ANTONIO M.

SERRANO
VS.
GALLANT MARITIME SERVICES, INC.
FACTS:
Petitioner Antonio Serrano was hired by respondents Gallant Maritime
Services, Inc. and Marlow Navigation Co., Inc., under a POEA-approved
contract of employment for 12 months, as Chief Officer, with the basic
monthly salary of US$1,400, plus $700/month overtime pay, and 7 days paid
vacation leave per month.
On the date of his departure, Serrano was constrained to accept a
downgraded employment contract upon the assurance and representation
of respondents that he would be Chief Officer by the end of April 1998.
Respondents did not deliver on their promise to make Serrano Chief Officer.
Hence, Serrano refused to stay on as second Officer and was repatriated to
the Philippines, serving only two months and 7 days, leaving an unexpired
portion of nine months and twenty-three days.
Upon complaint filed by Serrano before the Labor Arbiter (LA), the dismissal
was declared illegal.
On appeal, the NLRC modified the LA decision based on the provision of RA
8042.
Serrano filed a Motion for Partial Reconsideration, but this time he
questioned the constitutionality of the last clause in the 5th paragraph of
Section 10 of RA 8042.
ISSUES:
1. Whether or not the subject clause violates Section 10, Article III of the
Constitution on non-impairment of contracts;
2. Whether or not the subject clause violate Section 1, Article III of the
Constitution, and Section 18, Article II and Section 3, Article XIII on labor as
a protected sector.
HELD:
On the first issue.
The answer is in the negative. Petitioners claim that the subject clause
unduly interferes with the stipulations in his contract on the term of his
employment and the fixed salary package he will receive is not tenable.
The subject clause may not be declared unconstitutional on the ground that
it impinges on the impairment clause, for the law was enacted in the
exercise of the police power of the State to regulate a business, profession
or calling, particularly the recruitment and deployment of OFWs, with the
noble end in view of ensuring respect for the dignity and well-being of OFWs
wherever they may be employed.
On the second issue.
The answer is in the affirmative.

To Filipino workers, the rights guaranteed under the foregoing

constitutional provisions translate to economic security and parity.
Upon cursory reading, the subject clause appears facially neutral, for it
applies to all OFWs. However, a closer examination reveals that the subject
clause has a discriminatory intent against, and an invidious impact on,
OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs
with employment contracts of one year or more;
Second, among OFWs with employment contracts of more than one year;
and
Third, OFWs vis--vis local workers with fixed-period employment;
The subject clause singles out one classification of OFWs and burdens it
with a peculiar disadvantage.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042
is violative of the right of petitioner and other OFWs to equal protection.
The subject clause or for three months for every year of the unexpired
term, whichever is less in the 5th paragraph of Section 10 of Republic Act
No. 8042 is DECLARED UNCONSTITUTIONAL.

GREAT PACIFIC LIFE ASSURANCE CORPORATION (GREPALIFE) VS. JUDICO

HONORATO (GR NO. 73887 DECEMEBER 21, 1989)

FACTS:
Petition for certiorari to review the decision NLRC dated September 9, 1985
Ordering petitioner Grepalife to recognize private respondent
HonoratoJudico, as its regular employee as defined under Art. 281 of the
Labor Code.
Remanding the case to its origin for the determination of private
respondent Judico's money claims.
HonoratoJudico filed a complaint for illegal dismissal against Grepalife, a
duly organized insurance firm.
Said complaint prayed for award of money claims consisting of:
Separation pay,
Unpaid salary and 13th month pay,
Refund of cash bond,
Moral and exemplary damages and attorney's fees.
Grepalife admits that Judico entered into an agreement of agency with them
to become a debit agent attached in Cebu City.

