Labor Standards Employer-Employee Relationship
G.R. No. 172101 November 23, 2007
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY
COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners,
vs.
ASIAPRO COOPERATIVE, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to annul and set aside the Decision 1 and
Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006
and 20 March 2006, respectively, which annulled and set aside the Orders of the
Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February
20043 and 16 September 2004,4 respectively, thereby dismissing the petition-
complaint dated 12 June 2003 filed by herein petitioner Social Security System
(SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-
judicial body authorized by law to resolve disputes arising under Republic Act No.
1161, as amended by Republic Act No. 8282. 5 Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other
hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose
cooperative created pursuant to Republic Act No. 6938 6 and duly registered with the
Cooperative Development Authority (CDA) on 23 November 1999 with Registration
Certificate No. 0-623-2460.7
The antecedents of this case are as follows:
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.8 Its primary objectives are to provide savings
and credit facilities and to develop other livelihood services for its owners-members.
In the discharge of the aforesaid primary objectives, respondent cooperative entered
into several Service Contracts9 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 surplus10 which the respondent cooperative earns from different
areas of trade it engages in, such as the income derived from the said Service
(Article 82, Labor Code)
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 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 contributions of the said
owners-members were equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for
Mindanao Division, Atty. Eddie A. Jara, sent a letter 11 to the respondent cooperative,
addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma,
informing the latter that based on the Service Contracts it exEecuted with Stanfilco,
respondent cooperative is actually a manpower contractor supplying employees to
Stanfilco and for that reason, it is an employer of its owners-members working with
Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as
an employer and make the corresponding report and remittance of premium
contributions in accordance with the Social Security Law of 1997. On 9 October
2002,12 respondent cooperative, through its counsel, sent a reply to petitioner SSS’s
letter asserting that it is not an employer because its owners-members are the
cooperative itself; hence, it cannot be its own employer. Again, on 21 October
2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to
register as an employer and report its owners-members as employees for compulsory
coverage with the petitioner SSS. Respondent cooperative continuously ignored the
demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner
SSC against the respondent cooperative and Stanfilco praying that the respondent
cooperative or, in the alternative, Stanfilco be directed to register as an employer and
to report respondent cooperative’s owners-members as covered employees under the
compulsory coverage of SSS and to remit the necessary contributions in accordance
with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-
15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging
that no employer-employee relationship exists between it and its owners-members,
thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco,
on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss
filed by the respondent cooperative. The respondent cooperative moved for the
 Labor Standards Employer-Employee Relationship
reconsideration of the said Order, but it was likewise denied in another Order issued
by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for
Extension of Time to File a Petition for Review before the Court of Appeals.
Subsequently, respondent cooperative filed a Manifestation stating that it was no
longer filing a Petition for Review. In its place, respondent cooperative filed a
Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No.
87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner]
SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess
of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over
the petition a quo, considering that it failed to first resolve the issue of the existence
of an employer-employee relationship between [respondent] cooperative and its
owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under
the SSS Law with respect to coverage, benefits, contributions, and related matters, it
is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases
where there is no dispute as to the existence of an employer-employee relationship.
C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-
employee relationship raised in [respondent’s] Motion to Dismiss can be
preliminarily resolved through summary hearings prior to the hearing on the merits.
However, any inquiry beyond a preliminary determination, as what [petitioner SSC]
wants to accomplish, would be to encroach on the jurisdiction of the National Labor
Relations Commission [NLRC], which is the more competent body clothed with
power to resolve issues relating to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the
petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor Law but is
a multi-purpose cooperative created pursuant to Republic Act No. 6938 and
composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent] cooperative are
derived from their Membership Agreements, the Cooperatives By-Laws, and
Republic Act No. 6938, and not from any contract of employment or from the Labor
Laws. Moreover, said owners-members enjoy rights that are not consistent with
(Article 82, Labor Code)
being mere employees of a company, such as the right to participate and vote in
decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-members of
[respondent] cooperative are not paid any compensation income. 15 (Emphasis
supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition
filed by the respondent cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February
2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is
entered DISMISSING the petition-complaint dated [12 June 2003] of [herein
petitioner] Social Security System.16
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but
it was denied by the appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of
Appeals erred in not finding that the SSC has jurisdiction over the subject matter and
it has a valid basis in denying respondent’s Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by
the [petitioner SSS] under R.A. No. 8282.
II. Respondent [cooperative] is estopped from questioning the jurisdiction of
petitioner SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to
[D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of discretion in denying
respondent [cooperative’s] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a question of fact where
presentation of evidence is necessary.
V. There is an employer-employee relationship between [respondent cooperative]
and its [owners-members].
 Labor Standards Employer-Employee Relationship
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS as it involved an issue of whether or not a worker is entitled to
compulsory coverage under the SSS Law. Petitioners avow that Section 5 of
Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers
upon petitioner SSC the power to settle disputes on compulsory coverage, benefits,
contributions and penalties thereon or any other matter related thereto. Likewise,
Section 9 of the same law clearly provides that SSS coverage is compulsory upon all
employees. Thus, when petitioner SSS filed a petition-complaint against the
respondent cooperative and Stanfilco before the petitioner SSC for the compulsory
coverage of respondent cooperative’s owners-members as well as for collection of
unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid
petition-complaint was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to
determine the existence of an employer-employee relationship between the
respondent cooperative and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-complaint.
Considering that the principal relief sought in the said petition-complaint has to be
resolved by reference to the Social Security Law and not to the Labor Code or other
labor relations statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperative’s Motion to
Dismiss grounded on the alleged lack of employer-employee relationship does not
constitute grave abuse of discretion on the part of petitioner SSC because the latter
has the authority and power to deny the same. Moreover, the existence of an
employer-employee relationship is a question of fact where presentation of evidence
is necessary. Petitioners also maintain that the respondent cooperative is already
estopped from assailing the jurisdiction of the petitioner SSC because it has already
filed its Answer before it, thus, respondent cooperative has already submitted itself
to the jurisdiction of the petitioner SSC.
Finally, petitioners contend that there is an employer-employee relationship between
the respondent cooperative and its owners-members. The respondent cooperative is
the employer of its owners-members considering that it undertook to provide
services to Stanfilco, the performance of which is under the full and sole control of
the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them. The
persons of the employer and the employee are merged in the owners-members
themselves. Likewise, respondent cooperative’s owners-members even requested the
respondent cooperative to register them with the petitioner SSS as self-employed
(Article 82, Labor Code)
individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint
filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that
petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction
over the petition-complaint without determining first if there was an employer-
employee relationship between the respondent cooperative and its owners-members.
Respondent cooperative claims that the question of whether an employer-employee
relationship exists between it and its owners-members is a legal and not a factual
issue as the facts are undisputed and need only to be interpreted by the applicable
law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from
assailing the jurisdiction of petitioner SSC simply because it filed an Answer with
Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first
instance and where the only relief being sought is the dismissal of the petition-
complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed
before it by petitioner SSS against the respondent cooperative.
II. Whether the respondent cooperative is estopped from assailing the jurisdiction of
petitioner SSC since it had already filed an Answer with Motion to Dismiss before
the said body.
Petitioner SSC’s jurisdiction is clearly stated in Section 5 of Republic Act No. 8282
as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:
SEC. 5. Settlement of Disputes. – (a) Any dispute arising under this Act with respect
to coverage, benefits, contributions and penalties thereon or any other matter related
thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. – Any dispute arising under the Social Security Act with
respect to coverage, entitlement of benefits, collection and settlement of
contributions and penalties thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its President, Manager or
 Labor Standards Employer-Employee Relationship
Officer-in-charge of the Department/Branch/Representative Office concerned had
first taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory
coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is
important to note, though, that the mandatory coverage under the SSS Law is
premised on the existence of an employer-employee relationship17 except in cases of
compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the
Answer or in the Motion to Dismiss, determine which court has jurisdiction over an
action; otherwise, the question of jurisdiction would depend almost entirely upon the
defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the
court, it remains with it until the full termination of the case. 19 The said principle
may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner
SSC against the respondent cooperative and Stanfilco alleges that the owners-
members of the respondent cooperative are subject to the compulsory coverage of
the SSS because they are employees of the respondent cooperative. Consequently,
the respondent cooperative being the employer of its owners-members must register
as employer and report its owners-members as covered members of the SSS and
remit the necessary premium contributions in accordance with the Social Security
Law of 1997. Accordingly, based on the aforesaid allegations in the petition-
complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction.
Although the Answer with Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-
employee relationship between itself and its owners-members, the same is not
enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint
filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming
jurisdiction over the petition-complaint of the petitioner SSS.
Nonetheless, since the existence of an employer-employee relationship between the
respondent cooperative and its owners-members was put in issue and considering
that the compulsory coverage of the SSS Law is predicated on the existence of such
relationship, it behooves the petitioner SSC to determine if there is really an
employer-employee relationship that exists between the respondent cooperative and
its owners-members.
The question on the existence of an employer-employee relationship is not within the
exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article
217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the
NLRC provides that:
(Article 82, Labor Code)
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. -
(a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (₱5,000.00) regardless of whether accompanied with
a claim for reinstatement.20
Although the aforesaid provision speaks merely of claims for Social Security, it
would necessarily include issues on the coverage thereof, because claims are
undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining the
coverage of the Social Security System is explicitly excluded from the jurisdiction of
the NLRC and falls within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS
involved the issue of compulsory coverage of the owners-members of the respondent
cooperative, this Court agrees with the petitioner SSC when it declared in its Order
dated 17 February 2004 that as an incident to the issue of compulsory coverage, it
may inquire into the presence or absence of an employer-employee relationship
without need of waiting for a prior pronouncement or submitting the issue to the
NLRC for prior determination. Since both the petitioner SSC and the NLRC are
independent bodies and their jurisdiction are well-defined by the separate statutes
creating them, petitioner SSC has the authority to inquire into the relationship
existing between the worker and the person or entity to whom he renders service to
determine if the employment, indeed, is one that is excepted by the Social Security
Law of 1997 from compulsory coverage.21
Even before the petitioner SSC could make a determination of the existence of an
employer-employee relationship, however, the respondent cooperative already
elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court
of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner
SSC became a party to the said Petition for Certiorari pursuant to Section 5(b) 22 of
Republic Act No. 8282. The appellate court ruled in favor of the respondent
cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-
complaint filed before it because there was no employer-employee relationship
between the respondent cooperative and its owners-members. Resultantly, the
petitioners SSS and SSC, representing the Republic of the Philippines, filed a
Petition for Review before this Court.
 Labor Standards Employer-Employee Relationship
Although as a rule, in the exercise of the Supreme Court’s power of review, the
Court is not a trier of facts and the findings of fact of the Court of Appeals are
conclusive and binding on the Court,23 said rule is not without exceptions. There are
several recognized exceptions24 in which factual issues may be resolved by this
Court. One of these exceptions finds application in this present case which is, when
the findings of fact are conflicting. There are, indeed, conflicting findings espoused
by the petitioner SSC and the appellate court relative to the existence of employer-
employee relationship between the respondent cooperative and its owners-members,
which necessitates a departure from the oft-repeated rule that factual issues may not
be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the workers; (2) the
payment of wages by whatever means; (3) the power of dismissal; and (4) the power
to control the worker’s conduct, with the latter assuming primacy in the overall
consideration.25 The most important element is the employer’s control of the
employee’s conduct, not only as to the result of the work to be done, but also as to
the means and methods to accomplish.26 The power of control refers to the existence
of the power and not necessarily 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 employer has the right to wield that power. 27 All the aforesaid
elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent
cooperative which has the exclusive discretion in the selection and engagement of
the owners-members as well as its team leaders who will be assigned at
Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered." 29 In this case, the weekly stipends or the so-
called shares in the service surplus given by the respondent cooperative to its
owners-members were in reality wages, as the same were equivalent to an amount
not lower than that prescribed by existing labor laws, rules and regulations, including
the wage order applicable to the area and industry; or the same shall not be lower
than the prevailing rates of wages.30 It cannot be doubted then that those stipends or
shares in the service surplus are indeed wages, because these are given to the
owners-members as compensation in rendering services to respondent cooperative’s
client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts
that it is the respondent cooperative which has the power to investigate, discipline
and remove the owners-members and its team leaders who were rendering services at
Stanfilco.31 Fourth. As earlier opined, of the four elements of the employer-employee
relationship, the "control test" is the most important. In the case at bar, it is the
(Article 82, Labor Code)
respondent cooperative which has the sole control over the manner and means of
performing the services under the Service Contracts with Stanfilco as well as the
means and methods of work.32 Also, the respondent cooperative is solely and entirely
responsible for its owners-members, team leaders and other representatives at
Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee
relationship between the respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and
Stanfilco expressly provide that there shall be no employer-employee relationship
between the respondent cooperative and its owners-members.34 This Court, however,
cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually
exists between the respondent cooperative and its owners-members. The four
elements in the four-fold test for the existence of an employment relationship have
been complied with. The respondent cooperative must not be allowed to deny its
employment relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by law and not by what the
parties say it should be.35
It is settled that the contracting parties may establish such stipulations, clauses, terms
and conditions as they want, and their agreement would have the force of law
between them. However, the agreed terms and conditions must not be contrary to
law, morals, customs, public policy or public order. 36 The Service Contract provision
in question must be struck down for being contrary to law and public policy since it
is apparently being used by the respondent cooperative merely to circumvent the
compulsory coverage of its employees, who are also its owners-members, by the
Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural
Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern,
being run either by persons, partnerships, or corporations. Its owners and/or
members are the ones who run and operate the business while the others are its
employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot
bargain with himself or his co-owners. In the opinion of August 14, 1981 of the
 Labor Standards Employer-Employee Relationship (Article 82, Labor Code)

Solicitor General he correctly opined that employees of cooperatives who are
themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners
of the cooperative.1awp++i1
However, in so far as it involves cooperatives with employees who are not members
or co-owners thereof, certainly such employees are entitled to exercise the rights of
all workers to organization, collective bargaining, negotiations and others as are
enshrined in the Constitution and existing laws of the country.
