knitcraft Co Inc. G.R.
No. 189658, December 12, 2011
81. Polyfoam-RGC International Corp., vs.
Concepcion, G.R. No. 172349, June 13,
2012
82. Superior Packaging Corp., vs. Balagsay et
al., G.R. No. 178909, October 10, 2012
83. Digital Telecommunications Phils Inc. vs.
Digitel Employees Union et al., G.R. No.
184903-04, October 10, 2012
84. Norkis Trading Corp., vs. Buenavista, et al.,
G.R. No. 182018, October 10, 2012
85. Goya Inc. vs. Goya Inc. Employees Union-
FFW G.R. No. 170054, Jan. 21, 2013
86. Vigilla et al., vs. Phil. College of
Criminology Inc., G.R. No. 200094, June
10, 2013
87. BPI Employees Union-Davao city-FUBU
vs. Bank of the Phil Islands et al., G.R. No.
174912, July 24, 2013
B.WORKER'S PREFERENCE
88. DBP vs. NLRC, 242 SCRA 59 [1995]
89. Batongbuhay Gold Mines vs. De la Serna,
312 SCRA 45
90. Barayoga vs. Asset Privatization Trust, G.R.
No. 160073, October 24, 2005
91. Phil. Airlines vs. Zamora, G.R. No. 166996,
Feb. 6, 2007
92. Phil. Airlines vs. Phil. Airlines Employees
Association, 525 SCRA 29 [2007], citing
Rubberworld vs. NLRC, 305 SCRA 721
[1999]
93. Garcia vs. Phil Air Lines, G.R. No. 164856,
January 20, 2009
C.ATTORNEY'S FEES & APPEARANCE OF
LAWYERS
94. Bank of the Philippines Island vs. NLRC,
171 SCRA 556
95. Traders Royal Bank Employees Union vs.
NLRC, 269 SCRA 733 [1997]
96. Brahm Industries vs. NLRC, 280 SCRA 824
[1997]
97. Heirs of Aniban vs. NLRC, 282 SCRA 377
[1997]
98. Sapio vs. Undaloc Construction et al., G.R.
No. 155034, May 22, 2008
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
99. Atty. Ortiz vs. San Miguel Corp., G.R. No.
151983-84, July 31, 2008
100.Masmud vs. NLRC et al., G.R. No. 183385,
Feb. 13, 2009
101.Kaisahan at kapatiran ng mga Manggagawa
at Kawani sa MWC-East Zone Union vs.
Manila Water Company, G.R. No. 174179,
November 16, 2011
102.Malvar vs. Kraft Food Phils Inc. et al., G.R.
No. 183952, Sept. 9, 2013
D.SPECIAL TYPES OF WORKERS
103.Bernardo vs. NLRC, 310 SCRA 186 [1999]
E. EMPLOYMENT OF WOMEN
104.PT&T vs. NLRC, 272 SCRA 596 [1997]
105.Del Monte Phils vs. Velasco, G.R. No.
153477, March 6, 2007
106.Co vs. Vargas, G.R. No. 195167, November
16, 2011
F. EMPLOYMENT OF CHILDREN
G. EMPLOYMENT OF HOUSEHELPER
107.Ultra Villa Food Haus vs. Geniston, 309
SCRA 17 [1999]
108.Remington Industrial Sales Corp., vs.
Castaneda, G.R. No. 169295-96, Nov. 20,
2006 citing Apex Mining
Co vs. Vargas, G.R. No. 195167, November
16, 2011
H. EMPLOYMENT OF HOMEWORKERS
I. EMPLOYMENT OF NON-RESIDENT
ALIENS
J. EMPLOYMENT OF STUDENTS &
WORKING SCHOLAR
K.EMPLOYMENT OF ACADEMIC/NON-
ACADEMIC PERSONNEL IN PRIVATE
EDUCATIONAL INSTITUTION
109.University of the east et al., vs. Pepanio, G.r.
No. 193897, Jan. 23, 2013
4

110.Colegio Del Santisimo Rosario et al., vs.
Rojo, G.R. No. 170388, Sept. 4, 2013 citing
Mercado et al., vs. AMA Computer College-
Paranaque City, GR No. 183572, April 13,
2010
111. Herrera-Manaois vs. St. Scholasticas
College, GR No. 188914, December 11,
2013
MEDICAL, DENTAL AND OCCUPATIONAL
SAFETY
112.Tolosa vs. NLRC, G.R. No. 149578, April
10, 2003
113.U-Bix Corp., vs. Bandiola, 525 SCRA 566
[2007]
114.Ocean Builders Construction vs. Sps.
Cubacub, GR No. 150898, April 13, 2011
MIGRANT WORKER'S ACT & OVERSEAS
FILIPINO ACT OF 1995 & RECRUITMENT
AND PLACEMENT
115.ISS Indochina Corp., vs. Ferrer, G.R. No.
156381, Oct. 14, 2005
116.People vs. Capt. Gasacao, G.R. No. 168449,
Nov. 11, 2005
117.Acuna vs. CA, G.R. No. 159832, May 5,
2006
118.Asian International Manpower Services vs.
CA, G.R. No. 169652, October 9, 2006
119.Sim vs. NLRC et al., G.R. No. 157376,
October 2, 2007
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
120.Bahia Shipping Services vs. Chua, G.R. No.
162195, April 8, 2008
121.Masangkay vs. Trans-Global Maritime
Agency Inc., et al., G.R. No. 172800,
October 17, 2008
122.Magsaysay Maritime Corp., et al., vs.
Velasquez, et al., G.R. No. 179802, Nov 14,
2008
123.Serrano vs. Gallant Maritime Services et al.,
G.R. No. 167614, March 24, 2009 – En
Banc
124.Becmen Service Exporter and Promotion
Inc., vs. Spouses Cuaresma, GR Nos.
182978-79 & 184298-99, April 7, 2009
125.People vs. Domingo, GR No. 181475, April
7, 2009
126.ATCI Overseas Corp. et al., vs. Echin, GR
No. 178551, Oct. 11, 2010
127.Yap vs. Thenamaris Ship Management et al.,
G.R. No. 179532, May 30, 2011
128.Skippers United Pacific vs. Doza et al., G.R.
No. 175558, February 8, 2012
129.International Management Services vs.
Logarta, G.R. No. 163657, April 18, 2012
130.Pert/Cpm Manpower Exponent Co., Inc. vs.
Vinuya et al., G.R. No. 197528, September
8, 2012
131.Hon. Sto. Tomas, et al., vs. Salac et al., G.R.
No. 152642 & 152710, November 13, 2012
5

1. Tolosa vs. NLRC G.R. No. 149578, April 10,
2003
Facts: Petitioner is the wife of Capt. Tolosa who was
hired to be the master of M/V Lady Dona with
private respondents Garate and Asis as Chief Mate
and Second Mate of the vessel respectively. Capt.
Tolosa was hired by co-private respondent Qwana-
Kaiun through the manning agent Asia Bulk
Transport Phils., Inc. The voyage was from
Yokohama, Japan to Long Beach, California. Capt.
Tolosa was given a compensation of US$1,700
monthly plus US$400 overtime allowance monthly.
Upon embarkation, Capt. Tolosa’s health was still in
good shape but after being drenched in rainwater
after embarkation, he suffered Loose Bowel
Movement and fever which led eventually to his
death after several days.
Petitioner filed a Complaint/Position Paper with the
Philippine Overseas Employment Agency against
private respondents herein but because of the
amendatory law expanding the jurisdiction of the
National Labor Relations Commission (NLRC), the
case was raffled to a Labor Arbiter. She sought to
recover (a) loss of earning capacity as ‘actual
damages’ and (b) blacklisting imputing gross
negligence to private respondents Garate and Asis.
She anchored her claim on Article 161 of the Labor
Code regarding Assistance of Employer.
Private respondents, on the other hand, asserted that
the Labor Arbiter has no jurisdiction as the complaint
is based on torts which the regular courts have
jurisdiction.
The Labor Arbiter ruled in favor of petitioner
granting her the relief sought. On appeal, the NLRC
reversed the Labor Arbiter’s Decision. It ruled that
the Labor Arbiter had no jurisdiction over the subject
matter. The Court of Appeals affirmed the NLRC. It
ruled that the case did not arise from a quasi-delict or
tort and not from an employee-employer relationship
nor does it have any reasonable causal connection for
damages to be awarded incident to an employee-
employer relationship. Hence, this instant petition.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Petitioner argued that her cause of action is not based
on negligence but on Art. 161 of the Labor Code. She
alleged that the reasonable causal rule should be
applied in her favor.
Issue: Whether or not the Labor Arbiter has
jurisdiction over the subject matter?
Ruling: No, the Labor Arbiter does not have
jurisdiction over the subject matter. The Court ruled
that labor arbiters and the NLRC have no power to
grant reliefs from claims that do not arise from
employer-employee relationships. They have no
jurisdiction over torts that do not have a reasonable
causal connection to any of the claims provided for in
the Labor Code, other labor statutes, or collective
bargaining agreements.
It has been emphasized that the allegation of the
complaint determines the nature of the action and
consequently, the jurisdiction of the courts. The Court
was convinced that the allegations were in the nature
of an action based on quasi-delict or tort resulting
from gross negligence. Even though Labor Arbiters
have jurisdiction to grant damages under the Civil
Code, these reliefs must still be based on an action
that has a reasonable causal connection with the
Labor Code, other labor statutes, or collective
bargaining agreements. It is the character of the
principal relief that appears essential in this
connection.
In the case at hand, loss of earning capacity and
blacklisting cannot be equated to wages, overtime
compensation or separation pays. They arise from
causes within the realm of civil law. Petitioner cannot
also anchor her claim on Article 161 as this does not
grant or specify a claim or relief.
2. Austria vs. NLRC G.R. No. 124382
August 16, 1999
Facts:
Private Respondent Central Philippine Union Mission
Corporation of the Seventh-Day Adventists (SDA) is
a religious corporation duly organized and existing
under Philippine law. Austria was a Pastor of the
SDA until 1991, when his services were terminated.
6

Austria worked with the SDA for 28 years from 1963
to 1991. He began his work with the SDA as a
literature evangelist, selling literature of the SDA
over the island of Negros. From then on, he worked
his way up the ladder and got promoted several
times. He was elevated to the position of Pastor and
the finally as a District Pastor in Negros with 12
churches under his jurisdiction.
On various occasions, Austria received several
communications the treasurer of the Negros Mission
asking him to admit accountability and responsibility
for the church tithes and offerings. After several
meetings were held and an investigation was made on
the matter, Austria received a letter of dismissal citing
misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and
habitual neglect of duties, and commission of an
offense against the person of employer's duly
authorized representative, as grounds for the
termination of his services.
Reacting against the adverse decision of the SDA,
Austria filed a before the Labor Arbiter for illegal
dismissal against the SDA and its officers and prayed
for reinstatement with backwages and benefits, moral
and exemplary damages and other labor law benefits.
The SDA contended that by virtue of the doctrine of
separation of church and state, the Labor Arbiter and
the NLRC have no jurisdiction to entertain the
complaint filed by Austria. Since the matter at bar
allegedly involves the discipline of a religious
minister, it is to be considered a purely ecclesiastical
affair to which the State has no right to interfere.
Issue:
Do the Labor Arbiter and the NLRC have jurisdiction
to try and decide the complaint filed by Austria
against the SDA?
Ruling:
Yes, they have jurisdiction.
The principle of separation of church and state finds
no application here. The case at bar does not concern
an ecclesiastical or purely religious affair as to bar
the State from taking cognizance of the same. An
ecclesiastical affair involves the relationship between
the church and its members and relate to matters of
faith, religious doctrines, worship and governance of
the congregation. To be concrete, examples of this so-
called ecclesiastical affairs to which the State cannot
meddle are proceedings for excommunication,
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
ordinations of religious ministers, administration of
sacraments and other activities with attached
religious significance.
While the matter at hand relates to the church and its
religious minister it does not ipso facto give the case
a religious significance. What is involved here is the
relationship of the church as an employer and the
minister as an employee. The matter of terminating
an employee, which is purely secular in nature, is
different from the ecclesiastical act of expelling a
member from the religious congregation. As such, the
State, through the Labor Arbiter and the NLRC, has
the right to take cognizance of the case and to
determine whether the SDA, as employer, rightfully
exercised its management prerogative to dismiss an
employee. This is in consonance with the mandate of
the Constitution to afford full protection to labor.
Under the Labor Code, the provision which governs
the dismissal of employees, is comprehensive enough
to include religious corporations, such as the SDA, in
its coverage. Article 278 of the Labor Code on post-
employment states that "the provisions of this Title
shall apply to all establishments or undertakings,
whether for profit or not." Obviously, the cited article
does not make any exception in favor of a religious
corporation. This is made more evident by the fact
that the Rules Implementing the Labor Code,
particularly, Section 1, Rule 1, Book VI on the
Termination of Employment and Retirement,
categorically includes religious institutions in the
coverage of the law, to wit:
Sec. 1. Coverage. — This Rule shall apply
to all establishments and undertakings,
whether operated for profit or not, including
educational, medical, charitable and
religious institutions and organizations, in
cases of regular employment with the
exception of the Government and its
political subdivisions including government-
owned or controlled corporations.
3. Eviota vs. Court of Appeals 407 SCRA 394
FACTS:
Sometime on January 26, 1998, the respondent
Standard Chartered Bank and petitioner Eduardo G.
Eviota executed a contract of employment under
which the petitioner was employed by the respondent
7

bank as Compensation and Benefits Manager, VP
(M21). Petitioner came up with many proposals
which the bank approved and made preparations of.
He was also given privileges like car, renovation of
the office, and even a trip to Singapore at the
company’s expense. However, the petitioner abruptly
resigned from the respondent bank barely a month
after his employment and rejoined his former
employer. On June 19, 1998, the respondent bank
filed a complaint against the petitioner with the RTC
of Makati City for damages brought about his abrupt
resignation. Though petitioner reimbursed part of the
amount demanded by Standard, he was not able topay
it full. Standard alleged that assuming arguendo that
had the right to terminate his employment with the
Bank for no reason, the manner in and circumstances
under Eviota which he exercised the same are clearly
abusive and contrary to the rules governing human
relations, governed by the Civil Code. Further,
Standard alleged that petitioner also violated the
Labor Code when he terminated his employment
without one (1) notice in advance. This stipulation
was also provided in the employment contract of
Eviota with Standard, which would also constitute
breach of contract. The petitioner filed a motion to
dismiss the complaint on the ground that the action
for damages of the respondent bank was within the
exclusive jurisdiction of the Labo Arbiter under
paragraph 4, Article 217 of the Labor Code of the
Philippines, as amended. The petitioner averred that
the respondent bank’s claim for damages arose out of
or were in connection with his employer-employee
relationship with the respondent bank or some aspect
or incident of such relationship. The respondent bank
opposed the motion, claiming that its action for
damages was within the exclusive jurisdiction of the
trial court. Although its claims for damages
incidentally involved an employer-employee
relationship, the said claims are actually predicated
on the petitioner’s acts and omissions which are
separately, specifically and distinctly governed by the
New Civil Code.
ISSUE: Whether or not the RTC had jurisdiction
over the case.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
HELD: The SC held that the RTC has jurisdiction.
Case law has it that the nature of an action and the
subject matter thereof, as well as which court has
jurisdiction over the same, are determined by the
material allegations of the complaint and the reliefs
prayed for in relation to the law involved. Not every
controversy or money claim by an employee against
the employer or vice-versa is within the exclusive
jurisdiction of the labor arbiter. A money claim by a
worker against the employer or vice-versa is within
the exclusive jurisdiction of the labor arbiter only if
there is a reasonable causal connection between the
claim asserted and employee-employer
relation. Absent such a link, the complaint will be
cognizable by the regular courts of justice. Actions
between employees and employer where the
employer-employee relationship is merely incidental
and the cause of action precedes from a different
source of obligation is within the exclusive
jurisdiction of the regular court. The jurisdiction of
the Labor Arbiter under Article 217of the Labor
Code, as amended, is limited to disputes arising from
an employer-employee relationship which can only
be resolved by reference to the Labor Code of the
Philippines, other labor laws or their collective
bargaining agreements. Jurisprudence has evolved the
rule that claims for damages under paragraph 4 of
Article 217, to be cognizable by the Labor Arbiter,
must have a reasonable causal connection with any of
the claims provided for in that article. Only if there is
such a connection with the other claims can the claim
for damages be considered as arising from employer-
employee relations. In this case, the private
respondent’s first cause of action for damages is
anchored on the petitioner’s employment of deceit
and of making the private respondent believe that he
would fulfil his obligation under the employment
contract with assiduousness and earnestness. The
petitioner volte face when, without the requisite
thirty-day notice under the contract and the Labor
Code of the Philippines, as amended, he abandoned
his office and rejoined his former employer; thus,
forcing the private respondent to hire
a replacement. The private respondent was left in
a lurch, and its corporate plans and program in
jeopardy and disarray. Moreover, the petitioner took
off with the private respondent’s computer diskette,
papers and documents containing confidential
information on employee compensation and other
8

bank matters. On its second cause of action, the
petitioner simply walked away from his employment
with the private respondent sans any written notice,
to the prejudice of the private respondent, its banking
operations and the conduct of its business. Anent its
third cause of action, the petitioner made false and
derogatory statements that the private respondent
reneged on its obligations under their contract of
employment; thus, depicting the private respondent
as unworthy of trust. The primary relief sought is for
liquidated damages for breach of a "inviting" him to answer the following charges:
contractual obligation. The other items demanded are
not labor benefits demanded by workers generally
taken cognizance of in labor disputes, such as
payment of wages, overtime compensation or
separation pay. The items claimed are the natural
consequences flowing from breach of an obligation,
intrinsically a civil dispute. It is evident that the
causes of action of the private respondent against the
petitioner do not involve the provisions of the Labor
Code of the Philippines and other labor laws but the
New Civil Code. Thus, the said causes of action are
intrinsically civil. There is no causal relationship
between the causes of action of the private
respondent’s causes of action against the petitioner
and their employer-employee relationship. The fact
that the private respondent was the erstwhile
employer of the petitioner under an existing
employment contract before the latter abandoned his
employment is merely incidental. Petition is denied.
4. DYNAMIC SIGNMAKER OUTDOOR
ADVERTISING SERVICES, INC. vs.
FRANCISCO POTONGAN G.R. No. 156589
June 27, 2005
FACTS:
In 1987, respondent started working for petitioner
corporation as a Production Supervisor at a monthly
salary ofP16,000.00.3
In early February 1996, the union of rank and file
employees of petitioner corporation,
the BigkisManggagawasaDynamicSignmakers
Outdoor Advertising Services
– KilusanngManggagawangMakabayan (KMM-
Katipunan),4declared a strike on account of which
petitioner corporation replaced all its supervisors and
designated, by letter memorandum5 dated February
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
16, 1996, certain persons to take over the operations
of the corporation including Rufino Hornilla6 who
took over petitioner’s functions.
By February 21, 1996, respondent’s salary was
withheld7 and was advised to take a leave of absence
until further notice.8
Respondent later received on February 28, 1996 a
letter from petitioner Filomeno P. Hernandez,
President/General Manager of the corporation,
1.) That on February 21, 1996, at around 9:00 A.M.
you entered the company fabrication shop where you
were assigned as supervisor and caused to create fire
by secretly switching ‘on’ the idle plastic oven and
grounded the 2 electric machine welders while the
‘strike’ was on-going outside the premises.
Witnesses also in the persons of Mr. Luis Mimay, and
his men found out later what you have done and
noticed the electric current and the burning of the
oven already very hot. You secretly left the premises
and had not for the said witnesses and contractors,
you had vehemently caused to burn the company’s
main building and its offices.
2.) That you allegedly on several occasions, urged
strongly the same group of contractors led by Mr.
Luis Mimay, working on some left over jobs at the
factory, to slow down work or not to work at all in
sympathy to the ‘strikers’who are in the ranking files.
Those proved also that as our trusted staff and
supervisor you have caused disruption of work of the
contractors. The company suffered losses in its
failure to accomplish its job projects on due dates.
Your actuations and actions proved disastrous to the
company’s interest. Considering these circumstances,
we urge you to reply your side on these matters so
that we could institute proper corresponding action
based on the above in 5 days time from receipt of this
letter.9 (Underscoring supplied)
By letter of March 4, 1996, respondent through
counsel, denied the charges proffered against him, he
insisting that they were fabricated to justify his
termination due to suspicions that he was a strike-
sympathizer.10 In the same letter, respondent
expressed his openness to the conduct of a full-blown
investigation of the case by the NLRC.11
Respondent later filed on January 29, 1997 a
complaint against herein petitioners for illegal
9

dismissal, reinstatement, backwages and damages
with the Regional Arbitration Branch of the NLRC,
docketed as NLRC Case No. RAB-IV-1-8738-97-
RI,12 the case subject of the petition.
Respondent complained that although he was not sent
a formal notice of termination, he was effectively
dismissed from employment for after he was asked to
take a leave of absence on February 21, 1996, as he
did, and he was not instructed nor allowed to return
to work, nor paid his salaries.13
By Decision30 of September 30, 2002, the appellate
court reversed the NLRC decision, it holding that
respondent was denied due process and was
dismissed without cause when he was replaced by
RufinoHornilla and instructed to go on leave
indefinitely.31
In reversing the NLRC decision, the appellate court
noted that it was on account of respondent’s
replacement as Operations Manager and the
instruction for him to go on indefinite leave that it
took almost a year for him to file the complaint for
illegal dismissal. Hence, the appellate court
concluded, he should not be faulted for laches. Nor,
said the appellate court, could respondent be deemed
to have abandoned his work on receipt of petitioner’s
counsel’s return to work March 1, 1999 letter because
prior thereto he had considered himself illegally
terminated as in fact he had filed on January 29, 1997
the complaint for illegal dismissal.32
ISSUE:
Petitioners insist that respondent was not illegally
dismissed, "management [having] merely opted to
reorganize," hence, the award to him of full
backwages, reinstatement or separation pay, and
attorney’s fees is bereft of factual and legal basis.33
HELD:
This Court upholds then the appellate court’s finding
that respondent was constructively dismissed:
There is no doubt, therefore, that the petitioner in this
case was effectively terminated from employment by
respondent when he was replaced as Operations
Manager and instructed to take a leave indefinitely.
Petitioner was neither transferred nor reassigned to
another office or position contrary to what public
respondent seems to allude. Petitioner was simply
replaced and instructed to take a leave indefinitely.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
"In cases of illegal dismissal, the burden is on the
employer to prove that there was a valid ground for
dismissal." Medenilla vs. Philippne Veterans Bank,
328 SCRA 1, 7. We failed to extract from the record
any evidence to show that there exists valid and just
cause to terminate herein petitioner from
employment. In fact during the pendency of the
complaint for illegal dismissal by the petitioner
against private respondents, the latter in a letter dated
March 1, 1999, ordered petitioner to report back to
work immediately. This in itself proves that herein
private respondents believe that there exists no valid
and just grounds (sic) to terminate herein petitioners
from his employment.42 (Underscoring supplied)
It upholds too the award to respondent of attorney’s
fees in the amount of P50,000.00, he having been
forced to litigate and thereby incur expenses to
protect his rights and interests.43
Clutching at straws, petitioners fault the appellate
court for failure to recognize the final and executory
nature of the June 24, 1996 NLRC Decision rendered
in the consolidated cases and for affirming the
nullification of said decision, with respect to
respondent, which could be attacked only by direct
action.44
Contrary to petitioners’ position, the validity of a
judgment or order of a court or quasi-judicial tribunal
which has become final and executory may be
attacked when the records show that it lacked
jurisdiction to render the judgment.45 For a judgment
rendered against one in a case where jurisdiction over
his person was not acquired is void, and a void
judgment maybe assailed or impugned at any
time either directly or collaterally by means of a
petition filed in the same or separate case, or by
resisting such judgment in any action or proceeding
wherein it is invoked.46
Petitioners in fact do not even dispute respondent’s
claim that no summons was ever issued and served
on him either personally or through registered mail as
required under Rule III, Sections 3 and 6 of the Rules
of Procedure of the NLRC, as amended by
Resolution No. 01-02, Series of 2002:
10

SEC. 3. Issuance of Summons. Within two (2) days
from receipt of a case, the Labor Arbiter shall issue
the required summons, attaching thereto a copy of the
complaint/petition and supporting documents, if any.
The summons, together with a copy of the complaint,
shall specify the date, time and place of the
conciliation and mediation conference in two (2)
settings.
xxx
SEC. 6. Service of Notices and Resolutions. a)
Notices or summonses and copies of orders, shall be
served on the parties to the case personally by the
bailiff or duly authorized public officer within three
(3) days from receipt thereof or by registered mail,
provided that in special circumstances, service of
summons may be effected in accordance with the
pertinent provisions of the Rules of Court; xxx
Supplementary or applied by analogy to these
provisions are the provisions and prevailing
jurisprudence in Civil Procedure. Where there is then
no service of summons on or a voluntary general
appearance by the defendant, the court acquires no
jurisdiction to pronounce a judgment in the cause.47
At all events, even if administrative tribunals
exercising quasi-judicial powers are not strictly
bound by procedural requirements, they are still
bound by law and equity to observe the fundamental
requirements of due process.48
Res inter aliosactanocerenondebet. Things done
between strangers ought not to injure those who are
not parties to them.49
WHEREFORE, the instant petition is hereby
DENIED. The decision of the appellate court is
hereby AFFIRMED with the MODIFICATION that if
reinstatement is no longer possible due to strained
relations between the parties, petitioners are ordered
to pay respondent, Francisco Potongan, separation
pay equivalent to One Month salary for every year of
service, computed from the time he was first
employed until the finality of this decision.
SO ORDERED.
5. METROMEDIA TIMES CORPORATION
and/or ROBINA GOKONGWIE PE, v. Johnny
Pastorin G.R. NO. 154295. July 29, 2005
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
FACTS:
Johnny Pastorin (Respondent) was
employed by Metromedia Times Corporation
(Petitioner) on 10 December 1990 as a Field
Representative/Collector. His task entailed the
periodic collection of receivables from dealers of
petitioner's newspapers.
Respondent, because of tardiness was
supposedly terminated by the petitioner company, but
because of the timely intervention of the union, the
dismissal was not effected.
However, he incurred another infraction
when he obtained a loan from a magazine dealer
and when he was not able to pay the loan, he
stopped collecting the outstanding dues of the
dealer/creditor. After requiring him to explain,
respondent admitted his failure to pay the loan but
gave no definitive explanation for the same.
Thereafter, he was penalized with
suspension. He was also not allowed to do field
work, and was transferred to a new position. Despite
the completion of his suspension, respondent stopped
reporting for work and sent a letter communicating
his refusal to accept the transfer. He then filed a
complaint for constructive dismissal, non-payment of
backwages and other money claims with the labor
arbiter.
The complaint was resolved in favor of
respondent. Petitioner lodged an appeal with the
NLRC, raising as a ground the lack of jurisdiction of
the labor arbiter over respondent’s complaint.
Significally, this issue was not raised by petitioner in
the proceedings before the Labor Arbiter.
The NLRC reversed the decision of the LA
and ruled that the LA has no jurisdiction over the
case, it being a grievance issue properly cognizable
by the voluntary arbitrator. However, the CA
reinstated the ruling of the CA. The CA held that the
active participation of the party against whom the
action was brought, coupled with his failure to object
to the jurisdiction of the court or quasi-judicial body
11

where the action is pending, is tantamount to an
invocation of that jurisdiction and a willingness to
abide by the resolution of the case and will bar said
party from later on impugning the court or body’s
jurisdiction.
ISSUE:
Whether or not petitioner is estopped from
questioning the jurisdiction of the LA during appeal.
HELD:
The SC held that petitioner is not estopped
from questioning the jurisdiction of the LA during
appeal.
The general rule is that the jurisdiction of
a court over the subject matter of the action is a
matter of law and may not be conferred by
consent or agreement of the parties. The lack of
jurisdiction of a court may be raised at any stage of
the proceedings, even on appeal. This doctrine has
been qualified by recent pronouncements which
stemmed principally from the ruling in the cited case
of Sibonghanoy. It is to be regretted, however, that
the holding in said case had been applied to situations
which were obviously not contemplated therein. The
exceptional circumstances involved in Sibonghanoy
which justified the departure from the accepted
concept of non-waivability of objection to
jurisdiction has been ignored and, instead a blanket
doctrine had been repeatedly upheld that rendered the
supposed ruling in Sibonghanoy not as the exception,
but rather the general rule, virtually overthrowing
altogether the time honored principle that the issue of
jurisdiction is not lost by waiver or by estoppel.
The operation of the principle of estoppel on
the question of jurisdiction seemingly depends upon
whether the lower court actually had jurisdiction or
not. If it had no jurisdiction, but the case was
tried and decided upon the theory that it had
jurisdiction, the parties are not barred, on appeal,
from assailing such jurisdiction, for the same
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
'must exist as a matter of law, and may not be
conferred by consent of the parties or by estoppel.
However, if the lower court had jurisdiction, and the
case was heard and decided upon a given theory,
such, for instance, as that the court had no
jurisdiction, the party who induced it to adopt such
theory will not be permitted, on appeal, to assume an
inconsistent position—that the lower court had
jurisdiction. Here, the principle of estoppel applies.
The rule that jurisdiction is conferred by law, and
does not depend upon the will of the parties, has no
bearing thereon.
Applying the general rule that estoppel
does not confer jurisdiction, petitioner is not
estopped from assailing the jurisdiction of the
labor arbiter before the NLRC on appeal.
Decision of the CA is set aside.
YUSEN AIR AND SEA SERVICE PHILIPPINES,
INCORPORATED,petitioner
vs.
ISAGANI A. VILLAMOR,respondent
Facts:
-Petitioner,is engaged in the business of freight
forwarding. As such, it is contracted by clients to
pick-up, unpack, consolidate, deliver, transport and
distribute all kinds of cargoes, acts as cargo or freight
accommodation and enters into charter parties for the
carriage of all kinds of cargoes or freight.
-On 1993, petitioner hired respondent as branch
manager in its Cebu Office. Later, petitioner
reclassified respondent’s position to that of Division
Manager, which position respondent held until his
resignation on February 1, 2002.
- Immediately after his resignation, respondent
started working for Aspac International, a
corporation engaged in the same line of business as
that of petitioner.
12
 LABOR STANDARDS LAW

- On February 11, 2002,petitioner filed against

respondent a complaint[3] for injunction and damages
with prayer for a temporary restraining order, the HELD:
complaint alleged,inter alia, as follows:

-The petition is impressed with merit.

7. That [respondent]
duly signed an - the 2-year prohibition against employment in a
undertaking to abide by competing company which petitioner seeks to
the policies of the enforce thru injunction, had already expired
[Petitioner] which sometime in February 2004. Necessarily, upon the
includes the provision on expiration of said period, a suit seeking the issuance
the employees’ of a writ of injunction becomes functusoficio and
responsibility and therefore moot.
obligation in cases of
conflict of interest, which
reads:

2nd issue:

No employee may engage in any business or With regards to the claim for damages
undertaking that is directly or indirectly in
competition with that of the company and its *whether petitioner's claim for damages
affiliates or engage directly or indirectly in any arose from employer-employee relations between the
undertaking or activity prejudicial to the interests of parties.
the company or to the performance of his/her job or
work assignments. The same provision will be
implemented for a period of two (2) years from
the date of an employee’s resignation, termination HELD:
or separation from the company.

-Petitioner thus prayed for a judgment enjoining

respondent from “further pursuing his work at Aspac
International”, and awarding it P2,000,000 as actual
damages; P300,000 as exemplary damages;
- respondent filed against petitioner a case for illegal
dismissal before the National Labor Relations
Commission.
- Meanwhile, instead of filing his answer,
respondent filed a Motion to Dismiss,arguing that the
RTC has no jurisdiction over the subject matter of
said case because an employer-employee relationship
is involved.
1st issue:
With regards to the 2 yr prohibition
In Dai-Chi Electronics Manufacturing vs.
Villarama,with a substantially similar factual
backdrop, we held that an action for breach of
contractual obligation is intrinsically a civil dispute.
There, a complaint for damages was filed with
the regular court by an employer against a former
employee who allegedly violated the non-compete
provision of their employment contract when, within
two years from the date of the employee’s
resignation, he applied with, and was hired by a
corporation engaged in the same line of business as
that of his former employer. The employer sought to
recover liquidated damages. The trial court ruled that
it had no jurisdiction over the subject matter of the
controversy because the complaint was for damages
arising from employer-employee relations, citing
Article 217 (4) of the Labor Code, as amended by
R.A. No. 6715, which stated that it is the Labor

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 13

 LABOR STANDARDS LAW

Arbiter who had original and exclusive jurisdiction xxx xxx xxx
over the subject matter of the case.

4. Clai
When the case was elevated to this Court, we ms for
held that the claim for damages did not arise from actual,
employer-employee relations, to wit: moral,
exempla
ry and
other
Petitioner does not ask for any relief under the forms of
Labor Code of the Philippines. It seeks to recover damages
damages agreed upon in the contract as redress for arising
private respondent’s breach of his contractual from the
obligation to its “damage and prejudice”. Such cause employe
of action is within the realm of Civil Law. r-
employe
e
relations
;"
-Indeed, jurisprudence has evolved the rule that
claims for damages under paragraph 4 of Article 217,
to be cognizable by the Labor Arbiter, must have a
reasonable causal connection with any of the claims
provided for in that article. Only if there is such a xxx xxx xxx
connection with the other claims can a claim for
damages be considered as arising from employer-
employee relations.
- In San Miguel Corporation vs. National Labor
Relations Commission

Article 217, as amended by Section 9 of RA

6715, provides:
Art. 217. Jurisdiction of
Labor Arbiters and the
Commission. — (a) Except as
otherwise provided under this
Code, the Labor Arbiters shall have
original and exclusive jurisdiction
to hear and decide, within thirty
(30) calendar days after the
submission of the case by the
parties for decision without
extension, even in the absence of
stenographic notes, the following
cases involving all workers,
whether agricultural or non-
agricultural:
“While paragraph 3 above refers to “all money
claims of workers,” it is not necessary to suppose that
the entire universe of money claims that might be
asserted by workers against their employers has been
absorbed into the original and exclusive jurisdiction
of Labor Arbiters. In the first place, paragraph 3
should be read not in isolation from but rather within
the context formed by paragraph 1 (relating to unfair
labor practices), paragraph 2 (relating to claims
concerning terms and conditions of employment),
paragraph 4 (claims relating to household services, a
particular species of employer-employee relations),
and paragraph 5 (relating to certain activities
prohibited to employees or employers). It is evident
that there is a unifying element which runs through
paragraph 1 to 5 and that is, that they all refer to
cases or disputes arising out of or in connection with
an employer-employee relationship.

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 14


For it cannot be presumed that money claims of
workers which do not arise out of or in connection
with their employer-employee relationship, and
which would therefore fall within the general
jurisdiction of regular courts of justice, were intended
by the legislative authority to be taken away from the
jurisdiction of the courts and lodged with Labor
Arbiters on an exclusive basis. The Court, therefore,
believes and so holds that the “money claims of
workers” referred to in paragraph 3 of Article 217
embraces money claims which arise out of or in
connection with the employer-employee relationship,
or some aspect or incident of such relationship. Put a
little differently, that money claims of workers which
now fall within the original and exclusive jurisdiction
of Labor Arbiters are those money claims which have
some reasonable causal connection with the
employer-employee relationship.”
-With the reality that the stipulation refers to the post-
employment relations of the parties.
For sure, a plain and cursory reading of the
complaint will readily reveal that the subject matter is
one of claim for damages arising from a breach of
contract, which is within the ambit of the regular
court’s jurisdiction
Duty Free Philippines v. Rossano Mojica, GR No.
166365, 30 September 2005, First Division,
Ynares-Santiago1
Principles of law: Complaints of civil service
employees come under the jurisdiction of the CSC
and not NLRC; any decision of the Labor Arbiter
involving a CS employee is void for want of
jurisdiction
Facts
 Mojica was an employee of Duty Free
Philippines who was charged with neglect
resulting to considerable damage to or loss
of materials, assets and properties of DFP;
1 19 August 2014.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
 Hence, the discipline committee of Duty
Free considered her resigned with forfeiture
of all benefits except salary and accrued
leave credits;
 As a result a complaint for illegal dismissal
with prayer of full back wages and
reinstatement was filed by Mojica before the
NLRC;
 The Labor Arbiter awarded the back wages
including an order for reinstatement; this
was, however, reversed by NLRC;
 A motion for reconsideration was likewise
dismissed by NLRC;
 A petition for Certiorari under Rule 65 was
filed by Mojica before the CA, which court
granted the reliefs prayed for; Duty Free
petitioned before the SC;
Issue
1. Whether the filing by Mojica of the
complaint before the NLRC was proper
2. What is the nature of DFP?
3. What is the tribunal clothed with jurisdiction
to try civil service cases?
Held
1. No, DFP being a government agency
attached with DOT, complaints against it are
not cognizable by NLRC. 2
DFP was created under Executive Order
(EO) No. 46 on September 4, 1986 primarily
to augment the service facilities for tourists
and to generate foreign exchange and
revenue for the government. In order for the
government to exercise direct and effective
control and regulation over the tax and duty
free shops, their establishment and operation
was vested in the Ministry, now Department
of Tourism (DOT), through its implementing
arm, the Philippine Tourism Authority
(PTA). All the net profits from the
merchandising operations of the shops
accrued to the DOT.
2 Note that it was initially decided upon by the Labor
Arbiter. NLRC in fact dismissed the petition
15

2. EO No. 292 or The Administrative Code of
1987 empowered the Civil Service
Commission to hear and decide
administrative cases instituted by or brought
before it directly or on appeal, including
contested appointments, and review
decisions and actions of its offices and of the
agencies attached to it.
8. Easycall Communications Phils., Inc vs.
Edward King
Facts:
Petitioner Easycall Communications Phils., Inc was a
domestic corporation engaged in the business of
message handling. On May 1992, petitioner, through
its general manager, Roberto Malonzo, hired the
services of respondent as assistant to the general
manager. He was given the responsibility of ensuring
that the expansion plans outside Metro Manila and
Metro Cebu were achieved as soon as possible.
In an Memo dated Aug 14, Mr. RT Casas,
respondent’s immediate superior, recommended his
promotion to assistant vice president for nationwide
expansion. On December 22, respondent was
appointed to the even higher position. His promotion
was based his performance for the preceding 6
months of his appointment. As VP, he became
responsible for the sales and rentals of pager units in
the expansion areas. He also coordinated with the
dealers.
Sometime in March 1993, Malonzo reviewed King’s
sales performance. He also scrutinized status of
petitioner’s Nationwide Expansion program (NEP)
which was under King’s responsibility. The
management then confronted respondent. On April
1993, Rockwell Gohu, petitioner’s deputy manager,
talked to respondent and told him that Malonzo
wanted respondent’s resignation. He then wrote a
letter confronting Malonzo.
On April 19 1993, he received a termination letter
from Malonzo effective April 30 with the reason that
the management is no longer confident with him for
the position he’s occupying. Aggrieved, respondent
filed a complaint for illegal dismissal with NLRC.
LA found the termination ground for loss of
confidence valid. On appeal, NLRC affirmed that
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
decision of LA but ordered petitioner to indemnify
respondent for lack of due process. MR dismissed.
Filed certiorari before CA.CA held NLRC lacked
jurisdiction and that there was illegal dismissal.
Petitioner filed MR, denied. Hence, this petition.
Issue/s:
1. Whether or not NLRC had jurisdiction over
the case of respondent’s illegal dismissal
2. Whether or not respondent Edward King
was validly dismissed
Ruling:
SC ruled first with jurisdiction as it is decisive. If
NLRC has no jurisdiction, then it would be
unnecessary to talk about the validity of dismissal.
Petitioner contends that it is SEC, and not the NLRC,
who has jurisdiction since respondent was a
“corporate officer.” Is respondent a corporate officer?
Here, petitioner failed to prove that respondent was a
corporate officer.
“Corporate officers” are those officers who
are given that character under the
Corporation Code. Under Section 25
thereof, the “corporate officers” are the
president, secretary, treasurer and such other
officers as may be provided by the by-laws.
Since petitioner failed to satisfy burden of proof that
was required of it, we cannot sanction its claim that
respondent was a corporate officer whose removal
was cognizable by the SEC under PD 902-A and not
by NLRC.
An “office” is created by the charter of the
corporation and the officer is elected by the
directors and stockholders. On the other
hand, employee occupies no office and
generally is employed not by the action of
the directors or stockholders but by the
managing officer of the corporation who
also determines compensation of employee.
Respondent was appointed VP by Malonzo,
petitioner’s manager, not by the board of directors. It
was also Malozo who determined respondent’s
compensation package. Thus, respondent was an
employee, not a corporate officer. The CA was
correct in ruling that jurisdiction over the case was
properly with NLRC, not with SEC.
Validity of the Dismissal
16

While loss of confidence is a valid ground for
dismissing the employee, it should not be simulated.
It must not be indiscriminately used as a shield by the
employer against a claim that the dismissal was
arbitrary.
Loss of trust and confidence must be based
on a willful breach and founded on cleary
established facts. A breach is willful if it is
done intentionally, knowingly and
purposely, without justifiable excuse as
opposed to carelessness, thoughtlessness and
heedlessness. It cannot be from mere
carelessness.
In this case, LA’s finding, was that sales record of
respondent at the time he spent work in the field were
clear indications of complainant’s inefficiency and/or
negligence. Inefficiency implies incompetence,
ignorance and carelessness. They were not sufficient
to claim a loss of confidence as a ground for
dismissal.
Moreover, the promotion of the employee negates the
employer’s claim that it has lost its trust and
confidence on the employee. The lack of cause in
respondent’s dismissal was aggravated by the
absence of due process. The twin requirements of
notice and hearing constitute the essential elements of
due process.
The law requires the employer to furnish the
employee sought to be dismissed 2 written
notices before termination can be legally
effected:
1. Written notice apprising the employee
of the particular acts for which his
dismissal is sought to afford him an
opportunity to be heard and defend
himself
2. Subsequent notice informing
employer’s decision.
The procedure above is MANDATORY and its
absence taints the dismissal with illegality. In the case
at bar, respondent was only served with 1 notice –
notice of his termination.
Petition is DENIED. CA is affirmed.
9. SAN MIGUEL FOODS, INC. v. SAN MIGUEL
CORPORATION EMPLOYEES UNION-
PTWGO G.R. NO. 168569 October 5, 2007
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
FACTS:
At the time material to the case, respondent,
San Miguel Corporation Employees Union - PTWGO
(the Union), was the sole bargaining agent of all the
monthly paid employees of petitioner San Miguel
Foods, Incorporated (SMFI).
On November 9, 1992, some employees of
SMFI's Finance Department, through the Union
represented by Edgar Moraleda, brought a
grievance against Finance Manager Gideon
Montesa (Montesa), for "discrimination,
favoritism, unfair labor practices, not flexible
[sic], harassment, promoting divisiveness and
sectarianism, etc.," before SMFI Plant Operations
Manager George Nava in accordance with Step 1 of
the grievance machinery adopted in the Collective
Bargaining Agreement (CBA) forged by SMFI and
the Union.
The Union sought:
1. review, evaluation & upgrading of all
Finance staff and
2. promotion of G.Q. Montesa to other SMC
affiliates & subsidiaries.
January 14, 1993- A grievance meeting was
held by SMFI informing the Union that a “work
management review” to be completed on March 1993
would be done to address the grievence, asking the
finance personnel to give it their attention.
The "work management review" was not
completed by March 1993, however, prompting the
Union to, on March 26, 1993, elevate the grievance
to Step 2.
Almost nine months after the grievance
meeting was held or on October 6, 1993, SMFI
rendered a "Decision on Step 1 Grievance" stating
that it was still in the process of completing the "work
management review," hence, the Union's requests
could not be granted.
October 20, 1993- The Union filed a
complaint before the NLRC Arbitration brance
against SMFI, its president and Montesa for "unfair
labor practice, [and] unjust discrimination in
matters of promotion . . . " It prayed that SMFI et
al. be ordered to promote the therein named
employees "with the corresponding pay increases or
17

adjustment including payment of salary differentials
plus attorney's fees[,] and to cease and desist from
committing the same unjust discrimination in matters
of promotion."7
Instead of filing a position paper as is
required for step 2, SMFI filed for a motion to
dismiss instead on the ground that that the issues
raised in the complaint were grievance issues and,
therefore, "should be resolved in the grievance
machinery provided in [the] collective bargaining
agreements [sic] of the parties or in the mandated
provision of voluntary arbitration which is also
provided in the CBA."
ISSUE:
Whether respondent's complaint is one for unfair
labor practice (ULP) over which a Labor Arbiter has
jurisdiction
RULING:
The jurisdiction of Labor Arbiters,
enumerated in Article 217 of the Labor Code,
includes complaints for ULP.
SMFI argues that the allegations in the
Union's complaint filed before the Labor Arbiter do
not establish a cause of action for ULP, the Union
having merely contended that SMFI was guilty
thereof without specifying the ultimate facts upon
which it was based. It cites Section 1 of Rule 8 of
the Rules of Court as applying suppletorily to the
proceedings before the Labor Arbiter, which Section
reads:
Section 1. In general. - Every
pleading shall contain in a
methodical and logical form, a
plain concise and direct statement
of the ultimate facts on which the
party pleading relies for his
claim . . .
Alleging that the Union failed to comply
with this Rule, SMFI concludes that the Labor
Arbiter has no jurisdiction over its complaint.
A perusal of the complaint shows that,
indeed, the particular acts of ULP alleged to have
been committed by SMFI were not specified; neither
were the ultimate facts in support thereof. In its
Position Paper, however, the Union detailed the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
particular acts of ULP attributed to SMFI and the
ultimate facts in support thereof.
Section 7, Rule V of the New Rules of Procedure of
the NLRC provides:
Nature of Proceedings. - The
proceedings before the Labor
Arbiter shall be non-litigious in
nature. Subject to the requirements
of due process, the technicalities
of law and procedure and the
rules obtaining in the courts of
law shall not strictly apply
thereto. The Labor Arbiter may
avail himself of all reasonable
means to ascertain the facts of the
controversy speedily, including
ocular inspection and examination
of well-informed persons.
(Emphasis and underscoring
supplied)cralawlibrary
Section 1 of Rule 8 of the Rules of Court
should thus not be strictly applied to a case filed
before a Labor Arbiter. In determining jurisdiction
over a case, allegations made in the complaint, as
well as those in the position paper, may thus be
considered.
On the questioned promotions, the Union
did not allege that they were done to encourage or
discourage membership in a labor organization. In
fact, those promoted were members of the
complaining Union. The promotions do not thus
amount to ULP under Article 248(e) of the Labor
Code.
As for the alleged ULP committed under
Article 248(i), for violation of a CBA, this Article is
qualified by Article 261 of the Labor Code, the
pertinent portion of which latter Article reads:
x xx violations of a Collective
Bargaining Agreement, except
those which are gross in
character, shall no longer be
treated as unfair labor practice
and shall be resolved as grievances
under the Collective Bargaining
18

Agreement. For purposes of this
article, gross violations of
Collective Bargaining Agreement
shall mean flagrant and/or
malicious refusal to comply with
the economic provisions of such
agreement. (Emphasis and
underscoring
supplied)cralawlibrary
Silva v. NLRC instructs that for a
ULP case to be cognizable by the Labor
Arbiter, and the NLRC to exercise its appellate
jurisdiction, the allegations in the complaint should
show prima facie the concurrence of two things,
namely: (1) gross violation of the CBA; AND (2)
the violation pertains to the economic provisions
of the CBA.17 (Emphasis and underscoring
supplied)cralawlibrary
As reflected in the above-quoted allegations
of the Union in its Position Paper, the Union charges
SMFI to have violated the grievance machinery
provision in the CBA. The grievance machinery
provision in the CBA is not an economic provision,
however, hence, the second requirement for a
Labor Arbiter to exercise jurisdiction of a ULP is
not present.
The Union likewise charges SMFI, however,
to have violated the Job Security provision in the
CBA, specifically the seniority rule, in that SMFI
"appointed less senior employees to positions at its
Finance Department, consequently intentionally by-
passing more senior employees who are deserving of
said appointment."
Article 4 of the Labor Code
provides that "All doubts in the
implementation and
interpretation of the provisions
of this Code, including
implementing rules and
regulations, shall be resolved in
favor of labor." Since the
seniority rule in the promotion
of employees has a bearing on
salary and benefits, it may,
following a liberal construction
of Article 261 of the Labor
Code, be considered an
"economic provision" of the
CBA.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
As above-stated, the Union charges SMFI to
have promoted less senior employees, thus bypassing
others who were more senior and equally or more
qualified. It may not be seriously disputed that this
charge is a gross or flagrant violation of the
seniority rule under the CBA, a ULP over which
the Labor Arbiter has jurisdiction.
SMFI, at all events, questions why the Court
of Appeals came out with a finding that it (SMFI)
disregarded the seniority rule under the CBA when its
petition before said court merely raised a question of
jurisdiction. The Court of Appeals having affirmed
the NLRC decision finding that the Labor Arbiter has
jurisdiction over the Union's complaint and thus
remanding it to the Labor Arbiter for continuation of
proceedings thereon, the appellate court's said
finding may be taken to have been made only for
the purpose of determining jurisdiction.
LEYTE IV ELECTRIC COOPERATIVE, INC.,
vs LEYECO IV Employees Union- ALU,
G.R. No. 157775
October 19, 2007
Facts: The Leyte IV Electric Cooperative, Inc.
(petitioner) and Leyeco IV Employees Union-ALU
(respondent) entered into a Collective Bargaining
Agreement covering petitioner rank-and-file
employees, for a period of five (5) years.
The Regional Vice-President, Vicente P. Casilan (for
respondent), sent a letter to petitioner demanding
holiday pay and in effect enforcing the CBA.
Petitioner sent a letter-reply to respondent claiming
that it had already paid all employees all the holiday
pay by reviewing the pay slips.
After exhausting the procedures of the grievance
machinery, both parties agreed to submit their issues
for arbitration of the National Conciliation and
Mediation Board (NCMB). Petitioner claimed that
payment was presumed since the formula used in
determining the daily rate of pay of the covered
employees is Basic Monthly Salary divided by 30
days or Basic Monthly Salary multiplied by 12
divided by 360 days, thus with said formula, the
employees are already paid their regular and special
days, the days when no work is done, the 51 un-
worked Sundays and the 51 un-worked Saturdays.
19

Issue: WON Leyte IV Electric Cooperative is liable
for underpayment of holiday pay.
Held: Leyte IV Electric Cooperative is not liable for
underpayment of holiday pay.
The Voluntary Arbitrator gravely abused its discretion
in giving a strict or literal interpretation of the CBA
provisions that the holiday pay be reflected in the
payroll slips. Such literal interpretation ignores the
admission of respondent in its Position Paper that the
employees were paid all the days of the month even
if not worked. In light of such admission, petitioner's
submission of its 360 divisor in the computation of
employees' salaries gains significance.
This ruling was applied in Wellington Investment and
Manufacturing Corporation v. Trajano, 43 Producers
Bank of the Philippines v. National Labor Relations
Commission. In this case, the monthly salary was
fixed by Wellington to provide for compensation for
every working day of the year including the holidays
specified by law — and excluding only Sundays. In
fixing the salary, Wellington used what it called the
"314 factor"; that is, it simply deducted 51 Sundays
from the 365 days normally comprising a year and
used the difference, 314, as basis for determining the
monthly salary. The monthly salary thus fixed
actually covered payment for 314 days of the year,
including regular and special holidays, as well as
days when no work was done by reason of fortuitous
cause, such as transportation strike, riot, or typhoon
or other natural calamity, or cause not attributable to
the employees.
It was also applied in Odango v. National Labor
Relations Commission, where Court ruled that the
use of a divisor that was less than 365 days cannot
make the employer automatically liable for
underpayment of holiday pay. In said case, the
employees were required to work only from Monday
to Friday and half of Saturday. Thus, the minimum
allowable divisor is 287, which is the result of 365
days, less 52 Sundays and less 26 Saturdays (or 52
half Saturdays). Any divisor below 287 days meant
that the employees were deprived of their holiday pay
for some or all of the ten legal holidays. The 304-day
divisor used by the employer was clearly above the
minimum of 287 days.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
In this case, the employees are required to work only
from Monday to Friday. Thus, the minimum
allowable divisor is 263, which is arrived at by
deducting 51 un-worked Sundays and 51 un-worked
Saturdays from 365 days. Considering that petitioner
used the 360-day divisor, which is clearly above the
minimum, indubitably, petitioner's employees are
being given their holiday pay. Thus, the Voluntary
Arbitrator should not have simply brushed aside
petitioner's divisor formula. In granting respondent's
claim of non-payment of holiday pay, a "double
burden" was imposed upon petitioner because it was
being made to pay twice for its employees' holiday
pay when payment thereof had already been included
in the computation of their monthly salaries.
11.) GR No. 173115 & 173163-64, April 16, 2009
Atty Garcia vs. Eastern
Telecommunications Phils., et al.,
FACTS:
Atty. Virgilio R. Garcia was placed under
preventive suspension for complaints of sexual
harassment. After the period of preventive
suspension, Atty. Garcia was terminated as Vice
President and Head of Business Support Services and
Human Resource Departments of the Eastern
Telecommunications Philippines, Inc. (ETPI) by Atty.
Salvador C. Hizon, President/Chief Executive Officer
of ETPI. Aggrieved by his termination from ETPI,
Atty. Garcia filed a case before the National Labor
Relations Commission (NLRC) for illegal dismissal
with prayer for full back wages.
The Labor Arbiter ruled that the preventive
suspension and the subsequent dismissal of Atty.
Garcia are illegal. However, the NLRC, on appeal,
dismissed the case for lack of jurisdiction.
Unperturbed, Atty. Garcia appealed the dismissal of
the case to the Court of Appeals (CA). Upon review
of the case, the appellate court dismissed the case for
lack of merit. The appellate court ruled that Atty.
Garcia, being the Vice President for Business Support
Services and Human Resource Departments of ETPI,
was a corporate officer at the time he was
removed. Being a corporate officer, his removal was
a corporate act and/or an intra-corporate controversy,
the jurisdiction of which rested with the Securities
and Exchange Commission (now with the Regional
Trial Court), and not the Labor Arbiter and the
NLRC. It added that ETPI and Atty. Hizon were not
20

estopped from questioning the jurisdiction of the
Labor Arbiter before the NLRC on appeal, inasmuch
as said issue was seasonably raised by ETPI and Atty.
Hizon in their reply memorandum before the Labor
Arbiter.
Atty. Garcia is now before us via a Petition
for Review, which he filed on 3 August 2006. The
petition was docketed as G.R. No. 173115. On 8
August 2006, he filed an Amended Petition for
Review.He prays that the decision of the NLRC dated
21 March 2003 and its resolution dated 16 December
2003, and the decision of the Court of Appeals dated
24 March 2006 and its resolution dated 14 June 2006,
be reconsidered and set aside and that the decision of
the Labor Arbiter dated 30 September 2002 be
affirmed and reinstated.
ISSUE: Whether or not the Labor Arbiter has the
jurisdiction over the case
RULING:Labor Arbiter has no jurisdiction over the
case
The Supreme Court, in a long line of cases,
has decreed that a corporate officer’s dismissal or
removal is always a corporate act and/or an intra-
corporate controversy, over which the Securities and
Exchange Commission [SEC] (now the Regional
Trial Court) has original and exclusive jurisdiction.
We have ruled that an intra-corporate
controversy is one which pertains to any of the
following relationships: (1) between the corporation,
partnership or association and the public; (2) between
the corporation, partnership or association and the
State insofar as the former’s franchise, permit or
license to operate is concerned;(3) between the
corporation, partnership or association and
its stockholders, partners, members or officers; and
(4) among the stockholders, partners or associates
themselves. InLozon v. National Labor Relations
Commission,we declared that Presidential Decree No.
902-A confers on the SEC original and exclusive
jurisdiction to hear and decide controversies and
cases involving intra-corporate and partnership
relations between or among the corporation, officers
and stockholders and partners, including their
elections or appointments …xxx…
Before a dismissal or removal could
properly fall within the jurisdiction of the SEC, it has
to be first established that the person removed or
dismissed was a corporate officer. “Corporate
officers” in the context of Presidential Decree No.
902-Aare those officers of the corporation who are
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
given that character by the Corporation Code or by
the corporation’s by-laws. There are three specific
officers whom a corporation must have under Section
25 of the Corporation Code. These are the president,
secretary and the treasurer. The number of officers is
not limited to these three. A corporation may have
such other officers as may be provided for by its by-
laws like, but not limited to, the vice-president,
cashier, auditor or general manager. The number of
corporate officers is thus limited by law and by the
corporation’s by-laws.
In the case before us, the by-laws of ETPI
provide:
ARTICLE V
Officers
Section 1. Number. – The
officers of the Company shall be a
Chairman of the Board, a President,
one or more Vice-Presidents, a
Treasurer, a Secretary, an Assistant
Secretary, and such other officers
as may be from time to time be
elected or appointed by the Board
of Directors. One person may hold
any two compatible offices.
Atty. Garcia tries to deny he is an officer of
ETPI. Not being a corporate officer, he argues that
the Labor Arbiter has jurisdiction over the case. One
of the corporate officers provided for in the by-laws
of ETPI is the Vice-President. It can be gathered
from Atty. Garcia’s complaint-affidavit that he was
Vice President for Business Support Services and
Human Resource Departments of ETPI when his
employment was terminated effective 16 April
2000. It is therefore clear from the by-laws and from
Atty. Garcia himself that he is a corporate
officer. One who is included in the by-laws of a
corporation in its roster of corporate officers is an
officer of said corporation and not a mere
employee. Being a corporate officer, his removal is
deemed to be an intra-corporate dispute cognizable
by the SEC and not by the Labor Arbiter.
We agree with both the NLRC and the Court
of Appeals that Atty. Garcia’s ouster as Vice-
President, who is a corporate officer of ETPI,
partakes of the nature of an intra-corporate
controversy, jurisdiction over which is vested in the
SEC (now the RTC). The Labor Arbiter thus erred in
assuming jurisdiction over the case filed by Atty.
21

Garcia, because he had no jurisdiction over the
subject matter of the controversy.
12.)HALAGUEÑA vs. PHILIPPINE AIRLINES
INCORPORATED
G.R. No. 172013
October 2, 2009
Facts:
Petitioners were employed as female flight
attendants of respondent Philippine Airlines (PAL)
on different dates prior to November 22, 1996. They
are members of the Flight Attendants and Stewards
Association of the Philippines (FASAP), a labor
organization certified as the sole and exclusive
certified bargaining representative of the flight
attendants, flight stewards and pursers of respondent.
On July 11, 2001, respondent and FASAP
entered into a Collective Bargaining Agreement[3]
incorporating the terms and conditions of their
agreement for the years 2000 to 2005, hereinafter
referred to as PAL-FASAP CBA.
The controversy of this petition is the the
constitutionality of Section 144, Part A of their
PAL-FASAP CBA, it provides that:
“ A. For the Cabin Attendants hired before 22
November 1996:
3. Compulsory Retirement
Subject to the grooming standards
provisions of this Agreement, compulsory
retirement shall be fifty-five (55) for
females and sixty (60) for males. Xxxx”
Petitioners and several female cabin crews
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LABOR STANDARDS LAW
challenged the aforementioned CBA provision on
compulsory retirement averring that the provision is
discriminatory, and demanded for an equal treatment
with their male counterparts.
On July 29, 2004, petitioners filed a Special Civil
Action for Declaratory Relief with Prayer for the
Issuance of Temporary Restraining Order and Writ of
Preliminary Injunction with the Regional Trial Court
(RTC) of Makati City against respondent for the
invalidity of Section 144, Part A of the PAL-FASAP
CBA.
Respondent questioned the jurisdiction of the RTC
as the case make out a labor dispute arising from
employer-employee relationship .
On August 9, 2004, the RTC issued an Order
upholding its jurisdiction over the present case. The
RTC reasoned that the instant case, the thrust of the
Petition is Sec. 144 of the subject CBA which is
allegedly discriminatory as it discriminates against
female flight attendants, in violation of the
Constitution, the Labor Code, and the CEDAW. The
allegations in the Petition do not make out a labor
dispute arising from employer-employee relationship
as none is shown to exist.
Aggrieved, respondent, on October 8, 2004 appealed
the case to the CA praying that the order of the RTC,
which denied its objection to its jurisdiction, be
annuled and set aside for having been issued without
and/or with grave abuse of discretion amounting to
lack of jurisdiction.
The CA rendered a Decision, dated August 31, 2005,
granting the respondent's petition, and ruled that the
lower court is by us declared to have NO
JURISDICTION OVER THE CASE.
Hence, this petition.
Issue:
The main issue in this case is whether the RTC has
jurisdiction over the petitioners' action challenging
the legality or constitutionality of the provisions on
the compulsory retirement age contained in the CBA
between respondent PAL and FASAP.
22

Ruling:
The petition is meritorious.
Jurisdiction of the court is determined on the basis of
the material allegations of the complaint and the
character of the relief prayed for irrespective of
whether plaintiff is entitled to such relief.
In the case at bar, the allegations in the petition for
declaratory relief plainly show that petitioners' cause
of action is the annulment of Section 144, Part A of
the PAL-FASAP CBA.
The Supreme Court held that from the petitioners'
allegations and relief prayed for in its petition it was
clear that the issue raised by the women flight
attendants is whether Section 144, Part A of the PAL-
FASAP CBA is unlawful and unconstitutional.
Therefore the subject of litigation is incapable of
pecuniary estimation, hence, exclusively cognizable
by the RTC, pursuant to Section 19 (1) of Batas
PambansaBlg. 129, as amended. Being an ordinary
civil action, the same is beyond the jurisdiction of
labor tribunals.
The jurisdiction of labor arbiters and the NLRC
under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee
relationship which can only be resolved by reference
to the Labor Code, other labor statutes, or their
collective bargaining agreement.
Not all controversy or money claim by an
employee against the employer or vice-versa is
within the exclusive jurisdiction of the labor
arbiter. Actions between employees and employer
where the employer-employee relationship is merely
incidental and the cause of action precedes from a
different source of obligation is within the
exclusive jurisdiction of the regular court.
Thus, where the principal relief sought is to be
resolved not by reference to the Labor Code or other
labor relations statute or a collective bargaining
agreement but by the general civil law, the
jurisdiction over the dispute belongs to the regular
courts of justice and not to the labor arbiter and the
NLRC.
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LABOR STANDARDS LAW
Here in the instant case, the employer-employee
relationship between the parties is merely incidental
and the cause of action ultimately arose from
different sources of obligation, i.e., the Constitution
and Convention on the Elimination of All Forms of
Discrimination Against Women (CEDAW).
The Supreme Court also holds that the grievance
machinery and voluntary arbitrators do not have the
power to determine and settle the issues at hand.
They have no jurisdiction and competence to decide
constitutional issues relative to the questioned
compulsory retirement age. Their exercise of
jurisdiction is futile, as it is like vesting power to
someone who cannot wield it.
Although the CBA provides for a procedure for the
adjustment of grievances, such referral to the
grievance machinery and thereafter to voluntary
arbitration would be inappropriate to the petitioners,
because the union and the management have
unanimouslyagreed to the terms of the CBA and
their interest is unified.
WHEREFORE, the Decision of the Court of Appeals,
are hereby REVERSED and SET ASIDE.
13. Okol vs. Slimmer’s World International, et al,
G.R. No. 160146, December 11, 2009
Facts:
Respondent, Slimmers World International, employed
petitioner Leslie Okol initially as a management
trainee. She rose up the ranks to become Head Office
Manager and then Director and Vice President until
her dismissal.
Prior to her dismissal, respondent preventively
suspended Okol which arose from the seizure by the
Bureau of Customs of seven Precor Elliptical
Machines and seven Precor Treadmills belonging to
or consigned to Slimmers World. Okol received a
memorandum extending her suspension until pending
the outcome of the investigation on the Precor
equipment importation. Okol received another
memorandum requiring her to explain why no
disciplinary action should be taken against her.
Thereafter, Okol filed her written explanation but
respondents found it to be unsatisfactory.Through a
23

letter signed by its president Ronald Joseph Moy,
Slimmers World terminated Okol’s employment.
Okol filed a complaint with the Arbitration branch of
the NLRC against respondents for illegal suspension,
illegal dismissal, unpaid commissions, damages and
attorney’s fees, with prayer for reinstatement and
payment of back wages. Respondents filed a motion
to dismiss on the ground that NLRC had no
jurisdiction over the subject matter of the complaint,
with a reservation of their right to file a Position
Paper at the proper time. The Labor Arbiter granted
the motion to dismiss ruling that Okol was the vice
president, and since it involved a corporate officer,
the dispute was an intra-corporate controversy falling
outside the jurisdiction of the Arbitration branch.
Okol filed an appeal with the NLRC, and it reversed
and set aside the labor arbiter’s decision, ordering the
reinstatement of Okol with payment of full back
wages and other indemnities.
Respondents filed a Motion for Reconsideration with
the NLR, contending that the relief prayed for was
confined only to the question of jurisdiction.
However, the NLRC not only decided the case on the
merits but did so in the absence of position papers
from both parties.
Respondents then filed an appeal with the Court of
Appeals which set aside the NLRC’s Resolution and
affirmed the Labor Arbiter’s order. The Court of
Appeals ruled that the case, being an intra-corporate
dispute, falls within the jurisdiction of the regular
courts pursuant to Republic Act No. 8799. Okol filed
a motion for Reconsideration which was denied,
hence this petition for Review on Certiorari.
Issue:
WON the NLRC has jurisdiction over the illegal
dismissal case filed by the petitioner
Ruling:
The petition lacks merit. Petitioner insists that even
as vice president, the work she performed conforms
to that of an employee. Mere title or designation in a
corporation will not, by itself, determine the
existence of an employer-employee relationship. It is
the “four-fold” test. Respondents, on the other hand,
maintain that petitioner was a corporate officer at the
time of her dismissal.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Sec 25 of the Corporation Code enumerates corporate
officers as the president, secretary, treasurer and such
other officers as may be provided for in the by-laws.
In Tabang v. NLRC, 12 we held that an "office" is
created by the charter of the corporation and the
officer is elected by the directors or stockholders. On
the other hand, an "employee" usually occupies no
office and generally is employed not by action of the
directors or stockholders but by the managing officer
of the corporation who also determines the
compensation to be paid to such employee.
Clearly, from the documents submitted by
respondents, petitioner was a director and officer of
Slimmers World. The charges of illegal suspension,
illegal dismissal unpaid commissions, reinstatement
and back wages imputed by petitioner against
respondent falls squarely within the ambit of intra-
corporation disputes. It is not a simple labor problem
but a matter that comes within the area of corporate
affairs and management and is a corporate
controversy in contemplation of the Corporation
Code, subject to the jurisdiction of the regular courts.
Thus the appellate court correctly ruled that it is not
the NLRC but the regular courts which have
jurisdiction over the present case.
14.) Hugo et al., vs. Light Rail Transit Authority,
G.R. No. 181866, March 18, 2010
Facts:
Respondent Light Rail Transit Authority (LRTA), a
government-owned and controlled corporation,
constructed a light rail transit system which traverses
from Baclaran in Parañaque City to Monumento in
Kalookan City, Metro Manila pursuant to its mandate
under its charter, Executive Order No. 603, Series of
1980, as amended.
To effectively carry out its mandate, LRTA entered
into a ten-year Agreement for the Management and
Operation of the Metro Manila Light Rail Transit
System (the Agreement) from June 8, 1984 until June
8, 1994 with Metro Transit Organization, Inc.
(METRO).
One of the stipulations in the Agreement was:
METRO shall be free to employ such
employees and officers as it shall deem
24
 LABOR STANDARDS LAW

necessary in order to carry out the Department of Labor and Employment which has
requirements of the Agreement. Such jurisdiction over workers in the private sector, viz:
employees and officers shall be the
employees of METRO and not of LRTA. . . . [E]mployees of petitioner METRO
METRO shall prepare a compensation cannot be considered as employees of
schedule for the salaries and fringe petitioner LRTA. The employees hired by
benefits of its personnel (Article 3, par. METRO are covered by the Labor Code and
3.05). are under the jurisdiction of the Department
of Labor and Employment, whereas the
METRO thus hired its own employees including employees of petitioner LRTA, a
herein petitioners-members of the Pinag- government-owned and controlled
isangLakasngManggagawasa METRO, Inc.-National corporation with original charter,
Federation of Labor, otherwise known as PIGLAS- are covered by civil service rules.
METRO, INC.-NFL-KMU (the Union), the certified Herein private respondent workers cannot
exclusive collective bargaining representative of have the best of two worlds, e.g., be
METRO's rank-and-file employees. considered government employees of
petitioner LRTA, yet allowed to strike as
When the Agreement expired on July 31, 2000, LRTA private employees under our labor laws. x
did not renew it. It instead took over the management xx.
and operations of the light rail transit system, hiring
new personnel for the purpose. METRO thus x xxx
considered the employment of all its
personnel terminated effective September 30, 2000. . . . [I]t is inappropriate to pierce
the corporate veil of petitioner
Petitioners filed a complaint for illegal dismissal and METRO. x xx.
unfair labor practice with prayer for reinstatement
and damages against METRO and LRTA before the In the instant case, petitioner
NCR Arbitration Branch, National Labor Relations METRO, formerly Meralco Transit
Commission (NLRC). Organization, Inc., was originally
owned by the Manila Electric
Company and registered with the
Securities and Exchange
Issue: Commission more than a decade
before the labor dispute. It then
 Whether or not the Labor Arbiter's decision
entered into a ten-year agreement
against LRTA was rendered without
with petitioner LRTA in 1984.
jurisdiction.
And, even if petitioner LRTA
Ruling: eventually purchased METRO in
1989, both parties maintained their
The Labor Arbiter and the NLRC do not have separate and distinct juridical
jurisdiction over LRTA. Petitioners themselves personality and allowed the
admitted in their complaint that LRTA "is a agreement to proceed. In 1990, this
government agency organized and existing pursuant Court, in Light Rail Transit
to anoriginal charter (Executive Order No. 603)," and Authority v. Commission on
that they are employees of METRO. Audit (G.R. No. 88365, January 9,
1990), even upheld the validity of
Light Rail Transit Authority v. Venus, Jr., which has a the said agreement. Consequently,
similar factual backdrop, holds that LRTA, being a the agreement was extended
government-owned or controlled corporation created beyond its ten-year period. In 1995,
by an original charter, is beyond the reach of the METRO's separate juridical

