SYNOPSIS Petitioner had worked with the private respondent Seventh Day Adventists (SDA) for 28 years before

he was terminated. Prior to said termination, petitioner was asked to admit accountability for the church offerings collected by his wife in the amount of P15,078.10. Petitioner refused since it was private respondents Pastor Buhat and Eufronio Ibesate who authorized his wife to collect. Thereafter petitioner requested Pastor Buhat to convene the Executive Committee to settle the dispute between him and Pastor Rodrigo, but the latter denied the same, and heated arguments between the two ensued until petitioner banged the attach case of Pastor Buhat on the table, scattered the books and threw the phone. Later, an Executive Committee meeting was held where the non-remittance of church collections and the events that transpired were discussed. Subsequently, petitioner received a letter of dismissal citing therein grounds for the termination of his services. Petitioner then filed a complaint for illegal dismissal and a decision was rendered in his favor. The SDA appealed the same to the NLRC and after much ado, the case was dismissed for lack of jurisdiction on the ground that the case involved an ecclessiastical affair to which the State cannot interfere. The case at bar did not concern a purely religious affair as to bar the State from taking cognizance thereof. What is involved here is the relationship of the church as an employer and the minister as an employee. There was no compliance of the requirement that there should be a written notice specifying the grounds for termination and giving the employee reasonable opportunity to explain his side. Here, petitioner was not given enough opportunity to properly prepare for his defense. At any rate, the validity of the dismissal cannot be sustained. There was no basis for the loss of confidence and breach of trust as it was petitioners wife who collected the money and failed to remit the same. On the ground of serious misconduct and commission of an offense against the person of the employers duly authorized representative, the same was unmeritorious as petitioners actuations cannot be considered grave enough to be considered as serious misconduct to merit the ultimate penalty of dismissal. Then also, there was no proof that petitioner committed gross and habitual neglect of duties. Hence, since petitioner was illegally dismissed, he is entitled to reinstatement with full backwages. SYLLABUS
1. POLITICAL LAW; SEPARATION OF CHURCH AND STATE; ELUCIDATED.- The rationale of principle of separation of church and state is summed up in the familiar saying, Strong fences make good neighbors. The idea advocated by this principle is to delineate the boundaries between the two institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of their respective exclusive jurisdictions. The demarcation line calls on the entities to render therefore unto Ceasar the things that are Ceasars and unto God the things that are Gods. While the State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters. 2. ID.; ID.; ECCLESIASTICAL AFFAIR; ELUCIDATED.- An ecclesiastical affair is one that concerns doctrine, creed, or form of worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership. Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this socalled ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with attached religious significance. 3. ID.; ID.; ID.; NOT APPRECIATED AS CASE AT BAR CONCERNS EMPLOYMENT PROBLEM.- The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance of the same. While the matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved here is the relationship of the church as an employer and the minister as an employee. It is purely secular and has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner was not ex-

communicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of expelling a member from the religious congregation. 4. LABOR AND SOCIAL LEGISLATION; EMPLOYMENT; DISMISSAL OF EMPLOYEES; PROVISIONS THEREOF APPLICABLE TO RELIGIOUS CORPORATIONS.- Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on post-employment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law. Hence, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code. 5. REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; ESTOPPEL; RAISING THE ISSUE OF LACK OF JURISDICTION FOR THE FIRST TIME ON APPEAL AFTER ACTIVE PARTICIPATION IN TRIAL BELOW.Private respondents are estopped from raising the issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of the case from start to finish. The Court has already ruled that the active participation of a party against whom the action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on impugning the court or bodys jurisdiction. Thus, the active participatio n of private respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question on jurisdiction. 6. ID.; EVIDENCE; FACTUAL FINDINGS OF NATIONAL LABOR RELATIONS COMMISSION, RESPECTED; EXCEPTIONS; WHEN IT DIFFERS FROM THE FINDINGS OF THE LABOR ARBITER.- As a general rule, findings of fact of administrative bodies like the NLRC are binding upon this Court. A review of such findings is justified, however, in instances when the findings of the NLRC differ from those of the labor arbiter, as in this case. When the findings of NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records to determine which findings should be preferred as more conformable to the evidentiary facts. 7. LABOR AND SOCIAL LEGISLATION; EMPLOYMENT; DISMISSAL BY EMPLOYER; VALIDITY; REQUISITES.- In termination cases, the settled rule is that the burden of proving that the termination was for a valid or authorized cause rests on the employer. Thus, private respondents must not merel y rely on the weaknesses of petitioners evidence but must stand on the merits of their own defense. The issue being the legality of petitioners dismissal, the same must be measured against the requisites for a valid dismissal, namely: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code. Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal. 8. ID.; ID.; ID.; ID.; ID.; NOTICE OF TERMINATION; DISCUSSED.- Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the employer to furnish the employee with two (2) written notices, to wit: (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; and, (b) 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. The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts or omissions for which his dismissal is sought. The second notice on the other hand seeks to inform the employee of the employers decision to dismiss him. This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice within which to answer the charge and ample opportunity to be heard and defend himself with the assistance of a representative, if he so desires. This is in consonance with the express provision of law on the protection of labor and the broader dictates of procedural due process. Non-compliance therewith is fatal because these requirements are conditions sine qua nonbefore dismissal may be validly effected. 9. ID.; ID.; ID.; GROUNDS; BREACH OF TRUST; NOT APPRECIATED.- We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employers arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated. This ground has never been intended to afford an occasion for abuse, because of its subjective nature. The records show that there were only six (6) instances when petitioner personally collected and received from the church treasurers the tithes, collections, and donations for the church. The stenographic notes on the witnesses testimony show that Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission. Then, petitioner cannot be made accountable for the alleged

