1. G.R. No.

122226 March 25, 1998

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner,
vs.
HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES, INC. respondents.
MENDOZA, J.:
Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the union filed a petition for
certification election on behalf of the route managers at Pepsi-Cola Products Philippines, Inc. However, its petition was
denied by the med-arbiter and, on appeal, by the Secretary of Labor and Employment, on the ground that the route
managers are managerial employees and, therefore, ineligible for union membership under the first sentence of Art. 245
of the Labor Code, which provides:
Ineligibility of managerial employees to join any labor organization; right of supervisory employees. — Managerial
employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.
Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated in the order dated
September 22, 1995, of the Secretary of Labor and Employment. Its petition was dismissed by the Third Division for lack
of showing that respondent committed grave abuse of discretion. But petitioner filed a motion for reconsideration,
pressing for resolution its contention that the first sentence of Art. 245 of the Labor Code, so far as it declares
managerial employees to be ineligible to form, assist or join unions, contravenes Art. III, §8 of the Constitution which
provides:
The right of the people, including those employed in the public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be abridged.
For this reason, the petition was referred to the Court en banc.
The Issues in this Case
Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products Philippines, Inc. are
managerial employees and (2) whether Art. 245, insofar as it prohibits managerial employees from forming, joining or
assisting labor unions, violates Art. III, §8 of the Constitution.
In resolving these issues it would be useful to begin by defining who are "managerial employees" and considering the
types of "managerial employees."
Types of Managerial Employees
The term "manager" generally refers to "anyone who is responsible for subordinates and other organizational
resources."1 As a class, managers constitute three levels of a pyramid:
Top management
————————
Middle
Management
——————————
First-Line
Management
(also called
Supervisor)
====================
Operatives
or
Operating
Employees
FIRST-LINE MANAGERS — The lowest level in an organization at which individuals are responsible for the work of
others is called first-line or first-level management. First-line managers direct operating employees only; they do not
supervise other managers. Examples of first-line managers are the "foreman" or production supervisor in a
manufacturing plant, the technical supervisor in a research department, and the clerical supervisor in a large
office. First-level managers are often called supervisors.
MIDDLE MANAGERS — The term middle management can refer to more than one level in an organization. Middle
managers direct the activities of other managers and sometimes also those of operating employees. Middle
managers' principal responsibilities are to direct the activities that implement their organizations' policies and to

1
balance the demands of their superiors with the capacities of their subordinates. A plant manager in an electronics
firm is an example of a middle manager.
TOP MANAGERS — Composed of a comparatively small group of executives, top management is responsible for the
overall management of the organization. It establishes operating policies and guides the organization's interactions
with its environment. Typical titles of top managers are "chief executive officer," "president," and "senior vice-
president." Actual titles vary from one organization to another and are not always a reliable guide to membership in
the highest management classification.2
As can be seen from this description, a distinction exists between those who have the authority to devise, implement
and control strategic and operational policies (top and middle managers) and those whose task is simply to ensure
that such policies are carried out by the rank-and-file employees of an organization (first-level managers/supervisors).
What distinguishes them from the rank-and-file employees is that they act in the interest of the employer in
supervising such rank-and-file employees.
"Managerial employees" may therefore be said to fall into two distinct categories: the "managers" per se, who
compose the former group described above, and the "supervisors" who form the latter group. Whether they belong
to the first or the second category, managers, vis-a-vis employers, are, likewise, employees.3
The first question is whether route managers are managerial employees or supervisors.
Previous Administrative Determinations of
the Question Whether Route Managers
are Managerial Employees
It appears that this question was the subject of two previous determinations by the Secretary of Labor and
Employment, in accordance with which this case was decided by the med-arbiter.
In Case No. OS-MA-10-318-91, entitled Worker's Alliance Trade Union (WATU) v. Pepsi-Cola Products Philippines, Inc.,
decided on November 13, 1991, the Secretary of Labor found:
We examined carefully the pertinent job descriptions of the subject employees and other documentary evidence on
record vis-a-vis paragraph (m), Article 212 of the Labor Code, as amended, and we find that only those employees
occupying the position of route manager and accounting manager are managerial employees. The rest i.e. quality
control manager, yard/transport manager and warehouse operations manager are supervisory employees.
To qualify as managerial employee, there must be a clear showing of the exercise of managerial attributes under
paragraph (m), Article 212 of the Labor Code as amended. Designations or titles of positions are not controlling. In the
instant case, nothing on record will support the claim that the quality control manager, yard/transport manager and
warehouse operations manager are vested with said attributes. The warehouse operations manager, for example,
merely assists the plant finance manager in planning, organizing, directing and controlling all activities relative to
development and implementation of an effective management control information system at the sale offices. The
exercise of authority of the quality control manager, on the other hand, needs the concurrence of the manufacturing
manager.
As to the route managers and accounting manager, we are convinced that they are managerial employees. Their job
descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92. entitled In Re: Petition for Direct Certification
and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-Cola Products Phils. Inc., as follows:
The issue brought before us is not of first impression. At one time, we had the occasion to rule upon the status of
route manager in the same company vis a vis the issue as to whether or not it is supervisory employee or a
managerial employee. In the case of Workers Alliance Trade Unions (WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-
MA-A-10-318-91 ), 15 November 1991, we ruled that a route manager is a managerial employee within the context of
the definition of the law, and hence, ineligible to join, form or assist a union. We have once more passed upon the
logic of our Decision aforecited in the light of the issues raised in the instant appeal, as well as the available
documentary evidence on hand, and have come to the view that there is no cogent reason to depart from our earlier
holding. Route Managers are, by the very nature of their functions and the authority they wield over their
subordinates, managerial employees. The prescription found in Art. 245 of the Labor Code, as amended therefore,
clearly applies to them.4
Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission,5 however, petitioner argues that these
previous administrative determinations do not have the effect of res judicata in this case, because "labor relations
proceedings" are "non-litigious and summary in nature without regard to legal technicalities."6 Nasipit Lumber Co.
involved a clearance to dismiss an employee issued by the Department of Labor. The question was whether in a
subsequent proceeding for illegal dismissal, the clearance was res judicata. In holding it was not, this Court made it
clear that it was referring to labor relations proceedings of a non-adversary character, thus:

2
The requirement of a clearance to terminate employment was a creation of the Department of labor to carry out the
Labor Code provisions on security of tenure and termination of employment. The proceeding subsequent to the filing
of an application for clearance to terminate employment was outlined in Book V, Rule XIV of the Rules and
Regulations Implementing the Labor Code. The fact that said rule allowed a procedure for the approval of the
clearance with or without the opposition of the employee concerned (Secs. 7 & 8), demonstrates the non-litigious and
summary nature of the proceeding. The clearance requirement was therefore necessary only as an expeditious shield
against arbitrary dismissal without the knowledge and supervision of the Department of Labor. Hence, a duly
approved clearance implied that the dismissal was legal or for cause (Sec. 2). 7
But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early as 1956,
in Brillantes v. Castro,8 we sustained the dismissal of an action by a trial court on the basis of a prior administrative
determination of the same case by the Wage Administration Service, applying the principle of res judicata. Recently,
in Abad v. NLRC9 we applied the related doctrine of stare decisis in holding that the prior determination that certain
jobs at the Atlantic Gulf and Pacific Co., were project employments was binding in another case involving another
group of employees of the same company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its
opinion that "the doctrine of res judicata applies . . . to judicial or quasi judicial proceedings and not to the exercise of
administrative powers."10 Now proceedings for certification election, such as those involved in Case No. OS-M-A-10-
318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature and, therefore, decisions rendered in such proceedings
can attain finality.11
Thus, we have in this case an expert's view that the employees concerned are managerial employees within the
purview of Art. 212 which provides:
(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.
All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of
this Book.
At the very least, the principle of finality of administrative determination compels respect for the finding of the
Secretary of Labor that route managers are managerial employees as defined by law in the absence of anything to
show that such determination is without substantial evidence to support it. Nonetheless, the Court, concerned that
employees who are otherwise supervisors may wittingly or unwittingly be classified as managerial personnel and thus
denied the right of self-organization, has decided to review the record of this case.
DOLE's Finding that Route Managers are
Managerial Employees Supported by
Substantial Evidence in the Record
The Court now finds that the job evaluation made by the Secretary of Labor is indeed supported by substantial
evidence. The nature of the job of route managers is given in a four-page pamphlet, prepared by the company, called
"Route Manager Position Description," the pertinent parts of which read:
A. BASIC PURPOSE
A Manager achieves objectives through others.
As a Route Manager, your purpose is to meet the sales plan; and you achieve this objective through the skillful
MANAGEMENT OF YOUR JOB AND THE MANAGEMENT OF YOUR PEOPLE.
These then are your functions as Pepsi-Cola Route Manager. Within these functions — managing your job and
managing your people — you are accountable to your District Manager for the execution and completion of various
tasks and activities which will make it possible for you to achieve your sales objectives.
B. PRINCIPAL ACCOUNTABILITIES
1.0 MANAGING YOUR JOB
The Route Manager is accountable for the following:
1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.
1.1.5 maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.

3
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to maximize
utilization of resources.
1.2 Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required on an accurate and
timely basis.
1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not limited to
shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection; accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0 MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:
2.1 Route Sales Team Development
2.1.2 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at least 3 days a
week, to be supported by required route ride documents/reports & back check/spot check at least 2 days a week to
be supported by required documents/reports.
2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of effective sales and
merchandizing [sic] techniques of the salesmen and helpers. Conduct group training at least 1 hour each week on a
designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company's reputation through strict adherence to PCPPI's code of conduct and the universal
standards of unquestioned business
ethics.12
Earlier in this opinion, reference was made to the distinction between managers per se (top managers and middle
managers) and supervisors (first-line managers). That distinction is evident in the work of the route managers which
sets them apart from supervisors in general. Unlike supervisors who basically merely direct operating employees in
line with set tasks assigned to them, route managers are responsible for the success of the company's main line of
business through management of their respective sales teams. Such management necessarily involves the planning,
direction, operation and evaluation of their individual teams and areas which the work of supervisors does not entail.
The route managers cannot thus possibly be classified as mere supervisors because their work does not only involve,
but goes far beyond, the simple direction or supervision of operating employees to accomplish objectives set by those
above them. They are not mere functionaries with simple oversight functions but business administrators in their
own right. An idea of the role of route managers as managers per se can be gotten from a memo sent by the director
of metro sales operations of respondent company to one of the route managers. It reads:13
03 April 1995
To : CESAR T . REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE
Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an increase of 10%. This
represents the added managerial responsibilities you will assume due to the recent restructuring and streamlining of
Metro Sales Operations brought about by the continuous losses for the last nine (9) months.
Let me remind you that for our operations to be profitable, we have to sustain the intensity and momentum that your
group and yourself have shown last March. You just have to deliver the desired volume targets, better negotiated
concessions, rationalized sustaining deals, eliminate or reduced overdues, improved collections, more cash accounts,
controlled operating expenses, etc. Also, based on the agreed set targets, your monthly performance will be closely
monitored.
You have proven in the past that your capable of achieving your targets thru better planning, managing your group as
a fighting team, and thru aggressive selling. I am looking forward to your success and I expect that you just have to
exert your doubly best in turning around our operations from a losing to a profitable one!
Happy Selling!!
(Sgd.) R.M. SANTOS
The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug, although entitled "RM's
Job Description," is only a summary of performance standards. It does not show whether route managers are
managers per se or supervisors. Obviously, these performance standards have to be related to the specific tasks given
to route managers in the four-page "Route Manager Position Description," and, when this is done, the managerial

4
nature of their jobs is fully revealed. Indeed, if any, the card indicates the great latitude and discretion given to route
managers — from servicing and enhancing company goodwill to supervising and auditing accounts, from trade (new
business) development to the discipline, training and monitoring of performance of their respective sales teams, and
so forth, — if they are to fulfill the company's expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in
nature but requires the use of independent judgment." Thus, their only power is to recommend. Certainly, the route
managers in this case more than merely recommend effective management action. They perform operational, human
resource, financial and marketing functions for the company, all of which involve the laying down of operating policies
for themselves and their teams. For example, with respect to marketing, route managers, in accordance with B.1.1.1
to B.1.1.9 of the Route Managers Job Description, are charged, among other things, with expanding the dealership
base of their respective sales areas, maintaining the goodwill of current dealers, and distributing the company's
various promotional items as they see fit. It is difficult to see how supervisors can be given such responsibility when
this involves not just the routine supervision of operating employees but the protection and expansion of the
company's business vis-a-vis its competitors.
While route managers do not appear to have the power to hire and fire people (the evidence shows that they only
"recommended" or "endorsed" the taking of disciplinary action against certain employees), this is because this
is a function of the Human Resources or Personnel Department of the company.14 And neither should it be presumed
that just because they are given set benchmarks to observe, they are ipso facto supervisors. Adequate control
methods (as embodied in such concepts as "Management by Objectives [MBO]" and "performance appraisals") which
require a delineation of the functions and responsibilities of managers by means of ready reference cards as here,
have long been recognized in management as effective tools for keeping businesses competitive.
This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code, prohibiting managerial
employees from forming, assisting or joining any labor organization, is constitutional in light of Art. III, §8 of the
Constitution which provides:
The right of the people, including those employed in the public and private sectors, to form unions, associations, or
societies for purposes not contrary to law shall not be abridged.
As already stated, whether they belong to the first category (managers per se) or the second category (supervisors),
managers are employees. Nonetheless, in the United States, as Justice Puno's separate opinion notes, supervisors
have no right to form unions. They are excluded from the definition of the term "employee" in §2(3) of the Labor-
Management Relations Act of 1947.15 In the Philippines, the question whether managerial employees have a right of
self-organization has arisen with respect to first-level managers or supervisors, as shown by a review of the course of
labor legislation in this country.
Right of Self-Organization of Managerial
Employees under Pre-Labor Code Laws
Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the Industrial Peace
Act (R.A. No. 875).
In accordance with the general definition above, this law defined "supervisor" as follows:
Sec. 2. . . .
(k) "Supervisor" means any person having authority in the interest of an employer, to hire, transfer, suspend, lay-off,
recall, discharge, assign, recommend, or discipline other employees, or responsibly to direct them, and to adjust their
grievances, or effectively to recommend such acts, if, in connection with the foregoing, the exercise of such authority
is not of a merely routinary or clerical nature but requires the use of independent judgment.16
The right of supervisors to form their own organizations was affirmed:
Sec. 3. Employees' Right to Self-Organization. — Employees shall have the right to self-organization and to form, join
or assist labor organizations of their own choosing for the purpose of collective bargaining through representatives of
their own choosing and to engage in concerted activities for the purpose of collective bargaining and other mutual aid
and protection. Individuals employed as supervisors shall not be eligible for membership in a labor organization of
employees under their supervision but may form separate organizations of their own.17
For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize for purposes of
labor relations.18
Although it had a definition of the term "supervisor," the Industrial Peace Act did not define the term "manager." But,
using the commonly-understood concept of "manager," as above stated, it is apparent that the law used the term
"supervisors" to refer to the sub-group of "managerial employees" known as front-line managers. The other sub-
group of "managerial employees," known as managers per se, was not covered.

5
However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial Relations,19 the right of all
managerial employees to self-organization was upheld as a general proposition, thus:
It would be going too far to dismiss summarily the point raised by respondent Company — that of the alleged identity
of interest between the managerial staff and the employing firm. That should ordinarily be the case, especially so
where the dispute is between management and the rank and file. It does not necessarily follow though that what
binds the managerial staff to the corporation forecloses the possibility of conflict between them. There could be a real
difference between what the welfare of such group requires and the concessions the firm is willing to grant. Their
needs might not be attended to then in the absence of any organization of their own. Nor is this to indulge in empty
theorizing. The record of respondent Company, even the very case cited by it, is proof enough of their uneasy and
troubled relationship. Certainly the impression is difficult to erase that an alien firm failed to manifest sympathy for
the claims of its Filipino executives. To predicate under such circumstances that agreement inevitably marks their
relationship, ignoring that discord would not be unusual, is to fly in the face of reality.
. . . The basic question is whether the managerial personnel can organize. What respondent Company failed to take
into account is that the right to self-organization is not merely a statutory creation. It is fortified by our Constitution.
All are free to exercise such right unless their purpose is contrary to law. Certainly it would be to attach unorthodoxy
to, not to say an emasculation of, the concept of law if managers as such were precluded from organizing. Having
done so and having been duly registered, as did occur in this case, their union is entitled to all the rights under
Republic Act No. 875. Considering what is denominated as unfair labor practice under Section 4 of such Act and the
facts set forth in our decision, there can be only one answer to the objection raised that no unfair labor practice could
be committed by respondent Company insofar as managerial personnel is concerned. It is, as is quite obvious, in the
negative.20
Actually, the case involved front-line managers or supervisors only, as the plantilla of employees, quoted in the main
opinion,21 clearly indicates:
CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by the Company
Payroll Position Title
Assistant to Mgr. — National Acct. Sales
Jr. Sales Engineer
Retail Development Asst.
Staff Asst. — 0 Marketing
Sales Supervisor
Supervisory Assistant
Jr. Supervisory Assistant
Credit Assistant
Lab. Supvr. — Pandacan
Jr. Sales Engineer B
Operations Assistant B
Field Engineer
Sr. Opers. Supvr. — MIA A/S
Purchasing Assistant
Jr. Construction Engineer
Sr. Sales Supervisor
Deport Supervisor A
Terminal Accountant B
Merchandiser
Dist. Sales Prom. Supvr.
Instr. — Merchandising
Asst. Dist. Accountant B
Sr. Opers. Supervisor
Jr. Sales Engineer A
Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.
Credit Supervisor A
Asst. Stores Supvr. A
Ref. Supervisory Draftsman

6
Refinery Shift Supvr. B
Asst. Supvr. A — Operations (Refinery)
Refinery Shift Supvr. B
Asst. Lab. Supvr. A (Refinery)
St. Process Engineer B (Refinery)
Asst. Supvr. A — Maintenance (Refinery)
Asst. Supvr. B — Maintenance (Refinery)
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery)
Finally, also deemed included are all other employees excluded from the rank and file unions but not classified as
managerial or otherwise excludable by law or applicable judicial precedents.
Right of Self-Organization of Managerial
Employees under the Labor Code
Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and middle managers
by assimilating them with the supervisory group under the broad phrase "managerial personnel," provided the
lynchpin for later laws denying the right of self-organization not only to top and middle management employees but
to front line managers or supervisors as well. Following the Caltex case, the Labor Code, promulgated in 1974 under
martial law, dropped the distinction between the first and second sub-groups of managerial employees. Instead of
treating the terms "supervisor" and "manager" separately, the law lumped them together and called them
"managerial employees," as follows:
Art. 212. Definitions . . . .
(k) "Managerial Employee" is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees, or to effectively
recommend such managerial actions. All employees not falling within this definition are considered rank and file
employees for purposes of this Book.22
The definition shows that it is actually a combination of the commonly understood definitions of both groups of
managerial employees, grammatically joined by the phrase "and/or."
This general definition was perhaps legally necessary at that time for two reasons. First, the 1974 Code denied
supervisors their right to self-organize as theretofore guaranteed to them by the Industrial Peace Act. Second, it stood
the dictum in the Caltex case on its head by prohibiting all types of managers from forming unions. The explicit
general prohibition was contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was made apparent in the Omnibus Rules Implementing the
Labor Code which the Department of Labor promulgated on January 19, 1975. Book V, Rule II, §11 of the Rules
provided:
Supervisory unions and unions of security guards to cease operation. — All existing supervisory unions and unions of
security guards shall, upon the effectivity of the Code, cease to operate as such and their registration certificates shall
be deemed automatically canceled. However, existing collective agreements with such unions, the life of which
extends beyond the date of effectivity of the Code, shall be respected until their expiry date insofar as the economic
benefits granted therein are concerned.
Members of supervisory unions who do not fall within the definition of managerial employees shall become eligible to
join or assist the rank and file labor organization, and if none exists, to form or assist in the forming of such rank and
file organization. The determination of who are managerial employees and who are not shall be the subject of
negotiation between representatives of the supervisory union and the employer. If no agreement is reached between
the parties, either or both of them may bring the issue to the nearest Regional Office for determination.
The Department of Labor continued to use the term "supervisory unions" despite the demise of the legal definition of
"supervisor" apparently because these were the unions of front line managers which were then allowed as a result of
the statutory grant of the right of self-organization under the Industrial Peace Act. Had the Department of Labor seen
fit to similarly ban unions of top and middle managers which may have been formed following the dictum in Caltex, it
obviously would have done so. Yet it did not, apparently because no such unions of top and middle managers really
then existed.
Real Intent of the 1986 Constitutional Commission
This was the law as it stood at the time the Constitutional Commission considered the draft of Art. III, §8.
Commissioner Lerum sought to amend the draft of what was later to become Art. III, §8 of the present Constitution:
MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the words "people" and "to"
the following: WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS. In other words, the section will now

7
read as follows: "The right of the people WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS to form
associations, unions, or societies for purposes not contrary to law shall not be abridged."23
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all persons whether or not they
are employed in the government. Under that provision, we allow unions in the government, in government-owned
and controlled corporations and in other industries in the private sector, such as the Philippine Government
Employees' Association, unions in the GSIS, the SSS, the DBP and other government-owned and controlled
corporations. Also, we have unions of supervisory employees and of security guards. But what is tragic about this is
that after the 1973 Constitution was approved and in spite of an express recognition of the right to organize in
P.D. No. 442, known as the Labor Code, the right of government workers, supervisory employees and security guards
to form unions was abolished.
And we have been fighting against this abolition. In every tripartite conference attended by the government,
management and workers, we have always been insisting on the return of these rights. However, both the
government and employers opposed our proposal, so nothing came out of this until this week when we approved a
provision which states:
Notwithstanding any provision of this article, the right to self-organization shall not be denied to government
employees.
We are afraid that without any corresponding provision covering the private sector, the security guards, the
supervisory employees or majority employees [sic] will still be excluded, and that is the purpose of this amendment.
I will be very glad to accept any kind of wording as long as it will amount to absolute recognition of private sector
employees, without exception, to organize.
THE PRESIDENT. What does the Committee say?
FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner Rodrigo is well-taken.
Perhaps, we can lengthen this a little bit more to read: "The right of the people WHETHER UNEMPLOYED OR
EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS.
I want to avoid also the possibility of having this interpreted as applicable only to the employed.
MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam President?
MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private sector is recognized. 24
Lerum thus anchored his proposal on the fact that (1) government employees, supervisory employees, and security
guards, who had the right to organize under the Industrial Peace Act, had been denied this right by the Labor Code,
and (2) there was a need to reinstate the right of these employees. In consonance with his objective to reinstate the
right of government, security, and supervisory employees to organize, Lerum then made his proposal:
MR. LERUM. Mr. Presiding Officer, after a consultation with several Members of this Commission, my amendment will
now read as follows: "The right of the people INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE SECTORS to
form associations, unions, or societies for purposes not contrary to law shall not be abridged. In proposing that
amendment I ask to make of record that I want the following provisions of the Labor Code to be automatically
abolished, which read:
Art. 245. Security guards and other personnel employed for the protection and security of the person, properties and
premises of the employers shall not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization.
THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?
FR. BERNAS. The Committee accepts.
THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the amendment, as amended.
Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is approved.25
The question is what Commissioner Lerum meant in seeking to "automatically abolish" the then Art. 246 of the Labor
Code. Did he simply want "any kind of wording as long as it will amount to absolute recognition of private sector
employees, without exception, to organize"?26 Or, did he instead intend to have his words taken in the context of the
cause which moved him to propose the amendment in the first place, namely, the denial of the right of supervisory
employees to organize, because he said, "We are afraid that without any corresponding provision covering the private
sector, security guards, supervisory employees or majority [of] employees will still be excluded, and that is the
purpose of this amendment"?27
It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees to organize. For
even though he spoke of the need to "abolish" Art. 246 of the Labor Code which, as already stated, prohibited
"managerial employees" in general from forming unions, the fact was that in explaining his proposal, he repeatedly
referred to "supervisory employees" whose right under the Industrial Peace Act to organize had been taken away by

8
Art. 246. It is noteworthy that Commissioner Lerum never referred to the then definition of "managerial employees" in
Art. 212(m) of the Labor Code which put together, under the broad phrase "managerial employees," top and middle
managers and supervisors. Instead, his repeated use of the term "supervisory employees," when such term then was
no longer in the statute books, suggests a frame of mind that remained grounded in the language of the Industrial
Peace Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to organize, despite
the fact that the Industrial Peace Act did not expressly provide for the right of top and middle managers to organize. If
Lerum was aware of the Caltex dictum, then his insistence on the use of the term "supervisory employees" could only
mean that he was excluding other managerial employees from his proposal. If, on the other hand, he was not aware
of the Caltex statement sustaining the right to organize to top and middle managers, then the more should his
repeated use of the term "supervisory employees" be taken at face value, as it had been defined in the then Industrial
Peace Act.
At all events, that the rest of the Commissioners understood his proposal to refer solely to supervisors and not to other
managerial employees is clear from the following account of Commissioner Joaquin G. Bernas, who writes:
In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum explained that the
modification included three categories of workers: (1) government employees, (2) supervisory employees, and (3)
security guards. Lerum made of record the explicit intent to repeal provisions of P.D. 442, the Labor Code. The
provisions referred to were:
Art. 245. Security guards and other personnel employed for the protection and security of the person, properties and
premises of the employers shall not be eligible for membership in a labor organization.
Art. 246. Managerial employees are not eligible to join, assist, and form any labor organization. 28
Implications of the Lerum Proposal
In sum, Lerum's proposal to amend Art. III, §8 of the draft Constitution by including labor unions in the guarantee of
organizational right should be taken in the context of statements that his aim was the removal of the statutory ban
against security guards and supervisory employees joining labor organizations. The approval by the Constitutional
Commission of his proposal can only mean, therefore, that the Commission intended the absolute right to organize of
government workers, supervisory employees, and security guards to be constitutionally guaranteed. By implication,
no similar absolute constitutional right to organize for labor purposes should be deemed to have been granted to top-
level and middle managers. As to them the right of self-organization may be regulated and even abridged
conformably to Art. III, §8.
Constitutionality of Art. 245
Finally, the question is whether the present ban against managerial employees, as embodied in Art. 245 (which
superseded Art. 246) of the Labor Code, is valid. This provision reads:
Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory employees. —
Managerial employees are not eligible to join, assist or form any labor organization. Supervisory employees shall not
be eligible for membership in a labor organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own.29
This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise known as the
Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the Labor Code which it superseded, R.A. No.
6715 provides separate definitions of the terms "managerial" and "supervisory employees," as follows:
Art. 212. Definitions. . . .
(m) "managerial employee" is one who is vested with powers or prerogatives to lay down and execute management
policies and/or to hire transfer, suspend, lay off, recall, discharge, assign or discipline employees. Supervisory
employees are those who, in the interest of the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.
All employees not falling within any of the above definitions are considered rank-and-file employees for purposes of
this Book.
Although the definition of "supervisory employees" seems to have been unduly restricted to the last phrase of the
definition in the Industrial Peace Act, the legal significance given to the phrase "effectively recommends" remains the
same. In fact, the distinction between top and middle managers, who set management policy, and front-line
supervisors, who are merely responsible for ensuring that such policies are carried out by the rank and file, is
articulated in the present definition.30 When read in relation to this definition in Art. 212(m), it will be seen that Art.
245 faithfully carries out the intent of the Constitutional Commission in framing Art. III, §8 of the fundamental law.
Nor is the guarantee of organizational right in Art. III, §8 infringed by a ban against managerial employees forming a
union. The right guaranteed in Art. III, §8 is subject to the condition that its exercise should be for purposes "not

9
contrary to law." In the case of Art. 245, there is a rational basis for prohibiting managerial employees from forming
or joining labor organizations. As Justice Davide, Jr., himself a constitutional commissioner, said in
his ponencia in Philips Industrial Development, Inc. v. NLRC:31
In the first place, all these employees, with the exception of the service engineers and the sales force personnel, are
confidential employees. Their classification as such is not seriously disputed by PEO-FFW; the five (5) previous CBAs
between PIDI and PEO-FFW explicitly considered them as confidential employees. By the very nature of their
functions, they assist and act in a confidential capacity to, or have access to confidential matters of, persons who
exercise managerial functions in the field of labor relations. As such, the rationale behind the ineligibility of
managerial employees to form, assist or joint a labor union equally applies to them.
In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:
. . . The rationale for this inhibition has been stated to be, because if these managerial employees would belong to or
be affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence of managerial employees in Union
membership.32
To be sure, the Court in Philips Industrial was dealing with the right of confidential employees to organize. But the
same reason for denying them the right to organize justifies even more the ban on managerial employees from
forming unions. After all, those who qualify as top or middle managers are executives who receive from their
employers information that not only is confidential but also is not generally available to the public, or to their
competitors, or to other employees. It is hardly necessary to point out that to say that the first sentence of Art. 245 is
unconstitutional would be to contradict the decision in that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.

10
 2. G.R. No. 138051 June 10, 2004
JOSE Y. SONZA, petitioner,
vs.
ABS-CBN BROADCASTING CORPORATION, respondent.
DECISION
CARPIO, J.:
The Case
Before this Court is a petition for review on certiorari1 assailing the 26 March 1999 Decision2 of the Court of Appeals in
CA-G.R. SP No. 49190 dismissing the petition filed by Jose Y. Sonza ("SONZA"). The Court of Appeals affirmed the findings
of the National Labor Relations Commission ("NLRC"), which affirmed the Labor Arbiter’s dismissal of the case for lack of
jurisdiction.
The Facts
In May 1994, respondent ABS-CBN Broadcasting Corporation ("ABS-CBN") signed an Agreement ("Agreement") with the
Mel and Jay Management and Development Corporation ("MJMDC"). ABS-CBN was represented by its corporate officers
while MJMDC was represented by SONZA, as President and General Manager, and Carmela Tiangco ("TIANGCO"), as EVP
and Treasurer. Referred to in the Agreement as "AGENT," MJMDC agreed to provide SONZA’s services exclusively to
ABS-CBN as talent for radio and television. The Agreement listed the services SONZA would render to ABS-CBN, as
follows:
a. Co-host for Mel & Jay radio program, 8:00 to 10:00 a.m., Mondays to Fridays;
b. Co-host for Mel & Jay television program, 5:30 to 7:00 p.m., Sundays.3
ABS-CBN agreed to pay for SONZA’s services a monthly talent fee of ₱310,000 for the first year and ₱317,000 for the
second and third year of the Agreement. ABS-CBN would pay the talent fees on the 10th and 25th days of the month.
On 1 April 1996, SONZA wrote a letter to ABS-CBN’s President, Eugenio Lopez III, which reads:
Dear Mr. Lopez,
We would like to call your attention to the Agreement dated May 1994 entered into by your goodself on behalf of ABS-
CBN with our company relative to our talent JOSE Y. SONZA.
As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. We
consider these acts of the station violative of the Agreement and the station as in breach thereof. In this connection, we
hereby serve notice of rescission of said Agreement at our instance effective as of date.
Mr. Sonza informed us that he is waiving and renouncing recovery of the remaining amount stipulated in paragraph 7 of
the Agreement but reserves the right to seek recovery of the other benefits under said Agreement.
Thank you for your attention.
Very truly yours,
(Sgd.)
JOSE Y. SONZA
President and Gen. Manager4
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the Department of Labor and Employment, National
Capital Region in Quezon City. SONZA complained that ABS-CBN did not pay his salaries, separation pay, service
incentive leave pay, 13th month pay, signing bonus, travel allowance and amounts due under the Employees Stock
Option Plan ("ESOP").
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on the ground that no employer-employee relationship existed
between the parties. SONZA filed an Opposition to the motion on 19 July 1996.
Meanwhile, ABS-CBN continued to remit SONZA’s monthly talent fees through his account at PCIBank, Quezon Avenue
Branch, Quezon City. In July 1996, ABS-CBN opened a new account with the same bank where ABS-CBN deposited
SONZA’s talent fees and other payments due him under the Agreement.
In his Order dated 2 December 1996, the Labor Arbiter5 denied the motion to dismiss and directed the parties to file
their respective position papers. The Labor Arbiter ruled:
In this instant case, complainant for having invoked a claim that he was an employee of respondent company until April
15, 1996 and that he was not paid certain claims, it is sufficient enough as to confer jurisdiction over the instant case in
this Office. And as to whether or not such claim would entitle complainant to recover upon the causes of action asserted
is a matter to be resolved only after and as a result of a hearing. Thus, the respondent’s plea of lack of employer-
employee relationship may be pleaded only as a matter of defense. It behooves upon it the duty to prove that there
really is no employer-employee relationship between it and the complainant.
The Labor Arbiter then considered the case submitted for resolution. The parties submitted their position papers on 24
February 1997.