Grepalife defines a debit agent as "an insurance agent selling/servicing

industrial life plans and policy holders.
As a debit agent, Judico had definite work assignments including but not
limited to collection of premiums from policyholders and selling insurance to
prospective clients.
Public respondent NLRC also found out that complainant was initially paid P
200. 00 as allowance for thirteen (13) weeks regardless of production and
later a certain percentage denominated as sales reserve of his total
collections but not lesser than P 200.00.
Judicowas promoted to the position of Zone Supervisor and was given
additional (supervisor's) allowance fixed at P110.00 per week.
During the third week of November 1981, he was reverted to his former
position as debit agent but, for unknown reasons, not paid so-called weekly
sales reserve of at least P 200.00.
Finally on June 28, 1982, complainant was dismissed by way of termination
of his agency contract.
Petitioner assails and argues that the respondent is not an employee and
that his compensation was not based on any fixed number of hours he was
required to devote to the service of company but rather it was the
production or result of his efforts or his work that was being compensated
That the so-called allowance for the first thirteen weeks that Judico worked
as debit agent, cannot be construed as salary but as a subsidy or a way of
assistance for transportation and meal expenses of a new debit agent
during the initial period of his training which was fixed for thirteen (13)
weeks.
Said contentions of petitioner were strongly rejected by respondent he
maintains that he received a definite amount as his wage known as "sales
reserve" the failure to maintain the same would bring him back to a
beginner's employment with a fixed weekly wage of P 200.00 regardless of
production.
He was assigned a definite place in the office to work on when he is not in
the field and in addition to canvassing and making regular reports.
He was burdened with the job of collection and to make regular weekly
report thereto for which an anemic performance would mean dismissal.
He earned out of his faithful and productive service, a promotion to Zone
Supervisor with additional supervisor's allowance, (a definite or fixed
amount of P110.00) that he was dismissed primarily because of anemic
performance and not because of the termination of the contract of agency
substantiate the fact that he was indeed an employee of the petitioner and
not an insurance agent in the ordinary meaning of the term.
Both parties appealed to the NLRC and decision was rendered by the Labor
Arbiter dismissing the complaint on the ground that:
The employer-employee relations did not exist between the parties.

But ordered Grepalife to pay complainant the sum of Pl,000.00 by reason of

Christian Charity.
On appeal, decision was reversed by the NLRC ruling that:
Complainant is a regular employee as defined under Art. 281 of the Labor
Code.
Declaring the appeal of Grepalife questioning the legality of the payment of
Pl,000.00 to complainant moot and academic.
Petitioner company moved to reconsider, which was denied, hence this
petition.

ISSUE:
Whether or not employer-employee relationship existed between petitioner
and private respondent.

HELD:
That Judico was an agent of the petitioner is unquestionable.
As held in (Investment Planning Corp. vs. SSS, 21 SCRA 294), an insurance
company may have two classes of agents who sell its insurance policies:
Salaried employees who keep definite hours and work under the control and
supervision of the company.
Registered representatives who work on commission basis.
The test therefore is 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.
Applying the test to the case at bar, We can readily see that the element of
control by the petitioner on Judico was very much present.
The record shows that:
Petitioner Judico received a definite minimum amount per week as his wage
known as "sales reserve".
He was assigned a definite place in the office to work on when he is not in
the field.
In addition to his canvassing work he was burdened with the job of
collection.
Both cases he was required to make regular report to the company
regarding these duties, and for which an anemic performance would mean a
dismissal.
Conversely faithful and productive service earned him a promotion and
additional supervisor's allowance, a definite amount of P110.00 aside from
the regular P 200.00 weekly "allowance".

His contract of services with petitioner is not for a piece of work nor for a
definite period.
In the instant case the facts show that:
He was controlled by petitioner insurance company not only as to the kind
of work.
The amount of results, the kind of performance but also the power of
dismissal.
Ratio:
Undoubtedly, private respondent, by nature of his position and work, had
been a regular employee of petitioner and is therefore entitled to the
protection of the law and could not just be terminated without valid and
justifiable cause.
Premises considered, the appealed decision is hereby AFFIRMED

GR. NO. 119500 AUGUST 28, 1998 PAGUIO TRANSPORT CORPORATION

(petitioner) Vs. NLRC and WILFREDO MELCHOR (respondents)
FACTS:
Complainant Melchor was hired by PTC as a taxi driver under the
boundary system. He was advised to stop working and have a rest after a
car accident involving the taxi unit he was driving. He was told by the PTC
that his service was no longer needed. Then the complaint for illegal
dismissal was raised. The petitioner concludes that he had no control over
the number of hours private respondent had to work and the routes he had
to take; therefore no employer-employee relationship exists.

ISSUE:
Whether or not employer-employee relationship exists.

FACTS:
Boundary system is that of employer-employee and not of lessorlessee. Under the boundary system the drivers do not receive fixed
wages; all the excess in the amount of boundary was considered his income
but it is not sufficient to withdraw the relationship between them from that
of employer and employee. Private respondents were employees because
they had been engaged to perform activities which were usually necessary
or desirable in the usual trade or business of the employer.
The petition was dismissed, the private respondent was entitled for
the claim of damages and illegal dismissal.

Besa v. Trajano
FACTS:

Respondent KAMPI filed a Petition for Certification Election. Petitioner

opposed alleging that there is no ER-EE relationship between Besa and
petitioners. These petitioners are shoe shiners paid on a commission basis.
The question of ER-EE relationship became a primordial consideration in
resolving whether or not the subject shoe shiners have the juridical
personality and standing to present a petition for certification as well as to
vote therein.