The situation in the aforesaid case is very much different from the present case. The
declaration made by the Court in the aforesaid case was made in the context of
whether an employee who is also an owner-member of a cooperative can exercise the
right to bargain collectively with the employer who is the cooperative wherein he is
an owner-member. Obviously, an owner-member cannot bargain collectively with
the cooperative of which he is also the owner because an owner cannot bargain with
himself. In the instant case, there is no issue regarding an owner-member’s right to
bargain collectively with the cooperative. The question involved here is whether an
employer-employee relationship can exist between the cooperative and an owner-
member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will
show that it actually recognized that an owner-member of a cooperative can be its
own employee.
In sum, having declared that there is an employer-employee relationship between the
respondent cooperative and its owners-member, we conclude that the petitioner SSC
has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This
being our conclusion, it is no longer necessary to discuss the issue of whether the
respondent cooperative was estopped from assailing the jurisdiction of the petitioner
SSC when it filed its Answer with Motion to Dismiss.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236,
dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and
SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16
September 2004 are hereby REINSTATED. The petitioner SSC is hereby
DIRECTED to continue hearing the petition-complaint filed before it by the
petitioner SSS as regards the compulsory coverage of the respondent cooperative and
its owners-members. No costs.
SO ORDERED.

It bears stressing, too, that a cooperative acquires juridical personality upon its
registration with the Cooperative Development Authority.38 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. 39 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. 0-623-2460.40 In its by-laws,41 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.
 Labor Standards Employer-Employee Relationship
G.R. No. 155207 August 13, 2008
WILHELMINA S. OROZCO, petitioner,
vs.
THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS,
PHILIPPINE DAILY INQUIRER, and LETICIA JIMENEZ
MAGSANOC, respondents.
DECISION
NACHURA, J.:
The case before this Court raises a novel question never before decided in our
jurisdiction – whether a newspaper columnist is an employee of the newspaper
which publishes the column.
In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure,
petitioner Wilhelmina S. Orozco assails the Decision 1 of the Court of Appeals (CA)
in CA-G.R. SP No. 50970 dated June 11, 2002 and its Resolution 2 dated September
11, 2002 denying her Motion for Reconsideration. The CA reversed and set aside the
Decision3 of the National Labor Relations Commission (NLRC), which in turn had
affirmed the Decision4 of the Labor Arbiter finding that Orozco was an employee of
private respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as
columnist of said newspaper.
In March 1990, PDI engaged the services of petitioner to write a weekly column for
its Lifestyle section. She religiously submitted her articles every week, except for a
six-month stint in New York City when she, nonetheless, sent several articles
through mail. She received compensation of P250.00 – later increased to P300.00 –
for every column published.5
On November 7, 1992, petitioner’s column appeared in the PDI for the last time.
Petitioner claims that her then editor, Ms. Lita T. Logarta, 6 told her that respondent
Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her
column for no reason at all and advised petitioner to talk to Magsanoc herself.
Petitioner narrates that when she talked to Magsanoc, the latter informed her that it
was PDI Chairperson Eugenia Apostol who had asked to stop publication of her
column, but that in a telephone conversation with Apostol, the latter said that
Magsanoc informed her (Apostol) that the Lifestyle section already had many
columnists.7
On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle
section editor to discuss how to improve said section. They agreed to cut down the
number of columnists by keeping only those whose columns were well-written, with
(Article 82, Labor Code)
regular feedback and following. In their judgment, petitioner’s column failed to
improve, continued to be superficially and poorly written, and failed to meet the high
standards of the newspaper. Hence, they decided to terminate petitioner’s column. 8
Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal
dismissal, backwages, moral and exemplary damages, and other money claims
before the NLRC.
On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of
petitioner, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, finding complainant to be an employee
of respondent company; ordering respondent company to reinstate her to her former
or equivalent position, with backwages.
Respondent company is also ordered to pay her 13 th month pay and service incentive
leave pay.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.9
The Labor Arbiter found that:
[R]espondent company exercised full and complete control over the means and
method by which complainant’s work – that of a regular columnist – had to be
accomplished. This control might not be found in an instruction, verbal or oral, given
to complainant defining the means and method she should write her column. Rather,
this control is manifested and certained (sic) in respondents’ admitted prerogative to
reject any article submitted by complainant for publication.
By virtue of this power, complainant was helplessly constrained to adopt her subjects
and style of writing to suit the editorial taste of her editor. Otherwise, off to the trash
can went her articles.
Moreover, this control is already manifested in column title, "Feminist Reflection"
allotted complainant. Under this title, complainant’s writing was controlled and
limited to a woman’s perspective on matters of feminine interests. That respondent
had no control over the subject matter written by complainant is strongly belied by
this observation. Even the length of complainant’s articles were set by respondents.
 Labor Standards Employer-Employee Relationship
Inevitably, respondents would have no control over when or where complainant
wrote her articles as she was a columnist who could produce an article in thirty (3)
(sic) months or three (3) days, depending on her mood or the amount of research
required for an article but her actions were controlled by her obligation to produce an
article a week. If complainant did not have to report for work eight (8) hours a day,
six (6) days a week, it is because her task was mainly mental. Lastly, the fact that her
articles were (sic) published weekly for three (3) years show that she was
respondents’ regular employee, not a once-in-a-blue-moon contributor who was not
under any pressure or obligation to produce regular articles and who wrote at his
own whim and leisure.10
PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the
NLRC Second Division dismissed the appeal thereby affirming the Labor Arbiter’s
Decision. The NLRC initially noted that PDI failed to perfect its appeal, under
Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC
said that the reason proffered by PDI for not filing the bond – that it was difficult or
impossible to determine the amount of the bond since the Labor Arbiter did not
specify the amount of the judgment award – was not persuasive. It said that all PDI
had to do was compute based on the amount it was paying petitioner, counting the
number of weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s
decision.11
The NLRC also resolved the appeal on its merits. It found no error in the Labor
Arbiter’s findings of fact and law. It sustained the Labor Arbiter’s reasoning that
respondent PDI exercised control over petitioner’s work.
PDI then filed a Petition for Review12 before this Court seeking the reversal of the
NLRC Decision. However, in a Resolution13 dated December 2, 1998, this Court
referred the case to the Court of Appeals, pursuant to our ruling in St. Martin
Funeral Homes v. National Labor Relations Commission.14
The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC
Decision and dismissed petitioner’s Complaint. It held that the NLRC
misappreciated the facts and rendered a ruling wanting in substantial evidence. The
CA said:
The Court does not agree with public respondent NLRC’s conclusion. First, private
respondent admitted that she was and [had] never been considered by petitioner PDI
as its employee. Second, it is not disputed that private respondent had no
employment contract with petitioner PDI. In fact, her engagement to contribute
articles for publication was based on a verbal agreement between her and the
petitioner’s Lifestyle Section Editor. Moreover, it was evident that private
respondent was not required to report to the office eight (8) hours a day. Further, it is
(Article 82, Labor Code)
not disputed that she stayed in New York for six (6) months without petitioner’s
permission as to her leave of absence nor was she given any disciplinary action for
the same. These undisputed facts negate private respondent’s claim that she is an
employee of petitioner.
Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling
that the guidelines given by petitioner PDI for private respondent to follow, e.g. in
terms of space allocation and length of article, is not the form of control envisioned
by the guidelines set by the Supreme Court. The length of the article is obviously
limited so that all the articles to be featured in the paper can be accommodated. As to
the topic of the article to be published, it is but logical that private respondent should
not write morbid topics such as death because she is contributing to the lifestyle
section. Other than said given limitations, if the same could be considered
limitations, the topics of the articles submitted by private respondent were all her
choices. Thus, the petitioner PDI in deciding to publish private respondent’s articles
only controls the result of the work and not the means by which said articles were
written.
As such, the above facts failed to measure up to the control test necessary for an
employer-employee relationship to exist.15
Petitioner’s Motion for Reconsideration was denied in a Resolution dated September
11, 2002. She then filed the present Petition for Review.
In a Resolution dated April 29, 2005, the Court, without giving due course to the
petition, ordered the Labor Arbiter to clarify the amount of the award due petitioner
and, thereafter, ordered PDI to post the requisite bond. Upon compliance therewith,
the petition would be given due course. Labor Arbiter Amansec clarified that the
award under the Decision amounted to P15,350.00. Thus, PDI posted the requisite
bond on January 25, 2007.16
We shall initially dispose of the procedural issue raised in the Petition.
Petitioner argues that the CA erred in not dismissing outright PDI’s Petition
for Certiorari for PDI’s failure to post a cash or surety bond in violation of Article
223 of the Labor Code.
This issue was settled by this Court in its Resolution dated April 29, 2005. 17 There,
the Court held:
But while the posting of a cash or surety bond is jurisdictional and is a condition sine
qua non to the perfection of an appeal, there is a plethora of jurisprudence
 Labor Standards Employer-Employee Relationship
recognizing exceptional instances wherein the Court relaxed the bond requirement as
a condition for posting the appeal.
xxxx
In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed
decision of the Labor Arbiter concerned did not contain a computation of the
monetary award due the employees, a circumstance which is likewise present in this
case. In said case, the Court stated,
As a rule, compliance with the requirements for the perfection of an appeal within
the reglamentary (sic) period is mandatory and jurisdictional. However, in National
Federation of Labor Unions v. Ladrido as well as in several other cases, this Court
relaxed the requirement of the posting of an appeal bond within the reglementary
period as a condition for perfecting the appeal. This is in line with the principle that
substantial justice is better served by allowing the appeal to be resolved on the merits
rather than dismissing it based on a technicality.
The judgment of the Labor Arbiter in this case merely stated that petitioner was
entitled to backwages, 13th month pay and service incentive leave pay without
however including a computation of the alleged amounts.
xxxx
In the case of NFLU v. Ladrido III, this Court postulated that "private respondents
cannot be expected to post such appeal bond equivalent to the amount of the
monetary award when the amount thereof was not included in the decision of the
labor arbiter." The computation of the amount awarded to petitioner not having been
clearly stated in the decision of the labor arbiter, private respondents had no basis for
determining the amount of the bond to be posted.
Thus, while the requirements for perfecting an appeal must be strictly followed as
they are considered indispensable interdictions against needless delays and for
orderly discharge of judicial business, the law does admit of exceptions when
warranted by the circumstances. Technicality should not be allowed to stand in the
way of equitably and completely resolving the rights and obligations of the parties.
But while this Court may relax the observance of reglementary periods and technical
rules to achieve substantial justice, it is not prepared to give due course to this
petition and make a pronouncement on the weighty issue obtaining in this case until
the law has been duly complied with and the requisite appeal bond duly paid by
private respondents.18
(Article 82, Labor Code)
Records show that PDI has complied with the Court’s directive for the posting of the
bond;19 thus, that issue has been laid to rest.
We now proceed to rule on the merits of this case.
The main issue we must resolve is whether petitioner is an employee of PDI, and if
the answer be in the affirmative, whether she was illegally dismissed.
We rule for the respondents.
The existence of an employer-employee relationship is essentially a question of
fact.20 Factual findings of quasi-judicial agencies like the NLRC are generally
accorded respect and finality if supported by substantial evidence. 21
Considering, however, that the CA’s findings are in direct conflict with those of the
Labor Arbiter and NLRC, this Court must now make its own examination and
evaluation of the facts of this case.
It is true that petitioner herself admitted that she "was not, and [had] never been
considered respondent’s employee because the terms of works were arbitrarily
decided upon by the respondent." 22 However, the employment status of a person is
defined and prescribed by law and not by what the parties say it should be. 23
This Court has constantly adhered to the "four-fold test" to determine whether there
exists an employer-employee relationship between parties.24 The four elements of an
employment relationship are: (a) the selection and engagement of the employee; (b)
the payment of wages; (c) the power of dismissal; and (d) the employer’s power to
control the employee’s conduct.25
Of these four elements, it is the power of control which is the most crucial 26 and
most determinative factor,27 so important, in fact, that the other elements may even
be disregarded.28 As this Court has previously held:
the significant factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of
performance of the service being rendered, and the degree to which the principal
may intervene to exercise such control.29
In other words, the test is whether the employer controls or has reserved the right to
control the employee, not only as to the work done, but also as to the means and
methods by which the same is accomplished.30
 Labor Standards Employer-Employee Relationship
Petitioner argues that several factors exist to prove that respondents exercised control
over her and her work, namely:
a. As to the Contents of her Column – The PETITIONER had to insure that the
contents of her column hewed closely to the objectives of its Lifestyle Section and
the over-all principles that the newspaper projects itself to stand for. As admitted, she
wanted to write about death in relation to All Souls Day but was advised not to.
b. As to Time Control – The PETITIONER, as a columnist, had to observe the
deadlines of the newspaper for her articles to be published. These deadlines were
usually that time period when the Section Editor has to "close the pages" of the
Lifestyle Section where the column in located. "To close the pages" means to prepare
them for printing and publication.
As a columnist, the PETITIONER’s writings had a definite day on which it was
going to appear. So she submitted her articles two days before the designated day on
which the column would come out.
This is the usual routine of newspaper work. Deadlines are set to fulfill the
newspapers’ obligations to the readers with regard to timeliness and freshness of
ideas.
c. As to Control of Space – The PETITIONER was told to submit only two or three
pages of article for the column, (sic) "Feminist Reflections" per week. To go beyond
that, the Lifestyle editor would already chop off the article and publish the rest for
the next week. This shows that PRIVATE RESPONDENTS had control over the
space that the PETITIONER was assigned to fill.
d. As to Discipline – Over time, the newspaper readers’ eyes are trained or
habituated to look for and read the works of their favorite regular writers and
columnists. They are conditioned, based on their daily purchase of the newspaper, to
look for specific spaces in the newspapers for their favorite write-ups/or opinions on
matters relevant and significant issues aside from not being late or amiss in the
responsibility of timely submission of their articles.
The PETITIONER was disciplined to submit her articles on highly relevant and
significant issues on time by the PRIVATE RESPONDENTS who have a say on
whether the topics belong to those considered as highly relevant and significant,
through the Lifestyle Section Editor. The PETITIONER had to discuss the topics
first and submit the articles two days before publication date to keep her column in
the newspaper space regularly as expected or without miss by its readers. 31
(Article 82, Labor Code)
Given this discussion by petitioner, we then ask the question: Is this the form of
control that our labor laws contemplate such as to establish an employer-employee
relationship between petitioner and respondent PDI?