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 25


identity was again recognized when
it entered into a collective
bargaining agreement with the
workers' union. All these years,
METRO's distinct corporate
personality continued quiescently,
separate and apart from the
juridical personality of petitioner
LRTA.
The labor dispute only arose in
2000, after a deadlock occurred
during the collective bargaining
between petitioner METRO and the
workers' union. This alone is not a
justification to pierce the corporate
veil of petitioner METRO and
make petitioner LRTA liable to
private respondent workers. There
are no badges of fraud or any
wrongdoing to pierce the corporate
veil of petitioner METRO.
x xxx
In sum, petitioner LRTA cannot
be held liable to the employees of
petitioner METRO.
IN FINE, the Labor Arbiter's decision against LRTA
was rendered without jurisdiction, hence, it is void,
thus rendering it improper for the remand of the case
to the NLRC, as ordered by the appellate court, for it
(NLRC) to give due course to LRTA's appeal.
A final word. It bears emphasis that this Court's
present Decision treats only with respect to the Labor
Arbiter's decision against respondent LRTA.
15. Matling Industrial Corporation vs. Coros
This is a petition for review on
certiorari assailing the decisionin the case
entitled Matling Industrial and Commercial
Corporation, et al. v. Ricardo R. Coros and National
Labor Relations Commission, whereby by the Court
of Appeals (CA) sustained the ruling of the National
Labor Relations Commission (NLRC) to the effect
that the LA had jurisdiction because the respondent
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
was not a corporate officer of petitioner Matling
Industrial and Commercial Corporation (Matling).
FACTS:
Respondent, Vice-President for Finance and
Administration of Matling was dismissed, thus, he
filed a complaint for illegal suspension and illegal
dismissal against Matling and some of its corporate
officers (petitioners) in the NLRC, Sub-Regional
Arbitration Branch XII, Iligan City.
The petitioners moved to dismiss the complaint
contending that the complaint pertained to the
jurisdiction of the Securities and Exchange
Commission (SEC) due to the controversy being
intra-corporate inasmuch as the respondent was a
member of Matling’s Board of Directors aside from
being its Vice-President for Finance and
Administration prior to his termination.
The respondent opposed the
petitioners’ motion to dismiss, insisting that his status
as a member of Matling’s Board of Directors was
doubtful, considering that he had not been formally
elected as such; that he did not own a single share of
stock in Matling, considering that he had been made
to sign in blank an undated indorsement of the
certificate of stock he had been given in 1992; that
Matling had taken back and retained the certificate of
stock in its custody; and that even assuming that he
had been a Director of Matling, he had been removed
as the Vice President for Finance and Administration,
not as a Director, a fact that the notice of his
termination dated April 10, 2000 showed.
The petitioners’ motion to dismiss was granted by the
Labor Arbiter ruling that the respondent was a
corporate officer because he was occupying the
position of Vice President for Finance and
Administration and at the same time was a Member
of the Board of Directors of Matling; and that his
removal was a corporate act of Matling and the
controversy resulting from such removal was under
the jurisdiction of the SEC, pursuant to Section 5,
paragraph (c) of Presidential Decree No. 902.
Respondent appealed to the NLRC, which set
aside the dismissal, concluding that the
respondent’s complaint for illegal dismissal was
properly cognizable by the LA, not by the SEC,
because he was not a corporate officer by virtue of
his position in Matling, albeit high ranking and
managerial, not being among the positions listed in
Matling’s Constitution and By-Laws.
26

The petitioners sought
reconsideration reiterating that the respondent, being
a member of the Board of Directors, was a corporate
officer whose removal was not within the LA’s
jurisdiction.
Nonetheless, on April 30, 2001, the NLRC denied the
petitioners’ motion for reconsideration.
Thus, the petitioners elevated the issue to the
CA by petition for certiorari, contending that the
NLRC committed grave abuse of discretion
amounting to lack of jurisdiction in reversing the
correct decision of the LA. The CA dismissed the
petition contending that:
The position of vice-president for administration and
finance, which Coros used to hold in the corporation,
was not created by the corporation’s board of
directors but only by its president or executive vice-
president pursuant to the by-laws of the corporation.
Moreover, Coros’ appointment to said position was
not made through any act of the board of directors
or stockholders of the corporation. Consequently, the
position to which Coros was appointed and later on
removed from, is not a corporate office despite its
nomenclature, but an ordinary office in the
corporation.
Coros’ alleged illegal dismissal therefrom is,
therefore, within the jurisdiction of the labor arbiter.
The CA denied the petitioners’ motion for
reconsideration on April 2, 2003.
ISSUES:
Whether or not respondent Coros was a
corporate officer of Matling
Whether or not the Labort Arbiter has
jurisdiction over the case
RULING:
First Issue
As a rule, the illegal dismissal of an officer or
other employee of a private employer is properly
cognizable by the LA. This is provided for in Article
217 (a) 2 of the Labor Code.
Where the complaint for illegal dismissal
concerns a corporate officer, however, the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
controversy falls under the jurisdiction of the
Securities and Exchange Commission (SEC), because
the controversy arises out of intra-corporate or
partnership relations between and among
stockholders, members, or associates, or between any
or all of them and the corporation, partnership, or
association of which they are stockholders, members,
or associates, respectively; and between such
corporation, partnership, or association and the State
insofar as the controversy concerns their individual
franchise or right to exist as such entity; or because
the controversy involves the election or appointment
of a director, trustee, officer, or manager of
such corporation, partnership, or association. Such
controversy, among others, is known as an intra-
corporate dispute.
The petitioners contend that the position of
Vice President for Finance and Administration was a
corporate office, having been created by Matling’s
President pursuant to By-Law No. V.
The respondent counters that Matling’s By-
Laws did not list his position as Vice President for
Finance and Administration as one of the corporate
offices; that Matling’s By-Law No. III listed only
four corporate officers, namely: President, Executive
Vice President, Secretary, and Treasurer; that the
corporate offices contemplated in the phrase “and
such other officers as may be provided for in the by-
laws” found in Section 25 of the Corporation
Code should be clearly and expressly stated in the
By-Laws; that the fact that Matling’s By-Law No. III
dealt with Directors & Officers while its By-Law No.
V dealt with Officers proved that there was a
differentiation between the officers mentioned in the
two provisions, with those classified under By-Law
No. V being ordinary or non-corporate officers; and
that the officer, to be considered as a corporate
officer, must be elected by the Board of Directors or
the stockholders, for the President could only appoint
an employee to a position pursuant to By-Law No. V.
The court favors the respondents contention.
Section 25 of the Corporation Code provides that a
position must be expressly mentioned in the By-Laws
in order to be considered as a corporate office. Thus,
the creation of an office pursuant to or under a By-
Law enabling provision is not enough to make a
position a corporate office. Moreover, the Board of
Directors of Matling could not validly delegate the
power to create a corporate office to the President, in
light of Section 25 of the Corporation Code requiring
the Board of Directors itself to elect the corporate
officers. Verily, the power to elect
the corporate officers was a discretionary power that
27

the law exclusively vested in the Board of Directors,
and could not be delegated to subordinate officers or
agents. The office of Vice President for Finance and
Administration created by Matling’s President
pursuant to By Law No. V was an ordinary, not a
corporate, office.
The power to create new offices and the power
to appoint the officers to occupy them vested by By-
Law No. V merely allowed Matling’s President to
create non-corporate offices to be occupied by
ordinary employees of Matling. Such powers were
incidental to the President’s duties as the executive
head of Matling to assist him in the daily operations
of the business.
Second Issue
Petitioners further content that because the
respondent was a Director/stockholder of
Matling, the NLRC had no jurisdiction over
his complaint, considering that any case for illegal
dismissal brought by a stockholder/officer against the
corporation was an intra-corporate matter that must
fall under the jurisdiction of the SEC conformably
with the context of PD No. 902-A.
This contention also has no merit.
The criteria for distinguishing between
corporate officers who may be ousted from office at
will, on one hand, and ordinary corporate employees
who may only be terminated for just cause, on the
other hand, do not depend on the nature of the
services performed, but on the manner of creation of
the office. In the respondent’s case, he was
supposedly at once an employee, a stockholder, and a
Director of Matling. The circumstances surrounding
his appointment to office must be fully considered to
determine whether the dismissal constituted an intra-
corporate controversy or a labor termination dispute.
We must also consider whether his status as Director
and stockholder had any relation at all to his
appointment and subsequent dismissal as Vice
President for Finance and Administration.
The respondent was not appointed as Vice
President for Finance and Administration because of
his being a stockholder or Director of Matling. He
had started working for Matling on September 8,
1966, and had been employed continuously for 33
years until his termination on April 17, 2000, first as
a bookkeeper, and his climb in 1987 to his last
position as Vice President for Finance and
Administration had been gradual but steady.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Even though he might have become a
stockholder of Matling in 1992, his promotion to the
position of Vice President for Finance and
Administration in 1987 was by virtue of the length of
quality service he had rendered as an employee of
Matling. His subsequent acquisition of the status of
Director/stockholder had no relation to his
promotion. Besides, his status of Director/stockholder
was unaffected by his dismissal from employment as
Vice President for Finance and Administration.
WHEREFORE, the petition for review
on certiorari is denied.
16.) Manila Electric Co. et al., vs. Lim, GR No.
184769, Oct. 5, 201056.
Facts:
Rosario G. Lim (respondent), also known as Cherry
Lim, is an administrative clerk at the Manila Electric
Company (MERALCO). Her workplace received
threats through letter and it was directed to her, thus
the human resource in her workplace directed her
transfer to other branch. From bulacan she was
transferred to muntinlupa.
Respondent appealed the transfer through letter, she
requested for voice dialogue with the head of HR
administration. She wanted to voice out her concerns
on the matter of her transfer and that there was no
due process when the direct order was issued, and the
grueling effort to travel from her home to the place
where she was transferred were not considered and
also it violates the CBA with regards to the job
security, and she also expressed her thoughts on the
letter, for her the letter was suspicious, doubtful or
just mere jokes if the letter ever existed.
She received no response from the company, thus she
filed a petition for habeas data, in RTC of bulacan.
Where she got a favorable decision, The trial court
justified its ruling by declaring that, inter alia,
recourse to a writ of habeas data should extend not
only to victims of extra-legal killings and political
activists but also to ordinary citizens, like respondent
whose rights to life and security are jeopardized by
petitioners’ refusal to provide her with information or
data on the reported threats to her person..
Thus, this petition for review in Supreme Court.
28
 LABOR STANDARDS LAW

Issue: trust and confidence; and, (3) to cut down operational

expenses to reduce further losses being experienced by
Whether or not, writ of habeas data is applicable in
the case at bar. respondent corporation.

Ruling:
Respondentsrefuted petitioner’s claim of illegal
No, the habeas data rule, in general, is designed to dismissal by alleging that after petitioner was appointed
protect by means of judicial complaint the image, Manager, he committed gross acts of misconduct
privacy, honor, information, and freedom of
information of an individual. It is meant to provide a detrimental to the company since 2000. He was almost
forum to enforce one’s right to the truth and to always absent, and neglected to supervise the employees
informational privacy, thus safeguarding the resulting in complaints from various clients about
constitutional guarantees of a person’s right to life,
employees’ performance.
liberty and security against abuse in this age of
information technology.
The Labor Arbiter (2003)found no convincing
Respondent’s plea that she be spared from complying
proof of the causes for which petitioner was terminated and
with MERALCO’s Memorandum directing her
reassignment to the Alabang Sector, under the guise noted that there was complete absence of due process in the
of a quest for information or data allegedly in manner of his termination. It declared petitioner as having
possession of petitioners, does not fall within the been illegally dismissed and ordered for his reinstatment to
province of a writ of habeas data.Respondent
trivializes these threats and accusations from hisformer positions without loss of seniority rights and
unknown individuals in her earlier-quoted portion of other privileges and to pay their full backwages from the
her July 10, 2008 letter as “highly suspicious, time of dismissal until actually reinstated, plus attorney’s
doubtful or are just mere jokes if they existed at all.”
fees.
18.) Real vs. Sangu Phils., Inc., et al., G.R. No.
168757, January 19, 2011 On appeal, the NLRC dismissed the petitioner’s
complaint established petitioner’s status as a stockholder
Facts:
and as a corporate officer and hence, his action against
Renato Real was the Manager of respondent respondent corporation is an intra-corporate controversy
corporation Sangu Philippines. Heclaimed to have been over which the Labor Arbiter has no jurisdiction.
illegaly dismissed through Board Resolution 2001-
03adopted by respondentcorporation’s Board of Directors
removing him from his position as manager. Petitioner Issues:
complained that he was neither notified of the Board
Meeting during which said board resolution was passed nor
formally charged with any infraction. He just received
Whether or not petitioner’s complaint for illegal dismissal
from respondents a letterdated March 26, 2001 stating that
constitutes an intra-corporate controversy and thus, beyond
he has been terminated from service effective March 25,
the jurisdiction of the Labor Arbiter.
2001 for the following reasons: (1) continuous absences at
his post at Ogino Philippines Inc. for several months which
Ruling:
was detrimental to the corporation’s operation; (2) loss of

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 29

 LABOR STANDARDS LAW

No intra-corporate relationship between the parties. The Court then combined the
two tests and declared that jurisdiction
should be determined by considering
not only the status or relationship of the
[A]n intra-corporate controversy is one
parties, but also the nature of the
which arises between a stockholder and
question under controversy.
the corporation. There is no distinction,
qualification nor any exemption
whatsoever. The provision is broad and
covers all kinds of controversies ‘To determine
between stockholders and corporations. whether a case involves an
intra-corporate controversy,
and is to be heard and
decided by the branches of
However, the better policy in
the RTC specifically
determining whether a dispute is intra-corporate
designated by the Court to try
or not is to consider concurrent factors such as
and decide such cases, two
the status or relationship of the parties or the
elements must concur: (a) the
nature of the question that is subject of their
status or relationship of the
controversy.
parties, and (2) the nature of
the question that is the
subject of their controversy.
Two-tier test in determining the existence of intra-
corporate controversy
The first element
requires that the controversy
Under the nature of the must arise out of intra-
controversy test, the incidents of that corporate or partnership
relationship must also be considered relations between any or all
for the purpose of ascertaining whether of the parties and the
the controversy itself is intra-corporate. corporation, partnership, or
The controversy must not only be association of which they are
rooted in the existence of an intra- not stockholders, members or
corporate relationship, but must as well associates, between any or all
pertain to the enforcement of the of them and the corporation,
parties’ correlative rights and partnership or association of
obligations under the Corporation which they are stockholders,
Code and the internal and intra- members or associates,
corporate regulatory rules of the respectively; and between
corporation. If the relationship and its such corporation, partnership,
incidents are merely incidental to the or association and the State
controversy or if there will still be insofar as it concerns the
conflict even if the relationship does individual franchises. The
not exist, then no intra-corporate second element requires that
controversy exists. the dispute among the parties
be intrinsically connected
with the regulation of the
corporation. If the nature of
the controversy involves

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 30


matters that are purely civil in
character, necessarily, the
case does not involve an
intra-corporate controversy.’
[Citations omitted.]
There is no merit in respondents’ contention that
the fact alone that petitioner is a stockholder and director of
respondent corporation automatically classifies this case as
an intra-corporate controversy. To reiterate, not all conflicts
between the stockholders and the corporation are classified
as intra-corporate. There are other factors to consider in
determining whether the dispute involves corporate matters
as to consider them as intra-corporate controversies.
18. RENATO REAL, Petitioner, vs. SANGU
PHILIPPINES, INC. and/ or KIICHI ABE,
Respondents. [G.R. No. 168757, January 19, 2011]
DEL CASTILLO, J.:
FACTS:
Renato Real was the Manager of respondent
corporation Sangu Philippines, Inc. which is engaged
in the business of providing manpower for general
services. He filed a complaint for illegal dismissal
against the respondents stating that he was neither
notified of the Board meeting during which his
removal was discussed nor was he formally charged
with any infraction.
Respondents, on the other hand, said that Real
committed gross acts of misconduct detrimental to
the company since 2000. The LA declared petitioner
as having been illegally dismissed. Sangu appealed to
NLRC and established petitioner’s status as a
stockholder and as a corporate officer and hence, his
action against respondent corporation is an intra-
corporate controversy over which the Labor Arbiter
has no jurisdiction. NLRC modified the LA’s
decision. On appeal, the CA affirmed the decision of
NLRC.
Hence, this petition.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
ISSUE: WON petitioner’s complaint for illegal
dismissal constitutes an intra-corporate controversy.
RULING:
To determine whether a case involves an intra-
corporate controversy, and is to be heard and decided
by the branches of the RTC specifically designated
by the Court to try and decide such cases, two
elements must concur: (a) the status or relationship of
the parties, and (2) the nature of the question that is
the subject of their controversy.
The first element requires that the controversy must
arise out of intra-corporate or partnership relations
between any or all of the parties and the corporation
x x . The second element requires that the dispute
among the parties be intrinsically connected with the
regulation of the corporation. If the nature of the
controversy involves matters that are purely civil in
character, necessarily, the case does not involve an
intra-corporate controversy.
Guided by this recent jurisprudence, we thus find no
merit in respondents’ contention that the fact alone
that petitioner is a stockholder and director of
respondent corporation automatically classifies this
case as an intra-corporate controversy. To reiterate,
not all conflicts between the stockholders and the
corporation are classified as intra-corporate. There
are other factors to consider in determining whether
the dispute involves corporate matters as to consider
them as intra-corporate controversies.
19. PORTILLO VS. RUDOLF LIETZ, INC. ET
AL. G.R. NO. 196539, OCTOBER 10, 2012
Petition for certiorari assailing the Resolutionll dated
31

14 October 2010 of the Court of Appeals in CA-G.R.
SP No. I 065g I which modified its Decisionl dated
31 March 2009, thus allowing the legal compensation
or petitioner Marietta N. Portillo's (Portillo) monetary
claims against respondent corporation Rudolf Lietz,
Inc.'s (Lietz Inc.)ςrνll claim for liquidated damages
arising from Portillos alleged violation of the
"Goodwill Clause" in the employment contract
executed by the parties.
Facts
In a letter agreement dated 3 May 1991,
signed by individual respondent Rudolf Lietz
(Rudolf) and conformed to by Portillo, the latter was
hired by the former under the following terms and
conditions:
A copy of [Lietz Inc.s] work rules
and policies on personnel is enclosed and an
inherent part of the terms and conditions of
employment.
We acknowledge your proposal in
your application specifically to the effect
that you will not engage in any other gainful
employment by yourself or with any other
company either directly or indirectly without
written consent of [Lietz Inc.], and we
hereby accept and henceforth consider your
proposal an undertaking on your part, a
breach of which will render you liable to
[Lietz Inc.] for liquidated damages.
On her tenth year with Lietz Inc.,
specifically on 1 February 2002, Portillo was
promoted to Sales Representative and received a
corresponding increase in basic monthly salary and
sales quota. In this regard, Portillo signed another
letter agreement containing a "Goodwill Clause:"
Three years thereafter, on 6 June 2005,
Portillo resigned from Lietz Inc. During her exit
interview, Portillo declared that she intended to
engage in businessa rice dealership, selling rice in
wholesale. On 15 June 2005, Lietz Inc. accepted
Portillos resignation and reminded her of the
"Goodwill Clause" in the last letter agreement she
had signed. Upon receipt thereof, Portillo jotted a
note thereon that the latest contract she had signed in
February 2004 did not contain any "Goodwill
Clause" referred to by Lietz Inc. In response thereto,
Lietz Inc. categorically wrote
Please be informed that the standard
prescription of prohibiting employees from
engaging in business or seeking employment
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
with organizations that directly or indirectly
compete against [Lietz Inc.] for three (3)
years after resignation remains in effect.
Subsequently, Lietz Inc. learned that Portillo
had been hired by Ed Keller Philippines, Limited to
head its Pharma Raw Material Department. Ed Keller
Limited is purportedly a direct competitor of Lietz
Inc.
14 September 2005, Portillo filed a
complaint with the National Labor Relations
Commission (NLRC) for non-payment of 1 months
salary two (2) months commission, 13th month pay,
plus moral, exemplary and actual damages and
attorney’s fees. In its position paper, Lietz Inc.
admitted liability for Portillos money claims in the
total amount of P110,662.16. However, Lietz Inc.
raised the defense of legal compensation: Portillos
money claims should be offset against her liability to
Lietz Inc. for liquidated damages in the amount of
₱869,633.09l for Portillos alleged breach of the
"Goodwill Clause" in the employment contract when
she became employed with Ed Keller Philippines,
Limited.
On 25 May 2007, Labor Arbiter granted
Portillos complaint ordering respondents Rudolf
Lietz, Inc. to pay complainant Marietta N. Portillo the
amount of Php110,662.16 representing her salary and
commissions, including 13th month pay.‚rνll
Lietz Inc. filed a petition for certiorari
before the Court of Appeals, alleging grave abuse of
discretion in the labor tribunal’s rulings. The CA
initially affirmed the labor tribunals, but on motion
for reconsideration, modified its previous decision.
While upholding the monetary award in favor of
Portillo in the aggregate sum P110, 662.16, the CA
allowed legal compensation or set-off of such award
of monetary claims by her liability to Lietz Inc. for
liquidated damages arising from her violation of the
“Goodwill Clause” in her employment contract with
them. Portillo’s motion for reconsideration was
denied. Hence, this petition for certiorari before the
SC.
Issue
32

Whether Portillo’s money claimes for unpaid salaries
may be offset against Lietz Inc.’s claim for liquidated
damages
Ruling
Paragraph 4 of Article 217 of the Labor
Code appears to have caused the reliance by the
Court of Appeals on the "causal connection between
Portillo’s monetary claims against respondents and
the latter’s claim from liquidated damages against the
former."
Art. 217. Jurisdiction of Labor Arbiters
and the Commission.
(a) Except as otherwise provided under this
code, the Arbiters shall have original and
exclusive jurisdiction to hear and decide,
within thirty (30) calendar days after the
submission of the case by the parties for
decision without extension, even in the
absence of stenographic notes, the following
case involving all workers, whether
agricultural or nonagricultural
4. Claims for actual, moral, exemplary and
other forms of damages arising from the
employer-employee relations; (Underscoring
supplied)
Evidently, the Court of Appeals is convinced
that the claim for liquidated damages emanates from
the "Goodwill Clause of the employment contract
and, therefore, is a claim for damages arising from
the employeremployee relations.
Singapore Airlines Limited v. Pa, we
established that not all disputes between an employer
and his employee(s) fall within the jurisdiction of the
labor tribunals. We differentiated between
abandonment per se and the manner and consequent
effects of such abandonment and ruled that the first,
is a labor case, while the second, is a civil law case.
Stated differently, petitioner seeks
protection under the civil laws and claims no
benefits under the Labor Code. The primary relief
sought is for liquidated damages for breach of a
contractual obligation. The other items demanded
are not labor benefits demanded by workers
generally taken cognizance of in labor disputes,
such as payment of wages, overtime compensation
or separation pay. The items claimed are the
natural consequences flowing from breach of an
obligation, intrinsically a civil dispute.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The Court, therefore, believes and so
holds that the "money claims of workers" referred
to in paragraph 3 of Article 217 embraces money
claims which arise out of or in connection with the
employer-employee relationship, or some aspect or
incident of such relationship. Put a little
differently, that money claims of workers which
now fall within the original and exclusive
jurisdiction of Labor Arbiters are those money
claims which have some reasonable causal
connection with the employer-employee
relationship.
In Dai-Chi Electronics Manufacturing
Corporation v. Villarama, Jr.,νwhich reiterated the
San Miguel ruling and allied jurisprudence, we
pronounced that a non-compete clause, as in the
"Goodwill Clause" referred to in the present case,
with a stipulation that a violation thereof makes the
employee liable to his former employer for liquidated
damages, refers to post-employment relations of the
parties
That the "Goodwill Clause" in this case is
likewise a postemployment issue should brook no
argument. There is no dispute as to the cessation of
Portillos employment with Lietz Inc. She simply
claims her unpaid salaries and commissions, which
Lietz Inc. does not contest. At that juncture, Portillo
was no longer an employee of Lietz Inc. The
"Goodwill Clause" or the "Non-Compete Clause" is a
contractual undertaking effective after the cessation
of the employment relationship between the parties.
In accordance with jurisprudence, breach of the
undertaking is a civil law dispute, not a labor law
case.
It is clear, therefore, that while Portillos
claim for unpaid salaries is a money claim that arises
out of or in connection with an employer-employee
relationship, Lietz Inc.s claim against Portillo for
violation of the goodwill clause is a money claim
based on an act done after the cessation of the
employment relationship. And, while the jurisdiction
over Portillos claim is vested in the labor arbiter, the
jurisdiction over Lietz Inc.s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for
any relief under the Labor Code. It merely
seeks to recover damages based on the
parties' contract of employment as redress
for respondent's breach thereof. Such cause
of action is within the realm of Civil Law,
and jurisdiction over the controversy
belongs to the regular courts. More so must
33

this be in the present case, what with the
reality that the stipulation refers to the
postemployment relations of the parties.
The Court of Appeals was misguided. Its conclusion
was incorrect.
There is no causal connection between the
petitioner employees claim for unpaid wages and the
respondent employers claim for damages for the
alleged "Goodwill Clause" violation. Portillos claim
for unpaid salaries did not have anything to do with
her alleged violation of the employment contract as,
in fact, her separation from employment is not
"rooted" in the alleged contractual violation. She
resigned from her employment. She was not
dismissed. Portillos entitlement to the unpaid salaries
is not even contested. Indeed, Lietz Inc.s argument
about legal compensation necessarily admits that it
owes the money claimed by Portillo.
Indeed, the application of compensation in
this case is effectively barred by Article 113 of the
Labor Code which prohibits wage deductions except
in three circumstances:
ART. 113. Wage Deduction. No employer, in
his own behalf or in behalf of any person,
shall make any deduction from wages of his
employees,
except:chanroblesvirtuallawlibrary
(a) In cases where the worker is insured with
his consent by the employer, and the
deduction is to recompense the employer for
the amount paid by him as premium on the
insurance;
(b) For union dues, in cases where the right
of the worker or his union to check-off has
been recognized by the employer or
authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is
authorized by law or regulations issued by
the Secretary of Labor.
WHEREFORE, the petition is
GRANTED.
20.)G.R. No. 197309: October 10, 2012
ACE NAVIGATION CO., INC., VELA
INTERNATIONAL MARINE LTD., and/or
RODOLFO
PAMINTUAN, Petitioners, v. TEODORICO
FERNANDEZ, assisted by GLENITA
FERNANDEZ,Respondent.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Facts:
On October 9, 2008, seaman Teodorico
Fernandez (Fernandez), assisted by his wife, Glenita
Fernandez, filed with the National Labor Relations
Commission (NLRC) a complaint for disability
benefits, with prayer for moral and exemplary
damages, plus attorneys fees, against Ace Navigation
Co., Inc., Vela International Marine Ltd., and/or
Rodolfo Pamintuan (petitioners).
The petitioners moved to dismiss the
complaint,contending that the labor arbiter had no
jurisdiction over the dispute. They argued that
exclusive original jurisdiction is with the voluntary
arbitrator or panel of voluntary arbitrators, pursuant
to Section 29 of the POEA Standard Employment
Contract (POEA-SEC), since the parties are covered
by the AMOSUP-TCC or AMOSUP-VELA
collective bargaining agreement (CBA). Under
Section 14 of the CBA, a dispute between a seafarer
and the company shall be settled through the
grievance machinery and mandatory voluntary
arbitration.
Fernandez opposed the motion. He argued
that inasmuch as his complaint involves a money
claim, original and exclusive jurisdiction over the
case is vested with the labor arbiter.
The Compulsory Arbitration Rulings
On December 9, 2008, Labor Arbiter
Romelita N. Rioflorido denied the motion to dismiss,
holding that under Section 10 of Republic Act (R.A.)
No. 8042, the Migrant Workers and Overseas
Filipinos Act of 1995, the labor arbiter has original
and exclusive jurisdiction over money claims arising
out of an employer-employee relationship or by
virtue of any law or contract, notwithstanding any
provision of law to the contrary.
The petitioners appealed to the NLRC, but
the labor agency denied the appeal. It agreed with the
labor arbiter that the case involves a money claim and
is within the jurisdiction of the labor arbiter, in
accordance with Section 10 of R.A. No. 8042.
Additionally, it declared that the denial of the motion
to dismiss is an interlocutory order which is not
appealable. Accordingly, it remanded the case to the
labor arbiter for further proceedings. The petitioners
moved for reconsideration, but the NLRC denied the
motion, prompting the petitioners to elevate the case
34

to the CA through a petition for certiorari under Rule
65 of the Rules of Court.
Issues:
Whether or not the challenge to the labor
arbiter’s denial of their motion to dismiss by way of
an appeal to the NLRC is proper?(negative)
Ruling:
No appeal from an interlocutory order shall
be entertained. To discourage frivolous or dilatory
appeals, including those taken from interlocutory
orders, the Commission may censure or cite in
contempt the erring parties and their counsels, or
subject them to reasonable fine or penalty.
In Indiana Aerospace University v. Comm.
on Higher Educ.,ll the Court declared that "[a]n order
denying a motion to dismiss is interlocutory"; the
proper remedy in this situation is to appeal after a
decision has been rendered. Clearly, the denial of the
petitioner’s motion to dismiss in the present case was
an interlocutory order and, therefore, not subject to
appeal.
Issues:
Who has the original and exclusive
jurisdiction over Fernandez disability claim the labor
arbiter under Section 10 of R.A. No. 8042, or the
voluntary arbitration mechanism as prescribed in the
parties CBA and the POEA-SEC?(latter)
Ruling:
The answer lies in the States labor relations
policy laid down in the Constitution and fleshed out
in the enabling statute, the Labor Code. Section 3,
Article XIII (on Social Justice and Human Rights) of
the Constitution declares:
The State shall promote the principle of
shared responsibility between workers and employers
and the preferential use of voluntary modes in
settling disputes, including conciliation, and shall
enforce their mutual compliance therewith to foster
industrial peace.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Article 260 of the Labor Code (Grievance machinery
and voluntary arbitration) states:
The parties to a Collective Bargaining
Agreement shall include therein provisions that will
ensure the mutual observance of its terms and
conditions. They shall establish machinery for the
adjustment and resolution of grievances arising from
the interpretation or implementation of their
Collective Bargaining Agreement and those arising
from the interpretation or enforcement of company
personnel policies.
Article 261 of the Labor Code (Jurisdiction of
Voluntary Arbitrators or panel of Voluntary
Arbitrators):
The Voluntary Arbitrator or panel of
Voluntary Arbitrators shall have original and
exclusive jurisdiction to hear and decide all
unresolved grievances arising from the interpretation
or implementation of the Collective Bargaining
Agreement and those arising from the interpretation
or enforcement of company personnel policies.
Article 262 of the Labor Code (Jurisdiction over
other labor disputes) declares:
The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties,
shall also hear and decide all other labor disputes
including unfair labor practices and bargaining
deadlocks.
Further, the POEA-SEC, which governs the
employment of Filipino seafarers, provides in its
Section 29 on Dispute Settlement procedure:
In cases of claims and disputes arising from this
employment, the parties covered by a collective
bargaining agreement shall submit the claim or
dispute to the original and exclusive jurisdiction of
the voluntary arbitrator or panel of voluntary
arbitrators. If the parties are not covered by a
collective bargaining agreement, the parties may at
their option submit the claim or dispute to either the
original and exclusive jurisdiction of the National
Labor Relations Commission (NLRC), pursuant to
Republic Act (RA) 8042 otherwise known as the
Migrant Workers and Overseas Filipinos Act of 1995
or to the original and exclusive jurisdiction of the
voluntary arbitrator or panel of voluntary arbitrators.
If there is no provision as to the voluntary arbitrators
to be appointed by the parties, the same shall be
35

appointed from the accredited voluntary arbitrators of
the National Conciliation and Mediation Board of the
Department of Labor and Employment.
Under the above-quoted constitutional and
legal provisions, the voluntary arbitrator or panel
of voluntary arbitrators has original and exclusive
jurisdiction over Fernandezs disability claim.
There is no dispute that the claim arose out of
Fernandezs employment with the petitioners and that
their relationship is covered by a CBA the
AMOSUP/TCC or the AMOSUP-VELA CBA. The
CBA provides for a grievance procedure for the
resolution of grievances or disputes which occur
during the employment relationship and, like the
grievance machinery created under Article 261 of the
Labor Code, it is a two-tiered mechanism, with
voluntary arbitration as the last step.
Consistent with this finding, Fernandezs
contention that his complaint for disability benefits is
a money claim that falls within the original and
exclusive jurisdiction of the labor arbiter under
Section 10 of R.A. No. 8042 is untenable. We
likewise reject his argument that he never referred his
claim to the grievance machinery (so that no
unresolved grievance exists as required under Article
261 of the Labor Code), and that the parties to the
case are not the union and the employer.ll Needless to
state, no such distinction exists in the parties CBA
and the POEA-SEC.
It bears stressing at this point that we are
upholding the jurisdiction of the voluntary arbitrator
or panel of voluntary arbitrators over the present
dispute, not only because of the clear language of the
parties CBA on the matter; more importantly, we so
uphold the voluntary arbitrators jurisdiction, in
recognition of the States express preference for
voluntary modes of dispute settlement, such as
conciliation and voluntary arbitration as expressed in
the Constitution, the law and the rules.
It is settled that when the parties have
validly agreed on a procedure for resolving
grievances and to submit a dispute to voluntary
arbitration then that procedure should be strictly
observed.
21 G .R. No. 201298 February 5, 2014
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Cosare vs. Broadcom Asia Inc.
FACTS:
Broadcom Asia Inc. (Broadcom) is engaged in the
business of selling b r o a d c a s t equipment needed
by television networks and production houses. One of
its incorporators was Cosare, having been assigned
100 shares of stock.
In October 2001, Cosare was promoted to the
position of Assistant Vice President for Sales and
Head of the Technical Coordination. In 2009,
however, Cosare was asked to tender his resignation
in exchange for “financial assistance” in t h e a m o
u n t o f ₱300,000.00. He refused to comply with the
directive.
Thereafter, Cosare received a memo charging him of
serious misconduct and willful breach of trust and
was, thus, suspended from having access to any and
all company files/records and use of company assets.
He was likewise barred from entering the company
premises and prevented from retrieving his personal
belongings. Aggrieved, Cosare filed a labor
complaint against Broadcom claiming that he was
constructively dismissed from his employment.
The Labor Arbiter dismissed the complaint on the
ground that Cosare failed to establish that he was
constructively dismissed. On appeal, the NLRC
reversed the Labor Arbiter’s decision. Broadcom
assailed the NLRC’s ruling, raising the new argument
that the case involved an intra-corporate controversy
and thus, within the jurisdiction of the RTC and not
of the Labor Arbiter.
The CA granted Broadcom’s petition and agreed that
the case involved an intra-corporate controversy
which, pursuant to Presidential Decree No. 902-A, as
amended, was within the exclusive jurisdiction of the
RTC. The CA found that Cosare was indeed a
stockholder of Broadcom, and that he was listed as
one of the directors. Moreover, he held the position of
AVP for Sales which is listed as a corporate office.
Hence, aggrieved by the decision of the CA, he raised
it to the SC.
ISSUE:
36

Whether or not this involved a n intra-corporate
controversy.
RULING:
No.
The Supreme Court held that the mere fact
that an employee was a stockholder and an officer at
the time he was illegally dismissed will not
necessarily make the case an intra-corporate dispute.
The Supreme Court reversed the CA and
explained the definition of corporate officers for the
purpose of identifying an intra-corporate controversy.
Citing Garcia v. Eastern Telecommunications
Philippines Inc. (G.R. No. 173115, April 16, 2009),
the Court said that corporate officers, in the context
of PD 902-A, are those officers of the corporation
who are given that character by the Corporation Code
or by the corporation’s by-laws. The Court further
held that an “office” is created by the charter of the
corporation and the officer is elected by the directors
and stockholders of the corporation.
The Court explained that two circumstances
must concur in order for an individual to be
considered a corporate officer, namely: (1) the
creation of the position is under the corporation’s by-
laws; and (2) the election of the officer is by the
directors or stockholders. It is only when the officer
claiming to have been illegally dismissed is classified
as such corporate officer that the issue is deemed an
intra-corporate dispute which falls within the
jurisdiction of the trial courts.
Broadcom failed to sufficiently establish
that the position of AVP for Sales was created by
virtue of an act of its board of directors, and that
Cosare was specifically elected or appointed to such
position by the directors. Considering that the
dispute particularly relates to Cosare’s rights and
obligations as a regular officer of Broadcom, instead
of a stockholder of the corporation, the controversy
cannot be deemed intra-corporate, the Court
concluded
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
22. T/SGP Larkins vs. NLRC, G.R. No. 92432,
February 23, 1995
Facts:
Petitioner was a member of the United States Air
Force (USAF) assigned to oversee the dormitories of
the Third Aircraft Generation Squadron (3 AGS) at
Clark Air Base, Pampanga.
On August 10, 1988, 3 AGS terminated the contract
for the maintenance and upkeep of the dormitories
with the De Guzman Custodial Services. The
employees thereof, including private respondents,
were allowed to continue working for 3 AGS. It was
left to the new contractor, the JAC Maintenance
Services owned by Joselito Cunanan, to decide
whether it would retain their services.
Joselito Cunanan, however, chose to bring in his own
workers. As a result, the workers of the De Guzman
Custodial Services were requested to surrender their
base passes to Lt. Col. Frankhauser or to petitioner.
On August 12, 1988, private respondents filed a
complaint with the Regional Arbitration Branch No.
III of the NLRC, San Fernando, Pampanga, against
petitioner, Lt. Col. Frankhauser, and Cunanan for
illegal dismissal and underpayment of wages. On
September 9, 1988, private respondents amended
their complaint and added therein claims for
emergency cost of living allowance, thirteenth-month
pay, service incentive leave pay and holiday
premiums.
Petitioner and Lt. Col. Frankhauser failed to answer
the complaint and to appear at the hearings. They,
likewise, failed to submit their position paper, which
the Labor Arbiter deemed a waiver on their part to do
so. The case was therefore submitted for decision on
the basis of private respondents' position paper and
supporting documents.
On November 21, 1988, the Labor Arbiter rendered a
decision granting all the claims of private
respondents. He found both Lt. Col. Frankhauser and
petitioner "guilty of illegal dismissal" and ordered
them to reinstate private respondents with full back
wages, or if that is no longer possible, to pay private
respondents' separation pay.
Petitioner appealed to the NLRC claiming that the
Labor Arbiter never acquired jurisdiction over her
person because no summons or copies of the
37

complaints, both original and amended, were ever
served on her.
Issue:
Whether or not Labor Arbiter acquired jurisdiction
over petitioners’ person because no summons or
copies of the complaints, both original and amended,
were ever served.
Ruling:
Labor Arbiter acquired no jurisdiction over the case
and the person of petitioner.
Firstly, the "Agreement Between the Republic of the
Philippines and the United States of America
Concerning Military Bases," otherwise known as the
R.P. — U.S. Military Bases Agreement, governed the
rights, duties, authority, and the exercise thereof by
Philippine and American nationals inside the U.S.
military bases in the country.
Article XIV is the governing procedure for service of
summons on persons inside U.S. military bases.
Summonses and other processes issued by Philippine
courts and administrative agencies for United States
Armed Forces personnel within any U.S. base in the
Philippines could be served therein only with the
permission of the Base Commander. If he withholds
giving his permission, he should instead designate
another person to serve the process, and obtain the
server's affidavit for filing with the appropriate court.
Respondent Labor Arbiter did not follow said
procedure. He instead, addressed the summons to Lt.
Col. Frankhauser and not the Base Commander.
Secondly, under Base Labor Agreement of May 27,
1968, any dispute or disagreement between the
United States Armed Forces and Filipino employees
should be settled under grievance or labor relations
procedures established therein (Art. II) or by the
arbitration process provided in the Romualdez-
Bosworth Memorandum of Agreement dated
September 5, 1985. If no agreement was reached or if
the grievance procedure failed, the dispute was
appealable by either party to a Joint Labor
Committee established in Article III of the Base
Labor Agreement.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Therefore, no jurisdiction was ever acquired by the
Labor Arbiter over the case and the person of
petitioner and the judgment rendered is null and void
(Filmerco Commercial Co. v. Intermediate Appellate
Court,supra.; Sy v. Navarro, 81 SCRA 458 [1978]).
Lastly, notices of hearing are not summonses. It is
basic that the Labor Arbiter cannot acquire
jurisdiction over the person without being served
with summons. In the absence of service of summons
or a valid waiver thereof, the hearings and judgment
rendered by the Labor Arbiter are null and void
(cf. Vda. de Macoy v. Court of Appeals,supra.)
Petitioner, in the case at bench, appealed to the
NLRC and participated in the oral argument before
the said body. This, however, does not constitute a
waiver of the lack of summons and a voluntary
submission of her person to the jurisdiction of the
Labor Arbiter. If an appearance before the NLRC is
precisely to question the jurisdiction of the said
agency over the person of the defendant, then this
appearance is not equivalent to service of summons
(De los Santos v. Montera, 221 SCRA 15 [1993]).
The petition for certiorari is GRANTED.
23. UERM Memorial Medical Center vs. NLRC,
G.R. No. 110419, March 3, 1997
FACTS:
On 12 April 1988, Policy Instruction No. 54 was
issued by the SOLE, which reads:
“the personnel in subject hospitals and clinics are
entitled to a full weekly wage of seven days if they
have completed the 40-hour/5-day workweek in any
given workweek.”
Petitioners challenged the validity of said Policy
Instruction and refused to pay the salaries of the
private respondents for Saturdays and Sundays.
38

Within the reglementary period for appeal, the
petitioners filed their Notice and Memorandum of
Appeal with a Real Estate Bond consisting of land
and various improvements therein worth
P102,345,650.
The private respondents moved to dismiss the appeal
on the ground that Article 223 of the Labor Code, as
amended, requires the posting of a cash or surety
bond. The NLRC directed petitioners to post a cash
or surety bond of P17,082,448.56 with a warning that
failure to do so would cause the dismissal of the
appeal.
The NLRC directed petitioners to post a cash or
surety bond of P17,082,448.56 with a warning that
failure to do so would cause the dismissal of the
appeal.
ISSUE: whether or not in perfecting an appeal to the
National Labor Relations Commission (NLRC) a
property bond is excluded by the two forms of appeal
bond — cash or surety — as enumerated in Article
223 of the Labor Code.
HELD: The applicable law is Article 223 of the
Labor Code, as amended by Republic Act No. 6715,
which provides: "In case of a judgment involving a
monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly
accredited by the Commission in the amount
equivalent to the monetary award in the judgment
appealed from." We have given a liberal
interpretation to this provision. In YBL (Your Bus
Line) v. NLRC, 190 SCRA 164 (1990) we ruled: ". . .
that while Article 223 of the Labor Code, as amended
by Republic Act No. 6715, requiring a cash or surety
bond in the amount equivalent to the monetary award
in the judgment appealed from for the appeal to be
perfected, may be considered a jurisdictional
requirement, nevertheless, adhering to the principle
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
that substantial justice is better served by allowing
the appeal on the merits threshed out by the NLRC,
the Court finds and so holds that the foregoing
requirement of the law should be given a liberal
interpretation." Then too, in Oriental Mindoro
Electric Cooperative, Inc. v. National Labor
Relations Commission (246 SCRA 801 [1995]), we
held: "The intention of the lawmakers to make the
bond an indispensable requisite for the perfection of
an appeal by the employer is underscored by the
provision that an appeal by the employer may be
perfected "only upon the posting of a cash or surety
bond." The word "only" makes it perfectly clear, that
the lawmakers intended the posting of a cash or
surety bond by the employer to be the exclusive
means by which an employer's appeal may be
perfected. The requirement is intended to discourage
employers from using an appeal to delay, or even
evade, their obligation to satisfy their employees' just
and lawful claims. Considering, however, that the
current policy is not to strictly follow technical rules
but rather to take into account the spirit and intention
of the Labor Code, it would be prudent for us to look
into the merits of the case, especially since petitioner
disputes the allegation that private respondent was
illegally dismissed."
In the case at bar, the judgment involved is more than
P17 million and its precipitate execution can
adversely affect the existence of petitioner medical
center. Likewise, the issues involved are not
insignificant and they deserve a full discourse by our
quasi-judicial and judicial authorities. We are also
confident that the real property bond posted by the
petitioners sufficiently protects the interests of private
respondents should they finally prevail. It is not
disputed that the real property offered by petitioners
is worth P102,345,650. The judgment in favor of
private respondent is only a little more than P17
million.
The case is remanded to the NLRC for continuation
of proceedings.
39

24. PHIL. TRANCO SERVICES VS. NLRC
April 1, 1998, G.R. No. 124100
Facts:
Nieva was employed as a driver by
petitioner assigned to the Legaspi City-Pasay City
route. Nieva sideswiped an owner-type jeep and a
criminal complaint was filed against him. Philtranco
posted a bail bond for Nieva. After having been
suspended, he was told to wait until his case was
settled. The case was finally settled he was requested
to file a new application as he was no longer
considered an employee of Philtranco, allegedly for
being absent without leave from October 19 to
November 20, 1989.
Nieva filed a complaint for illegal dismissal
and demanded for 13th month pay with the NLRC’s
National Capital Region Arbitration Branch in
Manila. Philtranco filed a motion to dismiss on the
ground of improper venue, stating that the complaint
should have been lodged with the NLRC’s Regional
Arbitration Branch in Legaspi City, not only because
Nieva was a resident thereof, but also because the
latter was hired, assigned, and based in Legaspi City.
Issue:
Whether or not NLRC’s NCR Arbitration
Branch in Manila was a proper venue for the filing of
Nieva’s complaints for illegal dismissal
Ruling:
The filing of the complaint with the National
Capital Region Arbitration Branch was proper,
Manila being considered as part of Nieva’s workplace
by reason of his plying the Legaspi City-Pasay City
route. In fact, Section 1(a), Rule IV of the New
Rules of Procedure of the NLRC is merely
permissive. Provisions on venue are intended to
assure convenience for the employee and his
witnesses and to promote the ends of justice provided
that it is not oppressive to the employer.
25 St. Martin Funeral Homes vs. NLRC, G.R. No.
142351, Nov. 22, 2006
Facts:
The owner of petitioner St. Martin Funeral
Homes, Inc. (St. Martin) is AmelitaMalabed. Prior to
January 1996, Amelita’s mother managed the funeral
parlor. In 1995, Aricayos was granted financial
assistance by Amelita’s mother. As a sign of
appreciation, respondent extended assistance in
managing St. Martin without compensation and no
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
written employment contract between Amelita’s
mother and respondent Aricayos; furthermore,
respondent Aricayos was not even listed as an
employee in the Company’s payroll.
When Amelita’s mother died in January
1996, Amelita took over as manager of St. Martin.
Much to her chagrin, she found out that St. Martin
had arrearages in the payment of BIR taxes and other
fees owing to the government, but company records
tended to show that payments were made thereon. As
a result, Amelita removed the authority from
respondent Aricayos and his wife from taking part in
managing St. Martin’s operations.
Aggrieved, respondent Aricayos accused St.
Martin of his illegal dismissal as Operations Manager
of the company. He believed that the cause of his
termination was Amelita’s suspicion that he pocketed
PhP 38,000.00 which was set aside for payment to the
BIR of St. Martin’s valued added taxes.On October
25, 1996, the Labor Arbiter rendered a Decision, in
favor of petitioner declaring that his office had no
jurisdiction over the case.
NLRC issued a Resolution annulling the
Arbiter’s Decision and remanded the case to him for
appropriate proceedings, to determine the factual
issue of the existence of employer-employee
relationship between the parties. When its motion for
reconsideration was rejected by the NLRC, petitioner
filed a petition for certiorari under Rule 65 before this
Court, docketed as G.R. No. 130866.
On September 16, 1998, this Court through
Justice Jose Vitug, rendered the landmark Decision in
this case then docketed as G.R. No. 130866, holding
for the first time that all petitions for certiorari under
Rule 65 assailing the decisions of the NLRC should
henceforth be filed with the CA
Issue: WON a petitioner can file his petition for
certiorari under Rule65 to assail the decision of a
lower court like NLRC.
Ruling:
A petition for certiorari under Rule65 must
first be filed at the Court of Appeals. Said court has a
concurrent jurisdiction on petitions for certiorari,
mandamus, prohibitions. This is in consonance with
the hierarchy of courts.
26. Ludo & Luym Corp., vs. Saornido, G.R. No.
140960, January 20, 2003
Facts:
40

Petitioner LUDO & LUYM CORPORATION
(LUDO for brevity) is a domestic corporation engaged
in the manufacture of coconut oil, corn starch, glucose
and related products. It operates a manufacturing
plant located at Tupas Street, Cebu City and a wharf
where raw materials and finished products are
shipped out
In the course of its business operations, LUDO
engaged the arrastre services of Cresencio Lu
Arrastre Services (CLAS) for the loading and
unloading of its finished products at the
wharf. Accordingly, several arrastre workers were
deployed by CLAS to perform the services needed by
LUDO
These arrastre workers were subsequently hired, on
different dates, as regular rank-and-file employees of
LUDO every time the latter needed additional
manpower services. Said employees thereafter joined
respondent union, the LUDO Employees Union
(LEU), which acted as the exclusive bargaining agent
of the rank-and-file employees.
On April 13, 1992, respondent union entered into a
collective bargaining agreement with LUDO which
provides certain benefits to the employees, the
amount of which vary according to the length of
service rendered by the availing employee.
the union requested LUDO to include in its members’
period of service the time during which they rendered
arrastre services to LUDO through the CLAS so that
they could get higher benefits. LUDO failed to act
on the request. Thus, the matter was submitted for
voluntary arbitration.
The parties accordingly executed a submission
agreement raising the sole issue of the date of
regularization of the workers for resolution by the
Voluntary Arbitrator.
decision dated April 18, 1997, the Voluntary
Arbitrator ruled that: (1) the respondent employees
were engaged in activities necessary and desirable to
the business of petitioner, and (2) CLAS is a labor-
only contractor of petitioner.[2] It disposed of the case
thus:
 the 214 complainants, as listed in the
Annex A, shall be considered regular
employees of the respondents six (6)
months from the first day of service at
CLAS;
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
 the said complainants, being entitled to
the CBA benefits during the regular
employment, are awarded a) sick leave,
b) vacation leave & c) annual wage and
salary increases during such period in
the amount of FIVE MILLION SEVEN
HUNDRED SEVEN THOUSAND
TWO HUNDRED SIXTY ONE PESOS
AND SIXTY ONE CENTAVOS
(P5,707,261.61)
petitioner raises the following issues:
 WHETHER OR NOT BENEFITS
CONSISTING OF SALARY
INCREASES, VACATION LEAVE
AND SICK LEAVE BENEFITS
FOR THE YEARS 1977 TO 1987
ARE ALREADY BARRED BY
PRESCRIPTION WHEN
PRIVATE RESPONDENTS FILED
THEIR CASE IN JANUARY 1999
 Petitioner contends that the appellate court
gravely erred when it upheld the award of
benefits which were beyond the terms of
submission agreement. Petitioner asserts that
the arbitrator must confine its adjudication to
those issues submitted by the parties for
arbitration, which in this case is the sole issue
of the date of regularization of the
workers. Hence, the award of benefits by the
arbitrator was done in excess of jurisdiction
 Respondents, for their part, aver that the
three-year prescriptive period is reckoned only
from the time the obligor declares his refusal to
comply with his obligation in clear and
unequivocal terms. In this case, respondents
maintain that LUDO merely promised to review
the company records in response to respondents’
demand for adjustment in the date of their
regularization without making a categorical
statement of refusal
Ruling
 we held in San Jose vs. NLRC, that the
jurisdiction of the Labor Arbiter and the
Voluntary Arbitrator or Panel of Voluntary
Arbitrators over the cases enumerated in the
Labor Code, Articles 217, 261 and 262, can
41

possibly include money claims in one form
or another.] Comparatively, in Reformist
Union of R.B. Liner, Inc. vs. NLRC
compulsory arbitration has been defined
both as “the process of settlement of labor
disputes by a government agency which has
the authority to investigate and to make an
award which is binding on all the parties,
and as a mode of arbitration where the
parties are compelled to accept the
resolution of their dispute through
arbitration by a third party
 In general, the arbitrator is expected to
decide those questions expressly stated and
limited in the submission
agreement. However, since arbitration is the
final resort for the adjudication of disputes,
the arbitrator can assume that he has the
power to make a final settlement
 While the submission agreement mentioned
only the determination of the date or
regularization, law and jurisprudence give
the voluntary arbitrator enough leeway of
authority as well as adequate prerogative to
accomplish the reason for which the law on
voluntary arbitration was created – speedy
labor justice.
 Since the parties had continued their
negotiations even after the matter was raised
before the Grievance Procedure and the
voluntary arbitration, the respondents had
not refused to comply with their duty. They
just wanted the complainants to present
some proofs. The complainant’s cause of
action had not therefore accrued
yet. Besides, in the earlier voluntary
arbitration case aforementioned involving
exactly the same issue and employees
similarly situated as the complainants’, the
same defense was raised and dismissed by
Honorable Thelma Jordan, Voluntary
Arbitrator.
27. Hansin Engineering & Construction vs. CA,
G.R. No. 165910, April 10, 2006
Facts:
Hanjin is a construction company that had been
contracted by the Philippine Government for the
construction of various foreign-financed projects.
Hanjin and the Philippine Government entered into
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contracts for the construction of the Malinao Dam at
Pilar, Bohol, with a projected completion period of
1,050 calendar days, including main canal and lateral
projects for 750 days. From August 1995 to August
1996, Hanjin contracted the services of 712
carpenters, masons, truck drivers, helpers, laborers,
heavy equipment operators, leadmen, engineers,
steelmen, mechanics, electricians and others.
In April 1998, 712 employees filed complaints for
illegal dismissal and for payment of benefits against
petitioners, before the NLRC. The complainants
averred that they were regular employees of Hanjin
and that they were separated from employment
without any lawful or just cause. Only 521 of the
complainants affixed their signatures in the
complaints.
Petitioners alleged that the complainants were mere
project employees in its Bohol Irrigation Project and
that 2 of the workers were charged with qualified
theft before the RTC. Some of the complainants had
already migrated to USA or had died, while 117 of
them were still under the employ of Hanjin.
Petitioner stated that some of the complainants had
voluntarily resigned; 14 were absent without prior
approved leave; 15 had signed a Motion to Withdraw
from the complaint; and many of the complainants
were separated on account of the completion of the
project. However, petitioners failed to append any
document to support their claim.
Labor Arbiter rendered judgment in favor of the 428
complainants, granting separation pay and attorney's
fees to each of them stating that the complainants
were regular employees of petitioner and their claims
for underpayment, holiday pay, premium pay for
holiday and rest day, 13th month pay, and service
incentive leave would be computed after sufficient
data were made available. Petitioners appealed the
decision to the NLRC, which affirmed with
modification the Labor Arbiter's ruling. Petitioners
filed a Motion for the Reconsideration of the decision
(with a motion to conduct clarificatory hearings)
NLRC partially granted petitioners' motion.
Unsatisfied, petitioners filed a Petition for Certiorari
under Rule 65 of the Revised Rules of Court in the
CA. CA dismissed the petition and affirmed the
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NLRC's ruling that the dismissed employees were
regular employees. The CA stressed that petitioners
failed to refute the claim of the respondents that they
were regular employees. Petitioners moved to
reconsider the decision, which the CA denied.
Issue: WON respondents are project employees.
Ruling:
While respondent alleged that "complainants all
signed a contract of employment at the time they
were hired indicating therein the particular project
they will be working on, the period and other
conditions provided in their contracts which
complainants fully knew and understood," nowhere
in the records can the said contracts be found.
Moreover, let it be stressed that under DO No. 19,
Series of 1993 on project employment, six (6)
indicators are enumerated therein and one of which is
that: "(T)he termination of his employment in the
particular project/undertaking is reported to the
Department of Labor and Employment (DOLE)
Regional Office having jurisdiction over the
workplace within 30 days following the date of his
separation from work x x x."
In this particular case, the records do not show that a
similar report was ever made by respondent to the
Department of Labor and Employment. Such failure
of respondent employer to report to the nearest
employment office of the Department of Labor, the
termination of the workers it claimed as project
employees at the time it completed the project, is
proof that complainants were not project employees.
The principal test for determining whether particular
employees are properly characterized as project
employees is: whether or not the project employees
were assigned to carry out a specific project or
undertaking, the duration of which were specified at
the time the employees were engaged for that project.
Predetermination of the duration or period of project
employment is essential in resolving whether one is a
project employee or not. In the instant case, the
completion of the project for which the complainants
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were hired was not determined at the start of their
employment, there being no substantial proof thereof.
The fact that complainants had rendered more than
one year of service at the time of their dismissal and
there being no substantial evidence to support that
they were engaged to work on a specific project or
undertaking, overturns respondent’s allegation that
complainants were project employees hired for a
specific fixed project for a limited period of time.
Complainants herein were, therefore, non-project
employees, but regular employees. Admittedly, being
a duly licensed contractor firm in the Philippines,
respondent is the awardee of several construction
projects and in many occasions it has been given the
priority in the awarding of subsequent projects.
In the light of the above facts and circumstances, the
respondent's main defense that completion of the
project worked on by the complainants constitute a
valid cause of termination is unsustainable. To repeat,
there is no substantial evidence on record to sustain
this contention. The mere allegation of the
respondents that under their employment contracts
the complainants were made to understand that they
were project employees is definitely not persuasive or
unworthy of credence. The best evidence of which
would have been the alleged contracts. These
employees signed duly notarized waivers/quitclaims
and who did not recant later. In the absence of
evidence showing the contrary, said quitclaims were
executed voluntarily and without any force or
intimidation.
Petitioners submitted to the NLRC dubious machine
copies of only some of respondents? contracts,
including alleged employment termination reports
submitted to the DOLE. The NLRC found the
contracts barren of probative weight and utterly
insufficient to buttress the contention of petitioners
that respondents were only project employees.
Contrary to the representation of respondent's
counsel, the original copies of the reports made to
DOLE were never produced and submitted to this
Commission. Neither were they presented for
comparison with the machine copies. These machine
copies were not also certified as true copies by the
DOLE.
43

The actual continuous employment of complainants
by respondent Hanjin since 1991 until 1995
overcomes the piecemeal "appointments" covering
for periods of six (6) months or less. From these short
term but repeated "appointments," it is apparent that
the periods have been imposed to preclude the
acquisition of tenurial security by the employee and
which kind of employment contracts should be
disregarded for being contrary to public policy.
The appellate court, the NLRC and the Labor Arbiter
are thus one in finding that respondents were not
project employees, and in sustaining respondents'
claim of illegal dismissal due to petitioners? failure to
adduce contrary evidence. Well-settled is the rule that
findings of fact of quasi-judicial agencies, like the
NLRC, are accorded not only respect but at times
even finality if such findings are supported by
substantial evidence. Such findings of facts can only
be set aside upon showing of grave abuse of
discretion, fraud or error of law, none of which have
been shown in this case.
28. ) G.R. No. 166421
PHILIPPINE JOURNALISTS, INC., BOBBY
DELA CRUZ, ARNOLD BANARES and ATTY.
RUBY RUIZ BRUNO,petitioners,
vs.
NATIONAL LABOR RELATIONS
COMMISSION, HON. COMMS. LOURDES
JAVIER, TITO GENILO and ERNESTO
VERCELES, JOURNAL EMPLOYEES UNION,
and THE COURT OF APPEALS, respondents
The Philippine Journalists, Inc. (PJI) is a domestic
corporation engaged in the publication and sale of
newspapers and magazines. The exclusive bargaining
agent of all the rank-and-file employees in the
company is the Journal Employees Union (Union for
brevity).
Sometime in April 2005, the Union filed a notice of
strike before the National Conciliation and Mediation
Board (NCMB), claiming that PJI was guilty of
unfair labor practice. PJI was then going to
implement a retrenchment program due to "over-
staffing or bloated work force and continuing actual
losses sustained by the company for the past three
years resulting in negative stockholders equity
of P127.0 million.
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After submitting their respective papers, in its
resolution dated May 31, 2001, the NLRC declared
that the 31 complainants were illegally dismissed and
that there was no basis for the petitioners
retrenchment program thus it ordered their
reinstatement to their former position without loss of
seniority rights and other other benefits, with
payment of unpaid salaries, bonuses and backwages.
Thereafter, the parties executed a Compromise
Agreement dated July 9, 2001, where PJI undertook
to reinstate the 31 complainant-employees effective
July 1, 2001 without loss of seniority rights and
benefits; 17 of them who were previously retrenched
were agreed to be given full and complete payment of
their respective monetary claims, while 14 others
would be paid their monetary claims minus what they
received by way of separation pay. The compromise
agreement was submitted to the NLRC for approval.
The compromise agreement was approved and was
deemed closed and terminated.
The Union filed another Notice of Strike on July 1,
2002 claiming that 29 employees where illegally
dismissed. After the retrenchment program was
implemented, the members-employees who
continued working were made to sign 5 month
contract and was threatened to be dismissed if they
refused to conform to 40% to 50% salary deduction.
The NLRC forthwith issued another Resolution on
July 25, 2002, declaring that the Clarificatory Motion
of complainants Floro Andrin, Jr. and Jazen M.
Jilhani had been mooted by the compromise
agreement as they appeared to be included in
paragraph 2.c and paragraph 2.d, respectively thereof.
As to the seven others who had filed a motion for
clarification, the NLRC held that they should have
filed individual affidavits to establish their claims or
moved to consolidate their cases with the certified
case. Thus, the NLRC granted the computation of
their benefits as shown in the individual affidavits of
the complainants. However, as to the prayer to
declare the Union guilty of unfair labor practice, to
continue with the CBA negotiation and to pay moral
and exemplary damages, the NLRC ruled that there
was no sufficient factual and legal basis to modify its
resolution. Thus, the compromise agreement was
44

approved and NCMB-NCR-NS-03-087-00 was
deemed closed and terminated.
In its Resolution dated July 31, 2003, the NLRC
ruled that the complainants were not illegally
dismissed. The May 31, 2001 Resolution declaring
the retrenchment program illegal did not attain
finality as "it had been academically mooted by the
compromise agreement entered into between both
parties on July 9, 2001." According to the
Commission, it was on the basis of this agreement
that the July 25, 2002 Resolution which declared the
case closed and terminated was issued. Thus, the May
31, 2001 Resolution could not be made the basis to
justify the alleged continued employment regularity
of the 29 complainants subsequent to their
retrenchment.
The NLRC also declared that by their separate acts of
entering into fixed-term employment contracts with
petitioner after their separation from employment by
virtue of retrenchment, they are deemed to have
admitted the validity of their separation from
employment and are thus estopped from questioning
it. The NLRC dismissed the case for lack of merit,
but directed the company to "give preference to the
separated 29 complainants should they apply for re-
employment."
In its Decision dated August 17, 2004, the appellate
court held that the NLRC gravely abused its
discretion in ruling for PJI. The compromise
agreement referred only to the award given by the
NLRC to the complainants in the said case, that
is, the obligation of the employer to the
complainants. The CA also ruled that the dismissed
employees were not barred from pursuing their
monetary claims despite the fact that they had
accepted their separation pay and signed their
quitclaims.
Issue:
The primary issue before the Court is whether an
NLRC Resolution, which includes a pronouncement
that the members of a union had been illegally
dismissed, is abandoned or rendered “moot and
academic” by a compromise agreement subsequently
entered into between the dismissed employees and
the employer and if such a compromise agreement
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constitutes res judicata to a new complaint later filed
by other union members-employees, not parties to the
agreement, who likewise claim to have been illegally
dismissed.
Held:
Article 227 of the Labor Code of the Philippines
authorizes compromise agreements voluntarily
agreed upon by the parties, in conformity with the
basic policy of the State "to promote and emphasize
the primacy of free collective bargaining and
negotiations, including voluntary arbitration,
mediation and conciliation, as modes of settling labor
or industrial disputes.
ART. 227 Compromise Agreements. – Any
compromise settlement, including those involving
labor standard laws, voluntarily agreed upon by the
parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be
final and binding upon the parties. The National
Labor Relations Commission or any court shall not
assume jurisdiction over issues involved therein
except in case of noncompliance thereof or if there is
prima facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
Thus, a judgment rendered in accordance with a
compromise agreement is not appealable, and is
immediately executory unless a motion is filed to set
aside the agreement on the ground of fraud, mistake,
or duress, in which case an appeal may be taken
against the order denying the motion. Under Article
2037 of the Civil Code, "a compromise has upon the
parties the effect and authority of res judicata," even
when effected without judicial approval; and under
the principle of res judicata, an issue which had
already been laid to rest by the parties themselves can
no longer be relitigated.
Adjective law governing judicial compromises
annunciate that once approved by the court, a judicial
compromise is not appealable and it thereby becomes
immediately executory but this rule must be
understood to refer and apply only to those who are
bound by the compromise and, on the assumption
that they are the only parties to the case, the litigation
comes to an end except only as regards to its
45

compliance and the fulfillment by the parties of their
respective obligations thereunder. The reason for the
rule, said the Court in Domingo v. Court of Appeals
[325 Phil. 469], is that when both parties so enter
into the agreement to put a close to a pending
litigation between them and ask that a decision be
rendered in conformity therewith, it would only be
"natural to presume that such action constitutes an
implicit waiver of the right to appeal" against that
decision. The order approving the compromise
agreement thus becomes a final act, and it forms part
and parcel of the judgment that can be enforced by a
writ of execution unless otherwise enjoined by a
restraining order.
Thus, contrary to the allegation of petitioners, the
execution and subsequent approval by the NLRC of
the agreement forged between it and the respondent
Union did not render the NLRC resolution
ineffectual, nor rendered it "moot and academic."
The agreement becomes part of the judgment of the
court or tribunal, and as a logical consequence,
there is an implicit waiver of the right to appeal.
In any event, the compromise agreement cannot bind
a party who did not voluntarily take part in the
settlement itself and gave specific individual consent.
It must be remembered that a compromise agreement
is also a contract; it requires the consent of the
parties, and it is only then that the agreement may be
considered as voluntarily entered into.
A careful perusal of the wordings of the compromise
agreement will show that the parties agreed that the
only issue to be resolved was the question of the
monetary claim of several employees.
The findings of the appellate court are in accord with
the evidence on record, and we note with approval
the following pronouncement:
Respondents alleged that it hired contractual
employees majority of whom were those retrenched
because of the increased but uncertain demand for its
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publications. Respondent did this almost immediately
after its alleged retrenchment program. Another
telling feature in the scheme of respondent is the fact
that these contractual employees were given contracts
of five (5) month durations and thereafter, were
offered regular employment with salaries lower than
their previous salaries. The Labor Code explicitly
prohibits the diminution of employee’s benefits.
Clearly, the situation in the case at bar is one of the
things the provision on security of tenure seeks to
prevent.
Lastly, it could not be said that the employees in this
case are barred from pursuing their claims because of
their acceptance of separation pay and their signing
of quitclaims. It is settled that “quitclaims, waivers
and/or complete releases executed by employees do
not stop them from pursuing their claims – if there is
a showing of undue pressure or duress. The basic
reason for this is that such quitclaims, waivers and/or
complete releases being figuratively exacted through
the barrel of a gun, are against public policy and
therefore null and void ab initio (ACD Investigation
Security Agency, Inc. v. Pablo D. Daquera, G.R. No.
147473, March 30, 2004).” In the case at bar, the
employees were faced with impending termination.
As such, it was but natural for them to accept
whatever monetary benefits that they could get.
29. Balagtas Multi Purpose Coop. vs. CA, G.R.
No. 159268, Oct. 27, 2006
Facts:
Balagtas Multi-Purpose Cooperative, Inc. is
a duly organized and existing cooperative under the
laws of the Philippines. Sometime in April 1991,
Balagtas hired Josefina G. Hipolito-Herrero, as part
time manager in its office. Subsequently, Josefina
made known of her intention to take a leave of
absence. Her proposal was immediately approved.
However, after the lapse of her leave of absence,
Josefina did not report for work anymore. Later on,
she filed her resignation.
Consequently Josefina filed a complaint
with the Provincial Office of the Department of
46

