Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

84484 November 15, 1989 INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents. Tirol & Tirol for petitioner. Enojas, Defensor & Teodosio Cabado Law Offices for private respondent. NARVASA, J.: On July 2, 1968, Insular Life Assurance Co., Ltd. (hereinafter simply called the Company) and Melecio T. Basiao entered into a contract 1 by which: 1. Basiao was "authorized to solicit within the Philippines applications for insurance policies and annuities in accordance with the existing rules and regulations" of the Company; 2. he would receive "compensation, in the form of commissions ... as provided in the Schedule of Commissions" of the contract to "constitute a part of the consideration of ... (said) agreement;" and 3. the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and those which may from time to time be promulgated by it, ..." were made part of said contract. The contract also contained, among others, provisions governing the relations of the parties, the duties of the Agent, the acts prohibited to him, and the modes of termination of the agreement, viz.: RELATION WITH THE COMPANY. The Agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. Nothing herein contained shall therefore be construed to create the relationship of employee and employer between the Agent and the Company. However, the Agent shall observe and conform to all rules and regulations which the Company may from time to time prescribe. ILLEGAL AND UNETHICAL PRACTICES. The Agent is prohibited from giving, directly or indirectly, rebates in any form, or from making any misrepresentation or over-selling, and, in general, from doing or committing acts prohibited in the Agent's Manual and in circulars of the Office of the Insurance Commissioner. TERMINATION. The Company may terminate the contract at will, without any previous notice to the Agent, for or on account of ... (explicitly specified causes). ... 1

Either party may terminate this contract by giving to the other notice in writing to that effect. It shall become ipso facto cancelled if the Insurance Commissioner should revoke a Certificate of Authority previously issued or should the Agent fail to renew his existing Certificate of Authority upon its expiration. The Agent shall not have any right to any commission on renewal of premiums that may be paid after the termination of this agreement for any cause whatsoever, except when the termination is due to disability or death in line of service. As to commission corresponding to any balance of the first year's premiums remaining unpaid at the termination of this agreement, the Agent shall be entitled to it if the balance of the first year premium is paid, less actual cost of collection, unless the termination is due to a violation of this contract, involving criminal liability or breach of trust. ASSIGNMENT. No Assignment of the Agency herein created or of commissions or other compensations shall be valid without the prior consent in writing of the Company. ... Some four years later, in April 1972, the parties entered into another contract an Agency Manager's Contract and to implement his end of it Basiao organized an agency or office to which he gave the name M. Basiao and Associates, while concurrently fulfilling his commitments under the first contract with the Company. 2 In May, 1979, the Company terminated the Agency Manager's Contract. After vainly seeking a reconsideration, Basiao sued the Company in a civil action and this, he was later to claim, prompted the latter to terminate also his engagement under the first contract and to stop payment of his commissions starting April 1, 1980. 3 Basiao thereafter filed with the then Ministry of Labor a complaint 4 against the Company and its president. Without contesting the termination of the first contract, the complaint sought to recover commissions allegedly unpaid thereunder, plus attorney's fees. The respondents disputed the Ministry's jurisdiction over Basiao's claim, asserting that he was not the Company's employee, but an independent contractor and that the Company had no obligation to him for unpaid commissions under the terms and conditions of his contract. 5 The Labor Arbiter to whom the case was assigned found for Basiao. He ruled that the underwriting agreement had established an employer-employee relationship between him and the Company, and this conferred jurisdiction on the Ministry of Labor to adjudicate his claim. Said official's decision directed payment of his unpaid commissions "... equivalent to the balance of the first year's premium remaining unpaid, at the time of his termination, of all the insurance policies solicited by ... (him) in favor of the respondent company ..." plus 10% attorney's fees. 6 This decision was, on appeal by the Company, affirmed by the National Labor Relations Commission. 7 Hence, the present petition for certiorari and prohibition. The chief issue here is one of jurisdiction: whether, as Basiao asserts, he had become the Company's employee by virtue of the contract invoked by him, thereby placing his claim for unpaid commissions within the original and exclusive jurisdiction of the Labor Arbiter under the provisions of Section 217 of the Labor Code, 8 or, contrarily, as the Company would have it, that under said contract Basiao's status was that of an independent contractor whose claim was thus cognizable, not by the Labor Arbiter in a labor case, but by the regular courts in an ordinary civil action. The Company's thesis, that no employer-employee relation in the legal and generally accepted sense existed between it and Basiao, is drawn from the terms of the contract they had entered into, which, either expressly or by necessary implication, made Basiao the master of his own time and selling methods, left to his judgment the 2

time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the basis of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to, and was free to adopt the selling methods he deemed most effective. Without denying that the above were indeed the expressed implicit conditions of Basiao's contract with the Company, the respondents contend that they do not constitute the decisive determinant of the nature of his engagement, invoking precedents to the effect that the critical feature distinguishing the status of an employee from that of an independent contractor is control, that is, whether or not the party who engages the services of another has the power to control the latter's conduct in rendering such services. Pursuing the argument, the respondents draw attention to the provisions of Basiao's contract obliging him to "... observe and conform to all rules and regulations which the Company may from time to time prescribe ...," as well as to the fact that the Company prescribed the qualifications of applicants for insurance, processed their applications and determined the amounts of insurance cover to be issued as indicative of the control, which made Basiao, in legal contemplation, an employee of the Company. 9 It is true that the "control test" expressed in the following pronouncement of the Court in the 1956 case of Viana vs. Alejo Al-Lagadan 10 ... In determining the existence of employer-employee relationship, the following elements are generally considered, namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees' conduct although the latter is the most important element (35 Am. Jur. 445). ... has been followed and applied in later cases, some fairly recent. 11 Indeed, it is without question a valid test of the character of a contract or agreement to render service. It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. 12 Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. Of such a character are the rules which prescribe the qualifications of persons who may be insured, subject insurance applications to processing and approval by the Company, and also reserve to the Company the determination of the premiums to be paid and the schedules of payment. None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. 3

There is no dearth of authority holding persons similarly placed as respondent Basiao to be independent contractors, instead of employees of the parties for whom they worked. In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for another, using a truck supplied by the latter, but with the right to employ his own workers, sell according to his own methods subject only to prearranged routes, observing no working hours fixed by the other party and obliged to secure his own licenses and defray his own selling expenses, all in consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold daily, was not an employee but an independent contractor. In Investment Planning Corporation of the Philippines us. Social Security System 14 a case almost on all fours with the present one, this Court held that there was no employer-employee relationship between a commission agent and an investment company, but that the former was an independent contractor where said agent and others similarly placed were: (a) paid compensation in the form of commissions based on percentages of their sales, any balance of commissions earned being payable to their legal representatives in the event of death or registration; (b) required to put up performance bonds; (c) subject to a set of rules and regulations governing the performance of their duties under the agreement with the company and termination of their services for certain causes; (d) not required to report for work at any time, nor to devote their time exclusively to working for the company nor to submit a record of their activities, and who, finally, shouldered their own selling and transportation expenses. More recently, in Sara vs. NLRC, 15 it was held that one who had been engaged by a rice miller to buy and sell rice and palay without compensation except a certain percentage of what he was able to buy or sell, did work at his own pleasure without any supervision or control on the part of his principal and relied on his own resources in the performance of his work, was a plain commission agent, an independent contractor and not an employee. The respondents limit themselves to pointing out that Basiao's contract with the Company bound him to observe and conform to such rules and regulations as the latter might from time to time prescribe. No showing has been made that any such rules or regulations were in fact promulgated, much less that any rules existed or were issued which effectively controlled or restricted his choice of methods or the methods themselves of selling insurance. Absent such showing, the Court will not speculate that any exceptions or qualifications were imposed on the express provision of the contract leaving Basiao "... free to exercise his own judgment as to the time, place and means of soliciting insurance." The Labor Arbiter's decision makes reference to Basiao's claim of having been connected with the Company for twenty-five years. Whatever this is meant to imply, the obvious reply would be that what is germane here is Basiao's status under the contract of July 2, 1968, not the length of his relationship with the Company. The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an ordinary civil action. The Labor Arbiter erred in taking cognizance of, and adjudicating, said claim, being without jurisdiction to do so, as did the respondent NLRC in affirming the Arbiter's decision. This conclusion renders it unnecessary and premature to consider Basiao's claim for commissions on its merits. WHEREFORE, the appealed Resolution of the National Labor Relations Commission is set aside, and that complaint of private respondent Melecio T. Basiao in RAB Case No. VI-0010-83 is dismissed. No pronouncement as to costs. 4

SO ORDERED. Cruz, Gancayco, Grio-Aquino, and Medialdea, JJ., concur. Footnotes

1 Rollo, pp. 14-15. 2 Rollo, p. 16. 3 Rollo, p. 17. 4 Docketed as RAB Case No. VI-0010-83. 5 Rollo, p. 17. 6 Id., pp. 18-22. 7 Rollo, pp., 23-27. 8 which at that time conferred upon the Labor Arbiters such jurisdiction over, among others, ... all money claims of workers, including those based on non-payment or underpayment of wages, overtime compensation, separation pay and other benefits provided by law or appropriate agreement, except claims for employees compensation, social security, medicare and maternity benefits." 9 Respondents Comments; Rollo, pp. 47-52, 60-69. 10 99 Phil. 408. 411-412. 11 Feati University vs. Bautista, 18 SCRA., 119: Dy Keh Beng vs. International Labor and Marine Union of the Phil., 90 SCRA 163: Rosario Bros. vs. Ople, 131 SCRA 72; National Mines and Allied Workers Union (NAMAWU) vs. Valero, 132 SCRA 578. 12 43 Am. Jur. 2d, pp. 73-91. 13 70 SCRA 139. 14 21 SCRA 924 (1967). 15 G.R. No. 73199. October 26, 1988.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 119930 March 12, 1998 INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fourth Division, Cebu City), LABOR ARBITER NICASIO P. ANINON and PANTALEON DE LOS REYES, respondents. BELLOSILLO, J.: On 17 June 1994 respondent Labor Arbiter dismissed for lack of jurisdiction NLRC RAB-VII Case No. 03-030994 filed by private respondent Pantaleon de los Reyes against petitioner Insular Life Assurance Co., Ltd. (INSULAR LIFE), for illegal dismissal and nonpayment of salaries and back wages after finding no employeremployee relationship between De los Reyes and petitioner INSULAR LIFE. 1 On appeal by private respondent, the order of dismissal was reversed by the National Labor Relations Commission (NLRC) which ruled that respondent De los Reyes was an employee of petitioner. 2 Petitioner's motion for reconsideration having been denied, the NLRC remanded the case to the Labor Arbiter for hearing on the merits. Seeking relief through this special civil action for certiorari with prayer for a restraining order and/or preliminary injunction, petitioner now comes to us praying for annulment of the decision of respondent NLRC dated 3 March 1995 and its Order dated 6 April 1995 denying the motion for reconsideration of the decision. It faults NLRC for acting without jurisdiction and/or with grave abuse of discretion when, contrary to established facts and pertinent law and jurisprudence, it reversed the decision of the Labor Arbiter and held instead that the complaint was properly filed as an employer-employee relationship existed between petitioner and private respondent. Petitioner reprises the stand it assumed below that it never had any employer-employee relationship with private respondent, this being an express agreement between them in the agency contracts, particularly reinforced by the stipulation therein that De los Reyes was allowed discretion to devise ways and means to fulfill his obligations as agent and would be paid commission fees based on his actual output. It further insists that the nature of this work status as described in the contracts had already been squarely resolved by the Court in the earlier case of Insular Life Assurance Co., Ltd. v. NLRC and Basiao 3 where the complainant therein, Melecio Basiao, was similarly situated as respondent De los Reyes in that he was appointed first as an agent and then promoted as agency manager, and the contracts under which he was appointed contained terms and conditions identical to those of Delos Reyes. Petitioner concludes that since Basiao was declared by the Court to be an independent contractor and not an employee of petitioner, there should be no reason why the status of De los Reyes herein vis-a-vispetitioner should not be similarly determined. We reject the submissions of petitioner and hold that respondent NLRC acted appropriately within the bounds of the law. The records of the case are replete with telltale indicators of an existing employer-employee relationship between the two parties despite written contractual disavowals.

These facts are undisputed: on 21 August 1992 petitioner entered into an agency contract with respondent Pantaleon de los Reyes 4 authorizing the latter to solicit within the Philippines applications for life insurance and annuities for which he would be paid compensation in the form of commissions. The contract was prepared by petitioner in its entirety and De los Reyes merely signed his conformity thereto. It contained the stipulation that no employer-employee relationship shall be created between the parties and that the agent shall be free to exercise his own judgment as to time, place and means of soliciting insurance. De los Reyes however was prohibited by petitioner from working for any other life insurance company, and violation of this stipulation was sufficient ground for termination of the contract. Aside from soliciting insurance for the petitioner, private respondent was required to submit to the former all completed applications for insurance within ninety (90) consecutive days, deliver policies, receive and collect initial premiums and balances of first year premiums, renewal premiums, deposits on applications and payments on policy loans. Private respondent was also bound to turn over to the company immediately any and all sums of money collected by him. In a written communication by petitioner to respondent De los Reyes, the latter was urged to register with the Social Security System as a self-employed individual as provided under PD No. 1636. 5 On 1 March 1993 petitioner and private respondent entered into another contract 6 where the latter was appointed as Acting Unit Manager under its office the Cebu DSO V (157). As such, the duties and responsibilities of De los Reyes included the recruitment, training, organization and development within his designated territory of a sufficient number of qualified, competent and trustworthy underwriters, and to supervise and coordinate the sales efforts of the underwriters in the active solicitation of new business and in the furtherance of the agency's assigned goals. It was similarly provided in the management contract that the relation of the acting unit manager and/or the agents of his unit to the company shall be that of independent contractor. If the appointment was terminated for any reason other than for cause, the acting unit manager would be reverted to agent status and assigned to any unit. As in the previous agency contract, De los Reyes together with his unit force was granted freedom to exercise judgment as to time, place and means of soliciting insurance. Aside from being granted override commissions, the acting unit manager was given production bonus, development allowance and a unit development financing scheme euphemistically termed "financial assistance" consisting of payment to him of a free portion of P300.00 per month and a validate portion of P1,200.00. While the latter amount was deemed as an advance against expected commissions, the former was not and would be freely given to the unit manager by the company only upon fulfillment by him of certain manpower and premium quota requirements. The agents and underwriters recruited and trained by the acting unit manager would be attached to the unit but petitioner reserved the right to determine if such assignment would be made or, for any reason, to reassign them elsewhere. Aside from soliciting insurance, De los Reyes was also expressly obliged to participate in the company's conservation program, i.e., preservation and maintenance of existing insurance policies, and to accept moneys duly receipted on agent's receipts provided the same were turned over to the company. As long as he was unit manager in an acting capacity, De los Reyes was prohibited from working for other life insurance companies or with the government. He could not also accept a managerial or supervisory position in any firm doing business in the Philippines without the written consent of petitioner. Private respondent worked concurrently as agent and Acting Unit Manager until he was notified by petitioner on 18 November 1993 that his services were terminated effective 18 December 1993. On 7 March 1994 he filed a complaint before the Labor Arbiter on the ground that he was illegally dismissed and that he was not paid his salaries and separation pay. Petitioner filed a motion to dismiss the complaint of De los Reyes for lack of jurisdiction, citing the absence of employer-employee relationship. It reasoned out that based on the criteria for determining the existence of such relationship or the so-called "four-fold test," i.e., (a) selection and engagement of employee, (b) payment 7

of wages, (c) power of dismissal, and, (d) power of control, De los Reyes was not an employee but an independent contractor. On 17 June 1994 the motion of petitioner was granted by the Labor Arbiter and the case was dismissed on the ground that the element of control was not sufficiently established since the rules and guidelines set by petitioner in its agency agreement with respondent Delos Reyes were formulated only to achieve the desired result without dictating the means or methods of attaining it. Respondent NLRC however appreciated the evidence from a different perspective. It determined that respondent De los Reyes was under the effective control of petitioner in the critical and most important aspects of his work as Unit Manager. This conclusion was derived from the provisions in the contract which appointed private respondent as Acting Unit Manager, to wit: (a) De los Reyes was to serve exclusively the company, therefore, he was not an independent contractor; (b) he was required to meet certain manpower and production quota; and, (c) petitioner controlled the assignment to and removal of soliciting agents from his unit. The NLRC also took into account other circumstances showing that petitioner exercised employer's prerogatives over De los Reyes, e.g., (a) limiting the work of respondent De los Reyes to selling a life insurance policy known as "Salary Deduction Insurance" only to members of the Philippine National Police, public and private school teachers and other employees of private companies; (b) assigning private respondent to a particular place and table where he worked whenever he was not in the field; (c) paying private respondent during the period of twelve (12) months of his appointment as Acting Unit Manager the amount of P1,500.00 as Unit Development Financing of which 20% formed his salary and the rest, i.e., 80%, as advance of his expected commissions; and, (d) promising that upon completion of certain requirements, he would be promoted to Unit Manager with the right of petitioner to revert him to agent status when warranted. Parenthetically, both petitioner and respondent NLRC treated the agency contract and the management contract entered into between petitioner and De los Reyes as contracts of agency. We however hold otherwise. Unquestionably there exist major distinctions between the two agreements. While the first has the earmarks of an agency contract, the second is far removed from the concept of agency in that provided therein are conditionalities that indicate an employer-employee relationship. The NLRC therefore was correct in finding that private respondent was an employee of petitioner, but this holds true only insofar as the management contract is concerned. In view thereof, the Labor Arbiter has jurisdiction over the case.. It is axiomatic that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in the management contract and providing therein that the "employee" is an independent contractor when the terms of the agreement clearly show otherwise. For, the employment status of a person is defined and prescribed by law and not by what the parties say it should be. 7 In determining the status of the management contract, the "four-fold test" on employment earlier mentioned has to be applied. Petitioner contends that De los Reyes was never required to go through the pre-employment procedures and that the probationary employment status was reserved only to employees of petitioner. On this score, it insists that the first requirement of selection and engagement of the employee was not met. A look at the provisions of the contract shows that private respondent was appointed as Acting Unit Manager only upon recommendation of the District Manager. 8 This indicates that private respondent was hired by petitioner because of the favorable endorsement of its duly authorized officer. But, this approbation could only have been based on the performance of De los Reyes as agent under the agency contract so that there can be no 8

other conclusion arrived under this premise than the fact that the agency or underwriter phase of the relationship of De los Reyes with petitioner was nothing more than a trial or probationary period for his eventual appointment as Acting Unit Manager of petitioner. Then, again, the very designation of the appointment of private respondent as "acting" unit manager obviously implies a temporary employment status which may be made permanent only upon compliance with company standards such as those enumerated under Sec. 6 of the management contract. 9 On the matter of payment of wages, petitioner points out that respondent was compensated strictly on commission basis, the amount of which was totally dependent on his total output. But, the manager's contract, speaks differently. Thus 4. Performance Requirements. To maintain your appointment as Acting Unit Manager you must meet the following manpower and production requirements: Quarter Active Calendar Year Production Agents Cumulative FYP Production 1st 2 P 125,000 2nd 3 250,000 3rd 4 375,000 4th 5 500,000 5.4. Unit Development Financing (UDF). As an Acting Unit Manager you shall be given during the first 12 months of your appointment a financial assistance which is composed of two parts: 5.4.1. Free Portion amounting to P300 per month, subject to your meeting prescribed minimum performance requirement on manpower and premium production. The free portion is not payable by you. 5.4.2. Validate Portion amounting to P1,200 per month, also subject to meeting the same prescribed minimum performance requirements on manpower and premium production. The validated portion is an advance against expected compensation during the UDF period and thereafter as may be necessary. The above provisions unquestionably demonstrate that the performance requirement imposed on De los Reyes was applicable quarterly while his entitlement to the free portion (P300) and the validated portion (P1,200) wasmonthly starting on the first month of the twelve (12) months of the appointment. Thus, it has to be admitted that even before the end of the first quarter and prior to the so-called quarterly performance evaluation, private respondent was already entitled to be paid both the free and validated portions of the UDF every month because his production performance could not be determined until after the lapse of the quarter involved. This indicates quite clearly that the unit manager's quarterly performance had no bearing at all on his entitlement at least to the free portion of the UDF which for all intents and purposes comprised the salary regularly paid to him by petitioner. Thus it cannot be validly claimed that the financial assistance consisting of the free portion of the UDF was purely dependent on the premium production of the agent. Be that as it may, it is worth considering that the payment of compensation by way of commission does not militate against the conclusion that private respondent was an employee of petitioner. Under Art. 97 of the Labor Code, "wage" 9

shall mean "however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, price or commission basis . . . ."10 As to the matter involving the power of dismissal and control by the employer, the latter of which is the most important of the test, petitioner asserts that its termination of De los Reyes was but an exercise of its inherent right as principal under the contracts and that the rules and guidelines it set forth in the contract cannot, by any stretch of the imagination, be deemed as an exercise of control over the private respondent as these were merely directives that fixed the desired result without dictating the means or method to be employed in attaining it. The following factual findings of the NLRC 11 however contradict such claims: A perusal of the appointment of complainant as Acting Unit Manager reveals that: 1. Complainant was to "exclusively" serve respondent company. Thus it is provided: . . . 7..7 Other causes of Termination: This appointment may likewise be terminated for any of the following causes: . . . 7..7..2. Your entering the service of the government or another life insurance company; 7..7..3. Your accepting a managerial or supervisory position in any firm doing business in the Philippines without the written consent of the Company; . . . 2. Complainant was required to meet certain manpower and production quotas. 3. Respondent (herein petitioner) controlled the assignment and removal of soliciting agents to and from complainant's unit, thus: . . . 7..2. Assignment of Agents: Agents recruited and trained by you shall be attached to your unit unless for reasons of Company policy, no such assignment should be made. The Company retains the exclusive right to assign new soliciting agents to the unit. It is agreed that the Company may remove or transfer any soliciting agents appointed and assigned to the said unit. . . . It would not be amiss to state that respondent's duty to collect the company's premiums using company receipts under Sec. 7.4 of the management contract is further evidence of petitioner's control over respondent, thus: xxx xxx xxx 7.4. Acceptance and Remittance of Premiums. . . . . the Company hereby authorizes you to accept and to receive sums of money in payment of premiums, loans, deposits on applications, with or without interest, due from policyholders and applicants for insurance, and the like, specially from policyholders of business solicited and sold by the agents attached to your unit provided however, that all such payments shall be duly receipted by you on the corresponding Company's "Agents' Receipt" to be provided you for this purpose and to be covered by such rules and accounting regulations the Company may issue from time to time on the matter. Payments received by you shall be turned over to the Company's designated District or Service Office clerk or directly to the Home Office not later than the next working day from receipt thereof . . . . Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao 12 to the instant case under the doctrine of stare decisis, postulating that both cases involve parties similarly situated and facts which are almost identical. 10

But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent was appointed Agency Manager under an Agency Manager Contract. To implement his end of the agreement, Melecio Basiao organized an agency office to which he gave the name M. Basiao and Associates. The Agency Manager Contract practically contained the same terms and conditions as the Agency Contract earlier entered into, and the Court observed that, "drawn from the terms of the contract they had entered into, (which) either expressly or by necessary implication, Basiao (was) made the master of his own time and selling methods, left to his own judgment the time, place and means of soliciting insurance, set no accomplishment quotas and compensated him on the bases of results obtained. He was not bound to observe any schedule of working hours or report to any regular station; he could seek and work on his prospects anywhere and at anytime he chose to and was free to adopt the selling methods he deemed most effective." Upon these premises, Basiao was considered as agent an independent contractor of petitioner INSULAR LIFE. Unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency manager. There is no evidence that to implement his obligations under the management contract, De los Reyes had organized an office. Petitioner in fact has admitted that it provided De los Reyes a place and a table at its office where he reported for and worked whenever he was not out in the field. Placed under petitioner's Cebu District Service Office, the unit was given a name by petitioner De los Reyes and Associates and assigned Code No. 11753 and Recruitment No. 109398. Under the managership contract, De los Reyes was obliged to work exclusively for petitioner in life insurance solicitation and was imposed premium production quotas. Of course, the acting unit manager could not underwrite other lines of insurance because his Permanent Certificate of Authority was for life insurance only and for no other. He was proscribed from accepting a managerial or supervisory position in any other office including the government without the written consent of petitioner. De los Reyes could only be promoted to permanent unit manager if he met certain requirements and his promotion was recommended by the petitioner's District Manager and Regional Manager and approved by its Division Manager. As Acting Unit Manager, De los Reyes performed functions beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised administrative functions which were necessary and beneficial to the business of INSULAR LIFE. In Great Pacific Life Insurance Company v. NLRC 13 which is closer in application than Basiao to this present controversy, we found that "the relationships of the Ruiz brothers and Grepalife were those of employeremployee. First, their work at the time of their dismissal as zone supervisor and district manager was necessary and desirable to the usual business of the insurance company. They were entrusted with supervisory, sales and other functions to guard Grepalife's business interests and to bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the company . . . . A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out . . . ." We need elaborate no further. Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner. WHEREFORE, the petition of Insular Life Assurance Company, Ltd., is DENIED and the Decision of the National Labor Relations Commission dated 3 March 1995 and its Order of 6 April 1996 sustaining it are AFFIRMED. Let this case be REMANDED to the Labor Arbiter a quo who is directed to hear and dispose of this case with deliberate dispatch in light of the views expressed herein. 11

SO ORDERED. Davide, Jr., Vitug, Panganiban and Quisumbing, JJ., concur.

Footnotes 1 Decision penned by Labor Arbiter Nicasio C. Aninon, Rollo, p. 35. 2 Penned by Commissioner Amorito V. Anete, concurred in by Presiding Commissioner Irenea E. Ceniza and Commissioner Bernabe S. Batuhan, id., p. 45. 3 G.R. No. 84484, 15 November 1989, 179 SCRA 459. 4 Agency Contract, Rollo, p. 72. 5 Letter dated 24 August 1992 sent by petitioner through its supervisor Gracia A. Refugia to Pantaleon de los Reyes, id., p. 50. 6 Office Memorandum of petitioner dated 5 March 1993 addressed to respondent De los Reyes, id., pp. 51-57. 7 Industrial Timber Corporation v. NLRC, G.R. No. 83616, 20 January 1989, 169 SCRA 341. 8 Rollo, p. 51. 9 Ibid. 10 Cosmopolitan Funeral Homes, Inc. v. Maalat, G.R. No. 86693, 2 July 1990, 187 SCRA 109. 11 Rollo, p. 36. 12 See Note 3. 13 G.R. Nos. 80750-51, 23 July 1990, 187 SCRA 694, 698.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. Nos. 169295-96 November 20, 2006

REMINGTON INDUSTRIAL SALES CORPORATION, Petitioner, vs. ERLINDA CASTANEDA, Respondent. DECISION PUNO, J.: Before this Court is the Petition for Review on Certiorari1 filed by Remington Industrial Sales Corporation to reverse and set aside the Decision2 of the Fourth Division of the Court of Appeals in CA-G.R. SP Nos. 64577 and 68477, dated January 31, 2005, which dismissed petitioners consolidated petitions for certiorari, and its subsequent Resolution,3 dated August 11, 2005, which denied petitioners motion for reconsideration. The antecedent facts of the case, as narrated by the Court of Appeals, are as follows: The present controversy began when private respondent, Erlinda Castaneda ("Erlinda") instituted on March 2, 1998 a complaint for illegal dismissal, underpayment of wages, non-payment of overtime services, nonpayment of service incentive leave pay and non-payment of 13th month pay against Remington before the NLRC, National Capital Region, Quezon City. The complaint impleaded Mr. Antonio Tan in his capacity as the Managing Director of Remington. Erlinda alleged that she started working in August 1983 as company cook with a salary of Php 4,000.00 for Remington, a corporation engaged in the trading business; that she worked for six (6) days a week, starting as early as 6:00 a.m. because she had to do the marketing and would end at around 5:30 p.m., or even later, after most of the employees, if not all, had left the company premises; that she continuously worked with Remington until she was unceremoniously prevented from reporting for work when Remington transferred to a new site in Edsa, Caloocan City. She averred that she reported for work at the new site in Caloocan City on January 15, 1998, only to be informed that Remington no longer needed her services. Erlinda believed that her dismissal was illegal because she was not given the notices required by law; hence, she filed her complaint for reinstatement without loss of seniority rights, salary differentials, service incentive leave pay, 13th month pay and 10% attorneys fees. Remington denied that it dismissed Erlinda illegally. It posited that Erlinda was a domestic helper, not a regular employee; Erlinda worked as a cook and this job had nothing to do with Remingtons business of trading in construction or hardware materials, steel plates and wire rope products. It also contended that contrary to Erlindas allegations that the (sic) she worked for eight (8) hours a day, Erlindas duty was merely to cook lunch and "merienda", after which her time was hers to spend as she pleased. Remington also maintained that it did not exercise any degree of control and/or supervision over Erlindas work as her only concern was to ensure that the employees lunch and "merienda" were available and served at the designated time. Remington likewise belied Erlindas assertion that her work extended beyond 5:00 p.m. as she could only leave after all the employees had gone. The truth, according to Remington, is that Erlinda did not have to 13

punch any time card in the way that other employees of Remington did; she was free to roam around the company premises, read magazines, and to even nap when not doing her assigned chores. Remington averred that the illegal dismissal complaint lacked factual and legal bases. Allegedly, it was Erlinda who refused to report for work when Remington moved to a new location in Caloocan City. In a Decision4 dated January 19, 1999, the labor arbiter dismissed the complaint and ruled that the respondent was a domestic helper under the personal service of Antonio Tan, finding that her work as a cook was not usually necessary and desirable in the ordinary course of trade and business of the petitioner corporation, which operated as a trading company, and that the latter did not exercise control over her functions. On the issue of illegal dismissal, the labor arbiter found that it was the respondent who refused to go with the family of Antonio Tan when the corporation transferred office and that, therefore, respondent could not have been illegally dismissed. Upon appeal, the National Labor Relations Commission (NLRC) rendered a Decision, 5 dated November 23, 2000, reversing the labor arbiter, ruling, viz: We are not inclined to uphold the declaration below that complainant is a domestic helper of the family of Antonio Tan. There was no allegation by respondent that complainant had ever worked in the residence of Mr. Tan. What is clear from the facts narrated by the parties is that complainant continuously did her job as a cook in the office of respondent serving the needed food for lunch and merienda of the employees. Thus, her work as cook inured not for the benefit of the family members of Mr. Tan but solely for the individual employees of respondent. Complainant as an employee of respondent company is even bolstered by no less than the certification dated May 23, 1997 issued by the corporate secretary of the company certifying that complainant is their bonafide employee. This is a solid evidence which the Labor Arbiter simply brushed aside. But, such error would not be committed here as it would be at the height of injustice if we are to declare that complainant is a domestic helper. Complainants work schedule and being paid a monthly salary of P4,000.00 are clear indication that she is a company employee who had been employed to cater to the food needed by the employees which were being provided by respondent to form part of the benefit granted them. With regard to the issue of illegal dismissal, we believe that there is more reason to believe that complainant was not dismissed because allegedly she was the one who refused to work in the new office of respondent. However, complainants refusal to join the workforce due to poor eyesight could not be considered abandonment of work or voluntary resignation from employment. Under the Labor Code as amended, an employee who reaches the age of sixty years old (60 years) has the option to retire or to separate from the service with payment of separation pay/retirement benefit. In this case, we notice that complainant was already 60 years old at the time she filed the complaint praying for separation pay or retirement benefit and some money claims. Based on Article 287 of the Labor Code as amended, complainant is entitled to be paid her separation pay/retirement benefit equivalent to one-half (1/2) month for every year of service. The amount of separation pay would be based on the prescribed minimum wage at the time of dismissal since she was then underpaid. In 14

as much as complainant is underpaid of her wages, it behooves that she should be paid her salary differential for the last three years prior to separation/retirement. xxx xxx xxx

WHEREFORE, premises considered, the assailed decision is hereby, SET ASIDE, and a new one is hereby entered ordering respondents to pay complainant the following: 1. Salary differential - P12,021.12 2. Service Incentive Leave Pay - 2,650.00 3. 13th Month Pay differential 1,001.76 4. Separation Pay/retirement benefit - 36,075.00 Total - P51,747.88 SO ORDERED. Petitioner moved to reconsider this decision but the NLRC denied the motion. This denial of its motion prompted petitioner to file a Petition for Certiorari6 with the Court of Appeals, docketed as CA-G.R. SP No. 64577, on May 4, 2001, imputing grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC in (1) reversing in toto the decision of the labor arbiter, and (2) awarding in favor of respondent salary differential, service incentive leave pay, 13th month pay differential and separation benefits in the total sum of P51,747.88. While the petition was pending with the Court of Appeals, the NLRC rendered another Decision 7 in the same case on August 29, 2001. How and why another decision was rendered is explained in that decision as follows: On May 17, 2001, complainant filed a Manifestation praying for a resolution of her Motion for Reconsideration and, in support thereof, alleges that, sometime December 18, 2000, she mailed her Manifestation and Motion for Reconsideration registered as Registered Certificate No. 188844; and that the said mail was received by the NLRC, through a certain Roland Hernandez, on December 26, 2000. Certifications to this effect was issued by the Postmaster of the Sta. Mesa Post Office bearing the date May 11, 2001 (Annexes A and B, Complainants Manifestation). Evidence in support of complainants having actually filed a Motion for Reconsideration within the reglementary period having been sufficiently established, a determination of its merits is thus, in order. On the merits, the NLRC found respondents motion for reconsideration meritorious leading to the issuance of its second decision with the following dispositive portion: WHEREFORE, premises considered, the decision dated November 23, 2000, is MODIFIED by increasing the award of retirement pay due the complainant in the total amount of SIXTY TWO THOUSAND FOUR HUNDRED THIRTY-SEVEN and 50/100 (P62,437.50). All other monetary relief so adjudged therein are maintained and likewise made payable to the complainant. SO ORDERED. Petitioner challenged the second decision of the NLRC, including the resolution denying its motion for reconsideration, through a second Petition for Certiorari8 filed with the Court of Appeals, docketed as CA-G.R. SP No. 68477 and dated January 8, 2002, this time imputing grave abuse of discretion amounting to lack of or 15

excess of jurisdiction on the part of the NLRC in (1) issuing the second decision despite losing its jurisdiction due to the pendency of the first petition for certiorari with the Court of Appeals, and (2) assuming it still had jurisdiction to issue the second decision notwithstanding the pendency of the first petition for certiorari with the Court of Appeals, that its second decision has no basis in law since respondents motion for reconsideration, which was made the basis of the second decision, was not filed under oath in violation of Section 14, Rule VII9 of the New Rules of Procedure of the NLRC and that it contained no certification as to why respondents motion for reconsideration was not decided on time as also required by Section 10, Rule VI10 and Section 15, Rule VII11 of the aforementioned rules. Upon petitioners motion, the Court of Appeals ordered the consolidation of the two (2) petitions, on January 24, 2002, pursuant to Section 7, par. b(3), Rule 3 of the Revised Rules of the Court of Appeals. It summarized the principal issues raised in the consolidated petitions as follows: 1. Whether respondent is petitioners regular employee or a domestic helper; 2. Whether respondent was illegally dismissed; and 3. Whether the second NLRC decision promulgated during the pendency of the first petition for certiorari has basis in law. On January 31, 2005, the Court of Appeals dismissed the consolidated petitions for lack of merit, finding no grave abuse of discretion on the part of the NLRC in issuing the assailed decisions. On the first issue, it upheld the ruling of the NLRC that respondent was a regular employee of the petitioner since the former worked at the company premises and catered not only to the personal comfort and enjoyment of Mr. Tan and his family, but also to that of the employees of the latter. It agreed that petitioner enjoys the prerogative to control respondents conduct in undertaking her assigned work, particularly the nature and situs of her work in relation to the petitioners workforce, thereby establishing the existence of an employer employee relationship between them. On the issue of illegal dismissal, it ruled that respondent has attained the status of a regular employee in her service with the company. It noted that the NLRC found that no less than the companys corporate secretary certified that respondent is a bonafide company employee and that she had a fixed schedule and routine of work and was paid a monthly salary of P4,000.00; that she served with petitioner for 15 years starting in 1983, buying and cooking food served to company employees at lunch and merienda; and that this work was usually necessary and desirable in the regular business of the petitioner. It held that as a regular employee, she enjoys the constitutionally guaranteed right to security of tenure and that petitioner failed to discharge the burden of proving that her dismissal on January 15, 1998 was for a just or authorized cause and that the manner of dismissal complied with the requirements under the law. Finally, on petitioners other arguments relating to the alleged irregularity of the second NLRC decision, i.e., the fact that respondents motion for reconsideration was not under oath and had no certification explaining why it was not resolved within the prescribed period, it held that such violations relate to procedural and nonjurisdictional matters that cannot assume primacy over the substantive merits of the case and that they do not constitute grave abuse of discretion amounting to lack or excess of jurisdiction that would nullify the second NLRC decision.