11
On 11 March 1997, SONZA filed a Reply to Respondent’s Position Paper with Motion to Expunge Respondent’s Annex 4
and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBN’s witnesses Soccoro Vidanes and Rolando V.
Cruz. These witnesses stated in their affidavits that the prevailing practice in the television and broadcast industry is to
treat talents like SONZA as independent contractors.
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the complaint for lack of jurisdiction.6 The
pertinent parts of the decision read as follows:
xxx
While Philippine jurisprudence has not yet, with certainty, touched on the "true nature of the contract of a talent," it
stands to reason that a "talent" as above-described cannot be considered as an employee by reason of the peculiar
circumstances surrounding the engagement of his services.
It must be noted that complainant was engaged by respondent by reason of his peculiar skills and talent as a TV host
and a radio broadcaster. Unlike an ordinary employee, he was free to perform the services he undertook to render in
accordance with his own style. The benefits conferred to complainant under the May 1994 Agreement are certainly
very much higher than those generally given to employees. For one, complainant Sonza’s monthly talent fees amount to
a staggering ₱317,000. Moreover, his engagement as a talent was covered by a specific contract. Likewise, he was not
bound to render eight (8) hours of work per day as he worked only for such number of hours as may be necessary.
The fact that per the May 1994 Agreement complainant was accorded some benefits normally given to an employee is
inconsequential. Whatever benefits complainant enjoyed arose from specific agreement by the parties and not by
reason of employer-employee relationship. As correctly put by the respondent, "All these benefits are merely talent
fees and other contractual benefits and should not be deemed as ‘salaries, wages and/or other remuneration’ accorded
to an employee, notwithstanding the nomenclature appended to these benefits. Apropos to this is the rule that the term
or nomenclature given to a stipulated benefit is not controlling, but the intent of the parties to the Agreement
conferring such benefit."
The fact that complainant was made subject to respondent’s Rules and Regulations, likewise, does not detract from
the absence of employer-employee relationship. As held by the Supreme Court, "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 to achieve it." (Insular Life Assurance Co.,
Ltd. vs. NLRC, et al., G.R. No. 84484, November 15, 1989).
x x x (Emphasis supplied)7
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a Decision affirming the Labor Arbiter’s decision.
SONZA filed a motion for reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the Court of Appeals assailing the decision and
resolution of the NLRC. On 26 March 1999, the Court of Appeals rendered a Decision dismissing the case.8
Hence, this petition.
The Rulings of the NLRC and Court of Appeals
The Court of Appeals affirmed the NLRC’s finding that no employer-employee relationship existed between SONZA and
ABS-CBN. Adopting the NLRC’s decision, the appellate court quoted the following findings of the NLRC:
x x x the May 1994 Agreement will readily reveal that MJMDC entered into the contract merely as an agent of
complainant Sonza, the principal. By all indication and as the law puts it, the act of the agent is the act of the principal
itself. This fact is made particularly true in this case, as admittedly MJMDC ‘is a management company devoted
exclusively to managing the careers of Mr. Sonza and his broadcast partner, Mrs. Carmela C. Tiangco.’ (Opposition to
Motion to Dismiss)
Clearly, the relations of principal and agent only accrues between complainant Sonza and MJMDC, and not between
ABS-CBN and MJMDC. This is clear from the provisions of the May 1994 Agreement which specifically referred to
MJMDC as the ‘AGENT’. As a matter of fact, when complainant herein unilaterally rescinded said May 1994 Agreement,
it was MJMDC which issued the notice of rescission in behalf of Mr. Sonza, who himself signed the same in his capacity
as President.
Moreover, previous contracts between Mr. Sonza and ABS-CBN reveal the fact that historically, the parties to the said
agreements are ABS-CBN and Mr. Sonza. And it is only in the May 1994 Agreement, which is the latest Agreement
executed between ABS-CBN and Mr. Sonza, that MJMDC figured in the said Agreement as the agent of Mr. Sonza.
We find it erroneous to assert that MJMDC is a mere ‘labor-only’ contractor of ABS-CBN such that there exist[s]
employer-employee relationship between the latter and Mr. Sonza. On the contrary, We find it indubitable, that MJMDC

12
is an agent, not of ABS-CBN, but of the talent/contractor Mr. Sonza, as expressly admitted by the latter and MJMDC in
the May 1994 Agreement.
It may not be amiss to state that jurisdiction over the instant controversy indeed belongs to the regular courts, the same
being in the nature of an action for alleged breach of contractual obligation on the part of respondent-appellee. As
squarely apparent from complainant-appellant’s Position Paper, his claims for compensation for services, ‘13th month
pay’, signing bonus and travel allowance against respondent-appellee are not based on the Labor Code but rather on the
provisions of the May 1994 Agreement, while his claims for proceeds under Stock Purchase Agreement are based on the
latter. A portion of the Position Paper of complainant-appellant bears perusal:
‘Under [the May 1994 Agreement] with respondent ABS-CBN, the latter contractually bound itself to pay complainant a
signing bonus consisting of shares of stocks…with FIVE HUNDRED THOUSAND PESOS (₱500,000.00).
Similarly, complainant is also entitled to be paid 13th month pay based on an amount not lower than the amount he was
receiving prior to effectivity of (the) Agreement’.
Under paragraph 9 of (the May 1994 Agreement), complainant is entitled to a commutable travel benefit amounting to
at least One Hundred Fifty Thousand Pesos (₱150,000.00) per year.’
Thus, it is precisely because of complainant-appellant’s own recognition of the fact that his contractual relations with
ABS-CBN are founded on the New Civil Code, rather than the Labor Code, that instead of merely resigning from ABS-
CBN, complainant-appellant served upon the latter a ‘notice of rescission’ of Agreement with the station, per his letter
dated April 1, 1996, which asserted that instead of referring to unpaid employee benefits, ‘he is waiving and renouncing
recovery of the remaining amount stipulated in paragraph 7 of the Agreement but reserves the right to such recovery of
the other benefits under said Agreement.’ (Annex 3 of the respondent ABS-CBN’s Motion to Dismiss dated July 10,
1996).
Evidently, it is precisely by reason of the alleged violation of the May 1994 Agreement and/or the Stock Purchase
Agreement by respondent-appellee that complainant-appellant filed his complaint. Complainant-appellant’s claims
being anchored on the alleged breach of contract on the part of respondent-appellee, the same can be resolved by
reference to civil law and not to labor law. Consequently, they are within the realm of civil law and, thus, lie with the
regular courts. As held in the case of Dai-Chi Electronics Manufacturing vs. Villarama, 238 SCRA 267, 21 November
1994, an action for breach of contractual obligation is intrinsically a civil dispute.9 (Emphasis supplied)
The Court of Appeals ruled that the existence of an employer-employee relationship between SONZA and ABS-CBN is a
factual question that is within the jurisdiction of the NLRC to resolve.10 A special civil action for certiorari extends only to
issues of want or excess of jurisdiction of the NLRC.11 Such action cannot cover an inquiry into the correctness of the
evaluation of the evidence which served as basis of the NLRC’s conclusion.12 The Court of Appeals added that it could
not re-examine the parties’ evidence and substitute the factual findings of the NLRC with its own.13
The Issue
In assailing the decision of the Court of Appeals, SONZA contends that:
THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE NLRC’S DECISION AND REFUSING TO FIND THAT AN
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTED BETWEEN SONZA AND ABS-CBN, DESPITE THE WEIGHT OF CONTROLLING
LAW, JURISPRUDENCE AND EVIDENCE TO SUPPORT SUCH A FINDING.14
The Court’s Ruling
We affirm the assailed decision.
No convincing reason exists to warrant a reversal of the decision of the Court of Appeals affirming the NLRC ruling which
upheld the Labor Arbiter’s dismissal of the case for lack of jurisdiction.
The present controversy is one of first impression. Although Philippine labor laws and jurisprudence define clearly the
elements of an employer-employee relationship, this is the first time that the Court will resolve the nature of the
relationship between a television and radio station and one of its "talents." There is no case law stating that a radio and
television program host is an employee of the broadcast station.
The instant case involves big names in the broadcast industry, namely Jose "Jay" Sonza, a known television and radio
personality, and ABS-CBN, one of the biggest television and radio networks in the country.
SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABS-CBN. On the
other hand, ABS-CBN insists that the Labor Arbiter has no jurisdiction because SONZA was an independent contractor.
Employee or Independent Contractor?
The existence of an employer-employee relationship is a question of fact. Appellate courts accord the factual findings of
the Labor Arbiter and the NLRC not only respect but also finality when supported by substantial evidence.15 Substantial
evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.16 A
party cannot prove the absence of substantial evidence by simply pointing out that there is contrary evidence on record,

13
direct or circumstantial. The Court does not substitute its own judgment for that of the tribunal in determining where
the weight of evidence lies or what evidence is credible.17
SONZA maintains that all essential elements of an employer-employee relationship are present in this case. Case law has
consistently held that the elements of an employer-employee 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
on the means and methods by which the work is accomplished.18 The last element, the so-called "control test", is the
most important element.19
A. Selection and Engagement of Employee
ABS-CBN engaged SONZA’s services to co-host its television and radio programs because of SONZA’s peculiar skills,
talent and celebrity status. SONZA contends that the "discretion used by respondent in specifically selecting and hiring
complainant over other broadcasters of possibly similar experience and qualification as complainant belies respondent’s
claim of independent contractorship."
Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from
ordinary employees. The specific selection and hiring of SONZA, because of his unique skills, talent and celebrity status
not possessed by ordinary employees, is a circumstance indicative, but not conclusive, of an independent contractual
relationship. If SONZA did not possess such unique skills, talent and celebrity status, ABS-CBN would not have entered
into the Agreement with SONZA but would have hired him through its personnel department just like any other
employee.
In any event, the method of selecting and engaging SONZA does not conclusively determine his status. We must
consider all the circumstances of the relationship, with the control test being the most important element.
B. Payment of Wages
ABS-CBN directly paid SONZA his monthly talent fees with no part of his fees going to MJMDC. SONZA asserts that this
mode of fee payment shows that he was an employee of ABS-CBN. SONZA also points out that ABS-CBN granted him
benefits and privileges "which he would not have enjoyed if he were truly the subject of a valid job contract."
All the talent fees and benefits paid to SONZA were the result of negotiations that led to the Agreement. If SONZA were
ABS-CBN’s employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and
13th month pay"20 which the law automatically incorporates into every employer-employee contract.21 Whatever
benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22
SONZA’s talent fees, amounting to ₱317,000 monthly in the second and third year, are so huge and out of the ordinary
that they indicate more an independent contractual relationship rather than an employer-employee relationship. ABS-
CBN agreed to pay SONZA such huge talent fees precisely because of SONZA’s unique skills, talent and celebrity status
not possessed by ordinary employees. Obviously, SONZA acting alone possessed enough bargaining power to demand
and receive such huge talent fees for his services. The power to bargain talent fees way above the salary scales of
ordinary employees is a circumstance indicative, but not conclusive, of an independent contractual relationship.
The payment of talent fees directly to SONZA and not to MJMDC does not negate the status of SONZA as an
independent contractor. The parties expressly agreed on such mode of payment. Under the Agreement, MJMDC is the
AGENT of SONZA, to whom MJMDC would have to turn over any talent fee accruing under the Agreement.
C. Power of Dismissal
For violation of any provision of the Agreement, either party may terminate their relationship. SONZA failed to show
that ABS-CBN could terminate his services on grounds other than breach of contract, such as retrenchment to prevent
losses as provided under labor laws.23
During the life of the Agreement, ABS-CBN agreed to pay SONZA’s talent fees as long as "AGENT and Jay Sonza shall
faithfully and completely perform each condition of this Agreement."24 Even if it suffered severe business losses, ABS-
CBN could not retrench SONZA because ABS-CBN remained obligated to pay SONZA’s talent fees during the life of the
Agreement. This circumstance indicates an independent contractual relationship between SONZA and ABS-CBN.
SONZA admits that even after ABS-CBN ceased broadcasting his programs, ABS-CBN still paid him his talent fees. Plainly,
ABS-CBN adhered to its undertaking in the Agreement to continue paying SONZA’s talent fees during the remaining life
of the Agreement even if ABS-CBN cancelled SONZA’s programs through no fault of SONZA.25
SONZA assails the Labor Arbiter’s interpretation of his rescission of the Agreement as an admission that he is not an
employee of ABS-CBN. The Labor Arbiter stated that "if it were true that complainant was really an employee, he would
merely resign, instead." SONZA did actually resign from ABS-CBN but he also, as president of MJMDC, rescinded the
Agreement. SONZA’s letter clearly bears this out.26 However, the manner by which SONZA terminated his relationship
with ABS-CBN is immaterial. Whether SONZA rescinded the Agreement or resigned from work does not determine his
status as employee or independent contractor.
D. Power of Control

14
Since there is no local precedent on whether a radio and television program host is an employee or an independent
contractor, we refer to foreign case law in analyzing the present case. The United States Court of Appeals, First Circuit,
recently held in Alberty-Vélez v. Corporación De Puerto Rico Para La Difusión Pública ("WIPR")27 that a television
program host is an independent contractor. We quote the following findings of the U.S. court:
Several factors favor classifying Alberty as an independent contractor. First, a television actress is a skilled position
requiring talent and training not available on-the-job. x x x In this regard, Alberty possesses a master’s degree in public
communications and journalism; is trained in dance, singing, and modeling; taught with the drama department at the
University of Puerto Rico; and acted in several theater and television productions prior to her affiliation with "Desde Mi
Pueblo." Second, Alberty provided the "tools and instrumentalities" necessary for her to perform. Specifically, she
provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services
necessary for her appearance. Alberty disputes that this factor favors independent contractor status because WIPR
provided the "equipment necessary to tape the show." Alberty’s argument is misplaced. The equipment necessary for
Alberty to conduct her job as host of "Desde Mi Pueblo" related to her appearance on the show. Others provided
equipment for filming and producing the show, but these were not the primary tools that Alberty used to perform her
particular function. If we accepted this argument, independent contractors could never work on collaborative projects
because other individuals often provide the equipment required for different aspects of the collaboration. x x x
Third, WIPR could not assign Alberty work in addition to filming "Desde Mi Pueblo." Alberty’s contracts with WIPR
specifically provided that WIPR hired her "professional services as Hostess for the Program Desde Mi Pueblo." There is
no evidence that WIPR assigned Alberty tasks in addition to work related to these tapings. x x x28 (Emphasis supplied)
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor.
The control test is the most important test our courts apply in distinguishing an employee from an independent
contractor.29 This test is based on the extent of control the hirer exercises over a worker. The greater the supervision
and control the hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well – the
less control the hirer exercises, the more likely the worker is considered an independent contractor.30
First, SONZA contends that ABS-CBN exercised control over the means and methods of his work.
SONZA’s argument is misplaced. ABS-CBN engaged SONZA’s services specifically to co-host the "Mel & Jay" programs.
ABS-CBN did not assign any other work to SONZA. To perform his work, SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s control. SONZA did not
have to render eight hours of work per day. The Agreement required SONZA to attend only rehearsals and tapings of the
shows, as well as pre- and post-production staff meetings.31 ABS-CBN could not dictate the contents of SONZA’s script.
However, the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its interests.32 The clear implication
is that SONZA had a free hand on what to say or discuss in his shows provided he did not attack ABS-CBN or its interests.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s
work.33 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."34 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.35
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.,36 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.37
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 to broadcast the "Mel & Jay" programs. However, the

15
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.38 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.39
A radio broadcast specialist who works under minimal supervision is an independent contractor.40 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.
Second, SONZA urges us to rule that he was ABS-CBN’s employee because ABS-CBN subjected him to its rules and
standards of performance. SONZA claims that this indicates ABS-CBN’s control "not only [over] his manner of work but
also the quality of his work."
The Agreement stipulates that SONZA shall abide with the rules and standards of performance "covering talents"41 of
ABS-CBN. The Agreement does not require SONZA to comply with the rules and standards of performance prescribed for
employees of ABS-CBN. The code of conduct imposed on SONZA under the Agreement refers to the "Television and
Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY (ABS-
CBN) as its Code of Ethics."42 The KBP code applies to broadcasters, not to employees of radio and television stations.
Broadcasters are not necessarily employees of radio and television stations. Clearly, the rules and standards of
performance referred to in the Agreement are those applicable to talents and not to employees of ABS-CBN.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former.43 In this case, SONZA failed to show that these rules controlled his performance. We find that these general
rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and
radio programs that comply with standards of the industry. We have ruled that:
Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the
services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this
case fall squarely with the case of Insular Life Assurance Co., Ltd. vs. NLRC. In said case, we held that:
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.44
The Vaughan case also held that one could still be an independent contractor although the hirer reserved certain
supervision to insure the attainment of the desired result. The hirer, however, must not deprive the one hired from
performing his services according to his own initiative.45
Lastly, SONZA insists that the "exclusivity clause" in the Agreement is the most extreme form of control which ABS-CBN
exercised over him.
This argument is futile. Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even
an independent contractor can validly provide his services exclusively to the hiring party. In the broadcast industry,
exclusivity is not necessarily the same as control.
The hiring of exclusive talents is a widespread and accepted practice in the entertainment industry.46 This practice is not
designed to control the means and methods of work of the talent, but simply to protect the investment of the broadcast
station. The broadcast station normally spends substantial amounts of money, time and effort "in building up its talents
as well as the programs they appear in and thus expects that said talents remain exclusive with the station for a
commensurate period of time."47 Normally, a much higher fee is paid to talents who agree to work exclusively for a
particular radio or television station. In short, the huge talent fees partially compensates for exclusivity, as in the present
case.
MJMDC as Agent of SONZA
SONZA protests the Labor Arbiter’s finding that he is a talent of MJMDC, which contracted out his services to ABS-CBN.
The Labor Arbiter ruled that as a talent of MJMDC, SONZA is not an employee of ABS-CBN. SONZA insists that MJMDC is
a "labor-only" contractor and ABS-CBN is his employer.
In a labor-only contract, there are three parties involved: (1) the "labor-only" contractor; (2) the employee who is
ostensibly under the employ of the "labor-only" contractor; and (3) the principal who is deemed the real employer.
Under this scheme, the "labor-only" contractor is the agent of the principal. The law makes the principal responsible to
the employees of the "labor-only contractor" as if the principal itself directly hired or employed the employees.48 These
circumstances are not present in this case.

16
There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely
acted as SONZA’s agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do
not show that MJMDC acted as ABS-CBN’s agent. MJMDC, which stands for Mel and Jay Management and Development
Corporation, is a corporation organized and owned by SONZA and TIANGCO. The President and General Manager of
MJMDC is SONZA himself. It is absurd to hold that MJMDC, which is owned, controlled, headed and managed by SONZA,
acted as agent of ABS-CBN in entering into the Agreement with SONZA, who himself is represented by MJMDC. That
would make MJMDC the agent of both ABS-CBN and SONZA.
As SONZA admits, MJMDC is a management company devoted exclusively to managing the careers of SONZA and his
broadcast partner, TIANGCO. MJMDC is not engaged in any other business, not even job contracting. MJMDC does not
have any other function apart from acting as agent of SONZA or TIANGCO to promote their careers in the broadcast and
television industry.49
Policy Instruction No. 40
SONZA argues that Policy Instruction No. 40 issued by then Minister of Labor Blas Ople on 8 January 1979 finally settled
the status of workers in the broadcast industry. Under this policy, the types of employees in the broadcast industry are
the station and program employees.
Policy Instruction No. 40 is a mere executive issuance which does not have the force and effect of law. There is no legal
presumption that Policy Instruction No. 40 determines SONZA’s status. A mere executive issuance cannot exclude
independent contractors from the class of service providers to the broadcast industry. The classification of workers in
the broadcast industry into only two groups under Policy Instruction No. 40 is not binding on this Court, especially when
the classification has no basis either in law or in fact.
Affidavits of ABS-CBN’s Witnesses
SONZA also faults the Labor Arbiter for admitting the affidavits of Socorro Vidanes and Rolando Cruz without giving his
counsel the
opportunity to cross-examine these witnesses. SONZA brands these witnesses as incompetent to attest on the prevailing
practice in the radio and television industry. SONZA views the affidavits of these witnesses as misleading and irrelevant.
While SONZA failed to cross-examine ABS-CBN’s witnesses, he was never prevented from denying or refuting the
allegations in the affidavits. The Labor Arbiter has the discretion whether to conduct a formal (trial-type) hearing after
the submission of the position papers of the parties, thus:
Section 3. Submission of Position Papers/Memorandum
xxx
These verified position papers shall cover only those claims and causes of action raised in the complaint excluding those
that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of
their respective witnesses which shall take the place of the latter’s direct testimony. x x x
Section 4. Determination of Necessity of Hearing. – Immediately after the submission of the parties of their position
papers/memorandum, the Labor Arbiter shall motu propio determine whether there is need for a formal trial or hearing.
At this stage, he may, at his discretion and for the purpose of making such determination, ask clarificatory questions to
further elicit facts or information, including but not limited to the subpoena of relevant documentary evidence, if any
from any party or witness.50
The Labor Arbiter can decide a case based solely on the position papers and the supporting documents without a formal
trial.51 The holding of a formal hearing or trial is something that the parties cannot demand as a matter of right.52 If the
Labor Arbiter is confident that he can rely on the documents before him, he cannot be faulted for not conducting a
formal trial, unless under the particular circumstances of the case, the documents alone are insufficient. The
proceedings before a Labor Arbiter are non-litigious in nature. Subject to the requirements of due process, the
technicalities of law and the rules obtaining in the courts of law do not strictly apply in proceedings before a Labor
Arbiter.
Talents as Independent Contractors
ABS-CBN claims that there exists a prevailing practice in the broadcast and entertainment industries to treat talents like
SONZA as independent contractors. SONZA argues that if such practice exists, it is void for violating the right of labor to
security of tenure.
The right of labor to security of tenure as guaranteed in the Constitution53 arises only if there is an employer-employee
relationship under labor laws. Not every performance of services for a fee creates an employer-employee relationship.
To hold that every person who renders services to another for a fee is an employee - to give meaning to the security of
tenure clause - will lead to absurd results.
Individuals with special skills, expertise or talent enjoy the freedom to offer their services as independent contractors.
The right to life and livelihood guarantees this freedom to contract as independent contractors. The right of labor to

17
security of tenure cannot operate to deprive an individual, possessed with special skills, expertise and talent, of his right
to contract as an independent contractor. An individual like an artist or talent has a right to render his services without
any one controlling the means and methods by which he performs his art or craft. This Court will not interpret the right
of labor to security of tenure to compel artists and talents to render their services only as employees. If radio and
television program hosts can render their services only as employees, the station owners and managers can dictate to
the radio and television hosts what they say in their shows. This is not conducive to freedom of the press.
Different Tax Treatment of Talents and Broadcasters
The National Internal Revenue Code ("NIRC")54 in relation to Republic Act No. 7716,55 as amended by Republic Act No.
8241,56 treats talents, television and radio broadcasters differently. Under the NIRC, these professionals are subject to
the 10% value-added tax ("VAT") on services they render. Exempted from the VAT are those under an employer-
employee relationship.57 This different tax treatment accorded to talents and broadcasters bolters our conclusion that
they are independent contractors, provided all the basic elements of a contractual relationship are present as in this
case.
Nature of SONZA’s Claims
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay, separation pay, service incentive leave,
signing bonus, travel allowance, and amounts due under the Employee Stock Option Plan. We agree with the findings of
the Labor Arbiter and the Court of Appeals that SONZA’s claims are all based on the May 1994 Agreement and stock
option plan, and not on the Labor Code. Clearly, the present case does not call for an application of the Labor Code
provisions but an interpretation and implementation of the May 1994 Agreement. In effect, SONZA’s cause of action is
for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58
WHEREFORE, we DENY the petition. The assailed Decision of the Court of Appeals dated 26 March 1999 in CA-G.R. SP
No. 49190 is AFFIRMED. Costs against petitioner.
SO ORDERED.

18
 3. G.R. No. 157634 May 16, 2005
MAYON HOTEL & RESTAURANT, PACITA O. PO and/or JOSEFA PO LAM, petitioners,
vs.
ROLANDO ADANA, CHONA BUMALAY, ROGER BURCE, EDUARDO ALAMARES, AMADO ALAMARES, EDGARDO
TORREFRANCA, LOURDES CAMIGLA, TEODORO LAURENARIA, WENEFREDO LOVERES, LUIS GUADES, AMADO
MACANDOG, PATERNO LLARENA, GREGORIO NICERIO, JOSE ATRACTIVO, MIGUEL TORREFRANCA, and SANTOS
BROÑOLA, respondents.
DECISION
PUNO, J.:
This is a petition for certiorari to reverse and set aside the Decision issued by the Court of Appeals (CA)1 in CA-G.R. SP
No. 68642, entitled "Rolando Adana, Wenefredo Loveres, et. al. vs. National Labor Relations Commission (NLRC), Mayon
Hotel & Restaurant/Pacita O. Po, et al.," and the Resolution2 denying petitioners' motion for reconsideration. The
assailed CA decision reversed the NLRC Decision which had dismissed all of respondents' complaints,3 and reinstated the
Joint Decision of the Labor Arbiter4 which ruled that respondents were illegally dismissed and entitled to their money
claims.
The facts, culled from the records, are as follows:5
Petitioner Mayon Hotel & Restaurant is a single proprietor business registered in the name of petitioner Pacita O.
Po,6 whose mother, petitioner Josefa Po Lam, manages the establishment.7 The hotel and restaurant employed about
sixteen (16) employees.
Records show that on various dates starting in 1981, petitioner hotel and restaurant hired the following people, all
respondents in this case, with the following jobs:8
1. Wenefredo Loveres Accountant and Officer-in-charge
2. Paterno Llarena Front Desk Clerk
3. Gregorio Nicerio Supervisory Waiter
4. Amado Macandog Roomboy
5. Luis Guades Utility/Maintenance Worker
6. Santos Broñola Roomboy
7. Teodoro Laurenaria Waiter
8. Eduardo Alamares Roomboy/Waiter
9. Lourdes Camigla Cashier
10. Chona Bumalay Cashier
11. Jose Atractivo Technician
12. Amado Alamares Dishwasher and Kitchen Helper
13. Roger Burce Cook
14. Rolando Adana Waiter
15. Miguel Torrefranca Cook
16. Edgardo Torrefranca Cook
Due to the expiration and non-renewal of the lease contract for the rented space occupied by the said hotel and
restaurant at Rizal Street, the hotel operations of the business were suspended on March 31, 1997.9 The operation of
the restaurant was continued in its new location at Elizondo Street, Legazpi City, while waiting for the construction of a
new Mayon Hotel & Restaurant at Peñaranda Street, Legazpi City.10 Only nine (9) of the sixteen (16) employees
continued working in the Mayon Restaurant at its new site.11
On various dates of April and May 1997, the 16 employees filed complaints for underpayment of wages and other
money claims against petitioners, as follows:12
Wenefredo Loveres, Luis Guades, Amado Macandog and Jose Atractivo for illegal dismissal, underpayment of wages,
nonpayment of holiday and rest day pay; service incentive leave pay (SILP) and claims for separation pay plus damages;
Paterno Llarena and Gregorio Nicerio for illegal dismissal with claims for underpayment of wages; nonpayment of cost of
living allowance (COLA) and overtime pay; premium pay for holiday and rest day; SILP; nightshift differential pay and
separation pay plus damages;
Miguel Torrefranca, Chona Bumalay and Lourdes Camigla for underpayment of wages; nonpayment of holiday and rest
day pay and SILP;

19
Rolando Adana, Roger Burce and Amado Alamares for underpayment of wages; nonpayment of COLA, overtime, holiday,
rest day, SILP and nightshift differential pay;
Eduardo Alamares for underpayment of wages, nonpayment of holiday, rest day and SILP and night shift differential pay;
Santos Broñola for illegal dismissal, underpayment of wages, overtime pay, rest day pay, holiday pay, SILP, and
damages;13 and
Teodoro Laurenaria for underpayment of wages; nonpayment of COLA and overtime pay; premium pay for holiday and
rest day, and SILP.
On July 14, 2000, Executive Labor Arbiter Gelacio L. Rivera, Jr. rendered a Joint Decision in favor of the employees. The
Labor Arbiter awarded substantially all of respondents' money claims, and held that respondents Loveres, Macandog
and Llarena were entitled to separation pay, while respondents Guades, Nicerio and Alamares were entitled to their
retirement pay. The Labor Arbiter also held that based on the evidence presented, Josefa Po Lam is the
owner/proprietor of Mayon Hotel & Restaurant and the proper respondent in these cases.
On appeal to the NLRC, the decision of the Labor Arbiter was reversed, and all the complaints were dismissed.
Respondents filed a motion for reconsideration with the NLRC and when this was denied, they filed a petition
for certiorari with the CA which rendered the now assailed decision.
After their motion for reconsideration was denied, petitioners now come to this Court, seeking the reversal of the CA
decision on the following grounds:
I. The Honorable Court of Appeals erred in reversing the decision of the National Labor Relations Commission (Second
Division) by holding that the findings of fact of the NLRC were not supported by substantial evidence despite ample and
sufficient evidence showing that the NLRC decision is indeed supported by substantial evidence;
II. The Honorable Court of Appeals erred in upholding the joint decision of the labor arbiter which ruled that private
respondents were illegally dismissed from their employment, despite the fact that the reason why private respondents
were out of work was not due to the fault of petitioners but to causes beyond the control of petitioners.
III. The Honorable Court of Appeals erred in upholding the award of monetary benefits by the labor arbiter in his joint
decision in favor of the private respondentS, including the award of damages to six (6) of the private respondents,
despite the fact that the private respondents have not proven by substantial evidence their entitlement thereto and
especially the fact that they were not illegally dismissed by the petitioners.
IV. The Honorable Court of Appeals erred in holding that Pacita Ong Po is the owner of the business establishment,
petitioner Mayon Hotel and Restaurant, thus disregarding the certificate of registration of the business establishment
ISSUED by the local government, which is a public document, and the unqualified admissions of complainants-private
respondents.14
In essence, the petition calls for a review of the following issues:
1. Was it correct for petitioner Josefa Po Lam to be held liable as the owner of petitioner Mayon Hotel & Restaurant, and
the proper respondent in this case?
2. Were respondents Loveres, Guades, Macandog, Atractivo, Llarena and Nicerio illegally dismissed?
3. Are respondents entitled to their money claims due to underpayment of wages, and nonpayment of holiday pay, rest
day premium, SILP, COLA, overtime pay, and night shift differential pay?
It is petitioners' contention that the above issues have already been threshed out sufficiently and definitively by the
NLRC. They therefore assail the CA's reversal of the NLRC decision, claiming that based on the ruling in Castillo v.
NLRC,15 it is non sequitur that the CA should re-examine the factual findings of both the NLRC and the Labor Arbiter,
especially as in this case the NLRC's findings are allegedly supported by substantial evidence.
We do not agree.
There is no denying that it is within the NLRC's competence, as an appellate agency reviewing decisions of Labor
Arbiters, to disagree with and set aside the latter's findings.16 But it stands to reason that the NLRC should state an
acceptable cause therefore, otherwise it would be a whimsical, capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject to invalidation by the extraordinary writ of certiorari.17 And when the factual findings
of the Labor Arbiter and the NLRC are diametrically opposed and this disparity of findings is called into question, there is,
necessarily, a re-examination of the factual findings to ascertain which opinion should be sustained.18 As ruled
in Asuncion v. NLRC,19
Although, it is a legal tenet that factual findings of administrative bodies are entitled to great weight and respect, we are
constrained to take a second look at the facts before us because of the diversity in the opinions of the Labor Arbiter and
the NLRC. A disharmony between the factual findings of the Labor Arbiter and those of the NLRC opens the door to a
review thereof by this Court.20
The CA, therefore, did not err in reviewing the records to determine which opinion was supported by substantial
evidence.

20
Moreover, it is explicit in Castillo v. NLRC21 that factual findings of administrative bodies like the NLRC are affirmed only
if they are supported by substantial evidence that is manifest in the decision and on the records. As stated in Castillo:
[A]buse of discretion does not necessarily follow from a reversal by the NLRC of a decision of a Labor Arbiter. Mere
variance in evidentiary assessment between the NLRC and the Labor Arbiter does not automatically call for a full review
of the facts by this Court. The NLRC's decision, so long as it is not bereft of substantial support from the records,
deserves respect from this Court. As a rule, the original and exclusive jurisdiction to review a decision or resolution of
respondent NLRC in a petition for certiorari under Rule 65 of the Rules of Court does not include a correction of its
evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of discretion. Thus, the NLRC's factual
findings, if supported by substantial evidence, are entitled to great respect and even finality, unless petitioner is able to
show that it simply and arbitrarily disregarded the evidence before it or had misappreciated the evidence to such an
extent as to compel a contrary conclusion if such evidence had been properly appreciated. (citations omitted)22
After careful review, we find that the reversal of the NLRC's decision was in order precisely because it was not supported
by substantial evidence.
1. Ownership by Josefa Po Lam
The Labor Arbiter ruled that as regards the claims of the employees, petitioner Josefa Po Lam is, in fact, the owner of
Mayon Hotel & Restaurant. Although the NLRC reversed this decision, the CA, on review, agreed with the Labor Arbiter
that notwithstanding the certificate of registration in the name of Pacita Po, it is Josefa Po Lam who is the
owner/proprietor of Mayon Hotel & Restaurant, and the proper respondent in the complaints filed by the employees.
The CA decision states in part:
[Despite] the existence of the Certificate of Registration in the name of Pacita Po, we cannot fault the labor arbiter in
ruling that Josefa Po Lam is the owner of the subject hotel and restaurant. There were conflicting documents submitted
by Josefa herself. She was ordered to submit additional documents to clearly establish ownership of the hotel and
restaurant, considering the testimonies given by the [respondents] and the non-appearance and failure to submit her
own position paper by Pacita Po. But Josefa did not comply with the directive of the Labor Arbiter. The ruling of the
Supreme Court in Metropolitan Bank and Trust Company v. Court of Appeals applies to Josefa Po Lam which is stated in
this wise:
When the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and
he refuses to produce such evidence, the presumption arises that the evidence[,] if produced, would operate to his
prejudice, and support the case of his adversary.
Furthermore, in ruling that Josefa Po Lam is the real owner of the hotel and restaurant, the labor arbiter relied also on
the testimonies of the witnesses, during the hearing of the instant case. When the conclusions of the labor arbiter are
sufficiently corroborated by evidence on record, the same should be respected by appellate tribunals, since he is in a
better position to assess and evaluate the credibility of the contending parties.23 (citations omitted)
Petitioners insist that it was error for the Labor Arbiter and the CA to have ruled that petitioner Josefa Po Lam is the
owner of Mayon Hotel & Restaurant. They allege that the documents they submitted to the Labor Arbiter sufficiently
and clearly establish the fact of ownership by petitioner Pacita Po, and not her mother, petitioner Josefa Po Lam. They
contend that petitioner Josefa Po Lam's participation was limited to merely (a) being the overseer; (b) receiving the
month-to-month and/or year-to-year financial reports prepared and submitted by respondent Loveres; and (c) visitation
of the premises.24 They also put emphasis on the admission of the respondents in their position paper submitted to the
Labor Arbiter, identifying petitioner Josefa Po Lam as the manager, and Pacita Po as the owner.25 This, they claim, is a
judicial admission and is binding on respondents. They protest the reliance the Labor Arbiter and the CA placed on their
failure to submit additional documents to clearly establish ownership of the hotel and restaurant, claiming that there
was no need for petitioner Josefa Po Lam to submit additional documents considering that the Certificate of Registration
is the best and primary evidence of ownership.
We disagree with petitioners. We have scrutinized the records and find the claim that petitioner Josefa Po Lam is merely
the overseer is not borne out by the evidence.
First. It is significant that only Josefa Po Lam appeared in the proceedings with the Labor Arbiter. Despite receipt of the
Labor Arbiter's notice and summons, other notices and Orders, petitioner Pacita Po failed to appear in any of the
proceedings with the Labor Arbiter in these cases, nor file her position paper.26 It was only on appeal with the NLRC that
Pacita Po signed the pleadings.27 The apathy shown by petitioner Pacita Po is contrary to human experience as one
would think that the owner of an establishment would naturally be concerned when all her employees file complaints
against her.