Labor in Malolos, Bulacan for illegal dismissal, and
non-payment of 13th month pay or Christmas Bonus.
She also prayed for reinstatement and paid
backwages as well as moral damages.
The Labor Arbiter rendered judgment in favor
of complainant and against respondents and ordered
the latter to pay the former 13th month pay,
backwages and separation pay. Aggrieved, herein
petitioners appealed the decision to NLRC but failed
to post either a cash or surety bond as required by
Article 223 of the Labor Code. They filed a
manifestation and motion instead, stating, that under
Republic Act No. 6938, Article 62(7) of the
Cooperative Code of the Philippines, petitioners are
exempt from putting up a bond in an appeal from the
decision of the inferior court. NLRC ordered
respondents to post a cash or surety bond in the
amount of P218,000.00, within 10 inextendible days
from receipt of the Order, failure of which shall
constitute a waiver and non-perfection of the appeal.
Balagtas appealed to CA, which dismissed the
petition holding that the exemption from putting up a
bond by a cooperative applies to cases decided by
inferior courts only.
Issues:
1. WON cooperatives are exempted from filing
a cash or surety bond required to perfect an
employer’s appeal under Section 223 of
Presidential Decree No. 442 (the Labor
Code);
2. WON a certification issued by the
Cooperative Development Authority
constitutes substantial compliance with the
requirement for the posting of a bond.
Ruling:
1. No. Petitioners argue that there are certain
benefits and privileges expressly granted to
cooperative under the Cooperative Code. It
invoked the provision on Article 62
regarding the exemption from payment of an
appeal bond, to wit: (7)All cooperatives
shall be exempt from putting up a bond for
bringing an appeal against the decision of an
inferior court or for seeking to set aside any
third party claim: Provided, That a
certification of the Authority showing that
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the net assets of the cooperative are in
excess of the amount of the bond required
by the court in similar cases shall be
accepted by the court as a sufficient bond.
However, it is only one among a
number of such privileges which appear
under the article entitled “Tax and Other
Exemptions” of the code. The provision
cited by petitioners cannot be taken in
isolation and must be interpreted in relation
to the Cooperative Code in its entirety.
Exceptions are to be strictly but reasonably
construed; they extend only so far as their
language warrants, and all doubts should be
resolved in favor of the general provision
rather than the exceptions.
2. No. Article 119 of the Cooperative Code
itself expressly embodies the legislative
intention to extend the coverage of labor
statutes to cooperatives. For this reason,
petitioners must comply with the
requirement set forth in Article 223 of the
Labor Code in order to perfect their appeal
to the NLRC. It must be pointed out that the
right to appeal is not a constitutional, natural
or inherent right. It is a privilege of statutory
origin and, therefore, available only if
granted or provided by statute. The law may
validly provide limitations or qualifications
thereto or relief to the prevailing party in the
event an appeal is interposed by the losing
party.
In this case, the obvious and logical
purpose of an appeal bond is to insure,
during the period of appeal, against any
occurrence that would defeat or diminish
recovery by the employee under the
judgment if the latter is subsequently
affirmed.
Therefore, no error can be ascribed
to the CA for holding that the phrase
“inferior courts” appearing in Article 62
paragraph (7) of the Cooperative Code does
not extend to “quasi-judicial agencies” and
that, petitioners are not exempt from posting
the appeal bond required under Article 223
of the Labor Code.
47

30. ST. MARTIN FUNERAL HOMES vs.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC) (Nov. 22, 2006)
FACTS:
Complainant, herein private respondent Aricayos,
filed a petition for illegal dismissal with prayer for
reinstatement, payment of back wages and damages
against petitioner St. Martin Funeral Homes. The
initiatory pleading was filed before the NLRC
RAB.
The owner of St. Marting Funeral Homes is Amelita
Malabed. Amelita’s mother managed the funeral
parlor. Respondent Aricayos, on the other hand, was
formerly an overseas contract worker. Aricayos, in
1995, was granted financial assistance by
Amelita’s mother. As a sign of appreciation,
Aricayos extended assistance to Amelita’s mother
in managing St. Martin without compensation.
There was no written employment contract between
them, Aricayos was not even listed as an employee in
the Company’s payroll.
When Amelita took over, after her mother’s death,
she saw that there were some arrears in the payment
of BIR taxes. Thus, Amelita removed the authority
from Aricayos and his wife from taking part in
managing St. Martin’s operations. Thus, Aricayos
accused St. Martin of his illegal dismissal as
Operations Manager on the ground of Amelita’s
suspicion that he pocketed money for payment of
BIR taxes.
LA rendered a decision in favor of St. Martins stating
that it had no jurisdiction over the case, citing Dela
Salle University vs. NLRC , as it is the civil court
which has jurisdiction to determine whether there is
an employer-employee relationship. NLRC, however,
reversed the decision stating that LA is so authorized
to threshed out the issue of the existence of
employer-employee relationship when the facts are
not too clear so as the ends of justice would better be
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served. MR of petitioner was denied by NLRC. P
filed for certiorari under Rule 65. The case was
remanded to the CA and CA affirmed the decision of
NLRC.
Petitioner asserts that LA already concluded that
there was no EE-ER relationship based on the
position papers and memoranda of the parties. On the
other hand, respondent Aricayos supports the
pronouncement of the NLRC as affirmed by the CA
that there was no determination of the existence of
EE-ER relationship.
Thus, this is petition for review on certiorari under
Rule 45 seeking to reverse the decision of the CA
which affirmed the NLRC in remanding the
complaint of respondent Aricayos to the Labor
Arbiter.
ISSUE:
WON the LA made a determination of the presence
of an EE-ER relationship between St. Martin and
Aricayos based on the evidence on record. Further,
WON it is within the authority of the LA to set the
labor case for hearing to be able to determine the
veracity of the conflicting positions of the parties.
RULING:
While a formal trial or hearing is discretionary on
the part of the Labor Arbiter, when there are
factual issues that require a formal presentation of
evidence in a hearing, the Labor Arbiter cannot
simply rely on the position papers, more so, on
mere unsubstantiated claims of parties.
APPLICATION:
In In the case at bar, there are certain admissions by
petitioner St. Martin that should have prodded the
Labor Arbiter to conduct a hearing for a more in-
depth examination of the contrasting positions of the
parties, namely:
48

1. That respondent helped Amelita's mother
manage the funeral parlor business by
running errands for her,
2. Overseeing the business from 1995 up to
January 1996 when the mother died,
3. And that after Amelita made changes in the
business operation, private respondent and
his wife were no longer allowed to
participate in the management of St. Martin.
These facts, as admitted by the petitioner and the
affidavits of St. Martin's witnesses, could have
been examined more in detail by the Labor
Arbiter in a hearing to convince himself that there
was indeed no employment relationship between
the parties as he originally found.
CA decision affirmed. Petition DENIED.
31. DOLE Philippines, Inc. vs. Medel Esteva, et al.
[GR No. 161115 November 30, 2006]
FACTS:
Petitioner is a corporation engaged
principally in the production and processing of
pineapple for the export market. Respondents are
members of the Cannery Multi-Purpose Cooperative
(CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise
known as the Cooperative Code of the Philippines.
Pursuant to the Service Contract, CAMPCO members
rendered services to petitioner. The number of
CAMPCO members that report for work and the type
of service they performed depended on the needs of
petitioner at any given time. Although the Service
Contract specifically stated that it shall only be for a
period of six months, i.e., from 1 July to 31
December 1993, the parties had apparently extended
or renewed the same for the succeeding years without
executing another written contract. It was under
these circumstances that respondents came to work
for petitioner. DOLE organized a Task Force that
conducted an investigation into the alleged labor-only
contracting activities of the cooperatives. The Task
Force identified six cooperatives that were engaged
in labor-only contracting, one of which was
CAMPCO. In this case, respondents alleged that they
started working for petitioner at various times in the
years 1993 and 1994, by virtue of the Service
Contract executed between CAMPCO and petitioner.
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All of the respondents had already rendered more
than one year of service to petitioner. While some of
the respondents were still working for petitioner,
others were put on “stay home status” on varying
dates in the years 1994, 1995, and 1996 and were no
longer furnished with work thereafter. Together,
respondents filed a Complaint with the NLRC for
illegal dismissal, regularization, wage differentials,
damages and attorney’s fees. Petitioner denied that
respondents were its employees. It explained that it
found the need to engage external services to
augment its regular workforce, which was affected by
peaks in operation, work backlogs, absenteeism, and
excessive leaves. It used to engage the services of
individual workers for definite periods specified in
their employment contracts and never exceeding one
year. However, such an arrangement became the
subject of a labor case, in which petitioner was
accused of preventing the regularization of such
workers.
ISSUES:
1. Whether or not the court of appeals was
correct when it made its own factual
findings and disregarded the factual
findings of the labor arbiter and the
NLRC.
2. Whether or not CAMPCO was a mere
labor-only contractor.
RULING:
Yes. The Court in the exercise of its equity
jurisdiction may look into the records of the case and
re-examine the questioned findings. As a corollary,
this Court is clothed with ample authority to review
matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is
necessary to arrive at a just decision of the case. The
same principles are now necessarily adhered to and
are applied by the Court of Appeals in its expanded
jurisdiction over labor cases elevated through a
petition for certiorari; thus, we see no error on its part
when it made anew a factual determination of the
matters and on that basis reversed the ruling of the
NLRC.
Yes. CAMPCO was a mere labor-only
contractor. First, although petitioner touts the multi-
million pesos assets of CAMPCO, it does well to
remember that such were amassed in the years
following its establishment. In 1993, when
CAMPCO was established and the Service Contract
between petitioner and CAMPCO was entered into,
49

CAMPCO only had P6,600.00 paid-up capital, which
could hardly be considered substantial. It only
managed to increase its capitalization and assets in
the succeeding years by continually and defiantly
engaging in what had been declared by authorized
DOLE officials as labor-only contracting. Second,
CAMPCO did not carry out an independent business
from petitioner. It was precisely established to render
services to petitioner to augment its workforce during
peak seasons. Petitioner was its only client. Even as
CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes;
the tools, machineries, and equipment actually used
by CAMPCO members when rendering services to
the petitioner belonged to the latter. Third, petitioner
exercised control over the CAMPCO members,
including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO
supervisor in the work premises. Yet, the mere
presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO
had control over its members. Section 8(1), Rule
VIII, Book III of the implementing rules of the Labor
Code, as amended, required for permissible job
contracting that the contractor undertakes the contract
work on his account, under his own responsibility,
according to his own manner and method, free from
the control and direction of his employer or principal
in all matters connected with the performance of the
work except as to the results thereof. As alleged by
the respondents, and unrebutted by petitioner,
CAMPCO members, before working for the
petitioner, had to undergo instructions and pass the
training provided by petitioner’s personnel. It was
petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO
members worked within petitioner’s plantation and
processing plants alongside regular employees
performing identical jobs, a circumstance recognized
as an indicium of a labor-only contractorship. Fourth,
CAMPCO was not engaged to perform a specific and
special job or service. In the Service Contract of
1993, CAMPCO agreed to assist petitioner in its
daily operations, and perform odd jobs as may be
assigned. CAMPCO complied with this venture by
assigning members to petitioner. Apart from that, no
other particular job, work or service was required
from CAMPCO, and it is apparent, with such an
arrangement, that CAMPCO merely acted as a
recruitment agency for petitioner. Since the
undertaking of CAMPCO did not involve the
performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as
a labor-only contractor. Lastly, CAMPCO members,
including respondents, performed activities directly
related to the principal business of petitioner. They
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
worked as can processing attendant, feeder of canned
pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing
attendant, and etc., functions which were, not only
directly related, but were very vital to petitioner’s
business of production and processing of pineapple
products for export. The declaration that CAMPCO is
indeed engaged in the prohibited activities of labor-
only contracting, then consequently, an employer-
employee relationship is deemed to exist between
petitioner and respondents, since CAMPCO shall be
considered as a mere agent or intermediary of
petitioner.
Since respondents are now recognized as
employees of petitioner, this Court is tasked to
determine the nature of their employment. In
consideration of all the attendant circumstances in
this case, this Court concludes that respondents are
regular employees of petitioner. As such, they are
entitled to security of tenure. They could only be
removed based on just and authorized causes as
provided for in the Labor Code, as amended, and
after they are accorded procedural due process.
Therefore, petitioner’s acts of placing some of the
respondents on “stay home status” and not giving
them work assignments for more than six months
were already tantamount to constructive and illegal
dismissal.
32)G.R. No. 151407, February 6, 2007
INTERCONTINENTAL BROADCASTING
CORP. VS. PANGANIBAN
FACTS:
Ireneo Panganiban (respondent) was employed as
Assistant General Manager of the Intercontinental
Broadcasting Corporation (petitioner) from May
1986 until his preventive suspension on August 26,
1988. Respondent resigned from his employment on
September 2, 1988.
On April 12, 1989, respondent filed a civil case with
the RTC of Quezon City, Branch 93 against the
members of the Board of Administrators (BOA) of
petitioner alleging, among others, non-payment of his
unpaid commissions. A motion to dismiss was filed
by Joselito Santiago, one of the defendants, on the
ground of lack of jurisdiction, as respondent’s claim
was a labor money claim, but this was denied by the
RTC. Thus, Santiago filed a petition for certiorari
50

with the CA which granted Santiago’s petition for
lack of jurisdiction and set aside the RTC’s Orders.
Thereafter, respondent was elected by the BOA as
Vice-President for Marketing in July 1992. He
resigned in April 1993. On July 24, 1996, respondent
filed against petitioner a complaint for illegal
dismissal, separation pay, retirement benefits, unpaid
commissions, and damages. The Labor Arbiter (LA)
ordered respondent’s reinstatement with full
backwages, and the payment of his unpaid
commission, damages and attorney’s fees. Petitioner
appealed to the NLRC but due to petitioner’s failure
to post a bond, the appeal was dismissed. The
decision was deemed final and executory.
ISSUE:
WON respondent’s claim for unpaid commissions
has already prescribed.
RULING:
Yes. Respondent’s claim had already prescribed as of
September 1991. In addition, the claims of private
respondent for reinstatement, backwages and benefits
in conjunction with his employment from 1986 to
1988 have prescribed.
The applicable law in this case is Article 291 of the
Labor Code which provides that “all money claims
arising from employer-employee relations accruing
during the effectivity of this Code shall be filed
within three (3) years from the time the cause of
action accrued; otherwise they shall be forever
barred.”
The term “money claims” covers all money claims
arising from an employer-employee relation the
prescription of an action is interrupted by (a) the
filing of an action, (b) a written extrajudicial demand
by the creditor, and (c) a written acknowledgment of
the debt by the debtor.
On this point, the Court ruled that although the
commencement of a civil action stops the running of
the statute of prescription or limitations, its dismissal
or voluntary abandonment by plaintiff leaves the
parties in exactly the same position as though no
action had been commenced at all. Hence, while the
filing of Civil Case could have interrupted the
running of the three-year prescriptive period, its
consequent dismissal by the CA due to lack of
jurisdiction effectively canceled the tolling of the
prescriptive period within which to file his money
claim, leaving respondent in exactly the same
position as though no civil case had been filed at all.
The running of the three-year prescriptive period not
having been interrupted by the filing of Civil Case
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
respondent’s cause of action had already prescribed
on September 2, 1991, three years after his cessation
of employment on September 2, 1988. Consequently,
when respondent filed his complaint for illegal
dismissal, separation pay, retirement benefits, and
damages in July 24, 1996, his claim, clearly, had
already been barred by prescription.
33. G.R. No. 162813, February 12, 2007, Far East
Agricultural Supply, Inc. and/or Alexander Uy vs.
Jimmy Lebatique and the Honorable Court Of
Appeals
FACTS:
The case originated from a complaint for illegal
dismissal and nonpayment of overtime pay filed by
Jimmy Lebatique, a truck driver against his
employer, Far East Agricultural Supply Inc.
Lebatique was employed March 1996 and was tasked
to deliver animal feeds to the company’s clients.
On January 24, 200o, Lebatique complained about
not being payed overtime pay. That same day when
he complained, he was suspended by Far East’s
General Manager Manuel Uy for his alleged illegal
use of company vehicle, and was prohibited from
entering the company premises when he reported to
work the next day.
Lebatique sought the assistance of the DOLE Public
Assistance and Complaints Unit for the issue on the
nonpayment of his Overtime pay.
Two days after seeking the assistance of the DOLE,
he received a telegram from Far East requiring him to
report to work. Upon his return, Alexander Uy
confronted him about his complaint and after talking
to Manuel, Alexander terminated Lebatique.
The Labor Arbiter ruled in favor of Lebatique but this
decision was overturned by the NLRC who stated
that Lebatique was merely suspended and that he is a
field personnel not entitled to overtime pay, service
incentive leave pay and 13th month pay. The Court of
Appeals reinstated the Arbiter’s ruling so petitioner
appealed to the Supreme Court by way of review on
certiorari.
51

ISSUE/S:
The case revolves around two specific points on (1)
whether or not Lebatique was illegally dismissed and
on (2) whether or not he is a field personnel who is
not entitled to overtime pay.
RULING:
The case was remanded to the Labor Arbiter for
further proceedings to determine
the amount of overtime pay and other monetary
benefits due to Lebatique because:
 Lebatique was illegally dismissed
In cases of illegal dismissal, the burden is on the
employer to prove that the termination was for a valid
cause and in this case the petitioners failed to
discharge such burden.
As to the petitioner’s claims that Lebatique was not
dismissed but that he abandoned his work after being
suspended, “an employee who takes steps to protest
his layoff cannot by any stretch of imagination be
said to have abandoned his work”. Lebatique’s filing
of the complaint is “proof enough of his desire to
return to work, thus negating any suggestion of
abandonment.”
 Lebatique is not a field personnel
The definition of a "field personnel" is not merely
concerned with the location where the employee
regularly performs his duties but also with the fact
that the employee’s performance is unsupervised by
the employer. A field personnel are those who
regularly perform their duties away from the
principal place of business of the employer and
whose actual hours of work in the field cannot be
determined with reasonable certainty. In order to
determine whether an employee is a field employee,
it is also necessary to ascertain if actual hours of
work in the field can be determined with reasonable
certainty by the employer. In so doing, an inquiry
must be made as to whether or not the employee’s
time and performance are constantly supervised by
the employer.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Given the above definition, Lebatique is not a field
personnel for the following reasons:
(1) company drivers, including Lebatique,
are directed to deliver the goods at a specified time
and place;
(2) they are not given the discretion to
solicit, select and contact prospective clients; and
(3) Far East issued a directive that company
drivers should stay at the client’s premises during
truck-ban hours which is from 5:00 to 9:00 a.m. and
5:00 to 9:00 p.m.
34. LETRAN CALAMBA FACULTY and
EMPLOYEES ASSOCIATION, petitioner, vs.
NATIONAL LABOR RELATIONS
COMMISSION and COLEGIO DE SANJUAN
DE LETRAN CALAMBA, INC.,respondent.
FACTS:
On October 8, 1992, the Letran Calamba
Faculty and Employees Association filed with
Regional Arbitration Branch No. IV of the NLRC a
Complaint against Colegio de San Juan de Letran,
Calamba, Inc for collection of various monetary
claims due its members. The complaint alleges
among many things, that in the computation for 13 th
month pay of its academic personnel respondent does
not include as basis therefor their compensation for
overloads, that respondent has not paid the wage
increase, the salary increase due to the non-academic
personnel as a result of job grading has not been
given, that the acts of the respondent has resulted in
diminution of benefits of the faculty members. In its
position paper, respondent denied all the allegations.
Prior to the filing of the above-mentioned
complaint, petitioner filed a separate complaint
against the respondent for money claims with
Regional Office No. IV of the Department of Labor
and Employment (DOLE). On the other hand,
pending resolution in another NLRC case, responden
school filed with Regional Arbitration Branch No. IV
of the NLRC a petition to declare as illegal the strike
staged by petitioner.
On September 28, 1998, the Labor Arbiter
(LA) handling the consolidated cases rendered a
Decision dismissing the money claims and declaring
the strike illegal. Upon appeal to the NLRC, the
petition was dismissed. Petitioner then availed of an
action for certiorari with the CA but was also
dismissed.
ISSUES:
52

1. Whether or nor the CA erred in holding that
the factual findings of the NLRCcannot be
revied in certiorari proceedings?
2. Whether or not the teaching overload should
be included in the basis in the computation
of their 13th month pay?
RULING:
On the first issue…
The Court finds no error in the ruling of the
CA that since nowhere in the petition is there any
acceptable demonstration that the LA or the NLRC
acted either with grave abuse of discretion or without
or in excess of its jurisdiction, the appellate court has
no reason to look into the correctness of the
evaluation of evidence which supports the labor
tribunals' findings of fact.
The findings of the Labor Arbiter, when
affirmed by the NLRC and the CA, are binding on
the Supreme Court unless patently erroneous. Thus,
in a petitioner for review on certiorari, this Court’s
jurisdiction is limited to reviewing errors of law in
the absence of any showing that the factual findings
complained of are devoid of support in the records or
are glaringly erroneous.
In petitions for review on certiorari like the
instant case, the Court invariably sustains the
unanimous factual findings of the LA, the NLRC and
the CA, specially when such findings are supported
by substantial evidence and there is no cogent basis
to reverse the same, as in this case.22
On the second issue
Settled is the doctrine that when an
administrative or executive agency renders an
opinion or issues a statement of policy, it merely
interprets a pre-existing law and the administrative
interpretation is at best advisory for it is the courts
that finally determine what the law means. Hence,
while the DOLE order may not be applicable, the
Court finds that overload pay should be excluded
from the computation of the 13th month pay of
petitioner’s members.
In the same manner that payment for
overtime work and work performed during special
holidays is considered as additional compensation
apart and distinct from an employee's regular wage or
basic salary, an overload pay, owing to its very nature
and definition, may not be considered as part of a
teacher's regular or basic salary, because it is being
paid for additional work performed in excess of the
regular teaching load.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
35. Metro Transit Organization vs. Piglas NFWU-
KMU et al., G.R. No. 175460, April 14, 2008
Facts:
Petitioner Metro Transit Organization, Inc.
(MTO) is a government owned and controlled
corporation which entered into a Management and
Operations Agreement (MOA) with the Light Rail
Transit Authority (LRTA) for the operation of the
Light Rail Transit (LRT) Baclaran-Monumento Line.
For purposes of collective bargaining agreement
(CBA), petitioner MTO’s rank and file employees
formed the Pinag-isang Lakas ng Manggagawa sa
Metro, Inc.-National Federation of Labor
(PIGLAS).
Petitioners MTO and PIGLAS entered into a
CBA covering the period of 13 February 1995 to 13
February 2000. Thereafter, PIGLAS renegotiated the
CBA demanding higher benefits.
On 25 July 2000, due to a bargaining deadlock,
PIGLAS filed a Notice of Strike before the National
Conciliation and Mediation Board (NCMB).
The striking PIGLAS members refused to
accede to the Return to Work Order. Following their
continued non-compliance, on 28 July 2000, the
LRTA formally informed petitioner MTO that it had
issued a Board Resolution which: (1) allowed the
expiration after 31 July 2000 of LRTA’s MOA with
petitioner MTO; and (2) directed the LRTA to take
over the operations and maintenance of the LRT
Line. By virtue of said Resolution, petitioner MTO
sent termination notices to its employees, including
herein respondents.
Resultantly, respondents filed with the Labor
Arbiter Complaints[4] against petitioners and the
LRTA for the following: (1) illegal dismissal; (2)
unfair labor practice for union busting; (3) moral and
exemplary damages; and (4) attorney’s fees.
On 13 September 2004, the Labor Arbiter
rendered judgment in favor of respondents.
Petitioners appealed to the National Labor
Relations Commission (NLRC). In a Resolution
dated 19 May 2006, the NLRC dismissed petitioners’
appeal for non-perfection since it failed to post the
required bond.
Without filing a Motion for Reconsideration
of the afore-quoted NLRC Resolution, petitioners
53

filed a Petition for Certiorari with the Court of
Appeals assailing the same.
They have not, however, filed a motion for
reconsideration of the ruling prior to filing the
petition. This renders the petition fatally defective.
Issue:
Whether or not the non-filing of motion of
reconsideration to the NLRC is a ground for
dismissal of the appeal
Held:
We agree in the Court of Appeals’ finding
that petitioners’ case does not fall under any of the
recognized exceptions to the filing of a motion for
reconsideration, to wit: (1) when the issue raised is
purely of law; (2) when public interest is involved;
(3) in case of urgency; or when the questions raised
are the same as those that have already been squarely
argued and exhaustively passed upon by the lower
court. As the Court of Appeals reasoned, the issue
before the NLRC is both factual and legal at the same
time, involving as it does the requirements of the
property bond for the perfection of the appeal, as well
as the finding that petitioners failed to perfect the
same. Evidently, the burden is on petitioners seeking
exception to the rule to show sufficient justification
for dispensing with the requirement.
Certiorari cannot be resorted to as a shield from the
adverse consequences of petitioners' own omission of
the filing of the required motion for reconsideration.
Nonetheless, even if we are to disregard the
petitioners’ procedural faux pas with the Court of
Appeals, and proceed to review the propriety of the
19 May 2006 NLRC Resolution, we still arrive at the
conclusion that the NLRC did not err in denying
petitioners’ appeal for its failure to file a bond in
accordance with the Rules of Procedure of the
NLRC.
In cases involving a monetary award, an
employer seeking to appeal the decision of the Labor
Arbiter to the NLRC is unconditionally required by
Article 223of the Labor Code to post a cash or surety
bond equivalent to the amount of the monetary award
adjudged. It should be stressed that the intention of
lawmakers to make the bond an indispensable
requisite for the perfection of an appeal by the
employer is underscored by the provision that an
appeal by the employer may be perfected only upon
the posting of a cash or surety bond. The word
“only” makes it perfectly clear that the lawmakers
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
intended the posting of a cash or surety bond by the
employer to be the exclusive means by which an
employer’s appeal may be perfected. Moreover, it
bears stressing that the perfection of an appeal in the
manner and within the period prescribed by law is not
only mandatory but jurisdictional, and failure to
conform to the rules will render the judgment sought
to be reviewed final and unappealable. It cannot be
overemphasized that the NLRC Rules, akin to the
Rules of Court, promulgated by authority of law,
have the force and effect of law.[
As borne by the records, petitioners filed a
property bond which was conditionally accepted by
the NLRC subject to the following conditions
specified in its 24 February 2006Order:
The conditional acceptance of petitioner’s property
bond was subject to the submission of the following:
1) Certified copy of Board Resolution or a Certificate
from the Corporate Secretary of Light Rail Transit
Authority stating that the Corporation President is
authorized by a Board Resolution to submit title as
guarantee of judgment award; 2) Certified Copy of
the Titles issued by the Registry of Deeds of Pasay
City; 3) Certified Copy of the current tax declarations
of Titles; 4) Tax clearance from the City Treasurer of
Pasay City; 5) Appraisal report of an accredited
appraisal company attesting to the fair market value
of property within ten (10) days from receipt of this
Order. Failure to comply therewith will result in the
dismissal of the appeal for non-perfection thereof.
36. J. K. MERCADO & SONS AGRICULTURAL
ENTERPRISES, INC., vs. STO. TOMAS
FACTS:
On December 3, 1993, the Regional Tripartite Wages
and Productivity Board, Region XI, issued Wage
Order No. RTWPB-XI-03, granting a Cost of Living
Allowance (COLA) to covered workers.
On January 28, 1994, petitioner filed an application
for exemption from the coverage of the aforesaid
wage order. Thus, however, was denied by the
regional wage board in an Order dated April 11,
1994.
Notwithstanding the said order, private respondents
were not given the benefits due them under Wage
Order No. RTWPB-XI-03.
54

On July 10, 1998, private respondents filed an
Urgent Motion for Writ of Execution, and Writ of
Garnishment seeking the enforcement of subject
wage order against several entities including herein
petitioner.
On October 7, 1998, the OIC-Regional Director,
Region XI, issued a Writ of Execution for the
enforcement of the Order dated April 11, 1994 of the
Regional Tripartite Wages and Productivity Board.
On November 17, 1998 and November 23, 1998,
respectively, petitioner filed a Motion to Quash the
Writ of Execution and a Supplemental Motion to the
Motion to Quash. Petitioner argued that herein
private respondents' right had already prescribed due
to their failure to move for the execution of the April
11, 1994 Order within the period provided under
Article 291 of the Labor Code, as amended, or within
three (3) years from the finality of the said order.
Ruling that the benefits which remained unpaid have
not prescribed and that the private respondents need
not file a claim to be entitled thereto, the Regional
Director denied the Motion to Quash in an Order
dated January 7, 1999.
Not satisfied with the denial of its motion to quash,
petitioner filed a Notice of Appeal on January 29,
1999.
Petitioner argued on appeal that the Regional
Director abused his discretion in issuing the writ of
execution since it was not a party to the case.
Petitioner likewise argued that the Regional Director
abused his discretion in issuing the writ of execution
in the absence of any motion filed by private
respondents. Petitioner likewise claimed that since
more than three (3) years have already elapsed from
the time of the finality of the order dated April 11,
1994, the right of private respondents to claim the
benefits under the same had already prescribed.
However, the appeal to the CA was denied. On March
2, 2001, petitioner filed a Motion for Reconsideration
but the same was denied for lack of merit by public
respondent in an Order dated March 14, 2002. Hence,
this petition.
ISSUES:
WON the claim of the private respondents for cost of
living allowance (COLA) pursuant to Wage Order
No. RTWPB-XI-03 has already prescribed because of
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
the failure of the respondents to make the appropriate
claim within the three (3) year prescriptive period
provided by Article 291 of the Labor Code, as
amended.
WON a money claim must be filed first by private
respondents against petitioner for the latter's refusal
to pay the COLA granted under WO
RULING:
A. NO.
Art. 291 of the Labor Code applies to money claims
in general and provides for a 3-year prescriptive
period to file them.
On the other hand, respondent employees' money
claims in this case had been reduced to a judgment, in
the form of a Wage Order, which has become final
and executory. The prescription applicable, therefore,
is not the general one that applies to money claims,
but the specific one applying to judgments. Thus, the
right to enforce the judgment, having been exercised
within five years, has not yet prescribed.
Stated otherwise, a claimant has three years to press a
money claim. Once judgment is rendered in her
favor, she has five years to ask for execution of the
judgment, counted from its finality. This is consistent
with the rule on statutory construction that a general
provision should yield to a specific one and with the
mandate of social justice that doubts should be
resolved in favor of labor.
B. NO.
Clearly, petitioner's contention is premised on the
mistaken belief that the right of private respondents
to recover their wage differential or COLA under
Wage Order No. 03 is still a contestable issue.
It must be emphasized that the order dated April 11,
1994 had long become final and executory. Petitioner
did not appeal the said order. Having failed to avail of
the remedy of appeal of the said order, petitioner
cannot belatedly avoid its duty to comply with the
said order by insisting that a money claim must first
be filed by herein private respondents. A contrary
ruling would result to absurdity and would even
unjustly benefit petitioner who for quite sometime
had exerted every effort to avoid the obligation of
55

giving the wage differential or COLA granted under
Wage Order No. 3.
37. J. Phil. Marine Inc., vs. NLRC, G.R. No.
1753661, August 11, 2008
Facts:
Warlito E. Dumalaog (respondent), who
served as cook aboard vessels plying overseas, filed
on March 4, 2002 before the National Labor
Relations Commission (NLRC) a pro-forma
complaint1 against petitioners ─ manning agency J-
Phil Marine, Inc. (J-Phil), its then president Jesus
Candava, and its foreign principal Norman Shipping
Services ─ for unpaid money claims, moral and
exemplary damages, and attorney’s fees.
Respondent thereafter filed two amended
pro forma complaints2 praying for the award of
overtime pay, vacation leave pay, sick leave pay, and
disability/medical benefits, he having, by his claim,
contracted enlargement of the heart and severe
thyroid enlargement in the discharge of his duties as
cook which rendered him disabled.
Respondent’s total claim against petitioners
was P864,343.30 plus P117,557.60 representing
interest and P195,928.66 representing attorney’s
fees.3
By Decision4 of August 29, 2003, Labor
Arbiter Fe Superiaso-Cellan dismissed respondent’s
complaint for lack of merit.
On appeal,5 the NLRC, by Decision of
September 27, 2004, reversed the Labor Arbiter’s
decision and awarded US$50,000.00 disability
benefit to respondent. It dismissed respondent’s other
claims, however, for lack of basis or jurisdiction.6
Petitioners’ Motion for Reconsideration7 having been
denied by the NLRC,8 they filed a petition for
certiorari9 before the Court of Appeals.
By Resolution10 of September 22, 2005, the
Court of Appeals dismissed petitioners’ petition for,
inter alia, failure to attach to the petition all material
documents, and for defective verification and
certification. Petitioners’ Motion for Reconsideration
of the appellate court’s Resolution was denied; 11
hence, they filed the present Petition for Review on
Certiorari.
During the pendency of the case before this
Court, respondent, against the advice of his counsel,
entered into a compromise agreement with
petitioners. He thereupon signed a Quitclaim and
Release subscribed and sworn to before the Labor
Arbiter.
Issues:
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
WON the compromise agreement is valid even
without the intervention of the counsel.
Held:
Yes. The compromise agreement is valid even
without the intervention of the counsel.
Article 227 of the Labor Code provides:
Any compromise settlement, including those
involving labor standard laws, voluntarily agreed
upon by the parties with the assistance of the
Department of Labor, shall be final and binding upon
the parties. The National Labor Relations
Commission or any court shall not assume
jurisdiction over issues involved therein except in
case of non-compliance thereof or if there is prima
facie evidence that the settlement was obtained
through fraud, misrepresentation, or coercion.
That a client has undoubtedly the right to
compromise a suit without the intervention of his
lawyer24 cannot be gainsaid, the only qualification
being that if such compromise is entered into with the
intent of defrauding the lawyer of the fees justly due
him, the compromise must be subject to the said
fees.25 In the case at bar, there is no showing that
respondent intended to defraud his counsel of his
fees. In fact, the Quitclaim and Release, the execution
of which was witnessed by petitioner J-Phil’s
president Eulalio C. Candava and one Antonio C.
Casim, notes that the 20% attorney’s fees would be
"paid 12 April 2007 – P90,000."
38. Sy vs. ALC Industries, G.R. No. 168339,
October 10, 2008
Facts:
Petitioner was hired by respondent
corporation ALCII as a supervisor in its purchasing
office. She was thereafter assigned to ALCII's
construction project in Davao City as business
manager and supervisor of the Administrative
Division. Her Davao assignment was from May 1997
to April 15, 1999.
Petitioner alleged that respondents refused
to pay her salary beginning August 1998 and
allowances beginning June 1998, despite her almost
weekly verbal follow-up. Petitioner filed a complaint
before the labor arbiter for unpaid salaries and
allowances. Despite several notices and warnings,
respondents did not file a position paper to controvert
petitioner's claims. The case was submitted for
resolution based solely on petitioner's allegations and
evidence.
In his June 30, 2000 decision, the labor
arbiter ordered ALCII and/or Dexter Ceriales to pay
56

petitioner P282,560 representing her unpaid salary
and allowance.
Respondents filed an appeal with motion for
reduction of bond in the National Labor Relations
Commission (NLRC) without posting any cash or
surety bond. In a resolution dated September 6, 2001,
the NLRC dismissed respondents' appeal. It ruled that
respondents failed to adduce substantial evidence to
support their arguments of non-liability. Moreover, it
found no justifiable reason to grant a reduction in the
required bond.
Respondents were able to file a motion for
reconsideration on time, accompanied by a joint
undertaking/declaration in lieu of the cash or surety
bond. Nevertheless, respondents' motion for
reconsideration was denied.
On August 2, 2002, respondents filed a
motion for clarification but this was likewise denied.
Respondents questioned the NLRC's denial of their
motion for clarification and reconsideration in the CA
via a petition for certiorari and prohibition.
In its March 30, 2005 decision, the CA set
aside the resolutions of the NLRC and the decision of
the labor arbiter and dismissed petitioner's complaint.
Issue: WON the decision of the Labor Arbiter has
become final and executory.
Ruling:
Article 223. APPEAL. - Decisions, awards,
or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by
any or both parties within ten calendar days from
receipt of such decisions, awards, or orders. xxx.
In case of a judgment involving a monetary
award, an appeal by the employer may be
perfected only upon the posting of a cash or
surety bond issued by a reputable bonding
company duly accredited by the
Commission in the amount equivalent to the
monetary award in the judgment appealed
from. (emphasis supplied)
Section 1, Rule VI of the Rules of Procedure
of the NLRC, as amended, likewise provides that the
appeal must be filed within ten days from receipt of
the decision, resolution or order of the labor arbiter.
Moreover, Section 6 of the same rules provides that
an appeal by the employer may be perfected only
upon the posting of a cash or surety bond. As the
right to appeal is merely a statutory privilege, it must
be exercised only in the manner and in accordance
with the provisions of the law. Otherwise, the right to
appeal is lost.
In a long line of cases, we have ruled that
the payment of the appeal bond is a jurisdictional
requisite for the perfection of an appeal to the NLRC.
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The lawmakers intended to make the posting of a
cash or surety bond by the employer the exclusive
means by which an employer's appeal may be
perfected. The rationale for this rule is:
The requirement that the employer post a
cash or surety bond to perfect its/his appeal
is apparently intended to assure the workers
that if they prevail in the case, they will
receive the money judgment in their favor
upon the dismissal of the employers' appeal.
It was intended to discourage employers
from using an appeal to delay, or even
evade, their obligation to satisfy their
employee's just and lawful claims.
The explanation advanced by respondents for their
failure to pay the appeal bond belies their claim. The
NLRC found that respondents did not pay the appeal
bond on the mistaken notion that they were not liable
for the monetary award and had already ceased
operations due to bankruptcy. Respondents belatedly
filed a bond with their motion for reconsideration of
the NLRC's dismissal of their appeal. We cannot
countenance such flagrant disregard of established
rules of procedure on appeals.
Moreover, the filing of a joint
undertaking/declaration, filed way beyond the ten-
day reglementary period for perfecting an appeal and
as a substitute for the cash or surety bond, did not
operate to validate the lost appeal.
The decision of the labor arbiter therefore
became final and executory for failure of respondents
to perfect their appeal within the reglementary
period. Clearly, the CA no longer had jurisdiction to
entertain respondents' appeal from the labor arbiter's
decision.
Respondents point out that we have
occasionally allowed exceptions to mandatory and
jurisdictional requirements in the perfection of
appeals, such as disregarding unintended lapses on
the basis of strong and compelling reasons. This is
true. However, the obvious motive behind
respondents' plea for liberality is to thwart petitioner's
claims. This we cannot allow. Respondents' lapses
were far from unintentional. They were deliberate
attempts to circumvent established rules.
Respondents' other contention that they were
deprived of due process is likewise devoid of merit.
Due process is satisfied when the parties are afforded
fair and reasonable opportunity to explain their
respective sides of the controversy. In Mariveles
Shipyard Corp. v. CA, we held:
The requirements of due process in labor
cases before a Labor Arbiter is satisfied
when the parties are given the
opportunity to submit their position
papers to which they are supposed to attach
57

all the supporting documents or
documentary evidence that would prove
their respective claims, in the event that the
Labor Arbiter determines that no formal
hearing would be conducted or that such
hearing was not necessary. (emphasis
supplied).
We ruled in Times Transportation Company, Inc. v.
Sotelo:
To extend the period of appeal is to prolong
the resolution of the case, a circumstance
which would give the employer the
opportunity to wear out the energy and
meager resources of the workers to the point
that they would be constrained to give up for
less than what they deserve in law.
39.) PCI TRAVEL CORPORATION,petitioner Vs
NLRC
Facts:
Sometime in 1994, respondent NUBE-
AMEXPEA/PCI Travel Employees Union filed a
Complaint for unfair labor practice against petitioner
PCI Travel Corporation. It claimed that petitioner
had been filling up positions left by regular rank-and-
file with contractual employees, but were performing
work which were usually necessary and desirable in
the usual business or trade of the petitioner.
Respondent prayed that the Labor Arbiter order the
petitioner to pay the “contractual employees” the
differentials between the wages/benefits of regular
employees and the actual wages/benefits paid to them
from the first day of their employment, plus moral
and exemplary damages, and attorney’s fees of not
less than P300,000.00 per employee.
Petitioner moved to dismiss the complaint on the
ground that the Union was not the real party-in-
interest. Subsequently, petitioner manifested that
while it was ready and willing to prove that said
employees were provided by independent legitimate
contractors and that it was not engaged in labor-only
contracting in a position paper yet to be submitted,
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petitioner prayed that the Labor Arbiter first resolve
the issues raised in their motion to dismiss.
Labor Arbiter ruled that motion to dismiss is a
prohibited pleading. Labor arbiter decided that the
petitioner is guilty of unfair labor practices.
Petitioner filed petition for certiorari with the Court
of Appeals. However, the CA dismissed the appeal
for failure of the petitioner to attach the necessary
documents and pleading in support for the relief they
sought. Additionally, the verification for non-forum
shopping was signed by Company’s President
without proof that he is authorized by the corporation
to sign it trough resolution.
Issue:
WON the CA was correct in dismissing the
case based on the aforementioned technical grounds.
Ruling.
No. the Court of Appeals erred in its
decision. The case must be remanded to the CA for
resolution on the merits.
Reasoning.
President of the corporation can sign the verification
and certification without need of a board resolution,
there thus exists a compelling reason for the
reinstatement of the petition before the Court of
Appeals. A perusal of the petition
for certiorari would reveal that petitioner intended to
show the grave abuse of discretion committed by the
labor tribunals in not allowing the petitioner the
ample opportunity to submit its position paper on the
alleged violation of the CBA. The Labor Arbiter and
the NLRC viewed it as a waiver on its part and
hastened to rule that ”since the complainant’s
allegations remain unrebutted, they are deemed
correct and valid.” Due process dictates that a person
should be given the opportunity to be
heard. Unfortunately, this was not accorded to the
58

petitioner and such right was even foreclosed when
the appellate court dismissed the petition before it on
technical grounds. The policy of our judicial system
is to encourage full adjudication of the merits of an
appeal. Ends of justice are better served when both
parties are heard and the controversy decided on its
merits. Thus, in the exercise of its equity
jurisdiction, the Court will not hesitate to reverse the
dismissal of appeals that are grounded merely on
technicalities.
40. Lolita Lopez et al. vs. Quezon City Sports
Club, Inc.
Facts:
In this case, there are two actions. First, the one
initiated by the labor organization and the other
initiated by the employer. In the first case, the
Kasapiang Manggagawa sa Quezon City Sports Club
(union) claims that it is a registered independent
labor organization and the incumbent collective
bargaining agent of Quezon City Sports Club
(QCSC). They filed a complaint for unfair labor
practice against QCSC on 12 November 1997.
The Union averred that it was ordered to submit a
new information sheet. It immediately wrote a letter
addressed to the general manager, Angel Sadang, to
inquire about the information sheet, only to be
insulted by the latter. The members of the union were
not paid their salaries on 30 June 1997. A QCSC
board member, Antonio Chua allegedly harassed one
of the employees and told him not to join the strike
and even promised a promotion. On 4 July 1997, the
union wrote a letter to the management for the release
of the members’ salaries for the period 16-30 June
1997, implementation of Wage Order No. 5, and
granting of wage increases mandated by the
Collective Bargaining Agreement (CBA). When its
letter went unanswered, the union filed a notice of
strike on 10 July 1997 for violation of Article 248 (a)
(c)(e) of the Labor Code, nonpayment of overtime
pay, refusal to hear its grievances, and malicious
refusal to comply with the economic provisions of
the CBA. After conducting a strike vote, it staged a
strike on 12 August 1997. On 16 August 1997, the
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QCSC placed some of its employees under temporary
lay-off status due to redundancy.
The second case: It appears that on 22 December
1997, QCSC also filed a petition for cancellation of
registration against the union and to declare the
union’s strike on August 12, 1997 as illegal. This
action by QCSC is docketed as NLRC CASE NO.
00-09-0663-97. The Labor Arbiter Ernesto Dinopol
declared the strike of the union illegal in its decision
dated October 9, 1998 (Dinopol decision). The
dispositive reads:
WHEREFORE, in view of the Union’s
having violated the no-strike-no-lockout
provision of the Collective Bargaining
Agreement, the strike it staged on August
12, 1998 is hereby declared illegal and
consequently, pursuant to Article 264 of the
Labor Code, the individual respondents,
namely: RONILO C. LEE, EDUARDO V.
SANTIA, CECILLE C. PANGAN, ROMEO
M. MORGA, GENARO C. BANDO AND
ALEX J. SANTIAGO, who admitted in
paragraph 1 of their position paper that they
are officers/members of the complaining
Union are hereby declared to have lost their
employment status.
Back to the first case, the Labor Arbiter (Joel Lustria)
found QCSC guilty of unfair labor practice. QCSC
appealed from the labor arbiter’s decision. It also
filed a motion for reduction of the appeal bond to
P4,000,000.00. The NLRC ordered the posting of an
additional P6,000,000.00). QCSC filed a supplement
to its appeal, citing the Dinopol decision.
Meanwhile, the National Labor Relations
Commission (NLRC) rendered a decision granting
the appeal and reversing the Lustria decision. The
NLRC said that the Dinopol Decision in the illegal
strike case must prevail over the Lustria Decision
because of the established doctrine of primacy and
finality of decision. In the illegal strike case, Ronilo
Lee, Eduardo Santia, Cecille Pangan, Romeo Morga,
Genaro Bando and Alex Santiago lost or forfeited
their employment on the day the illegal strike was
staged. The NLRC said that the forfeiture of their
59

employment status carries with it the extinction of
their right to demand for and be entitled to the
economic benefits accorded to them by law and the
existing CBA.
The other complainants (petitioners) meanwhile filed
a motion for reconsideration, which was denied by
the NLRC. They filed a petition for certiorari under
Rule 65 before the Court of Appeals but was denied.
Issues:
1. Do the simultaneous filing of the motion to reduce
the appeal bond and posting of the reduced amount of
bond within the reglementary period for appeal
constitute substantial compliance with Article 223 of
the Labor Code?
2. Whether the NLRC erred in declaring them to
have lost their employment contrary to the Dinopol
decision which only affected a few of the employees
who were union members.
Ruling:
First issue:
Under the Rules, appeals involving monetary awards
are perfected only upon compliance with the
following mandatory requisites, namely: (1) payment
of the appeal fees; (2) filing of the memorandum of
appeal; and (3) payment of the required cash or
surety bond.
Thus, the posting of a bond is indispensable to the
perfection of an appeal in cases involving monetary
awards from the decision of the labor arbiter. The
filing of the bond is not only mandatory but also a
jurisdictional requirement that must be complied with
in order to confer jurisdiction upon the NLRC. Non-
compliance with the requirement renders the decision
of the labor arbiter final and executory. This
requirement is intended to assure the workers that if
they prevail in the case, they will receive the money
judgment in their favor upon the dismissal of the
employer’s appeal. It is intended to discourage
employers from using an appeal to delay or evade
their obligation to satisfy their employees’ just and
lawful claims.
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However, Section 6 of the New Rules of Procedure of
the NLRC also mandates, among others, that no
motion to reduce bond shall be entertained except on
meritorious grounds and upon the posting of a bond
in a reasonable amount in relation to the monetary
award. Hence, the NLRC has the full discretion to
grant or deny the motion to reduce the amount of the
appeal bond.
In the case of Nicol v. Footjoy Industrial Corporation
ruled that the bond requirement on appeals involving
monetary awards had been and could be relaxed in
meritorious cases such as: (1) there was substantial
compliance with the Rules; (2) the surrounding facts
and circumstances constitute meritorious grounds to
reduce the bond; (3) a liberal interpretation of the
requirement of an appeal bond would serve the
desired objective of resolving controversies on the
merits; or (4) the appellants, at the very least,
exhibited their willingness and/or good faith by
posting a partial bond during the reglementary
period. Applying these jurisprudential guidelines, we
find and hold that the NLRC did not err in reducing
the amount of the appeal bond and considering the
appeal as having been filed within the reglementary
period.
The posting of the amount of P4,000,000.00
simultaneously with the filing of the motion to reduce
the bond to that amount, as well as the filing of the
memorandum of appeal, all within the reglementary
period, altogether constitute substantial compliance
with the Rules.
Second issue:
We rule in favor of petitioners.
The assailed Dinopol decision involves a complaint
for illegal strike filed by QCSC on the ground of a
“no-strike no lockout” provision in the CBA. The
challenged decision was rendered in accordance with
law and is supported by factual evidence on record.
In the notice of strike, the union did not state in
particular the acts, which allegedly constitute unfair
labor practice. Moreover, by virtue of the “no-strike
no lockout” provision in the CBA, the union was
prohibited from staging an economic strike, i.e., to
force wage or other concessions from the employer,
which he is not required by law to grant. However, it
60

should be noted that while the strike declared by the
union was held illegal, only the union officers were
declared as having lost their employment status. In
effect, there was a ruling only with respect to some
union members while the status of all others had
remained disputed.
There is no conflict between the Dinopol and the
Lustria decisions. While both rulings involve the
same parties and same issues, there is a distinction
between the remedies sought by the parties in these
two cases. In the Dinopol decision, it was QCSC
which filed a petition to declare the illegality of the
12 August 1997 strike by the union. The consequence
of the declaration of an illegal strike is termination
from employment, which the Labor Arbiter did so
rule in said case. However, not all union members
were terminated. In fact, only a few union officers
were validly dismissed in accordance with Article
264 of the Labor Code (the six named). Corollarily,
the other union members who had merely
participated in the strike but had not committed any
illegal acts were not dismissed from employment.
Hence, the NLRC erred in declaring the employment
status of all employees as having been lost or
forfeited by virtue of the Dinopol decision.
On the other hand, the Lustria decision involved the
unfair labor practices alleged by the union with
particularity. In said case, Labor Arbiter Lustria sided
with the Union and found QCSC guilty of such
practices. As a consequence, the affected employees
were granted backwages and separation pay. The
grant of backwages and separation pay however was
not premised on the declaration of the illegality of the
strike but on the finding that these affected
employees were constructively dismissed from work,
as evidenced by the layoffs effected by the company.
Therefore, with respect to petitioners and union
officers Alex J. Santiago, Ma. Cecilia Pangan, Ronilo
E. Lee, and Genaro Bando, who apparently had been
substituted by present petitioner Teresita Bando, the
Dinopol decision declaring them as having lost their
employment status still stands.
To recapitulate, the NLRC erred in setting aside the
Lustria decision, as well as in deleting the award of
backwages and separation pay, despite the finding
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that the affected employees had been constructively
dismissed.
Based on the foregoing, the Lustria decision should
be upheld and therefore reinstated except as regards
the four petitioners.
41. Lockheed Detective & Watchman Agency vs
UP G.R. No. 185918, April 18, 2012
Facts: Petitioner entered into a contract for security
services with respondent. An NLRC Decision holding
respondent solidarily liable with petitioner to security
guards for P12,142,522.69 became final and
executory.
A writ of execution was issued by the Labor Arbiter,
which was later on quashed upon motion by
respondent. The quashal was reversed by the NLRC.
Upon reconsideration, the NLRC reconsidered and
modified that the satisfaction of the award will be
only against the funds of respondent which are not
identified as public funds. The NRLC’s order and
resolution having become final, an alias writ of
execution was issued. A notice of garnishment was
served upon PNB Diliman Branch. Upon learning of
the notice, respondent filed an urgent motion to quash
garnishment which was dismissed by the Labor
Arbiter. Funds from PNB were withdrawn by the
sheriff. Respondent filed a petition for certiorari with
the Court of Appeals. The CA dismissed the petition
ruling that the funds are not public funds but on
reconsideration, amended its decision holding still
that the funds are not public funds but the petition is
granted because of the case of National
Electrification Administration vs Morales(NEA case)
that all money claims against the government must be
first filed with the Commission on Audit. Petitioner
moved for reconsideration but was denied. The
Amended Decision and Resolution are now being
assailed in this petition for review on certiorari.
Issue: Whether or not the funds of respondent were
properly garnished?
Ruling: No, the funds of respondent were not
properly garnished. The Court ruled that the CA
correctly cited the NEA case. Respondent is a
juridical personality separate and distinct from the
government and has the capacity to sue and be sued.
61

Thus, it cannot evade execution, and its funds may be
subject to garnishment or levy. However, before
execution may be had, a claim for payment of the
judgment award must first be filed with COA
pursuant to Commonwealth Act No. 327.
42. Portillo vs. Rudolf Lietz, Inc. et al., G.R. No.
196539, October 10, 2012
Facts:
Portillo was a Sales Representative of Rudolf Lietz,
Inc. pharmaceutical business. Portillo signed an
employment contract containing a ‘Goodwill Clause”
as follows:
“It remains understood and you agreed that,
on the termination of your employment by
act of either you or [Lietz Inc.], and for a
period of three (3) years thereafter, you
shall not engage directly or indirectly as
employee, manager, proprietor, or solicitor
for yourself or others in a similar or
competitive business or the same character
of work which you were employed by [Lietz
Inc.] to do and perform. Should you breach
this good will clause of this Contract, you
shall pay [Lietz Inc.] as liquidated damages
the amount of 100% of your gross
compensation over the last 12 months, it
being agreed that this sum is reasonable and
just.”
Portillo subsequently resigned from her employment
with Lietz. She demanded from Lietz Inc. for the
payment of her remaining salaries and commissions,
which were not paid to her upon such resignation.
Later, and within the 3-year prohibitory period, Lietz
learned that Portillo was hired by Ed Keller
Philippine as head of its Pharma Raw Material
Department. Ed Keller is direct competitor of Lietz.
As Portillo’s demand for remaining salaries and
commissions from Lietz still went unheeded, she
filed a complaint with the NLRC for non-payment of
1½ months’ salary, 2 months’ commission, 13th
month pay, plus moral, exemplary and actual
damages and attorney’s fees.
In its position paper, Lietz admitted liability for
Portillo’s money claims. However, Lietz raised the
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defense of legal compensation: Portillo’s money
claims should be offset against her liability to Lietz
for liquidated damages for Portillo’s breach of the
“Goodwill Clause” in the employment contract when
she became employed with Ed Keller.
Issue:
Should the claims of Portillo against Lietz for unpaid
wages, commissions, etc. be offset against her
liability to Lietz for damages from breach of the
“Goodwill Clause” in the contract?
Ruling:
No, it should not be offset.
While Portillo’s claim for unpaid salaries is a money
claim that arises out of or in connection with an
employer-employee relationship, Lietz’ claim
against Portillo for violation of the goodwill clause is
a money claim based on an act done after the
cessation of the employment relationship. And,
while the jurisdiction over Portillo’s claim is
vested in the labor arbiter, the jurisdiction over
Lietz Inc.’s claim rests on the regular courts.
The difference in the nature of the credits that one has
against the other, conversely, the nature of the debt
one owes another, which difference in turn results in
the difference of the forum where the different credits
can be enforced, prevents the application of
compensation. The labor tribunal does not have
jurisdiction over the civil case of breach of contract.
43. Building Care Corp. vs. Macaraeg, G.R. No.
198357, December 10, 2012
Petitioners are in the business of providing security
services to their clients. They hired respondent as a
security guard beginning August 25, 1996, assigning
her at Genato Building in Caloocan City. However,
on March 9, 2008, respondent was relieved of her
post. She was re-assigned to Bayview Park Hotel
from March 9-13, 2008, but after said period, she was
allegedly no longer given any assignment. Thus, on
September 9, 2008, respondent filed a complaint
against petitioners for illegal dismissal,
62

underpayment of salaries, non-payment of separation
pay and refund of cash bond. Conciliation and
mediation proceedings failed, so the parties
were ordered to submit their respective position
papers.
Respondent claimed that petitioners failed to give her
an assignment for more than nine months, amounting
to constructive dismissal, and this compelled her to
file the complaint for illegal dismissal.
On the other hand, petitioners that respondent was
relieved from her post as requested by the client
because of her habitual tardiness, persistent
borrowing of money from employees and tenants of
the client, and sleeping on the job. Respondent filed a
complaint for illegal dismissal with the Labor Arbiter.
The Labor Arbiter (LA) in favor of petitioners,
holding that the dismissal of Macaraeg was valid, but
ordered the former to pay a certain sum as financial
assistance. The Appeal which respondent filed with
the NLRC was for having been filed out of time.
Hence, NLRC declared that the LA's Decision had
become final and executory on June 16, 2009.
Respondent elevated the case to the CA via a petition
for certiorari. The CA reversed and set aside the
decision of NLRC and declared Macaraeg to have
been illegally dismissed. Petitioners were ordered to
reinstate petitioner without loss of seniority rights,
benefits and privileges; and to pay her backwages
and other monetary benefits during the period of
her illegal dismissal up to actual reinstatement.
Petitioners' motion for reconsideration was denied.
Hence, the present petition.
ISSUE:
Whether the CA erred in liberally applying the rules
of procedure and ruling that respondent's appeal
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should be allowed and resolved on the merits despite
having been filed out of time.
RULING:
The Court cannot sustain the CA's Decision. It should
be emphasized that the resort to a liberal application,
or suspension of the application of procedural rules,
must remain as the exception to the well-settled
principle that rules must be complied with for the
orderly administration of justice. In Marohomsalic v.
Cole, the Court stated: While procedural rules may be
relaxed in the interest of justice, it is well-settled that these are
tools designed to facilitate the adjudication of cases. The
relaxation of procedural rules in the interest of justice was never
intended to be a license for erring litigants to violate
the rules with impunity. Liberality in the
interpretation and application of the rules can be invoked
only in proper cases and under justifiable causes and
circumstances. While litigation is not a game of technicalities,
every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of
justice.
The later case of Daikoku Electronics Phils., Inc.
v. Raza, further explained that:
To be sure, the relaxation of procedural rules cannot be made
without any valid reasons proffered for or underpinning it. To
merit liberality, petitioner must show reasonable cause justifying
its non-compliance with the rules and must convince the Court
that the outright dismissal of the petition would defeat the
administration of substantial justice. x x x The desired leniency
cannot be accorded absent valid and compelling reasons for such
a procedural lapse. x x x
In this case, the justifications given by the CA for its
liberality by choosing to overlook the belated filing
of the appeal are, the importance of the issue raised,
i.e., whether respondent was illegally dismissed; and
the belief that respondent should be "afforded the
amplest opportunity for the proper and just
determination of his cause, free from the constraints
63

of technicalities," considering that the belated filing
of respondent's appeal before the NLRC was the fault
of respondent's former counsel. Note, however, that neither
respondent nor her former counsel gave any explanation or
reason citing extraordinary circumstances for her
lawyer's failure to abide by the rules for filing an
appeal. Respondent merely insisted that she had not
been remiss in following up her case with said
lawyer. It is, however, an oft-repeated ruling that
the negligence and mistakes of counsel bind the
client. A departure from this rule would bring
about never-ending suits, so long as lawyers could
allege their own fault or negligence to support
the client’s case and obtain remedies and reliefs
already lost by the operation of law.
It should also be borne in mind that the right of the
winning party to enjoy the finality of the resolution of
the case is also an essential part of public policy and
the orderly administration of justice. Hence, such
right is just as weighty or equally important as the
right of the losing party to appeal or seek
reconsideration within the prescribed period.
When the Labor Arbiter's Decision became final,
petitioners attained a vested right to said judgment.
44. PHILIPPINE BANK OF
COMMUNICATIONS vs.
THE NATIONAL LABOR RELATIONS
COMMISSION et al. G.R. No. L-66598
December 19, 1986
FACTS:
Petitioner Philippine Bank of Communications and
the Corporate Executive Search Inc. (CESI) entered
into a letter agreement dated January 1976 under
which (CESI) undertook to provide "Tempo[rary]
Services" to petitioner Consisting of the "temporary
services" of eleven (11) messengers. The contract
period is described as being "from January 1976—."
The petitioner in truth undertook to pay a "daily
service rate of P18, " on a per person basis.
Attached to the letter agreement was a "List of
Messengers assigned at Philippine Bank of
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Communications" which list included, as item No. 5
thereof, the name of private respondent Ricardo
Orpiada.
Ricardo Orpiada was thus assigned to work with the
petitioner bank. As such, he rendered services to the
bank, within the premises of the bank and alongside
other people also rendering services to the bank.
There was some question as to when Ricardo Orpiada
commenced rendering services to the bank. As noted
above, the letter agreement was dated January 1976.
However, the position paper submitted by (CESI) to
the National Labor Relations Commission stated that
(CESI) hired Ricardo Orpiada on 25 June 1975 as a
Tempo Service employee, and assigned him to work
with the petitioner bank "as evidenced by the
appointment memo issued to him on 25 June 1975. "
Be that as it may, on or about October 1976, the
petitioner requested (CESI) to withdraw Orpiada's
assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint
in the Department of Labor (now Ministry of Labor
and Employment) against the petitioner for illegal
dismissal and failure to pay the 13th month pay
provided for in Presidential Decree No. 851. This
complaint was docketed as Case No. R04-1010184-
76-E.After investigation, the Office of the Regional
Director, Regional Office No. IV of the Department
of Labor, issued an order dismissing Orpiada's
complaint for failure of Mr.Orpiada to show the
existence of an employer-employee relationship
between the bank and himself.
Despite the foregoing order, Orpiada succeeded in
having his complaint certified for compulsory
arbitration in Case No. RB-IV-11187-77
entitled "Ricardo Orpiada, complaint vs. Philippine
Bank of Communications, respondent." During the
compulsory arbitration proceedings, CESI was
brought into the picture as an additional respondent
by the bank. Both the bank and (CESI) stoutly
maintained that (CESI) (and not the bank) was the
employer of Orpiada.
ISSUE:
Whether or not an employer-employee relationship
existed between the petitioner bank and private
respondent Ricardo Orpiada. The petitioner bank
maintains that no employer-employee relationship
was established between itself and Ricardo Orpiada
and that Ricardo Orpiada was an employee of (CESI)
and not of the bank.
64

The second ("payment of wages") and third ("power
of dismissal") factors suggest that the relevant
relationship was that subsisting between (CESI) and
Orpiada, a relationship conceded by (CESI) to be one
between employer and employee. Upon the other
hand, the first ("selection and engagement") and
fourth ("control of employee's conduct") factors
indicate that some direct relationship did exist
between Orpiada and the bank and that such
relationship may be assimilated to employment.
Perhaps the most important circumstance which
emerges from an examination of the facts of the tri-
lateral relationship between the bank, (CESI) and
Orpiada is that the employer-employee relationship
between (CESI) and Orpiada was established
precisely in anticipation of, and for the very purpose
of making possible, the secondment of Orpiada to the
bank. It is therefore necessary to confront the task of
determining the appropriate characterization of the
relationship between the bank and (CESI) was that
relationship one of employer and job (independent)
contractor or one of employer and "labor-only"
contractor?
Under the general rule set out in the first and second
paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance
of work for the employer, does not thereby create an
employer-employes relationship between himself and
the employees of the contractor. Thus, the employees
of the contractor remain the contractor's employees
and his alone. Nonetheless when a contractor fails to
pay the wages of his employees in accordance with
the Labor Code, the employer who contracted out the
job to the contractor becomes jointly and severally
liable with his contractor to the employees of the
latter "to the extent of the work performed under the
contract" as such employer were the employer of the
contractor's employees. The law itself, in other
words, establishes an employer-employee
relationship between the employer and the job
contractor's employees for a limited purpose, i.e., in
order to ensure that the latter get paid the wages due
to them.
A similar situation obtains where there is "labor only"
contracting. The "labor-only" contractor-i.e "the
person or intermediary" is considered "merely as an
agent of the employer. " The employer is made by the
statute responsible to the employees of the "labor
only" contractor as if such employees had been
directly employed by the employer. Thus, where
"labor only" contracting exists in a given case, the
statute itself implies or establishes an employer-
employee relationship between the employer (the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
owner of the project) and the employees of the "labor
only" contractor, this time for
a comprehensive purpose: "employer for purposes
of this Code, to prevent any violation or
circumvention of any provision of this Code. " The
law in effect holds both the employer and the "labor-
only" contractor responsible to the latter's employees
for the more effective safeguarding of the employees'
rights under the Labor Code.
Both the petitioner bank and (CESI) have insisted
that (CESI) was not a "labor only" contractor. Section
9 of Rule VIII of Book III entitled "Conditions of
Employment," of the Omnibus Rules Implementing
the Labor Code provides as follows:
In contrast, job contracting-contracting out a
particular job to an independent contractor is defined
by the Implementing Rules as follows:
The definition of "labor-only" contracting in Rule
VIII, Book III of the Implementing Rules must be
read in conjunction with the definition of job
contracting given in Section 8 of the same Rules. The
undertaking given by CESI in favor of the bank was
not the performance of a specific — job for instance,
the carriage and delivery of documents and parcels to
the addresses thereof. There appear to be many
companies today which perform this discrete service,
companies with their own personnel who pick up
documents and packages from the offices of a client
or customer, and who deliver such materials utilizing
their own delivery vans or motorcycles to the
addresses. In the present case, the undertaking of
(CESI) was toprovideits client-thebank-with a certain
number of persons able to carry out the work of
messengers. Such undertaking of CESI was complied
with when the requisite number of persons were
assigned or seconded to the petitioner bank. Orpiada
utilized the premises and office equipment of the
bank and not those of (CESI) Messengerial work-the
delivery of documents to designated persons whether
within or without the bank premises — is of course
directly related to the day-to-day operations of the
bank. Section 9(2) quoted above does notrequire for
its applicability that the petitioner must be engaged in
the delivery of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel delivery
company: as its name indicates, it is a recruitment
and placement corporation placing bodies, as it were,
in d ifferent client companies for longer or shorter
periods of time. It is this factor that, to our mind,
distinguishes this case from American President v.
65

