On the foregoing facts and in the light of the errors asigned the issues to be resolved are:

1. Whether the appellee Tourist World Service unilaterally disco the telephone line
at the branch office on Ermita;

2. Whether or not the padlocking of the office by the Tourist World Service was
actionable or not; and

3. Whether or not the lessee to the office premises belonging to the appellee
Noguera was appellees TWS or TWS and the appellant.

In this appeal, appealant Lina Sevilla claims that a joint bussiness venture was entered into by and between
her and appellee TWS with offices at the Ermita branch office and that she was not an employee of the TWS to
the end that her relationship with TWS was one of a joint business venture appellant made declarations
showing:

1. Appellant Mrs. Lina 0. Sevilla, a prominent figure and wife of an eminent eye,
ear and nose specialist as well as a imediately columnist had been in the travel business prior to the
establishment of the joint business venture with appellee Tourist World Service, Inc. and appellee Eliseo
Canilao, her compadre, she being the godmother of one of his children, with her own clientele, coming mostly
from her own social circle (pp. 3-6 tsn. February 16,1965).

2. Appellant Mrs. Sevilla was signatory to a lease agreement dated 19 October

1960 (Exh. 'A') covering the premises at A. Mabini St., she expressly warranting and holding [sic] herself
'solidarily' liable with appellee Tourist World Service, Inc. for the prompt payment of the monthly rentals
thereof to other appellee Mrs. Noguera (pp. 14-15, tsn. Jan. 18,1964).

3. Appellant Mrs. Sevilla did not receive any salary from appellee Tourist World
Service, Inc., which had its own, separate office located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with said business at the Trade & Commerce
Building (pp. 16-18 tsn Id.).

4. Appellant Mrs. Sevilla earned commissions for her own passengers, her own
bookings her own business (and not for any of the business of appellee Tourist World Service, Inc.) obtained
from the airline companies. She shared the 7% commissions given by the airline companies giving appellee
Tourist World Service, Lic. 3% thereof aid retaining 4% for herself (pp. 18 tsn. Id.)

5. Appellant Mrs. Sevilla likewise shared in the expenses of maintaining the A.

Mabini St. office, paying for the salary of an office secretary, Miss Obieta, and other sundry expenses, aside
from desicion the office furniture and supplying some of fice furnishings (pp. 15,18 tsn. April 6,1965), appellee
Tourist World Service, Inc. shouldering the rental and other expenses in consideration for the 3% split in the co
procured by appellant Mrs. Sevilla (p. 35 tsn Feb. 16,1965).

6. It was the understanding between them that appellant Mrs. Sevilla would be
given the title of branch manager for appearance's sake only (p. 31 tsn. Id.), appellee Eliseo Canilao admit that
it was just a title for dignity (p. 36 tsn. June 18, 1965- testimony of appellee Eliseo Canilao pp. 38-39 tsn April
61965-testimony of corporate secretary Gabino Canilao (pp- 2-5, Appellants' Reply Brief)

Upon the other hand, appellee TWS contend that the appellant was an employee of the appellee Tourist
World Service, Inc. and as such was designated manager.1

xxx xxx xxx

The trial court2 held for the private respondent on the premise that the private respondent, Tourist World
Service, Inc., being the true lessee, it was within its prerogative to terminate the lease and padlock the
premises. 3 It likewise found the petitioner, Lina Sevilla, to be a mere employee of said Tourist World Service,
Inc. and as such, she was bound by the acts of her employer. 4 The respondent Court of Appeal 5 rendered an
affirmance.

The petitioners now claim that the respondent Court, in sustaining the lower court, erred. Specifically, they
state:

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN HOLDING
THAT "THE PADLOCKING OF THE PREMISES BY TOURIST WORLD SERVICE INC. WITHOUT THE KNOWLEDGE AND
CONSENT OF THE APPELLANT LINA SEVILLA ... WITHOUT NOTIFYING MRS. LINA O. SEVILLA OR ANY OF HER
EMPLOYEES AND WITHOUT INFORMING COUNSEL FOR THE APPELLANT (SEVILIA), WHO IMMEDIATELY BEFORE
THE PADLOCKING INCIDENT, WAS IN CONFERENCE WITH THE CORPORATE SECRETARY OF TOURIST WORLD
SERVICE (ADMITTEDLY THE PERSON WHO PADLOCKED THE SAID OFFICE), IN THEIR ATTEMP AMICABLY SETTLE
THE CONTROVERSY BETWEEN THE APPELLANT (SEVILLA) AND THE TOURIST WORLD SERVICE ... (DID NOT)
ENTITLE THE LATTER TO THE RELIEF OF DAMAGES" (ANNEX "A" PP. 7,8 AND ANNEX "B" P. 2) DECISION
AGAINST DUE PROCESS WHICH ADHERES TO THE RULE OF LAW.

II

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPELLANT SEVILLA RELIEF BECAUSE SHE HAD "OFFERED TO WITHDRAW HER COMP PROVIDED THAT ALL
CLAIMS AND COUNTERCLAIMS LODGED BY BOTH APPELLEES WERE WITHDRAWN." (ANNEX "A" P. 8)

III

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN
DENYING-IN FACT NOT PASSING AND RESOLVING-APPELLANT SEVILLAS CAUSE OF ACTION FOUNDED ON
ARTICLES 19, 20 AND 21 OF THE CIVIL CODE ON RELATIONS.