infraction committed by his wife. After all, they still have separate and distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter which is fully supported by the evidence on record. 10. ID.; ID.; ID.; ID.; SERIOUS MISCONDUCT AND COMMISSION OF AN OFFENSE AGAINST THE PERSON OF THE EMPLOYERS DULY AUTHORIZED REPRESENTATIVE; NOT APPRECIATED. - With respect to the grounds of serious misconduct and commission of an offense against the person of the employers duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioners dismissal from the service. Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. For misconduct to be considered serious it must be of such grave and aggravated character and not merely trivial or unimportant. Based on this standard, we believe that the act of petitioner in banging the attache case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot be considered as grave enough to be considered as serious misconduct. After all, though petitioner committed damage to property, records show that he did not physically assault Pastor Buhat or any other pastor present during the incident. Hence, there is no basis for the allegation that petitioners act constituted serious misconduct or that the same was an offense against the person of the employers duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does not condone wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of the many disadvantages that weigh heavily on him like an albatross on his neck. Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker ought not be visited with a consequence so severe such as dismissal from employment. For the foregoing reasons, we believe that the minor infraction committed by petitioner does not merit the ultimate penalty of dismissal. 11. ID.; ID.; ID.; ID.; GROSS AND HABITUAL NEGLECT OF DUTIES; NOT APPRECIATED.- The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does not require an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not proof. Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise. Petitioners rise from the ranks disclose that he was actually a hard-worker. Private respondents evidence, which consisted of petitioners Workers Reports, revealed how petitioner travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with dismissal from the service for a non-existent cause. 12. ID.; ID.; ILLEGAL DISMISSAL; REINSTATEMENT AND BACKWAGES, PROPER .- In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former position without loss of seniority rights and the payment of full backwages without any deduction corresponding to the period from his illegal dismissal up to actual reinstatement.

[G.R. No. 124382. August 16, 1999]

PASTOR DIONISIO V. AUSTRIA, petitioner, vs. HON. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTIST, ELDER HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR. RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, and MR. ELEUTERIO LOBITANA, respondents. DECISION
KAPUNAN, J.:

Subject to the instant petition for certiorari under Rule 65 of the Rules of Court is the Resolution[1] of public respondent National Labor Relations Commission (the NLRC), rendered on 23 January 1996, in NLRC Case No. V-0120-93, entitled Pastor Dionisio V. Austria vs. Central Philippine Union Mission Corporation of Seventh Day Adventists, et. al., which dismissed the case for illegal dismissal filed by the petitioner against private respondents for lack of jurisdiction. Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists (hereinafter referred to as the SDA) is a religious corporation duly organized and existing under Philippine law and is represented in this case by the other private respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services were terminated. The records show that petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from 1963 to 1991.[2] He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of the SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several times. In January, 1968, petitioner became the Assistant Publishing Director in the West Visayan Mission of the SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the provinces of Romblon and Guimaras. Petitioner held the same position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31 October 1991. On various occasions from August up to October, 1991, petitioner received several communications[3] from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros Mission. In his written explanation dated 11 October 1991,[4] petitioner reasoned out that he should not be made accountable for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio Ibesate who authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that time. Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to convene the Executive Committee for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner arose from an incident in which petitioner assisted his friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latters motor vehicle which he failed to pay to Diamada.[5] Due to the assistance of petitioner in collecting Pastor Rodrigos debt, the latter harbored ill-feelings against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a complaint against him with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked the latter to convene the Executive Committee. Pastor Buhat denied the request of petitioner since some committee members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the office of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, Pastor daw inisog na ina iya (Pastor you are talking tough).[6] Irked by such remark, petitioner returned to the office of Pastor Buhat, and tried to overturn the latters table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attache case of Pastor Buhat on the table, scattered the books in his office, and threw the phone. [7] Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montao were around and they pacified both Pastor Buhat and petitioner. On 17 October 1991, petitioner received a letter[8] inviting him and his wife to attend the Executive Committee meeting at the Negros Mission Conference Room on 21 October 1991, at nine in the morning. To be discussed in the meeting were the non-remittance of church collection and the events that transpired on 16 October 1991. A fact-finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding committee conducted an investigation of petitioner. Sensing that the result of the