It is not.
Petitioner has misconstrued the "control test," as did the Labor Arbiter and the
NLRC.
Not all rules imposed by the hiring party on the hired party indicate that the latter is
an employee of the former. Rules which serve as general guidelines towards the
achievement of the mutually desired result are not indicative of the power of
control.32 Thus, this Court has explained:
It should, however, be obvious that not every form of control that the hiring party
reserves to himself over the conduct of the party hired in relation to the services
rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, 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.
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it. x x
x.33
The main determinant therefore is whether the rules set by the employer are meant to
control not just the results of the work but also the means and method to be used by
the hired party in order to achieve such results. Thus, in this case, we are to examine
the factors enumerated by petitioner to see if these are merely guidelines or if they
indeed fulfill the requirements of the control test.
Petitioner believes that respondents’ acts are meant to control how she executes her
work. We do not agree. A careful examination reveals that the factors enumerated by
the petitioner are inherent conditions in running a newspaper. In other words, the so-
called control as to time, space, and discipline are dictated by the very nature of the
newspaper business itself.
 Labor Standards Employer-Employee Relationship
We agree with the observations of the Office of the Solicitor General that:
The Inquirer is the publisher of a newspaper of general circulation which is widely read
throughout the country. As such, public interest dictates that every article appearing in the
newspaper should subscribe to the standards set by the Inquirer, with its thousands of readers
in mind. It is not, therefore, unusual for the Inquirer to control what would be published in the
newspaper. What is important is the fact that such control pertains only to the end result, i.e.,
the submitted articles. The Inquirer has no control over [petitioner] as to the means or method
used by her in the preparation of her articles. The articles are done by [petitioner] herself
without any intervention from the Inquirer.34
Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or
produce her articles each week. Aside from the constraints presented by the space allocation of
her column, there were no restraints on her creativity; petitioner was free to write her column
in the manner and style she was accustomed to and to use whatever research method she
deemed suitable for her purpose. The apparent limitation that she had to write only on subjects
that befitted the Lifestyle section did not translate to control, but was simply a logical
consequence of the fact that her column appeared in that section and therefore had to cater to
the preference of the readers of that section.
The perceived constraint on petitioner’s column was dictated by her own choice of her
column’s perspective. The column title "Feminist Reflections" was of her own choosing, as
she herself admitted, since she had been known as a feminist writer. 35 Thus, respondent PDI,
as well as her readers, could reasonably expect her columns to speak from such perspective.
Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or
limitation on the subject matter – within the Lifestyle section – that she could write about.
Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did
PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In
fact, petitioner herself said that she received "no comments on her articles…except for her to
shorten them to fit into the box allotted to her column." Therefore, the control that PDI
exercised over petitioner was only as to the finished product of her efforts, i.e., the column
itself, by way of either shortening or outright rejection of the column.
The newspaper’s power to approve or reject publication of any specific article she wrote for
her column cannot be the control contemplated in the "control test," as it is but logical that one
who commissions another to do a piece of work should have the right to accept or reject the
product. The important factor to consider in the "control test" is still the element of control
over how the work itself is done, not just the end result thereof.
In contrast, a regular reporter is not as independent in doing his or her work for the newspaper.
We note the common practice in the newspaper business of assigning its regular reporters to
cover specific subjects, geographical locations, government agencies, or areas of concern,
more commonly referred to as "beats." A reporter must produce stories within his or her
particular beat and cannot switch to another beat without permission from the editor. In most
newspapers also, a reporter must inform the editor about the story that he or she is working on
for the day. The story or article must also be submitted to the editor at a specified time.
(Article 82, Labor Code)
Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover
another beat, if the need arises.
This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was
not precluded from submitting her column ahead of time or from submitting columns to be
published at a later time. More importantly, respondents did not dictate upon petitioner the
subject matter of her columns, but only imposed the general guideline that the article should
conform to the standards of the newspaper and the general tone of the particular section.
Where a person who works for another performs his job more or less at his own pleasure, in
the manner he sees fit, not subject to definite hours or conditions of work, and is compensated
according to the result of his efforts and not the amount thereof, no employer-employee
relationship exists.36
Aside from the control test, this Court has also used the economic reality test. The economic
realities prevailing within the activity or between the parties are examined, taking into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties.37 This is especially appropriate when, as in this case, there is no written
agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of
economic reality in analyzing possible employment relationships for purposes of applying the
Labor Code ought to be the economic dependence of the worker on his employer.38
Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights
advocate working in various women’s organizations.39 Likewise, she herself admits that she
also contributes articles to other publications.40 Thus, it cannot be said that petitioner was
dependent on respondent PDI for her continued employment in respondent’s line of
business.41
The inevitable conclusion is that petitioner was not respondent PDI’s employee but an
independent contractor, engaged to do independent work.
There is no inflexible rule to determine if a person is an employee or an independent
contractor; thus, the characterization of the relationship must be made based on the particular
circumstances of each case.42 There are several factors43 that may be considered by the courts,
but as we already said, the right to control is the dominant factor in determining whether one is
an employee or an independent contractor.44
In our jurisdiction, the Court has held that an independent contractor is one who carries on a
distinct and independent business and undertakes to perform the job, work, or service on one’s
own account and under one’s own responsibility according to one’s own manner and method,
free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.45
On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the
Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of
ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his "unique
 Labor Standards Employer-Employee Relationship
skills, talent and celebrity status not possessed by ordinary employees," a circumstance that,
the Court said, was indicative, though not conclusive, of an independent contractual
relationship. Independent contractors often present themselves to possess unique skills,
expertise or talent to distinguish them from ordinary employees. 47 The Court also found that,
as to payment of wages, Sonza’s talent fees were the result of negotiations between him and
ABS-CBN.48 As to the power of dismissal, the Court found that the terms of Sonza’s
engagement were dictated by the contract he entered into with ABS-CBN, and the same
contract provided that either party may terminate the contract in case of breach by the other of
the terms thereof.49 However, the Court held that the foregoing are not determinative of an
employer-employee relationship. Instead, it is still the power of control that is most important.
On the power of control, the Court found that in performing his work, Sonza only needed his
skills and talent – how he delivered his lines, appeared on television, and sounded on radio
were outside ABS-CBN’s control.50 Thus:
We find that ABS-CBN was not involved in the actual performance that produced the finished
product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-
CBN merely reserved the right to modify the program format and airtime schedule "for more
effective programming." ABS-CBN’s sole concern was the quality of the shows and their
standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and
methods of performance of SONZA’s work.
SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power
over the means and methods of the performance of his work. Although ABS-CBN did have
the option not to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s
talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods
of SONZA’s performance of his work, or even with the quality or product of his work, ABS-
CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to
broadcast SONZA’s show but ABS-CBN must still pay his talent fees in full.
Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the
obligation to continue paying in full SONZA’s talent fees, did not amount to control over the
means and methods of the performance of SONZA’s work. ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work - how he
delivered his lines and appeared on television - did not meet ABS-CBN’s approval. This
proves that ABS-CBN’s control was limited only to the result of SONZA’s work, whether to
broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s talent
fees in full until the expiry of the Agreement.
In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that
vaudeville performers were independent contractors although the management reserved the
right to delete objectionable features in their shows. Since the management did not have
control over the manner of performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.
SONZA further contends that ABS-CBN exercised control over his work by supplying all
equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed
(Article 82, Labor Code)
to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the
"tools and instrumentalities" SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his appearance. Even though
ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA
was still an independent contractor since ABS-CBN did not supervise and control his work.
ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the
programs.
A radio broadcast specialist who works under minimal supervision is an independent
contractor. SONZA’s work as television and radio program host required special skills and
talent, which SONZA admittedly possesses. The records do not show that ABS-CBN
exercised any supervision and control over how SONZA utilized his skills and talent in his
shows.51
The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her
talent, skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all
these in writing her column was not subject to dictation by respondent. As in Sonza,
respondent PDI was not involved in the actual performance that produced the finished product.
It only reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to
accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a
reality in the newspaper business that space constraints often dictate the length of articles and
columns, even those that regularly appear therein.
Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she
needed to perform her work. Petitioner only needed her talent and skill to come up with a
column every week. As such, she had all the tools she needed to perform her work.
Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of
illegal dismissal.
WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are
hereby AFFIRMED.
SO ORDERED.
 Labor Standards Employer-Employee Relationship
G.R. No. 151228 August 15, 2002
ROLANDO Y. TAN, petitioner,
vs.
LEOVIGILDO LAGRAMA and THE HONORABLE COURT OF
APPEALS, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision, 1 dated May 31, 2001, and
the resolution,2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP.
No. 63160, annulling the resolutions of the National Labor Relations Commission
(NLRC) and reinstating the ruling of the Labor Arbiter which found petitioner
Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama
and ordering him to pay the latter the amount of P136,849.99 by way of separation
pay, backwages, and damages.
The following are the facts.
Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters for more than 10
years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: "Nangihi na naman ka sulod sa imong drawinganan." ("You again
urinated inside your work area.") When Lagrama asked what Tan was saying, Tan
told him, "Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan
karon, wala nay drawing. Gawas." ("Don't say anything further. I don't want you to
draw anymore. From now on, no more drawing. Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one
who entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan shouted
"Gawas" ("Get out"), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he
had been illegally dismissed and sought reinvestigation and payment of 13th month
pay, service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama was
an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of
(Article 82, Labor Code)
Lagrama during the conferences before the Labor Arbiter that he was paid on a fixed
piece-work basis, i.e., that he was paid for every painting turned out as ad billboard
or mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema
owners, an amusement park owner, and those supervising the construction of a
church to prove that the services of Lagrama were contracted by them. He denied
having dismissed Lagrama and alleged that it was the latter who refused to paint for
him after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainant's [Lagrama's] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay - P 59,000.00
B. Backwages - 47,200.00
(from 17 October 1998 to 17 June 1999)
C. 13th month pay (3 years) - 17,700.00
D. Service Incentive Leave Pay (3 years) - 2, 949.99
E. Damages - 10,000.00
TOTAL [P136,849.99]
Complainant's other claims are dismissed for lack of merit.3
Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City,
which, on June 30, 2000, rendered a decision4 finding Lagrama to be an independent
contractor, and for this reason reversing the decision of the Labor Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of
merit by the NLRC in a resolution of September 29, 2000. He then filed a petition
for certiorari under Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagrama's work by
dictating the time when Lagrama should submit his billboards and murals and setting
rules on the use of the work area and rest room. Although it found that Lagrama did
 Labor Standards Employer-Employee Relationship
work for other cinema owners, the appeals court held it to be a mere sideline
insufficient to prove that he was not an employee of Tan. The appeals court also
found no evidence of any intention on the part of Lagrama to leave his job or sever
his employment relationship with Tan. Accordingly, on May 31, 2001, the Court of
Appeals rendered a decision, the dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED.
The Resolutions of the Public Respondent issued on June 30, 2000 and September
29, 2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P.
Legaspi on June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals found no reason to
reverse its decision and so denied his motion for lack of merit. 5 Hence, this petition
for review on certiorari based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP
NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had
no jurisdiction or exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any positive finding on
its part that the Resolution of 30 June 2000 of the NLRC is not supported by
substantial evidence, is without authority to substitute its conclusion for that of said
NLRC.
III. With all due respect, respondent Court of Appeals' discourse on "freelance artists
and painters" in the decision in question is misplaced or has no factual or legal basis
in the record.
IV. With all due respect, respondent Court of Appeals' opening statement in its
decision as to "employment," "monthly salary of P1,475.00" and "work schedule
from Monday to Saturday, from 8:00 o'clock in the morning up to 5:00 o'clock in the
afternoon" as "facts" is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420
[G.R. No. 111042 October 26, 1999] relied upon by respondent Court of Appeals is
not applicable to the peculiar circumstances of this case.6
The issues raised boil down to whether or not an employer-employee relationship
existed between petitioner and private respondent, and whether petitioner is guilty of
illegally dismissing private respondent. We find the answers to these issues to be in
the affirmative.
(Article 82, Labor Code)
I.
In determining whether there is an employer-employee relationship, we have applied
a "four-fold test," to wit: (1) whether the alleged employer has the power of selection
and engagement of employees; (2) whether he has control of the employee with
respect to the means and methods by which work is to be accomplished; (3) whether
he has the power to dismiss; and (4) whether the employee was paid wages. 7 These
elements of the employer-employee relationship are present in this case.
First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party. It is
the existence of the second element, the power of control, that requires discussion
here.
Of the four elements of the employer-employee relationship, the "control test" is the
most important. Compared to an employee, an independent contractor is one who
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, 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.8 Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the
employer's power to control the means and methods by which the employee's work is
to be performed and accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was
an independent contractor and never his employee, the evidence shows that the latter
performed his work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown Theater of petitioner,
for the use of which petitioner prescribed rules. The rules included the observance of
cleanliness and hygiene and a prohibition against urinating in the work area and any
place other than the toilet or the rest rooms.9 Petitioner's control over Lagrama's
work extended not only to the use of the work area, but also to the result of
Lagrama's work, and the manner and means by which the work was to be
accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that he
paid Lagrama only for the latter's services.10
Private respondent Lagrama claimed that he worked daily, from 8 o'clock in the
morning to 5 o'clock in the afternoon. Petitioner disputed this allegation and
maintained that he paid Lagrama P1,475.00 per week for the murals for the three
 Labor Standards Employer-Employee Relationship
theaters which the latter usually finished in 3 to 4 days in one week. 11 Even assuming
this to be true, the fact that Lagrama worked for at least 3 to 4 days a week proves
regularity in his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets in and
about his work premises. He was urinating right at the place where he was
working when it was so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal
out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the compelling
reason, to fire him from his painting job upon discovery and his admission of such
acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who
stopped to paint for respondents.12
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important
element of the employer-employee relationship.13 Indeed, the fact that, as petitioner
himself said, he waited for Lagrama to report for work but the latter simply stopped
reporting for work reinforces the conviction that Lagrama was indeed an employee
of petitioner. For only an employee can nurture such an expectancy, the frustration of
which, unless satisfactorily explained, can bring about some disciplinary action on
the part of the employer.