IV

THE COURT OF APPEALS ERRED ON A QUESTION OF LAW AND GRAVELY ABUSED ITS DISCRETION IN DENYING
APPEAL APPELLANT SEVILLA RELIEF YET NOT RESOLVING HER CLAIM THAT SHE WAS IN JOINT VENTURE WITH
TOURIST WORLD SERVICE INC. OR AT LEAST ITS AGENT COUPLED WITH AN INTEREST WHICH COULD NOT BE
TERMINATED OR REVOKED UNILATERALLY BY TOURIST WORLD SERVICE INC.6

As a preliminary inquiry, the Court is asked to declare the true nature of the relation between Lina Sevilla and
Tourist World Service, Inc. The respondent Court of see fit to rule on the question, the crucial issue, in its
opinion being "whether or not the padlocking of the premises by the Tourist World Service, Inc. without the
knowledge and consent of the appellant Lina Sevilla entitled the latter to the relief of damages prayed for and
whether or not the evidence for the said appellant supports the contention that the appellee Tourist World
Service, Inc. unilaterally and without the consent of the appellant disconnected the telephone lines of the
Ermita branch office of the appellee Tourist World Service, Inc.7 Tourist World Service, Inc., insists, on the
other hand, that Lina SEVILLA was a mere employee, being "branch manager" of its Ermita "branch" office and
that inferentially, she had no say on the lease executed with the private respondent, Segundina Noguera. The
petitioners contend, however, that relation between the between parties was one of joint venture, but
concede that "whatever might have been the true relationship between Sevilla and Tourist World Service," the
Rule of Law enjoined Tourist World Service and Canilao from taking the law into their own hands, 8 in
reference to the padlocking now questioned.
 The Court finds the resolution of the issue material, for if, as the private respondent, Tourist World Service,
Inc., maintains, that the relation between the parties was in the character of employer and employee, the
courts would have been without jurisdiction to try the case, labor disputes being the exclusive domain of the
Court of Industrial Relations, later, the Bureau Of Labor Relations, pursuant to statutes then in force. 9

In this jurisdiction, there has been no uniform test to determine the evidence of an employer-employee
relation. In general, we have relied on the so-called right of control test, "where the person for whom the
services are performed reserves a right to control not only the end to be achieved but also the means to be
used in reaching such end." 10 Subsequently, however, we have considered, in addition to the standard of
right-of control, the existing economic conditions prevailing between the parties, like the inclusion of the
employee in the payrolls, in determining the existence of an employer-employee relationship.11

The records will show that the petitioner, Lina Sevilla, was not subject to control by the private respondent
Tourist World Service, Inc., either as to the result of the enterprise or as to the means used in connection
therewith. In the first place, under the contract of lease covering the Tourist Worlds Ermita office, she had
bound herself in solidum as and for rental payments, an arrangement that would be like claims of a master-
servant relationship. True the respondent Court would later minimize her participation in the lease as one of
mere guaranty, 12 that does not make her an employee of Tourist World, since in any case, a true employee
cannot be made to part with his own money in pursuance of his employer's business, or otherwise, assume
any liability thereof. In that event, the parties must be bound by some other relation, but certainly not
employment.

In the second place, and as found by the Appellate Court, '[w]hen the branch office was opened, the same
was run by the herein appellant Lina O. Sevilla payable to Tourist World Service, Inc. by any airline for any fare
brought in on the effort of Mrs. Lina Sevilla. 13 Under these circumstances, it cannot be said that Sevilla was
under the control of Tourist World Service, Inc. "as to the means used." Sevilla in pursuing the business,
obviously relied on her own gifts and capabilities.

It is further admitted that Sevilla was not in the company's payroll. For her efforts, she retained 4% in
commissions from airline bookings, the remaining 3% going to Tourist World. Unlike an employee then, who
earns a fixed salary usually, she earned compensation in fluctuating amounts depending on her booking
successes.

The fact that Sevilla had been designated 'branch manager" does not make her, ergo, Tourist World's
employee. As we said, employment is determined by the right-of-control test and certain economic
parameters. But titles are weak indicators.
 In rejecting Tourist World Service, Inc.'s arguments however, we are not, as a consequence, accepting Lina
Sevilla's own, that is, that the parties had embarked on a joint venture or otherwise, a partnership. And
apparently, Sevilla herself did not recognize the existence of such a relation. In her letter of November 28,
1961, she expressly 'concedes your [Tourist World Service, Inc.'s] right to stop the operation of your branch
office 14 in effect, accepting Tourist World Service, Inc.'s control over the manner in which the business was
run. A joint venture, including a partnership, presupposes generally a of standing between the joint co-
venturers or partners, in which each party has an equal proprietary interest in the capital or property
contributed 15 and where each party exercises equal rights in the conduct of the business.16 furthermore, the
parties did not hold themselves out as partners, and the building itself was embellished with the electric sign
"Tourist World Service, Inc. 17in lieu of a distinct partnership name.

It is the Court's considered opinion, that when the petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.'s Ermita office, she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent renders services "in representation or on behalf of
another.18 In the case at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions.
And as we said, Sevilla herself based on her letter of November 28, 1961, pre-assumed her principal's authority
as owner of the business undertaking. We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a principal agent relationship, rather than a
joint managament or a partnership..

But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency
having been created for mutual interest, of the agent and the principal. 19 It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover,
she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the
payment of rentals. She continued the business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the power of management delegated to her. It
is an agency that, as we said, cannot be revoked at the pleasure of the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla, to damages.

As we have stated, the respondent Court avoided this issue, confining itself to the telephone disconnection
and padlocking incidents. Anent the disconnection issue, it is the holding of the Court of Appeals that there is
'no evidence showing that the Tourist World Service, Inc. disconnected the telephone lines at the branch
office. 20 Yet, what cannot be denied is the fact that Tourist World Service, Inc. did not take pains to have
them reconnected. Assuming, therefore, that it had no hand in the disconnection now complained of, it had
clearly condoned it, and as owner of the telephone lines, it must shoulder responsibility therefor.
 The Court of Appeals must likewise be held to be in error with respect to the padlocking incident. For the fact
that Tourist World Service, Inc. was the lessee named in the lease con-tract did not accord it any authority to
terminate that contract without notice to its actual occupant, and to padlock the premises in such fashion. As
this Court has ruled, the petitioner, Lina Sevilla, had acquired a personal stake in the business itself, and
necessarily, in the equipment pertaining thereto. Furthermore, Sevilla was not a stranger to that contract
having been explicitly named therein as a third party in charge of rental payments (solidarily with Tourist
World, Inc.). She could not be ousted from possession as summarily as one would eject an interloper.