investigation might be one-sided, petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and chairman of the fact-finding committee, requesting that certain members of the fact-finding committee be excluded in the investigation and resolution of the case.[9] Out of the six (6) members requested to inhibit themselves from the investigation and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991, petitioner received a letter of dismissal[10] citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employers duly authorized representative, as grounds for the termination of his services. Reacting against the adverse decision of the SDA, petitioner filed a complaint[11] on 14 November 1991, before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages and benefits, moral and exemplary damages and other labor law benefits. On 15 February 1993, Labor Arbiter Cesar D. Sideo rendered a decision in favor of petitioner, the dispositive portion of which reads thus:

WHEREFORE, PREMISES CONSIDERED, respondents CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTISTS (CPUMCSDA) and its officers, respondents herein, are hereby ordered to immediately reinstate complainant Pastor Dionisio Austria to his former position as Pastor of Brgy. Taculing, Progreso and Banago, Bacolod City, without loss of seniority and other rights and backwages in the amount of ONE HUNDRED FIFTEEN THOUSAND EIGHT HUNDRED THIRTY PESOS (P115,830.00) without deductions and qualificatioons. Respondent CPUMCSDA is further ordered to pay complainant the following: A. B. C. D. 13th month pay Allowance Service Incentive Leave Pay Moral Damages E. F. Exemplary Damages P21,060.00 P 4,770.83 P 3,461.85 P50,000.00 P25,000.00 P22,012.27

Attorneys Fee

SO ORDERED.[12]
The SDA, through its officers, appealed the decision of the Labor Arbiter to the National Labor Relations Commission, Fourth Division, Cebu City. In a decision, dated 26 August 1994, the NLRC vacated the findings of the Labor Arbiter. The decretal portion of the NLRC decision states:

WHEREFORE, the Decision appealed from is hereby VACATED and a new one ENTERED dismissing this case for want of merit. SO ORDERED.[13]

Petitioner filed a motion for reconsideration of the above-named decision. On 18 July 1995, the NLRC issued a Resolution reversing its original decision. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, Our decision dated August 26, 1994 is VACATED and the decision of the Labor Arbiter dated February 15, 1993 is REINSTATED. SO ORDERED.[14]
In view of the reversal of the original decision of the NLRC, the SDA filed a motion for reconsideration of the above resolution. Notable in the motion for reconsideration filed by private respondents is their invocation, for the first time on appeal, that the Labor Arbiter has no jurisdiction over the complaint filed by petitioner due to the constitutional provision on the separation of church and state since the case allegedly involved and ecclesiastical affair to which the State cannot interfere. The NLRC, without ruling on the merits of the case, reversed itself once again, sustained the argument posed by private respondents and, accordingly, dismissed the complaint of petitioner. The dispositive portion of the NLRC resolution dated 23 January 1996, subject of the present petition, is as follows:

WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby granted. Accordingly, this case is hereby DISMISSED for lack of jurisdiction. SO ORDERED.[15]
Hence, the recourse to this Court by petitioner. After the filing of the petition, the Court ordered the Office of the Solicitor General (the OSG) to file its comment on behalf of public respondent NLRC. Interestingly, the OSG filed a manifestation and motion in lieu of comment[16] setting forth its stand that it cannot sustain the resolution of the NLRC. In its manifestation, the OSG submits that the termination of petitioner of his employment may be questioned before the NLRC as the same is secular in nature, not ecclesiastical. After the submission of memoranda of all the parties, the case was submitted for decision. The issues to be resolved in this petition are:
1) Whether or not the Labor Arbiter/NLRC has jurisdiction to try and decide the complaint filed by petitioner against the SDA; 2) Whether or not the termination of the services of petitioner is an ecclesiastical affair, and, as such, involves the separation of church and state; and 3) Whether or not such termination is valid.

The first two issues shall be resolved jointly, since they are related. Private respondents contend that by virtue of the doctrine of separation of church and state, the Labor Arbiter and the NLRC have no jurisdiction to entertain the complaint filed by petitioner. Since the matter at bar allegedly involves the discipline of a religious minister, it is to be considered a purely ecclesiastical affair to which the State has no right to interfere. The contention of private respondents deserves scant consideration. The principle of separation of church and state finds no application in this case. The rationale of the principle of the separation of church and state is summed up in the familiar saying, Strong fences make good neighbors.[17] The idea advocated by this principle is to delineate the boundaries between the two institutions and thus avoid encroachments by one against the other because of a misunderstanding of the limits of their respective exclusive jurisdictions.[18] The demarcation line calls on the

