G.R. No.

64948 September 27, 1994

MANILA GOLF & COUNTRY CLUB, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and FERMIN LLAMAR, respondents.
NARVASA, C.J.:
The question before the Court here is whether or not persons rendering caddying services
for members of golf clubs and their guests in said clubs' courses or premises are the
employees of such clubs and therefore within the compulsory coverage of the Social
Security System (SSS).
That question appears to have been involved, either directly or peripherally, in three
separate proceedings, all initiated by or on behalf of herein private respondent and his
fellow caddies. That which gave rise to the present petition for review was originally filed
with the Social Security Commission (SSC) via petition of seventeen (17) persons who styled
themselves "Caddies of Manila Golf and Country Club-PTCCEA" for coverage and availment
of benefits under the Social Security Act as amended, "PTCCEA" being
the acronym of a labor organization, the "Philippine Technical, Clerical, Commercial
Employees Association," with which the petitioners claimed to be affiliated. The petition,
docketed as SSC Case No. 5443, alleged in essence that although the petitioners were
employees of the Manila Golf and Country Club, a domestic corporation, the latter had not
registered them as such with the SSS.
At about the same time, two other proceedings bearing on the same question were filed or
were pending; these were:
(1) a certification election case filed with the Labor Relations Division of the
Ministry of Labor by the PTCCEA on behalf of the same caddies of the Manila
Golf and Country Club, the case being titled "Philippine Technical, Clerical,
Commercial Association vs. Manila Golf and Country Club" and docketed as
Case No. R4-LRDX-M-10-504-78; it appears to have been resolved in favor of
the petitioners therein by Med-Arbiter Orlando S. Rojo who was thereafter
upheld by Director Carmelo S. Noriel, denying the Club's motion for
reconsideration; 1
(2) a compulsory arbitration case initiated before the Arbitration Branch of the
Ministry of Labor by the same labor organization, titled "Philippine Technical,
Clerical, Commercial Employees Association (PTCCEA), Fermin Lamar and
Raymundo Jomok vs. Manila Golf and Country Club, Inc., Miguel Celdran,
Henry Lim and Geronimo Alejo;" it was dismissed for lack of merit by Labor
Arbiter Cornelio T. Linsangan, a decision later affirmed on appeal by the
National Labor Relations Commission on the ground that there was no
employer-employee relationship between the petitioning caddies and the
respondent Club. 2

In the case before the SSC, the respondent Club filed answer praying for the dismissal of the
petition, alleging in substance that the petitioners, caddies by occupation, were allowed into
the Club premises to render services as such to the individual members and guests playing
the Club's golf course and who themselves paid for such services; that as such caddies, the
petitioners were not subject to the direction and control of the Club as regards the manner in
which they performed their work; and hence, they were not the Club's employees.
Subsequently, all but two of the seventeen petitioners of their own accord withdrew their
claim for social security coverage, avowedly coming to realize that indeed there was no
employment relationship between them and the Club. The case continued, and was
eventually adjudicated by the SSC after protracted proceedings only as regards the two
holdouts, Fermin Llamar and Raymundo Jomok. The Commission dismissed the petition for
lack of merit, 3ruling:
. . . 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
From this Resolution appeal was taken to the Intermediate appellate Court by the union
representing Llamar and Jomok. After the appeal was docketed 5 and some months before
decision thereon was reached and promulgated, Raymundo Jomok's appeal was dismissed at
his instance, leaving Fermin Llamar the lone appellant. 6
The appeal ascribed two errors to the SSC:
(1) refusing to suspend the proceedings to await judgment by the Labor
Relations Division of National Capital Regional Office in the certification
election case (R-4-LRD-M-10-504-78) supra, on the precise issue of the
existence of employer-employee relationship between the respondent club
and the appellants, it being contended that said issue was "a function of the
proper labor office"; and
(2) adjudicating that self same issue a manner contrary to the ruling of the
Director of the Bureau of Labor Relations, which "has not only become final
but (has been) executed or (become) res adjudicata." 7
The Intermediate Appellate Court gave short shirt to the first assigned error, dismissing it as
of the least importance. Nor, it would appear, did it find any greater merit in the second
alleged error. Although said Court reserved the appealed SSC decision and declared Fermin
Llamar an employee of the Manila Gold and Country Club, ordering that he be reported as
such for social security coverage and paid any corresponding benefits, 8 it conspicuously
ignored the issue of res adjudicata raised in said second assignment. Instead, it drew basis
for the reversal from this Court's ruling in Investment Planning Corporation of the Philippines
vs. Social Security System, supra 9 and declared that upon the evidence, the questioned
employer-employee relationship between the Club and Fermin Llamar passed the so-called
"control test," establishment in the case i.e., "whether the employer controls or has
reserved the right to control the employee not only as to the result of the work to be done
but also as to the means and methods by which the same is to be accomplished," the
Club's control over the caddies encompassing:
(a) the promulgation of no less than twenty-four (24) rules and regulations just
about every aspect of the conduct that the caddy must observe, or avoid,
when serving as such, any violation of any which could subject him to
disciplinary action, which may include suspending or cutting off his access to
the club premises;
(b) the devising and enforcement of a group rotation system whereby a caddy
is assigned a number which designates his turn to serve a player;
(c) the club's "suggesting" the rate of fees payable to the caddies.
Deemed of title or no moment by the Appellate Court was the fact that the caddies were
paid by the players, not by the Club, that they observed no definite working hours and
earned no fixed income. It quoted with approval from an American decision 10 to the effect
that: "whether the club paid the caddies and afterward collected in the first instance, the

caddies were still employees of the club." This, no matter that the case which produced this
ruling had a slightly different factual cast, apparently having involved a claim for workmen's
compensation made by a caddy who, about to leave the premises of the club where he
worked, was hit and injured by an automobile then negotiating the club's private driveway.
That same issue of res adjudicata, ignored by the IAC beyond bare mention thereof, as
already pointed out, is now among the mainways of the private respondent's defenses to the
petition for review. Considered in the perspective of the incidents just recounted, it
illustrates as well as anything can, why the practice of forum-shopping justly merits censure
and punitive sanction. Because the same question of employer-employee relationship has
been dragged into three different fora, willy-nilly and in quick succession, it has birthed
controversy as to which of the resulting adjudications must now be recognized as decisive.
On the one hand, there is the certification case [R4-LRDX-M-10-504-78), where the decision
of the Med-Arbiter found for the existence of employer-employee relationship between the
parties, was affirmed by Director Carmelo S. Noriel, who ordered a certification election held,
a disposition never thereafter appealed according to the private respondent; on the other,
the compulsory arbitration case (NCR Case No. 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, factfinding character, in which the investigating agency plays the part of a
disinterested investigator seeking merely to ascertain the desires of the
employees as to the matter of their representation. The court enjoys a wide
discretion in determining the procedure necessary to insure the fair and free
choice of bargaining representatives by the employees. 15
Indeed, if any ruling or judgment can be said to operate as res adjudicata on the contested
issue of employer-employee relationship between present petitioner and the private
respondent, it would logically be that rendered in the compulsory arbitration case (NCR Case
No. AB-4-771-79, supra), petitioner having asserted, without dispute from the private
respondent, that said issue was there squarely raised and litigated, resulting in a ruling of
the Arbitration Branch (of the same Ministry of Labor) that such relationship did not exist,
and which ruling was thereafter affirmed by the National Labor Relations Commission in an
appeal taken by said respondent. 16
In any case, this Court is not inclined to allow private respondent the benefit of any doubt as
to which of the conflicting ruling just adverted to should be accorded primacy, given the fact
that it was he who actively sought them simultaneously, as it were, from separate fora, and
even if the graver sanctions more lately imposed by the Court for forum-shopping may not
be applied to him retroactively.
Accordingly, the IAC is not to be faulted for ignoring private respondent's invocation of res
adjudicata; on contrary, it acted correctly in doing so.
Said 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 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.
THIRD DIVISION
[G.R. No. 157214. June 7, 2005]
PHILIPPINE
GLOBAL
COMMUNICATIONS,
VERA, respondent.

INC., petitioner,

DECISION
GARCIA, J.:

vs. RICARDO

DE

Before us is this appeal by way of a petition for review on certiorari from the 12
September 2002 Decision[1] and the 13 February 2003 Resolution [2] of the Court of Appeals in
CA-G.R. SP No. 65178, upholding the finding of illegal dismissal by the National Labor
Relations Commission against petitioner.
As culled from the records, the pertinent facts are:
Petitioner Philippine Global Communications, Inc. (PhilCom), is a corporation engaged in
the business of communication services and allied activities, while respondent Ricardo De
Vera is a physician by profession whom petitioner enlisted to attend to the medical needs of
its employees. At the crux of the controversy is Dr. De Veras status vis a vis petitioner when
the latter terminated his engagement.
It appears that on 15 May 1981, De Vera, via a letter dated 15 May 1981, [3] offered his
services to the petitioner, therein proposing his plan of works required of a practitioner in
industrial medicine, to include the following:
1.

Application of preventive medicine including periodic check-up of employees;

2.

Holding of clinic hours in the morning and afternoon for a total of five (5) hours
daily for consultation services to employees;

3.

Management and treatment of employees that may necessitate hospitalization

including emergency cases and accidents;

4.

Conduct pre-employment physical check-up of prospective employees with no

additional medical fee;

5.

Conduct home visits whenever necessary;

6.

Attend to certain medical administrative function such as accomplishing medical

forms, evaluating conditions of employees applying for sick leave of absence and
subsequently issuing proper certification, and all matters referred which are
medical in nature.

The parties agreed and formalized respondents proposal in a document denominated

as RETAINERSHIP CONTRACT[4] which will be for a period of one year subject to renewal, it
being made clear therein that respondent will cover the retainership the Company
previously had with Dr. K. Eulau and that respondents retainer fee will be at P4,000.00 a
month. Said contract was renewed yearly. [5] The retainership arrangement went on from
1981 to 1994 with changes in the retainers fee. However, for the years 1995 and 1996,
renewal of the contract was only made verbally.
The turning point in the parties relationship surfaced in December 1996 when Philcom,
thru a letter[6] bearing on the subject boldly written as TERMINATION RETAINERSHIP
CONTRACT, informed De Vera of its decision to discontinue the latters retainers contract
with the Company effective at the close of business hours of December 31, 1996 because
management has decided that it would be more practical to provide medical services to its
employees through accredited hospitals near the company premises.

On 22 January 1997, De Vera filed a complaint for illegal dismissal before the National
Labor Relations Commission (NLRC), alleging that that he had been actually employed by
Philcom as its company physician since 1981 and was dismissed without due process. He
averred that he was designated as a company physician on retainer basis for reasons
allegedly known only to Philcom. He likewise professed that since he was not conversant
with labor laws, he did not give much attention to the designation as anyway he worked on a
full-time basis and was paid a basic monthly salary plus fringe benefits, like any other
regular employees of Philcom.
On 21 December 1998, Labor Arbiter Ramon Valentin C. Reyes came out with a
decision[7] dismissing De Veras complaint for lack of merit, on the rationale that as a
retained physician under a valid contract mutually agreed upon by the parties, De Vera
was an independent contractor and that he was not dismissed but rather his contract
with [PHILCOM] ended when said contract was not renewed after December 31, 1996.
On De Veras appeal to the NLRC, the latter, in a decision [8] dated 23 October 2000,
reversed (the word used is modified) that of the Labor Arbiter, on a finding that De Vera is
Philcoms regular employee and accordingly directed the company to reinstate him to his
former position without loss of seniority rights and privileges and with full backwages from
the date of his dismissal until actual reinstatement. We quote the dispositive portion of the
decision:
WHEREFORE, the assailed decision is modified in that respondent is ordered to reinstate
complainant to his former position without loss of seniority rights and privileges with full
backwages from the date of his dismissal until his actual reinstatement computed as follows:
Backwages:
a)

Basic Salary
From Dec. 31, 1996 to Apr. 10, 2000 = 39.33 mos.
P44,400.00 x 39.33 mos.

P1,750,185.00

13th Month Pay:

b)

1/12 of P1,750,185.00
c)

145,848.75

Travelling allowance:
P1,000.00 x 39.33 mos.

39,330.00
GRAND TOTAL

P1,935,363.75

The decision stands in other aspects.

SO ORDERED.
With its motion for reconsideration having been denied by the NLRC in its order of 27
February 2001,[9] Philcom then went to the Court of Appeals on a petition for certiorari,

thereat docketed as CA-G.R. SP No. 65178, imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the NLRC when it reversed the findings of the
labor arbiter and awarded thirteenth month pay and traveling allowance to De Vera even as
such award had no basis in fact and in law.
On 12 September 2002, the Court of Appeals rendered a decision, [10] modifying that of
the NLRC by deleting the award of traveling allowance, and ordering payment of separation
pay to De Vera in lieu of reinstatement, thus:
WHEREFORE, premises considered, the assailed judgment of public respondent, dated 23
October 2000, is MODIFIED. The award of traveling allowance is deleted as the same is
hereby DELETED. Instead of reinstatement, private respondent shall be paid separation pay
computed at one (1) month salary for every year of service computed from the time private
respondent commenced his employment in 1981 up to the actual payment of the
backwages and separation pay. The awards of backwages and 13th month pay STAND.
SO ORDERED.
In time, Philcom filed a motion for reconsideration but was denied by the appellate court
in its resolution of 13 February 2003.[11]
Hence, Philcoms present recourse on its main submission that THE COURT OF APPEALS ERRED IN SUSTAINING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION AND RENDERING THE QUESTIONED DECISION AND RESOLUTION IN
A WAY THAT IS NOT IN ACCORD WITH THE FACTS AND APPLICABLE LAWS AND
JURISPRUDENCE WHICH DISTINGUISH LEGITIMATE JOB CONTRACTING AGREEMENTS FROM
THE EMPLOYER-EMPLOYEE RELATIONSHIP.
We GRANT.
Under Rule 45 of the Rules of Court, only questions of law may be reviewed by this Court
in decisions rendered by the Court of Appeals. There are instances, however, where the
Court departs from this rule and reviews findings of fact so that substantial justice may be
served. The exceptional instances are where:
xxx xxx xxx (1) the conclusion is a finding grounded entirely on speculation, surmise and
conjecture; (2) the inference made is manifestly mistaken; (3) there is grave abuse of
discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact
are conflicting; (6) the Court of Appeals went beyond the issues of the case and its findings
are contrary to the admissions of both appellant and appellees; (7) the findings of fact of the
Court of Appeals are contrary to those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they are based; (9) the facts set
forth in the petition as well as in the petitioners main and reply briefs are not disputed by
the respondents; and (10) the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record. [12]
As we see it, the parties respective submissions revolve on the primordial issue of
whether an employer-employee relationship exists between petitioner and respondent, the
existence of which is, in itself, a question of fact [13] well within the province of the NLRC.

Nonetheless, given the reality that the NLRCs findings are at odds with those of the labor
arbiter, the Court, consistent with its ruling in Jimenez vs. National Labor Relations
Commission,[14] is constrained to look deeper into the attendant circumstances obtaining in
this case, as appearing on record.
In a long line of decisions, [15] the Court, in determining the existence of an employeremployee relationship, has invariably adhered to the four-fold test, to wit: [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.
Applying the four-fold test to this case, we initially find that it was respondent himself
who sets the parameters of what his duties would be in offering his services to petitioner.
This is borne by no less than his 15 May 1981 letter[16] which, in full, reads:
May 15, 1981
Mrs. Adela L. Vicente
Vice President, Industrial Relations
PhilCom, Paseo de Roxas
Makati, Metro Manila
Madam:
I shall have the time and effort for the position of Company physician with your corporation
if you deemed it necessary. I have the necessary qualifications, training and experience
required by such position and I am confident that I can serve the best interests of your
employees, medically.
My plan of works and targets shall cover the duties and responsibilities required of a
practitioner in industrial medicine which includes the following:
1. Application of preventive medicine including periodic check-up of employees;
2. Holding of clinic hours in the morning and afternoon for a total of five (5) hours
daily for consultation services to employees;
3. Management and treatment of employees that may necessitate hospitalization
including emergency cases and accidents;
4. Conduct pre-employment physical check-up of prospective employees with no
additional medical fee;
5. Conduct home visits whenever necessary;
6. Attend to certain medical administrative functions such as accomplishing
medical forms, evaluating conditions of employees applying for sick leave of

absence and subsequently issuing proper certification, and all matters referred
which are medical in nature.
On the subject of compensation for the services that I propose to render to the corporation,
you may state an offer based on your belief that I can very well qualify for the job having
worked with your organization for sometime now.
I shall be very grateful for whatever kind attention you may extend on this matter and
hoping that it will merit acceptance, I remain
Very truly yours,
(signed)
RICARDO V. DE VERA, M.D.
Significantly, the foregoing letter was substantially the basis of the labor arbiters
finding that there existed no employer-employee relationship between petitioner and
respondent, in addition to the following factual settings:
The fact that the complainant was not considered an employee was recognized by the
complainant himself in a signed letter to the respondent dated April 21, 1982 attached as
Annex G to the respondents Reply and Rejoinder. Quoting the pertinent portion of said
letter:
To carry out your memo effectively and to provide a systematic and workable time schedule
which will serve the best interests of both the present and absent employee, may I propose
an extended two-hour service (1:00-3:00 P.M.) during which period I can devote ample time
to both groups depending upon the urgency of the situation. I shall readjust my private
schedule to be available for the herein proposed extended hours, should you consider this
proposal.
As regards compensation for the additional time and services that I shall render to the
employees, it is dependent on your evaluation of the merit of my proposal and your
confidence on my ability to carry out efficiently said proposal.
The tenor of this letter indicates that the complainant was proposing to extend his time with
the respondent and seeking additional compensation for said extension. This shows that the
respondent PHILCOM did not have control over the schedule of the complainant as it [is] the
complainant who is proposing his own schedule and asking to be paid for the same. This is
proof that the complainant understood that his relationship with the respondent PHILCOM
was a retained physician and not as an employee. If he were an employee he could not
negotiate as to his hours of work.
The complainant is a Doctor of Medicine, and presumably, a well-educated person. Yet, the
complainant, in his position paper, is claiming that he is not conversant with the law and did
not give much attention to his job title- on a retainer basis. But the same complainant
admits in his affidavit that his service for the respondent was covered by a retainership
contract [which] was renewed every year from 1982 to 1994. Upon reading the contract
dated September 6, 1982, signed by the complainant himself (Annex C of Respondents

Position Paper), it clearly states that is a retainership contract. The retainer fee is indicated
thereon and the duration of the contract for one year is also clearly indicated in paragraph 5
of the Retainership Contract. The complainant cannot claim that he was unaware that the
contract was good only for one year, as he signed the same without any objections. The
complainant also accepted its renewal every year thereafter until 1994. As a literate person
and educated person, the complainant cannot claim that he does not know what contract he
signed and that it was renewed on a year to year basis.[17]
The labor arbiter added the indicia, not disputed by respondent, that from the time he
started to work with petitioner, he never was included in its payroll; was never deducted any
contribution for remittance to the Social Security System (SSS); and was in fact subjected by
petitioner to the ten (10%) percent withholding tax for his professional fee, in accordance
with the National Internal Revenue Code, matters which are simply inconsistent with an
employer-employee relationship. In the precise words of the labor arbiter:
xxx xxx xxx After more than ten years of services to PHILCOM, the complainant would have
noticed that no SSS deductions were made on his remuneration or that the respondent was
deducting the 10% tax for his fees and he surely would have complained about them if he
had considered himself an employee of PHILCOM. But he never raised those issues. An
ordinary employee would consider the SSS payments important and thus make sure they
would be paid. The complainant never bothered to ask the respondent to remit his SSS
contributions. This clearly shows that the complainant never considered himself an
employee of PHILCOM and thus, respondent need not remit anything to the SSS in favor of
the complainant.[18]
Clearly, the elements of an employer-employee relationship are wanting in this case.
We may add that the records are replete with evidence showing that respondent had to bill
petitioner for his monthly professional fees. [19] It simply runs against the grain of common
experience to imagine that an ordinary employee has yet to bill his employer to receive his
salary.
We note, too, that the power to terminate the parties relationship was mutually vested
on both. Either may terminate the arrangement at will, with or without cause. [20]
Finally, remarkably absent from the parties arrangement is the element of control,
whereby 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.[21]
Here, petitioner had no control over the means and methods by which respondent went
about performing his work at the company premises. He could even embark in the private
practice of his profession, not to mention the fact that respondents work hours and the
additional compensation therefor were negotiated upon by the parties. [22] In fine, the parties
themselves practically agreed on every terms and conditions of respondents engagement,
which thereby negates the element of control in their relationship. For sure, respondent has
never cited even a single instance when petitioner interfered with his work.
Yet, despite the foregoing, all of which are extant on record, both the NLRC and the
Court of Appeals ruled that respondent is petitioners regular employee at the time of his
separation.