The Court is satisfied that from the chronicle of events, there was indeed some malevolent design to put the
petitioner, Lina Sevilla, in a bad light following disclosures that she had worked for a rival firm. To be sure, the
respondent court speaks of alleged business losses to justify the closure '21 but there is no clear showing that
Tourist World Ermita Branch had in fact sustained such reverses, let alone, the fact that Sevilla had moonlit for
another company. What the evidence discloses, on the other hand, is that following such an information (that
Sevilla was working for another company), Tourist World's board of directors adopted two resolutions
abolishing the office of 'manager" and authorizing the corporate secretary, the respondent Eliseo Canilao, to
effect the takeover of its branch office properties. On January 3, 1962, the private respondents ended the
lease over the branch office premises, incidentally, without notice to her.

It was only on June 4, 1962, and after office hours significantly, that the Ermita office was padlocked,
personally by the respondent Canilao, on the pretext that it was necessary to Protect the interests of the
Tourist World Service. " 22 It is strange indeed that Tourist World Service, Inc. did not find such a need when it
cancelled the lease five months earlier. While Tourist World Service, Inc. would not pretend that it sought to
locate Sevilla to inform her of the closure, but surely, it was aware that after office hours, she could not have
been anywhere near the premises. Capping these series of "offensives," it cut the office's telephone lines,
paralyzing completely its business operations, and in the process, depriving Sevilla articipation therein.

This conduct on the part of Tourist World Service, Inc. betrays a sinister effort to punish Sevillsa it had
perceived to be disloyalty on her part. It is offensive, in any event, to elementary norms of justice and fair play.

We rule therefore, that for its unwarranted revocation of the contract of agency, the private respondent,
Tourist World Service, Inc., should be sentenced to pay damages. Under the Civil Code, moral damages may be
awarded for "breaches of contract where the defendant acted ... in bad faith. 23

We likewise condemn Tourist World Service, Inc. to pay further damages for the moral injury done to Lina
Sevilla from its brazen conduct subsequent to the cancellation of the power of attorney granted to her on the
authority of Article 21 of the Civil Code, in relation to Article 2219 (10) thereof —
 ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.24

ART. 2219. Moral damages25 may be recovered in the following and analogous cases:

xxx xxx xxx

(10) Acts and actions refered into article 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The respondent, Eliseo Canilao, as a joint tortfeasor is likewise hereby ordered to respond for the same
damages in a solidary capacity.

Insofar, however, as the private respondent, Segundina Noguera is concerned, no evidence has been shown
that she had connived with Tourist World Service, Inc. in the disconnection and padlocking incidents. She
cannot therefore be held liable as a cotortfeasor.

The Court considers the sums of P25,000.00 as and for moral damages,24 P10,000.00 as exemplary damages,
25 and P5,000.00 as nominal 26 and/or temperate27 damages, to be just, fair, and reasonable under the
circumstances.

WHEREFORE, the Decision promulgated on January 23, 1975 as well as the Resolution issued on July 31,
1975, by the respondent Court of Appeals is hereby REVERSED and SET ASIDE. The private respondent, Tourist
World Service, Inc., and Eliseo Canilao, are ORDERED jointly and severally to indemnify the petitioner, Lina
Sevilla, the sum of 25,00.00 as and for moral damages, the sum of P10,000.00, as and for exemplary damages,
and the sum of P5,000.00, as and for nominal and/or temperate damages.

Costs against said private respondents.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

 Facts:

Petitioner Angelina Francisco was hired by respondent Kasei Corporation during its incorporation stage as
Accountant and Corporate Secretary and later as Liaison Officer. Subsequently she was also designated Acting
Manager until replaced, but was assured by the company that she was still connected as Technical Consultant.
Thereafter, Kasei Corporation reduced petitioner’s salary until it was later withheld despite repeated follow-
ups. Petitioner once again asked for her salary but was informed that she is no longer connected with the
company. Petitioner thus filed an action for constructive dismissal before the Labor Arbiter. Respondent Kasei
Corporation averred that petitioner is not their employee as she performed her work at her own discretion
without their control and supervision. Both the Labor Arbiter and NLRC tribunal found for petitioner. CA
reversed the decision.

Issue:

Whether or not there was employer-employee relationship between the parties.

Ruling: YES.

In certain cases the control test is not sufficient to give a complete picture of the relationship between the
parties, owing to the complexity of such a relationship where several positions have been held by the worker.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s
power to control the employee with respect to the means and methods by which the work is to be
accomplished; and (2) the underlying economic realities of the activity or relationship.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because
she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She
reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal, receiving
check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as
deductions and Social Security contributions. Petitioner’s membership in the SSS as manifested by a copy of
the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of
her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. It is therefore apparent that petitioner is economically
dependent on respondent corporation for her continued employment in the latter’s line of business.

ANGELINA FRANCISCO, Petitioner, versus NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON
ESCUETA, Respondents., G.R. No. 170087, 2006 Aug 31.

FACTS:

1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company.
She was also designated as Liaison Officer to the City of Makati to secure business permits, construction
permits and other licenses for the initial operation of the company.

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents;
neither did she attend any board meeting nor required to do so. She never prepared any legal document and
never represented the company as its Corporate Secretary. 1996, petitioner was designated Acting Manager.
Petitioner was assigned to handle recruitment of all employees and perform management administration
functions; represent the company in all dealings with government agencies, especially with the BIR, SSS and in
the city government of Makati; and to administer all other matters pertaining to the operation of Kasei
Restaurant which is owned and operated by Kasei Corporation.