ISSUE: W/N ER-EE relationship exists betweem shoe shiners and Besa
HELD: No.
Shoe shiner is different from a piece worjer:
Shoe shiner
Piece Woker
1. contributes anything to the
1. paid for work accomplished
capital
of the
employer
2. the employer
pays
his
2.
paid
directly
by his customer
wages
the proceeds derived from
3. paid for work3.accomplished
trade
are divided share
without concernthe
to the
profit
with
respondent
BESA
derived by employer
4.
respondent
does
not
4.
the shoe
employer supervises
and
Thus,
shiners are not employees
exercise control
controls
his
work
of the
company, but are
partners, because there is no control by the owner and shoe shiners have
their own customers whom they charge a fee and divide the proceeds
equally with the owner.
Encyclopaedia Britannica, Inc vs. NLRC, G.R. No. 87098, November 4, 1996;
264 SCRA 1
Facts: Private respondent was a sales division manager of private petitioner
and was in charge of selling the latters products through sales
representatives. As compensation, private respondent receive commissions
from the products sold by his agents. After resigning from office to pursue
his private business, he filed a complaint against the petitioner, claiming for
non-payment of separation pay and other benefits.
Petitioner alleged that complainant was not its employee but an
independent dealer authorized to promote and sell its products and in
return, received commissions therefrom. Petitioner did not have any salary
and his income from petitioner was dependent on the volume of sales
accomplished. He had his own office, financed the business expense, and
maintained his own workforce. Thus petitioner argued that it had no control
and supervision over the complainant as to the manner and means he
conducted his business operations.

The Labor Arbiter ruled that complainant was an employee of the petitioner
company. Petioner had control over the complainant since the latter was
required to make periodic reports of his sales activities to the company.
Issue: Whether or not there exists an employer-employee relationship.
Held: No. Control of employees conduct is commonly regarded as the most
crucial and determinative indicator of the presence or absence of an
employer-employee relationship. Under this, an employer-employee
relationship exists where the person for whom the services are performed
reserves the right to control not only the end to be achieved, but also the
manner and means to be used in reaching that end.
The fact that petitioner issued memoranda to private respondent and to
other division sales managers did not prove that petitioner had actual
control over them. The different memoranda were merely guidelines on
company policies which the sales managers follow and impose on their
respective agents.

SONZA vs. ABS-CBN Case Digest

JOSE SONZA vs. ABS-CBN BROADCASTING CORPORATION
G.R. No. 138051
June 10, 2004

Facts: In May 1994, ABS-CBN signed an agreement with the Mel and Jay
Management and Development Corporation (MJMDC). ABS-CBN was
represented by its corporate officers while MJMDC was represented by
Sonza, as President and general manager, and Tiangco as its EVP and
treasurer. Referred to in the agreement as agent, MJMDC agreed to provide
Sonzas services exclusively to ABS-CBN as talent for radio and television.
ABS-CBN agreed to pay Sonza a monthly talent fee of P310, 000 for the first
year and P317, 000 for the second and third year.

On April 1996, Sonza wrote a letter to ABS-CBN where he irrevocably

resigned in view of the recent events concerning his program and career.
After the said letter, Sonza filed with the Department of Labor and
Employment a complaint alleging that ABS-CBN did not pay his salaries,
separation pay, service incentive pay,13th month pay, signing bonus, travel
allowance and amounts under the Employees Stock Option Plan (ESOP).
ABS-CBN contended that no employee-employer relationship existed

between the parties. However, ABS-CBN continued to remit Sonzas monthly

talent fees but opened another account for the same purpose.

The Labor Arbiter dismissed the complaint and found that there is no
employee-employer relationship. NLRC affirmed the decision of the Labor
Arbiter. CA also affirmed the decision of NLRC.

Issue: Whether or not there was employer-employee relationship between

the parties.

Ruling: Case law has consistently held that the elements of an employeeemployer relationship are selection and engagement of the employee, the
payment of wages, the power of dismissal and 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.

Sonzas services to co-host its television and radio programs are because of
his peculiar talents, skills and celebrity status. 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. All the talent fees
and benefits paid to SONZA were the result of negotiations that led to the
Agreement. For violation of any provision of the Agreement, either party
may terminate their relationship. Applying the control test to the present
case, we find that SONZA is not an employee but an independent
contractor.