Clave et al, 114 SCRA 826 (1982) if indeed
distinguishing way is needed.
The bank urged that the letter agreement entered into
with CESI was designed to enable the bank to obtain
the temporary services of people necessary to enable
the bank to cope with peak loads, to replace
temporary workers who were out on vacation or sick
leave, and to handle specialized work. There is, of
course, nothing illegal about hiring persons to carry
out "a specific project or undertaking the completion
or termination of which [was] determined at the time
of the engagement of [the] employee, or where the
work or service to be performed is seasonal in nature
and the employment is for the duration of the season"
(Article 281, Labor Code).<äre||anº•1àw> The letter
agreement itself, however, merely required (CESI) to
furnish the bank with eleven 11) messengers for " a
contract period from January 19, 1976 —." The
eleven (11) messengers were thus supposed to render
"temporary" services for an indefinite or unstated
period of time. Ricardo Orpiada himself was assigned
to the bank's offices from 25 June 1975 and rendered
services to the bank until sometime in October 1976,
or a period of about sixteen months. Under the Labor
Code, however, any employee who has rendered at
least one year of service, whether such service is
continuous or not, shall be considered a regular
employee (Article 281, Second paragraph).
Assuming, therefore, that Orpiada could properly be
regarded as a casual (as distinguished from a regular)
employee of the bank, he became entitled to be
regarded as a regular employee of the bank as soon as
he had completed one year of service to the bank.
Employers may not terminate the service of a regular
employee except for a just cause or when authorized
under the Labor Code (Article 280, Labor Code). It is
not difficult to see that to uphold the contractual
arrangement between the bank and (CESI) would in
effect be to permit employers to avoid the necessity
of hiring regular or permanent employees and to
enable them to keep their employees indefinitely on a
temporary or casual status, thus to deny them security
of tenure in their jobs. Article 106 of the Labor Code
is precisely designed to prevent such a result.
We hold that, in the circumstances 'instances of this
case, (CESI) was engaged in "labor-only" or
attracting vis-a-vis the petitioner and in respect c
Ricardo Orpiada, and that consequently, the petitioner
bank is liable to Orpiada as if Orpiada had been
directly, employed not only by (CESI) but also by the
bank. It may well be that the bank may in turn
proceed against (CESI) to obtain reimbursement of,
or some contribution to, the amounts which the bank
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
will have to pay to Orpiada; but this it is not
necessary to determine here.
WHEREFORE, the petition for certiorari is DENIED
and the decision promulgated on 29 December 1983
of the National Labor Relations Commission is
AFFIRMED. The Temporary Restraining Order
issued by this Court on 11 April 1984 is hereby lifted.
Costs against petitioner.
SO ORDERED.
45. VIRGINIA G. NERI and JOSE CABELIN
vs. NATIONAL LABOR RELATIONS
COMMISSION FAR EAST BANK & TRUST
COMPANY (FEBTC) and BUILDING CARE
CORPORATION
G.R. No. Nos. 97008-09 July 23, 1993
FACTS:
Neri and Cabelinapllied for and were hired
by respondent BCC, a corporation engaged in
providing technical, maintenance, engineering,
housekeeping, security and other specific services to
its clientele.They were assigned to work in the
Cagayan de Oro City Branch of respondent FEBTC
on 1 May 1979 and 1 August 1980, respectively, Neri
a radio/telex operator and Cabelin as janitor, before
being promoted to messenger on 1 April
1989.chanroblesvirtualawlibrarychanrobles virtual
law library
On 28 June 1989, petitioners instituted
complaints against FEBTC and BCC before Regional
Arbitration Branch No. 10 of the Department of
Labor and Employment to recognize them as its
regular employees and be paid the same wages which
its employees receive.
On 16 November 1989, the Labor Arbiter
dismissed the complaint for lack of merit.Respondent
BCC was considered an independent contractor
because it proved it had substantial capital. Thus,
petitioners were held to be regular employees of
BCC, not FEBTC. The dismissal was appealed to
NLRC which on 28 September 1990 affirmed the
decision on appeal. On 22 October 1990, NLRC
denied reconsideration of its affirmance,prompting
petitioners to seek redress from this Court.
Nevertheless, petitioners insist before that
BCC is engaged in "labor-only" contracting hence,
66

they conclude, they are employees of respondent
FEBTC.
ISSUE:
Whether or not BCC is only a job
contracting company, hence petitioners are
not regular employees of FEBTC.
RULING:
We cannot sustain the petition.
Respondent BCC need not prove that it
made investments in the form of tools, equipment,
machineries, work premises, among others, because it
has established that it has sufficient capitalization.
The Labor Arbiter and the NLRC both determined
that BCC had a capital stock of P1 million fully
subscribed and paid for.BCC is therefore a highly
capitalized venture and cannot be deemed
engaged in "labor-only" contracting.
It is well-settled that there is "labor-only"
contracting where:
(a) the person supplying workers to an
employer does not have substantial
capital or investment in the form of
tools, equipment, machineries, work
premises, among others; and,
(b) the workers recruited and placed by
such person are performing activities
which are directly related to the
principal business of the employer.
Article 106 of the Labor Code defines
"labor-only" contracting thus
Art. 106. Contractor or
subcontractor. . . . . There is "labor-
only" contracting where the person
supplying workers to an employer
does not have substantial capital or
investment in the form of tools,
equipment, machineries, work
premises, among others, and the
workers recruited by such persons
are performing activities which are
directly related to the principal
business of such employer . . . .
(emphasis supplied).
Based on the foregoing, BCC cannot be
considered a "labor-only" contractor because it
has substantial capital. While there may be no
evidence that it has investment in the form of tools,
equipment, machineries, work premises, among
others, it is enough that it has substantial capital, as
was established before the Labor Arbiter as well as
the NLRC. In other words, the law does not require
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
both substantial capital and investment in the form of
tools, equipment, machineries, etc. This is clear from
the use of the conjunction "or". If the intention was to
require the contractor to prove that he has both
capital and the requisite investment, then the
conjunction "and" should have been used. But,
having established that it has substantial capital, it
was no longer necessary for BCC to further adduce
evidence to prove that it does not fall within the
purview of "labor-only" contracting. There is even no
need for it to refute petitioners' contention that the
activities they perform are directly related to the
principal business of respondent bank.
Even assuming ex argumentithat
petitioners were performing activities directly
related to the principal business of the bank,
under the "right of control" test they must still be
considered employees of BCC. In the case of
petitioner Neri, it is admitted that FEBTC issued a
job description which detailed her functions as a
radio/telex operator. However, a cursory reading of
the job description shows that what was sought to be
controlled by FEBTC was actually the end-result
of the task,e.g., that the daily incoming and outgoing
telegraphic transfer of funds received and relayed by
her, respectively, tallies with that of the register. The
guidelines were laid down merely to ensure that the
desired end-result was achieved. It did not, however,
tell Neri how the radio/telex machine should be
operated.
More importantly, under the terms and
conditions of the contract, it was BCC alone which
had the power to reassign petitioners. Their
deployment to FEBTC was not subject to the bank's
acceptance. Cabelin was promoted to messenger
because the FEBTC branch manager promised BCC
that two (2) additional janitors would be hired from
the company if the promotion was to be effected.
Furthermore, BCC was to be paid in lump sum unlike
in the situation in Philippine Bank of
Communications where the contractor, CESI, was to
be paid at a daily rate on a per person basis. And, the
contract therein stipulated that the CESI was merely
to provide manpower that would render temporary
services. In the case at bar, Neri and Cabelin were to
perform specific special services. Consequently,
petitioners cannot be held to be employees of FEBTC
as BCC "carries an independent business" and
undertaken the performance of its contract with
various clients according to its "own manner and
method, free from the control and supervision" of its
principals in all matters "except as to the results
thereof."
The Petition for Certiorari is dismissed.
67

46. Filipinas Synthetic Fiber Corporation vs. NLRC, et al.
[257 SCRA 336 June 14, 1996]
Facts:
On 4 April 1991 FILSYN, a domestic corporation
engaged in the manufacture of polyester fiber,
contracted with De Lima Trading andGeneral
Services (DE LIMA) for the performance of specific
janitorial services Pursuant to the agreement Felipe
Loterte, among others, wasdeployed at FILSYN to
take care of the plants and maintain general
cleanliness around the premises.On 24 February 1992
Loterte sued FILSYN and DE LIMA as alternative
defendants for illegal dismissal, underpayment of
wages,non-payment of legal holiday pay, service
incentive leave pay and 13th month pay alleging that
he was first assigned to perform janitorial work
atFILSYN in 1981 by the La Saga General Services;
that the La Saga was changed to DE LIMA on August
1991; that when a movement todemand increased
wages and 13th month pay arose among the workers
on December 1991 he was accused by a certain
Dodie La Flores of havingposted in the bulletin board
at FILSYN an article attributing to management a
secret understanding to block the demand; and, for
denyingresponsibility, his gate pass was
unceremoniously cancelled on 6 February 1992 and
he was subsequently dismissed
Loterte was classified by the Labor Arbiter as a
regular employee on the ground that he performed
tasks usually necessary or desirablein the main
business of FILSYN for more than ten (10) years or
since 1981. FILSYN was declared to be the real
employer of Loterte and DELIMA as a mere labor
contractor. Hence, FILSYN was adjudged liable for
Loterte's reinstatement, payment of salary
differentials and back wages and other
benefits. Hence, this petition for certiorari
by FILSYN.
Issue:
Whether or not there exists an employer-employee
relationship between FILSYN and private respondent
Felipe Loterte.
SC Ruling:
DE LIMA is an independent job contractor, therefore
no direct employer-employee relationship exists
between petitioner FILSYN andprivate respondent
Felipe Loterte. The relationship between petitioner
Filipinas Synthetic Fiber Corporation (FILSYN) and
private respondent DeLima Trading and General
Services (DE LIMA) is one of job-contractorship.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Under the Labor Code, two (2) elements must exist
for a finding of labor-only contracting: (a) the person
supplying workers to anemployer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and (b) theworkers recruited and placed by
such persons are performing activities directly
related to the principal business of such employer.
These two (2) elements do not exist in the instant
case. As pointed out by petitioner, private respondent
DE LIMA is a going concernduly registered with the
Securities and Exchange Commission with
substantial capitalization of P1,600,000.00,
P400,000.00 of which is actuallysubscribed. Hence, it
cannot be considered as engaged in labor-only
contracting being a highly capitalized venture.
Moreover, while the janitorialservices performed by
Felipe Loterte pursuant to the agreement between
FILSYN and DE LIMA may be considered directly
related to theprincipal business of FILSYN which is
the manufacture of polyester fiber, nevertheless, they
are not necessary in its operation. On the
contrary,they are merely incidental thereto, as
opposed to being integral, without which production
and company sales will not suffer. Judicial notice
hasalready been taken of the general practice in
private as well as in government institutions and
industries of hiring janitorial services on
anindependent contractor basis.
Respondent De Lima Trading and General Services
(DE LIMA) are ordered to reinstate private
respondent FELIPE LOTERTE to hisformer position
or its equivalent without loss of seniority rights. And
private respondent De Lima Trading and General
Services (DE LIMA) isordered jointly and severally
with petitioner Filipinas Synthetic Fiber Corporation
(FILSYN) to pay private respondent FELIPE
LOTERTE his salary differentials, 13th month
pay, service incentive leave pay, and backwages
without prejudice to FILSYN seeking reimbursement
from DELIMA for whatever amount the former may
pay or have paid the latter
47. Alejandro Maraguinot and Paulino Enero v.
NLRC, GR No. 120969, 22 January 1998, Davide,
First Division
Facts
Maraguinot and Enero were both hired by Vic del
Rosario to work for his projects under Viva films;
68

Sometime in 1992, they asked for their salary to be
adjusted according to the minimum wage;
It is to be noted that at the time, Maraguinot was
having a salary of only 475 per week (this was in
1991);
Both Maraguinot and Enero asked their supervisors
for their wage to be adjusted according to the
minimum wage however, they were told that their
concern is to be aired to the owner of Viva;
They were told that their wage will be adjusted but
they have to sign a blank employment contract;
Enero did not accept and so he was fired;
Maraguinot was fired but was asked to return few
days after;
He was once again asked to sign a blank employment
contract in exchange of the adjustment of his salary
according to the minimum wage; this, he did not
accede to, hence, he was fired;
A case was filed by the two against Viva but NLRC
ruled in favour of Viva saying that there was really no
employer-employee relationship between them;
Issue
1. Whether there was employer-employee
relationship between Viva and the
complainants that would merit a filing of an
illegal dismissal case?
Held
1. Yes, the complainants are employees of
Viva. In fact in most cases, it was Viva that
paid the complainants. Further, the argument
of Viva that they are contractual employees
is untenable for the reason that the
complainants are employed on long-term
basis.
48. Urbanes Jr. vs. Sec. of Labor, G.R. No. 122791,
Feb. 19, 2003
Facts:
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Petitioner Placido O. Urbanes, Jr., doing business
under the name and style of Catalina Security
Agency, entered into an agreement to provide
security services to respondent Social Security
System (SSS).
During the effectivity of the agreement, petitioner, by
letter of May 16, 1994, requested the SSS for the
upward adjustment of their contract rate in view of
Wage Order No. NCR-03 which was issued by the
Regional Tripartite Wages and Productivity Board-
NCR.
Petitioner sent several letters dated June 7 and June 8,
1994, reiterating the request. On June 24, 1994,
petitioner pulled out his agency’s services from the
premises of the SSS. Petitioner, on June 29, 1994,
filed a complaint with the DOLE-NCR against the
SSS seeking the implementation of Wage Order No.
NCR-03.
SSS prayed for the dismissal of the complaint on the
ground that petitioner is not the real party in interest
and has no legal capacity to file the same. In any
event, it argued that if it had any obligation, it was to
the security guards. Morever, it contended that the
security guards assigned to the SSS do not have any
legal basis to file a complaint against it for lack of
contractual privity.
The Regional Director held in favor of petitioner
ordering SSS to pay complainant the sum of P
1,600,858.46 representing the wage differentials
under Wage Order No. NCR-03 of the 168 Security
Guards of Catalina Security Agency covering the
period from December 16, 1993 to June 24, 1994.
The SSS moved to reconsider the September 16,
1994 Order of the Regional Director, praying that the
computation be revised. The amount was reduced to
P 1,237,740.00.
The SSS appealed to the Secretary of Labor upon
several assigned errors. Thereafter, the Secretary of
Labor, by Order of June 22, 1995, set aside the order
of the Regional Director and remanded the records of
the case "for recomputation of the wage differentials
using P 5,281.00 as the basis of the wage
adjustment." And the Secretary held petitioner’s
security agency "Jointly and severally liable for
wage differentials, the amount of which should be
paid directly to the security guards concerned."
Issues:
1. Whether or not the Secretary of Labor has
jurisdiction to review appeals from decisions
of the Regional Directors.
2. Whether or not SSS is liable to pay
petitioner for wage differentials.
Contentions:
Petitioner asserts that the Secretary of Labor does not
have jurisdiction to review appeals from decisions of
69

the Regional Directors in complaints filed under
Article 129 of the Labor Code. Petitioner thus
contends that as the appeal of SSS was filed with the
wrong forum, it should have been dismissed.
The SSS, on the other hand, contends that Article
128, not Article 129, is applicable to the case. Article
128.
Held:
Neither the petitioner’s contention nor the SSS’s is
impressed with merit.Lapanday Agricultural
Development Corporation v. Court of
Appealsinstructs so. In that case, the security agency
filed a complaint before the RTC against the principal
or client Lapanday for the upward adjustment of the
contract rate in accordance with Wage Order Nos. 5
and 6. Lapanday argued that it is the National Labor
Relations Commission, not the civil courts, which has
jurisdiction to resolve the issue in the case, it
involving the enforcement of wage adjustment and
other benefits due the agency’s security guards as
mandated by several wage orders. Holding that the
RTC has jurisdiction over the controversy, this Court
ruled:
We agree with the respondent that the RTC
has jurisdiction over the subject matter of
the present case. 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.
In the case at bar, even if petitioner filed the
complaint on his and also on behalf of the security
guards, the relief sought has to do with the
enforcement of the contract between him and the SSS
which was deemed amended by virtue of Wage Order
No. NCR-03. The controversy subject of the case at
bar is thus a civil dispute, the proper forum for the
resolution of which is the civil courts.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
But even assuming arguendo that
petitioner’s complaint were filed with the proper
forum, for lack of cause of action it must be
dismissed. Articles 106, 107 and 109 of the Labor
Code provide:
ART. 106. CONTRACTOR OR
SUBCONTRACTOR. Whenever an
employer enters into 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 wage 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.
ART. 109. SOLIDARY LIABILTY. The
provisions of existing laws to the contrary
notwithstanding, every employer or indirect
employer shall be held responsible with his
contractor or subcontractor for any violation
of any provision of this Code. For purposes
of determining the extent of their civil
liability under this Chapter, they shall be
considered as direct employers.
As to the second issue, the liability of the
SSS to reimburse petitioner arises only if and when
petitioner pays his employee-security guards "the
increases" mandated by Wage Order No. NCR-03.
The records do not show that petitioner has
paid the mandated increases to the security guards.
The security guards in fact have filed a complaint
with the NLRC against petitioner relative to, among
other things, underpayment of wages.
49. San Miguel vs. Maerc Integrated Services
G.R. No. 144672, July 10, 2003
FACTS:
70

291 workers filed their complaints against
San Miguel Corporation and Maerc Integrated
Services, Inc, for illegal dismissal, underpayment
of wages, non-payment of service incentive leave
pays and other labor standards benefits, and for
separation pays.
The complainants alleged that they were
hired by San Miguel Corporation (SMC) through its
agent or intermediary Maerc Integrated Services, Inc.
(MAERC) to work in 2 designated workplaces in
Mandaue City. They washed and segregated various
kinds of empty bottles used by SMC to sell and
distribute its beer beverages to the consuming public.
They were paid on a per piece or pakiao basis except
for a few who worked as checkers and were paid on
daily wage basis.
Complainants alleged that long before
SMC contracted the services of MAERC a
majority of them had already been working for
SMC under the guise of being employees of
another contractor, Jopard Services, until the
services of the latter were terminated on 31
January 1988.
SMC denied liability for the claims and
averred that the complainants were not its employees
but of MAERC, an independent contractor whose
primary corporate purpose was to engage in the
business of cleaning, receiving, sorting, classifying,
etc., glass and metal containers.
In a letter dated 15 May 1991, SMC
informed MAERC of the termination of their
service contract by the end of June 1991. SMC
cited its plans to phase out its segregation activities
starting 1 June 1991 due to the installation of labor
and cost-saving devices.
When the service contract was terminated,
complainants claimed that SMC stopped them
from performing their jobs; that this was
tantamount to their being illegally dismissed by
SMC who was their real employer as their
activities were directly related, necessary and
desirable to the main business of SMC; and, that
MAERC was merely made a tool or a shield by SMC
to avoid its liability under the Labor Code. MAERC
admitted that it recruited the complainants and placed
them in the bottle segregation project of SMC but
maintained that it was only conveniently used by
SMC as an intermediary in operating the project.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The Labor Arbiter rendered a decision
holding that MAERC was an independent contractor.
The National Labor Relations Commission (NLRC)
ruled that MAERC was a labor-only contractor and
that complainants were employees of SMC.
ISSUE:
Whether the complainants are employees of
petitioner SMC or of respondent MAERC.
HELD:
Employees are those of SMC.
In ascertaining an employer-employee
relationship, the following factors are considered:
(a) the selection and engagement of
employee;
(b) the payment of wages;
(c) the power of dismissal; and,
(d) the power to control an
employee's conduct.
Evidence discloses that petitioner played
a large and indispensable part in the hiring of
MAERC's workers. It also appears that majority
of the complainants had already been working for
SMC long before the signing of the service
contract between SMC and MAERC in 1988.
In the case, the incorporators of MAERC
admitted having supplied and recruited workers for
SMC even before MAERC was created. The NLRC
also found that when MAERC was organized into a
corporation in February 1988, the complainants who
were then already working for SMC were made to go
through the motion of applying for work with Ms.
Olga Ouano, President and General Manager of
MAERC.
As for the payment of workers' wages, SMC
assumed the responsibility of paying for the
mandated overtime, holiday and rest day pays of
the MAERC workers. SMC also paid the
employer's share of the SSS and Medicare
contributions, the 13th month pay, incentive leave
pay and maternity benefits. These lend credence
to the complaining workers' assertion that while
71

MAERC paid the wages of the complainants, it
merely acted as an agent of SMC.
SMC maintained a constant presence in the
workplace through its own checkers. The
responsibility of watching over the MAERC workers
by MAERC personnel became superfluous with the
presence of additional checkers from SMC. Control
of the premises in which the contractor's work was
performed was also viewed as another phase of
control over the work, and this strongly tended to
disprove the independence of the contractor.
But the most telling evidence is a letter by
Mr. Antonio Ouano, Vice-President of MAERC
addressed to Francisco Eizmendi, SMC President and
Chief Executive Officer, asking the latter to
reconsider the phasing out of SMC's segregation
activities in Mandaue City. The letter attested to an
arrangement entered into by the two (2) parties which
was not reflected in the Contract of Services. A
peculiar relationship mutually beneficial for a time
but nonetheless ended in dispute when SMC decided
to prematurely end the contract leaving MAERC to
shoulder all the obligations to the workers.
While MAERC's investments in the form of
buildings, tools and equipment amounted to more
than P4 Million, one cannot disregard the fact that it
was the SMC which required MAERC to undertake
such investments under the understanding that the
business relationship between petitioner and MAERC
would be on a long term basis.
NOTES:
Jurisprudence has it that in determining the existence
of an independent contractor relationship, several
factors may be considered such as:
o whether the contractor was carrying on
an independent business
o the nature and extent of the work
o the skill required
o the term and duration of the relationship
o the right to assign the performance of
specified pieces of work
o the control and supervision of the
workers
o the power of the employer with respect to
the hiring, firing and payment of the
workers of the contractor
o the control of the premises
o i.the duty to supply premises, tools,
appliances, materials and labor
 the mode, manner and terms of payment.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
50. Mariveles Shipyard Corp v. Court of Appeals
G.R. No. 144134, Novemeber 11, 2003
FACTS: Petitioner submits that respondent Court of
Appeals (CA) erred in its decisions in the previous
cases where the petitioner was involved. The latter
contend that, among other issues, CA gravely erred in
its affirmation on the National Labor Relations
Commission‘s (NLRC) decision that the petitioner
together with ‘Longest Force’, a security agency, are
jointly and severally liable for the payment of back
wages and overtime pay to private respondents. The
petitioner invokes that it has already paid all the
necessary compensation to the private respondents.
ISSUE: Whether or not the petitioner should be held
jointly and severally liable, together with ‘Longest
Force’ in the payment of back wages to the private
respondents as affirmed by respondent CA?
HELD: Yes.
Under Article 106, par. 2 of the Labor Code, ‘in the
event that the contractor or subcontractor fails to
pay wages of his employees…the employer shall be
jointly and severally liable with his contractor or
subcontractor xxx’. Also, in Article 107 of the same
Code, the law states that ‘…the preceding Article
shall likewise apply to person, partnership,
association or corporation which, not being an
employer, contracts with an independent
contractor…’. Pursuant to the mentioned provisions
of the Labor Code, the Court said that, in this case,
the petitioner as an indirect employer, shall truly be
liable jointly and severally with ‘Longest Force’ in
paying backwages and overtime pay to the private
respondents. Moreover, the Court emphasized that
‘Labor standard are enacted by the legislature to
alleviate the plight of workers whose wages barely
meet the spiraling costs of their basic needs. Labor
laws are considered written in every contract.
Stipulations in violation thereof are considered
null‘. Therefore, the petitioner should be held jointly
and severally liable, together with ‘Longest Force’ to
the private respondents as earlier decided by NLRC,
as affirmed by the CA.
51.) G.R. No. 154715, Dec. 11, 2003
New Golden City Builders vs. CA
72

FACTS:
Petitioner entered into a construction
contract with Prince David Development Corporation
for the construction of a 17-storey office and
residential condominium building. Petitioner engaged
the services of NiloLayno Builders to do the
specialized concrete works, forms works and steel
rebars works. Pursuant to the contract, NiloLayno
Builders hired private respondents to perform work at
the project.
After the completion of the phase for which
NiloLayno Builders was contracted, private
respondents filed a complaint against petitioner and
its president (NGC Builder and Manuel Sy) for unfair
labor practice, non-payment of 13th month pay,
service incentive leave, illegal dismissal and
severance pay, in lieu of reinstatement.
The Labor Arbiter ruled in favor of
respondents, but dismissed the charges for illegal
dismissal including their prayers for back wages and
unfair labor practice and other monetary claims
except their 13th month pay and service incentive
leave pay. It was also found that NiloLayno Builders
was a labor-only-contractor, thus private respondents
were deemed employees of the petitioner. Both
parties appealed to the National Labor Relations
Commission, which affirmed the Labor Arbiter's
decision with modification that private respondents
were illegally dismissed.
Since petitioner's motion for reconsideration
was denied, it instituted a special civil action for
certiorariwith the Court of Appeals, but the latter
denied the same; hence, a petition for review in SC.
Issue: Whether NiloLayno Builders was an
"independent contractor" or a "labor-only" contractor
Ruling:NiloLayno Builders is an independent
contractor.
Under Section 8, Rule VIII, Book III, of the
Omnibus Rules Implementing the Labor Code, an
independent contractor is one who undertakes "job
contracting," i.e., a person who: (a) 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 (b) has substantial capital or investment
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LABOR STANDARDS LAW
in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in
the conduct of the business. Jurisprudential
holdingsare to the effect that in determining the
existence of an independent contractor relationship,
several factors may be considered, such as, but not
necessarily confined to, whether or not the contractor
is carrying on an independent business; the nature
and extent of the work; the skill required; the term
and duration of the relationship; the right to assign
the performance of specified pieces of work; the
control and supervision of the work to another; the
employer's power with respect to the hiring, firing
and payment of the contractor's workers; the control
of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode,
manner and terms of payment.
We are convinced that Nilo Layno Builders
is undertaking permissible labor or job contracting.
NiloLayno Builders is a duly licensed labor
contractor carrying on an independent business for a
specialized work that involves the use of some
particular, unusual and peculiar skills and expertise,
like concrete works, form works and steel rebars
works. As a licensed labor contractor, it complied
with the conditions set forth in Section 5, Rule VII-A,
Book III, Rules to Implement the Labor Code, among
others, proof of financial capability and list of
equipment, tools, machineries and implements to be
used in the business. Further, it entered into a written
contract with the petitioner, a requirement under
Section 3, Rule VII-A, Book III, Rules to Implement
the Labor Code to assure the employees of the
minimum labor standards and benefits provided by
existing laws.
The test to determine the existence of
independent contractorship is whether one claiming
to be an independent contractor has contracted to do
the work according to his own methods and without
being subject to the control of the employer, except
only to the results of the work. This is exactly the
situation obtaining in the case at bar. NiloLayno
Builders hired its own employees, the private
respondents, to do specialized work in the Prince
David Project of the petitioner. The means and
methods adopted by the private respondents were
directed by NiloLayno Builders except that, from
time to time, the engineers of the petitioner visited
the site to check whether the work was in accord with
the plans and specifications of the principal. As
admitted by Nilo G. Layno, he undertook the contract
work on his own account and responsibility, free
from interference from any other persons, except as
to the results; that he was the one paying the salaries
73

of private respondents; and that as employer of the
private respondents, he had the power to terminate or
dismiss them for just and valid cause. Indubitably, the
Court finds that NiloLayno Builders
maintained effective supervision and control over the
private complainants.
Thus, it was plain conjecture on the part of the
Labor Arbiter, the NLRC and the Court of Appeals to
conclude that Nilo Layno Builders was a labor-only
contractor merely because it does not have
investment in the form of tools or machineries. They
failed to appreciate the fact that Nilo Layno Builders
had substantial capitalization for it did not only
provide labor to do the specified project and pay their
wages, but it furnished the materials to be used in the
construction.
In Neri v. NLRC, we held that the labor
contractor which sufficiently proved that it had
substantial capital was not engaged in labor-only
contracting. Thus:
While there may be no evidence that it has
investment in the form of tools, equipment,
machineries, work premises, among others, it is
enough that it has substantial capital, as was
established before the Labor Arbiter as well as the
NLRC. In other words, the law does not require both
substantial capital and investment in the form of
tools, equipment, machineries, etc. This is clear from
the use of the conjunction “or”. If the intention was to
require the contractor to prove that he has both
capital and the requisite investment, then the
conjunction “and” should have been used.
52.)NFA vs. MASADA SECURITY AGENCY,
INC.G.R. No. 163448.March 08, 2005
Facts:
On September 17, 1996, respondent MASADA
Security Agency, Inc., entered into a one year
contract with NFA to provide security services to the
various offices, warehouses and installations of the
scope of the NFA Region I.
Upon the expiration of said contract, the parties
extended the effectivity of the contract on a monthly
basis under same terms and condition.
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LABOR STANDARDS LAW
Meanwhile on several occasions, the Regional
Tripartite Wages and Productivity Board issued
several wage orders mandating increases in the daily
wage rate.
Therefore because of the wage orders mandating
increase in the wage rates, respondent requested NFA
for a corresponding upward adjustment in the
monthly contract rate consisting of the increases in
the daily minimum wage of the security guards as
well as the corresponding raise in their overtime pay,
holiday pay, 13th month pay, holiday and rest day
pay.
NFA, however, granted the request but only with
respect to the increase in the daily wage and
denied the same with respect to the adjustments in
the other benefits and remunerations computed on
the basis of the daily wage.
Respondent sought the intervention of the Office of
the Regional Director, Regional Office No. I.
Despite the advisory of DOLE Regional Director
sustaining the claim of respondent that the increase
mandated by Republic Act No. 6727 (RA 6727) and
the wage orders issued by the RTWPB is not limited
to the daily pay, NFA maintained its stance that it is
not liable to pay the corresponding adjustments in
the wage related benefits of respondent’s security
guards.
Respondent filed with the Regional Trial Court of
Quezon, City, Branch 83, a case for recovery of sum
of money against NFA.
On September 19, 2002, the trial court rendered a
decision in favor of respondent holding that NFA is
liable to pay the security guards’ wage related
benefits pursuant to RA 6727.
NFA appealed to the Court of Appeals but the same
was dismissed on February 12, 2004.
Hence, this petition.
Issue:
Whether or not the liability of principals in service
contracts under Section 6 of RA 6727 and the wage
orders issued by the Regional Tripartite Wages and
74

Productivity Board is limited only to the increment in
the minimum wage.
Ruling:
General rule, payment of the increases in the wage
rate of workers is ordinarily shouldered by the
employer.
However, Section 6 of RA 6727, expressly lodged
said obligation to the principals or indirect
employers in construction projects and
establishments providing security, janitorial and
similar services.
Section 6 of RA 6727, provides:
SEC. 6. In the case of contracts for construction
projects and for security, janitorial and similar
services, the prescribed increases in the wage rates of
the workers shall be borne by the principals or
clients of the construction/service contractors and the
contract shall be deemed amended accordingly. In
the event, however, that the principal or client fails to
pay the prescribed wage rates, the
construction/service contractor shall be jointly and
severally liable with his principal or client.
There is merit on the contention of NFA that its
additional liability under the aforecited provision is
limited only to the payment of the increment in the
statutory minimum wage rate, i.e., the rate for a
regular eight (8) hour work day.
The term “wage” as used in Section 6 of RA 6727
pertains to no other than the “statutory minimum
wage” which is the lowest wage rate fixed by law
that an employer can pay his worker. Hence, the
prescribed increases or the additional liability to be
borne by the principal under Section 6 of RA 6727 is
the increment or amount added to the
remuneration of an employee for an 8-hour work.
Therefore, since the increase in wage referred to in
Section 6 pertains to the “statutory minimum wage”
as defined herein, principals in service contracts
cannot be made to pay the corresponding wage
increase in the overtime pay, night shift
differential, holiday and rest day pay, premium
pay and other benefits granted to workers.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Applying the elementary rule on statutory
construction that if the statute is clear, plain and free
from ambiguity, it must be given its literal meaning
and applied without interpretation. Therefore, the
presumption is that lawmakers are well aware that the
word “wage” as used in Section 6 means the statutory
minimum wage. If their intention was to extend the
obligation of principals in service contracts to the
payment of the increment in the other benefits and
remuneration of workers, it would have so expressly
specified. In not so doing, the only logical
conclusion is that the legislature intended to limit the
additional obligation imposed on principals in service
contracts to the payment of the increment in the
statutory minimum wage.
Although the general rule is that construction of a
statute by an administrative agency charged with the
task of interpreting or applying the same is entitled to
great weight and respect. The Court, however, is not
bound to apply said rule where such executive
interpretation, is clearly erroneous, or when there is
no ambiguity in the law interpreted, or when the
language of the words used is clear and plain, as in
the case at bar. Besides, administrative
interpretations are at best advisory for it is the Court
that finally determines what the law means.
Hence, the interpretation given by the labor agencies
in the instant case which went as far as
supplementing what is otherwise not stated in the law
cannot bind this Court.
So long as the minimum obligation of the principal,
i.e., payment of the increased statutory minimum
wage is complied with, the Wage Rationalization Act
is not violated.
WHEREFORE, the petition is GRANTED
53. Abella vs. PLDT, G.R. No. 159469, June 8,
2005
Facts:
Respondent People’s Security Incorporated
entered into an agreement with the PLDT to provide
75

the latter with such number of qualified uniformed
and properly armed security guards for the purpose of
guarding and protecting PLDT’s installations and
properties from theft, pilferage, intentional damage,
trespass or other unlawful acts. Under the agreement,
it was expressly provided that there shall be no
employer-employee relationship between the PLDT
and the security guards, which may be supplied to it
by PSI, and that the latter shall have the entire charge,
control and supervision over the work and services of
the supplied security guards. It was likewise
stipulated therein that PSI shall also have the
exclusive authority to select, engage, and discharge
its security guards, with full control over their wages,
salaries or compensation.
Consequently, respondent PSI deployed
security guards to the PLDT. The sixty-five (65)
security guards supplied by respondent PSI filed a
Complaint for regularization against the PLDT
alleging that petitioner security guards have been
employed by the company through the years and that
PSI acted as the middleman in the payment of the
minimum pay to the security guards, but no premium
for work rendered beyond eight hours was paid to
them nor were they paid their 13th month pay. In
sum, the Complaint states that inasmuch as the
complainants are under the direct control and
supervision of PLDT. Hence they should be
considered as regular employees by the latter.
Issue: Whether or not an employer- employee
relationship exists between petitioners and
respondent PLDT;
Ruling:
We considered the following factors in
considering the existence of an employer-employee
relationship: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power to
dismiss; and (4) the power to control the employee’s
conduct.
Testimonies during the trial reveal that
interviews and evaluation were conducted by PLDT
to ensure that the standards it set are met by the
security guards. In fact, PLDT rarely failed to accept
security guards referred to by PSI but on account of
height deficiency. The referral is nothing but for
possible assignment in a designated client which has
the inherent prerogative to accept and reject the
assignee for justifiable grounds or even arbitrarily.
We are thus convinced that the employer-employee
relationship is deemed perfected even before the
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LABOR STANDARDS LAW
posting of the complainants with the PLDT, as
assignment only comes after employment.
PSI is a legitimate job contractor pursuant to
Section 8, Rule VII, Book II of the Omnibus Rules
Implementing the Labor Code. It is a registered
corporation duly licensed by the Philippine National
Police to engage in security business. It has
substantial capital and investment in the form of
guns, ammunitions, communication equipments,
vehicles, office equipments like computer,
typewriters, photocopying machines, etc., and above
all, it is servicing clients other than PLDT like
PCIBank, Crown Triumph, and Philippine Cable,
among others. Here, the security guards which PSI
had assigned to PLDT are already the former’s
employees prior to assignment and if the assigned
guards to PLDT are rejected by PLDT for reasons
germane to the security agreement, then the rejected
or terminated guard may still be assigned to other
clients of PSI as in the case of Jonathan Daguno who
was posted at PLDT on 21 February 1996 but was
subsequently relieved therefrom and assigned at
PCIBank Makati Square effective 10 May 1996.
Therefore, the evidence as it stands is at odds with
petitioners’ assertion that PSI is an “in-house” agency
of PLDT so as to call for a piercing of veil of
corporate identity
It is PSI that determined and paid the
petitioners’ wages, salaries, and compensation. As
elucidated by the Labor Arbiter, petitioners’ witness
testified that his wages were collected and withdrawn
at the office of PSI and PLDT pays PSI for the
security services on a lump-sum basis and that the
wages of complainants are only a portion of the total
sum. The signature of the PLDT supervisor in the
Daily Time Records does not ipso facto make PLDT
the employer of complainants inasmuch as the Labor
Arbiter had found that the record is replete with
evidence showing that some of the Daily Time
Records do not bear the signature of a PLDT
supervisor yet no complaint was lodged for
nonpayment of the guard’s wages evidencing that the
signature of the PLDT’s supervisor is not a condition
precedent for the payment of wages of the guards.
Notably, it was not disputed that complainants enjoy
the benefits and incentives of employees of PSI and
that they are reported as employees of PSI with the
SSS.
Lastly, petitioners capitalize on the
delinquency reports prepared by PLDT personnel
against some of the security guards as well as
certificates of participation in civil disturbance
76

course, certificates of attendance in first aid training,
certificate of completion in fire brigade training
seminar and certificate of completion on restricted
land mobile radio telephone operation to show that
the petitioners are under the direct control and
supervision of PLDT and that the latter has, in fact,
the power to dismiss them.
The Labor Arbiter found from the evidence
that the delinquency reports were nothing but
reminders of the infractions committed by the
petitioners while on duty which serve as basis for
PLDT to recommend the termination of the
concerned security guard from PLDT. As already
adverted to earlier, termination of services from
PLDT did not ipso facto mean dismissal from PSI
inasmuch as some of those pulled out from PLDT
were merely detailed at the other clients of PSI as in
the case of Jonathan Daguno, who was merely
transferred to PCIBank Makati.
54.) San Miguel vs. Aballa, G.R. No. 149011, June
28, 2005
Facts:
Petitioner San Miguel Corporation entered into a one-
year contract with the Sunflower Multi-Purpose
Cooperative.
Sunflower undertook and agreed to perform and
provide the company on a non exclusive basis for a
period of one year the following: Messengerial,
Janitorial, Shrimp harvesting and Sanitation.
Pursuant to the contract, Sunflower engaged private
respondents to render services at SMC’s Bacolod
Shrimp Processing Plant. The contract was renewed
and private respondent continued to perform their
tasks.
Later, private respondents filed a complaint praying
to be declared as regular employees of SMC, with
claims of recovery of all benefits and privileges.
Issue:
 Whether or not Sunflower is engaged in
labor only contracting
Ruling:
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LABOR STANDARDS LAW
The test to determine the existence of independent
contractorship is whether one claiming to be an
independent contractor has contracted to do the work
according to his own methods and without being
subject to the control of the employer, except only as
to the results of the work.
In legitimate labor contracting, the law creates an
employer-employee relationship for a limited
purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly
and severally liable with the job contractor, only for
the payment of the employees’ wages whenever the
contractor fails to pay the same. Other than that, the
principal employer is not responsible for any claim
made by the employees.
In labor-only contracting, the statute creates an
employer-employee relationship for a comprehensive
purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the
principal employer and the latter is responsible to the
employees of the labor-only contractor as if such
employees had been directly employed by the
principal employer.
The following would show that sunflower is engaged
in labor only contracting: What appears is that
Sunflower does not have substantial capitalization or
investment in the form of tools, equipment,
machineries, work premises and other materials to
qualify it as an independent contractor.
It is gathered that the lot, building, machineries and
all other working tools utilized by private
respondents in carrying out their tasks were owned
and provided by SMC.
Sunflower, during the existence of its service contract
with respondent SMC, did not own a single
machinery, equipment, or working tool used in the
processing plant. Everything was owned and
provided by respondent SMC. The lot, the building,
and working facilities are owned by respondent
SMC.
And from the job description provided by SMC itself,
the work assigned to private respondents was directly
related to the aquaculture operations of SMC.
Undoubtedly, the nature of the work performed by
77

private respondents in shrimp harvesting, receiving
and packing formed an integral part of the shrimp
processing operations of SMC. As for janitorial and
messengerial services, that they are considered
directly related to the principal business of the
employer has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an
independent business or undertake the performance
of its service contract according to its own manner
and method, free from the control and supervision of
its principal, SMC, its apparent role having been
merely to recruit persons to work for SMC.
Therefore since Sunflower is labor only contracting,
there is the existence of an employer- employee
relationship between SMC and private respondents.
55. Manila Electric Co. vs. Benamira, G.R. No.
145271, July 14, 2005
Facts:
The individual respondents are licensed
security guards formerly employed by People’s
Security, Inc. and deployed as such at MERALCO’s
head office. The security service agreement between
PSI and MERALCO was terminated. Thereafter, 56
of PSI’s security guards, including herein eight
individual respondents, filed a complaint for unpaid
monetary benefits against PSI and MERALCO.
Meanwhile, the security service agreement between
respondent Armed Security & Detective Agency, Inc.,
(ASDAI) and MERALCO took effect. Subsequently,
the individual respondents were absorbed by ASDAI
and retained at MERALCO’s head office. Later, the
security service agreement between respondent
Advance Forces Security & Investigation Services,
Inc. (AFSISI) and MERALCO took effect,
terminating the previous security service agreement
with ASDAI. The individual respondents amended
their complaint to implead AFSISI as party
respondent.
Issue: Whether or not the individual respondents
are employees of MERALCO;
Ruling:
No. In this case, the terms and conditions
embodied in the security service agreement between
MERALCO and ASDAI expressly recognized
ASDAI as the employer of individual respondents.
Under the security service agreement, it was ASDAI
which (a) selected, engaged or hired and discharged
the security guards; (b) assigned them to MERALCO
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LABOR STANDARDS LAW
according to the number agreed upon; (c) provided
the uniform, firearms and ammunition, nightsticks,
flashlights, raincoats and other paraphernalia of the
security guards; (d) paid them salaries or wages; and,
(e) disciplined and supervised them or principally
controlled their conduct. The agreement even
explicitly provided that “[n]othing herein contained
shall be understood to make the security guards under
this Agreement, employees of the COMPANY, it
being clearly understood that such security guards
shall be considered as they are, employees of the
AGENCY alone.” Clearly, the individual respondents
are the employees of ASDAI.
Neither is the stipulation that the agency
cannot pull out any security guard from MERALCO
without its consent an indication of control. It is
simply a security clause designed to prevent the
agency from unilaterally removing its security guards
from their assigned posts at MERALCO’s premises
to the latter’s detriment.
The clause that MERALCO has the right at
all times to inspect the guards of the agency detailed
in its premises is likewise not indicative of control as
it is not a unilateral right. The agreement provides
that the agency is principally mandated to conduct
inspections, without prejudice to MERALCO’s right
to conduct its own inspections.
Moreover, ASDAI and AFSISI are not
“labor-only” contractors. There is “labor only”
contract when the person acting as contractor is
considered merely as an agent or intermediary of the
principal who is responsible to the workers in the
same manner and to the same extent as if they had
been directly employed by him. On the other hand,
“job (independent) contracting” is present if the
following conditions are met: (a) 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 to the result
thereof; and (b) the contractor has substantial capital
or investments in the form of tools, equipment,
machineries, work premises and other materials
which are necessary in the conduct of his business.
Given the above distinction and the provisions of the
security service agreements entered into by petitioner
with ASDAI and AFSISI, we are convinced that
ASDAI and AFSISI were engaged in job contracting.
The individual respondents can not be
considered as regular employees of the MERALCO
for, although security services are necessary and
desirable to the business of MERALCO, it is not
directly related to its principal business and may even
be considered unnecessary in the conduct of
78

MERALCO’s principal business, which is the
distribution of electricity.
Furthermore, the fact that the individual
respondents filed their claim for unpaid monetary
benefits against ASDAI is a clear indication that the
individual respondents acknowledge that ASDAI is
their employer.
56. Granspan Development Corp., vs. Bernardo,
G.R. No. 141464, Sept. 21, 2005
Facts:
The instant controversy stemmed from a complaint
for illegal dismissal and non-payment of benefits
filed with the Labor Arbiter by Ricardo Bernardo,
Antonino Ceñidoza and Edgar Del Prado,
respondents, against Grandspan Development
Corporation, petitioner, and/or its warehouse
manager, Manuel G. Lee, docketed as NLRC Case
No. RAB-IV-11-4605-92-RI.
Those three respondents alleged in their complaint
that they were terminated illegally, the petitioners
(granspan development corp) sent them a notice that
they were terminated on the grounds that they
vandalized the logbooks and for the use of profane
language. Also they alleged that they were employed
by the petitioner, they were given ID and a daily
salary of 104 php.
Petitioner denied these allegations, claiming that they
are contractors. Thus there is no employee-employer
relationship, And that the warehouse manager
received reports from their supervisor that those
respondents vandalized the company’s log book,
which violates their company’s rules and regulations.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
After the submission of the parties’ pleadings and
position papers, the Labor Arbiter rendered a
Decision dated June 30, 1994 dismissing
respondents’ complaint. In concluding that
respondents were validly dismissed from
employment, the Labor Arbiter held that they were
project employees whose services were terminated
upon completion of the project for which they were
hired.
When the case was appealed at the NLRC, the NLRC
ordered that the case is remanded to the labor arbiter
for proper proceeding. This prompted both parties to
file motion for reconsideration, which were denied by
the NLRC.
Then respondents filed a petition for certiorari in
Supreme Court(SC), which was referred to the Court
of Appeals (CA). While the case was pending, Del
Prado died and was substituted by his surviving
parent, Edgardo Del Prado.
The CA, ruled in favor of the respondents. The court
ordered that these respondents should be reinstated
and that del prado shall be paid of his separation pay.
Petitioner filed a motion for reconsideration.
Respondents also filed a motion for reconsideration
and/or clarification praying that the Appellate Court’s
Decision be modified by awarding respondent Del
Prado his backwages. Court of Appeals promulgated
its Resolution denying petitioner’s motion for
reconsideration but modifying its Decision in the
sense that petitioner and J. Narag Construction are
ordered to pay respondent Del Prado his separation
pay and backwages.
Hence, this petition for review on certiorari in SC.
Issues:
Whether or Not there is employer-employee
relationship in the case at bar.
Ruling:
Yes, there is employer-employee relationship.
The SC upheld the CA’s ruling. CA found that the J.
Narag Construction assigned the respondents to
perform activities directly related to the main
79

business of the petitioner, all the documents that
proved the employment of the respondents were all
approved by the petitioner, such as the payrolls, the
using of equipment, materials and supplies of the J.
narag construction. The termination of the
respondents also proves that there is employer-
employee relationship, since it was the petitioner who
terminated them and the J. Narag construction.
Being a legitimate independent contractor cannot be
pinned on J. Narag Construction, rather the CA held
that they are labor-only contractor which was upheld
by the SC too.
On the basis of the records, we have no reason to
deviate from the Appellate Court’s finding that J.
Narag Construction is indeed a labor-only contractor.
These are the reasons: (1) it is not registered as a
building contractor with the SEC; (2) it has no
contract with petitioner; and (3) there is no proof of
its financial capability and has no list of equipment,
tools, machineries and implements used in the
business.
The allegations of the petitioners that the respondents
are project employees, thus making them contractors
and that their services ended up when the project was
finished is untenable. petitioner could not present
employment contracts signed by respondents
showing that their employment was for the duration
of the HCMG or Sogo project. Likewise, as correctly
observed by the Court of Appeals, petitioner failed to
present any report terminating the services of
respondents when its projects were actually finished.
Time and again, we held that failure of the employer
to file termination reports after every project
completion with the nearest public employment
office is an indication that respondents were
employees.
Records show that respondents were not served by
petitioner with notices, verbal or written, informing
them of the particular acts for which their dismissal is
sought. Neither were they required to give their side
regarding the alleged serious misconduct imputed
against them.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
We thus sustain the Court of Appeals ruling that
respondents were deprived of both their substantive
and procedural rights to due process and, therefore,
the termination of their employment is illegal.
57. ACEVEDO v ADVANSTAR, GR 157656
FACTS:
The Advanstar Company Inc. (ACI) was
engaged in the distribution and sale of various brands
of liquor and alcoholic spirits, including the Tanduay
brand. To effectively launch its vigorous marketing
operations, ACI hired several salesmen, one of whom
was Tony Jalapadan. On September 1, 1994, ACI
executed an Agreement for the Sale of Merchandise
with Jalapadan for a period of one year, renewable
for another year under the same terms and conditions.
Under the agreement, the parties agreed, inter alia,
that Jalapadan would promote and sell products of
ACI, solicit from customers and outlets within his
designated territory, collect payments from such
customers and account the same to ACI. Jalapadan
was provided with a 6-wheeler truck to facilitate the
sale and delivery of products to customers and outlets
from his base of operations. Jalapadan was also
authorized to employ and discharge a driver and other
assistants as he deemed necessary. It was stipulated,
however, that the hired hands would be considered
his employees, and that he alone would be liable
for their compensation and actual expenses,
including meals while on duty.
Jalapadan hired Arnulfo Acevedo as the
driver of the truck assigned to him by ACI. Acevedo
was tasked to sell and deliver stocks to outlets and
customers, collect payments, and to maintain the
truck in good and clean condition. He reported for
work from 6:00 a.m. to 8:00 or 9:00 p.m. Acevedo
received a daily wage of P152.00 and was paid on a
weekly basis. He also enjoyed sick leave privilege,
which benefit was convertible into cash. Sometime
in June 1998, he received from Jalapadan a salary
differential for the period of December 1997 to June
1998, following a P15.00 increase in his daily wage.
He received his wages from Jalapadan through
vouchers approved by the latter.
80

Sometime in July 1998, Acevedo failed to
comply with Jalapadan’s instructions. At that time,
they were on their way to Plaridel, Misamis Oriental
on board the truck. Jalapadan ordered Acevedo to
alight from the truck, and threatened to leave him
behind to fend for himself. However, Jalapadan later
asked him to return to work and the latter agreed.
On October 7, 1998, Acevedo failed to
report for work. The next day, Jalapadan inquired
why he failed to check and wash the truck. Jalapadan
berated Acevedo and ordered him to get his personal
belongings and leave. Acevedo did as he was told.
Later, Jalapadan urged Acevedo to go back to work,
stating that they were “one big family,” but Acevedo
refused. He then signed a Letterdated October 10,
1998, informing Jalapadan that he was resigning
effective that date.
However, on October 26, 1998, Acevedo
filed a complaint against Jalapadan, ACI and its
general manager, Felipe Loi, for illegal dismissal and
for the recovery of backwages and other monetary
benefits.
ISSUES:
1. WON ACI was the employer of Jalapadan---
YES. LABOR-ONLY CONTRACTOR
2. WON Acevedo is an employee of ACI---
YES
3. WON Acevedo resigned from his
employment---NO
HELD:
ISSUES 1&2:
The pertinent provision of the Labor Code
on labor-only contracting is paragraph 4 of Article
106, which provides:
There is “labor-only”
contracting where the person
supplying workers to an employer
does not have substantial capital or
investment in the form of tools,
equipment, machineries, work
premises, among others, and the
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LABOR STANDARDS LAW
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.
Rule VIII-A, Book III, Section 4(f) of the
Omnibus Rules Implementing the Labor Code further
defines “labor-only” contracting as an arrangement
where the contractor or subcontractor merely recruits,
supplies or places workers to perform a job, work or
service for a principal. In labor-only contracting, the
following elements are present:
(a) The contractor or
subcontractor does not have
substantial capital or investment to
actually perform the job, work or
service under its own account and
responsibility;
(b) The employees
recruited, supplied or placed by
such contractor or subcontractor,
are performing activities which are
directly related to the main
business of the principal.
In such case, the law creates an employee-
employer relationship so that labor laws may not be
circumvented. The principal employer becomes
solidarily liable with the labor-only contractor for all
the rightful claims of the employees. The labor-only
contractor is considered merely as an agent of the
employer, the employer having been made, by law,
responsible to the employees of the labor-only
contractor as if such employees had been directly
employed by it.
81

On the other hand, permissible job
contracting or subcontracting refers to an
arrangement whereby a principal agrees to put out or
farm out with the contractor or subcontractor the
performance or completion of a specific job, work or
service within a definite or predetermined period
regardless of whether such job, work or service is to
be performed or completed within or outside the
premises of the principal.
A person is considered engaging in
legitimate job contracting or subcontracting if the
following conditions concur:
(a) The contractor or
subcontractor carries on a distinct
and independent business and
undertakes to perform the job, work
or service on its own account and
under its own responsibility
according to its own manner and
method, and free from the control
and direction of the principal in all
matters connected with the
performance of the work except as
to the results thereof;
(b) The contractor or
subcontractor has substantial
capital or investment; and
(c) The agreement
between the principal and
contractor or subcontractor assures
the contractual employees
entitlement to all labor and
occupational safety and health
standards, free exercise of the right
to self-organization, security of
tenure, and social and welfare
benefits.
The test to determine the existence of an
independent contractorship is whether one who
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LABOR STANDARDS LAW
claims to be an independent contractor has
contracted to do the work according to his own
methods and without being subject to the
employer’s control except only as to the results.
Each case must be determined by its own facts and
all the features of the relationship are to be
considered.
In the case of Vinoya v. NLRC, the Court
declared that it is not enough to show substantial
capitalization or investment in the form of tools,
equipment, etc. to determine whether one is an
independent contractor. Other factors that may be
considered include the following: whether or not the
contractor is carrying on an independent business; the
nature and extent of the work; the skill required; the
term and duration of the relationship; the right to
assign the performance of specified pieces of work;
the control and supervision of the work to another;
the employer’s power with respect to the hiring,
firing and payment of the contractor’s workers; the
control of the premises; the duty to supply premises,
tools, appliances, materials and labor; and the mode
and manner or terms of payment.
In the present case, the respondents failed to
prove that respondent Jalapadan was an independent
contractor. Indeed, the substantial evidence on record
shows that he was merely a labor-only contractor.
First. The respondents failed to adduce a
scintilla of evidence that respondent Jalapadan had
any substantial capital or investment, such as tools
and equipment, to perform the work contracted for.
There is even no evidence that respondent Jalapadan
had any assets, or that he maintained an office, staff
or a terminal for the truck entrusted to him by
respondent ACI.
Second. Respondent Jalapadan bound and
obliged himself to work exclusively for respondent
ACI during the terms of the agreement.
Third. Under the agreement, respondent ACI
had the right to control not only the end to be attained
but also the manner and means to be used in
82
 LABOR STANDARDS LAW

accomplishing that end or purpose. Aside from compensation. He had no other means of income
Jalapadan’s duties/obligations as salesman, because he was obliged, under the agreement, to
respondent ACI could require him to perform other devote all his time for respondent ACI. Respondent
duties and obligations. Respondent Jalapadan was, Jalapadan’s claim that he sold the products of the
likewise, mandated to obey all rules, regulations, respondent ACI for a marked-up price as his
orders, and instructions, whether oral or written, of commission is belied by their agreement, which
respondent ACI. He was obliged to work only in the precisely prohibited him from selling such products
territory assigned to him, which may be altered at any at a different price. Respondent Jalapadan was only
time upon the discretion of ACI. He was also entitled to a commission based on their booked sales.
prohibited from overpricing or underpricing the Aside from the fact that such commission was not
products of respondent ACI, and was required to sell fixed, there is no evidence on record how much, if
the same according to the prices dictated solely by it. any, respondent Jalapadan received from the
While Jalapadan was entitled to a monthly respondent ACI by way of commission.
compensation of P3,590.00 payable on a bi-monthly
basis and an unspecified commission based on
Considering all these, then, the Court
booking sales fully remitted to respondent ACI, the
concludes that the petitioner’s wages must have
latter had the absolute right to change, at any time,
been paid for by respondent ACI through
the amount and/or all the payments of such
respondent Jalapadan, its labor-only contractor.
compensation and commission. Moreover, notice of
such changes was only for information purposes.
Furthermore, Jalapadan was obliged to inform
respondent ACI of his activities, situation or
whereabouts. Since he did not have any truck for the
delivery of products to customers or outlets, he had to
ISSUE 3:
rely on the truck entrusted to him by respondent ACI
or, in lieu thereof, a traveling allowance of P600.00 a
month which could even be changed. Respondent Ruling of NLRC and CA which the SC agrees with:
Jalapadan was prohibited from incurring any other
expenses unless permission was first secured from
The only incident
respondent ACI. He was prohibited from using the
from which complainant
truck for purposes other than the performance of his
drew the conclusion that
duties and responsibilities under the agreement.
he was dismissed from
Respondent Jalapadan was mandated to maintain the
work is when he was
truck and its accessories in clean and good order and
allegedly told to
condition. The agreement was for a period of one
disembark from the
year, renewable under the same terms and conditions
vehicle. Nothing on
but the parties could terminate the agreement upon
record shows that he was
notice to the other. Moreover, while respondent ACI
terminated from work. On
did not fix or impose any quota on respondent
the contrary, complainant
Jalapadan, it reserved the right to do so.
himself reveals that
previously (in July 1995)
Fourth. Respondent Jalapadan was obliged to he was also told to
pay the petitioner’s monthly wage of P3,648.00, as disembark to be left on the
well as that of his helper, another P4,000.00 a month, road by an angry
totaling P7,648.00, exclusive of other expenses such Jalapadan, the latter went
as meals, gasoline, and the upkeep of the vehicle. On back to fetch him and told
the other hand, respondent Jalapadan received from him that “we are just one
respondent ACI only P3,590.00 a month as family.” Evidently, [these]

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 83

 LABOR STANDARDS LAW

incidents were mere

expressions of anger on HOPE AND PRAY FOR
the part of Jalapadan YOUR CONSIDERATION AND I
without intention of REMAIN PRAYING FOR THE
terminating his CONTINUOUS SUCCESS OF
employment. Rather, it YOUR MOST PROGRESSIVE
was complainant as COMPANY AND I HAVE NO
admitted by him – who, CLAIM WHATSOEVER.
this time, refused to return
to work…
HANDTHUMBMARK
VERY TRULY YOURS,

When he testified before the Labor Arbiter,

the petitioner admitted that he was not dismissed
from employment. In fact, respondent Jalapadan
appealed to the petitioner to go back to work, and the
latter spurned such plea. The Court finds, however,
that contrary to the rulings of the NLRC and the CA,
the petitioner did not resign from his employment.
Reliance on the handwritten letter of resignation
dated October 10, 1998 signed and thumbmarked by
the petitioner is misplaced. The handwritten letter
of resignation signed by the petitioner is inconsistent
with the respondents’ claim that respondent Jalapadan
was the petitioner’s employer. This is so because the
said letter is addressed to Tanduay Corporation, and
not to respondent Jalapadan, thus:
TANDUAY CORPORATION
OZAMIS BRANCH
(SGD.)________
HANDTHUMBMARK
ARNULFO ACEBEDO
Neither the petitioner nor the respondents
explained why the letter was addressed to Tanduay
Corporation. Significantly, respondent Jalapadan did
not deny the petitioner’s claim that the letter was
handwritten by him (Jalapadan). If such claim were
true, there is neither rhyme nor reason why Tanduay
Corporation was its addressee. Moreover, it appears
that the letter was coursed through respondent
Jalapadan as salesman of the said corporation, which
is antithetical to the respondents’ claim that he was
the petitioner’s employer and an independent
contractor of respondent ACI.

THRU: MR. TONY

JALAPADAN, SALESMAN
58. Big AA Manufacturer vs. Antonio, G.R. No.
1608504, March 3, 2006
SIR:
Facts:
I HAVE THE HONOR TO
TENDER MY RESIGNATION, Petitioner is a sole proprietorship registered in the
EFFECTIVE OCT. 10, 1998, BY name of its proprietor, Enrico E. Alejo, with office
address at 311 Barrio Santol, Balagtas, Bulacan.
REASON THAT I AM
SEARCHING FOR BETTER
On January 13, 2000, herein respondents Eutiquio
INCOME. BY VIRTUE THAT Antonio,Jay Antonio, Felicisimo Antonio, Leonardo
MY SALARY CURRENTLY IS Antonio, Sr. and Roberto Fabian filed a complaint for
NOT SUFFICIENT FOR MY illegal lay-off and illegal deductions before the
FAMILY. NLRC’s Regional Arbitration Branch No. III. They

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 84


claimed that they were dismissed on January 11, 2000
and sought separation pay from petitioner.
In respondents’ position paper,they alleged that as
regular employees, they worked from 8:00 a.m. to
5:00 p.m. at petitioner’s premises using petitioner’s
tools and equipment and they received P250 per day.
Eutiquio was employed as carpenter-foreman from
1991-1999; Jay as carpenter from 1993-1999;
Felicisimo as carpenter from 1994-1999; and
Leonardo, Sr. also as carpenter from 1997-1999.
According to respondents, they were dismissed
without just cause and due process; hence, their
prayer for reinstatement and full backwages.
On the other hand, petitioner denied that respondents
were its regular employees. Instead, petitioner
claimed that Eutiquio Antonio was one of its
independent contractors who used the services of the
other respondents. According to petitioner, its
independent contractors were paid by results and
were responsible for the salaries of their own
workers. Allegedly, there was no employer-employee
relationship between petitioner and respondents.
However, petitioner stated it allowed respondents to
use its facilities to meet job orders.
Petitioner also denied that respondents were laid-off,
since they were project employees only. It added that
since Eutiquio Antonio had refused a job order of
office tables, their contractual relationship ended.
On June 1, 2000, the Labor Arbiter rendered a
decisionordering petitioner to pay separation pay and
backwages. It ruled that respondents were regular
employees because their work as carpenters was
necessary and desirable in petitioner’s business.
Since Eutiquio worked in petitioner’s premises and
was without substantial capital or investment in the
form of tools, equipment, machinery or work
premises, the Labor Arbiter held that Eutiquio was
not an independent contractor. Noting the absence of
contracts providing the duration of respondents’
employment and of reports of project completion to
the Department of Labor and Employment (DOLE),
the Labor Arbiter also rejected petitioner’s allegation
that respondents were project employees. The Labor
Arbiter further held that respondents were
constructively dismissed when the Implementing
Guidelines changed their status from regular
employees to project employees.
On appeal, the NLRC modified the Labor Arbiter’s
decision by ordering petitioner to reinstate
respondents to their former positions or to pay them
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
separation pay in case reinstatement was no longer
feasible, with full backwages in either case. It ruled
that respondents were regular employees, not
independent contractors. It further held that petitioner
failed to justify its reason for terminating respondents
and its failure to comply with the due process
requirements.
Issue:
Whether or not respondents were regular employees
and were illegally dismissed.
Ruling:
Respondents are petitioner’s regular employees.
Respondents were employed for more than one year
and their work as carpenters was necessary or
desirable in petitioner’s usual trade or business of
manufacturing office furniture. Under Article 280 of
the Labor Code, the applicable test to determine
whether an employment should be considered regular
or non-regular is the reasonable connection between
the particular activity performed by the employee in
relation to the usual business or trade of the
employer.
True, certain forms of employment require the
performance of usual or desirable functions and
exceed one year but do not necessarily result to
regular employment under Article 280 of the Labor
Code.Some specific exceptions include project or
seasonal employment. Yet, in this case, respondents
cannot be considered project employees. Petitioner
had neither shown that respondents were hired for a
specific project the duration of which was determined
at the time of their hiring nor identified the specific
project or phase thereof for which respondents were
hired.
We also agree that Eutiquio was not an independent
contractor for he does not carry a distinct and
independent business, and he does not possess
substantial capital or investment in tools, equipment,
machinery or work premises.He works within
petitioner’s premises using the latter’s tools and
materials, as admitted by petitioner. Eutiquio is also
under petitioner’s control and supervision. Attesting
to this is petitioner’s admission that it allowed
respondents to use its facilities for the "proper
implementation" of job orders. Moreover, the
Implementing Guidelines regulating attendance,
overtime, deadlines, penalties; providing petitioner’s
right to fire employees or "contractors"; requiring the
85

carpentry division to join petitioner’s exercise
program; and providing rules on machine
maintenance, all reflect control and supervision over
respondents.
Petitioner likewise alleges that it did not dismiss
respondents as they were not its regular employees;
that respondents failed to sufficiently establish the
fact of illegal dismissal; and that respondents
abandoned the work after it issued the Implementing
Guidelines.
Having ruled that respondents are regular employees,
we shall proceed to determine whether respondents
have, as petitioner contends, abandoned their work,
or they have been illegally dismissed.
The consistent rule is that the employer must
affirmatively show rationally adequate evidence that
the dismissal was for a justifiable cause, failing in
which would make the termination illegal, as in this
case.
For accusing respondents of abandonment, petitioner
must present evidence (1) not only of respondents’
failure to report for work or absence without valid
reason, but (2) also of respondents’ clear intention to
sever employer-employee relations as manifested by
some overt acts. The second element is the more
determinative factor.
Here, petitioner’s argument in support of its
abandonment charge was that respondents may have
resented its issuance of the Implementing Guidelines.
This, in our view, fails to establish respondents’
intention to abandon their jobs. On the contrary, by
filing the complaint for illegal dismissal within two
days of their dismissal on January 11, 2000 and by
seeking reinstatement in their position paper,
respondents manifested their intention against
severing their employment relationship with
petitioner and abandoning their jobs. It is settled that
an employee who forthwith protests his layoff cannot
be said to have abandoned his work.
Finally, Article 279 of the Labor Code,provides that a
regular employee who is unjustly dismissed from
work is 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. If
reinstatement is no longer feasible, separation pay
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LABOR STANDARDS LAW
equivalent to one month salary for every year of
service should be awarded as an alternative. This has
been our consistent ruling in the award of separation
pay to illegally dismissed employees in lieu of
reinstatement.
59.) DOLE Philippines, Inc. Vs. Esteva
G.R. No. 161115, Nov. 30, 2006
Petition for Review on Certiorari under
Rule 45 of the revised Rules of Civil Procedure
seeking the reversal of the Decision, dated 20 May
2002, and the Amended Decision, dated 27
November 2003, both rendered by the Court of
Appeals in CA-G.R. SP No. 63405, which declared
herein petitioner Dole Philippines, Inc. as the
employer of herein respondents, Medel Esteva and 86
others; found petitioner guilty of illegal dismissal;
and ordered petitioner to reinstate respondents to
their former positions and to pay the latter
backwages.
Facts
Petitioner is a corporation engaged
principally in the production and processing of
pineapple for the export market. Respondents are
members of the Cannery Multi-Purpose Cooperative
(CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938, otherwise
known as the Cooperative Code of the Philippines.
Pursuant to the Service Contract, CAMPCO members
rendered services to petitioner. The number of
CAMPCO members that report for work and the type
of service they performed depended on the needs of
petitioner at any given time. Although the Service
Contract specifically stated that it shall only be for a
period of six months, i.e., from 1 July to 31
December 1993, the parties had apparently extended
or renewed the same for the succeeding years without
executing another written contract. It was under
these circumstances that respondents came to work
for petitioner. DOLE organized a Task Force that
conducted an investigation into the alleged labor-only
contracting activities of the cooperatives. The Task
Force identified six cooperatives that were engaged
in labor-only contracting, one of which was
CAMPCO. In this case, respondents alleged that they
started working for petitioner at various times in the
years 1993 and 1994, by virtue of the Service
Contract executed between CAMPCO and petitioner.
All of the respondents had already rendered more
than one year of service to petitioner. While some of
86

the respondents were still working for petitioner,
others were put on “stay home status” on varying
dates in the years 1994, 1995, and 1996 and were no
longer furnished with work thereafter. Together,
respondents filed a Complaint with the NLRC for
illegal dismissal, regularization, wage differentials,
damages and attorney’s fees. Petitioner denied that
respondents were its employees. It explained that it
found the need to engage external services to
augment its regular workforce, which was affected by
peaks in operation, work backlogs, absenteeism, and
excessive leaves. It used to engage the services of
individual workers for definite periods specified in
their employment contracts and never exceeding one
year. However, such an arrangement became the
subject of a labor case, in which petitioner was
accused of preventing the regularization of such
workers.
Issues
 Whether or not the court of appeals
was correct when it made its own
factual findings and disregarded the
factual findings of the labor arbiter
and the NLRC.
 Whether or not CAMPCO was a
mere labor-only contractor.
Ruling
The Court in the exercise of its equity jurisdiction
may look into the records of the case and re-examine
the questioned findings. As a corollary, this Court is
clothed with ample authority to review matters, even
if they are not assigned as errors in their appeal, if it
finds that their consideration is necessary to arrive at
a just decision of the case. The same principles are
now necessarily adhered to and are applied by the
Court of Appeals in its expanded jurisdiction over
labor cases elevated through a petition for certiorari;
thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis
reversed the ruling of the NLRC.
On the second issue, CAMPCO was a mere labor-
only contractor. First, although petitioner touts the
multi-million pesos assets of CAMPCO, it does well
to remember that such were amassed in the years
following its establishment. In 1993, when
CAMPCO was established and the Service Contract
between petitioner and CAMPCO was entered into,
CAMPCO only had P6,600.00 paid-up capital, which
could hardly be considered substantial. It only
managed to increase its capitalization and assets in
the succeeding years by continually and defiantly
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
engaging in what had been declared by authorized
DOLE officials as labor-only contracting. Second,
CAMPCO did not carry out an independent business
from petitioner. It was precisely established to render
services to petitioner to augment its workforce during
peak seasons. Petitioner was its only client. Even as
CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes;
the tools, machineries, and equipment actually used
by CAMPCO members when rendering services to
the petitioner belonged to the latter. Third, petitioner
exercised control over the CAMPCO members,
including respondents. Petitioner attempts to refute
control by alleging the presence of a CAMPCO
supervisor in the work premises. Yet, the mere
presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO
had control over its members. Section 8(1), Rule
VIII, Book III of the implementing rules of the Labor
Code, as amended, required for permissible job
contracting that the contractor undertakes the contract
work on his account, under his own responsibility,
according to his own manner and method, free from
the control and direction of his employer or principal
in all matters connected with the performance of the
work except as to the results thereof. As alleged by
the respondents, and unrebutted by petitioner,
CAMPCO members, before working for the
petitioner, had to undergo instructions and pass the
training provided by petitioner’s personnel. It was
petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO
members worked within petitioner’s plantation and
processing plants alongside regular employees
performing identical jobs, a circumstance recognized
as an indicium of a labor-only contractorship. Fourth,
CAMPCO was not engaged to perform a specific and
special job or service. In the Service Contract of
1993, CAMPCO agreed to assist petitioner in its
daily operations, and perform odd jobs as may be
assigned. CAMPCO complied with this venture by
assigning members to petitioner. Apart from that, no
other particular job, work or service was required
from CAMPCO, and it is apparent, with such an
arrangement, that CAMPCO merely acted as a
recruitment agency for petitioner. Since the
undertaking of CAMPCO did not involve the
performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as
a labor-only contractor. Lastly, CAMPCO members,
including respondents, performed activities directly
related to the principal business of petitioner. They
worked as can processing attendant, feeder of canned
pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing
attendant, and etc., functions which were, not only
87

directly related, but were very vital to petitioner’s
business of production and processing of pineapple
products for export.
The declaration that CAMPCO is indeed
engaged in the prohibited activities of labor-
only contracting, then consequently, an
employer-employee relationship is deemed
to exist between petitioner and respondents,
since CAMPCO shall be considered as a
mere agent or intermediary of petitioner.
Since respondents are now recognized as
employees of petitioner, this Court is tasked
to determine the nature of their
employment. In consideration of all the
attendant circumstances in this case, this
Court concludes that respondents are regular
employees of petitioner. As such, they are
entitled to security of tenure. They could
only be removed based on just and
authorized causes as provided for in the
Labor Code, as amended, and after they are
accorded procedural due process. Therefore,
petitioner’s acts of placing some of the
respondents on “stay home status” and not
giving them work assignments for more than
six months were already tantamount to
constructive and illegal dismissal.
60.) G.R. No. 147566 December 6, 2006
SAN MIGUEL CORPORATION, petitioner vs.
NATIONAL LABOR RELATIONS
COMMISSION AND RAFAEL MALIKSI,
respondent.
FACTS:
On 16 October 1990, Rafael M. Maliksi filed
a complaint against the San Miguel Corporation-
Magnolia Division, herein referred to as SMC and
Philippine Software Services and Education
Center herein referred to as PHILSSEC to compel
the said respondents to recognize him as a regular
employee. He amended the complaint on 12
November 1990 to include the charge of illegal
dismissal because his services were terminated on
31 October 1990.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The complainant’s employment record
indicates that he rendered service with Lipercon
Services from 1 April 1981 to February 1982 as
budget head assigned to SMC-Beer Division, then
from July 1983 to April 1985 with Skillpower,
Inc., as accounting clerk assigned to SMC-
Magnolia Division, then from October 1988 to
1989 also with Skillpower, Inc. as acting clerk
assigned to SMC-Magnolia Finance, and from
October 1989 to 31 October 1990 with PHILSSEC
assigned to Magnolia Finance as accounting clerk.
The complainant considered himself as an
employee of SMC-Magnolia. Lipercon Services,
Skillpower, Inc. and PHILSSEC are labor-only
contractors and any one of which had never been
his employer. His dismissal, according to him, was
in retaliation for his filing of the complaint for
regularization in service. His dismissal was illegal
there being no just cause for the action. He was
not accorded due process neither was his dismissal
reported to the Department of Labor and
Employment.
SMC likewise contends that PHILSSEC
exercised exclusive managerial prerogative over
the complainant as to hiring, payment of salary,
dismissal and most importantly, the control over
his work. SMC was interested only in the result of
the work specified in the contract but not as to the
means and methods of accomplishing the same.
Moreover, PHILSSEC has substantial capital of its
own. It has an IBM system, 3 computers, 17 IBM
or IBM-compatible computers; it has a building
where the computer training center and main
office are located. What it markets to clients are
computer programs and training systems on
computer technology and not the usual labor or
manpower supply to establishment concerns.
Moreover, what PHILSSEC set up employing the
complainant, among others, has no relation to the
principal business of SMC, which is food and
beverage..
The Labor Arbiter declared Maliksi a
regular employee of PHILSSEC and absolved
SMC from liability. Maliksi appealed to the
88