entities to render therefore unto Ceasar the things that are Ceasars and unto God th e things that are Gods.[19] While the State is prohibited from interfering in purely ecclesiastical affairs, the Church is likewise barred from meddling in purely secular matters.[20] The case at bar does not concern an ecclesiastical or purely religious affair as to bar the State from taking cognizance of the same. An ecclesiastical affair is one that concerns doctrine, creed, or form or worship of the church, or the adoption and enforcement within a religious association of needful laws and regulations for the government of the membership, and the power of excluding from such associations those deemed unworthy of membership.[21] Based on this definition, an ecclesiastical affair involves the relationship between the church and its members and relate to matters of faith, religious doctrines, worship and governance of the congregation. To be concrete, examples of this so-called ecclesiastical affairs to which the State cannot meddle are proceedings for excommunication, ordinations of religious ministers, administration of sacraments and other activities with which attached religious significance. The case at bar does not even remotely concern any of the abovecited examples. While the matter at hand relates to the church and its religious minister it does not ipso facto give the case a religious significance. Simply stated, what is involved here is the relationship of the church as an employer and the minister as an employee. It is purely secular and has no relation whatsoever with the practice of faith, worship or doctrines of the church. In this case, petitioner was not excommunicated or expelled from the membership of the SDA but was terminated from employment. Indeed, the matter of terminating an employee, which is purely secular in nature, is different from the ecclesiastical act of expelling a member from the religious congregation. As pointed out by the OSG in its memorandum, the grounds invoked for petitioners dismissal, namely: misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties and commission of an offense against the person of his employers duly authorize representative, are all based on Article 282 of the Labor Code which enumerates the just causes for termination of employment.[22] By this alone, it is palpable that the reason for petitioners dismissal from the service is not religious in nature. Coupled with this is the act of the SDA in furnishing NLRC with a copy of petitioners letter of termination. As aptly stated by the OSG, this again is an eloquent admission by private respondents that NLRC has jurisdiction over the case. Aside from these, SDA admitted in a certification[23] issued by its officer, Mr. Ibesate, that petitioner has been its employee for twenty-eight (28) years. SDA even registered petitioner with the Social Security System (SSS) as its employee. As a matter of fact, the workers records of petitioner have been submitted by private respondents as part of their exhibits. From all of these it is clear that when the SDA terminated the services of petitioner, it was merely exercising its management prerogative to fire an employee which it believes to be unfit for the job. As such, the State, through the Labor Arbiter and the NLRC, has the right to take cognizance of the case and to determine whether the SDA, as employer, rightfully exercised its management prerogative to dismiss an employee. This is in consonance with the mandate of the Constitution to afford full protection to labor. Under the Labor Code, the provision which governs the dismissal of employees, is comprehensive enough to include religious corporations, such as the SDA, in its coverage. Article 278 of the Labor Code on postemployment states that the provisions of this Title shall apply to all establishments or undertakings, whether for profit or not. Obviously, the cited article does not make any exception in favor of a religious corporation. This is made more evident by the fact that the Rules Implementing the Labor Code, particularly, Section 1, Rule 1, Book VI on the Termination of Employment and Retirement, categorically includes religious institutions in the coverage of the law, to wit:

Section 1. Coverage. This Rule shall apply to all establishments and undertakings, whether operated for profit or not, including educational, medical, charitable and religious institutions and organizations, in cases of regular employment with the exception of the Government and its political subdivisions including government-owned or controlled corporations.[24]
With this clear mandate, the SDA cannot hide behind the mantle of protection of the doctrine of separation of church and state to avoid its responsibilities as an employer under the Labor Code.

Finally, as correctly pointed out by petitioner, private respondents are estopped from raising the issue of lack of jurisdiction for the first time on appeal. It is already too late in the day for private respondents to question the jurisdiction of the NLRC and the Labor Arbiter since the SDA had fully participated in the trials and hearings of the case from start to finish. The Court has already ruled that the active participation of a party against whom the action was brought, coupled with his failure to object to the jurisdiction of the court or quasi-judicial body where the action is pending, is tantamount to an invocation of that jurisdiction and a willingness to abide by the resolution of the case and will bar said party from later on impugning the court or bodys jurisdiction.[25] Thus, the
active participation of private respondents in the proceedings before the Labor Arbiter and the NLRC mooted the question on jurisdiction.