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The Court of Appeals denied petitioners contention that the NLRC lost its jurisdiction to issue the second decision when it received the order indicating the Court of Appeals initial action on the first petition for certiorari that it filed. It ruled that the NLRCs action of issuing a decision in installments was not prohibited by its own rules and that the need for a second decision was justified by the fact that respondents own motion for reconsideration remained unresolved in the first decision. Furthermore, it held that under Section 7, Rule 65 of the Revised Rules of Court,12 the filing of a petition for certiorari does not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding with the case. From this decision, petitioner filed a motion for reconsideration on February 22, 2005, which the Court of Appeals denied through a resolution dated August 11, 2005. Hence, the present petition for review. The petitioner raises the following errors of law: (1) the Court of Appeals erred in affirming the NLRCs ruling that the respondent was petitioners regular employee and not a domestic helper; (2) the Court of Appeals erred in holding that petitioner was guilty of illegal dismissal; and (3) the Court of Appeals erred when it held that the issuance of the second NLRC decision is proper. The petition must fail. We affirm that respondent was a regular employee of the petitioner and that the latter was guilty of illegal dismissal. Before going into the substantive merits of the present controversy, we shall first resolve the propriety of the issuance of the second NLRC decision. The petitioner contends that the respondents motion for reconsideration, upon which the second NLRC decision was based, was not under oath and did not contain a certification as to why it was not decided on time as required under the New Rules of Procedure of the NLRC. 13 Furthermore, the former also raises for the first time the contention that respondents motion was filed beyond the ten (10)-calendar day period required under the same Rules,14 since the latter received a copy of the first NLRC decision on December 6, 2000, and respondent filed her motion only on December 18, 2000. Thus, according to petitioner, the respondents motion for reconsideration was a mere scrap of paper and the second NLRC decision has no basis in law. We do not agree. It is well-settled that the application of technical rules of procedure may be relaxed to serve the demands of substantial justice, particularly in labor cases.15 Labor cases must be decided according to justice and equity and the substantial merits of the controversy.16 Rules of procedure are but mere tools designed to facilitate the attainment of justice.17 Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided.18 This Court has consistently held that the requirement of verification is formal, and not jurisdictional. Such requirement is merely a condition affecting the form of the pleading, non-compliance with which does not necessarily render it fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.19 The court may order the correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order that the ends of justice may thereby be served.20 17

Anent the argument that respondents motion for reconsideration, on which the NLRCs second decision was based, was filed out of time, such issue was only brought up for the first time in the instant petition where no new issues may be raised by a party in his pleadings without offending the right to due process of the opposing party. Nonetheless, the petitioner asserts that the respondent received a copy of the NLRCs first decision on December 6, 2000, and the motion for reconsideration was filed only on December 18, 2000, or two (2) days beyond the ten (10)-calendar day period requirement under the New Rules of Procedure of the NLRC and should not be allowed.21 This contention must fail. Under Article 22322 of the Labor Code, the decision of the NLRC shall be final and executory after ten (10) calendar days from the receipt thereof by the parties. While it is an established rule that the perfection of an appeal in the manner and within the period prescribed by law is not only mandatory but jurisdictional, and failure to perfect an appeal has the effect of rendering the judgment final and executory, it is equally settled that the NLRC may disregard the procedural lapse where there is an acceptable reason to excuse tardiness in the taking of the appeal. 23 Among the acceptable reasons recognized by this Court are (a) counsel's reliance on the footnote of the notice of the decision of the Labor Arbiter that "the aggrieved party may appeal. . . within ten (10) working days"; 24 (b) fundamental consideration of substantial justice;25 (c) prevention of miscarriage of justice or of unjust enrichment, as where the tardy appeal is from a decision granting separation pay which was already granted in an earlier final decision; 26 and (d) special circumstances of the case combined with its legal merits27 or the amount and the issue involved.28 We hold that the particular circumstances in the case at bar, in accordance with substantial justice, call for a liberalization of the application of this rule. Notably, respondents last day for filing her moti on for reconsideration fell on December 16, 2000, which was a Saturday. In a number of cases, 29 we have ruled that if the tenth day for perfecting an appeal fell on a Saturday, the appeal shall be made on the next working day. The reason for this ruling is that on Saturdays, the office of the NLRC and certain post offices are closed. With all the more reason should this doctrine apply to respondents filing of the motion for reconsideration of her cause, which the NLRC itself found to be impressed with merit. Indeed, technicality should not be permitted to stand in the way of equitably and completely resolving the rights and obligations of the parties for the ends of justice are reached not only through the speedy disposal of cases but, more importantly, through a meticulous and comprehensive evaluation of the merits of a case. Finally, as to petitioners argument that the NLRC had already lost its jurisdiction to decide the case when it filed its petition for certiorari with the Court of Appeals upon the denial of its motion for reconsideration, suffice it to state that under Section 7 of Rule 6530 of the Revised Rules of Court, the petition shall not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding with the case. Thus, the mere pendency of a special civil action for certiorari, in connection with a pending case in a lower court, does not interrupt the course of the latter if there is no writ of injunction. 31 Clearly, there was no grave abuse of discretion on the part of the NLRC in issuing its second decision which modified the first, especially since it failed to consider the respondents motion for reconsideration when it issued its first decision.

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Having resolved the procedural matters, we shall now delve into the merits of the petition to determine whether respondent is a domestic helper or a regular employee of the petitioner, and whether the latter is guilty of illegal dismissal. Petitioner relies heavily on the affidavit of a certain Mr. Antonio Tan and contends that respondent is the latters domestic helper and not a regular employee of the company since Mr. Tan has a separate and distin ct personality from the petitioner. It maintains that it did not exercise control and supervision over her functions; and that it operates as a trading company and does not engage in the restaurant business, and therefore respondents work as a cook, which was not usually necessary or desirable to its usual line of business or trade, could not make her its regular employee. This contention fails to impress. In Apex Mining Company, Inc. v. NLRC,32 this Court held that a househelper in the staff houses of an industrial company was a regular employee of the said firm. We ratiocinated that: Under Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended, the terms "househelper" or "domestic servant" are defined as follows: "The term househelper as used herein is synonymous to the term domestic servant and shall refer to any person, whether male or female, who renders services in and about the employers home and which services are usually necessary or desirable for the maintenance and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment of the employers family." The foregoing definition clearly contemplates such househelper or domestic servant who is employed in the employers home to minister exclusively to the personal comfort and enjoyment of the employers family. Such definition covers family drivers, domestic servants, laundry women, yayas, gardeners, houseboys and similar househelps. xxx xxx xxx

The criteria is the personal comfort and enjoyment of the family of the employer in the home of said employer. While it may be true that the nature of the work of a househelper, domestic servant or laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in their circumstances is that in the former instance they are actually serving the family while in the latter case, whether it is a corporation or a single proprietorship engaged in business or industry or any other agricultural or similar pursuit, service is being rendered in the staffhouses or within the premises of the business of the employer. In such instance, they are employees of the company or employer in the business concerned entitled to the privileges of a regular employee. Petitioner contends that it is only when the househelper or domestic servant is assigned to certain aspects of the business of the employer that such househelper or domestic servant may be considered as such an employee. The Court finds no merit in making any such distinction. The mere fact that the househelper or domestic servant is working within the premises of the business of the employer and in relation to or in connection with its business, as in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that such househelper or domestic servant is and should be considered as a regular employee of the employer and not as a mere family househelper or domestic servant as contemplated in Rule XIII, Section 1(b), Book 3 of the Labor Code, as amended. 19

In the case at bar, the petitioner itself admits in its position paper 33 that respondent worked at the company premises and her duty was to cook and prepare its employees lunch and merienda. Clearly, the situs, as well as the nature of respondents work as a cook, who caters not only to the needs of Mr. Tan and his f amily but also to that of the petitioners employees, makes her fall squarely within the definition of a regular employee under the doctrine enunciated in the Apex Mining case. That she works within company premises, and that she does not cater exclusively to the personal comfort of Mr. Tan and his family, is reflective of the existence of the petitioners right of control over her functions, which is the primary indicator of the existence of an employer employee relationship. Moreover, it is wrong to say that if the work is not directly related to the employer's business, then the person performing such work could not be considered an employee of the latter. The determination of the existence of an employer-employee relationship is defined by law according to the facts of each case, regardless of the nature of the activities involved.34 Indeed, it would be the height of injustice if we were to hold that despite the fact that respondent was made to cook lunch and merienda for the petitioners employees, which work ultimately redounded to the benefit of the petitioner corporation, she was merely a domestic worker of the family of Mr. Tan. We note the findings of the NLRC, affirmed by the Court of Appeals, that no less than the companys corporate secretary has certified that respondent is a bonafide company employee;35 she had a fixed schedule and routine of work and was paid a monthly salary of P4,000.00;36 she served with the company for 15 years starting in 1983, buying and cooking food served to company employees at lunch and merienda, and that this service was a regular feature of employment with the company.37 Indubitably, the Court of Appeals, as well as the NLRC, correctly held that based on the given circumstances, the respondent is a regular employee of the petitioner.1wphi1 Having determined that the respondent is petitioners regular employee, we now proceed to ascertain the legality of her dismissal from employment. Petitioner contends that there was abandonment on respondents part when she refused to report for work when the corporation transferred to a new location in Caloocan City, claiming that her poor eyesight would make long distance travel a problem. Thus, it cannot be held guilty of illegal dismissal. On the other hand, the respondent claims that when the petitioner relocated, she was no longer called for duty and that when she tried to report for work, she was told that her services were no longer needed. She contends that the petitioner dismissed her without a just or authorized cause and that she was not given prior notice, hence rendering the dismissal illegal. We rule for the respondent. As a regular employee, respondent enjoys the right to security of tenure under Article 279 38 of the Labor Code and may only be dismissed for a just39 or authorized40 cause, otherwise the dismissal becomes illegal and the employee becomes entitled to reinstatement and full backwages computed from the time compensation was withheld up to the time of actual reinstatement. Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.41 It is a form of neglect of duty; hence, a just cause for termination of employment by the employer under Article 282 of the Labor Code, which enumerates the just causes for termination by the employer. 42 For a valid finding of 20

abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employee has no more intention to work.43 The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified.44 This, the petitioner failed to do in the case at bar. Alongside the petitioners contention that it was the respondent who quit her employment and refused t o return to work, greater stock may be taken of the respondents immediate filing of her complaint with the NLRC. Indeed, an employee who loses no time in protesting her layoff cannot by any reasoning be said to have abandoned her work, for it is well-settled that the filing of an employee of a complaint for illegal dismissal with a prayer for reinstatement is proof enough of her desire to return to work, thus, negating the employers charge of abandonment.45 In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid cause; failure to do so would necessarily mean that the dismissal was illegal. 46 The employers case succeeds or fails on the strength of its evidence and not on the weakness of the employees defense. 47 If doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.48 IN VIEW WHEREOF, the petition is DENIED for lack of merit. The assailed Decision dated January 31, 2005, and the Resolution dated August 11, 2005, of the Court of Appeals in CA-G.R. SP Nos. 64577 and 68477 are AFFIRMED. Costs against petitioner. SO ORDERED. REYNATO S. PUNO Associate Justice WE CONCUR: ANGELINA SANDOVAL-GUTIERREZ Associate Justice RENATO C. CORONA Associate Justice CANCIO C. GARCIA Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Associate Justice Chairperson 21 ADOLFO S. AZCUNA Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO V. PANGANIBAN Chief Justice
Footnotes 1 Under Rule 45 of the 1997 Rules of Civil Procedure. 2 Rollo, pp. 15-33; penned by Justice Arturo D. Brion, concurred in by Justices Delilah Vidallon-Magtolis and Eliezer R. De los Santos. 3 Id. at 35-36. 4 Id. at 98-104; penned by Labor Arbiter Vicente R. Layawen. 5 Id. at 106-128; penned by Presiding Commissioner Raul T. Aquino, concurred in by Commissioners Victoriano R. Calaycay and Angelita A. Gacutan. 6 Id. at 75-85. 7 Id. at 118-128. 8 Annex "D," id. at 50-60. 9 Section 14, Rule VII of the New Rules of Procedure of the National Labor Relations Commission, provides: Section 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. 10 Section 10, Rule VI of the New Rules of Procedure of the National Labor Relations Commission, provides: Section 10. Period to Resolve Appeal. The Commission shall resolve the appeal from the decision, order of award of the Labor Arbiter and the Administrator within twenty (20) calendar days from receipt of the answer of the appellee or upon the filing of the last pleading or memorandum required by this Rules. In case of appeal from the decision of the Regional Director or his duly authorized Hearing Officer, the same shall be resolved within ten (10) calendar days. 11 Section 15, Rule VII of the New Rules of Procedure of the National Labor Relations Commission provides: Section 15. Period to Decide/Resolve Certification Thereto. The Commission shall decide/resolve all cases/matters within the prescribed period. In the event that a case/matter has not been decided/resolved within the prescribed period, the Chairman/Presiding Commissioners shall certify why the decision/resolution has been issued within the said period and a copy thereof served upon the parties. 12 Section 7, Rule 65 of the 1997 Revised Rules of Court, provides: Section 7. Expediting proceedings; injunctive relief. The court in which the petition is filed may issue orders expediting the proceedings, and it may also grant a temporary restraining order or a writ of preliminary injunction for the preservation of the rights of the parties pending such proceedings. The petition shall not interrupt the course of the principal case unless a temporary restraining order or a writ of preliminary injunction has been issued against the public respondent from further proceeding in the case. 13 Supra, notes 9, 10 and 11. 14 Section 14, Rule VII of the New Rules of Procedure of the National Labor Relations Commission, supranote 9. 15 Havtor Management Phils., Inc. v. National Labor Relations Commission , G.R. No. 146336, December 13, 2001, 372 SCRA 271. 16 EDI Staff Builders International, Inc. v. Magsino , G.R. No. 139430, June 20, 2001, 359 SCRA 212. 17 Philippine National Bank v. Sanao Marketing Corporation, G.R. No. 153951, July 29, 2005, 465 SCRA 307. 18 Solicitor General v. Metropolitan Manila Authority , G.R. No. 102782, December 11, 1991, 204 SCRA 837, 843. 19 Shipside Incorporated v. Court of Appeals, G.R. No. 143377, February 20, 2001, 352 SCRA 346. 20 Villarica v. Court of Appeals , G.R. No. 96085, March 16, 1992, First Division, Minute Resolution.

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Section 14, Rule VII of the New Rules of Procedure of the National Labor Relations Commission. Article 223 of the Labor Code of the Philippines provides: Article 223. Appeal Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. xxx The Commission shall decide all cases within twenty (20) calendar days from receipt of the answer of the appellee. The decision of the Commission shall be final and executory after ten (10) calendar days from receipt thereof by the parties. 23 Chong Guan Trading v. NLRC , G.R. No. 81471, April 26, 1989, 172 SCRA 831, 839. 24 Firestone Tire and Rubber Co. v. Lariosa, G.R. No. L-70479, February 27, 1987, 148 SCRA 187, 190-191. 25 Insular Life Assurance Co. v. NLRC, G.R. No. L-74191, December 21, 1987, 156 SCRA 740, 746; see also the Resolution therein of July 26, 1988; Blancaflor v. NLRC, G.R. No. 101013, February 2, 1993, 218 SCRA 366, 370-371. 26 Olacao v. NLRC, G.R. No. 81390, August 29, 1989, 177 SCRA 38, 41. 27 Pacific Asia Overseas Shipping Corp. v. NLRC , G.R. No. 76595, May 6, 1988, 161 SCRA 122, 130. 28 City Fair Corp. v. NLRC, G.R. No. 95711, April 21, 1995, 243 SCRA 572, 576. 29 See Judy Philippines, Inc. v. NLRC , G.R. No. 111934, April 29, 1998, 289 SCRA 764; Aquino v. NLRC, G.R. No. 98108, September 3, 1993, 226 SCRA 81-82; Pacaa v. National Labor Relations Commission, G.R. No. 83513, April 18, 1989, 172 SCRA 472. 30 Supra note 13. 31 Peza v. Alikpala, G.R. No. L-29749, April 15, 1988, 160 SCRA 35. 32 G.R. No. 94951, April 22, 1991, 196 SCRA 251, 254-255. 33 CA rollo, p. 24. 34 Philippine Fuji Xerox Corporation v. NLRC , G.R. No. 111501, March 5, 1996, 254 SCRA 300-301. 35 Rollo, p. 27. 36 Id. 37 Id. 38 Article 279 of the Labor Code of the Philippines provides: Article 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. 39 See Article 282 of the Labor Code of the Philippines. 40 See Articles 283 and 284 of the Labor Code of the Philippines. 41 Columbus Philippine Bus Corporation v. NLRC , G.R. Nos. 114858-59, September 7, 2001, 364 SCRA 622. 42 Nueva Ecija Electric Cooperative II v. NLRC , G.R. No. 157603, June 23, 2005, 461 SCRA 182. 43 Sta. Catalina College v. NLRC , G.R. No. 144483, November 19, 2003, 416 SCRA 239-240. 44 C. Alcantara & Sons, Inc. v. NLRC, G.R. No. 73521, January 5, 1994, 229 SCRA 109. 45 Samarca v. Arc-Men Industries, Inc., G.R. No. 146118, October 8, 2003, 413 SCRA 162; Lambo v. NLRC, G.R. No. 111042, October 26, 1999, 317 SCRA 420. 46 Solidbank Corporation v. Court of Appeals, G.R. No. 151026, August 25, 2003, 409 SCRA 554. 47 PLDT v. Tiamson, G.R. Nos. 164684-85, November 11, 2005, 474 SCRA 771. 48 Sy v. Court of Appeals, G.R. No. 148766, January 22, 2003, 395 SCRA 729.
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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 146881 February 5, 2007

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners, vs. DR. DEAN N. CLIMACO, Respondent. DECISION AZCUNA, J.: This is a petition for review on certiorari of the Decision of the Court of Appeals 1 promulgated on July 7, 2000, and its Resolution promulgated on January 30, 2001, denying petitioners motion for reconsideration. The Court of Appeals ruled that an employer-employee relationship exists between respondent Dr. Dean N. Climaco and petitioner Coca-Cola Bottlers Phils., Inc. (Coca-Cola), and that respondent was illegally dismissed. Respondent Dr. Dean N. Climaco is a medical doctor who was hired by petitioner Coca-Cola Bottlers Phils., Inc. by virtue of a Retainer Agreement that stated: WHEREAS, the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement upon terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual agreement hereinafter contained, the parties agree as follows: 1. This Agreement shall only be for a period of one (1) year beginning January 1, 1988 up to December 31, 1988. The said term notwithstanding, either party may terminate the contract upon giving a thirty (30)-day written notice to the other. 2. The compensation to be paid by the company for the services of the DOCTOR is hereby fixed at PESOS:Three Thousand Eight Hundred (P3,800.00) per month. The DOCTOR may charge professional fee for hospital services rendered in line with his specialization. All payments in connection with the Retainer Agreement shall be subject to a withholding tax of ten percent (10%) to be withheld by the COMPANY under the Expanded Withholding Tax System. In the event the withholding tax rate shall be increased or decreased by appropriate laws, then the rate herein stipulated shall accordingly be increased or decreased pursuant to such laws. 3. That in consideration of the above mentioned retainers fee, the DOCTOR agrees to perform the duties and obligations enumerated in the COMPREHENSIVE MEDICAL PLAN, hereto attached as Annex "A" and made an integral part of this Retainer Agreement. 4. That the applicable provisions in the Occupational Safety and Health Standards, Ministry of Labor and Employment shall be followed. 24

5. That the DOCTOR shall be directly responsible to the employee concerned and their dependents for any injury inflicted on, harm done against or damage caused upon the employee of the COMPANY or their dependents during the course of his examination, treatment or consultation, if such injury, harm or damage was committed through professional negligence or incompetence or due to the other valid causes for action. 6. That the DOCTOR shall observe clinic hours at the COMPANYS premises from Monday to Saturday of a minimum of two (2) hours each day or a maximum of TWO (2) hours each day or treatment from 7:30 a.m. to8:30 a.m. and 3:00 p.m. to 4:00 p.m., respectively unless such schedule is otherwise changed by the COMPANY as [the] situation so warrants, subject to the Labor Code provisions on Occupational Safety and Health Standards as the COMPANY may determine. It is understood that the DOCTOR shall stay at least two (2) hours a day in the COMPANY clinic and that such two (2) hours be devoted to the workshift with the most number of employees. It is further understood that the DOCTOR shall be on call at all times during the other workshifts to attend to emergency case[s]; 7. That no employee-employer relationship shall exist between the COMPANY and the DOCTOR whilst this contract is in effect, and in case of its termination, the DOCTOR shall be entitled only to such retainer fee as may be due him at the time of termination.2 The Comprehensive Medical Plan,3 which contains the duties and responsibilities of respondent, adverted to in the Retainer Agreement, provided: A. OBJECTIVE These objectives have been set to give full consideration to [the] employees and dependents health: 1. Prompt and adequate treatment of occupational and non-occupational injuries and diseases. 2. To protect employees from any occupational health hazard by evaluating health factors related to working conditions. 3. To encourage employees [to] maintain good personal health by setting up employee orientation and education on health, hygiene and sanitation, nutrition, physical fitness, first aid training, accident prevention and personnel safety. 4. To evaluate other matters relating to health such as absenteeism, leaves and termination. 5. To give family planning motivations. B. COVERAGE 1. All employees and their dependents are embraced by this program. 2. The health program shall cover pre-employment and annual p.e., hygiene and sanitation, immunizations, family planning, physical fitness and athletic programs and other activities such as group health education program, safety and first aid classes, organization of health and safety committees. 25

3. Periodically, this program will be reviewed and adjusted based on employees needs. C. ACTIVITIES 1. Annual Physical Examination. 2. Consultations, diagnosis and treatment of occupational and non-occupational illnesses and injuries. 3. Immunizations necessary for job conditions. 4. Periodic inspections for food services and rest rooms. 5. Conduct health education programs and present education materials. 6. Coordinate with Safety Committee in developing specific studies and program to minimize environmental health hazards. 7. Give family planning motivations. 8. Coordinate with Personnel Department regarding physical fitness and athletic programs. 9. Visiting and follow-up treatment of Company employees and their dependents confined in the hospital. The Retainer Agreement, which began on January 1, 1988, was renewed annually. The last one expired on December 31, 1993. Despite the non-renewal of the Retainer Agreement, respondent continued to perform his functions as company doctor to Coca-Cola until he received a letter4 dated March 9, 1995 from petitioner company concluding their retainership agreement effective 30 days from receipt thereof. It is noted that as early as September 1992, petitioner was already making inquiries regarding his status with petitioner company. First, he wrote a letter addressed to Dr. Willie Sy, the Acting President and Chairperson of the Committee on Membership, Philippine College of Occupational Medicine. In response, Dr. Sy wrote a letter5 to the Personnel Officer of Coca-Cola Bottlers Phils., Bacolod City, stating that respondent should be considered as a regular part-time physician, having served the company continuously for four (4) years. He likewise stated that respondent must receive all the benefits and privileges of an employee under Article 157 (b)6 of the Labor Code. Petitioner company, however, did not take any action. Hence, respondent made another inquiry directed to the Assistant Regional Director, Bacolod City District Office of the Department of Labor and Employment (DOLE), who referred the inquiry to the Legal Service of the DOLE, Manila. In his letter7 dated May 18, 1993, Director Dennis P. Ancheta, Legal Service, DOLE, stated that he believed that an employer-employee relationship existed between petitioner and respondent based on the Retainer Agreement and the Comprehensive Medical Plan, and the application of the "four-fold" test. However, Director Ancheta emphasized that the existence of employer-employee relationship is a question of fact. Hence, termination disputes or money claims arising from employer-employee relations exceeding P5,000 may be filed with the National Labor Relations Commission (NLRC). He stated that their opinion is strictly advisory.

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An inquiry was likewise addressed to the Social Security System (SSS). Thereafter, Mr. Romeo R. Tupas, OICFID of SSS-Bacolod City, wrote a letter8 to the Personnel Officer of Coca-Cola Bottlers Phils., Inc. informing the latter that the legal staff of his office was of the opinion that the services of respondent partake of the nature of work of a regular company doctor and that he was, therefore, subject to social security coverage. Respondent inquired from the management of petitioner company whether it was agreeable to recognizing him as a regular employee. The management refused to do so. On February 24, 1994, respondent filed a Complaint9 before the NLRC, Bacolod City, seeking recognition as a regular employee of petitioner company and prayed for the payment of all benefits of a regular employee, including 13th Month Pay, Cost of Living Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus. The case was docketed as RAB Case No. 06-02-10138-94. While the complaint was pending before the Labor Arbiter, respondent received a letter dated March 9, 1995 from petitioner company concluding their retainership agreement effective thirty (30) days from receipt thereof. This prompted respondent to file a complaint for illegal dismissal against petitioner company with the NLRC, Bacolod City. The case was docketed as RAB Case No. 06-04-10177-95. In a Decision10 dated November 28, 1996, Labor Arbiter Jesus N. Rodriguez, Jr. found that petitioner company lacked the power of control over respondents performance of his duties, and recognized as valid the Retainer Agreement between the parties. Thus, the Labor Arbiter dismissed respondents complaint in the first case, RAB Case No. 06-02-10138-94. The dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint seeking recognition as a regular employee. SO ORDERED.11 In a Decision12 dated February 24, 1997, Labor Arbiter Benjamin Pelaez dismissed the case for illegal dismissal (RAB Case No. 06-04-10177-95) in view of the previous finding of Labor Arbiter Jesus N. Rodriguez, Jr. in RAB Case No. 06-02-10138-94 that complainant therein, Dr. Dean Climaco, is not an employee of Coca-Cola Bottlers Phils., Inc. Respondent appealed both decisions to the NLRC, Fourth Division, Cebu City. In a Decision13 promulgated on November 28, 1997, the NLRC dismissed the appeal in both cases for lack of merit. It declared that no employer-employee relationship existed between petitioner company and respondent based on the provisions of the Retainer Agreement which contract governed respondents employment. Respondents motion for reconsideration was denied by the NLRC in a Resolution 14 promulgated on August 7, 1998. Respondent filed a petition for review with the Court of Appeals. In a Decision promulgated on July 7, 2000, the Court of Appeals ruled that an employer-employee relationship existed between petitioner company and respondent after applying the four-fold test: (1) the power to hire the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employers power to control the employee with respect to the means and methods by which the work is to be accomplished. 27

The Court of Appeals held: The Retainer Agreement executed by and between the parties, when read together with the Comprehensive Medical Plan which was made an integral part of the retainer agreements, coupled with the actual services rendered by the petitioner, would show that all the elements of the above test are present. First, the agreements provide that "the COMPANY desires to engage on a retainer basis the services of a physician and the said DOCTOR is accepting such engagement x x x" (Rollo, page 25). This clearly shows that Coca-Cola exercised its power to hire the services of petitioner. Secondly, paragraph (2) of the agreements showed that petitioner would be entitled to a final compensation of Three Thousand Eight Hundred Pesos per month, which amount was later raised to Seven Thousand Five Hundred on the latest contract. This would represent the element of payment of wages. Thirdly, it was provided in paragraph (1) of the agreements that the same shall be valid for a period of one year. "The said term notwithstanding, either party may terminate the contract upon giving a thirty (30) day written notice to the other." (Rollo, page 25). This would show that Coca-Cola had the power of dismissing the petitioner, as it later on did, and this could be done for no particular reason, the sole requirement being the formers compliance with the 30-day notice requirement. Lastly, paragraphs (3) and (6) of the agreements reveal that Coca-Cola exercised the most important element of all, that is, control, over the conduct of petitioner in the latters performance of his duties as a doctor for the company. It was stated in paragraph (3) that the doctor agrees to perform the duties and obligations enumerated in the Comprehensive Medical Plan referred to above. In paragraph (6), the fixed and definite hours during which the petitioner must render service to the company is laid down. We say that there exists Coca-Colas power to control petitioner because the particular objectives and activities to be observed and accomplished by the latter are fixed and set under the Comprehensive Medical Plan which was made an integral part of the retainer agreement. Moreover, the times for accomplishing these objectives and activities are likewise controlled and determined by the company. Petitioner is subject to definite hours of work, and due to this, he performs his duties to Coca-Cola not at his own pleasure but according to the schedule dictated by the company. In addition, petitioner was designated by Coca-Cola to be a member of its Bacolod Plants Safety Committee. The minutes of the meeting of the said committee dated February 16, 1994 included the name of petitioner, as plant physician, as among those comprising the committee. It was averred by Coca-Cola in its comment that they exercised no control over petitioner for the reason that the latter was not directed as to the procedure and manner of performing his assigned tasks. It went as far as saying that "petitioner was not told how to immunize, inject, treat or diagnose the employees of the respondent (Rollo, page 228). We believe that if the "control test" would be interpreted this strictly, it would result in an absurd and ridiculous situation wherein we could declare that an entity exercises control over anothers activities only in instances where the latter is directed by the former on each and every stage of performance of the particular activity. Anything less than that would be tantamount to no control at all.

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To our minds, it is sufficient if the task or activity, as well as the means of accomplishing it, is dictated, as in this case where the objectives and activities were laid out, and the specific time for performing them was fixed by the controlling party.15 Moreover, the Court of Appeals declared that respondent should be classified as a regular employee having rendered six years of service as plant physician by virtue of several renewed retainer agreements. It underscored the provision in Article 28016 of the Labor Code stating that "any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed, and his employment shall continue while such activity exists." Further, it held that the termination of respondents services without any just or authorized cause constituted illegal dismissal. In addition, the Court of Appeals found that respondents dismissal was an act oppressive to labor and was effected in a wanton, oppressive or malevolent manner which entitled respondent to moral and exemplary damages. The dispositive portion of the Decision reads: WHEREFORE, in view of the foregoing, the Decision of the National Labor Relations Commission dated November 28, 1997 and its Resolution dated August 7, 1998 are found to have been issued with grave abuse of discretion in applying the law to the established facts, and are hereby REVERSED and SET ASIDE, and private respondent Coca-Cola Bottlers, Phils.. Inc. is hereby ordered to: 1. Reinstate the petitioner with full backwages without loss of seniority rights from the time his compensation was withheld up to the time he is actually reinstated; however, if reinstatement is no longer possible, to pay the petitioner separation pay equivalent to one (1) months salary for every year of service rendered, computed at the rate of his salary at the time he was dismissed, plus backwages. 2. Pay petitioner moral damages in the amount of P50,000.00. 3. Pay petitioner exemplary damages in the amount of P50,000.00. 4. Give to petitioner all other benefits to which a regular employee of Coca-Cola is entitled from the time petitioner became a regular employee (one year from effectivity date of employment) until the time of actual payment. SO ORDERED.17 Petitioner company filed a motion for reconsideration of the Decision of the Court of Appeals. In a Resolution promulgated on January 30, 2001, the Court of Appeals stated that petitioner company noted that its Decision failed to mention whether respondent was a full-time or part-time regular employee. It also questioned how the benefits under their Collective Bargaining Agreement which the Court awarded to respondent could be given to him considering that such benefits were given only to regular employees who render a full days work of not less that eight hours. It was admitted that respondent is only required to work for two hours per day.

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The Court of Appeals clarified that respondent was a "regular part-time employee and should be accorded all the proportionate benefits due to this category of employees of [petitioner] Corporation under the CBA." It sustained its decision on all other matters sought to be reconsidered. Hence, this petition filed by Coca-Cola Bottlers Phils., Inc. The issues are: 1. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, CONTRARY TO THE DECISIONS OF THE HONORABLE SUPREME COURT ON THE MATTER. 2. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE WORK OF A PHYSICIAN IS NECESSARY AND DESIRABLE TO THE BUSINESS OF SOFTDRINKS MANUFACTURING, CONTRARY TO THE RULINGS OF THE SUPREME COURT IN ANALOGOUS CASES. 3. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND HOLDING INSTEAD THAT THE PETITIONERS EXERCISED CONTROL OVER THE WORK OF THE RESPONDENT. 4. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE IS EMPLOYER-EMPLOYEE RELATIONSHIP PURSUANT TO ARTICLE 280 OF THE LABOR CODE. 5. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THERE EXISTED ILLEGAL DISMISSAL WHEN THE EMPLOYENT OF THE RESPONDENT WAS TERMINATED WITHOUT JUST CAUSE. 6. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS A REGULAR PART TIME EMPLOYEE WHO IS ENTITLED TO PROPORTIONATE BENEFITS AS A REGULAR PART TIME EMPLOYEE ACCORDING TO THE PETITIONERS CBA. 7. THAT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR, BASED ON A SUBSTANTIAL QUESTION OF LAW, IN REVERSING THE FINDINGS OF THE LABOR ARBITERS AND THE NATIONAL LABOR RELATIONS COMMISSION, AND FINDING THAT THE RESPONDENT IS ENTITLED TO MORAL AND EXEMPLARY DAMAGES.