NLRC. In turn, in a decision dated January 26,
1998, the NLRC reversed that of the Labor Arbiter
by declaring Maliksi a regular employee of the
petitioner and ordering the latter to reinstate him
without loss of seniority rights and with full
benefits.
Issue:
WHETHER OR NOT PRIVATE
RESPONDENT IS A REGULAR EMPLOYEE
OF PETITIONER SMC DESPITE ITS
FINDINGS THAT PHILSSEC IS AN
INDEPENDENT JOB CONTRACTOR?
(affirmative)
Ruling:
SMC concedes that Maliksi, before his
employment with PHILSSEC, worked in SMC
from November 1988 to April 1990, but as
employee of Skillpower and that he was
previously assigned to SMC between 1981 up to
February 1985, “for periods spread apart.” The
Labor Arbiter found, as earlier stated, that Maliksi
rendered service with Lipercon from 1 April 1981
to February 1982 as budget head assigned to
SMC-Beer Division; from July 1983 to April
1985 with Skillpower as accounting clerk
assigned to SMC-Magnolia Division, then from
October 1988 to 1989 also with Skillpower as
acting clerk assigned to SMC-Magnolia Finance,
and from October 1989 to 31 October 1990 with
PHILSSEC assigned to Magnolia Finance as
accounting clerk. In all, it appears that, while
under the employ of either Lipercon or Skillpower,
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Maliksi has undisputedly rendered service with
SMC for at least three years and seven months.
The Court takes judicial notice of the fact
that Lipercon and Skillpower were declared to be
labor-only contractors, providing as they do
manpower services to the public for a fee. The
existence of an employer-employee relationship is
factual and we give due deference to the factual
findings of both the NLRC and the CA that an
employer-employee relationship existed between
SMC and Maliksi. Indeed, having served SMC for
an aggregate period of more than three (3) years
through employment contracts with these two
labor contractors, Maliksi should be considered as
SMC’s regular employee. The hard fact is that he
was hired and re-hired by SMC to perform
administrative and clerical work that was
necessary to SMC’s business on a daily basis.
The act of hiring and re-hiring the
petitioners over a period of time without
considering them as regular employees
evidences bad faith on the part of private
respondent. The public respondent made a
finding to this effect when it stated that the
subsequent re-hiring of petitioners on a
probationary status “clearly appears to be a
convenient subterfuge on the part of management
to prevent complainants (petitioners) from
becoming regular employees.”
Issue:
Whether or not individual private respondents
should first comply with certain requirements, like
89

submission of NBI and police clearances and
submission to physicak and medical examinations
and etc?
Ruling:
Considering that the clearances and
examinations sought by petitioners from private
respondents are not 'periodic' in nature but are
made preconditions for reinstatement, as in fact
the petition filed alleged that reinstatement shall
be effective upon compliance with such
requirements, which should not be the case
because this is not a case of initial hiring, the
workers concerned having rendered years of
service to petitioners who are considered direct
employers, and that regularization is a labor
benefit that should apply to all qualified
employees similarly situated and may not be
denied merely because some employees were
allegedly not parties to or were not impleaded
in the voluntary arbitration case, even as the
finding of Labor Arbiter Genilo is to the
contrary, this Court finds no grave abuse of
discretion committed by Labor Arbiter Genilo
in issuing the questioned order of October 20,
1988.
61. Eparwa Security and Janitorial Services vs.
Liceo De Cagayan University
Facts:
Eparwa and LDCU, through their
representatives, entered into a Contract for Security
Services. Subsequently, 11 security guardswhom
Eparwa assigned to LDCU filed a complaint before
the NLRC-RAB against both Eparwa and LDCU for
underpayment of salary, legalholiday pay, 13th month
pay, rest day, service incentive leave, night shift
differential, overtime pay, and payment for attorney's
fees. LDCU madea cross-claim and prayed that
Eparwa should reimburse LDCU for any payment to
the security guards.The LA found that the security
guards are entitled to wage differentials and premium
for holiday and rest day work. The LA held Eparwa
and LDCU solidarily liable pursuant to Article 109 of
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LABOR STANDARDS LAW
the Labor Code and likewise orderd Eparwa to
reimburse LDCU for whateveramount the latter may
be required to pay the security guards. On appeal to
the NLRC, Eparwa and LDCU was held solidarily
liable for the wagedifferentials and premium for
holiday and rest day work, but the NLRC did not
require Eparwa to reimburse LDCU for its payments
to thesecurity guards. Upon motion for
reconsideration, NLRC declared that although
Eparwa and LDCU are solidarily liable to the
security guards forthe monetary award, LDCU alone
is ultimately liable ordering it to reimburse Eparwa
for payments made to the contractual employees.
Uponappeal to the CA, the appellate court allowed
LDCU to claim reimbursement from Eparwa. Eparwa
then filed an action for certiorari before the SC.
Issue:
Whether or not LDCU alone is ultimately liable to
the security guards for the wage differentials and
premium for holiday and rest daypay without any
right of reimbursement from Eparwa.
Ruling:
This joint and several liability of the
contractor and the principal is mandated by the Labor
Code to assure compliance of theprovisions therein
including the statutory minimum wage. The
contractor is made liable by virtue of his status as
direct employer. The principal,on the other hand, is
made the indirect employer of the contractor's
employees for purposes of paying the employees
their wages should thecontractor be unable to pay
them. This joint and several liability facilitates, if not
guarantees, payment of the workers' performance of
any work,task, job or project, thus giving the workers
ample protection as mandated by the 1987
Constitution. For the security guards, the actual
source of the payment of their wage differentials and
premium for holiday and rest day work does not
matter as long as they are paid. This is the import of
Eparwa and LDCU's solidary liability. Creditors,
such as the security guards, may collect from anyone
of the solidary debtors. Solidary liabilitydoes not
mean that, as between themselves, two solidary
debtors are liable for only half of the payment.
LDCU's ultimate liability comes intoplay because of
the expiration of the Contract for Security Services.
90

There is no privity of contract between the security
guards and LDCU, butLDCU's liability to the
security guards remains because of Articles 106, 107
and 109 of the Labor Code. Eparwa is already
precluded from askingLDCU for an adjustment in the
contract price because of the expiration of the
contract, but Eparwa's liability to the security guards
remainsbecause of their employer-employee
relationship. In lieu of an adjustment in the contract
price, Eparwa may claim reimbursement from
LDCUfor any payment it may make to the security
guards. However, LDCU cannot claim any
reimbursement from Eparwa for any payment it
maymake to the security guards.
62. Lapanday Agri Development Corp., vs. Court of
Appeals, 324 SCRA 39
FACTS:
On June 1986 private respondent and plaintiff entered
into a Guard Service Contract. Respondent 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. This was followed on November 1,
1984 by Wage Order No. 6 which 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" (Sec. 6 and Sec. 9, Wage Orders No.
5 and 6, respectively).
- Respondent demanded that its Guard Service
Contract with defendant be upgraded in compliance
with Wage Order Nos. 5 and 6. Plaintiff refused.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Their Contract expired on June 6, 1986 without the
rate adjustment called for Wage Order Nos. 5 and 6
being implemented. The security agency then filed a
case for the collection of a sum of money with the
regional Trial Court that had jurisdiction over the
case. Lapanday opposed, stating the NLRC was the
proper forum for the case.
ISSUES:
1. WON RTC has jurisdiction over the case
2. WON petitioner is liable to the private respondent
for the wage adjustments provided under Wage Order
Nos. 5 and 6 and for attorney's fees
RULING:
1. YES
The enforcement of the 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. The RTC has jurisdiction
over the subject matter of the present case. 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.
The liability of the petitioner to reimburse the
respondent only arises if and when respondent
actually pays its employees the increases granted by
Wage Order Nos. 5 and 6. Payment, which means not
only the delivery of money but also the performance,
in any other manner, of the obligation, is the
operative fact which will entitle either of the solidary
91

debtors to seek reimbursement for the share which
corresponds to each of the debtors.
It is not disputed that the private respondent has not
actually paid the security guards the wage increases
granted under the Wage Orders in question. Neither is
it alleged that there is an extant claim for such wage
adjustments from the security guards concerned,
whose services have already been terminated by the
contractor. 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 by recovering wage increases, for its own
benefit.
Finally, considering that the private respondent has
no cause of action against the petitioner, private
respondent is not entitled to attorney's fees.
Petition GRANTED. The complaint of private
respondent COMMANDO SECURITY SERVICE
AGENCY, INC. is hereby DISMISSED.
63. Escario vs. NLRC, 333 SCRA 257
[2000]
FACTS:
Petitioners worked as merchandisers for CMC, a
company engaged in manufacturing and distributing
food products. They filed a case against CMC to
regularize their employment status. Pending
determination of the case, D.L. Admark, a
promotional firm, dismissed the petitioners. Hence,
they amended their complaint to include illegal
dismissal as a cause of action and impleaded D.L.
Admark as party-defendant.
The issue brought to the fore is whether petitioners
are employees of CMC or D.L. Admark. IDESTH
The Labor Arbiter ruled that petitioners should be
reinstated by CMC as they are employees engaged in
activities necessary and desirable in the usual
business of CMC. The NLRC, on the other hand,
ruled that D.L. Admark is a legitimate independent
contractor, which should be the one to reinstate the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
petitioners with backwages.
Hence, this petition.
ISSUE: whether petitioners are employees of CMC
or D.L. Admark. In resolving this, it is necessary to
determine whether D.L. Admark is a labor-only
contractor or an independent contractor.
HELD:the Supreme Court affirmed the decision of
the NLRC, ruling that based on the criteria for
determining whether there is labor-only contracting
or job contracting, the status of D.L. Admark as a job
contractor or independent contractor, hence, the true
employer of petitioners, was established in this case.
The Court also affirmed the NLRC finding that D.L.
Admark had no just cause in dismissing petitioners
for allegedly disowning them as their employer.
There is labor-only contracting when the contractor
or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal. In labor-only contracting, the following
elements are present:
(a) The person supplying workers to an
employer does not have
substantial capital or
investment in the form of
tools, equipment,
machineries, work premises,
among others; and
(b) The workers recruited and placed by
such person are performing
activities which are directly
related to the principal
business of the employer. 7
In contrast, there is permissible job contracting when
a principal agrees to put out or farm out with a
contractor or a subcontractor the performance or
completion of a specific job, work or service within a
definite or predetermined period, regardless of
whether such job or work or service is to be
performed or completed within or outside the
premises of the principal. In this arrangement, the
92
 LABOR STANDARDS LAW

following conditions must concur: firm engaged in promotional,

advertising, marketing and
(a) The contractor carries on a distinct merchandising activities.
and independent business and
undertakes the contract work 2) The service contract between CMC
on his account under his own and D.L. Admark clearly
responsibility according to provides that the agreement is
his own manner and method, for the supply of sales
free from the control and promoting merchandising
direction of his employer or services rather than one of
principal in all matters manpower placement. 11
connected with the
performance of his work 3) D.L. Admark was actually engaged in
except as to the results several activities, such as
thereof; and cdphil advertising, publication,
promotions, marketing and
(b) The contractor has substantial capital or merchandising. It had several
investment in the form of tools, equipment, merchandising contracts with
machineries (sic), work premises, and other materials companies like Purefoods,
which are necessary in the conduct of his business. Corona Supply, Nabisco
Biscuits, and Licron. It was
likewise engaged in the
publication business as
In the recent case of Alexander Vinoya vs. NLRC, et
evidenced by its magazine
al., 9 this Court ruled that in order to be considered
the "Phenomenon." 12
an independent contractor it is not enough to show
substantial capitalization or investment in the form of 4) It had its own capital assets to carry
tools, equipment, machinery and work premises. In out its promotion business. It
addition, the following factors need be considered: then had current assets
(a) whether the contractor is carrying on an amounting to P6 million and
independent business; (b) the nature and extent of the is therefore a highly
work; (c) the skill required; (d) the term and duration capitalized venture. 13 It had
of the relationship; (e) the right to assign the an authorized capital stock of
performance of specified pieces of work; (f) the P500,000.00. It owned
control and supervision of the workers; (g) the power several motor vehicles and
of the employer with respect to the hiring, firing and other tools, materials and
payment of workers of the contractor; (h) the control equipment to service its
of the premises; (i) the duty to supply premises, tools, clients. It paid rentals of
appliances, materials, and labor; and (j) the mode, P30,020 for the office space
manner and terms of payment. 10 it occupied.

Based on the foregoing criterion, we find that D.L. 64. ABOITIZ HAULERS VS.DIMAPATOI
Admark is a legitimate independent contractor. Sept. 19, 2006, G.R. No. 148619

Among the circumstances that tend to establish the Facts:

status of D.L. Admark as a legitimate job contractor
are:
1) The SEC registration certificate of
D.L. Admark states that it is a
Petitioner Aboitiz Haulers, Inc. is a domestic
corporation principally engaged in the nationwide
and overseas forwarding and distribution of cargoes.
Private respondents MonaoraiDimapatoi, Cecilia
Agawin, Raul Mamate, Emmanuel Guerrero and
GemenianoBigaw worked as checkers in the Mega

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 93


Warehouse, which is owned by the petitioner, located
at the Tabacalera Compound, United Nations Avenue,
Manila.
Respondents maintain that during their
employment with the petitioner, they were not paid
their regular holiday pay, night shift differential, 5-
day service incentive leave, and overtime premium.
They also averred that illegal deductions were being
made on their wages, particularly the contributions
for a Mutual Assistance Fund, a Cash Bond, and
claims for damaged and misrouted cargoes incurred
by petitioner.
On 17 May 1996, respondent Raul Mamate
filed a complaint before the Department of Labor and
Employment (DOLE) for nonpayment of wages and
other benefits, as well as illegal deductions. The other
respondents filed their own complaints. Since the
claims of the respondents exceeded Five Thousand
Pesos (P5,000.00), the case was referred to the
NLRC. Thereafter, respondents filed their complaint
for illegal dismissal and other money claims before
the Arbitration Branch of the NLRC.
Petitioner claims that respondents are not its
employees, rather they are the employees of Grigio
Security Agency and General Services (Grigio), a
manpower agency that supplies security guards,
checkers and stuffers. It allegedly entered into a
Written Contract of Service with Grigio on 1 March
1994. By virtue of the aforementioned Written
Contract of Service, Grigio supplied petitioner with
security guards, checkers and stuffers for petitioner's
Mega Warehouse. The respondents were among the
checkers that were assigned to the petitioner's
warehouse.
Petitioner emphasizes that Grigio retained
control over the respondents by providing their own
supervisors to oversee Grigio's personnel, as well as
time cards to monitor the attendance of its personnel.
Petitioner also alleges that on 9 May 1996, the
respondents left the warehouse and did not report to
work thereafter. As a result of the respondents'
sudden abandonment of their work, there was no
orderly and proper turnover of papers and other
company property in connection with the termination
of the Written Contract for Services.
Respondents, on the other hand, claim that
most of them worked as checkers in petitioner's
warehouse even before 1 March 1994.
Issue:
Whether or not Grigio is a "labor-only"
contractor.
Ruling:
Grigio is a "labor-only" contractor. The first
issue that needs to be resolved is whether Grigio is a
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
"labor-only" contractor, which is tantamount to a
finding that the petitioner is the employer of the
respondents. Article 106 of the Labor Code 24
explains the relations which may arise between an
employer, a contractor and the contractor's employees
thus:
ART. 106. Contractor or
subcontractor. — Whenever an
employer enters into a contract
with another person for the
performance of the former's work,
the employees of the contractor and
of the latter's subcontractor, if any,
shall be paid in accordance with the
provisions of this Code.
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.
The Secretary of Labor may, by appropriate
regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established
under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor
only contracting and job contracting as well as
differentiations within these types of contracting and
determine who among the parties involved shall be
considered the employer for purposes of this Code, to
prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the
person supplying workers to an employer does not
have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such
persons are performing activities which 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.
The first two paragraphs of Art. 106 set the
general rule that a principal is permitted by law to
engage the services of a contractor for the
performance of a particular job, but the principal,
nevertheless, becomes solidarily liable with the
contractor for the wages of the contractor's
employees. The third paragraph of Art. 106, however,
empowers the Secretary of Labor to make
distinctions between permissible job contracting and
"labor-only" contracting, which is a prohibited act
94
 LABOR STANDARDS LAW

further defined under the last paragraph. A finding Labor-only contracting is hereby
that a contractor is a "labor-only" contractor is declared prohibited. For this
equivalent to declaring that there is an employer- purpose, labor-only contracting
employee relationship between the principal and the shall refer to an arrangement where
employees of the supposed contractor, and the "labor- the contractor or subcontractor
only" contractor is considered as a mere agent of the merely recruits, supplies or places
principal, the real employer. Section 7 of the Rules workers to perform a job, work or
Implementing Articles 106 to 109 of the Labor Code, service for a principal, and any of
as amended, reiterates the rules in determining the the following elements are is
existence of employer-employee relationship between present:
employer, contractor or subcontractor, and the
contractor's or subcontractor's employee. i) The contractor or
Section 7. Existence of an subcontractor does not have
employer-employee relationship. substantial capital or
— The contractor or subcontractor investment which relates to the
shall be considered the employer of job, work or service to be
the contractual employee for performed and the employees
purposes of enforcing the recruited, supplied or placed
provisions of the Labor Code and by such contractor or
other social legislation. The subcontractor are performing
principal, however, shall be activities which are directly
solidarily liable with the contractor related to the main business of
in the event of any violation of any the principal; or
provision of the Labor Code, ii) the contractor does not
including the failure to pay wages. exercise the right to control
The principal shall be deemed the employer over the performance of the
of the contractual employee in any of the following work of the contractual
cases, as declared by a competent authority: employee.
a. where there is a labor-only contracting; or The foregoing provisions shall be without
b. where the contracting arrangement falls prejudice to the application of Article 248 (C) of the
within the prohibitions provided in Section 6 Labor Code, as amended.
(Prohibitions) hereof. "Substantial capital or investment" refers to
In determining whether or not a "labor-only" capital stocks and subscribed capitalization in the
contracting exists, Art. 106 of the Labor Code and case of corporations, tools, equipment, implements,
Section 5 of the Rules Implementing Articles 106 to machineries and work premises, actually and directly
109 of the Labor Code, as amended, provides the used by the contractor or subcontractor in the
following criteria: (1) where the person supplying performance or completion of the job, work or
workers to an employer does not have substantial service contracted out.
capital or investment in the form of tools, equipment, The "right to control" shall refer to the right
machineries, work premises, among other things; (2) reserved to the person for whom the services of the
the workers recruited and placed by such persons are contractual workers are performed, to determine not
performing activities which are directly related to the only the end to be achieved, but also the manner and
principal business of such employer; and (3) the means to be used in reaching that end.
contractor does not exercise the right to control the The allegation of the petitioner that Grigio is
performance of the work of the contractual employee. an independent job contractor, and, therefore, this
In order that one is considered by law as a "labor- case is one of permissible job contracting, is without
only" contractor, all three aforementioned criteria basis. In this case, the respondents' work, as
need not be present. If the contractor enters into an warehouse checkers, is directly related to the
arrangement characterized by any one of the criteria principal business of the petitioner. Petitioner also
provided, this would be a clear case of "labor-only exercises the right to control and determines not only
contracting." The clear phrasing of Section 5 of the the end to be achieved, but also the manner and
Rules Implementing means to be used in reaching that end. Lastly,
Articles 106 to 109 of the Labor Code, as petitioner failed to sufficiently prove that Grigio had
amended, support this interpretation. "substantial capital or investment."
Section 5. Prohibition The respondents, as checkers, were
against labor-only contracting. — employed to check and inspect these cargoes, a task

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 95


which is clearly necessary for the petitioner's
business of forwarding and distributing of cargoes.
The petitioner did not dispute the fact that the
respondents were hired as checkers as early as 1992.
The fact that they were employed before the Written
Contract of Services took effect on 24 February 1994,
and continued with their jobs until 1996, after the
said contract had already expired on 24 February
1995, 29 indicates that the respondents' work was
indeed necessary for the petitioner's business. In a
similar case, Guarin v. National Labor Relations
Commission, the workers' contracts were repeatedly
renewed to perform services necessary for the
employer's business. Thus, the Court described the
arrangement as "labor-only" contracting:
The jobs assigned to the petitioners as
mechanics, janitors, gardeners, firemen and
grasscutters were directly related to the business of
Novelty as a garment manufacturer. In the case of
Philippine Bank of Communications vs. NLRC, 146
SCRA 347, we ruled that the work of a messenger is
directly related to a bank's operations. In its
Comment, Novelty contends that the services which
are directly related to manufacturing garments are
sewing, textile cutting, designs, dying, quality
control, personnel, administration, accounting,
finance, customs, delivery and similar other
activities; and that allegedly, "it is only by stretching
the imagination that one may conclude that the
services of janitors, janitresses, firemen, grasscutters,
mechanics and helpers are directly related to the
business of manufacturing garments" (p. 78, Rollo).
Not so, for the work of gardeners in maintaining
clean and well-kept grounds around the factory,
mechanics to keep the machines functioning properly,
and firemen to look out for fires, are directly related
to the daily operations of a garment factory. That fact
is confirmed by Novelty's rehiring the workers or
renewing the contract with Lipercon every year from
1983 to 1986, a period of three (3) years.
As Lipercon was a "labor-only" contractor,
the workers it supplied Novelty became regular
employees of the latter.Where the employees are
tasked to undertake activities usually desirable or
necessary in the usual business of the employer, the
contractor is considered as a "labor-only" contractor
and such employees are considered as regular
employees of the employer.
In addition, Grigio did not undertake the
performance of its service contract according to its
own manner and method, free from the control and
supervision of its principal. The work activities, work
shifts, and schedules of the respondents, including the
time allowed for "recess" were set under the Written
Contract of Services. This clearly indicates that these
matters, which consist of the means and methods by
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
which the work is to be accomplished, were not
within the absolute control of Grigio. By stipulating
these matters in a contract, Grigio is constrained to
follow these provisions and would no longer be able
to exercise the freedom to alter these work shifts and
schedules at its own convenience. Such being the
case, Grigio cannot be considered as an independent
job contractor.
Petitioner's allegation that Grigio retained
control over the respondents by providing supervisors
to monitor the performance of the respondents cannot
be given much weight. Instead of exercising their
own discretion or referring the matter to the officers
of Grigio, Grigio's supervisors were obligated to refer
to petitioner's supervisors any discrepancy in the
performance of the respondents with their specified
duties. The Written Contract of Services provided
that:
5.c. That the GRIGIO personnel, particularly the
supervisors, shall perform the following:
The Supervisor for the warehouse operation
shall monitor the performance and productivity of all
the checkers, jacklifters, stuffers/strippers, forklift
operators, drivers, and helpers. He shall coordinate
with AHI's supervisors regarding the operations at the
Warehouse to ensure safety at the place of work.
He shall see to it that the cargoes are not overlanded,
shortlanded, delivered at a wrong destination, or
misdelivered to consignee's port of destination. Any
discrepancy shall be reported immediately to AHI's
Logistic Manager, Mr. Andy Valeroso.
The control exercised by petitioner's
supervisors over the performance of respondents was
to such extent that petitioner's Warehouse Supervisor,
Roger Borromeo, confidently gave an evaluation of
the performance of respondent MonaoraiDimapatoi,
who likewise felt obliged to obtain such Certification
from Borromeo.
Petitioner's control over the respondents is
evident. And it is this right to control the employee,
not only as to the result of the work to be done, but
also as to the means and methods by which the same
is to be accomplished, that constitutes the most
important index of the existence of the employer-
employee relationship.
Lastly, the law casts the burden on the
contractor to prove that it has substantial capital,
investment, tools, etc. Employees, on the other hand,
need not prove that the contractor does not have
substantial capital, investment, and tools to engage in
job-contracting. In this case, neither Grigio nor the
petitioner was able to present any proof that Grigio
had substantial capital. There was no evidence
pertaining to its capitalization nor its investment in
tools, equipment or implements actually used in the
performance or completion of the job, work, or
96

service that it was contracted to render. Grigio was
merely expected to supply petitioner with manpower
to carry out work necessary for its business, to be
carried out in the manner which petitioner provided
in the contract.
Thus, Grigio is obviously a "labor-only"
contractor since it did not have substantial capital or
investment which relates to the service performed;
the respondents performed activities which were
directly related to the main business of the petitioner;
and Grigio did not exercise control over the
performance of the work of the respondents.
Consequently, the petitioner is considered as the
employer of the respondents.
In prohibiting "labor-only" contracting and
creating an employer-employee relationship between
the principal and the supposed contractor's
employees, the law intends to prevent employers
from circumventing labor laws intended to protect
employees. In the case of Aurora Land Projects Corp.
v. National Labor Relations Commission, this Court
pronounced:
The question as to whether an employer-
employee relationship exists in a certain situation
continues to bedevil the courts. Some businessmen
try to avoid the bringing about of an employer-
employee relationship in their enterprises because
that judicial relation spawns obligations connected
with workmen's compensation, social security,
medicare, minimum wage, termination pay, and
unionism. In light of this observation, it behooves
this Court to be ever vigilant in checking the
unscrupulous efforts of some of our entrepreneurs,
primarily aimed at maximizing their return on
investments at the expense of the lowly workingman.
65. GSIS vs. NLRC, G.R. No. 157647, October 15,
2007, citing Rosewood Processing vs.
NLRC, 290 SCRA 408
Facts:
Tomas Lanting, doing business under the
name and style of Lanting Security and Watchman
Agency (LSWA) entered into a Security Service
Contract to provide security guards to the properties
of the Government Service Insurance System (GSIS)
at the contract rate of P3,000.00 per guard per month.
During the effectivity of the contract, LSWA
requested the GSIS for an upward adjustment of the
contract rate in view of Section 7 of Wage Order No.
1 and Section 3 of Wage Order No. 2, which were
issued by the Regional Tripartite Wages and
Productivity Board-NCR pursuant to Republic Act
No. 6727, otherwise known as the Wage
Rationalization Act.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Acting on the request of LSWA, the GSIS,
through its Board of Trustees and under Board
Resolution No. 207, dated May 24, 1991, approved
the upward adjustments of the contract price from
P3,000.00 to P3,716.07 per guard, per month
effective November 1, 1990 to January 7, 1991, and
P4,200.00 effective January 8, 1991 to May 31, 1991.
LSWA assigned security guards Daniel Fanila, Hector
Moreno, IsauroFerrer, Rubin Wilfredo, Jesus Delima
Jr., Maria Legaspi, Santiago Noto Jr., and Virgilio
Soriano (hereafter complainants) to guard one of
GSIS's properties.
On March 15, 1993, GSIS terminated the
Security Service Contract with LSWA. All the
complainants, except Virgilio Soriano, were absorbed
by the incoming security agency. On March 7, 1994,
complainants filed separate complaints against LSWA
for underpayment of wages and non-payment of labor
standard benefits from March 1991 to March 15,
1993. Virgilio Soriano also complained of illegal
dismissal.
In its Position Paper, LSWA alleged that
complainants were estopped from claiming that they
were underpaid because they were informed that the
pay and benefits given to them were based on the
contract rate of P103.00 per eight hours of work or
about P3,100.00 per month.
On August 9, 1994, LSWA filed a Third-
Party Complaint against GSIS for underpayment of
complainants' wages.
In its Position Paper, GSIS alleged that the
Third-Party Complaint states no cause of action
against it; that LSWA obligated itself in the Security
Service Contract to be solely liable for the
enforcement of and compliance with all existing
labor laws, rules and regulations; that the GSIS Board
of Trustees approved the upward adjustment on a
month-to-month basis, at P4,200 per guard per
month, effective January 8, 1991 to May 31, 1991,
under Board Resolution No. 207 dated May 24, 1991,
which was incorporated in the Security Service
Contract; that GSIS fully paid the services of the
security guards as agreed upon in the Security
Service Contract.
Issues: Whether GSIS is solidarily liable for
payment of complainants-respondnents' salary
differentials.
Ruling:
Yes. Articles 106 and 107 of the Labor Code
provide:
ART. 106. Contractor or
subcontractor. — Whenever an
employer enters into contract with
another person for the performance
97

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 wage 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.
In this case, the GSIS cannot evade liability
by claiming that it had fully paid complainants'
salaries by incorporating in the Security Service
Contract the salary rate increases mandated by Wage
Order Nos. 1 and 2 by increasing the contract price
from P3,000.00 to P3,176.07 per guard per month
effective November 1, 1990 to January 7, 1991, and
P4,200.00 effective January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v. National
Labor Relations Commission, 25 the Court explained
the rationale for the joint and several liability of the
employer, thus:
The joint and several liability of the
employer or principal was enacted to ensure
compliance with the provisions of the Code,
principally those on statutory minimum wage. The
contractor or subcontractor is made liable by virtue of
his or her status as a direct employer, and the
principal as the indirect employer of the contractor's
employees. This liability facilitates, if not guarantees,
payment of the workers' compensation, thus, giving
the workers ample protection as mandated by the
1987 Constitution. This is not unduly burdensome to
the employer. Should the indirect employer be
constrained to pay the workers, it can recover
whatever amount it had paid in accordance with the
terms of the service contract between itself and the
contractor.
Thus, the Court does not agree with the
GSIS's claim that a double burden would be imposed
upon the latter because it would be paying twice for
complainants' services. Such fears are unfounded.
Under Article 1217 of the Civil Code, if the GSIS
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
should pay the money claims of complainants, it has
the right to recover from LSWA whatever amount it
has paid in accordance with the terms of the service
contract between the LSWA and the GSIS.
Joint and solidary liability is simply meant
to assure aggrieved workers of immediate and
sufficient payment of what is due them. This is in line
with the policy of the State to protect and alleviate
the plight of the working class.
66. Republic of the Phils/SSC/SSS vs. Asiapro
Cooperative, G.R. No. 172101, November 23, 2007
Facts:
Respondent Asiapro, as a cooperative, is composed of
owners-members. Under its by-laws, owners-
members are of two categories, to wit: (1) regular
member, who is entitled to all the rights and
privileges of membership; and (2) associate member,
who has no right to vote and be voted upon and shall
be entitled only to such rights and privileges provided
in its by-laws.
In the discharge of the aforesaid primary objectives,
respondent cooperative entered into several Service
Contracts with Stanfilco - a division of DOLE
Philippines, Inc. and a company based in Bukidnon
The owners-members do not receive compensation or
wages from the respondent cooperative. Instead, they
receive a share in the service surplus [10] which the
respondent cooperative earns from different areas of
trade it engages in, such as the income derived from
the said Service Contracts with Stanfilco. The
owners-members get their income from the service
surplus generated by the quality and amount of
services they rendered, which is determined by the
Board of Directors of the respondent cooperative.
In order to enjoy the benefits under the Social
Security Law of 1997, the owners-members of the
respondent cooperative, who were assigned to
Stanfilco requested the services of the latter to
register them with petitioner SSS as self-employed
98
 LABOR STANDARDS LAW

Petitioner:
and to remit their contributions as such. Also, to
comply with Section 19-A of Republic Act No. 1161,
as amended by Republic Act No. 8282, the SSS The [petitioner SSC] has jurisdiction over
contributions of the said owners-members were equal the petition-complaint filed before it by the
[petitioner SSS] under R.A. No. 8282.
to the share of both the employer and the employee.
There is an employer-employee relationship
between [respondent cooperative] and its
SSS said that it is respondent who should register [owners-members].
their owner-members to the SSS as they are the ones
employing the said owner-members. Respondent
[Petitioner] SSC
petitioner SSS, on 12 June 2003, filed a arbitrarily proceeded with the case
Petition before petitioner SSC against the respondent as if it has jurisdiction over the
cooperative and Stanfilco praying that the respondent petition a quo, considering that it
failed to first resolve the issue of
cooperative or, in the alternative, Stanfilco be
the existence of an employer-
directed to register as an employer and to report employee relationship between
respondent cooperative’s owners-members as [respondent] cooperative and its
covered employees under the compulsory coverage owners-members.
of SSS and to remit the necessary contributions in [Respondent] is not an employer
accordance with the Social Security Law of 1997 within the contemplation of the
Labor Law but is a multi-purpose
Respondent cooperative filed its Answer with Motion cooperative created pursuant to
to Dismiss alleging that no employer-employee Republic Act No. 6938 and
composed of owners-members, not
relationship exists between it and its owners-
employees.
members, thus, petitioner SSC has no jurisdiction B. The
over the respondent cooperative. Stanfilco, on the rights and
other hand, filed an Answer with Cross-claim against obligations of the
the respondent cooperative. owners-members
of [respondent]
cooperative are
On 17 February 2004, petitioner SSC issued an Order derived from
denying the Motion to Dismiss filed by the their Membership
Agreements, the
respondent cooperative. The respondent cooperative
Cooperatives By-
moved for the reconsideration of the said Order, but it Laws, and
was likewise denied in another Order issued by the Republic Act No.
6938, and not
SSC dated 16 September 2004. from any contract
of employment or
from the Labor
respondent cooperative filed a Motion for Extension Laws. Moreover,
of Time to File a Petition for Review before the Court said owners-
of Appeals. Subsequently, respondent cooperative members enjoy
filed a Manifestation stating that it was no longer rights that are not
filing a Petition for Review. In its place, respondent consistent with
being mere
cooperative filed a Petition forCertiorari before the
employees of a
Court of Appeals. company, such as
the right to
Issues presented by each side: participate and
vote in decision-

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 99

 LABOR STANDARDS LAW

making for the employee under a written or unwritten contract of

cooperative.
 C. employment for work done or to be done, or for
As service rendered or to be rendered.” In this case,
found by
the the weekly stipends or the so-called shares in the
Bureau service surplus given by the respondent cooperative
of
to its owners-members were in reality wages, as the
Internal
Revenue same were equivalent to an amount not lower than
[BIR], that prescribed by existing labor laws, rules and
the
owners- regulations, including the wage order applicable to
member the area and industry; or the same shall not be lower
s of
[respond than the prevailing rates of wages. It cannot be
ent] doubted then that those stipends or shares in the
cooperat
ive are service surplus are indeed wages, because these are
not paid given to the owners-members as compensation in
any
rendering services to respondent cooperative’s client,
compens
ation Stanfilco. Third. It is also stated in the above-
income. mentioned Service Contracts that it is the respondent
(Emphas
is cooperative which has the power to investigate,
supplied discipline and remove the owners-members and its
.)
team leaders who were rendering services at
Ruling: Stanfilco. Fourth. As earlier opined, of the four
elements of the employer-employee relationship, the
The existence of an employer-employee relationship
“control test” is the most important. In the case at
cannot be negated by expressly repudiating it in a
bar, it is the respondent cooperative which has the
contract, when the terms and surrounding
sole control over the manner and means of
circumstances show otherwise. The employment
performing the services under the Service Contracts
status of a person is defined and prescribed by law
with Stanfilco as well as the means and methods of
and not by what the parties say it should be.
work. Also, the respondent cooperative is solely and
First. It is expressly provided in the Service
entirely responsible for its owners-members, team
Contracts that it is the respondent cooperative which
leaders and other representatives at Stanfilco. All
has the exclusive discretion in the selection and
these clearly prove that, indeed, there is an employer-
engagement of the owners-members as well as its
employee relationship between the respondent
team leaders who will be assigned at
cooperative and its owners-members.
Stanfilco. Second. Wages are defined as
“remuneration or earnings, however designated,
It is true that the Service Contracts executed between
capable of being expressed in terms of money,
the respondent cooperative and Stanfilco expressly
whether fixed or ascertained, on a time, task, piece or
provide that there shall be no employer-employee
commission basis, or other method of calculating the
relationship between the respondent cooperative and
same, which is payable by an employer to an

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 100


its owners-members. This Court, however, cannot
give the said provision force and effect.
It bears stressing, too, that a cooperative acquires
juridical personality upon its registration with the
Cooperative Development Authority. It has its Board
of Directors, which directs and supervises its
business; meaning, its Board of Directors is the one
in charge in the conduct and management of its
affairs. With that, a cooperative can be likened to a
corporation with a personality separate and distinct
from its owners-members. Consequently, an owner-
member of a cooperative can be an employee of the
latter and an employer-employee relationship can
exist between them.
In the present case, it is not disputed that the
respondent cooperative had registered itself with the
Cooperative Development Authority, as evidenced by
its Certificate of Registration No. 0-623-2460. In its
by-laws, its Board of Directors directs, controls, and
supervises the business and manages the property of
the respondent cooperative. Clearly then, the
management of the affairs of the respondent
cooperative is vested in its Board of Directors and not
in its owners-members as a whole. Therefore, it is
completely logical that the respondent cooperative, as
a juridical person represented by its Board of
Directors, can enter into an employment with its
owners-members.
As there is employee-employer relationship, SSC
jurisdiction.
67. Almeda et al., vs. Asahi Glass, G.R. No.
177785, Sept. 3, 2008
Facts:
This a complaint for illegal dismissal with claims for
moral and exemplary damages and attorney’s fees
filed by Almeda, et al against Asahi Glass and San
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Sebastian Allied Services, Inc. SSASI. Petitioners
alleged that Asahi and SSASI entered into a service
contract whereby SSASI undertook to provide Asahi
with the necessary manpower for its operations.
Pursuant to such a contract, SSASI employed
petitioners Randy Almeda, Edwin Audencial, Nolie
Ramirez and Ernesto Calicagan as glass cutters, and
petitioner Reynaldo Calicagan as Quality Controller,
all assigned to work for respondent. Asahi terminated
its service contract with SSASI, which in turn,
terminated the employment of petitioners on the same
date. Believing that SSASI was a labor-only
contractor, and having continuously worked as glass
cutters and quality controllers for the respondent -
functions which are directly related to its main line of
business as glass manufacturer - for three to 11 years,
petitioners asserted that they should be considered
regular employees of the Asahi; and that their
dismissal from employment without the benefit of
due process of law was unlawful.
Asahi claimed that petitioners were employees of
SSASI and were merely assigned by SSASI to work
for respondent to perform intermittent services
pursuant to an Accreditation Agreement. SSASI
averred that it was the one who hired petitioners and
assigned them to work for respondent on occasions
that the latter’s work force could not meet the
demands of its customers. Eventually, however,
respondent ceased to give job orders to SSASI,
constraining the latter to terminate petitioners’
employment.
Issue: Are Almeda, et al employees of Asahi Glass
even considering that they were originally hired by
San Sebastian Allied Services, Inc.?
Ruling:
Yes. Almeda, et al are employees of Asahi Glass.
Permissible job contracting or subcontracting refers
to an arrangement whereby a principal agrees to put
out or farm out to a contractor or subcontractor the
performance or completion of a specific job, work or
service within a definite or predetermined period,
101

regardless of whether such job, work or service is to
be performed or completed within or outside the
premises of the principal. A person is considered
engaged in legitimate job contracting or
subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a
distinct and independent business and undertakes to
perform the job, work or service on its own account
and under its own responsibility according to its own
manner and method, and free from the control and
direction of the principal in all matters connected
with the performance of the work except as to the
results thereof;
(b) The contractor or subcontractor has substantial
capital or investment; and
(c) The agreement between the principal and
contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational
safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and
welfare benefits.
On the other hand, labor-only contracting, a
prohibited act, is an arrangement in which the
contractor or subcontractor merely recruits, supplies
or places workers to perform a job, work or service
for a principal. In labor-only contracting, the
following elements are present:
(a) The contractor or subcontractor does not have
substantial capital or investment to actually perform
the job, work or service under its own account and
responsibility;
(b) The employees recruited, supplied or placed by
such contractor or subcontractor is performing
activities which are directly related to the main
business of the principal.
In labor-only contracting, the statutes create an
employer-employee relationship for a comprehensive
purpose: to prevent circumvention of labor laws. The
contractor is considered as merely the agent of the
principal employer and the latter is responsible to the
employees of the labor-only contractor as if such
employees are directly employed by the principal
employer. Therefore, if SSASI was a labor-only
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
contractor, then respondent shall be considered as the
employer of petitioners who must bear the liability
for the dismissal of the latter, if any.
An important element of legitimate job contracting is
that the contractor has substantial capital or
investment, which respondent failed to prove. There
is a dearth of evidence to prove that SSASI possessed
substantial capital or investment when respondent
began contractual relations with it more than a
decade before 2003. The Court did not find a single
financial statement or record to attest to the economic
status and financial capacity of SSASI to venture into
and sustain its own business independent from
petitioner.
Furthermore, the Court is unconvinced by
respondent’s argument that petitioners were
performing jobs that were not directly related to
respondent’s main line of business. Respondent is
engaged in glass manufacturing. One of the
petitioners served as a quality controller, while the
rest were glass cutters. The only excuse offered by
respondent - that petitioners’ services were required
only when there was an increase in the market’s
demand with which respondent could not cope - only
prove even more that the services rendered by
petitioners were indeed part of the main business of
respondent. It would mean that petitioners
supplemented the regular workforce when the latter
could not comply with the market’s demand;
necessarily, therefore, petitioners performed the same
functions as the regular workforce. The
indispensability of petitioners’ services was fortified
by the length and continuity of their performance,
lasting for periods ranging from three to 11 years.
More importantly, the Court finds that the crucial
element of control over petitioners rested in
respondent. The power of control refers to the
authority of the employer to control the employee not
only with regard to the result of work to be done, but
also to the means and methods by which the work is
to be accomplished. It should be borne in mind that
the power of control refers merely to the existence of
the power and not to the actual exercise thereof. It is
not essential for the employer to actually supervise
the performance of duties of the employee; it is
enough that the former has a right to wield the power.
102

Petitioners followed the work schedule prepared by
respondent. They were required to observe all rules
and regulations of the respondent pertaining to,
among other things, the quality of job performance,
regularity of job output, and the manner and method
of accomplishing the jobs. Other than being the one
who hired petitioners, there was absolute lack of
evidence that SSASI exercised control over them or
their work.
The fact that it was SSASI which dismissed
petitioners from employment is irrelevant. It is hardly
proof of control, since it was demonstrated only at
the end of petitioners’ employment. What is more, the
dismissal of petitioners by SSASI was a mere result
of the termination by respondent of its contractual
relations with SSASI.
SSASI is a labor-only contractor; hence, it is
considered as the agent of respondent. Respondent is
deemed by law as the employer of petitioners.
Equally unavailing is respondent’s stance that its
relationship with petitioners should be governed by
the Accreditation Agreement stipulating that
petitioners were to remain employees of SSASI and
shall not become regular employees of the
respondent. A party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the
character of its business, i.e., whether as labor-only
contractor or as job contractor, it being crucial that its
character be measured in terms of and determined by
the criteria set by statute.
68. ROLANDO SASAN, SR., vs NATIONAL
LABOR RELATIONS COMMISSION
Assailed in this Petition for Review under
Rule 45 of the Rules of Court are the
Decision[1] dated 24 April 2006 of the Court of
Appeals in CA-G.R. SP No. 79912, which affirmed
the Decision dated 22 January 2003 of the National
Labor Relations Commission (NLRC) in NLRC Case
No. V-000241-2002 finding that Helpmate, Inc. (HI)
is a legitimate independent job contractor and that the
petitioners were not illegally dismissed from work
Respondent Equitable-PCI Bank (E-
PCIBank), a banking entity duly organized and
existing under and by virtue of Philippine laws,
entered into a Contract for Services with HI, a
domestic corporation primarily engaged in the
business of providing janitorial and messengerial
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
services. The contract was impliedly renewed every
year after year.
July 23, 2001, petitioners filed with the
Arbitration Branch of the NLRC in Cebu City against
HI and E- PCIBANK for illegal dismissal with
claims for separation pay, service incentive leave pay,
allowances, damages, attorney’s fees and costs.
Position papers were submitted. Petitioners
claimed that they had become regular employees of
E-PCIbank with respect to activities for which they
were employed and that the bank had direct control
and supervision over the means and methods by
which they were to perform their jobs and their
dismissal by HI was null and void since they were
regular employees of E-PCIBANK.
PCI Bank said that it entered into a Contract
for Services with HI, an independent job contractor
which hired and assigned petitioners to the bank to
perform janitorial and messengerial services thereat.
It was HI that paid petitioners’ wages, monitored
petitioners’ daily time records (DTR) and uniforms,
and exercised direct control and supervision over the
petitioners and that therefore HI has every right to
terminate their services legally. E-PCIBank could not
be held liable for whatever misdeed HI had
committed against its employees.
HI, on the other hand, asserted that it was an
independent job contractor engaged in the business of
providing janitorial and related services to business
establishments, and E-PCIBank was one of its
clients. Petitioners were its employees, part of its
pool of janitors/messengers assigned to E-
PCIBank. The Contract for Services between HI and
E-PCIBank expired on 15 July 2000. E-PCIBank no
longer renewed said contract with HI and, instead,
bidded out its janitorial requirements to two other job
contractors, Able Services and Puritan. HI
designated petitioners to new work assignments, but
the latter refused to comply with the
same. Petitioners were not dismissed by HI, whether
actually or constructively, thus, petitioners’
complaints before the NLRC were without basis.
On 7 January 2002, on the basis of the
parties’ position papers and documentary evidence,
Labor Arbiter Gutierrez rendered a Decision finding
that HI was not a legitimate job contractor on the
ground that it did not possess the required substantial
capital or investment to actually perform the job,
work, or service under its own account and
responsibility as required under the Labor Code. HI
is therefore a labor-only contractor and the real
employer of petitioners is E-PCIBank which is held
liable to petitioners.
Aggrieved by the decision of Labor Arbiter
Gutierrez, respondents E-PCIBank and HI appealed
the same to the NLRC, 4th Division, stationed
103

in Cebu City. The NLRC promulgated its Decision
on 22 January 2003 modifying the ruling of Labor
Arbiter Gutierrez. The NLRC took into
consideration the documentary evidence presented by
HI for the first time on appeal and, on the basis
thereof, declared HI as a highly capitalized venture
with sufficient capitalization, which cannot be
considered engaged in “labor-only contracting.”
Petitioners moved for a motion for recon
was denied by NLRC.In the CA, it affirmed the
findings of the NLRC that HI was a legitimate job
contractor and that it did not illegally dismiss
petitioners because they were offered new work
assignments to various establishments but they
refused to.
Issue:
A) Whether HI is a labor-only contactor?
B) E-PCIBank should be deemed petitioners’
principal employer?
Held: A) NO.
The court finds that HI is a legitimate job
contractor.
HI has a certification of registration issued
by the DOLE. Moreover, the DOLE being the agency
primarily responsible for regulating the business of
independent job contractors, we can presume in the
absence of evidence to the contrary that it thoroughly
evaluated the requirements submitted by HI as a
precondition to the issuance of the Cerificate of
Registration.
HI has substantial capital in the amount
of P20,939,935.72. It has its own building where it
holds office and it has been engaged in business for
more than a decade now.As observed by the Court of
Appeals, surely, such a well-established business
entity cannot be considered a labor-only contractor.
The evidence on record also shows that HI is
carrying on a distinct and independent business from
E-PCIBank. The employees of HI are assigned to
clients to perform janitorial and messengerial
services, clearly distinguishable from the banking
services in which E-PCIBank is engaged.
The court declared that while these services
rendered by the petitioners as janitors, messengers
and drivers are considered directly related to the
principal business of a bank, in this case E-PCIBank,
nevertheless, they are not necessary in the conduct of
its (E-PCIBANK’s) principal business.
Permissible job contracting or subcontracting refers
to an arrangement whereby a principal agrees to put
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LABOR STANDARDS LAW
out or farm out to a contractor or subcontractor the
performance or completion of a specific job, work or
service within a definite or predetermined period,
regardless of whether such job, work or service is to
be performed or completed within or outside the
premises of the principal.[35] A person is considered
engaged in legitimate job contracting or
subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on
a distinct and independent business and undertakes to
perform the job, work or service on its own account
and under its own responsibility according to its own
manner and method, and free from the control and
direction of the principal in all matters connected
with the performance of the work except as to the
results thereof;
(b) The contractor or subcontractor has
substantial capital or investment; and
(c) The agreement between the principal and
contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational
safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and
welfare benefits.[36]
In contrast, labor-only contracting, a prohibited act,
is an arrangement where the contractor or
subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal.[37] In labor-only contracting, the following
elements are present:
(a) The contractor or subcontractor does not have
substantial capital or investment to actually perform
the job, work or service under its own account and
responsibility; and
(b) The employees recruited, supplied or placed by
such contractor or subcontractor are performing
activities which are directly related to the main
business of the principal.
In distinguishing between permissible job
contracting and prohibited labor-only contracting, we
elucidated in Vinoya v. National Labor Relations
Commission, that it is not enough to show substantial
capitalization or investment in the form of tools,
equipment, etc. Other facts that may be considered
include the following: whether or not the contractor
is carrying on an independent business; the nature
and extent of the work; the skill required; the term
and duration of the relationship; the right to assign
the performance of specified pieces of work; the
104

control and supervision of the work to another; the
employer’s power with respect to the hiring, firing
and payment of the contractor’s workers; the control
of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode and
manner or terms of payment.[41] Simply put, the
totality of the facts and the surrounding
circumstances of the case are to be considered.
[42]
Each case must be determined by its own facts
and all the features of the relationship are to be
considered.
B )NO.
The presence of the first requisite for the
existence of an employer-employee relationship to
wit, the selection and engagement of the employee is
shown by the fact that it was HI which selected and
engaged the services of petitioners as its employees.
On the second requisite regarding the
payment of wages, it was HI who paid
petitioners their wages and who provided their daily
time records and uniforms and other materials
necessary for the work they performed. Therefore, it
is HI who is responsible for petitioner’s claims for
wages and other employee’s benefits.
As to the third requisite on the power to
control the employee’s conduct, and the fourth
requisite regarding the power of dismissal, again E-
PCIBank did not have the power to control
petitioners with respect to the means and methods by
which their work was to be accomplished.
Considering the foregoing, plus taking
judicial notice of the general practice in private, as
well as in government institutions and industries, of
hiring an independent contractor to perform special
services, ranging from janitorial, security and even
technical services, we can only conclude that HI is a
legitimate job contractor. As such legitimate job
contractor, the law creates an employer-employee
relationship between HI and petitioners which
renders HI liable for the latter’s claims.
69. Purefoods Corp. vs. NLRC et al., G.R. No.
172241, November 20, 2008
FACTS:
Lolita Neri (Neri) originally filed a claim for
nonpayment of additional wage increase,
regularization, nonpayment of service incentive
leave, underpayment of 13th month pay, and
nonpayment of premium pay for holiday and holiday
pay against Purefoods Corporation (Purefoods). By
July 4, 1992, however, Neri was dismissed from her
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LABOR STANDARDS LAW
work as a Deli-Attendant. Subsequently, or on 13
July 1992, eleven (11) other complainantsjoined
forces with Neri and together they filed an amended
complaint, with Neri charging Purefoods with illegal
dismissal.All the other complainants, save for Neri,
were still working for Purefoods at the time of the
filing of the amended complaint. On August 31,
1993, Labor declared Neri and the complainants as
Purefoods' regular employees; and Neri as having
been illegally dismissed and entitled to reinstatement
with payment of backwages. Purefoods filed a partial
appeal, praying that the claims of complainants be
dismissed for lack of merit, or in the alternative, the
case be remanded for formal hearing on the merits
and to implead D.L. Admark as a party-
respondent.The NLRC granted the appeal and
remanded the case for further hearings on the factual
issues.
The case was remanded to Labor Arbiter,
who, after finding that Neri is not an employee of
petitioner, but rather of D.L. Admark, an
independent labor contractor, dismissed the
complaint. A memorandum on appeal was nominally
filed by all the complainants; the NLRC ruled in
complainants' favor and reversed and set aside the
labor arbiter's decision. According to the NLRC, the
pieces of evidence on record established the
employer-employee relationship between Purefoods
and Neri and the other complainants. Purefoods
moved for the reconsideration of the decision but its
motion was denied for lack of merit. Hence, its
recourse to the Court of Appeals via a petition for
certiorari.
The Court of Appeals, relying on the case of
Escario v. NLRC, held that D.L. Admark is a
legitimate independent contractor. However, it ruled
that complainants are regular employees of
Purefoods. Citing Art. 280 of the Labor Code, the
appellate court found that complainants were
engaged to perform activities which are usually
necessary or desirable in the usual business or trade
of Purefoods, and that they were under the control
and supervision of Purefoods' supervisors, and not of
D.L. Admark's. It noted that in the Promotions
Agreements between D.L. Admark and Purefoods,
there was no mention of the list of D.L. Admark
employees who will handle particular promotions for
petitioner, and that complainants' periods of
employment are not fully covered by the Promotions
Agreements.
Issue: Whether or not Neri and the other
complainants are employees of PUREFOODS or
A.D. ADMARK’S
Ruling:
105

The Court agrees with Purefoods' argument
that Art. 280 of the Labor Codefinds no application in
a trilateral relationship involving a principal, an
independent job contractor, and the latter's
employees. Indeed, the Court has ruled that said
provision is not the yardstick for determining the
existence of an employment relationship because it
merely distinguishes between two kinds of
employees, i.e., regular employees and casual
employees, for purposes of determining the right of
an employee to certain benefits, to join or form a
union, or to security of tenure; it does not apply
where the existence of an employment relationship is
in dispute. It is therefore erroneous on the part of the
Court of Appeals to rely on Art. 280 in determining
whether an employer-employee relationship exists
between respondent Neri and Purefoods.
Permissible job contracting or
subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with the
contractor or subcontractor the performance or
completion of a specific job, work or service within a
definite or predetermined period regardless of
whether such job, work or service is to be performed
or completed within or outside the premises of the
principal. In this arrangement, the following
conditions must be met: (a)the contractor carries on
a distinct and independent business and undertakes
the contract work on his account under his own
responsibility according to his own manner and
method, free from the control and direction of his
employer or principal in all matters connected with
the performance of his work except as to the results
thereof; (b)the contractor has substantial capital or
investment; and(c)the agreement between the
principal and contractor or subcontractor assures
the contractual employees' entitlement to all labor
and occupational safety and health standards, free
exercise of the right to self-organization, security of
tenure, and social welfare benefits.
To support its position that respondent is not
its employee, Purefoods relies on the following: (i)
the Promotions Agreements it entered into with D.L.
Admark; (ii) Department Order No. 10 (Series of
1997) which defines legitimate contracting or
subcontracting; and (iii) Escario v. NLRC wherein the
Court declared D.L. Admark as a legitimate labor
contractor.
On the other hand, early on, Neri and the
rest of the complainants admitted that they worked
for petitioner through D.L. Admark. However, they
also averred that they were under the control and
supervision of petitioner's employees–salesmen,
poultry sales managers, deli supervisors–who give
them work orders and to whom they submit weekly
inventory reports and monthly competitive sales
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LABOR STANDARDS LAW
report. In support of these statements, Neri appended
several documents (various Identification Cards,
Certification from Rustan's Supermarkets stating that
respondent Neri is from Purefoods, Memoranda to
respondent Neri written by a supervisor from
Purefoods, letters from Purefoods area sales
managers introducing complainants as Purefoods
Merchandisers). Purefoods, meanwhile, claims that
these documents must be taken in the context of the
performance of the service contracted out–promotion
of its products.
In the first place, D.L. Admark's status as a
legitimate independent contractor has already been
established in Escario v. NLRC. In the said case,
complainants, through D.L. Admark, worked as
merchandisers for California Manufacturing
Corporation (CMC). They filed a case before the
labor arbiter for the regularization of their
employment status with CMC, and while the case
was pending, D.L. Admark sent termination letters to
complainants. The complainants thereafter amended
their complaint to include illegal dismissal. The Court
considered the following circumstances as tending to
establish D.L. Admark's status as a legitimate job
contractor:
1) The SEC registration certificate
of D.L. Admark states that it is a firm
engaged in promotional, advertising,
marketing and merchandising activities.
2) The service contract between
CMC and D.L. Admark clearly provides that
the agreement is for the supply of sales
promoting merchandising services rather
than one of manpower placement.
3) D.L. Admark was actually
engaged in several activities, such as
advertising, publication, promotions,
marketing and merchandising. It had several
merchandising contracts with companies
like Purefoods, Corona Supply, Nabisco
Biscuits, and Licron. It was likewise
engaged in the publication business as
evidenced by its magazine the
"Phenomenon."
4) It had its own capital assets to
carry out its promotion business. It then had
current assets amounting to P6 million and
is therefore a highly capitalized venture. It
had an authorized capital stock of
P500,000.00. It owned several motor
vehicles and other tools, materials and
equipment to service its clients. It paid
rentals of P30,020 for the office space it
occupied.
Moreover, applying the four-fold test used in
determining employer-employee relationship, the
106

Court found that: the employees therein were selected
and hired by D.L. Admark; D.L. Admark paid their
salaries, as evidenced by the payroll prepared by D.L.
Admark and sample contribution forms; D.L.
Admark had the power of dismissal as it admitted
that it was the one who terminated the employment of
the employees; and finally, it was D.L. Admark who
exercised control and supervision over the
employees.
Furthermore, it is evident from the
Promotions Agreements entered into by Purefoods
that D.L. Admark is a legitimate labor contractor.
A sample agreement reads in part:
WHEREAS, The FIRST PARTY is
engaged in the general promotion business;
WHEREAS, The SECOND
PARTY will launch its "Handogsa
Graduates" promotion project;
WHEREAS, The FIRST PARTY
has offered its services to the SECOND
PARTY, in connection with the said
promotion project, and the latter has
accepted the said offer;
NOW, THEREFORE, for and in
consideration of the foregoing premises, and
of the mutual convenience between them,
the parties have agreed as follows:
1. The FIRST PARTY
shall handle and implement the
"Handogsa Graduates" promotion
project of the SECOND PARTY,
said project to last from February 1,
1992 to July 31, 1992.
2. The FIRST PARTY
shall indemnify the SECOND
PARTY for any loss or damage to
the latter's properties, if such loss
or damage is due to the fault or
negligence of the FIRST PARTY or
its agents or employees.
3. There shall be no
employer-employee relationship
between the FIRST PARTY or its
agents or employees and the
SECOND PARTY.
4. In consideration for the
services to be rendered by the
FIRST PARTY to the SECOND
PARTY, the latter shall pay the
former the amount of Two Million
Six Hundred Fifty Two Thousand
pesos only (P2,652,000.00) payable
as follows:
The agreements confirm that D.L.
Admark is an independent contractor which
Purefoods had engaged to supply general
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
promotion services, and not mere manpower
services, to it. The provisions expressly permit D.L.
Admark to handle and implement Purefoods' project,
and categorically state that there shall be no
employer-employee relationship between D.L.
Admark's employees and Purefoods. While it may be
true that complainants were required to submit
regular reports and were introduced as Purefoods
merchandisers, these are not enough to establish
Purefoods' control over them. Even if the report
requirements are somehow considered as control
measures, they were imposed only to ensure the
effectiveness of the promotion services rendered by
D.L. Admark. It would be a rare contract of service
that gives untrammelled freedom to the party hired
and eschews any intervention whatsoever in his
performance of the engagement.Indeed, it would be
foolhardy for any company to completely give the
reins and totally ignore the operations it has
contracted out.
Significantly, the pieces of evidence
submitted by Neri do not support her claim of having
been a regular employee of Purefoods. We note that
two "Statement of Earnings and Deductions"were
issued for the same period, December 1989, and in
one "Statement," someone deliberately erased the
notation "January 1997," thereby casting doubt on the
authenticity of the said documents. Even the
identification cards presented by Neri are neither
binding on Purefoods nor even indicative of her
claimed employee status of Purefoods, issued as they
were by the supermarkets concerned and not by
Purefoods itself. Moreover, the check voucher issued
by Purefoods marked "IN PAYMENT OF DL
ADMARK DELI ATTENDANTS 12.00 PESOS
ADJUSTMENT JAN 30, 1991 TO JUNE 22, 1992,"
signed and received by Neri, is proof that Purefoods
never considered Neri as its own employee, but rather
as one of D.L. Admark's deli attendants.
We also note that Neri herself admitted in
her SinumpaangSalaysay and in the hearings that she
applied with D.L. Admark and that she worked for
Purefoods through D.L. Admark. Neri was aware
from the start that D.L. Admark was her employer
and not Purefoods. She had kept her contract with
D.L. Admark, and inquired about her employment
status with D.L. Admark. It was D.L. Admark, as her
employer, which had the final say in, and which
actually effected, her termination.
In view of the foregoing, we hold that Neri
is not an employee of Purefoods, but that of D.L.
Admark. In the absence of employer-employee
relations between Neri and Purefoods, the
complaint for illegal dismissal and other monetary
claims must fail.
107

70. MARANAW HOTELS and RESPORT CORP.
vs. CA
FACTS:
Private respondent Sheryl Oabel filed a complaint
for regularization, subsequently converted into
one for illegal dismissal before LA Madjayran H.
Ajan.
Oabel was initially hired by Maranaw Hotels as an
extra beverage attendant on April 24, 1995. This
lasted until February 7, 1997. Oabel worked in
Century Park Hotel, an establishment owned by the
petitioner. Petitioner then contracted with Manila
Resource Dev’t Corp. (MANRED). Subsequently,
Oabel was transferred to MANRED with the latter
deporting itself as her employer. MANRED has
intervened in all stages of the proceedings and has
consistently claimed to be the employer of Oabel.
Oabel performed the following functions: Secretary
Public Relations, Gift Shop Attendant, Waitress, and
Shop Attendant from 1997 – 1998.
In 1998, Oabel filed before LA a petition for
regularization of employment against petitioner.
However, in the same year, Oabel was dismissed
from employment. Thus, Oabel converted her petition
into a complaint for illegal dismissal.
LA dismissed the complaint claiming that Oabel
never disputed the fact that her work with petitioner
was on a per function basis or a “need basis” thus
Oabel could not even be considered as a casual
employee nor a provisional employee. Maranaw
consider Oabel, at most, as a project employee
which does not ripen into a regular employee.
Oabel appealed before the NLRC. NLRC reversed
the ruling of LA and held that MANRED is a labor-
only contractor and Oabel was illegaly dismissed
for it was done without a valid or just cause.
NLRC grounded these findings on the fat that:
1. Under the terms of the service contract,
MANRED shall provide Maranaw not
specific jobs or services but personnel; and
2. That MANDRED had insufficient
capitalization and was not sufficiently
equipped to provide specific jobs; and
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LABOR STANDARDS LAW
3. That the activities performed by Oabel was
directly related to and usually necessary or
desirable in the business of Maranaw.
Maranaw then filed a petition before the CA. CA
dismissed the petition on account of the failure of
Maranaw to append the board resolution
authorizing the counsel for petitioner to file the
petition before the CA.
In the present petition, petitioner invokes,
substantial justice as justification for a reversal of
the resolution of the CA. Further, Maranaw contends
that the filing of a MR with the certificate of non-
forum shopping attached constitutes substantial
compliance with the requirement.
ISSUE:
WON there was substantial compliance with respect
on the certificate of non-forum shopping. Further,
WON there exists an EE-ER relationship between
Oabel and Maranaw.
RULING:
Specific authorization, the Court held, could only
come in the form of a board resolution issued by the
Board of Directors that specifically authorizes the
counsel to institute the petition and execute the
certification, to make his actions binding on his
principal, i.e.,the corporation.
Art. 280. Regular and casual employment. —
The provisions of written agreement to the
contrary notwithstanding and regardless of the
oral agreement of the parties, an employment
shall be deemed to be regular where the
employee has been engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of the
employer, except where the employment has
been fixed for a specific project or undertaking
the completion or termination of which has
been determined at the time of the engagement
of the employee or where the work or service to
be performed is seasonal in nature and the
employment is for the duration of the season.
108