The control test is the most important test our courts apply in distinguishing
an employee from an independent contractor. This test is based on the
extent of control the hirer exercises over a worker. The greater the
supervision and control the hirer exercises, the more likely the worker is
deemed an employee. The converse holds true as well the less control the
hirer exercises, the more likely the worker is considered an independent
contractor. To perform his work, SONZA only needed his skills and talent.
How SONZA delivered his lines, appeared on television, and sounded on
radio were outside ABS-CBNs control. ABS-CBN did not instruct SONZA how
to perform his job. ABS-CBN merely reserved the right to modify the
program format and airtime schedule "for more effective programming."
ABS-CBNs sole concern was the quality of the shows and their standing in
the ratings.

Clearly, ABS-CBN did not exercise control over the means and methods of
performance of Sonzas work. A radio broadcast specialist who works under
minimal supervision is an independent contractor. Sonzas work as
television and radio program host required special skills and talent, which
SONZA admittedly possesses.

ABS-CBN claims that there exists a prevailing practice in the broadcast and
entertainment industries to treat talents like Sonza as independent
contractors. The right of labor to security of tenure as guaranteed in the
Constitution arises only if there is an employer-employee relationship under
labor laws. Individuals with special skills, expertise or talent enjoy the
freedom to offer their services as independent contractors. The right to life
and livelihood guarantees this freedom to contract as independent
contractors. The right of labor to security of tenure cannot operate to
deprive an individual, possessed with special skills, expertise and talent, of
his right to contract as an independent contractor.

ZANOTTE SHOES V. NLRC

241 SCRA 261
VITUG, J.
FACTS
1. Private respondents Joseph Lluz, et. al averred that they started to work
for petitioners Zanotte Shoes/ Leonardo Lorenzo between 1975 to 1987.
They alleged that they worked for a minimum of 12 hours daily, including
Sundays and holidays
when needed and that they were paid on piece-work basis.
2. Private respondents claimed that it angered petitioner Lorenzo when they
requested to be made members of the SSS and that when they demanded an
increase in their pay rates, they were prevented from entering the work
premises. Private respondents filed a complaint for illegal discharge against
petitioners.
3. Petitioners, in their Answer, claim that their business operations were
only seasonal, normally twice a year- one in June and another in December,
when heavy job orders would come in. They contend that private
respondents were engaged on purely contractual basis and paid the rates
conformably with their respective agreements.
4. The Labor Arbiter rendered judgment in favor of private respondents. He
declared that there was an employer-employee relationship between
petitioners and private respondents and that the latter were regular
employees of the former. The Labor Arbiter concluded that there is neither
dismissal nor abandonment, but ordered petitioners to pay the private
respondents their separation pay.
5. The NLRC, on appeal, affirmed the Labor Arbiters decision

ISSUE
Whether or not there is an employer-employee relationship between
petitioners and private respondents.

HELD
YES. There is an employer-employee relationship between petitioners and
private respondents. The work of private respondents is clearly related to
and in the pursuit of the principal activity of the petitioners. The indicia
used for determining the existence of an employer-employee relationship,
all extant in the case at bench, include: (1) the selection and engagement of
the employee, (2) the payment of wages, (3) the power of dismissal, and (4)
the employers power to control the employee with respect to the result of
the work to be done and to the means and methods by which the work is to
be accomplished. The last requirement, so herein posed as an issue, refers
to the existence of the right to control and not necessarily to the actual
exercise of the right.
The Court, however, finds the award of separation pay to be
unwarranted.The Labor
Arbiter, sustained by the NLRC, concluded that there was neither dismissal
nor abandonment. The fact of the matter is that petitioners have repeatedly
indicated their willingness to accept the private respondents, but the latter
have steadfastly refused the offer. For being without any clear legal basis,
the award of separation pay must thus be set aside. There is nothing,
however, that prevents petitioners from voluntarily giving private
respondents some amounts on ex gratia basis.

G.R. No. 166920, February 19, 2007]

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. AND JENS PETER
HENRICHSEN, PETITIONERS, VS. KLAUS K. SCHONFELD, RESPONDENT.

FACTS

Respondent is a Canadian citizen and was a resident of New Westminster,

British Columbia, Canada. He had been a consultant in the field of
environmental engineering and water supply and sanitation. Pacicon
Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI
was to engage in the business of providing specialty and technical services
both in and out of the Philippines. It is a subsidiary of Pacific Consultants
International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen,
who was also the director of PCIJ, was based in Tokyo, Japan.

On January 7, 1998, Henrichsen transmitted a letter of employment to

respondent in Canada, requesting him to accept the same and affix his
conformity thereto. Respondent made some revisions in the letter of
employment and signed the contract. He then sent a copy to Henrichsen.
The letter of employment contains among others a stipulation which states:

Any question of interpretation, understanding or fulfillment of the

conditions of employment, as well as any question arising between the
Employee and the Company which is in consequence of or connected with
his employment with the Company and which can not be settled amicably, is
to be finally settled, binding to both parties through written submissions, by
the Court of Arbitration in London.

