1. CMS Estate vs SSS; GR No.

L- 26298 September 28, 1984

FACTS:
Petitioner CMS Estate Inc is a domestic corporation engaged in the
real estate business. In December 1952, it began with only 6
employees. In 1956, it also engaged in the logging business and
obtained an ordinary license from the Bureau of Forestry to operate
forest concession (13,000 hectares) in Baganga, Davao. In January
1957, CMS Estate entered into a contract of management with
Eufracio Rojas for the operation of the logging concession which
began in April 1957 with four employees earning monthly salaries.
By September 1957, CMS Estate had 89 employees in the logging
operation. But on December 1957, CMS Estate revoked its contract
with Rojas. By August 1958, CMSEstate became a member of SSS
with respect to its real estate business and remitted to the SSS
P203.13 representing the initial premium of the salaries of the
employees in the logging business.
But on October 1958, petitioner demanded the refund of the
amount, alleging that it is not yet subject to compulsory coverage in
its logging business. Respondent SSS denied the petition on the
ground that the logging business is only an expansion of the
companys existing activities and that it should be considered a
member since December 1952 when it opened its business.
CMS Estate contends that the SSS contributions required of
employees and employers under the SSS Act of 1954 are not in the
nature of excise taxes and therefore, not compulsory of employers.
ISSUE:

W/N Petitioners logging business is subject to compulsory coverage

in the SSS
HELD:
The Social Security Law was enacted pursuant to the policy to
develop, establish gradually and perfect a social security system
which shall be suitable to the needs of the people throughout the
Philippines and provide protection against the hazards of disability,
sickness, old age and death. It is clear then that the
implementation of the SSS Law is in line with the general welfare
mandate of the Constitution and as such, is a legitimate exercise of
the police power.
As held in Philippine Blooming Mills Co. vs. SSS: membership in the
SSS is not a bilateral, consensual agreement where obligations and
rights of the parties are subject to their will. RA 1161 requires
compulsory coverage of employees and employers under the
system. As such, the principle of non-impairment of obligation of
contract cannot be raised as a defense.
The taxing power of the State is exercised for the purpose of raising
revenues. However, under our Social Security Law, the emphasis is
more on the promotion of the general welfare. The Act is not part of
out Internal Revenue Code nor are the contributions and premiums
therein dealt with and provided for, collectible by the Bureau of
Internal Revenue. The funds contributed to the System belong to
the members who will receive benefits, as a matter of right,
whenever the hazards provided by the law occur.

2. People vs Pomar; GR No. L-22008 November 3, 1924

Facts:
That on or about the 27th day of August, 1923, and sometime prior
thereto, in the City of Manila, Philippine Islands, the said accused,
being the manager and person in charge of La Flor de la Isabela, a
tobacco factory pertaining to La Campania General de Tabacos de
Filipinas, a corporation duly authorized to transact business in said
city, and having, during the year 1923, in his employ and service as
cigar-maker in said factory, a woman by the name of Macaria
Fajardo, whom he granted vacation leave which began on the 16th
day of July, 1923, by reason of her pregnancy, did then and there
willfully, unlawfully, and feloniously fail and refuse to pay to said
woman the sum of eighty pesos (P80), Philippine currency, to which
she was entitled as her regular wages corresponding to thirty days
before and thirty days after her delivery and confinement which
took place on the 12th day of August, 1923, despite and over the
demands made by her, the said Macaria Fajardo, upon said accused,
to do so.
To said complaint, the defendant demurred, alleging that the facts
therein contained did not constitute an offense. The demurrer was
overruled, whereupon the defendant answered and admitted at the
trial all of the allegations contained in the complaint, and
contended that the provisions of said Act No. 3071, upon which the
complaint was based were illegal, unconstitutional and void.
Upon a consideration of the facts charged in the complaint and
admitted by the defendant, the Honorable C. A. Imperial, judge,
found the defendant guilty of the alleged offense described in the

complaint, and sentenced him to pay a fine of P50, in accordance

with the provisions of section 15 of said Act, to suffer subsidiary
imprisonment in case of insolvency, and to pay the costs.
Issue: W/N Section 13 of Act No. 3071 is unconstitutional?
Held:
Yes, Act No. 3071 is unconstitutional. Such Act violates the right to
enter into a lawful contract. The right to enter into lawful contracts
constitutes one of the liberties provided by the constitution for the
people of the State. Being such a right, it should not therefore be
arbitrarily interfered with. Even though it has been contended that
Act No. 3071 is within the police power of the State, such power
cannot be exercised in violation to the Constitution which is the
fundamental and supreme law of the land.
Said section 13 was enacted by the Legislature of the Philippine
Islands in the exercise of its supposed police power, with the
praiseworthy purpose of safeguarding the health of pregnant
women laborers in "factory, shop or place of labor of any
description," and of insuring to them, to a certain extent,
reasonable support for one month before and one month after their
delivery. The question presented for decision by the appeal is
whether said Act has been adopted in the reasonable and lawful
exercise of the police power of the state.
In determining whether a particular law promulgated under the
police power of the state is, in fact, within said power, it becomes
necessary first, to determine what that power is, its limits and
scope. Literally hundreds of decisions have been promulgated in
which definitions of the police power have been attempted. An
examination of all of said decisions will show that the definitions are

generally limited to particular cases and examples, which are as

varied as they are numerous.
Without further attempting to define what are the peculiar subjects
or limits of the police power, it may safely be affirmed, that every
law for the restraint and punishment of crimes, for the preservation
of the public peace, health, and morals, must come within this
category. But the state, when providing by legislation for the
protection of the public health, the public morals, or the public
safety, is subject to and is controlled by the paramount authority of
the constitution of the state, and will not be permitted to violate
rights secured or guaranteed by that instrument or interfere with
the execution of the powers and rights guaranteed to the people
under their law the constitution. (Mugler vs. Kansas, 123 U. S.,
623.)
The police power of the state is a growing and expanding power. As
civilization develops and public conscience becomes awakened, the
police power may be extended, as has been demonstrated in the
growth of public sentiment with reference to the manufacture and
sale of intoxicating liquors. But that power cannot grow faster than
the fundamental law of the state, nor transcend or violate the
express inhibition of the people's law the constitution. If the
people desire to have the police power extended and applied to
conditions and things prohibited by the organic law, they must first
amend that law.