January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei Corporation reduced
her salary, she was not paid her mid-year bonus allegedly because the company was not earning well. On
October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well. Eventually she was informed
that she is no longer connected with the company.

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive
dismissal before the labor arbiter. Private respondents averred that petitioner is not an employee of Kasei
Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting
matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work
at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record
and she came to the office any time she wanted and that her services were only temporary in nature and
dependent on the needs of the corporation.

The Labor Arbiter found that petitioner was illegally dismissed, NLRC affirmed with modification the Decision
of the Labor Arbiter. On appeal, CA reversed the NLRC decision. CA denied petitioner’s MR, hence, the present
recourse.

ISSUES:

WON there was an employer-employee relationship between petitioner and private respondent; and if in the
affirmative,

Whether petitioner was illegally dismissed.

RULING:

Generally, courts have relied on the so-called right of control test where the person for whom the services
are performed reserves a right to control not only the end to be achieved but also the means to be used in
reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence
of an employer-employee relationship.

There are instances when, aside from the employer’s power to control the employee, economic realities of
the employment relations help provide a comprehensive analysis of the true classification of the individual,
whether as employee, independent contractor, corporate officer or some other capacity.

It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to control; and (2) the
economic realities of the activity or relationship.

The control test means that there is an employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end achieved but also the manner and means
used to achieve that end.

There has to be analysis of the totality of economic circumstances of the worker. Thus, the determination of
the relationship between employer and employee depends upon the circumstances of the whole economic
activity, such as: (1) the extent to which the services performed are an integral part of the employer’s
business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of
control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative,
skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the degree of
dependency of the worker upon the employer for his continued employment in that line of business. The
proper standard of economic dependence is whether the worker is dependent on the alleged employer for his
continued employment in that line of business

By applying the control test, it can be said that petitioner is an employee of Kasei Corporation because she
was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She
reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical
Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is,
rendering accounting and tax services to the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement. Respondent corporation had the power to control petitioner with the means
and methods by which the work is to be accomplished.

Under the economic reality test, the petitioner can also be said to be an employee of respondent corporation
because she had served the company for 6 yrs. before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions from. When petitioner was designated General Manager, respondent corporation made a report
to the SSS. Petitioner’s membership in the SSS evinces the existence of an employer-employee relationship
between petitioner and respondent corporation. The coverage of Social Security Law is predicated on the
existence of an employer-employee relationship.

The corporation constructively dismissed petitioner when it reduced her. This amounts to an illegal
termination of employment, where the petitioner is entitled to full backwages

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive
dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment
becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or
when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.
Petition is GRANTED.

EN BANC

[G.R. No. L-8967. May 31, 1956.]

 ANASTACIO VIAÑA, Petitioner, vs. ALEJO AL-LAGADAN and FILOMENA PIGA, Respondents.

DECISION

CONCEPCION, J.:

Petitioner Anastacio Viaña owned the fishing sailboat “Magkapatid”, which, in the night of September 3,
1948, sunk in the waters between the province of Bataan and the island of Corregidor, as a consequence of a
collision with the USS “TINGLES”, a vessel of the U.S. Navy. Inasmuch as Alejandro Al-Lagadan, a member of
the crew of the “Magkapatid”, disappeared with the craft, his parents, Respondent Alejo Al-Lagadan and
Filomena Piga, filed the corresponding claim for compensation under Act No. 3428. After appropriate
proceedings, a Referee of the Workmen’s Compensation Commission rendered a decision, dated February 23,
1953:chanroblesvirtuallawlibrary

“1. Ordering Mr. Anastacio Viaña to pay the above-named claimants through the Workmen’s Compensation
Commission, Manila, the sum of P1,560 in lump sum with interest at 6 per cent from September 3, 1948 until
fully paid; chan roblesvirtualawlibraryand.

“To pay the sum of P16 to the Workmen’s Compensation Commission as costs.”

Said decision was, on petition for review filed by Viaña, affirmed by the Workmen’s Compensation
Commissioner, on or about October 22, 1954, “with additional fee of P5.00”. Said Commissioner, having
subsequently denied a reconsideration of this action, Viaña has brought the matter to us, for review by
certiorari, upon the ground that this case does not fall within the purview of Act No. 3428, because the gross
income of his business for the year 1947 was allegedly less than P10,000, and because Alejandro Al-Lagadan
was, at the time of his death, his (Petitioner’s) industrial partner, not his employee.

The first ground is untenable, Petitioner not having invoked it before the rendition of the Referee’s decision
on February 23, 1953. The objection to the application of Act No. 3428, upon said ground, was made for the
first time when Petitioner sought a review of said decision by the Workmen’s Compensation Commissioner.
The non- applicability of said Act to employers whose gross income does not reach P20,000 is, however, a
matter of defense, which cannot be availed of unless pleaded in the employer’s answer to the claim for
compensation filed by the employee or his heirs. Petitioner herein having failed to do so, said defense may not
now be entertained (Rolan vs. Perez, 63 Phil., 80, 85-86).

As regards the second ground, Petitioner maintains, contrary to the finding of the Referee and said
Commissioner, that the deceased was his industrial partner, not employee. In this connection, it is alleged in
paragraph (6) of the petition:chanroblesvirtuallawlibrary

“That the practice observed then and now in engaging the services of crewmen of sailboats plying between
Mindoro and Manila is on a partnership basis, to wit:chanroblesvirtuallawlibrary that the owner of the vessel,
on one hand receives one-half of the earnings of the sailboat after deducting the expenses for the
maintenance of the crew, the other half is divided pro rata among the members of the crew, the ‘patron’ or
captain receiving four parts, the ‘piloto’ or next in command three parts, the wheelsman or ‘timonel’ 1 1/2
parts and the rest of the members of the crew one part each, as per Annex ‘B’ hereof.”