The jurisdictional question now settled, we shall now proceed to determine whether the dismissal of petitioner was valid. At the outset, we note that as a general rule, findings of fact of administrative bodies like the NLRC are binding upon this Court. A review of such findings is justified, however, in instances when the findings of the NLRC differ from those of the labor arbiter, as in this case.[26] When the findings of NLRC do not agree with those of the Labor Arbiter, this Court must of necessity review the records to determine which findings should be preferred as more comformable to the evidentiary facts.[27] We turn now to the crux of the matter. In termination cases, the settled rule is that the burden of proving that the termination was for a valid or authorized cause rests on the employer.[28] Thus, private respondents must not merely rely on the weaknesses of petitioners evidence but must stand on the merits of their own defense. The issue being the legality of petitioners dismissal, the same must be measured against the requisites for a valid dismissal, namely: (a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard and to defend himself, and; (b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code.[29] Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal.[30] Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the employer to furnish the employee with two (2) written notices, to wit: (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; and, (b) 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. The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts or omissions for which his dismissal is sought.[31] The second notice on the other hand seeks to inform the employee of the employers decision to dismiss him.[32] This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice within which to answer the charge and ample opportunity to be heard and defend himself with the assistance of a representative, if he so desires.[33] This is in consonance with the express provision of the law on the protection to labor and the broader dictates of procedural due process.[34] Non-compliance therewith is fatal because these requirements are conditions sine quo non before dismissal may be validly effected.[35] Private respondent failed to substantially comply with the above requirements. With regard to the first notice, the letter,[36] dated 17 October 1991, which notified petitioner and his wife to attend the meeting on 21 October 1991, cannot be construed as the written charge required by law. A perusal of the said letter reveals that it never categorically stated the particular acts or omissions on which petitioners impending termination was grounded. In fact, the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned that petitioner and his wife were invited to a meeting wherein what would be discussed were the alleged unremitted church tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out that the alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the dismissal of petitioner from the service were only revealed to him when the actual letter of dismissal was finally

issued. For this reason, it cannot be said that petitioner was given enough opportunity to properly prepare for his defense. While admittedly, private respondents complied with the second requirement, the notice of termination, this does not cure the initial defect of lack of the proper written charge required by law. In the letter of termination,[37] dated 29 October 1991, private respondents enumerated the following as grounds for the dismissal of petitioner, namely: misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employers duly authorized representative. Breach of trust and misappropriation of denominational funds refer to the alleged failure of petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10 which were collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and commission of an offense against the person of the employers duly authorized representative pertain to the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked by private respondents is gross and habitual neglect of duties allegedly committed by petitioner. We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that they have lost their confidence in petitioner for his failure, despite demands, to remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case reveals that there is simply no basis for the alleged loss of confidence and breach of trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.[38] It must rest on substantial grounds and not on the employers arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer.[39] It should be genuine and not simulated.[40] This ground has never been intended to afford an occasion for abuse, because of its subjective nature. The records show that there were only six (6) instances when petitioner personally collected and received from the church treasurers the tithes, collections, and donations for the church.[41] The stenographic notes on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission.[42] Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were not able to establish that petitioner failed to remit the same to the Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact, as admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he collected to the Negros Mission for which corresponding receipts were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to stand on. In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged non-remittance of the tithes collected by his wife. This argument deserves little consideration. First of all, as proven by convincing and substantial evidence consisting of the testimonies of the witnesses for private respondents who are church treasurers, it was Mrs. Thelma Austria who actually collected the tithes and donations from them, and, who failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of conspiracy and collusion, which private respondents failed to demonstrate, between petitioner and his wife, petitioner cannot be made accountable for the alleged infraction committed by his wife. After all, they still have separate and distinct personalities. For this reason, the Labor Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter which is fully supported by the evidence on record. With respect to the grounds of serious misconduct and commission of an offense against the person of the employers duly authorized representative, we find the same unmeritorious and, as such, do not warrant petitioners dismissal from the service.

Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.[43] For misconduct to be considered serious it must be of such grave and aggravated character and not merely trivial or unimportant.[44] Based on this standard, we believe that the act of petitioner in banging the attache case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot be considered as grave enough to be considered as serious misconduct. After all, as correctly observed by the Labor Arbiter, though petitioner committed damage to property, he did not physically assault Pastor Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged offense committed upon the person of the employers representatives was never really established or proven by private respondents. Hence, there is no basis for the allegation that petitioners act constituted serious misconduct or that the same was an offense against the person of the employers duly authorized representative. As such, the cited actuation of petitioner does not justify the ultimate penalty of dismissal from employment. While the Constitution does not condone wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him in light of the many disadvantages that weigh heavily on him like an albatross on his neck.[45] Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker ought not be visited with a consequence so severe such as dismissal from employment.[46] For the foregoing reasons, we believe that the minor infraction committed by petitioner does not merit the ultimate penalty of dismissal. The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does not requires an exhaustive discussion. Suffice it to say that all private respondents had were allegations but not proof. Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise. Petitioners rise from the ranks disclose that he was actually a hard-worker. Private respondents evidence,[47] which consisted of petitioners
Workers Reports, revealed how petitioner travelled to different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with a dismissal from the service for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to reinstatement to his former position without loss of seniority right[48] and the payment of full backwages without any deduction corresponding to
the period from his illegal dismissal up to actual reinstatement. [49]

WHEREFORE, the petition for certiorari is GRANTED. The challenged Resolution of public respondent National Labor Relations Commission, rendered on 23 January 1996, is NULLIFIED and SET ASIDE. The Decision of the Labor Arbiter, dated 15 February 1993, is reinstated and hereby AFFIRMED. SO ORDERED.