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The main issue in this case is whether or not there exists an employer-employee relationship between the parties. The resolution of the main issue will determine whether the termination of respondents employment is illegal. The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employees conduct, or the so-called "control test," considered to be the most important element.18 The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no employer-employee relationship exists between the parties. The Labor Arbiter and the NLRC correctly found that petitioner company lacked the power of control over the performance by respondent of his duties. The Labor Arbiter reasoned that the Comprehensive Medical Plan, which contains the respondents objectives, duties and obligations, does not tell respondent "how to conduct his physical examination, how to immunize, or how to diagnose and treat his patients, employees of [petitioner] company, in each case." He likened this case to that ofNeri v. National Labor Relations Commission,19 which held: In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated. In effect, the Labor Arbiter held that petitioner company, through the Comprehensive Medical Plan, provided guidelines merely to ensure that the end result was achieved, but did not control the means and methods by which respondent performed his assigned tasks. The NLRC affirmed the findings of the Labor Arbiter and stated that it is precisely because the company lacks the power of control that the contract provides that respondent shall be directly responsible to the employee concerned and their dependents for any injury, harm or damage caused through professional negligence, incompetence or other valid causes of action. The Labor Arbiter also correctly found that the provision in the Retainer Agreement that respondent was on call during emergency cases did not make him a regular employee. He explained, thus: Likewise, the allegation of complainant that since he is on call at anytime of the day and night makes him a regular employee is off-tangent. Complainant does not dispute the fact that outside of the two (2) hours that he is required to be at respondent companys premises, he is not at all further required to just sit around in the premises and wait for an emergency to occur so as to enable him from using such hours for his own benefit and advantage. In fact, complainant maintains his own private clinic attending to his private practice in the city, where he services his patients, bills them accordingly -- and if it is an employee of respondent company who is attended to by him for special treatment that needs hospitalization or operation, this is subject to a special billing. More often than not, an employee is required to stay in the employers workplace or proximately close thereto that he cannot utilize his time effectively and gainfully for his own purpose. Such is not the prevailing situation here.1awphi1.net

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In addition, the Court finds that the schedule of work and the requirement to be on call for emergency cases do not amount to such control, but are necessary incidents to the Retainership Agreement. The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination. The Court agrees with the Labor Arbiter and the NLRC that there is nothing wrong with the employment of respondent as a retained physician of petitioner company and upholds the validity of the Retainership Agreement which clearly stated that no employer-employee relationship existed between the parties. The Agreement also stated that it was only for a period of 1 year beginning January 1, 1988 to December 31, 1998, but it was renewed on a yearly basis. Considering that there is no employer-employee relationship between the parties, the termination of the Retainership Agreement, which is in accordance with the provisions of the Agreement, does not constitute illegal dismissal of respondent. Consequently, there is no basis for the moral and exemplary damages granted by the Court of Appeals to respondent due to his alleged illegal dismissal. WHEREFORE, the petition is GRANTED and the Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The Decision and Resolution dated November 28, 1997 and August 7, 1998, respectively, of the National Labor Relations Commission are REINSTATED. No costs. SO ORDERED. ADOLFO S. AZCUNA Associate Justice WE CONCUR: REYNATO S. PUNO Chairperson Chief Justice ANGELINA SANDOVAL-GUTIERREZ Associate Justice Working Chairperson CANCIO C. GARCIA Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. 32 RENATO C. CORONA Asscociate Justice

REYNATO S. PUNO Chief Justice

Footnotes 1 Docketed as CA-G.R. SP No. 50760. 2 Rollo, pp. 86-87. 3 Id. at 88. 4 Id. at 91. 5 CA Rollo, p. 21. 6 Art. 157. Emergency medical and dental services.-- It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of: xxx (b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300). 7 CA Rollo, p. 29. 8 Id. at 34. 9 Id. at 35. 10 Rollo, p. 38. 11 Id. at 46. 12 Id. at 48. 13 Id. at 52. 14 Id. at 61. 15 Id. at 73-75. 16 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 activity exists. 17 Id. at 78-79. 18 Philippine Global Communications, Inc. v. De Vera, G.R. No. 157214, June 7, 2005, 459 SCRA 260, 268. 19 G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 7717, 722-723.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 155731 September 3, 2007

LOLITA LOPEZ, petitioner, vs. BODEGA CITY (Video-Disco Kitchen of the Philippines) and/or ANDRES C. TORRESYAP, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the July 18, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 66861, dismissing the petition for certiorari filed before it and affirming the Decision of the National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 00-03-01729-95; and its Resolution dated October 16, 2002,2 denying petitioner's Motion for Reconsideration. The NLRC Decision set aside the Decision of the Labor Arbiter finding that Lolita Lopez (petitioner) was illegally dismissed by Bodega City and/or Andres C. Torres-Yap (respondents). Respondent Bodega City (Bodega City) is a corporation duly registered and existing under and by virtue of the laws of the Republic of the Philippines, while respondent Andres C. Torres-Yap (Yap) is its owner/ manager. Petitioner was the "lady keeper" of Bodega City tasked with manning its ladies' comfort room. In a letter signed by Yap dated February 10, 1995, petitioner was made to explain why the concessionaire agreement between her and respondents should not be terminated or suspended in view of an incident that happened on February 3, 1995, wherein petitioner was seen to have acted in a hostile manner against a lady customer of Bodega City who informed the management that she saw petitioner sleeping while on duty. In a subsequent letter dated February 25, 1995, Yap informed petitioner that because of the incident that happened on February 3, 1995, respondents had decided to terminate the concessionaire agreement between them. On March 1, 1995, petitioner filed with the Arbitration Branch of the NLRC, National Capital Region, Quezon City, a complaint for illegal dismissal against respondents contending that she was dismissed from her employment without cause and due process. In their answer, respondents contended that no employer-employee relationship ever existed between them and petitioner; that the latter's services rendered within the premises of Bodega City was by virtue of a concessionaire agreement she entered into with respondents. The complaint was dismissed by the Labor Arbiter for lack of merit. However, on appeal, the NLRC set aside the order of dismissal and remanded the case for further proceedings. Upon remand, the case was assigned to a 34

different Labor Arbiter. Thereafter, hearings were conducted and the parties were required to submit memoranda and other supporting documents. On December 28, 1999, the Labor Arbiter rendered judgment finding that petitioner was an employee of respondents and that the latter illegally dismissed her.3 Respondents filed an appeal with the NLRC. On March 22, 2001, the NLRC issued a Resolution, the dispositive portion of which reads as follows: WHEREFORE, premises duly considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED, and in its stead, a new one entered DISMISSING the above-entitled case for lack of merit.4 Petitioner filed a motion for reconsideration of the above-quoted NLRC Resolution, but the NLRC denied the same. Aggrieved, petitioner filed a Petition for Certiorari with the CA. On July 18, 2002, the CA promulgated the presently assailed Decision dismissing her special civil action for certiorari. Petitioner moved for reconsideration but her motion was denied. Hence, herein petition based on the following grounds: 1. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT THE NATIONAL LABOR RELATIONS COMMISSION DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE LABOR ARBITER FINDING PETITIONER TO HAVE BEEN ILLEGALLY DISMISSED BY PRIVATE RESPONDENTS. 2. WITH DUE RESPECT, PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RULING THAT PETITIONER WAS NOT AN EMPLOYEE OF PRIVATE RESPONDENTS.5 Petitioner contends that it was wrong for the CA to conclude that even if she did not sign the document evidencing the concessionaire agreement, she impliedly accepted and thus bound herself to the terms and conditions contained in the said agreement when she continued to perform the task which was allegedly specified therein for a considerable length of time. Petitioner claims that the concessionaire agreement was only offered to her during her tenth year of service and after she organized a union and filed a complaint against respondents. Prior to all these, petitioner asserts that her job as a "lady keeper" was a task assigned to her as an employee of respondents. Petitioner further argues that her receipt of a special allowance from respondents is a clear evidence that she was an employee of the latter, as the amount she received was equivalent to the minimum wage at that time. Petitioner also contends that her identification card clearly shows that she was not a concessionaire but an employee of respondents; that if respondents really intended the ID card issued to her to be used simply for having access to the premises of Bodega City, then respondents could have clearly indicated such intent on the said ID card. 35

Moreover, petitioner submits that the fact that she was required to follow rules and regulations prescribing appropriate conduct while she was in the premises of Bodega City is clear evidence of the existence of an employer-employee relationship between her and petitioners. On the other hand, respondents contend that the present petition was filed for the sole purpose of delaying the proceedings of the case; the grounds relied upon in the instant petition are matters that have been exhaustively discussed by the NLRC and the CA; the present petition raises questions of fact which are not proper in a petition for review on certiorari under Rule 45 of the Rules of Court; the respective decisions of the NLRC and the CA are based on evidence presented by both parties; petitioner's compliance with the terms and conditions of the proposed concessionaire contract for a period of three years is evidence of her implied acceptance of such proposal; petitioner failed to present evidence to prove her allegation that the subject concessionaire agreement was only proposed to her in her 10th year of employment with respondent company and after she organized a union and filed a labor complaint against respondents; petitioner failed to present competent documentary and testimonial evidence to prove her contention that she was an employee of respondents since 1985. The main issue to be resolved in the present case is whether or not petitioner is an employee of respondents. The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact.6 While it is a settled rule that only errors of law are generally reviewed by this Court in petitions for review oncertiorari of CA decisions,7 there are well-recognized exceptions to this rule, as in this case, when the factual findings of the NLRC as affirmed by the CA contradict those of the Labor Arbiter. 8 In that event, it is this Court's task, in the exercise of its equity jurisdiction, to re-evaluate and review the factual issues by looking into the records of the case and re-examining the questioned findings.9 It is a basic rule of evidence that each party must prove his affirmative allegation.10 If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.11 The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be successful if no evidence of such matters were given.12 In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.13 However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.14 In filing a complaint before the Labor Arbiter for illegal dismissal based on the premise that she was an employee of respondent, it is incumbent upon petitioner to prove the employee-employer relationship by substantial evidence.15 The NLRC and the CA found that petitioner failed to discharge this burden, and the Court finds no cogent reason to depart from their findings. The Court applies the four-fold test expounded in Abante v. Lamadrid Bearing and Parts Corp.,16 to wit:

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To ascertain the existence of an employer-employee relationship, jurisprudence has invariably applied the four-fold test, namely: (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 is the most important. The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the presence or absence of an employeremployee relationship. 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.17 To prove the element of payment of wages, petitioner presented a petty cash voucher showing that she received an allowance for five (5) days.18 The CA did not err when it held that a solitary petty cash voucher did not prove that petitioner had been receiving salary from respondents or that she had been respondents' employee for 10 years. Indeed, if petitioner was really an employee of respondents for that length of time, she should have been able to present salary vouchers or pay slips and not just a single petty cash voucher. The Court agrees with respondents that petitioner could have easily shown other pieces of evidence such as a contract of employment, SSS or Medicare forms, or certificates of withholding tax on compensation income; or she could have presented witnesses to prove her contention that she was an employee of respondents. Petitioner failed to do so. Anent the element of control, petitioner's contention that she was an employee of respondents because she was subject to their control does not hold water. Petitioner failed to cite a single instance to prove that she was subject to the control of respondents insofar as the manner in which she should perform her job as a "lady keeper" was concerned. It is true that petitioner was required to follow rules and regulations prescribing appropriate conduct while within the premises of Bodega City. However, this was imposed upon petitioner as part of the terms and conditions in the concessionaire agreement embodied in a 1992 letter of Yap addressed to petitioner, to wit: January 6, 1992 Dear Ms. Lolita Lopez, The new owners of Bodega City, 1121 Food Service Corporation offers to your goodself the concessionaire/contract to provide independently, customer comfort services to assist users of the ladies comfort room of the Club to further enhance its business, under the following terms and conditions: 1. You will provide at your own expense, all toilet supplies, useful for the purpose, such as toilet papers, soap, hair pins, safety pins and other related items or things which in your opinion is beneficial to the services you will undertake; 2. For the entire duration of this concessionaire contract, and during the Club's operating hours, you shall maintain the cleanliness of the ladies comfort room. Provided, that general cleanliness, sanitation and physical maintenance of said comfort rooms shall be undertaken by the owners of Bodega City; 37

3. You shall at all times ensure satisfaction and good services in the discharge of your undertaking. More importantly, you shall always observe utmost courtesy in dealing with the persons/individuals using said comfort room and shall refrain from doing acts that may adversely affect the goodwill and business standing of Bodega City; 4. All remunerations, tips, donations given to you by individuals/persons utilizing said comfort rooms and/or guests of Bodega City shall be waived by the latter to your benefit provided however, that if concessionaire receives tips or donations per day in an amount exceeding 200% the prevailing minimum wage, then, she shall remit fifty percent (50%) of said amount to Bodega City by way of royalty or concession fees; 5. This contract shall be for a period of one year and shall be automatically renewed on a yearly basis unless notice of termination is given thirty (30) days prior to expiration. Any violation of the terms and conditions of this contract shall be a ground for its immediate revocation and/or termination. 6. It is hereby understood that no employer-employee relationship exists between Bodega City and/or 1121 FoodService Corporation and your goodself, as you are an independent contractor who has represented to us that you possess the necessary qualification as such including manpower compliment, equipment, facilities, etc. and that any person you may engage or employ to work with or assist you in the discharge of your undertaking shall be solely your own employees and/or agents. 1121 FoodService Corporation Bodega City By: (Sgd.) ANDRES C. TORRES-YAP Conforme: _______________ LOLITA LOPEZ19 Petitioner does not dispute the existence of the letter; neither does she deny that respondents offered her the subject concessionaire agreement. However, she contends that she could not have entered into the said agreement with respondents because she did not sign the document evidencing the same. Settled is the rule that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror.20 For a contract, to arise, the acceptance must be made known to the offeror. 21 Moreover, the acceptance of the thing and the cause, which are to constitute a contract, may be express or implied as can be inferred from the contemporaneous and subsequent acts of the contracting parties.22 A contract will be upheld as long as there is proof of consent, subject matter and cause; it is generally obligatory in whatever form it may have been entered into.23 In the present case, the Court finds no cogent reason to disregard the findings of both the CA and the NLRC that while petitioner did not affix her signature to the document evidencing the subject concessionaire agreement, the fact that she performed the tasks indicated in the said agreement for a period of three years 38

without any complaint or question only goes to show that she has given her implied acceptance of or consent to the said agreement. Petitioner is likewise estopped from denying the existence of the subject concessionaire agreement. She should not, after enjoying the benefits of the concessionaire agreement with respondents, be allowed to later disown the same through her allegation that she was an employee of the respondents when the said agreement was terminated by reason of her violation of the terms and conditions thereof. The principle of estoppel in pais applies wherein -- by one's acts, representations or admissions, or silence when one ought to speak out -- intentionally or through culpable negligence, induces another to believe certain facts to exist and to rightfully rely and act on such belief, so as to be prejudiced if the former is permitted to deny the existence of those facts.24 Moreover, petitioner failed to dispute the contents of the affidavit 25 as well as the testimony26 of Felimon Habitan (Habitan), the concessionaire of the men's comfort room of Bodega City, that he had personal knowledge of the fact that petitioner was the concessionaire of the ladies' comfort room of Bodega City. Petitioner also claims that the concessionaire agreement was offered to her only in her 10th year of service, after she organized a union and filed a complaint against respondents. However, petitioner's claim remains to be an allegation which is not supported by any evidence. It is a basic rule in evidence that each party must prove his affirmative allegation,27 that mere allegation is not evidence.28 The Court is not persuaded by petitioner's contention that the Labor Arbiter was correct in concluding that there existed an employer-employee relationship between respondents and petitioner. A perusal of the Decision29 of the Labor Arbiter shows that his only basis for arriving at such a conclusion are the bare assertions of petitioner and the fact that the latter did not sign the letter of Yap containing the proposed concessionaire agreement. However, as earlier discussed, this Court finds no error in the findings of the NLRC and the CA that petitioner is deemed as having given her consent to the said proposal when she continuously performed the tasks indicated therein for a considerable length of time. For all intents and purposes, the concessionaire agreement had been perfected. Petitioner insists that her ID card is sufficient proof of her employment. In Domasig v. National Labor Relations Commission,30 this Court held that the complainant's ID card and the cash vouchers covering his salaries for the months indicated therein were substantial evidence that he was an employee of respondents, especially in light of the fact that the latter failed to deny said evidence. This is not the situation in the present case. The only evidence presented by petitioner as proof of her alleged employment are her ID card and one petty cash voucher for a five-day allowance which were disputed by respondents. As to the ID card, it is true that the words "EMPLOYEE'S NAME" appear printed below petitioner's name.31However, she failed to dispute respondents' evidence consisting of Habitan's testimony, 32 that he and the other "contractors" of Bodega City such as the singers and band performers, were also issued the same ID cards for the purpose of enabling them to enter the premises of Bodega City. The Court quotes, with approval, the ruling of the CA on this matter, to wit: Nor can petitioners identification card improve her cause any better. It is undisputed that nonemployees, such as Felimon Habitan, an admitted concessionaire, musicians, singers and the like at Bodega City are also issued identification cards. Given this premise, it appears clear to Us that 39

petitioner's I.D. Card is incompetent proof of an alleged employer-employee relationship between the herein parties. Viewed in the context of this case, the card is at best a "passport" from management assuring the holder thereof of his unmolested access to the premises of Bodega City.33 With respect to the petty cash voucher, petitioner failed to refute respondent's claim that it was not given to her for services rendered or on a regular basis, but simply granted as financial assistance to help her temporarily meet her family's needs. Hence, going back to the element of control, the concessionaire agreement merely stated that petitioner shall maintain the cleanliness of the ladies' comfort room and observe courtesy guidelines that would help her obtain the results they wanted to achieve. There is nothing in the agreement which specifies the methods by which petitioner should achieve these results. Respondents did not indicate the manner in which she should go about in maintaining the cleanliness of the ladies' comfort room. Neither did respondents determine the means and methods by which petitioner could ensure the satisfaction of respondent company's customers. In other words, petitioner was given a free hand as to how she would perform her job as a "lady keeper." In fact, the last paragraph of the concessionaire agreement even allowed petitioner to engage persons to work with or assist her in the discharge of her functions.34 Moreover, petitioner was not subjected to definite hours or conditions of work. The fact that she was expected to maintain the cleanliness of respondent company's ladies' comfort room during Bodega City's operating hours does not indicate that her performance of her job was subject to the control of respondents as to make her an employee of the latter. Instead, the requirement that she had to render her services while Bodega City was open for business was dictated simply by the very nature of her undertaking, which was to give assistance to the users of the ladies' comfort room. In Consulta v. Court of Appeals,35 this Court held: It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammeled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement. Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. 36 Lastly, the Court finds that the elements of selection and engagement as well as the power of dismissal are not present in the instant case. It has been established that there has been no employer-employee relationship between respondents and petitioner. Their contractual relationship was governed by the concessionaire agreement embodied in the 1992 letter. Thus, petitioner was not dismissed by respondents. Instead, as shown by the letter of Yap to her dated February 15, 1995,37 their contractual relationship was terminated by reason of respondents' termination of the 40

subject concessionaire agreement, which was in accordance with the provisions of the agreement in case of violation of its terms and conditions. In fine, the CA did not err in dismissing the petition for certiorari filed before it by petitioner. WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals areAFFIRMED. Costs against petitioner. SO ORDERED. Ynares-Santiago, Chairperson, Chico-Nazario, Nachura, Reyes, JJ., concur.
Footnotes 1 Penned by Justice Cancio C. Garcia (now a member of this Court) and concurred in by Justices Marina L. Buzon and Eliezer R. de los Santos; rollo, p. 26. 2 CA rollo, p. 452. 3 Rollo, p. 113. 4 CA rollo, p. 16. 5 Rollo, p. 18. 6 Manila Water Company, Inc. v. Pea , G.R. No. 158255, July 8, 2004, 434 SCRA 53, 58. 7 Mitsubishi Motors Philippines Corporation v. Chrysler Philippines Labor Union , G.R. No. 148738, June 29, 2004, 433 SCRA 206, 217. 8 Diamond Motors Corporation v. Court of Appeals, 462 Phil. 452, 458 (2003). 9 Tiu v. Pasaol, Sr. , 450 Phil. 370, 379 (2003); Manila Water Company, Inc. v. Pea , supra note 6, at 58-59. 10 Martinez v. National Labor Relations Commission, 339 Phil. 176, 183 (1997). 11 Rufina Patis Factory v. Alusitain , G.R. No. 146202, July 14, 2004, 434 SCRA 418, 428. 12 Imperial Victory Shipping Agency v. National Labor Relations Commission, G.R. No. 84672, August 5, 1991, 200 SCRA 178,185. 13 R.P. Dinglasan Construction, Inc. v. Atienza , G.R. No. 156104, June 29, 2004, 433 SCRA 263, 269. 14 Sy v. Court of Appeals, 446 Phil. 404, 413 (2003). 15 Martinez v. National Labor Relations Commission , supra note 10, at 183; Rules of Court, Rule 133, Section 5. 16 G.R. No. 159890, May 28, 2004, 430 SCRA 368. 17 Id. at 379. 18 CA rollo, p. 62. 19 CA rollo, p. 176. 20 Jardine Davies Inc. v. Court of Appeals , 389 Phil. 204, 212 (2000). 21 Id. 22 Civil Code of the Philippines, Article 1320; Jardine Davies Inc. v. CA, supra note 20, at 214. 23 Cordial v. Miranda, 401 Phil. 307, 319 (2000). 24 Spouses Hanopol v. Shoemart, Inc., 439 Phil. 266, 285 (2002). 25 CA rollo, p. 207. 26 Id. at 242-245. 27 Aklan Electric Cooperative Inc. v. National Labor Relations Commission , 380 Phil. 225, 245 (2000). 28 Martinez v. National Labor Relations Commission, supra note 10, at 183; Ramoran v. Jardine CMG Life Insurance Co., Inc., 383 Phil. 83, 100 (2000). 29 Rollo, pp. 94-113. 30 330 Phil. 518, 524-525 (1996). 31 CA rollo, p. 61. 32 Id. at 246-250. 33 CA rollo, p. 428. 34 Id. at 176-177.

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G.R. No. 145443, March 18, 2005, 453 SCRA 732 citing Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, G.R. No. 84484, November 15, 1989, 175 SCRA 459. 36 Consulta v. Court of Appeals, id. at 740. 37 CA rollo, p. 184.
35

42

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 178827 March 4, 2009

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, Petitioners, vs. SHANGRI-LA'S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITO, Respondents. DECISION CARPIO MORALES, J.: Registered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort (Shangri-la) in Cebu of which she was a retained physician. In late 2002, petitioners filed with the National Labor Relations Commission (NLRC) Regional Arbitration Branch No. VII (NLRC-RAB No. VII) a complaint1 for regularization, underpayment of wages, non-payment of holiday pay, night shift differential and 13th month pay differential against respondents, claiming that they are regular employees of Shangri-la. The case was docketed as RAB Case No. 07-11-2089-02. Shangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via Memorandum of Agreement (MOA)2 pursuant to Article 157 of the Labor Code, as amended. Respondent doctor for her part claimed that petitioners were already working for the previous retained physicians of Shangri-la before she was retained by Shangri-la; and that she maintained petitioners services upon their request. By Decision3 of May 6, 2003, Labor Arbiter Ernesto F. Carreon declared petitioners to be regular employees of Shangri-la. The Arbiter thus ordered Shangri-la to grant them the wages and benefits due them as regular employees from the time their services were engaged. In finding petitioners to be regular employees of Shangri-la, the Arbiter noted that they usually perform work which is necessary and desirable to Shangri-las business; that they observe clinic hours and render services only to Shangri-las guests and employees; that payment for their salaries were recommended to Shangri-las Human Resource Department (HRD); that respondent doctor was Shangri-las "in-house" physician, hence, also an employee; and that the MOA between Shangri-la and respondent doctor was an "insidious mechanism in order to circumvent [the doctors] tenurial security and that of the employees under her." Shangri-la and respondent doctor appealed to the NLRC. Petitioners appealed too, but only with respect to the non-award to them of some of the benefits they were claiming. By Decision4 dated March 31, 2005, the NLRC granted Shangri-las and respondent doctors appeal and dismissed petitioners complaint for lack of merit, it finding that no employer-employee relationship exists 43

between petitioner and Shangri-la. In so deciding, the NLRC held that the Arbiter erred in interpreting Article 157 in relation to Article 280 of the Labor Code, as what is required under Article 157 is that the employer should provide the services of medical personnel to its employees, but nowhere in said article is a provision that nurses are required to be employed; that contrary to the finding of the Arbiter, even if Article 280 states that if a worker performs work usually necessary or desirable in the business of the employer, he cannot be automatically deemed a regular employee; and that the MOA amply shows that respondent doctor was in fact engaged by Shangri-la on a retainer basis, under which she could hire her own nurses and other clinic personnel. Brushing aside petitioners contention that since their application for employment was addressed to Shangri -la, it was really Shangri-la which hired them and not respondent doctor, the NLRC noted that the applications for employment were made by persons who are not parties to the case and were not shown to have been actually hired by Shangri-la. On the issue of payment of wages, the NLRC held that the fact that, for some months, payment of petitio ners wages were recommended by Shangri-las HRD did not prove that it was Shangri-la which pays their wages. It thus credited respondent doctors explanation that the recommendations for payment were based on the billings she prepared for salaries of additional nurses during Shangri-las peak months of operation, in accordance with the retainership agreement, the guests payments for medical services having been paid directly to Shanrgi-la. Petitioners thereupon brought the case to the Court of Appeals which, by Decision5 of May 22, 2007, affirmed the NLRC Decision that no employer-employee relationship exists between Shangri-la and petitioners. The appellate court concluded that all aspects of the employment of petitioners being under the supervision and control of respondent doctor and since Shangri-la is not principally engaged in the business of providing medical or healthcare services, petitioners could not be regarded as regular employees of Shangri-la. Petitioners motion for reconsideration having been denied by Resolution6 of July 10, 2007, they interposed the present recourse. Petitioners insist that under Article 157 of the Labor Code, Shangri-la is required to hire a full-time registered nurse, apart from a physician, hence, their engagement should be deemed as regular employment, the provisions of the MOA notwithstanding; and that the MOA is contrary to public policy as it circumvents tenurial security and, therefore, should be struck down as being void ab initio. At most, they argue, the MOA is a mere job contract. And petitioners maintain that respondent doctor is a labor-only contractor for she has no license or business permit and no business name registration, which is contrary to the requirements under Sec. 19 and 20 of the Implementing Rules and Regulations of the Labor Code on sub-contracting. Petitioners add that respondent doctor cannot be a legitimate independent contractor, lacking as she does in substantial capital, the clinic having been set-up and already operational when she took over as retained physician; that respondent doctor has no control over how the clinic is being run, as shown by the different orders issued by officers of Shangri-la forbidding her from receiving cash payments and several purchase orders for medicines and supplies which were coursed thru Shangri-las Purchasing Manager, circumstances indubitably showing that she is not an independent contractor but a mere agent of Shangri-la.

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In its Comment,7 Shangri-la questions the Special Powers of Attorneys (SPAs) appended to the petition for being inadequate. On the merits, it prays for the disallowance of the petition, contending that it raises factual issues, such as the validity of the MOA, which were never raised during the proceedings before the Arbiter, albeit passed upon by him in his Decision; that Article 157 of the Labor Code does not make it mandatory for a covered establishment to employ health personnel; that the services of nurses is not germane nor indispensable to its operations; and that respondent doctor is a legitimate individual independent contractor who has the power to hire, fire and supervise the work of the nurses under her. The resolution of the case hinges, in the main, on the correct interpretation of Art. 157 vis a vis Art. 280 and the provisions on permissible job contracting of the Labor Code, as amended. The Court holds that, contrary to petitioners postulation, Art. 157 does not require the engagement of full-time nurses as regular employees of a company employing not less than 50 workers. Thus, the Article provides: ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of: (a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this Article; (b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300); and (c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300). In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency. (Emphasis and underscoring supplied) Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to "furnish" its employees with the services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means that it should provide or make available such medical and allied services to its employees, not necessarily to hire or employ a service provider. As held in Philippine Global Communications vs. De Vera:8 x x x while it is true that the provision requires employers to engage the services of medical practitioners in certain establishments depending on the number of their employees, nothing is there in the law which says that 45

medical practitioners so engaged be actually hired as employees, adding that the law, as written, only requires the employer "to retain", not employ, a part-time physician who needed to stay in the premises of the nonhazardous workplace for two (2) hours. (Emphasis and underscoring supplied) 1avvphi1 The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the person engaged to provide the services, for Article 157 must not be read alongside Art. 280 9 in order to vest employeremployee relationship on the employer and the person so engaged. So De Vera teaches: x x x For, we take it that any agreement may provide that one party shall render services for and in behalf of another, no matter how necessary for the latters busin ess, even without being hired as an employee. This set-up is precisely true in the case of an independent contractorship as well as in an agency agreement. Indeed, Article 280 of the Labor Code, quoted by the appellate court, is not the yardstick for determining the existence of an employment relationship. As it is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual. x x x10 (Emphasis and underscoring supplied) The phrase "services of a full-time registered nurse" should thus be taken to refer to the kind of services that the nurse will render in the companys premises and to its employees, not the manner of his engagement. As to whether respondent doctor can be considered a legitimate independent contractor, the pertinent sections of DOLE Department Order No. 10, series of 1997, illuminate: Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met: (1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary 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. (c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of 46

each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers. (Emphasis supplied) The existence of an independent and permissible contractor relationship is generally established by considering the following determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.11 On the other hand, existence of an employer- employee relationship is established by the presence of the following determinants: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration.12 Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily prove that respondent doctor lacks substantial capital and investment. Besides, the maintenance of a clinic and provision of medical services to its employees is required under Art. 157, which are not directly related to Shangri-las principal business operation of hotels and restaurants. As to payment of wages, respondent doctor is the one who underwrites the following: salaries, SSS contributions and other benefits of the staff13; group life, group personal accident insurance and life/death insurance14 for the staff with minimum benefit payable at 12 times the employees last draw n salary, as well as value added taxes and withholding taxes, sourced from her P60,000.00 monthly retainer fee and 70% share of the service charges from Shangri-las guests who avail of the clinic services. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS premium as well as their wages if they were not indeed her employees.15 With respect to the supervision and control of the nurses and clinic staff, it is not disputed that a document, "Clinic Policies and Employee Manual"16 claimed to have been prepared by respondent doctor exists, to which petitioners gave their conformity17 and in which they acknowledged their co-terminus employment status. It is thus presumed that said document, and not the employee manual being followed by Shangri-las regular workers, governs how they perform their respective tasks and responsibilities. Contrary to petitioners contention, the various office directives issued by Shangri -las officers do not imply that it is Shangri-las management and not respondent doctor who exercises control over them or that Shangri la has control over how the doctor and the nurses perform their work. The letter 18 addressed to respondent doctor dated February 7, 2003 from a certain Tata L. Reyes giving instructions regarding the replenishment of emergency kits is, at most, administrative in nature, related as it is to safety matters; while the letter19 dated May 17, 2004 from Shangri-las Assistant Financial Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments from the resorts guests is a matter of financial policy in order to ensure proper sharing of the proceeds, considering that Shangri-la and respondent doctor share in the guests payments for medical services rendered. In fine, as Shangri-la does not control how the work should be performed by petitioners, it is not petitioners employer. 47

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated May 22, 2007 and the Resolution dated July 10, 2007 are AFFIRMED. SO ORDERED. CONCHITA CARPIO MORALES Associate Justice WE CONCUR: LEONARDO A. QUISUMBING Associate Justice Chairperson ARTURO D. BRION Associate Justice

ANTONIO EDUARDO B. NACHURA* Associate Justice DIOSDADO M. PERALTA** Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. LEONARDO A. QUISUMBING Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice
Footnotes * Additional member per Special Order No. 571 dated February 12, 2009 in lieu of Justice Dante O. Tinga who is on official leave. ** Additional member per Special Order No. 572 dated February 12, 2009 in lieu of Justice Presbitero J. Velasco, Jr. who is on official leave. 1 Records, pp. 1-2. 2 Id. at 44-49. 3 Id. at. 221-227. 4 Rollo, pp. 73-82. Penned by Presiding Commissioner Gerardo C. Nograles and concurred in by Commissioners Oscar S. Uy and Aurelio D. Menzon.

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CA rollo, pp. 262-269. Penned by Associate Justice Isaias P. Dicdican and concurred in by Associate Justices Antonio L. Villamor and Stephen C. Cruz. 6 Id. at 63. 7 Rollo, pp. 181-235. 8 G.R. No. 157214, June 7, 2005, 459 SCRA 260, 275. 9 Art. 280. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform 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 (1) year of service, whether such is continuous or broken, shall be considered a regular with respect to the activity in which he is employed and his employment shall continue while such activity exists. 10 Supra note at 274. 11 DOLE Philippines, Inc. v. Esteva, et al., G.R. No. 161115, November 30, 2006, 509 SCRA 332, 376. 12 Corporal v. NLRC, G.R. No. 129315, October 2, 2000, 341 SCRA 658, 666. 13 Vide SSS Employment Report and Salary/Calamity/Educational/Emergency Loan Collection List, records, pp. 214-219. 14 Vide various Statements of Account re healthcare and insurance, records, pp. 67-71. 15 Corporal v. NLRC, supra at 668. 16 Records, pp. 50-59. 17 Id. at 60-61. 18 CA rollo, p. 71. 19 Id. at 72.
5

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 164156 September 26, 2006

ABS-CBN BROADCASTING CORPORATION, petitioner, vs. MARLYN NAZARENO, MERLOU GERZON, JENNIFER DEIPARINE, and JOSEPHINE LERASAN, respondents. DECISION CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76582 and the Resolution denying the motion for reconsideration thereof. The CA affirmed the Decision2 and Resolution3 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000762-2001 (RAB Case No. VII-10-1661-2001) which likewise affirmed, with modification, the decision of the Labor Arbiter declaring the respondents Marlyn Nazareno, Merlou Gerzon, Jennifer Deiparine and Josephine Lerasan as regular employees. The Antecedents Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is engaged in the broadcasting business and owns a network of television and radio stations, whose operations revolve around the broadcast, transmission, and relay of telecommunication signals. It sells and deals in or otherwise utilizes the airtime it generates from its radio and television operations. It has a franchise as a broadcasting company, and was likewise issued a license and authority to operate by the National Telecommunications Commission. Petitioner employed respondents Nazareno, Gerzon, Deiparine, and Lerasan as production assistants (PAs) on different dates. They were assigned at the news and public affairs, for various radio programs in the Cebu Broadcasting Station, with a monthly compensation of P4,000. They were issued ABS-CBN employees identification cards and were required to work for a minimum of eight hours a day, including Sundays and holidays. They were made to perform the following tasks and duties: a) Prepare, arrange airing of commercial broadcasting based on the daily operations log and digicart of respondent ABS-CBN; b) Coordinate, arrange personalities for air interviews; c) Coordinate, prepare schedule of reporters for scheduled news reporting and lead-in or incoming reports; d) Facilitate, prepare and arrange airtime schedule for public service announcement and complaints; e) Assist, anchor program interview, etc; and 50

f) Record, log clerical reports, man based control radio.4 Their respective working hours were as follows: Name Time No. of Hours 1. Marlene Nazareno 4:30 A.M.-8:00 A.M. 7 8:00 A.M.-12:00 noon 2. Jennifer Deiparine 4:30 A.M.-12:00M.N. (sic) 7 3. Joy Sanchez 1:00 P.M.-10:00 P.M.(Sunday) 9 hrs. 9:00 A.M.-6:00 P.M. (WF) 9 hrs. 4. Merlou Gerzon 9:00 A.M.-6:00 P.M. 9 hrs.5 The PAs were under the control and supervision of Assistant Station Manager Dante J. Luzon, and News Manager Leo Lastimosa. On December 19, 1996, petitioner and the ABS-CBN Rank-and-File Employees executed a Collective Bargaining Agreement (CBA) to be effective during the period from December 11, 1996 to December 11, 1999. However, since petitioner refused to recognize PAs as part of the bargaining unit, respondents were not included to the CBA.6 On July 20, 2000, petitioner, through Dante Luzon, issued a Memorandum informing the PAs that effective August 1, 2000, they would be assigned to non-drama programs, and that the DYAB studio operations would be handled by the studio technician. Thus, their revised schedule and other assignments would be as follows: Monday Saturday 4:30 A.M. 8:00 A.M. Marlene Nazareno. Miss Nazareno will then be assigned at the Research Dept. From 8:00 A.M. to 12:00 4:30 P.M. 12:00 MN Jennifer Deiparine Sunday 5:00 A.M. 1:00 P.M. Jennifer Deiparine 1:00 P.M. 10:00 P.M. Joy Sanchez

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Respondent Gerzon was assigned as the full-time PA of the TV News Department reporting directly to Leo Lastimosa. On October 12, 2000, respondents filed a Complaint for Recognition of Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay, Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay with Damages against the petitioner before the NLRC. The Labor Arbiter directed the parties to submit their respective position papers. Upon respondents failure to file their position papers within the reglementary period, Labor Arbiter Jose G. Gutierrez issued an Order dated April 30, 2001, dismissing the complaint without prejudice for lack of interest to pursue the case. Respondents received a copy of the Order on May 16, 2001.7Instead of re-filing their complaint with the NLRC within 10 days from May 16, 2001, they filed, on June 11, 2001, an Earnest Motion to Refile Complaint with Motion to Admit Position Paper and Motion to Submit Case For Resolution.8 The Labor Arbiter granted this motion in an Order dated June 18, 2001, and forthwith admitted the position paper of the complainants. Respondents made the following allegations: 1. Complainants were engaged by respondent ABS-CBN as regular and full-time employees for a continuous period of more than five (5) years with a monthly salary rate of Four Thousand (P4,000.00) pesos beginning 1995 up until the filing of this complaint on November 20, 2000. Machine copies of complainants ABS-CBN Employees Identification Card and salary vouchers are hereto attached as follows, thus: I. Jennifer Deiparine: Exhibit "A" - ABS-CBN Employees Identification Card Exhibit "B", - ABS-CBN Salary Voucher from Nov. Exhibit "B-1" & 1999 to July 2000 at P4,000.00 Exhibit "B-2" Date employed: September 15, 1995 Length of service: 5 years & nine (9) months II. Merlou Gerzon - ABS-CBN Employees Identification Card Exhibit "C" Exhibit "D" Exhibit "D-1" & Exhibit "D-2" - ABS-CBN Salary Voucher from March 1999 to January 2001 at P4,000.00 52