Respondent arrived in the Philippines and assumed his position as PPI

Sector Manager. He was accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules

Implementing the Labor Code, PPI applied for an Alien Employment Permit
(Permit) for respondent before the Department of Labor and Employment
(DOLE).

On May 5, 1999, respondent received a letter from Henrichsen

informing him that his employment had been terminated effective August 4,
1999 for the reason that PCIJ and PPI had not been successful in the water
and sanitation sector in the Philippines. However, on July 24, 1999,
Henrichsen, by electronic mail, requested respondent to stay put in his job
after August 5, 1999, until such time that he would be able to report on
certain projects and discuss all the opportunities he had developed.
Respondent continued his work with PPI until the end of business hours on
October 1, 1999.
Respondent filed with PPI several money claims, including unpaid salary,
leave pay, air fare from Manila to Canada, and cost of shipment of goods to
Canada. PPI partially settled some of his claims (US$5,635.99), but refused
to pay the rest.

On December 5, 2000, respondent filed a Complaint for Illegal Dismissal

against petitioners PPI and Henrichsen with the Labor Arbiter. In his
Complaint, respondent alleged that he was illegally dismissed; PPI had not
notified the DOLE of its decision to close one of its departments, which
resulted in his dismissal; and they failed to notify him that his employment
was terminated after August 4, 1999. Respondent also claimed for
separation pay and other unpaid benefits. He alleged that the company
acted in bad faith and disregarded his rights.

Petitioners filed a Motion to Dismiss the complaint on the following grounds:

(1) the Labor Arbiter had no jurisdiction over the subject matter; and (2)

venue was improperly laid. It averred that respondent was a Canadian

citizen, a transient expatriate who had left the Philippines. He was
employed and dismissed by PCIJ, a foreign corporation with principal office
in Tokyo, Japan. Since respondents cause of action was based on his letter
of employment executed in Tokyo, Japan dated January 7, 1998, under the
principle of lex loci contractus, the complaint should have been filed in
Tokyo, Japan. Petitioners claimed that respondent did not offer any
justification for filing his complaint against PPI before the NLRC in the
Philippines. Moreover, under Section 12 of the General Conditions of
Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute
should be brought before the London Court of Arbitration. Since even the
Supreme Court had already ruled that such an agreement on venue is valid,
Philippine courts have no jurisdiction.

The Labor Arbiter rendered a decision granting petitioners Motion to

Dismiss. The Labor Arbiter found, among others, that the January 7, 1998
contract of employment between respondent and PCIJ was controlling; the
Philippines was only the duty station where Schonfeld was required to
work under the General Conditions of Employment. PCIJ remained
respondents employer despite his having been sent to the Philippines.
Since the parties had agreed that any differences regarding employeremployee relationship should be submitted to the jurisdiction of the court of
arbitration in London, this agreement is controlling.

9On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and
affirmed the latters decision in toto.
Respondent then filed a petition for certiorari under Rule 65 with the CA.
The CA found the petition meritorious. Applying the four-fold test of
determining an employer-employee relationship, the CA declared that
respondent was an employee of PPI. On the issue of venue, the appellate
court declared that, even under the January 7, 1998 contract of
employment, the parties were not precluded from bringing a case related
thereto in other venues. While there was, indeed, an agreement that issues
between the parties were to be resolved in the London Court of Arbitration,
the venue is not exclusive, since there is no stipulation that the complaint
cannot be filed in any other forum other than in the Philippines. It ordered
the remand of the case to the Labor Arbiter for disposition of the merits of
the case.

ISSUE
Whether or not the Philippine Labor Arbiter can take cognizance over
the case notwithstanding what was stated in the Employment Contract?

RULING

The settled rule on stipulations regarding venue, as held by this Court in the
vintage case of Philippine Banking Csaorporation v. Tensuan, is that while
they are considered valid and enforceable, venue stipulations in a contract
do not, as a rule, supersede the general rule set forth in Rule 4 of the
Revised Rules of Court in the absence of qualifying or restrictive words.
They should be considered merely as an agreement or additional forum, not
as limiting venue to the specified place. They are not exclusive but, rather
permissive. If the intention of the parties were to restrict venue, there must
be accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at the place
named by them.