Partly says the appellate court in its assailed decision:

Be that as it may, it is admitted that private respondents written retainer contract was
renewed annually from 1981 to 1994 and the alleged renewal for 1995 and 1996, when it
was allegedly terminated, was verbal.
Article 280 of the Labor code (sic) provides:
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.
Parenthetically, the position of company physician, in the case of petitioner, is usually
necessary and desirable because the need for medical attention of employees cannot be
foreseen, hence, it is necessary to have a physician at hand. In fact, the importance and
desirability of a physician in a company premises is recognized by Art. 157 of the Labor
Code, which requires the presence of a physician depending on the number of employees
and in the case at bench, in petitioners case, as found by public respondent, petitioner
employs more than 500 employees.
Going back to Art. 280 of the Labor Code, it was made therein clear that the provisions of a
written agreement to the contrary notwithstanding or the existence of a mere oral
agreement, if the employee is engaged in the usual business or trade of the employer, more
so, that he rendered service for at least one year, such employee shall be considered as
a regular employee. Private respondent herein has been with petitioner since 1981 and his
employment was not for a specific project or undertaking, the period of which was predetermined and neither the work or service of private respondent seasonal. (Emphasis by
the CA itself).
We disagree to the foregoing ratiocination.
The appellate courts premise that regular employees are those who perform activities
which are desirable and necessary for the business of the employer is not determinative in
this case. 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
business, 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. It does not apply where, as
here, the very existence of an employment relationship is in dispute. [23]
Buttressing his contention that he is a regular employee of petitioner, respondent
invokes Article 157 of the Labor Code, and argues that he satisfies all the requirements
thereunder. The provision relied upon reads:
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.
Had only respondent read carefully the very statutory provision invoked by him, he
would have noticed that in non-hazardous workplaces, the employer may engage the
services of a physician on retained basis. As correctly observed by the petitioner, 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 medical practitioners so engaged be actually hired as employees,
[24]
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 non-hazardous workplace for
two (2) hours.[25]
Respondent takes no issue on the fact that petitioners business of telecommunications
is not hazardous in nature. As such, what applies here is the last paragraph of Article 157
which, to stress, provides that the employer may engage the services of a physician and

dentist on retained basis, subject to such regulations as the Secretary of Labor may
prescribe. The successive retainership agreements of the parties definitely hue to the
very statutory provision relied upon by respondent.
Deeply embedded in our jurisprudence is the rule that courts may not construe a statute
that is free from doubt. Where the law is clear and unambiguous, it must be taken to mean
exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.
[26]
As it is, Article 157 of the Labor Code clearly and unequivocally allows employers in nonhazardous establishments to engage on retained basis the service of a dentist or
physician. Nowhere does the law provide that the physician or dentist so engaged thereby
becomes a regular employee. The very phrase that they may be engaged on retained
basis, revolts against the idea that this engagement gives rise to an employer-employee
relationship.
With the recognition of the fact that petitioner consistently engaged the services of
respondent on a retainer basis, as shown by their various retainership contracts, so can
petitioner put an end, with or without cause, to their retainership agreement as therein
provided.[27]
We note, however, that even as the contracts entered into by the parties invariably
provide for a 60-day notice requirement prior to termination, the same was not complied
with by petitioner when it terminated on 17 December 1996 the verbally-renewed
retainership agreement, effective at the close of business hours of 31 December 1996.
Be that as it may, the record shows, and this is admitted by both parties, [28] that
execution of the NLRC decision had already been made at the NLRC despite the pendency of
the present recourse. For sure, accounts of petitioner had already been garnished and
released to respondent despite the previous Status Quo Order [29] issued by this Court. To all
intents and purposes, therefore, the 60-day notice requirement has become moot and
academic if not waived by the respondent himself.
WHEREFORE, the petition is GRANTED and the challenged decision of the Court of
Appeals REVERSED and SET ASIDE. The 21 December 1998 decision of the labor arbiter is
REINSTATED.
No pronouncement as to costs.
SO ORDERED.
Panganiban, (Chairman), Corona, and Carpio-Morales, JJ., concu

FIRST DIVISION
ABS-CBN BROADCASTING
CORPORATION,
Petitioner,

G.R. No. 164156

Present
PANGANIBAN, C.J., Chairperson,
YNARES-SANTIAGO,

- versus -

AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ.

MARLYN NAZARENO,
Promulgated:
MERLOU GERZON,
JENNIFER DEIPARINE,
and JOSEPHINE LERASAN,
Respondents.
September 26, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision[1] 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 Decision[2] and Resolution[3] 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)
b)

Prepare, arrange airing of commercial broadcasting based on the daily

operations log and digicart of respondent ABS-CBN;
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

f)

Record, log clerical reports, man based control radio. [4]

Their respective working hours were as follows:

Name
1. Marlene Nazareno

Time
No. of Hours
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

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 13 th 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.[7] Instead 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
Exhibit C
Exhibit D
Exhibit D-1 &
Exhibit D-2

- ABS-CBN Employees Identification Card

- ABS-CBN Salary Voucher from March

1999 to January 2001 at P4,000.00
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

Date employed:
Length of service:

Complainant Joy Sanchez Lerasan

Signed by ABS-CBN Administrative
Officer May Kima Hife
April 15, 1998
3 yrs. and one (1) month[9]

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:
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.
1)
2)
3)
4)

Complainant Nazareno assists in the programs:

Nagbagang Balita (early morning edition)
Infor Hayupan
Arangkada (morning edition)
Nagbagang Balita (mid-day edition)

b.

c.

1)
2)
3)
4)
5)
6)

Complainant Deiparine assists in the programs:

Unzanith
Serbisyo de Arevalo
Arangkada (evening edition)
Balitang K (local version)
Abante Subu
Pangutana Lang

Complainant Gerzon assists in the program:

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)
4)
On Sundays:
(a)
Siesta Serenata
(b)
Sunday Chismisan
(c)
Timbangan sa Hustisya
(d)
Sayri ang Lungsod
(e)
Haranahan[11]
1)

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
II
III
IV

Merlou A. Gerzon
Marlyn Nazareno
Jennifer Deiparine
Josephine Sanchez Lerazan

P12,025.00
12,025.00
12,025.00
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.
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 enteredORDERING 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
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 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 19961999 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 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.
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 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, 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. 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]

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
[35]
they are employed.
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.[41] We note further that
petitioner did not report the termination of respondents employment in the 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
Corporation[43] 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

respondents claim of independent contractorship.

as

complainant

belies

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, ABSCBN 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 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 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.[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 ABS-CBN 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 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 nonmember 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.

FIRST DIVISION

ANGELINA FRANCISCO,

G.R. No. 170087

Petitioner,
Present:

Panganiban, C.J. (Chairperson),

- versus -

Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA

Promulgated:

and RAMON ESCUETA,

Respondents.
August 31, 2006
x ---------------------------------------------------------------------------------------- x

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 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 Corporation. [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

(27,500 x 10 mos.)
b.

Salary Differentials (01/2001 09/2001)

c.

Housing Allowance (01/2001 07/2002)

57,000.00

d.

Midyear Bonus 2001

27,500.00

e.

13th Month Pay

f.

10% share in the profits of Kasei

Corp. from 1996-2001

g.

Moral and exemplary damages

h.

10% Attorneys fees

22,500.00

27,500.00

361,175.00
100,000.00
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,
allowance, mid year bonus and 13th month pay are AFFIRMED.

housing

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 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 employeremployee 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 control 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-ofcontrol 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.

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 facilities; (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. [25] By 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. 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. [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 petitioners 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 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.

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, is REINSTATED. 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.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176484

November 25, 2008

CALAMBA MEDICAL CENTER, INC., petitioner

vs.
NATIONAL LABOR RELATIONS COMMISSION, RONALDO LANZANAS AND
MERCEDITHA*LANZANAS, respondents.
DECISION
CARPIO MORALES, J.:
The Calamba Medical Center (petitioner), a privately-owned hospital, engaged the services
of medical doctors-spouses Ronaldo Lanzanas (Dr. Lanzanas) and Merceditha Lanzanas (Dr.
Merceditha) in March 1992 and August 1995, respectively, as part of its team of resident
physicians. Reporting at the hospital twice-a-week on twenty-four-hour shifts, respondents
were paid a monthly "retainer" of P4,800.00 each.1 It appears that resident physicians were
also given a percentage share out of fees charged for out-patient treatments, operating
room assistance and discharge billings, in addition to their fixed monthly retainer. 2
The work schedules of the members of the team of resident physicians were fixed by
petitioner's medical director Dr. Raul Desipeda (Dr. Desipeda). And they were issued
identification cards3 by petitioner and were enrolled in the Social Security System
(SSS).4 Income taxes were withheld from them.5
On March 7, 1998, Dr. Meluz Trinidad (Dr. Trinidad), also a resident physician at the hospital,
inadvertently overheard a telephone conversation of respondent Dr. Lanzanas with a fellow
employee, Diosdado Miscala, through an extension telephone line. Apparently, Dr. Lanzanas
and Miscala were discussing the low "census" or admission of patients to the hospital. 6
Dr. Desipeda whose attention was called to the above-said telephone conversation issued to
Dr. Lanzanas a Memorandum of March 7, 1998 reading:

As a Licensed Resident Physician employed in Calamba Medical Center

since several years ago, the hospital management has committed upon you
utmost confidence in the performance of duties pursuant thereto. This is the reason
why you were awarded the privilege to practice in the hospital and were entrusted
hospital functions to serve the interest of both the hospital and our patients using
your capability for independent judgment.
Very recently though and unfortunately, you have committed acts inimical to the
interest of the hospital, the details of which are contained in the hereto attached
affidavit of witness.
You are therefore given 24 hours to explain why no disciplinary action
should be taken against you.
Pending investigation of your case, you are hereby placed under 30-days
[sic] preventive suspension effective upon receipt hereof.7 (Emphasis, italics
and underscoring supplied)
Inexplicably, petitioner did not give respondent Dr. Merceditha, who was not involved in the
said incident, any work schedule after sending her husband Dr. Lanzanas the
memorandum,8 nor inform her the reason therefor, albeit she was later informed by the
Human Resource Department (HRD) officer that that was part of petitioner's cost-cutting
measures.9
Responding to the memorandum, Dr. Lanzanas, by letter of March 9, 1998, 10 admitted that
he spoke with Miscala over the phone but that their conversation was taken out of context
by Dr. Trinidad.
On March 14, 1998,11 the rank-and-file employees union of petitioner went on strike due to
unresolved grievances over terms and conditions of employment.12
On March 20, 1998, Dr. Lanzanas filed a complaint for illegal suspension 13 before the
National Labor Relations Commission (NLRC)-Regional Arbitration Board (RAB) IV. Dr.
Merceditha subsequently filed a complaint for illegal dismissal. 14
In the meantime, then Sec. Cresenciano Trajano of the Department of Labor and
Employment (DOLE) certified the labor dispute to the NLRC for compulsory arbitration
and issued on April 21, 1998 return-to-work Order to the striking union officers and
employees of petitioner pending resolution of the labor dispute.15
In a memorandum16 of April 22, 1998, Dr. Desipeda echoed the April 22, 1998 order of the
Secretary of Labor directing all union officers and members to return-to-work "on or April 23,
1998, except those employees that were already terminated or are serving disciplinary
actions." Dr. Desipeda thus ordered the officers and members of the union to "report for
work as soon as possible" to the hospital's personnel officer and administrator for "work
scheduling, assignments and/or re-assignments."
Petitioner later sent Dr. Lanzanas a notice of termination which he received on April 25,
1998, indicating as grounds therefor his failure to report back to work despite the DOLE
order and his supposed role in the striking union, thus:

On April 23, 1998, you still did not report for work despite memorandum issued by
the CMC Medical Director implementing the Labor Secretary's ORDER. The same is
true on April 24, 1998 and April 25, 1998,--you still did not report for work [sic].
You are likewise aware that you were observed (re: signatories [sic] to the Saligang
Batas of BMCMC-UWP) to be unlawfully participating as member in the rank-and-file
union's concerted activities despite knowledge that your position in the hospital
is managerial in nature (Nurses, Orderlies, and staff of the Emergency Room carry
out your orders using your independent judgment) which participation is expressly
prohibited by the New Labor Code and which prohibition was sustained by the MedArbiter's ORDER dated February 24, 1998. (Emphasis and italics in the original;
underscoring partly in the original and partly supplied)
For these reasons as grounds for termination, you are hereby terminated
for cause from employment effective today, April 25, 1998 , without prejudice
to further action for revocation of your license before the Philippine [sic] Regulations
[sic] Commission.17 (Emphasis and underscoring supplied)
Dr. Lanzanas thus amended his original complaint to include illegal dismissal. 18 His and Dr.
Merceditha's complaints were consolidated and docketed as NLRC CASE NO. RAB-IV-3-987998-L.
By Decision19 of March 23, 1999, Labor Arbiter Antonio R. Macam dismissed the spouses'
complaints for want of jurisdiction upon a finding that there was no employer-employee
relationship between the parties, the fourth requisite or the "control test" in the
determination of an employment bond being absent.
On appeal, the NLRC, by Decision20 of May 3, 2002, reversed the Labor Arbiter's findings,
disposing as follows:
WHEREFORE, the assailed decision is set aside. The respondents are ordered to pay
the complainants their full backwages; separation pay of one month salary for every
year of service in lieu of reinstatement; moral damages of P500,000.00 each;
exemplary damages ofP250,000.00 each plus ten percent (10%) of the total award as
attorney's fees.
SO ORDERED.21
Petitioner's motion for reconsideration having been denied, it brought the case to the Court
of Appeals on certiorari.
The appellate court, by June 30, 2004 Decision, 22 initially granted petitioner's petition and
set aside the NLRC ruling. However, upon a subsequent motion for reconsideration filed by
respondents, itreinstated the NLRC decision in an Amended Decision 23 dated September 26,
2006 but tempered the award to each of the spouses of moral and exemplary damages
to P100,000.00 and P50,000.00, respectively and omitted the award of attorney's fees.
In finding the existence of an employer-employee relationship between the parties, the
appellate court held:

x x x. While it may be true that the respondents are given the discretion to decide on
how to treat the petitioner's patients, the petitioner has not denied nor explained why
its Medical Director still has the direct supervision and control over the
respondents. The fact is the petitioner's Medical Director still has to approve the
schedule of duties of the respondents. The respondents stressed that the
petitioner's Medical Director also issues instructions or orders to the
respondents relating to the means and methods of performing their
duties,i.e. admission of patients, manner of characterizing cases, treatment of
cases, etc., and may even overrule, review or revise the decisions of the
resident physicians. This was not controverted by the petitioner. The foregoing
factors taken together are sufficient to constitute the fourth element, i.e. control test,
hence, the existence of the employer-employee relationship. In denying that it had
control over the respondents, the petitioner alleged that the respondents were free to
put up their own clinics or to accept other retainership agreement with the other
hospitals. But, the petitioner failed to substantiate the allegation with substantial
evidence. (Emphasis and underscoring supplied)24
The appellate court thus declared that respondents were illegally dismissed.
x x x. The petitioner's ground for dismissing respondent Ronaldo Lanzanas was based
on his alleged participation in union activities, specifically in joining the strike and
failing to observe the return-to-work order issued by the Secretary of Labor. Yet,
the petitioner did not adduce any piece of evidence to show that respondent Ronaldo
indeed participated in the strike. x x x.
In the case of respondent Merceditha Lanzanas, the petitioner's explanation that "her
marriage to complainant Ronaldo has given rise to the presumption that her
sympat[hies] are likewise with her husband" as a ground for her dismissal is
unacceptable. Such is not one of the grounds to justify the termination of her
employment.25 (Underscoring supplied)
The fallo of the appellate court's decision reads:
WHEREFORE, the instant Motion for Reconsideration is GRANTED, and the Court's
decision dated June 30, 2004, is SET ASIDE. In lieu thereof, a new judgment is
entered, as follows:
WHEREFORE, the petition is DISMISSED. The assailed decision dated May 3,
2002 and order dated September 24, 2002 of the NLRC in NLRC NCR CA No.
019823-99 are AFFIRMED with the MODIFICATION that the moral and
exemplary damages are reduced to P100,000.00 each and P50,000.00 each,
respectively.
SO ORDERED.26 (Emphasis and italics in the original; underscoring supplied)
Preliminarily, the present petition calls for a determination of whether there exists an
employer-employee relationship27 between petitioner and the spouses-respondents.
Denying the existence of such relationship, petitioner argues that the appellate court, as
well as the NLRC, overlooked its twice-a-week reporting arrangement with respondents who

are free to practice their profession elsewhere the rest of the week. And it invites attention
to the uncontroverted allegation that respondents, aside from their monthly retainers, were
entitled to one-half of all suturing, admitting, consultation, medico-legal and operating room
assistance fees.28 These circumstances, it stresses, are clear badges of the absence of any
employment relationship between them.
This Court is unimpressed.
Under the "control test," an employment relationship exists between a physician and a
hospital if the hospital controls both the means and the details of the process by which the
physician is to accomplish his task.29
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 is compensated according to the result of
his efforts and not the amount thereof, the element of control is absent. 30
As priorly stated, private respondents maintained specific work-schedules, as determined by
petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight
hours each week and which were strictly to be observed under pain of administrative
sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that
in the emergency room, the operating room, or any department or ward for that matter,
respondents' work is monitored through its nursing supervisors, charge nurses and orderlies.
Without the approval or consent of petitioner or its medical director, no operations can be
undertaken in those areas. For control test to apply, it is not essential for the employer to
actually supervise the performance of duties of the employee, it being enough that it has
the right to wield the power.31
With respect to respondents' sharing in some hospital fees, this scheme does not sever the
employment tie between them and petitioner as this merely mirrors additional form or
another form of compensation or incentive similar to what commission-based employees
receive as contemplated in Article 97 (f) of the Labor Code, thus:
"Wage" paid to any employee shall mean the remuneration or earning, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee. x x x (Emphasis and
underscoring supplied),
Respondents were in fact made subject to petitioner-hospital's Code of Ethics, 32 the
provisions of which cover administrative and disciplinary measures on negligence of duties,
personnel conduct and behavior, and offenses against persons, property and the hospital's
interest.