3. Magallanes vs Sun Yat Sen Elementary School; GR No. 160876

January 18, 2008
Facts:
Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented
by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were
all employed as teachers in the Sun Yat Sen Elementary School in
Surigao City.
Paz Go and Elena Cubillan are principals of the said school. Willy Ang
Gan Teng and Benito Ang are its directors, while Teotimo Tan is the
school treasurer. They are all respondents herein.
On May 22, 1994, respondents terminated the services of
petitioners. Thus, on August 3, 1994, they filed with the National
Labor Relations Commission (NLRC), Butuan City, complaints against
respondents for illegal dismissal, underpayment of wages, payment
of backwages, 13th month pay, ECOLA, separation pay, moral
damages, and attorneys fees. Likewise, on August 22, 1994,
petitioner Cotecson filed a separate complaint praying for the same
reliefs.
On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a
Decision declaring that petitioners were illegally dismissed from the
service and ordering respondents to reinstate them to their former
or equivalent positions without loss of seniority rights, and to pay
them their backwages, salary differential, 13th month pay
differential, and service incentive leave benefits "as of June 20,
1995." Respondents were likewise directed to pay petitioners moral
and exemplary damages.

On appeal by respondents, the NLRC, in its Decision dated February

20, 1996, reversed the Arbiters judgment, holding that petitioners
are contractual employees and that respondents merely allowed
their contracts to lapse.
Petitioners timely filed a motion for reconsideration, but it was
denied by the NLRC in its Resolution dated April 17, 1996.
Petitioners then filed with the Court of Appeals a petition for
certiorari, docketed as CA-G.R. SP No. 50531.
Issue: W/N the issuance by the NLRC of the Order dated March 30,
2001, amending the amounts of separation pay and backwages,
awarded to petitioners and computed by the Labor Arbiter, is
tantamount to grave abuse of discretion amounting to lack or
excess of jurisdiction?
Held:
We opt for liberality in the application of the rules to the instant
case in light of the following considerations. First, the rule that
negligence of counsel binds the client may be relaxed where
adherence thereto would result in outright deprivation of the
clients liberty or property or where the interests of justice so
require.5 Second, this Court is not a slave of technical rules, shorn of
judicial discretion in rendering justice, it is guided by the norm
that on the balance, technicalities take a backseat against
substantive rights. Thus, if the application of the rules would tend to
frustrate rather than promote justice, it is always within this Courts
power to suspend the rules or except a particular case from its
application.

This case involving a labor dispute has dragged on for over a decade
now. Petitioners have waited too long for what is due them under
the law. One of the original petitioners, Judith Cotecson, died last
September 28, 2003 and has been substituted by her heirs. It is time
to write finis to this controversy. The Labor Code was promulgated
to promote the welfare and well-being of the working man. Its spirit
and intent mandate the speedy administration of justice, with least
attention to technicalities but without sacrificing the fundamental
requisites of due process.
Clearly, the Decision in CA-G.R. SP No. 50531 had long become final
and executory. The Labor Arbiter computed the monetary awards
due to petitioners corresponding to the period from June 1994 to
October 28, 1999, in accordance with the Decision of the Court of
Appeals (Special Sixteenth Division). The award for backwages and
money claims is in the total sum of P912,086.15.

4. Calalang vs Williams; GR No. 47800 December 2, 1940

Facts:
The Secretary of Public Works and Communications (PWC)
approved with modification the recommendation that originated
from the National Traffic Commission (NTC), which was favorably
indorsed by the Director of Public Works (PW) that Rosario Street
and Rizal Avenue be closed to traffic of animal-drawn vehicles,
between the points and during the hours from 7 a.m. to 11 p.m., for
a period of one year from the date of the opening of the Colgante
Bridge to traffic; that the Mayor of Manila and the Acting Chief of
Police of Manila have enforced and caused to be enforced the rules
and regulations thus adopted; that as a consequence of such
enforcement, all animal drawn vehicles are not allowed to pass and
pick up passengers in the places abovementioned to the detriment
not only of their owners but of the riding public as well.

Commonwealth Act No. 548 gives the Director of Public Works the
authority to promulgate rules and regulations to regulate and
control the use of and traffic on national roads.
Maximo Calalang, in his capacity as private citizen and as a taxpayer
of Manila, filed a petition for a writ of prohibition against the
Chairman of NTC, Director of PW, Acting Secretary of PWC, Mayor
of Manila and Acting Chief of Police of Manila.
ISSUE: WON the rules and regulations complained of infringe the
constitutional precept regarding the promotion of social justice to
insure the well-being of all the people?
Held:

The promotion of social justice, however, is to be achieved not

through a mistaken sympathy towards any given group. Social
justice is "neither communism, nor despotism, nor atomism, nor
anarchy," but the humanization of laws and the equalization of
social and economic forces by the State so that justice in its rational
and objectively secular conception may at least be approximated.
Social justice means the promotion of the welfare of all the people,
the adoption by the Government of measures calculated to insure
economic stability of all the competent elements of society, through
the maintenance of a proper economic and social equilibrium in the
interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extraconstitutionally, through the exercise of powers underlying the
existence of all governments on the time-honored principle of salus
populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the
necessity of interdependence among divers and diverse units of a
society and of the protection that should be equally and evenly
extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount
objective of the state of promoting the health, comfort, and quiet of
all persons, and of bringing about "the greatest good to the greatest
number.

5. Manaya vs Alabang Country Club; GR No. 168988 June 19, 2007

Held:

Facts:

In all these, the Court allowed liberal interpretation given the

extraordinary circumstances that justify a deviation from an
otherwise stringent rule.[29]

Petitioner alleged that on 21 August 1989, he was initially hired by

the respondent as a maintenance helper[3] receiving a salary
of P198.00 per day. He was later designated as company
electrician. He continued to work for the respondent until 22
August 1998 when the latter, through its Engineering and
Maintenance Department Manager, Engr. Ronnie B. de la Cruz,
informed him that his services were no longer required by the
company.[4] Petitioner alleged that he was forcibly and illegally
dismissed without cause and without due process on 22 August
1998.[5] Hence, he filed a Complaint[6] before the Labor Arbiter. He
claimed that he had not committed any infraction of company
policies or rules and that he was not paid his service incentive leave
pay, holiday pay and 13th month pay. He further asserted that with
his more or less nine years of service with the respondent, he had
become a regular employee. He, therefore, demanded his
reinstatement without loss of seniority rights with full backwages
and all monetary benefits due him.[7]
In its Answer, respondent denied that petitioner was its
employee. It countered by saying that petitioner was employed by
First Staffing Network Corporation (FSNC), with which respondent
had an existing Memorandum of Agreement dated 21 August
1989. Thus, by virtue of a legitimate job contracting, petitioner, as
an employee of FSNC, came to work with respondent, first, as a
maintenance
helper,
and
subsequently
as
an
electrician. Respondent prayed for the dismissal of the complaint
insisting that petitioner had no cause of action against it.
Issue: W/N the interpretation must be liberally construed?