[G.R. No. 125606. October 7, 1998]

SAN MIGUEL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, THIRD DIVISION, and FRANCISCO DE GUZMAN, JR.,respondents. DECISION
QUISUMBING, J.:

Before us is the petition for certiorari under Rule 65 of the Revised Rules of Court seeking to set aside the April 18, 1996 Decision[1] and the May 30, 1996 Resolution[2] of public respondent National Labor Relations Commission[3] in NLRC CA No. 009490-95. Said decision reversed the June 30, 1995

judgment[4] of the Labor Arbiter[5] in NLRC-NCR Case No. 00-08-05954-94, and ordered the reinstatement of private respondent as follows:

WHEREFORE, premises considered, the assailed decision is hereby VACATED and SET ASIDE. A new one is hereby entered ordering herein respondent San Miguel Corporation to reinstate complainant to his former position with full backwages from the time he was dismissed from work until he is actually reinstated without loss of seniority rights and other benefits, less earnings elsewhere, if any.
[6]

The facts on record show that in November 1990, private respondent was hired by petitioner as helper/bricklayer for a specific project, the repair and upgrading of furnace C at its Manila Glass Plant. His contract of employment provided that said temporary employment was for a specific period of approximately four (4) months. On April 30, 1991, private respondent was able to complete the repair and upgrading of furnace C. Thus, his services were terminated on that same day as there was no more work to be done. His employment contract also ended that day. On May 10, 1991, private respondent was again hired for a specific job or undertaking, which involved the draining/cooling down of furnace F and the emergency repair of furnace E. This project was for a specific period of approximately three (3) months. After the completion of this task, namely the draining/cooling down of furnace F and the emergency repair of furnace E, at the end of July 1991, private respondents services were terminated. On August 1, 1991, complainant saw his name in a Memorandum posted at the Companys Bulletin Board as among those who were considered dismissed. On August 12, 1994, or after the lapse of more than three (3) years from the completion of the last undertaking for which private respondent was hired, private respondent filed a complaint for illegal dismissal against petitioner, docketed as NLRC NCR Case No. 08-05954-94.[7] Both parties submitted their respective position papers, reply and rejoinder to Labor Arbiter Felipe Garduque II. On June 30, 1995, he rendered the decision dismissing said complaint for lack of merit. In his ruling Labor Arbiter Garduque sustained petitioners argument that private respondent was a project employee. The position of a helper does not fall within the classification of regular employees. Hence, complainant never attained regular employment status. Moreover, his silence for more than three (3) years without any reasonable explanation tended to weaken his claim. [8] Not satisfied with the decision, private respondent interposed his appeal with public respondent NLRC on August 8, 1995. Petitioner filed its opposition thereto on August 29, 1995. On April 18, 1996, public respondent NLRC, promulgated its assailed decision, reversing Labor Arbiter Garduques decision. In its ruling, public respondent made the following findings:

Respondents scheme of subsequently re-hiring complainant after only ten (10) days from the last day of the expiration of his contract of employment for a specific period, and giving him again another contract of employment for another specific period cannot be countenanced. This is one way of doing violence to the employees constitutional right to security of tenure under which even employees under probationary status are amply protected.
Under the circumstances obtaining in the instant case we find that herein complainant was indeed illegally dismissed. Respondent failed to adduce substantial evidence to prove that Francisco de

Guzman, Jr. was dismissed for a just or authorized cause and after due process. The only reason they advanced is that his contract of employment which is for a specific period had already expired. We, however, find this scheme, as discussed earlier, not in accordance with law.[9] Petitioner then moved for the reconsideration of said decision. This was, however, denied by public respondent on May 30, 1996 as it found no cogent reason, or patent or palpable error, that would warrant the disturbance of the decision sought to be reconsidered. Hence, this petition, based on the following grounds:
1. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN FAILING TO RULE THAT PRIVATE RESPONDENT IS A PROJECT OR A FIXED PERIOD EMPLOYEE. 2. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT PETITIONER VIOLATED PRIVATE RESPONDENTS RIGHT TO SECURITY OF TENURE AND THAT PRIVATE RESPONDENT WAS ILLEGALLY DISMISSED. 3. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT LACHES OR SILENCE OR INACTION FOR AN UNREASONABLE LENGTH OF TIME DID NOT BAR PRIVATE RESPONDENTS CLAIM.