More importantly, petitioner itself provided incontrovertible proof of the employment status
of respondents, namely, the identification cards it issued them, the payslips 33 and BIR W-2
(now 2316) Forms which reflect their status as employees, and the classification as "salary"
of their remuneration. Moreover, it enrolled respondents in the SSS and Medicare
(Philhealth) program. It bears noting at this juncture that mandatory coverage under the SSS
Law34 is premised on the existence of an employer-employee relationship, 35 except in cases
of compulsory coverage of the self-employed. It would be preposterous for an employer to
report certain persons as employees and pay their SSS premiums as well as their wages if
they are not its employees.36
And if respondents were not petitioner's employees, how does it account for its issuance of
the earlier-quoted March 7, 1998 memorandum explicitly stating that respondent is
"employed" in it and of the subsequent termination letter indicating respondent Lanzanas'
employment status.
Finally, under Section 15, Rule X of Book III of the Implementing Rules of the Labor Code, an
employer-employee relationship exists between the resident physicians and the training
hospitals, unless there is a training agreement between them, and the training program is
duly accredited or approved by the appropriate government agency. In respondents' case,
they were not undergoing any specialization training. They were considered nontraining general practitioners,37 assigned at the emergency rooms and ward sections.
Turning now to the issue of dismissal, the Court upholds the appellate court's conclusion that
private respondents were illegally dismissed.
Dr. Lanzanas was neither a managerial nor supervisory employee but part of the rank-andfile. This is the import of the Secretary of Labor's Resolution of May 22, 1998 in OS A-05-1598 which reads:
xxxx
In the motion to dismiss it filed before the Med-Arbiter, the employer (CMC) alleged
that 24 members of petitioner are supervisors, namely x x x Rolando Lanzonas [sic]
x x x.
A close scrutiny of the job descriptions of the alleged supervisors narrated by the
employer only proves that except for the contention that these employees allegedly
supervise, they do not however recommend any managerial action. At most, their job
is merely routinary in nature and consequently, they cannot be considered
supervisory employees.
They are not therefore barred from membership in the union of
rank[-]and[-]file, which the petitioner [the union] is seeking to represent in the
instant case.38 (Emphasis and underscoring supplied)
xxxx
Admittedly, Dr. Lanzanas was a union member in the hospital, which is considered
indispensable to the national interest. In labor disputes adversely affecting the continued
operation of a hospital, Article 263(g) of the Labor Code provides:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.

xxxx
(g) x x x x
x x x x. In labor disputes adversely affecting the continued operation of such
hospitals, clinics or medical institutions, it shall be the duty of the striking union
or locking-out employer to provide and maintain an effective skeletal workforce of
medical and other health personnel, whose movement and services shall be
unhampered and unrestricted, as are necessary to insure the proper and adequate
protection of the life and health of its patients, most especially emergency cases, for
the duration of the strike or lockout. In such cases, the Secretary of Labor and
Employment is mandated to immediately assume, within twenty-four hours from
knowledge of the occurrence of such strike or lockout, jurisdiction over the same or
certify to the Commission for compulsory arbitration. For this purpose, the
contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and
Employment or the Commission, under pain of immediate disciplinary
action, including dismissal or loss of employment status or payment by the
locking-out employer of backwages, damages and other affirmative relief,
even criminal prosecution against either or both of them.
x x x x (Emphasis and underscoring supplied)
An assumption or certification order of the DOLE Secretary automatically results in a returnto-work of all striking workers, whether a corresponding return-to-work order had been
issued.39 The DOLE Secretary in fact issued a return-to-work Order, failing to comply with
which is punishable by dismissal or loss of employment status.40
Participation in a strike and intransigence to a return-to-work order must, however, be duly
proved in order to justify immediate dismissal in a "national interest" case. As the appellate
court as well as the NLRC observed, however, there is nothing in the records that would bear
out Dr. Lanzanas' actual participation in the strike. And the medical director's
Memorandum41 of April 22, 1998 contains nothing more than a general directive to all union
officers and members to return-to-work. Mere membership in a labor union does not ipso
facto mean participation in a strike.
Dr. Lanzanas' claim that, after his 30-day preventive suspension ended on or before April 9,
1998, he was never given any work schedule42 was not refuted by petitioner. Petitioner in
fact never released any findings of its supposed investigation into Dr. Lanzanas' alleged
"inimical acts."
Petitioner thus failed to observe the two requirements,before dismissal can be effected
notice and hearing which constitute essential elements of the statutory process; the first
to apprise the employee of the particular acts or omissions for which his dismissal is sought,
and the second to inform the employee of the employer's decision to dismiss him. 43 Nonobservance of these requirements runs afoul of the procedural mandate.44

The termination notice sent to and received by Dr. Lanzanas on April 25, 1998 was the first
and only time that he was apprised of the reason for his dismissal. He was not afforded,
however, even the slightest opportunity to explain his side. His was a "termination upon
receipt" situation. While he was priorly made to explain on his telephone conversation with
Miscala,45 he was not with respect to his supposed participation in the strike and failure to
heed the return-to-work order.
As for the case of Dr. Merceditha, her dismissal was worse, it having been effected without
any just or authorized cause and without observance of due process. In fact, petitioner never
proferred any valid cause for her dismissal except its view that "her marriage to [Dr.
Lanzanas] has given rise to the presumption that her sympath[y] [is] with her husband; [and
that when [Dr. Lanzanas] declared that he was going to boycott the scheduling of their
workload by the medical doctor, he was presumed to be speaking for himself [and] for his
wife Merceditha."46
Petitioner's contention that Dr. Merceditha was a member of the union or was a participant
in the strike remained just that. Its termination of her employment on the basis of her
conjugal relationship is not analogous to
any of the causes enumerated in Article 28247 of the Labor Code. Mere suspicion or belief, no
matter how strong, cannot substitute for factual findings carefully established through
orderly procedure.48
The Court even notes that after the proceedings at the NLRC, petitioner never even
mentioned Dr. Merceditha's case. There is thus no gainsaying that her dismissal was both
substantively and procedurally infirm.
Adding insult to injury was the circulation by petitioner of a "watchlist" or "watch out
list"49 including therein the names of respondents. Consider the following portions of Dr.
Merceditha's Memorandum of Appeal:
3. Moreover, to top it all, respondents have circulated a so called "Watch List" to
other hospitals, one of which [was] procured from Foothills Hospital in Sto. Tomas,
Batangas [that] contains her name. The object of the said list is precisely to harass
Complainant and malign her good name and reputation. This is not only
unprofessional, but runs smack of oppression as CMC is trying permanently deprived
[sic] Complainant of her livelihood by ensuring that she is barred from practicing in
other hospitals.
4. Other co-professionals and brothers in the profession are fully aware of these
"watch out" lists and as such, her reputation was not only besmirched, but was
damaged, and she suffered social humiliation as it is of public knowledge that she
was dismissed from work. Complainant came from a reputable and respected family,
her father being a retired full Colonel in the Army, Col. Romeo A. Vente, and her
brothers and sisters are all professionals, her brothers, Arnold and Romeo Jr., being
engineers. The Complainant has a family protection [sic] to protect. She likewise has
a professional reputation to protect, being a licensed physician. Both her personal
and professional reputation were damaged as a result of the unlawful acts of the
respondents.50

While petitioner does not deny the existence of such list, it pointed to the lack of any board
action on its part to initiate such listing and to circulate the same, viz:
20. x x x. The alleged watchlist or "watch out list," as termed by complainants, were
merely lists obtained by one Dr. Ernesto Naval of PAMANA Hospital. Said list was
given by a stockholder of respondent who was at the same time a
stockholder of PAMAN[A] Hospital. The giving of the list was not a Board
action.51 (Emphasis and underscoring supplied)
The circulation of such list containing names of alleged union members intended to prevent
employment of workers for union activities similarly constitutes unfair labor practice,
thereby giving a right of action for damages by the employees prejudiced. 52
A word on the appellate court's deletion of the award of attorney's fees. There being no
basis advanced in deleting it, as exemplary damages were correctly awarded, 53 the award of
attorney's fees should be reinstated.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 75871
is AFFIRMED withMODIFICATION in that the award by the National Labor Relations
Commission of 10% of the total judgment award as attorney's fees is reinstated. In all other
aspects, the decision of the appellate court is affirmed.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162994

September 17, 2004

DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners,

vs.
GLAXO WELLCOME PHILIPPINES, INC., Respondent.
RESOLUTION
TINGA, J.:
Confronting the Court in this petition is a novel question, with constitutional overtones,
involving the validity of the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company.
This is a Petition for Review on Certiorari assailing the Decision1 dated May 19, 2003 and
the Resolution dated March 26, 2004 of the Court of Appeals in CA-G.R. SP No. 62434. 2
Petitioner Pedro A. Tecson (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.
The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to
inform management of any existing or future relationship by consanguinity or affinity with
co-employees or employees of competing drug companies. If management perceives a
conflict of interest or a potential conflict between such relationship and the employees
employment with the company, the management and the employee will explore the
possibility of a "transfer to another department in a non-counterchecking position" or
preparation for employment outside the company after six months.
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 August 1999, Tecson again requested for more time resolve the problem. In September
1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not
have a milk division, the potential conflict of interest would be eliminated. His application
was denied in view of Glaxos "least-movement-possible" policy.
In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao 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.
During the pendency of the grievance proceedings, Tecson was paid his salary, but was not
issued samples of products which were competing with similar products manufactured by
Astra. He was also not included in product conferences regarding such products.
Because the parties failed to resolve the issue at the grievance machinery level, they
submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of onehalf () month pay for every year of service, or a total of P50,000.00 but he declined the
offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB)
rendered its Decision declaring as valid Glaxos policy on relationships between its
employees and persons employed with competitor companies, and affirming Glaxos right to
transfer Tecson to another sales territory.
Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the
NCMB Decision.
On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for
Review on the ground that the NCMB did not err in rendering its Decision. The appellate
court held that Glaxos policy prohibiting its employees from having personal relationships
with employees of competitor companies is a valid exercise of its management
prerogatives.4
Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion
was denied by the appellate court in its Resolution dated March 26, 2004.5
Petitioners filed the instant petition, arguing therein that (i) the Court of Appeals erred in
affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying
an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not
finding that Tecson was constructively dismissed when he was transferred to a new sales
territory, and deprived of the opportunity to attend products seminars and training
sessions.6
Petitioners contend that Glaxos policy against employees marrying employees of competitor
companies violates the equal protection clause of the Constitution because it creates invalid
distinctions among employees on account only of marriage. They claim that the policy
restricts the employees right to marry.7
They also argue that Tecson was constructively dismissed as shown by the following
circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to
the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was
excluded from attending seminars and training sessions for medical representatives, and (4)
he was prohibited from promoting respondents products which were competing with Astras
products.8
In its Comment on the petition, 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.9
Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical
products, it has a genuine interest in ensuring that its employees avoid any activity,
relationship or interest that may conflict with their responsibilities to the company. Thus, it
expects its employees to avoid having personal or family interests in any competitor
company which may influence their actions and decisions and consequently deprive Glaxo of
legitimate profits. The policy is also aimed at preventing a competitor company from gaining
access to its secrets, procedures and policies.10
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
According to Glaxo, Tecsons marriage to Bettsy, an employee of Astra, posed a real and
potential conflict of interest. Astras products were in direct competition with 67% of the
products sold by Glaxo. Hence, Glaxos enforcement of the foregoing policy in Tecsons case
was a valid exercise of its management prerogatives.12 In any case, Tecson was given
several months to remedy the situation, and was even encouraged not to resign but to ask
his wife to resign form Astra instead.13
Glaxo also points out that Tecson can no longer question the assailed company policy
because when he signed his contract of employment, he was aware that such policy was
stipulated therein. In said contract, he also agreed to resign from respondent if the
management finds that his relationship with an employee of a competitor company would be
detrimental to the interests of Glaxo.14
Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion
from seminars regarding respondents new products did not amount to constructive
dismissal.
It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines SurCamarines Norte sales area to the Butuan City-Surigao City and Agusan del Sur sales area.
Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons
family. Since Tecsons hometown was in Agusan del Sur and his wife traces her roots to
Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales
area would be favorable to him and his family as he would be relocating to a familiar
territory and minimizing his travel expenses.15
In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new antiasthma drug was due to the fact that said product was in direct competition with a drug
which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for
him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix-up
created by his refusal to transfer to the Butuan City sales area (his paraphernalia was
delivered to his new sales area instead of Naga City because the supplier thought he already
transferred to Butuan).16

The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in
ruling that Glaxos policy against its employees marrying employees from competitor
companies is valid, and in not holding that said policy violates the equal protection clause of
the Constitution; (2) Whether Tecson was constructively dismissed.
The Court finds no merit in the petition.
The stipulation in Tecsons contract of employment with Glaxo being questioned by
petitioners provides:

10. You agree to disclose to management any existing or future relationship you may
have, either by consanguinity or affinity with co-employees or employees of
competing drug companies. Should it pose a possible conflict of interest in
management discretion, you agree to resign voluntarily from the Company as a
matter of Company policy.
17
The same contract also stipulates that Tescon agrees to abide by the existing company rules
of Glaxo, and to study and become acquainted with such policies. 18 In this regard, the
Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict
of interest:
1. Conflict of Interest
Employees should avoid any activity, investment relationship, or interest that may
run counter to the responsibilities which they owe Glaxo Wellcome.
Specifically, this means that employees are expected:
a. To avoid having personal or family interest, financial or otherwise, in any
competitor supplier or other businesses which may consciously or
unconsciously influence their actions or decisions and thus deprive Glaxo
Wellcome of legitimate profit.
b. To refrain from using their position in Glaxo Wellcome or knowledge of
Company plans to advance their outside personal interests, that of their
relatives, friends and other businesses.
c. To avoid outside employment or other interests for income which would
impair their effective job performance.
d. To consult with Management on such activities or relationships that may
lead to conflict of interest.
1.1. Employee Relationships

Employees with existing or future relationships either by consanguinity or affinity

with co-employees of competing drug companies are expected to disclose such
relationship to the Management. If management perceives a conflict or potential
conflict of interest, every effort shall be made, together by management and the
employee, to arrive at a solution within six (6) months, either by transfer to another
department in a non-counter checking position, or by career preparation toward
outside employment after Glaxo Wellcome. Employees must be prepared for possible
resignation within six (6) months, if no other solution is feasible. 19
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.21
As held in a Georgia, U.S.A case,22 it is a legitimate business practice to guard business
confidentiality and protect a competitive position by even-handedly disqualifying from jobs
male and female applicants or employees who are married to a competitor. Consequently,
the court ruled than an employer that discharged an employee who was married to an
employee of an active competitor did not violate Title VII of the Civil Rights Act of
1964.23 The Court pointed out that the policy was applied to men and women equally, and
noted that the employers business was highly competitive and that gaining inside
information would constitute a competitive advantage.
The challenged company policy does not violate the equal protection clause of the
Constitution as petitioners erroneously suggest. It is a settled principle that the commands
of the equal protection clause are addressed only to the state or those acting under color of
its authority.24 Corollarily, it has been held in a long array of U.S. Supreme Court decisions
that the equal protection clause erects no shield against merely private conduct, however,
discriminatory or wrongful.25 The only exception occurs when the state29 in any of its
manifestations or actions has been found to have become entwined or involved in the
wrongful private conduct.27 Obviously, however, the exception is not present in this case.
Significantly, the company actually enforced the policy after repeated requests to the
employee to comply with the policy. Indeed, the application of the policy was made in an
impartial and even-handed manner, with due regard for the lot of the employee.

In any event, from the wordings of the contractual provision and the policy in its employee
handbook, it is clear that Glaxo does not impose an absolute prohibition against
relationships between its employees and those of competitor companies. Its employees are
free to cultivate relationships with and marry persons of their own choosing. What the
company merely seeks to avoid is a conflict of interest between the employee and the
company that may arise out of such relationships. As succinctly explained by the appellate
court, thus:
The policy being questioned is not a policy against marriage. An employee of the
company remains free to marry anyone of his or her choosing. The policy is not
aimed at restricting a personal prerogative that belongs only to the individual.
However, an employees personal decision does not detract the employer from
exercising management prerogatives to ensure maximum profit and business
success. . .28
The Court of Appeals also correctly noted that the assailed company policy which forms part
of respondents Employee Code of Conduct and of its contracts with its employees, such as
that signed by Tescon, was made known to him prior to his employment. Tecson, therefore,
was aware of that restriction when he signed his employment contract and when he entered
into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a
contract of employment with Glaxo, the stipulations therein have the force of law between
them and, thus, should be complied with in good faith." 29 He is therefore estopped from
questioning said policy.
The Court finds no merit in petitioners contention that Tescon was constructively dismissed
when he was transferred from the Camarines Norte-Camarines Sur sales area to the Butuan
City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the
companys seminar on new products which were directly competing with similar products
manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary
resignation resorted to when continued employment becomes impossible, unreasonable, or
unlikely; when there is a demotion in rank or diminution in pay; or when a clear
discrimination, insensibility or disdain by an employer becomes unbearable to the
employee.30 None of these conditions are present in the instant case. The record does not
show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As
found by the appellate court, Glaxo properly exercised its management prerogative in
reassigning Tecson to the Butuan City sales area:
. . . In this case, petitioners transfer to another place of assignment was merely in
keeping with the policy of the company in avoidance of conflict of interest, and thus
validNote that [Tecsons] wife holds a sensitive supervisory position as Branch
Coordinator in her employer-company which requires her to work in close
coordination with District Managers and Medical Representatives. Her duties include
monitoring sales of Astra products, conducting sales drives, establishing and
furthering relationship with customers, collection, monitoring and managing Astras
inventoryshe therefore takes an active participation in the market war
characterized as it is by stiff competition among pharmaceutical companies.
Moreover, and this is significant, petitioners sales territory covers Camarines Sur and
Camarines Norte while his wife is supervising a branch of her employer in Albay. The
proximity of their areas of responsibility, all in the same Bicol Region, renders the
conflict of interest not only possible, but actual, as learning by one spouse of the
others market strategies in the region would be inevitable. [Managements]

appreciation of a conflict of interest is therefore not merely illusory and wanting in

factual basis31
In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission,32 which involved
a complaint filed by a medical representative against his employer drug company for illegal
dismissal for allegedly terminating his employment when he refused to accept his
reassignment to a new area, the Court upheld the right of the drug company to transfer or
reassign its employee in accordance with its operational demands and requirements. The
ruling of the Court therein, quoted hereunder, also finds application in the instant case:
By the very nature of his employment, a drug salesman or medical representative is
expected to travel. He should anticipate reassignment according to the demands of
their business. It would be a poor drug corporation which cannot even assign its
representatives or detail men to new markets calling for opening or expansion or to
areas where the need for pushing its products is great. More so if such reassignments
are part of the employment contract.33
As noted earlier, the challenged policy has been implemented by Glaxo impartially and
disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave
Tecson several chances to eliminate the conflict of interest brought about by his relationship
with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors at Glaxo
constantly reminded him about its effects on his employment with the company and on the
companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the
conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo
even expressed its desire to retain Tecson in its employ because of his satisfactory
performance and suggested that he ask Bettsy to resign from her company instead. Glaxo
likewise acceded to his repeated requests for more time to resolve the conflict of interest.
When the problem could not be resolved after several years of waiting, Glaxo was
constrained to reassign Tecson to a sales area different from that handled by his wife for
Astra. Notably, the Court did not terminate Tecson from employment but only reassigned
him to another area where his home province, Agusan del Sur, was included. In effecting
Tecsons transfer, Glaxo even considered the welfare of Tecsons family. Clearly, the
foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo. 34
WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

EN BANC

GREGORIO V. TONGKO,
Petitioner,

G.R. No. 167622

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
- versus -

LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,

THE MANUFACTURERS LIFE

INSURANCE CO. (PHILS.), INC. and
RENATO A. VERGEL DE DIOS,

MENDOZA, and
SERENO, JJ.

Respondents.
Promulgated:

January 25, 2011

x-----------------------------------------------------------------------------------------x

RESOLUTION

BRION, J.:

We

resolve

petitioner

Gregorio

V.

Tongkos bid,

through

his Motion

for

Reconsideration,[1] to set aside our June 29, 2010 Resolution that reversed our
Decision of November 7, 2008.[2] With the reversal, the assailed June 29, 2010 Resolution
effectively affirmed the Court of Appeals ruling [3] in CA-G.R. SP No. 88253 that the petitioner
was an insurance agent, not the employee, of the respondent The Manufacturers Life
Insurance Co. (Phils.), Inc. (Manulife).

In his Motion for Reconsideration, petitioner reiterates the arguments he had

belabored in his petition and various other submissions. He argues that for 19 years, he
performed administrative functions and exercised supervisory authority over employees and
agents of Manulife, in addition to his insurance agent functions. [4] In these 19 years, he was
designated as a Unit Manager, a Branch Manager and a Regional Sales Manager, and now
posits that he was not only an insurance agent for Manulife but was its employee as well.

We find no basis or any error to merit the reconsideration of our June 29,
2010 Resolution.

A.

Labor Law Control = Employment Relationship

Control over the performance of the task of one providing service both with respect
to the means and manner, and the results of the service is the primary element in
determining whether an employment relationship exists. We resolve the petitioners Motion
against his favor since he failed to show that the control Manulife exercised over him was
the control required to exist in an employer-employee relationship; Manulifes control fell
short of this norm and carried only the characteristic of the relationship between an
insurance company and its agents, as defined by the Insurance Code and by the law of
agency under the Civil Code.