21
Second. The records of the case belie petitioner Josefa Po Lam's claim that she is merely an overseer. The findings of the
Labor Arbiter on this question were based on credible, competent and substantial evidence. We again quote the Joint
Decision on this matter:
Mayon Hotel and Restaurant is a [business name] of an enterprise. While [petitioner] Josefa Po Lam claims that it is her
daughter, Pacita Po, who owns the hotel and restaurant when the latter purchased the same from one Palanos in 1981,
Josefa failed to submit the document of sale from said Palanos to Pacita as allegedly the sale was only verbal although
the license to operate said hotel and restaurant is in the name of Pacita which, despite our Order to Josefa to present
the same, she failed to comply (p. 38, tsn. August 13, 1998). While several documentary evidences were submitted by
Josefa wherein Pacita was named therein as owner of the hotel and restaurant (pp. 64, 65, 67 to 69; vol. I, rollo)[,] there
were documentary evidences also that were submitted by Josefa showing her ownership of said enterprise (pp. 468 to
469; vol. II, rollo). While Josefa explained her participation and interest in the business as merely to help and assist her
daughter as the hotel and restaurant was near the former's store, the testimonies of [respondents] and Josefa as well as
her demeanor during the trial in these cases proves (sic) that Josefa Po Lam owns Mayon Hotel and Restaurant.
[Respondents] testified that it was Josefa who exercises all the acts and manifestation of ownership of the hotel and
restaurant like transferring employees from the Greatwall Palace Restaurant which she and her husband Roy Po Lam
previously owned; it is Josefa to whom the employees submits (sic) reports, draws money for payment of payables and
for marketing, attending (sic) to Labor Inspectors during ocular inspections. Except for documents whereby Pacita Po
appears as the owner of Mayon Hotel and Restaurant, nothing in the record shows any circumstance or manifestation
that Pacita Po is the owner of Mayon Hotel and Restaurant. The least that can be said is that it is absurd for a person to
purchase a hotel and restaurant in the very heart of the City of Legazpi verbally. Assuming this to be true, when
[petitioners], particularly Josefa, was directed to submit evidence as to the ownership of Pacita of the hotel and
restaurant, considering the testimonies of [respondents], the former should [have] submitted the lease contract
between the owner of the building where Mayon Hotel and Restaurant was located at Rizal St., Legazpi City and Pacita
Po to clearly establish ownership by the latter of said enterprise. Josefa failed. We are not surprised why some
employers employ schemes to mislead Us in order to evade liabilities. We therefore consider and hold Josefa Po Lam as
the owner/proprietor of Mayon Hotel and Restaurant and the proper respondent in these cases.28
Petitioners' reliance on the rules of evidence, i.e., the certificate of registration being the best proof of ownership, is
misplaced. Notwithstanding the certificate of registration, doubts were cast as to the true nature of petitioner Josefa Po
Lam's involvement in the enterprise, and the Labor Arbiter had the authority to resolve this issue. It was therefore
within his jurisdiction to require the additional documents to ascertain who was the real owner of petitioner Mayon
Hotel & Restaurant.
Article 221 of the Labor Code is clear: technical rules are not binding, and the application of technical rules of procedure
may be relaxed in labor cases to serve the demand of substantial justice.29 The rule of evidence prevailing in court of law
or equity shall not be controlling in labor cases and it is the spirit and intention of the Labor Code that the Labor Arbiter
shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard
to technicalities of law or procedure, all in the interest of due process.30 Labor laws mandate the speedy administration
of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.31
Similarly, the fact that the respondents' complaints contained no allegation that petitioner Josefa Po Lam is the owner is
of no moment. To apply the concept of judicial admissions to respondents — who are but lowly employees - would be to
exact compliance with technicalities of law that is contrary to the demands of substantial justice. Moreover, the issue of
ownership was an issue that arose only during the course of the proceedings with the Labor Arbiter, as an incident of
determining respondents' claims, and was well within his jurisdiction.32
Petitioners were also not denied due process, as they were given sufficient opportunity to be heard on the issue of
ownership.33 The essence of due process in administrative proceedings is simply an opportunity to explain one's side or
an opportunity to seek reconsideration of the action or ruling complained of.34 And there is nothing in the records which
would suggest that petitioners had absolute lack of opportunity to be heard.35 Obviously, the choice not to present
evidence was made by petitioners themselves.36
But more significantly, we sustain the Labor Arbiter and the CA because even when the case was on appeal with the
NLRC, nothing was submitted to negate the Labor Arbiter's finding that Pacita Po is not the real owner of the subject
hotel and restaurant. Indeed, no such evidence was submitted in the proceedings with the CA nor with this Court.
Considering that petitioners vehemently deny ownership by petitioner Josefa Po Lam, it is most telling that they
continue to withhold evidence which would shed more light on this issue. We therefore agree with the CA that the
failure to submit could only mean that if produced, it would have been adverse to petitioners' case.37
Thus, we find that there is substantial evidence to rule that petitioner Josefa Po Lam is the owner of petitioner Mayon
Hotel & Restaurant.

22
2. Illegal Dismissal: claim for separation pay
Of the sixteen employees, only the following filed a case for illegal dismissal: respondents Loveres, Llarena, Nicerio,
Macandog, Guades, Atractivo and Broñola.38
The Labor Arbiter found that there was illegal dismissal, and granted separation pay to respondents Loveres, Macandog
and Llarena. As respondents Guades, Nicerio and Alamares were already 79, 66 and 65 years old respectively at the time
of the dismissal, the Labor Arbiter granted retirement benefits pursuant to Article 287 of the Labor Code as
amended.39 The Labor Arbiter ruled that respondent Atractivo was not entitled to separation pay because he had been
transferred to work in the restaurant operations in Elizondo Street, but awarded him damages. Respondents Loveres,
Llarena, Nicerio, Macandog and Guades were also awarded damages.40
The NLRC reversed the Labor Arbiter, finding that "no clear act of termination is attendant in the case at bar" and that
respondents "did not submit any evidence to that effect, but the finding and conclusion of the Labor Arbiter [are] merely
based on his own surmises and conjectures."41 In turn, the NLRC was reversed by the CA.
It is petitioners contention that the CA should have sustained the NLRC finding that none of the above-named
respondents were illegally dismissed, or entitled to separation or retirement pay. According to petitioners, even the
Labor Arbiter and the CA admit that when the illegal dismissal case was filed by respondents on April 1997, they had as
yet no cause of action. Petitioners therefore conclude that the filing by respondents of the illegal dismissal case was
premature and should have been dismissed outright by the Labor Arbiter.42 Petitioners also claim that since the validity
of respondents' dismissal is a factual question, it is not for the reviewing court to weigh the conflicting evidence.43
We do not agree. Whether respondents are still working for petitioners is a factual question. And the records are
unequivocal that since April 1997, when petitioner Mayon Hotel & Restaurant suspended its hotel operations and
transferred its restaurant operations in Elizondo Street, respondents Loveres, Macandog, Llarena, Guades and Nicerio
have not been permitted to work for petitioners. Respondent Alamares, on the other hand, was also laid-off when the
Elizondo Street operations closed, as were all the other respondents. Since then, respondents have not been permitted
to work nor recalled, even after the construction of the new premises at Peñaranda Street and the reopening of the
hotel operations with the restaurant in this new site. As stated by the Joint Decision of the Labor Arbiter on July 2000, or
more than three (3) years after the complaint was filed:44
[F]rom the records, more than six months had lapsed without [petitioner] having resumed operation of the hotel. After
more than one year from the temporary closure of Mayon Hotel and the temporary transfer to another site of Mayon
Restaurant, the building which [petitioner] Josefa allege[d] w[h]ere the hotel and restaurant will be transferred has been
finally constructed and the same is operated as a hotel with bar and restaurant nevertheless, none of [respondents]
herein who were employed at Mayon Hotel and Restaurant which was also closed on April 30, 1998 was/were recalled
by [petitioner] to continue their services...
Parenthetically, the Labor Arbiter did not grant separation pay to the other respondents as they had not filed an
amended complaint to question the cessation of their employment after the closure of Mayon Hotel & Restaurant on
March 31, 1997.45
The above factual finding of the Labor Arbiter was never refuted by petitioners in their appeal with the NLRC. It
confounds us, therefore, how the NLRC could have so cavalierly treated this uncontroverted factual finding by ruling that
respondents have not introduced any evidence to show that they were illegally dismissed, and that the Labor Arbiter's
finding was based on conjecture.46 It was a serious error that the NLRC did not inquire as to the legality of the cessation
of employment. Article 286 of the Labor Code is clear — there is termination of employment when an otherwise bona
fide suspension of work exceeds six (6) months.47 The cessation of employment for more than six months was patent
and the employer has the burden of proving that the termination was for a just or authorized cause.48
Moreover, we are not impressed by any of petitioners' attempts to exculpate themselves from the charges. First, in the
proceedings with the Labor Arbiter, they claimed that it could not be illegal dismissal because the lay-off was merely
temporary (and due to the expiration of the lease contract over the old premises of the hotel). They specifically invoked
Article 286 of the Labor Code to argue that the claim for separation pay was premature and without legal and factual
basis.49 Then, because the Labor Arbiter had ruled that there was already illegal dismissal when the lay-off had exceeded
the six-month period provided for in Article 286, petitioners raise this novel argument, to wit:
It is the firm but respectful submission of petitioners that reliance on Article 286 of the Labor Code is misplaced,
considering that the reason why private respondents were out of work was not due to the fault of petitioners. The
failure of petitioners to reinstate the private respondents to their former positions should not likewise be attributable to
said petitioners as the private respondents did not submit any evidence to prove their alleged illegal dismissal. The
petitioners cannot discern why they should be made liable to the private respondents for their failure to be reinstated
considering that the fact that they were out of work was not due to the fault of petitioners but due to circumstances
beyond the control of petitioners, which are the termination and non-renewal of the lease contract over the subject

23
premises. Private respondents, however, argue in their Comment that petitioners themselves sought the application of
Article 286 of the Labor Code in their case in their Position Paper filed before the Labor Arbiter. In refutation, petitioners
humbly submit that even if they invoke Article 286 of the Labor Code, still the fact remains, and this bears stress and
emphasis, that the temporary suspension of the operations of the establishment arising from the non-renewal of the
lease contract did not result in the termination of employment of private respondents and, therefore, the petitioners
cannot be faulted if said private respondents were out of work, and consequently, they are not entitled to their money
claims against the petitioners.50
It is confounding how petitioners have fashioned their arguments. After having admitted, in effect, that respondents
have been laid-off since April 1997, they would have this Court excuse their refusal to reinstate respondents or grant
them separation pay because these same respondents purportedly have not proven the illegality of their dismissal.
Petitioners' arguments reflect their lack of candor and the blatant attempt to use technicalities to muddle the issues and
defeat the lawful claims of their employees. First, petitioners admit that since April 1997, when hotel operations were
suspended due to the termination of the lease of the old premises, respondents Loveres, Macandog, Llarena, Nicerio
and Guades have not been permitted to work. Second, even after six months of what should have been just a
temporary lay-off, the same respondents were still not recalled to work. As a matter of fact, the Labor Arbiter even
found that as of the time when he rendered his Joint Decision on July 2000 — or more than three (3) years after the
supposed "temporary lay-off," the employment of all of the respondents with petitioners had ceased, notwithstanding
that the new premises had been completed and the same operated as a hotel with bar and restaurant. This is
clearly dismissal — or the permanent severance or complete separation of the worker from the service on the initiative
of the employer regardless of the reasons therefor.51
On this point, we note that the Labor Arbiter and the CA are in accord that at the time of the filing of the complaint,
respondents had no cause of action to file the case for illegal dismissal. According to the CA and the Labor Arbiter, the
lay-off of the respondents was merely temporary, pending construction of the new building at Peñaranda Street.52
While the closure of the hotel operations in April of 1997 may have been temporary, we hold that the evidence on
record belie any claim of petitioners that the lay-off of respondents on that same date was merely temporary. On the
contrary, we find substantial evidence that petitioners intended the termination to be permanent. First, respondents
Loveres, Macandog, Llarena, Guades, Nicerio and Alamares filed the complaint for illegal dismissal immediately
after the closure of the hotel operations in Rizal Street, notwithstanding the alleged temporary nature of the closure of
the hotel operations, and petitioners' allegations that the employees assigned to the hotel operations knew about this
beforehand. Second, in their position paper submitted to the Labor Arbiter, petitioners invoked Article 286 of the Labor
Code to assert that the employer-employee relationship was merely suspended, and therefore the claim for separation
pay was premature and without legal or factual basis.53 But they made no mention of any intent to recall these
respondents to work upon completion of the new premises. Third, the various pleadings on record show that
petitioners held respondents, particularly Loveres, as responsible for mismanagement of the establishment and for
abuse of trust and confidence. Petitioner Josefa Po Lam's affidavit on July 21, 1998, for example, squarely blamed
respondents, specifically Loveres, Bumalay and Camigla, for abusing her leniency and causing petitioner Mayon Hotel &
Restaurant to sustain "continuous losses until it is closed." She then asserts that respondents "are not entitled to
separation pay for they were not terminated and if ever the business ceased to operate it was because of
losses."54 Again, petitioners make the same allegation in their memorandum on appeal with the NLRC, where they
alleged that three (3) years prior to the expiration of the lease in 1997, the operation of the Hotel had been sustaining
consistent losses, and these were solely attributed to respondents, but most especially due to Loveres's
mismanagement and abuse of petitioners' trust and confidence.55 Even the petition filed in this court made reference to
the separation of the respondents due to "severe financial losses and reverses," again imputing it to respondents'
mismanagement.56 The vehemence of petitioners' accusation of mismanagement against respondents, especially against
Loveres, is inconsistent with the desire to recall them to work. Fourth, petitioners' memorandum on appeal also averred
that the case was filed "not because of the business being operated by them or that they were supposedly not receiving
benefits from the Labor Code which is true, but because of the fact that the source of their livelihood, whether legal or
immoral, was stopped on March 31, 1997, when the owner of the building terminated the Lease Contract."57 Fifth,
petitioners had inconsistencies in their pleadings (with the NLRC, CA and with this Court) in referring to the
closure,58 i.e., in the petition filed with this court, they assert that there is no illegal dismissal because there was "only a
temporary cessation or suspension of operations of the hotel and restaurant due to circumstances beyond the control of
petitioners, and that is, the non-renewal of the lease contract..."59 And yet, in the same petition, they also assert that:
(a) the separation of respondents was due to severe financial losses and reverses leading to the closure of the business;
and (b) petitioner Pacita Po had to close shop and was bankrupt and has no liquidity to put up her own building to
house Mayon Hotel & Restaurant.60 Sixth, and finally, the uncontroverted finding of the Labor Arbiter that petitioners

24
terminated all the other respondents, by not employing them when the Hotel and Restaurant transferred to its new site
on Peñaranda Street.61 Indeed, in this same memorandum, petitioners referred to all respondents as "former employees
of Mayon Hotel & Restaurant."62
These factors may be inconclusive individually, but when taken together, they lead us to conclude that petitioners really
intended to dismiss all respondents and merely used the termination of the lease (on Rizal Street premises) as a means
by which they could terminate their employees.
Moreover, even assuming arguendo that the cessation of employment on April 1997 was merely temporary,
it became dismissal by operation of law when petitioners failed to reinstate respondents after the lapse of six (6)
months, pursuant to Article 286 of the Labor Code.
We are not impressed by petitioners' claim that severe business losses justified their failure to reinstate respondents.
The evidence to prove this fact is inconclusive. But more important, serious business losses do not excuse the employer
from complying with the clearance or report required under Article 283 of the Labor Code and its implementing rules
before terminating the employment of its workers.63 In the absence of justifying circumstances, the failure of petitioners
to observe the procedural requirements set out under Article 284, taints their actuations with bad faith, especially since
they claimed that they have been experiencing losses in the three years before 1997. To say the least, if it were true that
the lay-off was temporary but then serious business losses prevented the reinstatement of respondents, then
petitioners should have complied with the requirements of written notice. The requirement of law mandating the giving
of notices was intended not only to enable the employees to look for another employment and therefore ease the
impact of the loss of their jobs and the corresponding income, but more importantly, to give the Department of Labor
and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized cause of termination.64
And even assuming that the closure was due to a reason beyond the control of the employer, it still has to accord its
employees some relief in the form of severance pay.65
While we recognize the right of the employer to terminate the services of an employee for a just or authorized cause,
the dismissal of employees must be made within the parameters of law and pursuant to the tenets of fair play.66 And in
termination disputes, the burden of proof is always on the employer to prove that the dismissal was for a just or
authorized cause.67 Where there is no showing of a clear, valid and legal cause for termination of employment, the law
considers the case a matter of illegal dismissal.68
Under these circumstances, the award of damages was proper. As a rule, moral damages are recoverable where the
dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done in a
manner contrary to morals, good customs or public policy.69 We believe that the dismissal of the respondents was
attended with bad faith and meant to evade the lawful obligations imposed upon an employer.
To rule otherwise would lead to the anomaly of respondents being terminated from employment in 1997 as a matter of
fact, but without legal redress. This runs counter to notions of fair play, substantial justice and the constitutional
mandate that labor rights should be respected. If doubts exist between the evidence presented by the employer and the
employee, the scales of justice must be tilted in favor of the latter — the employer must affirmatively show rationally
adequate evidence that the dismissal was for a justifiable cause.70 It is a time-honored rule that in controversies
between a laborer and his master, doubts reasonably arising from the evidence, or in the interpretation of agreements
and writing should be resolved in the former's favor.71 The policy is to extend the doctrine to a greater number of
employees who can avail of the benefits under the law, which is in consonance with the avowed policy of the State to
give maximum aid and protection of labor.72
We therefore reinstate the Labor Arbiter's decision with the following modifications:
(a) Separation pay for the illegal dismissal of respondents Loveres, Macandog and Llarena; (Santos Broñola cannot be
granted separation pay as he made no such claim);
(b) Retirement pay for respondents Guades, Nicerio, and Alamares, who at the time of dismissal were entitled to their
retirement benefits pursuant to Article 287 of the Labor Code as amended;73 and
(c) Damages for respondents Loveres, Macandog, Llarena, Guades, Nicerio, Atractivo, and Broñola.
3. Money claims
The CA held that contrary to the NLRC's ruling, petitioners had not discharged the burden of proving that the monetary
claims of the respondents have been paid.74 The CA thus reinstated the Labor Arbiter's grant of respondents' monetary
claims, including damages.
Petitioners assail this ruling by repeating their long and convoluted argument that as there was no illegal dismissal, then
respondents are not entitled to their monetary claims or separation pay and damages. Petitioners' arguments are not
only tiring, repetitive and unconvincing, but confusing and confused — entitlement to labor standard benefits is a
separate and distinct concept from payment of separation pay arising from illegal dismissal, and are governed by
different provisions of the Labor Code.

25
We agree with the CA and the Labor Arbiter. Respondents have set out with particularity in their complaint, position
paper, affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that
petitioners have failed to pay them. It was therefore petitioners' burden to prove that they have paid these money
claims. One who pleads payment has the burden of proving it, and even where the employees must allege nonpayment,
the general rule is that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove
non payment.75 This petitioners failed to do.
We also agree with the Labor Arbiter and the CA that the documents petitioners submitted, i.e., affidavits executed by
some of respondents during an ocular inspection conducted by an inspector of the DOLE; notices of inspection result
and Facility Evaluation Orders issued by DOLE, are not sufficient to prove payment.76 Despite repeated orders from the
Labor Arbiter,77 petitioners failed to submit the pertinent employee files, payrolls, records, remittances and other similar
documents which would show that respondents rendered work entitling them to payment for overtime work, night shift
differential, premium pay for work on holidays and rest day, and payment of these as well as the COLA and the SILP –
documents which are not in respondents' possession but in the custody and absolute control of petitioners.78 By
choosing not to fully and completely disclose information and present the necessary documents to prove payment of
labor standard benefits due to respondents, petitioners failed to discharge the burden of proof.79 Indeed, petitioners'
failure to submit the necessary documents which as employers are in their possession, inspite of orders to do so, gives
rise to the presumption that their presentation is prejudicial to its cause.80 As aptly quoted by the CA:
[W]hen the evidence tends to prove a material fact which imposes a liability on a party, and he has it in his power to
produce evidence which from its very nature must overthrow the case made against him if it is not founded on fact, and
he refuses to produce such evidence, the presumption arises that the evidence, if produced, would operate to his
prejudice, and support the case of his adversary.81
Petitioners next claim that the cost of the food and snacks provided to respondents as facilities should have been
included in reckoning the payment of respondents' wages. They state that although on the surface respondents
appeared to receive minimal wages, petitioners had granted respondents other benefits which are considered part and
parcel of their wages and are allowed under existing laws.82 They claim that these benefits make up for whatever
inadequacies there may be in compensation.83 Specifically, they invoked Sections 5 and 6, Rule VII-A, which allow the
deduction of facilities provided by the employer through an appropriate Facility Evaluation Order issued by the Regional
Director of the DOLE.84 Petitioners also aver that they give five (5) percent of the gross income each month as incentives.
As proof of compliance of payment of minimum wages, petitioners submitted the Notice of Inspection Results issued in
1995 and 1997 by the DOLE Regional Office.85
The cost of meals and snacks purportedly provided to respondents cannot be deducted as part of respondents'
minimum wage. As stated in the Labor Arbiter's decision:86
While [petitioners] submitted Facility Evaluation Orders (pp. 468, 469; vol. II, rollo) issued by the DOLE Regional Office
whereby the cost of meals given by [petitioners] to [respondents] were specified for purposes of considering the same
as part of their wages, We cannot consider the cost of meals in the Orders as applicable to [respondents]. [Respondents]
were not interviewed by the DOLE as to the quality and quantity of food appearing in the applications of [petitioners] for
facility evaluation prior to its approval to determine whether or not [respondents] were indeed given such kind and
quantity of food. Also, there was no evidence that the quality and quantity of food in the Orders were voluntarily
accepted by [respondents]. On the contrary; while some [of the respondents] admitted that they were given meals and
merienda, the quality of food serve[d] to them were not what were provided for in the Orders and that it was only when
they filed these cases that they came to know about said Facility Evaluation Orders (pp. 100; 379[,] vol. II, rollo; p. 40,
tsn[,] June 19, 1998). [Petitioner] Josefa herself, who applied for evaluation of the facility (food) given to [respondents],
testified that she did not inform [respondents] concerning said Facility Evaluation Orders (p. 34, tsn[,] August 13, 1998).
Even granting that meals and snacks were provided and indeed constituted facilities, such facilities could not be
deducted without compliance with certain legal requirements. As stated in Mabeza v. NLRC,87 the employer simply
cannot deduct the value from the employee's wages without satisfying the following: (a) proof that such facilities are
customarily furnished by the trade; (b) the provision of deductible facilities is voluntarily accepted in writing by the
employee; and (c) the facilities are charged at fair and reasonable value. The records are clear that petitioners failed to
comply with these requirements. There was no proof of respondents' written authorization. Indeed, the Labor Arbiter
found that while the respondents admitted that they were given meals and merienda, the quality of food served to them
was not what was provided for in the Facility Evaluation Orders and it was only when they filed the cases that they came
to know of this supposed Facility Evaluation Orders.88 Petitioner Josefa Po Lam herself admitted that she did not inform
the respondents of the facilities she had applied for.89
Considering the failure to comply with the above-mentioned legal requirements, the Labor Arbiter therefore erred when
he ruled that the cost of the meals actually provided to respondents should be deducted as part of their salaries, on the

26
ground that respondents have availed themselves of the food given by petitioners.90 The law is clear that mere
availment is not sufficient to allow deductions from employees' wages.
More important, we note the uncontroverted testimony of respondents on record that they were required to eat in the
hotel and restaurant so that they will not go home and there is no interruption in the services of Mayon Hotel &
Restaurant. As ruled in Mabeza, food or snacks or other convenience provided by the employers are deemed as
supplements if they are granted for the convenience of the employer. The criterion in making a distinction between a
supplement and a facility does not so much lie in the kind (food, lodging) but the purpose.91 Considering, therefore, that
hotel workers are required to work different shifts and are expected to be available at various odd hours, their ready
availability is a necessary matter in the operations of a small hotel, such as petitioners' business.92 The deduction of the
cost of meals from respondents' wages, therefore, should be removed.
We also do not agree with petitioners that the five (5) percent of the gross income of the establishment can be
considered as part of the respondents' wages. We quote with approval the Labor Arbiter on this matter, to wit:
While complainants, who were employed in the hotel, receive[d] various amounts as profit share, the same cannot be
considered as part of their wages in determining their claims for violation of labor standard benefits. Although called
profit share[,] such is in the nature of share from service charges charged by the hotel. This is more explained by
[respondents] when they testified that what they received are not fixed amounts and the same are paid not on a
monthly basis (pp. 55, 93, 94, 103, 104; vol. II, rollo). Also, [petitioners] failed to submit evidence that the amounts
received by [respondents] as profit share are to be considered part of their wages and had been agreed by them prior to
their employment. Further, how can the amounts receive[d] by [respondents] be considered as profit share when the
same [are] based on the gross receipt of the hotel[?] No profit can as yet be determined out of the gross receipt of an
enterprise. Profits are realized after expenses are deducted from the gross income.
On the issue of the proper minimum wage applicable to respondents, we sustain the Labor Arbiter. We note that
petitioners themselves have admitted that the establishment employs "more or less sixteen (16)
employees,"93 therefore they are estopped from claiming that the applicable minimum wage should be for service
establishments employing 15 employees or less.
As for petitioners repeated invocation of serious business losses, suffice to say that this is not a defense to payment of
labor standard benefits. The employer cannot exempt himself from liability to pay minimum wages because of poor
financial condition of the company. The payment of minimum wages is not dependent on the employer's ability to pay.94
Thus, we reinstate the award of monetary claims granted by the Labor Arbiter.
4. Conclusion
There is no denying that the actuations of petitioners in this case have been reprehensible. They have terminated the
respondents' employment in an underhanded manner, and have used and abused the quasi-judicial and judicial
processes to resist payment of their employees' rightful claims, thereby protracting this case and causing the
unnecessary clogging of dockets of the Court. They have also forced respondents to unnecessary hardship and financial
expense. Indeed, the circumstances of this case would have called for exemplary damages, as the dismissal was effected
in a wanton, oppressive or malevolent manner,95 and public policy requires that these acts must be suppressed and
discouraged.96
Nevertheless, we cannot agree with the Labor Arbiter in granting exemplary damages of P10,000.00 each to all
respondents. While it is true that other forms of damages under the Civil Code may be awarded to illegally dismissed
employees,97 any award of moral damages by the Labor Arbiter cannot be based on the Labor Code but should be
grounded on the Civil Code.98 And the law is clear that exemplary damages can only be awarded if plaintiff shows proof
that he is entitled to moral, temperate or compensatory damages.99
As only respondents Loveres, Guades, Macandog, Llarena, Nicerio, Atractivo and Broñola specifically claimed damages
from petitioners, then only they are entitled to exemplary damages.sjgs1
Finally, we rule that attorney's fees in the amount to P10,000.00 should be granted to each respondent. It is settled that
in actions for recovery of wages or where an employee was forced to litigate and incur expenses to protect his rights and
interest, he is entitled to an award of attorney's fees.100 This case undoubtedly falls within this rule.
IN VIEW WHEREOF, the petition is hereby DENIED. The Decision of January 17, 2003 of the Court of Appeals in CA-G.R.
SP No. 68642 upholding the Joint Decision of July 14, 2000 of the Labor Arbiter in RAB V Case Nos. 04-00079-97 and 04-
00080-97 is AFFIRMED, with the following MODIFICATIONS:
(1) Granting separation pay of one-half (1/2) month for every year of service to respondents Loveres, Macandog and
Llarena;
(2) Granting retirement pay for respondents Guades, Nicerio, and Alamares;
(3) Removing the deductions for food facility from the amounts due to all respondents;

27
(4) Awarding moral damages of P20,000.00 each for respondents Loveres, Macandog, Llarena, Guades, Nicerio,
Atractivo, and Broñola;
(5) Deleting the award of exemplary damages of P10,000.00 from all respondents except Loveres, Macandog, Llarena,
Guades, Nicerio, Atractivo, and Broñola; and
(6) Granting attorney's fees of P10,000.00 each to all respondents.
The case is REMANDED to the Labor Arbiter for the RECOMPUTATION of the total monetary benefits awarded and due
to the employees concerned in accordance with the decision. The Labor Arbiter is ORDERED to submit his compliance
thereon within thirty (30) days from notice of this decision, with copies furnished to the parties.
SO ORDERED.

28
 4. G.R. No. 79664 August 11, 1992
ANDRES VILLAVILLA and ESTER GADIENTE VILLAVILLA, petitioners,
vs.
COURT OF APPEALS, SOCIAL SECURITY COMMISSION, REYNALDO MERCADO, and MARCELO COSUCO, respondents,
SOCIAL SECURITY SYSTEM, intervenor.
Public Attorney's Office for petitioners.
F.V. Faylona & Associates for Marcelino Casuco.

BELLOSILLO, J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated April 10, 1987, affirming the
Order 2 of the Social Security Commission dated November 28, 1984, dismissing the complaint of herein petitioners for
lack of cause of action, as well as the Resolution 3 of respondent court denying the motion of petitioners for
reconsideration.
The antecedents: Arturo Villavilla, son of petitioners, was employed as "tripulante" (crew member) of the fishing boat
"F/B Saint Theresa" from 1974 until September 11, 1977, when the boat sank off Isla Binatikan, Taytay, Palawan. Arturo
was not among the known survivors of that sinking and had been missing since then. 4
On November 20, 1979, petitioners Andres Villavilla and Ester Gadiente Villavilla, parents of Arturo, filed a petition with
the Social Security Commission against Reynaldo Mercado and Marcelino Cosuco, owners of the ill-fated fishing boat, for
death compensation benefits of Arturo whom respondents failed to register as their employee. 5
On May 29, 1981, the Social Security System (SSS) filed a petition in intervention alleging that records from the SSS
Production Department showed that "F/B Saint Theresa", owned by Marcelino Cosuco and operated by Reynaldo
Mercado, was a registered member-employer, and that in the event petitioners succeeded in proving the employment
of Arturo with private respondents, the latter should be held liable in damages equivalent to the benefits due the
petitioners for failure to report Arturo for coverage pursuant to Sec. 24 (a) of the Social Security Act, as amended. 6
Respondent Cosuco filed his answer denying all allegations in the petition and claiming that he already sold the fishing
boat to respondent Mercado on December 10, 1975, and from then on he did not participate anymore in the operation
and management of the boat nor in the hiring of its crewmembers. 7
Meanwhile respondent Mercado was declared in default for failure to file his answer.
After petitioners had presented their evidence and rested their case, respondent Cosuco filed a motion to dismiss
(demurrer to evidence) on the ground of res judicata and lack of cause of action. 8
On November 28, 1984, respondent Social Security Commission issued an Order dismissing the petition for lack of cause
of action. 9
On appeal, respondent Court of Appeals in its decision of April 10, 1987, affirmed the questioned Order of respondent
Commission there being no reversible error. 10
Petitioners are before Us predicating their petition for review on the following issues: whether there was an employer-
employee relationship between petitioners' deceased son, Arturo Villavilla, and herein private respondents; whether
private respondents are liable for death compensation benefits of Arturo Villavilla; and, whether there was a violation of
the Social Security Act, as amended, by private respondents for not registering Arturo Villavilla with the System as their
employee as mandated by law.
Petitioners argue that it was private respondent Reynaldo Mercado who recruited Arturo Villavilla sometime in 1974 to
be a crew member of the fishing boat "F/B Saint Theresa" with a daily wage of P20.00. The boat was then owned by
private respondent Marcelino Cosuco and operated by Reynaldo Mercado. On December 10, 1975, Cosuco sold the
fishing boat to Mercado.
Invoking Negre vs. Workmen's Compensation Commission, 11 petitioners assert that "fishermen-crew members are
individual employees and not industrial partners as in the case at bar" so that the "mere presence of Arturo Villavilla in
the fishing boat of Mercado makes him an employee of the employer, Mercado." Further citing RJL Martinez Fishing
Corporation vs. NLRC, 12 petitioners posit that "the main factor that determines whether a person is an employee of the
employer is the kind of work being performed by that person. If the work of the laborer is part of the regular business or
occupation of the employer, the said laborer is a regular employee of the employer." Petitioners thus contend that since
Arturo was recruited by Mercado himself sometime in 1974 as one of his fishermen-crew members and that the crew
members were uniformly paid by Mercado, there can be no other conclusion but that Arturo was an employee of
Mercado at the time his fishing boat sank.
A careful and assiduous review of the records, however, completely undermines the base of petitioners' position. The
records disclose that the relationship between Mercado and the crew members of the ship headed by its skipper, Capt.