Date employed: September 1, 1995 Length of service: 5 years & 10 months III. Marlene Nazareno Exhibit "E" - ABS-CBN Employees Identification Card Exhibit "E" - ABS-CBN Salary Voucher from Nov. Exhibit "E-1" & 1999 to December 2000 Exhibit :E-2" Date employed: April 17, 1996 Length of service: 5 years and one (1) month IV. Joy Sanchez Lerasan Exhibit "F" - ABS-CBN Employees Identification Card Exhibit "F-1" - ABS-CBN Salary Voucher from Aug. Exhibit "F-2" & 2000 to Jan. 2001 Exhibit "F-3" Exhibit "F-4" - Certification dated July 6, 2000 Acknowledging regular status of Complainant Joy Sanchez Lerasan Signed by ABS-CBN Administrative Officer May Kima Hife Date employed: April 15, 1998 Length of service: 3 yrs. and one (1) month9 Respondents insisted that they belonged to a "work pool" from which petitioner chose persons to be given specific assignments at its discretion, and were thus under its direct supervision and control regardless of nomenclature. They prayed that judgment be rendered in their favor, thus:

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WHEREFORE, premises considered, this Honorable Arbiter is most respectfully prayed, to issue an order compelling defendants to pay complainants the following: 1. One Hundred Thousand Pesos (P100,000.00) each and by way of moral damages; 2. Minimum wage differential; 3. Thirteenth month pay differential; 4. Unpaid service incentive leave benefits; 5. Sick leave; 6. Holiday pay; 7. Premium pay; 8. Overtime pay; 9. Night shift differential. Complainants further pray of this Arbiter to declare them regular and permanent employees of respondent ABS-CBN as a condition precedent for their admission into the existing union and collective bargaining unit of respondent company where they may as such acquire or otherwise perform their obligations thereto or enjoy the benefits due therefrom. Complainants pray for such other reliefs as are just and equitable under the premises. 10 For its part, petitioner alleged in its position paper that the respondents were PAs who basically assist in the conduct of a particular program ran by an anchor or talent. Among their duties include monitoring and receiving incoming calls from listeners and field reporters and calls of news sources; generally, they perform leg work for the anchors during a program or a particular production. They are considered in the industry as "program employees" in that, as distinguished from regular or station employees, they are basically engaged by the station for a particular or specific program broadcasted by the radio station. Petitioner asserted that as PAs, the complainants were issued talent information sheets which are updated from time to time, and are thus made the basis to determine the programs to which they shall later be called on to assist. The program assignments of complainants were as follows: a. Complainant Nazareno assists in the programs: 1) Nagbagang Balita (early morning edition) 2) Infor Hayupan 3) Arangkada (morning edition) 54

4) Nagbagang Balita (mid-day edition) b. Complainant Deiparine assists in the programs: 1) Unzanith 2) Serbisyo de Arevalo 3) Arangkada (evening edition) 4) Balitang K (local version) 5) Abante Subu 6) Pangutana Lang c. Complainant Gerzon assists in the program: 1) On Mondays and Tuesdays: (a) Unzanith (b) Serbisyo de Arevalo (c) Arangkada (evening edition) (d) Balitang K (local version) (e) Abante Sugbu (f) Pangutana Lang 2) On Thursdays Nagbagang Balita 3) On Saturdays (a) Nagbagang Balita (b) Info Hayupan (c) Arangkada (morning edition) (d) Nagbagang Balita (mid-day edition)

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4) On Sundays: (a) Siesta Serenata (b) Sunday Chismisan (c) Timbangan sa Hustisya (d) Sayri ang Lungsod (e) Haranahan11 Petitioner maintained that PAs, reporters, anchors and talents occasionally "sideline" for other programs they produce, such as drama talents in other productions. As program employees, a PAs engagement is coterminous with the completion of the program, and may be extended/renewed provided that the program is on-going; a PA may also be assigned to new programs upon the cancellation of one program and the commencement of another. As such program employees, their compensation is computed on a program basis, a fixed amount for performance services irrespective of the time consumed. At any rate, petitioner claimed, as the payroll will show, respondents were paid all salaries and benefits due them under the law.12 Petitioner also alleged that the Labor Arbiter had no jurisdiction to involve the CBA and interpret the same, especially since respondents were not covered by the bargaining unit. On July 30, 2001, the Labor Arbiter rendered judgment in favor of the respondents, and declared that they were regular employees of petitioner; as such, they were awarded monetary benefits. The fallo of the decision reads: WHEREFORE, the foregoing premises considered, judgment is hereby rendered declaring the complainants regular employees of the respondent ABS-CBN Broadcasting Corporation and directing the same respondent to pay complainants as follows: I - Merlou A. Gerzon P12,025.00 II - Marlyn Nazareno 12,025.00 III - Jennifer Deiparine 12,025.00 IV - Josephine Sanchez Lerazan 12,025.00 _________ P48,100.00 plus ten (10%) percent Attorneys Fees or a TOTAL aggregate amount of PESOS: FIFTY TWO THOUSAND NINE HUNDRED TEN (P52,910.00). Respondent Veneranda C. Sy is absolved from any liability. 56

SO ORDERED.13 However, the Labor Arbiter did not award money benefits as provided in the CBA on his belief that he had no jurisdiction to interpret and apply the agreement, as the same was within the jurisdiction of the Voluntary Arbitrator as provided in Article 261 of the Labor Code. Respondents counsel received a copy of the decision on August 29, 2001. Respondent Nazareno received her copy on August 27, 2001, while the other respondents received theirs on September 8, 2001. Respondents signed and filed their Appeal Memorandum on September 18, 2001. For its part, petitioner filed a motion for reconsideration, which the Labor Arbiter denied and considered as an appeal, conformably with Section 5, Rule V, of the NLRC Rules of Procedure. Petitioner forthwith appealed the decision to the NLRC, while respondents filed a partial appeal. In its appeal, petitioner alleged the following: 1. That the Labor Arbiter erred in reviving or re-opening this case which had long been dismissed without prejudice for more than thirty (30) calendar days; 2. That the Labor Arbiter erred in depriving the respondent of its Constitutional right to due process of law; 3. That the Labor Arbiter erred in denying respondents Motion for Reconsideration on an interlocutory order on the ground that the same is a prohibited pleading; 4. That the Labor Arbiter erred when he ruled that the complainants are regular employees of the respondent; 5. That the Labor Arbiter erred when he ruled that the complainants are entitled to 13th month pay, service incentive leave pay and salary differential; and 6. That the Labor Arbiter erred when he ruled that complainants are entitled to attorneys fees. 14 On November 14, 2002, the NLRC rendered judgment modifying the decision of the Labor Arbiter. The fallo of the decision reads: WHEREFORE, premises considered, the decision of Labor Arbiter Jose G. Gutierrez dated 30 July 2001 is SET ASIDE and VACATED and a new one is entered ORDERING respondent ABS-CBN Broadcasting Corporation, as follows: 1. To pay complainants of their wage differentials and other benefits arising from the CBA as of 30 September 2002 in the aggregate amount of Two Million Five Hundred, Sixty-One Thousand Nine Hundred Forty-Eight Pesos and 22/100 (P2,561,948.22), broken down as follows: a. Deiparine, Jennifer - P 716,113.49 b. Gerzon, Merlou - 716,113.49 c. Nazareno, Marlyn - 716,113.49 57

d. Lerazan, Josephine Sanchez - 413,607.75 Total - P 2,561,948.22 2. To deliver to the complainants Two Hundred Thirty-Three (233) sacks of rice as of 30 September 2002 representing their rice subsidy in the CBA, broken down as follows: a. Deiparine, Jennifer - 60 Sacks b. Gerzon, Merlou - 60 Sacks c. Nazareno, Marlyn - 60 Sacks d. Lerazan, Josephine Sanchez - 53 Sacks Total 233 Sacks; and 3. To grant to the complainants all the benefits of the CBA after 30 September 2002. SO ORDERED.15 The NLRC declared that the Labor Arbiter acted conformably with the Labor Code when it granted respondents motion to refile the complaint and admit their position paper. Although respondents were not parties to the CBA between petitioner and the ABS-CBN Rank-and-File Employees Union, the NLRC nevertheless granted and computed respondents monetary benefits based on the 1999 CBA, which was effective until September 2002. The NLRC also ruled that the Labor Arbiter had jurisdiction over the complaint of respondents because they acted in their individual capacities and not as members of the union. Their claim for monetary benefits was within the context of Article 217(6) of the Labor Code. The validity of respondents claim does not depend upon the interpretation of the CBA. The NLRC ruled that respondents were entitled to the benefits under the CBA because they were regular employees who contributed to the profits of petitioner through their labor. The NLRC cited the ruling of this Court in New Pacific Timber & Supply Company v. National Labor Relations Commission.16 Petitioner filed a motion for reconsideration, which the NLRC denied. Petitioner thus filed a petition for certiorari under Rule 65 of the Rules of Court before the CA, raising both procedural and substantive issues, as follows: (a) whether the NLRC acted without jurisdiction in admitting the appeal of respondents; (b) whether the NLRC committed palpable error in scrutinizing the reopening and revival of the complaint of respondents with the Labor Arbiter upon due notice despite the lapse of 10 days from their receipt of the July 30, 2001 Order of the Labor Arbiter; (c) whether respondents were regular employees; (d) whether the NLRC acted without jurisdiction in entertaining and resolving the claim of the respondents under the CBA instead of referring the same to the Voluntary Arbitrators as provided in the CBA; and (e) whether the NLRC acted with grave abuse of discretion when it awarded monetary benefits to respondents under the CBA although they are not members of the appropriate bargaining unit. On February 10, 2004, the CA rendered judgment dismissing the petition. It held that the perfection of an appeal shall be upon the expiration of the last day to appeal by all parties, should there be several parties to a 58

case. Since respondents received their copies of the decision on September 8, 2001 (except respondent Nazareno who received her copy of the decision on August 27, 2001), they had until September 18, 2001 within which to file their Appeal Memorandum. Moreover, the CA declared that respondents failure to submit their position paper on time is not a ground to strike out the paper from the records, much less dismiss a complaint. Anent the substantive issues, the appellate court stated that respondents are not mere project employees, but regular employees who perform tasks necessary and desirable in the usual trade and business of petitioner and not just its project employees. Moreover, the CA added, the award of benefits accorded to rank-and-file employees under the 1996-1999 CBA is a necessary consequence of the NLRC ruling that respondents, as PAs, are regular employees. Finding no merit in petitioners motion for reconsideration, the CA denied the same in a Resolution 17 dated June 16, 2004. Petitioner thus filed the instant petition for review on certiorari and raises the following assignments of error: 1. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND GRAVELY ERRED IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION NOTWITHSTANDING THE PATENT NULLITY OF THE LATTERS DECISION AND RESOLUTION. 2. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC FINDING RESPONDENTS REGULAR EMPLOYEES. 3. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE NLRC AWARDING CBA BENEFITS TO RESPONDENTS.18 Considering that the assignments of error are interrelated, the Court shall resolve them simultaneously. Petitioner asserts that the appellate court committed palpable and serious error of law when it affirmed the rulings of the NLRC, and entertained respondents appeal from the decision of the Labor Arbiter despite the admitted lapse of the reglementary period within which to perfect the same. Petitioner likewise maintains that the 10-day period to appeal must be reckoned from receipt of a partys counsel, not from the time the party learns of the decision, that is, notice to counsel is notice to party and not the other way around. Finally, petitioner argues that the reopening of a complaint which the Labor Arbiter has dismissed without prejudice is a clear violation of Section 1, Rule V of the NLRC Rules; such order of dismissal had already attained finality and can no longer be set aside. Respondents, on the other hand, allege that their late appeal is a non-issue because it was petitioners own timely appeal that empowered the NLRC to reopen the case. They assert that although the appeal was filed 10 days late, it may still be given due course in the interest of substantial justice as an exception to the general rule that the negligence of a counsel binds the client. On the issue of the late filing of their position paper, they maintain that this is not a ground to strike it out from the records or dismiss the complaint. We find no merit in the petition. We agree with petitioners contention that the perfection of an appeal within the statutory or reglementary period is not only mandatory, but also jurisdictional; failure to do so renders the assailed decision final and executory and deprives the appellate court or body of the legal authority to alter the final judgment, much less 59

entertain the appeal. However, this Court has time and again ruled that in exceptional cases, a belated appeal may be given due course if greater injustice may occur if an appeal is not given due course than if the reglementary period to appeal were strictly followed.19 The Court resorted to this extraordinary measure even at the expense of sacrificing order and efficiency if only to serve the greater principles of substantial justice and equity.20 In the case at bar, the NLRC did not commit a grave abuse of its discretion in giving Article 223 21 of the Labor Code a liberal application to prevent the miscarriage of justice. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. 22 We have held in a catena of cases that technical rules are not binding in labor cases and are not to be applied strictly if the result would be detrimental to the workingman.23 Admittedly, respondents failed to perfect their appeal from the decision of the Labor Arbiter within the reglementary period therefor. However, petitioner perfected its appeal within the period, and since petitioner had filed a timely appeal, the NLRC acquired jurisdiction over the case to give due course to its appeal and render the decision of November 14, 2002. Case law is that the party who failed to appeal from the decision of the Labor Arbiter to the NLRC can still participate in a separate appeal timely filed by the adverse party as the situation is considered to be of greater benefit to both parties.24 We find no merit in petitioners contention that the Labor Arbiter abused his discretion when he admitted respondents position paper which had been belatedly filed. It bears stressing that the Labor Arbiter is mandated by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process. 25 Indeed, as stressed by the appellate court, respondents failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint. 26 Likewise, there is simply no truth to petitioners assertion that it was denied due process when the Labor Arbiter admitted respondents position paper without requiring it to file a comment before admitting said position paper. The essence of due process in administrative proceedings is simply an opportunity to explain ones side or an opportunity to seek reconsideration of the action or ruling complained of. Obviously, there is nothing in the records that would suggest that petitioner had absolute lack of opportunity to be heard.27 Petitioner had the right to file a motion for reconsideration of the Labor Arbiters admission of respondents position paper, and even file a Reply thereto. In fact, petitioner filed its position paper on April 2, 2001. It must be stressed that Article 280 of the Labor Code was encoded in our statute books to hinder the circumvention by unscrupulous employers of the employees right to security of tenure by indiscriminately and absolutely ruling out all written and oral agreements inharmonious with the concept of regular employment defined therein.28 We quote with approval the following pronouncement of the NLRC: The complainants, on the other hand, contend that respondents assailed the Labor Arbiters order dated 18 June 2001 as violative of the NLRC Rules of Procedure and as such is violative of their right to procedural due process. That while suggesting that an Order be instead issued by the Labor Arbiter for complainants to refile this case, respondents impliedly submit that there is not any substantial damage or prejudice upon the refiling, even so, respondents suggestion acknowledges complainants right to prosecute this case, albeit with the burden of repeating the same procedure, thus, entailing additional time, efforts, litigation cost and precious time for the Arbiter to repeat the same process twice. Respondents suggestion, betrays its notion of prolonging, rather than promoting the early resolution of the case.

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Although the Labor Arbiter in his Order dated 18 June 2001 which revived and re-opened the dismissed case without prejudice beyond the ten (10) day reglementary period had inadvertently failed to follow Section 16, Rule V, Rules Procedure of the NLRC which states: "A party may file a motion to revive or re-open a case dismissed without prejudice within ten (10) calendar days from receipt of notice of the order dismissing the same; otherwise, his only remedy shall be to re-file the case in the arbitration branch of origin." the same is not a serious flaw that had prejudiced the respondents right to due process. The case can still be refiled because it has not yet prescribed. Anyway, Article 221 of the Labor Code provides: "In any proceedings before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission and its members and the Labor Arbiters 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." The admission by the Labor Arbiter of the complainants Position Paper and Supplemental Manifestation which were belatedly filed just only shows that he acted within his discretion as he is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. Indeed, the failure to submit a position paper on time is not a ground for striking out the paper from the records, much less for dismissing a complaint in the case of the complainant. (University of Immaculate Conception vs. UIC Teaching and Non-Teaching Personnel Employees, G.R. No. 144702, July 31, 2001). "In admitting the respondents position paper albeit late, the Labor Arbiter acted within her discretion. In fact, she is enjoined by law to use every reasonable means to ascertain the facts in each case speedily and objectively, without technicalities of law or procedure, all in the interest of due process". (Panlilio vs. NLRC, 281 SCRA 53). The respondents were given by the Labor Arbiter the opportunity to submit position paper. In fact, the respondents had filed their position paper on 2 April 2001. What is material in the compliance of due process is the fact that the parties are given the opportunities to submit position papers. "Due process requirements are satisfied where the parties are given the opportunities to submit position papers". (Laurence vs. NLRC, 205 SCRA 737). Thus, the respondent was not deprived of its Constitutional right to due process of law. 29 We reject, as barren of factual basis, petitioners contention that respondents are considered as its talents, hence, not regular employees of the broadcasting company. Petitioners claim that the functions performed by the respondents are not at all necessary, desirable, or even vital to its trade or business is belied by the evidence on record. Case law is that this Court has always accorded respect and finality to the findings of fact of the CA, particularly if they coincide with those of the Labor Arbiter and the National Labor Relations Commission, when supported by substantial evidence.30 The question of whether respondents are regular or project employees or independent contractors is essentially factual in nature; nonetheless, the Court is constrained to resolve it due 61

to its tremendous effects to the legions of production assistants working in the Philippine broadcasting industry. We agree with respondents contention that where a person has rendered at least one year of service, rega rdless of the nature of the activity performed, or where the work is continuous or intermittent, the employment is considered regular as long as the activity exists, the reason being that a customary appointment is not indispensable before one may be formally declared as having attained regular status. Article 280 of the Labor Code provides: 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. In Universal Robina Corporation v. Catapang,31 the Court reiterated the test in determining whether one is a regular employee: The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists.32 As elaborated by this Court in Magsalin v. National Organization of Working Men:33 Even while the language of law might have been more definitive, the clarity of its spirit and intent, i.e., to ensure a "regular" workers security of tenure, however, can hardly be doubted. In determining whether an employment should be considered regular or non-regular, the applicable test is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The standard, supplied by the law itself, is whether the work undertaken is necessary or desirable in the usual business or trade of the employer, a fact that can be assessed by looking into the nature of the services rendered and its relation to the general scheme under which the business or trade is pursued in the usual course. It is distinguished from a specific undertaking that is divorced from the normal activities required in carrying on the particular business or trade. But, although the work to be performed is only for a specific project or seasonal, where a person thus engaged has been performing the job for at least one year, even if the performance is not continuous or is merely intermittent, the law deems the repeated and continuing need for its performance as being sufficient to indicate the necessity or desirability of that activity to the business or trade of the employer. The employment of such person is also then deemed to be regular with respect to such activity and while such activity exists.34

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Not considered regular employees are "project employees," the completion or termination of which is more or less determinable at the time of employment, such as those employed in connection with a particular construction project, and "seasonal employees" whose employment by its nature is only desirable for a limited period of time. Even then, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity performed and while such activity actually exists. It is of no moment that petitioner hired respondents as "talents." The fact that respondents received pre-agreed "talent fees" instead of salaries, that they did not observe the required office hours, and that they were permitted to join other productions during their free time are not conclusive of the nature of their employment. Respondents cannot be considered "talents" because they are not actors or actresses or radio specialists or mere clerks or utility employees. They are regular employees who perform several different duties under the control and direction of ABS-CBN executives and supervisors. Thus, there are two kinds of regular employees under the law: (1) those engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous or broken, with respect to the activities in which they are employed.35 The law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining situation necessitates the succor of the State. What determines whether a certain employment is regular or otherwise is not the will or word of the employer, to which the worker oftentimes acquiesces, much less the procedure of hiring the employee or the manner of paying the salary or the actual time spent at work. It is the character of the activities performed in relation to the particular trade or business taking into account all the circumstances, and in some cases the length of time of its performance and its continued existence. 36 It is obvious that one year after they were employed by petitioner, respondents became regular employees by operation of law.37 Additionally, respondents cannot be considered as project or program employees because no evidence was presented to show that the duration and scope of the project were determined or specified at the time of their engagement. Under existing jurisprudence, project could refer to two distinguishable types of activities. First, a project may refer to a particular job or undertaking that is within the regular or usual business of the employer, 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. Second, the term project may also refer to a particular job or undertaking that is not within the regular business of the employer. 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.38 The principal test is whether or not the project employees were assigned to carry out a specific project or undertaking, the duration and scope of which were specified at the time the employees were engaged for that project.39 In this case, it is undisputed that respondents had continuously performed the same activities for an average of five years. Their assigned tasks are necessary or desirable in the usual business or trade of the petitioner. The persisting need for their services is sufficient evidence of the necessity and indispensability of such services to petitioners business or trade.40 While length of time may not be a sole controlling test for project employment, it can be a strong factor to determine whether the employee was hired for a specific undertaking or in fact tasked to perform functions which are vital, necessary and indispensable to the usual trade or business of the employer.41We note further that petitioner did not report the termination of respondents employment in the 63

particular "project" to the Department of Labor and Employment Regional Office having jurisdiction over the workplace within 30 days following the date of their separation from work, using the prescribed form on employees termination/ dismissals/suspensions.42 As gleaned from the records of this case, petitioner itself is not certain how to categorize respondents. In its earlier pleadings, petitioner classified respondents as program employees, and in later pleadings, independent contractors. Program employees, or project employees, are different from independent contractors because in the case of the latter, no employer-employee relationship exists. Petitioners reliance on the ruling of this Court in Sonza v. ABS-CBN Broadcasting Corporation43 is misplaced. In that case, the Court explained why Jose Sonza, a well-known television and radio personality, was an independent contractor and not a regular employee: A. Selection and Engagement of Employee ABS-CBN engaged SONZAS services to co-host its television and radio programs because of SONZAS 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 respondents 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-CBNs employee, there would be no need for the parties to stipulate on benefits such as "SSS, Medicare, x x x and 13th month pay which the law automatically incorporates into every employer-employee contract. Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship. SONZAs talent fees, amounting to P317,000 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 SONZAS 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 64

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.44 In the case at bar, however, the employer-employee relationship between petitioner and respondents has been proven. First. In the selection and engagement of respondents, no peculiar or unique skill, talent or celebrity status was required from them because they were merely hired through petitioners personnel department just like any ordinary employee. Second. The so-called "talent fees" of respondents correspond to wages given as a result of an employeremployee relationship. Respondents did not have the power to bargain for huge talent fees, a circumstance negating independent contractual relationship. Third. Petitioner could always discharge respondents should it find their work unsatisfactory, and respondents are highly dependent on the petitioner for continued work. Fourth. The degree of control and supervision exercised by petitioner over respondents through its supervisors negates the allegation that respondents are independent contractors. The presumption is that when the work done is an integral part of the regular business of the employer and when the worker, relative to the employer, does not furnish an independent business or professional service, such work is a regular employment of such employee and not an independent contractor.45 The Court will peruse beyond any such agreement to examine the facts that typify the parties actual relationship. 46 It follows then that respondents are entitled to the benefits provided for in the existing CBA between petitioner and its rank-and-file employees. As regular employees, respondents are entitled to the benefits granted to all other regular employees of petitioner under the CBA. 47 We quote with approval the ruling of the appellate court, that the reason why production assistants were excluded from the CBA is precisely because they were erroneously classified and treated as project employees by petitioner: x x x The award in favor of private respondents of the benefits accorded to rank-and-file employees of ABSCBN under the 1996-1999 CBA is a necessary consequence of public respondents ruling that private respondents as production assistants of petitioner are regular employees. The monetary award is not considered as claims involving the interpretation or implementation of the collective bargaining agreement. The reason why production assistants were excluded from the said agreement is precisely because they were classified and treated as project employees by petitioner. As earlier stated, it is not the will or word of the employer which determines the nature of employment of an employee but the nature of the activities performed by such employee in relation to the particular business or trade of the employer. Considering that We have clearly found that private respondents are regular employees of petitioner, their exclusion from the said CBA on the misplaced belief of the parties to the said agreement that they are project employees, is therefore not proper. Finding said private respondents as regular employees and 65

not as mere project employees, they must be accorded the benefits due under the said Collective Bargaining Agreement. A collective bargaining agreement is a contract entered into by the union representing the employees and the employer. However, even the non-member employees are entitled to the benefits of the contract. To accord its benefits only to members of the union without any valid reason would constitute undue discrimination against non-members. A collective bargaining agreement is binding on all employees of the company. Therefore, whatever benefits are given to the other employees of ABS-CBN must likewise be accorded to private respondents who were regular employees of petitioner.48 Besides, only talent-artists were excluded from the CBA and not production assistants who are regular employees of the respondents. Moreover, under Article 1702 of the New Civil Code: "In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living of the laborer." IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 76582 are AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.
Footnotes 1 Penned by Associate Justice Mariano C. Del Castillo, with Associate Justices Rodrigo V. Cosico and Rosalinda AsuncionVicente, concurring, rollo, pp. 9-34. 2 Id. at 170-219. 3 Id. at 220-227. 4 Rollo, p. 180. 5 Id. at 183. 6 Id. at 213. 7 Id. at 174. 8 Id. at 248-250. 9 CA rollo, pp. 128-129. 10 Id. at 138-139. 11 See CA rollo, pp. 7-8. 12 Rollo, pp. 229-233. 13 Id. at 257-258. 14 Rollo, p. 172. 15 Rollo, p. 218. 16 385 Phil. 93 (2000). 17 Rollo, p. 36. 18 Id. at 58-59. 19 Mabuhay Development Industries v. National Labor Relations Commission, 351 Phil. 227, 234-235 (1998), citing City Fair Corporation v. National Labor Relations Commission, 313 Phil. 464, 465 (1995). 20 Sublay v. National Labor Relations Commission, 381 Phil. 198, 204 (2000). 21 Art. 223. APPEAL Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. x x x 22 Buenaobra v. Lim King Guan, G.R. No. 150147, January 20, 2004, 420 SCRA 359, 364 (2004). 23 Huntington Steel Products, Inc. v. National Labor Relations Commission, G.R. No. 158311, November 14, 2004, 442 SCRA 551, 560. 24 See Sandol v. Pilipinas Kao, Inc., et al., G.R. No. 87530, June 13, 1990, 186 SCRA 491.

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Panlilio v. National Labor Relations Commission, 346 Phil. 30, 35-36 (1997). U.I.C. v. U.I.C. Teaching & Non-Teaching Personnel and Employees Union, 414 Phil. 522, 533 (2001). 27 Mayon Hotel & Restaurant v. Adana, G.R. No. 157634, May 16, 2005, 458 SCRA 609, 629-630. 28 Philips Semiconductors (Phils.), Inc. v. Fadriquela, Infra note 35, at 418. 29 CA rollo, pp. 51-52. 30 Lopez v. National Steel Corporation, G.R. No. 149674, February 16, 2004, 423 SCRA 109, 113. 31 G.R. No. 164736, October 14, 2005, 473 SCRA 189. 32 Id. at 203-204, citing Abasolo v. National Labor Relations Commission, 400 Phil. 86, 103 (2000), De Leon v. National Labor Relations Commission, G.R. No. 70705, August 21, 1989, 176 SCRA 615, 621. 33 451 Phil. 254 (2003). 34 Id. at 260-261. 35 Philips Semiconductors (Phils.), Inc. v. Fadriquela, G.R. No. 141717, April 14, 2004, 427 SCRA 408, 419. 36 De Leon v. National Labor Relations Commission, supra note 32, at 624. 37 Kimberly Independent Labor Union for Solidarity v. Drilon, et al., G.R. Nos. 77629 and 78791, May 9, 1990, 185 SCRA 190, 204. 38 Villa v. National Labor Relations Commission, 348 Phil. 116, 143 (1998). 39 ALU-TUCP, et al. v. National Labor Relations Commission, G.R. No. 109902, August 2, 1994, 234 SCRA 678, 685. 40 Samson v. National Labor Relations Commission, 323 Phil 135, 148 (1996). 41 Tomas Lao Construction v. National Labor Relations Commission, 344 Phil. 268, 279 (1997). 42 Section 2.2 of Department Order No. 19, cited in Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, G.R. No. 152427, August 9, 2005, 466 SCRA 265, 273-274 and Samson v. National Labor Relations Commission, supra note 40, at 147. 43 G.R. No. 138051, June 10, 2004, 431 SCRA 538. 44 Id. at 595-596. 45 David Albert Pierce, Esq., "Management-side employment law advice for entertainment industry" with subtitle "Classification of Workers: Independent Contractor versus Employee"http://www.piercegorman.com/Classification_of_Workers.html (visited July 14, 2006). 46 Id. 47 Cinderella Marketing Corporation v. National Labor Relations Commission, Second Division, G.R. Nos. 112535 and 113758, June 22, 1998, 291 SCRA 91, 96. 48 Rollo, pp. 121-122.
25 26

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 179546 February 13, 2009

COCA-COLA BOTTLERS PHILS., INC., Petitioner, vs. ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G. ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG, URRIQUIA T. ARVIN, GIL H. FRANCISCO, and EDWIN M. GOLEZ, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision 1 dated 19 February 2007, promulgated by the Court of Appeals in CA-G.R. SP No. 85320, reversing the Resolution2rendered on 30 October 2003 by the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 036494-03. The Court of Appeals, in its assailed Decision, declared that respondents Alan M. Agito, Regolo S. Oca III, Ernesto G. Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T. Arvin, Gil H. Francisco, and Edwin M. Golez were regular employees of petitioner Coca-Cola Bottlers Phils., Inc; and that Interserve Management & Manpower Resources, Inc. (Interserve) was a labor-only contractor, whose presence was intended merely to preclude respondents from acquiring tenurial security. Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and engaged in manufacturing, bottling and distributing soft drink beverages and other allied products. On 15 April 2002, respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated Services, Inc., Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th month pay, and damages. The two cases, docketed as NLRC NCR Case No. 04-02345-2002 and NLRC NCR Case No. 05-03137-02, were consolidated. Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of petitioner. They had been in the employ of petitioner for years, but were not regularized. Their employment was terminated on 8 April 2002 without just cause and due process. However, they failed to state the reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent Partners, Inc.3 Petitioner filed its Position Paper (with Motion to Dismiss), 4 where it averred that respondents were employees of Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract of Services5 executed between petitioner and Interserve on 23 March 2002. Said Contract between petitioner and Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted legitimate job contracting, given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business. 68

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of Incorporation of Interserve;6 (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue;7 (3) the Income Tax Return, with Audited Financial Statements, of Interserve for 2001;8 and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the Department of Labor and Employment (DOLE).9 As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages, and supervised their work, as proven by: (1) respondents Personal Data Files in the records of Interserve;10 (2) respondents Contract of Temporary Employment with Interserve; 11 and (3) the payroll records of Interserve.12 Petitioner, thus, sought the dismissal of respondents complaint against it on the ground that the Labor Arbiter did not acquire jurisdiction over the same in the absence of an employer-employee relationship between petitioner and the respondents.13 In a Decision dated 28 May 2003, the Labor Arbiter found that respondents were employees of Interserve and not of petitioner. She reasoned that the standard put forth in Article 280 of the Labor Code for determining regular employment (i.e., that the employee is performing activities that are necessary and desirable in the usual business of the employer) was not determinative of the issue of whether an employer-employee relationship existed between petitioner and respondents. While respondents performed activities that were necessary and desirable in the usual business or trade of petitioner, the Labor Arbiter underscored that respondents functions were not indispensable to the principal business of petitioner, which was manufacturing and bottling soft drink beverages and similar products. The Labor Arbiter placed considerable weight on the fact that Interserve was registered with the DOLE as an independent job contractor, with total assets amounting to P1,439,785.00 as of 31 December 2001. It was Interserve that kept and maintained respondents employee records, including their Perso nal Data Sheets; Contracts of Employment; and remittances to the Social Securities System (SSS), Medicare and Pag-ibig Fund, thus, further supporting the Labor Arbiters finding that respondents were employees of Interserve. She ruled that the circulars, rules and regulations which petitioner issued from time to time to respondents were not indicative of control as to make the latter its employees. Nevertheless, the Labor Arbiter directed Interserve to pay respondents their pro-rated 13th month benefits for the period of January 2002 until April 2002.14 In the end, the Labor Arbiter decreed: WHEREFORE, judgment is hereby rendered finding that [herein respondents] are employees of [herein petitioner] INTERSERVE MANAGEMENT & MANPOWER RESOURCES, INC. Concomitantly, respondent Interserve is further ordered to pay [respondents] their pro-rated 13th month pay. The complaints against COCA-COLA BOTTLERS PHILS., INC. is DISMISMMED for lack of merit. In like manner the complaints against PEERLESS INTEGRATED SERVICES, INC., BETTER BUILDING INC. and EXCELLENT PARTNERS COOPERATIVE are DISMISSED for failure of complainants to pursue against them. Other claims are dismissed for lack of merit. 69