Third. Payment of wages is one of the four factors to be considered in determining
the existence of employer-employee relation. Wages are defined as "remuneration or
earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or
for services rendered or to be rendered." 14 That Lagrama worked for Tan on a fixed
piece-work basis is of no moment. Payment by result is a method of compensation
and does not define the essence of the relation.15 It is a method of computing
compensation, not a basis for determining the existence or absence of employer-
employee relationship. One may be paid on the basis of results or time expended on
the work, and may or may not acquire an employment status, depending on whether
the elements of an employer-employee relationship are present or not.16
The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll.17 The payroll should show among other things, the
(Article 82, Labor Code)
employee's rate of pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the payroll to support his
claim that Lagrama was not his employee, raising speculations whether his failure to
do so proves that its presentation would be adverse to his case. 18
The primary standard for determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to
the usual trade or business of the employer.19 In this case, there is such a connection
between the job of Lagrama painting billboards and murals and the business of
petitioner. To let the people know what movie was to be shown in a movie theater
requires billboards. Petitioner in fact admits that the billboards are important to his
business.20
The fact that Lagrama was not reported as an employee to the SSS is not conclusive
on the question of whether he was an employee of petitioner. 21 Otherwise, an
employer would be rewarded for his failure or even neglect to perform his
obligation.22
Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends has
not been denied by petitioner. On the other hand, Samuel Villalba, for whom
Lagrama had rendered service, admitted in a sworn statement that he was told by
Lagrama that the latter worked for petitioner.23
Lagrama had been employed by petitioner since 1988. Under the law, therefore, he is
deemed a regular employee and is thus entitled to security of tenure, as provided in
Art. 279 of Labor Code:
ART. 279. Security of Tenure. — In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when authorized
by this Title. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.
This Court has held that if the employee has been performing the job for at least one
year, even if not continuously but intermittently, the repeated and continuing need
for its performance is sufficient evidence of the necessity, if not indispensability, of
that activity to the business of his employer. Hence, the employment is also
considered regular, although with respect only to such activity, and while such
activity exists.24
 Labor Standards Employer-Employee Relationship
It is claimed that Lagrama abandoned his work. There is no evidence to show this.
Abandonment requires two elements: (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, with the second element as the more determinative factor and
being manifested by some overt acts.25 Mere absence is not sufficient. What is more,
the burden is on the employer to show a deliberate and unjustified refusal on the part
of the employee to resume his employment without any intention of returning.26 In
the case at bar, the Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for abandonment to
be a just and valid ground for dismissal, the employer must show, by clear proof, the
intention of the employee to abandon his job. . . .
In the present recourse, the Private Respondent has not established clear proof of the
intention of the Petitioner to abandon his job or to sever the employment relationship
between him and the Private Respondent. On the contrary, it was Private Respondent
who told Petitioner that he did not want the latter to draw for him and thereafter
refused to give him work to do or any mural or billboard to paint or draw on.
More, after the repeated refusal of the Private Respondent to give Petitioner murals
or billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration
Branch No. X of the National Labor Relations Commission, a Complaint for "Illegal
Dismissal and Money Claims." Such act has, as the Supreme Court declared, negate
any intention to sever employment relationship. . . . 27
II.
The second issue is whether private respondent Lagrama was illegally dismissed. To
begin, the employer has the burden of proving the lawfulness of his employee's
dismissal.28 The validity of the charge must be clearly established in a manner
consistent with due process. The Implementing Rules of the Labor Code 29 provide
that no worker shall be dismissed except for a just or authorized cause provided by
law and after due process. This provision has two aspects: (1) the legality of the act
of dismissal, that is, dismissal under the grounds provided for under Article 282 of
the Labor Code and (2) the legality in the manner of dismissal. The illegality of the
act of dismissal constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process. 30
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for
the purpose by the employer constitutes violation of reasonable regulations intended
to promote a healthy environment under Art. 282(1) of the Labor Code for purposes
(Article 82, Labor Code)
of terminating employment, but the same must be shown by evidence. Here there is
no evidence that Lagrama did urinate in a place other than a rest room in the
premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee
has been so strained that the latter's reinstatement would no longer serve any
purpose. The parties do not dispute this finding. Hence, the grant of separation pay in
lieu of reinstatement is appropriate. This is of course in addition to the payment of
backwages which, in accordance with the ruling in Bustamante v. NLRC,31 should be
computed from the time of Lagrama's dismissal up to the time of the finality of this
decision, without any deduction or qualification.
The Bureau of Working Conditions32 classifies workers paid by results into two
groups, namely; (1) those whose time and performance is supervised by the
employer, and (2) those whose time and performance is unsupervised by the
employer. The first involves an element of control and supervision over the manner
the work is to be performed, while the second does not. If a piece worker is
supervised, there is an employer-employee relationship, as in this case. However,
such an employee is not entitled to service incentive leave pay since, as pointed out
in Makati Haberdashery v. NLRC33 and Mark Roche International v. NLRC,34 he is
paid a fixed amount for work done, regardless of the time he spent in accomplishing
such work.
WHEREFORE, based on the foregoing, the petition is DENIED for lack of
showing that the Court of Appeals committed any reversible error. The decision of
the Court of Appeals, reversing the decision of the National Labor Relations
Commission and reinstating the decision of the Labor Arbiter, is AFFIRMED with
the MODIFICATION that the backwages and other benefits awarded to private
respondent Leovigildo Lagrama should be computed from the time of his dismissal
up to the time of the finality of this decision, without any deduction and
qualification. However, the service incentive leave pay awarded to him
is DELETED.
SO ORDERED.
 Labor Standards Employer-Employee Relationship
[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, v. 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.
DECISION
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:jgc:chanrobles.com.ph
"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 Oñate, Feliciano Arceo, Melencio
Eugenio, 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 illegal 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
(Article 82, Labor Code)
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 decrees 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-employee relationship as borne out by
the records of the case . . ."cralaw virtua1aw library
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."cralaw virtua1aw library
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 "pahinantes" at the SMC Plant loading, unloading,
piling or palleting empty bottles and wooden 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 order 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.
 Labor Standards Employer-Employee Relationship (Article 82, Labor Code)

Work in the glass factory was neither regular nor continuous, depending wholly on San Miguel refused to bargain with the petitioner union alleging that the workers are
the volume of bottles manufactured to be loaded and unloaded, as well as the not their employees.
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 On February 20, 1969, all the petitioners were dismissed from their jobs and,
necessitated work on Sundays and holidays. For this, they were neither paid overtime thereafter, denied entrance to respondent company’s glass factory despite their
nor compensation for work on Sundays and holidays. regularly reporting for work. A complaint for illegal dismissal and unfair labor
practice was filed by the petitioners.
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 The case reaches us now with the same issues to be resolved as when it had begun.
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 The question of whether an employer-employee relationship exists in a certain
compared with the notes of the checker and warehousemen as to whether or not they situation continues to bedevil the courts. Some businessmen try to avoid the bringing
tally. Final approval of report is by officer-in-charge Camahort. The pay check is about of an employer-employee relationship in their enterprises because that judicial
given to the group leaders for encashment, distribution, and payment to the relation spawns obligations connected with workmen’s compensation, social
petitioners in accordance with payrolls prepared by said leaders. From the total security, medicare, minimum wage, termination pay, and unionism. (Mafinco
earnings of the group, the group leader gets a participation or share of ten (10%) Trading Corporation v. Ople, 70 SCRA 139).
percent plus an additional amount from the earnings of each individual.
In determining the existence of an employer-employee relationship, the elements that
The petitioners worked exclusively at the SMC plant, never having been assigned to are generally considered are the following: (a) the selection and engagement of the
other companies or departments of SMC plant, even when the volume of work was at employee; (b) the payment of wages; (c) the power of dismissal; and (d) the
its minimum. When any of the glass furnaces suffered a breakdown, making a employer’s power to control the employee with respect to the means and methods by
shutdown necessary, the petitioners’ work was temporarily suspended. Thereafter, which the work is to be accomplished. It is the so-called "control test" that is the
the petitioners would return to work at the glass plant. 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
Sometime in January, 1969, the petitioner workers - numbering one hundred and Brothers, Inc. v. Ople, 131 SCRA 72).
forty (140) organized and affiliated themselves with the petitioner union and engaged
in union activities. Believing themselves entitled to overtime and holiday pay, the Applying the above criteria, the evidence strongly indicates the existence of an
petitioners pressed management, airing other grievances such as being paid below employer-employee relationship between petitioner workers and respondent San
the minimum wage law, inhuman treatment, being forced to borrow at usurious rates Miguel Corporation. The respondent asserts that the petitioners are employees of the
of interest and to buy raffle tickets, coerced by withholding their salaries, and salary Guaranteed Labor Contractor, an independent labor contracting firm.
deductions made without their consent. However, their gripes and grievances were
not heeded by the respondents. The facts and evidence on record negate respondent SMC’s claim.

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.
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 Anne., 75 ALR
7260727).chanrobles virtual lawlibrary
 Labor Standards Employer-Employee Relationship (Article 82, Labor Code)

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):jgc:chanrobles.com.ph
". . . [T]he employer-employee relationship between the parties herein is not co-
terminous 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)."cralaw virtua1aw
library
so is 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.chanrobles virtual lawlibrary
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:jgc:chanrobles.com.ph
"Job contracting. — There is job contracting permissible under the Code if the
following conditions are met:jgc:chanrobles.com.ph
"(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."cralaw virtua1aw library
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
 Labor Standards Employer-Employee Relationship
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:jgc:chanrobles.com.ph
"‘[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:chanrobles lawlibrary : rednad
". . . 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."cralaw virtua1aw library
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
(Article 82, Labor Code)
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.chanrobles.com : virtual law library
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.
 Labor Standards Employer-Employee Relationship (Article 82, Labor Code)

"ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving,

[G.R. No. 84484. November 15, 1989.] directly or indirectly, rebates in any form, or from making any misrepresentation or
over-selling, and, in general, from doing or committing acts prohibited in the Agent’s
INSULAR LIFE ASSURANCE CO., LTD., Petitioner, v. NATIONAL LABOR Manual and in circulars of the Office of the Insurance Commissioner.
RELATIONS COMMISSION and MELECIO BASIAO, Respondents.
"TERMINATION. The Company may terminate the contract at will, without any
Tirol & Tirol for Petitioner. previous notice to the Agent, for or on account of . . . (explicitly specified causes) . . .

Enojas, Defensor & Teodosio Cabado Law Offices for Private Respondent. Either party may terminate this contract by giving to the other notice in writing to
that effect. It shall become ipso facto cancelled if the Insurance Commissioner
should revoke a Certificate of Authority previously issued or should the Agent fail to
DECISION renew his existing Certificate of Authority upon its expiration. The Agent shall not
have any right to any commission on renewal of premiums that may be paid after the
termination of this agreement for any cause whatsoever, except when the termination
NARVASA, J.: is due to disability or death in line of service. As to commission corresponding to
any balance of the first year’s premiums remaining unpaid at the termination of this
agreement, the Agent shall be entitled to it if the balance of the first year premium is
On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the paid, less actual cost of collection, unless the termination is due to a violation of this
Company) and Melecio T. Basiao entered into a contract 1 by which:chanrob1es contract, involving criminal liability or breach of trust.
virtual 1aw library
"ASSIGNMENT. No Assignment of the Agency herein created or of commissions or
1. Basiao was "authorized to solicit within the Philippines applications for insurance other compensations shall be valid without the prior consent in writing of the
policies and annuities in accordance with the existing rules and regulations" of the Company . . ."cralaw virtua1aw library
Company;
Some four years later, in April 1972, the parties entered into another contract - an
2. he would receive "compensation, in the form of commissions . . . as provided in Agency Manager’s Contract — and to implement his end of it Basiao organized an
the Schedule of Commissions" of the contract to "constitute a part of the agency or office to which he gave the name M. Basiao and Associates, while
consideration of . . . (said) agreement;" and concurrently fulfilling his commitments under the first contract with the Company. 2

3. the "rules in . . . (the Company’s) Rate Book and its Agent’s Manual, as well as all
its circulars . . . and those which may from time to time be promulgated by it, . . ."
were made part of said contract.
The contract also contained, among others, provisions governing the relations of the
parties, the duties of the Agent, the acts prohibited to him, and the modes of
termination of the agreement, viz.:chanrobles.com.ph : virtual law library
"RELATION WITH THE COMPANY. The Agent shall be free to exercise his own
judgment as to time, place and means of soliciting insurance. Nothing herein
contained shall therefore be construed to create the relationship of employee and
employer between the Agent and the Company. However, the Agent shall observe
and conform to all rules and regulations which the Company may from time to time
prescribe.
In May, 1979, the Company terminated the Agency Manager’s Contract. After
vainly seeking a reconsideration, Basiao sued the Company in a civil action and this,
he was later to claim, prompted the latter to terminate also his engagement under the
first contract and to stop payment of his commissions starting April 1, 1980. 3
Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the
Company and its president. Without contesting the termination of the first contract,
the complaint sought to recover commissions allegedly unpaid thereunder, plus
attorney’s fees. The respondents disputed the Ministry’s jurisdiction over Basiao’s
claim, asserting that he was not the Company’s employee, but an independent
contractor and that the Company had no obligation to him for unpaid commissions
under the terms and conditions of his contract. 5
The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that
the underwriting agreement had established an employer-employee relationship
 Labor Standards Employer-Employee Relationship
between him and the Company, and this conferred jurisdiction on the Ministry of
Labor to adjudicate his claim. Said official’s decision directed payment of his unpaid
commissions." . . equivalent to the balance of the first year’s premium remaining
unpaid, at the time of his termination, of all the insurance policies solicited by . . .
(him) in favor of the respondent company . . ." plus 10% attorney’s fees. 6
This decision was, on appeal by the Company, affirmed by the National Labor
Relations Commission. 7 Hence, the present petition for certiorari and prohibition.