It appears that, before rendering his aforementioned decision, the Referee requested Mr. Manuel O.
Morente, an attorney of the Workmen’s Compensation Commission, “to look into and inquire and determine
the method of and the basis of engaging the services of crewmen for sailboats (batel) of twenty (20) tons or
more plying between Manila and Mariveles and moored along Manila North Harbor”, and that, thereafter, said
Atty. Morente reported:chanroblesvirtuallawlibrary

“The basis of engaging the services of crewmen of a batel is determined in accordance with the contract
executed between the owner and the patron. The contract commonly followed is on a share basis after
deducting all the expenses incurred on the voyage. One half goes to the owner of the batel and the other half
goes to the patron and the members of the crew and divided among themselves on a share basis also in
accordance with their agreement with the patron getting the lion’s share. The hiring of the crew is done by the
patron himself. Usually, when a patron enters into a contract with the owner of the batel, he has a crew ready
with him.” (Italics supplied.)

In sustaining the Referee’s finding to the effect that the deceased was an employee of Viaña, the Workmen’s
Compensation Commissioner said:chanroblesvirtuallawlibrary

“The trial referee found that there was an employer-employee relation between the Respondent and the
deceased, Alejandro Al-Lagadan, and the share which the deceased received at the end of each trip was in the
nature of ‘wages’ which is defined under section 39 of the Compensation Act. This is so because such share
could be reckoned in terms of money. In other words, there existed the relation of employer and employee
between the Respondent and Alejandro Al-Lagadan at the time of the latter’s death.
 “We believe that the trial referee did not err in finding the deceased an employee of the Respondent. We
cite the following cases which illustrate the point at issue:chanroblesvirtuallawlibrary

‘The officers and crews of whaling and other fishing vessels who are to receive certain proportions of
produce of the voyage in lieu of wages; chan roblesvirtualawlibrary(Rice vs. Austin, 17 Mass. 206; chan
roblesvirtualawlibrary2Y & C. 61); chan roblesvirtualawlibraryCaptains of merchant ships who, instead of
wages, receive shares in the profits of the adventure; chan roblesvirtualawlibrary(4 Maule & C. 240); chan
roblesvirtualawlibraryor who take vessels under an agreement to pay certain charges and receive a share of
the earnings; chan roblesvirtualawlibrary(Tagard vs. Loring, 16 Mass. 336, 8 Am. Dec. 140; chan
roblesvirtualawlibraryWinsor vs. Cutts, 7 Greenl. Me. 261) have generally been held not to be partners with
the Respondent, and the like. Running a steamboat on shares does not make the owners partners in respect to
the vessel (The Daniel Koine, 35 Fed. 785); chan roblesvirtualawlibraryso of an agreement between two parties
to farm on shares; chan roblesvirtualawlibrary(Hooloway vs. Brinkley, 42 Ga. 226); chan
roblesvirtualawlibraryA seaman who is to receive pay in proportion to the amount of fish caught is not a
partner; chan roblesvirtualawlibrary(Holdren vs. French, 68 Me. 241); chan roblesvirtualawlibrarysharing
profits in lieu of wages is not a partnership. There is no true contribution; chan
roblesvirtualawlibrary(Crawford vs. Austin, 34 Md. 49; chan roblesvirtualawlibraryWhitehill vs. Shickle, 43 Mo.
538; chan roblesvirtualawlibrarySankey vs. Iron Works, 44 Ga. 228.)’“ (Italics supplied.)

In other words, in the opinion of the Referee, as well as of said Commissioner, the mere fact that Alejandro’s
share in the understanding “could be reckoned in terms of money”, sufficed to characterize him as an
employee of Viaña. We do not share this view. Neither can we accept, however, Petitioner’s theory to the
effect that the deceased was his partner, not an employee, simply because he (the deceased) shared in the
profits, not in the losses. In determining the existence of employer-employee relationship, the following
elements are generally considered, namely:chanroblesvirtuallawlibrary (1) the selection and engagement of
the employee; chan roblesvirtualawlibrary(2) the payment of wages; chan roblesvirtualawlibrary(3) the power
of dismissal; chan roblesvirtualawlibraryand (4) the power to control the employees’ conduct — although the
latter is the most important element (35 Am. Jur. 445). Assuming that the share received by the deceased
could partake of the nature of wages — on which we need not, and do not, express our view — and that the
second element, therefore, exists in the case at bar, the record does not contain any specific data regarding
the third and fourth elements.

With respect to the first element, the facts before us are insufficient to warrant a reasonable conclusion, one
way or the other. On the one hand, Atty. Morente said, in his aforementioned report, that “the contract
commonly followed is on a share basis cralaw The hiring of a crew is done by the patron himself. Usually, when
a patron enters into a contract with the owner of the batel, he has a crew ready with him”. This statement
suggests that the members of the crew are chosen by the patron, seemingly, upon his sole responsibility and
authority. It is noteworthy, however, that said report referred to a practice commonly and “usually” observed
in a given place. The record is silent on whether such practice had been followed in the case under
consideration. More important still, the language used in said report may be construed as intimating, not only
that the “patron” selects and engages the crew, but, also, that the members thereof are subject to his control
and may be dismissed by him. To put it differently, the literal import of said report is open to the conclusion
that the crew has a contractual relation, not with the owner of the vessel, but with the patron, and that the
latter, not the former, is either their employer or their partner.