29
Pedro Matibag, is one positively showing the existence of a joint venture. This is clearly revealed in the testimonies of
Capt. Pedro Matibag and Gil Chua, a crew member, both witnesses for petitioners, to wit:
Atty. Aganan (to witness Pedro Matibag):
Q Mr. Witness, will you tell us who your employer is?
A Mr. Cosuco, Ma'am.
xxx xxx xxx
Q Who pays your salary?
A The procedure is sharing. It we have a catch, we share the catch.
Q What is the nature of "partihan" or sharing?
A Upon selling the fish to the market, a certain portion will be deducted for the expenses and taken by the checker and
the remaining amount will be shared by the crew-members.
Q By crew-members, you mean, those who are fishing or who catch fish?
A Yes, Ma'am.
xxx xxx xxx
Q Is the checker also paid and also included in the sharing?
A Yes, Ma'am. 13
xxx xxx xxx
Atty. Riva:
Q Mr. Captain, is Arturo Villavilla a member of the crew?
A A fisherman.
Q As a fisherman, what is his duty?
A His duty is, he will ride the fishing boat and he will "mangangawil".
Q By the way, who hired him?
A There was a master whom we talked to.
Q And this master is the one who hired him and gave him the share for fishing?
A Yes, Sir.
Q So, assuming that Marcelino Cosuco is the owner, he has nothing to do with Arturo Villavilla?
A Yes, Sir, it was the master.
Q And the same was through (true) with Reynaldo Mercado that he has nothing to do with the hiring of Arturo Villavilla
because it is the master fisherman who hired him, is that right?
A Yes, Sir.
Q And Mr. Mercado only buys fish from them?
A Yes, Sir. 14
xxx xxx xxx
Hearing Officer:
Q Do you want to convey to this Honorable Commission Mr. Matibag, that you went to fishing venture to fish?
A Yes, Sir.
Q In this fishing venture, do you have any agreement to (with) the owner of the fishing boat?
A Our agreement with the owner was to go to high seas for fishing.
Q Do you receive monthly salary from the owner of the fishing boat?
A None, Sir, because it was a sharing basis.
Q So, what is the contribution of the owner of the fishing boat to your fishing venture?
A Food and other equipment.
Q Mr. Matibag, who supplied you the gasoline?
A The owner of the fishing boat, Sir.
Q Who gave you provisions or food in your fishing or during the duration of your fishing?
A The owner.
Q While you were in high seas, was there anybody who supervised you?
A None, Sir, there was no radio. I gave the order.
Q Before you go (sic) to the high seas for fishing purposes, did you receive any instruction from the owner?
A There was no instruction given. 15
xxx xxx xxx
Atty. Agana (to witness Gil Chua):
Q Will you please inform the Honorable Investigator how much is your salary and where did you get your salary?

30
A It was given to us by the captain when there is (sic) a sale.
Q So, I understand from you, Mr. witness, that whenever there is a sale of fish, you get a share?
A We received P 200 or P 300, not the same always.
xxx xxx xxx
Atty. Riva:
Q Depending on the volume of sale of fish, is it not?
A That is all I know. 16
xxx xxx xxx
Hearing Officer:
Q Was there a time that you did not receive any share?
A If we have a trip, we usually receive.
Q How about if there is no trip, did you receive any salary from Mr. Mercado as owner of fishing boat St. Theresa?
A No., Sir.
xxx xxx xxx
Q So, you are sure Mister Witness, that when your fishing boat has no catch, you did (sic) not receive any share?
A Yes, Sir. 17
It is thus clear that the arrangement between the boat owner and the crew members, one of whom was petitioners'
son, partook of the nature of a joint venture: the crew members did not receive fixed compensation as they only shared
in their catch; they ventured to the sea irrespective of the instructions of the boat owners, i.e., upon their own best
judgment as to when, how long, and where to go fishing; the boat owners did not hire them but simply joined the fishing
expedition upon invitation of the ship master, even without the knowledge of the boat owner. In short, there was
neither right of control nor actual exercise of such right on the part of the boat owner over his crew members.
Consequently, respondent Court of Appeals is correct in upholding the application by respondent Social Security
Commission of the ruling in Pajarillo v. Social Security System 18 where We held:
. . . an employee is defined as a "person who performs services for an employer in which either or both mental and
physical efforts are used and who receives compensation for such services, where there is an employer-employee
relationship" (Sec. 8[d], Rep. Act 1161, as amended by Rep. Act 2658). In the present case, neither the pilots nor the
crew-members receive compensation from boat-owners. They only share in their own catch produced by their own
efforts. There is no showing that outside of their one third share, the boat-owners have anything to do with the
distribution of the rest of the catch among the pilots and the crew members. The latter perform no service for the boat-
owners, but mainly for their own benefit.
In the undertaking in question, the boat-owners obviously are not responsible for the wage, salary, or fee of the pilot
and crew-members. Their sole participation in the venture is the furnishing or delivery of the equipment used for fishing,
after which, they merely wait for the boat's return and receive their share in the catch, if there is any. For his part, a
person who joins the outfit is entitled to a share or participation in the fruit of the fishing trip. If it gives no return, the
men get nothing. It appears to us therefore that the undertaking is in the nature of a joint venture, with the boat-owner
supplying the boat and its equipment (sic), and the pilot and crew-members contributing the necessary labor, and the
parties getting specific shares for their respective contributions.
xxx xxx xxx
Add to this extreme difficulty, if not impossibility of determining the monthly wage or earning of these fishermen for the
purpose of fixing the amount of their and the supposed employer's contributions (See Secs. 18 and 19, Ibid.), and there
is every reason to exempt the parties to this kind of undertaking from compulsory registration with the Social Security
System.
Certainly, petitioners' reliance on Negre v. Workmen's Compensation Commission, supra, and RJL Fishing Corp. v. NLRC,
supra, is misplaced. The observations of respondent Social Security Commission are more persuasive and correct. Thus
—
The case of Jose Negre vs. Workmen's Compensation, et al., 135 SCRA 651, invoked by the petitioners-appellants in
support of their claim that there existed an employer-employee relationship between their son Arturo Villavilla and
private respondent Reynaldo Mercado cannot be applied to the instant case for the simple reason that the facts in the
aforesaid case are different from those in the case at bar. A look at the Jose Negre case will show that it made referral to
the case of Abong vs. Workmen's Compensation Commission, 54 SCRA 379, wherein this Honorable Court stated, and we
beg to quote:
xxx xxx xxx
In Abong vs. Workmen's Compensation Commission (54 SCRA 379) we held that fisherman crew-members Manuel and
Miguel are employees and not industrial partners.

31
xxx xxx xxx
It is to be noted, however, that in the case of Abong vs. Workmen's Compensation Commission, this Honorable Court
stated and we again beg to quote:
xxx xxx xxx
As pointed by the Commission's finding, the fundamental bases showing that petitioner Dr. Agustino R. Abong is the
employer, are present, namely, the selection and engagement of the employee; the payment of wages; the power of
dismissal and the employer's power to control the employees conduct. These powers were lodged in petitioner Abong,
thru his agent, Simplicio Panganiban, whom he alleges to be his partner. On this score alone, the petition for review
must fail. It is well-settled that employer-employee relationship involves findings of facts which are conclusive and
binding and not subject to review by this Court. (emphasis supplied).
xxx xxx xxx
Interestingly, the aforementioned fundamental bases for the existence of employer-employee relationship are not
present in the case at bar. As mentioned earlier, private respondent Reynaldo Mercado had no connection with the
selection and engagement of Arturo Villavilla (pp. 38-39, T.S.N. 12-6-83); exercised no power of dismissal over Arturo
Villavilla; neither had he any power of control or had reserved the right to control Arturo Villavilla as to the result of the
work to be done as well as the means and methods by which the same is to be accomplished, and there was no such
uniform salary involved (pp. 41-43, T.S.N. 12-6-83).
In the case before Us, it is clear that there was no employer-employee relationship between petitioner's son Arturo and
private respondent Mercado, much less private respondent Cosuco. As such, Arturo could not be made subject of
compulsory coverage under the Social Security Act; hence, private respondents cannot be said to have violated said law
when they did not register him with the Social Security System. A fortiori, respondent as well as intervenor are not
answerable to petitioners for any death benefits under the law.
Culled from the foregoing, the inexorable conclusion is that respondent Court of Appeals did not err in sustaining the
judgment of respondent Social Security Commission.
It may not be amiss to mention that while petitioners merely raise factual questions which are not proper under Rule 45
of the Rules of Court, We nevertheless went to great lengths in dissecting the facts of this case if only to convince Us
that petitioners, who are pauper litigants and seeking claims under a social legislation, have not been denied its benefits.
For, We are not unaware that in this jurisdiction all doubts in the implementation and interpretation of provisions of
social legislations should be resolved in favor of the working class. But, alas, justice is not fully served by sustaining the
contention of the poor simply because he is poor. Justice is done by properly applying the law regardless of the station
in life of the contending parties.
WHEREFORE, finding no reversible error in the questioned judgment of the appellate court, the same is AFFIRMED. No
costs.
SO ORDERED.

32
 5. G.R. No. 151309 October 15, 2008
BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIÑO, VIVENCIO B.
BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C.
RIVERA, respondents.
DECISION
NACHURA, J.:
This petition seeks a review of the Decision1 of the Court of Appeals (CA) dated July 24, 2001 and Resolution dated
December 20, 2001, which affirmed the finding of the National Labor Relations Commission (NLRC) that the petitioners'
transfer to another workplace did not amount to a constructive dismissal and an unfair labor practice.
The pertinent factual antecedents are as follows:
Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines and its principal office is located in
Caloocan City. Petitioners Joselito Lariño, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are its regular
employees, occupying the positions of helper, shipment helper and factory workers, respectively, assigned to the
Production Department. They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining
representative of the rank-and-file employees.
Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for a compressed workweek
schedule to be implemented in the company effective May 20, 1996. The MOA was entered into pursuant to
Department of Labor and Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines on the
Implementation of Compressed Workweek. As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall
be considered as the regular working hours, and no overtime pay shall be due and payable to the employee for work
rendered during those hours. The MOA specifically stated that the employee waives the right to claim overtime pay for
work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday considering that the compressed workweek
schedule is adopted in lieu of the regular workweek schedule which also consists of 46 hours. However, should an
employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to overtime pay.
Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the implementation
of a compressed workweek in the company.3
In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement (CBA) but failed to
arrive at a new agreement.
Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the Department of
Agriculture reminding it that its production should be conducted in San Rafael, Bulacan, not in Caloocan City:
MR. WILFREDO C. RIVERA
President, Tryco Pharma Corporation
San Rafael, Bulacan
Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan
Dear Mr. Rivera:
This is to remind you that your License to Operate as Veterinary Drug and Product Manufacturer is addressed at San
Rafael, Bulacan, and so, therefore, your production should be done at the above mentioned address only. Further,
production of a drug includes propagation, processing, compounding, finishing, filling, repacking, labeling, advertising,
storage, distribution or sale of the veterinary drug product. In no instance, therefore, should any of the above be done
at your business office at 117 M. Ponce St., EDSA, Caloocan City.
Please be guided accordingly.
Thank you.
Very truly yours,
(sgd.)
EDNA ZENAIDA V. VILLACORTE, D.V.M.
Chief, Animal Feeds Standard Division4
Accordingly, Tryco issued a Memorandum5 dated April 7, 1997 which directed petitioner Aya-ay to report to the
company's plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on April 18,
1997.6 Subsequently, through a Memorandum7 dated May 9, 1997, Tryco also directed petitioners Egera, Lariño and
Barte to report to the company's plant site in Bulacan.
BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor practice. In
protest, BMT declared a strike on May 26, 1997.

33
In August 1997, petitioners filed their separate complaints8 for illegal dismissal, underpayment of wages, nonpayment of
overtime pay and service incentive leave, and refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In
their Position Paper,9 petitioners alleged that the company acted in bad faith during the CBA negotiations because it
sent representatives without authority to bind the company, and this was the reason why the negotiations failed. They
added that the management transferred petitioners Lariño, Barte, Egera and Aya-ay from Caloocan to San Rafael,
Bulacan to paralyze the union. They prayed for the company to pay them their salaries from May 26 to 31, 1997, service
incentive leave, and overtime pay, and to implement Wage Order No. 4.
In their defense, respondents averred that the petitioners were not dismissed but they refused to comply with the
management's directive for them to report to the company's plant in San Rafael, Bulacan. They denied the allegation
that they negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President and Legal Counsel as the
company's representatives to the CBA negotiations. They claim that the failure to arrive at an agreement was due to the
stubbornness of the union panel.
Respondents further averred that, long before the start of the negotiations, the company had already been planning to
decongest the Caloocan office to comply with the government policy to shift the concentration of manufacturing
activities from the metropolis to the countryside. The decision to transfer the company's production activities to San
Rafael, Bulacan was precipitated by the letter-reminder of the Bureau of Animal Industry.
On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.10 The Labor Arbiter held that the transfer of
the petitioners would not paralyze or render the union ineffective for the following reasons: (1) complainants are not
members of the negotiating panel; and (2) the transfer was made pursuant to the directive of the Department of
Agriculture.
The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was justified because the
petitioners did not render work from May 26 to 31, 1997; overtime pay is not due because of the compressed workweek
agreement between the union and management; and service incentive leave pay cannot be claimed by the complainants
because they are already enjoying vacation leave with pay for at least five days. As for the claim of noncompliance with
Wage Order No. 4, the Labor Arbiter held that the issue should be left to the grievance machinery or voluntary
arbitrator.
On October 29, 1999, the NLRC affirmed the Labor Arbiter's Decision, dismissing the case, thus:
PREMISES CONSIDERED, the Decision of February 27, 1998 is hereby AFFIRMED and complainants' appeal therefrom
DISMISSED for lack of merit. Complainants Joselito Lariño, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are
directed to report to work at respondents' San Rafael Plant, Bulacan but without backwages. Respondents are directed
to accept the complainants back to work.
SO ORDERED.11
On December 22, 1999, the NLRC denied the petitioners' motion for reconsideration for lack of merit.12
Left with no recourse, petitioners filed a petition for certiorari with the CA.
On July 24, 2001, the CA dismissed the petition for certiorari and ruled that the transfer order was a management
prerogative not amounting to a constructive dismissal or an unfair labor practice. The CA further sustained the
enforceability of the MOA, particularly the waiver of overtime pay in light of this Court's rulings upholding a waiver of
benefits in exchange of other valuable privileges. The dispositive portion of the said CA decision reads:
WHEREFORE, the instant petition is DISMISSED. The Decision of the Labor Arbiter dated February 27, 1998 and the
Decision and Resolution of the NLRC promulgated on October 29, 1999 and December 22, 1999, respectively, in NLRC-
NCR Case Nos. 08-05715-97, 08-06115-97 and 08-05920-97, are AFFIRMED.
SO ORDERED.13
The CA denied the petitioners' motion for reconsideration on December 20, 2001.14
Dissatisfied, petitioners filed this petition for review raising the following issues:
-A-
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE PATENTLY ERRONEOUS RULING OF THE LABOR ARBITER
AND THE COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL DISMISSAL, OF THE INDIVIDUAL
PETITIONERS.
-B-
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND CONCLUDING THAT PRIVATE RESPONDENTS
COMMITTED ACTS OF UNFAIR LABOR PRACTICE.
-C-
THE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING THAT PETITIONERS ARE ENTITLED TO THEIR MONEY
CLAIMS AND TO DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEY'S FEES.15
The petition has no merit.

34
We have no reason to deviate from the well-entrenched rule that findings of fact of labor officials, who are deemed to
have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but even
finality, and bind us when supported by substantial evidence.16 This is particularly true when the findings of the Labor
Arbiter, the NLRC and the CA are in absolute agreement.17 In this case, the Labor Arbiter, the NLRC, and the CA uniformly
agreed that the petitioners were not constructively dismissed and that the transfer orders did not amount to an unfair
labor practice. But if only to disabuse the minds of the petitioners who have persistently pursued this case on the
mistaken belief that the labor tribunals and the appellate court committed grievous errors, this Court will go over the
issues raised in this petition.
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. They maintain that the letter of
the Bureau of Animal Industry is not credible because it is not authenticated; it is only a ploy, solicited by respondents to
give them an excuse to effect a massive transfer of employees. They point out that the Caloocan City office is still
engaged in production activities until now and respondents even hired new employees to replace them.
We do not agree.
We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry conspired with the
respondents just to effect the transfer of the petitioners. There is not an iota of proof to support this outlandish claim.
Absent any evidence, the allegation is not only highly irresponsible but is grossly unfair to the government agency
concerned. Even as this Court has given litigants and counsel a relatively wide latitude to present arguments in support
of their cause, we will not tolerate outright misrepresentation or baseless accusation. Let this be fair warning to counsel
for the petitioners.
Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether it was
made pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right to control and
manage its enterprise effectively. While the law is solicitous of the welfare of employees, it must also protect the right of
an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied.18
This prerogative extends to the management's right to regulate, according to its own discretion and judgment, all
aspects of employment, including the freedom to transfer and reassign employees according to the requirements of its
business.19 Management's prerogative of transferring and reassigning employees from one area of operation to another
in order to meet the requirements of the business is, therefore, generally not constitutive of constructive
dismissal.20 Thus, the consequent transfer of Tryco's personnel, assigned to the Production Department was well within
the scope of its management prerogative.
When the transfer is not unreasonable, or inconvenient, or prejudicial to the employee, and it does not involve a
demotion in rank or diminution of salaries, benefits, and other privileges, the employee may not complain that it
amounts to a constructive dismissal.21 However, the employer has the burden of proving that the transfer of an
employee is for valid and legitimate grounds. The employer must show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits.22
Indisputably, in the instant case, the transfer orders do not entail a demotion in rank or diminution of salaries, benefits
and other privileges of the petitioners. Petitioners, therefore, anchor their objection solely on the ground that it would
cause them great inconvenience since they are all residents of Metro Manila and they would incur additional expenses
to travel daily from Manila to Bulacan.
The Court has previously declared that mere incidental inconvenience is not sufficient to warrant a claim of constructive
dismissal.23 Objection to a transfer that is grounded solely upon the personal inconvenience or hardship that will be
caused to the employee by reason of the transfer is not a valid reason to disobey an order of transfer.24
Incidentally, petitioners cite Escobin v. NLRC25 where the Court held that the transfer of the employees therein was
unreasonable. However, the distance of the workplace to which the employees were being transferred can hardly
compare to that of the present case. In that case, the employees were being transferred from Basilan to Manila; hence,
the Court noted that the transfer would have entailed the separation of the employees from their families who were
residing in Basilan and accrual of additional expenses for living accommodations in Manila. In contrast, the distance from
Caloocan to San Rafael, Bulacan is not considerably great so as to compel petitioners to seek living accommodations in
the area and prevent them from commuting to Metro Manila daily to be with their families.
Petitioners, however, went further and argued that the transfer orders amounted to unfair labor practice because it
would paralyze and render the union ineffective.
To begin with, we cannot see how the mere transfer of its members can paralyze the union. The union was not deprived
of the membership of the petitioners whose work assignments were only transferred to another location.

35
More importantly, there was no showing or any indication that the transfer orders were motivated by an intention to
interfere with the petitioners' right to organize. Unfair labor practice refers to acts that violate the workers' right to
organize. With the exception of Article 248(f) of the Labor Code of the Philippines, the prohibited acts are related to the
workers' right to self-organization and to the observance of a CBA. Without that element, the acts, no matter how
unfair, are not unfair labor practices.26
Finally, we do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary to law. The MOA
is enforceable and binding against the petitioners. Where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as a valid and binding undertaking.27
D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will derive from
the adoption of a compressed workweek scheme, thus:
The compressed workweek scheme was originally conceived for establishments wishing to save on energy costs,
promote greater work efficiency and lower the rate of employee absenteeism, among others. Workers favor the scheme
considering that it would mean savings on the increasing cost of transportation fares for at least one (1) day a week;
savings on meal and snack expenses; longer weekends, or an additional 52 off-days a year, that can be devoted to rest,
leisure, family responsibilities, studies and other personal matters, and that it will spare them for at least another day in
a week from certain inconveniences that are the normal incidents of employment, such as commuting to and from the
workplace, travel time spent, exposure to dust and motor vehicle fumes, dressing up for work, etc. Thus, under this
scheme, the generally observed workweek of six (6) days is shortened to five (5) days but prolonging the working hours
from Monday to Friday without the employer being obliged for pay overtime premium compensation for work
performed in excess of eight (8) hours on weekdays, in exchange for the benefits abovecited that will accrue to the
employees.
Moreover, the adoption of a compressed workweek scheme in the company will help temper any inconvenience that
will be caused the petitioners by their transfer to a farther workplace.
Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect the interest of
the employees in the implementation of a compressed workweek scheme:
1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which shall not exceed
their normal weekly hours of work prior to adoption of the compressed workweek arrangement;
2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe benefits of the
employees;
3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to the adoption of
the compressed workweek scheme, all such excess hours shall be considered overtime work and shall be compensated
in accordance with the provisions of the Labor Code or applicable Collective Bargaining Agreement (CBA);
4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8) hours a day may
be devised by the parties to the agreement.
5. The effectivity and implementation of the new working time arrangement shall be by agreement of the parties.
PESALA v. NLRC,28 cited by the petitioners, is not applicable to the present case. In that case, an employment contract
provided that the workday consists of 12 hours and the employee will be paid a fixed monthly salary rate that was above
the legal minimum wage. However, unlike the present MOA which specifically states that the employee waives his right
to claim overtime pay for work rendered beyond eight hours, the employment contract in that case was silent on
whether overtime pay was included in the payment of the fixed monthly salary. This necessitated the interpretation by
the Court as to whether the fixed monthly rate provided under the employment contract included overtime pay. The
Court noted that if the employee is paid only the minimum wage but with overtime pay, the amount is still greater than
the fixed monthly rate as provided in the employment contract. It, therefore, held that overtime pay was not included in
the agreed fixed monthly rate.
Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange of a five-
day workweek, there is no room for interpretation and its terms should be implemented as they are written.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated July 24, 2001 and Resolution dated December
20, 2001 are AFFIRMED.
SO ORDERED.

36
 6. G.R. No. 149793. April 15, 2005
WACK WACK GOLF & COUNTRY CLUB, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, MARTINA G.
CAGASAN, CARMENCITA F. DOMINGUEZ, and BUSINESS STAFFING AND MANAGEMENT, INC., Respondents.
D E C I S I O N CALLEJO, SR., J.:
This is a petition for review of the Resolution1 of the Court of Appeals (CA) in CA-G.R. SP No. 63658, dismissing the
petition for certiorari before it for being insufficient in form and the subsequent resolution denying the motion for
reconsideration thereof.
The undisputed antecedent facts are as follows:
On November 29, 1996, a fire destroyed a large portion of the main clubhouse of the Wack Wack Golf and Country Club
(Wack Wack), including its kitchen. In view of the reconstruction of the whole clubhouse complex, Wack Wack filed a
notice with the Department of Labor and Employment (DOLE) on April 14, 1997 that it was going to suspend the
operations of the Food and Beverage (F & B) Department one (1) month thereafter. Notices to 54 employees (out of a
complement of 85 employees in the department) were also sent out, informing them that they need not report for work
anymore after April 14, 1997 but that they would still be paid their salaries up to May 14, 1997. They were further told
that they would be informed once full operations in Wack Wack resume.
The Wack Wack Golf Employees Union branded the suspension of operations of the F & B Department as arbitrary,
discriminatory and constitutive of union-busting, so they filed a notice of strike with the DOLE’s National Conciliation
and Mediation Board (NCMB). Several meetings between the officers of Wack Wack and the Union, headed by its
President, Crisanto Baluyot, Sr., and assisted by its counsel, Atty. Pedro T. De Quiroz, were held until the parties entered
into an amicable settlement. An Agreement2 was forged whereby a special separation benefit/retirement package for
interested Wack Wack employees, especially those in the F & B Department was offered. The terms and conditions
thereof reads as follows:
1. The UNION and the affected employees of F & B who are members of the UNION hereby agree to accept the special
separation benefit package agreed upon between the CLUB management on the one hand, and the UNION officers and
the UNION lawyer on the other, in the amount equivalent to one-and-one-half months salary for every year of service,
regardless of the number of years of service rendered. That, in addition, said employees shall also receive the other
benefits due them, namely, the cash equivalent of unused vacation and sick leave credits, proportionate 13th month
pay; and other benefits, if any, computed without premium;
2. That the affected F & B employees who have already signified intention to be separated from the service under the
special separation benefit package shall receive their separation pay as soon as possible;
3. That the same package shall, likewise, be made available to other employees who are members of the bargaining unit
and who may or may not be affected by future similar suspensions of operations. The UNION re-affirms and recognizes
that it is the sole prerogative of the management of the Club to suspend part or all of its operations as may be
necessitated by the exigencies of the situation and the general welfare of its membership. The closure of the West
Course, which is scheduled for conversion to an All-Weather Championship golf course, is cited as an example. It is,
however, agreed that if a sufficient number of employees, other than F & B employees, would apply for availment of the
package within the next two months, the Club may no longer go through the process of formally notifying the
Department of Labor. The processing and handling of benefits for these other employees shall be done over a transition
period within one year;
4. All qualified employees who may have been separated from the service under the above package shall be considered
under a priority basis for employment by concessionaires and/or contractors, and even by the Club upon full resumption
of operations, upon the recommendation of the UNION. The Club may even persuade an employee-applicant for
availment under the package to remain on his/her job, or be assigned to another position.3
Respondent Carmencita F. Dominguez, who was then working in the Administrative Department of Wack Wack, was the
first to avail of the special separation package.4 Computed at 1½ months for every year of service pursuant to the
Agreement, her separation pay amounted to ₱91,116.84, while economic benefits amounted to ₱6,327.53.5 On
September 18, 1997, Dominguez signed a Release and Quitclaim6 in favor of Wack Wack.
Respondent Martina B. Cagasan was Wack Wack’s Personnel Officer who, likewise, volunteered to avail of the
separation package.7 On September 30, 1997, she received from Wack Wack the amount of ₱469,495.66 as separation
pay and other economic benefits amounting to ₱17,010.50.8 A Release and Quitclaim9 was signed on September 30,
1997.
The last one to avail of the separation package was Crisanto Baluyot, Sr. who, in a Letter10 dated January 16, 1998
addressed to Mr. Bienvenido Juan, Administrative Manager of Wack Wack, signified his willingness to avail of the said
early retirement package. The total amount of ₱688,290.3011 was received and the Release and Quitclaim12 signed on
May 14, 1998.

37
On October 15, 1997, Wack Wack entered into a Management Contract13 with Business Staffing and Management, Inc.
(BSMI), a corporation engaged in the business as Management Service Consultant undertaking and managing for a fee
projects which are specialized and technical in character like marketing, promotions, merchandising, financial
management, operation management and the like.14 BSMI was to provide management services for Wack Wack in the
following operational areas:
1. Golf operations management;
2. Management and maintenance of building facilities;
3 .Management of food and beverage operation;
4. Management of materials and procurement functions;
5. To provide and undertake administrative and support services for the [said] projects.15
Pursuant to the Agreement, the retired employees of Wack Wack by reason of their experience were given priority by
BSMI in hiring. On October 21, 1997, respondents Cagasan and Dominguez filed their respective applications16 for
employment with BSMI. They were eventually hired by BSMI to their former positions in Wack Wack as project
employees and were issued probationary contracts.17
Aside from BSMI, Wack Wack also engaged several contractors which were assigned in various operating functions of
the club, to wit:
1. Skills and Talent Employment Promotion (STEP) whose 90 workers are designated as locker attendants, golf bag
attendants, nurses, messengers, technical support engineer, golf director, agriculturist, utilities and gardeners;
2. Marvel Manpower Agency - whose 19 employees are designated as sweepers, locker attendants, drive range
attendant, telephone operator, workers and secretaries;
3 City Service Corporation – contractor for janitorial services for the whole club;
4. Microstar Business and Management Services, Inc. whose 15 employees are designated in the Finance and Accounting
departments.18
Due to these various management service contracts, BSMI undertook an organizational analysis and manpower
evaluation to determine its efficacy, and to streamline its operations. In the course of its assessment, BSMI saw that the
positions of Cagasan and Dominguez were redundant. In the case of respondent Cagasan, her tasks as personnel officer
were likewise being taken cared of by the different management service contractors; on the other hand, Dominguez’s
work as telephone operator was taken over by the personnel of the accounting department. Thus, in separate
Letters19 dated February 27, 1998, the services of Dominguez and Cagasan were terminated. With respect to Baluyot, he
applied for the position of Chief Porter on May 12, 1998. The position, however, was among those recommended to be
abolished by the BSMI, so he was offered the position of Caddie Master Aide with a starting salary of ₱5,500.00 a month.
Baluyot declined the offer. Pending Wack Wack’s approval of the proposed abolition of the position of Chief Porter,
Baluyot was temporarily accepted to the position with a monthly salary of ₱12,000.00. In July 1998, Baluyot decided not
to accept the position of Caddie Master Aide; thus, BSMI continued with its plan to abolish the said position of Chief
Porter and Baluyot was dismissed from the service.
Thereafter, the three (3) employees filed their respective complaints with the National Labor Relations Commission
(NLRC) for illegal dismissal and damages against Wack Wack and BSMI.
The complainants averred that they were dismissed without cause. They accepted the separation package upon the
assurance that they would be given their former work and assignments once the Food and Beverage Department of
Wack Wack resumes its operations. On the other hand, the respondents therein alleged that the dismissal of the
complainants were made pursuant to a study and evaluation of the different jobs and positions and found them to be
redundant.
In a Decision20 dated January 25, 2000, the Labor Arbiter found that the dismissal of Dominguez and Cagasan was for a
valid and authorized cause, and dismissed their complaints.
The position of personnel manager occupied by Martina Cagasan was redundated as it is allegedly not necessary,
because her functions will be taken over [by] the field superintendent and the company’s personnel and operations
manager. The work of Carmencita Dominguez on the other hand as telephone operator will be taken over by the
accounting department personnel. Such move really are intended to streamline operations. While admittedly, they are
still necessary in the operations of Wack Wack, their jobs can be assigned to some other personnel, who will be
performing dual functions and does save Wack Wack money. This is feasible on account of the fact that they are
functions pertaining to administrative work.21
As to Baluyot, however, the Labor Arbiter found that while the position of chief porter had been abolished, the caddie
master aide had been created. Their functions were one and the same. The porters, upon instructions from the chief
porter, are the ones who bring down the golf bags of the players from the vehicle. The caddie master receives them and
counts the number of clubs inside the golf set. After the game, the same procedure is repeated before the golf sets are