The petitioner asserts in his Motion that Manulifes labor law control over him was
demonstrated (1) when it set the objectives and sales targets regarding production,
recruitment and training programs; and (2) when it prescribed the Code of Conduct for

Agents and the Manulife Financial Code of Conduct to govern his activities. [5] We find no
merit in these contentions.

In our June 29, 2010 Resolution, we noted that there are built-in elements of control
specific to an insurance agency, which do not amount to the elements of control that
characterize an employment relationship governed by the Labor Code. The Insurance Code
provides definite parameters in the way an agent negotiates for the sale of the companys
insurance products, his collection activities and his delivery of the insurance contract or
policy.[6] In addition, the Civil Code defines an agent as a person who binds himself to do
something in behalf of another, with the consent or authority of the latter. [7] Article 1887 of
the Civil Code also provides that in the execution of the agency, the agent shall act in
accordance with the instructions of the principal.

All these, read without any clear understanding of fine legal distinctions, appear to
speak of control by the insurance company over its agents. They are, however, controls
aimed only at specific results in undertaking an insurance agency, and are, in fact,
parameters set by law in defining an insurance agency and the attendant duties and
responsibilities an insurance agent must observe and undertake. They do not reach the level
of control into the means and manner of doing an assigned task that invariably characterizes
an employment relationship as defined by labor law. From this perspective, the petitioners
contentions cannot prevail.

To reiterate, guidelines indicative of labor law control do not merely relate to the
mutually desirable result intended by the contractual relationship; they must have the
nature of dictating the means and methods to be employed in attaining the result. [8] Tested
by this norm, Manulifes instructions regarding the objectives and sales targets, in
connection with the training and engagement of other agents, are among the directives that
the principal may impose on the agent to achieve the assigned tasks. They are targeted
results that Manulife wishes to attain through its agents. Manulifes codes of conduct,
likewise, do not necessarily intrude into the insurance agents means and manner of
conducting their sales. Codes of conduct are norms or standards of behavior rather than
employer directives into how specific tasks are to be done. These codes, as well as
insurance industry rules and regulations, are not per se indicative of labor law control under
our jurisprudence.[9]

The duties[10] that the petitioner enumerated in his Motion are not supported by
evidence and, therefore, deserve scant consideration. Even assuming their existence,
however, they mostly pertain to the duties of an insurance agent such as remitting
insurance fees to Manulife, delivering policies to the insured, and after-sale services. For
agents leading other agents, these include the task of overseeing other insurance agents,
the recruitment of other insurance agents engaged by Manulife as principal, and ensuring
that these other agents comply with the paperwork necessary in selling insurance. That
Manulife exercises the power to assign and remove agents under the petitioners supervision
is in keeping with its role as a principal in an agency relationship; they are Manulife agents in
the same manner that the petitioner had all along been a Manulife agent.

The petitioner also questions Manulifes act of investing him with different titles and
positions in the course of their relationship, given the respondents position that he simply
functioned as an insurance agent.[11] He also considers it an unjust and inequitable situation
that he would be unrewarded for the years he spent as a unit manager, a branch manager,
and a regional sales manager.[12]

Based on the evidence on record, the petitioners occupation was to sell Manulifes
insurance policies and products from 1977 until the termination of the Career Agents
Agreement (Agreement). The evidence also shows that through the years, Manulife
permitted him to exercise guiding authority over other agents who operate under their own
agency agreements with Manulife and whose commissions he shared. [13] Under this scheme
an arrangement that pervades the insurance industry petitioner in effect became a lead
agent and his own commissions increased as they included his share in the commissions of
the other agents;[14] he also received greater reimbursements for expenses and was allowed
to use Manulifes facilities. His designation also changed from unit manager to branch
manager and then to regional sales manager, to reflect the increase in the number of agents
he recruited and guided, as well as the increase in the area where these agents operated.

As our assailed Resolution concluded and as we now similarly conclude, these

arrangements, and the titles and positions the petitioner was invested with, did not change
his status from the insurance agent that he had always been (as evidenced by the
Agreement that governed his relationship with Manulife from the start to its disagreeable

end). The petitioner simply progressed from his individual agency to being a lead agent who
could use other agents in selling insurance and share in the earnings of these other agents.

In sum, we find absolutely no evidence of labor law control, as extensively discussed

in our Resolution of June 29, 2010, granting Manulifes motion for reconsideration. The
Dissent, unfortunately, misses this point.

B.

No Resulting Inequity

We also do not agree that our assailed Resolution has the effect of fostering an
inequitable or unjust situation. The records show that the petitioner was very amply paid for
his services as an insurance agent, who also shared in the commissions of the other agents
under his guidance. In 1997, his income was P2,822,620; in 1998, P4,805,166.34; in
1999, P6,797,814.05; in 2001, P6,214,737.11; and in 2002, P8,003,180.38. All these he
earned as an insurance agent, as he failed to ever prove that he earned these sums as an
employee. In technical terms, he could not have earned all these as an employee because
he failed to provide the substantial evidence required in administrative cases to support the
finding that he was a Manulife employee. No inequity results under this legal situation; what
would be unjust is an award of backwages and separation pay amounts that are not due
him because he was never an employee.

The Dissents discussion on this aspect of the case begins with the wide disparity in
the status of the parties that Manulife is a big Canadian insurance company while Tongko is
but a single agent of Manulife. The Dissent then went on to say that [i]f is but just, it is but
right, that the Court interprets the relationship between Tongko and Manulife as one of
employment under labor laws and to uphold his constitutionally protected right, as an
employee, to security of tenure and entitlement to monetary award should such right be
infringed.[15] We cannot simply invoke the magical formula by creating an employment
relationship even when there is none because of the unavoidable and inherently weak
position of an individual over a giant corporation.

The Dissent likewise alluded to an ambiguity in the true relationship of the parties
after Tongkos successive appointments. We already pointed out that the legal significance
of these appointments had not been sufficiently explained and that it did not help that
Tongko never bothered to present evidence on this point. The Dissent recognized this but
tried to excuse Tongko from this failure in the subsequent discussion, as follows:

[o]ther evidence was adduced to show such duties and responsibilities. For
one, in his letter of November 6, 2001, respondent De Dios addressed
petitioner as sales manager. And as I wrote in my Dissent to the June 29,
2010 Resolution, it is difficult to imagine that Manulife did not issue
promotional appointments to petitioner as unit manager, branch manager,
and, eventually, regional sales manager. Sound management practice simply
requires an appointment for any upward personnel movement, particularly
when additional functions and the corresponding increase in compensation
are involved. Then, too, the adverted affidavits of the managers of Manulife
as to the duties and responsibilities of a unit manager, such as petitioner,
point to the conclusion that these managers were employees of Manulife,
applying the four-fold test.[16]

This Court (and all adjudicators for that matter) cannot and should not fill in the
evidentiary gaps in a partys case that the party failed to support; we cannot and should
not take the cudgels for any party. Tongko failed to support his cause and we should
simply view him and his case as they are; our duty is to sit as a judge in the case that he
and the respondent presented.

To support its arguments on equity, the Dissent uses the Constitution and the Civil
Code, using provisions and principles that are all motherhood statements. The mandate of
the Court, of course, is to decide cases based on the facts and the law, and not to
base its conclusions on fundamental precepts that are far removed from the particular case
presented before it. When there is no room for their application, of capacity of principles,
reliance on the application of these fundamental principles is misplaced.

C. Earnings were Commissions

That his earnings were agents commissions arising from his work as an insurance
agent is a matter that the petitioner cannot deny, as these are the declarations and
representations he stated in his income tax returns through the years. It would be doubly
unjust, particularly to the government, if he would be allowed at this late point to turn
around and successfully claim that he was merely an employee after he declared himself,
through the years, as an independent self-employed insurance agent with the privilege of
deducting business expenses. This aspect of the case alone considered together with the
probative value of income tax declarations and returns filed prior to the present controversy
should be enough to clinch the present case against the petitioners favor.

D.

The Dissents Solution:

Unwieldy and Legally Infirm

The Dissent proposes that Tongko should be considered as part employee (as
manager) and part insurance agent; hence, the original decision should be modified to
pertain only to the termination of his employment as a manager and not as an insurance
agent. Accordingly, the backwages component of the original award to him should not
include the insurance sales commissions. This solution, according to the line taken by the
Dissent then, was justified on the view that this was made on a case-to-case basis.

Decisions of the Supreme Court, as the Civil Code provides, form part of the law of
the land. When the Court states that the determination of the existence of an employment
relationship should be on a case-to-case basis, this does not mean that there will be as
many laws on the issue as there are cases. In the context of this case, the four-fold test is
the established standard for determining employer-employee relationship and the existence
of these elements, most notably control, is the basis upon which a conclusion on the
absence of employment relationship was anchored. This simply means that a conclusion on
whether employment relationship exists in a particular case largely depends on the facts
and,

in

no

small

measure,

on

the

parties

evidence vis--vis the

clearly

defined

jurisprudential standards. Given that the parties control what and how the facts will be
established in a particular case and/or how a particular suit is to be litigated, deciding the
issues on a case-to-case basis becomes an imperative.

Another legal reality, a more important one, is that the duty of a court is to say what
the law is.[17] This is the same duty of the Supreme Court that underlies the stare
decisis principle. This is how the public, in general and the insurance industry in particular,
views the role of this Court and courts in general in deciding cases. The lower courts and
the bar, most specially, look up to the rulings of this Court for guidance. Unless extremely
unavoidable, the Court must, as a matter of sound judicial policy, resist the temptation of
branding its ruling pro hac vice.

The compromise solution of declaring Tongko both an employee and an agent is

legally unrealistic, unwieldy and is, in fact, legally infirm, as it goes against the above basic
principles of judicial operation. Likewise, it does not and cannot realistically solve the
problem/issue in this case; it actually leaves more questions than answers.

As already pointed out, there is no legal basis (be it statutory or jurisprudential) for
the

part-employee/part-insurance

agent

status

under

an

essentially

principal-agent

contractual relation which the Dissent proposes to accord to Tongko. If the Dissent intends
to establish one, this is highly objectionable for this would amount to judicial legislation. A
legal relationship, be it one of employment or one based on a contract other than
employment, exists as a matter of law pursuant to the facts, incidents and legal
consequences of the relationship; it cannot exist devoid of these legally defined underlying
facts and legal consequences unless the law itself creates the relationship an act that is
beyond the authority of this Court to do.

Additionally, the Dissents conclusion completely ignores an unavoidable legal reality

that the parties are bound by a contract of agency that clearly subsists notwithstanding
the successive designation of Tongko as a unit manager, a branch manager and a regional
sales manager. (As already explained in our Resolution granting Manulifes motion for
reconsideration, no evidence on record exists to provide the Court with clues as to the
precise impact of all these designations on the contractual agency relationship.) The
Dissent, it must be pointed out, concludes that Tongkos employment as manager was
illegally terminated; thus, he should be accordingly afforded relief therefor. But, can Tongko
be given the remedies incidental to his dismissal as manager separately from his status as
an insurance agent? In other words, since the respondents terminated all relationships with
Tongko through the termination letter, can we simply rule that his role as a manager was

illegally terminated without touching on the consequences of this ruling on his status as an
insurance agent? Expressed in these terms, the inseparability of his contract as agent with
any other relationship that springs therefrom can thus be seen as an insurmountable legal
obstacle.

The Dissents compromise approach would also sanction split jurisdiction. The labor
tribunals shall have jurisdiction over Tongkos employment as manager while another entity
shall decide the issues/cases arising from the agency relationship. If the managerial
employment is anchored on the agency, how will the labor tribunals decide an issue that is
inextricably linked with a relationship that is outside the loop of their jurisdiction? As already
mentioned

in

the

Resolution

granting

Manulifes

reconsideration,

the DOMINANT relationship in this case is agency and no other.

E. The Dissents Cited Cases

The Dissent cites the cases of Great Pacific Life Assurance Corporation v. National
Labor Relations Commission[18] and Insular Life Assurance Co., Ltd. v. National Labor
Relations Commission[19] to support the allegation that Manulife exercised control over the
petitioner as an employer.

In considering these rulings, a reality that cannot but be recognized is that cases turn
and are decided on the basis of their own unique facts; the ruling in one case cannot simply
be bodily lifted and applied to another, particularly when notable differences exist between
the cited cases and the case under consideration; their respective facts must be strictly
examined to ensure that the ruling in one applies to another. This is particularly true in a
comparison of the cited cases with the present case. Specifically, care should be taken in
reading the cited cases and applying their rulings to the present case as the cited cases all
dealt with the proper legal characterization of subsequent management contracts that
superseded the original agency contract between the insurance company and the agent.

In Great Pacific Life, the Ruiz brothers were appointed to positions different from their
original positions as insurance agents, whose duties were clearly defined in a subsequent

contract. Similarly, in Insular, de los Reyes, a former insurance agent, was appointed as
acting unit manager based on a subsequent contract. In both cases, the Court anchored its
findings of labor control on the stipulations of these subsequent contracts.

In contrast, the present case is remarkable for the absence of evidence of any
change in the nature of the petitioners employment with Manulife. As previously stated
above and in our assailed Resolution, the petitioner had always been governed by the
Agreement from the start until the end of his relationship with Manulife. His agency status
never changed except to the extent of being a lead agent. Thus, the cited cases where
changes in company-agent relationship expressly changed and where the subsequent
contracts were the ones passed upon by the Court cannot be totally relied upon as
authoritative.

We cannot give credit as well to the petitioners claim of employment based on the
affidavits executed by other Manulife agents describing their duties, because these same
affidavits only affirm their status as independent agents, not as employees. To quote these
various claims:[20]

1.a. I have no fixed wages or salary since my services are compensated by

way of commissions based on the computed premiums paid in full on the
policies obtained thereat;

1.b. I have no fixed working hours and employ my own method in soliciting
insurance at a time and place I see fit;

1.c. I have my own assistant and messenger who handle my daily work load;

1.d. I use my own facilities, tools, materials and supplies in carrying out my
business of selling insurance;

x x x x

6. I have my own staff that handles day to day operations of my office;

7. My staff are my own employees and received salaries from me;

x x x x

9. My commission and incentives are all reported to the Bureau of Internal

Revenue (BIR) as income by a self-employed individual or professional with a
ten (10) percent creditable withholding tax. I also remit monthly for
professionals.

The petitioner cannot also rely on the letter written by respondent Renato Vergel de
Dios to prove that Manulife exercised control over him. As we already explained in the
assailed Resolution:

Even de Dios letter is not determinative of control as it indicates the

least amount of intrusion into Tongkos exercise of his role as manager in
guiding the sales agents. Strictly viewed, de Dios directives are merely
operational guidelines on how Tongko could align his operations with
Manulifes re-directed goal of being a big league player. The method is to
expand coverage through the use of more agents. This requirement for the
recruitment of more agents is not a means-and-method control as it relates,
more than anything else, and is directly relevant, to Manulifes objective of
expanded business operations through the use of a bigger sales force whose
members are all on a principal-agent relationship. An important point to note
here is that Tongko was not supervising regular full-time employees of
Manulife engaged in the running of the insurance business; Tongko was
effectively guiding his corps of sales agents, who are bound to Manulife
through the same agreement that he had with manulife, all the while sharing
in these agents commissions through his overrides.[21]

Lastly, in assailing the Agreement between him and Manulife, the petitioner
cites Paguio v. National Labor Relations Commission [22] on the claim that the agreement that
the parties signed did not conclusively indicate the legal relationship between them.

The evidentiary situation in the present case, however, shows that despite the
petitioners insistence that the Agreement was no longer binding between him and Manulife,

no evidence was ever adduced to show that their relationship changed so that Manulife at
some point controlled the means and method of the petitioners work.

In fact, his evidence

only further supports the conclusion that he remained an independent insurance agent a
status he admits, subject only to the qualification that he is at the same time an
employee. Thus, we can only conclude that the Agreement governed his relations with
Manulife.

Additionally, it is not lost on us that Paguio is a ruling based on a different factual

setting; it involves a publishing firm and an account executive, whose repeated engagement
was considered as an indication of employment. Our ruling in the present case is specific to
the insurance industry, where the law permits an insurance company to exercise control
over its agents within the limits prescribed by law, and to engage independent agents for
several transactions and within an unlimited period of time without the relationship
amounting to employment. In light of these realities, the petitioners arguments on his last
argument must also fail.

The dissent also erroneously cites eight other cases Social Security System v. Court
of

Appeals,[23] Cosmopolitan

Funeral

Homes,

Inc.

v.

Maalat,[24] Algon

Construction Corporation v. National Labor Relations Commission,

[25]

Engineering

Equitable Banking

Corporation v. National Labor Relations Commission,[26]Lazaro v. Social Security Commission,

[27]

Dealco Farms, Inc. v. National Labor Relations Commission,[28] South Davao Development

Company, Inc. v. Gamo,[29]and Abante, Jr. v. Lamadrid Bearing & Parts Corporation.[30] The
dissent cited these cases to support its allegation that labor laws and jurisprudence should
be applied in cases, to the exclusion of other laws such as the Civil Code or the Insurance
Code, even when the latter are also applicable.

In Social Security System, Cosmopolitan Funeral Homes, Dealco Farms, and South
Davao Development, the issue that repeats itself is whether complainants were employees
or independent contractors; the legal relationships involved are both labor law concepts and
make no reference to the Civil Code (or even the Insurance Code). The provisions cited in
the Dissent Articles 1458-1637 of the Civil Code [31] and Articles 1713-1720 of the Civil
Code

[32]

do not even appear in the decisions cited.

In Algon, the issue was whether the lease contract should dictate the legal
relationship between the parties, when there was proof of an employer-employee
relationship. In the cited case, the lease provisions on termination were thus considered
irrelevant because of a substantial evidence of an employment relationship. The cited case
lacks the complexity of the present case; Civil Code provisions on lease do not prescribe
that lessees exercise control over their lessors in the way that the Insurance Code and the
Civil provide that insurance companies and principals exercised control over their agents.

The issue in Equitable, on the other hand, is whether a lawyer-client relationship or

an employment relationship governs the legal relation between parties. Again, this case is
inapplicable as it does not illustrate the predominance of labor laws and jurisprudence over
other laws, in general, and the Insurance Code and Civil Code, in particular. It merely
weighed the evidence in favor of an employment relationship over that of a lawyer-client
relationship. Similarly in Lazaro, the Court found ample proof of control determinative of an
employer-employee relationship. Both cases are not applicable to the present case, which is
attended by totally different factual considerations as the petitioner had not offered any
evidence of the companys control in the means and manner of the performance of his work.

On the other hand, we find it strange that the dissent cites Abante as a precedent,
since the Court, in this case, held that an employee-employer relationship is notably absent
in this case as the complainant was a sales agent. This case better supports the majoritys
position that a sales agent, who fails to show control in the concept of labor law, cannot be
considered an employee, even if the company exercised control in the concept of a sales
agent.[33]

It bears stressing that our ruling in this case is not about which law has primacy over
the other, but that we should be able to reconcile these laws. We are merely saying that
where the law makes it mandatory for a company to exercise control over its agents, the
complainant in an illegal dismissal case cannot rely on these legally prescribed control
devices as indicators of an employer-employee relationship. As shown in our discussion, our
consideration of the Insurance Code and Civil Code provisions does not negate the
application of labor laws and jurisprudence; ultimately, we dismissed the petition because of
its failure to comply with the control test.

WHEREFORE, premises
Reconsideration WITH

considered,

FINALITY for

lack

of

we

hereby DENY the Motion

merit. No

further

pleadings

entertained. Let entry of judgment proceed in due course.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

PRIMO E. CAONG, JR., ALEXANDER J.

TRESQUIO, and LORIANO D. DALUYON,
Petitioners,

G.R. No. 179428

Present:

CARPIO, J.,
Chairperson,
- versus -

NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

AVELINO REGUALOS,

Promulgated:

Respondent.
January 26, 2011

x------------------------------------------------------------------------------------x

shall

for
be

DECISION

NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in their boundary

obligations reasonable? The Court of Appeals (CA) answered the question in the affirmative
in its Decision[1] dated December 14, 2006 and Resolution dated July 16, 2007. In this
petition for review on certiorari, we take a second look at the issue and determine whether
the situation at bar merits the relaxation of the application of the said policy.