Upon the other hand, the very allegations of the petition show otherwise, for Petitioner explicitly averred
therein that the deceased Alejandro Al-Lagadan was his “industrial partner”. This implies that a contract of
partnership existed between them and that, accordingly, if the crew was selected and engaged by the
“patron”, the latter did so merely as agent or representative of Petitioner herein. Again, if Petitioner were a
partner of the crew members, then neither the former nor the patron could control or dismiss the latter.

In the interest of justice and equity, and considering that a decision on the merits of the issue before us may
establish an important precedent, it would be better to remand the case to the Workmen’s Compensation
Commission for further evidence and findings on the following questions:chanroblesvirtuallawlibrary (1) who
selected the crew of the “Magkapatid” and engaged their services; chan roblesvirtualawlibrary(2) if selected
and engaged by the “patron”, did the latter act in his own name and for his own account, or on behalf and for
the account of Viaña; chan roblesvirtualawlibrary(3) could Viaña have refused to accept any of the crew
members chosen and engaged by the “patron”; chan roblesvirtualawlibrary(4) did Petitioner have authority to
determine the time when, the place where and/or the manner or conditions in or under which the crew would
work; chan roblesvirtualawlibraryand (5) who could dismiss its members.

Wherefore, let the case be remanded to the Workmen’s Compensation Commission, for further proceedings
in conformity with this decision, without special pronouncement as to costs. SO ORDERED.

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-48645 January 7, 1987

 "BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO, PROSPERO
TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO
PARINAS, NORBERTO GALANG, JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L.
EGUIA, CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B. MATIAR, ET AL.,
petitioners,

vs.

HON. RONALDO B. ZAMORA, PRESIDENTIAL ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON.
AMADO G. INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO OLIVES, ENRIQUE
CAMAHORT, FEDERICO OÑATE, ERNESTO VILLANUEVA, ANTONIO BOCALING and GODOFREDO CUETO,
respondents.

Armando V. Ampil for petitioners.

Siguion Reyna, Montecillo and Ongsiako Law Office for private respondents.

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship exists between
petitioners-members of the "Brotherhood Labor Unit Movement of the Philippines" (BLUM) and respondent
San Miguel Corporation, is the main issue in this petition. The disputed decision of public respondent Ronaldo
Zamora, Presidential Assistant for legal Affairs, contains a brief summary of the facts involved:

1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now
defunct Court of Industrial Relations, charging San Miguel Corporation, and the following officers: Enrique
Camahort, Federico Ofiate Feliciano Arceo, Melencio Eugenia Jr., Ernesto Villanueva, Antonio Bocaling and
Godofredo Cueto of unfair labor practice as set forth in Section 4 (a), sub-sections (1) and (4) of Republic Act
No. 875 and of Legal dismissal. It was alleged that respondents ordered the individual complainants to
disaffiliate from the complainant union; and that management dismissed the individual complainants when
they insisted on their union membership.

On their part, respondents moved for the dismissal of the complaint on the grounds that the complainants
are not and have never been employees of respondent company but employees of the independent
contractor; that respondent company has never had control over the means and methods followed by the
independent contractor who enjoyed full authority to hire and control said employees; and that the individual
complainants are barred by estoppel from asserting that they are employees of respondent company.

While pending with the Court of Industrial Relations CIR pleadings and testimonial and documentary
evidences were duly presented, although the actual hearing was delayed by several postponements. The
dispute was taken over by the National Labor Relations Commission (NLRC) with the decreed abolition of the
CIR and the hearing of the case intransferably commenced on September 8, 1975.
 On February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred in by the
NLRC in a decision dated June 28, 1976. The amount of backwages awarded, however, was reduced by NLRC to
the equivalent of one (1) year salary.

On appeal, the Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence of
an employer-mployee relationship as borne out by the records of the case. ...

The petitioners strongly argue that there exists an employer-employee relationship between them and the
respondent company and that they were dismissed for unionism, an act constituting unfair labor practice "for
which respondents must be made to answer."

Unrebutted evidence and testimony on record establish that the petitioners are workers who have been
employed at the San Miguel Parola Glass Factory since 1961, averaging about seven (7) years of service at the
time of their termination. They worked as "cargadores" or "pahinante" at the SMC Plant loading, unloading,
piling or palleting empty bottles and woosen shells to and from company trucks and warehouses. At times,
they accompanied the company trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were issued gate passes
signed by Camahort and were provided by the respondent company with the tools, equipment and
paraphernalia used in the loading, unloading, piling and hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-officer-in-charge. In
turn, the assistant informs the warehousemen and checkers regarding the same. The latter, thereafter, relays
said orders to the capatazes or group leaders who then give orders to the workers as to where, when and what
to load, unload, pile, pallet or clean.

Work in the glass factory was neither regular nor continuous, depending wholly on the volume of bottles
manufactured to be loaded and unloaded, as well as the business activity of the company. Work did not
necessarily mean a full eight (8) hour day for the petitioners. However, work,at times, exceeded the eight (8)
hour day and necessitated work on Sundays and holidays. For this, they were neither paid overtime nor
compensation for work on Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the number of cartons
and wooden shells they were able to load, unload, or pile. The group leader notes down the number or volume
of work that each individual worker has accomplished. This is then made the basis of a report or statement
which is compared with the notes of the checker and warehousemen as to whether or not they tally. Final
approval of report is by officer-in-charge Camahort. The pay check is given to the group leaders for
encashment, distribution, and payment to the petitioners in accordance with payrolls prepared by said
leaders. From the total earnings of the group, the group leader gets a participation or share of ten (10%)
percent plus an additional amount from the earnings of each individual.

The petitioners worked exclusive at the SMC plant, never having been assigned to other companies or
departments of SMC plant, even when the volume of work was at its minimum. When any of the glass
furnaces suffered a breakdown, making a shutdown necessary, the petitioners work was temporarily
suspended. Thereafter, the petitioners would return to work at the glass plant.