In the instant case, no restrictive words like only, solely, exclusively in

this court, in no other court save , particularly, nowhere else
but/except , or words of equal import were stated in the contract. It
cannot be said that the court of arbitration in London is an exclusive venue
to bring forth any complaint arising out of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his
place of permanent residence, or where the PCIJ holds its principal office, at
the place where the contract of employment was signed, in London as
stated in their contract. By enumerating possible venues where respondent
could have filed his complaint, however, petitioners themselves admitted
that the provision on venue in the employment contract is indeed merely
permissive.

Petitioners insistence on the application of the principle of forum non

conveniens must be rejected. The bare fact that respondent is a Canadian
citizen and was a repatriate does not warrant the application of the
principle for the following reasons:

First. The Labor Code of the Philippines does not include forum non
conveniens as a ground for the dismissal of the complaint.

Second. The propriety of dismissing a case based on this principle

requires a factual determination; hence, it is properly considered as
defense.

Third. In Bank of America, NT&SA, Bank of America International, Ltd.

v. Court of Appeals, this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it

chooses to do so; provided, that the following requisites are met: (1) that
the Philippine Court is one to which the parties may conveniently resort to;
(2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, (3) that the Philippine Court has or is likely
to have power to enforce its decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED.

G.R. No. 146881 February 5, 2007]

COCA COLA BOTTLERS (PHILS.), INC./ERIC MONTINOLA, Manager, Petitioners,
vs. DR. DEAN N. CLIMACO, Respondent.
FACTS
Dr. Dean N. Climaco is a medical doctor who was hired by petitioner CocaCola by virtue of a Retainer Agreement. The compensation to be paid is
fixed at P3,000.00 per month. He may charge professional fee for hospital
services rendered in line with his specialization. He is to observe clinic hours
at the company premises from Monday to Saturday at least two (2) hours
each day unless such schedule is otherwise changed by the company as the
situation so warrants, subject to the labor Code provisions on Occupational
Safety and Health Standards as the Company may determine. It was also
expressly stated in the contract that no employer-employee relationship
shall exist between the retainer and the company. The doctor also agrees to
perform the duties and obligations enumerated in the Comprehensive
Medical Plan. After the expiration of the 1-year retainer agreement,
respondent continued to perform his functions as a company doctor to CocaCola until he received a letter from the latter concluding their retainership
agreement effective 30 days from receipt thereof.
Respondent then filed a complaint before the NLRC, seeking recognition as a
regular employee of petitioner company and prayed for the payment of all
benefits of a regular employee, including 13th Month Pay, Cost of Living
Allowance, Holiday Pay, Service Incentive Leave Pay, and Christmas Bonus.
This was later amended to include illegal dismissal.
ISSUE
W/n there existed an employee-employer relationship between Climaco and
Coca Cola.
HELD
The SC held that there is no employer-employee relationship between
petitioner and respondent company. The Court, in determining the existence

of an employer-employee relationship, has invariably adhered to the fourfold test: (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; and (4) the power to control
the employees conduct, or the so-called control test, considered to be
the most important element.
The circumstances of this case show that no employer-employee
relationship exists between the parties because the company lacked the
power of control over the performance by respondent of his duties. The
company in providing a Comprehensive Medical Plan, merely issued
guidelines in order to ensue that the end result was achieved, but did not
control the means and methods by which respondent performed his
assigned tasks. The company lacks the power of control that the contract
provides that the respondent shall be directly responsible to the employee
concerned and their dependents for any injury, harm or damage caused
through professional negligence, incompetence, or other valid causes of
action. The Court also finds that the schedule of work and the requirement
to be on call for emergency cases do not amount to such control, but are
necessary incidents to the Retainership Agreement. The Court also notes
that the Retainership Agreement granted to both parties the power to
terminate their relationship upon giving a 30-day notice. Hence, petitioner
company did not wield the sole power of dismissal or termination. There is
nothing wrong with the employment of respondent as a retained physician
of petitioner company and upholds the validity of the retainership
agreement which clearly states that no employer-employee relationship
existed between the parties.
Petition is granted.

[G.R. No. 84484 November 15, 1989]

INSULAR LIFE ASSURANCE CO., LTD., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and MELECIO BASIAO, respondents.
FACTS
Since 1968, respondent Basiao has been an agent for petitioner company,
and is authorized to solicit within the Philippines applications for insurance
policies and annuities in accordance with the existing rules and regulations
of the company. In return, he would receive compensation, in the form of
commissions.
Some four years later, in April 1972, the parties entered into another
contract an Agency Manager's Contract and to implement his end of it
Basiao organized an agency or office to which he gave the name M. Basiao
and Associates, while concurrently fulfilling his commitments under the first
contract with the Company. In May, 1979, the Company terminated the
Agency Manager's Contract. After vainly seeking a reconsideration, Basiao
sued the Company in a civil action and this, he was later to claim, prompted
the latter to terminate also his engagement under the first contract and to
stop payment of his commissions starting April 1, 1980.