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano
D. Daluyon (Daluyon) were employed by respondent Avelino Regualos under a boundary
agreement,

as

drivers

of

his jeepneys.

In

November

2001,

they

filed

separate

complaints[2] for illegal dismissal against respondent who barred them from driving the
vehicles due to deficiencies in their boundary payments.

Caong was hired by respondent in September 1998 and became a permanent driver
sometime in 2000. In July 2001, he was assigned a brand- new jeepney for a boundary fee
of P550.00 per day. He was suspended on October 9-15, 2001 for failure to remit the full
amount of the boundary. Consequently, he filed a complaint for illegal suspension. Upon
expiration of the suspension period, he was readmitted by respondent, but he was
reassigned to an older jeepney for a boundary fee ofP500.00 per day. He claimed that, on
November 9, 2001, due to the scarcity of passengers, he was only able to remit P400.00 to
respondent. On November 11, 2001, he returned to work after his rest day, but respondent
barred him from driving because of the deficiency in the boundary payment. He pleaded
with respondent but to no avail.[3]

Tresquio was employed by respondent as driver in August 1996. He became a

permanent driver in 1997. In 1998, he was assigned to drive a new jeepney for a boundary
fee of P500.00 per day. On November 6, 2001, due to the scarcity of passengers, he was
only able to remit P450.00. When he returned to work on November 8, 2001 after his rest
day, he was barred by respondent because of the deficiency of P50.00. He pleaded with
respondent but the latter was adamant.[4]

On the other hand, Daluyon started working for respondent in March 1998. He
became a permanent driver in July 1998. He was assigned to a relatively newjeepney for a
boundary fee of P500.00 per day. On November 7, 2001, due to the scarcity of passengers,
he was only able to pay P470.00 to respondent. The following day, respondent barred him
from driving his jeepney. He pleaded but to no avail.[5]

During the mandatory conference, respondent manifested that petitioners were not
dismissed and that they could drive his jeepneys once they paid their arrears. Petitioners,
however, refused to do so.

Petitioners averred that they were illegally dismissed by respondent without just
cause. They maintained that respondent did not comply with due process requirements
before terminating their employment, as they were not furnished notice apprising them of
their infractions and another informing them of their dismissal. Petitioners claimed that
respondents offer during the mandatory conference to reinstate them was an insincere
afterthought as shown by the warning given by respondent that, if they fail to remit the full
amount of the boundary yet again, they will be barred from driving the jeepneys. Petitioners
questioned respondents policy of automatically dismissing the drivers who fail to remit the
full amount of the boundary as it allegedly (a) violates their right to due process; (b) does
not constitute a just cause for dismissal; (c) disregards the reality that there are days when
they could not raise the full amount of the boundary because of the scarcity of passengers.

In his Position Paper, respondent alleged that petitioners were lessees of his vehicles
and not his employees; hence, the Labor Arbiter had no jurisdiction. He claimed that he
noticed that some of his lessees, including petitioners, were not fully paying the daily rental
of his jeepneys. In a list which he attached to the Position Paper, it was shown that
petitioners had actually incurred arrears since they started working. The list showed that
Caongs total arrears amounted to P10,315.00, that of Tresquio was P10,760.00, while that
of Daluyon was P6,890.00. He made inquiries and discovered that his lessees contracted
loans with third parties and used the income of the jeepneys in paying the loans. Thus, on
November 4, 2001, he gathered all the lessees in a meeting and informed them that,
effective November 5, 2001, those who would fail to fully pay the daily rental would not be
allowed to rent a jeepney on the following day. He explained to them that the jeepneys were
acquired on installment basis, and that he was paying the monthly amortizations through
the lease income. Most of the lessees allegedly accepted the condition and paid their
arrears. Petitioners, however, did not settle their arrears. Worse, their remittances were
again short of the required boundary fee. Petitioner Daluyons rent payment was short
of P20.00 on November 5, 2001 and P80.00 on November 7, 2001. On November 6, 2001, it
was Tresquio who incurred an arrear of P100.00. On November 7 and 9, 2001, petitioner
Caong was in arrear of P50.00 and P100.00, respectively. Respondent stressed that, during
the mandatory conference, he manifested that he would renew his lease with petitioners if
they would pay the arrears they incurred during the said dates. [6]

On March 31, 2003, the Labor Arbiter decided the case in favor of respondent, thus:

WHEREFORE, judgment is hereby rendered, DISMISSING the aboveentitled cases for lack of merit. However, respondent Regualos is directed to
accept back complainants Caong, Tresquio and Daluyon, as regular drivers of
his passenger jeepneys, after complainants have paid their respective
arrearages they have incurred in the remittance of their respective boundary
payments, in the amount of P150.00, P100.00 and P100.00. Complainants, if
still interested to work as drivers, are hereby ordered to report to respondent
Regualos within fifteen (15) days from the finality of this decision. Otherwise,
failure to do so means forfeiture of their respective employments.

Other claims of complainants are dismissed for lack of merit.

SO ORDERED.[7]

According to the Labor Arbiter, an employer-employee relationship existed between

respondent and petitioners. The latter were not dismissed considering that they could go
back to work once they have paid their arrears. The Labor Arbiter opined that, as a
disciplinary measure, it is proper to impose a reasonable sanction on drivers who cannot pay
their boundary payments. He emphasized that respondent acquired the jeepneys on loan or
installment basis and relied on the boundary payments to comply with his monthly
amortizations.[8]

Petitioners appealed the decision to the National Labor Relations Commission (NLRC).
In its resolution[9] dated March 31, 2004, the NLRC agreed with the Labor Arbiter and
dismissed the appeal. It also denied petitioners motion for reconsideration. [10]

Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision[11] dated December 14, 2006, the CA found no grave abuse of
discretion on the part of the NLRC. According to the CA, the employer-employee relationship
of the parties has not been severed, but merely suspended when respondent refused to
allow petitioners to drive the jeepneys while there were unpaid boundary obligations. The CA
pointed out that the fact that it was within the power of petitioners to return to work is proof
that there was no termination of employment. The condition that petitioners should first pay
their arrears only for the period of November 5-9, 2001 before they can be readmitted to
work is neither impossible nor unreasonable if their total unpaid boundary obligations and
the need to sustain the financial viability of the employers enterprisewhich would
ultimately redound to the benefit of the employeesare taken into consideration. [12]

The CA went on to rule that petitioners were not denied their right to due process. It
pointed out that the case does not involve a termination of employment; hence, the strict
application of the twin-notice rule is not warranted. According to the CA, what is important is
that petitioners were given the opportunity to be heard. The meeting conducted by
respondent on November 4, 2001 served as sufficient notice to petitioners. During the said
meeting, respondent informed his employees, including petitioners, to strictly comply with
the policy regarding remittances and warned them that they would not be allowed to take
out the jeepneys if they did not remit the full amount of the boundary.[13]

Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the
motion in its Resolution dated July 16, 2007.[14]

Petitioners are now before this Court resolutely arguing that they were illegally
dismissed by respondent, and that such dismissal was made in violation of the due process
requirements of the law.

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible error, but grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of respondent.
Mere abuse of discretion is not enough. It must be shown that public respondent exercised

its power in an arbitrary or despotic manner by reason of passion or personal hostility, and
this must be so patent and so gross as to amount to an evasion of a positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law. [15]

As correctly held by the CA, petitioners failed to establish that the NLRC
committed grave abuse of discretion in affirming the Labor Arbiters ruling, which is
supported by the facts on record.

It

is

already

settled

that

the

relationship

between jeepney owners/operators

and jeepney drivers under the boundary system is that of employer-employee and not of
lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in
excess of the so-called boundary that they pay to the owner/operator is not sufficient to
negate the relationship between them as employer and employee. [16]

The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not
dismissed from employment but merely suspended pending payment of their arrears.
Findings of fact of the CA, particularly where they are in absolute agreement with those of
the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are
deemed binding upon this Court so long as they are supported by substantial evidence. [17]

We have no reason to deviate from such findings. Indeed, petitioners suspension

cannot be categorized as dismissal, considering that there was no intent on the part of
respondent to sever the employer-employee relationship between him and petitioners. In
fact, it was made clear that petitioners could put an end to the suspension if they only pay
their recent arrears. As it was, the suspension dragged on for years because of petitioners
stubborn refusal to pay. It would have been different if petitioners complied with the
condition and respondent still refused to readmit them to work. Then there would have been
a clear act of dismissal. But such was not the case. Instead of paying, petitioners even filed
a complaint for illegal dismissal against respondent.

Respondents policy of suspending drivers who fail to remit the full amount of the
boundary was fair and reasonable under the circumstances. Respondent explained that he

noticed that his drivers were getting lax in remitting their boundary payments and, in fact,
herein petitioners had already incurred a considerable amount of arrears. He had to put a
stop to it as he also relied on these boundary payments to raise the full amount of his
monthly amortizations on the jeepneys. Demonstrating their obstinacy, petitioners, on the
days immediately following the implementation of the policy, incurred deficiencies in their
boundary remittances.

It is acknowledged that an employer has free rein and enjoys a wide latitude of
discretion

to

regulate

all

aspects

of

employment,

including

the

prerogative

to

instill discipline on his employees and to impose penalties, including dismissal, if warranted,
upon erring employees. This is a management prerogative. Indeed, the manner in which
management conducts its own affairs to achieve its purpose is within the managements
discretion. The only limitation on the exercise of management prerogative is that the
policies, rules, and regulations on work-related activities of the employees must always be
fair and reasonable, and the corresponding penalties, when prescribed, commensurate to
the offense involved and to the degree of the infraction. [18]

Petitioners argue that the policy is unsound as it does not consider the times when
passengers are scarce and the drivers are not able to raise the amount of the boundary.

Petitioners concern relates to the implementation of the policy, which is another

matter. A company policy must be implemented in such manner as will accord social justice
and compassion to the employee. In case of noncompliance with the company policy, the
employer must consider the surrounding circumstances and the reasons why the employee
failed to comply. When the circumstances merit the relaxation of the application of the
policy, then its noncompliance must be excused.

In the present case, petitioners merely alleged that there were only few passengers
during the dates in question. Such excuse is not acceptable without any proof or, at least, an
explanation as to why passengers were scarce at that time. It is simply a bare allegation, not
worthy of belief. We also find the excuse unbelievable considering that petitioners incurred
the shortages on separate days, and it appears that only petitioners failed to remit the full
boundary payment on said dates.

Under a boundary scheme, the driver remits the boundary, which is a fixed
amount, to the owner/operator and gets to earn the amount in excess thereof. Thus, on a
day when there are many passengers along the route, it is the driver who actually benefits
from it. It would be unfair then if, during the times when passengers are scarce, the
owner/operator will be made to suffer by not getting the full amount of the boundary. Unless
clearly shown or explained by an event that irregularly and negatively affected the usual
number of passengers within the route, the scarcity of passengers should not excuse the
driver from paying the full amount of the boundary.

Finally, we sustain the CAs finding that petitioners were not denied the right to due
process. We thus quote with approval its discussion on this matter:

Having established that the case at bench does not involve termination
of employment, We find that the strict, even rigid, application of the twinnotice rule is not warranted.

But the due process safeguards are nonetheless still available to

petitioners.

Due process is not a matter of strict or rigid or formulaic process. The

essence of due process is simply the opportunity to be heard, or as applied to
administrative proceedings, an opportunity to explain ones side or an
opportunity to seek a reconsideration of the action or ruling complained of. A
formal or trial-type hearing is not at all times and in all instances essential, as
the due process requirements are satisfied where the parties are afforded fair
and reasonable opportunity to explain their side of the controversy at hand. x
x x.

xxxx

In the case at bench, private respondent, upon finding that petitioners

had consistently failed to remit the full amount of the boundary, conducted a
meeting on November 4, 2001 informing them to strictly comply with the
policy regarding their remittances and warned them to discontinue driving if
they still failed to remit the full amount of the boundary.[19]

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

MARTICIO SEMBLANTE and

DUBRICK PILAR,

G.R. No. 196426

Petitioners,

Present:

CARPIO,* J.
- versus -

VELASCO, JR., Chairperson,

BRION,**
PERALTA, and

COURT OF APPEALS, 19THDIVISION,

now SPECIAL FORMER 19TH DIVISION,
GALLERA DE MANDAUE /
SPOUSES VICENTE and MARIA
LUISA LOOT,

SERENO,*** JJ.

Promulgated:

Respondents.
August 15, 2011
x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

Before Us is a Petition for Review on Certiorari under Rule 45, assailing and seeking to
set aside the Decision[1] and Resolution[2] dated May 29, 2009 and February 23, 2010,
respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 03328. The CA affirmed the
October 18, 2006 Resolution[3] of the National Labor Relations Commission (NLRC), Fourth
Division (now Seventh Division), in NLRC Case No. V-000673-2004.

Petitioners Marticio Semblante (Semblante) and Dubrick Pilar (Pilar) assert that they
were hired by respondents-spouses Vicente and Maria Luisa Loot, the owners of Gallera de
Mandaue (the cockpit), as the official masiador and sentenciador, respectively, of the cockpit
sometime in 1993.

As the masiador, Semblante calls and takes the bets from the gamecock owners and
other bettors and orders the start of the cockfight. He also distributes the winnings after
deducting the arriba, or the commission for the cockpit. Meanwhile, as the sentenciador,
Pilar oversees the proper gaffing of fighting cocks, determines the fighting cocks physical
condition and capabilities to continue the cockfight, and eventually declares the result of the
cockfight.[4]

For their services as masiador and sentenciador, Semblante receives PhP 2,000 per
week or a total of PhP 8,000 per month, while Pilar gets PhP 3,500 a week or PhP 14,000 per
month. They work every Tuesday, Wednesday, Saturday, and Sunday every week, excluding
monthly derbies and cockfights held on special holidays. Their working days start at 1:00
p.m. and last until 12:00 midnight, or until the early hours of the morning depending on the
needs of the cockpit. Petitioners had both been issued employees identification cards [5] that
they wear every time they report for duty. They alleged never having incurred any infraction
and/or violation of the cockpit rules and regulations.

On November 14, 2003, however, petitioners were denied entry into the cockpit upon
the instructions of respondents, and were informed of the termination of their services
effective that date. This prompted petitioners to file a complaint for illegal dismissal against
respondents.

In answer, respondents denied that petitioners were their employees and alleged that
they were associates of respondents independent contractor, Tomas Vega. Respondents
claimed that petitioners have no regular working time or day and they are free to decide for
themselves whether to report for work or not on any cockfighting day. In times when there
are few cockfights in Gallera de Mandaue, petitioners go to other cockpits in the vicinity.
Lastly, petitioners, so respondents assert, were only issued identification cards to indicate
that they were free from the normal entrance fee and to differentiate them from the general
public.[6]

In a Decision dated June 16, 2004, Labor Arbiter Julie C. Rendoque found petitioners
to be regular employees of respondents as they performed work that was necessary and
indispensable to the usual trade or business of respondents for a number of years. The Labor
Arbiter also ruled that petitioners were illegally dismissed, and so ordered respondents to
pay petitioners their backwages and separation pay.[7]

Respondents counsel received the Labor Arbiters Decision on September 14, 2004.
And within the 10-day appeal period, he filed the respondents appeal with the NLRC on
September 24, 2004, but without posting a cash or surety bond equivalent to the monetary
award granted by the Labor Arbiter.[8]

It was only on October 11, 2004 that respondents filed an appeal bond dated October
6, 2004. Hence, in a Resolution[9] dated August 25, 2005, the NLRC denied the appeal for its
non-perfection.

Subsequently,

however,

the

NLRC,

acting

on

respondents

Motion

for

Reconsideration, reversed its Resolution on the postulate that their appeal was meritorious
and the filing of an appeal bond, albeit belated, is a substantial compliance with the
rules. The NLRC held in its Resolution of October 18, 2006 that there was no employeremployee relationship between petitioners and respondents, respondents having no part in
the selection and engagement of petitioners, and that no separate individual contract with
respondents was ever executed by petitioners.[10]

Following the denial by the NLRC of their Motion for Reconsideration, per Resolution
dated January 12, 2007, petitioners went to the CA on a petition for certiorari. In support of
their petition, petitioners argued that the NLRC gravely abused its discretion in entertaining
an appeal that was not perfected in the first place. On the other hand, respondents argued
that the NLRC did not commit grave abuse of discretion, since they eventually posted their
appeal bond and that their appeal was so meritorious warranting the relaxation of the rules
in the interest of justice.[11]

In its Decision dated May 29, 2009, the appellate court found for respondents, noting
that referees and bet-takers in a cockfight need to have the kind of expertise that is
characteristic of the game to interpret messages conveyed by mere gestures. Hence,
petitioners are akin to independent contractors who possess unique skills, expertise, and
talent to distinguish them from ordinary employees. Further, respondents did not supply
petitioners with the tools and instrumentalities they needed to perform work. Petitioners
only

needed

their

unique

skills

and

talents

to

perform

their

as masiador and sentenciador.[12] The CA held:

In some circumstances, the NLRC is allowed to be liberal in the

interpretation of the rules in deciding labor cases. In this case, the appeal
bond was filed, although late. Moreover, an exceptional circumstance
obtains in the case at bench which warrants a relaxation of the bond
requirement as a condition for perfecting the appeal. This case is highly
meritorious that propels this Court not to strictly apply the rules and thus
prevent a grave injustice from being done.

As elucidated by the NLRC, the circumstances obtaining in this

case wherein no actual employer-employee exists between the
petitioners and the private respondents [constrain] the relaxation of
the rules. In this regard, we find no grave abuse attributable to the
administrative body.

xxxx

Petitioners are duly licensed masiador and sentenciador in the

cockpit owned by Lucia Loot. Cockfighting, which is a part of our cultural
heritage, has a peculiar set of rules. It is a game based on the fighting ability

job

of the game cocks in the cockpit. The referees and bet-takers need to
have that kind of expertise that is characteristic of the cockfight
gambling who can interpret the message conveyed even by mere
gestures. They ought to have the talent and skill to get the bets from
numerous cockfighting aficionados and decide which cockerel to put in the
arena. They are placed in that elite spot where they can control the game and
the crowd. They are not given salaries by cockpit owners as their
compensation is based on the arriba. In fact, they can offer their
services everywhere because they are duly licensed by the GAB. They are free
to choose which cockpit arena to enter and offer their expertise. Private
respondents cannot even control over the means and methods of the
manner by which they perform their work. In this light, they are akin to
independent contractors who possess unique skills, expertise and talent to
distinguish them from ordinary employees.

Furthermore, private respondents did not supply petitioners with the

tools and instrumentalities they needed to perform their work. Petitioners only
needed their talent and skills to be a masiador and sentenciador. As such,
they had all the tools they needed to perform their work. (Emphasis supplied.)

The CA refused to reconsider its Decision. Hence, petitioners came to this Court,
arguing in the main that the CA committed a reversible error in entertaining an appeal,
which was not perfected in the first place.

Indeed, the posting of a bond is indispensable to the perfection of an appeal in cases

involving monetary awards from the Decision of the Labor Arbiter. [13]Article 223 of the Labor
Code 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. Such appeal may be entertained only on any of the
following grounds:

xxxx

In case of a judgment involving a monetary award, an appeal by the

employer may be perfected only upon the posting of a cash or surety

bond issued by a reputable bonding company duly accredited by the

Commission in the amount equivalent to the monetary award in the judgment
appealed from. (Emphasis supplied.)

Time and again, however, this Court, considering the substantial merits of the case,
has relaxed this rule on, and excused the late posting of, the appeal bond when there are
strong and compelling reasons for the liberality, [14] such as the prevention of miscarriage of
justice extant in the case [15] or the special circumstances in the case combined with its legal
merits or the amount and the issue involved. [16] After all, technical rules cannot prevent
courts from exercising their duties to determine and settle, equitably and completely, the
rights and obligations of the parties.[17] This is one case where the exception to the general
rule lies.