The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become
the Company’s employee by virtue of the contract invoked by him, thereby placing
his claim for unpaid commissions within the original and exclusive jurisdiction of
the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or,
contrarily, as the Company would have it, that under said contract Basiao’s status
was that of an independent contractor whose claim was thus cognizable, not by the
Labor Arbiter in a labor case, but by the regular courts in an ordinary civil
action.chanrobles virtual lawlibrary
The Company’s thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the contract
they had entered into, which, either expressly or by necessary implication, made
Basiao the master of his own time and selling methods, left to his judgment the time,
place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he could seek and work
on his prospects anywhere and at anytime he chose to, and was free to adopt the
selling methods he deemed most effective.
Without denying that the above were indeed the expressed or implicit conditions of
Basiao’s contract with the Company, the respondents contend that they do not
constitute the decisive determinant of the nature of his engagement, invoking
precedents to the effect that the critical feature distinguishing the status of an
employee from that of an independent contractor is control, that is, whether or not
the party who engages the services of another has the power to control the latter’s
conduct in rendering such services. Pursuing the argument, the respondents draw
attention to the provisions of Basiao’s contract obliging him to." . . observe and
conform to all rules and regulations which the Company may from time to time
prescribe . . .," as well as to the fact that the Company prescribed the qualifications
of applicants for insurance, processed their applications and determined the amounts
of insurance cover to be issued as indicative of the control, which made Basiao, in
legal contemplation, an employee of the Company. 9
It is true that the "control test" expressed in the following pronouncement of the
Court in the 1956 case of Viana v. Alejo Al-Lagadan: 10
(Article 82, Labor Code)
". . . In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (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 employees’ conduct - although the latter is the most important element
(35 Am. Jur. 445). . .,"
has been followed and applied in later cases, some fairly recent. 11 Indeed, it is
without question a valid test of the character of a contract or agreement to render
service. It should, however, be obvious that not every form of control that the hiring
party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether. Realistically, 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.
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means
or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first,
which aim only to promote the result, create no employer-employee relationship
unlike the second, which address both the result and the means used to achieve it.
The distinction acquires particular relevance in the case of an enterprise affected
with public interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance company. 12 Rules and
regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and
expected for an insurance company to promulgate a set of rules to guide its
commission agents in selling its policies that they may not run afoul of the law and
what it requires or prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications to
processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of
these really invades the agent’s contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between him and
the company.
There is no dearth of authority holding persons similarly placed as respondent Basiao
to be independent contractors, instead of employees of the parties for whom they
worked. In Mafinco Trading Corporation v. Ople, 13 the Court ruled that a person
 Labor Standards Employer-Employee Relationship (Article 82, Labor Code)

engaged to sell soft drinks for another, using a truck supplied by the latter, but with
the right to employ his own workers, sell according to his own methods subject only
to prearranged routes, observing no working hours fixed by the other party and
obliged to secure his own licenses and defray his own selling expenses, all in
consideration of a peddler’s discount given by the other party for at least 250 cases
of soft drinks sold daily, was not an employee but an independent
contractor.chanrobles virtual lawlibrary
The Court, therefore, rules that under the contract invoked by him, Basiao was not an
employee of the petitioner, but a commission agent, an independent contractor whose
claim for unpaid commissions should have been litigated in an ordinary civil action.
The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being
without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter’s
decision. This conclusion renders it unnecessary and premature to consider Basiao’s
claim for commissions on its merits.chanrobles law library : red

In Investment Planning Corporation of the Philippines v. Social Security System, 14 WHEREFORE, the appealed Resolution of the National Labor Relations
a case almost on all fours with the present one, this Court held that there was no Commission is set aside, and that complaint of private respondent Melecio T. Basiao
employer-employee relationship between a commission agent and an investment in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs.
company, but that the former was an independent contractor where said agent and
others similarly placed were: (a) paid compensation in the form of commissions SO ORDERED.
based on percentages of their sales, any balance of commissions earned being
payable to their legal representatives in the event of death or registration; (b)
required to put up performance bonds; (c) subject to a set of rules and regulations
governing the performance of their duties under the agreement with the company and
termination of their services for certain causes; (d) not required to report for work at
any time, nor to devote their time exclusively to working for the company nor to
submit a record of their activities, and who, finally, shouldered their own selling and
transportation expenses.

More recently, in Sara v. NLRC, 15 it was held that one who had been engaged by a
rice miller to buy and sell rice and palay without compensation except a certain
percentage of what he was able to buy or sell, did work at his own pleasure without
any supervision or control on the part of his principal and relied on his own resources
in the performance of his work, was a plain commission agent, an independent
contractor and not an employee.

The respondents limit themselves to pointing out that Basiao’s contract with the
Company bound him to observe and conform to such rules and regulations as the
latter might from time to time prescribe. No showing has been made that any such
rules or regulations were in fact promulgated, much less that any rules existed or
were issued which effectively controlled or restricted his choice of methods - or the
methods themselves of selling insurance. Absent such showing, the Court will not
speculate that any exceptions or qualifications were imposed on the express
provision of the contract leaving Basiao." . . free to exercise his own judgment as to
the time, place and means of soliciting insurance."cralaw virtua1aw library

The Labor Arbiter’s decision makes reference to Basiao’s claim of having been
connected with the Company for twenty-five years. Whatever this is meant to imply,
the obvious reply would be that what is germane here is Basiao’s status under the
contract of July 2, 1968, not the length of his relationship with the Company.
 Labor Standards Employer-Employee Relationship
G.R. No. 119268 February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO
MARCOS, LUIS DE LOS ANGELES, JOEL ORDENIZA and AMADO
CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN
TAXI (PHILJAMA INTERNATIONAL, INC.) respondents.
QUISUMBING, J.:
This special civil action for certiorari seeks to annul the decision1 of public
respondent promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92,
and its resolution2 dated December 13, 1994 which denied petitioners motion for
reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a
domestic corporation engaged in the operation of "Goodman Taxi." Petitioners used
to drive private respondent's taxicabs every other day on a 24-hour work schedule
under the boundary system. Under this arrangement, the petitioners earned an
average of P400.00 daily. Nevertheless, private respondent admittedly regularly
deducts from petitioners, daily earnings the amount of P30.00 supposedly for the
washing of the taxi units. Believing that the deduction is illegal, petitioners decided
to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let
petitioners drive their taxicabs when they reported for work on August 6, 1991, and
on succeeding days. Petitioners suspected that they were singled out because they
were the leaders and active members of the proposed union. Aggrieved, petitioners
filed with the labor arbiter a complaint against private respondent for unfair labor
practice, illegal dismissal and illegal deduction of washing fees. In a decision3 dated
August 31, 1992, the labor arbiter dismissed said complaint for lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994,
reversed and set aside the judgment of the labor arbiter. The labor tribunal declared
that petitioners are employees of private respondent, and, as such, their dismissal
must be for just cause and after due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor
Arbiter appealed from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is
directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis
de los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr.,
(Article 82, Labor Code)
and Joel Ordeniza, to their former positions without loss of seniority and other
privileges appertaining thereto; to pay the complainants full backwages and other
benefits, less earnings elsewhere, and to reimburse the drivers the amount paid as
washing charges; and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.4
Private respondent's first motion for reconsideration was denied. Remaining hopeful,
private respondent filed another motion for reconsideration. This time, public
respondent, in its decision5 dated October 28, 1994, granted aforesaid second motion
for reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and
private respondent have no employer-employee relationship. It held that the
relationship of the parties is leasehold which is covered by the Civil Code rather than
the Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under
reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994
are hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is
likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack
of jurisdiction.
No costs.
SO ORDERED.6
Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision
which was denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess
of jurisdiction, or with grave abuse of discretion in rendering the assailed decision,
arguing that:
I. THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S
SECOND MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A
PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE
SAME ON GROUNDS NOT EVEN INVOKED THEREIN.
II. THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP
BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE
CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE
JURISDICTION TO REVERSE, ALTER OR MODIFY.
 Labor Standards Employer-Employee Relationship
III. IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER
SUPPORTS THE VIEW THAT PETITIONERS-TAXI DRIVERS ARE
EMPLOYEES OF RESPONDENT TAXI COMPANY.7
The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction"
has settled meaning in the jurisprudence of procedure. It means such capricious and
whimsical exercise of judgment by the tribunal exercising judicial or quasi-judicial
power as to amount to lack of power.8 In labor cases, this Court has declared in
several instances that disregarding rules it is bound to observe constitutes grave
abuse of discretion on the part of labor tribunal.
9 or decision of the Commission shall not be entertained except when based on palpable or
In Garcia vs. NLRC, private respondent therein, after receiving a copy of the labor
arbiter's decision, wrote the labor arbiter who rendered the decision and expressed
dismay over the judgment. Neither notice of appeal was filed nor cash or surety bond
was posted by private respondent. Nevertheless, the labor tribunal took cognizance
of the letter from private respondent and treated said letter as private respondent's
appeal. In a certiorari action before this Court, we ruled that the labor tribunal acted
with grave abuse of discretion in treating a mere letter from private respondent as
private respondent's appeal in clear violation of the rules on appeal prescribed under
Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,10 we held that the labor arbiter committed grave
abuse of discretion when he failed to resolve immediately by written order a motion
to dismiss on the ground of lack of jurisdiction and the supplemental motion to
dismiss as mandated by Section 15 of Rule V of the New Rules of Procedure of the
NLRC.
In Unicane Workers Union-CLUP vs. NLRC,11 we held that the NLRC gravely
abused its discretion by allowing and deciding an appeal without an appeal bond
having been filed as required under Article 223 of the Labor Code.
In Mañebo vs. NLRC,12 we declared that the labor arbiter gravely abused its
discretion in disregarding the rule governing position papers. In this case, the parties
have already filed their position papers and even agreed to consider the case
submitted for decision, yet the labor arbiter still admitted a supplemental position
paper and memorandum, and by taking into consideration, as basis for his decision,
the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,13 we held that public respondent gravely abused its discretion
in treating the motion to set aside judgment and writ of execution as a petition for
relief of judgment. In doing so, public respondent had, without sufficient basis,
(Article 82, Labor Code)
extended the reglementary period for filing petition for relief from judgment contrary
to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available
to it by seeking reconsideration of public respondent's decision dated April 28, 1994,
which public respondent denied. With this motion for reconsideration, the labor
tribunal had ample opportunity to rectify errors or mistakes it may have committed
before resort to courts of justice can be had.14 Thus, when private respondent filed a
second motion for reconsideration, public respondent should have forthwith denied it
in accordance with Rule 7, Section 14 of its New Rules of Procedure which allows
only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. — Motions for reconsideration of any order, resolution
patent errors, provided that the motion is under oath and filed within ten (10) calendar days
from receipt of the order, resolution or decision with proof of service that a copy of the same
has been furnished within the reglementary period the adverse party and provided further, that
only one such motion from the same party shall be entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist
the parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious
reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may
involve no less than the livelihood of an employee and that of his loved ones who are
dependent upon him for food, shelter, clothing, medicine, and education. It may as well
involve the survival of a business or an industry.15
As correctly pointed out by petitioner, the second motion for reconsideration filed by private
respondent is indubitably a prohibited pleading16 which should have not been entertained at
all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends
of justice",17 especially when its disposition of a legal controversy ran afoul with a clear and
long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion.
Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of
rectifying an error or mistake. In our view, public respondent gravely abused its discretion in
taking cognizance and granting private respondent's second motion for reconsideration as it
wrecks the orderly procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping
decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not
in accord with the applicable decisions of this Court. The labor tribunal reasoned out as
follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that
complainants are taxi drivers purely on the "boundary system". Under this system the driver
takes out his unit and pays the owner/operator a fee commonly called "boundary" for the use
of the unit. Now, in the determination the existence of employer-employee relationship, the
Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October
 Labor Standards Employer-Employee Relationship
1988) has applied the following 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 of control
the employees conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most
important that the other requisites may even be disregarded". Under the control test, an
employer-employee relationship exists if the "employer" has reserved the right to control the
"employee" not only as to the result of the work done but also as to the means and methods by
which the same is to be accomplished. Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent
does not pay the drivers, the complainants herein, their wages. Instead, the drivers pay a
certain fee for the use of the vehicle. On the matter of control, the drivers, once they are out
plying their trade, are free to choose whatever manner they conduct their trade and are beyond
the physical control of the owner/operator; they themselves determine the amount of revenue
they would want to earn in a day's driving; and, more significantly aside from the fact that
they pay for the gasoline they consume, they likewise shoulder the cost of repairs on damages
sustained by the vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a
leasehold or one that is covered by a charter agreement under the Civil Code rather than the
Labor Code.18
The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,19 we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is
that of employer-employee and not of lessor-lessee. We explained that in the lease of chattels,
the lessor loses complete control over the chattel leased although the lessee cannot be reckless
in the use thereof, otherwise he would be responsible for the damages to the lessor. In the case
of jeepney owners/operators and jeepney drivers, the former exercise supervision and control
over the latter. The management of the business is in the owner's hands. The owner as holder
of the certificate of public convenience must see to it that the driver follows the route
prescribed by the franchising authority and the rules promulgated as regards its operation.
Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-
called "boundary" they pay to the owner/operator is not sufficient to withdraw the relationship
between them from that of employer and employee. We have applied by analogy the
abovestated doctrine to the relationships between bus owner/operator and bus
conductor,20 auto-calesa owner/operator and driver,21 and recently between taxi
owners/operators and taxi drivers.22 Hence, petitioners are undoubtedly employees of private
respondent because as taxi drivers they perform activities which are usually necessary or
desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance
with law. The just and authorized causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out
in Article 277 (b) of the said Code. Hence, petitioners, being employees of private respondent,
(Article 82, Labor Code)
can be dismissed only for just and authorized cause, and after affording them notice and
hearing prior to termination. In the instant case, private respondent had no valid cause
to terminate the employment of petitioners. Neither were there two (2) written
notices sent by private respondent informing each of the petitioners that they had
been dismissed from work. These lack of valid cause and failure on the part of
private respondent to comply with the twin-notice requirement underscored the
illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.23 It must be emphasized, though, that recent
judicial pronouncements24 distinguish between employees illegally dismissed prior to
the effectivity of Republic Act No. 6715 on March 21, 1989, and those whose illegal
dismissals were effected after such date. Thus, employees illegally dismissed prior to
March 21, 1989, are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after that date are granted full
backwages inclusive of allowances and other benefits or their monetary equivalent
from the time their actual compensation was withheld from them up to the time of
their actual reinstatement. The legislative policy behind Republic Act No. 6715
points to "full backwages" as meaning exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned employee during the
period of his illegal dismissal. Considering that petitioners were terminated from
work on August 1, 1991, they are entitled to full backwages on the basis of their last
daily earnings.