38
loaded once more into the vehicle.22 The Labor Arbiter found that the dismissal of Baluyot as Chief Porter was unjustified
and can not be considered redundant in the case at bar. It was a means resorted to in order to unduly sever Baluyot’s
relationship with BSMI without justifiable cause. The Labor Arbiter therefore found Baluyot’s dismissal to be illegal. The
dispositive portion of the decision reads as follows:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the complaints of Carmencita F.
Dominguez and Martina Cagasan for lack of merit. Finding Crisanto Baluyot’s dismissal to be illegal. Consequently, he
should immediately be reinstated to his former position as Chief Porter or Caddie Master, and paid his backwages which,
as of December 31, 1999, has accumulated in the sum of ₱180,000.00 by BSMI.
All other claims are dismissed for lack of merit.23
Since Baluyot no longer appealed the decision, complainants Dominguez and Cagasan filed a Partial Appeal on the
ground of prima facie abuse of discretion on the part of the Labor Arbiter and serious errors in his findings of facts and
law. Their claims were anchored on the Agreement between the Union and management, that they were promised to
be rehired upon the full resumption of operations of Wack Wack. They asserted that Wack Wack and BSMI should not
avoid responsibility to their employment, by conniving with each other to render useless and meaningless the
Agreement.
BSMI also appealed to the NLRC, alleging that the Labor Arbiter committed grave abuse of discretion in finding Baluyot’s
dismissal to be illegal, when in fact his position as Chief Porter was abolished pursuant to a bona fide reorganization of
Wack Wack. It was not motivated by factors other than the promotion of the interest and welfare of the company.
On September 27, 2000, the NLRC rendered its Decision24 ordering Wack Wack to reinstate Carmencita F. Dominguez
and Martina Cagasan to their positions in respondent Wack Wack Golf & Country Club with full backwages and other
benefits from the date of their dismissal until actually reinstated. It anchored its ruling on the Agreement dated June 16,
1997 reached between the Union and Wack Wack, particularly Section 425 thereof. The NLRC directed Wack Wack to
reinstate the respondents and pay their backwages since "Business Staffing and Management, Inc. (BSMI) is a contractor
who [merely] supplies workers to respondent Wack Wack. It has nothing to do with the grievance of the complainants
with their employer, respondent Wack Wack."
Wack Wack and BSMI filed a motion for reconsideration which was denied in the Resolution26 dated December 15, 2000.
Wack Wack, now the petitioner, consequently filed a petition for certiorari with the Court of Appeals, docketed as CA-
G.R. SP No. 63658 alleging the following:
A. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
AND DENIAL OF DUE PROCESS IN HOLDING THAT RESPONDENTS CAGASAN AND DOMINGUEZ HAVE REGAINED THEIR
JOBS OR EMPLOYMENT PURSUANT TO THE AGREEMENT BETWEEN PETITIONER AND WACK WACK GOLF EMPLOYEES
UNION.
B. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
AND DENIAL OF DUE PROCESS IN RULING THAT RESPONDENT BSMI IS NOT AN INDEPENDENT CONTRACTOR BUT A MERE
SUPPLIER OF WORKERS TO THE PETITIONER.
C. RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
AND DENIAL OF DUE PROCESS IN HOLDING PETITIONER LIABLE FOR THE REINSTATEMENT OF RESPONDENTS CAGASAN
AND DOMINGUEZ AND FOR THE PAYMENT OF THEIR SUPPOSED BACKWAGES DESPITE THE ABSENCE OF EMPLOYER-
EMPLOYEE RELATION BETWEEN THEM.27
Likewise, BSMI also assailed the resolutions of the NLRC and filed its own petition for certiorari with the CA, docketed as
CA-G.R. SP No. 63553.28 A perusal of the petition which is attached to the records reveal that BSMI ascribes grave abuse
of discretion on the part of the NLRC in ruling that: (a) the private respondents have regained their employment
pursuant to the Agreement between Wack Wack and the Wack Wack Golf Employees Union; (b) the dismissal of private
respondents was made pursuant to the petitioner’s exercise of its management prerogatives; and (c) the petitioner
(BSMI) is liable for the reinstatement of private respondents and the payment of their backwages.29
On April 3, 2001, the CA (Twelfth Division) dismissed the petition on the ground that the petitioner therein failed to
attach an Affidavit of Service as required in Section 11, Rule 13 of the 1997 Rules of Civil Procedure. Moreover, the
verification and certification against forum shopping was insufficient for having been executed by the general manager
who claimed to be the duly-authorized representative of the petitioner, but did not show any proof of authority, i.e., a
board resolution, to the effect.
A motion for reconsideration was, consequently, filed appending thereto the requisite documents of proof of authority.
It asserted that in the interest of substantial justice, the CA should decide the case on its merits.
BSMI filed a Comment30 to the Motion for Reconsideration of the petitioner, also urging the CA to set aside technicalities
and to consider the legal issues involved: (a) whether or not there is a guaranty of employment in favor of the
complainants under the Agreement between the petitioner and the Union; (b) whether or not the termination of the

39
employment of the complainants, based on redundancy, is legal and valid; and (c) who are the parties liable for the
reinstatement of the complainants and the payment of backwages. It further added that it shares the view of the
petitioner, that the assailed resolutions of the NLRC are tainted with legal infirmities. For this reason, it was also
constrained to file its own petition for certiorari with the CA, docketed as CA-G.R. SP No. 63553 pending with the Special
Fourth Division, just to stress that there is no guaranty of perpetual employment in favor of the complainants.
On August 31, 2001, the CA denied petitioner’s motion for reconsideration.
The petitioner is now before the Court, assailing the twin resolutions of the CA. It points out that BSMI has filed its
petition for certiorari before the CA one day late and yet, the Special Fourth Division admitted the petition in the
interest of substantial justice, and directed the respondents to file a comment thereon;31 whereas, in the instant case,
the mere lack of proof of authority of Wack Wack’s General Manager to sign the certificate of non-forum shopping was
considered fatal by the CA’s Twelfth Division. It further asserts that its petition for certiorari is meritorious, considering
that the NLRC committed grave abuse of discretion in ordering Wack Wack to reinstate the respondents Cagasan and
Dominguez, and to pay their backwages when indubitable evidence shows that the said respondents were no longer
employees of Wack Wack when they filed their complaints with the Labor Arbiter.
There is merit in the petition.
In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the authority of the general manager to sue on
behalf of the corporation and to sign the requisite verification and certification of non-forum shopping. The general
manager is also one person who is in the best position to know the state of affairs of the corporation. It was also error
for the CA not to admit the requisite proof of authority when in the Novelty case, the Court ruled that the subsequent
submission of the requisite documents constituted substantial compliance with procedural rules. There is ample
jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the
rules of procedure in the interest of justice.33 While it is true that rules of procedure are intended to promote rather
than frustrate the ends of justice, and while the swift unclogging of court dockets is a laudable objective, it nevertheless
must not be met at the expense of substantial justice.34 It was, therefore, reversible error for the CA to have dismissed
the petition for certiorari before it. The ordinary recourse for us to take is to remand the case to the CA for proper
disposition on the merits; however, considering that the records are now before us, we deem it necessary to resolve the
instant case in order to ensure harmony in the rulings and expediency.
Indeed, the merits of the case constitute special or compelling reasons for us to overlook the technical rules in this case.
With the dismissal of its petition for certiorari before the CA, the petitioner by virtue of the NLRC decision is compelled
to reinstate respondents Cagasan and Dominguez and pay their full backwages from the time of their dismissal until
actual reinstatement when the attendant circumstances, however, show that the respondents had no cause of action
against the petitioner for illegal dismissal and damages.
It must be recalled that said respondents availed of the special separation package offered by the petitioner. This special
separation package was thought of and agreed by the two parties (Wack Wack and the Union) after a series of
discussions and negotiations to avert any labor unrest due to the closure of Wack Wack.35 Priority was given to the
employees of the F & B Department, but was, likewise, offered to the other employees who may wish to avail of the
separation package due to the reconstruction of Wack Wack. Respondents do not belong to the F & B Department and
yet, on their own volition opted to avail of the special separation package. The applications which were similarly worded
read as follows:
TO : WACK WACK GOLF & COUNTRY CLUB
BOARD OF DIRECTORS AND MANAGEMENT
Based on the information that the Club and the employees’ Union have reached an agreement on a special separation
benefit package equivalent to one-and-one-half months salary for every year of service, regardless of the number of
years of service, for employees who have been affected and may be affected by ongoing as well as forthcoming Club
renovation, construction and related activities and reportedly even for those who may not be affected but wish to avail
of an early retirement under the above package arrangement, I hereby register my desire to be separated from the Club
and receive the benefits under the above stated package.36
Thereafter, the respondents signed their respective release and quitclaims after receiving their money benefits.
It cannot be said that the respondents in the case at bar did not fully comprehend and realize the consequences of their
acts. Herein respondents are not unlettered persons who need special protection. They held responsible positions in the
petitioner-employer, so they presumably understood the contents of the documents they signed. There is no showing
that the execution thereof was tainted with deceit or coercion. Further, the respondents were paid hefty amounts of
separation pay indicating that their separation from the company was for a valuable consideration. Where the person
making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as being a valid and binding undertaking.37 As in contracts,

40
these quitclaims amount to a valid and binding compromise agreement between the parties which deserve to be
respected.38
We reiterate what was stated in the case of Periquet v. NLRC 39 that:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and
represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible
person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what
he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking. …40
When the respondents voluntarily signed their quitclaims and accepted the separation package offered by the
petitioner, they, thenceforth, already ceased to be employees of the petitioner. Nowhere does it appear in the
Agreement that the petitioner assured the respondents of continuous employment in Wack Wack. Qualified employees
were given priority in being hired by its concessionaires and/or contractors such as BSMI when it entered into a
management contract with the petitioner.
This brings us to the threshold issue on whether or not BSMI is an independent contractor or a labor-only contractor.
The NLRC posits that BSMI is merely a supplier of workers or a labor-only contractor; hence, the petitioner remains to be
the principal employer of the respondents and liable for their reinstatement and payment of backwages.
The ruling of the NLRC is wrong. An independent contractor is one who undertakes "job contracting," i.e., a person who:
(a) carries on an independent business and undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal
in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial
capital or investment in the form of tools, equipments, machineries, work premises and other materials which are
necessary in the conduct of the business. Jurisprudential holdings are to the effect that in determining the existence of
an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to,
whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill
required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the
control and supervision of the work to another; the employer’s power with respect to the hiring, firing, and payment of
the contractor’s workers; the control of the premises; the duty to supply premises, tools, appliances, materials and
labor; and the mode, manner and terms of payment.41
There is indubitable evidence showing that BSMI is an independent contractor, engaged in the management of projects,
business operations, functions, jobs and other kinds of business ventures, and has sufficient capital and resources to
undertake its principal business. It had provided management services to various industrial and commercial business
establishments. Its Articles of Incorporation proves its sufficient capitalization. In December 1993, Labor Secretary
Bienvenido Laguesma, in the case of In re Petition for Certification Election Among the Regular Rank-and-File Employees
Workers of Byron-Jackson (BJ) Services International Incorporated, Federation of Free Workers (FFW)-Byron Jackson
Services Employees Chapter,42 recognized BSMI as an independent contractor. As a legitimate job contractor, there can
be no doubt as to the existence of an employer-employee relationship between the contractor and the workers.43
BSMI admitted that it employed the respondents, giving the said retired employees some degree of priority merely
because of their work experience with the petitioner, and in order to have a smooth transition of operations.44 In
accordance with its own recruitment policies, the respondents were made to sign applications for employment,
accepting the condition that they were hired by BSMI as probationary employees only. Not being contrary to law,
morals, good custom, public policy and public order, these employment contracts, which the parties are bound are
considered valid. Unfortunately, after a study and evaluation of its personnel organization, BSMI was impelled to
terminate the services of the respondents on the ground of redundancy. This right to hire and fire is another element of
the employer-employee relationship45 which actually existed between the respondents and BSMI, and not with Wack
Wack.
There being no employer-employee relationship between the petitioner and respondents Cagasan and Dominguez, the
latter have no cause of action for illegal dismissal and damages against the petitioner. Consequently, the petitioner
cannot be validly ordered to reinstate the respondents and pay them their claims for backwages.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals and the NLRC are SET ASIDE and
REVERSED. The complaints of respondents Cagasan and Dominguez are DISMISSED. No costs.
SO ORDERED.

41
 7. 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., 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

42
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.
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.
In Garcia vs. NLRC,9 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, 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 or decision of the
Commission shall not be entertained except when based on palpable or 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.

43
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 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, 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

44
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.1âwphi1.nêt
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.

45
 8. G.R. No. 64948 September 27, 1994
MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
Bito, Misa & Lozada for petitioner.
Remberto Z. Evio for private respondent.

NARVASA, C.J.:
The question before the Court here is whether or not persons rendering caddying services for members of golf clubs and
their guests in said clubs' courses or premises are the employees of such clubs and therefore within the compulsory
coverage of the Social Security System (SSS).
That question appears to have been involved, either directly or peripherally, in three separate proceedings, all initiated
by or on behalf of herein private respondent and his fellow caddies. That which gave rise to the present petition for
review was originally filed with the Social Security Commission (SSC) via petition of seventeen (17) persons who styled
themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment of benefits under the Social
Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial Employees Association," with which
the petitioners claimed to be affiliated. The petition, docketed as SSC Case No. 5443, alleged in essence that although
the petitioners were employees of the Manila Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same question were filed or were pending; these were:
(1) a certification election case filed with the Labor Relations Division of the Ministry of Labor by the PTCCEA on behalf
of the same caddies of the Manila Golf and Country Club, the case being titled "Philippine Technical, Clerical,
Commercial Association vs. Manila Golf and Country Club" and docketed as Case No. R4-LRDX-M-10-504-78; it appears
to have been resolved in favor of the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter upheld by
Director Carmelo S. Noriel, denying the Club's motion for reconsideration; 1
(2) a compulsory arbitration case initiated before the Arbitration Branch of the Ministry of Labor by the same labor
organization, titled "Philippine Technical, Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar and
Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran, Henry Lim and Geronimo Alejo;" it was
dismissed for lack of merit by Labor Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the National
Labor Relations Commission on the ground that there was no employer-employee relationship between the petitioning
caddies and the respondent Club. 2
In the case before the SSC, the respondent Club filed answer praying for the dismissal of the petition, alleging in
substance that the petitioners, caddies by occupation, were allowed into the Club premises to render services as such to
the individual members and guests playing the Club's golf course and who themselves paid for such services; that as
such caddies, the petitioners were not subject to the direction and control of the Club as regards the manner in which
they performed their work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their claim for social security
coverage, avowedly coming to realize that indeed there was no employment relationship between them and the Club.
The case continued, and was eventually adjudicated by the SSC after protracted proceedings only as regards the two
holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for lack of merit, 3 ruling:
. . . that the caddy's fees were paid by the golf players themselves and not by respondent club. For instance, petitioner
Raymundo Jomok averred that for their services as caddies a caddy's Claim Stub (Exh. "1-A") is issued by a player who
will in turn hand over to management the other portion of the stub known as Caddy Ticket (Exh. "1") so that by this
arrangement management will know how much a caddy will be paid (TSN, p. 80, July 23, 1980). Likewise, petitioner
Fermin Llamar admitted that caddy works on his own in accordance with the rules and regulations (TSN, p. 24, February
26, 1980) but petitioner Jomok could not state any policy of respondent that directs the manner of caddying (TSN, pp.
76-77, July 23, 1980). While respondent club promulgates rules and regulations on the assignment, deportment and
conduct of caddies (Exh. "C") the same are designed to impose personal discipline among the caddies but not to direct
or conduct their actual work. In fact, a golf player is at liberty to choose a caddy of his preference regardless of the
respondent club's group rotation system and has the discretion on whether or not to pay a caddy. As testified to by
petitioner Llamar that their income depends on the number of players engaging their services and liberality of the latter
(TSN, pp. 10-11, Feb. 26, 1980). This lends credence to respondent's assertion that the caddies are never their
employees in the absence of two elements, namely, (1) payment of wages and (2) control or supervision over them. In
this connection, our Supreme Court ruled that in the determination of the existence of an employer-employee

46
relationship, the "control test" shall be considered decisive (Philippine Manufacturing Co. vs. Geronimo and Garcia, 96
Phil. 276; Mansal vs. P.P. Coheco Lumber Co., 96 Phil. 941; Viana vs.
Al-lagadan, et al., 99 Phil. 408; Vda, de Ang, et al. vs. The Manila Hotel Co., 101 Phil. 358, LVN Pictures Inc. vs. Phil.
Musicians Guild, et al.,
L-12582, January 28, 1961, 1 SCRA 132. . . . (reference being made also to Investment Planning Corporation Phil. vs. SSS
21 SCRA 925).
Records show the respondent club had reported for SS coverage Graciano Awit and Daniel Quijano, as bat unloader and
helper, respectively, including their ground men, house and administrative personnel, a situation indicative of the
latter's concern with the rights and welfare of its employees under the SS law, as amended. The unrebutted testimony
of Col. Generoso A. Alejo (Ret.) that the ID cards issued to the caddies merely intended to identify the holders as
accredited caddies of the club and privilege(d) to ply their trade or occupation within its premises which could be
withdrawn anytime for loss of confidence. This gives us a reasonable ground to state that the defense posture of
respondent that petitioners were never its employees is well taken.4
From this Resolution appeal was taken to the Intermediate appellate Court by the union representing Llamar and Jomok.
After the appeal was docketed 5 and some months before decision thereon was reached and promulgated, Raymundo
Jomok's appeal was dismissed at his instance, leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor Relations Division of National Capital Regional
Office in the certification election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the existence of employer-
employee relationship between the respondent club and the appellants, it being contended that said issue was "a
function of the proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the Director of the Bureau of Labor Relations,
which "has not only become final but (has been) executed or (become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as of the least importance.
Nor, it would appear, did it find any greater merit in the second alleged error. Although said Court reserved the
appealed SSC decision and declared Fermin Llamar an employee of the Manila Gold and Country Club, ordering that he
be reported as such for social security coverage and paid any corresponding benefits, 8 it conspicuously ignored the issue
of res adjudicata raised in said second assignment. Instead, it drew basis for the reversal from this Court's ruling
in Investment Planning Corporation of the Philippines vs. Social Security System, supra 9 and declared that upon the
evidence, the questioned employer-employee relationship between the Club and Fermin Llamar passed the so-called
"control test," establishment in the case — i.e., "whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by which the same is to
be accomplished," — the Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty-four (24) rules and regulations just about every aspect of the conduct that
the caddy must observe, or avoid, when serving as such, any violation of any which could subject him to disciplinary
action, which may include suspending or cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation system whereby a caddy is assigned a number which designates his
turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the caddies were paid by the players, not by the
Club, that they observed no definite working hours and earned no fixed income. It quoted with approval from an
American decision 10 to the effect that: "whether the club paid the caddies and afterward collected in the first instance,
the caddies were still employees of the club." This, no matter that the case which produced this ruling had a slightly
different factual cast, apparently having involved a claim for workmen's compensation made by a caddy who, about to
leave the premises of the club where he worked, was hit and injured by an automobile then negotiating the club's
private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as already pointed out, is now
among the mainways of the private respondent's defenses to the petition for review. Considered in the perspective of
the incidents just recounted, it illustrates as well as anything can, why the practice of forum-shopping justly merits
censure and punitive sanction. Because the same question of employer-employee relationship has been dragged into
three different fora, willy-nilly and in quick succession, it has birthed controversy as to which of the resulting
adjudications must now be recognized as decisive. On the one hand, there is the certification case [R4-LRDX-M-10-504-
78), where the decision of the Med-Arbiter found for the existence of employer-employee relationship between the
parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held, a disposition never
thereafter appealed according to the private respondent; on the other, the compulsory arbitration case (NCR Case No.

47
AB-4-1771-79), instituted by or for the same respondent at about the same time, which was dismissed for lack of merit
by the Labor Arbiter, which was afterwards affirmed by the NLRC itself on the ground that there existed no such
relationship between the Club and the private respondent. And, as if matters were not already complicated enough, the
same respondent, with the support and assistance of the PTCCEA, saw fit, also contemporaneously, to initiate still a third
proceeding for compulsory social security coverage with the Social Security Commission (SSC Case No. 5443), with the
result already mentioned.
Before this Court, the petitioner Club now contends that the decision of the Med-Arbiter in the certification case had
never become final, being in fact the subject of three pending and unresolved motions for reconsideration, as well as of
a later motion for early resolution. 11 Unfortunately, none of these motions is incorporated or reproduced in the record
before the Court. And, for his part, the private respondent contends, not only that said decision had been appealed to
and been affirmed by the Director of the BLR, but that a certification election had in fact been held, which resulted in
the PTCCEA being recognized as the sole bargaining agent of the caddies of the Manila Golf and Country Club with
respect to wages, hours of work, terms of employment, etc. 12 Whatever the truth about these opposing contentions,
which the record before the Court does not adequately disclose, the more controlling consideration would seem to be
that, however, final it may become, the decision in a certification case, by the
very nature of that proceedings, is not such as to foreclose all further dispute between the parties as to the existence, or
non-existence, of employer-employee relationship between them.
It is well settled that for res adjudicata, or the principle of bar by prior judgment, to apply, the following essential
requisites must concur: (1) there must be a final judgment or order; (2) said judgment or order must be on the merits;
(3) the court rendering the same must have jurisdiction over the subject matter and the parties; and (4) there must be
between the two cases identity of parties, identity of subject matter and identity of cause of action. 13
Clearly implicit in these requisites is that the action or proceedings in which is issued the "prior Judgment" that would
operate in bar of a subsequent action between the same parties for the same cause, be adversarial, or contentious, "one
having opposing parties; (is) contested, as distinguished from an ex parte hearing or proceeding. . . . of which the party
seeking relief has given legal notice to the other party and afforded the latter an opportunity to contest it" 14 and a
certification case is not such a proceeding, as this Court already ruled:
A certification proceedings is not a "litigation" in the sense in which the term is commonly understood, but mere
investigation of a non-adversary, fact-finding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the employees as to the matter of their
representation. The court enjoys a wide discretion in determining the procedure necessary to insure the fair and free
choice of bargaining representatives by the employees.15
Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employer-employee
relationship between present petitioner and the private respondent, it would logically be that rendered in the
compulsory arbitration case (NCR Case No. AB-4-771-79, supra), petitioner having asserted, without dispute from the
private respondent, that said issue was there squarely raised and litigated, resulting in a ruling of the Arbitration Branch
(of the same Ministry of Labor) that such relationship did not exist, and which ruling was thereafter affirmed by the
National Labor Relations Commission in an appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent the benefit of any doubt as to which of the conflicting
ruling just adverted to should be accorded primacy, given the fact that it was he who actively sought them
simultaneously, as it were, from separate fora, and even if the graver sanctions more lately imposed by the Court for
forum-shopping may not be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res adjudicata; on contrary, it
acted correctly in doing so.
Said Court’s holding that upon the facts, there exists (or existed) a relationship of employer and employee between
petitioner and private respondent is, however, another matter. The Court does not agree that said facts necessarily or
logically point to such a relationship, and to the exclusion of any form of arrangements, other than of employment, that
would make the respondent's services available to the members and guest of the petitioner.
As long as it is, the list made in the appealed decision detailing the various matters of conduct, dress, language, etc.
covered by the petitioner's regulations, does not, in the mind of the Court, so circumscribe the actions or judgment of
the caddies concerned as to leave them little or no freedom of choice whatsoever in the manner of carrying out their
services. In the very nature of things, caddies must submit to some supervision of their conduct while enjoying the
privilege of pursuing their occupation within the premises and grounds of whatever club they do their work in. For all
that is made to appear, they work for the club to which they attach themselves on sufference but, on the other hand,
also without having to observe any working hours, free to leave anytime they please, to stay away for as long they like. It
is not pretended that if found remiss in the observance of said rules, any discipline may be meted them beyond barring

48
them from the premises which, it may be supposed, the Club may do in any case even absent any breach of the rules,
and without violating any right to work on their part. All these considerations clash frontally with the concept of
employment.
The IAC would point to the fact that the Club suggests the rate of fees payable by the players to the caddies as still
another indication of the latter's status as employees. It seems to the Court, however, that the intendment of such fact
is to the contrary, showing that the Club has not the measure of control over the incidents of the caddies' work and
compensation that an employer would possess.
The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn
to serve and being assigned instead the last number for the day. 17
By and large, there appears nothing in the record to refute the petitioner's claim that:
(Petitioner) has no means of compelling the presence of a caddy. A caddy is not required to exercise his occupation in
the premises of petitioner. He may work with any other golf club or he may seek employment a caddy or otherwise with
any entity or individual without restriction by petitioner. . . .
. . . In the final analysis, petitioner has no was of compelling the presence of the caddies as they are not required to
render a definite number of hours of work on a single day. Even the group rotation of caddies is not absolute because a
player is at liberty to choose a caddy of his preference regardless of the caddy's order in the rotation.
It can happen that a caddy who has rendered services to a player on one day may still find sufficient time to work
elsewhere. Under such circumstances, he may then leave the premises of petitioner and go to such other place of work
that he wishes (sic). Or a caddy who is on call for a particular day may deliberately absent himself if he has more
profitable caddying, or another, engagement in some other place. These are things beyond petitioner's control and for
which it imposes no direct sanctions on the caddies. . . . 18
WHEREFORE, the Decision of the Intermediate Appellant Court, review of which is sought, is reversed and set aside, it
being hereby declared that the private respondent, Fermin Llamar, is not an employee of petitioner Manila Golf and
Country Club and that petitioner is under no obligation to report him for compulsory coverage to the Social Security
System. No pronouncement as to costs.
SO ORDERED.

49
 9. G.R. No. 109704 January 17, 1995
ALFREDO B. FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO BAÑEZ, JR., in his capacity as Administrator, both
of the National Center for Mental Health, and the CIVIL SERVICE COMMISSION, respondents.

KAPUNAN, J.:
Taking advantage of this Court's decisions involving the removal of various civil servants pursuant to the general
reorganization of the government after the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of the
National Center for Mental Health (formerly the National Mental Hospital) as illegal and violative of the constitutional
provision on security of tenure allegedly because his removal was made pursuant to an invalid reorganization.
In Mendoza vs. Quisumbing1 and the consolidated cases involving the reorganization of various government
departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these consolidated petitions because the heads of
departments and agencies concerned have chosen to rely on their own concepts of unlimited discretion and
"progressive" ideas on reorganization instead of showing that they have faithfully complied with the clear letter and
spirit of the two Constitutions and the statutes affecting reorganization.2
In De Guzman vs. CSC3 , we upheld the principle, laid down by Justice J.B.L. Reyes in Cruz vs. Primicias4 that a valid
abolition of an office neither results in a separation or removal, likewise upholding the corollary principle that "if the
abolition is void, the incumbent is deemed never to have ceased to hold office," in sustaining therein petitioner's right to
the position she held prior to the reorganization.
The instant petition on its face turns on similar facts and issues, which is, that petitioner's removal from a permanent
position in the National Center for Mental Health as a result of the reorganization of the Department of Health was void.
However, a closer look at the facts surrounding the instant petition leads us to a different conclusion.
After passing the Physician's Licensure Examinations given by the Professional Regulation Commission in June of 1979,
petitioner, Dr. Alfredo B. Felix, joined the National Center for Mental Health (then the National Mental Hospital) on May
26, 1980 as a Resident Physician with an annual salary of P15,264.00.5 In August of 1983, he was promoted to the
position of Senior Resident Physician6 a position he held until the Ministry of Health reorganized the National Center for
Mental Health (NCMH) in January of 1988, pursuant to Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior Resident Physician in a temporary capacity
immediately after he and other employees of the NCMH allegedly tendered their courtesy resignations to the Secretary
of Health.7 In August of 1988, petitioner was promoted to the position of Medical Specialist I (Temporary Status), which
position was renewed the following year.8
In 1988, the Department of Health issued Department Order No. 347 which required board certification as a prerequisite
for renewal of specialist positions in various medical centers, hospitals and agencies of the said department. Specifically,
Department Order No. 347 provided that specialists working in various hospitals and branches of the Department of
Health be recognized as "Fellows" of their respective specialty societies and/or "Diplomates" of their specialty boards or
both. The Order was issued for the purpose of upgrading the quality of specialties in DOH hospitals by requiring them to
pass rigorous theoretical and clinical (bedside) examinations given by recognized specialty boards, in keeping up with
international standards of medical practice.
Upon representation of the Chiefs of Hospitals of various government hospitals and medical centers, (then) Secretary of
Health Alfredo Bengzon issued Department Order No. 347 providing for an extension of appointments of Medical
Specialist positions in cases where the termination of medical specialist who failed to meet the requirement for board
certification might result in the disruption of hospital services. Department Order No. 478 issued the following
guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4 shall apply unless the Chief of Hospital requests
for exemption, certifies that its application will result in the disruption of the delivery service together with the steps
taken to implement Section 4, and submit a plan of action, lasting no more than 3-years, for the eventual phase out of
non-Board certified medical specialties.
2. Medical specialist recommended for extension of appointment shall meet the following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least three (3) years prior to December 1988.
c. Has applied or taken the specialty board examination.
3. Each recommendation for extension of appointment must be individually justified to show not only the qualification
of the recommendee, but also what steps he has taken to be board certified.

50
4. Recommendation for extension of appointment shall be evaluated on a case to case basis.
5. As amended, the other provisions of Department Order No. 34/s. 1988 stands.
Petitioner was one of the hundreds of government medical specialist who would have been adversely affected by
Department Order No. 347 since he was no yet accredited by the Psychiatry Specialty Board. Under Department Order
No. 478, extension of his appointment remained subject to the guidelines set by the said department order. On August
20, 1991, after reviewing petitioner's service record and performance, the Medical Credentials Committee of the
National Center for Mental Health recommended non-renewal of his appointment as Medical Specialist I, informing him
of its decision on August 22, 1991. He was, however, allowed to continue in the service, and receive his salary,
allowances and other benefits even after being informed of the termination of his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was held to discuss, among other matters, the
petitioner's case. In the said meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed out petitioner's
poor performance, frequent tardiness and inflexibility as among the factors responsible for the recommendation not to
renew his appointment.9 With one exception, other department heads present in the meeting expressed the same
opinion, 10 and the overwhelming concensus was for non-renewal. The matter was thereafter referred to the Civil
Service Commission, which on February 28, 1992 ruled that "the temporary appointment (of petitioner) as Medical
Specialist I can be terminated at any time . . ." and that "[a]ny renewal of such appointment is within the discretion of
the appointing authority." 11 Consequently, in a memorandum dated March 25, 1992 petitioner was advised by hospital
authorities to vacate his cottage since he was no longer with said memorandum petitioner filed a petition with the Merit
System Protection Board (MSPB) complaining about the alleged harassment by respondents and questioning the non-
renewal of his appointment. In a Decision rendered on July 29, 1992, the (MSPB) dismissed petitioner's complaint for
lack of merit, finding that:
As an apparent incident of the power to appoint, the renewal of a temporary appointment upon or after its expiration is
a matter largely addressed to the sound discretion of the appointing authority. In this case, there is no dispute that
Complainant was a temporary employee and his appointment expired on August 22, 1991. This being the case, his re-
appointment to his former position or the renewal of his temporary appointment would be determined solely by the
proper appointing authority who is the Secretary, Department of Health upon the favorable recommendation of the
Chief of Hospital III, NCMH. The Supreme Court in the case of Central Bank vs. Civil Service Commission G.R. Nos. 80455-
56 dated April 10, 1989, held as follows:
The power of appointment is essentially a political question involving considerations of wisdom which only the
appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the non-renewal of his expired temporary appointment
much less invoke the aid of this Board cannot substitute its judgment to that of the appointing authority nor direct the
latter to issue an appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from the Department of Health (DOH), the Board
finds the same inconsequential. Said Department Order merely allowed the extension of tenure of Medical Specialist I
for a certain period but does not mandate the renewal of the expired appointment.
The Board likewise finds as baseless complainant's allegation of harassment. It should be noted that the subsistence,
quarters and laundry benefits provided to the Complainant were in connection with his employment with the NCMH.
Now that his employment ties with the said agency are severed, he eventually loses his right to the said benefits. Hence,
the Hospital Management has the right to take steps to prevent him from the continuous enjoyment thereof, including
the occupancy of the said cottage, after his cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to have been tainted with any legal infirmity,
thus rendering as baseless, this instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed the same in its Resolution dated December
1, 1992. Motion for Reconsideration was denied in CSC Resolution No. 93-677 dated February 3, 1993, hence this
appeal, in which petitioner interposes the following assignments of errors:
I
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING THAT BY SUBMITTING HIS COURTESY
RESIGNATION AND ACCEPTING HIS TEMPORARY APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF OF
HIS SECURITY OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH COURTESY RESIGNATION AND ACCEPTANCE OF
APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION OF THE PERMANENT APPOINTMENT OF
PETITIONER TO TEMPORARY WAS DONE IN BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID, BEING
VIOLATIVE OF THE PETITIONER'S RIGHT OF SECURITY OF TENURE.