While respondents had failed to post their bond within the 10-day period provided
above, it is evident, on the other hand, that petitioners are NOT employees of respondents,
since their relationship fails to pass muster the four-fold test of employment We have
repeatedly mentioned in countless decisions: (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, which is the most important element. [18]

As found by both the NLRC and the CA, respondents had no part in petitioners
selection and management;[19] petitioners compensation was paid out of thearriba (which is
a percentage deducted from the total bets), not by petitioners; [20] and petitioners
performed their functions as masiador and sentenciador free from the direction
and control of respondents.[21] In the conduct of their work, petitioners relied mainly on
their expertise that is characteristic of the cockfight gambling, [22] and were never given by
respondents any tool needed for the performance of their work.[23]

Respondents, not being petitioners employers, could never have dismissed, legally
or illegally, petitioners, since respondents were without power or prerogative to do so in the
first place. The rule on the posting of an appeal bond cannot defeat the substantive rights of
respondents to be free from an unwarranted burden of answering for an illegal dismissal for
which they were never responsible.

Strict implementation of the rules on appeals must give way to the factual and legal
reality that is evident from the records of this case. [24] After all, the primary objective of our
laws is to dispense justice and equity, not the contrary.

WHEREFORE, We DENY this petition and AFFIRM the May 29, 2009 Decision and
February 23, 2010 Resolution of the CA, and the October 18, 2006 Resolution of the NLRC.
SECOND DIVISION

JOSE MEL BERNARTE,

G.R. No. 192084

Petitioner,

Present:

- versus -

CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,*
PEREZ, and
SERENO, JJ.
PHILIPPINE BASKETBALL
ASSOCIATION (PBA), JOSE
EMMANUEL M. EALA, and

Promulgated:

PERRY MARTINEZ,
Respondents.

September 14, 2011

x-----------------------------------------------------------------------------------------x

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010
Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside
the decision of the National Labor Relations Commission (NLRC), which affirmed the decision
of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor,
and not an employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel
M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to
join the PBA as referees. During the leadership of Commissioner Emilio Bernardino,
they were made to sign contracts on a year-to-year basis. During the term of
Commissioner Eala, however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first
conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It
was only during the second conference when he was made to sign a one and a half
month contract for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner
advising him that his contract would not be renewed citing his unsatisfactory
performance on and off the court. It was a total shock for Bernarte who was awarded

Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix
a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA
pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee.
Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6,
2003, respondent Martinez issued a memorandum to Guevarra expressing
dissatisfaction over his questioning on the assignment of referees officiating out-oftown games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts
of retainer with the PBA in the year 2003. The first contract was for the period
January 1, 2003 to July 15, 2003; and the second was for September 1 to December
2003. After the lapse of the latter period, PBA decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the
PBA. Their respective contracts of retainer were simply not renewed. PBA had the
prerogative of whether or not to renew their contracts, which they knew were fixed. 4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose
dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the
reinstatement of petitioner and the payment of backwages, moral and exemplary damages
and attorneys fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have
illegally dismissed complainants are hereby ordered to (a) reinstate complainants
within thirty (30) days from the date of receipt of this decision and to solidarily pay
complainants:

JOSE MEL RENATO GUEVARRA

BERNARTE

1. backwages from January 1,

2004 up to the finality of this
Decision, which to date is

P211,250.00
P536,250.00

2. moral damages

100,000.00

100,000.00

50,000.00
3. exemplary damages

50,000.00

4. 10% attorneys fees

TOTAL

68,625.00

36,125.00

P754,875.00

P397,375.00

or a total of P1,152,250.00

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The
dispositive portion of the NLRCs decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor

Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the
decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals
decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January
28, 2008 and Resolution dated August 26, 2008 of the National Labor Relations
Commission areANNULLED and SET ASIDE. Private respondents complaint before
the Labor Arbiter is DISMISSED.

SO ORDERED.10

The Court of Appeals Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not
exercise any form of control over the means and methods by which petitioner performed his
work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts of blowing
the whistle and making calls during basketball games, it, nevertheless, theorized that
the said acts refer to the means and methods employed by the referees in officiating
basketball games for the illogical reason that said acts refer only to the referees
skills. How could a skilled referee perform his job without blowing a whistle and
making calls? Worse, how can the PBA control the performance of work of a referee
without controlling his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the
NLRC) that the Contracts of Retainer show that petitioners have control over private
respondents.

xxxx

Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that
private respondents repeated hiring made them regular employees by operation of
law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in
turn determines whether petitioner was illegally dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiters decision has become
final and executory for failure of respondents to appeal with the NLRC within
thereglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final
and executory for failure of respondents to appeal with the NLRC within the prescribed
period. Petitioner claims that the Labor Arbiters decision was constructively served on
respondents as early as August 2005 while respondents appealed the Arbiters decision only
on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that
service of an unclaimed registered mail is deemed complete five days from the date of first
notice of the post master. In this case three notices were issued by the post office, the last
being on 1 August 2005. The unclaimed registered mail was consequently returned to
sender. Petitioner presents the Postmasters Certification to prove constructive service of the
Labor Arbiters decision on respondents. The Postmaster certified:

xxx

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis,
Jr., immediately issued the first registry notice to claim on July 12, 2005 by the
addressee. The second and third notices were issued on July 21 and August 1, 2005,
respectively.

That the subject registered letter was returned to the sender (RTS) because the
addressee failed to claim it after our one month retention period elapsed. Said
registered letter was dispatched from this office to Manila CPO (RTS) under bill #6,
line 7, page1, column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete upon actual

delivery. Service by ordinary mail is complete upon the expiration of ten (10) days
after mailing, unless the court otherwise provides. Service by registered mail is
complete upon actual receipt by the addressee, or after five (5) days from the date
he received the first notice of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the
completeness of which is determined upon receipt by the addressee of the registered mail;
and (2) constructive service the completeness of which is determined upon expiration of five
days from the date the addressee received the first notice of the postmaster. 13

Insofar as constructive service is concerned, there must be conclusive proof that a first
notice was duly sent by the postmaster to the addressee.14 Not only is it required that notice
of the registered mail be issued but that it should also be delivered to and received by the
addressee.15 Notably, the presumption that official duty has been regularly performed is not
applicable in this situation. It is incumbent upon a party who relies on constructive service to
prove that the notice was sent to, and received by, the addressee. 16

The best evidence to prove that notice was sent would be a certification from the
postmaster, who should certify not only that the notice was issued or sent but also as to

how, when and to whom the delivery and receipt was made. The mailman may also testify
that the notice was actually delivered.17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the
delivery and receipt of the three notices issued by the post office was made. There is no
conclusive evidence showing that the post office notices were actually received by
respondents, negating petitioners claim of constructive service of the Labor Arbiters
decision on respondents. The Postmasters Certification does not sufficiently prove that the
three notices were delivered to and received by respondents; it only indicates that the post
office issued the three notices. Simply put, the issuance of the notices by the post office is
not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there
is no proof of completed constructive service of the Labor Arbiters decision on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot
as respondents appeal was considered in the interest of substantial justice. We agree with
the NLRC. The ends of justice will be better served if we resolve the instant case on the
merits rather than allowing the substantial issue of whether petitioner is an independent
contractor or an employee linger and remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a

general rule, factual issues are beyond the province of this Court. However, this rule admits
of exceptions, one of which is where there are conflicting findings of fact between the Court
of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the
present case.18

To determine the existence of an employer-employee relationship, case law has consistently

applied the four-fold test, to wit: (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 so-called
control test is the most important indicator of the presence or absence of an employeremployee relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer
contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as
stipulated in the retainer contract. PBA can terminate the retainer contract for petitioners
violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case,
making petitioner an independent contractor and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents

since the latter exercise control over the performance of his work. Petitioner cites the
following stipulations in the retainer contract which evidence control: (1) respondents
classify or rate a referee; (2) respondents require referees to attend all basketball games
organized or authorized by the PBA, at least one hour before the start of the first game of
each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate
referee or substitute; (4) referee agrees to observe and comply with all the requirements of
the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees
(a) to keep himself in good physical, mental, and emotional condition during the life of the
contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to
officiate as referee in any basketball game outside of the PBA, without written prior consent
of the Commissioner; (c) always to conduct himself on and off the court according to the
highest standards of honesty or morality; and (6) imposition of various sanctions for
violation of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by
which petitioner performs his work as a referee officiating a PBA basketball game. The
contractual stipulations do not pertain to, much less dictate, how and when petitioner will
blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or
guidelines in order to maintain the integrity of the professional basketball league. As
correctly observed by the Court of Appeals, how could a skilled referee perform his job
without blowing a whistle and making calls? x x x [H]ow can the PBA control the
performance of work of a referee without controlling his acts of blowing the whistle and
making calls?20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between

a television and radio station and one of its talents, the Court held that not all rules imposed
by the hiring party on the hired party indicate that the latter is an employee of the former.
The Court held:

We find that these general rules are merely guidelines towards the achievement of
the mutually desired result, which are top-rating television and radio programs that
comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect
of establishing an employer-employee relationship. The facts of this case fall squarely
with the case of Insular Life Assurance Co., Ltd. v. 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. 22

We agree with respondents that once in the playing court, the referees exercise their own
independent judgment, based on the rules of the game, as to when and how a call or
decision is to be made. The referees decide whether an infraction was committed, and the
PBA cannot overrule them once the decision is made on the playing court. The referees are
the only, absolute, and final authority on the playing court. Respondents or any of the PBA
officers cannot and do not determine which calls to make or not to make and cannot control
the referee when he blows the whistle because such authority exclusively belongs to the
referees. The very nature of petitioners job of officiating a professional basketball game
undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor:

(1) the referees are required to report for work only when PBA games are scheduled, which
is three times a week spread over an average of only 105 playing days a year, and they
officiate games at an average of two hours per game; and (2) the only deductions from the
fees received by the referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day
for five days a week, petitioner is required to report for work only when PBA games are
scheduled or three times a week at two hours per game. In addition, there are no deductions
for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual
deductions from employees salaries. These undisputed circumstances buttress the fact that
petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent
contractor, whose special skills and independent judgment are required specifically for such
position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois
held that plaintiff, a soccer referee, is an independent contractor, and not an employee of
defendant which is the statutory body that governs soccer in the United States. As such,
plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The
U.S. District Court ruled:

Generally, if an employer has the right to control and direct the work of an
individual, not only as to the result to be achieved, but also as to details by which the
result is achieved, an employer/employee relationship is likely to exist. The Court
must be careful to distinguish between control[ling] the conduct of another party
contracting party by setting out in detail his obligations consistent with the freedom
of contract, on the one hand, and the discretionary control an employer daily
exercises over its employees conduct on the other.

Yonan asserts that the Federation closely supervised his performance at each
soccer game he officiated by giving him an assessor, discussing his performance, and
controlling what clothes he wore while on the field and traveling. Putting aside that

the Federation did not, for the most part, control what clothes he wore, the
Federation did not supervise Yonan, but rather evaluated his performance after
matches. That the Federation evaluated Yonan as a referee does not mean that he
was an employee. There is no question that parties retaining independent contractors
may judge the performance of those contractors to determine if the contractual
relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games.
He had full discretion and authority, under the Laws of the Game, to call the game as
he saw fit. x xx In a similar vein, subjecting Yonan to qualification standards and
procedures like the Federations registration and training requirements does not
create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of
independent contractor status. x x x Unskilled work, on the other hand, suggests an
employment relationship. x x x Here, it is undisputed that soccer refereeing,
especially at the professional and international level, requires a great deal of skill
and natural ability. Yonan asserts that it was the Federations training that made him
a top referee, and that suggests he was an employee. Though substantial training
supports an employment inference, that inference is dulled significantly or negated
when the putative employers activity is the result of a statutory requirement, not the
employers choice. x x x

In McInturf v. Battle Ground Academy of Franklin,24 it was held that the umpire
was not an agent of the Tennessee Secondary School Athletic Association
(TSSAA), so the players vicarious liability claim against the association should be
dismissed. In finding that the umpire is an independent contractor, the Court of
Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball
games played between TSSAA member schools. The TSSAA does not supervise
regular season games. It does not tell an official how to conduct the game beyond
the framework established by the rules. The TSSAA does not, in the vernacular of the
case law, control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that
petitioner is an employee of the former. For a hired party to be considered an employee, the
hiring party must have control over the means and methods by which the hired party is to
perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner
simply signifies the renewal of the contract between PBA and petitioner, and highlights the
satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if
PBA decides to discontinue petitioners services at the end of the term fixed in the contract,
whether for unsatisfactory services, or violation of the terms and conditions of the contract,
or for whatever other reason, the same merely results in the non-renewal of the contract, as

in the present case. The non-renewal of the contract between the parties does not constitute
illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of
Appeals.
Republic of the Philippines
Supreme Court
Baguio City
FIRST DIVISION
CHARLIE JAO,

G.R. No. 163700

Petitioner,

- versus -

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

BCC PRODUCTS SALES INC.,

Promulgated:
and TERRANCE TY,
Respondents.
April 18, 2012
x-----------------------------------------------------------------------------------------x
D E C I S I O N

BERSAMIN, J.:
The issue is whether petitioner was respondents employee or not. Respondents
denied an employer-employee relationship with petitioner, who insisted the contrary.
Through his petition for review on certiorari, petitioner appeals the decision
promulgated by the Court of Appeals (CA) on February 27, 2004,[1] finding no employeeemployer relationship between him and respondents, thereby reversing the ruling by the
National Labor Relations Commission (NLRC) to the effect that he was the employee of
respondents.

Antecedents

Petitioner maintained that respondent BCC Product Sales Inc. (BCC) and its President,
respondent Terrance Ty (Ty), employed him as comptroller starting from September 1995
with a monthly salary of P20,000.00 to handle the financial aspect of BCCs business; [2] that
on October 19,1995, the security guards of BCC, acting upon the instruction of Ty, barred
him from entering the premises of BCC where he then worked; that his attempts to report to
work in November and December 12, 1995 were frustrated because he continued to be
barred from entering the premises of BCC;[3] and that he filed a complaint dated December
28, 1995 for illegal dismissal, reinstatement with full backwages, non-payment of wages,
damages and attorneys fees.[4]
Respondents countered that petitioner was not their employee but the employee of
Sobien Food Corporation (SFC), the major creditor and supplier of BCC; and that SFC had
posted him as its comptroller in BCC to oversee BCCs finances and business operations and
to look after SFCs interests or investments in BCC.[5]
Although Labor Arbiter Felipe Pati ruled in favor of petitioner on June 24, 1996,[6] the
NLRC vacated the ruling and remanded the case for further proceedings. [7] Thereafter, Labor
Arbiter Jovencio Ll. Mayor rendered a new decision on September 20, 2001, dismissing
petitioners complaint for want of an employer-employee relationship between the parties.
[8]

Petitioner appealed the September 20, 2001 decision of Labor Arbiter Mayor.
On July 31, 2002, the NLRC rendered a decision reversing Labor Arbiter Mayors

decision, and declaring that petitioner had been illegally dismissed. It ordered the payment
of unpaid salaries, backwages and 13th month pay, separation pay and attorneys fees.
[9]

Respondents moved for the reconsideration of the NLRC decision, but their motion for

reconsideration was denied on September 30, 2002.[10] Thence, respondents assailed the
NLRC decision on certiorari in the CA.
Ruling of the CA
On February 27, 2004, the CA promulgated its assailed decision, [11] holding:
After a judicious review of the records vis--vis the respective posturing
of the contending parties, we agree with the finding that no employeremployee relationship existed between petitioner BCC and the private
respondent. On this note, the conclusion of the public respondent must be
reversed for being issued with grave abuse of discretion.
Etched in an unending stream of cases are the four (4) standards in
determining the existence of an employer-employee relationship, namely,
(a) the manner of selection and engagement of the putative employee;

(b) the mode of payment of wages; (c) the presence or absence of power of
dismissal; and, (d) the presence or absence of control of the putative
employees conduct. Of these powers the power of control over the
employees conduct is generally regarded as determinative of the existence of
the relationship.
Apparently, in the case before us, all these four elements are
absent. First, there is no proof that the services of the private respondent
were engaged to perform the duties of a comptroller in the petitioner
company. There is no proof that the private respondent has undergone a
selection procedure as a standard requisite for employment, especially with
such a delicate position in the company. Neither is there any proof of his
appointment nor is there any showing that the parties entered into an
employment
contract,
stipulating
thereof
that
he
will
receive
P20,000.00/month salary as comptroller, before the private respondent
commenced with his work as such. Second, as clearly established on record,
the private respondent was not included in the petitioner companys payroll
during the time of his alleged employment with the former. True, the name of
the private respondent Charlie Jao appears in the payroll however it does not
prove that he has received his remuneration for his services. Notably, his
name was not among the employees who will receive their salaries as
represented by the payrolls. Instead, it appears therein as a comptroller who
is authorized to approve the same. Suffice it to state that it is rather obscure
for a certified public accountant doing the functions of a comptroller from
September 1995 up to December 1995 not to receive his salary during the
said period. Verily, such scenario does not conform with the usual and
ordinary experience of man. Coming now to the most controlling factor, the
records indubitably reveal the undisputed fact that the petitioner company did
not have nor did not exercise the power of control over the private
respondent. It did not prescribe the manner by which the work is to be carried
out, or the time by which the private respondent has to report for and leave
from work. As already stated, the power of control is such an important factor
that other requisites may even be disregarded. In Sevilla v. Court of
Appeals, the Supreme Court emphatically held, thus:
The control test, under which the person for whom the
services are rendered reserves the right to direct not only
the end to be achieved but also the means for reaching such
end, is generally relied on by the courts.
We have carefully examined the evidence submitted by the private
respondent in the formal offer of evidence and unfortunately, other than the
bare assertions of the private respondent which he miserably failed to
substantiate, we find nothing therein that would decisively indicate that the
petitioner BCC exercised the fundamental power of control over the private
respondent in relation to his employmentnot even the ID issued to the
private respondent and the affidavits executed by Bertito Jemilla and Rogelio
Santias. At best, these pieces of documents merely suggest the existence of
employer-employee relationship as intimated by the NLRC. On the contrary, it
would appear that the said sworn statement provided a substantial basis to
support the contention that the private respondent worked at the petitioner
BCC as SFCs representative, being its major creditor and supplier of goods
and merchandise. Moreover, as clearly pointed out by the petitioner in his
Reply to the private respondents Comment, it is unnatural for SFC to still
employ the private respondent to oversee and supervise collections of
account receivables due SFC from its customers or clients like the herein
petitioner BCC on a date later than December, 1995 considering that a
criminal complaint has already been instituted against him.