An employment shall be deemed to be casual
if it is not covered by the preceding
paragraph: Provided, That any employee
who has rendered at least one year of service,
whether such service is continuous or
broken, shall be considered a regular
employee with respect to the activity in
which he is employed and his employment
shall continue while such activity exists.
APPLICATION:
The procedural aspects placed aside, it may be seen
sustained by this court that MANRED is a labor-
only contractor and that the real employer of
Oabel is Manaraw.
Further, it appears that Oabel has already rendered
more than one year of service to the petitioner, for
the period of 1995-1998, for which she must already
be considered a regular employee, as stated in Art.
280 of LC.
Notably, the operations of the hotel itself do not cease
with the end of each even or function and that there is
an ever present need for individuals to perform
certain tasks necessary in petitioner’s business. Thus,
although the tasks themselves may vary, the need for
sufficient manpower to carry them out does not.
Thus, in any event, the petitioner determines the
nature of the tasks to be performed by Oabel.
Therefore, in the process, exercising control.
DENIED.
71. Coca-Cola Bottlers Phils., Inc. vs. Alan M.
Agito, et al.
[GR No. 179546 February 13, 2009]
FACTS:
Coca-Cola Bottlers Phils. Inc. (COKE), the
petitioner herein is a domestic corporation engaged in
manufacturing, bottling and distributing soft drink
beverages and other allied products. Respondents
were salesmen assigned at Coke Lagro Sales Office
for years but were not regularized. Coke averred that
respondents were employees of Interserve who were
tasked to perform contracted services in accordance
with the provisions of the Contract of Services
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LABOR STANDARDS LAW
executed between Coke and Interserve on 23 March
2002. Said Contract constituted legitimate job
contracting, given that the latter was a bona fide
independent contractor with substantial capital or
investment in the form of tools, equipment, and
machinery necessary in the conduct of its business.
To prove the status of Interserve as an
independent contractor, petitioner presented the
following pieces of evidence: (1) the Articles of
Incorporation of Interserve; (2) the Certificate of
Registration of Interserve with the Bureau of Internal
Revenue; (3) the Income Tax Return, with Audited
Financial Statements, of Interserve for 2001; and (4)
the Certificate of Registration of Interserve as an
independent job contractor, issued by the Department
of Labor and Employment (DOLE).
As a result, petitioner asserted that
respondents were employees of Interserve, since it
was the latter which hired them, paid their wages, and
supervised their work, as proven by: (1) respondents’
Personal Data Files in the records of Interserve; (2)
respondents’ Contract of Temporary Employment
with Interserve; and (3) the payroll records of
Interserve.
ISSUES:
1. Whether or not Inteserve is a legitimate
job contractor;
2. Whether or not an employer-employee
relationship exists between petitioner
Coca-Cola Bottlers Phils. Inc. and
respondents.
RULING:
No. Inteserve is not a legitimate job
contractor
There is "labor-only" contracting where the
person supplying workers to an employee does not
have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such
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.
The afore-quoted provision recognizes two
possible relations among the parties: (1) the permitted
109

legitimate job contract, or (2) the prohibited labor-
only contracting.
A legitimate job contract, wherein an
employer enters into a contract with a job contractor
for the performance of the former's work, is permitted
by law. Thus, the employer-employee relationship
between the job contractor and his employees is
maintained. In legitimate job contracting, the law
creates an employer-employee relationship between
the employer and the contractor's employees only for
a limited purpose, i.e., to ensure that the employees
are paid their wages. The employer becomes jointly
and severally liable with the job contractor only for
the payment of the employees' wages whenever the
contractor fails to pay the same. Other than that, the
employer is not responsible for any claim made by
the contractor's employees.
On the other hand, labor-only contracting is
an arrangement wherein the contractor merely acts as
an agent in recruiting and supplying the principal
employer with workers for the purpose of
circumventing labor law provisions setting down the
rights of employees. It is not condoned by law. A
finding by the appropriate authorities that a
contractor is a "labor-only" contractor establishes an
employer-employee relationship between the
principal employer and the contractor's employees
and the former becomes solidarily liable for all the
rightful claims of the employees.
Section 5 of the Rules Implementing
Articles 106-109 of the Labor Code, as amended,
provides the guidelines in determining whether labor-
only contracting exists:
Section 5. Prohibition against labor-
only contracting. — Labor-only contracting is hereby
declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies,
or places workers to perform a job, work or service
for a principal, and any of the following elements are
[is] present:
i) The contractor or subcontractor does not
have substantial capital or investment which relates
to the job, work, or service to be performed and the
employees recruited, supplied or placed by such
contractor or subcontractor are performing activities
which are directly related to the main business of the
principal; or
ii) The contractor does not exercise the right to
control the performance of the work of the
contractual employee.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The foregoing provisions shall be without
prejudice to the application of Article 248(C) of the
Labor Code, as amended. "Substantial capital or
investment" refers to capital stocks and subscribed
capitalization in the case of corporations, tools,
equipment, implements, machineries and work
premises, actually and directly used by the contractor
or subcontractor in the performance or completion of
the job, work, or service contracted out.
The "right to control" shall refer to the right
reserved to the person for whom the services of the
contractual workers are performed, to determine not
only the end to be achieved, but also the manner and
means to be used in reaching that end. (Emphasis
supplied.)
In sum, Interserve did not have substantial
capital or investment in the form of tools, equipment,
machineries, and work premises; and respondents,
it’s supposed employees, performed work which was
directly related to the principal business of petitioner.
It is, thus, evident that Interserve falls under the
definition of a “labor-only” contractor, under Article
106 of the Labor Code; as well as Section 5(i) of the
Rules Implementing Articles 106-109 of the Labor
Code, as amended. It is also apparent that Interserve
is a labor-only contractor under Section 5(ii) of the
Rules Implementing Articles 106-109 of the Labor
Code, as amended, since it did not exercise the right
to control the performance of the work of
respondents.
The lack of control of Interserve over the
respondents can be gleaned from the Contract of
Services between Interserve (as the CONTRACTOR)
and petitioner (as the CLIENT). The Contract of
Services between Interserve and petitioner did not
identify the work needed to be performed and the
final result required to be accomplished. Instead, the
Contract specified the type of workers Interserve
must provide petitioner (“Route Helpers, Salesmen,
Drivers, Clericals, Encoders & PD”) and their
qualifications (technical/vocational course graduates,
physically fit, of good moral character, and have not
been convicted of any crime). The Contract also
states that, “to carry out the undertakings specified in
the immediately preceding paragraph, the
CONTRACTOR shall employ the necessary
personnel,” thus, acknowledging that Interserve did
not yet have in its employ the personnel needed by
petitioner and would still pick out such personnel
based on the criteria provided by petitioner. In other
words, Interserve did not obligate itself to perform an
identifiable job, work, or service for petitioner, but
merely bound itself to provide the latter with specific
110

types of employees. These contractual provisions
strongly indicated that Interserve was merely a
recruiting and manpower agency providing petitioner
with workers performing tasks directly related to the
latter’s principal business.
The certification issued by the DOLE stating
that Interserve is an independent job contractor does
not sway this Court to take it at face value, since the
primary purpose stated in the Articles of
Incorporation of Interserve is misleading. According
to its Articles of Incorporation, the principal business
of Interserve is to provide janitorial and allied
services. The delivery and distribution of Coca-Cola
products, the work for which respondents were
employed and assigned to petitioner, were in no way
allied to janitorial services. While the DOLE may
have found that the capital and/or investments in
tools and equipment of Interserve were sufficient for
an independent contractor for janitorial services, this
does not mean that such capital and/or investments
were likewise sufficient to maintain an independent
contracting business for the delivery and distribution
of Coca-Cola products.
With the finding that Interserve was engaged
in prohibited labor-only contracting, petitioner shall
be deemed the true employer of respondents. As
regular employees of petitioner, respondents cannot
be dismissed except for just or authorized causes,
none of which were alleged or proven to exist in this
case, the only defense of petitioner against the charge
of illegal dismissal being that respondents were not
its employees. Records also failed to show that
petitioner afforded respondents the twin requirements
of procedural due process, i.e., notice and hearing,
prior to their dismissal. Respondents were not served
notices informing them of the particular acts for
which their dismissal was sought. Nor were they
required to give their side regarding the charges made
against them. Certainly, the respondents’ dismissal
was not carried out in accordance with law and,
therefore, illegal.
72.[G.R. No. 171814. May 8, 2009.]
SOUTH DAVAO
DEVELOPMENT COMPANY,
INC. (NOW SODACO
AGRICULTURAL
CORPORATION) AND/OR
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
MALONE PACQUIAO AND
VICTOR A.
CONSUNJI, petitioners, vs.
SERGIO L. GAMO,
ERNESTO BELLEZA, FELIX
TERONA, CARLOS ROJAS,
MAXIMO MALINAO,
VIRGILIO COSEP,
ELEONOR COSEP, MAXIMO
TOLDA, NELSON BAGAAN,
and TRADE UNION OF THE
PHILIPPINES and ALLIED
SERVICES
(TUPAS), respondents.
Facts:
Petitioner South Davao Development Company
(petitioner or petitioner corporation) is the operator of
a coconut and mango farm in San Isidro, Davao
Oriental and Inawayan/Baracatan, Davao del Sur. On
August 1963 petitioner hired respondent Sergio L.
Gamo (Gamo) as a foreman. Sometime in 1987,
petitioner appointed Gamo as a copra maker
contractor. Respondents Ernesto Belleza, Carlos
Rojas, Maximo Malinao were all employees in
petitioner's coconut farm, while respondents Felix
Terona, Virgilio Cosep, Maximo Tolda, and Nelson
Bagaan were assigned to petitioner's mango farm. All
of the abovenamed respondents (copra workers) were
later transferred by petitioner to Gamo as the
latter's copraceros. From 1987 to 1999, Gamo and
petitioner entered into a profit-sharing agreement
wherein 70% of the net proceeds of the sale of copra
went to petitioner and 30% to Gamo. The copra
workers were paid by Gamo from his 30% share.
Petitioner wanted to standardize payments to its
"contractors" in its coconut farms. On 2 October
1999, petitioner proposed a new payment scheme to
Gamo. The new scheme provided a specific price for
each copra making activity. Gamo submitted his
counter proposal. Petitioner did not accept Gamo's
counter proposal since it was higher by at least fifty
percent (50%) from its original offer. Without
agreeing to the new payment scheme, Gamo and his
copra workers started to do harvesting work.
Petitioner told them to stop. Eventually, petitioner
and Gamo agreed that the latter may continue with
the harvest provided that it would be his last
"contract" with petitioner. Gamo suggested to
petitioner to look for a new "contractor" since he was
not amenable to the new payment scheme.
Gamo and petitioner failed to agree on a payment
scheme, thus, petitioner did not renew the "contract"
111
 LABOR STANDARDS LAW

of Gamo. Gamo and the copra workers alleged that either: (1) generally known
they were illegally dismissed. within the territorial jurisdiction
of the trial court; or (2) capable
On the other hand, respondent Eleonor Cosep
of accurate and ready
(Eleonor) was employed as a mango classifier in the
determination by resorting to
packing house of petitioner's mango farm in San
sources whose accuracy cannot
Isidro, Davao Oriental. Sometime in October 1999,
reasonably be questionable.
she did not report for work as she had wanted to raise
and sell pigs instead. Petitioner, through Malone Things of "common knowledge",
Pacquiao, tried to convince Eleonor to report for of which courts take judicial
work but to no avail matters coming to the knowledge
of men generally in the course of
On 22 March 2000, respondents filed a complaint for
the ordinary experiences of life,
illegal dismissal against petitioner. They alleged that
or they may be matters which are
sometime in December 1999, petitioner verbally
generally accepted by mankind
terminated them en masse.
as true and are capable of ready
Issues: and unquestioned demonstration.
Thus, facts which are universally
(1) whether the Court of Appeals failed to take
known, and which may be found
judicial notice of the accepted practice of
in encyclopedias, dictionaries or
independent contractors in the coconut industry; (2)
other publications, are judicially
whether there is a valid job contracting between
noticed, provided, they are of
petitioner and Gamo; and (3) whether Eleonor had
such universal notoriety and so
effectively abandoned her work.
generally understood that they
Held: may be regarded as forming part
of the common knowledge of
The labor arbiter took judicial notice of the alleged
every person. As the common
prevailing business practices in the coconut industry
knowledge of man ranges far and
that copra making activities are done quarterly; that
wide, a wide variety of particular
the workers can contract with other farms; and that
facts have been judicially noticed
the workers are independent from the land owner on
as being matters of common
all work aspects. Petitioner wants this Court to take
knowledge. But a court cannot
judicial notice of the current business practice in the
take judicial notice of any fact
coconut industry which allegedly treats copraceros as
which, in part, is dependent on
independent contractors. In Expertravel & Tours, Inc.
the existence or non-existence of
v. Court of Appeals, we held, thus:
a fact of which the court has no
Generally speaking, matters of constructive knowledge.
judicial notice have three
An invocation that the Court take judicial notice of
material requisites: (1) the matter
certain facts should satisfy the requisites set forth by
must be one of common and
case law. A mere prayer for its application shall not
general knowledge; (2) it must be
suffice. Thus, in this case the Court cannot take
well and authoritatively settled
judicial notice of the alleged business practices in the
and not doubtful or uncertain;
copra industry since none of the material requisites of
and (3) it must be known to be
matters of judicial notice is present in the instant
within the limits of the
petition. The record is bereft of any indication that
jurisdiction of the court. The
the matter is of common knowledge to the public and
principal guide in determining
that it has the characteristic of notoriety, except
what facts may be assumed to be
petitioners' self-serving claim. CaASIc
judicially known is that of
notoriety. Hence, it can be said A related issue is whether Gamo is an independent
that judicial notice is limited to contractor. In Escario v. NLRC, we ruled that there is
facts evidenced by public records permissible job contracting when a principal agrees
and facts of general notoriety. to put out or farm out with a contractor or a
Moreover, a judicially noticed subcontractor the performance or completion of a
fact must be one not subject to a specific job, work or service within a definite or
reasonable dispute in that it is predetermined period, regardless of whether such job

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 112


or work service is to be performed within or outside
the premises of the principal. To establish the
existence of an independent contractor, we apply the
following conditions: first, 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 to the result
thereof; and second, the contractor has substantial
capital or investments in the form of tools,
equipment, machineries, work premises and other
materials which are necessary in the conduct of his
business.
The Implementing Rules and Regulation of the Labor
Code defines investment — as tools, equipment,
implements, machineries and work premises, actually
and directly used by the contractor or subcontractor
in the performance or completion of the job, work, or
service contracted out. The investment must be
sufficient to carry out the job at hand.
In the case at bar, Gamo and the copra workers did
not exercise independent judgment in the
performance of their tasks. The tools used by Gamo
and his copra workers like the karit, bolo, pangbunot,
panglugit and pangtapok are not sufficient to enable
them to complete the job. Reliance on these
primitive tools is not enough. In fact, the
accomplishment of their task required more
expensive machineries and equipment, like the trucks
to haul the harvests and the drying facility, which
petitioner corporation owns.
In order to determine the existence of an employer-
employee relationship, the Court has frequently
applied the four-fold test: (1) the selection and
engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the power
to control the employee's conduct, or the so called
"control test", which is considered the most important
element. From the time they were hired by petitioner
corporation up to the time that they were reassigned
to work under Gamo's supervision, their status as
petitioner corporation's employees did not cease.
Likewise, payment of their wages was merely
coursed through Gamo. As to the most determinative
test — the power of control, it is sufficient that the
power to control the manner of doing the work exists,
it does not require the actual exercise of such
power. In this case, it was in the exercise of its
power of control when petitioner corporation
transferred the copra workers from their previous
assignments to work as copraceros. It was also in the
exercise of the same power that petitioner corporation
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
put Gamo in charge of the copra workers although
under a different payment scheme. Thus, it is clear
that an employer-employee relationship has existed
between petitioner corporation and respondents since
the beginning and such relationship did not cease
despite their reassignments and the change of
payment scheme.
It is well settled that abandonment as a just and valid
ground for dismissal requires the deliberate and
unjustified refusal of the employee to return for work.
Two elements must be present, namely: (1) the failure
to report for work or absence without valid or
justifiable reason, and (2) a clear intention to sever
the employer-employee relationship. The second
element is more determinative of the intent and must
be evinced by overt acts. Mere absence, not being
sufficient, the burden of proof rests upon the
employer to show that the employee clearly and
deliberately intended to discontinue her employment
without any intention of returning. 28 In Samarca v.
Arc-Men Industries, Inc., we held that abandonment
is a matter of intention and cannot lightly be
presumed from certain equivocal acts.
To constitute abandonment, there must be clear proof
of deliberate and unjustified intent to sever the
employer-employee relationship. Clearly, the
operative act is still the employee's ultimate act of
putting an end to his employment. 29 However, an
employee who takes steps to protest her layoff cannot
be said to have abandoned her work because a charge
of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal,
more so when it includes a prayer for
reinstatement. 30When Eleonor filed the illegal
dismissal complaint, it totally negated petitioner's
theory of abandonment.
Also, to effectively dismiss an employee for
abandonment, the employer must comply with the
due process requirement of sending notices to the
employee. In Brahm Industries, Inc. v. NLRC, 31 we
ruled that this requirement is not a mere formality
that may be dispensed with at will. Its disregard is a
matter of serious concern since it constitutes a
safeguard of the highest order in response to man's
innate sense of justice. 32 Petitioner was not able to
send the necessary notice requirement to Eleonor.
Petitioner's belated claim that it was not able to send
the notice of infraction prior to the filing of the illegal
dismissal case cannot simply unacceptable. 33 Based
on the foregoing, Eleonor did not abandon her work.
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals is AFFIRMED.
73. G.R. No. 164205 September 3, 2009
113

Oldarico S. Traveño, Rovel A. Genelsa, Ruel U.
Villarmente, Alfredo A. Panilagao, Carmen P.
Danila, Elizabeth B. Macalino, Ramil P. Albito,
Reynaldo A. Ladrillo, Lucas G. Tamayo, Diosdado
A. Amorin, Rodino C. Vasquez, Gloria A.
Felicano, Nole E. Fermilan, Joselito B. Rendon,
Cristeta D. Caña, Evelyn D. Arcenal and Jeorge
M. Nono vs. Bobongon Banana Growers Multi-
Purpose Cooperative, Timog Agricultural
Corporation, Diamond Farms, Inc., and Dole Asia
Philippines, Respondents.
FACTS:
a. Origin of Case
 The case originated from three separate
complaints for illegal dismissal filed by
petitioners, individually and collectively,
with the National Labor Relations
Commission against the respondents
including respondent Dole Asia Philippines
as it then supposedly owned Timog
Agricultural Corporation (TACOR), for
unpaid salaries, overtime pay, 13th month
pay, service incentive leave pay, damages,
and attorney’s fees.
 Petitioners Traveno, et. al. were hired by
TACOR and Diamond Farms (DFI) to work
at a Banana Plantation in Bobongon, Sto.
Tomas, Davao del Norte, where they helped
to prepare the lands for the planting of
banana.
 While petitioners worked under the direct
control of supervisors from TACOR and
DFI, these companies made it appear that
they were hired through independent
contractors including individuals,
unregistered associations and cooperatives,
such as the other respondent Bobongon
Banana Growers Multi-purpose
Cooperative.
 Sometime in 2000, the respondents began
harassing the respondents in order to ease
them out of their jobs. They unilaterally
changed their compensation package from
being based on a daily rate to a pakyawan
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
rate and then soon after, they stopped paying
their salaries which prompted the petitioners
to also stop working.
b. Respondents’ Defense
 TACOR and DFI (answering as a merged
company) claim that they never engaged the
services of the petitioners. They allege that
when TACOR still existed, it had an
arrangement with several land owners in
Sto. Tomas that it would extend technical
and financial assistance to these landowners
for the development of their lands into a
banana plantation on the condition that
TACOR would be the exclusive buyer of the
bananas produced with such assistance.
TACOR maintains that it is the landowners
who formed the cooperative who hired
laborers for the farms.
c. Petitioners’ Argument
 Petitioners argue that while the Cooperative
was their employer on paper, the other
respondents exercised control and
supervision over them and that the
Cooperative was a labor-only contractor.
ISSUE/S:
The case is anchored on the issue of whether or not
DFI (with which TACOR had been merged) and Dole
should be held solidarily liable with the Cooperative
for petitioners’ illegal dismissal and money claims.
RULING:
 The Cooperative’s co-respondents are not
solidarily liable for the illegal dismissal
and money claims
Job contracting or subcontracting refers to an
arrangement whereby a principal agrees to farm out
with a contractor or subcontractor the performance of
a specific job, work or service within a definite or
114

predetermined period, regardless of whether such job,
work or service is to be performed or completed
within or outside the premises of the principal. The
present case does not involve such an arrangement.
Dole entered into a Banana Production and Purchase
Agreement (Contract) with the Cooperative. Such
contract partakes only the nature of a joint venture
agreement and not a job contracting arrangement.
By way of the four-fold test of employer-employee
relationship, it is only the Cooperative and not the
other co-respondents who can be considered the
petitioners’ employer because:
a.) DFI has total lack of knowledge on who actually
were engaged by the Cooperative to work in the
banana plantation (selection of workers)
b.) The Cooperative handles the fund in the
operational expenses including the wages of the
workers (payment of wages)
c.) The Contract stipulated that the Cooperative was
to be responsible for the proper conduct and general
welfare of its members and workers in the plantation
(power of dismissal and power of control)
74. Raul G. Locsin & Eddie Tomaquin v. PLDT,
G.R. No. 185251
Facts
On November 1, 1990, PLDT and the Security
and Safety Corporation of the Philippines (SSCP)
entered into a Security Services Agreement whereby
SSCP would provide armed security guards to PLDT
to be assigned to its various offices. Petitioners Raul
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Locsin and Eddie Tomaquin were among those
posted at a PLDT office. However, on August 30,
2001, PLDT terminated the Agreement
effective October 1, 2001.
However, despite the termination of the
Agreement, petitioner continued to secure the
premises of the office because they were allegedly
told to maintain their posts. Then, on September 30,
2002, petitioners’ services were terminated.
Petitioners sought recourse to the Labor
Arbiter for illegal dismissal and recover of money
claims, such remedy was thereby granted, finding
PLDT liable for the dismissal. PLDT raised its appeal
first to the NLRC and then consequently to the CA
asking for the nullification of the Resolution issued
by the NLRC as well as the Labor Arbiter’s Decision.
The CA ruled that SSCP was not a labor-only
contractor and was an independent contractor having
substantial capital to operate and conduct its own
business. Furthermore, the agreement stipulates
against an employer-employee relationship.
ISSUE
Whether petitioners became employees of respondent
after the Agreement between SSCP and respondent
was terminated.
RULING
Yes, petitioners became employees of respondent
after the Agreement between SSCP and respondent
was terminated.
115
 LABOR STANDARDS LAW

for purposes of this Code, to

prevent any violation or
circumvention of any provision of
Notable, ordinarily, business owners or
this Code.
managers would not allow security guards of an
agency with whom the owners or managers have
severed ties with to continue to stay within the Thus, the Secretary of Labor issued
business’ premises. Moreover, from the foregoing Department Order No. 18-2002, Series of 2002,
circumstances, it can be assumed that petitioners implementing Art. 106 as follows:
remained at their post under the instructions of
respondent. We can further conclude that respondent
dictated upon petitioners that the latter perform their Section 5. Prohibition
against labor-only contracting.––
regular duties to secure the premises during operating Labor-only contracting is hereby
hours. This, to our mind and under the circumstances, declared prohibited. For this
purpose, labor-only contracting
is sufficient to establish the existence of an employer-
shall refer to an arrangement where
employee relationship. the contractor or subcontractor
merely recruits, supplies or places
While there is no legal relationship with the workers to perform a job, work or
SSCP because of the termination of the Agreement, service for a principal, and any of
the following elements are
petitioners continued to hold post, indicating that the present:xxx
element of control is exercised by the respondent
over petitioners.
(ii) the
Furthermore, Article 106 of the Labor Code contractor does not
contains a provision on contractors, to wit: xxx exercise the right to
control over the
performance of the work
of the contractual
The Secretary of Labor employee.
and Employment may, by
appropriate regulations, restrict There is no question that
or prohibit the contracting-out of respondent having control over the
labor to protect the rights of petitioners must be considered as
workers established under this petitioners’ employer––from the termination
Code. In so prohibiting or of the Agreement onwards––as this was the
restricting, he may make only time that any evidence of control was
appropriate distinctions between exhibited by respondent over petitioners and
labor-only contracting and job in light of our ruling inAbella. Thus, as aptly
contracting as well as declared by the NLRC, petitioners were
differentiations within these types entitled to the rights and benefits of
of contracting and determine employees of respondent, including due
who among the parties involved process requirements in the termination of
shall be considered the employer their services.

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 116


75. Aliviado, et. al. vs. Proctor & Gamble Phils.,
G.R. No. 160506, March 9, 2010
Facts:
Petitioners worked as merchandisers of P&G from
various dates, allegedly starting as early as 1982 or as
late as June 1991, to either May 5, 1992 or March 11,
1993. They all individually signed employment
contracts with either Promm-Gem or SAPS for
periods of more or less five months at a time. They
were assigned at different outlets, supermarkets and
stores where they handled all the products of P&G.
They received their wages from Promm-Gem or
SAPS.
SAPS and Promm-Gem imposed disciplinary
measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off
without prior notice.
P&G is principally engaged in the manufacture and
production of different consumer and health products,
which it sells on a wholesale basis to various
supermarkets and distributors. To enhance consumer
awareness and acceptance of the products, P&G
entered into contracts with Promm-Gem and SAPS
for the promotion and merchandising of its products.
In December 1991, petitioners filed a complaint
against P&G for regularization, service incentive
leave pay and other benefits with damages. The
complaint was later amended to include the matter of
their subsequent dismissal.
On November 29, 1996, the Labor Arbiter dismissed
the complaint for lack of merit and ruled that there
was no employer-employee relationship between
petitioners and P&G. He found that the selection and
engagement of the petitioners, the payment of their
wages, the power of dismissal and control with
respect to the means and methods by which their
work was accomplished, were all done and exercised
by Promm-Gem/SAPS. He further found that
Promm-Gem and SAPS were legitimate independent
job contractors.
Appealing to the NLRC, petitioners disputed the
Labor Arbiter’s findings. On July 27, 1998, the
NLRC rendered a Decision dismissing their appeal.
Petitioners then filed a petition for certiorari with the
CA, alleging grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the Labor
Arbiter and the NLRC. However, said petition was
also denied by the CA.
Petitioners filed a motion for reconsideration but the
motion was also denied. Hence, this petition.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Issue: Whether or not Promm-Gem and SAPS are
labor-only contractors
Ruling:
Promm-Gem is an independent contractor however,
SAPS is a labor-only contractor.
The pertinent Labor Code provision on the matter
states:
ART. 106. Contractor or subcontractor. – Whenever
an employer enters into a contract with another
person for the performance of the former’s work, the
employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
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.
There is "labor-only" contracting where the person
supplying workers to an employer does not have
substantial capital or investment in the form of tools,
equipment, machineries, work premises, among
others, and the workers recruited and placed by such
person are performing activities which are directly
related to the principal business of such employer. In
such cases, the person or intermediary shall be
considered merely as an agent of the employer who
shall be responsible to the workers in the same
manner and extent as if the latter were directly
employed by him.
Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code, as amended by
Department Order No. 18-02, distinguishes between
legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting
Arrangements. In legitimate contracting, there exists
a trilateral relationship under which there is a
contract for a specific job, work or service between
the principal and the contractor or subcontractor, and
a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three
parties involved in these arrangements, the principal
which decides to farm out a job or service to a
contractor or subcontractor, the contractor or
subcontractor which has the capacity to
independently undertake the performance of the job,
work or service, and the contractual workers engaged
117

by the contractor or subcontractor to accomplish the
job, work or service.
Section 5. Prohibition against labor-only contracting.
Labor-only contracting is hereby declared prohibited.
For this purpose, labor-only contracting shall refer to
an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to
perform a job, work or service for a principal, and
any of the following elements are present:
i) The contractor or subcontractor does not have
substantial capital or investment which relates to the
job, work or service to be performed and the
employees recruited, supplied or placed by such
contractor or subcontractor are performing activities
which are directly related to the main business of the
principal; or
ii) [T]he contractor does not exercise the right to
control over the performance of the work of the
contractual employee.
The foregoing provisions shall be without prejudice
to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital
stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements,
machineries and work premises, actually and directly
used by the contractor or subcontractor in the
performance or completion of the job, work or
service contracted out.
The "right to control" shall refer to the right reserved
to the person for whom the services of the contractual
workers are performed, to determine not only the end
to be achieved, but also the manner and means to be
used in reaching that end.
Clearly, the law and its implementing rules allow
contracting arrangements for the performance of
specific jobs, works or services. Indeed, it is
management prerogative to farm out any of its
activities, regardless of whether such activity is
peripheral or core in nature. However, in order for
such outsourcing to be valid, it must be made to an
independent contractor because the current labor
rules expressly prohibit labor-only contracting.
In the instant case, the financial statements of
Promm-Gem show that it has authorized capital stock
of P1 million and a paid-in capital, or capital
available for operations, of P500,000.00 as of 1990.
It also has long term assets worth P432,895.28 and
current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and
office space with a floor area of 870 square meters. It
also had under its name three registered vehicles
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LABOR STANDARDS LAW
which were used for its promotional / merchandising
business. Promm-Gem also has other clients aside
from P&G. Under the circumstances, we find that
Promm-Gem has substantial investment which relates
to the work to be performed. These factors negate the
existence of the element specified in Section 5(i) of
DOLE Department Order No. 18-02. The records
also show that Promm-Gem supplied its complainant-
workers with the relevant materials, such as markers,
tapes, liners and cutters, necessary for them to
perform their work. Promm-Gem also issued
uniforms to them. It is also relevant to mention that
Promm-Gem already considered the complainants
working under it as its regular, not merely contractual
or project, employees. This circumstance negates the
existence of element (ii) as stated in Section 5 of
DOLE Department Order No. 18-02, which speaks of
contractual employees. This, furthermore, negates –
on the part of Promm-Gem – bad faith and intent to
circumvent labor laws which factors have often been
tipping points that lead the Court to strike down the
employment practice or agreement concerned as
contrary to public policy, morals, good customs or
public order.
Under the circumstances, Promm-Gem cannot be
considered as a labor-only contractor. We find that it
is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of
SAPS shows that it has a paid-in capital of only
P31,250.00. There is no other evidence presented to
show how much its working capital and assets are.
Furthermore, there is no showing of substantial
investment in tools, equipment or other assets.
In Vinoya v. National Labor Relations Commission,
the Court held that "[w]ith the current economic
atmosphere in the country, the paid-in capitalization
of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI
cannot qualify as an independent
contractor."Applying the same rationale to the present
case, it is clear that SAPS – having a paid-in capital
of only P31,250 - has no substantial capital. SAPS’
lack of substantial capital is underlined by the records
which show that its payroll for its merchandisers
alone for one month would already total P44,561.00.
It had 6-month contracts with P&G. Yet SAPS failed
to show that it could complete the 6-month contracts
using its own capital and investment. Its capital is not
even sufficient for one month’s payroll. SAPS failed
to show that its paid-in capital of P31,250.00 is
sufficient for the period required for it to generate its
needed revenue to sustain its operations
independently. Substantial capital refers to
capitalization used in the performance or completion
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of the job, work or service contracted out. In the
present case, SAPS has failed to show substantial
capital.
Furthermore, the petitioners have been charged with
the merchandising and promotion of the products of
P&G, an activity that has already been considered by
the Court as doubtlessly directly related to the
manufacturing business, which is the principal
business of P&G. Considering that SAPS has no
substantial capital or investment and the workers it
recruited are performing activities which are directly
related to the principal business of P&G, we find that
the former is engaged in "labor-only contracting".
"Where ‘labor-only’ contracting exists, the Labor
Code itself establishes an employer-employee
relationship between the employer and the employees
of the ‘labor-only’ contractor." The statute establishes
this relationship for a comprehensive purpose: to
prevent a circumvention of labor laws. The contractor
is considered merely an agent of the principal
employer and the latter is responsible to the
employees of the labor-only contractor as if such
employees had been directly employed by the
principal employer.
Consequently, petitioners recruited and supplied by
SAPS -- which engaged in labor-only contracting --
are considered as the employees of P&G while those
having worked under, and been dismissed by Promm-
Gem, are considered the employees of Promm-Gem,
not of P&G.
76. SAN MIGUEL CORPORATION vs.
VICENTE B. SEMILLANO
FACTS:
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LABOR STANDARDS LAW
AMPCO hired the services of Vicente
Semillano, Nelson Mondejar, Jovito Remada
and Alex Hawod, herein respondents. All of
them were assigned to work in SMC's
Bottling Plant situated at Brgy. Granada Sta.
Fe, Bacolod City, in order to perform the
following tasks: segregating bottles,
removing dirt therefrom, filing them in
designated places, loading and unloading the
bottles to and from the delivery trucks, and
performing other tasks as may be ordered by
SMC's officers. They were required to work
inside the premises of SMC using SMC’s
equipment. They rendered service with SMC
for more than 6 months.
Subsequently, SMC entered into a Contract
of Services with AMPCO designating the
latter as the employer of Vicente, et al., As a
result, Vicente et al., failed to claim the
rights and benefits ordinarily accorded a
regular employee of SMC. In fact, they were
not paid their 13th month pay. They were
not allowed to enter the premises of SMC.
The project manager of AMPCO, Merlyn
Polidario, told them to wait for further
instructions from the SMC's supervisor.
Vicente et al., waited for one month,
unfortunately, they never heard a word from
SMC.
Consequently, Vicente et al., as
complainants, filed a complaint for illegal
dismissal with the Labor Arbiter against
AMPCO, Merlyn V. Polidario, SMC and
Rufino I. Yatar, SMC Plant Manager, as
respondents. Complainants assert that they
are regular employees of SMC. However,
SMC utilized AMPCO making it appear that
the latter was their employer, so that SMC
may evade the responsibility of paying the
benefits due them under the law.
The Labor Arbiter rendered judgment
declaring Vicente, et al. as regular
employees of San Miguel Corporation.
Initially, the NLRC Fourth Division
affirmed with modifications the findings of
the LA but in a Resolution, the NLRC
reversed its earlier ruling. It absolved
petitioner from liability and instead held
AMPCO, as employer of respondents, as an
independent contractor.
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The Court of Appeals overturned the Commission’s
finding that petitioner SMC wielded the power of
control over respondent and the power of dismissal
and that AMPCO was a labor-only contractor since "a
capital of nearly one million pesos" was insufficient
for it to qualify as an independent contractor.
SMC filed a motion for reconsideration but was
denied. Hence, this petition for review on certiorari.
Petitioner SMC argues that the CA wrongly assumed
that it exercised power of control over the
respondents just because they performed their work
within SMC's premises. In advocacy of its claim that
AMPCO is an independent contractor, petitioner
relies on the provisions of the service contract
between petitioner and AMPCO, wherein the latter
undertook to provide the materials, tools and
equipment to accomplish the services contracted out
by petitioner. The same contract provides that
AMPCO shall have exclusive discretion in the
selection, engagement and discharge of its
employees/personnel or otherwise in the direction
and control thereof. Petitioner also adds that AMPCO
determines the wages of its employees/personnel who
shall be within its full control.
In its Comment, respondent AMPCO essentially
advanced the same arguments in support of its claim
as a legitimate job contractor.
ISSUE:
WON AMPCO is a legitimate job contractor
RULING:
NO, AMPCO is a labor-only contractor.
The test to determine the existence of independent
contractorship is whether or not the one claiming to
be an independent contractor has contracted to do the
work according to his own methods and without
being subject to the control of the employer, except
only as to the results of the work.
Although there may be indications of an independent
contractor arrangement between petitioner and
AMPCO, the most determinant of factors exists
which indicate otherwise.
AMPCO's main business activity is trading,
maintaining a store catering to members and the
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LABOR STANDARDS LAW
public. Its job contracting with SMC is only a minor
activity or sideline. The component of AMPCO's
substantial capital are in fact invested and used in the
trading business.
AMPCO does not have substantial equipment, tools,
machineries, and supplies actually and directly used
by it in the performance or completion of the
segregation and piling job. There is nothing in
AMPCO's list of fixed assets, machineries, tools, and
equipment which it could have used, actually and
directly, in the performance or completion of its
contracted job, work or service with petitioner. Thus,
there can be no other logical conclusion but that the
tools and equipment utilized by respondents are
owned by petitioner SMC. It is likewise noteworthy
that neither petitioner nor AMPCO has shown that
the latter had clients other than petitioner. Therefore,
AMPCO has no independent business.
In connection therewith, DOLE Department Order
No. 10 also states that an independent 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, and 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. This embodies what has long been
jurisprudentially recognized as the control test to
determine the existence of employer-employee
relationship.
In the case at bench, petitioner failed to show how
AMPCO took "entire charge, control and supervision
of the work and service agreed upon."
Moreover, the Court was not convinced that AMPCO
wielded "exclusive discretion in the discharge" of
respondents. AMPCO's project manager, even told
respondents to "wait for further instructions from the
SMC's supervisor" after they were prevented from
entering petitioner SMC's premises.
Despite the fact that the service contracts contain
stipulations which are earmarks of independent
contractorship, they do not make it legally so. The
language of a contract is neither determinative nor
conclusive of the relationship between the parties.
Petitioner SMC and AMPCO cannot dictate, by a
declaration in a contract, the character of AMPCO's
business, that is, whether as labor-only contractor, or
job contractor. AMPCO's character should be
measured in terms of, and determined by, the criteria
set by statute. At a closer look, AMPCO's actual
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status and participation regarding respondents'
employment clearly belie the contents of the written
service contract.
Petitioner cannot rely either on AMPCO's Certificate
of Registration as an Independent Contractor issued
by the proper Regional Office of the DOLE to prove
its claim. It is not conclusive evidence of such status.
The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor
from arising. In distinguishing between permissible
job contracting and prohibited labor-only contracting,
the totality of the facts and the surrounding
circumstances of the case are to be considered.
Thus, petitioner SMC, as principal employer, is
solidarily liable with AMPCO, the labor-only
contractor, for all the rightful claims of respondents.
Under this set-up, AMPCO, as the "labor-only"
contractor, is deemed an agent of the principal
(SMC). The law makes the principal responsible over
the employees of the "labor-only" contractor as if the
principal itself directly hired the employees.
77.Manila Water Company Inc. vs Dalumpines
Facts:
By virtue of Republic Act No. 8041,
otherwise known as the "National Water Crisis Act of
1995," the Metropolitan Waterworks and Sewerage
System (MWSS) was given the authority to enter into
concession agreements allowing the private sector in
its operations. Petitioner Manila Water Company, Inc.
(Manila Water) was one of two private
concessionaires contracted by the MWSS to manage
the water distribution system in the east zone of
Metro Manila. The east service area included the
following towns and cities: Mandaluyong, Marikina,
Pasig, Pateros, San Juan, Taguig, Makati, parts of
Quezon City and Manila, Angono, Antipolo, Baras,
Binangonan, Cainta, Cardona, Jala-Jala, Morong,
Pililla, Rodriguez, Tanay, Taytay, Teresa, and San
Mateo.3
On November 21, 1997, before the
expiration of the contract of services, the 121 bill
collectors formed a corporation duly registered with
the Securities and Exchange Commission (SEC) as
the "Association Collector’s Group, Inc." (ACGI).
ACGI was one of the entities engaged by Manila
Water for its courier service. However, Manila Water
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LABOR STANDARDS LAW
contracted ACGI for collection services only in its
Balara Branch.6
In December 1997, Manila Water entered
into a service agreement with respondent First
Classic Courier Services, Inc. (FCCSI) also for its
courier needs. The service agreements between
Manila Water and FCCSI covered the periods 1997 to
1999 and 2000 to 2002.7 Earlier, in a memorandum
dated November 28, 1997, FCCSI gave a deadline for
the bill collectors who were members of ACGI to
submit applications and letters of intent to transfer to
FCCSI. The individual respondents in this case were
among the bill collectors who joined FCCSI and were
hired effective December 1, 1997.8
On various dates between May and October
2002, individual respondents were terminated from
employment. Manila Water no longer renewed its
contract with FCCSI because it decided to implement
a "collectorless" scheme whereby Manila Water
customers would instead remit payments through
"Bayad Centers."9 The aggrieved bill collectors
individually filed complaints for illegal dismissal,
unfair labor practice, damages, and attorney’s fees,
with prayer for reinstatement and backwages against
petitioner Manila Water and respondent FCCSI. The
complaints were consolidated and jointly heard.
Petitioner Manila Water, for its part, denied
that there was an employer-employee relationship
between its company and respondent bill collectors.
Based on the agreement between FCCSI and Manila
Water, respondent bill collectors are the employees of
the former, as it is the former that has the right to
select/hire, discipline, supervise, and control. FCCSI
has a separate and distinct legal personality from
Manila Water, and it was duly registered as an
independent contractor before the DOLE.
Issues:
WON FCCSI was a labor-only contractor and that
respondent bill collectors are employees of petitioner
Manila Water
Held:
Yes. FCCSI was a labor-only contractor and that
respondent bill collectors are employees of petitioner
Manila Water.
"Contracting" or "subcontracting" refers to
an arrangement whereby a principal agrees to put out
or farm out with a contractor or subcontractor the
performance or completion of a specific job, work, or
service within a definite or predetermined period,
regardless of whether such job, work, or service is to
be performed or completed within or outside the
premises of the principal.
Department Order No. 18-02, Series of
2002, enunciates that labor-only contracting refers to
an arrangement where the contractor or subcontractor
merely recruits, supplies, or places workers to
121

perform a job, work, or service for a principal, and
any of the following elements are present: (i) the
contractor or subcontractor does not have substantial
capital or investment which relates to the job, work,
or service to be performed and the employees
recruited, supplied, or placed by such contractor or
subcontractor are performing activities which are
directly related to the main business of the principal;
or (ii) the contractor does not exercise the right to
control the performance of the work of the
contractual employee.
FCCSI has no sufficient investment in the
form of tools, equipment and machinery to undertake
contract services for Manila Water involving a fleet
of around 100 collectors assigned to several branches
and covering the service area of Manila Water
customers spread out in several cities/towns of the
East Zone. The only rational conclusion is that it is
Manila Water that provides most if not all the
logistics and equipment including service vehicles in
the performance of the contracted service,
notwithstanding that the contract between FCCSI and
Manila Water states that it is the Contractor which
shall furnish at its own expense all materials, tools
and equipment needed to perform the tasks of
collectors.
78. Teng vs. Pahagac, G.R. No. 169704,
November 17, 2010
Facts:
Albert Teng Fish Trading is engaged in deep
sea fishing and, for this purpose, owns boats (basnig),
equipment, and other fishing paraphernalia. As owner
of the business, Teng claims that he customarily
enters into joint venture agreements with master
fishermen (maestros) who are skilled and are experts
in deep sea fishing; they take charge of the
management of each fishing venture, including the
hiring of the members of its complement. He avers
that the maestros hired the respondent workers as
checkers to determine the volume of the fish caught
in every fishing voyage.
On February 20, 2003, the respondent
workers filed a complaint for illegal dismissal against
Albert Teng Fish Trading, Teng, and Chua before the
NCMB, Region Branch No. IX, Zamboanga City.
Issues:
1. WON the VA’s decision is not subject to a
motion for reconsideration.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
2. WON an employer-employee relationship
existed between Teng and the respondent
workers.
Held: The petition is denied.
1. Article 262-A of the Labor Code does not
prohibit the filing of a motion for
reconsideration.
On March 21, 1989, Republic Act
No. 6715 took effect, amending, among
others, Article 263 of the Labor Code which
was originally worded as:
Art. 263 x x x Voluntary arbitration
awards or decisions shall be final,
unappealable, and executory.
As amended, Article 263 is now Article
262-A, which states:
Art. 262-A. x x x [T]he award or
decision x x x shall contain the facts
and the law on which it is based. It
shall be final and executory after ten
(10) calendar days from receipt of the
copy of the award or decision by the
parties.
Notably, Article 262-A deleted the
word "unappealable" from Article 263. The
deliberate selection of the language in the
amendatory act differing from that of the
original act indicates that the legislature
intended a change in the law, and the court
should endeavor to give effect to such intent.
We recognized the intent of the change of
phraseology in Imperial Textile Mills, Inc. v.
Sampang, where we ruled that:
It is true that the present rule [Art.
262-A] makes the voluntary arbitration
award final and executory after ten calendar
days from receipt of the copy of the award
or decision by the parties. Presumably, the
decision may still be reconsidered by the
Voluntary Arbitrator on the basis of a motion
for reconsideration duly filed during that
period.
Teng’s allegation that the VA’s
decision had become final and executory by
the time the respondent workers filed an
appeal with the CA thus fails. We
consequently rule that the respondent
workers seasonably filed a motion for
reconsideration of the VA’s judgment, and
the VA erred in denying the motion because
no motion for reconsideration is allowed.
2. There exists an employer-employee
relationship between Teng and the
respondent workers.
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While Teng alleged that it was the
maestros who hired the respondent workers,
it was his company that issued to the
respondent workers identification cards
(IDs) bearing their names as employees and
Teng’s signature as the employer. Generally,
in a business establishment, IDs are issued
to identify the holder as a bona fide
employee of the issuing entity.
For the 13 years that the respondent
workers worked for Teng, they received
wages on a regular basis, in addition to their
shares in the fish caught. The worksheet
showed that the respondent workers
received uniform amounts within a given
year, which amounts annually increased
until the termination of their employment in
2002. Teng’s claim that the amounts
received by the respondent workers are mere
commissions is incredulous, as it would
mean that the fish caught throughout the
year is uniform and increases in number
each year.
More importantly, the element of
control – which we have ruled in a number
of cases to be a strong indicator of the
existence of an employer-employee
relationship – is present in this case. Teng
not only owned the tools and equipment, he
directed how the respondent workers were to
perform their job as checkers; they, in fact,
acted as Teng’s eyes and ears in every
fishing expedition.
Teng cannot hide behind his
argument that the respondent workers were
hired by the maestros. To consider the
respondent workers as employees of the
maestros would mean that Teng committed
impermissible labor-only contracting. As a
policy, the Labor Code prohibits labor-only
contracting:
ART. 106. Contractor or
Subcontractor – x x x The Secretary of
Labor and Employment may, by appropriate
regulations, restrict or prohibit the
contracting-out of labor.
xxxx
There is "labor-only" contracting
where the person supplying workers to an
employer does not have substantial
capital or investment in the form of tools,
equipment, machineries, work premises,
among others, and the workers recruited
and placed by such persons are
performing activities which are directly
related to the principal business of such
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LABOR STANDARDS LAW
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.
Section 5 of the DO No. 18-
02, which implements Article 106 of the
Labor Code, provides:
Section 5. Prohibition against
labor-only contracting. – Labor-only
contracting is hereby declared
prohibited.For this purpose, labor-only
contracting shall refer to an arrangement
where the contractor or subcontractor
merely recruits, supplies or places workers
to perform a job, work or service for a
principal, and any of the following elements
are present:
(i) The contractor or subcontractor
does not have substantial capital or
investment which relates to the job, work or
service to be performed and the employees
recruited, supplied or placed by such
contractor or subcontractor are performing
activities which are directly related to the
main business of the principal; or
(ii) The contractor does not
exercise the right to control over the
performance of the work of the contractual
employee.
In the present case, the maestros
did not have any substantial capital or
investment. Teng admitted that he solely
provided the capital and equipment, while
the maestros supplied the workers. The
power of control over the respondent
workers was lodged not with the maestros
but with Teng. As checkers, the respondent
workers’ main tasks were to count and
classify the fish caught and report them to
Teng. They performed tasks that were
necessary and desirable in Teng’s fishing
business. Taken together, these incidents
confirm the existence of a labor-only
contracting which is prohibited in our
jurisdiction, as it is considered to be the
employer’s attempt to evade obligations
afforded by law to employees.
Accordingly, we hold that
employer-employee ties exist between Teng
and the respondent workers. A finding that
the maestros are labor-only contractors is
equivalent to a finding that an employer-
employee relationship exists between Teng
and the respondent workers. As regular
123

employees, the respondent workers are
entitled to all the benefits and rights
appurtenant to regular employment.
79. GSIS vs. NLRC, et. al., G.R. No. 180045, Nov.
17, 2010
Facts:
Respondents Dionisio Banlasan, Alfredo T. Tafalla,
Telesforo D. Rubia, Rogelio A. Alvarez, Dominador
A. Escobal, and Rosauro Panis were employed as
security guards by DNL Security Agency (DNL
Security). By virtue of the service contract entered
into by DNL Security and petitioner Government
Service Insurance System on May 1, 1978,
respondents were assigned to petitioner’s Tacloban
City office, each receiving a monthly income
ofP1,400.00. Sometime in July 1989, petitioner
voluntarily increased respondents’ monthly salary to
P3,000.00.3
In February 1993, DNL Security informed
respondents that its service contract with petitioner
was terminated. This notwithstanding, DNL Security
instructed respondents to continue reporting for work
to petitioner. Respondents worked as instructed until
April 20, 1993, but without receiving their wages;
after which, they were terminated from
employment.4
On June 15, 1995, respondents filed with the
National Labor Relations Commission (NLRC),
Regional Arbitration Branch No. VIII, Tacloban City,
a complaint against DNL Security and petitioner for
illegal dismissal, separation pay, salary differential,
13th month pay, and payment of unpaid salary.
Issue: WON GSIS is jointly and severally liable with
DNL Security Agency for payment of the
unsubstantiated amounts of Salary Differentials and
the 13th Month Pay to the private respondent security
guards.
Held:
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The fact that there is no actual and direct employer-
employee relationship between petitioner and
respondents does not absolve the former from
liability for the latter’s monetary claims. When
petitioner contracted DNL Security’s services,
petitioner became an indirect employer of
respondents, pursuant to Article 107 of the Labor
Code, which reads:
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.
After DNL Security failed to pay respondents the
correct wages and other monetary benefits, petitioner,
as principal, became jointly and severally liable, as
provided in Articles 106 and 109 of the Labor Code,
which state:
ART. 106. Contractor or subcontractor. – Whenever
an employer enters into a contract with another
person for the performance of the former’s work, the
employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with
the provisions of this Code.
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. x x x.
xxxx
ART. 109. Solidary liability. – The provisions of
existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held
responsible with his contractor or subcontractor for
any violation of any provision of this Code. For
purposes of determining the extent of their civil
liability under this Chapter, they shall be considered
as direct employers.
124

This statutory scheme is designed to give the workers
ample protection, consonant with labor and social
justice provisions of the 1987 Constitution.
Petitioner’s liability covers the payment of
respondents’ salary differential and 13th month pay
during the time they worked for petitioner. In
addition, petitioner is solidarily liable with DNL
Security for respondents’ unpaid wages from
February 1993 until April 20, 1993. While it is true
that respondents continued working for petitioner
after the expiration of their contract, based on the
instruction of DNL Security, petitioner did not object
to such assignment and allowed respondents to render
service. Thus, petitioner impliedly approved the
extension of respondents’ services. Accordingly,
petitioner is bound by the provisions of the Labor
Code on indirect employment. Petitioner cannot be
allowed to deny its obligation to respondents after it
had benefited from their services. So long as the
work, task, job, or project has been performed for
petitioner’s benefit or on its behalf, the liability
accrues for such services. The principal is made
liable to its indirect employees because, after all, it
can protect itself from irresponsible contractors by
withholding payment of such sums that are due the
employees and by paying the employees directly, or
by requiring a bond from the contractor or
subcontractor for this purpose.
Petitioner’s liability, however, cannot extend to the
payment of separation pay. An order to pay
separation pay is invested with a punitive character,
such that an indirect employer should not be made
liable without a finding that it had conspired in the
illegal dismissal of the employees.
Lastly, we do not agree with petitioner that the
enforcement of the decision is impossible because its
charter unequivocally exempts it from execution.
To be sure, petitioner’s charter should not be used to
evade its liabilities to its employees, even to its
indirect employees, as mandated by the Labor Code.
80. Marialy Sy, et al. vs. Fairland Knitcraft Co.,
Inc.,
x--------------------------------------x (consolidated
with)
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Susan T. De Leon vs. Fairland Knitcraft Co., Inc.,
et al.
Facts:
Fairland is a domestic corporation engaged in
garments business, while Susan de Leon (Susan) is
the owner/proprietress of Weesan
Garments (Weesan).
On the other hand, the complaining workers, Marialy
Sy and 33 others (the workers) are sewers, trimmers,
helpers, a guard and a secretary who were hired by
Weesan.
The workers filed separate complaints for
underpayment and/or non-payment of wages,
overtime pay, premium pay, 13th month pay and other
monetary benefits against Susan/Weesan. These
complaints were then consolidated by the Arbitration
Branch of the NLRC in January 2003.
February 5, 2003, Weesan filed before the
Department of Labor and Employment-National
Capital Region (DOLE-NCR) a report on its
temporary closure for a period of not less than six
months. On the same day, the workers were not
anymore allowed to work. So on February 18, 2003
they filed an Amended Complaint, and on March 13,
2003, another pleading entitled Amended Complaints
and Position Paper for Complainants, to include the
charge of illegal dismissal and impleaded Fairland
and its manager, Debbie Manduabas (Debbie), as
additional respondents.
At the Hearings set by the Labor Arbiter Ramon
Valentin Reyes, Atty. Antonio Geronimo represented
both Susan/Weesan and Fairland. He submitted 2
position papers for the two entities. The workers filed
a Reply, to which Atty. Geronimo also submitted a
Consolidated Reply by Susan/Weesan and Fairland.
Workers answered back through a Rejoinder.
The Labor Arbiter dismissed the case for lack of
merit, but ordered the respondent companies to pay
each complainant P5,000.00 by way of financial
assistance.
The NLRC granted the worker’s appeal and set aside
the Labor Arbiter’s decision. The Commission
125

declared the dismissal of the workers as illegal and
ordered reinstatement, will full backwages from
February 5, 2003 and payment all the unpaid benefits
to be paid solidarily by Susan/Weesan and Fairland.
Atty. Geronimo filed a Motion for Reconsideration.
However, Fairland filed another Motion for
Reconsideration through Atty. Melina O. Tecson
(Atty. Tecson) assailing the jurisdiction of the Labor
Arbiter and the NLRC over it, claiming that it was
never summoned to appear, attend or participate in all
the proceedings conducted therein. It also denied that
it engaged the services of Atty. Geronimo. These
MRs were denied by the NLRC.
Thus, Fairland and Susan/Weesan filed their petitions
for certiorari before the Court of Appeals.
CA’s decision on Fairland’s petition:
The CA denied Fairland’s petition and affirmed the
NLRC ruling which held Fairland solidarily liable
with Susan.
On MR, Fairland moved also for the voluntary
inhibition of Justices Leagogo and Maambong. The
CA granted the motion for voluntary inhibition and
transferred the case from the First Division to the
Ninth Division. The Ninth Division reversed the
earlier denial of Fairland’s petition It held that the
labor tribunals did not acquire jurisdiction over the
person of Fairland, and even assuming they did,
Fairland is not liable to the workers since Weesan is
not a mere labor-only contractor but a bona fide
independent contractor. The Special Ninth Division
thus annulled and set aside the assailed NLRC
Decision and Resolution insofar as Fairland is
concerned and excluded the latter therefrom.
Workers appealed this decision to the Supreme Court.
CA’s decision on Susan’s petition:
Susan’s petition was denied due course and dismissed
for lack of merit. The CA affirmed the NLRC ruling
with respect to Susan.
Her MR was denied by the CA.
Before the Supreme Court:
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Susan filed a petition for review on certiorari with the
SC, which was dismissed by the Supreme Court on
technicality and for failure to sufficiently show any
reversible error in the assailed judgment. Susan filed
an appeal but before it could be resolved, the
Supreme Court consolidated Susan’s case with that
the workers.
The Supreme Court granted Susan’s Motion for
Reconsideration and reinstated her petition for review
on certiorari.
Issues:
1. Whether or not Susan/Weesan is a labor-only
contracting agent acting as an agent of Fairland?
2. Whether or not the individual private respondents
(Sy, et al.) were illegal dismissed?
Ruling:
G.R. No. 182915 (Susan de Leon vs. Fairland,
Sy et al.)
1. Susan is a mere labor-only contractor.
“There is labor-only contracting when the contractor
or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal. In labor-only contracting, the following
elements are present:
(a) The person supplying workers to an employer
does not have substantial capital or investment in the
form of tools, equipment, machineries, work
premises, among others; and
(b) The workers recruited and placed by such person
are performing activities which are directly related to
the principal business of the employer.”
The workers, majority of whom are sewers, were
recruited by Susan/Weesan and that they performed
activities which are directly related to Fairland’s
principal business of garments. Did Susan/Weesan
have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among
others? The SC said that there was nothing in the
records that would show that Weesan has investment
126

in the form of tools, equipment or machineries. The
records show that Fairland has to furnish Weesan
with sewing machines for it to be able to provide the
sewing needs of the former. Weesan was unable to
show that apart from the borrowed sewing machines,
it owned and possessed any other tools, equipment,
and machineries necessary to its being a contractor or
sub-contractor for garments. Neither was Weesan
able to prove that it has substantial capital for its
business.
Further, the work premises utilized by Weesan is
owned by Fairland, which significantly, was not in
the business of renting properties. They also
advanced that there was no showing that
Susan/Weesan paid any rentals for the use of the
premises. Instead of refuting the worker’s
allegations, Susan instead claimed that Weesan rented
the premises from another entity, De Luxe. To
support this, she attached to her petition two
Contracts of Lease purportedly entered into by her
and De Luxe for the lease of the premises covering
the periods August 1, 1997 to July 31, 2000 and
January 1, 2001 to December 31, 2004 as well as
TCTs and Tax declarations in De Luxe’s name but the
SC found it wanting. There were no rental receipts
presented nor did the TCTs indicate with certainty
that the registered property is the same one used for
Weesan’s work premises. Weesan does not have its
own workplace and is only utilizing the workplace of
Fairland to whom it supplied workers for its garment
business.
Suffice it to say that “[t]he presumption is that a
contractor is a labor-only contractor unless such
contractor overcomes the burden of proving that it
has substantial capital, investment, tools and the
like.” As Susan/Weesan was not able to adduce
evidence that Weesan had any substantial capital,
investment or assets to perform the work contracted
for, the presumption that Weesan is a labor-only
contractor stands.
2. Yes, the worker’s were illegally dismissed.
Susan relies on Article 283 of the Labor Code which
allows as a mode of termination of employment the closure
or termination of business, which is a management
prerogative. The exercise of which requires: a) that the
closure/cessation of business is bona fide, i.e., its purpose is
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
to advance the interest of the employer and not to defeat or
circumvent the rights of employees under the law or a valid
agreement; b) that written notice was served on the
employees and the DOLE at least one month before the
intended date of closure or cessation of business; and c) in
case of closure/cessation of business not due to financial
losses, that the employees affected have been given
separation pay equivalent to ½ month pay for every year of
service or one month pay, whichever is higher.”
The burden of proving that a temporary suspension
is bona fide falls upon the employer. Clearly here,
Susan/Weesan was not able to discharge this
burden. The documents Weesan submitted to support
its claim of severe business losses cannot be
considered as proof of financial crisis to justify the
temporary suspension of its operations since they
clearly appear to have not been duly filed with the
BIR. Weesan failed to satisfactorily explain why the
Income Tax Returns and financial statements it
submitted do not bear the signature of the receiving
officers. Also hard to ignore is the absence of the
mandatory 30-day prior notice to the workers.
Hence, the Court finds that Susan failed to prove that
the suspension of operations of Weesan was bona
fide and that it complied with the mandatory
requirement of notice under the law. Susan likewise
failed to discharge her burden of proving that the
termination of the workers was for a lawful cause.
Therefore, the NLRC and the CA, in CA-G.R. SP No.
93860, did not err in their findings that the workers
were illegally dismissed by Susan/Weesan.
The court also ruled that Fairland’s claim of
prescription does not deserve consideration. Fairland
says that they only engaged Weesan’s services 1996
to 1997, but in January 31, 2003, Fairland wrote
Weesan requesting for the sewing machines back.
G.R. No. 182915 (Sy vs. Fairland)
“It is basic that the Labor Arbiter cannot acquire
jurisdiction over the person of the respondent without
the latter being served with summons.” However, “if
there is no valid service of summons, the court can
still acquire jurisdiction over the person of the
defendant by virtue of the latter’s voluntary
appearance.” Although not served with summons,
jurisdiction over Fairland and Debbie was acquired
through their voluntary appearance. When the
worker’s complaint was before the Labor Arbiter, it is
127

confirmed that Fairland and Debbie were never
summoned.
The crucial question now is: Did Fairland
and Debbie voluntarily appear before the Labor
Arbiter as to submit themselves to its jurisdiction?
Fairland argued before the CA that it did not
engage Atty. Geronimo as its counsel. However, the
Court held in Santos v. National Labor Relations
Commission viz:
Moreover, jurisdiction over the
person of the defendant in civil cases is
acquired not only by service of summons
but also by voluntary appearance in court
and submission to its
authority. ‘Appearance’ by a legal advocate
is such ‘voluntary submission to a court’s
jurisdiction’. It may be made not only by
actual physical appearance but likewise by
the submission of pleadings in compliance
with the order of the court or tribunal.
The fact that Atty. Geronimo entered his
appearance for Fairland and Debbie and that he
actively defended them before the Labor Arbiter
raised the presumption that he is authorized to appear
for them. As held in Santos, it is unlikely that Atty.
Geronimo would have been so irresponsible as to
represent Fairland and Debbie if he were not in fact
authorized. As an officer of the Court, Atty.
Geronimo is presumed to have acted with due
propriety. Moreover, “[i]t strains credulity that a
counsel who has no personal interest in the case
would fight for and defend a case with persistence
and vigor if he has not been authorized or employed
by the party concerned.”
The presumption of authority of counsel to
appear on behalf of a client is found both in the Rules
of Court and in the New Rules of Procedure of the
NLRC.
Sec. 8, Rule III of the New Rules of
Procedure of the NLRC, which is the rules
prevailing at that time, states in part:
SECTION 8. APPEARANCES. - An
attorney appearing for a party is presumed to
be properly authorized for that purpose.
However, he shall be required to indicate in
his pleadings his PTR and IBP numbers for
the current year.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
As Atty. Geronimo consistently indicated his PTR
and IBP numbers in the pleadings he filed, there is no
reason for the Labor Arbiter not to extend to Atty.
Geronimo the presumption that he is authorized to
represent Fairland.
Moreover, the fact that Debbie signed the verification
attached to the position paper filed by Atty.
Geronimo, without a secretary’s certificate or board
resolution attached thereto, is not sufficient reason for
the Labor Arbiter to be on his guard and require Atty.
Geronimo to prove his authority. Debbie, as General
Manager of Fairland is one of the officials of the
company who can sign the verification without need
of a board resolution because as such, she is in a
position to verify the allegations in the petition.
Suffice it to say that an attorney’s presumption of
authority is a strong one. “A mere denial by a party
that he authorized an attorney to appear for him, in
the absence of a compelling reason, is insufficient to
overcome the presumption, especially when the
denial comes after the rendition of an adverse
judgment,” such as in the present case.
To stress, Article 224 contemplates the furnishing of
copies of final decisions, orders or awards both to the
parties and their counsel in connection with the
execution of such final decisions, orders or
awards. However, for the purpose of computing the
period for filing an appeal from the NLRC to the CA,
same shall be counted from receipt of the decision,
order or award by the counsel of record pursuant to
the established rule that notice to counsel is notice to
party. In sum, we hold that the Labor Arbiter had
validly acquired jurisdiction over Fairland and its
manager, Debbie, through the appearance of Atty.
Geronimo as their counsel and likewise, through
the latter’s filing of pleadings on their behalf.
Further proof that Fairland is Weesan’s principal: (1)
aside from sewing machines, Fairland also lent
Weesan other equipment such as fire extinguishers,
office tables and chairs, and plastic chairs; (2) no
proof evidencing the contractual arrangement
between Weesan and Fairland was ever submitted by
Fairland; (3) while both Weesan and Fairland assert
that the former had other clients aside from the latter,
no proof of Weesan’s contractual relationship with its
other alleged client is extant on the records; and (4)
there is no showing that any of the workers were
assigned to other clients aside from
Fairland. Moreover, the activities, the manner of
work and the movement of the workers were subject
to Fairland’s control.
128

Fairland, therefore, as the principal employer, is
solidarily liable with Susan/Weesan, the labor-only
contractor, for the rightful claims of the employees.
Under this set-up, Susan/Weesan, as the "labor-only"
contractor, is deemed an agent of the principal,
Fairland, and 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.
WHEREFORE, the Court,
1) in GR No. 189658 denies Susan’s Petition for
Review on Certiorari. The CA decision declaring her
a labor-only contractor is affirmed.
2) in G.R. No. 182915, grants the worker’s Petition
for Review on Certiorari. Decision of the CA (ninth
division) which excluded Fairland from being
solidarily liable is reversed and set aside. The
Decision of the CA (first division) which held
Fairland as solidarily liable with Susan/Weesan is
reinstated and affirmed.
81. Polyfoam-RGC International Corp., vs.
Concepcion G.R. No. 172349, June 13, 2012
Facts:
Respondent filed a complaint against petitioner
Polyfoam for illegal dismissal alleging that he was an
all-around factory worker who served for almost six
years. He was illegally dismissed when he discovered
that his time card was not in the rack and that he was
informed by the security guard that he can no longer
punch his card. Protesting to the supervisor, he found
out that he was dismissed due to an infraction of a
company rule. A request was sent to Polyfoam’s
manager asking for respondent’s re-admittance but
was unheeded.
Co-petitioner Gramaje filed a Motion for Intervention
claiming to be the real employer of respondent. She
alleges that her business PAGES is a legitimate job
contractor. Polyfoam, then, filed a Motion to Dismiss
since there was no employer-employee relationship
between Polyfoam and respondent. Gramaje assert
that respondent was not illegally dismissed but rather,
it was respondent that abandoned work.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The Motion to Intervene was granted but the Motion
to Dismiss was denied. In denying the motion to
dismiss, the Labor Arbiter ruled that the non-
existence of the relationship is a matter of defense. In
deciding the case, the Labor Arbiter ruled in favor of
respondent finding him to be illegally dismissed and
awarded his money claims. It ruled that Polyfoam
and Gramaje are solidarily liable to respondent. On
appeal the NLRC, the LA’s decision was modified by
exonerating Polyfoam from responsibility and
deleting some of the money awards. It ruled that
Gramaje is an independent contractor and was not
illegally dismissed but abandoned work. On appeal to
the CA, the NLRC’s decision was reversed and the
LA’s decision reinstated. Aggrieved, petitioners filed
this petition for review on ceritiorari.
Issues:
Whether or not Polyfoam is solidarily
liable?
Whether or not respondent was illegally
dismissed?
Ruling:
Yes, Polyfoam is solidarily liable. Yes, respondent
was illegally dismissed. The Court ruled that Gramaje
was involved in labor-only contracting and that
respondent did not abandon work but was illegally
dismissed.
In support of its conclusion that Polyfoam is involved
in labor-only contracting, the following were
considered by the Court: (a) Gramaje has no
substantial capital; and (b) Gramaje did not carry on
an independent business or undertake the
performance of its service contract according to its
own manner and method, free from the control and
supervision of its principal, Polyfoam. On the first
ground, it was not able to prove ownership over the
equipment in Polyfoam’s premises that is allegedly
owned by Gramaje.
Respondent was illegally dismissed. Credence was
given to respondent’s narration of facts. Several
circumstance also negated the theory of abandonment
like: (a) he immediately inquired from his supervisor;
(b) he wrote a letter asking to be re-admitted and (c)
he filed a case for illegal dismissal.
129

. determination as to the existence of an employer-
82. SUPERIOR PACKAGING CORP., VS.
BALAGSAY ET AL., G.R. NO. 178909,
OCTOBER 10, 2012
Facts:
Superior Packaging Corporation (Superior) is
involved in the manufacture and sale of commercial
and industrial corrugated boxes. It engaged the
services of Lancer Staffing & Services Network, Inc.
(Lancer) to provide reliever services to its business.
The respondents in this case are the workers of
Lancer assigned to Superior for such reliever
services.
The workers filed a complaint with the DOLE against
Superior for underpayment of wages, non- payment
of premium pay for worked rest, overtime pay and
non-payment of salaries. The DOLE then conducted
an inspection of the Superior’s premises and made a
finding, among others, that Superior is engaged in
labor-only contracting and is consequently an indirect
employer of the workers. Having found that Superior
committed the violations alleged by the workers, the
DOLE issued an Order finding in favor of the
workers and ordering Superior to pay their claims.
Superior filed a motion for reconsideration on the
ground that the workers are not its employees but of
Lancer. It objects to the finding that it is engaged in
labor-only contracting and is consequently an indirect
employer, and alleges that it is beyond the visitorial
and enforcement power of the DOLE to make such
conclusion. According to Superior, such conclusion
may be made only upon consideration of evidentiary
matters and cannot be determined solely through a
labor inspection.
Issue:
Can the DOLE make a finding as to the existence or
non-existence of employer-employee relationship in
the course of an inspection conducted pursuant to its
visitorial and enforcement power?
Ruling:
Yes, the DOLE can.
Under Art. 128(b) of the Labor Code, as amended by
RA 7730, the DOLE is fully empowered to make a
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
employee relationship in the exercise of its visitorial
and enforcement power.
The expanded visitorial and enforcement power of
the DOLE granted by RA 7730 would be rendered
nugatory if the alleged employer could, by the simple
expedient of disputing the employer-employee
relationship, force the referral of the matter to the
NLRC. At least a prima facie showing of the absence
of an employer-employee relationship be made to
oust the DOLE of jurisdiction. But it is precisely the
DOLE that will be faced with that evidence, and it
is the DOLE that will weigh it, to see if the same
does successfully refute the existence of an
employer- employee relationship.
Here, the DOLE finding Lancer was not an
independent contractor and that Superior and Lancer
were engaged in “labor-only contracting” is a finding
as to the existence of employer-employee
relationship. Hence, Superior was considered an
indirect employer of the workers and liable to the
latter for their unpaid money claims.
83. D I G I T A L
TELECOMMUNICATIONS
PHIL., INC. VS. DIGITEL
EMPLOYEES UNION (G.R.
NOS. 184903, 10OCT2012)
FACTS:
By virtue of a certification election, Digitel
Employees Union (Union) became the exclusive
bargaining agent of all rank and file employees of
Digitel in 1994. The Union and Digitel then
commenced collective bargaining negotiations which
resulted in a bargaining deadlock. The Union
threatened to go on strike, but then the Labor
Secretary assumed jurisdiction over the dispute and
eventually directed the parties to execute a CBA.
However, no CBA was forged between Digitel and
the Union. Some Union members abandoned their
130
 LABOR STANDARDS LAW

employment with Digitel. The Union later
became dormant. Ten (10) years thereafter or on 28
September 2004, Digitel received from Esplana, who
was President of the Union, a letter containing the list
of officers, CBA proposals and ground rules.
Digitel was reluctant to negotiate with the Union and
demanded that the latter Union show compliance
with the provisions of the Union’s Constitution and
By -laws on union membership and election
of officers. On 4 November 2004, Esplana and his
group filed a case for Preventive Mediation before
the National Conciliation and Mediation Board based
on Digitel’s violation of the duty to bargain. On 25
November 2004, Esplana filed a notice of strike. On
10 March 2005, the then Labor Secretary issued an
Order.
Assuming jurisdiction over the labor dispute. During
the pendency of the controversy, Digitel Service, Inc.
(Digiserv), a non-profit enterprise engaged in call
center servicing, filed with the DOLE an
Establishment Termination Report stating that it will
cease its business operation. The closure affected at
least 100 employees, 42 of whom are members of the
herein respondent Union. Alleging that the affected
employees are its members and in reaction to
Digiserv’s action, Esplana and his group filed another
Notice of Strike for union busting, illegal lock-out,
and violation of the assumption order. On 23 May
2005, the Labor Secretary ordered the second notice
of strike subsumed by the previous Assumption
Order.
with theUnion and certified for compulsory
arbitration before the NLRC the issue of unfair labor
practice.In accordance with the 13 July 2005 Order of
the Secretary of Labor, the unfair labor practice issue
was certified forcompulsory arbitration before the
NLRC. On 31 January 2006, NLRC rendered a
Decision dismissing the unfair labor practicecharge
against Digitel but declaring the dismissal of the 13
employees of Digiserv as illegal and ordering their
reinstatement.
The Union manifested that out of 42 employees, only
13 remained, as most had already accepted separation
pay.In view of this unfavorable decision, Digitel filed
a petition on 9 June 2006 before the Court of
Appeals, challenging theabove NLRC Decision and
Resolution and arguing mainly that Digiserv
employees are not employees of Digitel.On 18 June
2008, CA partially granted the case for ULP, thus
modifying the assailed NLRC dispositions. The
CAlikewise sustained the finding that Digiserv is
engaged in labor-only contracting and that its
employees are actually employeesof Digitel.Digitel
filed a motion for reconsideration but was denied in a
Resolution dated 9 October 2008. Hence, this petition
forreview on certiorari.
ISSUES:
1) Whether Digiserv is a legitimate contractor; and
2) Whether there was a valid dismissal.