51
Responding to the instant petition, 12 the Solicitor General contends that 1) the petitioner's temporary appointment
after the reorganization pursuant to E.O. No. 119 were valid and did not violate his constitutional right of security of
tenure; 13 2) petitioner is guilty of estoppel or laches, having acquiesced to such temporary appointments from 1988 to
1991; 14 and 3) the respondent Commission did not act with grave abuse of discretion in affirming the petitioner's non-
renewal of his appointment at the National Center for Mental Hospital.15
We agree.
The patent absurdity of petitioner's posture is readily obvious. A residency or resident physician position in a medical
specialty is never a permanent one. Residency connotes training and temporary status. It is the step taken by a physician
right after post-graduate internship (and after hurdling the Medical Licensure Examinations) prior to his recognition as a
specialist or sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a required three-year accredited residency in Internal Medicine
(four years in DOH hospitals) and moves on to a two or three-year fellowship or residency in Cardiology before he is
allowed to take the specialty examinations given by the appropriate accrediting college. In a similar manner, the
accredited Psychiatrist goes through the same stepladder process which culminates in his recognition as a fellow or
diplomate (or both) of the Psychiatry Specialty Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum standards and skills and ensures that the
physician claiming to be a specialist will not be set loose on the community without the basic knowledge and skills of his
specialty. Because acceptance and promotion requirements are stringent, competitive, and based on merit. acceptance
to a first year residency program is no guaranty that the physician will complete the program. Attribution rates are high.
Some programs are pyramidal. Promotion to the next post-graduate year is based on merit and performance
determined by periodic evaluations and examinations of knowledge, skills and bedside manner. 17 Under this system,
residents, specialty those in university teaching hospitals 18 enjoy their right to security of tenure only to the extent that
they periodically make the grade, making the situation quite unique as far as physicians undergoing post-graduate
residencies and fellowships are concerned. While physicians (or consultants) of specialist rank are not subject to the
same stringent evaluation procedures, 19 specialty societies require continuing education as a requirement for
accreditation for good standing, in addition to peer review processes based on performance, mortality and morbidity
audits, feedback from residents, interns and medical students and research output. The nature of the contracts of
resident physicians meet traditional tests for determining employer-employee relationships, but because the focus of
residency is training, they are neither here nor there. Moreover, stringent standards and requirements for renewal of
specialist-rank positions or for promotion to the next post-graduate residency year are necessary because lives are
ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the reorganizations made pursuant to Executive
Order No. 119 would therefore be akin to a college student asking to be sent back to high school and staying there.
From the position of senior resident physician, which he held at the time of the government reorganization, the next
logical step in the stepladder process was obviously his promotion to the rank of Medical Specialist I, a position which he
apparently accepted not only because of the increase in salary and rank but because of the prestige and status which
the promotion conferred upon him in the medical community. Such status, however, clearly carried with it certain
professional responsibilities including the responsibility of keeping up with the minimum requirements of specialty rank,
the responsibility of keeping abreast with current knowledge in his specialty rank, the responsibility of completing board
certification requirements within a reasonable period of time. The evaluation made by the petitioner's peers and
superiors clearly showed that he was deficient in a lot of areas, in addition to the fact that at the time of his non-
renewal, he was not even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of Medical Specialist I (temporary) in August
of 1988, no objection was raised by him about the change of position or the temporary nature of designation. The
pretense of objecting to the promotion to specialist rank apparently came only as an afterthought, three years later,
following the non-renewal of his position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier renewals of his temporary Specialist I
contracts in 1989 and 1990, clearly demonstrating his acquiescence to — if not his unqualified acceptance of the
promotion (albeit of a temporary nature) made in 1988. Whatever objections petitioner had against the earlier change
from the status of permanent senior resident physician to temporary senior physician were neither pursued nor
mentioned at or after his designation as Medical Specialist I (Temporary). He is therefore estopped from insisting upon a
right or claim which he had plainly abandoned when he, from all indications, enthusiastically accepted the promotion.
His negligence to assert his claim within a reasonable time, coupled with his failure to repudiate his promotion to a
temporary position, warrants a presumption, in the words of this Court in Tijam vs. Sibonghanoy, 20 that he "either
abandoned (his claim) or declined to assert it."

52
There are weighty reasons of public policy and convenience which demand that any claim to any position in the civil
service, permanent, temporary of otherwise, or any claim to a violation of the constitutional provision on security of
tenure be made within a reasonable period of time. An assurance of some degree of stability in the civil service is
necessary in order to avoid needless disruptions in the conduct of public business. Delays in the statement of a right to
any position are strongly discouraged. 21 In the same token, the failure to assert a claim or the voluntary acceptance of
another position in government, obviously without reservation, leads to a presumption that the civil servant has either
given up his claim of has already settled into the new position. This is the essence of laches which is the failure or
neglect, for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or
should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or declined to assert it. 22
In fine, this petition, on its surface, seems to be an ordinary challenge against the validity of the conversion of
petitioner's position from permanent resident physician status to that of a temporary resident physician pursuant to the
government reorganization after the EDSA Revolution. What is unique to petitioner's averments is the fact that he
hardly attempts to question the validity of his removal from his position of Medical Specialist I (Temporary) of the
National Center for Mental Health, which is plainly the pertinent issue in the case at bench. The reason for this is at once
apparent, for there is a deliberate and dishonest attempt to a skirt the fundamental issue first, by falsely claiming that
petitioner was forced to submit his courtesy resignation in 1987 when he actually did not; and second, by insisting on a
right of claim clearly abandoned by his acceptance of the position of Medical Specialist I (Temporary), which is hence
barred by laches.
The validity of the government reorganization of the Ministry of Health pursuant to E.O. 119 not being the real issue in
the case at bench, we decline to make any further pronouncements relating to petitioner's contentions relating to the
effect on him of the reorganization except to say that in the specific case of the change in designation from permanent
resident physician to temporary resident physician, a change was necessary, overall, to rectify a ludicrous situation
whereby some government resident physicians were erroneously being classified as permanent resident physicians in
spite of the inherently temporary nature of the designation. The attempts by the Department of Health not only to
streamline these positions but to make them conform to current standards of specialty practice is a step in a positive
direction. The patient who consults with a physician of specialist rank should at least be safe in the assumption that the
government physician of specialist rank: 1.) has completed all necessary requirements at least assure the public at large
that those in government centers who claim to be specialists in specific areas of Medicine possess the minimum
knowledge and skills required to fulfill that first and foremost maxim, embodied in the Hippocratic Oath, that they do
their patients no harm. Primium non nocere.
Finally, it is crystal clear, from the facts of the case at bench, that the petitioner accepted a temporary appointment
(Medical Specialist I). As respondent Civil Service Commission has correctly pointed out 23, the appointment was for a
definite and renewable period which, when it was not renewed, did not involve a dismissal but an expiration of the
petitioner's term.
ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug and
Mendoza, JJ., concur.

53
 10. G.R. No. 148508 May 20, 2004
R TRANSPORT CORPORATION, petitioner,
vs.
ROGELIO EJANDRA, respondent.
DECISION
CORONA, J.:
Before us is a petition for review of the decision1 of the Court of Appeals2 dated December 22, 2000 dismissing the
petition for certiorari of the decision of the National Labor Relations Commission3 (NLRC) dated May 30, 1997. The latter
affirmed the decision4 of the labor arbiter dated February 27, 1997 holding petitioner liable for illegal dismissal and
directing private respondent’s reinstatement.
Private respondent Rogelio Ejandra alleged that, for almost six years, from July 15, 1990 to January 31, 1996, he worked
as a bus driver of petitioner R Transport Corporation. He plied the route "Muntilupa-Alabang-Malanday-Monumento-
UE-Letre-Sangandaan" from 5:00 a.m. up to 2:00 a.m. the next day and was paid 10% of his daily earnings.
On January 31, 1996, an officer of the Land Transportation Office (LTO), Guadalupe Branch, Makati City, apprehended
him for obstruction of traffic for which his license was confiscated. Upon his arrival at petitioner’s garage, he
immediately reported the incident to his manager, Mr. Oscar Pasquin, who gave him ₱500 to redeem his license. The
following day, he went to LTO, Guadalupe Branch, to claim it but he was told that it had not yet been turned over by the
officer who apprehended him. He was able to retrieve his license only after a week.
On February 8, 1996, private respondent informed Mr. Pasquin that he was ready to report for work. However, he was
told that the company was still studying whether to allow him to drive again. Private respondent was likewise accused of
causing damage to the bus he used to drive. Denying the charge, private respondent blamed the person who drove the
said bus during his absence, considering that the damage was sustained during the week that he did not drive the bus.
Mr. Pacquin nonetheless told him "Magpahinga ka muna at tatawagin ka na lang namin kung kailangan ka na para
magmaneho. Magbakasyon ka muna, bata." When respondent asked how long he had to rest, the manager did not give
a definite time.
Petitioner denied private respondent’s allegations and claimed that private respondent, a habitual absentee, abandoned
his job. To belie private respondent’s allegation that his license had been confiscated, petitioner asserted that, had it
been true, he should have presented an apprehension report and informed petitioner of his problems with the LTO. But
he did not. Petitioner further argued that private respondent was not an employee because theirs was a contract of
lease and not of employment, with petitioner being paid on commission basis.
On February 23, 1997, labor arbiter Rogelio Yulo rendered his decision in favor of private respondent. The dispositive
portion of the decision read:
PREMISES CONSIDERED, judgment is hereby rendered finding the dismissal of Rogelio Ejandra to be without just cause
and, therefore, illegal and ORDERING R-Transport to REINSTATE him to his former position without loss of seniority and
other benefits and to pay him backwages from the time of his dismissal until actual reinstatement.
SO ORDERED.5
Labor arbiter Yulo gave no weight to petitioner’s claim that private respondent abandoned his work. His one-week
absence did not constitute abandonment of work considering that it took him the whole week to reclaim his license.
Private respondent could not retrieve it unless and until the apprehending officer first transmitted it to their office. His
inability to drive for petitioner that whole week was therefore not his fault and petitioner could be held liable for illegal
dismissal. Due process was not accorded to private respondent who was never given the opportunity to contest the
charge of abandonment. Moreover, assuming actual abandonment, petitioner should have reported such fact to the
nearest employment office of the Department of Labor and Employment. But no such report was ever made.
On May 30, 1997, the NLRC rendered a decision affirming the decision of the labor arbiter:
WHEREFORE, premises considered, the appeal is hereby DISMISSED and the appealed decision AFFIRMED in toto.
SO ORDERED.6
In disputing petitioner’s claim that private respondent was not its employee and was not therefore entitled to notice
and hearing before termination, the NLRC held that:
It is very clear that (sic) from no less than appellants’ admission, that complainant was not afforded his right to due
process prior to the severance of his employment with respondents. (First par. p.3, respondents’ Appeal Memorandum,
p. 45, Rollo)
Appellants’ defense of denying the existence of employer-employee relationship with the complainant based on the
manner by which complainant was being paid his salary, cannot hold water.
xxx xxx xxx

54
While employees paid on piece-rate and commission basis are not covered by the provisions of the Labor Code, as
amended, on hours of work, these employees however, for all intents and purposes, are employees of their employers.
xxx xxx x x x7
Petitioner filed in the Court of Appeals a petition for certiorari on the ground that the NLRC committed grave abuse of
discretion in affirming the decision of the labor arbiter. On December 22, 2000, the Court of Appeals rendered a
decision, the dispositive portion of which read:
WHEREFORE, the instant petition is hereby DENIED for lack of merit.
SO ORDERED.8
Categorizing the issues raised by petitioner as factual, the appellate court held that the findings of fact of the labor
arbiter (affirmed by the NLRC) were entitled to great respect because they were supported by substantial evidence. The
Court of Appeals also ruled that petitioner was barred from denying the existence of an employer-employee relationship
because petitioner invoked its rights under the law and jurisprudence as an employer in dismissing private respondent.
Hence, this appeal based on the following assignments of errors:
A
With due respect, the Honorable Court of Appeals, Tenth Division committed grave abuse of discretion when it
affirmed/adopted in toto the decision of the National Labor Relations Commission (NLRC) based purely on a speculation,
surmise or conjecture.
B
The findings of facts are mere conclusions without citation or specific evidence on which they are based.
C
Further, the Honorable Court of Appeals, Tenth Division committed grave abuse of discretion amounting to lack of
jurisdiction in not ruling that the relationship in law occurring between the petitioner R Transport Corporation and the
private respondent was in a nature of "lessor and lessee."
D
Moreover, there is a need by this Honorable Court to give a second look on the records of NLRC NCR Case RAB No. IV-2-
7910-R / NLRC NCR CA-012-605-97 to avoid miscarriage of justice and furtherance of the statutory requirements of due
process.
E
Finally, the Honorable Court of Appeals, Tenth Division gravely erred in denying the petition in CA-G.R. SP. No. 51962 in
its decision promulgated on December 22, 2000 (Annexes "G" and "G-1") and in its Resolution dated June 4, 2001
(Annex "B"), has acted contrary to law and the Rules of Court.9
According to the petitioner, the appellate court erred in not finding that private respondent abandoned his work; that
petitioner was not the lessor of private respondent; that, as such, the termination of the contract of lease of services did
not require petitioner to respect private respondent’s rights to notice and hearing; and, that private respondent’s
affidavit was hearsay and self-serving.
We deny the appeal.
Under Section 1, Rule 45 of the 1997 Rules of Civil Procedure, a petition for review shall only raise questions of law
considering that the findings of fact of the Court of Appeals are, as a general rule, conclusive upon and binding on this
Court.10 This doctrine applies with greater force in labor cases where the factual findings of the labor tribunals are
affirmed by the Court of Appeals. The reason is because labor officials are deemed to have acquired expertise in matters
within their jurisdiction and therefore, their factual findings are generally accorded not only respect but also finality, and
are binding on this Court.11
In the case at bar, the labor arbiter, the NLRC and the Court of Appeals were unanimous in finding that private
respondent worked as a driver of one of the buses of petitioner and was paid on a 10% commission basis. After he was
apprehended for a traffic violation, his license was confiscated. When he informed petitioner’s general manager of such
fact, the latter gave him money to redeem his license. He went to the LTO office everyday but it was only after a week
that he was able to get back his license. When he reported back to work, petitioner’s manager told him to wait until his
services were needed again. Considering himself dismissed, private respondent filed a complaint for illegal dismissal
against petitioner.
We have no reason to disturb all these factual findings because they are amply supported by substantial evidence.
Denying the existence of an employer-employee relationship, petitioner insists that the parties’ agreement was for a
contract of lease of services. We disagree. Petitioner is barred to negate the existence of an employer-employee
relationship. In its petition filed before this Court, petitioner invoked our rulings on the right of an employer to dismiss
an employee for just cause.12 Petitioner maintained that private respondent was justifiably dismissed due to
abandonment of work. By adopting said rulings, petitioner impliedly admitted that it was in fact the employer of private

55
respondent. According to the control test, the power to dismiss an employee is one of the indications of an employer-
employee relationship.13 Petitioner’s claim that private respondent was legally dismissed for abandonment was in fact a
negative pregnant:14 an acknowledgement that there was no mutual termination of the alleged contract of lease and
that private respondent was its employee. The fact that petitioner paid private respondent on commission basis did not
rule out the presence of an employee-employer relationship. Article 97(f) of the Labor Code clearly provides that an
employee’s wages can be in the form of commissions.
We now ask the next question: was private respondent, an employee of petitioner, dismissed for just cause? We do not
think so.
According to petitioner, private respondent abandoned his job and lied about the confiscation of his license. To
constitute abandonment, two elements must concur: (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. Of the two, the second element
is the more determinative factor and should be manifested by some overt acts. Mere absence is not sufficient. It is the
employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his
employment without any intention of returning.15
In the instant case, petitioner fell short of proving the requisites. To begin with, petitioner’s absence was justified
because the LTO, Guadalupe Branch, did not release his license until after a week. This was the unanimous factual
finding of the labor tribunals and the Court of Appeals. As aptly held by labor arbiter Yulo, the process of redeeming a
confiscated license, based on common experience, depended on when the apprehending officer turned over the same.
Second, private respondent never intended to sever his employment as he in fact reported for work as soon as he got
his license back. Petitioner offered no evidence to rebut these established facts. Third, labor arbiter Yulo correctly
observed that, if private respondent really abandoned his work, petitioner should have reported such fact to the nearest
Regional Office of the Department of Labor and Employment in accordance with Section 7, Rule XXIII, Book V of
Department Order No. 9, series of 199716 (Rules Implementing Book V of the Labor Code). Petitioner made no such
report.
In addition to the fact that petitioner had no valid cause to terminate private respondent from work, it violated the
latter’s right to procedural due process by not giving him the required notice and hearing. Section 2, Rule XXIII, Book V of
Department Order No. 9 provides for the procedure for dismissal for just or authorized cause:
SEC. 2. Standards of due process; requirement of notice. – In all cases of termination of employment, the following
standards of due process shall be substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so
desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against
him; and
(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices
shall be served on the employee’s last known address.
II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements of
due process shall be deemed complied with upon service of a written notice to the employee and the appropriate
Regional Office of the Department at least thirty days before the effectivity of the termination, specifying the ground or
grounds for termination.
III. If termination is brought about by the completion of the contract or phase thereof, no prior notice is required. If the
termination is brought about by the failure of an employee to meet the standards of the employer in case of
probationary employment, it shall be sufficient that a written notice is served the employee within a reasonable time
from the effective date of termination.
WHEREFORE, premises considered, the petition is hereby DENIED. Costs against the petitioner.
SO ORDERED.

56
 11. G.R. No. 162401 January 31, 2006
CORAZON ALMIREZ, Petitioner,
vs.
INFINITE LOOP TECHNOLOGY CORPORATION, EDWIN R. RABINO and COURT OF APPEALS, Respondents.
DECISION
CARPIO MORALES, J.:
Corazon Almirez (petitioner) was hired as a Refinery Senior Process Design Engineer for a specific project by respondent
Infinite Loop Technology Corporation (Infinite Loop) through its General Manager/President-co-respondent Edwin R.
Rabino (Rabino) who, by letter1 dated September 30, 1999 to petitioner, furnished the details of the employment of her
services as follows:
Subject: Acceptance of Professional Services
Refinery – Senior Process Design Engineer
Dear Ms. Almirez
This is to confirm acceptance of your services as per attached Terms and Conditions. Your services will commence
effective October 18, 1999 up to the completion of the scope of services and continuation thereof with a guaranty of 12
continuous months as outlined in the attachment or until a mutually agreed date.
We thank you for considering our company as a valued partner in the advancement of Petroleum Processing Technology
in our country.
x x x x (Emphasis and underscoring supplied)
As indicated in the above-quoted portion of Rabino’s letter, the terms and conditions attendant to the acceptance of
petitioner’s "Professional Services"2 were attached to it reading:
Scope of Professional Services
The Senior Process Design Engineer shall work together with the Process Design Consultant in performing the scope of
services below which includes but are not limited to the following:
1. Prepare the Process Design Terms of Reference or Basis of Design and other data required for the proposed 1,200,000
BPSD Petroleum Refinery. These data are to be used in securing the services of a Basic Design Engineering Company as
well as part of Project Accomplishment of Infinite Loop Technology Corp.
2. Review and revise/improve as necessary the existing conceptual process block diagram or Process Flow Scheme of the
proposed petroleum refinery. Various capacity combinations are to be considered to develop process design modules of
1,200,000 BPSD total capacity.
3. Implement new process technologies that can meet the requirements of Japanese, Australian and US petroleum
product standard by the year 2004. As well as the Philippine Clean Air Act provisions applicable to the proposed
1,200,000 BPSD petroleum refinery. Petroleum Product Standards required shall be researched and be part of the Basis
of Design or Term of Reference.
4. Participate in discussions during the solicitation of proposals from Basic Design Engineering Companies.
5. Review the progress of work being done by the Basic Design Engineering Company and coordinate with the company
management team for an efficient and effective project implementation.
6. Make reports and recommendations to the company management team regarding work progress, revisions and
improvement of process design on a regular basis as required by company management team.
7. Represent the Company in technical meetings to be held locally or abroad.
8. Perform other related works that are necessary in completing the Engineering Procurement and Construction (EPC)
bid documents and progress reports relevant to schedules of deliveries to the Project Proponent as required by the
company.
9. Continue related works when the construction stage of this Proposed Refinery will push through.
10. Serve as technical consultant to Infinite Loop Technology Corp. on other relevant works or projects when required.
x x x x (Emphasis in the original; underscoring supplied)
Terms of Payments
Professional Fee: US$ 2,000.00 per month (net of tax)
To be paid 50/50 split in US Dollars or
equivalent Peso every 15th and 30th of the month
Length of Service: Guaranteed minimum of 12 continuous months
or up to completion of services, or until a
mutually agreed date.
Reimbursable Expenses:

57
Work related expenses which include but not
limited to the following:
- Communication Expenses (Cellular
phone, fax, tels)
- Representation Expenses
- Out of town travel expenses
Other Benefits:
- US$ 300.00 per month as transportation
allowance (Engineer to use her
personal car in the performance of
work) to be paid in equivalent pesos
every end of the month.
- Project Bonus at the end of the contract
to be mutually agreed upon by both parties.
Others:
Infinite Loop Technology Corporation to provide
the ff:
- Laptop Computer (Pentium III or best
available model with modems etc.)
- Printer/ Scanner
- Process Simulation Softwares to be identified later (Emphasis in the original; underscoring supplied)
The letter, as well as the attached documents, bore the signature of petitioner and Rabino.
For her services, petitioner received the following amounts on the dates indicated:3
Voucher date Amount

11/23/99 Salary for Nov. 1-15, 1999 P20,000.00

12/02/99 Salary for Nov. 15-30, 1999 8,000.00

12/15/99 Full payment for Nov. 15-30 salary 2,000.00

Salary for Dec. 1-15, 1999 10,000.00

1/17/00 Salary for Jan. 1-15, 2000 12,000.00

1/16/00 Salary for Jan. 16-31, 2000 12,500.00

1/20/00 Salary for Jan. 1-15, 2000 12,500.00

---------------

Total P77,000.00
By letter4 dated February 2, 2000, petitioner conveyed to Infinite Loop through Rabino her disappointment with the
"salary" she was receiving in this wise:
x x x When I agreed with a salary of P30,000.00 monthly, my understanding is that, this amount is already net of tax x x
x. However, when I received my salary for the month of January which is only partial, (P25,000) and even less because
[of] SSS and tax deductions x x x
I understand that tax should be deducted from my salary for your Accounting records but I would like to ask you not to
deduct it from the P30,000.00 salary I am supposed to be receiving. Currently I am paying my SSS contributions
voluntarily so there is no need for the company to pay my monthly contributions.
I would like to render my service at Infinite Loop based on the contract that I signed and I am willing to serve
as technical consultant to Infinite Loop on other relevant works or projects while we are waiting for the Masbate
refinery project.
x x x x (Emphasis and underscoring supplied)
Responding,5 Rabino stated that petitioner’s letter "was totally different [from] what [they] verbally agreed [upon]" in
her house; that "like any other proposed project, [the Proposed 1,200,000 BPSD Petroleum Refinery] can be deferred
like its present status;" and that since "the financial side for the engineering design for the proposed [project] is not yet
available x x x it would be prudent to SUSPEND her professional services as Senior Process Design Engineer effective

58
February 7, 2000." Rabino assured petitioner that her professional services would be resumed once they are provided
with the initial payment requested from the project proponent.
By letter6 dated August 9, 2000, petitioner, through counsel, wrote Rabino "to compensate [her with] the total amount
of her contract," thus:
Our client MS. CORAZON S. ALMIREZ has referred to us for appropriate legal action concerning her contract with your
company as a refinery process design engineer.
In the said contract, which was accepted by our said client on September 30, 1999, you stated that our client’s services
"will commence effective October 18, 1999 up to the completion of the scope of the services and continuation thereof
with a guaranty of 12 continuous months as outlined in the attachment or until a mutually agreed date". However,
despite your guarantee of at least 12 continuous months of service, you suspended her professional services effective
February 7, 2000. The same is a clear violation of the terms and conditions of the contract. Moreover, you have paid her
only a total amount of SEVENTY FOUR THOUSAND TWO HUNDRED TWENTY NINE & 17/100 PESOS (P74,229.17), which
is way below than the agreed professional fee of US $2,000.00 a month net of tax. On account of your blatant violation
of the terms and conditions of the contract, our client suffered sleepless nights, anxiety and besmirched reputation. She
was constrained to resign from her job as an engineer at the Technoserve International Co., Inc., in view of her contract
with your company.
In view thereof, formal demand is hereby made on you to compensate our client the total amount of her contract or the
amount of US DOLLARS: twenty thousand ($ 20,000.00), MORE OR LESS, within five (5) days from your receipt hereof,
failing which we shall, much to our regret, be constrained to file the necessary action in court.
x x x x (Underscoring supplied)
Rabino later wrote petitioner, by letter of November 15, 2000,7 as follows:
Thank you for reminding us about our agreement about this possible landmark project. You all know that Infinite Loop
Tech. Corp. is the lead company in this undertaking in association with other companies forming a consortium to cope
up with the huge financial and technical requirement of this project. We all have invested a lot of group resources for
this, but unfortunately the Project Proponent, Arrox Resources Corp., have encountered re-organization and have not
yet paid us for this project.
At the moment, the former Chairman of Arrox Resources Corp. is still in contact with us. We all hope that this project
will push thru after our country would overcome all the peace and order, economic and political crisis we are
encountering now.
We all hope that you would bear with us. We would inform you soonest once any development from the project
proponent would be relayed to us.
On December 12, 2000, petitioner filed a complaint against Infinite Loop and Rabino before the National Labor Relations
Commission (NLRC) for "breach of contract of employment," praying that judgment be rendered in her favor ordering
Infinite Loop to pay:
(1) $22,000.00 or its peso equivalent representing salaries and wages;
(2) P300,000.00 as and for moral damages;
(3) P100,000.00 as and for exemplary damages; and
(4) 10% of the total claim as and for attorney’s fees.
Infinite Loop moved to dismiss8 petitioner’s complaint on the ground that the NLRC has no jurisdiction over the parties
and the subject matter, there being no employee-employer relationship between them as the contract they entered into
was one of services and not of employment.
By Resolution of November 14, 2001, the Labor Arbiter, finding that paragraph No. 6 of the Scope of Professional
Services of petitioner showed that "the company’s management team exercises control over the means and methods in
the performance of [petitioner’s] duties as Refinery Process Design Engineer," held that there existed an employer-
employee relationship between the parties.
The Labor Arbiter thus ordered Infinite Loop and Rabino to jointly and severally pay petitioner the sum of US$ 24,000.00
in its peso equivalent at the date of payment less advances in the amount of P77,000.00 plus 5% thereof by way of
attorney’s fees. It dismissed petitioner’s claim for damages, however.9
Infinite Loop and Rabino (hereafter respondents) appealed to the NLRC. By Resolution10 dated September 19, 2002, the
NLRC, finding that employer-employee relation between the parties indeed existed, dismissed respondents’ appeal.
Before the Court of Appeals to which respondents elevated the case, they argued that the NLRC:
I.
x x x ABUSED ITS DISCRETION AMOUNTING TO LACK OF JURISDICTION AND ERRED IN NOT FINDING THAT THE LABOR
ARBITER HAS NO JURISDICTION OVER THE CAUSES OF ACTION PLEADED IN THE COMPLAINT, I.E., NON PAYMENT OF
PROFESSIONAL FEE AND BREACH OF CONTRACT.

59
II.
x x x COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION AND COMMITTED REVERSIBLE
ERROR IN NOT FINDING THAT [PETITIONER] IS NOT AN EMPLOYEE OF [INFINITE LOOP].
III.
x x x SERIOUSLY ERRED IN NOT FINDING THE ENVISIONED ENGAGEMENT OF [PETITIONER] AS A REFINERY PROCESS
ENGINEER IS CO-TERMINOUS WITH THE PROJECT, WHICH PROJECT DID NOT MATERIALIZE.11 (Underscoring supplied)
The appellate court, finding that "[petitioner] was hired to render professional services for a specific project" and her
"primary cause of action is for a sum of money on account of [Infinite Loop’s] alleged breach of contractual obligation to
pay her agreed professional fee," held by Decision12 dated October 20, 2003 that no employer-employee relationship
existed between the parties, hence, the NLRC and the Labor Arbiter have no jurisdiction over the complaint. It
accordingly reversed the NLRC decision and dismissed petitioner’s complaint.
Hence, the present petition, petitioner contending that the appellate court erred when it:
A.
x x x INCONSISTENTLY RULED THAT THERE WAS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES BUT
AT THE SAME TIME IT CITED THAT [PETITIONER] IS A PROJECT EMPLOYEE. MOREOVER, THE ASSAILED JUDGMENT IS
BASED ON MISAPPRECIATION OF FACTS.
B.
x x x FAILED TO CONSIDER THE RELIEF MENTIONED IN [PETITIONER’S] COMPLAINT FOR PAYMENT OF SALARY x x x
C.
x x x RULED THAT THE SEPARATION FROM SERVICE OF [PETITIONER] BECAUSE OF THE PROJECT’S DISCONTINUANCE DID
NOT RESULT TO ILLEGAL DISMISSAL.13
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test,
to wit: (1) the manner of selection and engagement; (2) the payment of wages; (3) the presence or absence of the
power of dismissal; and (4) the presence or absence of the power of control. Of these four, the last one, the so called
"control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship.14
Under the control test, an employer-employee relationship exists where the person for whom the services are
performed reserves the right to control not only the end achieved, but also the manner and means to be used in
reaching that end.15
From the earlier-quoted scope of petitioner’s professional services, there is no showing of a power of control over
petitioner. The services to be performed by her specified what she needed to achieve but not on how she was to go
about it.
Contrary to the finding of the Labor Arbiter, as affirmed by the NLRC, above-quoted paragraph No. 6 of the "Scope of
[petitioner’s] Professional Services" requiring her to "[m]ake reports and recommendations to the company
management team regarding work progress, revisions and improvement of process design on a regular basis as required
by company management team" does not "show that the company’s management team exercises control over the
means and methods in the performance of her duties as Refinery Process Design Engineer." Having hired petitioner’s
professional services on account of her "expertise and qualifications" as petitioner herself proffers in her Position
Paper,16 the company naturally expected to be updated regularly of her "work progress," if any, on the project for which
she was specifically hired.
In bolstering her contention that there was an employer-employee relationship, petitioner draws attention to the pay
slips and Infinite Loop’s deduction of her SSS, Philhealth, and withholding tax, and to the designation of the payments to
her as "salaries."
The deduction from petitioner’s remuneration of amounts representing SSS premiums, Philhealth contributions and
withholding tax, was made in the only payslip issued to petitioner, that for the period of January 16-31, 2000,17 the other
amounts of remuneration having been documented by cash vouchers. Such payslip cannot prove the existence of an
employer-employee relationship between the parties.
The cases of Equitable Banking Corp. v. NLRC18 and Nagusara v. NLRC19 should be differentiated from the present case,
as the employers in these two cases did not only regularly make similar deductions from the therein complainants’
remuneration but also registered and declared the complainants with the SSS and Medicare (Philhealth) as their
employees.
As for the designation of the payments to petitioner as "salaries," it is not determinative of the existence of an
employer-employee relationship. "Salary" is a general term defined as "a remuneration for services given." It is the
above-quoted contract of engagement of services-letter dated September 30, 1999, together with its attachments,
which is the law between the parties. Even petitioner concedes rendering service "based on the contract,"20 which, as

60
reflected earlier, is bereft of a showing of power of control, the most crucial and determinative indicator of the presence
of an employer-employee relationship.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.