The computation of the Computation and Examination Unit, this Commission if (sic) made part of this Decision. 15 Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal with the NLRC, docketed as NLRC NCR CA No. 036494-03. In their Memorandum of Appeal,16 respondents maintained that contrary to the finding of the Labor Arbiter, their work was indispensable to the principal business of petitioner. Respondents supported their claim with copies of the Delivery Agreement17 between petitioner and TRMD Incorporated, stating that petitioner was "engaged in the manufacture, distribution and sale of soft drinks and other related products with various plants and sales offices and warehouses located all over the Philippines." Moreover, petitioner supplied the tools and equipment used by respondents in their jobs such as forklifts, pallet, etc. Respondents were also required to work in the warehouses, sales offices, and plants of petitioner. Respondents pointed out that, in contrast, Interserve did not own trucks, pallets cartillas, or any other equipment necessary in the sale of Coca-Cola products. Respondents further averred in their Memorandum of Appeal that petitioner exercised control over workers supplied by various contractors. Respondents cited as an example the case of Raul Arenajo (Arenajo), who, just like them, worked for petitioner, but was made to appear as an employee of the contractor Peerless Integrated Services, Inc. As proof of control by petitioner, respondents submitted copies of: (1) a Memorandum 18 dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor of petitioner, addressed to Arenajo, suspending the latter from work until he explained his disrespectful acts toward the supervisor who caught him sleeping during work hours; (2) a Memorandum19 dated 12 August 1998 again issued by Dy to Arenajo, informing the latter that the company had taken a more lenient and tolerant position regarding his offense despite having found cause for his dismissal; (3) Memorandum20 issued by Dy to the personnel of Peerless Integrated Services, Inc., requiring the latter to present their timely request for leave or medical certificates for their absences; (4) Personnel Workers Schedules, 21 prepared by RB Chua, another supervisor of petitioner; (5) Daily Sales Monitoring Report prepared by petitioner;22 and (6) the Conventional Route System Proposed Set-up of petitioner. 23 The NLRC, in a Resolution dated 30 October 2003, affirmed the Labor Arbiters Decision dated 28 May 2003 and pronounced that no employer-employee relationship existed between petitioner and respondents. It reiterated the findings of the Labor Arbiter that Interserve was an independent contractor as evidenced by its substantial assets and registration with the DOLE. In addition, it was Interserve which hired and paid respondents wages, as well as paid and remitted their SSS, Medicare, and Pag -ibig contributions. Respondents likewise failed to convince the NLRC that the instructions issued and trainings conducted by petitioner proved that petitioner exercised control over respondents as their employer.24 The dispositive part of the NLRC Resolution states:25 WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. However, respondent Interserve Management & Manpower Resources, Inc., is hereby ordered to pay the [herein respondents] their pro-rated 13th month pay. Aggrieved once more, respondents sought recourse with the Court of Appeals by filing a Petition for Certiorariunder Rule 65, docketed as CA-G.R. SP No. 85320. The Court of Appeals promulgated its Decision on 9 February 2007, reversing the NLRC Resolution dated 30 October 2003. The appellate court ruled that Interserve was a labor-only contractor, with insufficient capital and investments for the services which it was contracted to perform. With only P510,000.00 invested in its 70

service vehicles and P200,000.00 in its machineries and equipment, Interserve would be hard-pressed to meet the demands of daily soft drink deliveries of petitioner in the Lagro area. The Court Appeals concluded that the respondents used the equipment, tools, and facilities of petitioner in the day-to-day sales operations. Additionally, the Court of Appeals determined that petitioner had effective control over the means and method of respondents work as evidenced by the Daily Sales Monitoring Report, the Conventional Route System Proposed Set-up, and the memoranda issued by the supervisor of petitioner addressed to workers, who, like respondents, were supposedly supplied by contractors. The appellate court deemed that the respondents, who were tasked to deliver, distribute, and sell Coca-Cola products, carried out functions directly related and necessary to the main business of petitioner. The appellate court finally noted that certain provisions of the Contract of Service between petitioner and Interserve suggested that the latters undertaking did not involve a specific job, but rather the supply of manpower. The decretal portion of the Decision of the Court of Appeals reads:26 WHEREFORE, the petition is GRANTED. The assailed Resolutions of public respondent NLRC are REVERSED and SET ASIDE. The case is remanded to the NLRC for further proceedings. Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in a Resolution, dated 31 August 2007.27 Hence, the present Petition, in which the following issues are raised28: I WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH EVIDENCE ON RECORD, APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT RULED THAT INTERSERVE IS A LABOR-ONLY CONTRACTOR; II WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS PERFORMED WORK NECESSARY AND DESIRABLE TO THE BUSINESS OF [PETITIONER]; III WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DECLARED THAT RESPONDENTS WERE EMPLOYEES OF [PETITIONER], EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN EMPLOYMENT RELATIONSHIP; AND IV WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONCLUDED THAT INTERSERVE WAS ENGAGED BY [PETITIONER] TO SUPPLY MANPOWER ONLY. The Court ascertains that the fundamental issue in this case is whether Interserve is a legitimate job contractor. Only by resolving such issue will the Court be able to determine whether an employer-employee relationship 71

exists between petitioner and the respondents. To settle the same issue, however, the Court must necessarily review the factual findings of the Court of Appeals and look into the evidence presented by the parties on record. As a general rule, factual findings of the Court of Appeals are binding upon the Supreme Court. One exception to this rule is when the factual findings of the former are contrary to those of the trial court, or the lower administrative body, as the case may be. This Court is obliged to resolve an issue of fact herein due to the incongruent findings of the Labor Arbiter and the NLRC and those of the Court of Appeals. 29 The relations which may arise in a situation, where there is an employer, a contractor, and employees of the contractor, are identified and distinguished under Article 106 of the Labor Code: Article 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restriction, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is "labor-only" contracting where the person supplying workers to an employee does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or (2) the prohibited labor-only contracting. A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the formers work, is permitted by law. Thus, the employer-employee relationship between the job contractor and his employees is maintained. In legitimate job contracting, the law creates an employer-employee relationship between the employer and the contractors employees only for a limited purpose, i.e., to ensure that the employees are paid their wages. The employer becomes jointly and severally liable with the job contractor only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by the contractors employees. 30 On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and supplying the principal employer with workers for the purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned by law. A finding by the appropriate 72

authorities that a contractor is a "labor-only" contractor establishes an employer-employee relationship between the principal employer and the contractors employees and the former becomes s olidarily liable for all the rightful claims of the employees. 31 Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in determining whether labor-only contracting exists: Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work or service for a principal, and any of the following elements are [is] present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) The contractor does not exercise the right to control the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as amended. "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out. The "right to control" shall refer to the right reversed to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.) When there is labor-only contracting, Section 7 of the same implementing rules, describes the consequences thereof: Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages. The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a competent authority: a. where there is labor-only contracting; or b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

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According to the foregoing provision, labor-only contracting would give rise to: (1) the creation of an employeremployee relationship between the principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the principal and the contractor to the employees in the event of any violation of the Labor Code. Petitioner argues that there could not have been labor-only contracting, since respondents did not perform activities that were indispensable to petitioners principal business. And, even assuming that they did, such fact alone does not establish an employer-employee relationship between petitioner and the respondents, since respondents were unable to show that petitioner exercised the power to select and hire them, pay their wages, dismiss them, and control their conduct. The argument of petitioner is untenable. The law clearly establishes an employer-employee relationship between the principal employer and the contractors employee upon a finding that the contractor is engaged in "labor -only" contracting. Article 106 of the Labor Code categorically states: "There is labor-only contracting where the person supplying workers to an employee does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer." Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that "labor-only" contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar. Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose job was designated as leadman. In the Delivery Agreement32 between petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the manufacture, distribution and sale of softdrinks and other related products. The work of respondents, constituting distribution and sale of Coca-Cola products, is clearly indispensable to the principal business of petitioner. The repeated re-hiring of some of the respondents supports this finding.33Petitioner also does not contradict respondents allegations that the former has Sales Departments and Sales Offices in its various offices, plants, and warehouses; and that petitioner hires Regional Sales Supervisors and District Sales Supervisors who supervise and control the salesmen and sales route helpers.34 As to the supposed substantial capital and investment required of an independent job contractor, petitioner calls the attention of the Court to the authorized capital stock of Interserve amounting to P2,000,000.00.35 It cites as authority Filipinas Synthetic Fiber Corp. v. National Labor Relations Commission 36 and Frondozo v. National Labor Relations Commission,37 where the contractors authorized capital stock of P1,600,000.00 and P2,000,000.00, respectively, were considered substantial for the purpose of concluding that they were legitimate job contractors. Petitioner also refers to Neri v. National Labor Relations Commission 38 where it was held that a contractor ceases to be a labor-only contractor by having substantial capital alone, without investment in tools and equipment. This Court is unconvinced. At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting toP2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set an absolute figure for what it considers substantial capital for an independent job contractor, but it measures the same against the type of work which the contractor is obligated to perform for the principal. However, this is rendered impossible in this case since the Contract between petitioner and Interserve does not even specify the 74

work or the project that needs to be performed or completed by the latters employees, and uses the dubious phrase "tasks and activities that are considered contractible under existing laws and regulations." Even in its pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services that Interserve was obligated to render to petitioner. The importance of identifying with particularity the work or task which Interserve was supposed to accomplish for petitioner becomes even more evident, considering that the Articles of Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the business of janitorial and allied services.39 But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under such ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake the job it was contracting with petitioner. Petitioner cannot seek refuge in Neri v. National Labor Relations Commission. Unlike in Neri, petitioner was unable to prove in the instant case that Interserve had substantial capitalization to be an independent job contractor. In San Miguel Corporation v. MAERC Integrated Services, Inc., 40 therein petitioner San Miguel Corporation similarly invoked Neri, but was rebuffed by the Court based on the following ratiocination41 : Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. In that case, it was held that the law did not require one to possess both substantial capital and investment in the form of tools, equipment, machinery, work premises, among others, to be considered a job contractor. The second condition to establish permissible job contracting was sufficiently met if one possessed either attribute. Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only contractor despite the finding that MAERC had investments amounting to P4,608,080.00 consisting of buildings, machinery and equipment. However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were 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 the contractor was 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 workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment. In Neri, the Court considered not only the fact that respondent Building Care Corporation (BCC) had substantial capitalization but noted that BBC carried on an independent business and performed its contract according to its own manner and method, free from the control and supervision of its principal in all matters except as to the results thereof. The Court likewise mentioned that the employees of BCC were engaged to perform specific special services for their principal. The status of BCC had also been passed upon by the Court in a previous case where it was found to be a qualified job contractor because it was a "big firm which services among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the contractor before being assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor maintained effective supervision and control over them. Thus, in San Miguel Corporation, the investment of MAERC, the contractor therein, in the form of buildings, tools, and equipment of more than P4,000,000.00 did not impress the Court, which still declared MAERC to be a labor-only contractor. In another case, Dole Philippines, Inc. v. Esteva,42 the Court did not recognize the 75

contractor therein as a legitimate job contractor, despite its paid-up capital of over P4,000,000.00, in the absence of substantial investment in tools and equipment used in the services it was rendering. Insisting that Interserve had substantial investment, petitioner assails, for being purely speculative, the finding of the Court of Appeals that the service vehicles and equipment of Interserve, with the values of P510,000.00 andP200,000.00, respectively, could not have met the demands of the Coca-Cola deliveries in the Lagro area. Yet again, petitioner fails to persuade. The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in job contracting.43 Although not the contractor itself (since Interserve no longer appealed the judgment against it by the Labor Arbiter), said burden of proof herein falls upon petitioner who is invoking the supposed status of Interserve as an independent job contractor. Noticeably, petitioner failed to submit evidence to establish that the service vehicles and equipment of Interserve, valued at P510,000.00 and P200,000.00, respectively, were sufficient to carry out its service contract with petitioner. Certainly, petitioner could have simply provided the courts with records showing the deliveries that were undertaken by Interserve for the Lagro area, the type and number of equipment necessary for such task, and the valuation of such equipment. Absent evidence which a legally compliant company could have easily provided, the Court will not presume that Interserve had sufficient investment in service vehicles and equipment, especially since respondents allegation that they were using equipment, such as forklifts and pallets belonging to petitioner, to carry out their jobs was uncontroverted. In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a "laboronly" contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. The Court, however, does not stop at this finding. It is also apparent that Interserve is a labor-only contractor under Section 5(ii)44 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of respondents. The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the CONTRACTOR) and petitioner (as the CLIENT), pertinent portions of which are reproduced below: WHEREAS, the CONTRACTOR is engaged in the business, among others, of performing and/or undertaking, managing for consideration, varied projects, jobs and other related management-oriented services; WHEREAS, the CONTRACTOR warrants that it has the necessary capital, expertise, technical know-how and a team of professional management group and personnel to undertake and assume the responsibility to carry out the above mentioned project and services; WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the CONTRACTOR for emergency needs, rush jobs, peak product loads, temporary, seasonal and other special project requirements the extent that the available work of the CLIENT can properly be done by an independent CONTRACTOR permissible under existing laws and regulations; 76

WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the CLIENT as stated heretofore, under the terms and conditions herein stated, and the CLIENT has accepted the offer. NOW THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants and stipulations hereinafter set forth, the parties have hereto have stated and the CLIENT has accepted the offer: 1. The CONTRACTOR agrees and undertakes to perform and/or provide for the CLIENT, on a nonexclusive basis for tasks or activities that are considered contractible under existing laws and regulations, as may be needed by the CLIENT from time to time. 2. To carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel like Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least Technical/Vocational courses graduates provided with adequate uniforms and appropriate identification cards, who are warranted by the CONTRACTOR to be so trained as to efficiently, fully and speedily accomplish the work and services undertaken herein by the CONTRACTOR. The CONTRACTOR represents that its personnel shall be in such number as will be sufficient to cope with the requirements of the services and work herein undertaken and that such personnel shall be physically fit, of good moral character and has not been convicted of any crime. The CLIENT, however, may request for the replacement of the CONTRACTORS personnel if from its judgment, the jobs or the projects being done could not be completed within the time specified or that the quality of the desired result is not being achieved. 3. It is agreed and understood that the CONTRACTORS personnel will comply with CLIENT, CLIENTS policies, rules and regulations and will be subjected on-the-spot search by CLIENT, CLIENTS duly authorized guards or security men on duty every time the assigned personnel enter and leave the premises during the entire duration of this agreement. 4. The CONTRACTOR further warrants to make available at times relievers and/or replacements to ensure continuous and uninterrupted service as in the case of absences of any personnel above mentioned, and to exercise the necessary and due supervision over the work of its personnel. 45 Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the respondents, would comply with "CLIENT" as well as "CLIENTs policies, rules and regulations." It even required Interserve personnel to subject themselves to on-the-spot searches by petitioner or its duly authorized guards or security men on duty every time the said personnel entered and left the premises of petitioner. Said paragraph explicitly established the control of petitioner over the conduct of respondents. Although under paragraph 4 of the same Contract, Interserve warranted that it would exercise the necessary and due supervision of the work of its personnel, there is a dearth of evidence to demonstrate the extent or degree of supervision exercised by Interserve over respondents or the manner in which it was actually exercised. There is even no showing that Interserve had representatives who supervised respondents work while they were in the premises of petitioner. Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement of the CONTRACTORS personnel." True, this right was conveniently qualified by the phrase "if from its judgment, the jobs or the projects being done could not be completed within the time specified or that the quality of the desired result is not being achieved," but such qualification was rendered meaningless by the fact that the Contract did not stipulate what work or job the personnel needed to complete, the time for its completion, or the results desired. The said provision left a gap which could enable petitioner to demand the removal or 77

replacement of any employee in the guise of his or her inability to complete a project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is the strongest indication of a companys right of control as direct employer.461avvphil.zw+ Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would provide relievers and replacements in case of absences of its personnel, raises another red flag. An independent job contractor, who is answerable to the principal only for the results of a certain work, job, or service need not guarantee to said principal the daily attendance of the workers assigned to the latter. An independent job contractor would surely have the discretion over the pace at which the work is performed, the number of employees required to complete the same, and the work schedule which its employees need to follow. As the Court previously observed, the Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide petitioner ("Route Helpers, Salesmen, Drivers, Clericals, Encoders& PD") and their qualifications (technical/vocational course graduates, physically fit, of good moral character, and have not been convicted of any crime). The Contract also states that, "to carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel," thus, acknowledging that Interserve did not yet have in its employ the personnel needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words, Interserve did not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing petitioner with workers performing tasks directly related to the latters principal business. The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face value, since the primary purpose stated in the Articles of Incorporation47 of Interserve is misleading. According to its Articles of Incorporation, the principal business of Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the work for which respondents were employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the capital and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for janitorial services, this does not mean that such capital and/or investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca-Cola products. With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its employees. Records also failed to show that petitioner afforded respondents the twin requirements of procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents were not served notices informing them of the particular acts for which their dismissal was sought. Nor were they required to give their side regarding the charges made against them. Certainly, the respondents dismissal was not carried out in accordance with law and, therefore, illegal.48 Given that respondents were illegally dismissed by petitioner, they are entitled to reinstatement, full backwages, inclusive of allowances, and to their other benefits or the monetary equivalents thereof computed from the time their compensations were withheld from them up to the time of their actual reinstatement, as mandated under Article 279 of the Labor Code,. 78

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Court AFFIRMS WITH MODIFICATION the Decision dated 19 February 2007 of the Court of Appeals in CA-G.R. SP No. 85320. The Court DECLARES that respondents were illegally dismissed and, accordingly, ORDERS petitioner to reinstate them without loss of seniority rights, and to pay them full back wages computed from the time their compensation was withheld up to their actual reinstatement. Costs against the petitioner. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

DIOSDADO M. PERALTA Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice
Footnotes 1 Penned by Associate Justice Rosalinda Asuncion-Vicente with Associate Justices Elvi John S. Asuncion and Enrico M. Lanzanas, concurring. Rollo, pp. 57-69. 2 Rollo, pp. 152-157. 3 Id. at 236-242. 4 CA rollo, pp. 55-69. 5 Id. at 71-76.

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Id. at 78-87. Id. at 88. 8 Id. at 89-93. 9 Id. at 131. 10 Id. at 94, 97, 100, 103, 106, 109. Only six Personal Data Files were attached to the Position Paper. Personal Data Files of two of the respondents, Alfonso Paa, Jr. and Edwin Golez, were not submitted. 11 Id at 95-96, 98-99, 101-102, 104-405, 107-108, 110-111. Only six Contracts of Temporary Employment were attached to the Position Paper. The Contracts for Temporary Employment of two of the respondents, Alfonso Paa, Jr. and Edwin Golez, were not submitted. 12 Id. at 112-130. 13 Id. at 66-69. 14 Rollo, pp. 134-149. 15 Id. at 149-150. 16 CA rollo, pp. 150-170. 17 Id. at 186. 18 Id. at 193. 19 Id. at 194. 20 Id. at 195. 21 Id. at 201-202. 22 Id. at 196. 23 Id. at 197. 24 Rollo, pp.152-156. 25 Id. at 156. 26 Id. at 57-68. 27 CA rollo, pp. 456-457. 28 Rollo, p. 330. 29 Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, G.R. No. 153832, 18 March 2005, 453 SCRA 820, 826. 30 San Miguel Corporation v. MAERC Integrated Services, Inc., 453 Phil. 543, 566-567 (2003). 31 Id. at 567. 32 Rollo, p. 199. 33 Based on respondents Personal Data files, which were kept by Interserve, respondent Regolo Oca worked in Coca-Cola in September 2000 as a salesman and his contract was renewed three more times until he was dismissed in April 2002. Respondent Ernesto Alario worked in Coca-Cola in October 2001, and his contract was renewed one more time before his dismissal in April 2002. Respondent Gil Francisco worked in Coca-cola as a Driver on August 1998 and later on as leadman in December 1998, and his contract was renewed until he was dismissed in April 2002. Respondent Arvin Urquia worked as a salesman in Coca-Cola in October 2001, and his contract was renewed in February 2002 until he was dismissed in April 2002. Lastly, respondent Alan Agito worked in Coca-Cola as salesman in May 2002, and his contract was renewed until he was dismissed in April 2002. (CA rollo, pp. 94, 97, 100, 103, 106, and 109.) 34 Rollo, p. 283. 35 Id. at 331-338. 36 327 Phil. 144 (1996). 37 CA-G.R. SP No. 102442, 30 May 2008. 38 G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717. 39 CA rollo, p. 78. 40 Supra note 30. 41 Id. at 564-566. 42 G.R. No. 161115, 30 November 2006, 509 SCRA 332, 353 and 377. 43 Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, 19 September 2006, 502 SCRA 271, 289; Guarin v. National Labor Relations Commission, G.R. No. 86010, 3 October 1989, 178 SCRA 267, 273. 44 According to Section 5 of the Rules Implementing Articles 106-109, as amended: Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits,
6 7

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supplies, or places workers to perform a job, work or service for a principal, and any of the following elements are [is] present: i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or ii) The contractor does not exercise the right to control the performance of the work of the contractual employee. The use of the words "any" and "or" in the foregoing provision means that the elements of labor-only contracting identified therein need not exist concurrently. The existence of one element is sufficient to establish labor-only contracting. 45 Rollo, pp. 74-75. 46 Brotherhood Labor Unity Movement of the Philippines v. Zamora, G.R. No. L-48645, 7 January 1987, 147 SCRA 49, 59. 47 CA rollo, p. 78. 48 Abesco Construction and Development Corporation v. Ramirez, G.R. No. 141168, 10 April 2006, 487 SCRA 9, 15; Grandspan Development Corporation v. Bernardo, G.R. No. 141464, 21 September 2005, 470 SCRA 461, 470; Raycor Aircontrol Systems, Inc. v. National Labor Relations Commission, 330 Phil. 306, 334 (1996).

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-98368 December 15, 1993 OPULENCIA ICE PLANT AND STORAGE AND/OR DR. MELCHOR OPULENCIA, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), LABOR ARBITER NUMERIANO VILLENA AND MANUEL P. ESITA, respondents. Inocentes, De Leon, Leogardo, Atienza, Magnaye & Azucena (IDLAMA) Law Offices for petitioners. Noli J. De los Santos for private respondent. BELLOSILLO, J.: MANUEL P. ESITA was for twenty (20) years a compressor operator of Tiongson Ice Plant in San Pablo City. In 1980 he was hired as compressor operator-mechanic for the ice plants of petitioner Dr. Melchor Opulencia located in Tanauan, Batangas, and Calamba, Laguna. Initially assigned at the ice plant in Tanauan, Esita would work from seven o'clock in the morning to five o'clock in the afternoon receiving a daily wage of P35.00. In 1986, Esita was transferred to the ice plant in Calamba, which was then undergoing overhauling, taking the place of compressor operator Lorenzo Eseta, who was relieved because he was already old and weak. For less than a month, Esita helped in the construction-remodeling of Dr. Opulencia's house. On 6 February 1989, for demanding the correct amount of wages due him, Esita was dismissed from service. Consequently, he filed with Sub-Regional Arbitration Branch IV, San Pablo City, a complaint for illegal dismissal, underpayment, non-payment for overtime, legal holiday, premium for holiday and rest day, 13th month, separation/retirement pay and allowances against petitioners. Petitioners deny that Esita is an employee. They claim that Esita could not have been employed in 1980 because the Tanauan ice plant was not in operation due to low voltage of electricity and that Esita was merely a helper/peon of one of the contractors they had engaged to do major repairs and renovation of the Tanauan ice plant in 1986. Petitioners further allege that when they had the Calamba ice plant repaired and expanded, Esita likewise rendered services in a similar capacity, and thus admitting that he worked as a helper /peon in the repair or remodeling of Dr. Opulencia's residence in Tanauan. Opulencia likewise maintains that while he refused the insistent pleas of Esita for employment in the ice plants due to lack of vacancy, he nonetheless allowed him to stay in the premises of the ice plant for free and to collect fees for crushing or loading ice of the customers and dealers of the ice plant. Opulencia claims that in addition, Esita enjoyed free electricity and water, and was allowed to cultivate crops within the premises of the ice plant to augment his income. Petitioners however admit that "following the tradition of 'pakikisama' and as a token of gratitude of the part of the complainant (Esita), he helps in the cleaning of the ice plant premises and engine room whenever he is requested to do so, and this happens only (at) twice a month." 82

On 8 December 1989, Labor Arbiter Nemeriano D. Villena rendered a decision 1 finding the existence of an employer-employee relationship between petitioners and Esita and accordingly directed them to pay him P33,518.02 representing separation pay, underpayment of wages, allowances, 13th month, holiday, premium for holiday, and rest day pays. The claim for overtime pay was however dismissed for lack of basis, i.e., Esita failed to prove that overtime services were actually rendered. On 29 November 1990, the Third Division of the National Labor Relations Commission, in Case No. RAB-IV-22206-89, affirmed the decision of Labor Arbiter Villena but reduced the monetary award to P28,344.60 as it was not proven that Esita worked every day including rest days and on the days before the legal holidays. On 26 March 1991, petitioners' motion for reconsideration was denied. In this present recourse, petitioners seek reversal of the ruling of public respondents Labor Arbiter and NLRC, raising the following arguments: that public respondents have no jurisdiction over the instant case; that Esita's work in the repair and construction of Dr. Opulencia's residence could not have ripened into a regular employment; that petitioners' benevolence in allowing Esita to stay inside the company's premises free of charge for humanitarian reason deserves commendation rather than imposition of undue penalty; that Esita's name does not appear in the payrolls of the company which necessarily means that he was not an employee; and, that Esita's statements are inconsistent and deserving of disbelief. On 13 May 1991, petitioners' prayer for a temporary restraining order to prevent respondents from enforcing the assailed resolutions of NLRC was granted. The instant petition lacks merit, hence, must be dismissed. Petitioners allege that there is no employer-employee relationship between them and Esita; consequently, public respondents have no jurisdiction over the case. Petitioners even go to the extent of asserting that "in case like the one at bar where employer-employee relationship has been questioned from the very start, Labor Arbiters and the NLRC have no jurisdiction and should not assume jurisdiction therein." While the Labor Arbiter and the NLRC may subsequently be found without jurisdiction over a case when it would later appear that no employer-employee relationship existed between the contending parties, such is not the situation in this case where the employer-employee relationship between the petitioners and Esita was clearly established. If the argument of petitioners were to be allowed, then unscrupulous employers could readily avoid the jurisdiction of the Labor Arbiters and NLRC, and may even elude compliance with labor laws only on the bare assertion that an employer-employee relationship does not exist. Petitioners further argue that "complainant miserably failed to present any documentary evidence to prove his employment. There was no time sheet, pay slip and/or payroll/cash voucher to speak of. Absence of these material documents are necessary fatal to complainant's cause." We do not agree. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored considering that it should take much weightier proof to invalidate a written instrument. 2 Thus, as in this case where the employer-employee relationship between petitioners and Esita was sufficiently proved by testimonial evidence, the absence of time sheet, time record or payroll has become inconsequential.

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The petitioners' reliance on Sevilla v. Court of Appeals 3 is misplaced. In that case, we did not consider the inclusion of employer's name in the payroll as an independently crucial evidence to prove an employeremployee relation. Moreover, for a payroll to be utilized to disprove the employment of a person, it must contain a true and complete list of the employees. But, in this case, the testimonies of petitioners' witnesses admit that not all the names of the employees were reflected in the payroll. In their Consolidated Reply, petitioners assert that "employees who were absent were naturally not included in the weekly payrolls." 4 But this simply emphasizes the obvious. Petitioners' payrolls do not contain the complete list of the employees, so that the payroll slips cannot be an accurate basis in determining who are and are not their employees. In addition, as the Solicitor General observes: ". . . . the payroll slips submitted by petitioners do not cover the entire period of nine years during which private respondent claims to have been employed by them, but only the periods from November 2 to November 29, 1986 and April 26 to May 30, 1987 . . . . It should be noted that petitioners repeatedly failed or refused to submit all payroll slips covering the period during which private respondent claims to have been employed by them despite repeated directives from the Labor Arbiter . . . ." 5 In this regard, we can aptly apply the disputable presumption that evidence willfully suppressed would be adverse if produced. 6 Petitioners further contend that the claim of Esita that he worked from seven o'clock in the morning to five o'clock in the afternoon, which is presumed to be continuous, is hardly credible because otherwise he would not have had the time to tend his crops. 7 As against this positive assertion of Esita, it behooves petitioners to prove the contrary. It is not enough that they raise the issue of probability, nay, improbability, of the conclusions of public respondents based on the facts bared before them, for in case of doubt, the factual findings of the tribunal which had the opportunity to peruse the conflicting pieces of evidence should be sustained. The petitioners point out that even granting arguendo that Esita was indeed a mechanic, he could never be a regular employee because his presence would be required only when there was a need for repair. We cannot sustain this argument. This circumstance cannot affect the regular status of employment of Esita. An employee who is required to remain on call in the employer's premises or so close thereto that he cannot use the time effectively and gainfully for his own purpose shall be considered as working while on call. 8 In sum, the determination of regular and casual employment 9 is not affected by the fact that the employee's regular presence in the place of work is not required, the more significant consideration being that the work of the employee is usually necessary or desirable in the business of the employer. More importantly, Esita worked for 9 years and, under the Labor Code, "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 that activity in which he is employed . . . ." 10 The petitioners would give the impression that the repair of the ice plant and the renovation of the residence of Dr. Opulencia were voluntarily extended by Esita because "[r]espondent did it on their (sic) own." Unfortunately for petitioners, we cannot permit these baseless assertions to prevail against the factual findings of public respondents which went through the sanitizing process of a public hearing. The same observation may be made of the alleged inconsistencies in Esita's testimonies. Moreover, on the claim that Esita's construction work could not ripen into a regular employment in the ice plant because the construction work was only temporary and unrelated to the ice-making business, needless to say, the one month spent by Esita in construction is insignificant compared to his nine-year service as compressor operator in determining the status of his employment as such, and considering further that it was Dr. Opulencia who requested Esita to work in the construction of his house.

84

In allowing Esita to stay in the premises of the ice plant and permitting him to cultivate crops to augment his income, there is no doubt that petitioners should be commended; however, in view of the existence of an employer-employee relationship as found by public respondents, we cannot treat humanitarian reasons as justification for emasculating or taking away the rights and privileges of employees granted by law. Benevolence, it is said, does not operate as a license to circumvent labor laws. If petitioners were genuinely altruistic in extending to their employees privileges that are not even required by law, then there is no reason why they should not be required to give their employees what they are entitled to receive. Moreover, as found by public respondents, Esita was enjoying the same privileges granted to the other employees of petitioners, so that in thus treating Esita, he cannot be considered any less than a legitimate employee of petitioners. WHEREFORE, there being no grave abuse of discretion on the part of public respondents, the instant petition is DISMISSED. Accordingly, the restraining order we issued on 13 May 1991 is LIFTED. SO ORDERED. Cruz, Davide, Jr. and Quiason, JJ., concur.
# Footnotes 1 NLRC Case No. SRB IV-2-2206-89. 2 GSIS v. Custodio, No. L-26170, 27 January 1969; 26 SCRA 658, 664. 3 Nos. L-41182-3, 15 April 1988; 160 SCRA 171. 4 Rollo, p. 81. 5 Comment, p. 8. 6 Sec. 5 (e), Rule 131, Rules of Court. 7 Petition, p. 8; Rollo, p. 13. 8 Sec. 5 (b), Rule I, Book III, Implementing Rules of the Labor Code. 9 Art. 280 of the Labor Code provides: "The provisions of written agreements 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 activity exists." 10 See second par. of footnote 9.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION 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 86

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 decision 5 dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled that it lacks jurisdiction over the case as petitioners and private respondent have no employer-employee relationship. It held that the relationship of the parties is leasehold which is covered by the Civil Code rather than the Labor Code, and disposed of the case as follows: VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under reconsideration is hereby given due course. Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of jurisdiction. No costs. SO ORDERED.6 Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was denied. Hence, the instant petition. In this recourse, petitioners allege that public respondent acted without or in excess of jurisdiction, or with grave abuse of discretion in rendering the assailed decision, arguing that: I THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS NOT EVEN INVOKED THEREIN. II THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY. 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. 87

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 Maebo 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] 88

The rationale for allowing only one motion for reconsideration from the same party is to assist the parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may involve no less than the livelihood of an employee and that of his loved ones who are dependent upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival of a business or an industry.15 As correctly pointed out by petitioner, the second motion for reconsideration filed by private respondent is indubitably a prohibited pleading16 which should have not been entertained at all. Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of justice",17 especially when its disposition of a legal controversy ran afoul with a clear and long standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly, disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error or mistake. In our view, public respondent gravely abused its discretion in taking cognizance and granting private respondent's second motion for reconsideration as it wrecks the orderly procedure in seeking reliefs in labor cases. But, there is another compelling reason why we cannot leave untouched the flip-flopping decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows: On the issue of whether or not employer-employee relationship exists, admitted is the fact that complainants are taxi drivers purely on the "boundary system". Under this system the driver takes out his unit and pays the owner/operator a fee commonly called "boundary" for the use of the unit. Now, in the determination the existence of employer-employee relationship, the Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988) has applied the following fourfold 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 89

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 autocalesa 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 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.1wphi1.nt 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 90

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. Bellosillo, Mendoza and De Leon, Jr., JJ., concur. Buena, on official leave.
Footnotes 1 Rollo, pp. 16-22. 2 Id. at 23. 3 Id. at 25-32. 4 Id. at 41. 5 Id. at 16-22. 6 Id. at 21. 7 Id. at 3. 8 Arroyo vs. De Venecia, 277 SCRA 268, 294 (1997). 9 264 SCRA 261, 267 (1996). 10 263 SCRA 638, 657 (1996). 11 261 SCRA 573, 583-584 (1996). 12 229 SCRA 240, 248 (1994). 13 219 SCRA 561, 566 (1993). 14 Biogenerics Marketing and Research Corp. vs. NLRC, 122725, September 8, 1999, p. 6. 15 Maebo vs. NLRC, 229 SCRA 240, 248 (1994). 16 Rollo, p. 8. 17 Id. at 17. 18 Rollo, pp. 18-20. 19 National Labor Union vs. Dinglasan, 98 Phil. 649, 652 (1996); Magboo vs. Bernardo, 7 SCRA 952, 954 (1963); Lantaco, Sr. vs. Llamas, 108 SCRA 502, 514 (1981). 20 Doce vs. Workmen's Compensation Commission, 104 Phil. 946, 948 (1958). 21 Citizens' League of Freeworkers vs. Abbas, 18 SCRA 71, 73 (1966). 22 Martinez vs. NLRC, 272 SCRA 793, 800 (1997). 23 Art. 279, Labor Code. 24 Bustamante vs. NLRC, 265 SCRA 61, 69-70 (1996); Highway Copra Traders vs. NLRC, 293 SCRA 350, 356 (1998); Jardine Davies Inc. vs. NLRC, GR-76272, July 28, 1999, p. 8; Pepsi-Cola Products Philippines Inc. vs. NLRC, GR-121324, September 30, 1999, p. 9. 25 Five Taxi vs. NLRC, 235 SCRA 556, 562 (1994).

91

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION 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 92

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 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 93

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-10-50478) 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.