Basiao thereafter filed with the then Ministry of Labor a complaint against
the Company and its president. The complaint sought to recover
commissions allegedly unpaid thereunder, plus attorney's fees. The
respondents disputed the Ministry's jurisdiction over Basiao's claim,
asserting that he was not the Company's employee, but an independent
contractor.
ISSUE
Whether or not there exist an employer-employee relationship between
Basiao and Insular Life.
HELD
The SC ruled in favor of Insular Life.
Not every form of control that the hiring party reserves to himself over the
conduct of the party hired in relation to the services rendered may be
accorded the effect of establishing an employer-employee relationship
between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and
an individual contractor is not to vanish altogether.
Logically, the line should be drawn between rules that merely serve as
guidelines towards the achievement of the mutually desired result without
dictating the means or methods to be employed in attaining it, and those
that control or fix the methodology and bind or restrict the party hired to
the use of such means. The first, which aim only to promote the result,
create no employer-employee relationship unlike the second, which address
both the result and the means used to achieve it. The distinction acquires
particular relevance in the case of an enterprise affected with public
interest, as is the business of insurance, and is on that account subject to
regulation by the State with respect, not only to the relations between
insurer and insured but also to the internal affairs of the insurance
company. Rules and regulations governing the conduct of the business are
provided for in the Insurance Code and enforced by the Insurance
Commissioner. It is, therefore, usual and expected for an insurance company
to promulgate a set of rules to guide its commission agents in selling its
policies that they may not run afoul of the law and what it requires or
prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications
to processing and approval by the Company, and also reserve to the
Company the determination of the premiums to be paid and the schedules
of payment. None of these really invades the agent's contractual
prerogative to adopt his own selling methods or to sell insurance at his own
time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.
The respondents limit themselves to pointing out that Basiao's contract with
the Company bound him to observe and conform to such rules and
regulations as the latter might from time to time prescribe. No showing has
been made that any such rules or regulations were in fact promulgated,
much less that any rules existed or were issued which effectively controlled
or restricted his choice of methods or the methods themselves of

selling insurance. Absent such showing, the Court will not speculate that
any exceptions or qualifications were imposed on the express provision of
the contract leaving Basiao "... free to exercise his own judgment as to the
time, place and means of soliciting insurance."
The Court, therefore, rules that under the contract invoked by him, Basiao
was not an employee of the petitioner, but a commission agent, an
independent contractor whose claim for unpaid commissions should have
been litigated in an ordinary civil action.
NLRC Decision set aside.
Daniel Funtecha was a working student at the Filamer Christian Institute. He
was assigned as the school janitor to clean the school 2 hours every
morning. Allan Masa was the son of the school president and at the same
time he was the schools jeepney service driver. On October 20, 1977 at
about 6:30pm, after driving the students to their homes, Masa returned to
the school to report and thereafter have to go home with the jeep so that he
could fetch the students early in the morning. Masa and Funtecha live in the
same place so they usually go home together. Funtecha had a student
drivers license so Masa let him take the drivers seat. While Funtecha was
driving, he accidentally hit an elderly Kapunan which led to his
hospitalization for 20 days. Kapunan filed a criminal case and an
independent civil action based on Article 2180 against Funtecha.
In the independent civil action, the lower court ruled that Filamer is
subsidiarily liable for the tortious act of Funcheta and was compelled to pay
for damages based on Article 2180 which provides that employers shall be
liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks. Filamer assailed the
decision and it argued that under Section 14, Rule X, Book III of the Labor
Code IRR, working scholars are excluded from the employment coverage
hence there is no employer-employee relations between Filamer and
Funcheta; that the negligent act of Funcheta was due to negligence only
attributable to him alone as it is outside his assigned task of being the
school janitor. The CA denied Filamers appeal but the Supreme Court
agreed with Filamer. Kapunan filed for a motion for reconsideration.
ISSUE: Whether or not Filamer should be held subsidiarily liable.
HELD: Yes. This time, the SC ruled in favor of Kapunan (actually his heirs
cause by this time Kapunan was already dead). The provisions of Section 14,
Rule X, Book III of the Labor Code IRR was only meant to provide guidelines
as compliance with labor provisions on working conditions, rest periods, and
wages is concerned. This does not in any way affect the provisions of any
other laws like the civil code. The IRR cannot defeat the provisions of the
Civil Code. In other words, Rule X is merely a guide to the enforcement of
the substantive law on labor. There is a distinction hence Section 14, Rule X,
Book III of the Rules is not the decisive law in a civil suit for damages
instituted by an injured person during a vehicular accident against a
working student of a school and against the school itself.