RULING:
Meanwhile, on 14 March 2005, Digitel filed
a petition with the Bureau of Labor Relations (BLR)
seeking cancellation of the Union’s registration. In a Digiserv is a labor-only contractor.
Decision dated 11 May 2005, the Regional Director
of the DOLE dismissed the petition forcancellation of
union registration for lack of merit. The appeal filed
Labor-only contracting is expressly prohibited by our
by Digitel with the BLR was eventually dismissed for
labor laws. After an exhaustive review of the records,
lackof merit in a Resolution dated 9 March 2007. In
there is no showing that first, Digiserv has substantial
an Order dated 13 July 2005, the Secretary of Labor
investment in the form of capital, equipment or tools.
directed Digitel to commence the CBA negotiation

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 131


The NLRC, as echoed by the CA, did not find
substantial Digiserv’s authorized capital stock of P
1,000,000.00. It pointed out that only P 250,000.00 of
the authorized capital stock had been subscribed and
only P 62,500.00 had been paid up. There was no
increase in capitalization for the last 10 years.
Moreover, in the Amended Articles of Incorporation,
as well as in the General Information Sheets for the
years 1994, 2001 and 2005, the primary purpose of
Digiserv is to provide manpower services. In PCI
Automation Center, Inc. v. National Labor Relations
Commission the Court made the following
distinction: "the legitimate job contractor provides
services while the labor-only contractor provides only
manpower. The legitimate job contractor undertakes
to perform a specific job for the principal employer
while the labor-only contractor merely provides
the personnel to work for the principal employer."The
services provided by employees of Digiserv are
directly related to the business of Digitel. It is
undisputed that as early as March 1994, the affected
employees, except for two, were already performing
their job as Traffic Operator which was later renamed
as Customer Service Representative (CSR). It is
equally undisputed that all throughout their
employment, their function as CSR remains the
same until they were terminated effective May
30, 2005. Their long period of employment as such is
an indication that their job is directly related to
the main business of DIGITEL which is
telecommunications. Furthermore, Digiserv does not
exercise control over the affected employees.
Digiserv shared the same Human Resources,
Accounting, Audit and Legal Departments with
Digitel which manifested that it was Digitel who
exercised control over the performance of
the affected employees. The NLRC also relied on the
letters of commendation, plaques of appreciation and
certification issued by Digitel to the Customer
Service Representatives as evidence of control.
Considering that Digiserv has been found to be
engaged in labor-only contracting, the dismissed
employees aredeemed employees of Digitel.
The affected employees were illegally dismissed.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
In addition to finding that Digiserv is a labor-only
contractor, records teemwith proof that its dismissed
employees are in fact employees of Digitel. The
NLRC enumerated these pieces of evidence, thus:
The remaining affected employees, except for two
(2), were already hired by DIGITEL even before the
existence of DIGISERV. Likewise, the remaining
affected employees continuously held the position of
Customer Service Representative, which was earlier
known as Traffic Operator, from the time they were
appointed on March 1, 1994until they were
terminated on May 30, 2005.
Further, the Certificates issued to Customer Service
Representative likewise show that they are
employees of DIGITEL, Take for example the
"Service Award" issued to Ma. Loretta C. Esen, one
of the remaining affected employees. The "Service
Award" was signed by the officers of DIGITEL - the
VP-Customer Services Division, the VP-Human
Resources Division and the Group Head-Human
Resources Division. It cannot be gainsaid that it is
only the employer that issues service award to its
employees.
As an alternative argument, Digitel maintains that the
affected employees were validly dismissed on the
grounds of closure of Digiserv, a department within
Digitel. In the recent case of Waterfront Cebu City
Hotel v. Jimenez.
We reffered to the closure of a department or division of a
company as retrenchment. For a valid retrenchment,
the following elements must be present:(1)
That retrenchment is reasonably necessary and likely
to prevent business losses which, if already incurred,
must be substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived
objectively and in good faith by the employer;(2)
That the employer served written notice both to the
132

employees and to the Department of Labor and
Employment at least one month prior to the intended
date of retrenchment;(3) That the employer pays
the retrenched employees separation pay equivalent
to one (1) month pay or at least ½ month pay for
every year of service, whichever is higher;(4) That
the employer exercises its prerogative to retrench
employees in good faith for the advancement of its
interest and not to defeat or circumvent the
employees’ right to security of tenure; and
(5) That the employer used fair and reasonable
criteria in ascertaining who would be dismissed and
who would be retained among the employees, such
as status, efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.
Only the 3 elements of a valid retrenchment had been
here satisfied. Indeed, it is management prerogative
to close a department of the company. Digitel’s
decision to outsource the call center operation of the
company is a valid reason to close down the
operations of a department under which the affected
employees were employed. The fifth element
regarding the criteria to be observed by Digitel
clearly does not apply because all employees under
Digiserv were dismissed. The instant case is all about
the fourth element, that is, whether or not the affected
employees were dismissed in good faith. We find that
there was no good faith in the retrenchment. Prior to
the cessation of Digiserv’s operations, the Secretary
of Labor had issued the first and second assumption
order. The effects of the assumption order issued by
the Secretary of Labor are two-fold. It enjoins an
impending strike on the part of the employees and
orders the employer to maintain the status quo. There
is no doubt that Digitel defied the assumption order
by abruptly closing down Digiserv. The closure of a
department is not illegal per se. What makes it
unlawful is when the closure is undertaken in bad
faith. In St. John Colleges, Inc.v. St. John Academy
Faculty and Employees Union, bad faith was
evidenced by the timing of and reasons for the
closure andthe timing of and reasons for the
subsequent opening.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
84. NORKIS TRADING CORPORATION vs.
JOAQUIN BUENA VISTA et al
G.R. No. 182018 October 10, 2012
The Facts
The respondents were hired by Norkis Trading, a
domestic corporation engaged in the business of
manufacturing and marketing of Yamaha motorcycles
and multi-purpose vehicles, on separate dates and for
various positions.
Although they worked for Norkis Trading as skilled
workers assigned in the operation of industrial and
welding machines owned and used by Norkis Trading
for its business, they were not treated as regular
employees by Norkis Trading. Instead, they were
regarded by Norkis Trading as members of PASAKA,
a cooperative organized under the Cooperative Code
of the Philippines, and which was deemed an
independent contractor that merely deployed the
respondents to render services for Norkis
Trading.4 The respondents nonetheless believed that
they were regular employees of Norkis Trading,
citing in their Position Paper5 the following
circumstances that allegedly characterized their
employment with the company:
The work of the operators involves operating
industrial machines, such as, press machine,
hydraulic machine, and spotweld machine. On the
other hand, the welders used the welding machines.
The machines used by complainants herein
respondents in their work are all owned by
respondent Norkis Trading herein petitioner and these
are installed and located in the working area of the
complainants inside the company’s premises.
The salaries of complainants are paid inside the
premises of respondent Norkis Trading by Dalia Rojo
and Belen Rubio, who are also employees of the said
company assigned at the accounting office.
Despite having served respondent Norkis Trading for
many years and performing the same functions as
regular employees, complainants were not accorded
regular status. It was made to appear that
complainants are not employees of said company but
that of respondent PASAKA.6
Against the foregoing scenario, the respondents,
together with several other complainants,7 filed on
June 9, 1999 with the Department of Labor and
Employment (DOLE) a complaint against Norkis
133

Trading and PASAKA for labor-only contracting and
non-payment of minimum wage and overtime pay.
The complaint was docketed as LSED Case No.
RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting
allegedly led to the suspension of the respondents’
membership with PASAKA. On July 22, 1999, they
were served by PASAKA with memoranda charging
them with a violation of the rule against commission
of acts injurious or prejudicial to the interest or
welfare of the cooperative. The memoranda cited that
the respondents’ filing of a case against Norkis
Trading had greatly prejudiced the interest and
welfare of the cooperative.8 In their answer9 to the
memoranda, the respondents explained that they
merely wanted to be recognized as regular employees
of Norkis Trading. The case records include copies of
the memoranda sent to respondents Buenavista,
Fabroa and Dondoyano.10
On August 16, 1999, the respondents received
another set of memoranda from PASAKA, now
charging them with the following violations of the
cooperative’s rules and regulations: (1) serious
misconduct or willful disobedience of superior’s
instructions or orders; (2) gross and habitual neglect
of duties by abandoning work without permission; (3)
absences without filing leave of absence; and (4)
wasting time or loitering on company’s time or
leaving their post temporarily without permission
during office hours.11 Copies of the memoranda12 sent
to Fabroa and Cape form part of the records.
On August 26, 1999, PASAKA informed the
respondents of the cooperative’s decision to suspend
them for fifteen (15) working days, to be effective
from September 1 to 21, 1999, for violation of
PASAKA rules.
The records include copies of the memoranda13 sent
to Fabroa and Cape. The suspension prompted the
respondents to file with the NLRC the complaint for
illegal suspension against Norkis Trading and
PASAKA.
The 15-day suspension of the respondents was
extended for another period of 15 days, from
September 22, 1999 to October 12, 1999.14 Copies of
PASAKA’s separate letters15 to Buenavista, Fabroa,
Cape and Dondoyano on the cooperative’s decision to
extend the suspension form part of the records.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
On October 13, 1999, the respondents were to report
back to work but during the hearing in their NLRC
case, they were informed by PASAKA that they
would be transferred to NorkisTradings’ sister
company, PortaCoeli Industrial Corporation
(PortaCoeli), as washers of Multicab vehicles.
The respondents opposed the transfer as it would
allegedly result in a change of employers, from
Norkis Trading to PortaCoeli. The respondents also
believed that the transfer would result in a demotion
since from being skilled workers in NorkisTrading,
they would be reduced to being utility workers.These
circumstances made the respondents amend their
complaint for illegal suspension, to include the
charges of unfair labor practice, illegal dismissal,
damages and attorney’s fees.
For their part, both Norkis Trading and PASAKA
claimed that the respondents were not employees of
Norkis Trading. They insisted that the respondents
were members of PASAKA, which served as an
independent contractor that merely supplied services
to Norkis International Co., Inc. (Norkis
International) pursuant to a job contract16 which
PASAKA and Norkis International executed on
January 14, 1999 for 121,500 pieces of F/GF-Series
Reinforcement Production. After PASAKA received
reports from its coordinator at Norkis International of
the respondents’ low efficiency and violation of the
cooperative’s rules, and after giving said respondents
the chance to present their side, a penalty of
suspension was imposed upon them by the
cooperative. The illegal suspension being complained
of was then not linked to the respondents’
employment, but to their membership with PASAKA.
Norkis Trading stressed that the respondents were
deployed by PASAKA to Norkis International, a
company that is entirely separate and distinct from
Norkis Trading.
ISSUES:
1) THE COURT OF APPEALS HAS DEPARTED
FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN
FACTUAL FINDINGS AND DISREGARDED THE
UNIFORM AND CONSISTENT FACTUAL
FINDINGS OF THE LABOR ARBITER AND THE
NLRC, WHICH MUST BE ACCORDED GREAT
WEIGHT, RESPECT AND EVEN FINALITY. IN
SO DOING, THE COURT OF APPEALS
EXCEEDED ITS AUTHORITY ON CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT
134

BECAUSE SUCH FACTUAL FINDINGS WERE
BASED ON SPECULATIONS AND NOT ON
OTHER EVIDENCES [SIC] ON RECORD.
4) THE COURT OF APPEALS HAS
DETERMINED A QUESTION OF SUBSTANCE
NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN RULING THAT THE
RESPONDENTS WERE CONSTRUCTIVELY
DISMISSED CONTRARY TO THE FACTUAL
FINDINGS OF THE LABOR ARBITER AND THE
NLRC AND WITHOUT SHOWING ANY
EVIDENCE TO OVERTURN SUCH FINDING OF
FACT.42
This Court’s Ruling
The Court resolves to deny the petition.
Factual findings of labor officials
may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.
As regards the first ground, the petitioner questions
the CA’s reversal of LA Gutierrez’s and the NLRC’s
rulings, and argues that said rulings should have been
accorded great weight and finality by the appellate
court as these were allegedly supported by substantial
evidence.
On this matter, the settled rule is that factual findings
of labor officials, who are deemed to have acquired
expertise in matters within their jurisdiction, are
generally accorded not only respect but even finality
by the courts when supported by substantial
evidence, i.e., the amount of relevant evidence which
a reasonable mind might accept as adequate to
support a conclusion. We emphasize, nonetheless,
that these findings are not infallible. When there is a
showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be
examined by the courts. The CA can then grant a
petition for certiorari if it finds that the NLRC, in its
assailed decision or resolution, has made a factual
finding that is not supported by substantial evidence.
It is within the jurisdiction of the CA, whose
jurisdiction over labor cases has been expanded to
review the findings of the NLRC.47
We have thus explained in Cocomangas Hotel Beach
Resort v. Visca48 that the CA can take cognizance of a
petition for certiorari if it finds that the NLRC
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LABOR STANDARDS LAW
committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence
which are material to or decisive of the controversy.
The CA cannot make this determination without
looking into the evidence presented by the parties.
The appellate court needs to evaluate the materiality
or significance of the evidence, which are alleged to
have been capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other
evidence on record.
This case falls within the exception to the general
rule that findings of fact of labor officials are to be
accorded respect and finality on appeal. As our
discussions in the other grounds that are raised in this
petition will demonstrate, the CA has correctly held
that the NLRC has disregarded facts and evidence
that are material to the outcome of the respondents’
case. No error can be ascribed to the appellate court
for making its own assessment of the facts that are
significant to the case to determine the presence or
absence of grave abuse of discretion on the part of
the NLRC, even if the CA’s findings turn out to be
different from the factual findings of both the LA and
NLRC.
Termination of an employment for
no just or authorized cause
amounts to an illegal dismissal.
As to the issue of whether the respondents were
illegally dismissed by Norkis Trading, we answer in
the affirmative, although not by constructive
dismissal as declared by the CA, but by actual
dismissal.
Where an entity is declared to be a labor-only
contractor, the employees supplied by said contractor
to the principal employer become regular employees
of the latter. Having gained regular status, the
employees are entitled to security of tenure and can
only be dismissed for just or authorized causes and
after they had been afforded due
process.66 Termination of employment without just or
authorized cause and without observing procedural
due process is illegal.1âwphi1
In claiming that they were illegally dismissed from
their employment, the respondents alleged having
been informed by PASAKA that they would be
transferred, upon the behest of Norkis Trading, as
Multicab washers or utility workers to PortaCoeli, a
sister company of Norkis Trading. Norkis Trading
does not dispute that such job transfer was relayed by
PASAKA unto the respondents, although the
135

company contends that the transfer was merely an
"offer" that did not constitute a dismissal. It bears
mentioning, however, that the respondents were not
given any other option by PASAKA and Norkis
Trading but to accede to said transfer. In fact, there is
no showing that Norkis Trading would still willingly
accept the respondents to work for the company.
Worse, it still vehemently denies that the respondents
had ever worked for it. Again, all defenses of Norkis
Trading that anchor on the alleged lack of employer-
employee relationship between it and the respondents
no longer merit any consideration, given that this
Court’s findings in G.R. Nos. 180078-79 have
become conclusive. Thus, the respondents’ transfer to
PortaCoeli, although relayed to the respondents by
PASAKA was effectively an act of Norkis Trading.
Where labor-only contracting exists, the Labor Code
itself establishes an employer-employee relationship
between the employer and the employees of the
labor-only contractor. The statute establishes this
relationship for a comprehensive purpose: to prevent
a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer
and the latter is responsible to the employees of the
labor-only contractor as if such employees had been
directly employed by the principal employer.67
No further evidence or document should then be
required from the respondents to prove such fact of
dismissal, especially since Norkis Trading maintains
that it has no duty to admit and treat said respondents
as its employees. Considering that PortaCoeli is an
entity separate and distinct from Norkis Trading, the
respondents’ employment with Norkis Trading was
necessarily severed by the change in work
assignment. It then did not even matter whether or
not the transfer involved a demotion in the
respondents’ rank and work functions; the intention
to dismiss, and the actual dismissal of the
respondents were sufficiently established.
In the absence of a clear showing that the
respondents’ dismissal was for just or authorized
causes, the termination of the respondents’
employment was illegal. What may be reasonably
deduced from the records was that Norkis Trading
decided on the transfer, after the respondents had
earlier filed their complaint for labor-only contracting
against the company. Even Norkis Trading’s
contention that the transfer may be deemed a valid
exercise of management prerogative is misplaced.
First, the exercise of management prerogative
presupposes that the transfer is only for positions
within the business establishment. Second, the
exercise of management prerogative by employers is
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LABOR STANDARDS LAW
not absolute, as it is limited by law and the general
principles of fair play and justice.
WHEREFORE, premises considered, the petition
is DENIED.
SO ORDERED.
85. GOYA, INC. v. GOYA, INC. EMPLOYEES
UNION-FFW G.R. No. 170054 : January 21, 2013
FACTS:
Goya, Inc. (Company) is a domestic
corporation engaged in the manufacture, importation,
and wholesale of top quality food products.
Sometime in January 2004, the company
hired contractual employees from PESO Resources
Development Corporation (PESO) to perform
temporary and occasional services. Respondent
Goya, Inc. Employees UnionFFW (Union) requested
for a grievance conference on the ground that the
contractual workers do not belong to the categories of
employees stipulated in the existing CBA.
The hiring of contractual employees was in
contravention to their CBA agreement which has
been applied since 1970 where there are only 3 kinds
of employees: regular employees, probationary
employees and casual employees. The Union asserted
that the hiring of contractual employees from PESO
is not a management prerogative and in gross
violation of the CBA tantamount to unfair labor
practice (ULP).
The Union moreover advanced that
sustaining the Company’s position would easily
weaken and ultimately destroy the former with the
latters resort to retrenchment and/or retirement of
employees and not filling up the vacant regular
positions through the hiring of contractual workers
from PESO, and that a possible scenario could also
be created by the Company wherein it could "import"
workers from PESO during an actual strike.
136

The case was brought before the NCMB
when the matter remained unsolved for voluntary
arbitration. Voluntary Arbitrator Bienvenido E.
Laguesma manifested that amicable settlement was
no longer possible; hence, they agreed to submit for
resolution the solitary issue of "[w]hether or not the
Company is guilty of unfair labor acts in engaging
the services of PESO, a third party service provider,
under the existing CBA, laws, and jurisprudence."
ISSUE:
Whether or not the Company is guilty of
unfair labor acts in engaging the services of PESO, a
third party service provider, under the existing CBA,
laws, and jurisprudence.
RULING:
The company’s defense is that
their act of hiring contractual employees is a
management prerogative and is a valid act
thereof.
Declaring that a particular act falls within
the concept of management prerogative is
significantly different from acknowledging that such
act is a valid exercise thereof. What the VA and the
CA correctly ruled was that the Companys act of
contracting out/outsourcing is within the purview of
management prerogative. Both did not say, however,
that such act is a valid exercise thereof. Obviously,
this is due to the recognition that the CBA provisions
agreed upon by the Company and the Union delimit
the free exercise of management prerogative
pertaining to the hiring of contractual employees.
Indeed, the VA opined that "the right of the
management to outsource parts of its operations is
not totally eliminated but is merely limited by the
CBA," while the CA held that "this management
prerogative of contracting out services, however, is
not without limitation. x x x These categories of
employees particularly with respect to casual
employees serve as limitation to the Companys
prerogative to outsource parts of its operations
especially when hiring contractual employees.”
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
A collective bargaining agreement is the law
between the parties.
It is familiar and fundamental doctrine in
labor law that the CBA is the law between the parties
and they are obliged to comply with its provisions.
A collective bargaining agreement or CBA
refers to the negotiated contract between a legitimate
labor organization and the employer concerning
wages, hours of work and all other terms and
conditions of employment in a bargaining unit. As in
all contracts, the parties in a CBA may establish such
stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary
to law, morals, good customs, public order or public
policy. Thus, where the CBA is clear and
unambiguous, it becomes the law between the parties
and compliance therewith is mandated by the express
policy of the law.
Moreover, if the terms of a contract, as in a
CBA, are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of their
stipulations shall control.
On the power of the voluntary arbitrator:
In general, the arbitrator is expected to
decide those questions expressly stated and limited in
the submission agreement. However, since arbitration
is the final resort for the adjudication of disputes, the
arbitrator can assume that he has the power to make a
final settlement. Thus, assuming that the submission
empowers the arbitrator to decide whether an
employee was discharged for just cause, the arbitrator
in this instance can reasonably assume that his
powers extended beyond giving a yes-or-no answer
and included the power to reinstate him with or
without back pay.
86. Vigilla et al., vs. Phil. College of
Criminology Inc., G.R. No. 200094, June
10, 2013
Facts:
137

PCCr is a non-stock educational institution, while the
petitioners were janitors, janitresses and supervisor in
the Maintenance Department of PCCr under the
supervision and control of Atty. Florante A. Seril
(Atty. Seril), PCCr’s Senior Vice President for
Administration. The petitioners, however, were made
to understand, upon application with respondent
school, that they were under MBMSI, a corporation
engaged in providing janitorial services to clients.
Atty. Seril is also the President and General Manager
of MBMSI.
Sometime in 2008, PCCr discovered that the
Certificate of Incorporation of MBMSI had been
revoked as of July 2, 2003. On March 16, 2009,
PCCr, through its President, respondent Gregory Alan
F. Bautista (Bautista), citing the revocation,
terminated the school’s relationship with MBMSI,
resulting in the dismissal of the employees or
maintenance personnel under MBMSI, except
Alfonso Bongot (Bongot) who was retired.
In September, 2009, the dismissed employees, led by
their supervisor, Benigno Vigilla (Vigilla), filed their
respective complaints for illegal dismissal,
reinstatement, back wages, separation pay (for
Bongot), underpayment of salaries, overtime pay,
holiday pay, service incentive leave, and 13th month
pay against MBMSI, Atty. Seril, PCCr, and Bautista.
In their complaints, they alleged that it was the
school, not MBMSI, which was their real employer
because (a) MBMSI’s certification had been revoked;
(b) PCCr had direct control over MBMSI’s
operations; (c) there was no contract between
MBMSI and PCCr; and (d) the selection and hiring of
employees were undertaken by PCCr.
On the other hand, PCCr and Bautista contended that
(a) PCCr could not have illegally dismissed the
complainants because it was not their direct
employer; (b) MBMSI was the one who had
complete and direct control over the complainants;
and (c) PCCr had a contractual agreement with
MBMSI, thus, making the latter their direct
employer.
On September 11, 2009, PCCr submitted several
documents before LA Ronaldo Hernandez, including
releases, waivers and quitclaims in favor of MBMSI
executed by the complainants to prove that they were
employees of MBMSI and not PCCr.
Ruling of the Labor Arbiter
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LABOR STANDARDS LAW
After due proceedings, the LA handed down his
decision, finding that (a) PCCr was the real principal
employer of the complainants ; (b) MBMSI was a
mere adjunct or alter ego/labor-only contractor; (c)
the complainants were regular employees of PCCr;
and (d) PCCr/Bautista were in bad faith in dismissing
the complainants.
The LA explained that PCCr was actually the one
which exercised control over the means and methods
of the work of the petitioners, thru Atty. Seril, who
was acting, throughout the time in his capacity as
Senior Vice President for Administration of PCCr, not
in any way or time as the supposed employer/general
manager or president of MBMSI.
.Ruling of the NLRC
Not satisfied, the respondents filed an appeal before
the NLRC. In its Resolution, dated February 11,
2011, the NLRC affirmed the LA’s findings.
Nevertheless, the respondents were excused from
their liability by virtue of the releases, waivers and
quitclaims executed by the petitioners.
In their motion for reconsideration, petitioners
attached as annexes their affidavits denying that they
had signed the releases, waivers, and quitclaims.
They prayed for the reinstatement in toto of the July
30, 2010 Decision of the LA.8 MBMSI/Atty. Seril
also filed a motion for reconsideration9 questioning
the declaration of the NLRC that he was solidarily
liable with PCCr.
On April 28, 2011, NLRC modified its February 11,
2011 Resolution by affirming the July 30, 2010
Decision10 of the LA only in so far as complainants
Ernesto B. Ayento and Eduardo B. Salonga were
concerned. As for the other 17 complainants, the
NLRC ruled that their awards had been superseded
by their respective releases, waivers and quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied the petition
and affirmed the two Resolutions of the NLRC, dated
February 11, 2011 and April 28, 2011. The CA
pointed out that based on the principle of solidary
liability and Article 121711 of the New Civil Code,
petitioners’ respective releases, waivers and
quitclaims in favor of MBMSI and Atty. Seril
redounded to the benefit of the respondents. The CA
also upheld the factual findings of the NLRC as to
the authenticity and due execution of the individual
138

releases, waivers and quitclaims because of the
failure of petitioners to substantiate their claim of
forgery and to overcome the presumption of
regularity of a notarized document. Petitioners’
motion for reconsideration was likewise denied by
the CA in its January 4, 2012 Resolution.
Hence, this petition under Rule 45 challenging the
CA Decision
Issue:
 Whether or not their claims against the
respondents were amicably settled by virtue
of the releases, waivers and quitclaims
which they had executed in favor of
MBMSI.
o whether or not petitioners executed
the said releases, waivers and
quitclaims
o whether or not a labor-only
contractor is solidarily liable with
the employer.
Ruling:
The petition fails.
The Releases, Waivers and Quitclaims are Valid
We noted that the individual quitclaims,
waivers and releases executed by the complainants
showing that they received their separation pay from
MBMSI were duly notarized by a Notary Public.
Such notarization gives prima facie evidence of their
due execution. Further, said releases, waivers, and
quitclaims were not refuted nor disputed by
complainants herein, thus, we have no recourse but to
uphold their due execution
A Labor-only Contractor is Solidarily Liable with
the Employer
The issue of whether there is solidary
liability between the labor-only contractor and the
employer is crucial in this case. If a labor-only
contractor is solidarily liable with the employer, then
the releases, waivers and quitclaims in favor of
MBMSI will redound to the benefit of PCCr. On the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
other hand, if a labor-only contractor is not solidarily
liable with the employer, the latter being directly
liable, then the releases, waivers and quitclaims in
favor of MBMSI will not extinguish the liability of
PCCr.
xxx
The NLRC and the CA correctly ruled that
the releases, waivers and quitclaims executed by
petitioners in favor of MBMSI redounded to the
benefit of PCCr pursuant to Article 1217 of the New
Civil Code. The reason is that MBMSI is solidarily
liable with the respondents for the valid claims of
petitioners pursuant to Article 109 of the Labor Code.
As correctly pointed out by the respondents,
the basis of the solidary liability of the principal with
those engaged in labor-only contracting is the last
paragraph of Article 106 of the Labor Code, which in
part provides: "In such cases labor-only contracting,
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."
Xxx
Under the general rule set out in the first and
second paragraphs of Article 106, an employer who
enters into a contract with a contractor for the
performance of work for the employer, does not
thereby create an employer-employees relationship
between himself and the employees of the contractor.
Thus, the employees of the contractor remain the
contractor's employees and his alone. Nonetheless
when a contractor fails to pay the wages of his
employees in accordance with the Labor Code, the
employer who contracted out the job to the contractor
becomes jointly and severally liable with his
contractor to the employees of the latter "to the extent
of the work performed under the contract" as such
employer were the employer of the contractor's
employees. The law itself, in other words, establishes
an employer-employee relationship between the
employer and the job contractor's employees for a
limited purpose, i.e., in order to ensure that the latter
get paid the wages due to them.
139

A similar situation obtains where there is
"labor only" contracting. The "labor-only" contractor-
i.e "the person or intermediary" - is considered
"merely as an agent of the employer." The employer
is made by the statute responsible to the employees of
the "labor only" contractor as if such employees had
been directly employed by the employer. Thus, where
"labor-only" contracting exists in a given case, the
statute itself implies or establishes an employer-
employee relationship between the employer (the
owner of the project) and the employees of the "labor
only" contractor, this time for a comprehensive
purpose: "employer for purposes of this Code, to
prevent any violation or circumvention of any
provision of this Code." The law in effect holds both
the employer and the "laboronly" contractor
responsible to the latter's employees for the more
effective safeguarding of the employees' rights under
the Labor Code.35
87. BPI Employees Union-Davao city-FUBU vs.
Bank of the Phil Islands et al., G.R. No.
174912, July 24, 2013
Facts:
BOMC, which was created pursuant to Central Bank
Circular No. 1388, Series of 1993 (CBP Circular No.
1388, 1993), and primarily engaged in providing
and/or handling support services for banks and other
financial institutions, is a subsidiary of the Bank of
Philippine Islands (BPI) operating and functioning as
an entirely separate and distinct entity.
A service agreement between BPI and BOMC was
initially implemented in BPI’s Metro Manila
branches. In this agreement, BOMC undertook to
provide services such as check clearing, delivery of
bank statements, fund transfers, card production,
operations accounting and control, and cash
servicing, conformably with BSP Circular No. 1388.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Not a single BPI employee was displaced and those
performing the functions, which were transferred to
BOMC, were given other assignments.
The Manila chapter of BPI Employees Union
(BPIEU-Metro ManilaFUBU) then filed a complaint
for unfair labor practice (ULP). The Labor Arbiter
(LA) decided the case in favor of the union. The
decision was, however, reversed on appeal by the
NLRC. BPIEU-Metro Manila-FUBU filed a petition
for certiorari before the CA which denied it, holding
that BPI transferred the employees in the affected
departments in the pursuit of its legitimate business.
The employees were neither demoted nor were their
salaries, benefits and other privileges diminished.
On January 1, 1996, the service agreement was
likewise implemented in Davao City. Later, a merger
between BPI and Far East Bank and Trust Company
(FEBTC) took effect on April 10, 2000 with BPI as
the surviving corporation. Thereafter, BPI’s
cashiering function and FEBTC’s cashiering,
distribution and bookkeeping functions were handled
by BOMC. Consequently, twelve (12) former FEBTC
employees were transferred to BOMC to complete
the latter’s service complement.
BPI Davao’s rank and file collective bargaining
agent, BPI Employees Union-Davao City-FUBU
(Union), objected to the transfer of the functions and
the twelve (12) personnel to BOMC contending that
the functions rightfully belonged to the BPI
employees and that the Union was deprived of
membership of former FEBTC personnel who, by
virtue of the merger, would have formed part of the
bargaining unit represented by the Union pursuant to
its union shop provision in the CBA.7
The Union then filed a formal protest on June 14,
2000 addressed to BPI Vice Presidents Claro M.
Reyes and Cecil Conanan reiterating its objection. It
requested the BPI management to submit the BOMC
issue to the grievance procedure under the CBA, but
BPI did not consider it as "grievable." Instead, BPI
140

proposed a Labor Management Conference (LMC)
between the parties.
Thereafter, the Union demanded that the matter be
submitted to the grievance machinery as the resort to
the LMC was unsuccessful. As BPI allegedly ignored
the demand, the Union filed a notice of strike before
the National Conciliation and Mediation Board
(NCMB) on the following grounds:
a) Contracting out services/functions performed by
union members that interfered with, restrained and/or
coerced the employees in the exercise of their right to
self-organization;
b) Violation of duty to bargain; and
c) Union busting.
BPI then filed a petition for assumption of
jurisdiction/certification with the Secretary of the
Department of Labor and Employment (DOLE), who
subsequently issued an order certifying the labor
dispute to the NLRC for compulsory arbitration. The
DOLE Secretary directed the parties to cease and
desist from committing any act that might exacerbate
the situation.
On October 27, 2000, a hearing was conducted.
Thereafter, the parties were required to submit their
respective position papers
On December 21, 2001, the NLRC came out with a
resolution upholding the validity of the service
agreement between BPI and BOMC and dismissing
the charge of ULP. It ruled that the engagement by
BPI of BOMC to undertake some of its activities was
clearly a valid exercise of its management
prerogative. It further stated that the spinning off by
BPI to BOMC of certain services and functions did
not interfere with, restrain or coerce employees in the
exercise of their right to self-organization. The Union
did not present even an iota of evidence showing that
BPI had terminated employees, who were its
members. In fact, BPI exerted utmost diligence, care
and effort to see to it that no union member was
terminated.13 The NLRC also stressed that
Department Order (D.O.) No. 10 series of 1997,
strongly relied upon by the Union, did not apply in
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
this case as BSP Circular No. 1388, series of 1993,
was the applicable rule.
After the denial of its motion for reconsideration, the
Union elevated its grievance to the CA via a petition
for certiorari under Rule 65. The CA, however,
affirmed the NLRC’s December 21, 2001 Resolution
with modification that the enumeration of functions
listed under BSP Circular No. 1388 in the said
resolution be deleted. The CA noted at the outset that
the petition must be dismissed as it merely touched
on factual matters which were beyond the ambit of
the remedy availed of.14 Be that as it may, the CA
found that the factual findings of the NLRC were
supported by substantial evidence and, thus, entitled
to great respect and finality. To the CA, the NLRC
did not act with grave abuse of discretion as to merit
the reversal of the resolution.
As to the applicability of D.O. No. 10, the CA agreed
with the NLRC that the said order did not apply as
BPI, being a commercial bank, its transactions were
subject to the rules and regulations of the BSP.
Not satisfied, the Union filed a motion for
reconsideration which was, however, denied by the
CA.
Hence, the present petition
Issue:
 Whether or not the act of BPI to outsource the
cashiering, distribution and bookkeeping
functions to BOMC is in conformity with the
law and the existing CBA. Particularly in
dispute is the validity of the transfer of twelve
(12) former FEBTC employees to BOMC,
instead of being absorbed in BPI after the
corporate merger.
Ruling:
ART. 261. Jurisdiction of Voluntary Arbitrators or
panel of Voluntary Arbitrators. – x x x Accordingly,
violations of a Collective Bargaining Agreement,
except those which are gross in character, shall no
141

longer be treated as unfair labor practice and shall be
resolved as grievances under the Collective
Bargaining Agreement. For purposes of this article,
gross violations of Collective Bargaining Agreement
shall mean flagrant and/or malicious refusal to
comply with the economic provisions of such
agreement.
Clearly, only gross violations of the economic
provisions of the CBA are treated as ULP. Otherwise,
they are mere grievances.
In the present case, the alleged violation of the union
shop agreement in the CBA, even assuming it was
malicious and flagrant, is not a violation of an
economic provision in the agreement. The provisions
relied upon by the Union were those articles referring
to the recognition of the union as the sole and
exclusive bargaining representative of all rank-and-
file employees, as well as the articles on union
security, specifically, the maintenance of membership
in good standing as a condition for continued
employment and the union shop clause.26 It failed to
take into consideration its recognition of the bank’s
exclusive rights and prerogatives, likewise provided
in the CBA, which included the hiring of employees,
promotion, transfers, and dismissals for just cause
and the maintenance of order, discipline and
efficiency in its operations
The Union, however, insists that jobs being
outsourced to BOMC were included in the existing
bargaining unit, thus, resulting in a reduction of a
number of positions in such unit. The reduction
interfered with the employees’ right to self-
organization because the power of a union primarily
depends on its strength in number.28
It is incomprehensible how the "reduction of
positions in the collective bargaining unit" interferes
with the employees’ right to self-organization
because the employees themselves were neither
transferred nor dismissed from the service. As the
NLRC clearly stated:
In the case at hand, the union has not presented even
an iota of evidence that petitioner bank has started to
terminate certain employees, members of the union.
In fact, what appears is that the Bank has exerted
utmost diligence, care and effort to see to it that no
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
union member has been terminated. In the process of
the consolidation or merger of the two banks which
resulted in increased diversification of functions,
some of these non-banking functions were merely
transferred to the BOMC without affecting the union
membership
88. DBP vs. NLRC, 242 SCRA 59 [1995]
Facts:
In September 1983, petitioner Development
Bank of the Philippines, as mortgagee of TPWII,
foreclosed its plant facilities and equipment.
Nevertheless, TPWII continued its business
operations interrupted only by brief shutdowns for
the purpose of servicing its plant facilities and
equipment. In January 1986 petitioner took
possession of the foreclosed properties. From then on
the company ceased its operations. As a consequence
private respondent Leonor A. Ang was on 15 April
1986 verbally terminated from the service.
After hearing on a complaint for separation
pay, 13th month pay, vacation and sick leave pay,
salaries and allowances against TPWII, its General
Manager, and petitioner, the Labor Arbiter found
TPWII primarily liable to private respondent but only
for her separation pay and vacation and sick leave
pay because her claims for unpaid wages and 13th
month pay were later paid after the complaint was
filed. The General Manager was absolved of any
liability. But with respect to petitioner, it was held
subsidiarily liable in the event the company failed to
satisfy the judgment. The Labor Arbiter rationalized
that the right of an employee to be paid benefits due
him from the properties of his employer is superior to
the right of the latter's mortgagee, citing this Court's
resolution in PNB v. Delta Motor Workers Union.
On 16 November 1992 public respondent
National Labor Relations Commission affirmed the
ruling of the Labor Arbiter.Petitioner argues that the
decision of public respondent runs counter to the
consistent rulings of this Court in a long line of cases
emphasizing that the applicant of Art. 110 of the
Labor Code is contingent upon the institution of
bankruptcy or judicial liquidation proceedings against
the employer.
Issue:
Whether or not Art. 110 of the Labor Code,
as amended, which refers to worker preference in
case of bankruptcy or liquidation of an employer's
business, is applicable to the present case
notwithstanding the absence of any formal
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declaration of bankruptcy or judicial liquidation of
TPWII. In other words, is declaration of bankruptcy
or judicial liquidation required before the worker's
preference may be invoked under Art. 110 of the
Labor Code?
Ruling:
Article 110 is NOT applicable in the absence of any
formal declaration of bankruptcy or judicial
liquidation of TPWII.We hold that public respondent
gravely abused its discretion in affirming the decision
of the Labor Arbiter. Art. 110 should not be treated
apart from other laws but applied in conjunction with
the pertinent provisions of the Civil Code and the
Insolvency Law to the extent that piece-meal
distribution of the assets of the debtor is avoided. Art.
110, then prevailing, provides:
ARTICLE 110. Worker
preference in case of bankruptcy.
— In the event of bankruptcy or
liquidation of an employer's
business, his workers shall enjoy
first preference as regards wages
due them for services rendered
during the period prior to the
bankruptcy or liquidation, any
provision to the contrary
notwithstanding. Unpaid wages
shall be paid in full before other
creditors may establish any claim
to a share in the assets of the
employer.
Complementing Art. 110, Sec. 10, Rule VIII,
Book III, of the Revised Rules and Regulations
Implementing the Labor Code provides:
SECTION 10. Payment of
wages in case of bankruptcy. —
Unpaid wages earned by the
employees before the declaration of
bankruptcy or judicial liquidation
of the employer's business shall be
given first preference and shall be
paid in full before other creditors
may establish any claim to a share
in the assets of the employer.
We interpreted this provision in
Development Bank of the Philippines v. Santos to
mean that —. . . a declaration of bankruptcy or a
judicial liquidation must be present before the
worker's preference may be enforced. Thus, Article
110 of the Labor Code and its implementing rule
cannot be invoked by the respondents in this case
absent a formal declaration of bankruptcy or a
liquidation order . . .
The rationale is that to hold Art. 110 to be
applicable also to extrajudicial proceedings would be
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
putting the worker in a better position than the State
which could only assert its own prior preference in
case of a judicial proceeding. Art. 110, which was
amended by R.A. 6715 effective 21 March 1989, now
reads:
ARTICLE 110. Worker
preference in case of bankruptcy.
— In the event of bankruptcy or
liquidation of an employer's
business, his workers shall enjoy
first preference as regards their
unpaid wages and other monetary
claims, any provision of law to the
contrary notwithstanding. Such
unpaid wages and monetary claims
shall be paid in full before the
claims of the Government and
other creditors may be paid.
Obviously, the amendment expanded the
concept of "worker preference" to cover not only
unpaid wages but also other monetary claims to
which even claims of the Government must be
deemed subordinate. The Rules and Regulations
Implementing R.A. 6715, approved 24 May 1989,
also amended the corresponding implementing rule,
and now reads:
SECTION 10. Payment of
wages and other monetary claims
in case of bankruptcy. — In case
of bankruptcy or liquidation of the
employer's business, the unpaid
wages and other monetary claims
of the employees shall be given
first preference and shall be paid in
full before the claims of
government and other creditors
may be paid.
Although the terms "declaration" (of
bankruptcy) or "judicial" (liquidation) have been
notably eliminated, still in Development Bank of the
Philippines v. NLRC , this Court did not alter its
original position that the right to preference given to
workers under Art. 110 cannot exist in any effective
way prior to the time of its presentation in
distribution proceedings. In effect, we reiterated our
previous interpretation in Development Bank of the
Philippines v. Santos where we said:
It (worker preference) will find application
when, in proceedings such as insolvency, such unpaid
wages shall be paid in full before the 'claims of the
Government and other creditors' may be paid. But,
for an orderly settlement of a debtor's assets, all
creditors must be convened, their claims ascertained
and inventoried, and thereafter the preferences
determined in the course of judicial proceedings
which have for their object the subjection of the
143

property of the debtor to the payment of his debts or
other lawful obligations. Thereby, an orderly
determination of preference of creditors' claims is
assured (Philippine Savings Bank vs. Lantin, No. L-
33929, September 2, 1983, 124 SCRA 476); the
adjudication made will be binding on all parties-in-
interest since those proceedings are proceedings in
rem; and the legal scheme of classification,
concurrence and preference of credits in the Civil
Code, the Insolvency Law, and the Labor Code is
preserved in harmony.
In ruling, as we did, in Development Bank
of the Philippines v. Santos, we took into account the
following pronouncements: In the event of
insolvency, a principal objective should be to effect
an equitable distribution of the insolvent's property
among his creditors. To accomplish this there must
first be some proceeding where notice to all of the
insolvent's creditors may be given and where the
claims of preferred creditors may be bindingly
adjudicated.
The rationale therefore has been expressed in the
recent case of DBP v. Secretary of Labor (G.R. No.
79351, 28 November 1989), which we quote:
A preference of credit bestows
upon the preferred creditor an advantage of
having his credit satisfied first ahead of
other claims which may be established
against the debtor. Logically, it becomes
material only when the properties and assets
of the debtors are insufficient to pay his
debts in full; for if the debtor is amply able
to pay his various creditors in full, how can
the necessity exist to determine which of his
creditors shall be paid first or whether they
shall be paid out of the proceeds of the sale
(of) the debtor's specific property.
Indubitably, the preferential right of credit
attains significance only after the properties
of the debtor have been inventoried and
liquidated, and the claims held by his
various creditors have been established.
In the present case, there is as yet no
declaration of bankruptcy nor judicial liquidation of
TPWII. Hence, it would be premature to enforce the
worker's preference. The additional ratiocination of
public respondent that "under Article 110 of the
Labor Code complainant enjoys a preference of credit
over the properties of TPWII being held in possession
by DBP," is a dismal misconception of the nature of
preference of credit.
The DBP anchors its claims on a mortgage
credit. A mortgage directly and immediately subjects
the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation
for whose security it was constituted (Article 2176,
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Civil Code). It creates a real right which is
enforceable against the whole world. It is a lien on an
identified immovable property, which a preference is
not. A recorded mortgage credit is a special preferred
credit under Article 2242 (5) of the Civil Code on
classification of credits. The preference given by
Article 110, when not falling within Article 2241 (6)
and Article 2242 (3) of the Civil Code and not
attached to any specific property, is an ordinary
preferred credit although its impact is to move it from
second priority to first priority in order of preference
established by Article 2244 of the Civil Code.
The present controversy could have been
easily settled by public respondent had it referred to
ample jurisprudence which already provides the
solution. Stare decisis et non quietamovere. Once a
case is decided by this Court as the final arbiter of
any justiciable controversy one way, then another
case involving exactly the same point at issue should
be decided in the same manner. Public respondent
had no choice on the matter. It could not have ruled
any other way. This Court having spoken in a string
of cases against public respondent, its duty is simply
to obey judicial precedents. Any further disregard, if
not defiance, of our rulings will be considered a
ground to hold public respondent in contempt.
89. Batongbuhay Gold Mines vs. De la Serna G.R.
No. 86963 August 6, 1999
Facts:
On February 5, 1987, respondents Ty,
Mendelebar, Reyes and 1,247 others filed a complaint
against BatongBuhay Gold Mines, Inc. for:
(1) Non-payment of their basic pay and
allowances for the period of July 1983 to July 1984,
inclusive, under Wage Order No. 2;
(2) Non-payment of their basic pay and
allowances for the period June 1984 to October 1986,
inclusive under Wage Order No. 5;
(3) Non-payment of their salaries for the
period March 1986 to the present;
(4) Non-payment of their 13th month pay
for 1985, 1986 and 1987;
(5) Non-payment of their vacation and sick
leave, and the compensatory leaves of mine site
employees; and
144

(6) Non-payment of the salaries of
employees who were placed on forced leaves since
November, 1985 to the present, if this is not feasible,
the affected employees be awarded corresponding
separation pay.
On February 27, 1987, the complainants
filed a Motion for the issuance of an inspection
authority. After said inspection, the Labor Standards
and Welfare Officers submitted their report with the
recommendations that an Order of Compliance be
issued directing BatongBuhay Gold Mines Inc. to
pay complainants' Elsie Rosalina Ty, et al.
P4,818,746.40 by way of unpaid salaries of workers
from March 16, 1987 to present, unpaid and ECOLA
differentials under Wage Order Nos. 2 and 5 unpaid
13th months pay for 1985 and 1986, and unpaid (sic)
vacation/sick/compensatory leave benefits.
RD adopted recommendation of LSWOs.
Complainant filed an ex-parte motion for issuance of
a writ of execution and appointment of special
sheriff. The Regional Director issued an Order
directing BBGMI to put up a cash or surety bond
otherwise a writ of execution will be issued.
Respondent, however, failed to do so and RD
appointed a special sheriff thereafter to collect
amount from respondent. The Special Sheriff
proceeded to execute the order and seized properties
by respondent and sold them at public auction.
On December 1987, BBGMI finally posted
a supersedeas bond which prompted this Office to
issue an Order restraining the complainants and
Sheriff Ramos from enforcing the writ of execution.
Herein petitioner appealed the Order dated July 31,
1987 of Regional Director Luna C. Piezas to
respondent Undersecretary Dionisio de la Serna,
contending that the Regional Director had no
jurisdiction over the case. But the respondent upheld
the jurisdiction of the Regional Director and annulled
all the auction sales conducted by Special Sheriff
John Ramos.
Issues:
Whether the Regional Director has jurisdiction over
the complaint filed by the employees of BBGMI
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
SC Ruling:
(1) YES. The Regional Director has
jurisdiction over the BBGMI employees who are the
complainants in Case Number NCR-LSED-CI-2047-
87. The subject labor standards case of the petition
arose from the visitorial and enforcement powers by
the Regional Director of Department of Labor and
Employment (DOLE). Labor standards cases are
governed by Article 128(b) of the Labor Code. As
can be gleaned from the records on hand, subject
labor standards case was filed on February 5, 1987 at
which time Article 128 (b) read as follows:
Art. 128 (b) Visitorial and enforcement
powers.
(b) The Minister of Labor or his duly
authorized representative shall have the
power to order and administer, after due
notice and hearing, compliance with the
labor standards provisions of this Code
based on the findings of labor regulation
officers or industrial safety engineers made
in the course of inspection, and to issue
writs of execution to the appropriate
authority for the enforcement of their order,
except in cases where the employer contests
the findings of the labor regulations officers
and raises issues which cannot be resolved
without considering evidentiary matters that
are not verifiable in the ordinary course of
inspection.
Respondent Undersecretary Dionisio C.
DelaSerna, upheld the jurisdiction of Regional
Director Luna C. Piezas by relying on Sec 2 of E.O.
111, which states:
The provisions of article 217 of this code to the
contrary notwithstanding and in cases where the
relationship of employer-employee still exists, the
Minister of Labor and Employment or his duly
authorized representative shall have the power to
order and administer, after due notice and hearing,
compliance with the labor standards provision of this
Code based on the findings of the findings of labor
regulation officers or industrial safety engineers
made in the course of inspection, and to issue writs
of execution to the appropriate authority for the
enforcement of their order, except in cases where the
employer contests the findings of the labor
145

regulations officers and raises issues which cannot
be resolved without considering evidentiary matters
that are not verifiable in the ordinary course of
inspection.
The Court would have ruled differently had
the petitioner shown that subject labor standards case
is within the purview of the exception clause in
Article 128 (b) of the Labor Code. Said provision
requires the concurrence of the following elements in
order to divest the Regional Director or his
representatives of jurisdiction, to wit: (a) that the
petitioner (employer) contests the findings of the
labor regulations officer and raises issues thereon; (b)
that in order to resolve such issues, there is a need to
examine evidentiary matters; and (c) that such
matters are not verifiable in the normal course of
inspection.
Nowhere in the records does it appear that
the petitioner alleged any of the aforestated grounds.
The only instance when there was a semblance of
raising the aforestated grounds, was when they filed
an Appeal Memorandum wherein petitioner comes up
with the defense that the Regional Director was
without jurisdiction, as employer-employee
relationship was absent, since petitioner had ceased
doing business since 1985.
Records indicate that the Labor Standards
and Welfare Officers, pursuant to Complaint
Inspection Authority No. CI-2-047-87, were not
allowed to look into records, vouchers and other
related documents. The officers of the petitioner
alleged that the company is presently under
receivership of the Development Bank of the
Philippines. In lieu of this, the Regional Director had
ordered that a summary investigation be conducted.
Despite proper notices, the petitioner refused to
appear before the Regional Director. To give it
another chance, an order to file its position paper was
issued to substantiate its defenses. Notwithstanding
all these opportunities to be heard, petitioner chose
not to avail of such.
As held in the case of M. Ramirez Industries
vs. Sec. of Labor and Employment, . . .Under Art.
128(a) of the Labor Code, the Secretary of Labor of
his duly authorized representatives, such as the
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Regional Directors, has visitorial powers which
authorize him to inspect the records and premises of
an employer at any time of the day or night whenever
work is being undertaken therein, to question any
employee and investigate any fact, condition or
matter, and to determine violations of labor laws,
wage orders or rules and regulations. If the employer
refuses to attend the inspection or conference or to
submit any record, such as payrolls and daily time
records, he will be deemed to have waived his right
to present evidence.
Petitioner's refusal to allow the Labor
Standards and Welfare Officers to conduct inspection
in the premises of their head office in Makati and the
failure to file their position paper is equivalent to a
waiver of its right to contest the claims of the
employees. This Court had occasion to hold there is
no violation of due process where the Regional
Director merely required the submission of position
papers and resolved the case summarily thereafter.
Furthermore, the issuance of the compliance order
was well within the jurisdiction of the Regional
Director, as Section 14 of the Rules on the
Disposition of Labor Standards Cases provides:
Sec. 14.Failure to Appear. Where the
employer or the complainant fails or refuses
to appear during the investigation, despite
proper notice, for two (2) consecutive
hearings without justifiable reasons, the
hearing officer may recommend to the
Regional Director the issuance of a
compliance order based on the evidence at
hand or an order of dismissal of the
complaint as the case may be.
It bears stressing that this petition involves a
labor standards case and it is in keeping with the law
that "the worker need not litigate to get what legally
belongs to him, for the whole enforcement machinery
of the Department of Labor exists to insure its
expeditious delivery to him free of charge." Thus,
their claim of closure for business, among other
things, are factual issues which cannot be brought
here for the first time. As petitioner refused to
participate in the proceedings below where it could
have ventilated the appropriate defenses, to do so in
this petition is unavailing. The reason for this is that
factual issues are not proper subjects of a special civil
146

action for certiorari to the Supreme Court. It is
therefore abundantly clear that at the time of the
filing of the claims of petitioner's employees, the
Regional Director was already exercising visitorial
and enforcement powers.
The present law, RA 7730, can be
considered a curative statute to reinforce the
conclusion that the Regional Director has jurisdiction
over the present labor standards case. Republic Act
7730, the law governing the visitorial and
enforcement powers of the Labor Secretary and his
representatives reads:
Art. 128 (b)Notwithstanding the provisions
of Articles 129 and 217 of this Code to the
contrary, and in cases where the
relationship of employer-employee still
exists, the Secretary of Labor and
Employment or his duly authorized
representatives shall have the power to issue
compliance orders to give effect to the labor
standards provisions of this Code and other
labor legislation based on the findings of
labor employment and enforcement officers
or industrial safety engineers made in the
course of inspection. The Secretary or his
duly authorized representative shall issue
writs of execution to the appropriate
authority for the enforcement of their
orders, except in cases where the employer
contests the findings of the labor
employment and enforcement officer and
raises issues supported by documentary
proofs which were not considered in the
course of inspection.
90. ABUNDIO BARAYOGA and BISUDECO-
PHILSUCORCORFARM WORKERS UNION
(PACIWU CHAP-TPC) v. ASSET
PRIVATIZATION
G.R. No. 160073; October 24, 2005
Facts: Bisudeco-Philsucor Corfarm Workers Union is
composed of workers of Bicolandia Sugar
Development Corporation (BISUDECO), a sugar
plantation mill located in Himaao, Pili, Camarines
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Sur. Asset Privatization Trust (APT), a public trust
was created under Proclamation No. 50, as amended,
mandated to take title to and possession of, conserve,
provisionally manage and dispose of non-performing
assets of the Philippine government identified for
privatization or disposition. Pursuant to Section 23 of
Proclamation No. 50, former President Corazon
Aquino issued Administrative Order No.
14identifying certain assets of government
institutions that were to be transferred to the National
Government. Among the assets transferred was the
financial claim of the Philippine National Bank
against BISUDECO in the form of a secured loan.
Consequently, by virtue of a Trust Agreement
executed between the National Government and APT
on February 27, 1987, APT was constituted as trustee
over BISUDECO‟s account with the PNB.
Sometime later, BISUDECO contracted the services
of Philippine Sugar Corporation (Philsucor) to take
over the management of the sugar plantation and
milling operations until August 31, 1992.Meanwhile,
because of the continued failure of BISUDECO to
pay its outstanding loan with PNB, its mortgaged
properties were foreclosed and subsequently sold in a
public auction to APT, as the sole bidder. On April 2,
1991, APT was issued a Sheriff’s Certificate of Sale.
The union filed a complaint for unfair labor practice,
illegal dismissal, illegal deduction and underpayment
of wages and other labor standard benefits plus
damages. In the meantime, APT’s Board of Trustees
issued a resolution accepting the offer of Bicol-Agro-
Industrial Cooperative (BAPCI) to buy the sugar
plantation and mill. Again, on September 23, 1992,
the board passed another resolution authorizing the
payment of separation benefits to BISUDECO’s
employees in the event of the company’s
privatization.
Then, on October 30, 1992, BAPCI purchased the
foreclosed assets of BISUDECO from APT and took
over its sugar milling operations under the trade
name Peafrancia Sugar Mill (Pensumil). The union
alleged that when Philsucor initially took over the
operations of the company, it retained BISUDECO’s
existing
personnel under the same terms and conditions of em
ployment. Nonetheless, at the start of the season
147

sometime in May1991, Philsucor started recalling
workers back to work, to the exception of the union
members. Management told them thatthey will be re-
hired only if they resign from the union. Just the
same, thereafter, the company started to employ the
services of outsiders under the pakyaw system.
Issue: whether APT is liable to pay petitioners’
monetary claims, including back wages from May 1,
1991, to October 30, 1992 (the date of the sale of
BISUDECO assets to BAPCI).
Held: No. Pursuant to Administrative Order No. 14,
Series of 1987, PNB’s assets, loans and receivables
from its borrowers were transferred to APT as trustee
of the national government. Among the liabilities
transferred to APT was PNB’s financial claim against
BISUDECO, not the latter’s assets and chattel.
BISUDECO remained the owner of the mortgaged
properties in August 1988, when the Philippine Sugar
Corporation (Philsucor) undertook the operation and
management of the sugar plantation until August 31,
1992, under a so-called Contract of Lease between
the two corporations. At the time, APT was merely a
secured creditor of BISUDECO.
91.) G.R. 166996 February 6, 2007
Philippine Airlines vs Zamora
FACTS:
Respondent Zamora had been in the employ of
petitioner PAL since 9 February 1981 when the
former was hired as a Cargo Representative at
petitioner PAL’s Import Operations Division.
Respondent Zamora was then dismissed from service
for having been found by petitioner PAL’s
management to be liable for insubordination, neglect
of customer, disrespect for authority and absence
without official leave.
On 12 March 1996, respondent Zamora filed a
complaint against petitioners PAL and Francisco X.
Yngente IV before the NLRC for illegal dismissal,
unfair labor practice, non-payment of wages,
damages and attorney’s fees
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
On 1 February 2005, the Court of Appeals
promulgated an Amended Decision modifying its 13
August 2004 Decision but at the same time resolving
petitioner PAL's Motion for Reconsideration in this
wise: WHEREFORE, this Court's August 13, 2004
decision is hereby AMENDED, the dispositive
portion to read as follows:
WHEREFORE, in view of the
foregoing, the petition is GRANTED.
The NLRC resolution dated April 27,
2001 is MODIFIED. Considering that
petitioner is a detention prisoner
making reinstatement impossible, PAL
is hereby ordered to pay petitioner
Zamora his separation pay, in lieu of
reinstatement, to be computed at one
month salary for every year of service
from February 9, 1981 and back wages
to be computed from December 19,
1995, both up to October 1, 2000, the
date of his incarceration.
Considering that PAL is still under receivership, the
monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject
to the rules on preference of credits. The Court of
Appeals took into account respondent Zamora's
incarceration when it recalled its order of
reinstatement. Anent its earlier pronouncement
against the suspension of the proceedings of the case
owing to the present rehabilitation of petitioner PAL,
the appellate court only had this to say: However,
since PAL is still under receivership, the provisions
of PD 902-A, should apply. The enforcement of the
monetary claims of petitioner should be brought
before the PAL Rehabilitation Receiver for proper
disposition.
ISSUE:
WON respondent Zamora’s monetary claim should
be presented to the PAL rehabilitation receiver,
subject to the rules on preference of credits
RULING:
No. The relevant law dealing with the suspension of
actions for claims against corporations is Presidential
Decree No. 902-A, 52 as amended. The term "claim,"
as contemplated in Sec. 6 (c) of Presidential Decree
148

No. 902-A, refers "to debts or demands of
a pecuniary nature. It means 'the assertion of a right
to have money paid.
It is plain from the foregoing provisions of law that
"upon the appointment [by the SEC] of a
management committee or a rehabilitation receiver"
all actions for claims against the corporation pending
before any court, tribunal or board shall ipso jure be
suspended.
The law is clear: upon the creation of a management
committee or the appointment of a rehabilitation
receiver, all claims for actions "shall be suspended
accordingly." No exception in favor of labor claims is
mentioned in the law. Since the law makes
no distinction or exemptions, neither should this
Court.
Otherwise stated, no other action may be taken in,
including the rendition of judgment during the state
of suspension— what are automatically stayed or
suspended are the proceedings of an action or suit
and not just the payment of claims during the
execution stage after the case had become final and
executory.
The suspension of action for claims against a
corporation under rehabilitation receiver or
management committee embraces all phases of the
suit, be it before the trial court or any tribunal or
before this Court. Furthermore, the actions that are
suspended cover all claims against a distressed
corporation whether for damages founded on
a breach of contract of carriage, labor cases,
collection suits or any other claims of a pecuniary nat
ure. As to the appellate court's amended directive that
"the monetary claims of petitioner Zamora must be
presented to the PAL Rehabilitation Receiver, subject
to the rules on preference of credits," the same is
erroneous for there has been no declaration of
bankruptcy or judicial liquidation. Thus, the rules on
preference of credits do not apply.
92.)PAL vs. PALEA G.R. No. 142399 June
19, 2007
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Facts:
This case arose from a labor Complaint, filed by
herein PALEA against herein PAL and one Mary
Anne del Rosario, Director of Personnel, PAL, on 1
March 1989, charging them with unfair labor practice
for the non-payment of 13th month pay of employees
who had not been regularized as of the 30th of April
1988, as allegedly stipulated in the Collective
Bargaining Agreement (CBA) entered into by herein
parties.
the facts are:
On 6 February 1987, herein parties, PAL and PALEA,
the collective bargaining agent of the rank and file
employees of PAL, entered into a CBA that was to
cover the period of 1986 – 1989. Part of said
agreement required PAL to pay its rank and file
employees the following bonuses:
Section 4 – 13th Month Pay (Mid-year
Bonus)
A 13th month pay, equivalent to one month's
current basic pay, consistent with the
existing practice shall be paid in advance in
May.
Section 5 – Christmas Bonus
The equivalent of one month's basic pay as
of November 30, shall be paid in December
as a Christmas bonus. Payment may be
staggered in two (2) stages. It is distinctly
understood that nothing herein contained
shall be construed to mean that the
Company may not at its sole discretion give
an additional amount or increase the
Christmas bonus.
Prior to the payment of the 13th month pay (mid –
year bonus), PAL released an implementing
guideline on 22 April 1988. It stated that:
1) Eligibility
a) Ground employees in the general
payroll who are regular as of April
30, 1988;
149

b) Other ground employees in the
general payroll, not falling within
category a) above shall receive
their 13th Month Pay on or before
December 24, 1988;
2) Amount
a) For category a) above, one
month basic salary as of April 30,
1988;
b) Employees covered under 1 b)
above shall be paid not less than
1/12 of their basic salary for every
month of service within the
calendar year.
3) Payment Date: May 9, 1988 for category
1 a) above.
PALEA assailed the implementation of the foregoing
guideline. In response to the above, PAL informed
PALEA that rank and file employees who were
regularized after 30 April 1988 were not entitled to
the 13th month pay as they were already given the
Christmas bonus in December of 1988, per the
Implementing Rules of Presidential Decree No. 851.
PALEA, disagreeing with PAL, filed a Complaint for
unfair labor practice before the NLRC.
PAL answered that those rank and file employees
who were not regularized by 30 April of a particular
year are, in principle, not denied their 13 month pay,
considering they receive said mandatory bonus in the
form of the Christmas Bonus.
The Labor Arbiter rendered his decision dismissing
the complaint for lack of merit. The Labor Arbiter
ruled that PAL was not guilty of unfair labor practice
in withholding the grant of the 13th Month Pay or
Mid-Year Bonus, as set out in Section 4 of the CBA,
to the concerned employees. The giving of the
particular bonus was said to be merely an additional
practice made in the past, "such being the case, it
violated no agreement or existing practice or
committed unfair labor practice, as charged."
On appeal to the NLRC, the assailed decision of the
Labor Arbiter was reversed.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Undaunted, PAL went to this Court via a Petition for
Review on Certiorari, however, the petition was
referred to the Court of Appeals for proper resolution.
The Court of Appeals promulgated its Decision
dismissing the petition filed by PAL. It affirmed the
28 January 1998 NLRC Resolution.
Hence, this Petition for Review on Certiorari.
Issue:
Can a court or quasi-judicial agency amend or alter a
Collective Bargaining Agreement by expanding its
coverage to non-regular employees who are not
covered by the bargaining unit?"
Ruling:
The Securities and Exchange Commission (SEC) had
mandated the rehabilitation of PAL. Thus, PAL is still
undergoing rehabilitation.
The pertinent law concerning the suspension of
actions for claims against corporations due to its
rehabilitation is Presidential Decree No. 902-A, as
amended.
The aforementioned law provides that SEC assumes
jurisdiction in cases where the corporation is
undergoing rehabilitation with pending money claims
against the corporation.
The underlying principle behind the suspension of
claims pending rehabilitation proceedings was
explained in the case of BF Homes, Incorporated v.
Court of Appeals:
“the real justification is to enable the management
committee or rehabilitation receiver to effectively
exercise its/his powers free from any judicial or
extra-judicial interference that might unduly hinder
or prevent the "rescue" of the debtor company. To
allow such other action to continue would only add
to the burden of the management committee or
rehabilitation receiver, whose time, effort and
resources would be wasted in defending claims
against the corporation instead of being directed
toward its restructuring and rehabilitation.”
The Supreme Court citing Rubberworld vs. NLRC
said:
150