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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 forumshopping 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. 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 95

Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested issue of employeremployee 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 Courts 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 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 96

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.
Regalado and Mendoza, JJ., concur. Padilla, J., is on leave. Puno, J., took no part.
#Footnotes

1 Rollo, pp. 215-216. 2 NCR Case No. AB-4-1771-79, Rollo, pp. 143-151. 3 In a unanimous resolution dated May 20, 1981 written by Chairman Adrian E. Cristobal. 4 Rollo, pp. 87-90. 5 as AC-G.R. SP No. 13648. 6 Rollo, p. 52. 7 Id., at pp. 52-53. 8 Decision promulgated June 20, 1983, rendered by the First Special Cases Division, Rollo, pp. 48-58. 9 21 SCRA 925, 929; footnote 2. 10 Indian Hill Club vs. Industrial Commission, et al., 140 NE 871, 872, 309 III. 271; Rollo, pp. 55-56. 11 Brief for Petitioner, p. 32; Rollo, p. 19. 12 Brief for Private Respondent, pp. 2-4; Rollo, p. 216. 13 Valencia vs. RTC of Quezon City, Br. 90. 184 SCRA 80, 90-91, citing Yusingco, et al., vs. Ong Hing Lian, 42 SCRA 589, and Daeng vs. IAC, et al., 154 SCRA 159. 14 Black's Law Dictionary, 5th edition, p. 40. 15 LVN Pictures, Ic., vs. Phil. Musicians Guild and CIR, 110 Phil. 725, citing N.L.R.B. vs. Botany Worsted Mills, 319 U.S. 751, 87 L. ed. 1705, and Southern S.S. Co. vs. N.L.R.B. 316 U.S. 31, 86 L. ed. 1246, and N.L.R.B. vs. A. J. Tower Co., 66 Sup. Ct. 1911; also Rothenberg on Labor Relations, p. 514. 16 Brief for Petitioner, pp. 32-36; Rollo, p. 202. 17 Petition for Review, p. 4; Rollo, p. 18 18 Id., Rollo, pp. 18-19.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 102199 January 28, 1997 AFP MUTUAL BENEFIT ASSOCIATION, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and EUTIQUIO BUSTAMANTE, respondents. PANGANIBAN, J.: The determination of the proper forum is crucial because the filing of the petition or complaint in the wrong court or tribunal is fatal, even for a patently meritorious claim. More specifically, labor arbiters and the National Labor Relations Commission have no jurisdiction to entertain and rule on money claims where no employer-employee relations is involved. Thus, any such award rendered without jurisdiction is a nullity. This petition for certiorari under Rule 65, Rules of Court seeks to annul the Resolution 1 of the National Labor Relations Commission, promulgated September 27, 1991, in NLRC-NCR Case No. 00-02-01196-90, entitled "Eutiquio Bustamante vs. AFP Mutual Benefit Association, Inc.," affirming the decision of the labor arbiter which ordered payment of the amount of P319,796.00 as insurance commissions to private respondent. The Antecedent Facts The facts are simple. Private respondent Eutiquio Bustamante had been an insurance underwriter of petitioner AFP Mutual Benefit Association, Inc. since 1975. The Sales Agent's Agreement between them provided: 2 B. Duties and Obligations: 1. During the lifetime of this Agreement, the SALES AGENT (private respondent) shall solicit exclusively for AFPMBAI (petitioner), and shall be bound by the latter's policies, memo circulars, rules and regulations which it may from time to time, revise, modify or cancel to serve its business interests. 2. The SALES AGENT shall confine his business activities for AFPMBAI while inside any military camp, installation or residence of military personnel. He is free to solicit in the area for which he/she is licensed and as authoriied, provided however, that AFPMBAI may from time to time, assign him a specific area of responsibility and a production quota on a case to case basis. xxx xxx xxx C. Commission 1. The SALES AGENT shall be entitled to the commission due for all premiums actually due and received by AFPMBAI out of life insurance policies solicited and obtained by the SALES AGENT at the rates set forth in the applicant's commission schedules hereto attached. 98

xxx xxx xxx D. General Provisions 1. There shall be no employer-employee relationship between the parties, the SALES AGENT being hereby deemed an independent contractor. As compensation, he received commissions based on the following percentages of the premiums paid: 3 "30% of premium paid within the first year; 10% of premium paid with the second year; 5% of the premium paid during the third year; 3% of the premium paid during the fourth year; and 1% of the premium paid during the fifth year up to the tenth year. On July 5, 1989, petitioner dismissed private respondent for misrepresentation and for simultaneously selling insurance for another life insurance company in violation of said agreement. At the time of his dismissal, private respondent was entitled to accrued commissions equivalent to twenty four (24) months per the Sales Agent Agreement and as stated in the account summary dated July 5, 1989, approved by Retired Brig. Gen. Rosalino Alquiza, president of petitioner-company. Said summary showed that private respondent had a total commission receivable of P438,835.00, of which only P78,039.89 had been paid to him. Private respondent wrote petitioner seeking the release of his commissions for said 24 months. Petitioner, through Marketing Manager Juan Concepcion, replied that he was entitled to only P75,000.00 to P100,000.00. Hence, believing Concepcion's computations, private respondent signed a quitclaim in favor of petitioner. Sometime in October 1989, private respondent was informed that his check was ready for release. In collecting his check, he discovered from a document (account summary) attached to said check that his total commissions for the 24 months actually amounted to P354,796.09. Said document stated: 4 6. The total receivable for Mr. Bustamante out of the renewals and old business generated since 1983 grosses P438,835.00 less his outstanding obligation in the amount of P78,039.89 as of June 30, 1989, total expected commission would amount to P354,796.09. From that figure at a 15% compromise settlement this would mean P53,219.41 due him to settle his claim. Private respondent, however, was paid only the amount of P35,000.00. On November 23, 1989, private respondent filed a complaint with the Office of the Insurance Commissioner praying for the payment of the correct amount of his commission. Atty. German C. Alejandria, Chief of the Public Assistance and Information Division, Office of the Insurance Commissioner, advised private respondent that it was the Department of Labor and Employment that had jurisdiction over his complaint. On February 26, 1990, private respondent filed his complaint with the Department of Labor claiming: (1) commission for 2 years from termination of employment equivalent to 30% of premiums remitted during 99

employment; (2) P354,796.00 as commission earned from renewals and old business generated since 1983; (3) P100,000.00 as moral damages; and (4) P100,000.00 as exemplary damages. After submission of position papers, Labor Arbiter Jose G. de Vera rendered his decision, dated August 24, 1990, the dispositive portion of which reads: 5 WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the dismissal of the complainant as just and valid, and consequently, his claim for separation pay is denied. On his money claim, the respondent company is hereby ordered to pay complainant the sum of P319,796.00 plus attorney's fees in the amount of P31,976.60. All other claims of the complainant are dismissed for want of merit. The labor arbiter relied on the Sales Agent's Agreement proviso that petitioner could assign private respondent a specific area of responsibility and a production quota, and read it as signalling the existence of employeremployee relationship between petitioner and private respondent. On appeal, the Second Division 6 of the respondent Commission affirmed the decision of the Labor Arbiter. In the assailed Resolution, respondent Commission found no reason to disturb said ruling of the labor arbiter and ruled: 7 WHEREFORE, in view of the foregoing considerations, the subject appeal should be as it is hereby, denied and the decision appealed from affirmed SO ORDERED. Hence, this petition. The Issue Petitioner contends that respondent Commission committed grave abuse of discretion in ruling that the labor arbiter had jurisdiction over this case. At the heart of the controversy is the issue of whether there existed an employer-employee relationship between petitioner and private respondent. Petitioner argues that, despite provisions B(1) and (2) of the Sales Agent's Agreement, there is no employeremployee relationship between private respondent and itself. Hence, respondent commission gravely abused its discretion when it held that the labor arbiter had jurisdiction over the case. The Court's Ruling The petition is meritorious. First Issue: Not All That Glitters Is Control Well-settled is the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the National Labor Relations Commission shall be 100

accorded not only respect but even finality when supported by substantial evidence. 8 The determinative factor in such finality is the presence of substantial evidence to support said finding, otherwise, such factual findings cannot bind this Court. Respondent Commission concurred with the labor arbiter's findings that: 9 x x x The complainant's job as sales insurance agent is usually necessary and desirable in the usual business of the respondent company. Under the Sales Agents Agreement, the complainant was required to solicit exclusively for the respondent company, and he was bound by the company policies, memo circulars, rules and regulations which were issued from time to time. By such requirement to follow strictly management policies, orders, circulars, rules and regulations, it only shows that the respondent had control or reserved the right to control the complainant's work as solicitor. Complainant was not an independent contractor as he did not carry on an independent business other than that of the company's . . . To this, respondent Commission added that the Sales Agent's Agreement specifically provided that petitioner may assign private respondent a specific area of responsibility and a production quota. From there, it concluded that apparently there is that exercise of control by the employer which is the most important element in determining employer- employee relationship. 10 We hold, however, that respondent Commission misappreciated the facts of the case. Time and again, the Court has applied the "four-fold" test in determining the existence of employer-employee relationship. This test considers the following elements: (1) the power to hire; (2) the payment of wages; (3) the power to dismiss; and (4) the power to control, the last being the most important element. 11 The difficulty lies in correctly assessing if certain factors or elements properly indicate the presence of control. Anent the issue of exclusivity in the case at bar, the fact that private respondent was required to solicit business exclusively for petitioner could hardly be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 12 and 2-85, dated December 17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are barred from serving more than one insurance company, in order to protect the public and to enable insurance companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity restriction clearly springs from a regulation issued by the Insurance Commission, and not from an intention by petitioner to establish control over the method and manner by which private respondent shall accomplish his work. This feature is not meant to change the nature of the relationship between the parties, nor does it necessarily imbue such relationship with the quality of control envisioned by the law. So too, the fact that private respondent was bound by company policies, memo/circulars, rules and regulations issued from time to time is also not indicative of control. In its Reply to Complainant's Position Paper, 13 petitioner alleges that the policies, memo/circulars, and rules and regulations referred to in provision B(1) of the Sales Agent's Agreement are only those pertaining to payment of agents' accountabilities, availment by sales agents of cash advances for sorties, circulars on incentives and awards to be given based on production, and other matters concerning the selling of insurance, in accordance with the rules promulgated by the Insurance Commission. According to the petitioner, insurance solicitors are never affected or covered by the rules and regulations concerning employee conduct and penalties for violations thereof, work standards, performance appraisals, merit increases, promotions, absenteeism/attendance, leaves of absence, management-union matters, employee benefits and the like. Since private respondent failed to rebut these allegations, the same are deemed admitted, or at least proven, thereby leaving nothing to support the 101

respondent Commission's conclusion that the foregoing elements signified an employment relationship between the parties. In regard to the territorial assignments given to sales agents, this too cannot be held as indicative of the exercise of control over an employee. First of all, the place of work in the business of soliciting insurance does not figure prominently in the equation. And more significantly, private respondent failed to rebut petitioner's allegation that it had never issued him any territorial assignment at all. Obviously, this Court cannot draw the same inference from this feature as did the respondent Commission. To restate, the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control. The presence of such power of control is indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In other words, the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer except only as to the result of the work. 14 Such is exactly the nature of the relationship between petitioner and private respondent. 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. The distinction acquires particular relevance in the case of an enterprise affected with public interest, as is the business of insurance, and is on that account subject to regulation by the State with respect, not only to the relations between insurer and insured but also to the internal affairs of the insurance company. Rules and regulations governing the conduct of the business are provided for in the Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurande company to promulgate a set of rules to guide its commission agents in selling its policies that they may not run afoul of the law and what it requires or prohibits. . . . None of these really invades the agent's contractual prerogative to adopt his own selling methods or to sell insurance at his own time and convenience, hence cannot justifiably be said to establish an employer-employee relationship between him and the company. 15 Private respondent's contention that he was petitioner's employee is belied by the fact that he was free to sell insurance at any time as he was not subject to definite hours or conditions of work and in turn was compensated according to the result of his efforts. By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means of persuading people to take out insurance. There is no prohibition, as contended by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. As petitioner explains:

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(Private respondent) was free to solicit life insurance anywhere he wanted and he had free and unfettered time to pursue his business. He did not have to punch in and punch out the bundy clock as he was not required to report to the (petitioner's) office regularly. He was not covered by any employee policies or regulations and not subject to the disciplinary action of management on the basis of the Employee Code of Conduct. He could go out and sell insurance at his own chosen time. He was entirely left to his own choices of areas or territories, with no definite, much less supervised, time schedule. (Private respondent) had complete control over his occupation and (petitioner) did not exercise any right of Control and Supervision over his performance except as to the payment of commission the amount of which entirely depends on the sole efforts of (private respondent). He was free to engage in other occupation or practice other profession for as long as he did not commit any violation of the ethical standards prescribed in the Sales Agent's Agreement. 16 Although petitioner could have, theoretically, disapproved any of private respondent's transactions, what could be disapproved was only the result of the work, and not the means by which it was accomplished. The "control" which the above factors indicate did not sum up to the power to control private respondent's conduct in and mode of soliciting insurance. On the contrary, they clearly indicate that the juridical element of control had been absent in this situation. Thus, the Court is constrained to rule that no employment relationship had ever existed between the parties. Second Issue: Commission & Labor Arbiter Jurisdiction of Respondent

Under the contract invoked, private respondent had never been petitioner's employee, but only its commission agent. As an independent contractor, his claim for unpaid commission should have been litigated in an ordinary civil action. 17 The jurisdiction of labor arbiters and respondent Commission is set forth in Article 217 of the Labor Code. 18 The unifying element running through paragraphs (1) (6) of said provision is the consistent reference to cases or disputes arising out of or in connection with an employer-employee relationship. Prior to its amendment by Batas Pambansa Blg. 227 on June 1, 1982, this point was clear as the article included "all other cases arising from employer-employee relation unless expressly excluded by this Code." 19 Without this critical element of employment relationship, the labor arbiter and respondent Commission can never acquire jurisdiction over a dispute. As in the case at bar. It was serious error on the part of the labor arbiter to have assumed jurisdiction and adjudicated the claim. Likewise, the respondent Commission's affirmance thereof. Such lack of jurisdiction of a court or tribunal may be raised at any stage of the proceedings, even on appeal. The doctrine of estoppel cannot be properly invoked by respondent Commission to cure this fatal defect as it cannot confer jurisdiction upon a tribunal that to begin with, was bereft of jurisdiction over a cause of action. 20 Moreover, in the proceedings below, petitioner consistently challenged the jurisdiction of the labor arbiter 21 and respondent Commission. 22 It remains a basic fact in law that the choice of the proper forum is crucial as the decision of a court or tribunal without jurisdiction is a total nullity. 23 A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating from it have no legal effect. Hence, it can never become final. ". . . (I)t may be said to be a lawless 103

thing which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head." 24 The way things stand, it becomes unnecessary to consider the merits of private respondent's claim for unpaid commission. Be that as it may, this ruling is without prejudice to private respondent's right to file a suit for collection of unpaid commissions against petitioner with the proper forum and within the proper period. WHEREFORE, the petition is hereby GRANTED, and the assailed Resolution is hereby SET ASIDE. SO ORDERED. Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.
Footnotes 1 Rollo, pp. 48-54. 2 Rollo, p. 176. 3 Rollo, p. 98. 4 Rollo, p. 111. 5 Rollo, pp. 48-49. 6 Commissioner Rustico L. Diokno, ponente, with Presiding Commissioners Edna Bonto-Perez and Commissioner Domingo H. Zapanta. 7 Rollo, p. 53. 8 North Davao Mining Corporation vs. National Labor Relations Commission, 254 SCRA 721, 731, March 13, 1996; Great Pacific Life Assurance Corporation vs. National Labor Relations Commission, 187 SCRA 694, 699, July 23, 1990; Loadstar Shipping Co., Inc. vs. Gallo, 229 SCRA 654, 660, February 4, 1994; Inter-Orient Maritime Enterprises, Inc. vs. National Labor Relations Commission, 235 SCRA 268, 277, August 11, 1994. 9 Rollo, pp. 49-50. 10 Rollo, p. 51. 11 Insular Life Assurance Co., Ltd. vs. NLRC, 179 SCRA 459, 464, November 15, 1989; Rhone-Poulenc Agrochemicals Philippines, Inc. vs. NLRC, 217 SCRA 249, 255, January 19, 1993; and Villuga vs. NLRC, 225 SCRA 537, 546, August 23, 1993. 12 Memorandum Circular No. 2-81 on Licensing Of Insurance Agents, Variable Contract Agents, Insurance Brokers and Reinsurance Brokers provides: xxx xxx xxx 2. LICENSING REQUIREMENTS, LIMITATIONS xxx xxx xxx 2.5. No person shall be licensed to act as an insurance agent or general agent of more than one life insurance company, and/ or as a general agent of more than one non-life insurance company, and/or as insurance agent of more than three other non-life insurance companies. . . ." 13 Rollo, p. 36. 14 Investment Planning Corp. of the Phil. vs. Social Security System, 21 SCRA 924, 931, November 18, 1967. 15 Supra., p. 465. 16 Petitioner's Position Paper, Rollo, p. 32. 17 Insular Life Assurance Co., Ltd. vs. NLRC, supra, p. 467; Manliguez vs. Court of Appeals, 232 SCRA 427, 431, May 20, 1994; and Hawaiian-Philippine Company vs. Gulmatico, 238 SCRA 181, 187, November 16, 1994. 18 Art. 217. Jurisdiction of Labor Arbiters and the Commission. (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, . . ., the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes;; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment;

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4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; and 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement. xxx xxx xxx 19 San Miguel Corporation vs. National Labor Relations Commission, 161 SCRA 719, 724-725, May 31, 1988. 20 Southest Asian Fisheries Development Center-Agriculture Department vs. National Labor Relations Commission, 206 SCRA 283, 288, February 14, 1992; and Calimlim vs. Ramirez, 118 SCRA 399, 406, November 19, 1982. 21 Petitioner's Position Paper, Rollo, pp. 29-33. 22 Petitioner's Appeal Memorandum, Rollo, pp. 40-46. 23 Philippine Singapore Ports Corporation vs. National Labor Relations Commission, 218 SCRA 77, 83, January 29, 1993. 24 Leonor vs. Court of Appeals, et al., G.R. No. 112597, April 2, 1996, pp. 17-18.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 172101 November 23, 2007

REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY COMMISSION and SOCIAL SECURITY SYSTEM, Petitioners, vs. ASIAPRO COOPERATIVE, Respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 20043 and 16 September 2004,4respectively, thereby dismissing the petition-complaint dated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent. Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by Republic Act No. 8282.5 Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 69386 and duly registered with the Cooperative Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.7 The antecedents of this case are as follows: Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular member, who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-laws.8 Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into several Service Contracts9 with Stanfilco - a division of DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus 10 which the respondent cooperative earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get their income from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors of the respondent cooperative. In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register them with petitioner 106

SSS as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer and the employee. On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a letter11 to the respondent cooperative, addressed to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco. Thus, respondent cooperative should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in accordance with the Social Security Law of 1997. On 9 October 2002, 12 respondent cooperative, through its counsel, sent a reply to petitioner SSSs letter asserting that it is not an employer because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13 petitioner SSS sent a letter to respondent cooperative ordering the latter to register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative continuously ignored the demand of petitioner SSS. Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14 before petitioner SSC against the respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative, Stanfilco be directed to register as an employer and to report respondent cooperatives owners-members as covered employees under the compulsory coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its ownersmembers, thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent cooperative. On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The respondent cooperative moved for the reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004. Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review before the Court of Appeals. Subsequently, respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors: I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that: A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering that it failed to first resolve the issue of the existence of an employer-employee relationship between [respondent] cooperative and its owners-members. B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee relationship. 107

C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in [respondents] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the hearing on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of an employment relationship. II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo. A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multipurpose cooperative created pursuant to Republic Act No. 6938 and composed of ownersmembers, not employees. B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent with being mere employees of a company, such as the right to participate and vote in decision-making for the cooperative. C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensation income.15 (Emphasis supplied.) On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The decretal portion of the Decision reads: WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.16 Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its Resolution dated 20 March 2006. Hence, this Petition. In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in denying respondents Motion to Dismiss. The said issue is supported by the following arguments: I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282. II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it. III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperatives] [M]otion to [D]ismiss. 108

IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. V. There is an employer-employee relationship between [respondent cooperative] and its [ownersmembers]. Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner SSC for the compulsory coverage of respondent cooperatives owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC. Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee relationship between the respondent cooperative and its owners-members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore, jurisdiction over the same solely belongs to petitioner SSC. Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss grounded on the alleged lack of employer-employee relationship does not constitute grave abuse of discretion on the part of petitioner SSC because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from assailing the jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC. Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its owners-members. The respondent cooperative is the employer of its owners-members considering that it undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent cooperative. On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise between them. The persons of the employer and the employee are merged in the owners-members themselves. Likewise, respondent cooperatives owners-members even requested the respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it by petitioner SSS. Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction over the petition-complaint without determining first if there was an employer-employee relationship between the respondent cooperative and its owners-members. Respondent cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-members is a legal and not a factual issue as the facts are undisputed and need only to be interpreted by the applicable law and jurisprudence. 109

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of jurisdiction. From the foregoing arguments of the parties, the issues may be summarized into: I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative. II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body. Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure. Section 5 of Republic Act No. 8282 provides: SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.) Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states: Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President, Manager or Officerin-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.) It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important to note, though, that the mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship17 except in cases of compulsory coverage of the self-employed. It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action; otherwise, the question of jurisdiction would depend almost entirely upon the defendant.18 Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full termination of the case.19 The said principle may be applied even to quasi-judicial bodies. In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are subject to the compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the respondent cooperative being the employer of its owners-members must register as employer and report its owners-members as covered members of the SSS and remit the necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction. Although the 110

Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS. Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-members was put in issue and considering that the compulsory coverage of the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee relationship that exists between the respondent cooperative and its owners-members. The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that: ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x. xxxx 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.20 Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof, because claims are undeniably rooted in the coverage by the system. Hence, the question on the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising under the Social Security Law of 1997. On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the owners-members of the respondent cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may inquire into the presence or absence of an employer-employee relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior determination. Since both the petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997 from compulsory coverage.21 Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section 5(b) 22 of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship 111

between the respondent cooperative and its owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court. Although as a rule, in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and the findings of fact of the Court of Appeals are conclusive and binding on the Court,23 said rule is not without exceptions. There are several recognized exceptions24 in which factual issues may be resolved by this Court. One of these exceptions finds application in this present case which is, when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner SSC and the appellate court relative to the existence of employer-employee relationship between the respondent cooperative and its owners-members, which necessitates a departure from the oft-repeated rule that factual issues may not be the subject of appeals to this Court. In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration.25 The most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish. 26 The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.27 All the aforesaid elements are present in this case. First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.28 Second. Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered."29 In this case, the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same shall not be lower than the prevailing rates of wages. 30 It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are given to the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power to investigate, discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.31Fourth. As earlier opined, of the four elements of the employer-employee relationship, the "control test" is the most important. In the case at bar, it is the respondent cooperative which has the sole control over the manner and means of performing the services under the Service Contracts with Stanfilco as well as the means and methods of work.32 Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at Stanfilco.33 All these clearly prove that, indeed, there is an employer-employee relationship between the respondent cooperative and its owners-members. It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-employee relationship between the respondent cooperative and its owners-members.34 This Court, however, cannot give the said provision force and effect. As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its owners-members. The four elements in the four-fold test for the existence of an 112

employment relationship have been complied with. The respondent cooperative must not be allowed to deny its employment relationship with its owners-members by invoking the questionable Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and prescribed by law and not by what the parties say it should be. 35 It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy or public order. 36 The Service Contract provision in question must be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social Security Law. This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja37 wherein it held that: A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees x x x. An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative.1awp++i1 However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country. The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid case was made in the context of whether an employee who is also an owner-member of a cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the instant case, there is no issue regarding an owner-members right to bargain collectively with the cooperative. The question involved here is whether an employer-employee relationship can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee. It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority.38 It has its Board of Directors, which directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of its affairs. 39 With that, a cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them.

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In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40 In its by-laws,41 its Board of Directors directs, controls, and supervises the business and manages the property of the respondent cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore, it is completely logical that the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its owners-members. In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we conclude that the petitioner SSC has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss. WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are hereby REINSTATED. The petitioner SSC is hereby DIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage of the respondent cooperative and its owners-members. No costs. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice RUBEN T. REYES Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division 114 ADOLFO S. AZCUNA Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice
Footnotes 1 Penned by Associate Justice Juan Q. Enriquez, Jr. with Associate Justices Godardo A. Jacinto and Vicente Q. Roxas, concurring; rollo, pp. 63-74. 2 Id. at 61-62. 3 Penned by Commissioner Sergio R. Ortiz-Luis, Jr.; id. at 116-119. 4 Id. at 146-149. 5 Otherwise known as "Social Security Act of 1997," which was approved on 1 May 1997. 6 Otherwise known as "Cooperative Code of the Philippines," which was enacted on 10 March 1990. 7 CA rollo, p. 63. 8 Section 2, Asiapro Cooperative Amended By-Laws, CA rollo, p. 68. 9 Id. at 126-130, 444-449. 10 It represents the amount given to respondent cooperatives owners -members for rendering services to the client of respondent cooperative, like Stanfilco. Such amount shall not be lower than the prevailing rates of wages. 11 Rollo, pp. 75-76. 12 Id. at 82-86. 13 Id. at 87-88. 14 Id. at 89-97. 15 Rollo, pp. 66-68. 16 Id. at 74. 17 Social Security System v. Court of Appeals, 401 Phil. 132, 141 (2000). 18 Abacus Securities Corporation v. Ampil, G.R. No. 160016, 27 February 2006, 483 SCRA 315, 339. 19 Philrock, Inc. v. Construction Industry Arbitration Commission, 412 Phil. 236, 246 (2001). 20 Article 217(a)(6) of the Labor Code of the Philippines. 21 Rollo, p. 117. 22 SEC. 5. Settlement of Disputes. (a) x x x. (b) x x x. The Commission shall be deemed to be a party to any judicial action involving any such decision, and may be represented by an attorney employed by the Commission, by the Solicitor General or any public prosecutor. 23 Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322. 24 Recognized exceptions to this rule are: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellee and the appellant; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion (Langkaan Realty Development, Inc. v. United Coconut Planters Bank, 400 Phil. 1349, 1356 (2000); Nokom v. National Labor Relations Commissions, 390 Phil. 1228, 1243 (2000); Commissioner of Internal Revenue v. Embroidery and Garments Industries (Phils.), Inc., 364 Phil. 541, 546-547 (1999); Sta. Maria v. Court of Appeals, 349 Phil. 275, 282-283 (1998); Almendrala v. Ngo, G.R. No. 142408, 30 September 2005, 471 SCRA 311, 322.) 25 Jo v. National Labor Relations Commission, 381 Phil. 428, 435 (2000). 26 Chavez v. National Labor Relations Commission, G.R. No. 146530, 17 January 2005, 448 SCRA 478, 490. 27 Jo v. National Labor Relations Commission, supra note 25.

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7. SELECTION, ENGAGEMENT, DISCHARGE. The Cooperative shall have the exclusive discretion in the acceptance, engagement, investigation and discipline and removal of its owner-members and team leaders. (Service Contract, CA rollo, p. 458). 29 ART. 97(f) of the Labor Code. 30 4. COOPERATIVES RESPONSIBILITIES. The Cooperative shall have the following responsibilities: x x x x. 4.3. The Cooperative shall pay the share of the service surplus due to its owner-members assigned to the Client x x x. However, the amount of the share of the service surplus of the owner-members x x x shall be in an amount not lower than existing labor laws, rules and regulations, including the wage order applicable to the area and industry. x x x. (CA rollo, pp. 457-458). 31 Id. 32 1. SCOPE OF SERVICE. x x x. x x x. The Cooperative shall have sole control over the manner and means of performing the subject services under this Contract and shall complete the services in accordance with its own means and methods of work, in keeping with the Clients standards. (Id. at 456). 33 3. RELATIONSHIP OF THE PARTIES. x x x. The Cooperative shall be solely and entirely responsible for its ownermembers, team leaders and other representatives. (Id. at 457). 34 3. RELATIONSHIP OF THE PARTIES. It is hereby agreed that there shall be no employer-employee relationship between the Cooperative and its owners-members x x x. (Id). 35 Chavez v. National Labor Relations Commission, supra note 26 at 493; Lopez v. Metropolitan Waterworks and Sewerage System, G.R. No. 154472, 30 June 2005, 462 SCRA 428, 445-446. 36 Art. 1306, Civil Code of the Philippines; Philippine National Bank v. Cabansag, G.R. No. 157010, 21 June 2005, 460 SCRA 514, 533. 37 G.R. No. L-77951, 26 September 1988, 165 SCRA 725, 732-733. 38 ART. 16. Registration. - A cooperative formed or organized under this Code acquires juridical personality from the date the Cooperative Development Authority issues a certificate of registration under its official seal. x x x. (Republic Act No. 6938). 39 ART. 38. Composition of the Board of Directors. - The conduct and management of the affairs of a cooperative shall be vested in a board of directors x x x. ART. 39. Powers of the Board of Directors. - The board of directors shall direct and supervise the business, manage the property of the cooperative and may, by resolution, exercise all such powers of the cooperative as are not reserved for the general assembly under this Code and the by-laws. (Id.). 40 CA rollo, p. 63. 41 Id. at 68-78.
28

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 121143 January 21, 1997 PURIFICACION G. TABANG, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and PAMANA GOLDEN CARE MEDICAL CENTER FOUNDATION, INC., respondents. REGALADO, J.: This is a petition for certiorari which seeks to annul the resolution of the National Labor Relations Commission (NLRC), dated June 26, 1995, affirming in toto the order of the labor arbiter, dated April 26, 1994, which dismissed petitioner's complaint for illegal dismissal with money claims for lack of jurisdiction. The records show that petitioner Purificacion Tabang was a founding member, a member of the Board of Trustees, and the corporate secretary of private respondent Pamana Golden Care Medical Center Foundation, Inc., a non-stock corporation engaged in extending medical and surgical services. On October 30, 1990, the Board of Trustees issued a memorandum appointing petitioner as Medical Director and Hospital Administrator of private respondent's Pamana Golden Care Medical Center in Calamba, Laguna. Although the memorandum was silent as to the amount of remuneration for the position, petitioner claims that she received a monthly retainer fee of five thousand pesos (P5,000.00) from private respondent, but the payment thereof was allegedly stopped in November, 1991. As medical director and hospital administrator, petitioner was tasked to run the affairs of the aforesaid medical center and perform all acts of administration relative to its daily operations. On May 1, 1993, petitioner was allegedly informed personally by Dr. Ernesto Naval that in a special meeting held on April 30, 1993, the Board of Trustees passed a resolution relieving her of her position as Medical Director and Hospital Administrator, and appointing the latter and Dr. Benjamin Donasco as acting Medical Director and acting Hospital Administrator, respectively. Petitioner averred that she thereafter received a copy of said board resolution. On June 6, 1993, petitioner filled a complaint for illegal dismissal and non-payment of wages, allowances and 13th month pay before the labor arbiter. Respondent corporation moved for the dismissal of the complaint on the ground of lack of jurisdiction over the subject matter. It argued that petitioner's position as Medical Director and Hospital Administrator was interlinked with her position as member of the Board of Trustees, hence, her dismissal is an intra-corporate controversy which falls within the exclusive jurisdiction of the Securities and Exchange Commission (SEC).

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Petitioner opposed the motion to dismiss, contending that her position as Medical Director and Hospital Administrator was separate and distinct from her position as member of the Board of Trustees. She claimed that there is no intra-corporate controversy involved since she filed the complaint in her capacity as Medical Director and Hospital Administrator, or as an employee of private respondent. On April 26, 1994, the labor arbiter issued an order dismissing the complaint for lack of jurisdiction. He ruled that the case falls within the jurisdiction of the SEC, pursuant to Section 5 of Presidential Decree No. 902-A. 1 Petitioner's motion for reconsideration was treated as an appeal by the labor arbiter who consequently ordered the elevation of the entire records of the case to public respondent NLRC for appellate review. 2 On appeal, respondent NLRC affirmed the dismissal of the case on the additional ground that "the position of a Medical Director and Hospital Administrator is akin to that of an executive position in a corporate ladder structure." hence, petitioner's removal from the said position was an intra-corporate controversy within the original and exclusive jurisdiction of the SEC. 3 Aggrieved by the decision, petitioner filed the instant petition which we find, however, to be without merit. We agree with the findings of the NLRC that it is the SEC which has jurisdiction over the case at bar. The charges against herein private respondent partake of the nature of an intra-corporate controversy. Similarly, the determination of the rights of petitioner and the concomitant liability of private respondent arising from her ouster as a medical director and/or hospital administrator, which are corporate offices, is an intracorporate controversy subject to the jurisdiction of the SEC. Contrary to the contention of petitioner, a medical director and a hospital administrator are considered as corporate officers under the by-laws of respondent corporation. Section 2(i), Article I thereof states that one of the powers of the Board of Trustees is "(t)o appoint a Medical Director, Comptroller/Administrator, Chiefs of Services and such other officers as it may deem necessary and prescribe their powers and duties." 4 The president, vice-president, secretary and treasurer are commonly regarded as the principal or executive officers of a corporation, and modern corporation statutes usually designate them as the officers of the corporation. 5 However, other offices are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary. 6 It has been held that an "office'' is created by the charter of the corporation and the officer is elected by the directors or stockholders. 7 On the other hand, an "employee" usually occupies no office and generally is employed not by action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. 8 In the case at bar, considering that herein petitioner, unlike an ordinary employee, was appointed by respondent corporation's Board of Trustees in its memorandum of October 30, 1990, 9 she is deemed an officer of the corporation. Perforce, Section 5(c) of Presidential Decree No. 902-A, which provides that the SEC exercises exclusive jurisdiction over controversies in the election appointment of directors, trustees, officers or managers of corporations, partnerships or associations, applies in the present dispute. Accordingly, jurisdiction over the same is vested in the SEC, and not in the Labor Arbiter or the NLRC. Moreover, the allegation of petitioner that her being a member of the Board of Trustees was not one of the considerations for her appointment is belied by the tenor of the memorandum itself. It states: "We hope that 118

you will uphold and promote the mission of our foundation," 10 and this cannot be construed other than in reference to her position or capacity as a corporate trustee. A corporate officer's dismissal is always a corporate act, or an intra-corporate controversy, and the nature is not altered by the reason or wisdom with which the Board of Directors may have in taking such action. 11 Also, an intra-corporate controversy is one which arises between a stockholder and the corporation. There is no distinction, qualification, nor any exemption whatsoever. The provision is broad and covers all kinds of controversies between stockholders and corporations. 12 With regard to the amount of P5,000,00 formerly received by herein petitioner every month, the same cannot be considered as compensation for her services rendered as Medical Director and Hospital Administrator. The vouchers 13 submitted by petitioner show that the said amount was paid to her by PAMANA, Inc., a stock corporation which is separate and distinct from herein private respondent. Although the payments were considered advances to Pamana Golden Care, Calamba branch, there is no evidence to show that the Pamana Golden Care stated in the vouchers refers to herein respondent Pamana Golden Care Medical Center Foundation, Inc. Pamana Golden Care is a division of Pamana, Inc., while respondent Pamana Golden Care Medical Center Foundation, Inc. is a non-stock, non-profit corporation. It is stated in the memorandum of petitioner that Pamana, Inc. is a stock and profit corporation selling pre-need plan for education, pension and health care. The health care plan is called Pamana Golden Care Plan and the holders are called Pamana Golden Care Card Holders or, simply, Pamana Members. 14 It is an admitted fact that herein petitioner is a retained physician of Pamana, Inc., whose patients are holders of the Pamana Golden Care Card. In fact, in her complaint 15 filed before the Regional Trial Court of Calamba, herein petitioner is asking among others, for professional fees and/or retainer fees earned for her treatment of Pamana Golden Care card holders. 16 Thus, at most, said vouchers can only be considered as proof of payment of retainer fees made by Pamana, Inc. to herein petitioner as a retained physician of Pamana Golden Care. Moreover, even assuming that the monthly payment of P5,000.00 was a valid claim against respondent corporation, this would not operate to effectively remove this case from the jurisdiction of the SEC. In the case ofCagayan de Oro Coliseum, Inc. vs. Office of the Minister of Labor and Employment, etc., et al., 17 we ruled that "(a)lthough the reliefs sought by Chavez appear to fall under the jurisdiction of the labor arbiter as they are claims for unpaid salaries and other remunerations for services rendered, a close scrutiny thereof shows that said claims are actually part of the perquisites of his position in, and therefore interlinked with, his relations with the corporation. In Dy, et al., vs. NLRC, et al., the Court said: "(t)he question of remuneration involving as it does, a person who is not a mere employee but a stockholder and officer, an integral part, it might be said, of the corporation, is not a simple labor problem but a matter that comes within the area of corporate affairs and management and is in fact a corporate controversy in contemplation of the Corporation Code." WHEREFORE, the questioned resolution of the NLRC is hereby AFFIRMED, without prejudice to petitioner's taking recourse to and seeking relief through the appropriate remedy in the proper forum. SO ORDERED. Romero, Puno, Mendoza and Torres, Jr., JJ., concur.
Footnotes

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1 Rollo, 31-35. 2 Ibid., 37. 3 Ibid., 37-45. 4 Rollo, 189. 5 2 Fletcher Cyc. Corp., 1982 rev. ed., Sec. 2690, as cited in R.N. Lopez. The Corporation Code of the Philippines Annotated, Vol. I, 423; see also Sec. 25 of the Corporation Code. 6 SEC Opinion, dated March 25, 1983, Mr. Edison Alba, op cit., see also J. Campos, Jr., The Corporation Code, Comments, Notes and Selected Cases, Vol. I, 383-384. 7 2 Fletcher Cyc. Corp., Ch. II, Sec. 266. 8 Fletcher, op cit., citing Aldritt vs. Kansas Centennial Global Exposition, Inc., 189 Kan 649, 371 P2d 818, 424. 9 Rollo, 46. 10 Ibid., id. 11 Fortune Cement Corporation vs. NLRC, et al., G.R. No. 79762, January 24, 1991, 193 SCRA 258. 12 SEC, et al. vs. Court of Appeals, et al., G.R. No. 93832, August 23, 1991, 201 SCRA 124. 13 Rollo, 113-119. 14 Rollo, 852-853. 15 Civil Case No. 2006-93-C; Rollo, 897-908. 16 Rollo, 906-907. 17 G.R. No. 71589, December 17, 1990, 192 SCRA 315; see also Dy, et al., vs. NLRC, et al., G.R. No. 68544, October 27, 1986, 145 SCRA 211.

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Republic of the Philippines SUPREME COURT Manila FIRST DIVISION 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 Arbiters 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 SONZAs 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 SONZAs services a monthly talent fee of P310,000 for the first year and P317,000 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-CBNs 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.

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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 President and Gen. Manager4 Y. SONZA

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 SONZAs 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 SONZAs 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 respondents 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. On 11 March 1997, SONZA filed a Reply to Respondents Position Paper with Motion to Expunge Respondents Annex 4 and Annex 5 from the Records. Annexes 4 and 5 are affidavits of ABS-CBNs 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. 122

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 Sonzas month ly talent fees amount to a staggering P317,000. 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 respondents 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 Arbiters 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. 123

The Rulings of the NLRC and Court of Appeals The Court of Appeals affirmed the NLRCs finding that no employer-employee relationship existed between SONZA and ABS-CBN. Adopting the NLRCs 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 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-appellants 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 stockswith FIVE HUNDRED THOUSAND PESOS (P500,000.00). 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 (P150,000.00) per year.