Sometime in January, 1969, the petitioner workers — numbering one hundred and forty (140) organized and
affiliated themselves with the petitioner union and engaged in union activities. Believing themselves entitled
to overtime and holiday pay, the petitioners pressed management, airing other grievances such as being paid
below the minimum wage law, inhuman treatment, being forced to borrow at usurious rates of interest and to
buy raffle tickets, coerced by withholding their salaries, and salary deductions made without their consent.
However, their gripes and grievances were not heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor Relations in
connection with the dismissal of some of its members who were allegedly castigated for their union
membership and warned that should they persist in continuing with their union activities they would be
dismissed from their jobs. Several conciliation conferences were scheduled in order to thresh out their
differences, On February 12, 1969, union member Rogelio Dipad was dismissed from work. At the scheduled
conference on February 19, 1969, the complainant union through its officers headed by National President
Artemio Portugal Sr., presented a letter to the respondent company containing proposals and/or labor
demands together with a request for recognition and collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the workers are not their employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter, denied entrance to
respondent company's glass factory despite their regularly reporting for work. A complaint for illegal dismissal
and unfair labor practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had begun.

The question of 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. (Mafinco Trading Corporation v. Ople, 70
SCRA 139).

In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer's power to control the employee with respect to the means and
methods by which the work is to be accomplished. It. is the called "control test" that is the most important
element (Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924; Mafinco Trading
Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-employee
relationship between petitioner workers and respondent San Miguel Corporation. The respondent asserts that
the petitioners are employees of the Guaranteed Labor Contractor, an independent labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally established by the following criteria:
"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 a specified
piece 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 the
premises tools, appliances, materials and labor; and the mode, manner and terms of payment" (56 CJS Master
and Servant, Sec. 3(2), 46; See also 27 AM. Jur. Independent Contractor, Sec. 5, 485 and Annex 75 ALR
7260727)

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance of a specified
piece of work, the nature and extent of the work and the term and duration of the relationship. The records
fail to show that a large commercial outfit, such as the San Miguel Corporation, entered into mere oral
agreements of employment or labor contracting where the same would involve considerable expenses and
dealings with a large number of workers over a long period of time. Despite respondent company's allegations
not an iota of evidence was offered to prove the same or its particulars. Such failure makes respondent SMC's
stand subject to serious doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had worked
continuously and exclusively for the respondent company's shipping and warehousing department.
Considering the length of time that the petitioners have worked with the respondent company, there is
justification to conclude that they were engaged to perform activities necessary or desirable in the usual
business or trade of the respondent, and the petitioners are, therefore regular employees (Phil. Fishing Boat
Officers and Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing
Corporation v. National Labor Relations Commission, 127 SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor Relations Commission (supra):

... [T]he employer-employee relationship between the parties herein is not coterminous with each loading
and unloading job. As earlier shown, respondents are engaged in the business of fishing. For this purpose, they
have a fleet of fishing vessels. Under this situation, respondents' activity of catching fish is a continuous
process and could hardly be considered as seasonal in nature. So that the activities performed by herein
complainants, i.e. unloading the catch of tuna fish from respondents' vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of respondents. This circumstance makes the
employment of complainants a regular one, in the sense that it does not depend on any specific project or
seasonable activity. (NLRC Decision, p. 94, Rollo).lwphl@itç

so as it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant for repairs, the
petitioners, thereafter, promptly returned to their jobs, never having been replaced, or assigned elsewhere
until the present controversy arose. The term of the petitioners' employment appears indefinite. The
continuity and habituality of petitioners' work bolsters their claim of employee status vis-a-vis respondent
company,

Even under the assumption that a contract of employment had indeed been executed between respondent
SMC and the alleged labor contractor, respondent's case will, nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:

Job contracting. — There is job contracting permissible under the Code if the following conditions are met:

(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and
 (2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary in the conduct of his
business.

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor investment to
qualify as an independent contractor under the law. The premises, tools, equipment and paraphernalia used
by the petitioners in their jobs are admittedly all supplied by respondent company. It is only the manpower or
labor force which the alleged contractors supply, suggesting the existence of a "labor only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III, Implementing Rules and
Regulations of the Labor Code). In fact, even the alleged contractor's office, which consists of a space at
respondent company's warehouse, table, chair, typewriter and cabinet, are provided for by respondent SMC. It
is therefore clear that the alleged contractors have no capital outlay involved in the conduct of its business, in
the maintenance thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the actuality of an employer-employee
relationship whether between respondent company and petitioners or between the alleged independent
contractor and petitioners. It is important to emphasize that in a truly independent contractor-contractee
relationship, the fees are paid directly to the manpower agency in lump sum without indicating or implying
that the basis of such lump sum is the salary per worker multiplied by the number of workers assigned to the
company. This is the rule in Social Security System v. Court of Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum representing only the salaries
the workers were entitled to, arrived at by adding the salaries of each worker which depend on the volume of
work they. had accomplished individually. These are based on payrolls, reports or statements prepared by the
workers' group leader, warehousemen and checkers, where they note down the number of cartons, wooden
shells and bottles each worker was able to load, unload, pile or pallet and see whether they tally. The amount
paid by respondent company to the alleged independent contractor considers no business expenses or capital
outlay of the latter. Nor is the profit or gain of the alleged contractor in the conduct of its business provided
for as an amount over and above the workers' wages. Instead, the alleged contractor receives a percentage
from the total earnings of all the workers plus an additional amount corresponding to a percentage of the
earnings of each individual worker, which, perhaps, accounts for the petitioners' charge of unauthorized
deductions from their salaries by the respondents.