Clearly, emphasized in these cases is that the policy of liberal

interpretation is qualified by the requirement that there must be
exceptional circumstances to allow the relaxation of the rules.[30]
Absent exceptional circumstances, we adhere to the rule that
certain procedural precepts must remain inviolable, like those
setting the periods for perfecting an appeal or filing a petition for
review, for it is doctrinally entrenched that the right to appeal is a
statutory right and one who seeks to avail oneself of that right must
comply with the statute or rules. The rules, particularly the
requirements for perfecting an appeal within the reglementary
period specified in the law, must be strictly followed as they are
considered indispensable interdictions against needless delays and
for orderly discharge of judicial business. Furthermore, the
perfection of an appeal in the manner and within the period
permitted by law is not only mandatory but also jurisdictional and
the failure to perfect the appeal renders the judgment of the court
final and executory. Just as a losing party has the right to file an
appeal within the prescribed period, the winning party also has the
correlative right to enjoy the finality of the resolution of his/her
case.[31]
In this particular case, we adhere to the strict interpretation of
the rule for the following reasons:
Firstly, in this case, entry of judgment had already been
made[32] which rendered the Decision of the Labor Arbiter as final
and executory.

Secondly, it is a basic and irrefragable rule that in carrying out and in

interpreting the provisions of the Labor Code and its implementing
regulations, the workingmans welfare should be the primordial and
paramount consideration. The interpretation herein made gives
meaning and substance to the liberal and compassionate spirit of
the law enunciated in Article 4 of the Labor Code that all doubts in
the implementation and interpretation of the provisions of the
Labor Code including its implementing rules and regulations shall be
resolved in favor of labor
Without doubt, to allow the appeal of the respondent as what the
Court of Appeals had done and remand the case to the NLRC would
only result in delay to the detriment of the petitioner. In Narag v.
National Labor Relations Commission,[38] citing Vir-Jen Shipping and
Marine Services, Inc. v. National Labor Relations Commission,[39] we
held that delay in most instances gives the employers more
opportunity not only to prepare even ingenious defenses, what with
well-paid talented lawyers they can afford, but even to wear out the
efforts and meager resources of the workers, to the point that not
infrequently the latter either give up or compromise for less than
what is due them.[40]
Nothing is more settled in our jurisprudence than the rule that
when the conflicting interest of loan and capital are weighed on the
scales of social justice, the heavier influence of the latter must be
counter-balanced by the sympathy and compassion the law must
accord the under-privileged worker.[41]
Thirdly, respondent has not shown sufficient justification to
reverse the findings of the Labor Arbiter as affirmed by the NLRC.

6. Duncan Association vs Glaxo Wellcome; GR No. 162994

September 17, 2004
Facts:
Petitioner Pedro A. Tecson was hired by respondent Glaxo
Wellcome Philippines, Inc. (Glaxo) as medical representative on
October 24, 1995, after Tecson had undergone training and
orientation.
Thereafter, Tecson signed a contract of employment which
stipulates, among others, that he agrees to study and abide by
existing company rules; to disclose to management any existing or
future relationship by consanguinity or affinity with co-employees
or employees of competing drug companies and should
management find that such relationship poses a possible conflict of
interest, to resign from the company.
Tecson was initially assigned to market Glaxos products in the
Camarines Sur-Camarines Norte sales area.
Subsequently, Tecson entered into a romantic relationship with
Bettsy, an employee of Astra Pharmaceuticals3(Astra), a competitor
of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She
supervised the district managers and medical representatives of her
company and prepared marketing strategies for Astra in that area.
Even before they got married, Tecson received several reminders
from his District Manager regarding the conflict of interest which his
relationship with Bettsy might engender. Still, love prevailed, and
Tecson married Bettsy in September 1998.
In January 1999, Tecsons superiors informed him that his marriage
to Bettsy gave rise to a conflict of interest. Tecsons superiors

reminded him that he and Bettsy should decide which one of them
would resign from their jobs, although they told him that they
wanted to retain him as much as possible because he was
performing his job well.
Tecson requested for time to comply with the company policy
against entering into a relationship with an employee of a
competitor company. He explained that Astra, Bettsys employer,
was planning to merge with Zeneca, another drug company; and
Bettsy was planning to avail of the redundancy package to be
offered by Astra. With Bettsys separation from her company, the
potential conflict of interest would be eliminated. At the same time,
they would be able to avail of the attractive redundancy package
from Astra.
In November 1999, Glaxo transferred Tecson to the Butuan CitySurigao City-Agusan del Sur sales area. Tecson asked Glaxo to
reconsider its decision, but his request was denied.
Tecson sought Glaxos reconsideration regarding his transfer and
brought the matter to Glaxos Grievance Committee. Glaxo,
however, remained firm in its decision and gave Tescon until
February 7, 2000 to comply with the transfer order. Tecson defied
the transfer order and continued acting as medical representative in
the Camarines Sur-Camarines Norte sales area.
Issue: W/N the policy of a pharmaceutical company prohibiting its
employees from marrying employees of any competitor company is
valid
Held:
Glaxo argues that the company policy prohibiting its employees
from having a relationship with and/or marrying an employee of a

competitor company is a valid exercise of its management

prerogatives and does not violate the equal protection clause; and
that Tecsons reassignment from the Camarines Norte-Camarines
Sur sales area to the Butuan City-Surigao City and Agusan del Sur
sales area does not amount to constructive dismissal.
It likewise asserts that the policy does not prohibit marriage per
se but only proscribes existing or future relationships with
employees of competitor companies, and is therefore not violative
of the equal protection clause. It maintains that considering the
nature of its business, the prohibition is based on valid grounds.11
No reversible error can be ascribed to the Court of Appeals when it
ruled that Glaxos policy prohibiting an employee from having a
relationship with an employee of a competitor company is a valid
exercise of management prerogative.
Glaxo has a right to guard its trade secrets, manufacturing formulas,
marketing strategies and other confidential programs and
information from competitors, especially so that it and Astra are
rival companies in the highly competitive pharmaceutical industry.
The prohibition against personal or marital relationships with
employees of competitor companies upon Glaxos employees is
reasonable under the circumstances because relationships of that
nature might compromise the interests of the company. In laying
down the assailed company policy, Glaxo only aims to protect its
interests against the possibility that a competitor company will gain
access to its secrets and procedures.
That Glaxo possesses the right to protect its economic interests
cannot be denied. No less than the Constitution recognizes the right
of enterprises to adopt and enforce such a policy to protect its right
to reasonable returns on investments and to expansion and
growth.20 Indeed, while our laws endeavor to give life to the

constitutional policy on social justice and the protection of labor, it

does not mean that every labor dispute will be decided in favor of
the workers. The law also recognizes that management has rights
which are also entitled to respect and enforcement in the interest
of fair play.