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Thus, it is precisely because of complainant-appellants 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-CBNs 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-appellants 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 ABSCBN 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 wh ich served as basis of the NLRCs 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 NLRCS 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 Courts 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 Arbiters 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.

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SONZA contends that the Labor Arbiter has jurisdiction over the case because he was an employee of ABSCBN. 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, 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 employers 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 SONZAs services to co-host its television and radio programs because of SONZAs 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 respondents 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-CBNs 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 126

contract.21 Whatever benefits SONZA enjoyed arose from contract and not because of an employer-employee relationship.22 SONZAs talent fees, amounting to P317,000 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 SONZAs 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 SONZAs 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 SONZAs 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 SONZAs talent fees during the remaining life of the Agreement even if ABS-CBN cancelled SONZAs programs through no fault of SONZA.25 SONZA assails the Labor Arbiters 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. SONZAs 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 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-Vlez v. Corporacin De Puerto Rico Para La Difusin Pblica ("WIPR")27 that a television program host is an independent contractor. We quote the following findings of the U.S. court: 127

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 masters 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." Albertys 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." Albertys 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. SONZAs argument is misplaced. ABS-CBN engaged SONZAs 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-CBNs 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 SONZAs 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 SONZAs 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-CBNs 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 SONZAs work. SONZA claims that ABS-CBNs power not to broadcast his shows proves ABS-CBNs power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZAs show, ABS-CBN was still obligated to pay SONZAs talent fees... Thus, even if ABS-CBN was completely 128

dissatisfied with the means and methods of SONZAs 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 SONZAs show but ABS-CBN must still pay his talent fees in full.35 Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was by the obligation to continue paying in full SONZAs talent fees, did not amount to control over the means and methods of the performance of SONZAs 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-CBNs approval. This proves that ABS-CBNs control was limited only to the result of SONZAs work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZAs 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 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.38Even 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-CBNs 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 SONZAs 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-CBNs employee because ABS-CBN subjected him to its rules and standards of performance. SONZA claims that this indicates ABS-CBNs 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: 129

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 ABSCBN. 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 Arbiters finding that he is a talent of MJMDC, which contracted out his s ervices 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. There are essentially only two parties involved under the Agreement, namely, SONZA and ABS-CBN. MJMDC merely acted as SONZAs agent. The Agreement expressly states that MJMDC acted as the "AGENT" of SONZA. The records do not show that MJMDC acted as ABS-CBNs 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 130

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 SONZAs status. A mere executive iss uance 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-CBNs 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-CBNs 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 latters 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.50 131

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 Constitution 53 arises only if there is an employeremployee relationship under labor laws. Not every performance of services for a fee creates an employeremployee 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 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 SONZAs 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 SONZAs 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, SONZAs cause of action is for breach of contract which is intrinsically a civil dispute cognizable by the regular courts.58 132

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. Davide, Jr., Panganiban, Ynares-Santiago, and Azcuna, JJ., concur.
Footnotes 1 Under Rule 45 of the Rules of Court. 2 Penned by Associate Justice Eugenio S. Labitoria with Associate Justices Jesus M. Elbinias and Marina L. Buzon concurring. 3 Rollo, p. 150. 4 Ibid., p. 204. 5 Donato G. Quinto, Jr. 6 Rollo, pp. 114-130. 7 Ibid., pp. 123-125. 8 Ibid., p. 39. 9 Rollo, pp. 37-39. 10 Ibid., p. 39. 11 Ibid. 12 Ibid. 13 Ibid. 14 Ibid., p. 269. 15 Fleischer Company, Inc. v. National Labor Relations Commission, G.R. No. 121608, 26 March 2001, 355 SCRA 105; AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47; Cathedral School of Technology v. NLRC, G.R. No. 101438, 13 October 1992, 214 SCRA 551. See also Ignacio v. Coca-Cola Bottlers Phils., Inc., 417 Phil. 747 (2001); Gonzales v. National Labor Relations Commission, G.R. No. 131653, 26 March 2001, 355 SCRA 195; Sandigan Savings and Loan Bank, Inc. v. NLRC, 324 Phil. 348 (1996); Magnolia Dairy Products Corporation v. NLRC, 322 Phil. 508 (1996). 16 Madlos v. NLRC, 324 Phil. 498 (1996). 17 Domasig v. National Labor Relations Commission, G.R. No. 118101, 16 September 1996, 261 SCRA 779. 18 De Los Santos v. NLRC, 423 Phil. 1020 (2001); Traders Royal Bank v. NLRC, 378 Phil. 1081 (1999); Aboitiz Shipping Employees Association v. National Labor Relations Commission, G.R. No. 78711, 27 June 1990, 186 SCRA 825; Ruga v. National Labor Relations Commission, G.R. Nos. 72654-61, 22 January 1990, 181 SCRA 266. 19 Ibid. 20 Paragraph 10 of the Agreement provides: "The COMPANY shall provide him with the following benefits: SSS, Medicare, Healthcare, executive life and accident insurance, and a 13th-month pay based on an amount not lower than the amount he was receiving prior to the effectivity of this Agreement." 21 Presidential Decree No. 851 (Requiring All Employers to Pay their Employees a 13th-month Pay) for the 13th month pay; Republic Act No. 1161 (Social Security Law) for the SSS benefits; and Republic Act No. 7875 (National Health Insurance Act of 1995) for the Philhealth insurance. 22 Article 1157 of the Civil Code explicitly provides: Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. (Emphasis supplied) 23 See Article 283, Labor Code. 24 Paragraph 7 of the Agreement states: "Provided that the AGENT and Jay Sonza shall faithfully and completely perform each condition of this Agreement for and in consideration of the aforesaid services by the AGENT and its talent, the COMPANY agrees to pay the AGENT for the first year of this Agreement the amount of THREE HUNDRED TEN THOUSAND PESOS ONLY (P310,000.00) per month, payable on the 10th and 25th of each month. For the second and

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third year of this Agreement, the COMPANY shall pay the amount of THREE HUNDRED SEVENTEEN THOUSAND PESOS ONLY (P317,000.00) per month, payable likewise on the 10th and 25th of the each month." 25 Paragraph 11 of the Agreement states: " In the event of cancellation of this Agreement through no fault of the AGENT and its talent, COMPANY agrees to pay the full amount specified in this Agreement for the remaining period covered by this Agreement, provided that the talent shall not render any service for or in any other radio or television production of any person, firm, corporation or any entity competing with the COMPANY until the expiry hereof." 26 The opening sentence of the second paragraph of SONZAs letter reads: "As you are well aware, Mr. Sonza irrevocably resigned in view of recent events concerning his programs and career. xxx" 27 361 F.3d 1, 2 March 2004. 28 See also Spirides v. Reinhardt, 486 F. Supp. 685 (1980). 29 In the United States, aside from the right of control test, there are the "economic reality" test and the "multi-factor test." The tests are drawn from statutes, regulations, rules, policies, rulings, case law and the like. The "right of control" test applies under the federal Internal Revenue Code ("IRC"). The "economic reality" test applies to the federal Fair Labor Standards Act ("FLSA").[29] The California Division of Labor Standards Enforcement ("DLSE") uses a hybrid of these two tests often referred to as the "multi-factor test" in determining who an employee is. Most courts in the United States have utilized the control test to determine whether one is an employee. Under this test, a court must consider the hiring partys right to control the manner and means by which the product is accomplished. Among other factors relevant to this inquiry are the skills required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired partys discretion over when and how long to work; the method of payment; the hired partys role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party. (www.piercegorman.com, quoted from the article entitled "Management-side employment law advice for the entertainment industry" with subtitle "Classification of Workers: Independent Contractors versus Employee" by David Albert Pierce, Esq.) 30 www.piercegorman.com, quoted from the article entitled "Management-side employment law advice for the entertainment industry" with subtitle "Classification of Workers: Independent Contractors versus Employee" by David Albert Pierce, Esq. 31 Paragraph 4 of the Agreement provides: "AGENT will make available Jay Sonza for rehearsals and tapings of the Programs on the day and time set by the producer and director of the Programs and to attend pre and post production staff meetings." 32 Paragraph 15 of the Agreement provides: "AGENT, talent shall not use the Programs as a venue to broadcast or announce any criticism on any operational, administrative, or legal problems, situations or other matter which may occur, exist or alleged to have occurred or existed within the COMPANY. Likewise, AGENT, talent shall, in accordance with good broadcast management and ethics, take up with the proper officers of the COMPANY suggestions or criticisms on any matter or condition affecting the COMPANY or its relation to the public or third parties." 33 In Zhengxing v. Nathanson, 215 F.Supp.2d 114, citing Redd v. Summers, 232 F.3d 933 (D.C. Cir.), plaintiffs superior was not involved in the actual performance that produced the final product. 34 Paragraph 3 of the Agreement provides: "The COMPANY reserves the right to modify the program format and likewise change airtime schedule for more effective programming." 35 The right not to broadcast an independent contractors show also gives the radio and television station protection in case it deems the contents of the show libelous. 36 157 F.2d 26, 8 August 1946. 37 Ibid. 38 In Zhengxing v. Nathanson, 215 F.Supp.2d 114, 5 August 2002, plaintiff was also provided with the place of work and equipment to be used. 39 In the Alberty case, the US Court of Appeals rejected Albertys contention that WIPR provided the "equipment necessary to tape the show." The court held there that "the equipment necessary for Alberty to conduct her job as program host 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." Since Alberty provided, or obtained sponsors to provide, the costumes, jewelry, and other image-related supplies and services necessary for her appearance, she provided the "tools and instrumentalities" necessary for her to perform. The US Court of Appeals added that if it accepted Albertys argument, independent contractors could never work on collaborative projects because other individuals often provide the equipment required for different aspects of the collaboration.

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The Alberty case further ruled that "while control over the manner, location, and hours of work is often critical to the independent contractor/employee analysis, it must be considered in light of the work performed and the industry at issue. Considering the tasks that an actor performs, the court does not believe that the sort of control identified by Alberty necessarily indicates employee status." 40 In Zhengxing, a Chinese language broadcaster and translator was deemed an independent contractor because she worked under minimal supervision. The U.S. court also found that plaintiff was required to possess specialized knowledge before commencing her position as a broadcaster. 41 Paragraph 13 of the Agreement provides: "AGENT agrees that talent shall abide by the rules, regulations and standards of performance of the COMPANY covering talents, and that talent is bound to comply with the Television and Radio Code of the Kapisanan ng mga Broadcaster sa Pilipinas (KBP), which has been adopted by the COMPANY as its Code of Ethics. AGENT shall perform and keep all of the duties and obligations assumed or entered by the AGENT hereunder using its best talents and abilities. Any violation of or non-conformity with this provision by talent shall be a valid and sufficient ground for the immediate termination of the Agreement." (Emphasis supplied) 42 Ibid. 43 AFP Mutual Benefit Association, Inc. v. NLRC, G.R. No. 102199, 28 January 1997, 267 SCRA 47. 44 Ibid. 45 Supra note 36. 46 Rollo, p. 302. 47 Ibid. 48 The second paragraph of Article 106 of the Labor Code reads: There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such 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. 49 Rollo, p. 90. 50 New Rules of Procedure of the National Labor Relations Commission, as amended by Resolution 3-99, series of 1999. 51 University of the Immaculate Concepcion v. U.I.C. Teaching and Non-Teaching Personnel and Employees Union, 414 Phil. 522 (2001). 52 Columbus Philippine Bus Corp. v. NLRC, 417 Phil. 81 (2001). 53 Section 3, Article XIII of the Constitution. 54 Republic Act No. 8424. BIR Revenue Regulations No. 19-99 also provides the following: SECTION 1. Scope. Pursuant to the provisions of Sections 244 and 108 of the National Internal Revenue Code of 1997, in relation to Section 17 of Republic Act No. 7716, as amended by Section 11 of Republic Act 8241, these Regulations are hereby promulgated to govern the imposition of value-added tax on sale of services by persons engaged in the practice of profession or calling and professional services rendered by general professional partnerships; services rendered by actors, actresses, talents, singers and emcees, radio and television broadcasters and choreographers; musical, radio, movie, television and stage directors; and professional athletes. SECTION 2. Coverage. Beginning January 1, 2000, general professional partnerships, professionals and persons described above shall be governed by the provisions of Revenue Regulation No. 7-95, as amended, otherwise known as the "Consolidated Value-Added Tax Regulations". xxx 55 Otherwise known as the Expanded Value-Added Tax Law. 56 Act amending Republic Act No. 7716, otherwise known as the Expanded Value-Added Tax Law and other pertinent provisions of the National Internal Revenue Code, as amended (December 20, 1996). 57 Section 109 of the NIRC provides: Exempt transactions. The following shall be exempt from the value-added tax: xxx (o) Services rendered by individuals pursuant to an employer-employee relationship; xxx 58 Singapore Airlines Ltd. v. Hon. Cruz, etc., et al., 207 Phil. 585 (1983).

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 80750-51 July 23, 1990 GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ERNESTO RUIZ and RODRIGO RUIZ, respondents. G.A. Fortun and Associates for petitioner. Antonio P. Espinosa for private respondents. CORTES, J.: Brothers Rodrigo and Ernesto Ruiz (private respondents herein) entered into individual agency agreements with petitioner Grepalife in 1977, each starting out as trainee-agents and later promoted to higher positions. On July 6,1981, Ernesto was designated as district manager under a three-year Agreement of Managership [Annex 'A', Rollo, p. 341. However, he was dismissed from service on November 30, 1983, before the lapse of the period fixed in the contract, when upon audit he was found to have delayed the remittance of premium collections in his possession and to have appropriated for his own use the sum of Twelve Thousand Eight Hundred Eighteen Pesos and Seventy-Three Centavos (P12,818.73) by remitting smaller amounts of premiums than that actually paid by policy holders. Grepalife then designated Rodrigo as officer-in charge to take over the functions of district manager in the Butuan district effective December 5, 1983, in addition to his responsibilities then as zone supervisor. Unfortunately, Rodrigo proved to be made of the same stuff as his brother. After his designation as officer-in-charge was recalled in January 1984, he instigated the other zone supervisors and debit agents of the Butuan district not to submit their weekly reports of business and not to remit the premium collections. Rodrigo's insistent violation despite warnings from the Vice-President for VisMin Sales prompted Grepalife to terminate his employment effective March 5, 1984 in a letter dated March 8, 1984. Although the ground for Rodrigo's dismissal was not given in said letter, petitioner maintained that it was for substantially the same infractions committed by Ernesto. In the consolidated illegal dismissal cases (NLRC RAB X Case Nos. 4-0210-84 and 2-0103-85) filed by the brothers, the labor arbiter found that Rodrigo and Ernesto: (1) were employees of Grepalife; (2) committed acts inimical to Grepalife's business; and (3) were dismissed without first being afforded due process by way of a notice in writing of the grounds for their dismissal. However, despite such findings, the labor arbiter ordered their reinstatement without backwages [Rollo, pp. 5152]. Upon appeal, the National Labor Relations Commission (NLRC) affirmed the factual findings of the labor arbiter but reversed the order of reinstatement on the ground that Grepalife cannot ' be compelled to retain an employee found guilty of acts inimical to its interest. Nevertheless, 'separation pay" was awarded in favor of 136

private respondents for petitioner's failure to observe due process prior to their termination from employment. The dispositive portion of the decision reads: ... for failure of respondents [Grepalife and the branch manager] to give timely notice in writing to complainants of the acts constituting the grounds for their dismissal pursuant to Section 2, Rule XIV, of Batas Pambansa Blg. 130, respondent should be ordered to pay complainants Rodrigo Ruiz and Ernesto Ruiz separation pay, equivalent to one-half month's salary for every year of service. [NLRC Resolution, p. 5; Rollo, p. 9; Emphasis supplied.] Hence, the present petition. The Solicitor General filed its comment on behalf of public respondent. Petitioner filed a reply thereto. Subsequently, the Court resolved to give the petition due course and to require the parties to submit their memoranda. Petitioner and public respondent complied and duly submitted their respective memoranda. On the other hand, private respondents did not file their comment and memorandum. The existence of valid grounds for private respondents' dismissal is not disputed herein, and therefore the finding that the Ruiz brothers were dismissed for just cause is final. The only issues in this petition are (1) Whether or not there was grave abuse of discretion on the part of public respondent in holding that Ernesto and Rodrigo are employees of Grepalife; and (2) Whether or not there was grave abuse of discretion on the part of public respondent in ordering the award of separation pay to private respondents as sanction for Grepalife's failure to accord them due process even though there was finding of just cause for their dismissal. With respect to the first issue, the Court finds no grave abuse of discretion. Grepalife contends that Rodrigo and Ernesto are agents, not employees, of the company by alleging that they were hired under agency agreements, that they were not among the company's "organic personnel" who handled technical and administrative functions of the company, that they were paid on the basis of production/output (by way of commissions and bonuses, and not salaries), and that they were neither under any form of control whatsoever as to hours of work nor were they "on call" by the company. On the basis of the foregoing, Grepalife concluded that the relationship was one of principal-agent and therefore, necessarily, it is the Civil Code and the Insurance Code which properly govern the relationship, to the exclusion of the Labor Code. This contention is devoid of merit. Article 280 of the Labor Code provides that "[the provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements 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. ..." Furthermore, in determining who is considered an "employee', the Court has time and again applied the "four-fold" test,* with control being the most crucial and determinative indicator of an employer-employee relationship. The 'employer" must have control (or must have reserved the right to control) not only over the result of the "employee's" work but also the means and methods by which it is to be accomplished [Investment Planning Corp. of the Philippines v. SSS, G.R. No. L19124, November 18, 1967, 21 SCRA 924; Mafinco Trading Corp. v. Ople, G.R. No. L-37790, March 25, 1976, 70 SCRA 139; Rosario Brothers, Inc. v. Ople, G.R. No. 53590, July 31, 1984, 131 SCRA 72; Brotherhood Labor Unity Movement of the Philippines v. Zamora, G.R. No. L-48645, January 7, 1987,147 SCRA 49; Grepalife v. NLRC, G.R. No. 73887, December 21, 1989]. 137

Applying the above, the Court finds that, as correctly held by public respondent, the relationships of the Ruiz brothers and Grepalife were those of employer-employee. First, their work at the time of their dismissal as zone supervisor and district manager are necessary and desirable to the usual business of the insurance company. They were entrusted with supervisory, sales and other functions to guard Grepalife's business interests and to bring in more clients to the company, and even with administrative functions to ensure that all collections, reports and data are faithfully brought to the company. Furthermore, it cannot be gainsaid that Grepalife had control over private respondents' performance as well as the result of their efforts. A cursory reading of their respective functions as enumerated in their contracts reveals that the company practically dictates the manner by which their jobs are to be carried out. For instance, the District Manager must properly account, record and document the company's funds spot-check and audit the work of the zone supervisors, conserve the company's business in the district through 'reinstatements', follow up the submission of weekly remittance reports of the debit agents and zone supervisors, preserve company property in good condition, train understudies for the position of district manager, and maintain his quota of sales (the failure of which is a ground for termination). On the other hand, a zone supervisor must direct and supervise the sales activities of the debit agents under him, conserve company property through "reinstatements", undertake and discharge the functions of absentee debit agents, spot-check the records of debit agents, and insure proper documentation of sales and collections by the debit agents. True, it cannot be denied that based on the definition of an "insurance agent" in the Insurance Code [Art. 300] some of the functions performed by private respondents were those of insurance agents. Nevertheless, it does not follow that they are not employees of Grepalife. The Insurance Code may govern the licensing requirements and other particular duties of insurance agents, but it does not bar the application of the Labor Code with regard to labor standards and labor relations. Moreover, it is well-settled that the existence of an employer-employee relationship is ultimately a question of fact, and such findings of fact of the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by substantial evidence [RJL Martinez Fishing Corporation v. NLRC, G.R. Nos. 6355051, January 31, 1984, 127 SCRA 454; Asim v. Castro, G.R. Nos. 75063-64, June 30, 1988, 163 SCRA 344; Murillo v. Sun Valley Realty, Inc., G.R. No. 67272, June 30, 1988, 163 SCRA 271], as in this case. With respect to the second issue, petitioner argues that private respondents are not entitled to separation pay since there was clear finding of just cause for dismissal, and furthermore "neither the law nor the rules implementing the same authorizes the award of separation pay as 'penalty." [Petition, p. 8; Rollo, p. 25.] Again, the contention is devoid of merit. It must be emphasized that the monetary award fixed by public respondent, although erroneously termed as "separation pay', was in fact a sanction for the employer's failure to observe the procedural requirements of due process provided under Rule XIV, Secs. 2, 5 and 6 of the rules implementing Batas Pambansa Blg. 130, and the parties' own covenant [Annex "A", Rollo, p. 38.] The imposition of such a sanction is in consonance with the ruling in the case of Wenphil v. NLRC, [G.R. No. 80587, February 8,1989,170 SCRA 69). The Court held therein that anindemnity, not "separation pay", must be imposed on the employer for failure to observe the procedural requirements of notice and hearing prior to the dismissal of an employee for just cause. Considering the circumstances of the case at bar, petitioner must indemnify private respondents in the amount of One Thousand Pesos (P1,000.00) each [See also Shoemart, Inc. v. NLRC, G.R. No. 74229, August 11, 1989]. 138

IN VIEW OF THE FOREGOING, the decision of the NLRC is hereby MODIFIED insofar as the award of "separation pay" is concerned. In lieu of "separation pay" petitioner Grepalife is hereby ordered to indemnify private respondents Rodrigo Ruiz and Ernesto Ruiz the amount of One Thousand Pesos (P1,000.00) each. SO ORDERED. Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

139

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 72409 December 29, 1986 MAMERTO S. BESA, doing business under the name and style of BESA'S CUSTOMBUILT SHOES,petitioner, vs. THE HONORABLE CRESENCIANO B. TRAJANO, DIRECTOR OF THE BUREAU OF LABOR RELATIONS, MINISTRY OF LABOR AND EMPLOYMENT, AND KAISAHAN NG MANGGAGAWANG PILIPINO (KAMPIL-KATIPUNAN), respondents. De Asis and Hernando Law Office for petitioner. Estebal M. Mendoza for private respondent. PARAS, J.: This petition questions the decision of the Director of the Bureau of Labor Relations in BLR Case No. A-8-16585, which affirmed the appealed order of the Med-Arbiter, Labor Relations Division, NCR in NCR-LRD-M-1044-85, a certification election case. More specifically, petitioner seeks the resolution of the question as to whether or not an employer-employee relationship exists between herein petitioner and the seventeen (17) shoeshiners-members of the respondent union, who, if the relationship does exist, should be entitled to the rights, privileges and benefits of an employee as provided in the Labor Code. Sometime in January, 1985, private respondent Kaisahan ng Mangagawang Pilipino KAMPIL for short) a legitimate labor union duly registered with the Ministry of Labor and Employment (MOLE, for short), filed a Petition for Certification Election, docketed as NCR-LRD-M-1-044-85 in the National Labor Relations Division of the National Capital Region. Petitioner opposed it alleging that 1. There is no employer-employee relationship between Besa's and the petitioners-signatories to the petition; 2. The subject of the present petition had previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata; 3. The petition fails to comply with the mandatory formal requirements under Sec. 2, Book V, of the Omnibus Rules Implementing the Labor Code; and 4. This Hon. Commission has no jurisdiction over the subject matter and parties to the petition. Acting on the Petition, the Opposition thereto, and the Reply to the Opposition, the Med-Arbiter on June 27, 1985, issued an order declaring that there was an employer-employee relationship between the parties and directed that an election be conducted. 140

Petitioner appealed the order to the Director of BLR citing among others the following reasons 1. That the subject of the present petition has previously been decided by the defunct Court of Industrial Relations, and is therefore barred under the principle of res judicata (CIR Case Nos. 2783, 2751 and 2949 ULP December 21, 1965); 2. That on May 28, 1985, Director Severo Pucan of the Ministry of Labor and Employment, in dismissing the case for underpayment of commissions and non-payment of ECOLA, filed by the shoeshiners against Besas Custombuilt Shoes, for lack of jurisdiction petition, declared that there was no employer-employee relationship between the shoeshiners and petitioner Besas (Order in NCRLSED1-020-85); Director Pucan's findings were based on a letter-opinion of the Director of the Bureau of Working Conditions of the MOLE (Annex "B-2", Petition for Certiorari). The legal ground therein cited was res judicata. xxx xxx xxx Appeal was dismissed by the Director of BLR as contained in his decision dated Sept. 27, 1985 upholding the finding of the Med-Arbiter that supervisors were appointed to oversee the bootblacks' performance. It declared that such is a finding of fact that is entitled to respect and that res judicata does not he as the parties and the causes of action in the certification election case are different from the parties and causes of action in CIR Cases Nos. 2783-ULP 2751-ULP and 2949 ULP Thus the Petition of the Union (KAMPIL) before the Med-Arbiter for the holding of the certification election was granted. While the pre-election conference was in progress, petitioner herein BESAS filed with Us with petition for certiorari with Prohibition and simultaneously filed with the Med-Arbiter a motion to suspend the pre-election conference. The petition filed before Us was dismissed for lack of merit but was reconsidered upon Motion of petitioner. In its Motion for Reconsideration, petitioner raised the following grounds: I THE INSTANT PETITION PRESENTS QUESTIONS OF LAW AND SUBSTANCE TO MERIT THE CONSIDERATION OF THIS HONORABLE COURT. II THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE AND THE SAME IS PURELY BASED ON SPECULATIONS, SURMISES AND CONJECTURES. III THE QUESTIONED DECISION OF THE RESPONDENT DIRECTOR IS CONTRARY TO LAW AND APPLICABLE DECI SIONS OF THE SUPREME COURT ON THE MATTER. IV 141

THE PETITION FOR CERTIFICATION ELECTION FILED BY RESPONDENT UNION WITH THE MINISTRY OF LABOR AND EMPLOYMENT FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS UNDER ARTICLE 258 OF THE LABOR CODE, AS AMENDED, AND ITS IMPLEMENTING RULES. V THE RESPONDENT DIRECTOR ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DECIDING THAT THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PETITIONER AND THE SHOESHINER-MEMBERS OF THE RESPONDENT UNION, VI THE RESPONDENT DIRECTOR ACTED WITHOUT JURISDICTION IN TAKING COGNIZANCE OF THE BASIC PETITION CONSIDERING THAT THE SUBJECT MATTER AND THE PARTIES THEREOF HAVE BEEN DECIDED BY THE DEFUNCT COURT OF INDUSTRIAL RELATIONS AND IS THEREFORE BABRED BY THE PRINCIPLE OF RES ADJUDICATA. The main thrust of the instant petition is the question of employer-employee relationship between petitioner BESAS and 17 of the members of the herein respondent Union who are designated as shoeshiners. During the certification election held on Nov. 26, 1985 at BESAS of the 53 eligible voters, 49 cast their votes. 33 voted for the union while 16 voted for no union. Among the 33 voters who opted for a union 17 persons are shoeshiners while 16 persons are non-shoeshiners. The question of employer-employee relationship became a primodial consideration in resolving whether or not the subject shoeshiners have the juridical personality and standing to present a petition for certification election as well as to vote i therein. It is the position of petitioner that if the shoeshiners are not considered as employees of Besa's the basic petition for certification election must necessarily be dismissed for failure to comply with the mandatory requirements of the Labor Code, as amended, that at least thirty (30%) percent of the employees must support the petition for certification election and that in order to be certified as the sole and exclusive bargaining agent, the union must be obtained a majority of the valid votes cast by eligible voters. In the instant case, if the 17 shoeshiners are declared ineligible and their votes are consequently nullified the result of the certification election would be 16 "Yes" votes (33 minus 17) and 16 "No" votes, which is a tie. Since the respondent union did not obtain a clear majority for the "Yes" votes as required under Rule IV Sec. 8(f) of the Omnibus Rules of the Labor Code, it necessarily follows that the respondent union cannot be certified as the sole and exclusive bargaining agent of the workers of Besa's. The present petition merits Our consideration. The records of the case reveal that an employer-employee relationship does not exist between the 17 shoeshiners and petitioner. Be it noted that the defunct CIR in dismissing the cases for unfair labor practice filed by the shoeshiners against herein petitioner BESA declared in its Decision dated December 21, 1965 that: The shoe shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not, however, contribute anything to the capital of the employer other than his service. It is the employer of the piece worker who pays his wages, while the shoe shiner in this instance is paid directly by his customer. The piece worker is paid for work accomplished without regard or concern to the profit 142

as derived by his employer, but in the case of the shoe shiners, the proceeds derived from the trade are always divided share and share alike with respondent BESA. The shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is the practice of qqqBesas The employer of the piece worker supervises and controls his work, but in the case of the shoe shiner, respondent BESA does not exercise any degree of control or supervision over their person and their work. All these are not obtaining in the case of a piece worker as he is in fact an employee in contemplation of law, distinct from the shoe shiner in this instance who, in relation to respondent MAMERTO B. BESA, is a partner in the trade. Consequently, employer-employee relationship between members of the Petitioning union and respondent MAMERTO B. BESA being absent the latter could not be held guilty of the unfair tabor practice acts imputed against him. (p. 6, Annex "B1 " of said Decision).<re||an1w> Then too on Dec. 27, 1983, then Director Augusto Sanchez of the Bureau of Working Conditions, MOLE, in response to a letter of petitioner relative to the implementation of wage Order No. 2 which provided for an increase both in minimum wage and cost of living allowance, opined as follows: Entitlement of the minimum requirements of the law particularly on wages and allowances presupposes the existence of employer-employee relationship which is determined by the concurrence of the following conditions: 1. right to hire 2. payment of wages 3. right to fire; and 4. control and supervision The most important condition to be considered is the exercise of control and supervision over the employees, per our conversation, the persons concerned under your query are the shoe shiners and based on the decision rendered by Associate Judge Emiliano Tabigne of the defunct Court of Industrial Relations, these shoe shiners are not employees of the company, but are partners instead. This is due to the fact that the owner/manager does not exercise control and supervision over the shoe shiners. That the shiners have their own customers from whom they charge the fee and divide the proceeds equally with the owner, which make the owner categorized them as on purely commission basis. The attendant circumstances clearly show that there is no employer-employee relationship existing, and such the owner/manager is not by law, under obligation to extend to those on purely commission basis the benefit of Wage Order No. 2. However, the law does not preclude the employer in giving such benefit to all its employees including those which may not be covered by the mandate of the law. (Letter dated December 27, 1985 addressed to petitioner Annex B-2, Petition) The Office of the Solicitor General as counsel for public respondent agrees that in the present case, no employer-employee relationship exists. The Supreme Court in the Rosario Brothers case ruled that; A basic factor underlying the exercise of rights under the Labor Code is the status of employment. It is important in the determination of who shall be included in a proposed bargaining unit because it 143

is sine qua non. The fundamental and essential condition that a bargaining unit be composed of employees. Failure to establish this juridical relationship between the union members and the employer affects the legality of the union itself. It means the ineligibility of the union members to present a petition for certification election as well as to vote therein. Existence of employer-employee relationship is determined by the following elements, namely, a] selection and engagement of the employee; b] payment of wages; c] powers of dismissal; and d] power to control the employee's conduct although the latter is the most important element (Rosario Brothers Inc, vs. Ople, 131 SCRA 72, 1984) WHEREFORE, judgment is hereby rendered giving due course to the Petition and declaring VOID the decision of the Director of the Bureau of Labor Relations dated September 27, 1985. The Petition in BLR Case No. A-8165-85 (NCR-LRD-M1-044-85) is therefore hereby DISMISSED. SO ORDERED. Feria (Chairman), Fernan, Alampay, Gutierrez, Jr., JJ., concur.

144

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 170087 August 31, 2006 ANGELINA FRANCISCO, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents. DECISION YNARES-SANTIAGO, J.: This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004 1 and October 7, 2005, 2 respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15, 2003, 3 in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002, 4 in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal. In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company. 5 Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. However, on some occasions, she was prevailed upon to sign documentation for the company. 6 In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation. 7 For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation. 8 In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be 145

connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters. 9 Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. 10 On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company. 11 Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter. Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted. The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession. Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant. The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and that she was not one of those reported to the BIR or SSS as one of the companys employees. 12 Petitioners designation as technical consultant depended solely upon the will of management. As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation. To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner. SSS records were also submitted showing that petitioners latest employer was Seiji Cor poration. 13 The Labor Arbiter found that petitioner was illegally dismissed, thus: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. finding complainant an employee of respondent corporation; 2. declaring complainants dismissal as illegal; 3. ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation: a. Backwages 10/2001 07/2002 275,000.00 146

(27,500 x 10 mos.) b. Salary Differentials (01/2001 09/2001) 22,500.00 c. Housing Allowance (01/2001 07/2002) 57,000.00 d. Midyear Bonus 2001 27,500.00 e. 13th Month Pay 27,500.00 f. 10% share in the profits of Kasei Corp. from 1996-2001 361,175.00 g. Moral and exemplary damages 100,000.00 h. 10% Attorneys fees 87,076.50 P957,742.50 If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay. SO ORDERED. 14 On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the dispositive portion of which reads: PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows: 1) Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002; 2) The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted; 3) The award of 10% attorneys fees shall be based on salary differential award only; 4) The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED. SO ORDERED. 15 On appeal, the Court of Appeals reversed the NLRC decision, thus: WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendered 147

dismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal. SO ORDERED. 16 The appellate court denied petitioners motion for reconsideration, hence, the present recourse. The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed. Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending parties is supported by substantial evidence. 17 We held in Sevilla v. Court of Appeals 18 that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship. However, in certain cases the control test is not sufficient to give a complete picture of the relationship between the parties, owing to the complexity of such a relationship where several positions have been held by the worker. There are instances when, aside from the employers power to c ontrol the employee with respect to the means and methods by which the work is to be accomplished, economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity. The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship. This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latters employment. The control test initially found application in the case of Viaa v. Al-Lagadan and Piga, 19 and lately in Leonardo v. Court of Appeals, 20 where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. In Sevilla v. Court of Appeals, 21 we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker. 148

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, 22 such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the workers investment in equipment and f acilities; (3) the nature and degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. 23 The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business. 24 In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency. 25By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer. By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. S he reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement. Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the company for six years before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000. 26 When petitioner was designated General Manager, respondent corporation made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation. 27 It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latters line of business. In Domasig v. National Labor Relations Commission, 28 we held that in a business establishment, an identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers covering peti tioners salaries for the months stated therein, these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent. We likewise ruled in Flores v. Nuestro 29 that a corporation who registers its workers with the SSS is proof that the latter were the formers employees. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship. Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretary and that her designation as such was only for convenience. The actual nature of petitioners job was as Kamuras direct assistant with the duty of acting as Liaison Officer in representing the 149

company to secure construction permits, license to operate and other requirements imposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meeting of the corporation. She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company. 30 The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case. 31 Regardless of this fact, we are convinced that the allegations in the first affidavit are sufficient to establish that petitioner is an employee of Kasei Corporation. Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. 32 A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution. 33 Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished. The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement. 34 A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. 35 In Globe Telecom, Inc. v. Florendo-Flores, 36 we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer. Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment. In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees. This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development.

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WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Franciscos full backwages from the time she was illegally terminated until the date of finality of this decision, and separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year. SO ORDERED. CONSUELO YNARES-SANTIAGO Associate Justice WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice ROMEO J. CALLEJO, SR. Associate Justice

MINITA V. CHICO-NAZARIO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO V. PANGANIBAN Chief Justice
Footnotes 1 Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and concurred in by Associate Justices Regalado E. Maambong and Lucenito N. Tagle. 2 Id. at 24-25. 3 Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier and concurred in by Commissioner Tito F. Genilo. 4 Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio. 5 Id. at 89. 6 Id. at 89-90. 7 Id. at 90. 8 Id. 9 Id. at 91. 10 Id. 11 Id. at 91-92. 12 Id. at 92-93.