Sadly, the private respondent failed to sufficiently discharge the burden

of showing with legal certainty that employee-employer relationship existed
between the parties. On the other hand, it was clearly shown by the
petitioner that it neither exercised control nor supervision over the conduct of
the private respondents employment. Hence, the allegation that there is
employer-employee relationship must necessarily fail.
Consequently, a discussion on the issue of illegal dismissal therefore
becomes unnecessary.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decision of the public respondent NLRC dated July 31, 2002 and the
Resolution datedSeptember 30, 2002 are REVERSED and SET ASIDE.
Accordingly, the decision of the Labor Arbiter dated September 20, 2001 is
hereby REINSTATED.
SO ORDERED.
After the CA denied petitioners motion for reconsideration on May 14, 2004,[12] he
filed a motion for extension to file petition for review, which the Court denied through the
resolution dated July 7, 2004 for failure to render an explanation on why the service of
copies of the motion for extension on respondents was not personally made. [13] The denial
notwithstanding, he filed his petition for review on certiorari. The Court denied the petition
on August 18, 2004 in view of the denial of the motion for extension of time and the
continuing failure of petitioner to render the explanation as to the non-personal service of
the petition on respondents.[14]However, upon a motion for reconsideration, the Court
reinstated the petition for review on certiorari and required respondents to comment.[15]
Issue
The sole issue is whether or not an employer-employee relationship existed between
petitioner and BCC. A finding on the existence of an employer-employee relationship will
automatically warrant a finding of illegal dismissal, considering that respondents did not
state any valid grounds to dismiss petitioner.
Ruling
The petition lacks merit.
The existence of an employer-employee relationship is a question of fact. Generally, a
re-examination of factual findings cannot be done by the Court acting on a petition for
review on certiorari because the Court is not a trier of facts but reviews only questions of
law. Nor may the Court be bound to analyze and weigh again the evidence adduced and

considered in the proceedings below. [16] This rule is not absolute, however, and admits of
exceptions. For one, the Court may look into factual issues in labor cases when the factual
findings of the Labor Arbiter, the NLRC, and the CA are conflicting. [17]
Here, the findings of the NLRC differed from those of the Labor Arbiter and the CA.
This conflict among such adjudicating offices compels the Courts exercise of its authority to
review and pass upon the evidence presented and to draw its own conclusions therefrom.
To prove his employment with BCC, petitioner offered the following: (a) BCC
Identification Card (ID) issued to him stating his name and his position as comptroller, and
bearing his picture, his signature, and the signature of Ty; (b) a payroll of BCC for the period
of October 1-15, 1996 that petitioner approved as comptroller; (c) various bills and receipts
related to expenditures of BCC bearing the signature of petitioner; (d) various checks
carrying the signatures of petitioner and Ty, and, in some checks, the signature of petitioner
alone; (e) a court order showing that the issuing court considered petitioners ID as proof of
his employment with BCC; (f) a letter of petitioner dated March 1, 1997 to the Department of
Justice on his filing of a criminal case for estafa against Ty for non-payment of wages; (g)
affidavits of some employees of BCC attesting that petitioner was their co-employee in BCC;
and (h) a notice of raffle dated December 5, 1995 showing that petitioner, being an
employee of BCC, received the notice of raffle in behalf of BCC. [18]
Respondents denied that petitioner was BCCs employee. They affirmed that SFC had
installed petitioner as its comptroller in BCC to oversee and supervise SFCs collections and
the account of BCC to protect SFCs interest; that their issuance of the ID to petitioner was
only for the purpose of facilitating his entry into the BCC premises in relation to his work of
overseeing the financial operations of BCC for SFC; that the ID should not be considered as
evidence of petitioners employment in BCC;[19] that petitioner executed an affidavit in
March 1996,[20] stating, among others, as follows:
1.

I am a CPA (Certified Public Accountant) by profession but presently

associated with, or employed by, Sobien Food Corporation with the
same business address as abovestated;

2.

In the course of my association with, or employment by, Sobien

Food Corporation (SFC, for short), I have been entrusted by my
employer to oversee and supervise collections on account of
receivables due SFC from its customers or clients; for instance,
certain checks due and turned over by one of SFCs customers is
BCC Product Sales, Inc., operated or run by one Terrance L.
Ty, (President and General manager), pursuant to, or in
accordance with, arrangements or agreement thereon; such
arrangement or agreement is duly confirmed by said Terrance
Ty, as shown or admitted by him in a public instrument executed therefor,

particularly par. 2 of that certain Counter-Affidavit executed and

subscribed on December 11, 1995, xerox copy of which is hereto attached,
duly marked as Annex A and made integral part hereof.
3.

Despite such admission of an arrangement, or agreement insofar

as BCC-checks were delivered to, or turned over in favor of SFC, Mr.
Terrance Ty, in a desire to blemish my reputation or to cause me dishonor
as well as to impute unto myself the commission of a crime, state in
another public instrument executed therefor in that:
3. That all the said 158 checks were unlawfully appropriated by a
certain Charlie Jao absolutely without any authority from BCC and
the same were reportedly turned over by said Mr. Jao to a person
who is not an agent or is not authorized representative of BCC.
xerox copy of which document (Affidavit) is hereto attached, duly marked
as Annex B and made integral part hereof. (emphasis supplied)

and that the affidavit constituted petitioners admission of the arrangement or agreement
between BCC and SFC for the latter to appoint a comptroller to oversee the formers
operations.
Petitioner counters, however, that the affidavit did not establish the absence of an
employer-employee relationship between him and respondents because it had been
executed in March 1996, or after his employment with respondents had been terminated on
December 12, 1995; and that the affidavit referred to his subsequent employment by SFC
following the termination of his employment by BCC.[21]
We cannot side with petitioner.
Our perusal of the affidavit of petitioner compels a conclusion similar to that reached
by the CA and the Labor Arbiter to the effect that the affidavit actually supported the
contention that petitioner had really worked in BCC as SFCs representative. It does seem
more natural and more believable that petitioners affidavit was referring to his employment
by SFC even while he was reporting to BCC as a comptroller in behalf of SFC. As respondents
pointed out, it was implausible for SFC to still post him to oversee and supervise the
collections of accounts receivables due from BCC beyond December 1995 if, as he insisted,
BCC had already illegally dismissed him and had even prevented him from entering the
premises of BCC. Given the patent animosity and strained relations between him and
respondents in such circumstances, indeed, how could he still efficiently perform in behalf of
SFC the essential responsibility to oversee and supervise collections at BCC? Surely,
respondents would have vigorously objected to any arrangement with SFC involving him.

We note that petitioner executed the affidavit in March 1996 to refute a statement Ty
himself made in his own affidavit dated December 11, 1995 to the effect that petitioner had
illegally appropriated some checks without authority from BCC. [22] Petitioner thereby sought
to show that he had the authority to receive the checks pursuant to the arrangements
between SFC and BCC. This showing would aid in fending off the criminal charge
respondents filed against him arising from his mishandling of the checks. Naturally, the
circumstances petitioner adverted to in his March 1996 affidavit concerned those occurring
before December 11, 1995, the same period when he actually worked as comptroller in BCC.
Further, an affidavit dated September 5, 2000 by Alfredo So, the President of SFC,
whom petitioner offered as a rebuttal witness, lent credence to respondents denial of
petitioners employment. So declared in that affidavit, among others, that he had known
petitioner for being earlier his retained accountant having his own office but did not hold
office in SFCs premises; that Ty had approached him (So) looking for an accountant or
comptroller to be employed by him (Ty) in [BCCs] distribution business of SFCs general
merchandise, and had later asked him on his opinion about petitioner; and that he (So) had
subsequently learned that Ty had already employed [petitioner] as his comptroller as of
September 1995.[23]
The statements of So really supported respondents position in that petitioners
association with SFC prior to his supposed employment by BCC went beyond mere
acquaintance with So. That So, who had earlier merely retained petitioner as his
accountant, thereafter employed petitioner as a retained accountant after his supposed
illegal dismissal by BCC raised a doubt as to his employment by BCC, and rather confirmed
respondents assertion of petitioner being an employee of SFC while he worked at BCC.
Moreover, in determining the presence or absence of an employer-employee
relationship, the Court has consistently looked for the following incidents, to wit: (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.[24]
Hereunder are some of the circumstances and incidents occurring while petitioner
was supposedly employed by BCC that debunked his claim against respondents.
It can be deduced from the March 1996 affidavit of petitioner that respondents
challenged his authority to deliver some 158 checks to SFC. Considering that he contested

respondents challenge by pointing to the existing arrangements between BCC and SFC, it
should be clear that respondents did not exercise the power of control over him, because he
thereby acted for the benefit and in the interest of SFC more than of BCC.
In addition, petitioner presented no document setting forth the terms of his
employment by BCC. The failure to present such agreement on terms of employment may
be understandable and expected if he was a common or ordinary laborer who would not
jeopardize his employment by demanding such document from the employer, but may not
square well with his actual status as a highly educated professional.
Petitioners admission that he did not receive his salary for the three months of his
employment by BCC, as his complaint for illegal dismissal and non-payment of wages [25] and
the criminal case for estafa he later filed against the respondents for non-payment of
wages[26] indicated, further raised grave doubts about his assertion of employment by BCC. If
the assertion was true, we are puzzled how he could have remained in BCCs employ in that
period of time despite not being paid the first salary of P20,000.00/month. Moreover, his
name did not appear in the payroll of BCC despite him having approved the payroll as
comptroller.
Lastly, the confusion about the date of his alleged illegal dismissal provides another
indicium of the insincerity of petitioners assertion of employment by BCC. In the petition for
review on certiorari, he averred that he had been barred from entering the premises of BCC
on October 19, 1995,[27] and thus was illegally dismissed. Yet, his complaint for illegal
dismissal stated that he had been illegally dismissed on December 12, 1995 when
respondents security guards barred him from entering the premises of BCC, [28] causing him
to bring his complaint only on December 29, 1995, and after BCC had already filed the
criminal complaint against him. The wide gap between October 19, 1995 and December 12,
1995 cannot be dismissed as a trivial inconsistency considering that the several incidents
affecting the veracity of his assertion of employment by BCC earlier noted herein transpired
in that interval.
With all the grave doubts thus raised against petitioners claim, we need not dwell at
length on the other proofs he presented, like the affidavits of some of the employees of BCC,
the ID, and the signed checks, bills and receipts. Suffice it to be stated that such other
proofs were easily explainable by respondents and by the aforestated circumstances
showing him to be the employee of SFC, not of BCC.

WHEREFORE, the

Court AFFIRMS the

decision

of

the

Court

of

Appeals;

and ORDERS petitioner to pay the costs of suit.

SO ORDERED.

THIRD DIVISION
G.R. No. 171482, March 12, 2014
ASHMOR M. TESORO, PEDRO ANG AND GREGORIO SHARP, Petitioners, v. METRO
MANILA RETREADERS, INC. (BANDAG) AND/OR NORTHERN LUZON RETREADERS,
INC. (BANDAG) AND/OR POWER TIRE AND RUBBER CORP. (BANDAG), Respondents.
DECISION
ABAD, J.:
This case concerns the effect on the status of employment of employees who entered into a
Service Franchise Agreement with their employer.
The Facts and the Case
On various dates between 1991 and 1998, petitioners Ashmor M. Tesoro, Pedro Ang, and
Gregorio Sharp used to work as salesmen for respondents Metro Manila Retreaders, Inc.,
Northern Luzon Retreaders, Inc., or Power Tire and Rubber Corporation, apparently sister
companies, collectively called Bandag. Bandag offered repair and retread services for used
tires. In 1998, however, Bandag developed a franchising scheme that would enable others to
operate tire and retreading businesses using its trade name and service system.
Petitioners quit their jobs as salesmen and entered into separate Service Franchise
Agreements (SFAs) with Bandag for the operation of their respective franchises. Under the
SFAs, Bandag would provide funding support to the petitioners subject to a regular or
periodic liquidation of their revolving funds. The expenses out of these funds would be
deducted from petitioners sales to determine their incomes.
At first, petitioners managed and operated their respective franchises without any problem.
After a length of time, however, they began to default on their obligations to submit periodic
liquidations of their operational expenses in relation to the revolving funds Bandag provided
them. Consequently, Bandag terminated their respective SFA.
Aggrieved, petitioners filed a complaint for constructive dismissal, nonpayment of wages,
incentive pay, 13th month pay and damages against Bandag with the National Labor
Relations Commission (NLRC). Petitioners contend that, notwithstanding the execution of the
SFAs, they remained to be Bandags employees, the SFAs being but a circumvention of their
status as regular employees.
For its part, Bandag pointed out that petitioners freely resigned from their employment and
decided to avail themselves of the opportunity to be independent entrepreneurs under the
franchise scheme that Bandag had. Thus, no employeremployee relationship existed
between petitioners and Bandag.
On March 14, 2003 the Labor Arbiter rendered a Decision, dismissing the complaint on the

ground that no employeremployee relationship existed between Bandag and petitioners.

Upon petitioners appeal to the NLRC the latter affirmed on June 30, 2003 the Labor Arbiters
Decision. It also denied petitioners motion for reconsideration. Undaunted, petitioners filed
a petition for certiorari under Rule 65 with the Court of Appeals (CA) ascribing grave abuse
of discretion. On July 29, 2005 the CA rendered a Decision, 1 dismissing the petition for lack
of merit. It also denied their motion for reconsideration on February 7, 2006.
Issue of the Case
The only issue presented in this case is whether or not petitioners remained to be Bandags
salesmen under the franchise scheme it entered into with them.
Ruling of the Court
Franchising is a business method of expansion that allows an individual or group of
individuals to market a product or a service and to use of the patent, trademark, trade name
and the systems prescribed by the owner.2 In this case, Bandags SFAs created on their faces
an arrangement that gave petitioners the privilege to operate and maintain Bandag
branches in the way of franchises, providing tire repair and retreading services, with
petitioners earning profits based on the performance of their branches.
The question is: did petitioners remain to be Bandags employees after they began operating
those branches? The tests for determining employeremployee 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 with respect to the means
and methods by which the work is to be accomplished. The last is called the control test,
the most important element.3
When petitioners agreed to operate Bandags franchise branches in different parts of the
country, they knew that this substantially changed their former relationships. They were to
cease working as Bandags salesmen, the positions they occupied before they ventured into
running separate Bandag branches. They were to cease receiving salaries or commissions.
Their incomes were to depend on the profits they made. Yet, petitioners did not then
complain of constructive dismissal. They took their chances, ran their branches, Gregorio
Sharp in La Union for several months and Ashmor Tesoro in Baguio and Pedro Ang in
Pangasinan for over a year. Clearly, their belated claim of constructive dismissal is quite
hollow.
It is pointed out that Bandag continued, like an employer, to exercise control over
petitioners work. It points out that Bandag: (a) retained the right to adjust the price rates of
products and services; (b) imposed minimum processed tire requirement (MPR); (c) reviewed
and regulated credit applications; and (d) retained the power to suspend petitioners
services for failure to meet service standards.
But uniformity in prices, quality of services, and good business practices are the essence of
all franchises. A franchisee will damage the franchisors business if he sells at different
prices, renders different or inferior services, or engages in bad business practices. These
business constraints are needed to maintain collective responsibility for faultless and reliable
service to the same class of customers for the same prices.
This is not the control contemplated in employeremployee relationships. Control in such
relationships addresses the details of day to day work like assigning the particular task that
has to be done, monitoring the way tasks are done and their results, and determining the
time during which the employee must report for work or accomplish his assigned task.
Franchising involves the use of an established business expertise, trademark, knowledge,
and training. As such, the franchisee is required to follow a certain established system.
Accordingly, the franchisors may impose guidelines that somehow restrict the petitioners

conduct which do not necessarily indicate control. The important factor to consider is still
the element of control over how the work itself is done, not just its end result. 4
The Court held, in Tongko v. The Manufacturers Life Insurance Co. (Phils.), Inc.,5 that, results
wise, the insurance company, as principal, can impose production quotas upon its
independent agents and determine how many individual agents, with specific territories,
such independent agents ought to employ to achieve the companys objectives. These are
management policy decisions that the labor law element of control cannot reach. Petitioners
commitment to abide by Bandags policy decisions and implementing rules, as franchisees
does not make them its employees.
Petitioners cannot use the revolving funds feature of the SFAs as evidence of their employer
employee relationship with Bandag. These funds do not represent wages. They are more in
the nature of capital advances for operations that Bandag conceptualized to attract
prospective franchisees. Petitioners incomes depended on the profits they make, controlled
by their individual abilities to increase sales and reduce operating costs.
The Labor Arbiter, the NLRC, and the CA, are unanimous that petitioners were no longer
route salesmen, bringing previously ordered supplies and goods to dealers, taking back
returned items, collecting payments, remitting them, etc. They were themselves then the
dealers, getting their own supply and bringing these to their own customers and sub
dealers, if any.
The rule in labor cases is that the findings of fact of quasijudicial bodies, like the NLRC, are
to be accorded with respect, even finality, if supported by substantial evidence. This is
particularly true when passed upon and upheld by the CA.6
WHEREFORE, the instant petition is DENIED. The Decision dated July 29, 2005 and
Resolution dated February 7, 2006 of the Court of Appeals in CAG.R. SP 82447
are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 164774

April 12, 2006

STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners,

vs.
RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents.
DECISION
PUNO, J.:
We are called to decide an issue of first impression: whether the policy of the employer
banning spouses from working in the same company violates the rights of the employee
under the Constitution and the Labor Code or is a valid exercise of management prerogative.

At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated
August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor
Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter.
Petitioner Star Paper Corporation (the company) is a corporation engaged in trading
principally of paper products. Josephine Ongsitco is its Manager of the Personnel and
Administration Department while Sebastian Chua is its Managing Director.
The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda
N. Comia (Comia) and Lorna E. Estrella (Estrella) were all regular employees of the
company.1
Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an
employee of the company, whom he married on June 27, 1998. Prior to the marriage,
Ongsitco advised the couple that should they decide to get married, one of them should
resign pursuant to a company policy promulgated in 1995, 2 viz.:
1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up
to [the] 3rd degree of relationship, already employed by the company.
2. In case of two of our employees (both singles [sic], one male and another female)
developed a friendly relationship during the course of their employment and then
decided to get married, one of them should resign to preserve the policy stated
above.3
Simbol resigned on June 20, 1998 pursuant to the company policy. 4
Comia was hired by the company on February 5, 1997. She met Howard Comia, a coemployee, whom she married on June 1, 2000. Ongsitco likewise reminded them that
pursuant to company policy, one must resign should they decide to get married. Comia
resigned on June 30, 2000.5
Estrella was hired on July 29, 1994. She met Luisito Zuiga (Zuiga), also a co-worker.
Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly
could have terminated her services due to immorality but she opted to resign on December
21, 1999.6
The respondents each signed a Release and Confirmation Agreement. They stated therein
that they have no money and property accountabilities in the company and that they
release the latter of any claim or demand of whatever nature.7
Respondents offer a different version of their dismissal. Simbol and Comia allege that they
did not resign voluntarily; they were compelled to resign in view of an illegal company policy.
As to respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who
misrepresented himself as a married but separated man. After he got her pregnant, she
discovered that he was not separated. Thus, she severed her relationship with him to avoid
dismissal due to the company policy. On November 30, 1999, she met an accident and was
advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days.
She returned to work on December 21, 1999 but she found out that her name was on-hold at
the gate. She was denied entry. She was directed to proceed to the personnel office where

one of the staff handed her a memorandum. The memorandum stated that she was being
dismissed for immoral conduct. She refused to sign the memorandum because she was on
leave for twenty-one (21) days and has not been given a chance to explain. The
management asked her to write an explanation. However, after submission of the
explanation, she was nonetheless dismissed by the company. Due to her urgent need for
money, she later submitted a letter of resignation in exchange for her thirteenth month pay. 8
Respondents later filed a complaint for unfair labor practice, constructive dismissal,
separation pay and attorneys fees. They averred that the aforementioned company policy is
illegal and contravenes Article 136 of the Labor Code. They also contended that they were
dismissed due to their union membership.
On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack
of merit, viz.:
[T]his company policy was decreed pursuant to what the respondent corporation perceived
as management prerogative. This management prerogative is quite broad and
encompassing for it covers hiring, work assignment, working method, time, place and
manner of work, tools to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of workers. Except as provided for or limited by special law, an employer
is free to regulate, according to his own discretion and judgment all the aspects of
employment.9 (Citations omitted.)
On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January
11, 2002. 10
Respondents filed a Motion for Reconsideration but was denied by the NLRC in a
Resolution11 dated August 8, 2002. They appealed to respondent court via Petition for
Certiorari.
In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC
decision, viz.:
WHEREFORE, premises considered, the May 31, 2002 (sic)12 Decision of the National Labor
Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as
follows:
(1) Declaring illegal, the petitioners dismissal from employment and ordering private
respondents to reinstate petitioners to their former positions without loss of seniority
rights with full backwages from the time of their dismissal until actual reinstatement;
and
(2) Ordering private respondents to pay petitioners attorneys fees amounting to 10%
of the award and the cost of this suit.13
On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that:

1. x x x the subject 1995 policy/regulation is violative of the constitutional rights

towards marriage and the family of employees and of Article 136 of the Labor Code;
and
2. x x x respondents resignations were far from voluntary. 14
We affirm.
The 1987 Constitution15 states our policy towards the protection of labor under the following
provisions, viz.:
Article II, Section 18. The State affirms labor as a primary social economic force. It shall
protect the rights of workers and promote their welfare.
xxx
Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment
opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a living
wage. They shall also participate in policy and decision-making processes affecting their
rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers, recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns on investments, and to expansion and growth.
The Civil Code likewise protects labor with the following provisions:
Art. 1700. The relation between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.
Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer.
The Labor Code is the most comprehensive piece of legislation protecting labor. The case at
bar involves Article 136 of the Labor Code which provides:
Art. 136. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate
expressly or tacitly that upon getting married a woman employee shall be deemed resigned
or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman
employee merely by reason of her marriage.