With regard to the amount deducted daily by private respondent from petitioners for
washing of the taxi units, we view the same as not illegal in the context of the law.
We note that after a tour of duty, it is incumbent upon the driver to restore the unit he
has driven to the same clean condition when he took it out. Car washing after a tour
of duty is indeed a practice in the taxi industry and is in fact dictated by fair
play.25 Hence, the drivers are not entitled to reimbursement of washing charges.
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of
public respondent dated October 28, 1994, is hereby SET ASIDE. The DECISION of
public respondent dated April 28, 1994, and its RESOLUTION dated December 13,
1994, are hereby REINSTATED subject to MODIFICATION. Private respondent is
directed to reinstate petitioners to their positions held at the time of the complained
dismissal. Private respondent is likewise ordered to pay petitioners their full
backwages, to be computed from the date of dismissal until their actual
reinstatement. However, the order of public respondent that petitioners be
reimbursed the amount paid as washing charges is deleted. Costs against private
respondents. SO ORDERED.
 Labor Standards Employer-Employee Relationship
G.R. No. L-37790 March 25, 1976
MAFINCO TRADING CORPORATION, petitioner,
vs.
THE HON. BLAS F. OPLE, in his capacity as Secretary of Labor, The
NATIONAL LABOR RELATIONS COMMISSION RODRIGO
REPOMANTA and REY MORALDE, respondents.
Tanada, Sanchez, Tanada & Tanada for petitioner.
Jose T. Maghari for private respondents.
Solicitor General Estelito P. Mendoza for all other respondents.
AQUINO, J.:
Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of
certiorari and prohibition in order to annul the decision of the Secretary of Labor
dated April 16, 1973. In that decision the Secretary reversed an order of the old
National Labor Relations Commission (NLRC) and held that the NLRC had
jurisdiction over the complaint lodged by the Federacion Obrera de la Industria
Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against Mafinco for having
dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The
voluminous record reveals the following facts:
Peddling contracts and their termination. — On April 30, 1968 Cosmos Aerated
Water Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal,
appointed Mafinco as its sole distributor of Cosmos soft drinks in Manila. On May
31, 1972 Rodrigo Repomanta and Mafinco executed a peddling contract whereby
Repomanta agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a
similar contract. The contracts were to remain in force for one year unless sooner
terminated by either party upon five days notice to the other. 1 The contract with
Repomanta reads as follows:
PEDDLING CONTRACT
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT, entered into by and between:
The MAFINCO TRADING CORPORATION, a domestic corporation duly
organized and existing under the laws of the Philippines, doing business at Rm. 715
Equitable Bank Bldg., Juan Luna St., Manila, under the style MAFINCO represented
in this act by its General Manager, SALVADOR C. PICA, duly authorized for the
purpose and hereinafter referred to as MAFINCO, and RODRIGO REPOMANTA,
married/single, of legal age, and a resident of 70-D Bo. Potrero, MacArthur
Highway, Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH:
WHEREAS, MAFINCO has been appointed as the exclusive distributor of
'COSMOS' Soft Drink Products for and within the City of Manila;
(Article 82, Labor Code)
WHEREAS, the PEDDLER is desirous of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by MAFINCO;
NOW THEREFORE, for and in consideration of the foregoing premises and the
covenants and conditions hereinafter set forth, the parties hereto has agreed as
follows:
1. That in consideration of the competence of the PEDDLER and his ability to
promote mutual benefits for the parties hereto, MAFINCO shall provide the
PEDDLER with a delivery truck with which the latter shall exclusively peddle the
soft drinks of the former, under the terms set forth herein;
2. The PEDDLER himself shall, carefully and in strict observance to traffic
regulations, drive the truck furnished him by MAFINCO or should he employ a
driver or helpers such driver or helpers shall be his employees under his direction
and responsibility and not that of MAFINCO, and their compensation including
salaries, wages, overtime pay, separation pay, bonus or other remuneration and
privileges shall be for the PEDDLER'S own account; The PEDDLER shall likewise
bind himself to comply with the provisions of the Social Security Act and all the
applicable labor laws in relation to his employees;
3. The PEDDLER shall be responsible for any damage to property, death or injuries
to persons or damage to the truck used by him caused by his own acts or omission or
that of his driver and helpers;
4. MAFINCO shall furnish the gasoline and oil to run the said truck in business trips,
bear the cost of maintenance and repairs of the said truck arising from ordinary wear
and tear;
5. The PEDDLER shall secure at his own expense all necessary licenses and permits
required by law or ordinance and shall bear any and all expenses which may be
incurred by him in the sales of the soft drink products covered by the contract;
6. All purchases by the PEDDLER shall be charged to him at a price of P2.52 per
case of 24 bottles, ex-warehouse; PROVIDED, However, that if the PEDDLER
purchases a total of not less than 250 cases a day, he shall be entitled further to a
Peddler's Discount of P11.00;
7. Upon the execution of this contract, the PEDDLER shall give a cash bond in the
amount of P1,500.00 against which MAFINCO shall charge the PEDDLER with any
unpaid account at the end of each day or with any damage to the truck of other
account which is properly chargeable to the PEDDLER; within 30 days after the
termination of this contract, the cash bond, after deducting proper charges, shall be
returned to the PEDDLER;
 Labor Standards Employer-Employee Relationship
8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S authorized
representative at the end of each day, and his failure to do so shall subject his cash
bond at once to answer for any unliquidated accounts;
9. This contract shall be effective up to May 31, 1973 and supersedes any or all other
previous contracts, if any, that may have been entered into between the parties;
However, either of the parties may terminate the same upon five (5) days prior notice
to the other;
10. Upon the. termination of this contract, unless the same is renewed, the delivery
truck and such other equipment furnished by MAFINCO to the PEDDLER shall be
returned by the latter in good order and workable condition, ordinary wear and tear
excepted, und shall promptly settle his outstanding account if any, with MAFINCO;
11. To assure performance by the PEDDLER of his obligation to his employees
under the Social Security Act, the applicable labor laws and for damages suffered by
third persons, PEDDLER shall furnish a performance bond of P1,000.00 in favor of
MAFINCO from a SURETY COMPANY acceptable to MAFINCO.
IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City
of Manila, Philippines, this May 31, 1972.
MAFINCO TRADING CORPORATION
By:
(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA
Peddler General Manager
(Witnesses and notarial acknowledgment are omitted)
On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the
same. The notice to Repomanta reads as follows:
Dear Mr. Repomanta:
This has reference to the Peddling Contract you executed with the Mafinco Trading
Corporation on May 31, 1972. Please be informed that in accordance with the
provisions of paragraph 9 of the said peddling contract, we are hereby serving notice
of termination thereof effective on December 12, 1972.
Yours truly,
(Sgd.) SALVADOR C. PICA
General Manager
Complaints of Repomanta and Moralde and NLRCs dismissal thereof. — Four days
later or on December 11, 1972 Repomanta and Moralde, through their union, the
FOITAF, filed a complaint with the NLRC, charging the general manager of
Mafinco with having violated Presidential Decree No. 21, issued on October 14,
(Article 82, Labor Code)
1972, which created the NLRC and which was intended "to promote industrial peace,
maximize productivity and secure social justice for all". The brief complaint reads as
follows:
Hon. Amado Gat Inciong, Chairman
National Labor Relations Commission
Phoenix Bldg., Intramuros,
Manila
Sir:
Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a
complaint against SALVADOR C. PICA, General Manager of MAFINCO
TRADING CORP. located at Room 715, Equitable Bank Bldg., Juan Luna, Manila,
for terminating union officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde,
which is a violation of the above mentioned decree.
Notice of termination is herewith attach (sic).
We anticipate your due attention and assistance.
Respectfully yours,
(Signed by National Secretary of FOITAF)
Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no
jurisdiction because Repomanta and Moralde were not its employees but were
independent contractors. It stressed that there was termination of the contract, not a
dismissal of an employee. In Repomanta's case, it pointed out that he was registered
with the Social Security System as an employer who, as a peddler, paid premiums for
his employees; that he secured the mayor's permit to do business and the
corresponding peddler's license and paid the privilege tax and that he obtained
workmen's compensation insurance for his own employees or helpers. It alleged that
Moralde was in the same situation as Repomanta.
Mafinco further alleged that the Bureau of Labor Relations denied the application of
peedlers for registration as a labor union because they were not employees but
employers in their own right of delivery helpers (Decision dated January 4, 1966 by
the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter
of Cosmos Supervisors Association-PTGWO); that the Court of Industrial Relations
in Case No. 4399-ULP, Cosmos Supervisors' Association — PTGWO vs. Manila
Cosmos Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the
peddlers were not employees of Cosmos, and that the Court of Appeals held in
Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R,
March 18, 1958 that the delivery helpers of the peddlers were not employees of
Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung
Kui, Resolution dated July 16, 1958).
 Labor Standards Employer-Employee Relationship
The complaint was referred to a factfinder who in a lengthy report dated January 22,
1973 found, after "exhaustively and impartially" considering the contentions of the
parties, that the peddlers were employers or "independent businessmen', as held by
the Court of Industrial Relations and the Court of Appeals, and that that holding has
the force of res judicata. The factfinder recommended the dismissal of the complaint.
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O.
Castro, adopted that recommendation in its order dated February 2, 1973. That order,
which analyzes the peddling contract and reviews the court rulings on the matter, is
quoted below:
The question of whether peddling contracts of the kind entered into between the
parties give rise to an employer-employee relationship is not new. Nor are the
contracts themselves of recent vintage.
For at least twenty years respondent MAFINCO and its predecessor and/or principal,
the Manila-Cosmos Aerated Water Factory, have entered into contracts with
peddlers, under the terms of which the latter buy from the former at a special price,
and sell in Manila, the former's soft drink products. The distributor provides the
peddler with a delivery truck with the distributor answering for the cost of fuel and
maintenance. If a peddler buys a certain number of cases or more a day, he is entitled
to a fixed amount of peddler's discount.
The peddler himself drives the truck but if he engages a driver or helpers, the latter
are his employees and he assumes all the responsibilities of an employer in relation
to them. He also obtains at his own expense all licenses and permits required by law
of salesmen.
The peddler clears his accounts with the distributor at the end of each day, and
unpaid accounts are charged against the cash deposit or bond which he gives the
distributor upon the execution of the peddling contract. He answers for damages
caused by him or his employees to third persons.
Ruling upon this type of contracts, and the practices and relationships that attended
its implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did
not create a relationship of employer and employee; that the peddlers under such
contract were not employees of the manufacturer or distributor, and accordingly
dismissed the complaints in the said case. (The peddler-complainants in that case
were claiming overtime pay and damages, among others.) Elevated to the Supreme
Court on review (G.R. Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in
effect affirmed, for the petition for review was dismissed by the Supreme Court 'for
being factual and for lack of merit!
(Article 82, Labor Code)
The Court of Industrial Relations is of the same persuasion. After inquiring
extensively into substantially the same terms and conditions of peddling contracts
and the practices and relationships that went into their implementation, the Court
said in Case No. 4399ULP that the peddlers of the Manila-Cosmos Aerated Water
Factory were not employees of the latter.
These precedents apply squarely to the case at hand. The complainants here have not
shown that their peddling contracts with the respondent differ in any substantial
degree from those that were at issue in the Court of Industrial Relations, the Court of
Appeals and the Supreme Court in the cases cited above. Indeed, a comparison
between the contracts involved in those cases and those in the instant litigation do
not show any difference that would warrant a different conclusion than that reached
by those courts. If at all, the additional stipulations in the present contracts strengthen
the position that the complainant peddlers are independent contractors or
businessman, not employees of the respondent.
Nor has there been shown any substantial change in the old practices of peddlers vis-
a-vis the distributor or manufacturer. The points raised by the complainants in their
pleadings regarding these practices were extensively discussed by the CIR in the
ULP case above referred to.
We are not prepared to depart from this rule of long standing. It is the law of the
case.
We therefore hold that the complainants in this case were not employees of
MAFINCO and Presidential Decree No. 21 does not I apply to them.
Complainants' appeal and the Labor Secretary's decision that they were
employees of Mafinco. — Complainants Repomanta and Moralde appealed to the
Secretary of Labor. They argued that the NLRC erred (1) in holding that they were
independent contractors and not employees; (2) in relying on the peddler's contract to
determine the existence of employer-employee relationship; (3) in anchoring its
decisions on precedents which have only persuasive force and which did not rule
squarely on the issue of employer-employee relationship, and (4) in dismissing their
complaint.
As stated at the outset, the Secretary in his decision reversed al the NLRC order. He
ruled that Repomanta and Moralde were employees of Mafinco and that,
consequently, the NLRC had jurisdiction over their complaint. The Secretary
directed the NLRC to hear the case on the merits.
The Secretary found that the complainants "were driver-salesmen of the company,
driving the trucks and distributing the products of the company" and that they were
 Labor Standards Employer-Employee Relationship
not independent contractors because they had no capital of their own. That finding
was based on the following considerations:
(1) That the contracts are Identical; (2) that the complainants were originally plant
drivers' of the company; (3) that the complainants had no capital of their own; (4)
that their delivery trucks were provided by the company; (5) that the use of the trucks
were 'exclusively' for peddling the products of the company; (6) that they were
required to observe regulations; (7) that they were required to drive the trucks; (8)
that the company furnished the gasoline and oil to run the said trucks in business
trips; (9) that the company shouldered the cost of maintenance and repair of the said
trucks arising from an ordinary wear and tear; (10) that the company required them
to secure the necessary licenses and permits; (11) that the company prohibited them
from selling the company's products higher than the fixed price of the company; and
(12) that they and their helpers were paid on commission basis.