61
 12. G.R. No. 154472 June 30, 2005
ALEXANDER R. LOPEZ, HERMINIO D. PEÑA, SALVADOR T. ABUEL, GEORGE F. CABRERA, JOEL M. CARREON, DAMASO
M. CERVANTEX, JR., RICARDO V. CUEVAS, ROBERTO S. DAGDAG, IRENEO V. DURAY, OMER S. ESPIRIDION, MANOLO V.
FORONDA, RONITO R. FRIAS, ANGEL C. GARCIA, VICTORINO A. ILAGAN, DENNIS S. LEGADOS, MIGUEL J. LOPEZ,
EMMANUEL R. MERILLO, EDGAR E. NATARTE, MAMERTO S. NEPOMUCENO, MARVIN R. PADURA, ROMEO C. RAMILO,
ALBERTO R. RAMOS, JR., RONALDO A. SARMIENTO, ARMANDO S. SIONGCO, JOSE TEODY P. VELASCO, RICO P.
VILLANUEVA, SAMUEL L. ZAPATERO, EDGARDO D. AGUDO, ROBERTO A. ARAÑA, BENJAMIN ASUNCION, JULIAN C.
BACOD, EDWIN N. BORROMEO, ALBERTO T. BULAONG, DANIEL CADAÑOM, ROBERTO S. CAYETANO, ALFREDO C.
CLAVIO, EDGARDO A. DABUET, NEIL DAVID, ALEXANDER B. ESTORES, NOEL GUILLEN, RODOLFO MAGNO, REY
MANLEGRO, ROMEO V. MORALES, ROSAURO NADORA, EUGENIO M. ORITO, RONILO P. PAREDES, ADGARDO R.
PINEDA, CARLITO SAMARTINO, ARTURO C. SARAOS, JR., JOHNEL L. TORRIBIO, ANTONIO A. VERGARA, JIMMY C.
UNGSON, NOEL D. AMOYO, VIRGILIO L. AZARCON, RICARDO M. BROTONEL, EMERALDO C. CABAYA, JULIE G. CHAN,
LUIS C. CLAVIO, LUIS T. CANIZO, ERNESTO F. DAVID, EDGAR B. DE VERA, REYNALDO A. DUMLAO, ARTURO R.
DYCHITAN, ROMAN S. FAJARDO, BERNARDINO B. MACALDO, ROMEO D. MANASIS, JR., MARIO R. MANGALINDAN,
VICTORIANO C. MARTINEZ, LEONARDO D. MIRALLES, ROGELIO E. PACER, ROSENDO L. PANGILINAN, NOLI H. POLINAG,
DIOSDADO M. PUNZALAN, REYNALDO C. GATPO, CIRILO M. SANTOS, RAMON A. ZAMBRANA, PIO L. ASTORGA,
ROLANDO G. CAGALINGAN, ANGELITO A. CAUDAL, FRANCISCO S. DELOS SANTOS, CARLOS E. LOMIBAO, ROMEO S.
MALABANAN, LIBERATO B. MANGENTE, JULIAN M. MARTINEZ, BERNARDO S. MEDINA, MELVIN R. MENDEZ, ALBERT C.
MIRADOR, RENEE S. OCAMPO, DAVID J. PASCUA, AMORSOLO M. PILARTA, ROLANDO C. REYES, GAVINO SAN GABRIEL,
JR., PERCON F. SISON, PLARIDEL L. TANGLAO, RUBEN R. TAÑEDO, JR., RENATO G. TARUC, RONALDO D.C. VENTURA,
ANGEL L. VERTUCIO, ERWIN T. VIDAD, WILLIAM M. AGANAON, ALEX P. MANABAT, FRANCISCO ALMONTE, RODRIGO
C. ANTONIO, DOUGLAS R. AQUINO, REMEGIO R. ATIENZA, ABRAHAM C. BALICANTE, MELENCIO M. BAGNGUIS, JR.,
GERARDO T. BULAONG, MELITANTE I. CASTRO, MEDARDO S. CATACUTAN, VIRGILIO T. CATUBIG, JOSE S. CHIONG, NEL
T. COLOBONG, FELIPE C. COLLADO, RANDY T. CORTIGUERRA, ANTONIO D. DELA CRUZ, JESUS C. DINGLE, EDGARDO N.
GARCIA, CELSO Z. GOLFO, NONITO V. FERNANDEZ, LARRY HIDALGO, FRANCISCO B. JAO, JR., CARLOS P. LAGLIVA, RICO
L. LARRACAS, PEDRO V. ABARIDES, RUDY S. AGUINALDO, REGINALD F. ALCANTARA, SERAFIN ALCANTAR, JR., FELIX H.
ALEJANDRO, MIGUEL ALTONAGA, JOSE T. AGUILAR, PEDRO AGUILAR, JR., NOEL A. ALIPIO, WILLIAM A. ALMAZAR,
REYNALDO S.D. ALVAREZ, FLORIZEL M. AMBROCIO, JOSE A. ASPE, ROBERTO J. ARCEO, ERNESTO V. ARUTA, MILLARDO
DL. ATENCIO, ERNESTO G. AVELINO, WENCESLAO C. BABEJAS, ARNOLD F. BALINGIT, HEBERT F. BARCELON, MARLON
D. BORROZO, FLORENTINO BAS, JR., LEARNED A. BAUTISTA, ARMAN N. BORROMEO, CARLITO F. BARTOLO, CARLOS M.
CABERTO, ARTURO S. CAJUCOM, DIEGO CALDERON, JR., WILLIAM A. CAMPOS, JORGE CANONIGO, JR., ANGELITO M.
CAPARAC, EMMANUEL L. CAPIT, LAURO S. CASTRO, TOMEO B. CASTALONE, VERZNEV S. CATUBIG, ARMANDO
CERVANTES, CALIXTO P. COLADA, JR., JONATHAN P. CORONEL, JOE NOEL P. CRUZ, FRANCISCO CRUZ, JR., MARIANO B.
CRUZ, JR., JOSE J. DALUMPINES, SANITO S. DE JESUS, JOSE G. DE LEON, CRISANTO DE LOS REYES, EMMANUEL C. DE
VERA, RODOLFO DE VERA, JR., HERMAN C. DE VILLAR, IKE S. DELFIN, PEDRO E. DESIPEDA, ERAÑO A. DIONISIO,
ALFREDO L. DUGAYO, REYNALDO V. DURAY, EUGENIO C. ELEAZAR, RAFAEL U. ENCINA, ORLANDO C. ESCOLAR, ALLAN
P. ESPINA, LAURO S. ESPINA, ISRAEL F. FALLURIN, ORIEL A. FESTEJO, EDGARDO V. FIGUEROA, RALPH FLORES,
FERDINAND B. FUGGAN, NOEL Z. GABOT, EDUARDO M. GALANG, VICENTE D. GALLARDO, FRESCO B. GALO, ROSAURO
G. GAMBOA, MARIO S. GABRIEL, ROBERTO C. GAPASIN III, ROMUALDO GAPASIN, JR., DANILO C. GARCIA, RESTITUTO
S. GARCIA, NOEL B. GATDULA, BENJIE S. GERONIMO, ARTURO R. GLORIOSO, ISIDRO S. GOMED, JR., MEDEL P.
GREGORIO, REY T. HECHANOVA, VONREQUITO HERBUELA, CELSO F. IGNACIO, JR., CHARLIE S. IGNACIO, ILDEFONSO F.
ILDEFONSO, GAUDENICO M. INTAL, RIZALITO M. INTAL, RENATO HERRERO, BIENVENIDO L. JAO, JR., FERDINAND P.
LAGMAN, RENEIL M. LAREZA, ALMARIO M. LAXA, ARTHUR G. LEVISTE, ESTEBAN T. LEGARTO, RAMON G. LIWANAG,
ELISEO A. LU, RAYMUNDO LUSTICA, JR., FERNANDO D. MABANTA, NESTOR F. MAGALLANES, EDWIN A. MAGPAYO,
MICHAEL I. MAGRIA, ARIEL M. MALAPAD, RAMON O. MAMUCOD, FERDINAND P. MANINGAS, RONALD D.R. MANUEL,
ROLANDO F. MAPUE, CHITO C. MARCO, ERNESTO S. MARCHAN, JOSEPH B. MARIANO, FRANCIS J. MARIMON, JOHN L.
MARTEJA, JOSE E. MASE, JR., BERNARDO S. MEDINA, JOEREY B. MERIDOR, SUSANO S. MIRANDA, EDGARDO C.
MONTOYA, MARLON B. MORADA, ROMEO R. DEL MUNDO, REYNALDO C. NAREDO, EDGARDO R. NEPOMUCENO,
RODEL S. NEPOMUCENO, ROMMEL NIYO, ROMULO P. OLARTE, GEORGE N. OLAVERE, EDUARDO ONG, MARIO S.
PAGSANJAN, RENALD C. PALAD, GAUDENCIO G. PEDROCHE, RONALDO DELA CRUZ PEREÑA, EDILBERTO C. PIÑGUL,
ERNESTO PINGUL, AGNESIO D. QUEBRAL, JAMES M. QUINTO, RICARDO R. RAMOS, GENEROSO REGALADO, JR.,
EDUARDO L. REYES, RAMON C. REYES, LARRY S. RECAMADAS, ANTONIO B. REDONDO, FEDERICO M. RIVERA,
ROBERTO I. ROCOMORA, FERNANDO P. RODRIGUEZ, HERNANDO S. RODRIGUEZ, ROMMEL D. ROXAS, CHRISTOPHER
R. RUSTIA, ARNULFO T. JAMISON, MARIO G. SAN PEDRO, ELMER B. SANTOS, LEONARDO SEBASTIAN, JR.,
CARMENCITO M. SEXON, JOSE STA. ANA SIERRA, LLOYD Z. SINADJAN, RAMON S. SISIO, RAMIRO M. SOLIS, MANUEL C.
SUAREZ, BENJAMIN TALAVERA, JR., OSCAR U. TAN, RICARDO S. TAN, AUGUSTUS V. TANDOC, ROBERTO L. TAÑEDO,

62
ERNESTO R. TIBAY, CHARLIE P. TICSAY, REY DE VERE TIONGCO, VIVENCIO B. TOLENTINO, OSMUNDO S. TORRES,
HILARIO L. VALDEZ, LEONARDO C. VALDEZ, PASTOR M. VALENCIA, EFREN VELASCO, EDMUNDO D. VICTA, FERDINAND
VILLANUEVA, JOSE C. VILLANUEVA, JOSE ROMMEL VILLAMOR, OLIVER P. VILLANUEVA, VICTOR P. ZAFARALLA,
HORACIO L. ZAPATERO, COENE C. ZAPITER, THE HEIRS OF ESTEBAN BALDOZA, RUBEN GALANG, FAUSTO S. CRUZ,
REYNALDO BORJA, CRISANTO CAGALINGAN and ADRIANO VICTORIA, petitioners,
vs.
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, respondents.
DECISION
TINGA, J.:
Take not from the mouth of labor the bread it has earned.
Thomas Jefferson
The constitutional protection to labor, a uniform feature of the last three Constitutions including the present one, is
outstanding in its uniqueness and as a mandate for judicial activism.
This petition asks for the review of the Court of Appeals’ D E C I S I O N1 in C.A.-G.R. SP NO. 55263 entitled Alexander R.
Lopez, et al. v. Metropolitan Waterworks and Sewerage System, which affirmed in toto the Civil Service Commission’s
Resolutions2 denying petitioners’ claim for severance, retirement and terminal leave pay.
By virtue of an Agreement,3 petitioners were engaged by the Metropolitan Waterworks and Sewerage System (MWSS)
as collectors-contractors, wherein the former agreed to collect from the concessionaires of MWSS, charges, fees,
assessments of rents for water, sewer and/or plumbing services which the MWSS bills from time to time.4
In 1997, MWSS entered into a Concession Agreement with Manila Water Service, Inc. and Benpress-Lyonnaise, wherein
the collection of bills was transferred to said private concessionaires, effectively terminating the contracts of service
between petitioners and MWSS. Regular employees of the MWSS, except those who had retired or opted to remain with
the latter, were absorbed by the concessionaires. Regular employees of the MWSS were paid their retirement benefits,
but not petitioners. Instead, they were refused said benefits, MWSS relying on a resolution5 of the Civil Service
Commission (CSC) that contract-collectors of the MWSS are not its employees and therefore not entitled to the benefits
due regular government employees.
Petitioners filed a complaint with the CSC. In its Resolution dated 1 July 1999,6 the CSC denied their claims, stating that
petitioners were engaged by MWSS through a contract of service, which explicitly provides that a bill collector-
contractor is not an MWSS employee.7 Relying on Part V of CSC Memorandum Circular No. 38, Series of 1993, the CSC
stated that contract services/job orders are not considered government services, which do not have to be submitted to
the CSC for approval, unlike contractual and plantilla appointments.8 Moreover, it found that petitioners were unable to
show that they have contractual appointments duly attested by the CSC.9 In addition, the CSC stated that petitioners,
not being permanent employees of MWSS and not included in the list .submitted to the concessionaire, are not entitled
to severance pay.10 Petitioners’ claims for retirement benefits and terminal leave pay were likewise denied.
Petitioners sought reconsideration of the CSC Resolution, which was however denied by the CSC on 17 September
1999.11 According to the CSC, petitioners failed to present any proof that their appointments were contractual
appointments submitted to the CSC for its approval.12 The CSC held, thus:
WHEREFORE, the motion for Reconsideration of Alexander Lopez, et al. is hereby denied. Accordingly, CSC Resolution
No. 99-1384 dated July 1, 1999 stands. However, this is not without prejudice to whatever rights and benefits they may
have under the New Labor Code and other laws, if any.13
Aggrieved, petitioners filed a petition for review under Rule 43 of the Rules of Court with the Court of Appeals.14 In its D
E C I S I O N, the Court of Appeals narrowed down the issues presented by petitioners as follows: Whether or not the CSC
erred in finding that petitioners are not contractual employees of the government and, hence, are not entitled to
retirement and separation benefits.15
Affirming and generally reiterating the ruling of the CSC, the Court of Appeals held that the Agreement entered into by
petitioners and MWSS was clear and unambiguous, and should be read and interpreted according to its literal
sense.16 Hence, as per the terms of the agreement, petitioners were not MWSS employees. The Court of Appeals held
that no other evidence was adduced by petitioners to substantiate their claim that their papers were forwarded to the
CSC for attestation and approval.17 It added that in any event, as early as 26 June 1996, the CSC specifically stated that
"contract collectors are not MWSS employees and therefore not entitled to severance pay."18
The Court of Appeals held that petitioners are not similarly situated as the petitioner in the case of Chua v. Civil Service
Commission19 since the contractual appointment was submitted to and approved by the CSC, while the former were
not.20 Further, petitioners do not have creditable service for purposes of retirement, since their services were not
supported by duly approved appointments.21 Lastly, the Court of Appeals held that petitioners were exempt from

63
compulsory membership in the GSIS. Having made no monthly contributions remitted to the said office, petitioners are
not entitled to the separation and/or retirement benefits that they are claiming.22
Petitioners now assert that the Court of Appeals rendered a decision not in accord with law and applicable
jurisprudence, based on misapprehension of facts, and/or contrary to the evidence on record.23
Petitioners allege that while their hiring was made to appear to be on contractual basis, the contracts evidencing such
hiring were submitted to and approved by the CSC. Later contracts, however, do not appear to have been submitted to
the CSC for approval. To support its claim, petitioners presented two (2) sample agreements,24 both stamped
"approved" and signed by CSC Regional Directors. While styled as individual contracts/agreements, petitioners insist
that the same were actually treated by the MWSS as appointment papers.25
Petitioners claim that they were employees of the MWSS, and that the latter exercised control over them. They cite as
manifestations of control the training requirements, the mandated procedures to be followed in making collections,
MWSS’ close monitoring of their performance, as well as the latter’s power to transfer collectors from one branch to
another.26
Moreover, they add that with the nature and extent of their work at the MWSS, they served as collectors of MWSS
only.27 They stress that they have never provided collection services to customers as an independent business. In fact,
they applied individually and were hired by MWSS one by one.28 They were provided with uniforms and identification
cards, and received basic pay termed as "commissions" from which MWSS deducted withholding tax.29 The
"commissions" were determined or computed by MWSS and paid to the collectors by payroll every fifteenth (15th) and
last day of every month. In addition to the commission, collectors were given, among others, performance, mid-year and
anniversary bonuses, hazard pay, thirteenth (13th) month pay, traveling allowance, cash gift, meal allowance and
productivity pay.30
Petitioners claim that bill collectors were historically regarded as employees of National Waterworks and Sewerage
Authority (NAWASA), the forerunner of MWSS.31 They cite the case of National Waterworks and Sewerage Authority v.
NWSA Consolidated Labor Unions, et al.,32 wherein this Court supposedly declared the bill collectors of NAWASA as its
employees and the commissions received by said collectors as salary.33 Likewise, they claim that by MWSS’ own acts,
petitioners were its employees. To support this contention, they point to the identification cards (I.D.s) and certifications
of employment issued by MWSS in their favor.34 There were also "Records of Appointment", which referred to the
contract-collectors as employees with corresponding service records.35
In view of the cited documents, petitioners assert that MWSS is estopped from denying their employment with the
agency.36 Should there be doubt as to their status as employees, petitioners invoke the rule of liberal construction in
favor of labor, and the constitutional policy of protection to labor.37
To further strengthen their case, petitioners refer to CSC Resolution 92-2008 dated 8 December 1992, which states in
part:
. . . . The fact that they were being hired directly and paid on commission basis by MWSS itself is indicative that they are
government employees and should be entitled to the incentive awards.
WHEREFORE, foregoing premises considered, the Commission resolves to rule that the Contractual-Collectors of the
Metropolitan Waterworks and Sewerage System (MWSS) are entitled to loyalty awards.38
The same resolution was made the basis of the MWSS’ memorandum declaring contract-collectors government
employees or personnel entitled to salary increases pursuant to the Salary Standardization Law I & II.39
Thus, petitioners claim that by MWSS’ and CSC’s own acts and declarations, they were made to believe that they were
employees of MWSS and as such were government employees.40
Petitioners invoke the case of Chua v. Civil Service Commission, et al.41 wherein Chua, a co-terminus employee of the
National Irrigation Administration, sought to recover early retirement benefits but was denied the same. This Court,
having observed that Chua was hired and re-hired in four (4) successive projects during a span of fifteen (15) years, was
deemed a regular employee for purposes of retirement pay. Petitioners argue that in the same manner, in view of their
considerable length of service to MWSS, they are entitled to their claimed benefits.42
In addition to the retirement/separation/terminal leave pay prayed for, petitioners claim moral damages for the alleged
serious disturbance they suffered as a result of the denial of their claims. They also pray for the award of attorney’s
fees.43
For its part, the MWSS avers that the Court of Appeals did not err in sustaining the resolutions of the CSC denying
petitioners’ claim for entitlement to severance, retirement and terminal leave pay.
MWSS denies the existence of employer-employee relationship between itself and petitioners. Citing CSC Memorandum
Circular No. 38 Series of 1993, MWSS avers that it has the authority to contract the services of another who is
considered not its employee.44 With respect to the matter of payment of wages, MWSS states that the commission given

64
to petitioners does not fall within the definition of compensation as provided in Presidential Degree No. 1146 (P.D.
1146),45 or in the definition of the term under the Revised Administrative Code either.46
It adds that the issuance of I.D.s., certificates of recognition and loyalty awards as well as the grounds for termination of
the Agreement could hardly be considered as control as the same had no relation to the means and methods to be
employed by petitioners in collecting payments for MWSS.47 As for the training and orientation undergone by
petitioners, MWSS claims that it is but logical for any entity which has contracted the services of another to orient the
latter before actual performance of the service, more so if the entity’s function is impressed with public service. The fact
that collectors were given a regular time for remittance should likewise not be considered as a form of control. MWSS
states that none of these requirements invades the collector’s prerogative to adopt their own method/strategy in the
matter of collection.48
On the grant of thirteenth (13th) month pay and other benefits to petitioners, MWSS claims that these were mere acts
of benevolence and generosity.49
Pertinently, therefore, the issue to be resolved is whether or not petitioners were employees of the MWSS and,
consequently, entitled to the benefits they claim.
We find for the petitioners.
The Court has invariably affirmed that it will not hesitate to tilt the scales of justice to the labor class for no less than the
Constitution dictates that "the State . . . shall protect the rights of workers and promote their welfare."50 It is committed
to this policy and has always been quick to rise to defense in the rights of labor, as in this case.51
Protection to labor, it has been said, extends to all of labor¾local and overseas, organized and unorganized, in the public
and private sectors.52 Besides, there is no reason not to apply this principle in favor of workers in the government. The
government, including government-owned and controlled corporations, as employers, should set the example in
upholding the rights and interests of the working class.
The MWSS is a government owned and controlled corporation with its own charter, Republic Act No. 6234.53 As such, it
is covered by the civil service54 and falls under the jurisdiction of the Civil Service Commission.55
CSC Memorandum Circular No. 38, Series of 1993, categorically made the distinction between contract of services/job
orders and contractual and plantilla appointment, declaring that services rendered under contracts of services and job
orders are non-government services which do not have to be submitted to the CSC for approval. This was followed by
CSC Memorandum Circular No. 4, Series of 1994, which allowed the crediting of services for purposes of retirement only
for such services supported by duly approved appointments. Subsequently, the CSC issued other resolutions applying
the above-mentioned circulars, stating that while some functions may have been contracted out by a government
agency, the persons contracted are not entitled to the benefits due to regular government employees.56
For purposes of determining the existence of employer-employee relationship, the Court has consistently adhered to
the four-fold test, namely: (1) whether the alleged employer has the power of selection and engagement of an
employee; (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.57 Of the four,
the control test is the most important element.
A review of the circumstances surrounding the case reveals that petitioners are employees of MWSS. Despite the
obvious attempt of MWSS to categorize petitioners as mere service providers, not employees, by entering into contracts
for services, its actuations show that they are its employees, pure and simple. MWSS wielded its power of selection
when it contracted with the individual petitioners, undertaking separate contracts or agreements. The same goes true
for the power to dismiss. Although termed as causes for termination of the Agreement, a review of the same shows that
the grounds indicated therein can similarly be grounds for termination of employment.
Under the Agreement, MWSS may terminate it if the "Collector-Contractor" does or fails to do any of the following:
Article VII – Duration, Termination and Penal Clauses.
....
(a) Fails to collect at least eighty percent (80%) of bills issued within three (3) months from commencement of this
Agreement or ninety percent (90%) within six (6) months after effectivity of this Agreement;
(b) Erases, alters, or changes any figure on the bills or remittance receipt for purposes of defrauding either the
concessioner or the MWSS. In case of termination of his services for any irregularity, there shall be no prejudice against
any criminal action for which he may be liable;
(c) Is discourteous, dishonest, arrogant or his conduct is inimial [sic] to the good name or image of the MWSS;
(d) Fails to remit collections daily or to return uncollected bills daily; and
(e) Fails to comply with any of the undertakings as provided for in this Agreement, and the Manual of Procedures
mentioned in Article II hereof. 58 (Emphasis Supplied)
On the other hand, the Labor Code enumerates the just causes for termination of employment, thus:

65
Art.282. Termination by Employer. – An employer may terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in
connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of
his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Obviously, failure to collect the payments of customers or remit the collections constitutes neglect of duty. Making
erasures, alterations or changing of figures in the fees or collection receipts amounts to fraud. Lack of courtesy,
dishonesty and arrogance are practically the same as misconduct.
On the issue of remuneration, MWSS claims that the compensation received by petitioners does not fall under the
definition of wages as provided in Section 2(i) of P.D. 1146,59 which is "the basic pay or salary received by an employee,
pursuant to his employment appointments, excluding per diems, bonuses, overtime pay and allowances;" thus
petitioners are not its employees. This assertion, however, simply begs the question. The provision is a simple statement
of meaning, operating on the a priori premise or presumption that the recipient is already classified as an employee, and
does not lay down any basis or standard for determining who are employees and who are not.
On the other hand, relevant and appropriate is the definition of wages in the Labor Code, namely, that it is the
remuneration, however designated, for work done or to be done, or for services rendered or to be rendered.60 The
"commissions" due petitioners were based on the bills collected as per the schedule indicated in
the Agreement.61 Significantly, MWSS granted petitioners benefits usually given to employees, to wit: COLA, meal,
emergency, and traveling allowances, hazard pay, cash gift, and other bonuses.62 In an unabashed bid to claim credit for
itself, MWSS professes that these additional benefits were its acts of benevolence and generosity.63 We are not
impressed.
Petitioners rendered services to MWSS for which they were paid and given similar benefits due the other employees of
MWSS. It is hard to imagine that MWSS was simply moved by the spirit of benevolence and generosity when it granted
liberal benefits to petitioners. More so since MWSS is a government owned and controlled corporation created for the
"proper operation and maintenance of waterworks system to insure an uninterrupted and adequate supply and
distribution of potable water for domestic and other purposes and the proper operation and maintenance of sewerage
systems."64 Its main function is to provide basic services to the public. The disposition of MWSS’ income is limited to the
payment of its contractual and statutory obligations, expansion and development, and for the enhancement of its
efficient operation.65 It was not in a position to distribute hard-earned income of the State merely to give expression to
its supposed altruistic impulse, or to disburse funds not otherwise authorized by law or its charter. If MWSS was
impelled by some force to give the benefits to petitioners, it must have been the force of good business sense.
Obviously, the additional benefits were granted with the same motivation as good managers anywhere else have—to
foster a good working relationship with the bill-collectors and incentivize them to raise the high level of their
performance even higher.
Now the aspect of control. MWSS makes an issue out of the proviso in the Agreement that specifically denies the
existence of employer-employee relationship between it and petitioners. It is axiomatic that the existence of an
employer-employee relationship cannot be negated by expressly repudiating it in an agreement and providing therein
that the employee is "not an MWSS employee"66 when the terms of the agreement and the 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.67
In addition, the control test merely calls for the existence of the right to control, and not the exercise thereof. It is not
essential for the employer to actually supervise the performance of duties of the employee, it is enough that the former
has a right to wield the power.68 While petitioners were contract-collectors of MWSS, they were under the latter’s
direction as to where and how to perform their collection and were even subject to disciplinary measures. Trainings
were in fact conducted to ensure that petitioners are conversant of the procedures of the MWSS.
Contrary to MWSS’ assertion that petitioners were "free to adopt (their) own method/strategy in the matter of
collection",69 the Agreement clearly provided that the procedure and/or manner of the collection of bills to be followed
shall be in accordance with the provisions of the Manual of Procedures. Art. VI of the Agreement states:
Art. II - Procedure of Collection
The procedure and/or manner of the collection of bills to be followed shall be in accordance with Provisions of the
Manual of Procedures adopted on November 1, 1968, which is made an integral part of this Agreement as Annex "A." 70

66
Other manifestations of control are evident from the records. The power to transfer or reassign employees is a
management prerogative exclusively enjoyed by employers. In this case, MWSS had free reign over the transfer of bill
collectors from one branch to another.71 MWSS also monitored the performance of the petitioners and determined their
efficiency ratings.72
MWSS contends that petitioners were free to engage in other occupations and were not limited by
the Agreement. Suffice it to say, however, that the control measures installed by MWSS were restrictive enough to limit
or even render illusory the other employment options of petitioners as their tasks took up most of their time, they being
required to report and remit to MWSS almost twice daily. Interestingly in that regard, under the Agreement petitioners
were "allowed" to render overtime work, and were given additional "incentive commission" for work so rendered as
long as the same was authorized.73 Verily, the need to secure MWSS’ authorization before petitioners can render
overtime work debunks its claim that they were allowed to work as and when they please. All these indicate that MWSS
controlled the working hours of petitioners.
Furthermore, petitioners did not have their own offices nor their own supplies and equipment. MWSS provides them
with company stationeries, office space and equipment.74 Likewise, MWSS comported itself as the employer of
petitioners, providing them with I.D.s. and certifications which declared them as employees of MWSS.75 It also deducted
and remitted petitioners’ withholding taxes and Medicare contributions.76
Presaging and lending precedental lift to the present adjudication is the recent ruling in Manila Water Company, Inc. v.
Peña.77 In that case, Manila Water Company (Manila Water), a concessionaire of MWSS, individually hired some of the
former MWSS bill collectors to perform collection services for three (3) months. Subsequently, the bill collectors formed
a corporation, Association Collectors Group, Inc. (ACGI) which was contracted by Manila Water to collect charges. Later,
Manila Water asked the collectors to transfer to a newly formed corporation, First Classic Courier Services. Manila Water
later terminated its contract with ACGI, as a result of which collectors who opted to remain with ACGI became
unemployed. These bill collectors filed a complaint for illegal dismissal and money claims against Manila Water, claiming
that they were its employees since all the methods and procedures of their collection were controlled by the latter. On
the other hand, Manila Water contended that the bill collectors were employees of AGCI, an independent contractor.78
The Court ruled that the bill collectors were regular employees of Manila Water, debunking the latter’s claim that they
worked for an independent contractor corporation, thus:
First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials, to qualify as an independent contractor. While it has an authorized capital stock of
₱1,000,000.00, only ₱62,500.00 is actually paid-in, which cannot be considered substantial capitalization. The 121
collectors subscribed to four shares each and paid only the amount of ₱625.00 in order to comply with the incorporation
requirements. Further, private respondents reported daily to the branch office of the petitioner because ACGI has no
office or work premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Peña.
Moreover, in dealing with the consumers, private respondents used the receipts and identification cards issued by
petitioner.
Second, the work of the private respondents was directly related to the principal business or operation of the petitioner.
Being in the business of providing water to the consumers in the East Zone, the collection of the charges therefor by
private respondents for the petitioner can only be categorized as clearly related to, and in the pursuit of the latter’s
business.
Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according to
its own manner and method, free from the control and supervision of its principal, petitioner. Prior to private
respondents’ alleged employment with ACGI, they were already working for petitioner, subject to its rules and
regulations in regard to the manner and method of performing their tasks. This form of control and supervision never
changed although they were already under the seeming employ of ACGI. Petitioner issued memoranda regarding the
billing methods and distribution of books to the collectors; it required private respondents to report daily and to remit
their collections on the same day to the branch office or to deposit them with Bank of the Philippine Islands; it
monitored strictly their attendance as when a collector cannot perform his daily collection, he must notify petitioner or
the branch office in the morning of the day that he will be absent; and although it was ACGI which ultimately disciplined
private respondents, the penalty to be imposed was dictated by petitioner as shown in the letters it sent to ACGI
specifying the penalties to be meted on the erring private respondents. These are indications that ACGI was not left
alone in the supervision and control of its alleged employees. Consequently, it can be concluded that ACGI was not an
independent contractor since it did not carry a distinct business free from the control and supervision of petitioner.79
Even under the "four-fold test", the bill collectors proved to be employees of Manila Water. Thus, the Court held that:
Even the "four-fold test" will show that petitioner is the employer of private respondents. The elements to determine
the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of

67
wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct. 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 it.
We agree with the Labor Arbiter that in the three stages of private respondents’ services with the petitioner, i.e., (1)
from August 1, 1997 to August 31, 1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December 1,
1997 to February 8, 1999, the latter exercised control and supervision over the formers’ conduct.
Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only
temporary and done to accommodate their request to be absorbed since petitioner was still undergoing a transition
period. It was only when its business became settled that petitioner employed private respondents for a fixed term of
three months.
Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages in
the form of commission, subjecting them to its rules and imposing punishment in case of breach thereof, and controlling
not only the end result but the manner of achieving the same as well, an employment relationship existed between
them.
Notably, private respondents performed activities which were necessary or desirable to its principal trade or business.
Thus, they were regular employees of petitioner, regardless of whether the engagement was merely an accommodation
of their request….80 (Emphasis Ours)
In fine, the Court found that the so-called independent contractor did not have substantial capitalization or investment
in the form of tools, equipment, machineries, work premises and other material to qualify as an independent contractor.
Moreover, respondents therein reported daily to the Manila Water branch office and dealt with the consumers through
receipts and I.D.s. issued by the latter. Likewise, their work was directly related to and in the pursuit of Manila Water’s
principal business. More importantly, the Court noted that ACGI did not carry a distinct business free from the control
and supervision of Manila Water.
The similarity between this case and the instant petition cannot be denied. For one, the respondents in said case are
petitioners in this case.81 Second, the work set-up was essentially the same. While the bill collectors were individually
hired, or eventually engaged through ACGI, they were under the direct control and supervision of the concessionaire,
much like the arrangement between herein petitioners and MWSS. Third, they performed the same vital function of
collection in both cases. Fourth, they worked exclusively for their employers. Hence, the bill collectors in the Manila
Water case were declared employees of Manila Water despite the existence of a sham labor contractor. In the present
case, petitioners were directly and individually hired by MWSS, the latter not resoting to the intermediary labor
contractor artifice, but a mere a scrap of paper impudently declaring the bill collectors to be not employees of MWSS.
With greater reason, therefore, should the actuality of the employer-employee relationship between MWSS and
petitioners be recognized.
The CSC, as well as the Court of Appeals, makes much of CSC Memorandum Circular No. 38, Series of 1993, which
distinguishes between contract of services/job services and contractual appointment. The Circular provides:
Contract of Services and Job Orders are different from Contractual appointment and Plantilla appointment of casual
employees, respectively, which are required to be submitted to CSC for approval.
Contracts of Services and Job Orders refer to employment described as follows:
1. The contract covers lump sum work or services such as janitorial, security or consultancy services where no employer-
employee relationship exist;
2. The job order covers piece of work or intermittent job of short duration not exceeding six months on a daily basis;
3. The contract of services and job orders are not covered by Civil Service Law, Rules and Regulations; [sic] but covered
by COA rules;
4. The employees involved in the contracts or job orders do not enjoy the benefits enjoined by government employees,
such as PERA, COLA and RATA.
5. As the services rendered under contracts of services and job orders are not considered government services, they do
not have to be submitted to the Civil Service Commission for approval.82
Clinging to its tenuous denial of petitioners’ employee status, the CSC avers that contractual employees are those with
contractual appointment submitted to and attested by the CSC, unlike petitioners who failed to show that their
appointments were duly attested by the CSC. The Court recognizes the authority of the CSC in promulgating circulars
and memoranda concerning the civil service sector in line with its function as the central personnel agency of the
Government.83 Nevertheless, it cannot turn a blind eye to a rather haphazard application and interpretation by the CSC
of its own issuance, such as in this case.
A careful review of the above-quoted circular shows that the relationship defined by the Agreement cannot fall within
the purview of contract of services or job orders. Payments made by MWSS’ subscribers are the lifeblood of the

68
company. Viewed in that context the work rendered by the petitioners is essential to the company’s survival and
growth. Alongside its public service thrust, the MWSS is an income-generating entity for the Government. It relies for
the most part on the bill collections in order to sustain its operations. The task of collecting payments for the water
supplied by the MWSS to its consumers does not deserve to be compared with mere janitorial, security or even
consultancy work. It is not intermittent and seasonal, but rather continuous and increasing by reason of its indisputable
essentiality. To lump petitioners with the run-of-the-mill service providers is to ignore the vital role they perform for the
MWSS. Rightly so, as clearly indicated in the circular, employees involved in the contracts or job orders do not enjoy the
benefits enjoyed by the petitioners which are the same benefits given to government employees.
Petitioners are indeed regular employees of the MWSS. The primary standard of determining regular employment is the
reasonable connection between the particular activity performed by the employee in relation to the usual business or
trade of the employer. The connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Likewise, the repeated and continuing need for
the performance of the job has been deemed sufficient evidence of the necessity, if not indispensability of the activity to
the business.84 Some of the petitioners had rendered more than two decades of service to the MWSS. The continuous
and repeated rehiring of these bill collectors indicate the necessity and desirability of their services, as well as the
importance of the role of bill collectors in the MWSS.
We agree with the CSC when it stated that the authority of government agencies to contract services is an authority
recognized under civil service rules.85 However, said authority cannot be used to circumvent the laws and deprive
employees of such agencies from receiving what is due them.
The CSC goes further to say that petitioners were unable to present proof that their appointments were contractual in
nature and submitted to the CSC for its approval, and that submission to and approval of the CSC are important as these
show that their services had been credited as government service.86 The point is of no moment. Petitioners were able to
attach only two of such Agreements which bore the stamp of approval by the CSC and these are simply inadequate to
prove that the other agreements were similarly approved. Even petitioners admit that subsequently
such Agreements were no longer submitted to the CSC for its approval. Still, the failure to submit the documents for
approval of the CSC cannot militate against the existence of employer-employee relationship between petitioners and
MWSS. MWSS cannot raise its own inaction to buttress its adverse position.
MWSS committed itself to pay severance and terminal leave pay to its regular employees.87 The guidelines88 thereof
states that regular employees who have rendered at least a year of service and not eligible for retirement are entitled to
severance pay equivalent to one (1) month basic pay for every full year of service.89 In view of the Court’s finding that
petitioners were employees of MWSS, the corresponding severance pay, in accordance with the guidelines, should be
given to them. Terminal leave pay are likewise due petitioners, provided they meet the requirements therefor.
However, petitioners in this case cannot avail of retirement benefits from the GSIS. When their services were engaged
by MWSS, they were not reported as its employees and hence no deductions were made against them for purpose of
the GSIS contributions. It would be unjust to grant petitioners retirement benefits when there was no remittance of the
employees’ or the employer’s share of contributions.
The case of Chua v. Civil Service Commission90 relied upon by petitioners is not in point. There was no question that Chua
was an employee, specifically a contractual/project employee of the National Irrigation Administration (NIA). The CSC’s
denial of her request for early retirement benefits was based on the CSC’s conclusion that contractual employees are
not covered by the Early Retirement Law.91 This Court held that co-terminus employees who have rendered years of
continuous service such as Chua -who was continuously hired and rehired for four (4) successive times in a span of
fifteen (15) years-should be included in the coverage of the Early Retirement Law as long as they comply with CSC
regulations promulgated for such purpose. Underlying this grant of retirement benefits to Chua is the finding that her
work with the NIA was recognized and accredited by the CSC as government service, that she paid her GSIS contributions
throughout her service, and the fact that she applied for the benefit within the prescribed period.92
The differences between Chua and petitioners are readily apparent. The ruling in Chua concerns claims based on the
Early Retirement Law. On the other hand, this case involves bill collectors who were hired by virtue of individual
agreements, and who are now claiming payment of retirement, separation and terminal leave benefits. Petitioners’
services, admittedly, were not credited/recognized by the CSC. Likewise, the parties still dispute the nature of their
relationship when petitioners made the claim for the benefits, unlike in the case of Chua where there was no question
as to her status as an employee of the NIA. Moreover, unlike Chua, petitioners in this case did not give any contribution
for GSIS coverage, especially since retirement benefits come from the monthly contributions of GSIS members.
Petitioner’s claim for damages and attorney’s fees are similarly untenable. MWSS cannot be made liable for moral
damages for the "serious moral disturbance"93 petitioners allegedly suffered as a result of the denial of the requested
benefits because it was merely following the earlier resolution94 of the CSC. MWSS’ adherence to the position of the CSC

69
is but logical. It is after all, the central personnel agency of the government, and its resolution at the time was valid and
binding on MWSS.
WHEREFORE, the petition is GRANTED IN PART. The D E C I S I O N of the Court of Appeals in C.A.–G.R. SP No. 55263, as
well as the Civil Service Commission’s Resolutions Nos. 991384 and 992074, are hereby REVERSED and SET ASIDE. MWSS
is ordered to pay terminal leave pay and separation pay and/or severance pay to each of herein petitioners on the basis
of remunerations/commissions, allowances and bonuses each were actually receiving at the time of termination of their
employment as contract collectors of MWSS. Let the case be remanded to the Civil Service Commission for the
computation of the above awards and the appropriate disposition in accordance with the pronouncements in this D E C I
S I O N.
No pronouncement as to costs.
SO ORDERED.