The present case does not deal with a labor dispute on conditions of
employment between an alleged employee and an alleged employer. It
invokes a claim brought by one for damages for injury caused by the
patently negligent acts of a person, against both doer-employee and his
employer. Hence, the reliance on the implementing rule on labor to
disregard the primary liability of an employer under Article 2180 of the Civil
Code is misplaced. An implementing rule on labor cannot be used by an
employer as a shield to void liability under the substantive provisions of the
Civil Code.
Funtecha is an employee of Filamer. He need not have an official
appointment for a drivers position in order that Filamer may be held
responsible for his grossly negligent act, it being sufficient that the act of
driving at the time of the incident was for the benefit of Filamer (the act of
driving the jeep from the school to Masas house is beneficial to the school
because this enables Masa to do a timely school transportation service in
the morning). Hence, the fact that Funtecha was not the school driver or
was not acting with the scope of his janitorial duties does not relieve
Filamer of the burden of rebutting the presumption juris tantum that there
was negligence on its part either in the selection of a servant or employee,
or in the supervision over him. Filamer has failed to show proof of its having
exercised the required diligence of a good father of a family over its
employees Funtecha and Allan.

Daniel Funtecha was a working student at the Filamer Christian Institute. He was assigned as the school
janitor to clean the school 2 hours every morning. Allan Masa was the son of the school president and at
the same time he was the schools jeepney service driver. On October 20, 1977 at about 6:30pm, after
driving the students to their homes, Masa returned to the school to report and thereafter have to go home
with the jeep so that he could fetch the students early in the morning. Masa and Funtecha live in the same
place so they usually go home together. Funtecha had a student drivers license so Masa let him take the
drivers seat. While Funtecha was driving, he accidentally hit an elderly Kapunan which led to his
hospitalization for 20 days. Kapunan filed a criminal case and an independent civil action based on Article
2180 against Funtecha.
In the independent civil action, the lower court ruled that Filamer is subsidiarily liable for the tortious act of
Funcheta and was compelled to pay for damages based on Article 2180 which provides that employers
shall be liable for the damages caused by their employees and household helpers acting within the scope
of their assigned tasks. Filamer assailed the decision and it argued that under Section 14, Rule X, Book III
of the Labor Code IRR, working scholars are excluded from the employment coverage hence there is no
employer-employee relations between Filamer and Funcheta; that the negligent act of Funcheta was due
to negligence only attributable to him alone as it is outside his assigned task of being the school janitor.
The CA denied Filamers appeal but the Supreme Court agreed with Filamer. Kapunan filed for a motion
for reconsideration.
ISSUE: Whether or not Filamer should be held subsidiarily liable.
HELD: Yes. This time, the SC ruled in favor of Kapunan (actually his heirs cause by this time Kapunan
was already dead). The provisions of Section 14, Rule X, Book III of the Labor Code IRR was only meant
to provide guidelines as compliance with labor provisions on working conditions, rest periods, and wages
is concerned. This does not in any way affect the provisions of any other laws like the civil code. The IRR
cannot defeat the provisions of the Civil Code. In other words, Rule X is merely a guide to the
enforcement of the substantive law on labor. There is a distinction hence Section 14, Rule X, Book III of
the Rules is not the decisive law in a civil suit for damages instituted by an injured person during a
vehicular accident against a working student of a school and against the school itself.
The present case does not deal with a labor dispute on conditions of employment between an alleged
employee and an alleged employer. It invokes a claim brought by one for damages for injury caused by
the patently negligent acts of a person, against both doer-employee and his employer. Hence, the reliance
on the implementing rule on labor to disregard the primary liability of an employer under Article 2180 of the
Civil Code is misplaced. An implementing rule on labor cannot be used by an employer as a shield to void
liability under the substantive provisions of the Civil Code.
Funtecha is an employee of Filamer. He need not have an official appointment for a drivers position in
order that Filamer may be held responsible for his grossly negligent act, it being sufficient that the act of
driving at the time of the incident was for the benefit of Filamer (the act of driving the jeep from the school
to Masas house is beneficial to the school because this enables Masa to do a timely school transportation
service in the morning). Hence, the fact that Funtecha was not the school driver or was not acting with the
scope of his janitorial duties does not relieve Filamer of the burden of rebutting the presumption juris
tantum that there was negligence on its part either in the selection of a servant or employee, or in the
supervision over him. Filamer has failed to show proof of its having exercised the required diligence of a
good father of a family over its employees Funtecha and Allan.