The Secretary relied on this Court's ruling that a person who possesses no capital or
money of his own to pay his obligations to his workers but relies-entirely upon the
contract price to be paid by the company, falls short of the requisites or conditions
necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil.
941).
He observed that "behind the peddling cloak there was in fact employee-employer
relationship". He said:
While, generally, written employment contracts are held sufficient in determining the
nature of employment, such contracts, however, cannot be always held conclusive
where the actual circumstances of employment indicate otherwise. For example,
some employers, in order to avoid or evade coverage of the Workmen's
Compensation Act, enter into pseudo contracts with their employees who are named
as 'employers' or 'independent contractors'. Such 'written contracts as distinguished
from oral Agreements, purporting to make persons independent contractors, no
matter how 'adroitly framed', can be carefully scanned and the real relationship
ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe &
Inton, Workmen's Compensation Act. p. 69).
If the Peddling Contract were carefully scanned, the conclusion may be drawn that
the contract is but a device and subterfuge to evade coverage under the labor laws.
There is more than meets the eye in item 2 of the Peddling Contract which required
the peddlers to do that which the law intends the employer to have done.
In fact, such contracts, as the one in question, exempting or tending to exempt the
employers from their legal obligations to their workers are null and void under Sec. 7
of the Workmen's Compensation Act, as amended, which states:
(Article 82, Labor Code)
Any contract, regulation or device of any sort intended to exempt the employer from
all or part of the liability created by this Act shall be null and void.
To rule otherwise would be to open the floodgate to employers in this territory to
evade liabilities to their workers by simply letting contracts for the doing of their
business. 'Such construction could not only narrow the provisions of the Act, but
would defeat its intent and purposes in their entirety. (Andoyo vs. Manila Railroad
Co., supra).
The motion for the reconsideration of the decision was denied by the Secretary in his
order of July 16,1973.
The Committee's report that the peddlers are independent contractors. — On July
25, 1973 Mafinco moved for the clarification of the decision by inquiring whether
the question of employee-employer relationship would be included in the hearing on
the merits.
Action on the said motion was deferred until the receipt of the report of the
committee created to study the status of peddlers of Cosmos products. On September
3, 1973- the Secretary directed the committee composed of Ernesto Valencia,
Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of the actual
relationship existing between the Cosmos Bottling Co. and its peddlers.
The committee in its report dated September 17, 1973 arrived at the conclusion that
the relationship actually existing between Cosmos and Mafinco, on one hand, and
the peddlers of Cosmos products, on the other, is not one of employer and employee
and "that the peddlers are independent contractors".
The committee after a perusal of the record of NLRC Case No. LR-086 interviewed
twenty peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of
the interviews it 44 observed judicious adherence to impartiality and
openmindedness but with a modicum of friendliness and much of informality". The
report reads in part as follows:
(1) Implications of the 'Agreement To Peddler Soft Drinks'. — Of vital importance to
the mind of your committee is the fact that this Agreement entered into between
Cosmos and the Peddlers has, as its prefatory statement but before the enumeration
of its terms and conditions, the following:
That the Peddler has agreed to buy and sell the products of the
MANUFACTURER under the following conditions:
 Labor Standards Employer-Employee Relationship
Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers.
contains peculiarly Identical wordings. viz:
WHEREAS, the PEDDLER is desirious of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by
MAFINCO:
It is immediately clear from the beginning that the relationship that the parties would
want to establish between them is one of buyer and seller of the Cosmos Products.
Moreover, this type of Agreement or Contract has its roots since some twenty (20)
years earlier, with modifications only with respect to the factory price, the amount of
over prices or what the peddlers refer to as commission, and the amount pertaining to
the dealer's discount. which appear to vary depending upon the market demands.
We are, however, tempted to argue, as did the Peddlers, that this Agreement or
Contract might have been contrived as a device to evade responsibilities imposed
upon Cosmos or Mafinco under our labor laws as well as under other national or
municipal laws. Nevertheless, a close reading thereof will show a flaw in this line of
insistence, when we consider that this type of Agreement or Contract has been
substantially the same since the beginning of this relationship. More than this, it has
withstood the test of time by pronouncements of the CIR in ULP Case No.
4399, Cosmos Supervisors Association vs. Manila Cosmos Aerated Water Factory,
Inc.' July 17, 1967; by judicial review of the Court of Appeals in CA-G.R. Nos.
19477-R, 19478-R and 21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos
Aerated Water Factory, Inc.', promulgated on March 18, 1958; and impliedly by
resolution of the Supreme Court in G.R. Nos. L-14072 to L-14074 when the Court of
Appeals cases were appealed to that Tribunal.
But the more basic and indeed forceful ratiocination in favor of the validity of the
Agreement or Contract which covenants that the relationship between the Peddlers
and Cosmos or Mafinco is one of buyer and seller of the Cosmos Products on the
part of the Peddlers, and, therefore, one of an independent contractorship, finds
substantive support in our Civil Code which provides: (here arts. 1370 and 1374 of
the Civil Code regarding interpretation of contracts are quoted).
For its adjective interpretation, our Rules of Court specifically provides: (Here parol
evidence rule in see. 7, Rule 130, Rules of Court is quoted)
It must b restated at this point for purposes of emphasis that the validity of the
aforesaid Agreement or Contract has not been seriously assailed by the parties. In
fact, their rallying cause was the Agreement or Contract itself. To strengthen these
provisions of the Civil Code and the Rules of Court, stabilized jurisprudence have
(Article 82, Labor Code)
held that it is elementary rule of contract that the laws in force at the time the
contract was made must govern its interpretation and application; that the terms of
the contract, where unambiguous, are conclusive, in the absence of averment and
proof of mistake, the question being, not what intention existed in the minds of the
parties, but what intention is expressed by the language used; that interpretation of an
agreement does not include its modifications or the creation of a new or different
one; that Courts cannot make for the parties better agreements than they themselves
have been satisfied to make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties; and that there is no right to interpret an
agreement as meaning something different from what the parties intended as
expressed by the language they saw fit to employ.
xxx xxx xxx
(1) The selection and engagement of the employees.-Nothing in the Agreement to
Peddler Soft Drinks in the case of Cosmos and in the Peddling Contract in the case
of Mafinco, will reveal and we cannot logically infer therefrom, that the Peddlers
were engaged as employees of Cosmos or Mafinco. The selection of the Peddlers
who will buy and sell Cosmos products is left entirely between the parties; it is not
the sole prerogative of either one of the parties. There must be meeting of the minds
in order to consummate the Agreement or Contract and no evidence of coercion or
imposition of the will of one over the other is evident or apparent from the Peddlers'
or Managements' interviews had by the members of your Committee. This test,
therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments
to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the
Agreement or Contract itself provides that the Peddlers can hire helpers and drivers
under their direction and responsibility, and to whom they shall be liable for payment
of 'salaries, wages, overtime pay, separation pay, bonus and other remuneration and
privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M.
Fong Kui, who are peddlers in their own right. This evidently shows the discretion
granted the peddlers to hire employees of their own.
(2) The payment of wages. — On the basis of the clear terms of the Agreement or
Contract, no mention is made of the wages of the Peddlers; neither can an inference
be made that any salary or wage is given to Peddlers. In the interviews, however,
with the Peddlers, they vehemently take the position that the 'dealer's discount' which
was given to them at the rate of Pll.50 in excess of 200 cases of Cosmos products
they sell a day, constitutes their 'wages'. The term 'wages' as defined in Section 2 of
the Minimum Wage Law (Rep. Act No. 602, as amended) is as follows:
(g) 'Wage' paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece, commission basis, or other method of calculating
 Labor Standards Employer-Employee Relationship
the same, which is payable by an employer to an under a written or unwritten
contract of employement for work done or to be done or for services rendered or to
be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee. ...
Section 10 (k) of the same law provides as follows:
(k) Notification of wage conditions. — It shall be the duty of every employer to
notify his employees at the time of hiring of the wage conditions under which they
are employed, which shall include the following particulars:
(1) The rate of wages payable;
(2) The method of calculation of wages;
(3) The periodicity of wage payment; the day, the hour and pIace of payment; and
(4) Any change with respect to any of the foregoing items.
To the Committee's mind, all these requirements have not been shown to exist in the
relationship between the Peddlers and the Cosmos or Mafinco. If it were true that the
Pedders' 'dealer's discount' is in the nature of wages, then they must be notifed fully
of the wage conditions. Moreover, such 'wages' must be paid to them periodically at
least once every two weeks or twice a month. (See Par. (h) of See. 10 of Act No.
602, as amended). The absence of such notification to the Peddlers and the lack of
periodicity of such payment in the manner and procedure contemplated in the
Minimum Wage Law destroy, quiet evidently, their allegation that the 'dealer's
discount' was their 'wage'. Take note that the 'dealer's discount' was given only about
a week after the end of the month, and from the evidence submitted by Cosmos, it
appears clearly that the 'dealer's discount' varies from month to month. Thus, the
earnings of Mr. Salvador Abonales, who is a Peddler, from January to August, 1973,
amounted to P12,520.70, while that of Mr. Alberto S. Garcia, for the same period,
amounted to P13,633.42, and 4 their earnings every month vary decisively. This
factor defeats factually the insistence of the Peddlers that they are employees of
Cosmos or Mafinco.
Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers
are taken from the overprice or what is ordinarily termed as 'commission' of ten
centavos (P0.10) per case that they get-a factor which indicates that they are
themselves employers of their helpers. In addition, the Peddlers are reported as
Employers of these helpers with the Social Security System, and that they also
purchase workmen's compensation policies in their names as Employers of their own
helpers for purposes of workmen's compensation insurance of their liabilities, which
are all in accordance with the terms and conditions of the Agreement or Contract and
indicative of an attribute of one who is an independent merchant.
(3) The power of dismissal. — In the case of 'Rodrigo Repomanta and Rey Moralde
vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one of our
(Article 82, Labor Code)
bases for this study, the complainants therein appear to have complained before the
National Labor Relations Commission for being allegedly illegally dismissed or that
their services were terminated without cause. A search of the alleged dismissal
however shows that the Identical letters both dated December 7, 1972 addressed to
the said complainants were not actually what complainants pictured them to be, but
the termination of the peddling in accordance with paragraph 9 of said Contract.
xxx xxx xxx
Thus, complainants' services were not terminated, only their Peddling Contracts with
Mafinco were. The power of dismissal is not lodged with either Mafinco or Cosmos,
for based on the Agreement or Contract none whatsoever exists. Certainly, to
attribute a power of dismissal to Cosmos or Mafinco where none exists is careless
imprudence and a height of inaccuracy. This power of dismissal by Cosmos or
Mafinco is not countenanced in the Agreement or Contract.
There is, however, an allegation by the Peddlers that the hiring and firing of the
helpers ultimately rest on Cosmos or Mafinco. This allegation nevertheless, is
controverted by Cosmos and Mafinco. Nonetheless, we checked the basic document
— the Agreement or Contract — and we find that the hiring and, impliedly firing, we
is a prerogative of the Peddlers and not of Cosmos or Mafinco.
(4) The power to control the employee's conduct. — From the interviews had by
your Committee with both the Peddlers and the representatives of Cosmos and
Mafinco, we gather that the following findings on the power of control are
substantially correct:
(a) That the delivery trucks assigned to the Peddlers are available to them early in the
morning and are free to get them, which they usually do between 5:30 A.M. to 6:30
A.M. There was no compulsion on the part of the Peddlers to report for work at that
time, as in fact, they did not sign any time record. The practice of getting the delivery
trucks early in the morning is more beneficial to the Peddlers than to Cosmos or
Mafinco since they can finish the peddling of Cosmos products much earlier and
spend the rest of the day at their own pleasure. The signing of the 'logbooks' is both
pertinent and necessary since the trucks used in the delivery of Cosmos products are
owned by Cosmos or Mafinco and are simply utilized by Peddlers as a measure of
convenience and for advertising purposes. But peddlers are not precluded from
getting trucks of their own should they so desire.
(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in definite
areas routes or zones, not so much of supervision over Peddlers, since their areas,
routes or zones were already agreed upon or pre-arranged among them through the
Cosmos Peddlers Association, Inc. of which all Peddlers are members, as principally
for market analysis since soft drinks selling is a highly competitive business, and
 Labor Standards Employer-Employee Relationship
also to inquire or check on sales, and the result of which, report is made direct to the
Office of Cosmos or Mafinco.
(c) That the use of the uniform does not seem to be an imposition by management of
Cosmos or Mafinco upon the Peddlers, but a voluntary arrangement among the
Peddlers themselves. For, from the documents submitted to this Committee, it
appears that the Cosmos Peddlers Association, in a meeting held on August 5, 1967,
adopted a resolution to 'always wear their uniform while in the performance of their
sales work,' and in their meeting on January 25, 1969, it adopted another resolution
penalizing Peddlers who failed to wear their uniform in the amount of P2.00 per
violation. Certainly, the resolutions of the Cosmos Peddlers Association, an
independent association of Peddlers and duly registered with the Securities and
Exchange Commission, and possessing an entirely distinct existence, cannot be taken
as impositions from Cosmos or Mafinco.
(d) That the matter of turning in of sales of collection which, if found short, is
charged against the Peddler's cash bond, is to the mind of the Committee, giving
effect to the valid terms and conditions of the Agreement or Contract, and also an
ordinary business practice which necessarily requires liquidation of the day's
accounts. We do not see any evidence of control on the part of Cosmos or Mafinco
over the activities, including the sales, of the Cosmos products by the Peddlers
themselves who are, apparently, left to their own choices of routes, areas or zones as
pre-arranged, with no definite, much less supervised, time schedule.
(e) That in the matter of reprimand or discipline which the peddlers attempt to
project when they failed to report for work, your Committee found no substantial
evidence on this point. The evidence shows that the peddlers are free to choose their
time. Obviously, any absence that they may incur means so much reduction from
their earnings. Thus, if their attention is incidentally called on this matter it is for the
observance of their agreements which is present in any contractual relations.
As to the aspect of employer-employee relation, therefore, between Cosmos or
Mafinco and the Peddlers, your Committee does not have sufficient basis to
reasonably sustain the stand of the Peddlers that there is such relationship.