70
 13. vG.R. No. 138254 July 30, 2004
ANGELITO L. LAZARO, Proprietor of Royal Star Marketing, petitioner,
vs.
SOCIAL SECURITY COMMISSION, ROSALINA LAUDATO, SOCIAL SECURITY SYSTEM and THE HONORABLE COURT OF
APPEALS, respondents.

DECISION

TINGA, J.:
Before us is a Petition for Review under Rule 45, assailing the Decision1 of the Court of Appeals Fifteenth Division2 in CA-
G.R. Sp. No. 40956, promulgated on 20 November 1998, which affirmed two rulings of the Social Security Commission
("SSC") dated 8 November 1995 and 24 April 1996.
Private respondent Rosalina M. Laudato ("Laudato") filed a petition before the SSC for social security coverage and
remittance of unpaid monthly social security contributions against her three (3) employers. Among the respondents was
herein petitioner Angelito L. Lazaro ("Lazaro"), proprietor of Royal Star Marketing ("Royal Star"), which is engaged in the
business of selling home appliances.3 Laudato alleged that despite her employment as sales supervisor of the sales
agents for Royal Star from April of 1979 to March of 1986, Lazaro had failed during the said period, to report her to the
SSC for compulsory coverage or remit Laudato's social security contributions.4
Lazaro denied that Laudato was a sales supervisor of Royal Star, averring instead that she was a mere sales agent whom
he paid purely on commission basis. Lazaro also maintained that Laudato was not subjected to definite hours and
conditions of work. As such, Laudato could not be deemed an employee of Royal Star.5
After the parties submitted their respective position papers, the SSC promulgated a Resolution6 dated 8 November 1995
ruling in favor of Laudato.7 Applying the "control test," it held that Laudato was an employee of Royal Star, and ordered
Royal Star to pay the unremitted social security contributions of Laudato in the amount of Five Thousand Seven Pesos
and Thirty Five Centavos (P5,007.35), together with the penalties totaling Twenty Two Thousand Two Hundred Eighteen
Pesos and Fifty Four Centavos (P22,218.54). In addition, Royal Star was made liable to pay damages to the SSC in the
amount of Fifteen Thousand Six Hundred Eighty Pesos and Seven Centavos (P15,680.07) for not reporting Laudato for
social security coverage, pursuant to Section 24 of the Social Security Law.8
After Lazaro's Motion for Reconsideration before the SSC was denied,9 Lazaro filed a Petition for Review with the Court of
Appeals. Lazaro reiterated that Laudato was merely a sales agent who was paid purely on commission basis, not
included in the company payroll, and who neither observed regular working hours nor accomplished time cards.
In its assailed Decision, the Court of Appeals noted that Lazaro's arguments were a reprise of those already presented
before the SSC.10 Moreover, Lazaro had not come forward with particulars and specifics in his petition to show that the
Commission's ruling is not supported by substantial evidence.11 Thus, the appellate court affirmed the finding that
Laudato was an employee of Royal Star, and hence entitled to coverage under the Social Security Law.
Before this Court, Lazaro again insists that Laudato was not qualified for social security coverage, as she was not an
employee of Royal Star, her income dependent on a generation of sales and based on commissions.12 It is argued that
Royal Star had no control over Laudato's activities, and that under the so-called "control test," Laudato could not be
deemed an employee.13
It is an accepted doctrine that for the purposes of coverage under the Social Security Act, the determination of
employer-employee relationship warrants the application of the "control test," that is, whether the employer controls or
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 accomplished.14 The SSC, as sustained by the Court of Appeals, applying the control test
found that Laudato was an employee of Royal Star. We find no reversible error.
Lazaro's arguments are nothing more but a mere reiteration of arguments unsuccessfully posed before two bodies: the
SSC and the Court of Appeals. They likewise put to issue factual questions already passed upon twice below, rather than
questions of law appropriate for review under a Rule 45 petition. The determination of an employer-employee
relationship depends heavily on the particular factual circumstances attending the professional interaction of the
parties. The Court is not a trier of facts15 and accords great weight to the factual findings of lower courts or agencies
whose function is to resolve factual matters.16
Lazaro's arguments may be dispensed with by applying precedents. Suffice it to say, the fact that Laudato was paid by
way of commission does not preclude the establishment of an employer-employee relationship. In Grepalife v.
Judico,17 the Court upheld the existence of an employer-employee relationship between the insurance company and its

71
agents, despite the fact that the compensation that the agents on commission received was not paid by the company
but by the investor or the person insured.18 The relevant factor remains, as stated earlier, whether the "employer"
controls or has reserved the right to control the "employee" not only as to the result of the work to be done but also as
to the means and methods by which the same is to be accomplished.19
Neither does it follow that a person who does not observe normal hours of work cannot be deemed an employee.
In Cosmopolitan Funeral Homes, Inc. v. Maalat,20 the employer similarly denied the existence of an employer-employee
relationship, as the claimant according to it, was a "supervisor on commission basis" who did not observe normal hours
of work. This Court declared that there was an employer-employee relationship, noting that "[the] supervisor, although
compensated on commission basis, [is] exempt from the observance of normal hours of work for his compensation is
measured by the number of sales he makes."21
It should also be emphasized that the SSC, also as upheld by the Court of Appeals, found that Laudato was a sales
supervisor and not a mere agent.22 As such, Laudato oversaw and supervised the sales agents of the company, and thus
was subject to the control of management as to how she implements its policies and its end results. We are disinclined
to reverse this finding, in the absence of countervailing evidence from Lazaro and also in light of the fact that Laudato's
calling cards from Royal Star indicate that she is indeed a sales supervisor.
The finding of the SSC that Laudato was an employee of Royal Star is supported by substantial evidence. The SSC
examined the cash vouchers issued by Royal Star to Laudato,23 calling cards of Royal Star denominating Laudato as a
"Sales Supervisor" of the company,24 and Certificates of Appreciation issued by Royal Star to Laudato in recognition of
her unselfish and loyal efforts in promoting the company.25 On the other hand, Lazaro has failed to present any
convincing contrary evidence, relying instead on his bare assertions. The Court of Appeals correctly ruled that petitioner
has not sufficiently shown that the SSC's ruling was not supported by substantial evidence.
A piece of documentary evidence appreciated by the SSC is Memorandum dated 3 May 1980 of Teresita Lazaro, General
Manager of Royal Star, directing that no commissions were to be given on all "main office" sales from walk-in customers
and enjoining salesmen and sales supervisors to observe this new policy.26 The Memorandum evinces the fact that,
contrary to Lazaro's claim, Royal Star exercised control over its sales supervisors or agents such as Laudato as to the
means and methods through which these personnel performed their work.
Finally, Lazaro invokes our ruling in the 1987 case of Social Security System v. Court of Appeals27 that a person who works
for another at his own pleasure, subject to definite hours or conditions of work, and is compensated according to the
result of his effort is not an employee.28 The citation is odd for Lazaro to rely upon, considering that in the cited case, the
Court affirmed the employee-employer relationship between a sales agent and the cigarette firm whose products he
sold.29 Perhaps Lazaro meant instead to cite our 1969 ruling in the similarly-titled case of Social Security System v. Court
of Appeals,30 also cited in the later eponymous ruling, whose disposition is more in accord with Lazaro's argument.
Yet, the circumstances in the 1969 case are very different from those at bar. Ruling on the question whether jockeys
were considered employees of the Manila Jockey Club, the Court noted that the jockeys were actually subjected to the
control of the racing steward, whose authority in turn was defined by the Games and Amusements Board.31 Moreover,
the jockey's choice as to which horse to mount was subject to mutual agreement between the horse owner and the
jockey, and beyond the control of the race club.32 In the case at bar, there is no showing that Royal Star was similarly
precluded from exerting control or interference over the manner by which Laudato performed her duties. On the
contrary, substantial evidence as found by the SSC and the Court of Appeals have established the element of control
determinative of an employer-employee relationship. We affirm without hesitation.
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of Appeals dated 20 November 1998 is
AFFIRMED. Costs against petitioner.
SO ORDERED.

72
 14. G.R. No. 127598 February 22, 2000
MANILA ELECTRIC COMPANY, petitioner,
vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and WORKERS ASSOCIATION
(MEWA), respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor dated August 19, 1996 and
December 28, 1996 are set aside to the extent set forth above. The parties are directed to execute a Collective
Bargaining Agreement incorporating the terms and conditions contained in the unaffected portions of the Secretary of
Labor's orders of August 19, 1996 and December 28, 1996, and the modifications set forth above. The retirement fund
issue is remanded to the Secretary of Labor for reception of evidence and determination of the legal personality of the
MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:
January 27, 1999 decision Secretary's resolution

Wages - P1,900.00 for 1995-96 P2,200.00

X'mas bonus - modified to one month 2 months

Retirees - remanded to the Secretary granted

Loan to coops - denied granted

GHSIP, HMP and

Housing loans - granted up to P60,000.00 granted

Signing bonus - denied granted

Union leave - 40 days (typo error) 30 days

High voltage/pole - not apply to those who are members of a team

not exposed to the risk

Collectors - no need for cash bond, no

need to reduce quota and MAPL

CBU - exclude confidential employees include

Union security - maintenance of membership closed shop

Contracting out - no need to consult union consult first

All benefits - existing terms and conditions all terms

Retroactivity - Dec. 28, 1996-Dec. 27, 199(9) from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed a motion for
intervention and a motion for reconsideration of the said Decision. A separate intervention was likewise made by the
supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona fide legal interest in the outcome of the
case.3 The Court required the "proper parties" to file a comment to the three motions for reconsideration but the
Solicitor-General asked that he be excused from filing the comment because the "petition filed in the instant case was
granted" by the Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal Seeking Immediate
Reconsideration" was also filed by the alleged newly elected president of the Union.5 Other subsequent pleadings were
filed by the parties and intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the Court in the January 27, 1999
decision. No new arguments were presented for consideration of the Court. Nonetheless, certain matters will be
considered herein, particularly those involving the amount of wages and the retroactivity of the Collective Bargaining
Agreement (CBA) arbitral awards.

73
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed, it would
simply pass the cost covering such increase to the consumers through an increase in the rate of electricity. This is a non
sequitur. The Court cannot be threatened with such a misleading argument. An increase in the prices of electric current
needs the approval of the appropriate regulatory government agency and does not automatically result from a mere
increase in the wages of petitioner's employees. Besides, this argument presupposes that petitioner is capable of
meeting a wage increase. The All Asia Capital report upon which the Union relies to support its position regarding the
wage issue cannot be an accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule 130
Rules of Evidence provides:
Commercial lists and the like. — Evidence of statements of matters of interest to persons engaged in an occupation
contained in a list, register, periodical, or other published compilation is admissible as tending to prove the truth of any
relevant matter so stated if that compilation is published for use by persons engaged in that occupation and is generally
used and relied upon by them therein.
Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that compilation
is published for use by persons engaged in that occupation and is generally used and relied upon by them therein." As
correctly held in our Decision dated January 27, 1999, the cited report is a mere newspaper account and not even a
commercial list. At most, it is but an analysis or opinion which carries no persuasive weight for purposes of this case as
no sufficient figures to support it were presented. Neither did anybody testify to its accuracy. It cannot be said that
businessmen generally rely on news items such as this in their occupation. Besides, no evidence was presented that the
publication was regularly prepared by a person in touch with the market and that it is generally regarded as trustworthy
and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible.6 In the same manner,
newspapers containing stock quotations are not admissible in evidence when the source of the reports is
available.7 With more reason, mere analyses or projections of such reports cannot be admitted. In particular, the source
of the report in this case can be easily made available considering that the same is necessary for compliance with certain
governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion.8 An estimate by the All
Asia financial analyst stated that petitioner's net operating income for the same year was about P5.7 billion, a figure
which the Union relies on to support its claim. Assuming without admitting the truth thereof, the figure is higher than
the P4.171 billion allegedly suggested by petitioner as its projected net operating income. The P5.7 billion which was the
Secretary's basis for granting the P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It
would be proper then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For
1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for 1993; further
reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for the years 1992-1994 are
P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the P2,000.00 increase for the two-
year period awarded to the rank-and-file is much higher than the highest increase granted to supervisory employees.9 As
mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision the factors that
should affect wage determination" because collective bargaining disputes particularly those affecting the national
interest and public service "requires due consideration and proper balancing of the interests of the parties to the
dispute and of those who might be affected by the dispute."10 The Court takes judicial notice that the new amounts
granted herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-file
employees within the community. It should be noted that the relations between labor and capital is impressed with
public interest which must yield to the common good.11 Neither party should act oppressively against the other or
impair the interest or convenience of the public.12 Besides, matters of salary increases are part of management
prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the renegotiation of
the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned. When the Secretary of Labor
assumed jurisdiction and granted the arbitral awards, there was no question that these arbitral awards were to be given
retroactive effect. However, the parties dispute the reckoning period when retroaction shall commence. Petitioner
claims that the award should retroact only from such time that the Secretary of Labor rendered the award, invoking the
1995 decision in Pier 8 case14 where the Court, citing Union of Filipino Employees v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the parties was promulgated on June 5, 1989, the
expiry date of the past CBA. Based on the provision of Section 253-A, its retroactivity should be agreed upon by the
parties. But since no agreement to that effect was made, public respondent did not abuse its discretion in giving the said
CBA a prospective effect. The action of the public respondent is within the ambit of its authority vested by existing law.
On the other hand, the Union argues that the award should retroact to such time granted by the Secretary, citing the
1993 decision of St. Luke's.16

74
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration of the previous CBA,
contrary to the position of petitioner. Under the circumstances of the case, Article 253-A cannot be properly applied to
herein case. As correctly stated by public respondent in his assailed Order of April 12, 1991 dismissing petitioner's
Motion for Reconsideration —
Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress that the provision of law
invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by and between the parties, and not
arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of arbitral awards
issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent
is deemed vested with plenary and discretionary powers to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations between management and
the union. The Secretary of Labor assumed jurisdiction and ordered the retroaction of the CBA to the date of expiration
of the previous CBA. As in this case, it was alleged that the Secretary of Labor gravely abused its discretion in making his
award retroactive. In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting retroactive of the effectivity of arbitral awards issued
by the Secretary of Labor pursuant to Article 263(g) of the Labor Code, such as herein involved, public respondent is
deemed vested with plenary and discretionary powers to determine the effectivity thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years counted from
December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a three-year period. Labor laws are
silent as to when an arbitral award in a labor dispute where the Secretary had assumed jurisdiction by virtue of Article
263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six months after the expiration of the
existing CBA retroacts to the day immediately following such date and if agreed thereafter, the effectivity depends on
the agreement of the parties.18 On the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that
granted not by virtue of the mutual agreement of the parties but by intervention of the government. Despite the silence
of the law, the Court rules herein that CBA arbitral awards granted after six months from the expiration of the last CBA
shall retroact to such time agreed upon by both employer and the employees or their union. Absent such an agreement
as to retroactivity, the award shall retroact to the first day after the six-month period following the expiration of the last
day of the CBA should there be one. In the absence of a CBA, the Secretary's determination of the date of retroactivity
as part of his discretionary powers over arbitral awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by the parties
because it requires the interference and imposing power of the State thru the Secretary of Labor when he assumes
jurisdiction. However, the arbitral award can be considered as an approximation of a collective bargaining agreement
which would otherwise have been entered into by the parties.19 The terms or periods set forth in Article 253-A pertains
explicitly to a CBA. But there is nothing that would prevent its application by analogy to an arbitral award by the
Secretary considering the absence of an applicable law. Under Article 253-A: "(I)f any such agreement is entered into
beyond six months, the parties shall agree on the duration of retroactivity thereof." In other words, the law
contemplates retroactivity whether the agreement be entered into before or after the said six-month period. The
agreement of the parties need not be categorically stated for their acts may be considered in determining the duration
of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of the Board and its President
addressed to their stockholders, which states that the CBA "for the rank-and-file employees covering the period
December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as indicative of petitioner's recognition that
the CBA award covers the said period. Earlier, petitioner's negotiating panel transmitted to the Union a copy of its
proposed CBA covering the same period inclusive.21 In addition, petitioner does not dispute the allegation that in the
past CBA arbitral awards, the Secretary granted retroactivity commencing from the period immediately following the
last day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the subject CBA
awards to a different date. The period is herein set at two (2) years from December 1, 1995 to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that it is no
different from housing loans granted by the employer. The award of loans for housing is justified because it pertains to a
basic necessity of life. It is part of a privilege recognized by the employer and allowed by law. In contrast, providing seed
money for the establishment of the employee's cooperative is a matter in which the employer has no business interest
or legal obligation. Courts should not be utilized as a tool to compel any person to grant loans to another nor to force
parties to undertake an obligation without justification. On the contrary, it is the government that has the obligation to
render financial assistance to cooperatives and the Cooperative Code does not make it an obligation of the employer or
any private individual.22

75
Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any confusion, it is
herein declared that the union leave is only thirty (30) days as granted by the Secretary of Labor and affirmed in the
Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6) months or more
has been rejected by the Court. Suffice it to say that the employer is allowed to contract out services for six months or
more. However, a line must be drawn between management prerogatives regarding business operations per se and
those which affect the rights of employees, and in treating the latter, the employer should see to it that its employees
are at least properly informed of its decision or modes of action in order to attain a harmonious labor-management
relationship and enlighten the workers concerning their rights.23 Hiring of workers is within the employer's inherent
freedom to regulate and is a valid exercise of its management prerogative subject only to special laws and agreements
on the matter and the fair standards of justice.24 The management cannot be denied the faculty of promoting efficiency
and attaining economy by a study of what units are essential for its operation. It has the ultimate determination of
whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual
consultation, eventually deference is to be paid to what management decides.25 Contracting out of services is an
exercise of business judgment or management prerogative.26 Absent proof that management acted in a malicious or
arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.27 As mentioned in the
January 27, 1999 Decision, the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate
limitations, such that the employer must be motivated by good faith and the contracting out should not be resorted to
circumvent the law or must not have been the result of malicious or arbitrary actions.29 These are matters that may be
categorically determined only when an actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is MODIFIED as follows:
(1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997; and (2) the award of wage is
increased from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to Two Thousand Pesos
(P2,000.00) for the years 1995 and 1996. This Resolution is subject to the monetary advances granted by petitioner to its
rank-and-file employees during the pendency of this case assuming such advances had actually been distributed to
them. The assailed Decision is AFFIRMED in all other respects.1âwphi1.nêt
SO ORDERED.

76
 15. G.R. Nos. 100376-77 June 17, 1994
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, GODOFREDO MORILLO, JR., SUNDAY BACEA, ALFREDO COS and ROGELIO
VILLANUEVA, respondents.
Vicente T. Cuison for petitioner.
Tamondong, Wong, Cos, & Associates for private respondent.

PADILLA, J.:
This petition for review on certiorari (here treated as a petition for certiorari under Rule 65, Rules of Court) seeks to
reverse and set aside the Resolution dated 11 June 1991 of respondent National Labor Relations Commission ("NLRC") in
NLRC NCR Case Nos. 00-09-03383-87 and 00-10-03562-87, denying petitioner’s motion for reconsideration, the
dispositive part of which reads:
Accordingly, the Bank’s motion for reconsideration is hereby denied. The responsible officers of the Bank and its counsel
are hereby warned, under pain of contempt, that we shall not tolerate their further delaying the execution of the
subject award. 1
Private respondents Godofredo Morillo, Sunday Bacea, Alfredo Cos and Rogelio Villanueva were hired as security guards
by Confidential Investigation and Security Corporation ("CISCOR") on 19 May 1981, 21 August 1984, 22 January 1985,
and 27 November 1985, respectively. In the course of their employment, private respondents were assigned to secure
the premises of CISCOR’s clients, among them, the herein petitioner, Development Bank of the Philippines ("DBP")
which, in turn, assigned private respondents to secure one of its properties or assets, the Riverside Mills Corporation.
On 11 August 1987, private respondent Villanueva resigned from CISCOR. On 15 August 1987, private respondents
Morillo, Bacea and Cos followed suit in resigning from CISCOR. Thereafter, private respondents claimed from CISCOR the
return of their cash bond and payment of their 13th month pay and service incentive leave pay. For failure of CISCOR to
grant their claims, private respondents Villanueva and Cos filed against CISCOR and its President/Manager Ernesto
Medina NLRC NCR Case No. 00-10-3562-87 on 13 October 1987, while private respondents Morillo and Bacea filed NLRC
NCR Case No. 00-09-3383-87 on 29 September 1987. In said two (2) cases, private respondents sought recovery of their
cash bond, payment of 13th month pay, and their five-day service incentive leave pay. The two (2) cases were
consolidated and assigned to Labor Arbiter Crescencio Iniego.
In their position paper filed on 23 November 1987, private respondents (as complainants) alleged that they tendered
their resignations in August 1987 upon the assurance of CISCOR that they would be paid the cash benefits due them. For
failure of CISCOR to comply, private respondents claimed violations committed by CISCOR and Medina, specifically, the
non-payment of their 13th month pay, five (5) day service incentive leave pay from the date of employment to the time
of their separation, non-refund of their cash bond, non-payment of legal holiday pay and rest day pay. On the other
hand, CISCOR and Medina in their position paper filed on 3 March 1988 admitted that private respondents were former
security guards of CISCOR. They added, however, that sometime in 1987, petitioner allegedly formed its own security
agency and pirated private respondents who tendered their voluntary resignations from CISCOR. Thereafter, when
private respondents sought from CISCOR the return of their cash bond deposit, payment of 13th month pay and service
incentive leave pay, CISCOR explained to private respondents that in view of the claim of petitioner that it incurred
losses when private respondents and their other co-security guards secured the premises of Riverside Mills Corporation,
private respondents, prior to the payment of their claims, were asked to first secure an individual/agency clearance from
petitioner to show that no losses were incurred while they were guarding Riverside Mills Corporation.
Instead of getting such clearance from the petitioner, private respondents secured their clearance from CISCOR’s
detachment commander. Hence, for failure to secure the required clearance, private respondents’ cash bond deposit,
their proportionate 13th month pay and service incentive leave pay were withheld to answer for liabilities incurred
while private respondents were guarding Riverside Mills Corporation.
On 10 March 1988, CISCOR filed a motion with leave to implead petitioner bank and averred therein that in view of its
contract with the petitioner whereby, for a certain service fee, CISCOR undertook to guard petitioner’s premises, both
CISCOR and petitioner, under the Labor Code, are jointly and severally liable to pay the salaries and other statutory
benefits due the private respondents, petitioner being an indispensable party to the case. On 11 March 1988, Labor
Arbiter Iniego issued an order granting the aforesaid motion and including petitioner as one of the respondents therein.
To this, private respondents filed their opposition and alleged, among others, that petitioner, not being an employer of
the private respondents, was not a proper, necessary or indispensable party to the case.
In answer, petitioner filed its position paper alleging therein that it was not made a respondent by the herein private
respondents in their complaint, and that none of the original parties to the case (private respondents and

77
CISCOR/Medina) interposed any claim against the petitioner. It further stated that it cannot be held liable to the claim of
private respondents because there was no failure on the part of CISCOR and Medina to pay said claims. If CISCOR had
apparently failed to pay private respondents’ claims, it was only due to the failure of private respondents to secure their
individual clearance of accountability or agency clearance that there were no losses incurred while they were guarding
Riverside Mills Corporation.
On 12 July 1988, the Labor Arbiter rendered a decision, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered ordering the respondents Confidential Investigation and Security
Corporation, Mr. Ernesto Medina and Development Bank of the Philippines to pay the complainants the corresponding
salary differential due them to be computed for the last three (3) years from the time they stopped working with the
respondents sometime in August 1987. Confidential Investigation and Security Corporation is further ordered to return
to the complainants their respective cash bond cited in this decision within a period of ten (10) days from receipt
hereof. 2
From the above decision, CISCOR and Medina appealed to the NLRC. Petitioner likewise filed its Motion for
Reconsideration/Appeal and prayed for the Labor Arbiter to modify his decision and make CISCOR and Medina solely
liable for the claims of private respondents, and to declare the award for salary differentials as null and void.
In its Resolution of 24 January 1991, the NLRC held the petitioner DBP, CISCOR and Medina, as jointly and severally
liable, the pertinent part of which reads:
WHEREFORE, the decision appealed from is hereby modified. All the respondents (Confidential Investigation and
Security Corporation, Ernesto Medina and the Development Bank of the Philippines) are hereby adjudged jointly and
severally liable to the admitted claims for 13th month pay, 5 days incentive leave, and refund of cash bond, and
accordingly, immediate execution is hereby directed against any of the aforesaid respondents without prejudice to their
having lawful recourse against each other.
Anent the award of wage differential and the claim for rest day and legal holiday pay, the same are hereby remanded to
the Arbitration Branch of origin for further hearing with the directive that it be completed in 20 days from the
Arbitration Branch’s receipt of this Order. 3
Hence, this petition for review on certiorari, with petitioner DBP raising the following issues:
1. Whether or not the DBP is really liable for any of the claims of private respondents;
2. Whether or not the NLRC (or the Labor Arbiter) correctly applied Article 106 of the Labor Code; and
3. Whether or not the wage differential, rest day and legal holiday pay could and should be adjudicated in this case.
The threshold and, in the ultimate analysis, the decisive issue raised by the present petition is whether petitioner was
correctly held jointly and severally liable, alongside CISCOR and Medina, for the payment of the private respondents’
salary differentials, 13th month pay, service incentive leave pay, rest day pay, legal holiday pay, and the refund of their
cash deposit.
Petitioner posits that it is not the employer of private respondents and should thus not be held liable for the latter’s
claims. In addition, it avers that it was not properly impleaded as it was CISCOR and Medina who filed the motion to
implead petitioner, and not the private respondents, as complainants therein. Petitioner even goes further by
countering that, assuming arguendo, it was the indirect employer of private respondents, Article 106 of the Labor
Code 4 cannot be applied to the present case as there was no failure on the part of CISCOR and Medina, as direct
employer, to pay the claims of private respondents, but only a failure on the part of the latter to present the proper
clearance to pave the way for the payment of the claims. It emphasizes that the term "fails" in Article 106 of the Labor
Code implies insolvency or unwillingness of the direct employer to pay, which cannot be said of CISCOR and Medina as
they have manifested their willingness to pay private respondents’ claims after they have presented proper clearance
from accountability.
We are not persuaded by petitioner’s arguments.
Petitioner’s interpretation of Article 106 of the Labor Code is quite misplaced. Nothing in said Article 106 indicates that
insolvency or unwillingness to pay by the contractor or direct employer is a prerequisite for the joint and several liability
of the principal or indirect employer. In fact, the rule is that in job contracting, the principal is jointly and severally liable
with the contractor. The statutory basis for this joint and several liability is set forth in Articles 107 5 and 109 6 in relation
to Article 106 of the Labor Code. 7 There is no doubt that private respondents are entitled to the cash benefits due them.
The petitioner is also, no doubt, liable to pay such benefits because the law mandates the joint and several liability of
the principal and the contractor for the protection of labor. In Eagle Security Agency, Inc. vs. NLRC, this Court, explaining
the aforesaid liability, held:
This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of
the provisions therein including the statutory minimum wage [Article 99, Labor Code]. The contractor is made liable by
virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the

78
contractor’s employees for purposes of paying the employees their wages should the contractor be unable to pay them.
This joint and several liability facilitates, if not guarantees, payment of the workers’ performance of any work, task, job
or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and
Article XIII Sec. 3]. 8
Neither may petitioner argue that it was not properly impleaded and hence, should not be made liable to the claims of
private respondents. On this matter, petitioner cannot be absolved from responsibility. We sustain respondent
Commission’s holding that:
Anent the Bank’s first issue, what we actually have here is a "Third-Party Complaint", defined by Section 12, Rule 6 of the
Rules of Court as "a claim that a defending party may, with leave of court, file against a person not a party to the action,
called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent’s
claim" (emphasis ours). Since Rule I, Section 3 of our 1986 Revised NLRC Rules adopts suppletorily the Rules of Court "in
the interest of expeditious labor justice and whenever practicable and convenient" with the Security Agency’s
impleading the Bank for indemnity and subrogation considering that the complainants worked with the Bank "to
safeguard their premises, properties and their person" (Record, p. 76), such a third-party complaint would therefore be
proper. That the bank has not disputed liability on the admitted claims, but professes merely subsidiary, instead of
solidary liability, we find its position here all the more, untenable. 9
Finally, petitioner submits that wage differential, rest day and legal holiday pay should not be adjudicated in this case.
The respondent Commission, however, observed:
Regarding the question of wage differential, we note that the complaint (Record, p. 1), as well as the complainants’
Position Paper (Record, pp. 5-10) do not mention about any wage differential claim. We do not therefore see any basis
with which we may, on sight, affirm the said award. We note though that complainants’ position paper save technical
arguments (that after all are not binding to us in this jurisdiction), sufficiently claims rest day and legal holiday pay,
claims that were not strongly refuted by respondents. Impressed, although not convincingly, that the award on wage
differential could have referred to the complainants’ claim for rest day and legal holiday pay, we therefore see the need
to have the said claims subjected to further hearing but for a limited period of 20 days. 10
We note that in the present case, there is no claim for wage differentials either in the complaints or in the position
paper filed by private respondents before the labor arbiter. Accordingly, no relief may be granted on such matter. We,
however, agree with the respondent Commission in its stand that private respondents are entitled to rest day and
holiday pay (aside from the refund of their cash bond and the payment of their 13th month pay and service incentive
leave pay for 1989). Private respondents’ position paper submitted before the labor arbiter properly raised the two (2)
issues (rest and holiday pay) and included the same in their prayer for relief. The computation of the amount due each
individual security guard can be made during the additional hearings ordered by the Commission.
WHEREFORE, premises considered, the questioned resolution of the respondent NLRC is hereby AFFIRMED with the
modification that the additional hearing ordered by the NLRC shall not include wage differentials but shall be confined to
legal holiday and rest day pay. Execution shall forthwith proceed as to the NLRC awards of 13th month pay, service
incentive leave pay and return of private respondents’ cash bond. Petitioner and CISCOR/Medina are ORDERED to pay
jointly and severally the claims of private respondents, as finally awarded by the NLRC, without prejudice to the right of
reimbursement which petitioner or CISCOR/Medina may have against each other.
SO ORDERED.

79