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Id. at 94. Id. at 172-173. 15 Id. at 197-198. 16 Id. at 100. 17 Abante, Jr. v. Lamadrid Bearing & Parts Corporation, G.R. No. 159890, May 28, 2004, 430 SCRA 368, 379. 18 G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180, citing Visayan Stevedore Transportation Company v. Court of Industrial Relations, 125 Phil. 817, 820 (1967). 19 99 Phil. 408 (1956). 20 G.R. No. 152459, June 15, 2006. 21 Supra note 18. 22 Rutherford Food Corporation v. McComb, 331 U.S. 722, 727 (1947); 91 L.Ed. 1772, 1777 (1946). 23 See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v. Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th Cir. 1979); Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961); Bartels v. Birmingham, 332 U.S. 126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947). 24 Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987). 25 Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir. 1979). 26 Rollo, pp. 305-321. 27 Id. at 264-265. 28 330 Phil. 518, 524 (1996). 29 G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571. 30 Rollo, pp. 120-121. 31 Id. at 57. 32 People v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-27. 33 People v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA 647, 651. 34 Globe-Mackay Cable and Radio Corporation v. National Labor Relations Commission, G.R. No. 82511, March 3, 1992, 206 SCRA 701, 711-712. 35 Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126 (2000). 36 438 Phil. 756 (2002).
13 14

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 121605 February 2, 2000

PAZ MARTIN JO and CESAR JO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and PETER MEJILA, respondents. QUISUMBING, J.: This petition for certiorari seeks to set aside the Decision1 of National Labor Relations Commission (Fifth Division) promulgated on November 21, 1994, and its Resolution dated June 7, 1995, which denied petitioners' motion for reconsideration. Private respondent Peter Mejila worked as barber on a piece rate basis at Dina's Barber Shop. In 1970, the owner, Dina Tan, sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, including private respondent, were absorbed by the new owners. The name of the barbershop was changed to Windfield Barber Shop. The owners and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the fee paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop. In 1977, petitioners designated private respondent as caretaker of the shop because the former caretaker became physically unfit. Private respondent's duties as caretaker, in addition to his being a barber, were: (1) to report to the owners of the barbershop whenever the airconditioning units malfunctioned and/or whenever water or electric power supply was interrupted, (2) to call the laundry woman to wash dirty linen; (3) to recommend applicants for interview and hiring; (4) to attend to other needs of the shop. For this additional job, he was given an honorarium equivalent to one-third (1/3) of the net income of the shop.1wphi1.nt When the building occupied by the shop was demolished in 1986, the barbershop closed. But soon a place nearby was rented by petitioners and the barbershop resumed operations as Cesar's Palace Barbershop and Massage Clinic. In this new location, private respondent continued to be a barber and caretaker, but with a fixed monthly honorarium as caretaker, to wit: from February 1986 to 1990 P700; from February 1990 to March 1991 P800; and from July 1992 P1,300. In November 1992, private respondent had an altercation with his co-barber, Jorge Tinoy. The bickerings, characterized by constant exchange of personal insults during working hours, became serious so that private respondent reported the matter to Atty. Allan Macaraya of the labor department. The labor official immediately summoned private respondent and petitioners to a conference. Upon investigation, it was found out that the dispute was not between private respondent and petitioners; rather, it was between the former and his fellow barber. Accordingly, Atty. Macaraya directed petitioners' counsel, Atty. Prudencio Abragan, to thresh out the problem.

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During the mediation meeting held at Atty. Abragan's office a new twist was added. Despite the assurance that he was not being driven out as caretaker-barber, private respondent demanded payment for several thousand pesos as his separation pay and other monetary benefits. In order to give the parties enough time to cool off, Atty. Abragan set another conference but private respondent did not appear in such meeting anymore. Meanwhile, private respondent continued reporting for work at the barbershop. But, on January 2, 1993, he turned over the duplicate keys of the shop to the cashier and took away all his belongings therefrom. On January 8, 1993, he began working as a regular barber at the newly opened Goldilocks Barbershop also in Iligan City. On January 12, 1993, private respondent filed a complaint2 for illegal dismissal with prayer for payment of separation pay, other monetary benefits, attorney's fees and damages. Significantly, the complaint did not seek reinstatement as a positive relief. In a Decision dated June 15, 1993, the Labor Arbiter found that private respondent was an employee of petitioners, and that private respondent was not dismissed but had left his job voluntarily because of his misunderstanding with his co-worker.3 The Labor Arbiter dismissed the complaint, but ordered petitioners to pay private respondent his 13th month pay and attorney's fees. Both parties appealed to the NLRC. In a Decision dated November 21, 1994, it set aside the labor arbiter's judgment. The NLRC sustained the labor arbiter's finding as to the existence of employer-employee relationship between petitioners and private respondent, but it ruled that private respondent was illegally dismissed. Hence, the petitioners were ordered to reinstate private respondent and pay the latter's backwages, 13th month pay, separation pay and attorney's fees, thus: For failure of respondents to observe due process before dismissing the complainant, We rule and hold that he was illegally terminated. Consequently, he should be reinstated and paid his backwages starting from January 1, 1993 up , the time of his reinstatement and payment of separation pay, should reinstatement not be feasible on account of a strained employer-employee relationship. As complainant's income was mixed, (commission and caretaker), he becomes entitled to 13th month pay only in his capacity as caretaker at the last rate pay given to him. With respect to separation pay, even workers paid on commission are given separation pay as they are considered employees of the company. Complainant should be adjudged entitled to separation pay reckoned from 1970 up to the time he was dismissed on December 31, 1992 at one-half month pay of his earnings as a barbers; and as a caretaker the same should be reckoned from 1977 up to December 31, 1992. As complainant has been assisted by counsel not only in the preparation of the complaint, position paper but in hearings before the Labor Arbiter a quo attorney's fees equivalent to 10% of the money awards should likewise be paid to complainant. WHEREFORE, the decision appealed from is Vacated and Set Aside and a new one entered in accordance with the above-findings and awards. SO ORDERED.4 154

Its motion for reconsideration having been denied in a Resolution dated June 7, 1995, petitioners filed the instant petition. The issues for resolution are as follows: 1. Whether or not there exists an employee-employee relationship between petitioners and private respondent. 2. Whether or not private respondent was dismissed from or had abandoned his employment. Petitioners contend that public respondent gravely erred in declaring that private respondent was their employee. They claim that private respondent was their "partner in trade" whose compensation was based on a sharing arrangement per haircut or shaving job done. They argue that private respondent's task as caretaker could be considered an employment because the chores are very minimal. At the outset, we reiterate the doctrine that the existence of an employer-employee relationship is ultimately a question of fact and that the findings thereon by the labor arbiter and the NLRC shall be accorded not only respect but even finality when supported by ample evidence.5 In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct, with the latter assuming primacy in the overall consideration. The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.6 Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of industrial partnership, we entertain no doubt that private respondent was employed by petitioners as caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as barber by absorbing the latter in their employ. Undoubtedly, the services performed by private respondent as barber is related to, and in the pursuit of the principal business activity of petitioners. Later on, petitioners tapped private respondent to serve concurrently as caretaker of the shop. Certainly, petitioners had the power to dismiss private respondent being the ones who engaged the services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested by the latter. As a caretaker, private respondent was paid by petitioners wages in the form of honorarium, originally, at the rate of one-third (1/3) of the shop's net income but subsequently pegged at a fixed amount per month. As a barber, private respondent earned twothirds (2/3) of the fee paid per haircut or shaving job done. Furthermore, the following facts indubitably reveal that petitioners controlled private respondent's work performance, in that: (1) private respondent had to inform petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could leave only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with the key.7 These duties were complied with by the private respondent upon instructions of petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On the contrary, it was crucial to the business operation of petitioners as shown in the preceding discussion. Hence, there was enough basis to declare private respondent an employee of petitioners. Accordingly, there is no cogent reason to disturb the findings of the labor arbiter and NLRC on the existence of employer-employee relationship between herein private parties.

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With regard to the second issue, jurisprudence has laid out the rules and valid ground for termination of employment. To constitute abandonment, there must be concurrence of the intention to abandon and some overt acts from which it may be inferred that the employee concerned has no more interest in working.8 In other words, there must be a clear, deliberate and unjustified refusal to resume employment and a clear intention to sever the employer-employee relationship on the part of the employee.9 In the case at bar, the labor arbiter was convinced that private respondent was not dismissed but left his work on his own volition because he could no longer bear the incessant squabbles with his co-worker. Nevertheless, public respondent did not give credence to petitioners' claim that private respondent abandoned his job. On this score, public respondent gravely erred as hereunder discussed. At the outset, we must stress that where the findings of the NLRC contradict those of the labor arbiter, the Court, in the exercise of its equity jurisdiction, may look into the records of the case and reexamine the questioned findings.10 In this case, the following circumstances clearly manifest private respondent's intention to sever his ties with petitioners. First, private respondent even bragged to his co-workers his plan to quit his job at Cesar's Palace Barbershop and Massage Clinic as borne out by the affidavit executed by his former co-workers.11 Second, he surrendered the shop's keys and took away all his things from the shop. Third, he did not report anymore to the shop without giving any valid and justifiable reason for his absence. Fourth, he immediately sought a regular employment in another barbershop, despite previous assurance that he could remain in petitioners' employ. Fifth, he filed a complaint for illegal dismissal without praying for reinstatement. Moreover, public respondent's assertion that the institution of the complaint for illegal dismissal manifests private respondent's lack of intention to abandon his job12 is untenable. The rule that abandonment of work is inconsistent with the filing of a complainant for illegal dismissal is not applicable in this case. Such rule applies where the complainant seeks reinstatement as a relief. Corollarily, it has no application where the complainant does not pray for reinstatement and just asks for separation pay instead 13 as in the present case. It goes without saying that the prayer for separation pay, being the alternative remedy to reinstatement, 14 contradicts private respondent's stance. That he was illegally dismissed is belied by his own pleadings as well as contemporaneous conduct. We are, therefore, constrained to agree with the findings of the Labor Arbiter that private respondent left his job voluntarily for reasons not attributable to petitioners. It was error and grave abuse of discretion for the NLRC to hold petitioners liable for illegal dismissal of private respondent. WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of public respondent NLRC are reversed and set aside. The decision of the Labor Arbiter dated June 15, 1993, is hereby reinstated. No costs. SO ORDERED.1wphi1.nt Bellosillo, Mendoza, Buena and De Leon, Jr., JJ., concur.
Footnotes 1 Penned by Commissioner Oscar M. Abella, and concurred by Presiding Commissioner Musib M. Buat and Commissioner Leon G. Gonzaga Jr. 2 Rollo, pp. 34-37. 3 Id. at 60-61.

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Id. at 84. AFP Mutual Benefit Association Inc., NLRC, 267 SCRA 47, 56 (1997); North Davao Mining Corp. v. NLRC, 254 SCRA 721, 731 (1996); Inter-Orient Maritime Enterprises Inc. v. NLRC, 235 SCRA 268, 277 (1994); Loadstar Shipping Co. Inc. v. Gallo, 229 SCRA 654, 660 (1994); Great Pacific Life Assurance Corp. v. NLRC, 187 SCRA 694, 699 (1990). 6 Equitable Banking Corporation v. NLRC, 273 SCRA 352, 371 (1997); MAM Realty Development Corporation v. NLRC, 244 SCRA 797, 800-801 (1995); Zanotte Shoes v. NLRC, 241 SCRA 261, 265 (1995). 7 Id. at 56-38. 8 A Prime Security Services Inc. v. NLRC, 220 SCRA 142, 145 (1993); Dagupan Bus Co. Inc., v. NLRC, 191 SCRA 328, 331 (1990). 9 Tan v. NLRC, 271 SCRA 216, 221 (1997); Caete v. NLRC, 250 SCRA 259, 267 (1995); Reno Foods Inc. v. NLRC, 249 SCRA 379, 386 (1995); Labor v. NLRC, 248 SCRA 183, 198 (1995); International School of Speech v. NLRC. 242 SCRA 382, 389 (1995); Santos v. NLRC, 166 SCRA 759, 764 (1988); Velasco v. Inciong, 164 SCRA 67, 74 (1988). 10 Industrial Timber Corporation v. NLRC, 273 SCRA 200, 209 (1997); Magcalas v. NLRC, 269 SCRA 453, 463 (1997). 11 Rollo, p. 61. 12 Id. at 83. 13 A' Prime Security Services Inc. v. NLRC, supra, p. 145. 14 Bombase v. NLRC, 245 SCRA 496, 500 (1995).
4 5

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 96520 June 28, 1996 RESTITUTO C. PALOMADO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MARLING RICE MILL and/or MARIO TAN TENG KUAN and ROLANDO TAN, respondents. PANGANIBAN, J.:p In this Decision, this Court reiterates some well-entrenched doctrines in labor cases, like (1) the appropriate remedy to challenge rulings of the NLRC is a petition for certiorari under Rule 65, not a petition for review under Rule 45 or 43; (2) a motion for reconsideration is an essential prerequisite to certiorari; (3) only questions relating to jurisdiction or grave abuse of discretion -- not ordinary errors of law -- are reviewable on certiorari; (4) hence, findings of facts of the NLRC are generally accorded great respect, even finality; (5) the law grants the labor arbiter wide latitude to determine the need for a formal hearing after the submission by the parties of their position papers; (6) labor tribunals need only substantial evidence -- not beyond reasonable doubt -- as basis for their decisions; and (7) before a case for illegal dismissal can prosper, an employer-employee relationship must first be established. Petitioner questions the correctness of the Resolution 1 dated November 29, 1990 of respondent National Labor Relations Commission 2 in Case No. RAB-IV-4-2385-90, which affirmed in toto the decision dated June 27, 1990 rendered by Labor Arbiter Numeriano D. Villena dismissing herein petitioner's complaint for alleged illegal dismissal, underpayment of wages and various benefits. Antecedent Facts The labor arbiter made the following factual findings: As viewed from the complaint filed on April 17, 1990, complainant Restituto Palomado charges respondents Marling Rice Mill and/or Mario Tan Teng (sic) Kuan and Rolando S. (sic) Tan for alleged illegal dismissal, underpayment of wages, overtime pay, legal holiday pay, premium pay for holiday and rest day and separation pay/retirement/resignation benefit. After a careful appraisal of the verified position papers together with their supporting proofs, documents and affidavits submitted by the parties, the undersigned finds that the case could be decided judiciously without the necessity of going through formal hearings, hence this Decision. In support of his claims, complainant, in his verified position paper submitted on June 7, 1990 gave the following averments: that on January 2, 1970, he was hired by respondent Marline Rice Mill as a truck driver paid on a "per trip basis" amounting to a monthly average of P3,000.00; that he allegedly worked thereat continuously up to August 1987 when he was illegally dismissed by respondent Rolando O. Tan, in his capacity as manager/operator of respondent Marling Rice 158

Mill. Complainant likewise averred that sometime in 1973, respondent Mario Tan Ten ( sic) Kuan suffered from stroke and in view thereof, his son, respondent Rolando O. Tan, managed and operated Marling Rice Mill. It was further argued that sometime in August 1987, respondent Rolando Tan talked to him (complainant) and told him that he (R. Tan) would sell the Isuzu cargo truck which complainant used to drive in order to buy a new truck with the assurance that he would be retained as the driver of the new unit, however, when the Isuzu cargo truck was bought, respondent Tan dismissed him without cause and hired a new driver by the name of Antonio Pustrado. Complainant contended that because of his unjustified dismissal from Marling Rice Mill, he suffered and continues to suffer loss of income in the average amount of P3,000.00 a month starting September 1987. With regards to his money claims, complainant argued that he had to take trips which took 2-3 days to complete for which he was paid minimal amounts depending on the load of his truck and that for said minimal amounts, he had to work continuously for days and even nights; that there were occasions when he had to drive even during holidays and his rest days as per order of the respondents (,) hence, for these, he is entitled to overtime pay, legal holiday pay and premium pay for holiday and rest day. Complainant submitted as part of its (sic) documentary evidence a "Certification of Premium Payments" issued by the Employee Accounts Department of the Social Security System dated October 26, 1988 showing the premium payments made by Marling Trading and Ricemill in his favor from April 1972 to July 1979. As likewise indicated by the letters "NI" in the columns corresponding to the months after July 1979, complainant's name was no longer included in the quarterly collection list submitted by the respondents on file with the Social Security System. On the other hand, respondent Rolando S. (sic) Tan, in his verified position paper submitted on May 28, 1990 alleged among others that he is the proprietor of R.S. Ricemill located in Bo. Hibanga, Sariaya, Quezon, which business he started in 1987 while respondent Mario Tan Ten (sic) Kuan was the proprietor of "Marling Rice Mill", which ceased operations in 1987 following the infirmity and poor health of Mr. Mario Tan Teng Kuan who died of cardiac arrest on March 15, 1989. Respondent Rolando S. (sic) Tan strongly argued that he is not the owner neither the manager of Marling Rice Mill although he was a former employee of Mr. Mario Tan Teng Kuan and that complainant had never been an employee of R.S. Ricemill which he owned and operated. The labor arbiter found that there was no dispute as to the fact that respondent Mario Tan Teng Kuan (as owner of Marling Rice Mill) employed petitioner herein as truck driver, the real controversy being when the latter's services actually ended, particularly in view of the untimely death of respondent Mario Tan Teng Kuan in 1989 and the Marling Rice Mill's cessation of operation in 1987. Absent other concrete evidence of petitioner's length of service, the labor arbiter relied upon the "certification of premium payments" prepared and issued by the SSS Employee Accounts Department, Premium Verification Division II at the instance of petitioner himself, which certification showed that after June 1979, petitioner was no longer included among the employees listed in the quarterly collection list filed with the Social Security System -- in other words, he ceased to be employed with respondent Marling Rice Mill after June 1979. This was buttressed by the payrolls of Marling Rice Mill submitted to the SSS for various periods after June 1979, as well as by the unrebutted sworn statement of one Dionisio Belda, petitioner's co-worker and pahinante, who alleged that petitioner asked to go on vacation leave in June 1979 and did not report back to work after that. The arbiter thus concluded that petitioner ceased to be an employee of respondent Marling Rice Mill since July 1979, and 159

therefore, inasmuch as the complaint against his former employer Marling Rice Mill and/or Mario Tan Teng Kuan was filed only on April 17, 1990, or beyond the reglementary period prescribed by law, 3 the complaint was already barred by prescription. As to petitioner's claims against respondent Rolando O. Tan, the labor arbiter found that the documentary evidence presented by said respondent overwhelmingly negated petitioner's allegations that he had been employed by Tan, who it turned out was himself but an employee of Marling Rice Mill, and who subsequently became proprietor of his own business (R.S. Ricemill), which started operations in 1986, and which was never impleaded by petitioner as party-respondent in the case below. Thus, the arbiter ruled that there existed no employer-employee relationship between the herein petitioner and respondent Rolando O. Tan, and dismissed the petitioner's claims for lack of merit. Dissatisfied, petitioner appealed the decision to public respondent NLRC, claiming grave abuse of discretion by the arbiter and serious errors in his findings of fact. But the public respondent agreed with the findings made by the arbiter and then concluded: We have gone over the entire records of this case, and We find no evidentiary support for complainant's (petitioner's) allegations against respondent Rolando Tan. Thus, it is Our opinion that the Labor Arbiter neither abused his discretion nor committed serious errors in his findings of facts. Hence, We affirm. 4 Aggrieved, petitioner now pleads NLRC's abuse of discretion before this Court. Issues Raised Petitioner framed the "principal issue" this-wise: Whether or not public respondent NLRC erred in finding that the Labor Arbiter did not act with grave abuse of discretion amounting to lack of jurisdiction nor commit serious errors in his findings both in questions of fact and of law. and then proceeded to attack the labor arbiter's rulling by alleging the following specific "grounds" for the petition: I. The labor arbiter acted with grave abuse of discretion amounting to lack of jurisdiction in the conduct of the proceedings in this case. II. The labor arbiter committed serious errors in his findings in questions of fact. III. The labor arbiter committed serious errors in his findings in questions of law. The Court's Ruling We find for the respondents, the instant petition being obviously and indubitably bereft of merit. At the outset, it must be noted that this petition suffers from serious procedural defects which would have warranted its outright dismissal. First of all, it was incorrectly brought "under the provisions of Rule 43 of the Rules of Court" (rollo, p. 6). We have time and again ruled that the appropriate remedy to challenge a 160

resolution of the NLRC is a special civil action for certiorari under Rule 65 of the Rules of Court, and not a petition for review under Rule 45, 5 much less Rule 43. However, in order to afford the parties substantial justice, the Court decided to treat the instant petition as a special civil action for certiorari. Additionally, the allegations in the petition clearly show that petitioner failed to file a motion for reconsideration of the assailed Resolution before filing the instant petition. As correctly argued by private respondent Rolando Tan, such failure constitutes a fatal infirmity even if the petition be treated as a special civil action for certiorari. The unquestioned rule in this jurisdiction is that certiorari will lie only if there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law against the acts of public respondent. In the instant case, the plain and adequate remedy expressly provided by law 6 was a motion for reconsideration of the assailed decision, based on palpable or patent errors, to be made under oath and filed within ten (10) calendar days from receipt of the questioned decision. And for failure to avail of the correct remedy expressly provided by law, petitioner has permitted the subject Resolution to become final and executory after the lapse of the ten day period within which to file such motion for reconsideration. We have held in Pure Foods Corporation vs. NLRC 7 that: (T)he filing of such a motion is intended to afford public respondent an opportunity to correct any actual or fancied error attributed to it by way of a re-examination of the legal and factual aspects of the case. Petitioner's inaction or negligence under the circumstances is tantamount to a deprivation of the right and opportunity of the respondent commission to cleanse itself of an error unwittingly committed or to vindicate itself of an act unfairly imputed. An improvident resort to certiorari cannot be used as a tool to circumvent the right of public respondent to review and purge its decision of an oversight, if any. Neither should this special civil action be resorted to as a shield from the adverse consequences of petitioner's own negligence or error in the choice of remedies. Having allowed the decision to become final and executory, petitioner cannot by an overdue strategy question the correctness of the decision of the respondent commission when a timely motion for reconsideration was the legal remedy indicated. Likewise, in the case of Zapata vs. NLRC, 8 this Court held: Furthermore, fatal to this action is petitioner's failure to move for the reconsideration of the assailed decision on the dubious pretext that it will be a mere rehash of the arguments and issues previously raised in his position paper, but which stratagem conveniently skirts as a consequence the reglementary period therefor, especially if the same has already expired. The implementing rules of respondent NLRC are unequivocal in requiring that a motion for reconsideration of the order, resolution, or decision of respondent commission should be seasonably filed as a precondition for pursuing any further or subsequent remedy, otherwise the said order resolution, or decision shall become final and executory after ten calendar days from receipt thereof . Obviously, the rationale therefor is that the law intends to afford the NLRC an opportunity to rectify such errors or mistakes it may have lapsed into before resort to the courts of justice can be had. This merely adopts the rule that the function of a motion for reconsideration is to point out to the court (or commission) the error that it may have committed and to give it a chance to correct itself. (footnote omitted; emphasis supplied.) But even if the aforementioned procedural flaws were to be disregarded, the herein petition nevertheless suffers from even more grievous substantive defects. A petition for certiorari under Rule 65 of the Rules of Court will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part of the respondent commission is clearly shown. In Loadstar Shipping Co., Inc. vs. Gallo, 9 we reiterated the basic policy that the original and exclusive jurisdiction of this Court to review a decision or resolution of respondent 161

NLRC does not include a correction of its evaluation of the evidence but is confined to issues of jurisdiction or grave abuse of discretion. But the instant petition is a mere rehash of petitioner's Memorandum of Appeal 10 dated July 13, 1990 filed with respondent NLRC. Nowhere in the petition is it shown that the respondent commission committed such patent, gross and prejudicial errors of law or fact, or a capricious disregard of settled law and jurisprudence, as to amount to a grave abuse of discretion or lack of jurisdiction on its part. Absent such showing, this Court ordinarily will not engage in a review of the facts found nor even of the law as interpreted or applied by respondent, for the writ of certiorari is an extraordinary remedy, and certiorari jurisdiction is not to be equated with appellate jurisdiction. 11 Moreover, it is a fundamental rule that factual findings of quasi-judicial agencies like the public respondent NLRC if supported by substantial evidence are generally accorded not only great respect but even finality, and are binding upon this Court, unless petitioner is able to show that respondent Commission had arbitrarily disregarded evidence before it or had misapprehended evidence to such an extent as to compel a contrary conclusion if such evidence had been properly appreciated. 12 This is rooted in the fact that this Court is not a trier of facts, as well as in the respect to be accorded the determinations made by administrative bodies in general on matters falling within their respective fields of specialization or expertise. 13 In any event, a careful perusal of the records of this case leads to the inescapable conclusion that respondent NLRC acted correctly in affirming in toto the decision of the labor arbiter dismissing the claims of petitioner. Clearly, the arbiter's decision is based on substantial evidence, and no infirmity or circumstance can be found in its factual findings as would detract from the conclusiveness thereof. Thus, there being nothing irregular, arbitrary, capricious or oppressive, amounting to lack of jurisdiction, nor erroneous exercise of discretion, much less any grave abuse thereof, on the part of public respondent, we therefore may not amend or revoke its factual findings. Any error which may be attributed to respondent NLRC would at most be a mere error of judgment which cannot be a proper subject of the special civil action for certiorari. 14 But if only to demonstrate the utter lack of basis for the instant petition and obliterate all doubts as to the correctness of the respondent Commission's ruling, we shall delve into the alleged errors assigned by the petitioner. Firstly, petitioner complains that the labor arbiter "acted with grave abuse of discretion . . ." when on May 17, 1990 he terminated the preliminary conference and directed the parties to file their respective position papers without even requiring the private respondents to answer the claims of petitioner and in spite of the fact that petitioner's counsel had moved for ten days to file a reply/comment to respondent Tan's Letter-Answer (Petitioner's Memorandum, pp. 7-8; rollo, pp. 185-186). Petitioner also insists that inasmuch as the parties held totally conflicting positions, the arbiter ought to have held formal hearings. These arguments are simply untenable. Petitioner should know that the basic purpose of the initial conference/hearing is to explore the possibility of amicably settling the case upon a fair compromise (Sec. 1, Rule VII, Revised Rules of the NLRC). Therefore, when the possibility of an amicable settlement appears remote, either in whole or in part, it becomes imperative for the labor arbiter to terminate the conference and require the parties to submit their respective verified position papers pursuant to Sec. 2 of Rule VII. In the case below, the arbiter's exercise of his discretion, which carries with it the presumption of regularity, was based only on the belief that it was futile to continue exploring the possibility of a settlement. The arbiter ordered submission of position papers also because of the "failure of complainant's representative to appear" ( rollo, p. 41). This, however, did not preclude the petitioner's filing of a reply/comment to respondent Tan's LetterAnswer if he had so desired. In any event, we do not see how the failure of the arbiter to conduct a formal hearing could constitute "grave abuse of discretion". Sec. 3, Rule VII grants an arbiter wide latitude to "determine whether there is a need for a formal hearing or investigation . . . after the submission by the parties of their position papers and supporting proofs." Additionally, the records show that petitioner signed the 162

minutes of the hearing of May 17, 1990, signifying his agreement to the arbiter's colatilla that "in case a formal hearing is no longer necessary, this case shall be deemed submitted for decision." (Rollo, p. 41.) Secondly, petitioner believes that had there been a formal hearing, the arbiter's allegedly mistaken reliance on certain of the documentary evidence submitted by parties "would have been cured and remedied by the parties", presumably through the presentation of controverting evidence. This postulate is not in consonance with the need for speedy disposition of labor cases, for the parties may then willfully withhold their evidence and disclose the same only during the formal hearing, thus creating surprises which would merely complicate the issues and prolong the trial. There is a dire need to lessen technicalities in the process of settling labor disputes; hence, Sec. 2 of Rule VII provides: Sec. 2. Submission of position papers. -- During the initial conference/hearing, or immediately thereafter, the Labor Arbiter shall require the parties to simultaneously submit to him their respective verified position papers, which shall cover only the issues raised in the complaint, accompanied by all supporting documents then available to them and the affidavits of their witnesses which shall take the place of their direct testimony. The parties shall thereafter not be allowed to allege, or present evidence to prove, facts not referred to and any cause or causes of action not included in their complaint or position papers, affidavits and other documents. The parties shall furnish each other with copies of the position papers, together with the supporting affidavits and documents submitted by them. Petitioner further alleges that the arbiter ignored all his documentary exhibits save one, which was even used against him, "while laboriously enumerating one by one all the documentary exhibits of respondent Rolando Tan without qualification whatsoever on the admissibility and credibility of the same." The one piece of documentary evidence being referred to was the SSS's certification of premium payments which, as earlier mentioned, indicated on its face that by July 1979 petitioner was no longer an employee of Marling Rice Mill. Other documentary evidence presented by petitioner consisted of various receipts for purchases of gasoline, which cannot be regarded as relevant to nor in any way supportive of his allegation of having been employed from 1979 onwards, and so were correctly disregarded. Petitioner also questions respondent Commission's condonation of the labor arbiter's "serious errors" in determining the non-existence of employer-employee relationship based on (i) the SSS certification of premium payments, (ii) the payrolls of Marling Rice Mill submitted to the SSS, and (iii) the sworn statement executed by Dionisio Belda. The petitioner's proposition is tenuous if not flimsy. He himself procured and submitted to the arbiter the SSS certification of premium payments to prove his employment from 1979 to his alleged date of termination. Thus, he must have foreseen the consequences of such evidence, for the certification "clearly showed that after June 1979, his name as an employee of respondent Marling Rice Mill was no longer included in the submitted quarterly collection list on file with the Social Security System, or in short, he ceased to be employed with the respondent Marling Rice Mill after June 1979." 15 As for the payrolls of Marline Rice Mill pertaining to various parts of 1979, 1984, 1985 and 1986, we agree with respondent Tan 16 that petitioner's accusation that Tan deliberately and unlawfully withheld the payrolls for the intervening periods is unfounded, reckless and irresponsible. In the first place, he did not prove the existence of such unpresented payrolls (said rice mill having ceased operation in 1987) and secondly, he failed to prove that respondent Tan (who insists he was not the manager thereof) was in possession or custody of such payrolls. If he indeed believe that by such withheld payrolls he could have proven the existence of an employer-employee relationship in his favor, then he should have exerted diligent efforts to secure the same through subpoena duces tecum. But he did not. In any event, quasi-judicial agencies need only substantial evidence as basis for their decisions. Petitioner submitted a 163

"Sinumpaang Salaysay" dated July 26, 1990 of Mr. Dionisio Belda (which, incidentally, was presented for the first time only before this Court) in order to counteract and offset the effects of the sworn statement dated October 28, 1979 executed by the same Mr. Belda in which he categorically stated that petitioner did not return to work after going on vacation leave in June 1979, Nevertheless, it is obvious that the new sworn statement does not in the least detract from the weight of the evidence showing that petitioner was not an employee of private respondent Rolando Tan and that Rolando Tan was not the manager of Marling Rice Mill but merely an employee thereof. The petitioner also failed to explain why, in the payrolls of Marling Rice Mill, a certain Guillermo Tan signed as the manager thereof, if indeed it is true that Rolando Tan was the manager of said rice mill. The "Bilihang Lampasan" between respondent Tan and Antonio Lindog for the sale of an Isuzu cargo truck does not, contrary to petitioner's contention, prove that respondent Tan was in "absolute control" of Marling Rice Mill. To begin with, the mentioned truck was not even shown to have been owned by the rice mill, thus no presumption of absolute control by respondent Tan over the rice mill could have arisen from that contract of sale. Disregarding the peripheral matters, the key issue in this case is whether there exists an employer-employee relationship between petitioner and private respondent Rolando Tan, who, petitioner claims, exercised the power to select and engage the services of the Marling Rice Mill's employees; to dismiss employees (in the same way petitioner was allegedly dismissed), and paid the wages and controlled all work of the mill's employees. Petitioner likewise avers that he was terminated without "cause, just or authorized, thereby making the same illegal". As discussed earlier, and as found by the labor arbiter and affirmed by the public respondent NLRC, there never existed an employer-employee relationship between petitioner and private respondent Rolando Tan. Thus the labor arbiter held (and public respondent NLRC concurred): With regards to complainant's claims against respondent. Rolando O. Tan, the overwhelming documentary evidences presented by said respondent strongly negated complainant's charges that he had been under the employ of Rolando O. Tan who appeared to be the registered proprietor/owner of R.S. Rice Mill, (an) entity which started to operate in 1986 as per Certificate of Registration issued by the Bureau of Domestic Trade dated April 11, 1986 and which was never interpleaded (sic) by herein complainant as party-respondent in this case. Respondent Rolando Tan, whom complainant alluded to as the manager/operator of Marling Rice Mill after respondent. Mario Tan Ten (sic) Kuan suffered (a) stroke some time in 1973 was nothing more than a mere employee of Marling Rice Mill as shown by the payrolls submitted to the Social Security System by respondent Marling Rice Mill. Complainant's allegation that Rolando Tan managed, operated and transacted business for Marling Rice Mill is of no moment and wanting in evidence since it is even clear from the said payrolls that it was one Guillermo Tan who was the manager of Marling Rice Mill. Complainant's documentary exhibits (Annexes "I", "I-1" to "I16", inclusive, and Annex "J") failed to serve their purpose as they are in themselves mere scraps of paper, irrelevant and immaterial. In view of all the foregoing, the undersigned finds that there existed no employee-employer relationship between complainant and respondent Rolando O. Tan. (Rollo, pp. 49-50.) An indispensable precondition of illegal dismissal is the prior existence of an employer-employee relationship; in this case, since it was established that there was no such relationship between petitioner and private respondent Tan, therefore the allegation of illegal dismissal does not have any leg to stand on. The claims for backwages, separation pay and other benefits must likewise fail. WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED for lack of merit and the Resolution of the public respondent NLRC dated November 29, 1990 is AFFIRMED in toto. No costs. 164

SO ORDERED. Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.
Footnotes 1 Rollo, pp. 34-37. 2 Third Division, composed of Comm. Rogelio I. Rayala, ponente, and Pres. Comm. Lourdes C. Javier and Comm. Ireneo B. Bernardo, concurring. 3 Cf . Section 1, Rule II of Book VII of the Labor Code. 4 Resolution, p. 3; Rollo, p. 36. 5 De Asis vs. National Labor Relations Commission, 177 SCRA 340 (September 7, 1989), citing Asiaworld Publishing House, Inc. vs. Ople, 152 SCRA 219 (July 23, 1987). 6 Sec. 9, Rule X, New Rules of the National Labor Relations Commission. 7 171 SCRA 415, 425 (March 21, 1989); see also Villarama vs. National Labor Relations Commission, 236 SCRA 280 (September 2, 1994). 8 175 SCRA 56, 60 (July 5, 1989); see also G.A. Yupangco vs. NLRC, G.R. No. 102191, February 17, 1992, minute resolution. 9 229 SCRA 654, 659-660 (February 4, 1994); see also Sta. Fe Construction Co. vs. NLRC, 230 SCRA 593 (March 2, 1994). 10 Annex "G", Petition; rollo, pp. 53-78. 11 Cf . Sime Darby Pilipinas, Inc., vs. Magsalin, 180 SCRA 177 (December 15, 1989). 12 St. Mary's College (Tagum, Davao vs. NLRC, 181 SCRA 62, 66 (January 12, 1990); Tropical Hut Employees' UnionCGW vs. Tropical Hut Food Market, Inc., 181 SCRA 173, 187 (January 20, 1990); Loadstar Shipping Co., Inc. vs. Gallo, supra; Inter-Orient Maritime Enterprises, Inc. vs. NLRC, 235 SCRA 268, 277 (August 11, 1994); Five J Taxi vs. NLRC, 235 SCRA 556, 560 (August 22, 1994). 13 Maya Farms Employees Organization vs. NLRC, 239 SCRA 508 (December 28, 1994); also Lucena vs. Pan-Trade Inc., 172 SCRA 733, 736 (April 25, 1989). 14 Vide Zapat vs. National Labor Relations Commission, supra. 15 Arbiter's Decision, pp. 6-7; rollo, pp. 47-48. 16 Memorandum for respondent Rolando Tan pp. 12-13; rollo, pp. 171-172.

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