(c) Attributes of an independent contractor. — As a countercheck, as it were, to the
issue of employer-employee relationship your committee has taken the task of testing
such relationship against the attributes of an independent contractor which, from the
interviews and documents submitted by the parties, appear to exists on the part of the
Peddlers. The earlier case of Andoyo vs. Manila Railroad Co., G.R. No. 34722,
promulgated on March 28, 1932, furnishes us the definition of an 'independent
contractor.' Our Supreme Court of pre-war composition, ruled:
(Article 82, Labor Code)
An independent contractor is one who exercises independent employment and
contracts to do a piece of work according to his own methods and without being
subject to control of his employer except as to the resuIt of thework. A person who
has no capital or money of his own to pay his laborers or to comply with his
obligations to them, who files no bond to answer for the fulfillment of his contract
with his employer, falls short of the requisites or conditions necessary to classify him
as independent contractor.
These requisites and conditions were reiterated in the postwar cases of Philippine
Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November
29, 1954, and Koppel (Phil.), Inc. vs. Darlucio et, al., G.R. No. L-14903,
promulgated on August. 29, 1960. Analyzing the definition of 'independent
contractor', the following may be gathered from the relationship between the
Peddlers, on the one hand, and Cosmos or Mafinco, on the other:
(1) Peddlers contract to sell and buy Cosmos products from Cosmos or Mafinco, the
latter furnishing the delivery truck, but the former sell Cosmos products according to
their own methods, subject to the pre-arranged routes, areas and zones, and go back
to the Company compound to return the delivery truck and to make accounting of the
day's sales collection at any time in the morning or in the afternoon. Essentially,
control, if at all, extends only as to observance of traffic regulations which is
inherent in ownership of the delivery truck by Cosmos or Mafinco and the end result
which is the liquidation of the sales collection. Control over the details of the
Peddlers' sales activities seems to be farfetched in this case.
(2) Capital or money of the Peddlers to pay their own helpers is evidently within
their prerogative, although it appears that the wages of helpers are uniform at P6.00
per trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers
constitute their capital? For big-time businessmen, this small amount may not be
considered capital, but when it is taken as a 'deposit on consignment' since the same
answers for any deficiencies that the Peddlers may incur during the day's sales
collection, then it can be taken to mean 'capital' within its signification that it
allocates to every day business dealing. The amount of capital, to us, is immaterial; it
is the purpose for which the same is deposited that is most significant.
(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and
Peddling Contract to put up not only the cash bond of P1,500.00, but also a
performance bond of P1,000.00 as embodied in said Agreement to Peddler Soft
Drinks as follows:
(4) To assure performance by the PEDDLER of his obligation to his employees
under the Social Security Act, the applicable labor laws, and for damages suffered by
third persons PEDDLER shall furnish a performance bond of P1,000.00 in favor of
 Labor Standards Employer-Employee Relationship
the MANUFACTURER from a surety Company acceptable to the
MANUFACTURER. And, in case Performance Bond within 30 days from the date
of signing of this Contract, such failure shall be sufficient ground for the
MANUFACTURER to suspend the business relationship with the Peddler until the
Peddler complies with this provision.
Again, to the mind of your Committee, the amount of the Performance Bond is not
so relevant and material as to the purpose for which the same is executed- which is to
assure performance of the Peddlers' obligations as employer of his helpers. This is an
attribute of an independent contractor to which the Peddlers are bound under the
Agreement or Contract.
(4) Peddlers are doing business for themselves since they took out licenses in the
City of Manila, and have paid their corresponding professional or occupation tax to
the Bureau of Internal Avenue. This fact strengthens the Committee findings that the
peddlers are carrying on a business as independent merchants.
The Secretary in his resolution of October 18, 1973 ignored the committee's
conclusion. He clarified that the NLRC should determine whether the two
complainants were illegally dismissed and that the jurisdictional issue should not be
taken up anymore.
The instant petition; the issue and the ruling thereon. — Mafinco filed the instant
actions on November 14, 1973. It prayed for a declaration that the Secretary of Labor
and the NLRC had no jurisdiction to entertain the complaints of Repomanta and
Moralde; that the Secretary's decision should be set aside, and that the NLRC and the
Secretary be enjoined from further proceeding in NLRC Case No. LR-086.
Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21
the Secretary's decision "is appealable" to the President of the Philippines (Nation
Multi Service Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274).
However, under section 22 of the old NLRC regulations, an appeal to the President
should be made only "in national interest cases".
On the other hand, judicial review of the decision of an administrative agency or
official exercising quasi-judicial functions is proper in cases of lack of jurisdiction,
error of law, grave abuse of discretion, fraud or collusion or in case the
administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel
Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56;
Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General,
L-21352, November 29, 1966, 18 SCRA 877, 891).
(Article 82, Labor Code)
After the parties had submitted their illuminating memoranda, Mafinco filed a
motion in this Court for the dismissal of the complaint in the defunct NLRC on three
grounds, to wit: (1) that the NLRC had no jurisdiction over the case because
Repomanta and Moralde had not sought reinstatement or backwages; (2) that the
employer's failure to secure written clearance from the Secretary of Labor before
dismissing an employee might constitute a crime punishable under article 327 of the
Labor Code and not mere contempt, as contemplated in section 10 of Presidential
Decree No. 21, and (3) that the contempt provisions of that decree were abrogated by
the Labor Code.
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale
Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was
held that the regular court, not the NLRC, has jurisdiction over an employee's action
for damages against his employer's act of demoting him.
Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed
out that, inasmuch as their complaint is pending in the new NLRC, this Court cannot
dismiss it. They also observed that article 327 was eliminated from the Labor Code
which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains only
292 articles. Article 327 was superseded by article 278 of the amended Code.
The truth is that Mafinco's motion merely adduced additional grounds to support its
stand that the Secretary of Labor had no jurisdiction over the complaint of
Repomanta and Moralde.
This case was not rendered moot by the Labor Code. Although the Code abolished
the old NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases
pending before the old NLRC should be transferred to, and processed by, the
corresponding labor relations division or the new NLRC and should be decided in
accordance with Presidential Decree No. 21 and the rules and regulations adopted
thereunder (Art. 290. See Sec. 5, P.D. No. 626).
The issue is whether the dismissal of Repomanta and Moralde was within the
jurisdiction of the old NLRC. If, as held by the old NLRC, it had no jurisdiction over
their complaint because they were not employees of Mafinco but independent
contractors, then the Secretary of Labor had no jurisdiction to remand the case to the
NLRC for a hearing on the merits of the complaint.
Hence, the crucial issue is whether Repomanta and Moralde were employees of
Mafinco under the peddling contract already quoted. Is the contract an employment
contract or a contract to sell or distribute Cosmos products?
 Labor Standards Employer-Employee Relationship
The question of whether an employer-employee relationship exists in a certain
situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried
to avoid the bringing about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay
and unionism.
Presidential Decree No. 21 provides:
SEC. 2. The Commission shall have original and exclusive jurisdiction over the
following:
1) All matters involving employee-employer relations including all disputes and
grievances which may otherwise lead to strikes and lockouts under Republic Act No.
875;
xxx xxx xxx
SEC. 10. The President of the Philippines, on recommendation of the Commission
and the Secretary of Labor, may order the arrest and detention of any person held in
contempt by the Commission for non-compliance and defiance of any subpoena,
order or decision duly issued by the Commission in accordance with this Decree and
its implementing rules and regulations and for any violation of the provisions of this
Decree.
SEC. 11. No employer may shut down his establishment or dismiss or terminate the
services of regular employees with at least one year of service without the written
clearance of the Secretary of , Labor.
The Solicitor General, as counsel for the old NLRC and the Secretary of Labor,
argues that the question of whether Repomanta and Morale are independent
contractors or employees is factual in character and cannot be resolved by merely
construing the peddling contracts; that other relevant facts aliunde or dehors the said
contracts should be taken into account, and that the contracts were a part of an
"intricate network of devices (of Mafinco and Cosmos) developed. and perfected
through the years to conceal the true nature of their relationship to their sales
agents".
Repomanta and Moralde contend that their peddling contracts were terminated
because of their activities in organizing a union among the peddlers. Annexed to
their memorandum is a joint affidavit of sixty-three sales agents of Cosmos products
who described therein the nature of their work, the organization of their union and
the dismissal of Repomanta and Moralde. Annexed to their answer is Resolution No.
921 of the Social Security Commission dated November 16, 1972 in SSS Case No.
602 wherein it was held that peddlers and their helpers were employees of Cosmos.
(Article 82, Labor Code)
Like the Solicitor General, Repomanta and Moralde harp on the argument that the
peddling contracts were a scheme to camouflage an employer-employee relationship
and thus evade the coverage of labor laws.
The parties in their pleadings and memoranda injected conflicting factual allegations
to support their diametrically opposite contentions. From the factual angle, the case
has become highly controversial.
In a certiorari and prohibition case, like the instant case, only legal issues affecting
the jurisdiction of the tribunal, board or officer involved may be resolved on the
basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require
that in the verified petition for certiorari, mandamus and prohibition the petitioner
should allege "facts with certainty".
In this case the facts have become uncertain. Controversial evidentiary facts have
been alleged. What is certain and indubitable is that a notarized peddling contract
was executed.
This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the
jurisdictional issue on the basis of the parties' contradictory factual submissions. The
record has become voluminous because of their efforts to persuade this Court to
accept their discordant factual statements.
Pro hac vice the issue of whether Repomanta and Moralde were employees of
Mafinco or were independent contractors should be resolved mainly in the light of
their peddling contracts. A different approach would lead this Court astray into the
field of factual controversy where its legal pronouncements would not rest on solid
grounds.
A restatement of the provisions of the peddling contract is necessary in order to find
out whether under that instrument Repomanta and Moralde were independent
contractors or mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddler with a delivery
truck to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler
employ a driver and helpers, he would be responsible for their compensation and
social security contributions and he should comply with applicable labor laws "in
relation to his employees" (Par. 2).
The peddler would be responsible for any damage to persons or property or to the
truck caused by his own acts or omissions or those of his driver and helpers (Par. 3).
Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The
 Labor Standards Employer-Employee Relationship
peddler would secure at his own expense the necessary licenses and permits and bear
the expenses to be incurred in the sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-
warehouse. Should he purchase at least 250 cases a day, he would be entitled to a
peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in
the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash
bond of P1,000 to answer for his obligations to his employees (Par. 11). He should
liquidate his accounts at the end of each day (Par. 8). The contract would be effective
up to May 31, 1973. Either party might terminate it upon five days' prior notice to
the other (Par. 9).
We hold that under their peddling contracts Repomanta and Moralde were not
employees of Mafinco but were independent contractors as found by the NLRC and its fact-
finder and by the committee appointed by the Secretary of Labor to look into the status of
Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with their own
capital and employees. Ordinarily, an employee or a mere peddler does not execute a formal
contract of employment. He is simply hired and he works under the direction and control of
the employer.
Repomanta and Moralde voluntarily executed with Mafinco formal peddling contracts which
indicate the manner in which they would sell Cosmos soft drinks. That Circumstance signifies
that they were acting as independent businessmen. They were to sign or not to sign that
contract. If they did not want to sell Cosmos products under the conditions defined in that
contract; they were free to reject it.
But having signed it, they were bound by its stipulations and the consequences thereof under
existing labor laws. One such stipulation is the right of the parties to terminate the contract
upon five days' prior notice (Par. 9). Whether the termination in this case was an unwarranted
dismissal of an employee, as contended by Repomanta and Moralde, is a point that cannot be
resolved without submission of evidence. Using the contract itself as the sole criterion, the
termination should perforce be characterized as simply the exercise of a right freely stipulated
upon by the parties.
"In determining the existence of employer-employee relationship, the following elements are
generally considered, namely: (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 employees'
conduct-although the latter is the most important element" (Viana vs. Al-Lagadan and Piga, 99
Phil. 408, 411, citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercises independent employment
and contracts to do a piece of work according to his own methods and without being subject to
control of his employer except as to the result of the work" (Mansal vs. P.P. Gocheco Lumber
Co., supra).
(Article 82, Labor Code)
Among the factors to be considered are whether the contractor is carrying on an independent
business; whether the work is part of the employer's general 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 the work to another; the power to terminate the relationship; the existence of a
contract for the performance of a specified piece of work; the control and supervision of the
work; the employer's powers and duties with respect to the hiring, firing, and payment of the
contractor's servants; the control of the premises; the duty to supply the premises, tools,
appliances, material and labor; and the mode, manner, and terms of payment. (56 C.J.S. 46).
Those tests to determine the existence of an employer-employee relationship or whether the
person doing a particular work for another is an independent contractor cannot be
satisfactorily applied in the instant case. It should be obvious by now that the instant case is a
penumbral, sui generis case lying on the shadowy borderline that separates an employee from
an independent contractor.
In determining whether the relationship is that of employer and employee or whether one is an
independent contractor, "each case must be determined on its own facts and all the features of
the relationship are to be considered" (56 C.J.S. 45). We are convinced that on the basis of the
peddling contract, no employer-employee relationship was created. Hence, the old NLRC had
no jurisdiction over the termination of the peddling contract.
However, this ruling is without prejudice to the right of Repomanta and Moralde and the other
peddlers to sue in the proper Court of First Instance and to ask for a reformation of the
instrument evidencing the contract or for its annulment or to secure a declaration that,
disregarding the peddling contract, the actual juridical relationship between them and Mafinco
or Cosmos is that of employer and employee. In that action a fulldress trial may be held and
the parties may introduce the evidence necessary to sustain their respective contentions.
Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had acted
oppressively towards their peddlers, as contemplated in article 1701 of the Civil Code, then
they should file the proper action for damages in the regular courts. Where there is a right,
there is a remedy (Ubi jus, ubi remedium).
WHEREFORE, the decision, order and resolution of the Secretary of Labor in NLRC Case
No. LR-086 dated April 16, July 16 and October 18, 1973, respectively, are set aside and the
order of the NLRC dated February 2, 1973, dismissing the case for lack of jurisdiction, is
affirmed. No costs.
SO ORDERED.