7. Abella vs NLRC; GR No. 71813 July 20, 1987

Facts:
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a
farm land in Monteverde, Negros Occidental, known as Hacienda
Danao-Ramona, for a period of ten (10) years, renewable, at her
option, for another ten (10) years (Rollo, pp. 16-20).On August 13,
1970, she opted to extend the lease contract for another ten (10)
years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private
respondents. Private respondent Ricardo Dionele, Sr. has been a
regular farm worker since 1949 and he was promoted to Cabo in
1963. On the other hand, private respondent Romeo Quitco started
as a regular employee in 1968 and was promoted to Cabo in
November of the same year.Upon the expiration of her leasehold
rights, petitioner dismissed private respondents and turned over the
hacienda to the owners thereof on October 5, 1981, who continued
the management, cultivation and operation of the farm (Rollo, pp.
33; 89).
On November 20, 1981, private respondents filed a complaint
against the petitioner at the Ministry of Labor and Employment,
Bacolod City District Office, for overtime pay, illegal dismissal and
reinstatement with backwages. After the parties had presented
their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a
Decision dated July 16, 1982 (Ibid, pp. 29-31), ruled that the
dismissal is warranted by the cessation of business, but granted the
private respondents separation pay.
Issue: W/N respondents are entitled to separation pay?
Held:

The purpose of Article 284 as amended is obvious-the protection of

the workers whose employment is terminated because of the
closure of establishment and reduction of personnel. Without said
law, employees like private respondents in the case at bar will lose
the benefits to which they are entitled for the thirty three years
of service in the case of Dionele and fourteen years in the case of
Quitco. Although they were absorbed by the new management of
the hacienda, in the absence of any showing that the latter has
assumed the responsibilities of the former employer, they will be
considered as new employees and the years of service behind them
would amount to nothing. Moreover, to come under the
constitutional prohibition, the law must effect a change in the rights
of the parties with reference to each other and not with reference
to non-parties.
As correctly observed by the Solicitor General, Article 284 as
amended refers to employment benefits to farm hands who were
not parties to petitioner's lease contract with the owner of
Hacienda Danao-Ramona. That contract cannot have the effect of
annulling subsequent legislation designed to protect the interest of
the working class.
In any event, it is well-settled that in the implementation and
interpretation of the provisions of the Labor Code and its
implementing regulations, the workingman's welfare should be the
primordial and paramount consideration. It is the kind of
interpretation which gives meaning and substance to the liberal and
compassionate spirit of the law as provided for in Article 4 of the
New Labor Code which states that "all doubts in the
implementation and interpretation of the provisions of this Code
including its implementing rules and regulations shall be resolved in
favor of labor." The policy is to extend the applicability of the
decree to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed
policy of the State to give maximum aid and protection to labor.

Case No 14

consideration for the 3% split in the co procured by appellant Mrs.

Sevilla (p. 35 tsn Feb. 16,1965).

Sevilla v CA
On the strength of a contract entered into on Oct. 19, 1960 by and
between Mrs. Segundina Noguera; the Tourist World Service, Inc.,
represented by Mr. Eliseo Canilao as party of the second part, and
hereinafter referred to as appellants. Mrs. Sevilla was signatory to a
lease agreement dated 19 October 1960 covering the premises at
A. Mabini St., she expressly warranting and holding herself
'solidarily' liable with appellee Tourist World Service, Inc. for the
prompt payment of the monthly rentals thereof to other appellee
Mrs. Noguera.
Appellant Mrs. Sevilla did not receive any salary from appellee
Tourist World Service, Inc., which had its own, separate office
located at the Trade & Commerce Building; nor was she an
employee thereof, having no participation in nor connection with
said business at the Trade & Commerce Building.
Appellant Mrs. Sevilla earned commissions for her own passengers,
her own bookings her own business (and not for any of the business
of appellee Tourist World Service, Inc.) obtained from the airline
companies. She shared the 7% commissions given by the airline
companies giving appellee Tourist World Service, Lic. 3% thereof
aid retaining 4% for herself.
Appellant Mrs. Sevilla likewise shared in the expenses of
maintaining the A. Mabini St. office, paying for the salary of an
office secretary, Miss Obieta, and other sundry expenses, aside
from desicion the office furniture and supplying some of fice
furnishings (pp. 15,18 tsn. April 6,1965), appellee Tourist World
Service, Inc. shouldering the rental and other expenses in

It was the understanding between them that appellant Mrs. Sevilla

would be given the title of branch manager for appearances sake
only, appellee Eliseo Canilao admits that it was just a title for
dignity.
On or about November 24, 1961 the Tourist World Service, Inc.
appears to have been informed that Lina Sevilla was connected with
a rival firm, the Philippine Travel Bureau, and, since the branch
office was anyhow losing, the Tourist World Service considered
closing down its office
Because of this, and to comply with the mandate of the Tourist
World Service, the
corporate secretary Gabino Canilao went over to the branch office,
and, finding the
premises locked, and, being unable to contact Lina Sevilla, he
padlocked the premises
on June 4, 1962 to protect the interests of the Tourist World Service
When neither the appellant Lina Sevilla nor any of her employees
could enter the locked premises, a complaint wall filed by the herein
appellants against the appellees with a prayer for the issuance of
mandatory preliminary injunction.
Tourist World Service, Inc., insists, on the other hand, that Lina
SEVILLA was a mere
employee, being "branch manager" of its Ermita "branch" office and
that inferentially, she had no say on the lease executed with the
private respondent, Segundina Noguera.
Issue: Was there an employer-employee relationship?