Respondents submit that their dismissal violates the above provision. Petitioners allege that
its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new
meaning if read together with the first paragraph of the rule. The rule does not require the
woman employee to resign. The employee spouses have the right to choose who between
them should resign. Further, they are free to marry persons other than co-employees.
Hence, it is not the marital status of the employee, per se, that is being discriminated. It is
only intended to carry out its no-employment-for-relatives-within-the-third-degree-policy
which is within the ambit of the prerogatives of management. 16
It is true that the policy of petitioners prohibiting close relatives from working in the same
company takes the nature of an anti-nepotism employment policy. Companies adopt these
policies to prevent the hiring of unqualified persons based on their status as a relative,
rather than upon their ability.17 These policies focus upon the potential employment
problems arising from the perception of favoritism exhibited towards relatives.
With more women entering the workforce, employers are also enacting employment policies
specifically prohibiting spouses from working for the same company. We note that two types
of employment policies involve spouses: policies banning only spouses from working in the
same company (no-spouse employment policies), and those banning all immediate
family members, including spouses, from working in the same company (anti-nepotism
employment policies).18
Unlike in our jurisdiction where there is no express prohibition on marital
discrimination,19 there are twenty state statutes20 in the United States prohibiting marital
discrimination. Some state courts21 have been confronted with the issue of whether nospouse policies violate their laws prohibiting both marital status and sex discrimination.
In challenging the anti-nepotism employment policies in the United States, complainants
utilize two theories of employment discrimination: the disparate treatment and
the disparate impact. Under the disparate treatment analysis, the plaintiff must prove
that an employment policy is discriminatory on its face. No-spouse employment policies
requiring an employee of a particular sex to either quit, transfer, or be fired are facially
discriminatory. For example, an employment policy prohibiting the employer from hiring
wives of male employees, but not husbands of female employees, is discriminatory on its
face.22
On the other hand, to establish disparate impact, the complainants must prove that a
facially neutral policy has a disproportionate effect on a particular class. For example,
although most employment policies do not expressly indicate which spouse will be required
to transfer or leave the company, the policy often disproportionately affects one sex. 23
The state courts rulings on the issue depend on their interpretation of the scope of marital
status discrimination within the meaning of their respective civil rights acts. Though they
agree that the term "marital status" encompasses discrimination based on a person's status
as either married, single, divorced, or widowed, they are divided on whether the term has
a broader meaning. Thus, their decisions vary.24
The courts narrowly25 interpreting marital status to refer only to a person's status as
married, single, divorced, or widowed reason that if the legislature intended a broader
definition it would have either chosen different language or specified its intent. They hold
that the relevant inquiry is if one is married rather than to whom one is married. They

construe marital status discrimination to include only whether a person is single, married,
divorced, or widowed and not the "identity, occupation, and place of employment of one's
spouse." These courts have upheld the questioned policies and ruled that they did not
violate the marital status discrimination provision of their respective state statutes.
The courts that have broadly26 construed the term "marital status" rule that it encompassed
the identity, occupation and employment of one's spouse. They strike down the no-spouse
employment policies based on the broad legislative intent of the state statute. They reason
that the no-spouse employment policy violate the marital status provision because it
arbitrarily discriminates against all spouses of present employees without regard to the
actual effect on the individual's qualifications or work performance. 27 These courts also find
the no-spouse employment policy invalid for failure of the employer to present any evidence
of business necessity other than the general perception that spouses in the same
workplace might adversely affect the business.28 They hold that the absence of such a bona
fide occupational qualification29 invalidates a rule denying employment to one spouse
due to the current employment of the other spouse in the same office. 30 Thus, they rule that
unless the employer can prove that the reasonable demands of the business require a
distinction based on marital status and there is no better available or acceptable policy
which would better accomplish the business purpose, an employer may not discriminate
against an employee based on the identity of the employees spouse. 31 This is known as
the bona fide occupational qualification exception.
We note that since the finding of a bona fide occupational qualification justifies an
employers no-spouse rule, the exception is interpreted strictly and narrowly by these state
courts. There must be a compelling business necessity for which no alternative exists other
than the discriminatory practice.32 To justify a bona fide occupational qualification, the
employer must prove two factors: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and, (2) that there is a factual basis for
believing that all or substantially all persons meeting the qualification would be unable to
properly perform the duties of the job.33
The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We
employ the standard ofreasonableness of the company policy which is parallel to the bona
fide occupational qualification requirement. In the recent case of Duncan Association of
Detailman-PTGWO and Pedro Tecson v. Glaxo Wellcome Philippines, Inc.,34 we
passed on the validity of the policy of a pharmaceutical company prohibiting its employees
from marrying employees of any competitor company. We held that Glaxo has a right to
guard its trade secrets, manufacturing formulas, marketing strategies and other confidential
programs and information from competitors. We considered the prohibition against personal
or marital relationships with employees of competitor companies upon Glaxos
employeesreasonable under the circumstances because relationships of that nature might
compromise the interests of Glaxo. In laying down the assailed company policy, we
recognized that Glaxo only aims to protect its interests against the possibility that a
competitor company will gain access to its secrets and procedures. 35
The requirement that a company policy must be reasonable under the circumstances to
qualify as a valid exercise of management prerogative was also at issue in the 1997 case
of Philippine Telegraph and Telephone Company v. NLRC.36 In said case, the employee
was dismissed in violation of petitioners policy of disqualifying from work any woman
worker who contracts marriage. We held that the company policy violates the right against

discrimination afforded all women workers under Article 136 of the Labor Code, but
established a permissible exception, viz.:
[A] requirement that a woman employee must remain unmarried could be justified as a
"bona fide occupational qualification," or BFOQ, where the particular requirements of
the job would justify the same, but not on the ground of a general principle, such as the
desirability of spreading work in the workplace. A requirement of that nature would be valid
provided it reflects an inherent quality reasonably necessary for satisfactory job
performance.37(Emphases supplied.)
The cases of Duncan and PT&T instruct us that the requirement of reasonableness must
be clearly established to uphold the questioned employment policy. The employer has the
burden to prove the existence of a reasonable business necessity. The burden was
successfully discharged in Duncan but not in PT&T.
We do not find a reasonable business necessity in the case at bar.
Petitioners sole contention that "the company did not just want to have two (2) or more of
its employees related between the third degree by affinity and/or consanguinity" 38 is lame.
That the second paragraph was meant to give teeth to the first paragraph of the questioned
rule39 is evidently not the valid reasonable business necessity required by the law.
It is significant to note that in the case at bar, respondents were hired after they were found
fit for the job, but were asked to resign when they married a co-employee. Petitioners failed
to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then
an employee of the Repacking Section, could be detrimental to its business operations.
Neither did petitioners explain how this detriment will happen in the case of Wilfreda Comia,
then a Production Helper in the Selecting Department, who married Howard Comia, then a
helper in the cutter-machine. The policy is premised on the mere fear that employees
married to each other will be less efficient. If we uphold the questioned rule without valid
justification, the employer can create policies based on an unproven presumption of a
perceived danger at the expense of an employees right to security of tenure.
Petitioners contend that their policy will apply only when one employee marries a coemployee, but they are free to marry persons other than co-employees. The questioned
policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate
effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a
showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The
failure of petitioners to prove a legitimate business concern in imposing the questioned
policy cannot prejudice the employees right to be free from arbitrary discrimination based
upon stereotypes of married persons working together in one company. 40
Lastly, the absence of a statute expressly prohibiting marital discrimination in our
jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is
vast and extensive that we cannot prudently draw inferences from the legislatures
silence41 that married persons are not protected under our Constitution and declare valid a
policy based on a prejudice or stereotype. Thus, for failure of petitioners to present
undisputed proof of a reasonable business necessity, we rule that the questioned policy is an
invalid exercise of management prerogative. Corollarily, the issue as to whether respondents
Simbol and Comia resigned voluntarily has become moot and academic.

As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular
fact that her resignation letter was written in her own handwriting. Both ruled that her
resignation was voluntary and thus valid. The respondent court failed to categorically rule
whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol
and Comia.
Estrella claims that she was pressured to submit a resignation letter because she was in dire
need of money. We examined the records of the case and find Estrellas contention to be
more in accord with the evidence. While findings of fact by administrative tribunals like the
NLRC are generally given not only respect but, at times, finality, this rule admits of
exceptions,42 as in the case at bar.
Estrella avers that she went back to work on December 21, 1999 but was dismissed due to
her alleged immoral conduct. At first, she did not want to sign the termination papers but
she was forced to tender her resignation letter in exchange for her thirteenth month pay.
The contention of petitioners that Estrella was pressured to resign because she got
impregnated by a married man and she could not stand being looked upon or talked about
as immoral43 is incredulous. If she really wanted to avoid embarrassment and humiliation,
she would not have gone back to work at all. Nor would she have filed a suit for illegal
dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the
employee is compelled by personal reason(s) to dissociate himself from employment. It is
done with the intention of relinquishing an office, accompanied by the act of
abandonment. 44 Thus, it is illogical for Estrella to resign and then file a complaint for illegal
dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation
was voluntary, Estrellas dismissal is declared illegal.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated
August 3, 2004 isAFFIRMED.1avvphil.net
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 96169 September 24, 1991
EMPLOYERS CONFEDERATION OF THE PHILIPPINES, petitioner,
vs.
NATIONAL WAGES AND PRODUCTIVITY COMMISSION AND REGIONAL TRIPARTITE
WAGES AND PRODUCTIVITY BOARD-NCR, TRADE UNION CONGRESS OF THE
PHILIPPINES, respondents.
Sycip Salazar, Hernandez & Gatmaitan for petitioner.
Gilbert P. Lorenzo for private respondent.

SARMIENTO, J.:p
The petition is given due course and the various pleadings submitted being sufficient to aid
the Court in the proper resolution of the basic issues raised in this case, we decide it without
further ado.
The Employers Confederation of the Philippines (ECOP) is questioning the validity of Wage
Order No. NCR-01-A dated October 23, 1990 of the Regional Tripartite Wages and
Productivity Board, National Capital Region, promulgated pursuant to the authority of
Republic Act No. 6727, "AN ACT TO RATIONALIZE WAGE POLICY DETERMINATION BY
ESTABLISHING THE MECHANISM AND PROPER STANDARDS THEREFORE, AMENDING FOR THE
PURPOSE ARTICLE 99 OF, AND INCORPORATING ARTICLES 120, 121, 122, 123, 124, 126, AND
127 INTO, PRESIDENTIAL DECREE NO. 442 AS AMENDED, OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, FIXING NEW WAGE RATES, PROVIDING WAGE INCENTIVES FOR
INDUSTRIAL DISPERSAL TO THE COUNTRYSIDE, AND FOR OTHER PURPOSES," was approved
by the President on June 9, 1989. Aside from providing new wage rates, 1 the "Wage
Rationalization Act" also provides, among other things, for various Regional Tripartite Wages
and Productivity Boards in charge of prescribing minimum wage rates for all workers in the
various regions 2 and for a National Wages and Productivity Commission to review, among
other functions, wage levels determined by the boards. 3
On October 15, 1990, the Regional Board of the National Capital Region issued Wage Order
No. NCR-01, increasing the minimum wage by P17.00 daily in the National Capital
Region. 4 The Trade Union Congress of the Philippines (TUCP) moved for reconsideration; so
did the Personnel Management Association of the Philippines (PMAP). 5ECOP opposed.
On October 23, 1990, the Board issued Wage Order No. NCR-01-A amending Wage Order No.
NCR-01, as follows:
Section 1. Upon the effectivity of this Wage Order, all workers and employees
in the private sector in the National Capital Region already receiving wages
above the statutory minimum wage rates up to one hundred and twenty-five
pesos (P125.00) per day shall also receive an increase of seventeen pesos
(P17.00) per day.
ECOP appealed to the National Wages and Productivity Commission. On November 6, 1990,
the Commission promulgated an Order, dismissing the appeal for lack of merit. On
November 14, 1990, the Commission denied reconsideration.
The Orders of the Commission (as well as Wage Order No. NCR-01-A) are the subject of this
petition, in which. ECOP assails the board's grant of an "across-the-board" wage increase to
workers already being paid more than existing minimum wage rates (up to P125. 00 a day)
as an alleged excess of authority, and alleges that under the Republic Act No. 6727, the
boards may only prescribe "minimum wages," not determine "salary ceilings." ECOP likewise
claims that Republic Act No. 6727 is meant to promote collective bargaining as the primary
mode of settling wages, and in its opinion, the boards can not preempt collective bargaining
agreements by establishing ceilings. ECOP prays for the nullification of Wage Order No. NCR
01-A and for the "reinstatement" of Wage Order No. NCR-01.

The Court directed the Solicitor General to comment on behalf of the Government, and in
the Solicitor General's opinion, the Board, in prescribing an across-the-board hike did not, in
reality, "grant additional or other benefits to workers and employees, such as the extension
of wage increases to employees and workers already receiving more than minimum
wages ..." 6 but rather, fixed minimum wages according to the "salary-ceiling method."
ECOP insists, in its reply, that wage is a legislative function, and Republic Act No. 6727
delegated to the regional boards no more "than the power to grant minimum wage
adjustments" 7 and "in the absence of clear statutory authority," 8 the boards may no more
than adjust "floor wages." 9
The Solicitor General, in his rejoinder, argues that Republic Act No. 6727 is intended to
correct "wage distortions" and the salary-ceiling method (of determining wages) is meant,
precisely, to rectify wage distortions. 10
The Court is inclined to agree with the Government. In the National Wages and Productivity
Commission's Order of November 6, 1990, the Commission noted that the determination of
wages has generally involved two methods, the "floor-wage" method and the "salary-ceiling"
method. We quote:
Historically, legislation involving the adjustment of the minimum wage made
use of two methods. The first method involves the fixing of determinate
amount that would be added to the prevailing statutory minimum wage. The
other involves "the salary-ceiling method" whereby the wage adjustment is
applied to employees receiving a certain denominated salary ceiling. The first
method was adopted in the earlier wage orders, while the latter method was
used in R.A. Nos. 6640 and 6727. Prior to this, the salary-ceiling method was
also used in no less than eleven issuances mandating the grant of cost-ofliving allowances (P.D. Nos. 525, 1123, 1614, 1634, 1678, 1713 and Wage
Order Nos. 1, 2, 3, 5 and 6). The shift from the first method to the second
method was brought about by labor disputes arising from wage distortions, a
consequence of the implementation of the said wage orders. Apparently, the
wage order provisions that wage distortions shall be resolved through the
grievance procedure was perceived by legislators as ineffective in checking
industrial unrest resulting from wage order implementations. With the
establishment of the second method as a practice in minimum wage fixing,
wage distortion disputes were minimized. 11
As the Commission noted, the increasing trend is toward the second mode, the salary-cap
method, which has reduced disputes arising from wage distortions (brought about,
apparently, by the floor-wage method). Of course, disputes are appropriate subjects of
collective bargaining and grievance procedures, but as the Commission observed and as we
are ourselves agreed, bargaining has helped very little in correcting wage distortions.
Precisely, Republic Act No. 6727 was intended to rationalize wages, first, by providing for
full-time boards to police wages round-the-clock, and second, by giving the boards enough
powers to achieve this objective. The Court is of the opinion that Congress meant the boards
to be creative in resolving the annual question of wages without labor and management
knocking on the legislature's door at every turn. The Court's opinion is that if Republic No.
6727 intended the boards alone to set floor wages, the Act would have no need for a board
but an accountant to keep track of the latest consumer price index, or better, would have
Congress done it as the need arises, as the legislature, prior to the Act, has done so for

years. The fact of the matter is that the Act sought a "thinking" group of men and women
bound by statutory standards. We quote:
ART. 124. Standards / Criteria for Minimum Wage Fixing. The regional
minimum wages to be established by the Regional Board shall be as nearly
adequate as is economically feasible to maintain the minimum standards of
living necessary for the health, efficiency and general well-being of the
employees within the framework of the national economic and social
development program. In the determination of such regional minimum wages,
the Regional Board shall, among other relevant factors, consider the following:
(a) The demand for living wages;
(b) Wage adjustment vis-a-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of emphasis
employers;
(i) Effects of employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of
economic and social development. 12
The Court is not convinced that the Regional Board of the National Capital Region, in
decreeing an across-the-board hike, performed an unlawful act of legislation. It is true that
wage-fixing, like rate constitutes an act Congress;13 it is also true, however, that Congress
may delegate the power to fix rates 14 provided that, as in all delegations cases, Congress
leaves sufficient standards. As this Court has indicated, it is impressed that the abovequoted standards are sufficient, and in the light of the floor-wage method's failure, the Court
believes that the Commission correctly upheld the Regional Board of the National Capital
Region.
Apparently, ECOP is of the mistaken impression that Republic Act No. 6727 is meant to "get
the Government out of the industry" and leave labor and management alone in deciding
wages. The Court does not think that the law intended to deregulate the relation between
labor and capital for several reasons: (1) The Constitution calls upon the State to protect the
rights of workers and promote their welfare; 15 (2) the Constitution also makes it a duty of
the State "to intervene when the common goal so demands" in regulating property and
property relations; 16 (3) the Charter urges Congress to give priority to the enactment of
measures, among other things, to diffuse the wealth of the nation and to regulate the use of

property; 17 (4) the Charter recognizes the "just share of labor in the fruits of
production;" 18 (5) under the Labor Code, the State shall regulate the relations between labor
and management; 19 (6) under Republic Act No. 6727 itself, the State is interested in seeing
that workers receive fair and equitable wages; 20 and (7) the Constitution is primarily a
document of social justice, and although it has recognized the importance of the private
sector, 21 it has not embraced fully the concept of laissez faire 22 or otherwise, relied on pure
market forces to govern the economy; We can not give to the Act a meaning or intent that
will conflict with these basic principles.
It is the Court's thinking, reached after the Court's own study of the Act, that the Act is
meant to rationalize wages, that is, by having permanent boards to decide wages rather
than leaving wage determination to Congress year after year and law after law. The Court is
not of course saying that the Act is an effort of Congress to pass the buck, or worse, to
abdicate its duty, but simply, to leave the question of wages to the expertise of experts. As
Justice Cruz observed, "[w]ith the proliferation of specialized activities and their attendant
peculiar problems, the national legislature has found it more necessary to entrust to
administrative agencies the power of subordinate legislation' as it is caned." 23
The Labor Code defines "wage" as follows:
"Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether
fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done
or to be done, or for services rendered or to be rendered and includes the fair
and reasonably value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee. "Fair and reasonable value" shall not include any profit to the
employer or to any person affiliated with the employer. 24
The concept of "minimum wage" is, however, a different thing, and certainly, it means more
than setting a floor wage to upgrade existing wages, as ECOP takes it to mean. "Minimum
wages" underlies the effort of the State, as Republic Act No. 6727 expresses it, "to promote
productivity-improvement and gain-sharing measures to ensure a decent standard of living
for the workers and their families; to guarantee the rights of labor to its just share in the
fruits of production; to enhance employment generation in the countryside through industry
dispersal; and to allow business and industry reasonable returns on investment, expansion
and growth," 25 and as the Constitution expresses it, to affirm "labor as a primary social
economic force." 26 As the Court indicated, the statute would have no need for a board if the
question were simply "how much". The State is concerned, in addition, that wages are not
distributed unevenly, and more important, that social justice is subserved.
It is another question, to be sure, had Congress created "roving" boards, and were that the
case, a problem of undue delegation would have ensued; but as we said, we do not see a
Board (National Capital Region) "running riot" here, and Wage Order No. NCR-01-A as an
excess of authority.
It is also another question whether the salary-cap method utilized by the Board may serve
the purposes of Republic Act No. 6727 in future cases and whether that method is after all, a
lasting policy of the Board; however, it is a question on which we may only speculate at the

moment. At the moment, we find it to be reasonable policy (apparently, it has since been
Government policy); and if in the future it would be perceptibly unfair to management, we
will take it up then.
WHEREFORE, premises considered, the petition is DENIED. No pronouncement as to costs.