“we held that worker's claims before the NLRC and
labor arbiters are included among the actions
suspended upon the placing under receivership of the
employer-corporations. Although strictly speaking,
the ruling in Rubberworld dealt with actions for
claims pending before the NLRC and labor
arbiters, we find that the rationale for the automatic
suspension therein set out would apply to the instant
case where the employee's claim was elevated on
certiorari before this Court”
In another PAL case, specifically, Philippine Airlines,
Inc. v. Court of Appeal, the SC held that:
“that this Court is "not prepared to depart from the
well-established doctrines" essentially maintaining
that all actions for claims against a corporation
pending before any court, tribunal or board shall ipso
jure be suspended in whatever stage such actions may
be found upon the appointment by the SEC of a
management committee or a rehabilitation receiver.”
In view of the ongoing rehabilitation of petitioner
Philippine Airlines, Inc., herein proceedings are
heretoforeSUSPENDED
93.) Garcia vs. Phil. Air Lines, G.R. No. 164856,
January 20, 2009
Facts:
The case stemmed from the administrative charge
filed by PAL against its employees-herein
petitioners3 after they were allegedly caught in the act
of sniffing shabu when a team of company security
personnel and law enforcers raided the PAL Technical
Center’s Toolroom Section on July 24, 1995.
After due notice, PAL dismissed petitioners on
October 9, 1995 for transgressing the PAL Code of
Discipline, prompting them to file a complaint for
illegal dismissal and damages resolved by the Labor
Arbiter in their favor, thus ordering PAL to, inter
alia, immediately comply with the reinstatement
aspect of the decision.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
Prior to the promulgation of the Labor Arbiter’s
decision, the Securities and Exchange Commission
(SEC) placed PAL (hereafter referred to as
respondent), which was suffering from severe
financial losses, under an Interim Rehabilitation
Receiver, who was subsequently replaced by a
Permanent Rehabilitation Receiver on June 7, 1999.
The Labor Arbiter issued a Writ of Execution (Writ)
respecting therein statement aspect of his January 11,
1999 Decision, and on October 25, 2000, he issued a
Notice of Garnishment (Notice). Respondent
thereupon moved to quash the Writ and to lift the
Notice while petitioners moved to release the
garnished amount.
Issue:
1. Whether petitioners may collect their wages
during the period between the Labor
Arbiter’s order of reinstatement pending
appeal and the NLRC decision overturning
that of the Labor Arbiter, now that
respondent has exited from rehabilitation
proceedings.
2. WON peculiar predicament of a corporate
rehabilitation rendered it impossible for
respondent to exercise its option under the
circumstances.
Ruling:
1. The decision of the Labor Arbiter reinstating
a dismissed or separated employee, insofar
as the reinstatement aspect is concerned,
shall immediately be executory, pending
appeal. The employee shall either be
admitted back to work under the same terms
and conditions prevailing prior to his
dismissal or separation or, at the option of
the employer, merely reinstated in the
payroll. The posting of a bond by the
employer shall not stay the execution for
reinstatement provided herein.
The view as maintained in a number of cases is that:
x x x [E]ven if the order of reinstatement of the
Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate
151

and pay the wages of the dismissed employee
during the period of appeal until reversal by the
higher court. On the other hand, if the employee has
been reinstated during the appeal period and such
reinstatement order is reversed with finality, the
employee is not required to reimburse whatever
salary he received for he is entitled to such, more so
if he actually rendered services during the period.
In other words, a dismissed employee whose case
was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon
reinstatement, which is immediately executory.
Unless there is a restraining order, it is ministerial
upon the Labor Arbiter to implement the order of
reinstatement and it is mandatory on the employer to
comply therewith.
The Court reaffirms the prevailing principle that even
if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the
employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until
reversal by the higher court. It settles the view that
the Labor Arbiter's order of reinstatement
is immediately executory and the employer has to
either re-admit them to work under the same terms
and conditions prevailing prior to their dismissal, or
to reinstate them in the payroll, and that failing to
exercise the options in the alternative, employer must
pay the employee’s salaries.
2. The spirit of the rule on reinstatement
pending appeal animates the proceedings
once the Labor Arbiter issues the decision
containing an order of reinstatement. The
immediacy of its execution needs no further
elaboration.Reinstatement pending appeal
necessitates its immediate execution during
the pendency of the appeal, if the law is to
serve its noble purpose. At the same
time, any attempt on the part of the
employer to evade or delay its execution, as
observed in Panuncillo and as what actually
transpired in Kimberly, Composite, Air
Philippines, and Roquero, should not be
countenanced.
After the labor arbiter’s decision is reversed by a
higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the
delay in enforcing the reinstatement pending
appeal was without fault on the part of the
employer.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
The test is two-fold: (1) there must be actual delay or
the fact that the order of reinstatement pending
appeal was not executed prior to its reversal; and (2)
the delay must not be due to the employer’s
unjustified act or omission. If the delay is due to the
employer’s unjustified refusal, the employer may still
be required to pay the salaries notwithstanding the
reversal of the Labor Arbiter’s decision.
The new NLRC Rules of Procedure, which took
effect on January 7, 2006, now require the employer
to submit areport of compliance within 10 calendar
days from receipt of the Labor Arbiter’s
decision, disobedience to which clearly denotes a
refusal to reinstate. The employee need not file a
motion for the issuance of the writ of execution since
the Labor Arbiter shall thereafter motu proprio issue
the writ. With the new rules in place, there is
hardly any difficulty in determining the
employer’s intransigence in immediately
complying with the order.
In the case at bar, petitioners exerted efforts to
execute the Labor Arbiter’s order of reinstatement
until they were able to secure a writ of execution,
albeit issued on October 5, 2000 after the reversal by
the NLRC of the Labor Arbiter’s decision.
Technically, there was still actual delay which brings
to the question of whether the delay was due to
respondent’s unjustified act or omission.
It is apparent that there was inaction on the part of
respondent to reinstate them, but whether such
omission was justified depends on the onset of the
exigency of corporate rehabilitation.
It is settled that upon appointment by the SEC of a
rehabilitation receiver, all actions for claims before
any court, tribunal or board against the corporation
shall ipso jure be suspended. As stated early on,
during the pendency of petitioners’ complaint before
the Labor Arbiter, the SEC placed respondent under
an Interim Rehabilitation Receiver. After the Labor
Arbiter rendered his decision, the SEC replaced the
Interim Rehabilitation Receiver with a Permanent
Rehabilitation Receiver.
Case law recognizes that unless there is a restraining
order, the implementation of the order of
reinstatement is ministerial and mandatory. This
injunction or suspension of claims by legislative
fiat partakes of the nature of a restraining order that
constitutes a legal justification for respondent’s non-
compliance with the reinstatement order.
Respondent’s failure to exercise the alternative
152

options of actual reinstatement and payroll
reinstatement was thus justified. Such being the case,
respondent’s obligation to pay the salaries pending
appeal, as the normal effect of the non-exercise of the
options, did not attach.
While reinstatement pending appeal aims to avert the
continuing threat or danger to the survival or even the
life of the dismissed employee and his family, it does
not contemplate the period when the employer-
corporation itself is similarly in a judicially
monitored state of being resuscitated in order to
survive.
The parallelism between a judicial order of
corporation rehabilitation as a justification for the
non-exercise of its options, on the one hand, and a
claim of actual and imminent substantial losses as
ground for retrenchment, on the other hand, stops at
the red line on the financial statements.
More importantly, there are legal effects arising from
a judicial order placing a corporation under
rehabilitation. Respondent was, during the period
material to the case, effectively deprived of the
alternative choices under Article 223 of the Labor
Code, not only by virtue of the statutory injunction
but also in view of the interim relinquishment of
management control to give way to the full exercise
of the powers of the rehabilitation receiver. Had there
been no need to rehabilitate, respondent may have
opted for actual physical reinstatement pending
appeal to optimize the utilization of resources. Then
again, though the management may think this wise,
the rehabilitation receiver may decide otherwise, not
to mention the subsistence of the injunction on
claims.
In sum, the obligation to pay the employee’s salaries
upon the employer’s failure to exercise the alternative
options under Article 223 of the Labor Code is not a
hard and fast rule, considering the inherent
constraints of corporate rehabilitation
94.) Bank of the Philippines Island vs. NLRC, 171
SCRA 556
Facts:
On March 22, 1983, the NLRC resolved the
bargaining deadlock between BPI and its employees
by fixing the wage increases and other economic
benefits and ordering them to be embodied in a new
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
collective bargaining agreement to be concluded by
BPIEU-Metro Manila and ALU with BPI. It did not
decide the intra-union dispute, however, holding that
this was under the original jurisdiction of the med-
arbiter and the exclusive appellate jurisdiction of the
Bureau of Labor Relations.
Following the promulgation by the NLRC of its
decision of March 23, 1983, in Certified Cases Nos.
0279 and 0281, private respondent Ignacio Lacsina
filed a motion for the entry of attorney's lien for legal
services to be rendered by him as counsel of BPIEU
in the negotiation of the new collective bargaining
agreement with BPI.The basis of this motion was a
resolution dated August 26, 1982, signed by members
of the BPI Employees Union, providing for the terms
and conditions, including attorney’s fees and his
authority to check-off with the company.
Accordingly, BPI deducted the amount of P200.00
from each of the employees who had signed the
authorization. Upon learning about this, the
petitioners (ALU and BPIEU-ALU) challenged the
said order, on the ground that it was not authorized
under the Labor Code.
On April 15, 1983, the NLRC issued a resolution
setting aside the order and requiring BPI to safe-keep
the amounts sought to be deducted "until the rights
thereto of the interested parties shall have been
determined in appropriate proceedings.
Subsequently, the NLRC issued an en banc resolution
dated September 27, 1983, ordering the release to
Lacsina of the amounts deducted "except with respect
to any portion thereof as to which no individual
signed authorization has been given by the members
concerned or where such authorization has been
withdrawn.
The petitioners now impugn this order as contrary to
the provisions and spirit of the Labor Code. While
conceding that Lacsina is entitled to payment for his
legal services, they argue that this must be made not
by the individual workers directly, as this is
prohibited by law, but by the union itself from its
own funds. In support of this contention, they invoke
Article 222(b) of the Labor Code, providing as
follows:
Art. 222. Appearances and Fees.
153

(b) No attorney's fees, negotiation
fees or similar charges of any kind
arising from any collective
bargaining negotiations or
conclusions of the collective
agreement shall be imposed on any
individual member of the
contracting union: Provided,
however, that attorney’s fees may
be charged against union funds in
an amount to be agreed upon by the
parties. Any contract, agreement or
arrangement of any sort to the
contrary shall be null and void.
They also cite the case of Pacific Banking
Corporation v. Clave, where the lawyer's fee was
taken not from the total economic benefits received
by the workers but from the funds of their labor
union.
Issue:
 Is the mentioned Resolution signed by the
BPI employees granting attorney’s fees to
Lacsina to be deducted from the employees’
wages valid?
Ruling:
Yes. The Court reads the afore-cited provision as
prohibiting the payment of attorney's fees only when
it is effected through forced contributions from the
workers from their own funds as distinguished from
the union funds.
The purpose of the provision is to prevent imposition
on the workers of the duty to individually contribute
their respective shares in the fee to be paid the
attorney for his services on behalf of the union in its
negotiations with the management. The obligation to
pay the attorney's fees belongs to the union and
cannot be shunted to the workers as their direct
responsibility. Neither the lawyer nor the union itself
may require the individual workers to assume the
obligation to pay the attorney's fees from their own
pockets. So categorical is this intent that the law also
makes it clear that any agreement to the contrary
shall be null and void ab initio.
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
We see no such imposition in the case at bar. A
reading of the above-cited resolution will clearly
show that the signatories thereof have not been in any
manner compelled to undertake the obligation they
have there assumed. On the contrary, it is plain that
they were voluntarily authorizing the check-off of the
attorney's fees from their payment of benefits and the
turnover to Lacsina of the amounts deducted,
conformably to their agreement with him. There is no
compulsion here. And significantly, the authorized
deductions affected only the workers who adopted
and signed the resolution and who were the only ones
from whose benefits the deductions were made by
BPI. No similar deductions were taken from the other
workers who did not sign the resolution and so were
not bound by it.
That only those who signed the resolution could be
subjected to the authorized deductions was
recognized and made clear by the order itself of the
NLRC. It was there categorically declared that the
check-off could not be made where "no individual
signed authorization has been given by the members
concerned or where such authorization has been
withdrawn.”
The Pacific Banking Corporation case is not
applicable to the present case because there was there
no similar agreement as that entered into between
Lacsina and the signatories of the resolution in
question. Absent such an agreement, there was no
question that the basic proscription in Article 222
would have to operate. It is noteworthy, though, that
the Court there impliedly recognized arrangements
such as the one at bar with the following significant
observation.
Moreover, the case is covered squarely by the
mandatory and explicit prescription of Art. 222 which
is another guarantee intended to protect the employee
against unwarranted practices that would diminish his
compensation without his knowledge and consent.
A similar recognition was made in Galvadores v.
Trajano, where the payment of the attorney's fees
from the wages of the employees was not allowed
because: "No check-offs from any amount due to
employees may be effected without individual written
authorities duly signed by the employees specifically
stating the amount, purpose and beneficiary of the
154

deduction. The required individual authorizations in
this case are wanting.”
Finally, we hold that the agreement in question is in
every respect a valid contract as it satisfies all the
elements thereof and does not contravene law,
morals, good customs, public order, or public policy.
On the contrary, it enables the workers to avail
themselves of the services of the lawyer of their
choice and confidence under terms mutually
acceptable to the parties and, hopefully, also for their
mutual benefit.
95.) Traders Royal Bank Employees Union vs.
NLRC, 269 SCRA 733 [1997]
Facts:
Petitioner Traders Royal Bank Employees
Union and private respondent Atty. Emmanuel Noel
A. Cruz, head of the E.N.A. Cruz and Associates law
firm, entered into a retainer agreement on February
26, 1987 whereby the former obligated itself to pay
the latter a monthly retainer fee of P3,000.00 in
consideration of the law firm's undertaking to render
the services enumerated in their contract. During the
existence of that agreement, petitioner union referred
to private respondent the claims of its members for
holiday, mid-year and year-end bonuses against their
employer, Traders Royal Bank (TRB). These
employees obtained favorable decision from their
complaint which went through the SC.
The Supreme Court, in its decision
promulgated on August 30, 1990, modified the
decision of the NLRC by deleting the award of mid-
year and year-end bonus differentials while affirming
the award of holiday pay differential. The bank
voluntarily complied with such final judgment and
determined the holiday pay differential to be in the
amount of P175,794.32. Petitioner never contested
the amount thus found by TRB. The latter duly paid
its concerned employees their respective entitlement
in said sum through their payroll. After private
respondent received the above decision of the
Supreme Court on September 18, 1990, he notified
the petitioner union, the TRB management and the
NLRC of his right to exercise and enforce his
attorney's lien over the award of holiday pay
differential through a letter dated October 8, 1990.
Thereafter, on July 2, 1991, private
respondent filed a motion before Labor Arbiter
Lorenzo for the determination of his attorney's fees,
praying that ten percent (10%) of the total award for
holiday pay differential computed by TRB at
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
P175,794.32, or the amount of P17,579.43, be
declared as his attorney's fees, and that petitioner
union be ordered to pay and remit said amount to
him. The LA and the NLRC affirmed Atty. Cruz’
motion.
Petitioner union filed a comment and
opposition to said motion on July 15, 1991. Petitioner
maintains that the NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in
upholding the award of attorney's fees in the amount
of P17,574.43, or ten percent (10%) of the
P175,794.32 granted as holiday pay differential to its
members, in violation of the retainer agreement; and
that the challenged resolution of the NLRC is null
and void, for the reasons hereunder stated.
Although petitioner union concedes that the
NLRC has jurisdiction to decide claims for attorney's
fees, it contends that the award for attorney' s fees
should have been incorporated in the main case and
not after the Supreme Court had already reviewed
and passed upon the decision of the NLRC. Since the
claim for attorney's fees by private respondent was
neither taken up nor approved by the Supreme Court,
no attorney's fees should have been allowed by the
NLRC. Thus, petitioner posits that the NLRC acted
without jurisdiction in making the award of attorney's
fees, as said act constituted a modification of a final
and executory judgment of the Supreme Court which
did not award attorney's fees. It then cited decisions
of the Court declaring that a decision which has
become final and executory can no longer be altered
or modified even by the court which rendered the
same.
Issue: Whether or not Atty. Cruz is entitled to 10 %
of the judgment award as his attorney’s fees even if it
was not taken up in the main decision of the SC.
Ruling:
Yes, not in the concept contemplatedin
Article 111 of the Labor Code. The Labor Arbiter
erroneously set the amount of attorney's fees on the
basis of Art. 111 of the Labor Code; a hearing should
have been conducted for the proper determination of
attorney's fees.
There are two commonly accepted concepts
of attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's
fee is the reasonable compensation paid to a lawyer
by his client for the legal services he has rendered to
the latter. The basis of this compensation is the fact of
his employment by and his agreement with the client.
In its extraordinary concept, an attorney's
fee is an indemnity for damages ordered by the court
to be paid by the losing party in a litigation. The basis
of this is any of the cases provided by law where such
155

award can be made, such as those authorized in
Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional
compensation or as part thereof.
It is the first type of attorney's fees which
private respondent demanded before the labor arbiter.
Also, the present controversy stems from petitioner's
apparent misperception that the NLRC has
jurisdiction over claims for attorney's fees only
before its judgment is reviewed and ruled upon by the
Supreme Court, and that thereafter the former may no
longer entertain claims for attorney's fees. It will be
noted that no claim for attorney's fees was filed by
private respondent before the NLRC when it acted on
the money claims of petitioner, nor before the
Supreme Court when it reviewed the decision of the
NLRC. It was only after the High Tribunal modified
the judgment of the NLRC awarding the differentials
that private respondent filed his claim before the
NLRC for a percentage thereof as attorney's fees.
It would obviously have been impossible, if
not improper, for the NLRC in the first instance and
for the Supreme Court thereafter to make an award
for attorney's fees when no claim therefor was
pending before them. Courts generally rule only on
issues and claims presented to them for adjudication.
Accordingly, when the labor arbiter ordered the
payment of attorney's fees, he did not in any way
modify the judgment of the Supreme Court.
A CLAIM FOR ATTORNEY'S FEES MAY
BE ASSERTED EITHER IN THE VERY ACTION
IN WHICH THE SERVICES OF A LAWYER HAD
BEEN RENDERED OR IN A SEPARATE ACTION
- It is well settled that a claim for attorney's fees may
be asserted either in the very action in which the
services of a lawyer had been rendered or in a
separate action. Attorney's fees cannot be determined
until after the main litigation has been decided and
the subject of the recovery is at the disposition of the
court. The issue over attorney's fees only arises when
something has been recovered from which the fee is
to be paid. While a claim for attorney's fees may be
filed before the judgment is rendered, the
determination as to the propriety of the fees or as to
the amount thereof will have to be held in abeyance
until the main case from which the lawyer's claim for
attorney's fees may arise has become final.
Otherwise, the determination to be made by the
courts will be premature. Of course, a petition for
attorney's fees may be filed before the judgment in
favor of the client is satisfied or the proceeds thereof
delivered to the client. It is apparent from the
foregoing discussion that a lawyer has two options as
to when to file his claim for professional fees. Hence,
private respondent was well within his rights when he
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LABOR STANDARDS LAW
made his claim and waited for the finality of the
judgment for holiday pay differential, instead of
filing it ahead of the award's complete resolution. To
declare that a lawyer may file a claim for fees in the
same action only before the judgment is reviewed by
a higher tribunal would deprive him of his aforestated
options and render ineffective the foregoing
pronouncements of this Court.
The provisions of the contract entered into
between petitioner and respondents are clear and
need no further interpretation; all that is required to
be done in the instant controversy is its application.
The P3,000.00 which petitioner pays monthly to
private respondent does not cover the services the
latter actually rendered before the labor arbiter and
the NLRC in behalf of the former. As stipulated in
Part C of the agreement, the monthly fee is intended
merely as a consideration for the law firm's
commitment to render the services enumerated in
Part A (General Services) and Part B (Special Legal
Services) of the retainer agreement.
The difference between a compensation for
a commitment to render legal services and a
remuneration for legal services actually rendered can
better be appreciated with a discussion of the two
kinds of retainer fees a client may pay his lawyer.
These are a general retainer, or a retaining fee, and a
special retainer.
RETAINER FEES, GENERAL RETAINER
AND A SPECIAL RETAINER— A general retainer,
or retaining fee, is the fee paid to a lawyer to secure
his future services as general counsel for any
ordinary legal problem that may arise in the routinary
business of the client and referred to him for legal
action. The future services of the lawyer are secured
and committed to the retaining client. For this, the
client pays the lawyer a fixed retainer fee which
could be monthly or otherwise, depending upon their
arrangement. The fees are paid whether or not there
are cases referred to the lawyer. The reason for the
remuneration is that the lawyer is deprived of the
opportunity of rendering services for a fee to the
opposing party or other parties. In fine, it is a
compensation for lost opportunities. A special
retainer is a fee for a specific case handled or special
service rendered by the lawyer for a client. A client
may have several cases demanding special or
individual attention. If for every case there is a
separate and independent contract for attorney's fees,
each fee is considered a special retainer.
THE P3,000.00 MONTHLY FEE
PROVIDED IN THE RETAINER AGREEMENT
BETWEEN THE UNION AND THE LAW FIRM
REFERS TO A GENERAL RETAINER OR A
RETAINING FEE. — The P3,000.00 which
petitioner pays monthly to private respondent does
156

not cover the services the latter actually rendered
before the labor arbiter and the NLRC in behalf of
the former. As stipulated in Part C of the agreement,
the monthly fee is intended merely as a consideration
for the law firm's commitment to render the services
enumerated in Part A (General Services) and Part B
(Special Legal Services) of the retainer agreement.
Evidently, the P3,000.00 monthly fee provided in the
retainer agreement between the union and the law
firm refers to a general retainer, or a retaining fee, as
said monthly fee covers only the law firm's pledge, or
as expressly stated therein, its "commitment to render
the legal services enumerated." The fee is not
payment for private respondent's execution or
performance of the services listed in the contract,
subject to some particular qualifications or
permutations stated there. We have already shown
that the P3,000.00 is independent and different from
the compensation which private respondent should
receive in payment for his services. While petitioner
and private respondent were able to fix a fee for the
latter's promise to extend services, they were not able
to come into agreement as to the law firm's actual
performance of services in favor of the union. Hence,
the retainer agreement cannot control the measure of
remuneration for private respondent's services.
PRIVATE RESPONDENT'S
ENTITLEMENT TO AN ADDITIONAL
REMUNERATION FOR SPECIAL SERVICES
RENDERED IN THE INTEREST OF PETITIONER
IS BASED ON QUASI-CONTRACT. — The fact
that petitioner and private respondent failed to reach
a meeting of the minds with regard to the payment of
professional fees for special services will not absolve
the former of civil liability for the corresponding
remuneration therefor in favor of the latter.
Obligations do not emanate only from contracts. One
of the sources of extra-contractual obligations found
in our Civil Code is the quasi-contract premised on
the Roman maxim that nemo cum alterius detrimento
locupletari protest. As embodied in our law, certain
lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the
expense of another. A quasi-contract between the
parties in the case at bar arose from private
respondent's lawful, voluntary and unilateral
prosecution of petitioner's cause without awaiting the
latter's consent and approval. Petitioner cannot deny
that it did benefit from private respondent's efforts as
the law firm was able to obtain an award of holiday
pay differential in favor of the union. It cannot even
hide behind the cloak of the monthly retainer of
P3,000.00 paid to private respondent because, as
demonstrated earlier, private respondent's actual
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LABOR STANDARDS LAW
rendition of legal services is not compensable merely
by said amount.
THE LABOR ARBITER ERRONEOUSLY
SET THE AMOUNT OF ATTORNEY'S FEES ON
THE BASIS OF ART. 111 OF THE LABOR CODE;
A HEARING SHOULD HAVE BEEN
CONDUCTED FOR THE PROPER
DETERMINATION OF ATTORNEY'S FEES. -
Here, then, is the flaw we find in the award for
attorney's fees in favor of private respondent. Instead
of adopting the above guidelines, the labor arbiter
forthwith but erroneously set the amount of attorney's
fees on the basis of Article 111 of the Labor Code. He
completely relied on the operation of Article 111
when he fixed the amount of attorney's fees at
P17,574.43. As already stated, Article 111 of the
Labor Code regulates the amount recoverable as
attorney's fees in the nature of damages sustained by
and awarded to the prevailing party. It may not be
used therefore, as the lone standard in fixing the
exact amount payable to the lawyer by his client for
the legal services he rendered. Also, while it limits
the maximum allowable amount of attorney's fees, it
does not direct instantaneous and automatic award of
attorney's fees in such maximum limit. It, therefore,
behooves the adjudicator in questions and
circumstances similar to those in the case at bar,
involving a conflict between lawyer and client, to
observe the above guidelines in cases calling for the
operation of the principles of quasi-contract and
quantum meruit, and to conduct a hearing for the
proper determination of attorney's fees. The criteria
found in the Code of Professional Responsibility are
to be considered, and not disregarded, in assessing
the proper amount. Here, the records do not reveal
that the parties were duly heard by the labor arbiter
on the matter and for the resolution of private
respondent's fees.
As already stated, Article 111 of the Labor
Code regulates the amount recoverable as attorney's
fees in the nature of damages sustained by and
awarded to the prevailing party. It may not be used
therefore, as the lone standard in fixing the exact
amount payable to the lawyer by his client for the
legal services he rendered. Also, while it limits the
maximum allowable amount of attorney's fees, it
does not direct the instantaneous and automatic
award of attorney's fees in such maximum limit.
It, therefore, behooves the adjudicator in
questions and circumstances similar to those in the
case at bar, involving a conflict between lawyer and
client, to observe the above guidelines in cases
calling for the operation of the principles of quasi-
contract and quantum meruit, and to conduct a
hearing for the proper determination of attorney's
fees. The criteria found in the Code of Professional
157

Responsibility are to be considered, and not
disregarded, in assessing the proper amount. Here,
the records do not reveal that the parties were duly
heard by the labor arbiter on the matter and for the
resolution of private respondent's fees.
It is axiomatic that the reasonableness of
attorney's fees is a question of fact. Ordinarily,
therefore, we would have remanded this case for
further reception of evidence as to the extent and
value of the services rendered by private respondent
to petitioner. However, so as not to needlessly
prolong the resolution of a comparatively simple
controversy, we deem it just and equitable to fix in
the present recourse a reasonable amount of
attorney's fees in favor of private respondent. For that
purpose, we have duly taken into account the
accepted guidelines therefor and so much of the
pertinent data as are extant in the records of this case
which are assistive in that regard. On such premises
and in the exercise of our sound discretion, we hold
that the amount of P10,000.00 is a reasonable and fair
compensation for the legal services rendered by
private respondent to petitioner before the labor
arbiter and the NLRC.
96.) 96. Brahm Industries vs. NLRC, 280 SCRA
824 [1997
Facts:
Roberto M. Durian, Jone M. Comendador and
Reynaldo C. Gagarino (respondents) filed a case for
illegal suspension, illegal dismissal, illegal lay-off,
illegal deductions, non-payment of service incentive
leave, 13th month pay, and actual, moral and
exemplary damages against Brahm Industries, Inc.
(BRAHM) before the Labor Arbiter.
The respondents filed their complaints, they alleged
therein that they were over worked, they have to
work for 7 days, forced to over time for 3 times a
week, and that their overtime was based on minimum
wage. And without cause and due process the
respondents were terminated.
Brahm contended that Gagarino left the company for
abroad, and when he returned in the country, he work
for another company, and in the case of 2 other
respondents, they left the job for inability to account
for some tools amounting to 10,000php. Also, Brahm
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LABOR STANDARDS LAW
asserted that these respondents were not employees,
since they have their own customers and clients, and
the character of their work is based upon the
availability of projects or it depends if there are
contracts for projects such as constructing water
purifier or water control devices.
On Feb. 8, 1994, the labor arbiter ruled in favor of
the respondents, BRAHM was ordered to reinstate
them, pay their back wages and pay their attorneys
fees. However, with regards to Gagarino’s case, it
was dismissed by the labor arbiter since it was found
out that he really left the company for more than 2
years before he filed the complaint. Gagarino did not
appeal the order of the labor arbiter.
The decision was appealed by BRAHM to the NLRC
with regards to ruling of the labor arbiter which did
not favor them. However, NLRC affirmed the ruling
of labor arbiter.
This prompted BRAHM to appeal the decision in
Supreme Court (SC).
Issue:
Whether or not Durian and Comendador are project
employees.
Ruling:
No, they are no project employees.
A project employee is one whose employment has
been fixed for a specific project or undertaking, the
completion or termination of which has been
determined at the time of the engagement of the
employee or where the work or service to be
performed is seasonal in nature and the employment
is for the duration of the season.[6] Before an
employee hired on a per project basis can be
dismissed, a report must be made to the nearest
employment office of the termination of the services
of the workers everytime it completed a project,
pursuant to Policy Instruction No. 20.
Based on the facts, BRAHM did not follow anything
mentioned above and in pursuant to the case of
Ochoco v. National Labor Relations Commission,
where the SC held that the failure of the employer to
158
 LABOR STANDARDS LAW

follow such rule is a proof that the employee is not a FACTS:

project employee rather a regular employee.
Reynaldo Aniban was employed by the Philippine
Furthermore, in pursuant to the Art. 280 of the Labor Transmarine Carriers, Inc. (TRANSMARINE) as
Code which provides: radio operator (R/O) on board the vessel "Kassel" for
a contract period of nine (9) to eleven (11)
Art. 280. Regular and Casual Employment. - The months. During the period of his employment, R/O
provisions of written agreement to the contrary Aniban died due to myocardial infarction. He was
notwithstanding and regardless of the oral agreement survived by a pregnant wife and three (3) minor
of the parties, an employment shall be deemed to be children who prayed for death benefits provided
regular where the employee has been engaged to under par. (1) of the POEA Standard Employment
perform activities which are usually necessary or Contract thus -
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 1. In case of death of the
determined at the time of the engagement of the seaman during the term
employee or where the work or services to be of his contract, the
performed is seasonal in nature and the employment employer shall pay his
is for the duration of the season. beneficicaries the
Philippine currency
An employment shall be deemed to be casual if it equivalent to the
is not covered by the preceding paragraph: provided, amount of: x x x x b.
that, any employee who has rendered at least one (1) US$13,000.00 for other
year of service, whether such service is continuous officers including radio
or broken, shall be considered a regular employee operators and master
with respect to the activity in which he is employed electricians.
and his employment shall continue while such
activity exists (underscoring supplied).

Those respondents, namely durian worked for 5 years
while comendador worked for 9 years under
BRAHM. Mere self serving statements coming from
the petitioners will not prove that the respondents are
project employees.
A claim was also made for additional death benefits
under the Collective Bargaining Agreement executed
between Associated Marine Officers and Seamen's
Union of the Philippines and NORWEGIAN
represented by TRANSMARINE, to wit:

Even in the issue of abandonment raised by BRAHM,

it doesn’t disprove that they illegally terminate the
Article 11
respondent, sense they did not offer any proof to such
issue.

Thus, the petition was dismissed. Compensation for loss of

Life

97.) HEIRS OF ANIBAN VS NLRC

Death caused by an
GR 116354, DECEMBER 4, 1997
Occupational Injury or
Disease. - In the event
of death of an officer

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 159

 LABOR STANDARDS LAW

due to an occupational
injury or disease while
serving on board, while ISSUES:
travelling to and from
(a) WON the POEA has jurisdiction to determine the
the vessel on
claim of petitioners for death benefits---YES
Company's business or
due to marine peril, (b) WON myocardial infarction is an occupational
the Company will pay disease as to entitle petitioners to the death benefits
his beneficiaries a provided under the CBA. ---YES
compensation in
accordance with the
POEA's rules and
regulations x x x x It is HELD:
agreed that these
(a)
beneficiaries will be the
following next of kin: It is not disputed that R/O Reynaldo Aniban was a
The officer's spouse, Filipino seaman and that he died on board the vessel
children or parents in of his foreign employer during the existence of his
this preferential order. employment contract, hence, this claim for death
benefits by his widow and children.

The company will pay an

additional compensation The law applicable at the time the complaint was
to the beneficiaries listed filed on 13 November 1992 was Art. 20 of the Labor
above with same Code as amended by E. O. Nos. 797 and 247 which
preferential order to that clearly provided that "original and exclusive
compensation provided jurisdiction over all matters or cases including money
by the POEA Rules and claims, involving employer-employee relations,
Regulations. The arising out of or by virtue of any law or contract
additional compensation involving Filipino seamen for overseas employment
will be US$30,000.00 is vested with the POEA.
plus US$8,000.00 to
each child under the age
of eighteen (18) years,
maximum US$24,000.00 On the other hand, the jurisdiction of the ECC
(not exceeding 3 comes into play only when the liability of the State
children). Insurance Fund is in issue, as correctly suggested by
the Solicitor General. The ECC was created under
Title II, Bk. IV, of the Labor Code with the heading
of Employees Compensation and State Insurance
Only $13,000 was granted under the POEA Standard Fund. In addition to its powers and duties
Employment Contract. The claim under the CBA enumerated in Art. 177, Art. 180 explicitly provides
was rejected on the ground that myocardial infarction that the Commission exercises appellate jurisdiction
of which R/O Aniban died was not an only over decisions rendered by either the
occupational disease as to entitle his heirs to the Government Service Insurance System (GSIS) or
additional death benefits provided therein. Social Security System (SSS) in the exercise of their
Consequently, Brigida Aniban (wife) and her children respective original and exclusive jurisdictions.
filed a formal complaint for non-payment of death Hence, the ECC may not be considered as having
compensation benefits under the CBA.

UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE 160


jurisdiction over money claims, albeit death
compensation benefits, of overseas contract workers.
Thus, in so ruling, the NLRC clearly committed
grave abuse of discretion.
(b)
The POEA ruled in the affirmative when it likened
the infirmity to a "heart attack" commonly
aggravated by pressure and strain. It was observed
that R/O Aniban, in addition to undergoing physical
exertion while performing his duties as radio
operator, was also exposed to undue pressure and
strain as he was required to be on call twenty-four
(24) hours a day to receive/transmit messages and to
keep track of weather conditions. Such pressure and
strain were aggravated by being away from his
family, a plight commonly suffered by all seamen.
In the case of R/O Aniban, the separation was
particularly distressful as his pregnant wife was due
to deliver their fourth child. Hence, the POEA ruled
that myocardial infarction was an occupational
disease.
We cannot rule otherwise. Reynaldo Aniban was
healthy at the time he boarded the vessel of his
foreign employer. His medical records reveal that he
had no health problem except for a "defective
central vision secondary to injury." Hence, he was
certified "fit to work as radio operator" by the
examining physician. However, R/O Aniban died
three (3) months after he boarded "Kassel" due to
myocardial infarction. As aforesaid, the POEA ruled
that the cause of death could be considered
occupational. Being a factual finding by the
administrative agency tasked with its determination,
such conclusion deserves respect and must be
accorded finality. Besides we have already repeatedly
ruled that death due to myocardial infarction is
compensable. In Eastern Shipping Lines, Inc. v.
POEA, although compensability was not the main
issue, we upheld the decision of the POEA adjudging
as compensable the death of a seaman on board the
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LABOR STANDARDS LAW
vessel of his foreign employer due to myocardial
infarction.
Although it may be conceded in the instant case that
the physical exertion involved in carrying out the
functions of a radio operator may have been quite
minimal, we cannot discount the pressure and
strain that went with the position of radio operator.
As radio operator, Reynaldo Aniban had to place his
full attention in hearing the exact messages received
by the vessel and to relay those that needed to be
transmitted to the mainland or to other vessels. We
have already recognized that any kind of work or
labor produces stress and strain normally resulting
in the wear and tear of the human body. It is not
required that the occupation be the only cause of
the disease as it is enough that the employment
contributed even in a small degree to its
development.
It must be stressed that the strict rules of evidence
are not applicable in claims for compensation
considering that probability and not the ultimate
degree of certainty is the test of proof in
compensation proceedings.
It is a matter of judicial notice that an overseas
worker, having to ward off homesickness by reason
of being physically separated from his family for the
entire duration of his contract, bears a great degree of
emotional strain while making an effort to perform
his work well. The strain is even greater in the case
of a seaman who is constantly subjected to the perils
of the sea while at work abroad and away from his
family. In this case, there is substantial proof that
myocardial infarction is an occupational disease for
which Aniban's employer obligated itself to pay
death benefits and additional compensation under the
CBA in the event of the demise of its employee by
reason thereof.
161

98.) Sapio vs. Undaloc Construction et al., G.R.
No. 155034, May 22, 2008
Facts:
Petitioner filed against Undaloc
Construction and/or Engineer Cirilo Undaloc for
illegal dismissal, underpayment of wages and
nonpayment of statutory benefits. Respondent
Undaloc Construction, a single proprietorship owned
by Cirilo Undaloc, is engaged in road construction
business in Cebu City.
Petitioner had been employed as watchman
from 1 May 1995 to 30 May 1998 when he was
terminated on the ground that the project he was
assigned to was already finished, he being allegedly a
project employee. Petitioner asserted he was a
regular employee having been engaged to perform
works which are “usually necessary or desirable” in
respondents’ business. He claimed that from 1 May
to 31 August 1995 and from 1 September to 31
December 1995, his daily wage rate was only P80.00
and P90.00, respectively, instead of P121.87 as
mandated by Wage Order No. ROVII-03. From 1
March 1996 to 30 May 1998, his daily rate was
P105.00. He further alleged that he was made to sign
two payroll sheets, the first bearing the actual amount
he received wherein his signature was affixed to the
last column opposite his name, and the second
containing only his name and signature. To buttress
this allegation, petitioner presented the payroll sheet
covering the period from 4 to 10 December 1995 in
which the entries were written in pencil. He also
averred that his salary from 18 to 30 May 1998 was
withheld by respondents.
Respondent Cirilo Undaloc maintained that
petitioner was hired as a project employee on 1 May
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LABOR STANDARDS LAW
1995 and was assigned as watchman from one project
to another until the termination of the project on 30
May 1998. Refuting the claim of underpayment,
respondent presented the payroll sheets from 2
September to 8 December 1996, 26 May to 15 June
1997, and 12 January to 31 May 1998.
On 12 July 1999, the Labor Arbiter rendered
a decision finding complainant to be a project
employee and his termination was for an authorized
cause. However, respondent is found liable to pay
complainant’s salary of P2,648.45 and 13th month pay
of P2,489.00. Respondent is also found liable to pay
complainant’s salary differential in the amount of
P24,902.88. Attorney’s fee of P3,000.00 is also
awarded.
Respondents appealed the award of salary
differential to the NLRC, which sustained the
findings of the Labor Arbiter.
Upon appeal, the Court of Appeals deleted
the award of salary differential and attorney’s fees,
who did not subscribe to the common findings of the
Labor Arbiter and the NLRC. It pointed out that
allegations of fraud in the preparation of payroll
sheets must be substantiated by evidence and not by
mere suspicions or conjectures,
Issue:
Whether or not petitioner was entitled to the award of
salary differential and attorney’s fees.
Ruling:
While the SC adhered to the position of the
appellate court that the “tendency” to alter the entries
in the payrolls was not substantiated, it did subscribe
162

to the total deletion of the award of salary differential
and attorney’s fees.
The Labor Arbiter erred in his computation,
it granted a higher salary differential. He fixed the
daily wage rate actually received by petitioner at
P105.00 without taking into consideration the
P141.00 rate indicated in the typewritten payroll
sheets submitted by respondents. Moreover, the
Labor Arbiter misapplied the wage orders when he
wrongly categorized respondent as falling within the
first category. Based on the stipulated number of
employees and audited financial statements,
respondents should have been covered by the second
category (which is lower).
The total salary differential that petitioner is
lawfully entitled to amounts to P6,578.00 However,
pursuant to Section 12 of Republic Act (R.A.) No.
6727, as amended by R.A. No. 8188. Respondents
are required to pay double the amount owed to
petitioner, bringing their total liability to P13,156.00.
Section 12. Any person,
corporation, trust, firm, partnership,
association or entity which refuses
or fails to pay any of the prescribed
increases or adjustments in the
wage rates made in accordance
with this Act shall be punished by a
fine not less than Twenty-five
thousand pesos (P25,000.00) nor
more than One hundred thousand
pesos (P100,000.00) or
imprisonment of not less than two
(2) years nor more than four (4)
years, or both such fine and
imprisonment at the discretion of
the court: Provided, That any
person convicted under this Act
shall not be entitled to the benefits
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provided for under the Probation
Law.
The employer concerned
shall be ordered to pay an
amount equivalent to double the
unpaid benefits owing to the
employees: Provided, That
payment of indemnity shall not
absolve the employer from the
criminal liability imposable
under this Act.
If the violation is
committed by a corporation, trust
or firm, partnership, association or
any other entity, the penalty of
imprisonment shall be imposed
upon the entity’s responsible
officers, including, but not limited
to, the president, vice president,
chief executive officer, general
manager, managing director or
partner. (Emphasis supplied)
The award of attorney’s fees is warranted
under the circumstances of this case. Under Article
2208 of the New Civil Code, attorney's fees can be
recovered in actions for the recovery of wages of
laborers and actions for indemnity under employer's
liability laws but shall not exceed 10% of the amount
awarded. The fees may be deducted from the total
amount due the winning party.
99.) JOSE MAX S. ORTIZ vs. SAN MIGUEL
CORPORATION
G.R. Nos. 15198 3-84 July 31, 2008
This case is a Petition for Review on
Certiorari under Rule 45 of the 1997 Revised Rules
of Civil Procedure seeking to modify or partially
163

reconsider the Decision dated 22 August 2001 and
Resolution dated 9 January 2002 of the Court of
Appeals in CA-G.R. SP No. 54576-77, insofar as the
award of attorney’s fees is concerned. Herein
petitioner Jose Max S. Ortiz prays that this Court
affirm the award of attorney’s fees equivalent to 10%
of the monetary award adjudged by the National
Labor Relations Commission (NLRC) in its
Decisions dated 21 July 1995 and 25 July 1995 in
NLRC Cases No. V-0255-94 and No. V-0068-95,
respectively. Petitioner asserts that he is entitled to
the said attorney’s fees.
FACTS
The petitioner in this case, Jose Max S.
Ortiz, is a member of the Philippine Bar who
represented the complainants in NLRC Cases No. V-
0255-94 (hereinafter referred to as the Aguirre Cases)
and No. V-0068-95 (hereinafter referred to as the
Toquero Case) instituted against herein private
respondent San Miguel Corporation sometime in
1992 and 1993.The respondent is a corporation duly
organized and existing under and by virtue of the
laws of the Republic of the Philippines. It is
primarily engaged in the manufacture and sale of
food and beverage particularly beer products. In line
with its business, it operates breweries and sales
offices throughout the Philippines.The complainants
in NLRC Cases, Aguirre Cases and Toquero Case
were employees at private respondent's Sales Offices
in the Province of Negros Occidental.
The complainants of Cases, Aguire and
Toquero got a favorable decision in NLRC regarding
their money claims against San Miguel Corporation.
In effect, San Miguel Corporation filed a Petitions for
Certiorari. While this respondent’s petitions were
pending before the Court of Appeals, all but one of
the remaining complainants in Aguirre and Toquero
Cases on various dates before two Labor Arbiters and
in the presence of two witnesses, signed separate
Deeds of Release, Waiver and Quitclaim in favor of
private respondent. Based on the Deeds they
executed, complainants agreed to settle their claims
against private respondent for amounts less than what
the NLRC actually awarded. Private respondent
withheld 10% of the total amount agreed upon by the
parties in the said Deeds as attorney's fees and
handed it over to petitioner. Private respondent then
attached the Deeds to its Manifestation and Motion
filed before the appellate court. Then the Court of
appeals rendered a decision affirming the NLRC
decisions, only in so far as it concerned complainant
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LABOR STANDARDS LAW
Alfredo Gadian, Jr. (complainant Gadian), the only
complainant who did not execute a Deed of Release,
Waiver and Quitclaim. With respect to the other
complainants in the Aguirre and Toquero Cases, their
complaints were dismissed on account of their duly
executed Deeds of Release, Waiver and Quitclaim. In
a Resolution dated 9 January 2002, the appellate
court denied the motion of complainant Gadian and
his counsel, herein petitioner , that the award of
attorney's fees of 10% should be based on the
monetary awards adjudged by the NLRC.
Thus, this petition filed before the Court praying to
affirm the award of attorney's fees equivalent to 10%
of the monetary award adjudged by the NLRC in its
Decisions dated 21 July 1995 and 25 July 1995 in
Toquero Case and Aguirre Cases respectively.
ISSUE
Whether he is entitled to the amount of
attorney's fees as adjudged by the NLRC in its
Decisions in the Aguirre and Toquero Cases or only
to the 10% of the amounts actually paid to his clients,
the complainants who signed the Deeds of Release,
Waiver and Quitclaim.
RULING
This Court has consistently ruled that a
question of law exists when there is a doubt or
controversy as to what the law is on a certain state of
facts. On the other hand, there is a question of fact
when the doubt or difference arises as to the alleged
truth or falsehood of the alleged facts. For a question
to be one of law, it must involve no examination of
the probative value of the evidence presented by the
litigants or any of them. The test of whether a
question is one of law or of fact is not the appellation
given to such question by the party raising the same;
rather, it is whether the appellate court can determine
the issue raised without reviewing or evaluating the
evidence, in which case, it is a question of law;
otherwise, it is a question of fact.
The aforesaid issue evidently involves a
question of law. What it needs to do is ascertain and
apply the relevant law and jurisprudence on the
award of attorney's fees to the prevailing parties in
labor cases
Article 111 of the Labor Code, as amended,
specifically provides:
ART. 111. ATTORNEY'S FEES. —
164

(a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney's fees
equivalent to ten percent of the amount of wages
recovered.
b) It shall be unlawful for any person to demand or
accept, in any judicial or administrative proceedings
for the recovery of the wages, attorney's fees which
exceed ten percent of the amount of wages recovered.
In PCL Shipping Philippines, Inc. v.
National Labor Relations Commission citing Dr.
Reyes v. Court of Appeals, this Court enunciated that
there are two commonly accepted concepts of
attorney's fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorney's
fee is the reasonable compensation paid to a lawyer
by his client for the legal services the former has
rendered to the latter. The basis of this compensation
is the fact of the attorney's employment by and his
agreement with the client. In its extraordinary
concept, attorney's fees are deemed indemnity for
damages ordered by the court to be paid by the losing
party in a litigation. The instances in which these may
be awarded are those enumerated in Article 2208 of
the Civil Code, specifically paragraph 7 thereof,
which pertains to actions for recovery of wages, and
is payable not to the lawyer but to the client, unless
they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.
Article 111 of the Labor Code, as amended,
contemplates the extraordinary concept of attorney's
fees.
Based on the foregoing, the attorney's fees
awarded by the NLRC in its Decisions in the Aguirre
and Toquero Cases pertain to the complainants,
petitioner's clients, as indemnity for damages; and not
to petitioner as compensation for his legal services.
Records show that the petitioner neither alleged nor
proved that his clients, the complainants, willingly
agreed that the award of attorney's fees would accrue
to him as an additional compensation or part thereof.
What the complainants explicitly agreed to in their
individual Deeds of Release, Waiver, and Quitclaim
was that the 10% attorney's fees of the petitioner shall
be deducted from the amount of the gross settlement.
Thus, this Court has no recourse but to
interpret the award of attorney's fees by the NLRC in
its extraordinary concept. And since the attorney's
fees pertained to the complainants as indemnity for
damages, it was totally within the complainants' right
to waive the amount of said attorney's fees and settle
for a lesser amount thereof in exchange for the
immediate end to litigation. Petitioner cannot prevent
complainants from compromising and/or
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LABOR STANDARDS LAW
withdrawing their complaints at any stage of the
proceedings just to protect his anticipated attorney's
fees.
Even assuming arguendo that the
complainants in the Aguirre and Toquero Cases did
indeed agree that the attorney's fees awarded by the
NLRC should be considered in their ordinary
concept, i.e., as compensation for petitioner's
services, we refer back to Article 111 of the Labor
Code, as amended, which provides that the attorney's
fees should be equivalent to 10% of the amount of
wages recovered. Since the complainants decided to
settle their complaints against the private respondent,
the amounts actually received by them pursuant to
the Deeds of Release, Waiver and Quitclaim are the
amounts "recovered" and the proper basis for
determining the 10% attorney's fees.
In the case at bar, it is beyond cavil that the
petitioner is not the real party in interest; hence, he
cannot file this Petition to recover the attorney's fees
as adjudged by the NLRC in its Decisions dated 21
July 1995 and 25 July 1995 in the Aguirre and
Toquero Cases, respectively. To reiterate, the award
of attorney's fees pertain to the prevailing parties in
the NLRC cases, namely, the complainants, all but
one of whom no longer pursued their complaints
against private respondent after executing Deeds of
Release, Waiver and Quitclaim. Not being the party
to whom the NLRC awarded the attorney's fees,
neither is the petitioner the proper party to question
the non-awarding of the same by the appellate court.
This would show that petitioner has been
compensated for the services he rendered the
complainants. It may do well for petitioner to
remember that as a lawyer, he is a member of an
honorable profession, the primary vision of which is
justice. The practice of law is a decent profession and
not a money-making trade. Compensation should be
but a mere incident.
If petitioner earnestly believes that the
amounts he already received are grossly deficient,
petitioner's remedy is not against the private
respondent, but against his own clients, the
complainants. He should file a separate action for
collection of sum of money against complainants to
recover just compensation for his legal services, and
not the present Petition for Review to claim from
private respondent the attorney's fees which were
adjudged by the NLRC in favor of complainants as
the prevailing parties in the Aguirre and Toquero
Cases.
WHEREFORE, the instant Petition is hereby
DENIED.
165

100.) G.R. NO. 183385: February 13, 2009
EVANGELINA MASMUD (as substitute
complainant for ALEXANDER J. MASMUD),
Petitioner, v. NATIONAL LABOR RELATIONS
COMMISSION (First Division) and ATTY.
ROLANDO B. GO, JR., Respondents.
FACTS:
On July 9, 2003, Evangelina Masmud's
(Evangelina) husband, the late Alexander J. Masmud
(Alexander), filed a complaint against First Victory
Shipping Services and Angelakos (Hellas) S.A. for
non-payment of permanent disability benefits,
medical expenses, sickness allowance, moral and
exemplary damages, and attorney's fees. Alexander
engaged the services of Atty. Rolando B. Go, Jr.
(Atty. Go) as his counsel.
In consideration of Atty. Go's legal services,
Alexander agreed to pay attorney's fees on a
contingent basis, as follows: twenty percent (20%)
of total monetary claims as settled or paid and an
additional ten percent (10%) in case of appeal. It was
likewise agreed that any award of attorney's fees shall
pertain to respondent's law firm as compensation.
On November 21, 2003, the Labor Arbiter
(LA) rendered a Decision granting the monetary
claims of Alexander.
Alexander's employer filed an appeal before
the National Labor Relations Commission (NLRC).
During the pendency of the proceedings before the
NLRC, Alexander died. After explaining the terms of
the lawyer's fees to Evangelina, Atty. Go caused her
substitution as complainant. On April 30, 2004, the
NLRC rendered a Decision dismissing the appeal of
Alexander's employer.
Eventually, the decision of the NLRC
became final and executory. Atty. Go moved for the
execution of the NLRC decision, which was later
granted by the LA. The surety bond of the employer
was garnished. Upon motion of Atty. Go, the surety
company delivered to the NLRC Cashier, through the
NLRC Sheriff, the check amounting to
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LABOR STANDARDS LAW
P3,454,079.20. Thereafter, Atty. Go moved for the
release of the said amount to Evangelina.
On January 10, 2005, the LA directed the
NLRC Cashier to release the amount of
P3,454,079.20 to Evangelina. Out of the said amount,
Evangelina paid Atty. Go the sum of P680,000.00.
Dissatisfied, Atty. Go filed a motion to
record and enforce the attorney's lien alleging that
Evangelina reneged on their contingent fee
agreement. Evangelina paid only the amount of
P680,000.00, equivalent to 20% of the award as
attorney's fees, thus, leaving a balance of 10%, plus
the award pertaining to the counsel as attorney's fees.
In response to the motion filed by Atty. Go,
Evangelina filed a comment with motion to release
the amount deposited with the NLRC Cashier. In her
comment, Evangelina manifested that Atty. Go's
claim for attorney's fees of 40% of the total monetary
award was null and void based on Article 111 of the
Labor Code.
ISSUE: WHETHER OR NOT THE 40%
LAWYER’S FEE ON CONTINGENT BASIS OF
ATTY. GO IS PROPER? (AFFIRMATIVE)
There are two concepts of attorney's fees. In
the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his
client for the legal services rendered to the latter. On
the other hand, in its extraordinary concept, attorney's
fees may be awarded by the court as indemnity for
damages to be paid by the losing party to the
prevailing party, such that, in any of the cases
provided by law where such award can be made, e.g.,
those authorized in Article 2208 of the Civil Code,
the amount is payable not to the lawyer but to the
client, unless they have agreed that the award shall
pertain to the lawyer as additional compensation or as
part thereof.
Here, we apply the ordinary concept of
attorney's fees, or the compensation that Atty. Go is
entitled to receive for representing Evangelina, in
substitution of her husband, before the labor tribunals
and before the court.
Evangelina maintains that Article 111 of the
Labor Code is the law that should govern Atty. Go's
compensation as her counsel and assiduously opposes
their agreed retainer contract.
166

Article 111 of the said Code provides:
ART. 111. Attorney's fees. - (a) In cases of unlawful
withholding of wages the culpable party may be
assessed attorney's fees equivalent to ten percent of
the amount of the wages
recovered.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Contrary to Evangelina's proposition, Article
111 of the Labor Code deals with the extraordinary
concept of attorney's fees. It regulates the amount
recoverable as attorney's fees in the nature of
damages sustained by and awarded to the prevailing
party. It may not be used as the standard in fixing the
amount payable to the lawyer by his client for the
legal services he rendered.
In this regard, Section 24, Rule 138 of the Rules of
Court should be observed in determining Atty. Go's
compensation. The said Rule provides:
SEC. 24. Compensation of attorney's; agreement as to
fees. - An attorney shall be entitled to have and
recover from his client no more than a reasonable
compensation for his services, with a view to the
importance of the subject matter of the controversy,
the extent of the services rendered, and the
professional standing of the attorney. No court shall
be bound by the opinion of attorneys as expert
witnesses as to the proper compensation, but may
disregard such testimony and base its conclusion on
its own professional knowledge. A written contract
for services shall control the amount to be paid
therefor unless found by the court to be
unconscionable or unreasonable.
The retainer contract between Atty. Go and
Evangelina provides for a contingent fee. The
contract shall control in the determination of the
amount to be paid, unless found by the court to be
unconscionable or unreasonable. Attorney's fees are
unconscionable if they affront one's sense of justice,
decency or reasonableness. The decree of
unconscionability or unreasonableness of a stipulated
amount in a contingent fee contract will not preclude
recovery.
The criteria found in the Code of Professional
Responsibility are also to be considered in assessing
the proper amount of compensation that a lawyer
should receive.ςrαlαω Canon 20, Rule 20.01 of the
said Code provides:
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LABOR STANDARDS LAW
CANON 20 - A LAWYER SHALL CHARGE ONLY
FAIR AND REASONABLE FEES.
Rule 20.01. - A lawyer shall be guided by the
following factors in determining his fees:
(a) The time spent and the extent of the services
rendered or required;
(b) The novelty and difficulty of the question
involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a
result of acceptance of the proffered case;
(f) The customary charges for similar services and the
schedule of fees of the IBP Chapter to which he
belongs;
(g) The amount involved in the controversy and the
benefits resulting to the client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether
occasional or established; and
(j) The professional standing of the lawyer.
Contingent fee contracts are subject to the
supervision and close scrutiny of the court in order
that clients may be protected from unjust charges.
The amount of contingent fees agreed upon by the
parties is subject to the stipulation that counsel will
be paid for his legal services only if the suit or
litigation prospers. A much higher compensation is
allowed as contingent fees because of the risk that
the lawyer may get nothing if the suit fails. The
Court finds nothing illegal in the contingent fee
contract between Atty. Go and Evangelina's husband.
The CA committed no error of law when it awarded
the attorney's fees of Atty. Go and allowed him to
receive an equivalent of 39% of the monetary award.
Considering that Atty. Go successfully
represented his client, it is only proper that he should
receive adequate compensation for his efforts. Even
as we agree with the reduction of the award of
attorney's fees by the CA, the fact that a lawyer plays
a vital role in the administration of justice
emphasizes the need to secure to him his honorarium
lawfully earned as a means to preserve the decorum
and respectability of the legal profession. A lawyer is
as much entitled to judicial protection against
injustice or imposition of fraud on the part of his
client as the client is against abuse on the part of his
counsel. The duty of the court is not alone to ensure
that a lawyer acts in a proper and lawful manner, but
also to see that a lawyer is paid his just fees. With his
capital consisting of his brains and with his skill
acquired at tremendous cost not only in money but in
expenditure of time and energy, he is entitled to the
167

protection of any judicial tribunal against any attempt
on the part of his client to escape payment of his just
compensation. It would be ironic if after putting forth
the best in him to secure justice for his client, he
himself would not get his due.
101 KAISAHAN AT KAPATIRAN NG MGA
MANGGAGAWA AT KAWANI SA MWC-EAST
ZONE UNION and EDUARDO BORELA vs.
MANILA WATER COMPANY, INC.,
FACTS:
The Union is the duly-recognized bargaining
agent of the rank-and-file employees of the
respondent Manila Water Company, Inc. while Borela
is the Union President. In 1997, the Metropolitan
Waterworks and Sewerage System (MWSS) entered
into a Concession Agreement with the Company to
privatize the operations of the MWSS. The
Agreement provides that “the Concessionaire shall
grant its employees benefits no less favorable than
those granted to MWSS employees at the time of
their separation from MWSS.” Among the benefits
enjoyed by the employees of the MWSS were the
amelioration allowance (AA) and the cost-of-living
allowance (COLA). The payment of the AA and the
COLA was discontinued pursuant to Republic Act
No. 6758, otherwise known as the “Salary
Standardization Law,” which integrated the
allowances into the standardized salary. The
Company agreed to reinstate them upon renegotiation
of the parties’ CBA but however failed to give them.
As a result, the Union and Borela filed a complaint
against the Company for payment of the AA, COLA,
moral and exemplary damages, legal interest, and
attorney’s fees before the National Labor Relations
Commission (NLRC). In his decision of August 20,
2003, Labor Arbiter Aliman D. Mangandog ( LA)
ruled in favor of the petitioners and ordered the
payment of ten percent (10%) attorney’s fees in
addition to their benefits and interests. The award of
attorney’s fees was upheld by NLRC. However, this
was reversed by the CA. CA’s Decision: The
additional grant of 10% attorney’s fees violates
Article 111 of the Labor Code considering that the
MOA between the parties already ensured the
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LABOR STANDARDS LAW
payment of 10% attorney’s fees, deductible from the
AA and CBA receivables of the Union’s members.
ISSUE:
1.Whether or not the workers are entitled to
attorney’s fees.
RULING:
Yes.
In the present case, the ten percent (10%)
attorney’s fees awarded by the NLRC on the basis of
Article 111 of the Labor Code accrue to the Union’s
members as indemnity for damages and not to the
Union’s counsel as compensation for his legal
services, unless, they agreed that the award shall be
given to their counsel as additional or part of his
compensation; in this case the Union bound itself to
pay 10% attorney’s fees to its counsel under the
MOA and also gave up the attorney’s fees awarded to
the Union’s members in favor of their counsel. This
is supported by Borela’s affidavit which stated that
“[t]he 10% attorney’s fees paid by the
members/employees is separate and distinct from the
obligation of the company to pay the 10% awarded
attorney’s fees which we also gave to our counsel as
part of our contingent fee agreement.”[43] The limit
to this agreement is that the indemnity for damages
imposed by the NLRC on the losing party (i.e., the
Company) cannot exceed ten percent (10%).
Properly viewed from this perspective, the
award cannot be taken to mean an additional grant of
attorney’s fees, in violation of the ten percent (10%)
limit under Article 111 of the Labor Code since it
rests on an entirely different legal obligation than the
one contracted under the MOA. Simply stated, the
attorney’s fees contracted under the MOA do not
refer to the amount of attorney’s fees awarded by the
NLRC; the MOA provision on attorney’s fees does
not have any bearing at all to the attorney’s fees
awarded by the NLRC under Article 111 of the Labor
Code. Based on these considerations, it is clear that
the CA erred in ruling that the LA’s award of
attorney’s fees violated the maximum limit of ten
percent (10%) fixed by Article 111 of the Labor
Code.
168

Under this interpretation, the Company’s
argument that the attorney’s fees are unconscionable
as they represent 20% of the amount due or about
P21.4 million is more apparent than real. Since the
attorney’s fees awarded by the LA pertained to the
Union’s members as indemnity for damages, it was
totally within their right to waive the amount and
give it to their counsel as part of their contingent fee
agreement. Beyond the limit fixed by Article 111 of
the Labor Code, such as between the lawyer and the
client, the attorney’s fees may exceed ten percent
(10%) on the basis of quantum meruit, as in the
present case.
102. Malvar vs. Kraft Food Phils Inc. et al., G.R.
No. 183952, Sept. 9, 2013
Facts:
The case initially concerned the execution of a final
decision of the Court of Appeals (CA) in a labor
litigation, but has mutated into a dispute over
attorney's fees between the winning employee and
her attorney after she entered into a compromise
agreement with her employer under circumstances
that the attorney has bewailed as designed to prevent
the recovery of just professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI)
hired Czarina Malvar (Malvar) as its Corporate
Planning Manager. From then on, she gradually rose
from the ranks, becoming in 1996 the Vice President
for Finance in the Southeast Asia Region of Kraft
Foods International (KFI),KFPI’s mother company.
On November 29, 1999, respondent Bienvenido S.
Bautista, as Chairman of the Board of KFPI and
concurrently the Vice President and Area Director for
Southeast Asia of KFI, sent Malvar a memo directing
her to explain why no administrative sanctions should
be imposed on her for possible breach of trust and
confidence and for willful violation of company rules
and regulations. Following the submission of her
written explanation, an investigating body was
formed. In due time, she was placed under preventive
suspension with pay. Ultimately, on March 16, 2000,
she was served a notice of termination.
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Obviously aggrieved, Malvar filed a complaint for
illegal suspension and illegal dismissal against KFPI
and Bautista in the National Labor Relations
Commission (NLRC). In a decision dated April 30,
2001, the Labor Arbiter found and declared her
suspension and dismissal illegal, and ordered her
reinstatement, and the payment of her full
backwages, inclusive of allowances and other
benefits, plus attorney’s fees.
On October 22, 2001, the NLRC affirmed the
decision of the Labor Arbiter but additionally ruled
that Malvar was entitled to "any and all stock options
and bonuses she was entitled to or would have been
entitled to had she not been illegally dismissed from
her employment," as well as to moral and exemplary
damages.
KFPI and Bautista sought the reconsideration of the
NLRC’s decision, but the NLRC denied their motion
to that effect.
Undaunted, KFPI and Bautista assailed the adverse
outcome before the CA on certiorari, contending that
the NLRC thereby committed grave abuse of
discretion. However, the petition for certiorari was
dismissed by the CA on December 22, 2004, but with
the CA reversing the order of reinstatement and
instead directing the payment of separation pay to
Malvar, and also reducing the amounts awarded as
moral and exemplary damages.
After the judgment in her favor became final and
executory on March14, 2006, Malvar moved for the
issuance of a writ of execution. The Executive Labor
Arbiter then referred the case to the Research and
Computation Unit (RCU) of the NLRC for the
computation of the monetary awards under the
judgment. The RCU’s computation ultimately arrived
at the total sum of P41,627,593.75.
On November 9, 2006, however, Labor Arbiter Jaime
M. Reyno issued an order, finding that the RCU’s
computation lacked legal basis for including the
salary increases that the decision promulgated did not
include. Hence, Labor Arbiter Reyno reduced
Malvar’s total monetary award to P27,786,378.11.
Both parties appealed the computation to the NLRC,
which, on April19, 2007, rendered its decision setting
aside Labor Arbiter Reyno’s November 9, 2006 order,
and adopting the computation by the RCU.
169

In its resolution dated May 31, 2007, the NLRC
denied the respondents’ motion for reconsideration.
Malvar filed a second motion for the issuance of a
writ of execution to enforce the decision of the
NLRC rendered on April 19, 2007. After the writ of
execution was issued, a partial enforcement as
effected by garnishing the respondents’ funds
deposited with Citibank worth 37,391,696.06.
On July 27, 2007, the respondents went to the CA on
certiorari (with prayer for the issuance of a temporary
restraining order (TRO) or writ of preliminary
injunction), assailing the NLRC’s setting aside of the
computation by Labor Arbiter Reyno (CA-G.R. SP
No. 99865). The petition mainly argued that the
NLRC had gravely abused its discretion in ruling
that: (a) the inclusion of the salary increases and
other monetary benefits in the award to Malvar was
final and executory; and (b) the finality of the ruling
in CA-G.R. SP No. 69660 precluded the respondents
from challenging the inclusion of the salary increases
and other monetary benefits. The CA issued a TRO,
enjoining the NLRC and Malvar from implementing
the NLRC’s decision.
On April 17, 2008, the CA rendered its decision
reversing the NLRC decision.
The matter of computation of monetary awards for
private respondent is hereby REMANDED to the
Labor Arbiter and he is DIRECTED to recompute the
monetary award due to private respondent based on
her salary at the time of her termination, without
including projected salary increases.
Malvar sought reconsideration, but the CA denied her
motion on July30, 2008.
Aggrieved, Malvar appealed to the Court, assailing
the CA’s decision.
On December 9, 2010, while her appeal was pending
in this Court, Malvar and the respondents entered into
a compromise agreement, the pertinent dispositive
portion of which is quoted as follows:
The Compromise Payment includes full and complete
payment and settlement of Ms. Malvar’s salaries and
wages up to the last day of her employment,
allowances, 13th and 14th month pay, cash
conversion of her accrued vacation, sick and
emergency leaves, separation pay, retirement pay and
such other benefits, entitlements, claims for stock,
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LABOR STANDARDS LAW
stock options or other forms of equity compensation
whether vested or otherwise and claims of any and all
kinds against KFPI and KFI and Altria Group, Inc.,
their predecessors-in-interest, their stockholders,
officers, directors, agents or successors-in-interest,
affiliates and subsidiaries, up to the last day of the
aforesaid cessation of her employment.
Thereafter, Malvar filed an undated Motion to
Dismiss/Withdraw Case, praying that the appeal be
immediately dismissed/withdrawn in view of the
compromise agreement, and that the case be
considered closed and terminated.
Before the Court could act on Malvar’s Motion to
Dismiss/Withdraw Case, the Court received on
February 15, 2011 a so-called Motion for
Intervention to Protect Attorney’s Rights from The
Law Firm of Dasal, Llasos and Associates, through
its Of Counsel Retired Supreme Court Associate
Justice Josue N. Bellosillo (Intervenor), whereby the
Intervenor sought, among others, that both Malvar
and KFPI be held and ordered to pay jointly and
severally the Intervenor’s contingent fees.
Upon execution of the Compromise Agreement and
pursuant thereto, Petitioner immediately received
(supposedly) from RespondentsP40,000,000.00. But
despite the settlement between the parties, Petitioner
did not pay Intervenor its just compensation as set
forth in their engagement agreement; instead, she
immediately moved to Dismiss/Withdraw the Present
Petition On 15.
Opposing the Motion for Intervention, 28 Malvar
stresses that there was no truth to the Intervenor’s
claim to defraud it of its professional fees; that the
Intervenor lacked the legal capacity to intervene
because it had ceased to exist after Atty. Marwil N.
Llasos resigned from the Intervenor and Atty. Richard
B. Dasal became barred from private practice upon
his appointment as head of the Legal Department of
the Small Business Guarantee and Finance
Corporation, a government subsidiary; and that Atty.
Llasos and Atty. Dasal had personally handled her
case.
Issues
(a) Whether or not Malvar’s motion to dismiss the
petition on the ground of the execution of the
compromise agreement was proper; and (b) whether
or not the Motion for Intervention to protect
attorney’s rights can prosper..
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Ruling:
Client’s right to settle litigation
by compromise agreement, and
to terminate counsel; limitations
A compromise agreement is a contract, whereby the
parties undertake reciprocal obligations to avoid
litigation, or put an end to one already
commenced. The client may enter into a compromise
agreement with the adverse party to terminate the
litigation before a judgment is rendered therein. If the
compromise agreement is found to be in order and
not contrary to law, morals, good customs and public
policy, its judicial approval is in order. Compromise
agreement, once approved by final order of the court,
has the force of res judicata between the parties and
will not be disturbed except for vices of consent or
forgery.
A client has an undoubted right to settle her litigation
without the intervention of the attorney, for the
former is generally conceded to have exclusive
control over the subject matter of the litigation and
may at anytime, if acting in good faith, settle and
adjust the cause of action out of court before
judgment, even without the attorney’s intervention. It
is important for the client to show, however, that the
compromise agreement does not adversely affect
third persons who are not parties to the agreement.
By the same token, a client has the absolute right to
terminate the attorney-client relationship at any time
with or without cause. But this right of the client is
not unlimited because good faith is required in
terminating the relationship. The right is also subject
to the right of the attorney to be compensated.
A client may at any time dismiss his attorney or
substitute another in his place, but if the contract
between client and attorney has been reduced to
writing and the dismissal of the attorney was without
justifiable cause, he shall be entitled to recover from
the client the full compensation stipulated in the
contract. However, the attorney may, in the discretion
of the court, intervene in the case to protect his rights.
For the payment of his compensation the attorney
shall have a lien upon all judgments for the payment
of money, and executions issued in pursuance of such
judgment, rendered in the case wherein his services
had been retained by the client. (Bold emphasis
supplied)
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
In fine, it is basic that an attorney is entitled to have
and to receive a just and reasonable compensation for
services performed at the special instance and request
of his client. The attorney who has acted in good faith
and honesty in representing and serving the interests
of the client should be reasonably compensated for
his service.
2.
Compromise agreement is to be approved
despite favorable action on the
Intervenor’s Motion for Intervention
On considerations of equity and fairness, the Court
disapproves of the tendencies of clients
compromising their cases behind the backs of their
attorneys for the purpose of unreasonably reducing or
completely setting to naught the stipulated contingent
fees. Thus, the Court grants the Intervenor’s Motion
for Intervention to Protect Attorney’s Rights as a
measure of protecting the Intervenor’s right to its
stipulated professional fees that would be denied
under the compromise agreement. The Court does so
in the interest of protecting the rights of the
practicing Bar rendering professional services on
contingent fee basis.
Nonetheless, the claim for attorney’s fees does not
void or nullify the compromise agreement between
Malvar and the respondents. There being no obstacles
to its approval, the Court approves the compromise
agreement. The Court adds, however, that the
Intervenor is not left without a remedy, for the
payment of its adequate and reasonable compensation
could not be annulled by the settlement of the
litigation without its participation and conformity. It
remains entitled to the compensation, and its right is
safeguarded by the Court because its members are
officers of the Court who are as entitled to judicial
protection against injustice or imposition of fraud
committed by the client as much as the client is
against their abuses as her counsel. In other words,
the duty of the Court is not only to ensure that the
attorney acts in a proper and lawful manner, but also
to see to it that the attorney is paid his just fees. Even
if the compensation of the attorney is dependent only
on winning the litigation, the subsequent withdrawal
of the case upon the client’s initiative would not
deprive the attorney of the legitimate compensation
for professional services rendered.40
The stipulations of the written agreement between
Malvar and the Intervenors, not being contrary to law,
morals, public policy, public order or good customs,
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were valid and binding on her. They expressly gave
rise to the right of the Intervenor to demand
compensation. In a word, she could not simply walk
away from her contractual obligations towards the
Intervenor, for Article 1159 of the Civil Code
provides that obligations arising from contracts have
the force of law between the parties and should be
complied with in good faith.
As a final word, it is necessary to state that no court
can shirk from enforcing the contractual stipulations
in the manner they have agreed upon and written. As
a rule, the courts, whether trial or appellate, have no
power to make or modify contracts between the
parties. Nor can the courts save the parties from
disadvantageous provisions. The same precepts hold
sway when it comes to enforcing fee arrangements
entered into in writing between clients and attorneys.
In the exercise of their supervisory authority over
attorneys as officers of the Court, the courts are
bound to respect and protect the attorney’s lien as a
UNIVERSITY OF SAN CARLOS SCHOOL OF LAW AND GOVERNANCE
LABOR STANDARDS LAW
necessary means to preserve the decorum and
respectability of the Law Profession. Hence, the
Court must thwart any and every effort of clients
already served by their attorneys’ worthy services to
deprive them of their hard-earned compensation.
Truly, the duty of the courts is not only to see to it
that attorneys act in a proper and lawful manner, but
also to see to it that attorneys are paid their just and
lawful fees.61
WHEREFORE, the Court APPROVES the
compromise agreement; GRANTS the Motion for
Intervention to Protect Attorney's Rights; and
ORDERS Czarina T. Malvar and respondents Kraft
Food Philippines Inc. and Kraft Foods International
to jointly and severally pay to Intervenor Law Firm,
represented by Retired Associate Justice Josue N.
Bellosillo, its stipulated contingent fees of 10%
of P41,627,593.75, and the further sum equivalent to
10% of the value of the stock option.
172