Held:
No. In this jurisdiction, there has been no uniform test to determine
the evidence of an employer-employee relation. In general, we have
relied on the so-called right of control test, "where the person for
whom the services are performed reserves a right to control not
only the end to be achieved but also the means to be used in
reaching such end." 10 Subsequently, however, we have
considered, in addition to the standard of right-of control, the
existing economic conditions prevailing between the parties, like
the inclusion of the employee in the payrolls, in determining the
existence of an employer-employee relationship.
The records will show that the petitioner, Lina Sevilla, was not
subject to control by the private respondent Tourist World Service,
Inc., either as to the result of the enterprise or as to the means used
in connection therewith. In the first place, under the contract of
lease covering the Tourist Worlds Ermita office, she had bound
herself insolidum as and for rental payments, an arrangement that
would be like claims of a master-servant relationship. True the
respondent Court would later minimize her participation in the
lease as one of mere guaranty that does not make her an employee
of Tourist World, since in any case, a true employee cannot be
made to part with his own money in pursuance of his employer's
business, or otherwise, assume any liability thereof. In that event,
the parties must be bound by some other relation, but certainly not
employment.
In the second place, and as found by the Appellate Court, '[w]hen
the branch office was opened, the same was run by the herein
appellant Lina O. Sevilla payable to Tourist World Service, Inc. by
any airline for any fare brought in on the effort of Mrs. Lina Sevilla.
Under these circumstances, it cannot be said that Sevilla was under
the control of Tourist World Service, Inc. "as to the means used."

Sevilla in pursuing the business, obviously relied on her own gifts

and capabilities.
It is further admitted that Sevilla was not in the company's payroll.
For her efforts, she retained 4% in commissions from airline
bookings, the remaining 3% going to Tourist World. Unlike an
employee then, who earns a fixed salary usually, she earned
compensation in fluctuating amounts depending on her booking
successes.
The fact that Sevilla had been designated 'branch manager" does
not make her, ergo, Tourist World's employee. As we said,
employment is determined by the right-of-control test and certain
economic parameters. But titles are weak indicators.
We are convinced, considering the circumstances and from the
respondent Court's recital of facts, that the ties had contemplated a
principal agent relationship, rather than a joint managament or a
partnership.

Case No. 15
Francisco v NLRC
Facts: In 1995, petitioner, Angelina Francisco, was hired by Kasei
Corporation during its incorporation stage. She was designated as
Accountant and Corporate Secretary and was assigned to handle all
the accounting needs of the company. She was also designated as
Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of
the company. Although she was designated as Corporate Secretary,
she was not entrusted with the corporate documents; neither did
she attend any board meeting nor required to do so. She never
prepared any legal document and never represented the company
as its Corporate Secretary. However, on some occasions, she was
prevailed upon to sign documentation for the company. In 1996,
petitioner was designated Acting Manager for five years. 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 connected with Kasei Corporation. 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. 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.
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. 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
Issues: (1) Was there an employer-employee relationship between
petitioner and private respondent Kasei Corporation?
(2) Was the petitioner illegally dismissed?
Held: (1) Yes. 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.
The control test initially found application in the case of Viaa v. AlLagadan and Piga, and lately in Leonardo v. Court of Appeals, 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, we observed the need to consider the
existing economic conditions prevailing between the parties, in
addition to the standard of right-of-control, 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.

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. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the
same job functions, that is, rendering accounting and tax services to
the company and performing functions necessary and desirable for
the proper operation of the corporation such as securing business
permits and other licenses over an indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise
be said to be an employee of respondent corporation because she
had served the company for six years before her dismissal, receiving
check vouchers indicating her salaries/wages, benefits, 13th month
pay, bonuses and allowances, as well as deductions and Social
Security contributions from August 1, 1999 to December 18, 2000.
We likewise ruled in Flores v. Nuestro 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.
It is therefore apparent that petitioner is economically dependent
on respondent corporation for her continued employment in the
latters line of business.
(2) 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.

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.

Case No. 16
Sonza v ABS-CBN Broadcasting Corporation

broadcast industry is to treat talents like SONZA as independent

contractors.

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).
Referred to in the Agreement as AGENT, MJMDC agreed to
provide SONZAs services exclusively to ABS-CBN as talent for radio
and television.

Issue: Was there and employer-employee relationship?

On 1 April 1996, SONZA wrote a letter to ABS-CBNs President,

Eugenio Lopez III, a portion of which reads,: 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.
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).
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.
ABS-CBNs witnesses Soccoro Vidanes and Rolando V. Cruz, stated in
their affidavits that the prevailing practice in the television and

Held: No. 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. The last element, the so-called control test, is the
most important element.
(a) 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.
(b) 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.

(c) 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. 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. 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 ABSCBN.
SONZA admits that even after ABS-CBN ceased broadcasting his
programs, ABSCBN still paid him his talent fees.
(d) Applying the control test to the present case, we find that
SONZA is not an employee but an independent contractor. 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.
ABS-CBN engaged SONZAs services specifically to co-host the Mel
& Jay programs. ABS-CBN did not assign any other work to SONZA.
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. ABS-CBN could
not dictate the contents of SONZAs script. ABS-CBN merely
reserved the right to modify the program format and airtime
schedule for more effective programming. Clearly, ABS-CBN did

not exercise control over the means and methods of performance

of SONZAs work.
The equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA
principally needed were his talent or skills and the costumes
necessary for his appearance. Even though ABS-CBN provided
SONZA with the place of work and the necessary equipment, SONZA
was still an independent contractor since ABS-CBN did not supervise
and control his work. ABS-CBNs sole concern was for SONZA to
display his talent during the airing of the programs.
Being an exclusive talent does not by itself mean that SONZA is an
employee of ABS-CBN. Even an independent contractor can validly
provide his services exclusively to the hiring party. In the broadcast
industry, exclusivity is not necessarily the same as control.

Case No. 17
San Miguel Corp v Aballa
Facts: Petitioner San Miguel Corporation (SMC), and Sunflower
Multi-Purpose Cooperative (Sunflower), entered into a one-year
Contract of Services commencing on January 1, 1993, to be
renewed on a month to month basis until terminated by either
party.
The pertinent provisions of the contract read:
1. The cooperative agrees and undertakes to perform and/or
provide for the company, on a non-exclusive basis for a period of
one year the following services for the Bacolod Shrimp Processing
Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage

In July 1995, private respondents filed a complaint before the NLRC,

Regional Arbitration Branch No. VI, Bacolod City, praying to be
declared as regular employees of SMC, with claims for recovery of
all benefits and privileges enjoyed by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an
Amended Complaint to include illegal dismissal as additional cause
of action following SMCs closure of its Bacolod Shrimp Processing
Plant on September 15, 1995[5] which resulted in the termination
of their services.
In the meantime, on September 30, 1996, SMC filed before the
Regional Office at Iloilo City of the Department of Labor and
Employment (DOLE) a Notice of Closure of its aquaculture
operations effective on even date, citing serious business losses.
Issue: Was Sunflower a labor-only contrator?