Anent the argument that the petitioners are not employees as they worked on piece basis, we merely have
to cite our rulings in Dy Keh Beng v. International Labor and Marine Union of the Philippines (90 SCRA 161), as
follows:

"[C]ircumstances must be construed to determine indeed if payment by the piece is just a method of
compensation and does not define the essence of the relation. Units of time . . . and units of work are in
establishments like respondent (sic) just yardsticks whereby to determine rate of compensation, to be applied
whenever agreed upon. We cannot construe payment by the piece where work is done in such an
establishment so as to put the worker completely at liberty to turn him out and take in another at pleasure."

Article 106 of the Labor Code provides the legal effect of a labor only contracting scheme, to wit:

... 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.
 Firmly establishing respondent SMC's role as employer is the control exercised by it over the petitioners that
is, control in the means and methods/manner by which petitioners are to go about their work, as well as in
disciplinary measures imposed by it.

Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as to the means and
manner of performing the same is practically nil. For, how many ways are there to load and unload bottles and
wooden shells? The mere concern of both respondent SMC and the alleged contractor is that the job of having
the bottles and wooden shells brought to and from the warehouse be done. More evident and pronounced is
respondent company's right to control in the discipline of petitioners. Documentary evidence presented by the
petitioners establish respondent SMC's right to impose disciplinary measures for violations or infractions of its
rules and regulations as well as its right to recommend transfers and dismissals of the piece workers. The inter-
office memoranda submitted in evidence prove the company's control over the petitioners. That respondent
SMC has the power to recommend penalties or dismissal of the piece workers, even as to Abner Bungay who is
alleged by SMC to be a representative of the alleged labor contractor, is the strongest indication of respondent
company's right of control over the petitioners as direct employer. There is no evidence to show that the
alleged labor contractor had such right of control or much less had been there to supervise or deal with the
petitioners.

The petitioners were dismissed allegedly because of the shutdown of the glass manufacturing plant.
Respondent company would have us believe that this was a case of retrenchment due to the closure or
cessation of operations of the establishment or undertaking. But such is not the case here. The respondent's
shutdown was merely temporary, one of its furnaces needing repair. Operations continued after such repairs,
but the petitioners had already been refused entry to the premises and dismissed from respondent's service.
New workers manned their positions. It is apparent that the closure of respondent's warehouse was merely a
ploy to get rid of the petitioners, who were then agitating the respondent company for benefits, reforms and
collective bargaining as a union. There is no showing that petitioners had been remiss in their obligations and
inefficient in their jobs to warrant their separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain with the petitioners, it is clear
that the respondent company had an existing collective bargaining agreement with the IBM union which is the
recognized collective bargaining representative at the respondent's glass plant.

There being a recognized bargaining representative of all employees at the company's glass plant, the
petitioners cannot merely form a union and demand bargaining. The Labor Code provides the proper
procedure for the recognition of unions as sole bargaining representatives. This must be followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel Corporation is hereby
ordered to REINSTATE petitioners, with three (3) years backwages. However, where reinstatement is no longer
possible, the respondent SMC is ordered to pay the petitioners separation pay equivalent to one (1) month pay
for every year of service.

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

 The Lawphil Project - Arellano Law Foundation

Brotherhood Labor Unity Movement of the Phil. v. Zamora

Facts:

The petitioners are workers who have been employed at the San Miguel Parola Glass Factory as “pahinantes”
or “kargadors” for almost seven years. They worked exclusively at the SMC plant, never having been assigned
to other companies or departments of San Miguel Corp, even when the volume of work was at its minimum.
Their work was neither regular nor continuous, depending on the volume of bottles to be loaded and
unloaded, as well as the business activity of the company. However, work exceeded the eight-hour day and
sometimes, necessitated work on Sundays and holidays. -for this, they were neither paid overtime nor
compensation.

Sometime in 1969, the workers organized and affiliated themselves with Brotherhood Labor Unity
Movement (BLUM). They wanted to be paid to overtime and holiday pay. They pressed the SMC management
to hear their grievances. BLUM filed a notice of strike with the Bureau of Labor Relations in connection with
the dismissal of some of its members. San Miguel refused to bargain with the union alleging that the workers
are not their employees but the employees of an independent labor contracting firm, Guaranteed Labor
Contractor.

The workers were then dismissed from their jobs and denied entrance to the glass factory despite their
regularly reporting for work. A complaint was filed for illegal dismissal and unfair labor practices.

Issue:

Whether or not there was employer-employee (ER-EE)relationship between the workers and San Miguel
Corp.

Held:

YES. In determining if there is an existence of the (ER-EE) relationship, the four-fold test was used by the
Supreme Court. These are:

· The selection and engagement of the employee

· Payment of wages

· Power of dismissal

· Control Test- the employer’s power to control the employee with respect to the means and methods by
which work is to be accomplished
 In the case, the records fail to show that San Miguel entered into mere oral agreements of employment with
the workers. Considering the length of time that the petitioners have worked with the company, there is
justification to conclude that they were engaged to perform activities necessary in the usual business or trade.
Despite past shutdowns of the glass plant, the workers promptly returned to their jobs. The term of the
petitioner’s employment appears indefinite and the continuity and habituality of the petitioner’s work bolsters
the claim of an employee status.

As for the payment of the workers’ wages, the contention that the independent contractors were paid a
lump sum representing only the salaries the workers where entitled to have no merit. The amount paid by San
Miguel to the contracting firm is no business expense or capital outlay of the latter. What the contractor
receives is a percentage from the total earnings of all the workers plus an additional amount from the earnings
of each individual worker.

The power of dismissal by the employer was evident when the petitioners had already been refused entry to
the premises. It is apparent that the closure of the warehouse was a ploy to get rid of the petitioners, who
were then agitating the company for reforms and benefits.

The inter-office memoranda submitted in evidence prove the company’s control over the workers. That San
Miguel has the power to recommend penalties or dismissal is the strongest indication of the company’s right
of control over the workers as direct employer.

*SC ordered San Miguel to reinstate the petitioners with 3 years backwages.