Given these grounds, this petition may be resolved once the following issues are clarified: (a) What is the nature of the employment of private respondent, that of a project employee or a regular employee? and (b) Was he terminated legally or dismissed illegally? As a general rule, the factual findings and conclusions drawn by the National Labor Relations Commission are accorded not only great weight and respect, but even clothed with finality and deemed binding on the Court, as long as they are supported by substantial evidence. However, when such findings and those of the Labor Arbiter are in conflict, it behooves this Court to scrutinize the records of the case, particularly the evidence presented, to arrive at a correct decision. [10] Art. 280 of the Labor Code defines regular, project and casual employment as follows:

ART. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists.
The above mentioned provision reinforces the Constitutional mandate to protect the interest of labor as it sets the legal framework for ascertaining ones nature of employment, and distinguishing different kinds of employees. Its language manifests the intent to safeguard the tenurial interest of worker who may be denied the enjoyment of the rights and benefits due to an employee, regardless of the nature of his employment, by virtue of lopsided agreements with the economically powerful

employer who can maneuver to keep an employee on a casual or contractual status for as long as it is convenient to the employer. Thus, under Article 280 of the Labor Code, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer even if the parties enter into an agreement stating otherwise. But considered not regular under said Article are (1) the so-called project employment the termination of which is more or less determinable at the time of employment, such as those connected with a particular construction project; and (2) seasonal employment, which by its nature is only for one season of the year and the employment is limited for the duration of that season, such as the Christmas holiday season. Nevertheless, an exception to this exception is made: any employee who has rendered at least one (1) year of service, whether continuous or intermittent, with respect to the activity he performed and while such activity actually exists, must be deemed regular. Following Article 280, whether one is employed as a project employee or not would depend on whether he was hired to carry out a specific project or undertaking, the duration and scope of which were specified at the time his services were engaged for that particular project. [11] Another factor that may be considered is the reasonable connection between the particular activity undertaken by the employee in relation to the usual trade or business of the employer; if without specifying the duration and scope, the work to be undertaken is usually necessary or desirable in the usual business or trade of the employer, then it is regular employment and not just project much less casual employment. Thus, the nature of ones employment does not depend on the will or word of the empl oyer. Nor on the procedure of hiring and the manner of designating the employee, but on the nature of the activities to be performed by the employee, considering the employers nature of business [12] and the duration and scope of the work to be done. In ALU-TUCP vs. NLRC,[13] this Court discussed two types of projects:

In the realm of business and industry, we note that project could refer to one or the other of at least two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of the employer company, but which is distinct and separate, and identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends at determined or determinable times. xxx The term project could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. x x x (Italics supplied)
Public respondent NLRCs findings that herein private respondent is a regular employee is erroneous as the latters employment clearly falls within the definition of project employees under paragraph 1 of Article 280 of the Labor Code and such is a typical example of the second kind of project employment in the ALU-TUCP case discussed above. Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of glass, an integral component of the packaging and manufacturing business of petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case of need and after being used continuously for a varying period of five (5) to ten (10) years.

In 1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and separate from petitioners business of manufacturing glass. For this purpose, petitioner must hire workers to undertake the said repair and upgrading. Private respondent was, thus, hired by petitioner on November 28, 1990 on a temporary status for a specific job for a determined period of approximately four months. Upon completion of the undertaking, or on April 30, 1991, privat e respondents services were terminated. A few days, thereafter, two of petitioners furnaces required draining/cooling down and emergency repair. Private respondent was again hired on May 10, 1991 to help in the new undertaking, which would take approximately three (3) months to accomplish. Upon completion of the second undertaking, private respondents services were likewise terminated.[14] He was not hired a third time, and his two engagements taken together did not total one full year in order to qualify him as an exception to the exception falling under the cited proviso in the second paragraph of Art. 280 of the Labor Code. Clearly, private respondent was hired for a specific project that was not within the regular business of the corporation. For petitioner is not engaged in the business of repairing furnaces. Although the activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor arose only when a particular furnace reached the end of its life or operating cycle. Or, as in the second undertaking, when a particular furnace required an emergency repair. In other words, the undertakings where private respondent was hired primarily as helper/bricklayer have specified goals and purposes which are fulfilled once the designated work was completed. Moreover, such undertakings were also identifiably separate and distinct from the usual, ordinary or regular business operations of petitioner, which is glass manufacturing. These undertakings, the duration and scope of which had been determined and made known to private respondent at the time of his employment, clearly indicated the nature of his employment as a project employee. Thus, his services were terminated legally after the completion of the project.[15] Public respondent NLRCs decision, if upheld, would amount to negating the distinctions made in Article 280 of the Labor Code. It would shunt aside the rule that since a project employees work depends on the availability of a project, necessarily, the duration of his employment is coterminous with the project to which he is assigned.[16] It would become a burden for an employer to retain an employee and pay him his corresponding wages if there was no project for him to work on. Well to remember is the language of the Court in the case of Mamansag v. NLRC:[17]

While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every dispute will be automatically decided in favor of labor. Management has also rights, which, as such, are entitled to respect and enforcement in the interest of fair play. Although the Supreme Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.
Considering that private respondent was a project employee whose employment, the nature of which he was fully informed, related to a specific project, work or undertaking, we find that the Labor Arbiter correctly ruled that said employment legally ended upon completion of said project. Hence the termination of his employment was not tantamount to an illegal dismissal; and it was a grave abuse of discretion on public respondent's part to order his reinstatement by petitioner. WHEREFORE, the instant petition is hereby GRANTED. The decision of respondent NLRC is hereby REVERSED, and the judgment of the Labor Arbiter REINSTATED.