2. To carry out the undertaking specified in the immediately

preceding paragraph, the cooperative shall employ the necessary
personnel and provide adequate equipment, materials, tools and
apparatus, to efficiently, fully and speedily accomplish the work and
services undertaken by the cooperative. Xxx

Held: Yes. 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 results of the work.

4. There is no employer-employee relationship between the

company and the cooperative, or the cooperative and any of its
members, or the company and any members of the cooperative.

In legitimate labor contracting, the law creates an employeremployee relationship for a limited purpose, i.e., to ensure that the
employees are paid their wages. The principal 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 principal employer is not
responsible for any claim made by the employees.

8. The cooperative undertakes to pay the wages or salaries of its

member-workers, as well as all benefits, premiums and protection
in accordance with the provisions of the labor code, cooperative
code and other applicable laws and decrees and the rules and
regulations promulgated by competent authorities, assuming all
responsibility therefor.

In labor-only contracting, the statute creates an employeremployee relationship for a comprehensive purpose: to prevent a

circumvention of labor laws. The contractor is considered merely an

agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had
been directly employed by the principal employer.
What appears is that Sunflower does not have substantial
capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an
independent contractor. On the other hand, it is gathered that the
lot, building, machineries and all other working tools utilized by
private respondents in carrying out their tasks were owned and
provided by SMC.
Furthermore, Sunflower did not carry on an independent business
or undertake the performance of its service contract according to its
own manner and method, free from the control and supervision of
its principal, SMC, its apparent role having been merely to recruit
persons to work for SMC.
It is gathered from the evidence adduced by private respondents
before the labor arbiter that their daily time records were signed by
SMC supervisors which fact shows that SMC exercised the power of
control and supervision over its employees.
Sunflower did not cater to clients other than SMC, and with the
closure of SMCs
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist.
Since private respondents who were engaged in shrimp processing
performed tasks usually necessary or desirable in the aquaculture
business of SMC, they should be deemed regular employees of the
latter and as such are entitled to all the benefits and rights
appurtenant to regular employment. They should thus be awarded
differential pay corresponding to the difference between the wages

and benefits given them and those accorded SMCs other regular
employees.
The law of course provides for two kinds of regular employees,
namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity
in which they are employed.
As for those of private respondents who were engaged in janitorial
and messengerial tasks, they fall under the second category and are
thus entitled to differential pay and benefits extended to other SMC
regular employees from the day immediately following their first
year of service.

Case No. 18
Dumpit-Murillo v CA
Facts: On October 2, 1995, under Talent Contract No. NT95-1805,
private respondent Associated Broadcasting Company (ABC) hired
petitioner Thelma Dumpit-Murillo as a newscaster and co-anchor
for Balitang-Balita, an early evening news program. The contract
was for a period of three months. In addition, petitioners services
were engaged for the program Live on Five. On September 30,
1999, after four years of repeated renewals, petitioners talent
contract expired. Two weeks after the expiration of the last
contract, petitioner sent a letter to Mr. Jose Javier, Vice President
for News and Public Affairs of ABC, informing the latter that she was
still interested in renewing her contract subject to a salary increase.
Thereafter, petitioner stopped reporting for work.
A month later, petitioner sent a demand letter to ABC, demanding:
(a) reinstatement to her former position; (b) payment of unpaid
wages for services rendered from September 1 to October 20, 1999
and full backwages; (c) payment of 13th month pay,
vacation/sick/service incentive leaves and other monetary benefits
due to a regular employee starting March 31, 1996. ABC replied that
a check covering petitioners talent fees for September 16 to
October 20, 1999 had been processed and prepared, but that the
other claims of petitioner had no basis in fact or in law.
On December 20, 1999, petitioner filed a complaint against ABC,
Mr. Javier and Mr. Edward Tan, for illegal constructive dismissal,
nonpayment of salaries, overtime pay, premium pay, separation
pay, holiday pay, service incentive leave pay, vacation/sick leaves
and 13th month pay in NLRC-NCR Case No. 30-12-00985-99.
Issue: Was there an employer-employee relationship?

Held:
Yes. The Court of Appeals committed reversible error when it held
that petitioner was a fixed-term employee. Petitioner was a regular
employee under contemplation of law. The practice of having fixedterm contracts in the industry does not automatically make all
talent contracts valid and compliant with labor law. The assertion
that a talent contract exists does not necessarily prevent a regular
employment status.
Further, the Sonza case is not applicable. In Sonza, the television
station did not instruct Sonza how to perform his job. How Sonza
delivered his lines, appeared on television, and sounded on radio
were outside the television stations control. Sonza had a free hand
on what to say or discuss in his shows provided he did not attack
the television station or its interests. Clearly, the television station
did not exercise control over the means and methods of the
performance of Sonzas work. In the case at bar, ABC had control
over the performance of petitioners work. Noteworthy too, is the
comparatively low P28,000 monthly pay of petitioner vis the
P300,000 a month salary of Sonza,[26] that all the more bolsters the
conclusion that petitioner was not in the same situation as Sonza.
In Manila Water Company, Inc. v. Pena, we said that the elements
to determine the existence of an employment relationship are: (a)
the selection and engagement of the employee, (b) the payment of
wages, (c) the power of dismissal, and (d) the employers power to
control. 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 it. The
duties of petitioner as enumerated in her employment contract
indicate that ABC had control over the work of petitioner. Aside
from control, ABC also dictated the work assignments and payment
of petitioners wages. ABC also had power to dismiss her. All these

being present, clearly, there existed an employment relationship

between petitioner and ABC.
Concerning regular employment, the law provides for two kinds of
employees, namely: (1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or
trade of the employer; and (2) those who have rendered at least
one year of service, whether continuous or broken, with respect to
the activity in which they are employed.[30] In other words, regular
status arises from either the nature of work of the employee or the
duration of his employment.

Case No. 19
ABS CBN v Nazareno
Facts: 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. 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.
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
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.
Respondents alleged that they were engaged by respondent ABSCBN as regular and full-time employees for a continuous period of
more than five (5) years.
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.
For its part, petitioner alleged in its position paper that the
respondents were 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.
Issue: (1) Were the respondents regular employees?
(2) Was there an employer-employee relationship?
Held: (1) Yes. We agree with respondents contention that where a
person has rendered at least one year of service, regardless 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.
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.

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.
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. 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. In this case, it is undisputed that respondents had
continuously performed the same activities for an average of five
years.
(2) Yes. 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 employer-employee 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. The Court will peruse
beyond any such agreement to examine the facts that typify the
parties actual relationship.

Lolita Lopez vs. Bodega City (Video-Disco Kitchen of the

Philippines)
G.R. No. 155731, Sept. 3, 2007
Facts:
Petitioner was the "lady keeper" of Bodega City tasked with
manning its ladies' comfort room. In a letter signed by Yap
(owner/manager) 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.
Issue: Whether or not employer-employee relationship exists

Ruling:The Court applied the four-fold test expounded in Abante v.

Lamadrid Bearing and Parts Corp.,to wit:
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 employer-employee 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.
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.
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. Petitioner insists that her ID card
is sufficient proof of her employment. In Domasig v. National Labor
Relations Commission, 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...As to the ID card, it is true that the words
"EMPLOYEE'S NAME" appear printed below petitioner's name.
However, she failed to dispute respondents' evidence consisting of
Habitan's testimony, 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.
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 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.
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. 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, their contractual
relationship was terminated by reason of respondents' termination

of the subject concessionaire agreement, which was in accordance

with the provisions of the agreement in case of violation of its terms
and conditions.

ABANTE VS. LAMADRID

G.R. No 159890. May 28, 2004
FACTS:
Petitioner, Empermaco B. Abante, was employed by respondent
company Lamadrid Bearing and Parts Corporation as a salesman
covering the whole area of Mindanao. His average monthly income
was more or less P16,000.00, but later was increased to
approximately P20, 269.50. Aside from selling the merchandise of
Respondent Corporation, he was also tasked to collect payments
from his various customers. Petitioner encountered five
customers/clients with bad accounts. Petitioner was confronted by
respondent Lamadrid over the bad accounts and warned that if he
does not issue his own checks to cover the said bad accounts, his
commissions will not be released and he will lose his job. Not
contented with the issuance of the foregoing checks as security for
the bad accounts, respondents "tricked" petitioner into signing two
documents, which he later discovered to be a Promissory Note and
a Deed of Real Estate Mortgage. Due to financial difficulties,
petitioner inquired about his membership with the SSS in order to
apply for a salary loan. To his dismay, he learned that he was not
covered by the SSS and therefore was not entitled to any benefit.
While doing his usual rounds as commission salesman, petitioner
was handed by his customers a letter from the respondent company
warning them not to deal with petitioner since it no longer
recognized him as a commission salesman. Petitioner thus filed a
complaint for illegal dismissal with money claims against
respondent company and its president, Jose Lamadrid, before the
NLRC.
ISSUE: Whether or not an employer-employee relationship exists
between plaintiff and respondentcompany
RULING:

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. 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. Where a person who works for another does so
more or less at his own pleasure and is not subject to definite hours
or conditions of work, and in turn is compensated according to the
result of his efforts and not the amount thereof, no relationship of
employer-employee exists. Petitioner Abante was a commission
salesman who received 3% commission of his gross sales. No quota
was imposed on him by the respondent. He was not required to
report to the office at anytime or submit any periodic written report
on his sales performance and activities. He was not designated by
respondent to conduct his sales activities at any particular or
specific place. He pursued his selling activities without interference
or supervision from respondent company and relied on his own
resources to perform his functions. Respondent company did not
prescribe the manner of selling the merchandise; he was left alone
to adopt any style or strategy to entice his customers. Moreover,
petitioner was free to offer his services to other companies engaged
in similar or related marketing activities as evidenced by the
certifications issued by various customers. Applying the
aforementioned test, an employer-employee relationship is notably
absent in this case.

R TRANSPORT CORP. vs. ROGELIO EJANDRA

[G.R. No. 148508 May 20, 2004]
FACTS: Private respondent Rogelio Ejandra alleged that, for almost
six years, he worked as a bus driver of petitioner R Transport
Corporation. An officer of LTO of Guadalupe, Makati City,
apprehended him for obstruction of traffic for which his license was
confiscated. He was able to retrieve his license only after a week.
Private respondent informed Mr. Pasquin (his manager) that he was
ready to report for work. However, he was told that the company
was still studying whether to allow him to drive again. Private
respondent was likewise accused of causing damage to the bus he
used to drive. He was asked to take a vacation which the manager
did not specify for how long. Petitioner claimed that private
respondent abandoned his job. He also claimed that there was no
employer and employee relationship between him and the
respondent. Labor arbiter Rogelio Yulo decided in favor of private
respondent. NLRC rendered a decision affirming the decision of the
labor arbiter. In disputing petitioner's claim that private respondent
was not its employee and was not therefore entitled to notice and
hearing before termination, the NLRC held that complainant was
not afforded his right to due process prior to the severance of his
employment with respondents. Appellants' defense of denying the
existence of employer-employee relationship with the complainant
based on the manner by which complainant was being paid his
salary, cannot hold water.
ISSUE: Whether or not, the respondent abandoned his work.
HELD: No, to constitute abandonment, two elements must concur:
(1) the failure to report for work or absence without valid or
justifiable reason and (2) a clear intention to sever the employeremployee relationship. Of the two, the second element is the more
determinative factor and should be manifested by some overt acts.

Mere absence is not sufficient. It is the employer who has the

burden of proof to show a deliberate and unjustified refusal of the
employee to resume his employment without any intention of
returning.
In the instant case, petitioner fell short of proving the requisites.
Petitioner's absence was justified because the LTO, Guadalupe
Branch, did not release his license until after a week. The process of
redeeming a confiscated license, based on common experience,
depended on when the apprehending officer turned over the same.
Second, private respondent never intended to sever his
employment as he in fact reported for work as soon as he got his
license back. Third, labor arbiter Yulo correctly observed that, if
private respondent really abandoned his work, petitioner should
have reported such fact to the nearest Regional Office of the
Department of Labor and Employment. Petitioner made no such
report.
In addition to the fact that petitioner had no valid cause to
terminate private respondent from work, it violated the latter's
right to procedural due process by not giving him the required
notice and hearing.

Manila Electric v. Quisumbing

G.R. No. 127598 February 22, 2000

Facts:
Members of the Private respondent union, MERALCO Employees
and Workers Association (MEWA), were dissatisfied with the terms
of a CBA with petitioner. The parties in this case were ordered by
the Sec. of Labor to execute a collective bargaining agreement (CBA)
wherein. The CBA allowed for the increase in the wages of the
employees concerned. The petitioner argues that if such increase
were allowed, it would pass off such to the consumers.
Issue: W/N matters of salary are part of management prerogative
RULING: Yes. There is no need to consult the Secretary of Labor in
cases involving contracting out for 6 months or more as it is part of
management prerogative. However, a line must be drawn with
respect to management prerogatives on business operations per se
and those which affect the rights of the workers. Employers must
see to it that that employees are properly informed of its decisions
to attain harmonious labor relations and enlighten the worker as to
their rights. The contracting out business or services is an exercise
of business judgment if it is for the promotion of efficiency and
attainment of economy. Management must be motivated by good
faith and contracting out should not be done to circumvent the law.
Provided there was no malice or that it was not done arbitrarily, the
courts will not interfere with the exercise of this judgment.