NO COSTS.
G.R. No. L-80680 January 26, 1989 DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA, FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners, vs. CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C. TUMANON, respondents. V.E. Del Rosario & Associates for respondent CMC. The Solicitor General for public respondent. Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners. Mildred A. Ramos for respondent Lily Victoria A. Azarcon.

SARMIENTO, J.: On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission for reinstatement and payment of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living allowance pay, against the respondent, the California Manufacturing Company. 1 On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a motion to dismiss as well as a position paper denying the existence of an employer-employee relation between the petitioners and the company and, consequently, any liability for payment of money claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent. It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as "promotional merchandisers" 3 for the former firm pursuant to a manpower supply agreement. Among other things, the agreement provided that California "has no control or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform [Californias] obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and [Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to comply with all existing as well as future laws, rules and regulations pertinent to employment of labor" 6 and that "[California] is free and harmless from any liability arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for [California]. 7 It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8 The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new agreements with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received P38.56 plus P15.00 in allowance daily. The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They likewise claim that pending further proceedings below, they were notified by California that they would not be rehired. As a result, they filed an amended complaint charging California with illegal dismissal.

California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is not, to begin with, the petitioners' employer and that the "retrenchment" had been forced by business losses as well as expiration of contracts. 9 It appears that thereafter, Livi re-absorbed them into its labor pool on a "wait-in or standby" status. 10 Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are California's or Livi's employees. The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employeremployee relation between the petitioners and California ostensibly in the light of the manpower supply contract,supra, and consequently, against the latter's liability as and for the money claims demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in question was allegedly "beyond its control ." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees. We reverse. The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners cannot be made to suffer from its adverse consequences. This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four standards: (1) the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power of dismissal; and (4) the presence or absence of a power to control the putative employee's conduct. 14 Of the four, the right-of-control test has been held to be the decisive factor. 15 On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced: ART. 106. Contractor or sub-contractor. Whenever an employee enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's sub-contractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provisions of this Code. There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work had been contracted out by a "labor-only" contractor, and the employees, the former has the responsibility, together with the "labor-only" contractor, for any valid labor claims, 16 by operation of law. The reason, so we held, is

that the "labor-only" contractor is considered "merely an agent of the employer," 17 and liability must be shouldered by either one or shared by both. 18 There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent contractor." 20 The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and prevailing case law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities 'which are not directly related to the general business of manufacturing," 22 California's purported "principal operation activity. " 23 The petitioner's had been charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and occational [sic] price tagging," 24 an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its (California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done; Livi, as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and equipment. 25 Neither Livi nor California can therefore escape liability, that is, assuming one exists. The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing conclusive. For one thing, the fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by declarations of parties. The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of Communications v. NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity related to the day-today operations of California. It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latter's merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers, are not the latter's employees, but of the restaurant. As we pointed out in the Philippine Bank of Communications case: xxx xxx xxx ... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the addressees. In the present case, the undertaking of CESI was to provide its client the bank with a certain number of persons able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work the delivery of documents to designated persons whether within or without the bank premises-is of course directly related to the day-to-day operations of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing bodies, as it were, in different client companies for longer or shorter periods of time, ... 28

In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client. " 29 When it thus provided California with manpower, it supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the Code applies. The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-avis the four barometers referred to earlier, since by fiction of law, either or both shoulder responsibility. It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it illegal. Under the Labor Code, genuine job contracts are permissible, provided they are genuine job contracts. But, as we held in Philippine Bank of Communications, supra, when such arrangements are resorted to "in anticipation of, and for the very purpose of making possible, the secondment" 30 of the employees from the true employer, the Court will be justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to security of tenure. This brings us to the question: What is the liability of either Livi or California? The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of the Code, they had become regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process of law. California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second, by reason of financial distress brought about by "unfavorable political and economic atmosphere" 31"coupled by the February Revolution." 32 As to the first objection, we reiterate that the petitioners are its employees and who, by virtue of the required one-year length-of-service, have acquired a regular status. As to the second, we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business reverses as a result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as a cause for its alleged losses to be gratuitous and without basis in fact. California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only on the State's initiatives to maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately scarce in jobs. And, the National Labor Relations Commission should have known better than to fall for such unwarranted excuses and nebulous claims. WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights of regular employees; and (3) ORDERING the respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such other and further benefits as may be provided by existing collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4) ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in addition to those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit. IT IS SO ORDERED. Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.