Philippine Airlines v Ligan

G.R. No. 146408. February 29, 2008.
Facts: PAL (as owner) and Synergy Services Corp (as contractor)
entered into an Agreement where the latter undertook to provide
loading, unloading, delivery and other related services. It was
expressly stated that Synergy was an independent contractor and
that no employer-employee relationship would exist between its
employees and PAL. Ligan et al (laborer-respondents) filed
complaints against PAL and Synergy for 1) underpayment, nonpayment of 13th month pay/holiday pay/premium pay etc. and for
2) regularization of employment. The Labor Arbiter found Synergy
an independent contractor and dismissed the complaint against PAL
for regularization. NLRC set aside this decision and held that
Synergy was a labor-only contractor. CA affirmed NLRCs decision.
Issue: Whether or not Synergy is a legitimate contractor?
Ruling: No. SC held Synergy a labor-only contractor. D.O. No. 18-02,
Series of 2002 defines legitimate contracting and labor-only
contracting.
Section 3.Trilateral relationship in contracting arrangements. In
legitimate contracting, there exists a trilateral relationship under
which there is a contract for a specific job, work or service between
the principal and the contractor or subcontractor, and a contract of
employment between the contractor or subcontractor and its
workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or
service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual
workers engaged by the contractor or subcontractor to accomplish
the job, work or service.

If one of the two elements is present, there is labor-only

contracting:
(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 over
the performance of the work of the contractual employee.
In this case, the work performed by the respondents were directly
related to the main business of PAL. Also, the equipment used as
station loaders such as trailers and conveyors were all owned by
PAL. PAL and Synergy also failed to substantiate their claim that the
latter had substantial capital, and only after the CA decision was
rendered did it try to prove such fact. It was found that respondents
worked alongside PALs regular employees who performed the
same work. PAL tried to disprove the its right to control; however,
the Court found that the Agreement stipulated that the contractor
shall comply with the owners rules, regulations, procedures, and
directives. PAL in fact admitted that it fixes the work schedule of
respondents. Also, PALs managers and supervisors approved
respondents weekly work assignments and were referred to as
station attendants of cargo operation and airfreight services of
PAL. Respondents having performed tasks which are usually
necessary and desirable in the air transportation business of PAL,
they should be deemed its regular employees and Synergy as a
labor-only contractor. The Court ordered PAL to accept respondents
as regular employees, pay wages and benefits due, plus salary
differentials. Case remanded to LA for determination of monetary
liabilities.

Big AA Manufacturer vs. Antonio

[GR No. 160854, March 3, 2006]
Facts:
Petitioner Big AA Manufacturer is a sole proprietorship registered in
the name of its proprietor, Enrico E. Alejo. Respondents filed a
complaint for illegal lay-off and illegal deductions. That as regular
employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioners
premises using petitioners tools and equipment and they received
P250 per day. Eutiquio was employed as carpenter-foreman from
1991-99; Jay as carpenter from 1993-99; Felicisimo as carpenter
from 1994-99; and Leonardo, Sr. also as carpenter from 1997-99;
That they were dismissed without just cause and due process;
hence, their prayer for reinstatement and full back wages.
Petitioner Big AA Manufacturer contested that it is a sole
proprietorship registered in the name of Enrico Alejo and engaged
in manufacturing office furniture, but it denied that respondents
were its regular employees. It claimed that Eutiquio Antonio was
one of its independent contractors who used the services of the
other respondents. It said that its independent contractors were
paid by results and were responsible for the salaries of their own
workers. Allegedly, there was no employer-employee relationship
between petitioner and respondents. But it allowed respondents to
use its facilities to meet job orders. It also denied that respondents
were laid-off by Big AA Manufacturer, since they were project
employees only. It added that since Eutiquio Antonio had refused a
job order of office tables, their contractual relationship ended.
Labor Arbiter ruled against petitioners. Both appealed to NLRC.
Respondents appealed for not ordering their reinstatement to their
former positions. The NLRC modified the Labor Arbiters decision. It
ordered petitioner to reinstate respondents to their former

positions or to pay them separation pay in case reinstatement was

no longer feasible, with full back wages in either case. The NLRC
ruled that respondents were regular employees, not independent
contractors. It further held that petitioner failed to justify its reason
for terminating respondents and its failure to comply with the due
process requirements. CA affirmed NLRC ruling.
Issue:
1. WON respondents were regular employees
2. WON respondents were illegally dismissed
Ruling
1. YES- Respondents were employed for more than 1 year and their
work as carpenters was necessary or desirable in petitioners usual
trade or business of manufacturing office furniture. Under Art. 280
of the Labor Code, the applicable test to determine whether an
employment should be considered regular or non-regular is the
reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the
employer. True, certain forms of employment require the
performance of usual or desirable functions and exceed 1 year but
do not necessarily result to regular employment under Art. 280 of
the Labor Code. Some specific exceptions include project or
seasonal employment. Yet, in this case, respondents cannot be
considered project employees. Petitioner had neither shown that
respondents were hired for a specific project the duration of which
was determined at the time of their hiring nor identified the specific
project or phase thereof for which respondents were hired.
Obiter on Requirements for an Independent contractor: a) he
carries a distinct and independent business, b) possesses substantial
capital or investment in tools, equipment, machinery or work
premises, c) he does not work within another employer/companys

premises using the latters tools and materials, and d) he is not

under the control and supervision of an employer or company.

2. YES- The consistent rule is that the employer must affirmatively

show rationally adequate evidence that the dismissal was for a
justifiable cause, failing in which would make the termination illegal,
as in this case. Contrary to petitioners claim of abandonment as a
valid just cause for termination, herein respondents did not
abandon their work. Petitioner failed to prove that (1) not only of
respondents failure to report for work or absence without valid
reason, but (2) also of respondents clear intention to sever
employer-employee relations as manifested by some overt acts.- By
filing the complaint for illegal dismissal within two days of their
dismissal and by seeking reinstatement in their position paper,
respondents manifested their intention against severing their
employment relationship with petitioner and abandoning their jobs.
It is settled that an employee who forthwith protests his layoff
cannot be said to have abandoned his work.